High Court of Australia Judgment Summary Notes

Spencer v Commonwealth of Australia [2010] HCA 28 (1 September 2010)

In 2007 Mr Spencer commenced proceedings in the Federal Court of Australia claiming that certain Commonwealth legislation and intergovernmental agreements had effected an acquisition of his property other than on just terms.  The High Court held that the case should not have been summarily dismissed under s 31A of the Federal Court of Australia Act 1976 (Cth), as it could not be said that Mr Spencer had “no reasonable prospect” of successfully prosecuting the proceedings.   Mr Spencer was the owner of a farm at Shannons Flat, New South Wales, known as “Saarahnlee”.  The property was subject to the Native Vegetation Act 2003 (NSW) and previously subject to the Native Vegetation Conservation Act 1997 (NSW) (“the State Acts”).  Both statutes restricted his ability to clear native vegetation on his land.   On 12 June 2007, Mr Spencer commenced proceedings against the Commonwealth of Australia in the Federal Court.  He claimed that the restrictions imposed by the State Acts effectively amounted to an acquisition of his interests in the land, in particular his rights to carbon sequestration.  He claimed that the acquisition had been on other than just terms and had been made in furtherance of agreements between the Commonwealth and the State of New South Wales.  Those agreements established a framework for the management and use of land, including native vegetation clearing, and allocated Commonwealth funds to the State for that purpose.  Mr Spencer alleged that the agreements, and the Commonwealth legislation that authorised them — the Natural Resources Management (Financial Assistance) Act 1992 (Cth) and the Natural Heritage Trust of Australia Act 1997 (Cth) (“the Commonwealth Acts”) — were invalid to the extent to which they effected or authorised the acquisition of property other than on just terms within the meaning of s 51(xxxi) of the Constitution.   At first instance, the Commonwealth applied for summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth).  Section 31A provides that the Court may give judgment for one party against another where “the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding”.  On 28 August 2008, Justice Emmett made an order dismissing the proceedings on the basis that neither of the Commonwealth Acts could be characterised as a law with respect to the acquisition of property within the meaning of s 51(xxxi). His Honour held that neither of the Commonwealth Acts required or permitted the Commonwealth to impose, as a condition for the grant of financial assistance, a requirement that the State acquire the property other than on just terms.   Mr Spencer was granted leave to appeal to the Full Court of the Federal Court but the appeal was dismissed on 24 March 2009.  On 12 March 2010, Mr Spencer’s application for special leave to appeal to the High Court was referred for hearing before seven Justices of the High Court.   The High Court has held that the case had not been a suitable one for the application of s 31A of the Federal Court of Australia Act.  Mr Spencer had argued that the Commonwealth Acts formed part of a scheme or device designed to avoid the restrictions on Commonwealth legislative power found in s 51(xxxi) of the Constitution.  The statement of claim referred to arrangements or understandings between the Commonwealth and the State of New South Wales beyond what appeared on the face of the relevant legislation and intergovernmental agreements.  The Court noted that, in a case decided after the Full Federal Court’s decision in this matter (ICM Agriculture Pty Ltd v The Commonwealth), three members of the High Court expressly left open the question whether a Commonwealth law might be characterised by reference to informal arrangements for the grant of financial assistance as a law with respect to the acquisition of property.  Whether there were such arrangements in this case, and whether they were constitutionally significant, was not a question suitable for determination on a summary judgment application. The High Court held that, in light of the decision in ICM, it could not be said that Mr Spencer had “no reasonable prospect of successfully prosecuting the proceeding”.  The Court granted Mr Spencer special leave to appeal and allowed the appeal with costs.

Public Trustee of Queensland v Fortress Credit Corporation (Aus) 11 Pty Ltd [2010] HCA 29 (1 September 2010)

Section 266 of the Corporations Act 2001 (Cth) provides that a charge, or a variation to the terms of a charge, will be void as a security unless notice of the charge or its variation is lodged with the Australian Securities and Investments Commission (“ASIC”).  The High Court held that a deed, which did not amend the terms of a charge but, when read with the charge, had the effect of increasing the liabilities secured under it, did not trigger the operation of s 266.

On 31 May 2007, Fortress Credit Corporation (Aus) 11 Pty Ltd (“Fortress”) entered into a loan agreement with Young Village Estates Pty Ltd as borrower. The loan was guaranteed (“the YVE guarantee”) by the second respondent, Octaviar Limited (“Octaviar”).  No security was given for repayment of the loan. On 1 June 2007, Fortress entered into another loan agreement with Octaviar’s subsidiary, Octaviar Castle Pty Ltd (“Octaviar Castle”), as borrower (“the Castle Facility Agreement”).  Octaviar and another of its subsidiaries, Octaviar Administration Pty Ltd (“Octaviar Administration”), guaranteed that loan.  Octaviar provided security for its guarantee by way of a fixed and floating charge. Notice of the charge was lodged with ASIC, in accordance with s 263 of the Corporations Act.

Under clause 2.1 of the charge, Octaviar charged all its present and future property for payment of “Secured Money”, defined in the charge as “all money, obligations and liabilities…owing or payable…under or in relation to a Transaction Document”. The term “Transaction Document” was to have the meaning given to it in the Castle Facility Agreement, which provided that a “Transaction Document” included each document that Fortress and Octaviar agreed in writing was a Transaction Document. On 22 January 2008, Fortress, Octaviar and Octaviar Castle executed a deed acknowledging that the YVE guarantee was a “Transaction Document” for the purposes of the Castle Facility Agreement and thus within the terms of the charge. This had the effect of increasing the liabilities secured by the charge. No notice of any charge created or varied was lodged with ASIC.

In late 2008, administrators were appointed to Octaviar and Octaviar Administration and each subsequently executed a deed of company arrangement. On 19 February 2009, the Public Trustee of Queensland applied to the Supreme Court of Queensland for orders terminating each deed. It contended that each deed had been premised on the validity in all respects of the charge, which, in the absence of a notice lodged with ASIC, did not validly secure the YVE guarantee. The Public Trustee submitted that the deed of 22 January 2008 was a new charge, or a variation in the terms of an existing charge, requiring lodgement of a notice with ASIC in accordance with s 263 or s 268 respectively of the Corporations Act. In the absence of such notice, a new charge would be void pursuant to s 266(1), and a varied charge void pursuant to s 266(3), of the Corporations Act.

At first instance, McMurdo J ordered that the question of the validity of the charge be determined separately from the applications to terminate the deeds. His Honour held that the deed of 22 January 2008 amounted to a variation in the terms of the charge, by bringing the YVE guarantee within its coverage, and was void for failure to lodge notice of the variation. The Court of Appeal unanimously allowed an appeal from that decision. On 12 March 2010, the Public Trustee was granted special leave to appeal to the High Court.   The Court unanimously dismissed the appeal, finding that the deed of 22 January 2008 was neither a new charge nor a variation in the terms of the charge. As a result of the 22 January 2008 deed, the YVE guarantee was now a “Transaction Document”. However that did not vary the meaning of “Transaction Document” in the Castle Facility Agreement and consequently the meaning of “Secured Money” in the charge. The effect of the deed was that the YVE guarantee now fell within he class of liabilities secured by the charge; there was no variation made to the terms of the charge either in their text or in the rights and obligations to which those terms gave rise. Where parties elect that a term of a charge will be variable or ambulatory in operation, there is no variation in the terms each time its operation is, as a matter of fact, altered or modified. The Corporations Act requires notice only for variations in the terms of the charge, and not to modifications in the way in which those terms apply to the circumstances from time to time during the currency of the charge.   The Court dismissed the appeal and ordered the Public Trustee to pay Fortress’s costs.

Dickson v The Queen [2010] HCA 30 (22 September 2010)

In 2008, Kevin Dickson was convicted in the Supreme Court of Victoria of conspiracy to steal under s 321 of the Crimes Act 1958 (Vic) (“the Victorian Crimes Act”). He was sentenced to imprisonment for five years and six months. The conspiracy involved an agreement to steal, contrary to s 74 of the Victorian Crimes Act, a large quantity of cigarettes. The cigarettes had been seized by the Australian Customs Service (“Customs”) and transferred to a storage facility within a secured warehouse operated by Dominion Group (Vic) Pty Ltd (“Dominion”). Customs paid storage fees to Dominion for exclusive use of a padlocked area of the warehouse. A month after their transfer, the cigarettes were removed from the storage area by cutting the padlock that secured it.   The charge against Mr Dickson and the conduct of his prosecution were based on there having been an offence committed against the law of Victoria alone. At trial, the judge directed the jury that they could assume that the cigarettes had been under the control of, and thus belonged to, Dominion.   The Court of Appeal dismissed an application by Mr Dickson to appeal against his conviction and sentence. Mr Dickson then sought special leave to appeal to the High Court against the Court of Appeal’s decision. On 23 April 2010, three Justices of the High Court referred some of the proposed grounds of appeal in his application for special leave for further consideration by an enlarged Bench of the Court. At the hearing, Mr Dickson sought and was granted special leave to appeal on a further ground based on the operation of s 109 of the Constitution. His submission was that the section of the Victorian Crimes Act under which he had been charged was inconsistent with provisions of the Criminal Code (Cth) (“the Commonwealth Criminal Code”) concerning theft of Commonwealth property and conspiracy under federal law. He argued that, by operation of s 109 of the Constitution, the Victorian Crimes Act provision was therefore invalid to the extent of the inconsistency.

The High Court upheld Mr Dickson’s appeal on this constitutional ground, quashing the presentment preferred against him and his conviction and setting aside his sentence of imprisonment. The Court held that the cigarettes that formed the basis of the offence with which he had been charged were property belonging to the Commonwealth because they were in the possession of Customs at the time they were stolen. That meant that the theft provision in s 131.1 of the Commonwealth Criminal Code applied and that the conspiracy provision in s 11.5 of the Commonwealth Criminal Code could attach to it. It also meant that, if the Victorian provisions had a relevant valid operation, the cigarettes were property belonging to the Commonwealth for the purposes of s 72 of the Victorian Crimes Act, which informs the meaning of the offence of theft found in s 74.   The Court held that the Victorian conspiracy provision was directly inconsistent with the Commonwealth conspiracy provision because s 321 of the Victorian Crimes Act, if valid, effectively defined the offence of conspiracy more widely than conspiracy under s 11.5 of the Commonwealth Criminal Code. The Victorian provision would thereby alter, impair or detract from the operation of the Commonwealth law. The Victorian law was thus invalid to the extent of the inconsistency.   By virtue of the Court’s decision on the constitutional question, it was unnecessary for the Court to consider the remainder of Mr Dickson’s application for special leave to appeal. The proposed grounds of appeal remaining in that application were thus dismissed.

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 (29 September 2010)

The applicant (“Miller”), an insurance broker, negotiated a $3.975 million loan with the respondent (“BMW”) on behalf of a client, Consolidated Timber Holdings Ltd (“Consolidated Timber”). The loan was sought to fund a premium for an insurance policy insuring against credit risks in connection with a plantation investment scheme. In the course of negotiations, BMW requested details of the insurance policy from Miller. In response, Miller provided a certificate of insurance issued by HIH Casualty and General Insurance Limited that included a list of four properties on which plantations were operated. Premium funding lenders generally require the insurance policy for which a loan is sought to be cancellable. Cancellable policies provide the lender with a form of security: the lender can require the borrower to assign its rights under the policy, including cancellation rights, and in the event of default the lender may cancel the policy and recover the unused premium. BMW concluded from the list of properties on the certificate of insurance that it concerned property insurance, which is generally cancellable. Later, Miller provided the policy itself as part of a bundle of materials. The policy in respect of which Miller negotiated the loan with BMW was a cost-of-production policy and was not cancellable. Miller did not explicitly draw BMW’s attention to this fact.   After the third repayment, Consolidated Timber defaulted on the loan. BMW sued Miller in the Supreme Court of Victoria for recovery of its loss, alleging among other things that Miller had engaged in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth). The claim was put in two ways. The first was that Miller’s supply of the certificate of insurance in response to BMW’s request for details of the insurance policy was misleading or deceptive. The second was that Miller’s failure to tell BMW that the policy for which funding was sought was not cancellable constituted misleading or deceptive conduct. The primary judge found against BMW. His Honour also rejected oral evidence given by the two employees of BMW who had responsibility for the loan that they had not understood that the policy later provided by Miller was connected to the loan.   BMW successfully appealed against the primary judge’s decision to the Court of Appeal. The Court overturned the rejection by the primary judge of the BMW employees’ evidence on the ground that the finding was based on a mistaken understanding of an agreed fact and the inferences arising from it. The Court also held that Miller’s provision of the certificate of insurance conveyed a representation that the policy was cancellable. As a result of a combination of this and Miller’s failure to inform BMW about the policy’s non-cancellability, the Court of Appeal considered Miller to have engaged in misleading or deceptive conduct.   Miller applied to the High Court for special leave to appeal against the decision of the Court of Appeal. Its application was referred for consideration by the Full Court, which heard the application on 16 April 2010 as if on appeal. The Court today overturned the Court of Appeal’s decision and reinstated the decision of the primary judge. It held that the Court of Appeal had erred in overturning the primary judge’s rejection of the oral evidence. The Court of Appeal had mistaken the basis of that finding by the primary judge. The High Court also held that the Court of Appeal’s finding that Miller had engaged in misleading or deceptive conduct could not be sustained. There was no foundation for the conclusion that the known importance of the cancellability of the insurance policy gave rise to a reasonable expectation, in the circumstances of the particular transaction, that Miller would not supply the certificate of insurance without disclosing that the policy was non-cancellable.

Kostas v HIA Insurance Services Pty Limited [2010] HCA 32 (29 September 2010)

In August 1999, the appellants engaged a builder to undertake substantial renovations to their home. By June 2000, disputes had arisen and the appellants purported to terminate the building contract. They made a claim with HIA Insurance Services Limited (“HIA”), the statutory insurer of the builder’s work. Upon HIA rejecting the claim, the appellants commenced proceedings in September 2000 against HIA and the builder in the Consumer, Trader and Tenancy Tribunal of New South Wales.   In a decision handed down in May 2005, the Tribunal held that the appellants had not validly terminated the contract. Central to this decision was a finding that the builder had served two claims for extensions of time in accordance with the contract and that the appellants had not disputed those claims in the manner required by the contract.   The appellants appealed against the Tribunal’s decision to the Supreme Court of New South Wales under s 67 of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW). At the relevant time, that section provided for a right of appeal to the Supreme Court against a decision by the Tribunal of “a question with respect to a matter of law”. The appellants contended that there was no evidence properly before the Tribunal that supported its finding that the builder had served time-extension claims in accordance with the contract. They contended that, as a result, the Tribunal had made an erroneous decision of a question with respect to a matter of law. The Supreme Court agreed, finding that the termination of the contract was lawful and effective and quashing the Tribunal’s decision.   HIA successfully appealed to the Court of Appeal on the basis that there was no “question with respect to a matter of law” to attract the Supreme Court’s jurisdiction. The Court of Appeal held that a contention that there was no evidence to support a factual finding of the Tribunal could not form the basis of a statutory appeal under s 67 of the Consumer, Trader and Tenancy Tribunal Act. The appellants were granted special leave to appeal to the High Court against the Court of Appeal’s decision.   The High Court has allowed the appeal and restored the decision of the Supreme Court. The Court held that the question whether there was no evidence to support a factual finding of the Tribunal was a question with respect to a matter of law. The factual finding in this case was that the builder had served the relevant time-extension claims. The Court held that there was no evidence before the Tribunal upon which it could make this finding. The jurisdiction of the Supreme Court under s 67 was properly invoked and the decision of the judge at first instance on this point was correct.

Travelex Ltd v Commissioner of Taxation [2010] HCA 33 (29 September 2010)

The High Court has held that a sale of foreign currency on the departures side of the Customs barrier at Sydney International Airport was a GST-free supply under s 38-190(1) of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“the GST Act”).   In November 2007, an employee of Travelex Ltd flew from Sydney to Fiji.  After clearing Customs, he went to the Travelex counter in the departure hall and purchased F$400 in bank notes.   Travelex sought a declaration in the Federal Court that it was exempt from paying GST on the sale of foreign currency to a passenger who had passed through Customs.  Item 4(a) of s 38-190(1) of the GST Act provides that, except to the extent that it is a supply of goods or real property, a supply that is made in relation to rights is GST-free if the rights are for use outside Australia.  The primary judge and, on appeal, a majority of the Full Court of the Federal Court rejected Travelex’s argument that the supply was a supply “in relation to” rights, and therefore a GST-free supply. Both the primary judge and the majority of the Full Court took the view that the relevant supply was the supply of bank notes and that the rights attaching to those bank notes, as legal tender in Fiji, were merely incidental to that supply.   The High Court allowed the appeal and substituted for the orders of the primary judge a declaration that the sale was a supply of or in relation to rights and a GST-free supply under the GST Act.  A majority of the Court, observing that the value of bank notes is in the rights that attach to them, characterised the transaction as a supply by which the purchaser acquires the rights that attach to the bank notes, rather than simply a supply of bank notes.  The Commissioner of Taxation was ordered to pay Travelex’s costs.