High Court of Australia Judgment Summary Notes

Commissioner of State Taxation v Cyril Henschke Pty Ltd & Ors [2010] HCA 43

Today the High Court held that a deed of retirement (“the Deed”) giving effect to the retirement of one partner from a partnership that carried on a business, which was to be carried on by the other partners after her retirement, attracted stamp duty under the Stamp Duties Act 1923 (SA) (“the Act”).

A winemaking business trading as CA Henschke & Co was conducted, prior to execution of the Deed, as a partnership (“the Partnership”) comprising four partners. The Deed provided for the retirement of one partner from the Partnership, and stated that the remaining partners “shall continue the Partnership under the Partnership Agreement (without purchasing [the retiring partner’s] interest in the Partnership and without the Partnership being dissolved)”. It provided for a payment to the retiring partner “in full satisfaction of all claims she has against the Partnership”, and a release and indemnity by the remaining partners in favour of the retiring partner. The Deed purported to reallocate the interests in the Partnership to the remaining partners.

Under the Act, stamp duty is charged on a conveyance or transfer on sale of any property. A conveyance is defined to include every instrument “by which or by virtue of which or by the operation of which … any … personal property or any estate or interest in any such property is assured to, or vested in, any person”.

The Treasurer of South Australia upheld an assessment of stamp duty on the Deed made by the Commissioner of State Taxation, which had determined that the Deed conveyed the retiring partner’s interest in the partnership property to the remaining partners. In the South Australian Supreme Court, the trial judge upheld the Commissioner’s assessment, but this was reversed on appeal to the Full Court of the Supreme Court. The Full Court considered that the effect of the Deed was not to convey the retiring partner’s interest but rather to convert her existing partnership interest (an equitable chose in action) into an entitlement to payment of a specific amount. It held that as her interest was not transferred, the transaction was not, and did not effect, a conveyance on sale.

The High Court unanimously held that the Deed had the legal effect of dissolving the Partnership, and constituting a new partnership between the remaining partners. The Court accepted that a partner’s interest in partnership assets is an equitable chose in action. The Deed extinguished the retiring partner’s existing equitable chose in action against the remaining partners, and created a new partnership through which equitable choses in action representing the remaining partners’ “reallocated” partnership interests were vested. On this basis, the Deed was a conveyance and attracted stamp duty under the Act.

The respondents were ordered to pay the Commissioner’s costs.

Aid/Watch Incorporated v Commissioner of Taxation [2010] HCA 42 

Today the High Court held that an organisation involved in promoting and campaigning for effective foreign aid policies through the generation of public debate was a charitable institution for the purpose of tax exemptions and concessions.

Aid/Watch Incorporated is an organisation concerned with promoting the effectiveness of Australian and multinational aid provided in foreign countries by means which include investment programs, projects and policies. In October 2006, the Commissioner of Taxation revoked Aid/Watch’s endorsements as a charitable institution for the purposes of income tax, fringe benefits tax and GST.

In 2008, the Administrative Appeals Tribunal set aside the Commissioner’s decision and determined that Aid/Watch was a charitable institution notwithstanding that it sought to influence government policy through its activities. The Full Court of the Federal Court allowed an appeal by the Commissioner, holding that because Aid/Watch’s activities necessarily involved a criticism of government activities and policies, its main purpose was a political purpose and it could not therefore be categorised as a charitable institution.

The High Court by majority allowed Aid/Watch’s appeal from the Full Court’s decision, and restored the decision of the AAT. The Court referred to authorities establishing that free communication on matters of government and politics is an indispensable incident of the system of representative and responsible government established by the Constitution. The Court stated that the generation by lawful means of public debate concerning the efficiency of foreign aid directed to the relief of poverty is itself a purpose beneficial to the community. It held that in Australia there is no broad general rule excluding “political objects” from charitable purposes, and that because Aid/Watch’s activities contribute to the public welfare, it was entitled to be regarded as a charitable institution.

Item Plaintiff M61/2010E v Commonwealth of Australia & Ors and Plaintiff M69 of 2010 v Commonwealth of Australia & Ors [2010] HCA 41   

Today the High Court declared that it was an error of law for a person conducting a review of a refugee status assessment as part of an “offshore processing regime” to fail to treat provisions of the Migration Act 1958 (Cth) (“the Migration Act”) and the decisions of Australian courts as binding. It held that two Sri Lankan citizens who arrived at Christmas Island claiming refugee status were also denied procedural fairness in the review of the assessment of their claims.

Each plaintiff arrived at Christmas Island by boat, and was detained under the Migration Act. Under the Migration Act, each became an “unlawful non-citizen” and by the operation of section 46A(1) could not make a valid application for a protection visa. The Minister had power to waive the operation of section 46A(1), or grant a visa, if it was in the public interest to do so. During the plaintiffs’ detention, officers of the Department of Immigration and Citizenship made assessments of each plaintiff’s refugee status and concluded that neither was a person to whom Australia owed protection obligations. An Independent Merits Review of each of those decisions conducted by contractors of the Department reached the same conclusion.

Each plaintiff argued before the High Court that he was not afforded procedural fairness during the assessment or review process, and that the persons conducting the assessment and review erred in law by not treating themselves as bound by relevant provisions of the Migration Act and relevant decisions of Australian courts. The Commonwealth and the Minister for Immigration and Citizenship argued that the assessment and review processes were conducted as an exercise of  nonstatutory executive power. It was argued that there was consequently no obligation on assessors and reviewers to afford procedural fairness, or to decide applications according to law. The plaintiffs argued that the processes were a part of the exercise of the Minister’s powers under the Migration Act. It was also argued by one plaintiff that section 46A of the Migration Act, which precluded him from making a valid application for a protection visa in the circumstances of the case, was invalid.

In a unanimous decision the Court held that because the Minister has decided to consider exercising powers under the Migration Act in every case where an offshore entry person claims to be owed protection obligations, the assessment and review inquiries adopted in respect of such offshore entry persons are therefore steps taken under and for the purposes of the Migration Act. Because these inquiries prolonged the detention of the plaintiffs, there was a direct impact on the rights and interests of the plaintiffs to freedom from detention at the behest of the Executive. Those making the inquiries were therefore bound to act according to law and to afford procedural fairness to the plaintiffs. The Court rejected the challenge to the validity of section 46A.

The Commonwealth and the Minister were ordered to pay the plaintiffs’ costs.

Commissioner of Taxation v Anstis [2010] HCA 40   

Today the High Court held that a university student in receipt of youth allowance payments was entitled to claim various self-education expenses as income tax deductions.

Symone Anstis was enrolled as a full-time student in a teaching degree at the Australian Catholic University. In the 2006 income year she earned $14,946 in wages as a part-time sales assistant, and $3,622 in youth allowance payments. In her tax return for that period she claimed a $920 deduction for self-education expenses, comprising the depreciation in value of a computer, textbooks and stationery, a student administration fee, supplies for children during her teaching rounds, and travel expenses other than to university.

Section 8-1 of the Income Tax Assessment Act 1997 (Cth) (“the 1997 Act”) relevantly provides that a person can deduct from their assessable income any loss or outgoing to the extent that it is incurred in gaining or producing their assessable income except to the extent that it is a loss or outgoing of a private or domestic nature.

The Commissioner of Taxation disallowed the deduction, and Ms Anstis was unsuccessful in an application for review by the Administrative Appeals Tribunal (“AAT”). In 2009, the AAT’s decision was reversed by the Federal Court. The Full Federal Court dismissed an appeal by the Commissioner against that decision.

The High Court unanimously dismissed an appeal by the Commissioner of Taxation. The Court held that youth allowance payments amounted to assessable income under the 1997 Act as they fell within the concept of “ordinary income”. Because Ms Anstis’ entitlement to youth allowance arose from her undertaking full-time study, the expenses claimed were incurred in gaining or producing her assessable income. The Court also held that the expenses were not of a private or domestic nature, and as such were deductible under s 8-1 of the 1997 Act.

The Commissioner of Taxation was ordered to pay Ms Anstis’ costs.

State of South Australia v Totani & Anor [2010] HCA 39  

The High Court today held s 14(1) of the Serious and Organised Crime (Control) Act 2008 (SA) (“the Act”) and a control order made under it constitutionally invalid.

In December 2008, the South Australian Commissioner of Police applied to the Attorney-General for South Australia for a declaration under s 10(1) of the Act in respect of the Finks Motorcycle Club Inc. Section 10(1) of the Act empowers the Attorney-General to make a declaration if he is satisfied that the members of an organisation associate for the purposes of organising, planning, facilitating, supporting or engaging in serious criminal activity and the organisation represents a risk to public safety and order in South Australia. The term “serious criminal activity” is defined to mean the commission of indictable offences or certain summary offences prescribed by regulation.

On 14 May 2009, the Attorney-General made the declaration sought by the Commissioner. Eleven days later, the Commissioner applied to the Magistrates Court of South Australia for a control order against Donald Hudson under s 14(1) of the Act. Mr Hudson was not notified of the application and was not required to be notified. The Attorney-General later applied for a control order against Sandro Totani. Section 14(1) requires the Magistrates Court, on application by the Commissioner, to make a control order against a person if the Court is satisfied that the person is a member of a declared organisation. A “member” is defined to include an associate or prospective member, a person who identifies as belonging to the organisation and a person who is treated by the organisation or persons who belong to the organisation, in some way, as if the person belongs to the organisation. By virtue of s 35 of the Act, any person who associates on six or more occasions during a period of 12 months with a member of a declared organisation or a person the subject of a control order made under s 14(1) is guilty of an offence punishable by imprisonment for up to five years.

The Magistrates Court made a control order in respect of Mr Hudson, prohibiting him from associating with other persons who are members of declared organisations and from possessing a dangerous article or prohibited weapon. Mr Hudson and Mr Totani then commenced proceedings in the Supreme Court of South Australia seeking a declaration that s 14(1) of the Act was invalid. The Supreme Court held that the sub-section was not valid and that the control order made in respect of Mr Hudson was void. The State of South Australia appealed against this decision to the High Court.

The High Court determined that s 14(1) was invalid. A majority of the Court considered that the provision authorised the executive to enlist the Magistrates Court in implementing decisions of the executive and that the manner in which that occurred was incompatible with the Magistrates Court’s institutional integrity. In making a declaration under s 10(1) in respect of an organisation, the Attorney-General needed only to be satisfied that a member or members of the organisation committed a criminal offence. Those members did not necessarily include a person against whom the Commissioner of Police later sought a control order under s 14(1). As a result, s 14(1) would oblige the Magistrates Court to impose serious restraints on a person’s liberty whether or not that person had committed or was ever likely to commit a criminal offence.

The Court dismissed South Australia’s appeal and ordered it to pay the costs of Mr Totani and Mr Hudson.

The Queen v Nguyen [2010] HCA 38

The High Court of Australia today granted the prosecution special leave to appeal against the decision of the Court of Appeal of the Supreme Court of Victoria to quash Dang Quang Nguyen’s jury convictions on one count of murder and one count of attempted murder. The High Court unanimously allowed the prosecution’s appeal. The High Court also unanimously allowed a  crossappeal brought by Dang Quang Nguyen. The High Court found that the trial judge misdirected the jury on the charge of murder by failing to leave open the alternative verdict of manslaughter. The High Court ordered a new trial.

In the early hours of 8 November 2004, Dang Quang Nguyen went to a flat in Carlton, Victoria, with Dang Khoa Nguyen and Bill Ho, allegedly to collect a drug debt. Seven young people were in the flat. Dang Quang Nguyen waved a sword about in the lounge room of the flat, cutting two or three people. Bill Ho shot two men: one of those men survived, but the other died.

Dang Quang Nguyen, Dang Khoa Nguyen and Bill Ho were each charged with one count of murder and one count of attempted murder. Dang Quang Nguyen was charged on the basis that he had been complicit in crimes committed by Bill Ho. On 13 October 2007, after a Supreme Court trial that lasted several weeks, a jury found all three men guilty on both counts.

Dang Quang Nguyen appealed against his convictions. In December 2009, two years after the men had been sentenced, the Court of Appeal allowed Dang Quang Nguyen’s appeal, quashed his convictions and directed that he be acquitted. In its reasons, published in February 2010, the Court of Appeal held that Dang Quang Nguyen’s convictions could not be supported by the evidence, and were therefore unsafe or unsatisfactory.

The High Court today granted the prosecution special leave to appeal against the Court of Appeal’s decision to quash Dang Quang Nguyen’s convictions, and allowed that appeal. The Court held that, on the whole of the evidence presented at trial, it was open to the jury to be satisfied beyond reasonable doubt that Dang Quang Nguyen agreed in the use of deadly force, contemplated that it might be used, or encouraged its use. The Court of Appeal was therefore wrong to find that the verdicts of the jury in respect of Dang Quang Nguyen were unsafe or unsatisfactory.

The High Court also granted Dang Quang Nguyen’s application for special leave to cross-appeal in relation to the sufficiency of the directions given by the trial judge to the jury, and allowed that appeal. The Court held that the trial judge’s directions did not sufficiently leave manslaughter to the jury as an alternative verdict in respect of Dang Quang Nguyen’s murder charge. The Court held that it was open to the jury to conclude that, even though the principal offender Bill Ho was  guilty of murder, Dang Quang Nguyen was guilty of the lesser crime of manslaughter because he agreed in, contemplated or encouraged only the infliction of some harm, and not the infliction of really serious injury or death. The Court held that the misdirection constituted a wrong decision on a question of law and that it could not be said that there was no substantial miscarriage of justice in the trial of Dang Quang Nguyen.

The Court held that, despite the undue protraction of Dang Quang Nguyen’s case in the courts below, the orders of the Court of Appeal should be set aside, Dang Quang Nguyen’s convictions quashed, and a new trial had.

Selected Seeds Pty Ltd v QBEMM Pty Ltd & Ors [2010] HCA 37

The High Court today held an insurer could not rely upon an exclusion clause in an insurance policy to deny liability to its insured, a seed merchant, sued by a grower in connection with the supply of seed contaminated with a weed.

The appeal involved the purchase and sale of Jarra grass seed, a type of livestock fodder. The appellant, a seed merchant, bought and sold a batch of Jarra grass seed unaware that it was contaminated with seed of Summer grass, a weed. The seed was purchased, planted, harvested and on-sold several times. With each progressive harvest, the presence of Summer grass seed increased.

Seed traceable to the contaminated batch sold by the appellant was purchased by Mr and Mrs Shrimp. The Shrimps planted the seed for fodder. By this time, the seed was almost entirely Summer grass seed and the Shrimps reaped only Summer grass. They brought proceedings to recover for the damage to their land, and the appellant was eventually joined as a party to the proceedings. The Shrimps’ claim was settled and the appellant sought indemnity from its insurer, the respondents, in respect of its contribution to settlement and its costs. The indemnity request was refused.

In the proceedings brought by the appellant in the Supreme Court of Queensland to enforce its insurance policy, the respondents relied upon an efficacy clause in the policy. The clause excluded liability caused or arising from the failure of any product to correctly fulfil its intended use or function and/or meet the level of performance, quality, fitness or durability warranted or represented by the appellant.

The trial judge found for the appellant, concluding that liability for damages arose not from what the product failed to do but from the damage it caused to the Shrimps’ property. On appeal, the Queensland Court of Appeal reversed the trial judge’s decision, holding that the appellant’s liability arose because the seed did not correctly fulfil its represented or warranted quality as Jarra grass seed or correctly fulfil its intended function of producing Jarra grass and seed. By special leave, the appellant appealed to the High Court.

Today, the High Court overturned the Court of Appeal’s decision. It held that the liability excluded by the efficacy clause was for property damage caused by or arising from a failure of a product to fulfil its use or function. The damage to the Shrimps’ land did not arise out of the failure of the seeds that were sown to fulfil their intended use or function to produce Jarra grass and seed. Rather, the damage was caused by the introduction of Summer grass, a weed, to the land. The insurance policy held by the appellant with the respondents therefore covered the liability to the Shrimps.