High Court of Australia Judgment Summary Notes

Gary Ernest White v The Director Of Public Prosecutions for Western Australia [2011] HCA 20

Today the High Court dismissed an appeal against the decision of the Court of Appeal of the Supreme Court of Western Australia to make a crime-used property substitution declaration under s 22 of the Criminal Property Confiscation Act 2000 (WA) (“Act”) in respect of property owned by the appellant.

In 2003 the appellant was convicted of a wilful murder which was committed immediately outside the boundary of fenced and gated premises in Maddington, Western Australia in 2001. At the time of the offence, the appellant was leasing the premises. The appellant shot at the deceased five times inside the premises, the gates to which had been locked at the appellant’s direction. At least two shots wounded the deceased. The deceased climbed over one of the locked gates to escape the appellant but was fatally shot while on the ground outside the gate. The appellant was sentenced to strict-security life imprisonment with a non-parole period of 22 years.

Section 22 of the Act provides that a “crime-used property substitution declaration” can be made, on the application of the Director of Public Prosecutions (“the DPP”), if two conditions are satisfied: first, the crime-used property is not available for confiscation because it neither belongs to nor is effectively controlled by the offender; and second, it is more likely than not that “criminal use” was made of the “crime-used property”. If the conditions in s 22 of the Act are satisfied, the court must make a declaration that property owned by the offender is available for confiscation instead of the crime-used property.

Section 147 provides that a person makes criminal use of property if the person, alone or with anyone else, uses the property in a way that brings the property within the definition of “crime-used property”. Section 146(1)(a) provides that property is crime-used if the property is used, directly or indirectly, in or in connection with the commission of a confiscation offence, or in or in connection with facilitating the commission of a confiscation offence. Section 146(1)(c) provides that property is “crime-used” if any act or omission was done, omitted to be done or facilitated in or on the property in connection with the commission of a confiscation offence. Relevantly, a “confiscation offence” is an offence that is punishable by imprisonment for two years or more (s 141(1)(a)).

The DPP applied for a crime-used property substitution declaration against the appellant. The primary judge dismissed the DPP’s application holding that the appellant’s conduct only fell within s 146(1)(c), which was not covered by the definition of “criminal use” in s 147. The Court of Appeal of Western Australia allowed the DPP’s appeal and made the declaration sought by the DPP against the appellant. The Court of Appeal held that the concept of “criminal use” in s 147 encompassed all activities that brought property within the definition of “crime-used” under s 146. The appellant appealed to the High Court. 2

The High Court held that “makes criminal use of property” within s 147 encompasses conduct within s 146(1)(c) of the Act. It was not disputed that the premises leased by the appellant were “crime-used” within s 146(1)(c). The appellant therefore made “criminal use” of the premises within s 147. The conditions of s 22 of the Act were satisfied and the Court of Appeal was correct to make the crime-used property substitution declaration.

The Commissioner of Taxation of the Commonwealth Of Australia v BHP Billiton Limited & Ors [2011] HCA 17

Today the High Court dismissed appeals by the Commissioner of Taxation against the decision of the Full Federal Court of Australia regarding the construction of s 243-20(2) of the Income Tax Assessment Act 1997 (Cth) (“the Act”). The Court held that a debt owed by BHP Billiton Direct Reduced Iron Pty Ltd (“BHPDRI”) to BHP Billiton Finance Limited (“Finance”) was not a “limited recourse debt” and therefore the respondents were not liable to an increase in assessable income under Div 243 of the Act.

BHP Billiton Ltd (“BHPB”) is a listed company and its directly or indirectly wholly owned subsidiaries include Finance and BHPDRI. Finance raised, for the purposes of the BHPB group, large sums of money which it loaned to other members of the BHPB group on terms adopted by board resolution and which did not purport to limit the rights of Finance as an unsecured creditor. Finance earned a profit from the interest rates charged on loans to other members of the BHPB group.

BHPB’s board approved the construction of plant and facilities near Port Hedland in Western Australia for the manufacture of iron briquettes to be undertaken by BHPDRI. BHPDRI was partly funded by a loan provided by Finance on its standard terms. Further capital expenditures required to complete the project were partly funded by advances by Finance which were subsequently partly written off by Finance. The project was not successful and terminated in May 2005.

The expenditure which BHPDRI incurred on the project gave rise to “capital allowance” deductions claimed by BHPDRI for the years 1996-2002 and by BHPB for the years 2003-2006. In 2007, the Commissioner issued a notice of assessment applying Div 243 of the Act to reduce the capital allowance deductions claimed by BHPDRI for the years 2003-2006. BHPDRI transferred its tax losses in the years 2000-2002 to other companies in the BHPB group (“the transferees”) and the Commissioner’s adjustments resulted in reductions to those transferred amounts which was reflected in assessments issued to the transferees.

BHPB’s objection to the Commissioner’s assessment was disallowed. BHPB and the transferees appealed to the Federal Court. The primary judge held that limited recourse debt was not used wholly or partly to finance or refinance BHPDRI’s expenditure so that Div 243 did not apply. The Full Court dismissed the Commissioner’s appeal. The Commissioner appealed, by special leave, to the High Court.

The Act provides, inter alia, that Div 243 applies if limited recourse debt has been used to wholly or partly finance or refinance expenditure. The dispute between the parties was whether limited recourse debt had been used.

One definition of “limited recourse debt” is found in s 243-20(2). Section 243-20(2) provides that an obligation imposed by law on a debtor to pay an amount to the creditor is limited recourse debt if it is reasonable to conclude that the rights of the creditor as against the debtor in the event of default in payment of the debt or interest are “capable of being limited” in the way mentioned in s 243-20(1) having regard to certain specified matters. It was the operation of this definition which was argued in the High Court.

The Commissioner argued that BHPDRI’s debt to Finance was a “limited recourse debt” under s 243-20(2) of the Act. The Commissioner contended that s 243-20(2) of the Act was not concerned with current contractual limitations or rights or with economic equivalence but was concerned with a practical capacity or ability to bring about legal limitations on legal rights. The Commissioner also argued that Finance’s contractual rights at the inception of each loan were “capable” of restriction should BHPDRI default because the parties were not dealing at arm’s length.

The High Court held that BHPDRI’s debt to Finance was not a “limited recourse debt” within the meaning of Div 243. The Court held that s 243-20(2) is not directed to possibilities for limitation of a creditor’s rights of recourse which may arise in the future.

Jemena Gas Networks (NSW) Limited v Mine Subsidence Board [2011] HCA 19 

Today the High Court allowed an appeal from the Court of Appeal of the Supreme Court of New South Wales regarding the construction of s 12A(1)(b) of the Mine Subsidence Compensation Act 1961 (NSW). By majority, the High Court held that the appellant is entitled, under s 12A(1)(b) of the Act, to an amount from the Mine Subsidence Compensation Fund (“the Fund”) to meet the proper and necessary expense of preventing or mitigating cumulative subsidence from approved longwall mining at Mallaty Creek that the appellant reasonably anticipated, based on expert advice, would likely cause damage to its pipeline.

The appellant owns and operates a gas pipeline which runs from Moomba to Sydney. The gas pipeline is the main source of natural gas for the Sydney and Newcastle metropolitan areas. The gas pipeline runs underground at the point where it crosses Mallaty Creek and traverses an area of land which is subject to a mining lease held by a subsidiary of BHP Billiton Limited relating to the West Cliff Colliery. The pipeline runs above a series of “panels” (designated areas) proposed, and used, for underground longwall mining. Longwall mining has been taking place in them for some years. Expert consultants predicted in December 2003 that there would be subsidence where the pipeline crosses Mallaty Creek when a certain panel was mined and that the subsidence would increase as subsequent longwall panels were mined. Other expert consultants advised in February 2004 that mitigating works would be needed as a result of future extraction from subsequent longwall panels. Between December 2005 and January 2007, the appellant undertook excavation work to prevent the pipeline being damaged by the predicted subsidence. The cumulative subsidence that eventuated after those works were undertaken broadly corresponded with the predictions of the expert consultants.

The Fund, to which colliery proprietors make compulsory contributions pursuant to the Act, is administered by the respondent, the Mine Subsidence Board (“the Board”). Under s 12A(1)(b), owners of improvements on land may make claims for payment from the Fund for proper and necessary expenditure incurred in preventing or mitigating damage to those improvements that, in the opinion of the Board, “the owner could reasonably have anticipated would otherwise have arisen, or could reasonably anticipate would otherwise arise, from a subsidence that has taken place”. On 17 July 2007, pursuant to s 12A(1)(b), the appellant made a claim against the Fund for the costs of preventative and mitigatory works performed between December 2005 and January 2007 on the pipeline.

The Board considered that the appellant could not make a claim under s 12A(1)(b) of the Act. The Board held that a claim could only be made under that provision if the whole of the subsidence had occurred before the expense of preventative works was incurred.

The appellant instituted proceedings in the Land and Environment Court of New South Wales against the Board. That Court held that, assuming that the appellant could establish that the expenses were “proper and necessary”, the appellant was not entitled to an amount under s 12A(1)(b) because the Court of Appeal had held in a previous case that no claim could be made unless the whole of the subsidence had occurred before the expense of preventative works was incurred. The appellant appealed to the Court of Appeal, however, the appeal was unanimously dismissed. The appellant appealed to the High Court.

By majority, the High Court held that claims under s 12A(1)(b) are not confined to expenditure incurred only once a subsidence has in fact occurred. Rather, claims under s 12A(1)(b) extend to expenditure that, in the opinion of the Board, the owner could reasonably have anticipated would otherwise have arisen, or could reasonably anticipate would otherwise arise, from a subsidence that has taken place prior to that damage arising, even though at the time when the expense is incurred or proposed there has not yet been either subsidence or damage.