O n 3 September 2008 the High Court of Australia allowed appeals by two men who had been convicted, in the New South Wales District Court, in June 2004 of conspiracy to import a commercial quantity of ecstasy into Australia. Rafael Cesan and Ruben Mas Rivadavia had been sentenced in March 2005, Mr Cesan to 13 years and six months’ imprisonment and Mr Mas Rivadavia to 11 years’ imprisonment. The High Court allowed the men’s appeals because the trial judge, who had repeatedly fallen asleep during their trial, did not exercise the supervision of the trial required by law. The jury had become distracted and a substantial miscarriage of justice resulted. The Court ordered new trials.
The High Court published its reasons for allowing the appeals.
Mr Cesan and Mr Mas Rivadavia were convicted after a 17-day trial. In 2007 they appealed to the New South Wales Court of Criminal Appeal (CCA) against their convictions and sentences, complaining that the trial judge had been asleep when evidence was being given. The CCA received evidence from friends and relatives as well as from Mr Cesan and Mr Mas Rivadavia themselves describing what occurred at the trial. They described episodes of up to 20 minutes’ sleep, sometimes accompanied by snoring. Periods of sleep became longer as the trial went on. Members of the jury were visibly detracted and, at times, amused. Mr Cesan said the judge’s snoring was disruptive when he was being cross-examined. Prosecutor Geoffrey Bellew SC also swore an affidavit referring to occasions in which the judge appeared to be asleep. Medical evidence showed the judge had been suffering from severe obstructive sleep apnoea. The CCA, by majority, dismissed the appeals on the basis that the judge’s conduct did not result in any demonstrated error, omission or misdirection. No complaint had been made at trial about the judge’s sleep episodes.
Mr Cesan and Mr Mas Rivadavia appealed to the High Court on a number of grounds including the contention that there had been a miscarriage of justice and no trial by jury as required by section 80 of the Constitution in relation to indictable offences against laws of the Commonwealth. The Court confined argument initially to the question whether there had been a miscarriage of justice. At the end of that argument, on 3 September 2008, the High Court allowed the appeals, set aside the convictions and ordered retrials.
The Court unanimously held that the trial judge had a duty to supervise and control the conduct of the trial. Because the judge was noticeably and repeatedly asleep or inattentive the trial was flawed to such an extent that there was a miscarriage of justice. The CCA could not conclude from the trial transcript alone that each of the accused was guilty beyond reasonable doubt. The High Court held that it could not be said that no substantial miscarriage of justice actually occurred, because the members of the jury were prevented from paying full attention to the evidence and therefore unable to perform their task properly.
Commissioner of Taxation v Day [2008] HCA 53 (12 November 2008)
A Customs officer charged with misconduct offences could claim a tax deduction for his legal expenses as the offences were connected with his work, the High Court of Australia has held.
Shane Day was charged with failure of duty in 1998 and in 1999 and obtained legal advice and representation. The 1998 charge was of improper conduct by presenting his Customs identification to a clerk at the Downing Centre Local Court in Sydney to try to obtain information about a search warrant which had been executed on the Australian Customs Service. Mr Day was unsuccessful. The warrant had authorised the Australian Federal Police to search his workstation. An authorised Customs officer found that it was improper for Mr Day to have conveyed that his purpose was official. He was demoted and his salary reduced. The Disciplinary Appeal Committee found the charge proved but upgraded the position and salary from that directed by the inquiry officer. In judicial review proceedings in the Federal Court, Justice Roger Gyles held that the conduct was not improper and remitted the case to the Committee which set aside the direction of the inquiry officer and ordered the Commonwealth to pay Mr Day’s costs. A Full Court of the Federal Court dismissed the Commonwealth’s appeal from Justice Gyles’s decision.
Mr Day was charged with a set of seven charges in 1999 and suspended without pay. Three charges related to his conduct in connection with a claim for a diesel fuel rebate by the partner of another Customs officer, including helping to create a false diary. The fourth charge was that he had acquired a work vehicle for a fellow officer to transport Mr Day’s daughter. Two charges involved his actions to conceal absences from work, by asking a colleague to cover for him and to switch his computer on, and by submitting a false attendance record. The seventh charge was that he failed to communicate information concerning an investigation into an individual. Mr Day commenced proceedings in the Federal Court to have the charges set aside, alleging that information obtained by the AFP through telephone intercepts as part of a criminal investigation was wrongly made available to Customs officials. That application, an appeal to a Full Court, and an application for special leave to appeal to the High Court were refused with costs.
For the financial year 2001-02, Mr Day claimed that $37,077 of outstanding legal expenses should have been allowed as a tax deduction. The deduction was refused and the Tax Commissioner disallowed his objection to his income tax assessment. Mr Day appealed to the Federal Court. Justice Arthur Emmett held that the legal expenses were not deductible as they were not incurred in gaining or producing taxable income in accordance with section 8-1(1)(a) of the Income Tax Assessment Act, but also held that the Commissioner be estopped from contending that expenses from the 1999 charges were not deductible as it had earlier consented to a deduction for fees paid to one counsel for legal advice. The Full Court of the Federal Court, by majority, allowed the Commissioner’s appeal on the issue of estoppel, but allowed Mr Day’s cross-appeal, holding the expenses to have been properly deductible under section 8-1(1)(a). The Commissioner appealed to the High Court.
The Court dismissed the appeal by a 4-1 majority. It held that Mr Day’s legal expenses were properly allowable as deductions. What was productive of his income was to be found in all the incidents of his position in Customs, including his obligation to observe standards of conduct which if breached might entail disciplinary charges. Mr Day’s outgoings by way of legal expenses followed upon the bringing of the charges with respect to his conduct, or misconduct. He was exposed to those charges and consequential expenses by reason of his office. The charges could not be viewed as remote from his office or of a private nature. Whether the charges were well-founded was not relevant to the question of deductibility. The Court held that the incurring of expenses by an employee to defend a charge that may result in their dismissal may not always establish a necessary connection to the employment which was productive of income. Much depended on what was entailed in the employment and duties it imposed upon an employee. In Mr Day’s case, the requisite connection was present.
Puttick v Tenon Limited (formerly called Fletcher Challenge Forests Limited) [2008] HCA 54 (12 November 2008)
Victoria was not a clearly inappropriate forum to decide a claim for damages arising from the asbestos-related death of a former employee of a New Zealand company, the High Court of Australia has held.
Janina Puttick’s late husband, Russell Puttick, was employed by Tasman Pulp and Paper Company in NZ between 1981 and 1989. He allegedly contracted malignant mesothelioma from exposure to asbestos during visits to factories in Belgium and Malaysia. Mr Puttick, a NZ citizen who had moved to Melbourne, died in 2005, just after commencing proceedings for damages in the Victorian Supreme Court. Mrs Puttick continued the claim. Tasman was a subsidiary of Tenon Limited. Tenon allegedly owed Mr Puttick a duty of care through the control it had over Tasman and its employees. Mr Puttick claimed that it had breached that duty. Tenon was incorporated in NZ. It sought an order permanently staying the proceedings or dismissing them summarily. Tenon contended that the alleged negligence occurred in NZ, that the law to be applied to determine the claim was NZ law, and that NZ’s statutory compensation scheme barred a common law claim.
In 2006 Justice David Harper held that the proceedings should be permanently stayed on grounds that Victoria was an inconvenient or inappropriate forum. It was then not necessary to decide Tenon’s application for summary judgment so Justice Harper did not express an opinion about the effect of the NZ no-fault compensation scheme on Mrs Puttick’s claim. Justice Harper held that NZ was the more appropriate forum because many witnesses and the relevant documents were in NZ. He held that the law governing substantive issues was the law of the place where the tort occurred, which he said was NZ, so the action should be permanently stayed.
Mrs Puttick appealed to the Victorian Court of Appeal, alleging that Justice Harper had made an error of law. Tenon cross-appealed, alleging that, because NZ law was the governing law and NZ law regulating the no-fault compensation scheme should preclude the negligence claim, her action should be dismissed as bound to fail. The Court of Appeal, by majority, dismissed Mrs Puttick’s appeal and held that the relevant law was the law of NZ. She appealed to the High Court.
The Court unanimously allowed the appeal. It held it was not yet possible to decide whether NZ law was the applicable law to decide the case. The Court held that the Court of Appeal and Justice Harper erred in deciding that the material available in this matter was sufficient to decide what law governed the rights and duties of the parties. Details about Mr Puttick’s factory visits and the relationships between Tenon, Tasman and Mr Puttick were lacking or ambiguous and were not resolved by determining Tenon’s application for a permanent stay. The Court held that, without those issues being resolved, not even a provisional finding could be made about where the alleged tort occurred. It was not possible, on the material available, to decide which legal system was applicable. All that Justice Harper and the Court of Appeal could decide was that NZ law was arguably the law that governed the dispute. Assuming the dispute was governed by NZ law, Tenon had not established that Victoria was a clearly inappropriate forum to try the dispute. Geographical proximity, similarities between legal systems and legislation for the determination of some trans-Tasman litigation meant Victoria was potentially an appropriate forum. The Court ordered that Justice Harper’s orders be set aside and that Tenon’s original summons be dismissed with costs.
Commissioner of Taxation of the Commonwealth of Australia v Word Investments Limited [2008] HCA 55 (3 December 2008)
A company that conducted commercial businesses to raise funds for a missionary organisation was entitled to the status of a tax-exempt charity, the High Court of Australia has held.
Since 1986, Word Investments has accepted deposits from the public which were invested at commercial rates of interest. Between 1996 and 2002 it operated a funeral business. Profits generated from the investment and funeral businesses supported Christian activities carried out by Wycliffe Bible Translators (International). The Australian arm, Wycliffe Bible Translators Australia, has had charitable status since 1 July 2000. Wycliffe’s missionaries were mostly active in developing countries. They learned the local language, taught people to read and write their language, translated the Bible into that language, and taught people how to read the Bible. Word was founded by people associated with Wycliffe to raise money in Australia to give to Wycliffe to carry out its purposes. Word does not directly carry out the training or despatching of missionaries overseas, the publishing of the Bible or the preaching of the gospel.
The Tax Commissioner rejected Word’s applications for endorsement as an income tax-exempt charity on the basis that it was not an organisation instituted to advance or promote charitable purposes. The Commissioner claimed there were four obstacles to a tax exemption. The first was that Word’s objects were not confined to charitable purposes. The second was that an entity conducting investment, trading or other commercial activity for profit was not a charitable institution even though it was established for the purpose of distributing its profits wholly or mainly to charities. The third was that the bodies to which Word gave its profits were not confined as to the use to which the funds could be put. The fourth was that Word did not have a physical presence in Australia and did not incur its expenditure or pursue its objectives principally in Australia.
The Administrative Appeals Tribunal set aside the Tax Commissioner’s refusal to endorse Word as a charity. The Federal Court of Australia dismissed an appeal by the Commissioner and allowed a cross-appeal by Word so that Word’s income tax-exempt status was extended back to 1 July 2000. The Full Court of the Federal Court dismissed the Commissioner’s appeal from those orders. The Commissioner then appealed to the High Court.
The Court, by a 4-1 majority, dismissed the appeal. It resolved the issues surrounding the four obstacles in Word’s favour. The Court held that Word’s purposes were charitable, that it was a charitable institution, and that that character was not lost by the fact that it did not advance charitable purposes directly but gave its profits to other institutions which did. It held that Word’s objects in its memorandum of association were for advancing religious charitable purposes and the powers set out in the memorandum did not authorise conduct which did not further those purposes. The goal of making a profit was not an end in itself but was incidental to its charitable purposes. Its commercial activities were not intrinsically charitable but were charitable in character. Wycliffe was not at liberty to spend the money it received from Word on non- charitable objects and there was no evidence that it did. The Court held that Word had a physical presence exclusively in Australia and advanced its money to Wycliffe in Australia. Wycliffe was not required under the Income Tax Assessment Act to spend the money within Australia. The Act only required that Word incur its expenditure and pursue its objectives principally in Australia.
Kennon v Spry; Spry v Kennon [2008] HCA 56 (3 December 2008)
The assets of a family trust established before marriage could be taken into account in property settlement orders under the Family Law Act, the High Court of Australia has held.
Dr Ian Spry, a retired Victorian barrister, married Helen Spry in 1978. They had four daughters, now in their twenties. In 1968, Dr Spry created the ICF Spry Trust with himself and his siblings, their spouses and their children as beneficiaries. He was the sole trustee. In 1983, he excluded himself as a beneficiary for land tax reasons. In 1998, when his marriage was in difficulty, Dr Spry further varied the trust to exclude himself and his wife as capital beneficiaries. The Sprys separated in October 2001. In January 2002, Dr Spry divided the income and capital of the trust between four trusts he set up for his daughters. Mrs Spry filed for divorce in the Federal Magistrates Court in December 2002. The divorce was finalised in February 2003.
In April 2002, Mrs Spry applied to the Family Court for orders for property settlement and maintenance. In 2005 Justice Strickland found that contributions to the couple’s assets, including trust assets, were 52 per cent by Dr Spry and 48 per cent by Mrs Spry, and that Dr Spry was entitled to $5,105,435 and Mrs Spry $4,712,709. Taking account of assets Mrs Spry already had, Justice Strickland ordered Dr Spry to pay her $2,182,302. Justice Strickland found that the steps taken with respect to the ICF Spry Trust in 1998 and 2002 were designed to keep property away from his wife and the Family Court. Under section 106B of the Act, he set aside the 1998 variation and the 2002 dispositions of assets. Dr Spry appealed. He and Edwin Kennon cross-appealed in their capacity as joint trustees of three daughters’ trusts. Dr Spry and his daughter Elizabeth cross-appealed in their capacity as joint trustees of the Elizabeth Spry Trust. The Full Court of the Family Court, by majority, dismissed the appeal and cross-appeals. Dr Spry and the joint trustees of the children’s trusts appealed to the High Court against both dismissals.
The Court, by a 4-1 majority, dismissed the appeals and upheld Justice Strickland’s order for Dr Spry to pay Mrs Spry $2,182,302. The appellants were ordered to pay Mrs Spry’s costs. Dr Spry and the children argued that the assets of the trust were not part of the asset pool to be considered in making property orders. Three Justices held that without the 1998 variation and the 2002 dispositions, Mrs Spry would have had a right due administration of the trust and to due consideration as a beneficiary. Dr Spry would have had a power to appoint to her the whole of the assets of the trust. The Court held that these rights were property of the parties to the marriage. It held that the Family Court could make orders in property settlement proceedings as if changes to property rights brought about by the divorce had not yet occurred. The High Court held that it was open to Justice Strickland to make the orders he did on the basis that the asset pool comprised $9,818,144. One Justice supported Justice Strickland’s orders by reference to section 85A of the Act providing for variation of post-nuptial property settlements.
Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57 (11 December 2008)
Indemnity for a loan was unavailable when loan payments were late, even if the lender accepted the payments as “punctual”, the High Court of Australia has held.
In 1997, Oceania Agriculture (OAL) promoted a tea tree plantation investment scheme that was marketed as having tax advantages for investors. Each participant was granted a 17-year licence over an allotment of land on which would be planted at least 18,000 tea trees for the production of tea tree oil. They paid OAL annual licence and management fees. OAL managed the project and established and maintained the trees. Investors could obtain finance under a loan agreement to fund the initial management fees and those who accepted finance from Agricultural and Rural Finance (ARF) had the option of entering into a loan indemnity agreement with OAL and ARF. For a flat fee, if amounts due under the loan agreement were paid punctually, OAL would indemnify obligations under the loan contracts if the business ceased due to certain events.
Between October 1997 and May 1999, ARF made four loans to investor Bruce Gardiner. Each loan agreement required periodic payments and provided that the whole of the principal outstanding was immediately payable, at the option of ARF, if Mr Gardiner defaulted in the punctual payment of interest or any repayment instalment. Mr Gardiner did not pay certain amounts under three of the four loan agreements on the due date. When payments were late, ARF accepted payment and did not choose to accelerate repayment of the outstanding principal. Mr Gardiner ceased to carry on the tea tree business due to an event of a kind specified in the indemnity agreement. When the scheme collapsed, ARF sought to recover its loans and sued Mr Gardiner and 215 other borrowers in the New South Wales Supreme Court. The Chief Judge in Equity, Justice Peter Young, rejected all of Mr Gardiner’s defences to ARF’s claims for payment and dismissed his cross-claims against ARF and OAL. ARF obtained judgment for the whole of the amounts it claimed as principal and most of its claim for interest. In the NSW Court of Appeal, ARF obtained judgment for its claim under Mr Gardiner’s fourth loan agreement, but lost its claims to recover principal or interest in respect of the first three loan agreements. ARF appealed to the High Court in respect of the first two agreements. The third loan agreement was performed punctually and ARF no longer disputed that the indemnity agreement was effective and enforceable and that it could only look to OAL for repayment.
In the High Court, Mr Gardiner sought to rely on the indemnity agreements for both loans, claiming that his overdue payments should be regarded as “punctual” and that ARF, in its statements and actions, had waived compliance with due dates by accepting late payments. Mr Gardiner submitted that the waiver took the form of an election between inconsistent rights, forbearance from exercising a contractual right, or the abandonment or renunciation of a right.
The High Court unanimously allowed the appeal with costs. It held that Mr Gardiner did not pay punctually, indemnities for the first and second loans were therefore not effective and enforceable, and there had been no waiver by ARF or OAL. “Punctual” had its ordinary meaning and did not depend on ARF’s attitude to late payments. The Court held that, in the circumstances of the case, none of the three forms of waiver contended for by Mr Gardiner applied. Even if ARF had waived its rights to punctual payment, that did not bind OAL to indemnify the loans. The obligation for punctual payments was imposed by the loan agreements and was owed to ARF, not to OAL. ARF was entitled to judgment for the amounts owing for the first and second loans as well as for the fourth loan.
