High Court of Australia Judgments – Summary Notes

 CGU Insurance Limited v AMP Financial Planning Pty Ltd (two matters) [2007] HCA 36 (29 August 2007)

AMP was not entitled to be indemnified by its insurer for payouts it made to investors because it had not established by appropriate evidence that the payments were reasonable, the High Court of Australia has held.

In 1999, AMP entered into a professional risks insurance contract with CGU. That same year, Ashok Pal and Anthony Howarth, who conducted the Macquarie Advisory Group (MAG) and were representatives of AMP, were found to have invested $3.4 million of clients’ funds in a company already in deep financial trouble and the investors lost their money. Mr Pal and Mr Howarth became bankrupt, and the Australian Securities and Investments Commission (ASIC) banned them from the securities industry and from company management. On becoming aware of the large losses, AMP notified CGU, its insurer, and sought indemnity under the policy. AMP drew up a protocol for handling claims in which AMP would notify CGU of each claim and prepare a liability report and CGU would decide within 14 days whether to settle or defend the claim. CGU agreed in principle to the protocol, but held off deciding whether it would indemnify AMP for the losses and repeatedly told AMP to act as a “prudent uninsured”. AMP, under pressure from ASIC to resolve claims promptly and after repeated requests to CGU for determination of AMP’s liability, went ahead and paid out more than $3.24 million for 47 claims in October and November 2001. CGU eventually denied AMP indemnity and AMP commenced proceedings alleging that CGU was in breach of its policy. It sought damages for the investors’ claims paid, interest and investigation costs and sought a declaration that AMP was entitled to indemnity for outstanding claims.

In the Federal Court, Justice Peter Heerey dismissed the application. He held that AMP had no belief that CGU had accepted liability and that AMP paid the settlement amounts because it considered this was in its own best interests to do so, not because of any representation by CGU that it would not require AMP to prove its liability to the investors. AMP had also not shown that the settlements were reasonable and had failed to take into account whether section 819(4) of the Corporations Law could have made MAG rather than AMP liable. The Full Court of the Federal Court, by majority, allowed an appeal by AMP and remitted to Justice Heerey questions on whether AMP was induced by CGU into settling the claims. CGU appealed to the High Court.

The Court, by a 4-1 majority, allowed the appeal. It held that nothing in CGU’s conduct conveyed a representation to AMP that it would not be required to prove its liability to investors to receive indemnity. Nothing in AMP’s conduct showed that it relied on such a representation. AMP had no belief that CGU accepted liability, instead making payments for its own commercial reasons to ensure legal proceedings for determining investors’ claims did not occur and to preserve relations with ASIC. It was open to Justice Heerey to conclude that AMP had not shown the settlements were reasonable.

In the Full Court of the Federal Court, CGU had cross-appealed against Justice Heerey’s costs order. The Full Court, in allowing the appeal by AMP, did not deal with the cross-appeal, and CGU brought a second appeal to the High Court. The High Court ordered that the matter should be remitted to the Full Court for consideration of CGU’s cross-appeal.

Shu-ling Chang and Tai-hsing Chang v Laidley Shire Council [2007] HCA 37 (29 August 2007)

An application to subdivide land for a housing development was rightly refused by the Laidley Council as it did not comply with legislation then in force, the High Court of Australia has held.

In 2004 the Changs applied to Laidley Council to subdivide their 16.67-hectare block at Blenheim near Laidley in south-eastern Queensland into 25 lots. The reconfiguration was not permitted under revised planning provisions. Under the Council’s 1996 town plan, the subdivision was permissible. A new planning scheme adopted in March 2003 meant the 25 lots would be too small as new rural subdivisions had to be at least 100 hectares, the reconfiguration could not take place, and the value of the Changs’ interest would be reduced. However, Queensland’s 1997 Integrated Planning Act allowed affected land owners to seek redress from their Council within two years of the adoption of such a planning scheme. Within that period, expiring in March 2005, the Changs could make a “development application (superseded planning scheme)” (DA(SPS)). The Council could then either pay compensation or consent, in whole or in part, to the development sought. The Changs lodged their DA(SPS) in December 2004. However in September 2004 the earlier Act was superseded by the Integrated Planning and Other Legislation Amendment Act (IPOLA), which cut short the two-year period. IPOLA provided for a completely revised regional planning scheme for south-eastern Queensland. The Council did not accept the Changs’ DA(SPS) as the development was contrary to the draft regulatory provisions for the regional plan provided for by IPOLA.

The Changs sought to recover compensation for the diminished value of their land. The Planning and Environment Court held that the Changs’ development application was not a “properly made application”. The Court of Appeal refused them leave to appeal. The Changs then appealed to the High Court. They argued their entitlement to make a DA(SPS) had accrued under the 1997 Act, that they had applied for the DA(SPS) within the two-year leeway provided by that Act, and that because the 2004 changes did not expressly or impliedly repeal the compensation provisions of the 1997 Act their entitlement to compensation survived even if the Council could no longer give approval for their proposed development.

The Court unanimously dismissed the appeal. It held that the effect of IPOLA was to deprive the Changs of what would otherwise have been an entitlement to compensation if they had made a DA(SPS) within time. Under IPOLA, the Changs’ application was not a properly made application. As the application was made after IPOLA came into effect, their application fell to be determined in accordance with the legislative provisions that were then in force. The Court held that IPOLA did not have retrospective operation and that no right to compensation had accrued to the Changs.

Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd, the State of Western Australia, the State of South Australia and the State of New South Wales [2007] HCA 38 (29 August 2007)

A corporation does not derive immunity from civil proceedings for contraventions of the Trade Practices Act (TPA) through conducting business with governments, the High Court of Australia has held.

Baxter Healthcare is the Australian arm of a global medical products company. It manufactures various sterile fluids for hospitals and fluids and apparatus for home-based kidney dialysis patients. Baxter has the only Australian manufacturing plant for certain types of sterile fluids, at Toongabbie in Sydney. Between 1998 and 2001, Baxter entered into long-term contracts to supply sterile fluids and dialysis products to public hospitals in four States and the ACT. Baxter offered to supply products either priced on an item-by-item basis or heavily discounted by bundling together on a sole-supplier basis. The resulting contracts provided for the total supply of certain sterile fluids and at least 90 per cent of dialysis fluids for up to five years. None of the contracts is still on foot.

In 2000, the South Australian Department of Human Services sought tenders for various products and Baxter and two other companies responded. Baxter’s Offer 1 was an item-by-item bid for two years, with optional extensions. Offer 2 was a combined bid on an exclusive basis for five years with volume discounts. The Department requested a revised offer for a five-year term for all products, except renal products, with a volume discount. Baxter’s Offer 1A did not include this discount. Both Offer 1A and Offer 1 cost $5,914,291. The bundled Offer 2 cost $4,501,053, which included renal products but was cheaper than Offer 1A. The Department protested and raised concerns about Baxter’s conduct possibly breaching section 46 of the TPA. Offer 1A was not accepted and a different offer from Baxter was later accepted.

Section 46 is concerned with misuse of market power and section 47 with exclusive dealing. Section 46 prohibits corporations taking advantage of market power to eliminate or damage a competitor or to deter or prevent competitive conduct. Exclusive dealing in section 47 includes corporations’ supplying goods on condition that the customer will not acquire certain goods from a competitor or refusing to supply goods because the customer has not agreed not to acquire goods from a competitor, if the conduct has the purpose or effect of substantially lessening competition.

In the Federal Court of Australia, the ACCC sought declarations that Baxter had committed 20 contraventions of sections 46 and 47, plus monetary penalties and injunctions. Justice James Allsop found that Baxter’s conduct would have contravened section 46 in one respect in relation to Offer 1A in SA and section 47 in a number of respects. The conduct was not in making or giving effect to a contract but occurred before any contract was entered into. However Justice Allsop held that the Act did not apply to this conduct due to the Crown immunity Baxter derived from doing business with the States and dismissed the ACCC’s application. The Full Court dismissed an appeal, but did not decide Baxter’s argument that Justice Allsop was wrong to conclude that, but for immunity, there would have been breaches of sections 46 and 47. The ACCC appealed to the High Court.

The High Court, by a 6-1 majority, allowed the appeal. It held that Baxter, in dealing with a government, did not enjoy a general immunity not available to the government if the government itself had carried on a business. Such a conclusion would go beyond what is necessary to protect the legal rights of governments. The Court rejected an argument that the TPA does not prevent the Crown in right of a State or Territory from making any contract it wishes and that the TPA preserves the Crown’s freedom by providing that corporations dealing with the Crown should be free to make any contract unfettered by any constraints. The Court held that this argument was not supported by established principles of statutory construction and could not be reconciled with the purpose and subject matter of the TPA. It held that in its dealings with the States and Territories, Baxter was bound by sections 46 and 47. Conduct found to have fallen within the prohibitions of sections 46 and 47 should now be subject to remedies, including pecuniary penalties, sought by the ACCC. The Court remitted the case to the Full Court of the Federal Court for further consideration of remaining issues, including whether Baxter’s conduct contravened sections 46 and 47.

Lemaluofuifatu Alipapa Tofilau v The Queen Matthew Joseph Marks v The Queen Shane John Hill v The Queen Malcolm Joseph Thomas Clarke v The Queen [2007] HCA 39 (30 August 2007)

Confessions to unsolved murders made to Victorian undercover police posing as criminal gangsters were voluntary and admissible as evidence, the High Court of Australia has held.

Mr Tofilau was suspected of strangling his ex-girlfriend, Belinda Loree Romeo, in her unit. Mr Marks was suspected to have beaten his great-aunt, Margaret Mary O’Toole, to death after borrowing large sums of money from her. Mr Hill was suspected of killing his stepbrother, Craig Anthony Reynolds, in the house they shared by fracturing his skull with a blunt object. Mr Clarke was suspected of killing six-year-old Bonnie Melissa Clarke (no relation) in 1982. He had been boarding with Bonnie’s mother until three months before. Bonnie had been stabbed in the chest and sexually assaulted. Police had been unable to make a strong enough case against any of the men.

In a technique imported from Canada, each of the four Melbourne men was tricked by undercover police posing as criminals into confessing. They were approached by supposed criminal gangs playing out various crime scenarios over several months. Each was told that in order to be a gang member and to profit from the gang’s activities he had to tell the gang boss the truth about his involvement in the murder. Each was told that the boss could make any problems disappear.

In Mr Tofilau’s case, typical of all four cases, undercover police staged 16 scenarios in which he participated in or observed what appeared to be serious criminal activity. This was designed to instil confidence that association with the gang would bring financial benefits and protection from police investigation. In March 2002 police served notice on Mr Tofilau that they were applying to the Magistrates Court for permission to take a DNA sample from him. On hearing of this, a gang member exhorted him to tell the truth and Mr Tofilau admitted strangling Ms Romeo. He was taken to a meeting in a hotel room with the gang boss. The boss told him that if he told the truth the boss would make it “go away”. Mr Tofilau described how he had killed Ms Romeo with her scarf which he threw into a car at her unit block. He was arrested the next day and later convicted of murder.

In each case the trial judge held that what each man had said to people he believed to be criminal gang members did not constitute a statement to a person in authority. Each trial judge also held that the confession was voluntary. The convictions were upheld by the Court of Appeal. All four men appealed to the High Court which, by a 6-1 majority, dismissed the appeals.

The Court held that the confessions of all four were procured by inducements, but that the people holding out the inducements — police officers posing as criminals — were not persons in authority. The men believed they had been offered inducements, not by police, but by gangsters apparently able to influence certain corrupt police officers. The Court held that, although the confessions were obtained by deception, the wills of the appellants were not overborne, there was no duress or intimidation, and the confessions were voluntary. Mr Clarke also argued that the trial judge should have exercised his discretion to exclude the confession for reasons of unreliability, unfairness and public policy. Those arguments were dismissed by both the Court of Appeal and the High Court.

SZATV v Minister for Immigration and Citizenship and Refugee Review Tribunal [2007] HCA 40 (30 August 2007) SZFDV v Minister for Immigration and Citizenship and Refugee Review Tribunal [2007] HCA 41 (30 August 2007)

Relocation to another part of a country of nationality by applicants for protection visas may sometimes be reasonable, the High Court of Australia held in two judgments today.

SZATV, from Chernovtsky in what is now Ukraine, trained as a civil engineer but worked as a journalist. He wrote stories on regional government corruption but after a campaign of alleged intimidation he came to Australia in 2001. He was refused a protection visa. That decision was affirmed by the Refugee Review Tribunal in 2003. The RRT accepted that SZATV had been subjected to systematic harassment, including physical mistreatment, but held that the persecution was localised and he could reasonably move to another part of Ukraine so his fears of persecution upon returning to Ukraine were not well-founded. Appeals to the Federal Magistrates Court and the Federal Court of Australia were dismissed. SZATV appealed to the High Court. The appeal was heard with the appeal by SZFDV also concerning the internal relocation principle.

SZFDV, from the Indian State of Tamil Nadu, claimed his family were Communist sympathisers and that his brother was killed by members of the major Tamil parties, the DMK and AIADMK. At the mill where he worked he was elected a trade union leader and was involved in pay disputes. SZFDV said the mill owners held him responsible for the mill’s closure by government order in 2002, that the owners used their DMK influence to procure the laying of false charges of murder of a DMK leader, and that he was assaulted by DMK members and his family threatened. He moved to the capital Chennai (formerly Madras) where he continued to fear DMK persecution. He left for Australia in May 2004. An application for a protection visa was refused. This decision was upheld by the RRT, the Federal Magistrates Court and the Federal Court. The RRT noted that the adjoining State of Kerala had a large Tamil-speaking community and that the Communist Party had a significant presence. SZFDV appealed to the High Court.

The Court unanimously allowed SZATV’s appeal but refused SZFDV’s appeal by a 4-1 majority. It held that whether it is reasonable or practicable to relocate to another part of the country depends upon the particular circumstances of the applicant and the impact upon that person of relocation. Differential treatment in matters like race or religion may be encountered in parts of a country whereas in other parts there is insufficient basis for a well-founded fear of persecution. In other cases, the conduct or attribute of an individual attracting persecution may be unrelated to regional geography.

In SZATV’s case, the Court held that the effect of the RRT’s decision was that SZATV was expected to move elsewhere, not work as a journalist, and live discreetly so as not to attract the attention of authorities. It held that the RRT had not properly considered whether his fear of persecution was well-founded and ordered the RRT to reconsider SZATV’s application for review. In SZFDV’s case, the Court held that it may be reasonable to relocate in the country of nationality to a region where objectively there is no appreciable risk of recurrence of the feared persecution. It held that the RRT had properly considered that SZFDV could safely relocate to Kerala and that it would not be unreasonable to expect him to do so.

Roads and Traffic Authority of New South Wales v Philip James Dederer and Great Lakes Shire Council [2007] HCA 42 (30 August 2007)

The Roads and Traffic Authority did not breach its duty of care to a teenager who became a partial paraplegic by diving off a bridge, the High Court of Australia has held.

On 31 December 1998, Mr Dederer, then aged 14, dived from the bridge across the Wollamba River, struck a submerged sandbank and suffered a severe spinal injury. Pictorial signs prohibited diving and written signs prohibited climbing on the bridge. Mr Dederer spent family holidays in the area so he knew of the sandbar from boating and that the water varied in depth, but he had not jumped or dived from the bridge until jumping twice the day before the accident. Both times he was totally submerged in the water and his feet did not touch bottom. Mr Dederer had frequently seen people jumping and occasionally diving off the bridge. He had seen a “no diving” sign but did not think the activity was dangerous. Council officers and police had been unable to stop other people diving. Mr Dederer’s dive was the first reported accident since the bridge was built in 1959.

Mr Dederer sued the RTA and the Council in the NSW Supreme Court for negligence. Justice John Dunford found for Mr Dederer against both defendants but reduced damages by 25 per cent for Mr Dederer’s contributory negligence. Mr Dederer was awarded $840,000, with RTA ordered to pay 80 per cent of the damages and the Council 20 per cent. Justice Dunford found that the RTA was negligent in failing to erect signs warning of the danger of shifting sands and variable depth, in failing to replace horizontal railings with vertical pool-style fencing, and in failing to change the flat top of the handrail to a triangular shape that would be difficult to stand on.

The Court of Appeal held that the NSW Civil Liability Act meant that the Council was not liable but that the Act did not apply to the action against the RTA. The Court of Appeal, by majority, dismissed the appeal by the RTA apart from increasing the proportion of Mr Dederer’s contributory negligence from 25 per cent to 50 cent. The RTA appealed to the High Court and Mr Dederer cross-appealed against the increase in his contributory negligence. The Council was joined as a second respondent but played no active part in the appeal.

The High Court, by a 3-2 majority, allowed the appeal and dismissed the cross-appeal. It held that a duty of care imposes an obligation to exercise reasonable care, not a duty to prevent potentially harmful conduct. The extent of the obligation owed by the RTA is that of a roads authority exercising reasonable care to see that the road is safe for users exercising reasonable care for their own safety. The Court held that the risk arose not from the state of the bridge but from the risk of jumping into shallow water and shifting sands, which were not under the RTA’s control. The magnitude of the risk and the probability of injury had to be balanced against the expense, difficulty and inconvenience of any alleviating action. New fencing was estimated to cost $150,000 and a triangular handrail $108,072 and would not necessarily stop people jumping from bridges. The Court held that the existing “no diving” signs were a reasonable response to the risk and the RTA did not breach its duty of care.

Vickie Lee Roach v Electoral Commissioner and Commonwealth of Australia

Chief Justice Murray Gleeson made the following statement:

Prior to an amendment of the Commonwealth Electoral Act in 2006, prisoners serving a sentence of three years or longer were not entitled to vote. In 2006, the Act was amended to provide that prisoners serving any sentence of imprisonment were not entitled to vote.

The plaintiff challenged the validity of the 2006 amendment. The plaintiff also argued that, if the 2006 amendment were invalid, either the pre-2006 legislation did not continue to apply, or, if it did, it also was invalid.

The Court, by majority, upholds the challenge to the 2006 amendment. It also holds that the pre-2006 legislation continues in force and is valid. Reasons for the decision will be published at a future date.

The order of the Court is as follows:

The questions stated in the amended special case filed on 9 July 2007 be answered as follows:

(1)

(2)

(3)

I publish that order.