Endeavouring to Solve a Contracting Puzzle: Verve Energy

By Wayne Jocic and Matthew Bell

Verve Energy Case Page

Every transactional lawyer, and his or her clients, can imagine the situation. Contract negotiations have stalled because one party is unable to commit unconditionally to an obligation: aspects of its performance, it says, are beyond its control. That party might be a builder who is reluctant to provide a warranty that a third party assessor will accredit a building’s environmental sustainability to a particular standard, or an information technology contractor which needs to provide documents to independent consultants but cannot guarantee that they will keep them confidential.

The contract needs to be finalised and signed. Where do the parties turn?

Inevitably, the drafter or negotiator will call for help from an ‘endeavours’ clause. Whether the adjective in which it is clothed is ‘best’, ‘reasonable’ or otherwise, the concept often ends up being the foundation on which the conditioned obligation rests. Prudent drafters typically seek to add precision, perhaps by specifying criteria by which the endeavours are to be tested, or by setting out specific action that the counterparty must take.

In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 (Verve Energy), the High Court was called upon to decide whether a clause requiring gas sellers to use ‘reasonable endeavours’ to supply a ‘supplemental’ amount of gas was breached by the sellers. They had declined to make that gas available, largely because they could charge more than the contracted amount for it. Continue reading

An Opportunity Saved: Duress in the High Court of Australia: Verve Energy

By Professor Elise Bant

Verve Energy Case Page

Some may regard the recent High Court of Australian decision in Electricity Generation Corporation v Woodside Energy Limited [2014] HCA 7 (Verve Energy) as a missed opportunity to clarify the doctrine of duress. The basic elements of duress are straightforward: the plaintiff must have been (1) subjected to illegitimate pressure which (2) caused the plaintiff to confer a benefit on the defendant (see Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, 45–6 (McHugh JA)). However, the boundaries of the doctrine are highly controversial. Verve Energy seemed to provide the opportunity to examine some of these controversies, in particular the operation and boundaries of so-called ‘economic duress’ and whether ‘lawful act duress’ is anything other than a legal oxymoron.

Why did the High Court not consider duress?
As it was, Verve Energy was decided on contractual principles. Specifically, a majority of the High Court held that the respondent Woodside had not breached any contractual duties to Verve in the light of the Court’s interpretation of key contractual provisions. It was conceded by the parties that this rendered consideration of the duress case unnecessary (at [33]). This narrow approach to deciding the case, however, leaves the door open for the Court to consider the duress issues afresh, and on the basis of full and proper argument, in due course. In the meantime, the Court of Appeal decision insofar as it relates to duress remains a valuable addition to the body of authority on this important area. Furthermore, certain characterisations of duress made in argument before the High Court that, if accepted, would have substantially altered the nature of duress in Australia, and for the worse, have for the time being been shelved. This again leaves it open to the High Court on another occasion, and in the light of full argument on the points, to reinforce the core nature and operation of duress in Australia. Continue reading

Protecting the Plaintiff’s Expectations: Clark v Macourt

By Dr Katy Barnett

Clark v Macourt Case Page

Clark v Macourt [2013] HCA 56 is a case where the damages awarded far outstripped the cost of the original contract. The contract concerned the sale of an IVF business for close to $387,000, but a majority of the High Court affirmed the decision of the trial judge that the purchaser of the business was entitled to damages of over $1.2 million for a breach of warranty, as a substantial amount of the sperm included as an asset of the business did not comply with the warranty. This award was made notwithstanding the fact that the purchaser passed the cost of purchasing substitute sperm onto patients. This post will concentrate on the High Court’s recognition of the plaintiff’s interest in performance of the contract and the way in which damages are measured. Continue reading

Is Every Crook a Money Launderer? Milne v The Queen

By Professor Jeremy Gans

Milne v The Queen Case Page

Some trace the term ‘money laundering’ to the coin-operated Chinese laundromats that Al Capone pretended were the source of millions he earned from Prohibition-era alcohol sales and vice. This dubious origin-story rests on some hard facts: that crime can pay, that it may pay a lot, but that not all money is equal. If criminals want to spend their profits without attracting attention to their crimes, they have to find a way to make it look like their riches were legitimately earned. That is, illicit money is of little value until it is ‘cleaned’.

The criminal law now adds to the wealthy criminal’s burden by deeming the act of money laundering to be an especially heinous offence in and of itself. In Australia, after police and prosecutors baulked at the dirty work of sorting out criminals’ financial shenanigans, legislatures and courts have recently stretched the offence’s definition to include simply handling any money or property en route to or from any crime. The result is that many very ordinary criminal acts can now also be charged as money laundering. Shoplifting. Bank robbery. Social security fraud. Commercial offences. Just about any crime that involves anything of value. That includes tax evasion, the only crime the Americans were able to pin on Al Capone. Or it did, until the High Court put a stop to the bloat of money laundering last month.

Airing some dirty laundry

On Valentine’s Day 2004, officers of the Australian Crime Commission entered a presidential suite in Melbourne’s Sheraton Towers (now The Langham), armed with a warrant to search for evidence that celebrity lawyer Michael Brereton had schemed to evade tax. Brereton himself was never charged with tax fraud, but the Toshiba notebook computer they seized (belonging to the room’s occupant, Philip Egglishaw) yielded a list of the clients of Egglishaw’s Geneva firm Strachan and prompted seven federal agencies to join forces to investigate offshore tax havens.

Project Wickenby has resulted in dozens of prosecutions and convictions and has featured at least yearly in the High Court’s caseload this decade. In 2010, the Court rejected attempts by one of Wickenby’s most famous (but also never charged) targets, Paul Hogan, to keep a document detailing his tax affairs secret. The next year, the Court ruled that the common law did not prevent the Commission from compulsorily examining one target’s wife. In 20102011 and 2013, the Court dismissed three criminal appeals by convicted Wickenby targets. This run of successes in the High Court ended with this year’s Milne v The Queen [2014] HCA 4. Continue reading

Australia’s Indefinite Stance on Indefinite Detention: Plaintiff M76/2013 v Minister for Immigration and Citizenship

By Megan Driscoll and Houston Ash

Plaintiff M76/2013 Case Page

Dozens of people who have been found to be genuine refugees remain in immigration detention in Australia because they are the subjects of secret adverse security assessments made by the Australian Security and Intelligence Organisation (ASIO). Plaintiff M76/2013 v Minister for Immigration and Citizenship [2013] HCA 53 was a case brought by one of these refugees, challenging her continued detention under the Migration Act 1958 (Cth). It was of particular interest to High Court watchers because the plaintiff sought to challenge the correctness of the controversial 2004 High Court decision of Al-Kateb v Godwin [2004] HCA 37. In that case, a majority of the High Court held that the Migration Act could authorise the indefinite detention of ‘unlawful non-citizens’. In the event, a majority of the High Court in Plaintiff M76 chose not to consider the correctness of Al-Kateb. However, Plainitff M76 nonetheless sheds some light on the prospect of Al-Kateb being overturned in the future. It also ties together two recent decisions of the High Court relating to Australia’s asylum seeker assessment procedures.

Plaintiff M76’s entry into Australia
The plaintiff in this case is a Sri Lankan Tamil woman, known to us as Plaintiff M76, who entered Australia by boat at Christmas Island in May 2010 seeking asylum. Under the Migration Act, she was classified as an ‘unlawful non-citizen’ and, having arrived in Australia at an ‘excised offshore place’, she was also an ‘offshore entry person’ (now ‘unauthorised maritime arrival’). Section 189(3) of the Migration Act required officers of the Department of Immigration to immediately detain her, and under s 196(1) she must remain in immigration detention until she is removed from Australia, deported, granted a visa, or she is dealt with for the purpose of removing her to a regional processing country. Section 198(2) of the Migration Act requires officers to remove Plaintiff M76 from Australia as soon as reasonably practicable provided that she either has not made a valid application for a substantive visa or her visa application has been finally determined. Continue reading

Digging Down to the Principle of Legality: Lee v New South Wales Crime Commission

By Anna Dziedzic

Lee v New South Wales Crime Commission Case Page

In Lee v New South Wales Crime Commission [2013] HCA 39, the High Court split 4:3 on the application of the ‘principle of legality’ — a rule of statutory interpretation which requires parliament to use clear statutory language if it intends to restrict fundamental rights or depart from general principles of law. This post attempts to trace whether the differences between the members of the Court reflect merely a different interpretation of the NSW crime legislation in question, or lie at the deeper level of the rationale and operation of the principle of legality.

NSW’s criminal assets recovery legislation
Father and son Jason Lee and Seong Won Lee were arrested for money laundering, drugs and firearms offences. After they were charged — but before the completion of their trial — the NSW Crime Commission applied to the NSW Supreme Court for various orders under the Criminal Assets Recovery Act 1990 (NSW).

This Act sets out a scheme for the confiscation of property if the Supreme Court finds it ‘more probable than not’ that a person has engaged in serious crime related activity (s 3(a)). There is no requirement for the person to have been convicted of a criminal offence.

Section 31D authorises the Crime Commission to seek orders for the examination of a person about the person’s affairs or those of another. Such examinations are to be held before the Supreme Court. During an examination, the person must provide information even if it tends to incriminate him or her, but such information is not admissible in criminal proceedings (s 31A). In other words, the legislation abrogates the privilege against self-incrimination but provides ‘direct use’ immunity.

The Crime Commission applied for an order that Jason Lee and Seong Won Lee be examined on oath before the Court. The Judge hearing the application refused to make the order on the grounds that it would expose the Lees to questioning about matters relevant to the criminal charges they were facing, creating a real risk of interference in their ongoing criminal trials. The NSW Court of Appeal overturned this decision. Jason and Seong Won Lee then appealed to the High Court. Continue reading

Fine Print Disclaimers May Not Protect Advertising from being Misleading: Australian Competition and Consumer Commission v TPG Internet Pty Ltd

By Dr Jeannie Marie Paterson and Veronica Wong

ACCC v TPG Internet Pty Ltd Case Page

Section 18 of the Australian Consumer Law (previously s 52 of the Trade Practices Act 1974 (Cth)) contains a broad ranging prohibition on conduct that is misleading or deceptive or likely to mislead or deceive. Misleading conduct in advertisements by traders causes harm by distorting the purchasing choices of consumers. This may reduce competition in the market by leading consumers to favour products that don’t have the features that are promoted. It may also increase costs for consumers, incurred either by entering into contracts that are not in their best interests or by incurring search costs that are wasted when they discover that the product does not exist as represented.

In Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54, the High Court confirmed importance of s 18 in protecting consumer interests by holding that so-called ‘headline’ advertising may be misleading notwithstanding the existence of a fine print disclaimer qualifying the representations in the headline statement.

The High Court also confirmed that deterrence should play a ‘primary’ role in setting the appropriate penalty to be imposed on a trader for a contravention of s 18. Specifically, the court should consider the need to deter offending conduct and any penalty imposed should be significant enough that it is not merely a cost of doing business. A majority of the High Court (French CJ, Crennan, Bell and Keane JJ; Gageler J dissenting) held that the Full Federal Court erred in setting aside the findings of primary judge and restored the pecuniary penalty of $2 million.

The decision of the High Court in TPG shows that whether an advertisement is misleading contrary to s 18 of the ACL should, as the words of the section suggest, be assessed by reference to the impressions conveyed by the advertisement in the circumstances in which it is delivered, and not merely by reference to the existence of technically correct information available to those consumers who choose to look for it or by reference to the presumed background knowledge of consumers. This approach, combined with the recognition that the penalty for contravention of s 18 is aimed at genuine deterrence of the offending behavior, is entirely consistent with the consumer protection purposes of the legislation. Continue reading

Is Victoria’s Constitution Invalid? Rutledge v Victoria

By Dr John Waugh

So you don’t want to pay your council rates, or your parking fines? If you live in Victoria, a bit of searching on the internet will provide you with what looks like a great solution: you don’t need to pay, because the Victorian Constitution is invalid. Anything that local councils do under its authority is invalid too. These arguments recently came before the High Court, not for the first time, in Rutledge v Victoria [2013] HCATrans 294 (Hayne J).

Mr Rutledge claimed that he wasn’t bound to pay his rates to the Greater Bendigo City Council, because the creation of the Council wasn’t properly authorised. In effect, the argument was that the Victorian Parliament couldn’t validly establish the Council, because the power it relied on was given by the Constitution Act 1975 (Vic), and that Act was invalid.

Law and mystery
Mr Rutledge had earlier made the same claims in the Victorian Supreme Court, without success. Now he took his case against the State of Victoria and the Greater Bendigo City Council to the High Court. They applied for judgment against him, on the ground that his action was bound to fail.

It’s not hard to see the appeal of arguments like these, at least until you look at the details. Arguments about constitutional validity turn up routinely in the news, and occasionally the courts do indeed overturn Acts of Parliament or government decisions on constitutional grounds. To the ordinary ratepayer, it’s not immediately apparent what the difference is between, on the one hand, arguments that the High Court has accepted in such cases as South Australia v Totani [2010] HCA 39 (the Finks Motorcycle Club case) and Williams v Commonwealth [2012] HCA 23 (the school chaplains case) and, on the other, the arguments put forward in Rutledge and similar cases.

From the outside, constitutional law is often mysterious. The subtle and complex grounds on which challenges succeeded in Totani and Williams seem to hold out the promise that similarly arcane reasoning might succeed in other situations. True, the consequences of accepting the arguments for Mr Rutledge would be sweeping, entailing the invalidity of Victoria’s constitution, but it’s possible to find comparable examples by reaching further back into history. Continue reading

Fly-In Fly-Out Workers Entitled to Accommodation while on Strike: Construction Forestry Mining and Energy Union v Mammoet Australia Pty Ltd

By Adriana Orifici

CFMEU v Mammoet Australia Pty Ltd Case Page

The High Court’s final decision before the 2013 federal election concerned the highly political area of industrial relations law. The case, Construction Forestry Mining and Energy Union v Mammoet Australia Pty Ltd [2013] HCA 36, resulted in a win for the union and striking construction workers. While the then opposition leader was determined to not raise the prospect of industrial reforms during the election campaign, the new Coalition government has since sought to undo industrial initiatives of the past government. This might mean that the High Court’s decision is exposed to legislative reform, with mining lobbyists agitating for the government to bring legislation before parliament to overturn the decision.

In Mammoet the High Court unanimously decided that providing accommodation to striking employees is not a ‘payment’ that is prohibited by s 470(1) of the Fair Work Act 2009 (Cth) (Fair Work Act). This decision is significant because it confines the meaning of s 470(1), which prohibits an employer from making ‘a payment’ to an employee taking protected industrial action in relation to the ‘total duration’ of the action on that day. Moreover the effect of the decision is that if an employer fails to provide a striking employee with non-monetary benefits during a period of protected industrial action, this may constitute adverse action under the Fair Work Act or breach of the terms of a relevant industrial instrument. Continue reading

Beyond Male and Female: Time for a Non-Specific Sex Category

By Anna Chapman

Earlier this month the High Court indicated it was prepared to hear a legal case that tests the ability of intersex Australians to be legally recognised as being neither male or female.

The High Court hearing will be the final decision in a claim initiated in 2010 by NSW resident Norrie, who had applied to the NSW Registry of Births, Deaths and Marriages for a certificate to register a change of sex from male to ‘non-specific’.

The evidence before the hearing was that Norrie (who does not use a last name) did not identify as either male or female. Although at birth Norrie’s sex had been recorded as male, as an adult Norrie had undergone medical procedures, and now self-identified — and was identified in the community — as androgynous.

Statutory declarations from Norrie’s doctors supported the registration of a change in sex to ‘non-specific’. The NSW Registrar initially granted Norrie’s application, but this was later revoked.

Norrie appears to be the first person in Australia to litigate for the right to be identified as being of ‘non-specific’ sex. This ground-breaking litigation squarely challenges the capacity of law to countenance sex and gender diversity. Continue reading

The High Court on Mandatory Sentencing in Magaming v The Queen: Only Part of the Story

By Anna Dziedzic and Sophie Walker

Magaming v The Queen Case Page

There is only one set of offences under federal law that attracts a mandatory sentence, and perhaps unsurprisingly these offences all relate to people smuggling. Upon conviction of a crime of aggravated people smuggling under the Migration Act 1958 (Cth), the sentencing judge must impose a jail term of at least five years. In Magaming v The Queen [2013] HCA 40, six of the seven judges of the High Court upheld the validity of this mandatory sentencing provision under the Australian Constitution. But this is only part of the story. After all, the principal character is Bonang Darius Magaming, a 19 year old Indonesian fisherman who was recruited to steer the boat which carried 52 asylum seekers to Australia. On 6 September 2010, his boat was detained by the Australian Navy near Ashmore Reef. Mr Magaming pleaded guilty to the aggravated offence of smuggling at least five people into Australia. At sentencing, the judge described Mr Magaming as ‘a simple Indonesian fisherman’ and explained that but for the mandatory sentencing provision, he would have imposed a lighter sentence. The judge said:

The seriousness of [Mr Magaming’s] part in the offence therefore falls right at the bottom end of the scale. … In the ordinary course of events, normal sentencing principles would not require a sentence to be imposed as heavy as the mandatory penalties that have been imposed by Federal Parliament. However, I am constrained by the legislation to impose that sentence.

Neither the pleadings, nor the judgment, nor media reports manage to fill in many of the gaps in Mr Magaming’s story. Why did he decide to join the crew? How was his mental and physical health? How did the imposition of a mandatory sentence which the judge considered well beyond the severity of the sentence that would have otherwise been imposed affect him? Continue reading