The civil lawyer

County Court Commercial List Practice Notes for 2013.

noreply@blogger.com (Andrew Downie) — Wed, 15 May 2013 23:17:00 +0000

The County Court has issued several practice notes for the Commercial List.

The first is Practice Note PNCI 3-2013 for the Commercial List, General Division, of the County Court of Victoria. This supersedes the previous practice note issued. Click here for the Practice Note PNCI 3-2013.

The main points of note in Practice Note PNCI 3-2013 are as follows:

It concerns the General Division only.
Once an appearance is filed an administrative mention is triggered, which requires the parties to submit consent orders to the court and for the court to nominate a trial date. If the parties are not ready to proceed at the time an administrative mention notice is received, they should contact the directions group indicating why the matter is not ready and requesting that the case be listed for administrative mention.
Discovery of certain minimum documents will be required, and a catch all order of the documents which are 'reasonable in the circumstances' for a party to discover will be made. The parties must determine the question of reasonableness, and if they cannot, they can obtain the assistance of the Court.
The Court encourages the preparation of agreed lists of discoverable documents.
Applications for interlocutory hearings may be made to the Commercial List Duty Judge through the Directions Group. Applications are made by filing a draft form of order together with any affidavit(s) in support, unless the Rules specifically require the issue of a summons.
The Court may order a case conference or a judicial resolution conference. The parties, or a representative of a corporate party with authority to settle the proceeding, must attend. A case conference will be held in open court and counsel for the parties will be expected to be able to discuss the issues of fact and law. There will be an opportunity for private negotiations.
The Judge may participate in without prejudice discussions where both parties are present at a judicial resolution conference. Everything said or done in a judicial resolution conference is confidential. The Judge who conducts the judicial resolution conference will not hear the trial of the proceeding unless the parties consent.
Every effort will be made to ensure that General Division cases are listed before a Judge with commercial experience. Where a case cannot be reached, it will be transferred to the Expedited Cases Division and listed before a specific commercial Judge, with priority.
Parties are encouraged to agree to the tender of non-contentious documents wherever possible.

The second is Practice Note PNCI 1-2013 for the Commercial List Duty Judge. This supersedes the previous practice note issue. Click here for Practice Note PNCI 1-2013.

The main points of note in Practice Note PNCI 1-2013 are as follows:

The Duty Judge hears all case conferences and judicial resolution conferences, in addition to administrative mentions, directions hearings and hearing interlocutory disputes. In other lists of the Commercial List, the Judge in charge will deal with interlocutory applications, and not the Duty Judge.
Unless a summons is specifically required by the rules, the standard order reserving liberty to apply will be regarded by the court as obviating the need for a summons to apply for all other applications.
Where a summons is not required for an application, application is made by email to the directions group, and the email must be copied to all other parties. An affidavit is not required where only correspondence is relied on, and the correspondence may be produced as a bundle at the hearing.
Where the application requires evidence of contentious facts, an affidavit is necessary. The affidavit must be served in sufficient time before the application is heard to allow all parties an opportunity to respond to the application.
If the matter requires a relatively short directions hearing in the General Division, it is likely to be given a return date on the next available Thursday at 9.30am provided the time estimate is less than 1 hour.
Short directions hearings in the Expedited Cases Division will be listed on Fridays at 9.30am.
More substantive interlocutory matters will be listed during Monday to Wednesday subject to the availability of the Duty Judge.
Proceedings are not automatically transcribed unless by prior arrangement.

The third is Practice Note PNCI 2-2013 for the Commercial List, Expedited Cases Division. This supersedes the previous practice note issued. Click here for Practice Note PNCI 2-2013.

The main points of note in Practice Note PNCI 2-2013 are as follows:

Directions will depend on the circumstances of the case, and flexibility will be shown in relation to interlocutory steps and the mode of presenting evidence at the trial.

New costs regime for the Supreme Court of Victoria: Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012

noreply@blogger.com (Andrew Downie) — Sun, 24 Mar 2013 01:01:00 +0000

The Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012 is a significant amendment to Order 63 (costs) and the Scale of Costs in the Supreme Court (General Civil Procedure) Rules 2005. The amendment commences on 1 April 2013 in relation to all proceedings irrespective of commencement date (that is, it applies to proceedings commenced before 1 April 2013).

2 major changes include the removal of the 3 current bases of taxation (being party-party, solicitor-client and indemnity) and the replacement with ‘standard basis’ (being all costs reasonably incurred and of reasonable amount) and ‘indemnity basis’; and the alteration of the Scale of Costs to a time charging basis of 6 minute units.

In terms of the time-value of the Scale of Costs, the following are the hourly rates for attendances by a legal practice (based on the 6 minute units):

Item 1(a) attendance requiring legal skill or knowledge, $36 per 6 min, being $360 per hour.
Item 1(b) attendance requiring legal skill or knowledge by an employee who is not a legal practitioner, $27 per 6 min, being $270 per hour.
Item 1(c) attendance not requiring legal skill or knowledge capable of being performed by a clerk $21 per 6 min, being $210 per hour.

Where the attendances in the Scale of Costs are not based on folios or individual attendance charges, they are based on the timed charges above.

Counsel's fees are a maximum of $500 per hour and $5,000 per day for junior counsel, and $750 per hour and $7,500 per day for senior counsel.

The scale is expressed to be GST exclusive, so the above rates are the GST exclusive figures.

I have included below the explanation from the Supreme Court, followed by the Practice Note (1 of 2013):

Explanatory note

Commencing on 1 April 2013 the Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012 introduce a new scale of costs for the Supreme Court and make significant amendments to aspects of the costs rules.

The new Rule 63.90 will provide that the Rules as amended

“apply to all things done or required to be done or omitted to be done on or after 1 April 2013 in or in relation to, any proceeding in the Court… regardless of the date of commencement of the proceeding”.
The Court has also issued Practice Note No 1 of 2013 which includes a summary of the changes, an explanation of the process for applications for allowance of counsel fees in excess of scale, and the guideline figure for allowance for the reproduction of documents (22 cents per printed side of a page).

All lawyers practising in the Supreme Court civil jurisdiction should familiarise themselves with the changes.

In summary, the major changes to the Rules are

The current bases for taxation will be replaced with the following:

i. standard basis- all costs reasonably incurred and of reasonable amount

ii. indemnity basis- (as now) all costs except in so far as they are of an unreasonable amount or have been unreasonably incurred.

Interlocutory costs orders are not to be taxed until the completion of proceedings unless the Court orders otherwise.

The parties’ costs in the proceeding, unless the Court orders otherwise, will include reserved costs, the cost of an interlocutory application if no order is made or the order is silent as to costs, and costs thrown away by reason of amendment to a pleading or of and occasioned by amendment to a pleading.

Proceedings for debt or damages which do not recover amounts over $100,000 only attract County Court costs unless the Court orders otherwise.

The main changes to the Scale of Costs are:

The scale is exclusive of GST

The scale has been changed to allow a higher hourly rate for attendances charged in 6-minute units in line with most time recording systems currently used by law firms. The hourly rates actually charged by the individuals who performed the work will need to be included in the bill as well.

The cost of photocopying is entirely discretionary in the scale. Guidelines for photocopying will be issued from time to time.

The scale provides an allowance for solicitors to approve documents drawn by Counsel prior to filing and service.

The scale provides for the leaving of messages by email or SMS or other means that are 20 words or less.

The charges for letters include delivery by any means. No additional charge applies.

The scale includes a charge to receive correspondence by any means and placing a copy of the letter on a file. This includes the printing of emails or facsimiles.

The scale differentiates between perusal, scanning and examination of documents.

Items 11, 12, and 13 of the scale include allowances for review and consideration, delegation and supervision, and research.

The scale provides allowances for redaction and collation, pagination and indexing of documents.

Item 17 of the scale includes an allowance of an additional amount having regard to the circumstances of the case.

Fixed fees are provided in relation to Corporations short form bills. Additional costs in the way of reasonable disbursements can be allowed.

Tips

An order for costs will by default mean reasonable 'costs' (standard basis) not the lower recovery test of 'necessary or proper' (party and party basis). Parties seeking orders on a different basis will require a specific order to that effect.

An order for indemnity costs means on scale - so if the intention is to order that costs be taxed on the basis of the costs agreement in place between the party and their lawyers this will need to be articulated in the order.

Parties who wish to recover interlocutory costs before the conclusion of proceedings will need to apply for a order that the costs be taxed forthwith.

Amendments to pleadings will be costs in the proceeding unless the Court orders otherwise. If a party seeks costs 'thrown away' (i.e. wasted as a result of the amendment) or costs 'of and occasioned by' (i.e. future costs arising from the amendment) they need an order to this effect.

Counsel must ask for an order if they are contending for costs to be recovered from the other party over and above the maximums in the scale ($7,500 for senior counsel and $5,000 for junior counsel). They can either seek an order for a specific sum, or an order that a figure above the maximum is appropriate with the quantum to be determined by the Costs Court on taxation.

Practice Note (No. 1 of 2013)

The New Scale of Costs and Counsel fees

1. The Chief Justice has authorised the issue of the following practice note.

2. Significant changes have been introduced to the Supreme Court of Victoria scale of costs contained in Appendix A and to the provisions in Rule 63 of the Supreme Court (General Civil Procedure) Rules 2005 generally. The changes are effective from 1 April 2013 and apply to work undertaken after that date.

3. The basis of allowance of costs has changed to abolish the default “necessary or proper” test for party and party costs. The standard basis of costs that are “reasonable in amount and reasonably incurred” is now the usual basis for assessment or taxation of party and party costs. Indemnity costs may be allowed if the Court so orders.

4. The scale in its preamble allows the Judge, Associate Judge, Costs Judge, Judicial Registrar or costs registrar full discretion to allow any fee, cost or disbursement in full or in part or such other fee, costs or disbursement as is fair or reasonable to compensate for the work actually done.

5. Item 19 in the new scale now contains maxima fees for Counsel. Where costs are taxed pursuant to an order of the Supreme Court, Counsel’s fees in excess of scale cannot be allowed by the Costs Court unless the Supreme Court otherwise orders. Therefore where costs are sought pursuant to an order of the Supreme Court, and a party seeks sums for Counsel’s fees in excess of the maximums in the scale, an application will need to be made to the Supreme Court at the time a costs order is sought and an order made that Counsel’s fees in excess of the scale be allowed before they can be allowed on taxation by the Costs Court.

6. The Supreme Court may fix the rate or amount of Counsel’s fees above scale, or direct the Costs Court to allow the fees of Counsel in excess of scale when assessing or taxing the costs. In the latter case the Costs Judge, Judicial Registrar or Costs Registrar will fix the rate of charge in excess of the scale amount.

7. The Costs Court will only have a full discretion to allow fees in excess of the maximum in limited circumstances. For example, pursuant to a Notice of Discontinuance or arising from the acceptance of a formal Offer of Compromise, or taxation pursuant to the terms of a Release, or in reviews under the Legal Profession Act 2004 where the reviews are conducted in accordance with scale.

8. Additional changes have also been made including:

(a) The scale is exclusive of GST. This amendment allows legal practitioners who charge their clients on scale to add GST to the total sum to be charged.

(b) The scale has been changed to allow a higher hourly rate for attendances but now in 6-minute units in line with most time recording systems currently used by law firms. The hourly rates actually charged by the individuals who performed the work will need to be included in the bill as well.

(c) The cost of photocopying is entirely discretionary in the scale. Guidelines for photocopying will be issued from time to time. The guide is not intended to limit the discretion to allow higher or lower fees if it is considered appropriate. Guidelines appears at paragraph 11 below.

(d) The scale provides an allowance for solicitors to approve documents drawn by Counsel prior to filing and service.

(e) The scale provides for the leaving of messages by email or SMS or other means that are 20 words or less.

(f) The charges for letters include delivery by any means. No additional charge applies.

(g) The scale includes a charge to receive correspondence by any means and placing a copy of the letter on a file. This includes the printing of emails or facsimiles.

(h) The scale differentiates between perusal, scanning and examination of documents.

(i) Items 11, 12, and 13 of the scale include allowances for review and consideration, delegation and supervision, and research. Applications to the Costs Court for allowances for these items will need to be supported by file notes or other means. The Costs Court has a full discretion to make allowances for claims made pursuant to these items depending on the proof produced and the particular claims made for perusal, scanning and examination in the bill of costs.

(j) Any claim made for research will not be allowed unless the research involves a legal question of some complexity that is not procedural in nature.
(k) The scale provides allowances for redaction and collation, pagination and indexing of documents. These allowances are for the time taken to complete each task that is reasonable in the circumstances.

(l) Item 17 of the scale includes an allowance of an additional amount having regard to the circumstances of the case. Rule 63 provides that bills of costs are to be prepared on an itemised and chronological basis without differentiation between instructions for brief or preparation for trial work and any other work.

(m) Fixed fees are provided in relation to Corporations short form bills. Additional costs in the way of reasonable disbursements can be allowed.
10. Appendix B of the scale includes allowances for Witness Expenses and interpreters’ fees. An additional fee or higher fees may be allowed if the Court makes an order for a higher rate.

11. Guide to reproduction of documents

The scale of costs allows a discretion in relation to copy documents. The new scale provides at item 4 that reproduction by photocopy or other machine made copy including hard copies of electronic documents shall be at the discretion of the Costs Court.

As a guide, the Costs Court will allow reproduction as follows:

Reproduction—

for each printed side of a page
0.22
If printed out of the office, the amount charged by the service provider should be claimed as a disbursement and will be allowed if reasonable.

Security of payment: Lahey Constructions Pty Ltd v Trident Civil Contracting Pty Ltd - [2013] NSWSC 176

noreply@blogger.com (Andrew Downie) — Mon, 11 Mar 2013 23:00:00 +0000

The matter of Lahey Constructions Pty Ltd v Trident Civil Contracting Pty Ltd [2013] NSWSC 176 was an application for a declaration, before Stevenson J, in respect of an Adjudicator's adjudication.

Trident was a subcontractor engaged by Lahey to carry out earth works at the North Beach Pavilion in Woolongong. Clause 40 of the subcontract concerned variation claims, placing an onus on the subcontractor to make a variation claim within 2 days of a direction by Lahey to vary works. Lahey gave Trident an instruction (which Lahey denied was a variation) concerning the earthworks, and Trident alleged that this was a variation in a payment claim made 14 months after the work was completed. There was no variation claim made by Trident under the contract.

Particularity of payment schedules

Lahey issued a payment schedule (under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) broadly denying liability for the variation, stating: 'and as such we refer you to the Variation & Notice clauses within the contract'. Stevenson J noted that the Act states that a payment schedule 'must indicate why' the amount in the payment schedule is less than the amount claimed as well as 'reasons' for withholding payment (note: the equivalent Victorian act sets out this requirement in s15(3)). Stevenson J held that although particularity is required to 'a degree reasonably sufficient to apprise the parties of the real issues in dispute', sometimes the issue 'has been so expansively agitated in prior correspondence that the briefest reference in the payment schedule will suffice to identify it clearly' (at [30]:

[28] A payment schedule need not articulate the response to the payment claim as precisely as would be required in a pleading. However, "cryptic or vague" statements in a payment schedule as to the reasons for withholding payment are not sufficient. Particularity is required "to a degree reasonably sufficient to apprise the parties of the real issues in dispute" and "to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication". Sometimes, however, the issue "has been so expansively agitated in prior correspondence that the briefest reference in the payment schedule will suffice to identify it clearly": Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [77] per Palmer J; cited with approval in Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; (2005) 64 NSWLR 448 at [27] per Mason P, with whom Giles and Santow JJA agreed; see also Nepean Engineering Pty Ltd v Total Process Services Pty Ltd [2005] NSWCA 409; (2005) 64 NSWLR 462 at [24] per Hodgson JA.

Here, there was a previous application under the Act in relation to an earlier dispute, and the previous determination dealt with these contentions. Stevenson J held that the issue the subject of the adjudication had been 'expansively agitated' between the parties and the brief reference to that issue in the payment schedule was sufficient for the purposes of the Act.

Jurisdictional error

Lahey submitted to the Adjudicator that Trident was barred from claiming a variation as it had not complied with the contract. In ordering that Lahey pay Trident the amount claimed in Trident's payment claim, the Adjudicator held as follows:

"[Lahey] submits that the conditions of contract provide a bar on any variation made other than in accordance with the contract conditions. The Act provides at section 3 that a person who undertakes to carry out construction work under a construction contract is entitled to receive and is able to recover progress payments in relation to the carrying out of that work. I determine that where [Trident] has undertaken construction work it is entitled to payment for that work and the conditions of contract do not provide a bar to the payment for that work".

Lahey submitted that the Adjudicator 'misapprehended the effect of the Act; that he thereby failed to discharge his statutory function under the Act and failed to consider something that the statute required him to consider, namely the terms of the contract between the parties.' Stevenson J agreed, and held that the Adjudicator committed jurisdictional error and failed to provide the parties natural justice by deciding a contractual issue on a basis not advocated by the parties.

Lahey submitted that the jurisdictional error was 'Proceeding in the absence of a jurisdictional fact; disregarding something that the relevant statute requires to be considered as a condition of jurisdiction, or considering something required to be ignored; and misconstruction of the statute leading to misconception of functions' [Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWSCA 190; (2010) 78 NSWLR 393, and Kirk v Industrial Court of New South Wales (2010) 239 CLR 531] That is, the Adjudicator misapprehended the nature of his powers by disregarding something that the Act required to be considered as a condition of jurisdiction, leading to a misconception by him of his functions. Stevenson J held that the Adjudicator's reasons showed that the Adjudicator felt entitled to reject the bar to variation point by reference to the Act, and in doing so the Adjudicator fell into error.

Stevenson J, referring to the objects of the Act in s3 (also s3 in the equivalent Victorian Act), held that a fundamental matter for consideration by the Adjudicator is the terms of the contract between the parties, and that the Adjudicator had no basis to simply ignore the terms of the subcontract. As such, Stevenson J held that the misapprehension of the role played by s3 of the Act and the Adjudicator's failure to have regard to the terms of the subcontract was jurisdictional error.

Denial of natural justice by deciding a point not agitated

Stevenson J also noted that neither party submitted to the adjudicator that the Adjudicator should decide the bar to variation issue with reference to s3 of the Act. Stevenson J referred to McDougall J in Musico v Davenport [2003] NSWSC 977 at [107]-[108]: "'It follows, in my opinion, that where an adjudicator determines an adjudication application upon a basis that neither party has notified to the other or contended for, and that the adjudicator has not notified to the parties, there is a breach of the fundamental requirement of natural justice that a party to a dispute have 'a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it'". Stevenson J held that the Adjudicator acted in breach of the requirements of natural justice. Stevenson J also noted that had the Adjudicator alerted the parties to the intention to decide the bar to variation point by reference to s3 of the Act, it is obvious that submissions could have been put to change the Adjudicator's mind on the point (referring to Watpac Constructions v Austin Corporation [2010] NSWSC 168 at [144]-[147]).

Lahey Constructions Pty Ltd v Trident Civil Contracting Pty Ltd [2013] NSWSC 176 is an important case. It decides 3 critical issues which commonly occur in the context of security of payment claims, that is, adequacy of particulars in a payment schedule, the necessity for the adjudicator to consider the terms of the contract and the necessity for the adjudicator to decide the matter on the arguments raised by the parties.

Offers of compromise and 'cost inclusiveness': Victorian Education Foundation Ltd v AC Hall Airconditioning Contracting Pty Ltd [2013] VSCA 32

noreply@blogger.com (Andrew Downie) — Wed, 06 Mar 2013 08:49:00 +0000

Late last year I presented a seminar on Offers of Compromise and Calderbank offers with Daryl Williams, S.C., to the Victorian Bar. I was going through that paper again today and, whilst trawling through AustLII, happened to see a fresh judgment in the Victorian Supreme Court of Appeal which discussed 'cost inclusive' offers of compromise.

The matter of Victorian Education Foundation Ltd v AC Hall Airconditioning Contracting Pty Ltd [2013] VSCA 32 was a leave to appeal application (Neave and Priest JJA) from a costs order made by a Judge of the County Court of Victoria (Ginnane J). There were orders made by the County Court that VEF pay AC Hall the sum of $131,430, and costs of $34,254.68 were awarded to AC Hall based on an offer of compromise made by AC Hall on 12 October 2011 for $145,000 plus costs. Costs were ordered to be paid on a party-party basis to the date of the offer, and thereafter on a solicitor-client basis. An issue arose because there were earlier offers made including:

A purported offer of compromise on 8 July 2010 by VEF for $165,000 expressed to be 'in full and final settlement of its claim', purportedly pursuant to Order 26 of the County Court Rules; and
A purported offer of compromise on 29 November 2010 by AC Hall for $165,000 expressed to be 'in full and final settlement' of its claim.

The County Court held that VEF's offer was an 'all in' offer and fell foul of the Rules, following Aquatec-Maxon Pty Ltd v Barwon Region Water Authority (No 8) [2007] VSC 363. The County Court also held that it was not a 'Calderbank' offer as it was impossible to determine whether VEF achieved a more favourable outcome than was offered. The County Court held that the offer of AC Hall for $145,000 was more favourable to VEF than the judgment sum, and AC Hall was entitled to costs under Order 26.

VEF clearly would not be happy with this outcome, since the order plus costs was around $165,000, which was the amount first offered by it to AC Hall.

The Rule surrounding the controversy is Rule 26.03 which provides as follows:

(7) Upon the acceptance of an offer of compromise in accordance with paragraph (4), unless the Court otherwise orders, the defendant shall pay the costs of the plaintiff in respect of the claim up to and including the day the offer was served.
(8) If an offer of compromise contains a term which purports to negative or limit the operation of paragraph (7), that term shall be of no effect for any purpose under this Part.

I have discussed two interesting aspects of the judgment below, being the re-iteration by the Court of Appeal that an offer of compromise cannot be expressed to be costs inclusive, and whether the meaning of an offer of compromise is to be determined objectively or subjectively.

Priest JA, with Neave JA agreeing, refused the application for leave to appeal. Priest JA held that since the offer was expressed as being in 'full and final settlement' the County Court was correct in interpreting the offer of compromise as being inclusive of costs, and therefore was proscribed by Rule 26.03(8) (at [24] to [25]). Priest JA considered the reasoning of Giles J in Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349. In that case, an offer of compromise was expressed to be 'inclusive of costs'. Giles J held that this took the offer outside of the operation of the Rules, which Priest JA noted was almost precisely the same terms as Rule 26.03(8).

Priest JA then considered whether the term concerning inclusiveness of costs could be severed from the offer. His Honour held that it would be impossible to do so and leave any part of the offer salvageable (at [29]).

VEF argued that the County Court should have held that AC Hall was under no misapprehension as to what the offer meant, particularly where AC Hall made a later offer in similar terms. Priest JA held that this argument was without substance as (first) it was not possible to determine what the offer actually meant, and (secondly) in determining what an offer means it falls to be construed objectively according to its terms and not according to a subjective belief that a party might have harboured as to its terms. Priest JA referred to Theiss Contractors Pty Ltd v SCI Operations Pty Ltd (Unreported, 21 September 1990, Sup Crt NSW, Rogers CJ Comm D) in support of this latter proposition.

This case serves as an important reminder that offers of compromise must be prepared pursuant to the rules to avoid this sort of harsh outcome for an offeror.

Happy 2013, and the Courts Legislation Amendment (Reserve Judicial Officers) Bill

noreply@blogger.com (Andrew Downie) — Wed, 30 Jan 2013 22:22:00 +0000

I just returned from a month long holiday in Vietnam, so apologies to my readers for the absence of posts during the Christmas and January 2013 period. A belated happy new year to all of my readers.

I attended the Victoria Law Foundation's Legal Laneway breakfast yesterday, which was a nice way to start the year amongst friends and colleagues. The Attorney General, Robert Clark, gave a refreshing (and admirably noteless) speech to the crowd. The Attorney's speech reminded me of the Courts Legislation Amendment (Reserve Judicial Officers) Bill which was introduced into Parliament on 13 December 2012, and which has progressed through the first and second reading in the Victorian Legislative Assembly (lower house).

The Bill proposes to repeal the legislation, introduced by the previous government, which created the position of acting judicial officers, and legislate for the creation of the reserve judicial officer. The title may appear similar, but the position differs greatly in practical terms.

The acting judicial officer (either Judge of Magistrate) was a legal professional who was given a temporary judicial position to deal with fluctuations in the judicial workload. This position caused concern to the legal profession, as the acting judicial officer did not have the security of a permanent position and was normally not an experienced Judge of Magistrate. The fact that the position was not permanent gave rise to questions of independence in the role, largely because reappointment was dependent on the attitude of the government at the time.

The Courts Legislation Amendment (Reserve Judicial Officers) Bill allows the Governor in Council to appoint retired and other former tenured Judge of Magistrate, and interstate Judge of Magistrate to the position of reserve Judge of Magistrate.

The explanatory memorandum provides as follows:

The Courts Legislation Amendment (Reserve Judicial Officers) Bill 2012 amends the Constitution Act 1975 , the Supreme Court Act 1986 , the County Court Act 1958 , the Magistrates' Court Act 1989 and the Children, Youth and Families Act 2005 and make consequential amendments to other Acts.

The Bill improves the court and judicial system by providing for the offices of reserve judge and reserve magistrate, abolishing the offices of acting judges and acting magistrates and making consequential amendments to certain other Acts.

Some highlights of the Courts Legislation Amendment (Reserve Judicial Officers) Bill are:

The Governor in Council may appoint as many reserve Judge of Magistrate as are necessary for transacting the business of the Court.
The office of reserve Judge of Magistrate ceases after 5 years or when the reserve Judge of Magistrate reaches the age of 75 years.
It prohibits a reserve Judge of Magistrate from engaging in legal practice, undertaking paid employment or conducting a business, trade or profession while engaged to undertake the duties of a Judge, without the approval of the Attorney-General.
It provides that a reserve Judge of Magistrate has the same powers, jurisdiction, immunities and protection as a Judge of Magistrate of the relevant court.
It provides that a reserve Judge of Magistrate may be employed on a full time or sessional basis, the former being paid at the full judicial rate and the latter paid at a sessional rate. The salaries are to be adjusted if the acting Judge of Magistrate is already receiving a judicial pension.
Reserve Judges and Magistrates are eligible for re-appointment.
A reserve Judge of Magistrate cannot be appointed Chief Justice or Chief Judge, President of the Court of Appeal, or Chief Magistrate.

I'll provide an update post if or when the Bill receives Royal Assent.

Appointment of Senior Counsel in Victoria for 2012

noreply@blogger.com (Andrew Downie) — Tue, 27 Nov 2012 00:10:00 +0000

The Chief Justice Marilyn Warren AC has announced the appointment of Senior Counsel in Victoria for 2012. The list is as follows:

Trevor Stanley Monti
Suzanne Bridget McNicol
Peter George Sest
Aileen Mary Ryan
Christopher William Beale
George Anthony Georgiou
Mark Andrew Robins
Benjamin Andrew Shnookal
Philip David Corbett
Michael Grant Roberts
Alistair Neill Murdoch
Nicholas Pane
Nicholas David Hopkins
Carolyn Hayley Sparke
Kevin Joseph Aloysius Lyons
Edvard William Alstergren
Andrew David Clements
Adrian John Finanzio
Bernard Francis Quinn
Saul Conrad Holt

Congratulations to all of those Counsel in 2012 that have been appointed Senior Counsel!

Civil Procedure Amendment Act 2012 receives royal assent and commences 1 May 2013

noreply@blogger.com (Andrew Downie) — Wed, 31 Oct 2012 00:26:00 +0000

I attended the Commercial Bar Association annual cocktail party in the Supreme Court of Victoria library on 30 October 2012, and during his speech the Attorney-General Robert Clark noted that the Civil Procedure Amendment Act 2012 received Royal Assent that morning.

I previously wrote about the structure of the Civil Procedure Amendment Bill 2012 in my article Civil Procedure Amendment Bill 2012 - costs disclosure and expert evidence. The structure of the Act has not appeared to have changed since it was introduced as a Bill.

By way of summary, the Act:

empowers the Court to make orders about costs disclosure;
empowers the Court to make orders about the costs of proceedings;
empowers the Court to make orders managing expert witnesses; and
removes duplicative certification requirements for frequent litigants.

The Civil Procedure Amendment Act 2012 commences as an amendment to the Civil Procedure Act 2010 on 1 May 2013.

The full authorised text from the Victorian Parliament is here.

On another note, at the cocktail party the Commercial Bar Association launched its new website: http://www.commbar.com.au

Prevention in 2012: Spiers Earthwords PL v Landtec Projects Corporation PL (No. 2) [2012] WASCA 53

noreply@blogger.com (Andrew Downie) — Tue, 30 Oct 2012 00:43:00 +0000

In construction law the 'prevention' or 'Peak' principle was considered to have taken a turn for the worse after the two decisions of Turner Corporation Ltd v Co-ordinated Industries Pty Ltd (1995) 11 BCL 202 and Turner Corporation Ltd (receiver & manager appointed) v Austotel Pty Ltd (1997) 13 BCL 378. In the Turner cases, the New South Wales Supreme Court held (by way of summary) that a contractor is not able to claim that the principal prevented the contractor from reaching completion if the contractor failed to exercise its rights under the contract to claim an extension of time for such conduct.

Spiers Earthwords PL v Landtec Projects Corporation PL (No. 2) [2012] WASCA 53 (Spiers v Landtec) revisited the prevention principle in the context of the AS 2124-1986 standard contract (which is similar to the often used AS2124-1992 contract). The contractor claimed that it was prevented from reaching practical completion in respect of a contract for road works which had a 10 week completion period, and that the principal could not impose liquidated damages for the delay beyond the date for practical completion. The contractor claimed that the principal failed to supply sufficient or suitable material, that rectification was performed with unsuitable material, that additional works were undertaken at the principal's requests, that the principal made design changes and that there was inclement weather and also latent conditions.

The principal responded by saying that the contractor had not given notice requesting an extension of time (relying on the principle from the Turner cases). The contractor responded to this by saying that the principal requested additional work and the principal and superintendent had not responded to the contractor's requests for extensions of time, and was therefore estopped from relying on the contractor's failure to issue a notice under the contractual extension of time provisions.

The trial judge found that the principal was estopped from relying on the notice requirements of clause 35.5 in relation to 42 days, being a combination of additional work and rain delay, and that the date of the contract should be extended by 42 days. The contractor appealed this (although the finding was in the contractor's favour) as the contractor's position was that it didn't seek an extension of time, but instead sought that time be 'at large' (i.e. that completion occur within a reasonable time) by reason of the preventative conduct of the principal. The New South Wales Court of appeal upheld the trial judge's decision.

The contract in question (AS2124-1986) had a clause which expressed that principal or superintendent caused delays do not cause time to be set 'at large', in clause 35.5:

A delay by the Principal or the failure of the Superintendent to grant a reasonable extension of time or to grant an extension of time within 28 days shall not cause the Date for Practical Completion to be set at large but nothing in this paragraph shall prejudice any right of the Contractor to damages.

McLure P said that the Court was bound to follow Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211, which upheld the Turner cases. Peninsula Balmain approved the Turner cases, and also is authority for the proposition that the power of the superintendent to extend time in the absence of the required contractual notice from the contractor was to be exercised in the interests of both the principal and the contractor, and the superintendent is obliged to act honestly and impartially in considering whether to do so. The result in Peninsula Balmain was that the referee appointed by a court extended the date for practical completion as it considered that the superintendent (which didn't extend the time) ought to have done so.

In obiter, McLure P cast doubt on the proposition that anyone other than the superintendent can grant an extension of time (at [57]). That is, in Peninsula Balmain the referee exercised the power of the superintendent to extend time, but McLure P didn't consider that this was a power that could have been exercised by anyone other than the superintendent.

In Spiers v Landtec the contractor argued, along the lines set out in Peninsula Balmain, that (at [58]):

the respondent had breached its duty to ensure the superintendent acted honestly and fairly as a result of the superintendent's breach of his duty to consider and, if appropriate, grant the appellant's requests for an extension of time regardless of the absence of any relevant notice; and
in the alternative, by reason of waiver and/or estoppel of the requirement for notice, the superintendent was in breach of his obligation to consider and, if appropriate, grant an extension of time.

McLure P noted that the contractor's propositions ignored the paragraph in clause 35.5 set out above and that its purpose was 'to prevent the prevention principle having the effect of setting time at large' (at [61] and [62]):

61 Whether and to what extent cl 35.5 is intended to exclude the application of the prevention principle is a matter of contractual construction. The objectively determined purpose of cl 35.5 is at least twofold. The first is to provide contractual machinery to prevent the time for practical completion being set at large as a result of the application of the prevention principle. The second is to place on the principal the risk of delay caused loss not attributable to any contractual party. However, it would appear its purpose is not to exclude the prevention principle itself insofar as it applies to delay caused by the principal's breach of the building contract. In the absence of an extension of time under cl 35.5, the contractor would be entitled to damages against the principal for its breach of contract, including any damages (liquidated or otherwise) it suffered as a result of principal-caused delays in practical completion. Whether or not that could be relied on as a defence (such as equitable set-off) does not have to be decided. In the result, cl 35.5 brings the prevention principle back into line with the general contractual principles relating to the implied duty to cooperate. Accordingly, it is unnecessary to determine whether contractual parties are free to exclude the implied duty to cooperate, which is a term implied by law.

62 The same analysis would apply to a (derivative) breach by the principal arising from a superintendent's breach of the duty to consider the exercise of the power in cl 35.5. Moreover, it is arguable that the prevention principle is a relevant consideration in the exercise of the superintendent's discretion to extend time in relation to the 'non-breach' causes of delay specified in cl 35.5. If a court or another decision-maker concludes that the superintendent should have exercised the power and granted an extension of time, the principal will be prevented from claiming liquidated damages for the relevant (proven) delay. In summary, the relevant purpose of cl 35.5 is to prevent the prevention principle having the effect of setting time at large.

McLure P held that on her analysis the principal would not be entitled to liquidated damages for the period for which the appellant should have been given an extension of time under clause 35.5, and upheld the decision of the trial judge. Newnes JA agreed with McLure P on these grounds.

Spiers v Landtec is particularly important for two reasons (in the context of the 'prevention principle'):

The Court has questioned whether anyone other than the superintendent can extend time. This requires an analysis of the relevant contract the subject of a dispute to ascertain the scope of the power to extend time, and to determine whether anyone else can exercise this power.
The Court has noted that the prevention principle is alive and well, at least to the extent that a principal may be precluded from relying on a claim for liquidated damages for a particular period of time during which that principal has contributed to the delay.

One of the difficulties, however, with the analysis of McLure P is that it is unclear how the conclusion is reached that the principal is not entitled to liquidated damages for the 42 days. For instance, it is not characterised by McLure P as an entitlement of the contractor in estoppel, despite the trial judge finding that this is how it was to be characterised.

The Edelsten judgment (Beach J): possibly the best opening of any judgment ever.

noreply@blogger.com (Andrew Downie) — Thu, 18 Oct 2012 00:42:00 +0000

In the matter of Norman South Pty Ltd & Anor v da Silva [2012] VSC 477, Justice Beach heard a breach of confidence claim.

I won't go into any detail of the case in this post, other to extract the opening paragraph which states: 'A little over 13 years ago, Brooking J commenced a judgment with the statement “Titus Oates was the greatest perjurer that ever lived”.[1] Self-evidently, his Honour was not the trial judge in the present proceeding.'

Possibly one of the best opening lines to a judgment I have read.

The Fortescue decision: insights from the Commercial Court seminar

noreply@blogger.com (Andrew Downie) — Wed, 10 Oct 2012 21:47:00 +0000

As I indicated on my article yesterday, I went to the Commercial Court seminar on the Fortescue decision which was handed down by the High Court of Australia on 2 October 2012.

The insights provided were helpful and interesting.

Justice Robson of the Supreme Court of Victoria noted that the main between the majority decision and Justice Heydon's decision was whether the statement by Fortescue amounted to an opinion. The majority opined that it did not, and Heydon J opined that it did. Justice Robson observed that the majority decision is likely to be used to reject an opinion based approach to the question of whether a statement is misleading or deceptive conduct.

The majority's approach is highlighted at [33]:

33. As has already been noted, ASIC's argument in this Court hinged on the proposition that the impugned statements conveyed to their intended audience a view about the legal enforceability of the framework agreements. ASIC sought to describe what was conveyed as a matter of fact, submitting that "the words 'agreement' or 'binding agreement' convey that it is an agreement containing all of the essential elements that would constitute a contract under Australian law". While it is to be doubted that the proposition which ASIC identified is accurately, or at least sufficiently, described as a statement of "fact", it is ultimately unprofitable to attempt to classify the statement according to some taxonomy, no matter whether that taxonomy adopts as its relevant classes fact and opinion, fact and law, or some mixture of these classes. It is necessary instead to examine more closely and identify more precisely what it is that the impugned statements conveyed to their audience.

Mark Moshinsky, SC, noted the main difference between the decision of the Full Court of the Federal Court of Australia (FCFCA) and the High Court was that the FCFCA looked at the correctness of the statement as a matter of legal enforceability whereas the High Court looked at what the parties did and intended to do. This is highlighted at [37] and [38]:

37. Would they, as the Full Court assumed, ask a lawyer's question and look not only to what the parties had said and done but also to what could or would happen in a court if the parties to the agreement fell out at some future time? Or would they take what was said as a statement of what the parties to the agreements understood that they had done and intended would happen in the future? The latter understanding is to be preferred.

38. The Full Court's conclusion hinged on the use of the word "contract" or "agreement" in each of the impugned statements. The Full Court assumed that, by using one or other of those terms, the impugned statements conveyed to their intended audience a message about the legal quality (as determined by reference to Australian law) of the contract or agreement referred to in the relevant communication. And the relevant legal quality was identified as future enforceability in the event of a dispute between the parties. That is, the Full Court assumed that the words "contract" and "agreement" necessarily conveyed a message about legal enforceability in an Australian court. But that is too broad a proposition. First, it is necessary to examine the whole of the impugned statements to see the context in which reference was made to the making of a contract or agreement. Second, it is necessary to undertake that task without assuming that what is said must be put either into a box marked "fact" (identified according to whether an Australian court would enforce the agreement) or into a box marked "opinion" (identified according to whether the speaker thoughtthat an Australian court could or would enforce the agreement).

Senior counsel noted the implications of the decision were:

the reduced relevance of a distinction between what is a statement of fact and a statement of opinion;
in Justice Heydon's reasons, what principles are applied when there is a statement of opinion; and
the question of who is the intended audience.

Michael Kingston, the Chief Legal Officer of ASIC, noted that the impugned statements caused an enormous fluctuation in the Fortescue share price and induced a substantial number of share sales, bringing home the enormous effect of the statements on the market.

Mr Kingston questioned whether the standards for market disclosure were now lower than expected. Given the test for disclosure is [by way of broad summary only] what a reasonable person would have expected to have communicated to him or her, he questioned if now the market was required to 'read between the lines' when a disclosure is made, for instance, when a company enters into a 'binding contract' with a Chinese company as Fortescue did.

The Commercial Court seminar series has come to an end for 2012. Many thanks to Justice Davies for her efforts in organising and pulling together such a fantastic cast of speakers for the series.

The Fortescue decision: analysis and the Commercial Court seminar

noreply@blogger.com (Andrew Downie) — Tue, 09 Oct 2012 23:23:00 +0000

I'm attending a seminar tonight held by the Commercial Court of the Supreme Court of Victoria on the Fortescue decision by the High Court of Australia: Forrest v Australian Securities and Investments Commission [2012] HCA 39. Here's a flyer for the seminar.

By way of summary Fortescue Metals Group Pty Ltd (Fortescue) signed, between 6 August 2004 and 20 October 2004, 3 4 page agreements with 3 Chinese state owned companies. It sent a letter to the ASX, together with a media release, in which Fortescue said that it had entered into a 'binding contract' with one of the companies. There were further statements made by Fortescue as and when it entered into the agreements with the other Chinese companies during that time.

The nub of ASIC's case was that the contracts weren't binding as Fortescue could not oblige the companies to abide by them, and for that reason, Fortescue engaged in misleading or deceptive conduct in relation to a financial product (being shares) in breach of s1041H Corporations Act; it breached the continuous disclosure requirements under s674 Corporations Act; and Mr Forrest had not exercised his powers or discharged his duties as a director of Fortescue with the degree of care and diligence required by s180 Corporations Act.

At first instance the matter went before Gimour J of the Federal Court of Australia who dismissed the case. The Full Court of the Federal Court allowed an appeal by ASIC, and Fortescue and Mr Forrest appealed to the High Court of Australia.

The Fortescue decision isn't particularly revolutionary as the High Court's attention is focused on what the intended audience would make of the representation that Fortescue had entered into binding contracts with Chinese state-owned companies.

The majority (French CJ, Gummow J, Hayne J and Kiefel J) identified the audience (at [36]):

36 There are at least two difficulties in the Full Court's analysis. Both stem, ultimately, from the need to identify the intended audience for the impugned statements and the message or messages conveyed to that audience. The intended audience can be sufficiently identified as investors (both present and possible future investors) and, perhaps, as some wider section of the commercial or business community. It is not necessary to identify the audience more precisely. When that audience was told that Fortescue had made binding contracts with identified Chinese state‑owned entities, what would they have understood?

The majority then went on to note that no evidence had been led by ASIC which would demonstrate that the audience would understand 'binding contracts' to mean contracts which are enforceable in a court (at [39]):

39. There was no evidence led at trial to show that investors or other members of the business or commercial community (whether in Australia or elsewhere) would have understood the references in the impugned statements to a "binding contract" as conveying not only that the parties had agreed upon what they said was a bargain intended to be binding, but also that a court (whether in Australia or elsewhere) would grant relief of some kind or another to one of the parties if, in the future, the opposite party would not carry out its part of the bargain.

The majority then went on to identify a critical problem, which was ASIC's case that the representation conveyed to the audience a larger message that the agreements were not open to challenge in an Australian Court (at [43]):

43 Once it is accepted, as it must be, that the parties genuinely intended to make a legally binding agreement, the breadth of ASIC's submission (and the Full Court's conclusion) becomes apparent. For the submission was that, although the impugned statements accurately recorded that the parties to each framework agreement had made an agreement which said that the bargain was, and was intended by the parties to be, legally binding, the impugned statements were misleading or deceptive or likely to mislead or deceive because they also conveyed to their intended audience a larger message. This was that the agreements the parties had made were not open to legal challenge in an Australian court. That broader proposition should not be accepted. The impugned statements conveyed to their intended audience what the parties to the framework agreements had done and said they had done. No further message was shown to have been conveyed to an "ordinary or reasonable" member of that audience.

The critical question about the audience was identified by the majority at [48]:

48. It is, however, necessary to bear firmly in mind that the impugned statements were made to the business and commercial community. What would that audience make of the statement that Fortescue had made a binding contract with an entity owned and controlled by the People's Republic of China?

This was answered by the majority at [50]:

50. Instead, the central tenet of ASIC's case was that the impugned statements conveyed a message to their intended audience (a) that, in the words of ASIC's statement of claim, it was "practicable to force" the counter‑parties to perform their part of the bargain and (b) that whether it was "practicable to force" performance was to be determined according to the same principles as would be applied to an agreement for the sale of a suburban block of land or the construction of a house in suburban Australia. ASIC established neither of those propositions. The impugned statements conveyed to their intended audience what the parties to the framework agreements said they had done — make agreements that they said were binding — and no more. ASIC did not demonstrate that members of the intended audience for the impugned statements would have taken what was said as directed in any way to what the parties to the agreements could do if the parties were later to disagree about performance. ASIC did not demonstrate that the impugned statements conveyed to that audience that such a disagreement could and would be determined by Australian law. And given that the impugned statements did accurately convey what the parties to the framework agreements had said in those agreements, it would be extreme or fanciful for the audience to understand the impugned statements as directing their attention to any question of enforcement by an Australian court if the parties later disagreed. Such an extreme or fanciful understanding should not be attributed to the ordinary or reasonable member of the audience receiving the impugned statements.

The conclusion by the majority was that the letter which Fortescue sent to the ASX accurately recorded what the agreement provided, and that that letter did not convey to its intended audience any message about whether an Australian Court would enforce that agreement. For that reason, the appeal was allowed by the majority across the board (at [58] to [60], [65] and [67]):

58. The letter which Fortescue sent to the ASX about having made the framework agreement with CREC was not misleading or deceptive and was not likely to mislead or deceive. That letter accurately recorded what the framework agreement provided. The letter did not convey to its intended audience any message about whether an Australian court would conclude that the agreement could be enforced. It conveyed to its intended audience that the framework agreement between Fortescue and CREC was what those parties had described (and a commercial audience would describe) as a "binding contract".

59. Having regard to the way in which ASIC presented its argument in this Court, it is not necessary to consider separately the other impugned statements to which ASIC referred in its statement of claim. It is also unnecessary to give separate consideration to the "likely to mislead or deceive" limb of s 1041H. In the Full Court, Emmett J expressly based his reasons on this ground. His Honour concluded that the statements "were, at least, likely to mislead or deceive an ordinary and reasonable member of the investing public who read the [impugned statements]". But the inquiry into how an ordinary or reasonable member of the intended audience would receive a message is of its nature hypothetical. That inquiry is therefore apt to answer both whether conduct is misleading or deceptive and whether it is likely to mislead or deceive. Separate consideration of this limb of s 1041H is therefore not necessary once it is decided that an ordinary or reasonable member of the audience would not have understood the impugned statements to have conveyed anything other than what the parties did and intended, and that the statement made about those matters was neither misleading nor deceptive.

60. ASIC did not establish that Fortescue engaged in misleading or deceptive conduct contrary to s 1041H of the Corporations Act.

65. For the reasons already given, the premise for ASIC's alternative argument about the application of s 674 was not established. The impugned statements did not express any relevant opinion. The impugned statements accurately conveyed to their intended audience what the agreements provided. That is reason enough to reject ASIC's alternative argument. Fortescue's statements having described accurately what the framework agreements provided, it is not to be supposed that s 674 nonetheless required Fortescue to publish the very text of those agreements. ASIC should have special leave to cross‑appeal but its cross‑appeal should be dismissed.
70. ASIC's allegations that Mr Forrest breached the duties imposed by s 180(1) of the Corporations Act on directors and officers depended upon it demonstrating that Fortescue had contravened s 1041H or s 674. Having failed to do that, ASIC's claim of contravention of s 180(1) also fails.

Heydon J, in separate reasons, allowed the appeal, the summary of which is set out at [85]:

85. First, leaving aside issues relating to what was "contractually binding", the agreement was an agreement calculated to ensure that CREC built and financed a railway by compelling the parties to enter further negotiations about the further detailed agreements necessary to make certain that the railway was built within the framework – what cl 7 called the "intent" – of the agreement. Secondly, even if the agreement was not a "binding contract" to build the railway, it was a "binding contract" to engage in the necessary further negotiations and enter the necessary further agreements. Thirdly, so far as Fortescue had represented that there was a "binding contract" to build the railway, the statement was one of opinion, and only fell within s 1041H if ASIC established that Fortescue did not hold that opinion, or, if it did, that it had no reasonable basis for stating it. ASIC did not establish either proposition.

The more interesting aspect of the Fortescue decision was the heavy criticism of ASIC by all members of the High Court.

The majority took ASIC to task in the way it appeared to conflate a pleading on misleading or deceptive conduct with a pleading of fraud, and when this was explained by ASIC, took ASIC to task even further (at [24] and [25]):

24. ASIC sought to explain and justify the inclusion in its statement of claim of a plea that Fortescue had no genuine or reasonable basis for making the statements as a plea that anticipated Fortescue alleging that the impugned statements were expressions of opinion not fact. But it was neither necessary nor appropriate for ASIC to attempt to use its statement of claim to meet an answer that had not been made.

25. This is no pleader's quibble. It is a point that reflects fundamental requirements for the fair trial of allegations of contravention of law. It is for the party making those allegations (in this case ASIC) to identify the case which it seeks to make and to do that clearly and distinctly. The statement of claim in these matters did not do that.

Further, Heydon J at [89] agreed with D Jackson QC's submission that ASIC's pleaded characterisation of the agreement was 'absolute nonsense', describing it as 'false':

89 The above reasoning renders false the allegations in par 28(a)-(c) that the agreement "did not state that CREC would … build and finance the railway", or "construct it on a 'Build and Transfer' basis", or "complete any works". It also renders false the allegations in par 20(a) and (b) that the agreement "did not by its terms oblige CREC" either to "build or transfer a railway facility" or "to finance the construction of a railway facility". Mr D F Jackson QC submitted that leaving aside the question of contractual effect, "with respect, the contention that that is not the effect of the agreement is absolute nonsense." This submission was entirely correct in content, style and tone.

I'm interested in the insights which will come from the seminar, particularly since it is being presented by Michael Kingston, the Chief Legal Officer of ASIC and Mark Moshinsky SC, who appeared as one of the senior counsel for ASIC.

Litigation funding: International Litigation Partners Pte Ltd v Chameleon Mining NL [2012] HCA 45

noreply@blogger.com (Andrew Downie) — Mon, 08 Oct 2012 03:48:00 +0000

The matter of International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45 was an appeal to the High Court of Australia from the Supreme Court of New South Wales.

International Litigation Partners Pte Ltd (ILP) entered into a litigation funding deed (the Deed) with Chameleon Mining NL (Chameleon) to fund litigation by Chameleon against Murchison Metals Ltd and others, claiming compensation for breach of statutory and fiduciary duties. Judgment was reserved in the Federal Court proceeding, and there was a restructure of Chameleon which triggered an 'Early Termination Fee' in the Deed. The fee was substantial, and was defined to mean 'an amount equal to "the Legal Costs (including Security for Costs)" expended by ILP up to the date of termination under cl 4.1 and a further amount being the higher of $9 million or the value of 20 per cent of the share capital of Chameleon at the "strike price" of its shares by the acquirer of the Change in Control' (at [10]).

In response to a claim by ILP for the fee, Chameleon gave a notice of rescission of the Deed under s925A Corporations Act, claiming that ILP ought to have had an Australian financial services license when entering into the Deed with Chameleon. While carrying on the business of litigation funding, ILP was not the holder of an Australian financial services license under Part 7.6 of the Corporations Act, and Chameleon argued that ILP should have been so licensed.

The majority (French CJ, Gummow, Crennan and Bell JJ) describe the operation of Part 7.6 of the Corporations Act as follows:

7. Part 7.6 of Ch 7 of the Act (ss 910A-926B) establishes a scheme for the licensing of providers of "financial services". Section 925A is of critical importance. It applies (by dint of s 924A) to an agreement with a client entered into in the course of a "financial services business" by a non-licensee who does not hold a licence and is not exempt from the requirement to do so, where the agreement constitutes or relates to the provision of a financial service by the non-licensee. Section 925A empowers the client to give to the non-licensee a written notice stating that the client wishes to rescind the agreement. This has the effect given by s 925E that the non-licensee is not entitled to enforce the agreement or to rely on it by way of defence or otherwise as against the client.

ILP argued that the provision of litigation funding to Chameleon was a 'credit facility' within the meaning of s765A(1)(h)(i) of the Corporations Act, which was exempt from the licensing requirement under Chapter 7 of the Corporations Act.

The Majority considered the Revised Explanatory Memorandum to the Financial Services Reform Act 2001 which stated that credit facilities were not covered by the definition of 'financial product' and to the extent they were consumer credit, they would be regulated by the State based Uniform Consumer Credit Code (which was displaced by the National Consumer Credit Protection Act 2009) (at [23]).

The majority considered the definition of a credit facility under the Corporations Regulations (at [26]):

26. Subject to exclusions which do not apply, the provision of "credit ... for any period", with or without prior agreement between the credit provider and the debtor and whether or not both credit and debit facilities are available, is a "credit facility" (reg 7.1.06(1)(a)). The term "credit" is defined in reg 7.1.06(3)(a) as meaning a contract, arrangement or understanding under which payment of a debt to the credit provider "is deferred", and as including "any form of financial accommodation" (reg 7.1.06(3)(b)(i)). The use in this way of the concept "means and includes" is to avoid any doubt that what is identified by the inclusion falls within the scope of the designated meaning of "credit"[11]. The result is that a contract, arrangement or understanding that is any form of financial accommodation is "credit", and its provision "for any period" will be a "credit facility".

The majority noted that the principal obligation of ILP in the Deed was to pay 'Legal Costs' within 28 days of receipt of written notification requiring payment, and upon resolution of the proceedings in favour of Chameleon, whether by settlement of judgment, ILP would be entitled to repayment of the 'Legal Costs' paid by it together with a 'Funding Fee'. The majority held that this was a form of financial accommodation provided by ILP to Chameleon, notwithstanding that ILP was to pay the 'Legal Costs' incurred by Chameleon, rather than advancing to it the moneys to enable it to do so itself (at [29] to [32]):

29. The principal obligation undertaken by ILP in the Funding Deed was its agreement in cl 2.1 to pay the "Legal Costs" within 28 days of receipt of written notification requiring payment. "Legal Costs" were defined as all costs associated with procuring the files of Chameleon's previous solicitor in the Federal Court proceedings, and all future agreed legal costs and disbursements incurred by Chameleon and ILP in relation to those proceedings or any appeal (cl 1). Upon resolution of the proceedings in favour of Chameleon, whether by settlement or judgment, ILP would be entitled (cl 3.1(a)) to "Repayment" of the Legal Costs it had paid in accordance with cl 2.1; ILP also would be entitled to payment of the "Funding Fee" (cl 3.1(b)). This was an amount being the higher of three times the costs incurred by ILP under cl 2.1 and the "Percentage Payment" out of the "Resolution Sum", being the gross amount received upon settlement or judgment in the proceedings. The "Resolution Sum" was to be held by Chameleon's solicitors on trust for ILP, as to so much thereof as was due to ILP under the Funding Deed (cl 3.3).

30. Hodgson JA was of the view that what the Funding Deed provided to Chameleon was a form of financial accommodation[13]. This was so, in our opinion, notwithstanding that ILP was to pay the Legal Costs incurred by Chameleon rather than advancing to it the moneys to enable it to do so.

31. In its submissions, Cape Lambert emphasised that reg 7.1.06(1)(a)(i) defined "credit facility" for s 765A(1)(h)(i) of the Act as "the provision of credit ... for any period". This was said to require identification in the Funding Deed of a period of time when there was money owing by Chameleon but not payable. This reflected too narrow a view of what might amount to the provision for a period of "credit" by a form of financial accommodation. This is true also of the submission made by Chameleon that "financial accommodation" postulated an obligation by Chameleon to pay money which was deferred, the deferral representing the accommodation. A bank overdraft may be subject to a term that it be repayable on demand by the bank, but the facility is one of accommodation for that period which elapses before the demand is made.

32. Clause 2.1 of the Funding Deed contained a present promise by ILP to pay the Legal Costs within 28 days of receipt of written notification. The temporal limitation upon the performance of that promise was that the notification relate to costs in relation to the Federal Court proceedings or any appeal from a judgment or order therein. For its part, Chameleon undertook to make the payments identified in cl 3.1 if the Federal Court proceedings yielded a receipt whether by way of settlement or judgment.

Heydon J agreed with the majority in separate reasons.

The ILP v Chameleon decision is important for the litigation funding industry as it is authority for the proposition that similar funding agreements are 'credit facilities' which are exempt from the licensing requirements under Chapter 7 of the Corporations Act.

Disclaimer of a lease by a landlord update: Re Willmott Forests [2012] VSCA 202.

noreply@blogger.com (Andrew Downie) — Mon, 03 Sep 2012 02:58:00 +0000

I wrote a post on disclaimer of a lease by a landlord in 'Disclaimer of a lease by a landlord: Willmott Forests Ltd [2012] VSC 29'. That matter was a decision by Davies J in which Her Honour held that a landlord could not disclaim a lease, under s568 Corporations Act, for the following reasons (at [11]):

a disclaimer of the lease by the liquidator of the landlord would only terminate the rights, interests, liabilities and property of the landlord but it would not bring the lease to an end for all purposes. Specifically, it would not bring the tenant’s proprietary interest in the land to an end. The tenant’s proprietary rights in the land will continue to subsist, even though the effect of disclaimer is that the landlord’s interests and liabilities under the lease have been terminated. Thus the effect of disclaimer is different where the lease is disclaimed by the liquidator of the landlord.

That decision was appealed, and the Court of Appeal (Warren CJ, Redlich JA and Sifris AJA) upheld the appeal in Re Willmott Forests [2012] VSCA 202. I haven't linked the AustLII decision to this page as the decision is not available yet. However the decision is available on the ABL website section devoted to the Willmott Forests liquidation litigation (http://www.abl.com.au/willmott/willmott.htm).

Warren CJ and Sifris AJA summarised the critical question as follows (at [1]): 'The critical question in this appeal is whether a leasehold interest in land is extinguished by the disclaimer of the lease agreement by the liquidator of the lessor, pursuant to s 568(1) of the Corporations Act 2001 (Cth) ('the Act').'

The Court of Appeal considered that if the interest of a lessee under a disclaimed contract terminated, then the leasehold estate must also go.

Warren CJ and Sifris AJA construed s568D(1) Corporations Act widely and considered that it included the obligation to provide possession and quiet enjoyment (at [37]):

37. The context of the word 'liability' in s 568D(l) suggests that it should be given the widest possible meaning and include the obligation to provide possession and quiet enjoyment. The section is specifically designed to enable a liquidator 'to cease performing obligations ... [and] to achieve a release of the company in liquidation from its obligations'. If WFL is to be relieved of its obligation to provide quiet enjoyment, clearly and in context a liability, the interest of the lessee so far as tenure is concerned is directly related to and underpins such liability. The tenure must go. It is necessary to affect the Growers rights (tenure) in order to release WFL from its liability (possession and quiet enjoyment). The cases where rights have been preserved usually involve claims against third parties unrelated to any liability of the company in liquidation.

Warren CJ and Sifris AJA relied on the decision of Deane J in Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited (1985) 157 CLR 17 (at [42] of Willmott):

[T]he leasehold estate cannot be divorced from its origins and basis in the law of contract (c.f. per Aitkin L.J. in Matthew v Curling): the lease should be seen as 'resting on covenant' (or contractual promise) and it is 'the contract ... and not the state ... which is the determining factor': see per Isaacs J., Frith v O'Halloran quoting from Hallen v Spaeth.
...
[O]nce it is accepted that the principles of the law of contract governing termination for fundamental breach are, as a matter of theory, applicable to leases generally, there is no difficulty in applying them in the present case in much the same fashion as an ordinary executory contract: '[i]f the contract is avoided or dissolved ... the estate falls with it': per Lord Wright, Cricklewood Property and Investment Trust Ltd v Leighton's Investment Trust Ltd.

Warren CJ and Sifris AJA held that because the leasehold interest is governed by the law of contract, the consequences of disclaimer of a contract of lease were no different to those for termination of a lease by way of acceptance of a repudiation (at [47]):

47. Although the event bringing about the termination of the contract of lease (and as a consequence, any leasehold interest) was a repudiation accepted by the non-defaulting party, it is the consequences of such termination, (namely termination of the leasehold interest) however brought about, that are relevant. There is no reason in principle or policy that should treat the consequences of disclaiming a contract of lease in a different way. In both cases, the lease agreement is at an end and what follows is a matter of law, namely termination of the leasehold interest that does not depend in any way on the reason for such termination.

Warren CJ and Sifris AJA held that the leasehold interest could not survive the termination of the very document that created it and regulated the tenure of the Grower, and held that the policy of the Corporations Act, particularly the disclaimer provisions, supported the appellant's position (at [58]):

58. Accordingly, in our opinion, the grounds of appeal are made out. For the reasons given, any leasehold interest cannot survive the termination of the very contract that created it and regulated the tenure of the Grower. It is this tenure which creates, and is the basis of, the obligation or liability on the part of WFL to provide quiet enjoyment. Section 586D(1) allows the liquidator to terminate this obligation or liability despite its intrusion into the property rights of an innocent party. The evident policy is to permit the loss of these rights in order to enable the company in liquidation to be free of obligations so that it can be wound up without delay for the benefit of its creditors. To compensate, the rights of the affected parties are transmuted into various statutory rights and claims.

Redlich JA also held that s568D ought to be construed widely (at [82]):

82. Save where the terms of the lease provide otherwise, the landlord will ordinarily be obliged to meet various expenses arising from ownership of the freehold to ensure the tenant's undisturbed possession of the land. But 'liability' in the context of s 568D is not to be confined to a financial obligation or immediate financial detriment. There is nothing in s 568D or Div 7 A to suggest that the term liability is not so wide as to include 'a legal obligation or duty.' The term 'liability' has a broad meaning which covers executory obligations in relation to the quiet possession, use and enjoyment of the land into the future. To release the appellants from these obligations it is necessary that the respondents' estates or interests in the leased lands be extinguished at the same time as the contracts.

Amendment vs removal of caveats: Ren v Shi [2012] VSC 271

noreply@blogger.com (Andrew Downie) — Wed, 25 Jul 2012 06:39:00 +0000

I was recently involved in the matter of Ren v Shi [2012] VSC 271 which was a hearing before Justice McMillan in the Supreme Court of Victoria. The plaintiff was seeking to remove a caveat from a property, and the defendant alleged that the caveat ought to remain on the title as, although defective, it was said to be capable of amendment.

The defect in the caveat was largely in the section 'estate or interest claimed'. The caveat claimed an 'estate in fee simple' (i.e. stating that the caveator was the owner of the land), whereas it appeared that the interest that the caveator had could only be, at its highest, an equitable charge (at [34] to [37]). Also, the document (written in Chinese) said to give rise to the interest was translated as follows (at [33]):

The plaintiff’s translation reads “[Mr] Xiao agrees to use his family assets to guarantee the repayment of the debt owed to [Mr]Shi”. In contrast, the defendant’s translation reads “[Mr] Xiao agrees to use his family assets as security for the repayment of the debt owed to [Mr] Shi”.

Power to amend a defective caveat

s90(3) of the Transfer of Land Act 1958 (Vic) (the TLA) provides:

(3) Any person who is adversely affected by any such caveat may bring proceedings in a court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit. [emphasis mine]

s90(3) TLA has been construed widely, giving the Court a discretion not only to remove a caveat, but also to amend the caveat to cure certain defects on the face of the caveat. There had been ongoing debate about whether or not the power to amend a caveat extends to amending the 'estate or interest claimed'.

In Ren v Shi, the McMillan J noted the factors that a Court must consider when faced with a defective caveat and an application to amend, including (at [21]):

(a) Whether the amendment is to the estate or interest claimed and not just the grounds of claim.

(b) The circumstances in which the error was made, including whether the caveator was represented by lawyers at the time.

(c) “The Court should not readily act in a way which might encourage the belief that the caveats can be imprecisely formulated and then ’fixed up later’.”

(d) The overall merits of the claim.

These factors developed from the decision of Macaulay J in Percy & Michele Pty Ltd v Gangemi [2010] VSC 530 (Gangemi) and were fleshed out by Dixon J in Martorella v Innovision Developments Pty Ltd [2011] VSC 282 (Martorella). Much earlier, in Midwarren Estates Pty Ltd v Retek & Stivic [1975] VR 575, Menhennit J held that the 'estate or interest claimed' could not be amended. However, Macaulay J in Gangemi and Dixon J in Martorella held that the 'estate or interest claimed' section in a caveat could be amended, but in considering the four factors set out above, special circumstances had to exist for such an amendment to be allowed (see Martorella at [65]).

The reasons for the limitation are discussed by Dixon J in Martorella in detail between [51] and [66]. A succinct summary is set out by Dixon J in Martorella at [55]:

A person proposing to deal with the land is entitled to assume that the claim expressed is the only one made, for the express mention of one ground is to the exclusion of the other. If a caveator enjoyed more, or different, rights in land than claimed in the caveat, it is proper and appropriate to lodge another, or a different, caveat notifying such interests.

For instance, it would be unfair for a registered proprietor to issue proceedings against a caveator, knowing that the caveator doesn't have the particular interest claimed, only to have the Court cure the defective caveat to the benefit of the caveator and to the detriment of the registered proprietor.

Removal of a caveat

McMillan J went on to discuss the considerations for the exercise of the Court's discretion to order the removal of a caveat. The basis for the removal of a caveat is the same as for an interlocutory injunction, as noted by Warren CJ in Piroshenko v Grojsman (2010) 27 VR 489 (Piroshenko) at [7] (also in Ren v Shi at [30]):

Caveats under the Torrens system are treated by the courts as analogous to applications for interlocutory injunctive relief. In so far as their registration is an administrative act, it is when application is made for their removal that the onus falls on the caveator to satisfy the two-stage test used by the court when deciding whether to exercise its discretion to grant injunctive relief. ... This two-stage approach requires the caveator to establish that there is a serious question to be tried that they have the estate or interest which they claim in the land in question, and having done so, to establish that the balance of convenience favours the maintenance of the caveat on the Register of Titles until trial.

Australian Broadcasting Corporation v O’Neill [2006] 227 CLR 57 clarified the proper test for a Court exercising its discretion to grant an interlocutory injunction. As a result, the trial division of the Supreme Court of Victoria recently reformulated the test for the removal of caveats, particularly with respect to the first arm of the test, being whether there is a 'serious question to be tried'. The test is as follows (Piroshenko v Grojsman [2010] VSC 240 at [18] and Ren v Shi at [31]):

1. there is a probability on the evidence before the court that he or she will be found to have the asserted equitable rights or interest; and

2. that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question in accordance with their normal proprietary rights.

If there is a 'serious question to be tried', then the Court goes on to consider the 'balance of convenience'. The 'balance of convenience' test has had a similar re-expression as a result of the Court of Appeal in Bradto Pty Ltd v State of Victoria [2006] VSCA 89 rejigging the 'balance of convenience' test for interlocutory injunctions. This has been expressed as 'the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ (see Bradto at [35] and Ren v Shi at [38]).

Ultimately, McMillan J held that the caveat ought not be amended ([25]), and even if it was amended, the Court would order its removal as there was no serious question to be tried (at [37]), nor would the balance of convenience favour the retention of the caveat (at [38]).

Ren v Shi is a good summary of the factors which influence the exercise of the Court's discretion under s90(3) TLA. It also discusses the circumstances in which a Court will award compensation for a caveat lodged without reasonable cause under s118 TLA, and when an award of indemnity costs ought to be made against a caveator, but these topics are beyond the scope of this post.

Civil Procedure Amendment Bill 2012 - costs disclosure and expert evidence

noreply@blogger.com (Andrew Downie) — Tue, 26 Jun 2012 02:37:00 +0000

The Civil Procedure Amendment Bill 2012 was recently introduced into the Victorian Parliament by Attorney-General Robert Clark and is currently being considered by the lower house. The Civil Procedure Amendment Bill 2012 is an amendment to the Civil Procedure Act 2010.

The explanatory memorandum of the Civil Procedure Amendment Bill 2012 notes that it is being introduced to give additional powers and discretions for the Courts in relation to costs disclosure and expert evidence:

The Civil Procedure Amendment Bill 2012 amends the Civil Procedure Act 2010 to introduce specific powers and discretions for the courts in relation to costs and expert evidence, to amend and create greater flexibility in the overarching obligations and proper basis certification requirements and to make other technical amendments.

The Bill aims to reduce costs and delays for persons involved in civil litigation in Victoria, and improve the effectiveness of the civil justice system. The Bill builds on the foundation established by the Civil Procedure Act 2010 in seeking to give judges and magistrates a clear legislative mandate to proactively manage cases in a manner that will promote the just, efficient, timely and cost-effective resolution of the real issues in dispute in a civil proceeding.

Part 2 of the Civil Procedure Amendment Bill 2012 gives the Court power to require costs disclosure to a lawyer's own client, and expands the type of costs orders which are able to be made:

Disclosure of litigation costs by a lawyer to his or her client is critical for informed decision-making. The Bill gives the courts a discretionary power to order that a lawyer make costs disclosure to the lawyer's own client. The order may be made at any stage of the proceeding. This will allow the courts, in appropriate cases, to increase the parties' access to information in relation to actual and estimated costs and disbursements incurred prior to trial, thereby encouraging more informed decision-making and the settlement of appropriate cases.

The Bill also clarifies and strengthens the courts' discretionary power to make other costs orders aside from the usual order that the losing party pay the winning party's costs. The Bill provides that the court may make any costs order that it considers appropriate to further the overarching purpose. Specific powers include ordering costs as a lump sum figure instead of taxed costs, ordering a party to pay a proportion of costs or fixing or capping recoverable costs in advance. Such orders avoid or narrow the scope of a taxation of costs. The objective is to increase the use of other costs orders in appropriate cases, thereby reducing the complexity, time and cost associated with taxation. Orders may be made in relation to any aspect of a proceeding, including, but not limited to, any interlocutory proceeding.

Part 3 of the Civil Procedure Amendment Bill 2012 gives the Court greater power to manage expert evidence, including requiring parties to seek directions if the party intends to adduce expert evidence at trial, ordering conferences and joint reports and limiting expert evidence in Court:

Expert evidence plays a critical role in civil litigation and is often essential to the just determination of an issue in dispute between the parties. However, expert evidence can also be a significant source of expense, complexity and delay in civil litigation. For example, the disproportionate use of expert witnesses has the potential to increase costs and delays for parties and reduce the effectiveness of the civil justice system as a whole. The inherent complexity and volume of expert evidence can also limit its usefulness to decision-makers.

The main objective of the expert evidence provisions is to reduce the costs and delays associated with expert evidence by providing clear legislative guidance and encouragement for the courts to actively manage and control expert evidence. The provisions also aim to improve the quality and integrity of expert evidence and enhance its usefulness to judges and magistrates.

Some of the expert evidence provisions consolidate existing powers of the courts, for example in the rules of court and practice directions. Although the existing powers of the court may be sufficient for the court to give directions and impose reasonable limits on any party in respect of expert evidence, clear statutory provisions will have greater impact in encouraging the courts to actively manage and control expert evidence. This will also resolve any argument about the limits of existing rule-making powers and will overcome any constraints on the exercise of powers that exist at common law.

Finally, the Civil Procedure Amendment Bill 2012 amends the certification requirements, including extending certification to any 'substantive document' that a party relies on (with some qualification).

The expert provisions appear to be detailed and, if the Civil Procedure Amendment Bill 2012 is passed and given Royal Assent, practitioners will need to quickly get up to speed with the detail in the bill. The proposed commencement date is 1 May 2012 or on proclamation.

Learned observations on Investec Bank (Australia) Limited v Mann & Anor [2012] VSC 81

noreply@blogger.com (Andrew Downie) — Fri, 15 Jun 2012 04:07:00 +0000

On 6 June 2012 I attended the Commercial Court seminar on Investec Bank (Australia) Limited v Mann & Anor [2012] VSC 81 (Investec No. 2).

The decision in Investec No. 2 appears to be quite drastic. That is, the Supreme Court of Victoria dismissed an application for the solicitor to file a notice of solicitor ceasing to act, and required the solicitor to continue to act and be on the Court record in circumstances where the client did not have the available funding or instructions. However Michael McGarvie, the Legal Services Commissioner, noted that Investec had to be put into context which is otherwise not apparent from the judgment.

The context was a preceding decision of Pagone J in Investec Bank (Australia) Limited v Mann & Anor [2012] VSC 58 (Investec No. 1) in which the defendants' and their solicitor's conduct was brought into question. In Investec No. 1 the defendants made application for leave to file and serve an expert report out of time and by 2 March 2012 (11 days before trial). There was evidence that the defendant's solicitor sent correspondence to the plaintiff suggesting that an expert had already been engaged and that the expert required further time for the preparation of a report. The plaintiff gave evidence that the expert, once contacted by the plaintiff, said that he hadn't been retained at all. Pagone J agreed with the plaintiff, dismissed the application and invited submissions on whether it was appropriate to order costs against the defendant's lawyer (see [13] and [14]). Obviously this sort of background would colour the application for leave in Investec No 2.

Justice Davies, who introduced and summarised Investec No. 2, noted that the procedure used in Investec No. 2 could be a tactic for a party to obtain an adjournment of the trial. The difficulty that I see with a Judge dealing with this sort of application is how to infer that this tactic is being used, when the evidence will never really go to this. Perhaps the notable lack of evidence on certain issues could be used to infer such an intention on the party who was represented by the solicitor seeking leave (e.g., such as the notable lack of evidence on certain matters in Investec No. 2 at [9]).

Solicitor not permitted to cease to act - Investec Bank (Australia) Limited v Mann & Anor [2012] VSC 81

noreply@blogger.com (Andrew Downie) — Tue, 05 Jun 2012 06:16:00 +0000

I am attending a Commercial Court seminar tomorrow (6 June 2012) at Monash University Law Chambers on the matter of Investec Bank (Australia) Limited v Mann & Anor [2012] VSC 81. I thought I'd give a brief summary by way of background to bring both myself and my audience up to speed.

Investec was an application before Pagone J for leave to file and serve a notice of solicitor ceasing to act. The trial was listed for 13 March 2012 and it was set down on 9 December 2011. The defendants' solicitor applied for leave to file and serve their notice on 2 March 2012, 11 days before the trial.

The evidence of the defendant's solicitor in support of the application was to the effect that a request for funds was made on 2 March 2012 and the defendants said that they could not provide the funding.

Pagone J held that there were 'special circumstances which render it expedient to retain the solicitor on record', particularly the lateness of the request for funding and the inconvenience to the parties and the Court (at [8]):

8 This is a case where in my view there are “special circumstances which render it expedient to retain the solicitor on the record.” The application was made almost three months after the date was fixed for trial and only eleven days before the trial was due to commence. Madgwicks left their requirement that its clients put them in funds for the trial until 2 March 2012. No explanation was given for the delay (or timing) in imposing or insisting upon funds or for the delay (or timing) in making the application for leave. It is incumbent on solicitors making such applications for leave to satisfy the Court that it is proper and appropriate that leave should be granted. Applications of this kind are likely to be unopposed and that circumstance, coupled with the practitioner’s duty to the Court and to uphold the law, makes it incumbent upon them to be full and frank with the Court asked to grant leave. The removal, or absence, of legal practitioners close to trial is sometimes used as a reason for an adjournment of the hearing with inconvenience to the Court, the other parties and to other litigants. Practitioners ought to guard against the possibility of the Court finding itself with unrepresented litigants close to the hearing date. No evidence was given by Madgwicks of having taken any steps to avoid the inexpedient consequences to the Court, to the plaintiff and to the plaintiff’s solicitors which would arise if the leave Madgwicks seeks were to be granted. Nor, for that matter, have Madgwicks given evidence of any steps to prevent the situation of the defendants finding themselves close to the hearing date without legal representation or having to conduct the trial unrepresented after many months of all concerned knowing of the trial date. The inconvenience to the Court and the additional inconvenience and costs to the plaintiff and its solicitors, that would be occasioned by granting leave at so late a stage, could not be compensated by costs orders and outweigh any burden to Madgwicks of not granting them leave. The requirement in r 20.03(3) of seeking leave is imposed upon legal practitioners for the proper administration of justice. It enables the Court’s work to be performed efficiently and with the confidence of the assistance of practitioners it provides a protection to former clients and serves to protect the position of adversaries.

Pagone J held that the effect of this meant that the solicitors would not necessarily have to conduct the trial for the defendants, but would be required to offer such assistance as the court may require (at [9]):

9 The role Madgwicks may hereafter be required to perform upon my refusal to grant leave is another matter. Their continued role should, as far as possible, be limited to the purpose of the rule requiring leave as explained in Plenty v Gladwin as concerned with the record of the Court and with service of documents. They may be required to continue to receive documents from the plaintiff’s solicitors. It may require Madgwicks to continue to convey to the defendants any documents served for them at Madgwicks. Their status as officers of the Court may conceivably also require them to offer such assistance as the Court may require during the conduct of the trial. Madgwicks may not be required to conduct the trial on behalf of their former clients without funding but may need to give such other assistance as may be required by the Court to lessen or eliminate the adverse impact upon the Court’s record or upon the orderly service of documents upon the defendants as the Court may direct. It is conceivable that greater duties may also arise but they should not be considered in the abstract and without hearing submissions from Madgwicks and others affected.

The decision in Investec has serious implications for litigation legal practitioners as it would appear to require a legal practice to continue working for a client in circumstances where there is no funding available or likely to be available. With that in mind, I am looking forward to the commentary on Investec from the Bench, Senior Counsel and the Victorian Legal Services Commissioner at the seminar tomorrow night.

Assignment of restitutionary rights: Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham's Warehouse Sales Pty Ltd [2012] HCA 7

noreply@blogger.com (Andrew Downie) — Mon, 30 Apr 2012 22:51:00 +0000

The matter of Equuscorp Pty Ltd v Haxton; Equuscorp Pty Ltd v Bassat; Equuscorp Pty Ltd v Cunningham's Warehouse Sales Pty Ltd [2012] HCA 7 was an appeal to the High Court from the Victorian Court of Appeal in respect of loans entered into by investors for the purpose of facilitating investments in managed investment schemes.

The schemes had the usual tax effective structure in which investors would pay an amount to a management company for planting, maintenance and harvesting fees and the investors would get a return on harvest, together with a tax deduction for their initial investment. The investors entered into loans with Rural Finance Pty Ltd (Rural), the financier of the schemes. The purpose of these loans was to fund their investments in the schemes.

Equuscorp Pty Ltd (Equuscorp) became a mortgagee of the land and chargee of the assets of the various group entities for the schemes just before the schemes collapsed. When the schemes collapsed the receivers and managers assigned the loans from the investors to Equuscorp under a deed of assignment.

Equuscorp sued the investors for loan defaults in the Supreme Court of Victoria. The investors defended the proceedings claiming, amongst other things, that the loan agreements were unenforceable for illegality.
Because of this, Equuscorp claimed that the amounts loaned to the investors were recoverable by way of a restitutionary claim for money had and received on the basis of failure of consideration by reason of the loan agreement being unenforceable, and that the restitutionary claim was validly assigned from Rural to Equuscorp.

The High Court agreed with the investors that the loan agreements were unenforceable for illegality because they were entered into in breach of the requirement in the then Companies Code for certain public offerings to have a registered prospectus.

The High Court held that there was no claim for money had and received, by reason of Rural being not an arm's length party when arranging the loans (at [45] per French CJ, Crennan and Kiefel JJ, at [110] to [111] per Gummow and Bell JJ):

45. Had a right to claim restitution for money had and received been available to Rural in this case, it would have been able to recover by such claims what the policy of the law denied it in respect of the loan agreements. Rural was not an arms length financier. It was part of the closely related group of companies that were involved in the promotion of the schemes. The loan agreements were an integral part of the schemes and in so far as they involved the issue of invitations and offers to investors to take up prescribed interests without the benefit of the protections required by the Code, furthered that illegal purpose. As in the Hurst case, while not essential to the investments, the loans made the investments more attractive. Recovery from the investors would have been recovery from persons whose protection was the object of the statutory scheme. The respondents were not in pari delicto with Rural. The failure of consideration invoked by Equuscorp was the product of Rural's own conduct in offering the loan agreements in furtherance of an illegal purpose. This is a clear case in which the coherence of the law, and the avoidance of stultification of the statutory purpose by the common law, lead to the conclusion that Rural did not have a right to claim recovery of money advanced under the loan agreements as money had and received. There was therefore no right to claim such relief available for assignment to Equuscorp. In any event, for the reasons that follow, any such rights, if they had existed, would not have been assigned by the Deed.

...

110. The explanation of the money lending cases given by Mason and Wilson JJ in Pavey & Matthews is in point here. Their Honours said:

"The relevant provisions in those cases explicitly rendered unenforceable contracts executed by the money-lender. The statutes were directed at making unenforceable an obligation to repay money already lent and a security already given in respect of such an obligation. It was not possible to interpret these provisions so that they left on foot any quasi-contractual causes of action on the part of the lender. Request and receipt by the borrower of the money lent were integral elements in a situation in which the contract and all securities were expressed to be unenforceable. An additional feature of the money-lending cases is that the legislation was designed to protect borrowers by imposing onerous obligations on money-lenders to comply with the statutory requirements." (emphasis added)

111. The prospectus provisions have a long history. This was traced by Mahoney JA in Hurst v Vestcorp to the mid-19th century. As Heerey J later remarked when dealing with the prospectus provisions of the Code, so seriously did the legislature regard these provisions, including s 170, that a breach not necessarily fraudulent and not necessarily causing monetary loss nevertheless could result in a five year term of imprisonment. This supports the conclusion that in a case such as is presented by these appeals, the investors who received prescribed interests should not be in the same position as if Pt IV Div 6 of the Code had not been enacted or had been complied with by Rural, and the loan agreements had been effective in accordance with their terms. The respondents correctly submit that to permit recovery on the actions for money had and received would stultify the statutory policy evident in Pt IV Div 6 of the Code. We agree with what is further said on this point by French CJ, Crennan and Kiefel JJ at [45] in their reasons. Equuscorp, as successor to Rural, in these circumstances cannot complain that the loss is left to lie where it has fallen.

However the High Court held that if there was a right to restitution, then that right was assignable (at [53] per French CJ, Crennan and Kiefel JJ, at [159] per Heydon J):

53. A restitutionary claim for money had and received under an unenforceable loan agreement is inescapably linked to the performance of that agreement. If assigned along with contractual rights, albeit their existence is contestable, it is not assigned as a bare cause of action. Neither policy nor logic stands against its assignability in such a case. The assignment of the purported contractual rights for value indicates a legitimate commercial interest on the part of the assignee in acquiring the restitutionary rights should the contract be found to be unenforceable. Equuscorp fell into the category of a party with a genuine commercial interest in the restitutionary rights. Notwithstanding the difficulties that may attend the claims having regard to particular circumstances and defences which might affect their vindication, the better view is that adopted by the Court of Appeal, namely, that the restitutionary claims were assignable. The question that next arises is whether they were assigned.

...

159. The respondents also submitted that a claim for money had and received is a personal one, infused with equitable notions of conscience, requiring a detailed analysis and balancing of the particular merits of the case, and so personal in nature as to be incapable of assignment. They cited authority relating to the non-assignability of the benefit of a contract involving personal skill and confidence. This case has nothing to do with the assignment of the benefit of a contract involving personal skill and confidence. And the circumstance that, like other legal rights, a claim for money had and received might rest on a detailed analysis of matters of fact that call for judgment does not prevent the right, once established, from being assignable.

However the issue of whether the deed of assignment would have been effective to assign the restitutionary rights had a split answer. French CJ, Crennan and Kiefel JJ held that the deed of assignment was not cast in wide enough terms to include the assignment (at [66]) whereas Gummow and Bell JJ (at [75]) and Heydon J (at [160]) held that a robust construction of the deed was preferred, such that the right to restitution was assigned.

Reinstatement of pre-Corporations Law (1991) companies: Part 3

noreply@blogger.com (Andrew Downie) — Thu, 19 Apr 2012 00:00:00 +0000

In my previous post I noted that the balance of authorities consider that the Corporations Act is not the appropriate legislation for reinstatement of a company which was registered and deregistered/dissolved under pre-1991 corporations legislation.

In City West Water Limited v Mr D Investments Pty Ltd [2002] VSC 553, Senior Master Mahony of the Supreme Court of Victoria considered that the legislation applicable at the time of the deregistration / dissolution is the appropriate legislation for the reinstatement of the deregistered company (at [28]). In Armitage v HXE Limited [2010] NSWSC 1109 White J of the New South Wales Supreme Court held that on the basis of the reasoning of Senior Master Mahony in City West Water, the Companies Act 1961 (NSW) was the appropriate legislation for reinstatement of a company deregistered at the time that the Companies Act 1961 (NSW) applied.

However, one issue with the application of these Acts is that they have been repealed. For instance:

The Companies Act 1961 was repealed on 10 February 2010 by s3 (Schedule 1) of the Legislation Reform (Repeals No. 5) Act 2010.
The Companies (Victoria) Code and Companies (Application of Laws) Act 1981 were repealed in 2008.

So how can these Acts be used to reinstate a company deregistered under them?

In Armitage, White J applied the Companies Act 1961 to effect the reinstatement of a company, whereas the Companies Act 1961 had been repealed. The basis for this was that there is legislation allowing for the survival of certain parts of previous corporations legislation which is not carried over into the Corporations Act (at [9] and [10]):

9 In Baird v WJT Howes Investments Pty Ltd [2008] NSWSC 1232; (2008) 68 ACSR 485, Barrett J followed City West Water Ltd v Mr D Investments Pty Ltd [2002] VSC 553; (2002) 43 ACSR 622 in holding that where a company had been deregistered under the Companies (New South Wales) Code, the provision of that Code remained applicable to applications for reinstatement. This was by virtue of s 85 of the Corporations (New South Wales) Act 1990 (NSW) pursuant to which the Code continued to apply by its own force in relation to matters arising directly or indirectly out of matters that arose before the commencement of that Act.

10 Section 20 of the Companies (Application of Laws) Act 1981 (NSW) provided that unless the contrary intention appeared all things and circumstances appointed or created by or under the Companies Act 1961 should, subject to the Companies (New South Wales) Code, continue to have the same status, operation and effect as they would have had if the Companies (Application of Laws) Act had not been enacted.

It appears that s85 of the Corporations (Victoria) Act 1990 may allow for the survival of the Corporations (Victoria) Code to the extent that the Corporations Act does not deal with those matters. s85 provides as follows:

(1) This section provides for the national scheme laws of this jurisdiction to supersede the co-operative scheme laws, which are to continue to operate of their own force only in relation to-

(a) matters arising before the commencement of this section; and

(b) matters arising, directly or indirectly, out of such matters-

in so far as the national scheme laws or the Corporations legislation do not deal with those matters.

Unfortunately s85 is unclear in its application and scope.

In respect of the survival of the reinstatement provisions of the Companies Act 1961, the Victorian equivalent of the survival legislation for the Companies Act 1961, being the Companies (Application of Laws) Act 1981, appears to have been repealed.

It is therefore unclear how any company could be reinstated if it was dissolved under pre-1991 corporations legislation. This issue was confronted by Barrett J in Tan v ASIC [2011] NSWSC 58 in which Barrett J was asked to reinstate a company deregistered under pre-1991 corporations legislation. Barrett J noted the lack of clarity, complexity and resultant difficulties in the equivalent New South Wales provisions at [6] to [9] as follows:

6. I am bound to say, however, that I have a distinct discomfort about continuing resort to the Companies (New South Wales) Code , given that its applicability and availability rest solely on the insubstantial foundation of s 85 of the Corporations (New South Wales) Act 1990 (NSW). The Companies (New South Wales) Code is otherwise not in force following repeal of the Companies (Application of Laws) Act 1981 (NSW) by the Statute Law (Miscellaneous Provisions) Act 2008 (NSW) which was itself repealed by the Statute Law (Miscellaneous Provisions) Act 2009 (NSW).

7. As regards a company deregistered under New South Wales companies legislation before 1 January 1991, a combination of:

(a) transitional provisions that came into effect upon the creation of the Corporations Law of New South Wales on 1 January 1991 by the Corporations (New South Wales) Act 1990 (NSW);

(b) insertion into the Corporations Law of New South Wales by the Company Law Review Act 1998 (Cth) of not only reinstatement provisions corresponding with those in the present s 601AH but also the particular transitional provision that became s 1362CH;
(c) non-inclusion of that s 1362CH in the Corporations Act 2001(Cth); and

(d) the wide-ranging but sometimes very generally and imprecisely expressed transitional provisions now in force through Division 6 of Part 10.1 of the Corporations Act 2001 (Cth)

does not seem to provide a basis for a conclusion that reinstatement of registration may be dealt with by the court and by ASIC under s 601AH of the present Corporations Act.

8. It is in my opinion desirable that Parliament enact legislation dealing in a clear and concise way with reinstatement of the registration of a company either deregistered or dissolved before 1 January 1991 under State or Territory legislation then in force.

9. Such cases arise fairly frequently. Identification of the correct basis on which to order and effect reinstatement is not something that is remote from practical affairs.

The take-home message here is the following:

Unless the issue is resolved by a Court of Appeal, it is unclear whether there is any scope for the reinstatement of a company deregistered before 1991.
A practitioner needs to be very careful and thorough when faced with an application to reinstate a company dissolved before 1991.

s1324 Injunctions - AGBC Pty Ltd & Anor v Dessa & Ors [2012] VSC 118

noreply@blogger.com (Andrew Downie) — Sun, 15 Apr 2012 22:50:00 +0000

The matter of AGBC Pty Ltd & Anor v Dessa & Ors [2012] VSC 118 was an application by a liquidator for an interim injunction under s1324(4) of the Corporations Act 2001 (Cth). The liquidator was seeking to restrain a previous director of the company in liquidation from removing the assets and confidential information of the company.

s1324 provides as follows:

(1) Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:

(a) a contravention of this Act; or
(b) attempting to contravene this Act; or
(c) aiding, abetting, counselling or procuring a person to contravene this Act; or
(d) inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f) conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.

...

(4) Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).

Gardiner AsJ referred to ASIC v Mauer-Swisse Securities Limited and Anor [2002] NSWSC 741 and set out the principles for obtaining an injunction under s1324 (at [31]):

31 In Australian Securities and Investments Commission v MauerSwisse Securities Limited and anor,[2] Palmer J of the Equity Division of the Supreme Court of New South Wales considered the principles to be applied in applications for interim injunctions under s 1324(4) of the Act. He described an inconsistency in approach in the authorities as to the principles upon which the Court should act in an application for an interim injunction under the sub-section. In the judgment, he summarised the principles he considered should be applied. Those which have relevance in the present context are as follows:

– the jurisdiction which the Court exercises under s.1324 CA is a statutory jurisdiction, not the Court’s traditional equity jurisdiction;
– Parliament has made it increasingly clear by successive statutory enactments that the Court, in exercising its statutory jurisdiction under s.1324, is not to be confined by the considerations which would be applicable if it were exercising its traditional equity jurisdiction;
– amongst the considerations which the Court must take into account in an application for an injunction under s.1324 CA are the wider issues referred to by Austin J in Sweeney and Parkes, and by Davies AJ in Pegasus; they may be gathered under the broad question whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act;
– these considerations are to be taken into account regardless of whether the application is for a permanent injunction under s. 1324(1) or for an interim injunction under s. 1324(4);
– although the questions whether there is a serious question to be tried and where the balance of convenience lies will not circumscribe the Court’s consideration in an application for an interim injunction under s. 1324(4), the interests of justice will always require that those questions be examined carefully when restrictions are sought to be imposed before the case has been properly examined by the Court, even where the protection of the public is said to be involved: see per Young J (as his Honour then was), in Corporate Affairs Commission (NSW) v Lombard Nash International Pty Ltd (1986) 11 ACLR 566, at 570-571;

In reaching the decision to grant the interim injunction sought by the plaintiff, Gardiner AsJ approached the matter on the principles set out in Mauer-Swisse and then considered that even if the injunction was treated as a conventional application in the equitable jurisdiction of the court, there are sufficient facts to demonstrate a serious question to be tried and that the balance of convenience favours the granting of the orders. Gardiner AsJ referred to the Court of Appeal's decision in Bradto Pty Ltd v Victoria (2006) 15 VR 6 (at [38]):

38 I also consider that the balance of convenience favours the granting of the orders sought. As was observed in Bradto Pty Ltd v Victoria,[4] the Court must in determining whether to grant an interlocutory injunction:

... [T]ake whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party who fails to establish his right at the trial or in failing to grant an injunction to a party who succeeds at trial.

By way of summary:

In AGBC Gardiner AsJ notes that the jurisdiction to grant an injunction under s1324 is a statutory one, and the considerations are different to those in the exercise of the Court's equitable jurisdiction.
The broad consideration for the granting of the injunction appears to be whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act.
The considerations in the equitable jurisdiction of whether there is a serious question to be tried and whether the balance of convenience favours the granting of the orders remain relevant.

ACCC v Google [2012] FCAFC 49 - the appeal to the Full Court (FCA)

noreply@blogger.com (Andrew Downie) — Wed, 11 Apr 2012 23:36:00 +0000

The matter of Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49 was an appeal from the decision of Nicholas J. I gave a summary and analysis of the decision of Nicholas J in my previous post here.

The matter was heard before Keane CJ, Jacobson and Lander JJ, and concerned part of the matter before Nicholas J. Specifically, it concerned four advertisements, or 'sponsored links' which appeared on the Google search page. The 'sponsored links' were triggered by the insertion of key words concerning their competitors. By way of summary, the appeal concerned the following (at [5] to [8]):

The other aspect of the ACCC’s case at trial raised what is now the principal issue on the appeal. The primary judge held that in four instances relied on by the ACCC an advertiser had engaged in misleading and deceptive conduct by falsely representing that there was a commercial association or affiliation with its competitor, and that information regarding the competitor could be found by clicking on to what was, in fact, the advertiser’s web address. These instances concerned sponsored links triggered by the insertion of key words relating to “Harvey World Travel”, “Honda.com.au”, “Alpha Dog Training”, and “Just 4x4s Magazine”.
His Honour held, however, that Google did not make the representations contained in these sponsored links. His Honour held that Google did not endorse or adopt the advertisement but did no more than represent that the advertisements were advertisements.
The ACCC contends in its appeal to this Court that, given Google’s involvement in the process of displaying the sponsored links in response to a user’s search, the primary judge should have held that Google had engaged in misleading conduct.
Google supports the decision of the primary judge. It also contends that it was entitled to succeed on other grounds not accepted by his Honour. In this latter regard, it contends that each of the advertisements in question either was not misleading or that Google was entitled to rely upon the defence afforded by s 85(3) of the Act.

The Full Court upheld the appeal and held that Google had engaged in misleading or deceptive conduct. In doing so, the Full Court analysed what conduct was said to be misleading or deceptive and held that Google was more than a 'mere conduit' of information from the advertiser (at [88] to [90]):

It is necessary to be clear as to what it is about Google’s conduct that is said to be misleading or deceptive on its part. Google’s conduct consists relevantly of the display of the sponsored link in response to the entry of the user’s search term in collocation with the advertiser’s URL. The display of the sponsored link is effected by Google’s engine as Google’s response to a user’s search. That which is displayed by Google is called up by Google’s facility as Google’s response to the user’s search. The clickable link, when clicked, takes the user directly to the advertiser’s URL.
An ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor’s URL in response to the user’s search. Even if all these circumstances would not be apparent to ordinary and reasonable users, so that Google could not be “seen” by them to be more than a mere conduit, these circumstances show that Google is, in fact, much more than a mere conduit. The reaction of the ordinary and reasonable member of the class is not solely determinative of the issue. As Gummow J said in ACCC v Channel Seven the question is whether the “carrier is and is seen to be a mere conduit”; and as the primary judge acknowledged, the fact that a representation is not understood by the audience to be an advertisement for another person will not necessarily exclude Google from the scope of s 52 of the Act. His Honour said at [186]:

The mere fact that the relevant class may not have understood the representations to have been made by Google cannot be determinative of the question:Cassidy v Saatchi & Saatchi [2004] FCAFC 34; (2004) 134 FCR 585 per Moore and Mansfield JJ at [28].

Critical to this conclusion is the fact that the sponsored link is displayed on the screen in response to the user’s query which is made by the entry of selected key words. Thus, the user asks a question of Google and obtains Google’s response. Several features of the overall process indicate that Google engages in misleading conduct.

The misleading conduct was said to be Google's conduct because it responded to a query using search terms and informed the user that the content of the 'sponsored link' is responsive to the user's query (at [92]):

The conduct is Google’s because Google is responding to the query and providing the URL. It is not merely passing on the URL as a statement made by the advertiser for what the statement is worth. Rather, Google informs the user, by its response to the query, that the content of the sponsored link is responsive to the user’s query about the subject matter of the keyword.

The Australian Financial Review has reported that Google is considering an appeal to the High Court. The article is here.

Apple's 4G iPad 3 advertising and the ACCC - undertakings filed

noreply@blogger.com (Andrew Downie) — Thu, 29 Mar 2012 03:23:00 +0000

In response to the proceeding filed by the ACCC, Apple has filed undertakings in the Federal Court of Australia.

A media release from the ACCC notes that Apple has filed undertakings which provide that until further order or hearing, Apple Pty Limited would as soon as is reasonably practicable and by no later than 5 April 2012:

display a statement that the “This product supports very fast cellular networks. It is not compatible with current Australian 4G LTE networks and WiMAX Networks” in its promotional materials, on its website and online store
distribute signage with the same wording to resellers to be displayed at points of sale
contact by email any persons for whom Apple Pty Limited has an email address and who have purchased the “iPad with WiFI + 4G” between 16 March and 28 March 2012 (including pre-orders prior to 16 March 2012) including statements to the effect that “This product supports very fast cellular networks. It is not compatible with current Australian 4G LTE networks and WiMAX Networks” and that such persons are entitled to return the product and request a refund within a timeframe specified in the email.

The following are the main steps in the proceeding leading to trial:

A directions hearing has been scheduled for 16 April 2012 at 9:30am.
A mediation has been ordered for 18 April 2012.
A hearing on liability has been set down commencing 2 May 2012

The ACCC release is here.

Reinstatement of pre-Corporations Law (1991) companies: Part 2

noreply@blogger.com (Andrew Downie) — Wed, 28 Mar 2012 23:00:00 +0000

In my last post I noted that s601AH of the Corporations Act 2001 (Cth) does not appear to give a Court power to reinstate a company that was registered and deregistered under pre-1991 corporations legislation.

However the authorities diverge on whether the Corporations Act is the appropriate avenue for reinstatement of a company that was either 'deregistered' or 'dissolved' under pre-1991 corporations legislation.

In terms of what companies laws have previous applied, I note that the following are some of the main acts which are the equivalent of the modern Corporations Act since the 1960's:

The Companies Act 1961, being uniform State Acts.
The Companies (Victoria) Code and the Companies (Application of Laws Act) 1981, being uniform State Acts.
The Corporations Act 1989 (Cth) (the Corporations Law)
The Corporations Act 2001 (Cth) (the Corporations Act).

In Parker v Australian Asbestos [2002] NSWSC 520, Austin J formed the view that although s601AH did not appear to apply to a company registered and deregistered under pre-1991 corporations legislation, there were other provisions in the Corporations Act which allowed s601AH to apply to such companies.

The reasoning and provisions are as follows (and contained at [11] to [14] of Parker):

S610AH Corporations Act provides for the reinstatement of a 'company'.
‘Company’ is defined under the Corporations Act as a company registered under that Act. As such, a company deregistered before the commencement of the Corporations Act is not a company for the purposes of the Corporations Act.
S1400 Corporations Act provides that if a right was acquired under a provision of the Corporations Law (being the Corporations Act 1989) in force before 15 July 2011 and corresponds to a provision of the Corporations Act, then that carries over.
S601AH Corporations Act has a corresponding s601AH in the Corporations Law.
S1362CH of the Corporations Law (which does not have a corresponding provision in the Corporations Act) extends s601AH Corporations Law to reinstatement of companies incorporated under previous laws, including state laws, such as the Companies Act 1961.
Because 601AH is a carried over provision, and because the carried over provision extends to earlier acts such as the Companies Act 1961, the company can be reinstated under s601AH of the Corporations Act.

For that reason, Austin J held that a company that was registered and deregistered under the Companies Act 1961 could be reinstated under s601AH of the Corporations Act.

For clarity, s1362CH Corporations Law provides the following:

ASIC's powers under section 601AH extend to the reinstatement of the registration of a body corporate that:

(a)was at some time before commencement incorporated or taken to be incorporated under a previous law of this jurisdiction corresponding to Chapter 2 of the old law; and
(b)was deregistered before commencement.

In City West Water Ltd v Mr D Investments Pty Ltd [2002] VSC 553, Senior Master Mahony (now Associate Justice Mahony) disputed the correctness of the reasoning of Austin J. Associate Justice Mahony noted that s1362 of the Corporations Law only applied to ASIC's powers, and not the Court's powers. The criticism of the reasoning is set out at [26]:

With respect, as has been seen, the subject of s 1362CH was limited to `ASIC's powers' and the section did not have such a general operation with respect to the whole of s 601AH as Austin, J suggests in the passage quoted in [25]. In particular, it had no application to the jurisdiction of the Court under s 601AH (2).

For that reason, Associate Justice Mahony was 'compelled to conclude that, the company having been deregistered under the Code, the Court's jurisdiction to make the order for reinstatement of its registration is still to be found in s 459 (6) of the Code' (at [28]).

This decision has been followed an applied in Armitage v HXE Limited [2010] NSWSC 1109 to reinstate a company under the Companies Act 1961.

Armitage and City West Water are authorities in strong support of the proposition that if a company is deregistered/dissolved under pre-1991 corporations legislation, particularly the Companies Act 1961 and the Companies (Victoria) Code, then it is to be reinstated under those past Acts.

Apple's 4G iPad 3 advertising and the ACCC

noreply@blogger.com (Andrew Downie) — Tue, 27 Mar 2012 07:21:00 +0000

The ACCC is filing a claim tomorrow against Apple for Apple's advertising which claims that the iPad 3 is 4G compatible.

The ACCC release is here.

The ACCC says that the iPad 4 advertising is misleading because 'it represents to Australian consumers that the product "iPad with WiFi + 4G" can, with a SIM card, connect to a 4G mobile data network in Australia, when this is not the case.'

The ACCC will be seeking urgent interlocutory relief and final orders including injunctions, penalties, orders for corrective advertising and orders for refunds to affected persons.

Withdrawal of an admission: Hodgson v Amcor; Amcor v Barnes & Ors [2012] VSC 94

noreply@blogger.com (Andrew Downie) — Sun, 25 Mar 2012 22:10:00 +0000

The matter of Hodgson v Amcor; Amcor v Barnes & Ors [2012] VSC 94 was a dispute concerning the Amcor management. Hodgson was suing for amounts owing to him on termination of his contract of employment, and Amcor was counterclaiming against its management for breach of fiduciary and like duties for acting in their own interests when selling two Amcor businesses.

Amcor's defence contained an admission of fact, including:

4.(g) For the financial year 2003/2004, the Defendant and Plaintiff agreed on budget and performance measures to be met by the Plaintiff, upon achievement of which the Plaintiff would be entitled to a bonus and such measures included, inter alia, compliance with all laws including without limitation the Trade Practices Act 1974 (Cth) (TPA) (MIP Framework 2003/04).

8. It says that the Plaintiff did not meet the budget and performance measures agreed by the Defendant and Plaintiff for the financial year 2003/2004 as described in paragraph 4 above and otherwise denies each and every allegation in paragraph 8 SOC.

Amcor issued a reply and sought to withdraw the above admissions after the trial was completed. His Honour Vickery J discussed the relevant principles for withdrawal of admissions in light of the case management principles which were set out in Aon (at [492] to [500]).

...Amcor relied upon McKenzie v Commonwealth of Australia[56] and Jeanes v Commonwealth of Australia.[57]

493 In McKenzie Gillard J discussed the principles concerning an application to amend a defence to withdraw an admission made, which were summarized as follows:

(b) No amendment would be allowed if it raised a false issue or did not raise an arguable defence.
(c) The issue is one of justice between the parties ensuring that the real matters in controversy are decided.
(d) The trial is the proper place to determine all claims and defences and it is not appropriate, except in a clear case on a summary application to amend, to exhaustively investigate the facts and the law.
(e) The burden of proof or persuasion may be crucial on an application where there are disputed facts.
(f) It is not the law that a defendant is not permitted to resile from an admission unless it was shown the admission was made inadvertently or through error; justice is the determinant.
(g) It is unnecessary to show that there was some error or mistake which led to the form of the pleading and that there is a reasonable explanation for having made the admission, before a party may seek to withdraw the admission. A court usually requires some explanation for the change in approach, but in the absence of the same, or whether it was an adequate or inadequate explanation, can hardly determine the outcome of the application in the face of compelling reasons of justice.
494 In accordance with these well established principles governing amendment, as they stood at the time McKenzie was decided, Gillard J granted to the Commonwealth the opportunity to argue the issue it wished to raise at trial, saying that prima facie it was entitled to amend its pleading, and “Whether it be permitted depends upon whether the plaintiff will suffer a prejudice which cannot be overcome”.

495 It is to be noted that in McKenzie, the Commonwealth sought leave to amend its defence in excess of two years after the date it delivered its defence, however, the proceeding had not been fixed for trial.

496 The principles referred to by Gillard J in McKenzie were said by his Honour to be supported by a number of decisions, including Queensland v J L Holdings Pty Ltd[58] where the High Court said:

Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties. In taking an opposite view, the primary judge was, in our view, in error in the exercise of her discretion.
497 The principles as to withdrawal of an admission and amendment referred to in McKenzie were re-stated by Gillard J in Jeanes.

498 However, since McKenzie and Jeanes, the High Court handed down its decision in Aon Risk Services Australia v Australian National University,[59] which it did on 5 August 2009. This decision affirmed the importance, not only to the parties, but to the Court and other litigants, of a “just but timely and cost-effective resolution of a dispute between the parties to a proceeding”.[60] French CJ noted there is “an irreparable element of unfair prejudice in unnecessarily delaying proceedings”.[61] In particular, the Chief Justice drew attention to “the waste of public resources”, the “strain and uncertainty imposed on litigants” and “the potential for loss of public confidence in the legal system” arising from adjournment of trials without adequate justification [62] Similarly, in Aon, Gummow, Hayne, Crennan, Kiefel and Bell JJ referred to the “ill-effects of delay” upon employees and officers of corporations, as well as upon defendant corporations whose ability to plan financially may be affected by a contingent liability.[63]

499 In Aon, the High Court accepted the principles of case management by the courts, saying:[64]

Such management is now an accepted aspect of the system of civil justice administered by courts in Australia. It was recognised some time ago, by courts here and elsewhere in the common law world, that a different approach was required to tackle the problems of delay and cost in the litigation process.

500 In so doing, the High Court expressly overruled statements in its previous decision of Queensland v JL Holdings to the effect that case management concerns are only relevant in exceptional circumstances. In its place it was ruled that courts must always consider the public interest in the efficient use of court resources when determining whether to grant indulgences such as amendment of pleadings and adjournments.

Vickery J rejected the application to amend as follows (at [501] to [505]):

501 In the present case, Amcor’s application to amend was made when the trial was all but over, with all of the evidence concluded, and the principal submissions in final address delivered. It was only in an otherwise short reply that Amcor made its application.

502 Amcor did not contend, or put on evidence, to suggest that the pleading in question was the product of mistake or inadvertence. Nor could it have properly been contended that this was the case, in my view, because of the positive nature of the plea advanced in paragraph 4(g) of Amcor’s defence. No other reason or excuse was put forward for the state of its original pleading.

503 Nevertheless, Amcor submitted that Hodgson, in spite of the admissions made in its pleading, went into evidence on the matter in his witness statement and accordingly, the parties went to trial seeking a determination of the issue on the facts. Further, senior counsel for Amcor, in the face of objection, challenged Hodgson on one component of his MIP bonus calculation relating to the relevant head count and put to him that there was no agreement about that, to which Hodgson replied that he disagreed.

504 I am not satisfied that Amcor has made out its case for the amendment which it sought. Hodgson was entitled to proceed to trial on the basis of the admissions made in Amcor’s pleading. Although he called evidence on the point, he may well have put on or referred to additional evidence on the issue, had the relevant pleas not been in place. A tight timetable was put in place for the hearing of the Quantum Trial. Had the amendment been granted, an application to reopen the trial with the calling of further witnesses was foreshadowed. This may well have resulted in the trial being adjourned to enable this to occur, following a period during which the parties would have to consider their position in the light of the amendment. This would have defeated the timetable set for the hearing of this part of the proceeding and been inimical to the case management regime which had been put in place to govern the trial. It may well have delayed the conclusion of the Quantum Trial and compounded the delays already suffered in this litigation.

505 For these reasons, I reject Amcor’s application to amend its pleadings made in the course of the Quantum Trial, as I have described.