(Other than Applications for Special Leave to Appeal)
AUGUST 2000
McCANN & ORS v. SWITZERLAND INSURANCE AUSTRALIA LIMITED & ORS (S229/1999)
Court appealed from: Supreme Court of NSW, Court of Appeal
Date of judgment: 27 August 1999
Date of grant of special leave: 19 November 1999
From October 1989 Ronald Powles was the resident partner in London of Allen, Allen and Hemsley (Allens) where he became interested in the prime bank instrument market (the pbi market). In order to carry out his investment activities Powles established an account with the London branch of Westpac. This account was opened without the authority of Allens and the operation of the account was a fraud on Powles' partners. It was used as a vehicle for dealings in the pbi market from which Powles was to obtain secret profits and commissions.
A transfer of US$8.7 million from the Nauru Phosphate Royalties Trust (the Nauruan Trust) was made into the Wespac account on 23 December 1991. On 31 December 1991, Powles instructed Westpac to draw US$8.55 million from the account for the purchase of a letter of credit. The delivery of the security failed to materialise. The monies were transferred to the Commonwealth National Bank Ltd in Antigua and eventually the funds went from the Commonwealth to a Swiss Bank. The funds became the subject of numerous transactions involving two other Swiss banks. Powles made demands on the Commonwealth for the return of the funds to no avail. The funds had been lost and Powles sought to conceal what was occurring from the Nauruan Trust by sending false and misleading reports until the Trust complained to Allens in Sydney in October 1992.
The Nauruan Trust brought proceedings against Allens for recovery of the US$8.55 million paid away by Powles. The appellants, the partners in Allens, claimed on the respondents for an indemnity in respect of their liability to the Nauruan Trust under their professional indemnity policies. The judge at first instance found that Powles had acted dishonestly, but that the liability of Allens was brought about by thieves who stole the US$8.55 million, not by Powles' conduct. He held that the appellants were entitled to be indemnified by the respondents for their losses.
The Court of Appeal found that Powles had acted dishonestly and probably fraudulently and that his conduct constituted the breach of duty from which the loss flowed, irrespective of whether that conduct brought about the loss. It held that the appellants were responsible for all loss flowing from the dishonest breach by Powles of his fiduciary duty, including loss caused through the deliberate acts of third parties. The Court held that the appellants rather than the respondents, their insurers, were liable to cover their own losses.
The grounds of appeal are:
- The Court of Appeal erred in finding that a clause in a professional indemnity insurance policy taken out by the appellant and those he represents which excludes indemnity in respect of any liability "brought about by the dishonest or fraudulent act or omission of the Assured" applied where the loss for which the insured was liable was not brought about by the relevant act or omission although the relevant liability flowed from that act or omission according to the appropriate concept of causation under the general law; and
- The Court of Appeal erred in finding that Powles' dishonest and fraudulent conduct, rather than the theft by others of moneys deposited by Powles with the Commonwealth National Bank, was that which brought about the liability with respect to which the appellant and those he represents sought indemnification.
MELWAY PUBLISHING PTY LTD v. ROBERT HICKS PTY LTD (TRADING AS AUTO FASHIONS AUSTRALIA) (M1/2000)
Court appealed from: Full Federal Court of Australia
Date of judgment: 20 May 1999
Date special leave granted: 10 December 1999
The appellant has for over 30 years published the Melway street directory for Melbourne. The product has about 85% of the retail market for Melbourne street directories. Except for a period in 1989-1990, Melway has been distributed by authorised wholesalers which deal in particular retail markets. The appellant charged the same price for its directories to each of its authorised wholesalers, which were free to make whatever pricing arrangements they wished with their customers.
The respondent was a wholesaler of the product to the automotive parts retail market. In February 1995 the appellant gave notice of termination of the respondent's distributorship effective from 30 June 1995. Prior to this the partners in the business of the respondent had a falling out. The departing partner started a new business and was appointed as distributor for the market sector which had been serviced by the respondent. In March 1995, while still in dispute about the termination, the respondent requested supply of over 30,000 directories from the appellant, for distribution as the respondent saw fit, i.e. outside the existing distribution structure set up by the appellant. The appellant refused supply and the respondent commenced proceedings, arguing that the appellant took advantage of its substantial market power for the purpose of preventing competition, contrary to s46 of the Trade Practices Act 1974 (Cth).
Merkel J found that in refusing to supply the respondent, the appellant had taken advantage of its market power. He further found that it was for a proscribed purpose, namely the purpose of preventing the respondent from engaging in competitive conduct in respect of the Melway directories with existing Melway distributors. The appellant appealed to the Full Court. The Court (Sundberg and Finkelstein JJ, Heerey J dissenting) dismissed the appeal. Heerey J considered that because Melway had operated a segmented distribution system from the commencement of its business in 1966, when it did not have market power, its refusal to supply in 1995, when it did have market power, did not amount to a taking advantage of its power. Sundberg and Finkelstein JJ each considered, as had the trial judge, that Melway's refusal to supply was only made possible because of the absence of competitive conditions.
The grounds of appeal include:
- The majority erred in proceeding upon that basis that a supplier with market power necessarily takes advantage of that power when it declines to sell its product by wholesale to a person who is not part of its distribution network; and
- The Full Court erred in finding that the purpose of the appellant in declining supply was to prevent the respondent from engaging in competitive conduct in respect.
COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v. PAYNE (S252/1999)
Court appealed from: Full Court of the Federal Court of Australia
Date of judgment: 30 March 1999
Date of grant of special leave: 10 December 1999
The respondent taxpayer had two sources of assessable income in the financial years 1991 to 1994. One was his salary as a pilot employed by Qantas. The other was his earnings from a deer farming business conducted by him on a property at Duri near Tamworth where he also resided. He travelled regularly from the farm property to the airport at Mascot. He claimed that he was entitled to deduct the cost of this travel and associated accommodation expenses as having been incurred in "gaining or producing the assessable income" within the meaning of s51(1) of The Income Tax Assessment Act 1936 (Cth) (the Act).
The appellant issued assessments in respect of those tax years which disallowed certain travelling expenses claimed as deductions pursuant to s51(1) of the Act. The respondent lodged objections against the amended assessments. These were disallowed. The respondent appealed to the Administrative Appeals Tribunal (the "AAT") which upheld the decision of the appellant. The AAT accepted that the expenses in question were necessary for the production of assessable income, in the sense that earning of income from both places would not be possible without expenditure upon travel between them. Nevertheless, it denied the claim for a deduction upon the basis that the travel expenses were not part of the cost of running the deer farming business nor were they incurred in the performance of the taxpayer's duties as a pilot. They did no more than place the taxpayer in the position where he could earn assessable income as a deer farmer in Tamworth and as a pilot in Sydney. The causal nexus was not sufficient to entitle the taxpayer to a deduction under the first limb of s51(1). The AAT said that the position would be otherwise if the travel was between two related places of business.
The respondent appealed to the Federal Court and the judge at first instance allowed the appeal. The appellant appealed to the Full Federal Court which (by majority) dismissed the appeal, holding that the Court was not precluded from concluding that travel between two unrelated places of business or employment can be deductible pursuant to s51(1) of the Act. Justice Hill, in the minority, found that "where the expenditure has no connection with either income producing activity which the taxpayer carries on and is not a working expense of either activity, the conclusion that it was incurred in, that is to say, in the course of gaining or producing assessable income is logically untenable."
The grounds of appeal include:
- Their Honours erred in law in holding that a taxpayer travelling from one place of business or employment, at which he or she derives assessable income, to another such place, in order to conduct unrelated activities from which he or she will also derive assessable income, ordinarily is "travelling on his (or her) work, as distinct from travelling to his (or her) work".
- Their Honours erred in law in holding that it does not matter that "the work" is for different employers, or involves one or more businesses, or spans different occupations; and
- Their Honours should have held that expenses of travelling between two places at which unrelated income earning activities take place are not deductible pursuant to s51(1) of the Income Tax Assessment Act, 1936 (Cth).
Full Court Matters
(Other than Applications for Special Leave to Appeal)
ADELAIDE CIRCUIT SITTINGS
AUGUST 2000
APPEALS
DINSDALE v. THE QUEEN (P42/2000)
Court Appealed from: Court of Criminal Appeal of the Supreme Court of Western Australia
Date of Judgment: 2 February 1999
Date of grant of special leave: 14 April 2000
On 24 September 1998, after a trial before a jury, the appellant was convicted on one count of sexually penetrating a child under the age of 13 and one count of indecently dealing with the child. The evidence supporting the charges was given by a 12 year old girl who was 10 at the time the offences were committed.
On 2 October 1998, the appellant was sentenced to 18 months' imprisonment on the first count and 18 months' imprisonment on the second count to be served concurrently with count one. An order was made that both sentences were to be wholly and immediately suspended under s76 of the Sentencing Act 1995 (WA).
The Crown appealed against the sentences and the Court of Criminal Appeal unanimously allowed the appeal and set aside the sentence imposed for the offence of sexual penetration. In lieu thereof, the Court made an order that the appellant be sentenced to a term of 30 months' imprisonment with eligibility for parole. The order for the suspension of the term of imprisonment was set aside.
The grounds of appeal are:
- The Court of Criminal Appeal erred in allowing the Crown appeal against the length of sentences imposed by the sentencing judge, when, in his sentencing reasons and decision, he made no express or implied error of law or fact;
- The Court of Criminal Appeal erred in allowing the Crown appeal against the order of suspension of the sentences imposed as:
(a) it could not be shown the sentencing judge had erred in exercising the discretion to suspend the sentences;
(b) The Court of Criminal Appeal was in error in deciding there was no evidence of rehabilitation;
(c) The Court of Criminal Appeal was in error in deciding the appellant's otherwise good character and the effect of an immediate sentence of imprisonment on the appellant's family were not relevant to the exercise of his Honour's discretion; and
(d) The Court of Criminal Appeal erred in attempting to proscribe or limit the circumstances in which, and factors relevant to, and order of suspension of imprisonment being appropriately made, and thus placed an unwarranted fetter on the exercise of the discretion to suspend a sentence under ss39 and 76 of the Sentencing Act 1995 (WA).
MODBURY TRIANGLE SHOPPING CENTRE PTY LTD v. ANZIL & ANOR (A16/2000)
Court appealed from: Full Court, Supreme Court of South Australia
Date of judgment: 12 August 1999
Date special leave granted: 24 March 2000
The appellant is the proprietor and lessor of the Modbury Triangle Shopping Centre ("the Centre"). The respondents are husband and wife. The first respondent (Tony) was employed by Focus Video Pty Ltd, a tenant of the appellant, as a co-manager of a video store in the Centre. The video shop faced the carpark which had four large lighting towers. Until about a year before the incident the subject of the proceedings, the lights would be left on until 11.00 pm. However, for some months prior to the incident in which Tony was injured, the carpark lighting had been turned off prior to the closure of the video shop. With the tower lights off at night the carpark and the area near the video shop was very dark. The video shop had complained on a number of occasions to the Centre management about the lack of lighting in the carpark whilst the video shop was open at night and at its closing time. It was Tony's practice when he left the video shop to check to see if anyone was about. If there was he would not leave the shop until that person had gone. In July 1983, after closing the shop at about 10.30 pm, Tony walked across the carpark towards his car (about 10 metres), after first checking that no one was around. He was violently attacked by three assailants carrying a baseball bat and badly injured. He brought an action in negligence against the appellant. Liability was in issue. The quantum of his damages was agreed at $205,000. The trial judge found in Tony's favour.
The appellant appealed on various grounds which, in effect, raised two matters. One, that the appellant did not owe a duty of care to Tony and two, that if there was such a duty and the appellant was in breach of that duty, there was no causal link between the breach and the injury sustained. The Full Court agreed with the trial judge that there was a duty of care owed by a landlord to a tenant and, at least, to the employees of the tenant. The Full Court found that the extent of the duty here was to ensure that sufficient lights were on when workers and customers were at the Centre and that the duty had been breached. On the issue of causation the Full Court upheld the trial judge's conclusions that the failure to keep the lights on created the very situation in which the attack was likely to occur. The Full Court dismissed the appeal.
The grounds of appeal include:
- The Full Court erred in finding that the scope of the duty of care owed by a commercial landlord to a tenant (or person claiming through a tenant) extended to the exercise of reasonable care to protect the tenant (or person claiming through the tenant) from the risk of physical injury caused by the criminal acts of third parties; and
- The Full Court erred in finding that the absence of lighting in the car park on the night in question was a cause of attack upon the first respondent and of the first respondent's.
SLIVAK & ANOR v. LURGI (AUSTRALIA) PTY LTD & ANOR (A18/2000)
Court Appealed from: Full Court, Supreme Court of South Australia
Date of Judgment: 18 June 1999
Date special leave granted: 12 May 2000
The first appellant (Slivak) and his wife, the second appellant, claimed damages from the first respondent (Lurgi) for personal injuries Slivak received in the course of his employment. The second respondent is Lurgi's insurer. The Broken Hill Proprietary Company Limited ("BHP") entered into a contract with Lurgi for the design, supply, erection and commissioning of a fume extraction system for a blast furnace operated by BHP at Whyalla. Under the contract Lurgi accepted responsibility for the whole project, including a general responsibility to BHP for the safety of the works and for safe working conditions. Slivak was employed by Lucon (Australia) Pty Ltd, who had contracted with Lurgi to carry out work on the project. Slivak and another worker were positioning a steel plate, prior to it being welded into its permanent position, in a tower which had been erected as part of the works. The plate fell; Slivak and his co-worker fell to the bottom of the tower and were injured.
Slivak's claims were based both in tort and on a breach of the duty imposed on designers of the industrial plant pursuant to s24(2a)(a) of the Occupational Health, Safety and Welfare Act 1986 (SA). The trial judge found the plate fell because the plate and its supports were not constructed in accordance with Lurgi's construction drawings, reducing to a dangerous level the overlap of the plate on its supports. Slivak contended that the statutory duty to ensure safety required the adoption of safety precautions which are simple and inexpensive relative to the cost and nature of the enterprise, even if the degree of risk is not high enough to be recognised in current industrial practices or to attract common law liability. The trial judge dismissed Slivak's claims.
Slivak appealed to the Full Court, which dismissed his appeal. The Court did not accept that a prudent designer should have anticipated the risk of exceeding the design tolerances during construction and should have incorporated features to safeguard against that possibility.
The grounds of appeal include:
- The Full Court erred in its construction of s24(2a)(a) of the Occupational Health Safety and Welfare Act 1986 (SA) which requires a person who designs any structure to "ensure so far as is reasonably practicable" that the structure is designed so that persons erecting it are "safe from injury" and in its consideration of the statutory duty imposed by the section in that the Full Court:-
(a) held that the phrase "reasonably practicable" required the Court to take into account whether other competent designers would have included the design elements which would have prevented the injury;
(b) held that the plaintiff carried the onus of proving that the design elements were reasonably practicable; and
(c) failed to hold that the section imposed a more onerous duty on a designer than the common law duty, in that even a small risk of injury was sufficient to require that the designer include design elements which were practicable.