This week in the High Court - 30 May 2011

There are three cases being heard in the High Court this week, and a judgment to be delivered in a suite of related cases.

On Tuesday, 1 June 2010 the High Court will hear the appeal in Michael Wilson & Partners Ltd v Nicholls.  In this case the respondents (Nicholls and Slater) were employees of the appellant, a law firm operating in Kazakhstan.  One of the partners of that law form was a Mr Emmott. The appellant commenced arbitration proceeding against Emmott in London alleging breach of fiduciary duty.  Subsequently, the appellant also commenced proceedings in the Supreme Court of NSW against Nicholls and Slater.  In those proceedings the appellant alleged Nicholls and Slater were knowingly-concerned in breaches of fiduciary duty by Emmott.  Justice Einstein found in favour of the appellant.  The Court of Appeal allowed the appeal by Nicholls and Slater.  There are three issues on the appeal to the High Court:

• The first is the finding of the Court of Appeal that the appellant’s proceedings should be dismissed as an abuse of process because after Justice Einstein’s judgment was delivered, the Arbitrators in London published an interim award on liability in which they dismissed most of the claims against Emmott.  The Court of Appeal held that to the extent the appellant was unsuccessful in the arbitration against Emmott, they should not be able to pursue claims against Nicholls and Slater based on Emmott’s supposed liability.  This would constitute a collateral challenge to the Arbitrator’s findings and would therefore be an abuse of process. 
• The second is the finding by the Court of Appeal that Justice Einstein should have recused himself on the grounds of apprehended bias. 
• The third is the rejection of a contention by the appellant that Nicholls and Slater had waived their entitlement to rely upon apprehended bias because they did not appeal against Justice Einstein’s refusal to recuse himself.

On Wednesday, 2 June 2011 the High Court will hear argument in Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd.  This appeal addresses the complex interaction between a covenant in a subdivision of land preventing certain parts of the land from being used as a hospital, the Ku-Ring-Gai Local Environment Plan 194 and certain provisions of the Environmental Planning & Assessment Act 1979.  Unless you work in “parks & gardens”, probably not very interesting.

On Thursday, 3 June 2011 the High Court will deal with HIH Claims Support Ltd v Insurance Australia Ltd.  This case arose out of the collapse of a large video screen during the 1998 Australia Grand Prix as a result of inadequate structural support.  The NSW Supreme Court found the scaffolder liable to the tune of almost $1.5 million.  The scaffolder had an insurance policy with HIH, but that company collapsed before making any payment.  The scaffolder then sought assistance from the Commonwealth Government assistance scheme established after the HIH collapse.  The Australian Grand Prix had a policy of insurance with the respondent that also responded to the claim.  The HIH support scheme paid over $1.3 million in satisfaction of the judgment against the scaffolder, and then sought contribution from the respondent on the basis it had a co-ordinate liability.  At trial the judge found that there was no co-ordinate liability because the HIH support scheme had no obligation to the scaffolder at the date of the collapse of the screen, as it did not at that stage exist.   Ultimately, the Victorian Court of Appeal held that the liabilities and burdens imposed upon the appellant and the respondent were different, and therefore no entitlement to contribution could arise.  This was demonstrated by considering what the position would have been had it been the respondent, and not the appellant, who paid out the claim by the scaffolder.  If the scaffolder had been paid under the respondent’s policy, there would have been no occasion for the scaffolder to make a claim under the support scheme, and therefore no liability of the support scheme to pay anything to the scaffolder.

Finally, on Wednesday, 2 June 2011 the High Court will deliver judgment in Commissioner of Taxation v BHP Billiton Ltd.  If you’re interested in the taxation treatment of limited recourse debts and inter-company loans and asset write-downs, this case is for you.

Dismissal of manslaughter charges no mere technicality

On 12 February 2009 members of the Australian Defence Force were engaged in a joint operation with Afghan National Army forces in Uruzgan Province in Afghanistan.  They were attempting to capture a known Taliban belligerent and, on the basis of intelligence that no-one suggests was unreliable, they raided a compound at Sorkh Morghab.  A firefight ensued between an adult male firing through a porthole in a room in the walled compound, and Australian forces exposed and vulnerable in an open courtyard. A fragmentation grenade was inserted through the porthole into the room that, for reasons that are not clear, did not have the desired effect.  The adult male kept firing at the soldiers and so, a second fragmentation grenade was inserted.  The explosion of this grenade brought the firefight to an end.  No-one who was there doubts that this conduct prevented the death of Australian and Afghan National Army soldiers.  Nor does anyone doubt the tragedy that was subsequently revealed: as well as the adult male bunkered in that room, 5 civilians also died as a result of that action.

Sergeant J who ordered the fragmentation grenade, and Lance-Corporal D who delivered it, live with the knowledge that their actions resulted in the loss of life of those civilians.  Perhaps they draw comfort in the knowledge that their actions saved the lives of their fellow soldiers.  There is no doubt that their fellow soldiers owe them a debt of gratitude.

There is also no doubt that the decision of the Director of Military Prosecutions to charge them with manslaughter, and with dangerous conduct with negligence as to consequences, will be rightly regarded as one of the most unfortunate episodes in Australian military justice history.

I am prompted to write this blogpost because of an editorial that suggested the soldiers had “got off” on a “technicality”.  Let there be no doubt, Sergeant J and Lance-Corporal D do not consider that they “got off”.  They have not had the opportunity to defend their actions and, given the sensitive nature of much of the detail of the operation, will be unable to do so in any public forum.  More importantly, to the extent that the charges have been dismissed, it was not because of a “technicality”.

Every criminal offence has certain elements that need to be proved by the prosecutor.  In the case of the charges of manslaughter, or dangerous conduct with negligence as to consequences, one of those elements is the need to demonstrate the existence of a duty of care owed by the soldiers to the civilians who lost their lives.  This duty of care is a substantive, and not a merely “technical” requirement of the offence charged.  It is an essential element of the very serious charges leveled at the soldiers.

It has been the law, since at least the Second World War, that soldiers do not owe a duty of care to anyone for their actions in combat.  I pre-empt an objection to the breadth of this principle by saying that this does not mean soldiers have carte blanche in the conduct of their operations.  Indeed, there are very specific, closely prescribed, and well-understood principles of international law governing that conduct.  Those principles form part of the domestic law of Australia governing the conduct of members of the ADF.  But the existence of the principle itself cannot be doubted.  It exists for good reason.  As Dixon J said in Shaw Savill & Albion Co Ltd v  The Commonwealth (1940) 66 CLR 344:

“It could hardly be maintained that during an actual engagement with the enemy or a pursuit of any of his ships the navigating officer of a King's ship of war was under a common-law duty of care to avoid harm to such noncombatant ships as might appear in the theatre of operations. It cannot be enough to say that the conflict or pursuit is a circumstance affecting the reasonableness of the officer's conduct as a discharge of the duty of care, though the duty itself persists. To adopt such a view would mean that whether the combat be by sea, land or air our men go into action accompanied by the law of civil negligence, warning them to be mindful of the person and property of civilians. It would mean that the Courts could be called upon to say whether the soldier on the field of battle or the sailor fighting on his ship might reasonably have been more careful to avoid causing civil loss or damage. No-one can imagine a court undertaking the trial of such an issue, either during or after a war. To concede that any civil liability can rest upon a member of the armed forces for supposedly negligent acts or omissions in the course of an actual engagement with the enemy is opposed alike to reason and to policy.”

The military prosecutor had considerable difficulty in articulating the source of the supposed duty of care.  Attempts to ground it in principles of international law could never succeed, the most cursory analysis of that jurisprudence revealing that criminal liability for contravention of the international law of armed conflict arises only where there is actual intent or recklessness.  Negligence has never been considered sufficient.  It would seem strange if, by negligence, a member of the ADF could be criminally responsible under the general criminal law for the use of lethal force authorised by international law, and used in accordance with the Additional Protocols to the Geneva Conventions which themselves have the force of law in Australia, particularly where that conduct did not contravene any of the specific crimes governing armed conflict set out in the Commonwealth Criminal Code.

There is also, of course, the invidious position in which Lance-Corporal D would have found himself in if such a duty of care existed.  Section 15F of the Defence Force Discipline Act 1982 creates an offence for failing to carry out lawful orders regarding operations against the enemy.  That offence carries a maximum punishment of 15 years imprisonment.  As the Chief Judge Advocate noted in his reasons for judgment dismissing the charges, members of the ADF cannot simply decide they will take no part in hostilities, or refrain from engaging in conduct that is inherently dangerous to themselves or others.  In practical terms, they cannot be required to question orders to determine whether or not they are soundly-based or else run the risk of breaching a duty of care.  So far as Sergeant J’s position was concerned, it will often be necessary for subordinates to be ordered into harm’s way.  If a duty of care existed to subordinates, such orders would run the risk of exposing superiors to  criminal charges in the event of death or serious injury. It is not answer to that to say that negligence would not in fact be established: the mere possibility of having to face trial and the uncertainty as to the outcome of any trial runs the risk of causing hesitation, further endangering lives and affording advantage to the enemy.  :

Nothing in the dismissal of the charges detracts from the personal tragedy inherent in the allegations, or diminishes the importance of the lives lost.  Nor does it detract from the personal tragedy of the soldiers involved, who bear the terrible burden of knowing their actions cost the lives of innocent civilians.  The domestic law of Australia and the international law of armed conflict hold members of the ADF to account for their conduct on the battlefield.  But for sound reasons, criminal responsibility in those circumstances requires proof of either intention or recklessness.  Mere negligence, even if it could be established, is for sound reason not a sufficient basis for criminal responsibility in armed conflict. 

That is no mere technicality.

Right to possession of posthumously-extracted sperm

In the recent decision of Edwards: Re the Estate of the late Mark Edwards [2011] NSWSC 478, Justice Hulme in the Supreme Court of NSW considered the question of whether a woman had the right to possession of a sperm sample taken from her husband shortly after his death.

Ms Edwards married Mr Edwards in November 2005 and they began planning a family together.  They apparently had some difficulties in conceiving, for which they sought treatment.  On Valentine’s Day in 2009 Mr Edwards, being concerned that he might have a terminal illness, said to his wife: “If something happens to me I would want a part of me to be here with you … If we find out I have cancer I want to make sure we have our baby before I am unable to have one, before I do any chemo.  Please promise me you will still have our baby.”

Tragically, although Mr Edwards was cleared of cancer, he was killed in a workplace accident in August 2010, the day before they were due to attend an appointment at an IVF clinic to discuss their treatment options.  Mr Edwards obtained an order from Simpson J in the Supreme Court of NSW enabling the extraction of sperm from Mr Edwards’ body to be preserved pending further order.

Ms Edwards initially sought orders to the effect that the sperm being held in storage be released to Ms Edwards and that she be permitted to use it for the purposes of the provision to her of assisted reproductive technology (“ART”).  The orders sought in that form could not be made, because section 19 of the Assisted Reproductive Technology Act 2007 prohibited an ART facility from providing treatment using human sperm without satisfying the consent requirements of section 17, which effectively required a written notice from the sperm provider.  Mr Edwards had not, prior to his death, provided such a written notice.

Eventually, therefore, Ms Edwards in the alternative sought orders to the effect that she, as the administrator of her husband’s estate, was entitled to possession of the sperm.

The leading authority in Australia on the question of whether there is property in, or a right to possession of, a human body or part thereof is the decision of the High Court in Doodeward v Spence (1908) 6 CLR 406.  This concerned the body of a “two-headed baby” that had been still-born in 1868.  The attending doctor had taken the body away and preserved it in spirits and kept it in his surgery as a curiosity.  When the doctor died in 1870 the preserved baby was sold as part of his personal effects, and eventually it came into possession of Doodeward, who exhibited it for commercial gain.  Spence, a police officer, seized the bottle and its contents, and Doodeward brought an action for repossession of it.  By majority (Griffiths CJ and Barton J) the High Court held that he was entitled to an order for the recovery of the bottle and the body.

Higgins J in dissent analysed the authorities which stood for the proposition that there could be no property in a corpse “except in favour of persons who wanted it for the purposes of burial, and who by virtue of their close relationship with the deceased might be regarded as under a duty to give the corpse decent interment.”

Griffiths CJ, however, did not consider those authorities of assistance, and preferred to analyse the issue from general principles of law.  He held (at 414):

“It is not necessary to give an exhaustive enumeration of the circumstances under which such a right may be acquired, but I entertain no doubt that, when a person has by the lawful exercise of work or skill so dealt with a human body or part of a human body in his lawful possession that it has acquired some attributes differentiating it from a mere corpse awaiting burial, he acquires a right to possession of it, at least as against any person not entitled to have it delivered to him for the purpose of burial, but subject, or course, to any positive law which forbids its retention under the particular circumstances.”

Barton J agreed entirely with the reasons of Griffiths CJ, although it seems clear that Barton J has been heavily influenced by the fact that as a “freak of nature” that had been preserved and exhibited as a curiosity, the body had long ceased to be a “corpse awaiting burial”, if it had ever answered that description.  While there has been some academic debate about the extent to which Barton J in fact agreed with Griffiths CJ, nonetheless Hulme J treated Griffiths CJ's "work and skill" test as constituting a majority opinion.

Justice Hulme surveyed a large number of subsequent decisions both in Australia and overseas that had considered the question of whether there could be property in a body or body parts.  Apart from noting, however, that they indicated a flexibility in the application of the law to meet new situations exposed by the advancement of medical technology, his Honour set about applying the law binging upon him in the High Court’s decision in Doodeward.

At [82] Hulme J applied Griffith CJ’s “work and skill” test to find that the removal of the sperm had been carried out lawfully pursuant to the previous orders made by Simpson J, that work and skill had been applied to it in that it had been preserved and stored, and that accordingly it was capable of being property.  But whose property?

It could not be Mr Edwards’ property.  The point of departure between the authorities referred to by Higgins J in dissent in Doodeward and the conclusions of the majority was only as to the recognition of the “work and skill” exception.  Mr Edwards had applied no work and skill, he had no property in his semen while he was alive, and it did not form part of the assets of his estate upon his death.

The persons who had applied work and skill were the doctors and technicians who had extracted and preserved the sperm.  However, at [88] Hulme J recognised that did so not for their own purposes but performed these functions on behalf of Ms Edwards, acting as her agents, and therefore did not themselves acquire any property rights.

Curiously, Hulme J does not expressly state that Ms Edwards acquired the property in the sperm by reason of the application of work and skill by the doctors and technicians.  However, that conclusion must be implicit in the finding that she was entitled to possession of the sperm, Hulme J having rejected the proposition that she was so entitled incidentally to her duty as administrator  for the purposes of disposal of the Mr Edwards’ body.  Prima facie, therefore, she was entitled to possession of it.

A further curiosity about this case is the consideration by Hulme J of whether, as a matter of discretion, he should make the orders sought.  This raised the question of what Ms Edwards would do with the sperm, and in particular whether the court should recognise the right to possession if Ms Edwards would then seek to use the sperm unlawfully.

As to the first, there was (perhaps surprisingly) no direct evidence as to what Ms Edwards intended to do with the sperm, although it is apparent from the original orders sought (and Hulme J inferred) that she wanted to use it for the purposes of conception.

As to the second, Ms Edwards could not lawfully use the sperm for ART in NSW.  Nor could she do so in Victoria, South Australia, or Western Australia.  In the other jurisdictions there is no legislation specifically dealing with the issue.  However the NHMRC’s Ethical Guidelines on the Use of Assisted Reproductive Technology in Clinical Practice and Research also require consent, although there is some ambiguity as to whether they require the consent to be in writing.  There was therefore the possibility that Ms Edwards would be able to seek ART in some other state or territory, and public policy considerations, on balance, did not prevent the court from recognising Ms Edwards’ entitlement to seek that treatment in some other jurisdiction where it could lawfully be performed.

In the end result, Hulme J was satisfied that the orders should be made that Ms Edwards was entitled to possession of the sperm recovered from her late husband.

Failed attempt to exclude liability in the High Court

In Insight Vacations Pty Ltd v Young [2011] HCA 16 the plaintiff, Mrs Young, decided to go to Europe for a holiday with her husband.  She bought a European tour package from Insight Vacations.  While travelling by coach from Prague to Budapest, Mrs Young got out of her seat to get something from a bag she had stowed in the overhead luggage shelf.  The coach braked suddenly.  Mrs Young fell backwards, and she suffered injury.

When she returned to Australia, she sued Insight, arguing that it had breached an implied term of her holiday contract that the services supplied by Insight would be rendered with due care and skill.  The term was implied into her holiday contract by section 74 of the Commonwealth's Trade Practices Act 1974. 

Mrs Young succeeded in the District Court of NSW and was awarded $22,371 plus costs.  Insight appealed, unsuccessfully to the NSW Court of Appeal, and then to the High Court of Australia. 

One may wonder what it was about such a small case that warranted the intervention of Australia’s highest court?  At issue was the interaction between the beneficial provisions of the Trade Practices Act (which implied the “due care and skill” term into the contract), and section 5N of the NSW Civil Liability Act 2002.

At trial, Insight defended the claim relying upon an exemption clause in the holiday contract that was in the following terms:

“Where the passenger occupies a motorcoach seat fitted with a safety belt, neither the Operators nor their agents or co-operating organisations will be liable for any injury, illness or death or for any damages or claims whatsoever arising from any accident or incident, if the safety belt is not being worn at the time of such accident or incident.”

Ordinarily, this attempt to exclude liability for breach of the “due care and skill” term implied by section 74 of the Trade Practices Act would be void, by virtue of section 68 of that Act.  However, Insight sought to rely upon an exception to the ordinary rule.  That exception provides that where a State law would operate to limit or exclude liability for breach of a term of the contract, that State law operates also to limit or exclude liability for breach of the term implied by the Trade Practices Act.

Insight argued that this exception applied, because section 5N of the NSW Civil Liability Act 2002 provided that:

“Despite any other written or unwritten law, a term of a contract for the supply of recreation services may exclude, restrict or modify any liability [in certain categories] that results from breach of an express or implied warranty that the services will be rendered with reasonable care and skill.”

However, the High Court disagreed.  It said that section 5N was not a law that “applies to limit or exclude liability for the breach”.  It was simply a law that permitted parties to provide for such a limit or exclusion in their contract.  It did not, itself, work an such limitation or exclusion.

Moreover, the High Court held that section 5N does not apply to a contract for the provision of services outside of NSW.  This is a significant geographical restriction on the operation of section 5N, and means that a tour operator’s capacity (or indeed any other provider of recreational services) to limit its liability is severely restricted in respect of interstate and international recreational services.

Somewhat perversely the High Court then went on to find that whatever the interaction between the Commonwealth Trade Practices Act and the NSW Civil Liability Act, the exemption clause in the holiday contract didn’t apply in any event.  That is because its operation was limited to those times when the plaintiff occupied her seat.  It did not apply to times when the plaintiff stood up to move around the coach, or to retrieve items from an overhead shelf, or to go to the lavatory.