The High Court returns from holidays - this week's arguments

This week the High Court returns from its winter sojourn to hear argument in four cases.  Perhaps appropriately, the court will wake from its hibernation with a dispute over coffee.

Today the Court will hear argument in Cantarella Bros Pty Limited v Modena Trading Pty Limited, which raises important issues relating to the use of foreign descriptive words as trade marks in Australia. Cantarella produces coffee in Australia from imported beans.  It promotes and sells its coffees using various registered trade marks including “Vittoria”, “Oro” and “Cinque Stelle”.  Cantarella widely promoted its Oro branded coffee through supermarkets, and its Cinque Stelle coffee was served in many restaurants and by Qantas. Modena imports and markets coffee supplied by an Italian company, Caffè Molinari SpA (“Molinari”).  Molinari’s coffees include blends named “Oro” and “Cinque Stelle”, which are sold in Italy and are exported to many countries.  Many other producers and importers of coffee also use the word “Oro” in their brands in Australia.  In Italian, “Oro” means gold, and “Cinque Stelle” means five stars.  Cantarella sued Modena for infringement of its registered trade marks.  Modena cross-claimed, seeking the cancellation of each trade mark’s registration.  At first instance Justice Emmett declared that Modena had infringed Cantarella’s trade marks.  His Honour held that the words “Oro” and “Cinque Stelle” were sufficiently distinctive because only a small minority of people in Australia would understand the meaning of the words, and thus the allusions to quality made by them.
The Full Court of the Federal Court unanimously allowed Modena’s appeal. Their Honours held that instead of focusing on the knowledge of the general population, the focus ought to have been on the knowledge of traders in coffee.   Italian was so commonly used in relation to coffee in Australia that traders other than Cantarella would readily understand, and indeed had long used, the words “Oro” and “Cinque Stelle” to signify quality of goods.  The Full Court then ordered that the registration of the trade marks of those words be cancelled.

On Wednesday, 6 August 2014 the Court will hear argument in Maxwell v Highway Hauliers Pty Ltd, which raises an important issue in relation to the proper construction of s 54 of the Insurance Contracts Act 1984 (Cth). Hauliers carried on a trucking business and operated a fleet of trucks and trailers that transported freight between the Eastern and Western states of Australia. Hauliers had a contract of insurance with various Underwriters at Lloyds in London (represented in Australia by Maxwell) that covered accidental loss or damage to all vehicles owned, leased or acquired by it.  The contract of insurance also included a provision which stated that no indemnity was provided under the policy unless all drivers met certain conditions, including obtaining a People and Quality Services test score of at least 36. In separate accidents in 2004 and 2005 trucks owned by Hauliers were damaged. Claims under the insurance policy were rejected on the basis that the relevant drivers had not obtained the relevant PAQS test score.  It was accepted by Maxwell that the failure of the drivers to complete a PAQS test had not caused or contributed to the accidents. Hauliers sued Maxwell for indemnity, and also claimed damages for breach of the contract of insurance for the loss of profits for not being able to use the damaged trucks.  At first instance and in the Western Australia Court of Appeal, it was held that Maxwell was obliged to indemnify the Insured by reason of s 54(1) of the Act, which relevantly provides that where the effect of the policy would be that the insurer may refuse to pay a claim (in whole or in part) by reason of some act of the insured or of some other person, being an act that occurred after the policy was entered into, the insurer may not refuse to pay the claim by reason only of that act, but its liability is reduced by the amount that fairly represents the prejudice to the insurer's interests. In doing so they rejected the contention by Maxwell, relying upon a 2010 decision of the Queensland Court of Appeal, that the failure to undertake the PAQS test was not an omission to which section 54(1) applied, but was simply a state of affairs which had the effect that there was no cover provided by the policy at all. 

On Thursday, 7 August 2014 the Court will hear argument in related appeals in Kentwell v The Queen and O’Grady v The Queen.  These cases raise an important procedural issue in relation to appeals in the criminal jurisdiction in NSW.  In each case the appellants commenced an appeal against sentence in the NSW Court of Criminal Appeal, but required an extension of time within which to bring that appeal.  The same panel of judges heard each of the applications, and in each case it was found that the sentencing judge had erred by making a so-called Muldrock error (named after the High Court decision that held that a standard non-parole period was not the starting point from which sentencing courts depart by applying aggravating or mitigating factors, but was simply one of the factors in determining the appropriate sentence).  Nonetheless, in each case the Court of Criminal Appeal held that the error had not resulted in any substantial injustice and therefore refused the extension of time within which to appeal.  The appellants’ complaint is two-fold: firstly, the CCA should not have imposed a “no substantial injustice” test to the exercise of the discretion to extend time, and secondly that in doing so they effectively determined the merits of the appeal in a “summary fashion”.

On Friday, 8 August 2014 the Court will hear argument in Alphapharm Pty Ltd v H Lundbeck A/S.  This case involves a challenge to a decision by the Commissioner of Patents (upheld by the AAT and the Full Federal Court) to extend the time within which Lundbeck could make an application to extend the term of the Patent held for an anti-depressant drug marketed by Lundbeck in various forms under the names Cipramil and Lexapro.  At its heart is an argument about the proper construction of the Patents Act and the regulations made thereunder.  But it has profound commercial significance for Lundbeck and its competitors (who had already placed generic versions of the drugs on the market prior to the extension) as well as for the public health budget.

Minister for Immigration desperately clutching at all available straws

On 20 June 2014 the High Court ruled that a determination made by the Minister for Immigration and Border Protection on 4 March 2014, limiting the number of protection visas to be granted in the year ended 30 June 2014, was invalid.  Undeterred by recent defeats in the High Court, the Minister continues to thumb his nose at oversight by the Judiciary and Parliament, and is desperately clutching at every available straw to ensure that the plaintiffs’ success in the High Court is Pyrrhic.

In ruling in favour of the plaintiffs M150 and S297, the High Court proceeded by way of a Special Case, which asked the Court to answer particular questions of law on the basis of facts agreed between the parties. The facts agreed between the parties included that:

·      the plaintiffs were persons to whom Australia owed protection obligations.  In one case, it was agreed that the plaintiff faced a real chance of being seriously harmed or killed by extremist groups should he be returned to Pakistan. This engaged Australia’s complementary protection obligations.  In the other case, it was agreed that the plaintiff was a refugee within the meaning of the Refugees Convention.

·      the only criterion that prevented the plaintiffs from being granted a Protection Visa was criterion 866.222.  This criterion had the effect that a Protection Visa could not be granted to unauthorised maritime arrivals (who would instead, by virtue of other regulations, be granted a Temporary Protection Visa).

After the Special Case was referred to the High Court criterion 866.222 was disallowed by the Senate, and the regime of Temporary Protection Visas no longer provided a basis for refusing to grant the plaintiffs a Protection Visa.  With criterion 866.222 no longer relevant, it seemed to be implicit in the agreement between the parties that the plaintiffs otherwise satisfied the various criteria for the grant of a Protection Visa.

Based upon the agreed facts presented before the High Court, and the High Court ruling itself, it seemed that the plaintiffs were now assured of a grant of a Protection Visa.

Alas, the Minister had another card tucked away in his sleeve.  Undeterred by the High Court, on 30 June 2014 the Minister wrote to the plaintiffs inviting their comments on the possible adverse application of a different criterion for the grant of a Protection Visa, criterion 866.226.  This criterion says simply:  “The Minister is satisfied that the grant of the visa is in the national interest.”

The High Court transcript of the hearing last Friday does not reveal why the Minister considers that the grant of a Protection Visa to the plaintiffs might not be in the national interest.  However, recent media reports suggest that the Minister is considering an argument to the effect that it would not be in the national interest to grant the plaintiffs visas because to do so would undermine the Government’s stated policy of not granting Protection Visas to unauthorized maritime arrivals. 

Even more extraordinarily, the Minister has indicated that he will consider issuing a certificate under section 411(3) of the Migration Act (to the effect that it would be contrary to the national interest for the decision to be changed or reviewed) which would have the effect that any decision not to grant a Protection Visa in reliance upon criterion 866.226 could not be challenged in the Refugee Review Tribunal.

It appears that the Minister has so tightly wound himself up to prevent unauthorised maritime arrivals from obtaining Protection Visas that he is simply incapable of accepting defeat, and will try to exploit every conceivable loophole in the legislation to ensure Protection Visas are not issued, and that the implementation of the policy is beyond review.

National School Chaplaincy Program still invalid: Williams wins again

In 2012 the High Court in Williams v Commonwealth (No 1) (2012) 248 CLR 156 held that an agreement the Commonwealth Government had made to pay money for the provision of chaplaincy services in schools, and the payments the Commonwealth had made under that agreement, were not supported by the executive power of the Commonwealth under section 61 of the Constitution. Soon after, the Parliament enacted legislation intended to provide legislative authority to make not only the agreement and payments which had been held to have been invalidly made, but also many other agreements and arrangements for the outlay of public money and the payments made or to be made under those agreements or arrangements.

Today, in Williams v Commonwealth (No 2) [2014] HCA 23 the High Court has ruled that this remedial legislation is itself invalid in its operation in relation to the school chaplaincy program.

The Commonwealth sought to defend the legislation, insofar as it related to the School Chaplaincy Program, as a law with respect to the provision of benefits to students under section 51(xxiiiA) of the Constitution.  The Scripture Union of Queensland also sought to defend the legislation as a law with respect to trading and financial corporations, on the grounds that the recipients of the funding were required to be an organization incorporated under Commonwealth or State law.  In addition, the Commonwealth effectively sought to advance arguments it had unsuccessfully advanced in Williams (No 1).

The High Court’s consideration of the validity of the remedial legislation began with an understanding of two earlier decisions.  The first was Pape v Federal Commissioner of Taxation (2009) 238 CLR 1, in which the High Court ruled that sections 81 and 83 of the Constitution did not confer a substantive spending power upon the Commonwealth. The power to spend appropriated moneys must be found elsewhere in the Constitution or in legislation made under it. (the majority of the Court in Pape held that the determination of the Executive Government that there was a need for an immediate fiscal stimulus to the national economy enlivened legislative power under s 51(xxxix) to enact laws supporting the stimulus package as a law incidental to that exercise of the executive power).

The second important decision was Williams (No 1) itself.  That decision confirmed the conclusions in Pape that the appropriation of moneys in accordance with the requirements of sections 81 and 83 of the Constitution did not itself confer a substantive spending power and that the power to spend appropriated moneys must be found elsewhere in the Constitution or in statutes made under it.  It also held that the agreement providing for payments to SUQ was invalid, because it was beyond the executive power of the Commonwealth under section 61 of the Constitution, and that the making of the relevant payments by the Commonwealth to SUQ under that agreement was not supported by the executive power of the Commonwealth under section 61.  Consistent with what had been held in Pape, six members of the Court held that there was no authority in the Constitution or in statutes made under it to spend the moneys appropriated for the purposes of what was then called the National School Chaplaincy Program.

The Court then turned to consider whether the remedial legislation could be supported as a law with respect to the provisions of benefits to students under section 51(xxiiiA) of the Constitution.  The Court held that the use of the term “benefits” in section 51(xxxiiiA) referred to the provision of aid to or for individuals for human wants arising as a consequence of the circumstances identified in the section: being unemployed, needing pharmaceutical items such as drugs or medical appliances, being sick, needing the services of a hospital, or being a student.  In the usual case, the benefits will take the form of material aid to relieve against consequences associated with the identified circumstances. Provision of the benefit will relieve the person to whom it is provided from a cost which that person would otherwise incur. For example, in the case of unemployment and sickness benefits, the aid relieves against the costs of living when the individual’s capacity to work is not or cannot be used. That aid may take the form of payment of money or provision of other material aid against the needs brought on by unemployment or sickness. Pharmaceutical and hospital benefits provide aid for, or by the provision of, the goods and services identified. In the case of benefits to students, the described benefit is material aid provided against the human wants which the student has by reason of being a student.

The majority of the Court held that providing the services of a chaplain or welfare worker was not provision of “benefits” for the purposes of section 51(xxiiiA). Providing those services did not provide material aid to provide for the human wants of students. It did not provide material aid in the form of any service rendered to or for any identified or identifiable student. There is no payment of money by the Commonwealth for or on behalf of any identified or identifiable student. The service provided is not directed to the consequences of being a student. There is no more than the payment of an amount (in this case to an intermediary) to be applied in payment of the wages of a person to “support the wellbeing” of a particular group of children: those who attend an identified school. And the only description of how the “support” is to be given is that it includes “strengthening values, providing pastoral care and enhancing engagement with the broader community”.  While the Court regarded these as desirable ends, the facts that they are to be achieved in the course of the school day does not give them the quality of being benefits to students. 

Crennan J, in separate reasons otherwise agreeing with the majority, held that the National School Chaplaincy and Student Welfare Program was not a scheme for the provision of government assistance by way of the provision of services to, or for, persons who had a personal entitlement to a benefit.  No student was required to be identified as a prescribed recipient or beneficiary entitled to a social security benefit. Payments made to SUQ (or other providers) out of public moneys were not made in respect of government assistance to persons with a personal entitlement to some benefit. Accordingly, the National School Chaplaincy and Student Welfare Program is not a scheme for the provision of “benefits” within the meaning of section 51(xxiiiA).

The argument advanced by SUQ that the remedial legislation was relevantly a law with respect to trading or financial corporations was rejected on the grounds that the remedial legislation did not authorize or regulate the activities, functions, relationships or business of constitutional corporations generally, or any particular constitutional corporation.  Nor did it regulate the conduct of those through whom a constitutional corporation acts, or those whose conduct is capable of affecting its activities, functions, relationships or business.  The mere fact that the recipient of the funds was a constitutional corporation was not sufficient to engage that head of power.

The Commonwealth sought leave to re-open Williams (No 1), which application the High Court rejected.  In doing so, the Court in short form re-affirmed what had been said in Williams No 1.  However, in the course of doing so it made an interesting observation about the extent of Commonwealth Executive Power that will no doubt provide fruitful areas for argument into the future.  This observation was to the effect that there was no proper basis for assuming that he executive power of the Commonwealth should be assumed to be no less than the executive power of the British Executive.  Why, the Court asked rhetorically, should the executive power of the new federal entity created by the Constitution be assumed to have the same ambit, or be exercised in the same way and same circumstances, as the power exercised by the Executive of a unitary state having no written constitution?  The fact that the British Executive had a power to spend and contract without legislative authority did not mean the Commonwealth executive has the same power. 

Accordingly, insofar as it purported to authorize the National School Chaplaincy and Student Welfare Program the remedial legislation was not a valid exercise of Commonwealth legislative power, and neither the entry into the funding agreements nor the expenditure of funds was authorized by the remedial legislation.

High Court rejects challenge to Manus Island

In S156-2013 v Minister for Immigration and Border Protection [2014] HCA 22 the High Court has today rejected a challenge to the provisions of the Migration Act 1956 providing for the designation of regional processing countries, and the particular designation of Papua New Guinea as one such country.

Section 198AB of the Act provides that the Minister may, by legislative instrument, designate that a country is a regional processing country. The only express condition for the exercise of this power is that "the Minister thinks that it is in the national interest to designate the country to be a regional processing country".  In considering that national interest, the Minister must have regard to whether or not the country has given Australia assurances to the effect that they would not be refouled, and that they would provide a system for the making of refugee determinations in accordance with the Refugees Convention.

Section 198AD of the Act provides that unauthorised maritime arrivals ("UMAs") must, as soon as reasonably practicable, be taken from Australia to a designated regional processing country.

The plaintiff arrived in Australia claiming to fear persecution in Iran.  He entered Australia’s Migration Zone by sea at Christmas Island on 23 July 2013.  He was therefore a UMA for the purposes of section 198AD.  While being held on Christmas Island he was informed that he was to be removed to Manus Island.  He was also told that it would take a long time for any refugee claim he might make to be processed; and that, even if he was found to be a refugee, he would never be resettled in Australia.  He was subsequently removed to Manus Island where he has been detained ever since.

The plaintiff challenged the validity of sections 198AB and 198AD of the Act on the grounds that they were not supported by any head of Commonwealth power.  The High Court, in a joint judgment of the six sitting justices (Gageler J having recused himself), rejected this challenge, holding that the provisions were supported by the “aliens” power under section 51(xix) of the Constitution.  The plaintiff had sought to argue that the scheme established by sections 198AB and 198AD went significantly further than merely regulating the entry of aliens to, or providing for their removal from, Australia.  They could not be justified by the purpose of deterrence because they were so extreme in their operation that they were not reasonably appropriate and adapted to that end, and the control that the scheme imposes upon persons after their removal from Australia cannot be said to be appropriate and adapted to that end.  The High Court, however, held that notions of proportionality had no role to play in determining the metes and bounds of the non-purposive power to legislate with respect to aliens.

The plaintiff also sought to challenge the provisions on the grounds that they could not authorize the Executive, in effect, to imprison people in third countries against their will for an indefinite period of time.  However, the court noted that this argument was untenable, as the sections did not in fact provide for imprisonment in third countries.

In addition to the constitutional challenge to the validity of the sections, the plaintiff also challenged the decision of the Minister to designate PNG as a regional processing country.  The plaintiff argued that there were a number of considerations relevant to the Minister's decision to designate PNG as a regional processing country that were not taken into account.  These included: Australia's international law obligations; the need to consult with the UNHCR prior to designation; PNG's international obligations and its domestic law; PNG's capacity to implement its obligations; the framework, if any, for processing refugee claims in PNG; the possibility of indefinite detention; and the conditions in which UMAs would be detained.

The High Court, however, held that section 198AB clearly stated that the only mandatory condition for the exercise of the power was that the Minister was of the opinion that it was in Australia’s national interest to designate PNG as a regional processing country.  It was plain from the text of the section that the Minister was not obliged to take any other consideration into account in determining whether or not to designate a country as a regional processing country. In determining Australia’s national interest, the section enumerated a number of matters that the Minister must have regard to, but otherwise it simply conferred a general discretion as to what matters the Minister may, but was not obliged to, take into consideration determining the the national interest.  Accordingly, there being no obligation on the Minister to have regard to the matters identified by the plaintiff, the failure to take them into consideration did not invalidate the exercise of the power to designate PNG.