Subject: NCAT Legal Bulletin Issue 5 of 2018

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NCAT Legal Bulletin
Issue 5 of 2018
The NCAT Legal Bulletin provides a summary of relevant and interesting case law of significance to the work of the NSW Civil and Administrative Tribunal.

This latest issue features case summaries of recent decisions from the High Court of Australia, and NSW and Victoria Courts of Appeal, including:
  • The Queen v Falzon [2018] HCA 29, regarding the admissibility of evidence of cash to bolster a case that a person is engaged in the business of selling drugs;
  • DL v The Queen [2018] HCA 32, which examined the exercise of the NSWCA's re-sentencing power; and
  • Coliban Heights Pty Ltd v Citisolar Vic Pty Ltd [2018] VSCA 191, involving the termination of a contract for breaches of consumer guarantees in the ACL.
High Court of Australia
The Queen v Falzon [2018] HCA 29
8 August 2018 - Kiefel CJ, Bell, Keane, Nettle and Gordon JJ

In brief: The High Court unanimously allowed an appeal from the Victorian Court of Appeal, holding that evidence of cash, in conjunction with evidence of other indicia of drug trafficking, was admissible as an item of circumstantial evidence capable of founding the inference that the respondent was engaged in the business of selling drugs ([40]).

Contrary to the Court of Appeal’s reasoning, the fact that the cash was likely to have come from previous drug sales “fortified the probability of the respondent making regular and recurring sales of cannabis” ([41]).

Further error was identified in the approach to s 137 of the Evidence Act. The probative value of the evidence of the cash was high, not low ([45]):

“Combined with the other circumstantial evidence of the respondent's carrying on of a business of drug trafficking, … [the evidence of the cash] constituted a powerful circumstantial case that the respondent was engaged in a business of cultivating and selling cannabis…”.

The High Court was critical of the Court of Appeal’s failure to adhere to “a succession of decisions” regarding admissibility of the evidence of cash ([49]):

“As this Court has emphasised on several occasions, Australian intermediate appellate courts are bound to follow the decisions of other Australian intermediate appellate courts in both matters of statutory interpretation and matters of common law unless persuaded that those decisions are plainly wrong. …The majority in the Court of Appeal in this matter did not suggest that those decisions were plainly wrong and could not properly have considered them to be so. …So to hold was in effect to refuse to follow those earlier decisions while purporting to observe them. That was not a course properly open to the majority and it should not be repeated.” (footnotes omitted)

Read the decision on the High Court of Australia website.
Federal Commissioner of Taxation v Thomas & Ors [2018] HCA 31
8 August 2018 - Kiefel CJ, Bell, Gageler, Keane, Nettle, Gordon and Edelman JJ

In brief: In 2006 to 2008, the trustee of an investment trust received franked distributions within the meaning of Div 207 of the Income Tax Assessment Act 1997 (Cth). In each of those years, the trustee passed resolutions to distribute the franking credits between the beneficiaries, separately from, and in different proportions to, the income comprising the franked distributions. The assumption that such an approach was valid was referred to as the “Bifurcation Assumption”.

In 2010, the Queensland Supreme Court directed that these resolutions could give effect to the “Bifurcation Assumption”. The Commissioner opposed this view, and gave notice of an audit, the findings of which were challenged by the taxpayer in the Federal Court.

The High Court allowed the Commissioner’s appeal, holding by majority (Kiefel CJ, Bell, Keane, Nettle, Gordon and Edelman JJ) that the Federal Court had erred in finding that it was bound to conclude that the Supreme Court’s directions determined conclusively that Div 207 could operate consistently with the Bifurcation Assumption, in accordance with Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA) (1939) 62 CLR 545; [1939] HCA 35 ([5]).

Finding that the Bifurcation Assumption was contrary to the proper construction of the Act, the majority noted that ([11]-[13]):

“As a general rule, a member of a corporate tax entity will be taxed on the full amount of the franked distribution and the attached franking credits but will be entitled to an imputation credit, a tax offset, equal to the franking credit …

That general rule is modified where the distribution is made to a trustee. In that situation, [the Act] creates a system which notionally allocates the franking credits in the same proportions as the beneficiaries' share in the franked distributions. …

The beneficiaries' share in the franked distributions, in turn, depends on how the beneficiaries share in the income of the trust …” (footnotes omitted)

Under the 4-step system for calculating these shares (see [13]-[16]), “the statutory notional allocation of franking credits to beneficiaries follows the proportions … established with respect to their notional sharing in franked distributions at the earlier stages.” ([16])

The Court held that Executor Trustee is ([54]-[55]):

“…authority for the proposition that the general law rights of trustee and beneficiary inter se, to the extent that they are defined by a decision made in duly constituted proceedings, are defined as against the Commissioner unless the decision is set aside... [but is] not authority for the proposition that the Commissioner… should determine the application of the taxing acts otherwise than according to law.” (footnotes omitted)

Read the decision on the High Court of Australia website.
DL v The Queen [2018] HCA 32
8 August 2018 - Bell, Keane, Nettle, Gordon and Edelman JJ

In brief: The High Court unanimously allowed an appeal from the NSW Court of Criminal Appeal, holding that ([44]):

“The majority's decision to depart from the primary judge's unchallenged factual findings, and to take the new evidence [of the offender's post-sentence conduct] into account in substituting a finding of aggravation – the intention to kill (and in Wilson J's case the finding of premeditation and the rejection of the finding of unlikelihood of re-offending) – without notice to the appellant, was procedurally unfair and has occasioned a miscarriage of justice.”

The appellant was convicted of murdering a 15-year-old school girl. On appeal to the NSWCCA, it was found that the primary judge erred in applying the standard non-parole period legislation, a conclusion which enlivened the Court's re-sentencing power ([6]).

The appeal to the High Court was brought on the basis that (i) the appellant was denied procedural fairness, and (ii) the NSWCCA erred in substituting aggravated factual findings, even though neither party had challenged the primary judge’s findings, and the Court had accepted that those findings were open ([8]).

The appeal was allowed on the first ground and remitted to the NSWCCA ([46]).

Read the decision on the High Court of Australia website.
Re Culleton [2018] HCA 33
10 August 2018 - Kiefel CJ

In brief: Following a resolution of the Senate, the High Court, sitting as the Court of Disputed Returns, heard a reference concerning Senator Rodney Culleton. By reason of s 44(ii) of the Constitution, the Court found that there was a vacancy in the Senate, for Mr Culleton’s place, which should be filled by a special count of the ballot papers. Mr Panagiotis Georgiou was duly elected in Mr Culleton’s place.

Following judgment, Mr Culleton filed a summons seeking, in effect, to reopen the matter, on the basis that the Senate was not quorate when the resolution was put, and the Court therefore had no jurisdiction.

Justice Kiefel dismissed the summons, holding that “[t]he steps … taken on the basis of the perfected orders of this Court weigh heavily against reopening the matter.” ([19])
A heavy burden is cast upon an applicant for reopening to show that such an exceptional course is required. This is reflected in the principle stated in University of Wollongong v Metwally [No 2] (1985) 59 ALJR 481 at 483; 60 ALR 68 at 71; [1985] HCA 28 ([6]):

“It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had [an] opportunity to do so.”

On this point, her Honour found that “it is the doctrine of finality, together with concerns of injustice, which underpin the principles relating to reopening a matter.” ([8]) Further, Justice 
Kiefel found that ([12]):

“…Counsel for Mr Culleton conceded that no evidence had been placed before the Court at [the time the matter was first heard] on the question whether the Senate was quorate. There was therefore no evidentiary basis for such an argument.”

Read the decision on the High Court of Australia website.
Victorian Court of Appeal
Coliban Heights Pty Ltd v Citisolar Vic Pty Ltd [2018] VSCA 191
Tate, Kyrou and McLeish JJA

In brief: The Victorian Court of Appeal dismissed an appeal, holding that a consumer cannot terminate a contract for services under the Australian Consumer Law (ACL) while accepting goods that were connected with the services in question.

The relevant provisions of the ACL were set out as follows (at [25]-[30]):
  • Sections 60-63 contain statutory guarantees relating to the supply of services. In particular, s 60 provides that “services supplied to a consumer in trade or commerce ‘will be rendered with due care and skill’”, and s 61 requires that services will be reasonably fit for the consumer’s stated purpose ([26]).

  • Section 267 provides for action to be taken for a failure to comply with a guarantee, distinguishing ‘major’ failures from those which are not ([27]). The situations amounting to a ‘major failure’ are set out in s 268, and include a supply of services that “creates an unsafe situation.” (s 268(e))

  • Sections 269 and 270 stipulate the consequences of terminating a contract for the supply of services.
Because the product of the relevant services was unsafe, the respondent had failed to comply with one or more consumer guarantees and these were ‘major failures’. As a result, the applicant was entitled to terminate the contract, under s 267(3) ([30]).

The ACL stipulates “when termination takes effect, but not what is required to constitute termination. That is a question of fact in every case.” In making that assessment, it is necessary to ([47]):

“…look at what the party alleging an act of termination said and did that bears on the question whether that party terminated the contract or elected to keep it on foot. But in the context of s 267, that inquiry must be conducted bearing in mind that the ACL treats the termination of a contract for services as entailing a simultaneous deemed rejection of goods connected with those services. The legislation proceeds on the basis that one does not happen without the other.”

Where, as in the present case, “the party alleging termination seeks to retain the goods, this is at odds with the deemed rejection of the goods which accompanies every termination under s 267” ([48]). The purpose of s 270(1) is to create obligations regarding return of the goods and the payment of a refund to the consumer ([49]):

“…It would defy that scheme to treat a consumer as terminating a contract in circumstances where the consumer accepts, rather than rejects, the goods. The result would be perverse, in that the consumer would purport to accept the goods while simultaneously attracting an obligation to return them and a right to be paid a refund in respect of them.”

Read the decision on the BarNet Jade website.
NSW Court of Appeal
The Court of Appeal publishes a bulletin containing summaries of its latest decisions of interest. Find below several such decisions from recent bulletins.
Avopiling Pty Ltd v Bosevski; Avopiling Pty Ltd v The Workers Compensation Nominal Insurer [2018] NSWCA 146
Catchwords: TORTS – negligence – employer – whether formulation of risk of harm impermissibly narrow – whether breach of duty of care – whether employer should have appreciated risk of harm 
TORTS – negligence – contributory negligence – risk of harm – whether formulation of risk of harm impermissibly narrow – whether respondent or his employer knew or should have known of risk of harm – whether open to the primary judge to draw a Jones v Dunkel inference from the failure of the appellant to call the only two people who could give evidence about the moment of injury 
DAMAGES – basis of assessment – future economic loss – Civil Liability Act 2002 (NSW), s 13 – approach in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20 – required approach in case of future attendant care needs – required approach in case of future medical expenses 
COSTS – whether it is appropriate to award costs on the basis of mixed success on significant and separable parts of appeal

Read the decision on the NSW Caselaw website.
Isaac v Dargan Financial Pty Ltd ATF The Dargan Financial Discretionary Trust (ABN 68 702 047 521) (trading under the name of Home Loan Experts) [2018] NSWCA 163
Catchwords: RESTRAINT OF TRADE – covenants in restraint of trade – enforcement of covenants following termination of independent contractor relationship – non-interference covenant – where appellant prohibited from interfering with relationship between respondent and its clients – whether appellant interfered
RESTRAINT OF TRADE – reasonableness of non-solicitation covenant - whether respondent had a legitimate commercial interest in protecting client connections and confidential information – whether non-solicitation covenant was reasonable
CONTRACTS – general contractual principles – construction and interpretation of contracts – whether the expression “confidential information” should be limited to information which is confidential in nature
EQUITY – confidentiality obligations – whether respondent’s client lists constituted confidential information – whether client details were known outside respondent’s business – where clients’ contact details kept in appellant’s phone and computer – where clients’ names published on appellant’s Facebook page – whether clients’ details entered public domain
REMEDIES – injunction – where appellant restrained from use and disclosure of contents of client lists – whether discretion to grant injunction miscarried – where client details tendered in open court by respondent without seeking or obtaining confidentiality order – whether client information entered public domain – whether there was utility in restraining appellant from disclosing or using client details

Read the decision on the NSW Caselaw website.
The Owners – Strata Plan No 66375 v King [2018] NSWCA 170
Catchwords: BUILDING AND CONSTRUCTION – claim by owners corporation against persons alleged to be “developers” as defined by Home Building Act 1989 (NSW) s 3A – question of fact as to whether alleged “developers” were parties to building contract
APPEALS – drawing of inferences on appeal – evaluation of competing inferences – where primary judge failed to draw inference that respondents were parties to the building contract
BUILDING AND CONSTRUCTION – whether developers liable for “design defects” – statutory construction of Home Building Act 1989 (NSW) ss 18B and 18C – scope of notional contract pursuant to s 18C – whether breach of statutory warranty pursuant to s 18B(c)

Read the decision on the NSW Caselaw website.
Lavender v Director of Fisheries Compliance, Department of Industry Skills and Regional Development [2018] NSWCA 174
Catchwords: CONSTITUTIONAL LAW – legislation and legislative powers – extraterritorial operation of legislation – whether the Fisheries Management Act 1994 (NSW) and Fisheries Management (Abalone Share Management Plan) Regulation 2000 (NSW) invalid
CONSTITUTIONAL LAW – operation and effect of the Commonwealth Constitution – inconsistency of laws (Constitution, s 109) – whether Fisheries Management Act 1994 (NSW) and Fisheries Management (Abalone Share Management Plan) Regulation 2000 (NSW) inconsistent with Commonwealth legislation
CONSTITUTIONAL LAW - operation and effect of the Commonwealth Constitution – alteration of limits of States (Constitution, s 123) – whether Fisheries Management (Abalone Share Management Plan) Regulation 2000 (NSW) alters the limits of New South Wales.

Read the decision on the NSW Caselaw website
NSW Civil and Administrative Tribunal, Level 9, 86-90 Goulburn Street, 2000, Sydney, Australia
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