Fair recompense

Have I spoken about the case of Roxborough v Rothmans of Pall Mall Australia Limited [2001] HCA 68 on this blog before? If not, I’m surprised, because it’s one of my bug-bears.

Put briefly, tobacco wholesalers collected excise tax to pay to the State government. This tax was forwarded from tobacco retailers, who in turn charged the general public extra on the price of tobacco products. The retailers had collected the tax from the consumers, and had forwarded the tax to the wholesalers, but the wholesalers had not yet purchased excise licences from the NSW government when the High Court declared that state excise taxes were unconstitutional. There was a whole heap of unconstitutional tax money up for grabs. So the retailers sued the wholesalers to get the tax back. And they succeeded.

Here we have a problem. Can you see it? The retailers are not the real losers in this situation. The real losers are the consumers, the every day people who paid extra for their cigarettes. So whether it was the wholesalers or the retailers who kept the tax, the winner would get a windfall.

How can we give a fair recompense to the members of the public who had been overcharged for the price of their cigarettes? It would be almost impossible to prove how much consumers had been overcharged in that time.

I have always been a fan of creating some kind of trust for the benefit of the consumers. But then, what would be for the benefit of tobacco consumers? Maybe some kind of trust to recompense consumers, their families and the general public for the medical costs that they will have to incur as a result of tobacco related diseases? That way, it would be for the benefit of all.

There’s no way as the law presently stands that a court could do that. However, both American and Canadian law have developed in a way that enables a court to administer the proceeds of a class action according to the cy pres doctrine. That is, the court might not be able to compensate each wronged consumer precisely, but they could administer the money for the benefit of the wronged consumer for a purpose that comes as close as possible to helping all.

Recently, the Victorian Law Reform Commission has been considering proposals to enact provisions allowing Victorian courts to do this in its First Exposure Draft on Civil Reforms (pages 42 – 47 for those interested). I note that they consider precisely the sort of mechanism I proposed above and believe that courts should have the power to make such an arrangement. I prefer putting money into a cy pres scheme rather than putting it into some kind of a Justice Fund (which is another proposal), but I agree with the VLRC that there should be a broad discretion on the part of judges to choose how they administer the money.

All these considerations returned to my mind again with the recent Federal Court ruling against cardboard box magnate Richard Pratt. Visy was found to have entered into a price-fixing arrangement with its main rival, Amcor, so that they could set the price at a higher level than would occur if genuine competition were present. Apparently companies who have purchased Visy and Amcor products have commenced a class action, and have been greatly heartened by Justice Heerey’s ruling.

But here again: who are the real losers in this scenario? It is the general public, to whom the puchasers of Visy and Amcor products would have passed on any extra costs to the consumer. As Graeme Samuels, head of the ACCC said, “It was a premeditated fraud on Australian consumers. Anyone in the past who has bought a block of chocolate or a piece of fruit packed in a box made by Visy or Amcor has probably been ripped off.”

This is where another of my favourite beasts, a profit-stripping remedy, could come in useful. I would like consumer groups to bring an action to strip Visy and Amcor of ill-gotten profits gained through price-fixing and then ask the court administer the funds in a cy pres scheme for the benefit of the public (eg, to help people who are struggling to afford food and basic necessities).

More on choosing judges

Women are represented in the law as judges, barristers, solicitors, attorneys-general, law makers and court administrators. They identify an issue quickly, focus on it and persuade rather than dictate. Mostly, women who work in the law are goal oriented. They readily identify their litigation goal, their judgment goal.Women provide perspective. They search out the resolutions.Women have finely honed organisational skills (hence they make excellent juniors and instructors in litigation, sometimes of itself a distinct disadvantage).

Women are adaptive and flexible. They have identified the open and closed areas of legal practice. Thus, women have remained in the traditional fields of family law, conveyancing and criminal prosecution but expanded into relatively new areas, taxation and revenue law, planning and environmental law, administrative law, human rights law and indigenous land rights law. In so doing they have avoided the more adversarial, combative zones of commercial law and common law.

Women bring to the law a strong sense of method. This is borne out in the judgment writing of women in the superior courts…

(Extract from speech by Marilyn Warren, current Chief Justice of the Supreme Court of Victoria, on 15 May 2003 to Victorian Women Lawyers)

I’d like to explore my own ambivalence about the words of Chief Justice Warren above. Are women different to men? Do they bring different qualities to a role? Before I had male cousins, I would have said that women and men were the same, but I no longer believe this. In general, women and men do have different approaches to matters. That is not to say that either approach is better than the other. It is also not to say that all women are the same. Most people will have a mixture of “masculine” and “feminine” traits. For example, my husband will kill me for writing this, but I am better at reverse parking and spatial tasks than he is (typically thought to be a more masculine trait). Further I am far more adversarial than my husband. He does not like confrontation. I don’t like it either, but if I have to confront someone, I will. And there are women who are far more aggressive than any man, and far less caring. Think about someone like Maggie Thatcher – hardly a stereotypically “feminine” woman.

I guess I’m wary of gross generalisations, and the idea that women are somehow better than men. We aren’t better than men, sometimes we’re just different. But I do think that many women have a very valuable perspective to add to the judicial bench. With this in mind, I am considering the appointment of Justice Kiefel to the High Court of Australia.

Will Justice Kiefel bring a different perspective to the Court? I really hope so. I don’t care if it’s as a result of her gender or not. To me, the point for celebration is not that Her Honour is a woman, but that she shows some signs of having independent thought processes. The present High Court is so hidebound. I don’t know if this is some kind of pendulum effect – whether the Court is at pains to swing away from the perceived “activism” of the 80s and 90s. I think that this is mistaken. To try to keep the law static is as much activism as is attempting to change the law. It also has a political agenda behind it.

The whole point of being on the High Court is that the law is (within reason) what you say it is. You are not bound by precedent. A High Court should both explain what the law is and develop it if necessary. By contrast, recent judgments of the House of Lords in the last 10 years have been interesting and one gets the feeling that they actually have open minds. I find myself almost wishing that there was still an avenue of appeal to the Privy Council. {Zounds, can a republican like myself really be saying that? Shows how desperate times have become… Note for US readers: republican = anti-Queen-as-head-of-Australia in this context}

So, congratulations, Justice Kiefel. May you make a difference!

Attack of the clones

Sir Gerard Brennan (formerly Chief Justice of the High Court of Australia) has warned against allowing governments to appoint “judicial clones” who will just follow the government’s wishes. I do share Sir Gerard’s concern about the appointment of willing judges who will countenance any extension of the law. But I’m not sure how to resolve it.

Sir Gerard has suggested the institution of a more formal and transparent process, including a judicial selection committee. I’ve written about this issue before. I suspect that if the government wants a certain type of judge appointed, they can stack the judicial selection committee with appointees.

I am disappointed with the current High Court, though, speaking as a lawyer and academic who is passionate about property law, restitution and equity. Take, for example, the recent decision of Farah Constructions Pty Ltd v Saydee Pty Ltd [2007] HCA 22. I’ve never read such a profoundly negative and snarky judgment in my whole life. It doesn’t assist in outlining what the law is – it just says what it isn’t.

The whole judgment smacks of a personally motivated desire to smack those uppity restitution lawyers on the head and put them back in the box which they belong. I suspect Heydon J is behind it, given the nitpicking factual approach, and his Honour’s general attitude (expressed in the Introduction to Meagher Gummow and Lehane) that restitution lawyers represent “the enemy”. The Court of Appeal’s judgment preceding it erred in the other direction, with an overly enthusiastic embrace of restitution (finding restitutionary principles to be a basis for knowing receipt for breach of fiduciary duty, when the parties did not raise this argument or have a chance to respond to it). I think either approach is inappropriate. One cannot let one’s personal enthusiasms or dislikes for a particular area of law into a judgment. It’s not about point-scoring.

To my mind, it is important for judges to keep in mind that you are not fighting a personal battle championing a particular interpretation of the law, you are making a decision which will affect individuals involved in profound ways. Of course, one can’t divorce politics from the law, and indeed, as I have discussed earlier, it is intrinsic to the law. But one can try to minimise personal concerns and try to make the law conherent and fair. What does it matter whether a principle is restitutionary, equitable or based in the common law, as long as it works fairly and produces just and predictable outcomes? (Yes, I’m a fusion fallacist, and proud of it.)

The unpalatable truth

I was interested to read about a recent High Court decision, John Fairfax Publications Pty Ltd v Gacic [2007] HCA 28, concerning an allegation that a restaurant review was defamatory. A majority has found that a September 2003 review of Sydney habourside restaurant Coco Roco was defamatory. The restaurateurs claimed they lost 2700 customers immediately after the story, with most citing the review as the reason why. Shortly afterwards, Coco Roco was in liquidation.

Of course, the first thing I wanted to do after hearing that was to read the review. Here are some choice extracts:

If a restaurant serves good as well as bad food, do you give it the benefit of the doubt? I wouldn’t do that with a three chef’s hat restaurant, so why should I do it here? Especially when more than half the dishes I’ve tried at Coco Roco are simply unpalatable.

Coco Roco is the swank new eatery at King Street Wharf. The opening was touted as ‘Sydney’s most glamorous restaurant’. If glamour peaked at about 1985, then perhaps they’re right. Something about the polished stainless steel around the open kitchen and the black reflector tiles in the bathroom make me feel I should be wearing a pink shirt and a thin leather tie. Maybe it’s just me.

What isn’t disputable is that this place has had a $3 million fitout, has views westwards over the water and scored Sarah O’Hare as its official guest at the opening. It has set itself up as a flash restaurant with big-end-of-town prices. Its business card even boasts that ‘A new level of dining comes to Sydney’s King Street Wharf.’ I couldn’t agree more.

Coco Roco is actually two restaurants: Coco, the posh place upstairs off Lime Street, and sibling Roco, also smartly fitted out on the foreshore. Forever in pursuit of excellence, we chose the more expensive option.

Expensive is right. Mains skid dizzily from a vegetarian dish at just under $30 and crash over the $50 mark. It’s a brave restaurateur who tries that without the goods to back it up.

A degustation of oysters ($28 for six/$40 for 12) arrives as different flavoured bivalves, rather than as oysters from various regions. There’s a saffron infused gin one. There’s a seafood foam which looks like it’s been piped on top. The texture is scary and, let’s be polite, not to my tastes. The limoncello, however, is worse – flavours jangle like a car crash; all at once it’s sickly sweet, overtly alcoholic, slippery, salty and bitter.

…

On a side dish, three house-made mustards – milk, Guinness and lavender – prove that some things are better left alone.

…

I’ve never had pork belly that could almost be described as dry. Until tonight. A generous square of pig’s paunch ($33) is snuggled into a mass of starchy lentils. The meat is unevenly spiced with Moorish flavours and the lentils are poor. Texturally, it brings to mind the porcine equal of a parched weetbix.

…

In a city where harbourside dining has improved out of sight in recent years, Coco Roco is a bleak spot on the culinary landscape.

…

Whew! Yep, that’s pretty full on. If I had a booking there (unlikely, I think the concept of a $50 main is ridiculous), I would cancel it after reading that review.

Prior to trial, it was held that there were four potentially defamatory imputations that could be drawn from the review:

(a) The respondents sell unpalatable food at Coco Roco.

(b) The respondents charge excessive prices at Coco Roco.

(c) The respondents provide some bad service at Coco Roco.

(d) The respondents are incompetent as restaurant owners because she/he employs a chef at Coco Roco who makes poor quality food.

The trial of the proceeding was conducted pursuant to s 7A of the Defamation Act 1974 (NSW) which applied at that time. According to s 7A(3), if the court decided that the defamatory material was capable of holding the alleged imputations, and that the imputations were defamatory, then the jury was to decide whether this was in fact the case. Only imputations (a) and (c) were considered before the High Court. A majority of the High Court found that the review did carry the imputations that the respondents sold unpalatable food and that the respondents provided bad service, and that these imputations were defamatory.

The defamation in question was said to be “business defamation”. Gleeson CJ and Crennan J explain this concept as follows at paragraph [2]:

Suppose someone says: “X is a thoroughly decent person, but he is showing signs of age; his eyesight is poor, and his hands tremble.” That would not be a reflection on X’s character. It would be likely to evoke sympathy rather than hatred, ridicule or contempt. If, however, X were a surgeon, the statement could be damaging. To say that someone is a good person, but a dangerously incompetent surgeon, is clearly likely to injure the person’s professional reputation.

The issue which was the subject of the appeal was the test put to the jury. Ordinarily, the test for finding whether material is defamatory is whether that it would lower a person in the eyes of ordinary, right-thinking members of the community. However, because the case concerned business defamation, the test was different. It was whether the material would be likely to injure a person in his or her trade or profession by reason of suggesting unfitness or incompetence or something of that nature.

The jury found that imputations (a) and (c) were conveyed but were not defamatory, and that imputations (b) and (d) were not conveyed. Judgment was entered for the appellants. The plaintiffs (the restaurateurs) then appealed to the Court of Appeal. The Court of Appeal held that the trial judge’s direction was not adequate, in that she failed to draw the necessary distinction between business defamation and personal defamation. The tests were entirely different. The Court of Appeal found that no reasonable, properly directed jury could have decided that the imputations in (a) and (c) were not defamatory, having regard to the test for business defamation.

The defendants (the newspaper) then appealed to the High Court. There were a number of matters which were at issue before the High Court. First, there was the question of whether the Court of Appeal was entitled to substitute its judgment of fact for the judgment of the jury. The High Court concluded that it was entitled to do so pursuant to s 108(3) of the Supreme Court Act 1970 (NSW). Secondly, there was a question of whether the jury were entitled to take community standards into account when deciding whether imputations (a) and (c) were defamatory. The majority rejected this submission. For example, at [190], Callinan and Heydon JJ concluded:

Business capacity and reputation are different from personal reputation. Harm to the former can be, as here, inflicted more directly and narrowly than harm to a person’s reputation. A person who does not have an admirable character may be a very good restaurateur. It might be possible to say things about him or her personally that are not defamatory, but not about that person as a restaurateur in relation to the conduct of the restaurant. Restaurant standards rather than community ones are the relevant standards in that situation. No community standard or value could obliterate or alter the defamatory meaning of the imputations in this case. It is unimaginable, in any event, that the estimation of the respondents in the mind of any adult person, let alone a reasonable reader, would not be lowered by a statement that they sold unpalatable food and provided bad service at their restaurant, and did so for considerable sums of money.

Kirby J dissented on both questions. The nub of his dissent, at [143], is worth reading:

Moreover, on subjects such as a criticism of a restaurant’s food and service, lay jurors are much more likely to reflect community standards than judges, many of whom, like myself, have no special interest in culinary matters, expensive restaurants or cuisine generally. Astonishing as it may seem, judges may occasionally lack a sense of irony or humour. Some may undervalue “free speech” or sometimes even feel hostility to a “free press”. In such matters, therefore, there is safety in the numbers of a jury. It was an error of the Court of Appeal to consider that community standards were insignificant in judging the suggested defamatory character of the review of the respondents’ restaurant. With all respect, such an attitude contradicts the legislative preservation by s 7A(3) of the function of a jury. That function is not unreviewable. It does not exclude a proper role for the Court of Appeal. But the jury’s function is still very important. Because Parliament exceptionally provided for it, it is to be respected in defamation actions.

I rest my case: Kirby J is a hip cat. It is, as his Honour suggests, a instance where Parliament has required that the lawyers refer a matter to the general public to see what they think of a matter. The general public answers in a way which leads lawyers to think, “That’s not the right answer!”, and then proceed to argue that the “right (lawyerly) answer” should be substituted.

What, then, is the point of asking a jury what it thinks about a matter if judges are just going to overrule the jury when they don’t come up with the answer that a lawyer would come up with? Isn’t that the whole point of a jury? I understand that it is scary for lawyers to put things in the hands of the hoi polloi, but for goodness sakes’, sometimes we lawyers need a reality check. I have described in a previous post how lawyers see things quite differently to the rest of humanity. Sometimes that’s a good thing, but sometimes, it means that we are “out of touch”. We can make the illogical seem perfectly illogical.

I’m going to try to take off my wig and gown here and put on my “foodie” hat. I’ll try to think with my stomach. Speaking as someone who loves her food, I would like food critics to be able to write honestly about restaurants. Who wants to read a review where the reviewer pussyfoots around because he is worried about making a defamatory comment? What about an unfavourable review of a book? Or a CD? Where do we draw the line? Aren’t we entitled to make public criticisms of someone’s work when they put it out there for us to judge?

Of course, it has to be noted that the trial isn’t over yet. The defendant newspaper still has to file its defences. Perhaps it will be able to establish a defence on the basis that the review was truthful, or that freedom of speech requires that the review be published.

Still, the decision represents a worrying tendency for lawyers to presume that we know better than anyone else, even when we ask ordinary people to make a judgment for us.

Nice to see they’re hip cats on the High Court

I just read that the High Court is hearing a Constitutional challenge to those provisions of the Commonwealth Electoral Act 1918 (Cth) which prevent a person who is serving a sentence of imprisonment from voting (namely ss 93(8AA), 208(2)(c) and 221(3)).

Now that’s an interesting legal question in and of itself. But it gets even more interesting when you read the transcript of the hearing:

MR MERKEL: … I was going to say under section 93(8AA) the amending legislation defines “sentence of imprisonment”. That is at page 7. This was also a significant amendment because prior to this amendment there was a question about whether home detention or parole would be caught by the disqualification. So this amendment made it clear that you had to be in detention on a full-time basis. So that is in the extrinsic materials. So there was no question if someone on parole or on home detention would not be caught by the disqualification and that comes out as a result of that definition.

Can I take your Honours next to Part VIII of the Act starting at page 122 dealing with – – –

KIRBY J: So Paris Hilton would now be disqualified, but last week for a short time she would have been entitled to vote?

MR MERKEL: Yes, your Honour, and she would have been entitled if she were in Australia and an Australian citizen to be standing here unburdened by the five-year point at least.

KIRBY J: I just wanted you to know that I follow these things.

(Via Larvatus Prodeo)

What a hip cat that Kirby J is! Just check out his efforts as a rapper recently:

(Photo via Sydney Morning Herald)

Well, perhaps I should qualify that. He’s not always quite so down and jiggy wid’ it… Check out this beautiful little snippet of transcript from 2002, involving a case about contributory negligence and drink driving.

CALLINAN J: Mr Jackson, it seems to me that clearly the people at the party, including Ms Joslyn and Mr Berryman, went out with the intention of getting drunk.

MR JACKSON: It would be a big night, your Honour, big night.

CALLINAN J: With the intention of getting drunk and they fulfilled that intention.

MR JACKSON: Well, your Honour, young people sometimes – – –

KIRBY J: I just think “drunk” is a label and I am a little worried about – it is not necessary to put that label. It is just that they were sufficiently affected by alcohol to affect their capacity to drive.

MR JACKSON: Yes.

KIRBY J: “A drunk” has all sorts of baggage with it.

HAYNE J: Perhaps “hammered” is the more modern expression, Mr Jackson, or “well and truly hammered”.

MR JACKSON: I am indebted to your Honour.

KIRBY J: I do not know any of these expressions.

McHUGH J: No, no. Justice Hayne must live a very different life to the sort of life we lead.

KIRBY J: I have never heard that word “hammered” before, never. Not before this very minute.

Buying shares in a "lemon"

A recent High Court decision Sons of Gwalia Ltd v Margaretic [2007] HCA 1 has established by a majority that shareholders rank equally with other unsecured creditors in a voluntary administration.

At first blush, the decision has an immediate appeal. On 18 April 2004, Magaretic purchased 20,000 shares in Sons of Gwalia Ltd, a publicly listed gold mining company, at a cost of $26,200. 11 days later, on 29 August 2004, voluntary administrators were appointed to the company. At the time Magaretic bought the shares in the company, they were worthless. Magaretic claimed that Sons of Gwalia breached the stock exchange listing rules by failing to tell the Australian Stock Exchange that its gold reserves were insufficient to meet its gold delivery contracts, and that it could not continue as a going concern. Accordingly he brought a claim for misleading and deceptive conduct pursuant to the Trade Practices Act, the Corporations Act and the ASIC Act. He seeks compensation for the amount he spent on the valueless shares). Many other shareholders have similar claims.The High Court has decided that Magaretic is indeed a creditor, and that his claim ranks equally with other unsecured creditors.

Section 563A of the Corporations Act essentially provides that payment of a debt to a person in his or her capacity as a shareholder (whether dividends, profits or otherwise, will be postponed to any other claims of any other creditors. The practical effect of this is that claims by shareholders rank last – they can only get the money (if any) which is left over after all the other secured and unsecured creditors have taken their slices of the asset pie. A majority of the High Court decided that Magaretic’s claim could not be described as arising from his capacity as a shareholder (Calllinan J dissented). Strictly speaking, Margaretic’s claim arose before he became a shareholder at all, for that was when the misleading and deceptive conduct occurred. Section 563A of the Corporations Act can be contrasted with §510(b) of the United States Bankruptcy Code which specifically subrogates a shareholders claim “for damages arising from the purchase or sale of such a security”.

The practical effect of the decision is that Magaretic and all the other shareholders with claims for misleading and deceptive conduct will now be able to claim with all the other unsecured creditors (trade creditors, employees and lenders). This will substantially enhance the shareholders’ chance of recovery, but it will also reduce the amount available for distribution to other creditors. In this instance, there are apparently many other shareholders with claims for misleading and deceptive conduct. An administrator will find it difficult to ascertain which shareholders’ claims have validity, and the amount of damages to which they are entitled. This will significantly increase the length of voluntary administrations. Further such claims are not included as listed liabilities when a potential lender tries to ascertain whether it should lend money to or invest in a company. Mark Korda has noted that this may make some US companies wary of investing in Australian companies.

Although one’s immediate sympathies lie with Magaretic, who bought worthless shares eleven days before the administration, investment on the share market is a risky business. The broader practical implications of the decision may be to make the administration of insolvent companies much more difficult and costly, and result in less money for all creditors. Already, according to the administrator of car-part manufacturer Ion, payouts to creditors will be delayed by a year by the decision in Margaretic.

Deceit and the family

I was sitting in the kitchen having a cup of coffee on Friday when my husband came in from the lounge room, where he had been watching the news. “How can someone fail to prove deceit when he’s found out that two of “his” kids for whom he’s been paying maintenance are not actually his?” my husband asked. He’s not the only one who has been asking this, either.

This seems to be the instinctive reaction to the High Court’s recent case, Magill v Magill [2006] HCA 51. Shortly, the facts of the case were that Mrs Magill had three children during the period of her marriage to Mr Magill (they were married in 1988 and separated in 1992). Mr Magill paid child support payments for those children from 1992 to late 1999. In 2000, DNA tests proved that although Mr Magill was the father of the first of Mrs Magill’s children, he was not the father of the two younger children. The father of the younger children was in fact a man with whom Mrs Magill was having an affair. The High Court unianimously dismissed Mr Magill’s appeal and rejected his claims.

So: how can it be argued that Mr Magill has not be deceived in this scenario? The answer to that is that “deceit” is not being used in the way a layperson would use it. There is absolutely no doubt whatsoever that Mr Magill was deceived. However, “deceit” in this context is being used a legal term of art, in the sense that it refers to the tort of deceit.

The tort of deceit is a common law action which provides compensation for persons who have suffered injury as a result of of dishonesty. More technically, (for the lawyers out there) deceit is made out where, as a result of the false representation made by the defendant, the plaintiff has acted to his or her detriment, and therefore suffered economic loss.

Historically, deceit has been found in a commercial context. The High Court case of Gould v Vaggelas (1984) 157 CLR 215 is a typical example. In that case, the Goulds (through their company, Gould Holdings Pty Ltd) purchased a tourist resort from a group of companies (including South Molle Pty Ltd) for whom Mr Vaggelas acted. As part of the contract of sale, there was a mortgage back to South Molle, for which the Goulds gave personal guarantees. Gould Holdings defaulted on the mortgage and South Molle exercised its power of sale pursuant to the mortgage. There was not enough money to cover the debt. South Molle sued the Goulds under the guarantees. The Goulds counter-sued Mr Vaggelas, arguing that they had been induced to purchase the tourist resort based on certain misrepresentations by Mr Vaggelas as to the profitability of the resort. They successfully sued him for the tort of deceit.

Is anyone still with me after this point? How many people nodded off, or skimmed over that paragraph? Hopefully you got enough of a sense of the context in which the tort of deceit generally arises. Probably you found that example somewhat dry (unless, of course, you happen to enjoy this kind of law, which I certainly do, mmm yes I do, because I am incontrovertibly a sick puppy in this respect).

The problem faced by Mr Magill was that he was trying to get the High Court to extend this commercial principle to a very personal, private family situation. But this was not his only problem. He also needed to point to the economic loss flowing from the “representation” by his wife that he was the father of her children. An important point to be made is that Mr Magill was not suing for the child support payments which he had made up until 1999. He was suing for damages to compensate for psychiatric injury (namely, severe anxiety and depression) resulting from the discovery that “his” children were not, in fact, his. He also claimed for related loss of earnings (for example, he claimed compensation for the time he took off work for the birth of each of the second and third child).

It is not like Gould v Vaggelas, where the Goulds could point to certain losses their company had made as a result of its purchase of the tourist resort. As Gleeson CJ cogently pointed out in his judgment in Magill:

“There is no reason in principle why the harm for which the tort may provide compensation should not include personal injury, or why personal injury should not include psychiatric injury, but the harm for which damages are awarded is the “actual damage directly flowing from the fraudulent inducement”, that is to say, the damage directly flowing from the alteration of the plaintiff’s position which occurred as a result of the inducement. Distress, disappointment, frustration and anger may all be natural responses to discovery of deception, but the tort of deceit does not set out to compensate people for wounded pride or dignity, or for the pain that results from broken illusions.”

This was not a suitable case for the principle to be extended beyond a commercial context. I think the High Court made the right decision. If Mr Magill’s cause were upheld, if a wife suspects a child is not her husband’s, would she have a legal duty to voice this suspicion to the husband? You can’t impose a duty like that in law, no matter what one’s moral duty is. What if a husband suspects he may have fathered a child out of wedlock? Does he have a duty to tell his wife too?

I agree with the Court that it is not appropriate for the law to get involved with private, personal disputes such as these. Essentially, Mr Magill wants to get revenge on his ex-wife for cheating on him which, while understandable, is not the kind of thing for which the law of deceit should be used.

The lawyer for Mr Magill said: “What they (the judges) are saying is that if a child is born within a marriage it’s presumed to be a child of that marriage, end of story.” Well, I should hope so, too, otherwise we live in a very sad society. Sadly, as this case shows, that presumption is not always true. But what can you do? You can’t force every child to have DNA tests at birth just so you are sure that you are the father of the child. This would be ridiculous and invasive. Personlly, I would find the very notion offensive.

Mr Magill may have lost his case, but ultimately, unfortunately, it seems no one’s a winner in this scenario. I feel very, very sorry for Mr Magill. It is a terrible situation in which to find oneself. However, I do not think that an award of damages for deceit is the best way to resolve his dispute with his ex-wife. I feel very, very sorry for the children too. Apparently, according to the newspaper, he has not had contact with the three children since 2000. They have lost the person whom they knew as their “father” from their birth (even if he was not the genetic father of two of the children). I think they are the ones I feel sorriest for.

Freedom of Information ain’t so free

On Wednesday, the High Court handed down a decision which will be pivotal in establishing the ambit of FOI claims. In McKinnon v Secretary, Department of Treasury [2006] HCA 45, a majority of the High Court found that requests for information could be resisted on the basis that the minister responsible for that portfolio had signed a certificate stating that disclosure of information was not in the public interest.

The facts arose in the following manner. Mr McKinnon, the FOI Editor of The Australian made two requests for material from the Department of Treasury in late 2002 pursuant to the Freedom of Infomation Act 1982 (Cth) (“FOI Act“). The first request was for material relating to “bracket creep” in the federal income taxation system, and the second request was for material relating to the First Home Owners Scheme. Mr Costello, Federal Treasurer, signed two certificates pursuant to s 36(3) of the FOI Act stating that disclosure of the most of the relevant documents would not be in the public interest. The reasons for this were broadly as follows:

• Disclosure would mean that goverment officers would not feel comfortable communicating freely with a Minister and his office on issues which are sensitive. Officers should feel able to make written notes of such communications.
• Some of the documents discussed options that were not settled at the time the document was drafted or recommended courses of action that were not ultimately taken. This could lead to confusion and to mislead the public, and would undermine the public integrity of the Government’s decision making process.
• Further, preparation of possible responses to questions in Parliament is a very sensitive aspect of the work of departmental officers and should remain undisclosed. The release of such documents would threaten the Westminster-based system of Government.
• Some documents could not be put into their proper context because of the absence of any explanation of the variables used or assumptions relied upon, and so would not be a valuable contribution to public debate.
• The documents were intended for a specific audience familiar with the technical terms and jargon used, and thus could lead to public misunderstanding.

Meanwhile, Mr McKinnon made an application to the Administrative Appeals Tribunal (“AAT”) seeking a review of the decision to refuse to disclose the documents. Pursuant to s 58(3) of the FOI Act, the ATT does not have the power to review the decision to give the certificate. However, pursuant to s 58(4), the AAT can decide whether the Minister has reasonable grounds for citing the grounds claimed in the certificate. Further, pursuant to s 58(5), the AAT can decide whether the Minister has reasonable grounds for the claim that failure to disclose the document is in the public interest.

The ATT determined that there were “reasonable grounds” for the Treasurer to sign a certificate pursuant to s 36(3). Mr McKinnon then “appealed” to the Federal Court. A majority of the Full Court of the Federal Court (Tamberlin and Jacobson JJ, Conti J dissenting) dismissed Mr McKinnon’s appeal. Mr McKinnon then appealed to the High Court.

A majority of the High Court (Hayne J and Callinan and Heydon JJ) dismissed Mr McKinnon’s appeal. Hayne J said that Mr McKinnon’s submission had been that the AAT was in error in its approach to the question:

• It had merely identified a single ground that was not irrational, absurd or ridiculous in upholding the claim disclosure was not merited in order to preserve confidentiality of intra-governmental communications
• It had not decided all of the relevant questions of fact tendered by the competing evidence adduced at the hearing, and had wrongly treated certain classes of documents as necessarily exempt from disclosure.

Hayne J concluded that the AAT had not been in error in this manner, and therefore Mr McKinnon’s claim must fail.

Callinan and Heydon JJ, in a joint judgment, concluded at [131]:

“[I]f one reasonable ground for the claim of contrariety to the public interest exists, even though there may be reasonable grounds the other way, the conclusiveness will be beyond review. It is important to notice that the statutory language does not give an entitlement to access if there are, as often there may very well be, reasonable grounds for the revelation of the document in the public interest. It further follows that the Tribunal is not obliged to undertake a balancing exercise of the kind the appellant submits it was bound to do. The role of the Tribunal in the circumstances of, and on the basis of the statutory language governing this case, is not to undertake a full merits review… Whether therefore, the only practical and real means of attacking a conclusive certificate will be by demonstrating that there are no reasonable grounds in fact, or that the grounds relied on are so unreasonable that no reasonable person could hold the opinions upon which they are based, does not arise for decision in this appeal.”

As Gleeson CJ and Kirby J point out in their dissent, the view of the majority appears to mean that, so long as there is anything relevant to be said in support of the view that disclosure would be contrary to the public interest, an application for review of a certificate must fail. The AAT may, however, in making its opinion, take account of all relevant opinions. Gleeson CJ and Kirby J explicitly reject the suggestion that they are arguing that the AAT should perform a “balancing” operation. They state at [19]:

There is a “general right of access to information … limited only by exceptions and exemptions necessary for the protection of essential public interests [and other matters not presently material]” (s 3(1)(b)). That is the context in which a Minister makes a decision under s 36(3), and in which such a decision is reviewed under s 58(5). References to “balancing” create a danger of losing sight of that context. That is the context in which the question of reasonableness raised by s 58(5) is to be addressed. To lose sight of that would be to lose sight of the principal object of the FOI Act.”

With respect, I think that the judgment of Gleeson CJ and Kirby J is far more compelling and accords with the aims of the FOI Act. It seems ridiculous to me that if there is just one reasonable ground for non-disclosure and one hundred reasonable grounds for non-disclosure, the AAT should come down on the side of non-disclosure. As Gleeson CJ and Kirby J say, the FOI Act makes it clear that its intention is to allow the disclosure of the vast majority of information in the public interest, and so it is not so much a “balancing act” as an exercise of deciding when it is appropriate to allow the aims of the FOI Act to be curtailed.

The government is supposed to act in the interests of the public and for their benefit. It seems that we are not allowed to have the information to decide whether the government is actually acting for our benefit if the government decides in its infinite wisdom that we should not know. I believe it is unfortunate that the majority view has prevailed, as this will give government a further means to sidestep the provision of information about which the public has a right to know.

Litigation Funding

The High Court has just upheld the validity of litigation funding in Campbells Cash and Carry Pty Limited v Fostif Pty Limited [2006] HCA 41.

As the name suggests, the idea behind litigation-funding companies is that they pay the costs of litigation on behalf of litigants. If the client wins, the company takes a share of the proceeds of the win, but if the client loses, the funding company pays the other party’s costs. Litigation-funding companies help parties who would otherwise not be able to afford to litigate to bring legal actions.

The present case is just the latest instalment in a long history of litigation involving the invalidity of licence fees in respect of tobacco. All States in Australia levied a licence fee, which was included in the price of tobacco products when sold by retailers. The retailers passed the licence feeson to the wholesalers. It was then intended that the wholesalers would then pass the fees on to the respective State revenue offices.

However, in August 1997, in Ha v New South Wales (1997) 189 CLR 465, the High Court held that the States did not have the power to levy the licence fees, as they fell within the definition of “excise” according to s 90 of the Constitution. Subsequently, in Roxborough v Rothmans of Pall Mall Australia Lid (2001) 208 CLR 516, the High Court held that retailers were entitled to restitution of the sums paid to the wholesalers.

Firmstones was a litigation-funding company. During 2002, it sought to encourage tobacco retailers to claim the licence fees to which they were entitled from tobacco wholesalers according to Roxborough. It wrote to various retailers asking for authority to act on the retailers’ behalf. If successful, Firmstones’ would retain 331/3 per cent of any money received by the retailer from the tobacco wholesaler. If costs were awarded to the retailer, Firmstones would retain its “success fee”, but if costs were awarded against the retailer, Firmstones would bear those costs.

Firmstones formed the view that the limitation period for retailers to make claims against wholesalers expired at the end of June 2003, and it believed that there were many retailers who had not yet considered making a claim.

Accordingly, on 30 June 2003, Firmstones caused Mr Richards (the solicitor acting for Firmstones and the retailers) to issue a number of summonses in the Commercial List of the Equity Division of the Supreme Court of New South Wales. The proceedings were brought pursuant to Pt 8 r 13 of the Supreme Court Rules 1970 (NSW) and were representative proceedings. Specific plaintiffs were named in the summonses, but the summonses also purported to bring action on behalf of various “unnamed persons” whose identities would be known by the time of judgment. These representative proceedings were “opt-in”, meaning that parties could opt in to the litigation at a later date.

In 2003, Einstein J held that the proceedings could not continue as representative proceedings. His Honour found:

1. That the “litigation funding arrangements proposed by the opt-in procedure are against public policy as well as comprising an abuse of the court process”;
2. The persons whom the plaintiff proposed to represent “cannot be said to have the “same interest” in the proceedings”; and
3. To permit the proceedings to go forward as representative proceedings, would not facilitate “the just, quick and cheap resolution of the real issues”, it would instead “give rise to a procedural morass likely ultimately to be able to be resolved only by a disaggregation of the representative proceedings into separate proceedings”.

The High Court considered a number of questions in the Campbells judgment.

First, the Court considered whether the plaintiffs had the “same interest” in proceedings. A majority (Gummow, Hayne and Crennan JJ; Callinan and Heydon JJ) held that the plaintiffs failed to establish that they and the unnamed persons had the “same interest” as required by the 1970 Supreme Court Rules. This was because at the time when the summonses were issued, there was only one plaintiff seeking relief. It was contemplated that other plaintiffs would later join, but it could not be said that there were numerous other persons with the same interest in proceedings at that time. Gleeson CJ and Kirby J dissented in separate judgments.

Secondly, the Court considered whether litigation-funding companies were against public policy. On this issue, a majority held that litigation-funding companies were not contrary to public policy (Gleeson CJ, Gummow, Hayne and Crennan JJ and Kirby J). Callinan and Heydon JJ dissented in a joint judgment, where they stated that litigation funding was an abuse of process because Firmstones’ primary object in bringing the litigation was profit.

In the course of its reasoning, the Court considered the history of the torts of champerty and maintenance, and the way in which these torts are essentially obselete in present day circumstances. [As an aside, I think champerty must be one of my favourite legal names. It makes me think of a team of big cart horses champing at the bit – champerty, champerty, champ!). I know that it is obsolete, but I still like it.]

At para [95], Gummow, Hayne and Crennan JJ conclude that litigation funding is not an abuse of process:

The difficulties thought to inhere in the prosecution of an action which, if successful, would produce a large award of damages but which, to defend, would take a very long time and very large resources, is a problem that the courts confront in many different circumstances, not just when the named plaintiffs represent others and not just when named plaintiffs receive financial support from third party funders. The solution to that problem (if there is one) does not lie in treating actions financially supported by third parties differently from other actions. And if there is a particular aspect of the problem that is to be observed principally in actions where a plaintiff represents others, that is a problem to be solved, in the first instance, through the procedures that are employed in that kind of action. It is not to be solved by identifying some general rule of public policy that a defendant may invoke to prevent determination of the claims that are made against that defendant.

I believe that this decision is to be applauded. Otherwise litigation can be out of the price range of the ordinary person, even though they may have quite a good chance of success. Private entities are unlikely to help with litigation unless they can make a profit out of it. Firmstones’ main object may indeed be to make a profit from successful litigation, rather than to uphold justice. However, the same can be said for both law firms and barristers, so I do not think that this criticism stands up. The important thing is that the legal system should remain accessible to average people, and not just something which can only be afforded by an elite and well-off section of society. If litigation funding is a way of promoting this, then so be it.

Limitation of Actions and Post Traumatic Stress Disorder

I was interested to see that the High Court have handed down a decision in Stingel v Clark [2006] HCA 37.

This case involves former chairman of ATSIC, Geoff Clark, and Carol Stingel, a woman who alleges that Clark was the leader of a pack of men who gang raped her in 1971. She claims that she suffered post traumatic stress disorder which had delayed onset and that it developed in 2000 when she saw reports that Mr Clark had become chairman of ATSIC.

The case hinges on the interpretation of s 5(1A) of the Limitation of Actions Act 1958 (Vic), which reads as follows:

“An action for damages for negligence nuisance or breach of duty (whether the duty exists by virtue of a contract or of provision made by or under a statute or independently of any contract or any such provision) where the damages claimed by the plaintiff consist of or include damages in respect of personal injuries consisting of a disease or disorder contracted by any person may be brought not more than six years from and the cause of action shall be taken to have accrued on the date on which the person first knows –

(a) that he has suffered those personal injuries; and
(b) that those personal injuries were caused by the act or omission of some person.”

Gleeson CJ, Callinan, Heydon and Crennan JJ gave a joint judgment and Hayne J gave a separate judgment, in which they allowed the appeal by Ms Stingel. Gummow J and Kirby J dissented in separate judgments.

Essentially, Clark’s counsel were arguing that the words “breach of duty” in s 5(1A) did not cover an intentional assault or trespass. Gleeson CJ, Callinan, Heydon and Crennan JJ noted that this interpretation would mean that an injured plaintiff who was the victim of an intentional trespass would be worse off under the Act than a plaintiff who was a victim of negligence. They state:

“In the case of injuries of the kind dealt with by s 5(1A), assuming the other conditions are satisfied, the statute extends the limitation period in the case of a person who was neglected as a child, but not one who was sexually abused. It is difficult to understand why the policy of the Act would be to discriminate in that fashion.”

In his separate judgment, Hayne J agreed with the findings of Gleeson CJ, Callinan, Heydon and Crennan JJ and stressed the historical context of such an interpretation.

In comparison, each of Gummow J and Kirby J found in separate judgments that “breach of duty” in s 5(1A) did not cover an intentional assault or trespass. In so finding, they followed the UK authority of Stubbings v Webb [1993] AC 498 and the Irish authority of Devlin v Roche [2002] 2 IR 360, both of which had dealt with substantially similar legislation.

The next argument by Clark’s counsel was that the word “damages” in s 5(1A) was intended to distinguish between “traumatic” or “frank” personal injuries and “insidious” personal injuries. Counsel argued that the reference to “damages” only applies to insidious diseases where the victim is not aware they have contracted the disease, where symptoms do not become evident within the limitation period and the symptoms become evident at a later time.

Winneke P, Charles and Eames JJA of the Victorian Court of Appeal had adopted this distinction. They held that Ms Stingel’s injury was “traumatic” or “frank” (being the assault and rape which occurred in 1971) followed by a late-onset psyhiatric condition and was thus not covered by s 5(1A). This was contrasted with an insidiously progressive disease (such as asbestosis). Warren CJ and Callaway JA dissented and refused to adopt this distinction. They were of the opinion that the word “damages” was unambiguous, and that there was nothing in the wording of the section which would merit a distinction between “traumatic” and “insidious” injuries.

It seems to me that, on a legal basis, the decision of the majority is correct. That is to say, there seems no reason from the history and words of the statute to draw distinctions between an intentional assault or trespass and negligence or “traumatic” and “insidious” injuries.

The interesting question is how this case will affect various claims for post traumatic stress disorder and whether (in that time-honoured phrase) “the floodgates have been opened”. I would suggest that claimants such as Ms Stingel will still face substantial difficulties in bringing claims. The length of time between the original triggering event and the later psychiatric injury will mean that claimants’ cases will probably be difficult to prove on the merits. I will watch with interest to see how Ms Stingel fares on the merits against Mr Clark.