Hearsay ... the Journal of the Bar Association of Queensland
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Issue 30: October 2008
High Court of Australia Judgment Summary Notes Print E-mail

The following summary notes of recent decisions of the High Court of Australia have been prepared by the Public Information Officer, Fiona Hamilton. They provide a brief overview of each case. For more detailed information, please consult the Reasons for Judgment which may be downloaded by clicking on the case name.

The following Judgments are summarised in this issue. The summary notes follow after this list:

  • W.R. Carpenter Holdings Pty Limited v Commissioner of Taxation; W.R. Carpenter Australia Pty Limited v Commissioner of Taxation [2008] HCA 33
  • Burrell v The Queen [2008] HCA 34
  • Copyright Agency Limited v State of New South Wales [2008] HCA 35
  • Hearne v Street [2008] HCA 36
  • Osland v Secretary to the Department of Justice [2008] HCA 37
  • Master Education Services Pty Limited v Ketchell [2008] HCA 38
  • The Queen v Tang [2008] HCA 39
  • Imbree v McNeilly; McNeilly v Imbree [2008] HCA 40
  • Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41
  • Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42
  • Gedeon v Commissioner of the New South Wales Crime Commission [2008] HCA 43

W.R. Carpenter Holdings Pty Limited v Commissioner of Taxation; W.R. Carpenter Australia Pty Limited v Commissioner of Taxation [2008] HCA 33 (31 July 2008)

Two companies which allegedly owe income tax in relation to various international transactions could not compel the Commissioner to provide certain information which they sought in connection with their appeals against their tax bills, the High Court of Australia has held.

tax220389.jpgThe WR Carpenter companies are members of Perth businessman Ric Stowe’s Griffin Group of companies. The group disputed 44 income tax assessment notices issued by the Australian Tax Office (ATO) in 2004 to seven members of the group in respect of income between 1986 and 2002,
following an audit of the group. Decisions on 42 assessments are pending in the Administrative Appeals Tribunal. With the other two, both involving international transactions, the Carpenter companies instituted proceedings in the Federal Court of Australia by way of appeal under the Taxation Administration Act (TAA). Those appeals are also still pending. Carpenter Holdings claimed that an assessment for 1986-87 was excessive while Carpenter Australia disputed the assessment for 1992-93. The 1987 assessment concerned a transaction in which Carpenter Holdings sold to the Cyprus-based Griffin company, Carpenter Holdings International Limited (CHIL), shares in other companies in the group. The cost was $129 million of which $79 million was to be paid after 15 years. CHIL was not charged any interest. The ATO deemed the interest that would have been due over that period was $167.3 million, including $17.9 million for 1986-87. The 1993 assessment involved loans by Carpenter Australia to a group company based in the United States. No interest was charged and the loans were written off in the 1993 and 1994 years. The ATO deemed total interest payable as $4.77 million, including $986,180 in 1992-93. It said tax was owed on both transactions as neither was carried out “at arm’s length”. Under the TAA, the companies had the burden of proving that assessments were excessive.

By motions filed in the Federal Court on 19 May 2006, the Carpenter companies sought orders that the ATO provide certain particulars of matters taken into account in determinations that sections 136AD(1) or 136AD(2) of the Income Tax Assessment Act should apply to the international transactions so as to produce the interest deemed or imputed to have been paid to the companies. The motions were dismissed by Justice Kevin Lindgren on 20 September 2006. The ATO had already filed a statement outlining its contentions and the facts and issues in the case. Appeals to the Full Court against Justice Lindgren’s ruling were dismissed on 11 July 2007. The companies appealed to the High Court.

The Court unanimously dismissed the appeals. It held that the requests for information made by the companies were not directed to any issue that arose in the appeals and that provision of the information as requested was neither necessary nor appropriate for the resolution of the issues in the appeals.

Burrell v The Queen [2008] HCA 34 (31 July 2008)

The High Court of Australia ordered the New South Wales Court of Criminal Appeal to rehear Mr Burrell’s appeal against conviction for the kidnap and murder of Kerry Whelan in 1997 after the CCA reopened the original appeal hearing to correct an error.
Mrs Whelan disappeared on 6 May 1997. Her body has never been found. Mr Burrell had once worked for her husband Bernie Whelan’s company but had been made redundant. Shortly before Mrs Whelan’s disappearance Mr Burrell re-established contact with the Whelans. He was later charged with detaining Mrs Whelan for advantage and with murdering her on or about 6 May 1997. A trial in 2005 ended with a hung jury but Mr Burrell was convicted after a second trial in 2006. He was sentenced to life imprisonment for murder and 16 years’ jail for the kidnapping charge.

Mr Burrell appealed to the CCA against his convictions and sought leave to appeal against the sentences. On Friday 16 March 2007, the CCA published reasons for its decision to dismiss the appeal against convictions, grant leave to appeal against the sentences, but dismiss that appeal. That same day, notification to Mr Burrell of the CCA’s orders was prepared in the Court’s Registry, signed on behalf of the Registrar and stamped with the Court’s seal. Particulars of the notification were entered in to the records of the NSW Supreme Court as the court of trial.

After the orders were formally recorded, the CCA discovered that its reasons contained substantial
factual errors. On Monday 19 March, the matter was called on by the CCA. Chief Judge at Common Law Peter McClellan said that the judgment, which he had written on behalf of the CCA,
had some inaccuracies in its recounting of the Crown case. He said he had drawn upon a statement of facts alleged in the Crown case and mistakenly assumed it was correct. In further argument on 21 March, Mr Burrell submitted that the CCA had no power to reopen the appeals and that the matter should be redetermined by a newly constituted Bench because of a reasonable apprehension of bias. In reasons delivered on 23 March, the CCA rejected those submissions and held that it had power to reopen the appeals. It held that because the appeals were not determined in relation to the relevant evidence they had not been finally determined. The CCA ordered that its orders dismissing the appeals should be confirmed. Mr Burrell appealed to the High Court against the first orders made on 16 March 2007 and the second orders made on 23 March 2007.

The Court unanimously allowed the appeal. It held that the CCA lacked power to reopen the appeals after the first orders had been formally recorded. The second orders were made without power so must be set aside. As there was no dispute that the first orders were flawed because of the factual errors, those orders must also be set aside. The Court ordered that Mr Burrell’s appeal against conviction and his application for leave to appeal against sentence be remitted to the CCA
for rehearing.

Copyright Agency Limited v State of New South Wales [2008] HCA 35 (6 August 2008)

The State of New South Wales was not entitled to use surveyors’ plans without fairly remunerating copyright owners, the High Court of Australia has held.

Members of the Copyright Agency Limited (CAL) include consulting surveyors. They own the copyright in their survey plans, which are “artistic works” protected by the Commonwealth Copyright Act. CAL is the relevant collecting society distributing remuneration to copyright owners. It applied to the Copyright Tribunal to determine the terms upon which the State could copy the survey plans and provide them to the public. Part VII, Division 2 of the Act provides for the use of copyright material by the Crown where “the Crown” includes the government of a State, and provides for an exception to infringement provisions which would otherwise apply. Because section 183(1) exempts the copying and distribution of plans from infringement if done for the services of a State, CAL did not contend that NSW was infringing the copyright in survey plans. The Act provides that a State, doing any acts within the copyright, must inform the copyright owner. Section 183A(2) provides that the government must pay the collecting society fair remuneration for the making of government copies using a method agreed on by the collecting society and the government or, if there were no agreement, determined by the Tribunal.
copyright.jpgThe Copyright Tribunal referred 11 questions of law to a Full Court of the Federal Court of Australia. The appeal to the High Court related to questions 5 and 6. Question 5 asked whether the State, other than by operation of section 183 of the Act, was entitled to a licence to reproduce survey plans and to communicate them to the public. Question 6 asked if the answer to question 5 is “yes”, what were the terms of the licence. The Full Court answered “yes” to question 5 and answered question 6 by saying that the licence which they found was for the State to do everything it was obliged to do under the statutory and regulatory framework that governed registered plans. CAL appealed to the High Court on the issue of whether the Full Court erred in finding that the State had a licence to reproduce the plans and to communicate them to the public,
independently of section 183 of the Act. CAL contended that section 183 was a statutory licence scheme leaving no room for the implication of a licence to copy the plans to communicate them to the public. The State relied upon a licence said to be implied by the conduct of a surveyor permitting survey plans to be registered in the knowledge of the uses to which they would be put.

The High Court unanimously allowed the appeal. It answered “no” to question 5, making it unnecessary to answer question 6. The Court held that Part VII, Division 2 of the Copyright Act contained a comprehensive licence scheme for government use of copyright material. Copyright owners such as surveyors had a statutory right to seek terms upon which the State did any act within copyright and to receive remuneration for any government copying. The Court held that various factors militate against implying a licence in favour of the State in respect of its dealings with survey plans. First, nothing in the conduct of a surveyor in preparing plans for registration involved abandoning exclusive rights bestowed by the Act, particularly since the statutory licence scheme qualified those rights on condition that remuneration be paid for permitted uses. Secondly, surveyors could not practise their profession without consenting to the provision of survey plans for registration, knowing the subsequent uses to which plans would be put. Thirdly, an application by a surveyor for fair remuneration for government uses of survey plans involving copying and communication of the plans to the public after registration did not undermine clients’ use of the survey plans for lodgement for registration and issue of title. Fourthly, neither a surveyor nor their client could factor into fees under the contract between them, copying for public uses done by the State. Fifthly, the State charged for copies issued to the public. Sixthly, nothing in the express terms of section 183(1) could justify reading down the expression “for the services of the ... State” to exclude copying and communication of plans to the public.

Hearne v Street [2008] HCA 36 (6 August 2008)

Operators of Luna Park, the Sydney harbourside amusement park, were bound by an obligation not to use other parties’ affidavits or witness statements other than for court proceedings and breaching that obligation was a contempt of court, the High Court of Australia has held.
Luna Park opened in 1935, closed in 1979 and re-opened in April 2004. Nearby residents were unhappy with noise, including music, loud speakers, mechanical noise and screams from people on the rides. Mr Hearne is managing director and chief executive of Luna Park Sydney Pty Ltd, the lessee and operator of Luna Park. Mr Tierney is a director of the parent company. On 5 April 2005 residents began noise nuisance proceedings in the New South Wales Supreme Court by filing a summons with supporting affidavits.
On 18 April, The Daily Telegraph newspaper published a story headed “The NUMBY* files”. It said: “*NUMBY: Not Under My Balcony. The city cousin of the NIMBY (Not in My Backyard)”. The story said “well-heeled” residents had “made some quirky, if not bizarre, claims”. It cited affidavits which gave as reasons why Luna Park should be shut down disrupted violin lessons, entrapped Chinese herbal medicine fumes and smoking daughters. The residents’ solicitors complained to Luna Park Sydney Pty Ltd about the release of residents’ affidavits. The solicitors for Luna Park Sydney gave an unreserved apology from Luna Park Sydney. A 10-day trial was set down to begin on 31 October 2005.

Between July and October 2005, Mr Hearne and Mr Tierney had dealings with Tourism, Sport and Recreation Minister Sandra Nori in an attempt to have the NSW Luna Park Site Act amended to protect Luna Park from the noise nuisance proceedings and any future complaints. Both Mr Hearne and Mr Tierney emailed Ms Nori’s staff sections of a resident’s affidavit and an acoustic expert’s noise impact report. The Luna Park Site Amendment (Noise Control) Bill, which was retrospective to 30 March 2004, was passed on 18 October 2005. The trial date was vacated. The residents amended their claim to allege breaches of the Commonwealth Trade Practices Act and the NSW Crown Lands Act.

On 15 March 2006, the residents filed notices of motion and statements of charge against Mr Hearne and Mr Tierney alleging they were in contempt of court by publishing extracts of the affidavit and the acoustic report in the emails to the Minister’s office. Justice Ian Gzell dismissed the action, holding that they were not bound by such an obligation. The Court of Appeal, by majority, allowed appeals by the residents and found Mr Hearne and Mr Tierney guilty of contempt of court. It held that the obligation was binding on them personally as well as on the company. Mr Hearne and Mr Tierney appealed to the High Court.

The Court unanimously dismissed the appeal. It held that the “implied undertaking” not to disclose pre-trial documents to people not involved in the proceedings was a substantive legal obligation. The Court held that a party’s servants or agents who were aware that documents had been prepared for legal proceedings were directly bound by this obligation, and the role Mr Hearne and Mr Tierney played meant they could be categorised as agents of Luna Park Sydney. There was also a jurisdictional issue. The NSW Supreme Court Act did not allow appeals from a Supreme Court judgment or order that a person had been found not to have committed criminal contempt. Mr Hearne and Mr Tierney argued that the charges against them were for criminal contempt and therefore the appeal to the Court of Appeal against Justice Gzell’s dismissal of the contempt charges was incompetent. The High Court agreed with the Court of Appeal majority that the contempt proceedings were not punitive, so were civil Court of Appeal was competent.

Osland v Secretary to the Department of Justice [2008] HCA 37 (7 August 2008)

The Victorian Court of Appeal, in considering whether public interest overrode legal professional privilege attaching to advice that Mrs Osland should not be pardoned for murder, should have inspected the documents in question, the High Court of Australia has held.

murder2263694.jpgIn 1996, Mrs Osland was convicted of murdering her husband, Frank Osland, in 1991, allegedly after years of violence. She was sentenced to 14-and-a-half years' imprisonment, with a non-parole period of nine-and-a-half years. The High Court dismissed her appeal against conviction and sentence in 1998. Mrs Osland then submitted a petition for mercy to the Victorian Attorney-General, seeking a pardon from the Governor. On 6 September 2001, Attorney-General Rob Hulls announced that the Governor had refused the petition. In a press release Mr Hulls noted that legal advice had been received from three senior counsel (including Susan Crennan QC, now a Justice of the High Court, who did not hear this appeal). Mrs Osland sought access under the Victorian Freedom of Information Act (FOI Act) to various pieces of advice related to her request for a pardon. The Department of Justice refused access to the documents, both initially and upon internal review. It said the documents were exempt from disclosure by reason of section 30 (relating to internal working documents) and section 32 (relating to legal professional privilege).

That decision was overturned by the President of the Victorian Civil and Administrative Tribunal, Justice Stuart Morris. He found that the documents fell within section 32, but that the “public interest override” provided by section 50(4) of the FOI Act nevertheless required access be given to
all the documents in dispute. The Secretary successfully appealed to the Court of Appeal. In that appeal, Mrs Osland maintained her action only in relation to the advice from the three senior counsel, known as Document 9. The Court of Appeal held that Justice Morris correctly decided that legal professional privilege had not been waived in respect of Document 9 but erred in dealing with the public interest override. He had inspected the documents but the Court of Appeal did not. Mrs Osland appealed to the High Court. She argued that Mr Hulls had waived the legal professional privilege of Document 9 because his press release disclosed the substance and gist of the advice and the conclusions reached in it. Mrs Osland argued that the Court of Appeal erred in concluding that there was no basis for applying the public interest override under section 50(4) without having inspected the documents for itself.
The Court, by a 5-1 majority, allowed the appeal. It held that legal professional privilege had not been waived in relation to Document 9 by Mr Hulls's press release, but that the Court of Appeal should have examined the documents in question before deciding that, in the circumstances of the
case, there was no basis for the application of section 50(4). It remitted the matter to the Court of Appeal for further hearing to enable it to inspect the documents to consider whether public interest overrode legal professional privilege.

Master Education Services Pty Limited v Ketchell [2008] HCA 38 (27 August 2008)

A breach of the Franchising Code of Conduct by a franchisor did not necessarily bring a franchise contract to an end as other remedies were available, the High Court of Australia has held.

Section 51AD, in Part IVB of the Trade Practices Act (TPA), provides that a corporation must not contravene an applicable industry code, such as the Franchising Code of Conduct. Clause 11(1) of the Code provides that a franchisor must not enter into a franchise agreement or receive non- refundable money under an agreement unless a prospective franchisee provided a written statement that they had received, read and had a reasonable opportunity to understand the disclosure document and the Code. Master Education Services (MES), as franchisor, gave Ms Ketchell a disclosure document and a copy of the Code before executing a franchise agreement with her on 11 February 2000, but it failed to obtain the statement required by clause 11(1).

In August 2003, MES brought proceedings in Campbelltown Local Court to recover $26,043.59 in
monthly fees due under the franchise agreement plus interest. Ms Ketchell claimed that MES failed to comply with clause 11 of the Code so that it was unlawful for MES to receive the money and cross-claimed for unconscionable conduct under section 51AC of the TPA. The Magistrate dismissed the claim of unconscionable conduct and found that Ms Ketchell had received legal advice and had obtained various amendments to the franchise agreement through her solicitor. She conducted the business on a trial basis for 12 months before signing the franchise agreement. The Magistrate found that clause 11(1) had not been complied with but that the contravention did not make the contract illegal although damages might be awarded for any loss and damage suffered. The NSW Supreme Court set that judgment aside and remitted it for full determination with respect to non-compliance with clause 11(1) of the Code. The Magistrate gave judgment for Ms Ketchell on the basis that the Court could not require payment since it would involve MES breaching clause 11(1) by receiving the money. MES appealed to the Supreme Court which held that non-compliance did not render the franchise agreement illegal. Ms Ketchell then successfully appealed to the Court of Appeal, which held that section 51AD, read with clause 11 of the Code, directly prohibited the contract and the recovery of money. MES appealed to the High Court.

The Court unanimously allowed the appeal. It held that while failure to comply with clause 11(1) was a contravention of section 51AD of the TPA, it did not result in the contract being void and unenforceable. The prohibition in section 51AD was directed to securing compliance by franchisors with industry codes and the consequence of contravention was the grant of remedies provided in Part VI of the TPA. These included compensation for loss and damage, varying the terms of an agreement entered into in breach of the Code, or termination of an agreement. The Court held that the TPA provided a more flexible approach than the common law. Under the common law the agreement may have been rendered void for contravention of section 51AD. Such
a result may have harsh consequences and not necessarily be what a franchisee wanted. The Court ordered Ms Ketchell to pay MES $26,043.59 plus interest dating back to 15 August 2003.

The Queen v Tang [2008] HCA 39 (28 August 2008)

The High Court of Australia upheld the slavery convictions of a Melbourne brothel owner and overturned the orders of the Victorian Court of Appeal for a new trial.

prostitute2899365jpgMs Tang was convicted in 2006 of five counts of intentionally possessing a slave and five counts of intentionally exercising a power of ownership over a slave, contrary to section 270.3(1)(a) of the Commonwealth Criminal Code. She was sentenced to 10 years’ imprisonment, with a non-parole period of six years. Ms Tang was the first person convicted under the anti-slavery laws, introduced in 1999. The charges related to five women, all Thai nationals.

Ms Tang owned a licensed brothel, Club 417, at 417 Brunswick Street, Fitzroy, in Melbourne. She held a 70 per cent interest in a syndicate which bought four of the women with the remaining 30 per cent held by a co-accused, DS, who negotiated with recruiters in Thailand, and her associates. The fifth woman was brought to Australia by other “owners”. She worked in another brothel, then was moved to Club 417. Customers at Club 417 were charged $110. Ms Tang retained $43 in her capacity as brothel owner plus 70 per cent of the remaining $67 for four of the women and DS and her associates received 30 per cent. In relation to the fifth woman, after Ms Tang took her $43 fee, the other $67 was divided between her owners. Each woman had a debt of $45,000. It reduced by $50 per customer. The women worked six days a week, serving up to 900 customers to pay off their debt. If they worked a seventh day, they could keep the $50 per customer, while Ms Tang got $43 and the remaining $17 was divided among syndicate members. The women were not usually under lock and key, but they had little money and limited English, their passports were retained, their visas had been obtained illegally, they feared detection by immigration authorities, and they worked long hours. The evidence was that they were well provided for. Two women paid off their debts in six months and restrictions on them were lifted, their passports were returned, they were paid and they could choose their hours of work.

The Court of Appeal of the Supreme Court of Victoria held that the directions given to the jury were inadequate, quashed each conviction, and ordered a new trial on all counts. It held that the jury should have been instructed that the prosecution had to prove that Ms Tang had the knowledge or belief that the powers being exercised were through ownership, as well as proving an intention to exercise those powers. The prosecution appealed to the High Court and Ms Tang sought special leave to cross-appeal on three grounds against the order for a new trial rather than an acquittal.

The High Court allowed the appeal by a 6-1 majority and overturned the order for a new trial. It held that the prosecution had made out the required elements of the offences and did not need to prove what Ms Tang knew or believed about her rights of ownership. The prosecution did not need to prove that she knew or believed that the women were slaves. The critical powers she exercised were the power to make each woman an object of purchase, the capacity to use the women in a substantially unrestricted manner for the duration of their contracts, the power to control and restrict their movements, and the power to use their services without commensurate compensation.

The Court unanimously granted Ms Tang special leave to cross-appeal on the first two grounds concerning the meaning and constitutional validity of section 270.3(1)(a) but dismissed the cross-appeal. It held that Parliament had the power to make laws with respect to external affairs, in this case by section 270 giving effect to Australia's obligations under the Slavery Convention. The Court refused special leave on the third ground, that the Court of Appeal failed to hold that the jury’s verdicts were unreasonable or could not be supported by the evidence. Because the Court of Appeal allowed the appeal against conviction, it did not deal with Ms Tang’s sentence, so the High Court remitted that question to the Court of Appeal for its consideration.

Imbree v McNeilly; McNeilly v Imbree [2008] HCA 40 (28 August 2008)

A 16-year-old without a driver’s licence or learner’s permit who had taken a turn at driving in central Australia had the same duty as any other driver to take reasonable care to avoid injury to others, including a passenger supervising him, the High Court of Australia has held.
The Court overturned its 1986 decision in Cook v Cook, in which the Court held that the standard
of care owed was what was reasonably expected of an unqualified and inexperienced driver.
Mr Imbree was left a tretraplegic when his four-wheel-drive crashed while Jesse McNeilly (spelled “Jessie” in the title of the appeal) was driving on Larapinta Drive, a gravel road between Kings Canyon and Hermannsburg in the Northern Territory in April 2002. Mr Imbree was accompanied by his friend Ben Watson, his sons Paul and Reece, and Paul’s friend Jesse. Paul and Jesse were both 16. Paul had a learner’s permit but Jesse did not. On the trip from New South Wales to the NT, Mr Imbree allowed Paul and Jesse to drive from time to time. After visiting Ayers Rock and Kings Canyon, the group headed towards Hermannsburg and Alice Springs on Larapinta Drive. At first the road was hilly and corrugated and Mr Imbree and Mr Watson drove. When the road became wider and smoother Mr Imbree allowed Paul then Jesse to drive. When they came across tyre debris, instead of straddling and driving over it, Jesse veered to the right. Mr Imbree yelled at him to brake but he did not. When the vehicle was on the far right-hand side of the road, Jesse turned sharply to the left and accelerated, causing the vehicle to overturn.

Mr Imbree brought proceedings in the NSW Supreme Court against Mr McNeilly as driver and Qantas as owner of the vehicle. He worked for Qantas and had a company vehicle. Justice Timothy Studdert gave judgment for Mr Imbree. He found that Mr McNeilly had behaved with carelessness beyond mere inexperience and rejected the argument that Mr Imbree had assumed the risk of injury, but found that he had been contributorily negligent. Mr Imbree’s damages, assessed at more than $9.5 million, were therefore reduced by 30 per cent. Mr McNeilly and Qantas appealed to the Court of Appeal, which held that the damages should be reduced by two-thirds for contributory negligence. The Court of Appeal treated Cook v Cook as establishing that actions resulting from inexperience, rather than carelessness, did not constitute a breach of the duty of care which a learner driver owed to a supervising licensed driver, but the majority found that Mr McNeilly had been careless by swerving off the road. Mr Imbree appealed to the High Court.
The Court unanimously allowed the appeal and restored the 30 per cent reduction to the damages award in place of the two-thirds reduction. By a 6-1 majority, the Court held that Cook v Cook should no longer be followed. It held that there should not be different standards of care, depending on whether a plaintiff was supervising the defendant’s driving or not, and such a distinction in Cook v Cook was unwarranted. If a supervising passenger failed to take reasonable care for their own safety, for example in failing to exercise reasonable supervision, principles of contributory negligence would apply, but the learner driver was still subject to the same objective standard of care as any other driver rather than a lesser standard which varied according to experience and perhaps a variety of other factors personal to the driver. The Court dismissed an application by Mr McNeilly and Qantas for special leave to appeal against the Court of Appeal’s finding that Mr McNeilly had driven carelessly.

Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41 (3 September 2008) 

The High Court of Australia upheld statutory demands for tax debts against three related property development companies, holding that pending challenges to their tax assessments were not a proper basis to set aside the demands.

The three corporations, controlled by Mark Howard, were involved in construction and sale of residential apartments. Howard Racing and Neutral Bay failed to pay $6,389,785.75 and $8,433,350.79 respectively for goods and services tax (GST), interest and penalties. On 24 April 2006 a Deputy Tax Commissioner issued them with statutory demands for the debts pursuant to section 459E of the Corporations Act. A similar demand was issued to Broadbeach Properties on 17 May 2006 for $1,679,920.24, its liability under a default assessment of income tax for 2003-04 plus interest for late payment. The tax liability of Howard Racing and Neutral Bay included GST for sales of apartments between the companies. Only new homes never before sold attracted GST. Ordinarily a supply within a group registered for GST did not attract GST. Neutral Bay and Neutral Bay Sales were registered as a group for GST purposes and Howard Racing and Broadbeach were registered as another. The representative companies within each group – Neutral Bay and Howard Racing – claimed sales to Neutral Bay Sales and Broadbeach were not taxable because they were within a group. Because the “first sales” had been sales within the group, they then said that subsequent sales of the same properties to the public did not attract GST. After the Commissioner disallowed objections by the three companies against their assessments and GST declarations, they began Administrative Appeals Tribunal review proceedings in accordance with Part IVC of the Taxation Administration Act. Those proceedings are still pending.

The companies also applied pursuant to section 459G of the Corporations Act to the Queensland Supreme Court for orders to set aside the statutory demands pursuant to sections 459H and 459J. Section 459H provided for the setting aside of a statutory demand where there is a “genuine dispute” about the existence or amount of a debt to which the demand related. Section 459J provided that a court may set aside a statutory demand if satisfied that substantial injustice would otherwise occur because the demand is defective or there is “some other reason” to set it aside. Justice Philip McMurdo ordered that the statutory demands be set aside. The Court of Appeal dismissed appeals by the Commissioner, holding that there was a genuine dispute in relation to all three debts. It held that, where the tax liability was challenged by the taxpayer in Part IVC proceedings, a court was not obliged to conclude that there was no genuine dispute as to the existence of the debt. The Commissioner then appealed to the High Court, arguing that Part IVC proceedings neither gave rise to a “genuine dispute” as to the existence or amount of a debt, nor were a proper basis for setting aside a statutory demand for “some other reason” under section 459J. The matters are test cases funded by the Commissioner in all three courts. The Commissioner conceded that a court might have regard to the existence of “reasonably arguable” Part IVC proceedings at a later stage of an application to wind up a company.

The High Court unanimously allowed the appeals. It held that the Court of Appeal failed to recognise distinctions between the existence of a debt which was due and payable and the issues and outcome of a Part IVC proceeding. The taxation legislation provided for the tax debts to be due and payable and for the Commissioner to proceed with their recovery notwithstanding the pending review proceedings under Part IVC. Use by the Commissioner of the statutory demand procedure to recover the tax debts was a permissible avenue of recovery. The legislation provided that, except in the Part IVC proceedings, production by the Commissioner of notices of assessment and GST declarations conclusively demonstrated that the amounts and particulars in the assessments and declarations were correct. The operation of tax laws creating the debts and providing for their recovery by the Commissioner could not be avoided by an application under section 459G to set aside a statutory demand issued by the Commissioner. The Court further held that the exercise of discretion by Justice McMurdo relating to “some other reason” under section 459J miscarried and the Court of Appeal erred in upholding and supplementing it, because the taxation legislation permitted the recovery of tax debts, notwithstanding the pending Part IVC proceedings.

Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42 (4 September 2008) 

The High Court of Australia ordered:

1.  Appeal allowed.

2.  Respondents to pay the appellant's costs of the appeal.

3.  Set aside order 1 of the orders made by the Court of Appeal of the Supreme Court of New South Wales on 22 June 2007 and, in its place, order that the application for leave to appeal to that Court be dismissed with costs.

4.  Application for special leave to cross-appeal dismissed with costs.

5.  Set aside orders 1, 2, 3 and 5 of the orders made by the Court of Appeal of the Supreme Court of New South Wales on 23 October 2007 and, in their place, order that the appellant be entitled to be reimbursed out of the Schedule A Property for the balance of its costs, charges and expenses incurred in conducting the proceedings in the Court of Appeal to the extent to which they are not paid by the respondents.

6. Order that the appellant be entitled to be reimbursed out of the Schedule A Property for the balance of its costs, charges and expenses incurred in conducting the proceedings in this Court to the extent to which they are not paid by the respondents.
Reasons for the decision will be published at a future date.

Gedeon v Commissioner of the New South Wales Crime Commission [2008] HCA 43 (4 September 2008)

Controlled operations that involved the selling of large quantities of cocaine to users was conduct likely to seriously endanger the health or safety of those people and should not have been authorised by the NSW Crime Commission, the High Court of Australia has held.
In early 2005, the Commissioner authorised six controlled operations using unlawfully imported cocaine in early 2005, pursuant to the NSW Law Enforcement (Controlled Operations) Act (LECO Act). Two authorities were used to support sales by an informer codenamed “Tom” to Mr Gedeon of 2kg and 750g of cocaine. Another was used for the sale of 1kg to Mr Dowe. None of this cocaine was recovered. The Commissioner and senior police had been briefed that recovery of the cocaine would be unlikely because it would be sold on to end users.
The LECO Act was the NSW response to the High Court’s decision in Ridgeway v The Queen in 1995 to quash John Anthony Ridgeway’s conviction for possession of heroin, which had been imported as part of an undercover police operation. The Act legitimised certain actions of undercover officers and permitted evidence obtained in authorised controlled operations to be classified as legal and prima facie admissible. Section 16 stated that activity engaged in as part of a controlled operation was not unlawful as long as it was authorised by the authority. Section 7(1)(b) stated that an authority to conduct a controlled operation must not be granted where a participant would be engaging in conduct likely to seriously endanger the health or safety of any other person.

In May 2005, Mr Gedeon and Mr Dowe were charged with taking part in the supply of a prohibited drug, contrary to the NSW Drug Misuse and Trafficking Act. The two men commenced proceedings in the NSW Supreme Court in April 2006, seeking declarations that the authorities were invalid. They failed in the Supreme Court and, by majority, in the Court of Appeal. In the meantime they were committed for trial. Mr Dowe was convicted in November 2007, after the Court of Appeal upheld the validity of the authorities, and sentenced to 12 years’ imprisonment. His appeal and Mr Gedeon’s trial are still pending. They sought special leave to appeal to the High Court from the Court of Appeal concerning the validity of the authorities. Two Justices referred their special leave applications to a Court of six Justices.

The Court unanimously granted them special leave to appeal and allowed their appeals with costs against the Commission. It made a declaration that the relevant authorities were invalid. The Court held that Mr Gedeon and Mr Dowe were entitled to succeed on grounds related to section 7(1)(b) of the LECO Act. It held that there was no statutory power to grant an authority where the proposed operation involved any participant in the operation of any activity listed in section 7(1). The Commission had estimated that the conduct of the controlled operations using Tom was that between 70,000 and 100,000 dosage units of cocaine would reach the streets. The Court held that a reasonable person in the position of the Commissioner would have foreseen that this would involve a risk of seriously endangering the health of at least some of the purchasers of the cocaine. It held that that prospect was sufficient to attract the prohibition in section 7(1)(b).

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