SPOTLIGHT Archive

AGS's assistance to the inquiry into equine influenza

Catherine Kelso, Andras Markus, Rebecca Reid, Sharon Hanstein and Simon Daley

During 2007 AGS was appointed to act as Solicitors Assisting the Commission of Inquiry into the August 2007 Outbreak of Equine Influenza.

AGS's team for the inquiry comprised Andras Markus (Team Leader), Sharon Hanstein, Catherine Kelso and Rebecca Reid. AGS Special Counsel Litigation, Simon Daley, was a consultant to the team.

1. the circumstances that contributed to the outbreak of equine influenza in Australia
2. the need for any strengthened biosecurity procedures for quarantine management of imported horses.

• helping to set up the commission
• managing and reviewing material produced under the commission's compulsory powers, which primarily consisted of material produced by the Department of Agriculture, Fisheries and Forestry (which was represented by another law firm)
• dealing with the parties and witnesses and their legal representatives
• preparing evidence for tender
• instructing counsel assisting in the hearings.

AGS experts to present seminars on indemnities

Linda Richardson

In May and June 2008, AGS experts will present seminars in several Australian capital cities on the use of indemnities in commercial transactions.

Port Phillip Bay Dredging Decision

Emily Nance

David Brown

Larson Landes

AGS successfully represented the Commonwealth in the recent Blue Wedges litigation in the Federal Court in Melbourne.

AGS welcomes Darryl Wookey, expert in freedom of information

Darryl Wookey

We are pleased to announce that our Canberra Information Access Team, led by Justin Hyland, has recently expanded to include Ms Darryl Wookey, who joins us as a senior executive lawyer.

AGS lawyer experiences pro bono work with ACT Pro Bono Clearing House

Karina Harvey

Karina Harvey, a litigation lawyer in AGS’s Canberra office, spent some of last year working part time at the ACT Pro Bono Clearing House. This work was supported by AGS, as an AGS-sponsored pro bono project under our national Pro Bono Policy.

• a public interest legal issue that affects a significant number of people or is of broad public concern; or
• a private interest law matter (i.e. a litigious matter with reasonable prospects of success or a non-litigious matter with reasonable prospects of achieving the outcome the applicant seeks).

The High Court and the Constitution

David Bennett QC, Deputy Government Solicitor, and Senior Executive Lawyer Andrew Buckland work in the Constitutional Litigation Unit and lead AGS's constitutional litigation practice.

AGS has an unmatched High Court practice and has acted in many landmark matters for the Australian Government. The following are some of the significant constitutional cases in the High Court in which we acted during 2006–07. Issues ranged from national security and acquisition of property to judicial power.

Attorney-General (Vic) v Andrews

The High Court held that provisions of the Safety, Rehabilitation and Compensation Act 1988 (Cth) under which a private corporation may be licensed as a self-insurer and thereby taken out of the Victorian WorkCover scheme were supported by the corporations power (section 51(xx) of the Constitution) and did not infringe the ‘State insurance’ proviso in the insurance power (section 51(xiv) of the Constitution).

Thomas v Mowbray

The High Court upheld the validity of Subdivision B of Division 104 of the Criminal Code (Cth), which deals with the making of interim control orders to protect the public from a terrorist act. The court held that the provisions were supported by the defence power (section 51(vi) of the Constitution), supplemented for some justices by the external affairs power (section 51(xxix)) where necessary, and did not infringe Chapter III of the Constitution.

Bennett v Commonwealth

The High Court upheld the validity of the Norfolk Island Amendment Act 2004 (Cth), which prescribes Australian citizenship as a qualification to vote or stand for election for the Norfolk Island Legislative Assembly, under the territories power (section 122 of the Constitution).

Attorney-General (Cth) v Alinta Ltd

The High Court allowed the Attorney-General’s appeal from a decision of the Full Court of the Federal Court and upheld the validity of section 657A(2)(b) of the Corporations Act 2001 (Cth). The High Court decided that s 657A(2)(b) was not invalid on the ground that it purported to confer the judicial power of the Commonwealth on the Takeovers Panel.

Bodruddaza v Minister for Immigration and Multicultural Affairs

The High Court held invalid section 486A of the Migration Act 1958 (Cth), which imposed a definite time limit on applications to the High Court for judicial review by way of the constitutional writs under section 75(v) of the Constitution.

Albarran v Members of the Companies Auditors and Liquidators Disciplinary Board

The High Court upheld the disciplinary powers of the Companies Auditors and Liquidators Disciplinary Board under section 1292 of the Corporations Act 2001 (Cth). The court held that the board was not exercising judicial power contrary to Chapter III of the Constitution.

Visnic v Australian Securities and Investments Commission

The High Court upheld the validity of section 206F of the Corporations Act 2001 (Cth), which confers power on ASIC to disqualify a person from managing a corporation. The court held that ASIC was not exercising judicial power contrary to Chapter III of the Constitution.

White v Director of Military Prosecutions

The High Court upheld the validity of sections 115 and 129 of the Defence Force Discipline Act 1982 (Cth). The sections conferred jurisdiction on courts martial and Defence Force magistrates respectively to try defence members charged with service offences, including those based on offences against the laws of the Australian Capital Territory. The court held that such trials did not involve the exercise of the judicial power of the Commonwealth within the meaning of Chapter III of the Constitution.

Santos Ltd v Chaffey

The High Court upheld the validity of retrospective amendments to statutory entitlements to workers compensation under the Work Health Act (NT) as not involving an acquisition of property requiring ‘just terms’.

Roach v Electoral Commissioner

The High Court held invalid amendments made in 2006 to the Commonwealth Electoral Act 1918 (Cth) that precluded prisoners who were serving any sentence of imprisonment from voting in a federal election. However, the High Court also held that the pre-2006 legislation, which prevented prisoners who were serving a sentence of imprisonment of three years or longer from voting, continued in force and was valid.

 

For further information please contact:

Andrew Buckland
Senior Executive Lawyer
Constitutional Litigation Unit
T 02 6253 7024 F 02 6253 7303
andrew.buckland@ags.gov.au

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‘A High Watermark in the Enforcement of Competition Law in Australia’¹

Susan Pryde

Martin Lockett

The Australian Competition and Consumer Commission (ACCC), assisted by AGS, secured a major victory in November 2007 when a record $36 million penalty was ordered against Visy Board Pty Ltd (Visy) and the Visy Group’s director and owner, Richard Pratt, for serious cartel conduct. Separate penalties, totalling $2 million, were ordered against Harry Debney, the Visy Group's former CEO, and Rod Carroll, Visy's former general manager.

These groundbreaking penalties followed eleventh-hour admissions by Visy that it had participated in a long-running price-fixing cartel with industry rival Amcor Ltd (Amcor). The cartel had operated over a four-year period in Australia's $2 billion corrugated fibreboard packaging (CFP) market, 90% of which was supplied by Visy or Amcor.

This settlement was successfully negotiated with Visy only weeks from the commencement of trial. Significantly, the resulting Agreed Statement of Facts and consent orders, which were emphatically adopted by Justice Heerey in his judgment of 2 November 2007, mirrored, for the most part, the ACCC's pleadings against Visy.²

This extraordinary outcome for the ACCC was preceded by several years of exhaustive investigation and case preparation by the ACCC, AGS and counsel.

Background

In late 2004, senior executives from Amcor approached the ACCC and admitted to having engaged in the cartel with Visy. As Amcor was 'first in the door' with this information, it was granted conditional immunity from penalty proceedings under the ACCC’s Immunity Policy.³

Amcor admitted that it had entered into an agreement with Visy to increase prices and retain respective market shares in the CFP market. In support of these allegations, Amcor provided the ACCC with a unique arsenal of evidence. This included taped covert recordings of discussions between senior Amcor executives, and Mr Debney of Visy, about the cartel. ACCC interviews with senior Amcor executives also provided compelling evidence of cartel conduct.

The ACCC soon instructed AGS to act in the matter. Almost a year later, after months of witness interviews and further investigation, the Statement of Claim was filed. Three Visy companies were initially named as Respondents (although, ultimately, orders were only sought against Visy), along with Mr Pratt, Mr Debney and Mr Carroll.

The cartel conduct

‘One of the most serious, blatant cartels that the ACCC has litigated’⁴

The five-year cartel in the CFP industry was underpinned by an 'overarching understanding' arrived at in early 2000, when Mr Debney met with Peter Brown, the then managing director of Amcor Australasia, at Mr Brown's home in the leafy Melbourne suburb of Glen Iris.

This understanding included an agreement to collude on tenders for major contracts, in order to ensure that Amcor and Visy each retained their major customers. If any major customer was 'stolen' by one company then that company would be required to provide 'compensation' to the other company by ensuring that an account, or accounts, of similar value changed hands in the opposite direction.

Many of Australia's major companies, and in turn their customers, were affected by the understanding. This included Cadbury Schweppes, Nestlé, Goodman Fielder, George Weston Foods, and Foster's. As Justice Heerey stated:

Every day every man, woman and child in Australia would use or consume something that at some stage has been transported in a cardboard box. The cartel in this case therefore had the potential for the widest possible effect.⁵

The cartel also included agreements by Visy and Amcor to collude in imposing annual price increases on CFP products purchased by (typically smaller) non-contract customers, such as fruit and vegetable growers, between 2000 and 2003.

These various understandings came about in particularly surreptitious ways, with Amcor and Visy executives meeting in motel rooms, pubs, public parks and the Crown casino to discuss the cartel. Discussions would also be held using prepaid mobile phones and public telephones, sometimes with the use of a code name.

The Visy defence

Aside from denying that much of the conduct alleged by the ACCC ever occurred, Visy also maintained that its communications with Amcor executives were for the purpose of ’camouflage’ and to gain market intelligence. In effect, Visy sought to argue that, if it had sought to engage Amcor in cartel conduct, it had only done so with a view to taking market share from Amcor.

Justice Heerey gave short shrift to this line of argument, referring to it in his judgment as Visy’s ‘John le Carre defence’, an obvious allusion to Visy’s claims of double-crossing and dirty deals.

Privilege fight

A significant challenge in the case came in early 2007, when Visy filed a motion contesting the ACCC’s claim to legal professional privilege in hundreds of documents created prior to the institution of proceedings in December 2005.

Visy’s case, in summary, was that litigation could not have been reasonably anticipated by the ACCC from 15 December 2004 (as claimed by the ACCC), but, rather, that litigation was only reasonably anticipated when the ACCC commissioners formally decided to institute proceedings in December 2005.

At first instance, Justice Heerey found for the ACCC on the following bases:

• Although only ACCC commissioners have the power to institute proceedings, anticipation of litigation must logically precede institution of proceedings. Accordingly, it does not follow that only ACCC commissioners may anticipate legal proceedings.
• The state of mind of senior, responsible supervisors on the case could be imputed as the state of mind of the ACCC for the purposes of anticipating litigation. That is, where litigation is reasonably anticipated by the person or persons within the ACCC who have been given primary responsibility for the running of the matter (including the creation of documents containing privileged communications), that will suffice to demonstrate that proceedings were reasonably anticipated for the purposes of maintaining a claim to legal professional privilege.

This decision was upheld on appeal to the Full Court of the Federal Court. Although leave to bring the appeal was not granted, Justices Moore, Weinberg and Lander provided detailed reasons which were substantially supportive of Justice Heerey’s decision.

Case preparation

With the ACCC’s claim for privilege upheld, the very substantial task of case preparation continued, including:

• interviewing scores of witnesses in every state of Australia
• preparing and filing 1,000 pages of detailed witness outlines in respect of 111 witnesses
• comprehensively reviewing the ACCC’s files for discovery purposes
• reviewing the nearly 130,000 documents produced for inspection by the respondents
• managing a one-million-page database of material
• dealing with complex confidentiality claims and stringent undertakings to the court
• briefing expert witnesses on four continents
• briefing a total of 22 barristers, including a team of 14 retained for the purposes of reviewing in detail the voluminous documentary and witness evidence in respect of every aspect of the pleadings.

Settlement negotiations and judgment

With a six-month trial set to begin in October 2007, and the possibility of viva voce evidence being led from over 120 witnesses, the parties entered into several weeks of delicate (and often frantic) settlement negotiations.

Following resolution of the Agreed Statement of Facts and consent orders, and the hearing of the parties on penalties, Justice Heerey ordered:

• a penalty of $36 million against Visy—the single largest penalty to date for a contravention of the Trade Practices Act 1974
• an additional $2 million in penalties, in total, against Mr Debney and Mr Carroll for their part in the conduct, bringing the total to a record $38 million—more than twice the amount ever imposed by the Federal Court in a single proceeding brought by the ACCC
• approximately 50 pages of declarations and injunctions against Visy, Mr Pratt, Mr Debney and Mr Carroll
• an order that Visy pay the ACCC’s costs (which are likely to exceed $5 million) and undertake a trade practices compliance program.

In his judgment, Justice Heerey noted that this cartel was run deliberately at the highest level in Visy, and that senior executives did not hesitate before engaging in this unlawful conduct. His Honour also noted that this conduct occurred despite the existence of a trade practices compliance manual, which ‘might as well have been written in Sanskrit’⁶ for all the notice that was taken of it.

Justice Heerey was sceptical as to the remorse of Mr Pratt, who admitted his knowledge of the cartel in the Agreed Statement of Facts yet attempted to revive Visy’s defence publicly by stating that the Visy did not appreciate the complexities of the Trade Practices Act and was in fact seeking to take advantage of Amcor. His Honour found that there was no doubt that Mr Pratt knew that the cartel, to which he gave his approval, was seriously unlawful.

As stated by Chairman Graeme Samuel at the press conference following the handing down of Justice Heerey’s judgment:

Visy knew what the Trade Practices Act was about.

The law against price fixing is not 'complex'. It is simple – don't do it.⁷

AGS lawyers, including Susan Pryde, Martin Lockett, David Ablett, Alice Crowe, Jessica Cleaver, Annamie Hale, Stefany Goldring, Emma O’Neill, James Forsaith and Roland Dillon provided advice and assisted in gathering evidence, document management, discovery, and all aspects of case management and trial preparation over the course of nearly three years.

The ACCC’s counsel included Peter Jopling QC, Chris Caleo SC, Simon Marks SC, Peter Gray, Jonathon Moore and Peter Wallis.

AGS’s Litigation Technology Solutions team, led by Matthew Eaton and Julian Lambert, provided seamless document management and information sharing solutions for a million-page database accessible from various locations in Australia.

 

For further information please contact:

Susan Pryde
Senior Executive Lawyer
T 03 9242 1426 F 03 9242 1496
susan.pryde@ags.gov.au

Martin Lockett
Senior Executive Lawyer
T 03 9242 1214 F 03 9242 1496
martin.lockett@ags.gov.au

 

Notes

1. Australian Competition and Consumer Commission Chairman, Mr Graeme Samuel, ‘Visy News Conference—Opening Statement’, 2 November 2007.
2. Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No. 3) [2007] FCA 1617 (2 November 2007).
3. At that time known as the ACCC Leniency Policy.
4. Australian Competition and Consumer Commission, 'ACCC welcomes record penalties against Visy: Calls for stronger cartel law', news release, 2 November 2007.
5. At [312].
6. At [320].
7. Australian Competition and Consumer Commission Chairman, Mr Graeme Samuel, ‘Visy News Conference—Opening Statement’, 2 November 2007.

Important: The material in Spotlight is provided as an early, interim view for general information only, and further analysis on the matter may be prepared by AGS. The material should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material.

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Our Client Counsel practice

Simon Blake, Practice Manager, Client Counsel group

Our clients appreciate close contact with our lawyers, and at times feel a need to integrate them into their own office context. In response, we have arrangements in place for AGS outposted lawyers to work from a number of our clients’ premises.

Meeting differing client needs

These outposting arrangements vary widely. Clients sometimes require a single lawyer to work with them, or they may need an entire AGS team.

In other cases, clients seek a ‘trusted adviser’ to support them in-house for varying lengths of time, to provide advice on high-level projects, often those relating to new government initiatives that fall within their portfolios. In such instances, some of our most senior lawyers may be outposted, either singly or as a small expert team, to work on a discrete project or in a general counsel capacity.

Benefits for our clients

AGS has a long and successful history of providing lawyers to work with our clients in-house to manage their legal needs. With the depth of expertise in government law that these lawyers bring to the role, they rapidly gain an intimate understanding of the client’s particular organisational needs, culture, legislation and regulatory regimes while retaining the ability to provide objective legal advice.

All of our outposted lawyers also have direct access to the full range of legal knowledge, resources and IT support of AGS. This means they can contact some of Australia’s most experienced government lawyers at any time, providing further peace of mind for our clients.

What our clients say

‘We have had various AGS lawyers outposted to our organisation for the past three years. The outposted AGS lawyers have, without fail, understood the context in which we are working and provided extremely useful advice to assist us in achieving our outcomes.

Having AGS lawyers located with us meant that they were devoted to our work, always accessible and across the problems we were confronting on a day to day basis. Indeed, at times we have relied heavily on the outposted AGS lawyers to be key drivers in achieving outcomes.

We are also particularly impressed with the fact that the outposted AGS lawyers work as a team with their colleagues in central office to provide a comprehensive and highly reliable service. They have enabled us to do our business more easily.’

Drew Clarke, Head of Division, Energy and Environment Division, Department of Industry, Tourism and Resources

‘We have had AGS lawyers outposted to our Group for over two years. This has been invaluable in the process of developing, drafting, defending and interpreting the Work Choices legislation and, more recently, the Independent Contractors legislation.

Having AGS lawyers dedicated to our work and located with us means that they are always accessible, understand our day to day working environment, and the context of the policy issues and problems we are confronting. But they also have access to other lawyers in AGS whenever the need arises. Outposted AGS lawyers are able to quickly accommodate changing priorities and it is especially useful to have them on hand to help us frame responses to urgent matters.’

Natalie James, Chief Counsel, Workplace Relations Legal Group, Department of Employment and Workplace Relations

 

For further information about AGS’s Client Counsel practice, please see pages 27–29 of our 2006–2007 Annual Report.

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Water resources

Robert Orr PSM QC

Dr Genevieve Ebbeck

Robyn Briese

Water was a key legal and political issue at the time of Federation, and has re-emerged in recent years as a major policy issue for the Commonwealth.

AGS has been advising the Australian Government as it has developed its policies, institutional framework and legislation over the past few years aimed at achieving sustainable management of Australia’s water resources.

The Commonwealth Water Bill

Following a national water summit in February 2007, the Commonwealth, in consultation with states and territories, prepared a draft comprehensive Water Bill, which provided in particular for new, unified arrangements for the sustainable management of water resources in the Murray-Darling Basin, based on a referral of powers by the Basin states, and for national management of water information.

However, with only three of the four Basin states agreeing to the referral of powers, the Prime Minister announced on 24 July 2007 that the Australian Government would proceed with a Water Bill based on the Commonwealth’s existing constitutional powers. This Water Bill was introduced into the Australian Parliament on 8 August 2007.

AGS has provided advice and assistance to the Department of the Environment and Water Resources in relation to the Water Bill. In particular, AGS lawyers Robyn Briese and Genevieve Ebbeck worked in the department on this project, under the supervision of Robert Orr QC, providing assistance with understanding the relevant legal environment, including existing Australian water law and international and constitutional law principles, and with the development of the new legislative and intergovernmental regime.

 

For further information please contact:

Robert Orr PSM QC
Deputy General Counsel
T: 02 6253 7129 F: 02 6253 7304
robert.orr@ags.gov.au

Dr Genevieve Ebbeck
Senior General Counsel
T: 02 6274 1451 F: 02 6253 7304
genevieve.ebbeck@ags.gov.au

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AGS team helps with energy efficiency goals

Josephine Ziino, Senior Executive Lawyer and Team Leader of AGS’s Property and Leasing group, was responsible for the AGS input to this innovative project.

For the last three years an AGS team has been assisting the Australian Greenhouse Office to develop innovative Green Lease Schedules for inclusion in Commonwealth building leases.

These schedules, which are additional to the standard government building lease contract clauses, are aimed at increasing energy efficiency by creating mutual obligations for tenants and building owners.

Josephine Ziino, leader of the AGS team, played a prime role in creating this unique, cutting-edge suite of documents comprising the lease schedules, comprehensive guidance notes and a supporting handbook.

These Green Lease Schedules are an important component of the Australian Government’s Minimum Energy Performance Standards, which form part of the 2006 Energy Efficiency In Government Operations Policy. They emphasise mutual contractual lease obligations to achieve energy efficiency targets in Commonwealth-leased buildings, and focus on remedial action rather than litigation to achieve outcomes. They provide greater consistency across government, with flexibility to include other sustainability outcomes such as water conservation and waste reduction.

Australian Government agencies occupy almost 2.6 million square metres of office accommodation around Australia, and government leadership in this area is expected to encourage market acceptance of this approach. Increased energy efficiency in buildings will reduce Australia’s total energy consumption and greenhouse gas emissions. Energy management will also lead to significant savings and improvements in the cost-effectiveness of government operations.

Australia is gaining recognition as a world leader in this area, with this energy policy and associated lease documents generating significant overseas interest.

 

For further information please contact:

Josephine Ziino
Senior Executive Lawyer
T 03 9242 1312 F 03 9242 1481
josephine.ziino@ags.gov.au

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AGS expert on ATO panel

Gordon Brysland

AGS is proud to announce that Gordon Brysland was recently appointed as an external member of the ATO Public Rulings Panel.

It is expected that Gordon will provide technical input on GST issues within the rulings program, particularly as they affect government.

Based in Canberra, Gordon joined AGS in 2003 as a Senior General Counsel after many years in private practice specialising in indirect taxes. He is now an eminent adviser to government agencies on GST questions, and has a strong reputation for fast turnaround on complex matters.

Gordon has published extensively in tax-related matters over a long period. He produces a comprehensive article each year for the Australian GST Journal dealing with all the GST cases over the preceding 12 months (obligatory reading for all GST practitioners). His latest one is called 'Brown to Tenvoc and beyond – the next 30 odd GST cases! – Part 2' (2006) 6 AGSTJ 69.

Gordon is a regular speaker at high-level GST conferences. He also founded and convenes a GST discussion group, active in Canberra since 2001, called the Reverse Charge Club.

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Damages claim for negligent advice given 34 years previously not statute-barred

Sarah Wright

Kim Bennett

The High Court, by a majority of 6:1, held that a damages claim for negligent advice on eligibility to join a Commonwealth defined benefit superannuation scheme, given some 34 years previously, was, in the circumstances, brought within time.

Background

The respondent, John Cornwell, commenced employment as a temporary employee in the Commonwealth’s Department of the Interior in 1962, as a spray painter at the Canberra bus depot. Mr Cornwell claimed that in July 1965 his (deceased) manager negligently advised him that he was not eligible to join the Commonwealth Superannuation Fund established under the Superannuation Act 1922 (the Fund).

The ACT courts below ruled in Mr Cornwell’s favour, holding that the negligent advice caused him to refrain from commencing contributions to the Fund in 1965 or 1966.

Mr Cornwell only became a member of the Commonwealth Superannuation Scheme (the CSS) established under the Superannuation Act 1976 (Cth) in 1987, when his employment was reclassified as permanent. He retired from Commonwealth employment on 31 December 1994.

Mr Cornwell commenced proceedings against the Commonwealth on 16 November 1999, some 34 years after the negligent advice.

The Commonwealth pleaded that Mr Cornwell’s claim was barred by section 11 of the Limitations Act 1985 (ACT), as the action was commenced more than six years after the date on which the cause of action first accrued. The ACT courts rejected this defence.

The Commonwealth was granted special leave to appeal to the High Court on the question of the point at which loss was first sustained, such that time began to run for the purposes of the Limitation Act defence.

Summary of decision

An appeal by the Commonwealth to the High Court was dismissed by a 6:1 majority.

The majority agreed with the courts below that Mr Cornwell suffered no actual loss until his retirement. He had no entitlement to benefits under the Superannuation Act 1976 until he had satisfied any applicable statutory criteria for the payment of benefits in the CSS, such as ceasing to be an employee on or after attaining the specified ages of 55, 60 or 65 years. Entitlements under the Commonwealth’s defined benefit schemes are prospective only until the occurrence of a contingency. It is only then that an actual loss is sustained.

The majority rejected the proposition that Mr Cornwell had suffered either an actual loss prior to retirement, or the loss of a chance. Consequently, Mr Cornwell had six years from the date of his retirement to commence proceedings, and he had commenced proceedings within time.

The majority considered speculative the question of whether in 1976 Mr Cornwell would have been better or worse off had he invested the money he would otherwise have paid in contributions to the superannuation schemes. Their Honours considered that it would not have been possible to calculate Mr Cornwell’s loss at any time prior to retirement (or the happening of some other trigger for the payment of benefits).

Mr Cornwell’s damages remain to be assessed.

Dissenting judgment

In a strong dissent, Callinan J was of the view that Mr Cornwell had as at 1977, at the latest, suffered both an actual loss and the loss of a chance, stating that the Commonwealth had proved its case ‘beyond contradiction’. His Honour noted that it has never been the law that damage occurs only when the loss is ascertained or ascertainable. Courts regularly estimate damages on the basis of likelihood or probability. It was not only upon retirement, or the happening of the other relevant triggers (or contingencies) that Mr Cornwell became entitled to an ascertainable interest in the scheme. It was always open to Mr Cornwell from at least 1977 to prove the likelihood or otherwise of each of the relevant statutory contingencies, and the statute of limitations (the predecessor of section 11 of the Limitations Act 1985) ran from then, expiring well before the commencement of the current claim.

Implications

The precedent value of the High Court decision is that similar claims involving negligent advice by management about entitlements under the Commonwealth’s defined benefit superannuation schemes may be instituted within six years of the date of retirement (or other relevant statutory trigger), regardless of when the alleged advice was given. There remains, however, no positive general duty on the Commonwealth to advise employees of superannuation entitlements (as opposed to an obligation not to misadvise), and each individual claimant must prove all the elements of the cause of action in his or her particular circumstances.

The Department of Finance and Administration is currently considering how to process other claims and will provide further information to potential claimants in due course.

Text of the decision is available at:
http://www.austlii.edu.au/au/cases/cth/high_ct/2007/16.html

AGS lawyers acted for the Commonwealth in all stages of the litigation. The Commonwealth’s counsel included Kim Bennett, Special Counsel Litigation.

For further information please contact:

Sarah Wright
Senior Lawyer
T 02 6253 7285 F 02 6253 7381
sarah.wright@ags.gov.au

Kim Bennett
Special Counsel Litigation
T 02 6253 7404 F 02 6253 7381
kim.bennett@ags.gov.au

Important: The material in this note is provided to clients as an early, interim view for general information only, and further analysis on the matter may be prepared by AGS. The material should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material.

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Appointment of two Commonwealth Queen’s Counsel

David Bennett QC

Tom Howe QC

Attorney-General Philip Ruddock has announced the appointment of AGS Deputy Government Solicitor David Bennett and Chief Counsel Litigation Tom Howe as Commonwealth Queen’s Counsel.

In announcing the appointments, Mr Ruddock drew attention to ‘their outstanding abilities and expertise in their respective fields of Commonwealth law’. CEO of the Australian Government Solicitor, Rayne de Gruchy, has congratulated David and Tom on behalf of all of their AGS colleagues. ‘It is wonderful to see this significant recognition of their professionalism and expertise,’ she said.

David Bennett QC

David Bennett has been involved in Commonwealth advising work for 26 years, and has led AGS’s Constitutional Litigation practice for the last 15 years. Since 1992 he has been directly involved in over 300 constitutional cases for the Commonwealth, including nearly all major constitutional cases in the High Court of Australia in that period and a number of significant cases in other superior courts around Australia. Among these were New South Wales v Commonwealth (Work Choices), Western Australia v Commonwealth (Native Title Act case) and Lange v Australian Broadcasting Corporation (implied freedom of political communication). As a result he has made a significant and enduring contribution to the development of Australian constitutional law, helping to ensure that the Commonwealth’s submissions present a coherent and principled view of the Constitution. He provides expert counsel to people across government who need access to constitutional law expertise, as well as to AGS lawyers.

Tom Howe QC

For the last 20 years at AGS, Tom Howe has concentrated on litigation and advocacy work. He was appointed AGS’s Chief Counsel Litigation in 2002. He has appeared as counsel for the Commonwealth in many key cases before the High Court and other Australian courts and tribunals including the Federal Court, the Supreme Courts of the states and territories, and the Administrative Appeals Tribunal. He has also advised and appeared for the Commonwealth in various inquiries and commissions. Tom has made an extraordinary contribution to the delivery of a principled and cohesive litigation service to the Commonwealth. He assists relevant departments and agencies in consultations on the broader implications for them, and the Commonwealth as a whole, of available options and arguments.

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North Head legal title transfer to the Commonwealth

Mark Sheridan – legal adviser

In January 2007 the Commonwealth and subsequently the Sydney Harbour Federation Trust secured legal title to the 72-hectare former School of Artillery site at North Head from the State of New South Wales. The site on the headland at the entrance to Sydney Harbour is a significant landmark with a unique ecology and a rich cultural and military past.

Mark Sheridan, a senior lawyer with the AGS Sydney office, advised the Sydney Harbour Federation Trust on the arrangements leading up to the transfer and was instrumental in negotiating and documenting the terms of the transfer and a tripartite agreement between the Sydney Harbour Federation Trust, the Commonwealth and the State of New South Wales for the future management of North Head.

The former School of Artillery at North Head

The successful completion of this matter required a high degree of cooperation between the NSW Government, the Commonwealth and the Sydney Harbour Federation Trust. It required the identification of each party’s concerns and the development and documentation of contractual arrangements that addressed these concerns.

Click on the link to read the ministerial media statement entitled 'Wildlife sanctuary planned for Sydney's North Head'.

Cliffs at North Head	The handover: (left to right) NSW Environment Minister, Bob Debus, Minister for Health and Ageing and Member for Warringah,Tony Abbott, and Chairman of the Sydney Harbour Federation Trust, Kevin McCann.

Photos by permission of the Sydney Harbour Federation Trust

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The Work Choices decision

Andrew Buckland

David Bennett

The High Court, by a 5:2 majority (Kirby J and Callinan J dissenting), has upheld the constitutional validity of the recent amendments to the Workplace Relations Act 1996 (WRA) made by the Workplace Relations Amendment (Work Choices) Act 2005 (Work Choices Act).

State of New South Wales v Commonwealth of Australia (Work Choices Case)

High Court of Australia, 14 November 2006
[2006] HCA 52

In upholding the constitutional validity of the Work Choices Act the Court has confirmed that the Commonwealth’s power with respect to trading, financial and foreign corporations extends to:

• the regulation of the activities, functions, relationships and the business of a corporation
• the creation of rights, and privileges belonging to a corporation
• the imposition of obligations on a corporation.

In respect of these matters, the corporations power also extends to:

• the regulation of the conduct of those through whom a corporation acts, its employees and shareholders
• the regulation of those whose conduct is or is capable of affecting its activities, functions, relationships or business.

Background

Historically, Commonwealth laws regulating aspects of industrial relations have relied on s 51(xxxv) of the Constitution, which confers power on the Commonwealth Parliament to enact legislation with respect to ‘conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State’. In more recent years, however, the Commonwealth has relied on other heads of power, including s 51(xx), for some aspects of its industrial relations legislation. Section 51(xx) confers power on the Commonwealth Parliament to enact legislation with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’ (constitutional corporations).

Then in December 2005 the Commonwealth Parliament enacted the Work Choices Act, which created a substantially new federal industrial relations regime primarily in reliance on the corporations power.¹ Most significantly, the WRA (as amended by the Work Choices Act) now directly regulates the industrial rights and obligations of constitutional corporations and their employees.

The States of New South Wales, Victoria, Queensland, South Australia and Western Australia and two trade union organisations challenged the constitutional validity of the WRA as amended by the Work Choices Act. The Attorneys-General of Tasmania, the Northern Territory and the Australian Capital Territory intervened in support of the plaintiffs’ challenge to the constitutional validity of the law. The case was argued over six days by a record 39 counsel.

According to the Explanatory Memorandum for the Work Choices Act, use of the corporations power (together with the other powers relied on) for the new regime ‘would mean that up to 85 per cent of Australian employees would be covered by the federal system’. The principal issue before the High Court was the validity of the extensive use of the corporations power to support the new federal regime.

The majority decision

Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ delivered a joint judgment upholding the validity of the legislation.

Scope of corporations power

After discussing previous High Court authority on the corporations power, developments in company and corporations law in the 19th century, the Convention Debates,² drafting history and various failed referendums³ to amend both s 51(xx) and s 51(xxxv), the majority endorsed the statement by Gaudron J in Re Pacific Coal Pty Ltd⁴ that the corporations power extends to:

the regulation of the activities, functions, relationships and the business of a corporation described in that sub-section, the creation of rights, and privileges belonging to such a corporation, the imposition of obligations on it and, in respect of those matters, to the regulation of the conduct of those through whom it acts, its employees and shareholders and, also, the regulation of those whose conduct is or is capable of affecting its activities, functions, relationships or business.

It follows that the power ‘extends to laws prescribing the industrial rights and obligations of corporations and their employees and the means by which they are to conduct their industrial relations’: [178].

The plaintiffs had relied on three main lines of reasoning to argue that the corporations power should not be construed as supporting the WRA: [57].

• First, the corporations power was said to extend only to regulating the dealings of corporations with persons external to the corporation and not its internal relationships. The relationship between a corporation and its employees was said to be part of its internal relationships.
• Secondly, it was argued that the corporations power did not support a law merely because it conferred rights or imposed obligations on a corporation. Rather, ‘the fact that the corporation is a foreign, trading, or financial corporation should be significant in the way in which the law relates to it’: [140].
• Thirdly, it was argued that the corporations power had to be read down because of the presence of s 51(xxxv). The consequence was said to be that the Commonwealth Parliament could enact laws dealing with the industrial relations between a corporation and its employees only under s 51(xxxv) and not under the corporations power.

The joint judgment rejected each of these asserted limitations on the corporations power. Their Honours observed that underlying each of them ‘was a theme, much discussed in the authorities on the corporations power, that there is a need to confine its operation because of its potential effect upon the (concurrent) legislative authority of the States’: [54], [183]–[196]. They regarded this appeal to the ‘federal balance’ as carrying ‘a misleading implication of static equilibrium’.

The approach of the joint judgment was to determine the content of the power to legislate ‘with respect to’ constitutional corporations by applying settled principles of constitutional interpretation, beginning with the decision in the Engineers’ case.⁵ The Engineers’ case discarded ‘an approach to constitutional construction that started in a view of the place to be accorded to the States formed independently of the text of the Constitution’ although it ‘did not establish that no implications are to be drawn from the Constitution’: [194]. One of those implications is that the Constitution requires the continued existence of the States ‘as separate bodies politic each having legislative, executive and judicial functions’: [194]. However, the implication ‘does not identify the content of any of those functions’.

Their Honours emphasised at several points the need to construe the constitutional text and said:

The general principles to be applied in determining whether a law is with respect to a head of legislative power are well settled. It is necessary, always, to construe the constitutional text and to do that "with all the generality which the words used admit". The character of the law must then be determined by reference to the rights, powers, liabilities, duties and privileges which it creates. The practical as well as the legal operation of the law must be examined. If a law fairly answers the description of being a law with respect to two subject-matters, one a subject-matter within s 51 and the other not, it is valid notwithstanding there is no independent connection between the two subject-matters. Finally, as remarked in Grain Pool of Western Australia v The Commonwealth, "if a sufficient connection with the head of power does exist, the justice and wisdom of the law, and the degree to which the means it adopts are necessary or desirable, are matters of legislative choice". [142] (footnotes omitted)

It is apparent that their Honours did not regard the ‘fundamental and far-reaching legal, social, and economic changes in the place now occupied by the corporation, compared with the place it occupied when the Constitution was drafted and adopted’ as providing any basis for applying different principles in construing the text of s 51(xx): [67], see also [121]. The consequent extension in the range of activities that Commonwealth laws could now reach was a practical result of those changes but this fell well short of establishing that ‘the States could no longer operate as separate governments exercising independent functions’. The majority concluded that ‘the proposition, that a particular construction of s 51(xx) would or would not impermissibly alter the federal balance, must have content, and the plaintiffs made no attempt to define that content’: [196].

In rejecting the three particular ways in which the plaintiffs sought to restrict the scope of the legislative power in s 51(xx), the majority also reached the following conclusions.

First, the suggested division between external and internal relationships found no support in the text of s 51(xx) ([94]–[95]), was ‘a distinction of doubtful stability’ and, even if were to be adopted, ‘there seems every reason to treat relationships with employees as a matter external to the corporation’: [66], see also [89]–[90].

Secondly, the majority held that s 51(xx) is not, as some members of the Court had previously suggested, limited to the trading activities of trading corporations and the financial activities of financial corporations. That is not what s 51(xx) says: [169]. To the extent that the WRA prescribes norms regulating the relationship between constitutional corporations and their employees, or is directed to protecting constitutional corporations from conduct intended and likely to cause loss or damage to them, it can be characterised as a law with respect to corporations without needing to satisfy any additional requirement that the nature of a corporation (as a trading, financial or foreign corporation) is significant as an element in the nature or character of the law: [198].

Thirdly, there was no basis in the text and structure of the Constitution, or in the historical context in which s 51(xxxv) was included in the Constitution, for reading down s 51(xx) by reference to s 51(xxxv). The majority referred to the general principle that ‘a law with respect to a subject-matter within Commonwealth power does not cease to be valid because it affects a subject outside power or can be characterized as a law with respect to a subject matter outside power’: [219], see also [204]. Although s 51(xxxv) confers power in relation to particular means (conciliation and arbitration) for the prevention and settlement of a particular class of industrial disputes (interstate disputes), its text expresses the scope of the power as a compound conception rather than containing a positive prohibition or restriction upon what would otherwise be within its scope. There was, then, no reason to read s 51(xx) as subject to any such prohibition or restriction: [203], [219]–[222].

WRA validly regulates industrial rights and obligations

As a result, the majority upheld the validity under the corporations power of the provisions of the WRA that regulate the industrial rights and obligations of constitutional corporations and their employees. These include provisions dealing with:

• minimum terms and conditions of employment covering matters such as rates of pay, maximum hours of work, and leave entitlements, which together constitute the ‘Australian Fair Pay and Conditions Standard’ in Part 7 of the WRA ([246]), and other provisions relating to minimum entitlements of employees: [251]
• the making of workplace agreements, in Part 8 of the WRA ([252]), including provisions:
• prohibiting certain content from being included in the agreements and proscribing conduct in relation to prohibited content: [275], [416]
• regulating industrial action to do with the making of collective Workplace Agreements in Part 9: [258]–[261]
• the minimum entitlements of employees in relation to termination of employment set out in ss 637 and 643 of the WRA ([278]), and the interim exclusion of certain corporations (small businesses) from State laws regarding redundancy pay effected by Part VIAAA : [270].⁶

The majority also upheld these provisions as supported by the Territories power (s 122) in so far as they apply to employers incorporated in a Territory, or employers that carry on an activity in a Territory so far as the employer employs, or usually employs, an individual in connection with the activity carried on in the Territory: [335]–[343].

Registration and accountability of organisations

Schedule 1 sets up a system of registration, incorporation and regulation of industrial organisations (i.e. unions and employer organisations). Registered organisations have a range of rights and privileges under the WRA, including to intervene in matters before the Australian Industrial Relations Commission (AIRC), to be parties to collective agreements and to seek certain relief under the Act. In return for such rights and privileges, however, registered organisations are required to comply with various standards set out in Schedule 1.

The majority upheld the validity of Schedule 1, stating that:

If it be accepted, as it should be for the argument on this branch of the plaintiffs' case, that it is within the corporations power for the Parliament to regulate employer–employee relationships and to set up a framework for this to be achieved, then it also is within power to authorise registered bodies to perform certain functions within that scheme of regulation. It also is within power to require, as a condition of registration, that these organisations meet requirements of efficient and democratic conduct of their affairs. [322]

Excluding State and Territory laws (s 16 of the Act)

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