The 2023 term opened on 7 February, with corporate insolvency the hot topic in judgments delivered on Wednesday 8th.  Metal Manufactures Ltd v Morton [2023] HCA 1; (2023) 97 ALJR 69, concerned a creditor’s attempt to claim a set-off against a liquidator’s claim to recover preferential payments.  The appellant received two payments totalling $190,000 from a company called MJ Woodman Electrical Contractors Pty Ltd, which was placed in liquidation.  Woodman’s liquidator sought to recover the payments as preferences, having been made during the relevant relation-back period.  The appellant, which was separately owed $194,000 by Woodman, claimed to set that amount off against the moneys sought by the liquidator, relying on the “mutual dealings” provision in the Corporations Act, s 553C.

The High Court unanimously said “no”.  Kiefel CJ, Gordon, Edelman and Steward JJ, with whom Gageler J agreed, held that for s 553C to operate, the equitable or beneficial interests of the parties in the credits, debts or claims must be between the same persons; the benefit or burden of them must lie in the same interests and they must ultimately sound in money.  The critical time for considering mutuality of dealings was the commencement of winding up.  At that time Woodman owed money to the appellant, but the appellant owed nothing to Woodman.  The liquidator’s claim against the appellant arose by virtue of the Corporations Act, s 588FF, and critically lay with the liquidator, not Woodman; nor was the liquidator an agent of Woodman.  New claims acquired by a liquidator on the company’s behalf could not vary antecedent rights such as to be available for set-off.

Metal Manufactures has thus sounded the death knell for set-off as a defence to a claim for recovery of a preference.

Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2; (2023) 97 ALJR 69 also handed down on 8 February, has likewise killed off the “peak indebtedness” rule in relation to the impact of insolvency on “continuing business relationships” such as running accounts.  The respondent supplied services on a regular basis to companies in the Gunns group, rendering monthly invoices.  The supply continued even though Gunns began missing payments or short-paying accounts.  Ultimately the contract was terminated and a “cessation plan” put in place but some services continued to be supplied.  When Gunns went under, the appellant liquidator sought to recover payments made to the respondent as voidable preferences.  Having regard to the existence of a running account during part of that period the liquidator selected a date within the relation-back period at which Gunns’s indebtedness to the respondent peaked, as the starting date for the single transaction referred to in the Corporations Act, s 588FA(3).

In her Honour’s first judgment as a Justice of the High Court, Jagot J (with whom the rest of the court agreed) held that the “peak indebtedness” rule is not, and was not intended to be incorporated in the Corporations Act, Pt 5.7B.  Rather, the first transaction that can form part of the continuing business relationship contemplated by s 588FA(3) is the later of the first transaction after the beginning of the prescribed period or after the date of insolvency, or (if the relationship started after the beginning of the prescribed period or the date of insolvency) the first transaction after the beginning of the continuing business relationship.

On 15 February a majority of the court held, in Stanley v Director of Public Prosecutions (NSW) [2023] HCA 3; (2023) 97 ALJR 107 that a judge of the District Court of New South Wales fell into jurisdictional error when declining to make an Intensive Correction Order as an alternative to sentencing the appellant to imprisonment for firearms offences to which she had pled guilty in the Local Court.  The Crimes (Sentencing Procedure) Act 1999 (NSW), s 7(1) gives a sentencing court discretion to order that an offender serve their sentence by way of intensive correction in the community.  By s 66(1), the court must make community safety the paramount consideration in respect of an ICO.  Section 66(2) then goes on to say that “[w]hen considering community safety, the sentencing court is to assess whether making the order or serving the sentence by way of full-time detention is more likely to address the offender’s risk of reoffending.”

On an appeal from the New South Wales Court of Appeal, a slim majority of the High Court consisting of Gordon, Edelman, Steward and Gleeson JJ, held that in failing to make the assessment required by s 66(2) before declining to make an ICO, the sentencing judge made a jurisdictional error of law, which the appellant was entitled to have reviewed by the Supreme Court.  Kiefel CJ, Gageler and Jagot JJ, in separate dissenting judgments held that s 66(2) did not condition the court’s authority to make or decline to make an ICO under s 7(1) and non-compliance with s 66(2) did not exceed the court’s jurisdiction to pass a custodial sentence.

The union movement in New South Wales and the State government have long been at loggerheads over the government’s attempts to curb or cap election campaign funding by third parties.  This has led to previous constitutional challenges to the State’s various attempts to have its way legislatively – see here and here, for example.  In the latest development in this longstanding feud, Unions NSW commenced proceedings in the High Court in June 2022, seeking to invalidate the Electoral Funding Act 2018 (NSW), ss 29(11) and 35, as they stood at the time.  The litigation was commenced in anticipation of the March 2023 State election and the possibility of a by-election before that date.  A Special Case was prepared for the Full Court’s consideration, asking whether ss 29(11) and 35 were invalid as infringing the constitutionally implied freedom of political communication by reason of the funding caps that they imposed.  Perhaps unfortunately for curious constitutional lawyers, events moved faster than the litigation.  Section 35 was repealed on 19 October 2022.  After argument was heard on the now-amended Special Case, and while the court’s judgment stood reserved, a State Parliamentary Committee reported its view that s 29(11) was unconstitutional.  New South Wales therefore conceded that part of the proceedings.

On 15 February the court delivered judgment on what was left of Unions NSW v New South Wales [2023] HCA 4; (2023) 97 ALJR 150.  A majority consisting of Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ held that there was still some utility in answering “yes” to the question concerning invalidity of s 29(11) because the subsection had not yet been repealed.  The State bore the persuasive onus of justifying the burden the subsection placed on freedom of political communication and, by conceding, had not offered any justification at all.  However the court was of the unanimous view that repeal of s 35 had undercut the plaintiff’s standing to obtain relief, there being no justiciable controversy or “matter” left to adjudicate.

Four more judgments were handed down in the March sittings.  Mitchell & Ors v The King [2023] HCA 5; (2023) 97 ALJR 172, handed down on 8 March examined the relationship between the common law principle of extended joint criminal enterprise and the statutory offence of constructive murder, relevantly enunciated in the Criminal Law Consolidation Act 1935 (SA), s 12A.  A group of men including the appellants formed a plan to break into a “grow house” and steal cannabis under cultivation there.  When they broke in, they surprised and violently assaulted another man who was living in the house and guarding the crop.  He died at the scene and the appellants were tried for causing death by an intentional act of violence while involved in a criminal trespass.  The prosecution case alleged that the appellants contemplated that in carrying out their plan, a co-venturer might perpetrate an intentional act of violence resulting in the death of a victim.  The trial judge directed the jury that the prosecution was positing “two paths to murder” based on either common law or s 12A, both relying on extended joint criminal enterprise to sheet the death home to all of the appellants.  The jury returned verdicts of guilty but weren’t asked – and didn’t say – which path they took.  The High Court allowed the appeals, quashed the convictions and ordered new trials.  Their Honours unanimously held that the deeming effects of both s 12A and extended joint criminal enterprise could not be combined to create a new pathway to murder.

There have already been repercussions from this decision.  On the following day Button J in the Supreme Court of New South Wales aborted a jury trial of five people accused of murder in the course of robbing a man in possession of substantial amounts of cash and cocaine.  The Crown case was structured so as to combine extended joint criminal enterprise and constructive murder in the manner disapproved by the High Court in Mitchell – see R v Nehme [2023] NSWSC 202.

The introduction of COVID-19 restrictions in New South Wales had a significant effect on the business of the State’s pubs and restaurants – perhaps none more so than the Quarryman’s Hotel in inner-Sydney Pyrmont.  On 31 January 2020 the parties to Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd [2023] HCA 6; (2023) 97 ALJR 194 were just parties to a contract for sale of the freehold hotel and its business.  A condition in the contract required the vendor to carry on the business pending completion “in the usual and ordinary course as regards its nature, scope and manner”.  Then on 23 March 2020, while the contract was still executory, a public health order prohibited hotels from opening “except for the purposes … of selling food or beverages for persons to consume off the premises.”  This of course radically changed how the Quarryman’s could carry on business “in the usual and ordinary course”.  The purchaser sought to get out of the contract; the vendor responded with a notice to complete.  They all finished up in the High Court.

In a unanimous joint judgment, Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ held that at the time it served its notice to complete, the vendor was not in default of its contractual obligations and was ready, willing and able to complete the agreement.  The reduction in business brought about by the public health order did not mean that the vendor was unable to comply with its contractual obligation: it was obliged to run the business according to the prevailing law and ongoing legal compliance was essential to the business.

On 15 March, in Barnett v Secretary, Department of Communities and Justice [2023] HCA 7; (2023) 97 ALJR 206, Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ published their reasons for unanimously revoking special leave to appeal in a family law case involving the removal of a child from Ireland.  Special leave was originally granted on the single ground that the court below had relied on a bare declaration by an Irish court to find an issue estoppel against the appellant mother’s custody application.  The Irish court’s reasons for making the declaration had not then been available but were furnished on the application to revoke special leave.  The foundation for the grant of special leave having been removed, it was contrary to the interests of justice to allow an appeal to proceed on a false premise.

In Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8, also delivered on 15 March, Kiefel CJ, Gageler, Gordon, Edelman and Gleeson JJ considered the issue of infringement by reason of deceptive similarity contrary to the Trade Marks Act 1995 (Cth), s 120(1).  The respondent Allergan makes the heavy-duty anti-wrinkle treatment Botox and is the registered owner of two trade marks embodying the name.  The appellants supply anti-wrinkle preparations in the form of topical creams, serums and lotions called “Inhibox” and “Protox”.  Inhibox was described as an “instant Botox® alternative”.

Allergan’s case was that the phrase “instant Botox® alternative” was used in relation to Inhibox as a trade mark and was deceptively similar to its “Botox” trade mark.  “Protox” was also claimed to be deceptively similar in the manner of its use.  In a unanimous joint judgment the court held that “instant Botox® alternative” was not used as a trade mark so the question of deceptive similarity did not arise.  Further, “instant Botox® alternative” did not contravene the Australian Consumer Law because the word “instant” did not convey a misleading representation as to Inhibox’s long term efficiency.  The court further held that “Protox” was not deceptively similar to “Botox”: when assessing deceptive similarity under s 120(1), the reputation of the registered mark and its owner was irrelevant.  A notional buyer of Protox would not have been led to wonder whether the two products came from the same trade source.

And finally, in Parry v Secretary, Department of Health (Cth) [2023] HCA 9; (2023) 97 ALJR 211, Gageler J ordered that a cause commenced in the court’s original jurisdiction be remitted to the Federal Court pursuant to the Judiciary Act 1903 (Cth), s 44(1).  The plaintiff seeks certiorari to quash certain decisions of the Minister around the administration of a particular COVID-19 vaccine to young children, or alternatively a declaration that those decisions were unlawful.  The factual issues are expected to be complicated and there could also be issues around standing and interveners.  In those circumstances Gageler J held that the application contemplated significant case management and fact finding which was unsuitable for adjudication in the court’s original jurisdiction and would unduly divert the court from its principal functions.  The Federal Court was a more appropriate forum in those circumstances.

The court is now in Easter recess and sittings will resume on Tuesday, 11 April.