Stays of execution

Stays of execution

Rule 66.16 of the Supreme Court General Civil Procedure Rules states that “[t]he Court may stay execution of a judgment”, while rule 66.01 states that “judgment” includes “order”. The County Court’s rule 66.16 is the same, and the Magistrates’ Court rule is analogous, but refers to the execution of “an order”.

As the very simple text of the rules suggests, the court has a wide discretion to stay execution of its judgments or orders. Usually, an application for a stay is likely to arise when an appeal is in the works, and so we also need to make reference to Supreme Court rule 64.39 which states, for appeals to the Court of Appeal, that “except so far as the Court of Appeal otherwise orders…. an appeal or application for leave to appeal shall not operate as a stay of execution or of proceedings under the decision appealed from.”[1] Similar rules apply to other kinds of appeal[2], and a stay may also be granted under the court’s inherent jurisdiction.

A stay under rule 66.16 is not as impressive as a stay of this kind of execution.
A stay under rule 66.16 is not as impressive as a stay of this kind of execution.

These rules support a presumption that the general discretion to stay execution will not be exercised merely because there is an appeal on foot. More is required.

An impending (or in process) appeal is not the only situation where a stay of execution might be sought: where a set-off has been granted and needs to be given effect, for example. There is some suggestion that the appeal-oriented cases are the subject of a “distinct body of law”[3] as compared with cases where the basis for the stay application is something other than an appeal. I hesitate to regard them as wholly distinct and they appear at times to be conflated. If they are indeed distinct bodies of law, they are certainly closely related. The distinction, if there is one, lies in the requirement for “special” or “exceptional” circumstances – more on this below.

The relatively recent Court of Appeal decision, Maher and Anor v Commonwealth Bank of Australia and Anor [2008] VSCA 122, conveniently sets out the relevant principles in the context of a pending appeal. Per Dodds-Streeton JA, Redlich JA concurring:

The principles governing a stay of execution of judgment pending the hearing and determination of an appeal are well established.

Prima facie, a successful party is entitled to the benefit of the judgment obtained below and the presumption that the judgment is correct. The applicant for a stay therefore bears the onus of demonstrating that a stay is justified.

The Court has a wide discretion, which is not circumscribed by rigid rules. It should take into account all the circumstances of the case.

In Scarborough’s v Lew’s Junction Stores Pty Ltd… Adam J recognized that special circumstances might exist where a successful appellant would be deprived of the fruits of the appeal if a stay of execution were not granted. In such a case, the appeal might be rendered nugatory.

In Cellante, Young CJ stated that special circumstances would ‘exist where for whatever reason, there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed’.

An appeal could be rendered nugatory in that sense in a variety of ways. The test could be satisfied where a defendant appeals and there is a real risk that the plaintiff would remove the proceeds of the judgment from the jurisdiction. Similarly, special circumstances may be recognised where, for example, although the respondent is solvent, the subject matter of the appeal is, in substance, irreplaceable.

The prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment. A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.[4]

Maund v Racing Victoria is a good, recent example of a case where “there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed” – in this case, a racehorse trainer was to be disqualified unless execution was stayed; in the event of disqualification, the preparation of each of 17 horses would have been “deleteriously affected to the extent that the preparations would be wasted in full”, at considerable cost to the owners of the horses and to the trainer’s relationship with those owners, such that the trainer’s business could not recover.[5]

Special or exceptional circumstances

As can be seen in Maher, there is a generally recognised requirement for “special or exceptional circumstances” before a stay will be granted. There is an obvious (though not irresoluble) tension between such a requirement and the – equally well recognised – broad discretion available to the court. (Note that it appears to be the case that in NSW the “special or exceptional circumstances” has been abandoned.)

In Maund, the court sidestepped the question of whether “special circumstances” are required, finding that the applicant had met the test whether he was required to do so or not, and noting that the requirement of special circumstances arises from the presumption set out in rule 64.39 (ie, that an appeal does not act as a stay).

It seems to me that the “special circumstances” requirement may now be somewhat vestigial, or at least that it adds little to the general proposition that the an applicant must prove a reasonable basis for the court’s exercise of its discretion. In Re S & D International Pty Ltd (in liq) (No 6), the court was faced with a multiplicity of related proceedings, and granted a stay in relation to one proceeding (with conditions protecting the respondent) pending the outcome of others. Robson J stated, “[i]n my view, the reference to special circumstances is an acknowledgment that prima facie a successful litigant is entitled to the fruits of its litigation. The applicant for a stay bears the onus of establishing that in those circumstances a stay should be granted.”[6] This is not the same basis for the requirement for special circumstances as found in the context of a pending appeal, where the basis is the presumption from rule 64.39. It is, however, a wholly plausible basis. I suggest that both bases are sound, and that they have more or less the same effect on the court’s discretion. In other words, there is not really a different test in the context of a pending appeal.

This is because it seems to me reasonable to take the view that:

  1. each case must be decided on its facts;
  2. the requirement for “special circumstances” arises from the prima facie right of a successful litigant to the benefits of the judgment in all cases;
  3. the same requirement arises independently for cases where an appeal is pending, under rule 64.39 and similar rules;
  4. the court does not look at the merits of an appeal or the validity of an underlying judgment; and,
  5. it is for the applicant for a stay to prove that there is a basis for the stay.

With all of these points in mind, it is hard see a lot of room for a different test in the case of a pending appeal, as opposed to other cases of stay applications.

The discretion is wide

References to a broad discretion follow the earlier decision of Joskovitz v Bonnick, in which Herring CJ held that “there is no question, I think, under that rule that a court or a judge has a very wide discretion… I have, as I have already indicated, a wide discretion which requires me to take into account all the circumstances of the ease. I think I should say at once the decisions on other sets of facts do not bind me, nor is assistance to be derived from cases which are not really concerned with exactly the same problem as I am concerned with… In cases of this class also it is clear that each case has to be determined on its own facts.”[7] This decision in turn was one of a long thread of cases emphasising the breadth of the discretion.

It’s not about the underlying judgment

As noted, each case must be determined on its own facts. But what facts is the court concerned with? Only facts that relate to the circumstances of the execution that is to be stayed. The merits of the underlying judgment are not under consideration, and nor are the merits of the appeal except insofar as a truly hopeless appeal would preclude a stay. From Re S & D International Pty Ltd (in liq) (No 6) [2011] VSC 119 again: “the grounds must be relevant to a stay of the enforcement proceedings, rather than grounds which may bear upon the validity or correctness of the judgment.”[8] This follows logically from the propositions that a successful litigant is entitled, prima facie, to the benefit of the judgment.

[1] It was stated in Maund v Racing Victoria Limited & Anor [2015] VSCA 276, in the context of an appeal from a VCAT decision, that rule 64.39 is an independent basis for a power to stay; if this is correct then presumably all of the other, similar rules also form such a basis.

[2] See also Supreme Court General Civil Procedure rules 58.05, 58.12, 58.21, 77.06.6, and 84.12. Also see s109 and (for completeness) s110(4) of the Magistrates’ Court Act 1989, and s74(4) of the County Court Act 1958.

[3] For example, Cook’s Annotated Rules of Court.

[4] I have omitted some footnotes and references. This decision followed the decision of Young CJ in Cellante.

[5] This decision also makes some reference to Frugtniet v Law Institute of Victoria Ltd, familiar to most lawyers in Victoria, in which the need to protect the public weight heavily against a stay.

[6] Re S & D International Pty Ltd (in liq) (No 6) [2011] VSC 119

[7] Joskvitz v Bonnick 1964 VR 654

[8] Re S & D International Pty Ltd (in liq) (No 6) [2011] VSC 119 (at 130).

‘Natural’ claims for therapeutic goods ingredients

A case note on ACCC v v Dateline Imports Pty Ltd [2014] FCA 791

I was recently asked to for some advice about claims in advertising that products or their ingredients are “natural”. As is often the case when dealing with a claim that may be made in theory, rather than a real advertisement in context, the question was a bit of a rabbit hole – a word like “natural” is very likely to mean one thing in one context, and something quite different in another. Nevertheless, it is an issue that seems to be rising to prominence in the therapeutic goods category, and it’s worth looking at some of the basic considerations that might apply when such a representation is being assessed for compliance – either because it is proposed for use in advertisement, or because it has been used already and faces criticism.

This is natural keratin. Photo: Muhammad Mahdi Karim
This is natural keratin. Photo: Muhammad Mahdi Karim

The first thing that needs to be noted is that “natural” is usually going to be what the ACCC describes as a “credence” claim. Credence claims are those that need to be taken on faith by consumers, because they are not easy subjects for independent verification. They also tend to be claims that call on some moral or principled preference of consumers: examples are claims that eggs are “free range” rather than cage eggs, that a product is “marine friendly” or “environmentally friendly”.

A recent case in the Federal Court involved representations about a shampoo product, “Keratin Complex Smoothing Therapy”. Some aspects of Rangiah J’s decision were successfully appealed (in relation to references to formaldehyde), but for this post I am going to focus on an aspect that was not the subject of appeal: the use of the word “natural” in relation to the keratin ingredient.

I had better get one aspect of the decision out of the way: Rangiah J made two findings about the general knowledge of consumers that readers may find rather optimistic. His Honour stated, firstly, that ‘if consumers… were asked, “What is formaldehyde?”, some would give the further answer, “It is the chemical used to preserve biological specimens in glass jars”. Such an answer is likely to be given, at least, by persons who have done high school chemistry or biology or who work in the chemical industry or are otherwise generally familiar with chemicals. Such persons would understand that formaldehyde is a preservative which is or can be a liquid or solution. Such persons would also understand, at least from the advertisement, that formaldehyde is toxic or dangerous. In my opinion, this understanding would be the understanding of a not insubstantial group of ordinary consumers in the class.’

Secondly, and relevantly to the use of the word natural, Rangiah J found that keratin ‘is a word that is not uncommonly used and that many, if not most, consumers in the class would understand keratin to be a substance that occurs in hair and nails. Anyone who studied science or biology at any level at high school is likely to have that understanding’. On the question of whether consumers would expect the keratin in the product to be in its ‘natural or unchanged state’, his Honour found that ’consumers would not expect, for example, shaving of nails or hair to be in the product’.

While I commend his Honour’s optimism, I have to admit to some doubts about it. A straw poll of randomly selected, but educated people in my vicinity yielded none who were quite sure what keratin was, or what form keratin would take in its ‘natural or unchanged state’.

That having been said, it is important to note that the decision as a whole is founded on the factual findings that the relevant consumers do in fact have an understanding of what keratin is, and that in its natural or unchanged state it would consist of matter such as hair and fingernail clippings.

With that in mind, the case becomes a useful touchstone when contemplating a “natural” claim.

The claims related to natural keratin were: “Keratin Complex treatments contain 40% natural Keratin for far superior and long lasting results” and “With its unique formulation Express Blow Out infuses over 35% Natural Keratin in the shortest amount of time!”

The ACCC alleged (as the court put it) that “ordinary readers of the advertisement would understand natural keratin to mean keratin in its natural or unchanged state” and that “having regard to the form of the keratin contained in Keratin Complex and the processing it undergoes, the representation was false.”

The court disagreed: ‘I reject the ACCC’s submission that a not insignificant number of ordinary consumers would regard the advertisement as representing that Keratin Complex contained keratin in its natural or unchanged state. That would be contrary to common sense. Consumers would not expect, for example, shaving of nails or hair to be in the product. Rather, they would expect that a natural substance that contains keratin would be treated or processed to extract the keratin. In addition, I think that they would have an expectation that the keratin that was extracted might undergo some form of treatment or processing to make it usable in the product. Therefore, I accept Dateline’s submission that the statement that, “With its unique formulation [Keratin Complex] infuses over 35% Natural Keratin” meant, in part, that Keratin Complex contained keratin derived from natural sources.’

Leaving aside, then, the question of whether consumers really would understand what keratin actually is, the proposition that this case supports is that an ingredient can may properly be described as “natural” even if it has undergone a degree of processing that makes it useable in the product.

Not every “natural” claim relates to the degree of processing an ingredient has undergone, of course – an advertisement for “natural vitamin E” is probably describing natural vitamin E as opposed to synthetic vitamin E, which is chemically different, and not the degree to which vitamin E has been processed. But where the “natural” claim really is about the degree to which an ingredient has been processed from its raw state, ACCC v Dateline Imports gives support to a view that an ingredient may be “natural” despite some amount of processing.

Contracts to make wills

Contracts to make wills

A contract binding a person to make a particular will, or to make a will with a particular provision, is not unusual historically. Although such a contract does have a slightly archaic feel about it, I am confident that many practitioners will have come across examples, especially those practising in rural areas.

Not surprisingly, legal complexities may ensue if a breach of contract occurs – as when a party does not make the agreed will, or makes it but revokes it later. If a dispute arises, then privity of contract, constructive trusts (and other equitable considerations) will need consideration. Family provision legislation may also cause brows to furrow.

The short answer in such cases is essentially this: a will that made in contravention of such a contract is generally a valid will in itself, but the contract can give rise to a debt or equitable interest that will get surviving parties at least some of the way towards the contractually agreed result. But “some of the way” isn’t all the way, and these kinds of contracts probably need to be recognised as somewhat less than ironclad, especially in the context of a TFM claim.

Typical scenarios

There are a few common categories of contracts to make wills or bequests.

Perhaps the classic scenario is a contract to make mutual wills. These are usually wills where parties leave their entire respective estates to one another (the outcome depending, of course, on who is the survivor), with the survivor leaving the resulting single estate to some agreed beneficiaries. A wife, for example, may by her will leave everything to her husband, provided that he agrees to leave it all to her children in his own will. Usually, mutual wills simply contain corresponding provisions so that they act the same way regardless of which party dies first.

Another common scenario is where a will-maker agrees to make a will that leaves particular property in exchange for a benefit within their own lifetime. It seems like these examples coalesce into two categories of reported cases: ageing men who agree to leave their housekeepers a house (or a life interest in a house) in exchange for housekeeping services, and farmers who agree to leave the family farm to a son who takes on the farm work.

The legal situation

There is no bar to contracts of these kinds – they are valid and they are not contrary to public policy, even when they may be aimed at frustrating the effects of TFM legislation: “The Full Court [of the Supreme Court of South Australia] held that it was not contrary to public policy for parties to enter into a deed that had the effect of disentitling a person from making a claim under a TFM statute. Nothing in the High Court judgments is inconsistent with that proposition, nor is that proposition plainly wrong. “[1] (That is not to say, however, that they will not be defeated by TFM legislation, only that they are not inherently invalid.)

What, though, is their legal effect? Does a beneficiary ultimately receive a benefit under the will, or under the contract? Where there is no dispute, it doesn’t really matter much in practice – the executors will not have much difficulty deciding how to deal with estate assets. But in the case of a dispute and competing claims on an estate, the exact nature of the beneficiary’s rights can matter quite a lot.

Before we turn to the case law, let’s try to clarify things conceptually.

For a single testator, we may have:

  • a testator who promises in a contract to leave assets by will;
  • a promisee under the contract, who may have any or all of:
    1. contractual rights arising from the contract;
    2. a right to damages in the event of a breach of contract;
    3. rights as a beneficiary under the will;
    4. rights in equity arising from detrimental reliance on the promise;

Where there are two testators and mutual wills, we may have:

  • the two mutual testators, each of whom is also a promisee of the other, who may have:
    1. contractual rights arising from the contract;
    2. a right to damages in the event of a breach of contract by the other testator;
    3. rights as a beneficiary under the other testator’s will;
    4. rights in equity arising from detrimental reliance on a promise.
  • the ultimate beneficiary under the mutual wills, who may have any or all of:
    1. contractual rights, if the beneficiary is a party to the contract;
    2. a right to damages in the event of a breach of contract;
    3. rights as a beneficiary under each will;
    4. rights in equity arising from detrimental reliance on a promise.

If a testator breaches the contract and doesn’t make the required will, then the promisee or mutual testator will generally have a right to damages for breach of contract, which in its final effect amounts to a debt owed by the estate. At first blush, it is arguable that this could give rise to an anomalous situation where a party has a stronger right in the case of a breach of contract by the testator than in the case where the contract was adhered to, because it is generally better to be a creditor than to be a mere beneficiary (but this controversy is resolved – see Barns v Barns[2], discussed below).

Additionally, in either case there may be a TFM claimant, and the relationship between rights under TFM legislation and the promisee’s and/or mutual testator’s rights presents a quandary.

Birmingham v Renfrew[3]

If we are going to pick apart the contract, the promisee’s rights arising from it, rights under a will, and any other rights, the decision of the High Court in Birmingham v Renfrew is a good place to start. There are no TFM issues muddying the waters in this instance.

The case involved a wife, a husband, and relatives of the wife who were the plaintiffs. The wife inherited “a very substantial amount of property under the will of an uncle”. There was an agreement between the husband and wife to create mutual wills, to the effect that:

  1. the wife would leave her whole estate to the husband and, if he did not survive her, to her relatives;
  2. the husband would make a corresponding will, leaving his whole estate to the wife and, if she did not survive him, to the wife’s relatives.

In practice, the goal was evidently that the husband and wife would continue to have their collective property in their lifetimes, but that it would ultimately go to the wife’s relatives and not to the husband’s.

They made the wills. The wife died. The husband inherited his wife’s estate. The husband then revoked his will, leaving nothing to the wife’s relatives. On the husband’s death, the wife’s relatives sued the estate.

The High Court found in favour of the wife’s relatives, so that in effect the estate was distributed according to the husband’s earlier will (the one that was made mutually with his wife), and not his last will.

It is important to understand clearly, though, that the husband’s last will was a valid one. The contract didn’t invalidate the husband’s last will, but rather created rights in the wife’s relatives that had priority over the provisions of that last will. The form those rights took were a constructive trust, the terms of which were exactly the terms of the mutual will.

Interpreting the contract, Dixon J stated that:

  1. the contract, by implication, bound the husband not to revoke his will without notice to the wife;
  2. once the wife died, the husband was bound by the contract never to revoke his will;
  3. the mutual will made by the wife constituted consideration for the husband’s promise to make a will.

The judgment further stated that “it has long been established that a contract between persons to make corresponding wills gives rise to equitable obligations when one acts on the faith of such an agreement and dies leaving his will unrevoked, so that the other takes property under its dispositions. It operates to impose upon the survivor an obligation regarded as specifically enforceable.”

As to the validity of the will that was subsequently made, that did not comply with the contract, Dixon J continued:

“It is true that he cannot be compelled to make and leave unrevoked a testamentary document, and if he dies leaving a last will containing provisions inconsistent with his agreement it is nevertheless valid as a testamentary act. But the doctrines of equity attach the obligation to the property. The effect is, I think, that the survivor becomes a constructive trustee, and the terms of the trust are those of the will which he undertook would be his last will.”

The nature of the constructive trust

The surviving party to the contract – in this case the husband – thus becomes a constructive trustee, and the intended beneficiaries under the will – in this case, the wife’s relatives – become the beneficiaries under the constructive trust. But the trust is unusual, largely because of the intention that underlay it:

“The purpose of an arrangement for corresponding wills must often be, as in this case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying. That is to say, the object of the transaction is to put the survivor in a position to enjoy for his own benefit the full ownership, so that, for instance, he may convert it and expend the proceeds if he choose. But when he dies he is to bequeath what is left in the manner agreed upon. It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the lifetime of the survivor, can descend upon the assets at his death and crystallise into a trust. No doubt gifts and settlements inter vivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition inter vivos is, therefore, not unqualified. But, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivor’s own benefit and advantage upon condition that at his death the residue shall pass as arranged.”

That is, the surviving testator, though a constructive trustee, is permitted to treat the property as his own, except insofar as he has a duty to bequeath it a particular way. Latham CJ referred to this point in slightly different terms, stating:

“In the present case the promise by the husband was a promise to leave his property to certain persons by will, including such property as his wife might leave to him by her will, less (as my brother Dixon has explained in some detail in his judgment) such amount of that property as he might have boná fide disposed of during his lifetime.”

As a side note: Birmingham v Renfrew, the agreement between spouses to make mutual wills was oral. This is not a desirable state of affairs, because the court will be very reluctant to infer that there was any such agreement, even where the existence of mutual wills seems to point towards it.

The crucial points are these:

  1. the agreement to make mutual wills, together with reliance by the mutual testators upon it, leads to the imposition of a constructive trust upon the surviving testator;
  2. the terms of the constructive trust are essentially the terms of the will that was agreed upon;
  3. the subject matter of the constructive trust is the property that passes from the testator who dies first to the surviving testator.

The question of when the constructive trust arises can become quite important – it had certainly arisen by the time both mutual testators had died in Birmingham v Renfrew, but what if litigation had commenced after the first death but before the second?

There may be room for uncertainty on reading Birmingham v Renfrew (although I think that this case is actually fairly clear), but in any event the question was answered definitively in Barns v Barns – see below.

That there may be a constructive trust on foot in these cases also creates an interesting dilemma in cases where TFM legislation applies, and some questions around TFM were also resolved by the decision in Barns v Barns.

Where TFM legislation applies

TFM legislation must always contend with the prospect that a testator will seek to evade the effects of the legislation through actions undertaken during the testator’s own lifetime – for example, by simply gifting assets to others.

The purpose of TFM legislation, broadly put, is to ensure that a testator’s family is appropriately provided for out of the testator’s estate, even where the testator has not provided for the family by will. The TFM legislation applies to assets of the testator possesses at the time of death.

Now, suppose that a testator contracted in his lifetime to leave his estate to one person, when another person might also have a claim under TFM legislation when he dies. This was the case in Re Richardson’s Estate[4]. Richardson agreed with his housekeeper that he would leave her his home (note, though, that their relationship included some degree of business partnership and pooling of assets, and not just housekeeping services).

The testator did indeed leave his whole estate to his housekeeper, but his widow was not entirely satisfied with the arrangement. She claimed provision for herself and their child under the applicable TFM legislation. The Tasmanian Supreme Court took, by majority, a view that the housekeeper’s rights under contract effectively took the testator’s assets out of the estate, so that the TFM legislation had no “net estate” to deal with. They did so on the basis that, had the testator failed to make the will as agreed, the housekeeper would have been entitled to damages.

Whatever its status at the time, this approach is certainly no longer correct. It is discussed in the High Court decision Barns v Barns, which resolved inconsistent decisions of the Privy Council in Dillon v Public Trustee NZ[5] and Schaefer v Schuhmann[6]. Although those two prior cases are well worth reading, I am only going to set out the position from Barns v Barns here.

Barns v Barns

Barns v Barns was a case where a husband and wife, who were farmers, agreed with their son and one another that:

  • the parents would leave the farm to one another by way of mutual wills; and,
  • by way of the same mutual wills, the surviving parent would leave the farm to the son.

The agreement was by deed, and was presumably very similar to many an agreement created within farming families over many years.

Now, the purpose of the agreement was, apparently explicitly, to prevent any TFM claim in the surviving parent’s estate by a daughter, who did not work the farm as the son did, and had encountered some significant financial difficulties as a result of her own business ventures with her husband.

It is important to note that the litigation arose at the time of death of the first testator to die. Had a constructive trust arisen already at this point? There are two relevant and arguable timelines.

The first has the constructive trust arising early, as follows:

  • H and W contract to make mutual wills, ultimately favouring S as sole recipient of their combined estates;
  • a constructive trust over both estates arises in favour of S;
  • H dies;
  • a claimant under TFM legislation makes a claim.

The second has it arising later:

  • H and W contract to make mutual wills, ultimately favouring S as sole recipient of their combined estates;
  • H dies;
  • a claimant, C, under TFM legislation makes a claim;
  • a constructive trust over H’s estate arises, in favour of S.

The difference is plainly quite decisive as far as both C and S are concerned – S either gains a proprietary interest prior to any TFM claim arising, or does not.

The answer, provided by the decision in Barns v Barns, is this: the constructive trust comes into existence after H dies, because at that point there can be no revocation of the agreement to which W could respond. But at the time of H’s death, H was not a constructive trustee and his whole estate falls within the ambit of a TFM claim. Per Gleeson CJ: “In argument in the present case, an attempt was made to demonstrate that the effect of the deed and the mutual wills was that, upon his death, the deceased was not the beneficial owner of any property; for that reason there was no estate of the deceased within the meaning of the Act; and therefore the Act was incapable of having any effect. That argument, which appeared in some respects to confuse the position of the deceased with that of the second respondent as survivor, fails.”

The further issue, as I noted above, arises from the interplay of W’s rights under the will, her rights under the deed that led the mutual wills, and TFM legislation. The question is arguably pretty complicated, but we are fortunate to have a fairly clear statement of how it plays out: “The answer to the argument that this takes no account of the rights of the second respondent under the deed, and treats her as a mere beneficiary, is that the nature of the rights she obtained under the deed was such that they were always liable to be affected by the potential operation of the Act. Because the Act imposed a restriction on freedom of testamentary disposition, a promise to make a testamentary disposition was subject to the potential operation of that legislative restriction.”

Gleeson CJ continued: “The effect of the legislation could have been avoided by a disposition inter vivos so that the deceased died with no estate; that is inherent in the scheme of the legislation. But the effect of the legislative restriction on freedom of testamentary disposition cannot be avoided by a promise to make a certain disposition.”

The upshot of this is that a contractual right in relation to estate assets can be defeated by TFM legislation; a proprietary right cannot (in saying this, I am leaving aside the effects of “notional estate” provisions as found in NSW.)

Some further observations

A few concepts are perhaps worth restating:

  • the contract doesn’t affect the will itself – a beneficiary’s rights, as a beneficiary under the will, are no greater because of the contract[7]
  • the contract can give rise to an equitable interest such as a constructive trust that has priority as compared with a right under the will, but this is not the default position
  • a breach of contract, as with any contract, can give rise to a right to damages, and therefore to a debt owed by the estate
  • the mere fact that TFM legislation frustrates the contract does not mean there has been a breach.



[1] Calvert v Badenach [2015] TASFC 8 – Porter J, quoting with agreement the decision of the trial judge.

[2] 214 CLR 169

[3] 57 CLR 666

[4] (1935) 29 Tas LR 149. This case is reviewed in Barns v Barns and I have relied on Gleeson CJ’s summary of it.

[5] [1941] AC 294

[6] [1972] AC 572

[7] Barns v Barns, per Gummow and Hayne JJ: “where, as in the present case, the contract by Mr Barns was one not to revoke his will in favour of Mrs Barns, she cannot claim rights greater than she would have had immediately after the moment of the execution of the will”

Magistrates’ Court arbitration – some notes

I’m a bit of a fan of Magistrates’ Court practice, and that includes arbitration in the Magistrates’ Court. This is a form of proceeding that is designed to be swifter, cheaper, and less formal than an ordinary court hearing. My experience is that it works very well: the parties still get their day in court, but the process is likely to be considerably less stressful for them, will almost certainly be less costly, will consume less court time, and will yield much the same practical result as a full hearing.

Which claims go to arbitration

Arbitration will generally be used in the Magistrates’ Court where the monetary relief sought in a complaint is under $10,000, though not every such case will be arbitrated – for example, if the complaint is complex or involves fraud, or if the parties agree that the complaint shouldn’t be arbitrated, then the court may order that it be dealt with as a normal hearing and determination – s102 of the Magistrates’ Court Act 1989 (“the Act”).

Council rates and water rates matters are exempt from arbitration.

Note that an arbitration is to be distinguished from a court hearing, and results in an “award” to a party as distinct from an order. The award “has effect as if it were an order made by the Court in a proceeding heard and determined by it” (s104 of the Act).


As well as the provisions of the Act, there are some rules set out in the Magistrates’ Court (Miscellaneous Civil Proceedings) Rules 2010, under Order 2. These set out the way the pleadings stage is to be conducted – note that they essentiually limit parties to a statement of claim and a defence. A reply, request for further and better particulars, notice for discovery, and expert witness statement are all impermissible (rule 2.04) but things being as they are, you might receive them from the other side regardless. A list of documents must be given (rule 2.05) and there are special documentation requirements for matters arising from motor vehicle accidents.

Rules of evidence

The Act provides that the court is not bound by the rules of evidence (but privilege still applies – s103(2A)), and is not required to conduct proceedings in a formal manner. The court is bound by the rules of natural justice, and has all the usual powers it would have in relation to the hearing and determination of a complaint. Remember that the rules of natural justice bear on evidence – the no evidence rule says that relevant evidence must be considered, and irrelevant evidence must not be considered.

Adducing evidence

In practice, every arbitration I have seen works this way: counsel for the plaintiff sets out the evidence of the plaintiff (or, conceivably, the principle witness for the plaintiff) more or less in entirety. That witness is then called and sworn, and asked something along the lines of, “You have heard the summary I’ve just given of your evidence. [Yes.] Do you agree that it’s an accurate account of your evidence? [Yes.] And is there anything you would like to add to it? [No.]” The witness is then cross-examined and re-examined. Due to the relative informality of arbitration proceedings (or for less commendable reasons), it is sometimes the case that a witness will be cross-examined, re-examined, cross-examined again, and re-examined again, although this kind of thing is obviously undesirable and you wouldn’t want to rely on its being permitted.

After that principal witness, other witnesses may be called for the plaintiff, although it’s not at all unusual for there to be only one witness. Those witnesses give evidence in the normal way, without the opening summary and instead with oral evidence-in-chief.

After the close of the plaintiff’s case, the defence conducts its case in a corresponding manner.

There is no requirement that arbitration be conducted in the way I have just described. It is simply, as I understand it, the time-hallowed approach. The parties should probably seek the leave of the court to conduct the proceeding this way, but it does seem that it would be unusual to conduct it any other way. There may also be reasons why you’d prefer to run your case differently; the court could theoretically permit just about any approach at all that didn’t fall afoul of the rules of natural justice. If, say, you have a good reason for wanting your principal witness to give evidence in her own words, you might not want to use the usual approach.

Evidence need not be oral, though (s103(3) of the Act). It may be in writing, and the court may require written evidence to be given by affidavit. Bear in mind that, although the court is not bound by the rules of evidence, this doesn’t mean that any and all documents can be handed up and relied upon. A document may well be objectionable because it is of unknown or uncertain provenance, is plainly unreliable, and so on, or it may be of limited value to the court because the witness who made the document ought to be available for cross-examination.

Professional costs

Professional fees are capped for the arbitration, and the capped figure covers both solicitor and counsel. The capped fees are set out in Appendix AA of the Magistrates’ Court (Miscellaneous Civil Proceedings) Rules 2010 (or, perhaps more conveniently, on the Magistrates’ Court website.) They are set pursuant to regulation under s140 of the Act and seem to be updated fairly regularly.

Costs awards

The quantum of costs that can be awarded is also constrained. If the amount ultimately awarded to a party is less than $500 and there are no special circumstances, no costs may be awarded at all (s105 of the Act). Of course if no award is made at all, then the plaintiff has presumably lost and costs may be awarded.

When costs are awarded, they are capped – these figures are also set out in Appendix AA and they are the same as the professional costs caps. As follows logically, it is possible for a successful litigant to recover their costs fully in Magistrates’ Court arbitratation.

The reasonable dog

Kurt G Schnauzer
The author’s own, very reasonable, dog

It’s a little known fact, but the Domestic Animals Act 1994 includes a standard for the reasonable dog. The dog on the Clapham omnibus, if you will, or maybe the dog on Clapham Common.

Well, not quite. But it does, usefully, set out something like a standard of dog behaviour by way of a defence to dog attack charges.

Section 29 of the Act sets out the offences and liability relating to dog attacks. These are fairly easy to understand. There are various categories of dog attack liability, with responsibility falling on the person in apparent control of the dog, and, failing that, on the dog’s owner. Penalties are potentially quite severe and, for dangerous or restricted breed dogs, include imprisonment, and the severity of the injury is relevant. Perhaps also noteworthy is the fact that an offence also occurs when a dog merely rushes at or chases a person (but not, it seems, another animal).

The defences

So what was that about a reasonable dog? Well, the dog can walk if it falls within one of four defences, which arise “if the incident occurred because –

(a) the dog was being teased, abused or assaulted; or

(b) a person was trespassing on the premises on which the dog was kept; or

(c) another animal was on the premises on which the dog was kept; or

(d) a person known to the dog was being attacked in front of the dog.”

(To be clear: the matter relied upon in defence must have caused the attack.)

These defences are strong, and the case to look at is Johnson  v  Buchanan  & Anor [2012] VSC 195. The defence relied upon in this case was the one set out in section 29(9)(b) – trespass on the premises. The offending (but defensible, as it turned out) dog bite occurred this way: “One day [the victim] was talking to his son in the driveway of his home.  He leaned on and allowed his arm partially to protrude over the fence.  As the arm went down, it was bitten by the dog, causing [the victim] serious injuries.”

The decision is meticulous and far-ranging, and you should read it. But the long and the short of it is this: even the mere protrusion of an arm into “the premises on which the dog was kept” is a trespass sufficient to enliven the defence. The relevant provisions are to be interpreted strictly: “Although the general purpose of the Domestic Animals Act is protective and that might justify a liberal interpretation of provisions having that purpose, s 29(4) is a penal provision and s 29(9)(b) creates a defence against what otherwise would be criminal liability.  As s 29(9)(b) creates a defence to a crime, it has the same penal character as the provision creating the substantive offence (s 29(4)), and must be interpreted accordingly. The principle which must be applied in the interpretation of penal legislation where the meaning of the provision remains ambiguous or doubtful according to the ordinary rules of interpretation is that ‘the ambiguity or doubt may be resolved in favour of the subject by refusing to extend the category of criminal offences’.”

I have relied upon this decision to inform the application of the subsection (d) defence, and it plainly applies to all four defences (although I wonder how widely you could apply subsection (c)).

So there you have it. A reasonable dog is not one that never attacks anyone, just one that has one of several acceptable reasons for doing it!

Uncollected goods – the Warehousemen’s Liens Act 1958

Not goods for storage. (Photo credit: Daniel Schwen)
Not goods for storage. (Photo credit: Daniel Schwen)

The Warehousemen’s Liens Act 1958 (“WHML Act”) is an interesting member of the Victorian family of legislation dealing with uncollected goods. Uncollected goods are now primarily dealt with in Part 4.2 of the Australian Consumer Law and Fair Trading Act 2012 (“ACLFT Act)”, about which I will write at a later date. But in the specific context of warehousemen, the WHML Act is important. It will be useful to a warehouseman who is storing uncollected goods, provided notice was given at the time the goods were placed in storage, and it may arise for a consumer who has placed goods into storage and failed to keep up payment.

A “warehouseman” in the context of the WHML Act is “a person lawfully engaged in the business of storing goods as a bailee for hire or reward”. Now, at common law, warehousemen had no lien over goods stored with them (see Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48), so any such lien therefore must derive from legislation.

The starting point under the WHML Act is that a warehouseman has a lien (s 4) for lawful and reasonable charges (see s 5 for particulars of these), provided that s/he gave notice, claiming a lien, within two months of the deposit of the goods. Notice must be given to any person who has claimed an interest in the goods or who, to the warehouseman’s knowledge, has an interest in the goods (s6). There is clearly a gap here – on the face of it, notice need not be given to a person with an interest in the goods if the warehouseman became aware of that person’s interest more than two months after the deposit of the goods.

(Consider this factual scenario involving an estranged couple: they abandon the family home, one after the other, and the husband places the wife’s possessions in storage without her consent. The warehouseman collects the goods by arrangement with the husband, is aware that the whole arrangement is under the shadow of marital breakdown, and understands that the goods belong to the wife. There is a contract with the husband, but not with the wife. Yes, it is preferable to settle this one out of court.)

Assuming notice has been given, the WHML Act grants the warehouseman a power to sell the stored goods at public auction to satisfy the lien (s7) once payment is at least 12 months in arrears. Notice must be given of the intention to sell, payment must be demanded in the notice, and the demand for payment must allow at least one month for payment.

That notice enlivens a power in the Magistrates’ Court to stay any further proceedings towards the sale of the goods “for such period and on such terms as it deems just”. Such an order may be made on the application of a person with an interest in the goods.

I dealt with one such application not too long ago, and it appeared clear that they don’t arise too often. (So far as I am aware there is no pro forma available for the purpose, but it is not too hard to draft an application that will do the job.)

Now, how does this all fit in with the uncollected goods provisions of the ACLFT Act? It’s a good question. The ACLFT Act repealed the old Disposal of Uncollected Goods Act 1961 (“DOUG Act”). It didn’t repeal the WHML Act.

The WHML Act and the DOUG Act look a lot like companion pieces. The WHML Act deals with uncollected goods that were accepted for storage, while the DOUG Act deals with goods accepted “in the course of a business for repair or other treatment on the terms (express or implied) that they will be redelivered to the bailor.” In other words, you have one piece of legislation for goods in storage, and another for goods left for repair or other treatment. I think there is a case – possibly a rather thin one – for the proposition that the ACLFT Act does not cover uncollected goods that were left for storage rather than repair or treatment. The argument hinges on a careful reading of s54 of the ACLFT Act, and the non-repeal of the WHML Act is significant. On the other hand, a really plain reading of the ACLFT Act adds, at a minimum, some extra burdens to any storer relying on the WHML Act.

No significant conflict is likely to arise in practice, but it probably pays to be aware of the possibility. The precise contractual relationship between the parties, if there is one, is also likely to be highly significant.

The WHML Act has its analogues in other jurisdictions. The Queensland Act refers to “storers” rather than “warehousemen”, and does not include the initial notice requirement for the person who actually deposited the goods (which seems fairly sensible). That Act was considered recently in Fearnley v Finlay [2014] QCA 155 and involved an interesting twist: is the agistment of cattle a “storage” arrangement? Generally speaking, it seems not, although it is quite possible for cattle to be goods for storage in other circumstances than agistment.

[This is the first of several planned posts on uncollected goods.]






The Forfeiture Rule – a recap

It’s called the Slayer rule in the US. YEAH! (Photo credit: Mdnghtshdw)

The forfeiture rule lurks in the background of many a great detective story. As every reader knows, when someone is killed, their heirs are always prime suspects. But what happens when Poirot or Scudder or McGee unmasks the killer? Thanks to the forfeiture rule, the heir who kills the testator loses the inheritance – you can’t profit from an unlawful homicide. It’s a common-sense rule, too – anyone who knows nothing about the law would still assume there has to be a rule along these lines. It apparently dates back many centuries as a feature of Roman law, and later the Napoleonic Code. And, given human nature, one imagines that the basic principle may have originated not long after the invention of private property.

The common law rule was enunciated clearly in the 1891 judgment in Cleaver v Mutual Reserve Fund Life Association, in which it was said to be founded on public policy and not on prior decisions. Though Cleaver is sometimes referred to as the “first case” enunciating the rule, I wonder if that’s right – there is a US case dating to 1889 (Riggs v Palmer, 115 N.Y. 506, in which the grandson Elmer poisoned his grandfather to ensure he wouldn’t change his will) – but regardless, it is the proper starting point for the rule as it currently stands in Victoria.

The forfeiture rule arises in the non-fiction world more often than might be expected, because it doesn’t just apply in cases of cold-blooded murder. It applied in cases of defensive homicide (the statutory offence introduced in 2005 and abolished in 2014) and manslaughter. Its application in the case of crimes such as culpable driving is variable, and in some jurisdictions unresolved. By its nature, it tends to apply within families. Since it originated, our understanding of domestic violence has evolved, and the prospect of unintentionally but criminally killing family members has probably increased, thanks to car accident risk.

Partly because of the uncertainty about its scope, and partly because it currently applies in cases that appear manifestly unjust, the forfeiture rule was the subject of a review by the Victorian Law Reform Commission last year. As usual the report is of excellent quality and provides a useful review of the current law.

Since that report was tabled, the issues it deals with have arisen in court. A notable case is Re Edwards; State Trustees Ltd v Edwards [2014] VSC 392. The facts are rather sad and, I seem to recall, were reasonably well-publicised after they occurred. A couple were married in 1998. Soon after, the husband began to be violent, and his abuse grew steadily worse. Not unusually he caused her to become more and more isolated, and because of the abuse her mental health deteriorated. He threatened to kill her. Then she killed him, on a day when he woke up drunk and threatened to set her on fire. At the time when the forfeiture rule was considered, she had already been convicted (on a guilty plea) of defensive homicide.

The rule leaves no room for judicial discretion

Although that offence no longer exists, McMillan J’s judgment offers a useful recap of the evolution of the rule and an example of its current application. It also seeks to resolve some tension between prior decisions, and between some past majority judgments and (arguably somewhat attractive) dissenting judgments. Beginning with a reasonably comprehensive history of the case law, at least as it relates to homicides, Her Honour states: “In my view, the modern forfeiture rule is an instantiation of the wider principle of public policy that a person shall not be allowed to profit from her crime. It is an expression of the legal maxim ex turpi causa non oritur actio [‘From an evil cause an action cannot arise’]… In the more specific context of homicide, the rule is based on the abhorrence that one may benefit from killing another person.”

Crucially, the judgment states that the forfeiture rule is a particular principle of public policy, and not a principle that public policy should be assessed on a case-by-case basis: “The reference to ‘public policy’ in various statements of the principle does not, in my view, justify the consideration of wide-ranging policies in deciding whether the rule applies to the case at hand. Nor does it invite a judge to weigh competing public policy concerns against one another as she sees fit. It does not follow from the proposition that the rule is based on a principle of public policy that broad concepts of public policy may be applied directly to the instant case.” The point here is that the reference to “public policy” is not a licence to treat the rule as a flexible one; rather, it is an explanation of origins of a rule that is nevertheless strict: “neither hardship on the defendant resulting from application of the rule, nor low moral culpability, is a basis upon which to relieve the killer from the application of the rule.”

So the outcome is this: “I have concluded that I have no discretion to grant relief from the forfeiture rule on the basis of Mrs  Edwards ’ tragic circumstances and very low moral culpability. It follows that Mrs  Edwards  forfeits her interest in the deceased’s estate.”

How is the testator’s will then given effect?

The will of the deceased in Re Edwards contained a fairly run-of-the-mill gift-over provision: the whole estate was to go to the wife, or, in the event that she predeceased the husband, it was to go to various other beneficiaries. The contingency set out in the will had not occurred – the wife had not predeceased the husband, and her ineligibility under the will arose instead from her having been his killer. The question was whether the court ought to give effect to the gift-over regardless and, after a very detailed examination of the relevant case law, Her Honour concluded that it should not. There are two important points here.

The first relates to an approach that has sometimes been adopted: that the “slayer” should be treated as though deceased, so far as the will is concerned. This approach, which would have led to a simple enough resolution of the estate, was rejected.

The second follows from that: it deals with the question of what the testator intended. There are cases where a gift-over depends on a contingency that is expressed in quite specific terms, but is found to reveal an intended application in a wider range of circumstances, because the “real contingency guarded against” is broader than that stated in the will. In the present case, though, no such intention could be found – the contingency that the gift-over was intended to guard against was the prior death of the wife, and did not extend to her ineligibility due to the forfeiture rule.

The estate therefore fell into intestacy, and the estate was to be distributed to the daughter of the deceased.

Other kinds of cases

The VLRC Report I mentioned above covers a much wider field. Some curly questions arise: what about assisted suicide? What about failure to control a dangerous dog? Dangerous driving causing death or culpable driving? Broadly speaking, the application of the forfeiture rule is uncertain in these areas and would need a close look. The VLRC recommendations are designed to remove this uncertainty, although with an emphasis on case-by-case justice that may undermine the principle that ought to be paramount. Watch this space.

Determining net earnings under reg 72 of the Magistrates’ Court Civil Procedure Rules

Garnished crabcake.
Garnishee? Garnisheeing? Garnishing? I get confused, then hungry. (Photo credit: Stu Spivack

But first, an anecdote.

Though listed for 9am, my matter was not finally heard until around 3pm. It was a simple, brief appearance at the Magistrates’ Court but the day had been consumed with a series of odd (but entertaining) cases – there was a driver seeking to have an interlock condition lifted from her licence, who had multiple witnesses on hand to state that they, and not she, had blown into it to cause some recorded alcohol readings, and a protracted discussion of the need to turn on the ignition to operate power windows, a consumer’s dispute with a building supplies company that involved pages worth of “and the u-joints. Did you get those?” “No.” “And the twelve millimetre dynabolts. Did you get those?” “No.” “And the 70×35 millimetre pine, did you get those?” “No.”

And then, a solicitor who repeatedly accused a witness of lying, regularly walking over to the witness box to show him documents –  documents which the witness showed no sign of being able to read at all, since he apparently spoke almost no English and had arranged no interpreter.

I was unopposed in a very simple debt matter, and I had to read out to His Honour some numbers. “Four hundred and thirty-six dollars and… some cents, Your Honour”, I said (because the rounded dollar figure would do the job in this context), and he replied, “There’s no cents in this courtroom Mr Korke.” I hesitated. Then I laughed, somewhat involuntarily, and His Honour said, “However you spell it.”

Net earnings

Now, the number I was reading out (and it wasn’t really $436) related to a defendant’s net earnings, and the context was reg 72 of the Magistrates’ Court Civil Procedure Rules 2010 – Attachment of Earnings. It is generally regarded as a pretty straightforward area, and it is one, but a few things sometimes seem to be misunderstood. One is the determination of net earnings. This generally involves review of payslips that have been subpoenaed from an employer. They are sometimes confusing, but they nearly always include a figure for “net pay” for a given pay period. There, that’s the net pay… right? Unfortunately, it’s not, but thankfully we have calculators built into our phones these days.

Tax is the only deduction

“Net earnings” is defined under reg 72.01 as “the amount of the earnings… after making all proper deductions under income tax legislation of the Commonwealth.” The net pay figure on the payslip, however, is likely to involve a whole lot of other deductions besides income tax – union fees, social club fees, child support, and so on. In many cases, therefore, it is necessary to calculate the relevant “net earnings”, which are distinct from the net earnings shown on the payslip.

(All those other deductions may of course be relevant to what the debtor can afford to pay under an order, but they should be considered under reg 72.05, when the court considers what rate of repayment is “reasonable”.)

Variation in pay

Even with all that in mind, determining net earnings can be challenging at times, particularly where the defendant doesn’t attend at court to explain their situation. For many people, income varies from payslip to payslip. For some, there are pay periods with no pay at all. In some instances a simple average can properly be used, while in others it might be the most recent pay, net pay excluding overtime, or something else again.

Which way should the court err?

In the case of variable income, the court is tasked with determining a level of net earnings. At first blush, it might seem as though a creditor would prefer the highest possible interpretation of “net earnings”, while a debtor would prefer the lowest. This isn’t necessarily so, though. Because of reg 72.05(5), “protected earnings” are generally set at 80 percent of net earnings. It follows that high net earnings means high protected earnings, so if a debtor regularly earns less than the court-determined net earnings, they may very well pay less than would be expected under the order. This is because, in a period with lower-than-expected pay, the court-ordered deduction would impermissibly dip into protected earnings. In such a situation, a creditor would have been better served by a lower level of protected earnings. The difference is rarely going to be earth-shattering, but it does merit consideration.