Murphy v State of Victoria and Anor [2014] HCATrans 230 (17 October 2014)

Last Updated: 22 October 2014

[2014] HCATrans 230

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M95 of 2014

B e t w e e n -

ANTHONY MURPHY

Applicant

and

STATE OF VICTORIA

First Respondent

LINKING MELBOURNE AUTHORITY

Second Respondent

Application for special leave to appeal

CRENNAN J
GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 17 OCTOBER 2014, AT 9.34 AM

Copyright in the High Court of Australia

MR R. MERKEL, QC: If the Court pleases, I appear with my learned friends, MS M.J. RICHARDS, SC and MS S. GORY, for the applicant. (instructed by Fitzroy Legal Service)

MR M.K. MOSHINSKY, QC: If the Court pleases, I appear with my learned friend, MR P.D. HERZFELD, for the first respondent. (instructed by Victorian Government Solicitor)

MR B.W. WALKER, SC: If it please the Court, I appear with my learned friend, MR R.A. HEATH, for the second respondent. (instructed by Clayton Utz Lawyers)

CRENNAN J: Yes, Mr Merkel.

MR MERKEL: If the Court pleases, the question which we seek to raise on the application for special leave is one that has not been considered by the courts before this case. The question relates to the boundaries of the injunctive power conferred under section 232 of the Australian Consumer Law to grant relief following the contravention of section 18, that is the misleading conduct provision, but the unique feature of the case arises because the contravention alleged and assumed by the Court of Appeal is by the executive arm of the State government. So the unusual circumstances of this case raise the parameters of liability of State entities, federal, State and territorial engaged in carrying on business and engaged in misleading and deceiving the public in the course of carrying on that business.

CRENNAN J: Now, Mr Merkel, it is put against you that this question about whether or not the jurisprudence in relation to section 80 of the Trade Practices Act applies in the context of section 232 of Australian Consumer Law, it is put against you that that point was not squarely raised before the Court of Appeal in the context of an application for interim relief.

MR MERKEL: We say that is wrong, your Honour, that we squarely raised these questions and, indeed, that comes out clearly by the way in which the Court described it, there are some hundreds of pages of transcript. In the application book, your Honour, at 149 their Honours set out at paragraph 11 the very submissions that we made relating to a new norm of conduct and a range of remedies, and their Honours said that these arguments:

are novel, and raise questions of statutory construction –

which relate to section 18 and section 232 –

which are yet to be authoritatively determined.

Squarely, in the second judgment, their Honours, that is at page 199 put our submission concerning section 80 at paragraph 101 where the court said that we:

accepted that the authorities concerning s 80 of the Trade Practices Act have application in respect of cases concerning s 232 of the ACL, the appellant contended that s 232 of the ACL is, so far as the appellant’s application –

can I put aside B(b), it is B(c) which is to stop the project -

of the Prayer for Relief is concerned, in more favourable terms to the appellant than s 80 of the Trade Practices Act.

What we put squarely before the court was that the changes to the legislative scheme both in respect of section 18 by defining trade and commerce to include any business activity and section 232(5) and (6) which gave a power to restrain the carrying on of business and a whole range of activities - - -

CRENNAN J: Then, one has to look, does one not, at paragraph 102 on the next page:

it seems to us that the authorities to which we have referred concerning a necessary nexus –

that is the expression that is used -

the performance of an evaluative judgment and the judicial and sensible exercise of the injunctive power apply as much to s 232 of the ACL as they did to s 80 of the Trade Practices Act.

So they are not adopting a narrow approach.

MR MERKEL: No, there has been a debate, a confrontation, in effect, by reason of Rural Press and Justice Gummow in ICI about whether injunctive relief must be limited to contravening conduct and that came out of Justice Gummow in ICI in a passage that was cited with approval by three judges of this Court in Rural Press. The broader view is that the jurisdiction relates to preventing a contravention but can be wider than just conduct that is itself a contravention such as in Foster where there was someone misrepresenting weight loss treatment, they were restrained from carrying on a weight loss business to prevent repetition of the contravening conduct.

Our case was raised squarely before the Court that we accepted the conduct we are seeking to enjoin, which is the further progression of the project, was not itself not contravening conduct. We accepted that we were not in the position of a private interest seeking to rely on the conduct but we contended squarely before their Honours, which is set out clearly in the judgment, that the loss that we are seeking to protect against is the loss suffered by the public of Victoria, that is, public harm, from this as a loss making project, and the novel question is, does the State, in effect, stand with some kind of impunity in that area because it does not have shareholders in respect of provisions in Truth about Motorways that were said to be conferring standing on an individual in the public interest, to represent the public interest, to redress a public wrong.

The one question that the courts have not considered which we raised squarely before their Honours was whether public harm being the losses suffered by the State was within or outside the boundaries of the interest that may be protected. Their Honours found, on assumptions that were made in our favour, for reasons I will explain shortly, that all of our claims will be made out, which is as successful as we could ever be at trial, that that was not an interest that was cognisable under section 232.

GAGELER J: Where did they say that?

MR MERKEL: Your Honour, they set out our submissions – can I take your Honour to page 148 where they set out our submissions in summary form at paragraphs 8, 9 and 10, but at the second sentence of paragraph 9, their Honours said:

counsel argued, it should not be doubted that injunction may go against the respondents to restrain them from giving effect to the project until and unless the impugned representations have been rectified.

Their Honours said there was force in those submissions, so there were two sides to be looked at at paragraph 11, and then their Honours said we reject that that public harm, public interest concept goes that far - - -

GAGELER J: Where do they say that?

MR MERKEL: At paragraph – well, I will take your Honours through it if I can. At paragraph 12 their Honours then said that:

Truth About Motorways, was pre-eminently about standing –

in other words, rejected that standing – they draw a dichotomy between standing and relief. What we said is because you get standing to protect the public interest, you must necessarily have standing for the purposes of section 80 to protect the public interest in the sense of public harm.

CRENNAN J: But the members of the Full Court – that was never denied, was it, Mr Merkel? It is true that Truth about Motorways is primarily about standing and standing is important when the standing is standing to protect a public interest in terms of remedies.

MR MERKEL: That is right, your Honour, but what we sought to say, and the Court did not accept, is that standing to redress a public wrong representing the public interest gives you the right to, in this context, prevent the public harm that arises from the conduct from flowing. Now, their Honours at paragraph 13 said that it was not because of the wider ambit we contended for for section 18, it is not lightly to be supposed that the section is directed to protecting the broader class of persons, and then their Honours defined what has been the traditional approach under section 80, people who act to their detriment in reliance upon it or who may be affected directly or indirectly. That is the first ground for rejecting our broad submission. Then their Honours go on over the page at paragraph 14, they deny that it gives:

relief to a wider class of persons –

then in the third line their Honours, talking about “sufficient relevant connexion”, say -

the remedy which is sought, and thus sufficient relevant connexion between the impugned conduct –

and then they put another criterion of -

prevention or eradication of the harm to which the remedy is directed. In this case, any connexion between the impugned conduct and such harm –

is, we say, at best fortuitous and logically very tenuous. Now, that is - - -

CRENNAN J: Mr Merkel, may I take you, just for a moment, just before you go on, to page 308 of the transcript which is part of the supplementary application book and I wanted to take you just to the last few lines in a - - -

MR MERKEL: Is it a page in the supplementary - - -

CRENNAN J: Sorry, 640 in the application book and 308 of the transcript.

MR MERKEL: Yes, I have got that heavily marked, your Honour.

CRENNAN J: I think it was the Acting President Justice of Appeal Justice Nettle. Right at the last three lines, his Honour talks about what will be assumed for the purpose of the application and right at the end he says:

What further could you demonstrate by way of evidence at a trial which would inform the consideration of the relevant connection between the relief sought and the misleading and deceptive conduct?

Not unlike the passages to which you have just taken us, his Honour is there referring to the fact that there needs to be some connection between injunctive relief and the statute pursuant to which the relief is sought. I notice you did not demur from his Honour making that remark and I am just struggling to understand if you are complaining about the use of that locution “relevant connexion” in the context of the application for interlocutory relief.

MR MERKEL: Your Honour, this application, with respect, has been distracted by a debate over the words “nexus”, “relevant connexion”, “sufficient relevant connexion” or “appropriately related to the contravention”. One can use any of - - -

CRENNAN J: There is not much difference between any of them, is there?

MR MERKEL: No, there is not much difference. We say that each time we have used “sufficient relevant connexion” it has been on the basis that the trade practices cases have always required that the relief be directed at preventing repetition of contravening conduct. We put it squarely to their Honours under sections 80 – 232(5) and (6) but under the new scheme, including the explanatory memorandum and including the fact that section 18 has now become a national norm rather than what was referred to as not having a national norm by a side wind back in 1992 or so in Concrete Constructions, what we say is that that limitation of preventing repetition which has occurred in the trade practices context is no longer a limitation under section 232 and (5) and (6) are examples of conduct that is unrelated to repetition. There must be a nexus, but here the nexus is simply stated, your Honour.

What we say is that to the public of Victoria, the State is represented in simple terms that this has a cost benefit ratio of 1.4 but on the assumptions made that overstates it by at least 75 per cent which takes you back to, at least, point 8 or below which makes it a loss making project. Thus, the harm which the public would suffer is 20 cents in every dollar which in a $8 billion project is $1.5 billion. Now, their Honours did not take that into account, notwithstanding it was an assumption made, and on many occasions in the transcript we said that was the relevant loss. They did not refer to it on balance of convenience not because they overlooked it but because that was not regarded by their Honours as a protectable or cognisable interest because that kind of public harm was not protectable.

That is the issue raised on the special leave application. Does the State of Victoria have an impunity that we would imagine no private enterprise would have if it made these representations in a prospectus, was carrying on a business, and may I emphasise, the representations were about every cent to be spent and every cent to be earned over the life of the project. They were not incidental to the framework of the project. They went to the very heart of the – they defined the project. If a private enterprise made that representation there would be certainly action by those who rely on it. We would say investors whose money was about to be lost by the commencement of the business under this regime would have standing.

CRENNAN J: This is why you are referring to Paringa in your argument?

MR MERKEL: Well, Paringa needs some explanation, in this sense. What happened – because their Honours found that the hearing of the matter miscarried by unfairness to us, we had never had the opportunity to put our case. When we were in the Court of Appeal, we were in the same position as the litigant was before the High Court except that litigant had had a hearing, we had none. His Honour, and we say, correctly and fairly, overcame that by that passage that your Honour just took me to which started with his Honour being very prescient, he said, at the top of the page:

I’m going to regret this –

but the reason he did it was not to test our case but that was the step that overcame unfairness, so he said if I assume everything in your favour and he asked me what else should I assume and I said, not only that they were not reasonable but that there was no basis, which was our ultimate case, the reason he did that was that we could no longer say that the process was unfair because he was putting our case at its highest. That is why we say that this is no different from a demurrer because it is assuming we can succeed at the highest level of our claim which is fully pleaded, in this context, and the end result is we have little prospect, no real prospect. Their Honours said at paragraph 16 regarding this interest is that which it is designed:

the legislation was designed to protect, would be an abuse of the legislation.

Now, we say that no trial judge could grant this relief on the basis of this judgment because we cannot have our statement of claim rise any higher than the assumptions his Honour made. We say that it is only - a Court of Appeal would not say this is clearly wrong because we accept there are arguments both ways because - - -

KEANE J: Mr Merkel, how can you say that in the light of paragraph 17:

So to say is not intended to exclude the possibility of the appellant succeeding in obtaining the final relief which he seeks.

MR MERKEL: Again, your Honour, that needs to be put in context. We had argued that the case of this Court, Browne’s Case – Wickstead v Browne, what had happened there is in the Court of Appeal Justice Kirby had said I will not strike out a duty of care. There were two, there was a fiduciary duty and a common law duty and the cases made it clear, fairly strongly, that only one rather than both would survive and two judges on the Court of Appeal struck out one. His Honour dissented. It came on for special leave before the Full Court and the Full Court said you really ought not to have struck it out even though it was tenuous because the same matter will have to go to trial and you are not shortening anything and it may be a court on appeal may come to a different view.

We put Wickstead v Browne to his Honour and in the judgment that was the basis for saying you should not strike out the relief because that is not going to contribute or add to the cost of the litigation and his Honour said maybe something might emerge at a later point. That is the context in which that was said but we cannot put it any higher than this. No matter how successful we are at trial, we cannot rise higher than no grounds and the pleading of a loss making project that will run into hundreds of millions, possibly more than $1 billion of loss.

CRENNAN J: Just going back to that point, Mr Merkel, that there is going to be – the hearing has been remitted pursuant to the final orders made by the Court of Appeal. As I understand it, there is a public interest immunity claim to be ventilated which, of course, means that your particulars in your pleading may be amplified, matters of that kind, and there will be an opportunity on the remitted hearing to advance arguments in relation to whether or not the jurisprudence in relation to section 80 can be transposed across in relation to section 232.

MR MERKEL: I think the issue, with respect, your Honour, is broader than that. It is not whether the jurisprudence is transposed because their Honours gave as broad a view of section 80 as one could wish for but it stopped short of recognising the public interest would protect the public harm that, we say, is caused by the State. That is the special leave question. When a State carries on business, makes representations about the essential elements of that business that are misleading and as a result if that business is conducted, the State will run into very substantial losses, is that a cognisable interest which the Truth About Motorways approach would say we give standing to get that relief in the public interest. We say whether or not that public harm which otherwise would not be recoverable in any other way or protectable in any other way is an interest protected under 232.

The Court’s approach to section 80 was as wide as there has been but it stopped short of recognising the interest which, we contend, we are entitled to protect. That issue has never been considered by the courts, and given the nature and extent of State conduct of businesses, federal and State and territory, we say, where the public interest stands is an issue that warrants consideration by this Court because there is no doubt that we have been precluded from that final relief by this finding because we can never do any better, whatever the outcome of the public interest immunity application is.

It is said that this is hypothetical. It is said it is not an appropriate vehicle. Having those assumptions made, we say, raises the question fairly and squarely. Does paragraph B(c), which we sought, it is in the application book, your Honours, the supplementary application book at page 252. It is that relief which has been foreclosed in every practical sense and we have sought to define the special leave questions at page 212 and, we say, in our concise statement, particularly in paragraph 2:

Whether, on the assumptions made, it would as a matter of law be open to the trial court to grant the injunctions to the applicant, representing the public interest, to protect the public from the financial harm assumed to be caused by the public wrong committed by the respondents?

We say that is an important question which has not been considered by the courts but is foreclosed to us on interlocutory and final relief. So, in a practical sense, your Honour, no matter how much it might be said the point is being left open for some possibility, it is not a realistic possibility in this litigation.

GAGELER J: Why is it not open to you to make that argument for final relief?

MR MERKEL: Because the decision of the Court of Appeal in terms of its view of it says that that is not a cognisable interest to protect the public from harm. We say a fair reading of the judgment has foreclosed that. It is hard to see how a trial judge could consistently, with the Full Court’s view of that public interest, come to any different view.

CRENNAN J: But then it can go up the court hierarchy and then we can have the benefit of an appellate court’s full consideration of the issue which could not be said occurred on this occasion.

MR MERKEL: Except for this, your Honour, it did consider it because it refused the relief. We say there is no - - -

CRENNAN J: It touched on it, Mr Merkel, did not consider it, and there would be some wisdom in the matter being debated on the remitted hearing, notwithstanding what you have said about the difficulty a primary judge might have, because should the point then come to this Court, this Court would have the benefit of the full consideration of the intermediate appellate court.

MR MERKEL: There are two difficulties, your Honour. We say the project will be over by then so there will be no practical relief, it would be impossible to stop or unscramble the egg but, more importantly, we say it is a question of law. The facts being assumed make this a demurrer point. We say that a hearing will not put any court in any better position. Their Honours considered it by reference to the points they gave in their judgment. Those points are right and wrong. Their Honours accepted. Two views were open. There was force, in our view, but their Honours set out the factors that led them to reject it.

KEANE J: Were not those factors, basically, a view of the balance of convenience?

MR MERKEL: No, with respect not, your Honour, because once they had decided that the public harm was not a cognisable interest, there was no question any longer of balance of convenience because they did not take into account, on that view, the hundreds of millions of dollars of loss on the other side, which was the public harm.

KEANE J: I find it difficult to understand that submission, frankly, having regard to paragraph 17 and having said what they say in paragraph 17, that they are not foreclosing your prospects of success at trial. They then go on to say, it is however plain from the affidavit material that an injunction in the terms sought by the appellant would be likely to have profound consequences, and they go on to set out what those consequences are.

MR MERKEL: They did, your Honour, but they never looked at the harm that we had projected because that was not cognisable. If that harm

was there that would be counterbalanced and it was a different public interest weighing exercise. So the issue that we rely upon on the main argument, your Honour, is one that necessarily foreclosed consideration of public harm on the balance of convenience.

KEANE J: Does it weigh in the balance of convenience that you are seeking to save the public of the State of Victoria from harm when the government of the State of Victoria is saying, we know the facts. The people with whom the State of Victoria wants to deal are saying we know the facts. We want to make these deals. Does it not go into the balance of convenience that those who speak for the State of Victoria and those who are making the contracts you seek to restrain are all very keen to make the contracts, notwithstanding the suggestions of misconduct?

MR MERKEL: It is a bit like asking the defendant what is your view of the plaintiff’s case. The culprit is the State of Victoria, that is why we put our – I am sorry, I think I have got my red light on, your Honours, so I should be sitting down, but if I can answer your Honour’s question. We say the culprit is the State of Victoria. It is the one that is causing the harm and the only person on your Honour’s scenario that could have any standing to protect the public from it - - -

KEANE J: No, not standing at all, balance of convenience.

MR MERKEL: Your Honour, as I said, the State puts its balance of convenience but it does not concede because it has concealed the losses, but they were pleaded and they were assumed. There are two explanations for the Court of Appeal’s failure to refer to the losses. One is the one we put forward because their Honours were cognisable of it. That is, that they regarded it not as a cognisable interest. The second is they overlooked the factual material that they had assumed and that was in error but we assume it was the first because of the rejection of our argument on the principle point. If your Honours please.

CRENNAN J: We will not trouble the respondents in this matter.

The applicant seeks special leave to appeal from an interlocutory decision of the Court of Appeal of the Supreme Court of Victoria. The Court of Appeal refused to grant interim injunctive relief for the period for which it was sought. The refusal appears to us to have been based on considerations of the balance of convenience. We are not satisfied that the refusal involved any error of principle or question of law such as might warrant a grant of special leave to appeal. Further, we are not persuaded that this application is a suitable vehicle for agitating a question of the precise ambit of section 232 of the Australian Consumer Law. That question can be debated on the remitted hearing. Accordingly, we are not persuaded that this application engaged the interests of justice. Special leave to appeal is refused with costs, including costs reserved.

The Court will adjourn briefly to reconstitute.

AT 10.01 AM THE MATTER WAS CONCLUDED