New Zealand Law Society - Supreme Court roundup 18-24 June 2021

Supreme Court roundup 18-24 June 2021

Decisions, proceedings and news from the highest courts in some common law jurisdictions in the past week.

New Zealand Supreme Court

Leapfrog appeal, excess breath alcohol, “sense and effect”

McKinney v New Zealand Police [2021] NZSC 68 (21 June 2021) 

Unsuccessful leave application – McK sought leave to bring leapfrog appeal against HC decision – HC allowed police appeal against DC decision dismissing a charge against McK for driving a vehicle while the proportion of alcohol in his breath exceeded 400 mcg of alcohol per litre of breath – DC dismissed charge because of non-compliance with s 77 of the Land Transport Act 1998 – McK wanted to appeal directly to SC from HC essentially to challenge CA decision Solicitor-General’s Reference (No 1 of 2020) – Wanted to argue that CA wrong to apply the “sense and effect” approach – McK’s counsel described that approach as “outdated and inapt” – SC said interests of justice not served by effectively a repeat of the exercise CA  already under took in  Solicitor-General’s Reference (No 1 of 2020) - Arguments did not have sufficient prospects of success to justify a reconsideration of that exercise -  Miscarriage of justice did not  arise for same reason – Application dismissed.

High Court of Australia

Limitation, mortgagee’s rights

Price and ors v Spoor and ors [2021] HCA 20 (23 June 2021) 

Unsuccessful appeal from Queensland CA - Law Partners Mortgages Pty Ltd (LPM) advanced $320,000 to P in 1998, secured by mortgages over land - S, successors in title to LPM, brought proceedings as mortgagees - Claimed monies owing under and secured by two mortgages, together with recovery of possession of land subject to the mortgages - Pleaded S statute-barred from bringing  action for debt pursuant to ss 10, 13 and 26 of Limitation of Actions Act 1974 (Qld) (Act) -Further alleged that S’s title under the mortgages had been extinguished by operation of s 24 of Act – Act, section 24 provided, in effect, that where relevant time period within which a person "may bring an action" to recover land had expired, "title" to that land "shall be extinguished" - In reply, S relied on cl 24 of each mortgage, which they contended amounted to a covenant on P’s part not to plead limitation defence  - Primary judge dismissed S’s application for summary judgment or for strike out of defences – CA allowed appeal saying possible to contract out of the defences Act conferred and s 24 did not apply here – HCA  unanimously dismissed P’s appeal - Said right to plead expiry of the relevant time period as a defence a benefit conferred upon individuals - Not contrary to public policy for parties to agree to give up that right and such an agreement was enforceable - By agreeing to cl 24, P effectively gave up the right to plead expiry of relevant time period - S not statute-barred and s 24 of the Act did not operate to extinguish S’s title – HCA also said S not confined to action in damages if P breached cl 24 – Appeal dismissed.

Immigration detention, lawfulness of

Commonwealth of Australia v AJL20 [2021] HCA 21 (23 June 2021) 

Successful appeal from FCA - Section 189(1) of the Migration Act 1958 (Cwth) (Act), read with the s 5(1) definition of "detain", authorised and required Executive to take into and keep "unlawful non-citizens" in immigration detention - "Unlawful noncitizens" were non-citizens in the "migration zone" (in broad terms, Australia) who did not hold effective visas - Section 196 governed period for which an unlawful non-citizen taken into immigration detention to be kept in immigration detention under s 189(1) - Section 196(1) relevantly provided unlawful non-citizen had to be kept in immigration detention until he or she was removed from Australia under s 198 or until he or she was granted a visa - Section 198(6) imposed obligation on Executive to effect removal of unlawful non-citizen (without an outstanding visa application) "as soon as reasonably practicable" - Section 197C had  effect that it was irrelevant whether Executive's performance of s 198 duty would place Australia in breach of its non-refoulement obligations under international law – A’s visa cancelled on character grounds on 2 October 2014 - Having become unlawful non-citizen, was detained as required by s 189(1) - On 11 September 2020, FC ordered A’s release saying his continuing detention was unlawful because, due to its legislatively irrelevant desire to comply with Australia's non-refoulement obligations, Executive had not removed him from Australia "as soon as reasonably practicable" – FC said detention period Act authorised and required ceased when removal should have occurred had the Executive acted with all reasonable despatch - This reading of Act thought to be compelled by a need to observe the limitations on Parliament's power to authorise detention by Executive flowing from the separation of judicial power effected by Ch III of the Constitution – HCA majority said ss 189(1) and 196(1) validly authorised and required detention of unlawful non-citizen until actual event of their removal from Australia or grant of a visa - Detention so authorised and required did not involve constitutionally impermissible Executive punishment of detainee because was reasonably capable of being seen as necessary for legitimate non-punitive purposes of segregation pending investigation and determination of any visa application or removal - Authority and obligation to detain hedged about by enforceable duties, including that in s 198(6), that gave effect to these legitimate non-punitive purposes and meant detention duration capable of determination -  Upon the Executive  performing these hedging duties, detention be brought to an end – Executive non-performance erased neither duties nor legitimate non-punitive statutory purposes which they support - Rather, judicial power compelled Executive performance of its duties, through the remedy of mandamus, so as to enforce the supremacy of the Parliament over the Executive – Appeal allowed.

Judicial Committee of the Privy Council

Arbitral award, procurement contract, public policy

Betamax v State Trading Corporation [2021] UKPC 14 (14 June 2021) 

Successful appeal from Mauritius SC - Underlying dispute concerned contract of affreightment (COA) entered into on 27 November 2009 between Betamax Ltd (B), a Mauritian company, and State Trading Corporation (STC) a public company responsible for importing essential commodities to Mauritius - Under COA, Betamax agreed to build and operate a tanker and use it to transport STC’s petroleum products from India to Mauritius -  Mauritian law governed COA - Provided for arbitration under Singapore International Arbitration Centre Rules - On 30 January 2015, a new Mauritian Government said it would terminate the COA because contract award breached Public Procurement Act 2006 (PPA) and the Public Procurement Regulations 2008 (PP Regs) - On 15 May 2015, B filed a notice of arbitration against STC, claiming damages for breach of COA - STC objected on various grounds, including that COA breached Mauritian public procurement laws and was therefore illegal and unenforceable - Arbitrator disagreed with STC and awarded in B’s favour on 5 June 2017 - Said COA  did not breach Mauritian public procurement laws and B  entitled to USD 115.3m in damages – Following Award, both parties applied to Mauritius SC, B to enforce the Award, STC to set award aside for several reasons, including that Award conflicted with Mauritius public policy - SC agreed with STC and set award aside - SC focused on whether COA breached PPA – said it did, COA illegal,  illegality flagrant and award should be set aside as to enforce it would conflict with Mauritian public policy – SC granted B permission to appeal to PC - Appeal raised three issues: (1) (the main issue) was SC entitled to review arbitrator’s decision that COA did not breach Mauritian public procurement laws; (2) if SC entitled, was COA illegal; and (3) if COA illegal, did award conflict with Mauritian public policy? PC said proper question under section 39(2)(b)(ii) is whether, on the findings of law and fact made in the award, there was any conflict between the award and public policy - Interpreting PP Act and PP Regulations raised no public policy issue – Issue simply whether COA exempted from  procurement legislation – SC could not use guise of public policy to reopen issues relating to meaning and effect of a contract or whether it complies with a regulatory or legislative scheme – PC .conclusion on issue one, meant issues two and three did not arise – Appeal allowed.

Share allocation, nominees for another

Pleshakov v Sky Stream Corporation and ors [2021] UKPC 15 (14 June 2021)

Successful appeal from Eastern Caribbean CA in respect of British Virgin Islands - P claimed beneficial ownership of all issued shares of Sky Stream Corporation (S) - In 1990 P founded a Russian company called Transaero Airlines (T) - In 2005, P held (directly or indirectly) around 32% of T shares and his family held another around 11% - Another group of companies (B) held just over 43% of T shares - S incorporated in British Virgin Islands in 2005 to acquire shares in T - Second and Third Respondents were Russian lawyers (lawyers) - P said upon S’s incorporation, when its shares were allotted 50:50 to lawyers, they held shares as P’s nominees - Lawyers appointed as S Directors -  In 2013 P began proceedings seeking declaration that the lawyers acquired the S shares as his nominees and seeking rectification of members’ register to reflect his share ownership - Commercial Court allowed P’s claim - Said lawyers acquired S shares as P’s nominees -  In a judgment delivered more than three years after the appeal was heard, CA allowed lawyers’ appeal and set Commercial Court orders aside – P appealed to PC – PC said, among other things, this was a classic case where there was a good deal to be said on each side regarding primary facts, inferences to be drawn, and circumstances in which the parties were acting – Trial judge’s function to carefully weigh carefully each side’s points and come to definite conclusions - Was what the judge did - Found inference was lawyers acquired shares intending to hold them on trust for P – PC said Judge fully entitled to weigh the evidence as he did and come to that conclusion – PC also commented on “extraordinary period” that elapsed between CA hearing and judgment - Was “most unsatisfactory both for the parties and for the administration of justice more generally” – Appeal allowed.

United Kingdom

Negligence, scope of duty

Manchester Building Society v Grant Thornton LLP [2021] UKSC 20 (18 June 2021) 

Manchester Building Society (society) a small mutual building society - Until 2012, Grant Thornton UK LLP (GT) audited society’s accounts - In 2006 and annually thereafter, GT incorrectly and negligently advised society its accounts could be prepared according to a method known as "hedge accounting" and that accounts prepared using that method gave a true and fair view of the society’s financial position - Relying on that advice, society carried on a strategy of entering into long-term interest rate swaps as a hedge against the cost of borrowing money to fund its lifetime mortgages business - Misstated accounts served to hide volatility in society’s capital position and what became a severe mismatch between the swaps’ negative value and the value of the mortgages the swaps were supposed to hedge - In 2013, GT realised its error - Society had to restate its accounts, showing substantially reduced assets and insufficient regulatory capital - To remedy the situation, the society closed out the interest rate swap contracts early at a cost of over £32m – Issue on appeal whether society could recover in damages the cost of closing out the swaps from GT - Trial judge and CA said it could not, in each case based on their understanding of the scope of duty principle – SC unanimously allowed appeal - Said society suffered a loss falling within the scope of the duty of care GT assumed, having regard to purpose for which it gave its advice on using hedge accounting - GT liable for loss society suffered  breaking the swaps early, subject to a reduction in damages of 50% for contributory negligence – Appeal allowed.

Negligence, scope of duty

Khan v Meadows [2021] UKSC 21 (18 June 2021) 

Unsuccessful appeal from CA - In 2006 M consulted her GP practice to establish whether she carried the haemophilia gene - Following blood tests, K  negligently led  M to believe she was not a carrier - In fact, the tests only confirmed that she did not herself have haemophilia - In 2010, M became pregnant with her son, A -  Shortly after his birth A  diagnosed as having haemophilia - Subsequent genetic testing confirmed M was a carrier of the gene - Had M known she was a carrier, she would have undergone foetal testing for haemophilia when  pregnant - This would have revealed the foetus was affected – M would then have chosen to terminate her pregnancy, and her son would not have been born – No dispute over K being liable in negligence for the costs of bringing up A attributable to his haemophilia - Dispute between arose from A being born and subsequently diagnosed with autism, a condition not related to his haemophilia -  Was K  liable for all costs related to A’s disabilities arising from the pregnancy or only those associated with his haemophilia – HC said K liable for costs associated with both A’s haemophilia and autism - CA allowed K’s appeal, saying she was only liable for costs associated with A’s haemophilia – SC unanimously agreed with CA - Said no principled basis for excluding clinical negligence from the ambit of the scope of duty principle - K liable only for losses falling within the scope of her duty of care to advise M on whether or not she was a carrier of haemophilia gene - Not liable for costs associated with A’s autism – Appeal dismissed.

United States Supreme Court

Obamacare, standing to question

California et al v Texas et al (19-840) (17 June 2021) 

Appeal from 5th Circuit CA - The Patient Protection and Affordable Care Act as enacted in 2010 required most Americans to obtain minimum essential health insurance coverage and imposed a monetary penalty upon most individuals who failed to do so -  Amendments to the Act in 2017 effectively nullified the penalty by setting its amount to $0 -  Subsequently, Texas (along with over a dozen States and two individuals) brought suit against federal officials, claiming that without the penalty the Act’s minimum essential coverage provision, codified at 26 U. S. C. §5000A(a), was unconstitutional - They sought a declaration that the provision was unconstitutional, a finding that the rest of the Act was not severable from §5000A(a), and an injunction against enforcement of the rest of the Act -  DC said individual plaintiffs had standing – Also said §5000A(a) both unconstitutional and not severable from the rest of the Act - Fifth Circuit agreed as to the existence of standing and the unconstitutionality of §5000A(a), but said DC’s severability analysis insufficient justification to strike down the entire Act - Petitioner California and other States intervened to defend Act’s constitutionality and seek further review – SC said Plaintiffs did not have standing to challenge §5000A(a)’s minimum essential coverage provision, among other things, because they had not shown past or future injury fairly traceable to defendants’ conduct enforcing the specific statutory provision they attacked as unconstitutional – CA reversed and case remanded.

Alien Tort Statute, child slavery, liability

Nestle USA Inc v Doe et al (19-146) (17 June 2021)

Successful appeal from 9th Circuit CA - Six individuals from Mali (respondents) alleged that they were  trafficked into Ivory Coast as child slaves to produce cocoa - U. S.-based companies Nestlé USA, Inc., and Cargill, Inc., did not own or operate cocoa farms in Ivory Coast, but bought cocoa from farms located there and provided those farms with technical and financial resources -  Respondents sued Nestlé, Cargill, and others under the Alien Tort Statute (ATS)—which provided federal courts jurisdiction to hear claims brought “by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States,” 28 U. S. C. §1350 — contending that this arrangement aided and abetted child slavery – Because respondents’ injuries occurred overseas and only domestic conduct they alleged was general corporate activity, DC dismissed suit as impermissible extraterritorial application of ATS – 9th Circuit said respondents pleaded a domestic application of the ATS, because corporations’ major operational decisions originated in the United States – SC said respondents improperly sought extraterritorial application of ATS - SC’s two-step framework for analysing extraterritoriality issues first presumed that a statute applied only domestically and asked “whether the statute gives a clear, affirmative indication” that rebuts the presumption – SC already said ATS did not rebut presumption of domestic application - ATS did not expressly “regulate conduct” at all, much less “evince a ‘clear indication of extraterritoriality ” -  Second, where statute, as here, did not apply extraterritorially, plaintiffs had to establish that “the conduct relevant to the statute’s focus occurred in the United States . . . even if other conduct occurred abroad “- Parties disputed what conduct was relevant to ATS “focus”, but even if dispute were resolved in respondents’ favour, their complaint would impermissibly seek extraterritorial application of ATS -  Nearly all the conduct they alleged aided and abetted forced labour—providing training, equipment, and cash to overseas farmers— occurred in Ivory Coast - Pleading general corporate activity, like “mere corporate presence,” did not draw sufficient connection between the cause of action and domestic conduct - To plead facts sufficient to support domestic application of the ATS, plaintiffs had to allege more domestic conduct than general corporate activity common to most corporations – Judgment reversed and case remanded.

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