New Zealand Law Society - Supreme Court roundup 28 January to 10 February

Supreme Court roundup 28 January to 10 February

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

Supreme Court of Canada

Contract, termination, honest performance, good faith

C M Callow v Zollinger [2020] SCC 45 (18 December 2020)

Successful appeal from Ontario CA - In 2012 a group of condominium corporations (B) entered into a two year winter maintenance contract and a separate summer maintenance contract with C - Clause 9 of the winter maintenance contract entitled B to terminate that agreement if C failed to give satisfactory service under contract terms - Clause 9 also provided that if for any other reason, C’s services were no longer required B could terminate the contract on 10 days’ written notice - In early 2013 B decided to terminate the winter maintenance agreement but chose not to inform C of its decision - Throughout the spring and summer of 2013 C had discussions with B regarding renewing the winter maintenance agreement - Following those discussions C thought it would get a two year renewal of the winter maintenance contract and that B was satisfied with its services - During the 2013 summer C performed work above and beyond the summer maintenance contract at no charge -Hoped would act as an incentive for B to renew the winter maintenance agreement – In September 2013 B told C it was terminating the winter maintenance agreement – C alleged breach of contract - Said B acted in bad faith - Trial judge said good faith performance principle and honest performance duty were engaged - Satisfied that B actively deceived C from September 2013 – Said B acted in bad faith by withholding termination decision to ensure C performed summer maintenance contract and by continuing to represent that the contract was not in danger despite knowing C was taking on extra tasks to bolster the chances of the winter maintenance contract being renewed - Awarded damages to C to place it in the same position as if the breach had not occurred - CA set aside first instance judgment saying trial judge erred by improperly expanding the duty of honest performance beyond the terms of the winter maintenance agreement – It also said any deception in communications during the summer of 2013 related to a new contract not yet in existence - Renewal C hoped to negotiate - therefore was not directly linked to the winter contract performance – SCC majority allowed appeal and reinstated trial judge’s decisions.

Criminal court, concurrent jurisdiction with youth court

T J M v R [2021] SCC 6 (29 January 2021)

Successful appeal from Alberta Queen’s Bench - M, a young person, charged with second degree murder, an offence listed in s. 469 of the Canadian Criminal Code - Crown gave notice of intention to seek an adult sentence, entitling M to elect the mode of trial - He elected trial by a superior court judge sitting without a jury, requested a preliminary inquiry, and sought judicial interim release before a justice of the Alberta Court of Queen’s Bench - Application judge said he had no jurisdiction to grant judicial interim release to a young person – Said Alberta Provincial Court was designated youth court for the province - Had exclusive jurisdiction - M appealed to SCC – SCC said superior court justice had jurisdiction to hear and decide application for judicial interim release brought by a young person charged with an offence listed in s. 469 - That jurisdiction held concurrently with judges of the province’s designated youth court – Appeal allowed.

High Court of Australia

Constitutional law, freedom of movement, COVID-19

Gerner and anor v State of Victoria [2020] HCA 48 (10 December 2020]

Reasons for allowing State’s demurrer to claim concerning whether constitution implicitly guaranteed freedom of movement - The Public Health and Wellbeing Act 2008 (Vic) (the Act) empowered authorised officers to exercise emergency powers when the Minister for Health declared a state of emergency - State of emergency declared to exist in the whole of Victoria because of serious risk to public health posed by COVID-19 pandemic - Directions restricting the movement of people within Victoria (the Lockdown Directions) were made from time to time in exercise of emergency powers conferred by s 200(1)(b) and (d) of the Act, and remained in force on 6 November 2020 - Plaintiffs sought declarations that s 200(1)(b) and (d) and the Lockdown Directions were invalid as infringing a guarantee of freedom of movement said to be implicit in the Constitution - State demurred to the plaintiffs' claim - Said Constitution did not imply the freedom of movement the plaintiffs contended – HCA said no freestanding guarantee of freedom to move wherever one wishes for whatever reason is implicit in the Constitution on any of the grounds plaintiffs contended - First, the Court said such a limitation on the legislative and executive power of the Commonwealth and States could not be implied from the fact of federation - Rather, the legal nature and effect of the federation the Constitution established could be known only from the terms and structure of the Constitution itself; those terms and that structure provided no support for the limitation on power for which the plaintiffs contended - Second, HCA said while legislated limits on movement that burdened political communication might infringe the implied freedom of political communication, a limit on movement which did not have a political character would not - Thirdly, the Court said s 92 of the Constitution does not imply a freedom of movement of the kind for which the plaintiffs contended - Such an implication would render otiose the delineation clearly drawn by the text of s 92 between protected interstate intercourse and intrastate intercourse which it does not purport to protect - Would also attribute to the text a meaning rejected by the framers of the Constitution – Demurrer allowed.

Judicial Committee of the Privy Council

Insurance, cost recovery, contract terms, unjust enrichment

Samsoondar v Capital Insurance Co Ltd [2020] UKPC 33 (14 December 2020)

Successful appeal from Trinidad and Tobago CA – S owned a transport company. In 2005, one of S’s vehicles collided with a third party (the "Third Party") whilst being driven by one of his employees. That vehicle was insured with Capital Insurance Company Limited (Insurer), under an insurance policy that purported to limit coverage to S only (the Policy) - Third Party claimed against Insurer for damage suffered as a result of the collision - Insurer settled the claim with Third Party in the sum of $43,400, believing this was its statutory obligation under the Motor Vehicles Insurance (Third Party Risks) Act Chap 48:51 (the Act) - Before making payment, the Insurer notified S that it would seek to recover any sums paid to Third Party since the Policy did not extend to cover incidents where S’s employees were driving – S did not pay - Insurer subsequently issued proceedings against S seeking to recover the sum it paid to Third Party from S as damages for breach of the Policy or as an indemnity for monies paid on his behalf – S argues that Insurer was not obliged to pay any sums to Third Party under the Act and had no authority to settle the claim on his behalf – Cited 2012 Privy Council judgment as authority for the proposition that the Act did not oblige an insurer to satisfy a third party claim in respect of policies covering the policyholder only – PC said, among other things, although the principal sum at stake in this motor insurance dispute was only $43,400, the case raised such interesting legal issues that, at times, the Board felt almost as if it was tackling an exam question - Involved retrospectivity of a judicial interpretation of a statute, which overturned a previous judicial interpretation, and, in the light of that, there were questions on contractual interpretation and on the compulsory or mistaken discharge of another’s legal liability in the law of unjust enrichment – As would become clear, and perhaps disappointingly for the development of the law, it was not necessary to answer all those questions in order to decide the appeal – PC said with respect, something had here gone awry with the reasoning of the lower courts - When his employee drove the truck with S’s consent, he did not breach his insurance contract of insurance with insurer - Consequence, as a matter of contract law, was simply that, while the employee was driving, the defendant was not insured (subject to any statutory provision to the effect that, even though the policy was “owner driver only”, the employee should be treated as insured) - There was no term, express or implied, in the insurance policy that the defendant could not give permission to anyone else to drive his truck - It followed that the principal reasoning of the lower courts could not stand - Insurer could not recover from S the sum paid out to the third party as damages for a breach of contract comprising allowing the employee to drive the truck - Having cleared the ground, PC focused on issues at the heart of this appeal – First was the “contractual/statutory indemnity” issue and the second as the “unjust enrichment” issue - Albeit not clearly articulated, the first was pleaded and, through a glass darkly, may be regarded as having been considered by the trial judge and CA - CA raised the second on its own initiative - Issue as to whether it was appropriate for CA to have done so – PC said it did not underestimate the complexities that could arise where a legal ruling was overturned, However, its conclusion was that CA wrong to refuse S’s appeal against trial judge’s decision – PC’s reasoning summarised was: (i) CA incorrect to uphold judge’s decision that insurer could recover from the defendant the sum paid out to the third party ($43,400) as damages for a breach of contract comprising allowing the defendant’s employee to drive the truck. (ii) On the “contractual/statutory indemnity” issue, CA incorrect to uphold judge’s decision that insurer entitled to the sum claimed by reason of a contractual or statutory indemnity; (iii) On the “unjust enrichment” issue, CA incorrect to decide that a claim in unjust enrichment should succeed on the basis of legal compulsion; and mistake of law was neither pleaded nor proved - Issues relating to S’s enrichment and defences provide further reasons why the unjust enrichment claim based on legal compulsion should not have been upheld and why it was now too late to raise a claim based on mistake - For all these reasons, the appeal should be allowed - Moreover claim should be dismissed because it would plainly be inappropriate for the insurer to be allowed now to amend its claim by pursuing an action in unjust enrichment based on a mistake of law - Already been a trial of this action which was the insurer’s opportunity to advance its case in the way that it thought best - Would be unfair and prejudicial to the defendant to allow the claimant a second bite of the cherry – Appeal allowed.

United Kingdom Supreme Court

R (on the Application of Friends of the Earth and ors) v Heathrow Airport Ltd (Appellant) [2020] UKSC 52 (16 December 2020)

Successful appeal from CA - Appeal concerned lawfulness of the Airports National Policy Statement (ANPS) and its accompanying environmental report - ANPS was national policy framework which governed construction of a third runway at Heathrow Airport - Any future application for development consent would be considered against the policy framework in the ANPS - ANPS did not grant development consent in its own right - Successive governments had considered whether there was a need for increased airport capacity in the South East of England - Secretary of State for Transport (Secretary) said Government accepted the case for airport expansion in 2015 – Said in October 2016 that North West Runway (NWR) scheme was preferred scheme - UK was separately developing its policy on environmental issues and climate change including obligations under the Paris Agreement - Against this background, the Secretary designated ANPS as national policy on 26 June 2018 - Objectors to the NWR scheme including Friends of the Earth Ltd (FoE) and Plan B Earth challenged the lawfulness of the Secretary’s designation on a number of grounds - Divisional Court dismissed all the objectors’ claims in two separate judgments - CA upheld the main parts of these judgments on appeal but allowed some of FoE and Plan B Earth’s grounds - Said Secretary acted unlawfully in failing to take the Paris Agreement into account when designating the ANPS – Accordingly ANPS was of no legal effect - Secretary did not appeal CA decision - However company which owned Heathrow Airport, Heathrow Airport Ltd (HAL) was a party to the proceedings and was been granted permission to appeal to SC - HAL said it had already invested a large sum of money promoting the NWR scheme and wished to apply for development consent to carry the project through – SC unanimously allowed appeal – Said Section 5(7) of the Planning Act 2008 (PA) provided that national policy frameworks such as ANPS must give reasons for the policy adopted - Section 5(8) said reasons must include an explanation of how that policy takes account of existing “Government policy” relating to the mitigation of and adaptation to climate change - Meaning of “Government policy” a matter of interpretation of the statutory provision - Phrase needed to be construed relatively narrowly in context to allow section 5(8) to operate sensibly - Otherwise would create a “bear trap” for civil servants and ministers, who would have to consider all ministerial statements given in any context which might be characterised as “policy” in a broad sense – Court said “Government policy” in the context of section 5(8) referred to carefully formulated written policy statements cleared by the relevant departments on a Government-wide basis - Epitome of “Government policy” a formal written statement of established policy - Absolute minimum standard a statement which was clear, unambiguous, and devoid of relevant qualification – Appeal allowed.

Insurance, business interruption, causal link, COVID-19

Financial Conduct Authority v Arch Insurance (UK) Ltd and ors [2021] UKSC 1 (15 January 2021)

A series of appeals clarified whether a variety of insurance policy wordings covered business interruption losses resulting from the COVID-19 pandemic and public health measures taken by UK authorities in response to the pandemic from March 2020 – Financial Conduct Authority (FCA) brought proceedings under Financial Markets Test Case Scheme (Scheme) under an agreement with eight insurance companies to resolve issues of general importance on which immediately relevant and authoritative English law guidance was needed – Lower court constituted under Scheme considered 21 sample insurance policy wordings - Court accepted many of the FCA’s arguments about the effect of these wordings but the FCA “leap-frog” appealed directly to SC on certain issues on which it did not succeed - Six insurance companies (the “Insurers”) appealed against Court decision on other issues and also responded to FCA’s appeal – SC addressed: (i) the interpretation of “disease clauses” (which covered business interruption losses resulting from any occurrence of a notifiable disease within a specified distance of insured premises) (ii) the interpretation of “prevention of access” clauses (which covered business interruption losses resulting from public authority intervention preventing access to, or the use of, business premises) and “hybrid clauses” (which contained both disease and prevention of access elements); (iii) what causal link had to be shown between business interruption losses and occurrence of a notifiable disease (or other insured peril specified in the relevant policy wording) (iv) the effect of “trends clauses” (which prescribed a standard method of quantifying business interruption losses by comparing the performance of a business to an earlier period of trading); (v) the significance in quantifying business interruption losses of effects of the pandemic on the business which occurred before the cover was triggered (“Pre-Trigger Losses”); and (vi) in relation to causation and the interpretation of trends clauses, the status of a 2010 Commercial Court decision relating to Orient Express Hotels Ltd – SC substantially allowed FCA appeal and dismissed Insurers’ appeals.

Regulatory powers, investigation of company inc. overseas

R (on the application of KBR Inc) v Director of Serious Fraud Office [2021] UKSC 2 (5 February 2021)

Successful appeal from Divisional Court - Under s 2(3) of the Criminal Justice Act 1987 (the 1987 Act) the Director of the Serious Fraud Office (SFO) had power to issue a notice requiring persons to produce documents and other information for the purposes of an SFO investigation into serious or complex fraud - Failure to comply a criminal offence - Issue here whether SFO could s 2(3) power in to compel a foreign company to produce documents it held outside the UK - KBR, Inc, (KBR) a company incorporated in the USA - Did not have a fixed place of business in the UK, and had never carried on business in the UK - However, had UK subsidiaries, including Kellogg Brown and Root Ltd (KBR UK) – On 4 April 2017, SFO issued a s 2(3) notice to KBR UK - KBR UK provided various documents to the SFO in response, but made it clear that some of the requested material was held by KBR in the USA, if and to the extent it existed - In July 2017, KBR officers attended a meeting with the SFO in London - During that meeting, the SFO handed KBR’s Executive Vice President a further s 2(3) notice (July notice) - July notice contained multiple requirements for KBR to produce material it held outside the UK – KBR applied for judicial review to quash July notice - Amongst other things, said July notice ultra vires because s2(3) did not permit the SFO to require a company incorporated in the USA to produce documents it held outside the UK - Divisional Court refused KBR’s application – Said s2(3) extended extra-territorially to foreign companies in respect of documents held outside the UK if there was a sufficient connection between the company and the UK - On the facts, there was a sufficient connection between KBR and the UK, so July notice was valid – KBR appealed to SC – SC unanimously allowed appeal – Said starting point was presumption that UK legislation generally not intended to have extra-territorial effect - Presumption rooted in both the requirements of international law and the concept of comity, founded on mutual respect between States - Presumption against extra-territorial effect clearly applied here KBR not a UK company, and never had a registered office or carried on business in the UK - No basis for Divisional Court’s finding that SFO could use the s2(3) power to require foreign companies to produce documents held outside the UK if there was a sufficient connection between the company and the UK - Implying a sufficient connection test into s2(3) inconsistent with Parliament’s intention and would involve illegitimately re-writing the statute – Appeal allowed.

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