Brief - April Edition by The Law Society of Western Australia

VOLUME 49

NUMBER 2

APRIL 2022

Special Feature:

Future Proof

ALSO INSIDE

Emerging Tech and Lawyers

Canada’s Extraordinary Use of the Emergencies Act PPSA and You Guide to the Property Securities Act 2009 Proportionality in Legal Costs Taxing Matters The “Backpacker Tax”

YLC Section Event Wrap-ups, Case Notes and more Book Review “Secret State” by Julian Grill

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Volume 49 | Number 2 | April 2022

CONTENTS

ARTICLES 06

Council Member Interview: Kellie Woods

Treasures of the Old Court House Law Museum

Council Member Interview: Dr Brett Davies

Special Feature: Future Proof Emerging Tech & Lawyers

44 45 47

Proportionality in Legal Costs Taxing Matters Book Review: Secret State by Julian Grill

A Guide to the Personal Property Securities Act 2009

Canada’s Extraordinary Use of the Emergencies Act

LawSocietyWA @LawSocietyWA

DISCLAIMER: The views and opinions expressed in Brief and the claims made in advertisements published within it, are not to be taken as those of, or as being endorsed by the Law Society of Western Australia (Inc.) or the Brief Editorial Committee. No responsibility whatsoever is accepted by the Society, or the Editorial Committee for any opinion, information or advertisement contained in or conveyed by Brief. COPYRIGHT: Readers are advised that the materials that appear in Brief Journal are copyright protected. Copyright is retained by the author. Readers wanting to cite from or reference articles in Brief Journal should reference as follows: (Month and Year) Brief Magazine (Perth: The Law Society of Western Australia) at page __). Readers wanting to reproduce a substantial part of any article in Brief Journal should obtain permission from individual authors. If an author’s name is not provided, or if readers are not able to locate an author’s contact details, readers should contact the Law Society of Western Australia (Inc.). The trade mark BRIEF is the subject of registered trade mark 1253722 and is owned by the Law Society of Western Australia (Inc). Trade mark 1253722 is registered for Western Australia. Published bi-monthly (Feb, Apr, Jun, Aug, Oct and Dec) Advertising enquiries to Manager Corporate Communications: Madeleine McErlain Tel: (08) 9324 8650 | Email: mmcerlain@lawsocietywa.asn.au

YLC Section

Communications and Design Officer: Des McKenzie RRP $16.00 incl GST.

Editor: Jason MacLaurin SC

REGULARS 02 04 35 39 46 50 53

President’s Report Editor’s Opinion Ethics Column New Members Member Privileges High Court Judgments Federal Court Judgments

Editorial Committee: Gregory Boyle, Thomas Camp, Dianne Caruso, Lucy Clark, Tracy Cole, Megan Cramp, Patricia Femia, Jessica Henderson, Anlee Khuu, Roselina Kruize, The Hon John McKechnie QC, Grace Ritter, Dr Pat Saraceni, Robert Sceales, Eu-Min Teng, Johann Andreas von Altenstadt.

55 58 59 60 61

Family Law Case Notes

Proofreaders: Ingrid Briggs, Sonia Chee, Cassandre Hubert

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Brief is the official journal of the Law Society of Western Australia Level 4, 160 St Georges Tce Perth WA 6000 Phone: (08) 9324 8600 | Fax: (08) 9324 8699 Email: brief@lawsocietywa.asn.au | Web: lawsocietywa.asn.au ISSN 0312 5831

Law Council Update

Submission of articles: Contributions to Brief are always welcome. For details, contact brief@lawsocietywa.asn.au.

Quirky Cases

Classifieds

President: Rebecca Lee Senior Vice President: Ante Golem Junior Vice President & Treasurer: Paula Wilkinson Immediate Past President: Jocelyne Boujos Ordinary Members: Ben Bullock, Rebecca Bunney, Dr Brett Davies, Angie Gimisis, June Kenny, Gary Mack, Judy McLean, Kellie Woods Junior Members: Thomas Camp, Selina Gates, Hamish Glenister Chief Executive Officer: David Price

PRESIDENT'S REPORT

Rebecca Lee President, The Law Society of Western Australia

Welcome to the April edition of Brief. On behalf of the Law Society, I warmly thank our CPD Chairs and Speakers for generously giving their time and valued expertise during the 2021/2022 CPD year, which concluded on 31 March. Our thanks also extend to our delegates for actively participating and engaging in our CPD programmes. Due to COVID-19 restrictions, many of our CPD sessions were presented via Zoom and webinar, but that didn’t seem to lessen either the value of the engagement or the positivity of the feedback. With the generosity of the Western Australian legal profession providing their time and knowledge, the Law Society is in a strong position to present excellent content across the four competency areas this new CPD year. We look forward to you joining us again at our next CPD programme event.

Submissions Since the last Advocacy Column in Brief, the Law Society has made submissions on: Tendency and coincidence evidence in Western Australia Review of the Contentious Business Determinations Inquiry into the next statutory review of the Commercial Tenancy (Retail Shops) Agreements Act 1985 Statutory Review of the Mental Health Act Law Council of Australia – Call to Parties Document Air Conditioning in Roebourne Prison The Law Society has also progressed updating the Joint Form of General Conditions which will be released in coming months. This period has also resulted in some positive activity in the WA Parliament, with two long awaited and highly anticipated pieces of legislation progressing through the Legislative Assembly and Legislative Council:

Statutory Legacy On Wednesday, 23 March 2022, the Administration Amendment Bill 2021 (WA) finally passed through State Parliament. The Law Society has long advocated for this overhaul of the statutory legacy scheme, regarding these important and long overdue legislative changes in WA that affect people who die without a valid will — which is nearly half of our community.

2 | BRIEF APRIL 2022

The updated scheme increases the payment to a surviving spouse or partner from $50,000 to $472,000 if the deceased dies leaving direct descendants, such as children or grandchildren. If the deceased dies leaving a surviving spouse or partner but no direct descendants, the amount is increased from $75,000 to $705,000. A surviving partner includes a de-facto partner or same-sex partner. This updated legislation brings WA into line with other Australian jurisdictions, whose legacies were updated decades ago.

committees and to be part of the drive to a more equitable future for all members of the legal profession.

Legal Profession Uniform Law

Law Week celebrates the good work performed by lawyers which benefits the wider community. Throughout WA you will find lawyers using their skills to help others in a wide range of ways, and the Law Society seeks to showcase positive stories and highlight the benefits of seeking legal representation to the community.

On 5 April 2022, the Uniform Law Application Bills finally passed the WA Parliament, another occasion years in the making. The passage of amendments through both the Legislative Council and Legislative Assembly means that Western Australia will now join New South Wales and Victoria as a Uniform Law jurisdiction. It is anticipated the scheme will become operational from 1 July 2022, following further consultation with stakeholders. Uniform Law is designed to harmonise regulation of the legal profession, cut red tape and create a single system to govern legal practice. A single, largely uniform set of professional conduct rules providing interjurisdictional consistency will benefit the legal profession and regulators, especially with national and international firms now being commonplace. The Law Society has also developed resources to assist the Western Australian legal profession in preparing for the changes brought about by the Uniform Law. The Law Society has already run a series of CPD Seminars on Uniform Law, and will continue to host seminars on topical Uniform Law matters such as Costs Disclosure, Complaints and Conduct Rules. Visit the CPD Seminars section of the Law Society website for more information.

International Women’s Day International Women’s Day marks a call to action for accelerating gender parity, and on 2 March 2022 representatives from the Asian Australian Lawyers Association, the Society of African Australian Lawyers, Pride in Law, the Society of Jewish Jurists and Lawyers, and Midlas came together for an evening of full of storytelling and conversations. The panel was organised by the Joint Law Society/Women Lawyers of WA committee. The overarching question was, what does it mean to truly embrace diversity and foster a profession where everyone can feel that they belong? As President, it was my pleasure to Chair, and my hope is that we may all be given the space to be discovered for who we truly are. The Society is proud to reflect inclusion and diversity throughout its management and

Law Week 2022 Every year Law Week brings an opportunity to connect the legal profession and the broader community to build a shared understanding of the law. This year’s programme again promises to be an exciting one, with events for both the profession and the community from Monday, 16 May to Friday, 20 May – Mark your Diaries!

I invite you to save the date for two very special events that open and close Law Week 2022. On Monday, 16 May, the President of the Law Society of England and Wales, I. Stephanie Boyce will share her thoughts on leadership and access to justice in a special CPD forum via webinar. To close Law Week, the Law Society is hosting a Long Table Lunch Live at The Westin on Friday, 20 May starting at 12.00pm – make sure you don’t miss out! Please visit lawsocietywa.asn.au/lawweek/#law-week-events for details of the major events taking place.

Country Lawyers CPD Day Country lawyers, more than most, understand the isolating impact of distance that make it difficult to get together as a profession, to share collegiality and support, and to learn from each other through tailored Continuing Professional Development initiatives. I encourage country practitioners to save the date for our Law Week Special CPD Day for Rural, Regional and Remote Legal Practitioners on Friday, 20 May 2022. Please click here for information. This CPD Day is FREE to Law Society Country Members with CPD Freedom and is heavily discounted for Country Members and Non-member Country Practitioners. (Conditions apply.)

Happy Easter Balancing work and life can be challenging, and I would like to remind you that your membership of the Law Society provides complimentary access to LawCare WA, a valuable, free, and confidential, support programme to assist you. Visit lawsocietywa. asn.au/lawcarewa for more information and to access these resources. Finally, with the long weekend upon us, I wish you a happy, healthy and safe Easter break.

EDITOR'S OPINION Jason MacLaurin SC Editor, Brief | Barrister, Francis Burt Chambers

Our special section “Future Proof” ought to be of interest to (hopefully all) readers intending to participate in the future, which of course might already be here. Developing technology affects not only how law is (and ought ethically and professionally) to be practiced, but also provides novel subject matter for legal work, and questions about what the law should regulate. As noted in Brenda van Rensburg’s “A Macro Way to Reputation Damage” some jurisdictions, for instance in American Bar Association Rules, expressly stipulate that lawyers must keep abreast of technology. This special section also has Angelina Gomez on whether DAOs might become the new corporate form, Michael Woods providing his expertise on “Cyber Threat Landscape for the Legal Profession”, and Eli Bernstein on “The Rise and Rise of Stablecoins”. Brief went for a title of “Future Proof”, rather than Alvin Toffler’s “Future Shock” (the “dizzying disorientation brought on by the premature arrival of the future”) which is the safe play given uncertainty as to the Toffler’s estate’s intellectual property rights and some of the Sussex’s recent initiatives. Previous Brief editorials have noted the Sussex’s use of technology, especially the podcast, in a profitable, if not particularly productive, way,1 however they very recently announced that “Archewell Audio” would release a podcast series: “Archetypes.” Any cynical misgivings about the podcast’s title being mainly concerned with being catchy

and marketable2 were surely dispelled when Markle announced that the “central question” lying at the heart of “Archetypes” is “where do these stereotypes come from? And how do they keep showing up and defining our lives?” and the Sussex’s filing a few weeks ago a trade mark application over “Archetypes” despite its ancient Greek origins, common usage in English from the 1540’s, Carl Jung’s estate likely being ropable and, most importantly it seems, a skin care and cleaning company already owning a trademark for the word. Toffler’s “Future Shock” still resonates today. Notably, 50 years ago a 1972 edition of the Australian “Women’s Weekly” featured an article about the Tofflers visiting Australia on a book tour.3 In 2022 the title “Women’s Weekly” is problematic given it has been a monthly publication since 1983, and in any event the hottest controversy going at the moment seems to be how (and whether) to define the word “Women”. The year 2022 features in science fiction artistic works about dystopian futures that often ventilate issues with which the law also grapples. 1973’s classic dystopian future movie Soylent Green is set in 2022, so it is too late to worry about spoiler alerts when noting its shocking iconic ending phrase “It’s people!” is at least an expression of the need for accurate and honest food ingredient labelling. And, while not explicitly set in 2022, this year marks the 70th anniversary of the famous “Twilight Zone”4 episode “To Serve Man”

about seemingly benevolent aliens who arrive to help an Earth beset by multiple crises, citing as evidence of their good intentions an (encrypted) book “To Serve Man” and taking a polygraph test. The iconic and shocking revelatory line in the closing scene “It’s a cookbook!” highlights not only the unreliability of lie detector evidence, but also the absolute importance of reading the whole of the text before interpreting key phrases. Set in March 2022, 2013’s “The Purge” is a dystopian future/horror/thriller movie about an America, in addressing a crisis in crime, violence and overcrowded prisons, having a government sanctioned annual 12-hour period where laws are suspended and any criminal activity is legal (sort of like the 120 minutes following Buddy Franklin kicking his 1,000th goal recently). Some critics say the film has been said to give rise to profound legal and moral questions such as the competition between the Hobbesian “Modern Unity State” versus the Althusian “Modern Federated Polity” models for civil society, and between legal positivism and natural law theories (the Hart-Fuller debate)5 about whether morality and the law in regards to the validity of and obedience to a law, or whether morality is the source of law’s binding power. For the Editor, these complex issues were all very quickly cut through and went out the window when (spoiler alert) Ethan Hawke’s daughter’s boyfriend decides to use the

Charleton Heston starring in the 1973 ecological dystopian thriller “Soylent Green” set in 2022 – still not the year we were expecting but perhaps a pandemic is the better option?

4 | BRIEF APRIL 2022

opportunity presented by the Purge to try to shoot and kill his girlfriend’s old man. It remains to be seen whether the Sussex’s podcasts will be as closely analysed as TS Eliot’s, famous poem “The Waste Land”, currently celebrating its 100th Anniversary, which commences with the memorable lines “April is the cruellest month, breeding lilacs out of the dead land, mixing memory and desire, stirring dull roots with spring rain”.6 It is often suggested that the themes of “The Waste Land” includes the degradation of human dignity arising from technological advances (which may become an increasing popular analysis from English literature students who are to be deprived of texts upon the Archetypal critical analysis method).7 Remarkably, one of, if not the main character, in “The Waste Land” is the (possible Archetype but in any event Greek Mythology figure) Tiresias who had the gift of prophecy but not to the extent that he predicted that hitting copulating snakes with a stick would result in Hera transforming him into a woman for 7 years, no doubt causing mayhem with pronouns and definitions (in another version of the myth, Hera just sends Will Smith to slap him). Some recent technological legal mishaps may have unfortunately reinforced some stereotypes about the hot blooded passionate Latin American, with Peruvian lawyer, Hector Paredes Robles caught during a Zoom court hearing (to adopt an actual Latin phrase) in flagrante delicto which followed a previous episode where an Argentinian MP had to resign after being caught in a similar fashion during an online parliamentary session.8 In Mr Robles’ case the Judge angrily observed “we are witnessing obscene acts which represent a violation of public decency aggravated by the fact that they are being recorded nationally” and one assumes that if Hera was around and sympathised with the Judge, she would have fully endorsed or joined in with Tiresias’ use of a wacking stick. In any event, both lawyer and politician

were no doubt wishing profoundly for the intervention of a cat filter on their zoom images. 2022 also involves (or marks anniversaries of) some notable apparent AI victories over humans in games many lawyers have an affinity for, and somewhat comfortingly regarded as having essential human elements (and other features) that, like lawyering, AI might be unlikely to conquer and take over. Just last month AI beat eight World Champions at bridge though many were quick to point out that the game did not involve bidding and was limited to declared play9 (Brief is aware of many avid bridge players among the profession, and perhaps some might explain to the Editor the significance of this, and also the rules of bridge, the principles and tactics behind it, and notable war stories, which might well require a word limit of, say, 16,000 words). 2022 is the 25th Anniversary of IBM’s Deep Blue’s Chess victory over Garry Kasparov, although it was conventionally thought that chess was easier for AI to conquer than bridge or poker, because those card games involved more human and less finite variables, and do not concern “perfect information” but rather “hidden information” which is not shared (giving hope to lawyers). 2022 is also the 15th Anniversary of AI solving checkers but only the 5th Anniversary of Microsoft ’s AI solving/ conquering Ms Pac-Man. Ms Pac-Man is celebrating a 50th Anniversary, and Ms Pac-Man regarded by those in the know as being a superior game to the original Pac-Man (1980) but recently, Ms Pac-Man has been replaced by “Pac-Mom” due to the recent resolution of a longstanding intellectual property dispute. And just when “Pac-Mom” is celebrating the resolution of the dispute and rebranding, they’ll probably find out Meghan Markle has changed her middle name to “Oprah” and applied for intellectual property protection over everything “MOM”.

LEAVING A

Although this is a special edition of Brief, with an upcoming special May edition focusing around Law Week 2022, we have many other items of interest including Dr Sagi Peari and Richard Winter on the Personal Property Securities Act and, with Human Rights at the forefront of news lately, Myrna El Fakhry Tuttle and Linda McKay-Panos on how “Canada’s Extraordinary Use of the Emergencies Act Poses Human Rights Concerns”. We have Steven Penglis SC’s review and thought provoking comments upon Julian Grill’s book “Secret State” launched earlier this year. Our regular Taxing Matters section features Clare Thompson SC on the rebuttal of the presumption of advancement in the purchase of the marital home and David Garnsworthy addressing proportionality in legal costs. As always we are grateful for the Law Society’s Young Lawyers Committee contributions with this edition having the usual and much appreciated items such as case notes and Aunt Juris.

End Notes 1 Their 2020 $30M Spotify podcast deal had produced only one celebrity holiday extended audio instagram post/podcast. 2 Or Spotify executives who might have taken it as a welcome announcement that Archie had learned to type, making him potentially the most productive member of the family 3 “Future Shock”, The Australian Women’s Weekly (Wed 15 Nov 1972) . 4 For the younger generation: No it does not star Robert Patterson and Kirsten Stewart. 5 See JL Hausmann “Purge-ian Jurisprudence” University of La Verne Law Review, M36, page 61. 6 Though April 2022 was perhaps not the cruellest, but rather the coolest month as it kicked off with Stone Cold Steve Austin wrestling for the first time in 19 years at Wrestlemania. 7 “Brief Encounter! Peruvian lawyer is caught on Zoom…” www.dailymail.uk 30/1/21 8 “Artificial intelligence beats eight world champions at bridge” www.theguardian.com 29/3/ 2022 9 See for instance “An Archetypal Approach to Eliot’s “The Waste Land””, An Interdisciplinary Journal of Literary Studies, Vol: 1, www.postscriptum.co.in; The Belladonna: Eliot’s Female Archetype in The Waste Land, Philip Sicker, Twentieth Century Literature, Vol. 30, No. 4 (Winter, 1984); and The Archetypal Imagery of T. S. Eliot Genevieve W. Foster PMLA Vol. 60, No. 2 (Jun., 1945),

LASTING LASTING LEGACY LEGACY

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Interview: Law Society Council Member Kellie Woods Special Counsel at Dentons Australia Ltd Interviewed by Thomas Camp, Junior Council Member, Law Society of Western Australia,

Why did you decide to run for the Law Society Council? I decided to run for the Law Society Council to contribute more to the legal profession and positively engage with other members of the profession in a way that I have not done previously. Being part of the Law Society Council will allow me to contribute more towards the advancement and promotion of continuing professional development and legal education and the maintenance of legal professional standards and practice.

You have done further study for a Certification of Advanced Insolvency, what inspired you to do that? Insolvency is an area of law that has interested me all of my career. I decided to complete the ARITA course because I wanted to advance my insolvency knowledge and develop key relationships in the insolvency profession.

Do you have any reflections on the closure of Kott Gunning after more than a 100 years of operation? Kott Gunning had a long established history and a well-regarded reputation in the legal profession in Western Australia. Kott Gunning’s closure is unfortunate.

Your primary practice in litigation and disputes is in a number of areas, what led you to litigation practice?

in professionalism and Court etiquette. I would like to change how young lawyers are educated in this regard.

I had the opportunity to complete litigation work experience with John Park whilst I was at University, which I thoroughly enjoyed. That work experience led to me enjoying Civil Procedure at University and obtaining very good grades, so I decided that dispute resolution and litigation was for me. I am also the kind of person that is motivated by a “challenge”.

Do you have a favourite part of Brief?

Since you began practice, what change in law/legal profession has been the most positive? The most positive change in the legal profession since I began practice is that the profession in the last 5 to 10 years has become more flexible. There is a recognition by many members of the profession, including the Judiciary, that lawyers have lives outside of work. Professional commitments and deadlines can still be achieved without lawyers sacrificing personal well-being and commitments.

We can assure your clients in the unfortunate situation of them passing away before their much loved

6 | BRIEF APRIL 2022

Lawyers are known to work long hours, how do you manage to balance your work and personal life? It can sometimes be challenging to manage work and personal life, particularly in litigation practice with Court deadlines to be met or where often urgent matters arise. I am very lucky that I have an excellent personal support network and work in a flexible work environment at Dentons in a collaborative and supportive team environment.

Do you have any wellbeing tips? Stay active and try to always make time for yourself and family.

Is there anything you would like to change about the legal profession? In my experience, over the last 10 years, in litigation practice there has been a decline

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Interview: Law Society Council Member Dr Brett Davies Adjunct Professor, UWA Law School Interviewed by Thomas Camp, Junior Council Member, Law Society of Western Australia,

Why did you decide to run for the Law Society Council? Dad came across from Middlesex as a 10-pound Pom. Because of the war he did not get past grade 7. He died 7 years ago never speaking of the bombing of his parent’s home in London. He never spoke of his time in the air force. His trade was one of butcher. Mum, while Dux of her third year at a Fremantle high school, was forced to leave school as she was a woman. Later, as the senior stenographer at Royal Perth Hospital she was forced to resign. Her only crime was that she was getting married. At 27 years of age, she was paid less than the 18-year-old male office boy.

seminars online, so quickly. And we had the ability to talk (and argue) with other practitioners online. We all talk about mental health. The Law Society addresses such issues by action. Having been a member of other Australian law societies, the Law Society of WA is the best run law society in Australia. And after being involved with the Law Council of Australia, USA and UK similar organisations is one of the best run law representative groups in the world. The profession is under attack. And the single strong voice is the Law Society of WA. To protect and serve the community every lawyer should join the Law Society of WA. It is an honour to be a member.

As a lawyer, and butcher’s son, I fight against injustice for my clients and, on a pro bono basis, those less fortunate members of the community.

You have been involved in a number of publicly listed law firms. What are the benefits of a law firm being listed on the Australian Stock Exchange?

But that is only possible because of the strong support provided by the Law Society of Western Australia to the legal profession.

I was the first person in the world to lodge a Prospectus to list a law firm on a stock exchange. However, Slater & Gordon got to the market before me. So, I was the second person in the world to list a law firm. My life of fame was not to be!

I am proud to be able to start giving back to an organisation that is so protective and nurturing of the profession of law, justice and the community.

Since 1988 you have sat on ten Law Society of WA committees. This includes as the Convenor of Graduate and Academic Standards. What keeps you coming back? I was the first of my family to go to a university. And I was the first to take up the profession of law. I therefore had few professional role models.

A problem with traditional law practices is the competing and conflicting interests in the partnership. That really comes to a head when the debate turns to investment. That’s what a public listed law firm gives. There is internal funding where a listed law firm can retain earnings and reinvest.

The Law Society of Western Australia was, and remains, an important support to me both professionally and personally.

You served for 16 years as Deputy Convenor of our Law Office Management Committee. You were National Chair of the Law Council’s Australian Law Management Group. Why the fascination on how law firms operate?

The life of a sole practitioner is lonely. You have no partners to talk (and fight) with. With the Covid lock downs you are even more isolated. The Law Society of WA was remarkable at being able to move

I have sat at the feet of some brilliant and innovative Managing Partners including Julie Bishop and Jeremy Birman. I was involved in the Law Society’s 1999 Lawyers Exit Survey. This on why WA lawyers leave

8 | BRIEF APRIL 2022

the profession. It opened my eyes. After my own ASX listing, while in London completing my doctorate, I worked with large law firms on potential IPOs on the London Stock Exchange. As big as the London law firms are they are still minnows compared to the behemoth accounting houses. There is an interesting debate as to why accounting houses can run worldwide professional service businesses. While even the biggest law firms in the USA and London still run as cottage industries.

But why do you believe the listing on a Stock Exchange can improve law firms? To escape, what I see as a cottage industry mentality, I believe that a law firm can take many directions. Listing on a stock exchange may be one advantage. The member law firms may grow faster, as they move away from a ‘partnership’ style of practice and become more ‘corporate’. Partnerships typically require a great deal of consensus. The majority of partners may not be prepared to act against the will of the minority. Partners may also be reluctant to invest for the future, particularly as they approach retirement. Some partners that wish to retire may not do so because they receive little capital reward for their ownership in the law firm. They may wind down their involvement in the practice, while still seeking full partner drawings. There can be confusion between the rights of an owner and that of a manager in the law firm. A positive of non-lawyers owning law firms is that they come with a different strategic view of how a business should be run. I say this as a lawyer myself – some lawyers are not always particularly good businessmen. As lawyers we are good at running cases

and generating income. But in terms of running a business, identifying procedures to be streamlined, and investment in systems to deliver legal services in different ways, lawyers often do not lead that change.

partner dies the small business often fails. The UK and the USA have thoughtful tax relief structures for small business succession planning. My research compares the Australian laws with those jurisdictions.

Any downside of publicly listing a law firm?

You are, and have been, involved in a number of community boards. What motivates you to be involved in those sorts of activities outside of your everyday work?

There are many downsides of being in a listed vehicle. Of course, whether you are sole practitioner or operating in a company (listed or not) our highest duty as lawyers is to the courts and then our clients. The shareholders (whether they be yourself or a great number of the public) come third. That is a message your Board of Directors and your shareholders have to get used to.

What inspired you to complete your doctorate on the reform of the tax laws for business succession planning? As a tax lawyer I am sick and tired of small business owners (my clients) having to do what the ATO tells them – without question. Even ATO press releases seem to take on the force of law. Taxation laws are often portrayed as external factors outside the control of a small business. In contrast, larger businesses have greater resources to invest heavily in external affairs and direct lobbying. This is to secure changes in the law to suit their purposes. I wanted to be an advocate for people that have no voice – the small business owner. Therefore, for three years of my life, I did the research on reforming Australian business succession planning taxation laws. Small businesses are the number one employer in Australia. Yet when a business

I grew up in a Noongar family. Dad’s second wife was a proud Noongar lady. My second mum. And they had a daughter. My half-sister. I have the greatest respect and love of the Noongar people and their generosity. I am in awe of the oldest race on the Earth being able to live on this planet without damaging it. Sadly, the whitefella, including myself, continue to environmentally damage Australia and the delicate environment of Mother Earth.

But, by 1994, it became obvious that I would be better off looking for a niche. I decided to only practice in tax and superannuation. My colleagues laughed at me for being too specialised. Now when I tell my students that I practice in both tax and super they believe me to be too general! I think even an Articled Clerk can become the world leader in one small aspect of the law. I believe you need to specialise more than ever in law.

Can I ask a cheeky question. You sit on UWA Senate. Your new Chancellor is our very own former Chief Justice of the High Court of Australia, the Hon Robert French AC. Give us the gossip. There are 16 strong willed people on UWA Senate. The Chancellor is quietly able to maintain order and good debate. He is an incredible catch for UWA. And we are lucky that he gives us his time so freely.

The Australian government gave me the gift of a law degree. In fact, I hold 6 university degrees. They were all free!

In the heat of battle on Senate I have referred to the Chancellor as “Chief Justice”. To the howls of delight from the student reps on Senate!

It is the duty of those lucky enough to be legal practitioners (especially if your degree was free) to give back to the community.

As well as 5 degrees from UWA you also have an MBA from Murdoch. Is UWA and Murdoch going to merge? You have a foot in each camp!

I follow and give time to things I am passionate about.

Now that is getting a bit cheeky.

Since you were admitted in 1988, how have you changed the way you practice?

Both are wonderful world class Universities. One has its campus south of the river. The other is north of the river. All things are possible.

In the ‘good old days’ you could be a generalist. The law firm Robinson Cox had a wonderful rotation system in the first two years of my practice. And I fantasied of working in all aspect of commercial and corporate law.

Gifts in Wills help us get closer to our vision of a cancer free future for our community. How are we going to achieve this? By funding world-class researchers here in WA.

By providing support from the point of diagnosis through to treatment and beyond.

By empowering healthier lifestyles and shaping public policies for West Australians to reduce their risk of cancer.

When writing a Will for a client please ask them to consider a charitable gift.

To find out more contact us on 08 9212 4333 or visit cancerwa.asn. au/getinvolved/a-gift-in-will Cancer Council Western Australia (Inc). Level 1, 420 Bagot Road, Subiaco WA 6008 ABN: 15 190 821 561

future proof EMERGING TECH & LAWYERS

This edition’s feature takes a look at the bleeding edge of developments in the digital space and how some factors may affect the legal profession. Is DAO the New Form of a Corporation?

Pg 11

The Cyber Threat Landscape for the Legal Profession

Pg 16

A Macro Way to Reputation Damage Pg 20 On the Rise and Rise of Stablecoins

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EMERGING TECH & LAWYERS

Is DAO the New Form of a Corporation? by Angelina Gomez, counsel at Clifford Chance; Co-founder and director of the Digital Law Association

Introduction The Hon T F Bathurst, former Chief Justice of New South Wales, in a speech to the Francis Forbes Society noted that the “…corporate form is a ubiquitous part of modern commercial life and has a significance to our economy which it is difficult to overstate” with its “separate legal personality, perpetual existence, transferable shares and limited liability for members”.1 However, regardless of its ubiquity, with the emergence and adoption of blockchain and smart contracts in modern commercial life, we seem to be moving with some speed towards a decentralised future, and away from the hierarchical structures of corporations, with its board of directors and shareholders. This acceleration is mostly due to the fact that decentralisation encourages participation and transparency. This can be clearly seen in the 2020 rise of decentralised finance (DeFi), which has rekindled interest in Decentralised Autonomous Organisations (DAOs), as being the appropriate vehicle to take advantage of DeFi, to engage in digital transactions and the endless possibilities for its members to act with common

purpose, for example, to invest, fundraise and to collect NFTs and other assets. The crypto community is predicting that DAOs will become the “next big trend”.2 ASIC Chair, Joe Longo at the Australian Financial Review’s Super & Wealth Summit in November 2021, admitted “to a certain fascination with DAOs”, and raised the following questions: What are they? What do they do? How can DAOs be regulated? … To paraphrase a concept familiar to corporate lawyers, to whom does ASIC turn to ascertain the directing mind and will of a DAO? It is not clear who is accountable if things go wrong, or don’t go as intended or anticipated. Nor is it clear how a DAO itself can be held accountable in a court of law.3 So what is a DAO? The building blocks of DAOs are blockchains4 and smart contracts,5 and they work together to effect the decisions of the members of a DAO. Are DAOs the new corporate paradigm? This article will examine the characteristics of most DAOs (bearing in mind that DAOs are not homogenous), the legal issues they raise and possible solutions.

What is a DAO and how does it work? DAOs are organisations that operate on decentralised blockchain infrastructure, essentially, they are exclusively ‘online’, generally using open source code to carry out their operations. While DAOs can come in all shapes, sizes and protocol, a DAO is essentially a group of people who have agreed to achieve a common goal or mission, from the purchasing of digital assets to building a media empire. Each DAO has its own system of governance but a common feature is that it is not managed by a board or any other form of central authority. Instead, it is a democratised organisation and its governance is based on a community of members. DAOs operate on a flattened hierarchy, and decisions are made collectively by their members. A DAO’s members comprise a group of, for the most part, anonymous people/entities, located anywhere in the world, who may never have met (and may never meet) one another in real life, who agree to abide by certain rules to participate in the DAO.

future proof Members (or governance token holders) of a DAO make decisions on what a DAO does, shaping the DAO’s future through voting. As token holders, they own a stake or ‘equity’ in the DAO, but not all token holders have voting rights, for example, only masternode operators are allowed to vote on funding community projects supporting the Dash ecosystem.6 However, with those that can vote, usually they do so on equal footing. There are a number of ways a person can join a DOA and obtain voting rights, they can buy governance tokens or be rewarded governance tokens for their work done for the DAO or through ‘airdrops’ (which are distributions of DAO tokens to members or potential members), for example, to encourage adoption or as a reward for early participation.

FlamingoDAO (with a portfolio in early 2022 of over $1 billion, and members comprising traders, developers, artists and builders)8 and PleasrDAO (notably the owners of Wu-Tang Clan’s one-of-akind unreleased album, “Once Upon a Time in Shaolin”).9 DAOs are also making the purchase or renting of digital land in the various metaverse platforms more accessible, by pooling funds to invest in digital real estate, for example, Pangea DAO is a metaverse land investment cooperative with the “goal of creating more equitable virtual worlds”.10 Then there are mission orientated DAOs, for example, the Komorebi Collective DAO, which invests in “exceptional female and non-binary founders”11 and the Big Green DAO, “a USA 501c3 non-profit that believes growing food changes lives”.12

Any member can propose a project, the community of members will then discuss the project and vote. Depending on the rules or protocol governing the DAO (and which are embedded into its code), once consensus is reached, meaning when sufficient members agree according to the rules of the DAO, a decision is made and smart contracts action it. By way of example, a DAO’s rules could be as simple as ensuring that its decisions are only made by majority vote. Essentially, once decisions are made, the DAO’s smart contracts are activated. These smart contracts hang off the DAO blockchain effecting its operations through algorithms (based on the DAO’s rules, the code of the DAO) that run when certain criteria are met – they are non-repudiable and enforced without discretion, making the DAO’s functions automated and self-executing.

Issues with DAOs and possible solutions

Every decision made and transaction carried out by the DAO through its smart contracts is coded on its blockchain; is immutable, tamperproof and transparent. No member or administrator/project governor (if the DAO has one) can edit the rules of the DAO (its source code) without other members noticing it. Essentially, the rules and governance of each DAO are coded in smart contracts on the blockchain and cannot be changed unless voted upon by the DAO’s members. The use cases for DAOs are endless. In 2021, the ConstitutionDAO, made up of 17,000 members put together $40 million to bid on an early copy of the US Constitution – they were ultimately outbid by a hedge fund billionaire.7 Some of the more well-known DAOs that collect NFTs (Non-Fungible Tokens, which are a form of digital asset) include

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In 2016, the concept of DAOs ran into problems with the unfortunately named, “The DAO”. Initially extremely successful, The DAO raised $150 million, which at that time, was one of the largest crowdfunding efforts undertaken. A hacker (or hackers) exploiting an issue with The DAO’s code base, managed to draw $50 million worth of ether (ETH) from the DAO before it was stopped by Ethereum having to hard fork13 its blockchain to restore the siphoned funds (by moving the funds raised to a recovery address where the DAO’s token holders could exchange their DAO tokens for ETH).14 This created concerns around security and debate as to whether code should be the only law, meaning that if the algorithms of the smart contract (that formed part of the DAO’s code base) allowed the drawing of the $50 million, then it could not be illegal and should be allowed to stand.15 Since then, with the gains made in DeFi, confidence in DAOs is again increasing rapidly. However, DAOs in most jurisdictions are still not supported by government oversight or any regulatory structures that address issues of taxation and other legal uncertainties, as to member responsibility and potential liabilities. In order to truly flourish, establish on a large scale and give long term benefit to its members, DAOs need certainty through regulation, they need to be recognised as a legal personality.16 Granting DAOs separate legal personality would mean that a DAO could own assets, sue and be sued and could also

protect its members from personal liability. The current situation (in Australia) is that DAOs are not established as legal entitles, and consequently, their decentralised governance structures do not fall readily within existing regulatory categories. At present, DAOs are likely to be considered common law partnerships or unincorporated associations, whose operations are run by smart contracts. These entities are not recognised as separate legal entities from their associated members/partners and consequently, this creates issues around the holding of assets, succession, the liquidation by members of their tokens, taxation and could potentially expose a DAO’s members to a number of risks and liabilities, including that they could be held liable for debts incurred by the DAO. To address these issues, hybrid structures have developed – DAOs are being wrapped in legal personality for example, through the creation of limited liability companies or trusts linked to DAOs, acting as service entities, giving DAOs the ability to enter into contracts, hold assets and ensure that their members are protected by limited liability.17 Until we have regulations that deal with DAOs, these structures provide a bridge between the digital world of the DAOs and the real world of legal regulations and protections. As reported in the Australian Financial Review, in 2021, the Digital Law Association (the DLA) proposed “formal recognition of new, decentralised models for corporate governance where a board of directors is replaced with an internet community” and suggested that a DAO Limited structure could draw from the “DAO Model Law” proposed by the Coalition of Automated Legal Applications (COALA), but not to adopt it wholesale,18 with a new “authorisation class” to be created in the Australian Financial Services Licence (AFSL) regime, for digital assets, the currency of DAOs.19 The DLA argued that DAOs: …will increasingly feature as a business model in the digital and decentralised economy and must be given legal recognition, the clear ability to hold property and contract, as well as limited liability.20 The DLA also “called for a review of the impact of tax laws on DAOs to ensure technological neutrality happens in practice. It has also suggested that a multi-agency working group establish a

EMERGING TECH & LAWYERS taxonomy for digital assets setting out the Australian legal and tax implications of digital asset businesses and transactions with input from multiple Australian regulators”.21 Following the DLA’s submissions and those of other interested parties, in October 2021, Senator Andrew Bragg’s Select Committee made a number of recommendations on cryptocurrency and digital assets, de-banking and “that the Australian Government establish a new Decentralised Autonomous Organisation company structure”,22 proposing that: The government should examine the COALA model and other international examples in developing a DAO company structure that suits Australia’s specific corporate frameworks.23 Apart from legal personality, the protocol (or rules) of the DAO must be considered carefully as code is the law of the DAO. Transparency through open source coding (available in a public forum) is of fundamental importance here as usually, during the DAO’s development phase (before its member base is assembled), its creators and designers decide a number of substantive aspects of the DAO’s protocol including its decision framework, financial incentives, voting structure and governance (unless they set these up provisionally and include as part of the DAO’s protocol, an approval mechanism to allow members to vote on the DAO’s protocol when launched). Other issues that need to be considered when setting up or joining a DAO include: 1. whether the DAO has administrators, and their role in the DAO, for example, do they act as the ‘post box’ of the DAO, a contact point for regulators and other third parties; 2. was an audit of the DAO’s code done prior to launch and whether the DAO undergoes regular audits to ensure that its code continues to match the objectives of its members and is not subject to major security risks; 3. the different classes of tokens the DAO offers and what rights and liabilities are attached to them, for example, whether there is protection of minority rights; 4. voting protocols – do they deal with voter indifference or voting fatigue and possible off-chain voter influence (to gain a majority to push a project through the DAO); 5. whether the DAO’s tokens are able

to be liquidated, transferred or bequeathed;

8. the anonymity of members which could make recovery against them difficult and costly;

autonomous organizations is that DAOs allow us to very quickly prototype and experiment with an aspect of our social interactions that is so far arguably falling behind our rapid advancements in information and social technology elsewhere: organizational governance. … Now, it may be possible to create systems that are more fluid and generalized that take advantage of the full power law curve of people’s ability and desire to contribute.” 25

9. security issues – it may take time to vote on changing defective code and in the meantime, hackers may make use of the identified shortcomings in the code;

However, to truly take advantage of all that DAOs promise, we must have proper and adaptable legal guardrails in place to regulate and provide oversight. This is what we need to be working on now.

10. when a hard fork will be initiated (and how the fallout of possibly having two DAOs in operation will be managed);

Angelina Gomez, counsel at Clifford Chance; Co-founder and director of the Digital Law Association, https://digitallawassociation.com/.

6. the DAO’s dispute resolution processes; 7. fiduciary or other equitable obligations that members of a DAO may owe to each other – and how to legislate or contract out of these obligations;

11. potential missing elements from smart contracts that could create disputes within the DAO or with third parties affected by the operation of a smart contract, including, representations made by the parties to a smart contract (for example, as to the scope of the contract or with regards to consumers of a DAO product), warranties, indemnities, force majeure provisions, governing law, notice provisions, human errors (for example, late payment even by mere hours may not result in the smart contract being triggered) and coding errors (for example, performance does not match the agreement between the parties); and 12. the massive energy consumption associated with running blockchains. In 2022, Forbes reported that Ethereum and Bitcoin mining operations together were responsible for “emitting more than 78 million tons of CO2 into the atmosphere, equal to the annual tailpipe emissions of more than 15.5 million cars”.24

Conclusion The potential of DAOs is enormous. It has the potential to democratise decision making, creating diverse opportunities for asset acquisition, ensuring that those who gather together to achieve a particular goal, will be able to do so transparently, quickly and efficiently. Vitalik Buterin, a co-founder of Ethereum noted that: “One of the more interesting long-term practical benefits of the technology and concept behind decentralized

End Notes 1 The Hon T F Bathurst, Chief Justice Of New South Wales, “The Historical Development of Corporations Law”, Francis Forbes Society for Australian Legal History: Introduction to Australian Legal History Tutorials, Sydney, 3 September 2013. 2 Taylor Locke, “What are DAOs? Here’s what to know about the ‘next big trend’ in crypto”, CNBC, 25 October 2021, https://www.cnbc.com/2021/10/25/ what-are-daos-what-to-know-about-the-next-bigtrend-in-crypto.html, accessed 4 April 2022. 3 Speech by ASIC Chair Joe Longo at the AFR Super & Wealth Summit, 22 November 2021, https://asic.gov. au/about-asic/news-centre/speeches/responsibilityamid-change/, accessed 6 April 2022. 4 A blockchain is a type of distributed ledger technology that can be used to verify and share/ track information or anything of value (e.g. financial transactions, property). Its main features are that it is decentralised, transparent and immutable. Each transaction on a blockchain is a block and every block is chained to a previous block using cryptography. Blocks are time-stamped and can only be added to the chain sequentially. Blockchains can be open to everyone or restricted to permissioned participants. In both, information is distributed across a network of computers and is decentralised, meaning that a trusted party is not required to validate each transaction. As each computer in the network possesses an identical copy of the ledger, when transactions are added, they are reflected in all copies of the ledger. 5 Nick Szabo first coined the term “smart contract” referring to “a set of promises, specified in digital form, including protocols within which the parties perform on these promises”: See Smart Contracts: Building Blocks for Digital Markets, by Nick Szabo, 1996, https://www. fon.hum.uva.nl/rob/Courses/InformationInSpeech/ CDROM/Literature/LOTwinterschool2006/szabo.best. vwh.net/smart_contracts_2.html, accessed 4 April 2022. Smart contracts are essential to run most cryptobased projects. They are built in computer code and stored on a blockchain i.e. smart contracts can be hosted and executed on a blockchain. Smart contracts are self-executing agreements and with contractual terms embedded as computer code in software, they automatically enforce obligations. Performance is enabled through technology and rule-based operations (using predefined inputs). These automated contracts are irrevocable and once initiated the smart contract is coded to perform unless a pre-set condition is not met. Human discretion and control are excluded (unless it forms part of the code). After every transaction (if X then Y), the nodes on the blockchain update the new state of the distributed ledger. See also Scott A McKinney, Rachel Landy, and Rachel Wilka, “Smart Contracts, Blockchain, and the Next Frontier of Transactional Law, 13 Washington Journal of Law, Technology & Arts

future proof (2018) 313; Reggie O’Shields, “Smart Contracts: Legal Agreements for the Blockchain”, 21 North Carolina Banking Institute (2017) 177. 6 Dash, “Becoming a voting member”, https://www. dash.org/masternodes/, accessed 4 April 2022. 7 Tristan Bove, “A DAO outbid a billionaire for an original copy of the U.S. Constitution last year and nearly won. What a DAO is, and how it could change the future of business”, Fortune, 16 February 2022, https://fortune.com/2022/02/15/what-is-a-daoexplaining-decentralized-autonomous-organizations/, accessed 4 April 2022. 8 Tracy Wang, “FlamingoDAO’s NFT Portfolio Is Now Worth $1B”, CoinDesk, 11 February 2022, https://www. coindesk.com/markets/2022/02/10/flamingodaos-nftportfolio-is-now-worth-1b/, accessed 4 April 2022. 9 Keira Wright, “PleasrDAO adds $4M ‘OG NFT’ WuTang Clan album to its collection”, CoinTelegraph, 21 October 2021, https://cointelegraph.com/news/ pleasrdao-adds-4m-og-nft-wu-tang-clan-album-to-itscollection, accessed 4 April 2022. 10 The PangeaDAO, https://www.pangeadao.org/, accessed 4 April 2022. 11 The Komorebi Collective, https://syndicate.io/ syndicate/komorebi_collective, accessed 4 April 2022. 12 The Big Green DAO, https://dao.biggreen.org/, accessed 4 April 2022. 13 A hard fork refers to a fundamental change to the rules or protocol of the blockchain underpinning the DAO, usually resulting in two blockchains, with the ‘new’ blockchain no longer compatible with the earlier blocks on the ‘old’ blockchain. See Crypto Basics, “What is a fork?”, Coinbase, https://www.coinbase. com/learn/crypto-basics/what-is-a-fork, accessed on 6 April 2022. 14 Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO, Release No. 81207, 25 July 2017, page 9, https://www.sec.gov/litigation/investreport/34-81207. pdf, accessed 4 April 2022; Christoph Jentzsch, What the

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‘Fork’ Really Means, slock.it Blog, 19 June 2016), https:// blog.slock.it/what-the-fork-really-means-6fe573ac31dd, accessed 4 April 2022. 15 See further Cathy Hackl, “What Are DAOs And Why You Should Pay Attention”, Forbes, 1 June 2021, https://www. forbes.com/sites/cathyhackl/2021/06/01/what-are-daosand-why-you-should-pay-attention/?sh=5f5578497305, accessed 4 April 2022; David Siegel, “Understanding The DAO Attack”, CoinDesk, 25 June 2016, https://www. coindesk.com/learn/2016/06/25/understanding-thedao-attack/, accessed 4 April 2022. 16 Some jurisdictions have started to create legal structures for DAOs, and in July 2021, Wyoming became the first State in the US to recognise DAOs as legal entities and provided a legal framework for their existence: Decentralized autonomous organizations, Bill no. SF0038, LSO no. 21LSO-0263, https://www.wyoleg. gov/Legislation/2021/SF0038, accessed 4 April 2022. 17 It has also been proposed that while a DAO remains unrecognised as a legal person, a solution is to wrap an entire DAO as a single unincorporated non-profit association (UNA) or “siloing” DAO activity “between the treasury and the protocol, with the treasury being “wrapped” in an UNA and the protocol remaining regimeless or “wrapped” in a variety of possible entities”, which will be determined by the facts and circumstances of a particular DAO: From David Kerr and Miles Jennings, “A Legal Framework for Decentralized Autonomous Organizations”, 2021, [LINK], accessed on 4 April 2022. 18 Coalition of Automated Legal Applications (COALA), “Model Law for Decentralized Autonomous Organizations (DAOs)”, 2021, https://coala.global/ reports/#1623963887316-6ce8de52-e0a0 and https:// coala.global/wp-content/uploads/2021/06/DAO-ModelLaw.pdf, accessed 4 April 2022. 19 James Eyers, “Digital lawyers call for a new legal entity: the DAO Limited”, Australian Financial Review, 15 July 2021; Digital Law Association Submission, “Third Issues Paper (Senate Select Committee on Australia as a Technology and Financial Centre)”, July 2021, page 29, [LINK], accessed 4 April 2022.

20 Ibid, Digital Law Association Submission. 21 Eyers, above n 20; Digital Law Submission. 22 The Senate, Select Committee on Australia as a Technology and Financial Centre, Final Report, October 2021, pages vii-viii, https://parlinfo.aph.gov.au/parlInfo/ download/committees/reportsen/024747/toc_pdf/ Finalreport.pdf;fileType=application%2Fpdf, accessed 6 April 2022. 23 Ibid, page 138 [6.35]. 24 Ted Knutson, “Crypto Energy Consumption Enormous But It Needn’t Be, Congressional Panel Hears”, Forbes, 20 January 2022, https://www.forbes.com/sites/ tedknutson/2022/01/20/crypto-energy-consumptionenormous-but-it-neednt-be-congressional-panelhears/?sh=1aff91084abb, accessed 4 April 2022. 25 Ethereum Foundation Blog, Research & Development, “An Introduction to Futarchy”, posted by Vitalik Buterin, 21 August 2014, https://blog.ethereum. org/2014/08/21/introduction-futarchy/, accessed 4 April 2022.

E M E H C S S D R A D N A T S L A N O I S S E F PRO

The Law Society of Western Australia Professional Standards Scheme (Scheme) enables Australian legal practitioners and incorporated legal practices to limit their professional liability at $1.5 Million, $5 million or $10 million, subject to the exclusions contained in section 5 of the Professional Standards Act 1997(WA) (the Act), depending on the total annual fee income of their law practice. Only members of an occupational association can be members of a limitation of liability scheme in accordance with the Act. Therefore only Ordinary members (members with a current Australia practicing certificate) and Incorporated Legal Practice (ILP) members of the Law Society can participate in the Scheme. The Scheme operates on a one-in all-in basis. For a law practice to receive the full benefit of the Scheme, all practitioners within the law practice and the law practice itself (if incorporated) need to participate in the Scheme.

Participating members are required to disclose their limited liability status to clients. Failure to do so is an offence under the Act. For further information in relation to the Scheme, please visit the Law Society’s website or contact the Scheme Coordinator on (08) 9324 8653 or by email to pss@lawsocietywa.asn.au

lawsocietywa.asn.au/pss/

future proof

The Cyber Threat Landscape for the Legal Profession

by Michael Woods

MCybSecurity BBus CISSP CCSP CISA CISM CRISC CGEIT CEH CDPSE

Founder and CEO Tannhauser

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EMERGING TECH & LAWYERS Introduction In 2021 we saw a distinct shift in the cyber threat landscape, with supply chain risk through software vendor vulnerabilities now a significant cyber security threat faced by organisations. The COVID-19 pandemic forced organisations to rapidly change how they operate, in turn creating new opportunities for threat actors in the process. Remote working meant that threats around offsite access and infrastructure were exposed, offering new challenges in securing data. This article explores the current cyber threat landscape for the legal profession and the challenges that must be addressed to protect your organisations.

Australia’s Growing Concern with Cyber Security Our society is now heavily reliant on technology and digital services (public or private). The online environment is one that is constantly changing, with new threats and opportunities emerging at an unprecedented pace. In our alwaysconnected digital world, the stakes are higher than ever before, and as we navigate a period of increased geopolitical tension between global superpowers and their alliances, the Australian Government has been speaking publicly about cyber threats posed to local companies. Per the Australian Cyber Security Centre (ACSC) Annual Cyber Threat Report 2020-21, last financial year over 67,500 cybercrimes were reported, an increase of nearly 13 per cent from the previous year. Self-reported losses from these cybercrimes total more than $33 billion. Published in January 2022, the World Economic Forum conducts their “Executive Opinion Survey: National Risk Perceptions” to understand the leading concerns of business leaders around the globe. For Australia, the failure of cybersecurity measures was named number one due to the growing digital dependency intensifying potential cyberthreats. Cyber risk outranked extreme weather events and climate action failure which may have changed now given recent events on the east coast of Australia. The challenge in Western Australia is unique, but not uncommon: population of roughly 2.7 million, economic sector focus on rocks and crops, small technology sector, low digital literacy amongst senior business leaders, technology teams who wrestle with talking business risk, almost non-existent cyber risk appetite defined for individual businesses, lagging legislation

and regulation, and a misrepresentation of core issues by the media for attention grabbing headlines. These contributing factors greatly increase the likelihood of a successful cyber-attack occurring within your organisation. Law firms must now assume intrusion within their network and shift focus to building resilience capabilities whilst protecting sensitive data and services.

Why Are Law Firms Targeted It should come as no surprise to this audience that lawyers are privy to vast amounts of sensitive and valuable information. This is one reason why law firms are such popular targets for espionage and criminal activity. This information is not just sensitive personal and private client information, but also very valuable business documents related to finances, mergers and acquisitions, transactions, due diligence, business strategies, and much more. Criminals seek to maximise their profits from a cyber attack in a variety of ways. Information could be sold to third parties or your systems and data could be held hostage until a ransom is paid. We have seen ransomware threats evolve from seeking ransom from the business, to criminals reaching out to their clients for ransom before disclosing information. An increasing threat is funds payment manipulation either through phishing (business email compromise and/or whaling) or targeted attacks on payment systems and online bank accounts. And let’s not forget sometimes it’s pure pot luck for criminals who randomly search for a vulnerability on a range of global IP addresses and may happen to stumble upon the domain of a law firm and then explore Aladdin’s cave for their loot.

Notable Cyber-Attacks on Law Firms Over the last decade cyber attacks have plagued law firms with increasing frequency and severity. The impacts have ranged from information disclosure, unavailability of systems due to ransomware and supply chain issues with software vendors. We have collated notable industry cyber incidents below: 2013: The International Consortium of Investigative Journalists’ (ICIJ) Offshore Leaks was a 260-gigabyte set of 2.5 million documents from the Portcullis offshore group.

2016: The Panama Papers comprised 11.5 million files of Panama law firm Mossack Fonseca, with 2.6 terabytes of data. Personal and private data was leaked leading to tax evasion investigations. 2017: DLA Piper LLP, one of the largest law firms in the world, was hit by a ransomware attack (Petya) that infected hundreds of thousands of computers across their platform. The global cyber event encrypted all affected files and requested a ransom of $300 in bitcoin to regain access to individual machines to avoid the threat of deletion. 2017: Paradise Papers in 2017 contained 13.4 million documents in 1.4 terabytes of data exfiltrated from British Virgin Islands law firm Appleby. 2021: Pandora Papers 2021 contained 14 different offshore service providers’ private information. The code name for the 12-month investigation was Aladdin. 2021: Campbell Conroy & O’Neil, P.C., a law firm handling hundreds of cases for the world’s leading companies, announced a large data breach that resulted from a ransomware attack in February. 2021: Allens suffered a high profile attack on their file-sharing system provided by third party cloud company Accellion with confidential information accessed illegally. And it’s not just Big Law that have suffered cyber incidents. Even smaller practitioners have had their pockets picked by sophisticated cyber criminals, whether ransomware wielders or email con artists. Business email compromise, also known as whaling, a type of sophisticated phishing, frequently impacts law firms with criminals trying to misdirect funds transfer. Please do not be led into a false sense of security that Western Australia’s geographic isolation provides your business protection from a cyber incident. To the contrary the internet has brought everyone closer and cyber criminals to your doorstep within a few clicks and carefully crafted emails.

Technical Debt “Technical Debt” is an emergent condition present in many digitally-enabled law firms that have now discovered their existing technology is too rigid to accommodate new business objectives and priorities. This rigidity is created from past system design and architecture decisions that were made,

future proof usually with the best intentions, based on the architect’s knowledge of business objectives that were available at the time. No technology solution is able to do everything. In order to design a system for any particular purpose, architects and engineers must make a series of design choices, or trade-offs, along the way that, as a necessary consequence, sacrifice other choices that could have been made at that juncture. Specifically in security this phenomena is explained as control friction vs. user experience. Addressing technical debt is a significant investment for any law firm and is typically left to the last minute or worse after a successful cyber attack. The point here is don’t leave technology change too late as it is far more costly recovering from a cyber attack or a loss of system availability.

The Push to Digital

of any cyber security defence, and we expect to see individuals continue to be targeted as an easy route to gaining access. Organisations must build a secure culture and ensure their entire workforce, no matter their role, adopt the secure behaviours and attitudes needed to keep the organisation safe.

Hybrid Working Now a Reality Fighting a strong trend toward hybrid work, Goldman Sachs CEO David Solomon has repeatedly insisted that employees return to the office full-time, leaving no doubt that he views remote work as a temporary aberration. When the New York Offices opened up recently only 50% of staff returned. Employee expectations have shifted with demonstration, in some cases, that work can be effectively performed at home.

COVID-19 created a digital rush which left many organisations exposed, with teams still cleaning up poorly implemented and/ or secured solutions. While there is no doubt that the pandemic amplified the adoption of new technologies, technological advancements were already changing the world over the past two decades, from living standards to the very nature of our work.

For cyber security, this increases potential avenues of attack. We are no longer sitting in our law firm castle with a big stone wall and a moat protecting our valuable data. Our data is in the homes of our employees on a portable laptop. How do we enable and empower our staff to make conscious security decisions from home?

These changes require business leaders to revisit corporate strategy and necessary security considerations. Technology has created seismic shifts in the mix of skills required for the new workforce to remain relevant to our customers. These new skills and platforms change the risk environment for law firms.

In 2021, several high-profile incidents related to supply chain compromise. In some cases, multiple threat actors compromised the same “supplier” entity independently, complicating the scoping, response, and attribution of incidents.

Social Engineering Threat actors continue to perfect their social engineering techniques and are being bolder with their engagements with targets. Social media platforms, once used for reconnaissance, are now increasingly used to directly interact with employee targets over multiple mediums. LinkedIn is becoming a favoured platform to engage with targets. Criminals create fake recruiter profiles, building trust with their victims, sometimes over a period of weeks or months of interaction. Once trust is established, the conversation reportedly moves to other means of communication including WhatsApp, email, and even phone calls. Victims are tricked into opening malicious attachments disguised as job specifications which contain malware. Human error is still a major vulnerability

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Supply Chain Exposed

For the legal industry, the most highprofile supply chain compromise related to the file transfer platform Accellion. Critical vulnerabilities were identified within the cloud platform that allowed unauthorised users access to data stored within the platform. Allens, a legal adviser to almost three-quarters of Australia’s top 100 companies, was impacted by this supply chain incident. Threat actors that target supply chains display a high level of sophistication and remain under the radar for months if not years. Organisations should be asking themselves about access privileges and whether they are giving IT management and security software too much leeway. They should also be assessing whether their threat detection capabilities can identify malicious activity across their environment and whether any changes could be made to identity and access management systems to detect the abuse of trusted or privileged access.

Changing Regulation and Legislation There are major changes being introduced to state and federal legislation covering cyber security, privacy, ransomware, criminal penalties and critical infrastructure. These changes are necessary to keep up with technology and the risk presented to Australian citizens and organisations. At Tannhauser, we support systemic changes to the Privacy Act 1988 (The Act) to focus on the privacy rights and protections of individuals rather than responsibilities of an insufficient subset of organisations within Australia. At June 30 2021 there were 2,402,254 actively trading businesses in the Australian economy, 93.0% of those businesses had turnover of less than $2 million. Businesses with a turnover over $3 million are required to meet the requirements within The Act. This does not consider the long list of excluded organisations from The Act. The Notifiable data breaches scheme, as part of the The Act, is an incredibly important tool for Australian Citizens to protect themselves. This requires businesses to notify upon a breach but the coverage of organisations is limited as illustrated. There must be greater emphasis on the protection of individuals and the obligations on entities to ensure business models and practices safeguard privacy. The proposed Crimes Legislation Amendment (Ransomware Action Plan) Bill 2022 amends the geographical jurisdiction provision for computer offences, introduces standalone offences for extortive conduct associated with ransomware and increases maximum penalties for these offences. The Ransomware Payments Bill 2021 (No. 2) proposes the establishment of a mandatory requirement for Commonwealth, state or territory entities, corporations and partnerships to report to the ACSC ransomware payments paid in response to a ransomware attack. Enhancement of critical infrastructure legislation is much needed, only emphasised during a pandemic and recent natural disasters. The Security Legislation Amendment (Critical Infrastructure) Act 2021 creates a framework for managing risks relating to critical infrastructure with reporting requirements related to critical assets and cyber security incidents.

Enforcement: Increasing Opportunity Cost Existing legislation and enforcement powers against cyber criminals have been seen as toothless tigers. This has led to

EMERGING TECH & LAWYERS

Steps to Take Now There are foundational cyber security controls that every business should strive towards and these are articulated within the Australian Cyber Security Centre’s Essential 8, these mitigation strategies are aimed at preventing an incident occurring. However, we know a cyber attack is inevitable (not if, but when), so we must also consider business resilience initiatives to ensure law firms can respond and recover from a cyber-attack swiftly to reduce any downtime and potential financial impacts to the firm.

The first starting point is training staff to ensure everyone is on the same page with the risk they face in their day to day duties. For example, making the assumption that your staff have the same level of knowledge and ability when it comes to detecting a phishing attempt should be put to bed. Avoiding the loss of private data is an important factor in protecting not only your company data, but connected customers and companies. Simple measures can significantly improve your security posture, these include:

Educate your staff on cyber threats;

Only people who need access to the sensitive data to perform their job are granted access;

Avoid connecting your devices to public Wi-Fi networks;

Enabling multi-factor authentication for every internet accessible application;

Turning on your device firewall and installing antivirus software on all devices; and

Backing up your data.

3 4

Avoiding easily guessable passwords;

Being cautious when opening attachments in emails from unknown senders; Australian Law Firms who are starting their cyber security journey should conduct a cyber risk maturity assessment with a reputable and qualified cyber security firm.

recent proposals of increased penalties. Chief among these penalties are an increased maximum penalty of 10 years’ imprisonment for cybercriminals that use ransomware and a new maximum penalty of 25 years’ imprisonment for criminals that target Australia’s critical infrastructure. However, harsher fines and judgements do not necessarily contribute to the reduction of cyber crime. In 2019, the effects of DNA databases on the deterrence and detection of offenders was researched in Denmark (Anker, et al). The report concluded that a 1% higher detection probability reduces crime by more than 2%. For example, a change in policing policy may increase the probability that an offender gets caught and subsequently taken to court. This can reduce the incentive to offend, reducing the offending rate. The challenge with cyber crime is that it’s often a faceless attack perpetrated overseas in an unfavourable jurisdiction. The Internet is a near anonymous environment where crimes can be committed with tracks hidden, paid in crypto currency which can then be “tumbled” or washed to further remain hidden.

Legislation should emphasise and increase the likelihood of being caught and holding those to account. Attack attribution is by no means an easy feat but to reduce this crime type we need to introduce higher costs to the perpetrators either through enhanced control environments or increasing the propensity of threat actors actually being caught.

Backup Serves the Purpose of Recourse A backup plan or contingency strategy is an alternative which can be used if something goes wrong with the main plan; a recourse. As mentioned above we must now assume intrusion which means your backup plan will be tested when cyber security controls fail. An immutable copy of your data is now essential. This allows recovery of data to a point in time that is known to be not impacted by the cyber attack. We have witnessed teams recovering with a compromised backup exacerbating the original incident. Backup will not eliminate all cyber risk to your organisation only those scenarios where recovery is required, e.g. ransomware. Backup doesn’t solve loss of confidentiality from exfiltrated data or payment redirection. Ensure you have the

right solution for different scenarios that could impact your business.

Conclusion Cyberspace continues to be increasingly dangerous; however, there are simple steps, as illustrated, to uplift your security posture to increase costs to the criminals to reduce the likelihood of attack on your firm. Barring any criminal activity, it’s a firm’s responsibility to protect information about their clients. A strong cybersecurity culture and the right defensive tools are the best way to protect the reputation of your firm as a secure place for clients’ data. While it can be costly for businesses to invest in the right people, processes and technology to protect against these threats, the damage that results from being unprepared is ultimately far more costly. Our reliance on digital services will increase and as such so do the potential risks associated. We must look towards enhanced risk management practices and continuous monitoring to ensure those responsible and accountable for the organisation are well informed and make the best possible decisions available to them.

future proof A Macro Way to Reputation Damage by Brenda van Rensburg

Introduction The increase of cyber-crime has placed a significant amount of responsibility on anyone using digital technology. Since its release to the public in 1994, digital technology has advanced at such an exponential rate that it is near impossible for legislation to keep up. While regulation is supposed to offer judicial direction, it often leaves victims at the hands of a faceless perpetrator without any legal recourse. In addition to this, businesses are left defending their reputational castle with nothing more than a thread of ethics and a Band-Aid of professional conduct. Despite the increased use of security tools, data breaches have increased by over 68 percent in the last year1 leaving data security in the hands of businesses with an expectation to do the right thing. Fortunately, there is a level of accountability which is guarded by governance and discipline.2 A professional who breaches these rules could face serious penalties.3 This article will discuss a lawyer’s ethical and professional responsibility to prevent the unauthorised access and disclosure of personal and confidential data through the implementation of the Essential 8.

The Legal Expectation According to Legal Professions Conduct Rules (WA), lawyers are expected to uphold fundamental ethical duties4 which, at the core, would not ‘bring the profession into disrepute’.5 A lawyer owes a ‘duty of care’ to both their client and the administration of justice, to ensure that their use of technology will not increase the likelihood of harm to a client, or the legal profession.6 With data breaches increasing rapidly, there is a heightened chance that information could be either accessed maliciously or disclosed in a manner that would place confidentiality at risk. According to Meghan LeWallen, lawyers ‘must be aware of security and confidentiality risks’ as this could ‘lead to ethics violations.’7 Arguably, unauthorised

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disclosure of information is disclosure without the client’s consent.8 In 2012, The American Bar Association amended the Professional Conduct Rules to include a lawyer’s responsibility to keep up to date with risks associated with technology.9 As a result, lawyers have a duty of competence to ensure that they either have knowledge of the technology they use, or they seek the advice of a person who specializes in this area.10

Essential 8 and Ethical Responsibility In 2017, the Australian Cyber Security Centre published the Essential Eight Maturity Model11 (Essential 8). It was designed to protect ‘Microsoft Windowsbased-internet-connected networks.’12 The four levels of maturity, identified within the Essential 8, helps organisations to implement controls based on their business model. The Essential 8 offers lawyers a guide to protecting confidential data which is ‘fundamental to the lawyer-client relationship.’13 The duty of confidentiality is necessary for the adversarial system, client compliance and to promote ‘client trust, dignity and autonomy.’14 In New South Wales Bar Association v Cummins, the court agreed that ‘clients must feel secure in confiding their secrets’.15 Arguably, clients place their trust in a lawyer, and this relationship should not be seen as a commercial one.16 The North Dakota Supreme Court illustrated that lawyers must provide competent representation which ‘includes keeping abreast of changes in technology.’17 Therefore, it would be expected that lawyers have a level of responsibility to ensure that they adopt a security framework that would not place the information at ‘risk of coming into the hands of someone with an adverse interest.’18

A Macro Disaster The Essential 8’s mitigation strategies cover 3 key areas that include prevention, limitation, and recovery. The Australian Signals Directorate considers the Essential 8 as the one of the most effective cyber resilience models for any organisation.19 These controls were designed to help businesses protect their security systems against a range of adversaries. One of the 4 preventative controls within the Essential 8, is configuration of the Microsoft Office macro settings. The Microsoft Office suite, also known as Microsoft 365, contains an ‘embedded code written in Visual Basic for Applications (VBA) programming language’.20 It allows a user to automate repetitive tasks.21 The same code can also be used to hide malware which can lead to malicious actors accessing different information systems.22 The first time the world experienced a global macro attack was in 1999. The Melissa Virus, which took advantage of the macro security flaw, created havoc that allowed adversaries to access personal and sensitive information.23 Malicious actors continually use this tactic because it is simple to use, and documents are shared quickly between friends and associates.24 In 2021, Microsoft announced that ‘internet macros’ would be blocked by default.25 The added new feature is a message bar with a button to notify users about the risks and safe practices.26 Unfortunately, users can still enable macros by a click of button leaving organisations to accept the risk when using Microsoft Office documents.

Reputational Risk Cyber security presents several risks to a business. The most critical of all is reputational risk. According to Tori Taylor, 87% of consumers are ‘willing to take their business elsewhere’ if a data breach was to occur.27 In 2016, Target Pty Ltd experienced a data breach which exposed 40 million credit card records.28 Target sales dropped by

EMERGING TECH & LAWYERS 46% for that quarter which was equivalent to roughly $520 million. Arguments have been raised that due to their size and popularity, consumers felt they ‘should have known better’.29 It was identified in the 2019 American Bar Association (ABA) Technology Survey Report, that 26% of legal firms had experienced a data breach. The consequence of this breach included loss of billable hours, replacement of hardware, loss of data, informing clients of a data breach and reporting the breach to regulators.30 Arguably, all consequences can ultimately lead to reputational damage. The ABA Model Rules of Professional Conduct state that a ‘lawyer shall provide competent representation to a client.’31 The ABA commentary illustrates that an ‘ethical practice includes knowledge and understanding of the risks and benefits’ associated with the use of technology.32 According to the North Dakota Rules of Professional Conduct, lawyers have a duty ‘not to reveal client confidences, no matter the source, form, or media, whether electronic, paper or oral.’33 Failure to secure confidential data could be considered as ‘unsatisfactory professional misconduct’ as lawyers must not ‘disclose any information which is confidential’.34 Arguably, a client, whose information has been compromised, can make a complaint against a lawyer that could ultimately lead to both reputational damage and financial compensation.35

Taking a Macro Action The Essential 8 identifies macros as a serious security issue.36 It highlights the importance to restrict the use of macros within the organisation. Notably, several departments will use macros as it was designed to automate mundane tasks.37 Disabling macros on all devices may disrupt a business’s function. Therefore, it is strongly recommended that businesses identify which departments and individuals require the use of Microsoft Office macros. If a business decides to allow all employees to use macros, then it is recommended that users are trained to review macros within documents they download or receive. This review process will require technical skills. Ideally, it is recommended that a business creates an organisation process on screening macros which should include a third party that has technical skills.38 Both training and documentation can be easily achieved through a company that specializes in this area.

If, however, a business decides to disable macros, it is recommended that they develop a change management strategy before authorizing the security configuration within the organisation’s group policy.39 This would help the business to identify which areas would be significantly impacted by this change. Additionally, businesses should further consider including a ‘macro request process’ to reduce resistance to this modification.

Conclusion The advancement of technology has raised concerns with many industry experts. As we surge forward into the digital world, we are finding that the cyber world is riddled with risks. Lawyers are not only left navigating through a minefield of legal decisions, but also face a duty of care when using technology. Most lawyers are aware of the risks around the collection, storage, and disclosure of personal and sensitive information. Arguably, they have a fundamental ethical duty to ensure this information is secure from unauthorised access or disclosure. The Australian Cyber Security Centre recognised the risks facing all organisations. The Essential 8 was purposefully designed to help organisations, such as law firms, to navigate through the minefield of cyber risk. A course of action a law firm can take is to complete an Essential 8 assessment to establish a cyber security baseline. This will assist in identifying gaps and developing a strategy to reduce the risk of a data breach which ultimately could impact their reputation.

End notes 1 Bee Fowler, Data Breaches Breach Record in 2021 (Web Page, 24 January 2022) website < https://www. cnet.com/tech/services-and-software/record-numberof-data-breaches-reported-in-2021-new-report-says/>. 2 Australian Solicitors Conduct Rules 2015 (Cth). 3 Legal Profession Act 2008 (WA). 4 Australian Solicitor’s Conduct Rules 2015 (Cth) r 4. 5 Australian Solicitor’s Conduct Rules 2015 (Cth) r 5. 6 Kevin Crews, The Door to a Virtual Law Practice is Always Open: and the Proper Use of Technology can keep it that way (2014) The Florida Bar Journal 6. 7 Meghan C LeWallen, ‘Cloud Computing: A Lawyer’s Ethical Duty to Act with Reasonable Care when Storing Client Confidences in the Cloud’ (2013) 60 Cleveland State Law Review 1133. 8 Rick Cullen, ‘The Duty of Confidentiality’ (2018) Brief 17. 9 American Bar Association Model Rules of Professional Conduct (2012) r 11. 10 Erik Mazzone and David Ries, A Techno-ethics Checklist: Basics for Being Safe, not Sorry (2009) 35 Law Practice 2. 11 Australian Cyber Security Centre, Essential Eight Maturity Model (Web Page) < https://www.cyber.gov. au/acsc/view-all-content/publications/essential-eightmaturity-model>.

12 ACSC, Essentail Eight Maturity Model (Web Page) < https://www.cyber.gov.au/acsc/view-all-content/ publications/essential-eight-maturity-model>. 13 Paul Baron and Lillian Corban, Ethics and Legal Professionalism in Australia (Oxford University Press, 2020) 159. 14 Rebecca Aviel, The Boundary Claim’s Caveat: Lawyers and Confidentiality Exceptionalism (2011-12) 86 Tulane Law Review 1005. 15 New South Wales Bar Association v Cummins [2001] NSWCA 284. 16 Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41. 17 Tracy Vigness Kolb, ‘Technology Competence: The New Ethical Mandate for North Dakota Lawyers and the Practice of Law’ (2016) 92 North Dakota Law Review 91. 18 Prince Jefri Bolkiah v KPMG [1999] 2 AC 222. 19 Australian Cyber Security Centre, Essential Eight Maturity Model (Web Page) < https://www.cyber.gov. au/acsc/view-all-content/publications/essential-eightmaturity-model>. 20 Ibid. 21 Steven Roman, Writing Excel Macros with VBA (O’Reilly Media Inc, 2002). 22 Arielle Waldman, Microsoft Disables VBA Macros by default (Web Page, 08 February 2022)< https://www. techtarget.com/searchsecurity/news/252513141/ Microsoft-disables-VBA-macros-by-default>. 23 Lee Garber, Melissa Virus Creates a New Type of Threat (1999) 31 Computer 6. 24 Paul Docherty and Peter Simpson, Macro Attacks: What Next After Melissa? (1999) Computers & Science 18. 25 Arielle Waldman, Microsoft Disables VBA macros by default (Web Page, 08 February 2022) https://www. techtarget.com/searchsecurity/news/252513141/ Microsoft-disables-VBA-macros-by-default>. 26 Ibid 27 Tori Taylor, How Reputational Damage from a Data Breach Affects Consumer Perception (Web Page, 22 February 2022)< https://www.securelink.com/blog/ reputation-risks-how-cyberattacks-affect-consumerperception/>. 28 Dough Drinkwater, Does a Data Breach Really Affect your Firm’s Reputation? (Web Page) < https://www. databreaches.net/does-a-data-breach-really-affectyour-firms-reputation/>. 29 Christos Makridis, Do Data Breaches Damage Reputation? Evidence from 45 Companies between 2002 and 2018 (2021) 1 Journal of Cybersecurity 8. 30 John Loughnane, Tech Report 2019: Cybersecurity (2019) Law Technology Today. 31 American Bar Association Model Rules of Professional Conduct (2020) r 1.1. 32 Heidi Frostestad Kuehl, Technologically Competent: Ethical Practice For 21st Century Lawyering (2019) 10 Journal of Law, Technology, and the Internet. 33 Tracy Vigness Kolb, ‘Technology Competence: The New Ethical Mandate for North Dakota Lawyers and the Practice of Law’ (2016) 92(1) North Dakota Law Review 91. 34 Australian Solicitor’s Conduct Rules (Cth) r 9. 35 Legal Profession Uniform Law 2018 (NSW) s 275. 36 Australian Cyber Security Centre, Essential Eight Maturity Model (Web Page) < https://www.cyber.gov. au/acsc/view-all-content/publications/essential-eightmaturity-model>. 37 Victorian State Government, Improving Cyber Maturity with the Essential Eight (2021) 3 Victorian Government Cyber Maturity Benchmark 1. 38 Victorian State Government, Improving Cyber Maturity with the Essential Eight (2021) 3 Victorian Government Cyber Maturity Benchmark 1. 39 Ibid.

future proof On the Rise and Rise of Stablecoins by Eli Bernstein Eli Bernstein is a fintech, privacy and emerging technologies lawyer at Cornwalls. The views expressed are the author’s and do not necessarily reflect those of Cornwalls.

hile digital assets like Bitcoin or Ethereum rise and fall sharply - with volatility as their only constant, another asset class that has kept its price constant has been growing over time. Indeed, total market capitalisation for stablecoins has grown fourfold in 2021 alone and continues to grow.1 The Financial Stability Oversight Council reported that in the twelve months ending October 2021, the market capitalisation for stablecoins has grown 500% to reach USD $127 billion market capitalisation.2 In the five months since that report was issued, the market has grown a further 50% (to reach USD $189 billion as of the time of writing).3

A Brief History Of Money

In Australia, ANZ recently announced its foray into this space with the launch of the A$DC stablecoin.4

3. a store of value (Store) capable of transferring purchasing power from the present to the future (though perhaps not as well as gold or property).7

This stable cryptocurrency merits some attention. Any examination of stablecoins would require an understanding of the interaction of three frameworks: economic, technical and regulatory.

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In 1875 William S Jevons described how money functions to overcome the limitations of barter he described four functions:5 Money’s a matter of functions four, A Medium, a Measure, a Standard, a Store.6 Most modern economists have since dropped the Standard (of debt) and now claim three functions of money, as: 1. a medium of exchange (Medium) that can facilitate trade even where only one desires what the other supplies. 2. a unit of account (Measure) that can be used as a single measure to price all things (from houses to oranges), and furthermore, be subdivided.

From the origins of sovereign-backed money, such as the Lydian Slater (6th Century BCE) until 1971, money was

backed by physical commodities, typically gold (Commodity money). When on 15 August 1971, the US dollar, and along with it the global supply of money pegged to it was no longer constrained by any physical commodity, Fiat money was born (Fiat).8 Since then, the US dollar lost 98% of its value when compared to gold.9 10 11 On 3 January 2009, following the Global Financial Crisis and subsequent bailouts, Satoshi Nakamoto, the pseudonymous creator of Bitcoin released the genesis block of the Bitcoin network.12 Bitcoin combines encryption, decentralised computing and game theory to create a currency that keeps inflation in check (there is an upper limit of 21 million coins). Since the advent of bitcoin, thousands of cryptocurrencies emerged. They can generally be classified as one of the following categories: a) Payment coins (currency or monero) are used to replace cash (eg. Bitcoin, Bitcoin Cash).

EMERGING TECH & LAWYERS b) Stablecoins – coins pegged to the value of other assets (eg. USD Tether). c)

CBDC (Central Bank Digital Currency) – government-issued stablecoins (eg. Digital Yuan).

What are stablecoins?

d) Privacy coins – payment coins that obfuscate sender and receiver information (eg. Zcash). e) Governance tokens – managing voting rights for decentralised protocols (eg. Uniswap). f)

Utility tokens – tokens that unlock access to a service (eg. Ethereum).

g) Non-fungible Tokens – unique tokens incorporating digital (or representing physical) assets (eg. Cryptokitties). h) Security tokens – tokens that represent ownership rights (eg. Tokenised REITs). Bitcoin was created to act as a peer-topeer payment mechanism. In practice, however, the utility of Bitcoin as a Medium has been dampened by speculation about its value as a Store and the price volatility associated with speculative trading.13 This is consistent with Hayek’s concerns in the Denationalisation of Money about the utility of an intrinsically or speculatively valuable currency as a media of exchange.14 Most Bitcoin holders (or ‘hodlers’) would likely seek to avoid the story of Laszlo Hanyecz who spent 10,000 Bitcoins (today worth over USD $400 Million today) to purchase two pizzas back in May 2010.15 Such concern coupled with relatively high transaction costs have dampened Bitcoin’s utility as an efficient Medium.

Types of Crypto Assets

PRIVACY COINS The blockchain nature of Bitcoin creates concerns over privacy of transactions. Privacy coins like Zcash and Monero aim to obfuscate transaction values as sender details.

As such, the need for a reliable, secure, stable and efficient medium of exchange for cryptocurrencies was born.

A stablecoin is “a crypto-asset that seeks to stabilise the price of the ‘coin’ by linking its value to a pool of assets, making it a reliable and attractive store of value.”16 ASIC in a recent submission defined Stablecoins as “a form of cryptoasset that aim to maintain a stable value relative to a specified unit of account or store of value,” such as dollars or gold. A stablecoin has some or all of the characteristics of ‘money’, being a unit of account, a means of payment, and potentially a store of value.17

2. Institutional and reserve banking: large investment banks are proposing treasury and cross-border payments collateralised by assets, such as deposits at private or central banks.20 3. A retail currency (referred to as a Global Stablecoin) a stablecoin aimed at retail use - for households or merchants using the stablecoin in everyday transfers and payments (eg. Facebook’s Diem, the coin formerly known as Libra).21 Structurally, three general approaches to stablecoin collateralisation exist:22 1. Fiat-collateralised stablecoins These asset-backed stablecoins maintain a stable value by reference to financial assets. These are typically fully collateralised and often centrally governed. They are typically backed by:

Functionally, stablecoins therefore act as a bridge between a volatile Store (eg. Bitcoin) and a stable Medium (eg. USD). Tony Richards (Head of Payments Policy at the Reserve Bank of Australia) in a recent address19 identified three main functions of stablecoins as: 1. Trading Pairs: Stablecoins are used to bridge between Fiat currency and Cryptocurrency as a Medium for payment or settlement for transactions involving cryptocurrencies or tokenised assets. Stablecoins are also used as a Store of value for those wishing to transfer their assets from cryptocurrencies to fiat currency without leaving the blockchain ecosystem (eg. USD Tether $USDT).

Fiat: Coins like USD Coin or Binance USD are backed by funds secured in a trust account in a third-party licensed financial institution. Ideally, the accounts are regularly audited to ensure stablecoins match collateralised funds. In some cases, the stablecoin is backed by a basket of currencies rather than a single currency (as Facebook’s Libra initially proposed) 2. Asset-collateralised stablecoins These asset-backed stablecoins maintain a stable value by reference to a single asset or basket of assets, typically commodities or crypto assets.

PAYMENT COINS

STABLECOINS

CBDCs

Used to purchase everyday items. Includes BTC, ETH, LTC and Bitcoin Cash. The likes of Bitcoin and Etherium can also be used as a store of value.

Stable coins aim to reduce volatility by tying the value of the token to assets such as USD, the Pound, Euros and precious metals.

Comparible to stable coins. Issued by central banks rather than private companies. Currently being considered by the USA and being trialled by China.

GOVERNANCE TOKENS

UTILITY TOKENS

NON-FUNGIBLE TOKENS

These allow people to vote on changes to the way the platform works. Commonly associated with decentralised financial protocols like Uniswap and Yearn Finance.

Access to services can be unlocked with these. As an example tokens created using the ERC-20 standard represent subscriptions.

Designed to be completely unique and rare, like fine art originals. These tokens are often created using the ERC-721 standard.

Source: currency.com

future proof They are typically backed by:

deflationary costs when stablecoin demand is low while the rest of the network experiences stability of both price and volume of stablecoin supply. (like Basis Cash, loosely based on Sam’s 2014 paper26)

Commodities: Coins like Paxos Gold and DigiX fall in this category. Each stablecoin is backed by 1 troy ounce of fine gold against either allocated gold (serialised and held in vaults) or unallocated gold (spot market with physical delivery) and is redeemable on demand. They are typically fully collateralised and governed by a centralised platform.

In contrast to the above, indirect price control deals with demand rather than supply. They do not directly expand and contract coin supply but offer the incentive framework for changing demand patterns. One such method is:

Crypto Assets: Stablecoins such as MakerDAO’s DAI and Synthetix’s sUSD fall in this category and are over-collateralised and governed by decentralised protocols. For instance, in the case of DAI, each $1 of stablecoins is backed by $2 of ETH assets, allowing for liquidation in case of a sharp fall in ETH price.

Coupon model: When supply outstrips demand, devaluation is avoided by issuing bonds at a discount to face-value, utilising funds raised to buy on-market stablecoins, burning them (bringing back its price to par value) and redeeming them from bondholders by issuing new stablecoins.

3. Algorithmic stablecoins These tokens adjust supply - and in some cases, induce demand - deterministically (i.e. through a pre-determined algorithm).23 Unlike the other stablecoins, algorithmic stablecoins are neither redeemable to, nor backed one-to-one by U.S. dollars or any assets. There are a number of general models of algorithmic stablecoins, offering either direct or indirect control over money supply, and the field is still developing. In direct price control models, price control is achieved by increasing or decreasing the supply of stablecoins in response to changes in demand, keeping the price of a stablecoin constant.24 Methods of direct control include: Rebase model: the first iteration of algorithmic stablecoins (such as Ampleforth (AMPL), loosely based on Ametrano’s 2014 paper25) saw a rules-based, supply-elastic cryptocurrency that rebases according to demand. This means that the number of stablecoins in circulation in each user’s wallets is volatile while their total value is kept stable. Seigniorage Shares model: Similar to the rebase model but with a key distinction, instead of a rebasing currency, the system consists of two tokens, a supply-elastic stablecoin and Seigniorage Shares, which are tokens representing investment shares of the network. Seigniorage Shares holders are exposed to inflationary rewards when stablecoin demand is high and

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The regulatory approaches to stablecoins will differ for each stablecoin model structure described above, for every functional use and for every jurisdiction they are traded in.

US Regulatory Trends The regulatory experience for stablecoins in the United States to date has been mixed: a) Tether, the largest stablecoin by market capitalisation, was recently fined US$41 million by the US Commodity Futures Trading Commission (CFTE) for misleading statements regarding its asset-backing having found that it had adequate cover for only 27.6% of the time (sampled). Furthermore, Tether relied on unregulated third-party entities to provide custody, co-mingled its reserve, operational and customer funds; and held reserves in non-fiat financial products.27 b) Paxos claims to take “a regulation-first approach to its products and service.”28 Paxos launched the world’s first regulated stablecoin, the Pax Dollar (USDP) - redeemable and backed by USD in regulated and audited trust accounts, as well as Pax Gold (PAXG) - redeemable and backed by gold reserves held in secured vaults. Paxos operates under a trust regulated by the New York State Department of Financial Services.29 TrueUSD (TUSD) have taken a similar approach to regulation.30 c)

Basis.io was the first centralised solution seeking to develop an algorithmic stablecoin with bond and

share tokens alongside a stablecoin. After receiving advice that the bond and share tokens associated with their platform would be characterised as securities (even though the stablecoin itself was not), Basis decided it could not carry out the project and refunded investors the $133 million it had raised. 31 The project has since been revived in decentralised form as Basis Cash, an unregulated non-custodial Decentralised-Finance (DeFi) platform.32 Recent US Developments suggest a tightening of regulation around stablecoins is likely in the near term. The recent report by the President’s Working Group on Financial Markets (PWG) highlighted the risks of payment stablecoins and was critical of gaps in its regulation.33 The report recommended that Congress enact legislation, or in its absence, FSOC act without congressional approval, to designate some stablecoin activities as systemically important payment, clearing, and settlement activities which guard against stablecoin runs (the ‘bank run’ equivalent if confidence in stablecoin is low), monopolistic power, payment system risk and general risk-management standards.34 FSOC in its annual reports, echoed the concerns about the risks posed by stablecoins as a means of payment creating a range of prudential concerns, and highlighting the need to manage risks relating to illicit financing, national security, cybersecurity, privacy and international monetary and payment systems integrity.35

Australian Market and Regulatory Trends In Australia, both the use of stablecoins as a payment method and the supply of Australian dollar-linked stablecoins has been very limited. Dark et al 37 argue that the reason for low demand to date has been the fact that the alternative is a reliable, low-inflation store of value (the Australia Dollar) and an efficient payments network.As such, no compelling proposition for widespread use of stablecoins exists in Australia.38 Until recently, a few attempts have been tried without great success. The AUDRamp (AUDR) was the first Australian project to do so in 2018. It obtained approval as a managed investment scheme but does not appear to have ever reached active trading. TrueAUD (TAUD) was launched by TrustToken (the issuers of TrueUSD) in 2019,39 but appears to not have significant trading volume or the liquidity required to stabilise its price at $1. Terra AU (AUT) is a new stablecoin built on the Terra ecosystem.

EMERGING TECH & LAWYERS The following is a summary of regulatory issues, categorised by functions and activities affecting stablecoins as identified by the Financial Stability Board: Functions

Activities

Governance of the arrangement

Establishing rules governing the stablecoin arrangement

Issuance, redemption and stabilisation of value of coins

Issuing, creating and destroying stablecoins Managing reserve assets Providing custody/trust services for reserve assets

Transfer of coins

Operating the infrastructure Validating transactions

Interaction with users

Storing the private keys (wallet) Exchanging, trading and reselling Marketmaking

Adapted from the Financial Stability Board’s report36

Promisingly for the market was the recent announcement by ANZ Bank of the launch of A$DC, a Fiat stablecoin pegged to the Australian dollar. The A$DC is backed $1 for $1 in a client trust account held at an ADI. This is the first Australian stablecoin backed by an authorised deposit-taking institution. ANZ is reported to be working with regulators, including APRA and AUSTRAC.40 In light of this milestone development coupled with the explosive growth in stablecoins over the past year, further regulatory clarity around stablecoins is warranted. In June 2021, the Council of Financial Regulators (comprising of ASIC, APRA, RBA and Treasury) was forming a working group with other government agencies (including ACCC, AUSTRAC, and the ATO) to study the effects of stablecoins on the Australian economy.41 The report has yet to be released. Reserve Bank officials, like their US counterparts, have been calling for greater regulation of stablecoins. Tony Richards (Head of Payments Policy at the RBA) recently suggested that “given the possibility that there could be a potential significant role for stablecoins in the settlement of transactions in tokenised assets, or that large retail-focused stablecoins could emerge, it is important that a suitable regulatory framework is developed”. Sentiments echoed by the Reserve Bank Governor. 42

Regulatory Considerations In Australia, the key question in regulating stablecoins is whether a stablecoin is considered a financial product for the purposes of the Corporations Act 2001 (Cth) (‘Corporations Act’). If a stablecoin is a security, managed investment scheme

or derivative or if it meets the general definition of a of a financial product (a facility for making a financial risk, managing a financial risk or making a noncash payment), it will be considered a financial product and regulated under Chapter 7 of the Corporations Act. Restrictions will apply to those who can provide advice, trade, provide intermediary services, or operate a market in relation to such stablecoins. Each stablecoin will differ in legal classification depending on the following: Structural characteristics: collateralised (1:1, under or over-collateralised); algorithmic Asset backing: Fiat; Commodity; Real Estate; Crypto; or Nothing Functional characteristics: Trading Pairs; Institutional and reserve banking; Global Stablecoin (retail) The following questions may be used to analyse whether a stablecoin will amount to a financial product or not. Depending on its structure, function and asset-backing. 1. Is the stablecoin a facility for making a financial investment under s 763B or alternatively a Managed Investment Scheme under s 764A? 1.1. Does the fact the primary objective of the stablecoin is stability mean its purpose is not to “generate a financial return or other benefit” for the purposes of s 763B (making a financial investment) or “to produce financial benefits”43 for the purposes of ss764A, 9 (Managed investment Scheme)? 1.2. In an algorithmic model, are the incentives offered a “financial return” under s 763B or “financial benefit” under s 9 (Managed investment Scheme)?

1.3. Does the contributor have “dayto-day control” for the purposes of the Act?44 1.4. Is there a pooling of contributions or a common enterprise for the purpose of s 9 (Managed Investment Scheme)? 2. Is the stablecoin a security or debenture under s 764A? 2.1. What legal and equitable rights are attached to an asset-backed token? 2.2. Do bonds in the Coupon model amount to debentures? 2.3. Do Seigniorage Shares amount to securities? 3. Is the stablecoin a derivative under s 761D? 3.1. Does the stablecoin platform offer an arrangement for future consideration (beyond 1 day)? 3.2. Is that consideration determined in reference to the value of something else? 4. Is the stablecoin a facility for managing financial risk under s 763C? 4.1. Is a stablecoin used to limit the financial consequences of price fluctuations, or rather: is the use of the stablecoin a way of managing the financial risk itself rather than mitigating its consequences? 5. Is the stablecoin a facility for making a non-cash payment under s 763D? (For this purpose, a functional analysis of how the stablecoin is utilised for payments is more appropriate than a structural analysis of the assets that back it.)45

future proof Total Stablecoin Supply USDC

May ‘21

Jul ‘21

BUSD

UST

DAI

10 Others

200b

150b

Source: The Block

Stablecoins now represent 10% of the crypto market and are growing fast. With time, as web 3.0 adoption grows and smart contracts become ubiquitous in managing our financial life, demand for stablecoins will increase beyond the crypto world.45 We are likely still at early phases of stablecoin market adoption.

USDT

100b

50b

5.1. Would a Global Stablecoin used for retail currency (as proposed by Facebook’s Diem) meet the definition of making a payment otherwise than through the physical delivery of cash? 5.2. Would a stablecoin used merely for trading pairs or for institutional and reserve banking meet the definition? 6. Is it specifically included under s 764A? 7. Is it specifically excluded under s 765A? 8. Is the financial product aspect an incidental facility of a non-financial product purpose under s 763E? 9. If the stablecoin is determined to be a security, derivative or interest in a managed investment scheme, can the issuer be said to be providing a Clearing and Settlement facility (CS facility) under s 768A(1)?

Conclusion Stablecoins now represent 10% of the crypto market and are growing fast. With time, as web 3.0 adoption grows and smart contracts become ubiquitous in managing our financial life, demand for stablecoins will increase beyond the crypto world.46 We are likely still at early phases of stablecoin market adoption. Policy makers will need to balance between the competing needs of consumer protection (such as ensuring collateralised stablecoins are adequately backed) and the need to allow for innovation in this field to emerge. Reserve Bank governor Philip Lowe recently said, referring to privatelybacked stablecoins: If this is how the system develops, it will be important that these tokens are backed by high-quality assets and that

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they meet high standards for safety and security. One reason I say this is that a lesson from history is that privately issued and backed money all too often ends in financial instability and losses for consumers. This is one reason why national currencies are today ultimately backed by the state. So if privately issued stablecoins are ultimately the way things head, it will be crucial that they meet very high standards. And if there were to be multiple stablecoins, there would be advantages in them being interoperable.47 While stories like Tether misrepresenting their asset-backing give cause for concern for regulators, there is a risk that overregulation may backfire and cause the stablecoin ecosystem to move to DeFi. This was the story of Basis, a project that having failed in the regulated environment (Basis. io) was reborn as a DeFi project (Basis. Cash) with the tagline: ‘Basis.io without Regulatory Risk’.48 Overzealous regulation of stablecoins will lead projects down this path. What may very well emerge is a two-tiered system: On one side, regulated fiatcollateralised, asset-backed stablecoins which apply client money rules, have third party trust custody, and are regularly audited or licenced (as required) for institutional and mainstream retail investors. On the other hand, crypto investors will likely prefer an unregulated DeFi stablecoin, either asset-backed (overcollateralized crypto assets) or algorithmic (uncollateralised) with the user controlling their assets (on a noncustodial wallet) and a monetary supply that is governed deterministically.49 Whichever way regulation ultimately develops, we must heed the warning of John Maynard Keynes who said:

Sep ‘21

Nov ‘21

Jan ‘22

Mar ‘22

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. ”50 Whether the debauched currency is the stablecoin or the fiat that backs it remains to be seen.

End Notes 1 Katherine Greifeld, ‘Stablecoins Soar in Value as Everything Else in Crypto Shrinks’, Bloomberg (Article, 24 February 2022) <https://www.bloomberg.com/ news/articles/2022-02-24/stablecoins-soar-in-valueas-everything-else-in-crypto-shrinks>. 2 FSOC Annual Report, p124 3 ‘Stablecoins by Market Capitalization’, CoinGecko (Web Page, 27 March 2022) <https://www.coingecko.com/ en/categories/stablecoins>. 4 James Eyers, ‘ANZ the first bank to mint an Australian dollar stablecoin, the A$DC’ Australian Financial Review (24 March 2022) <https://www.afr.com/ companies/financial-services/anz-the-first-bankto-mint-an-australian-dollar-stablecoin-the-a-dc20220323-p5a743>. 5 William S Jevons, Money and the Mechanism of Exchange (1875), D. Appleton, London. 6 A 1919 couplet based on Jevons, above n 4 7 N. Gregory Mankiw, Macroeconomics (Harvard University, Worth Publishers, 9th ed, 2016) 82. 8 Ibid 84. 9 An ounce of gold worth $38 in 1971 is worth over $1900 as of today. 10 Gold and property can therefore be said to be better Stores of value than Fiat Currency, as they are restrained by physical scarcity while Fiat is not. On the other hand, fiat currency is more transferable than gold or property, and acts as a better Medium of exchange and as a common Measure (especially in the case of the USD while it holds the status of a global reserve currency). 11 Benn Steil and Manuel Hinds, Money, Markets, and Sovereignty (Yale University Press, 2009). 12 In a clue to their motivation, Nakomoto embedded within the first block the following message and proof of date: ‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks’. 13 Cameron Dark, David Emery, June Ma and Clare Noone ’Cryptocurrency: Ten Years On’, Reserve Bank of Australia (Bulletin, 20 June 2019) < https:// www.rba.gov.au/publications/bulletin/2019/jun/ cryptocurrency-ten-years-on.html >. 14 Frederick A Hayek, Denationalization of Money: The Argument Refined, An Analysis of the Theory and Practice of Concurrent Currencies (1990, Third edition), Institute of Economic Affairs. Online at <fee.org/ resources/denationalization-of-money/>, accessed 20 March 2022. 15 ‘10 Years After Laszlo Hanyecz Bought Pizza With

EMERGING TECH & LAWYERS 10K Bitcoin, He Has No Regrets’, CoinDesk (Web Page, 22 May 2020) <https://www.coindesk.com/ markets/2020/05/22/10-years-after-laszlo-hanyeczbought-pizza-with-10k-bitcoin-he-has-no-regrets/>, , accessed 27 March 2022. 16 G7 Working Group on Stablecoins, Investigating the impact of global stablecoins (Report, October 2019) ii. 17 ASIC, Submission 61, Senate Select Committee on Australia as a Technology and Financial Centre (June 2021) 6. 18 Dark et al, above n 13. 19 Tony Richards, ‘The Future of Payments: Cryptocurrencies, Stablecoins or Central Bank Digital Currencies’, Address to the Australian Corporate Treasury Association, Reserve Bank of Australia (18 November 2021) <https://www.rba.gov.au/ speeches/2021/pdf/sp-so-2021-11-18.pdf> , accessed 20 March 2022.

2021 <https://www.cftc.gov/PressRoom/ PressReleases/8450-21>, accessed 27 March 2022 28 Paxos, www.paxos.com, , accessed 27 March 2022 29 Ibid 30 Dark et al, above n 13 31 Basis <www.basis.io>, , accessed 27 March 2022 32 Basis Cash <www.basis.cash>, , accessed 27 March 2022 33 Issued on November 1 2021 along with the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC). 34 ‘Report on Stablecoins,’ President’s Working Group on Financial Markets (PWG), the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) (November 2021) <https://home.treasury.gov/system/files/136/ StableCoinReport_Nov1_508.pdf >

20 Related but distinguished from central Bank Digital Currency (CBDC): government-backed stablecoins such as the Chinese Digital Yuan, which the Australia and the US are both investigating its use case.

35 2021 Annual Report, Financial Stability Oversight Council, US Department of Treasury (17 December 2021) <https://home.treasury.gov/system/files/261/ FSOC2021AnnualReport.pdf>.

21 Ibid.

36 From Table 1: Functions and activities in a stablecoin arrangement in ‘Addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements,’ Financial Stability Board, p10 (14 April 2020).

22 With the first two approaches to stablecoin collateralisation being subsets of asset-backed stablecoins. 23 Benjamin Simon, ’Stability, Elasticity, and Reflexivity: A Deep Dive into Algorithmic Stablecoins‘ Mechanism Capital (Wep page, 21 December 2020) <https://www. mechanism.capital/algorithmic-stablecoins/>. 24 Ibid. 25 Ferdinando M. Ametrano, Hayek Money: The Cryptocurrency Price Stability Solution (April 2014; Revised: August 2016). Available at SSRN: https://ssrn. com/abstract=2425270 or http://dx.doi.org/10.2139/ ssrn.2425270, , accessed on 20 March 2022. 26 R. M. Sams, A Note on Cryptocurrency Stabilisation: Seigniorage Shares (October 2014, Revised: April 2015) Available at https://github.com/rmsams/stablecoins/ blob/master/paper.pdf, accessed on 20 March 2022. 27 CFTC Press Release 8450-21, 15 October

37 Dark et al, above n 13. 38 Ibid, 210. 39 Ibid. 40 James Eyers, ‘ANZ the first bank to mint an Australian dollar stablecoin, the A$DC’ Australian Financial Review (Article, 24 March 2022) <https://www.afr. com/companies/financial-services/anz-the-first-bankto-mint-an-australian-dollar-stablecoin-the-a-dc20220323-p5a743>.

decentralisation and user control. A centralised infrastructure (CeFi) holding custody of the stablecoin offers far less “day-to-day control” than a decentralised platform (DeFi) running on pre-set rules where the user controls their stablecoins on a noncustodial wallet. 45 That said, a structural analysis would nevertheless be beneficial to determine whether the stablecoin is comparable to elements specifically included as making a non-cash payment (such as traveller’s cheques, stored value cards or electronic cash) or those specifically excluded (such as a means of guarantee given by a financial institution). 46 For example, an insurance smart contract could offer a refund if a flight is delayed (using flight departure data source as an oracle). To do so, it would require to lock digital currency in a smart contract to be released to the insured upon the insurable event occurring, resulting in fully automated claims process. Users are likely to prefer an AUD-pegged policy than one that pays out in Ethereum. 47 Philip Lowe, ‘Payments: The Future?’ Reserve Bank of Australia (Address to the Australian Payments Network Summit 2021, 9 December 2021) <https://www.rba. gov.au/speeches/2021/sp-gov-2021-12-09.html>. 48 Basis Cash, above n 31 49 As advocated by Henry C Simon, “Rules versus Authorities in Monetary Policy,” Journal of Political Economy 44 (1936) 1-30 and agreed to by Frederick A Hayek in “The Monetary Framework,” The Constitution of Liberty, University of Chicago Press, 1960. 50 John Maynard Keynes, The Economic Consequences of the Peace (Harcourt, Brace and Howe, 1920).

41 ASIC, Above n 16 42 Tony Richards, above n 15 43 As defined in s9 44 The answer may vary depending on the level of

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PPSA and You

A Short Guide to the Personal Property Securities Act 2009 for the Perplexed by Richard Winter & Sagi Peari

If you lend money to someone, what are some of the ways to make sure you get your money back? You obviously need to check if the borrower has good credit, that they have the means to repay the debt or, you might want to take security (also known as ‘collateral’) from them so that if they don’t repay, you can sell the collateral and recover the debt. Prior to 2012, the laws regarding taking of and enforcing security against personal property (that is, all property excluding real estate property, know has “real” property) were a jumble with dozens of separate state and federal based laws in place regulating the taking of security over different types of collateral. There were also different registers if the security provider (the “Grantor”) was a company, or whether the type of property was something like a car, and even then it varied from state to state. In 2012, the Personal Property Securities Act 2009 (Cth) (”PPSA”) came into effect and replaced the myriad of state, territory and federal laws and registers with one national system and register – the Personal Property Securities Register (“PPSR”).

mortgage, charge or pledge, to name a few examples. The traditional priority of form over substance approach was seen to be problematic as it meant many transactions that would in substance act as security would not be recognised. The guiding principle in the PPSA is that it applies to every transaction that “in substance” creates a security interest. Further, in treating varying types of security interest on an equal basis (that is, if they are in substance security then they are security interests) the PPSA was able to set out rules that apply to all security interests, ranging from the ways in which that interest is perfected (registration typically), how different security interests are ranked/compete with one another, treatment of third party buyers and the remedies available following default. Now at last there was a single unifying law and register covering all personal property security interests, and covering all variety of Grantors including companies, partnerships, trusts and individuals.

The Register: A One Stop Shop

Apart from collapsing multiple registers and laws into one, the PPSA also introduced some new and innovative legal concepts to assist in capturing “what is a security interest”.

The strongest position that a funder taking security (that is a “Secured Party”) can have is if its security interest is perfected. Perfected means that the security interest is in the strongest form it can be which can assist in any battle between Secured Parties as to who gets first use of the collateral in being able to recover and discharge their debt and which may also protect that Secured Party against third party purchasers.

The PPSA does not care what the form of document is that creates the security interest, whether it is in the form of a

The key way in which a security interest is able to be perfected is through registration on the PPSR. The golden rule

In Substance Security

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is that first in time prevails, or “you snooze you lose”. Further, the PPSR, being the sole place in which personal property security interests are registered, acts as a notice board to all others wanting to lend and take security. The opposite is also true, if you had the chance to register and perfect but did not, then you cannot complain if someone else, on checking the register and seeing it clear, takes security and gets a first place ranking.

Deemed Security Interests The PPSA further widened the scope of what is a security interest by deeming certain types of transactions as security interests, some potentially obtaining “super priority” if properly registered. Certain types of transactions, such as leases, may not fall within the “substance test” and without the deeming provisions would not be able to be captured under the PPSA. Failing to recognise these types of transactions would have been a large gap in what is otherwise a uniform code and if left out would mean a party searching the register and not finding these transactions may be misled as to the extent to which a Grantor has financed its activities. So the PPSA included provisions which stated that if a lease is for over 2 years (or has been going for at least 2 years where there is no term) and where leasing is a regular part of the Secured Party’s business (that is a “PPS Lease”), then even if it was not in substance a security (say because at the end of the term the leasehold item, say a car, would be returned to the lessor) nevertheless it would be “deemed” to be a security interest. The same rules then would apply, failure to register would leave the lessor’s security interest unperfected.

Loss of Assets Possible? Besides potentially losing a battle with another secured party if the security interest (in substance or deemed) is unperfected, there is also another very large and big stick that the PPSA wields to encourage registration. Where a security interest is unperfected then, if the Grantor goes insolvent and is wound-up or becomes bankrupt, the assets forming the collateral will become part of the estate of the Grantor. This is highly problematic for funders such as lessors who, prior the PPSA’s introduction, relied on their ownership of the leased assets and their ability to recover them in the Grantor’s insolvency. The PPSA overrides that previously fundamental legal principle and vests ownership of those assets with the Grantor, converting the lessor into an unsecured creditor in the Grantor’s insolvency. This rather dramatic law change has provided one of the most compelling reasons for Secured Parties to ensure that they register their security interests!

Super Security and Timing of Registrations The PPSA also introduced the idea that some security interests are to be deemed to be higher in their priority than other standard securities. If the security interest is found to be “Purchase Money Security Interest” (“PMSI”) then in a battle between a registered PMSI and a registered standard security, even if the standard security was registered first, the PMSI will win the priority battle. Simply, a PMSI occurs

where the funds used to acquire the relevant asset were specifically provided by the Secured Party, such as money lent to buy a car. This type of security is given super status because it is in effect “new money” provided to the Grantor for that specific asset or assets and is treated as if it should exist beyond the reach of general secured creditors (like banks that provide a line of credit for the general running of a business). It is in a sense the flip side of the potential for an unperfected lessor’s security interest/asset being lost in a Grantor’s insolvency – here if the lessor can manage to register its PMSI correctly, it will replicate the advantages of the old law and access those funded goods in priority to all other creditors.

Additionally, if the Grantor is a company,

There are special rules that apply to registering PMSIs though – where the security interest is a “PPS Lease” then registration needs to occur within 15 days of the Grantor obtaining possession of the goods and if those goods form “inventory” then registration must take place before possession itself.

that their secured goods are protected

Note for other security interests (not PMSIs) registration can be done only from the time that the Secured Party believes on reasonable grounds that they have, or will become, a secured party in relation to the relevant collateral. This might mean in appropriate circumstances that registration can be done in advance of entering into any formal security agreement (for example, parties signing binding terms sheets committing to the secured financing). Where those reasonable grounds no longer exist, the Secured Party has 5 Business Days to remove that registration.

registration must be done within 20 Business Days of entry into the security agreement (otherwise the Secured Party may not be able to enforce its security against the Grantor if the Grantor goes insolvent within 6 months of that security being granted).

Conclusion The PPSA has fundamentally altered the landscape in Australia for the creation and protection of security interests in personal property. Individuals and business alike need to get familiar with this new landscape in order to ensure in the most optimal way or that what they are acquiring is indeed free of third party interests and clear title is obtained. The ease of searching and nominal costs involved means there is little excuse for not searching the register and the outcomes of failing to register correctly and on time are so dramatic that the mental tattoo of “Register, Register, Register” should be indelibly inked in every Secured Party’s mind.

Richard Winter is a Sessional Tutor, University of Western Australia Law School. Sagi Peari is a Senior Lecturer in Private & Commercial Law; Director, UWA Business Law Major, University of Western Australia Law School.

Using the Register The PPSA not only provides convenience for funders in terms of a one stop shop for searching and registration but it also assists purchasers for potential transactions. Purchasers are able to run PPSR searches (for the very nominal $2 per search if done directly via the government website: https://www.ppsr.gov.au/) to check that the asset they are contemplating buying is free of security (or to the extent it is secured who has security and what that security covers) to ensure that when they complete their purchase they are obtaining full title and ownership to that property. A good example is buying a car. A purchaser is able to run a search against the car’s VIN (vehicle identification number) or chassis number (depending on the age of the car) and if the search comes up with no results then even if there was a security interest in that car (unregistered and hence unperfected) the purchaser would buy that car free of the security interest. If a security interest was found then the seller would need to ensure that the registration was removed as part of the sale process.

Canada’s Extraordinary Use of the Emergencies Act Poses Human Rights Concerns By Myrna El Fakhry Tuttle, J.D., M.A., LL.M. and Linda McKay-Panos, B.Ed, J.D., LLM.

Overseas, there was recently a prominent and highly charged controversy arising from the measures implemented by the Canadian Government in response to what was called the “Freedom Convoy”. On February 14, 2022, the federal government in Canada invoked, for the first time, the Emergencies Act (the Act) by issuing a proclamation of a public order emergency in order to end disruptions, border blockades and the occupation of the Capital City of Ottawa. The proclamation was followed by an Emergency Economic Measures Order (the Order) and by Emergency Measures Regulations (the Regulations). The Canadian Government argued that the protests and blockades that had been taking place since January 2022 were an emergency that required the invocation of the Act. The Act became law in 1988. It can be used by the federal government in case there is a “national emergency” which is defined by section 3 of the Act as follows: [A]n urgent and critical situation of a temporary nature that (a) seriously endangers the lives, health or safety of Canadians and is of such proportions or nature as to exceed the capacity or authority of a province to deal with it, or (b) seriously threatens the ability of the Government of Canada to preserve the sovereignty, security, and territorial integrity of Canada and that cannot be effectively dealt with under any other law of Canada. A national emergency must fall within one of the four different emergencies to which the Act applies: a public welfare emergency (Part I), a public order emergency (Part II), an international emergency (Part III), and a war emergency (Part IV). A public order emergency is defined by section 16 of the Act as “an emergency that arises from threats to the security of Canada and that is so serious as to be a national emergency.”

Confirmation of the Declaration of Emergency The declaration of an emergency under the Act was the subject of three full days’ debate (February 19, 2022 to February 21, 2022) in the House of Commons before voting to confirm it (185 to 151). The tenor of the debate largely fell on predictable lines, with the New Democratic Party (NDP) supporting the minority Liberal government to achieve passage of the declaration. There is also a review required under the Act (section 62). Within 60 days of the declaration of emergency being revoked or expiring, the government will have to convene an inquiry (section 63) to study the use of the powers. The report will have to then be presented to Parliament within 360 days. The declaration of emergency was revoked on February 23, 2022, because the government considered the emergency to be over. There were almost 200 people charged with criminal offences while the blockades were removed. However, that did not mean that the declaration did not face any challenges.

The Charter When the Act is invoked, and according to its preamble, the Canadian Charter of Rights and Freedoms (the Charter) continues to protect

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Ottawa Ontario Canada, February 13 2022, Freedom Convoy Trucker Protest Credit: Franklin McKay - Shutterstock

individual rights as the government takes special temporary measures to protect the safety and well-being of Canadians. According to Annemieke E. Holthuis: The preamble to the Emergencies Act, while having no legal force in and of itself, sets out the underlying principles of the legislation. A government’s fundamental obligations during a state of emergency are stated to be the following: it must safeguard ‘the safety and security of the individual’, protect ‘the values of the body politic’ and preserve ‘the sovereignty, security and territorial integrity of the state’. The preamble acknowledges that, in fulfilling these obligations, the Governor in council or in effect, Cabinet, may require temporary emergency powers not normally accorded to it. Section 2(b) of the Charter protects freedom of expression, section 2(c) protects freedom of peaceful assembly and section 2(d) protects freedom of association. In addition, Charter section 7 protects “life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.” All of these Charter sections are at issue in this emergency situation. However, the Charter allows the government to balance the rights of individuals with the interests of society where restrictions on protected rights and freedoms can be justified in a free and democratic society (section 1 of the

Charter). This means that during a public order emergency, the government must only take actions that are reasonable and justifiable to protect Canadian citizens.

Emergency Measures Regulations (the Regulations) According to the Department of Justice in Canada, the Act was invoked on February, 14, 2022 to grant temporary additional and necessary powers to the federal government to make orders and/or regulations that are believed, on reasonable grounds, necessary to deal with the blockades and public assemblies. The Regulations prohibited individuals from participating in a public assembly that may reasonably be expected to lead to a breach of the peace through: 1. the serious disruption of the movement of persons or goods or the serious interference with trade; 2. interference with the functioning of critical infrastructure; or 3. support of the threat or use of acts of serious violence against persons or property (section 2(1)). The Regulations also prohibited individuals from directly or indirectly using, collecting, providing, making available or inviting a person to provide property to facilitate or participate in any assembly or for the purpose of benefiting any person who is facilitating or participating in such an activity (section 5).

Emergency Economic Measures Order (the Order) The Order required banks to freeze the accounts of these individuals without a court order. It required banks and other financial institutions to stop providing any financial or related services to a designated person that can be any individual or entity that is directly or indirectly in an activity prohibited by the Regulations (Order, section 1). Deputy Prime Minister and Finance Minister Chrystia Freeland (Minister Freeland) announced that some of the financial measures passed under the Declaration of Emergency will eventually be permanent and will outlast the revocation of the Act. These have been of concern to many.

Registering with FINTRAC The Order applied to specified financial entities already subject to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), including banks, credit societies, trust companies, loan companies and securities dealers, as well as entities that may not have been previously subject to the PCMLTFA. Minister Freeland noted that Canada’s anti-money laundering and terrorist financing rules now cover crowdfunding platforms and the payment service providers they use. These changes cover all forms of transactions, including digital assets such as cryptocurrencies. Under the Order, platform fundraisers and payment processors must register with the

After their occupation was declared illegal, the occupiers moved to GiveSendGo, a crowdfunding platform more friendly to right-wing causes. Another $10 million rolled in. A litany of smaller crowdfunding operations followed, including a Bitcoin fund, the creation of a novel cryptocurrency, a series of e-transfers, and cash donations. It all amounted to a small war chest designed to keep the occupation going.

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) if they are in possession or control of property that is owned, held or controlled by or on behalf of a designated person (Order, subsection 4(1)). They also must report to FINTRAC the transactions and information according to the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (Order, subsections 4(2)(3); must report large and suspicious transactions). Minister Freeland explained: This will help mitigate the risk that these platforms receive illicit funds; increase

the quality and quantity of intelligence received by FINTRAC; and make more information available to support investigations by law enforcement into these illegal blockades. We are making these changes because we know that these platforms are being used to support illegal blockades and illegal activity, which is damaging the Canadian economy. The government will also bring forward legislation to provide these authorities to FINTRAC on a permanent basis.

Freezing Accounts The government also authorized Canadian financial institutions to temporarily cease providing financial services where the institution suspects that an account is being used to further the illegal blockades and occupations. This Order covers both personal and corporate accounts. This was effective as of February 15, 2022; a bank or other financial service provider will be able to immediately freeze or suspend the account of an individual or business affiliated with these illegal blockades without a court order.

Reporting to RCMP and CSIS In addition, financial services providers described in the Order must disclose without delay to the Commissioner of the Royal Canadian Mounted Police (RCMP) or to the Director of the Canadian Security Intelligence Service (CSIS): (a) the existence of property in their possession or control that they have reason to believe is owned, held or controlled by or on behalf of a designated person; and (b) any information about a transaction or proposed transaction in respect of property referred to in paragraph (a) (Order, section 5).

Ottawa, Ontario, Canada - January 29 2022. Protesters on a truck in Ottawa Convoy for Freedom 2022 protesting in the streets. Credit: Benoit Daoust - Shutterstock

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Canada’s Extraordinary Use of the Emergencies Act Finally, the Order protected these financial institutions against lawsuits (Order, section 7). It also required the suspension of insurance policies for any vehicle being used in a public assembly (Order, section 2).

Concerns Two measures that were of particular concern may be summarized: 1. Any bank or credit agency was to immediately cease “making available any property, including funds or virtual currency” to those blocking critical infrastructure and borders. The government also ordered the banks to stop “providing any financial or related services” to those occupiers. The order stipulated that any institution that complied with these orders would be immune from liability. 2. Crowdfunding services were to register with the Financial Transactions and Reports Analysis Centre (FINTRAC) and report any transactions over a certain threshold, or deemed suspicious.

persons who are engaged directly or indirectly in a Prohibited Activity. The Order provides that Canadian federal, provincial and territorial institutions may disclose information to financial services providers described in the Order, if the disclosing institution is satisfied that the disclosure will contribute to the application of the Order. Presumably this disclosure will involve names of persons allegedly involved in Prohibited Activities. Financial services providers will, on receipt of such disclosure, have to decide whether to act on the basis of the information it contains – a decision that may present some serious challenges given that noncompliance with the Order is subject to prosecution.

One worry was that these measures (freezing accounts and refusing services) could be undertaken without judicial oversight.

The Canadian Bar Association (CBA) believes that the emergency financial measures will likely have ramifications for years to come. They note that the occupiers’ initial GoFundMe campaign raised $10 million before they even arrived in Ottawa, but the crowdfunding website shut it down. All in all, only $1 million was released.

Canadian law firm Stikeman Elliott stated:

The CBA notes:

The immediate challenge for financial service providers will be to assess what steps they must take to identify

After their occupation was declared illegal, the occupiers moved to GiveSendGo, a crowdfunding platform

more friendly to right-wing causes. Another $10 million rolled in. A litany of smaller crowdfunding operations followed, including a Bitcoin fund, the creation of a novel cryptocurrency, a series of e-transfers, and cash donations. It all amounted to a small war chest designed to keep the occupation going. As the federal government devised plans to dislodge the occupation, that pool of cash became a prime target. Fasken notes that financial entities face significant new responsibilities. First: [I]t is not clear how Financial Entities will be able to determine with certainty and in the time available whether it is dealing in property that is owned, held or controlled, directly or indirectly not only by a designated person but also by a person acting on behalf of or at the direction of the designated person or whether they are facilitating any such transaction. Second, it is difficult to ascertain the exact meaning of: “cease providing any financial or related services to or for the benefit of”. For example, are banks and credit unions required to freeze all the accounts that a designated person has with that bank or credit union? Would this include mortgages? On February 25, 2022, a spokesperson for Minister Freeland said that roughly

Emergency Powers in Australia

mergency powers are special prerogatives that a government can resort to in extraordinary situations such as war, insurgency, terrorist attacks, or other severe threats to the state, environmental calamities, serious industrial accidents, pandemics or similar situations that threaten a great number of lives. It is commonly accepted that these powers should only be used in such extraordinary circumstances, and even then only to the extent that the situation requires.1 In Australia, there is no single ‘emergency’ lawgiving one government all the power to formulate and implement a national response to such extraordinary emergencies, though the Federal Government has powers and functions under Federal laws that might be exercised during States of Emergency to assist the States and Territories in their responses.

For example, on 18 March 2020, at the onset of the COVID-19 pandemic, the Federal government declared a nationwide human biosecurity emergency under the Biosecurity Act 2015 (Cth). (Health Minister Greg Hunt confirmed in late March 2022 that, from 17 April 2022 and for the first time in 2 years, there will be no extension to the human biosecurity emergency period) In Western Australia, a state of emergency can be declared under the Emergency Management Act 2005 (WA), and a public health state of emergency under the Public Health Act 2016 (WA). Both these states of emergency have been in effect in WA since 15 March 2020. The state of emergency legislation is due to expire in July, however Premier Mark McGowan has recently confirmed that it is likely to be continued beyond July (there being no express limits on how many times it can be extended.)

Australian Human Rights Commissioner Lorraine Finlay has expressed concerns about the long-term use of state of emergency laws saying: “The state of emergency declaration transfers an enormous amount of power to the executive, and therefore to public servants and bureaucrats, and reduces parliamentary oversight and scrutiny.” As emergency powers are characterised by extraordinary concentrated powers of the executive, there is a real risk of human rights rule of law violations. Last year, the Australian Human Rights Commission, in a submission to a Senate inquiry examining the National Emergency Declaration Act 2020, called for greater accountability to be embedded in laws that extend the Commonwealth’s power in the event of national emergencies. It stated that the laws, which empower the Australian Government to act quickly and unilaterally during national emergencies, must include appropriate checks and balances.2 (read their statement here).

Canada’s Extraordinary Use of the Emergencies Act 200 occupiers had their accounts frozen, thanks to names referred by the RCMP. The spokesperson also noted: “The account freezes will remain in force no longer than the declaration of public order emergency lasts,” they stressed. Thus, after the Act was revoked, the freezes lapsed. However, the CBA points out that these measures “marked a significant new expansion of federal power into the financial sector.”

Court Challenges Legal actions to the Federal Court for judicial review of the decision to invoke the Act have been initiated and continued by the Canadian Civil Liberties Association (CCLA), the Canadian Constitution Foundation (CCF) , and Alberta Premier Jason Kenney. Saskatchewan Premier Scott Moe said that his province was also considering a court challenge. The CCLA believes that the high standard for invoking the “massive powers” of the Act has not been met. In their view,

“many ordinary laws and police powers allow governments to respond to difficult and complex law enforcement situations.” The federal emergency powers were not needed to manage border blockades and protests in cities across the country. They state (CCLA, March Edition: Your Gifts at Work): After invoking the Act, the federal Cabinet has the power to create laws (emergency orders) without the usual checks and balances of a democratic system such as transparency, accountability, and public participation. The CCLA expressed concerns about Cabinet passing: [T]wo emergency orders that limited peaceful protest from coast to coast, allowed for the freezing of bank accounts and financial assets without a court order, required the sharing of personal financial information with Canada’s security agencies, and handed enormous enforcement powers to police

services across the country (CCLA, March Edition: Your Gifts at Work). The CCLA is also concerned that current and future governments will be comfortable taking extraordinary measures that suspend Canada’s ordinary democratic processes. Moreover, CCF Litigation Director stated: Emergency legislation should not be normalized. The threshold for using the Emergencies Act is extremely high and has not been met. The decision to invoke the Emergencies Act, which has never been used or interpreted by the courts, is unprecedented. If Parliament authorizes the proclamation of the public order emergency, the courts will be the last defence for the rule of law. However, in spite of these concerns, it has been reported that a majority of Canadians supported the invocation of the Act.

Conclusion The Act gives the Federal government extraordinary powers to deal with a national emergency. Courts have an obligation to oversee how the government exercises its emergency powers and whether these powers have been abused. Therefore, the Federal Court may set aside or quash an emergency proclamation, order or regulation for inconsistency with the Act in accordance with section 18.1(3)(b) of the Federal Courts Act. It will be interesting to see how the Federal Court is going to interpret the government’s actions in this situation, and whether these events will embolden future governments to declare an emergency.

End Notes 1. Anna Chakee, Securing Democracy? A Comparative Analysis of Emergency Powers in Europe, Policy Paper – No 30, Genever Centre for the Democratic Control of Armed Forces (DCAF), 2009, 5. 2. Australian Human Rights Commission Media Statement: https://humanrights.gov.au/about/news/ media-releases/greater-scrutiny-emergency-powersneeded (downloaded on 7 April 2022)

Ottawa, Ontario, Canada - February 12, 2022. Trucks parked in the street during Freedom Convoy Protest in Ottawa. Credit: Benoit Daoust - Shutterstock

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Freedom to Speak Gino Dal Pont Professor, Faculty of Law, University of Tasmania

Ethics Column

Freedom of thought translates in large measure to freedom of speech. Lawyers accordingly enjoy freedom of speech but must nonetheless take care in its exercise. There is a danger of lawyer freedom of speech being abused. Humans have freedom to think as they wish. And while some regimes have over history sought to control freedom of thought — typically through various means of (political or other) indoctrination — ‘success’ in this endeavour has proven elusive. One upshot of freedom of thought is the freedom to express and disseminate the subject matter of that thought. In our Western society, we describe this in terms of freedom of speech; in some cultures, conversely, this ‘freedom’ appears severely compromised. Of course, the notion of an absolute freedom, even in Western society, is a myth. The vaunted freedom of speech is no exception. There are occasions where its exercise has negative legal consequences. It cannot, for instance, legitimately sustain imputations that are defamatory. Nor can it overcome statutory proscriptions on vilification. It can also be constrained by legal obligations of confidentiality, wherever sourced. Like others in society, lawyers enjoy freedom of thought and, subject to constraints such as those mentioned above, freedom of speech. In many instances, moreover, there is good reason why members of society should hear from lawyers, at least within their field(s) of expertise. For the legal profession to be mute in the face of

ostensible abuses of legally defensible freedoms, or to stand silent in the face of apparent injustice, misaligns with the privileges its members enjoy. Lawyers are also well positioned — some would say best positioned — to assess the adequacy and appropriateness of the law and its processes. After all, lawyers confront these on a daily basis. It follows that to constrain lawyer freedom of speech in these endeavours could serve to compromise some of the greatest utility that lawyers can bring to society. But with this freedom comes responsibility, and consequent restraint, sometimes exceeding what may apply to laypersons. For instance, the strictures of lawyer-client confidentiality are likely to constrain lawyer freedom of speech more so than communications arising in many other relationships. Lawyers must also take greater care in making adverse allegations against others, not only by reason of the privilege applying to statements during court proceedings and to eschew being a party to abuses of process, but because many in society might attach to such allegations the imprimatur of truth by reason of having been made by a member of the profession. This explains why lawyers who, whether in a legal or personal capacity, make unfounded allegations against third parties can be exposed to professional discipline.1 As inferred above, lawyers are ideally positioned to contribute to law reform. But even in this context, freedom comes with responsibility and restraint. There is nothing amiss in lawyers alerting lawmakers to deficiencies in the law and proffering suggestions for its improvement. Indeed, this is entirely apt, and many lawyers make submissions to reform and regulatory bodies with this object. The value of these is not to be underplayed, assuming that any criticism is designed to be constructive rather than being understood as some indictment or aspersion vis-à-vis individuals with alternative viewpoints. There is a danger, in this latter respect, in a lawyer’s exercise of freedom of speech being hijacked by interest groups who

see the lawyer’s status as an asset. The foregoing is not to say that lawyers should suppress their own personal views when it comes to contentious matters of law or procedure. Nor should it outright preclude them speaking as part of a campaign for reform, even should this be associated with an interest group while opposed to another. At the forefront of lawyers’ minds, though, is that bringing an independent mind to an issue is valuable not only when acting in a representative capacity. This can in turn be prejudiced by becoming too closely aligned with a broader cause, with the risk of being swept up by the broader movement, and the attendant risk of constructive legal criticism being construed as having a much broader purview. This sweeping has the potential further danger of being perceived as advocating breach of the law, to which no lawyer should be a party, whether in a personal or professional capacity. At a time of unheralded assaults on long-enjoyed individual freedoms — to associate, to travel and even to work — there is clearly scope for lawyers to analyse and test the relevant laws. Silence is hardly the only option. But freedom of speech here, arguably more so than in other contexts, comes with an appreciation of professional responsibility.

End Notes 1 See, for example, Hewson v Bar Standards Board [2021] EWHC 28 (Admin) (involving grossly offensive tweets against another practitioner); Ibrahim v Nasr [2021] NSWSC 1321 (Facebook posts vilifying the opponent).

It’s going to be a big year!

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Chris Burch

Chair, Young Lawyers Committee

Demi Swain

Deputy Chair, Young Lawyers Committee

It turns out nothing can stop young lawyers from getting together. And we are very glad the traditional incentives of good food, ruthlessly competitive (‘social’) volleyball, and welcoming our colleagues into the profession have kept us engaging through the peaks and as we head toward the troughs. But the year is only starting and there is plenty still to come. Our mentoring programme has matched

students with practitioners and is just kicking off. Law Week, with the YLC’s focus on the inclusion of people with a disability in the profession, is coming up fast. And our Social Justice Careers Opportunities Evening, next Sundowners, and Golden Gavel can only be around the corner. We are looking forward to seeing you all again soon.

@ylc.wa follow the YLC on Instagram @ylc.wa to be the first to know when new events and news are released

Event Wrap-up: YLC Mixed Beach Volleyball It was another great social event on Friday, 18 March, at the YLC Mixed Beach Volleyball Competition. The sold-out competition saw 11 eager teams take to the sand to battle it out for the top prize. After five fast paced rounds, Allen & Overy and reigning champions, The Humbles faced off in the grand final. It was a great game, but it was The Humbles from CS Legal who emerged victorious once again and took home the trophy. Special mention to Richard’s Finest and The YLC who also made it to the semi-finals. Thank you to all the teams who joined in on the fun and congratulations to this year’s winners.

Event Wrap-up

Lalla Rookh Sundowner Sponsored by

Thomas Camp

Junior Council Member, Law Society of Western Australia, Member, Young Lawyers Committee

Click here to watch our short sundowner wrap-up video

It was just in the nick of time that the YLC held its most recent sundowner on 23 February 2022. Lalla Rookh was the venue, a sensible choice in the era of Covid given its airy outdoor area. There was a good mix of young lawyers, youngat-heart lawyers and young at-heartlawyers (or as they are more commonly known, law students). It is worthy of tribute that the Law Society and YLC were able to host this event in the face of rising case numbers. As more

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and more workers are working from home, and more and more events are being cancelled, it was refreshing and rejuvenating to have a well attended (indeed, sold out) excuse to catch up with old friends and make new ones. Luckily, the Law Society’s expert planning made sure the event went off without a hitch and there was no suggestion of super-spreaders. A great success! The event was as well catered as it was well attended, and while entry included

two drink vouchers, because it was a Wednesday restraint was the name of the game (though there are always a few who play close to the edge). Many thanks also to the College of Law for sponsoring this event, making it possible for everyone to reconnect and reset before the year gets moving in earnest. While it might be some time until the next sundowner, I thoroughly recommend all future sundowners to anyone interested as they are always good fun.

Prudence Juris Dear Aunt Prudence,

Dear Aunt Prudence,

The new grads have just started at our firm and I’m feeling left out. They get all the shiny new laptops and welcome drinks, but I still don’t know what I’m doing. When does firm life get better? - Middle Grad Syndrome

My firm has recently moved to a new office space that is entirely open plan. I’ve noticed that some people in the office, including my supervising Partner, are still getting used to the change. It’s only been a week and I’m already sick of overhearing their loud personal telephone calls and smelling the reheated tuna bake that they insist on eating at their desk every day. Will it ever end? - I Miss My Office

Dear Middle Grad Syndrome Welcome to your second year of practice. You’re only a restricted practitioner and the expectations are higher, but the sheen has well and truly worn off. Your Aunt ain’t gonna lie — almost two decades of education and clerkships have all led to this moment, and it kinda blows. You’ve moved up the first step of the pyramid, but found out Giza has nothing on the rungs you still have to climb. Take solace, though, for there’s something you’ve forgotten. Like a younger sibling, the new grads bring with them opportunity. They’re keen. They’re fresh. And they want to be involved. So, like a remote auction participant talking to your agent, it’s time to have them do your bidding. That filing you’ve been putting off? Those boxes that need to be carted to court? The Lord giveth a grad, and the Lord taketh away your photocopying. This is when life starts to get better. Enjoy, Aunt Prudence

New Members Associate Membership Mrs Jillian Hodges Murdoch University Mr Gabriel Merga Curtin University Mr Jordan Feinberg Murdoch University Mr Robert Mathew The University of Western Australia Mr Harrison Langsford The University of Western Australia Mr Michael Barry The University of Western Australia Ms Rachel Macy The University of Western Australia Mr Dallas Hodgetts University of Canberra Ms Madeline Quirk University of New England Ms Emma Wilson The University of Western Australia Mrs Malyque Neal The University of Western Australia Mr Ashton Godfrey The University of Western Australia Miss Teagan Joffe The University of Western Australia Ms Jenna Fuller The University of Western Australia Ms Emma Morhall The University of Western Australia Mr Javier Williams The University of Western Australia

Dear I Miss My Office You’re not alone. A large number of firms have recently turned against the dated private office layout in favour of cost-effective open plan spaces. While the change can have many positive ramifications – including greater opportunities for learning and collaboration between junior and senior lawyers – a few rules of etiquette should be observed. On the off-chance that your supervising Partner is reading my humble column, I shall spell out my top three tips to ensure open plan harmony: 1. Keep noise and distractions to a minimum: Noisy telephone conversations or habits such as tapping on the desk or fidgeting often can create an annoying distraction to those trying to concentrate. If you need to make a personal call to your child’s best friend’s brother’s orthodontist, perhaps use a break out room.

2. Be aware of smells: Within a tight space smells can be magnified, so use consideration when packing your lunch or snacks; especially if you dare to commit the cardinal sin of reheating a fish dish in the communal office microwave. Why don’t you dine al fresco or in the break room, rather than at your desk. 3. Respect another’s need to work: Just because an unassuming grad is sitting nearby, it does not mean they are available for conversation at all times (in fact, they’re probably frantically working on an impossible research task). Act respectfully and expect others to act in the same way. If all else fails, dear reader, you may benefit from working remotely until your colleagues have adapted to open plan life. All the best! Aunt Prudence

Do you have a question for your Aunt Prudence? Send all inquiries to younglawyers@lawsocietywa. asn.au and look out for your Aunt’s response in the next edition of Brief.

New members joining the Law Society (March 2022 & April 2022)

Ms Ann Roberts Murdoch University Mr Liam Aspinall Curtin University Miss Isobel Holling Joss Legal Mr Jacob Ferrell The University of Western Australia Ms Georgia Babun Murdoch University Mrs Deanna Ham Miss Abigail Gregorio The University of Western Australia Ms Anthea Todman Edith Cowan University Mrs Carla Machin The University of Western Australia Ms Alexandra Hamilton The University of Western Australia Mr Felix Attard The University of Western Australia Miss Alea Kaye Go The University of Western Australia Ms Peina Jin Murdoch University Miss Christina James The University of Western Australia Mr Nic Jones The University of Western Australia Mr Dalton Whittle The University of Western Australia Mr Obafemi Fayomi The University of Western Australia

Miss Chene Delport Murdoch University Miss Bea Belonio Murdoch University Ms Joy Johnston Murdoch University Mr Chrispus Mukhooli Murdoch University Ms Rebecca Harms University of Notre Dame Australia Miss Sophie Walker Murdoch University Ms Polina Zhbanova The University of Western Australia Mr Julian Krohn The University of Western Australia Ms Nana Kwakwaa Akuoko-Tawiah The University of Western Australia Miss Kiasah Crookshanks Murdoch University Ms Savannah Greene Murdoch University Mr Brandon Yip The University of Western Australia Miss Emma Tirabosco Allens Mr Todd Montgomery Edith Cowan University Miss Ellis McMillan Edith Cowan University Miss Katherine Manderson Allens

Barrister Membership Mr Christopher Mofflin Francis Burt Chambers

Ordinary Membership Ms Connie Yan Mr Steven Johnson Pty Ltd

Clifford Chance WA Law Group

Restricted Practitioner Mrs Michelle Parsons Pricewaterhouse Coopers Mr Mukesh Dahiya BNT Legal Pty Ltd Mr Michael Clements Paterson & Dowding - Perth Mrs Rebecca Wastall Accident Claims Lawyers Mrs Pamela McWatters FMD Legal Ms Jessica Renae Smith Birman & Ride Mr Brodie Rodgers Andrew Levalds Barrister & Solicitor Mr Nimrod Amanuel Tottle Partners Miss Jovetta Johnson Roe Legal Services Ms Ida Jogic Lynn & Brown Lawyers Mr Emmanuel Morgan Savannah Legal

“The Public Trustee can use your personal funds, your life savings to fight you, to keep you entrapped in this system” State Control: Australians Trapped, Stripped of Assets and Silenced - ABC Four Corners

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Case Notes by Chris Burch

Chair, Young Lawyers Committee

Australian Broadcasting Corporation v Public Trustee [2022] WASC 85

ast month, Four Corners reported on public trustee and guardian systems nationally, in State Control. It is, as journalist Anne Connolly put it, a story of ‘Australians who say they’ve been virtually abducted by the state’. A story which, perhaps surprisingly, ‘in most of the country it’s illegal for [those Australians] to talk about … publicly — and [journalists] could go to prison for reporting …’. To air the report, Four Corners had to bring proceedings in Western Australia and Queensland to allow individuals subject to the public guardian and trustee systems to have their own stories told. The report uncovered issues of people being charged excessive fees for no apparent service, being effectively confined to nursing homes and hospitals, and being denied access to their own money to seek reviews of guardianship and administration orders. One aspect of the report concerned the WA Public Trustee. A woman moved in with her daughter in 2012, shortly before being diagnosed with early onset Alzheimer’s. She is reported as having said to her daughter ‘what’s mine is yours’, after which her daughter says she spent her mother’s money on things including household living expenses and a car to transport her family, her mother and her mother’s wheelchair. The Public Trustee was appointed in 2015, and questioned the spending. After her mother’s death, the Public Trustee reported the daughter to the police. She was arrested and tried over 5 days, but acquitted by a jury within 10 minutes. The Public Trustee took almost $12,000 from the mother’s estate for building the police case against her daughter. The daughter said she was ‘a shell of who I was. I was broken and exhausted. I was completely depleted. That experience took away from me the ability to grieve my mom when she died’. The report highlights how secretive guardianship and administration proceedings are. There are, of course, good reasons for that secrecy (see her

Honour Justice Pritchard in CD [2020] WASAT 41 [35] – [37]). It is consistent with the approach of courts and tribunals to protect vulnerable people: ABC v Public Trustee [26]. 1 However, as Four Corners makes clear, some matters that should be brought to the public’s attention are instead remaining hidden.

The operation of the confidentiality provisions of the GA Act Until the ABC’s application was decided in Australian Broadcasting Corporation v Public Trustee [2022] WASC 85, there had been no judicial consideration of schedule 1 clause 12(8)(d) of the Guardianship and Administration Act 1990 (WA) (GA Act): [23]. That provision establishes an exception to the strict confidentiality requirements otherwise attaching to proceedings under the GA Act for reports published ‘in pursuance of the direction of the Tribunal or of a court’. The extent of those confidentiality requirements is potentially surprising. Unlike other proceedings in courts and tribunals, the GA Act starts from the position that all documents filed in proceedings are confidential and that names of persons involved as well as witnesses cannot be published: [25]. Section 112 of the GA Act makes it an offence, punishable by fine or imprisonment, for anyone other than particular people (eg, represented people, parties, or the Tribunal and its staff) to access a document or material lodged with or held by the Tribunal for the purposes of any application. Section 113 prescribes a fine for, in effect, the unauthorised disclosure of any personal information obtained in the course of duty relating to a represented person, or person in respect of whom an application is made, by any person performing a function under the GA Act. Schedule 1 clause 12 makes it a crime punishable by fine or imprisonment of up to 1 year to report to the public any account of any proceedings under the GA Act that identifies particular people,

including parties to the proceedings or people related to or associated with them. It prohibits the disclosure of any particulars of a range of matters, if sufficient to identify the person to a member of the public, including a person’s name, work or home addresses, physical description, employment, relationships, interests or beliefs, or property they have an interest in or are associated with. Nor can the person’s picture be included in a report, nor their voice be broadcast if it could be identified by a member of the public. As her Honour Justice Hill noted, those provisions impose strict requirements of confidentiality in relation to all documents and personal information held by the Tribunal in relation to proceedings brought under the GA Act: [15].

The ABC’s application The ABC brought its application under schedule 1 clause 12(8)(d) on grounds including that it would be of public benefit to shine a light on the mother’s experiences in the Tribunal, as well as the experience of having her financial affairs administered by the Public Trustee: [2]. The ABC contended the making of orders allowing the report to be broadcast would facilitate the public’s right to know and would be in the public interest: [2]. The ABC’s evidence was that to convey a story persuasively and enable viewers to form their own views on the subject matter of the story, it was important to include the name and image of the person who the story is about. That was particularly the case in long form stories: [9]. The adult children of the mother over whose affairs the Public Trustee had been appointed administrator consented to their mother being identified by name and image, and for each of them to be identified in the report: [11]. They gave evidence that there were important reasons for their mother’s story to be told, including that their experience demonstrated ‘a lack of cultural understanding’ by the Public Trustee: [11].

Case Notes What was and will be required to publish reports of Western Australian guardianship and administration proceedings? Justice Hill began by acknowledging that the primary concern of the Tribunal in determining any application will be the best interests of any represented person, or of a person in respect of whom an application is made: [14]. Justice Hill noted that the GA Act makes plain that applications made under it are an exception to the principle of open justice, unless the court makes an order allowing publication: [27]. Her Honour considered that the ordinary meaning of ‘notice’ and ‘report’ in schedule 1 clause 12(8)(d) were not restricted to meaning documents or reports filed or evidence given by witnesses in proceedings. They extended to the proposed Four Corners report: [30]. As to exercising the discretion under that clause, Justice Hill considered it conferred a general discretion on the court in unconfined terms. That broad discretion is to be exercised by taking into account all relevant facts, matters and circumstances, paying careful attention to whether the identity of someone and their private information should be disclosed to the public and whether that is the right thing to do: [33] – [36]. Further, the court should not place any constraints on the exercise of discretion not found in the express terms of the GA Act; matters logically relevant to its exercise should only be excluded if such an exclusion is implied from the subject

matter, scope and purpose of the Act: [37]. Relevant matters include relevant aspects of public interest, including in personal privacy and freedom of communication, as well as the position (if known) of the person who is subject of any application, and whether there is any opposition to the application: [37].

On that basis, Justice Hill granted the

Relevant factors also include whether the application is in the best interests of the party the subject of the application, whether that party consents to the application, whether the welfare of the person will improve or suffer if the publication is allowed, how publication will impact on any relevant relationships, whether there is any opposition to orders being made, and whether there is public interest in the publication: [37].

Key takeaways

As to the ABC’s application, Justice Hill noted that the administration orders were made more than 5 years ago, and that the children’s mother had died not long afterwards: [39]. Her Honour also recorded the children’s active support for the application and consent to being identified, with no one objecting: [39]. The hearing before the Tribunal was also said not to be the focus of the Four Corners report, but instead the family’s experience of the orders and their interaction with the Public Trustee: [40].

required to be kept confidential under the

Justice Hill accepted that there was a public interest in the community understanding how the Public Trustee interacts with members of the community, particularly those from a multi-cultural background: [40]. Her Honour also accepted there was a public interest in the community having a proper understanding of the GA Act and the role of the Public Trustee: [40].

It remains to be seen whether that

application, subject to an undertaking that the ABC would not broadcast any report of the proceedings before the Tribunal, or disclose medical or any other personal information beyond that necessary to provide a fair and accurate report: [41].

The decision in ABC v Public Trustee makes clear that applications may well have to be made where reports about the conduct of the Public Trustee in particular cases are to be broadcast or published. Importantly, the Court will have power to make orders allowing the broadcast or publication of matters that are otherwise GA Act. The Court may well be receptive to arguments founded in the public interest in the community better understanding the operation of the GA Act and the Public Trustee. That result means that the Public Trustee and the Tribunal will not be free from scrutiny in particular cases in which guardianship and administration orders are made.

scrutiny, including through the work of Four Corners, will have a significant effect on the issues that appear to exist in the current system.

End Notes 1 Subsequent paragraph references are to the decision in ABC v Public Trustee.

[2022] WASC 85

JURISDICTION

: SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS

CITATION

: AUSTRALIAN BROADCASTING CORPORATION -v- PUBLIC TRUSTEE [2022] WASC 85

CORAM

: HILL J

HEARD

: 4 MARCH 2022

DELIVERED

: 8 MARCH 2022

PUBLISHED

: 11 MARCH 2022

FILE NO/S

: CIV 1196 of 2022

BETWEEN

: AUSTRALIAN BROADCASTING CORPORATION Plaintiff AND PUBLIC TRUSTEE Defendant

Catchwords: State Administrative Tribunal - Confidentiality of proceedings under Guardianship and Administration Act 1990 (WA) - Application to direct publication of a notice or report under Guardianship and Administration Act 1990, sch 1, cl 12(8)(d) - Whether general discretion to make direction or whether direction is subject to there being exceptional circumstances - Proper construction of cl 12(8)(d) - Application allowed Legislation: Family Court Act 1997 (WA) s 243(8)(d) Family Law Act 1975 (Cth) s 121(9)(d) Guardianship and Administration Act 1990 (WA) sch 1, cl 12(8)(d)

Page 1

Click the thumbnail to view the decision of Australian Broadcasting Corporation v Public Trustee [2022] WASC 85

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Click the thumbnail to view the full statement from the Public Trustee of Queensland

Click the thumbnail to view the full statement from Queensland’s Public Guardian

Treasures of the Old Court House Law Museum

By Natasha Fenner, Museum Curator, Old Court House Law Museum

Trial Notebooks of Chief Justice Archibald Paull Burt: Regina vs Cornelius Ahern, 1867

Click on any of the images to view a full size copy

orty-two people were legally executed in Western Australia in the 1860s, double that of any other decade. One was Ticket of Leave man Cornelius Ahern, who was hanged in a public execution at Perth Gaol on 12 April 1867. A remarkable document, the petitioning letter written by Ahern and presented to Chief Justice Archibald Paull Burt at his trial, has recently been found in the collection of the Old Court House Law Museum. In 1989, Sir Francis Burt generously donated a collection of 34 notebooks containing his grandfather’s notes about all the criminal and civil trials he presided over as the first Chief Justice of Western Australia, as well as 8 letterbooks of correspondence. One of our volunteers, John Davies, has been transcribing Burt’s criminal trial notebooks. Folded inside one he discovered the rare petitioning letter. Cornelius Ahern (convict number 4738, registered as surname Hern) appeared before Burt at the Old Court House on 4 April 1867 charged with wounding with intent to murder Police Constable Moran. Late on the evening of 27 February 1867, Constable Moran stopped an intoxicated Ahern in Murray Street. When Ahern did not provide his name as requested Moran apprehended him, but Ahern resisted and struck Moran in the head with ‘a paling about three feet long with a nail in one end.’1 Moran was unconscious for three days after suffering severe head injuries. An account of Ahern’s trial in The Herald records Ahern submitting ‘…a written statement in which he admitted striking with the stick, and was sorry for it. He did not know it had a nail in it. He had that day had his Ticket-of-Leave revoked and was excited by that and drink.’ 2

First page of petitioning letter written by Cornelius Ahern and presented to Chief Justice Archibald Paull Burt at his trial in the Old Court House on 4 April 1867.

Ahern’s letter explains that he had ‘no Counsellor to defend me and…not the means to employ one.’ The average wage earnt by Ticket of Leave men was not generous and most remained marginalised on the lowest rungs of colonial society.3 Therefore, Ahern had no other choice than to represent himself in court and crossexamine witnesses himself. There was little hope in his endeavour. The day he assaulted Constable Moran, Ahern had received notification he was destined for a return to custody as his Ticket of Leave had been suspended for six months. Since obtaining his Ticket in 1860 Ahern had accumulated a string of new offences to his name including drunkenness, breaching ticket regulations and larceny. The settler jury needed only an hour to find him guilty and Chief Justice Burt pronounced the death sentence, which was carried out eight days later. Interestingly, had Ahern committed the same offence in England he would have been spared the hangman’s noose. The 1861 UK Offences Against the Person Act had abolished all but four capital offences.4 All non-fatal crimes against people were no longer punishable by death. Circumstances in the Swan River Colony were different. Chief Justice Burt detailed his recommendations for the Western Australian Criminal Law Consolidation Ordinance 1865 in a letter to the Colonial Secretary on 1 May 1865. He recommended that certain sections of the 1861 Offences Against the Person Act should not be

Cornelius Ahern’s letter was found folded in the pages of Burt’s judge’s notebook for Supreme Court criminal trials, 6 January 1866 - 4 April 1867.

adopted in WA due to ‘the peculiar state of things in this Colony’.5 Subsequently the crimes of rape, burglary with violence, and administering poison or wounding with intent to murder were retained as capital offences. Retaining a wider array of capital offences enabled the colonial administration to legitimately use the law to subjugate and control elements of society that threatened the expansion and stability of the colony.

Visit the Old Court House Museum’s new temporary exhibition, Capital Punishment in 1860s Western Australia: The Hangman’s Heyday to learn more. The museum is open Tuesdays to Fridays from 10am to 4pm. End Notes 1 SUPREME COURT—CRIMINAL SIDE. (1867, April 5). The Perth Gazette and West Australian Times (WA : 1864 1874), p. 3. Retrieved March 10, 2022, from http://nla. gov.au/nla.news-article3750520 2 THURSDAY, APRIL 4. (1867, April 6). The Herald (Fremantle, WA : 1867 - 1886), p. 3. Retrieved March 10, 2022, from http://nla.gov.au/nla.newsarticle110069445 3 Marshall, L. (2020). The ticketer’s plight: Living standards and mortality among ticket-of-leave convicts in Western Australia, 1850-1877. Studies in Western Australian History, (34), 97121. https://search.informit.org/doi/10.3316/ informit.426452831812875 4 Offences Against the Person Act 1861 (24 & 25 Vict c 100). Retrieved March 10, 2022, from https://www. legislation.gov.uk/ukpga/Vict/24-25/100/enacted 5 Burt, A.P. (1865, May 1). [Letter to Colonial Secretary]. A.P. Burt Letterbooks (1989.36a-g), Old Court House Law Museum, Perth, Western Australia.

Proportionality in Legal Costs By David Garnsworthy – Barrister

New Paper 2021 v2 8.12.21 The concept of Proportionality is becoming more important but is not well understood. This process is a value judgement, it is not mathematical. For example, the concept does not mean that if $10, 000 was recovered, costs can not be greater than $10,000. The concept is simply that resources must be proportionate to what the case is about. Context is everything. Note what has happened to costs in family provision cases where estates were eaten up with costs. Stephen Warne in his excellent blog1 cites Yara Australia Pty Ltd v Oswal [2016] VSC 440 as the leading authority. The statutory framework in this State is not the same as Victoria, though the concept of an overarching obligation to the Court is recognised. Value based judgements are notoriously difficult to make or challenge. The Family Court provides examples of this dilemma. Especially this is so in cases relating to visiting children where an economic element does not come into play. It’s not possible to attach a $ figure to visiting children. In this situation proportion refers to the issues and difficulties, e.g. psychological or drug use. How the COVID-19 plays in this situation may be a more recent factor. The leading case on proportionality in this State is Defendi -v- Eden Hill Plasterers.2 At [7] the Chief Justice said: The principle of proportionality should be borne steadfastly in mind by all the civil courts of the state. The powers available to those courts, under the various Rules of Court, construed by reference to the principle that Rules of Court are to be interpreted and administered in such a way as to enable a court to administer justice, and not in such a way as might result in the court becoming an instrument of injustice (in the context of the Magistrates Court, this is specifically required by s 13(1) of the Act), are quite sufficient to enable the principle of proportionality to be observed. The comments of the Chief Justice emphasise another aspect of the issue, namely impact on the administration of justice where cases require disproportionate resources compared to what was in issue. The instant case involved just over $50,000 in an 11 day trial in the Magistrates Court, which is extraordinary.

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Proportionality in the Magistrates Court - Civil Section 13 of the Magistrates Court (Civil Proceedings) Act 2004 (WA) refers to the rule making power of the Court but provides a guide to how the Court will approach its role. As an example spending three days over a $100 claim may not be regarded as an efficient use of the court’s resources. The factor in issue is about use of resources, not a ratio to the amount claimed. A further factor is about appropriate use of legal (ie lawyers) time in relation to what is at issue. In Criminal cases the task is more complex but might be seen in the consequences of conviction to the Defendant. The potential for a jail sentence may require and support greater use of resources. In traffic cases loss of licence or the risk of loss of licence may also support greater use of resources. Contesting a parking fine may not support greater use of court or lawyers resources.

Proportionality in the District Court In Allstate Plumbing Pty Ltd -v- Crouch Developments Pty Ltd [No 2]3 at [69] then Principal Registrar Gething said : A particular dimension of the public interest that is relevant for present purposes is proportionality. As noted, in mid 2010, RSC O 1 r 4A was amended to strengthen the weight to be given to proportionality in the management of cases. The comments made by Judge Birmingham QC about the attempts made by the defendant to amend the defence, reflected in an indemnity costs order, as well as my own review of the action, lead me to the view that issue of proportionality ought to be a paramount consideration in the exercise of the discretion I am required to exercise.

Determination and Orders [70] In balancing the risks of injustice, the issues of proportionality, finality, delay and the ‘the need to revisit interlocutory processes’ (Aon [24]), lead me to the view that I should make an order limiting the ability of the defendant to make yet another application for leave to amend its pleading. As the High Court stated in Aon: ‘Limits may be placed upon repleading, when delay and cost are taken into account’: ([98], [102]). Further, it ‘cannot be said that a just resolution requires that a party be permitted to

raise any arguable case at any point in the proceedings, on payment of costs’: Aon [98]. I am satisfied that the defendant has had adequate, indeed ample, opportunity to amend its defence to plead the loss of reputation claim or the loss of other contracts claim. The amount in issue (over $18,000) is not mentioned but may have been in the background. Note the reference to proportionality in the context of case management, not as a ratio to what was at stake. Time spent on issues may not be appropriate to the nature of a case. Particularly where a party appears in person wanting to get their narrative before the Court. Rogers -v- Gulf Western Corporation Pty Ltd4 is an even better comment on the principle where the Principal Registrar said [at 32]: Looming large in relation to the interests of justice is the question of proportionality. The principle of proportionality is conveniently summarised in the District Court Circular to Practitioners CIV 2008/2, dealing with the Commercial List, in the following terms: That principle may generally be expressed in terms of requiring the court to deal with cases, so far as practicable, in ways which are proportionate: (a) to the importance of the issues involved; (b) to the value of the subject matter involved; (c) to the complexity of the issues; and (d) to the financial position of each party; Consistently with the overriding obligation of the court to deal justly with its cases. That statement of proportionality is largely consistent with comments of the Chief Justice in Youlden Enterprises Pty Ltd v Heath Solutions (WA) Pty Ltd5 (Youlden Enterprises)in Staley v Pivot Group Pty Ltd6 [5]; and Macmahon Contractors Pty Ltd v Woodside Energy Ltd7 The first three factors are consistent with the trend of cases but the last factor, financial position of a party raises the increasingly important issue of access to justice. Here we see an impact on lawyer/ client costs though yet to be seen in case law as a factor it may well soon surface. Value may not be limited to $ but the wider sense of significance to the party.

Taxing Matters Interlocutory Disputes Note the comments of Martin CJ in Youlden Enterprises8 that interlocutory disputes can assume an importance out of proportion to effect on resolution of the trial.

And the (Mostly) Uniform Law While it is not clear when the new Uniform Law will reach us, proportionality has an important role to play in lawyer/client costs. Using the Victorian version of the Uniform Law Application Act Schedule 1 s172(1) reads: Legal costs must be fair and reasonable (emphasis added) (1) A law practice must, in charging legal costs, charge costs that are no more than fair and reasonable in all the circumstances and that in particular are— (a) proportionately and reasonably incurred; and (b) proportionate and reasonable in amount The wording of s 172(1) is curious but is better understood as a requirement to be fair (in the context in which they are incurred) and reasonable ( in amount which could bring in other issues such as appropriate fee earners). The circumstances part is not limited to proportionality which has two sub parts being both reasonably incurred and of reasonable amount. Both sub parts must be satisfied . The considerations are brought into play by use of the word “includes”. The context in which the costs appear mean that the costs are measured against the action in which it is incurred.

And a Last Note Justice Brereton in 2007 wrote an excellent paper on the subject. Though it is dated the core comments are still relevant and resonate. The internet reference is https://www.supremecourt.justice. nsw.gov.au/Documents/Publications/ Speeches/Pre-2015%20Speeches/Brereton/ brereton310807.pdf and the title is Costs – The Proportionality Principle.

End Notes 1 And cites other useful cases . Note his comment about a case in the Family Court: https://lawyerslawyer. net/2020/01/21/the-costs-proportionality-overarchingobligation 2 [2008] WASCA 269 3 [2011] WADC 60 4 [2011] WADC 30 5 [2006] WASC 161; (2006) 33 WAR 1, 2, Kenneth Martin J, 6 [2009] WASC 204 7 [2008] WASC 271 [11] - [26]. Per Templeman J 8 op cit at [2]

Presumption of Advancement Rebutted FOR PURCHASE OF THE MATRIMONIAL HOME

By Clare Thompson SC, Francis Burt Chambers

Lawyers are familiar with the presumption of advancement: in certain relationships where one party transfers property to another and the transferor is under a natural obligation to provide for the transferee, the law will presume the transfer of property is a gift in the hands of the transferee. It is possible to rebut the presumption of advancement, in which case the property will be held on trust by the transferee, for the benefit of the transferor. The presumption arises most commonly in a spousal relationship between a man and a woman. Once the relationship is established and a husband buys property that is owned in his wife’s name, the law presumes the purchase was intended as a gift. Notably, gifts to a husband from a wife are not the subject of a presumption, nor does it apply to de facto couples, or same sex spouses. However, a presumption is just that, it can be rebutted, typically by evidence which shows that the presumption does not apply. This will involve evidence of what the intention of the parties was at the time of the transaction. In the absence of direct evidence from the parties, a court is left to draw inferences from the other available evidence, including documents and the surrounding circumstances. In Commissioner of Taxation v Bosanac [2021] FCAFC 158, the Full Federal Court considered the interaction of two presumptions, the presumption of advancement and the presumption of a resulting trust. Unusually, it was not a party to the transaction who was seeking to rebut the presumption, but a third party, the Commissioner of Taxation. Both husband and wife made submissions in support of the presumption. Bosanac concerned the true beneficial ownership of a house in suburban Perth. The property was purchased by a married couple who lived in it as their matrimonial home, until they separated, and the husband moved out about 8 years later. The property was funded by a deposit from a joint bank account and a loan entered into

by both husband and wife, with the title being registered solely in the wife’s name. This is not a particularly unusual factual scenario. At first instance the trial judge concluded that the presumption of advancement arose and was not rebutted, so that the wife held the entire beneficial interest in the property. On appeal the Full Court found the presumption of advancement was rebutted so that the property was held by Ms Bosanac as to 50%, and 50% by her on trust for the benefit of Mr Bosanac. The effect of the decision is that Mr Bosanac’s share of the property is available to pay part of a taxation debt owed to the Commissioner from other proceedings. Notably, neither Mr nor Ms Bosanac gave evidence. The factors which the Full Court found led to the rebuttal of the presumption were: at the time of the purchase they moved into the home together, from which the inference was drawn that it would be for their joint use and for the benefit of them both, despite what the title recorded; the purchase was made using joint borrowings from the same bank pursuant to 2 loan agreements both Mr & Ms Bosanac entered into; the predominant purpose of the joint loans was to purchase the property; the effect of the loan agreements was that the Bosanacs each contributed half of the purchase price; and the securities for the loans included mortgages over the property in question. The lack of direct evidence proved critical, in particular there was no evidence from Mr Bosanac as to why he entered into the loans when the property was registered solely in his wife’s name. An application for special leave to appeal to the High Court has been lodged and will soon be heard orally. If special leave is granted, it will be interesting to see if the High Court says anything about the operation of the presumption in the modern era.

Taxing Matters Discrimination by reason of nationality: THE “BACKPACKER TAX” In the 2015 budget the Commonwealth Government announced changes to the way some foreign workers, including those on working holiday visas, otherwise known as backpackers, were taxed on their earnings in Australia. The initial proposal was to require all income to be taxed at 32.5 cents in the dollar, scrapping the tax free threshold of $18,200. That proposal was ultimately changed so that from 1 January 2017 backpackers were charged 15c tax on every dollar earnt up to $37,000, with the usual tax rates applying above that amount. The original proposal and its amended version were highly controversial in sectors which heavily relied on backpackers and seasonal workers. Against that background, in the 2017 tax year an English backpacker, Catherine Addy, came to Australia and worked as a waitress in Sydney for 5 months and for a short period, in WA. She was an Australian resident for tax purposes given she predominantly lived and worked in Sydney and as a result of the length of time she was there.

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In 2018 Ms Addy commenced an appeal to the Federal Court against the assessment of the Commissioner for the 2017 income year. Ms Addy’s appeal to the Federal Court was successful: [2019] FCA 1768. The Commissioner appealed to the Full Federal Court, which upheld the appeal [2020] FCAFC 135. The High Court granted special leave. The primary issue for the High Court was the impact of article 25(1) of the double tax treaty between Australia and the UK1 and specifically, whether the tax levied on Ms Addy by reason of the backpacker tax was more burdensome on her, a UK citizen, than it would have been if levied on an Australian citizen. The question the High Court was required to answer was whether the more burdensome regime of the backpacker tax was imposed on Ms Addy as a result of her nationality. The High Court found2 the tax rate imposed on Ms Addy was more burdensome as a result of her nationality and so struck down the tax insofar as it relates to backpackers from countries with a similar double tax treaty, and who are Australian residents for tax purposes. The result might have been different if Ms

Addy was not an Australian resident for tax purposes. In reaching its conclusion, the Court said by reason of article 25(1), it was required to compare the treatment of Ms Addy to that of an Australian national who was in the same circumstances. In doing this, a non-backpacker Australian tax resident was compared to Ms Addy and it was found that the only difference between their treatment under the taxation laws was as a result of her nationality, hence the non-discrimination clause in article 25(1) was contravened. It is worth noting that article 25(1) is common in Australia’s double tax treaties. The ATO advises that the decision will impact backpackers who are Australian residents for tax purposes from Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany and Israel, with whom Australia has a similar treaty.

End Notes 1 Convention between the Government of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains 2 [2021] HCA 34

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BOOK REVIEW

Secret State by Julian Grill Speech given by Steven Penglis SC (researched by Tom Penglis) at official launch on 3 February 2022

Of “reputations”, in Poor Richard’s Almanack, 1750, Benjamin Franklin wrote “Glass, China, and reputation are easily crack’d, and never well mended”. In Othello, Act 2 Scene 3, William Shakespeare wrote “Reputation, reputation, reputation! Oh, I’ve lost my reputation! I’ve lost the immortal part of myself, and what remains is bestial”. Although covering a far larger canvas, at its core, Julian Grill’s book Secret State is a detailed account of events which occurred in this State between 2005 to 2012, the likes of which should never have occurred and, importantly, the likes of which must never be allowed to occur again. The scene is aptly set by the opening 2 paragraphs of the book. “This is a story about justice. Or, more correctly, injustice. Rampant, blatant, ruthless injustice conducted by the apparatus of State of Western Australia in a nation that prides itself on embracing all of the protections of an enlightened Western society. It is a story of remorseless and unjustified pursuit of two individuals and their most unfortunate friends and associates, carried out with all the covert investigative and penal powers of an autocratic regime. It is also the narrative of the shameful carnage visited upon a collection of civilians, innocent public officers and their shocked families.” Put simply, with respect to what Julian calls the “Smiths Beach” inquiry and then the “Lobbyist” inquiry, only one person was ever convicted with respect to any of the CCC’s investigations. That conviction was for giving false evidence to the Commission and resulted in a small fine. In other words, the matters which the Commission investigated did not result in any convictions. However, through its processes, and what in my opinion may fairly be described as a “scorched earth policy”, the CCC decimated the reputations of many innocent people. That occurred largely because of two things. First, as lawyers well know, there is a fundamental difference between a Commission and a Court. As Julian notes in the book, parties appearing before the Commission (which is no more than an

administrative body publishing no more than an opinion) enjoy hardly any of the rights afforded to a litigant, particularly an accused in criminal proceedings. In particular, the rules and procedures that have been established over centuries to protect the judicial process and those who are subjected to it, do not apply. Secondly, and without the protections afforded in court proceedings, many of the examinations took place in public. That then resulted in allegations made against persons appearing before the Commission being fair-game for the media, which, as Julian’s book demonstrates, regularly reported such matters with little balance. To be clear, Julian, rightly in my view, does not suggest that the CCC should be abolished. To the contrary, he acknowledges it performs a critically important function in our modern democracy. Nor in my view does the solution lie in affording persons appearing before the Commission greater rights (although that would clearly assist). Rather, I am firmly of the view that the only way of avoiding anything coming close to a repetition of the damage to reputations laid bare in Julian’s book is to permanently close the doors on the CCC conducting public hearings. The statutory discretion to do so must be removed. So how was all this possible? Well, the starting point is the first Corruption Commission in Australia, namely the New South Wales ICAC. It was based on the Hong Kong ICAC, founded some 15 years earlier. The Hong Kong ICAC did not hold public hearings. Notwithstanding, the New South Wales Parliament decided to empower the Commission with a discretion to order public hearings if satisfied in all the circumstances that it is in the public interest to do so. Whilst the Act identifies certain matters which the Commission must consider, in the end the discretion is at large (i.e. subject only to it being exercised having regard to and consistent with the overriding objectives of ICAC). Along with Queensland, the WA CCC legislation adopted the same approach, namely providing that the Commission may “open an examination to the public if, having weighed the benefits of public exposure and public awareness against the potential for prejudice or privacy infringements, it considers that it is in the public interest to do so”: section 140. This does not apply to organised crime investigations (which must be held in private).

The Independent Broad-Based AntiCorruption Commission legislation in Victoria is far more prescribed. It requires IBAC to reach a view to hold public hearings “on reasonable grounds” and only if “there are exceptional circumstances” and where “a public examination can be held without causing unreasonable damage to a person’s reputation, safety or wellbeing”. The imposition of a requirement for any decision to hold a public hearing to be “on reasonable grounds” (i.e. an objective test) provides a much higher threshold that needs to be satisfied in the Eastern States and WA. It would therefore be easier (but not easy) to challenge such a decision in Court. In stark contrast to other states is South Australia. The governing legislation of the SA ICAC provides that all examinations relating to corruption in public administration must be conducted in private: there is no discretion to hold public hearings. The Act does empower the Commissioner to make a public statement in connection with a particular matter, but only if, in the Commissioner’s opinion, it is appropriate to do so in public interest (after having regard to the various matters the Act requires to be taken into consideration). The reasoning behind the private hearings was best explained by the Hon Thomas Kenyon in the second reading speech for the SA ICAC Act: “Investigations into corruption conducted by the ICAC will be conducted in private. This is because persons under investigation by the ICAC have not been charged with any criminal offence. As is currently the case with criminal investigations undertaken by SA Police, a suspect is publicly identified once an investigation is completed and a charge or charges have been laid (subject of course to any suppression order that may be in place). To make an investigation undertaken by the ICAC into

BOOK REVIEW corruption public, would prematurely and unnecessarily prejudice the reputation of a person or person, who may or may not end up being charged with any offence.” The reading of the Parliamentary debates with respect to the introduction of the CCC Act in WA discloses that, whilst Parliament certainly had an eye to the New South Wales ICAC, it didn’t blindly adopt that model. A reading of Hansard shows that there was significant disquiet amongst many members of Parliament with respect to public hearings. However, it also discloses the primary reason why those who held such reservations were prepared to support the Commission having qualified power to hold public hearings, namely the very strong views held and communicated by the late Terry O’Connor QC, the Chairman of the predecessor to the CCC, namely the AntiCorruption Commission. Mr O’Connor’s view was that the work of the ACC was hamstrung because it could not speak publicly about ongoing investigations. In the second reading speech, the then Attorney-General, Jim McGinty said, this: “In a similar context, we discuss whether people could report the fact that they had made a complaint or referred a matter to the Corruption and Crime Commission. The fact that people used the phrase ‘I’ve referred a matter to a body that cannot be named, ho ho ho’ brought the whole system into disrepute. People will misuse that opportunity in the lead up to Local Government and State elections. However, it is a matter of the public being informed. Public hearings are a necessary requirement. The media should be intelligent enough not to jump at the sensational when someone is using the Commission as a political tool in the lead up to an election” (emphasis added). Seriously?! In my view the position was best summed up by the Parliamentary speech of Matt Birney on 4 June 2003, which included the following: “… one of the greatest issues of human rights that faces Western Australia today is the ability of a media outlet to print somebody’s name in a newspaper or air somebody’s name on an electronic media outlet when that person has not been found guilty. It is an absolute tragedy for somebody to wake up one morning and find his name in print associated with all manner of accusations, such as paedophilia, corruption as in this case, stealing or assault. It would be an absolute tragedy for somebody to have his name sullied publicly without being found guilty. We proceed in this country on the basis that one is innocent until found

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guilty. Unfortunately, public hearings do not recognise the court of public opinion. Like it or not, if somebody’s name appears in the media in association with a particular crime, human nature dictates that people automatically assume, rightly or wrongly, that he is guilty. The initial allegations against someone can be printed on the front page of a newspaper, but the conclusion of the court hearing in which that person may be found innocent can be printed on page 185. That is a tragedy for human rights. I greatly fear that public hearings will be misused to sully the name of a person who might subsequently be found to be innocent. I have a very strong reservation about the need for public hearings. Having said that, I understand that the former Anti-Corruption Commission was somewhat hamstrung because it could not speak publicly about ongoing investigations. … One of the major problems that Mr O’Connor faced over a long period was his inability to respond to accusations. I am very pleased to hear and see today that, with the passage of this legislation, that will no longer be the case. However, I have a severe reservation about people’s names being made public in connection with allegations prior to any possible determination of guilt. I do not have any problem with the new commissioner being able to speak publicly about particular ongoing cases, but I have a problem with people being able to print somebody’s name in connection with a case prior to its being determined. I guess that is something of a halfway mark. Mr O’Connor has been an advocate of public hearings and of openness and accountability, and I congratulate him for that. I believe we can go some way down that track. However, people’s names should not be printed unless they are found guilty. It would be a tragedy of mammoth proportions if that were not the case. I fear that public hearings will become a charade and a media circus, and will result in victimisation by association and guilt by media.” The reason why the CCC’s hearings should not be in public is in my view best expressed by the observations of Justice Cole of the Supreme Court of New South Wales in Chaffey v ICAC, an unreported judgment delivered in 1993, in which his Honour said: “A clear distinction is to be drawn between the proceedings in a court where there is an obvious requirement in the public interest that save in exceptional circumstances proceedings should be heard ‘publicly and in open view’ in order that the public may have confidence in the judicial process, and proceedings before

an administrative, investigative body such as ICAC. As Gibbs J said in Russell v Russell (1976) 134 CLR 495 at 520: ‘It is the ordinary rule of the Supreme Court, as of the courts of the nation, that their proceedings shall be conducted “publicly and in open view” (Scott v Scott [1913] AC 417 at 441). This rule has the virtue that the proceedings of every court be fully exposed to public and professional scrutiny and interest, without which abuses may flourish undetected. Further, the public administration of justice tends to maintain confidence in the integrity and independence of the courts. The fact that courts of law are held openly and not in secret is an essential aspect of their character. It distinguishes their activities from those of administrative officials, for “publicity is the authentic hallmark of judicial as distinct from administrative procedure” (MacPherson v MacPherson [1936] AC 177 at 200.’ Inquiries by ICAC are not judicial proceedings. They are administrative. As the High Court stated in Balog at 636: ‘The Commission is primarily an investigative body whose investigations are intended to facilitate the actions of others in combating corrupt conduct. It is not a law enforcement agency and it exercises no judicial or quasi-judicial function. Its investigative powers carry with them no implication, having regard to the manner in which it is required to carry out its functions, that it should be able to make findings against individuals of corrupt or criminal behaviour.’ There is thus no compelling requirement that its inquiries be heard in public. As an administrative and investigatory body with the power in certain circumstances to render reports to the Parliament and others, confidence in its processes is more likely to flow from the quality of the material which it produces after conducting an inquiry, whether that product be a referral to an appropriate body (s53) for further action, or a report, whether to parliament or otherwise (s74), rather than from the circumstance that its inquiry is conducted in public.” I respectfully adopt his Honour’s remarks. The issue of “Public versus Private Hearings” is a matter dealt with in Chapter 4 of the 13 September 2017 report of the Federal Select Committee on a National Integrity Commission. The usual arguments for and against are set out therein by reference to various submissions that had been received. Importantly, submissions were received by the Parliamentary Inspectors of various State Corruption Commissions, all of whom strongly opposed the ability to hold public hearings.

Secret State by Julian Grill On 25 November 2021, there was tabled in the New South Wales Parliament a report by the Committee on ICAC dealing with “Reputational impact on an individual being adversely named in the ICAC’s investigations”. Again, the usual arguments for and against public hearings are laid out. Importantly, the Committee “acknowledged and supported that a review be undertaken of the threshold for determining whether to hold public hearings in both legislation and practice by the ICAC compared to like bodies in other jurisdictions”. In doing so the Committee noted that, in a review of the NSW ICAC in 2016, a former Inspector of ICAC, the late Honourable David Levine, expressed the firm view that the ICAC could expose corrupt conduct while protecting reputations solely through the use of private proceedings. His Honour put it thus: “I have come to the view that the proceedings of the ICAC should be in private. That does not prevent the exposure of found corrupt conduct at the end of the investigation and the referral to prosecuting authorities. It will prevent the undeserved trashing of reputations and will still permit a proper focus and a fairly managed forensic process, without the distraction of the temptation for flamboyance or theatre. The exposure of corrupt conduct after such proceedings will be in a more brilliant and clear light rather than in any part exposure merging out of the darkness, the shadows into an occasional entr’acte”. On 26 June 2003, the then Shadow AttorneyGeneral, Mrs CL Edwards, when debating unrelated legislation (Prostitution Control Bill 2003), said that: “The various models of corruption commissions that have been considered have shown that the personalities of the chairman of these commissions can determine the sorts of matters that are made public.” To make good that proposition one needs to only look at, for example, the statistics published in NSW ICAC Annual Reports comparing the years the Honourable David Ipp was Chairman to others. Similarly, there is a noticeable difference between the ratio of public and private hearing days in the Hammond/Roberts-Smith years of the CCC compared to the last 7 years under the guiding hand of the Honourable John McKechnie. What is heard in public and what is heard in private cannot be left to the personalities of the Chairpersons from time to time. The fact that, for my part, one can say with confidence that the events described in Julian’s book will not be repeated during the

term of the current Commissioner, provides little comfort for the future. Let there be no doubt that when the events the subject of Julian’s book were unfolding, the then Commissioner, The Honourable Len Roberts-Smith, well knew the importance of reputation and that it is “easily crack’d, and never well mended”. In 2008, the Commission commenced proceedings against the Parliamentary Inspector of the Corruption and Crime Commission, Malcolm McCusker AO QC. The Commission had previously published a report entitled “Report on the investigation of alleged misconduct concerning Mr Stephen Lee, Mayor of the City of Cockburn”. The Parliamentary Inspector, has produced his own report which was highly critical of the Commission’s report. An advanced copy was provided to the Commission on 17 December 2008, a draft executive summary of the report having been provided on the 15th. In the afternoon of 17 December, the Commission wrote to the Parliamentary Inspector requiring further time within which to respond. The Parliamentary Inspector replied on the morning of 18 December indicating that he considered the Commission had had sufficient time to respond and observing that the Parliamentary Inspector was not prepared to delay the tabling of his report any later than 4:00pm on Tuesday 23 December 2008. So what did the Commission do? It made an urgent ex parte application to the Supreme Court to restrain the Parliamentary Inspector from carrying out his statutory duty of reporting to Parliament. The application was heard that afternoon by the then Chief Justice, Wayne Martin. Stephen Hall SC (as his Honour then was and who acted as Counsel Assisting the Commission in the “Smith Beach” and “Lobbyists” Inquiries) appeared for the Commission. The Chief Justice was scathing of the Commission for having sought such orders without first giving notice to the Inspector. In that regard his Honour concluded “I can therefore see no justification whatever for having proceeded without notice to the Inspector in this case”. Whilst an application without notice to a statutory Inspector is bad enough, the basis upon which the urgent application was based is nothing short of gobsmacking. Remarkably, the Commission argued that it wanted to restrain publication of the report because “damage will be caused to the reputation of the Commission which can never be restored”! The Martin CJ, with respect correctly, observed that in fact there was another

reputation at stake, namely the person whose reputation had been damaged by the Commission’s report in the first place. At [17]-[18], the Chief Justice said this: “There is another matter that I should mention, and that concerns the interests of others who are affected by these proceedings. As I have mentioned, the matters in respect of which relief is sought go to a report which has been published by the Commission into the conduct of Mr Stephen Lee, the Mayor of Cockburn. The basis upon which the relief is sought is because the draft report of the Inspector would cast doubt upon the validity of the adverse opinions expressed by the Commission in its report relating to Mr Lee. The relief sought by the Commission would therefore prevent publication of the Inspector’s report – that report would go some way towards addressing and perhaps restoring to some extent the reputation of Mr Lee in the light of the previously published report of the Commission. The relief that is sought by the Commission would have an adverse impact upon Mr Lee.” In the end, the Chief Justice dismissed the application, not only because the Parliamentary Inspector had not been given notice of it, but because the balance of convenience did not favour it, including by reason of the fact that any diminution in the reputation of the Commission, being a statutory body and not a natural person, was in large part outweighed by the interests of Mr Lee, a natural person, having his reputation partially restored. The theoretical arguments in favour of public hearings are far outweighed by the human toll of doing so. The system needs to be changed now so that there is simply no possibility of whomever comes to control CCC in the future holding public hearings through which the reputations of innocent people are damaged, let alone destroyed. It is bad enough that the CCC can, by a report, damage the reputations of people. However, at least at that stage all of the evidence has been heard by the Commission and an opinion formed. That is not the case during the hearing phase of an inquiry. It is my sincere hope that the publication of Julian’s book will, as it has with me, once again put in sharp focus how the human toll of public hearings is too high a cost for the perceived benefits of the CCC operating and being seen to be operating in public.

HIGH COURT JUDGMENTS Dr Michelle Sharpe Castan Chambers, Melbourne

Trade practices Competition

In the High Court decision of Port of Newcastle Operations Pty Limited v Glencore Coal Assets Australia Pty Ltd [2021] HCA 39 (8 December 2021) the High Court was required to determine two issues under the Competition and Consumer Act 2010 (Cth) (CCA); first, whether the respondent (Glencore) had a right to negotiate the charge levied by the appellant (PNO) for access to the Port of Newcastle (Navigation Service Charge) and, second, the amount of the Navigation Service Charge. PNO leases the Port from the State of New South Wales and is the “operator” of the Port of Newcastle (Port) under the Ports and Maritime Administration Act 1995 (NSW) (PMA Act). The Port is the only commercially viable means of exporting coal from coal mines operating in the Hunter Valley. Glencore is the largest producer of coal in the Hunter Valley. Most of the coal produced by Glencore is sold to overseas buyers on a “free on board” (FOB) contract. Under the FOB contract, Glencore is typically required to deliver the coal onto a vessel nominated by the buyer docked in the Port. Glencore arranges transport of the coal from the Hunter Valley to the Port but the buyer charters the vessel that will convey the coal out of the country. But, PNO controls the use of the Port for coal export in two ways. First, PNO controls the loading berths located at the Port terminals at which coal is loaded onto vessels. Second, PNO controls the shipping channels (first constructed by the state years ago) through which vessels must pass on entering or leaving the Port. In respect of the latter, PNO levies the Navigation Service Charge for passage. The PMA Act entitles the PNO to levy a charge for the use of navigation channels. The PMA Act provides that the charge is payable by the “owner” of the vessel which is defined to include a person who exercises any of the functions of the owner of the vessel (or holds him/herself out as exercising any of those functions). After increases in charges levied by PNO, Glencore sought to trigger the regulatory process provided for in Part IIIA of the CCA for access to essential facilities. This involved two stages: having the service

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“declared” (s44F, CCA) and a third party gaining “access” to the declared service by way of a right to negotiate enforceable by the Australian Competition & Consumer Commission (ACCC) (s44S(1), CCA). Glencore asked the National Competition Council (NCC) to recommend to the designated Minister that he declare the service provided by PNO by means of the shipping channels. The NCC declined to make the recommendation sought by Glencore and the Minister decided not to make the declaration. Glencore appealed the Minister’s decision to the Australian Competition Tribunal (Tribunal). The Tribunal set aside the Minister’s decision (finding the Port to be a necessary input to effective competition) and declared the service. The Tribunal described the service as being the “provision of the right to access and use the shipping channels (including berths next to wharves as part of the channels) at the Port, by virtue of which vessels may enter a Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct” (Service). In the meantime Glencore had notified the ACCC of a dispute with PNO over access to the Service. The ACCC made a final determination of the access dispute, as required by the CCA, and Glencore appealed the ACCC’s decision to the Tribunal. In its final determination the Tribunal decided (among other things) that Glencore was excluded from the right to negotiate the Navigation Service Charge when it sold its coal under a FOB contract. As to the price of the Navigation Service Charge, the Tribunal set aside the ACCC’s decision to reduce the price by taking into account the state’s investment in constructing the shipping channels. The Tribunal was of the view that these contributions did not justify a deduction in price under the CCA on the limited material presented to the Tribunal. The Full Court of the Federal Court overturned the Tribunal’s decision. The Full Court considered that the Tribunal had taken an unduly physical view of access to the Service. The Full Court held that access and use can be economic. Alternatively, the Navigation Service Charge was indivisible from the Service (which included loading coal onto a vessel docked in the Port). The Full Court also held that the Tribunal misapplied the CCA in determining the amount of the Navigation

Service Charge. PNO appealed to the High Court with mixed success. In a unanimous decision, and a single joint judgment, the High Court held at [123] that the Full Court was correct to conclude that the Tribunal erred in its approach to access to the Service but the Full Court was wrong in finding that the Tribunal erred in fixing the amount of the Navigation Service Charge. In respect of access, the High Court considered the meaning of the term “access” in the context of Part IIIA of the CCA and concluded at [97] that the meaning that appeared to best achieve the objects of Part IIIA is “the right or opportunity to benefit from or use a system or service”. The High Court observed at [98] that: “To a supplier or buyer who is a competitor in that upstream or downstream market who wants to ensure that the use of the bottleneck facility [like the Port] is on fair and reasonable terms, it cannot matter which person in the supply chain actually uses that facility”. In respect of the amount of the Navigation Service Charge, the High Court observed at [113] that s44X(1) required the Tribunal to take certain, specified, matters into account in making the final determination. The High Court held that: “Provided the Tribunal so took each of the specified matters into account, how the Tribunal factored each of them into its decision-making process was a matter for it”. Similarly, s44X(1)(h) of the CCA obliged the Tribunal to take the pricing principles specified in s44ZZCA in making the final determination. And the High Court at [121] found that the Tribunal did, in fact, take into account these principles. So, PNO having lost the access fight and Glencore having lost the price fight, the High Court concluded at [123] that each of the parties was to bear their own cost.

Criminal practice Miscarriage of justice

In Orreal v The Queen [2021] HCA 44 (16 December 2021) the High Court was required to determine whether the failure of the trial judge to direct the jury to disregard certain evidence amounted to a miscarriage of justice and the appellant’s conviction should be set aside under s668E(1A) of the Criminal Code contained in Schedule 1 to the Criminal Code 1899 (Cth) (Criminal Code).

The appellant was convicted of three counts of indecent dealing with a child under 16 years and two counts of rape. In the course of the trial, evidence that both the appellant and the complainant had tested positive for herpes simplex virus type 1 (HSV-1) was admitted (Impugned Evidence). The trial judge did not direct the jury that the Impugned Evidence was to be disregarded. The appellant later appealed the conviction on two grounds: his defence counsel should have objected to the admission of the Impugned Evidence and the judge should have directed the jury to disregard the Impugned Evidence. A majority of the Court of Appeal of the Supreme Court of Queensland (Mullins JA and Bond J, McMurdo JA dissenting) held that a miscarriage of justice had occurred but that no substantial miscarriage of justice had actually occurred for the purposes of s668E(1A) of the Criminal Code and dismissed the appeal. The majority considered that it was obvious that the Impugned Evidence could not have assisted the prosecution case when almost 80 per cent of the adult population would have tested positive for HSV-1 and concluded that there was no risk that the jury would use the evidence in a way that was adverse to the appellant. But, McMurdo J, in dissent, found that there was a significant possibility that the Impugned Evidence assisted the prosecution to persuade the jury to accept the complainant’s evidence. As for the decision by the defence counsel not to object to the admission of the Impugned Evidence, the Court of Appeal observed that the defence counsel made a forensic decision to not object to the Impugned Evidence because it allowed evidence of the complainant’s previous sexual encounter to be admitted into evidence also. The appellant successfully appealed to the High Court. In a unanimous decision, the High Court held that the trial judge’s failure to direct the jury to disregard the Impugned Evidence amounted to a substantial miscarriage of justice for the purposes of s668E(1A) of the Criminal Code. The High Court observed that s668E(1A) of the Criminal Code requires an appellate court to be persuaded that evidence properly admitted at trial establishes guilt to the requisite standard before it can conclude that no substantial

miscarriage of justice actually occurred: Keifel CJ and Keane J at [20], Gordon, Steward and Gleeson JJ at [41]. And the High Court recognised that proof of the appellant’s guilt was wholly dependent on the complainant’s evidence. Keifel CJ and Keane J observed at [23]: “It may be accepted that, logically, the evidence could not assist the jury, but often the nature of prejudicial evidence means that it may not be rationally applied. Uninstructed by the trial judge, the jury may well have reasoned that the test results were no coincidence and pointed to the complainant having contracted the virus from the appellant”. And Gordon, Steward and Gleeson JJ observed at [45] that: “In effect, the jury were invited to employ the impugned evidence as they saw fit. In those circumstances, it was not possible for the Court of Appeal to assess whether guilt was proved beyond reasonable doubt”.

Industrial law

Nature of employment relationship Rather unusually, on 9 February 2022, the High Court handed down two separate decisions (allowing both appeals) in which the Court was required to answer the same legal question: What is the nature of the employment relationship? In these twin decisions, the High Court applied the same approach to answer this legal question with opposite results. That approach being to focus on, and construe the terms of, the written contract pursuant to which the work was performed. Case 1 In the High Court decision of Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 the High Court was required to determine whether an unskilled labourer, Mr McCourt (McCourt), was engaged as an employee or an independent contractor. Personnel Contracting Pty Ltd (trading as “Construct”) carries on a business of supplying labour to building clients under a triangular labour-hire arrangement. Construct provides labour to its clients under a written Labour Hire Agreement (LHA) (a contract between Construct and its client) and then engages labourers under a separate written Administrative Services Agreement (ASA) (a contract

between Construct and the labourer). McCourt was a 22 year old British backpacker who had travelled to Australia on a working visa. After McCourt satisfied a Construct representative that he had purchased a hard hat, steel capped boots and hi-vis clothing (all for the princely sum of $100), he was provided with the ASA to sign. The ASA described McCourt as a “self-employed contractor”. The following day Construct offered McCourt work on Hanssen’s Concerto project site. Sometime later, McCourt was also offered work on Hanssen’s Aire project site. On both sites, McCourt performed basic labouring tasks under the supervision of Hanssen supervisors. McCourt and the Union commenced proceedings against Construct for compensation and penalties pursuant to ss545, 546 and 547 of the Fair Work Act 2009 (Cth) (FW Act). The crucial question in the proceeding was whether McCourt was a Construct employee for the purposes of the FW Act. The primary judge (O’Callaghan J) adopted a “multifactorial approach” to the question. Ultimately, the primary judge found all of the relevant factors were evenly split on question and so he settled on the parties’ characterisation of their relationship in the ASA to find that McCourt was a contractor (not an employee). Unsurprisingly, McCourt and the Union appealed to the Full Court of the Federal Court (Allsop CJ, Jagot and Lee JJ). The Full Court, like the primary judge, also applied a multifactorial approach. But, Lee J (Allsop CJ and Jagot J agreeing) disagreed with the primary judge’s use of the contractual designation in the ASA as a tie-breaker factor. Instead, Lee J declared that he was inclined to conclude that McCourt was an employee, rather than a contractor, because there was no indication that McCourt was carrying on a business of his own account and that he was not acting in any other capacity than a builder’s labourer, but Lee J held that the Full Court should follow the West Australian Court of Appeal decision of Personnel Contracting Pty Ltd v Construction, Forestry, Mining and Energy Union of Workers (2004) 141 IR 31 (Personnel (No 1)). Lee J considered that Personnel (No 1) essentially involved the same dispute between the same parties and he was unable to conclude that the decision in Personnel (No 1) was plainly wrong.

HIGH COURT JUDGMENTS McCourt and the Union successfully sought special leave to appeal to the High Court and were ultimately rewarded with the High Court (Gordon J dissenting) overturning the Full Court’s decision. Kiefel CJ, Keane and Edelman JJ held, at [43], that where the terms of a parties relationship are comprehensively committed to a written contract (and where the contract was not challenged as being a sham contract and or varied by subsequent conduct) there is no reason why the rights and obligations set out therein should not be decisive of the character of their relationship. Their Honours continued on, at [44], to note that because the “only kind of rights with which courts of justice are concerned are legal rights . . . There is nothing artificial about limiting the consideration of legal relationships to legal concepts such as rights and duties”. But, their Honours clarified, at [63], that the “label” which the parties may have chosen to describe their relationship in the contract will not be determinative, or even relevant to, the characterisation of their relationship. Examining the ASA, their Honours found, at [75], that Construct was entitled to determine for whom McCourt worked and, once assigned to a Construct client, McCourt was required to comply with the directions of Construct, and the client, in carrying out the work. In other words, McCourt had no control over what or how he worked. Their Honours concluded, at [79], that although described as a “contractor” in the ASA, the description of McCourt’s rights and duties left no room for ambiguity: McCourt was engaged by Construct as an employee to work in Construct’s business. As for Personnel (No 1), their Honours considered, at [86], that this case (and other authority in which triangular labour-hire arrangements were held not to create relationships of employment) was wrongly decided because the Court treated the parties’ description of their relationship as being decisive. Gageler and Gleeson JJ reached the same destination as the Kiefel CJ et al, but by a different path. Their Honours considered, at [102], that McCourt was an employee not merely by reason of having entered into the ASA but by reason of what occurred when he performed the work. Their Honours identified those aspects which characterised McCourt as an employee at [158]. Gordon J, in dissent, considered Personnel (No 1) should not be overturned. Case 2 In ZG Operations Australia Pty Ltd v Jamsek & Ors [2022] HCA 2 the High Court was required to determine whether two truck

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drivers were engaged as employees or independent truck drivers. The truck drivers, Mr Jamsek and Mr Whitby (Drivers) were engaged as truck drivers between 1977 and 2017 by the second appellant’s predecessors in business and then by the second appellant itself (Company). The Drivers were initially employed as employees of the Company and drove trucks provided by the Company. In late 1985 or early 1986, the Company insisted that it would no longer employ the Drivers and would continue to use their services if they bought their own trucks and entered into contracts to carry goods for the Company. The Drivers agreed and each set up a partnership with their wife (Partnerships) and executed a written agreement with the Company for the provision of delivery services. The Drivers then made deliveries as requested by the Company and invoiced the Company for the delivery services provided. Part of the revenue earned from these services was applied to costs of operating the truck. The net revenue earned was declared partnership income and split between the Drivers and their wives for the purposes of income tax. The agreement between the Partnerships and the Company was terminated in 2017. The Drivers then commenced Federal Court proceedings claiming entitlements as employees of the Company under the FW Act, the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act) and the Long Services Leave Act 1955 (NSW) (LSL Act). The primary judge (Thawley J) concluded that, having regard to the totality of the parties relationship, the Drivers were not Company employees for the purposes of the FW Act and the SGA Act or workers for the purposes of the LSL Act. The primary judge instead found the Partnerships had conducted their affairs as one would expect of a business. Relevantly, the primary judge noted the delivery services were provided to the Company by vehicles owned by the Partnerships and the Company’s right of control was less extensive than was typical of an employer-employee relationship. For example, the Drivers chose their delivery area and route and on one occasion Mr Jamsek paid for someone else to provide the services while he was on leave. The Drivers appealed successfully to the Full Court (Perram, Wigney and Anderson JJ). Anderson J (Perram and Wigney JJ agreeing) held that the question of whether the Drivers were Company employees was to be answered by reference to the “substance and reality” of the totality of the parties relationship. The Full Court considered that the Drivers were Company employees because there was little evidence that

the Drivers’ wives contributed to the Partnership, the Company expected their logo to be displayed on the delivery vehicles, the Drivers devoted their working lives to providing delivery services to the Company and that the Partnerships generated no goodwill. The Full Court also considered that the Drivers had very little bargaining power in respect of their entry into the contracts for the supply of delivery services to the Company. The Company obtained special leave and was successful in its appeal to the High Court. The High Court unanimously allowed the Company’s appeal, finding that the Drivers were not Company employees. Kiefel CJ, Keane and Edelman JJ identified, at [6], two errors in the Full Court’s approach in determining the character of the parties’ relationship. First, their Honours held that the Full Court (and the primary judge) was wrong to apply significant attention to the manner in which the parties conducted themselves over the decades of their relationship. Their Honours, referring to their earlier decision in Personnel Contracting (outlined above) held, at [48], that the correct approach was to look to the rights and obligations set out in the written agreements between the Company and the Partnerships. Their Honours observed, at [70], that the services provided by the Partnerships under the contracts involved the Drivers’ truck-driving skills and the use of vehicles owned by the Partnership. And the provision of such services has been consistently held (both in Australia and England) to be characteristic of independent contractors and not employees. Second, their Honours considered that the Full Court erred in finding that the disparity of bargaining power between the Drivers and the Company affected the contract, pursuant to which the delivery services were provided, such that the real relationship between the Company and Drivers was one of employment. Their Honours, at [62], found that disparities of bargaining power have no bearing on the meaning and effect of the contracts between the Drivers and the Company. Gageler and Gleeson JJ also concluded that the Drivers were not Company employees in a separate set of short reasons. As did Gordon and Steward JJ. Dr Michelle Sharpe is a Victorian barrister practicing in general commercial, real property, disciplinary and regulatory law, ph 9225 8722, email msharpe@vicbar.com. au. The full version of these judgments can be found at www.austlii.edu.au.

FEDERAL COURT JUDGMENTS By Dr David J Townsend and Nadia Stojanova

Liquidation

Decision

Statutory set off of debts under Corporations Act – nature of debt owed by company to creditor v creditor’s obligation to repay unfair preference pursuant to court order – mutuality of debts

The Full Court held that set off was not available to the Defendant as s553C explicitly required that sums to be set off against one another be “mutual credits, mutual debts or other mutual dealings”. This necessary quality of “mutuality” requires that the sums be owed to and by the company in the same interest. In the present case, the $194,727.23 debt owed by the company to the Defendant was owed in one capacity (the company as debtor), whereas the receipt of money by the company on repayment of an unfair preference by the Defendant occurred in another capacity (the company as payee pursuant to a court order under s588FF, in the context of the liquidator gathering in the insolvent estate). Unlike the preexisting obligation on the company to pay its trade creditor, the obligation on the Defendant to repay an unfair preference to the company is a new right created by the Court, in exercise of a statutory power, on the making of the relevant order. Such repayment is not received by the company in the same interest as its obligation to pay the Defendant creditor, but rather for the benefit of the creditors in insolvency generally and under the control of the liquidator (at [7]-[8] and [153]-[154]).

In Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufacturers Pty Ltd [2021] FCAFC 228 the question reserved for the Full Court of the Federal Court of Australia (Allsop CJ, Middleton and Derrington JJ) was whether a Defendant who had a claim in debt against a company in liquidation could avail itself of the statutory right of set-off of debts under Corporations Act 2001 (Cth) (Act) s553C(1) in respect of the liquidator’s claim against the Defendant for recovery of an unfair preference paid out to the Defendant. The Full Court unanimously answered that it was not available: the unfair preference must first be repaid, then debts may be proven against the company in liquidation in the normal way. In the course of so deciding, Allsop CJ delivered a lengthy lead judgment tracing the history and operation of the right of statutory set off, and in particular the necessity for “mutuality” of debts if they are to be set off against one another under the Act.

Facts The agreed facts were the subject a special case (or case stated). The company in liquidation owed two debts to the Defendant for the supply of goods, one of which debts amounted to $194,727.23. The Defendant had received payments during the relation back period amounting to $190,000.00 in respect of the other debt owed by the company. (The Defendant acknowledged that it could not set-off an unfair preference against the very debt in respect of which the unfair preference was paid – that would defeat the purpose of the unfair preference provisions in the first place!) The liquidator sought repayment of the $190,000.00 as an unfair preference under s588FA of the Act. The Defendant sought to avail itself of the right of set off of debts under s553C(1). The liquidator acceded that if the Defendant was correct, the proceedings should be dismissed.

Further, at the relevant date of the winding up resolution/order there was no right or equity (vested or contingent) in the company to recover the unfair preference, nor any corresponding right or equity (vested or contingent) in the Defendant to repay the preference, to be set off. The obligation to repay the unfair preference only arises later, after the liquidator is appointed and successfully applies to the Court for a repayment order under s588FF (at [7]-[8]).

Statutory text and legislative history Allsop CJ traced the statutory history of the text of s553C back through Australian and English insolvency and bankruptcy law. His Honour observed that, under the similarlyphrased provisions which had preceded the current text, it had never been the case that an unfair preference paid to a creditor could be set off against a debt owed to that creditor by the company, and that there was no basis for concluding that the present enactment had intended to alter that position.

As to whether an eventual obligation to repay an unfair preference constituted a contingent debt for the purposes of s533C, His Honour held that it did not, and drew a distinction between a transaction which is “contingent at [the relevant date] and [is] of a kind which will ultimately mature into pecuniary demands susceptible of set-off” (Gye v MacIntyre [1991] HCA 60; 171 CLR 609) and a court order for repayment of an unfair preference under s588FF (at [56]-[58] and [157]).

Purpose Considering the consequences of a debt and a repayment of an unfair preference being able to be set off, His Honour observed that if this were permitted, it would have the effect of distributing the company’s assets not by reference to the overall position of the insolvent company and the claims of all creditors, but rather by reference only to the size of an unfair preference payment compared to a given creditor’s other debt(s) owed. In effect, this would render such a creditor a super-priority creditor, able to be satisfied before even the costs of administration and the repayment of priority creditors, including vulnerable priority creditors such as employees (at [31] and [65]). This would dislocate the working of the Act and disturb the proper order of the administration of an insolvent estate, and any interpretation of s553C which allowed an unfair preference to be set off against a debt would ill conform to the policy of the Act in protecting priority creditors (at [155]). Such a seemingly arbitrary dislocation and failure to remediate an unfair preference would require “[t]he clearest statutory text”, and there is no such clear text present in the Act (at [156]). As a result, with no set off being available, the Defendant would be required to first repay the unfair preference (thereby making good the insolvent estate) and then prove its two debts against the company in the normal way, and, if successful, join with other unsecured creditors in pari passu distribution of the company’s remaining assets.

Dr David J Townsend is a barrister at 3rd Floor Wentworth Chambers, Sydney.

FEDERAL COURT JUDGMENTS Defamation – practice and procedure

both the contextual imputation and the published material relied on by the plaintiff (at [11]).

Application for part of the respondent’s defence to be struck-out – whether the contextual imputation comprising the word “creep” to describe the applicant’s character is too imprecise and ambiguous

Dr Laming submitted that the Creep Contextual Imputation was “slang of imprecise meaning” and, therefore, not pleaded with the required precision (at [16]).

In Laming v Nine Network Australia Pty Ltd [2022] FCA 63 (28 January 2022) Dr Andrew Laming, a member of the House of Representatives for an electorate in Queensland, sued for defamation. He did so in relation to a 27 March 2021 news segment concerning him that was published on the Channel 9 free-to-air network and subsequently on another Channel 9 service, a website and social media accounts. The first respondent, Nine Network Australia Pty Ltd (Nine Network), is the producer of the Nine News television program. Nine Network’s defence pleaded various defences, including a defence of contextual truth. Dr Laming took issue with this aspect of the defence pleading and particulars provided. The terms of s26 of the Defamation Act 2005 (NSW), which were in force at the time of the publications and apply to the proceeding (since repealed), provide that it is a defence to the publication of defamatory matter if the defendant proves that: in addition to the defamatory imputations of which the plaintiff complains, the matter carried one or more other imputations (contextual imputations) that are substantially true; and the defamatory imputations do not further harm the reputation of the plaintiff because of the substantial truth of the contextual imputations. One of the proposed contextual truth imputations in this decision was that “the Applicant is a creep, in that he is an unpleasant and repellent person” (Creep Contextual Imputation) (at [7]). The Court set out well-established principles as to pleading contextual truth imputations from McLachlan v Browne (No 7) [2018] NSWSC 1914 and Domican in Pan Macmillan Australia Pty Ltd [2019] FCA 1384 (at [9]-[12]). These principles include that the contextual imputation be specified with sufficient precision to enable the parties and the courts to identify its composite elements in a procedurally fair manner (at [10]). In addition, the formulation of the contextual imputation needs to be such that the material relied on to establish its truth bears a reasonable relationship to

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Nine Network suggested that the contextual imputation lay in the nature of Dr Laming’s conduct that was the subject of the news segment, including Dr Laming taking the photograph of Ms White’s posterior when she was bending over (at [16]). Bromwich J accepted that slang could form the basis for an imputation, particularly where the term is widely used in the community. The Court held this was particularly so when the word “creep” was supplemented by the words “unpleasant and repellent person”, which in turn refer to the nature of the alleged conduct reported by Nine Network (at [17]).

Industrial law Admitted contravention of s 500 of the Fair Work Act 2009 (Cth) – relevance of prior contraventions in assessing the seriousness of the contravention In Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (The NEXT DC P2 Project Case) [2022] FCA 37 (31 January 2022) the Australian Building and Construction Commission (ABCC) sought the imposition of a penalty against the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) for admitted contraventions of s500 of the Fair Work Act 2009 (Cth) (FW Act). The admitted contraventions were the result of actions taken by CFMMEU employee and officer, Mr Stephen Parker, at a workplace site in Perth (Site). While exercising his entry rights in accordance with Part 3-4 of the FW Act, Mr Parker acted in an improper manner by: remaining on Site without an escort by a Multiplex representative; and not complying with requests by Multiplex employees to move from where he was standing when the Multiplex employees were unloading doorframes (at [2]). The CFMMEU was taken to have engaged in the improper conduct because Mr Parker had actual or apparent authority to act on behalf of, and was acting on behalf of, the CFMMEU (at [39]). Section 500 of the FW Act provides that a permit holder exercising, or seeking

to exercise, rights in accordance with the relevant part of the statute must not intentionally hinder or obstruct any person, or otherwise act in an improper manner. Section 546 of the FW Act provides for the imposition of pecuniary penalties for contraventions of the FW Act. The Court set out the general principles for assessing penalties (at [44]-[49]). Some principles that may be relevant include the objective nature and seriousness of the offending conduct and the particular circumstances of the contravener (at [47]). A live issue was the role of prior contraventions in assessing the seriousness of the admitted contraventions in this case. The Court followed the Full Court in Pattinson v Australian Building and Construction Commissioner [2020] FCAFC 177; (2020) 282 FCR 580 (Pattison) and held that prior contraventions may increase the seriousness of a current contravention by evidencing an attitude of disobedience to the law (at [51]). However, the Court also relied on Pattison as support for the position that prior contraventions will not automatically mean that a current contravention is more serious merely because it was committed by a recidivist. Rather, the precise nature of the current contravention must be considered (at [53]). The ABCC submitted that the CFMMEU is a recidivist offender (at [66]) but the Court noted that the ABCC had not provided analysis of why a connection should be drawn between previous cases and the present case (at [69]). Ultimately, Banks-Smith J held that the relatively minor nature of the current contravention did not require heightened deterrence due simply to the more significant prior contraventions of the CFMMEU. These prior contraventions did not relevantly inform the present case (at [87]).

Employment and industrial relations – practice and procedure – costs Interlocutory application for extension of time in which to make application in the Court – where applicant’s solicitor deposed to belief that document in fact filed within time and/or any delay caused by solicitor’s error – whether appropriate to grant extension of time – whether proper case for award of costs against solicitor In Hennessy v Barminco Limited [2022] FCA 9 (4 January 2022) the applicant made an interlocutory application for extension of time in which to make an application

to the Court pursuant to s370 of the Fair Work Act 2009 (Cth) (FW Act). The applicant did so after the respondent made its own interlocutory application for orders including that the originating application be dismissed because it was not made within the time frame prescribed by the FW Act (Respondent’s Interlocutory Application). Section 370 of the FW Act is concerned with matters involving taking a general protections dismissal dispute to court. On the face of the documents, the originating application was lodged with the Court 28 minutes late. The reason for the delay was provided by the applicant’s solicitor, who stated that he had determined that lodgement occurred at 3.58pm Brisbane time, which was 4.28pm in Adelaide time. The applicant’s solicitor believed that lodgement occurred prior to the closure of the South Australia Registry so that lodgement was within time (at [9]). Besanko J did not accept this reasoning, including because the applicant’s solicitor did not produce the accounting records to which he referred (at [10]). The Court did not accept that the application was filed within time (at [10]) but applied the well-known principles relevant to whether time should be extended (at [12]) and granted an extension of time (at [17]). Section 570(2)(b) of the FW Act provides that a party may be ordered to pay costs only if the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs. In Hennessy v Barminco Limited (No 2) [2022] FCA 33 (27 January 2022) Besanko J ordered the applicant’s solicitor to pay half of the respondent’s costs of the Respondent’s Interlocutory Application because: there was no reason the originating application could not have been filed within time; the applicant only made his application for extension of time after the Respondent’s Interlocutory Application; and the explanation for delay was unsatisfactory (at [3]).

Nadia Stojanova is a barrister at the Victorian Bar, ph 0480 254 662 or email nadia.stojanova@vicbar.com.au. The full version of these judgments can be found at www.austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.

FAMILY LAW CASE NOTES Craig Nicol and Keleigh Robinson Accredited family law specialists Editor and co-editor of The Family Law Book

Spousal maintenance – Consent order (made as part of property orders) that husband pay wife’s mortgage could only be a maintenance order In Thorpe & Stirling [2021] FedCFamC1A 86 (15 December 2021) the Full Court (Aldridge, McEvoy & Altobelli JJ) allowed an appeal from a decision of Judge Kemp where a final consent order required the wife to sell a property and provided that she receive $430,000 of the sale proceeds on the basis that the husband would be guarantor and pay mortgage payments on a future loan of up to $500,000. The order provided that the husband would continue to pay the mortgage until its loan balance was discharged. The husband refused to pay after the wife re-married, contending that the order was a spousal maintenance order that had no effect upon re-marriage per s 82(4) of the Act. Considering the order (“Order 36”), the Full Court said (from [20]):

[45] … Order 36 can be seen as being made as a spousal maintenance order …”

Property – Full Court holds that noncommutable disability income insurance payment is not “property” but a financial resource In Tomaras [2021] FedCFamC1A 82 (13 December 2021) the Full Court (AinslieWallace, Aldridge & Watts JJ) dismissed an appeal from Judge Purdon-Sully’s decision in Tomaras & Tomaras & Anor (No. 2) [2019] FCCA 2830 . At first instance, the Court dismissed the wife’s application for a property adjustment where there was no property other than the husband’s total and permanent disability insurance policy (“TPD policy”), which the Court held was not property, where the husband’s monthly payment under the policy was contingent upon his establishing an entitlement to payment each month.

“ … [T]he husband’s liability under the mortgage remains until it is paid out. … [T]hat liability could … exceed what the husband otherwise received under the … orders ( … )

Ainslie-Wallace & Aldridge JJ cited Crapp [1979] FamCA 17, Mullane v Mullane [1983] HCA 4, Marchant [2012] FamCAFC 181 and Pates [2018] FamCAFC 171 and said (from [80]):

[26] … [P]roperty, as defined, is limited to existing property, whatever it may be (Stanford v Stanford [2012] HCA 52; … ), and does not extend to property that might be received in the future … [Section 79] does not empower the Court to make an order against property which does not presently exist but could be brought into existence by the exercise of borrowing capacity … ( … )

“ … [T]he capitalised value of the pension is not property capable of division because no such property exists in that sum … The pension can only be regarded as a financial resource or income. … [T]here is no more than a right to receive the next payment provided the relevant disability continues ( … )

[36] … [H]is Honour found … the husband’s obligations under Order 36 ‘were likely to be paid out of the husband’s future income stream including his receipt of any … bonus payments’ ( … ) [37] Order 36 does not work an alteration of the interests of the parties in their property but rather creates an obligation which is separate to the division of that property. [38] … [T]herefore, that Order 36 could not be an order made under s 79 of the Act … ( … )

[82] A … difficulty arises in this case because there was no other property to be divided. If there was such property, then … the expected receipt of the payments could properly be taken into account as a financial resource in any property division under s 79 of the Act so as to allow the other party to receive more of that other property. [83] The appellant submitted that as the TPD policy could be commuted and the respondent’s entitlements assigned, this case could be distinguished from those just discussed. [84] … [S]uch a course would require the respondent and the insurer to

FAMILY LAW CASE NOTES agree. … The evidence indicated that the insurer was amenable to such a course … However, as the respondent’s position was that he would never agree to such a course, there is no possibility of commutation ( … ) [93] … [W]e think that the husband’s insurance payments, when considered in light of the meaning of ‘property’ under the Act, should best be categorised as income.”

Children – Error in treating parents’ joint opposition to grandmother spending time with the children as an incident of parental responsibility In Bonner & Chandler [2021] FedCFamC1A 81 (8 December 2021) Austin J, sitting in the appellate jurisdiction of the Federal Circuit and Family Court of Australia, allowed an appeal from a decision of the Magistrates Court of Western Australia, which dismissed a maternal grandmother’s interim application for time with her grandchildren. The parents (whose marriage was intact) jointly sought the dismissal of the grandmother’s application. The Court at first instance made findings that “the respondents have made a parental decision … [s]uch decision falls under the umbrella of parental responsibility”; that “[where] the parents [are] in an intact family making a parental decision which they have the authority … to make … this Court should be cautious in peering over the shoulder of functional parents …” ([20]). Austin J said (from [23]): “The Full Court has repeatedly affirmed that, in child-related proceedings, the parents of the subject children do not enjoy superiority over any other person who is keenly interested in the children’s welfare (…) [25] … [T]he magistrate’s reasons reveal the appellant’s application was dismissed essentially because the respondents jointly opposed the children spending any time with the appellant. The magistrate considered the respondents were entitled to make that decision as an incident of their parental responsibility for the children and strongly implied the legitimacy of their decision need not be scrutinised, much less countermanded. ( … ) The appellant … had standing under the Act to bring the proceedings … and so her application ought have been considered on merit; not dismissed just because the respondents opposed it. ( … ) [27] It seems apparent from the evidence

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… that other factors affecting the children’s best interests were pertinent and ought to have been considered. ( … ) [28] It could be that, even if the Act is applied correctly, the same result would ensue, but it cannot be said with certainty that the magistrate’s error of law had no influence upon the result. Accordingly, the error cannot be disregarded ...”

Property – Bankrupt appellant lacked sufficient interest to prosecute appeal In Glover & Webster [2021] FedCFamC1A 69 (19 November 2021) the Full Court (Strickland, Ainslie-Wallace and Aldridge JJ) heard an appeal from a decision of Baumann J relating to a binding financial agreement (“BFA”). The Court declared the BFA as binding and that it covered all assets of the parties. The de facto wife appealed, but was then made bankrupt. The trustee in bankruptcy advised that pursuant to s 60(2) of the Bankruptcy Act 1966, he would not prosecute the appeal but that he did not oppose or consent to the appellant continuing the action. The Court said (from [30]): “Fundamental to the bankrupt being relieved of both his property for the benefit of his creditors is that the bankrupt has no financial interest in an appeal such that he may continue it in his own name after being made bankrupt. (…) [33] This concept has been applied in the family law context. Whilst a bankrupt party can commence property settlement proceedings, in Guirguis & Guirguis [1997] FamCA 6 … the Full Court accepted that a bankrupt party cannot appeal property orders where the subject of the orders vests or will vest in the trustee in bankruptcy, because the bankrupt lacks sufficient interest. (…) [38] If the appeal from the declaration in this matter was successful, and the declaration set aside, then there would either be the re-exercise of the discretion, or a rehearing of the question of whether there was property not covered by the BFA, and if there was, then the … appellant could pursue an application pursuant to s 90SM of the Act seeking an entitlement to some or all of that property. However, as an undischarged bankrupt, any property that she thereby became entitled to would then vest in her trustee in bankruptcy as afteracquired property pursuant to s 58(1)(b) of

the Bankruptcy Act. [39] It follows … that the appellant does not have sufficient interest in the order the subject of the appeal to give her standing to prosecute the appeal. As the trustee does not wish to pursue it, the appeal must be dismissed.”

Children – Father unsuccessfully appeals order authorising mother to vaccinate child against COVID-19 In Dacombe & Paddison [2021] FedCFamC1A 103 (23 December 2021) Austin J (sitting in the appellate jurisdiction of the Federal Circuit and Family Court of Australia) summarily dismissed a father’s appeal against a consent order, which authorised the mother to arrange vaccinations of the parties’ daughter. The Court said (from [8]): “An appeal may be summarily dismissed if the appellant has no reasonable prospect of successfully prosecuting it (s 46(2)) [ed. of the Federal Circuit and Family Court of Australia Act 2021 (Cth)], even if it is not hopeless or bound to fail (s 46(3)) ( … ) [10] The father’s first contention – that he did not consent to the order – is false. … [11] While it was the legal practitioners who confirmed the parties’ agreement, the father did not demur when the primary judge was informed of the compromise. … [12] When the primary judge sought to formulate an order to properly reflect the parties’ agreement, the father even helped with the drafting ( … ) [14] [The father] … only disagreed with any form of government-imposed immunisation or treatment for the child, but the appealed order did not deal with any form of immunisation or treatment mandated by government because the parties agreed the child should be immunised ( … ) [16] … Ground 1 of the father’s appeal depends entirely upon his false contention that he did not consent to the appealed order. He did and now he cannot appeal the order on merit in the teeth of such consent. … [17] … [Section] 51(xxiiiA) of the Constitution enables the parliament to make laws about the provision of medical and dental services (but not so as to authorize any form of civil conscription) ( … ) [21] … [T]he Constitutional impediment only affects the validity of federal legislation which enables the civil conscription of medical and dental services, upon which field the Family Law Act does not play. An

order made under the … Act which ensures a child’s receipt of … medical treatment is not caught by the prohibition ( … )”

Property – Applicant’s equitable trust claim fails as purchases were gifts – Respondent’s claim fails as there was no de facto relationship In H, AW v K, S [2021] SASC 128 (11 November 2021) Bochner J of the Supreme Court of South Australia dismissed all applications after a 4 year relationship between a dual citizen of Australia and the USA (“the applicant”’) and a single mother who lived in Adelaide (“the respondent”). The applicant sought a declaration that the respondent’s vehicle and bank balances were held on trust for him ([4]). The respondent argued the dealings were gifts and [she] sought a declaration that the parties were in a de facto relationship. The Court said (from [52]): “The applicant agreed that [his] … communication [to the respondent] amounted to representations that he would provide for her … He denied … that the provision of financial support … or … any other gifts to her would be unconditional. (…) [59] … [T]he parties did not acquire any assets together … The respondent never visited the applicant’s house …, nor was she invited to do so. ( … ) [151] The applicant came to Adelaide [where the Respondent lived] between five and nine times each year during the relationship. The length of the visits varied, from less than twenty-four hours, to seven days ( … ) [193] … I consider that the parties’ relationship was not that of a couple living together on a genuine domestic basis. The evidence does not demonstrate ‘the merger of two individual lives into life as a couple’ … [I]t demonstrates two individuals living their separate lives and coming together seven or eight times each year for some shared time. It my view it is the time that was shared, rather than the lives.” As to the trust claim, the Court said (from [214]): “ … [T]his evidence leads me to the conclusion that the moneys given to the respondent … were a gift. … [A]ny statements made by the applicant that the moneys should be used for rent, clothes and other expenses were no more than indicative of his motive … They did not serve to impress the funds with a trust.”

Children – Hague Child Abduction Convention – Order for production of solicitor’s file set aside, given its irrelevance to habitual residence In Sterling [2022] FedCFamC1A 3 (27 January 2022), the Full Court (Austin, Berman & Harper JJ) allowed an appeal from a decision of Williams J, where a mother had travelled to Germany with the parties’ daughter for a holiday, but then communicated to the father that she would not return to Australia and unsuccessfully sought parenting orders in a German Court. The German Court applied the Hague Convention on the Civil Aspects of International Child Abduction and found that the daughter was habitually resident in Australia and that Australian courts had exclusive jurisdiction. The father then successfully applied for orders for the return of the child, for which the father engaged a German lawyer. Before the child’s return, the father issued parenting proceedings in Australia, where the Court scheduled a discrete hearing as to whether the Court had jurisdiction pursuant to s 111CD of the Act. In those proceedings, the mother contended that the father had waived privilege to his German solicitors’ file, whereas Williams J ordered that it be produced. The father appealed, to which the Full Court said (from [23]): “The application of ss 111CD(1)(a), 111CD(1) (b) or 111CD(1)(f) depends upon whether or not the child is habitually resident in either Australia or Germany ( … ) [25] Given the singular contentious issue affecting the exercise of Australian jurisdiction was the identification of the child’s place of habitual residence, it begged the question of how the file of the father’s German lawyer could be relevant ( … ) [32] As an entirely factual question, the determination of the child’s place of habitual residence could not conceivably be materially influenced by any communication between the father and his German lawyer concerning the prior German proceedings. ( … ) [34] Regardless of whether the father waived his legal professional privilege by his conduct, which is another issue by which the parties were distracted, there was no need to compel his surrender of the confidentiality he reposed in the lawyer/ client communications.”

Property – Contributions assessment of 65 per cent in favour of the wife

contained error as trailing commissions remained a joint contribution In Candle & Falkner [2021] FedCFamC1A 102 (23 December 2021), the Full Court (McClelland DCJ, Berman & Harper JJ) allowed an appeal from a decision of Foster J in a case involving a 13 year marriage where the parties established and operated a residential home lending business (C Pty Ltd). After litigation, in 2010 the husband received a payout from a third party on the condition that he resign as director, after which the wife was sole director and conducted operations of the company. The Court assessed the wife’s contributions at 65 per cent, finding that from 2010 onwards, the wife had “overwhelmingly contributed to the evolution of the current asset pool through her ongoing management of C Pty Ltd” ([38]). The husband appealed. The Full Court said (from [82]): “We are … persuaded that the primary judge failed to take account of relevant contributions of the husband. [83] It was common ground that C Pty Ltd was a joint enterprise of the parties from inception until March 2010, when the husband ceased to be a director. … [T]he business of C Pty Ltd produced an income stream for the benefit of the parties from trailing commissions, which continued for an average of five to six years. It followed that some trailing commissions continued past 2010, and thus some of the income produced by C Pty Ltd post-2010 must be seen as the result of the parties’ joint efforts in the business before 2010 ( … ) [90] The husband argued that the ultimate result of 65 per cent to the wife could only be justified by ignoring the husband’s contributions to the business of C Pty Ltd … after December 2010 ( … ) [92] … [H]is Honour assessed contributions by reference to his detailed findings about the course of contributions … The problem is that nowhere in those paragraphs is there any mention of specific contributions by the husband to C Pty Ltd … after 2010. Consequently, we are unable to conclude his Honour took those contributions into account, despite, or even because of, the reference to [the husband’s] ‘minimal contributions’ in … the reasons. … [93] Once it is accepted that the primary judge failed to take account of contributions by the husband to C Pty Ltd … even if more modest than those of the wife, the percentage assessment of 65 per cent in favour of the wife is unsafe and cannot stand.”

The Tale of the Jealous Doctor By The Hon John McKechnie QC We met Dr Pugh in the Tale of a Lost Invitation. He was a popular and well-respected doctor in Launceston, Van Diemen’s land. In early November 1841, Mr Thomas Williams, a merchant was taken ill. The family physician Dr De Dassell was summoned and called in other doctors for consultation including Dr Pugh. Mr Williams had a strangulated hernia. An operation had to be performed immediately or Mr Williams would surely die. Even with a successful operation, death was probable. All the doctors agreed that Dr Pugh was the best person with the skills. The patient consented. Dr Pugh advised Mr Williams’ friends to get him to make a will. The operation was difficult. It took place at 4 am. At the conclusion, the patient was relieved and slept well. Alas, relief was temporary. A couple of days later, the symptoms returned. Dr Pugh and the other doctors told Mr Williams there was no hope and he died the next day. It must have been a grim time. There was no anaesthetic. Indeed, not until 1847 was the first operation in Australia conducted under anaesthetic. Ironically the surgeon who performed that operation was Dr Pugh who thus maintains a place in the pantheon of anaesthesiology. Naturally there was a post-mortem. All the doctors who had been present at the operation were present. All except one were satisfied that the operation performed by Dr Pugh was not the cause of death. The dissentient was Dr De Dassell. However he was a silent dissentient at the time. He did not make his feelings about the operation known to anyone either during or immediately after. Nor did he voice them at the post-mortem. Mr Williams was consigned to the grave and there the matter rested for months. In June 1842 there came to Launceston town Burton George Haygath MD, a young man looking to establish himself as a doctor. He and Dr De Dassells soon met and the latter told him that the operation had been badly performed by Dr Pugh who had caused the patient’s death. Dr Haygath was most interested although at the time of the operation he had been sixteen thousand miles away. With only the word of Dr De Dassells to go on, on 22 August 1842 Dr Haygath swore out an information charging Dr Pugh with manslaughter. Why?

As counsel for Dr Pugh subsequently put it: “This either shows an extreme instance of philanthropy, in leaving his own country to come here to do good, or you must impute it to a very different feeling towards a man he could never have known.” A magistrate, Mr Breton, conducted a hearing. Dr Pugh attended with counsel. Dr Haygath conducted the case himself. The hearing lasted 12 hours until midnight. In Mr Breton’s opinion Dr Haygath’s manner was very improper both in addressing the bench and examining witnesses. His manner appeared very malignant both against Dr Pugh and the other doctors. The magistrate dismissed the case. Now we know from the tale of the lost invitation that Dr Pugh was not one to let bygones be bygones or be magnanimous in victory. Not at all. He sued Dr Haygath for malicious prosecution before Chief Justice Pedder and a jury. Poor Dr Haygath. His star witness was to be Dr De Dassells. But each time his name was called, there was no response. He never appeared. On the other hand, other doctors did give evidence. Dr Gaunt said an operation was agreed after the usual remedies had proven unsuccessful – warm bath, bleeding, tobacco injection etc. The operation was competently performed. The Chief Justice summed up for the jury both the law and the facts concluding by saying that he thought there was not a tittle of ground on which the defendant had to rest his case. The jury were out for 15 minutes before returning a verdict in favour of Dr Pugh and awarding him damages of 250 pounds. The Medical Gazette was forthright about Dr Haygath. “If the motives of that individual were in reality good, the consciousness of his error, and the weight of his disgrace, must, we apprehend, fill him with regret; if his intentions were otherwise, the just severity of the law and the fiat of society must ere this have rendered his punishment sufficiently weighty”. Dr Haygath went to gaol and seems to have disappeared from history. Dr Pugh continued his medical practice and was also active in other areas. He assisted Count Paul Strzelecki in the chemical analysis of coal and minerals. He helped coroners in matters of poisoning. He was a founding member of what became the Tasmanian Society. It was his interest in chemistry that led to the use of ether as an anaesthetic in 1847. He died in 1895 at the age of 89. (Adapted from Pugh v Haygath [1843] TASSupC 1)

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Law Council Update

Australia must work to ensure AHRC remains fully compliant with Paris Principles 8 April 2022 The Law Council of Australia is disappointed the Australian Human Rights Commission’s (AHRC) reaccreditation as an A-status national human rights institution has been deferred by the international standards body, the Global Alliance of National Human Rights Institutions (GANHRI). “The AHRC is a vital institution with an important mandate, and we support its role and work,” Law Council of Australia President, Mr Tass Liveris said. However, the Law Council has warned of the importance of ensuring support for the AHRC to fulfil its independent statutory mandate to protect and promote human rights in Australia and internationally. “This is the first time the AHRC has been at risk of losing its A-status since the establishment of international standards in 1993. The GANHRI’s decision that further consideration of the AHRC’s re-accreditation application will be deferred for 18 months must put the Commonwealth on notice that immediate improvements need to be made.” The concerns raised by the GANHRI include issues previously highlighted by the Law Council of Australia. “Institutions like the AHRC require transparent appointment processes and adequate funding in order to be able to carry out their responsibilities effectively,” Mr Liveris said. “In our 2022-23 Pre-Budget Submission we called on the Australian Government to adequately resource the AHRC to ensure it can effectively carry out its investigation, complaint and conciliation functions, its advocacy on human rights in laws and policies, and its public education function. This requires sustainable, ongoing baseline funding. “We look forward to the Government addressing each matter noted by the GANHRI’s Sub-Committee on Accreditation and ensuring Australia retains its A-status when it is reviewed in 15 months’ time. Ensuring that this status is retained should

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be considered an important component of Australia’s global engagement on human rights issues.

of Australia as part of the Government’s enhanced case management arrangements for family law proceedings.

“The Law Council believes this is an opportunity for Australia to further reflect on its commitment to the promotion and protection of human rights. We are the only democratic nation that does not have a constitutional or statutory bill or charter of human rights.

$8.4 million over three years for a pilot of a new service delivery model to provide survivors of sexual assault with greater access to dedicated legal services to support their recovery and engagement with the criminal justice system.

“Pending the adoption of constitutional guarantees, the introduction of a statutory charter of human rights would be a positive step towards better protection of human rights. Therefore, the Law Council also supports the enactment of a Human Rights Act by the Commonwealth Parliament.”

Budget a missed opportunity to invest in justice 29 March 2022 The Law Council welcomes the funding announced in tonight’s Budget to support Australians interacting with the family law system, women experiencing family violence and those affected by the floods. In particular: $87.9 million over four years to expand the Federal Circuit and Family Court of Australia’s Lighthouse Project pilot and culturally responsive support for First Nations Australians. This includes $63.75 million in funding to the Court and $24.2 million over three years for Legal Aid Commissions to raise their capacity to meet increased demand for representation services resulting from the extension and expansion of the Lighthouse Project pilot. $52.4 million over four years to Legal Aid Commissions to meet expected demand for support under the Family Violence and Cross Examination of Parties Scheme. $22 million over five years from 202122 to support the placement of state child protection and policing officials in the family law courts across Australia to facilitate information sharing between the family law, child protection and family violence systems. $16.5 million over two years from 2021-22 to support Legal Aid Commissions to meet the cost of legal representation, including independent children lawyers as ordered by the Federal Circuit and Family Court

$7 million over two years for nine Women’s and Community Legal Services nationally, to help women access legal assistance and migration support, $5.4 million over two years from 2021-22 to existing legal assistance services operating within Queensland and NSW to support individuals and businesses affected by the recent floods. “The Law Council is particularly pleased to see additional funding for the Lighthouse Project, which triages matters with serious family violence, and the Family Violence and Cross Examination of Parties Scheme and additional funding for the Court and Legal Aid Commissions,” Law Council President Mr Tass Liveris said. “However, this funding does not effectively acknowledge that some of these initiatives, particularly the case management pathway, have increased costs for Australian families and that the family law sector has been significantly underfunded for many years. We will have to wait to see the impact this funding has on reducing the backlog of matters, in meeting the growing demand for services and ensuring Australian families can afford assistance when they need it. “We also welcome the further investment of $1.3 billion to deliver targeted measures towards implementation of the new National Plan to Reduce Violence Against Women and Children. “These are important initiatives that will help women and children impacted by family violence to navigate the family law system. “However, more resources to ensure all Australians have equal access to justice are needed. “The focus of this year’s Budget has been on addressing increasing cost-of-living pressures. These pressures have the biggest impact on the most vulnerable in our society.

“In the Justice Project, the Law Council identified that people experiencing disadvantage, including financial disadvantage, are often more vulnerable to experiencing legal problems, including family law issues and family violence. There can be a particular impact on civil law issues related to care needs, housing and rising debts. “We know that legal issues can arise or worsen when times get tougher and services need to be there and able to help when people need them most. The consequences of being unable to access legal help can be profound, with implications for their financial security, health, housing and safety. A stated focus of this Budget is on guaranteeing essential services. It is time to recognise that legal services are an essential service.” While the Law Council welcomes the announcements in the Federal Budget tonight, frontline legal services within the legal assistance sector remain critically underfunded and subject to strict resourcing limitations. “Investment in frontline legal services not only improves outcomes for individuals it has demonstrated benefits in terms of downstream costs savings for the Government,” Mr Liveris said. In the lead up to the Federal Election, the Law Council looks forward to hearing

from all parties and candidates regarding proposals to improve access to justice for Australians.

increase the Commonwealth Director of Public Prosecution’s capacity to respond to its increasing caseload.

“The looming Federal Election is another important opportunity for those seeking to be our elected representatives to commit to the investment needed to ensure that all arms of our justice system can effectively help the people of Australia,” Mr Liveris said.

$2.5 million over two years from 2022-23 to support the Financial Rights Legal Centre’s National Insurance Law Service to continue to provide legal advice and advocacy for consumers in financial distress due to insurance claim disputes.

Other Budget measures noted by the Law Council include: $9.3 million over four years to support legal assistance services involved in coronial inquiries and expensive and complex cases. $1.4 million over two years from 2022-23 to the Attorney-General’s Department to progress a national approach to modernise the execution of common legal documents. $5.6 million over four years to the Fair Work Commission (FWC) for a small business support unit to improve employer/employee experiences when navigating the Fair Work system. $17.0 million over two years from 202223 to support the Office of the Australian Information Commissioner in undertaking its privacy and regulatory functions. $15.7 million over four years from 202223 (and $4.0 million per year ongoing) to

Classifieds

$2.0 million over two years from 2022-23 for the Aboriginal Legal Service of Western Australia to expand the Youth Engagement Program as part of the Kimberley Juvenile Justice Project in the Kimberley and Pilbara region. $1.6 million in 2022-23 to continue a pilot for a single case management solution for the Administrative Appeals Tribunal (AAT), with the cost to be met from within the existing resources of the AAT. $6.7 million in 2022-23 to support the work of the Office of the Special Investigator’s (OSI) investigation and prosecution of potential war crimes in Afghanistan. $1.8 million over three years for advice and support services for women who experience sexual harassment. $1.2 million over four years to develop and implement a training and education program for volunteers who assist court users within the Federal Circuit and Family Court of Australia.

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Madeleine McErlain Manager, Corporate Communications T: (08) 9324 8650 E: advertising@lawsocietywa.asn.au lawsocietywa.asn.au

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