Facebook Inc v Australian Information Commissioner & Anor

[2022] HCATrans 157

[2022] HCATrans 157

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S28 of 2022

B e t w e e n -

FACEBOOK INC

Applicant

and

AUSTRALIAN INFORMATION COMMISSIONER

First Respondent

FACEBOOK IRELAND LIMITED

Second Respondent

Application for special leave to appeal

KEANE J
EDELMAN J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON FRIDAY, 16 SEPTEMBER 2022, AT 10.31 AM

Copyright in the High Court of Australia

KEANE J:   I will announce the appearances for the parties.

MR N.C. HUTLEY, SC appears with MR S.H. HARTFORD DAVIS and MR D.J. REYNOLDS for the applicant.  (instructed by King & Wood Mallesons)

MS R.C.A. HIGGINS, SC appears with MR T.O. PRINCE for the first respondent.  (instructed by the Australian Government Solicitor)

KEANE J:   There is a submitting appearance filed by the second respondent.  Yes, Mr Hutley.

MR HUTLEY:   Thank you, your Honour.  At page 158 of the book, you will find section 5B(3)(b) which sets out the requirement of an Australian link; relevantly, that the relevant organisation:

carries on business in Australia –

relevantly.  The only relevant fact, your Honours will find at application book 108, paragraph 85, which sets out from the second sentence what has been found, for the purposes of this application at the prima facie level, my client is doing – and for the purposes of any appeal, of course, we do not contest that finding.

At page 109, Justice Perram, at paragraph 87, quotes, in the second sentence, from the statement of this Court in Hope v Bathurst City Council.  That, we say, is the ordinary meaning of the expression.  At paragraph 93, his Honour accepted:

that the facts of this case –

those facts which I have taken you to:

raised the interesting question which had been left unanswered –

by the High Court in Luckins v Highway Motel, which is there referred to.  The relevant question is that which you will see from the quotation from the judgment of Justice Gibbs – as the Chief Justice then was – at page 111, in the same paragraph.  Then his Honour, at paragraph 96, says:

[it] is a particular manifestation of a more general question.

His Honour then went on to say that the concept of carrying‑on business had:

two elements:  (a) activities undertaken as a commercial enterprise as a going concern with a view to a profit; and (b) carried on in a continuous and repetitive basis.

His Honour then referred to two problems which he said could arise in 96(1) and (2).  He described the 96(2) problem as “the unanswered question in Luckins”.  We submit his Honour’s error commenced there by erroneously assuming that the ordinary meaning had two limbs which were distinct and essentially unconnected.  Luckins did not proceed on the basis that the ordinary meaning was to be so bifurcated, but rather left open whether such activity could be comprehended within that ordinary meaning.  It was only through this process of bifurcation that his Honour could come to the conclusion which he does at paragraph 103 at application book 113 and particularly, as he says, “to put the problem in more general terms”, et cetera.

STEWARD J:   Mr Hutley, could I ask a threshold question, and that is this:  do we know what are the . . . . . square parameters of Facebook Inc’s business, that is, as a distinct legal entity?  Does it run a business of being a holding company or the owner of intellectual property worldwide?  How does it make money?

MR HUTLEY:   Well, its business was described in the first instance judgment, and essentially the business of Facebook – as it were, the Facebook group – is sectionalised between a business in the United States and various other jurisdictions, and the rest of the world which is run out of Ireland.

STEWARD J:   Do I take it that, as one would expect in this sort of business, that Australians at this particular time had a contractual or a legal relationship with Facebook Ireland rather than Facebook Inc?

MR HUTLEY:   Yes, your Honour.

STEWARD J:   Did Facebook Inc have a subsidiary in Australia carry on marketing activities or something like that?

MR HUTLEY:   A subsidiary of the – I was about to say Facebook Inc has a subsidiary which does so, yes, but Facebook Inc does not.

STEWARD J:   No, I understand that.  Do I take it that the subsidiary exists under Facebook Ireland at this time?

MR HUTLEY:   No, it is Facebook Australia Proprietary Limited.  I do not think it is a – Facebook Ireland is an intermediate holding company.

STEWARD J:   Were there many findings made about what it does as its business?

MR HUTLEY:   No.  No issue was put in place about that issue.

STEWARD J:   All right.  Thank you for that.

MR HUTLEY:   It is not a party, your Honour.  If I could return, we say that one comes to 103, and we say that has the strange consequence that an ordinary English noun phrase “carrying on business” has two elements joined by the inelegant and oblique . . . . . when the inquiry is concerned with where the business is carried on.

What went wrong in his Honour’s analysis was his Honour’s reliance upon the Court’s decision, or the judgment particularly of Justice Gibbs in Smith v Capewell which the Court has – it is number six in the list.  The headnote sets out the facts.  Justice Gibbs expressed the view at 518 from about point 9 over to 519 that led his Honour Justice Perram to the conclusion he came to at paragraph 102 on page 113 of the application book which his Honour considered entailed the consequences explained at 103.

The other two Justices in the statutory majority in Smith v Capewell, that is the Chief Justice and Justice Aickin, found that there was no carrying on business in that case, and your Honours will see that at the bottom of page 514 over to the top of page 515, being the conclusion of the Chief Justice in which Justice Aickin agreed.

Justice Stephen, who was part of the minority, would have found that business was carried on, but he found that in terms from the bottom of 521 over to the top of 522, which are in terms, with respect, where it is unclear what his Honour was fully relying upon in coming to the conclusion he did.

Sir Anthony Mason addressed this question from 525 over to 526, again in terms by no means consistent with, in our respectful submission, or not expressly relying on principles referred to by Justice Gibbs.  Justice Murphy at 529 found that the company was carrying – the person was carrying on business but gave no reasons.

Returning to the judgment, if we might, paragraph 103 at application book page 113, seems to have developed a wholly new test, which is not only overbroad but also mandatory in the sense that if a company satisfies one or other of the so‑called requirements, then, according to the Court, it will conduct business in Australia.  According to that test, there is an automatic conclusion that follows whenever either of the so‑called two limbs in Hope are satisfied.

Now, we have referred to a series of cases at paragraph 12 of our submissions at application book page 146.  Now, if – which are cases over the last 143 years – which, if this approach were adopted, each would be found to be wrong because each could be seen as involving non‑commercial activity of a repetitive character in the performance of the business of the company which carried business overseas.  Now, what we submit is that the judgment is wrong; it relies upon a single judgment in a statutory majority in the Court, and it assumes that that judgment would not find that some commercial activity of the variety which the Court accepted was not present here is not a requirement for the carrying on of business in Australia, which, we say, is simply wrong.

Whereas Facebook Inc, my client, has no commercial presence in Australia; had no contract with Australian users or other contract counterparties; had no personnel in Australia; it earned no revenues from  Australia; had no premises or other property, we say that in that situation there is simply not a carrying on of business by Facebook Inc in Australia.  This is an important question because Justice Perram, in whose judgment the other Justices concurred, has set down a criterion of operation which is absolute.

As we referred to in our submissions, this decision – you will see that in our submissions in reply at page 213, paragraph (3) – has already been applied a number of times.  Since our submissions in reply, it has applied a third time in the decision that Hamilton v Meta Platforms, Inc (Service out of Jurisdiction) [2022] FCR 681, at paragraph 32. Now, our learned ‑ ‑ ‑

STEWARD J:   Mr Hutley, can I ask you another question?  I am sorry to interrupt you.  When the Court below said at paragraph (83) that:

Facebook Inc’s business of providing data processing services to Facebook Ireland include the installation and removal of cookies –

was it ever suggested below that when Facebook Inc did the installation and removal of cookies, it did so in a capacity in which it was acting for Facebook Ireland?

MR HUTLEY:   Our position was it had a contract with Facebook Ireland to provide that service to Facebook Ireland, and that is the way the case was conducted.

STEWARD J:   Thank you.

EDELMAN J:   Mr Hutley, what was the extent of the evidence including the expert evidence as to the nature and operation of the cookies?

MR HUTLEY:   There was no expert evidence at all.  In effect, that really forms the basis of our second ground of appeal, where your Honours will see that the Court held that the criteria under the Act of collection in Australia was met because an inference was drawn that information was collected on cookies.  You will see that ‑ ‑ ‑

EDELMAN J:   Sorry, Mr Hutley.  Just before you get to your second ground, given the centrality of the operation of the cookies, what do you say to the proposition that there are difficulties with this case as a vehicle – at least at the prima facie test stage – when questions of the nature and operation of cookies might loom fairly large in determining whether the activities were conducted in the carrying on of a business?

MR HUTLEY:   The Court has found that the activities were undertaken and we, for the purposes as appealed, do not dispute that finding as being on a prima facie basis and that they took place in Australia.  Our point is ‑ ‑ ‑

EDELMAN J:   But what precisely was, or were, the activities of collecting the cookies?

MR HUTLEY:   The findings were that the cookies involved – and you will see it at 39 in the judgment – paragraph 34, page 94 to 95 – paragraph 39, I am sorry.  I do apologise.  That is what it was.  And we say we accept that at its highest for the purposes of the first point.  Our point is it does not in any way involve commercial relations between – as properly understood in all the cases, and which was accepted by the Full Court.  Justice Perram accepted it.  That is why he said this is a case which . . . . . raises the question which was left open in Luckins; that is, no commercial relations.  None.  Activities in the country but not ones which create a commercial relationship with anybody.  The commercial relationship was with Facebook.  We say that that is why this is the perfect vehicle to determine this question.  Whatever the cookies did or did not do, there was no shred of evidence that they brought about a commercial relation between my client and any Australian user of the service provided by Facebook Ireland.  That is why ‑ ‑ ‑ 

EDELMAN J:   Does a commercial relation have to be, on your submission, a consensual or commercial undertaking that is voluntarily given?

MR HUTLEY:   It has to, in our respectful submission, on the cases involve a dealing, a transaction – the cases have referred to it – between the company said to carry on business and someone within the jurisdiction.  That dealing can be in many ways:  ownership of property and the incidence of ownership of property; contractual relations of one variety or another; services, et cetera, and it was looked at by your Honour when, in the Federal Court, in the Valve Corporation case – that very question.

Now, it is not necessary to go to that for these purposes, but we say all cases historically until now have said as it were aspects of a business which are conducted in a jurisdiction which do not have the attributes of part of the commercial venturing in the jurisdiction, because it is not a bifurcation.  You have to carry on business within the jurisdiction.

Justice Perram’s judgment says you carry on business in a jurisdiction even if you have no, as it were, commercial engagement with any person in that jurisdiction.  We say all cases up until this case have been to the contrary, and that, we say, is the point.  So how the cookies do or do not work, we say, is really not to the point.  We can put it at its very highest as it was and the point is still the same.  I hope that answers your Honour’s question.

Now, our learned friends say that it is not an appropriate vehicle because it is only a prima facie case stage.  The problem with that is this test of law developed by his Honour at paragraph 103 will be applied at the final hearing.  It is because of that test that his Honour found we conducted business in Australia, and we say that test is wrong and that is an important question of principle.  So nothing is advanced, in our respectful submission, by going on to a final hearing.

Can I now turn shortly to the prima facie case test.  We really essentially rely upon what is in our written submissions, and that comes down to the question, as we have advanced there, there was no evidence because there was no expert evidence as to whether cookies operated as devices to collect personal information.  His Honour’s finding is at paragraph 140 at page 123.

EDELMAN J:   Mr Hutley, does that really not just collapse back into your first submission, because I do not understand there to be any dispute that if there is a complete absence of evidence to support a necessary fact that would be required to establish the case, then there could not be a prima facie case because there is an entire absence of evidence to support a necessary element of it.  That then brings one back to the question of:  what is the test?

MR HUTLEY:   Yes.

EDELMAN J:   It is not really a dispute about what a prima case is, is it?  It is really just a dispute about what the appropriate test is for carrying on a business in Australia.

MR HUTLEY:   I accept that.  Those are our submissions, if the Court pleases.

KEANE J:   Thanks, Mr Hutley.  Yes, Ms Higgins.

MS HIGGINS: Your Honours, the only issue for the full Federal Court and the only issue that would arise if special leave was granted was whether, on the evidence adduced, the Commissioner had demonstrated a prima facie case within the meaning of rule 1043 of the Federal Court Rules 2011. That immediately directs attention to what is meant by prima facie case in that rule. That question is raised by the second of the applicant’s special leave questions which seem to challenge the correctness of the full Federal Court’s decision in Ho v Akai (2006) 247 FCR 205.

EDELMAN J:   Ms Higgins, do you accept the point that Mr Hutley just accepted at the end of his submissions, that if there is a complete absence of evidence to support a necessary fact that an applicant would need to establish to succeed, then there could not be a prima facie case?

MS HIGGINS:   Yes, your Honour.

EDELMAN J:   If that is the applicant’s case, then it really comes down to the first ground, does it not, not the second?

MS HIGGINS:   Yes, your Honour.  We accept that.  What we wanted to bring out – and I need not do so if it will not assist the Court – is that the ultimate question which arises as to prima facie cases is the one that would arise for this Court, and the contest that our learned friends say arose below did not arise.  There was no controversy as to the standard referrable to prima facie case that ought to be implied.  We say – I need not take your Honours to the detail of that – it is manifest in the transcript that we have included in the application book at tab 9, page 140, especially at lines 25 to 34.  Our learned friends accepted the test in Ho v Akai.  On the premise that the parties’ accepted Ho in the Full Court, we say it would not in any circumstance be in the interest of justice for this Court to consider the second special leave question.

In any event, as we have explained in writing, Facebook’s argument confronts obvious difficulties.  We have addressed them in writing, your Honours, so I will not repeat them.  But then shortly ‑ ‑ ‑

STEWARD J:   Ms Higgins, can I ask a question – and maybe you cannot answer – but looking at paragraph 76 of Justice Thawley’s judgment, and paragraph 78 and so on, one has the impression that Facebook Ireland has the right to exploit Facebook intellectual property worldwide, save for North America – and that is what it does with customers in Australia.  So, there may be a question about whether Facebook Inc has any legal entitlement to carry on that type of business in Australia or indeed in any other what it defined to be Facebook Ireland territories.  Was there any finding or argument about that below?

MS HIGGINS:   There was not, your Honour.  With respect, your Honour is correct as to the rights to exploit.  The argument below did not raise the point your Honour has identified at any point.  As your Honours appreciate, we had two arguments; first, that Facebook Inc directly carries on activities within Australia, and, secondly – which would arise on any notice of contention – that it did so through the agency of Facebook Ireland.  The argument did not go beyond those propositions, your Honour.

STEWARD J:   Thank you.

MS HIGGINS:   Can I then continue to say that shorn of the second special leave question, which we say simply does not fairly arise, the applicant is left with the complaint as to whether there is a prima facie case or not.  That is quintessentially a factual complaint about an interlocutory issue bereft of general significance.  In relation to the second ground of appeal, whether there is a prima facie ‑ ‑ ‑ 

EDELMAN J:   But it is one, Ms Higgins, that requires a court to identify what is meant by carrying on a business in Australia.

MS HIGGINS:   Without question, your Honour.  Can I come directly to what we say about that?  Our learned friends do seek to manufacture, from this quintessentially factual question, a question of general importance in relation to that statutory notion of carrying on a business.  We say that that question has no general significance for the following reasons.  First, it was found as a matter of fact by the trial judge and by the Full Federal Court that it was open to infer that Facebook Inc installed and removed cookies on users’ devices in Australia and managed the Graph API in Australia as part of providing services to Facebook Ireland for which it received renumeration, to pick up a question of Justice Steward earlier. 

Secondly, if your Honours turn to the Full Court’s reason at tab 5, page 102, judgment 67, your Honours will see that two arguments were put to the Full Court as to why there was no prima facie case that Facebook was carrying on business in Australia.  The first of those arguments was that were no relevant physical indicia business in Australia.  That argument is now not pursued.  Your Honours see that, paragraph 9 of our learned friends’ reply submissions in the book at page 214.  So, the second argument, which is the only one now pressed, is that the relevant acts done in Australia lacked sufficient commerciality.  But, as Chief Justice Allsop identifies in the book at page 85, paragraphs 8 to 9, the commercial significance of particular acts must be judged in the particular context of Facebook Inc’s activities; it is a fact and context‑sensitive inquiry, rather than a question of law of general application.

Thirdly, and we submit importantly, Facebook Inc accepted below and does not challenge here the correctness of the statement of the Full Federal Court in Valve Corporation v ACCC (2017) 258 FCR 190 at paragraph 149 that relevantly, and I quote:

the territorial concept of carrying on business involves acts within the relevant territory that amount to or are ancillary to transactions that make up or support the business.

Now, that test is adopted and applied by his Honour the Chief Justice in the application book at pages 85 to 86 in paragraph 10.  It is also applied by his Honour Justice Perram at paragraphs 81, 83, 84 and 87 of the judgment which your Honours see in the book at pages 107 to 109, and Justice Yates agrees with Justice Perram at judgment 166, page 132.

STEWARD J:   Ms Higgins, I am sorry to interrupt you.  Can I ask you the question I asked Mr Hutley?  I am sorry, it is a very basic question, but how does Facebook Inc make money as a legal entity?  Is it the recipient of dividends from its subsidiaries?  Is it the payment of intellectual property licensing fees from Facebook Ireland and others?  I mean, if I am going to make a decision if leave is granted about whether someone is carrying on business in Australia, I want to know what their business is.

MS HIGGINS:   Yes, your Honour.  Insofar as it directly relates to the present dispute, Facebook Inc receives moneys from Facebook Ireland for the data servicing processes that it provides under the Data Processing Agreement, but the majority of its earnings appear to come from advertising.  Insofar as it arises from this dispute, in our answer, it answers your Honour’s question.

STEWARD J:   Thank you.

MS HIGGINS:   So, your Honours, once it is accepted that the Court has applied Valve in the Full Federal Court at 149, the only debate is whether on the facts the installation, management and removal of cookies and the management of the Graph API were at least ancillary to Facebook Inc’s business of providing data processing services to Facebook Ireland, and, again, any debate on that issue is one of fact and not one of general application.

We say that in any event there can be no real doubt about the correctness of the Full Court’s conclusion.  In his Honour the Chief Justice’s reasons in the book at page 83 at paragraph 3 and similarly at paragraph 9, his Honour finds that the activities were integral to Facebook’s commercial pursuits; at paragraph 6 his Honour finds that they were “essential elements of the acts or activities themselves”; and at paragraph 8 on page 85, the Chief Justice finds that they take place “as a material part of the working of the business”.

STEWARD J:   Sorry to interrupt you again.  The problem possibly with paragraph 9 is that it conflates the different legal entities within the Facebook group.  It might be integral to Facebook Ireland’s business of exploiting Facebook technology and raising revenues for advertising, but it may not be Facebook Inc’s business, particularly given that Facebook Ireland owns the worldwide rights outside of North America.

MS HIGGINS:   Well, your Honour, we see that the findings of the fact, and in several respects, concurrent findings of fact in the Full Court and the Federal Court are to the effect, as your Honours sees at paragraph 8, in particular on page 85, that the activities were taking place:

as a material part of the working of the business –

of Facebook Inc.  If I can invite your Honour to read paragraph 8 in that respect.  We do not understand in light of our learned friend Mr Hutley’s submissions that they do contest the findings of fact below.  Similarly, Justice Perram at paragraph 104 of the judgment, page 114, said that the activities were part of Facebook Inc’s:

business of providing data processing services –

to Facebook Ireland.  With respect, so as much is plain in the contractual documents, and that is evidenced in the first instance judgment at page 39, judgment 103.  Now, your Honours ‑ ‑ ‑

EDELMAN J:   Ms Higgins, what do you say to the proposition, though, that whether something is incidental or intrinsically connected or important, there cannot be a carrying on of business unless there is, within the territory, some form of – whether one calls it a transaction, a dealing, an undertaking, a consensual relation between parties.

MS HIGGINS:   Your Honour, we see this, that so long as there are activities carried on by an entity within the jurisdiction, they are at least ancillary to transactions that make up or support the business.  That entity will be carrying on business in Australia, and that is consistent with Valve at 149. We do not say – and we would not accept – that that need have a consensual character, although in fact in this case, consent to the installation of cookies likely arises through the various agreements between users and Facebook Inc and Facebook Ireland. But we hold your Honour to the test applied at 149 above.

KEANE J:   Ms Higgins, if that is right, and it may be, is it not a proposition that this Court should be stating?

MS HIGGINS:   We say not, your Honour.  We say that because there was no dispute below as to the correctness of Valve at 149. It was accepted by both the parties below and does not appear to be contested here. We say that this is not a suitable vehicle because it is at the stage of the application of the prima facie test. We say that it is not a suitable vehicle because there is, in truth, no reason to doubt the conclusion of the primary judge and the Full Federal Court.

We say also, your Honour, that the issue that our learned friends have raised in respect of paragraph 103 is not an issue that invites the intervention of this Court because, properly understood, it is the culmination of Justice Perram’s analysis and, understood within the context of his reasons, it sits comfortably within the central conclusion of the Full Federal Court in Valve about which there was no dispute between these parties.

EDELMAN J:   Ms Higgins, could I just ask you about paragraph 149 of Valve?  Is that because you read the sentence that says:

the case law makes clear that the territorial concept of carrying on business involves acts within the relevant territory that amount to, or are ancillary to, transactions that make up or support the business.

as though there were, in effect, in parentheses after “transactions” the words, within or outside the territory?  In other words, you read Valve as saying that it does not matter where the transactions are, provided that within the territory there is some form of incidental conduct, because Valve itself plainly involved transactions that were undertaken within the territory.

MS HIGGINS:   Yes, your Honour.  We do not read in that parenthesis per se, but we do say the paragraph is broad enough to encompass that circumstance, and it will be a fact and context‑sensitive inquiry in each case as to whether there is a sufficient jurisdictional nexus arising from the character and pervasiveness of the activities said to be carried on directly within this jurisdiction.

Your Honours, as I was just submitting, we submit that paragraph 103 of the judgment is the culmination of Justice Perram’s

analysis.  We say it does not sit at odds with paragraph 149 of Valve, to which your Honour Justice Edelman just referred.  It is not essential, under that analysis, that the acts or transactions themselves have a commercial character.  It is instead essential that those transactions make up or support the business, even if that business is otherwise conducted by an overseas organisation. 

So, we say that his Honour is not stating a new test.  His Honour is adopting and applying the full Federal Court in Valve.  He is also, at the invitation of Facebook Inc, viewing this circumstance through the prism of this Court’s reasons especially in Luckins and Smith, but that does not produce an answer inconsistent with Valve.  For those reasons, we say that the first special leave question raises no point of general significance.  As we have already submitted, it is not an appropriate vehicle for reasons I have traversed.  We finally submit, your Honours, that there is a strong reason to avoid further fragmentation and delay in this proceeding.  Your Honours, unless I can further assist you, those are our submissions.

KEANE J:   Thank you, Ms Higgins.  Mr Hutley, anything in reply?

MR HUTLEY:   Just shortly, your Honour.  Paragraph 149 in Valve points up the very question with which we are concerned.  In Valve, there were significant transactions supporting the business within the jurisdiction, and that was important to the determination of the Full Court’s judgment. 

So, in effect, Valve certainly has not addressed the issue left open by Luckins and it is very noteworthy that Justice Perram did not suggest it had, because had it dealt with it, all he would have needed to say, this has been determined by Valve, and there it is.  So, Luckins had actually been addressed by the Full Court.  Of course, it had not, because central to paragraph 149 is the very form of commercial transactions which we say is an essential attribute of carrying on business.  So, in other words, paragraph 103 raises a very important question of law.  This is an appropriate vehicle and, in our respectful submission, leave should be granted.  That is all we wish to say, with respect.

KEANE J:  Thanks, Mr Hutley.  The Court will adjourn briefly to consider the course it will take in this matter.

AT 11.09 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.15 AM:

KEANE J:   There will be a grant of special leave in this matter in relation to both grounds 1 and 2 on page 143 of the court application book.  Mr Hutley, how long do you think the case will take to argue?

MR HUTLEY:   A day, your Honour, I think with full written submission should see it out comfortably.

KEANE J:   Ms Higgins, what do you think?

MS HIGGINS:   Yes, your Honour.  We agree with that.  We have foreshadowed in writing certain Notice of Contention points we may raise, but even if those are raised we consider a day would be sufficient.

KEANE J:   Okay.  Thank you very much.  Very well, then.  As I say, there will be a grant of special leave in this matter.  The Court will now adjourn until 11.30 am.  Adjourn the Court, please.

AT 11.16 AM THE MATTER WAS CONCLUDED