Insight Vacations Pty Ltd T/as Insight Vacations v Young [2011] HCATrans 79

[2011] HCATrans 79

[2011] HCATrans 079

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S273 of 2010

B e t w e e n -

INSIGHT VACATIONS PTY LTD T/AS INSIGHT VACATIONS

Appellant

and

STEPHANIE YOUNG

Respondent

FRENCH CJ
GUMMOW J
HAYNE J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 1 APRIL 2011, AT 10.00 AM

Copyright in the High Court of Australia

MR J.E. SEXTON, SC:   May it please the Court, I appear with my learned friend, MR D.I. TALINTYRE, for the appellant.  (instructed by Lee & Lyons Lawyers)

MR M.J. JOSEPH, SC:   If your Honour pleases, I appear with MR A.P.L. NAYLOR, for the respondent.  (instructed by Gerard Malouf & Partners)

MR M.G. SEXTON, SC, Solicitor‑General for the State of New South Wales:   If the Court pleases, I appear with my learned friend, MR H. EL HAGE, for the Attorney‑General who intervened in the Court of Appeal below, but whom we take to be a party in these proceedings.  (instructed by the Crown Solicitor (NSW))

FRENCH CJ:   Yes, Mr Sexton.

MR J. SEXTON: Thank you, your Honour. Your Honours, we have identified in our summary of oral argument the three issues which, in our submission, arise in this appeal, the first being whether section 5N of the Civil Liability Act (NSW) is picked up by section 74(2A) of the Trade Practices Act. That issue turns on whether or not section 74(2A) applies to only a State or Territory statutory provision which itself satisfies that subsection, or whether it extends to a section such as section 5N of the Civil Liability Act, which authorises a contractual provision having that effect.

The second issue which we have identified falls in two parts. It goes to jurisdiction, firstly of section 74(2A)(b) which speaks in terms of the proper law of the contract and, secondly in relation to section 5N itself, the extent of the application of that section and then the third issue is a question of whether the exclusion clause in the particular contract applies in the circumstances of this case.

Can I commence by taking your Honours to section 74 itself, noting that section 74 of the Trade Practices Act, now repealed, is now found partly in section 60 and partly in section 275 of the Australian Consumer Law in Schedule 2. Your Honours will see that section 74 operates by, firstly in subsection (1), incorporating:

In every contract for the supply by a corporation . . . of services . . . warranty that the services will be rendered with due care and skill -

but then in subsection (2A) carving out from that implied warranty or more particularly the operation of that implied warranty following breach, the operation of a law of the State or Territory which:

applies to limit or preclude liability for the breach, and recovery of that liability (if any), in the same way as it applies to limit or preclude liability, and recovery of a liability, for breach of another term of the contract.

GUMMOW J:   What is another term of the contract in this case?

MR J. SEXTON:   It would be any other express provision, if there was one, your Honour, but it does not require there to be another term of the contract because the important words are “in the same way” so that, in our submission, what that means is that the contractual provision which subsection (2A) is contemplating operates in the same way as – or the law operates in the same way as it does for breach of any other term of a similar contract.

KIEFEL J:   Do you read it, in a sense, as for breaches as if it were a term of the contract because it is importing it into the contract?

MR J. SEXTON:   Yes, your Honour.  In our submission, for example, the law of the State or Territory would apply in the same way to such a provision, the words “in the same way as it applies to limit or preclude liability, for breach of another term of the contract” would pick up State limitation provisions, for example, or State provisions which might otherwise have effect on the manner in which liability for breach is determined.  The point of departure in the Court of Appeal was between a statutory provision which itself limited or precluded liability for breach and a statutory provision which applies in that way but I – giving authority to a contractual provision which has that effect.

That is what section 5N does so that critical issue in the appeal is whether subsection (2A) contemplates that type of provision and we put forward two reasons for construing subsection (2A) in the way that we contend for. The first is that the whole of the division which section 74 falls within is directed towards either the insertion or the deletion of contractual terms from contracts. It is not directed to State or Territory statutory provisions which have a particular effect.

Subsection (2A) may pick up such a provision but the general thrust of this part of the Trade Practices Act is towards insertion into or deletion from private contracts.  That is the first point.  The second point is that the construction we contend for is consistent with the legislative intention that is disclosed by the explanatory memorandum and reading speeches which indicate an intention federally to give effect to State laws which provide for regulation of contracts.

Can I take your Honours briefly through the relevant sections commencing, your Honours, with section 67, which becomes relevant later in relation to the jurisdictional points that I identified.  Section 67 is directed towards ‑ ‑ ‑

GUMMOW J:   Is there any definition of “consumer transaction”?

MR J. SEXTON:   Yes, there is, your Honour.  If your Honour will excuse me for a moment.

HAYNE J:   You need to begin with 4B, do you not?

MR J. SEXTON:   Yes, your Honour.  “Consumer contract”, your Honours, is defined in section 4.  Your Honour, might I come back to that because there is some confusion as a result of the recent amendments?  We are looking at the ‑ ‑ ‑

FRENCH CJ:   Yes, does the term “consumer transactions” in the heading of Division 2 appear in any of the actual provisions themselves?

MR J. SEXTON:   I do not think so, your Honour, but I will check.  Your Honours, might I come back to that?

GUMMOW J:   Is there a definition of “corporation”?

FRENCH CJ:   That is in 4, is it not?

MR J. SEXTON:   Yes, your Honours, it is in section 4.  It includes or means a “foreign corporation”, “a trading corporation formed within the limits of Australia”, a body “incorporated in a Territory” or “the holding company” of any of those types of body corporates ‑ ‑ ‑

GUMMOW J:   Anyhow, it seems to, in this case at any rate, hang off of the corporations power.  The section seems to hang off the corporations power.

MR J. SEXTON:   Yes, your Honour.

GUMMOW J:   Section 74.

FRENCH CJ:   I suppose the extended operation of the Act in relation to other heads of power would also apply?

MR J. SEXTON:   Yes, your Honour.  Your Honours, I was briefly taking you through section 67.  Section 68 again applies to a term of a contract, as does section 68A.  So does section 68B, although it is not as relevant in this case, the point being, your Honours, that section 74 is part of a series of provisions which deal with contractual provisions, as this Court said in Wallis v Downard-Pickford 179 CLR 388 at page 398 – Justices Toohey and Gaudron referring to what Justice Brennan had said in Arturi v Zupps Motors that section 71 – and Wallis v Downard-Pickford was dealing with section 74 – this is about point 7 on the page, the obligation imposed by the statute:

takes effect by a legal fiction, namely, that the parties had made a contract which included the obligation . . . [A] breach of the obligation is not to be treated as a breach of an obligation imposed upon the obligor by the Act dehors the contract, but as an obligation imposed by the contract itself.”

Now, what section 74(2A) is doing is excising from the obligation imposed into a contract by subsection (1), a certain legal effect and, in our submission, it would be surprising if that legal effect which is dealing with the imposition into a contract of a particular type of warranty would not itself apply to a contractual provision which has that effect.

FRENCH CJ:   Well, that boils down to the proposition, does it, that as a matter of the policy of the legislation there is no reason to read it in the narrower way?

MR J. SEXTON:   Yes, your Honour, but not only that in applying the usual statutory process of construction of identifying the purpose of the legislation as a whole that this section or division of the Trade Practices Act is dealing with, as I said earlier, insertion into and deletion of provisions from private contracts and subsection (2A) should be read in that context.  So, your Honours, that is ‑ ‑ ‑

GUMMOW J:   What is the nature of section 74(2A)?  Is it some attempt to limit the operation of section 109 or is it a rewriting of the federal law before section 109 operates?

MR J. SEXTON:   It is, in my submission, a rewriting before section 109 operates.

GUMMOW J:   So when it says “the law of the State or Territory applies” it means applies by force of this dissection?

MR J. SEXTON:   Yes, your Honour.  Your Honour, not just – that is part of it but it also has the meaning of, as Chief Justice Spigelman said, bringing to bear something which has the effect of limiting or precluding liability for breach.

FRENCH CJ:   It is not just pulling back the tide of the Act and saying there is an area here where a State law can operate, it is actually stating that the law of the State applies.  So is that applies by force of federal law?

MR J. SEXTON:   Yes, your Honour.  Your Honours that is the first point that can be shortly stated as can the second point.

BELL J:   Before you move to the second point, can you just explain how you deal with Justice Basten’s point that 74(2A) assumes the term is implied and breach and that sits perhaps a little oddly with picking up the State law which has the effect of inserting the contractual provision of excluding the implied term.  As a pure question of construction, it is the point that Justice Basten makes at 103, appeal book 194 in the balance of that paragraph.

MR J. SEXTON:   Your Honours, the way we deal with that is that we say that section 68(1) comes into operation after section 74(2A) has operated in the way that we contend that it does and the reason for that is because section 68(2), which is another section which deals with a term of a contract, provides that:

A term of a contract shall not be taken to exclude, restrict or modify the application of a provision of this Division . . . unless the term . . . is inconsistent with that provision or section.

So that, in our submission, section 68(1) does not apply in circumstances in which 74(2A) has already excised the – I will withdraw the word “excised” – section 74(2A) has already made that particular contractual provision or that particular term of the contract, consistent with section 74(1).  Your Honours, the next point we make is that ‑ ‑ ‑

FRENCH CJ:   On this construction does the – your construction – the exclusion clause in this case would be applied by force of the federal law because if the State or Territory law applies, and you say that that means things done pursuant to the State or Territory or authorised by it are applied by operation of this law.

MR J. SEXTON:   Yes, your Honour.  Section 68(1) has no application for the reason that I identified, that is, 68(2). 

GUMMOW J:   So the phrase in 68 “the application of . . . the provisions of this Division” includes 74(2A)?

MR J. SEXTON:   Yes, your Honour.  It includes 74(2A) because 74(2A) operates so that 74(1) itself is limited in its operation.  It is as if, your Honours, the term implied into the contract by section 74 as a whole was expressed in terms there is a warranty that services will be rendered with due care and skill.  However, liability for breach of that warranty will be limited in the following ways.  That is the way subsection (1) and subsection (2A) work together and it is at that point. 

Notwithstanding the words “If there is a breach of an implied warranty” that does not mean that subsection (2A) only operates at the time of breach.  It is contemplating that if there is a breach, like any other contractual provision which limits liability, absent any statutory provision, it contemplates that there will be performance.  But if there is not performance, then these provisions will take effect on breach.  That is the way the words “if there is a breach” should be read. 

So that the provision as a whole, that is the implied warranty under subsection (1) and whatever additional words are implied into the – or inserted into the contract by force of a State or Territory law are read as though they are in the contract at the time that it is made.  That is why 68(1) has no application because there is no inconsistency and it is not a situation, as I understand, as put by the respondent that subsection (2A) has no operation until after there has been a breach.  It operates from the outset.

Your Honours, the next point is the extrinsic materials.  The relevant words are picked up in paragraph 21 of our original submissions.  It is not necessary to take your Honours to the detail of the consideration in the detailed speech or the supplementary explanatory memorandum or the second reading speech, although they are ‑ ‑ ‑

FRENCH CJ:   Paragraph 22 of your submissions, I think, is it not?

MR J. SEXTON:   Paragraph 22, I am sorry.  But the short point is that the federal legislature contemplated that the amendment, that is the insertion of subsection (2A) into section 74, will seek to ensure that State and Territory reforms of the law of contract are not ‑ ‑ ‑

GUMMOW J:   That is a legally incoherent statement.

MR J. SEXTON:   What do we make of it?  What we make of it, your Honour, is an expressed intention to not undermine ‑ ‑ ‑

GUMMOW J:   What does undermine mean?  It is a metaphor for something or other?

MR J. SEXTON:   Adversely effect, your Honour, restrict, undercut but it identifies an intention perhaps not ‑ ‑ ‑

GUMMOW J:   Well, impair or detract, we understand, that is in the language of section 109 cases.

MR J. SEXTON:   Yes, your Honour, but the law of contract and the way in which the reforms ‑ ‑ ‑

GUMMOW J:   But we have decided that is not the way this works.  It is not a section 109 pull back situation.  That is why I say it is incoherent.

MR J. SEXTON:   I understand what your Honour is putting to me, but what I can submit is that it indicates an intention, even if inelegantly expressed, to deal with contracts and not statutes.  This was an amendment ‑ ‑ ‑

GUMMOW J:   Contracts are governed by the common law of Australia, which is another incoherence in all of this, except insofar as there is a change to it by a State law or a Commonwealth law.  This notion that the common law is somehow the preserve of the States – it is just a constitutional nonsense.  It is the common law of Australia which is subject to change by any competent legislature.

MR J. SEXTON:   Yes, your Honour, but what this particular sentence is addressing is the level in the hierarchy at which a State or Territory legislature is operating and it is recognising that those legislatures have or may reform the common law of contract in a way that would be negated by section 68 of the Trade Practices Act but for section 74(2A). 

So in that context and dealing with the issue here which is whether or not section 74(2A) applies only to a State or Territory statute which itself limits or precludes liability or one which authorises a contractual provision, these words do indicate that it is the federal intention that (2A) be given a broad construction. Your Honours, they are our submissions in relation to subsection (2A) and whether it picks up section 5N because it was intended to apply to a provision such as 5N.

Your Honours, the next point which I have identified as being of relevance which is not dealt with either in the courts below or in the original submissions is a question of whether there is a limitation either in 74(2A)(b) or in section 5N itself in terms of application to this particular contract and those issues arise in the context of what has been said by this Court in cases such as Akai v People’s Insurance and Kay’s Leasing.  It arises ‑ ‑ ‑

GUMMOW J:   You did not take us to section 67 of the Commonwealth Act?

MR J. SEXTON:   In the submissions.

GUMMOW J:   Well, this morning.

MR J. SEXTON:   This morning’s submissions, no.  Our submission about section 67 is – there is reference to it in paragraph 11 of the submissions that we handed up, your Honour.  Section 67 deals with the type of circumstance which Akai v People’s Insurance considered, namely when there is an express choice of law provision in a private contract which provides for a choice of law outside Australia. 

The point that we make about section 67 in relation to construing 74(2A)(b) and the words “the proper law of the contract” is that in the context of a choice of law for “some other country”, picking up the words of 67(a), there is a provision that this relevant division applies – notwithstanding such a term – that reflects the approach of this Court in Akai v People’s Insurance to a similar provision in the Insurance Contracts Act. 

The point we make about the words “the proper law of the contract”, which is a different expression to a term that it – that is, the proper law – should be the law of some other country is that (2A)(b) would apply to a private choice of law provision within the Commonwealth because it does not fall within section 67 and it is not otherwise provided for either – well, certainly expressly in (2A)(b), so that in relation to the proper construction of the words “the proper law of the contract” in (2A)(b) we submit that that would extend to a case like the present one in which there is an express choice of law provision.

The next point, however, which is whether section 5N applies in the circumstances of this particular case depends upon, as a matter of construction, what the intended operation of section 5N would be. It arises in this case because both parties to the contract were residents of New South Wales. There was an express choice of law provision in the contract selecting New South Wales. There is some evidence that some payment was made to an agent of the appellant in Queensland, and the services to be provided within the meaning of section 5N, that is “recreation services” as defined in section 5K of the Civil Liability Act (NSW), were to be supplied in about 20 foreign jurisdictions because the subject matter of the contract was a tour package going to 20 different ‑ ‑ ‑

GUMMOW J:   Suppose the contract had said the proper law is the law of Victoria. 

MR J. SEXTON:   In my submission, in that case section 74(2A)(b) ‑ ‑ ‑

GUMMOW J:   I am thinking about 5N.

MR J. SEXTON:   For 5N, if it had said that the proper law is the law of Victoria then, in my submission, 5N would still apply because the place which has the most relevant close connection to the contract is New South Wales.  That is where the contracting parties resided and if the ‑ ‑ ‑

GUMMOW J:   Well, the express choice of law clause would be disregarded.

MR J. SEXTON:   Yes, your Honour, in the same way as it was in Kay’s - I am sorry, I will withdraw that.

GUMMOW J:   That was for a different reason.

MR J. SEXTON:   Yes, your Honour. 

GUMMOW J:   To put it more acutely, suppose it said the law of Western Australia, which does not have this extended definition, I think, of recreational activities.

MR J. SEXTON:   In my submission, 5N would apply because 5N applies to every contract which has sufficient connection with New South Wales, which this one does.

GUMMOW J:   How do you get that out of the words?

MR J. SEXTON:   Because ‑ ‑ ‑

GUMMOW J:   It is important because this civil liability legislation which was introduced in 2002 is not an exercise in uniformity.

MR J. SEXTON:   That is so, your Honour.

GUMMOW J:   So problems will arise quite acutely, I think, with all sorts of provisions in these statutes which do not coincide where the State legislatures seem to act without any regard to the necessity to attach a clear connecting factor.

MR J. SEXTON:   Yes, your Honour.  I should say at the outset ‑ ‑ ‑

GUMMOW J:   Hence, giving rise to uncertainty and cost.

MR J. SEXTON:   Yes, your Honour.  The question your Honour has posed to me does not arise in this case because there is an express choice of law provision for New South Wales and, in our submission ‑ ‑ ‑

GUMMOW J:   No, no.  The statute does not say that.

MR J. SEXTON:   No, your Honour, the statute is silent in terms of precisely which contracts it applies to but ‑ ‑ ‑

GUMMOW J:   Well, it fixes on the word “supply”, does it not – “for the supply”?

MR J. SEXTON:   Yes, your Honour.

GUMMOW J:   The problem disappears – the problem I put to you disappears if the services are exclusively for rendering rendition in New South Wales.  It would reappear if they were also for rendition in Western Australia but that would be coped with by the West Australian Act, I suppose.

HAYNE J:   The same point can be put as, why should one read 5N as meaning a term of a contract for the supply anywhere in the world of recreation services.  Why should one not read it “a term of a contract that is applied in New South Wales of recreation services has certain consequences”?

MR J. SEXTON: That is an available construction, your Honour, but in my submission the preferable one is to read it as a term of a contract made in New South Wales for the supply of recreational services because section 5N is prima facie dealing with contracts made in New South Wales. It would certainly not be read as meaning that any suit in New South Wales in respect of a contract wherever made is subject to section 5N. But the New South Wales legislature would prima facie be interested in regulating contracts made in New South Wales.

HAYNE J:   But there are two propositions in that, I think.  One you accept, as I understand it, that you read 5N as subject to some geographic limitation.  You seek to attach it to the contract, that is to sever the expression “contract for the supply of recreation services” into its constituent elements and apply it to contract.  But there is a difficulty if you read it as a singular, conglomerate phrase “contract for the supply of services” - where are you then going to attach the geographic limitation except to supply.  But that is the construction choice that your argument seems to present.  Is that right?

MR J. SEXTON:   Yes, your Honour.  We put three alternatives in paragraph 15 of the submissions that we provided at the commencement.

GUMMOW J:   I just wondered, Mr Sexton, does this problem occur in the tort sections as well?  Various aspects of the law of tort are modified, are they not?

MR J. SEXTON:   Yes, they are, your Honour.

GUMMOW J:   Take section 5M(1):

A person . . . does not owe a duty of care to another person who engages in a recreational activity –

Surely that means engages in New South Wales in the recreational activity?  Division 5, of which both these provisions are part, is headed “Recreational activities”.  So it would be sensible, perhaps, to find the one connecting factor for Division 5.

MR J. SEXTON:   Well, your Honour, in my submission, 5M(1) should be construed as meaning does one owe a duty of care in New South Wales to another person who engages in a recreational activity.  The way in which this case was presented at first instance was that there were breaches of duty by the appellant in not warning the respondent in New South Wales before the respondent left Australia about, for example, wearing a seatbelt and so on.

HAYNE J:   But the provision you would have to grapple with is then 5J(1), is it not, which is the general provision limiting the application of the division?  Section 5J(1):

This Division applies only in respect of liability . . . resulting from a recreational activity engaged in by the plaintiff. 

You have to read that, I think, as saying, “recreational activity engaged in anywhere by the plaintiff”.  Now, that is a rather large reading, is it not?

MR J. SEXTON:   No, your Honour because it is not difficult to envisage circumstances in which there may be a breach in New South Wales, damage suffered in New South Wales in respect of a recreational activity engaged in outside New South Wales.

KIEFEL J:   What about the definition of “recreational activity” in 5K, in particular, paragraph (c)?  It is a cumulative definition and it focuses upon a “pursuit or activity engaged in at a place”?

MR J. SEXTON:   Yes, it does, your Honour, but if I might just address 5J(1) before answering your Honour’s question.

KIEFEL J:   Yes, I am sorry.

MR J. SEXTON:   In my submission, 5J(1) is directed towards liability in New South Wales in negligence.  It does not matter where the recreational activity takes place.  It does not matter where, for the purposes of subparagraph (c) in the definition of “recreational activity”, that place is.

GUMMOW J:   You begin, do you not, with some support for Justice Kiefel’s question in section 12(1)B, the reference to a locality in and of New South Wales, an ordinary interpretation provision.

MR J. SEXTON:   Yes, but the words “at a place” in paragraph (c) do not limit subparagraphs (a) or (b) of recreational activity.

HAYNE J:   What is underpinning this stream of answers is a notion that the Civil Liability Act is to be applied by the forum regardless.  Now, is there any provision, either in the Civil Liability Act which deals with choice of law questions or any other statutory provision that deals with choice of law questions?

MR J. SEXTON:   Before the Civil Liability Act?

HAYNE J:   For actions of this kind.  Otherwise you are back to lex loci, are you not?

MR J. SEXTON:   Yes, your Honour.

HAYNE J:   The knife in the napkin is that it rather suggests that 5J should be read as dealing with activities that occur in New South Wales where the place of the delict will occur.  You may say the knife is blunt or remains within the napkin.

GUMMOW J:   Bearing in mind that insofar as this is a vest of tort too, John Pfeiffer would emphasise the importance of a lex loci.

MR J. SEXTON:   I appreciate that, your Honour, but the point I am making is that ‑ ‑ ‑

GUMMOW J:   As a common law rule, unless you get into a sub‑statute that changes that.

MR J. SEXTON:   The submission I am making is that the liability in negligence in New South Wales does not depend on a recreational activity taking place in New South Wales.  There can be liability for breach in New South Wales, and damage suffered in New South Wales, even though the particular recreational activity took place outside New South Wales, or partly in New South Wales and partly outside New South Wales, and in my submission in those circumstances the Civil Liability Act (NSW) applies.

Conformably with that, 5N is dealing with a contract made in New South Wales and it will apply to a contract made in New South Wales even if the recreational activity takes place partly in New South Wales, partly out of New South Wales, or wholly out of New South Wales.  It is directed towards contracts made in New South Wales.  In my submission, 5N would apply even if there was an express choice of law provision choosing a jurisdiction other than New South Wales.  For the same reasons, it is the State legislature’s provenance to regulate contracts made in New South Wales, and 5N does that.

FRENCH CJ:   I think the plaintiff’s position was that the contract was governed by the law of New South Wales.  There was no issue.

MR J. SEXTON:   There is absolutely no doubt, and I do not think anyone would ‑ ‑ ‑

FRENCH CJ:   That does not answer the legal question, of course.

MR J. SEXTON: It does not, exactly. There is no doubt that this litigation was conducted on the basis that the proper law of the contract was the law of New South Wales and that section 5N applied. However, what I am dealing with is a legal question about whether or not, despite the proper law of the contract for other purposes being New South Wales, nevertheless section 5N has no application because the recreational activities were taking place outside New South Wales and the answer to that is what I have already submitted, namely that section 5N operates on contracts made in New South Wales, or alternatively, contracts which have as their closest connection New South Wales, which in this case, we submit, is New South Wales because otherwise you have the situation in which there are at least 20 other jurisdictions which would be identified applying those types of principles in terms of identifying a choice of law for this contract.

It can be put against us, that is enough.  All you have to do is say it is not New South Wales.  The services were being provided outside of New South Wales.  But again, our response to that is that 5N is addressed to the contract.  It is not addressed to the recreational services themselves.  Your Honours, those are our submissions on - I have not addressed orally, and I do not propose to, the question of whether the exemption clause applies.  In any event, if we get over all of these other hurdles in relation to the application of (2A).  We have dealt with that very briefly in our written submissions and unless your Honours wish me to deal with that, I was not proposing to do so orally.

FRENCH CJ:   Thank you, Mr Sexton.  Mr Solicitor, are you going next?

MR M. SEXTON: If the Court pleases. Your Honours, if I can just say something about that last question that has been raised in relation to the territorial ambit, if I can call it that, of section 5N? We have, in a sense, come to make the argument that if section 5N is applicable to this particular contractual situation, then it is picked up by the Commonwealth legislation so we have not made submissions on whether or not section 5N would actually apply but we would essentially adopt the submissions that have been made by my learned friend, Mr Sexton, to focus on the notion of the contract in 5N, rather than on the phrase “recreational services”. Section 12 of the Interpretation Act (NSW) 1987, which is not on any of the lists, but says in section 12(1)(b) that:

a reference to a locality, jurisdiction or other matter or thing is a reference to such a locality, jurisdiction or other matter or thing in and of New South Wales.

So in relation to a contract that is, we would say, has a sufficient connection with New South Wales, either because of where it is made or because it is made between residents of New South Wales, or there could be other circumstances as well, and perhaps including what the proper law of the contract is, we would say that in those circumstances section 5N would extend to a contract of that kind.

FRENCH CJ:   We are accustomed to, in recent times, seeing State statutes purporting to apply to the whole of the world but there is no such provision either in the Civil Liability Act or in the Interpretation Act though there is a specific provision, I think, in relation to application to coastal waters, generally  That is about as far as it goes.  In the Interpretation Act, I mean.

MR M. SEXTON: Except for this, your Honour, that section 12 essentially, and subject to contrary intention, confines references in statutes in New South Wales to, as it were, to the local jurisdiction but if one, as I say, looks at the term “contract” in section 5N, we would say that that would include contracts that have a real connection with New South Wales and that would be consistent with section 12 of the Interpretation Act.

GUMMOW J:   And, the tort provisions?  I am looking at section 5A.  It rather bundles up tort and contract, I think.  Section 5A(1).

KIEFEL J:   A very European view.

MR M. SEXTON:   It may be that there are differences between the tort and contractual situation under this legislation.

GUMMOW J:   The plan of the legislation is to avoid that, I suspect.

MR M. SEXTON:   It is.  Section 5A(1) talks about “harm”.  Again, it may be a question of connection with the State, in a sense the notion of extraterritoriality.

GUMMOW J:   The opening words could be applied to any claim in a New South Wales court.  We just do not know.

MR M. SEXTON: Or, it could be “harm”, or - and there is “negligence”. It seems to us that section 5N is a more straightforward case in its reference to a contract.

HAYNE J: How does that work with not just section 5J, but section 5K, “recreational activity”? I have in mind particularly section 5K(c):

(c)      any pursuit or activity engaged in at a place –

A place in New South Wales?  A place anywhere in the world?  If it is limited to New South Wales, does that say anything about (a) “sport”, (b) “pursuits and activities”, I do not know.

MR M. SEXTON:   Well, it depends whether one looks at the term “contract” or at the notion of the recreational activity.  If one were to focus on the recreational activity one would, I suppose, in terms of the Interpretation Act, perhaps confine it to New South Wales.

GUMMOW J:   I wonder if there was any attention given in the reports that produced - brought this statute to these questions, the connection in choice of law?  I think not.

MR M. SEXTON:   I think the answer is not, but I cannot be sure, your Honour.  I do not recall that there was.  There is no doubt, in a sense, that, of course, the statute is primarily directed to activities in New South Wales and the legal consequences for those but in terms of a contract, it seems it may have a wider ambit.

Your Honours, there are only two other matters that I wanted to add to what has been put by the appellant and one goes to that question of construction which is based on the assumption that section 5N is applicable to this case. It is obvious from the decision of the Court of Appeal that there are two available constructions in relation to the relevant provision of the Trade Practices Act but, we would say, that the policy basis for that legislation provides a powerful argument for preferring the construction that is put forward by the appellant. 

My learned friend, Mr Sexton, referred to the extrinsic materials.  I do not want to take your Honours to them in detail but they are conveniently set out in the judgment of Chief Justice Spigelman at pages 176 and 178 of the appeal book where it is reasonably clear, we would say, that the problem, perhaps I will not call it mischief, but the problem that was being addressed was the fact that actions under the Trade Practices Act were seen as alternatives to the cause of action in negligence.  If one looks at the consideration in detailed speech in relation to ‑ ‑ ‑

GUMMOW J:   That is significant, is it not?  Negligence would be attached by the lex loci, would it not?

MR M. SEXTON:   Yes, your Honour.

GUMMOW J:   Unless the statute was going to say otherwise.  This is treating contract in pari materia to negligence, is it not – “a real alternative”.

MR M. SEXTON:   That is in the middle of page 176 in a sense, your Honour, but it is repeated in the consideration in detailed speech on 177 at about point 5 where it says that some provisions of the Trade Practices Act:

imply into contracts an obligation to supply services with ‘due care and skill’ – a concept which has remarkable similarities to the duty of care required by the law of negligence.

Contract law is ordinarily dealt with by the states and territories.  Based on legal advice, the Commonwealth has concerns that some actions in contracts based on a breach of the condition that services be provided with due care and skill may not be subject to any limitations which might be applied by a state or territory contractual remedy. 

“Any limitations” it says, which we would say supports the construction that was adopted in the Court of Appeal by Chief Justice Spigelman and then a supplementary explanatory memorandum which goes over onto page 178 talks about again ‑ ‑ ‑

GUMMOW J:   That statement at line 40:

Contract law is ordinarily dealt with ‑ ‑ ‑

MR M. SEXTON:   I am sorry, 40 in ‑ ‑ ‑

GUMMOW J:   Line 40 on 177.

MR M. SEXTON:   Page 177.

GUMMOW J:   Yes.  It might have been true in the 1950s.  It seems to overlook the significance of Part 5 of the Trade Practices Act, which we have had for nearly 40 years now.

MR M. SEXTON:   Your Honour, looking at the main thrust of the ‑ ‑ ‑

GUMMOW J:   Well, the most significant contracts are made by trading corporations.

MR M. SEXTON:   But it is a provision of the Trade Practices Act that is the subject of the construction here, your Honour.

GUMMOW J:   Indeed.

MR M. SEXTON:   In paragraph 1.4 on page 178 of the memorandum ‑ ‑ ‑

GUMMOW J:   I am just wondering what the “legal advice” is referred to at line 41.

MR M. SEXTON:   Yes.

FRENCH CJ:   Then, of course, there is the extended operation also under section 6 which brings in telephonic arrangements and territorial things ‑ ‑ ‑

MR M. SEXTON:   That is right.

FRENCH CJ: Everything you can find in the Constitution, really.

MR M. SEXTON:   We are aware of that, your Honour.  I just wanted to draw your Honours’ attention to paragraph 1.4 which is just at about line 25 there, that – I will leave out the initial bit – it says that:

legal advice that . . . the High Court’s decision in Wallis v Downard‑Pickford (North Queensland) Pty Ltd is that actions in contract based on a breach of the condition that services be provided with ‘due care and skill’ would not be subject –

and it says again –

to any limitations which might be applied by a State and Territory to contractual remedies –

suggesting, we would say, that this was intended to have a broader effect than simply to deal with what was a direct statutory provision in Wallis, excluding liability, and also to deal with the indirect exclusion in the way that it is done by section 5N.

One final matter - your Honours, my learned friend Mr Joseph’s outline of argument in paragraph 21 says that if sections 74(2A) and 5N did have the effect of rolling back the operation of the implied warranty, section 109 of the Commonwealth Constitution would apply to invalidate the State law. It seems to us to misunderstand the notion of section 109 because if the relevant provision of the Trade Practices Act does pick up section 5N, then you do not really get to section 109. It operates as a Commonwealth law.

FRENCH CJ:   It gives the effect of federal law to State provision, answering the description in (2A), and you say on its proper construction, it gives the effect of federal law to a State provision which authorises the inclusion in a contract of the qualifying exclusion clause.

MR M. SEXTON:   Yes.  There is a reference in that paragraph to Telstra v Worthing, a very different sort of case we would say where there were competing bodies of State and federal law and the question was whether the Commonwealth law covered the field. The Court said that it did, but this is really a question here of the construction of a particular Commonwealth statutory provision, and the construction of that provision will then determine its operation, and that will in turn determine whether section 5N is picked up and applies to this particular contractual situation. Unless there are any other specific matters, those are our submissions, your Honours.

FRENCH CJ:    Thank you, Mr Solicitor.  Yes, Mr Joseph.

MR JOSEPH:   Our first submission relates to the proposition that all words in 74(2A) have work to do and that, in particular, the reference to “breach” in 74(2A) is an actual breach and not a purported breach, as has been suggested.  It is a precondition to the operation of the State law, in our submission and it would mean, in our submission, that the effect of (2A) relates not to the voiding of the implied term, but rather the operation of State law, once breach has occurred, of the implied term.  The reference to the law of the State, being the proper law of the contract is also significant, in our submission, as to the ambit of 74(2A), not because it might identify the relevant State law, but as to when it is 74(2A) kicks in, in terms of the statutory scheme.

In particular, because of section 67B it is quite clear, in our submission, that what 67 does and 67B does is that regardless of what might be the proper law of the contract or, indeed, for that matter the law of the State, it – that is the provisions of the division – shall have primacy.  That, in our submission, that is 67B, that is that the terms of the division shall have primacy obviously was done at a time before 74(2A) was included in the legislation, but when 74(2A) was included it must have appreciated that 67B made it quite clear that regardless of what the law of any State might have, in respect of substituting or some terms of the contract, the division applies regardless.

That is the scheme, in our submission, into which 74(2A) came in.  It indicates, in our submission, that given that the proper law of the contract has no relevance as to the operation of the division the reference to proper law of the contract in 74(2A) indicates that that section only applies after the implied terms, which the division inserts have had their effect and, indeed, after the voiding provision takes place, in respect of 68.

My friend says that section 68 does not have that effect, that is section 68 voiding the clause does not have any work to do in respect of this contract and, in part, he says because of section 68(2).  Section 68(2) requires that if you are going to modify the provisions of the division, it must be done so expressly or as inconsistent with that provision or section.  In our submission, clause 4, that is the term which is being relied on here in the contract, can hardly be said to be expressly or inconsistent with the operation of the division.  In other words, section 68(2) does not do the work my friend would seek it to do to avoid the operation of section 68(1).

In our submission, section 68(1) operates, as with section 67, at the outset of the contract.  Indeed, Kay’s Leasing makes it clear that these provisions operate on the formation of the contract and, therefore, in our submission, section 68A operates before you get to section 74(2A).  It has not been expressly – and the clause in the contract does not expressly or is inconsistent with the division – and, therefore, section 68A makes the clause void and obviously continues to be void for all purposes.

The other words of section 74(2A) which we submit are important and was mentioned by Justice Gummow was the work to be done by the words “of another term of the contract”.  My friend dismisses that in this case because there is no relevant other term for which it can apply and, therefore, the section has, in effect, added verbiage of no meaning or use.  However, in our submission, you do not look at section 74(2A) from the point of view of the contract, you look at section 74(2A) as to the words that have been inserted there and what work they have to do.

What work they have to do, in our submission, and which gives meaning to the construction of section 74(2A), is that the legislation in question is legislation that operates not at the specific level of the implied term only, but at a more general level in the manner we have identified in our written submissions, namely, either at the level of damages or quantification or of contributory negligence. In other words, that legislation operates both on any breach, be it the implied term or any other term of the contract, and in that way you give meaning to those words another term of the contract. In other words, section 5N which only operates on one term does not satisfy the State legislation being characterised in section 74(2A) because it only operates on one term and not another term of the contract.

KIEFEL J:   But reading (2A) as a whole, is it not intended to give the implied term a particular status?  That is what that term for breach of another term read with the rest of the subsection is about.  It is giving it the status of the other contractual terms.

MR JOSEPH: What I submit by way of analogy is what its meaning is and we have not referred to this in our written submissions but we have referred to the professional standards legislation which the States have passed. What the States did incorporate was a reformulation of the duty of care in respect of doctors. In section 5O of the Civil Liability Act (NSW) is the one in question but it is also repeated elsewhere. Section 5O abolishes the Bollen test and reformulates the duty of care of doctors and professional persons in a way that is no longer consistent with the duty of care which might be seen as being similar to that of the implied term.  That is, you are to carry out your duties with due care and skill.

Thus, that reformulation applies to - not only do they reformulate the duty and, therefore, give credence – it precludes or limits liability for the breach as it would for any other term of that contract.  It controls the duty.  If you are controlling the duty you control all aspects of the contract.  In our submission, be it liability or be it for any other breach, and in our submission, that is the work that those words have to do in terms of 74(2A).  It permits the reformulation of matters at a general level which would be normally included in a contract, not just the implied term but all other terms of the contract to which the duty gives rise to.  I do not know if that answers your Honour’s question but that is how we would incorporate that part of the section to give it the general level of applicability that is required before the State Act is properly characterised as having been picked up.

Can I just answer further the question of the word “applies”.  Obviously, from the courts below it is clear that there is a question meaning applies in its own terms or applies by way of permission or facilitative.  We would also add the consideration as to the word “applies” as giving some sort of temporal meaning as well.  That is, the law that is, in a sense picked up, is that which applies at the time when considerations of breach or recovery of damage are considered.

So we would obviously adopt the characterisation that it applies in its own terms, but we would add to that that what 74(2A) as a whole is indicating by the word “breach”, by the use of “the proper law of the contract”, and by the word “applies” is an indication that it only fits into the scheme of the division at the time when breach has occurred and considerations of damage are being made, because at that point the proper law of the contract obviously is relevant, as will be State laws which might limit or preclude liability for that breach or the recovery of damages.

My friend refers briefly to the policy of the Act, and I appreciate that is one matter that this Court is required to consider in statutory interpretation.  It is our submission that it is all one way, that the policy is only consistent with a limited meaning being given to 74(2A).  The scheme is clear enough to this Court that the implied terms have been statutorily planted there in order to protect the consumer.  If that is the purpose, to allow through the back door so to speak those very rights to be taken away without any sort of direct knowledge to the consumer that those rights have been taken away in express terms, it would be our submission that that would be an unusual consequence of a protective protection division of this Act.  It would be not a consequence, in our submission, consistent with the objectives and policy of the Act.

Now, clear enough, parliaments often do act inconsistently, but the purpose of interpretation is to try and provide at least some consistency and, in our submission, the consistent policy direction of the Act and the division and, indeed, this Part would be to give it a restricted interpretation, especially as the consumer would not have been in any way on notice that such an outcome was likely or even might occur.

FRENCH CJ:   Sorry, I do not quite understand that.  You say the consumer is more likely to know the content of a State or Territory law directly, precluding liability, than he or she is likely to know the existence of an exclusion clause in the contract, supported by that ‑ ‑ ‑

MR JOSEPH:   What we are saying is that it is more likely that they would assume that those rights that have been implied by section 74 were their rights and that the exclusion clause – I will come on to the exclusion clause – but the exclusion clause would have limited operation and ‑ ‑ ‑

FRENCH CJ:   One wonders how many people who sign up for the 20‑day European holiday have read section 74 of the Trade Practices Act before?

MR JOSEPH:   True, but they are probably aware of the consumer protection provisions of the Trade Practices Act, more so.  But as to the clause my friend did not make a submission about it, but we do seek to make some submissions about it as to its operation because it is - not much attention obviously because the majority did not have to consider it, but Justice Spigelman did. 

If, of course, we are wrong about the operation of 74(2A), we submit that the clause in question does not apply - that can be found at page 165 of the appeal book.  Clause 4 is the relevant clause.  Justice Spigelman held that the meaning of the word “occupies” is not to be taken as if the person was in occupation but rather sort of occupies, having been given some sort of ticket to sit in that seat.  Our submission is that that would be an unusual meaning of the word “occupies” in the context, in particular, of a seatbelt.

Clearly the clause, in our submission, relates to people who are in seats fitted with seatbelts and who fail to use them.  So, in our submission, clause 4 has just no relevance to the circumstances of this case where the facts – undisputed facts – were that the plaintiff was standing seeking to get something from an overhead locker and the accident occurred.

So, in our submission, she clearly was not occupying the seat in the sense of a motor coach seat, even though it was fitted with a seatbelt and the meaning to be given to that clause, obviously consistent with this Court’s views on exclusion clauses, would be a restricted meaning and not an expansive meaning as His Honour Chief Justice Spigelman so found. 

The other thing about clause 4 is, in our submission, that it does not satisfy 5N. Section 5N – it can be found on page 169 for convenience – permits, in our submission:

a term of a contract which for the supply of recreation services may exclude, restrict or modify any liability to which this Division applies that results from breach of an express or implied warranty that the services will be rendered with reasonable care and skill.

In our submission, clause 4 is not such a term.  It does not ‑ ‑ ‑

GUMMOW J:   This is in addition to the submission that - 5N(1) is not engaged anyway because the supply was outside New South Wales.

MR JOSEPH:   Yes.

GUMMOW J:   So it is addition to that.

MR JOSEPH: Yes, your Honour. Thus it is not engaged because it is not a term sufficiently consistent with 5N if 5N was to have been engaged. On that matter, Justice Gummow, it is of note that the heading in section 5N relates to recreational activities which has a different meaning to recreational services which brings, if I may finally, to the matter concerning 68B in the Trade Practices Act.  It is certainly agreed that 68B ‑ ‑ ‑

GUMMOW J:   I just want to be clear about this.  You are submitting, contrary to what was being discussed with Mr Sexton, or what Mr Sexton was putting to us, that it is not enough to attract 5N(1) that the contract has connections with New South Wales.

MR JOSEPH:   That is right, yes, your Honour.

FRENCH CJ:   That is not in your written submissions either, is it?

MR JOSEPH:   No, your Honour.

FRENCH CJ:   No.  It was not in your pleadings either.

MR JOSEPH:   No, your Honour, but when it has been so powerfully put, your Honour, it would be foolish to disregard it.  The only other matter is 68B.  Can I just deal with that, which is in the Trade Practices Act obviously, and what work does it do in colouring the meaning of 74(2A).  Section 68B, importantly of course, deals directly with section 68, Justice Bell was making – it expressly says that 68, unlike 74(2A), expressly says that 68 will have no effect. 

It deals, as we would submit ought to be dealt with – that is, 68 remains alive but for express repealing of it, but it deals with recreational services and indeed personal injuries of a different type to 5N.  Your Honour Justice Gummow talks about the inconsistencies in definitions.  The definition of “personal injury” here in 68B is much wider than anything in the Civil Liability Act.  The definition of “recreational services”, on the other hand, is narrower.  We have in our written submissions, in particular at page 6, dealt with the legislative history of 5N but also 68B.  It is of some significance, we submit, that –

Section 5N . . . was introduced on 28 May 2002 and commenced on 10 January 2003 –

and 68B – at page 6 of our written submissions – was introduced shortly thereafter –

on 27 June 2002 and commenced on 19 December 2002.

Now, we go there and refer to the second reading speech, and we make this submission:  there is something to be said of the chronology as to the fact that the Commonwealth’s reaction to 5N was 68B, not 74(2A), and 68B - and in fact, as I have indicated, is different in terms than 5N and creates tension if indeed 5N was to have been picked up.  One has situations of different injuries in different places in relation to different services being picked up under allegedly 74(2A) and 78B in a sense having no work to do because of the more expansive manner by which the States dealt with the matter of recreational activities or services.

We submit that when these second reading speeches are referred to the more coherent way to deal with the meaning of 74(2A), in our submission, is to accept that 68B is the response of the Commonwealth to the introduction into State schemes of limitations on recreational activity contracts, and that what 74(2A) is about, in our submissions, and when you read the reading speeches my friend referred to and to which Justice Gummow has referred to, relates to the capping of damages on professional services and limitations of damages of professional services, in the background that there remained remedies.  It is interesting, in our submission, that when one looks at the second reading speeches, it is referred to as a minor amendment, 74(2A).

It is hardly, in our submission, a minor amendment on any view if the appellant’s submissions are right and, secondly, when one reads the second reading speech and, it was particular to that page 177 referred to, it is in the context of remedies, ie, in the context of breaches, not in the context in the context of no remedy and where there is no entitlements to parties.  It could be said to be a minor amendment, in our submission, if it related to matters concerning breach.  It could hardly be a minor amendment if in fact what occurs is that there is no duty take reasonable care in respect of recreational activities.

Indeed, 68B, in our submission, provides the exemplar by which if the Commonwealth was to pick up an Act, a State Act, which was to impact upon 68, that is the way it would be done, not through some contractual waivering, I should say, by parties.  Some parties and, in our submission, some parties and sometimes not some parties, it does not have a statutory flavour about it at all.  Rather, it seems to be back in the bad old days of caveat emptor which would be inconsistent, in our submission, with the whole policy of consumer protection.

FRENCH CJ:   An exclusion clause takes effect in the ordinary course, not as a matter of State law but as a matter of common law, is that right?

MR JOSEPH:   Yes.

FRENCH CJ:   Presumably the thing that lies in your favour in 74(2A) is simply the language that says the law of the State or Territory applies to limit – has to be a direct effect, on your construction.

MR JOSEPH:   Yes.

FRENCH CJ:   Your primary resort must be to the text.  There was a cloud of policy swirling around it.

MR JOSEPH:   That was our submission, your Honour, yes.

FRENCH CJ:   Thank you, Mr Joseph.  Yes, Mr Sexton.

MR J. SEXTON:   Thank you, your Honour.  Two matters, the first of which responds to the submission my learned friend made about section 67 and also to the submission about 68B.  The point that I am seeking to make, and I will develop it briefly, is that both section 67 and 68B come back to section 68 and, as I said in my submissions in-chief, section 68 itself is expressly subject to any inconsistency with any other provision.

Now, dealing firstly with section 67, the point my learned friend was making was that subsection (b)(ii) refers to the provisions of the law of a State or Territory, and provides that the provisions of this division apply despite that term.  Now, the provisions of this division which are relevant here are section 68, and similarly in relation to 68B, the opening words are that:

A term of a contract for the supply by a corporation of is not void under section 68 by reason only –

So that in both cases one comes back to section 68, and what section 68 does is to make a term of a contract if it has certain effects void, but those certain effects are deemed not to happen unless the term of the contract is inconsistent with a particular provision or section of the division.

GUMMOW J:   What is the significance in this of the narrower definition of “recreational services” in 68B in the operation then of 68B to qualify 68 itself?

MR J. SEXTON:   In my submission, none, your Honour, for this reason.  What the definition of “recreational services” for the purposes of section 68B does is to identify an exception to 68, which is a different exception to the exception that comes into play by 74(2A) so that, in our submission, the way that the division operates is that section 74, as I said in my submissions‑in‑chief, implies a term which on our construction, at the time of implication, provides for what happens on breach and that is a term which section 68 does not apply to because that term is not inconsistent with section 74 as a whole.  It is only after 74(2A) does whatever work it does, depending on what the proper construction of it is, that section 68B operates so that if by the time you get to section 68B, because there is a State law which has a wider operation in terms of the definition of “recreational services” so that section 68B has no work to do by that time, then it has no effect but if, for example, the law which is picked up by 74(2A) does not deal with recreational services or recreational activities but deals with something else, then 68B would then operate, and it might operate in a different way because of different definitions, but ‑ ‑ ‑

GUMMOW J:   This word “applies” in 74(2A) has a lot of work to do.

MR J. SEXTON:   It certainly does, your Honour.

GUMMOW J:   It applies to produce some internal implied repeal, as it were.

MR J. SEXTON:   No, your Honour, because it operates before you get to section 68 so it is not ‑ ‑ ‑

FRENCH CJ:   Does 68 operate on anything other than the common law?

MR J. SEXTON:   Yes, it might, your Honour, because there may be a term of a contract which is purportedly modified by a State law.

FRENCH CJ:   A State law, yes.

MR J. SEXTON:   If that was the case then 68 read with 67 would operate ‑ ‑ ‑

FRENCH CJ:   It either operates directly on the State law or it is inconsistent with it.

MR J. SEXTON:   Yes, your Honour.  There is certainly ‑ ‑ ‑

FRENCH CJ:   This places the right or ‑ ‑ ‑

MR J. SEXTON:   There is certainly scope for inconsistency between sections of this division and State or Territory laws if they are not within 74(2A).

HAYNE J:   You have to take account of 75 in that respect as well, do you not?

MR J. SEXTON:   Yes, your Honour.

HAYNE J:   And the general provision about so‑called concurrent operation.

MR J. SEXTON:   Yes, your Honour, that is so.  That is the first point, your Honour.  The second point was in relation to my learned friend’s submission that “applies” has a temporal meaning in terms of the way it operates when a breach occurs we agree with that in the sense that at the time, if there is a State provision, which operates as at the date of breach or as at the date of judgment in relation to limiting or precluding liability, it may be that it is at that time that one considers whether the particular contract falls within that provision.  But that does not negate in any way the proposition that the modified implied warranty that is modified by (2A) is in the contract from the beginning under 74(1). 

Now, your Honours, can I just say that in relation to the question of the construction of the actual clause, I simply adopt Chief Justice Spigelman’s reasonings at page 184 of the appeal book in relation to the application of the contractual exclusion.  If it please the Court, they are my submissions.

FRENCH CJ:   Yes, thank you, Mr Sexton.  The Court will reserve its decision and the Court adjourns until 9.45 on Tuesday, 5 April for pronouncement of orders.

AT 11.48 AM THE MATTER WAS ADJOURNED