Priminds Shipping (HK) Co Ltd v Noble Chartering Inc [2020] EWHC 127 (Comm) (31 January 2020)

Neutral Citation Number: [2020] EWHC 127 (Comm)
Case No: CL-2019-000060

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)

Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
31/01/2020

B e f o r e :

HIS HONOUR JUDGE PELLING QC
SITTING AS A JUDGE OF THE HIGH COURT

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Between:

PRIMINDS SHIPPING (HK) CO LTD
Claimant
– and –
 
NOBLE CHARTERING INC

Defendant

Motor Vessel Tai Prize
 

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Mr Alexander Wright (instructed by Penningtons Manches Cooper LLP) for the Claimant
Mr James Leabeater QC (instructed by Birketts LLP) for the Defendant

Hearing dates: 17 December 2019
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HTML VERSION OF JUDGMENT APPROVED
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Crown Copyright ©

 

HH Judge Pelling QC

Introduction

    1. This is the hearing of an appeal by the claimant voyage charterer under s.69 of the Arbitration Act 1996 (“AA”) in respect of three questions of law arising out of a final award by Ms Sarra Kay (“Arbitrator”) published on 7 January 2019 (“Award”) by which the Arbitrator ordered the claimant to pay the defendant disponent owner’s claim in the sum of US$500,000, potentially a further £35,000, the defendant’s costs of the reference and Arbitrator’s fees.
    2. These proceedings were commenced by the issue of an Arbitration Claim Form sealed on 29 January 2019 to which the defendant responded by a Respondent’s Notice dated 19 March 2019. By an Order made on 18 June 2019, Popplewell J gave leave to appeal under AA, s.69(3)(c)(ii) on the ground that the appeal raised points of law of general public importance and the statutory criteria were fulfilled.
    3. Although it was submitted by Mr Leabeater QC on behalf of the defendant that Popplewell J gave permission “… on the basis that there was a point of general public importance not on the basis that the Award was obviously wrong” that overstates the effect of what the Judge held. AA, s.69(3)(c)(ii) provides that leave is to be given only if the question is one of general public importance and “… the decision of the tribunal is at least open to serious doubt“. As Popplewell J said in his reasons for giving leave, in his judgment the appeal raised points of law of general public importance and the statutory criteria were fulfilled, by which he meant (amongst other things) that he was satisfied that the decision of the tribunal is at least open to serious doubt. In those circumstances, I derive no assistance from the basis on which the application for leave was determined.

Background

    1. The defendant was at all material times the time charterer of the Motor Vessel Tai Prize (“Vessel”) from her owner (“Shipowner”). By a recap voyage charterparty dated 29 June 2012, the defendant as disponent owner agreed to let the Vessel to the claimant for the carriage of a cargo of heavy grains, soya and sorghum in bulk from Brazil to the People’s Republic of China (“Charterparty”).
    2. Pursuant to the Charterparty, the Vessel arrived at Santos and between 24 and 29 July 2012, 63,366.150 metric tonnes of Brazilian soya beans (“Cargo”) were loaded onto the Vessel from a silo or silos via mechanical hoppers. A Bill of Lading (“B/L”) in the 1994 Edition of the Congenbill form was drafted by the shipper and offered for signature by or on behalf of the Master of the Vessel (“Master”) on 29 July 2012. It identified the shipper as being Sucocitrico Cutrale LTDA (“Shipper”), the Port of Loading as Santos and the Port of Discharge as “Main Port(s) of South China“. Under the heading “Shipper’s description of Goods” the Cargo was described as being

“63,366.150 metric tons Brazilian Soyabeans

Clean on Board

Freight pre-paid”

The B/L was executed by agents on behalf of the Master without any reservations stating that the Cargo had been:

“SHIPPED at the Port of Loading in apparent good order and condition on board the Vessel for carriage to the Port of Discharge …

Weight, measure, quality, quantity, condition, contents and value unknown …”

It incorporated the Hague Rules by operation of clause 2 on its reverse side. The contract of affreightment contained in or evidenced by the B/L was with the Shipowner not the claimant.

    1. The Vessel arrived of the port of discharge (Guangzhou) on 9 September 2012 for discharge to the receivers of the goods, Guangzhou Green Oil Industrial Co Ltd (“Receiver”). Discharge commenced on 15 September 2012. On 17 September, discharge from two of the Vessel’s holds (Holds No.3 and 5) was suspended “Due to charred Cargo Found“. The remaining cargo was discharged without complaint and the cargo in Holds Nos 3 and 5 was discharged but the Receiver maintained that the Cargo in those holds had suffered heat and mould damage.
    2. On 19 September, the Shipowner’s P&I Club provided an Undertaking to the Receiver as security to prevent the arrest of the Vessel. It provided that the dispute under the contract of affreightment contained in or evidenced by the B/L between the Shipowner and the Receivers was subject to Chinese law and the exclusive jurisdiction of the Chinese Courts. Proceedings were commenced by the Receiver against the Shipowner. The Shipowner contested the claim but lost both at first instance and on appeal and was ordered to pay the Receiver a sum equivalent to US$1,086,564.70.
    3. On 15 June 2016, the Shipowner commenced an arbitration in London against the defendant under clause 38 of the time charter between the Shipowner and the defendant for a contribution of 50% to the sum it had to pay to the Receiver (US$543,282.35). By a settlement agreement between the Shipowner and the defendant, the defendant agreed to pay and has paid US$500,000 to the Shipowner in full and final settlement of the Shipowner’s claim. In the arbitration giving rise to these proceedings (“Arbitration”) the defendant claimed from the claimant the right to be indemnified for the amount they paid to the Shipowner and the costs of defending that claim. There is no express provision under which the defendant is entitled to the indemnity it seeks.

The Award

    1. The Arbitrator found as fact that:

i) the relevant part of the Cargo suffered from two types of damage being (a) heating caking and discolouration of some of the beans and (b) mould in some places (Award, para. 37);

ii) in relation to the heating caking and discolouration, the damaged beans had been loaded in a pre-existing heat damaged condition (Award, para. 44);

iii) the mould damage was due to the cargo being loaded in a pre-damaged condition (Award, para. 47);

iv) the damage from which the beans were suffering was not reasonably visible to the Master or crew or the stevedores or the attending surveyors or any agent of the claimant at or during loading (i.e. when being shipped) (Award, paras. 52, 54 and 56); but

v) the shippers would have been able to discover the condition of the beans by reasonable means (Award, para. 55) because some of the damaged beans were or would have been discoloured at or before loading (Award, para. 84).

    1. At para. 80 of the Award, the Arbitrator held that the phrase “Clean on Board” meant the same as “… apparent good order and condition …” and at para. 81 that although the phrase “Clean on Board” was an express representation made by the shippers, neither party had argued for that conclusion. The Arbitrator concluded that because the discolouration of the beans would have been visible on reasonable examination by the shipper it followed that the cargo was not in apparent good order and condition when shipped notwithstanding her earlier conclusion that the damage from which the beans were suffering was not reasonably visible to the Master or crew or the stevedores or any agent of the claimant at or during loading.
    2. The Arbitrator rejected the defendant’s claim to be entitled to the benefit of a general implied indemnity from the claimant applying The George C Lemos (Third Party Proceedings) [1991] 2 Lloyds. Rep. 107 (Mustill J as he then was) (Award, paras. 87-90). However, the Arbitrator held the claimant liable to the defendant because:

i) The shipper was the claimant’s agent and thus the claimant had impliedly warranted the accuracy of any statement as to condition contained in the B/L and/or had impliedly agreed to indemnify the defendant against the consequences of the inaccuracy of any such statement (Award, paras. 115-125) on the basis that the claimant was liable for the consequences of the shipper’s acts since otherwise the defendant would be left without recourse for the “… wrongs of parties who were on the (claimant’s) side of the line” (Award, para. 124);

ii) The claimant by its agent the shipper had warranted that the Cargo was ” …. SHIPPED at the Port of Loading in apparent good order and condition…” by inviting the Master or his agent to sign the B/L containing the statement as to apparent condition; and

iii) The Cargo was not shipped ” … in apparent good order and condition…” because the discolouration to which the Arbitrator had earlier referred would have been visible on reasonable examination by the shipper even though it was not reasonably visible to the Master or crew or the stevedores or any agent of the claimant at or during loading.

The Issues of Law Arising On This Appeal

    1. As set out in the Arbitration Claim Form, the issues of law identified by the claimant are:

i) Did the words “Clean on Board” and the words ” …. SHIPPED at the Port of Loading in apparent good order and condition…” in the draft B/L presented to the agents for signature on behalf of the Master amount to a representation or warranty by the shippers and/or the claimant as to the apparent condition of the cargo observable prior to loading or were they an invitation to the Master to make a representation of fact in accordance with his own assessment of the apparent condition of the Cargo;

ii) In light of the answer to (i), whether on the findings of fact made by the Arbitrator any statement in the B/L was inaccurate as a matter of law; and

iii) If so, are the claimants obliged to indemnify the defendants against any consequences of that statement being inaccurate whether pursuant to an implied indemnity arising by operation of law or an implied contractual warranty or term.

The defendant submits that there is no proper basis for interfering with the Award; that it is “… very well established …” that where an owner has incurred liability as a result of an inaccurate statement in a bill of lading presented for signature to the master of a ship by a charterer or shipper, the owner may recover an indemnity from the charterer so long as the master did not have reasonable means of discovering the statement is inaccurate and that on this basis and in light of the facts found by the Arbitrator, the Award is “… entirely orthodox and correct“.

    1. The claimant’s central submission is that the Arbitrator erroneously conflated information provided by the shipper with the standard form wording contained in the B/L, which invited the Master to carry out his own assessment of the apparent condition of the Cargo. The claimant submits that the standard wording could not give rise to any representation by the claimant or for that matter the shipper and should not give rise to any implied warranty or indemnity against inaccuracy.
    2. The defendant argues that this central submission is misplaced because the presentation of the draft B/L was both a representation by the claimant to the defendant that the cargo was in apparent good order to the shipper’s and claimant’s knowledge and an invitation to the Master to make a representation as to the apparent condition of the Cargo for the benefit of the consignee or any other lawful holder of the B/L. At paragraph 2.5 of his written submissions, Mr Leabeater QC submits that if the claimant is correct then a charterer or shipper who “…knows of either (a) latent defect in cargo or (b) a patent defect which a Master would not be able to identify could properly draft a bill describing the cargo as clean on board and in apparent good order because … that representation in the mouth of the Master would be correct. That cannot possibly be the right answer: if the shipper or charterer knows of a defect in the cargo he is bound to declare it to the Master and if he chooses not to do so he is liable for the consequences“.

Discussion

Issues (i) and (ii)

    1. It is necessary to start with a summary of the purpose and effect of a ship’s master’s statement as to apparent condition. When the charterer or shipper on his behalf tenders a bill of lading for signature by the Master that contains a statement as to apparent condition in the same or similar terms to the wording in the B/L, the charterer or shipper is inviting the shipowner by its agent the Master to make a representation of fact as to the apparent condition of the goods on shipment – see The David Agmashenebeli [2003] 1 Lloyds Rep 92 per Colman J at 103 RHC. It is not a warranty as to the accuracy of the represented facts, nor is the statement in the bill (once it is signed by the Master) a representation as to the actual condition of the goods shipped. As Colman J put it in The David Agmashenebeli (ibid.) at 105:

“…the master should make up his mind whether in all the circumstances the cargo in so far as he can see it in the course and circumstances of loading , appears to satisfy the description of its apparent order and condition in the bills of lading tendered for signature … the shipowner’s duty is to issue a bill of lading which records the apparent order and condition of the goods according to the reasonable assessment of the master. That is not, as I have indicated, any contractual guarantee of absolute accuracy as to the order and condition of the cargo or its apparent order and condition.”

This has consistently been held to be the effect of the statement in a bill of lading signed by the ship’s master – see most recently The Saga Explorer [2012] EWHC 3124; [2013] 1 Lloyds Rep 401 per Simon J (as he then was) at paragraph 32.

    1. The obligation to record the apparent order and condition of the goods is owed by the shipowner to the shipper – see CookeVoyage Charters,4th Ed., para. 85-145. The purpose of the representation is to record the carrier’s evidence as to the apparent condition of the goods when placed (shipped) aboard the ship. It can be relied on by the consignee and all subsequent holders of the bill of lading as reflecting the reasonable judgment of a reasonably competent and observant master – see The Saga Explorer (ibid.) at paragraph 33. As Donaldson J (as he then was) put it in The Galatia [1979] 2 Lloyds Rep 450 at 455, RHC:

The shipowner’s prime obligation is to deliver the goods at the contractual destination in the like good order and condition as when shipped. The cleanliness of the bill of lading may give rise to an estoppel …”

precluding the carrier from proving that the goods were not in apparent good order and condition when shipped and therefore from alleging that there were at shipment external defects in them that were apparent to reasonable inspection– see Silver v. Ocean Steamship Company Limited [1930] 1 KB 416 per Scrutton LJ at 425. However, as Mustill LJ observed in The Nogar Marin [1988] 1 Lloyds Rep 412 at 421, if:

” … the defects in the goods are not such as to be apparent on reasonable inspection at the point of shipment … the signature of the bill of lading without qualification does not preclude the owners from establishing the true condition of the goods. “

    1. With that background in mind, it is next necessary to consider the Hague Rules (“HR”) since, as I have mentioned already and as is common ground, they were incorporated into the Charterparty and the B/L. The HR draws a clear distinction (which in my judgment is reflective of the common law applicable in non HR cases as I explain further below) between the position in relation to information that appears in the B/L that is provided by the charterer or shipper on the charterer’s behalf, which the carrier or master on its behalf is obliged to accept at face value and representations as to the apparent condition of cargo at shipment. HR, Art. III, Rule 3 provides for the inclusion within a bill of lading to which the HR applies of the “… leading marks necessary for identification of the goods …” and “… the number of packages or pieces or the quantity or weight …” of the goods constituting the cargo to which the relevant bill relates, critically, in each case, as that information is “… furnished in writing by the shipper“. In so far as the bill sets out this information, it is recording information supplied by the shipper. In this case this rule applied to the information that the cargo consisted of “63,366.150 metric tons Brazilian Soyabeans“.
    2. However, again critically, the rule goes on to provide that the bill should also set out “… the apparent order and condition of the goods”. However, that is not something that is to be “… furnished in writing by the shipper“. As I have explained and as is apparent from the rule, it is exclusively an assessment by the carrier (or the Master on its behalf) of the goods – see AikensBills of Lading, 2nd Ed., at para. 4.11 – at the point of shipment – see The Galatia (ibid.) at 455, RHC. As Mustill LJ put it in The Nogar Marin (ibid.) at 422 RHC:

“Everyone in the shipping trade knows that the master need not sign a clean bill just because one is tendered; everyone knows that it is the master’s task to verify the condition of the goods before he signs.”

    1. By HR, Art. III, Rule 5 a warranty is deemed to have been supplied by the shipper to the carrier in respect of the information “… furnished in writing by the shipper” pursuant to HR, Art. III, Rule 3 but there is no such guarantee deemed to be given in respect of the apparent order and condition of the goods – see Carver on Bills of Lading, 4th Ed., at paragraph 9-173. The reason for this is obvious from the terms of the Rules – the guarantee is deemed to have been given in respect of the information supplied by the charterer or shipper which the carrier is entitled and is perhaps obliged to accept at face value. It is not given in respect of apparent condition, because that is a representation by the shipowner or on behalf of the shipowner by the ship’s master based on his assessment (or an assessment carried out on his behalf by an appropriate expert) of the apparent order and condition of the relevant goods. In making that assessment, the master does not act on the basis of the information provided to him by the shipper but makes his own independent assessment as I have explained.
    2. In this case there is no finding by the Arbitrator to the effect that the invitation to sign the B/L in relation to apparent condition was (or was understood by either the Master or the agents to be) an invitation to sign without any independent investigation by the Master of the sort referred to in the authorities cited earlier or anything other than an invitation to sign with whatever qualifications concerning apparent condition that the Master considered appropriate. The presentation of the draft B/L must be understood in the commercial context in which it was delivered being that I have summarised above. In particular that context included what Mustill LJ summarised in The Nogar Marin (ibid.) at 422 RHC namely ” … everyone in the shipping trade knows that the master need not sign a clean bill just because one is tendered; everyone knows that it is the master’s task to verify the condition of the goods before he signs …”
    3. There is no finding by the Arbitrator that the Master failed to carry out an independent assessment in the terms contemplated by the caselaw referred to earlier or acted either wholly or in part on any implied representation based on tendering the draft B/L for signature with the statement concerning apparent condition in it. To the contrary, the Arbitrator found the damage from which the beans were suffering was damage that existed prior to shipment but was not reasonably visible to the Master or crew or the stevedores or any agent of the claimant at or during loading. In those circumstances the Shipowner and defendant complied with their prime obligation to deliver the goods at the contractual destination in the apparent good order and condition they were in when shipped. In those circumstances, it is difficult to see how there could be any causal link between the loss suffered by the defendant in settling with the Shipowner and the making of the alleged representation by the claimant because the signature of the bill of lading did not preclude the defendant from establishing the true condition of the goods in the arbitration as between it and the Shipowner.
    4. As I explained at the outset the Shipper described the goods in the draft B/L as having been delivered “clean on board“. The Arbitrator said of this statement at paragraph 81 of the Award:

“The typed words “clean on board” were located in the box headed “shipper’s description“. I understand that to amount to an express representation made by the shippers, but neither party argued this before me. As to whether this is relevant, it would probably not add anything to my decision … that the [claimant is] to take responsibility for the shippers in the context of this dispute.”

I agree with the Arbitrator’s observation that the inclusion of the phrase within the shipper’s description box on the draft B/L was at least arguably an express representation made by the shippers to the effect that the goods were in apparent good order and condition. It is conceivable that it might have been argued by reference to the inclusion of this representation that the Shipper as agent for the claimant thereby represented that the goods were in apparent good order and condition. However, that was not argued before the Arbitrator and there are no findings to the effect that the Master acted on the truth and accuracy of the representation in signing the B/L without carrying out the reasonable assessments referred to in the caselaw referred to earlier. The Respondent’s Notice to which I referred at the outset of this judgment does not seek to uphold the Award on grounds other than those expressed by the Arbitrator in the Award and in those circumstances this point is immaterial.

    1. The Answer to Question (i)

I conclude that by presenting the draft B/L for signature by or on behalf of the Master, in relation to the statement concerning apparent good order and condition, the Shipper was doing no more than inviting the Master to make a representation of fact in accordance with his own assessment of the apparent condition of the Cargo.

    1. The Answer to Question (ii)

In light of the finding by the Arbitrator that the damage from which the beans were suffering was not reasonably visible to the Master or crew or the stevedores or any agent of the claimant at or during loading, I answer question (ii) by holding that the B/L was not inaccurate as a matter of law. It contained no more than a representation of fact by the Master as to apparent condition that was not inaccurate because the Master did not and could not reasonably have discovered the relevant defects because they were not reasonably visible to him or any other agent of the claimant at or during shipment.

    1. The Arbitrator fell into error by asking herself whether as a matter of fact the B/L was inaccurate – see Award, paras. 77-84 – but without reference to either the “… legal effect of the statement …” that was said to be inaccurate or “ … by whom it is made…“. The danger of this approach is apparent from the hypothetical example the Arbitrator gave in support of her conclusion that as a matter of fact the B/L was inaccurate namely that:

“…if there was fog that disabled the crew (on the deck) from seeing the defective condition of the cargo but others standing by (on the quay or at the loading terminal) such as shippers could see better, the cargo is still not as a matter of fact in apparent good order and condition.”

Question (iii)

    1. The claimant and defendant’s contract was contained in the Charterparty. It incorporated the HR. The HR makes specific provision for what indemnities apply as I have explained already. The scheme of the HR is to impose on a charterer an express indemnity obligation in respect of information furnished by the charterer. The scheme does not provide for such an obligation in relation to statements concerning apparent order and condition of cargo. That was a deliberate omission for the reasons I have explained. In those circumstances there is no room for the implication of an implied guarantee or warranty.
    2. The principles applicable to the implication of terms were comprehensively set out by the Supreme Court in Marks and Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Limited [2015] UKSC 72; [2016] AC 742 and applied in Ali v. Petroleum Company of Trinidad and Tobago [2017] UKPC 2; [2017] ICR 531. In summary, terms are to be implied only if to do so is necessary in order to give the contract business efficacy or was so obvious that it goes without saying. As was made clear by all the judgments in Marks and Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Limited (ibid.) and emphasised by Lord Hughes in Ali v. Petroleum Company of Trinidad and Tobago (ibid.) at paragraph 7, the ” … concept of necessity must not be watered down. Necessity is not established by showing that the contract would be improved by the addition. The fairness or equity of a suggested implied term is an essential but not a sufficient precondition for inclusion.” As he also added:

” … if there is an express term in the contract which is inconsistent with the proposed implied term, the latter cannot, by definition, meet these tests, since the parties have demonstrated that it is not their agreement.”

or as Fancourt J put it in UTB LLC v. Sheffield United Limited [2019] 2322 (Ch) at paragraph 203: ” … the principle [is] that (as restated in the Marks and Spencer case) no term may be implied into a contract if it would be inconsistent with an express term“. This is in substance no different from the approach identified some 80 years earlier by Greer LJ – see Dawson Line Limited v. Aktiengesellschaft Adler Fuer Chemische Industrie of Berlin [1932] 1 KB 433 at 440.

    1. Finally, recent cases have emphasised the need for particular care when considering implying terms into a sophisticated and professionally drawn and negotiated agreement between well-resourced parties. The reason for this is obvious. Where an issue has been left unresolved, it is much more likely to be the result of choice rather than error. This point was one emphasised in Marks and Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Limited (ibid.) and most recently by Fancourt J in UTB LLC v. Sheffield United Limited (ibid.) who summarised the applicable principle as being that where ” … detailed, professionally-drawn contracts exist, it is more difficult to imply terms because there is a strong inference that the parties have given careful consideration to all the terms by which they agree to be bound (though the test for implying terms remains the same)“. In my judgment this approach applies with equal force to contracts that incorporate standard forms or wordings contained in provisions such as the HR which are the result of careful consideration over a number of years by experienced industry professionals.
    2. Applying those principles to the Charterparty leads me to conclude that it would be wrong in principle to attempt to imply into this contract a provision that makes the claimant liable by implication to indemnify the defendant when the drafters of the HR could have but decided not to provide expressly for such a provision.
    3. In arriving at the contrary conclusion, the Arbitrator relied on the decision of the House of Lords in Elder, Dempster and Co v. C.G Dunn and Co (1909) 15 Com.Cas. 49, but in my judgment she was wrong to do so for two reasons. First, that case was not concerned with a contract that incorporated the HR and secondly, that case was concerned with marks on a cargo of cotton bales, which had been supplied by the charterers to the master. That is the sort of case where, under the HR, a charterer would be liable to the shipowner. It does not assist in an apparent condition case.
    4. The other authority relied on by the authors of the text book from which the Arbitrator quotes in paragraph 117 of the Award is Dawson Line Limited v. Aktiengesellschaft Adler Fuer Chemische Industrie of Berlin (ibid.) but again that case does not support the conclusions of the Arbitrator for the same two reasons that Elder Dempster (ibid.) does not support it. That case was not concerned with a charterparty to which the HR applied but secondly it was a case concerned with weights as set out in the bills of lading concerned. As Scrutton LJ observed at 439, on the facts of that case “… the master was required to sign the bill of lading as presented to him, the charterers were bound to present an accurate bill of lading as to the weight shipped. The shippers were the charterers’ agent to supply the cargo and present the bill of lading; they presented an inaccurate bill of lading with consequent loss. The charterers must therefore make good that loss.” That is the same outcome as would occur applying the HR referred to earlier because the issue that arose concerned weights furnished by the shippers as the charter’s agent. The key point is that there as under the HR ” … the charterers were bound to present an accurate bill of lading as to the weight shipped …” [Emphasis Supplied]. As Greer LJ said at 440, having considered earlier cases including Elder, Dempster and Co v. C.G Dunn and Co (ibid.) they meant no more than:

“… if the charterer or some person for whom he is responsible, presents a bill of lading to the master which the latter is bound to sign as part of the terms of the contract, there may be implied from the act of presenting the bill … taken together with the terms of the contract, a warranty of the correctness of the figures, description, or marks stated in the bill …”

Slesser LJ agreed with Greer LJ – see page 442. The analysis of the majority provides no assistance in an apparent condition case, much less one to which the HR applies, because as I have said more than once, the master is not bound to sign a bill containing a statement as to apparent condition in the terms it is tendered but is obliged to carry out his own reasonable verification of condition.

    1. Although the Arbitrator relied on The Nogar Marin [1988] 1 Lloyds Rep 412 – see paragraph 122 of the Award – in my judgment that reliance was misplaced. That case was concerned with a claim by the owner against the charterer for an indemnity in respect of a claim against it by the receiver of goods carried on the owner’s ship. The cargo was wire rods in coils and on arrival were found to be rusty. As between the receivers and the shipowner, it was found that the damage occurred before shipment and that the master had been negligent in failing to record that fact on the mate’s receipt for the cargo. The owners contended that there was an implied right to an indemnity from the charterer against liability under bills of lading signed at the request of the charterers that stated the condition of the goods on shipment inaccurately. The claim failed before the arbitrators, and at first instance. The Court of Appeal dismissed the appeal. Mustill LJ delivered the judgment of the Court of Appeal. The Court of Appeal rejected the suggestion that there is invariably an implied term of a charterparty that the bill as presented will correctly state the apparent condition of the cargo – see 420 RHC. It added at 421 RHC:

“… we cannot see the point of the suggested term. Two situations may be envisaged. First the defects in the goods are not such as to be apparent on reasonable inspection at the point of shipment. It is a common place that in such a situation the signature of the bill of lading without qualification does not preclude the owners from establishing the true condition of the goods. Thus there is no enhanced exposure beyond that which existed under the charter and no need for an implied term to protect the owners against it … “

In relation to the claim for an implied indemnity under the charter, that was rejected in these terms at 422:

“It seems to us plain and the authorities leave us in no doubt that the implication of an obligation to indemnify is not automatic. It must always depend on the facts of the individual case and on the terms of any underlying contractual relationship. The first step is always to [identify] the express or implied request [to the person seeking the indemnity to act in a particular way] by the person called upon to indemnify. Here, if the request is to be understood as meaning ‘Kindly sign this bill, just as it stands, with its acknowledgement of receipt in apparent good order and condition’ the claim for an indemnity must be sound for the agents did precisely what they were asked … In the present case we do not regard this as a correct reading of what happened. Everyone in the shipping trade knows that the master need not sign a clean bill just because one is tendered; everyone knows that it is the master’s task to verify the condition of the goods before he signs. This being so, we cannot understand the request implicit in the tender as being more than this: ‘The charter requires you to bind your owners to the contract of carriage contained in the bill of lading and please do so. The bill of lading also constitutes a receipt, and please sign it as such, with whatever appropriate qualifications you may think fit’. If this is the right account of the transaction, as we believe it to be, the claim for an indemnity must fail.”

The reason for this distinction is that identified by the Court of Appeal at 417 LHC – where something is done by one party at the request of another which is not manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to a third party, the person doing the act is generally entitled to an indemnity from the person who requested that it should be done. This test is satisfied by a request in the terms of the first request identified by the Court of Appeal but not the second because in the latter case there is an intervening act between the request and the response (the independent reasonable inspection by the master or the failure of the master to carry out such an inspection as he should) that breaks the causal link between the request and the act of the person requested to act.

    1. There is no material difference between the situation referred to by the Court of Appeal and this case. The knowledge of everyone in the shipping trade referred to by the Court of Appeal has not changed. There is nothing in the circumstances of this case that moves the implicit request made by the tendering of the draft B/L towards the first of the requests identified by the Court of Appeal in the quotation set out above. The tenor of the request in cases such as Dawson Line (ibid.) is similar to the first type of request identified by the Court of Appeal but is not so where the shipper or charterer requests a representation as to the apparent condition of the cargo because the request is not to sign a bill that contains a statement furnished by the shipper or charterer but is a request to make a representation as to the apparent condition of the cargo having taken reasonable steps to verify the condition of the cargo.
    2. Finally, in paragraph 122 of the Award, the Arbitrator stated first that the Shippers “… must be taken to be the agents for the [Claimant] for the purposes of supplying the cargo and presenting the bill of lading to the [Master] for signature” and “… the [claimant] should therefore be liable for the consequences of the shippers’ acts in this situation; it would otherwise leave the [defendant] without recourse and without protection from the wrongs of parties who were on the [claimant’s] side of the line“. In my judgment these conclusions are wrong. The conclusion that the Shipper was the agent of the claimant is based on Scrutton LJ’s conclusion in Dawson (ibid.) that in that case the ” … shippers were the charterers’ agent to supply the cargo and present the bill of lading …” – see the extract quoted in paragraph 31 above. However, that is not material to the facts of this case. In that case as Scrutton LJ said in the same passage ” … the charterers were bound to present an accurate bill of lading as to the weight shipped …“. The charterers were liable on the facts of that case because their agent for the purpose of presenting the bill of lading ” … presented an inaccurate bill of lading with consequent loss …“. That was so because as I have explained above in detail there is a fundamental difference between the responsibility that falls to a charterer in respect of information supplied by or on behalf of the charterer such as the weight of the cargo and the position in relation to apparent condition. In the former case the master is bound to accept what the charterer or its agent the shipper says. That is not so in relation to the apparent condition issue because as Mustill LJ said in The Nogar Marin (ibid.) at 422 RHC namely ” … everyone in the shipping trade knows that the master need not sign a clean bill just because one is tendered; everyone knows that it is the master’s task to verify the condition of the goods before he signs …”
    3. The Arbitrator’s concern that the defendant would be left without recourse was misplaced because its liability did not and could not arise as a result of the wrongs of anyone on the charterer’s “… side of the line” because its liability to the Shipowner was the result of its decision to pay the Shipowner rather than defend the claim by reference to the true condition of the goods. There is nothing unfair, unjust, uncommercial or unconscionable about an outcome that leaves ultimate liability with the defendant because there was no misrepresentation, no evidence or finding that the Master had acted on the alleged misrepresentation rather than, or even as well as, attempting to and/or being unable reasonably to verify the condition of the goods before his agents signed the B/L and because it decided to pay the Shipowner.
    4. The Answer to Question (iii)

It follows from my answers to Questions (i) and (ii) and for the further reasons set out above, that the answer to Question (iii) is “no”.

Eiser Infrastructure Ltd v Kingdom of Spain [2020] FCA 157

FEDERAL COURT OF AUSTRALIA 

Eiser Infrastructure Ltd v Kingdom of Spain [2020] FCA 157

File numbers: NSD 601 of 2019
NSD 602 of 2019
Judge: STEWART J
Date of judgment: 24 February 2020
Catchwords:

ARBITRATION – international arbitration – applications for recognition and enforcement of awards of the International Centre for Settlement of Investment Disputes (ICSID) under s 35(4) of the International Arbitration Act 1974 (Cth)

PRIVATE INTERNATIONAL LAW – foreign state immunity – where foreign state respondent asserts sovereign immunity – interaction between s 9 of the Foreign States Immunities Act 1985 (Cth) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Investment Convention) which is given the force of law by s 32 of the Arbitration Act – where s 9 of the Immunities Act provides that a foreign state is immune from the jurisdiction of the courts of Australia in a proceeding – where Art 54 of the Investment Convention provides that each Contracting State shall recognise an award rendered pursuant to the Investment Convention as binding and enforce the pecuniary obligations imposed by that award as if it were a final judgment of a court of that state – whether the apparent inconsistency between Art 54 of the Investment Convention and s 9 of the Immunities Act can be resolved – whether submission to jurisdiction under s 10 of the Immunities Act

PRIVATE INTERNATIONAL LAW – foreign state immunity – interpretation of the Investment Convention – whether the Investment Convention excludes any claim for foreign state immunity in proceedings for the recognition and enforcement of an award – distinction between recognition and enforcement of award as if it were a final judgment of a court under Art 54(1) and execution of an award in Art 54(3) of the Investment Convention – where Art 55 provides that nothing in Art 54 shall be construed as derogating from the law in force in relation to immunity from execution

STATUTORY INTERPRETATION – public international law – Vienna Convention on the Law of Treaties – construction of the Investment Convention – reconciling the English, French and Spanish authentic texts

 

ORDERS

THE COURT ORDERS THAT:

1.           The applicants have leave under s 35(4) of the International Arbitration Act 1974 (Cth) to enforce the award of the International Centre for Settlement of Investment Disputes dated 4 May 2017 in Case No. ARB/13/36 against the respondent;

2.           The respondent pay the applicants €128,000,000;

3.           The respondent pay the applicants interest on €128,000,000 from 20 June 2014 to 4 May 2017 at the rate of 2.07%, compounded monthly, and from 5 May 2017 to the date of payment at the rate of 2.50%, compounded monthly;

4.           The respondent pay the applicants’ costs of the proceeding, save that if any party wishes to vary this order 4 it may apply to do so by filing an interlocutory application to that effect with written submissions of no more than three pages within 14 days of the making of these orders.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

NSD 602 of 2019
BETWEEN:

INFRASTRUCTURE SERVICES LUXEMBOURG S.A.R.L.

First Applicant

 

ENERGIA TERMOSOLAR B.V.
Second Applicant

 

AND:

KINGDOM OF SPAIN

Respondent

 

 

JUDGE:

STEWART J

DATE OF ORDER:

24 FEBRUARY 2020

THE COURT ORDERS THAT:

 

1.           The applicants have leave under s 35(4) of the International Arbitration Act 1974 (Cth) to enforce the award of the International Centre for Settlement of Investment Disputes dated 15 June 2018 as rectified by the award dated 29 January 2019 in Case No. ARB/13/31 against the respondent;

2.           The respondent pay the applicants €101,000,000;

3.           The respondent pay the applicants interest on €101,000,000 from 20 June 2014 to 15 June 2018 at the rate of 2.07%, compounded monthly, and from 16 June 2018 to the date of payment at the rate of 2.50%, compounded monthly;

4.           The respondent pay the applicants US$635,431.70 and £2,447,008.61;

5.           The respondent pay the applicants’ costs of the proceeding, save that if any party wishes to vary this order 5 it may apply to do so by filing an interlocutory application to that effect with written submissions of no more than three pages within 14 days of the making of these orders.

 

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

 

REASONS FOR JUDGMENT

STEWART J:

INTRODUCTION

[1]

BACKGROUND

[4]

The relief sought

[4]

Background to NSD601

[9]

The ECT

[12]

The ICSID arbitration

[16]

Spain’s application for annulment of the Award

[21]

Background to NSD602

[25]

The ICSID arbitration

[27]

Spain’s request for rectification of the Award

[30]

Spain’s application for annulment of the award and the stay of the enforcement proceeding

[32]

THE PROCEEDINGS IN THIS COURT

[37]

Spain’s immunity claim

[37]

The applicants’ case on immunity

[39]

THE IMMUNITIES ACT

[44]

The ALRC Report

[44]

Part II – Immunity from jurisdiction

[46]

Part IV – Enforcement

[59]

THE ARBITRATION ACT AND THE INVESTMENT CONVENTION

[68]

The Arbitration Act

[68]

The Investment Convention

[79]

Interpretation of the Investment Convention

[83]

DISTINCTION BETWEEN ENFORCEMENT AND EXECUTION IN THE ARBITRATION ACT AND THE INVESTMENT CONVENTION

[89]

Some terminology

[89]

The English text of Arts 53-55 of the Investment Convention

[95]

Object and purpose

[114]

The preparatory materials

[117]

The French and Spanish texts of Arts 53-55

[136]

Commentary on the Investment Convention

[145]

The foreign cases

[162]

Conclusion

[173]

SUBMISSION TO JURISDICTION

[177]

SECTION 34 OF THE ARBITRATION ACT

[202]

IMPLIED REPEAL

[204]

CONCLUSION

[209]

 

INTRODUCTION

  1. These two cases concern the interaction of the Foreign States Immunities Act 1985 (Cth) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature 18 March 1965, 575 UNTS 159 (entered into force 14 October 1966) (the Investment Convention) which is given the force of law by s 32 of the International Arbitration Act 1974 (Cth). Section 9 of the Immunities Act provides that a foreign state is immune from the jurisdiction of the courts of Australia in a proceeding, but Art 54 of the Investment Convention provides that each Contracting State, which includes Australia, shall recognise an award rendered pursuant to the Investment Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that state.  The question is whether the apparent inconsistency between these provisions can be resolved.
  2. Put differently, is a foreign state immune from the recognition and enforcement of an arbitral award made under the Investment Convention notwithstanding that the Investment Convention inherently envisages arbitration awards being made against foreign states and it provides that such awards “shall” be recognised and enforced by Australian courts?
  3. That question arises from the fact that the applicants in each case have substantial arbitral awards in their favour against the respondent, the Kingdom of Spain, which they seek to have recognised and to enforce by way of judgment in terms of the awards.  Spain relies on foreign state immunity to resist that.  The awards were issued by tribunals appointed under the auspices of the International Centre for the Settlement of Investment Disputes (or ICSID) which is established under the Investment Convention.

    BACKGROUND

    The relief sought

  4. In case NSD601/2019, the two applicants, Eiser Infrastructure Ltd, which is incorporated in England and Wales, and Energia Solar Luxembourg S.à.r.l., which is incorporated in Luxembourg, seek the following relief against Spain:

    (1)          Pursuant to s 35(4) of the Arbitration Act, the applicants have leave to have the award of the Centre in Case No. ARB/13/36 against Spain dated 4 May 2017 enforced as if it were a judgment of the Court.

    (2)          Spain pay the applicants €128,000,000.00.

    (3)          Spain pay the applicants interest on the amount of €128,000,000.00 from 20 June 2014 to 4 May 2017 at the rate of 2.07%, compounded monthly, and interest from 5 May 2017 to the date of payment at the rate of 2.50%, compounded monthly.

    (4)          Pursuant to s 43(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), Spain is to pay the applicants’ costs of this proceeding as agreed or assessed.

  5. In case NSD602/2019, the two applicants, Infrastructure Services Luxembourg S.à.r.l., which is incorporated in Luxembourg, and Energia Termosolar BV, which is incorporated in the Netherlands, seek the following relief against Spain:

    (1)          Pursuant to s 35(4) of the Arbitration Act, the applicants have leave to have the award of the Centre in Case No. ARB/13/31 against Spain dated 15 June 2018 as rectified by the award dated 29 January 2019 enforced as if it were a judgment of the Court.

    (2)          Spain pay the applicants €101,000,000.00.

    (3)          Spain pay the applicants interest on the amount of €101,000,000.00 from 20 June 2014 to 15 June 2018 at the rate of 2.07%, compounded monthly, and interest from 16 June 2018 to the date of payment at the rate of 2.07%, compounded monthly.

    (4)          Spain pay the applicants US$635,431.70 as a contribution to the payment of their share of the costs of the proceedings and £2,447,008.61 as a contribution to the payment of their legal representation costs and expenses.

    (5)          Pursuant to s 43(1) of the FCA Act, Spain is to pay the applicants’ costs of this proceeding as agreed or assessed.

  6. In short, in both cases the applicants seek, under s 35 of the Arbitration Act, the recognition and enforcement of arbitration awards in their favour by converting them into judgments of the Court.  They do not, at least not at this stage, seek to execute on the judgments.  The distinction between recognition and enforcement, on the one hand, and execution on the other, is central to these reasons.
  7. The underlying dispute in both proceedings arose from the applicants’ investment in solar power projects in Spain and, as it was found in the arbitrations that gave rise to the awards, Spain’s failure to accord fair and equitable treatment to the applicants’ investments, in breach of Art 10(1) of The Energy Charter Treaty (ECT), opened for signature 17 December 1994, 2080 UNTS 95 (entered into force 16 April 1998).
  8. The background facts set out below in relation to each proceeding are summarised from the arbitration award in each case.

    Background to NSD601

  9. From 1997, Spain adopted a series of regulatory measures aimed at promoting the development of solar power and other sources of renewable energy.  In particular, in 2007 Spain adopted legislation known as “RD 661/2007” aimed at establishing a stable subsidy system that guaranteed attractive profitability for electricity production from solar power and other renewable resources.
  10. Relying on the financial incentives and inducements available to the applicants under this legislative regime, the applicants invested approximately €126 million in solar power projects in Spain’s territory.
  11. Following a change in government, Spain adopted a series of laws between 2012 and 2014 reducing, and eventually revoking, the financial incentives on which the applicants had relied when making their investments in Spain.  The new measures adopted by Spain were intended to, and did, accomplish the objective of significantly reducing the level of subsidies paid to solar power and other renewable energy generators.  The changes in Spain’s legislative regime caused substantial harm to the value of the applicants’ investments.

    The ECT

  1. The ECT is a multilateral treaty which was opened for signature in 1994 and entered into force in 1998.  According to Art 2 of the ECT, its purpose is to establish a legal framework in order to promote long-term cooperation in the energy field, based on “complementarities and mutual benefits” in accordance with the objectives and principles of the European Energy Charter (adopted in the Concluding Document of the Hague Conference on the European Energy Charter signed at The Hague on 17 December 1991).
  2. Article 10(1) of the ECT obliges Contracting Parties to encourage and create stable, equitable, favourable and transparent conditions for investors of other contracting parties, including to accord to their investments fair and equitable treatment.
  3. Article 26 of the ECT provides for dispute resolution mechanisms which include, at the option of an Investor (as defined in Art 1(7) of the ECT) in certain circumstances, arbitration under the auspices of the Centre pursuant to the Investment Convention. I will return to the specifics of this mechanism when I consider the applicants’ argument that Spain submitted to the jurisdiction of this Court, amongst others, for recognition and enforcement of the awards in this case and thereby waived any reliance on foreign state immunity. See at [178]-[179] below.
  4. In the meanwhile, it can be noted that Spain is a Contracting Party to the ECT and a Contracting State to the Investment Convention.  The applicants are Investors under the ECT and are incorporated in countries that are Contracting Parties to the ECT and Contracting States to the Investment Convention.  Australia is also a signatory to the ECT, although it has not ratified it.  By Arts 38 and 39 of the ECT, signature alone is not sufficient to cause a state to be bound by the ECT.  See G Korontzis, “Making the Treaty” in D Hollis (ed.) The Oxford Guide to Treaties (Oxford University Press, 2012) 195-201.

    The ICSID arbitration

  5. In December 2013, the applicants commenced arbitration proceedings under the auspices of the Centre.  ICSID case number ARB/13/36 was allocated to the proceeding.  In summary, the applicants contended that Spain’s legislative actions that resulted in the diminution of the value of their investments constituted a breach of its obligation under Art 10(1) of the ECT to provide fair and equitable treatment.  A three-member tribunal was established.
  6. The tribunal conducted a “Hearing on Jurisdiction and the Merits” in Paris, France, in February 2016.  The applicants and Spain both took an active part in the arbitration at all stages.
  7. The tribunal issued its award on 4 May 2017, finding that:

    (1)          it had jurisdiction to determine the claim under the ECT and the Investment Convention; and

    (2)          Spain had breached Art 10(1) of the ECT by failing to accord fair and equitable treatment to the applicants’ investments.

  8. The award requires Spain to pay the applicants:

    (1)          €128,000,000 as compensation; and

    (2)          Interest on the sum awarded from 20 June 2014 to 4 May 2017 at the rate of 2.07%, compounded monthly, and interest at the rate of 2.5% from 5 May 2017 until the date of payment, compounded monthly.

  9. The tribunal decided that each party should bear its own costs.

    Spain’s application for annulment of the Award

  10. Following publication of the award, Spain made an application to the Centre for annulment of the award, including a stay of enforcement.  Article 52 of the Investment Convention provides for either party to an arbitration to request annulment of the award issued by the tribunal on one or more specified grounds, but not by way of a review of the merits of the award.  In July 2017, the Secretary-General of the Centre provisionally stayed the enforcement of the award as required under the Art 52(5) of the Investment Convention and r 54(2) of the ICSID Rules of Procedure for Arbitration Proceedings 2006 (ICSID Arbitration Rules) pending the appointment of the Annulment Committee.
  11. In March 2018, the Annulment Committee issued a decision not to continue the stay of enforcement of the award pending its decision on annulment.  Spain made a subsequent application to stay the award but that was rejected by the Annulment Committee with the result that the stay remained terminated as from 23 March 2018.
  12. In March 2019, the Annulment Committee held a hearing on annulment in Paris, France.  As at the date of the hearing in this Court, no decision had yet been issued on Spain’s annulment application.  However, the Committee’s decision not to continue the stay on enforcement of the award means that there is no obstacle (in this respect) to the recognition and enforcement of the award by this Court.
  13. Thus far, Spain has failed to comply with the award in whole or in part.  In other words, nothing has been paid by Spain to the applicants in discharge of the award.  The reasons for Spain not having paid and the applicants seeking enforcement in Australia rather than Spain were not canvassed, and are not presently relevant.  They may be related to the controversy arising from the judgment of the Court of Justice of the European Union in Slovak Republic v Achmea BV [2018] 4 WLR 87. The ECJ held (at [60]) that the Treaty on the Functioning of the European Union precludes a provision in an international agreement concluded between Member States under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.

    Background to NSD602

  14. The underlying dispute in this proceeding concerns the same factual scenario as in NSD601 outlined at [9]-[11] above. The only material difference between the matters for present purposes is that the applicants in NSD602 invested approximately €139.5 million in solar power projects in Spain’s territory.
  15. As outlined above (at [15]), Spain is a Contracting Party to the ECT and the Investment Convention. The applicants are Investors under the ECT and are incorporated in countries that are Contracting Parties to the ECT and the Investment Convention.

    The ICSID arbitration

  16. In November 2013, the applicants commenced arbitration proceedings against Spain under the auspices of the Centre.  ICSID case number ARB/13/31 was allocated to the proceeding.  The duly constituted three-member arbitral tribunal – constituted differently from the tribunal in the other case – conducted a hearing on jurisdiction and the merits in Paris, France, in October 2016.  The applicants and Spain both took an active part in the arbitration at all stages.
  17. On 15 June 2018, the arbitral tribunal issued an award, finding that:

    (1)          It had jurisdiction to determine the claim under the ECT and the Investment Convention; and

    (2)          Spain had breached Article 10(1) of the ECT by failing to accord fair and equitable treatment to the applicants’ investments.

  18. The award required Spain to pay the applicants:

    (1)          €112,000,000 as compensation;

    (2)          Interest on the sum awarded from 20 June 2014 to 15 June 2018 at the rate of 2.07%, compounded monthly, and interest at the rate of 2.07% from 16 June 2018 until the date of payment, compounded monthly; and

    (3)          US$635,431.70 as a contribution to the payment of the applicants’ share of the costs of the arbitral proceeding and £2,447,008.61 as a contribution to the payment of the applicants’ legal representation costs and expenses.

    Spain’s request for rectification of the Award

  19. In July 2018, Spain applied to the tribunal for rectification of the award in accordance with Art 49 of the Investment Convention and r 49 of the ICSID Arbitration Rules.  Spain contended that the tribunal had made a clerical error in the computation of the compensation.
  20. The tribunal issued its decision on rectification of the award on 29 January 2019.  The tribunal rectified certain paragraphs of the award with the effect of reducing the award of compensation in favour of the applicants by €11 million to €101 million. The award must now be read in light of the rectification decision.  The applicants only seek enforcement of the award as rectified.

    Spain’s application for annulment of the award and the stay of the enforcement proceeding

  21. In May 2019, Spain applied to the Centre for the annulment of the award and requested a stay of the enforcement of the award.  The Secretary-General granted an automatic provisional stay of enforcement of the award as required under the Art 52(5) of the Investment Convention and r 54(2) of the ICSID Arbitration Rules. These matters are dealt with in Infrastructure Services Luxembourg S.A.R.L v Kingdom of Spain [2019] FCA 1220 in which I stayed proceeding NSD602 because of the provisional stay on the enforcement of the award.
  22. On 21 October 2019, the ad hoc committee hearing Spain’s application for annulment of the award issued its decision discontinuing the provisional stay of enforcement of the award.
  23. On 25 October 2019, the applicants applied to the Court to lift the stay on the proceeding in this Court and also sought orders that the proceeding be heard substantively and concurrently with proceeding NSD601 which was listed for hearing four days’ later.  Spain indicated, through correspondence, that it would neither object nor consent to the orders that were sought by the applicants.  On that basis, I made orders lifting the stay of the proceeding and dealing with ancillary matters, including that this matter be listed for final hearing concurrently with proceeding NSD601 on 29 October 2019.
  24. At the hearing, senior counsel for Spain confirmed that Spain took no issue with the two matters being heard together on that day.  Indeed, Spain had previously contended that the two matters should be heard together on the immunity point even if enforcement of the award in NSD602 was still stayed.
  25. As at the date of the hearing, no hearing had yet been held on Spain’s annulment application and Spain has failed to comply with the award in whole or in part.

    THE PROCEEDINGS IN THIS COURT

    Spain’s immunity claim

  26. In both proceedings in this Court, Spain has appeared conditionally to assert foreign state immunity in reliance on s 9 of the Immunities Act.  It asserts that it is immune from the jurisdiction of the Court in the proceedings in which money judgments of the Court are sought against it.  Its ability to appear and assert immunity, and to claim the costs of doing so, is protected from amounting to a submission to jurisdiction by s 10(7) of the Immunities Act.
  27. Spain asserts, and the applicants accept, that since Spain has invoked immunity that question must be decided as a preliminary issue before the substantive applications can proceed to be determined.  That is clearly correct: Zhang v Zemin [2010] NSWCA 255; 79 NSWLR 513 per Spigelman CJ at [33]-[35] with Allsop P at [157] and McClellan CJ at CL at [174] agreeing; PT Garuda Indonesia Ltd v ACCC [2012] HCA 33; 247 CLR 240 per French CJ, Gummow, Hayne and Crennan JJ at [22]. However, Spain has identified that its only objection or defence to the applications that it wishes to assert is immunity. Therefore, if I find that Spain is not immune and I am otherwise satisfied that the applicants have made out their cases, it will be proper to go on to grant the relief that is sought.

    The applicants’ case on immunity

  28. On the face of it, at least, Spain is entitled to immunity from the applicants’ suits in reliance on s 9 of the Immunities Act.  The applicants’ case to avoid this as the ultimate conclusion can be summarised as follows.
  29. As a foundational argument, the applicants submit that the Investment Convention excludes any claim for foreign state immunity in proceedings for the recognition and enforcement of an award, as opposed to in relation to any steps to execute upon a judgment that recognises and enforces such an award.  This arises principally from the distinction between the recognition of an award as binding and the enforcement of the pecuniary obligations imposed by the award as if it were a final judgment of a court as referred to in Art 54(1), on the one hand, and the execution of an award in Art 54(3), on the other.  It rests also on Art 55 that provides that nothing in Art 54 shall be construed as derogating from the law in force relating to immunity from execution, without reference to recognition or enforcement.
  30. In summary, Spain submits in response that the foundational argument must fail principally on the basis that the French and Spanish versions of the Investment Convention draw no distinction between recognition/enforcement, on the one hand, and execution, on the other.  Properly interpreted, Spain submits, the Investment Convention makes no such distinction with the result that Art 55 expressly preserves the operation of domestic law on foreign state immunity in relation to the enforcement that the applicants seek.
  31. If the applicants’ foundational argument is correct, then there is on the face of it an inconsistency between the immunity conferred by s 9 of the Immunities Act and the exclusion of such immunity in relation to the recognition and enforcement of ICSID arbitration awards under the Arbitration Act.  The applicants advance three alternative arguments for the resolution of that apparent inconsistency:

    ·            First, the applicants submit that by becoming a Contracting Party to the ECT and a Contracting State to the Investment Convention, Spain submitted to the jurisdiction of this Court within the meaning of s 10 of the Immunities Act and has to that extent waived the immunity provided for in s 9.

    ·            Second, the applicants submit that s 34 of the Arbitration Act, which excludes “other laws relating to the recognition and enforcement of arbitral awards”, has the effect that the Immunities Act simply does not apply at the recognition and enforcement stage under the Arbitration Act and the Investment Convention.

    ·            Third, the applicants submit that the relevant provisions of the Arbitration Act and the Investment Convention that are given the force of law, which were enacted after the Immunities Act, impliedly repealed the Immunities Act to the extent of the inconsistency.

  32. Before considering each of the arguments in more detail, it is convenient to identify relevant provisions of, and principles applicable to, the Immunities Act and the Arbitration Act and Investment Convention.

    THE IMMUNITIES ACT

    The ALRC Report

  33. The position of the law in Australia on foreign state immunity prior to the Immunities Act is set out comprehensively in the learned report of the Law Reform Commission, Foreign State Immunity, (Report No. 24, Australian Government Publishing Service, 1984) (the ALRC Report) that proposed legislation that became the Immunities Act.  The report has been described as “a useful source of instruction about the purpose of the [Immunities Act] or, in earlier terminology, about the mischief to which it was directed” (Zhang at [67] and [138] per Spigelman CJ) and as “valuable” and part of the context in which the Immunities Act must be interpreted (Zhang at [158] per Allsop P).
  34. In PT Garuda it was acknowledged that the ALRC Report identifies the purpose of the proposed Australian legislation that became the Immunities Act as being to reflect the more “restrictive view” of the common law immunity which had been taken in other countries and adopted in legislation (at [7] per French CJ, Gummow, Hayne and Crennan JJ).  This is as opposed to absolute immunity and is reflected in various exceptions to immunity set out in the Immunities Act.  See also Firebird Global Master Fund II Ltd v Republic of Nauru [2015] HCA 43; 258 CLR 31 at [5]-[6] and [173].

    Part II – Immunity from jurisdiction

  35. Part II of the Immunities Act is headed “Immunity from jurisdiction”, which is the subject with which it deals, as opposed to Pt IV which is headed “Enforcement”. I will return to Pt IV. In the meanwhile, Pt II opens with s 9 which is as follows:

    9  General immunity from jurisdiction

    Except as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding.

  36. Sections 10 to 22 then provide for exceptions to the general immunity from jurisdiction set out in s 9. Before turning to the exceptions, there are some important observations to make about s 9.
  37. By enacting Pt II, Parliament intended to remove the uncertainty in the state of both international law and the common law by creating, in s 9, an absolute immunity and providing, in subsequent sections, for a precise and complete list of exceptions: Zhang at [136] per Spigelman CJ. His Honour reasoned (at [137]) that the Act purports to cover the field and there is no room for international law to make up any deficiency which may appear in the law.
  38. Allsop P held (Zhang at [161]) that the Immunities Act is set against a background of lack of clarity at the time in the underlying principles of foreign state immunity.  It sought, by its terms, to lay down, as a matter of legislative expression, the extent and restrictions on the immunity.  It is not to be interpreted as “an instrument of plasticity”, including or not including immunity depending on the development of international law.
  39. In PT Garuda it was held (at [8]) that the general provision in s 9 is exhaustive of the common law and indicates that statute provides the sole basis for foreign state immunity in Australian courts. That position was reiterated in Firebird (at [5] per French CJ and Kiefel J and at [174] per Nettle and Gordon JJ).
  40. As opposed to subject matter jurisdiction, it is clear that in s 9 and elsewhere in the Immunities Act the term “jurisdiction” is used with reference to the amenability of a defendant to the process of Australian courts.  In PT Garuda it was held (at [17]) per French CJ, Gummow, Hayne and Crennan JJ that:

    The notion expressed by the term “immunity” is that the Australian courts are not to implead the foreign State, that is to say, will not by their process make the foreign State against its will a party to a legal proceeding.  Thus, the immunity may be understood as a freedom from liability to the imposition of duties by the process of Australian courts.

  41. See also Firebird at [35], [133]-[134] and [185].
  42. The term “proceeding” in s 9 refers to any application to a court in its civil jurisdiction for its intervention or action; that is, some method permitted by law for moving a court to do some act according to law. In the context of s 9 and foreign state immunity, it may be understood to refer to a process by which the jurisdiction of an Australian court is invoked, in which a foreign state is named as a party and in which judicial power may be exercised against the foreign state and its interests: Firebird at [36], [135] and [184]-[185].
  43. In Firebird it was held (at [47]-[49]) that an ex parte application for registration of a foreign judgment under the Foreign Judgments Act 1991 (Cth) is a “proceeding” within the meaning of s 9 of the Immunities Act.  The same must be true of an application to enforce an arbitration award under s 35 of the Arbitration Act. Unsurprisingly, it was common ground that each proceeding in this Court is a “proceeding” within the meaning of s 9.
  44. Of the various exceptions to foreign state immunity in Pt II of the Immunities Act, the only one relied on by the applicants is submission to jurisdiction in s 10 which relevantly provides as follows:

    10       Submission to jurisdiction

    (1)          A foreign State is not immune in a proceeding in which it has submitted to the jurisdiction in accordance with this section.

    (2)          A foreign State may submit to the jurisdiction at any time, whether by agreement or otherwise, but a foreign State shall not be taken to have so submitted by reason only that it is a party to an agreement the proper law of which is the law of Australia.

    (3)          A submission under subsection (2) may be subject to a specified limitation, condition or exclusion (whether in respect of remedies or otherwise).

    (4)          Without limiting any other power of a court to dismiss, stay or otherwise decline to hear and determine a proceeding, the court may dismiss, stay or otherwise decline to hear and determine a proceeding if it is satisfied that, by reason of the nature of a limitation, condition or exclusion to which a submission is subject (not being a limitation, condition or exclusion in respect of remedies), it is appropriate to do so.

    (5)          An agreement by a foreign State to waive its immunity under this Part has effect to waive that immunity and the waiver may not be withdrawn except in accordance with the terms of the agreement.

    (11)         In addition to any other person who has authority to submit, on behalf of a foreign State, to the jurisdiction:

    (a)          the person for the time being performing the functions of the head of the State’s diplomatic mission in Australia has that authority; and

    (b)           a person who has entered into a contract on behalf of and with the authority of the State has authority to submit in that contract, on behalf of the State, to the jurisdiction in respect of a proceeding arising out of the contract.

  1. In s 3(1) of the Immunities Act “agreement” is defined to mean an agreement in writing which includes “a treaty or other international agreement in writing”.  This is relevant because the applicants rely on Spain being a party to the ECT and the Investment Convention to found their case that Spain submitted to the jurisdiction of this Court under s 10.
  2. Although the applicants only rely on s 10 of the Immunities Act, Spain refers to s 17 in its submission that in a proceeding for the recognition or enforcement of an arbitration award against a state it is only the s 17 exception from foreign state immunity that can apply.  I will deal with that submission below (at [186]-[190]), but in the meanwhile it is pertinent to identify that s 17 deals with two distinct exceptions to immunity in respect of arbitrations to which a state is a party.  The first, in s 17(1), is in relation to the supervisory jurisdiction of a court in respect of such an arbitration.  It is not presently relevant.  The second, in s 17(2), is in respect of “a proceeding concerning the recognition as binding for any purpose, or for the enforcement, of an award made pursuant to the arbitration, wherever the award was made.”
  3. Section 17(2) provides an exception to immunity in a proceeding for recognition and enforcement only where, apart from when the parties agreed that immunity would nevertheless apply, the foreign state would not be immune in a proceeding concerning a transaction or event and the foreign state is a party to an agreement to submit to arbitration a dispute about that transaction or event.  That is to say, the foreign state will enjoy immunity from recognition and enforcement proceedings unless the foreign state would not be immune in a proceeding concerning the underlying transaction or event the subject of the award: Firebird at [205].

    Part IV – Enforcement

  4. As will be seen, Pt IV of the Immunities Act is also relevant to the applicants’ argument.  In that regard, s 7(4) provides that Pt IV only applies where, by virtue of a provision of Pt II, the foreign state is not immune from the jurisdiction of the courts of Australia in the proceeding concerned.  Thus, if no exception to immunity from jurisdiction applies – and in this case s 10 is the only exception that is relied on – then Pt IV will not apply.
  5. Pt IV of the Immunities Act relevantly provides as follows:

    Part IV—Enforcement

    30       Immunity from execution

    Except as provided by this Part, the property of a foreign State is not subject to any process or order (whether interim or final) of the courts of Australia for the satisfaction or enforcement of a judgment, order or arbitration award or, in Admiralty proceedings, for the arrest, detention or sale of the property.

  6. Section 31 then deals with “Waiver of immunity from execution”, s 32 with “Execution against commercial property” and s 33 with “Execution against immovable property etc.”. Section 34 deals with restrictions on penalties or fines being imposed on a foreign state or a person on behalf of a foreign state. Section 35, being the last section in Pt IV, deals with the application of Pt IV to separate entities of a foreign state.
  7. Contrary to what was submitted on behalf of Spain, the heading to s 30 (and the heading to each other section) forms part of the Act and can be referred to as an intrinsic aid to interpretation. That much is plain from s 13(1) of the Acts Interpretation Act 1901 (Cth) which provides that all material from and including the first section of an Act to the end of the last section of the Act, or the last Schedule to the Act if there is a Schedule, is part of the Act. See Pearce DC, Statutory Interpretation in Australia (9th ed., LexisNexis Butterworths, 2019) at [4.59] and [4.71]. The headings in a statute can be taken into consideration in determining the meaning of a provision where that provision is ambiguous, and may sometimes be of service in determining the scope of a provision, although the heading cannot limit the operation of a provision if its meaning is clear: Silk Bros Pty Ltd v State Electricity Commission (Vic) [1943] HCA 2; 67 CLR 1 at 16 per Latham CJ.
  8. It is quite apparent that the Immunities Act draws a distinction between immunity of a foreign state from jurisdiction, which is dealt with in Pt II, and immunity of property from execution of a judgment or arbitral award, which is dealt with in Pt IV.  That distinction is apparent from the substance of each of those Pts of the Immunities Act as well as from the headings to ss 30-33 all of which include the word “execution”.  Although s 30 uses the language of “satisfaction or enforcement” in respect of arbitral awards, it is “the property of a foreign State” that enjoys immunity.  Immunity of property from “enforcement” of an arbitral award can only operate with respect to the execution of a judgment on the award.  The arbitrators, whose jurisdiction arises from the consent of the parties, do not have powers of coercion in relation to property – their decisions can only have that effect through the means of enforcement by judgment of a court and then execution.
  9. The ALRC Report also makes the distinction clear.  It recognised (at xxi [32]) that “because questions of enforcement are controversial, and because the rules on jurisdictional immunity cannot simply be applied or transferred to this area, special provisions are necessary”.  It also recognised (at 11 [13]) that the practice of governments with regard to immunity draws a distinction between recognition and execution.  With reference to Art 55 of the Investment Convention, to which I shall return in some detail, the ALRC Report (at 12 [13] and fn 74) recognised that the Investment Convention also distinguishes between recognition and execution.
  10. The ALRC Report, in explaining its basic approach to its proposed legislation (at 35 [66]), acknowledged that immunity from jurisdiction and immunity from execution are connected but stated that there are sound practical reasons for treating them separately.  It recommended that the proposed legislation should treat them differently which was then reflected in its proposal that was ultimately adopted – separate chapters were to deal with “immunity from jurisdiction” and “immunity from execution”.
  11. The Explanatory Memorandum to the Foreign State Immunities Bill 1985 (Cth) that was proposed by the Law Reform Commission and which was adopted as the Immunities Act, which is in Appendix A to the ALRC Report, explains (at 138) that Pt IV “deals with the extent to which execution of a judgment can be levied against property of foreign states”.
  12. Thus, the heading “Enforcement” to Pt IV and the use of “enforcement” in s 30 must be understood to mean enforcement by way of execution rather than enforcement by way of recognition and judgment.  In other words, Pt IV deals with the enforcement of judgments of the courts (i.e. execution).  It does not deal with pre-execution jurisdiction which would include jurisdiction in proceedings for the enforcement by way of judgment on arbitral awards or foreign judgments.

    THE ARBITRATION ACT AND THE INVESTMENT CONVENTION

    The Arbitration Act

  13. Part IV of the Arbitration Act deals with the Investment Convention.  That is the only Part of the Arbitration Act that is relevant for present purposes.  It was inserted by the ICSID Implementation Act 1990 (Cth) in order to fulfil Australia’s obligations under the Investment Convention: Arbitration Act, s 2D(f).  The Investment Convention entered into force on 14 October 1966.  It was signed by Australia on 24 March 1975 (Arbitration Act, s 31(1)) and ratified on 2 May 1991.
  14. As explained in the Explanatory Memorandum to the ICSID Implementation Bill 1990 (Cth) (at 1), the Investment Convention establishes the Centre which provides facilities for arbitration or conciliation of investment disputes between states and nationals of other states under its auspices.  By providing this dispute resolution machinery, the Centre aims to improve the international investment climate and stimulate a larger flow of private international investment.
  15. Section 31(2) provides that except so far as the contrary intention appears, a word or expression used in Pt IV and in the Investment Convention has, in Pt IV, the same meaning as it has in the Investment Convention.
  16. Section 32 provides that subject to Pt IV, Chs II to VII of the Investment Convention have the force of law in Australia. As will be seen, Ch IV is particularly relevant to the present proceedings.
  17. Section 33(1) provides that an award is binding on a party to the investment dispute to which the award relates.  Section 33(2) provides that an award is not subject to any appeal or to any other remedy, otherwise than in accordance with the Investment Convention.
  18. Section 34 is in the following terms:

    34       Investment Convention awards to prevail over other laws

    Other laws relating to the recognition and enforcement of arbitral awards, including the provisions of Parts II and III, do not apply to:

    (a)       a dispute within the jurisdiction of the Centre; or

    (b)       an award under this Part.

  19. As will be recalled, the applicants submit that the combined effect of s 33(2) and s 34 is that the Immunities Act, which is said to be another law “relating to the recognition and enforcement of arbitral awards”, does not apply to their applications for the recognition and enforcement of the awards in their favour against Spain. I consider this submission at [202]-[203] below.
  20. Section 35 relevantly provides as follows:

    35      Recognition of awards

    (1)          The Supreme Court of each State and Territory is designated for the purposes of Article 54.

    (2)          An award may be enforced in the Supreme Court of a State or Territory with the leave of that court as if the award were a judgment or order of that court.

    (3)          The Federal Court of Australia is designated for the purposes of Article 54.

    (4)          An award may be enforced in the Federal Court of Australia with the leave of that court as if the award were a judgment or order of that court.

  21. Art 54 of the Investment Convention, which is quoted below (at [81]), deals with the recognition of awards and the enforcement of the pecuniary obligations of awards.  More specifically, Art 54(2) refers to courts being designated for the purposes of recognition and enforcement.  Thus, by s 35(3) of the Arbitration Act this Court is a designated court for the purposes of the enforcement of an award under Art 54 of the Investment Convention.
  22. Because of the operation of s 31(2) (see [70] above), the word “enforce” as used in ss 35(2) and 35(4) will have the same meaning as it has in the Investment Convention.
  23. In Australia, enforcement of an award under s 35(4) of the Arbitration Act and Art 54(1) of the Investment Convention “as if the award were a final judgment of a court” is done by making a judgment on the award.  That was held to be the case in respect of the similarly worded s 8(3) of the Arbitration Act in Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; 201 FCR 535 at [72] per Foster J. Steps must be taken to render the award as a judgment or order of the court. The judgment or order cannot differ in any material way from the terms of the decision of the tribunal as embodied in the award.

    The Investment Convention

  24. Sections 32-35 of the Arbitration Act give effect to what is referred to as the “closed” or “self-contained” system of remedies that parties can seek as set out in Arts 26, 27, 49(2) and 50-53 of the Investment Convention.  These provisions cover the entitlement of parties subject to a Centre award to apply for the interpretation, revision or annulment of the award.  Unlike under the 1958 New York Convention and the UNCITRAL Model Law, which are also given effect to by the Arbitration Act, the Investment Convention leaves no grounds for refusal of recognition and enforcement of a Centre award by national courts – not even on public policy grounds.
  25. As explained in the Explanatory Memorandum to the ICSID Implementation Bill 1990 (Cth) (at 7), a Centre award is not subject to any appeal or to any remedy apart from those provided for in the Investment Convention.  This ensures that the objectives of the Investment Convention will not be able to be frustrated through ancillary litigation.  Arbitration under the Investment Convention “is to the exclusion of any other remedy”.
  26. Section 6 of Ch IV of the Investment Convention contains the provisions critical to the present cases.  It is in the following terms:

    Recognition and Enforcement of the Award

    Article 53

    (1)   The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.

    (2)   For the purposes of this Section, “award” shall include any decision interpreting, revising or annulling such award pursuant to Articles 50, 51 or 52.

    Article 54

    (1)   Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state.

    (2)   A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary‑General. Each Contracting State shall notify the Secretary‑General of the designation of the competent court or other authority for this purpose and of any subsequent change in such designation.

    (3)   Execution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought.

    Article 55

    Nothing in Article 54 shall be construed as derogating from the law in force in any Contracting State relating to immunity of that State or of any foreign State from execution.

  27. In the testimonium (or formal words of conclusion) (Gardiner R, Treaty Interpretation (2nd ed, Oxford University Press, 2015), 85) at the end of the Investment Convention, after Art 75 and outside of any part of the Investment Convention that is given the force of law in Australia by s 32 of the Arbitration Act, it is recorded that the Convention was “done” at Washington “in the English, French and Spanish languages, all three texts being equally authentic”.  Spain relies on this provision to refer to the French and Spanish language texts of the Investment Convention in its submissions on the proper interpretation of the Investment Convention.

    Interpretation of the Investment Convention

  28. The proper approach to the construction of an international convention or treaty is to be found in the Vienna Convention on the Law of Treaties, opened for signature  23 May 1969, 1155 UNTS 331, [1974] ATS 2 (entered into force 27 January 1980).  Section 3 of Pt III deals with the interpretation of treaties.  It is relevantly in the following terms:

    Article 31.  GENERAL RULE OF INTERPRETATION

    1.            A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

    2.            The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

    (a)          Any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty;

    (b)          Any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

    3.        There shall be taken into account, together with the context:

    (a)          Any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

    (b)          Any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

    (c)           Any relevant rules of international law applicable in the relations between the parties.

    4.            A special meaning shall be given to a term if it is established that the parties so intended.

    Article 32. SUPPLEMENTARY MEANS OF INTERPRETATION

    Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

    (a)       Leaves the meaning ambiguous or obscure; or

    (b)       Leads to a result which is manifestly absurd or unreasonable.

    Article 33. INTERPRETATION OF TREATIES AUTHENTICATED IN TWO OR MORE LANGUAGES

    1.            When a treaty has been authenticated in two or more languages, the text is equally authoritative in each language, unless the treaty provides or the parties agree that, in case of divergence, a particular text shall prevail.

    2.            A version of the treaty in a language other than one of those in which the text was authenticated shall be considered an authentic text only if the treaty so provides or the parties so agree.

    3.            The terms of the treaty are presumed to have the same meaning in each authentic text.

    4.            Except where a particular text prevails in accordance with paragraph 1, when a comparison of the authentic texts discloses a difference of meaning which the application of articles 31 and 32 does not remove, the meaning which best reconciles the texts, having regard to the object and purpose of the treaty, shall be adopted.

  29. The effect of Art 31 of the Vienna Convention is that although primacy must be given to the written text of the Investment Convention, the context, object and purpose of the treaty must also be considered.  The need to give the text primacy in interpretation results from the tendency of multilateral treaties to be the product of compromises by the parties to such treaties.  However, treaties should be interpreted in a more liberal manner than ordinarily adopted by a court construing exclusively domestic legislation.  See Morrison v Peacock [2002] HCA 44; 210 CLR 274 at [16] per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ.
  30. The proper construction and interpretation of the Arbitration Act in respect of its implementation of the Investment Convention requires an understanding of the context of the Investment Convention and an understanding of the subjects of concern and debate leading to its formation.  This process assists in understanding the public policy lying behind the enactment of the Investment Convention into Australian municipal law.  See Comandate Marine Corporation v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; 157 FCR 45 at [191] per Finn, Finkelstein and Allsop JJ. Also, international treaties should be interpreted uniformly by contracting states with the result that it would be wrong to interpret the Investment Convention with reference to existing domestic law such as the Immunities ActPovey v Qantas Airways Ltd [2005] HCA 33; 216 ALR 427 at [25] and [32] per Gleeson CJ, Gummow, Hayne and Heydon JJ.
  31. Importantly, under Art 32 of the Vienna Convention, recourse to the preparatory materials is “supplementary” to the application of the techniques in Art 31 and is for the purpose of confirming the meaning resulting from the application of those techniques, or to determine the meaning when the interpretation according to Art 31 leaves the meaning ambiguous or obscure or leads to a result which is manifestly absurd or unreasonable.  See Li v Zhou [2014] NSWCA 176; 87 NSWLR 20 at [26].
  1. The parties are agreed that the fact that the testimonium is not part of those chapters of the Investment Convention that are given the force of law does not detract from the equal authenticity of the three texts and the application of Art 33 of the Vienna Convention.  The testimonium is part of the Investment Convention that was signed and ratified by Australia and Spain, and it forms part of the necessary context to any particular article that is being construed.  Reference must necessarily be made to that context under Art 31(2) of the Vienna Convention.
  2. I can now turn to consider the applicants’ foundational argument.

    DISTINCTION BETWEEN ENFORCEMENT AND EXECUTION IN THE ARBITRATION ACT AND THE INVESTMENT CONVENTION

    Some terminology

  3. There are three concepts at play here, namely recognition, enforcement and execution. Before turning to the text of the Investment Convention, it is useful to consider those concepts at a more general level in the context of arbitral law and practice.
  4. Recognition is a distinct and necessarily prior step to enforcement, but recognition and enforcement are closely linked: Briggs A, The Conflict of Laws (3rd ed, Oxford University Press, Clarendon Series, 2013) 140-141; Clarke v Fennoscandia Ltd [2007] UKHL 56; 2008 SC (HL) 122 at [18]-[23]. An award may be recognised without being “enforced” by a court: TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533 at [23]. Examples would be where an award is recognised as giving rise to res judicata, issue estoppel, cause of action estoppel or set-off, or as a claim in an insolvent estate. See Associated Electric and Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] UKPC 11; [2003] 1 WLR 1041 at [15] as an example of recognition by estoppel.
  5. An arbitral award is enforced through the means of the entering of a judgment on the award, either in the form of a money judgment for the amount of an award or for damages for failing to honour an award.  That form of enforcement by a court is an exercise of judicial power: TCL at [32]. There is some debate in the authorities as to whether an award can be enforced by means of a court making a declaration. See Tridon Australia Pty Ltd v ACD Tridon Inc [2004] NSWCA 146 and AED Oil Ltd v Puffin FPSO Ltd [2010] VSCA 37; 27 VR 22 at [18]-[20]. It is not necessary to enter upon that debate for present purposes because Art 54(3) of the Investment Convention requires the enforcement of only the pecuniary obligations of an award. That would seem to exclude declaratory awards, injunctions and orders for specific performance.
  6. An award cannot, however, be executed, in the sense of executed against the property of an award debtor, without first being converted into a judgment of a court: Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (No 2) [2011] FCA 206; 277 ALR 441 at [12]-[13]. Nevertheless, it is not a strain of language to refer to an award being enforced by way of execution.
  7. Thus, depending on the context, reference to the enforcement of an arbitral award can be used to mean the entering of a judgment on the award to the exclusion of execution or it can mean execution, or it can encompass both.
  8. Recognition and enforcement by judgment on the award is equivalent to what is referred to in civilian jurisdictions as exequatur (see Firebird at [47]-[48] and Briggs A, The Conflict of Laws (3rd ed, Oxford University Press, Clarendon Series, 2013), 139).

    The English text of Arts 53-55 of the Investment Convention

  9. As identified above (at [84]), the starting point in the task of construction of the Investment Convention is the text.
  10. Section 6 of Ch IV of the Investment Convention uses all three of the concepts recognition, enforcement and execution.  The heading to the section refers to recognition and enforcement.  Art 54(1) draws a distinction between recognition of an award and the enforcement of the pecuniary obligations of an award, but in its second sentence refers to the enforcement of an award generally, i.e. not qualified with reference to the pecuniary obligations of the award.  Art 54(2) refers to recognition or enforcement, which suggests that they are different although possibly overlapping.  As will be seen, the French and Spanish equivalent texts speak of recognition and enforcement.  That difference does not appear to have any significance in the present cases.
  11. Articles 54(3) and 55 then refer to execution only.  In Art 54(3) that is clearly in the context of post-judgment execution measures.  That much is clear from the reference being to “execution of judgments in force in the state”.  There can be no execution of judgments without there first being a judgment.  There is nothing to suggest that execution has a different meaning in Art 55 to what it has in Art 54(3) – use of the same word, in particular in such close proximity, and distinctly from the use of recognition and enforcement, would suggest that both uses are the same.
  12. Therefore, with reference to only the English text of the Investment Convention, there is a clear distinction drawn between recognition/enforcement and execution.  On that basis, Art 54(1) means that an award sounding in money (i.e. having “pecuniary obligations”) shall be recognised as binding and shall be enforced by the courts designated under Art 54(2) as if it were a judgment of the court.  Also, it is only the foreign state immunity law in relation to post-judgment execution that is preserved by Art 55 and there is no preservation of such immunity in relation to recognition or other forms of pre-execution enforcement – such preservation is inconsistent with the obligation on designated courts to enforce Centre awards under the Investment Convention.
  13. In Lahoud v The Democratic Republic of Congo [2017] FCA 982, Gleeson J (at [20]) held that Arts 54 and 55 expressly distinguish between an initial stage of recognition of an award and a final stage of execution, and that issues under domestic law relating to sovereign immunity might arise only in the latter stage. Her Honour also concluded (at [28]) that jurisdiction was not excluded by foreign state immunity on the basis that the respondent had submitted to the jurisdiction of the ICSID tribunals. However, because that case proceeded ex parte the arguments that have been raised before me were not raised before her Honour.
  14. Notwithstanding the authority that Lahoud clearly constitutes, I must independently consider and decide the arguments that have been presented and not follow Lahoud only in the event that I am persuaded that it is clearly wrong: La Macchia v Minister for Primary Industries and Energy [1992] FCA 673; 110 ALR 201 at 204 and Undershaft (No 1) Ltd v Federal Commissioner of Taxation [2009] FCA 41; 175 FCR 150 at [68]-[88]. Thus far in the analysis, Lahoud serves to confirm the approach that I have come to.
  15. Spain submits that this approach, which leaves no room to invoke foreign state immunity at the stage of recognition and enforcement of a Centre award, would have the effect of creating a new exception to the general immunity under s 9 of the Immunities Act.  It submits that there can be no such new exception and that the approach is therefore incorrect.
  16. That submission misses the point because the question of interaction with the Immunities Act only arises at the next stage of analysis.  As will be seen, the interpretation of the Investment Convention in the way in which I have identified does not create a new exception to foreign state immunity, but rather informs the inquiry whether, by becoming a signatory to the Investment Convention, Spain submitted to the jurisdiction of designated courts and therefore, in Australia, waived immunity under s 10 of the Immunities Act.
  17. Spain also submits that if the applicants’ contention, that the effect of Arts 54(3) and 55 is to limit consideration of immunity to the time after a Centre award is registered as a judgment, was accepted it would lead to an absurdity – the court would be engaged in an exercise in futility by converting a Centre award into a judgment only to have that judgment rendered unenforceable on the grounds of immunity when execution is sought.  Spain submits that, in other words, a “zombie judgment” is created and that it cannot have been the intention of the legislature to create a scheme in which the courts would participate in such an absurdity.
  18. That submission is wrong for two reasons.
  19. First, once again, the question of interaction with the Immunities Act arises only at the next stage of analysis.
  20. Secondly, because of the distinction in the Immunities Act between immunity from jurisdiction and immunity from execution (see [63]-[67] above), if there is no immunity from jurisdiction (which is the consequence of the applicants’ contention) then the question of immunity from execution arises (see s 7(4) of the Immunities Act).  In any particular case, depending on whether one of the exceptions to immunity from execution in ss 31-35 of the Immunities Act can be established, it may be that there is immunity from execution.
  21. In other words, the Immunities Act envisages that a foreign state may not enjoy immunity from a proceeding under Pt II of the Immunities Act with the result that there might be a judgment against it, but that such a judgment is not able to be executed because no exception to immunity from execution in Pt IV of the Immunities Act can be established.  That is the inevitable consequence of the separate treatment of immunity from jurisdiction and immunity from execution in Pts II and IV.  This demonstrates that a so-called “zombie judgment” is not viewed by the legislature as an absurdity.
  22. In another case, where an exception to Pt IV execution immunity can be established, a judgment against a foreign state will be able to be executed.  In the present cases, if the applicants are successful in having judgments entered against Spain on their Centre awards, and leaving aside what benefit those judgments might give the applicants in Australia or elsewhere in seeking to get Spain to pay the awards, they can then go about seeking to establish an exception to Pt IV immunity.  One possibility, by way of example, would be to find “commercial property” of Spain in Australia within the meaning of s 32 of the Immunities Act.  Such property would be susceptible to execution.  There would then be no “zombie judgment”.
  23. Spain submits, with reference to the Immunities Act, that Australian law on foreign state immunity knows no dichotomy in language between the recognition or enforcement of a judgment or arbitral award and, separately, execution.  Thus, Spain submits, such a dichotomy should not be discerned in Arts 54-55 of the Investment Convention.  As already canvassed above, enforcement is used variously in legal language to refer to pre-execution steps and also to execution.  For the reasons already given, in my view Pt IV of the Immunities Act deals with the execution stage, even though the terminology of enforcement is also used in relation to it.  The dichotomy between pre-execution (i.e. up to and including judgment) steps and execution (i.e. post-judgment) steps is quite clear in the Immunities Act itself, and that it was intended to be present is clear from the ALRC Report.
  24. In any event, in relation to each of Spain’s submissions dealt with at [101]-[109] above, it would be wrong to seek to interpret the Investment Convention with reference to the Immunities Act.  That is because of the requirement that the Investment Convention be given an international interpretation as explained above (at [83]-[85]) and because the Investment Convention pre-dates the Immunities Act by nearly two decades.
  25. Spain also submits that “enforcement” and “execution” are used synonymously in private international law, and on this basis submits that that is how they should be understood in the Investment Convention.  In support of that submission, Spain refers to Collins, Lord Lawrence (ed), Dicey, Morris & Collins on The Conflict of Laws (15th ed, Sweet & Maxwell, 2012) at [14-003].  That paragraph, which deals with the recognition and enforcement of foreign judgments, uses the language of enforcement synonymously with execution – it states that a person seeking to have a foreign judgment “executed or otherwise carried out as against the person against whom it is given … is then seeking to enforce the judgment” (emphasis in the original).  However, it also characterises the setting up of a foreign judgment by way of counterclaim or other cross-proceeding as being “enforcement” of the foreign judgment, which is not what would ordinarily be characterised as execution.  Thus even in the context of foreign judgments, enforcement and execution are not uses synonymously.
  26. More tellingly, in the chapter dealing with arbitration and foreign awards, Dicey, Morris & Collins use the terminology of enforcement with reference to suing on a foreign award or applying to a court for judgment on an award (e.g. [16-105], and [16-114]).  Those are necessarily pre-execution steps.  Specifically with reference to the Investment Convention, the authors state that Contracting States are bound to recognise a Centre award “and enforce it in accordance with Art 54(1)” but that the Convention “does not … affect the law in relation to state immunity from execution” (at [16-189]).  The authors thus draw the same distinction between enforcement and execution in the context of the Investment Convention that I have drawn, and there is nothing in what they say that supports Spain’s contention to the contrary.
  27. It is also clear from comparative international law that the distinction between enforcement by way of recognition and judgment and enforcement by way of execution is common in the law of foreign state immunity in other jurisdictions: Fox H and Webb P, The Law of State Immunity (3rd ed, Oxford University Press, 2013) Ch 4 (dealing with immunity from jurisdiction) and Ch 16 (dealing with immunity from enforcement of judgment, i.e. execution); Hill J and Chong A, International Commercial Disputes: Commercial Conflict of Laws in English Courts (Hart Publishing, 2010) at [2.3.14]-[2.3.38] (“immunity from adjudicative jurisdiction”) and [2.3.39]-[2.3.57] (“immunity from enforcement jurisdiction” where enforcement refers to orders for specific performance and injunctions and execution against property); McClean D and Ruiz Abou-Nigm V, The Conflict of Laws (8th ed, Sweet & Maxwell, 2012) at [6-13]-[6-14].

    Object and purpose

  28. The object and purpose of the Investment Convention can be gleaned from its preamble, although there is little there to assist on the issue at hand.  In its sixth clause, however, it recognises that the mutual consent by parties to disputes that arise in connection with investments between Contracting States and the nationals of other Contracting States constitutes a binding agreement which requires, in particular, that any arbitral award be complied with.  Thus, it is apparent that the existence of an effective enforcement mechanism in the scheme of the Investment Convention underpins the object and purpose of the Investment Convention.
  29. The report of the Executive Directors of the World Bank of 18 March 1965, which is referred to in more detail below (at [119]), gives further insight into the object and purpose of the Investment Convention (International Bank for Reconstruction and Development, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (18 March 1965)).  The primary purpose of the Investment Convention is described as being to stimulate a larger flow of private international investment into territories (at [12] of the report).  It is also said that the creation of an institution designed to facilitate the settlement of disputes between states and foreign investors can be a major step toward promoting an atmosphere of mutual confidence and thus stimulating a larger flow of private international capital into those countries which wish to attract it (at [9] of the Report).  In that context, it is said that the provisions of the Investment Convention maintain a careful balance between the interests of investors and those of host states and that the Executive Directors have constantly had in mind that the provisions of the Convention should be equally adapted to the requirements of both host states as well as investors (at [13] of the Report).  The preamble to the Investment Convention is consistent with this idea of equality of treatment in its statement that there is a desire to create facilities for international arbitration “to which Contracting States and nationals of other Contracting States” may submit disputes.
  30. It might thus be said that the object and purpose of the Investment Convention support the notion that effective enforcement mechanisms that treat investors and state parties to the Convention equally were intended.  That would support the notion that, insofar as the text allows, arbitral awards should be recognised and enforceable equally against investors and state parties.  The obvious textual limitation on this idea of equal treatment is the preservation of foreign state immunity in respect of execution in Art 55.

    The preparatory materials

  31. Under Art 32 of the Vienna Convention, recourse may be had to the preparatory materials in order to confirm the meaning resulting from the application of Art 31.
  32. The Investment Convention was formulated by the Executive Directors of the International Bank for Reconstruction and Development (commonly referred to as the World Bank) after extensive preparatory work by the staff of the Bank performed in part with the assistance of national legal experts convened in four regional Consultative Meetings.  The deliberations of a special Legal Committee were also taken into account. See History of the ICSID Convention (International Centre for Settlement of Investment Disputes, 1970) Vol I, ii.
  33. The extensive consultative processes led to the Executive Directors, meeting formally, adopting a resolution approving the text of the Investment Convention and their Report on it on 18 March 1965.  The resolution instructed the President to transmit the draft Investment Convention and the Report to all member governments of the Bank whereafter the process of the signing of the Investment Convention by a number of states commenced leading ultimately to it coming into force on 14 October 1966. See History Vol I, 8-10.
  34. The travaux préparatoires, or preparatory materials, as I shall refer to them, were published by the Centre in 1970.  They consist of a systematic and complete presentation of all relevant preparatory documents: the successive drafts with annotations thereto, proposed amendments, staff memoranda and the records of all reports of the debates in the Consultative Meetings and the Legal Committee and by the Executive Directors and the Board of Governors of the World Bank.  There are four volumes.  Volume I is in English, French and Spanish and consists of a brief narrative account of the formulation of the Investment Convention, followed by an article-by-article historical analysis of its text and complete lists of all relevant documents produced by the Bank and of the names of all persons who participated in this work.  Volumes II (in two parts), III and IV contain, respectively in English, French and Spanish, comprises all the documents having any substantive significance in connection with the formulation of the Investment Convention. See History Vol I, ii-iv.
  35. In the debates and consultations that preceded the final draft and the Report, there are conflicting indications as to whether the ultimate preservation of foreign state immunity as provided for in Art 55 was for the whole of states’ domestic law on foreign state immunity, or whether it was limited to that law in relation to the execution of judgments.  Indeed, the language of enforcement and execution is used loosely and at times interchangeably in the debates, which is perhaps not surprising given that the original languages of the participants varied considerably and the participants themselves also changed from time to time.  It is therefore difficult to discern a common use of language and a common understanding of the relevant concepts.
Segment #4
  1. Spain also refers to Smutny AC, Smith AD and Pitt M, “Enforcement of ICSID Convention Arbitral Awards in US Courts” (2016) 43 Pepperdine Law Review 649, 657-758 in support of the proposition that a distinction between enforcement and execution cannot be sustained with reference to the French and Spanish texts.   Citing Scheuer, the authors observe that that proposition has been advanced, but they do not themselves advocate that as the correct approach.
  2. There are a number of other commentators who recognise the distinction in Art 54 between enforcement and execution and who argue that foreign state immunity only applies at the stage of execution and not at the stage of judgment.
  3. Booysen H, “The Municipal Enforcement of Arbitration Awards against States in Terms of Arbitration Conventions, with Special Reference to the New York Convention – Does International Law Provide for a Municipal Law Concept of an Arbitrable Act of State?” (1986/87) 12 South African Yearbook of International Law 73 says (at 110) that an award under the Investment Convention is final and automatically enforceable without any further examination by the courts of the contracting state.  Professor Booysen says (at 110-111) that the Convention distinguishes between the recognition and enforcement, on the one hand, and the execution of an award, on the other.  He says (at 112) that the view is generally held that the agreement to arbitrate amounts to a waiver of immunity in respect of the recognition and enforcement, but not in respect of the execution, of the award.
  4. Franzoni BD, “International Law – Enforcement of International Centre for Settlement of Investment Disputes Arbitral Awards in the United States” (1988) 18 Georgia Journal of International and Comparative Law 101 (at 115) says that the Investment Convention draws a distinction between enforcement and execution, that immunity from enforcement of arbitral awards is not available to Contracting States, and that the law on foreign state immunity resolves only the issue of which assets of a Contracting State are available for execution of the award.
  5. Soley DA, “ICSID Implementation: An Effective Alternative to International Conflict” (1985) 19 The International Lawyer 521 (at 525) says that the Art 54 obligation to recognise and enforce an award as if it was a final judgment from a domestic court means that a judgment must be rendered to enforce whatever pecuniary obligations have been established.  The author says that the Investment Convention distinguishes between the notions of enforcement and execution.  He says that this is the obligation regardless of defences such as sovereign immunity and public policy, but that execution – being the actual seizing and selling of the debtor’s property – is subject to domestic procedures and sovereign immunity laws existing in the country hearing the suit.
  6. Delaume GR, “Arbitration with Governments: Domestic v. International Awards” (1983) 17 The International Lawyer 687 (at 695) says that the Investment Convention segregates issues of recognition and enforcement from subsequent measures of execution, and that Art 54 prevents the contracting state party to the dispute from raising, at the time of recognition and enforcement, the defence of immunity from suit.  The author says that in the system of the Investment Convention, recognition and enforcement are considered as constituting the ultimate phase of the arbitration process and the contracting state party to the dispute is deemed to have waived any defence, including immunity from suit, which would interfere with the ICSID machinery and would be inconsistent with the consent given by that state to ICSID arbitration.  See also Delaume GR, “ICSID Arbitration and the Courts” (1983) 77 American Journal of International Law 784, 799-800.
  7. Other commentators to similar effect on the distinction between enforcement and execution in the Investment Convention include Buckley RP, “Now We Have Come to the ICSID Party: Are Its Awards Final and Enforceable” (1992) 14 Sydney Law Review 358, 368-369; Chukwumerije O, “ICSID Arbitration and Sovereign Immunity” (1990) 19 Anglo-American Law Review 166, 178-180; van den Berg AJ, “Recent Enforcement Problems under the New York and ICSID Conventions” (1989) 5 Arbitration International 2, 11-14; van den Berg AJ, “Some Recent Problems in the Practice of Enforcement under the New York and ICSID Conventions” (1987) 2 ICSID Review – Foreign Investment Law Journal 439, 447-451; Toope SJ, Mixed International Arbitration (Grotius Publications Ltd, 1990) 245-247; Juratowitch B, “Waiver of State Immunity and Enforcement of Arbitral Awards” (2016) 6 Asian Journal of International Law 199.
  8. It is apparent that the weight of commentary favours the interpretation that I have thus far arrived at, and that Professor Schreuer stands on his own in considering that enforcement and execution mean the same thing in Art 54.

    The foreign cases

  9. The distinction between recognition and enforcement, on the one hand, and execution, on the other, is recognised in decisions of foreign courts.
  10. In Benvenuti & Bonfant v People’s Republic of the Congo, Cour d’appel, Paris (26 June 1981) 65 ILR 88, the claimants sought recognition and enforcement (by exequatur) of a Centre award against the Congo and took steps to secure the recognition of the award before the French courts. At first instance, the Tribunal de Grande Instance granted recognition of the award, but made recognition subject to the condition that “no measure of execution, or even a conservatory measure, shall be taken pursuant to the said award, on any assets located in France without the prior authorization of this Court” (at 90).  The claimant appealed this condition, arguing that under Art 54(2) the judge at first instance could only ascertain the authenticity of the award and that he had confused two different stages, that relating to the obtaining of an exequatur and that relating to actual execution (at 90).
  11. The Cour d’appel agreed with the claimant, and ordered that the condition be removed.  It held that the provisions of Art 54 of the Investment Convention lay down a simplified procedure for obtaining an exequatur and restrict the function of the court to ascertaining the authenticity of the award certified by the Secretary-General of the Centre (at 91).  It held that the order granting recognition and enforcement to an arbitral award does not constitute a measure of execution but is only a decision preceding possible measures of execution and that acting on a request pursuant to Art 54, the court could therefore not, without exceeding its competence, become involved in the second stage, being execution, to which the question of the immunity from execution of foreign states relates (at 91).
  12. In Société Ouest Africaine des Bétons Industriels (SOABI) v Senegal (1991) 30 ILM 1169recognition of an award against Senegal had initially been granted by the Paris Tribunal de Grande Instance under Art 54, but that had been reversed by the Cour d’appel on the ground that recognition would violate the immunity of Senegal from execution.  In a further appeal, the Cour de Cassation observed that a foreign state which has consented to arbitration has thereby agreed that the award may be granted recognition (exequatur) which, as such, does not constitute a measure of execution that might raise issues pertaining to the immunity from execution of the state concerned (at 1169).
  13. It is significant that the French courts, presumably with reference to the French text of the Convention, have recognised and maintained the distinction between recognition/ enforcement and execution in Arts 54 and 55.  That rather tells against Spain’s reliance on that text as revealing no such distinction.
  14. In Liberian Eastern Timber Corporation (LETCO) v The Government of the Republic of Liberia 650 FSupp 73 (SDNY 1986), the Government of Liberia sought to vacate the judgment of the United States District Court which enforced the Centre award in issue and, in the alternative, sought to vacate the execution of that judgment against its property.  The District Court rejected the Government of Liberia’s application and held that Liberia, as a signatory to the Investment Convention, waived its sovereign immunity in the United States with respect to the enforcement of any arbitration award entered pursuant to the Convention.  It held (at 76) that, by agreeing to arbitration under the Investment Convention, Liberia:

    invoked the provision contained in Article 54 of the Convention which requires enforcement of such an award by Contracting States. That action, and reading the treaty as a whole, leaves little doubt that the signatories to the Convention intended that awards made pursuant to its provisions be given full faith and credit in their respective jurisdictions subject to such rights as are reserved by signatories thereunder. Therefore, Liberia clearly contemplated the involvement of the courts of any of the Contracting States, including the United States as a signatory to the Convention, in enforcing the pecuniary obligations of the award.

  15. The question of execution was decided separately with reference to foreign state immunity from execution as preserved by Art 55 (at 77).
  16. This approach was followed in Blue Ridge Investments LLC v Republic of Argentina 735 F3d 72 (2d Cir 2013). Argentina sought to rely on state immunity to resist enforcement of a Centre award against it. The United States Court of Appeals for the Second Circuit upheld (at 84) the first instance decision that Argentina had waived its sovereign immunity in respect of recognition and enforcement by becoming a party to the Investment Convention, which expressly provides for the automatic recognition and enforcement of awards in Contracting States. The Court stated (at 84):

    In light of the enforcement mechanism provided by the ICSID Convention, we agree with the District Court that Argentina ‘must have contemplated enforcement actions in other [Contracting] [S]tates’, including the United States.

  17. Blue Ridge was more recently affirmed in Mobil Cerro Negro Ltd v Bolivarian Republic of Venezuela 863 F3d 96 (2d Cir 2017).
  18. The Court of Appeal of England and Wales in Micula v Romania [2018] EWCA Civ 1801 at [258]-[260] per Legatt LJ recognised that the reference to execution in Art 54(3) is a reference to post-judgment execution and that that article gives the national court control over the process of execution of the award. Enforcement of the award, in contrast, is intended to be automatic.
  19. It is thus apparent that the weight of comparative case law favours the interpretation that I have thus far come to.

    Conclusion

  20. In my view, it is not only the English text of the Investment Convention that makes a clear and workable distinction between enforcement and execution, but that that distinction is also clear from the preparatory materials.  The fact that the French and Spanish texts are not as clear on the distinction, although it is still there in Art 54(3) as I have explained, does not lead to the conclusion that the English text must be interpreted in such a way as to discard the distinction.  In contrast, in my view the French and Spanish texts would be more readily interpreted in the same way as the English text in any exercise to interpret the equally authentic texts consistently.
  21. I am not persuaded by Professor Schreuer’s view to the contrary, and in any event I find much in what Professor Schreuer has written elsewhere, particularly in relation to Art 55, to support the view that I have formed.  The weight of other commentators also take that view, and there is considerable support for it in decisions of foreign courts.
  22. In the circumstances, in my view the Art 54(1) of the Investment Convention imposes on each Contracting State the obligation to enforce the pecuniary obligations of a Centre award in its territory as if it were a judgment of its designated courts.  That obligation includes the obligation to recognise such an award by exequatur or judgment on the award.  Also, Art 55 preserves any claim to foreign state immunity in relation to any steps to execute upon a judgment that recognises and enforces such an award and not in proceedings for the recognition and enforcement of an award.
  23. The conclusion that I have reached with regard to the proper construction of the Investment Convention means that the applicants’ foundational argument is established.  That means that there is, on the face of it, a conflict between the effect of the Investment Convention as given the force of law in Australia by the Arbitration Act and s 9 of the Immunities Act insofar as foreign state immunity is concerned.  The resolution of the conflict requires consideration of the applicants’ subsidiary arguments, of which the first is that Spain submitted to the jurisdiction of this Court (amongst others), within the meaning of s 10 of the Immunities Act, by becoming a signatory to the ECT and the Investment Convention.

    SUBMISSION TO JURISDICTION

  24. As canvassed above (at [55]), a state is not immune from jurisdiction in a proceeding in which it has submitted to the jurisdiction of the court (Immunities Act, s 10(1)).  Further, a state may submit to the jurisdiction at any time “by agreement or otherwise”, which includes by treaty or other international agreement (Immunities Act, s 10(2) and the definition of “agreement” in s 3(1)).  An agreement by a foreign state to waive its immunity under Pt II has effect to waive that immunity and the waiver may not be withdrawn except in accordance with the terms of the agreement (Immunities Act, s 10(5)).
  25. The ECT, to which Spain is a signatory, in Art 26(2), gives an Investor party to a dispute with a Contracting Party three options for the resolution of disputes.  The third option, in Art 26(2)(c) with reference to Art 26(3)(a) and Art 26(4), is by submitting the dispute to one or other of three modes of arbitration.  In that regard, each Contracting Party gave “its unconditional consent to the submission of a dispute to international arbitration or conciliation in accordance with the provisions of [Art 26]” (Art 26(3)(a)).  One of the modes of arbitration which is available, if the “Contracting Party of the Investor” (i.e. the investor’s home state) and the Contracting Party to the dispute are both parties to the Investment Convention, is submission of the dispute to the Centre established pursuant to the Investment Convention (Art 26(4)(a)).
  26. It was thus apparently the intention of the parties to the ECT to create rights in favour of private investors capable of enforcement in consensual arbitration against one or other state parties to the ECT.  The election of the applicants to exercise the Investment Convention dispute resolution option given to them by the ECT must be considered as giving rise to an enforceable obligation on the part of Spain to arbitrate under the Investment Convention.  See Republic of Ecuador v Occidental Exploration and Production Co [2005] EWCA Civ 1116; [2006] QB 432 at [32]. Thus, by being a Contracting Party to the ECT and a Contracting State to the Investment Convention, Spain submitted to the arbitrations under the Investment Convention which produced the awards they seek to enforce.
  27. The question then is whether, by doing so, Spain also submitted to the jurisdiction of the designated courts (including this Court) for the purposes of enforcement (as opposed to execution) of those awards.
  28. On the construction of the Investment Convention which I have arrived at, it must be that Spain has so submitted.  In that regard, it has agreed to the terms of the Investment Convention which provide, amongst other things, that a Centre award is binding on the parties and is not subject to any appeal or any other remedy except those provided for in the Convention (Investment Convention, Art 53), that Contacting States (including Australia) are obliged to “recognise and enforce the pecuniary obligations imposed” by the award “as if it were a final judgment of a court in that state” (Art 54(1)), that in order for the applicants to seek recognition and enforcement of an award all that has to be done by them is to furnish to the competent court (which in Australia includes this Court) a copy of the award certified by the Secretary-General (Art 54(2)), and that foreign state immunity can be raised only at the stage of execution (Arts 54(3) and 55).
  29. By agreeing to the designated courts of Contracting States having the power, and the obligation, to recognise and enforce arbitral awards against it, Spain inevitably consented to them doing so.  It thereby waived any reliance on foreign state immunity from the jurisdiction of such courts in proceedings to recognise and enforce such awards.
  30. Art 54 of the Investment Convention, which is at the heart of what I have found to be Spain’s submission to the jurisdiction of designated courts for the purposes of recognition and enforcement of Centre arbitral awards, can be contrasted with Art 14 of the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, opened for signature 10 December 1984, 1465 UNTS 85 (entered into force 26 June 1987) which was at the heart of the unsuccessful contention in Li v Zhou that China as a party to that Convention had submitted to the courts of Australia.  Article 14(1) relevantly provides that “[e]ach State Party shall ensure in its legal system that the victim of an act of torture obtains redress and has an enforceable right to fair and adequate compensation, including the means for as full rehabilitation as possible”.  It says nothing equivalent to the provisions of Art 54 of the Investment Convention that the pecuniary obligations of arbitral awards must be enforced as if they were final judgments of a court.  Li v Zhou is clearly distinguishable.
  31. Spain draws attention to Art 26(8) of the ECT which provides that each Contracting Party must make provision for the effective enforcement of awards “in its Area”.  Area is defined under the ECT with respect to a state that is a Contracting Party to mean the territory under its sovereignty (Art 1(10)).  From this, Spain argues that it did not submit to the enforcement of the awards in this case in other countries, including Australia, but only within its Area.
  32. That submission might have had some validity if the ECT was simply an agreement between Spain and investors foreign to Spain.  However, it is a treaty between Contracting Parties by which each state that is a Contracting Party promised to the others that it would “carry out without delay” any award and that it would make provision for the effective enforcement, in its area, of such an award.  But in any event, the applicants need rely on the ECT only to the extent that it gave them the option to arbitrate under the auspices of the Centre under the Investment Convention.  The applicants having accepted Spain’s offer in Art 26(4) of the ECT in that regard, the arbitrations were conducted under the Investment Convention and it is to its terms that one must have regard for the purposes of recognition and enforcement.
  33. Spain submits that s 17 of the Immunities Act deals exhaustively with the circumstances in which a foreign state would lose its immunity in proceedings for the recognition and enforcement of arbitral awards with the result that s 10 cannot be relied on in such proceedings.  It submits that s 17 constitutes a comprehensive statement on the loss of state immunity in an arbitration and that the scope of s 10 (concerned with acts of waiver) cannot be expanded, as the applicants seek to do, by employing the general words of s 10 to further extend the arbitration exception in s 17.
  34. There is nothing in the Immunities Act, or the ALRC Report, to support the proposition that there can be no overlap in the application of the exceptions to immunity set out in ss 10 to 22 of the Immunities Act.  For example, there is no reason in principle why if the exception in s 11 in respect of commercial transactions applies, the exception in s 10 in respect of submission to jurisdiction should not also be able to apply, i.e. a state party to a commercial transaction can also submit to the jurisdiction of the Court such as to enliven the s 10 exception to immunity.  Equally, “there is no reason to prevent, for example, a tort which fails to come within the tort exception to immunity [s 12] being brought under, say, the commercial transaction exception provided the facts permit” (ALRC Report [88]).  The corollary is that if the tort exception does apply, the commercial transaction exception may also apply, depending on the facts.
  1. The High Court in Firebird reasoned that the exceptions to immunity can overlap: [62] per French CJ and Kiefel J, [131] per Gageler J and [203]-[204] per Nettle and Gordon JJ.
  2. The ALRC Report recognised that a foreign state arbitral award debtor in respect of an arbitration that does not meet the requirements of s 17 (which are identified at [57]-[58] above) may nevertheless not enjoy immunity in proceedings for the recognition and enforcement of an arbitration award if it has submitted to jurisdiction. That much is clear from the following discussion in the Report (at [107]) of the s 17 arbitration exception:

    A foreign state is competent to waive its immunity, and (by agreement to accept service or otherwise) to submit to the jurisdiction of the courts of any country.  In the absence of express submission the more defensible view is that the local courts should only be able to enforce an award against a foreign state if, had the underlying dispute being brought before those courts for resolution, the foreign state would not have been immune.  This will allow the enforcement of awards arising out of commercial transactions, or of other transactions of the foreign state over which the courts would have had jurisdiction.  Private parties seeking the enforceability of foreign awards in a wider category of cases are of course free to stipulate to that effect in the agreement to arbitrate.  Foreign states cannot convincingly object, in view of the widespread acceptance of international commercial arbitration and of the New York Convention of 1958, if a foreign arbitral award is enforced in this way.  The Commission believes that it is sufficient to assert a similar rule for local arbitrations, leaving any more general abrogation of immunity to be provided for by agreement of the parties.

    (Emphasis added.)

  3. This is exactly the point: on the proper construction of the Investment Convention (as I have found), Spain by becoming a Contracting State expressly submitted to the jurisdiction of the courts of other Contracting States in respect of the recognition and enforcement, but not execution, of any resulting award.  If that is correct, then it satisfies the requirements of submission/waiver under s 10 of the Immunities Act and there is no basis to conclude that, notwithstanding such a submission, Spain nevertheless enjoys immunity because the particular arbitration in question does not meet the requirements of the exception in s 17.
  4. Spain also submits that if a foreign state, absent any express submission to jurisdiction, was to be taken to have waived immunity from jurisdiction throughout the world in respect of enforcement proceedings for the purposes of s 10 of the Immunities Act simply by agreeing to arbitrate a dispute, s 17(2) would have no role to play.
  5. This submission misses the point.  It is not the case that “simply by agreeing to arbitrate the dispute” Spain has submitted to the jurisdiction of the Court under s 10 of the Immunities Act; that submission to jurisdiction arises from Spain’s agreement to the Investment Convention the terms of which include mutual obligations to recognise and enforce Centre awards.  That carries with it the inevitable consent to Centre awards being recognised and enforced in fulfilment of that obligation.  Section 17(2) will continue to apply, and be required, in circumstances where the parties have submitted their dispute to arbitration without such submission amounting to a submission to the jurisdiction of the Court for the purposes of recognition and enforcement.
  6. Insofar as foreign case law is concerned, several of the cases referred to above in the context of the distinction between enforcement and execution in the Investment Convention, namely SOABI (at [165] above), LETCO (at [167] above) and Blue Ridge Investments (at [169] above), also support the proposition that by becoming a signatory to the Investment Convention Spain submitted to the jurisdiction of the designated courts of Contracting States for the purposes of recognition and enforcement (but not execution) of any ensuing awards.
  7. The applicants also refer to Government of the Republic of Zimbabwe v Fick [2012] ZASCA 122 as an example of a court finding that by becoming a signatory to a treaty that creates a dispute resolution tribunal, a Contracting State submitted to the jurisdiction of the courts of other Contracting States for the purposes of enforcing decisions of the tribunal and thereby waived foreign state immunity.
  8. In that case, the South African Supreme Court of Appeal (SCA) held that by becoming a signatory to the Southern African Development Community (SADC) Treaty and a Protocol that established the SADC Tribunal, Zimbabwe “clearly both waived any immunity it might otherwise have been entitled to claim from the jurisdiction of the courts of member states and agreed that orders of the Tribunal would be enforceable in those courts” (at [44]).  That arose from Art 32 of the Protocol which provided that the law and rules of civil procedure for the registration and enforcement of foreign judgments in force in the territory of the Member State in which the judgment is to be enforced shall govern enforcement and that decisions of the SADC Tribunal shall be binding upon the parties to the dispute in respect of that particular case and enforceable within the territory of the Member State concerned.  The result and reasoning of the SCA was upheld by the Constitutional Court in Government of the Republic of Zimbabwe v Fick [2013] ZACC 22; 2013 (5) SA 325 at [33]-[35].
  9. In detailed analysis of each of the foreign cases relied upon by the applicants, Spain ultimately submits that they “are of no real assistance” because Spain’s plea of foreign state immunity arises in a very specific context; in accordance with the precise and unique terms of the Immunities Act Spain invokes sovereign immunity as a procedural bar to jurisdiction.
  10. There are two things to be said in response to that submission.  First, my analysis and conclusions have been reached independently of consideration of the foreign cases.  Second, and in any event, that analysis and those conclusions, both with regard to the proper interpretation of Arts 53-55 of the Investment Convention concerning the distinction between recognition/enforcement and execution and with regard to Spain’s submission to the jurisdiction of this Court in respect of the recognition and enforcement of the applicants’ awards, are supported by the foreign cases.  Relevantly, that analysis and those conclusions are not with regard to the construction of the Immunities Act – which is a domestic statute the interpretation of which, I accept, is not apt to be assisted by foreign case analysis.
  11. It is of course correct that each state has its own law on foreign state immunity, and that considerable divergence exists.  There is also no uniform international law on foreign state immunity: ALRC Report at [13], PT Garuda at [33]. The foreign cases cannot, therefore, assist in interpreting the Immunities Act, but that is not why I refer to them.  They are cited on the question of the proper, international, construction of the Investment Convention.  That, in turn, informs what it is that Contracting States agreed to, which is a necessary step in the analysis of whether such agreement amounts to submission to jurisdiction and waiver of foreign state immunity under s 10.
  12. Finally, Spain argues that in considering whether it submitted to jurisdiction I must give primacy to the Spanish text of the Investment Convention because Spain, a Spanish-speaking country, can be taken to have principally referenced that text in signing the Investment Convention.  On that basis, Spain submits, I should not regard Spain as having agreed to the distinction between recognition/enforcement and execution that is apparent in the English text.
  13. Spain’s submission cannot be accepted.  In becoming a Contracting State to the Investment Convention, Spain agreed to the whole of the Convention including the testimonium which provides for all three texts to have equal authenticity.  There is no basis upon which preference can be given to Spain’s asserted subjective intention to give the Spanish text primacy when, objectively with reference to its terms, the Investment Convention was done in three authentic texts.
  14. In view of my conclusion on submission, it is not necessary to deal with the two alternative bases on which the applicants seek to avoid the conflict between the immunity in s 9 of the Immunities Act and the Investment Convention as given the force of law by the Arbitration Act, namely the effect of s 34 of the Arbitration Act and implied repeal.  I will therefore state my conclusions on them only briefly.

    SECTION 34 OF THE ARBITRATION ACT

  15. As indicated above (at [42]), the applicants rely on the statement in s 34 of the Arbitration Act that “other laws relating to the recognition and enforcement of arbitral awards” do not apply to disputes within the jurisdiction of the Centre or Centre awards.  The applicants submit that such “other laws” include the Immunities Act.  I am not persuaded by that submission.
  16. In my view, the Immunities Act is not such an “other law” because it is not a law “relating to the recognition and enforcement of arbitral awards”.  It is a statute that “deals with the special and discrete topic of foreign state immunity in Australia”: Firebird at [85]. As with the Foreign Judgments Act and the Immunities Act, the Arbitration Act and the Immunities Act “deal with different subject matters and the overlap between them is only slight”: Firebird at [86].

    IMPLIED REPEAL

  17. It will be recalled that the applicants submit that the relevant provisions of the Arbitration Act and the Investment Convention that are given the force of law, which were enacted after the Immunities Act, impliedly repealed the Immunities Act to the extent of the inconsistency.
  18. Inconsistency is at the root of the principle of implied repeal: Ferdinands v Commissioner for Public Employment [2006] HCA 5; 225 CLR 130 at [18]. Because of my conclusion with regard to the construction of the Investment Convention, and consequently with regard to a foreign state’s submission to the jurisdiction of designated courts by becoming a signatory to the Investment Convention, there is no inconsistency between the relevant statutes – agreement to the Investment Convention will constitute submission to jurisdiction under s 10 of the Immunities Act.
  19. However, if there were such an inconsistency, as there was in Firebird (at [87]) in relation to the Foreign Judgments Act, the potential conflict is resolved by reading the relevant provisions of the Arbitration Act and the Investment Convention (i.e. those provisions that provide for the recognition and enforcement of Centre awards) to apply only where a defendant, including a foreign state defendant, is amenable to the jurisdiction of the court exercising jurisdiction under the Arbitration Act.
  20. In Firebird it was held (at [85]-[86]) that the Foreign Judgments Act and the Immunities Act deal with quite different subjects and that it is not to be supposed that a later general statute dealing with the subject of the enforcement of foreign judgments was intended to derogate from the Immunities Act.  That reasoning applies equally in the present context in relation to the Arbitration Act.
  21. Thus, on the authority and reasoning of Firebird, even if there was inconsistency in the present case, I would not accept the applicants’ submissions about the implied repeal of the Immunities Act with regard to its applicability to proceedings for the recognition and enforcement of Centre awards.

    CONCLUSION

  22. For the above reasons, Spain’s plea of foreign state immunity fails.
  23. As Spain has indicated that it intends to raise no other defence or objection to the relief that the applicants seek, and the applicants have established the authenticity of the awards on which they rely, they are entitled to recognition and enforcement of the awards.
  24. The applicants have sought leave under s 35(4) of the Arbitration Act to enforce the awards as if they were judgments of the Court.  They have established that they are entitled to such leave and to judgments in their favour for payment of the pecuniary obligations of the awards.
  25. The applicants have also sought the costs of these proceedings.  I do not at present see any reason why the costs should not follow the event.  In that regard, by s 10(10) of the Immunities Act, where a foreign state has submitted to the jurisdiction in a proceeding, then, subject to an exception not presently relevant, it is not immune in relation to a claim made in the proceeding that arises out of or relates to the transactions or events to which the proceeding relates.  The applicants’ claims for costs are claims that arise out of or relate to the ICSID arbitral proceedings which are the transactions and events to which the proceedings before this Court relate.  Therefore, Spain does not enjoy immunity from the applicants’ costs claims.
  26. In any event, by s 43(1) of the FCA Act, subject to certain exceptions not presently relevant, the Court has jurisdiction to award costs in all proceedings before the Court, including proceedings dismissed for want of jurisdiction.
  27. However, because I have not had submissions from the parties on the question of costs I will give them the opportunity to re-agitate the costs orders should they wish to.  Although I have expressed a view on the costs, that is only a preliminary view and I remain open to considering any submissions to the contrary.
I certify that the preceding two hundred and fourteen (214) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stewart.

Associate:

Dated: 24 February 2020

Americas Bulk Transport Ltd (Liberia) v Cosco Bulk Carrier Ltd (China) M.V. Grand Fortune [2020] EWHC 147 (Comm) (30 January 2020)

Neutral Citation Number: [2020] EWHC 147 (Comm)
Case No: CL-2018-000832

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)

Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
30/01/2020

B e f o r e :

HIS HONOUR JUDGE PELLING QC
SITTING AS A JUDGE OF THE HIGH COURT

____________________

Between:

AMERICAS BULK TRANSPORT LIMITED (LIBERIA)
Claimant
– and –
 
COSCO BULK CARRIER LIMITED (CHINA)

m.v. Grand Fortune

Defendant

____________________

Mr Mark Stiggelbout (instructed by MFB Solicitors) for the Claimant
Mr Paul Toms (instructed by Penningtons Manches Cooper LLP) for the Defendant
Hearing dates: 19 December 2020

____________________

HTML VERSION OF JUDGMENT APPROVED
____________________

Crown Copyright ©

HH Judge Pelling QC:

Introduction

    1. This is the hearing of the claimant’s application under s.67 of the Arbitration Act 1996 (“AA”) challenging the award of Messrs Marshall, Aston and Raymond (dissenting) (“Tribunal”) dated 29 November 2018 (“Award”) holding that the Tribunal had substantive jurisdiction in respect of the defendant’s claim for sums due alternatively damages against the claimant under a recap time charter of the Motor Vessel Grand Fortune (“Vessel”) dated 16 May 2008 (“Charterparty”) contained in or evidenced by an email of that date.
    2. At all material times the defendant was the disponent owner of the Vessel. By a time charter dated 15 November 2007, the defendant chartered the Vessel to Britannia Bulkers A/S (“Bulkers”) (“Head Charter”). Bulkers’ obligations under the Head Charter were guaranteed by Britannia Bulk Plc (“Bulk”). Bulkers was at all material times a wholly owned subsidiary of Bulk. Bulk was the larger of the two companies. Of the total group fleet, Bulk was the charterer and disponent owner of about 75% of the total fleet with Bulkers being the charterer and disponent owner of the remainder.
    3. There is no dispute that the claimant chartered the Vessel by the Charterparty. The Charterparty was negotiated on behalf of the claimant by Mr Philip Lambert, then the claimant’s exclusive broker, who is deceased, and Mr Andrew Lees, a freight trader employed by Bulk. The Charterparty was expressly fixed by reference to the Head Charter but did not state who the disponent owner was.
    4. The claimant’s case is that its counterparty under the Charterparty was Bulk not Bulkers. This is important to the jurisdiction of the Tribunal because the defendant’s claims against the claimant in the arbitration are brought as assignee of the rights of Bulkers. If Bulk was the disponent owner under the Charterparty then the Tribunal has no jurisdiction because the defendant cannot rely on the arbitration agreement contained in the Charterparty.
    5. The claimant sought a ruling from the Tribunal pursuant to AA, s.30(1)(a), declaring that the Tribunal had no jurisdiction because the true disponent owner was Bulk not Bulkers and thus there was no valid arbitration agreement between the claimant and defendant. By the Award, the Tribunal by a majority rejected the claimant’s case. Following publication of the Award, the claimant commenced these proceedings under AA, s.67(1)(a) challenging the Award on the basis that the Tribunal has no substantive jurisdiction and for an order varying the Award so as to uphold the claimant’s challenge to jurisdiction. The phrase “substantive jurisdiction” within AA, s.67(1)(a) refers to the matters set out in AA, s30(1)(a) to (c) – see AA, s.82. Such a challenge proceeds by way of a re-hearing – see Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs of the Government of Pakistan [2011] AC 763 at paras 25-26. The evidence will usually be and in this case is that which was given before the Tribunal as recorded in the transcripts of the proceedings before the Tribunal leading to the Award.

Background

Authoritative Version of Head Charter

    1. There are two versions of the Head Charter in existence. The claimant maintains that the version it adduces is the relevant version. The defendant contends that the version it has produced is the relevant version. However Mr Lees (the individual who negotiated the Charterparty on behalf of the disponent owner) accepted in the course of his oral evidence before the Tribunal that the authentic version was likely to have been the version produced by the claimant – see T1/94/5. I accept that evidence and so find because (a) there was nothing to contradict this evidence, (b) as Mr Lees accepted earlier in his cross examination the document in the possession of the claimant could only have been received by the claimant from Mr Lambert (the claimant’s broker) – see T1/93/6-9 – and Mr Lambert could only have obtained it from Mr Lees – see T1/93/10-12 – and (c) the version produced by defendant has some indications within it that suggest it was likely not to have been the authoritative version. Amongst the most obvious is that the version relied on by the claimant refers to the guarantee of Bulkers’ obligations by Bulk whereas the version produced by the defendant does not. The guarantee is dated the same day as the Head Charter. Since it is common ground that Bulk did guarantee Bulkers’ obligations this tends to support Mr Lees’ acceptance that the version produced by the claimant is the version that the parties were working to and (as I explain below) is the version to which the Charterparty refers.
    2. Although it is suggested by the defendant that the stamp “Working Copy” on the version produced by the claimant suggests it is a draft, I do not accept that to be so in the absence of any evidence that such was what was meant by the stamp. It is equally and perhaps more realistically arguably capable of meaning that the copy of the Head Charter supplied to the claimant was a copy of the Head Charter used by the defendant for trading the Vessel. I regard the stamp as essentially a neutral factor given the absence of any evidence as to its purposes and reach my conclusion by reference to the other factors mentioned earlier.

Charterparty

    1. The Charterparty on which the defendant relies is evidenced by an email dated 16 May 2008 from Mr Lambert which sets out “… a recap of fixture …” (“Recap”). The Recap describes the Vessel as being:

“mv GRAND FORTUNE

(as described in CP dated Nov. 15 2007)”

It contains a number of technical provisions typical of such a document and concludes “…Otherwise as per CP dated Nov. 15, 2008 with logical alterations”. It is common ground that the reference to “2008″ is a typographical error and that it should be “2007″ and is a reference to the Head Charter. The Recap names the claimant (described as “ABT“) as charterer but as I have said does not identify the disponent owner. The Charterparty was extended by an agreement contained in or evidenced by an email from Mr Lambert to Mr Lees dated 20 August 2008. In so far as is material the extension was on the same terms as the original Charterparty. It does not identify the disponent owner either. The final sentence of the 20 August email is “Were you able to draw CP“. In its context this is a question being asked by Mr Lambert (the claimant’s broker) of Mr Lees.

    1. By an email of 12 September 2008, the defendant sent the claimant a first draft charterparty (“Draft CP”). Although Mr Stiggelbout referred to it repeatedly as an engrossment, it was not. It is a draft that was never agreed between the parties. The Draft CP purported to be between Bulk as owner and the claimant as charterer. It is dated 16 May 2008 (the date of the recap email) and provides for signature at the end by or on behalf of Bulk as owner and the claimant as charterer. It was drafted after the date when the Recap had been sent and received and after the extension. The claimant relies very heavily on this draft in support of its case that Bulk not Bulkers was the true disponent owner.

The Underlying Dispute and Reference to Arbitration

    1. On 31 October 2008, Bulk was placed in administration and on 20 November 2008, Bulkers was placed in insolvent liquidation. A dispute arose between Bulkers and the defendant concerning hire alleged to be due from Bulkers to the defendant. The detail is not relevant. However, as part of a settlement agreement between Bulkers’ liquidators and the defendant, the defendant took an assignment of Bulkers’ rights, which it then utilised by claiming allegedly unpaid hire from the claimant as Bulkers’ assignee.
    2. This led, on 12 August 2011, to the issue of Notice of Arbitration by solicitors acting on behalf of the defendant. It described Bulkers as the disponent owners of the Vessel and the claimant as charterer. It claimed that the defendants had been “ … assigned all legal rights in relation to a Sub-Charterparty dated 16 May 2008 between [Bulkers] and [the claimant] …“.
    3. The claimant’s solicitors responded by an email dated 26 August 2011, in which they asserted that there “… was no contract between [the claimant] and [Bulkers] as evidenced by the charter drawn up by [Bulk] … there is therefore no arbitration agreement between [Bulkers] or [the defendant] and [the claimant] and indeed no charter …“. The response continued by indicating that Mr Rayment had been appointed as its arbitrator but the claimant’s rights were reserved “… to maintain that there was no contract between [the claimant] and [Bulkers] … and that the Tribunal has no jurisdiction in this matter …“. The letter concluded by inviting the defendant to withdraw the proceedings and threatening to seek indemnity costs if it did not. This was followed by a response from the defendant’s solicitors re-asserting the claim in October 2011.
    4. Nothing further passed between the parties before Mr Lambert died in 2014 or thereafter until 7 April 2017, when the defendant served its claim submissions. The claimant challenged jurisdiction and following an exchange of pleadings limited to the jurisdiction issue, there was a 2 day hearing before the Tribunal on 15-16 October 2018 followed by the publication of the Award on 29 November 2018.

The Award

    1. The decision of the majority was that the claimant’s counterparty was Bulkers and thus that the Tribunal had jurisdiction over the dispute between the claimant and defendant. The majority considered that the jurisdictional issue depended upon the construction of the “ … recap dated 16 May 2008 and the head charter dated 15 November 2007 which was between the [defendant] and [Bulkers] …” [Award, para. 138]. The substance of the majority’s decision is set out at para. 144 in these terms:

“What is however clear from the decisions in both the Double Happiness and the Rhodian River and the Rhodian Sailor is the presumed concern and hence intention, in the absence of evidence to the contrary, of charterers engaged in negotiations to contract with the disponent owners of the vessel who of course enjoy the authority to instruct and employ (sub-charter) the vessel. Here that coincided with the disponent owner named in the pro-forma [Bulkers]. As a matter of construction, therefore, the view of the majority of the tribunal is that [Bulkers] were the disponent owners who chartered the vessel to [the claimant].

Having reached that conclusion, the evidence that post-dated the conclusion of the fixture was irrelevant … “

In relation to the Draft CP, without prejudice to their finding that evidence that post-dated the conclusion of the fixture was irrelevant, the majority noted the inclusion within it of a provision that entitled Bulk to withhold performance if hire was outstanding – see the addition in italics to clause 5 on page 2 – that appeared “… nowhere else” by which they meant nowhere in the Recap or Head Charter. They then said of the Draft CP:

“…Mr Lees … insisted that the references to [Bulk] were mistakes but could not explain how the new term had been added. It is difficult to accept that mistakes were made. Given the deliberate addition of the new term, together with other discrepancies mean that this version of the charter prepared some months after the fixture was not the version agreed initially between the parties. In these circumstances, we consider that the document is open to too many uncertainties and is unreliable as evidence of the original agreement between the parties.”

    1. Mr Rayment disagreed with this approach. Having concluded that it was unusual in the London Charter market for the disponent owner or owner’s agent to draw up a working charterparty, he concluded that in those circumstances the Draft CP was one that would be drawn up with some care and that he was “… certain that whomever had drawn up the charter would have been given the correct owner’s style to insert by someone in authority in [Bulk’s] office“. He added that he did not accept that the use of Bulk rather than Bulkers’ name was an error and that given that it was unusual for the owner to draw up a working charterparty, Mr Lees “… would take as much extra care as was necessary to ensure that all the insertions were correct …“. This took no account of the inclusion within the document of the new term referred to by the majority, which did not appear in the Recap or Mr Lee’s evidence as to how the Draft CP came to be drawn up. I return to this evidence later in this judgment.

Issues and Parties’ Contentions in Summary

    1. The claimant submits that in order for the defendant to prove that Bulkers was a party to the Charterparty, it must prove that:

i) it was agreed by and between Mr Lambert and Mr Lees that Bulkers was the disponent owner; and

ii) Mr Lees (being an employee of Bulk) had authority from Bulkers to enter into the Charterparty.

The claimant submits that I should find that Messrs Lambert and Lees agreed that the disponent owner would be Bulk in essence because (i) the best evidence of what was agreed is contained in the Draft CP, which named Bulk as the disponent owner, (ii) Mr Lees did not have authority to conclude the Charterparty on behalf of Bulkers but only on behalf of Bulk and (iii) that in those circumstances its claim should succeed.

    1. The defendant contends that Bulkers was the disponent owner and that in consequence this claim should be dismissed because (a) that is so as a matter of construction of the Recap either (i) viewed in isolation or (ii) when read alongside all admissible extrinsic evidence known to the parties down to 16 May 2008 and/or (b) because Mr Lees was authorised to act on behalf of two principals (Bulk and Bulkers) and he intended to act on behalf of Bulkers in fixing the Charter to the claimant and/or because he had actual authority to act on behalf of Bulkers in fixing the Charterparty and no authority to do so on behalf of Bulk.

Applicable Legal Principles

    1. There is a dispute between the parties as to how the issues that arise should be determined. The claimant submits that ascertaining the identity of the parties to a contract is a question of fact to be determined by reference to all the relevant evidence even if it post-dates the contract in issue and even if it is not something known to both parties but only to one of them. The defendant submits that identification of a party to a contract is a matter of contractual construction, which may be supported by extrinsic evidence known to both parties at the time the contract was made. It submits that material coming into existence after that time is immaterial to the issue.
    2. In my judgment the applicable principles in summary are as follows:

i) Where the contract is contained in a document then the first question that arises is whether the document sufficiently unequivocally identifies the parties to the contract. If it does then the question is one to be determined by construction of the relevant document and is not a question of factual investigation and evaluation – see Hector v. Lyons (1988) 58 P & CR 156 and Shogun Finance Limited v. Hudson [2003] UKHL 62; [2004] 1 AC 919 per Lord Hobhouse at para. 49 because “ … the rule that other evidence may not be adduced to contradict the provisions of a contract contained in a written document is fundamental to the mercantile law of this country; the bargain is the document; the certainty of the contract depends on it …” and per Lord Phillips at para. 161;

ii) Where the contract is contained in or evidenced in writing but the document or documents containing or evidencing the agreement do not enable the parties to be ascertained, then recourse to extrinsic evidence is permitted of what the parties said to each other and what they did down to the point at which a contract was concluded for the purpose of determining who the parties to the agreement were intended to be – see Estor Limited v. Multifit (UK) Limited [2009] EWHC 2565 (TCC) per Akenhead J at para. 26 approved in Hamid v. Francis Bradshaw Partnership [2013] EWCA Civ 470 Per Jackson LJ at para. 56 with whom the other members of the court agreed – see paras 74 and 75;

iii) Where para (ii) applies in principle, the approach that should be adopted is objective not subjective so that the question the court must ask and answer is what a reasonable person furnished with the relevant information, would conclude – see Hamid v. Francis Bradshaw Partnership (ibid.) at para 57(ii) and Navig8 Inc v. South Vigour Shipping Inc and others [2015] EWHC 32; [2016] 2 All E.R. (Comm) 159 per Teare J at para. 94.

    1. It was submitted on behalf of the claimant that The Starsin [2003] UKHL 12; [2004] 1 AC 715 is authority for wider propositions than those I have set out above. I do not accept that submission. Lord Millett clearly draws the distinction referred to above between cases where a contract is in writing and sufficiently unequivocally identifies the party to the contract – see para 176 – and those where the document containing or evidencing the agreement does not enable the parties to be ascertained – as to which see para 175. There is nothing within what Lord Millett says that supports the proposition that post contractual conduct or knowledge possessed by only one of the parties is relevant to the exercise even if extrinsic evidence is admissible and so is not in conflict with what the Court of Appeal stated in Hamid v. Francis Bradshaw Partnership (ibid.)
    2. Although, it was submitted by the claimant that post contractual conduct was admissible to determine the parties to an agreement, this is not consistent with Akenhead J’s formulation in Estor Limited v. Multifit (UK) Limited (ibid.) which I am bound to follow since it is the formulation that was approved by the Court of Appeal in Hamid v. Francis Bradshaw Partnership (ibid.). No authority to contrary effect has been cited by the claimant. The only authority that the claimant submitted supported this proposition was ED&F Man Commodity Advisers Limited v. Fluxo-Cane Overseas Limited and another [2008] EWHC 1997. However the issue in that case was not concerned with ascertaining who the parties were to a contract that it was common ground had been made at a particular date but whether an agreement had been reached at all. That issue involves a different form of enquiry from that which arises in this case but in any event I am bound to follow Hamid v. Francis Bradshaw Partnership (ibid.) because it is a decision of the Court of Appeal concerned with the question that arises in this case.
    3. I accept the claimant’s submission that the reference to the Head Charter in the Recap did not have the effect of stating the charterer under the Head Charter was to be treated as being the disponent owner under Charterparty. The reference is effective only to incorporate the terms of the Head Charter into the Charterparty to the extent they are not contradicted by the terms of the Charterparty – see The Double Happiness [2007] 2 Lloyds Rep 131 per Langley J at para. 42. However, the Tribunal’s conclusion was not that the incorporation by reference of the Head Charter terms into the Charterparty had the effect of making Bulkers the disponent owner as a matter of construction but rather was the majority’s answer to the question the Tribunal was required to answer namely who a reasonable person furnished with the relevant information would conclude was a party to the Charterparty. The material was relevant to that question because the Head Charter had been supplied by Mr Lees to the claimant acting by Mr Lambert in the course of the negotiations leading to the Charterparty and because, all things being equal, neither Mr Lees nor anyone else had suggested to Mr Lambert that anyone other than Bulkers was entitled to sub-charter the Vessel and a charterer would prefer to contract with a party who had the power as well as the duty to perform – see The Rhodian River and Rhodian Sailor [1984] 1 Lloyds Rep 373 per Bingham J as he then was at para. 3. This was the point being made by Langley J – see The Double Happiness (ibid.) at para. 41 and 43.
    4. Finally, it was submitted by the defendant and I accept that if (i) the identity of the disponent owner is not apparent on the face of a document containing or evidencing the Charterparty and (ii) cannot be ascertained by reference to the extrinsic evidence available down to the point at which the relevant contract was concluded; but (iii) the relevant contract was entered into by an agent acting on behalf of two or more potential unidentified principals, the identity of the true principal can be ascertained by reference to the intention of the agent when entering the contract – see Atlantic Insurance Company Limited v. Nationwide General Insurance [2003] EWHC 499 (Comm) per Cooke J at paragraph 28, where he held that “ … where it is necessary to ascertain the [identity] of a principal, with whom the other party knows it is dealing but who remains unidentified on the face of the contract, resort … must be had to the intention of the agent when making the contract, to ascertain on whose behalf he was then acting …“. The material that is admissible in order to resolve this issue includes “ … any … admissible material showing what was subjectively intended by …” the agent – see National Oil Well (UK) Limited v. Davy Offshore Limited [1993] 2 Lloyds Rep. 582 per Colman J at 597 LHC (para.(3)). I accept that when this is the issue it is permissible to refer to post contractual as well as pre contractual evidence as long as the evidence is material to the subjective intent of the agent at the time when he contractually bound his principal.

Findings and Determination

    1. The Recap is not an agreement in writing but is an email recapitulation by Mr Lambert as agent on behalf of the claimant as charterer to Mr Lees as agent on behalf of the disponent owner of an underlying agreement reached by negotiation between them. There is no reason to suppose however that it is anything other than an accurate summary of what had been agreed not least because no objection was taken to its terms by Mr Lees when it was received or at all and the Charterparty was extended without variation of the terms set out in the Recap. The Recap is therefore evidence of an underlying agreement but it does not contain it. It does not identify expressly who the disponent owner is as I have said nor does it do so impliedly or by reference.
    2. The Recap describes the Vessel as being:

“mv GRAND FORTUNE

(as described in CP dated Nov. 15 2007)”

The reference to the “… CP dated Nov. 15 2007…” is to the Head Charter and, as I have held already, the version of the Head Charter that passed between the parties is that disclosed by the claimant. This does not have the effect of incorporating by reference into the Charterparty the identification of Bulkers as disponent owner. The Description referred to is of the Vessel in terms of its essential characteristics as set out in lines 4-11 of the Head Charter and in more detail in clause 44, which is entitled “Description clause“. The name of Bulkers set out at line 12 of the Head Charter is not part of the description of the Vessel but is the identification of the Charterer under the Head Charter. The inclusion of the phrase “Otherwise as per CP dated Nov. 15, 2008 with logical alterations” does not assist either, because the reference is effective only to incorporate the terms of the Head Charter into the Charterparty – see The Double Happiness (ibid.) – and then only to the extent that it is not necessary to make ” … logical alterations …“. In my judgment the inclusion of this phrase makes it close to obvious that the intention was to incorporate the terms of the Head Charter save to the extent they were contradicted by or were inconsistent with the express terms of the Charterparty as set out in the Recap. It follows that the principle referred to in paragraph 19(i) above is of no assistance in identifying the disponent owner.

    1. It is next necessary to consider the extrinsic evidence of what the parties said to each other and what they did down to the point at which a contract was concluded for the purpose of attempting to determine who a reasonable person, furnished with the relevant information, would conclude was the disponent owner.
    2. As I have explained, Mr Lambert has died since the events with which this claim is concerned took place. However, there is included within the trial bundle an unsigned statement by Mr Lambert. Mr Lambert’s evidence has not been tested in cross examination whereas Mr Lees’ evidence has been. In the statement Mr Lambert asserts that he acted as sole broker on behalf of both the claimant and Bulk in relation to the fixing of the Charterparty – see paragraph 3. That assertion is not accepted by the defendant and in cross examination it was accepted by Mr Coll (the President of Phoenix Bulk Carriers Inc., the claimant’s agent at the relevant time) that Mr Lambert acted exclusively for the claimant. That reflected Mr Lees’ understanding – see paragraph 9 of his witness statement. In those circumstances, I accept the defendant’s submission that Mr Lambert was not acting for the defendant or Bulk in relation to the Charterparty. This inaccuracy means that some care must be taken in accepting what is said in Mr Lambert’s statement, particularly in preference to what Mr Lees said in evidence save where there is a contemporaneous document that indicates that what is said in Mr Lambert’s statement should be preferred. Mr Lambert asserts that his understanding was that the Charterparty was with Bulk. The basis of that assertion is set out in paragraph 17 of his statement – that his negotiations were carried out with Mr Lees, he only ever spoke to Bulk in the UK and the Draft CP identified Bulk as the disponent owner. He also gives some evidence as to his understanding as to the relationship between Bulk and Bulkers. This understanding is challenged but in any event is immaterial since it is not alleged that Mr Lambert’s understanding was known to Mr Lees.
    3. Mr Lambert’s evidence does not assist on the issues that I have to decide. He does not anywhere assert that the issue of who was to be disponent owner under the Charterparty was the subject of any discussion between him and Mr Lees. In those circumstances, the question as to who the disponent party to the Charterparty was depends on the extrinsic evidence and the conclusion that a reasonable person with that knowledge would have drawn rather than the subjective and unarticulated views of one of the participants to the negotiation.
    4. Mr Lees’ evidence was that he was employed by Bulk as its freight trader, that this was the first time he had fixed a charter with Mr Lambert while he was employed at Bulk and that he conducted his part of the negotiation from Bulk’s offices in London using a London phone number and a Bulk email address. He confirmed that Bulk carried out all the chartering for the group, that there were about 80 ships being traded by the two companies, of which about 25% were controlled by Bulkers. Of this, the information known to both parties (that is by Mr Lambert and Mr Lees) was that Mr Lees conducted his part of the negotiation from Bulk’s offices in London using a London phone number and a Bulk email address.
    5. Mr Lambert also knew or ought to have known that Bulkers traded vessels or at any rate was apparently entitled to trade the Vessel. I reach that conclusion from the following reasons. Both Mr Lambert (and therefore the claimant) and Mr Lees were aware of the Head Charter because it was disclosed as I have described in the course of the negotiations leading to the Charterparty. Whilst there is no evidence as to when precisely it was disclosed, I conclude that it is probable it was disclosed prior to the date of the Recap because it is referred to in the Recap sent by Mr Lambert on behalf of the claimant to Mr Lees and it is clear from the terms of the Recap that the negotiations had proceeded on the basis that the terms of the Head Charter would be incorporated into the Charterparty by reference save where contradicted by the express terms of the Charterparty. Mr Lambert and Mr Lees could not have negotiated on that basis unless the Head Charter had been disclosed by Mr Lees to Mr Lambert in the course of the negotiations. Thus the claimant and its counterparty by their respective agents knew of the existence of the Head Charter and who was identified as the charterer therein.
    6. In my view such an assumption would have been fortified by the fact that the Head Charter identified Bulk as the guarantor of Bulkers’ obligations under the Head Charter. Thus a reasonable person in the position of Mr Lambert would have known from the Head Charter that not merely was Bulkers, not Bulk, the charterer under the Head Charter but that Bulk had elected to guarantee Bulkers’ obligations rather than itself become charterer under the Head Charter thus eliminating any risk of there having been a misidentification of the charterer in the Head Charter. The reference to Bulk’s guarantee within the Head Charter also drew attention to the probability that Bulk and Bulkers were related or associated companies. This largely negatives whatever inferences might otherwise have been properly drawn from the fact that Mr Lees operated from Bulk’s offices in London and used a Bulk phone number and email address.
    7. There is no evidence of any discussion between Mr Lees and Mr Lambert about the identity of the owner prior to the sending and receipt of the Recap. It is not suggested in Mr Lambert’s statement that there was any such discussion. Mr Lees’ evidence was that there was no such discussion. So when he was asked whether he had provided an assurance prior to fixing the Charterparty that Bulk would be the owner, he replied:

“I can’t remember. I have only general recollection, but I cannot remember any conversation like that and I can’t – I wouldn’t be able to have given that assurance to them.”

It was suggested that it was apparent on the face of the Head Charter that the defendant considered it necessary that Bulkers’ obligations be secured by a guarantee from Bulk and that it was implausible in those circumstances that the claimant would have agreed to contract with Bulkers without a further discussion or a guarantee, to which Mr Lees responded:

“Okay, well, we didn’t have a discussion of that kind as far as my memory serves … as far as I can recall we did not have any discussion like that.”

He confirmed a little later that he could not recall the name of Bulkers ever coming up in the course of discussions and a little later still that he and Mr Lambert did not discuss the identity of the disponent owner.

    1. I accept that this is likely to be the case, not least because the contrary is not suggested in Mr Lambert’s statement. The identity of the disponent owner was simply not discussed at any time down to the date when the charter was fixed and the Recap sent. This is unsurprising in the wider commercial context in which the Charterparty was negotiated. The shipping market at that time was extremely strong as is apparent from the increase in rates between Head Charter hire rate and the Recap rate of hire. The claimant had a pressing need for a ship of the Vessel’s type as is apparent from paragraph 5 of Mr Lambert’s statement. In such circumstances, it is unsurprising that the focus of discussion was on the commercial terms of the charter to the claimant rather than who the disponent owner was. Had there been any discussion of who the disponent owner was, the disponent owner would have been identified expressly in the Recap. As I have said earlier, it was not (and is not) suggested that the Recap is an inaccurate summary of what had been agreed between Mr Lambert and Mr Lees.
    2. There is no evidence of there being any disclosure, or even suggestion in the course of the negotiations of the existence, of a sub-charter between Bulkers and Bulk. Not merely is there no evidence that an internal charter from Bulkers to Bulk was mentioned in the course of the negotiations but there is no evidence of such a charter having been entered into. As I have explained, Bulk guaranteed the liabilities of Bulkers under the Head Charter. It would have been far more straightforward for Bulk to have become charterer in place of Bulkers when the Head Charter was being negotiated rather than guarantee Bulkers’ obligations if the intention was then to internally charter the Vessel from Bulkers to Bulk.
    3. Mr Lees’ evidence was that he would not have known if there had been an internal charter from Bulkers to Bulk unless he was told of such an arrangement – see T1/128/3-13 – and that he did not know of such an arrangement in relation to any other ships – see T1/129/1-2 – which led him to respond to the suggestion made on behalf of the claimant that “… there was probably a historical standing internal charter agreement between the two companies …” with the answer that “I have no idea”. However it went a little further than that as is apparent from this exchange between Mr Aston and Mr Lees:

“Mr Aston: Were you aware of any other cases, any other vessels that had been fixed on that basis that [it had been] chartered in by one company and you were asked to charter it out with another company?

A Not to my knowledge at all. As I keep saying, it was a long time ago, but no, I don’t remember that at all.”

Not merely was (i) Mr Lees not told of the existence of an internal charter, but (ii) no evidence was adduced of such an arrangement either generally within the Britannia Group or specifically in relation to the Vessel but (iii) no sensible explanation has been proffered as to why such an arrangement would be made without disclosing the arrangement to the person responsible for arranging a charter of the Vessel. The commercial reality is that if there was an internal charter from Bulkers to Bulk, the only purpose of it would be to enable Bulk rather than Bulkers to trade the Vessel. That being so, Bulk would have informed Mr Lees and Mr Lees would have informed Mr Lambert of the position when supplying him with a copy of the Head Charter. In those circumstances, the suggestion that there was such an arrangement but Mr Lees was not told about it is commercially absurd as is the notion that Mr Lees would not have explained the position when providing the copy of the Head Charter to Mr Lambert.

    1. As I explain below, the practice within the Britannia Group was that the entity that chartered the vessel in was the entity that chartered it out. In those circumstances, if Mr Lees was not told of an internal charter from Bulkers to Bulk, it would mean that Mr Lees (to the knowledge of his relevant managers and directors) would be fixing the charter of the Vessel to a sub-charterer on behalf of an entity other than one with the power to offer the Vessel for sub-charter.
    2. In those circumstances, I conclude that it is improbable that any such internal charter existed but in any event the existence of any such charter was not known to Mr Lees or Mr Lambert. It follows that even if such a charter existed, it’s supposed existence was not part of the extrinsic evidence of what the parties said to each other, did or knew before the Recap was sent and received.
    3. In summary therefore, down to the date when the Recap was sent and received, it was known to both Mr Lambert and Mr Lees that (a) Bulkers was charterer of the Vessel under the Head Charter; (b) therefore, Bulkers had the power to sub-charter the Vessel; (c) the terms of the Head Charter as disclosed reinforced this view by providing that Bulkers’ performance of its obligations under the Head Charter were guaranteed by Bulk; (d) Mr Lees had not suggested that any entity within the Britannia Group other than the entity that had chartered the Vessel under the Head Charter was to be disponent owner under the Charterparty, because he had not been instructed to that effect; and (e) if there had been an internal charter of the Vessel from Bulkers to Bulk (something which I consider to be implausible for the reasons set out above) that was not something known to Mr Lambert and, therefore to the claimant. That Mr Lees was employed by Bulk and was based at Bulk’s London office and used a Bulk email address and phone number was in the circumstances plainly outweighed by the other extrinsic evidence to which I have referred including in particular that a reasonable person with knowledge of the Head Charter would have inferred that Bulk and Bulkers were associated companies from the guarantee referred to in the Head Charter.
    4. In those circumstances, the extrinsic evidence of what the parties knew, said to each other and did down to the date when the Recap was sent and received would have led a reasonable person, furnished with the relevant information, to conclude that Bulkers was the disponent owner. In those circumstances, everything that was said and done thereafter was irrelevant and immaterial. What I say hereafter are findings I make on the basis that this conclusion (or my understanding as to the law in this area) is wrong.
    5. If and to the extent that (contrary to my conclusions set out earlier) it is permissible to refer to conduct occurring after the date when the relevant contract has been entered into for the purpose of ascertaining the parties to that contract, then I consider the following conduct provides significant support for the conclusion that I have reached by reference to the extrinsic evidence I have so far considered.
    6. First, it is not disputed that all the hire due under the Charterparty was paid to Bulkers. Indeed, the claimant’s preliminary final statement of account was entitled “Britannia (sic) Bulkers cp dated May 16 2008“. I accept that this is a strong indicator that the Charterparty was with Bulkers not Bulk and I reject the submission made on behalf of the claimant that this point is neutral on that question. Mr Lees’ oral evidence was that Bulkers did not deal with the receipt of hire on behalf of Bulk – see T1/78/13-24. The instructions for the payment of hire could only have come from either Bulk or Bulkers. It is improbable that Bulk would direct one of its charterers to pay hire to its subsidiary but by the same token it is probable that such an instruction would have been given on behalf of Bulkers if it was the disponent owner of the Vessel. The claimant did not challenge the instruction to pay Bulkers. The Charterparty was a profitable one – the hire due on the Head Charter was US$28,000 less than that payable under the Charterparty. Thus there was no reason for it to be receiving more than the sum needed to pay the hire due under the Head Charter if it was not the disponent owner. It is more probable than not that the instruction to pay Bulkers was given because Bulkers was the disponent owner. That instruction was consistent with the terms of the Head Charter.
    7. Similar considerations apply to the two Letters of Indemnity in evidence. Each was issued by the claimant and each was addressed to Bulkers. Each was a contract by which the claimant agreed to indemnify Bulkers if it delivered cargos shipped aboard the Vessel without production of the original Bills of Lading. In each Bulkers was described as being “The disponent owners of MV Grand Fortune“. If Bulk was the disponent owner then the Letters of Indemnity would and should have been addressed to it, Bulkers would have returned it as being wrongly addressed to it rather than Bulk and Bulk would have refused discharge of the cargo without corrective Letters of Indemnity – see Mr Coll’s evidence at T1/66-70.
    8. There was a dispute as to who was the originator of the text of the Letters of Indemnity. Mr Coll suggested it came from the Britannia side. Assuming that is so, the point being made remains a good one since as Mr Coll accepted at T1/68/18-69/5, if Britannia was sent a Letter of indemnity hypothetically naming a non-existent company that would be a real problem for Britannia. The reality is this: no competent ship manager would issue wording for a letter of indemnity that named the wrong company as disponent owner for the purpose of enabling a cargo to be released otherwise than against the production of original Bills of Lading. I accept that if there had been an internal charter between Bulk and Bulkers, an explanation for the terms of the letters of indemnity could be that within Britannia, Bulk was content that the Letter of Indemnity should be addressed to Bulkers because it was the head charterer from the defendant. However I have decided that there is no evidential basis for concluding that there was such an internal charter. In any event it is inherently more probable than not that Bulkers would request the letter of indemnity because it was the disponent owner to the claimant rather that if it was not.
    9. It is now necessary that I refer in some detail to the Draft CP. That document is relevant only if (contrary to what I have concluded) either (i) extrinsic evidence that post-dates the relevant contract is admissible in order to ascertain the party to the contract not ascertainable from the terms of a document containing or evidencing the relevant agreement or (ii) if I am wrong to conclude that the question can be answered by reference to the extrinsic evidence down to the date when the Recap was sent and received and it is necessary to ascertain the parties to the Charterparty by reference to the intention of the agent of the unidentified party when making the contract.
    10. Before turning to the Draft CP it is necessary to set out the context. As I have said already, Mr Lees was not told of the existence of any internal charter arrangement between Bulkers and Bulk at any stage. He did however possess a copy of the Head Charter and that document identified the charterer from the defendant as being Bulkers and Bulkers’ obligations under the Head Charter as being guaranteed by Bulk. In the absence of any instructions to him to the contrary, his only knowledge as to who could be the disponent owner was that which could be derived from the Head Charter namely that it was Bulkers.
    11. This is important because Mr Lees said in evidence that he would be authorised to fix the charter of any particular vessel by whichever of Bulk or Bulkers was capable of being its disponent owner – see T1/79/5-25. In relation to Bulk, the authorisation came from Mr Znak the managing director of Bulk and in relation to Bulkers from Mr Schultz, its managing director – see T1/79/12-18 and 80/1-4. This is entirely unsurprising. If this evidence is correct, Mr Lees could only have intended to fix the Charterparty on behalf of Bulkers not Bulk and only have had authority to fix it on Bulkers’ behalf unless he was instructed to fix it on behalf of Bulk – a proposition that I have rejected.
    12. Mr Lees’ evidence is that specific instructions were not given as to which entity was to be disponent owner. Rather he was told to fix a specific ship and “… if the ship was on period [charter] with one entity then you had to fix out using the same entity …” – see T1/80/7-10. Again this is entirely unsurprising. Although he was asked repeatedly to confirm that he would fix on behalf of whichever entity he was instructed to fix the charter on behalf of, Mr Lees repeatedly maintained that this was not the basis on which he worked. He said that he was told which entity to fix a vessel out by the documentation on the charterparty in – see T1/80/11-13. Similarly at T1/80/23-25 this exchange took place:

“Q: I suggest… you would have been told to fix out this vessel using one of the two companies.

A: The company that it had been fixed in by.”

As he added at T1/81/9-14:

“I would be chartering out under Plc or the Svendberg entity depending on who that ship was on charter to, so if Plc had a ship on period charter then Plc would be the owner, as I chartered out. If it was Bulkers then the same”

It was suggested to Mr Lees on a number of occasions that he would simply act on whatever instructions he was given as to which entity was to be the disponent owner and on each occasion when this was suggested Mr Lees refused to agree. So at T1/82/8-13, there was this exchange:

“Q: So sometimes you would just be told “fix for Britannia Bunkers A/S”

A: Well, I would be told “could you please fix this ship” and then I would see that the ship was either Plc or Bulkers AS and then that would be the entity that we would fix it out under.

(84/9-14):

A: … if the ship was chartered in by Plc then it would be chartered out of Plc as the disponent owner and likewise if it was AS Bulkers in then it should be chartered AS Bulkers out.”

In these circumstances and in light of my conclusion that it is improbable that there was an internal charter from Bulkers to Bulk, it is close to certain that Mr Lees’ intention was that the Charterparty would be between the claimant and Bulkers, being the entity that to his knowledge had chartered the vessel in. Although Mr Lees gave evidence many years after the events with which this litigation is concerned, given his evidence as set out above, it is more likely than not that he would have recalled being instructed to fix the charter of the Vessel in the name of an entity other than the one that had chartered the Vessel in, had he been given any such instructions, because such an instruction would have been contrary to what was the invariable practice adopted within the Group. Had he received such instructions, it is inherently improbable that Mr Lees would not have made the position clear to Mr Lambert and it is equally clear to me that if such a conversation had taken place, the Recap would have recorded it as being agreed that Bulk was disponent owner.

    1. The document on which the claimant places most reliance is the Draft CP. The claimant submits that this is the best evidence of what in fact had been agreed. I reject that submission because the Draft CP is not part of the extrinsic evidence of what the parties said to each other or did in the period down to the date when the Recap was sent and received. It was a document that came into existence after that event in the detailed circumstances to which I refer later in this judgment. If my conclusion that the Draft CP is not part of the relevant extrinsic evidence is wrong, I accept that it would then be a material consideration to be weighed with the other pre and post contract conduct referred to earlier. In any event, the claimant also relies on the document as demonstrating that Mr Lees did not have authority to conclude the Charterparty on behalf of Bulkers but only on behalf of Bulk.
    2. The key points made by the claimant are that this document was issued by Bulk and it names Bulk as the disponent owner in two separate places, being line 2, where Bulk is defined as being the owner of the Vessel and the signature box at the end, where Bulk is again identified as the owner. The claimant relies on the fact that it was agreed between Mr Lambert and Mr Lees that the latter would draw up the formal Charterparty.
    3. The first reference to the drawing of a formal charterparty came in the 20 August 2008 email referred to earlier, in which Mr Lambert asked Mr Lees “… were you able to draw CP?“. The Draft CP was sent by Bulk to the claimant on 12 September 2008 and was next mentioned in correspondence between Mr Lambert and Bulk in an email dated 14 October 2008, where Mr Lambert states:

“II) Ref: Charter party as drawn by owner and received by chrs on Sep 12 2008

We understand from brokers SITC that he did not draw this cp. In fact broker advises that at time of concluding this fixture, owners agreed to draw this charterparty.

The CP agreement was concluded on May 16th and the CP was never drawn by owner until the dispute over dry docking (clause 93) arose. Approximately 10 days after the dispute arose owners apparently moved rapidly to produce a ‘self-serving’ document containing a dry docking clause that should properly have been deleted/omitted as it is a logical alteration

Furthermore, had the CP been drawn in a timely fashion, charterers would have noticed owners inclusion of the subject clause and chrs would have objected immediately, thereby avoiding all of the damages that have subsequently arisen. “

There then followed a series of proposed amendments to the draft which serve to highlight that the document was a draft. These proposed amendments were never agreed and the document was never signed.

    1. The claimant submits that this document is evidence of the entity that had authorised Mr Lees to contract with the claimant. In support of this contention the claimant relies on Mr Lees’ evidence that on fixing the Charterparty, he would have entered the details on the Group’s “Ship Net” computer system including the names of the owner and charterer, the voyage and the ship – see T1/87/9-88/1. This leads the claimant to submit that whichever employee at Bulk draw up the Draft CP must have obtained the information as to who was the disponent owner from the Ship Net entry and this can only have been the information that was available and applied at the time when the Recap was sent and received. Thus it is submitted it was Mr Lees’ intention to enter into the Charterparty on behalf of Bulk not Bulkers.
    2. The claimant submits there are a number of reasons why this document is critical to arriving at a conclusion concerning the intention of Mr Lees. First, as I have said, it is submitted that the information in the Draft CP could only have come from Ship Net and that in turn could only have been inserted by Mr Lees. There is no evidence that is so however and Mr Lees evidence is that it was more probably drafted by a junior employee using the Recap as the main source of information but also the Head Charter. If that is so there is no explanation as to why Bulk rather than Bulkers was identified as disponent owner. The only explanation offered is error. Although the claimant submits that that error is improbable, I disagree. If the claimant is right about how the Draft CP came to be prepared then it necessarily follows that the Letters of Indemnity were erroneous as was the instruction to pay hire to Bulkers not Bulk. There is no evidence that Mr Lees consulted anything prior to fixture other than the Head Charter.
    3. Secondly, it is submitted that particular care would have been taken in drafting the Draft CP because it is unusual for a disponent owner to draft the formal charterparty. This was all the more the case because three quarters of the Group vessels were controlled by Bulk and the remainder by Bulkers meaning that care had to be taken in identifying the correct company within the group that was the disponent owner. It is important to note the nuanced nature of Mr Lees’ evidence on this issue however. When it was suggested to him that one of the first responsibilities of anyone tasked with drawing up a charter would have been to check on the correct Britannia entity that was letting the vessel concerned, Mr Lees replied: “… That is what should have been done absolutely“. When he was pressed with the implausibility of the wrong entity being identified in the draft, his response was “…Its clear it’s not … you know, its not as it should be.“. Although it is submitted that errors are improbable I do not agree. As I have said, if the claimant is correct in its submission as to the effect of the Draft CP, it follows that in all probability a mistake was made in the manner in which the Letter of Indemnity had been drawn up and in instructing the claimant to pay the hire to Bulker rather than Bulk. Given that the Letters of Indemnity and payment instructions are consistent with the Head Charter, in my view it is more probable that Mr Lees’ intention was that Bulkers be disponent owner and the Draft CP erroneously identified Bulk rather than Bulkers as disponent owner.
    4. Thirdly, it was submitted by the claimant to be obvious that whoever drew up the Draft CP did so with care and attention because multiple amendments including the addition of a “withholding of service” clause that was designed to assist with the underlying dry docking dispute were made which had no basis in the Recap and thus it is implausible that an error would have been made in identifying the correct letting entity.
    5. In my judgment that too does not necessarily lead to the conclusion that Mr Lees’ intention at the time when the contract was made for Bulk to be the letting entity and not Bulkers. These additions are equally consistent with someone within the Britannia organisation being asked to draw up a formal Charterparty having been supplied with the Recap and the Head Charter. I say that because all the drafting corrections suggested on behalf of the claimant in the 14 October email (apart from the deletion of the Withholding of Service clause, which had not been agreed) were corrections to clauses reflecting the Head Charter terms that were argued to be inappropriate by reason of the logical alteration qualification to the incorporation of the terms of the Head Charter. The claimant maintains that it is noteworthy that the list of corrections does not include a correction of the description of the disponent owner even though the claimant’s agent was at pains to ensure that the claimant was correctly described. In my judgment that point does not assist since it is at least as consistent with the identity of the disponent owner not having been discussed and the claimant not being in a position to comment on the issue.
    6. Potentially more important is that if the author of the Draft CP had access to the Head Charter then he or she would or ought to have seen that the charterer from the defendant was Bulkers not Bulk. However, whilst courts do not lightly assume drafting errors of this sort are made, such errors do occur and as I have said, it would appear that even on the claimant’s case mistakes have been made in documents prepared on the basis of information supplied by Bulk.
    7. Fourthly it was submitted that Mr Lees would have checked the charter document carefully himself. However the evidence that is relied on as supporting that proposition is not to that effect. At T1/88/21-23, the exchange between counsel and Mr Lees was as follows:

“Q: And when a draft engrossed charter, drawn up charter came back from a broker, you would typically check it?

A: That was part of my job, yes. … I think every chartering manager or freight trader on the planet would tell you that checking charterparties of deals done is quite a long way down their priority.

Q: But you would do it?

A: you would do it eventually.

Q: You would check it for correctness?

A: Yes.”

Two points emerge from this evidence. First, Mr Lees was not being asked what he did in relation to the Draft CP or even what he would have done in relation to a draft CP issued by Bulk on behalf of a Britannia entity that was the disponent owner but what he would have done if conventional practice had been followed and the charterer (rather than the disponent owner) had drawn a draft Charterparty for signature on behalf of a Britannia entity where that entity was the disponent owner. Secondly, whilst it was no doubt that such documents ought to be checked with care, Mr Lees was impliedly suggesting that did not always happen.

    1. It was submitted on behalf of the claimant that the Draft CP was “… contemporaneous/near contemporaneous evidence …” of whether Bulk or Bulkers was party to the Charterparty. Whilst I accept that it was much closer in time to the date when the Recap was sent and received than the witness statement of and oral evidence from Mr Lees, it remains the case that it was prepared some 4 months after that date and in circumstances where there was an emerging and serious dispute relating to the dry docking of the Vessel. Although provision for that was contained in the Head Charter, no provision was made for it in the Recap. Nonetheless the claimant submits that it is overwhelmingly improbable that the Draft CP did not accurately reflect the position as to who Mr Lees intended the disponent owner to have been. It submits that if that conclusion is to be rejected it involves concluding that whoever draw up the Draft CP did so without reference to the Ship Net system and that the individual responsible drafted the document so as to obtain an illegitimate advantage whilst at the same time making a mistake as to the entity that was the disponent owner. I return to these points in a moment.
    2. I reject as immaterial the fact that the claimant or Mr Lambert did not correct the identity of the disponent owner. As I have explained, that issue was never discussed between Mr Lambert and Mr Lees in the negotiations leading to the sending and receipt of the Recap. Similarly, I reject as immaterial the assertion that Mr Lees failed to correct the error. As I have said the evidence was that he would check incoming draft charterparties not that he checked this or any outgoing ones. His evidence was that he did not draw the Draft CP and he does not recall checking it – see para. 10 of his witness statement and his oral evidence at T1/124 – although he accepted it would have been his job to check it (by implication if anyone had checked it) – see T1/108/5-6. His evidence is that it would not have been sent to anyone for checking – see T1/107/17. His evidence both in his witness statement and orally was that the document was drawn up by a secretary or other junior colleague because it was in essence an administrative task – see T1/107/6-8.
    3. Ultimately, the defendant’s case is that the inclusion within the Draft CP of Bulk as disponent owner rather than Bulkers was an error. Whilst I accept that the insertion of the Withholding of Service clause, suggests that someone with knowledge of the underlying dry docking dispute had directed that such a provision be included, that does not lead necessarily to the conclusion that similar thought and care had been devoted to the remainder of the document. Indeed, the comments on the draft from Mr Lambert suggest that all the person preparing the document had done was to attempt to mirror within the Draft CP the provisions of the Head Charter without taking account of the “… logical alterations …” proviso. The only exception to this appears to be the addition of the words “and without guarantee” to the vessel’s description in clause 44. Inserting a clause that had not been agreed does not lead to the conclusion that the document had been prepared erroneously in other respects. The document is clearly a pro forma to which alterations have been made. Mr Lees evidence was that in order to be able to draft a charterparty such as the Draft CP, the person concerned needed to have the relevant template on his or her computer. I accept that this is probably correct given the appearance of the document. It is a standard document to which insertions and deletions have been made electronically. It is conceivable that the description of the disponent owner as being Bulk was left in the draft in error and not spotted. Such drafting errors are not unknown in many fields of activity. There is some evidence that such mistakes occurred in relation to other documents material to this case – see for example the draft head Charter relied on by the defendants where the charterer is described as being Bulkers but the continuation sheets refer to the charterer as being Bulk. They occur because the main focus of attention is elsewhere. At the time when the Draft CP was being drawn up, the identity of the disponent owner was not a contentious issue.
    4. The Draft CP is relevant only to the question concerning Mr Lees’ intention when making the contract in order to ascertain on whose behalf he was then acting. The Draft CP was not drafted by him, was not in fact approved or checked by him and was not prepared by reference to information provided by him. The information that he had available to him at the time the Charterparty was agreed in the terms of the Recap was that contained in the Head Charter. There is no evidence of any internal charter between Bulkers and Bulk nor any commercial reason why there should have been such an arrangement.

Conclusions

  1. For the reasons set out above, the only admissible evidence relevant to the question who was the disponent owner was evidence of what Mr Lambert and Mr Lees said to each other and what they did. Applying this test, in my judgment it is plain that the intended disponent owner under the Charterparty was Bulkers because it was the only entity entitled to trade the Vessel under the Head Charter. If and to the extent that evidence of conduct occurring after the event is relevant, I consider that the terms of the Letters of Indemnity and the instructions to pay Bulkers is much more significant than the terms of the Draft CP, which I conclude erroneously identified the wrong Britannia entity as the disponent owner. In those circumstances, this claim fails and is dismissed.

Rinehart v Rinehart [2020] NSWSC 68

Medium Neutral Citation: Rinehart v Rinehart [2020] NSWSC 68
Hearing dates: 15-19, 23, 25 July 2019
Date of orders: 14 February 2020
Decision date: 14 February 2020
Jurisdiction: Equity
Before: Ward CJ in Eq
Decision: 1. Pursuant to s 8(1) of the Commercial Arbitration Act (NSW) and s 8(1) of the Commercial Arbitration Act (WA), refer the parties to arbitration of the disputes the subject of this proceeding other than the claim for relief pursuant to s 247A of the Corporations Act 2001 (Cth).
2.   Stay the balance of the proceeding pending determination of the arbitration of the disputes so referred to arbitration in accordance with order 1.
3.   Stay the following motions pending the determination of the said arbitration: notice of motion filed on 27 April 2017 by Bianca (referred to in these reasons as motion (ii)); notice of motion filed on 14 August 2018 by Gina (referred to in these reasons as motion (vii)); notice of motion filed on 11 June 2019 by Bianca (referred to in these reasons as motion (viii)); and notice of motion filed on 20 June 2019 by HPPL (referred to in these reasons as motion (ix)).
4.   By consent, adjourn sine die notice of motion filed on 12 May 2007 by Bianca (referred to in these reasons as motion (iv))
5.   Direct the parties to file brief written submissions as to costs within 14 days with a view to determining that issue on the papers.
6.   Direct the parties to file brief written submissions within 14 days as to whether (if that be the case) they oppose the referral of this matter (on the Court’s own motion) to mediation; and, in any event, as to the appropriate time frame within which any such mediation may expeditiously take place.
Catchwords: COMMERCIAL ARBITRATION – arbitration agreement – application for referral to arbitration pursuant to commercial arbitration legislation and for stay of proceeding – alternative applications for stay based on case management principles and as abuse of process – held proceeding involved matters under the arbitration agreement and parties must be referred to arbitration – whether application for access to books and records of company under s 247A Corporations Act was matter under arbitration agreement and was arbitrable – held s 247A application not a matter under arbitration agreement but should be stayed – stay of other motions including unconscionability motion in which anti-arbitration injunction sought – intention of Court to refer parties to mediation

 

JUDGMENT

    1. HER HONOUR: In mid-2017, referred to me from the duty list, was a dispute as to the order in which various interlocutory applications should be heard in proceedings which had been commenced by the plaintiff, Bianca Rinehart, in her capacity as trustee of the Hope Margaret Hancock Trust (the HMH Trust) following the receipt by her of judicial advice given by Rein J (see Bianca Hope Rinehart as trustee of The Hope Margaret Hancock Trust [2017] NSWSC 282, to which I will refer as the Judicial Advice Decision). As in other judgments involving these parties, I will generally refer to the Rinehart family members by their first names, without intending any disrespect.
    2. The interlocutory applications that were then before me were the following:
      (a) an application by Hancock Prospecting Pty Ltd (HPPL), the second defendant, by notice of motion filed on 21 April 2017, seeking referral of the parties to arbitration and/or a stay of the proceeding (HPPL’s referral/stay motion);
    3. (b) an application by Bianca, by notice of motion filed on 27 April 2017, for leave to bring a derivative proceeding in the name of HPPL (Bianca’s s 237 application) and to inspect its books (Bianca’s s 247A application) (together, Bianca’s leave motion);

 

    1. (c) an application by the first defendant (Gina Rinehart), by notice of motion filed on 11 May 2017, seeking essentially the same relief as sought in HPPL’s referral/stay motion, namely the referral of the parties to arbitration and/or a stay of the proceeding (Gina’s referral/stay motion); and

 

    (d) an application by Bianca, by notice of motion filed on 12 May 2017, seeking to restrain Gina (the Executive Chairman of HPPL) and the third and fourth defendants (respectively, a director and an executive director/chief financial officer of HPPL) from, in effect, controlling or influencing HPPL’s conduct of this proceeding (Bianca’s conflict motion).

  1. The dispute as to sequencing arose, in essence, on the basis of the defendants’ contention that the disputes the subject of the proceeding fell within the ambit of an arbitration agreement between the parties and were required to be referred to arbitration. For the reasons published in 2017 (see Rinehart atf The Hope Margaret Hancock Trust v Rinehart [2017] NSWSC 803), I concluded that the hearing of the various interlocutory applications should be deferred until the then awaited decision of the Full Court of the Federal Court (the Full Court) in an appeal from orders that had been made by Gleeson J (in Rinehart v Rinehart (No 3) (2016) 257 FCR 310; [2016] FCA 539; to which I will refer as the Gleeson Decision) in relation to a dispute involving the very same arbitration clause the subject of the respective referral/stay motions in this Court.
  2. I was of the view at that stage that, subject to anything that might emerge following the Full Court’s decision, it would be in the interests of the just, quick and cheap resolution of the issues arising in the four interlocutory applications for them all then to be listed for hearing at the same time (and that it would then be a matter for the judge hearing those applications to determine the order in which argument on the respective motions would most conveniently be addressed and, ultimately, the order in which the applications should be determined).
  3. What then transpired was that, after the Full Court handed down its decision in late 2017 from the appeal in relation to the Gleeson Decision (see Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170, to which I will refer as the Full Court Decision), there was an application by Bianca (and her brother, John Hancock) for special leave to appeal to the High Court of Australia (the High Court) from that decision.
  4. On successive occasions when the matter came back before me for directions, I was of the view that the continued stay of the interlocutory applications was appropriate pending the outcome, first, of the special leave application and, then, of the appeal itself (special leave, limited in its scope, subsequently having been granted by the High Court – see further below). It was then anticipated that the High Court would resolve the conflict in approach as to the construction of the arbitration clause in question (being cl 20 of the confidential settlement deed referred to as the Hope Downs Deed) that had emerged as between the Full Court (in the Full Court Decision) and that of the Court of Appeal of this Court in an earlier decision (see Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95 to which I will refer as the Court of Appeal Decision).
  5. The High Court handed down its decision on the appeal from the Full Court Decision in May 2019 (see Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 to which I will refer as the High Court Decision). The High Court Decision endorsed the approach to construction that had been adopted by the Full Court (and, on one view, went even further in relation to the ambit of the arbitration clause in question). Ironically, though perhaps not surprisingly given the history of this ongoing litigious saga, there is now a dispute between the parties as to whether the High Court has in fact resolved that conflict as to the construction of cl 20 of the Hope Downs Deed at least insofar as the issues in the present proceeding are concerned (and hence as to whether, as a matter of precedent, the construction of the arbitration clause that was adopted by the Court of Appeal remains binding on me notwithstanding the High Court Decision). I consider that issue in due course.
  6. Meanwhile, however, the interlocutory motions in this proceeding have multiplied. Some interlocutory disputes between the parties have been able to be determined in advance of the present motions (for example, those relating to disputes as to the production of documents on subpoena or otherwise pursuant to the compulsory processes of the court); as have other disputes in in other proceedings in this Court between the respective parties. So, for example, disputes as to the requirement for production to Bianca (in her capacity as the new trustee of the HMH Trust) by Gina (as the former trustee of the HMH Trust) of documents of the HMH Trust as ordered by Brereton J, as his Honour then was, in 2015 (see Hancock v Rinehart [2015] NSWSC 646; (2015) 106 ACSR 207, to which I will refer as the 2015 Decision) and as subsequently clarified and confirmed by his Honour in Hancock v Rinehart (Trust Documents) [2018] NSWSC 1684, to which I will refer as the 2018 Decision) have been dealt with during the period in which the extant notices of motion in the present proceeding were awaiting hearing and determination.
  7. It is not necessary to say much further here, by way of introduction as to the substantive dispute between the parties in the present proceeding (though in due course it will be necessary to consider the pleaded claims in some detail) other than to note that the substantive dispute is the claim by Bianca, as trustee of the HMH Trust, against Gina (and others) for declaratory and other relief in relation to alleged oppressive conduct, breach of directors’ duties and breach of contract in relation to matters occurring with respect to, among other things, the payment (or non-payment) of dividends by HPPL. Bianca says that the central aim of the statement of claim in the present proceeding is the recovery and protection of trust assets.
  8. This proceeding is but one of a number of curial and arbitral proceedings that have been commenced across the country over more than a decade involving one or more of the parties to the present proceeding; those other proceedings raising similar (though I accept not always the same) issues and being at various stages of completion. At least by reference to the plethora of judgments published to date in the various proceedings, it can be seen that the Rinehart disputes have occupied an inordinate amount of court time, both at first instance and in appellate courts, largely on interlocutory issues.
  9. In summary, those proceedings (excluding the present proceeding) include: (i) the proceeding brought by Bianca and John in this Court for the removal of Gina as trustee of the HMH Trust (the Removal Proceeding), there remaining a dispute in that proceeding as to issues in relation to the production by Gina (as the former trustee) of documents of the trust to Bianca (the present trustee); (ii) an arbitral proceeding commenced by Bianca and John in 2012 pursuant to cl 20 of the Hope Downs Deed (referred to in submissions, and in these reasons, as the French Arbitration since the Hon Robert French AC has now been approached to arbitrate that dispute but which was initially before the Hon Tony Fitzgerald QC as arbitrator) in which complaint was made as to the non-payment of dividends by HPPL; (iii) the arbitral proceeding which was the culmination of the referral/stay applications in the Federal Court proceeding, in which allegations of misconduct by Gina as trustee are made (those referral/stay applications being the subject of the Full Court Decision and High Court Decision) (this arbitral proceeding being referred to as the Martin Arbitration since the presiding arbitrator is the Hon Wayne Martin AC QC); and, (iv) two related proceedings in the Supreme Court of Western Australia (one or both of which being referred to in submissions as the Hope Downs Proceeding), involving a number of third parties, in which various of the parties have now been referred to arbitration on the counter-claim brought by Bianca and John (the balance of the proceedings not having been stayed) (see the decision of Le Miere J in Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 10) [2018] WASC 407, to which I will refer as the Le Miere (No 10) Decision, which has been the subject of both an appeal and cross-appeal heard in November last year and on which the Court of Appeal of the Supreme Court of Western Australia is currently reserved).
  10. Senior Counsel for Bianca, Mr Thomas SC, has emphasised the differences in the allegations made in the present proceeding and those made in other proceedings (in particular, in the Federal Court proceeding that led to the Federal Court Decision and in the proceedings in the Supreme Court of Western Australia that have led to a number of decisions by Le Miere J including the Le Miere (No 10) Decision, which sets of proceedings have all now been referred, either in whole or in part, to arbitration). Mr Thomas argues that any relevant “interconnectedness” or commonality is between the Federal Court and the Western Australian proceedings; and not the present proceeding.
  11. There is, however, considerable force in my opinion to the complaint made by HPPL (see for example at T 172), if not also to the same extent to the similar complaint by Gina, that it has been vexed by a succession of proceedings across the country in which Bianca (albeit in different capacities – i.e., in her personal capacity in the other proceedings and as trustee in the present proceeding) has adopted inconsistent positions and has sought or is seeking inconsistent relief. That inconsistency is most glaring in relation to the question as to the beneficial ownership of the Hope Downs mining tenements (the claim in other proceedings being that these assets are held on constructive trust for Bianca and her siblings but, in the present proceeding, one or more of the claims being premised on HPPL having beneficial ownership of the mining tenements); that inconsistency being of no little significance when it comes to the exercise of any discretion to stay the present proceeding whether in whole or in part and, in particular, to the alternative bases on which the stay of the proceeding is presently sought. Bianca denies that there is any relevant inconsistency (as to which I say more in due course).
  12. There is an inescapable sense of déja vue in at least some of the arguments now raised by Bianca. This is particularly so in the context of Bianca’s latest (unconscionability) motion, having regard to the applications recently made by her (and John) in the proceedings in Western Australia. Bianca here emphasises that Le Miere J declined to hear that unconscionability application prior to the referral to arbitration and stay of the counter-claims ordered in those proceedings (see Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 9) [2018] WASC 122, to which I will refer as the Le Miere (No 9) Decision). In that regard, Bianca says that Le Miere J did not approach her unconscionability application in the Western Australian proceeding as a “true anti-arbitration” application (see T 6) but, rather, assessed it as a submission as to why the application for referral to arbitration should be dismissed. Bianca argues that such an approach is on a “different plane” to the present unconscionability motion (having regard to the jurisprudential nature of an anti-arbitration injunction) and she disputes that there has been any issue estoppel or other determination affecting her ability here to pursue the unconscionability motion. That said, it is relevant to note that (however one characterises the way in which the issue was ultimately approached by Le Miere J) the submissions made for Bianca on that occasion (to which I was taken in the course of hearing the present applications) bear a marked similarity to the way in which the unconscionability motion is here sought to be put.
  13. By their respective amended referral/stay motions, Gina and HPPL relevantly seek: (i) a referral to arbitration and the dismissal or permanent stay of the proceeding in this Court pursuant to Commercial Arbitration Act 2010 (NSW), s 8(1) (the Commercial Arbitration Act) and/or Commercial Arbitration Act 2012 (WA), s 8(1) (the WA Commercial Arbitration Act) (referred to in submissions as the s 8 Stay Applications) or, alternatively, the referral of some of the matters in the proceeding to arbitration (and, if there is a referral of only some, but not all, of the proceeding then a stay of the balance of the proceeding pursuant to the said commercial arbitration legislation (referred to as the s 8 Case Management Stay Applications) (see prayers 1-3 of HPPL’s amended referral/stay motion; prayers 1-3 of Gina’s amended referral/stay motion); (ii) alternatively, a temporary stay of the proceeding pending the determination of the other “related” proceedings (referred to as the Case Management Stay Applications) (see prayers 4-6 of HPPL’s amended referral/stay motion; prayer 4 of Gina’s referral/stay motion); and (iii), further in the alternative, an application for a stay of the whole of the proceedings on the basis that the proceedings are an abuse of process (referred to as the Abuse of Process Stay Applications) (see prayer 8 of HPPL’s amended referral/stay motion; prayer 5 of Gina’s referral/stay motion).
  14. The claims for a stay of the proceeding on these alternative (case management and abuse of process) grounds are put on the basis of a fundamental inconsistency between the respective proceedings.

The panoply of interlocutory motions as at 15 July 2019

      1. By the time of the hearing of the respective referral/stay motions, which commenced on 15 July 2019, the full range of extant interlocutory motions in the present proceeding comprised:
        (i) HPPL’s referral/stay motion (referred to at [2(a)] above), HPPL moving on an amended notice of motion dated 15 July 2019 and filed on 16 July 2019 in that regard;
      2. (ii) Bianca’s leave motion (referred to at [2(b)] above);

      1. (iii) Gina’s referral/stay motion (referred to at [2(c)] above), Gina moving on an amended notice of motion dated 26 June 2019 in that regard;
      1. (iv) Bianca’s conflict motion (referred to at [2(d)] above);
      1. (v) Bianca (and John)’s application, by notice of motion filed 16 April 2018, to restrain Gina and HPPL from taking any steps to prosecute the French Arbitration commenced by Bianca and John pursuant to cl 20 of the Hope Downs Deed (Bianca’s anti-French Arbitration motion);
      1. (vi) Gina’s application, by notice of motion filed 12 June 2018, for,

    inter alia

      1. , the summary dismissal or stay of Bianca’s anti-French Arbitration motion or to refer that motion to arbitration or otherwise to restrain Bianca and John from taking or participating in any step to advance or prosecute that motion (Gina’s stay of anti-French Arbitration motion);
      1. (vii) Gina’s application, by notice of motion filed 14 August 2018, to refer the disputes between the parties to mediation (Gina’s mediation motion);
      1. (viii) Bianca’s application, by notice of motion filed 11 June 2019, to restrain Gina and HPPL from taking any steps, directly or indirectly, to obtain or request an order staying or referring these proceedings, or any part thereof, to arbitration in reliance on the Hope Downs Deed or upon any right or interest said to arise thereunder (Bianca’s unconscionability motion) (this has been described by Bianca, as adverted to above, as a “true” anti-arbitration injunction – see T 5.5; and described by Gina as Bianca’s “Unconscionability Motion” – see T 2.35, since it proceeds on the basis that it is unconscionable and/or an abuse of process for Gina and HPPL to seek to refer the disputes to arbitration (i.e., that Gina and HPPL are unconscientiously seeking to enforce an agreement entered into in breach of trust by Gina)). I have in these reasons adopted HPPL’s nomenclature simply to avoid confusion between the respective anti-arbitration motions;
      1. (ix) HPPL’s application, by notice of motion filed 20 June 2019, effectively amounting to an anti-anti-arbitration application to refer Bianca’s unconscionability motion to arbitration pursuant to

    Commercial Arbitration Act 

      1. s 8(1) and a stay of that motion in this Court or alternatively a stay on case management grounds of as an abuse of process (HPPL’s stay of Bianca’s unconscionability motion). Similar relief is sought by Gina in her amended referral/stay motion; and, finally,
      (x) Gina’s application, by notice of motion filed on 14 July 2019, seeking confidentiality orders in relation to certain parts of the evidence.
  1. True to form, at the outset of the hearing of the referral/stay motions, there was again debate between the parties as to the sequence in which the respective motions should be heard (and, indeed, as to whether all were ready at that stage to be heard). In this regard, Bianca goes so far as to complain of procedural unfairness (see below) were the referral/stay motions to be determined before Bianca’s unconscionability motion. It is therefore necessary, not least because of that complaint, here to explain the procedural course that I have followed in relation to the hearing of the respective motions.
  2. Gina’s position in that regard was that (adopting the numbering of the motions as listed at [17] above): motions (i) and (iii) were ready to be heard; there was an issue as to whether motion (ii) should now be heard; it was anticipated that motions (iv), (v) and (vi) could be dealt with by consent orders; it was accepted that motion (vii) could be dealt with at a later stage; motions (viii) and (ix) were before the Court only for directions (as had been my direction when the matter was before me for directions on 26 June 2019); and motion (x) would arise at some stage when affidavit evidence was read in the course of the hearing of motions (i) and (iii) (see T 1-3). It was submitted by Gina that the appropriate course would be to hear motions (i) and (iii) and, at the end of argument on those motions, to make a determination as to whether to proceed to hear Bianca’s s 247A application for access to books and records of HPPL (which was part of Bianca’s leave motion, i.e., motion (ii)). HPPL supported that position (see below).
  3. Bianca’s position, broadly, was as follows: there was no dispute as to motions (i) and (iii) then being ready to be heard; nor was there any dispute that Bianca’s s 237 application (part of motion (ii)) was not to be heard at that stage but that Bianca’s s 247A application should be heard during the week that had been set aside for this matter (as I had indicated at earlier directions hearings would be the case, albeit expressly subject to any further argument from Gina or HPPL that might later dissuade me from so proceeding); that it was appropriate that motion (iv) not be dealt with pending determination of the stay issue and Bianca’s s 247A application; that motions (v) and (vi) did not need to be subject of further argument at that point; and that motion (vii) (seeking an order for mediation) was premature (in advance of determination, in particular, of Bianca’s s 247A application and the outcome of the production of documents ordered following the 2015 Decision and 2018 Decision in light of the need for transparency at any mediation). Nothing was said in relation to the sequencing of motion (ix), which presumably is accepted to travel with motion (viii); and no issue was taken by Bianca as to motion (x) being dealt with in the course of argument during the hearing of the motions that were to be heard that week.
  4. Although Bianca accepted that motion (viii) had only been listed by me for directions on 15 July 2019 (and did not seek to cavil with the direction that had been made to that effect, after debate with Counsel, on 26 June 2019), Bianca emphasised that Bianca’s unconscionability motion was properly characterised as an anti-arbitration application, the jurisprudential basis for which being the court’s inherent jurisdiction to control its own processes. It was submitted that, even if (contrary to her contention) Bianca is bound by the Hope Downs Deed, it would be unconscionable and an abuse of process for HPPL and Gina to rely upon it to seek a stay or referral of the relevant application(s); and that therefore, logically, Bianca’s unconscionability motion should be heard before the hearing of the referral/stay motions (or at least before the determination of those motions). Further, Bianca’s position (with which the defendants cavil) was that, by definition, Bianca’s unconscionability motion could not be referred out to arbitration (see T 8.2).
  5. What was of concern to me was that four and a half days had (for some time) been set aside in the court’s diary for the hearing of the various interlocutory applications (that listing having been fixed before the latest of those motions – relevantly, Bianca’s unconscionability motion and HPPL’s stay of Bianca’s unconscionability motion – had been filed) and I did not consider it consistent with the just, quick and cheap resolution of the real issues in dispute (see Civil Procedure Act 2005 (NSW) (Civil Procedure Act), s 56) for those hearing dates to be vacated. As I saw it, the difficulty in proceeding at that stage with motion (viii) (even leaving aside the defendants’ arguments that it, too, is required to be referred to arbitration) was that: it had been filed only shortly before the dates which had been set aside for the hearing of the interlocutory motions; on 26 June 2019 I had made it clear that it would only be listed for directions on 15 July 2019; and the defendants had indicated that, if it were now to be heard, then they would wish to consider whether to file evidence in relation to that motion (which would have delayed matters yet again). Furthermore, Mr Thomas, in his opening written submissions on sequencing, had expressly acknowledged the likelihood that not all the motions might be able to be heard that week (even leaving aside the question of motion (viii)) (though pressing for there to be a hearing of motion (ii) insofar as it related to Bianca’s s 247A application).
  6. What I indicated that I was then contemplating was that I would proceed on the basis that I would hear motions (i) and (iii); and then, if I were not at that stage persuaded that I should not do so, I would proceed to hear Bianca’s s 247A application; and that I would leave Bianca’s unconscionability motion to be heard at some later period but before determination of the other motions so that if Bianca succeeded on what is said by her to be the anterior point then one would not reach the other motions (see T 10.35). Pausing here, I note that the argument of the defendants is that the effect of Commercial Arbitration Act, s 8 is that it is not open to me to hear and determine Bianca’s s 247A application at all and that there is no choice but that it, too, must be referred to arbitration.
  7. Senior Counsel for Gina, Mr Brereton SC, indicated that he would be in a position to make (and did in due course make) some responsive submissions in relation to the submissions made for Bianca in support of motion (viii), such that it could then be determined when substantively, if at all, Bianca’s unconscionability motion should be heard (see T 13.39). Thus it was proposed that the “sequencing debate” (as to the listing/determination of Bianca’s unconscionability motion and the motions responsive to that motion) should be dealt with once full argument had been heard on the referral/stay motions.
  8. Senior Counsel for HPPL, Mr Giles SC, supported Mr Brereton’s position in this regard, indicating that his client’s position was that directions as to Bianca’s unconscionability motion (motion (viii)) would best be dealt with after argument on motions (i) and (ii), submitting that: the issue on Bianca’s unconscionability motion had already been determined; that the challenge by Bianca was caught by the arbitration agreement; and that, as a matter of principle, the attack by Bianca was directed at the wrong point (namely, to the Hope Downs Deed rather than to the arbitration agreement itself) (see T 14.22ff).
  9. Bianca’s position as to sequencing of the motions nevertheless remained, as had been articulated in written submissions, that it would be procedurally unfair for the referral/stay motions to be determined prior to Bianca’s unconscionability motion as that would “defeat the very right that she seeks to vindicate by pursing the application”. I note at this point that I do not accept that this is the necessary consequence of such a determination, since it would remain open for an arbitrator to determine the issue of unconscientious reliance on the Hope Downs Deed at the outset of any arbitration, but I say more about this in due course.
  10. It was in that context that I then proceeded to commence hearing motions (i) and (iii). As it transpired, the hearing of those two referral/stay motions occupied more than the time that had been set aside in the first place with a further full day and a half being required in order to complete the hearing of those motions. This was not least in order to assuage Mr Thomas’ concern that there be close to an equivalent amount of time allowed for oral submissions on Bianca’s behalf (see T 159.35), given the considerable time that had been taken in submissions for the defendants (primarily, it must be said, Gina’s submissions, she taking the running of much of the argument). There was, therefore, ultimately no time for oral argument on the substance of Bianca’s s 247A application, let alone on Bianca’s unconscionability motion and HPPL’s stay of Bianca’s unconscionability motion, in any event.
  11. Hence, these reasons deal substantively only with motions (i) and (iii), which (as set out below) I consider should be determined now, notwithstanding that Bianca’s unconscionability motion has not yet been heard (beyond the making of the brief opening submissions advanced by the parties in relation thereto). Furthermore, the conclusion I have reached on motions (i) and (iii) points to the steps that I consider should now be taken in relation to the balance of the extant motions, as I will explain in due course.
  12. For completeness, I note that, during the course of the hearing of motions (i) and (iii), it was agreed between the parties that it would be appropriate for motions (v) and (vi) simply to be dismissed with no order as to costs (on the basis that it was understood that the dismissal would not give rise to any issue estoppel) since events have to some extent overtaken those applications; and orders were made accordingly (see T 48). Orders were also made pursuant to motion (x) pursuant to the Court Suppression and Non-publication Orders Act 2010 (NSW). Thus, those three motions have now effectively been disposed of. As to motion (iv) (Bianca’s conflict motion), Mr Thomas did not have instructions to consent to its dismissal but agreed that it would be appropriate for it to be adjourned sine die, which is the course that I will follow. There will thus remain yet to be disposed of (albeit now mostly to be stayed in accordance with these reasons) only motions (ii), (vii), (viii) and (ix).

Summary of my conclusions

  1. In summary, for the reasons set out below, I have concluded as follows:
    • that cl 20 is an apparently valid arbitration agreement binding on Bianca in her personal capacity and, on its face, binding on her in her representative capacity as successor to Gina as the trustee of the HMH Trust, noting also that the extended definition of “party” under s 2 of the Commercial Arbitration Agreement Act (and s 2 of the WA Commercial Arbitration Act) would arguably encompass a person, such as Bianca, through whom (in her capacity as trustee) claims are made for the benefit of beneficiaries of the HMH Trust who are themselves parties to that arbitration agreement;
    • that any challenge to the efficacy of the Hope Downs Deed to bind Bianca (as successor trustee of the HMH Trust) is one that should be left to the arbitrator to determine (having regard, first and foremost, to the common law principle of separability and the relevant provisions of the commercial arbitration legislation to which I refer in due course, but also, as a matter of discretion, given the overlap between the allegations on which that challenge is based and those raised in the other “related” proceedings);
    • that the High Court has, as a matter of necessary inconsistency, effectively overruled the construction placed by the Court of Appeal on cl 20 of the Hope Downs Deed, including insofar as it relates to substantive claims of the kind here made;
    • that on the High Court’s construction of that clause, which is binding on me, the present proceeding raises a number of matters which, pursuant to cl 20 of the Hope Downs Deed and s 8(1) of the Commercial Arbitration Act (or the equivalent provision of the its Western Australian), must now be referred to arbitration (being matters that are part of an interconnected dispute, viewed holistically and having regard to the context, on which the High Court placed emphasis, in which the arbitration agreement was entered into by the parties thereto);
    • that Bianca’s s 247A application, though arbitrable, is not per se a dispute caught by cl 20 of the Hope Downs Deed and thus is not required to be referred to arbitration; and
    • nevertheless, that Bianca’s s 247A application, raising as it will inevitably do (at least as presently put forward) factual matters the subject of disputes that do fall under the arbitration clause, should as a matter of discretion be stayed pending the outcome of the arbitration of the substantive disputes and, therefore, that it is not necessarily separately to determine the application for relief on the alternative bases (being the stay on the grounds of case management principles or, alternatively, as an abuse of process).
  2. As to that last point, had it been necessary to determine the alternative bases for the stay sought by the defendants, I would have concluded that, as a matter of case management, the striking overlap between the factual allegations in this and other proceedings and the inconsistent bases on which relief is sought in this and the other proceedings (particularly, as to who is the beneficial owner of the Hope Downs mining tenements) warrant the exercise of the discretion to stay the present proceeding pending the determination of the other related proceedings. In that regard, I consider that there would be much to commend the consolidation of the respective arbitral proceedings, such that all issues in relation to, say, the dispute as to the non-payment of dividends and the like could be dealt with in the same proceeding. I say this notwithstanding that the claims made by Bianca in the respective proceedings are made by her in different capacities (i.e., both for her own personal benefit and for the benefit of beneficiaries of the HMH Trust, of whom she is one). I also note that an observation to similar effect was made by Rein J in the Judicial Advice Decision at [40].
  3. As to the alleged abuse of process, it cannot be said (nor was it suggested) to have been an abuse of process for Bianca to have commenced the present proceeding in her capacity as trustee at the time that she did in circumstances where she did so after having obtained judicial advice (see the Judicial Advice Decision). However, I consider that the continuation of claims in at least two sets of proceedings, premised on inconsistent factual assumptions (as to the ownership of the Hope Downs mining tenements), does amount to an abuse of process and that this would have been a separate reason to warrant a discretionary stay of the present proceeding pending the determination of the other “related” proceedings.
  4. As to Bianca’s unconscionability motion, it is not appropriate at this stage (pending a hearing of the merits of the motion) to enter into the debate as to whether (as HPPL and Gina contend) it, too, is required to be referred to arbitration. However, in any event, it is not necessary to hear that motion because I consider that to proceed to do so at this stage would offend against the common law principle of separability (see Full Court Decision at [341]ff) and because, as a matter of discretion, I have concluded that Bianca’s unconscionability motion should be stayed pending the outcome of the arbitration of the disputes now to be referred to arbitration. The allegations sought to be made by Bianca as to why the matter should not be referred to arbitration can be put before the arbitrator or arbitral panel in the course of the arbitration (that is, as arguments as to why the arbitration should not proceed) and dealt with in that forum (with the bargained-for confidentiality provided for under the Hope Downs Deed, at least at first instance, without, in my opinion, any obvious or undue prejudice to the position of Bianca as trustee or of the beneficiaries of the HMH Trust). Whereas, were I to proceed now to hear Bianca’s unconscionability motion (based as it is on at least some of the very same allegations of misconduct as appear to underlie various of the substantive claims made in this proceeding) this would inevitably give rise to the very public hearing that the parties to the arbitration agreement in my opinion agreed to avoid. I accept that there is a public interest in the supervision by the court of the duties of a trustee and under the Corporations Act 2001 (Cth) of the duties of a director, but that public interest must be weighed against other interests including the public interest in the finality of litigation and in the due administration of justice.
  5. The consequence of the conclusions I have thus reached is that: on motions (i) and (iii), I will refer the parties to arbitration of all matters other than Bianca’s s 247A application and will stay the balance of the proceeding (i.e., the application for relief pursuant to Corporations Act 2001 (Cth), s 247A) pending determination of the arbitration; motion (ii) (Bianca’s leave motion) will thus be stayed pending determination of the arbitration (subject to one qualification, which I make below); motion (iv) will by consent be adjourned sine die; motions (v) and (vi) have already been disposed of, as noted earlier; motion (vii) will be stayed pending the determination of the arbitration (subject to the further qualification, which I make below); motions (viii) and (ix) will be stayed pending the determination of the arbitration; motion (x) has already been disposed of as noted already; and I will direct the parties to file brief written submissions as to the costs orders that should be made consequent upon the determination of the above motions.
  6. The two qualifications to which I have referred above are these.
  7. First, my conclusion that Bianca’s s 247A application should be stayed is because, as I understand it, the hearing of that application will or is likely to involve a public airing of the matters the subject of the bargained-for confidentiality and, to the extent that the documents sought are relevant to the matters to be referred to arbitration, it will be open to Bianca to seek production of documents in the context of the arbitration. If, however, there are particular, limited categories of documents required by Bianca for the purpose of her administration of the HMH Trust, as its trustee (other than for the purposes of the prosecution of the claims the subject of this proceeding), then it may be that this would not give rise to the same difficulty and hence I do not rule out the possibility of entertaining an isolated s 247A application were that to be unconnected to the disputes the subject of the matters now to be referred to arbitration (and were it unlikely to involve the airing of factual disputes of that kind).
  8. Second, while the defendants did not press for the hearing of Gina’s mediation motion, I am very much inclined at this stage to refer the parties to mediation of my own motion. That is in circumstances where: the arbitration process will no doubt take some time (not least if there is any appeal from my decision to refer the parties to arbitration); Bianca’s s 247A application is to be stayed; the production of trust documents (which should by now have been well under way following the 2015 Decision, the 2018 Decision and my subsequent decisions in relation thereto) is or may be at risk of being again deferred (if not effectively de-railed) as a consequence of what I understand to be Bianca’s intention to challenge at least some part of my recent decision in relation thereto (subject to her latest application for judicial advice in that regard, which is now listed for hearing in March this year); and it seems to me that it is overwhelmingly in the interests of the administration of justice (and of the just, quick and cheap resolution of the real issues in dispute) to force the parties to focus sooner rather than later on whether a sensible and acceptable resolution of their long-running disputes can be achieved.
  9. The ongoing drain on court time and resources (not just in this Court but elsewhere) can only be to the prejudice of other litigants. The spectre that well-funded litigants may be perceived as being able indefinitely to prolong a final determination of their litigious disputes (and I say this without confining or addressing my comments to any one or other side of the warring factions here before me) can only serve to bring the administration of justice into disrepute.
  10. Accordingly, I will direct that there be brief written submissions filed within 14 days as to why, if there be opposition to this course, I should not of my own motion refer the parties in this proceeding to mediation before a private mediator (to be agreed between the parties or, in the absence of agreement, nominated by me) and in any event as to the time frame within which this could sensibly occur (including, if relevant, by reference to the status of the regime for the production of trust documents that was put in place late last year) but noting that I would expect the referral to mediation to take place within the near future and not to be postponed to some indeterminate future time. It seems to me that this course is not inconsistent with the referral at the same time of the parties to arbitration, particularly if, as Bianca anticipates, there will presumably be some delay in the arbitral process.
  11. I note that the defendants were amenable to a referral to mediation, when I raised this in the course of oral submissions; and that the opposition by Bianca to such a referral was simply a timing issue by reference to her complaint that she is not privy to all of the documents in relation to the matter (and therefore that there is, to adopt the terminology previously used in this matter, an information asymmetry). As to that complaint, it seems to me that unfortunately the reality is that such an information asymmetry is likely to continue for no little time (since the estimated time frame within which Bianca’s previous demands as to the production of trust documents could realistically be met was one that extended for some years into the future, and at a considerable cost); and I am not persuaded that the mere existence of such an asymmetry would preclude fruitful discussions at mediation (at least if all parties participate in the mediation in good faith, as they would be obliged to do).

Context in which Bianca has commenced the present proceeding

  1. Before turning to the issues raised by the respective referral/stay motions, it is relevant to note the following as to the context in which the present proceeding is brought, having regard to the emphasis placed by Bianca on the fact that she brings this proceeding in her capacity as trustee of the HMH Trust. Bianca points out that it is only by reason of her appointment as trustee, and the consequential vesting of 24% of HPPL shares in her qua trustee, that she is able to claim the relief she here seeks by way of equitable compensation, account of profits and under the Corporations Act (each of those statutory remedies being relevantly confined to a member).
  2. Much weight is placed by Bianca on the recognition by Brooking J in Young v Murphy [1996] 1 VR 279 (Young v Murphy) at 281 that “a trustee who has committed a breach of trust may be sued in respect of that breach … [by a] successor trustee” and that this applies even if the successor trustee was party to the breach (see T 202). Bianca submits that she has “no choice” in that regard, saying that:

The standing of a trustee to take proceedings to have a breach of trust redressed against a trustee or former trustee or a stranger who has become liable to redress a breach of trust is well recognised. Not only may a trustee take such proceedings, but he runs the risk of himself committing a breach of trust if he fails to do so. His obligation to take the proceedings (unless they be futile) is part of his duty to get in the trust estate, which includes rights of action against co-trustees or former trustees and strangers for breach of trust. This is clear as a matter of both principle and authority.

  1. Bianca says that criticism made by the defendants of the fact that, in her personal capacity, she has adopted a different position or made different claims in other proceedings (for example, in the Federal Court proceeding) fails to recognise that fundamental principle. It is said, somewhat plaintively, that:

Put simply, Bianca has no choice to bring the current proceedings as trustee, whatever her own personal claims against Gina might be, because to do otherwise could place herself in breach of trust. That fact alone renders complaints about abuse of process both untenable and unfair.

  1. That submission (what might be termed the “no choice” submission) must, however, itself be put into context. Bianca sought and obtained judicial advice that she would be justified in commencing the present proceeding (see the Judicial Advice Decision). Leaving aside for the moment the abuse of process arguments now put by the defendants, it is by no means apparent from the reasons given by Rein J that the question of the applicability or potential applicability of the arbitration agreement, or Bianca’s resistance or likely resistance to any referral of the parties in this proceeding to arbitration, was something that was raised before Rein J in the context of that judicial advice application (let alone that there was any argument put to his Honour that, as trustee, Bianca was not bound by the Hope Downs Deed). In that vein, HPPL, in the course of its submissions, says that it does not appear that Bianca ever suggested either to Brereton J, as his Honour then was, (in the Removal Proceeding) or to Rein J (on the judicial advice application) that, in her capacity as trustee of the HMH Trust, she intended to disavow the Hope Downs Deed on behalf of the beneficiaries of that trust. Rather, it is said, Bianca suggested the opposite to Brereton J when contending (in the trust documents dispute) that she is entitled to documents in relation to the Hope Downs Deed on the basis that the deed is trust property. In that regard, Bianca here disputes that there is any inconsistency between seeking production of physical documents held by the former trustee and denying that she is bound by the Hope Downs Deed but it is not necessary at this stage to explore that contention.
  2. Suffice it at this point simply to note that, while Bianca here emphasises that she has “no choice” but to bring the present proceeding in her capacity as trustee, it is not clear to me that her resistance to the referral to arbitration in the present proceeding is something about which she could be said as trustee to have “no choice” nor that this is something about which judicial advice was obtained. That is not insignificant when one considers the (no doubt not inconsiderable) cost and the delay to date occasioned by such resistance. When that issue was raised in the course of oral argument, the response for Bianca was to the effect that, if Bianca as trustee is not bound by the Hope Downs Deed, then she could not be criticised for resisting an application to refer the matter to arbitration. In one sense that may be so; and indeed there may well be perceived forensic and other potential advantages of the course that has been adopted. However, that response does not on its face necessarily take into account the potential disadvantage to the beneficiaries of the trust of the continuing cost and delay, by reason of such resistance, to the final resolution of the disputes the subject of this proceeding. Nor does it in my view adequately meet the inconsistency argument relied upon by the defendants in support of a stay of the proceeding (on the alternative bases) even if the dispute(s) is, or are, not covered by the arbitration clause in question.
  3. Insofar as HPPL has made submissions (see at [13]-[21] of its closing submissions) as to the Judicial Advice Decision, Bianca maintains that: the characterisation by Rein J in that decision of the matters in issue in these proceedings is irrelevant; that the matters in issue in these proceedings are to be determined by the statement of claim “and, possibly, the foreshadowed defences”; and that it was no part of Rein J’s function to determine what the “matters” in these proceedings were for the purposes of the Commercial Arbitration Act (and that there is no indication that his Honour in fact did so). So much may readily be accepted. However, that does not address the concern I have as to whether there was consideration given, at the time of the judicial advice application, to whether Bianca, in her capacity as trustee, was or would be justified in resisting any application of the kind now made in the referral/stay motions (the inevitability of which might well be said to have been obvious having regard to the history of such applications in other proceedings to date).
  4. “No choice” but to litigate does not equate to a mandate to litigate at all cost (or ‘to the death’, so to speak). Nor does it give any imprimatur to particular steps or forensic decisions that might be taken in the course of such litigation. In any event, that is not an issue on which I am here called upon to make any finding. I simply note it in the context of the emphasis placed by Bianca on her “no choice” submission.

Background to the present dispute

  1. As to the relevant background to the present dispute, the circumstances surrounding the entry into the Hope Downs Deed (these being the context which both the Full Court and the High Court considered of importance in the construction of the relevant arbitration clause) are set out from [28]ff of the Full Court Decision. Bianca does not cavil with that summary of the factual matrix (though, as I note in due course, she points to other events as relevant by way of context).
  2. The context surrounding entry into the Hope Downs Deed includes that, from around 2003, John was investigating the possibility of commencing proceedings against Gina. It is said by Gina that this was seemingly with Bianca’s involvement, reference being made in this regard to an email from John to Bianca on 12 May 2004 in which John tells Bianca that he had finished his affidavit and that he wanted to “get the show on the road” (see T 24). Gina relies on this correspondence as giving rise to an inference that Bianca had a copy of John’s affidavit (to which reference is made in the Hope Downs Deed) prior to entry into the Hope Downs Deed (see T 25).
  3. On 24 May 2004, solicitors acting for John wrote to Gina about “a number of concerns” about the HMH Trust and suggesting that she step down as trustee. On 7 October 2004, John’s solicitors wrote to Gina’s solicitor indicating that he proposed to file proceedings seeking to replace Gina and stating that John was “cognisant of the unwelcome publicity that such action will attract”. Pausing here, the not so subtle threat of publicity was thus prominent in the events leading up to the Hope Downs Deed and, not surprisingly, was an important part of the context in which the Full Court and the High Court considered the construction of cl 20 of that deed. It paves the way for the submission here made by Gina that it is relevant to ask whether this is the kind of dispute that the parties would have contemplated being determined in open court or by the confidential arbitration for which provision was made in the Hope Downs Deed.
  4. On 27 October 2004, John’s solicitors sent a further letter which: outlined alleged wrongdoing of Gina; enclosed a draft affidavit of John in support of the foreshadowed proceeding; and stated that “in the meantime our client requests $300,000 which would ameliorate some of the concerns expressed by him in the draft affidavit”.
  5. On 20 November 2004, John sent an email to, among others, Gina and Bianca, with an extract from The West Australian newspaper, which detailed the allegations contained in his draft affidavit.
  6. Pausing here, I note that, in terms of context, HPPL emphasises that Gina’s exercise of control over HPPL and the failure to pay dividends were matters agitated prior to the entry into of the Hope Downs Deed. It is noted that John’s draft affidavit made specific complaints about Gina’s control of HPPL and her failure to pay dividends to the HMH Trust, including:
    • the reference to a letter dated 7 October 2004 from John’s solicitors, Butcher Pauli & Calder, in which it was said that “it also must be the case that the dividends paid to the Trust have been minimised”;
    • the statement (at [195]) that “I am advised by my solicitors that … changes in the law relating to oppression would likely have rendered a deliberate failure to declare dividends oppressive conduct”;
    • the statement (at [241]) that “[g]iven that my mother was in control of HPPL, she clearly determined whether dividends were paid or not”;
    • the statement (at [254]) that “by holding 76.6% of all voting shares, and all the shares in one particular class (B), my mother is now able to declare dividends on those shares to herself, to the exclusion of the Trust, and all other classes”;
    • the statement (at [255]ff) (under the heading “Failure to Declare Dividends”);
    • the statement (at [260]) that “[t]he fact that mother refuses to dividends other than as she is required to do by the Articles again indicates that her interests are in conflict with those of the Trust …”; and
  7. Reference is also made to the fact that Bianca’s advice from Freehills, prior to her entry into the Hope Downs Deed, refers to the non-payment of dividends as potentially oppressive conduct.
  8. On 1 April 2005, John, HPPL, Gina and each of her daughters (Bianca, Hope and Gina, being the other beneficiaries, with John, of the HMH Trust) and others entered into a confidential deed of obligation and release (the Deed of Obligation and Release). Gina submits that Recitals D to F to the Deed of Obligation and Release (which I do not here set out) make plain the importance of confidentiality to the parties. A deed of loan was also entered into between HPPL and John.
  9. The Deed of Obligation and Release provided for various benefits to John (including a $3m loan from HPPL repayable when the HMH Trust vested and the free use of two apartments) in exchange for certain releases; and the parties agreed that all “disputes hereunder” were to be resolved by confidential mediation and arbitration in Western Australia (cl 14) (and see the Full Court Decision at [64]-[71]; the High Court Decision at [28]-[33]).
  10. On 12 April 2005, John gave notice of his intention to be heard in proceedings involving Gina as trustee. On 28 June 2005, his solicitors wrote to Gina’s solicitor asserting that John was not bound by the Deed of Obligation and Release because it had been the product of undue influence.
  11. On 1 July 2005, HPPL entered into the Co-operation Agreement Hope Downs Project with Rio Tinto parties and announced that it had done so. Soon after, the existence of the dispute between John and Gina was released to the media.
  12. On 11 July 2005, John gave notice of his intention to be joined as a party to proceedings then in the Supreme Court of Western Australia involving Gina as trustee, on the basis of alleged breaches of trust.
  13. In late September 2005, John filed a supporting affidavit sworn 27 September 2005 in the Supreme Court of Western Australia proceeding, alleging that Gina had committed grave breaches of trust, including: the removal of the Hope Downs mining tenements from the control of the HMH Trust (and into HPPL’s control); the reduction in HMH Trust ownership or control of shareholding in HPPL; the increase of Gina’s shareholding in HPPL from 51% to 76%; and the refusal to provide any or sufficient financial support for John from the HMH Trust. There was reference to a more recent draft affidavit, which as I understand it was a later version of the draft affidavit which had been annexed to the letter of 27 October 2004, outlining alleged wrongdoing by Gina and HPPL, including allegations that there had been a failure to declare HPPL dividends by Gina. The affidavit included the following assertions:

The fact that my mother refuses to declare dividends other than as she is required to do by the Articles [concerning CSS Dividends] again indicates that her interests are in conflict with the Trust, as the beneficiaries provide greater assistance than the CS share dividends provide. Clearly HPPL, which has made an after tax profit over $9 million in 2003, is more than capable of declaring dividends in excess of the required CS share dividend.

My mother’s conduct as director and controller of the various Hancock group entities, as well as her performance as trustee of the Trust and the Zamoever Trust, demonstrates she has only acted in her own interest, to the detriment of the children, and their rightful entitlements, in breach of her director’s duties, and fiduciary duties as trustee.

  1. Reliance is placed by Gina (by way of the context to entry into the Hope Downs Deed) on a note dated 16 November 2005 made by Bianca, apparently recording a conversation with John on 29 October 2005 in which there is reference to an attempt to convince her to come to “his side” and the following appears:

John stated that I was not to assume his attack against GHR [Gina] was over. He said that Hope Downs ‘belongs to the children’ and that because he was aware GHR was under immense pressure to get the Hope Downs deal signed in time for Government deadline of 30 June 2005, that is why he decided to ‘hit her up’ for a “few mill” then, but that his ‘case’ against GHR was by no means over…he stated that he would fight for ownership of our company’s other assets (excluding Hope Downs) – ie Roy Hill, and that he would float these once he had control of them.

  1. In March 2006, Rio Tinto’s subsidiaries and HPPL’s subsidiary, Hope Downs Iron Ore Pty Ltd (HDIO), signed the Hope Downs Joint Venture Agreement (HDJVA). Gina and Bianca, then a director of HDIO, signed the HDJVA on behalf of HDIO. Relevantly, the HDJVA contained various provisions relating to the continued control of HPPL by Gina (this being the context in which it was later said to be in HPPL’s interest for the Hope Downs Deed to be entered into by the parties thereto).
  2. On 31 March 2006, John sent an email to HPPL (a copy of which was forwarded to Bianca), stating that it “seems there is little else to do but put this matter before the courts” and that “[i]f you cannot yet realise the immense conflict of my Mother acting as both Trustee and majority shareholder of HPPL then please seek further legal advice”.
  3. In the period from June to August 2006, John continued to correspond with HPPL in relation to his allegations. In that period (i.e., leading up to the execution of the Hope Downs Deed in August 2006), Gina points out that Bianca received legal advice from two firms of solicitors (Freehills and AJ Muscat & Co) and John also had the benefit of legal advice.
  4. In August 2006, the Hope Downs Deed was executed by, among others, Bianca. John, at that stage, did not sign the Hope Downs Deed; rather, he signed a further deed in 2007 (the 2007 HD Deed) by which he agreed to be bound by the obligations in the Hope Downs Deed.
  5. In summary, the Hope Downs Deed: contained acknowledgments concerning the ownership of Hope Downs (cll 3 and 4); provided the beneficiaries with an entitlement to dividends from the profits earned in respect of Hope Downs, unless a beneficiary breached his or her obligations under the deed (cl 5); provided broad releases (cl 6); provided undertakings including concerning a non-disparagement undertaking and undertakings not to challenge the right of HPPL to the mining tenements and not to challenge the right of Gina in relation to HPPL (cl 7); contained an acknowledgement of Gina’s continuing and ongoing control and management HPPL during her lifetime (cl 8); imposed strict obligations of confidentiality in respect of matters in relation to the subject matter of the deed and disputes under the deed (cll 10 and 20.8); contained acknowledgments that each party entered into the deed freely and voluntarily, and required each of the beneficiaries to obtain legal advice (cl 12); and contained the arbitration clause the subject of the present applications relating to “any dispute under this deed” (cl 20).
  6. HPPL argues that the terms of the Hope Downs Deed itself indicate that it was intended to operate retrospectively, in terms of quelling disputes as to title through the release of past claims, as well as prospectively, in terms of regulating the conduct of the affairs of HPPL by its legal and beneficial shareholders. It is noted that the Hope Downs Deed: required HPPL to pay dividends derived from profits from the Hope Downs mine to the A class shareholders in HPPL, as long as there was not a breach of the Hope Downs Deed (cl 5); required the parties not to do anything at any time that could have an adverse impact on the Hope Downs joint venture with Rio Tinto (cl 7(a)); required the parties not to challenge the right of any member of the Hancock Group to any of the Hancock Group Interests (as defined) at any time (cl 7(b)); required the parties not to take any steps at any time which would result in HPPL ceasing to be wholly owned and controlled by “Hancock Family Group Members” (as defined) (cl 7(c)); required the parties not to challenge the rights of any of Gina or her four children to their right, title or interest in any of the Hancock Group or any trust in which they are a beneficiary (cl 7(e)); and acknowledged that during her lifetime Gina would maintain full ongoing control and management of HPPL (cl 8). HPPL emphasises that a critical object of the Hope Downs Deed was the maintenance of confidentiality about the affairs of the Hancock Group, the trusts, the intra-family dispute and the provisions of the deed itself (see the High Court Decision at [45]).
  7. As noted above, Bianca does not dispute the factual matrix identified by the Federal Court and High Court in their respective decisions as to the circumstances surrounding entry into the Hope Downs Deed. Bianca does, however, submit that the following additional circumstances need to be taken into account.
  8. First, which is not disputed, that in 2005 and 2006, Gina was the trustee of the HMH Trust and, in that capacity, owed fiduciary duties to the beneficiaries of the HMH Trust (being her children) (see the 2015 Decision at [1]-[2]). Pausing here, insofar as reference is made to earlier judgments, Bianca has disavowed reliance on factual findings in those judgments as evidence in the present proceeding (see T 17; s 91 of the Evidence Act 1995 (NSW) (Evidence Act)).
  9. Second, that: the catalyst for the Hope Downs Deed was the application made by John seeking to replace Gina as trustee (to which I previously referred as the Removal Proceeding, which led to the 2015 Decision – see the 2015 Decision at [1]-[2]; [13]-[14]; Bianca referring also to cl 7(c) of the Hope Downs Deed); in response to John’s application, Gina sought legal advice as to whether she could remove him as a beneficiary (Bianca referring to the fourth brief (dated 10 July 2006) to Mr Myers QC; and that Gina received legal advice (the Myers advice) to the effect that Gina could not do so consistently with her duties as trustee).
  10. Third, that in August 2006, just before the Hope Downs Deed was signed, Bianca was sent a series of communications by in-house counsel at HPPL to the effect that her duties as director of HPPL obliged her to sign the Hope Downs Deed and that it was urgent to do so; and that, at the time those communications were sent to Bianca, Gina was in the process of obtaining (but had not yet obtained) legal advice as to whether she could, consistently with her duties as trustee, execute the Hope Downs Deed in her capacity as trustee. Bianca points out that the question posed for legal advice was “whether the Trustee may execute the Deed on behalf of beneficiaries in accord with similar advice given earlier in relation to the Trustee being able to bind the Trust”.
  11. Fourth, that on 22 August 2006, Gina was provided with written legal advice (the Sceales advice) to the effect, Bianca says, that Gina could not sign the Hope Downs Deed as trustee of the HMH Trust without breaching her duties as trustee. Pausing here, Gina’s position is that the Myers advice and the Sceales advice must be put in context and does not accept that they bear the significance Bianca attaches to them.
  12. Fifth, that, Bianca submits, it is to be inferred from the later claim by Gina for privilege over the advices on the basis that they were confidential communications and had been obtained “in her personal (not her trustee) capacity”(referring to another decision of Brereton J – namely, Hancock v Rinehart [2016] NSWSC 12 at [4], [8], [13]-[15]) that Gina did not disclose either of the Myers advice or the Sceales advice to Bianca or to John prior to each of them signing the Hope Downs Deed.
  13. Sixth, that the legal advice obtained by Gina was paid for out the assets of the HMH Trust but was never provided to the beneficiaries.
  14. Finally, that the Hope Downs Deed conferred very significant benefits on Gina personally (Bianca referring in this context to cll 5, 6, 7(c), (d), (e), 8 and 11 of the Hope Downs Deed – see in due course below).
  15. I note that in Bianca’s written submissions on the present applications, some of the contents of, and context to, the Myers advice and Sceales advice is set out. I do not consider it necessary here to set that out in any great detail. Suffice it to note that Bianca maintains that the effect of the Myers advice was that Gina’s purposes for seeking to cut John out of the benefits of the trust were improper and it is asserted that, if that were so, then any attempts by Gina to fulfil those purposes would be in breach of trust. It is said that, as Gina has adduced no evidence here to controvert the natural inference that her state of mind was no different a matter of weeks later when she purported to execute the Hope Downs Deed on behalf of the HMH Trust, then that is the natural inference (i.e., that she was there seeking to cut John out of the benefits of the trust) in circumstances where cl 5(c) of the Hope Downs Deed gave Gina (by a different mechanism to that which was the direct subject of the Myers advice) the power to deprive John of HPPL dividends and of the fruits of the HMH Trust. Reference is made in the Myers advice to the principle stated in In re Wright; Hegan v Bloor [1920] 1 Ch 108 by PO Lawrence J at 120, referring to Humphrey v Olver (1859) 28 LJ (Ch) 406, in the context of a trustee’s power of appointment, namely that “if a corrupt intention is shown to have ever been entertained the burden of showing that it was abandoned previously to the execution of the power lay upon those who supported the appointment”.
  16. As to the Sceales advice, Bianca submits that the intent of the advice that was initially sought was to obtain a view as to whether Gina was required to obtain consent from the beneficiaries prior to execution of the deed. It is submitted that it can be inferred (more confidently, in the absence of evidence from Gina to explain the intent of the question) that Gina was aware that she had failed to obtain prior consent from the beneficiaries for her self-dealing and wished to procure an advice ratifying that failure. It is noted that, by that time, Gina had already executed the Hope Downs Deed, both in her personal capacity and purportedly in her capacity as trustee. Insofar as an amended request for advice was made to Mr Sceales, it is submitted (Bianca here again emphasising the absence of evidence from Gina) that the intent of the question appears to have been to obtain a view as to whether Gina was required to obtain consent from the beneficiaries personally or whether she instead could furnish their consent by executing the Hope Downs Deed on their behalf.
  17. Bianca argues that the Sceales advice contained a number of matters of obvious relevance to the beneficiaries, including: matters that, if correct, meant that what is said to be the primary benefit given to the beneficiaries under the Hope Downs Deed would be meaningless or at risk; that the Hope Downs Deed created or could give rise to a substantial or potentially substantial CGT liability; and that the Hope Downs Deed was, or was arguably, entered into in breach of trust.
  18. It is submitted that there was an absence of full disclosure by Gina (in her capacity as trustee) to the beneficiaries of the HMH Trust prior to Gina’s entry into the Hope Downs Deed on behalf of the HMH Trust; and hence no fully informed consent from the beneficiaries to Gina’s conduct in entering into the Hope Downs Deed.
  19. The significance that Bianca here attaches to the Myers advice and Sceales advice is twofold: the advices are relied on in support of Bianca’s unconscionability motion (as unconscientious conduct in relation to the entry into of the Hope Downs Deed); and they are relied on for the proposition that Bianca, as trustee, is not bound by the Hope Downs Deed, on the basis that it is not “trust property” as it was entered into by Gina in breach of trust. Bianca submits that the Myers advice and subsequent advices were plainly relevant to the beneficiaries; that they were evidence that Gina’s purposes were improper; and that, if Gina’s purposes were improper, then rights and obligations assumed under the Hope Downs Deed would not form part of the trust property. It is submitted that the beneficiaries should have been informed of that.
  20. It is further submitted that, at all material times, HPPL was the “alter ego” of Gina (reference there being made to the 2015 Decision at [204], [224]).In support of this submission, Bianca points to Gina’s position as an Executive Chairman and 76% majority shareholder and that Gina “deployed HPPL employees” to obtain the Myers advice and Sceales advice. Pausing here, HPPL: takes issue with the submission that HPPL was the “alter ego” of Gina; says that there is no evidence to support this; says that reliance cannot be placed on observations to that effect by Brereton J in the 2015 Decision (noting Evidence Act, s 91 in this regard); and says that it is unclear what is meant by that term in any juridical sense
  21. Insofar as Bianca points to the above matters as additional matters to be taken into account as to the context in which the Hope Downs Deed was entered into, it is also relevant here to note that there was an application to adduce fresh evidence (of the Sceales advice) when the matter was before the Full Court. That application was dismissed (see below) and so the Sceales advice was not part of the context considered by the Full Court and High Court in those respective decisions. Meanwhile, it is in evidence on the present applications but the defendants say that it is not relevant.
  22. I note at the outset that Bianca cavils with HPPL’s characterisation of the Hope Downs Deed as a “shareholders agreement” (referring to HPPL’s submissions at [35]). Bianca says that such a description is “unhelpful and apt to mislead”, submitting that the fact that the “single extant legal shareholder” in HPPL (i.e., Gina) was a party to the Hope Downs Deed “does not make it a Shareholders Agreement in any relevant sense” and noting that there were parties to the Hope Downs Deed who were neither legal nor beneficial shareholders in HPPL. It is said that none of the Recitals to the Hope Downs Deed give any support to the contention that the deed was intended to be a shareholders’ agreement; that cl 5, which “purported to give A Class shareholders a qualified contractual right to payments described as ‘dividends’”, did not purport exhaustively to regulate the dividend arrangements of HPPL and was in terms described as the “consideration” for the matters “recited in and the subject of this deed” (and particularly “the undertakings and releases given” in the Hope Downs Deed); and so thus was not a standalone provision in the Hope Downs Deed.
  23. Leaving aside the argument as to whether it is properly to be characterised as a shareholders’ agreement (on which nothing relevantly here turns), the relevant provisions of the Hope Downs Deed are set out below.
  24. The named parties to the Hope Downs Deed include:

GEORGINA HOPE RINEHART as trustee of the Hope Margaret Hancock Trust (“the Trustee” and “HMH Trust”)

GEORGINA HOPE RINEHART in her own right or as a director of a Hancock Group Member (“GHR”)

BIANCA HOPE RINEHART (in her own right or in any representative capacity)

  1. Clause 1.1 defines “Proceedings” to mean “Supreme Court of Western Australia action numbered CIV 1327 of 2015 the parties to which are the HMH Trust and Gina and to which JLH [John] is seeking to be joined”. Clause 1.2(f) provides that a reference to a party includes that party’s successors and permitted assigns.
  2. Clause 5 provides that:

DISTRIBUTION COVENANT

5. In consideration of the matters recited in and the subject of this deed (including without limitation the undertakings and releases given herein) HPPL and the Trustee covenant and agree with each other and the other parties hereto that they will implement the following according to these terms:

(a) to the extent that it is lawfully permitted and subject to sub-clause (f), HPPL shall pay dividends to holders of A Class shares in HPPL, based upon a proportion of the Hope Downs Net Cash Flow After Tax commencing 6 September 2011 … calculated as follow:

(i) twenty-five per cent (25%) of the Hope Downs Net Cash Flow After Tax;

(ii) a further twenty-five per cent (25%) of the Hope Downs Net Cash Flow After Tax, less any amounts required to be retained for HPPL’s and the Hancock Group’s equity requirements in relation to additional developments of or associated with the Hope Downs Joint Venture and/or the development of the Hope Downs Tenements as determined by the Directors of HPPL and/or HDIO in accordance with the requirements of the HDJV, and subject to the further requirements of this Clause 5;

(b) subject to sub-clause (c), the Trustee shall pay any dividend received from HPPL in accordance with sub-clause (a) above to the Beneficiaries in equal shares of one-quarter each on the relevant dates as noted in sub-clause (a) above;

(c) if any one or more of the Beneficiaries commit a breach of this deed at any time then:

(i) HPPL’s obligation to pay further dividends on the A Class shares pursuant to sub-clause (a) shall immediately cease from and after a date fourteen days after the service by HPPL on all other executing parties to this deed of a notice in writing advising of the breach which has been committed and advising the notice recipients that HPPL’s said obligation will cease on the said fourteen days after service of the notice if the said breach has not by then been rectified; the parties each undertake to advise HPPL in writing if and when they or any of them first become aware that any party has or may have committed a breach of this deed;

(ii) subject to clause 5(c)(iii), HPPL shall pay any further dividends to holders of the B Class shares in HPPL on the same terms as to time and amount as set out in sub-clause (a);

(iii) upon the cessation of the default and the carrying out of payment by the defaulting party of any remedy or damages to be performed or paid pursuant to any judgment consequent upon the default or any settlement of the same, HPPL shall reinstate the arrangements referred to in clause 5(a) and any further declaration of dividend pursuant to clause 5(c)(ii) shall thereupon cease.

(d) any default by a Beneficiary under the Deed of Obligation and Release dated 1 April 2005 (or as such is amended in writing by mutual agreement of all parties thereto) shall be deemed to be a default by that Beneficiary under this deed for the purpose of this clause;

(e) within one hundred and twenty (120) days of the end of any financial year of HPPL in respect of which payments are made under sub-clause 5(a) any amount calculated under this Clause 5 shall be verified by an independent auditor appointed by HPPL, at the request of any Beneficiary. A copy of the audit certificate will be provided to each Beneficiary. Any adjustments to the amounts paid required as a consequence of the audit shall be made as soon as practicable after the date of the audit certificate. The cost of such audit will be borne by all Beneficiaries receiving any payment under Clause 5 for the relevant year, in equal proportions; and

(f) payments under this Clause 5 shall immediately cease upon the declaration of an Event of Force Majeure under the HDJV and shall resume upon such an event abating and being rectified.

  1. Clause 7, relevantly, provides that:

7. Each of the parties to this deed undertakes with each of the other parties to this deed

(a) that they will not at any time do, nor attempt to do nor encourage, nor assist in any way any other party or third party to do anything which could have an adverse impact on the Hancock Group’s rights under:

• the Services and Commingling Agreement entered into or which may subsequently be entered into between Hamersley Iron Pty Ltd and members of the Hancock Group;

• or any of the documents entered into by the Rio Tinto Group and the Hancock Group in respect of the Hope Downs Joint Venture;

• or under any of the financing arrangements entered into by members of the Hancock Group in respect of the Hope Downs Joint Venture …

(c) not to take any steps at any time which would result in HPPL ceasing to be wholly owned and controlled by Hancock Family Group Members, including without limitation any change to the Trustee in contravention of the provisions of this Deed … [“Hancock Family Group Member” is defined to mean Gina “and her lineal descendants”]

(e) subject to the rights of HPPL under the Deed of Loan not to challenge the rights of any of GHR, JLH, BHR, HGRW or GHFR who execute this Deed to any of their right title or interests in any of the Hancock Group or in any trust in which they or any member of the Hancock Group is a beneficiary …

  1. Clause 8 of the Hope Downs Deed provides that:

8. The parties hereto acknowledge that GHR by her direct ownership of the share capital of and voting power in HPPL, has control of HPPL and without limiting in any way the legal and other rights of GHR in that regard whether at law or in equity or pursuant to the Constitution of HPPL, the parties hereto acknowledge that during her lifetime GHR shall maintain full ongoing control and management of HPPL and that GHR shall accordingly have the continuing right during her lifetime at her election from time to time to maintain or relinquish or re-establish herself as the chairman on an executive or non executive basis as she in her sole discretion shall decide of HPPL.

  1. Clause 9.3 provides that:

9.3. Notwithstanding either of the provisions in clause 9.1 and 9.2, the Trustee and the beneficiaries agree that nothing in this Deed limits any of the powers of the Trustee of the HMH Trust.

  1. Clause 11 provides that:

PLEA IN BAR

On and from the Effective Date each party may plead this deed in bar to any Claim or proceeding the subject of a release in this deed PROVIDED HOWEVER that nothing in this clause shall prevent any party from enforcing the provisions of this deed, the Porteous Settlement Deed, the Deed of Obligation and Release or Deed of Loan.

  1. Clause 15.1 provides, relevantly, that:

15.1 This deed shall be of full force and effect upon execution by HPPL, Westraint, HM, HFMF, 150, and HMHTI, the Trustee, GHR, and subject to clause 15.2, at least two of JLH, BHR, HGRW and GHFR, in respect of those parties who have so executed … Until this deed is executed by a party, neither this deed nor any provision hereof shall enure to the benefit of that party.

  1. The relevant arbitration agreement is contained in cl 20 of the Hope Downs Deed which provides that:

20.1 … In the event that there is any dispute under this deed then any party to his [sic] deed who has a dispute with any other party to this deed shall forthwith notify the other party or parties with whom there is the dispute and all other parties to this deed (“Notification”) and the parties to this deed shall attempt to resolve such difference in the following manner …

20.2 Confidential Arbitration

Where the disputing parties are unable to agree to an appointment of a mediator for the purposes of this clause T within fourteen (14) days of the date of the Notification or in the event any mediation is abandoned then the dispute shall on that date be automatically referred to arbitration for resolution …

  1. Bianca points out that cl 20.9 expressly distinguishes between the mechanism for serving notices on Gina and the mechanism for serving notices on the “Trustee”.
  2. Clause 21 provides that:

21. This deed shall be governed by and be subject to and interpreted according to the laws of the State of Western Australia and (subject to the provisions hereof requiring all disputes hereunder to be resolved by confidential mediation and confidential arbitration) the parties agree to the submit to the exclusive jurisdiction of the Courts of Western Australia for all purposes in respect of this deed.

  1. The execution page for the Hope Downs Deed contains, inter alia, the following execution clause:

SIGNED BY

GEORGINA HOPE RINEHART

as trustee of the Hope Margaret

Hancock Trust in the presence of …

  1. As noted, John did not sign the Hope Downs Deed in August 2006 but later, in 2007, signed a document binding himself to the obligations contained in the Hope Downs Deed (the 2007 HD Deed).

Constituent documents

  1. Bianca also points to the two constituent documents that it is said form the foundation of the present proceeding: the HMH Trust Deed (as amended); and HPPL’s Articles of Association. Bianca places emphasis on the fact that neither document requires the arbitration of disputes arising under it. Bianca says that there was a similar disparity in the case that was before the High Court of Singapore in BTY v BUA [2018] SGHC 213 (BTY) (to which I refer later), pointing to what was there said at [143] and [113].
  2. As to the HMH Trust Deed, it is noted that cl 10 of the Schedule provides that:

(a) The Trustee may:

(2) refer any dispute affecting the assets of the Trust to arbitration, other than a dispute involving a Beneficiary

  1. Bianca says that the HMH Trust Deed has thus, since at least 1995, permitted the trustee of the HMH Trust from time to time to refer a dispute to arbitration but that it does not require it; and further says that such permission is negated where the dispute is one “involving” a beneficiary. It is submitted that, far from supporting a concern to have the affairs of the HMH Trust the subject of arbitration, this clause evidences a contrary desire (that is, to ensure that any dispute involving a beneficiary is not arbitrated). Pausing here, it is difficult to see how far this argument takes the matter, since it does not in terms prohibit the trustee from entering into an agreement with a beneficiary for a dispute to be referred to arbitration – it simply appears to limit the trustee’s power unilaterally to refer a dispute affecting the assets of the trust, where that dispute involves a beneficiary, to arbitration.
  2. Bianca also notes that HPPL’s Articles of Association similarly contain no clause requiring the arbitration of disputes (at the highest, it is said, making provision for HPPL to agree to arbitrate matters with other persons) (referring to Art 153); and that HPPL’s Articles of Association make no reference to the Hope Downs Deed, despite HPPL’s Articles of Association having been restated in 2012 (six years after the execution of the Hope Downs Deed).
  3. Bianca accepts that the HMH Trust Deed was in evidence before Gleeson J in the proceedings the subject of the Gleeson Decision but says that there were no submissions made in either the Full Court or the High Court as to the HMH Trust Deed and HPPL’s Articles of Association.
  4. Bianca argues that the absence of arbitration clauses in either the HMH Trust Deed or HPPL’s Articles of Association suggests that it is incorrect to view the Hope Downs Deed as an agreement intended to require the arbitration of all disputes in relation to the affairs of HPPL and the trusts (cf Gina’s submissions at [125]). Rather, it is submitted by Bianca that the Hope Downs Deed was intended to quell disputes as to title in relation to the Hope Down Tenements (a matter that it is said is not the subject of the statement of claim in the present proceeding – as to which see below).

Other proceedings

  1. As noted above, the array of other proceedings in which the parties are or relevantly have been involved include (and this is by no means an exhaustive list) the following.
  2. First, the French Arbitration (commenced by Bianca and John in 2012 expressly pursuant to cl 20 of the Hope Downs Deed). Bianca says that there is no admissible evidence: supporting Gina’s submission (at [19]) that the French Arbitration remains dormant “predominantly by reason that [Bianca] made claims in the Federal Court that the Hope Downs Deed was void and the High Court Decision was pending”; nor supporting Gina’s submission (at [20]) or the similar submission by HPPL (at [59]) that “given there is a dispute as to whether dividends are payable under clause 5 … HPPL has made provision for the payment of dividends payable under the clause, but has not paid them”. As to the latter, objection was taken by Bianca to the admission in evidence on the present applications of correspondence between HPPL and Bianca in which information was provided by HPPL as to the provision made for the dividends. It was only provisionally admitted (for the fact of the communication not its truth). It is not necessary here finally to rule on that objection, since I do not place any reliance on that correspondence when determining the issues arising in relation to the present referral/stay motions. Were it to have been necessary formally to do so I would simply have admitted the evidence subject to relevance. Pausing here, I observe that it is not the least ironic that Bianca, whose complaint elsewhere has been that her requests for information have not been met by HPPL, objects to evidence in which HPPL appears to be responding to her queries (however unsatisfactory she may consider that response to be).
  3. More relevant, in my opinion, is the inconsistency between a claim made by Bianca (in her personal capacity) to be entitled, with her siblings, to the benefit of the mining tenement assets (and to an account of profits or equitable compensation in relation thereto) and a claim made by Bianca (in her capacity as trustee) as to a breach of trust or other duty, or breach of contract, arising out of the failure of HPPL to declare or pay dividends out of income from assets that (on Bianca’s case in her personal proceeding) are held on trust for Bianca and the other beneficiaries of the alleged constructive trust. That is, in the Federal Court proceeding (now referred to the Martin Arbitration) Bianca says, in effect, that HPPL is not the beneficial owner of the mining tenement assets; meanwhile, in this Court, as already noted, Bianca’s case is that she accepts that HPPL beneficially owns those assets and her complaint is as to the inadequacy of dividends paid in respect of income derived from those assets.
  4. The fact that Bianca may ultimately have an election to make as to the remedies she seeks (in one or other of her capacities) does not remove that inconsistency. Moreover, although in oral submissions I was taken to accounting documents in support of the proposition that there was capacity for the payment of dividends even if the Hope Downs mining tenements are held on trust for Gina’s children, Bianca’s submissions elsewhere acknowledge that the HMH Trust’s shares in HPPL are its “most substantial and only income producing asset”. Thus the beneficial ownership of the Hope Downs mining tenements assumes no little significance in the proceeding (and is something in respect of which Bianca presently appears to adopt different positions). Hence HPPL’s complaint that questions as to the ownership of its assets must be determined before any question as to its failure to pay dividends.
  5. Second, the Federal Court proceeding (now referred to the Martin Arbitration). Bianca disputes the contention (see HPPL’s submissions at [36]-[62]; Gina’s submissions at [21]-[22]) to the effect that this proceeding is either inconsistent with or related to the matters in the present proceeding. However, as noted above, that proceeding is premised on a challenge to HPPL’s beneficial ownership of the mining tenements, that being something that is not disputed in the present proceeding.
  6. Third, the two proceedings in the Supreme Court of Western Australia, involving third parties not involved in the present proceeding, part of which (Bianca and John’s counter-claim) has now been referred to arbitration (the Hope Downs Proceeding). Bianca here accepts that in the Hope Downs Proceeding, she (in her personal capacity) and John have asserted that it is unconscionable for Gina and HPPL to rely on the Hope Downs Deed, and that the present proceeding is premised on an acceptance of the validity of the Hope Downs Deed. However, Bianca maintains that the fact that the HMH Trust’s shares in HPPL are its “most substantial and only income-producing asset” puts the present proceeding in a different class to the Federal Court and Western Australian proceedings. Further, emphasis is placed by Bianca on the fact that she was, and is, not a party to any of the above “related proceedings” in her capacity as trustee of the HMH Trust. There is thus said by Bianca to be no res judicata, issue estoppel or Anshun estoppel arising from those proceedings binding on Bianca “suing in her present capacity” as trustee (reliance being placed in this context on what was said in Tyne v UBS AG (No 3) (2016) 236 FCR 1; [2016] FCA 5 (Tyne v UBS) at [376]-[400] per Greenwood J).
  7. Bianca notes, in this regard, that in certain of the proceedings (referring to a proceeding commenced by HPPL in the Federal Court that was cross-vested to this Court in which HPPL sought declaratory relief as to the payment of royalties – to which I will subsequently refer to as the Article 3A Proceeding), there was no suggestion by the defendants that they were subject to the arbitration agreement. HPPL’s explanation for this is, in effect, that it was seeking declaratory relief on a discrete issue of construction of HPPL’s Articles of Association and that nothing turns on the fact that it did not invoke the arbitration clause at that stage.

The referral/stay motions (motions (i) and (iii)) – preliminary issues

  1. As noted earlier, the principal relief sought by Gina and HPPL is the referral (whether in whole or in part) of the whole of the proceeding to arbitration and the stay or dismissal of the present proceeding pursuant to s 8 of the Commercial Arbitration Act or the equivalent provision under the WA Commercial Arbitration Act (as also noted earlier, the alternative bases for such relief being the case management and abuse of process grounds). I therefore turn first to the applications based on the relevant provisions of the Commercial Arbitration Act (and equivalent in the WA Commercial Arbitration Act).

Relevant provisions of the Commercial Arbitration Act

  1. Section 5 of the Commercial Arbitration Act provides that “[i]n matters governed by this Act, no court must intervene except where so provided by this Act”.
  2. Section 8(1) of the Commercial Arbitration Act, which is also mandatory in its terms, provides that:

8. A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

  1. Section 16(1) of the Commercial Arbitration Act provides that the arbitral tribunal may rule on its own jurisdiction, including objections with respect to the existence or validity of the arbitration agreement. Section 16(2) provides that for those purposes an arbitration clause which forms part of a contract is to be treated as an agreement independent of the other terms of the contract. Those sections provide that:

16. Competence of arbitral tribunal to rule on its jurisdiction

(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.

(2) For that purpose, an arbitration clause which forms part of a contract is to be treated as an agreement independent of the other terms of the contract.

Relevant principles

  1. In the Gleeson Decision, her Honour noted that s 8(1) is engaged if there is an apparently valid arbitration agreement; that being established by the tender of an executed agreement containing a clause which, properly construed, is an arbitration agreement within the meaning of s 7(1) of the Commercial Arbitration Act (see at [86]; and see also the Full Court Decision at [108]).
  2. If the existence of an apparently valid arbitration agreement can be established, it has been said that it is not then appropriate, on a s 8(1) application, to consider the circumstances in which the underlying agreement was entered into (see the Gleeson Decision at [145]; the Full Court Decision at [108], [150], [240]; the Le Miere (No 9) Decision at [3], [45] per Le Miere J; the Le Miere J (No 10) Decision) at [153] per Le Miere J).
  3. In ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 (ACD Tridon), Austin J (at [99]) considered three issues as arising on an application under s 8(1) of the Commercial Arbitration Act: first, the identification of the matters for determination in the relevant proceeding(s); second, on the proper construction of the arbitration agreement, whether those matters “are capable of settlement by arbitration in pursuance of the agreement” (emphasis in original); and, third, whether those matters are arbitrable.
  4. In the Full Court Decision (to which I refer in more detail shortly) it was noted that how an application under s 8 of the Commercial Arbitration Act is dealt with will depend significantly upon the issues and the context (see the Full Court Decision at [145]).
  5. There was some debate on the present application as to whether it is invariably necessary only to show that there is a “sustainable argument” that the arbitrator has jurisdiction (see HPPL’s submissions at [73]; Gina’s submissions at [49]) or whether more might be required in a given case. Bianca points to the fact that in the Court of Appeal Decision, Bathurst CJ had regard (after, I note, the pleaded claims had been considered in isolation of the defences) to whether, by reason of certain defences Gina was raising, the matter fell within the arbitration agreement (see at Court of Appeal Decision at [131]-[148]) and that his Honour did not consider only whether there was a “sustainable argument” as to whether the disputes fell within the agreement. Reference is also made by Bianca to the approach of the High Court in the High Court Decision (see at [34]-[40] of the plurality’s reasons).
  6. Bianca points to the fact that, in the Court of Appeal Decision (at [135]), Bathurst CJ said that “the mere fact that … assertions were made does not mean that it automatically follows that the whole claim is a dispute under the Settlement Deed” and considered that Brereton J “was entitled to examine the claim to form a view as to whether he could properly conclude, in the light of the evidence available, that the assertion that the claim was barred by the Settlement Deed was sustainable” (citing Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 356 per Lord Mustill).
  7. Bianca submits (and I do not understand this to be in contest by the defendants) that the “issues” and “context” relevant to how a judge deals with a s 8 application include: whether the issue is an issue of law involving the construction of documents that can readily be decided by the Court; whether the matter has been fully argued (referring to the Court of Appeal Decision at [135]); whether there is no genuine contention that further evidence might be relevant to the issue (see the Court of Appeal Decision at [135]); the strength of the contention that the arbitrator has jurisdiction (see the Court of Appeal Decision at [135]); whether, if the jurisdictional challenge were referred to the adjudicator, there would be duplication of argument and evidence; whether there is a contention that the matter is non-arbitrable and properly within the purview of the judiciary; whether referral to an arbitrator would or might cause delay in resolving an issue which could quickly and justly be decided by the Court; and whether third party interests would potentially be adversely affected by a referral to arbitration. Pausing here, what is in contest, of course, is what flows from this. Bianca submits that in the present case all these matters militate against the question only being as to whether there was a sustainable argument for jurisdiction; and, in particular, she maintains that “it would be most undesirable to compel a trustee, in that capacity, to participate in arbitration and thereby diminish trust assets if the trustee is not relevantly subject to the arbitration agreement”.
  8. Further, the Full Court made clear (and this was not the subject of the special leave granted by the High Court) that for the proviso to be invoked there must be a specific attack on the validity of the arbitration agreement – it is not sufficient, having regard to the common law principle of separability, to attack the validity of the contract of which an arbitration clause forms part (and see s 16 of the Commercial Arbitration Act set out above). As the Full Court said, the court is not a filter of matters suitable for arbitration; rather, arbitration is a consensual decision of the parties to the relevant agreement.
  9. Accordingly, on the s 8 Stay Applications, I proceed on the basis that it is necessary first to consider whether there is an apparently valid arbitration agreement; and, if there is (and subject to the submissions here made by Bianca as to whether, in her capacity as trustee, she is bound by the arbitration agreement), then to consider whether the action brought is a “matter” which is the subject of that arbitration agreement. The remaining issues: whether the party or parties seeking the referral to arbitration made the request no later than when submitting its or their first statement on the substance of the dispute; and whether the proviso arises (i.e. whether there should be a determination that the arbitration agreement is null and void, inoperative or incapable of being performed) do not arise in the present case (there is not a separate attack on the validity of the arbitration agreement per se; and there is no allegation that entry into the agreement to arbitrate was unconscionable). If there is an apparently valid arbitration agreement and an action has been brought in a matter the subject of that arbitration agreement, then referral to arbitration is mandatory pursuant to s 8(1) of the Commercial Arbitration Act (assuming that the matter is arbitrable) and the proceeding should be stayed (noting that the Full Court made clear that the court does not act as a filter as to the suitability of a matter to be referred to arbitration).

Apparently valid arbitration agreement – Bianca’s “threshold question”

  1. As to whether there is an “apparently valid arbitration agreement”, HPPL notes that the existence of an apparently valid arbitration agreement (namely, that comprised in cl 20 of the Hope Downs Deed) was described by the Full Court as being “beyond argument” (referring to the Full Court Decision at [151]). Bianca, however, raises a threshold issue, namely, as to whether she is bound by the Hope Downs Deed in her capacity as trustee of the HMH Trust arguing that, if she is not, then there is no relevant arbitration agreement in support of which the defendants can seek a mandatory or discretionary stay. In this context, Bianca also argues that the Hope Downs Deed is not “trust property”.

Bianca’s submissions

  1. Bianca accepts (as the defendants have emphasised in their respective submissions) that a trust has no legal personality separate from its trustee, and that a trustee does not have any additional or qualified legal personality (citing ALYK (HK) Limited v Caprock Commodities Trading Pty Ltd [2015] NSWSC 1006 (ALYK (HK)) at [22]-[25] per Black J, to which HPPL has also referred; Yarra Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 (Yarra Australia) at [259] per Pullin JA; and ACES Sogutlu Holdings Pty Ltd (in liq) v Commonwealth Bank of Australia (2014) 89 NSWLR 209; 2014 NSWCA 402 (ACES) at [16] per Leeming JA). Nevertheless, Bianca places emphasis on the fact that, in the Hope Downs Deed, careful distinctions are drawn between the capacities in which the deed is binding upon its signatories (noting that she did not execute the deed in her capacity as trustee). Meanwhile, the defendants contend that Bianca’s submissions are not consistent with an acceptance of the fundamental proposition that a trust has no separate legal personality (as I explain in due course.)
  2. Bianca further submits that it is incumbent on HPPL and Gina to demonstrate that the Hope Downs Deed was executed by Gina in the proper administration of the HMH Trust (and it is said that they have not met that burden). It is submitted that this is “especially problematic” given that: the Hope Downs Deed conferred, inter alia, valuable dividend rights on Gina personally and at the direct expense of the HMH Trust if any beneficiary breached the deed’s terms (said to be a stark example of a self-dealing transaction); and that there is material before the Court that suggests that Gina procured the execution of the Hope Downs Deed without obtaining the fully informed consent of the HMH Trust’s beneficiaries. It is submitted that, in the absence of evidence from HPPL and Gina explaining these matters, it could not be found that the Hope Downs Deed was executed by Gina in the proper administration of the HMH Trust.
  3. As to the question of construction of the Hope Downs Deed, Bianca submits that it is clear from the face of the deed that the parties intended to give some contractual significance to the institution that was the HMH Trust, relevantly by: distinguishing between Gina “as trustee” and Gina in her own right; and providing that the deed only came into existence once, inter alia, Gina in her capacity as trustee of the HMH Trust had executed it. It is said that, in light of the definition of “Proceedings”, the parties also contemplated that the HMH Trust might, so described, be a “party” to proceedings and that it was meaningful to distinguish between the HMH Trust in that capacity and Gina. It is submitted that the distinctions so drawn in the Hope Downs Deed, and the parties’ careful references to the HMH Trust, are of critical contractual significance.
  4. Bianca notes that the arbitration agreement in terms only applies where there is a dispute between two or more “parties” to the Hope Downs Deed and submits that, on its proper construction, a dispute is covered if and only if the dispute arises between parties to the Hope Downs Deed in one or more of the capacities in which they are parties to it. It is submitted that this construction is necessary and appropriate to avoid injustice and absurdity (referring to Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368; (2013) ANZ Ins Cas 61-991 at [152] per McColl JA (Beazley P, as Her Excellency then was, agreeing at [1]) where it was said that “[w]herever possible, an absurd or manifestly unjust result will be avoided upon the hypothesis that such would not have been intended by the parties” (citing Johnson v American Home Assurance Co (1998) 192 CLR 266; [1998] HCA 14 at [19](1) per Kirby J).
  5. By way of example, Bianca postulates the situation where one of the parties to the arbitration agreement were to become the executor of the estate of a person who was not a party to the arbitration agreement. It is submitted that it is most unlikely that the parties could have intended that that party (in the capacity as executor) could thereafter be drawn into an arbitration under the Hope Downs Deed (even though that party, upon becoming executor, does not become two juristic persons). Pausing here, it seems to me that this example conflates the issue as to whether a party is bound by the arbitration agreement with whether a dispute is one that arises “under the deed”. A party to the deed who becomes the executor of the estate of a non-party to the deed would still be bound by the Hope Downs Deed, however, it seems unlikely in that event that any dispute involving the non-party’s estate would be a dispute under the deed for the purposes of the arbitration clause and, if not, then the fact that the executor (in his or her personal capacity) is bound by the Hope Downs Deed would be irrelevant. This does not seem to me to require the further test as to whether the dispute is one that has arisen between parties to the deed “in one or more of the capacities in which they are parties to the deed”.
  6. Bianca argues that the construction for which she contends (that a dispute is covered if and only if the dispute arises between parties to the deed in one or more of the capacities in which they are parties to the deed) is also consistent with general principle, noting that the effect of a contractual identification that a party contracts in a particular capacity turns on the construction of the contract and referring to the principle, as stated in Muir v City of Glasgow Bank [1879] 4 App Cas 337(Muir) at 355-356 by the Lord Chancellor, Earl Cairns LC, that:

… whether, in any particular case, the contract of an executor or trustee is one which binds himself personally, or is to be satisfied only out of the estate of which he is the representative, is, as it seems to me, a question of construction, to be decided with reference to all the circumstances of the case; the nature of the contract; the subject-matter on which it is to operate, and the capacity and duty of the parties to make the contract in the one form or in the other. I know of no reason why an executor, either under English or Scotch law, entering into a contract for payment of money with a person who is free to make the contract in any form he pleases, should not stipulate by apt words that he will make the payment, not personally, but out of the assets of the testator. If, for example, A.B., the executor of X, contracted to make a payment as executor of X, and as executor only, to C.D., it would be difficult to suppose that any obligation except an obligation to pay out of assets was intended, C.D. in the case supposed would have authority to accept a contract so limited, and the words used could have no meaning, and could be referred to no object other than that of limiting responsibility. … But the first question, whether in Scotland or in England, must be, What is the contract into which the parties have entered? And that must be accompanied by another question, What is the contract into which the parties were competent to enter? …

  1. It is said that this principle underpins the observations of Young CJ in Eq, as his Honour then was, in Provident Capital Ltd v Zone Developments Pty Ltd [2001] NSWSC 843 at [50]- [52] (noted by Pembroke J in AMP Capital Investors Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2013] NSWSC 1633 (AMP Capital) at [16]-[17]) and that this analysis is supported by the conclusions of the Western Australian Court of Appeal in Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110 (Paharpur) at [45], where it was held that a reference to “a dispute or difference between the parties” did not refer to a dispute or difference involving a third party, the Court (at [45]) saying that:

45. In the present case, we do not think the parties could be taken to have contemplated such fragmentation. In our view, the reference in cl 2 of the contract to ‘a dispute or difference between the parties’ was intended to apply to a dispute between the parties to the contract only. It was not intended to apply to a dispute involving the parties and a stranger to the contract such as that which arose here, where the dispute involves the liability to one party to the contract (as the drawer/payee) of two acceptors of a bill of exchange, one of the acceptors being a party to the contract and the other a stranger to it.

  1. Thus it is submitted by Bianca that the arbitration agreement into which Gina and Bianca entered was an agreement under which a dispute was covered only so far as the dispute was between the parties in the capacity in which each party contracted.
  2. It is accepted by Bianca that the parties to the Hope Downs Deed did not “freeze in time” in those capacities (Bianca pointing to cl 1.2(f) which she accepts permits the arbitration agreement to extend to disputes between a party’s “successors”); and there noting what was said in Crossman v Sheahan (2016) 115 ACSR 130; [2016] NSWCA 200 (Crossman v Sheahan) at [181]. However, Bianca argues that the term “successor” does not have a fixed meaning; rather, it takes its meaning from its context (referring to Broadwater Hospitality Management Pty Ltd v Primewest (Lot 4 Davidson Street Kalgoorlie) Pty Ltd [2010] WASCA 174 at [58] per Pullin, Newnes and Murphy JJA).
  3. In the context of the Hope Downs Deed (and on the assumption that cl 1.2(f) applies to successors to the parties to the Hope Downs Deed including replacement trustees), Bianca submits that the term has the effect that a replacement trustee for the HMH Trust is only a “party” for the purposes of the arbitration agreement so far as the Hope Downs Deed forms part of the trust property such that the incoming trustee “succeeds” to the rights and obligations under the deed. It is submitted that this construction is consistent with the parties’ careful distinction between the capacities in which the parties to the deed contracted and is consistent with context (and hence that a person is not relevantly a “successor” if the person does not succeed to rights and obligations under the Hope Downs Deed). It is said that this construction avoids absurdity. Bianca argues that it is difficult to see why the parties would have intended that a deed which was not trust property would become trust property because of a change in trusteeship; and says that, if that were the parties’ intention, then the clearest language would be expected. By way of example, it is said that the parties could not sensibly have intended that, if the Hope Downs Deed were entered into in breach of trust such that it was not trust property, and that breach of trust was the occasion for the removal and replacement of the trustee, then the act of removing and replacing the trustee would achieve that which the former trustee did not (namely, to bind the trust to the deed).
  4. Bianca further submits that the assumption that cl 1.2(f) applies to successors to the parties to the Hope Downs Deed is unsound. It is submitted that cl 1.2(f) operates on “a reference to a party to a document”, noting that the deed describes itself as “this deed”, not a “document”; and says that the reference to “document” in cl 1.2(f) is a reference to documents referred to in the Hope Downs Deed other than the deed itself, such as the Porteous Settlement Deed and the Deed of Obligation and Release.
  5. Bianca also argues that the assumption that cl 1.2(f) was intended to apply to all successor trustees is unsound. It is submitted that the parties to the Hope Downs Deed cannot have contemplated that there would be any successor to Gina as trustee otherwise than pursuant to the regime in cl 9.2; but that the processes under that regime did not occur; and that the regime in cl 9.2 can no longer have any operation now that Gina has relinquished her trusteeship and left the selection of her successor to the court (contra Gina’s submissions at [115], [123]). Bianca says that Gina has previously put to the Court of Appeal that “if the new trustee was outside the parties to the deed it would be difficult to see how the contractual fetter would automatically flow over”. Thus, Bianca submits, Gina’s reliance on the clause is misplaced. Pausing here, it did not seem to me to be suggested that there was any admission against interest made by Gina by the making of what might be said to be inconsistent submissions in earlier proceedings. Hence the relevance of any such previous submissions on the present application is moot. Nor do I see a basis to conclude that the parties to the Hope Downs Deed cannot have contemplated that there would be any successor to Gina as trustee otherwise than pursuant to the regime in cl 9.2 simply by reason of the fact that cl 9.2 dealt with a particular circumstance in which Gina might be replaced as trustee.
  6. As to the suggestion by Gina (see below) that the parties could not have contemplated that disputes involving a successor trustee would fall outside the arbitration agreement, Bianca says that it is most unlikely that objectively the parties mutually contemplated that Gina would act in breach of trust in entering into the Hope Downs Deed (and that to suggest otherwise would be contrary to the presumption of regularity); and thus it is said that, objectively, there was no mutual consideration of what should occur if Gina ceased to be trustee and obligations under the Hope Downs Deed did not vest in the new trustee because of Gina’s default. To my mind, this elides two quite different questions: first, whether the parties would have contemplated that a dispute involving a successor trustee would be covered by the arbitration agreement and second, whether the parties would have contemplated that Gina would act in breach of trust when entering into the deed. As to the former, I do not see the basis on which it is suggested that parties entering into a deed which is expressed to include reference to a party’s successors should be taken not to have intended “successor” to include a successor trustee other than one appointed pursuant to the regime in cl 9.2, which seems to be the thrust of Bianca’s submission.
  7. Bianca says that it is not an answer (as Gina suggests) to point to the phrase “in any representative capacity” on the first page of the Hope Downs Deed as having been intended to operate in an anticipatory fashion to ensure that Bianca was bound if she were later to become the trustee. It is submitted that this involves the absurd proposition that Bianca was able to bind “the trust” to a deed by signing the deed prior to becoming trustee and otherwise than in the course of her duties as trustee. That, however, seems to me to miss the point: subject to the submissions made as to whether the Hope Downs Deed was entered into in breach of trust, the trustee of the HMH Trust, Gina at the time, was bound at the time the Hope Downs Deed was entered into; and the question is whether Bianca who was also a party to it can now say that, in her capacity now as trustee, she is not bound thereby – not whether she was able in some way prospectively to “bind the trust” to the deed at the time that she signed it.
  8. As to Gina’s contention that, if the Hope Downs Deed only bound parties in particular capacities, then various clauses of it would not “bite” against the parties in all of their capacities (and that this is a result that the parties could not have intended), Bianca submits that the parties could readily have intended that result and argues that this was why they went to some lengths to identify the various capacities in which the parties to the Hope Downs Deed were contracting. It is submitted that Gina’s contention is particularly weak when it is said that the parties could not have intended that successor trustees might not be bound by various obligations since the parties expressly agreed that nothing in the Hope Downs Deed limited any of the powers of the trustee (see cl 9.3). Clause 9.3, however, as extracted above, is clearly directed to dispelling any argument that the procedure set out in cll 9.1 and 9.2 might be construed as limiting the powers of the trustee. I do not see that it assists in determining whether “successor” to a party includes a successor to Gina in that person’s capacity as trustee.
  9. Bianca submits that the issue whether a person is a party to an arbitration agreement is one which can properly, and should, be determined as an incident of the determination of an application under s 8. It is noted that in the Gleeson Decision, Gleeson J determined for herself whether various persons were parties to the arbitration agreement (see at [515]-[544]) and that the High Court also decided for itself that certain persons were parties for the purposes of the Commercial Arbitration Act (see the High Court Decision at [74]).
  10. It is submitted that the question who is a party to an agreement is the kind of question that should commonly be resolved by a court before referring a matter; and that a person should not be subjected to arbitration if the person has not consented to the arbitrator’s jurisdiction. Bianca notes that the High Court has described the “consensual foundation of arbitration”, which it is said explains why an arbitrator’s power to determine matters arising under Commonwealth laws is non-judicial in character. Bianca says that the existence of the parties to an arbitration agreement constitutes a jurisdictional fact that must exist before the statutory compulsion contained in s 8 is engaged.
  11. Insofar as Gina has in her submissions (at [97]) quoted from G Born, International Commercial Arbitration (2009, Wolters Kluwer, Vol 1, pp1220-1) (see below), Bianca says that the full text makes it clear that disputes as to parties can and commonly are resolved by domestic courts:

Consistently with that regime, courts applying the Model Law have affirmed the power of arbitral tribunals to consider disputes over the identities of the parties to arbitration agreements, while also entertaining interlocutory litigation concerning this issue and reviewing arbitral awards addressing the subject.

  1. It is noted that Born refers to Fibreco Pulp Inc v The Star Dover (1998) 145 FTR 125, where the Federal Court of Canada held (at [28]) that it could not “force those who are not parties to the arbitration clause … to submit to arbitration” and to ABN Amro Bank Canada v Krupp MaK Maschinenbau GmhH (1994) 21 OR (3d) 511, where Haley J in the Ontario Court (General Division) said that, without consent, non-parties to an arbitration agreement should not be bound to arbitrate (reference there being made to the conclusions to that effect reached in Kaverit Steel & Crane Ltd v Kone Corp. (1992), 87 DLR (4th) 129, 85 Alta LR (2d) 287 (CA) and Boart Sweden AB v NYA Stromnes AB (1988), 41 BLR. 295 (Ont HCJ) at 304 per Campbell J).
  2. As to the question whether Bianca, as trustee, succeeded to Gina’s former rights and obligations under the Hope Downs Deed, Bianca says this question is not answered by pointing to order 2 made by Brereton J on 28 May 2015 in the 2015 Decision (at [383]) and ss 78 and 85 of the Trustees Act 1962 (WA) (cf Gina’s submissions at [51]). It is said that the effect of that order was to vest in Bianca the trust property (referring to the terms of the order and to general principle by reference to Young v Murphy at 291-2 per Brooking J); and that not every contract into which a person enters purportedly in the course of performing a trust is and becomes trust property (again citing Young v Murphy per Brooking J at 291). Relevantly, his Honour there said:

A contract was held in trust by the former trustee if it was made in the course of administering the trust. A contract made by a trustee because he is administering a trust is not necessarily made in the course of the administration. It may be made for his private purposes as trustee as opposed to being made in the management of the trust estate.

  1. Reference is also made by Bianca to the observation by Simmonds J in Conlan v The Executor or other Personal Representative as Executor of the Estate of Anthony John Croci [2009] WASC 266 at [31] that “simply because a contract was entered into as a result of a trustee’s administration of its trust does not necessarily make that contract trust property” (the contract there being held not to be trust property because it was entered into by the trustee for private purposes).
  2. Bianca says that this analysis echoes the approach taken to a trustee’s right of indemnity out of trust assets noting that, subject to variation by statute or the trust deed, that right exists “[i]f the trustee has incurred liabilities in the performance of the trust…” (Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 at 369 per Stephen, Mason, Aickin and Wilson JJ) and that this is commonly described as referring to liabilities “properly incurred by the trustee in the execution of the trust” (referring to Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd [2014] NSWCA 42 at [62] per Gleeson JA).
  3. Bianca thus maintains that: a contract is not part of the “trust property” if it was made for the trustee’s private purposes or was not entered into in the course of the proper administration of the trust (the defendants submit that there is no authority to support the second of these two alternatives); and that in those circumstances where the trustee is replaced, the contract remains the property of the legal person who was the trustee and does not vest in the incoming trustee. It is submitted that the circumstances in which a contract is not entered into for private purposes and/or in the course of administering a trust include, but are not limited to, the case where the trustee is motivated by an improper purpose and necessarily includes the circumstance where the trustee was conflicted and failed to obtain informed consent. Bianca maintains that in such circumstances the property remains in the hands of the defaulting trustee but subject to a constructive trust in favour of the beneficiaries of the trust (citing Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 at 198-199 per Deane J; Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Friendly Society Ltd (2018) 92 ALJR 918; [2018] HCA 43 at [68] per Gageler J (Ancient Order v Lifeplan); Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [183] per Finn, Stone and Perram JJ; and Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342; [1958] HCA 33 at 450 per Dixon CJ, McTiernan and Fullagar JJ).
  4. Bianca submits that it follows from this that she will not have “succeeded” to the Hope Downs Deed in her capacity as trustee if Gina did not enter into the Hope Downs Deed for the purposes of the trust and/or in the course of properly administering the trust; and that, if she did not succeed to the Hope Downs Deed in her capacity as trustee, then a dispute between Gina and HPPL, on the one hand, and Bianca in her capacity as trustee, on the other, is not within the four corners of the arbitration agreement.
  5. Bianca maintains that: the burden of establishing that the Hope Downs Deed was entered into in the proper administration of the HMH Trust rests upon the parties seeking to deploy it (here, HPPL and Gina); HPPL and Gina have failed to demonstrate that Gina entered into the Hope Downs Deed in the proper administration of the trust (and rather, in fact, did so for non-private purposes); and hence the Hope Downs Deed is not, and the rights and obligations given or imposed by it are not, trust property.
  6. As noted above, Bianca says that, on any view, the Hope Downs Deed is a stark example of a “self-dealing transaction” in that Gina both stood to gain personally from the Hope Downs Deed and stood to gain on the basis of unequal treatment between Gina and the beneficiaries of the HMH Trust.
  7. In that regard, Bianca points to: the provisions of the Hope Downs Deed pursuant to which, on a breach of the deed, all the dividends under cl 5 were “exclusively diverted” to Gina (the sole holder of Class B shares); the releases and discharges in cl 6 (which protected Gina personally as well as in her capacity as trustee); and the “right” of full ongoing control of HPPL given by cl 8 to Gina alone.
  8. Emphasis is placed on the strictness of the principle that the duty of trustee is one of “absolute and disinterested loyalty” (referring to Ancient Order v Lifeplan at [67] per Gageler J; Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461 at 471; [1843-60] All ER Rep 249 per Lord Cranworth LC; and Gray v Hart [2012] NSWSC 1435 at [323] per White J, as his Honour then was). Bianca submits that Gina is not permitted to defend her actions on the basis that “substantial benefits” accrued to the HMH Trust from the Hope Downs Deed (contra Gina’s submissions at [134(a)]); that such an enquiry is not permitted to occur; and that Gina’s duties as trustee of the HMH Trust obliged her not to enter into the Hope Downs Deed unless she had obtained fully informed consent from the beneficiaries (referring to the principle as stated by Bathurst CJ in Duncan v Independent Commission Against Corruption [2016] NSWCA 143 at [438]). It is said that the onus of establishing that there was fully informed consent lies on Gina as the prima facie defaulting trustee (citing Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384 at 398; [1929] HCA 24 per Isaacs J; Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 466; [1997] HCA 23 (Maguire v Makaronis) per Brennan CJ, Gaudron, McHugh and Gummow JJ; Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [133] per Leeming JA (Gleeson JA agreeing at [6]; Papadopoulos v Hristofordis [2001] NSWCA 368 at [31] per Hodgson JA (Spigelman CJ agreeing at [39], Sheller JA agreeing at [40]), and Farrant v Blanchord (1863) 1 De G J & B 107 at 119-120).
  9. As to the notion of informed consent in this context, reference is made to what was said by the Privy Council in Clarke Boyce v Bouat [1994] 1 AC 428 at 435-6 and that what is needed is “full knowledge of all the material facts” (referring to Spellson v George (1992) 26 NSWLR 666 at 670; [1992] NSWCA 254 per Handley JA; Barescape Pty Ltd v Bacchus Holdings (No 9) [2012] NSWSC 984 at [154] per Black J; Anthony v Morton [2018] NSWSC 1884 at [592]; and P Finn, Fiduciary Obligations (2016, Federation Press) at 198 [429]); and to the onerous nature of the “task of explanation inherent in a request to be excused from a fiduciary requirement” (see Re McGrath & Anor (In their capacity as liquidators of HIH Insurance Limited) (2010) 78 ACSR 405; [2010] NSWSC 404 at [47] per Barrett J, as his Honour then was); and the insistence upon “full candour and appropriately complete disclosure” (see O’Reilly v Law Society of New South Wales (1988) 24 NSWLR 204 at 208 per Kirby P, as his Honour then was).
  10. As to the non-disclosure of the Myers advice and Sceales advice, Bianca says: that it would be irrelevant if Gina were subsequently to have formed the view that the advice was erroneous and equally irrelevant that Gina may have subsequently obtained legal advice that permitted her to enter the transaction (cf Gina’s submissions at [134(b)]); and that whether the original advice was right or wrong was a decision for the beneficiaries to make (it being submitted that a duty of candour is not discharged by the disclosure only of that adverse material with which the person subject to the duty agrees). Bianca maintains that it was incumbent on Gina to disclose the Sceales advice when it was received, even though this was after the beneficiaries signed the Hope Downs Deed (as Gina notes in submissions at [134(c)]) and to seek ratification of her breach of duty, particularly when Gina procured Bianca and other beneficiaries to sign a further deed with a materially identical arbitration clause in 2007.
  11. As to any reliance on the subsequent advice from Mr Gilmour QC (the Gilmour advice) (to which Gina refers in her submissions at [134(b)]), Bianca says: first, that the Gilmour advice was furnished after Gina had executed the Hope Downs Deed and cannot bear on Gina’s state of mind at the time she executed the Hope Downs Deed; second, that the Gilmour advice did not advise on issues relating to informed consent (noting that on the face of the advice it appears that the potential for a conflict was appreciated); third, that the Gilmour advice was not disclosed to the beneficiaries at any material time nor was the fact that Mr Gilmour was requested to redact portions of his advice and re-issue it; and fourth, that there is no evidence that Mr Gilmour was briefed with the facts evidencing that Gina’s purposes were personal nor that he was briefed with the Sceales advice.
  12. Insofar as Gina asserts that the conflict was obvious on the face of the Hope Downs Deed and that Bianca obtained her own legal advice (referring to Gina’s submissions at [134](c)]), Bianca emphasises the strict standard required of informed consent and says that telling a beneficiary to get his or her own legal advice on the basis of the terms of the deed falls far short of obtaining informed consent.
  13. Bianca submits that: Gina has not demonstrated that she entered into the Hope Downs Deed for non-private purposes; the ready alternative inference is that her purpose for entering the Hope Downs Deed was to defeat John’s proceeding to remove her as trustee; and the inference that Gina entered into the Hope Downs Deed for private purposes is more readily drawn in circumstances where Gina obtained substantial benefits under the Hope Downs Deed by reason of cl 5(c), Gina potentially obtained the right to the whole of the dividend flow under cl 5(a) at the expense of the beneficiaries; Gina withheld the advices from the beneficiaries and Gina later ratified the Hope Downs Deed “despite holding advice that to do so was in breach of her duties as trustee”. Bianca invokes the principles in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 in this regard. In those circumstances, it is submitted that it has not been established the Hope Downs Deed was entered into by Gina in the proper course of administering the HMH Trust and for non-private purposes; and therefore that the “the Deed’s obligations did not (and do not) form part of the trust property”.
  14. Accordingly, it is submitted by Bianca that: the arbitration agreement is not enforceable against her acting in her capacity as trustee; and the covenants in cll 7 and 8 of the Hope Downs Deed are not relevantly covenants given by her (as trustee).
  15. Bianca says that no part of her submissions as to the Hope Downs Deed not forming part of trust property is inconsistent with the 2018 Decision and that Gina’s submissions to that effect conflate the effect of the vesting order over trust property made by his Honour and the separate order for the physical delivery up of trust documents. It is noted that the two orders were separately recorded (at [383(2) and [383(3)] of the 2015 Decision) and contained different terms and legal effect. It is said that, while the former vested the “assets and property of the Trust”, the latter required Gina to “deliver up” “all documents of the Trust in her possession custody or power”. Bianca says that it is self-evident that the latter order is concerned with physical documents, not with questions of succession to trust assets.
  16. Bianca argues that the fact that the 2018 Decision concerned only the latter (delivery up) order was recognised by Brereton J (at [1]) (and in Gina’s own submissions recorded at [2] of the 2018 Decision) pointing to [30], where his Honour noted that the “core of the dispute” concerned “the scope of the delivery up order” and in particular what is a “document of the Trust”, and his Honour’s reference (at [41]) to principles that require a predecessor trustee to “hand over to an incoming trustee all documents and information which relate to the administration of the trust so as to enable the incoming trustee to fulfil his duties”. Reference is made to his Honour’s observation (at [76]) that “[t]here is no doubt that documents maintained by the trustee in connection with the affairs of the trust are trust documents. These are, essentially, documents in the files kept by the trustee as trustee” and it is submitted that it was in this “quite different context” (of physical delivery of physical documents) that Brereton J held that original copies of the Hope Downs Deed and of the Sceales advice were “property of the trust” and therefore “within the scope of the delivery up order” (see at [111(5)(a)]). Bianca maintains that Brereton J did not thereby “authoritatively determine the extent to which the successor trustee is bound by a ‘self-evidently self-dealing transaction’”; noting that his Honour accepted (at [32] and [34]) that the expression “trust documents” included at least “documents relating to the trust property”, which includes documents relating to choses in action against the former trustee. Bianca argues that the Hope Downs Deed, which she says is the record of a self-dealing transaction, is such a document.

Defendants’ submissions

  1. I propose to summarise the defendants’ submissions as to the threshold question (which to a large extent overlap) collectively, rather than setting them out separately.
  2. Broadly, the defendants say that: the contention that Bianca is not bound by the Hope Downs Deed qua trustee raises matters that are for the arbitral tribunal, not the court, and hence there should be no exploration of the merits of those matters; it is Bianca, the “legal person”, who brings these proceedings (whatever the stated “capacity” in which she acts as plaintiff) and she is a person who is bound by the Hope Downs Deed; that, on its proper construction, the Hope Downs Deed, and in particular the arbitration agreement, applies to Bianca in her capacity as a replacement trustee; and Bianca is bound by the Hope Downs Deed by virtue of the vesting orders Brereton J made when she became trustee.
  3. As to the submission that this threshold question must be referred to arbitration, it is submitted that the tender of the apparently valid arbitration agreement is sufficient to establish the “parties” to that arbitration agreement for the purposes of the s 8 application (noting that “party” is defined in Commercial Arbitration Act, s 2(1) as meaning “a party to an arbitration agreement”, which includes “any person claiming through or under a party to the arbitration agreement”).
  4. It is submitted by the defendants that: given that there is no dispute that Bianca executed the arbitration agreement contained in cl 20 of the Hope Downs Deed, it is plainly arguable that Bianca (as trustee of the HMH Trust) is bound by the Hope Downs Deed, including cl 20; and therefore it is not appropriate here to entertain Bianca’s contention that she is not bound by the Hope Downs Deed in her capacity as trustee of the HMH Trust in circumstances where Bianca is undeniably bound in her personal capacity. It is submitted that Bianca’s contention that she is not bound involves a challenge to the efficacy of the Hope Downs Deed (emphasis being placed on the use by the High Court of the word “efficacy” rather than “validity”) and does not constitute a separate attack on the arbitration agreement; and that it does not appear to have been raised before either Brereton J or Rein J.
  5. Bianca’s submission that the Hope Downs Deed is not binding on her in her capacity as trustee is said of itself to demonstrate that there is a dispute under the Hope Downs Deed which must be determined by arbitration (it being noted that, by virtue of the competence-competence (or “kompetenz-kompetenz”) rule (see s 16(1) of the Commercial Arbitration Act and the High Court Decision at [13]), the arbitral tribunal has jurisdiction to determine whether it has jurisdiction to hear the dispute).
  6. Gina argues that, in circumstances where the threshold inquiry as to jurisdiction can involve questions as to the validity of the very agreement from which the arbitration arose, then, a fortiori, that threshold inquiry can also involve questions as to whether that agreement was binding on particular parties said to be bound by it. Reference is made by Gina to the explanation in G Born, International Commercial Arbitration (2009, Wolters Kluwer, Vol 1) at 1220-1 that:

Consistent with the more general approaches to the competence-competence doctrine, arbitral tribunals have almost uniformly concluded that they have authority to consider whether the parties’ arbitration agreement was binding on particular entities… The Model Law’s regime for competence-competence, in Articles 8 and 16, applies to disputes over the parties to an arbitration agreement. Consistently with that regime, courts applying the Model Law have affirmed the power of arbitral tribunals to consider disputes over the identities of parties to arbitration agreements.

  1. Gina thus submits, as does HPPL, that the question whether a party is bound by an arbitration agreement is for the arbitral tribunal to resolve, so long as it is arguable that the party is bound (citing Gulf Canada Res. Ltd v Arochem International Ltd., Arochem International, Inc (1992) 66 BCLR 2d 113 (BC Ct App); Trade Fortune Inc v Amalgamated Mill Supplies Limited [1995] ILPr 370 (Supreme Court of British Columbia), Borowski v Heinrich Fiedler Perforiertechnik GmbH and Another [1996] ILPr 373; Hancock v Rinehart [2013] NSWSC 1352 (to which I will refer as the 2013 Decision) at [87]-[88] per Bergin CJ in Eq); Robotunits Pty Ltd v Mennel (2015) 49 VR 323; [2015] VSC 268 (Robonunits) at [18] per Croft J); and that it is plainly arguable here that Bianca, as trustee of the HMH Trust, is bound by the Hope Downs Deed, including cl 20.
  2. As to the stated “capacity” in which the proceeding is brought, Gina argues that Bianca’s submissions are inconsistent with her stated acceptance (referring to Bianca’s submissions at [95]) of the proposition that a trust is not a separate entity from the trustee, and that a trustee does not have any additional or qualified legal personality. The defendants refer in this regard to the authorities already noted in relation to this proposition (ACESYarra at [409] per Murphy JA; and AMP Capital at [16] per Pembroke J. HPPL additionally refers in this context to Macarthur Cook Fund Management Limited v Zhaofeng Funds Limited [2012] NSWSC 911 at [117] per Hammerschlag J and Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20 at [24] per Kiefel CJ, Bell and Edelman JJ.
  3. It is submitted that the words “as trustee for” are generally no more than “a convenient shorthand that assists third parties to see the link between a person’s actions and a trust obligation owed by that person” and do not change the legal character of the person in question; and that, whatever capacity a person acts in, they remain one and the same legal person noting that it is for this reason that a person acting as trustee cannot enter into a contract with himself or herself in his or her personal capacity (Gina citing Williams v Scott [1900] AC 499; Rye v Rye [1962] AC 496; Minister Administering National Parks & Wildlife Act 1974 v Halloran (2004) 12 BPR 22, 391).
  4. Gina further submits that Bianca seeks to invest too much significance in the “capacity” in which these proceedings are said to have been brought. It is submitted that there are no particular legal consequences that flow from the fact that the originating process in this proceeding describes the plaintiff as “Bianca Rinehart as trustee for the HMH Trust”; and that it would have made no difference had she had been named only as “Bianca Rinehart” (she being the one legal person, capable of suing and being sued in her own name) (reference is made in this regard to ALYK (HK) at [26] per Black J; AMP Capital at [15] per Pembroke J; and St George Bank Ltd v Federal Commissioner of Taxation (2009) 176 FCR 424; [2009] FCAFC 62 at [88] per Perram J).
  5. Gina submits that, for Bianca’s submission to succeed, she must establish that she can act in any way qua trustee regardless of what she has promised in another capacity (postulating by way of example, that if she had contracted personally not to disparage somebody, she would not be restrained from doing so as trustee) and says that this is contrary to the principles referred to above.
  6. Gina also notes that part of the ultimate relief sought by Bianca is in the nature of information-gathering to assist in the commencement of a derivative suit by HPPL. It is said that, should leave be granted for such a suit to be instituted, HPPL would be obliged to arbitrate any dispute within the purview of the arbitration agreement in cl 20 of the Hope Downs Deed. Thus, it is submitted, not only does Bianca seek to act in breach of her obligations under the arbitration agreement, but that “she does so with the avowed purpose of procuring another party to the agreement to breach it as well”.
  7. As to the proper construction of the Hope Downs Deed, it is submitted that Bianca’s argument cannot be reconciled with the express terms of the Hope Downs Deed. A number of arguments are raised in this context.
  8. First, it is submitted that the effect of Bianca’s argument is that the words “any party to this deed” in cl 20 of the Hope Downs Deed must be read down so as to exclude Bianca, notwithstanding that she is a party to the Hope Downs Deed, in circumstances where she has a dispute in her capacity as trustee of the HMH Trust.
  9. The defendants point out that the Hope Downs Deed contemplates that Bianca may one day be the trustee (referring to cl 9.2) and it is submitted that the deed contemplates that, if so, she would continue to be bound by it (noting that it was clearly intended that “the Trustee” would be bound by the deed; that the Trustee could be someone other than Gina as long as it was a “Hancock Family Group Member”; and that the deed was to bind a party’s successor). It is further noted that the Hope Downs Deed also contemplates that Gina might cease to be trustee and then become trustee again (see cl 9.2). Gina argues that in these circumstances it is nonsensical to suggest that the Hope Downs Deed is not binding on the trustee during the period when Gina is not the trustee, but will be binding on the trustee when Gina “reassume[s] the position of Trustee”.
  10. Gina argues that it is inconceivable that a person in the position of the parties to the Hope Downs Deed would have thought that a dispute under it that engaged Bianca in her capacity as trustee would be heard and determined publicly in open court and says that there is no basis to read the language of cl 20 narrowly (which, it is said, is precisely what Bianca seeks to do).
  11. Second, reference is made to the structure embodied in the list of named parties on page 1 of the Hope Downs Deed, there being four naming conventions used in that list: a number of parties listed by name only (HPPL, Hancock Minerals Pty Ltd, Hancock Family Memorial Foundation Limited, Mr Watroba, Bianca, HMHT Investments Pty Ltd and 150 Investments Pty Ltd); Gina, listed in her capacity as trustee of the HMH Trust (with the definitions “The Trustee” and “HMH Trust” then utilised throughout the operative provisions of the deed); Gina, listed separately “in her own right as a director of Hancock Group Member”; and Gina’s four children, each listed each “in [his or her] own right or in any representative capacity”.
  12. It is noted that Bianca is named as a party to the Hope Downs Deed “in her own right or in any representative capacity” (Bianca submits that the words “any representative capacity” do not include her subsequent representative capacity as trustee of the HMH Trust because the “expression obviously refers to the capacities which Bianca held at that time”.) While it is accepted that it is possible for a trustee to contract with limited recourse to the trustee’s personal assets (in this regard, Gina referring to Leeming JA’s explanation in ACES at [18]), it is said that clear words are required, and that a mere description of the capacity in which a party enters a contract is insufficient to exclude full liability (Gina referring to Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773). Gina says that such clear words are lacking from the Hope Downs Deed; and that, to the contrary, the Hope Downs Deed made plain that Bianca was signing “in her own right or in any representative capacity”, which it is said is to be consistent with the usual rule that Bianca will be bound as a legal person, and recourse to her assets to enforce her obligations will not be limited in any way.
  13. Gina submits that the purpose of those words (“in any representative capacity”) may be explained by cl 9.2, which contemplates that the four people who are able to be appointed as a replacement trustee are Gina’s four children. Thus, it is said, it was contemplated that representative capacity would include “as trustee” (to the extent that it matters). Gina argues that the intent of page of the Hope Downs Deed titled “Parties” is that: to the extent that a party could only ever expect to be bound in his, her or its own personal capacity, it says so; to the extent that a party has a presently relevant representative capacity, it is named; and to the extent that a party is eligible to be subsequently appointed as trustee (being the beneficiaries, including Bianca), the deed ensures that that party will remain bound in “any representative capacity”.
  14. Third, the defendants refer to cl 1.2(f), which provides that “a reference to a party to a document includes that party’s successors and permitted assigns”. Gina submits that this is another mechanism that ensures that replacement trustees remain bound by the Hope Downs Deed.
  15. Insofar as Bianca argues that the Hope Downs Deed is not a “document” (referring to Bianca’s submissions at [107]), HPPL maintains that “any document” includes the Hope Downs Deed itself. Further, Gina says that this argument is premised upon an assumption that the term “document” has been deployed in deliberate contradistinction to “deed” throughout the Hope Downs Deed but that nowhere in the Hope Downs Deed is such a distinction imbued with any significance (rather, she submits, “document” in cl 1.2(f) has its ordinary meaning of “a piece of written, printed, or electronic matter that provides information or evidence or that serves as an official record”). Gina points out that a deed is a type of document; and that the two examples of “documents” on which Bianca relies are both deeds.
  16. As to the argument (contained in Bianca’s submissions at [106]) that “a replacement trustee for the Trust is only a ‘party’ for the purposes of the arbitration agreement so far as the Deed forms part of the trust property”, Gina says that there is nothing in the Hope Downs Deed itself to suggest that it is only binding on the trustee to the extent that the Hope Downs Deed forms part of the trust property (let alone the clear words required).
  17. As to Bianca’s argument (at [107]) that a replacement trustee is not a “successor”, the defendants argue that the term “successor” should be read naturally and in context so as to include a person who succeeds Gina as “Trustee”, such as pursuant to the Trustee Act 1962 (WA), at least where the person was expressly contemplated as a candidate to do so pursuant to cl 9.2. It is said that it is unnecessary to consider the position of replacement trustees not contemplated by that clause (cf Bianca’s submissions at [108]). In any event, it is noted that Bianca, albeit in a different context, has admitted that the Hope Downs Deed constitutes trust property.
  18. Fourth, it is submitted that the “narrowness and technicality” of the construction urged by Bianca flies in the face of the High Court Decision. In particular, it is noted that the High Court held at [46] that “a critical object of the Hope Downs Deed was the maintenance of confidentiality about the affairs of the Hancock Group, the trusts, the intra-family dispute and the provisions of the Deeds themselves” and that “[t]his object could not be clearer”. Gina submits that, as a matter of construction, in light of the High Court Decision, it is clear that the parties’ intention was that all disputes, including in relation to the affairs of HPPL and the trusts, be arbitrated away from the public spotlight; whereas, if Bianca’s construction were to be accepted, this would lead to consequences that are “clearly at odds with this intention”.
  19. By way of example, Gina argues that on Bianca’s construction she could breach the non-disparagement undertaking in cl 7(d) simply by asserting that any adverse public comments she makes are made not in her personal capacity but “in her capacity as trustee”; breach the confidentiality obligation in cl 10.1 by asserting that she has personally kept the information confidential, but has disclosed it only “in her capacity as trustee”; and breach the no assistance with prosecution of claims provision in cl 13 by claiming that in her personal capacity she has complied with that clause even if she has “entirely defeated the protection it was intended to secure” by assisting with the prosecution of claims in her capacity as trustee. Gina submits that this cannot be the way in which the Hope Downs Deed operates.
  20. Gina submits that the reference to “successors” in cl 1.2(f), as well as the references to “representative capacit[ies]” on the Parties page, was designed to ensure that the parties would be bound by the Hope Downs Deed in whatever guises they might ultimately come to assume. It is submitted that this is consistent with the usual result that a person must perform a promise in all capacities, rather than only in one.
  21. Gina submits that the significance of the careful distinction between Gina as trustee and Gina in her personal capacity (referred to in Bianca’s submissions at [93]- [94]) is that it demonstrates the clear intention of the parties that all parties involved would be bound by the agreement in relation to the affairs of HPPL and the affairs of the HMH Trust. It is said that that is consistent with the finding of the High Court, but “entirely inconsistent” with the position Bianca now seeks to advance.
  22. Further, it is said that, while a deliberate technique of differentiation is employed in setting out the obligations that apply to Bianca, the parties “critically” chose to refrain from using the same technique in the arbitration agreement (where the subject employed was as broad and inclusive as possible: “any party”). It is said that, in light of the approach taken to spelling out Gina’s obligations in the Hope Downs Deed on a role-by-role basis, the parties’ choice not to take a like approach elsewhere suggests that phrases such as “any party” should instead be construed with all the generality that the words admit.
  23. As to the significance of the vesting orders, the defendants submit that, even if Bianca was not bound by the Hope Downs Deed “as Trustee” by its terms (having been a party to the deed and also a successor to Gina as Trustee), she plainly became bound by virtue of the vesting order made by Brereton J on 28 May 2015 (relevantly, order 2), by which the “assets and trust property” of the HMH Trust were vested in Bianca as trustee pursuant to s 78 of the Trustees Act 1962 (WA). It is noted that, pursuant to s 85(1) of that Act, provision is made for vesting orders that are consequential on the appointment of a new trustee or the retirement of a trustee. The defendants submit that the effect of Brereton J’s vesting order is that trust property, including documents of the HMH Trust, vested in Bianca without the need for any conveyance, transfer or assignment from the outgoing trustee.
  24. As to whether the Hope Downs Deed is an asset of the HMH Trust (that is, “Trust property”), the defendants submit that it is. Gina accepts that the relevant test for trust property being whether the contract was made “in the course of administering the trust” (referring to Young v Murphy at 291 per Brooking J) but says, as does HPPL, that there is no authority to support the submission (made by Bianca at [113]-[131]) that the test is whether the contract was concluded in the “proper” course of administering the HMH Trust (as opposed to simply “in the course of administering the Trust”). It is submitted by Gina that if Bianca’s submission were accepted, it would have the “presumably unintended” effect that many of the documents which Bianca claims to be trust documents in the Removal Proceeding could not be documents of the HMH Trust, because there is an impugned transaction underlying them (such as the debt reconstruction) which Bianca alleges to have involved a breach of trust.
  25. Gina argues that the Hope Downs Deed is “Trust property” in that: it was expressly entered into by Gina in her trustee capacity; by cl 5 it conferred significant benefits on the HMH Trust which only the trustee, not the beneficiaries, has the right to enforce; Gina’s alleged non-disclosure was unrelated to any personal benefit she received; any benefits that Gina did receive were plain on the face of the Hope Downs Deed; and the beneficiaries who signed the Hope Downs Deed received independent legal advice (see cl 12.4). Thus, it is submitted, to the extent that fully-informed consent was required in relation to an alleged conflict, it was given.
  26. Gina says that the submission that the Hope Downs Deed was not executed in the “proper” administration of the HMH Trust (because it was a “self-dealing” transaction and fully informed consent was not obtained) should be rejected for the following reasons. First, because that submission ignores the substantial benefits to the HMH Trust that arise from the Hope Downs Deed, namely, a contractual entitlement to dividends in an amount disproportionate to the trust’s shareholding, and security of title to HPPL’s assets and thus security of the value of the trust’s shareholding in HPPL. Second, by reference to the Gilmour advice, that “[t]he trustee, in executing the agreement, as it seem to me is acting in the best interests of the Trust and its beneficiaries in seeking to protect its only substantial asset namely [its] shareholding in HPPL”. Third, that there was no non-disclosure in respect of Gina’s alleged conflict. Fourth, that the mere fact that a trustee obtains a personal benefit from entering into a deed with beneficiaries cannot, in and of itself, mean that the deed was not entered into in the proper administration of the trust.
  27. As to the third of those reasons, it is said that: all of the allegedly self-dealing aspects of the Hope Downs Deed were clear on its face and Bianca obtained her own legal advice in respect of those matters; the matters the subject of the Sceales advice went to an unrelated question of whether the trustee could fetter its discretion in relation to the distribution of dividends in future accounting periods, as well as various tax issues (noting that this advice was not received until after the Hope Downs Deed was executed); and the subject matter of the Sceales advice had nothing to do with any “self-dealing” aspects of the Hope Downs Deed (relating primarily to a benefit that the HMH Trust and the beneficiaries acquired under the Hope Downs Deed, pursuant to cl 5). Thus, it is submitted that, to the extent that there was any non-disclosure (which is not conceded), it was unrelated to any personal benefit to Gina, and there was no lack of informed consent in respect of Gina’s (alleged) position of conflict.
  28. As to the fourth of those reasons, it is said that this is particularly so when the benefits obtained by the trustee are clear on the face of the deed, and where the trust itself gains a material benefit from the deed. Gina says that if Bianca’s analysis were correct, then every settlement deed entered into between any trustee and the beneficiaries of a trust would suffer from the same “self-dealing” issue and would have the consequence that successor trustees were not bound.
  29. Gina further argues that Bianca has admitted that the Hope Downs Deed constitutes trust property (in the context of the proceedings in which orders were made for the delivery up documents of the HMH Trust, which documents Brereton J said were “trust property” – referring to the 2015 Decision at [365]). It is noted that: in September 2015, in her capacity as trustee, Bianca filed a notice of motion complaining that the documents of the HMH Trust had not been handed over, including the original copies of the Hope Downs Deed and related materials (category 5.1); and that Brereton J accepted these submissions determining in the 2018 Decision that the Hope Downs Deed was a document of the HMH Trust, and therefore trust property, referring to his Honour’s statement (at [111(5)(a)]):

111(5)(a). Any such documents relating to the [Hope Downs] Deed and the 2007 Confidential Settlement Deed. The first defendant entered into these two deeds, in her Trustee capacity, in 2006 and 2007. Contracts entered into by the Trustee in her Trustee capacity, and documents relating to them, would normally be documents of the Trust. The Hope Downs Deed and 2007 Confidential Settlement Deed involved a settlement of differences between the Trustee and the beneficiaries. As has been explained, advice obtained by a Trustee in connection with the defence of proceedings brought (or allegations made) by a beneficiary is prima facie personal to the Trustee and not a trust document. However, advice obtained by a Trustee to guide it in the performance of its duties is trust property. While I accept that communications relating to the defence of John’s allegations, and whether in her personal interest she should enter into the Deeds, are Mrs Rinehart’s personal documents and outside the scope of the delivery up order, I cannot accept that a deed entered into by her in her Trustee capacity is not a trust document… (Emphasis added.)

  1. Finally, HPPL submits that even if it were to be determined that it is not arguable that, as trustee, Bianca is bound by the Hope Downs Deed, there should still be a “s 8 stay”” because Bianca as trustee is claiming “through or under” parties to the arbitration agreement (i.e. on behalf of the beneficiaries of the HMH Trust), and therefore falls within the extended definition of “party” under Commercial Arbitration Act, s 2(1) (referring to the High Court Decision at [66]-[74]).

Determination as to threshold question

  1. Bianca does not dispute that she is a party to, and bound by, the Hope Downs Deed in her personal capacity. On the face of the Hope Downs Deed it is intended also to be binding on her in “any representative capacity”. As HPPL has noted, logically this cannot be a reference to Bianca’s then directorship of HPPL, as she separately executed the Hope Downs Deed in that capacity. There is nothing on the face of the Hope Downs Deed to suggest that the words “in any representative capacity” had a temporal limitation (i.e., that she was to be bound only in any representative capacity held by her at the time of its execution) and there is force to the argument that those words were intended to encompass the possibility of her becoming bound in a representative capacity at a later stage in circumstances where the parties to the deed clearly contemplated that any of the four beneficiaries might become a replacement trustee at some stage.
  2. The Hope Downs Deed is also clearly intended to be binding on any successor to a party to it. I see no reason not to accord to “successor” its ordinary meaning (see Crossman v Sheahan at [181]) and, where a party (here, Gina) is executing the deed expressly in her capacity as trustee, I see no reason why that expression would not include a successor trustee. Clearly, it was intended that whoever held the position of trustee from time to time should be bound by the provisions of the Hope Downs Deed.
  3. There is also force to the argument that, in any event, where Bianca is making claims in the proceeding in her stated capacity as trustee for or on behalf of the beneficiaries to the HMH Trust (who are themselves parties to the deed), then she is claiming through or under a party to the arbitration agreement in the sense considered by the High Court (as to which see further below).
  4. However, it is not necessary to come to a concluded decision on this issue (and indeed it is said for the defendants that it would be a clear error for me to do so – see T 134) because in my opinion there is, on the face of the Hope Downs Deed, an apparently valid arbitration agreement to which Bianca is bound in her own right and to which she is arguably also bound as trustee of the HMH Trust. I consider that the issues raised by Bianca as to whether the arbitration agreement binds her in her capacity as trustee are matters that fall within the scope of the arbitration agreement and must be referred to arbitration under Commercial Arbitration Act, s 8 or the equivalent WA Commercial Arbitration Act provision. The suggestion that there should be an exploration of factual disputes going to the alleged misconduct of the former trustee in entering into the agreement (in order to determine whether Bianca is bound by the deed in her capacity as trustee) is not consistent with the separability principle (see the Full Court Decision at [412], albeit in a different context). Moreover, the principle of competence-competence makes clear the abritrator’s ability to deal with such an issue.
  5. Similarly, the argument that the Hope Downs Deed is not “trust property” because it was not entered into in the proper administration of the trust, or was a self-dealing transaction for which fully informed consent from the beneficiaries was not obtained, goes to the efficacy of the arbitration agreement. Consistently with the construction of cl 20 of the Hope Downs Deed made clear by the High Court (as to which see below), and the above conclusion, this raises a dispute that must be referred to arbitration.

Section 8 Referral/Stay

  1. Turning then to the substance of the respective referral/stay motions, Bianca contends: first, that the matters in the present proceeding are not disputes under the Hope Downs Deed and are therefore not within the arbitration agreement; and second, that certain of the matters in the proceeding (and, in particular, Bianca’s s 247A application) are, in any event, non-arbitrable.
  2. It does not appear to be disputed by Bianca that determining whether an action has been brought in a matter that is the subject of an arbitration agreement involves the following: construing the relevant arbitration agreement; characterising the “matter”; determining whether the matter as characterised is the subject of the arbitration agreement as construed; and considering whether the said matter is arbitrable. I therefore turn first to the construction of the arbitration agreement (cl 20 of the Hope Downs Deed).

Construction of the arbitration agreement

The earlier decisions

  1. It is convenient at this stage to consider the earlier decisions in which the relevant arbitration clause (cl 20 of the Hope Downs Deed) has been considered, in particular to address the proposition put by Bianca, and contested by the defendants, that I am bound to follow the approach to construction of that clause that was adopted by the Court of Appeal in the Court of Appeal Decision notwithstanding the subsequent High Court Decision (on the basis that nothing in the High Court Decision expressly or implicitly overrules the Court of Appeal Decision or gives rise to a necessary inconsistency with that decision).
  2. As adverted to above, the defendants maintain that the High Court Decision provides the answer to the question now before me on the referral/stay motions and requires the grant of the relief that they seek; whereas Bianca maintains that the decision is of “very little assistance” in the determination of the referral/stay applications and says that I am bound, as a matter of precedent, to follow the Court of Appeal Decision (and to dismiss each of the referral/stay motions). Bianca further argues that, even if the construction adopted by the Full Court and confirmed as correct by the High Court is here applicable, then the same result should nevertheless follow as, even on that construction, the matters in dispute are not matters “under” the Hope Downs Deed. That latter contention I deal with when considering the characteristic of the “matters” raised by the pleadings.

Brereton J’s refusal of applications for stay of trustee removal proceeding (the Removal Proceeding)

  1. The litigious saga in relation to the referral/stay applications relevantly commences with the refusal of Brereton J (see Welker & Ors v Rinehart & Anor (No 2) [2011] NSWSC 1238 and Welker v Rinehart (No 4) [2011] NSWSC 1636) to order a stay of the proceeding brought against Gina in this Court by three of her children (Bianca, John and Hope). In that proceeding (which I have referred to previously as the Removal Proceeding), orders were sought for, inter alia, the removal of Gina as trustee of the HMH Trust.
  2. In the Removal Proceeding, by notices of motion dated 16 September 2011 and 7 October 2011 respectively, Gina and her other daughter, Ginia, brought applications for a stay of that proceeding pursuant to of the Civil Procedure Act, s 67. A similar application for a stay was brought by HPPL by notice of motion filed 15 November 2011 and amended on 22 December 2011.
  3. The basis on which a stay was sought was that the dispute was one arising under the Hope Downs Deed and that cl 20 of that deed required the parties to resolve their dispute by confidential mediation and arbitration. The first point to note, therefore, was that this was not an application pursuant to s 8(1) of the Commercial Arbitration Act (which was not then in force). Furthermore, as at the time the applications were before Brereton J, no pleadings had been filed.
  4. His Honour considered the application and, in an ex tempore judgment, refused the applications for a stay. As summarised at [34]ff of the subsequent Court of Appeal Decision, Brereton J identified three issues for resolution on the stay applications: first, whether the Hope Downs Deed (there referred to as the “Settlement Deed”) was binding on Hope and Bianca (Brereton J concluding that it was and his Honour’s conclusion not being contested on the subsequent appeal); second, whether a proceeding in the court’s equitable or statutory jurisdiction for removal of a trustee was susceptible to “private justice” by reference to arbitration (Brereton J concluding that there was no reason why such a dispute could not be referred to arbitration and a fortiori mediation and that conclusion being the subject of the notice of contention in the subsequent appeal proceeding); and, third, whether the subject proceeding was in respect of a dispute “under this deed”, so as to be covered by cl 20 of the Hope Downs Deed (Brereton J concluding that it was not and that conclusion being the principal issue on the subsequent appeal).
  5. Brereton J held (at [28]ff) that the words “under this deed” were of narrower scope than phrases such as “with respect to” or “in respect of” (relying in particular on the judgment of French J, sitting in the Federal Court as his Honour then was, in Paper Products Pty Limited v Tomlinsons (Rochdale) Ltd & Ors [1993] FCA 346; (1993) 43 FCR 439 (Paper Products) at 172) and therefore that the dispute must derive from or depend on the Hope Downs Deed, or involve enforcing or invoking some right created by the Hope Downs Deed. His Honour concluded on the construction issue that even if the clauses invoked by Gina involved a dispute under the Hope Downs Deed they were “but aspects of a larger dispute” which, as a whole, was not accurately characterised as a “dispute under this deed” (see at [49]).

Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95 (the Court of Appeal Decision)

  1. Separate appeals were brought (by leave) by Gina (and Ginia) on the one hand and by HPPL on the other against the refusal of the stay applications. The separate appeals were heard together. Bianca, and her siblings other than Gina, filed a notice of contention in the HPPL appeal, contending that HPPL lacked standing to seek a stay and that its motion constituted an abuse of process (that contention was to be heard separately from the appeals).
  2. It is not disputed that the question before the Court of Appeal did not relate to an application for a mandatory stay pursuant to s 8(1) of the Commercial Arbitration Act.
  3. By the time of the appeal hearing, statements of claim and defences had been filed in the proceeding. The Court of Appeal proceeded (without objection from the parties) on the basis that reference could be made thereto, even though they had not been before the primary judge (see Bathurst CJ’s judgment at [29]). At [130], Bathurst CJ (with whom McColl JA and, relevantly, Young JA agreed) noted that:

130. … The dispute in the present case was whether GHR [Gina] was entitled to engage in the conduct complained of and whether as a consequence the Trust should be split and/or GHR removed as trustee. Although at that time GHR had not formally responded to the claim, it could be reasonably anticipated she would deny the allegations and in that sense there was a dispute: AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] EWCA Civ 291; [2005] 1 WLR 2339 at [30]- [31]; Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd [2004] EWCA Civ 1757 at [62]- [63].

  1. In summary, Bathurst CJ concluded (see at [2]) that: the respondents’ claim, viewed in isolation from the defences raised by the appellants, was not a dispute under cl 20 of the Hope Downs Deed (for the reasons set out at [114]-[127]); the fact that the appellants relied on various provisions of the Hope Downs Deed in their defences did not lead to the conclusion that the whole dispute, and in particular the respondents’ claims, was one arising under the Hope Downs Deed (for the reasons set out at [128]-[148]); claims such as those made by the respondents were arbitrable (for the reasons set out at [164]-[183]); as a matter of discretion, no part of the proceedings should be stayed (for the reasons set out at [184]-[192]); and the primary judge did not err in declining to refer the proceedings to mediation (for the reasons set out at [193]-[194]). McColl JA broadly agreed with the Chief Justice (see at [196]-[217]). Young JA agreed, other than in relation to the issue as to the arbitrability of the claim for the removal of the trustee (see at [225]ff).
  2. At [30]-[33], Bathurst CJ summarised briefly the allegations made in the pleadings. At [34]ff, Bathurst CJ summarised the reasoning of the primary judge. Bathurst CJ noted (at [44]) that the conclusion reached by the primary judge on the question of construction primarily depended upon the proposition that, for cl 20 to have effect, the dispute brought by the respondents must be a dispute under the Hope Downs Deed in the sense of “enforcing or invoking some right created by it” and that it was not enough that the Hope Downs Deed may in some way impact on the rights of the respondents to bring their claims or could constitute a defence to those claims. Significantly, it was this approach being challenged on the appeal.
  3. Bathurst CJ’s consideration of the proper construction and scope of cl 20 commenced (at [115]) with some general observations as to the correct approach to the construction of arbitration clauses generally. In summary, his Honour said:
    • (at [115]) that the approach to be adopted in relation to the construction of arbitration clauses is no different to the construction of any other contractual provision – namely, the clause is to be construed objectively (referring to the principles stated by the High Court in Toll (FGCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 (at [40]));
    • (at [116]) that this does not mean that the court is entitled to disregard clear and unambiguous language used by the parties to produce results which the surrounding circumstances may indicate are more commercial or business-like (referring to Western Export Services Inc v Jireh International Pty Limited [2011] HCA 45; (2011) 86 ALJR 1) and that resort may only be had to surrounding circumstance where the words in question exhibit uncertainty or ambiguity (referring to Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352; [1982] HCA 24);
    • (at [117]-[119]) that it has frequently been stated that arbitration clauses should not be construed narrowly (referring to remarks made by Gleeson CJ in Francis Travel Marketing Pty Limited v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 (Francis Travel) at 165; by Allsop J, as his Honour then was, in Comandate Marine Corp v Pan Australian Shipping Pty Limited (2006) 157 FCR 45; [2006] FCAFC 192 (Comandate) at [164] (Finn and Finklestein JJ agreeing); and referring also to Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 (Walter Rau) at [41]-[42]; Global Partners Fund Limited v Babcock & Brown Limited (In liq) [2010] NSWCA 196; (2010) 79 ACSR 383 (Global Partners) at [60]-[65] per Spigelman CJ (Giles and Tobias JJA agreeing); Lipman Pty Limited v Emergency Services Superannuation Board [2011] NSWCA 163 (Lipman) at [6]-[8]); and
    • (at [120]) that the words of the clause cannot be given a meaning they do not have to satisfy a perceived commercial purpose (referring to Paper Products at 444 per French J (as his Honour then was), Walter Rau at [41], Comandate at [164] and Lipman at [6]-[8]); noting that “the words of an arbitration clause should be, to the extent possible, consistent with the ordinary meaning of the words, liberally construed”.
  4. At [121], his Honour turned to the approach of Lord Hoffman in Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2007] 4 All ER 951 (Fiona Trust). This was in the context of a submission by Gina (by reference to Fiona Trust; and to Lipman at [6]) that the distinction between the expression “under this deed” and expressions such as “with respect to” or “in respect of” had been expressly abandoned by the House of Lords in the context of arbitration clauses (see at [66]).
  5. Having set out the general observations as to the construction of arbitration clauses, his Honour said (at [121]-[122]):

121. It follows that it is not appropriate for this court to adopt what Lord Hoffman described in Fiona Corporation [supra] at [12] as a “fresh start” and construe clauses irrespective of the language in accordance with the presumption that the parties are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal unless the language makes it clear certain questions were intended to be excluded: Fiona Corporation [supra] at [13]. Whilst the presumption that parties intended the same tribunal to resolve all their disputes may justify a liberal approach consistent with the plain meaning of the words in question, the approach suggested by Lord Hoffman is contrary, in my opinion, to the approach laid down by the High Court as to the construction of commercial contracts.

122. In reaching this conclusion I am conscious that the Court of Appeal in Western Australia in Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110, cited the speech of Lord Hoffman in Fiona Corporation supra with approval, stating at [39] that it was consistent with “the approach that has been taken in Australia”. To the extent their Honours were stating that the approach was reflective of the liberal approach to which I have referred above, that is uncontroversial. However, to the extent their Honours were suggesting a particular rule of construction be applied irrespective of the plain meaning of the words, I am unable to agree.

  1. His Honour then turned to the construction of the phrase “under this deed” noting: (at [123]) that that phrase had consistently been given a narrower construction than phrases such as “arising out of the deed” or “in connection with the deed” (citing Samick Lines Co Ltd v Owners of the Antonis P Lemos [1985] AC 711 at 727 per Lord Brandon(with whom the other of their Lordships agreed); and (at [124]) the observations of French J in Paper Products at 448 as to the meaning of the phrase “any dispute between the parties hereto arising under this agreement”.
  2. At [125], his Honour then considered the meaning given by Warren J, as her Honour then was, in BTR Engineering (Australia) Ltd v Dana Corporation [2000] VSC 246, to the word “under” as “governed, controlled or bound by; in accordance with” (see at [27]) and to the similar construction given to the word by Hargrave J in TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronics Pty Limited [2009] VSC 553 (see at [34]). Bathurst CJ then said:

125. … As I indicated earlier (at [36] above) the primary judge took the view that the words “under this deed” in the present case involved enforcing or invoking some right created by the Settlement Deed. It seems to me that consistent with the authorities to which I have referred, if the outcome of the dispute was governed or controlled by the Settlement Deed, then there would be a dispute under the Settlement Deed irrespective of whether the claimant was invoking or enforcing some right created by the Settlement Deed. It may be that that was what the primary judge was referring to when he said the dispute must derive from or depend on the Settlement Deed.

  1. Having regard to the relief sought in the respective statements of claim in the case there before him (see at [126]), Bathurst CJ said (at [127]) that:

127. None of these matters, viewed in isolation from the defences, involve invoking or enforcing any rights created by the Settlement Deed nor is their outcome generated or controlled by the Settlement Deed. As GHR [Gina] submitted (see par [64] above), a court does not remove a trustee without looking at the whole of the circumstances; that would include the Settlement Deed but it would not lead to the conclusion that the outcome was governed or controlled by the Settlement Deed. Similarly, whilst it may be that it would be open to GHR to argue that what was done was reasonable in the context of the regime established by the Settlement Deed, this would not of itself lead to the conclusion that the outcome was governed or controlled by the Settlement Deed as distinct from the proper application of the statutory and inherent jurisdiction of the court. (Emphasis added.)

  1. Pausing here, it is clear that his Honour was there adopting a test as to whether there was a matter “under this deed” by reference to whether the matters involved “invoking or enforcing” any rights created by the Hope Downs Deed or, alternatively, whether the outcome of those matters was “governed or controlled” by the Hope Downs Deed (although in the consideration of the pleadings it appears that the latter assumed more prominence in his Honour’s reasoning).
  2. His Honour then considered the defences that had been filed (see at [128]ff) and Gina’s contention that, once it was contended that it was not legally open for the respondents to pursue the claims made by virtue of the provisions of the Hope Downs Deed, then the whole dispute was a dispute under the deed; in other words that once reliance was placed on any provision of the deed, then the whole dispute was governed by the deed. His Honour did not consider that the analogy Gina had sought to draw with the expressions “under this Constitution” or “under any laws made by the Parliament” was of any particular assistance (see at [129]); and was of the opinion that although the defences raised disputes under the deed (as they relied on provisions of the deed in answer to the respondents’ claims) those defences would not necessarily determine the outcome of the proceedings (see at [132]). Thus, but for the adoption of the “governed or controlled” test, it would seem that his Honour’s conclusion would have been that there were matters there involving disputes under the Hope Downs Deed.
  3. At [135], his Honour said:

135. If the Settlement Deed had the effect of barring the claims of the respondents, then it would follow that the dispute in question was governed or controlled by the Settlement Deed as the outcome would be regulated by its terms. However, the mere fact that these assertions were made does not mean that it automatically follows that the whole claim is a dispute under the Settlement Deed. The primary judge, in my opinion, was entitled to examine the claim to form a view as to whether he could properly conclude, in the light of the evidence available, that the assertion that the claim was barred by the Settlement Deed was sustainable: see Channel Tunnel Group Limited v Balfour Beatty Construction Ltd [1993] AC 334 at 356. This was particularly the case when each party made extensive submissions on the issue and none suggested there was any further material which may become available which would be of assistance to the Court on the issue of construction of the clause in question. It was also relevant, in my opinion, to look at the strength of the assertion to determine whether, as a matter of discretion, a stay of the whole or any part of the proceedings should be granted.

  1. As adverted to above, the adoption of a test by reference to whether there was a “sustainable argument” was the subject of debate on the present applications.
  2. Having considered various provisions of the Hope Downs Deed, his Honour said (at [145]):

145. It follows that the provisions of cll 6, 7(c), 11 and 13 of the Settlement Deed do not lead to the conclusion that the claims of the respondents are governed or controlled by the Settlement Deed in the sense that their outcome will be determined by its provisions.

  1. Similarly, his Honour considered (at [146]) that the other provisions of the Hope Downs Deed raised in answer to the claims of the respondents, whilst relevant to the outcome of the proceedings, did not of themselves govern or control the outcome of those claims and would not necessarily be determinative of the outcome.
  2. Accepting that the primary judge was correct to the extent that his Honour had found that the defences raised under the Hope Downs Deed were part of a larger dispute, Bathurst CJ then considered whether, those defences having been made, the proceedings should be stayed in whole or in part as a matter of discretion and concluded that there had been no error on the part of the primary judge in relation thereto (see at [148], [184]ff). It was noted (at [184]) that the parties agreed that the grant of a stay, whether sought under Civil Procedure Act, s 67 or under Commercial Arbitration Act was discretionary. Bathurst CJ also noted that it was therefore necessary for the appellants to demonstrate error in the sense referred to in House v The King (1936) 55 CLR 499; [1936] HCA 40.
  3. It was noted that the primary judge had indicated in obiter that, even if the prospective defences under cll 7(e) and (8) were disputes under the Hope Downs Deed, he would not have stayed the proceedings, primarily for the reason that those defences were “but aspects of a larger dispute not properly characterised as one ‘under this deed’” (see at [49]-[50] and the Court of Appeal Decision at [185]). Pausing here, there is no such discretion if s 8 of the Commercial Arbitration Act here applies.
  4. At [186], Bathurst CJ said that, in circumstances where he had concluded that the respondents’ claim was not a dispute under the Hope Downs Deed, the deed “did not have the effect of barring any claim for removal of the trustee and that the other defences, although arising under the [Hope Downs Deed], did not necessarily bar a claim for removal of [Gina] as trustee … [and] the manner in which the primary judge concluded he would have exercised his discretion had the occasion arisen would not have involved error in a House v The King sense.” Further, at [187], his Honour said that, to the extent that it was necessary for the Court to re-exercise the discretion, having regard to the comment of the primary judge that it did not directly arise, he would have reached the same conclusion. His Honour noted that “[o]nce it is established that the claim for removal of the trustee did not arise under the [Hope Downs Deed], this [C]ourt has no power to refer that claim to arbitration. There are therefore two alternatives; stay the proceedings pending determination of the issues raised by the defence or refuse the stay.”
  5. His Honour considered (at [188]) that it would not be appropriate to stay the proceedings pending determination of the defences, noting that the releases in cl 6 and the provisions of cll 7, 11 and 13 of the Hope Downs Deed did not bar the claim and would not be relevant to a claim for removal of the trustee arising out of misconduct subsequent to the date of the deed. His Honour said that “[w]hether the other defences raised will result in a refusal of the relief could only be determined in the context of a consideration of the allegations of the respondents and whether, even taking into account the provisions of the [Hope Downs Deed], the conduct complained of, if made out, would render [Gina] unfit to remain as trustee.”
  6. At [189]-[190], his Honour said:

189. The approach which I have suggested is appropriate. It is consistent with the approach commonly taken by courts to avoid multiplicity of proceedings and the possibility of inconsistent findings: Paharpur Cooling Towers [supra] at [43]-[44]; Savcor Pty Limited v State of New South Wales (2001) 52 NSWLR 587; [2001] NSWSC 596 at [47]- [50]; Taunton-Collins v Cromie [1964] WLR 633; [1964] 2 All ER 332 at 334; McGrath v O’Sullivan [1964] NSWR 436 at 437.

190. The position may be different in circumstances where that part of the claim which cannot be referred to arbitration is only a small part of the dispute: Bristol Corporation v John Aird [1913] AC 241 at 249-250; Radio Publicity (Universal) Ltd v Compagnie Luxembourgeoise de Radiodifusion [1936] 2 All ER 721 at 728. That is not the present case.

  1. His Honour went on to say (at [191]):

191. In my opinion it is also relevant in considering this issue, that the respondents’ claim relates to the proper conduct of a trustee, a matter warranting close public scrutiny: Rinehart v Welker [supra] at [52]. Whilst I have expressed the view that that factor would not render the dispute incapable of arbitration, it would not be a proper exercise of discretion to deny a beneficiary the right to approach the court in respect of alleged misconduct of a trustee where the issue in question was not covered by the arbitration clause.

  1. As to the dispute as to whether the claims were arbitrable, Bathurst CJ said (from [164]):

164. There do not seem to be any firm principles that determine whether a particular dispute is capable of being resolved by arbitration. The position was stated in Mustill and Boyd supra in the following terms (at 149-150):

“In practice therefore, the question has not been whether a particular dispute is capable of settlement by arbitration, but whether it ought to be referred to arbitration or whether it has given rise to an enforceable award. No doubt for this reason, English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not. The general principle is, we submit, that any dispute or claim concerning legal rights which can be the subject of an enforceable award, is capable of being settled by arbitration. This principle must be understood, however, subject to certain reservations.

First, certain types of dispute are resolved by methods which are not properly called arbitration. These are discussed in Chapter 2, ante.

Second, the types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a winding-up order or a decision that an agreement is exempt from the competition rules of the EEC under Article 85(3) of the Treaty of Rome. It would be wrong, however, to draw from this any general rule that criminal, admiralty, family or company matters cannot be referred to arbitration: indeed, examples of each of these types of dispute being referred to arbitration are to be found in the reported cases. Nor should one conclude that an arbitrator cannot effectively rule on a claim or defence raised under Articles 85 or 86 of the Treaty of Rome. Unless the nature of the question is such as to render the arbitration agreement itself void, or the European Commission has itself initiated proceedings on the question, the arbitrator can and should rule on it.” (Footnotes omitted.)

  1. His Honour noted (at [165]) that G Born, in International Commercial Arbitration (2009, Wolters Kluwer, Vol 1), stated (at 768) the position as follows:

Although the better view is that the Convention imposes limits on Contracting States’ applications of the non-arbitrability doctrine, the types of claims that are non-arbitrable differ from nation to nation. Among other things, classic examples of non-arbitrable subjects include certain disputes concerning consumer claims; criminal offences; labour or employment grievances; intellectual property; and domestic relations.

The types of disputes which are non-arbitrable nonetheless almost always arise from a common set of considerations. The non-arbitrability doctrine rests on the notion that some matters so pervasively involve public rights, or interests of third parties, which are the subjects of uniquely governmental authority, that agreements to resolve such disputes by ‘private’ arbitration should not be given effect. (Footnotes omitted.)

  1. His Honour referred (at [166]) to Comandate where Allsop J, as his Honour then was, in discussing the issue in the context of international commercial arbitration had said (at [200]):

First, the common element to the notion of non-arbitrability was that there was a sufficient element of legitimate public interest in these subject matters making the enforceable private resolution of disputes concerning them outside the national court system inappropriate. Secondly, the identification and control of these subjects was the legitimate domain of national legislatures and courts. Thirdly, in none of the travaux préparatoires was there discussion that the notion of a matter not being capable of settlement by arbitration was to be understood by reference to whether an otherwise arbitrable type of dispute or claim will be ventilated fully in the arbitral forum applying the laws chosen by the parties to govern the dispute in the same way and to the same extent as it would be ventilated in a national court applying national laws.

  1. At [167], Bathurst CJ observed that the above approach suggested that it was only in extremely limited circumstances that a dispute which the parties had agreed to refer to arbitration would be held to be non-arbitrable; and noted that this “expansive view” had generally been accepted by the courts (referring to the remarks of Mason J, as his Honour then was, in Government Insurance Office (NSW) v Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 CLR 206 at 246-247; [1981] HCA 9) and commenting (at [168]) that this approach was also reflected “in the fact that it has been held that parties can submit to arbitration issues involving rights conferred under statute and claims where the power to grant statutory remedies has been conferred on the court.” His Honour referred again (at [169]) to the decision of the Court of Appeal in Francis Travel and to passages from the judgment of Gleeson CJ in that case. His Honour noted (at [170]) that the “fact that an arbitrator cannot grant all the relief a court is empowered to grant does not mean the dispute is incapable of arbitration” (referring to IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 at 486 per Clarke JA (with whom Handley JA agreed); and to the similar approach taken by the Court of Appeal of England and Wales, in Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855; [2012] 1 All ER 414 (Fulham Football Club) at [103] per Longmore LJ (with whom Rix LJ agreed and from which permission to appeal to the Supreme Court of the United Kingdom was refused)).
  2. His Honour said (at [172]):

172. Thus it has been held that although an arbitrator would not have power to order the winding-up of a company (see A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170 at [13]- [19]) claims for relief under s 232 of the Corporations Act and its United Kingdom equivalent s 994 of the Companies Act have been held to be capable of being resolved by arbitration: ACD Tridon [supra] at [191]-[194]; Fulham Football Club [supra] at [76]-[79], [83], [101]-[103]. Similarly, the Supreme Court of Canada has concluded that disputes between parties as to the ownership of copyright are capable of settlement by arbitration: Desputeaux v Editions Chouette [supra] at [38], while Hammerschlag J in Larkden Pty Ltd [supra] held that a dispute as to entitlements to a patent application was capable of resolution by arbitration.

  1. His Honour then turned (at [173]ff) to the question whether a claim to remove a trustee is capable of settlement by arbitration. His Honour noted that: a trust is a creature of equity and the courts maintain an inherent supervisory jurisdiction over the administration of trusts (referring to McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 633, 637); in Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403, this Court had expressed the view (at [52]) the proper conduct of trustees was said to be a matter which required close public scrutiny; and the approach of a court in evaluating all relevant circumstances in considering whether it is in the interests of the beneficiaries to remove a trustee (see Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572 at 580–581; [1936] HCA 13) was “a matter which tends against such disputes being arbitrable” (see at [173]). His Honour referred to academic commentary (see T Cohen QC and M Staff, “The Arbitration of Trust Disputes” (1999) 7 Journal of International Trust and Corporate Planning 1) that suggested that the statutory jurisdiction of the court to appoint a new trustee could not be ousted by an arbitration provision (and citing Czarnikow v Roth, Schmidt and Company [1922] 2 KB 478 at 491 per Atkin LJ, as his Lordship then was). Bathurst CJ concluded at ([175]-[177]):

175. Notwithstanding these matters, it is my opinion that at least in circumstances where the trustee and each beneficiary have expressly agreed to their disputes being referred to arbitration, a court should give effect to that agreement. The supervisory jurisdiction of the court is not ousted. It continues to have the supervisory role conferred upon it by the relevant legislation, in this case the Commercial Arbitration Act. There may be powerful commercial or domestic reasons for parties to have disputes between a trustee and beneficiary settled privately. It does not seem to me that the matters to which I have referred above should preclude a court from giving effect to such an agreement provided the jurisdiction of the court is not ousted entirely.

176. The fact that an arbitrator may not have power to remove a trustee or make a vesting order does not alter this position. An arbitrator could give effect to a claim for removal by ordering the trustee to resign, to appoint a new trustee and to convey the trust property to that person. Such an award could be enforced as a judgment under, in this case, the Commercial Arbitration Act s 33.

177. In these circumstances it does not seem to me to be contrary to public policy for the beneficiaries under the Trust and the trustee to agree to resolve their disputes by arbitration, provided the supervisory jurisdiction of the court contained in the relevant legislation is maintained. It is not necessary in the present case to deal with a more difficult question which would arise if the arbitration clause was contained in the Trust Deed and purported to bind all persons beneficially entitled under the Trust, including infants and unborn beneficiaries.

  1. His Honour then also: rejected the contention that the fact that a dispute is not a “commercial” dispute and involves breaches of fiduciary duty meant that it is incapable of arbitration (at [178]) noting that “there may be sound reasons for the parties desiring that a family or domestic dispute be resolved privately”. said (at [179]) that, so far as the suggestion that third party rights are affected, the only third party identified was HPPL which supported the reference to arbitration; said further (at [180]):

180. Nor does it matter in my view that the claim involves an allegation of serious misconduct. The fact that serious misconduct found by the court is a ground for the removal of a trustee does not, in my opinion, lead to the conclusion that a claim for serious misconduct is not capable of settlement by arbitration. It has been held that in cases of alleged fraud a stay will be refused as a matter of course where the stay is opposed by the party against whom the fraud is alleged, not where the stay is opposed by the defrauded party: Russell v Russell (1880) 14 Ch 471 at 476-477; Camilla Cotton Oil Co v Granadex SA [1976] 2 Lloyd’s Rep 10 at 16; Cunningham-Reid v Buchanan-Jardine [1988] 1 WLR 678 at 685-686, 690, 691; [1988] 2 All ER 438. Consistent with that reasoning, where the allegations of serious misconduct are made against the party seeking the stay the fact that the allegations involve serious misconduct is relevant in the exercise of the discretion, but does not mean that a court as a matter of course would refuse a stay.

  1. At [181], his Honour said that the fact that the claim involved the status of Gina did not in his view affect the position. His Honour said that:

181. The removal and replacement of a trustee does not destroy the substratum of the Trust. In that regard the position may be contrasted with the winding-up of a company which, as Warren J (as her Honour then was) pointed out in A Best Floor Sanding Pty Limited v Skyer Australia Pty Limited [supra] at [18], strikes at the very heart of the corporate structure enshrined in the Corporations Act. In a case of removal of a trustee neither the trust property nor the rights of beneficiaries are affected. In these circumstances the fact that the claim involves the so-called status of the trustee does not alter the position.

  1. Thus his Honour concluded (at [183]) that, “if the parties had in fact agreed that the claim for the removal of [Gina] as trustee should be submitted to arbitration such a dispute would be arbitrable.”
  2. As noted, McColl JA and Young JA relevantly agreed with the conclusion reached by the Chief Justice as to the meaning of the expression “under this Deed” in the context of the Hope Downs Deed.

Hancock v Rinehart [2013] NSWSC 1352 (the 2013 Decision)

  1. The matter came back before this Court, before Bergin CJ in Eq, in September 2013, when there were further applications for a stay of the Removal Proceeding, and the referral to mediation, in circumstances where there had been a recent amendment to the pleadings and there was “now a new litigious environment” that required consideration in the determination of the applications (see at [1]), including the enactment of the WA Commercial Arbitration Act that had come into force on 7 August 2013 (see at [38]). Her Honour accepted that the WA Commercial Arbitration Act was the applicable statute in respect of the applications then before her (see at [82]).
  2. Her Honour referred to the need to promote uniformity between the application of the Act to domestic commercial arbitrations and the application of provisions of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) (see at [84]) and gave consideration to similar provisions in other jurisdictions (see from [85]), including reference (at [87]ff) to the proposition by Hinkson JA (with whom Cumming JA concurred) in Gulf Canada Resources Ltd v Arochem International Ltd (1992) 66 BCLR (2d) 113 in the Court of Appeal of British Columbia, considering the provisions of International Commercial Arbitration Act 1986 (BC), s 8, that :

Where it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted and those matters left to be determined by the arbitral tribunal.

  1. Her Honour then: noted (at [98]ff) that all parties had proceeded in the applications before her on the basis that, in determining whether there was a dispute under the deed, it was necessary to determine whether the assertions that the claims were barred were “sustainable” (referring to the Court of Appeal Decision at [135] per Bathurst CJ); and proceeded to consider whether there were reasonable prospects of a finding that any of the new claims as pleaded by the third statement of claim had been released by the Hope Downs Deed (her Honour not being satisfied that there were).

Rinehart v Hancock [2013] NSWCA 326 – leave application (the Leave Decision)

  1. An application for leave to appeal from Bergin CJ in Eq’s 2013 decision was subsequently dismissed (Rinehart v Hancock [2013] NSWCA 326, to which I will refer to as the Leave Decision). Reliance is placed by Bianca in resisting the present referral/stay motions on this judgment in that it is said that the Court (Macfarlan and Meagher JJA) there applied the concept of whether the outcome of the claims was “governed or controlled” by the Hope Downs Deed in the sense referred to in the Court of Appeal Decision at [125]. At [2], their Honours said that, to succeed on the application, the applicants needed to demonstrate that at least one of two contentions was correct, the first of those contentions being that the claims in question were “at least reasonably arguably foreclosed by the releases contained in clause 6 of the [Hope Downs] Deed, with the result that the outcome of the claims was ’governed or controlled‘ by the [Hope Downs] Deed in the sense referred to in [the Court of Appeal Decision]”.
  2. Pausing here, the defendants in the present proceeding contend that there is no precedential value to be accorded to the Leave Decision (see T 260; citing, inter aliaMaguire v Makaronis).

Rinehart v Rinehart (No 3) (2016) 257 FCR 310; [2016] FCA 539(the Gleeson Decision)

  1. The next chapter of the litigious saga, relevantly, commenced with the bringing of proceedings in the Federal Court by Bianca and John against Gina and HPPL in 2014 (at a time when the Removal Proceeding in this Court had not yet been finally determined).
  2. The allegations made in the statement of claim in the Federal Court proceeding included allegations that Gina, having assumed a position of control in respect of the entities in “the Hancock Group” (including the trusts which owned shares in HPPL and the Hancock Family Memorial Foundation Limited (HFMF)), had used that position in breach of her duties as a fiduciary and as a trustee, with the knowing assistance of HPPL, to take certain steps (removing all of the valuable mining assets from HFMF and transferring them to HPPL and “engineering a situation” in which she held a 76.55% shareholding in HPPL and her children a 23.45% shareholding) instead of the 49% it is said that she had agreed with her father (Lang Hancock) that the children would have after Lang Hancock’s death, thus “reneg[ing] upon and circumvent[ing]” an agreement reached in 1988 about the ownership of the Hancock Group (see Full Court Decision at [2]).
  3. The HPPL respondents brought an interlocutory application under s 8(1) of the Commercial Arbitration Act (and the equivalent provision under the WA Commercial Arbitration Act) seeking, among others, an order that the parties to the proceeding be referred to arbitration in respect of the matters the subject of the various arbitration agreements contained in the deeds pleaded in the statement of claim (the Hope Downs Deed and the 2007 HD Deed, by which John had bound himself to the provisions of the Hope Downs Deed (see Full Court Decision [82]ff)) and a stay of the proceeding.
  4. Gleeson J held that the Commercial Arbitration Act applied to the dispute because any arbitration of the dispute would be a “commercial arbitration” within the meaning of the Act. Her Honour held that some of the disputes in the proceeding were the subject of an arbitration agreement, and others (including, in particular, issues concerning the enforceability of the releases and arbitration clauses in the Hope Downs Deed) were not (see at [597]-[661]). Her Honour did not order that the parties be referred to arbitration by staying the proceedings but instead directed that the Court try the question whether the relevant arbitration agreements were “null and void, inoperative or incapable of being performed” within the meaning of s 8(1)(see at [669]).

Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170 (the Full Court Decision)

  1. The HPPL respondents, and Gina, sought and obtained leave to appeal against the orders of Gleeson J. Bianca and John sought and obtained leave to cross-appeal and also relied upon a notice of contention. The applications for leave to appeal and cross-appeal were heard concurrently with the appeal and cross-appeal (the Full Court comprised by Allsop CJ, Besanko and O’Callaghan JJ).
  2. The case on appeal proceeded, as it had before Gleeson J, on the assumption that the respondents or at least those of the respondents that had appeared in the proceeding, who were then yet to file a defence to the pleading, denied every material allegation of wrongdoing (see at [4]).
  3. Their Honours considered in detail the surrounding facts and allegations in the statement of claim, having first identified their approach to the issues in controversy as follows (from [16]-[22]):

16. The first issue is whether the CA Act applies at all. This has a number of sub-issues. The first sub-issue, which is related to the Constitutional challenge by the applicants to the validity of s 8(1) of the CA Act, is whether the CA Act, and relevantly s 8(1), is picked up by s 79 of the Judiciary Act 1903 (Cth). It is convenient to deal with this question towards the end of these reasons, apart from saying here that our view is that s 8(1) of the CA Act is relevantly picked up by s 79, that s 8(1) is Constitutionally valid, and that these reasons proceed on that basis.

17. The second sub-issue to the question whether the CA Act applies is whether, assuming the disputes are matters which are the subject of the relevant arbitration agreements, the arbitration contemplated by the agreements is “commercial” for the purposes of the CA Act. As part of this sub-issue, it will be necessary to consider whether (as the applicants submitted) the parties to the dispute must also be, or have at relevant times been in “a commercial relationship”.

18. We are of the view that the CA Act is engaged. Should we be wrong in that conclusion, it would be necessary to consider whether the Court has power or discretion to stay the proceedings and refer the parties to arbitration in any event, and if it does, whether and how that power or discretion should be exercised. Given our views as to the engagement of the CA Act, it is unnecessary to address these questions save in one respect.

19. The second issue is the extent to which the various arbitration clauses cover the matters in dispute, or, to put the matter in the words of s 8(1), the extent to which the matters are the subject of an arbitration agreement. Closely related to this is the proper approach of the Court to deciding that question. This issue relates, in particular, to the Hope Downs Deed.

20. The third issue or group of issues concerns the operation of the principles of separability and competence. The separability principle requires the arbitration agreement (as an agreement distinct from the main substantive agreement in which it is found as a provision or clause) to be directly impugned or attacked as “null and void, inoperative or incapable of being performed”. In the light of this principle and the competence principle, the question arises whether the applicants by their pleading, or by their articulation of the controversy in argument (if the latter be a legitimate way to address the question), have attacked the arbitration agreement itself, and if they have, what the limits of that attack are. Related to this is the question whether any such articulated attack can be said to be that the arbitration agreement is “null and void, inoperative or incapable of being performed”. In this respect, the HPPL parties, Mrs Rinehart and the eighth respondent contend that the attack must be that the arbitration agreements were invalid ab initio, or at least at the time of the stay application.

21. The fourth issue, assuming there is a sufficiently articulated attack on the arbitration agreements such that the proviso to s 8(1) is engaged, is whether the power to refer that attack on the arbitration agreement to arbitration is mandatory or discretionary, and if the latter, how that discretion is to be exercised.

22. The fifth issue is whether any of the parties to the proceeding, who are not parties to any deed or arbitration agreement, should nonetheless be referred to arbitration because they claim “through or under” entities who are parties to the relevant deed or agreement for the purpose of the definition of the word “party” in s 2(1) of the CA Act.

  1. In the course of considering the relevant documents, their Honours said of the Hope Downs Deed (the proper construction of which was central to the application, the appeals and the ultimate resolution of the disputes between the parties) that it was plain from the recitals and terms that its purpose was “to quell disputes as to title concerning the mining tenements, especially Hope Downs” (a finding emphasised here by Bianca) and that the Hope Downs Deed involved releases of claims in terms that “were drawn widely” (see at [77]).
  2. From [107], the Full Court summarised the conclusions that the primary judge had reached and its position in relation to those conclusions. Relevantly, their Honours:
    • (at [107]) agreed that the Commercial Arbitration Act applied;
    • (at ([108]) agreed that the existence of any relevant arbitration agreement was satisfied by finding an apparently valid agreement and that it was not appropriate to make findings on the stay application as to whether the deeds were entered into in the circumstances alleged by Bianca and John;
    • (at [109]) agreed, with some qualification as to the expression of principle, with the approach that determining whether a matter is the subject of an arbitration agreement will generally involve a process of characterisation of the matter without going into the merits of the dispute (though it may be necessary to examine the merits to some degree to ascertain whether there is a relevant matter or matter);
    • (at [110]) agreed with the general approach that the relevant arbitration clause should be construed as to its proper scope and meaning, against which the matters in dispute should be assessed and characterised to see whether they were the subject of the arbitration agreement;
    • (at [111]) agreed in principle that, once it was concluded that the proceedings raised a matter the subject of an apparently valid arbitration agreement, the Court had a discretion whether to hear itself or to send to the arbitrator the question as to validity of the arbitration agreement in the proviso thereby rejecting the submission that the Court had an obligation to hear that challenge (though being of the view that the primary judge had erred in the exercise of the discretion);
    • (at [112]) agreed that most of the “so-called” substantive claims fell within valid arbitration agreements, with the exception of claims against companies that were not parties to any arbitration agreement;
    • (at [113]) disagreed with the conclusion that the “so-called” validity claims propounded by Bianca were not the subject of the arbitration agreements but, with some exceptions, that those of John were, but broadly agreed that the “so-called” miscellaneous clauses were ; and
    • (at [114]) disagreed with the primary judge’s conclusion as to relief, saying that they “would stay the proceedings in Court, permitting the arbitrator to deal with all issues including the attack on the arbitration agreements.”
  3. As to the proper approach to an application under s 8, their Honours (at [141]-[142]) noted the two broad approaches being: the prima facie approach, namely, that if there appears to be a valid arbitration agreement which prima facie covers the matters in dispute, the matter should be referred to the arbitrator to deal with questions of jurisdiction including the scope of the arbitration agreement; and the merits approach, namely, that a full merits hearing will be undertaken as to the existence and scope of an arbitration agreement and that the disputes fall within it. Pausing here, I note that Bianca accepts that the Full Court’s decision as to the approach that a court should take in relation to s 8 is one to which, as a matter of comity, I should have regard.
  4. At [145]-[147], their Honours said:

145. We think that any rigid taxonomy of approach is unhelpful, as are the labels “prima facie” and “merits” approach. How a judge deals with an application under s 8 of the CA Act will depend significantly upon the issues and the context. Broadly speaking, however, and with some qualification, aspects of the prima facie approach have much to commend them as an approach that gives support to the jurisdiction of the arbitrator and his or her competence, as recognised by the common law and by s 16 of the CA Act, whilst preserving the role of the Court as the ultimate arbiter on questions of jurisdiction conferred by ss 16(9) and (10), 34(2)(a)(iii) and 36(1)(a)(iii) of the CA Act. Broadly, the approach is consonant with the structure of the CA Act and the Model Law. However, it is difficult to see how the Court can exercise its power under s 8 without forming a view as to the meaning of the arbitration agreement. Further, it may be that if there is a question of law otherwise affecting the answer to the question of jurisdiction, especially one that is confined, which might be dispositive, it might be less than useful for the Court not to deal with it…

146. To understand whether a body of disputes being the “matter”, assessed and characterised (at the necessarily early stage of the proceeding), is the subject of an arbitration agreement, will generally require the Court to form a view as to the legal meaning of the arbitration agreement. Section 8 is an important power the purpose of which is to protect the practical legitimacy and authority of the arbitration process as reflected in the words of s 1C of the CA Act. It involves the referral to arbitration, by a stay of court proceedings. However, it will often not be possible fully to delineate the metes and bounds of a dispute without fully hearing the dispute. To do so, that is to hear the facts to decide the width of the dispute, would undermine the practical and effective operation of s 8. The application must be brought early (not later than when submitting the party’s first statement on the substance of the dispute). The boundaries of the dispute may be unclear, but it will have to be characterised on the material available to be assessed as to whether it can be seen to be the “subject of” the arbitration agreement. That latter assessment will require some stability or clarity as to the meaning of the arbitration agreement. The Court is then required to construe the clause, at least to the point of being satisfied that the disputes forming the matter are the subject of the agreement, or not as the case may be. That said, and it is relevant to the arguments here, not every legal question need be, or should be, decided by the Court about the rights and obligations of the parties. That too would tend to undermine the practice and effective operation of s 8.

147. … Section 8 should be read with s 16(1) and thus, the word “finds” should not be read as requiring that the matters in the proviso cannot be part of the reference to the arbitrator.

  1. Their Honours discerned a difficulty insofar as the approach adopted by the primary judge had proceeded beyond a characterisation of the nature of the matter and whether it fell within the arbitration agreement, saying (at [149]):

149. … The requirement of an assessment as to whether there was a “sustainable argument” that the matter falls within the arbitration agreement has its dangers. Of course, if there is no sustainable argument that a matter or dispute can be characterised as falling within the agreement, it should not be referred to arbitration. But difficulties arise if this enquiry becomes one directed to the strength of the case raised by the issue or matter.  it would generally be wrong for the Court to examine an argument in a form of summary disposal application, and, if it were thought that an asserted case, in terms otherwise falling within the scope of the agreement, was sufficiently weak not to be “sustainable”, not to refer the matter to arbitration. That would be to usurp the role of the arbitrator. The Court’s role in s 8 is not to act as a court of summary disposal filtering the matters that are suitable for arbitration. (Emphasis added.)

  1. The Full Court expressly agreed, when deciding whether there is an apparently valid arbitration agreement against which one undertakes a process of characterisation of the matters in dispute, with the approach of “not deciding on a final basis the wide ranging factual matters said to give rise to a right to set aside the deeds in question and the particular issues of the interpretation of releases, covenants and acknowledgements which make up the rights of the parties from the deeds, and precisely how these questions affect the wide-ranging facts in dispute” (see at [150]) (i.e., in effect giving imprimatur to the so-called “prima facie” approach although having expressed the view as to the unhelpfulness of a rigid taxonomical distinction in that regard).
  2. At [151], their Honours said:

151. It is also important to recognise the different issues that may arise on an application under s 8. The proof of an apparently valid arbitration agreement, as here, may be beyond argument. The substantial issue in contest between the parties is whether by reason of the matters pleaded the terms of the deed apply, and from the matters pleaded whether such agreements are “null and void etc”. That the first question (the existence of an apparently valid arbitration agreement) should be proved to the required level to satisfy a court that it has authority to engage the power in s 8 does not mean that the Court should or must embark upon detailed consideration as to the operation of the deeds or as to the attack on the deeds or the arbitration agreement. The need for the existence of an arbitration agreement does not mean that the Court should not take a broad view characterising the disputes to assess whether they are the subject of an arbitration agreement such enquiry not engaging substantially in the merits of the case.

  1. Their Honours also said (at [152]) that the correct focus of generality or particularity with which to examine the “matter” the subject of the arbitration agreement will be affected by the proper construction of that agreement.
  2. At [156], their Honours said that the width or narrowness of the scope of the agreement was central to the ascertainment of the matter the subject of it. At [157], their Honours said that:

157 … any overly fine dissection of different “disputes” within a wide-ranging and interlocking controversy may lead to overly refined categorisation or classification of disputes falling within and without the arbitration agreement in question. When looked at holistically, the substance of a dispute in its interconnected character may well fall within the arbitration agreement. It is fundamental to recall, however, that the proper construction of the arbitration agreement is relevant to the focus one applies to the meaning of the word “matter” in any given circumstance. If the proper construction of the agreement requires a focus on individual disputes or requires a certain connection between the necessary resolution of an issue with the operation of an operative document, then close attention will be required to each individual issue or dispute to identify that connection, and so to identify the “matter”. If, on the other hand, the proper construction of the agreement requires a broader focus on the overall dispute more generally characterised, then the “matter” will likewise be broader. This is the significance of what was said in Comandate Marine Corporation v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 at [235] …

  1. Pausing here, as I have already noted, Bianca contends that the proper construction of the arbitration agreement the subject of the present applications has been authoritatively decided by the Court of Appeal Decision and that I am obliged to apply that construction (and not the approach of the Full Court) when considering the application of s 8.
  2. The overall dispute was described by the Full Court (at [158]) as being an accusation of “wholesale breaches of equitable and contractual duties in wrongfully transferring hugely valuable commercial assets from the control of entities that owned the assets significantly for the benefit of the children to entities and ownership structures controlled by [Gina]”; and in which wrongs the companies controlled by Gina were said to have been legally complicit. Meanwhile, Bianca here says that the dispute the subject of the present proceeding raises different allegations.
  3. Their Honours then set out (from [163]-[167]) the approach to the proper construction and interpretation of arbitration agreements, in which context they said (at [167]):

167. The existence of a “correct general approach to problems of this kind” [the expression used by Gleeson CJ in Francis Travel] does not imply some legal rule outside the orthodox process of construction; nor does it deny the necessity to construe the words of any particular agreement. But part of the assumed legal context is this correct general approach which is to give expression to the rational assumption of reasonable people by giving liberal width and flexibility where possible to elastic and general words of the contractual submission to arbitration, unless the words in their context should be read more narrowly. One aspect of this is not to approach relational prepositions with fine shades of difference in the legal character of issues, or by ingenuity in legal argument (Gleeson CJ in Francis Travel at 165); another is not to choose or be constrained by narrow metaphor when giving meaning to words of relationship, such as “under” or “arising out of” or “arising from”. … Thus, where one has relational phrases capable of liberal width, it is a mistake to ascribe to such words a narrow meaning, unless some aspect of the constructional process, such as context, requires it.

  1. Their Honours disagreed with the proposition that there was little or no elasticity in the phrase “any dispute … arising under the agreement” or that they are “a restricted form of words”; saying that they may in terms be less widely framed than other words but they are not restricted (see at [172]).
  2. It was against that background that their Honours then turned to consider the decision of Fiona Trust and, in doing so, made clear that they did not consider the arguments about that case to be critical to the resolution of the appeals (see at [173]).
  3. At [182], their Honours said that they did not see how the approach expressed by Lord Hoffman in Fiona Trust (at [13]) departed from the approach of Gleeson CJ in Francis Travel; rather, their Honours considered it to be reflective of it, noting that the assumption to be made (that rational business persons are likely to have intended any dispute arising out of the relationship to be decided by the same tribunal) was identical; and saying that “[t]he assumption of an appropriate common sense contextual framework is not foreign to, but part of, an orthodox approach to construction.”
  4. Turning then to the Court of Appeal Decision, their Honours (at [193]) did not agree that Fiona Trust “says that arbitration clauses should be construed irrespective of the language used or that it says anything different in substance from Francis Travel and Comandate” (referring to what had been said by Bathurst CJ at [121]-[122]; and expressing their agreement with what had been said by Martin CJ in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; (2013) 298 ALR 666). Their Honours went on to say (at [193]):

193. Lord Hoffman and Lord Hope were refusing (just as Longmore LJ preferred to approach the matter) to engage in semantic debates about relational prepositional phrases capable of throwing up fine distinctions, often based on the temporal or visual metaphor from the language “under”, “arising under”, “out of “, “arising out of”, “in relation to” and “in connection with”. Context will almost always tell one more about the objectively intended reach of such phrases than textual comparison of words of a general relational character. None of the phrases is linguistically stable or fixed. … Far more important, however, is the correct general approach referred to by Gleeson CJ in Francis Travel – that sensible parties do not intend to have possible disputes that may arise heard in two places. Effect is given to that assumption by interpreting words liberally when they permit that to be done. As some of the cases discussed in Fiona Trust (in the Court of Appeal and the House of Lords) reveal, the phrase “under this agreement” is amply able to encompass a dispute concerned with a claim to rescission of the agreement. Seeking to give the phrase some amplitude one would construe the phrase as including a dispute that contained a substantial issue that concerned the exercise of rights or obligations in the agreement, or a dispute that concerned the existence, validity or operation of the agreement as a substantial issue, or a dispute the resolution of which was governed or controlled by the agreement. That is not meant to be a prescriptive definition, but rather an illustration of a liberal reading of an arbitration clause using the correct general approach as an aspect of context in conventional contractual construction that can be found in Francis Travel, Comandate, United Group Rail, Global Partners, Lipman and Cape Lambert, and, in our respectful view, Fiona Trust. Disputes governed or controlled by the deed and its operation can be seen as part of the meaning of the phrase, but it is difficult to see why the meaning should be so limited. (my emphasis)

  1. Their Honours (at [194]) emphasised that the dispute as to Fiona Trust did not matter, noting that Bathurst CJ in terms applied the liberal approach. Having considered the basis on which the Chief Justice had reached his conclusion as to the limited meaning of “under this deed”, the Full Court made clear (at [199]) their disagreement with that construction, saying that:

199. … the limitation of disputes that are (necessarily) governed or controlled by the deed is narrow, not liberal. It is a construction that does not take account of the breadth of possible meaning of the phrase revealed by either dictionaries or by its context, or by judgments such as the Court of Appeal in Mackender v Feldia and Viscount Dilhorne and Lord Salmon in the Evje, and it is a construction which does not give meaning to a liberal approach to words that are capable of a broader construction. That it is a phrase that may be narrower in meaning than other phrases does not mean that its meaning is narrow.

  1. Their Honours drew attention to the fact that the phrase to be construed was “any dispute under the deed” (not “under the deed”) (see at [201]) and said that there was every reason not to confine the “dispute” narrowly to issues or parts of a dispute or of a controversy. Rather, their Honours considered that: the better way was to construe the phrase in an undivided way; and that doing so recognised that if a whole dispute involves not only the defence to a claim but also the attack on the availability of the defence then that part of the expression “under the deed” could not be limited to disputes (or “really parts of the dispute”) governed or controlled by the operation of the deed itself. Their Honours then said (at [202]):

202. The meaning of “any dispute under this deed” may be narrower than the meaning of other phrases, such as “a dispute in connection with this deed”. So much can be accepted. Nothing in Francis Travel, Comandate, or Fiona Trust required the meaning of words to be set to one side for a rule. What these cases say is that the correct general approach is to give liberal amplitude to available meaning. That one phrase has a narrower meaning than another, does not mean that the first has a narrow meaning.

  1. As to context, their Honours considered that the context of the deeds was one that tended to widen, not narrow, the likely operation of the deeds, noting (at [203]) that:

203. … One of the fundamental purposes of the Hope Downs Deed was the quelling of disputes about the title to the assets in a context where at least one sibling had expressed the view that he was not bound by an earlier deed, and where such quelling was of great commercial importance to the prospective arrangements with Rio Tinto. The context of the 2007 HD Deed was the same … Objectively, the Hope Downs Deed and the 2007 HD Deed had the purpose of quieting disputes about title, as did, on its face, the Deed of Obligation and Release.

  1. It was said that the deeds. in their operation if valid and by reason of their invalidity if not, lay at the heart of the dispute; and that “at this level of abstraction, there is little difficulty in concluding that all the substantive and validity claims fall within any clause framed ‘any dispute under this deed’” (at [204]).
  2. At [205], their Honours expressly recognised that their views differed from those in the Court of Appeal Decision but were persuaded, to the necessary degree of clarity, that the construction there adopted was not correct on the bases: first, that those earlier cases (in which different phrases were construed) were applied in a manner which, it was said, revealed “an overly narrow, dictionary-based meaning to an elastic relational phrase”; second, that the whole phrase “any dispute under this deed” was not the subject of focus, and that “were it to have been, a liberal construction of ’any dispute’ as ‘controversy’ would have militated against any narrow relationship between the operation of the deed and the dispute”; and third, that the objective context of the execution of the deed reinforced the “objectively wide meaning to the extent it can be given to the phrase ‘any dispute under the deed’”.
  3. The Full Court then turned in detail to the specifics of the deeds, the findings of the primary judge and the parties’ submissions, which I do not propose here to summarise save to note that: the Full Court reiterated (at [247]-[249]) its reasons for the conclusion that all the “validity claims” fell within cll 20.2 and 9 of the Hope Downs Deed and the 2007 HD Deed, including that a construction of “under the deed” as limited to “governed and controlled by the deed itself” was “overly narrow and the product of an incorrect interpretation of the phrase”; and that their Honours (at [266]) made clear that they considered that “all substantive and validity claims” by both Bianca and John were part of the matter or matters variously the subject of the arbitration agreements. Pausing here, the finding that all substantive and validity claims were the subject of the arbitration agreements is relevant insofar as Bianca here argues that the subsequent conclusions by the High Court are to be understood as limited to the validity claims.
  4. As to the issues raised in relation to whether the proviso to s 8(1) had been engaged by a relevant attack on the arbitration agreements, whether the power to refer such an attack is mandatory or discretionary and how any such discretion should be exercised (issues on which special leave was not granted by the High Court), the Full Court considered (from [341]) the doctrine of separability (setting out Commercial Arbitration Act, ss 16(1)-(3) and referring to the common law separability principle) and the principle of competence-competence.
  5. At [367], their Honours noted that of the Model Law art 8 and Commercial Arbitration Act, s 8 must be read with Art 16 and s 16, respectively; and reiterated that, as a matter of construction, the word “finds” in Art 8 and s 8 does not mandate that the Court hear the question whether the arbitration agreement is “null and void, inoperative or incapable of being performed” (referring to their reasons at [147]-[148]). At [372], their Honours said that:

372. It can be seen both as a practical mistake and as contrary to the statute (s 16(1)) to conclude that, if the question is (by the framing of a separate attack on the arbitration agreement) whether the arbitration agreement is in existence or is invalid or is void, the arbitral tribunal in the agreement attacked cannot (as opposed to should not in the circumstances) hear the challenge.

  1. At [377]-[378], their Honours said:

377. The real issue in any case is whether the Court should hear the separate attack or permit the arbitral tribunal to hear it, by staying its own proceeding. The proper answer to this question will depend on the nature of the attack and all the circumstances.

378. Thus, the words of Art 8 and s 8 should be read and given content against the background, first, that the Court is not required to decide the matters in the proviso; secondly, that the competence principle is wide enough to permit the arbitral tribunal to decide any question of jurisdiction, including whether the arbitration agreement came into existence; and, thirdly, that that decision by the arbitral tribunal is not final, the Court having the final say on the question. A further consideration is that s 8 should, conformably with its language, be construed to facilitate, not impede, the process of arbitration: s 1C(1) of the CA Act.

  1. Rejecting the proposition that there was a relevant distinction between “void” and “voidable” in this context, their Honours said (at [380]):

380. There is as good reason not to refer a dispute to an arbitrator if the arbitration agreement was brought about by deception as there is if the execution of the agreement was a forgery or made utterly without authority. The relevant question is whether the Court should embark on that hearing.

  1. The Full Court considered it doubtful whether there could be said to be any independent attack on the arbitration agreement; but proceeded on the basis that there was such an attack; and concluded that it was preferable to allow the proviso question to be permitted to be determined by the arbitrator (and observing that such an approach conformed to the significant legal policy reflected in Commercial Arbitration Act, s 1C). At [391]ff, the Full Court said:

391. We have come to views different in important respects from the views of the primary judge. As is clear from what we have said earlier, we disagree with her Honour’s construction of the arbitration clauses. That is because, with the utmost respect, we are persuaded (to the relevant extent of departing from his view about the same clause) that the construction given by Bathurst CJ to the relevant clauses was wrong. The conclusion to which the primary judge came as to the meaning of the clauses in question meant that the nature of the “matters” the subject of the clauses using the words “under” or “hereunder” was narrow. This led to a significant division of issue falling within and outside the arbitration agreements, and considerable complexity in the judgment and in the submissions on appeal. In such circumstances there is a much greater likelihood that a court will retain the hearing of issues that concern the validity of the arbitration agreement given the extent of issues that will, in any event, have to be heard in the Court.

392. A further disagreement that we have with the primary judge is the extent to which her Honour found that there was an independent impeachment of the arbitration agreements. At [126]-[127] of her Honour’s reasons, the primary judge set out the correct approach from the separability principle of needing to identify an identifiably separate attack on the arbitration agreement. However, at [662]-[663], the primary judge concluded that the arbitration agreements had been impeached on all bases of the validity claims. For the reasons we have given we cannot agree. With the exception of the two matters to which we have referred, all the complaints that found the validity claims are wholly directed to the validity of the deeds and are, to use Lord Hope’s phrase, parasitical to that and are not specific or distinctive to the arbitration agreements.

393. This means that it is unnecessary to deal with the primary judge’s exercise of discretion to the effect that the Court should hear the proviso application about the arbitration agreements. Thus, we must consider the question afresh. In our view the relevant considerations are in short compass. The separate attack is ill-formulated, resting on the narrow foundation identified above. As such it has an inherent lack of apparent strength given that the two features are well-understood characteristics of commercial arbitration. Further it may conceivably in argument (though we do not think it validly should) become entangled in matters of complaint against the substance and validity of the deeds, or at least the context of these matters. The parties to the litigation have displayed an intensity of application to every matter in dispute that makes us consider that the prospect of holding the parties to a short hearing centred upon these two issues is unlikely.

Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 (the High Court Decision)

  1. Bianca and John sought and obtained special leave to appeal from the Full Court Decision; that leave being confined to whether the validity claims fell within the scope of cl 20 of the Hope Downs Deed (see the High Court Decision at [54]). Special leave was refused in relation to the question of the separability principle. The appeal was subsequently dismissed. The third party companies’ application for special leave to cross-appeal was allowed and that cross-appeal itself was allowed.
  2. At the outset, I note that Bianca here emphasises that the matters the subject of the Federal Court proceeding (as summarised in the High Court Decision at [2]-[3]) are not matters the subject of the present proceeding (reference there being made to the 1988 Agreement said to have been made between Mr Lang Hancock and Gina in 1988); and that the substantive claims in the present proceeding were not before the High Court. Bianca says that the key passage in this regard is at [9], noting that no claim made in the present proceeding relates to this:

9. The Deeds came into existence against the background of and were addressed to claims and threats of litigation made publicly by Mr Hancock about wrongdoing on the part of Mrs Rinehart, HPPL and others which are reiterated in the substantive claims in the proceedings. The Deeds contain releases or abandonment of claims, expressed in wide terms, and promises not to make further claims. They contain assurances that they were entered into without undue influence or duress.

  1. At [12], the plurality in the High Court (Kiefel CJ, Gageler, Nettle and Gordon JJ) said:

12. The appellants’ “validity claims” are not discrete from the appellants’ “substantive claims”. The validity claims incorporate and rely upon the substantive claims. An example serves to illustrate the point. Paragraph 288.5 of the appellants’ statement of claim attacks the validity of the arbitral clause in the Hope Downs Deed, including on the basis that the purpose of the arbitral clause was to prevent public disclosure of the facts pleaded at sections 8-16 of the statement of claim; however, sections 8-16 of the statement of claim contain the substantive claims made by the appellants.

  1. Pausing here, Bianca submits that this passage is key to how the High Court viewed those claims — the validity claims being closely connected and intertwined with the substantive claims. That said, I do not read this passage as suggesting that a different stance should be taken to substantive claims when considered in isolation, which is the thrust of Bianca’s argument on the present applications.
  2. At [14]-[17], the plurality said:

14. The question before the primary judge which is relevant to these appeals is whether the validity claims are subject to the arbitral clauses.

15. The primary judge held that they were not. Central to her Honour’s reasoning was a perceived limitation on the scope of the clause resulting from the words “under this deed”. Accordingly, whilst the substantive claims may be the subject of arbitration, the validity claims are to be determined by the court under the proviso to s 8(1) of the NSW Act.

16. The Full Court (Allsop CJ, Besanko and O’Callaghan JJ) disagreed with the primary judge’s construction of cl 20 of the Hope Downs Deed, holding that it should be given a liberal, not a narrow, interpretation. The Full Court stayed the proceedings, permitting the arbitrator to deal with all issues, including validity.

17. When regard is had to the context of the Deeds, including the circumstances in which they were made as reflected in the text of the Deeds, it is apparent that the conclusion reached by the Full Court that the validity claims fell within the scope of the arbitral clauses is correct.

  1. For Bianca, it is here said that this was a narrow disposition of the appeal, and not an endorsement of the reasoning of the Full Court, though it is noted that emphasis was placed on context. For Gina, on the other hand, it is said that the reference to “perceived limitation” (at [15]) indicates that their Honours considered this aspect of the primary judge’s reasoning (which adopted the reasoning of the Court of Appeal) to be wrong.
  2. At [18], the plurality noted that a significant part of the Full Court’s reasons was taken up with arguments as to the approach taken by the House of Lords to the construction of arbitral clauses in Fiona Trust; and observed that this was understandable (given the way in which the matter had been dealt with by the primary judge) but that the appeals could be resolved “in the application of orthodox principles of interpretation, which require consideration of the context and purpose of the Deeds, without reference to Fiona Trust”.
  3. In circumstances where it was accepted that Fiona Trust was not critical to disposing of the appeals, the plurality said it was unnecessary to consider or rely upon Fiona Trust or the observations of Bathurst CJ in the Court of Appeal Decision concerning Fiona Trust (see at [25]). That, however, left open room for the argument that has now been the focus of much of the submissions in this Court, namely as to whether the High Court implicitly overruled the construction of the relevant arbitration clause that had been placed on it by the Court of Appeal (that construction having been noted at [23] of the plurality’s reasons, and its application noted at [24]).
  4. The plurality (from [26]) then addressed the question as to the background to and purpose of the relevant deeds, as follows:

26. As the Full Court concluded: “[c]ontext will almost always tell one more about the objectively intended reach of such phrases than textual comparison of words of a general relational character”. There may be cases which have to be resolved largely, if not entirely, by reference to the language of the arbitral clause in question. But this is not such a case. The background to and the purposes of the Deeds, as reflected in their terms, point clearly to arbitral clauses of wide coverage with respect to what was to be the subject of confidential processes of dispute resolution. (Emphasis added) (Footnotes omitted.)

  1. Pausing here, the prefatory words, emphasised in the above passage, make clear in my opinion that the plurality was here agreeing with the observation of the Full Court as to the comparative weight of context and text.
  2. Their Honours went on to say (at [27]):

27. The Full Court treated the context and purposes for which the Deeds were made as important to their construction. Their Honours identified the context for the making of the Deeds as the growing number of claims being made. One of the fundamental purposes of the Deeds, their Honours said, was the quelling of disputes about the title to assets, which was of great commercial importance to the prospective arrangements with a joint venturer. We respectfully agree. It is necessary to consider each of the Deeds in further detail.

  1. From [28], the plurality set out the background to the separate Deed of Obligation and Release (one of the three deeds there being considered), namely: the investigations undertaken by John around 2003 (or perhaps earlier) and the possibility he had raised of commencing litigation against Gina; and the sending in October 2004 of John’s unsworn affidavit “which contained many of the allegations concerning wrongful conduct on the part of Mrs Rinehart as trustee which now form part of the substantive claims”.
  2. The plurality considered that it was to be inferred from the recitals to the Deed of Obligation and Release (as the Full Court had observed), that it was considered necessary by the parties to stabilise the question of claims to ownership of tenements in order to provide a safe foundation for what was to be a long‑term commercial venture, noting that the parties to the deed acknowledged that “‘the primary nature of the HPPL business, is very long‑term, complex, large‑scale mining projects … necessitat[ing] long term consistent business plans, and many dealings with third parties on a strictly confidential basis’” (see at [31]). At [32], the plurality noted that confidentiality was plainly a serious concern at that point and that the recitals bore out the primary judge’s findings that the deed was intended to address the risk of commercial damage to HPPL and the Hancock Group by public statements which might be made by John along with the risk of disclosure of confidential information. Pausing here, in my opinion this goes beyond simply the purpose of quelling disputes in relation to the mining tenements alone – there being an emphasis on the need for confidentiality more generally by reference to the risk of commercial damage to HPPL and the Hancock Group.
  3. At [33], the plurality said:

33. These are circumstances which bespeak the object of cl 14 in providing for confidential mediation and arbitration of “all disputes hereunder”. The resolution of them was to be non-public and confidential. In this respect it is to be observed that whilst the Deeds were commercial arrangements and concerned claims concerning commercial dealings, the disputes also involved members of a family. That, too, is consistent with the need for confidentiality. It is also of relevance to the background to and provisions made in the Hope Downs Deed that, by cl 11 of the Deed of Obligation and Release, Mr Hancock acknowledged that he had received independent advice “on all matters relating to or which are the subject of this Deed” and that he acted wholly without duress – notwithstanding that he was to assert the contrary soon thereafter.

  1. The plurality considered the Hope Downs Deed from [34] and the “April 2007 Deed” from [41]. As to the meaning of cl 20 of the Hope Downs Deed, the plurality said that (at [43]ff) :

43. Even on an approach which focuses only on the language of cl 20 it might be argued that the validity claims are disputes “under” the deed. The question whether the substantive claims are the subject of releases and covenants may be seen to depend upon the question whether the validity claims are available and if so whether they are made out. And the challenges to validity may depend upon the effect given to the acknowledgment in the Deeds concerning duress, undue influence and the receipt of legal advice. This is a further example of how the substantive claims and the validity claims are intertwined in these appeals.

44. It is well established that a commercial contract should be construed by reference to the language used by the parties, the surrounding circumstances, and the purposes and objects to be secured by the contract. It could not have been understood by the parties to these Deeds that any challenge to the efficacy of the Deeds was to be determined in the public spotlight. Especially is this so with respect to the Hope Downs Deed.

45. The Hope Downs Deed was an attempt to put to rest the issues regarding ownership of property which had motivated Mr Hancock in the first place. Although the Joint Venture Agreement had been signed by this time, the Hancock Group of companies were undertaking negotiations for financing it in accordance with their contractual obligations. The need for commercial confidence remained.

46. Accordingly, a critical object of the Hope Downs Deed was the maintenance of confidentiality about the affairs of the Hancock Group, the trusts, the intra-family dispute and the provisions of the Deeds themselves. This object could not be clearer. Contrary to the submissions for the appellants, the parties were indeed agreeing to avoid public scrutiny. The fact that the claims made by Mr Hancock involve the administration of trusts does not affect the meaning persons in the parties’ position must have understood the arbitral clause to have.

47. By the time the Hope Downs Deed was executed, Mr Hancock had shown that he was intent on pursuing claims respecting the trusts. It was more than possible that he might challenge the Hope Downs Deed as he had done with respect to the Deed of Obligation and Release. This in large part explains the requirements of cl 12, including that as to lawyers’ assurances, which were addressed to the possibility of a dispute about the validity of the deed.

48. A person in the position of the parties to the Hope Downs Deed would have appreciated that disputes might once again arise, not only with respect to the claims made by Mr Hancock concerning the trusts but also concerning the validity of the deed. It is inconceivable that such a person would have thought that claims of the latter kind, raising allegations such as undue influence, were not to be the subject of confidential dispute resolution but rather were to be heard and determined publicly, in open court. (Emphasis added.)

  1. As to cl 14 of the Deed of Obligation and Release, the plurality said (at [49]):

49. The same may be said of the Deed of Obligation and Release. The Deed of Obligation and Release was brought about by Mr Hancock’s public statements, which were considered to have the potential to cause damage to the commercial interests of the Hancock Group. The need to avoid this and to ensure the confidentiality of information was critical because of the Joint Venture which was then being negotiated, which would have long-term implications for the Hancock Group. The evident object of the deed was to ensure that there was no further public airing of the claims made by Mr Hancock. It is inconceivable that a party to the deed could have thought that any challenge to it would be determined publicly, in court.

  1. As to the cross-appeal by the third party companies, they claiming to be persons claiming “through or under” a party to the Hope Downs Deed and hence within the definition of “party” in Commercial Arbitration Act, s 2(1), the plurality rejected the Full Court’s reasoning on the issue as to the meaning of “through or under” in its application to Commercial Arbitration Act, s 8 (which had proceeded on the Full Court’s analysis of the High Court’s decision in Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332; [1990] HCA 8 (Tanning Research)).
  2. As to that reasoning, the plurality (see at [61]ff) addressed each of the four steps that the Full Court had identified, being: first, to identify the “critical passage” in the joint judgment of Brennan and Dawson JJ in Tanning Research at 342 (see the Full Court Decision at [309]); second, to consider the submission that the liability of a knowing assistant or knowing recipient is “not indirect or derivative” (the Full Court concluding that the third party companies did not have a derivative defence “in the ordinary sense of that term” – see at [317]); third, , though the notion of claiming through or under a party is not limited to cases of assignment or transfer, to note that the only relationship between the companies and the party to the Hope Downs Deed under or through whom those companies purported to claim was not a legal relationship but “purely factual” (see the Full Court Decision at [317]); and, fourth, to reject the proposition that the covenants and releases in the Hope Downs Deed were an essential element in the third party companies’ defences, on the basis that the third party companies were not bound to raise those releases and covenants as a defence (see the Full Court Decision at [317]).
  3. The plurality emphasised (at [66]) that Brennan and Dawson JJ’s ultimate formulation of the test was, relevantly, whether “an essential element of the defence was or is vested in or exercisable by the party to the arbitration agreement” with the meaning of the phrase “through or under” to be “ascertained not by reference to authority but by reference to the text and context of” the provision in which it appeared. Thus, it was said by the plurality, that the statutory conception of “claiming through or under” applies to an alleged knowing recipient of trust property who invokes as an essential element of its defence that the alleged trustee was beneficially entitled to the subject property. Reference was made by the plurality (see the High Court Decision at [67]) to the reasoning of Deane and Gaudron JJ that “whether a party to proceedings is advancing a defence through or under a party to an arbitration agreement is necessarily to be answered by reference to the subject matter in controversy rather than the formal nature of the proceedings or the precise legal character of the person initiating or defending the proceedings”.
  4. The plurality noted (at [68]) that “it is unnecessary that the issues that the defence puts in controversy in the proceedings be limited to the matter capable of settlement by arbitration” – the two not needing to be co-extensive and it being sufficient that the defence puts in issue, among other things, “some right or liability which is susceptible of settlement under the arbitration agreement as a discrete controversy” (citing Tanning Research at 351).
  5. The plurality considered it beside the point that the third party companies were not privy to the arbitration agreement (see at [69]). Instead, it being sufficient that there was a discrete matter of controversy capable of settlement by arbitration under the arbitration agreement and one which, as between the appellants and HPPL, had been referred to arbitration in accordance with the Hope Downs Deed.
  6. Finally, as to the fourth step of the Full Court’s reasoning, the plurality noted that: this was not a case of the third party companies being “highly likely” to raise the defences – they had done so (albeit not at that stage by filing and serving a defence); and, if there were any doubt about it (which their Honours considered there was not), “the order for stay could have been conditioned on the issue being referred to arbitration and the third party companies undertaking to use all reasonable endeavours to prosecute the matter” (see at [71]).
  7. At [73], their Honours said:

73. … where an assignee of mining tenements is alleged to have taken the assignment with knowledge that the tenements were held by the assignor upon trust for the claimant and assigned to the assignee in breach of trust, and the assignee contests the claim on the ground that there was no breach of trust or if there were that, by reason of a deed of settlement, the assignor was absolved of responsibility for the breach of trust, the assignee takes its stand upon a ground which is available to the assignor and stands in the same position vis-à-vis the claimant as the assignor. Accordingly, since the assignor and the claimant are bound by an arbitration agreement applicable to the claim of breach of trust, there is no good reason why this claim should not be determined as between the claimant and the assignee in the same way as it will be determined between the claimant and the assignor. To exclude from the scope of the arbitration agreement binding on the assignor matters between the other party to that agreement and the assignee would give the arbitration agreement an uncertain operation. It would jeopardise orderly arrangements, potentially lead to duplication of proceedings and potentially increase uncertainty as to which matters of controversy are to be determined by litigation and which by arbitration. And ultimately it would frustrate the evident purpose of the statutory definition.

  1. The plurality concluded (at [74]) that “the third party companies are persons claiming through or under HPPL or HRL and, therefore, are parties within the meaning of s 8 of the [Commercial Arbitration Act].” It is said, in the present proceedings, that the same is true of Mr Newby, who is claiming “through” Gina and would be relying on cl 8.
  2. Edelman J agreed with the reasons in the joint judgment for refusing the applications for leave to intervene and for dismissing the appeals. His Honour emphasised (at [83]) that “[e]very clause in a contract, no less arbitration clauses, must be construed in context. No meaningful words, whether in a contract, a statute, a will, a trust, or a conversation, are ever a contextual.” His Honour went on to say:

83. … As the joint judgment in this Court explains, the Full Court of the Federal Court of Australia was correct to treat a fundamental purpose of the Deeds as the quelling of disputes about the title to important commercial assets. That purpose is plain from the context of the Deeds. The context of the Deeds also reveals the importance to the parties of confidential resolution of such disputes, including validity disputes similar to those which the appellants submitted lay outside the scope of the arbitration agreements. This context requires that the words “any dispute under this deed” and “all disputes hereunder” be construed broadly to include the validity claims. For that reason, it is unnecessary in this case to consider the amount of additional weight that should be placed upon the usual consideration of context that reasonable persons in the position of the parties would wish to minimise the fragmentation across different tribunals of their future disputes by establishing “one‑stop adjudication” as far as possible. (Footnotes omitted.)

  1. His Honour, however, reached a different conclusion from that of the plurality in relation to the cross-appeal (see [84]ff).

Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 9) [2018] WASC 122 (the Le Miere (No 9) Decision)

  1. That brings me to the proceedings in Western Australia. By 2018, what was there before Le Miere J (not unlike the position that has now transpired in this Court), in the context of applications that had been made by Gina, HPPL and other parties for referral to arbitration pursuant to s 8(1) of the WA Commercial Arbitration Act and a stay of the proceedings pending the outcome of any arbitration, was an application brought by Bianca and John, shortly in advance of the date when the hearing of the applications was listed to commence (that being 30 May 2018), by chamber summons, seeking orders that Gina and others be restrained from relying upon, invoking or otherwise taking steps in furtherance of the arbitration agreement in the Hope Downs Deed in the proceedings and that Gina be restrained from causing any party to the Hope Downs Deed from relying upon, invoking or otherwise taking steps in furtherance of the arbitration agreement in the Hope Downs Deed in the proceedings. Gina and HPPL (and another of the companies there involved, HDIO) then sought orders that those interlocutory claims by Bianca and John be referred to arbitration and their interlocutory application to the Supreme Court of Western Australia be stayed pending the outcome of any arbitration.
  2. In determining those preliminary interlocutory stoushes, Le Miere J (at [3]) indicated that at the hearing of the referral/stay applications his Honour would follow the reasoning of the Full Court in the Full Court Decision and would not determine issues of undue influence, duress, fraudulent concealment or any other matter which is said to go to the voidness or voidability of any of the arbitration agreements in question nor would his Honour make any findings of fact in relation to those issues.
  3. His Honour refused to hear, at the hearing commencing on 30 May 2018, the applications by Bianca and John by their chamber summons for interlocutory relief and said that those applications would be heard after determination of the referral/stay applications.
  4. The basis on which Bianca and John appear to have sought to prosecute the application in their chamber summons (see at [46]) was that the evidence they would adduce at the hearing commencing on 30 May 2018 would show that Gina and the HPPL parties had engaged in unconscionable conduct, that the Court had power to restrain it and that the Court should exercise its power to restrain those parties from seeking that the parties be referred to arbitration.
  5. Le Miere J said (at [47]):

47. I will not hear the application of Bianca and John at the hearing commencing on 30 May. It has been brought too late. There is no injustice to Bianca and John from not hearing their application at the hearing commencing on 30 May. The reasoning of the Full Federal Court leads to the conclusion that if the substantive claims made by John and Bianca fall within the arbitration agreements then so will their claims directed towards preventing the respondents from relying on releases, bars, covenants not to sue and arbitration clauses contained in Hope Downs deed and the other deeds. John and Bianca’s application will not be listed for hearing at the hearing commencing on 30 May 2018.

Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 10) [2018] WASC 407 (the Le Miere (No 10) Decision)

  1. In December 2018, Le Miere J ruled on the referral/stay applications. His Honour stayed the proceedings pursuant to s 8(1) of the WA Commercial Arbitration Act and stayed certain counterclaims pursuant to the general power of the court to control its proceedings (see the Le Miere (No 10) Decision at [1]). An appeal and cross-appeal from that decision was heard late last year and on which the Court of Appeal of the Supreme Court of Western Australia is presently reserved.
  2. His Honour noted that Bianca and John, in opposing the referral to arbitration or stay of the proceeding, had submitted that the stays were premised on the validity of the cl 7(b) undertaking and cl 20 of the Hope Downs Deed which were improperly obtained as the Hope Downs Deed was procured by the unconscionable conduct of HPPL and Gina; and hence that HPPL and Gina’s reliance on those rights to justify a stay of the proceedings was unconscionable and not be sanctioned by the court acceding to the stay application (see at [97]).
  3. Following the reasoning of the Full Court in the Full Court Decision, Le Miere J found that all the substantive claims and validity claims brought by Bianca and Gina in their counterclaims fell within the arbitration agreement in cl 20.2 (see at [147]-[148]) and therefore must be referred for arbitration. His Honour then considered the arguments advanced by Bianca and John for the dismissal of the stay applications – in essence that the Hope Downs Deed was procured by unconscionable conduct (as adverted to above) (relevantly, these are arguments that Bianca in the present case says were not there predicated on a true anti-injunction application thereby seeking to distinguish between the two applications).
  4. His Honour rejected the submission that the stay applications should be dismissed for unconscionability for two reasons: first, because they depended on the Court making findings of fact in support of their claims that they entered into the document and other deeds as a result of various forms of wrongdoing by Gina (a matter addressed in the reasons for the Le Miere (No 9) Decision – see at [45]); second, on the basis (at [154]) that:

154. … Framing their argument as a contention that it is unconscionable for HPPL and Mrs Rinehart to seek a referral to arbitration and a stay in reliance upon the provisions of the Hope Downs Deed adds nothing of substance to the contention that the Hope Downs Deed, and the arbitration agreement within it, is void and should not be enforced because of undue influence, duress, fraudulent concealment, unconscionable conduct or any other matter which is said to go to the deed and the arbitration agreement being void or unenforceable. Ms Rinehart’s and Mr Hancock’s contentions are but another way of putting their validity claims advanced in the Federal Court proceeding and again in the counterclaims in these proceedings. The Full Court found, and I have found, that those claims fall within the arbitration agreement and should be referred to arbitration, not determined by this court.

  1. Pausing here, HPPL submits that both of those reasons go to the first three issues raised by Bianca and John in their submissions (as set out at [151] of his Honour’s reasons), namely: the alleged non-disclosures of the Myers advice and Sceales advice and the subsequent Gilmour advice and PwC advice constituting unconscionable conduct; the alleged unconscientious reliance on legal rights improperly obtained; and that Gina and HPPL’s stance was vexatious and oppressive (placing Bianca and John in a “straightjacket” in their defence of other claims in the related proceedings before his Honour). Gina further submits that there is no reason why this should not give rise to an issue estoppel binding the parties.
  2. At [155], his Honour turned to a fourth reason that had been raised by Bianca and John for not referring their claims to arbitration and not staying their claims in those proceedings: that being that the court “may refuse to refer [Bianca and John’s] claims to arbitration and stay their claims in these proceedings without adjudicating upon the voidness or voidability of any of the arbitration agreements but because of the unconscionable circumstances under which the arbitration agreements were procured.” The submission being made that their attack on the arbitration agreements did not offend the separability principle and was clearly articulated and that the hearing would be confined. His Honour rejected the contention that the attack did not offend the separability principle (see at [156]).
  3. Having referred to the consideration by the Full Court of the issue, his Honour said at [159]:

159. [Bianca and John] allege that the Hope Downs Deed is void or voidable because of, amongst other things, unconscionable behaviour. However, that is not a distinct and separate attack on the arbitration agreement. Nor is the allegation that to seek a stay based upon the arbitration agreement in the Hope Downs deed which was procured by unconscionable behaviour is itself unconscionable a separate and distinct attack upon the arbitration agreement in any relevant sense.

  1. Thus his Honour rejected the arguments advanced by Bianca and John opposing the referral/stay applications in relation to their counterclaims.
  2. His Honour did not stay the whole of the proceedings (see from [192]), notwithstanding his Honour’s recognition as to the risk that this may give rise to inconsistent decisions and result in unnecessary duplication and expense. A significant factor in this regard was that the court proceedings involved other parties not party to the Hope Downs Deed and whose disputes could not be resolved in the arbitration (see at [204]). For the reasons given at [205]ff, his Honour considered that it was not in the interests of justice to stay the whole of the proceedings pending the outcome of the arbitral proceedings.

Bianca’s submissions as to the question of precedent

  1. Bianca submits that the High Court Decision does not point against the construction for which she contends. It is submitted that the High Court expressly did not consider the observations of Bathurst CJ in the Court of Appeal Decision in relation to a critical matter that underpinned his Honour’s analysis (namely, the relevance under Australian law of the approach in Fiona Trust) (see the High Court Decision at [25]). It is said that no criticism at all was levelled at his Honour’s construction of cl 20.2 as requiring that a dispute be governed or controlled by the Hope Downs Deed (referring to the High Court Decision at [23]).
  2. Bianca argues that the reasoning in the High Court Decision does not lead to the conclusion that the matters in this proceeding are under the Hope Downs Deed. In that regard Bianca points to the following.
  3. First, that the High Court’s analysis was confined to whether the parties to the Hope Downs Deed intended certain specific disputes as to the validity of the Hope Downs Deed to be covered by the arbitration agreement. It is noted that the High Court: repeatedly referred to disputes about or concerning the “validity” of the Hope Downs Deed (see at [43], [47], [48]); and held that, having regard to the context in which the Hope Downs Deed was entered into, the parties to the Hope Downs Deed intended the arbitration agreement to cover disputes concerning the deed’s validity (see at [43], [47]-[49]).
  4. Second, that the High Court was not asked to consider whether the matters in the present proceeding were covered by the arbitration agreement. It is said that the matters in the present proceeding are substantially different in their nature and scope when compared to those before the High Court.
  5. Third, that Bianca was not a party to the High Court proceeding in her capacity as trustee (and it is said that nothing in the High Court Decision indicates whether or not Bianca is, in that capacity, bound by the arbitration agreement).
  6. Fourth, that no part of Bianca’s pleaded case in the present proceeding challenges the validity of the Hope Downs Deed. As a result, it is submitted that one of the critical aspects of the High Court’s reasoning (namely, the intertwining of substantive and validity claims; Bianca referring by way of example to the High Court Decision at [12], [43]) does not here arise.
  7. Fifth, that the High Court’s reference to a “challenge to the efficacy of the Deeds” (see at [44]) (contrary to the weight placed by the defendants on the use of the word “efficacy”) cannot be read as anything other than a reference to the validity claims. It is said that no other issue was before the High Court and that Gina’s oral submissions to the contrary impermissibly involve reading the judgment as if it were a statute (cf Comcare v PVYW (2013) 250 CLR 246; [2013] HCA 41 at [15]- [16] per French CJ, Hayne, Crennan and Kiefel JJ).
  8. Sixth, insofar as Bianca separately contends by Bianca’s unconscionability (anti-arbitration) motion that as trustee she has an equitable right which is being infringed by the maintenance of the s 8 Stay Applications, Bianca says that that is not a challenge to the validity of the Hope Downs Deed. She says that she does not contend that the Hope Downs Deed, or the arbitration agreement, should be set aside nor does she contend that the Hope Downs Deed, or the arbitration agreement is unenforceable. It is said that Bianca, as trustee, could not pursue the anti-arbitration application against a party to the Hope Downs Deed who was not a party to the breach of trust, which indicates that the injunction does not impugn the validity or enforceability of the Hope Downs Deed, and that the right asserted in the unconscionability motion is an in personam right held by the beneficiaries of the HMH Trust as against Gina and her accessory (being HPPL). In this way, it is said that the application is a challenge to the right of Gina and HPPL to maintain an application for a stay (contra Gina’s submissions at [53] and Le Miere (No 10) Decision at [154]-[156], noting that that was a proceeding to which Bianca was not a party in her capacity as trustee).
  9. Bianca says that the proposition that the unconscionability motion does not give rise to a dispute under the Hope Downs Deed can be tested by reference to the example of a situation where what was sought was to restrain a breach of an injunction preventing Gina and HPPL from relying on the arbitration agreement. It is submitted that it is inconceivable that such a dispute would be characterised as being under the Hope Downs Deed (because it is not a challenge to the Hope Downs Deed’s validity nor would it be governed or controlled by the Hope Downs Deed).
  10. Bianca argues that the High Court Decision did not operate as an “implied overruling” of the Court of Appeal Decision. It is submitted that it is most unlikely that the High Court intended to overrule the Court of Appeal Decision but “failed to mention it” (noting that the Court of Appeal Decision was brought to the High Court’s attention and referred to in the High Court Decision). Bianca says that this is not like the example referred to by Campbell J, as his Honour then was, in Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 (Re French) (to which Gina/HPPL refers) at [57] where a prior authority was not mentioned (and appears not to have been brought to the Court of Appeal’s attention).
  11. Further, Bianca maintains that it is an error to assert (as the defendants do) that the High Court’s conclusion could not have been reached under a “governed or controlled test”. Bianca maintains that this is so for the following three reasons.
  12. First, it is said that the foundation of the High Court’s reasoning was that the “validity claims” were “not discrete from the appellants’ ‘substantive claims’” (see the High Court Decision at [12]), which in turn, reflected the Full Court’s finding in the Full Court Decision at [157]-[158] that there was one holistic dispute. It is said that a consequence of that was that, once one of the substantive claims was within the four corners of the arbitration agreement, then the whole of the matter was; and that the substantive claims considered in the High Court Decision fell within the arbitration agreement at least because of the release in cl 6, which governed or controlled some of the substantive claims (referring to the Gleeson Decision at [622]-[624], [634]-[636]). It is said that it followed necessarily that the Hope Downs Deed contemplated that the validity claims (which were not discrete from the substantive claims) were within the four corners of the arbitration agreement.
  13. Second, Bianca argues that the same result follows even if focus is only on the validity claims. It is noted that the “validity claims” included an allegation that the Hope Downs Deed had been procured by undue influence and that that was the only specific validity claim that the High Court mentioned in its judgment (see the High Court Decision at [48]). It is said that the focus on undue influence was understandable, since the High Court repeatedly pointed out that the Hope Downs Deed itself contained assurances that it had been entered into without undue influence and on the basis of legal advice (which could refute any presumption of undue influence) (referring to the High Court Decision at [9], [40], [43]); and that the High Court said (at [43]) that “the challenges to validity may depend upon the effect given to the acknowledgement in the Deeds concerning duress, undue influence and the receipt of legal advice.” Bianca argues that the determination of the validity claims might be governed or controlled by the effect given to cl 12, which contained the assurances against undue influence and in respect of legal advice.
  14. Third, it is submitted that, properly analysed, the High Court accepted the Full Court’s conclusion (at [248] of the Full Court Decision) that there was only one dispute, and thus did not need to decide whether or not the Full Court’s conclusion at [247] (rejecting the Court of Appeal Decision) was correct.
  15. It is submitted that these matters indicate that the High Court could have reached the conclusion it did applying the “governed or controlled” test and that, in that context, it is most unlikely that the High Court intended sub silentio to overrule a decision of the Court of Appeal which was squarely drawn to its attention and fully argued before it.
  16. Accordingly, Bianca submits that (if it is concluded, contrary to her argument on the threshold question, that the Hope Downs Deed binds her qua trustee), the correct approach to determining whether the current proceedings fall within the arbitration agreement in the Hope Downs Deed is that which was established by the Court of Appeal Decision (as subsequently applied by the Court of Appeal in the Leave Decision); namely, to consider whether the various matters the subject of the proceedings are “governed or controlled” by the Hope Downs Deed, in the sense that the Deed will necessarily determine the outcome of the claims made by the trustee.
  17. Bianca submits that, while comity “may be shown” to the Full Court Decision, it is the approach of Bathurst CJ in the Court of Appeal Decision that remains binding. It is submitted that nothing in the High Court Decision relevantly impacts on the Court of Appeal Decision. Bianca says that the High Court declined to choose which of the approaches identified by the Court of Appeal and Full Court ought be preferred (referring to the High Court Decision at [25]); and that, rather, the High Court simply determined that the “validity claims” pleaded in the Federal Court proceedings fell within the arbitration agreement. Again, emphasis is placed on the fact that no such claims are made in the pleadings before this Court; rather, it is said, these proceedings attack conduct of HPPL and Gina that post-dates entry into the Hope Downs Deed.
  18. Further, it is submitted that if there be any doubt about the standing of the Court of Appeal Decision, that doubt is properly resolved elsewhere in the judicial hierarchy than at the base of the judicial apex, pointing to what was said by Lander J in WorkCover Corporation v Jakas (2003) 86 SASR 20; [2003] SASC 155 at [49], namely that:

49. There might be some cases where the court or tribunal at the base of the apex can decide for itself that the first court of appeal decision has been overruled: Ratcliffe v Watters … at 505. However, the inferior tribunal or court would not decline to follow the first court of appeal if there was any doubt about whether the decision of that court had been overruled. If there is any doubt then the matter must be left to one or other of the courts of appeal.

  1. It is submitted that, a fortiori, a first instance judge may not “disregard a binding decision of an appellate court on some view based on the reasoning of judges in a decision of an ultimate appellate court which does not overrule the binding decision” (citing Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166 at 177 per Moffitt P and Glass JA agreeing at 180).
  2. Thus Bianca (respectfully) submits that it is not for me, sitting at first instance, where there is doubt as to whether the High Court has overruled the Court of Appeal’s construction of the relevant arbitration clause, to depart from the Court of Appeal’s construction (that, it is said, being a matter for the Court of Appeal to determine); and hence that, except to the extent of any necessary inconsistency with the conclusion in the High Court Decision, the ratio in the Court of Appeal Decision survives unimpeached and must be followed, even if it be assumed that some aspects of the High Court Decision “do not sit well” with the Court of Appeal Decision. Reference is made in that context to Jacob v Utah Construction & Engineering Pty Ltd (1966) 116 CLR 200; [1966] HCA 67 (Jacob v Utah), where it was said (at 207 per Barwick CJ) that:

207. It is not, in my opinion, for a Supreme Court of a State to decide that a decision of this Court precisely in point ought now to be decided differently because it appears to the Supreme Court to be inconsistent with reasoning of the Judicial Committee in a subsequent case. If the decision of this Court is to be overruled, it must be by the Judicial Committee, or by this Court itself. It cannot be treated by a Supreme Court as if it were overruled.

Defendants’ submissions

  1. In summary, the defendants maintain that the High Court Decision requires a different construction to cl 20 of the Hope Downs Deed than was reached in the Court of Appeal Decision, on the basis that the result of the High Court Decision is “entirely incompatible” with the “governed or controlled” test because the High Court found that certain claims which were not “governed or controlled” by the Hope Downs Deed raised disputes “‘under’ the deed”; and that Bianca’s approach (based on the “governed or controlled” test) is inconsistent with the High Court Decision. It is also submitted that even if the “governed or controlled” test is applicable, a number of aspects of this proceeding satisfy that test.
  2. Gina notes that, at first instance, Gleeson J applied the Court of Appeal Decision when determining that the “validity claims” were not subject to cl 20.2 of the Hope Downs Deed, because those claims were not governed or controlled by the Hope Downs Deed; that, on appeal, the Full Court reversed this decision, holding that the validity claims were part of a dispute under the Hope Downs Deed and that the “governed or controlled” test should not be applied (see the Full Court Decision at [161], [199] and [246]-[250]); and that the High Court dismissed the appeal concerning the referral of the validity claims.
  3. Gina submits that the High Court’s determination that the “validity claims” involved a dispute under the Hope Downs Deed involved interpreting the agreement in its context, rather than applying a substitute to the words used by the parties (i.e. “governed or controlled”) (referring to the plurality decision at [44]-[48]); and argues that it is of significance that the High Court did not determine that the validity claims were “governed and controlled” by the Hope Downs Deed (i.e, the approach taken in the Court of Appeal Decision) but, rather, affirmed the commercial construction approach adopted by the Full Court. It is submitted that the reason for this is obvious: namely, that the validity claims were not governed or controlled by the Hope Downs Deed (hence, it is said, the High Court’s determination is necessarily inconsistent with the Court of Appeal Decision). It is submitted that for me now to apply the governed or controlled test to cl 20 would be inconsistent with the High Court’s binding judgment.
  4. In this sense, it is submitted that the High Court Decision impliedly overruled the Court of Appeal Decision as to the proper construction of cl 20, being a question of law (see Bowes v Chaleyer [1923] HCA 15; (1923) 32 CLR 159 at 172; [1923] HCA 15 per Isaac and Rich JJ). Gina notes that a similar issue was addressed by Campbell J, as his Honour then was, in Re French at [57]:

57. The decision of the majority in the Court of Appeal in Hallett was inconsistent with Pennell v Deffell in the most direct way – Hallett came to a different conclusion to the conclusion which would have been arrived at if Pennell v Deffell remained good law. When Pennell v Deffell was expressly considered by Sir George Jessel MR and Baggallay LJ, and they came to a different conclusion to that which Pennell v Deffell dictated, Pennell v Deffell must be regarded as overruled. Though Brown v Adams was not expressly referred to, it should be regarded as impliedly overruled. In In Re Oatway; Hertslet v Oatway [1903] 2 Ch 356 at 360, Joyce J said that Brown v Adams ought not be followed since the decision in In Re Hallett’s Estate.

  1. Reference is also made to Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 497 at 505 and EKU17 v Minister for Immigration and Border Protection [2019] FCA 782 at [23] per Davies J.
  2. Gina submits that the above rationale applies directly to the present circumstances, namely that: the High Court considered the Court of Appeal Decision (see at [22]-[25]), noted that the primary judge came to the conclusion that the validity claims were not “under this deed” on the basis of the “governed or controlled” test (see at [14]-[15] and [22]-[24]), and then reached a conclusion which could not have been arrived at (emphasis added) if the Court of Appeal Decision remained good law as to the proper construction of cl 20 of the Hope Downs Deed.
  3. As to the fact that the High Court did not find it necessary to consider the observations of Bathurst CJ in the Court of Appeal Decision, it is noted that this was in relation to his Honour’s observations concerning Fiona Trust. HPPL says, and I accept, that the High Court did not refuse to decide whether the approach of the Full Court or that of the Court of Appeal was to be preferred (cf Bianca’s submissions at [61]); rather, the High Court found it unnecessary to determine whether Fiona Trust should not be followed since (at [18], [25]) the plurality accepted that Fiona Trust was not critical to the resolution of the appeals. Similarly, Gina says that the High Court did not need to determine whether, in accordance with Fiona Trust, there was a presumption to be applied that arbitration agreements were to be construed broadly nor whether Fiona Trust was contrary to the Australian approach (as was held in the Court of Appeal Decision), because the context demonstrated that the clause had wide coverage irrespective of any presumption to be applied (as the Full Court held).
  4. Gina submits that it is notable that the proceedings in the Court of Appeal did not involve an application under Commercial Arbitration Act, s 8; rather, the applications were made under Civil Procedure Act, s 67and in the Court’s inherent jurisdiction. It is submitted that the Court of Appeal in the Court of Appeal Decision therefore did not address the proper approach to determining what the “matter” in the proceeding is and how it should be characterised for the purpose of s 8. Gina maintains that the significance of the distinction is that, even if the construction of cl 20 in the Court of Appeal Decision remains binding upon this Court (despite the High Court Decision), it will only answer whether some part of the proceeding raises “a dispute under [the] deed” for the purpose of cl 20. It is said that if some part of the proceeding does raise such a dispute, then there will be a need to determine what the “matter” is that must be referred in accordance with s 8. In this respect, it is submitted that the Court should follow the Full Court Decision (in accordance with Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (Farah v Say-Dee) (see at [135]), pointing to what was said by the Full Court at [157] and [158] (and at [141] and [145]).

Determination

  1. I do not understand there to be any dispute as between the parties as to the proposition that, as a matter of precedent, I am bound to follow applicable High Court authority and that (in the absence of applicable High Court authority) where there is a conflict between Court of Appeal authority and that of the Full Court of the Federal Court (or any other intermediate appellate court) I would be bound to follow the Court of Appeal authority. As Bianca succinctly put it, it is not for me, sitting as a single judge of this Court, to choose which, of competing approaches of the Court of Appeal and the Full Court of the Federal Court, should be followed (see at T 248.46). There can be no quarrel with such a proposition. Nor can there be quarrel with the proposition that, in the absence of binding Court of Appeal (and High Court) authority, I would as a matter of comity be bound to follow other intermediate appellate authority (such as that of the Full Court) unless convinced it was plainly wrong (a principle that the defendants invoke when arguing that I am bound to follow the Full Court’s approach to the question of the separability principle insofar as that applies in relation to the issues sought to be raised on Bianca’s unconscionability motion).
  2. For Bianca, as adverted to already, it is submitted that the High Court Decision, though useful as to context, does not provide a great deal of assistance on the construction of s 8 of the Hope Downs Deed in the present case because the High Court (only having granted special leave in relation to the validity claims – not in relation to the substantive claims) was not concerned with the substantive claims. It is said that the High Court was dealing with “a different bucket of claims with a different nature” and, in effect, that its reasoning is authoritative only as to how it was that those claims, because of the way they were pleaded, were intertwined with and premised on the substantive claims (and because of that connection and context therefore fell under the Hope Downs Deed for the purposes of cl 20 of that deed) (see at T 248.20ff). It is submitted that there was no necessary inconsistency between the approach of Bathurst CJ in the Court of Appeal Decision and the “very contextual approach taken by the High Court in respect of quite different claims being the so-called validity claims in issue in that Court” (see T 292.25).
  3. Acceptance of that submission would seem to have the necessary consequence that there would be a different treatment accorded (at least at first instance in this Court) to “substantive claims” to that to be accorded to “validity claims” (in that, for the former, the “governed or controlled” test of the Court of Appeal would apply in order to determine whether those claims amounted to a dispute “under” the Hope Downs Deed; and, for the latter, the holistic contextual test, or the “interconnectivity” test, applied by the Full Court and approved by the High Court would apply).
  4. I am acutely conscious of the importance to the rule of law of adherence to the doctrine of precedent. I did not need reminding from Bianca (but have nevertheless duly taken to heart the admonitions that have here been made) as to my place, and that of the Court of Appeal, and the High Court at the apex of the appellate hierarchy above this Court (Bianca referring in that regard to what was said by Brennan J, as his Honour then was, in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107 at 129-130; [1988] HCA 44); nor need I be reminded as to the observation of Stephen J in Viro v R (1978) 141 CLR 88 at 129; [1978] HCA 9 as to the existence of an appeal being “inherent in and essential to the doctrine” of precedent.
  5. One possibility, to which I referred in the course of oral argument, would have been to remit the matter to the Court of Appeal for determination as to whether, in light of the High Court Decision, a different approach should be adopted to substantive claims. However, no such application had been made by any of the parties prior to the hearing of the present applications and, some days into the hearing of those applications, it is fair to describe the response by Counsel to that proposition as lukewarm at best. Moreover, the difficulty as to the competing approaches to construction at the intermediate appellate level does not arise if (as I have, after careful consideration, concluded) the High Court has impliedly overruled the approach adopted by the Court of Appeal. The High Court’s acceptance that the validity claims fell within the arbitration agreement necessarily involved a rejection of the “governed or controlled” test (as this was the basis upon which Gleeson J had held that the validity claims were not the subject of a s 8 stay).
  6. In that regard, I note that in Farah v Say-Dee, the High Court (at [134]), in the context of reiterating the position stated in Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 492; [1993] HCA 15, also emphasised the need for regard to be had to “long-established authority and seriously considered dicta of a majority of this Court”. While noting that in his Honour’s dissent in Pape v Commissioner of Taxation (2009) 238 CLR 1; [2009] HCA 23 at [473], Heydon J indicated that the reference in Farah v Say-Dee to the weight to be attributed to “seriously considered dicta” needs to be seen alongside the reference of the Court to “long-established authority”, I consider that the reasoning of a unanimous High Court bench (at least in relation to this point) as to the approach to construction to be taken in the context of validity claims that are intertwined with substantive claims, and the importance of context in that regard, must at the very least be seen to be “seriously considered dicta” applicable to construction of the clause in relation to substantive claims per se.
  7. As adverted to above, the High Court placed emphasis on the context in which the Hope Downs Deed was entered into and, in particular, the parties’ concern for confidentiality (about many issues, not just the mining tenements disputes). That concern is equally relevant in the context of the dispute here as to Bianca’s substantive claims as it is in relation to the so-called “validity” claims there being considered. The High Court also accepted the interconnectedness (or “interconnectivity”, as it was put in submissions in this Court) between the substantive and validity claims. It is difficult to compartmentalise the High Court’s reasoning as being applicable only to the operation or construction of cl 20 in its application to validity claims. This is not in my opinion a case where the subsequent High Court Decision simply “does not sit well” with the Court of Appeal’s construction (as meaning “governed or controlled”) of the words “under this Deed”. It is a case where the High Court’s reasoning, though not in terms expressly overruling that of the Court of Appeal, is in my opinion necessarily inconsistent with that decision.
  8. Insofar as it is said that it is most unlikely that the High Court would have overruled the Court of Appeal decision sub silentio, it seems to me equally likely (if not perhaps more likely, having regard to principles of comity) that the High Court considered that it was not there necessary to spell this out. In any event, speculation on this is not helpful. If, as I consider it is, the High Court Decision is necessarily inconsistent with the Court of Appeal’s construction of cl 20 of the Hope Downs Deed, then I am bound to apply the holistic contextual construction of cl 20 in the present case. The fact that the High Court did not expressly overrule the “governed or controlled” test in the context of substantive claims does not mean that that test can now stand consistently with the High Court’s approval of the holistic contextual approach of the Full Court.
  9. If the matter were to have been resolved by reference solely to the language or text of the Hope Downs Deed (and without reference to the High Court Decision) then there would be considerable force to the submissions here put for Bianca that “under this Deed” is a narrower expression than expressions such as “in connection with” (in that regard, see the authorities referred to in Bianca’s submissions), particularly where the approach urged by the defendants means that there is no relevant distinction between the phrase “under this Deed” and, say, the phrase “arising out of or in connection with this Deed” (see T 81); and, in any event, the Court of Appeal Decision (which is, with respect, uncontroversial in that context) would be binding on me. However, the High Court Decision does not accommodate such a textual approach. The High Court has made clear (not least by reference to its emphasis on context) that one cannot focus on the language of the clause alone (i.e., this is not a case that can be largely resolved solely by reference to textual considerations) and thus has not left untouched the reasoning of the Court of Appeal. I find it impossible to read the High Court Decision as other than rejecting the “governed and controlled” test in the context of the meaning of cl 20 of the Hope Downs Deed and I do not accept that this reasoning can be confined (as Bianca’s argument would have it do) to “validity claims” per se, or even to “validity claims” that are intertwined with substantive claims. Rather, the High Court has made clear that the context leading up to entry into the Hope Downs Deed, including the threat of unwelcome publicity, is central to the construction of the relevant clause.
  10. Invidious as the position in which I am here placed is (insofar as the submissions put by Bianca contemplate that there remains a divergence between the Court of Appeal and the High Court) and I here adopt the terminology used by McLelland J, as his Honour then was, in Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 218, when referring to one’s judicial duty “invidious task as that may be”, I consider it my duty to apply the law as I understand the High Court has determined it to be on the question of the proper approach to, and construction of, the very arbitration agreement the subject of the present applications.
  11. Accordingly, whatever view I might have taken had the issue come before me as to the construction of cl 20 without the benefit of the various appellate decisions to which I have referred above, and notwithstanding that (but for the High Court Decision) I would otherwise have been bound to follow the Court of Appeal Decision, it is not now open for me to do so.
  12. I thus accept the defendants’ submission that the arbitration agreement in cl 20 of the Hope Downs Deed cannot here be construed so as to be limited to disputes the outcome of which is “governed or controlled” by the Hope Downs Deed itself (cf Bianca’s submissions at [58]). The Full Court considered this construction to be overly narrow (Full Court Decision at [187]-[205], [247]) and, in dismissing Bianca’s ultimate appeal on the basis that the narrower “governed or controlled” test ought to have been adopted by the Full Court (see Ground 1(a) of Bianca’s notice of appeal [Ex 8]), I consider that the High Court accepted that the proper construction of the arbitration agreement was as stated by the Full Court.
  13. In those circumstances, it is not necessary to summarise the submissions made by the respective parties as to the proper textual construction of cl 20 (Bianca, in particular, set out in detail the textual considerations and additional contextual matters said to support the “governed or controlled” test applied by the Court of Appeal).
  14. I should add that, had I been left in doubt as to this issue, I would at this stage have remitted the matter of my own motion to the Court of Appeal for determination (conscious of the admonition in Jacob v Utah to which my attention was drawn), albeit with a statement of the views I have reached on this issue, as I consider that would be the most efficient way to proceed having regard to the statutory mandate in Civil Procedure Act, s 56. As it is, I am not left in a position of doubt. Relevantly, too, the parties urged me to proceed to determine the matter without themselves seeking a referral to the Court of Appeal. No doubt (given the litigious history of the matter) the opportunity for appellate review will arise soon enough albeit that I was cautioned by Bianca not to make any assumptions as to the inevitability of appeal. Be that as it may, in light of the conclusion which I have reached, I proceed on the basis that what I understand to be the High Court’s construction of cl 20 must be applied to the claims in the present case.

Requirements of s 8

  1. At the outset, two of the requirements of s 8(1) of the relevant legislation can be quickly disposed of: the requirement that the request for referral to arbitration be no later than the first statement on the substance of the dispute (since it is not suggested that this is not satisfied in the present case); and inapplicability of the proviso (since there was no suggestion on the hearing of the s 8 Stay Applications that the arbitration agreement is null and void, inoperative or incapable of being performed. As to the latter, the proviso to s 8(1) is engaged only if there is a separate and distinct attack on the arbitration agreement – see the Full Court Decision at [20], [343], [359]). I note that were there to have been such an attack, there would still be a discretion as to whether to embark on the inquiry as to whether the arbitration agreement is null and void, inoperative or incapable of being performed (see the Full Court Decision at [111], [147]-[148], [338], [367], [371]).
  2. I have already considered the threshold question as to whether there is an apparently valid arbitration agreement. That leaves the question as to whether the present proceeding raises any dispute under the Hope Downs Deed applying the High Court’s construction of cl 20 (i.e., whether the disputes as to oppressive conduct, breach of trust, breach of directors’ duties and the like, in the context of the defences that have been foreshadowed to some of those claims, at least insofar as they relate to the non-payment of dividends and to the relief sought in respect of the control of HPPL, are caught by cl 20 of the Hope Downs Deed).

Characterisation of the “matter”

  1. Gina submits that the approach to determining whether a matter is the subject of an arbitration agreement is as follows: first, to ascertain the legal meaning or scope of the arbitration agreement (see the Full Court Decision at [146]) (which it is said has in large part already been determined by the Full Court Decision and the High Court Decision); and second, then to characterise the “matter”, with an eye to the type of “matters” to which the arbitration agreement relates (referring to the Full Court Decision at [156]-[158]). I have already outlined above the meaning of cl 20 of the Hope Downs Deed (the first of those steps). I now turn to a consideration as to the “matter” the subject of the present proceeding.
  2. Bianca accepts that s 8(1) calls for an identification of the “matters” in issue in the court proceedings and points to the authorities on the identification of the “matter” that were collated in the Gleeson Decision (see at [93]-[97] of the Gleeson Decision) (in a passage cited generally with approval in the Full Court Decision at [156]-[157]).
  3. Bianca says that the authorities establish: first, that “[a] ‘matter’ for the purposes of s 8(1) means some right or liability in dispute which is susceptible of settlement as a discrete controversy” (see the Gleeson Decision at [94]); second, that “[a] ‘matter’ is something more than a mere issue that falls for decision” (at [95]); third, that what is a matter is to be understood “by reference to the arbitration agreement” (at [96] (quoting Comandate at [235] per Allsop J as his Honour then was); and see the Full Court Decision at [157]); fourth, that “[a] ‘matter’ for the purposes of s 8(1) may or may not comprise the whole dispute in any given court proceeding” (at [97]) (noting that the task is “made difficult” where, as here, there is no defence (nor any draft defence in any proposed arbitration) cf ACD Tridon at [109] per Austin J); fifth, that the Court should not draw inferences favourable to an applicant who has elected not to furnish a draft points of defence and who instead relies on non-specific assertions as to proposed defences (otherwise, there is a risk that the “matter” will, by reason of the defendant’s election not to adduce material it is within the defendant’s control to adduce, be mischaracterised); and, sixth, that while a matter raised in defence might affect the characterisation of the matter, that will (in part) be subject to the terms of the particular arbitration agreement, to which it is appropriate to turn.
  4. Bianca notes that in Recyclers of Australia Pty Ltd v Hettinga Equipment Inc (2000) 100 FCR 420; [2002] FCA 547 (Recyclers), Merkel J said (at [18]-[19]):

18. … The scope of the matter is to be ascertained from the pleadings and from the underlying subject matter upon which the pleadings, including the defence, are based …

19. The manner in which a claim or a defence is pleaded is of importance to, but is not determinative of, the characterisation of the “matter” …

and that in the Full Court Decision, it was said (at [157]) that:

157. … If the proper construction of the agreement requires a focus on individual disputes or requires a certain connection between the necessary resolution of an issue with the operation of an operative document, then close attention will be required to each individual issue or dispute to identify that connection, and so to identify the “matter”…

  1. In summary, Bianca submits that none of the matters the subject of the present proceeding is governed or controlled by the Hope Downs Deed; and that, although HPPL and Gina foreshadow reliance on several clauses of the Hope Downs Deed in defending the proceeding, that fact is insufficient to trigger the arbitration agreement (pointing to the reasoning of Bathurst CJ in the Court of Appeal Decision as recognition of this). It is said that the reliance placed by HPPL and Gina on the Hope Downs Deed is not tenable, as a matter of construction, even if regard is had only to the approaches adopted by the Full Court and High Court to the construction of the arbitration agreement; and that neither approach supports the conclusion that the “very different” matters raised in the statement of claim in this proceeding fall under the Hope Downs Deed. Further, although it is said that this is not necessary to decide, Bianca’s position is that a number of the matters should properly be characterised as non-arbitrable (including the s 247A relief sought by Bianca in the present case).
  2. Insofar as the arbitration agreement captures “any dispute” under the Hope Downs Deed, HPPL submits (and I accept) that there is every reason in this context not to confine “dispute” narrowly to issues or parts of a dispute or of a controversy (referring to the High Court Decision at [43]; the Full Court Decision at [201]); and that the arbitration agreement in cl 20 of the Hope Downs Deed should be construed broadly to include a dispute that contains a substantial issue concerning the exercise of rights or obligations in the Hope Downs Deed, or a dispute that concerned the existence, validity or operation of the Hope Downs Deed as a substantial issue or a dispute the resolution of which was governed or controlled by the Hope Downs Deed (referring to the Full Court Decision at [193], [204]).
  3. It is noted by HPPL that Bianca accepts (at [41] of her submissions) that the characterisation of the “matter” depends on the scope of the arbitration agreement. That is, it is submitted that if the arbitration agreement is to be construed broadly, then the “matter” ought also to be characterised broadly (see the Full Court Decision at [110], [152], [156]-[157]; Le Miere J (No 10) Decision at [121]). HPPL submits that, looked at holistically, the substance of a dispute in its inter-connected character may well fall within the arbitration agreement (see the Full Court Decision at [157]; Le Miere J (No 10) Decision at [121]). Given the breadth of the construction of the arbitration agreement adopted by the Full Court and High Court it is submitted that a similarly broad view must here be taken of the relevant “matter”.
  4. Furthermore, HPPL says that it is not necessary here finally to determine whether the matter falls within the scope of the arbitration agreement – rather, that it may be sufficient for this to be satisfied to the standard of a prima facie case (referring to the Full Court Decision at [145]-[146]; Le Miere (No 10) Decision at [114]). It is said that that is consistent with the Commercial Arbitration Act itself, as s 8(1) only requires the matter to be the “subject of the arbitration agreement” and s 16(1) accords the arbitral tribunal the ability to rule on its own jurisdiction. It is submitted that Bianca’s reliance on the Court of Appeal Decision to contend that the question as to whether the matter is the subject of an arbitration agreement should be determined finally (referring to Bianca’s submissions at [33], [35]) is misplaced because the Court of Appeal Decision did not involve an application under Commercial Arbitration Act, s 8.
  5. It is relevant, then, to turn to the pleadings as they presently stand. The four broad causes of action advanced by Bianca are: claims for breaches of trust ([568]-[621], [662]-[668] of the statement of claim), claims for breaches of directors’ duties ([622]-[633], [669]-[671] of the statement of claim), oppression claims ([634]-[660], [672]-[681] of the statement of claim) and breach of contract claims ([661], [682] of the statement of claim). HPPL says that these claims all “quintessentially” concern Gina’s exercise of control over HPPL and, in particular, the failure of HPPL to pay dividends. It is said that this was the basis upon which Bianca sought and obtained judicial advice to commence this proceeding (referring to the Judicial Advice Decision at [6]-[8]); and it is submitted that this is consistent with the interconnected way Bianca has pleaded her claims (HPPL referring by way of example to the statement of claim at [681]). Bianca, as I explain below, cavils with the characterisation of the claims made in the proceeding as a single interconnected matter; and argues that the submission as to the dividends being at the heart of the dispute ignores the different ways in which the dividend claims in the present proceeding are made compared to the other proceedings.

Statement of claim

  1. The statement of claim was filed on 21 March 2017. Bianca argues that there is no relevant commonality, similarity or connectedness between the claims made in the Federal Court proceeding or the proceedings in the Supreme Court of Western Australia to which reference is made in the Hope Downs Deed (or, for that matter, in the “unsworn draft” affidavit of John) and those made in the present proceeding.
  2. As to the allegations of breach by Gina of her duties as trustee at all times during FY10-FY15 (see the declarations sought at [662]; [663]; [664]), these are pleaded: first, by reference to the matters alleged at [572]-[581] on the basis of a failure to avoid conflicts of interest; second, by reference to the matters alleged at [582]-[591], [594]-[603] and [608]-[617], being matters relating to the passing of resolutions, the alleged failure to pursue HPPL and its directors concerning the underpayment of dividends and misuse of corporate funds; and third, by reference to the particular breaches alleged at [592]-[593], [604]-[607], [618], [619] and [620].
  3. As to the alleged breaches by reference to a failure to avoid conflicts of interest, it is alleged:
    • (at [572]) that at all times, prior to 28 May 2015, there was a real and possible conflict between the duties owed by Gina to HPPL (the “GHR HPPL Duties”) (see at [393]) and Gina’s general duties as trustee (the “GHR General Trustee Duties”) (see at [568]-[569]), or further and alternatively, specific duties owed by Gina as trustee (the “GHR Specific Trustee Duties”) (see at [570]-[571]) (the “GHR Specific Trustee Duties” including the duty to consider whether there was any claim against HPPL involving “HPPL’s failure to pay dividends or underpayment of dividends” where such conduct was oppressive (see at [570.3]), to consider whether to demand payment from HPPL of such amounts (see at [570.4]), so to demand (see at [570.5]) and to commence oppression and derivative proceedings concerning the same (see at [570.6])); particulars of the alleged conflict refer back to the matters alleged at [582]; [594]; and [608]; and, at [573], that Gina took no, or no sufficient, steps to avoid those conflicts;
    • (at [574]) that, in the alternative, there was a real and sensible possibility of conflict between Gina’s duty to HPPL and her duty to the beneficiaries of the HMH Trust, by reason of the matters alleged at [572]; and (at [575]), that Gina took no, or no sufficient, steps to avoid that conflict;
    • (at [576]) that, by reason of the matters alleged at [572] and [573] or alternatively [574] and [575], Gina breached her fiduciary duty to the beneficiaries to avoid conflicts;
    • (at [577]) that at all relevant times, prior to 28 May 2015, there was a real and sensible conflict between “GHR’s Personal Interest” (defined at [392]) and the “GHR General Trustee Duties” (as defined), or further and alternatively the “GHR Specific Trustee Duties” (again, as defined); that conflict particularised by reference to the matters at [587], [594], [608]; and at [578] that Gina took no, or no sufficient, steps to avoid that conflict;
    • (at [579]-[580]) that there was a real or sensible possibility of conflict between “GHR’s Personal Interests” and her duty to the beneficiaries of the HMH Trust, and that she took no, or no sufficient, steps to avoid that conflict; and
    • (at [581]) that by reason of the matters alleged at [577] and [578] or alternatively [579] and [580], Gina breached her fiduciary duty to the beneficiaries to avoid conflicts.
  4. At [582]-[591], there are allegations concerning Gina’s voting (and abstaining from voting) at general meetings of HPPL held on 12 October 2011, 31 October 2011 and 27 April 2012 on resolutions allegedly in accordance with her duty to HPPL and “GHR’s Personal Interests” but allegedly contrary to the best interests of the beneficiaries (see the meetings and resolutions pleaded at [225]-[230]; [231]-[235]; and [294]-[304], referred to above). In respect of each of these resolutions, it is alleged that Gina (who used her personal shares to vote in favour of the motions, thereby carrying them, and abstained from voting as trustee) was in a position of conflict, which she failed to take steps to resolve, including because as trustee she was required to vote against the resolutions (and, if they passed, consider whether to commence oppression proceedings or derivative proceedings for breach of directors duties) (see at [582]-[591]). It is alleged that Gina breached her duties as trustee by, inter alia, failing to vote against the resolutions and failing to pursue such proceedings against HPPL and its directors (see at [592]-[593]).
  5. At [594] to [603], it is alleged that Gina breached her obligations as trustee by failing to pursue HPPL and its directors concerning the alleged underpayment of dividends on the basis that she was in a position of potential or actual conflict because her duties as trustee required her to consider instituting, and institute, oppression proceedings and derivative proceedings for breach of directors duties in response to the alleged underpayment of dividends, but that this was in conflict with: her duties to HPPL (see at [594] and [596]) (including, her duty to be involved in decisions about dividends) which she took no steps, or no sufficient steps, to resolve (see at [595] and [597]); and “GHR’s Personal Interests” (see at [599] and [601]) which, again, it is alleged that she took no steps, or no sufficient steps, to resolve (see at [600] and [602]).
  6. At [608] to [617], it is alleged that Gina breached her duties to the beneficiaries by being in a position of actual or potential conflict in relation to the alleged misuse of corporate funds (see at [605]) by reference to the matters alleged at [217]-[219], [349]-[354], [355]-[360], [361]-[369] and [370]-[380]; that conflict being between her duties as trustee (which it is alleged required her to consider whether to institute, and institute, oppression proceedings and derivative proceedings for breach of directors duties in relation to the alleged misuse of corporate funds), on the one hand, and on the other hand, her duty to HPPL (see at [608] and [610]), which conflict it is said she took no steps, or no sufficient steps, to alleviate (see at [609] and [611]) and “GHR’s Personal Interests”, including to maintain control over HPPL ([613] and [615]), and again which it is said she took no steps, or no sufficient steps, to alleviate ([614] and [616]).
  7. The particular breaches of trust that are alleged relate to: failing to vote as trustee against the resolutions put at the general meetings referred to above (see at [592]-[593]); failing to take action against HPPL in response to the alleged underpayment of dividends (see at [604]) and misuse of corporate funds (see at [605]-[607]); failing to maintain trust accounts (see at [618]) by reason of the matters alleged at [110]-[115] (alleged failure to audit the accounts for the purpose of concealing from the beneficiaries the true value of the HMH Trust’s interest in HPPL); effecting amendments to the HMH Trust accounting requirements (by reason of the matters alleged at [110], [115]-[120]) (it being alleged that the amendments were made to conceal from the beneficiaries the true value of the HMH Trust’s interest in HPPL (see at [619]); and breach of duties as trustee in respect of the April 2012 vesting amendments alleged at [305]-[308] (see at [620])).
  8. As to the alleged breach by Gina of her duties as a director of HPPL, this is pleaded by reference to the matters alleged at [628]-[631] of the statement of claim. Those paragraphs plead the following conduct as amounting to breaches of directors’ duties owed to HPPL:
    • (at [628]) not causing HPPL to declare any discretionary dividends in FY10 to FY14 (see at [486]-[495]); and causing HPPL to make provision for discretionary dividends in FY14 to FY16 but not to pay those dividends (see at [501]-[509]), for the alleged purpose of ensuring that the beneficiaries of the HMH Trust did not receive the benefit of any dividends from HPPL (see at [496], [497]; [510]) (defined as the “Minimise Dividend Purpose”);
    • (at [629]) the under-calculation of Mandatory CSS Dividends payable (by reason of the matters pleaded in [511]-[514]) for the “Minimise Dividends Purpose”);
    • (at [630]) causing HPPL to enter into contracts and to pay out its corporate funds: otherwise than in good faith in the best interests of HPPL as a whole; improperly to gain an advantage for herself; improperly to cause a detriment to HPPL; other than for a proper purpose; and without the degree of care and diligence that a reasonable person would exercise if he or she was a director or officer of HPPL in HPPL’s circumstances and held the offices and had the responsibilities that Gina had (based on the conduct pleaded at [217]-[219], [349]-[354], [355]-[360], [361]-[369]; [370]-[380]); and
    • (at [631]) calling general meetings on 12 October 2011, 31 October 2011 and 27 April 2012 and putting the resolutions passed at those meetings (see at [255]-[230]), being the resolutions passed at the 12 October 2011 general meeting concerning a change to HPPL’s Articles of Association to require each director not to engage in conduct which would bring the company into disrepute or otherwise adversely affect its commercial interests, not to misuse confidential information(see at [231]-[235]) being the resolutions passed at the 31 October 2011 general meeting concerning a resolution to remove Bianca as a director of HPPL; and (see at [294]-[304]) being the resolutions passed at the 27 April 2011 general meeting concerning a resolution to alter HPPL’s Articles of Association to amend rights associated with CS Shares and D Class preference shares;
  9. Mr Watroba is alleged to have been involved in Gina’s alleged breaches in not declaring and paying sufficient discretionary dividends in FY10 to FY14 and providing for but not paying discretionary dividends in FY14 to FY16 (see at [628]) and in under-calculating CS Dividends (see at [629]); the allegation being that Mr Watroba considered and acted on the basis that Gina had complete control of HPPL including the decisions as to whether or not to declare and pay a dividend (see at [632]).
  10. Mr Newby is alleged to have been involved in Gina’s alleged breaches (see at [630]) in making payments the payments alleged at [217]-[219], ([349]-[354]; [355]-[360], [361]-[369] and [370]-[380]; on the basis that it is alleged that Mr Newby knew that those expenses were incurred and not taken steps to prevent such payments (see at [632]).
  11. As to the claim of oppression (see [634]-[649] of the statement of claim), reliance is placed on the entirety of the conduct of, inter alia, Gina and HPPL that is alleged in the pleading (see at [681]). Pausing here, this is an allegation on which the defendants place much emphasis in support of, inter alia, their primary position that this proceeding concerns a single “matter” or dispute because the underlying factual controversies are relied upon for each of the causes of action advanced by Bianca. I return to this point in due course.
  12. At [634]-[640], it is alleged that HPPL did not pay discretionary dividends in FY10 to FY14. At [641] it is alleged that this was contrary to the interests of members of HPPL as a whole by reference to [81] (which alleges that distribution of HPPL dividends was the only means of beneficiaries receiving economic benefit from the HMH Trust’s principal asset, in turn referring to the allegations at [78] and [79], concerning restraints on sale of HPPL shares) and [420] (which alleges that during FY08 to FY16 HPPL had sufficient profits, by reference to its large profits and the personal expenditure, to declare and pay very large discretionary dividends because it made a series of other payments (as pleaded in numerous paragraphs of the pleading, namely, key management payments ([395.12], [399.12], [401.12], [404.17], [406.20], [409.19], [411.19], [414.18], [416.16]); a B Class dividend in FY 08 ([421]-[423]); a loan to John ([518]-[521]); Gina’s legal fees in the Removal Proceeding ([349]-[354]); Ginia’s legal fees and other expenses ([355]-[360]); PwC expenses ([217]-[219]); Hope’s Settlement Advances ([361]-[369]); payment of HPPL trustee costs ([370]-[380]); HMF Foundation Advances ([527]-[533]); various property expenses and costs ([522]-[526]; [534]-[537]; [538]-[541]; [542]-[545]; [546]-[549]; [550]-[553]); payment for other investments; provision for additional dividends in FY14 to FY16 ([458]; [466]; [478]; and the capacity to pay double “Mandatory CSS Dividends” shares ([335]-[348])).
  13. Pausing here, HPPL maintains that the above allegation demonstrates: the relationship between the payment of dividends and the HMH Trust; the connection between the corporate expenditure and the alleged non-payment of dividends; and the reliance on dividends provided for but not paid (which HPPL claims was in accordance with the Hope Downs Deed).
  14. At [642], it is alleged that this conduct was oppressive (repeating the particulars to [641]) and that Gina stood to benefit from “as little as possible dividends being paid” including because: that would deplete funds available for HPPL to pay her salary, bonus and other benefits; that would provide funds to the HMH Trust and the beneficiaries to take legal action against her; and that would diminish the effectiveness of threats Gina had made in relation to the “September 2011 Breaches” (referring to the allegations at [211]-[213]; and see [133]). It is alleged that Gina did not require dividends because she was able to use her control of HPPL to pay herself a significant salary, bonuses and other compensation as well as having HPPL use its corporate funds for her benefit. Again, HPPL says this allegation demonstrates the interconnected nature between the allegations of breach of trust and the alleged underpayment of dividends.
  15. At [643]-[647], it is alleged that HPPL did not declare or pay all the dividends it provided for in FY14 to FY16 (which HPPL claims was in accordance with the Hope Downs Deed). At [648] it is alleged that the said conduct was contrary to the interests of the members of HPPL as a whole and at [649] that the conduct was oppressive.
  16. Apart from the declaratory relief sought as to the alleged breaches of duty as trustee, Bianca seeks a variety of other relief, including: pursuant to s 1317H of the Corporations Act, or equitable compensation or an account of profits, an order requiring Gina to pay HPPL the amounts alleged to have been paid in misuse of corporate funds (see at [671]); by way of relief for the alleged oppressive conduct, an order (see at [672]) for the payment by HPPL to Bianca of a dividend of not less than $2.2b, orders under s 233 regulating the affairs of HPPL so that Mr Watroba and Mr Newby cannot be involved in the management of HPPL or its related bodies corporate (see at [673]; [674]) and other management orders in relation to HPPL (see at [675]). Declaratory and other relief is sought as to the 2012 amendments of HPPL’s Articles of Association (see at [676]-[677]). An order is also sought for Gina to pay to HPPL the amounts identified at [671] (on the basis of relief against oppression, those being the payments the making of which is alleged to have amounted to oppression) (see at [678]); and an order is sought pursuant to s 241 of the Corporations Act for the appointment of an independent person to investigate the financial affairs of HPPL (see at [679]).
  17. As part of the relief claimed in the statement of claim (at [680]), an order is sought that Gina swear or affirm an affidavit setting out the matters listed at [680.6]-[680.21]. That relief is claimed by reason of the matters pleaded at [680.1]-[680.5], including: (at [680.1]) Gina causing HPPL to misuse its corporate funds (as alleged at [630]); (at [680.2]) the oppressive conduct of HPPL’s affairs in relation to that misuse of funds (as alleged at [658]-[660]); and (at [680.4]-[680.5]) that Bianca has sought information that would enable her to determine whether “such costs” (seemingly referring to the costs referred to at [680.3]) and other information as to the expenses of HPPL and has not received substantive responses to all of those requests.
  18. At [666] and [667], equitable compensation or an account of profits is sought from Gina or HPPL in respect of discretionary and CSS dividends that it is alleged HPPL would have declared if Gina had properly discharged her duties as trustee. That relief is also sought on the basis of the allegations made in [621], to the effect that HPPL is liable to Bianca as an accessory to Gina’s alleged breaches of trust, including by reason of all matters referred to in Chapter III of the pleading (defined as GHR’s Control of HPPL) (see at [38]-[66]).
  19. At [668] an account is sought of the affairs of the trust, including giving Bianca the liberty to cross-examine Gina; that relief being sought on the basis of the alleged failure of Gina to pursue HPPL for the alleged underpayment of dividends (as alleged at [594]-[604]).
  20. As to the claim in contract, at [682] damages are sought from HPPL for breach of contract for the alleged underpayment of CSS Dividends (as alleged at [661], which incorporates the matters alleged at [287], [298], [436], [448], [455], [461], [467] and [480]).

Defences under the Hope Downs Deed

  1. No defences have yet been filed but, in their submissions, Gina and HPPL have identified the matters that they say will be raised by way of defence.
  2. In response to the proceedings, Gina says that she relies on the Hope Downs Deed in five respects. Gina submits that the raising of these defences demonstrates that the proceedings concerns disputes “under the Deed”.
  3. First, in respect of the allegations that HPPL underpaid discretionary dividends, Gina will raise cl 5 of the Hope Downs Deed. It is said that, by this clause, the beneficiaries of the HMH Trust secured a right to receive the economic benefit of dividend payments that exceeded, and potentially significantly exceeded, their entitlements that otherwise existed; and that this provision was of significant economic benefit to Bianca and her siblings.
  4. In this regard, Gina refers to the dispute that arose (now the subject of the French Arbitration) following the issue of a notice of breach on 1 December 2011 by HPPL to Bianca, John and Hope pursuant to cl 5(c)(i) of the Hope Downs Deed , alleging a breach of the Hope Downs Deed (that it is said would in accordance with clause 5(c)(iii) have disentitled Bianca, John and Hope from dividends under cl 5 until that breach had ceased and was remedied). It is noted that: the breach was disputed by Bianca, John and Hope; a notice of a dispute under cl 20 of the Hope Downs Deed was given by HPPL and Mr Fitzgerald was appointed as arbitrator; and the parties, including Bianca, John and Hope filed pleadings, in the form of points of claim, defence, reply and cross-claim. Gina submits that (other than as set out in her submissions) the arbitration has remained dormant “predominantly by reason that Bianca made claims in the Federal Court that the Hope Downs Deed was void and the High Court Decision was pending”.
  5. Gina further says (and places emphasis on this) that there is a dispute as to whether dividends are payable under cl 5 to A Class shareholders (Gina and Bianca) or the B Class shareholder (Gina only); and that HPPL has made provision for the payment of dividends payable under the clause, but has not paid them. In this regard, Gina refers to correspondence from Bianca to HPPL and the response from HPPL (objection to the admission of which evidence was made by Bianca).
  6. It is submitted by Gina that any determination as to whether or not there has been an underpayment of dividends, as alleged in this proceeding, must be contingent upon a determination of the proper dividends payable under cl 5 of the agreement, including whether there has been a breach of the Hope Downs Deed. It is said that that dispute is obviously “under” the Hope Downs Deed and that it is already before an arbitrator.
  7. Further, it is noted that particular complaint is made in this proceeding in respect of the dividends that were “provided for” but not paid in FY14 to FY16 (see at [643]-[647]). It is alleged that HPPL made provision for dividends of $99m in FY14 (see statement of claim at [458.1]), $261m in FY15 (see statement of claim at [465.1]) and $400m in FY16 (see statement of claim at [478.1]). It is noted that Bianca alleges that those provisions: constituted a breach of directors’ duty by Gina (see at [628], [501]-[510]) and Mr Watroba (see at [632], [628], [501]-[510]) which was in turn oppressive (see at [673], [675], both referring to [628]); and thus demonstrates that HPPL’s conduct in not paying greater dividends was oppressive (because the provisions demonstrated that HPPL had the capacity prudently to pay the amount of dividends it had provided for and that “HPPL considered that it could prudently declare and pay those dividends and that it would be appropriate and in the best interest of HPPL as a whole to declare and pay those dividends”) (see [420] and [648] of the statement of claim, particulars 6 and 7); and are part of the justification for an order under Corporations Act, s 233 that HPPL pay Bianca a dividend of not less than $2.2b (see at [672]). Gina submits in this regard that the Hope Downs Deed “may provide a complete answer to these claims”, so that they are disputes which (she says) must be “under” the Hope Downs Deed, even on the narrowest test.
  8. Second, it is said by Gina that she, and Messrs Watroba and Newby, will raise cl 8 in their defence in this proceeding in various ways. These are as follows.
      <li “=””>(i) that Bianca seeks relief in this proceeding which is inconsistent with her acknowledgement in cl 8 of the Hope Downs Deed that Gina may continue to be involved in the management of HPPL (namely that Bianca seeks to prohibit Gina “from personally being a director (including a shadow director), officer or employee of [HPPL] or any of its related bodies corporate” (see prayer 10.2)). It is said that whether Bianca is entitled to seek, or entitled to, that relief will depend upon the proper construction of cl 8 of the Hope Downs Deed;
  9. <li “=””>(ii) that Bianca seeks relief which would inhibit Gina’s control of HPPL in the form of voting at general meetings of HPPL by seeking relief such as: removing Messrs Watroba and Newby as directors (see prayers 8 and 9), without Gina’s consent as the majority shareholder; that HPPL’s Articles of Association may not be altered other than by “the written, unanimous consent of shareholders” (see prayer 10.1), thereby taking away the control Gina enjoys as the majority shareholder in respect of HPPL’s Articles of Association; prohibiting Gina from using “her direct or indirect voting power to appoint more than one director” of HPPL and providing her with the power to appoint a director, thereby taking away the control that Gina enjoys as the majority shareholder in respect of the board (and giving some of that control to herself) (see prayers 10.3 and 10.4); and restricting HPPL to paying two types of dividends (see prayer 10.10); and<li “=””>(iii) that the fact that Bianca, and each of the other beneficiaries as parties to the Hope Downs Deed, acknowledged that Gina would “maintain full ongoing control and management of HPPL” including as an executive or non-executive chairman, may be a defence to the allegations that Gina breached trust by having a conflict or potential conflict between her duties to HPPL and duties to the beneficiaries (see at [572]-[576], [582]-[586], [594]-[598], [608]-[612]) (to some of which HPPL is said to have been an accessory, see at [621]). Gina’s defence, it is said, will be that cl 8 demonstrates that, from the time that the Hope Downs Deed was entered into (which precedes those alleged breaches), the beneficiaries had provided their consent for Gina continuing to act as a director of HPPL whilst being the trustee (noting that in the period prior to entry into the Hope Downs Deed, John had complained about the alleged conflict in Gina’s conduct as director and controller of HPPL and in her performance as trustee of the HMH Trust).

  10. Third, it is said that reliance will be placed on cl 7(e) of the Hope Downs Deed and, in particular, that Gina will contend that the prohibition in cl 7(e) has been breached by Bianca seeking relief concerning the composition of the HPPL’s board; and that Bianca ought to be restrained from continuing to breach her undertaking by seeking that relief. Similarly, Gina says that she will raise defences under cll 7(a) and (c) of the Hope Downs Deed. It is said that the present proceeding “could have an adverse impact on” HPPL’s rights under the HDJVA, because it “could” give the Rio Tinto parties the right to purchase HPPL’s share in Hope Downs because: the relief sought by Bianca: restricts the majority shareholder’s rights (see prayers 10.1 and 10.3); prohibits Gina from being involved in the management of HPPL (see prayer 10.2); and mandates the appointment of a non-family member to the board of HPPL as chairman (thereby giving them the deciding vote in the event Bianca’s and Gina’s nominee disagree) (see prayers 10.8 and 10.9), which it is said may result in HPPL ceasing to be controlled by “Hancock Family Group Members”.
  11. For Gina, it is said that she will contend that these undertakings have been breached by Bianca in seeking relief concerning the composition of the HPPL’s board, and that Bianca ought to be restrained from continuing to breach her undertaking by seeking that relief. It is further said that Messrs Watroba and Newby, each of whom is alleged to have been involved in Gina’s alleged breach of director’s duties (see statement of claim at [670]), will also raise those defences (noting Mr Watroba is a party to the Hope Downs Deed; and that even though Mr Newby is not a party to the deed he would fall within the definition of “party” in Commercial Arbitration Act, s 8 as a person “claiming through or under a party to the arbitration agreement”, by force of s 2(1)) (see the High Court Decision at [66]-[76]).
  12. HPPL similarly says that it will invoke cll 5, 7(a), 7(c), 7(e) and 8 of the Hope Downs Deed in answer to the claims made against it, on the basis that these provisions: preclude Bianca from bringing the claims; necessarily inform the question whether Gina has breached any duty or is acting oppressively; and determine the scope of the relief, if any, to be ordered.
  13. In particular, as to cl 5 (which requires HPPL to pay minimum dividends to its shareholders), it is said that this will be relied upon in respect of Bianca’s claims concerning the failure to pay dividends and that disputes concerning cl 5 are unarguably disputes under the Hope Downs Deed (noting that Bianca commenced her own claim in what is now referred to as the French Arbitration under cl 20 of the Hope Downs Deed seeking the payment of the minimum dividends under cl 5; and submitting that there is no reason in principle to treat a claim based on cl 5 any differently from a defence based on cl 5).
  14. As to cll 7(a) and 7(c), it is said by HPPL that these clauses are both directed towards ensuring that HPPL (and its subsidiary, HDIO) remain wholly owned and controlled by Hancock Family Group Members (because under the HDJVA with Rio Tinto, Rio Tinto has a right to acquire HDIO’s interest in the Hope Downs joint venture in the event that HDIO “ceases to be an entity wholly owned and controlled by Hancock Family Group Members and/or entities wholly owned and controlled by them” – see cl 13.3 of the HDJVA; referring to the 2015 Decision at [164]-[167]). It is noted that amendments were made to HPPL’s Constitution at about the same time which had the effect of restricting the transferability of its shares to “Hancock Family Group Members” (referring to the 2015 Decision at [55]). HPPL says that cll 7(a) and (c) can be relied upon in defence of Bianca’s claims regarding Gina’s control of HPPL.
  15. As to cl 7(e) (which precludes Bianca from challenging the rights of Gina to her right, title or interest in HPPL), the cognate provision to cl 7(b) (which precludes Bianca from challenging the right of any Hancock Group Member to any of the “Hancock Group Interests”), HPPL notes that cll 7(b) and 7(e) were construed by the Full Court as covenants not to sue, which could be set up as a complete defence as a plea in bar (referring to the Full Court Decision at [233]-[243]; and to McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at 186-188; [1940] HCA 4 per Dixon J, as his Honour then was). HPPL says that it will be argued that cl 7(e) precludes Bianca’s claims about Gina’s control of HPPL. Further, it is submitted that, to the extent that the “governed or controlled” test remains relevant, there is clearly a sustainable argument that cl 7(e) would “govern or control” Bianca’s claims (referring to the Gleeson Decision at [632]-[633]).
  16. As to cl 8 (which contains an acknowledgment that Gina, during her lifetime, would maintain full ongoing control and management of HPPL), HPPL says that the same reasoning applies as that which was applied by the Full Court to cl 4 (that being the cognate provision which contains an acknowledgment that the “Hancock Group Interests” have been and remain beneficially owned by the Hancock Group Member that purports to own them) should be applied – the Full Court construing cl 4 on the basis that there was a sustainable argument that it gave rise to an estoppel by deed (see the Full Court Decision at [216]-[217]). It is said that cl 8 will also be relied upon in defence to Bianca’s claims.
  17. Bianca submits (at [160]) that only “low” weight is to be given to the issues to be raised by way of defence, citing the Court of Appeal Decision at [130]. Gina submits that this is inconsistent with the approach taken by the High Court (referring to the plurality decision at [43]). It is submitted that this makes plain that the High Court considered the nature of the defences to be raised in considering the nature of the dispute.

Gina’s submissions as to “matter”

  1. Gina submits that, in accordance with the High Court’s approach, it is appropriate to ask whether a reasonable person in the position of the parties would have considered the present dispute would be subject to confidential arbitration or heard and determined publicly in open court (see High Court Decision at [48]). It is submitted that the liberal construction required of cl 20 would extend at least to:

… a dispute that contained a substantial issue that concerned the exercise of rights or obligations in the agreement, or a dispute that concerned the existence, validity or operation of the agreement as a substantial issue, or a dispute the resolution of which was governed or controlled by the agreement. [in the words of the Full Court Decision at [193]].

  1. Gina’s primary position is that, as in the Federal Court proceeding, this proceeding concerns a single “matter” or dispute, rather than a number of discrete matters or dispute, because the underlying factual controversies are relied upon for each of the causes of action advanced by Bianca “and, as such, the causes of action are intermingled”. Gina’s argument in this regard is as follows.
  2. First, that almost every allegation made in the pleading is relied upon in support of the oppression remedies sought (see [681] of the statement of claim), by which Bianca relies on all the matters pleaded in the statement of claim in support of the relief she seeks under Corporations Act, s 233 (consistent, it is said, and referring to Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 at [6] per Spigelman CJ, with the authorities that oppression must be assessed in light of all of the circumstances .
  3. Second, that (even leaving aside [681]) the oppression suit encompasses the entire breach of contract and breach of directors’ duties claims because: first, the alleged underpayment of “Mandatory CSS Dividends” (which is said to constitute the breach of contract) is alleged to constitute a breach of directors’ duty by Gina (see [629]); and second, all of the alleged breaches of directors’ duty; and Messrs Watroba and Newby’s alleged involvement in the same, are relied upon as part of the alleged oppressive conduct (see [675] which relevantly adopts [628] to [633], being the alleged breaches of trust and involvement; see too [673] and [674]).
  4. Third, that a core focus of the pleading is that of dividends (noting that reliance is placed on this issue for each of the three main causes of action, albeit that the breach of contract claim is only concerned with the “Mandatory CSS Dividends”).
  5. Reference is made, in particular, to: the allegation that the alleged underpayment of dividends gave rise to breaches of directors’ duty by Gina (see at [628]), in which Mr Watroba is alleged to have been involved (see at [632]); the allegation that the alleged underpayment of dividends is oppressive (see at [672], [634]-[649]), as are the alleged breaches of directors’ duty associated with the alleged underpayment (see [675], which relevantly adopts [628]), and that an order is sought that HPPL pay Bianca a dividend of not less than $2.2b (see at [672]); decisions concerning whether or not to pay discretionary dividends are alleged to have resulted in Gina breaching trust due to a conflict between her duties to the beneficiaries, on the one hand, and her duties to HPPL and alleged “Personal Interest” inter alia in maintaining control over HPPL, including as to whether it would pay dividends (see e.g. [662] which relevantly relies upon [572], which in turn relies upon [582], [594] and [601]; [577] and the definition of Gina’s “Personal Interest” in [392]); the allegation that, by failing to take action against HPPL due to the alleged failure to pay discretionary dividends, Gina breached trust (see at [594] to [603]) and equitable compensation or an account of profits is sought from Gina or HPPL in respect of discretionary dividends that would have been paid had Gina properly discharged her duties as trustee (see at [666]). Similarly, it is noted that in respect of the alleged underpayment of “Mandatory CSS Dividends” (which is the basis of the breach of contract claim), equitable compensation is sought on the basis that Gina breached trust duties concerning the “Mandatory CSS Dividends”, by being in a position of conflict (see at [667], [572]-[581]) and failing to pursue HPPL in respect of the alleged underpayment, including by instituting oppression proceedings (see at [667], [594]-[604]).
  6. Fourth, that another core focus of the allegations in the statement of claim is that Gina has, and has misused, a position of control over HPPL including concerning dividends and the use of corporate funds (see at [61] in particular). It is noted that Gina’s control over HPPL is addressed in Chapter III ([38]-[66]), and is not relevantly disputed, that Gina’s former control over the HMH Trust (the primary asset of which is 23.45% shareholding in HPPL) is addressed in Chapter IV ([67]-[94]); and Gina’s alleged objectives in using her control are outlined in Chapter V ([95]-[383]). Gina is alleged to have used this control to pass various resolutions at HPPL’s general meetings (see [225]-[230]; [231]-[235] and [294]-[304]) by which she is said to have breached her duties as trustee (see at [582]-[591] and [592]-[593]), breached her directors’ duties (see at [631]) and engaged in oppressive conduct (see [675], which adopts [631]; see too [650]-[657]). Gina is also alleged to have used this control in committing, and involving officers’ of HPPL in, alleged breaches of trust in September 2011, concerning the vesting of the HMH Trust (defined in [209] by reference to [125]-[157], [172]-[178] and [185]-[208]). That allegation is relied upon as justifying the relief that is sought under s 233 (in [675]) (by reference to [214], which refers to the “September 2011 Breaches”).
  7. Fifth, that another focus of the proceeding is upon HPPL’s corporate spending. It is said that this, too, is intimately connected with the core focuses of control and dividends and with the various causes of actions pleaded. By way of example, reference is made to the allegation that HPPL not paying dividends was oppressive including because: it had sufficient profits as demonstrated by the corporate expenditure on various matters pleaded (see [641] and [420]); Gina stood to benefit from “as little as possible dividends being paid”, including because that would deplete the funds available for corporate expenditure on her salary, bonus and other matters (see [642], particular 3); Gina did not require dividends to be paid to her as shareholder because she caused HPPL to pay her “significant salaries, bonuses and other compensation” and caused HPPL to use its corporate funds for her benefit (see [642], particulars 4 and 5). It is noted that the pleading alleges that Gina breached trust by being in a position of conflict regarding that corporate expenditure (see e.g. [572], with reference to [608]) and by failing to pursue HPPL concerning the corporate expenditure, including by instituting oppression proceedings (see at [605]-[617]).
  8. Alternatively, Gina argues that the proceeding involves the following “matters” which must be referred to arbitration: the relief claimed by Bianca in each of the following parts of the statement of claim – Part A of Chapter IX (“Remedies: Breaches of Trust”) (save for [665]); Part B of Chapter IX (“Remedies: Breach of Directors’ and Officers’ Duties”); and Part C of Chapter IX (“Remedies: Oppression”), and the paragraphs of the statement of claim relied upon directly or indirectly in support of that relief; as well as Bianca’s unconscionability motion (i.e., motion (iii), which was filed on 11 June 2019).
  9. Gina says that if these matters must be referred to arbitration then it will be appropriate to stay the balance of the proceeding pending the arbitral determination (reference being made in the Full Court Decision at [334] in this regard).

HPPL’s submissions as to “matter”

  1. HPPL notes that the “matter”: is the relevant dispute or controversy between the parties; can arise by claim or defence; and is more than a mere issue that falls for decision (citing the Gleeson Decision J at [93]-[97]; the Full Court Decision at [155]-[156]; Le Miere (No 10) Decision at [118]-[119]). It is submitted that, even in the absence of pleaded defences, this Court should proceed on the same basis as Gleeson J and the Full Court (namely, that all of Bianca’s contentions will be in dispute) (referring to the Gleeson Decision at [169]; the Full Court Decision at [4]).
  2. HPPL argues that the present dispute is a matter the subject of the arbitration agreement, in that it is a dispute that contains a substantial issue concerning the exercise of rights or obligations under the Hope Downs Deed, or a dispute that concerns the existence, validity or operation of the Hope Downs Deed as a substantial issue, or a dispute the resolution of which may be governed or controlled by the Hope Downs Deed.
  3. HPPL’s alternative position is that if, contrary to its primary position, it were to be found that there are a multitude of separate “matters”, and that some but not all are the subject of the arbitration agreement, then there should be a stay of any such matters that are not the subject of the arbitration agreement. This is put on the basis that they are not the principal claims and that a stay would avoid the risk of inconsistent findings and the incurrence of unnecessary expense (reference being made to the Full Court Decision at [332]-[336]).
  4. In particular, it is submitted that even if Bianca’s s 247A application (which I consider separately in due course) is not considered to be part of the wider “matter” the subject of the arbitration agreement, the Court should still refuse to determine it. It is noted that, in an analogous context, courts have stayed applications for preliminary discovery on the basis that it would be “counterintuitive to determine it in circumstances where the Court has found that the matters raised by it are subject to a commercial arbitration agreement” (referring to Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253 (Amcor Packaging) at [48] per Marshall J).

Bianca’s submissions as to “matter”

  1. Bianca submits that this is not a case where the arbitration agreement requires a broader focus on the overall dispute; rather, that it is a case where the agreement requires a careful identification of the connection between each particular dispute and the Hope Downs Deed. She argues that what the Court of Appeal meant in the Court of Appeal Decision by a dispute that was “controlled or governed” by the Hope Downs Deed can be identified by the manner in which the Court of Appeal reasoned at [146]:

146 The other provisions of the Settlement Deed raised in answer to the claims of the respondents, whilst relevant to the outcome of the proceedings, do not of themselves govern or control the outcome of those claims. As HPPL correctly submitted, if established, they amount to breaches of various undertakings under the Settlement Deed. Such breaches may be relevant to a tribunal determining whether to grant the relief sought, but would not necessarily be determinative of the outcome. …

  1. It is noted that the Court of Appeal then proceeded to identify how the various clauses of the Hope Downs Deed relied on in defence of the application for removal of Gina as trustee would not preclude a court from granting the relief sought. Bianca argues that a dispute is not governed or controlled by the Hope Downs Deed merely because the Hope Downs Deed is relevant to the determination of the dispute (and that it is different if the Hope Downs Deed were determinative of the outcome).
  2. It is submitted that, in determining the scope of the arbitration agreement, it is unhelpful to suggest that HPPL has an “interest” in certain kinds of disputes being resolved in private arbitration (cf HPPL’s submissions at [111]); and that the Hope Downs Deed is not to be construed by reference to what is now in HPPL’s interests.
  3. Finally, in this context, it is submitted that it is not to the point that the Court of Appeal Decision was determined prior to the coming into force of the Commercial Arbitration Act. It is noted that by the time the Court of Appeal came to consider the Hope Downs Deed for the second time (i.e., the Leave Decision), the Commercial Arbitration Act was in force (referring to the 2013 Decision at [38], [82], where Bergin CJ in Eq held that s 8(1) governed the then stay application). It is noted that, despite the Commercial Arbitration Act coming into force, both Bergin CJ in Eq (in the 2013 Decision) and the Court of Appeal (in the Leave Decision) proceeded to apply the Court of Appeal Decision.
  4. It is submitted that one reason for the willingness of this Court and the Court of Appeal to continue to apply the Court of Appeal Decision after the introduction of s 8(1) was that, as the Full Court itself recognised, the “proper construction of the arbitration agreement is relevant to the focus one applies to the meaning of the word “matter” in any given circumstance” (the Full Court Decision at [157]) (cf Gina’s submission at [38]). Bianca submits that it is the construction of cl 20, as contained in the Court of Appeal Decision, that informs the way in which “matter” is to be approached, not the other way around.
  5. Bianca submits that a consideration of the claims advanced in the Federal Court proceeding makes clear that those claims concern matters that closely relate to the subject matter of the Hope Downs Deed but she contends that those claims find no reflection in the statement of claim in the present proceeding. Bianca emphasises that the central origin of the Hope Downs Deed was a desire by HPPL to quell a controversy sought to be ventilated by John in the Supreme Court of Western Australia in the period 2004 to 2006 (in relation to the title of HPPL to valuable mining assets) referring to the finding by Full Court at [203] (in a passage expressly approved by the High Court in the High Court Decision at [27]).
  6. Bianca submits that it is significant that in the present case, unlike in the Federal Court, no reliance is placed by Gina and HPPL on the releases in the Hope Downs Deed. It is said that the absence of such an allegation takes the present case outside the scope of the reasoning adopted by the Full Court and High Court. Indeed, it is submitted that the fact that no reliance is foreshadowed to be placed by the defendants on cl 6 of the Hope Downs Deed should give me pause when considering the stay application; and that the situation facing me is unique in that no other judge in any jurisdiction has been asked to stay a proceeding in the absence of any reliance by the defendants on the cl 6 releases. (Suffice it to say that I have given careful consideration to all of the submissions made in this matter.) The position of the defendants in this regard is that: it is not surprising that no reliance is to be placed on the cl 6 releases since the conduct of which Bianca complains is conduct that post-dates the Hope Downs Deed; but that the matters that will be relied upon by way of defence do raise other provisions of the Hope Downs Deed (as noted above).
  7. Emphasis is placed by Bianca on the fact that the substantive allegations in the proceedings in the Federal Court and subject of the High Court Decision mirrored in large part the allegations made in the unsigned affidavit of John (referring to the Gleeson Decision at [290] and the High Court Decision at [9]). Bianca says that no similar argument is advanced by Gina and HPPL in this Court; that it is not suggested by Gina or HPPL that there is “significant commonality” (or, indeed, any material commonality) between the allegations made in the unsworn affidavit and the allegations made in the statement of claim in this proceeding; nor is it suggested that the statement of claim in this Court reiterates claims made previously by John (a matter that Bianca says is highlighted by the absence of reliance on cl 6).
  8. Bianca emphasises the nature of the Federal Court claims and their close connection to the Hope Downs Deed and says that there are distinct allegations brought in the statement of claim in this proceeding: that, here, there is no attack on the title to the mining tenements held by HPPL but, instead, the claim proceeds on the basis that the title to those assets continues to reside in HPPL; and that nor does the statement of claim repeat any of the other claims brought by John in the Supreme Court of Western Australia. It is said that the present proceeding amounts to a “free-standing and separate piece of litigation without connection to the Hope Downs Deed or its subject-matter, which must be assessed on its own merits in order to determine whether it gives rise to a dispute under the Hope Downs Deed”.
  9. As to the claims advanced in the statement of claim, Bianca submits that the fact that the statement of claim is lengthy does not mean that the whole of the proceeding must be characterised as one inseverable matter (cf HPPL’s submissions at [86]; Gina’s submissions at [45]).
  10. Bianca identifies the following seven matters raised by the statement of claim:
    • Bianca’s s 247A application (seeking relief at prayer 2 of the statement of claim), which she says is wholly severable from every other aspect of the proceeding and is a matter under the Corporations Act;
    • claims of breach of trustee duties by Gina (reflected in the relief sought in part of prayer 3 and in prayers 4 and 5) (summarised at [662]-[667] of the statement of claim), which she says arise under the general law and the documents constituting the HMH Trust;
    • claims as to the improper use of HPPL funds by Gina for non-corporate purposes (see statement of claim at [630] and [671]) (this being reflected in the relief sought in part of prayer 3 and in prayer 6), which it is said arise under the Corporations Act, HPPL’s Articles of Association and the general law and is a matter distinct from the matters relating to non-payment of dividends (cf Gina’s submissions at [79]) even though a potential consequence of Gina’s use of corporate funds for non-corporate purposes was that HPPL failed to declare dividends;
    • a claim for oppression relating to payment of dividends (see prayer 7 and [634]-[649]; [672] of the statement of claim), which it is said is a matter that directly arises under the Corporations Act;
    • a claim under HPPL’s Articles of Association in relation to payment of dividends (Bianca claims that HPPL has breached a contractual obligation imposed by Art 3A of HPPL’s Articles of Association by failing to declare and pay dividends) (prayer 15; [661] and [682] of the statement of claim), which it is said arises under HPPL’s Articles of Association;
    • the future management of HPPL (see prayers 7, 8, 10, 11 and 12; and, in particular, [214]-[224], [628]-[634] and [673]-[675] of the statement of claim), which it is said arises directly under the Corporations Act and, in respect of which, Bianca emphasises the fact that nothing in the relief sought would “inevitably … result in HPPL ceasing to be wholly owned and controlled by “Hancock Family Group Members” (see cl 7(c) of the Hope Downs Deed) submitting that the relief sought could all be given with control continuing to reside in the “Hancock Family Group Members” as defined); and
    • a claim for oppression and derivative action (and “information gathering”) (referring to prayers 13 and 14 and, in particular, [679]-[680] of the statement of claim), which it is said arises directly under the Corporations Act.
  11. Bianca maintains that none of those matters is governed or controlled by the Hope Downs Deed. Bianca emphasises in relation to those matters that: each of the claims is pursued by her in her capacity as trustee; a number of the claims involve assertions that there were breaches of directors’ duties (claims relating to misuse of HPPL funds, failure to pay dividends and past mismanagement of HPPL), noting the public aspect of director’s duties (see International Swimwear Logistics Ltd v Australian Swimwear Company Pty Ltd [2011] NSWSC 488 at [106]); the public aspect of directors’ duties is reflected in the inability to ratify a breach of statutory duties (referring to Anglas Law Services v Pty Ltd (in liq) v Carabelas (2005) 226 CLR 507; [2005] HCA 23 at [32] per Gleeson CJ and Heydon J) and the potential for breach to give rise to disqualification; and the whole of the proceedings is not comprised by the “oppressive conduct” claim by reason of failure to pay dividends (cf Gina’s submissions at [37]-[46] and [54]), there being other distinct claims and causes of action advanced by her.
  12. Bianca says, by way of example, that she could be successful in obtaining large parts of the relief sought by her (referring to prayers 2, 4, 5, 6, 13 and 15) even if it were ultimately found that there was no oppressive conduct or no improper failure to pay dividends; and that she could succeed on her oppression claims even if there had been no improper failure to pay dividends. It is submitted that Gina’s characterisation of the “matter” also cannot stand with the proposition that the “matters” in the proceedings are, in part, determined by reference to the particular arbitration agreement, in that the arbitration agreement directs attention to the instrument or law which governs or controls the relevant claims and there are different instruments and laws governing or controlling different parts of Bianca’s claims.
  13. Bianca submits that it is an error to characterise the whole of the dispute regarding dividends as a single “matter” (cf HPPL’s submissions at [117]). She says that this characterisation proceeds from an erroneously broad construction of the arbitration agreement and an erroneously broad view of the subject-matter of these proceedings.
  14. As to the classification of the matters in the proceedings advanced by HPPL in its submissions (at [89]-[93]), Bianca says that [38]-[66] of the statement of claim (Chapter III) simply plead the factual basis for Gina’s control of HPPL and [67]-[94] of the statement of claim (Chapter IV) simply plead the factual basis for Gina’s control of the HMH Trust (not being allegations about Gina’s control of HPPL per se; cf HPPL’s submissions at [90]). It is further said that [95]-[383] of the statement of claim (Chapter V) plead the factual basis for the dual contentions that Gina was at all material times motivated by retaining control of HPPL and of restricting the ability of the beneficiaries of the HMH Trust to understand and scrutinise HPPL’s affairs (such purposes inferred from: amendments to the trust instrument in 1995 ([97]-[102], Part A of the statement of claim); the failure to provide the trust instrument to the beneficiaries ([103], Part B of the statement of claim); Gina’s attempt to remove Mr Hancock as a beneficiary ([104]-[109], Part C of the statement of claim); Gina’s refusal properly to audit the trust’s accounts ([110]-[124], Part D of the statement of claim); conduct in September 2011 calculated to induce John and Bianca not to challenge Gina’s appointment as trustee ([125]-[213], Part E of the statement of claim); Gina’s use of HPPL resources to facilitate her conduct in September 2011 ([214]-[224], Part F of the statement of claim); amendments to HPPL’s Articles of Association on 12 October 2011 ([225]-[230], Part G of the statement of claim); the removal of Bianca as a director of HPPL on 31 October 2011 ([231]-[235], Part H of the statement of claim); ceasing to pay dividends pursuant to HPPL’s Articles of Association art 3A, making related amendments to HPPL’s Articles of Association and taking related steps to deter or disable the beneficiaries of the HMH Trust from obtaining Article 3A dividends ([236]-[348], Part I of the statement of claim); causing HPPL to pay funds for the benefit of Gina in the proceedings to remove Gina as trustee ([349]-[360], Part J of the statement of claim); entering into an arrangement with Hope calculated to maintain Gina’s control over the HMH Trust and HPPL ([361]-[369], Part K of the statement of claim); and causing HPPL to be involved in the Removal Proceeding ([370]-[383], Part L of the statement of claim).
  15. It is submitted that it is “overly simplistic” to characterise Chapter V of the statement of claim as an allegation that Gina “misused her position of control over HPPL in various ways, including in relation to the alleged non-declaration of dividends” (cf HPPL’s submissions at [90]); and that “most” of Chapter V has nothing to do with dividends. While it is accepted that parts of Part I of Chapter V make allegations in respect of Gina causing HPPL to cease paying dividends, it is said that the allegations relate to a failure to pay dividends pursuant to HPPL’s Articles of Association art 3A.
  16. As to [384]-[393] of the statement of claim (Chapter VI), it is noted that these paragraphs plead interests that Gina had which were collateral to the HMH Trust and duties which Gina owed to HPPL as a director.
  17. As to Chapter VII of the statement of claim, it is noted that: [394]-[420] (Part A) plead HPPL’s profitability and capacity to pay large discretionary dividends in the period FY08 to FY16; [421]-[485] (Part B) plead the actual dividends paid by HPPL during that period; [486]-[517] (Part B) plead that Gina was, at material times, motivated by the purpose of ensuring that the beneficiaries of the HMH Trust did not receive the benefit of dividends from HPPL and that that purpose influenced the exercise of Gina’s offices as director of HPPL and as trustee of the HMH Trust; and [518]-[567] (Part C) plead that Gina caused HPPL to expend HPPL funds on non-corporate purposes and that Gina failed to exercise the functions of her office as trustee to prevent that occurring.
  18. It is similarly submitted that it is an error to characterise the allegations at [518]-[567] of the statement of claim as that Gina “has misused corporate funds which could have been used to pay dividends” (cf HPPL’s submissions at [91]). Rather, it is said that the allegation of expenditure on non-corporate purposes is a stand-alone allegation of expenditure for an improper purpose (in breach of directors’ duties).
  19. As to Chapter VII of the statement of claim, Bianca notes that [568]-[621] of the statement of claim plead breaches of Gina’s duties as trustee to which HPPL was accessory. It is said that the asserted conflict is, at its root, a conflict between Gina’s interest in using HPPL for her own private purposes and Gina’s duty to the beneficiaries of the HMH Trust to ensure that HPPL was managed for their interests as well; and that that conflict was manifested in (but not constituted by) various failures by Gina to take steps to ensure that HPPL was managed in the interests of the beneficiaries (referring to [582]-[617] of the statement of claim). It is submitted that it is erroneous to characterise the matter as a contention that Gina should have fettered her control over HPPL (cf HPPL’s submissions at [93(a)]); rather, the issue is Gina’s private interest in obtaining for herself the fruits of HPPL and the conflict between that interest and her duties as trustee. It is said that such control as Gina had over HPPL is the mechanism by which she was able to pursue that interest, but is not the interest itself. It is submitted that even if Gina had never used any mechanisms she had to pursue her private interest, the conflict would have remained (and that the conflict could have been avoided by Gina ceasing to be trustee of the HMH Trust). It is submitted that cl 8 of the Hope Downs Deed is not an answer to this contention.
  20. Bianca disputes the proposition by HPPL that the matters in Chapters III to VI of the statement of claim are matters “under” the Hope Downs Deed because of the defences which HPPL intends to advance under cll 7(a), 7(c), 7(e) and 8 of the Hope Downs Deed (referring to HPPL’s submissions at [90]); and similarly disputes the proposition by HPPL that the matters in Chapter VII of the statement of claim are matters under the Deed because of those foreshadowed defences (referring to HPPL’s submissions at [91]).
  21. As to the pleading of oppression at [634]-[660] of the statement of claim, it is said that the oppression arises from: failure to pay dividends (see [634]-[649] of the statement of claim); amendments to HPPL’s Articles of Association calculated unfairly to benefit Gina (see [650]-[657] of the statement of claim); and expenditure of HPPL funds for non-corporate purposes (see [658]-[660] of the statement of claim). Bianca emphasises that the oppression is not limited to failure to pay dividends. It is noted that HPPL contends that the failure to pay dividends, but not the other contentions, is addressed by cll 5, 7(a), 7(c), 7(e) and 8 of the Hope Downs Deed (referring to HPPL’s submissions at [93(b)]). Bianca points to [661] of the statement of claim there being an allegation of breach of contract constituted by a breach of Article 3A of HPPL’s Articles of Association; and says that HPPL does not address this contention in its categorisation at [92] of its submissions.
  22. As to Chapter IX of the statement of claim, Bianca notes that at [662]-[665] there is pleaded the basis for various declarations in respect of Gina’s breaches of trust. Bianca disputes that proposition by HPPL that these allegations “engage the nature and extent of [Gina’s] entitlement under the Hope Downs Deed to have ‘full ongoing control’ of HPPL, as well as HPPL’s dividend payment history” (referring to HPPL’s submissions at [93(a)]). At [666]-[668] of the statement of claim, there is pleaded the basis for equitable relief in respect of HPPL’s failure to pay dividends. Bianca notes that the underlying breach of equitable duty is identified as the improper state of mind referred to in the second particular to [666] of the statement of claim. It is said that the matter arising out of [666]-[668] of the statement of claim is distinct from that appearing in [672] of the statement of claim and [682] of the statement of claim (see [672] seeking relief on the basis of oppression and [682] seeking relief on the basis of breach of art 3A); and that merely because the remedy sought in respect of discrete matters “relate[s] to dividends” does not make the various matters “one single matter” (cf HPPL’s submissions at [93(b)]) It is also noted that, at [673]-[675] of the statement of claim there is pleaded the factual basis for relief regulating the future management of HPPL.
  23. Bianca thus submits that the proceedings do not comprise a single, interlocking matter under the Hope Downs Deed (cf HPPL’s submissions at [94]). Rather, it is said that the proceedings comprise a set of discrete claims, each with a different juridical basis (the Corporations Act, general law directors’ duties, equity, and HPPL’s Articles of Association), none of which, it is said, relies on, “let alone is governed or controlled by”, the Hope Downs Deed.
  24. Bianca invokes the approach of Bathurst CJ in the Court of Appeal Decision to the effect that a matter does not become “under” the Hope Downs Deed merely because of a threatened defence which will refer to the Hope Downs Deed. Further, Bianca contends that the anticipated defences are not otherwise tenable for the following reasons.
  25. As already noted, Bianca submits that the absence of reliance on cl 6 as a defence is a key distinction between this case and the Federal Court proceeding, where reliance on cl 6 was made and where the Full Court relied upon that clause in holding that the substantive claims in that proceeding fell under the Hope Downs Deed (referring to the Full Court Decision at [218]-[225]).
  26. Bianca submits that: the arbitration agreement requires a disciplined analysis of the matters in the proceeding for the purpose of ascertaining whether the matter is a dispute under the Hope Downs Deed “or is no more than a dispute loosely related to the Deed or its parties”; and the defendants have mischaracterised the connection between this proceeding and the arbitration agreement. Further, Bianca submits that the weight given to anticipated defences (particularly when unpleaded) must be low (in light of the Court of Appeal’s holding in the Court of Appeal Decision at [130]). As to the specific clauses to which HPPL and Gina refer in their submissions, Bianca makes various responsive submissions.
  27. First, in relation to cl5, Bianca contends that cl 5 does not govern or control any of the relief sought in the statement of claim. It is submitted that, even on the broadest reading of cl 5, all of the relief in the statement of claim can be given independently of the clause. In particular, it is said that on the assumption that cl 5(a) and (c) are valid, and on the further assumption that cl 5(c) was triggered, all that would mean was that the duty imposed by 5(a) did not apply (referring to the Court of Appeal Decision at [146(a)]) and that HPPL (and the directors of HPPL) would remain subject to any other lawful obligations in relation to dividend payments. Further, it is said that HPPL (and the directors of HPPL) would retain all lawful discretions in relation to dividend payments. It is submitted that, a fortiori, the court would retain its “wide” discretion under Corporations Act, s 233 to order the payment of past dividends.
  28. Further, it is said that cl 5 cannot be characterised as an exhaustive agreement by the shareholders of HPPL “on a particular approach to the payment of dividends” (cf HPPL’s submissions at [115(a)], [116] and Gina’s submissions at [63]-[64] and [73]). Bianca says that cl 5(a) purports to give a (limited) contractual right to dividends (as, it is said, is made clear by the fact that the dividend entitlement conferred by cl 5(a) is confined to dividends paid out of an identifiable part only of HPPL’s profits; being dividends payable from “Hope Downs Net Cashflow After Tax”); and it is said that cl 5(c) qualifies that (limited) right. It is submitted that clear words would be needed (and are not contained in the clause) to oust the directors’ discretions under HPPL’s Articles of Association and that the opening words of cl 5(a) (“to the extent that it is lawfully permitted”) suggest that the clause is not even exhaustive of the field covered by its terms. It is submitted that whether or not the right in cl 5(a) exists at any point in time does not oust the directors’ residual discretions in respect of dividends under HPPL’s Articles of Association (a constituent document which Bianca points out does not include an arbitration agreement). Bianca submits that the arguments of HPPL and Gina to the contrary proceed from the erroneous premise that the Hope Downs Deed is a shareholders’ agreement.
  29. Finally, insofar as Gina suggests that cl 5 might be “a relevant circumstance” in deciding whether there has been oppression (Gina’s submissions at [47(a)]), Bianca says that, on that approach, cl 5 has “nothing to say” to the non-oppression matters raised. Further, as already noted, it is said that the fact that the Hope Downs Deed is relevant is not enough to give rise to a dispute “under” the deed (referring to the Court of Appeal Decision at [146]).
  30. Second, in relation to cl 7(a), Bianca says that the clause cannot be read as constraining the trustee’s power to commence and maintain to completion proceedings on behalf of the HMH Trust (cf Gina’s submissions at [47(c)]), particularly where the proceeding is, in significant part, a suit against the former trustee (and her accessories) for breach of trust and mismanagement of trust assets. It is said that this follows from general principle, noting that a clause purporting to exempt a trustee “from the consequences of a breach of trust” is void as contrary to public policy (referring to McLean at 641 per Young J, as his Honour then was and that a clause purporting to prevent there being a breach of trust in the first place will be read “as strictly as possible” (McLean at 641). It is noted that in the Court of Appeal Decision, one of the matters relied on by Bathurst CJ in holding that the defences raised under cl 7 did not render the matter “under” the Hope Downs Deed was that those defences assumed a construction of the deed that would render it “void as ousting the beneficiaries’ right to due administration of the trust” (see at [146(c)]).
  31. Further, it is said that “[n]o contractual provision which attempts to disable a party from resorting to the Courts of law was ever recognized as valid” (there citing Dobbs v National Bank of Australasia Limited [1935] HCA 49; (1935) 53 CLR 643 at 652; [1935] HCA 49 per Rich, Dixon, Evatt and McTiernan JJ; and referring to CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd (No 2) [2017] WASCA 123 at [95] per Buss P, Murphy and Beech JJA where it was said that “[t]he policy of the law against the ouster of the court’s jurisdiction means that a provision which purports to do so will not be enforced”). Bianca says this militates in favour of a narrow construction of the clause.
  32. Bianca submits that it is “presumptively unlikely” that the parties to the Hope Downs Deed intended it to have a meaning which would have the effect that it was entered into by Gina in breach of trust. It is said that if cl 7(a) purported to prevent the trustee from commencing or maintaining proceedings which are in the interests of the beneficiaries, then it would violate the rule articulated by Fletcher Moulton LJ in Osborne v Amalgamated Society of Railway Servants [1909] 1 Ch 163 at 187 that a trustee may not “[bind themselves] contractually for valuable consideration that he will exercise a trust in a specified manner to be decided by considerations other than [the trustee’s] own conscientious judgment at the time as to what is best in the interests of [the beneficiaries]”. It is said that what would independently follow from general principle is confirmed by the express terms of cl 9.3 which states that:

Notwithstanding either of the provisions in clause 9.1 and 9.2, the Trustee and the beneficiaries agree that nothing in this Deed limits any of the powers of the Trustee of the HMH Trust.

  1. Bianca submits that in that context, cl 7(a) cannot be read as preventing the present proceedings or any part of them.
  2. It is said that the obligation, if any, imposed by cl 7(a) is imposed only on “the parties”. Bianca submits that that phrase does not refer to the trustee so far as the Hope Downs Deed is not part of the trust property; and that cl 7(a) does not bar a court from giving the relief sought in the statement of claim and that if it purported to do that it would be void (hence it does not govern or control the proceedings). Bianca submits that what was said of cl 7(a) by the Court of Appeal in the Leave Decision at [13], [15] is applicable, namely that:

13. The applicants contend that the plaintiffs’ claims concerning the identity of the trustee of the Trust constitute a breach of the undertaking contained in clause 7(a) not to do anything which could have an adverse impact on the Hancock Group’s rights in certain respects. However, even if, by making those claims, the plaintiffs breached that undertaking, those claims would not necessarily fail. That breach of undertaking might be relevant to the Court’s consideration of the plaintiffs’ claims concerning the trustee but it would not automatically foreclose them. This was the approach, with which we respectfully agree, taken by Bathurst CJ (with the concurrence of Young JA) in Rinehart v Welker [2012] NSWCA 95 to breaches of undertakings contained in the Deed (see the chapeau to [146] and (b) and (c)). Whilst his Honour was dealing with undertakings in other sub-clauses of clause 7 than (a), his reasoning is in our view equally applicable to clause 7(a). …

[…]

15. In these circumstances, we do not consider it to be reasonably arguable that a finding that the plaintiffs had breached their undertaking in clause 7(a) would necessarily determine the plaintiffs’ claims concerning the 2006 Amendments in favour of the defendants.

  1. Insofar as Gina contends only that cl 7(a) affects the proceedings so far as they seek relief “concerning the composition of HPPL’s board” (referring to Gina’s submissions at [47(c)]) and submitting, referring to HPPL’s submissions at [110], that HPPL does not take the matter further, it is said that cl 7(a) can therefore only be relevant to that “matter” comprising the claim for relief in respect of future management of HPPL. It is said that cl 7(a) does not in its terms or effect require that Gina retain control of HPPL; and that restrictions on Gina’s control of HPPL do not necessarily infringe cl 7(a) (cf HPPL’s submissions at [119]-[121]).
  2. Third, in relation to cl 7(c), Bianca argues that this clause cannot and should not be given a meaning which prevents the trustee from commencing and maintaining proceedings of the present kind (cf Gina’s submissions at [47(d)]) and that the clause only applies to “parties” within the meaning of the Hope Downs Deed. It is said that the clause only requires that HPPL remain “controlled” by “Hancock Family Group Members”; it does not require that no other person may be involved in the management of HPPL; and that what was said of cl 7(c) in the Court of Appeal Decision at [144] applies equally here, namely that:

144. Clause 7(c) also does not bar the proceedings. The claims made by the respondents do not seek to replace GHR [Gina] with a non-Hancock Family Group Member, nor can it be said that it is inevitable this will occur, particularly when it is not sought by the respondents.

  1. It is submitted that none of the relief sought by Bianca necessarily requires that HPPL cease to be wholly owned and controlled by “Hancock Family Group Members”.
  2. Insofar as Gina contends only that cl 7(c) affects the proceedings so far as they seek relief “concerning the composition of HPPL’s board” (see Gina’s submissions at [47(d)]); it is again said that the clause can only be relevant to that “matter” comprising the claim for relief in respect of future management of HPPL; and that “relevance” is not enough to give rise to a dispute under the Hope Downs Deed.
  3. Fourth, in relation to cl 7(e), Bianca says that cl 7(e) cannot be read as preventing her, as trustee, from commencing and maintaining these proceedings (cf Gina’s submissions at [47(e)]); nor can it be read as ousting the court’s power to issue the relief sought. It is said that this is consistent with the conclusion of Bathurst CJ in the Court of Appeal Decision at [146(c)] that:

… it does not seem to me that the clause would absolutely bar a claim to remove the trustee even if such a claim was in breach of the provision. If the clause absolutely precluded the right to remove [Gina]as trustee it would be void as ousting the beneficiaries’ right to due administration of the trust: see [139]-[140] above …

  1. Bianca argues that even if the pursuit of this claim was a breach of cl 7(e), it would not bar the claim and therefore would not govern the matter. Moreover, insofar as Gina “only” asserts that this clause is relevant to the matter concerning the composition of HPPL’s board, Bianca says that this is not enough.
  2. Fifth, in relation to cl 8, Bianca says that cl 8 can only be relevant to the proceedings so far as relief affecting Gina’s control of HPPL is sought. It is said that it cannot be an answer to the relief sought in prayers 1 to 9, 11, 13 and 14. Bianca maintains that it is wholly irrelevant to all of the matters in the proceedings “save possibly for the oppression claim so far as it seeks relief in relation to the future management of HPPL”. Bianca further says that HPPL advances no plausible reason, beyond assertion, for the contention that cl 8 “limit[s] or inform[s] normative rights of the parties to the Hope Downs Deed such as those conferred by s 232 and s 247A” (see HPPL’s submissions at [108]). It is said that HPPL’s argument (at [106]]-[109] of HPPL’s submissions) appears erroneously to assume that a contractual provision acknowledging Gina’s control of HPPL could afford a defence to a breach of trust by Gina and/or through Gina’s improper exercise of that control. It is submitted that cl 8 does not contain the clear language that would be required to effect such an outcome (cf Leerac Pty Ltd v Fay [2008] NSWSC 1082 at [13] per Brereton J); and that, on no view, could cl 8 govern or control a court’s conclusion as to whether there has been oppression or whether a shareholder should be entitled to documents.
  3. Bianca maintains that cl 8 cannot be read as preventing her, as trustee, from suing in the best interests of the beneficiaries (cf Gina’s submissions at [47(b)]); and that, in any event, the clause is not in terms a prohibition on commencing proceedings. It is submitted that the clause appears to be directed to the “illegal” purpose of preventing a court from making orders under the Corporations Act effecting a change in the control of HPPL. Bianca again says that this clause is only binding on the “parties” and argues that critical parts of cl 8 are no more than an “acknowledgement” of certain matters. It is said that the language is exhortatory not obligatory (cf Gina’s submissions at [47(b)] which characterise it as a “warranty”). It is submitted that so far as there is obligatory language in the clause it applies only to the “continuing right” referred to at the end.
  4. Bianca submits that what was said of cl 8 in the Court of Appeal Decision at [146(d)] applies by analogy, namely that:

Whether that would prevent her from retaining full ongoing control and management may well be open to doubt. She would certainly be left with sufficient voting power to control the board of directors and pass any special resolution. However, even if it did diminish her ownership or control to some extent, that would not in my opinion prevent a court from removing her as trustee if it found that she was unfit to carry out that function.

  1. It is submitted that, similarly, a court would not hesitate to cause Gina to be removed from positions of control of HPPL if she were unfit to carry out that function and/or her continued control was oppressive.
  2. Finally, insofar as HPPL does not put the contention that cl 8 gives rise to an estoppel by deed any higher than that there is an “argument” (see HPPL’s submissions at [108]), Bianca says that even if the acknowledgments in cl 8 did give rise to an estoppel preventing a party from denying those acknowledgements, they would not and could not prevent the court from issuing relief removing Gina as a director; nor is it established that Bianca is privy to any estoppel in circumstances where any acknowledgement on the part of the HMH Trust was given by Gina.
  3. As to whether each of the seven “matters” identified by Bianca as being raised by the statement of claim falls within the arbitration agreement (and leaving aside for the moment Bianca’s s 247A application), Bianca submits that each “matter” is not a dispute under the Hope Downs Deed for the following reasons.
  4. As to the claim in relation to breaches of trustee duties by Gina (the second “matter” identified by Bianca), the underlying default is said to be “an improper view that distribution of Trust benefits was a gratuity from Gina”. Bianca says that this claim is under the general law and that cl 5 of the Hope Downs Deed does not govern or control that claim. It is said that nothing in cl 5(a) entitled Gina to form the view that distribution of Trust benefits was a gratuity from her. Further, it is said that cl 5 is not, and cannot be read as, an exhaustive specification of HPPL’s dividend arrangements (which is said implicitly to be assumed by Gina in her submissions at [63]-[64]).
  5. As to the contention that Gina caused HPPL to misuse HPPL funds for non-corporate purposes (the third “matter” identified by Bianca), it is noted that this claim is under the general law, the Corporations Act and HPPL’s Articles of Association. It is said that nothing in the Hope Downs Deed “entitles” Gina to misuse HPPL funds for her own purposes and that this “matter” is not “under” the Hope Downs Deed.
  6. As to oppression, and the claim for an order for payment of past dividends under the Corporations Act, (the fourth “matter” identified by Bianca) it is said that nothing in the Hope Downs Deed (and, in particular, nothing in cl 5) entitled HPPL not to exercise its discretion to declare dividends for the benefit of the HMH Trust (cf Gina’s submissions at [73]). It is submitted that even if HPPL is correct in arguing that cl 5 of the Hope Downs Deed raises a “substantial” issue involving a “sustainable” argument that could be advanced in this proceeding, that would not entail that this “matter” is under the Hope Downs Deed; and a fortiori, it would not entail that the Hope Downs Deed governs or controls the matter.
  7. As to the contention that there is a contractual right to dividends under art 3A of HPPL’s Articles of Association (the fifth “matter” identified by Bianca), Bianca says that cl 5 does not exclude the operation of art 3A and that this “matter” is not under the Hope Downs Deed (and it is submitted that Gina does not appear to suggest otherwise, referring to Gina’s submissions at [84]-[85]).
  8. As to the claim in relation to the future management of HPPL (namely that, by reason of past oppressive conduct, detailed orders should be made regarding the future management of HPPL) (the sixth matter identified by Bianca), it is said that this claim is under the Corporations Act. It is said that none of cll 5, 7(a), 7(c), 7(e) and 8, does or could require the Court to refrain from exercising its discretion under the Corporations Act.
  9. Finally, as to the relief sought in the nature of information gathering as to past misconduct by the controllers of HPPL (the seventh “matter” identified by Bianca), this is sought under ss 233 and 241 of the Corporations Act. It is said that nothing in the Hope Downs Deed does or could govern or control the Court’s exercise of the powers given by those provisions.
  10. Insofar as it is contended that the proceedings should be referred to arbitration because Bianca contends that the proceedings are not covered by the arbitration agreement (see HPPL’s submissions at [101], [103]-[105]), Bianca says that that contention is inconsistent with the approach in the Court of Appeal Decision and that this Court is entitled to, and should, determine whether or not the matters in the proceedings fall within the arbitration agreement.
  11. In the alternative to her primary contention (that the reasoning in the Court of Appeal Decision is binding as to the proper construction of cl 20 of the Hope Downs Deed and that the test is that of “governed or controlled”), Bianca submits that, even on the approach of the High Court or the Full Court (“without reference to” the Court of Appeal Decision), the referral/stay applications must be refused.
  12. As to the High Court Decision, Bianca emphasises the important role played by “context” in the High Court’s approach and the High Court’s acceptance that a fundamental objective of the Hope Downs Deed was the quelling of controversy as to the title of the Hope Downs mining tenements (see at [185]ff); and the observation of the High Court that the substantive allegations made in the Federal Court proceeding “reiterated” the very claims made in John’s unsworn affidavit (see the High Court Decision at [9]). It is submitted that that approach in no way supports a conclusion that a different proceeding (in which no challenge is made to the Hope Downs mining tenements, no challenge is made to the shareholdings in HPPL and no claims are said to be made that are the subject of releases in the Hope Downs Deed) also falls under the Hope Downs Deed. Bianca maintains that there are stark and important differences between the claims before the High Court and the claims in the present proceeding; and she submits that the context in which the deed was entered into demonstrates that the Hope Downs Deed was not intended to capture each and every dispute between the shareholders of HPPL that might arise at some point in the future.
  13. Further, it is submitted that the High Court’s analysis was also substantially informed by the fact that the “validity claims” in that case were intertwined with the substantive claims (see the High Court Decision at [12] and [43]). Bianca says that no such issue arises here because no validity claims are made in the statement of claim and, insofar as the anti-arbitration application is concerned, the matters relied upon do not intertwine with any substantive claims made in the statement of claim in this Court.
  14. As to the Full Court Decision, Bianca says that it is not “entirely clear” what construction of cl 20 of the Hope Downs Deed was ultimately adopted by their Honours but points to the central finding at [204] that, in the circumstances of that case, “the deeds, in [sic] their operation is valid, and by reason of their invalidity if not, lie at the heart of the dispute”. Emphasis is placed on the fact that that observation was immediately preceded by their Honour’s recognition that one of the fundamental purposes of the Hope Downs Deed was the quelling of disputes about the title to the Hope Downs mining tenements.
  15. Bianca maintains that Gina and HPPL have not established that the operation of the Hope Downs Deed, whether valid or invalid, lies at the heart of the dispute in this Court (noting that they “do not even assert” that the Hope Downs Deed precludes the claims being made by reason of a plea in bar or release in contrast to the position they took in the Federal Court and in the Western Australian Supreme Court).
  16. Insofar as the Hope Downs Deed might be a “relevant” matter to consider in respect of some of the claims brought, it is submitted by Bianca that nothing in the Full Court’s approach supports the conclusion that that circumstance is enough. It is noted that the Full Court (at [193] of the Full Court Decision) incorporated a concept of materiality into the assessment of whether a dispute was “under” an arbitration agreement; and spoke of a dispute that contained a “substantial” issue that concerned the exercise of rights or obligations under an agreement, or a dispute that concerned the existence, validity or operation of an agreement as a “substantial” issue or a dispute the resolution of which was governed or controlled by the agreement. Bianca says that Gina and HPPL have failed to identify, with particularity, how it could reasonably be said that the matters the subject of the statement of claim meet that standard.
  17. For Bianca it is submitted that the foreshadowed reliance on the various clauses of the Hope Downs Deed referred to above does not in effect amount to more than that those clauses may be of some relevance and that this is not sufficient. It is submitted that the propositions put forward by the defendants amount to extraordinary suggestions which a court would not entertain. So, for example, Bianca accepts that the existence of the Hope Downs Deed (“assuming that it remains in place … in regard to the proceedings in other jurisdictions”) is a relevant matter that a court would have regard to in determining whether or not to grant the relief sought under s 233 of the Corporations Act, but says that this does not lead to the conclusion that the outcome was governed or controlled by the Hope Downs Deed.
  18. It is said that the suggestion that cl 8 provides a complete defence to s 233 insofar as a court would wish to remove Gina as a director of HPPL (“[n]o matter what the nature of her misconduct, no matter how bad it is, she has a guaranteed right that this Court cannot interfere with to remain as a director for life”) is an outrageous submission unsupported by authority (i.e., that there can be no sustainable argument that a director can contract with her shareholders in such a way that she is immune from being removed by a court for misconduct). Similarly it is said that if all of the misconduct is established it cannot be the case that cl 7(e) operates as an absolute bar to a claim for appointment of an independent director or for a claim to qualify the ability of Bianca and Gina to elect directors (because that would be void as a matter of public policy); or that a director can contract entirely out of s 233 of the Corporations Act.
  19. Finally, it is submitted that the defendants are here asking the court to accept that there is a sustainable argument, with reasonable prospects of success, that Gina is exempt from the powers of this Court to control and supervise corporate function (and that such an argument has been foreclosed by the Court of Appeal at [186] of the Court of Appeal Decision).

Determination

  1. At the outset, I accept that there are a number of “matters” the subject of the present proceeding and that, though there is an obvious element of interconnectedness, there is not a single inseverable matter here to be determined.
  2. I proceed, as indicated earlier, on the basis that the High Court’s construction applies and that what is here required is to determine whether there is a dispute that contains a substantial issue that concerns the exercise of rights or obligations in the agreement contained in the Hope Downs Deed, or a dispute that concerns the existence, validity or operation of the agreement as a substantial issue, or a dispute the resolution of which is governed or controlled by the agreement (see the Full Court Decision at [193]).
  3. As to the matters identified by Bianca (leaving the first, Bianca’s s 247A application, to be dealt with separately below), it must be noted that a critical object (which the High Court said could not be clearer) of the Hope Downs Deed was the maintenance of confidentiality about “the affairs of the Hancock Group, the trusts, the intra-family dispute and the provisions of the Deeds themselves” (see the High Court Decision at [46]) and that the High Court further contemplated that the confidential disputes resolution provisions might apply to disputes arising after the Hope Downs Deed had been entered into (insofar as the plurality considered that claims concerning the validity of the deed itself would be covered, see at [48]).
  4. Once that is appreciated, it seems to me that there is little doubt that the allegations in relation to breach of trustee and directors’ duties, and of oppressive conduct, insofar as they encompass allegations relating to the payment of dividends, misuse of corporate funds and relief going to the control and further management of HPPL, raise or involve a substantial dispute as to matters the subject of the agreements or acknowledgments contained in the Hope Downs Deed.
  5. Whether the defendants will be able successfully to invoke the provisions of the Hope Downs Deed in order to resist some or all of the relief claimed by Bianca (and hence whether there is a complete defence or absolute bar by reference to the various provisions of the Hope Downs Deed) is not to the point. It is to my mind an inescapable conclusion, having regard to the various clauses that the defendants here wish to invoke in answer to the claims made against them, that the issues that will be raised in defence of the substantive claims in this proceeding are issues of the kind which the parties agreed should be determined under the confidential arbitration process (no doubt against the background of the threat of “unwelcome publicity” having historically been invoked by John).
  6. Much of Bianca’s argument seems to focus on whether the clauses here sought to be invoked by the defendants will ultimately succeed (and she contends that it was outrageous for such a defence ever to be contemplated). However, that harks back to the “governed or controlled” test that the High Court has in my opinion rejected. The reliance sought to be placed by the defendants on the various provisions of the Hope Downs Deed that they have identified goes beyond the mere “relevance” of those provisions to the issues in dispute. Indeed, I have reached this conclusion, as the High Court has dictated that I must, taking into account the nature of the matters the subject of the proceeding and not by mere reference to the fact that provisions of the Hope Downs Deed might, or even will, be raised by the defendants and that those provisions might, or will, bear on the determination of these disputes. Accordingly, and broadly accepting the defendants’ submissions in this regard, I consider that (leaving aside Bianca’s s 247A Application for the moment) the matters raised by the statement of claim, in light of the anticipated defences, do fall within the arbitration agreement.
  7. In saying this, I note that Bianca’s submissions characterise the defences sought to be raised as impermissibly seeking to oust the jurisdiction of the Court or to put herself (as trustee or director) beyond the control of the Court. I do not accept that the referral of the disputes to arbitration has that consequence. Determination by the arbitral panel of the factual disputes raised by the pleaded claims may still have consequences insofar as a subsequent grant of relief in this Court is concerned (see ACD Tridon); moreover, acceptance of the defendants’ submissions as to the referral to arbitration does not (as Bianca contends) involve any acceptance of the proposition that the Hope Downs Deed “entitles” Gina to misuse corporate funds for her own purposes or to breach her duties as trustee or director.
  8. The conclusion that the proceeding raises matters the subject of an apparently valid arbitration clause, and that the other requirements of the commercial arbitration legislation are satisfied, means that I am required to refer the parties to arbitration (this is not a matter of discretion).

Bianca’s s 247A application

  1. I consider this “matter” separately because it raises issues both as to whether it is a “matter” under the arbitration clause and as to whether it is arbitrable in any event.
  2. It is accepted that there are some disputes which may not be submitted to an arbitrator; and that in such a case, the arbitration agreement is “incapable of being performed” for the purposes of s 8(1) of the Commercial Arbitration Act (see Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206 at [90] per Martin CJ and the authorities there cited).
  3. The parties’ intentions are not relevant when it comes to issues of arbitrability (see Robotunits at [65] per Croft J); the general principle being that the public policy in certain disputes being resolved judicially cannot be surrendered into the hands of private parties.
  4. In Comandate, the Full Court of the Federal Court stated a number of general principles relating to arbitrability, including (at [200]) that:

200. … First, the common element to the notion of non-arbitrability was that there was a sufficient element of legitimate public interest in these subject matters making the enforceable private resolution of disputes concerning them outside the national court system inappropriate. Secondly, the identification and control of these subjects was the legitimate domain of national legislatures and courts… (Emphasis added.)

  1. In ACD Tridon, Austin J said (at [191]-[192]) that a “strongly persuasive” ground for holding that a dispute was non-arbitrable was that it “operates to affect the rights of third parties”. In BTY , Coomaraswamy J noted (at [148]) that:

148. … [T]here is a class of disputes which is not capable of settlement by arbitration. At the core of this class are disputes which are of a public character and disputes whose outcome will affect the interests of persons beyond the immediate disputants. An agreement to resolve any such dispute by arbitration is ineffective and cannot ground a stay. (Footnotes omitted.)

and in obiter said that at a challenge to the public filing of documents by a corporation might be non-arbitrable because “the outcome could affect a public register and thereby could affect third parties who may have acted in reliance on the accuracy of that register” (see at [144]).

Gina’s submissions

  1. Gina submits that there is no doubt that claims under the Corporations Act are capable of being resolved by arbitration (citing ACD TridonWDR Delaware Corporation v Hydrox Holdings Pty Ltd (2016) 245 FCR 452; [2016] FCA 1164 (WDR Delaware) at [144] per Foster J and Re Infinite Plus Pty Ltd (2017) 95 NSWLR 282; [2017] NSWSC 470 at [63]- [66] (Gleeson JA) (Re Infinite Plus). As to BTY, Gina notes those remarks were obiter because neither party raised any claim or defence under the agreement containing the arbitration clause, so the dispute was not caught by that clause (see at [64], [69]-[70], [75], [111] and [143]); and submits that those remarks do not apply to the current dispute (because it does not concern such a publicly filed document); and that they may not be in accordance with Australian law.
  2. Reliance is placed on the obiter observations of Austin J explained in ACD Tridon at [191]-[194]:

191. In A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170, the parties to a joint venture agreement agreed to arbitrate any dispute, difference or question touching, inter alia, the dissolution or winding up of the “association” which was their joint venture entity. Warren J declined an application for an order staying a winding up proceeding, under the Victorian commercial arbitration legislation, on the ground that the arbitration clause was null and void because it had the effect of “obviating the statutory regime for the winding up of a company” (at paragraph [18]). Her Honour’s decision was partly based on public policy considerations surrounding the process of winding up a company pursuant to court order. An additional ground seems to have been that a winding up order operates to affect the rights of third parties, not merely the rights of the parties to the arbitration clause.

192. In my opinion, the latter ground is a strongly persuasive one, in keeping with the general observations by Mustill & Boyd. I accept, as well, that public policy considerations operate against referring to arbitration a determination to wind up a company on the grounds upon which a court may order that a company be wound up. However, I would not regard these public policy considerations as preventing parties to a dispute from referring questions to arbitration merely because those questions arise under the Corporations Act. I see nothing special about the Corporations Act that would distinguish it, as a whole, from other legislation such as the Trade Practices Act. This seems to be the position reached by United States courts: see Dean Witter Reynolds Inc v Byrd [1985] USSC 44; 470 US 213 (1985); Shearson Lehman Hutton Inc v Wagoner [1991] USCA2 988; 944 F 2d 114 (2nd Cir 1991); also Pick v Discover Financial Services Inc 2001 No.Civ.A 00-935-SLR (D) Del Sept 28, 2001.

193. The statutory powers of a Court under the Corporations Act are, generally speaking, comparable to the powers exercised by a court under the general law (the power to make a winding up order being an exception to this proposition). They are generally not special powers to be exercised having regard to specialist public interest criteria.

194. Specifically, the public policy considerations held by Warren J to be applicable to a disputed claim to wind up a company do not seem to me to prevent the parties from referring to arbitration a claim for some merely inter partes relief under the oppression provisions of the Corporations Act, or for access to corporate information under s 247A. However, the “in rem” nature of an order for rectification of the share register of a company may prevent reference of that power to an arbitrator.

  1. Gina notes that those comments were applied in: Robotunits (at [66]; [69] per Croft J) which involved alleged breaches of directors’ duties; WDR Delaware (at [144]) which involved oppression claims and Infinite Plus (at [65]-[67]) which involved oppression claims and seeking to alter the board of the company; and that in Robotunits, Croft J went on to state at [69]-[70]:

69. In my view, and as a general proposition, there is not a sufficient element of legitimate public interest in matters involving the Corporations Act to make their resolution by arbitration – that is, outside the national court system – inappropriate.

70. Further, I do not consider there to be a sufficient element of legitimate public interest in a matter making it inappropriate for private dispute resolution merely because a statutory body such as the Australian Securities and Investments Commission (ASIC) may have an interest in the proceeding, or have sufficient standing to bring an action in relation to it. In the present case, there is nothing stopping ASIC from prosecuting Mennel under s 184(1) of the Corporations Act, or any other statutory provision, if it appears to ASIC that Mennel ought be prosecuted. Indeed, although ASIC may, as Robotunits submits, have an interest in the determination of Robotunits’ claims against Mennel, the settlement of these matters by arbitration does not interfere with ASIC’s statutory powers under Part 3 of the Australian Securities and Investments Commission Act 2001 (Cth) to investigate contraventions of, and prosecute offences against, the Corporations Act.

  1. Reference is also made to what was said in WDR Delaware at [161]:

161. In substance, the present case is a dispute between the sole shareholders of Hydrox involving the way in which those shareholders performed their contractual and other obligations inter partes. In truth, there is no substantial public interest element in the determination of these parties’ disputes. At the present time, it is not suggested that Hydrox is insolvent. Indeed, there is evidence to the effect that Woolworths has provided letters of comfort to the directors of Hydrox in order to allay any concerns that they may have as to the solvency of Hydrox. No creditor has attended any Court hearings or has sought leave to participate in the proceeding. This is despite the fact that it has been advertised as required under the relevant regulatory regime and despite the fact that the dispute between the plaintiffs and Woolworths has received considerable press coverage.

  1. It is submitted by Gina that in the present case there is an inter partes dispute between the company, its directors and its shareholders; and that it can and should be arbitrated. Gina notes that, even where particular powers may not be exercised by an arbitrator, it can be appropriate to refer the matter to arbitration and for a court then to consider whether to exercise the particular power, such as to wind up a company, on the basis of the award (referring to WDR Delaware at [164]). Therefore, it is said that even if the power in s 247A could not be exercised by an arbitrator, it would nevertheless be appropriate for the matter to be referred so that the factual controversy concerning the s 247A application could be determined by confidential arbitration.
  2. Finally, Gina submits that it should not be accepted that the s 247A application is a distinct “matter” from the substantive disputes. It is said to be telling that the s 247A relief was sought as interlocutory relief in aid of these proceedings, rather than independently (as Gina accepts it could have been). It is said that this is because it is part of the dispute raised in this proceeding. Further, it is said that the documents sought under s 247A are related to the issues raised in this proceeding (which Gina maintains are under the Hope Downs Deed). Moreover, it is said that, as is clear from the face of the categories of documents themselves, in many respects they appear to serve as categories for discovery in the proceeding.

HPPL’s submissions

  1. HPPL maintains that Bianca’s s 247A application forms part of the same “matter” in the sense that it can be seen as “part of the fabric of the overall dispute under the deed” (adopting the terminology of the Full Court Decision at [242]). It is submitted that the broad construction of the arbitration agreement (including, with reference to the Full Court Decision at [201], its extension to “any dispute” under the Hope Downs Deed,) is critical to this conclusion.
  2. HPPL says that Bianca’s s 247A application is brought as an interlocutory step in the main proceeding (that being the basis upon which Bianca sought, and obtained, judicial advice from Rein J); and maintains that it is not to the point that s 247A relief is final (cf Bianca’s submissions at [215]).
  3. HPPL submits that Bianca’s s 247A application and the main proceeding are intrinsically interlinked; that each s 247A category has a cognate complaint in the statement of claim and thus serves as a discovery application in aid of the main proceeding. It is noted that Bianca acknowledges in her submissions (at [217]) that a purpose of Bianca’s s 247A application is to facilitate these proceedings. Therefore, it is submitted that, as a matter of “substance”, Bianca’s s 247A application and the main proceeding must be seen as one “matter”. HPPL says that it is not to the point that, as well as facilitating this proceeding, s 247A relief may also facilitate an independent investigation and relations between the shareholder and company (as Bianca submits at [216]). Rather, it is said that the question is whether Bianca’s s 247A application forms part of “any dispute” between the parties under the Hope Downs Deed. It is said that the fact that s 247A relief may ultimately enable documents to be deployed in fora other than this proceeding does not render the relief sought any less part of the dispute between the parties.
  4. HPPL submits that the fact that Bianca’s s 247A application seeks relief under the Corporations Act also does not affect the analysis. It is noted that claims under the Corporations Act, including claims for s 247A relief, are capable of being resolved by arbitration (referring to ACD Tridon at [192]-[194] per Austin J; Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd (2011) 80 NSWLR 398; [2011] NSWSC 195 at [37] per Ball J; Robotunits at [66]-[69] per Croft J; WDR Delaware at [124]-[164] per Foster J; and Re Infinite Plus at [63]-[66] per Gleeson JA). HPPL says that Bianca is not shut out from seeking s 247A relief and using documents for parallel investigations and shareholder relations if she so chooses; but that she is precluded from seeking that relief in this forum.
  5. It is submitted by HPPL that even if Bianca’s s 247A application had been brought as a “standalone” application, it would constitute a “matter” in and of itself because whether there is a “case for investigation” warranting s 247A relief necessarily requires an understanding of the nature and content of the shareholder rights at issue. It is said that in this case those rights are informed or prescribed by the Hope Downs Deed in respect of payment of dividends and control of HPPL and, therefore, the question whether 247A relief should be granted, at all, is inextricably linked to the Hope Downs Deed.

Bianca’s submissions

  1. Bianca accepts that disputes as to rights and obligations under the Corporations Act may be arbitrable (see Gina’s submissions), but says that each case depends on the circumstances (referring WDR Delaware at [144] per Foster J). Relevantly, that an oppression claim may or may not be arbitrable and that this depends, in particular, on whether the issue is essentially inter partes (referring to BTY at [155]-[156]; WDR Delaware at [131], [149]); and, similarly, that a claim under s 247A might be arbitrable if it was “merely inter partes” (see ACD Tridon at [194] per Austin J in dicta and Robotunits at [66]).
  2. In the present case, Bianca maintains that some of the matters in the proceeding are not arbitrable, namely: Bianca’s s 247A application; the claim that Gina misused HPPL funds (in breach of directors’ duties); the claim of oppression leading to relief as to the future management of HPPL; and the claim for relief in prayers 13 and 14, which relate to information-gathering in relation to past misconduct.
  3. It is said that each of these matters involves investigations towards and/or orders in respect of breaches of directors’ duties by Gina (and, in part, the third and fourth defendants); that the relevant breaches occurred over an extended period of time, involved hundreds of millions of dollars of loss and were apt to affect the interests of beneficiaries of a trust; and that the breaches may have involved deliberate and conscious wrongdoing. It is said that these are not matters only of inter partes interest; rather that the underlying obligations are public ones. It is submitted that there is a sufficient element of legitimate public interest in the kind of major breaches of directors’ responsibilities at issue in this case being resolved in court and not by an arbitrator.
  4. Bianca submits that if some, but not all, matters in a proceeding are the subject of an arbitration agreement and are arbitrable that does not entail that the whole of the proceedings must be stayed. It is noted that the applicable principle was stated in Recyclers at [20]:

… it is clear that a proceeding that includes matters severable from or independent of the matter required to be referred to arbitration need not be stayed in respect of those matters.

and that that principle was subsequently adopted by Nettle JA, as his Honour then was, in Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd (2014) 44 VR 64; [2014] VSCA 166 at [105]. Bianca says that the approach to be taken to such matters is essentially a case management decision.

  1. Bianca says that the right asserted by her under Bianca’s s 247A application is a right given by the Corporations Act; that no provision of the Hope Downs Deed could, or does, deny the power to issue that relief; and that the Hope Downs Deed does not “govern or control” the application. Further, Bianca says that although the relief sought is described as “interlocutory”, it is in substance final relief (and that the description of relief in a pleading does not and cannot determine its character). It is said that the s 247A relief could have been sought by itself in separate proceedings (both under s 247A(1) and (3)) and would not have been treated as an interlocutory step in such proceedings (cf Gina’s submissions at [125]). It is noted that the relief under s 247A is not “until further order”; and it is said that relief under s 247A(1) is not logically “interlinked” with the final proceedings (cf HPPL’s submissions at [122]). It is said that the fact that fresh judicial advice might have been necessary to commence separate proceedings under s 247A does not mean that there is any necessary or substantive connection between the s 247A application and the final proceedings (cf HPPL’s submissions at [123]).
  2. Bianca notes that the power given to the Court by s 247A may be exercised for purposes other than facilitating the bringing of proceedings (such as, for example, being exercised for the purpose of facilitating “mere investigation”) and for the purpose of facilitating intra-mural relations between the shareholder and the company (referring to In the matter of Sirrah Pty Ltd [2017] NSWSC 1683 at [24], [26] per Black J). It is submitted that if Bianca obtains documents under s 247A, there is no reason to think that her use of those documents will be limited to these proceedings (postulating that they could be used to ask questions at general meetings or to communicate with ASIC or other regulators).
  3. Bianca says that the fact that one effect of the s 247A application will be to facilitate these proceedings does not make the application inseverable from the balance (cf HPPL’s submissions at [124]). By way of illustration, Bianca says that one effect of her briefing solicitors is to facilitate these proceedings, but that does not make her legal arrangements part of the “matter” or “matters” in these proceedings.
  4. Further, it is submitted that even if the application under s 247A(3) is connected to the final proceedings, the application under s 247A(3) is severable from the application under s 247A(1) (cf HPPL’s submissions at [123]). It is said that the fact that relief similar to that sought under s 247A could have been obtained through compulsory production (including discovery) incidental to the determination of the final proceedings does not intertwine the s 247A application with the balance of the proceedings (cf HPPL’s submissions at [126]); and that s 247A gives the Court a statutory power distinct from any interlocutory processes and should not be confused with them.
  5. It is further said that the fact that the s 247A application seeks material relating to use of HPPL funds for non-corporate purposes (which, in turn, is said to be related to the dividend dispute) does not intertwine it with the balance of the dispute (cf HPPL’s submissions at [127]). It is said that such an argument proceeds from too narrow an understanding of the function of s 247A orders.
  6. As to HPPL’s submission (at [128-129]) to the effect that, because Bianca has advanced submissions that Bianca’s s 247A application is not a dispute under the Hope Downs Deed, then the s 247A application must be a dispute under the Hope Downs Deed, it is said by Bianca that this contention is: inconsistent with the approach in the Court of Appeal Decision; finds no support in the High Court Decision; and that it suffers from manifest circularity (in suggesting that a dispute becomes under a deed because the dispute is said not to be under that deed).
  7. Insofar as HPPL (at [130]) indicates that it may refer to the Hope Downs Deed on the issue of proper purpose and discretion, Bianca again argues that this does not mean that any part of the Hope Downs Deed “governs or controls” the application.

Determination

  1. As adverted to above, there are two issues that arise in relation to Bianca’s s 247A application. First, whether it is a “matter” under the Hope Downs Deed (which, if arbitrable, must pursuant to s 8 of the Commercial Arbitration Act and the WA Commercial Arbitration Act, be referred to arbitration); and second, whether it is an arbitrable dispute.
  2. Turning first to the second of those questions (i.e., whether the s 247A application is arbitrable at all), it is relevant in this context to consider BTY, which involved an appeal from a decision of an assistant registrar of the Singapore High Court, in which a stay had been granted of shareholder’s litigation (the application for a stay having been based on an arbitration clause contained in a shareholder’s agreement between a joint venture company and its shareholders). The allegation in the substantive proceeding was that the company had breached the articles of association. The appeal was allowed and the shareholder’s litigation permitted to continue.
  3. Coomaraswamy J decided the appeal on the basis that the dispute was not within the ambit of the arbitration clause. His Honour also, however, in obiter considered whether a dispute of this kind was arbitrable in any event.
  4. As to the reasoning that led to the conclusion that the arbitration clause was not enlivened, his Honour concluded that there were two different relationships on two different planes: the Investment Agreement (a private contract deriving its contractual force purely from the private law of obligations) and the Articles of Association. Importantly, the latter being a component of the defendant’s constitution and which derived its contractual force from company law, not private law; and being a public contract in the sense that it is given binding force by a public Act of Parliament and not by a private act of the parties (not least in the sense that a company’s constitution, which includes its articles, must be lodged with the relevant authority under the companies legislation in that jurisdiction). His Honour concluded that the fundamentally different legal character of the two contracts meant also that they operated on separate planes (at [85]). Reference was made to ACD Tridon in this regard (at [92]).
  5. His Honour (at [106]) was prepared to accept the defendant’s submission that an arbitral tribunal was empowered to grant the relief sought by the plaintiff in this case (noting that the Court of Appeal in Tomolugen Holdings Ltd and another v Silica Investors Ltd [2016] 1 SLR 373 (Tomolugen) noted that the International Arbitration Act conferred wide remedial power on arbitral tribunals – see Tomolugen at [97]) but noted that the plaintiff had raised the issue of relief as support for its principal argument that the two agreements in question were of a fundamentally different character and that the dispute in that litigation arose out of the agreement which is not subject to an arbitration clause. His Honour accepted the plaintiff’s submissions on that issue.
  6. His Honour considered that the parties’ objectively ascertained intention was not that cl 29.2 of the Investment Agreement should apply to disputes arising from the separate legal relationship between the parties created by the Articles (referring to Robotunits at [4]-[5]; [8] and at [28], [47]; [56]-[58]). At [117], his Honour considered that a reasonable person in the position of the parties would not have understood the arbitration agreement in the Investment Agreement, without more, as extending to disputes arising under the Articles; rejecting each of the arguments raised by the defendant for the proposition that there was manifested an objectively ascertainable intent that cl 29.2 should apply to disputes arising under the Articles (at [118]). His Honour’s conclusion at [143] was that:

143 Clause 29.2 of the Investment Agreement on its proper construction

applies only to the legal relationship between the parties which arises out of the Investment Agreement itself. The Articles create a separate legal relationship between the parties which operates a separate legal plane. A dispute under the Articles is not within the scope of cl 29.2 and are governed by recourse to the courts in accordance with ordinary principles of company law. This dispute arises only under the Articles. The defendant has failed to establish the only basis on which it sought to stay this litigation.

  1. Hs Honour then went on to consider the question of arbitrability, as I have already noted in obiter, saying (at [144]):

144 I have found that the “matter” in this litigation is not the subject of the

parties’ arbitration agreement, and therefore a statutory stay under s 6(1) of the Companies Act is not available. But it also seems to me that it could be argued that an application to challenge the filing of documents on ACRA’s register is not arbitrable because the outcome could affect a public register and thereby could affect third parties who may have acted in reliance on the accuracy of that register.

  1. It was noted that this issue had apparently been conceded before the Assistant Registrar that the dispute underlying the litigation was arbitrable but that on appeal the plaintiff had raised the issue of arbitrability in its written submissions. In that regard, his Honour said (at [147]-[148]):

147 The second point which the plaintiff makes, and which I accept might

be a valid consideration on the question of arbitrability, is that any order which might be made in this litigation has the potential to affect third party rights. I bear in mind that the plaintiff made the point on arbitrability in its written submissions only in passing and did not pursue the point in oral submissions with any great enthusiasm. I have therefore rested my decision on the proper construction of s 6(1) of the IAA and cl 29.2 of the Investment Agreement and not on arbitrability. But since the plaintiff has raised arbitrability, is nevertheless apposite that I make a few remarks on it.

148 As the Court of Appeal in Tomolugen noted, there is a class of disputes which is not capable of settlement by arbitration. At the core of this class are disputes which are of a public character and disputes whose outcome will affect the interests of persons beyond the immediate disputants. An agreement to resolve any such dispute by arbitration is ineffective and cannot ground a stay: Tomolugen at [71] and [74].

  1. His Honour proceeded (from [149]ff) to consider the limits of arbitrability where third party rights intrude as explored in cases such as Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) [2011] SGCA 21; [2011] 3 SLR 414, Tomolugen, and Fulham Football Club, and considered the present case, while superficially similar to that in Fulham Football Club (which likewise concerned an alleged breach of a company’s articles of association), to be distinguishable in that the dispute there was entirely contractual, whereas the dispute before his Honour impinged upon the statutory safeguards for the benefit of third parties and engaged the public interest in the information on the public register. At [160]-[161], his Honour said:

160 I am conscious that the “matter” in this litigation, as I have found, is

whether the defendant has adopted or approved the 2015 Accounts in breach of the Articles. Whether the 2015 Accounts reflect a true and fair view of the defendant’s financial position and performance for the 2015 financial year is no part of the dispute in this litigation. But if the plaintiff is correct: (a) the public face of the defendant has disclosed inaccurate information – to put it neutrally – to its creditors and potential creditors since August 2017; and (b) that information will have to be expunged from the register. To my mind, that engages the public interest in the “matter” which is at the heart of this litigation.

161 I need say nothing further on arbitrability. As I have said, the plaintiff

raised it only obliquely in its written submissions and did not argue it with any great enthusiasm in its oral submissions. In any event, having rested my decision on the proper construction of s 6(1) of the IAA and cl 29.2 of the Investment Agreement, it is not necessary for me to decide the question of arbitrability in order to dispose of this appeal.

  1. In the present case, similar issues as to the arbitrability of the “matter” comprised by Bianca’s s 247A application arise.
  2. The principles applicable in considering arbitrability have been referred to above. In particular, in Comandate, the issue was framed by reference to public and private interests. The history leading up to the present application, concerning Bianca’s s 247A application, includes the fact that on previous interlocutory applications before me there has been some articulation of the purpose of that application. In particular, in the context of applications to set aside subpoenas that had been issued on applications by Bianca for the purpose of obtaining documents to assist in the s 247A applications, my attention was drawn to correspondence in which Bianca’s solicitors (in a letter dated 6 March 2018) had identified 13 categories of HPPL’s documents to which Bianca seeks access (in earlier submissions having indicated that she would narrow the scope of the relief sought under s 247A of the Corporations Act to particular categories of documents “in due course”).
  3. In oral submissions at a directions hearing before me on 8 March 2018, it was put that the purpose of Bianca’s requests for inspection of the books of HPPL (made as part of her claim for interlocutory relief in prayer 2 of the statement of claim and in her notice of motion filed 27 April 2017) was that there was a serious case for investigation by Bianca, as a trustee shareholder, of the matters the subject of multiple requests for documents and a need for her to obtain a greater insight and understanding of the affairs and governance of the company (see T 1.32-2.18; 8/3/2018).
  4. For the purposes of an application under s 247A of the Corporations Act, it is necessary that the court be satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose. The concept of “good faith and proper purpose” is a composite concept; its existence is to be determined objectively; and the applicant bears the onus in that regard (see Mesa Minerals Ltd v Mighty River International Ltd (2016) 241 FCR 241; [2016] FCAFC 16 (Mesa Minerals) at [22(4)] per Katzmann J).
  5. In Mesa Minerals, it was recognised that pursuing a reasonable suspicion of breach of duty is a proper purpose and that it is not necessary to establish that a breach of duty has occurred. What is said to be necessary is that the applicant demonstrate “‘a case for investigation’” (Praetorin Pty Ltd v TZ Ltd [2009] NSWSC 1237; 76 ACSR 236 at [38]- [39] per Barrett J, as his Honour then was) or that the issue raised by the applicant is “substantive and not fanciful” (In the matter of Style Ltd, Merim Pty Ltd v Style Ltd [2009] FCA 314; 255 ALR 63 at [66]- [67] per Goldberg J).
  6. At this stage, no affidavit evidence has been read going to the matters to be established on Bianca’s s 247A application and the merits of the application have not been explored. All that is presently before me is the application itself and the indication in the correspondence (to which I have referred in my earlier decisions) as to the categories that are being sought.
  7. However, as I apprehend it from the debate that took place in earlier interlocutory contests in this matter relating to subpoenas that had been issued by Bianca for the purpose of Bianca’s s 247A application, Bianca intends to discharge her onus of establishing good faith and proper purpose (a precondition to relief under s 247A) by demonstrating: a reasonable suspicion, a substantive and not fanciful issue, or a case for investigation of breaches of directors’ duties in relation to various of the matters the subject of the allegations in the present proceeding. The strength of the case for investigation is relevant to the issue of discretion on the grant of relief under s 247A, that discretion not being circumscribed and one that is apt to be informed by the Court’s assessment of the entirety of the evidence and submissions at a final hearing (see In the matter of Combined Projects (Arncliffe) Pty Ltd [2018] NSWSC 649 at [23] per Leeming JA).
  8. As I explained in Rinehart v Rinehart [2018] NSWSC 1102, what is likely ultimately to be in issue on the hearing of Bianca’s s 247A application will be whether, objectively ascertained, the application by Bianca for access to the books of HPPL is made in good faith and for a proper purpose. In that context, it seems clear that Bianca will be seeking to put before the Court on that application material going to the allegations of breach of duty that will include matters the subject of referral to arbitration in other proceedings as well as the subject of referral in the present proceeding.
  9. Bianca submits that Bianca’s s 247A application raises its own discrete discretionary issues and that that application can be resolved conveniently and expeditiously immediately. I accept the former proposition (though I note that Gina argues that it is not an isolated application and that it does engage cll 8 and 5 of the Hope Downs Deed – see T 139); the latter is more problematic. True it is that Bianca’s s 247A application can be seen as a discrete application; but the evidence that is likely to be adduced in relation to that application and the issues to be explored on that application as to the reasonable basis for suspicion of breach of duty, will raise many if not all of the issues the subject of the substantive disputes that are to be referred to arbitration. Bianca argues that it would be contrary to modern case management principles to require duplication of argument and evidence on this issue before an arbitrator. However, that assumes that the argument and evidence on this issue has been heard already –it has not.
  10. I have concluded, with some hesitation, that the dispute as to whether Bianca as shareholder should have access to the books and records of HPPL that she is seeking is arbitrable (though had the application been brought as a standalone application there might have been more doubt as to that issue).
  11. Where I have more difficulty is the proposition that Bianca’s s 247A application is a matter “under this Deed” for the purposes of Commercial Arbitration Act, s 8 or the equivalent under the WA Commercial Arbitration Act. There is force to HPPL’s submission that even a standalone s 247A application would be a matter “under” the Hope Downs Deed, as its determination would necessarily require consideration and determination of issues under the Hope Downs Deed. Insofar as a critical object of the Hope Downs Deed was the maintenance of confidentiality about, inter alia, the affairs of the Hancock Group, the trusts and the intra-family dispute (see the High Court Decision at [45]) and insofar as it is appropriate to ask whether a reasonable person in the position of the parties would have considered the s 247A dispute would be subject to confidential arbitration or heard and determined publicly in open court (see the High Court Decision at [48]), there is much to be said for the proposition that a standalone s 247A application would fall within cl 20 of the Hope Downs Deed at least to the extent that it requires consideration of matters relating to the affairs of the Hancock Group and the trusts that would otherwise have been expected to be subject to a confidential arbitration.
  12. That the relief sought is under the Corporations Act (and that relief in that form would not be available in an arbitration) is not determinative of the question whether a dispute as to that relief contains a substantial issue concerning the exercise of rights or obligations in the Hope Downs Deed or a dispute that concerns the existence, validity or operation of the Hope Downs Deed (which would bring the dispute within the arbitration agreement).
  13. Despite those matters, I have concluded, again with some hesitation, that Bianca’s s 247A application is not a dispute “under” the Hope Downs Deed because it is properly characterised as a claim by the trustee for access to documents of the company which the trustee contends are necessary for the proper administration of the trust. Nevertheless, that is not determinative of the position because there remains a discretion to stay the application (see Amcor Packaging) and I have concluded that, in circumstances where exploration of the issues that will inevitably arise on a hearing of the s 247A application will involve the airing of disputes as to factual matters the subject of the arbitration agreement, I should exercise the discretion to stay that application pending the outcome of the various arbitrations to which the parties have been referred. I accept the force of what one might term Bianca’s “public interest” submission (i.e., that Bianca’s s 247A application goes to matters not only in relation to a private dispute but raises public interest considerations, including alleged misuse of corporate funds or misconduct as a director or trustee). Nevertheless, I consider that this must be balanced against the fact that airing the matters in dispute in relation to Bianca’s s 247A application will trespass into the matters the subject of the arbitration and I do not consider that it is consistent with the public interest in the proper administration of justice for there to be overlapping proceedings in which the same issues are raised in different forums (see below in my discussion of the case management/abuse of process stays).
  14. I do not accept (as was submitted by Bianca) that the stay of Bianca’s s 247A application will effectively place Bianca in a “straitjacket”, as she has asserted, for the conduct of the claims she brings. It is open to an arbitrator or arbitral panel to order the production of documents (albeit not under Corporations Act, s 247A) insofar as they would be relevant to the matters the subject of the arbitration.
  15. Accordingly, I will stay Bianca’s s 247A application pending the outcome of the arbitration (and thus will stay motion (ii) until that time).

Section 8 Case Management Stay

  1. Insofar as Gina (in her submissions at [83]-[85]) and HPPL (in its submissions at [131]-[132]) contend that, if part only of the proceedings involves a matter which should be referred to arbitration, then the balance of the matter should be stayed pending arbitral determination of that matter (or those matters), Bianca says that there are difficulties in making submissions on this issue in advance of any ruling on what is covered by the arbitration agreement and that it may be appropriate to hear further from the parties after a ruling on arbitrability (on the basis that whether the s 8 Case Management Stay should be granted turns, in part, on which if any of the matters are subject to the arbitration agreement).
  2. In particular, Bianca accepts that if “only a small part of the dispute” is non-arbitrable, then it may be appropriate to stay that residual part (referring to the Court of Appeal Decision at [190]) but says that that this is not the case here. Bianca says that a stay of the court proceedings would not ordinarily be granted if the arbitrable claims are “subsidiary to” or “ancillary” to the non-arbitrable claims (referring to Recyclers at [66], which was approved in the Federal Court Decision at [334]); and that this would be the case here. Further, Bianca submits that the following discretionary factors count against the grant of a stay of any residuary claim in the proceedings.
  3. Bianca emphasises again that there is a strong public interest in a number of the matters in the proceedings going ahead in open court, noting that the matters include claims of wrongdoing against a trustee and claims of wrongdoing by directors of HPPL and the future management of HPPL. Reference is made to the observation of Bathurst CJ in the Court of Appeal Decision at [191] that the fact that a “claim relates to the proper conduct of a trustee, a matter warranting close public scrutiny” means that it would not be a proper exercise of discretion to deny a beneficiary the right to approach the court in respect of alleged misconduct of a trustee where the issue in question was not covered by the arbitration clause”. It is said that the matters in issue are matters warranting close public scrutiny. It is further submitted that there is a strong public interest in these matters being resolved expeditiously, noting that the proceedings were commenced in 2017, that they include relief directed to the management of HPPL and that Gina and HPPL have not identified steps that will or may be taken to ensure that an arbitrator can and will resolve the matters expeditiously.
  4. I consider below the submissions made in the context of the more general submissions in respect of Gina’s and HPPL’s alternative Case Management Stay Applications. Suffice it here to say that I do not consider that further submissions are warranted or necessary on the question as to whether the residual aspect of the proceeding should be stayed, since I have concluded that the only residual aspect is the s 247A application and that was the subject of detailed submission in the course of the present hearing. For the same reasons (set out below) that the alternative case management/abuse of process bases of the stay applications would have succeeded (had they arisen in light of the conclusion as to the referral/stay applications), I consider that any residual aspect of the proceeding remaining after referral of the parties to arbitration on the substantive claims should be stayed pending the outcome of the arbitration.

Case Management Stay

  1. That brings me to the first of the alternative bases for the respective stay applications. As already noted, Gina and HPPL place their Case Management Stay Applications (in the alternative to their application for the referral to arbitration and stay) on the basis that this is the only way in which Bianca’s inconsistent positions can be reconciled; arguing that the position taken by Bianca in this proceeding is fundamentally inconsistent with her position in the Federal Court proceeding and the French Arbitration. In HPPL’s case, it is said that the further difficulty that arises for it is that it is party to the Martin Arbitration and the arbitration now ordered by Le Miere J, in which proceedings it is being sued for all of its assets and that the outcome of those disputes will determine much of the relief sought in the present proceeding. Hence it is said that the character of the dispute in the present proceeding may change once the outcome of the arbitrations is known and it would be a waste of resources and costs to take steps progressing the present proceeding (and, for that matter, in listing for hearing Bianca’s unconscionability motion) until that time. Put baldly, it is said that in one forum HPPL is being sued for all of its assets and in another the position adopted by Bianca is that she accepts that HPPL owns all of those assets (see T 190).
  2. As both the Case Management Stay Application and the abuse of process applications are founded on the inconsistency argument, it is useful here to summarise HPPL’s position as to the problems it faces having regard to the allegations made in the present proceeding as to the non-payment of dividends (see T 124) and the uncertainty this poses.
  3. HPPL identifies four problems in this regard: first, that it does not know whether, under the Hope Downs Deed, it is obliged to pay 100% of the dividends to Gina (as the sole Class B shareholder) or some portion of the dividends to the Class A shareholder (Bianca as trustee of the HMH Trust), that issue turning on the dispute as to whether there has been a breach of the Hope Downs Deed and the validity of it (the subject of the French Arbitration); second, that it does not know whether the Hope Downs Deed will apply at all and says that, if the Hope Downs Deed is set aside, then there will be no obligation to make dividend payments under cl 5, rather, the obligation will arise by reference to the parties’ shareholdings and under HPPL’s Articles of Association (and, of course, subject to the allegation that assets are held on trust for the siblings that being the subject of the Federal Court proceeding now referred to the Martin Arbitration); third, the dispute as to the debt restructure, under which it is said that the outcome for the beneficiaries of the HMH Trust improved (from a 17.7% share to a 23% share), which is the subject of challenge in the Federal Court proceeding now referred to the Martin Arbitration and the relief there sought including to effect a change in the shareholding of the company (which, HPPL says, is another instance of inconsistency and gives rise to some concerns as to Bianca being in a position of conflict); and fourth, the claim by Bianca and John that they own the Hope Downs mining tenements beneficially (and their claim for an account of profits and equitable compensation that being the subject of the Federal Court proceeding now referred to the Martin Arbitration and the Western Australian proceedings now also referred to arbitration).

Gina’s submissions

  1. Gina says that the reasons for staying these proceedings are principally by reference to the assertion that the relief sought by Bianca (in her personal capacity) in the former proceedings before the Federal Court is entirely inconsistent with the claims she seeks to advance in this proceeding.
  2. It is noted that in the Federal Court dispute, Bianca (in her personal capacity) relevantly seeks: declarations that the Roy Hill tenements, Hope Downs tenements, Nicholas Down tenements and Mulga Downs tenements, which are owned by HPPL or its subsidiaries, have been held at all times on constructive trust for Bianca and her siblings (prayers 1, 15, 29 and 32); orders that Gina provide an account of profits to Bianca and her siblings, for the benefits she has received as a result of the Roy Hill and Hope Downs tenements, or equitable compensation (prayers 2, 3, 16, 17); and orders that HPPL provide an account of profits to Bianca and her siblings for the benefits it has obtained as a result of the Roy Hill, Hope Downs and Nicholas Downs tenements, or equitable compensation (prayers 6, 7, 20, 21, 30 and 31).
  3. It is said that Bianca sought the same relief in the Western Australian proceedings, by way of: a counterclaim in proceedings CIV 3041 of 2010 consolidated with CIV 2617 of 2012 (see [228]-[233] in relation to the Hope Downs tenements); in relation to the [243]-[258] Nicholas Downs tenements; [259]-[270] in relation to the Mulga Downs tenements) and a counterclaim in proceedings CIV 2737 of 2013 (see [228]-[233] in relation to the Hope Downs tenements; [243]-[258] in relation to the Nicholas Downs tenements; [259]-[270] in relation to the Mulga Downs tenements).
  4. It is said that, despite claiming that at all relevant times HPPL and its subsidiaries have not held many of its valuable mining tenements beneficially, Bianca’s central complaint in this proceeding is the underpayment of dividends by HPPL, including from profits generated form those very mining tenements.
  5. Insofar as Bianca asserts that the inconsistency between her positions in the two proceedings is “chimerical”, including because it is a question of fact and there is no admissible evidence that the non-payment of discretionary dividends by HPPL occurred because of the existence of the Federal Court proceeding (see Bianca’s submissions at [257], picking up her supplementary s 247A submissions at [12]), Gina puts forward two responses. First, that there is evidence that the Federal Court proceeding is a factor in dividend determinations (referring to the minutes of directors meeting held on 3 February 2017, which attached an explanatory document). Second (and, it is said, more importantly), that that assertion fails to grapple with the true inconsistency that arises: namely, that if Bianca succeeds in the arbitral dispute she maintains in her personal capacity, and many of HPPL’s principal assets are found not to be held by it beneficially, the whole basis of the numerous complaints made in this proceeding about the underpayment of dividends falls away.
  6. Furthermore, it is said that another issue raised in this proceeding is the propriety of providing for, but not paying, discretionary dividends in FY14 to FY16 (see statement of claim at [643]-[647]). That action is said to have constituted a breach of directors’ duty (see statement of claim at [628], [501]-[510]) and to have been oppressive (see statement of claim at [672]). However, it is noted that provision was made by HPPL pending the determination, by confidential arbitration before the Hon Fitzgerald AC QC (and now the Hon French AC), of a dispute as to the proper operation of cl 5 of the Hope Downs Deed. It is said that this proceeding should be stayed pending the determination of that extant arbitration.
  7. Insofar as Bianca suggests that this proceeding should continue to be progressed to trial even though it may not be determined until the various arbitral proceedings are determined (see her submissions at [258]-[262]), Gina says that these proceedings may be rendered moot by the determination of the arbitral proceedings “which will doubtlessly be years away”. It is submitted that the parties’ time and expenses (and the resources of the Court), should not be wasted in the meantime. It is submitted that there is no prejudice to Bianca from this course. Further, it is submitted that the outcome of the arbitrations will necessarily affect the defences and evidence that will be filed in this proceeding.
  8. It is submitted that the matters advanced by Bianca in this Court cannot properly be seen as claims made in the alternative to those that she advances in the arbitrations arising from the referrals made by the Federal Court and the Supreme Court of Western Australia. It is said that Bianca is asking separate decision-makers to come to conflicting and irreconcilable conclusions (something that could not happen if alternative claims are advanced before a single decision-maker). It is submitted that it is an abuse of the process of this Court to press for relief that is inconsistent with relief that is pressed in other proceedings. Gina notes that the circumstances in which the use of the Court’s processes will amount to an abuse include “where the use of the court’s procedures occasions unjustifiable oppression to a party” or “where the use serves to bring the administration of justice into disrepute” (citing UBS AG v Tyne [2018] HCA 45; (2018) 92 ALJR 968; 360 ALR 184 (UBS AG v Tyne) at [1] per Kiefel CJ, Bell and Keane JJ). It is submitted that these proceedings are apt to bring the administration of justice into disrepute because the one litigant simultaneously asks different decision-makers to come to irreconcilable conclusions.
  9. Insofar as Bianca also notes that qua trustee she will obtain no benefit from the arbitral proceedings (see her submissions at [263]), it is said that, aside from highlighting a potential conflict of interest she may have, this submission does not affect the case management decision to be made.

HPPL’s submissions

  1. It is noted that, in the Federal Court proceeding and the Western Australian proceeding (and the respective arbitral proceedings which have been commenced by reason of those proceedings), Bianca contends that: she is entitled to a constructive trust, an account of profits and equitable compensation in respect of various of HPPL’s mining interests, including the Hope Downs mining tenements; and that the Hope Downs Deed and other settlement deeds are void or should be set aside. As to the French Arbitration it is noted that this involves claims by Bianca that she is entitled to be paid the dividends under cl 5 of the Hope Downs Deed.
  2. I have set out already the problems that HPPL maintains the existence of the various proceedings give rise in terms of its uncertainty as to the payment of dividends. In essence, it is submitted that there is a live dispute as to who owns the mining tenements and a very considerable overlap between the respective proceedings in that regard.
  3. Considerable focus was placed in the course of argument on the uncertainty HPPL faces in relation to the payment of dividends (not least the issue arising under s 254T of the Corporations Act). HPPL says that it needs to have certainty as to what its assets are (since it cannot pay dividends if this would materially prejudice the company’s ability to pay creditors); that if Bianca and John fail in their claim to the assets in the Martin Arbitration then that would have the consequence that those assets are assets the income from which would be available to pay dividends but that if HPPL loses on that issue then the circumstances in which the breach of duty and breach of contract claims fall to be considered in the present proceeding will be very different (since HPPL will no longer have the beneficial interest in its only income generating assets). A further complication is envisaged if HPPL retains the assets but loses on the account of profits and/or equitable compensation claims.
  4. Accordingly, HPPL maintains that the present proceeding must await the outcome of at least the Martin Arbitration and, as I understand the submission, also the arbitration ordered by Le Miere J (since the claims by Bianca and John in those respective proceedings mirror each other).
  5. HPPL also says that Bianca has now deployed, in the Western Australian proceedings in which she appears in her personal capacity, the Sceales advice that was obtained by her in her capacity as trustee, in order to seek to “appropriate” HPPL assets for her benefit (but not for the benefit of the beneficiaries of the HMH Trust); and raises this as another reason that the present proceeding needs to await the outcome “in toto” of the dispute in relation to HPPL’s assets.

Bianca’s submissions

  1. Bianca submits that there is no proper justification for a wholesale stay of the proceedings pending the determination of the respective arbitral and other proceedings. It is submitted that the correct approach, consistent with case management principles, is to require the filing of pleadings and the provision of evidence in these proceedings and to assess any temporary stay after those steps have been completed.
  2. As to the discretion to stay proceedings pursuant to s 67 of the Civil Procedure Act, Bianca notes that the onus is on the person seeking the stay to must satisfy the court that the “requirements of justice require one” (see In the matter of Webuidem Pty Ltd [2012] NSWSC 708 at [13] per Black J).
  3. Bianca submits that, in addition to the matters referred to in cases like Sterling Pharmaceuticals Pty Ltd v Boots Co (Aust) Pty Ltd [1992] FCA 72; (1992) 34 FCR 287 at 290-291 per Lockhart J and In the matter of Treadtel International Pty Ltd [2014] NSWSC 1406 at [12] per Brereton J (as his Honour then was), the following matters are relevant to the exercise of the discretion: first, that prima facie “a plaintiff is entitled to have his action tried in the ordinary course of the procedure and business of the Court” (see Rochfort v John Fairfax & Son Ltd [1972] 1 NSWLR 16 at 19 per Sugerman ACJ); second, that “it is a grave matter to interfere with [a plaintiff’s] entitlement by a stay of proceedings, which requires justification on proper grounds” (citing ResMed Limited v Australian Manufacturing Workers Union (No 2) (2015) 243 FCR 366; [2015] FCA 537 at [50(b)] per Perry J (ResMed)), applying Apotex Pty Ltd v Les Laboratoires Servier (No 6) [2012] FCA 745 (Apotex) at [9] per Bennett J; and that “the burden is on the defendant in a civil action to show that it is just and convenient that the plaintiff’s ordinary rights should be interfered with” (ResMed at [50(b)], applying Apotex at [9]).
  4. It is submitted that Gina and HPPL have not discharged that onus for the following six reasons.
  5. First, that there is no “inconsistency” between these proceedings and the Federal Court Proceeding (now the subject of arbitration) and the related Hope Downs Proceeding (the Supreme Court of Western Australia proceedings), (see Bianca’s supplementary s 247A submissions at [11]-[15]). Bianca emphasises that: there is no asset claim made in this proceeding; there is no attack on the mining tenements made in this proceeding; and there is no attack on the debt or share restructure in this proceeding (see T 196). Bianca argues that there is more similarity between the Removal Proceeding and the present proceeding than between this proceeding and that in the Federal Court (though she accepts that Bianca’s unconscionability motion itself has an element of commonality) (see T 203).
  6. In oral submissions, responding to the allegation of inconsistency in relation to the dividend issue, Bianca’s position was put as follows (see T 248ff):

… This case that is brought in this court, is brought by reference to the facts as they fall as they currently are. What I mean by that, your Honour, is that we accept that dividends have been provided for in the context of the Fitzgerald arbitration. We also accept that claims have been made for many years against the mining tenements of HPPL, and your Honour was told about the WPPL claims. So those WPPL claims pre date the claims that Bianca in her personal capacity and John bring.

So we accept that this company has been the subject of attack with respect to its mining tenements for many, many years if not decades. What we say, your Honour, is that for the purposes of a 233 application for dividends, the court takes those matters into account but would be satisfied at trial that a further amount of discretionary dividends ought to have been paid nevertheless; and if we had reached the 247A application, I was going to be tendering by way of example, your Honour, resolutions of the board of HPPL which recognise the existence of the Federal Court claim about the mining tenements, recognise the existence of the Fitzgerald arbitration, recognise the existence of the WPPL claims, but then identify that there is sufficient amount of cash flow available within the business despite those matters to make a discretionary dividend of some tens or hundreds of millions of dollars.

So the actual facts, the actual fact is that HPPL was able in several years to make a determination of discretionary dividend despite those challenges to the relevant assets. The submission we’ll be making at trial, your Honour, is that at the level of 233 the Court would be satisfied that a higher amount of discretionary dividends could be paid. So we don’t see that as an inconsistency, we see that a recognition of actual fact, that the Court will be asked to determine what is a fair and reasonable amount of dividends to be paid to the shareholders and will take into account the challenges to assets that have been put in the proceedings. (Emphasis added.)

and at T 280:

… the way we put it, your Honour, is the trustee who I act for has an obligation to robustly preserve and make claims on behalf of the trust.

HER HONOUR: How does the trustee say that the trustee has a claim on behalf of the trust that there’s been oppression in not paying dividends out of assets that the trustee in her personal capacity says aren’t available to be paid to you because they’re hers.

THOMAS: No, we don’t want a hypothecation argument. So what we say is the company has an obligation to consider making discretionary dividends from time to time out of its assets or its income from whatever source, and we say the company in the first instance has failed to undertake that consideration from time to time and, secondly, that if it had undertaken that consideration it would have paid higher amounts by way of discretionary dividends, notwithstanding the existence of challenges to its assets.

So we don’t accept that a company in the position of HPPL given its profitability across all of its assets can decline to make discretionary dividends in some years or make low discretionary dividends where there are claims against its assets brought by my client and others. That’s an argument for trial. That’s the way we put the argument. We don’t see it as an inconsistency. It’s a matter, we accept, that a Court will closely consider in determining the quantum of dividends that it orders under 233. So it’s different to – we’re running it as a 233. It’s not a contract claim, it’s inviting the Court to‑‑

THOMAS: ‑‑determine a quantum in relation to that. Clause 5 will no doubt feature, at least on my right, as a relevant consideration and we will need to consider whether we agree it’s relevant at that time or whether we say that it needs to be contextualised or that it’s entirely irrelevant, but that’s the issue. We don’t see that there’s an inconsistency. My client is not here attaching herself to obtaining or seeking to obtain the underlying assets, as I’ve indicated.

  1. Second, it is said that it is premature to stay these proceedings because of asserted inconsistency with other proceedings. It is submitted that the risk of inconsistency could not possibly arise until the court is called on to make a determination; and that, until then, there are a number of steps that can be taken to ensure that this matter progresses. In particular, it is submitted that Gina and HPPL should be directed to file a defence; that nothing in the taking of that step could give rise to inconsistency; and that the filing of a defence may expose that some of the feared inconsistency cannot arise. For example, it is said that it may be clear that it is no part of Gina and HPPL’s defence to the directors’ duties claims that there were no profits available for the declaration of dividends (cf HPPL’s submissions at [140]). It is said that, once defences are on, Bianca should be directed to file evidence in support of her case (a step about which it is said Gina and HPPL could hardly be heard to complain); and then the question as to whether steps should be taken after Bianca’s evidence will then be a matter for the Court. It is submitted that, as a means to avoid the “feared” inconsistency, a wholesale stay of the proceedings is disproportionate and is apt to cause unnecessary delay. It is said that if a stay of the whole of the proceedings were now to be granted, the parties will need effectively to start these proceedings “from scratch” (save for the filing of a statement of claim) at some unspecified point in the future.
  2. Third, as has been emphasised throughout her submissions, that in each of the other proceedings relied on by Gina and HPPL, Bianca is not suing or being sued in her capacity as trustee. It is said that the benefits and burdens of those other proceedings will not necessarily accrue to the HMH Trust.
  3. Fourth, it is said that the fact that the construction of cl 5 of the Hope Downs Deed is in issue in the French Arbitration does not justify a stay of these proceedings (cf Gina’s submissions at [92]). It is said that the fact that the construction of cl 5 might ultimately be determined in that arbitration (and on the assumption that that construction is binding on Bianca) should not prevent the taking of pre-trial steps in this litigation.
  4. Fifth, it is noted that in this proceeding, insofar as Bianca seeks prospective relief relating to the future management of HPPL and that, if that relief should be granted then it should not be delayed.
  5. Sixth, it is submitted that the defendants are well-resourced and there is no reason to think that the progression of this proceeding (at least to an extent) will be financially oppressive.
  6. Finally, it is submitted that it is important to distinguish between Bianca’s s 247A application and other parts of this proceeding. It is said that there is, and can be, no inconsistency between the relief sought by Bianca under s 247A and any other proceedings; and it is submitted that if there were a risk of impermissible collateral use, that can be addressed by court order (cf HPPL’s submissions at [148]).

Abuse of process stay

  1. As to the abuse of process stay, this is again founded on the inconsistency in Bianca’s position in the proceeding with that in other proceedings.

Bianca’s submissions

  1. Bianca submits that there is no basis on which this proceeding, or any relief claimed therein, constitutes an abuse of process.
  2. Insofar as HPPL contends that these proceedings are an abuse of process because they are “unjustifiably oppressive” (HPPL’s submissions at [152]-[154], Bianca notes that the onus of satisfying the court that there is an abuse of process is “a heavy one” and lies upon the party alleging it (citing Williams v Spautz ([1992] HCA 34; 1992) 174 CLR 509 at 529; [1992] HCA 34 (Williams v Spautz) per Mason CJ, Dawson, Toohey and McHugh JJ). It is noted that the fact that “the same transactions and events are the subject of two separate proceedings in different forums … does not lead inexorably to the conclusion that there is an abuse” (citing Michael Wilson & Partners Limited v Nicholls (2011) 244 CLR 427; [2011] HCA 48 (Michael Wilson v Nicholls) at [110] per Gummow ACJ, Hayne, Crennan and Bell JJ). Bianca submits that there is no cogent evidence of oppression, noting again that the parties are well resourced.
  3. I should also add here that Bianca emphasises the observation made by Brereton J as to the pressure that was placed on her in the course of the litigation in this Court (see at T 203) and as to the need for robustness as trustee (see the 2015 Decision at [47] and see T 199.30 in this Court).

Determination

  1. I consider these alternative bases together.
  2. Proceedings have been held to be an abuse of process where: the Court’s processes are invoked for an illegitimate or improper purpose (see Williams v SpautzRogers v The Queen [1994] HCA 42; (1994) 181 CLR 251 at 287; [1994] HCA 42 per McHugh J); the use of the Court’s processes is unjustifiably oppressive to one of the parties or vexatious (Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538; [1990] HCA 55); and the use of the Court’s processes in the manner contemplated would bring the administration of justice into disrepute (Walton v Gardiner (1993) 177 CLR 378 at 393; [1993] HCA 77 (Walton v Gardiner) per Mason CJ, Deane and Dawson JJ). The categories of abuse of process are not closed (Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 256 CLR 507 (Tomlinson v Ramsey) at 518-20; [2015] HCA 28 per French CJ, Bell, Gageler and Keane JJ; Perera v GetSwift Ltd (2018) 263 FCR 92; [2018] FCAFC 202 at [144]; Michael Wilson v Nicholls at [89] per Gummow A-CJ, Hayne, Crennan and Bell JJ). It has been recognised that the doctrine of abuse of process is fluid and adaptable (Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27 at [9] per Gleeson CJ, Gummow, Hayne and Crennan JJ; Jeffery and Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75; [2009] HCA 43 at [70] per Heydon J).
  3. The bringing of two proceedings where one will lie, such as where the plaintiff bringing the second proceedings may obtain complete relief in the first (Moore v Inglis (1976) 9 ALR 509 at 513-14 per Mason J, as his Honour then was; Henry v HenryThirteenth Corp Pty Ltd v State [2006] FCA 979; (2006) 232 ALR 491 at [36]- [37] per Jessup J; Lidden Composite Buyers Ltd (1996) 67 FCR 560; (1996) 139 ALR 549 at 563-4 per Finn J; Branir Pty Ltd v Wallco Pastoral Co Pty Ltd [2006] NTSC 70; (2006) 203 FLR 115 at [17]- [20] per Mildren J; Commissioner of State Revenue v Aidlaw Pty Ltd (No 2) [2010] VSC 405 at [15] per Davies J) is one of the instances where an abuse of process has been found.
  4. The majority in the High Court, comprising Dawson, Gaudron, McHugh and Gummow JJ, in Henry v Henry (1996) 185 CLR 571; [1996] HCA 51 (Henry v Henry) said (at [35]):

35. It is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue [their Honours there referring to Moore v Inglis (1976) 50 ALJR 589]. And although there are cases in which it has been held that it is not prima facie vexatious, in the strict sense of the word, to bring proceedings in different countries, the problems which arise if the identical issue or the same controversy is to be litigated in different countries which have jurisdiction with respect to the matter are such, in our view, that, prima facie, the continuation of one or the other should be seen as vexatious or oppressive within the Voth sense of those words. (Emphasis added.)

  1. Their Honours went on to say that it did not necessarily follow that because one or other of the proceedings is prima facie vexatious or oppressive the local proceedings should be stayed but that:

… it does follow that the fact that there are or, even, that there may be simultaneous proceedings in different countries with respect to the same controversy is highly relevant to the question whether the local proceedings are oppressive in the sense of “seriously and unfairly burdensome, prejudicial or damaging”, or, vexatious, in the sense of “productive of serious and unjustified trouble and harassment”. And it also follows that courts should strive, to the extent that Voth permits, to avoid that situation. (Emphasis added.)

  1. In the context of representative proceedings, at first instance in the GetSwift proceedings (see Perera v GetSwift Ltd (2018) 263 FCR 1; [2018] FCA 732 (GetSwift)), Lee J concluded that it would be an abuse of process for more than one of those proceedings to continue and ordered that two of the proceedings be permanently stayed (see at [306]ff; [345]-[347]). On appeal, the Full Court (Middleton, Murphy and Beach JJ) did not consider it necessary to determine the question whether the continuation of competing proceedings was an abuse of process, concluding that there was power to stay one or more competing class actions pursuant to the Court’s inherent case management powers (see Perera v GetSwift Ltd (2018) 263 FCR 92; [2018] FCAFC 202 at [121] ff; [136]).
  2. In United Pacific Finance Pty Ltd v Tarrant [2009] NSWSC 630, Austin J (at [33]) noted that “the commencement of proceedings which create duplicity of proceedings is an abuse of process” (citing Moore v Inglis at 514 and 516 per Mason J; Commonwealth v Cockatoo Dockyard Pty Ltd [2003] NSWCA 192 at [56]–[63] per McColl JA; and referring also to Slough Estates Ltd v Slough Borough Council [1968] Ch 299 at 314–5 per Ungoed-Thomas J. His Honour also cited Thames Launches Ltd v Trinity House Corporation of Deptford Strond [1961] Ch 197 where Buckley LJ said (at 209):

[Counsel for the defendant] says that the principle is that a man should not pursue a remedy in respect of the same matter in more than one court. In my judgment, the principle is rather wider than that. It is that no man should be allowed to institute proceedings in any court if the circumstances are such that to do so would really be vexatious. In my judgment it is vexatious if somebody institutes proceedings to obtain relief in respect of a particular subject-matter where exactly the same issue is raised by his opponent in proceedings already instituted in another court to which he is not the plaintiff but the defendant. (Emphasis added.)

  1. In UBS AG v Tyne, Kiefel CJ, Bell and Keane JJ (with whom Gageler J agreed), said (at [1]) that:

1. … The varied circumstances in which the use of the court’s processes will amount to an abuse, notwithstanding that the use is consistent with the literal application of its rules, do not lend themselves to exhaustive statement. Either of two conditions enlivens the power: where the use of the court’s procedures occasions unjustifiable oppression to a party, or where the use serves to bring the administration of justice into disrepute … [Footnotes omitted.]

  1. Their Honours noted (at [38]) that the “timely, cost effective and efficient conduct of modern civil litigation takes into account wider public interests than those of the parties to the dispute” (citing Batistatos at [14] per Gleeson CJ, Gummow, Hayne and Crennan JJ; and Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [95] per Gummow, Hayne, Crennan, Kiefel and Bell JJ).
  2. As to the question of unjustifiable oppression, their Honours said (at [58]) that:

58. … That oppression is found not only in the significant delay in the resolution of the dispute and the inevitability of increased costs to UBS. At its core is the vexation of being required to deal again with claims that could have been resolved in the SCNSW proceedings. … On the final determination of the SCNSW proceedings, it was reasonable for UBS to order its affairs upon the understanding that the dispute between it and Mr Tyne, and the entities that he controlled, arising out of those dealings was at an end.

  1. At [59], their Honours said:

59. For the Federal Court to lend its procedures to the staged conduct of what is factually the one dispute prosecuted by related parties under common control with the attendant duplication of court resources, delay, expense and vexation, as Dowsett J [who had dissented in the Full Court] found, is likely to give rise to the perception that the administration of justice is inefficient, careless of costs and profligate in its application of public moneys…

  1. Gageler J, agreeing with the plurality, emphasised (at [62]) that in Tomlinson v Ramsey (at [24]-[25]), the doctrine of abuse of process, in its application to the assertion of rights or the raising of issues in successive proceedings, “was there explained to be informed in part by considerations of finality and fairness similar to those which inform the doctrine of estoppel but to be inherently broader and more flexible than that doctrine”.
  2. It is recognised that there may be circumstances in which the prima facie position that it is an abuse of process for any party to institute two proceedings for the one claim may be the subject of an explanation satisfactory to the Court (see Mala Pty Ltd v Johnston (1994) 13 ACLC 100 at 102 per Adams J; Roy Morgan Research Center Pty Ltd v Wilson Market Research Pty Ltd (1996) 39 NSWLR 311 at 317 per Santow J, as his Honour then was; Guardian Group Australia Pty Ltd v Lu [2005] NSWSC 1299 at [58] per Brereton J, as his Honour then was). Similarly, there may be a sufficient explanation as to why two proceedings raising the same issues should be continued at the same time. However, in general it is contrary to the public interest in the administration of justice for there to be permitted the risk of inconsistent decisions on the same issues; and there would be oppression at the continuation of proceedings with the risk of conflicting judgments, if the same or similar issues will arise for determination in each.
  3. Here, the commencement of the proceeding in New South Wales was the subject of the Judicial Advice Decision but the real question is as to the continuation of proceedings in which there is a duplicity of issues, or at least overlapping issues, between those raised in the other judicial and arbitral proceedings (particularly where the proceeding in this Court is hardly at an advanced stage).
  4. It is relevant in this context to note Gordon J’s observations (albeit in dissent as to the result) in UBS AG v Tyne that (at [151]):

151. The administration of justice may be brought into disrepute, in such a way as to amount to abuse of process, if the public perception is that the legal system is unfair, inefficient, ineffective, expensive (both for the parties and in terms of the use of public monies) or contrary to the rule of law. Permitting a proceeding to continue in such circumstances might suggest tolerance of behaviour that is contrary to the just, efficient and timely resolution of disputes including attempts to relitigate questions already resolved. (Footnotes omitted.)

  1. Here, of course, there is no suggestion of re-litigating questions already resolved but there is the spectre of inconsistent decisions at the very least in relation to the ownership of the mining assets; and the difficulty occasioned to HPPL arising from the inconsistency in Bianca’s position.
  2. At [155], Gordon J referred to considerations of finality, fairness and maintenance of public confidence in the administration of justice. At [80], Gageler J, agreeing with the majority, also emphasised the public interest in the timely and efficient administration of civil justice.
  3. As extracted above, the plurality (at [58]) spoke of oppression in the significant delay in the resolution of the disputes and the inevitability of increased costs. Those concerns as to the timely and efficient administration of justice arise in the present case. There is in my opinion much force to the submission by HPPL that all issues in relation to the payment of dividends and the ownership of the relevant assets should be dealt with the one set of proceedings.
  4. I have concluded that case management principles would have coupled with the stay of the proceedings even if the disputes had not been covered by the arbitration clause by reason of the fundamental inconsistency in the maintenance of the two claims as to the beneficial ownership of the mining tenements assets. From a case management perspective, it is inefficient and raises the spectre of inconsistent judgments to have these matters dealt with in different places before different decision-makers. I accept that there is not one single matter but I also accept that there is a marked degree of interconnectedness (or interconnectivity) in the respective allegations. Whether or not this is “all about the dividends”, as was put to me, there is little doubt that issues relating to the payment of dividends are squarely raised in the pleadings by Bianca and that this will give rise to submissions made on the basis of inconsistency with provisions of the Hope Downs Deed. The fact that a court might be unlikely to grant certain of the relief, or that reliance on certain clauses might ultimately be found to be against public policy or the like, is not to the point – what is relevant is that it is abundantly clear that the defendants will be relying on provisions of the Hope Downs Deed in their defence of the allegations made against them; and that exploring the issues so raised will involve disputes as to the provisions of the Hope Downs Deed. Moreover, I consider this continuation of the present proceedings involving overlapping issues and inconsistent claims for relief (and premised on inconsistent positions albeit raised in different capacities) would amount to an abuse of process.

Bianca’s unconscionability motion (motion viii)

  1. The basis of Bianca’s unconscionability motion (only before me for directions, as noted already) comprises: the conflict of interest and duty on the part of Gina that is said to be manifest on the face of the Hope Downs Deed (namely, that Gina obtained a personal benefit under the Hope Downs Deed and also purported to execute the Hope Downs Deed on behalf of the HMH Trust); the onus on Gina to justify that breach of duty (which onus is said to be undischarged); and the evidence indicating that Gina did not disclose material information to the beneficiaries prior to execution of the deed.
  2. In particular, the allegation by Bianca is that Gina failed to disclose to the beneficiaries that, after executing the Hope Downs Deed, Gina had requested (but not received) legal advice in her capacity as trustee about the lawfulness of the Hope Downs Deed.

Bianca’s submissions

  1. It is submitted by Bianca that, in circumstances where the Hope Downs Deed was “self-evidently a self-dealing transaction”, the failure of Gina to inform the beneficiaries prior to their own execution of the Hope Downs Deed that advice as to the lawfulness of the deed was outstanding precluded Gina from obtaining their fully informed consent; and that, whatever may be the effect of that conduct on the validity of the Hope Downs Deed, these facts support an injunction in the Court’s inherent jurisdiction preventing Gina (and HPPL, with reference to Farah v Say-Dee Pty at [110] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ, said to be her “alter ego” and accessory to the breach of trust) from seeking unconscientiously to deploy the Hope Downs Deed (entered into in breach of trust by Gina) against her successor trustee in aid of arbitration.
  2. It is submitted that Gina’s “breaches of trust and abuses of fiduciary position” are examples of “unconscientious conduct” in the strict sense (referring to Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 at [20] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ); that HPPL is an accessory to that unconscientious conduct; and that it would be unconscientious for Gina or HPPL to assert rights deriving from a transaction which was entered into unconscientiously (relying on what was said in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 (CSR) at 392 by the majority of the High Court; and noting the reference by the majority to what was said by Gummow J, then sitting in the Federal Court, at 232 in National Mutual Holdings Pty Ltd v Sentry Corp (1989) 22 FCR 209 (National Mutualas to the principles applicable in Chancery to restrain proceedings outside the forum). Reference is also made to the statement by Deane J in Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 at 619-20; as to the traditional doctrine of equity which operates upon a legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct; and to the academic commentary by RP Meagher, JD Heydon and MJ Leeming, Equity: Doctrines and Remedies (4th ed, 2002, LexisNexis Butterworths) at [21-015] in this regard.
  3. Bianca says that these principles apply equally in the context of anti-arbitration injunctions, referring to Kraft Foods Group Brands LLC v Bega Cheese Ltd [2018] FCA 549 at [24], [61], [63] per O’Callaghan J; and says (cf Gina’s submissions) that s 5 of the Commercial Arbitration Act does not abrogate the power of the court to grant an anti-arbitration injunction (pointing to art 5 of the Model Law, the text of which is set out in sch 2 of the International Arbitration Act 1974 (Cth) (International Arbitration Act), which is in relevantly identical terms to s 5 of the Commercial Arbitration Act and which has the force of law in Australia pursuant to s 16(1) of the International Arbitration Act.
  4. Bianca relies on the proposition that fiduciary duties will continue beyond the end of the fiduciary relationship (citing Disctronics Ltd v Edmonds [2002] VSC 454; (2002) 86 ATR 753 at [168] per Warren J, as her Honour then was; and Oliver Hume South East Queensland Pty Ltd v Investa Residential Group Pty Ltd (2017) 259 FCR 43; [2017] FCA 141 at [361] per Greenwood J).
  5. Bianca says that, in circumstances where Gina entered into the Hope Downs Deed in breach of the rule against conflicts, the benefit of Gina’s and HPPL’s rights under the Hope Downs Deed are appropriated for the benefit of the beneficiaries of the HMH Trust; and submits that in such circumstances, the constructive trustees, Gina and HPPL, would not be permitted to seek to enforce the legal rights (if any) against the interests of their beneficial owner, the beneficiaries of the HMH Trust; and that to seek to do so would breach Gina and HPPL’s duties as trustees de son tort. It is said that, by the unconscionability motion, Bianca seeks to defend the beneficiaries’ rights. Reference is again made in this context to the recognition in Young v Murphy that a trustee who has committed a breach of trust may be sued in respect of the breach by a successor trustee (see at 725).
  6. Pausing here, there is no suggestion that Bianca has received the benefit of any judicial advice as to whether she is justified in pursuing her unconscionability motion, as opposed to the judicial advice she obtained in relation to the commencement of the proceeding itself.
  7. Bianca submits that Gina and HPPL should not be permitted unconscientiously to seek to enforce an agreement entered into in breach of trust by Gina; and that this can be prevented through the exercise of the court’s inherent jurisdiction to control its own processes (by declining to grant the stay sought by Gina and HPPL and/or declining to entertain the application).
  8. Bianca maintains that Bianca’s unconscionability motion is not a dispute under the Hope Downs Deed nor is it a challenge to the validity or enforceability of the Hope Downs Deed (cf HPPL’s submissions at [100]), arguing that the application can succeed even if the Hope Downs Deed is valid and otherwise enforceable; and that nothing in the High Court Decision is directed to the kind of restraint here sought by Bianca, as trustee. In particular, it is submitted that the maintenance of the unconscionability motion is not foreclosed by the High Court Decision (cf HPPL’s submissions at [154] and Gina’s submissions at [142]-[145]). It is noted in this regard that: Bianca was not party to the High Court proceedings in her capacity as trustee; there was no contention in those proceedings that Gina and HPPL should not be entitled to rely on the arbitration agreement against Bianca (acting in her capacity as trustee); there was no contention in those proceedings that HPPL or Gina should not be entitled to maintain a stay application because doing so would breach equitable duties; and there was no contention that the beneficiaries of the HMH Trust were the equitable owners of the benefits given to Gina and HPPL by the Hope Downs Deed.
  9. Bianca says that the “validity” claims that were at issue in the Federal Court and High Court (contentions that the Hope Downs Deed was invalid and should be set aside) are not the dispute here; that the material on which she relies in these proceedings in support of the unconscionability motion was not before the Federal Court or the High Court; and that the relief that she seeks here is fundamentally different from the relief referred to in Gina’s closing submissions at [143].
  10. Bianca further says that the unconscionability motion is not foreclosed by the decisions of Le Miere J in the Western Australian proceedings. It is submitted that (cf Gina’s submissions at [146]) Le Miere J did not dismiss that application (noting that his Honour did not determine it but, rather, declined to hear the injunction application at the hearing commencing on 30 May 2018 for case management reasons – see Le Miere (No 9) at [47]); and that Bianca and John were confined in that case to arguing that the court should “dismiss” the s 8 application by reason of Gina’s unconscionable conduct (see Le Miere (No 10) at [150]ff). It is said that this is an argument “far removed” from an anti-arbitration injunction.
  11. As to the reference by Gina in her closing submissions to Tyne v UBS, Bianca says that to the extent that Mr Tyne (in his capacity as trustee of the relevant trust) was not bound by the decision in the Singapore proceedings (to which he was party in his personal capacity) and was pursuing the Federal Court proceeding in his capacity as trustee, the case is on all fours with the position of Bianca in the Western Australian proceedings. I note that in UBS v Tyne, by majority, the High Court held that the primary judge had been correct to stay the subsequent Federal Court proceeding brought by Mr Tyne in his capacity as trustee as an abuse of the process of the Federal Court (see at [59], [61]).
  12. Bianca says that the suggestion raised by HPPL in oral submissions that it is an abuse of process for her to pursue the unconscionability motion in these proceeding is without merit, noting that the onus of establishing abuse is on the party alleging it and is a heavy one. Emphasis is placed on the fact that Bianca, in her capacity as trustee, is not a party to the other proceedings to which reference has been made. It is said that Bianca’s unconscionability motion is raised defensively and has not been determined elsewhere; that Bianca’s claim (that the rights under the arbitration agreement are held on constructive trust for the beneficiaries) is a claim that is properly agitated by Bianca as trustee in these proceedings; and that there is no contention of oppression. It is submitted that there can be no serious suggestion that it would bring the administration of justice into disrepute for a trustee to raise, on behalf of beneficiaries, a defensive stay in circumstances of the present kind.
  13. Finally, while Gina and HPPL seek the referral of Bianca’s unconscionability motion itself to arbitration, Bianca says that the unconscionability motion engages the court’s inherent powers to control its own processes and engages those powers prior to the court adjudicating on a request made by a party under s 8. It is submitted that Bianca’s unconscionability motion is “inherently non-arbitrable” since no arbitrator has the ability to utilise this Court’s inherent powers to control its own processes; and hence must be determined by the court. Further, it is submitted that Bianca’s unconscionability motion must be determined prior to the s 8 Stay Applications since otherwise the right that Bianca (as trustee) seeks to vindicate by bringing the application would be destroyed before the application can be determined.
  14. In these circumstances, in her written submissions, Bianca argued that it is wrong, and procedurally unfair, to determine the stay applications before Bianca’s unconscionability motion is heard; particularly, it is said, where neither Gina nor HPPL has pointed to any or, any material, prejudice in having that motion heard before the stay applications are determined (and where Gina has addressed the substance of the anti-arbitration application in her written closing submissions). It is said that Bianca should not be left in a position where Gina and HPPL are permitted to proceed in that fashion without the unconscionability motion being heard and then determined concurrently with the stay applications.
  15. Bianca’s position is that, logically, the s 8 Stay Application(s) arise for determination only if Bianca is bound by the Hope Downs Deed in her capacity as trustee of the HMH Trust; and that the anti-arbitration motion should therefore be determined at the same time as, or prior to, the balance of issues arising on the s 8 Stay Applications and the s 8 Case Management Stay Application(s).
  16. Bianca submits that the consequence of the defendants’ submission that their stay applications should be heard and determined first, before the Court embarks upon the hearing of any other motion filed in this proceeding, is that she would be “shut out from even ventilating the 247A Application in open court”. Insofar as Gina submits that this approach is consistent with the High Court Decision, Bianca’s position is that the High Court Decision “is a distraction at this point in the analysis” and that it does not speak to the parties’ intentions or expectations in respect of either a s 247A application or Bianca’s unconscionability motion.
  17. Thus Bianca’s position on sequencing is that: it would be appropriate to determine the referral/stay applications prior to the s 247A application at least so far as the stay application seeks a stay which would encompass the s 247A application but that Bianca’s unconscionability motion should be determined at or before the determination of the s 8 Stay Application(s) and the s 8 Case Management Stay Application(s) (because Bianca’s unconscionability motion logically comes prior to the Gina and HPPL referral/stay applications). Bianca submits that the pursuit of those stay applications is in breach of duty and it would be procedurally unfair for the s 8 Stay Application(s) to be determined prior to Bianca’s unconscionability motion as that, as already adverted to, this would defeat the very right that she seeks to vindicate by pursing the application (and would do so in circumstances where the respondents to the motion have not identified any prejudice in the course proposed by her and have addressed the motion solely by way of written submission).

HPPL’s submissions

  1. HPPL maintains that, since it has been recognised that it is not appropriate to enter into consideration of the circumstances in which the arbitration agreement was entered into, it is not appropriate to entertain motion (viii) (Bianca’s unconscionability motion). As noted earlier, HPPL says that there are other reasons why it would be inappropriate to entertain Bianca’s unconscionability motion on HPPL’s s 8 stay application, including: that the anti-arbitration application is “itself unquestionably arbitrable” in that it challenges the “efficacy” of the Hope Downs Deed (referring to the High Court Decision at [44]); that substantially identical claims by Bianca (that the Hope Downs Deed was entered into by Gina in breach of her duties as the trustee of the HMH Trust, including by reason of her alleged failure to disclose certain legal advice to the beneficiaries) and that Gina and HPPL ought be restrained from relying upon the Hope Downs Deed, including the arbitration agreement in cl 20 of that Deed, have already been referred to arbitration (referring to the Federal Court Decision at [250]-[253]; Le Miere J (No 10) at [147]-[148], [154]); and that Bianca’s unconscionability motion is “relevantly indistinguishable” from an application made by Bianca to the Supreme Court of Western Australia, which application has been referred to arbitration. HPPL says that it is not suggested that Bianca’s unconscionability motion involves a direct attack on the arbitration agreement, in the sense that it would render the arbitration agreement null and void, inoperative or incapable of being performed; and hence that the hearing of Bianca’s unconscionability motion as part of the s 8 stay application would offend the principle of separability, as enshrined in s 16 of the Commercial Arbitration Act (citing the Full Court Decision at [341]-[360]; Le Miere (No 10) at [156]-[160]);
  2. HPPL notes that it has been suggested that there is a real question as to whether the Court has the power to grant anti-arbitration injunctions given Commercial Arbitration Act, s 5, to which I have referred earlier (referring to academic commentary B Lincoln, “The Role of the Courts: Enforcement of Arbitration Awards and Antiarbitration Injunctions” in International Commercial Litigation and Dispute Resolution (2010, Ross Parsons Centre of Commercial, Corporate and Taxation Law) at 93; and the view that anti-arbitration injunctions should only be granted “sparingly”, “with great caution” and only when “exceptional circumstances” exist, expressed in D Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (3rd ed, 2015, Sweet & Maxwell) at [12.88]; see also Lord Collins of Mapesbury and J Harris, Dicey, Morris and Collins on the Conflict of Laws (15th ed, 2012, Sweet & Maxwell) at [16-089]). Further, HPPL notes that Bianca’s unconscionability motion was brought more than two years after HPPL’s referral/stay motion was filed (and only shortly before the listed hearing of the referral/stay motions).
  3. Finally, it is said that although Bianca invokes the inherent jurisdiction of the Court in support of the anti-arbitration application (at [8] of Bianca’s submissions), it has been said that the Court will only exercise its inherent jurisdiction if the arbitration has an impermissible tendency to interfere with proceedings pending in Court (citing CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391-4). It is said that Bianca makes no attempt to identify how an arbitration would have this effect on the present proceeding. It is said that, had Bianca sought to invoke the Court’s equitable jurisdiction, she would bear the burden of establishing that the arbitral proceedings are vexatious or oppressive in the relevant sense.

Gina’s submissions

  1. Insofar as Bianca takes the position that the stay applications cannot be determined until Bianca’s unconscionability motion is determined (see Bianca’s submissions at [28(c)-(d)]), Gina complains that she has not had an opportunity to respond to the allegations made by Bianca in support of that motion. It is said that the apprehension by Bianca that the alleged breaches of trust will not be matters of contest (see the submissions at [14]) is misplaced.
  2. Gina argues that it is not correct that the determination of Bianca’s unconscionability motion should precede the determination of the stay motions.
  3. First, it is submitted that, in accordance with the approach applied by the High Court, Bianca’s unconscionability motion itself involves a dispute that must be referred to arbitration because that motion has at its heart a dispute about the efficacy of the Hope Downs Deed and, as the High Court has said “[i]t could not have been understood by the parties to these Deeds that any challenge to the efficacy of the Deeds was to be determined in the public spotlight” (see the High Court Decision at [44]).
  4. It is noted that, in the Federal Court, Bianca sought the following relief: injunctions restraining HPPL and Gina from enforcing or seeking to enforce the releases and arbitration clauses in the Hope Downs Deed (prayers 35, 40 and 42); declarations that the Hope Downs Deed was void ab initio as against Bianca (prayers 36 and 37) and John (prayer 41); and declarations that the Hope Downs Deed arbitration clause was void ab initio including as a fraud on the power by Gina acting in her capacity as the trustee of the Trust (prayers 38, 39, 42-47).
  5. It is noted that the basis of the relief relevantly includes the following allegations in the statement of claim in the Federal Court proceeding: breaches of trust and fraud on the power (see at [349]-[358]), including that by executing the Hope Downs Deed in her capacity of trustee, Gina breached her duties as the Deed was intended to benefit her personally and was not in the best interest of the beneficiaries of the trust (it is said that these allegations are very similar to those advanced in Bianca’s submissions at [14]-[16]; [271]-[280] albeit that the precise breach of trust is not clearly articulated); unconscionable conduct (see at [327]-[337]), on the basis of taking advantage of Bianca’s alleged vulnerability; that the purpose of Gina and HPPL entering into the Hope Downs Deed was Gina maintaining control of HPPL during her lifetime, preventing the beneficiaries from advancing claims against Gina and HPPL concerning “the ownership of the Hope Downs Tenements and Roy Hill Tenements, [Gina’s] shareholder of HPPL and the conduct of [Gina], the other relevant directors and officers of HPPL and HPPL in relation to the HFMF Trust or the HMH Trust” and to prevent public scrutiny (see at [288]); false and misleading representations that the entry into the Hope Downs Deed was in Bianca’s best interest (see at [292] and [294]); and fraudulent concealment by Gina and HPPL including of alleged breaches of trust by Bianca and HPPL’s knowing involvement in the same (see at [307]);
  6. It is said that the majority in the High Court held in relation to those claims that they were obviously within the scope of the arbitration agreement and referred them to arbitration (referring to the High Court Decision at [43]-[48]). It is submitted that, so too here, the question whether the relief sought concerning control over HPPL and dividends is available in light of cll 5, 7 and 8 of the Hope Downs Deed may be seen as depending upon whether the claim to restrain Gina and HPPL from relying upon the Hope Downs Deed are available and if so whether they are made out.
  7. Second, it is said that Bianca has already sought the very same relief in the Supreme Court of Western Australia, and her claims in that proceeding have been referred to arbitration. In her counterclaims, Bianca claimed that the Hope Downs Deed was entered into in breach of trust included because when Gina entered into it, she “knew of the Sceales Advice”, had a personal interest in executing the Hope Downs Deed, and so was in a position of conflict (see at [348]-[356]).
  8. It is noted that before Le Miere J determined HPPL’s and Gina’s stay application in the Western Australian proceeding, Bianca and John filed a motion seeking to restrain them from relying on the Hope Downs Deed on the basis that such reliance was unconscionable; and that at the hearing on 27 March 2018, Bianca and John contended that the stay application could not be determined before the restraint application. Le Miere J dealt with that matter as follows in the Le Miere (No 9) Decision at [46]-[47]. It is submitted that the same applies in this Court.
  9. Insofar as Bianca asserts that she was not a party to these and other proceedings in her capacity as trustee and thus asserts that no res judicata, issue estoppel or Anshun estoppel arises from those proceedings (citing Tyne v UBS AG (No 3) (2016) 236 FCR 1; [2016] FCA 5 at [376]- [400]; see Bianca’s submissions at [24]), Gina submits that Tyne does not support that assertion.
  10. It is noted that, in Tyne, the trustee was not a party to the relevant proceedings (see [378]-[379], [384] and [391]), as opposed to being a party in a capacity, and was not “privy” to the parties to the proceeding; and so it followed that no res judicata, issue estoppel or Anshun estoppel arose. It is said that the same cannot be said about Bianca, who is bound as a party to the various proceedings. Gina argues that this highlights the abuse of seeking to press the anti-arbitration application in this proceeding to restrain Gina and HPPL from relying upon the Hope Downs Deed, when that dispute has been referred to arbitration.

Determination

  1. The hearing of Bianca’s unconscionability motion at this stage would in my opinion offend the separability principle. It is not an attack on the validity of the arbitration agreement per se; and it raises factual matters the determination of which raise issues relating to matters that are (absent an anti-arbitration injunction being granted) to be referred to arbitration. The Full Court made clear that in the context of the application to adduce in evidence the Sceales advice (thus in a somewhat different context) (see the Full Court Decision at [412]) that it was “simply not relevant to hear detailed evidence in order to engage in fine assessments of the strengths of particular allegations”. The defendants similarly here say it is not appropriate to entertain a hearing of the allegations raised by Bianca’s unconscionability motion. It is said that the unconscionability motion wrongly seeks a ruling as to whether the Hope Downs Deed is property of the HMH Trust and whether it is binding on Bianca as party to the deed in her capacity as a trust, for example.
  2. Moreover, HPPL argues that Bianca’s unconscionability motion ignores the fact that HPPL is a separate entity. It is said that there will be a question of the conduct of Gina and its attribution to HPPL, just as there will be a question of the attribution of Bianca’s conduct to HPPL. I was informed during the course of closing submissions, for example, that at the Martin Arbitration HPPL proposes to tender a board minute recording Bianca’s presence at the board meeting at which it was decided to enter into the Hope Downs Deed.
  3. Also of relevance is the fact that it became apparent during the course of argument on the sequencing of the motions (as submitted by both Mr Giles and Mr Brereton) that the hearing of Bianca’s unconscionability motion itself would occupy considerably longer than the three days that I then had available in August last year.
  4. Emphasis was placed on the fact that Bianca’s unconscionability motion does not seek to restrain Gina solely from relying on the Hope Downs Deed in the present proceeding but in any court (see T 139). Mr Brereton submits that, on its face, the motion seeks final relief and that this will require findings on all of the matters involved in the present arbitrations. It is said that this is a “blatant attack” on the efficacy of the Hope Downs Deed (T 139) and that all attacks on the efficacy of the Hope Downs Deed should be addressed in the one forum (T 148). That last is a sentiment with which I agree.
  5. I do not accept that staying the hearing of Bianca’s unconscionability motion will prejudice Bianca in circumstances where she can raise the same issues in the arbitration that she wishes to do so here and, while cognisant of the issues as to public scrutiny of trusts, it seems to me that the prejudice to the defendants of entertaining an argument that might ultimately be found should have been referred to arbitration is the greater prejudice in the overall scheme of things.

Conclusion

For the above reasons, I make the following orders:

      • (1) Pursuant to s 8(1) of the Commercial Arbitration Act (NSW) and s 8(1) of the Commercial Arbitration Act (WA), refer the parties to arbitration of the disputes the subject of this proceeding other than the claim for relief pursuant to s 247A of the Corporations Act 2001 (Cth).
      • (2) Stay the balance of the proceeding pending determination of the arbitration of the disputes so referred to arbitration in accordance with order 1.
      • (3) Stay the following motions pending the determination of the said arbitration: notice of motion filed on 27 April 2017 by Bianca (referred to in these reasons as motion (ii)); notice of motion filed on 14 August 2018 by Gina (referred to in these reasons as motion (vii)); notice of motion filed on 11 June 2019 by Bianca (referred to in these reasons as motion (viii)); and notice of motion filed on 20 June 2019 by HPPL (referred to in these reasons as motion (ix)).
      • (4) By consent, adjourn sine die notice of motion filed on 12 May 2007 by Bianca (referred to in these reasons as motion (iv)).
      • (5) Direct the parties to file brief written submissions as to costs within 14 days with a view to determining that issue on the papers.
      • (6) Direct the parties to file brief written submissions within 14 days as to whether (if that be the case) they oppose the referral of this matter (on the Court’s own motion) to mediation; and, in any event, as to the appropriate time frame within which any such mediation may expeditiously take place.

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MPB v LGK [2020] EWHC 90 (TCC) (23 January 2020)

Neutral Citation Number: [2020] EWHC 90 (TCC)
Case No: HT-2019-000363

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
23/01/2020

B e f o r e :

VERONIQUE BUEHRLEN Q.C
SITTING AS A DEPUTY HIGH COURT JUDGE

____________________

Between:

MPB
Claimant
– and –

LGK
Defendant

____________________

Mark Chennells (instructed by Systech Solicitors Ltd) for the Applicant
Michael Wheater (instructed by direct access) for the Respondent

Hearing dates: 14 January 2020
____________________

HTML VERSION OF APPROVED JUDGMENT
____________________

Crown Copyright ©

VERONIQUE BUEHRLEN QC :

    1. This is an application to set aside a Tribunal award on jurisdiction dated 12 September 2019 (“the Award”) pursuant to section 67 of the Arbitration Act 1996 (“the Act”) on the grounds that there was no arbitration agreement between the parties, such that the Tribunal had no substantive jurisdiction over the dispute referred to it.
    2. The application is concerned with whether the contract incorporated clause 11 of the Respondent’s (“LGK”) standard terms and conditions which made provision for the resolution of disputes by adjudication followed by arbitration under the Construction Industry Model Arbitration Rules (“CIMAR”). It is common ground that if incorporated into the Contract, clause 11 is a written agreement to arbitrate.
    3. If clause 11 is not incorporated into the contract, LGK rely on the doctrine of approbation and reprobation as prohibiting the Applicant (“MPB”) from challenging the incorporation of clause 11.

Background

    1. MPB is a building contractor. It was engaged on a project at King’s Court in Primrose Hill, London NW3. LGK are suppliers and installers of structural steel work. In about April/early May 2016, the parties entered into a contract for the supply and installation of structural steel work to MPB’s project (“the Contract”). The evidence surrounding the formation of the Contract is incomplete. What is known or common ground follows.
    2. On 29 March 2016 MPB requested a quotation for the structural steel work required for the project. In so doing MPB provided LGK with a table setting out a description of the work with columns for LGK to complete for rates and total prices. By email dated 6 April 2016 LGK provided quotation no. Q17729 Rev A to MPB. The email refers to an original quote no. Q17729 dated 23 October 2015. I have not seen copies of either of these quotations.
    3. Following a request from MPB for additional items to be priced, LGK provided MPB with a further revised quotation dated 11 April 2016: Quotation Q17729 Rev. B (“the Quotation”). It is common ground that the Quotation was accompanied by LGK’s standard terms and conditions of contract (“LGK’s Terms”).
    4. A site meeting followed between the parties on 12 April 2016 together with email correspondence dated 13 April 2016 in which LGK provided MPB with further pricing and information as to the scope of work. LGK’s email dated 13 April 2016 confirmed LGK’s price for the steelwork at £92,500.
    5. On the same day, that is 13 April 2016, MPB issued a document entitled “Sub-Contractor Order” no. MP761/05. Again no copy of that document was provided to the Court. However, LGK responded by email dated 15 April 2016 raising a number of points in relation to the order and concluding “[t]rust these points are helpful and agreed”. MPB replied by email dated 28 April 2016 agreeing the majority but not all of the matters raised by LGK. What is agreed by both parties to be the final version of order no. MP761/05 includes certain manuscript annotations including a reference to MPB’s email of 28 April 2016. I refer to this final version of the document as “the Order”.
    6. The first material part of the Order set out a table comprised of columns entitled “Description of Work” and “Value”. Included in the table is the statement “based on quotation Q177129 Rev B dated 11/04/2016, meeting minutes dated 13/04/2016 and subsequent e-mail correspondence dated 13/04/16”.
    7. The Order then went on to state:

“All Subcontract Orders are placed in conjunction with PM Appendix 1 Subcontract Order Notes and are deemed to take precedence”

Appendix 1 comprised MPB’s standard terms and condition (“MPB’s Terms”) including a provision by which:

“Sub-contractors shall allow for all works in accordance with the documentation as stated on the order.”

    1. Under a further section entitled “Terms” the Order went on to state:

“The work to be executed in accordance with our Terms and Conditions and those of the main contract – it is required that you withdraw any of your conditions which are at variance with the conditions contained therein *” (original strike through)

The * was referred to at the bottom of the Order coupled with a manuscript annotation stating:

“See attached email MPB 28 April 2016 11.01 Appendix 1 Point 1”

Point 1 stating that LGK had not been provided with a copy of the main contract.

    1. I was informed at the hearing that the parties believe that the manuscript annotations (including the deletions) were made by LGK. The Order is unsigned. The works commenced in May 2016.
    2. In the event, the parties fell out and MPB engaged other contractors to complete LGK’s works. A series of adjudications followed. The first two adjudications were commenced by LGK. The third adjudication (to which I refer below as Adjudication no. 3) was commenced by MPB. It was commenced with reference to clause 11 of LGK’s Terms. By clause 11:

“The Contractor and Customer agree that either party may refer a dispute to adjudication at any time, following the rules and procedures of the Scheme for Construction Contracts Part 1 (the Scheme). The Decision of the Adjudicator shall be binding on the parties until the dispute is finally resolved through agreement for by Arbitration under the CIMAR rules.”

    1. Adjudication no. 3 resulted in Mr Riches holding that LGK’s account under the Contract was in the sum of £135,103.43 and that MPB was entitled to recover £76,056.67 once remedial / completion work was taken into account. Successful enforcement proceedings followed.
    2. The fourth adjudication was also commenced by MPB but is not pertinent to the matters at hand.
    3. LGK commenced arbitration proceedings in relation to Mr Riches’ decision in Adjudication no. 3 by Notice dated 5 July 2019. MPB immediately took issue with jurisdiction. Without prejudice to MPB’s position on jurisdiction, the parties agreed to appoint Mr Jonathan Cope as arbitrator. Following the exchange of submissions on jurisdiction, Mr Cope issued his award on jurisdiction on 12 September 2019. He held that there was an arbitration agreement through the incorporation of clause 11 of LGK’s Terms into the Contract and that therefore he had substantive jurisdiction over the parties’ dispute.

Issue 1: Did the Contract incorporate clause 11 of LGK’s Terms?

The Law

    1. The application has been brought under section 67(1)(a) of the Act (“challenging any award of the arbitral tribunal as to its substantive jurisdiction”) and asks that, in line with section 67(3)(c) of the Act, the Court set aside the Award. It is common ground that a challenge under section 67 proceeds by way of a de novo rehearing of the jurisdiction issues. The proper approach was helpfully recently summarised by Butcher J in The Republic of Korea v Mohammad Reza Dayyani & Ors [2019] EWHC 3580 (Comm) at [26] in these terms:

“A challenge under s. 67 proceeds by way of a de novo rehearing of the jurisdiction issue(s). The award of the arbitrators has no automatic legal or evidential weight. Nevertheless, and given that the arbitral tribunal has considered the same issues, the Court will examine the award with care and interest. If and to the extent that the reasoning is persuasive, then there is no reason why the Court should not be persuaded by it.”

    1. By section 6 of the Act:

“(1) In this Part an “arbitration agreement” means an agreement to submit to arbitration present or future disputes (whether they are contractual or not).

(2) The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement.”

    1. Since this is a case that falls within category 1 of Christopher Clarke J’s four categories in Habas v Sometal [2010] EWHC 29 (Comm), that is a case in which A and B made a contract in which they incorporate standard terms, the Court will apply the usual approach to the incorporation of terms considering what, as a matter of construction, the parties intended. In turn, the proper approach to questions of contract construction is well known. Quoting the passage at paragraph 15 of Lord Neuberger’s judgment in Arnold v Britton [2015] UKSC 36:

“15.  When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 , para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions… “

    1. In the context of the incorporation of the terms of one document into another, further guidance was given by Rix LJ in Tradigrain SA v King Diamond Marine [2000] 2 All ER (Comm) 542 at [78], as more recently applied by the Court of Appeal in TJH and Sons Consultancy Ltd v CPP Group plc [2017] EWCA Civ 46, per Lewison LJ at [13] to [14]:

“The first rule relating to the incorporation of one document’s terms into another document is to construe the incorporating clause in order to decide on the width of the incorporation … A second rule, however, is to read the incorporated wording into the host document in extensor to see if, in that setting, some parts of the incorporated wording nevertheless have to be rejected as inconsistent or insensible when read in their new context.”

The parties’ submissions

    1. MPB submit that on proper construction of the Contract, the words “based on quotation Q17729 Rev B dated 11/04/2016” did not serve to incorporate LGK’s Terms. In particular, MPB rely on the documentary context of the words together with the language used. They submit that the Order addresses the description of the work and the terms on which the work was to be executed separately and that the reference to the Quotation forms part of the section concerned with the description of the work. They rely on the fact that the section entitled “Terms” states that “[t]he work to be executed in accordance with our [i.e. MPB] terms and conditions” without reference to LGK’s Terms. MPB submit that whilst LGK’s Terms were included with the Quotation they did not form an integral and indivisible part of it in that they were additional to the 4 page Quotation itself. They rely on the words “based on” to mean that the preceding description of the work is based on the documents referred to. They also submit that it is inherently unlikely that the parties would have intended to agree to the inclusion of two sets of standard terms and the risk of subsequently having to reconcile them.
    2. MPB also submit that LGK’s reliance on the reference to “precedence” in the Order is misplaced. The relevant wording reads:

“All Subcontract Orders are placed in conjunction with MP Appendix 1 Subcontract Order Notes and are deemed to take precedence”

MPB submit that on true construction of this wording it is the Order that is to take precedence over other contractual documents.

    1. Further, if (contrary to MPB’s primary case) LGK’s Terms were incorporated into the Contract, MPB submit that it was subject to MPB’s Terms taking precedence and that those terms prevent the incorporation of the arbitration agreement. The point being that in the absence of an arbitration agreement in MPB’s Terms, the parties are entitled to bring their disputes before the Courts in the ordinary way. The effect of giving precedence to MPB’s Terms is therefore to preserve the right to go to Court.
    2. LGK submit that on proper construction of the Contract, the Order incorporated LGK’s Terms. They argue that it was both the description of the work and value that were “based on” the various contractual documents listed in the Order and that one cannot sever LGK’s Terms from the first 4 pages of the Quotation. They make the point that LGK’s Terms are relevant to both the scope of work and the price. They construe the words “[a]ll Subcontract Orders are placed in conjunction with MP Appendix 1 Subcontract Order Notes and are deemed to take precedence” as meaning that MPB’s Terms were to take precedence over LGK’s Terms. They also rely on the deletion by LGK of the words “It is required that you withdraw any of your conditions which are at variance with the conditions contained therein” as a refusal on the part of LGK to withdraw any of its terms. As MPB’s Terms were silent as to dispute resolution, the arbitration agreement in LGK’s Terms applies and the Arbitrator therefore has the requisite jurisdiction.

The Award

    1. The Arbitrator accepted that LGK’s Terms formed part of the Contract but that MPB’s terms took precedence in the event of incompatibility. In particular, he accepted that LGK’s Terms were prima facie express terms of the Contract on the basis that these were attached to the Quotation which was expressly referred to in the Order. There was no need to refer to LGK’s Terms separately because these were an integral part of the Quotation. He rejected the submission that anything turned on the fact that the Quotation was referred to in the Order under the heading “Description of Work”. He agreed with LGK that the natural and ordinary meaning of “… All Subcontract Orders are placed in conjunction with MP Appendix 1 Subcontract Notes and are deemed to take precedence …” was that MPB’s Terms should take precedence, not (as had been submitted by MPB) that any other terms and conditions were excluded.
    2. The Arbitrator then went on to the find that the arbitration agreement set out in clause 11 of LGK’s Terms was valid and binding on the parties. He concluded that since MPB’s Terms were silent on how disputes should be resolved there was no incompatibility with the arbitration agreement in clause 11 of LGK’s Terms and that therefore clause 11 applied. Finally, the Arbitrator rejected MPB’s submission as to the relevance of section 6(2) of the Act on the grounds that LGK’s Terms were express terms of the Contract. However, if wrong about that, he went on to hold that if the arbitration agreement was only incorporated by reference then that reference was “such as to make that clause part of the agreement“.

Discussion

    1. Despite Mr Chennells’ very able submissions, I have come to the conclusion that LGK’s Terms were incorporated into the Contract for the reasons set out below.
    2. MPB’s Sub-Contractor Order dated 13 April 2016, as subsequently amended by LGK in manuscript, sets out the parties’ agreement. The Order includes a Table comprised of two columns one entitled “DESCRIPTION OF WORK”, the other “VALUE”. Following four entries describing the works, the words “[b]ased on quotation Q17729 Rev B dated 11/04/2016, meeting minutes dated 13/04/2016 and subsequent e-mail correspondence dated 13/04/16” appear in the Table. The question is whether those words are sufficient (in the sense of wide enough) to incorporate LGK’s Terms into the Contract.
    3. It is common ground that the Quotation was provided by LGK to MPB together with LGK’s Terms. Although not expressly referred to in the first 4 pages of the Quotation, MPB were therefore given clear notice of LGK’s Terms. Further, the scope of work and price set out in the first 4 pages of the Quotation were clearly based on, and to be read in conjunction with, LGK’s appended terms and conditions. It follows that LGK’s Terms formed part of the Quotation and were an integral part of it. That conclusion is further supported by the fact that the email correspondence refers to the quotation attached and not to the quotation together with LGK’s Terms.
    4. Further, I agree with LGK’s submission that on their natural and ordinary meaning the words “[b]ased on Quotation Q17729 Rev B” mean based on the Quotation as a whole and therefore based on the Quotation including LGK’s Terms. The wording cannot on its face be a reference to only part of the Quotation as contended for by MPB. These words are therefore wide enough to incorporate LGK’s Terms into the contract. I also agree with LGK that the words “based on” should not be given too narrow or legalistic a construction. This was a contract negotiated and drawn up by two construction companies and not a document prepared by lawyers. In short in my view a reasonable person having all the background knowledge which would have been available to the parties would have understood the express reference in the Order to “based on quotation Q17729 Rev B dated 11/04/2016 …” as being a reference to the Quotation and as meaning that the Quotation was intended to form part of the Contract.
    5. While I accept MPB’s submission that I should take into account the documentary context of the wording of incorporation, that is the position of the wording in the document together with the surrounding provisions I do not accept that the reference to the Quotation was limited to the description of the work. The table deals with both the description of the work and the price as well as other contract provisions. For instance, the table includes a reference to “collateral warranty – to be provided prior to payment”. That is a term as to the timing for the provision of the warranty and not solely a reference to an item of work forming part of the description of the work.
    6. Further, I do not regard it as reasonable or practicable to seek to limit the reference in the Order to the Quotation to parts of the Quotation going to the description of the work. This would lead to significant difficulties in then determining which of the provisions of the Quotation, including LGK’s terms, were relevant to the description of the work and which were not. I say including LGK’s Terms because some of those terms are relevant to the description of the work such as clause 2(e) in relation to the number of general arrangement drawings LGK would produce. It cannot therefore have been the parties’ intention to incorporate only part of the Quotation without clearly identifying which part.
    7. It is correct that under the section entitled “Terms” it is stated “[t]he work to be executed in accordance with [MBP’s] Terms and Conditions”. However, those words alone are not apt to exclude LGK’s Terms when the Order also makes express reference to the scope of work and price being based on the Quotation which in turn included LGK’s Terms. That conclusion is further supported by the provision in the Order that “[a]ll Subcontract Orders are placed in conjunction with MP Appendix 1 Subcontract Order Notes and are deemed to take precedence.” Appendix 1 being MPB’s Terms. The parties disagreed as to how this further provision should be construed. I agree with LGK that the natural and ordinary meaning of this wording is that the Order was placed in conjunction with MPB’s Terms and that MPB’s Terms are to take precedence over any other terms and conditions. Although the sentence could be read as meaning that it is the Order that is to take precedence that would then beg the question over what? MPB suggest over other contract documents, but the sentence is not in my view apt to be construed as attempting to set the order of precedence of various contractual documents. The more obvious and natural meaning is that it is MPB’s Terms that are to take precedence over any other terms.
    8. My conclusion is also supported by the fact that by clause 2(a) of the MPB Terms LGK were required to “allow for all works in accordance with the documentation as stated on the order”. The documentation as stated on the Order included the Quotation of which LGK’s Terms formed part.
    9. LGK also relied on the fact that they had deleted certain wording from the form of the Order originally provided by MPB to LGK, so that the final version of the Order reads:

“The work to be executed in accordance with our Terms and Conditions and those of the Main Contract. It is required that you withdraw any of your conditions which are at variance with the conditions contained therein.

    1. LGK submit that:

i) When parties use a printed form and delete parts of it, the Court is entitled to have regard to what was deleted as part of the surrounding circumstances in light of which the Court construes the words that remain citing Mottram Consultants Ltd v Sunley (Bernard) & Sons Ltd [1975] 2 Lloyds Rep 197 at 209 per Lord Cross; and

ii) Where the parties have deleted certain words, the fact of deletion shows what the parties did not want in their agreement and that whilst the contract must be construed as a whole, there is a prima facie indication that the deleted provision was not required citing Punjab National Bank v de Boinville [1992] 1 WLR 1138 per Staughton LJ at 1148.

    1. The law as to the circumstances in which the Court may have regard to a deletion was set out by the Court of Appeal in Narandas-Girdhar and Anr v Bradstock [2016] EWCA Civ 88 where Briggs LJ said this:

“18.  Mr Wolman submitted that this aspect of the judge’s reasoning proceeded on an incorrect assumption that he was entitled to have regard to what was removed by the Modification, in arriving at a conclusion about its purpose. He said that, once the parties to a contractual negotiation agreed to remove certain provisions of a draft and replace them, then those removed provisions fell out of account for the purposes of interpretation.

19.  I disagree. The true position is that summarised by Clarke J (as he then was) in Mopani Copper Mines plc v Millennium Underwriting Ltd [2008] EWHC 1331 (Comm) at paragraph 120-123 as follows:

“120  The diversity of authority, of which Diplock J spoke, renders it difficult for a judge of first instance to recognise when recourse to deleted words may properly be made. The tenor of the authorities appears to be that in general such recourse is illegitimate, save that (a) deleted words in a printed form may resolve the ambiguity of a neighbouring paragraph that remains; and (b) the deletion of words in a contractual document may be taken into account, for what (if anything) it is worth, if the fact of deletion shows what it is the parties agreed that they did not agree and there is ambiguity in the words that remain. This is classically the case in relation to printed forms (Mottram Consultants, Timber Shipping, Jefco Mechanical Services), or clauses derived from printed forms (Team Service), but can also apply where no printed form is involved (Punjab National Bank Ltd ).

121  Support for that view may be found in the latest edition of Keating on Building Contracts which contains the following passage:

‘In this confusion the second school is generally to be preferred. Where parties have made a contract in a document that contains deletions, to look at the deletions does not offend the principle discussed above which prevents reference to preliminary negotiations. The deletion is physically contained in the concluded contract. It is submitted that the court should first construe the retained words. If they are unambiguous, reference to the deletions is unnecessary. If they are ambiguous reference to deletions from printed documents should be permitted to see whether objectively they throw light on the meaning of the retained words.’

122  Even if recourse is had to the deleted words, care must be taken as to what inferences, if any, can properly be drawn from them. The parties may have deleted the words because they thought they added nothing to, or were inconsistent with, what was already contained in the document; or because the words that were left were the only common denominator of agreement, or for unfathomable reasons or by mistake. They may have had different ideas as to what the words meant and whether or not the words that remained achieved their respective purposes.

123  Further, as Morgan J pointed out in Berkeley Community Villages Ltd v Pullen [2007] EWHC 1330:

‘Even in the case where the fact of deletion is admissible as an aid to interpretation, there is a great difference between a case where a self contained provision is simply deleted and an another case where the draft is amended and effectively re-cast. It is one thing to say that the deletion of a term which provides for “X” is suggestive that the parties were agreeing on “not X”; it is altogether a different thing where the structure of the draft is changed so that one provision is replaced by another provision. Further, where the first provision contains a number of ingredients, some assisting one party and some assisting the other, and that provision is removed, it by no means follows that the parties intended to agree the converse of each of the ingredients in the earlier provision”

20.  For present purposes, the relevant principle is that if the fact of deletion shows what it is the parties agreed that they did not agree and there is ambiguity in the words that remain, then the deleted provision may be an aid to construction, albeit one that must be used with care.”

    1. I do not think there is any ambiguity in the words that remained following LGK’s deletion i.e. in the words “[t] work to be executed in accordance with [MPB’s] Terms and Conditions”. Any ambiguity does not arise because of the words that remained but because of the reference earlier in the document to the Quotation and to MPB’s Terms taking precedence. Accordingly, I do not think this is an instance in which the Court should consider the deleted wording as an aid to construction. However, if I am wrong about that then I still do not think that the deleted words assist LGK.
    2. LGK submitted that the words “any of your conditions which are at variance” with MPB’s Terms were consistent with LGK’s Terms forming part of the Contract and that the deletion was a clear indication that LGK was not required to withdraw any of its conditions and in line with matters of interpretation being dealt with on the basis that MPB’s Terms would take precedence.
    3. That is one way of construing the deletion. However, there are other reasons why the parties might have agreed the deletion. They might, for instance, have thought that the provision was not necessary and potentially confusing if MPB’s Terms were to take precedence in any event. I also note that an explanation for the deletion was given in the manuscript note that refers the reader to Appendix 1 Point 1 of MPB’s email dated 28 April 2016 in which LGK made the point that they had not been provided with a copy of the main contract. Accordingly, I do not think that the deletion helps with determining the true construction of the terms of the Contract one way or the other.
    4. Finally, I agree with MPB that one should be slow to conclude that the parties agreed that both of their standard terms should apply to the contract given the inevitable risk of contradictions in those terms and resulting potential uncertainty. However, it is not uncommon for construction contracts to be set out in a number of different documents and to contain different sets of standard terms. In some instances, the parties may deliberately not identify a single set of standard terms for fear that the other party will not agree to have its terms excluded. Further, the situation is mitigated where (as in the present case) one set of terms is given precedence over another. Here, the parties did expressly incorporate the Quotation into their agreement and LGK’s Terms clearly formed part of that quotation.
    5. Given my conclusion on the incorporation of LGK’s Terms I now turn to consider the effect of MPB’s Terms taking precedence. It is MPB’s case that (i) the absence of an arbitration agreement in MPB’s Terms entitled the parties to take their disputes to Court; and (ii) that being inconsistent with an arbitration agreement, MPB’s Terms should take precedence. I disagree. Whilst the obvious implication where a contract is silent on the matter of dispute resolution is that any dispute will be brought before the Courts, that is not the same as an express dispute resolution provision being set out in MPB’s Terms which is inconsistent with a dispute resolution provision set out in LGK’s Terms. I agree that the parties should not be lightly taken to have given up their right of access to the Courts. However, I do not see one set of terms incorporating an arbitration clause as inconsistent with another set of terms incorporated into the same contract where no such clause has been included. Certainly that would cause problems in practice where it is common for construction contracts to comprise several contractual documents which are given an order of precedence in case of inconsistency and where only one of the documents down the list contains the arbitration agreement. In my judgment, clause 11 is not inconsistent with MPB’s Terms.
    6. An agreement for disputes to be resolved by way of adjudication and “… finally resolved through agreement or by Arbitration under the CIMAR rules…” is an agreement to “… submit to arbitration present or future disputes …” within the meaning of section 6(1) of the Act. The Contract therefore included an arbitration agreement and the Arbitrator does have the requisite jurisdiction to determine the Parties’ dispute. Like the Arbitrator, in these circumstances I do not think that section 6(2) of the Act is relevant for present purposes. However, if it was it follows for the reasons given above that I would have found that the reference to the Quotation in the Order was such as to make clause 11 part of the contract.

Issue 2: Is it open to MPB to challenge the application of clause 11 of LGK’s Terms?

    1. In light of my findings on Issue 1, I need not consider LGK’s alternative argument based on approbation and reprobation. However, having heard detailed argument on the matter and given that it provides an alternative route to establishing whether the Arbitrator has jurisdiction were I mistaken in relation to my conclusions on construction of the Contract, I set out my conclusions below.
    2. In short, it is LGK’s case that MPB elected to rely on LGK’s Terms and clause 11 for the purposes of Adjudication no. 3 and subsequent enforcement proceedings and that it is therefore not now open to MPB to deny that LGK’s Terms and/or clause 11 were incorporated into the Contract pursuant to the doctrine of approbation and reprobation.

The facts

    1. MPB served its notice of intention to refer a dispute to adjudication on LGK on 26 September 2017. Paragraph 2.2 of that notice stated that the terms of the Contract were “set out in the Sub-Contract Order dated 13 April 2017 from MPB to [LGK] and the documents referred to in the Sub-Contract Order”. Further, under the heading “Appointment of Adjudicator”, section 5 of the notice read:

“5.1 Clause 11 of the terms and conditions appended to [LGK’s] Quotation dated 11 April 2017 provides as follows:

“The Contractor and Customer agree that either party may refer a dispute to adjudication at any time, following the rules and procedures of the Scheme for Construction Contracts Part 1 (the Scheme). The Decision of the Adjudicator shall be binding on the parties until the dispute is finally resolved through agreement for by Arbitration under the CIMAR rules.”

“5.2 Consequently, either Clause 11 effects an incorporation of the adjudication provisions in the Scheme or under Section 108(5) of the Act the provisions of the Scheme operate as implied terms of the Sub-Contract. The Sub-Contact is silent as to nominating body.”

    1. By letter dated 26 September 2017, the Adjudicator (Mr Riches) wrote to MPB stating that he did not know which adjudication provisions applied and requesting “a copy of the relevant sections of the contract documents to show what if any Adjudication procedure applies”. In reply, Systech Ltd (MPB’s solicitors) provided Mr Riches and LGK with the final page of LGK’s Terms stating that “[t]he dispute resolution provisions are in Clause 11” and referring to section 5 of their Notice of Intention to Refer to Adjudication (set out above).
    2. MPB’s Referral Notice followed on 3 October 2017. It identified the contractual documents as including the Quotation and relied on the provision that “[a]ll Subcontract Orders are placed in conjunction with MP Appendix 1 Sub Contract Order Notes and are deemed to take precedence” as meaning that the Order and Appendix 1 took precedence over other contractual documents. By paragraph 14 of the Referral Notice, the Quotation was expressly stated to include LGK’s Terms. Several of those terms were then set out and relied upon by MPB including clause 2(a) (Contractor to carry out and complete the Works in accordance with the Quotation and in a good and workmanlike manner) and clause 8 (contractor to rectify defects notified within 12 months). Paragraphs 5.1 and 5.2 of the notice of intention to refer a dispute to adjudication were then repeated at paragraphs 2.1 and 2.2 of the Referral Notice under the heading “The Dispute Resolution Mechanism”.
    3. Paragraph 3.23.2 of the Referral Notice referred back to the first adjudication between the parties stating:

“Mr Dight decided that “the Parties intended to [sic] that the terms and conditions of the Referring Party’s quotation dated 11 April 2016 should stand as part of the Sub-contract save to the extent that they were varied by the express terms of the Respondent’s Sub-contractor Order” (Decision, paragraph A6). MPB agrees with Mr Dight’s decision that the terms of the Order and the Appendix took precedence over the other contractual documents and submits that this part of the Decision is binding on the parties.”

    1. Mr Riches issued his decision on 6 November 2017. Among other matters, he ordered LGK to pay MPB £76,056.67 (plus such VAT as is due in law) within 14 days of the decision.
    2. Enforcement proceedings were then issued by MPB in this Court on 4 January 2018. MPB’s Particulars of Claim (which bear the appropriate statement of truth) and the witness statement of Mr Twaites in support both referred to LGK’s Terms as forming part of the Contract and to clause 11 as the relevant term of the Contract pursuant to which the dispute was referred to adjudication. Paragraph 4 of the Particulars of Claim reads:

“The Sub-contract was evidenced in writing in the Claimant’s Sub-contractor Order dated 13 April 2016 and the documents referred to in the Sub-contractor Order and annexed thereto. The documents included both Parties’ terms and conditions and the Defendant’s revised quotation dated 11 April 2016 (“the Quotation”). Copies of the Sub-contractor Order and the other contractual documents appear at Tab 1 to the Particulars of Claim”.

Tab 1 included LGK’s Terms. Paragraph 13 of the POC went on to state:

“Either in accordance with the provisions of Clause 11 of the terms appended to the Defendant’s Quotation (which is a contractual document) or under the terms implied into the Sub-contract by the Scheme for Construction Contracts, the Claimant applied to an adjudicator nominating body, adjudication.co.uk, which appointed Mr John Riches (“the Adjudicator”) …”

The doctrine of approbation / reprobation

    1. The doctrine of approbation and reprobation prevents a party from electing to take and pursue inconsistent stances. So, for instance, a party cannot simultaneously approbate and reprobate the decision of an adjudicator. He cannot “blow hot and cold” about whether it is valid.
    2. In Codrington v Codrington [1875] LR 7 HL 854 at 866, Lord Chelmsford referred to the doctrine in these terms:

“He who accepts a benefit under an instrument must adopt the whole of it, confirming to all its provisions and renouncing every right inconsistent with it.”

    1. The doctrine was considered further in Lissenden v CAV Bosh Limited [1940] AC 412 in the House of Lords. In that case the appellant had obtained an award of compensation under the Workmen’s Compensation Act 1925. He appealed the award on the basis that the compensation was insufficient whilst meanwhile accepting payment of the sum awarded to him. The House of Lords held that the doctrine did not apply to the circumstances of the case. Viscount Maugham explained that the doctrine, emanating from Scotland, was the same as the equitable doctrine of election and that election in equity was concerned with preventing a person from taking a benefit under an instrument such as a will whilst making a claim against it (see pages 417-419 of the judgment). Lord Atkin said this about the doctrine at 429:

“But I also share the difficulty which I think all your Lordships feel as to the application of what has been called the doctrine of “approbation and reprobation.” The noble Lord on the Woolsack has to my mind clearly shown the limitations of that doctrine as defined in the law of Scotland from which it comes. In this country I do not think it expresses any formal legal concept: I regard it as a descriptive phrase equivalent to “blowing hot and cold.” I find great difficulty in placing such phrases in any legal category: though they may be applied correctly in defining what is meant by election whether at common law or in equity. In cases where the doctrine does apply the person concerned has the choice of two rights, either of which he is at liberty to adopt, but not both. Where the doctrine does apply, if the person to whom the choice belongs irrevocably and with knowledge adopts the one he cannot afterwards assert the other. Election between the liability of principal and agent is perhaps the most usual instance in common law.

The doctrine of election could have no place in the present case. The applicant is not faced with alternative rights: it is the same right that he claims but in larger degree …”

    1. In Banques des Marchands de Moscou v Kindersley [1951] 1 Ch 112 the liquidator of the claimant bank brought an action against the partners of a firm to recover certain monies. The partners issued a summons for an order dismissing the action on the grounds that the bank was non-existent. Notwithstanding that, the partners had sought to prove in the bank’s liquidation. The Court of Appeal held that there was no case of approbation and reprobation. Evershed MR said this:

“The phrases “approbating and reprobating” or “blowing hot and blowing cold” are expressive and useful, but if they are used to signify a valid answer to a claim or allegation they must be defined. Otherwise the claim or allegation would be liable to be rejected on the mere ground that the conduct of the party making it was regarded by the court as unmeritorious. From the authorities cited to us it seems to me to be clear that these phrases must be taken to express, first, that the party in question is to be treated as having made an election from which he cannot resile, and, second, that he will not be regarded, at least in a case such as the present, as having so elected unless he has taken a benefit under or arising out of the course of conduct which he has first pursued and with which his present action is inconsistent. These requirements appear to me to be inherent, for example, in Smith v. Baker and Ex parte Robertson. See also the speech of Lord Atkin in Evans v. Bartlam: “I find nothing in the facts analogous to cases where a party, having obtained and enjoyed material benefit from a judgment, has been held precluded from attacking it while he still is in enjoyment of the benefit. I cannot bring myself to think that a judgment debtor, who asks for and receives a stay of execution, approbates the judgment so as to preclude him thereafter from seeking to set it aside, whether by appeal or otherwise. Nor do I find it possible to apply the doctrine of election”: and the speech of Lord Russell of Killowen: “The doctrine of approbation and reprobation requires for its foundation inconsistency of conduct; as where a man, having accepted a benefit given him by a judgment, cannot allege the invalidity of the judgment which conferred the benefit”.

    1. More recently, the doctrine has been expressed more generally and in broader terms. Notably, in Express Newspapers Plc v News (UK) Ltd & others [1990] 1 WLR 1320, a breach of copyright case concerned with mutual copying of news stories, the Court held that the claimant’s resistance to judgment on the counterclaim was wholly inconsistent with its own claim and that on the basis of the doctrine of approbation and reprobation the claimant was not permitted to put forward two inconsistent cases. When giving judgment, Sir Nicolas Browne-Wilkinson VC put the doctrine in these terms:

“The fact is that if the defences now being put forward by the defendants in relation to the “Daily Star” article are good defences to the Ogilvy case, they were and are equally good defences to the claim by the “Daily Express” against “Today” newspaper relating to the Bordes claim. I think that what Mr. Montgomery describes as what is sauce for the goose is sauce for the gander has a rather narrower legal manifestation. There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance.

To apply that general doctrine to the present case is, I accept, a novel extension. But, in my judgment, the principle is one of general application and if, as I think, justice so requires, there is no reason why it should not be applied in the present case.”

    1. Both parties also referred me to a number of cases in which the doctrine has been raised in the context of adjudication. In particular, I was referred to PT Building Services Ltd v ROK Build Ltd [2008] EWHC 3434 (TCC), Twintec Ltd v Volkerfitzpatrick Ltd [2014] EWHC 10 (TCC), Rob Purton t/a Richwood Interiors v Kilker Projects Ltd [2015] EWHC 2624 (TCC), RMP Construction Services Ltd v Chalcroft Ltd [2015] EWHC 3737 (TCC), and Skymist Holdings Ltd v Grandlane Developments Ltd [2018] EHC 3504 (TCC). Save in relation to the PT Building Services case to which I refer further below, I have not found these decisions particularly pertinent. That is because they are concerned with challenges to an adjudicator’s jurisdiction on enforcement based, for instance, on whether the underlying construction contract was mis-described by the referring party or on whether the contractual provision relied upon to make the referral existed at all. This is not such a case.
    2. All the same, certain principles arise from the case law taken as a whole:

i) The first is that the approbating party must have elected, that is made his choice, clearly and unequivocally;

ii) The second is that it is usual but not necessary for the electing party to have taken a benefit from his election such as where he has taken a benefit under an instrument such as a will;

iii) Thirdly, the electing party’s subsequent conduct must be inconsistent with his earlier election or approbation.

In essence, the doctrine is about preventing inconsistent conduct and ensuring a just outcome.

The parties submissions

    1. LGK’s case is that having asserted that LGK’s Terms were incorporated into the Contract and relied on clause 11 as the basis for the referral of the dispute to adjudication, it is no longer open to MPB to deny the validity of the arbitration agreement. MPB should not be permitted to approbate and reprobate the validity / incorporation of clause 11. LGK also submit that, in their Referral Notice in Adjudication no. 3, MPB expressly agreed with a finding made by Mr Dight, the Adjudicator in Adjudication no. 1, to the effect that the terms of the Order (including Appendix 1) took precedence over LGK’s Terms and that this amounted to a final determination of any dispute as to the incorporation of LGK’s Terms into the Contract and was and remains binding on the parties.
    2. MPB submitted that to make good a case of approbation / reprobation, LGK needed to establish that MPB had unequivocally elected to incorporate LGK’s Terms into the Contract and that their new course was inconsistent with that earlier approach. There was no unequivocal election in the present case because MPB had relied on clause 11 or section 108(5) of the Housing Grants, Construction and Regeneration Act 1996 to found the adjudicator’s jurisdiction. MPB also submitted that usually it was necessary for a benefit to have been derived by the party relying on the doctrine from his opponent’s original course of conduct and that no such benefit had been conferred on MPB in the present case because MPB had the right to refer the dispute to adjudication by virtue of the Construction Act in any event.
    3. MPB also submitted, by reference to Sir Nicolas Browne-Wilkinson VC’s judgment in the Express Newspapers case, that whether the doctrine went beyond the doctrine of common law or equitable election was unresolved in the authorities to date. In the adjudication context relevant case law established that taking a different position on the contract on enforcement will not amount to approbation / reprobation where the adjudicator had jurisdiction over the dispute in any event. The adjudicator’s decision would remain enforceable. Further, none of the cases concerned approbation / reprobation of a dispute resolution clause and the Court should be very slow to extend the doctrine to a case such as this, all the more so in circumstances in which:

i) Adjudication is by its nature a temporarily binding “rough and ready” form of dispute resolution;

ii) Adjudication is very often conducted on one side or both in the absence of legal representation or advice;

iii) The “rough and ready” nature of the adjudication process is ameliorated by the fact that its effects are only temporary and the parties can go to Court or arbitration for a final determination; and

iv) The proposition that any party to an adjudication is to be treated as having elected unequivocally and for all time to commit to a particular position on the contract or anything else should be treated with utmost caution.

Discussion

  1. I do not need to decide whether MPB have precluded themselves from arguing that LGK’s Terms were not incorporated into the Contract. What I need to decide is whether, having relied on the dispute resolution provision at clause 11 of those terms, it is now open to MPB to deny that it is bound by the second limb of that mechanism, that is by the arbitration agreement.
  2. In my judgment MPB clearly and unequivocally elected to rely on clause 11 of LGK’s terms as setting out the dispute resolution provisions governing the parties’ relationship. Both the notice of intention to refer a dispute to adjudication and the Referral Notice expressly relied on clause 11 as setting out the applicable dispute resolution provisions or to quote the Referral Notice itself “[t]he Dispute Resolution Mechanism”. That was further confirmed to the Adjudicator and LGK by Systech’s letter dated 26 September 2017 stating that “[t]he dispute resolution provisions are in Clause 11” and enclosing a copy of the relevant page of LGK’s terms.
  3. MPB submit that there was no unequivocal election because they relied on either clause 11 or section 108(5) of the Housing Grants, Construction and Regeneration Act 1996 to found the jurisdiction of the adjudicator. I do not think that is correct. In expressly and repeatedly relying and quoting clause 11 of LGK’s terms in the adjudication and subsequent enforcement proceedings, MPB asserted the right both to refer the dispute to adjudication and to have the decision treated as binding on the parties until finally resolved by agreement or by arbitration under the CIMAR rules. Clause 11 envisages a two tier dispute resolution mechanism. The first tier consists of a referral of a dispute to adjudication and the second final determination of the dispute by arbitration. However, the two limbs of clause 11 go hand in hand since the second limb of clause 11 specifies the extent of the binding nature of the decision the subject of the first tier of the dispute resolution mechanism.
  4. MPB also submitted that there was no election because they were bound by the findings of Mr Dight in the first adjudication to the effect that LGK’s Terms formed part of the Contract. I don’t accept that submission. It was based primarily on the fact that in the first adjudication the adjudicator awarded LGK interest on the basis of a clause in the LGK Terms. That does not in my judgment explain the repeated and express reliance on the part of MPB in Adjudication no. 3 on clause 11 of the LGK Terms and there is no suggestion that MPB had any regard to Mr Dight’s findings when making the averments now relied upon by LGK as approbating the incorporation of the LGK Terms into the Contract. Indeed, whilst not binding and for reasons that are not clear, Mr Dight rejected clause 11 as founding his jurisdiction in Adjudication no. 1. MPB had a choice and they chose to invoke the dispute resolution mechanism set out in clause 11.
  5. LGK did not take issue with MPB’s case that the dispute was governed by the dispute resolution mechanism set out in clause 11 and (until MPB raised its jurisdiction challenge in the arbitration proceedings) the parties proceeded according to those dispute resolution provisions.
  6. By challenging the arbitration agreement, MPB are now asserting a different and inconsistent right that is to have the adjudicator’s decision treated as binding on the parties until finally resolved by agreement or in the Courts, that is in a different forum and under different procedural rules.
  7. Although, as rightly submitted by Mr Chennells, the doctrine of equitable election usually requires the election to have conferred a benefit on the party electing that is not invariably the case. As can be seen from the passage from his judgment in Banque des Marchands de Moscou v Kindersley [1951] 1 Ch 112, Evershed MR left the position open when holding that a party would not be taken to have made an election from which he could not resile unless he had taken a benefit from that course of conduct “at least in a case such as the present”. In PT Building Services Ltd v ROK Build Limited [2008] EWHC 3434 (TCC), the claimant relied in part on the fact that ROK had paid the adjudicator’s fees to submit that ROK had thereby elected to treat the decision as valid. ROK submitted that it was difficult to see how the payment could be characterised as ROK taking a benefit. However, Ramsey J held that “the taking of a benefit, whilst sufficient for there to be an election, is not necessary” and that what had to be determined was whether there had been an election (at [29]). He went on to hold that by making the payment ROK had elected to treat the adjudicator’s decision on fees and expenses as being a valid decision meaning that ROK could no longer challenge that decision. It is therefore clear that taking a benefit is not an invariable requirement of the doctrine.
  8. MPB submit that their reliance in the present case on clause 11 of LGK’s Terms did not confer a benefit upon them since they could just as easily have relied solely on section 108(5) of the Housing Grants, Construction and Regeneration Act 1996 to refer the dispute to adjudication. I think there is force in that submission although reliance on clause 11 will have reinforced MPB’s reliance on section 108(5) of the Act. Reliance on clause 11 also went beyond reliance on the first limb of the clause and provided certainty between the parties as to the future shape the dispute resolution process should take. Be that as it may, obtaining a benefit from the election is not necessary. What is key is that there should have been an election. In choosing to rely on clause 11 as the applicable dispute resolution mechanism for the purposes of the adjudication, MPB could not later challenge the second tier of that provision.
  9. Further, the requirement for a benefit to have been conferred on the party electing makes sense in the context of election and estoppel. It explains why it would be unjust to allow a party to reprobate. However, a detriment suffered by the other party will also explain why it would be unjust to allow the first party to reprobate. Here the parties were in agreement as to the applicable dispute resolution mechanism. According to that mechanism the adjudicator’s decision was to be binding until the dispute was finally resolved through agreement or arbitration. Not surprisingly, having lost the enforcement proceedings and in accordance with MPB’s approach, LGK therefore served a notice of arbitration on MPB. If LGK were now permitted to reprobate its previous case that the dispute resolution mechanism was as set out in clause 11 LGK will have both wasted time and costs in seeking to have the dispute finally resolved by arbitration. In those circumstances, in my judgment it would be unjust to allow MPB to approbate and then reprobate the dispute resolution mechanism set out in clause 11 of LGK’s Terms.
  10. Accordingly, I consider that the facts of the present case fall within the confines of the equitable doctrine of election without having to consider the wider general statement of principle set out by Sir Nicholas Browne-Wilkinson VC in the Express Newspapers Plc case. However, were it necessary, I would have held that the general principle enunciated by Sir Nicholas Browne-Wilkinson should extend to the present case and that justice or fairness requires that having elected to adopt the dispute resolution mechanism set out in clause 11 of LGK’s Terms, MPB should be held to it.
  11. MPB submitted that the Court should be slow to find that the doctrine of approbation / reprobation should apply in relation to things said and done in the context of an adjudication where by its nature adjudication is only a temporarily binding, “rough and ready” form of dispute resolution, very often conducted by the parties in the absence of legal representation and no more than a precursor to court or arbitration proceedings in which the parties may set out their cases in full. The point was also made on behalf of MPB that if things said and done in adjudication proceedings are to be treated as unequivocal elections binding how a party may put its case for all time that would encourage parties to crawl all over what had been said and done in those proceedings in the hope of preventing the other party from developing its case in subsequent proceedings. I have considerable sympathy with those submissions. It seems to me that a party’s case may change over time, that amendments may be made and even admissions withdrawn in certain circumstances. However, this case is not about whether MPB should be bound by how they put their case in the adjudication. Here the approbation and reprobation concern a party’s election to use a particular dispute resolution procedure and goes beyond how MPB put their case in the adjudication.
  12. Finally I need not address LGK’s case based on paragraph 3.23.2 of the Referral Notice to the effect that MPB are bound by their agreement that the terms of the Order and Appendix 1 should take precedence over the other contractual documents. I do not think this adds anything to the fact that MPB elected to adhere to the dispute resolution mechanism set out in clause 11 of LGK’s terms for the reasons already stated.
  13. Accordingly, MPB’s application to set aside the Award is dismissed with costs. I will deal with any consequential issues, if necessary, on paper.

Lenkor Energy Trading DMCC v Puri [2020] EWHC 75 (QB)

Neutral Citation Number: [2020] EWHC 75 (QB)
Case No. QB-2019-000183

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL
23rd January 2020

B e f o r e :

MASTER DAVISON
____________________

Between:

LENKOR ENERGY TRADING DMCC
Claimant

– and –

 
IRFAN IQBAL PURI
Defendant

____________________

Mr James Collins QC and Mr Philip Jones (Mackrell) for the Claimant
Mr Nigel Cooper QC and Ms Zahra Al-Rikabi (Hill Dickinson) for the Defendant

Hearing date: 13 January 2020
____________________

HTML VERSION OF JUDGMENT APPROVED
____________________

Crown Copyright ©

Master Davison:

Introduction

    1. This is the claimant’s application for summary judgment. The application seeks recognition at common law of the judgment of the Dubai First Instance Court (Judge Haidar Abdulrahim Hajj Omar) dated 30 May 2017. Judgment was entered against the defendant, Mr Puri, for AED (Dirhams)123,727,048 (plus interest at 9% per year). The total amount claimed within the Claim Form including interest is AED 173,342,180.
    2. There was an appeals process which included two visits to the UAE’s highest court, the Court of Cassation. The net effect of the appeals was to uphold the judgment. It is common ground that the judgment is the final and conclusive judgment of a court of competent jurisdiction. Therefore the prima facie position at common law is that it is to be recognised and enforced within this jurisdiction. But the defendant resists on the basis that recognition would be contrary to public policy.

Narrative background

    1. Mr Puri was the sole shareholder in and managing director of a Dubai company, IP Commodities DMCC (“IPC Dubai”). On 20 July 2014 and 7 August 2014 IPC Dubai drew two cheques in favour of the claimant (“Lenkor Dubai”) on a Dubai branch of Habib Bank Ltd. These were cheque 156851 for AED 91,400,200 and cheque 156862 for AED 117,100,000. Each of the cheques was signed by Mr Puri. Neither cheque stated expressly that Mr Puri was signing on behalf of IPC Dubai, but both had the name of that company stamped on them. The cheques were delivered to the claimant pursuant to an agreement made on 4 June 2014 between Lenkor Energy Trading Limited (“Lenkor HK”) (a sister company of the claimant incorporated in Hong Kong), IPC Dubai and a Pakistani corporate entity, which was the Buyer. There is no need to identify this entity in this judgment and I will continue to refer to it simply as “the Buyer”. The agreement provided for Lenkor HK to sell six cargoes of gasoil to the Buyer, with IPC Dubai acting as middleman (“the Tripartite Agreement”).
    2. Paragraph 15 of the Tripartite Agreement provided for payment by Letter of Credit as to 50% of each cargo value and by telegraphic transfer as to the other 50%. By paragraph 15(c) IPC Dubai was “to issue a payment guarantee for hundred percent of the cargo value by cheque in favour of [Lenkor Dubai] … 3 days before the vessel commences loading”. It was pursuant to this provision that the two cheques referred to above were drawn.
    3. The payment provisions were varied so that payment was in fact agreed to be made by the Buyer to IPC Dubai as Lenkor HK’s nominee. Two cargoes were delivered to the Buyer. The discharge port was Karachi. Pursuant to the payment obligations as varied, the Buyer made part-payment of approximately US$35m to IPC Dubai. This consisted of a payment of USD 4,008,900 to IPC Dubai in Dubai and (at IPC Dubai’s direction) PKR 3,196,855,717 (Rupees) to its sister company in Pakistan, IP Commodities Pakistan Ltd (“IPC Pakistan”). However, neither IPC Dubai nor IPC Pakistan paid any of this money over to Lenkor HK. The Buyer also refused to pay the balance.
    4. As a result, Lenkor HK initiated arbitration proceedings in London, with Mr Steven Berry QC as arbitrator. The main issues in the arbitration were resolved by the corrected and clarified partial final award of 26 February 2018. IPC Dubai was found liable to pay to Lenkor HK the monies which it and its sister company, IPC Pakistan, had received. The Buyer was found liable to pay a sum in US dollars which represented the difference (or “extra”) between what it had already paid over to IPC Dubai and the actual value of the cargoes. The arbitrator did not award Lenkor HK the full contract price of the cargoes because he found that the contract was tainted by illegality. The nature of that illegality was that Lenkor HK, through its servant or agent Mr Atiyeh, intended to deliver and did deliver a type of gasoil known as “Heavy End Product” sourced from Iran rather than the “High Speed Diesel” sourced from the UAE which the Tripartite Agreement actually contemplated and provided for. To this end, load port documents such as bills of lading were falsified and so were loadport test results. IPC Dubai and Mr Puri were complicit in this deception – though the arbitrator found that Lenkor HK was the more culpable party.
    5. The arbitration award has not been satisfied.
    6. With no payment received for the two delivered cargoes, the claimant also sought to cash the cheques. There is a dispute as to whether or how, and if so when, they were presented. However this may be, IPC Dubai did not have sufficient funds in its account to honour them and they were not honoured. This led to both criminal and civil proceedings in Dubai against Mr Puri.
    7. In the criminal proceedings, Mr Puri was convicted for signing the dishonoured cheques and sentenced to 3 years in prison.
    8. The civil proceedings resulted in the judgment set out above. The legal basis for the judgment was Article 599/2 of Dubai’s Commercial Transactions Law. This was summarised by the Dubai Court of Appeal as follows:

“… the cheque drawer for another account is personally liable in respect of his funds in the event that the claim of the beneficiary is filed on the basis of the bank obligation in accordance with Article 599/2 of the Commercial Transactions Law, unless the drawer proves that the drawee of the cheque had at the time of its drawing sufficient consideration for payment.”

(The evident intention of this statutory provision was to encourage probity in cheque transactions by placing on the drawer a burden to ensure that the drawee account was in funds.)

    1. An important fact to note is that the Dubai court did not order Mr Puri to pay the full value of the cheques. This amount would have been AED 208,500,200. What was ordered was AED 123,272,048 which was the total amount “received by [Mr Puri] and his company [IPC Dubai]”; see the Dubai Court of Appeal’s judgment following the hearing of 28 March 2018. In other words, Mr Puri was found liable for the sums which the Buyer had paid over to IPC Dubai but which had not been remitted onwards to the Seller.
    2. The interest of 9% was ordered to run from the due dates of the cheques (which fell in the last quarter of 2014). The rate appears to have been set by the exercise of a judicial discretion. The claimant asked for 12%; the judge awarded 9%.
    3. The Claim Form was issued on 17 January 2019. The application for summary judgment was issued on 26 July 2019.

The law on recognition of judgments

    1. The relevant law for present purposes is set out in Rules 42 and 51 of Dicey, Morris and Collins on the Conflict of Laws, 15th Ed:

Rule 42

(1) Subject to the Exceptions hereinafter mentioned and to Rule 62 (international conventions), a foreign judgment in personam given by the court of a foreign country with jurisdiction to give that judgment in accordance with the principles set out in Rules 43 to 46, and which is not impeachable under any of Rules 49 to 54, may be enforced by a claim or counterclaim for the amount due under it if the judgment is

(a) for a debt, or definite sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty); and

(b) final and conclusive,

but not otherwise. Provided that a foreign judgment may be final and conclusive, though it is subject to an appeal, and though an appeal against it is actually pending in the foreign country where it was given.

(2) A foreign judgment given by the court of a foreign country with jurisdiction to give that judgment in accordance with the principles set out in Rules 43 to 46, which is not impeachable under any of Rules 49 to 54 and which is final and conclusive on the merits, is entitled to recognition at common law and may be relied on in proceedings in England.

Rule 51

A foreign judgment is impeachable on the ground that its enforcement or, as the case may be, recognition, would be contrary to public policy.

    1. In accordance with Rule 51, it is the judgment and not the underlying transaction upon which the judgment is based which must offend English public policy. That point has been illustrated in a number of cases, but perhaps most economically in the case of Omnium De Traitement Et De Valorisation v Hilmarton [1999] 2 Lloyd’s Rep 222, a decision of Timothy Walker J. An ICC arbitration applying Swiss law as both the law of the contract and the curial law upheld a claim for fees rendered in respect of services performed in Algeria. The services consisted of approaching public servants and government officials in order to obtain a public works contract for OTV’s benefit. These activities did not involve bribery or corruption but were nevertheless contrary to an Algerian statute and the contract was therefore unlawful in its place of performance. OTV offered this as a reason why the arbitrator’s award should not be recognised in England. Timothy Walker J stated the point shortly as follows:

The public policy point invoked by OTV is that the agreement was unlawful in its place of performance. It is however in my judgment necessary for OTV to go further and establish that this infects the award as well.

He went on to say this:

… I am not adjudicating upon the underlying contract. I am deciding whether or not an arbitration award should be enforced in England. In this context it seems to me that (absent a finding of fact of corrupt practices which would give rise to obvious public policy considerations) the fact that English law would or might have arrived at a different result is nothing to the point. Indeed, the reason for the different result is that Swiss law is different from English law, and the parties chose Swiss law and Swiss arbitration. If anything, this consideration dictates (as a matter of policy of the upholding of international arbirtral awards) that the award should be enforced.

    1. Clearly, the same policy considerations would apply to judgments of a foreign court.

The law on summary judgment

    1. The law governing the application is very familiar. In relevant part, CPR rule 24.2 says:

The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if – (a) it considers that – (ii) that defendant has no real prospect of successfully defending the claim or issue and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.

    1. The approach to summary judgment applications was set out by Lewison J in Easyair Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) at paragraph 15. But, as Mr Collins QC, who appeared for the claimant, pointed out, that approach is generally directed to cases where there are disputes of fact. In the present case there are no significant disputes of fact. The issues are legal issues in respect of which the following statement by Moore-Bick LJ in ICI Chemicals & Polymers Ltd [2007] EWCA Civ 725 has resonance: “if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better”.

The public policy defences

    1. These sub-divided into (1) illegality, (2) impermissible piercing of the corporate veil and (3) penalty. I will summarise the submissions of Mr Cooper QC, who appeared for the defendant, under each heading.

Illegality

    1. This heading might better have been labelled “illegality of underlying transaction”.
    2. The cheques had been given pursuant to paragraph 15(c) of the Tripartite Agreement as a payment guarantee for the contract price of the cargoes of gasoil. The claim for the contract price had been found to be tainted by illegality so that the arbitrator had, in accordance with the law established by Patel v Mirza [2016] UKSC 42, found it proportionate to deny that claim (though he upheld Lenkor HK’s claim for restitution). Under English law, the finding that the principal obligation was tainted by illegality would have prevented enforcement of the guarantee; see e.g. Heald v O’Connor [1971] 1 WLR 497. Although Mr Cooper QC acknowledged that the cheques and the Dubai judgment gave rise to autonomous rights and obligations, he submitted that the court should look at the reality. And the reality was that there was a finding of illegality of the underlying transaction which tainted both the cheques and the claim to recognise the judgment. Another way of putting it was that the claimant was trying to enforce “by the back door” a claim which the arbitrator had found that it was not entitled to enforce.
    3. Mr Cooper QC sought to distinguish the OTV case on the ground that in that case the arbitrator had addressed and dealt with the issue of illegality. In this case, the Dubai court’s decision pre-dated that of the arbitrator and the issue of illegality had not been aired. Mr Cooper QC submitted that I should therefore address the issue and form my own view. In support of that proposition, he referred me to a passage in a Court of Appeal decision relied upon by Timothy Walker J in OTV, namely Westacre Investments Inc v Jugoimport SPDR Holding Co Ltd [2000] QB 288 at 311. It is sufficient if I cite the closing words of the passage relied upon. Waller LJ said this:

There are authorities which in my view support the proposition that where illegality is raised and at least where the evidence of illegality is so strong that if not answered it would be decisive of the case, the court would not allow reliance on issue estoppel, or on the principle in Henderson v. Henderson to prevent the point being ventilated. In other words, illegality can if raised provide the special circumstances in which an estoppel will not provide a defence.

    1. Mr Cooper QC also referred me to Azimut-Benetti SpA v Healey [2010] EWHC 2234 (Comm), which is summarised in Andrews and Millett, The Law of Guarantees, 7th Ed, at 6-019:

If a liquidated damages clause in the underlying contract is struck down as a penalty, a “saving” clause in the guarantee providing that the guarantor is not to be released from liability even if the contract is found to be invalid or unenforceable is unlikely to assist the creditor: in Azimut-Benetti SpA v Healey [2010] EWHC 2234 (Comm); [2011] 1 Lloyd’s Rep. 473, Blair J held (obiter) that it would be contrary to principle to allow the indirect enforcement of a claim for a penalty by such means. Moreover, as the guarantee related to all the principal’s obligations, it could not apply to a penalty, because that would never give rise to any “obligation.”

    1. The decision of Blair J that the wording of the guarantee did not overcome the finding of illegality affecting the underlying obligation was submitted to be encouragement for me to scrutinise the transaction underlying the cheques in this case. That transaction had been found to be unenforceable. So too the cheques, which had been drawn in support.

Impermissible piercing of the corporate veil

    1. Mr Cooper QC’s submissions on this point were focused on the respects in which the Dubai judgment ran counter to well-recognised principles of English law. In brief summary, these were as follows. Mr Puri was being made personally liable for the debts of IPC Dubai, which was the relevant party (as guarantor) to the Tripartite Agreement and the holder of the account upon which the cheques were drawn. The cheques had not been presented or had been presented out of time – or there was at least an issue about that. The combination of these matters was to impose an exorbitant liability on Mr Puri for sums which he had not agreed to guarantee.

Penalty

    1. Mr Cooper QC summarised the test under English law as “whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party’s interest in the performance of the contract” and Mr Collins QC did not dispute this formulation. Mr Cooper QC submitted that the interest rate of 9% (taken from the date the cheques were due) was exorbitant in that it had by now added some 40% to the principal sum. Taken in combination with the principal sum, the amount for which Mr Puri was liable was said to be an exorbitant liability.

Discussion

    1. I will not recite the submissions of Mr Collins QC. They appear sufficiently from what follows.

(1) Illegality

    1. The starting point is Rule 51 of Dicey. The judgment is only impeachable on the ground that its recognition would be contrary to public policy. It is agreed between the parties that the basis of the judgment was Article 599/2 of Dubai’s Commercial Transactions Law, which imposes a personal liability on the drawer of a cheque where the drawer cannot prove (the burden being on him) that the account was sufficiently in funds. As already observed, there is a powerful rationale behind this statutory liability. It is not the law of this country. But it cannot be said to offend any principle of English public policy. English law certainly recognises that a cheque gives rise to rights and liabilities that are unconditional and autonomous such that a cheque is treated as akin to cash. That the law of Dubai provides for more onerous liabilities is neither surprising nor repugnant.
    2. I, of course, accept that there are circumstances where an English court might enquire into the underlying transactions which gave rise to the judgment. Timothy Walker J in the OTV case gave the examples of an award or judgment which was “infected” with the underlying public policy point or “which contained a finding of fact of corrupt practices which would give rise to obvious public policy considerations”. In the course of his submissions Mr Collins QC gave the further (and very extreme) example of a money judgment in respect of a “contract killing”. There are no such circumstances here. The most that can be said is that the judgment does not confront the issue of the illegality affecting the Tripartite Agreement. But to this there are two decisive answers:

(i) The judgment did not have to confront this issue. The judgment was squarely based upon the legal consequences of signing cheques in Dubai in circumstances where there were insufficient funds to meet them. On the face of the judgment, those legal consequences were self-contained and independent. That an English court might have approached matters differently is irrelevant. It was a Dubai court applying the law of Dubai.

(ii) Even if it were permissible to look at the underlying transactions, the question that would arise would be whether enforcing the judgment would amount to indirectly enforcing the Buyer’s obligation to pay the contract price. It would not. The Dubai judgment was for a sum equal to the amount which the Buyer paid over to IPC Dubai, but which was not remitted onwards to Lenkor HK. This was considerably less than the contract price. If the judgment indirectly enforced any obligation, it was IPC Dubai’s obligation to account to Lenkor HK for the sums which it had received. This was found by the arbitrator to be an enforceable obligation both in contract and restitution. Thus, if I were required to form my own view, it would be that the underlying illegality was confined to the Buyer’s obligation to pay the contract price and that that obligation was not indirectly enforced by the civil claim and judgment in Dubai. To express that proposition in the language used in the Westacre decision (albeit that the passage relied on related to issue estoppel and does not neatly “map” on to the question of recognition), illegality would not have been “decisive of the case”.

    1. For these reasons, I find that illegality is no bar to recognition of the Dubai judgment. I would add two further observations both of which concern the overall fairness of that conclusion to Mr Puri. In relation to point (i) above, Mr Puri operated in Dubai and he knew or must be taken to have known the consequences of putting his name to cheques there. In relation to point (ii), IPC Dubai is a company of which he was at the material time the managing director and sole shareholder. IPC Dubai has been found liable by the arbitrator to pay to Lenkor HK all the monies which it received in respect of the two cargoes of gasoil. The factors which favoured that finding were that IPC Dubai was privy to the deception and that the contractual claim against IPC Dubai would not amount to a profit for Lenkor HK but would in substance be part restitution to it of the value of the cargoes. These factors would have equal force with respect to Mr Puri, who was the controlling mind of IPC Dubai and a key actor in the relevant events.

(2) Impermissible piercing of the corporate veil

    1. This point and the following one can be dealt with shortly. English law would not have imposed personal liability on Mr Puri in the same way that Dubai law did. That is because English law does not have a statutory provision equivalent to Article 599/2 of the Commercial Transactions Law, (though this is not to say that English law could offer no remedies at all in the circumstances under consideration). It does not, however, follow that English public policy would be offended by recognising the judgment. The rules that Mr Cooper QC referred to are English rules relating to English company and commercial law. They are not principles of public policy. The case against Mr Puri in Dubai was resolved according to the rules which the laws of Dubai apply to Dubai companies and to individuals who write cheques on Dubai accounts. As I have already observed, Mr Puri operated in Dubai and he knew that in writing the cheques he was subject to Dubai law. As I have already said, there is nothing repugnant to English public policy in recognising a judgment based upon Article 599/2. And to do so does not, as it seems to me, involve recognising that IPC Dubai’s corporate veil has been pierced. The liability was Mr Puri’s personal liability under that Article.

(3) Penalty

    1. Self-evidently, the judgment for the principal sum cannot be characterised as a penalty. As to the interest period, this, in England under the Bills of Exchange Act 1882, would have run from the date that the cheques were presented and so there is little, if any, divergence from Dubai law. As to the interest rate, 9% is only 1% higher than the judgment debt rate in England and only ¼% higher than the current rate under the Late Payment of Commercial Debts (Interest) Act 1998. In the light of this, to characterise the interest rate of 9% as amounting to a penalty is unrealistic.

Conclusion

  1. The clear conclusion that I have come to is that the judgment of the Dubai court should be recognised and summary judgment in favour of the claimant must follow.

Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2020] EWCA Civ 6

Neutral Citation Number: [2020] EWCA Civ 6
Case No: A4/2019/0944

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
SIR MICHAEL BURTON (Sitting as a Judge of the High Court)
CL-2017-000792

Royal Courts of Justice
Strand, London, WC2A 2LL
20/01/2020

B e f o r e :

LORD JUSTICE McCOMBE
LORD JUSTICE FLAUX
and
SIR BERNARD RIX

____________________

Between:

KABAB-JI S.A.L. (LEBANON)
Appellant
– and –
 
KOUT FOOD GROUP (KUWAIT)
Respondent

____________________

Nicholas Tse and Ravinder Thukral (instructed by Brown Rudnick LLP) for the Appellant
Ricky Diwan QC (instructed by RPC) for the Respondent
Hearing dates: 3, 4 and 5 December 2019

____________________

HTML VERSION OF APPROVED JUDGMENT
____________________

Crown Copyright ©

Lord Justice Flaux:

Introduction

    1. This appeal, which is brought with the permission of Males LJ against the Order dated 8 April 2019 of Sir Michael Burton sitting as a Judge of the High Court in the Commercial Court, raises issues (i) as to the governing law of an arbitration agreement which provides for arbitration in Paris but which is contained in a main agreement which is expressly governed by English law and (ii) as to whether the respondent became a party to the main agreement and/or the arbitration agreement notwithstanding the presence of No Oral Modification provisions in the main contract. The respondent cross-appeals, again with the permission of Males LJ, against the judge’s decision not to reach a final determination of the particular preliminary issue which is the subject of the appeal.

Factual and procedural background

    1. The appellant, a Lebanese company, entered into a Franchise Development Agreement dated 16 July 2001 for a period of 10 years with Al Homaizi Foodstuff Company (“AHFC”), a Kuwaiti company, as Licensee. In 2005 AHFC became a subsidiary of the respondent (which I will refer to as “KFG”) following a corporate reorganisation. A dispute arose under the FDA which the appellant referred to arbitration before the ICC in Paris pursuant to Article 14 of the FDA (the relevant provisions of which are set out at [8] below). That arbitration was only commenced against KFG, not AHFC.
    2. The arbitrators had to consider a jurisdictional issue as to whether KFG had become an additional party to the FDA and thus the arbitration agreement in Article 14 and went on to consider issues on the merits as to whether there had been a breach of the FDA and claims for remedies and relief (an application by KFG to bifurcate having failed). By an Award dated 11 September 2017, the majority arbitrators (Professor Dr Mohamed Abdel Wahab and M Bruno Leurent, neither of whom is an English qualified lawyer) found that the question of whether KFG was bound by the arbitration agreement was a matter of French law, but the issue of whether a transfer of substantive rights and obligations took place was governed by English law. They went on to conclude that, as a matter of English law, a ‘novation’ was to be inferred by the conduct of the parties adding KFG as the main franchisee. They determined that, on the merits, KFG was in breach of the FDA.
    3. The dissenting third arbitrator Mr Klaus Reichert SC, who is an English qualified lawyer, agreed that French law applied to the issue of validity of the arbitration agreement, but dissented by concluding that the appellant’s case should fail because, applying English law, KFG never became a counterparty to the FDA which meant that it owed no obligation to the appellant under the FDA and that the appellant had sued the wrong party.
    4. Following the publication of the Award, on 13 December 2017, KFG filed an annulment application before the French courts, Paris being the seat of the arbitration. That application is due to be heard by the Cour d’appel de Paris in February 2020. On 21 December 2017, the appellant issued proceedings in the Commercial Court in London under section 101 of the Arbitration Act 1996 for enforcement of the Award as a judgment. On 7 February 2018, Popplewell J made an order ex parte for the Award to be enforced as a judgment. On 1 March 2018, KFG applied under section 103(2)(a) and (b) of the Arbitration Act 1996 for an order that recognition and enforcement of the Award as a judgment be refused and an order setting aside the order of Popplewell J. It also sought case management directions including in respect of the trial of preliminary issues.
    5. At a case management conference on 15 June 2018, Teare J made an order for the trial of certain preliminary issues. He also ordered that the appellant’s applications for an adjournment of the enforcement proceedings in England pending the determination of the French proceedings and for security for the Award be dealt with by the Court at the same hearing as the preliminary issues.
    6. These applications all came before Sir Michael Burton for hearing on 12 to 14 March 2019. On the third day of the hearing, with the agreement of the parties, the judge reformulated the preliminary issues, as ordered by Teare J, as follows:

(1) Does the law governing the validity of the arbitration agreement govern the question of whether [KFG] became a party to the arbitration agreement?

(2) What is that law?

(3) At English law, has [KFG] become a party to (i) the FDA and (ii) if different, the arbitration agreement?

(4) What is the law governing the capacity of the Defendant to join the arbitration agreement?

The terms of the FDA

    1. Before considering the judgment of Sir Michael Burton, it is necessary to set out the terms of the FDA which were relevant to his decision and which are relevant to the present appeal:

“Article 1: Content of the Agreement

This Agreement consists of the foregoing paragraphs, the terms of agreement set forth herein below, the documents stated in it, and any effective Exhibit(s), Schedule(s) or Amendment(s) to the Agreement or to its attachments which shall be signed later on by both Parties. It shall be construed as a whole and each of the documents mentioned is to be regarded as an integral part of this Agreement and shall be interpreted as complementing the others.

Article 2: Good Faith and Fair Dealing

In carrying out their obligations under the Agreement, the Parties shall act in accordance with good faith and fair dealing. The provisions of the Agreement, as well as any statements made by the Parties in connection therewith, shall be interpreted in good faith.

Article 3: Grant of Rights

3.1. License: … This grant is intended to be strictly personal in nature to the LICENSEE and no rights hereunder whatsoever may be assigned or transferred by LICENSEE in whole or in part without the prior written approval of LICENSOR.

Article 14: Settlement of Disputes

14.2. Except for those matters which specifically involve the Mark, any dispute, controversy or claim between LICENSOR and LICENSEE with respect to any issue arising out of or relating to this Agreement or the breach thereof, …shall, failing amicable settlement, on request of LICENSOR or LICENSEE, be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

14.3. The arbitrator(s) shall apply the provisions contained in the Agreement. The arbitrator(s) shall also apply principles of law generally recognised in international transactions. The arbitrator(s) may have to take into consideration some mandatory provisions of some countries i.e. provisions that appear later on to have an influence on the Agreement. Under no circumstances shall the arbitrator(s) apply any rule(s) that contradict(s) the strict wording of the Agreement.

14.4 Nothing contained herein shall in any way deprive LICENSOR of its rights to seek and obtain a temporary restraining order, preliminary/permanent injunction or other equitable relief from a court of competent jurisdiction under any applicable law. All remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law.

14.5. The arbitration shall be conducted in the English language, in Paris, France.

Article 15: Governing Law

This Agreement shall be governed by and construed in accordance with the laws of England.

Article 17: Waiver

17.1. Any waiver of any term or condition of the Agreement must be in writing and signed by the [a]ffected party…

Article 19: Rights not Transferable

The parties hereto agree that all rights granted LICENSEE under this Agreement are personal in nature and are granted in reliance upon various personal and financial qualifications and attributes of LICENSEE. LICENSEE’S interest under this agreement is not transferable or assignable, under any circumstances whatsoever, voluntarily, by operation of law or otherwise without the written consent of LICENSOR or purported transfer or assignment of all or any part of such interest shall immediately terminate this Agreement without further action of the parties and without liability to LICENSOR or its designee of any nature.

Article 24: Entire Agreement

… No interpretation, change, termination or waiver of any provision hereof, and no consent or approval hereunder, shall be binding upon the other party or effective unless in writing signed by LICENSEE and by an authorized representative of LICENSOR or its designee.

Article 25: Survival of Terms and Conditions of Agreement

The rights and obligations contained in the following provisions of this Agreement shall survive the expiration or termination of this Agreement: articles 10, 11.2, 13, 15, 16, 18, 20, 23, 25, 26, 27, 28.2, 29, 30 and 33.

Article 26: Amendment of Agreement

The Agreement may only be amended or modified by a written document executed by duly authorised representatives of both Parties.”

The judgment below

    1. The judge noted at [8] of the judgment, by reference to the decision of the Supreme Court in Dallah Real Estate v Ministry of Religious Affairs [2010] UKSC 46; [2011] 1 AC 763, that an application such as was being made by KFG under section 103(2) was dealt with as a complete rehearing before the Court.
    2. In relation to the first preliminary issue, the judge noted at [10] of the judgment that there was no issue between the parties that the law governing the validity of the arbitration agreement governs the question of whether KFG became a party to the arbitration agreement. As to the second preliminary issue of what that law is, the judge said at [11] that this was simply a matter of applying section 103(2)(b) of the Arbitration Act 1996 which provides:

“(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves—

(b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made…”

    1. The judge then determined that the wording “the law to which the parties subjected [the arbitration agreement]” and “any indication thereon” allowed not simply for an express but an implied choice of law, which is clearly correct. This was no longer disputed by the appellant before this Court, so that it is not necessary to consider the point further.
    2. The judge then considered what he described as “the competing views” as to the application of an implied choice of law between the law of the ‘host’ agreement and the law of the seat of the arbitration. He cited what Lord Mustill said in Channel Tunnel Group Ltd v Balfour Beatty Ltd [1993] AC 334 at 357-8, that it would be exceptional for the proper law of the arbitration agreement to be different from an express choice of law for the host contract. The judge also quoted [26] of the judgment of Moore-Bick LJ in Sulamerica v Enesa Engelharia [2012] EWCA Civ 638; [2013] 1 WLR 102, to the effect that where the arbitration agreement forms part of the substantive contract an express choice of law to govern that substantive contract is “an important factor to be taken into account” and “likely…to lead to the conclusion that the parties intended the arbitration agreement to be governed by the same system of law as the substantive contract, unless there are other factors present which point to a different conclusion”.
    3. At [15], the judge then quoted [22] of the judgment of Longmore LJ in C v D [2007] EWCA Civ 1282; [2008] All ER (Comm) 1001 which said:

“The question then arises whether, if there is no express law of the arbitration agreement, the law with which that agreement has its closest and most real connection is the law of the underlying contract or the law of the seat of the arbitration. It seems to me that …the answer is more likely to be the law of the seat of the arbitration than the law of the underlying contract.”

    1. The judge said at [16] that, however, Steven Chong J in the High Court of Singapore in BCY v BCZ [2016] 2 Lloyd’s Rep 583 at [65] had said that, adopting Sulamerica: “the governing law of the main contract is a strong indicator of the governing law of the arbitration agreement unless there are indications to the contrary. The choice of a seat different from the law of the governing contract would not in itself be sufficient to displace that starting point.”
    2. The judge also cited what Andrew Smith J said in Arsanovia v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm); [2013] 1 Lloyd’s Rep 235 at [21]: “The governing law clause is, at the least, a strong pointer to their intention about the law governing the arbitration agreement, and there is no contrary indication other than choice of a London seat for arbitration.”
    3. At [17] the judge concluded that there had been an express choice of English law as governing the arbitration agreement in Article 14, in these terms:

“17.  However, whereas there would therefore be a powerful case for English law as being the implied choice in any event, by virtue of its governing the host agreement, I am satisfied that there is no need to resort to such implied agreement in this case, as there is an express choice. Article 15 provides for the laws of England as the governing law of the FDA. Article 14, the Settlement of Disputes clause, expressly states by clause 14.3, that “the arbitrators shall apply the provisions contained in the agreement”, which is the FDA, and Article 1 provides that “This Agreement …shall be considered as a whole.” Article 14 (3) then continues (with my underlining) “the arbitrators shall also apply principles of law generally recognised in international transactions. The arbitrators may have to take into consideration some mandatory provisions of some countries.” It is clear to me that, on the clear construction of Article 14.3, the provisions which the Arbitrators were thus required to apply included the provisions as to law in Article 15, because by Article 14 (3) they must also apply certain other principles of law.”

    1. The judge went on to conclude at [20] that irrespective of the approach of the arbitrators, who concluded that French law was the governing law of the arbitration agreement, English law governs the validity of the arbitration clause and the issue of whether KFG ever became a party to it.
    2. He then dealt with the third preliminary issue, whether as a matter of English law, KFG became a party to the FDA and, if different, the arbitration agreement. He referred to the various ways in which Mr Nicolas Tse for the appellant had put his case as to novation before the arbitrators and before the judge. It is not necessary to examine the detail of this on the appeal since before this Court Mr Tse essentially put his case on the basis that KFG had become an additional party to the FDA by conduct with the express or implied consent of the existing parties which is what the judge considered at [27] onwards of his judgment.
    3. The judge referred to the provisions of the FDA particularly relied upon by Mr Tse, including the Good Faith and Fair Dealing provision in Article 2, which the judge said at [29] may have a role to play. He also noted that the majority of the arbitrators had referred to the UNIDROIT Principles of International Commercial Contracts 2016 but concluded that: “because any reference to such principles is expressly governed by the terms of Article 14.3, whereby “under no circumstances shall the Arbitrators apply any rules that contradict the strict wording of the agreement “, they cannot add anything to Article 2.”
    4. The judge then referred to the various other provisions, Articles 3, 17, 19, 24 and 26 which, as he said at [30]: “are plainly in the context of imposing a strict interpretation of, and strict limits to, the obligations of both licensor and licensee (as per the strict wording referred to in Article 14.3).” He then noted at [31] that since the decision of the arbitrators, English law had been clarified in relation to so-called No Oral Modification clauses by the decision of the majority of the Supreme Court in MWB Business Exchange Centres Limited v Rock Advertising Limited [2018] UKSC 24; [2019] AC 119. The judge quoted [16] of the judgment of Lord Sumption JSC:

“16. The enforcement of No Oral Modification clauses carries with it the risk that a party may act on the contract as varied, for example by performing it, and then find itself unable to enforce it. It will be recalled that both the Vienna Convention and the UNIDROIT model code qualify the principle that effect is given to No Oral Modification clauses, by stating that a party may be precluded by his conduct from relying on such a provision to the extent that the other party has relied (or reasonably relied) on that conduct. In some legal systems this result would follow from the concepts of contractual good faith or abuse of rights. In England, the safeguard against injustice lies in the various doctrines of estoppel. This is not the place to explore the circumstances in which a person can be estopped from relying on a contractual provision laying down conditions for the formal validity of a variation. The courts below rightly held that the minimal steps taken by Rock Advertising were not enough to support any estoppel defences. I would merely point out that the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty for which the parties stipulated when they agreed upon terms including the No Oral Modification clause. At the very least, (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself: see Actionstrength Limited v International Glass Engineering INGLEN SpA [2003] 2 AC 54, paras 9, 51, per Lord Bingham of Cornhill and Lord Walker of Gestingthorpe.”

    1. The judge went on to consider at [34] and following the facts upon which the appellant relied, as found by the majority of the arbitrators, to constitute joinder/novation by addition. He then referred again at [50] to Rock Advertising, which he said “makes it at English law even more difficult to surmount and evade the strict provisions of such a contract as the FDA at English law”.
    2. At [51] he concluded that: “‘Behaving in such a manner that Claimant considered that [K] had become the Licensee’ (paragraph 205 of the Award), would in any event be unlikely to be sufficient, within MWB at least, without ‘some words or conduct unequivocally representing that the [transfer of rights and obligations to it] was valid, notwithstanding its informality’“. At [52] he dealt with the impact of Article 2 of the FDA in these terms:

“52.  The question is whether Article 2 makes any difference by providing that (i) the provisions of the FDA shall be interpreted in good faith (ii) Z [AHFC] must act in accordance with good faith and fair dealings (K [KFG] will only have to do that once a party to the Agreement). Mr Tse pointed, by way of exemplifying a good faith obligation, to the recent decision in Al Nehayan v Kent [2018] EWHC 233 (Comm). However, in that case Leggatt LJ was considering whether he could identify “two forms of furtive or opportunistic conduct, which seem to be incompatible with good faith in the circumstances of the case.” Nothing like that was suggested to occur in this case.”

    1. The judge continued at [53]:

“53. Against this background, in that (1) conduct of itself is plainly not enough, (2) there was some room for argument about the requirement for consent in writing being ” interpreted in good faith “, I invited Mr Tse to refer to any documents which he asserted could support a case that there had been anything approximating to consent in writing by the Claimant and/or by Z. He identified four documents, of which only two survived the most cursory examination, to which he added, after such investigation as could be carried out by reference to documents which were before the Arbitrators but not in the bundles before the court, a further two. The four were:

(i)  a letter dated 22 May 2006, sent by Mr Zeine, the Chief Executive Officer of Z and of K, on K note paper to the Claimant:

(ii)  an email dated June 3 2006, sent by the Claimant to Mr Zeine at Z, enclosing a copy of minutes of a meeting on the Claimant’s headed note paper dated May 29, 2006:

(iii)  a letter dated June 6, 2006 from Mr Zeine, on K headed note paper to the Claimant.

(iv)  an email dated 7 November 2006, from the Claimant to Mr Zeine, attaching a draft unsigned MOU between the Claimant and K for his comments.

It is necessary to add that the May/June 2006 exchanges (i) to (iii) were followed by an FOA dated 4 July 2006, expressly between the Claimant and Z as Operator: and the November 2006 email and draft was followed by a chain of emails between the Claimant and K, referring to the fact that “until further notification we are still operating under Z in regard to imports.”

    1. In relation to the third preliminary issue he concluded at [54]:

“54. It is these documents, and any others which Mr Tse says the Claimant may be able to locate from amongst the documents before the Arbitrators, as interpreted by Article 2, upon which the remnant of his case must depend. Only if he can make such a case will he be able to resist the otherwise clear answer to Preliminary Issue 3, namely that at English law K did not become a party to the FDA or, consequently, to the arbitration agreement.”

    1. The judge then dealt with the fourth preliminary issue with which we are not concerned on this appeal, before turning at [60] to the issue of whether he should adjourn the application at the behest of the appellant. He noted that applications for an adjournment under section 103(5) of the Arbitration Act 1996 are normally made by the judgment debtor anxious to avoid enforcement and referred to the well-established set of authorities beginning with the decision of the Court of Appeal in Soleh Boneh International v Uganda [1993] 2 Lloyd’s Rep 208. At [62] he said that in that case Staughton LJ identified two important factors to be considered on such an application, the first of which was the merits. He had concluded here that the award creditor’s merits, the prospects of the appellant ever enforcing the award in this jurisdiction, were very slim. The second factor was ease of enforcement and whether delay would render it more difficult which did not apply here where it was the award creditor seeking an adjournment.
    2. At [64] he noted that the adjournment was sought because the appellant wished to leave adjudication to the law of the seat. Mr Tse had mentioned the risk of inconsistent judgments. The judge continued

“It is common ground that there is no risk of issue estoppel here because the French court is not bound by this judgment, but I would hope that the firm opinion that I have expressed and am expressing as to the effect and impact of English law will not go unnoticed in the French courts, given that on any basis English law is central to the decision. I am very nearly persuaded by the Defendant to pursue the issue which I have taken to the brink in paragraph 54 above, in order to be in a position to set aside the enforcement and to give a firm answer to Preliminary Issue 3 by reference to English law, which at this moment I have left slightly unanswered.”

    1. At [65] he set out his reasons for not making a final determination, which so far as relevant to this appeal were:

“(1)  What Teare J ordered was the hearing of Preliminary Issues, though in the event not the ones I have heard, but nevertheless Preliminary Issues, and not the final resolution of this application.

(2)  That would of itself not prevent my proceeding to make an order if I was satisfied it was just to do so on it appearing that there is no prospect of success for the Claimant’s application, but Mr Tse has submitted that his submitted list of documents relied upon was only completed during the course of the hearing, and there may be more.

(4) It is just possible that the examination of the four (or any more) documents, and any evidence given, by way of rehearing, might establish that there was something approximating to a consent in writing by the parties in accordance with the conclusions I have reached, unlikely though that may seem.”

    1. Accordingly, in relation to this Preliminary Issue 3 the judge gave his answer in these terms at [66]:

“(3) At English law, has the Defendant become a party (i) to the FDA (ii) if different, the arbitration agreement? No to either agreement, subject only to the unlikely possibility that a further consideration by reference to English law, in accordance with my judgment above, might give a different answer. If the Award is not set aside in Paris, and the Claimant wishes to pursue enforcement in the English courts, the matter can be restored for determination of the issues I have left outstanding.”

    1. At the very end of the judgment, at [68] the judge said:

“…but for my having given a ‘last chance’ to the Claimant for the reasons I have given, I would have concluded that, as against K at English law, the Claimant has and ought to have no prospect of success in enforcing this Award.”

    1. The answer to preliminary issue 3 in [66(3)] of the judgment was then reflected in the judge’s order, paragraph 1(3) of which provided:

“At English law (subject to paragraphs 53, 54 and 66(3) of the judgment…) the Defendant did not become a party to the FDA or the arbitration agreement of the FDA, the two questions raising the same issue”.

Paragraph 3 of the order then adjourned the appellant’s enforcement application and stayed the judgment with liberty to restore the matter for determination of any outstanding issues following the decision of the Cour d’appel de Paris.

    1. During the course of argument, all three members of the Court indicated to both counsel that we had great difficulty in understanding the judge’s rationale in deciding not to make a final determination and to adjourn the matter until after the decision of the Cour d’appel de Paris. Given his findings on the evidence and his conclusion that, as a matter of English law, the No Oral Modification clauses in the FDA would mean that KFG was not a party to the FDA or the arbitration agreement unless the appellant could satisfy the conditions for estoppel or preclusion set out by Lord Sumption JSC at [16] of Rock Advertising (which on his findings the appellant could not), it is difficult to see what further evidence the judge was envisaging could emerge after the decision of the French Court. It may be, as Sir Bernard Rix suggested, that he had in mind the possibility that some further evidence would be adduced before the French Court which had not been before the arbitrators or the judge. However, it remains unclear what relevance the judge thought his own decision on English law would have for the French Court given that the French Court will apply French law without regard to any principles of conflicts of laws: see Poudret and Besson: Comparative Law of International Arbitration 2nd edition [300] and [301]. I will return to the question whether the judge should have granted the adjournment in the context of the cross-appeal later in this judgment.

The grounds of appeal and cross-appeal

    1. The appellant was given permission to appeal by Males LJ on only one ground of appeal which was Ground 2:

“The Judge erred in the following respects:

(a) The Judge failed to apply French law to the question of whether KFG was bound by the relevant arbitration agreements, and failed to find that KFG had become a party to the arbitration agreements as a result of its conduct and performance of the host contracts;

(b) The Judge, erroneously applying English law to find that the Respondent had not become a party to the arbitration agreements, or to the host contracts, because he ruled that the contracts required an agreement in writing to add the Respondent. On a proper and true construction of the relevant arbitration agreements and the host contracts, there was no such requirement under the relevant contracts.”

    1. Males LJ also gave KFG permission to pursue the arguments in Section 6 of the Respondent’s Notice which were, in summary:

(1) The judge had erred in law at [53] of the judgment in saying that there was “some room for argument” that the effect of the good faith interpretation clause in Article 2 whilst it could not dispense with the requirement for written consent under the No Oral Modification clauses, might mean that that requirement had to be interpreted in good faith, without identifying what that meant in practice. The No Oral Modification clauses were clear and unambiguous and incapable of being altered by Article 2 as a matter of interpretation. In any event, as the judge found, the appellant could point to no written consent of any description.

(2) The judge had erred in law in failing to apply the test for summary judgment to the application to enforce. Where, as here, the award debtor establishes a New York Convention defence under Article V (as enacted in section 103(2) of the Arbitration Act 1996) and/or the appellant has no realistic prospect of resisting the defence, recognition and enforcement should be refused without the need for any further or fuller rehearing.

(3) Had the judge applied the summary judgment test correctly, he would have made a final determination that KFG was not a party to the FDA or the arbitration agreement and refused recognition and enforcement without leaving open the possibility of further evidence and argument at a later stage.

Summary of the parties’ submissions

    1. On behalf of the appellant, Mr Tse submitted first that, on the true construction of the FDA and the arbitration agreement, there was no express choice of English law as the governing law of the arbitration agreement. The FDA itself was governed by English law supplemented by the obligation of good faith and fair dealing in Article 2 and by “principles of law generally recognised in international transactions” (Article 14.3) which included the UNIDROIT principles. In the remainder of this judgment I will refer to English law as so supplemented as “English law plus”. Mr Tse submitted that this supplementation meant that the arbitration agreement could not be governed by pure English law. It was not possible for it to be governed by English law plus as the common law required the law applicable to an arbitration to be the law of a country, not some hybrid: see Russell on Arbitration 24th edition [2-119].
    2. Further, the fact that the arbitration agreement in Article 14 referred to this supplementation was a contra-indication to English law being the express governing law. Mr Tse submitted that the judge had been wrong to conclude that there was anything in the wording of Article 14 (and specifically 14.3) which supported the case for an express choice of English law as governing the arbitration agreement. The Article was concerned with how the arbitrators should determine substantive disputes, so that the first sentence of 14.3 was saying no more than that the arbitrators should apply the provisions contained in the Agreement to substantive disputes. Contrary to the judge’s conclusion at [17] of the judgment, the word “also” in the second sentence did not mean in addition to English law but in addition to the first sentence. He submitted that the third sentence was also important since the mandatory provisions to which the arbitrators might have to give consideration could include mandatory provisions of French law as the law of the seat of the arbitration, for example as to the circumstances in which there could be a challenge to an award. Mr Tse placed particular emphasis on the fact that the words “English law shall apply to this arbitration agreement” were absent from Article 14 which did not mention England or English at all. This was in contrast to the position in Arsanovia where the express reference to the Indian Arbitration and Conciliation Act 1996 in the arbitration clause pointed to an express choice of Indian law.
    3. Mr Tse also relied upon the fact that, under Article 25, the arbitration agreement in Article 14 was one of the Articles which would not survive termination of the Agreement. I should say at once that I do not see how this has any bearing on what is the governing law of that arbitration agreement. In any event Article 25 is very odd since it refers to Articles 28.2, 29, 30 and 33 when there are only 27 Articles in the FDA, suggesting it has come from another agreement, further support for which is that one would normally expect an arbitration clause to be one of the clauses which survived termination, given that there might be outstanding disputes. After all, this is the rationale for the concept of separability, given statutory effect by section 7 of the Arbitration Act 1996 (as to which see further below). If in fact the numbering is awry and it was intended that the arbitration agreement survives, there would be nothing at all in this point.
    4. Where there is no express choice of the law governing the arbitration agreement, in the case of domestic agreements providing for London as the seat of the arbitration, the Court will next enquire whether there is an implied choice and if it finds there is none, it will determine with which system of law the arbitration agreement has its closest and most real connection. Those enquiries are not completely separate since the question of closest and most real connection may be relevant to the determination of an implied choice: see per Moore-Bick LJ in Sulamerica at [25].
    5. Mr Tse submitted that the express choice of a governing law in the host contract was no more than a starting assumption that the parties intended the whole of their relationship (including the arbitration agreement) to be governed by that system of law: see per Moore-Bick LJ in Sulamerica at [11] and per Longmore LJ in C v D at [23], who said it was not “automatic” that the answer to the enquiry was that the arbitration agreement was governed by the same system of law as the main agreement. He submitted that, where there were indications to the contrary, the arbitration agreement would not be governed by the same system of law as the main agreement.
    6. One such indication to the contrary was where, as here, the seat of the arbitration was in a different country from the country whose law governed the main agreement. The courts of the country of the seat of the arbitration would be the supervisory courts for the arbitration and proceedings on an award were only those permitted by the law of the seat: see per Longmore LJ in C v D at [16]-[17]. Mr Tse relied upon what Longmore LJ said at [23] about the earlier judgment of Mustill J in Black-Clawson v Papierwerke [1981] 2 Lloyds Rep 446 at 483: “Mustill J was, however, saying that it would be a rare case in which the law of the arbitration agreement was not the same as the law of the place (or seat) of the arbitration.” The fact that the seat of the arbitration was in a different country from the country whose law governed the main agreement was an “important factor” pointing away from the law governing the main agreement being an implied choice of law governing the arbitration agreement: see per Moore-Bick LJ in Sulamerica at [29].
    7. In cases of enforcement of foreign arbitration awards, the test under Article V(1)(a) of the New York Convention (as enacted in section 103(2)(b) of the Arbitration Act) differed from the test applicable to domestic awards in only one respect: where there is no express or implied choice of governing law the arbitration agreement will be governed by the law of the place where the award is made rather than the law of the country with which the arbitration agreement has the closest and most real connection. However, in practical terms this would amount to the same thing. If, as is almost always the case, the award is made in the place of the seat of the arbitration, the law of the seat is the system of law with which the arbitration agreement has the closest and most real connection.
    8. Mr Tse submitted that what Steven Chong J said in BCY v BCZ at [55] to the effect that, although in Sulamerica the choice of seat was accepted as one of the factors pointing away from the main agreement’s choice of law, it would be insufficient on its own to negate the presumption that the parties intended the governing law of the main agreement to govern the arbitration agreement, was wrong. That was not what Sulamerica decided at [29]-[32]. He submitted that any implied choice of English law as the governing law of the arbitration agreement was thus negatived by the fact that the seat of the arbitration was Paris and the judge should have concluded either that the implied choice of law governing the arbitration agreement was French law or, in default of any such choice, French law applied as the law of the place where the Award was made.
    9. Even if the judge was right that the governing law of the arbitration agreement was English law, he had erred in concluding that consent in writing was required for KFG to become an additional licensor under the FDA. English law plus included the express provision as to good faith and fair dealing in Article 2 and the UNIDROIT principles which were mandated by the third sentence of Article 14.3. Mr Tse relied in particular on the following UNIDROIT principles:

“Article 1.7 (Good faith and fair dealing)

(1) Each party must act in accordance with good faith and fair dealing in international trade. (2) The parties may not exclude or limit this duty.

Article 1.8 (Inconsistent behaviour)

A party cannot act inconsistently with an understanding it has caused the other party to have and upon which that other party reasonably has acted in reliance to its detriment.

Article 2.1.1 (Manner of formation)

A contract may be concluded either by the acceptance of an offer or by conduct of the parties that is sufficient to show agreement.

Article 2.1.18 (Modification in a particular form)

A contract in writing which contains a clause requiring any modification or termination by agreement to be in a particular form may not be otherwise modified or terminated. However, a party may be precluded by its conduct from asserting such a clause to the extent that the other party has reasonably acted in reliance on that conduct.”

    1. He submitted that all these provisions taken together meant that under English law plus, the extensive conduct of KFG and unequivocal performance by KFG of the FDA were sufficient to override the formality of the No Oral Modification clauses and make KFG an additional party to the FDA. He relied in particular upon (i) unequivocal conduct by KFG in performing the contract such as paying invoices for royalty payments (which were apparently addressed to KFG) for some 30 months; (ii) the exercise of and claim to contractual rights under the FDA by KFG, in relation to which he relied upon the materials referred to by the judge in [53] of the judgment and the evidence of what was said by the parties at meetings in May 2006; (iii) evidence of silence amounting to acquiescence on the part of KFG. He asserted that there had been a great deal of evidence before the arbitrators which had led to the majority of the tribunal determining this issue in favour of the appellant at [198] to [206] of the Award. Not all the evidence had been before the judge, since this had been a trial of preliminary issues which Teare J at least had envisaged would deal with issues of law without a full rehearing of the evidence.
    2. Mr Tse also submitted that what the evidence showed was inconsistent behaviour by KFG contrary to Article 2 of the FDA and Articles 1.7 and 1.8 of the UNIDROIT principles. In the light of that inconsistent behaviour, the judge had been wrong to conclude that consent in writing was required before KFG could become an additional party to the FDA. In any event, this Court should not allow the cross-appeal and make a final determination but should permit the appellant to adduce whatever evidence it had before the Commercial Court at a further hearing.
    3. The primary submission of Mr Ricky Diwan QC in relation to governing law was a simple and straightforward one, that the combination of Articles 1 and 15 of the FDA was, as a matter of construction, an express choice of English law as the governing law of the entire FDA including the arbitration agreement. Article 1 made clear that “This Agreement” consisted of all the terms of agreement then set out (which must include Article 14) and each of the documents (including therefore the document containing those terms of agreement) was an integral part of “This Agreement”. Article 15 then made clear that “This Agreement” (again capitalised) was governed by English law which must mean all of “This Agreement” including the arbitration agreement.
    4. These two Articles on their own established an express choice of English law as governing the arbitration agreement, but if there was any doubt it was removed by the first sentence of Article 14.3: “The arbitrator(s) shall apply the provisions contained in the Agreement.” The “Agreement” (again capitalised) must include Article 14 itself and Article 15, the governing law clause. Mr Diwan QC did not place the emphasis which the judge had on “also” in the second sentence as meaning in addition to Article 15. “Also” could equally mean in addition to the first sentence of Article 14.3, but the result was the same as that arrived at by the judge. The first sentence confirmed that, for all purposes, the Agreement included Articles 14 and 15 so that the governing law clause also governed the arbitration agreement.
    5. Mr Diwan QC submitted that this approach to construction was supported by the decision of Andrew Smith J in Arsanovia, who noted at [22] that counsel had felt constrained [by the decisions of the Court of Appeal in C v D and Sulamerica] to argue at first instance that the choice of law was implied rather than express, although he reserved the right to argue for express choice on any appeal. The judge continued:

“It seems to me that Mr Hirst might have been too diffident: that a case for an express choice might have been available even before me. When the parties expressly chose that “This Agreement” should be governed by and construed in accordance with the laws of India, they might be thought to have meant that Indian law should govern and determine the construction of all the clauses in the agreement which they signed including the arbitration agreement. Express terms do not stipulate only what is absolutely and unambiguously explicit, and it seems to me strongly arguable that that is the ordinary and natural meaning of the parties’ express words (notwithstanding relatively recent developments in the English law about the separability of arbitration agreements from the substantive contract in which it was made and assuming that these foreign companies are to be taken to have known about the developments in 2008 when they concluded the SHA). The governing law provisions in the agreements in the two Court of Appeal authorities referred to “the policy” and “this Policy” being governed by the internal laws of New York and Brazilian law respectively, and the word “policy” might naturally be taken to connote to obligations and rights more directly relating to the insurance than the arbitration agreement.”

    1. In relation to separability of an arbitration agreement from the main agreement for which section 7 of the Arbitration Act 1996 now provides by statute, Mr Diwan QC submitted that this did not assist Mr Tse. Section 7 provides as follows:

“Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.”

    1. Mr Diwan QC submitted that this confirms that the concept of separability is designed to protect an arbitration agreement where the main agreement is invalid etc. so as to ensure that any dispute as to such invalidity is determined by arbitration. It does not follow that the arbitration agreement is a separate agreement from the main other agreement for other purposes such as construction. This is precisely the point Moore-Bick LJ was making in Sulamerica at [26] when he said:

“The concept of separability itself, however, simply reflects the parties’ presumed intention that their agreed procedure for resolving disputes should remain effective in circumstances that would render the substantive contract ineffective. Its purpose is to give legal effect to that intention, not to insulate the arbitration agreement from the substantive contract for all purposes.”

    1. If, contrary to Mr Diwan QC’s primary case, there was no express choice of governing law of the arbitration agreement, he submitted that there was an implied choice of English law by virtue of the FDA being expressly governed by English law. He relied upon the analysis of Moore-Bick LJ in Sulamerica at [26] in the passage immediately after that just quoted:

“In the absence of any indication to the contrary, an express choice of law governing the substantive contract is a strong indication of the parties’ intention in relation to the agreement to arbitrate. A search for an implied choice of proper law to govern the arbitration agreement is therefore likely (as the dicta in the earlier cases indicate) to lead to the conclusion that the parties intended the arbitration agreement to be governed by the same system of law as the substantive contract, unless there are other factors present which point to a different conclusion.”

    1. At [29] Moore-Bick LJ said: “Although there are powerful factors in favour of an implied choice of Brazilian law as the governing law of the arbitration agreement, two important factors point the other way.” These were (i) that the seat of the arbitration was London and (ii) that as a matter of Brazilian law, whether or not to arbitrate was at the option of the assured. However, Mr Diwan QC submitted, when Moore-Bick LJ returned at [31] to the question of whether there was an implied choice of Brazilian law, it was only that second factor which led him to conclude: “I do not think that in this case the parties’ express choice of Brazilian law to govern the substantive contract is sufficient evidence of an implied choice of Brazilian law to govern the arbitration agreement, because (if the insured are correct) there is at least a serious risk that a choice of Brazilian law would significantly undermine that agreement.” He went on to consider the separate question: in the absence of any express or implied choice of law, with which system of law does the arbitration agreement have its closest and most real connection? It was only in that context that he considered the first factor, determining at [32] that in consequence of the seat of the arbitration being London, the arbitration agreement had its closest and most real connection with English law.
    2. Mr Diwan QC relied upon this analysis in support of his submission that the fact that the seat of the arbitration is in a different country to that whose law expressly governs the main agreement will not, without more, displace the strong indication that there is an implied choice of English law to govern the arbitration agreement by virtue of the FDA being expressly governed by English law. Mr Diwan QC submitted that this conclusion was supported by the judgment of Andrew Smith J in Arsanovia at [19]. It was also supported by the summary of the principles to be derived from the authorities, culminating in Sulamerica and Arsanovia, at [101] of the judgment of Hamblen J (as he then was) in Habas Sinai v VSC Steel Company Limited [2013] EWHC 4071 (Comm):

“(4) Where the matrix contract contains an express choice of law, this is a strong indication or pointer in relation to the parties’ intention as to the governing law of the agreement to arbitrate, in the absence of any indication to the contrary.

(5) The choice of a different country for the seat of the arbitration is a factor pointing the other way. However, it may not in itself be sufficient to displace the indication of choice implicit in the express choice of law to govern the matrix contract.”

    1. During the course of argument, there was some discussion between Mr Diwan QC and the Court as to the basis for the implication of a term into the arbitration agreement that it should be governed by English law, like the FDA. Mr Diwan QC submitted that the test of implication set out in Sulamerica and the later first instance decisions he relied upon, did not depend upon showing that the term to be implied was necessary for business efficacy. It seems to me that the problem with that submission is that it is quite clear from the decision of the Supreme Court in Marks & Spencer plc v BNP Paribas Securities [2015] UKSC 72; [2016] AC 742, where the law on the implication of terms was authoritatively restated by Lord Neuberger PSC at [14] to [32], that (save of course where terms are implied as a matter of law) a term will only be implied into a contract if it is necessary for business efficacy.
    2. Later in his submissions, Mr Diwan QC sought to argue for implication as a matter of law by analogy with Ali Shipping v Trogir [1999] 1 WLR 136 where the Court of Appeal held that an implied term as to confidentiality in an arbitration agreement was not to be implied to give business efficacy but as a matter of law because of the nature of the relationship. That argument can be dismissed immediately. Whilst it may be that, as a matter of law, an arbitration agreement has to have a governing law, the question of what that law is, is one of interpretation of the agreement, and terms will not be implied into the agreement as a matter of law.
    3. In relation to the second part of the appeal which proceeded on the basis that the governing law of the arbitration agreement is English law, Mr Diwan QC submitted that the FDA contained what he described as a “double lock”: the requirement for (i) a written document executed by duly authorised representatives of both parties to the FDA for any amendment to it to be effective (Article 26) and a written document signed by both parties for any consent to be effective (Article 24); and (ii) that any waiver of the first set of locks requires the written signed consent of both parties (Article 17). He submitted that, on any view the addition of KFG to the FDA for which the appellant contends is a “change” within Article 24 and an “amendment” within Article 26.
    4. He relied upon the analysis of Lord Sumption JSC in Rock Advertising at [12] as to the sound commercial reasons for No Oral Modification clauses:

“There are at least three reasons for including such clauses. The first is that it prevents attempts to undermine written agreements by informal means, a possibility which is open to abuse, for example in raising defences to summary judgment. Secondly, in circumstances where oral discussions can easily give rise to misunderstandings and crossed purposes, it avoids disputes not just about whether a variation was intended but also about its exact terms. Thirdly, a measure of formality in recording variations makes it easier for corporations to police internal rules restricting the authority to agree them. These are all legitimate commercial reasons for agreeing a clause like clause 7.6. I make these points because the law of contract does not normally obstruct the legitimate intentions of businessmen, except for overriding reasons of public policy. Yet there is no mischief in No Oral Modification clauses, nor do they frustrate or contravene any policy of the law.”

He submitted that by the double lock provisions to which they had agreed, the parties to the FDA had obviously been trying to achieve a high level of business certainty.

    1. Mr Diwan QC submitted that, contrary to Mr Tse’s submissions, the UNIDROIT principles (and specifically Articles 1.7 and Article 2.1.18) could not be relied upon to establish some amendment or change to the FDA by reason of the conduct of KFG since this would contradict the double lock in the No Oral Modification clauses in the FDA. Application of any such broad principle would contradict the strict terms of the No Oral Modification clauses in the FDA which was not permitted by the last sentence of Article 14.3. The judge had clearly been right to conclude that conduct alone could not be sufficient to effect a change or variation such as the addition of a party to the FDA. Something more was required. He submitted that what would be required to override the No Oral Modification clause was an estoppel as identified by Lord Sumption JSC at [16] of Rock Advertising: “(i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself”. Absent such words or conduct amounting to an unequivocal representation, a variation would only be effective if it complied with Articles 24 and 26.
    2. Mr Diwan QC submitted that the appellant’s entire case before the arbitrators had been conduct based. There were no documents other than conduct based documents, none of which would satisfy the requirements of the No Oral Modification clauses or of the estoppel required to override those clauses, as the judge correctly found. He described as a “phantom submission” the submission on behalf of the appellant that there were or might be any more documents not referred to by the judge which would have a bearing on the legal requirements of the FDA or satisfy Lord Sumption’s test for estoppel. Whilst there had been invoices from the appellant in relation to the royalty payments paid by KFG which were not before the Court, the royalty payments had been reimbursed by AHFC. As I pointed out in the course of argument, this would make the invoices equivocal, in the sense that KFG could have been paying them as agent for its subsidiary AHFC, which was the point the judge made at the beginning of [47] of his judgment. Mr Diwan QC submitted that if his submissions as to the construction of the double lock and the limited override of No Oral Modification clauses permitted by Rock Advertising were correct, there was no basis for reopening the judge’s factual assessment of the documents before him.
    3. Mr Diwan QC submitted that, having reached the conclusions that he did at [47] to [53] of the judgment, to the effect that the materials relied upon by the appellant did not satisfy the requirements of the No Oral Modification clauses or give rise to an estoppel, the judge should have made a final determination refusing recognition and enforcement and not given the appellant a last chance. He accepted that, under section 103(5) of the Arbitration Act 1996, the Court has the discretion to adjourn its decision on the recognition or enforcement of an award “if it considers it proper”. Guidance as to when it would be appropriate to exercise that discretion is provided by the judgment of Mance LJ in Dardana Limited v Yukos Oil Company [2002] EWCA Civ 543; [2002] 1 All ER (Comm) 819. That was another case where, unusually, it was the applicant for enforcement which was seeking the adjournment. At [23], Mance LJ gave examples of the circumstances where a court might adjourn an application of its own motion:

“…a court might conclude of its own motion that the determination of an application under s. 103(2) would be an inappropriate use of court time and/or contrary to comity or likely to give rise to conflict of laws problems, when there were concurrent proceedings which would be likely to resolve the issue in the country in which or under the law of which the award was made (cf. Soleh Boneh v Republic of Uganda [1993] 2 Lloyds Rep 208).”

As appears from [24] the adjournment was granted by the judge at first instance because issues of Swedish law arose which were best determined by the Swedish courts. That exercise of discretion was upheld by the Court of Appeal.

    1. In the present case, Mr Diwan QC submitted, there was no question of the inappropriate use of Court time, as Sir Michael Burton had heard the application over three days. No problems of comity or conflict of laws arose because, on the basis that both the FDA and the arbitration agreement were governed by English law, the English Court must be more appropriate than the French Court to determine issues of English law. Given that the French Court would apply French law of the will of the parties rather than a conflicts of laws analysis, issues of comity would not be resolved by an adjournment. What the French court decided was irrelevant to what the judge had to decide, so that he should not have granted an adjournment.
    2. Mr Diwan QC submitted that, before the Court should have granted the appellant a “last chance” to put forward further evidence in support of its application, the judge should have asked himself whether the appellant satisfied what is in effect the summary judgment test, whether the appellant had a real prospect of successfully establishing a case for enforcement of the Award under section 103(2), if there were a further hearing after the decision of the Cour d’appel de Paris. As authority for that approach, he relied upon the judgment of Ramsey J in Honeywell International v Meydan Group [2014] EWHC 1344 (TCC); [2014] 2 Lloyd’s Rep 133 at [68] and [69(vi)]. He submitted that the judge should have concluded, applying the test laid down by Lord Sumption JSC in Rock Advertising, that the appellant could not satisfy the minimum summary judgment threshold and, therefore, should not have granted an adjournment, but made a final determination.

Analysis and conclusions

    1. In my judgment, Mr Diwan QC is correct that Articles 1 and 15 of the FDA in themselves provide for the express choice of English law to govern the arbitration agreement in Article 14. Article 1 makes it clear that “This Agreement” (capitalised) includes all the terms of agreement then set out, which include Article 14. Because Article 15 provides that: “This Agreement [again capitalised] shall be governed by and construed in accordance with the laws of England” it is making clear that all the terms of the Agreement, including Article 14, are governed by English law. The answer to the suggestion that, if this analysis were correct, there would be an express choice of governing law of the arbitration clause in every contract which contains a governing law clause is essentially that given by Andrew Smith J in Arsanovia at [22]. Governing law clauses do not necessarily cover the arbitration agreement. This one does because of the correct construction of the terms of Articles 1 and 15 taken together.
    2. Contrary to Mr Tse’s submissions, the terms of Article 14 itself do not militate against the conclusion that the governing law provision in Article 15 also encompasses the arbitration agreement in Article 14. On the contrary, as Mr Diwan QC submitted, the first sentence of Article 14.3 supports the conclusion that, on the true construction of the FDA as a whole, there is an express choice of English law to govern the arbitration agreement. That sentence provides: “The arbitrator(s) shall apply the provisions contained in the Agreement.” In my judgment, that means that the arbitrators must apply all the provisions, including the governing law clause in Article 15, not just to substantive disputes (as Mr Tse suggested) but to any dispute as to their own jurisdiction, so that English law governs the resolution of any dispute as to their jurisdiction and is thus the governing law of the arbitration agreement.
    3. I agree with Mr Diwan QC that “also” in the second sentence of Article 14.3 probably means in addition to the first sentence rather than, as the judge thought, in addition to Article 15, but this construction still points to an express choice of English law as the governing law of the arbitration agreement. The arbitrators are directed to “apply principles of law generally recognised in international transactions”, in other words for present purposes UNIDROIT principles, in addition to applying all the provisions of the Agreement including the governing law clause, which will also determine the governing law of the arbitration agreement, for the reasons I have given.
    4. So far as the “English law plus” provisions are concerned, they do not assist Mr Tse’s argument on this part of the appeal, in the sense that they do not point to some different system of law (specifically French law) as governing the arbitration agreement than English law plus. The first sentence of Article 2 is concerned with how the parties carry out their obligations under the FDA and has nothing to say about what law governs their arbitration agreement. The second sentence provides that the provisions of the Agreement are to be interpreted in good faith but that also tells one nothing about the governing law of the arbitration agreement. In any event, the fact that the provisions are to be interpreted in good faith cannot justify an interpretation which goes beyond what has been agreed or which seeks to rewrite the Agreement: see per Lord Bingham of Cornhill at [19] of R v Immigration Officer at Prague Airport [2004] UKHL 55; [2005] 2 AC 1, albeit in the context of the interpretation of international treaties in good faith. Likewise, the UNIDROIT principles, upon which Mr Tse placed so much reliance, are silent as to which system of law governs any agreement, let alone the arbitration clause in an agreement.
    5. The concept of the separability of an arbitration agreement now enshrined in section 7 of the Arbitration Act 1996 does not assist Mr Tse in this context. The rationale of separability is that it ensures that the dispute resolution procedure chosen by the parties survives the main agreement becoming unenforceable for example because of fraud or misrepresentation. As Moore-Bick LJ said in Sulamerica at [26]: “Its purpose is to give legal effect to that intention, not to insulate the arbitration agreement from the substantive contract for all purposes.” In other words it does not preclude the arbitration agreement being construed with the remainder of the main agreement as a whole, a fortiori where the clear intention is that the main agreement should be construed as a whole and where, as here, there is nothing in the wording of the arbitration agreement which suggests that it is intended to be construed in isolation from the remainder of the main agreement; quite the contrary, as the first sentence of Article 14.3 demonstrates for the reasons I have given.
    6. Likewise, there is nothing in Mr Tse’s point that Article 14 does not contain the express words: “This arbitration agreement shall be governed by English law”. As Andrew Smith J said in Arsanovia at [22]: “Express terms do not stipulate only what is absolutely and unambiguously explicit”. If, as I have held, the express words the parties have used in Articles 1 and 15 and the first sentence of Article 14.3, demonstrate a clear intention that the entire FDA including the arbitration agreement, is to be governed by English law, it matters not that this is not spelt out expressly in Article 14 itself.
    7. That express choice of English law as governing the entire FDA including the arbitration agreement is not affected by the fact that Article 14.5 provides that the seat of the arbitration is to be Paris. Whatever impact that provision might have on an implied choice of the governing law of the arbitration agreement, it cannot overcome the clear effect of the express terms of the FDA that Article 15 covers not only the FDA but the arbitration agreement.
    8. Likewise, I do not consider that the appellant gains any assistance from the third sentence of Article 14.3: “The arbitrator(s) may have to take into consideration some mandatory provisions of some countries i.e. provisions that appear later on to have an influence on the Agreement.” Contrary to Mr Tse’s submission set out at [35] above, it does not seem to me that the sentence is focusing on mandatory provisions of French law as the seat of the arbitration. The words “may” and “appear later on” suggest that what is in contemplation is something which may happen after the FDA is made, for example, it suddenly becoming illegal under the law of Kuwait to sell these particular food products. Even if that third sentence has the meaning for which Mr Tse contends, the mandatory application of French law as the supervisory law of the arbitration because its seat is Paris cannot overcome the clear express choice of English law as the governing law of the arbitration agreement.
    9. Accordingly, in my judgment, the judge was correct in his determination that there was an express choice of English law as the governing law of the arbitration agreement. That conclusion means that it is not necessary to consider KFG’s alternative case that there was an implied choice of English law, thereby avoiding deciding the questions whether the correct analysis of Sulamerica is the one for which Mr Diwan QC contends and how the requirement of necessity for business efficacy before a term can be implied can be satisfied in any given case where there is a fallback position of either the law of the country with which the arbitration agreement has its closest and most real connection or the law of the country where the award is made. Since those questions do not require to be answered, it seems to me better to leave them for determination in another case where they are a necessary part of the determination to be made by the Court.
    10. The second part of the appeal proceeds on the basis that the governing law of the arbitration agreement is English law. The appellant contends that the judge should have applied Articles 1.7 and 2.1.18 of the UNIDROIT principles and concluded that KFG had become a party to the arbitration agreement by virtue of its inconsistent behaviour and its conduct as identified at [43] above. On behalf of KFG Mr Diwan QC submits that the judge was correct to conclude that the appellant’s evidence fell short of establishing that KFG should be precluded from relying on the No Oral Modification clauses, but erred in adjourning the application rather than making a final determination not to enforce the Award.
    11. The important starting point for consideration of these issues is that, prior to the decision of the Supreme Court in Rock Advertising, the weight of authority in the Court of Appeal was that No Oral Modification clauses were not effective: see the cases referred to by Lord Sumption JSC at [9] of his judgment and the decision of the Court of Appeal in Rock Advertising itself. In his judgment, at [13], Lord Sumption discussed the fact that the UNIDROIT principles did recognise in the first sentence of Article 2.1.18 that No Oral Modification clauses are effective although the second sentence went on to provide an exception to the application of that rule: “However, a party may be precluded by its conduct from asserting such a clause to the extent that the other party has reasonably acted in reliance on that conduct.”
    12. Lord Sumption JSC returned to that exception in Article 2.1.18 of UNIDROIT at [16] of his judgment where he said: “In some legal systems this result would follow from the concepts of contractual good faith or abuse of rights. In England, the safeguard against injustice lies in the various doctrines of estoppel.” He then went on to set out the test of what English law would require at the least before a party could be precluded from relying on a No Oral Modification clause.
    13. What emerges is that there is little difference between the UNIDROIT approach and the English approach through the doctrines of estoppel. This is borne out by the example of the exception in the second sentence of Article 2.1.18 given in the Comment on the UNIDROIT Principles:

“Yet there is an exception to the general rule. In application of the general principle prohibiting inconsistent behaviour (see Article 1.8), this Article specifies that a party may be precluded by its conduct from invoking the clause requiring any modification or termination to be in a particular form to the extent that the other party has reasonably acted in reliance on that conduct.

Illustration 2.

A, a contractor, contracts with B, a school board, for the construction of a new school building. The contract provides that the second floor of the building is to have sufficient bearing capacity to support the school library. Notwithstanding a “no oral modification” clause in the same contract, the parties orally agree that the second floor of the building should be of non-bearing construction. A completes construction according to the modification and B, who has observed the progress of the construction without making any objections, only at this point objects to how the second floor has been constructed. A court may decide that B is not entitled to invoke the “no oral modification” clause as A reasonably relied on the oral modification, and is therefore not liable for non-performance.”

    1. As I pointed out during the course of argument, the oral agreement postulated involves an unequivocal representation that the second floor does not have to be of load-bearing capacity, upon which the contractor relies by building according to that oral modification. In those circumstances, the school board could not rely upon the No Oral Modification clause. The illustration is a classic example of what Lord Sumption JSC said at [16] of his judgment was required by way of estoppel. In other words, Lord Sumption JSC is setting out how English law interprets this UNIDROIT principle and is not saying anything different from UNIDROIT.
    2. Even if, contrary to that conclusion, the UNIDROIT principles are enunciating some broader test for preclusion than that laid down by Lord Sumption JSC, those principles cannot be used to override the No Oral Modification clauses in the FDA. That would be to contradict the strict wording of the FDA, which is prohibited by the last sentence of Article 14.3. In my judgment, that strict wording, here the terms of the No Oral Modification clauses, can only be overridden to the extent permitted by English law as the governing law of the FDA, that is to the extent that the test for an estoppel stated in Rock Advertising is satisfied. The argument by Mr Tse that, because Article 14.3 provides for English law plus, some broader principle derived from UNIDROIT can be applied to override the No Oral Modification clauses is misconceived. Article 2.1.18 of UNIDROIT does not advocate some principle which is broader than the estoppel test set out in Rock Advertising.
    3. Similarly, the principle of good faith and fair dealing, whether in Article 2 of the FDA or Article 1.7 of the UNIDROIT principles, cannot be used to override the clear wording of the No Oral Modification clauses to a greater extent than identified by Lord Sumption JSC. The first sentence of Article 2 is focusing on good faith and fair dealing in the performance by the parties of their obligations under the FDA. It cannot be used to make someone a party to the FDA who would not otherwise be a party as a matter of English law, assuming that there was no