Winslow Constructors v Head, Transport for Victoria (Costs) [2021] VSC 74

 

MATTER Winslow Constructors v Head, Transport for Victoria (Costs) [2021] VSC 74
PARTIES Applicant

WINSLOW CONSTRUCTORS PTY LTD (ACN 006 581 764)

v

Respondent

HEAD, TRANSPORT FOR VICTORIA (ABN 97 481 088 949)

MATTER NUMBER S ECI 2020 02720
COURT IN THE SUPREME COURT OF VICTORIA
DIVISION ARBITRATION LIST
JUDGE: RIORDAN J
WHERE HELD: Melbourne
DATES OF HEARING: 3 December 2020 and written submissions filed 8, 10 and 14 December 2020
DATE OF JUDGMENT: 26 February 2021
CASE MAY BE CITED AS: Winslow Constructors v Head, Transport for Victoria (Costs)
MEDIUM NEUTRAL CITATION: [2021] VSC 74
CATCHWORDS ARBITRATION – Whether indemnity costs should be the default order in unsuccessful challenges to arbitral awards – Consideration of the appropriate test to be applied for unmeritorious challenges to arbitral awards – Whether a different approach should be adopted by reason of the objects of the Commercial Arbitration Act 2011 (Vic) or the International Arbitration Act 1974 (Cth).
COSTS – Jurisdiction to award indemnity costs – Principles to be applied with respect to unmeritorious claims considered – Application for indemnity costs refused.
REPRESENTATION For the Applicant

Solicitors – Giannakopoulos Solicitors

Council –    Mr H Foxcroft QC with
Mr T J Mullen

 

For the Respondent

Solicitors – Maddocks

Council –     Mr M R Scott QC with
Ms E Levine

 

JUDGMENT

HIS HONOUR:

  1. On 3 December 2020, judgment was entered for the applicant (‘Winslow’) pursuant to s 35 of the Commercial Arbitration Act 2011(Vic) (‘the Act’) and I ordered the respondent (‘the Department’) to pay Winslow the sum of $3,527,226.29 for the reasons published on that day.[1] As it had foreshadowed in its submissions filed 26 August 2020, Winslow applied for indemnity costs.

[1]          Winslow Constructors v Head, Transport for Victoria [2020] VSC 790 (‘Principal Reasons’).

  1. In accordance with directions made on 3 December 2020, the following submissions were filed:

(a)          the Department’s reply submissions opposing indemnity costs filed on 8 December 2020;

(b)          Winslow’s reply submissions in support of indemnity costs filed on 10 December 2020; and

(c)          the Department’s response to new matters raised by Winslow in reply submissions filed, without leave, on 14 December 2020.

Relevant statutory provisions

  1. In the analysis set out below, reference is made to the following statutory provisions:

(a) Section 1AA of the Act, which states that one of the purposes of the Act is ‘to improve commercial arbitration processes to facilitate the fair and final resolution of commercial disputes by arbitration without unnecessary delay or expense’.

(b) Section 1AC of the Act, which sets out the paramount object of the Act as follows:

(1)          The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.

 

(2)       This Act aims to achieve its paramount object by—

(a)          enabling parties to agree about how their commercial disputes are to be resolved (subject to subsection (3) and such safeguards as are necessary in the public interest); and

(b)          providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly.

(3)          This Act must be interpreted, and the functions of an arbitral tribunal must be exercised, so that (as far as practicable) the paramount object of this Act is achieved.

(4)          Subsection (3) does not affect the application of section 35 of the Interpretation of Legislation Act 1984 for the purposes of interpreting this Act.

(c) Section 2D of the International Arbitration Act 1974 (Cth) (‘the International Arbitration Act’), which sets out the objects of that Act as follows:

(a)          to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and

(b)          to facilitate the use of arbitration agreements made in relation to international trade and commerce; and

(c)          to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and

(d)          to give effect to Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting; and

(e)          to give effect to the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006; and

(f)          to give effect to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States signed by Australia on 24 March 1975.

 

(d) Section 39(2) of the International Arbitration Act, which states that where a court is considering exercising powers, including to enforce or to refuse to enforce a foreign award, it must have regard to:

(a)          the objects of the Act; and

(b)          the fact that:

(i)          arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and

(ii)       awards are intended to provide certainty and finality.

(e) Pursuant to s 16 of the International Arbitration Act, the UNCITRAL Model Law on International Commercial Arbitration (‘the Model Law’)[2] has the force of law in Australia. Article 34(2) of the Model Law provides for applications for setting aside arbitral awards as follows:

[2]          Adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006.

An arbitral award may be set aside by the court specified in article 6 only if:

(a)       the party making the application furnishes proof that:

(i)          a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or

(ii)         the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii)        the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv)         the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or

(b)       the court finds that:

(i)          the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii)         the award is in conflict with the public policy of this State.

(f) Article 34(2) of the Model Law is adopted in s 34 of the Act.

Principles relating to indemnity costs

  1. In Ugly Tribe Co Pty Ltd v Sikola, Harper J stated that an order for indemnity costs requires special circumstances.[3]He identified that special circumstances may include:

[3]          [2001] VSC 189, [7] (‘Ugly Tribe’) (citations omitted).

(i)          The making of an allegation, known to be false, that the opposite party is guilty of fraud.

(ii)         The making of an irrelevant allegation of fraud.

(iii)        Conduct which causes loss of time to the Court and to other parties.

(iv)         The commencement or continuation of proceedings for an ulterior motive.

(v)          Conduct which amounts to a contempt of court.

(vi)         The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.

(vii)        The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.[4]

[4]          Ibid, quoted with approval in 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216, [9] (Hansen, Ferguson and McLeish JJA).

  1. Recently, in Banksia Securities Ltd v Insurance House Pty Ltd (Costs), John Dixon J restated the principles applicable to an award of indemnity costs as follows:

(a)          Costs are to be assessed on a standard basis unless the circumstances of the case justify a departure from the usual course.

(b)          The making of an indemnity costs order is in the unlimited discretion of the court, with such discretion to be exercised judicially and not unreasonably.

(c)          The court may order indemnity costs where the circumstances warrant departing from the usual rule that costs be payable on a standard basis, including conduct that bears a ‘sufficient or unusual feature’ or some ‘relevant delinquency’.[5]

[5]          [2020] VSC 234, [15].

  1. His Honour proceeded to say that ‘[t]he court may order indemnity costs in cases where a party, properly advised, knew or should have known that it had no chance of success and has persisted with its claim’.[6]I will hereafter refer to such cases as ‘unmeritorious claims’.

[6]          Ibid.

  1. With respect to the category of unmeritorious claims, in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd,Woodward J considered that the jurisdiction to award indemnity costs was enlivened if the litigant had an ulterior motive for the litigation, and that an ulterior motive would be presumed if the litigant should have known there was no chance of success.[7] He explained:

I believe that it is appropriate to consider awarding … ‘indemnity costs’, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.[8]

[7]          (1988) 81 ALR 397, 401.

[8]          Ibid.

  1. In Johnston v Herrod,[9]Muir JA considered the jurisdiction for an indemnity costs order on the basis of an unmeritorious claim, and quoted with approval the following comments of Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart (a firm):

The authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more namely, carrying on that conduct unreasonably.[10]

[9] [2012] QCA 361, [10] (with whom Gotterson JA and Applegarth J agreed).

[10]         (1998) 156 ALR 169, 236. The application was for a personal costs order against solicitors. The passage has also been quoted with approval in the context of an application for indemnity costs. See, eg, Legal Services Commissioner v Bone [2014] QCA 179, [71] (Morrison JA with whom Fraser and Gotterson JJA agreed); Makoochieng v Kirk (No 2) [2017] VSC 747, [7] (McDonald J).

  1. In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch(No 2),[11]French J did not consider it necessary to find that the proceeding had been commenced or continued for an ulterior motive or that there was wilful disregard of the known facts or the clearly established laws. He said that the discretion to award indemnity costs could be enlivened if, ‘for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case’.[12]

[11]         (1993) 46 IR 301.

[12]         Ibid 303 (emphasis added).

  1. French J’s statement of principle was cited with approval by the Court of Appeal in Macedon Ranges Shire Council v Thompson.[13]There, the Court of Appeal confirmed that the discretion to make a special costs order may be enlivened if a litigant presses a case that, on proper consideration, should have been seenas hopeless, but that the Court may not be inclined to make such an order if the litigant did not recognise that its case was without merit.[14] In each case, the Court must have regard to ‘the litigant’s conduct against the facts then known or which ought to have been known, the inquiries that the litigant ought reasonably to have made and the legal advice which the litigant ought reasonably to have obtained’.[15]

[13]         (2009) 170 LGERA 41, 49 [15] (Redlich JA and Beach AJA).

[14]         Ibid.

[15]         Ibid.

  1. I would summarise the principles to be applied in considering an application for indemnity costs on the basis of an unmeritorious claim as follows:

(a)   The fact that a litigant filed or maintained a proceeding which has no, or substantially no prospect of success, does not of itself enliven the jurisdiction to award indemnity costs.

(b)  The jurisdiction is enlivened if the litigant knew or should have known, on proper consideration, that the case was hopeless.

(c)   The Court may decline to exercise its discretion if the litigant did not in fact recognise that the case was hopeless.

Do special rules apply to challenges to arbitral awards

  1. International authorities have considered whether a special rule should apply with respect to unsuccessful challenges to arbitral awards, such that indemnity costs would be the starting point and only ‘special circumstances’ would justify a different costs order (‘the A v R principle’). The A v R principle reverses the usual onus by requiring an unsuccessful party to establish special circumstances as to why an indemnity costs order should not be made.
  2. In Hong Kong, it appears to be settled law that indemnity costs will ‘generally’ be awarded against ‘an unsuccessful party in an application to challenge or resist enforcement of an arbitral award’.[16]

[16]         Altain Khuder LLC v IMC Mining Inc (No 2) [2011] VSC 12, [14] (Croft J).

  1. In A v R, Reyes J of the Hong Kong Court of First Instance stated as follows:

Parties should comply with arbitration awards. A person who obtains an award in his favour pursuant to an arbitration agreement should be entitled to expect that the court will enforce the award as a matter of course.

Applications by a party to appeal against or set aside an award or for an order refusing enforcement should be exceptional events. Where a party unsuccessfully makes such application, he should in principle expect to have to pay costs on a higher basis. This is because a party seeking to enforce an award should not have had to contend with such type of challenge.

Further, given the recent introduction of Civil Justice Reform (CJR), the court ought not normally to be troubled by such type of application. A party unmeritoriously seeking to challenge an award would not be complying with its obligation to the court under O 1A r 3 to further the underlying objectives of CJR, in particular the duty to assist the court in the just, cost-effective and efficient resolution of a dispute.

If the losing party is only made to pay costs on a conventional party-and-party basis, the winning party would in effect be subsidising the losing party’s abortive attempt to frustrate enforcement of a valid award. The winning party would only be able to recover about two-thirds of its costs of the challenge and would be out of pocket as to one-third.

This is despite the winning party already having successfully gone through an arbitration and obtained an award in its favour. The losing party, in contrast, would not be bearing the full consequences of its abortive application.

Such a state of affairs would only encourage the bringing of unmeritorious challenges to an award. It would turn what should be an exceptional and high-risk strategy into something which was potentially ‘worth a go’. That cannot be conducive to CJR and its underlying objectives.

Accordingly, in the absence of special circumstances, when an award is unsuccessfully challenged, the Court will henceforth normally consider awarding costs against a losing party on an indemnity basis.[17]

[17]         [2009] 3 HKLRD 389, 400-1 [67]-[72]. See also the decisions to similar effect of A v B (No 2) [2007] 1 All ER (Comm) 633 (Colman J); Wing Hong Construction Ltd v Tin Wo Engineering Co Ltd [2010] HKCFI 1994, [8]–[14] (Saunders J); Taigo Ltd v China Master Shipping Ltd [2010] HKFCI 530, [13]–[16] (Saunders J).

  1. In Altain Khuder LLC vIMC Mining Inc, Croft J dismissed an application under s 8(5)(b) of the International Arbitration Act to set aside an ex parte order enforcing an arbitration agreement.[18]In a separate judgment, Croft J ordered the applicant to pay the costs of that application on an indemnity basis, on the basis of the A v R  He said:

In my view, the considerations which moved Reyes J and Saunders J in the Hong Kong cases … apply with equal force in Victoria, both from an arbitration perspective and also from the perspective of legislation such as that contained in the Civil Procedure Act and in the Hong Kong CJR.[19]

[18]         (2011) 276 ALR 733.

[19]         Altain Khuder LLC v IMC Mining Inc (No 2) [2011] VSC 12, [20].

  1. In IMC Aviation Solutions Pty Ltd v Altain Khuder LLC, the Court of Appeal upheld an appeal against Croft J’s order for indemnity costs and rejected the A v R  Hansen JA and Kyrou AJA stated:

With great respect to his Honour, we can find nothing in the Act or in the nature of the proceedings that are available under the Act which of itself warrants costs being awarded against an unsuccessful award debtor on a basis different from that on which they would be awarded against unsuccessful parties to other civil proceedings. Accordingly, his Honour acted on a wrong principle in embracing the approach that has been adopted by the Hong Kong Court of First Instance. We note also that the Civil Procedure Act 2010 was not in force when his Honour heard this proceeding. Even if it were in force, it would not have warranted the order he made.

In proceedings under the Act, as in other civil proceedings, costs will ordinarily be awarded against the unsuccessful party on a party and party basis unless the successful party can establish special circumstances. The principles for determining the existence of special circumstances are well established. Special circumstances, if they exist, are found in the facts of the case at hand, and the exercise of the judicial discretion is not otherwise conditioned on whether those facts are comprehended by a category of case or cases in which a special order has been made. The fact that an award debtor fails to establish a ground for resisting enforcement of a foreign arbitral award cannot, of itself, constitute special circumstances. Nor can a finding that the award debtor’s case was ‘unmeritorious’ if all that is meant by that expression is that the award debtor failed to persuade the court to accept his or her evidence and submissions.[20]

[20]         (2011) 38 VR 303, 391-2 [335]-[336] (‘Altain Khuder’) (citations omitted). Warren CJ considered it unnecessary for her to express a view on whether the approach of Reyes J in A v R should be followed in Victoria: see 319-20 [58].

  1. In Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd, Hammerschlag J also refused to follow the A v R principle, stating that ‘[n]o presumption as to [the award of indemnity costs] is required or warranted’.[21]He applied conventional principles and stated:

(a)   indemnity costs were warranted ‘where a party maintains proceedings that it should know have no real prospects of success’;[22] and

(b)  the high threshold required for an application to set aside an award under the public policy exception made it easier to identify that a failed application was one that should not have been brought and so created an ‘enhanced risk’ of an order for indemnity costs.[23]

[21]         [2015] NSWSC 829, [6] (‘Colin Joss’).

[22]         Ibid [10].

[23]         Ibid [11]. See also the eight reasons given by Hammerschlag J in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd (No 2) [2015] NSWSC 564, [31]-[39] for refusing to adopt the similar principle in A v B (No 2) [2007] 1 All ER (Comm) 633 (Colman J).

  1. In Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2), Beach J rejected the A v Rprinciple where a party unsuccessfully challenged an arbitral award under art 34 of the Model Law.[24]He considered that indemnity costs questions should be determined in accordance with the public policy of the forum, stating:

Accordingly, as the law of the forum dictates the principles to be applied in assessing the indemnity costs question, with public policy underpinning such principles, it is not inconsistent with any international instrument or precedent that the public policy of the forum, ie Australia, be considered and applied.[25]

[24]         [2016] FCA 1169, [4]-[20] (‘Sino Dragon’).

[25]         Ibid [8].

  1. Although he rejected the A v R principle, Beach J stated that if an unsuccessful art 34 challenge was found not to have had reasonable prospects of success, that would constitute a ‘category of circumstances justifying an order for indemnity costs’ (‘the no reasonable prospects test’).[26]In summary, he reasoned as follows:

[26]         Ibid [26].

(a)   Exercise of the discretion to award indemnity costs may be informed by the category of the case.[27] In the context of art 34 proceedings, that discretion should be informed by:

[27]         Ibid [24]. Examples cited included where payment of the costs of litigation may come out of a fund or assets controlled by a trustee, liquidator or receiver, and contempt proceedings.

(a)          the objects set out in s 2D and the considerations set out in s 39(2) of the [International Arbitration Act];

(b)       the limited grounds for challenge under Art 34;

(c)          the fact that the parties’ dispute has been resolved under contract with the arbitral award being the contractually provided for outcome; and

(d)          in the context of (a) to (c), the public policy of discouraging Art 34 challenges (and the mirror s 8 proceedings opposing enforcement) that have no reasonable prospects of success, particularly where it may be said that such challenges that do not have such prospects are discordant with the agreed contractual setting for the relevant dispute resolution mechanism.[28]

[28]         Ibid [25] (citations omitted).

(b)  The adoption of the no reasonable prospects test would discourage the bringing of unmeritorious art 34 challenges.[29]

[29]         Ibid [28](b).

(c)   Public policy considerations mean that art 34 challenges are not ordinary litigation.[30] His Honour referred to the paper presented by Allsop CJ entitled ‘Public Policy in the New York Convention and the Model Law’,[31] which concluded with the following quote from TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd:

Parties in international commerce may choose arbitral dispute resolution for many reasons … that chosen international legal order depends crucially upon reliable curial enforcement and a respect by the courts for the choice and autonomy of the parties and for the delicate balance of the system.[32]

[30]         Ibid [28](c).

[31]         The Enforcement of International Arbitration Awards and Public Policy (Seminar Paper, Australian Maritime and Transport Arbitration Commission, 10 November 2014) 30-9 [56]-[74].

[32]         (2014) 232 FCR 361, 393-4 [110] (Allsop CJ, Middleton and Foster JJ).

  1. He further considered that the no reasonable prospects test was analogous to the test for summary judgment under s 31A of the Federal Court of Australia Act 1976(Cth), which empowers a Court to give summary judgment against a party who had no reasonable prospects of successfully defending or prosecuting (as applicable) a proceeding.[33]He opined that ‘reasonable prospects’ was more than ‘real prospects’.[34]

[33]         Sino Dragon [2016] FCA 1169, [26].

[34]         Ibid. ‘No real prospect’ is the test under s 63 of the Civil Procedure Act 2010 (Vic).

Submissions

Winslow’s submissions

  1. Winslow submitted that the Court should accept the approach of Beach J in Sino Dragon, for the following reasons:

(a)   In Altain Khuder, the Court of Appeal rejected the A v R principle but not the ‘careful analysis’ of Beach J in Sino Dragon or Hammerschlag J in Colin Joss as to the proper application of the principles.

(b) The objects in ss 1AA and 1AC of the Act are more supportive of Beach J’s approach than the relatively benign objects in s 2D of the International Arbitration Act.

(c) The lack of any real difference between the costs rules in Victoria, New South Wales and the Federal Court, and the desirability of uniformity in the approach to the Act and the International Arbitration Act, means that the Court ‘should follow carefully considered on point decisions from other superior Courts like Sino Dragon and Colin Joss’.

  1. On the basis that the jurisdiction had been enlivened, Winslow submitted that the Court should exercise its discretion to award indemnity costs because of the following factors:

(a)          The Department’s defence was ‘a barely disguised impermissible attack on the merits of the award’.

(b)          The Department’s tactical decision to wait and raise these matters in response to Winslow’s application for enforcement, at which time any inadequacies in the arbitrator’s reasons could no longer be cured by the Court or Tribunal.

(c)          The inconsistency of the Department’s arguments with respect to the purpose and object of the Act and the policy ramifications for arbitration if enforcement was refused.

(d)          The inconsistency of the resistance with the overarching purpose of the Civil Procedure Act 2010 (Vic), and the Department’s obligations under model litigant guidelines and its positive duties under the Act.

(e)          The fact that any breaches of any obligation to provide reasons were not serious, material or fundamental breaches of the arbitration agreement.

(f)          The Department’s conduct already referred to in Winslow’s submissions as to waiver.

The Department’s submissions

  1. The Department submitted that this Court should not follow the approach of Beach J in Sino Dragon, which declined to follow the Court of Appeal in Altain Khuderand is inconsistent with Victorian law.[35]

 

[35]         The Department referred to the following cases: Jeffrey v Giles [2016] VSC 78, [3] (McDonald J); Makoochieng v Kirk (No 2) [2017] VSC 747, [7] (McDonald J); Masters Home Improvement Pty Ltd v North East Solution Pty Ltd [2017] VSCA 113, [9].

  1. The Department further submitted that the discretion to award indemnity costs was not enlivened simply by instituting or maintaining a proceeding on behalf of a client who has no, or substantially no prospects of success. What is relevantly required is that the prospects must be ‘hopeless’.
  2. In any event, the Department submitted that its conduct in resisting enforcement was neither ‘unreasonable in all the circumstances’ nor ‘hopeless’, for the following reasons:

(a)          Winslow moved for enforcement before the Department’s time to apply to set aside the award under s 34 of the Act had expired, and the Department was entitled to take steps to defend itself by invoking grounds under s 36 of the Act.

(b)          Despite the Court’s finding on waiver, applying to set aside the award would have had no effect on the costs of the central issue decided by this Court, being the sufficiency of the arbitrator’s reasons.

(c)          There is no reason for the Court to take a stricter approach to costs in resisting enforcement of an award under s 36 of the Act, than an application to set aside an award under s 34 of the Act.

(d)          The Department’s opposition to enforcement was based on reasonably arguable grounds, being:

(i)          defects in the arbitrator’s reasons as the Department saw them; and

(ii)         the identification of the correct standard of reasons applicable to an award under the Act.

(e)          The Department’s core contention was that the arbitrator had failed to explain why extensions of time should be granted where he had expressly found that the relevant events were not caused by the Department. The Court concluded that it was not necessary for the arbitrator to do so because it was implicit in the arbitrator’s express conclusions. This was an issue properly capable of argument.

  1. Winslow’s conduct of the proceeding substantially enlarged the issues, including by its 86 page submission which raised a plethora of arguments. It would be unjust for the Department to pay indemnity costs on Winslow’s lengthy submissions, which included issues on which Winslow did not succeed and which were not decisive as to the outcome of the proceeding.

Conclusion

  1. I hesitate to disagree with the reasoning of Beach J in Sino Dragon, but I do not consider that there is any basis for departing from the usual rule with respect to unmeritorious claims, that the discretion to award indemnity costs will not be enlivened unless the party knew or should have known, on proper consideration, that the case was hopeless. While unsuccessful challenges to arbitral awards may give rise to contextual factors capable of supporting an order for indemnity costs under the usual principles, I am unable to accept the no reasonable prospects test as informing the jurisdiction for indemnity costs orders in such challenges.
  2. My reasons for this conclusion are as follows:

(a)   A modification to the conventional principles is not supported by the authorities.

(b)  There is no utility in equating the test for summary judgment with the test for indemnity costs.

(c)   The no reasonable prospects test is unlikely to discourage challenges to arbitral awards.

A modification to the conventional principles is not supported by the authorities

  1. The Court of Appeal in Altain Khuder specifically dealt with a failed attempt to resist the enforcement of an award and stated that such a fact ‘cannot, of itself, constitute special circumstances’.[36]

[36]         (2011) 38 VR 303, 392 [336] (Hansen JA and Kyrou AJA).

  1. The majority had regard to the International Arbitration Act, including ss 2D and 39(2),[37]but said:

[W]e can find nothing in the Act or in the nature of the proceedings that are available under the Act which of itself warrants costs being awarded against an unsuccessful award debtor on a basis different from that on which they would be awarded against unsuccessful parties to other civil proceedings.[38]

[37]         Ibid 354 [195].

[38]         Ibid 391 [335].

  1. In Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2), Edelman J agreed with the majority in Altain Khuder, stating:

[T]he A v B (No 2) approach—creating a different principle rather than merely being a context within which the usual principles are applied—does not find any support in the International Arbitration Act or in the Model Law.[39]

[39]         (2015) 246 FCR 498, 502 [14]. At [8] Edelman notes that the principle in A v B (No 2) [2007] 1 All ER (Comm) 633 (Colman J) is similar to the A v R principle. For a discussion of the reasons for rejecting the creation of a different principle and the various relevant authorities, see also [4]-[24].

  1. It is true that the Court of Appeal was not dealing with the no reasonable prospects test but the majority confirmed that special circumstances were required, and stated:

Special circumstances, if they exist, are found in the facts of the case at hand, and the exercise of the judicial discretion is not otherwise conditioned on whether those facts are comprehended by a category of case or cases in which a special order has been made.[40]

[40]         Altain Khuder (2011) 38 VR 303, 392 [336].

  1. In my opinion, there is nothing in the reasons of the majority supporting the rejection of the well-established proposition that the jurisdiction to award indemnity costs for unmeritorious claims is not enlivened by the mere fact that the proceeding had no or substantially no prospect of success.[41]Rather, it is enlivened by the fact that the litigant knew or should have known, on proper consideration, that the case was hopeless.[42]

[41]         See paragraphs 4 to 10 and 29 above. See also Jeffrey v Giles [2016] VSC 78, [3] (McDonald J); Makoochieng v Kirk (No 2) [2017] VSC 747, [7] (McDonald J).

[42]         See paragraph 11(b) above.

There is no utility in equating the test for summary judgment with the test for indemnity costs

  1. I do not consider that there is any utility served by equating the test for summary judgment under s 31A of the Federal Court of Australia Act 1976(Cth) with the test for indemnity costs orders, as suggested by Beach J.[43]The exercise of a power to summarily dispose of a proceeding and the power to order indemnity costs have different underlying purposes.

[43]         See Sino Dragon [2016] FCA 1169, [26], [28](c). I am mindful that the test for summary disposition under s 31A of the Federal Court of Australia Act 1976 (Cth) is ‘no reasonable prospect’ of success and the test under s 63 of the Civil Procedure Act 2010 (Vic) is ‘no real prospect’ of success. However, I do not consider that the differences, if any, between those tests or the ‘hopeless’ test are material to this discussion. With respect to any differences in these tests, see Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27, 30-40 [6]-[32] (Warren CJ, Nettle and Neave JJA).

  1. The purpose of summary judgment is to terminate a proceeding and avoid subjecting the parties to inconvenience, expensive litigation and the diversion of public funds in the administration of justice. As was stated in the Explanatory Memorandum to the Civil Procedure Bill 2010 (Vic):

The Commission stated that claims or defences that are without merit create problems for the parties and the administration of justice, subjecting plaintiffs and defendants to the inconvenience and expense of litigation. The pursuit of unmeritorious claims or defences also has adverse consequences for the administration of justice. Judicial and other publicly funded resources are expended and diverted from dealing with other cases.[44]

[44]         Explanatory Memorandum, Civil Procedure Bill 2010 (Vic) 24.

  1. Given the purpose of summary judgment, as set out in the preceding paragraph, it is irrelevant whether or not a party knows that its case is hopeless, or has no real prospect or no reasonable prospect of success.
  2. The purpose of an indemnity costs order against a party bringing an unmeritorious claim is to fully compensate the other party, who has been subjected to a proceeding that should not have been brought because it was known, or should have been known, by the party bringing the claim that it was hopeless. As Gray J said in Hamod v New South Wales:

Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.[45]

[45]         (2002) 188 ALR 659, 665 [20] (with whom Carr and Goldberg JJ agreed).

  1. The test for indemnity costs reflects the tension between the interests of successful and unsuccessful litigants. The courts should be careful not to deter bona fide litigants from bringing claims that might be attended by uncertainty.[46]

[46]         Ugly Tribe [2001] VSC 189, [10], discussing Spencer v Dowling [1997] 2 VR 127, 147 (Winneke P). See also Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141, [43] (Giles JA, Handley AJA and Whealy J).

  1. The Act and the International Arbitration Act both provide for grounds upon which arbitral awards may be challenged. A party in good faith should be able to attempt to prosecute such statutory rights in the courts, without being subjected to a different test governing whether indemnity costs should be payable.

The no reasonable prospects test is unlikely to discourage challenges to arbitral awards

  1. In my opinion, the risk of an indemnity costs order is unlikely to provide a significant disincentive to doubtful challenges to enforcement of awards. The nuanced difference between a test which:

(a)   requires that the lack of merit ought to have been known by the party; and

(b)  does not demand such a requirement,

is unlikely to discourage prospective litigants.

  1. The enforcement of awards is more effectively facilitated by:

(a)       the ordering of penalty interest; and/or

(b)          courts being prepared to manage and determine challenges to enforcement on an expedited basis.

Further observation

  1. Additionally, I reject Winslow’s submissions that the no reasonable prospects test is more strongly supported by the paramount object of the Act, as set out in s 1AC(1),[47]when compared to ss 2D(c)[48]or 39[49] of the International Arbitration Act. In my opinion they are substantially to the same effect.

[47]         See paragraph 2(b) above.

[48]         See paragraph 2(c) above.

[49]         See paragraph 2(d) above.

  1. As stated in paragraph 27 above, mindful of the objects set out in s 2D of the International Arbitration Act and s 1AC of the Act, the context surrounding a challenge to an arbitral award may be relevant in determining whether indemnity costs should be ordered on the conventional principles. For example:

(a)          Courts should be vigilant to ensure that applications to resist enforcement are not made for an ulterior purpose, such as delay. As Allsop CJ said in Ye v Zeng (No 5):

It is not merely a debt, it is the resolution of a dispute by a chosen contractual mechanism. Courts should be astute to distinguish between conduct that reflects no more than an attempt to delay or impede payment and the reasonable invocation of the proper protections built into the [New York Convention 1958] and the Act.[50]

Of course, if a court is satisfied that the proceeding is no more than an attempt to delay or impede payment, that would constitute an ulterior motive which would enliven the discretion for indemnity costs.

(b)          Imposing a higher threshold for a challenge to an arbitral award under the Act and the International Arbitration Act may facilitate a finding that the applicant knew, or should have known, that the application was hopeless.[51]

[50]         [2016] FCA 850, [23].

[51]         As was observed in Colin Joss [2015] NSWSC 829, [11] (Hammerschlag J).

Should indemnity costs be awarded in this case based on the usual principles?

  1. In my opinion, this is not an appropriate case to award costs on an indemnity basis. In particular, I do not consider that the Department’s opposition was hopeless, or that it should have been known to be hopeless, for the following reasons:

(a)          A significant part of the hearing was devoted to the appropriate test to be applied in determining the adequacy of the arbitrator’s reasons under s 31(3) of the Act. I accepted the Department’s submissions and applied the test as stated by Donaldson LJ in Bremer Handelsgesellschaft mbH v Westzucker GmbH [No 2], being:

All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. That is all that is meant by a ‘reasoned award’.[52]

[52]         [1981] 2 Lloyd’s Rep 130, 132-3 (‘Bremer’). Referred to in the Principal Reasons as ‘the Bremer formulation’.

The fact that Winslow so extensively submitted that the Court should accept a lower standard of reasons than the Bremer formulation does not sit comfortably with its contention that the Department’s case, applying that formulation, was hopeless.

(b)          The Bremer formulation does not provide a precise prescription. Minds may well differ as to whether reasons have been sufficiently expressed, and the reasons cannot be viewed in a vacuum. As Lyons J stated in Tayar v Feldman, in determining whether the reasons and award were adequate, the Court may take into account:

(1)          the weight of the particular issue proportionate to the other issues in dispute; and

(2)          the position of the parties and what they may understand the reasons to mean.[53]

(c)          As noted in the Principal Reasons, the Second Award consisted of 1,167 paragraphs in 224 pages.[54] Winslow submits that such detailed reasons could hardly be said not to satisfy the requirements of s 31(3) of the Act. However, the Department did not allege that there were inadequate reasons for the determination of all of the claims in the Second Award. As a matter of principle, a detailed consideration of one claim in an award cannot satisfy the obligation under s 31(3) of the Act for an award to include reasons with respect to another claim. Accordingly, the comprehensive and detailed reasons provided generally in the Second Award did not render the Department’s submissions as to the adequacy of the reasons with respect to particular claims hopeless.

(d)          The Department contended that its ‘key point’ was that the arbitrator had failed to ‘state reasons for his conclusions with respect to EOTs during winter suspensions, Christmas shutdowns, periods when Winslow ran into inclement weather and site recovery after the 2016 winter shutdown’. I rejected this contention but found that the arbitrator had not expressly stated that it was irrelevant whether a neutral event was only encountered by reason of Winslow’s prior default.[55] However, I do not consider that the Department’s contention was unarguable or that it must have known it to be hopeless.[56]

[53]         [2020] VSC 66, [151], discussing R v F [2012] 5 HKLRD 278, 286-7 [37] (Thomas Au J).

[54]         Principal Reasons [52]. See n 3 for the definition of Second Award.

[55]         Principal Reasons [76].

[56]         See generally Principal Reasons [73]-[78].

  1. In the circumstances, I propose to order that the Department pay Winslow’s costs, to be assessed on a standard basis.

Costs of Winslow’s application for indemnity costs

  1. The Department contended that, if Winslow’s application for indemnity costs was unsuccessful, it should be ordered to pay the Department’s costs of the application. Winslow argued that, even in that event, there should be no order as to costs because the Department should have been prepared to deal with Winslow’s previously foreshadowed application orally at the hearing on 3 December 2020. Winslow relied upon the following statement of the Court of Appeal:

Yet as we have observed, sanctions imposed for a breach of any overarching provisions have been a rarity at first instance. When no party invites the court to determine whether there has been a breach of the Act, there may a judicial disinclination to embark upon such an own-motion inquiry for fear that inquiry as to a potential breach may be time consuming and may require the introduction of material that was not before the court as part of the proceeding. Such fears cannot relieve judges of their responsibilities. But we would not wish it to be thought that a judicial officer at first instance must undertake a substantial inquiry when considering whether there has been a contravention of the Act. As the sanction for a breach will usually lie in an appropriate costs order, a judge may at the conclusion of the reasons for judgment immediately invite oral submissions as to why there should not be a finding that the Act was contravened. The judge may in a relatively brief way deal with that issue in providing succinct reasons for a finding that there has been a breach of the Act and how that finding affects the orders for costs that are to be pronounced.[57]

[57]         Yara Australia Pty Ltd v Oswal (2013) 41 VR 302, 311-2 [27] (Redlich and Priest JJA and Macaulay AJA).

  1. With respect, I do not consider that the Court of Appeal was suggesting that parties must, in all the circumstances or even generally, be prepared to argue all questions with respect to special costs orders or contraventions of the Civil Procedure Act 2010(Vic) at the time that reasons for judgment are published.
  2. In my opinion, at the time of the publication of the Principal Reasons, it was reasonable for the Department to not be in a position to make submissions in opposition to Winslow’s application for indemnity costs, for the following reasons:

(a)          Preparation of submissions with respect to indemnity costs would require consideration of the reasons as published.

(b)          The application for indemnity costs raised real issues as to the test to be applied following an unsuccessful challenge to an arbitral award and the application of such test to the facts of this case.

(c)          Preparation of submissions properly dealing with these issues prior to the publication of the Principal Reasons could lead to significant wasted costs depending on the ultimate result and on whether the successful party would press their stated intention of applying for a special costs order.

  1. In the circumstances, Winslow has unsuccessfully applied for indemnity costs and costs should follow the event.
  2. I order that Winslow pay the Department’s costs of and incidental to the application for indemnity costs on a standard basis.

 

Freedom Foods Pty Ltd v Blue Diamond Growers (No 2) [2021] FCA 409

FEDERAL COURT OF AUSTRALIA

 

Freedom Foods Pty Ltd v Blue Diamond Growers (No 2) [2021] FCA 409

File number: VID 644 of 2020
Judgment of: MOSHINSKY J
Date of Judgment: 23 April 2021
Date of Order: 23 April 2021
Catchwords: PRACTICE AND PROCEDURE – costs – international arbitration – where respondent sought stay of the proceeding pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) – where stay granted – where respondent substantially successful – whether to depart from ordinary rule that costs follow the event
Legislation: International Arbitration Act 1974 (Cth), s 7
Cases cited: ACN 154 520 199 Pty Ltd (in liq) v Commissioner of Taxation (No 2) [2020] FCAFC 225

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622

Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
 Orders:  THE COURT ORDERS THAT:

 

1.           The applicants pay the respondent’s costs of and incidental to:

(a)       1. the applicants’ interlocutory application dated 20 November 2020; and

(b)       2. the respondent’s interlocutory application dated 15 December 2020,

3. including the costs reserved by the orders made on 24 December 2020, 5 February 2021 and 10 February 2021.

2.           In relation to the other costs of the proceeding to date (including other reserved costs), there be no order as to costs.

3.           The costs referred to in paragraph 1 be fixed by way of a lump sum.

THE COURT DIRECTS THAT:

 

4.           Within 14 days, the parties file any agreed proposed minutes of orders fixing a lump sum in relation to the respondent’s costs.

5.           In the absence of any agreement:

(a)          within 21 days, the respondent file and serve an affidavit constituting a Costs Summary in accordance with paragraphs 4.10 to 4.12 of the Court’s Costs Practice Note (GPN-COSTS);

(b)          within a further 14 days, the applicants file and serve any Costs Response in accordance with paragraphs 4.13 to 4.14 of the Costs Practice Note (GPN-COSTS); and

(c)          in the absence of any agreement having been reached within a further 14 days, the matter of an appropriate lump sum figure for the respondent’s costs be referred to a Registrar for determination.

 

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

Number of paragraphs: 9
Date of last submissions: 7 April 2021
Date of hearing: Determined on the papers
Parties:  BETWEEN:  FREEDOM FOODS PTY LTD (ACN 068 972 181)

First Applicant

 

FREEDOM FOODS GROUP INGLEBURN PTY LTD (ACN 600 569 382)

Second Applicant

 

FREEDOM FOODS GROUP TRADING PTY LTD (ACN 614 863 286) (and another named in the Schedule)

Third Applicant

 

AND:  BLUE DIAMOND GROWERS

Respondent

Counsel for the Applicants: Mr PD Crutchfield QC with Dr AM Dinelli
Solicitor for the Applicants: Arnold Bloch Leibler
Counsel for the Respondent: Dr JP Moore QC, with Ms HA Tiplady and Mr T Farhall
Solicitor for the Respondent: Norton Rose Fulbright Australia

 

 

 

 

 

REASONS FOR JUDGMENT

MOSHINSKY J:

  1. On 5 March 2021, I published reasons for judgment and made orders in relation to two interlocutory applications: Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCA 172. I now deal with the issues of costs, both of the interlocutory applications and of the proceeding to date. These reasons should be read together with the reasons dated 5 March 2021. I will adopt the abbreviations used in the 5 March 2021 reasons.
  2. The parties have filed the following submissions on costs: BDG filed submissions on 26 March 2021; the applicants filed submissions on 29 March 2021; and BDG filed reply submissions on 7 April 2021.  The respective positions of the parties are as follows:

(a)          BDG seeks orders that the applicants pay, on a party and party basis, BDG’s costs of and incidental to the two interlocutory applications and otherwise of the proceeding.  BDG also seeks an order that these costs be assessed in accordance with the lump sum procedure set out in the Court’s Costs Practice Note (GPN-COSTS).

(b)          The applicants submit that the appropriate costs orders are:

(i)          the applicants pay 50% of BDG’s costs of the interlocutory applications; and

(ii)         there otherwise be no order as to the costs of the proceeding.

  1. The applicable principles relating to costs are well established.  It is sufficient for present purposes to refer to the recent summary of those principles in ACN 154 520 199 Pty Ltd (in liq) v Commissioner of Taxation (No 2) [2020] FCAFC 225 at [9]-[11].
  2. I will deal first with the costs of the two interlocutory applications.  These applications were heard together and there was an overlap in the evidence and submissions as between the two interlocutory applications.  It is appropriate to deal together with the costs of the two interlocutory applications.
  3. BDG was substantially successful in relation to both interlocutory applications. By BDG’s interlocutory application, BDG sought an order that the proceeding be stayed pursuant to s 7(2)of the International Arbitration Act 1974 (Cth). I made such an order. By the applicants’ interlocutory application, the applicants sought injunctions to restrain BDG from pursuing the Californian Arbitration and the US District Court Proceeding: see [12] of the 5 March 2021 reasons. I dismissed the applicants’ interlocutory application. Insofar as the applicants submit that, because BDG proffered, and the Court accepted, an undertaking that BDG would discontinue the US District Court Proceeding (and certain other undertakings), the applicants obtained some of the relief they sought, I do not accept that submission. The undertaking relating to the US District Court Proceeding was offered as part of BDG’s oral submissions in the context of a suggestion by the applicants that BDG was adopting inconsistent positions (see the 5 March 2021 reasons at [68]). It was offered with a view to the relevant claims being brought in the Californian Arbitration, not in the present proceeding. While the undertaking may overlap to some extent with the relief sought by the applicants, BDG was nevertheless substantially successful in relation to both interlocutory applications: the present proceeding was stayed and the Californian Arbitration is to continue.
  4. I note that the applicants were successful in respect of a number of the issues considered in the 5 March 2021 reasons, namely whether paragraph (d) of cl 5(1) of the Franchising Code was satisfied (considered at [115]-[116]); the 20% Issue (considered at [118]-[134]); and the issues considered at [136]-[139] of the 5 March 2021 reasons.  However, none of those issues was determinative.  In the circumstances of this case, I do not consider it appropriate to adopt an “issue by issue” approach to costs, or to depart from the usual rule that costs follow the event on account of the applicants’ success in respect of a number of issues.  The issue of costs arises in the context of interlocutory applications (rather than a final hearing) and there was considerable overlap in the evidence and submissions as between the issues that arose for determination.  In these circumstances, I consider it appropriate to focus on the overall outcomes of the interlocutory applications.  As described above, BDG was substantially successful in the outcomes.
  5. Accordingly, I consider it appropriate to order that the applicants pay BDG’s costs of and incidental to the interlocutory applications.  There were several case management hearings related to the interlocutory applications.  The costs of those hearings were reserved, by orders made on 24 December 2020, 5 February 2021 and 10 February 2021.  These reserved costs should form part of the costs of the interlocutory applications, and I will indicate this in the orders.
  6. I turn now to consider the other costs of the proceeding to date.  These costs are likely to be relatively limited, as the proceeding was at an early stage at the time when it was stayed.  While BDG has been successful in obtaining a stay of the proceeding, there has been no adjudication on the merits of the claims: cf Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin(1997) 186 CLR 622 at 624-625 per McHugh J. I do not consider that the applicants acted unreasonably in commencing the proceeding, notwithstanding the existence of the arbitration clause. As the reasons of 5 March 2021 indicate, there were arguments available to the applicants to support the view that a proceeding could be commenced in this jurisdiction. In the circumstances, I consider it appropriate to order that, in relation to the other costs of the proceeding to date (including other reserved costs), there be no order as to costs.
  7. BDG has sought an order that the costs be fixed by way of a lump sum.  The applicants did not submit otherwise.  I consider it appropriate to order that the costs be fixed by way of a lump sum, and will make directions for the filing of costs affidavits in accordance with the applicable practice note, and for the lump sum to be determined by a Registrar.
I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.

 

 

Associate:

 

Dated:       23 April 2021

 

 

SCHEDULE OF PARTIES

 

  VID 644 of 2020
Applicants  
Fourth Applicant: PACTUM AUSTRALIA PTY LTD (ACN 112 913 336)

 

Neptune Wellness Solutions Inc. v Azpa Pharmaceuticals Pty Ltd [2021] FCA 676

Federal Court of Australia

 

 

 

Case Name: Neptune Wellness Solutions Inc. v Azpa Pharmaceuticals Pty Ltd
Medium Neutral Citation: Neptune Wellness Solutions Inc. v Azpa Pharmaceuticals Pty Ltd [2021] FCA 676
Hearing Date(s):  21 June 2021
Date of Orders:  21 June 2021
Decision Date:  21 June 2021
Before: Colvin J
Decision: THE COURT DECLARES THAT:

 

1. Pursuant to s 8(3) of the International Arbitration Act 1974 (Cth), the applicant is entitled to enforce against the respondents a foreign arbitral award made in Montreal, Canada on 15 February 2021 as if the award were a judgment of the Court.

 

THE COURT ORDERS THAT:

 

2. There be judgment in favour of the applicant against the respondents in the following amounts:

(a) AU$4,185,917.15, being the principal amount of the award;

(b) AU$1,491,448.02, being pre-award interest on the amount in order 2(a) calculated at the Québec, Canada legal rate of interest, being 5% calculated daily, from 31 December 2013 to 15 February 2021; and

(c) $AU3,626,473.27, being the applicant’s costs associated with the arbitration.

3. The respondents pay the applicant’s costs of and incidental to the application.

Catchwords: ARBITRATION – application to enforce foreign arbitral award made in Canada as judgment of Court – where distributorship agreement contained arbitration agreement for arbitration in Quebec – where arbitrator made award in favour of applicant – where no payment made by respondents in respect of award – where respondents did not appear – whether requirements of s 9 of International Arbitration Act 1974 (Cth) met – application allowed
Legislation Cited:  International Arbitration Act 1974 (Cth) ss 8, 9
Cases Cited: Tianjin Jishengtai Investment Consulting Partnership Enterprise v Huang [2020] FCA 767
DIVISION: General Division
Parties: BETWEEN:
NEPTUNE WELLNESS SOLUTIONS, INCApplicantAND:
AZPA PHARMACEUTICALS PTY LTDFirst Respondent

 

ACN 137 395 003 PTY LTD (FORMERLY KNOWN AS AZPA PTY LTD)

Second Respondent

Representation: Counsel for the Applicant: Mr P Kulevski

Solicitor for the Applicant: Corrs Chambers Westgarth

Counsel for the Respondents: The Respondents did not appear

File Number(s): VID 208 of 2021
Publication Restriction: NIL

 

THE COURT DECLARES THAT:

 

1.           Pursuant to s 8(3) of the International Arbitration Act 1974 (Cth), the applicant is entitled to enforce against the respondents a foreign arbitral award made in Montreal, Canada on 15 February 2021 as if the award were a judgment of the Court.

 

THE COURT ORDERS THAT:

 

2.           There be judgment in favour of the applicant against the respondents in the following amounts:

(a)          AU$4,185,917.15, being the principal amount of the award;

(b)          AU$1,491,448.02, being pre-award interest on the amount in order 2(a) calculated at the Québec, Canada legal rate of interest, being 5% calculated daily, from 31 December 2013 to 15 February 2021; and

(c)          $AU3,626,473.27, being the applicant’s costs associated with the arbitration.

3.           The respondents pay the applicant’s costs of and incidental to the application.

 

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

 

REASONS FOR JUDGMENT

COLVIN J:

  1. Australia has assumed obligations under the Convention of the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration (Convention).  It has taken steps to give effect to those obligations by enacting the International Arbitration Act 1974 (Cth). By s 8 of the International Arbitration Act, an arbitral award made in pursuance of an arbitral agreement in a country other than Australia which is an arbitral award to which the Convention applies is binding for all purposes and may be enforced in this Court as if the award were a judgment or order of the Court.
  2. Neptune Wellness Solutions, Inc (Neptune) has obtained an arbitral award in Canada against Azpa Pharmaceuticals Pty Ltd and Azpa Pty Ltd (together, Azpa Parties).  Neptune seeks to enforce the award as if it were a judgment of this Court.  It seeks a declaration that it is entitled to do so and a judgment in Australian dollars in this Court that includes interest and costs as determined in the arbitration.  It also seeks the costs of the present application.
  3. The Azpa Parties are Australian companies with their registered offices at the same address in Melbourne.  They have been served with the originating process but have not responded.  Neptune seeks orders on the application despite the failure of the Azpa Parties to appear.
  4. The hearing of the application took place in open Court in Perth with counsel for Neptune appearing remotely.  There was no appearance for the Azpa Parties.
  5. The following affidavits were filed and read on the application:

    (1)          Felicia Renée Williams affirmed on 23 April 2021;

    (2)          Frédéric Paré sworn 15 April 2021;

    (3)          Bronwyn Lisa Lincoln sworn 26 April 2021;

    (4)          Christopher Mark Warwick affirmed 19 May 2021;

    (5)          Bronwyn Lisa Lincoln sworn 31 May 2021; and

    (6)          Bronwyn Lisa Lincoln sworn 21 June 2021.

  6. The affidavits establish that:

    (1)          Neptune and the Azpa Parties were parties to an arbitration agreement contained in a distributorship agreement entered into on 8 December 2011.

    (2)          Under the terms of the distributorship agreement, Azpa Pty Ltd was appointed as the exclusive distributor of Neptune Krill Oil in Australia and New Zealand.

    (3)          A duly certified copy of the distributorship agreement containing the arbitration agreement has been produced to the Court.

    (4)          The arbitration agreement provides for an arbitration in Quebec according to Canadian laws if the distributor is the defendant.

    (5)          Arbitration proceedings under the arbitration agreement were commenced on 20 August 2014.

    (6)          The Azpa Parties were defendants in the arbitral proceedings.

    (7)          The arbitrator was duly appointed and the parties actively participated in the arbitral process.

    (8)          The arbitral proceedings had a convoluted procedural history.

    (9)          Following a hearing at which the parties were represented by counsel and presented oral and written evidence, the arbitrator made an award in the following terms:

    For the reasons set out above, the Arbitrator:

    (a)     GRANTS Neptune’s claim for breach of contract, based on Azpa’s alleged failure to pay Neptune’s invoices for krill oil that Neptune delivered to Azpa during 2013, and

    ORDERS Azpa jointly and solidarily to pay the principal amount of CA$3,904,623.52 (corresponding to US$3,670,793.95 as of 31 December 2013), together with pre-Award interest at the Quebec legal rate to the date of this Award;

    (b)     DENIES all of Azpa’s counterclaims;

    (c)     ORDERS Azpa jointly and solidarily to pay an additional CA$3,382,774.27, on account of Neptune’s costs associated with this Arbitration;

    (d)     DECLARES that no further sums are owed by either Party on account of any claims asserted in these proceedings.

    (10)         The pre-award interest calculated in accordance with the Quebec legal rate is CA$1,391,222.71.

    (11)         A duly certified copy of the original award made in Montreal Canada on 15 February 2021 has been produced to the Court.

    (12)         No payment has been made by the Azpa Parties in respect of the award.

    (13)         On 14 May 2021, the Azpa Parties were served with the originating application and affidavits as then filed together with a copy of the orders listing the application for hearing on 15 June 2021.

    (14)         There was no appearance for the Azpa Parties at the hearing on 15 June 2021 and the application was heard and adjourned until 21 June 2021 for consideration of the making of final orders by reference to current evidence as to the applicable exchange rate.

    (15)         The exchange rate on 18 June 2021 as published by the Reserve Bank of Australia on 21 June 2021 was AU$1.00 = CA$0.9328.

    (16)         Applying the published exchange rate to the award, the amounts ordered by the arbitrator to be paid by the Azpa Parties equate to AU$4,185,917.15 for the principal amount and AU$3,626,473.27 for Neptune’s costs associated with the arbitration and AU$1,491,448.02 for pre-award interest.

  7. Canada is a party to the Convention.
  8. On the evidence, the requirements of s 9 of the International Arbitration Act are met and I am satisfied that the award is a foreign award for the purposes of the International Arbitration Act and that Neptune is entitled to have the award recognised and enforced in Australia.  Further, it may be enforced in this Court as if it were a judgment of this Court.  The appropriate course is for a declaration to be made and in order to enable the award to be enforced as a judgment of this Court in accordance with the rights conferred by the International Arbitration Act, for judgment in the amount of the award to be ordered in favour of Neptune.
  9. As the award is to be enforced in Australia, it is appropriate that the judgment be expressed in Australian currency:  Tianjin Jishengtai Investment Consulting Partnership Enterprise v Huang [2020] FCA 767 at [22]‑[23].
  10. There should be an order for Neptune’s costs of and incidental to the application to be paid by the Azpa Parties.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.

 

Associate:

Dated:       21 June 2021

CPB Contractors Pty Ltd v DEAL S.R.L. [2021] NSWSC 820

Supreme Court of NSW

 

 

Case Name: CPB Contractors Pty Ltd v DEAL S.R.L. [2021] NSWSC 820
Medium Neutral Citation: CPB Contractors Pty Ltd v DEAL S.R.L. [2021] NSWSC 820
Hearing Date(s): 3 June 2021
Date of Orders: 6 July 2021
Decision Date: 6 July 2021
Before: Rees J
Decision: THE COURT ORDERS THAT:

Pursuant to section 7(2) of the International Arbitration Act 1974 (Cth) that these proceedings be stayed and the parties be referred to arbitration, with such arbitration to be commenced in accordance with clause 46.9 of the Services Agreement for Design Services between the Rizzani Leighton Joint Venture and Deal S.R.L. entered into or about 27 July 2015.

The plaintiff to pay the defendant’s costs of the motion filed on 14 April 2021.

Catchwords: COMMERCIAL ARBITRATION – claim under the Australian Consumer Law – alleged pre-contractual representations – proceedings commenced on last day of limitation period – application for stay – whether court or arbitrator should determine scope of arbitration clause – kompetenz-kompetenz – principles at [48]-[59] – prima facie approach applied – arbitrator to determine jurisdiction – proceedings stayed.

 

CONDITIONS OF STAY – plaintiff seeks conditions on stay regarding limitation period and applicable law – principles at [92]-[111], [116]-[117] – condition regarding limitation period would substantively alter rights – conditions not imposed.

Legislation Cited: Commercial Arbitration Act 2010 (NSW)
International Arbitration Act 1974 (Cth) ss 7, 16, 39, sch 1, sch 2
Limitation Act 1969 (NSW) ss 70, 72
Trade Practices Act 1974 (Cth)
Cases Cited: A v B [2006] EWHC 2006 (Comm); [2007] 1 Lloyd’s Rep 237
Ansett Australia Ltd v Malaysian Airline System Berhad [2008] VSC 109; (2008) 217 FLR 376
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; (2013) 298 ALR 666
Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; [2006] FCAFC 192
Dialogue Consulting Pty Ltd v Instagram, Inc [2020] FCA 1846
Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160
Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170
Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (1997) 150 ALR 345
Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1
IBM Australia Ltd v National Distribution Services Pty Ltd (1991) 22 NSWLR 466
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Lepcanfin Pty Ltd v Lepfin Pty Ltd (2020) 102 NSWLR 627; [2020] NSWCA 155
O’Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601
Orient Overseas Container Line Ltd v APL Co Pte Ltd (No 2) [2021] FCA 606
QH Tours Ltd v Ship Design and Management (Aust) Pty Ltd (1991) 33 FCR 227
Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13
Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332
Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57; [2016] 1 SLR 373
Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102
WesTrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd [2008] NSWSC 894; (2008) 219 FLR 461
Texts Cited: Malcolm Holmes and Chester Brown, The International Arbitration Act 1974: A Commentary (3rd ed, 2018, LexisNexis)
DIVISION:  Equity – Commercial List
Parties: CPB Contractors Pty Limited (Plaintiff)
Deal S.R.L. (Defendant)
Representation: Counsel:
Mr B Kremer (Plaintiff)
Mr J Giles SC / Mr M Sheldon (Defendant)Solicitors:
Corrs Chambers Westgarth (Plaintiff)
Vincent Young (Defendant)
File Number(s):  2020/223531
Publication Restriction: NIL
Appeal from: Energy City Qatar Holding Company v Hub Street Equipment Pty Ltd (No 2) [2020] FCA 1116; Energy City Qatar Holding Company v Hub Street Equipment Pty Ltd (No 3) [2020] FCA 1219

Judgment

 

  1. HER HONOUR: The defendant, Deal S.R.L., seeks an order under section 7(2) of the International Arbitration Act 1974 (Cth) for these proceedings to be stayed and referred to arbitration in Singapore by reason of an arbitration clause in its contract with the plaintiff, CBP Contractors Pty Ltd (formerly known as Leightons Contractors Pty Ltd). In addition, the defendant says that the issue as to whether the arbitration clause covers this dispute should be referred to arbitration pursuant to the kompetenz-kompetenz principle.
  2. The plaintiff does not accept that the kompetenz-kompetenz principle applies and says the only question is whether these proceedings, which are said to only concern pre-contractual matters, are covered by the arbitration clause. If the Court is minded to stay these proceedings, the plaintiff seeks the imposition of conditions on the stay to prevent the defendant from raising a limitations defence or denying the applicability of the Australian Consumer Law.
  3. For the reasons which follow, I have concluded that the defendant is entitled to the orders it seeks.

FACTS

 

  1. The defendant relied on affidavits by its Operations Director, Stefano Fabbro, and solicitor, Phillip Coady. The plaintiff relied on affidavits by its former Commercial Manager, David Simbaqueba, and solicitor, Carla Mills. There was no cross-examination.
  2. The defendant is an Italian company which designs infrastructure services, in particular, bridges and viaducts, and also supplies specialised equipment for infrastructure construction. According to Mr Fabbro, at all relevant times the defendant was based in Italy, performed its design services there, and had no offices in Australia.
  3. The defendant is a subsidiary of Italian company, Rizzani de Eccher SpA. Rizzani de Eccher Australia Pty Ltd is also part of a group of companies including Rizzani de Eccher SpA.

Tender Teaming Agreement

 

  1. According to the Technology and Construction List Statement, the WestConnex M4 widening project was a major road infrastructure project in Sydney to increase the carrying capacity of the M4 road between Silverwater Road (in the east) and Parramatta (in the west) by increasing the width of the road from three to four through lanes in each direction and improving exit and entry ramps.
  2. On 13 March 2014, the plaintiff and Rizzani de Eccher Australia were selected by the WestConnex Delivery Authority to submit a tender in respect of various works in connection with the M4 project, being construction of a viaduct, two bridges and the widening of an existing bridge. On 17 April 2014, the WestConnex Delivery Authority issued a Request for Tender in respect of the works.
  3. On 11 April 2014, a Tender Teaming Agreement was executed between the plaintiff and Rizzani de Eccher Australia. The plaintiff and Rizzani de Eccher Australia agreed to pursue the opportunity to deliver the M4 project as an unincorporated joint venture (the Rizzani Leighton Joint Venture). The parties agreed to work together to lodge a tender and, if selected to proceed to preferred contractor, to negotiate the final terms of the contractual arrangements necessary to deliver the project. The agreement contained an arbitration clause.
  4. In clause 4, the parties agreed to bear their own internal costs in connection with the tender. In respect of consultants engaged to assist in preparing the tender, clause 4.1(a)(ii)(A) provided:

[Rizzani de Eccher Australia] will bear all costs of engaging DEAL (including any subconsultants to DEAL);

DEAL is not defined in the Tender Teaming Agreement but is, presumably, a reference to the defendant.

  1. The defendant was not a party to the Tender Teaming Agreement. The plaintiff contended that the defendant had a separate contract with Rizzani de Eccher Australia, relying upon a suggested admission made by the defendant in subsequent correspondence. Whilst that is possible, the admission is unclear and I am not prepared to proceed on the basis that there was such a contract: see [37]-[38].
  2. According to the Technology and Construction List Statement, pursuant to the Tender Teaming Agreement, Rizzani de Eccher Australia engaged the defendant to provide designs and advice for bridge and viaduct structures for the M4 project to the plaintiff and Rizanni de Eccher Australia.

Design Management Plan

 

  1. On 29 April 2014, Rizzani de Eccher Australia issued a document entitled “Design Management Plan (Tender Phase) – WestConnex – M4 Widening”. According to clause 1 of the Design Management Plan, the document was prepared to define the planning and management of the concept design and its interface with the wider Bid Team. The Bid Team was the Rizzani Leighton Joint Venture team led by Bid Manager, Giammaria Gentile of Rizzani de Eccher Australia.
  2. Clause 3.1 of the Design Management Plan set out the Bid Team organisation structure, which included Rizzani Leighton Joint Venture personnel comprising:
  1. a support team;
  2. the Bid Manager from Rizzani de Eccher Australia; and
  3. a Construction Manager, Estimating Manager and Engineering Manager from the plaintiff.

According to the organisation structure, the Engineering Manager was supported by five designers, including the defendant as viaduct and structural designer.

  1. Clause 5 of the Design Management Plan described the Design Process, with the design to be developed in four phases: initial concept design and pre-tender deliverables; preliminary concept design and value engineering; finalised concept design; and submission documentation.

Defendant provides drawings for tender

 

  1. From 30 May 2014 on, the defendant prepared and circulated engineering drawings in respect of the tender. Mr Fabbro says these drawings were prepared by the defendant as part of its function under the Design Management Plan. The documents were preliminary drawings, being concept drawings which did not provide individual details in respect of each single structure within the drawing. According to Mr Fabbro, if the tender was successful, then the drawings were the starting point to be developed through further design stages before being issued for construction.
  2. According to the Technology and Construction List Statement, between May and July 2014, the defendant provided Rizzani de Eccher Australia and the plaintiff with designs and advice for bridge and viaduct structures to be used for the tender including: engineering drawings; advice about methods of construction; advice about quantities required for construction; and the cost of construction. In providing these designs and advice, it is said that the defendant represented to the plaintiff that the structures in the designs were compliant with the requirements of the tender “and were suitable to use in a tender for a fixed price contract”; the quantities derived from the designs or advised by the defendant would be sufficient; the method of construction would be suitable and adequate to construct the designs in accordance with the M4 project delivery time requirements, being by 22 December 2016.
  3. These representations are said to have been made by the defendant in trade and commerce and to have been false, including because the designs could not be developed into a final design without significant alterations and the use of significant additional resources; the designs significantly understated the quantities of resource needed to construct the structures; and it was not possible to construct the structures in the required time frame.

The tender

 

  1. On 30 July 2014, the plaintiff and Rizzani de Eccher Australia submitted its tender: the joint venture proposed to undertake the work for $261 million, with the works to be completed on 22 December 2016.
  2. According to the Technology and Construction List Statement, the plaintiff relied on the defendant’s representations when calculating its price and preparing a program for the works. The plaintiff further says that, from July to December 2014, the defendant failed to take any steps to correct the errors and deficiencies in its design or address the suggested falsity of its representations.
  3. The tender was successful. On 28 November 2014, the WestConnex Delivery Authority selected the Rizzani Leighton Joint Venture as the preferred contractor to enter into a contract for delivery of the project. On 4 December 2014, a Design and Construct Deed was executed between WCX M4 Pty Ltd (the Principal) and the Rizzani Leighton Joint Venture. After negotiating some additions to the scope of works, the lump sum contract price was $287.5 million.

Work begins

 

  1. According to Mr Simbaqueba, the construction program for the M4 project was ‘tight’ and the defendant began producing and supplying designs as soon as the Design and Construct Deed was executed, even though it did not itself have a signed contract. This led to some unhappiness. By February 2015, the defendant was seeking a first payment but the plaintiff was not prepared to pay until a contract had been signed, albeit Mr Simbaqueba and other representatives of Rizzani de Eccher Australia and the plaintiff looked at ways of doing so. The defendant continued to produce work nonetheless.
  2. On 24 April 2015, the defendant entered into a Supply Agreement with the Rizzani Leighton Joint Venture to supply equipment needed for construction. It contained an arbitration clause.
  3. On about 29 April 2015, the defendant issued an invoice to the Rizzani Leighton Joint Venture, making a payment claim under the contract then in negotiations. Some comments were made on the invoice on 19 June 2015, which was promptly re-issued, but Mr Simbaqueba says the invoice was not paid as the contract had yet to be signed.

Services Contract

 

  1. Finally, on 27 July 2015, a Services Contract was signed between the Rizzani Leighton Joint Venture and the defendant to provide design services for a fixed lump sum of $2.5 million. The Services Contract comprised a Contract Preamble, Contract Instrument, Contract Conditions, Annexures to the Contract Conditions and Special Conditions: clause 2.2, Contract Instrument.
  2. The Services Contract contained an arbitration clause, which is reproduced and considered at [70]-[77].
  3. By clause 2.1(1) of the Contract Instrument, the defendant agreed to perform the Services in accordance with the Contract. (The meaning of Services is considered further at [78].) In return, the Rizzani Leighton Joint Venture agreed to pay the defendant the Consultant’s Fee: clause 2.1(2), Contract Instrument.

Prior Services

 

  1. Clause 2 of the Contract Conditions provided: (emphasis added)

PRIOR SERVICES

If at [the Rizzani Leighton Joint Venture]’s request, the [defendant] performs, before the date of the Contract, any services that are part of the Services, then:

(a)   the terms of the Contract apply to any such services;

(b)   the terms on which any such services were performed are superseded by the terms of the Contract;

(c)   any payments made to the [defendant] by [the Rizzani Leighton Joint Venture] in connection with any such services before the Contract became operative, will be treated as payments under the Contract in part discharge of [the Rizzani Leighton Joint Venture’s] obligation to pay the [defendant’s] Fee.

  1. The defendant submitted that the drawings provided during the tender phase fall within the definition of “Prior Services”, whilst the plaintiff submitted otherwise, pointing to Mr Simbaqueba’s evidence as supporting a construction of the clause as limited to work done after the tender was successful, rather than work for the tender. This will be considered further at [63].

Limitation of liability

 

  1. Annexure A to the Services Contract contained Special Conditions, including clause 1.2, “Limitation of Liability”. By this clause, the defendant limited its maximum liability under the Contract, whether in contract, tort, equity or otherwise, to $2.5 million, such limitation not to apply to the defendant’s liability inter alia for gross negligence or wilful misconduct. In addition, the defendant excluded liability under the Contract for consequential loss suffered by the Rizzani Leighton Joint Venture. The defendant observed that, if these proceedings are not stayed, then these limitations will be pleaded in any defence filed in these proceedings.

Choice of law

 

  1. Clause 4(1) of the Contract Conditions provided that the Services Contract is governed by and must be construed according to the law of New South Wales. Clause 4(2) provided:

The parties irrevocably submit to the non-exclusive jurisdiction of the courts of New South Wales, and the courts competent to determine appeals from those courts, with respect to any proceedings that may be brought at any time relating to the Contract. Nothing in this clause 4(2) affects the operation of clause 46.9 or the enforcement in any place of an award made in an arbitration held under clause 46.9.

 

Finishing the job

 

  1. On 3 August 2015, the Rizzani Leighton Joint Venture issued subcontract progress certificate No 1 to the defendant, approving some $1 million in work on a $2.5 million contract. That is, whilst negotiation of the Services Contract were underway, the defendant had completed almost half of the contracted works.
  2. On 27 August 2015, a Joint Venture Deed was executed between the plaintiff and Rizzani de Eccher Australia, replacing the Tender Team Agreement. It contained an arbitration clause.
  3. According to the Technology and Construction List Statement, it is said that the Rizzani Leighton Joint Venture was unable to complete the Works in time, or at the cost estimated when submitting the tender. Construction took a year longer than planned. The joint venture lost some $122 million on the project, of which half (some $61.3 million) was borne by the plaintiff.

Correspondence

 

  1. Correspondence has ensued between the parties in which the plaintiff and defendant have articulated positions which are now at odds with their submissions advanced before the Court. Each seeks to rely on the other’s prior inconsistent statements as admissions as to the proper construction of the arbitration clause. What each party said they understood the clause to mean – at an early stage of commercial negotiations when it appears that neither were assisted by legal advice – is, of course, no substitute for construing the clause in accordance with established principles for interpretation of commercial contracts and arbitration clauses, which I will consider further at [67].
  2. For completeness, on 3 July 2019, the plaintiff sent a “claim document” to the defendant, in which the plaintiff primarily asserted that the defendant was contractually liable for suggested defects in the tender drawings under the Services Contract and, in the alternative, contended that the defendant was liable under the Australian Consumer Law. The defendant points to the plaintiff’s assertion in the claims document that its claim for loss for work both before and after the Services Contract arose out of, was related to and was in connection with the Services Contract:

1.1.2   [The defendant] was engaged on behalf of [the plaintiff] and [Rizzani de Eccher Australia] to prepare the structural design for the bridge and viaduct structures (and temporary works) of the M4 project. It did so in and prior to July 2014. …

1.1.18   After entry into of the Design and Construct Deed on 4 December 2014, the JV entered into a Services Contract with [the defendant] on 27 July 2015 for the provision of further design and related services in relation to the M4 Project. …

1.1.19   [The plaintiff] is entitled to recover loss from [the defendant] pursuant to the Services Contract in relation to services performed by [the defendant] for the JV both before and after the date of the Services Contract.

1.1.20   Clause 2 of the Services Contract is titled “Prior Services”. It provides that any services performed by [the defendant] prior to the date of the Services Contract (i.e. 27 July 2015) are effectively “picked up” by the Services Contract and the terms of the Services Contract apply to such services.

2.2.4   [The defendant] was firstly engaged and paid for by [Rizzani de Eccher Australia] during the tender phase, as detailed within the Teaming Agreement at Item 4.1 …

3.4.1   [The defendant] was required by the parties to what became the [Rizzani Leighton Joint Venture] to develop the Tender Design in compliance with specifications and all other design requirements of the project … including the provision of the construction methodology.

  1. On 7 August 2019, the defendant replied, noting that it had completed a preliminary review of the claim document and a detailed review was ongoing. As to the suggestion that Clause 2 of the Services Contract applied to conduct before entry into the Services Contract: (emphasis added)

The development of a concept design for use by the [Rizzani Leighton Joint Venture] for its tender does not constitute prior services that form part of the “Services” as defined by reference to Annexure C of the Services Contract. Instead, as noted by [the plaintiff] in paragraph 2.2.4 of the Claim Document, [the defendant] developed the concept design under an earlier Tender Teaming Agreement with [Rizzani de Eccher Australia]. [The plaintiff] was not a party to the Tender Teaming Agreement, and [the plaintiff] (or the [Rizzani Leighton Joint Venture]) did not pay [the defendant] for its work performed under the Tender Teaming Agreement. …

  1. The plaintiff relied on the italicised text as an admission by the defendant that it had a prior contract with Rizzani de Eccher Australia to supply the tender drawings. The admission is tenuous. By this letter, Mr Fabbro, presumably writing in a language other than his first language and with admirable but imperfect English, appears to have “picked up” the plaintiff’s reference to the Tender Teaming Agreement in the claim document. The result is confusing. It may be that the defendant and Rizzani de Eccher Australia had a contract alongside the Tender Teaming Agreement between the plaintiff and Rizzani de Eccher Australia, but the state of the evidence is presently unsatisfactory.

These proceedings

 

  1. On 30 July 2020 – being precisely six years after submission of the tender – these proceedings were commenced. By Summons, the plaintiff seeks damages under the Australian Consumer Law or, alternatively, damages for negligence. The Technology and Construction List Statement describes the designs and advice said to have been provided by the defendant, said to be false representations on which the plaintiff relied when finalising the tender.
  2. The plaintiff claims that, if the defendant had not made these representations, then the plaintiff would not have entered into the Design and Construct Deed at all, or would only have submitted a tender at a higher lump sum price and, if accepted, entered into the contract on different terms such that it would not have suffered a loss on the project of some $61.3 million, being half of the joint venture’s loss. In addition, it is said that the defendant owed the plaintiff a duty to exercise reasonable skill and care in providing designs and advice for the bridge and viaduct structures for the M4 project, which duty is said to have been breached.
  3. Steps were taken for this Court to request service of the pleadings on the defendant in Italy. On 13 November 2020, the plaintiff also sent a letter of demand to the defendant for alleged breaches of the Service Contract, noting:

[The plaintiff] notes that the matters above sit along-side separate proceedings commenced by [the plaintiff] against [the defendant] in the New South Wales Supreme Court in respect of incorrect advice provided by [the defendant] during the tender period.

… in the event that [the plaintiff] does not receive payment … a Dispute will have arisen under the Services Contract, in which case [the plaintiff] intends to issue a Notice of Dispute pursuant to clause 46.2 [and] require that any Dispute be referred to arbitration under clause 46.9.

  1. The defendant notes that the loss claimed in the letter of demand – said to be a claim under the Services Contract – was $61,318,288.50, being the same loss claimed in these proceedings by reason of pre-contractual matters.

  2. In about March 2021, the defendant was served. On 14 April 2021, the motion presently before the Court was filed.

SECTION 7

 

  1. Section 7 of the Act provides: (emphasis added)

7   Enforcement of foreign arbitration agreements

(2)   Subject to this Part, where:

(a)   proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and

(b)   the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;

on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.

(5)   A court shall not make an order under subsection (2) if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

  1. When exercising its powers under section 7 of the Act, the Court must have regard to the statement of objects in section 2D and the matters set out in section 39(2) of the Act: section 39(1)(a)(vi), (1)(a)(vii) and (1)(c). The objects of the Act are, relevantly, to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes, to facilitate the use of arbitration agreements made in relation to international trade and commerce, and to give effect to Australia’s obligations under international conventions: section 2D. Section 39(2) requires the Court to have regard to the fact that arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes: sub-section (b)(i).
  2. The onus of establishing the requirements of section 7(2) rests on the party seeking the stay: Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 at 353 per Deane and Gaudron JJ. Where the requirements are satisfied, “the court shall” stay the proceedings. A stay is mandatory and there is no discretion: Tanning Research at 350; WesTrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd [2008] NSWSC 894; (2008) 219 FLR 461 at [7] per Barrett J.
  3. The plaintiff accepts that the Act applies and section 7(2)(a) is satisfied. The defendant contends that there are two bases on which these proceedings should be stayed:
  1. the proceedings should be stayed to permit an arbitrator to determine whether they have jurisdiction under the kompetenz-kompetenz principle; or
  2. a proper construction of the arbitration clause has the consequence that the subject matter of these proceedings “involve[s] the determination of a matter that … is capable of settlement by arbitration”, under section 7(2)(b).

KOMPETENZ-KOMPETENZ

 

  1. The principle of kompetenz-kompetenz is that the arbitrator may rule on the question of whether they have jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement, without having to resort to a court: Malcolm Holmes and Chester Brown, The International Arbitration Act 1974: A Commentary (3rd ed, 2018, LexisNexis) at [Sch 2 Art 16-1]. This principle is enshrined in Article 16(1) of the UNCITRAL Model Law on International Commercial Arbitration (being Schedule 2 to the Act), which states:

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

  1. Section 16(1) of the Act provides:

Subject to this Part, the Model Law has the force of law in Australia.

  1. The plaintiff submitted that section 16 of the Act did not confer power on this Court to make orders. That may be so, but section 7 of the Act does give the Court power to stay the proceedings and the section must be read together with the kompetenz-kompetenz provision in Article 16: Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170 at [147]; Dialogue Consulting Pty Ltd v Instagram, Inc [2020] FCA 1846 at [193] per Beach J.
  2. The plaintiff also submitted that Article 1(2) of the Model Law provides that the provisions of the Model Law “apply only if the place of arbitration is in the territory of this State”, whereas here the place of arbitration is in Singapore. However, as Beach J held in Dialogue v Instagram at [189]:

… the fact that Art 16 of the Model Law does not apply to foreign-seated arbitrations is also irrelevant. The key requirement under Hancock for application of the prima facie test is whether a competence-competence provision exists under the procedural law of the seat of arbitration. If such a provision exists, then the foundation for the prima facie test is established.

  1. As to how the competence principle is applied in Australia, one need go no further than Hancock, where the Full Federal Court considered the two approaches generally taken around the globe (as comprehensively canvassed by Menon CJ of the Singapore Court of Appeal in Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57; [2016] 1 SLR 373). (Whilst Hancock concerned the comparable provisions of the Commercial Arbitration Act 2010 (NSW), for ease of reference I have interposed the provisions of the Act.) The first approach is the “prima facie approach”, described in Hancock at [141]:

[This] approach … is to give significant weight to the authority of the arbitrator and to the principle of Kompetenz-Kompetenz recognised by s 16 of the CA Act [being in the same terms as Article 16 of the Model Law]. Under this approach, the Court does not reach a final view on the balance of probabilities in respect of the matters in s [7 of the International Arbitration Act], including the scope of the arbitration agreement. 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.

  1. The second approach is the “full merits approach”, where the Court hears evidence and argument and finally determines the existence and scope of the arbitration agreement and whether the disputes fall within it: at [142].
  2. In Hancock, the Court commended the “prima facie” approach, although not necessarily in all cases. At [145]-[147]: (emphasis added)

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 [section 7 of the International Arbitration 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 [Article 16], whilst preserving the role of the Court as the ultimate arbiter on questions of jurisdiction … . Broadly, the approach is consonant with the structure of the [International Arbitration] Act and the Model Law. However, it is difficult to see how the Court can exercise its power under s [7] 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 … 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 [7]. 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. …

147 … It can be accepted that as a general rule, unless there is an established legal basis for refusing to do so, a court should, upon legitimate request, exercise jurisdiction conferred on it. However, s [7] is found in an Act of Parliament the paramount object of which is the facilitation of the work of impartial arbitral tribunals. One of the features of that facilitation is the express recognition of the authority of the arbitral tribunal to rule on its own jurisdiction. This includes, expressly, any objection “with respect to the existence or validity of the arbitration agreement”, including any objection with respect to the existence or validity of the arbitration agreement: s 16(1) [of the Commercial Arbitration Act being in the same terms as Article 16 of the Model Law]. Section [7] should be read with s 16(1) [of the Commercial Arbitration Act being in the same terms as Article 16 of the Model Law] 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. The Court observed, “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”: at [149]. But the enquiry should not travel into the merits of the case beyond determining whether the argument is sufficiently weak not to be sustainable; “That would be to usurp the role of the arbitrator. The Court’s role in [section 7] is not to act as a court of summary disposal filtering the matters that are suitable for arbitration”: at [149]. The Court should take a broad view characterising the dispute to assess whether it is the subject of the arbitration agreement, rather than engage substantially in the merits of the case: at [151]. Further, at [377]-[378]:

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 [7] should be read and given content against the background, first, that the Court is not required to decide the matters in the proviso [equivalent to s 7(5)]; 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 [7] should, conformably with its language, be construed to facilitate, not impede, the process of arbitration: s [39(2)(b)(i)].

  1. In Hancock (at [148], [390]), the Court endorsed A v B [2006] EWHC 2006 (Comm); [2007] 1 Lloyd’s Rep 237, where Colman J was concerned with whether to order a trial in respect of the validity of the arbitration agreement (under the equivalent of section 7(5)) or whether a stay should be granted and the question of substantive jurisdiction should be left to the arbitrators. At [137]-[138]:

137   Whether the latter course is adopted may in many cases depend heavily on the extent to which the resolution of that issue will involve findings of fact which impact on substantive rights and obligations of the parties which are already in issue and whether in general the trial can be confined to a relatively circumscribed area of investigation or is likely to extend widely over the substantive matters in dispute between the parties. If the latter is the case the appropriate tribunal to resolve the jurisdictional issues is more likely to be the arbitration tribunal, provided it has Kompetenz-Kompetenz.

138   … The emphasis in modern international arbitration law is to maximise the arbitrators’ opportunity to determine their own jurisdiction: see in particular the judgment of Thomas J in Vale Do Rio Navegacao SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] 2 All ER (Comm) 70.

  1. In Hancock, the Court described this passage as of considerable assistance “because it throws up the point that it is a practical question not a logical question with which we are dealing”: at [390]. In A v B, the place of arbitration was Switzerland, the law to be applied was Swiss law, the arbitrator had kompetenz-kompetenz in relation to jurisdiction and his decisions were subject to supervision and review by the Swiss courts. Colman J concluded that this was a typical case where the English court, being unable to resolve to its satisfaction the matters referred to in the equivalent provision to section 7(5), “should stand back and allow the arbitrator to proceed to determine his own jurisdiction”: at [139].
  2. Applying the same principles in Dialogue v Instagram, Beach J accepted that the kompetenz-kompetenz principle applied, however, at [196]-[198]:

196   In summary, I accept the respondents’ argument that the competence-competence principle applies … . But the fact that I could apply the principle does not entail that I should. There are no hard and fast rules. Context is everything. I do not propose to apply the principle for the following reasons shortly put.

197   First, there are tricky choice of law questions. What law should be applied to determine the existence of the arbitration agreement? I am best placed to answer this. Further, whatever choice is made I now have all bases covered in terms of being fully informed on Australian law, and by Judge Ware on US law, in order to determine (under whichever law applies) whether there is an arbitration agreement.

198   Second, I now have all the evidence in to make a final assessment on the merits as to the existence of the arbitration agreement. To leave any decision at the lower threshold of the prima facie stage would be a limp effort.

  1. Beach J considered that he was better placed than the Californian arbitrator to deal with a cross-application concerning unfair contract terms and the question of Australian statutory unconscionability and, further, was better placed to deal with the choice of law on a question of waiver. In the result, Beach J decided to determine on a final basis whether an arbitration agreement existed.

  2. The plaintiff submitted that the competence principle was only invoked when there was a challenge to the arbitration agreement itself, being one of the grounds contemplated by section 7(5). There was no such challenge here but only that arbitration agreement did not cover these proceedings. This submission does not, I think, fairly reflect the structure of section 7 nor the breadth of the competence principle as described in Hancock. Rather, the arbitrator has jurisdiction to determine whether the dispute falls within the scope of the arbitration clause and whether the arbitration agreement exists and is operative. This Court can determine such questions but, generally speaking, should leave these matters to the arbitrator unless the context in which these questions arise make it preferable for the Court to determine such matters. The question is what the context dictates in this case.
  3. The defendant submitted that, to the extent a question remained about the proper application of the arbitration agreement, particularly to the extent the question remains because of disputed facts as to how the concept designs were used, how it was developed, whether there was an opportunity to rectify the design at an earlier stage under the Services Contract, the parties’ objective intentions and the correctness of any defences under the Services Contract, the scope of the arbitration agreement should be referred to arbitration for determination. The defendant noted, in particular, that the plaintiff relied on extrinsic evidence to construe the Services Contract, and this was best left for an arbitrator to determine.
  4. The parties did not suggest that an arbitrator in Singapore, conducting the arbitration in accordance with the Rules of the International Chamber of Commerce (as the arbitration clause dictates) will lack kompetence-kompetence in relation to jurisdiction. As there is no suggestion that the arbitration agreement is null and void, inoperative or incapable of being performed, the only question for the arbitrator or this Court is whether the issues the subject of these proceedings fall within the scope of the arbitration clause. Critical to this question is the construction of Clause 2 of the Contract Conditions, “Prior Services”, reproduced at [28].
  5. At the hearing of the motion, the plaintiff relied on the evidence of Mr Simbaqueba as pointing to a conclusion that Clause 2 was drafted with the object of ensuring that work done by the defendant after winning the tender but before entry into the Services Contract was covered by the Services Contract, but not work which the defendant did in preparing designs for the tender. Mr Simbaqueba’s evidence was proffered in fairly general terms – perhaps unsurprisingly given the nature of the interlocutory hearing – and not squarely addressed by the defendant’s evidence, again, presumably by reason of the nature of the interlocutory hearing. I expect that the defendant would wish to, and could, bring forward detailed evidence in answer to Mr Simbaqueba’s version of events, being evidence more usually received at a final hearing.

  1. I am most reluctant to construe Clause 2 having regard to extrinsic evidence, in circumstances where I have only a partial picture. Whilst there is no doubt that this Court can determine this matter on a final basis, the question is whether it should, where the arbitrator may also rule on this question.
  2. Having regard to the statement of objects in section 2D and the matters set out in section 39(2) of the Act, the issues and the context in this case, there is no unique issue of law arising which points to this Court as being the obvious and convenient place to determine this issue. There is nothing particularly unusual about the context in which the scope of the arbitration clause is to be considered. These proceedings, for practical purposes, have just commenced. The evidence before the Court on this application appears incomplete. There is no question of law arising which, if disposed of by this Court, will dispose of the proceedings. It is not necessary to hear and determine the dispute in order to determine whether it falls within the arbitration clause. The prima facie approach should be followed here. The arbitral tribunal should rule on its own jurisdiction.

ARBITRATION CLAUSE

 

  1. All that remains to be satisfied is that the arbitration agreement prima facie covers the matters in dispute. As explained in Hancock, the Court needs to construe the clause “at least to the point of being satisfied that the disputes forming the matter are the subject of the agreement”, taking a broad view and not travelling into the merits of the case beyond determining whether the argument that the dispute falls within the arbitration clause is unsustainable: at [146], [151].
  2. The principles concerning the construction of an arbitration agreement, and whether a “matter” is within the scope, or in pursuance, of an arbitration agreement were recently reviewed by Bell P (Payne and McCallum JJA agreeing) in Lepcanfin Pty Ltd v Lepfin Pty Ltd (2020) 102 NSWLR 627; [2020] NSWCA 155 at [78]-[94]. In short, a dispute resolution clause is to be construed like any other clause of a commercial contract, in accordance with the parties’ intention, objectively ascertained by reference to the language used by the parties, the circumstances known to them and the commercial purpose of the contract. The context in which the dispute resolution clauses have been entered into is important and may assist in interpreting the intended reach of dispute resolution clauses. Arbitration clauses are generally afforded a broad and liberal construction. In construing such clauses, it will generally be presumed that the parties intended that all aspects of their relationship would be determined by a single forum, rather than some disputes being dealt with by an arbitrator and others dealt with by the courts. Such an approach will obviously give way to the clear language of a clause identifying certain matters as being excluded from the arbitrator’s jurisdiction.

  3. Clause 46 of Contract Conditions dealt with dispute resolution. “Dispute” was defined in clause 1.1 of the Contract Conditions as follows:

“Dispute” means any dispute or difference between the parties in respect of any fact, matter or thing arising out of, or in any way in connection with, the Contract or the Services, including:

(a)   any disputed claim for additional payment, adjustment of the Consultant’s Fee, an extension of time or breach of contract or for rectification, termination, frustration or invalidity of the Contract;

  1. Clause 46.2 and 46.3 provided for Notices of Dispute to be served, followed by negotiations, with the Rizzani Leighton Joint Venture – but not the defendant – having the right to refer a Dispute to arbitration:

46.2   Notice of Dispute

(1)   If a Dispute arises, either party may give a written notice to the other party that:

(a)   states that it is a notice under this clause 46.2;

(b)   adequately describes and gives particulars of the alleged Dispute, including the amount of the Dispute;

(c)   in the case of a notice from the [defendant], is signed by a director or company secretary of the [defendant]; and

(d)   in the case of a notice from [Rizzani Leighton Joint Venture], states whether [Rizzani Leighton Joint Venture] requires the Dispute to be referred to arbitration under clause 46.9 if not resolved by negotiation under clause 46.3

(“Notice of Dispute”).

(2)   Within 20 Business Days of a Notice of Dispute being given by the [defendant] to [the Rizzani Leighton Joint Venture], [the Rizzani Leighton Joint Venture] may give a written notice to the [defendant] stating that [the Rizzani Leighton Joint Venture] requires the Dispute to be referred to arbitration under clause 46.9 if not resolved by negotiation under clause 46.3. …

46.3   Negotiations

Within 5 Business Days of service of a Notice of Dispute, a senior representative of each of the parties must confer at least once to attempt to resolve the Dispute, and if they cannot resolve the Dispute, they must endeavour to agree upon a procedure to resolve the Dispute. Unless the parties agree otherwise, the meeting will be held in Sydney, New South Wales.

  1. The arbitration clause is clause 46.9(1), which provided: (emphasis added)

Any dispute, controversy or claim arising out of, relating to, or in connection with this Agreement, including any question regarding its existence, validity or termination must be resolved by arbitration to be conducted in accordance with the Rules of the International Chamber of Commerce. The seat of the arbitration will be Singapore. …

  1. The defined terms “Dispute” and “Contract” are not used in the arbitration clause, whilst “Agreement” – which is not a defined term – is used. It may be that clause 46.9 is a ‘boilerplate’ clause which has not been amended to incorporate the defined terms used in the Contract Conditions, as has occurred elsewhere in clause 46. More likely, the Notice of Dispute and negotiation regime applies to Disputes, as defined, whilst the arbitration clause applies more broadly. Whilst it may be argued before the arbitrator that the definition of “Dispute” should be used to construe clause 46.9, I will consider the clause 46.9 on its face for the purposes of this application. I will also proceed on the basis that “Agreement” means “Contract”, although it is arguable that it does not and, by referring to “Agreement”, the arbitration clause is not limited to the Contract but applies to disputes arising from the parties’ agreement considered more broadly.
  2. By the arbitration clause, the parties agreed to arbitrate “any dispute, controversy or claim arising out of, relating to, or in connection with this Agreement”. These phrases are “of the widest import and should not, in the absence of compelling reasons to the contrary, be read down”: IBM Australia Ltd v National Distribution Services Pty Ltd (1991) 22 NSWLR 466 at 483. In IBM Australia, Clarke JA considered these words to be sufficiently wide to encompass claims of pre-contractual misrepresentations, said to be misleading or deceptive conduct in breach of section 52 of the Trade Practices Act. At 483:

There are no indications in the contract that the words should be construed narrowly. Nor, in my opinion, are there any compelling reasons in favour of reading down the meaning of the phrase. On the contrary there are powerful considerations in favour of the contrary view. The consequence of an interpretation of the arbitration clause which excludes the claims under the Act would be that the causes of action based upon breaches of the contract would remain with the arbitrator, and be decided by him, and those in which reliance were placed upon ss 52, 82 and 87 of the Act would be determined in a court of law. As I earlier pointed out this conclusion would follow even in a case in which the same representations were said to ground claims in breach of contract and under the Act.

The parties could hardly be thought to have contemplated that the arbitration clause would work in that way. It is far more likely that they intended that all disputes between them concerning the terms of the contract, the performance of it and matters connected, in a real sense, with the contract should be referred to the one tribunal for determination. For my part I would find it difficult to ascribe to the parties to a contract an intention to submit only part of a dispute to an arbitral tribunal reserving the remainder for consideration by the Court as this would, on any view, be inefficient and costly.

  1. Likewise in Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; [2006] FCAFC 192, the Full Court held that an arbitral clause requiring disputes “arising out of this contract” to be arbitrated in London was sufficiently wide to encompass a claim for misleading or deceptive conduct in contravention of the Trade Practices Act: at [7], [9], [49], [175]-[176] and [187]. See likewise Westrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd at [24]; Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1; QH Tours Ltd v Ship Design and Management (Aust) Pty Ltd (1991) 33 FCR 227.
  2. In Hancock, the Full Court considered it important in construing such clauses to bear in mind 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”: at [193]. I note that, according to the plaintiff’s letter of demand (see [41]-[42]), the plaintiff intends to refer the dispute under the Services Contract to arbitration whilst maintain these proceedings in this Court. In the absence of a stay, two disputes in relation to the same project will be dealt with in two venues. It seems unlikely that the parties would have considered such an outcome as desirable when negotiating the terms of the Services Contract, including the arbitration clause.
  3. Clause 46.9 extends to “any question regarding [the Contract’s] existence [or] validity”. Such questions will usually require consideration of pre-contractual dealings. This supports a construction of the clause as including disputes which encompass pre-contractual conduct: see likewise Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13 at [48].
  4. For the purpose of the exercise I am here undertaking, I do not think it much matters whether the misleading and deceptive conduct is said to have induced a party to enter into the contract containing the arbitration clause or whether it is said that such conduct induced the plaintiff to enter into a contract with a third party (the Design and Construct Deed) on particular terms, or at all. “[F]ine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument” should not determine which tribunal resolves the parties’ disputes: Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165.
  5. Thus, while not definitively construing the arbitration clause, on its face it is broadly worded to encompass pre-contractual representations such that the disputes the subject of these proceedings – viewed broadly – are the subject of the clause.

Services

 

  1. The plaintiff submitted that, while clause 46.9 uses words of broad reach, the clause does not extend to disputes concerning work done by the defendant long before entry into the Services Contract and which could not be considered on any view to be “Prior Services” or “Services” under the Services Contract. The Services Contract did not require the defendant to produce the tender drawings. The defendant’s work under the Services Contract was to take those designs and develop them and the plaintiff made no complaint in these proceeding about the designs produced by defendant under the Services Contract. A complaint about the tender drawings did not arise out of or relate to, and nor is it in connection with, the Services Contract. The complaint concerned alleged errors in producing the tender design, that made them unfit for use in a tender and led to a deficiency in its tender price. This was not a claim under the Services Contract and had nothing to do with that contract. However, this distinction appeared to me to be artificial and unlikely to be maintainable if these proceedings continue in parallel with an arbitration in respect of losses said to be sustained under the Services Contract.

  2. The defendant submitted that, when the parties entered into the Services Contract, they were aware that previous design work had been performed by the defendant. With that knowledge, the parties chose not to limit the ambit of the arbitration agreement to a dispute to work performed after entry into the Services Contract, but rather one arising out of, relating to, or in connection with that contract. They chose broad words of submission to arbitration with the knowledge that previous design work relating to or connected with the Services Contract had already been performed. They did not expressly seek to exclude that earlier work from the scope of the Services Contract. Reading the Services Contract as a whole, the language of the arbitration agreement was apt to encompass a claim of misleading or deceptive conduct in relation to the tender design.

  3. This submission requires a brief review of the relevant contractual provisions. It will be recalled that, under the Prior Services clause, the Services Contract applied to “any services that are part of the Services” which were performed by the defendant at the request of the Rizzani Leighton Joint Venture before the date of the Contract.“Services” was defined in clause 1.1. of the Contract Conditions as: (emphasis added)

Services” means all the services, activities, tasks and other things that the [defendant] is or may be required to perform under the Contract and includes the services set out in and reasonably inferred from Annexure C, Variations, rectification work and the provision of Contract Material;

  1. Annexure C to the Services Contract, entitled “Brief and Services”, noted that the Brief comprised the Design and Construct Deed and the “DEAL Scope of Works”, which was annexed to the Services Contract. The DEAL Scope of Works noted in paragraph 2.9:

The detailed design will in principle be developed from the Tender Design.

  1. Paragraph 2.11 of the DEAL Scope of Works, “Design Input”, noted that, throughout the entire design phase, the defendant was responsible for ensuring that all the required input was included in the design.

As a minimum the following input will be incorporated:

•   Tender design; …

  1. Paragraph 2 of Annexure C described the defendant’s role, including:

2.1   Commission

The Services include all design and engineering work required for the Main Contract Works, including but not limited to:

(a)   all design work as detailed in the DEAL Scope of Works document (referred to in the Brief 1(1)); and

(d)   All design works required in the DEAL Scope of Works document (Section 5).

  1. Paragraph 2.5 of Annexure C provided:

2.5   Concept Designs

To the extent relevant to the Services, the Consultant must:

(a)   prepare an outline design solution (including alternative proposals where required) examining Site options for review with other contractors (including design consultants) and [the Rizzani Leighton Joint Venture];

(b)   further develop the approved outline design solution:

(i)   ensuring all feasible concepts are reviewed; and

(ii)   preparing all necessary drawings, schedules and other material;

for review with other contractors (including design consultants and [the Rizzani Leighton Joint Venture];

(i)   Any other requirements specified in the DEAL Scope of Works document …

  1. Clause 1.1. of the Contract Conditions provided: (emphasis added)

Contract Material” means any documents (including specifications and drawings), software, designs, samples, models, prototypes, patterns, videos and other things prepared by or on behalf of the [defendant] for or in connection with the Contract, the Services or the Project (whether in electronic format or hard-copy format or both);

  1. As to interpretation of the Contract, clause 1.2(j) of the Contract Conditions provided:

the words ‘include’, ‘including’ and ‘includes’ and the expressions ‘for example’ and ‘such as’, are not words or expressions of limitation;

  1. By reference, in particular, to the italicised portions of these provisionsthe definition of “Services” is widely cast and inclusive such that the work done by the defendant in the tender phase may fall within “Prior Services”. But I consider this to be the wrong debate. The focus must be on the drafting of the arbitration clause, which is not limited to “Services” or, for that matter, “Prior Services” but to “any dispute, controversy or claim arising out of, relating to or in connection with this Agreement …”. Viewed broadly, the sequence of events from the defendant preparing the tender designs with a view, if the tender was accepted, to developing those designs for construction is consistent with the arbitration clause recording an agreement between the parties to submit all disputes, including in relation to the tender drawings, to arbitration.
  2. The provisions of the Services Contract on which the plaintiff relied do not provide a compelling reason to read down the arbitration clause. Nor do I think it can be said that there is no sustainable argument that the dispute falls within the arbitration agreement such that this Court should refrain from staying these proceedings and referring the matter to the arbitrator. Thus I conclude that these proceedings should be stayed pursuant to section 7(2) of the Act.

CONDITIONS

 

  1. The plaintiff sought that the stay be made subject to the following conditions:
  1. The defendant cannot raise any limitation point, in particular, any limitation defence that was unavailable to it when the proceeding was filed.
  2. The defendant will not argue that the Australian Consumer Law is inapplicable and will accept that, insofar as its conduct is alleged to contravene section 18 of the Australian Consumer Law or entitles the plaintiff to any remedy, the Australian Consumer Law is a mandatory law that the arbitrator must apply.
  1. The plaintiff submitted that both conditions were for the purpose of promoting and enforcing the agreement of the parties to resolve their disputes by arbitration, rather than by making orders which would be inconsistent with, or subversive of that agreement (Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; (2013) 298 ALR 666 at [84]).
  2. The defendant submitted that section 7(2) does not give the Court power to impose conditions, nor would it be appropriate to do so. The conditions sought are directed to substantive defences which the defendant has or may have: O’Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601. Where the plaintiff commenced these proceedings in breach of the arbitration agreement and the defendant has a right to have the proceedings determined by an arbitral tribunal, it would be wrong to only enforce that right subject to a condition that defeated a defence that the defendant may otherwise be able to establish.

Power to impose conditions

 

  1. The oft-cited principle as to how the power to impose conditions is to be exercised is that of Kirby P in O’Brien at 622: (emphasis added)

It is true that the subsection is expressed in apparently wide terms (“upon such conditions (if any) as it thinks fit”). But it is obvious that the conditions are incidental and ancillary to the achievement of the main purpose of s 7(2). This is to hold the parties to international commercial agreements to an agreement to arbitrate. I do not consider, in this context, that it would be proper to impose a condition which effectively distorted the agreement initially entered between the parties. Nor should such a condition be imposed as would manipulate the rights of the parties under that agreement, notwithstanding their agreement to arbitrate. Nor should conditions frustrate the achievement of the policy of the statute to enforce that agreement. The “conditions” which s 7(2) of the Act contemplates are machinery conditions. They relate to hearing and the like procedures and not to conditions which determine, in effect, the substantive rights of the parties. Those substantive rights were, relevantly, fixed by the agreement. The Court should neutrally hold the parties to that agreement. In my opinion it would be wrong for the Court to distort and frustrate that agreement (whilst requiring the stay necessitated by the statute) to impose conditions which were not within the agreement which it is the purpose of the Act to enforce.

  1. This statement was approved in WesTrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd, where Barrett J noted that it was thus clear that it was not open to the Court to impose conditions upon a stay which would detract from the integrity of the arbitration process the Act mandates: at [30]. See likewise Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd at [90], [101] per Martin CJ (Buss JA agreeing), at [125] per McLure P; Orient Overseas Container Line Ltd v APL Co Pte Ltd (No 2) [2021] FCA 606 at [14] per Stewart J.
  2. In Cape Lambert Resources, Martin CJ considered that the legislature intended that the power to attach conditions “should be utilised for the purpose of promoting and enforcing the agreement of the parties to resolve their disputes by arbitration, rather than by making orders which would be inconsistent with, or subversive of that agreement”: at [84]. The Chief Justice considered that courts should refrain from imposing conditions which may pre-empt the decision of the arbitrator and the operation of the arbitration cause, observing at [93]:

This approach to the ambit of the powers conferred upon the court by s 7 of the Act is consistent with the limited role which national courts play when parties have agreed to resolve their disputes by international commercial arbitration. National courts are not properly regarded as competitors or rivals for the jurisdiction which the parties have agreed to confer upon an arbitral tribunal. As I have already noted, the exercise of judicial power to facilitate the agreement of the parties to resolve their disputes by arbitration, and the strictly limited supervisory role usually conferred upon national courts by the lex arbitri, which is generally limited to containing arbitral tribunals within the jurisdiction conferred upon them by the parties and ensuring that the jurisdiction is exercised, is fundamentally different in character to the role of the arbitral tribunal in resolving the dispute by making an award defining the substantive rights and obligations of the parties. International comity requires national courts to faithfully respect these limitations upon their role – in this case by appropriately construing the ambit of the powers conferred upon the court by s 7 of the Act having regard to such limitations.

  1. Martin CJ considered that conditions should not be imposed which usurp the powers of the arbitrator in circumstances where there is no pressing need or justification for such conditions. Facilitative machinery orders, on the other hand, did not usurp or subvert the powers of arbitrators in a resolution of a dispute which the parties had agreed to refer to arbitration: at [101].
  2. Most recently, in Orient Overseas Container Line, Stewart J observed that there is nothing in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (set out in Schedule 1 to the Act and with which Part II of the Act is concerned to enforce) giving power to the Court to impose conditions upon a stay of proceedings and referral to arbitration, “That is an indication that the power to impose conditions is to be read in a restricted way”: at [11]. Further, at [12]: (emphasis added)

The principle underlying Art II [of the Convention], and hence s 7, is that arbitration agreements should be recognised and enforced by staying court proceedings in favour of arbitration where the subject of the proceedings is covered by the arbitration agreement. There is no justification for construing the power to impose conditions on such a stay as including conditions which interfere with the jurisdiction and power of the arbitral tribunal or which alter the rights of the parties under their arbitration agreement; the purpose is, after all, to uphold and enforce that agreement, not to alter or undermine it or the parties’ rights under it.

  1. Stewart J was therefore hesitant to exercise any power under section 7(2) to impose conditions that would “trespass upon the arbitration which the parties agreed to and which this Court is bound to support, not undermine”: at [18].

Statute of limitations

 

  1. Section 70 of the Limitation Act 1969 (NSW) provides:

70   Application of this Act

(1)    This Act applies to an arbitration in like manner as it applies to an action.

(2)   An arbitration for any difference or matter under any provisions for arbitration is not maintainable if commenced after the date of the expiration of the period of limitation fixed by or under this Act for a cause of action in respect of the same difference or matter.

  1. As such, the time within which an arbitration must be commenced is the same as the limitation period applicable to the cause of action pursued in proceedings in this Court.
  2. As to when an arbitration is commenced, section 72(1) of the Limitation Act provides:

72 Commencement

(1)    For the purposes of this Division:

(a)    where the provisions for arbitration require or permit a party to the arbitration to give notice in writing to another party:

(i)    requiring the other party to appoint or concur in appointing an arbitrator, or

(ii)    requiring the other party to submit or concur in submitting a difference or matter to a person named or designated in the provisions for arbitration as arbitrator, or

(b)    where, in a case to which paragraph (a) does not apply, a party to the arbitration takes a step required or permitted by the provisions for arbitration for the purpose of bringing a difference or matter before an arbitrator and gives to another party notice in writing of the taking of the step,

the arbitration is commenced, as between the party giving the notice and the party to whom the notice is given, on the date on which the notice is given.

  1. Here, the arbitration clause does not provide for a notice in writing; a Notice of Dispute may be served in respect of a Dispute, but the arbitration clause does not incorporate this mechanism. Thus section 72(1)(b) applies, such that an arbitration is commenced on the date on which the plaintiff “takes a step required or permitted by the provisions for arbitration for the purpose of bringing a difference or matter before an arbitrator and gives to another party notice in writing of the taking of the step”. Commencing proceedings in this Court is unlikely to satisfy this requirement.
  2. Similar to the case at hand, in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451, the plaintiff commenced proceedings in this Court the day before a limitation period expired, notwithstanding an arbitration clause. As to whether this had the effect of preventing the limitation period from expiring if the matter was referred to arbitration, Hammerschlag J observed at [130]:

This raises issues of significant complexity concerning, amongst others, the status of an action subject to a request under [s 7(2)], and the juridical effect of the court referring the parties to arbitration and the interplay between ss [7 of the Act] and [s] 14 of the [Limitation] Act, and ss 70(1) and 72 of the Limitation Act, the latter sections having been in force for many years prior to s [7] coming into force. Counsel informed the court that they had been unable to find any pertinent authority on these issues.

(Whilst John Holland concerned the comparable provisions of the Commercial Arbitration Act 2010 (NSW), for ease of reference I have again interposed the provisions of the Act.) Ultimately, it was unnecessary for Hammerschlag J to “delve into the intricacies” of this issue: at [130].

  1. This complex issue was not the subject of argument during the hearing before me, nor canvassed in subsequent written submissions which the plaintiff sought leave to make. Nor does it appear that the issue has been the subject of judicial consideration since John Holland. Rather, the problem has been addressed from time to time by the imposition of conditions similar to the condition now sought by the plaintiff.
  2. Such a condition was sought, but refused, in O’Brien as the condition would have had the effect of extending the limitation period to that which would apply if the arbitration agreement was adhered to. There, the contract between a New South Wales company and a Florida company had an arbitration clause and provided that the agreement was governed by the laws of Florida. The New South Wales company went into liquidation, which had the effect of suspending the limitation period in respect of claims against the company. The liquidator commenced proceedings against the Florida company in Florida, which were determined by arbitration (four years later), with no damages awarded to either side.
  3. The Florida company then lodged a proof of debt (which was rejected) and commenced proceedings seeking to review the liquidator’s decision. The liquidator sought, and was granted, a stay of the proceedings by reason of the arbitration clause. If the arbitration took place in Florida – for which the liquidator contended – the Florida company’s claim was arguably statute barred. The trial judge had posited that, if a stay was granted, it should be subject to conditions so that the liquidator could not take advantage of a statute of limitation in the forum in which the arbitration was to be heard. Kirby P did not agree. At 622:

The parties should be held to the arbitration to which they agreed. That arbitration should take place in Florida, according to the terms of the agreement and by arbitrators appointed as the agreement specified. I see nothing in the slightest wrong with the conduct of the liquidator in seeking to invoke the Act. On the contrary, I believe that in doing so he is acting properly to protect the assets of the company because he believes that he may, by asserting this legal right, secure for [the NSW company], and its creditors, the protection against the claim of [the Florida company] of a limitation bar. Whether he succeeds or fails in this respect will be determined by the arbitrators. But there is nothing improper in the liquidator’s claiming the right which he derives through [the NSW company] from the agreement with [the Florida company].

  1. In Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (1997) 150 ALR 345, such a condition was imposed where the proceedings were stayed and referred for arbitration in London. (As recorded in the appeal judgment, the claim concerned negligence, breach of contract, misrepresentations and contraventions of the Trade Practices Act 1974 (Cth): Hi-Fert (No 5) at 7 per Emmett J). The plaintiff had sought a condition that the defendant “shall take no objection as to the time within which the arbitration has been commenced”: at 346. The defendant sought a more confined condition, saying that it should be in no worse position as a result of its successful stay application than it would have been if the arbitration proceedings had been commenced at the same time as court proceedings. Tamberlin J agreed, at 347: (emphasis original)

In my view, this submission should be accepted because it preserves the rights of the parties. It operates to avoid the conferring of any possible additional benefit on either party beyond the rights and obligations which would have prevailed if the arbitration proceeding provided for in the agreement had been commenced.

  1. In the result, Tamberlin J imposed a condition that the arbitration “be treated as if it had been commenced with the appointment of the … arbitrator on the same day as the commencement of these proceedings”. The condition may be explicable by the fact that the proceedings concerned claims which were subject to the arbitration clause and claims which were not. The Full Court made an order that the arbitration not commence until after the non-arbitrable claims had been determined by the Federal Court. Where the applicant had properly commenced proceedings in the Federal Court, at least in respect of the claims not the subject of the arbitration clause, and where, by reason of the passage of time until determination of the Federal Court proceedings and commencement of the arbitration, limitation issues may arise, the condition preserved the status quo.
  2. A condition similar in form to that ordered in Hi-Fert was made by Hollingworth J in Ansett Australia Ltd v Malaysian Airline System Berhad [2008] VSC 109; (2008) 217 FLR 376. In that case, Ansett commenced proceedings in time. By the time the defendant obtained a stay, after a series of procedural delays, the limitation period has expired. The defendant argued that Ansett chose to commence the proceedings rather than refer its claim to arbitration and, to the extent that Ansett was now prejudiced by the grant of a stay, Ansett was the author of its own misfortune and should not be assisted by the Court: at [30]. Hollingworth J considered that this submission “completely ignores [the defendant’s] own contribution to Ansett’s current predicament, through repeated delays in this proceeding”: at [30]. Had the defendant acted promptly in seeking a stay, the stay application could have been heard and determined before the limitation period expired. At [33] and [35]:

33   In the circumstances, I would impose conditions necessary to ensure that Ansett is not prejudiced by [the defendant]’s delaying conduct.  That is to say, Ansett should not now be faced in an arbitration with any limitation periods which it did not face at the time it commenced this proceeding.

35   [The defendant] should be entitled to rely at the arbitration on any limitation period which was applicable under the proper law of the agreement at the time this proceeding was commenced. However, it should not be able to benefit from its own delays in making a stay application under the IAA.

  1. Hollingworth J considered that, if such a condition was not imposed, defendants would have an incentive when served with court proceedings in respect of a dispute covered by an arbitration agreement “to sit on their hands and allow time limits to expire before applying for a stay”. Thus, there were sound public policy reasons for imposing such a condition: at [37].
  2. The same condition was made in Orient Overseas Container Line, albeit by consent. Therefore, Stewart J did not determine whether it was otherwise appropriate to impose the condition: at [22].
  3. Having reviewed the case law, and bearing in mind that the imposition of conditions involves the exercise of judicial power (Hi-Fert (No 5) at 14) conferred by the Act, the following considerations may be relevant to whether a condition should be imposed in respect of limitation periods:

  1. whether the plaintiff has properly commenced proceedings in this Court, at least in respect of part of its claim;
  2. whether the potential expiration of limitation period is referable to the defendant’s delay or other events beyond the parties’ control, such as an order that the arbitration not take place until court proceedings are concluded;
  3. whether the condition will substantively alter the rights of the parties or preserve the status quo; and
  4. whether the condition will change the bargain between the parties to arbitrate.
  1. Here, the Services Contract provides that the law of contract is the law of New South Wales. Thus, the application of any limitation period will likely be the same, whether determined by this Court or by the arbitrator. However, as the plaintiff commenced these proceedings on – perhaps – the last day of the limitation period, the plaintiff’s claim may not be brought in time if the starting point is taken to be the date when the arbitral proceedings are commenced.
  2. The defendant submitted that Hollingworth J’s reasoning in Ansett did not engage with the scope of the power to impose conditions but, in any event, the circumstances of this case were very different. The defendant was not served with the originating process until March or April 2021. An application for a stay was made promptly, before the first directions hearing and before the time to file a List Response had expired. There was no delay by the defendant. Any delay was occasioned by the plaintiff given the time it took to file the originating process and the time after that for the plaintiff to effect service. The defendant submitted that, if the plaintiff established at the arbitration that the defendant had engaged in disentitling conduct which, for example, gave rise to an estoppel, then the arbitral tribunal would be able to prevent reliance on a limitation period.
  3. To be fair to the plaintiff, delay in effecting service overseas cannot readily be laid at the plaintiff’s door. This is an inter-Court process relying on a request to be issued by this Court and actioned, in this case, by the Italian Central Authority. Sometimes this process just takes time. That said, the fact that the plaintiff commenced these proceedings six years after the tender was submitted likely has the consequence that the conditions sought by the plaintiff will substantively alter the rights of the parties rather than preserve the status quo. The defendant is presently entitled to argue before the arbitrator that the plaintiff’s claim is out of time whilst, if I impose the condition sought, then the defendant will be deprived of this defence notwithstanding that, if the arbitrator finds that this dispute falls within the arbitration clause, the commencement of these proceedings was in breach of that clause. If the arbitrator determines that this dispute does not fall within the arbitration clause, then the plaintiff will be entitled to lift the stay and pursue its claims in this Court.
  4. The condition sought by the plaintiff is not incidental or ancillary to the achievement to the main purpose of section 7(2) but will distort the agreement initially entered into between the parties. I decline to impose the condition sought. I may have come to a different decision if the plaintiff had commenced these proceedings earlier and/or subsequent delays had been referrable to the defendant or delays inherent in the Court’s processes. But having left it to the last moment, I am not minded to affect the substantive rights of the parties. Of course, whether in fact an arbitration now commenced by the plaintiff is time-barred is a matter for the arbitrator to decide.

Australian Consumer Law

 

  1. A condition in the form of the second proposed condition was made by Allsop J (as his Honour then was) in Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 at [111]:

… I would impose a condition upon the parties to the arbitration to consent to all aspects of any [Trade Practices] Act claims, which would have been justiciable in this Court, being litigated in the arbitration irrespective of any conclusion as to the proper law. Such a condition would solve the potential conflict of Australian domestic statutory public policy and the operation by a foreign arbitrator of the rules of conflicts of law to set at nought governing Australian law. The arbitration agreement is a contract about submission. Its enforcement should not undermine the operation of a statute such as the [Trade Practices] Act.

His Honour noted that he had not heard the parties on this condition, and would do so: at [112].

  1. A year later, however, in Comandate Marine Corporation v Pan Australia Shipping Pty Ltd, Allsop J referred to the condition made in Walter Rau and noted at [245]:

Having had the benefit of argument in the appeal here I would not impose such a condition. At least in the circumstances here, I do not see such a term as appropriate. It would, to use the expression of Gleeson CJ in Francis Travel 39 NSWLR at 167, pre-empt the decision of the arbitrator and the operation of the arbitration clause. In any event, here, Comandate Marine has undertaken to the Court to agree to the determination in the arbitration of the Trade Practices Act claims.

There, the dispute was to be governed by English law.

  1. The defendant submitted that there was no need for the second condition as it would not make inconsistent submissions to this Court and to an arbitral tribunal. In this Court, the defendant submitted that the plaintiff’s claim for damages under the Australian Consumer Law fell within the scope of the arbitration agreement. The defendant would not contend otherwise in any arbitration.
  1. Given the choice of law clause and the defendant’s contention that the plaintiff’s claim under the Australian Consumer Law falls within the arbitration clause, the second proposed condition is not appropriate. It is a matter for the arbitrator.

ORDERS

 

  1. The plaintiff and defendant each sought their costs of the motion. The defendant, however, has succeeded and should have its costs. For these reasons, I make the following orders:
  1. Order pursuant to section 7(2) of the International Arbitration Act 1974 (Cth) that these proceedings be stayed and the parties be referred to arbitration, with such arbitration to be commenced in accordance with clause 46.9 of the Services Agreement for Design Services between the Rizzani Leighton Joint Venture and Deal S.R.L. entered into or about 27 July 2015.
  2. The plaintiff to pay the defendant’s costs of the motion filed on 14 April 2021.

**********

Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company [2021] FCAFC 110

FEDERAL COURT OF AUSTRALIA

 

 

Case Name: Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company [2021] FCAFC 110
Medium Neutral Citation: [2021] FCAFC 110
Hearing Date(s): 25 February 2021
Date of Orders: 25 June 2021
Decision Date: 25 June 2021
Before: ALLSOP CJ, MIDDLETON AND STEWART JJ
Decision: THE COURT ORDERS THAT:

 

1. The appeal be allowed.

2. The orders and declaration of the Court on 26 August 2020 in NSD 94 of 2020 be set aside and substituted with an order that the proceeding be dismissed.

3. The parties file and serve written submissions of no more than five pages on the questions of costs of the proceedings below and on appeal, which questions will be decided on the papers unless otherwise ordered, as follows:

(a) the appellant within seven days of these orders; and

(b) the respondent within seven days thereafter.

 

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

Catchwords: ARBITRATION – international arbitration – enforcement of award – where supervisory court appointed the arbitral tribunal – whether composition of the arbitral tribunal was in accordance with the agreement of the parties – comity – whether enforcing court should accept that the appointment of the tribunal by the supervisory court was in accordance with the agreement of the parties

 

ARBITRATION – international arbitration – enforcement of award – nature of the burden of proving a ground for non-enforcement – whether discretion to enforce award should nevertheless be exercised – nature of the discretion

 

PRACTICE AND PROCEDURE – settlement – where parties settled “in principle” – where judgment was complete subject to administrative matters prior to settlement – whether Court can hand down judgment notwithstanding settlement “in principle” – Court has a discretion to hand down judgment where it is in the public interest to do so

Legislation Cited: Civil Law and Justice Legislation Amendment Act 2018 (Cth) Sch 7 item 2

Federal Court Rules 2011 (Cth) r 36.73(1)(b)(ii)
International Arbitration Act 1974 (Cth) ss 2D, 3, 8, 39, Schs 1-2

Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959)

UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended on 7 July 2006)

Civil and Commercial Arbitration Law (Qatar) (Law No. 2 of 2017) Art 33

Civil and Commercial Code of Procedure (Qatar) (Law No. 13 of 1990) Art 195

Cases Cited: AKN v ALC [2015] SGCA 18
Barclay’s Bank plc v Nylon Capital LLP [2011] EWCA Civ 826; [2012] 1 All ER (Comm) 912
Beijing Jishi Venture Capital Fund (Limited Partnership) v Liu [2021] FCA 477
Biggin & Co Ltd v Permanite Ltd [1951] 2 KB 314
Blatch v Archer (1774) 1 Cowp 63; 98 ER 969
Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336
British American Tobacco Australia Services Ltd v Laurie [2009] NSWCA 414
Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163
China Nanhai Oil Joint Service Corp Shenzhen Branch v Gee Tai Holdings Co Ltd [1994] HKCFI 215; [1994] 3 HKC 375
Clarke v Great Southern Finance Pty Ltd [2014] VSC 516
CSR Ltd v Cigna Insurance Australia Ltd [1997] HCA 33; 189 CLR 345
Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46; [2011] 1 AC 763
Dardana Ltd v Yukos Oil Co [2002] EWCA Civ 543; [2002] 2 Lloyd’s Rep 326
Dickenson’s Arcade Pty Ltd v Tasmania [1974] HCA 9; 130 CLR 177
Encyclopaedia Universalis SA v Encyclopaedia Britannica Inc, 03 Civ 4363 (SAS) (S.D.N.Y. Dec. 3, 2003)Encyclopaedia Universalis SA v Encyclopaedia Britannica Inc, 403 F 3d 85 (2nd Cir, 2005)Enka Insaat ve Sanayi AS v OOO “Insurance Company Chubb” [2020] UKSC 38; [2020] 1 WLR 4117
F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 1) [2011] EWHC 1851 (Ch); [2012] Bus LR 884
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International NV [2007] FCAFC 43; 157 FCR 558
Glaxo Group Ltd v Genentech Inc [2008] EWCA Civ 23; Bus LR 888Greenwich Inc Ltd (In Administration) v Dowling [2014] EWHC 2451 (Ch); WLR (D) 334Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] FCAFC 109; 304 ALR 468
Gurney Consulting Engineers v Gleeds Health & Safety Ltd [2006] EWHC 536 (TCC); 108 Con LR 58

Hebei Import & Export Corp v Polytek Engineering Co Ltd [1999] HKCFA 40; [1999] 2 HKC 205
Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) [1998] FCA 1485; 90 FCR 1
Hilton v Guyot 159 US 113 (1895)
House v The King [1936] HCA 40; 55 CLR 499
IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSC 248; 38 VR 303
Liaoning Zhongwang Group Co Ltd v Alfield Group Pty Ltd [2017] FCA 1223
Liverpool Roman Catholic Archdiocesan Trustees Inc v Goldberg (No 3) [2001] EWHC 396 (Ch); 4 All ER 950 (Ch D)

Minmetals Germany GmbH v Ferco Steel Ltd [1999] 1 All ER (Comm) 315
Osborne v Auckland Council [2014] NZSC 67; 1 NZLR 766
Paklito Investment Ltd v Klockner (East Asia) Ltd [1993] 2 HKLR 39
Povey v Qantas Airways Ltd [2005] HCA 33; 223 CLR 189
Prudential Assurance Co Ltd v McBains Cooper [2000] EWCA Civ 172; 1 WLR 2000
PT First Media TBK v Astro Nusantara International BV [2014] 1 SLR 372; [2013] SGCA 57
PT First Media TBK v Astro Nusantara International BV [2018] HKCFA 12; [2018] 3 HKC 458
TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2014] FCAFC 83; 232 FCR 361
TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533
Voss v Davidson [2003] QCA 252

 

Texts Cited: Allsop JLB, “Comity and Commerce” (Address to the 16th Conference of Chief Justices of Asia & the Pacific, Sydney, 8 November 2015)

Bennett H and Broe GA, “The Civil Standard of Proof and the ‘Test’ in Briginshaw: Is There a Neurobiological Basis to Being ‘Comfortably Satisfied’?” (2012) 86 ALJ 258
Blackaby N, Partasides C, Redfern A and Hunter M, Redfern and Hunter on International Arbitration (5th ed, Oxford University Press, 2009)

Born G, International Commercial Arbitration (3rd ed, Kluwer Law International, 2021)

Herzfeld P and Prince T, Interpretation (2nd ed, Lawbook Co, 2020)

Gageler S, “Alternative Facts and the Courts” (2019) 93 ALJ 585
Gageler S, “Evidence and Truth” (2017) 13 TJR 1

Van den Berg AJ, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation (Kluwer Law International, 1981)

DIVISION: General Division
Parties: BETWEEN:
HUB STREET EQUIPMENT PTY LTD (ABN 52 109 882 617)AppellantAND:
ENERGY CITY QATAR HOLDING COMPANY (REGISTERED IN THE CR UNDER NO. 34913)Respondent
Representation: Counsel for the Appellant: T Mehigan SC

Solicitor for the Appellant: Henry William Lawyers

Counsel for the Respondent: T D Castle SC

Solicitor for the Respondent: Cowell Clarke Commercial Lawyers

File Number(s): NSD 1045 of 2020
Publication Restriction: NIL
Appeal from: Energy City Qatar Holding Company v Hub Street Equipment Pty Ltd (No 2) [2020] FCA 1116; Energy City Qatar Holding Company v Hub Street Equipment Pty Ltd (No 3) [2020] FCA 1219

REASONS FOR JUDGMENT

ALLSOP CJ:

  1. I have read the reasons of Stewart J to be published.  I agree with his Honour’s reasons and I agree with the orders proposed by his Honour.  Recent events, however, have necessitated that I make some additional remarks.
  2. The appeal was heard on 25 February 2021.  On Monday, 21 June 2021, the Court was in full agreement as to the judgment to be handed down and intended to hand down judgment on Wednesday, 23 June 2021, subject to administrative matters.  The parties were to be notified on the morning of 21 June 2021.  At 10:26am on that same morning (Monday, 21 June) the appellant (with the consent of the respondent) sent an email to the chambers of Middleton and Stewart JJ and me in the following terms:

    These proceedings have settled in principle, although the settlement remains subject to its terms being carried out. Should that occur, the parties anticipate that they will seek the leave of the Court to discontinue the appeal within 30 days. We are informing the Court of this development as a courtesy.

    At my request, my associate informed the practitioners that the Court had intended to hand down judgment on 23 June 2021, and requested that the parties communicate as soon as possible to the Court their view as to whether the judgment should be handed down.  The Court received no response.  On 22 June 2021 I informed the parties, through my associate, that the matter would be listed for judgment on 25 June 2021.  Again, the Court received no response.

  3. This raises an important question as to whether the Court can or should proceed to hand down its judgment notwithstanding that the proceedings have “settled in principle”. The parties have not yet sought leave to file a notice of discontinuance pursuant to r 36.73(1)(b)(ii) of the Federal Court Rules 2011 (Cth); nor have they requested that the Court delay handing down its judgment.
  4. The issue has arisen for consideration in a number of English authorities:  Prudential Assurance Co Ltd v McBains Cooper [2000] EWCA Civ 172; 1 WLR 2000; Liverpool Roman Catholic Archdiocesan Trustees Inc v Goldberg (No 3) [2001] EWHC 396 (Ch); 4 All ER 950 (Ch D); Gurney Consulting Engineers v Gleeds Health & Safety Ltd [2006] EWHC 536 (TCC); 108 Con LR 58; Glaxo Group Ltd v Genentech Inc [2008] EWCA Civ 23; Bus LR 888; F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 1) [2011] EWHC 1851 (Ch); [2012] Bus LR 884; Barclay’s Bank plc v Nylon Capital LLP [2011] EWCA Civ 826; [2012] 1 All ER (Comm) 912; Greenwich Inc Ltd (In Administration) v Dowling [2014] EWHC 2451 (Ch); WLR (D) 334. These authorities have been applied in Australia (Voss v Davidson [2003] QCA 252; Clarke v Great Southern Finance Pty Ltd [2014] VSC 516) and New Zealand (Osborne v Auckland Council [2014] NZSC 67; 1 NZLR 766).
  5. Putting to one side the complexities in the English cases arising from the English practice of circulating the draft judgment to practitioners prior to its delivery (see Practice Direction (Court of Appeal: Handed Down Judgments) [1995] 1 WLR 1055) important considerations of public policy and public interest support the judgment in this case being handed down.
  6. First, this appeal raises points of law of general interest pertaining to the nature of the burden and onus of proving grounds for the non-enforcement of arbitral awards, and, where such grounds have been made out, the nature of the discretion which permits enforcement notwithstanding the existence of vitiating irregularity.  It is thus in the public interest that these views are made the subject of a published judgment in order to facilitate the development of the law, and the provision of guidance to others, including the reduction of risks as to costs of others:  F&C Alternative Investments at [9] (Sales J).
  7. Secondly, the judgment corrects errors of both law and fact in the judgment below:  Prudential at [31] (Brooke LJ, with whom Walker and Gibson LJJ concurred); Barclay’s Bank v Nylon at [74] (Lord Neuberger MR);  Voss at [6] (Davies JA, with whom Williams and Wilson JJA concurred).
  8. Thirdly, the stage at which preparation of judgment had reached is a relevant consideration.  It is, as Lord Neuberger MR said, a highly questionable use of judicial time to prepare a judgment on a matter that has been settled:  Barclay’s Bank v Nylon at [75].  Here, the judgment was complete at the time of notification.
  9. Finally, whilst nothing in these reasons is intended to derogate from the dictum of Somervell LJ in Biggin & Co Ltd v Permanite Ltd [1951] 2 KB 314 at 321 that “the law … encourages reasonable settlements”, the parties had a long time in which they could have settled their dispute. They did not do so. The Court is unaware of the nature of the “in principle” settlement. The Court has a discretion in circumstances such as these to publish judgment where the private interests of the parties to settle the dispute without publication of judgment are outweighed by the countervailing public interest in making the judgment publicly available: F&C Alternative Investments at [1], [7]–[8] (Sales J);  Barclay’s Bank v Nylon at [74] (Lord Neuberger MR);  Clarke at [23]–[24] (Croft J); Osborne at [40]–[44] (Young J with whom Elias CJ, McGrath, Glazebrook and Tipping JJ concurred); Voss at [5]–[7] (Davies JA with whom Williams and Wilson JJA concurred); Greenwich at [131]–[137] (Smith J).
  10. In the light of the lack of clarity of the factual position concerning settlement “in principle” it is unnecessary to say anything about “matter” (in the Constitutional sense).
  11. Accordingly, I am of the opinion that judgment ought to be handed down and published.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop.

 

Associate:

 

Dated: 25 June 2021

REASONS FOR JUDGMENT

MIDDLETON J:

  1. I agree with Stewart J’s reasons and proposed orders.  I agree with the additional remarks of the Chief Justice.
I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Middleton.

 

Associate:

 

Dated:       25 June 2021

 

REASONS FOR JUDGMENT

STEWART J:

 

Introduction

 

  1. This is an appeal from a judgment enforcing an arbitration award under s 8(3) of the International Arbitration Act 1974 (Cth) (IAA). The principal ground on which the appellant contends that the award should not be enforced is that the composition of the arbitral tribunal was not in accordance with the agreement of the parties as envisaged by s 8(5)(e) of the IAA notwithstanding that the tribunal was appointed by a court at the seat of the arbitration, namely the Plenary Court of First Instance of the State of Qatar. The respondent’s principal contention in response is that the appointment, having been made by the Qatari Court, must be regarded as valid under the law of the seat and that the appellant’s remedy was to challenge it there rather than to resist enforcement in Australia. The respondent also contends that even if it is concluded that the ground for non-enforcement in s 8(5)(e), or any other ground, is made out, as a matter of discretion the Court should nevertheless enforce the award. The appeal therefore raises questions as to the nature and exercise of that discretion.
  2. For the reasons that follow, I have come to the conclusion that the appeal should be allowed.  In essence, the award should not be enforced in Australia because the arbitral tribunal was not composed in accordance with the agreement of the parties and that is a proper basis to resist enforcement, it not being necessary for the award debtor to seek to set the award aside at the seat of the arbitration.  Also, because a failure to compose the arbitral tribunal in accordance with the agreement of the parties is fundamental to the jurisdiction of the arbitrators, there is little if any scope to exercise the discretion to enforce in this case and it should not be so exercised.The statutory provisions
  3. It being common ground that the award in question is a “foreign award” as referred to in Pt II of the IAA, relevant provisions of the IAA for present purposes are the following:

    2D          Objects of this Act

    The objects of this Act are:

    (a)          to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and

    (b)          to facilitate the use of arbitration agreements made in relation to international trade and commerce; and

    (c)          to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and

    (d)          to give effect to Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting; and

    3            Interpretation

    (1)          In this Part, unless the contrary intention appears:

    arbitral award has the same meaning as in the Convention.

    foreign award means an arbitral award made, in pursuance of an arbitration agreement, in a country other than Australia, being an arbitral award in relation to which the Convention applies.

    8            Recognition of foreign awards

    (1)           Subject to this Part, a foreign award is binding by virtue of this Act for all purposes on the parties to the award.

    (3)           Subject to this Part, a foreign award may be enforced in the Federal Court of Australia as if the award were a judgment or order of that court.

    (3A)         The court may only refuse to enforce the foreign award in the circumstances mentioned in subsections (5) and (7).

    (5)           Subject to subsection (6), in any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may, at the request of the party against whom it is invoked, refuse to enforce the award if that party proves to the satisfaction of the court that:

    (c)           that party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his or her case in the arbitration proceedings; or

    (e)          the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

    (7)           In any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may refuse to enforce the award if it finds that:

    (b)       to enforce the award would be contrary to public policy.

    (7A)         To avoid doubt and without limiting paragraph (7)(b), the enforcement of a foreign award would be contrary to public policy if:

    (b)          a breach of the rules of natural justice occurred in connection with the making of the award.

    39          Matters to which court must have regard

    (1)          This section applies where:

    (a)       a court is considering:

    (i)           exercising a power under section 8 to enforce a foreign award; or

    (ii)          exercising the power under section 8 to refuse to enforce a foreign award, including a refusal because the enforcement of the award would be contrary to public policy; or

    (2)          The court or authority must, in doing so, have regard to:

    (a)       the objects of the Act; and

    (b)       the fact that:

    (i)          arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and

    (ii)         awards are intended to provide certainty and finality.

  4. As recognised in s 2D(d), s 8 was enacted following Australia’s accession to, and to give effect to, the New York Convention, i.e., the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959) which is reproduced as Sch 1 to the IAA: TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533 (TCL HCA) at [47] per Hayne, Crennan, Kiefel and Bell JJ. Section 8 closely mirrors the provisions of Art V of the Convention – Art V(1) is reflected in s 8(5) and Art V(2) in s 8(7). The same grounds for not enforcing an international arbitral award are also found in Art 36 of the UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended on 7 July 2006) which is reproduced as Sch 2 to the IAA.  The origins of Art 36 of the Model Law are also to be found in the New York Convention: TCL HCA at [7] per French CJ and Gageler J. Thus, Art 36(1)(a) of the Model Law mirrors Art V(1) of the New York Convention and Art 36(1)(b) of the Model Law mirrors Art V(2) of the New York Convention.
  1. It can thus be observed that the New York Convention and the Model Law represent a uniform framework for the recognition and enforcement of arbitral awards.  As explained in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2014] FCAFC 83; 232 FCR 361 (TCL FCAFC) at [58] per Allsop CJ, Middleton and Foster JJ, the Model Law deals with many aspects of arbitration and arbitral procedure not touched upon by the New York Convention, which is broadly limited to protecting, recognising and enforcing awards in the field of international commercial arbitration. There is overlap between the Model Law and the New York Convention on these matters.
  2. Insofar as foreign awards are concerned, it is noteworthy that of the 193 member states of the United Nations, 165 are signatories to the New York Convention (from 168 signatories in total); the regime is not only uniform, it is also remarkably widespread.  That underscores the importance of interpreting the provisions of the IAA that implement the New York Convention, and the corresponding provisions of the Model Law, with the aim of achieving international uniformity in their interpretation: Povey v Qantas Airways Ltd [2005] HCA 33; 223 CLR 189 at [25] and [32] per Gleeson CJ, Gummow, Hayne and Heydon JJ. Due regard should be paid to the reasoned decisions of the courts of other countries where their laws are either based on, or take their content from, international conventions or instruments such as the New York Convention and the Model Law; it is of the first importance to attempt to create or maintain, as far as the language employed in the IAA permits, a degree of international harmony and concordance of approach to international commercial arbitration: TCL FCAFC at [75].
  3. Section 8(3A) of the IAA, by use of the word “only”, makes it clear that an enforcing court has no residual discretion to refuse enforcement; enforcement can be refused only if one or other of the grounds for refusal in sub-ss (5) and (7) is made out. In that regard, once the party seeking enforcement has established that it relies on a foreign award to which it (leaving aside any assignment for the present) and the respondent are parties, the onus is on the respondent who seeks to resist enforcement to establish one or other of the enumerated grounds. That much is clear from the wording of the chapeau to s 8(5) that the court may refuse to enforce the award if the party against whom it is invoked “proves to the satisfaction of the court” that a ground for non-enforcement is made out.
  4. As will be seen, a question nevertheless arises as to the standard of the burden on the party resisting enforcement.  I will return to that question in the context of the first issue to be determined in the appeal.  A question also arises as to the court’s discretion to enforce an award even when a ground for non-enforcement is established.  I will return to that question in the context of the second issue to be determined in the appeal.Background
  5. The following facts are not in dispute.  They are principally drawn from the primary judgment, Energy City Qatar Holding Company v Hub Street Equipment Pty Ltd (No 2) [2020] FCA 1116 at [7]-[26].
  6. The respondent, Energy City Qatar (ECQ), the award creditor, is a company incorporated in Qatar.  The appellant, Hub Street Equipment Pty Ltd (Hub), the award debtor, is a company incorporated in Australia with its principal place of business in Sydney.
  7. In 2010, ECQ and Hub entered into a contract for Hub to supply and install street lighting equipment and accessories, and street furniture and accessories, in Doha, Qatar.
  8. Relevant contractual provisions include:

    (1)          Article 46, headed “SETTLEMENT OF DISPUTES – ARBITRATION”:

    Any dispute connected with inter alia the formation, performance, interpretation, nullification, termination or invalidation of this Agreement or arising there from [sic] or related thereto in any manner whatsoever which is not amicably settled within 28 days, or such other period as the parties may subsequently agree, shall be referred to arbitration in accordance with the rules of arbitration in Qatar.  An Arbitration Committee shall consist of three members, one member being appointed by each party within 45 days of one party receiving a written notice from the other party to start arbitration proceedings.  The third member shall be mutually chosen by the first two members and shall chair the Arbitration Committee and issue the decision of the Arbitration Committee which shall be by a majority vote and shall be binding on both parties.  If a decision as to the appointment of the third such member cannot be reached within 28 days from the last date of the appointment of the member by the Parties and their appointed Tribunal Members, the matter of appointment of such member shall be referred by either party to the competent Qatari Courts.

    (2)          Article 47, which provides that the contract was made in the State of Qatar and is subject to the laws of the State of Qatar.

    (3)          Article 50, which provides that the English language shall be the ruling language of the contract and accordingly all matters relating to the contract shall be in English.

  9. In August 2011, ECQ paid US$820,322.16 to Hub under the contract as an advance payment.  However, in 2012 ECQ decided not to proceed with the contract and sought repayment of the money paid under the contract.  Following some email communications and meetings in 2012 in which ECQ continued to seek repayment of the money, Hub informed ECQ that it would identify its position after obtaining legal advice.  However, Hub never communicated again with ECQ in circumstances where Hub retained the money ECQ had paid to it.
  10. Crucially, ECQ never sent a notice to Hub under Art 46 of the contract giving Hub 45 days to appoint one member of the arbitration committee.  Instead, in June 2016 ECQ filed a statement of claim in the Plenary Court of First Instance of the State of Qatar seeking orders that the Court appoint an arbitral tribunal of three arbitrators including an arbitrator nominated by ECQ.  In doing so, ECQ relied on Art 195 of Law No. 13 of 1990 promulgating the Civil and Commercial Code of Procedure (Qatar) (the Civil Procedure Code) which was in force at the relevant time (and until February 2017).  The English translation of Art 195 of the Qatari Civil Procedure Code that was available in the proceeding is in the following terms:

    If a dispute arises between the parties prior to an agreement between them as to the arbitrators, or if one or more of the arbitrators refuses to act as such, or withdraws, or is dismissed, or is prevented from acting due to an encumbrance, and no agreement exists between the parties in this respect, the court which has jurisdiction to consider the dispute shall appoint the necessary number of arbitrators at the request of one of the parties, filed in accordance with the normal procedure for filing a claim.  The court shall hear the application in the presence of the other parties or in their absence after being summoned to appear before the court.  The court’s decision in respect of the foregoing may not be appealed in any way whatsoever.  However, its decision to reject the appointment of arbitrators shall be subject to appeal pursuant to the relevant provisions of Article 205.

  11. In November 2016, ECQ sent a notice of the court proceeding to Hub at the office of a related company in Qatar, not to the nominated address in Sydney at which Hub had agreed in the contract to receive notices.  The notice was translated from Arabic to English by an employee of the related company and brought to the attention of the directors of Hub in December 2016.  Hub did not participate in the Qatari Court proceeding.
  12. The Qatari Court made orders in January 2017 appointing an arbitral tribunal.  Thereafter, the arbitral tribunal sent to Hub’s nominated address six notices in English about the conduct of the arbitration between April 2017 and July 2017, with the arbitration being adjourned on three occasions due to Hub’s failure to attend.  Hub did not participate in the arbitration proceeding.
  13. The primary judge was satisfied that notice of the court proceeding was given to Hub’s directors, and that each of the six letters from the arbitral tribunal were given to Hub and that Hub understood from them that ECQ had commenced an arbitration against Hub for recovery of the US$820,322.16 which had been paid to Hub.  The primary judge inferred that Hub decided not to involve itself in the arbitration because it decided that was what was in its best commercial interests at the time.
  14. On 1 August 2017, the arbitral tribunal issued the award obliging Hub to pay ECQ:

    (1)          US$820,322.16, being the full value of the advance payment;

    (2)          US$75,000.00, as compensation against damages incurred by ECQ; and

    (3)          US$150,000.00, as full fees of the arbitration.

  15. The award is in Arabic.  It is apparent from the English translation of the award that the arbitral tribunal was satisfied that it had notified Hub of the conduct of the arbitration on three occasions, after which it adjourned the arbitration, but that as there was never any appearance by Hub it proceeded to determine the dispute and make the award in Hub’s absence.The primary judgment
  16. On the basis of the factual findings made by her Honour, which are not challenged on appeal, the primary judge (at [28]) rejected Hub’s grounds for resisting enforcement of the award based on its factual contentions that it had not received proper notice of the arbitration proceeding (s 8(5)(c) of the IAA), that it was unable to present its case in the arbitration proceeding as it never received notice of the proceeding (also s 8(5)(c)), and the arbitral award involved a breach of the rules of natural justice and thus the award should not be enforced as it would be contrary to public policy to do so (ss 8(7) and 8(7A)(b) of the IAA).
  17. The primary judge (at [30]) rejected Hub’s contention that the award should not be enforced because the arbitral procedure was not in accordance with the agreement of the parties in that contrary to Art 50 of the contract it was not conducted in English and the award was issued in Arabic (relying on s 8(5)(e) of the IAA). That was on the basis that the notices from the arbitral tribunal to Hub about the arbitration were in English, and Hub decided to ignore them and take no part in the arbitration despite knowing that it was being conducted. Having done so, there was no prejudice to Hub occasioned by the fact that the arbitral proceeding was conducted in and the arbitral award issued in Arabic. For those reasons, the primary judge, as a matter of discretion, would have decided to enforce the award against Hub notwithstanding the fact that the arbitral procedure was not in accordance with the agreement of the parties.
  18. The remaining grounds on which Hub resisted enforcement of the award were related, namely that it did not receive proper notice of the appointment of the arbitrators and the composition of the arbitral authority was not in accordance with the agreement of the parties as the Art 46 procedure in the contract had not been followed. These grounds relied on paragraphs (c) and (e) of s 8(5) of the IAA. The primary judge dealt with these grounds together (at [31]-[60]).
  19. The primary judge observed (at [34]) that the Qatari Court stated (in the English translation of its judgment):

    Whereas the two parties failed to agree upon tribunal of arbitrators, with which the court decides to appoint a tribunal consisted of three arbitrators…

  20. With reference to that statement by the Qatari Court and Art 195 of the Qatari Civil Procedure Code, the primary judge (at [59]) reasoned that it must be taken that the Qatari Court was satisfied that a dispute had arisen between ECQ and Hub prior to an agreement between them as to the arbitrators, and, whether that is so or not, Hub had not proved that according to Qatari law Art 195 of the Qatari Civil Procedure Code did not apply to the circumstances of the case.  That was because Hub’s expert on Qatari law, Dr Al-Adba, did not in his affidavit take into account the judgment of the Qatari Court and did not consider whether Art 195 was engaged by the factual circumstances of the case.  Further, the primary judge found that there was a factual foundation in the evidence for the conclusion that a dispute had arisen between the parties prior to an agreement between them as to the arbitrators, being Hub’s failure to revert to ECQ once it had obtained legal advice.  The primary judge found that refusal to respond to a request for repayment is capable of constituting a dispute within the meaning of Art 195.
  21. In essence, the primary judge (at [59]) held that the onus of proof lay on Hub and that Hub had not proved that Art 195 did not operate so as to allow the appointment of arbitrators in the circumstances of the case.  As such, it was held that Hub had not proved that the appointment of the arbitrators by the Qatari Court was not in accordance with Art 46 of the contract.
  22. With regard to the burden of proof, the primary judge (at [60]) cited IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSC 248; 38 VR 303 at [53] per Warren CJ that “the enforcing court should start with a strong presumption of regularity in respect of the tribunal’s decision and the means by which it was arrived at” and “the conduct of the parties to the agreement at each of the various stages prior to an enforcement order being sought in these courts, and its consistency with the defence subsequently asserted, will be a relevant factor to consider when deciding whether that burden has been discharged to the necessary standard.”
  23. Finally, the primary judge (at [61]) stated that if her Honour’s conclusions in rejecting Hub’s grounds for resisting enforcement of the award were incorrect, then she would nevertheless have declined to exercise the discretion to refuse enforcement given by s 8(5) of the IAA in Hub’s favour. The reasons identified by the primary judge were that Hub had received actual notice of the proceeding by ECQ in the Qatari Court and knew that the notice concerned ECQ seeking repayment of the money yet did nothing to ascertain what the proceeding was about, and Hub received actual notice of the constitution of the arbitral tribunal and the conduct of the arbitration in ample time to take a role in the arbitration but chose not to do so. The primary judge thus concluded (at [62]) that there would be no unfairness to Hub by enforcement of the award against it as it had had adequate opportunity to participate and had chosen not to do so.
  24. In the result, the primary judge entered judgment for ECQ against Hub in the amount of US$1,045,322.16 and ordered that Hub pay the cost of the proceeding.The grounds of appeal
  25. Although the notice of appeal identifies four grounds of appeal, they were grouped together in argument in such a way that there are in effect two principal issues in the appeal.
  26. First, Hub contends that the award should not be enforced because Hub was not given proper notice of the arbitration proceeding and the composition of the arbitral tribunal was not in accordance with the agreement of the parties under Art 46 of the contract (in reliance on paragraphs (c) and (e) of s 8(5) of the IAA). Hub submits that Art 195 of the Qatari Civil Procedure Code did not override the parties’ agreement as to the mode of commencement and notification of the arbitral proceeding, and the requirement to give notice of the commencement of the arbitral proceeding under Art 46 of the contract could not be cured by giving notice of the proceeding before the Qatari Court to appoint an arbitral tribunal. Hub submits that the existence of a dispute between the parties did not constitute a failure to agree on the composition of the tribunal within Art 195 of the Qatari Civil Procedure Code and the appointment of arbitrators by the Qatari Court under Art 195 did not cure the failure to constitute the arbitral tribunal in accordance with Art 46 of the contract.
  27. Secondly, Hub contends that any residual discretion under s 8(5) of the IAA to enforce the foreign award despite a ground for non-enforcement being established – whether as to the language of the arbitration as found by the primary judge or the composition of the tribunal as contended on issue 1 – was not enlivened or should not be exercised. In that regard, Hub submits that the primary judge ought to have concluded that the failure to conduct the arbitration in English was a fundamental departure from the agreed arbitral procedure with the consequence that the Court’s narrow residual discretion under s 8(5) to enforce an arbitral award was not enlivened. A similar submission is made with regard to the composition of the tribunal.Issue 1: the appointment of the arbitral tribunal
  28. Article 46 of the contract provides in the customary way for each party to a dispute to appoint an arbitrator and for the two arbitrators so appointed to appoint the third member of the tribunal.  To an Australian lawyer, Art 195 of the Qatari Civil Procedure Code provides in the customary way for the court at the seat of the arbitration to appointment arbitrators where the parties’ agreed procedure has failed.  It does not, on the face of it, provide for the court to appoint arbitrators contrary the parties’ agreed procedure simply because the parties are in a contractual dispute.  If that were the case, then the court could always appoint arbitrators whatever the parties had agreed which would be contrary to the fundamental premise underlying arbitration, and the court’s enforcement of arbitration awards, which is that the jurisdiction of the tribunal arises from the agreement or consent of the parties: Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) [1998] FCA 1485; 90 FCR 1 at 14 per Emmett J, Beaumont and Branson JJ agreeing; TCL HCA at [9] and [29] per French CJ and Gageler J and [81] and [109] per Hayne, Crennan, Kiefel and Bell JJ. As it was put by Menon CJ in AKN v ALC [2015] SGCA 18 at [37], “a critical foundational principle in arbitration is that the parties choose their adjudicators” (cited with approval in Cameron Australasia Pty Ltd v AED Oil Ltd [2015] VSC 163 at [21] per Croft J).
  29. However, it is not for the court where enforcement is sought, being this Court, to construe Art 46 of the contract or Art 195 of the Qatari Civil Procedure Code with reference to the law of the forum.  Those are matters for, respectively, the law governing the agreement to arbitrate and the law of the seat, which in the present case is in both instances Qatari law.  In that regard, it is uncontroversial in the present case that the law governing the substance of the dispute, the agreement to arbitrate and the arbitration process were all the same.  On that tripartite distinction, see Enka Insaat ve Sanayi AS v OOO “Insurance Company Chubb” [2020] UKSC 38; [2020] 1 WLR 4117 at [1]-[6] and [170].
  30. That appreciation leads to an examination of the evidence before the primary judge of Qatari law.  In that regard, it is important to acknowledge at the outset that ECQ does not contend that the Qatari Court judgment that appointed the arbitrators is an authoritative statement of Qatari law or that it creates an issue estoppel or res judicata between the parties, but rather that it is a ministerial act which has force and effect in the State of Qatar, being the place of the seat of the arbitration, and should be given recognition as a matter of comity.
  31. It should also be observed that in opening the case before the primary judge, the advocate for Hub said that the Qatari Court had made its decision on the basis that it had power to appoint the tribunal because the process set out in Art 46 had been attempted but had not achieved an outcome.  It was said that the Qatari Court was misled, and that it viewed Art 195 in exactly the same way as that provision would be viewed in Australia, namely that it is “a backstop that the Court can use when the agreement between the parties has broken down”.
  1. In opening the case before the primary judge, counsel for ECQ accepted that there was no notice under Art 46 prior to the Qatari Court proceeding, and that by saying that the Qatari Court was misled was to in effect ask the primary judge “to sit on appeal from a Qatar court”.
  2. In the light of what was said in opening, and contrary to what was at least hinted at on behalf of ECQ on the appeal hearing, I am satisfied that the point under consideration was properly raised before the primary judge.  That point is whether Hub can resist enforcement of the award in Australia on the basis that the arbitral tribunal was not appointed in accordance with the parties’ agreement notwithstanding the appointment of the tribunal by the Qatari Court because the Qatari Court misapprehended what had taken place between the parties with regard to the appointment of a tribunal.
  3. ECQ’s statement of claim in the Qatari Court by which it sought the appointment of three arbitrators, after citing Art 195 of the Qatari Civil Procedure Code, stated the following:

    Whereas and as the Defendant had refrained from execution of its legal and contractual obligations then accepting to recourse to arbitration despite being agreed upon in the agreement connecting the two parties, against that the Plaintiff instituted this lawsuit with the request to appoint a triple arbitral tribunal by which the Plaintiff nominates the arbitrator Yarub Rayan

  4. It is not clear from that translation whether the Qatari Court was being informed that Hub had not observed its legal and contractual obligation to submit to arbitration, or whether it was that Hub had not observed its underlying legal and contractual obligations, i.e., to repay the money paid in advance.
  5. The reasons for judgment of the Qatari Court records that the Court had “heard pleading and reviewed the documents and deliberated legally”, the facts were summed up in the statement of claim of which Hub was legally notified, a docket of exhibits was submitted which included a copy of the contract, and ECQ had appeared by an attorney and Hub had not appeared despite being legally notified.  The Qatari Court quoted Art 195 of the Civil Procedure Code and referred to Art 46 of the contract.  It then stated as follows:

    Whereas the Plaintiff had instituted this lawsuit alleging that the Defendant had breached its obligations as per the contract and adhered to the condition of arbitration contained in the contract subject matter of lawsuit.  Later, it had contacted it by a letter by its virtue it had nominated Mr. Moneer Abdulaziz Shalabi as an arbitrator for its behalf and asked to appoint an arbitrator by its side and the Defendant failed to appear before the court despite of the legal notification accordingly it had not objected against the submitted arbitration application.  Whereas and as Items of the contract in Article (46) thereof provided for on appointment triple arbitral tribunal, each party shall appoint one member and the third member shall be nominated by the first and second members who will chair the committee and issue the decision of the arbitral decision and in case of failure to agree upon appointment of those members it shall be referred by either party to the competent Qatari Courts.  Whereas the two parties failed to agree upon tribunal of arbitrators, with which the court decides to appoint a tribunal consisted of three arbitrators from the table of court’s experts as arbitrators to decide in the dispute subject matter of lawsuit with which the court adjudicate as will be contained in the pronouncement.

    (Emphasis added.)

  6. From this it is apparent that the Qatari Court was advised, or in any event understood, that after the institution of the proceeding before the Court, ECQ had notified Hub that it had nominated Mr Shalabi as an arbitrator and it asked Hub to appoint an arbitrator but that Hub had failed to appear before the Court, and presumably had failed to appoint an arbitrator.  That was apparently the basis for the conclusion that the parties had failed to agree upon a tribunal of arbitrators which the Qatari Court regarded as enlivening its power to appoint the tribunal under Art 195 of the Civil Procedure Code.  On that basis it proceeded to appoint a tribunal of three: a civil engineer, an electrical engineer and an accountant.  Neither Mr Rayan, who had been nominated in the statement of claim, nor Mr Shalabi who was said to have been nominated after the court proceeding had been commenced, was appointed.
  7. Since it is an uncontroversial finding of fact of the primary judge that Hub had not been notified of the appointment by ECQ of an arbitrator and invited to appoint an arbitrator, as required by Art 46 of the contract, it is apparent that the Qatari Court proceeded upon a misapprehension as to the facts.  The reason for the misapprehension is not apparent, or particularly relevant.  It is nevertheless tolerably clear, the imperfections of translation accounted for, that the Qatari Court appointed the tribunal because, as it understood the position, ECQ had invoked the Art 46 procedure but Hub had failed to respond.
  8. Only Hub adduced expert evidence on Qatari law.  As indicated, its expert was Dr Al-Adba, a practising Qatari lawyer with a Bachelor of Laws (Qatar University), Master of Laws (Institute of International and Development Studies, Geneva), Graduate Diploma in Law (Harvard Law School) and Doctor of Philosophy (Manchester University).  Dr Al-Adba’s affidavit included the following statements of opinion:

    (1)          The most important thing to validly commence an arbitration is legal notification as agreed in the agreement.  Without this, the dispute might be premature and the arbitration deed and verdict will be invalid.

    (2)          The valid way either party to the contract with the wording of Art 46 may begin an arbitration against the other party is for the claimant to send a written notice by prepaid post to the respondent to the address provided in the contract and, within 45 days of that notice, each party may appoint an arbitrator.

    (3)          In the event that the notice under the contract is not responded to, the claimant may apply to the court for a judicial notification to appoint an arbitrator.

  9. In cross-examination, Dr Al-Adba gave the following evidence:

    (1)          With reference to the judgment of the Qatari Court, of which he was not aware at the time he prepared his affidavit, he said that the court had adjudicated to appoint the arbitral tribunal.  He then agreed with the proposition that until a judgment is set aside it represents the law in the State of Qatar.

    (2)          In response to the proposition that since the court appointed the arbitrators the award would not be null and void, he said that if the arbitrators are appointed by the court, “for some extent the appointment might be okay, if the notification is delivered”, but the award of the arbitrators might be null and void.  Dr Al-Adba would seem to have meant that if notification under Art 46 of the contract had been given and not responded to, then the appointment of the arbitrators would be valid but that whether or not an arbitration award would be valid and enforceable would depend on other considerations.

    (3)          He agreed with the proposition that “if you wanted to argue that the court should not have appointed the arbitrators then you have to make an application under article 33 of the Qatari Arbitration Law”.  That was a reference to Art 33 of the Civil and Commercial Arbitration Law (Law No. 2 of 2017) which was in force from March 2017, i.e., at the time of the hearing before the primary judge but not at the time of the judgment of the Qatari Court.  It provides for recourse against an arbitral award on narrow grounds that mirror those in Art 34 of the Model Law, the State of Qatar having adopted domestic legislation based on the Model Law.

    (4)          He did not agree with the proposition that it is a normal part of the procedure in Qatar to give notice of appointment of an arbitrator under the contract in the statement of claim commencing a lawsuit in which the court is asked to appoint arbitrators.

  10. It was not put to Dr Al-Adba that Art 195 of the Civil Procedure Code gave the court the power to appoint arbitrators where the procedure agreed by the parties for the appointment of arbitrators had not been followed. The high point of the cross-examination was that if Hub disagreed with the appointment by the Qatari Court it had to apply to set aside the award. That, of course, does not deal with the position in January 2017 when the appointment was made, which was when Art 195 of the Qatari Civil Procedure Code applied which states that the appointment of arbitrators under that provision “may not be appealed in any way whatsoever”. Also, it does not answer whether enforcement of the award can be resisted in Australia under s 8(5)(e) of the IAA. It merely speaks to what could be done in Qatar.
  11. In re-examination, Dr Al-Adba said that the statement of claim by which the lawsuit to appoint the arbitrators was commenced would not be considered as a notice of the kind contemplated by the arbitration agreement in Art 46 of the contract.
  12. The conclusions to draw from the evidence are that Art 46 required the notice and invitation to appoint an arbitrator procedure to be followed and Art 195 of the Civil Procedure Code gave to the court the power to appoint arbitrators where the parties had failed to agree.  That is also apparently what the Qatari Court understood that it was doing.  The evidence does not support the proposition that Art 195 empowered the court to override the agreement of the parties as to the appointment of the arbitral tribunal.  The Qatari Court apparently acted on the misapprehension that the Art 46 procedure had been followed but had failed to produce the appointment of a tribunal and on that basis it exercised its power of appointment.
  13. In those circumstances, under Qatari law as the applicable law, the composition of the arbitral tribunal was not in accordance with the agreement of the parties. The basis to resist enforcement of the award in reliance on s 8(5)(e) of the IAA was accordingly established. In my respectful view, the primary judge was in error in concluding that Hub had not proved that according to Qatari law Art 195 of the Civil Procedure Code did not apply to the circumstances of the case. Although there was a factual foundation to, and evidence to support, the conclusion that a dispute had arisen between the parties, that had not been prior to an agreement between them as to the arbitrators. They agreed on the method and procedure for the appointment of arbitrators in their contract at the outset, long before any dispute arose. There was also no dispute between them with regard to following the procedure required by Art 46 of the contract; ECQ, for whatever reason, had simply not followed that procedure and had gone prematurely to court which resulted in the appointment of a tribunal that was contrary to the parties’ agreement.
  14. Because the primary judge decided this point on the basis that Hub had not discharged the burden on it to prove that the composition of the arbitral tribunal was not in accordance with the agreement of the parties, it is necessary to consider the question of the standard of the burden of proof.  As indicated, the primary judge cited and apparently applied dicta of Warren CJ in IMC Aviation.  However, differing views were expressed on that question in IMC Aviation.
  15. The case concerned which party bore the onus on the question of whether the award debtor was a party to the arbitration agreement as referred to in s 8(1) of the IAA as it was then worded. Subsequent amendment of s 8(1) in response to the judgment in IMC Aviation (by the Civil Law and Justice Legislation Amendment Act 2018 (Cth), item 2 of Sch 7) makes it clear that for enforcement the award must be between the parties to the award, rather than the parties to the agreement. The Court was unanimous in the result, namely that the appeal should be allowed, but there were two judgments with different approaches to the burden of proof, one by Warren CJ and the other by Hansen JA and Kyrou AJA. It is to the joint judgment that one must look to find the rationes decidendi or, if the relevant point is not ratio, the majority dicta: Dickenson’s Arcade Pty Ltd v Tasmania [1974] HCA 9; 130 CLR 177 at 188 per Barwick CJ.
  16. The joint judgment in IMC Aviation (at [127]) recognised that s 39(2) of the IAA provides that in interpreting the IAA the court must have regard to its objects set out in s 2D as well as the stated facts that arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes and that awards are intended to provide certainty and finality.
  17. With regard to what has been described as the “pro-enforcement bias” of the New York Convention, the joint judgment (at [128]) reasoned that that means that the IAA, and the Convention, recognising the role and importance of arbitration in international trade and commerce and the certainty and finality of awards, has simplified the procedure for enforcing foreign awards while also limiting the grounds upon which the enforcement of such awards may be resisted and placed the onus of establishing those grounds upon the party resisting enforcement.  In support of that statement the judgment cited Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46; [2011] 1 AC 763 at [101] per Lord Collins of Mapesbury JSC; Blackaby N, Partasides C, Redfern A and Hunter M, Redfern and Hunter on International Arbitration (5th ed, Oxford University Press, 2009) p 588 [10.09] and Hebei Import & Export Corp v Polytek Engineering Co Ltd [1999] HKCFA 40; [1999] 2 HKC 205 at [99] per Sir Anthony Mason NPJ. Those references are all good authority for the proposition for which they were cited, and they reflect the approach with regard to the Convention in two significant common law jurisdictions.
  18. In Dallah, Lord Mance JSC (at [30]) expressed the matter as follows:

    The scheme of the New York Convention, … may give limited prima facie credit to apparently valid arbitration awards based on apparently valid and applicable arbitration agreements, by throwing on the person resisting enforcement the onus of proving one of the matters set out in article V(1) … . But that is as far as it goes in law.  Dallah starts with advantage of service, it does not also start 15 or 30 love up.

  19. Lord Hope of Craighead DPSC, Lord Saville of Newdigate JSC and Lord Clarke of Stone-cum-Ebony JSC agreed with the reasons of Lord Mance and Lord Collins JJSC.
  20. The joint judgment in IMC Aviation concluded (at [191]-[192]) that the primary judge in that case had been in error in concluding that the party resisting enforcement bears an onus that is “very high” and that “clear, cogent and strict proof” is required. Their Honours concluded that the IAA neither expressly nor by necessary implication provides that the standard of proof under ss 8(5) and (7) is anything other than the balance of probabilities, as one would expect in a civil case. The true position, it was concluded, is that what may be required, in a particular case, to produce proof on the balance of probabilities will depend on the nature and seriousness of that sought to be proved. See also Beijing Jishi Venture Capital Fund (Limited Partnership) v Liu [2021] FCA 477 at [25] per Middleton J where this approach was adopted. This includes the elementary maxim that all evidence is to be weighed according to the proof of which it was in the power of one side to have produced, and in the power of the other to have contradicted: Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970.
  21. Warren CJ, in contrast, reasoned (at [52]-[53]) that the enforcing court should start with “a strong presumption of regularity” and that it should treat allegations of vitiating irregularity, which her Honour had identified as being the grounds to resist enforcement in s 8(5)(a)-(e), as “serious”. On that basis, with reference to Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336 at 362 per Dixon J, her Honour concluded that a “correspondingly heavy onus falls upon the award debtor if it wishes to establish such an allegation on the balance of probabilities.”
  22. In my view, the expression of the point in the joint judgment is to be preferred to that of the Chief Justice for the reasons given in the joint judgment referred to above.  The nature of the “vitiating irregularity” and hence how “serious” it should be regarded to be may differ.  In one case it may involve allegations of or akin to fraud and in another case, such as the present where the issue is in essence whether the agreed commencing procedure was followed, it may be quite bland without any moral taint of “seriousness” although obviously of great importance; the “seriousness” or “gravity” of an allegation of fact on which an award debtor relies in order to establish a ground of non-enforcement is not necessarily of the nature of seriousness contemplated in Briginshaw such as by its nature to be more exacting to prove before the court will have “comfortable satisfaction” (Rich J at 350) or “feel an actual persuasion” (Dixon J at 362) of its having been established. See British American Tobacco Australia Services Ltd v Laurie [2009] NSWCA 414 at [10]-[13] per Allsop P; Bennett H and Broe GA, “The Civil Standard of Proof and the ‘Test’ in Briginshaw: Is There a Neurobiological Basis to Being ‘Comfortably Satisfied’?” (2012) 86 ALJ 258; Gageler S, “Evidence and Truth” (2017) 13 TJR 1 at 6-8; Gageler S, “Alternative Facts and the Courts” (2019) 93 ALJ 585 at 590-591.
  23. I respectfully agree with the joint judgment that the IAA neither expressly nor by necessary implication provides that the standard of proof under ss 8(5) and (7) is anything other than the balance of probabilities as ordinarily applied in a civil case. The point about the IAA having a pro-enforcement bias is that the grounds upon which enforcement may be resisted are finite and narrow, and not that they must be established to a standard that is higher than the ordinary standard. This is also the approach that better accords with that followed internationally.
  24. Finally on IMC Aviation, I do not see how, as stated by Warren CJ (at [53]) and cited by the primary judge, the conduct of the parties to the agreement at each of the various stages prior to an enforcement order being sought, and its consistency with the defence subsequently asserted, will be a relevant fact to consider when deciding whether the burden of establishing vitiating irregularity has been discharged to the necessary standard.  Such conduct may conceivably be relevant to the question of discretion, to which I will shortly turn.  The grounds for non-enforcement are, however, narrow and specific.  The conduct of the parties between the points at which the dispute arises and an enforcement order is made in the court cannot be relevant to, for example, the questions of whether a party to the arbitration agreement was under some legal incapacity at the time when the agreement was made, or the arbitration agreement is valid under the law applicable to it, or the award debtor was given proper notice of the appointment of the arbitrator, or the composition of the arbitral authority was in accordance with the agreement of the parties.
  25. In the result, Hub proved to the requisite standard that the composition of the arbitral tribunal was not in accordance with the arbitration agreement. It has thus established the ground for non-enforcement expressed in s 8(5)(e) of the IAA and Art V(1)(d) of the New York Convention. The question then turns to the matter of the court’s discretion to nevertheless enforce the award. But before doing so, it is necessary to consider one further submission made by ECQ.
  1. ECQ submits that Hub’s remedy was to seek to set aside the appointment of the arbitral tribunal or the award at the seat, i.e., Qatar, rather than to rely on the wrong composition of the tribunal as a ground to resist enforcement.  As indicated, that is on the basis that as a ministerial act the decision of the Qatari Court to appoint the arbitrators exists and is effective in Qatar and as a matter of comity this Court should regard it as effective until set aside.
  2. It is well established that as a general rule an award debtor does not have to take positive steps at the seat of the arbitration to set aside the award and can wait until the award is sought to be enforced before raising any defences to enforcement.  That arises from the text and structure of the New York Convention and the Model Law which provide for the same grounds for recourse against an award and resisting enforcement of any award and do not expressly or by implication require an award debtor to take one course rather than the other; the award debtor has a choice: it can actively seek to set aside the award in the supervisory court at the seat of the arbitration or it can wait and raise defences to the award in the enforcing court when the award is sought to be enforced.
  3. In Dallah (at [23] per Lord Mance JSC) it was said that a person who denies being party to any relevant arbitration agreement has no obligation to participate in the arbitration or to take any steps in the country of the seat of what they maintain to be an invalid arbitration leading to an invalid award against them. The party initiating the arbitration must try to enforce the award where it can. Only then and there is it incumbent on the award debtor denying the existence of any valid award to resist enforcement. It was also said (at [28]) that there is nothing in the text containing any suggestion that a person resisting recognition or enforcement in one country has any obligation to seek to set aside the award in the other country where it was made. See also [103] per Lord Collins JSC.
  4. What Lord Mance JSC had said on this point in Dallah was endorsed by Hansen JA and Kyrou AJA in IMC Aviation at [320]. The same position has been recognised in Singapore: PT First Media TBK v Astro Nusantara International BV [2014] 1 SLR 372; [2013] SGCA 57 (PT First Media SG) at [71] per Menon CJ for the Court, adopted in Liaoning Zhongwang Group Co Ltd v Alfield Group Pty Ltd [2017] FCA 1223 at [117]-[118] per Gleeson J.
  5. The position is, however, different where the court at the seat of the arbitration has itself rejected a challenge to the award.  It will generally be inappropriate for the enforcement court of a Convention country to reach a different conclusion on the same question of asserted defects in the award as that reached by the court of the seat of arbitration: Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] FCAFC 109; 304 ALR 468 at [65] per Allsop CJ, Besanko and Middleton JJ. The Court in Gujarat endorsed the observations of Coleman J in Minmetals Germany GmbH v Ferco Steel Ltd [1999] 1 All ER (Comm) 315 (at 331) that outside an exceptional case such as where the powers of the supervisory court are so limited that they cannot intervene even where there has been an obvious and serious disregard for basic principles of justice by the arbitrators or where for unjust reasons, such as corruption, they decline to do so, any suggestion that procedural defects in the conduct of the arbitration which have already been considered by the supervisory court should be reinvestigated by the enforcing court is to be most strongly deprecated.
  6. In Hebei, the Hong Kong Court of Final Appeal similarly held (at [84]-[85]) that the New York Convention recognises that although an award may be valid by the law of the place where it is made, its making may be attended by such a grave departure from basic concepts of justice as applied by the court of enforcement that the award should not be enforced. Thus, the refusal by a court of supervisory jurisdiction to set aside an award does not debar an unsuccessful applicant from resisting enforcement of the award in the court of enforcement. It is implicit in the reasoning that the circumstances in which opposition to enforcement will be successful in such an event are necessarily constrained.
  7. In PT First Media TBK v Astro Nusantara International BV [2018] HKCFA 12; [2018] 3 HKC 458 (PT First Media HK), awards made in Singapore and subject to the supervision of the courts in Singapore had been denied enforcement in Singapore on the fundamental basis that the arbitrators lacked jurisdiction, but they had not been set aside there (see PT First Media SG referred to above). Indeed, there had been no application there to set them aside. When enforcement was sought in Hong Kong, the award debtors resisted enforcement in reliance on the lack of jurisdiction of the arbitrators and the award creditor countered by arguing that since the awards had not been set aside in Singapore they were still a valid source of debt. The Court of Final Appeal (at [75] and [79]) reaffirmed the principle that absent considerations such as waiver an award debtor has a choice whether to actively pursue setting aside the award in the supervisory court or passively resisting enforcement in the enforcing court. Thus the failure to seek to set aside the awards in Singapore was no obstacle to resisting their enforcement in Hong Kong.
  8. The present case fits neither the paradigm case of the award debtor having a choice between whether to challenge the award at the seat or resist enforcement nor the case where the award has been endorsed by the supervising court at the seat, by rejecting a challenge to it, and the award debtor seeks to challenge it again at the enforcement stage.  In the first case there is no supervisory court endorsement of the award and in the second there is, whereas in the present case there is involvement of the supervisory court at the stage of appointment of the arbitral tribunal but no endorsement of the award.  ECQ consequently relies on comity rather than the structure of the common international regime for the recognition and enforcement of arbitral awards to justify this Court’s acceptance of the Qatari Court’s appointment of the tribunal notwithstanding the Qatari Court’s misapprehension already identified.
  9. In CSR Ltd v Cigna Insurance Australia Ltd [1997] HCA 33; 189 CLR 345 at 395-396, per Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ, citing Hilton v Guyot 159 US 113 (1895) at 163-164, it was recognised that “comity”, in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and goodwill, on the other. It is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws. See also Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International NV [2007] FCAFC 43; 157 FCR 558 at [18]-[19] per Black CJ, Allsop and Middleton JJ. Thus, comity is not an uncritical, automatic or unexamined recognition of a foreign court’s process or judgment; it is nuanced and depends on the nature of what is sought to be recognised, the purpose for which recognition is sought, domestic rights and the ramifications of recognition. See Allsop JLB, “Comity and commerce” (Address to the 16th Conference of Chief Justices of Asia & the Pacific, Sydney, 8 November 2015) [43].
  10. There is no detraction from the principle of comity, so understood, by not enforcing the award in this case on the basis that the Qatari Court acted on a misapprehension of the true position in appointing the arbitral tribunal. There are several considerations that lead to that conclusion. First, there is no disrespect of, or lack of goodwill towards, the Qatari Court to recognise that it acted upon a misapprehension of what we now know the facts to be. Secondly, any exercise of jurisdiction of the Qatari Court to appoint arbitrators to the dispute of the parties rested on the parties’ agreement, and since what they agreed was not followed the basis for the exercise of that jurisdiction was lacking; the failure goes to the very heart of the decision that ECQ would have this Court recognise. Thirdly, Hub did not invoke the process of the Qatari Court the result of which it is now seeking to resile from; it agreed a particular procedure for the commencement of arbitral proceedings and the appointment of an arbitral tribunal and when that was not followed it ignored what was subsequently done to appoint the arbitral tribunal, which it was entitled to do. Fourthly, Hub has the right (subject to the question of discretion which I will come to) under the law of Australia to not have enforced against it here an arbitral award by an arbitral tribunal that was not composed in accordance with what it had agreed. Section 8(5)(e) of the IAA is a law of the Commonwealth of Australia that the Court cannot merely brush aside in the interests of comity; the Court is duty bound to apply it.
  11. Support for that approach is to be found in the decision of the United States Court of Appeals for the Second Circuit in Encyclopaedia Universalis SA v Encyclopaedia Britannica Inc, 403 F 3d 85 (2nd Cir, 2005).  The arbitration agreement provided for each party to appoint an arbitrator and for them to jointly appoint the third arbitrator, but in the event of disagreement between them the third arbitrator would be appointed by the President of the Tribunal of Commerce of Luxembourg (apparently a chamber of the Luxembourg District Court) at the request of the arbitrator who was first to make such a request.  Encyclopedia Universalis SA (EUSA) appointed Danziger and Encyclopaedia Britannica Inc (EB) appointed Layton, and they conferred on various matters but not on the identity of the third arbitrator.  Then, Danziger wrote to the President of the Tribunal stating that he and Layton had been unable to agree on a third arbitrator.  The Presiding Judge of the Tribunal appointed the third arbitrator, Decker.  There was then a dispute about the appointment of the third arbitrator which went to a hearing before the Presiding Judge who ordered that Decker proceed with the arbitration.  EB and Layton did not participate in the ensuing arbitration proceeding which produced an award in favour of EUSA.
  12. EUSA then sued in the Southern District of New York seeking recognition and enforcement of the arbitration award pursuant to the New York Convention.  The Second Circuit agreed (at 91) with the District Court that “the Tribunal’s premature appointment of Decker irremediably spoiled the arbitration process” – it was premature because Danziger had sought the appointment before he and Layton had reached disagreement on it.  It was held that courts must not overlook agreed-upon arbitral procedures in deference to the strong public policy in favour of international arbitration, and that the New York Convention required that the parties’ commitment to the form of their arbitration be respected.  On that basis, the District Court’s refusal to enforce the award was upheld.  That conclusion was reached notwithstanding that the arbitral tribunal had been appointed by the Tribunal de Commerce in Luxembourg after a hearing at which both EB and EUSA were represented by counsel.  The District Court concluded that the defect in the proceedings was not attributable to any decision made by the Tribunal, but rather to the premature involvement of the Tribunal as a result of Danziger’s actions: Encyclopaedia Universalis SA v Encyclopaedia Britannica Inc, 03 Civ 4363 (SAS) (S.D.N.Y. Dec. 3, 2003) at 10.
  13. The present case is similar.  The defect in the proceeding is not attributable to the decision of the Qatari Court to appoint the arbitral tribunal, but to the premature involvement of the Qatari Court at the suit of ECQ.
  14. For these reasons, Hub’s reliance on s 8(5)(e) of the IAA is not answered by reliance on any regularising effect of the Qatari Court’s judgment.Issue 2: the discretion
  15. The essential questions are whether, as a matter of discretion, the award can or should be enforced notwithstanding that, first, the arbitration proceeding was conducted in Arabic, not English, and, second, the arbitral tribunal was prematurely appointed by the Qatari Court, both contrary to the procedure agreed by the parties.
  16. As indicated, the primary judge concluded in relation to the arbitral proceeding not being conducted in English, which her Honour found to have been a ground for non-enforcement that was established, that as a matter of discretion the award should nevertheless be enforced.  The exercise of that discretion is challenged in the appeal in which House v The King [1936] HCA 40; 55 CLR 499 error is required to be established, i.e., that the primary judge acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect the decision, mistook the facts, or did not take into account some material consideration (at 505 per Dixon, Evatt and McTiernan JJ).
  17. The primary judge also said that had she found that the ground of non-enforcement that the arbitral tribunal was not composed in accordance with the agreement of the parties had been established, she would nevertheless have exercised the discretion to enforce the award.  Since the primary judge did not, in fact, exercise the discretion, because of the conclusion that the ground for non-enforcement had not been established, this Court, on finding that that ground is established, must exercise the discretion for itself – no question arises as to finding an error with the exercise of the discretion by the primary judge in accordance with the principles expressed in House v The King.
  18. Article V(1) of the New York Convention provides that recognition and enforcement of the award “may be refused” on one or more of the enumerated grounds. Article V(2) similarly provides that recognition and enforcement of an arbitral award “may also be refused” on one or other of the grounds then set out. Article 36(1) of the Model Law and ss 8(5) and (7) of the IAA use the same permissive language of “may”. It is that language that is the source of the contention that there vests a discretion in the enforcing court to enforce an award even if one of the enumerated grounds for non-enforcement is made out, i.e., the court may, not must, refuse to enforce an award if a ground for non-enforcement is established. In domestic statutory interpretation, a provision which uses the word “may” is prima facie permissive: Herzfeld P and Prince T, Interpretation (2nd ed, Lawbook Co, 2020) [4.220] and the authorities there cited.
  19. In TCL FCAFC, this Court stated (at [55]), relevantly, that an international commercial arbitration award will not be denied recognition or enforcement under Art V of the New York Convention “unless there is demonstrated real unfairness or real practical injustice in how the international litigation or dispute resolution was conducted or resolved, by reference to established principles of natural justice or procedural fairness”. Although referred to by Hub in argument, those statements do not speak generally to the discretion to enforce an award even where a ground for non-enforcement is made out. Rather, they were made in the context of the public policy ground for non-enforcement which, uniquely, takes account of what might otherwise be discretionary factors in its assessment of the ground on non-enforcement. This is apparent from the Court’s statement (at [111]) that it is not profitable to seek to differentiate between the engagement of public policy under the relevant articles and a supposedly separate and a later question whether to exercise the discretion to enforce.
  20. Hub is correct in submitting that there is no authoritative statement in Australia of the nature of the discretion to enforce an award that is conveyed by ss 8(5) and (7) of the IAA. It was accepted in TCL FCAFC (at [48]) that there is a discretion to enforce, and that is supported by the use of “may” as indicated. For the reasons already explained, it is necessary to look to international authorities in reaching a view on the nature of the discretion.
  21. Dr van den Berg in The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation (Kluwer Law International, 1981) p 265, with reference to the permissive language of “may be” in both the first and second paragraphs of Art V of the New York Convention, said that for the first paragraph it means that even if a party against whom the award is invoked proves the existence of one of the grounds for refusal of enforcement, the court still has a certain discretion to overrule the defence and to grant the enforcement of the award.  The learned author reasoned that such overruling would be appropriate, for example, in the case where the respondent can be deemed to be estopped from invoking the ground for refusal.  For the second paragraph, it would mean that a court can decide that, although the award would violate domestic public policy of the court’s own law, the violation is not such as to prevent enforcement of the award in international relations.
  22. In Dardana Ltd v Yukos Oil Co [2002] EWCA Civ 543; [2002] 2 Lloyd’s Rep 326, Mance LJ (at [8] and [18], with whom Thorpe LJ and Neuberger J agreed) was not impressed with the suggestion that there is no discretion to enforce an award even where one of the grounds for non-enforcement is established, but, citing the passage from van den Berg referred to above, held that it is not “an open discretion”:

    The use of the word “may” must have been intended to cater for the possibility that, despite the original existence of one or more of the limited circumstances, the right to rely on them had been lost, by for example another agreement or estoppel.

  23. In Hebei the Hong Kong Court of Final Appeal considered the discretion to enforce an award even where a ground for non-enforcement had been made out. Sir Anthony Mason NPJ, with whom Li CJ and Ching and Bokhary PPJ agreed, agreed (at [93]) with Kaplan J in China Nanhai Oil Joint Service Corp Shenzhen Branch v Gee Tai Holdings Co Ltd [1994] HKCFI 215; [1994] 3 HKC 375 at [48]-[49] that the New York Convention confers a residual discretion on the court of enforcement to decline to refuse enforcement, even if a ground for refusal might otherwise be made out. That arises from the use of the permissive “may” in Art V of the Convention. In China Nanhai the discretion to enforce was exercised on the basis that the established irregularity was not prejudicial, or made no difference, as had been the position in Paklito Investment Ltd v Klockner (East Asia) Ltd [1993] 2 HKLR 39, also per Kaplan J.
  24. In Hebei it was said (at [94]) that whether the respondent’s conduct which justified the exercise of the discretion was described as giving rise to an estoppel, or a breach of the bona fide principle, or simply as a breach of the principle that a matter of non-compliance with the governing rules shall be raised promptly in the arbitration, was beside the point. It was said that on any of those bases, the respondent’s conduct in failing to raise in the arbitration its objection to unilateral communications having been made to the Chief Arbitrator was such as to justify the court of enforcement in enforcing the award. The factual basis for that (which was described at [104]) was that although the respondent had been aware of the irregularity at an early stage it had failed to take various steps that might have rectified the irregularity, including applying for the removal of the Chief Arbitrator, and had simply proceeded with the arbitration as if nothing untoward had happened.
  25. In PT First Media HK, the Court of Final Appeal held (at [42]) that the absence of a valid arbitration agreement between the parties is a fundamentally important factor militating against discretionary enforcement. It was thus concluded (at [44]) that the primary judge had misdirected himself by failing to take into account the fundamental defect that the awards were sought to be enforced against parties who were not parties to the arbitration agreement in respect of whom the awards were made without jurisdiction, and that had he taken this into account he could only have exercised his discretion to refuse enforcement.
  1. In Dallah, where the issue was whether the award debtor was a party to the arbitration agreement, Lord Mance JSC referred (at [67]) with approval to what he had said in the Court of Appeal in Dardana (referred to at [94] above) with regard to the discretion to enforce being restricted and to cover, as possible examples, circumstances of another agreement or estoppel. His Lordship said (at [68]) that absent some fresh circumstance such as another agreement or an estoppel, it would be a remarkable state of affairs if the word “may” enabled the court to enforce or recognise an award which it found to have been made without jurisdiction. It was also said (at [69]) that general complaints that the respondent did not behave well, unrelated to any known legal principle, were equally unavailing in a context where the respondent had proved that it was not party to the arbitration agreement.
  2. In the final sentence of [69] Lord Mance JSC said: “There is here no scope for reliance upon any discretion to refuse enforcement which the word ‘may’ may perhaps in some other contexts provide.”  It seems that what must have been meant is that “there is here no scope for reliance upon any discretion to refuse non-enforcement which the word ‘may’ may in some other contexts provide.”
  3. Lord Collins JSC (at [127]) also referred to what Mance LJ had said in Dardana about there being no arbitrary discretion and that the use of the word “may” was designed to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima face right to have an award set aside.  In addition to the example of estoppel that had been given in Dardana, Lord Collins JSC gave as another possible example where there had been no prejudice to the party resisting enforcement, and added that “it is not easy to see how that could apply to a case where a party had not acceded to an arbitration agreement.”
  4. It is to be noted that Gary Born in International Commercial Arbitration (3rd ed, Kluwer Law International, 2021) vol III p 3746 [§26.03[B][6]] reasons (with reference to Dallah) that it would be exceptional to recognise an award in cases where a recognition court (i.e., an enforcing court) concludes that no valid arbitration agreement was concluded or that the dispute exceeds the scope of the arbitration agreement, and also that it is difficult to see how awards that violate applicable public policy could ordinarily be subject to discretionary recognition.  This is the point made in TCL FCAFC (referred to at [91] above) and is presumably because any discretionary considerations would already have been taken into account in considering whether enforcement would be contrary to public policy. The learned author contrasts such cases with cases involving procedural irregularities where considerations of materiality, prejudice, waiver and estoppel may make recognition appropriate notwithstanding a technical basis for non-recognition.
  5. As already identified, the New York Convention has a pro-enforcement bias.  That finds expression in the narrow and limited grounds for non-enforcement which the award debtor must establish.  There is, however, no justification in the text and structure of the Convention to justify a broad-ranging or unlimited discretion to enforce even when one of the narrow grounds for non-enforcement is made out.  There is, equally, no justification in the text and structure to conclude that there is no discretion, or to limit it to such an extent that in cases of irregularity that has caused no material prejudice the court must nevertheless not enforce the award.
  6. Relevantly, the parties agreed by Art 50 of their contract that the English language would be the ruling language of the contract and that all matters relating to the contract would be in English, but contrary to that the arbitration was conducted in Arabic. There is no challenge to the primary judge’s conclusion that that was an irregularity within the meaning of s 8(5)(e) of the IAA as the arbitral procedure was not in accordance with the agreement of the parties. Contrary to the submission by Hub, in my view the primary judge was correct to conclude that the irregularity had no prejudice to Hub because it had received notices of the arbitration in English and it had elected not to participate. Such immateriality of the irregularity would fully justify the exercise of the enforcement discretion notwithstanding the irregularity. Hub’s submissions to the contrary, and in particular that the language irregularity affected the “structural integrity of the arbitration”, are not accepted. No House v The King error is established in the exercise of the discretion in relation to the language ground.
  7. Insofar as the other ground is concerned, the composition of the arbitral tribunal other than in accordance with the agreement of the parties is fundamental to the structural integrity of the arbitration; it strikes at the very heart of the tribunal’s jurisdiction.  That is a fundamental matter, much like in Dallah and PT First Media where the award debtor was not party to the arbitration agreement, such that the discretion to nevertheless enforce was not available.  Equally fundamental was a failure to give notice of the arbitration which precluded the exercise of the discretion to nevertheless enforce the award: Beijing Jishi at [155]-[156]. I would accordingly not exercise the discretion to enforce the award. ECQ’s reliance on the conduct of Hub in not responding to the Qatari Court proceeding or the notices from the arbitral tribunal, in divesting itself of its assets (even if established, on which no finding is required to be made) and in falsely contesting in the proceeding before the primary judge that it had received various notices, is to no avail in the circumstances.Conclusion
  8. In the result, the appeal should be allowed.  The orders of the primary judge on 26 August 2020 should be set aside and substituted with orders dismissing ECQ’s application to enforce the award.  Because most of Hub’s grounds for resisting enforcement, in particular those that were evidence-heavy such as that it received no notice of the arbitration proceeding, failed before the primary judge whose findings thereon were not challenged on appeal, it is not clear that Hub should have the costs of the proceeding at first instance.  I would therefore invite the parties to make brief written submissions on these costs.
  9. Although there is no immediately apparent reason why the costs of appeal should not follow the event, we did not hear the parties on the costs of the appeal so I would give them the opportunity to make written submissions on these costs as well.
  10. I have also read the additional remarks of the Chief Justice with which I agree.
  11. In the result, I would make the following orders:

    (1)          The appeal be allowed.

    (2)          The orders and declaration of the Court on 26 August 2020 in NSD 94 of 2020 be set aside and substituted with an order that the proceeding be dismissed.

    (3)          The parties file and serve written submissions of no more than five pages on the questions of costs of the proceedings below and on appeal, which questions will be decided on the papers unless otherwise ordered, as follows:

    (a)          the appellant within seven days of these orders; and

    (b)          the respondent within seven days thereafter.

     

I certify that the preceding ninety-six (96) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.

 

Associate:

Dated:       25 June 2021