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

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

Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. (No 3) [2021] FCAFC 112 (25 June 2021) (Allsop CJ, Perram and Moshinsky JJ)

FEDERAL COURT OF AUSTRALIA

 

Case Name: Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. (No 3) [2021] FCAFC 112 (25 June 2021) (Allsop CJ, Perram and Moshinsky JJ)
Medium Neutral Citation: [2021] FCAFC 112
Hearing Date(s): 24 August 2020
Date of Orders: 1 February 2021
Decision Date:  1 February 2021
Before: ALLSOP CJ, PERRAM AND MOSHINSKY JJ
Decision: THE COURT ORDERS THAT:

 

1. The appeal be allowed.

2. Orders 1, 2, 3 and 4 of the orders made on 24 February 2020 are set aside.

3. The appeal is stood over to a date to be fixed for further argument on the form of order for the recognition of the award and otherwise for the disposition of the appeal including on the question of costs.

4. The parties should confer and formulate draft orders providing for the delivery of written submissions on these issues with a page limit of 10 pages per submission.

 

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

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

 

PRIVATE INTERNATIONAL LAW – foreign state immunity – where foreign state respondent asserts sovereign immunity – interaction between s 9 of the Foreign States Immunities Act 1985 (Cth) (‘Immunities Act’) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) which is given the force of law by s 32 of the Arbitration Act – where s 9 of the Immunities Act provides that a foreign state is immune from the jurisdiction of the courts of Australia in a proceeding – where s 10 of the Immunities Act provides that a foreign state is not immune in a proceeding in which it has submitted to jurisdiction whether by agreement or otherwise – whether by Art 54(2) of the ICSID Convention the foreign state respondent has agreed to submit itself to the jurisdiction within the meaning of s 10 of the Immunities Act

 

PUBLIC INTERNATIONAL LAW – foreign state immunity – interpretation of the ICSID Convention – whether the ICSID Convention excludes any claim for foreign state immunity in proceedings for the recognition and enforcement of an award – meaning of recognition and enforcement in Art 54 and execution in Art 55 – where Art 55 provides that nothing in Art 54 shall be construed as derogating from the law in force in any Contracting State in relation to immunity from execution

Legislation Cited: Foreign States Immunities Act 1985 (Cth) Pts II, IV; ss 3, 7, 9, 10International Arbitration Act 1974 (Cth) Pt IV; ss 32, 34, 35
Judiciary Act 1903 (Cth) s 39B
Federal Court Rules 2011 (Cth) r 36.32

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)

Convention on the Settlement of Disputes between States and Nationals of Other States. Opened for signature 18 March 1965. 575 UNTS 159 art 50, 51, 54, 55, 64. (entered into force 14 October 1966)

The Energy Charter Treaty. Opened for signature 17 December 1994. 2080 UNTS 95 art 26. (entered into force 16 April 1998)

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)

Vienna Convention on the Law of Treaties. Opened for signature 23 May 1969. 1155 UNTS 331 arts 4, 33. (entered into force 27 January 1980)

Cases Cited: Benvenuti & Bonfant v People’s Republic of the Congo (Cour d’appel, Paris, 26 June 1981) 1 ICSID Reports 368; 108 Journal du Droit International 843

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424
Coulton v Holcombe [1986] HCA 33; 162 CLR 1
Lahoud v The Democratic Republic of Congo [2017] FCA 982
Liberian Eastern Timber Corporation (LETCO) v Liberia, (United States District Court for the Southern District of New York, 12 December 1986) 2 ICSID Reports 383

Micula v Romania [2020] UKSC 5; 1 WLR 1033
O’Brien v Komensaroff [1982] HCA 33; 150 CLR 310
Plaintiff S157/2002 v Commonwealth of Australia [2003] HCA 2; 211 CLR 476
PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; 247 CLR 240
Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16; 209 CLR 372
Société Ouest Africaine des Bétons Industriels (SOABI) v Senegal (Cour de cassation, 11 June 1991) 2 ICSID Reports 341; 118 Journal du Droit International 1005

TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533
Thiel v Federal Commissioner of Taxation [1990] HCA 37; 171 CLR 338
Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; 201 FCR 535
University of Wollongong v Metwally (No 2) [1985] HCA 28; 60 ALR 68

Kronke H, Nacimiento P, Otto D, Port NC (Eds), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (Kluwer Law International, 2010)

Schreuer CH, The ICSID Convention: A Commentary (2nd ed, Cambridge University Press, 2009)

van den Berg AJ, The New York Arbitration Convention of 1958 (Kluwer 1981)

Texts Cited: NIL
DIVISION: General Division
Parties: BETWEEN:

KINGDOM OF SPAIN

Appellant

 

AND:

INFRASTRUCTURE SERVICES LUXEMBOURG S.A.R.L.

First Respondent

 

ENERGIA TERMOSOLAR B.V.

Second Respondent

Representation: Counsel for the Appellant: Mr I M Jackman SC with Mr M R Tyson

Solicitor for the Appellant: Squire Patton Boggs

Counsel for the Respondents: Mr B Walker SC with Mr J Hogan-Doran and Mr C Brown

Solicitor for the Respondents: Norton Rose Fulbright

Counsel for the Intervener: Mr K Dharmananda SC with Mr L Firios

Solicitor for the Intervener: Lipman Karas

File Number(s): NSD 645 of 2020
Publication Restriction: NIL
Appeal from:  Eiser Infrastructure Ltd v Kingdom of Spain [2020] FCA 157

 

 

JUDGMENT

ALLSOP CJ:

  1. I have read the reasons for judgment to be published of Perram J.  I agree with the orders that his Honour proposes.  Subject to the following largely by way of elaboration, I agree with his Honour’s reasons. The orders to which the applicant was entitled were those that properly reflected the outcome of a recognition proceeding and that did not involve any form of execution contemplated by Arts 54(3) and 55 of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) and Part IV of the Foreign States Immunities Act 1985 (Cth). I agree that the parties should be heard on the proper form of the order to be made to achieve that outcome.
  2. As the reasons of the learned primary judge and of Perram J make clear the principal difficulty at the centre of the debate is linguistic or semantic. That is not to minimise the importance of the question: far from it. The ICSID Convention is not only an important international convention underpinning and supporting the flow of investment capital around the world, but it is also a law of the Parliament by force of s 32 of the International Arbitration Act 1974 (Cth). The confusion and difficulty capable of being generated by attempts to agree upon legal procedure amongst different nations with different legal systems was evident in the negotiation and creation of 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 (the New York Convention) only a handful of years before the ICSID Convention.  That negotiation was well known to the negotiators and drafters of the ICSID Convention.  The distinguished commentator and practitioner Albert Jan van den Berg has remarked that various of the proposals for the enforcement procedure for article III of the New York Convention created “a Babel-like confusion at the Conference”: van den Berg, The New York Arbitration Convention of 1958 (Kluwer 1981) at 235. Justice Perram refers to the “interpretive carnage” of the discussion dealt with deftly by Professor Schreuer as referred to in Perram J’s reasons at [93].
  3. Recognition and enforcement of an arbitral award are distinct, but related concepts.  The linguistic debate as to whether execution is synonymous with enforcement or is a concept within it need not, it seems to me, be debated or resolved as a question of fixed content, for all purposes.  We are dealing here with Arts 54 and 55 of the ICSID Convention.  As Professor Schreuer’s authoritative work (The ICSID Convention: A Commentary (Cambridge University Press, Second Edition)) makes clear, the related aims of Arts 54 and 55 were clear.
  4. Article 54 was intended to be available against both a State and an investor.  The inclusion of enforcement in article 54 was to give recourse against the defaulting investor: Schreuer op cit at p 1119 [7]. Professor Schreuer says that it “was considered highly unlikely that the State party to the Convention would not carry out its treaty obligations … to comply with an award”: ibid.  Nevertheless, articles 54(1) and (2) and the drafts thereof refer and referred to recognition and enforcement against the parties in equal terms: ibid.
  5. The preservation of State immunity from execution was taken for granted, though non-compliance by a State with an award was regarded as extremely unlikely: Schreuer op cit p 1152 [3]. Article 55 left the matter to the place of attempted execution or enforcement in that sense.
  6. The obligation to recognise an award under article 54 was unequivocal and unaffected by questions of immunity from execution.  As the reasons of Perram J and as the discussion of Professor Schreuer (op cit pp 1128–1134) both show, sovereign immunity from execution (Arts 54(3) and 55) does not arise at the point of recognition.
  7. If a proceeding is commenced in a competent court seeking a form of order that will permit or facilitate enforcement of, or execution procedures for, pecuniary obligations imposed by an award as if the award were a final judgment of the court, to the extent they are lawfully available, is that proceeding to be characterised as enforcement or execution (if there be a difference) or as recognition?
  8. I do not see that it can be other than a species of recognition and that it cannot be execution.  The order (whether in terms of that made by the United States District Court in Liberian Eastern Timber Corporation (LETCO) v Liberia, United States District Court for the Southern District of New York (12 December 1986) 2 ICSID Reports 383 or by Foster J in Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; 201 FCR 535) is one which gives the required recognised status to the award in the domestic firmament: It is to be seen as (recognised as) equivalent to a domestic judgment and is to be enforceable as such. This is a procedure for making the award operative within the domestic legal system. In many countries this is referred to as exequatur.  It enables steps thereafter to be taken to obtain satisfaction of the pecuniary obligations under the award whether by seizure or sale or sequestration of property, or appointment of a receiver to property, or otherwise.  It is logically and practically anterior to such later steps which can only be characterised as execution.  That (as a matter of language) an exequatur order, or an order that the award be enforceable as if it were a judgment of the court, or an order that judgment be entered in an amount of the award, could meaningfully be described in a particular context as an order being part of the process of enforcement (at its commencement, or as its point of commencement) does not mean that it is to be characterised as execution, or as a step or a procedure to which Arts 54(3) and 55 speak.
  9. The relationship between recognition and enforcement can be seen by the wording of the ICSID Convention itself and the International Arbitration Act.  Whether the French and Spanish languages have a penumbra or range of meaning in the words exécution and ejecutar to encompass a non-execution procedure of enforcement would be a matter of evidence.  I am unconvinced that the question of resolution of the meaning of the English, French and Spanish texts can be done in ignorance of the content by way of evidence of two of the three languages.  But it does not matter.  The proceeding which this Court has before it, which is untouched by foreign State immunity from execution, is one to obtain an order equivalent to exequatur: a form of recognition of the status of the award as a judgment of the Court or as equivalent to a judgment of the Court so that it may be, henceforth, enforced by way of pecuniary obligations as if it were such a judgment, subject to the Kingdom of Spain’s rights of immunity as to execution recognised by Arts 54(3) and 55, as part of the International Arbitration Act. In point of characterisation that is a proceeding to recognise the award in respect of which proceeding Spain has, by acceding to the ICSID Convention, submitted to the jurisdiction of the Court and waived immunity under s 10 of the Foreign States Immunities Act 1985 (Cth).
  10. I agree with Perram J that the orders made at first instance may go beyond what is an appropriate reflection of the substantive rights of the applicant under Art 54.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop.

 

Associate:

Dated:       1 February 2021

 

REASONS FOR JUDGMENT

PERRAM J:

 

I.  INTRODUCTION

 

  1. The Respondents obtained an award against the Appellant Kingdom under the provisions of an international treaty to which Spain and Australia are both Contracting States, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Opened for signature 18 March 1965. 575 UNTS 159 (entered into force 14 October 1966) (‘the ICSID Convention’).  The dispute between them related to the investment by the Respondents of EUR139,500,000 into solar power generation projects within the territorial confines of Spain.  They had been encouraged to do so by a subsidy program put in place by Spain which was subsequently withdrawn.  The Respondents alleged that the withdrawal of the subsidy program was a contravention of another treaty, The Energy Charter Treaty. Opened for signature 17 December 1994. 2080 UNTS 95 (entered into force 16 April 1998) (‘the ECT’).  Pursuant to Art 26(3)(a) of the ECT Spain agreed with the other Contracting States to that treaty that it gave its unconditional consent to the submission of the dispute to international arbitration and, by Art 26(4)(a) it agreed to an international arbitration under the auspices of the ICSID Convention.
  2. The arbitrators eventually awarded the Respondents EUR101,000,000 with interest. The Respondents then applied to this Court at first instance for a number of orders including an order that Spain pay it that amount with interest. Spain filed a notice contesting the jurisdiction of the Federal Court of Australia on the basis that it was immune from suit as a foreign state under s 9 of the Foreign States Immunities Act 1985 (Cth) (‘the Immunities Act’). It was accepted by both parties that the Immunities Act is the sole basis for foreign state immunity in this country and as such exhausts the common law: PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; 247 CLR 240 at [8] per French CJ, Gummow, Hayne and Crennan JJ.
  3. There is an exception to that immunity where a foreign state has agreed by treaty to submit itself to jurisdiction.  The Respondents argued that by acceding to Art 26 of the ECT and, more particularly, to the ICSID Convention, Spain had agreed with the Contracting States to the ICSID Convention (including Australia) to submit itself to the jurisdiction of this Court.  The issues in this appeal really only concern the operation of the ICSID Convention and little reference will be made to the ECT in the reasons which follow.
  4. At first instance, it was common ground between the parties that the question of whether Spain had agreed to submit itself to the jurisdiction of this Court was the only substantive issue and would determine the outcome of the application.  The primary judge accepted that Spain’s accession to the ICSID Convention constituted an agreement by treaty to submit itself to the Court’s jurisdiction and his Honour therefore rejected Spain’s plea of foreign state immunity.  His Honour made the following orders:

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

    (2)          The respondent pay the applicants €101,000,000;

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

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

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

  5. Spain now appeals from those orders.  As in the Court below, the principal question is whether Spain’s accession to the ICSID Convention constitutes a submission to the jurisdiction of the Federal Court.  Despite that, Spain submitted that Art 26 of the ECT was unlawful under European law.  However, this orphan submission does not appear connected to any question relating to foreign state immunity.  Spain did not advance an argument at trial or on appeal that this Court should refuse to recognise the Respondents’ award on such a jurisdictional basis.  I therefore disregard this submission.
  6. Returning to the actual issue – foreign state immunity – this turns on the operation of the Immunities Act and is a question of federal statute law. The relevant provisions are s 9 (which confers the immunity), s 10(1) and (2) (which create exceptions to the immunity) and s 3 (which contains two relevant definitions). They are as follows:

    3  Interpretation

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

    agreement means an agreement in writing and includes:

    (a)       a treaty or other international agreement in writing; and

    (b)       a contract or other agreement in writing.

    proceeding means a proceeding in a court but does not include a prosecution for an offence or an appeal or other proceeding in the nature of an appeal in relation to such a prosecution.

                General immunity from jurisdiction

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

    10  Submission to jurisdiction

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

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

  1. The proceeding at first instance was a ‘proceeding’ within the meaning of the definition in s 3 so the prima facie position was that s 9 afforded Spain the immunity it asserts. Section 9, however, is expressed to be subject to this Act which makes the existence of the immunity defeasible to any exception elsewhere provided for in the Immunities Act. One such exception appears in s 10(1) which extinguishes the immunity of a foreign state where it has submitted itself to jurisdiction. Section 10(2) expands upon that concept by stipulating that a foreign state’s submission to jurisdiction may be evidenced by an ‘agreement’. The definition of ‘agreement’ in s 3 clarifies what would otherwise be obvious in the case of a nation state viz that its agreement may be evidenced by a treaty to which it has acceded.
  2. It is in the light of these provisions that the Respondents submitted below and submit again in this Court that the ICSID Convention is an agreement within the meaning of s 10(2). Two articles of the ICSID Convention are principally relevant, Art 54 and Art 55. They are (in the English version of the text) as follows:

    Article 54

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

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

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

    Article 55

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

  3. The Respondents contend that the effect of Art 54(2) is that Spain has expressly agreed that a party with the benefit of an award under the ICSID Convention may apply to a ‘competent court’ for the recognition of the award and that the Federal Court is such a court. They submit that the maintenance by Spain of an entitlement to rely upon foreign state immunity in a recognition proceeding before a ‘competent court’ is incompatible with its agreement to Art 54(2). As such, so the argument runs, Spain must be taken to have agreed by treaty to submit itself to the jurisdiction of this Court within the meaning of s 10(2).
  4. Spain does not dispute that the Federal Court is a ‘competent court’ within the meaning of Art 54(2), a path altogether foreclosed to it by s 35(3) of the International Arbitration Act 1974 (Cth) (‘the International Arbitration Act’) (‘The Federal Court of Australia is designated for the purposes of Article 54’). However, Spain does maintain that it is entitled to rely on the immunity conferred by s 9. Why? There are several steps in this, Spain’s principal argument. The first is the contention that the Respondents’ proceeding is to be understood as a proceeding to ‘enforce’ the Respondents’ award within the meaning of Art 54(2). Next Spain submits that the word ‘execution’, where it appears in Art 55, must be understood as including a proceeding to ‘enforce’ an award (the reasons for this are, to an extent, complex and discussion of this issue may be postponed for now). In any event, it matters because if Spain be correct, it has the consequence that Art 54(2) must be read so that it does not derogate from any Australian law relating to the immunity of Spain from enforcement in that sense. So construed, Spain submits that Art 54(2) cannot evidence any agreement on its part that it will not rely upon its immunity under s 9. Since Art 54(2) should not be construed as amounting to such an agreement in the case of a proceeding to enforce an award, it must follow – says Spain – that it cannot have agreed either to waive its immunity by accession to Art 54(2) or, consequently, to have submitted itself to jurisdiction within the meaning of s 10(1) and (2). Since that exception is not engaged it must therefore remain entitled to rely upon the immunity conferred by s 9.
  5. Alternatively, as its secondary argument, Spain submits that even if this Court concludes that ‘execution’ in Art 54(3) and Art 55 does not mean ‘enforcement’, nevertheless, the question of the proper construction of Art 55 can only be definitively resolved by the International Court of Justice.  Until it is so determined by that court, Spain submits that its own interpretation of ‘execution’ is at least arguable so that its accession to Art 54 and Art 55 cannot represent its clear agreement to submit to jurisdiction.
  6. I would reject Spain’s principal argument for two cumulative reasons. The first relates to the proper construction of Art 54(2). It distinguishes recognition proceedings from enforcement proceedings and, further, does so in a way which is dichotomous. Whether Art 55 applies to proceedings for execution only (as the Respondents submit) or enforcement as well (as Spain submits), it has no application to recognition proceedings. In the context of such a proceeding Spain has agreed with Australia that the Respondents may apply to the Federal Court for recognition of their award. In proceedings of that kind, it must necessarily be taken to have agreed not to rely upon the immunity from suit it would otherwise have as a foreign state. In recognition proceedings there is necessarily therefore an ‘agreement’ by Spain to submit to jurisdiction within the meaning of s 10(2); the exception to s 9 provided for by s 10(1) is consequently engaged; and the immunity conferred by s 9 can no longer be extant.
  7. The second reason for rejecting Spain’s principal argument relates to the correct characterisation of the Respondents’ proceeding in the Court below.  The proceeding in the Court below was a recognition proceeding.  Once it is so characterised, the dichotomy in Art 54(2) observed in the preceding paragraph necessitates the conclusion, contrary to Spain’s submission, that the proceeding in the Court below could not be a proceeding to enforce the award within the meaning of Art 54(2).  Being one it could not be the other.  Since Art 55 has no application to recognition proceedings, Art 54(2) operates in accordance with its tenor as an agreement by Spain to submit to the jurisdiction of this Court as a competent court under Art 54(2) in a recognition proceeding.
  8. It is true that some of the relief sought by the Respondents at first instance was not in the nature of recognition, but even so the primary judge granted relief on the basis that the Court was recognising the award.  There is no basis, therefore, upon which one may conclude that the primary judge erred in declining to accept Spain’s plea of foreign state immunity in relation to a recognition proceeding, although there may be an issue as to whether the relief granted achieved that outcome.
  9. It is implicit in that conclusion that the question of whether ‘execution’ includes ‘enforcement’ in Art 54 and Art 55 is, whilst interesting, irrelevant.  Regardless of what execution and enforcement mean in Art 54 and Art 55 they are both distinct from recognition.II.  ARTICLE 55 DOES NOT APPLY TO RECOGNITION PROCEEDINGS
  10. Recognition, enforcement and execution are concepts which predate and exist outside of the ICSID Convention.  Simplistically, recognition refers to the formal confirmation by a municipal court that an arbitral award is authentic and has legal consequences under municipal law.  Enforcement goes a step further.  It refers to the process by which a successful party seeks the municipal court’s assistance in ensuring compliance with the award (as recognised) and obtaining the redress to which it is entitled.  Execution refers to the formal process by which enforcement is carried out.  Importantly, these concepts are not hermetically sealed from one another.  See generally Kronke H, Nacimiento P, Otto D, Port NC (Eds), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (Kluwer Law International, 2010) pp 7-8.
  11. However, those general concepts do not decide the issue before the Court which turns instead on the text of the ICSID Convention.  What does it say?  Art 54(1) requires Contracting States to recognise an award.  Art 54(2) permits a party having the benefit of an award to apply to a competent court for its recognition.  It also permits a party to apply for the enforcement of the award by application to a competent court.  As such the article explicitly contemplates two distinct applications to the competent court (or other authority).  If enforcement in Art 54(2) were synonymous with recognition this distinction would appear to be pointless.  The article therefore recognises the distinction between the two applications and requires applications for both to be made to the ‘competent court’.  For completeness, I note that Spain did not submit, in response to the Respondents’ contention that theirs was an application for recognition, that Art 54(2) did not contemplate such an application on its own.
  12. The distinction between the two applications is also reflected in the substantive provisions of Art 54(1).  Article 54(1) imposes two obligations on a Contracting State, first, recognition of the award as binding and, secondly, implicitly in relation to an award which has been recognised, enforcement of the pecuniary obligations imposed by the award ‘as if’ it were a final judgment of a domestic court.  (The curiosity that the federal part of Art 54(1) appears not to be limited to the enforcement of pecuniary obligations may be noted but is irrelevant in this case since only enforcement of pecuniary obligations was granted.)
  13. Article 54(1) and (2) show that a party may seek recognition of an award without seeking its enforcement.  It is also possible, as Art 54(2) shows, for a party to apply for enforcement of the award without applying for its recognition.  In such a case, however, it will be implicit in any enforcement step thereafter approved by the court that the award will have been recognised or, to put it another way, whilst a party seeking recognition need not formally seek enforcement under Art 54(2), any application for enforcement, if granted, will necessarily entail recognition.  Article 54 does not contemplate the enforcement of awards which have not been recognised.
  14. It is in light of that distinction therefore that one then turns to Art 55.  Focus on Art 55 is appropriate because it is the keystone of Spain’s argument.  It is only the status of that article as a non-derogation provision which equips Spain to submit that Art 54(2) does not necessarily involve a submission to jurisdiction.
  15. Spain’s contentions about Art 55 turn on the meaning of the word ‘execution’ which it says includes the concept of ‘enforcement’.  I explain below why I accept this submission and reject the Respondents’ contention that the concepts of execution and enforcement in Art 54 and Art 55 are distinct.  However, the fact that ‘execution’ includes ‘enforcement’ is of no assistance to Spain in a proceeding which seeks recognition.  Because recognition is necessarily distinct from enforcement or execution, the distinction between execution and enforcement is irrelevant in the present litigation.
  16. What does matter is that Art 55 does not refer to recognition and there can be no warrant for reading it as if it did.  To the contrary, were it read as applying to a recognition proceeding the exception in Art 55 would consume in its plenitude the entirety of Art 54, at least where an award against a Contracting State is concerned.  Why?  Amongst other things, Art 54(1) requires each Contracting State to recognise an award as binding.  But the recognition required by Art 54(1) is not immediately self-executing, except perhaps in the case where enforcement is sought in the territory of a Contracting State which is one of the parties to the award.  Apart perhaps from that case – which is of no present relevance – Art 54(1) is instead contingent on the making of the application referred to in Art 54(2), which is to say, only on the production of the certified copy of the award to a competent court (or other authority) does the binding effect of Art 54(1) come into play.  Their combined effect is that a Contracting State is required to recognise an award when a certified copy of the award is furnished to the competent court (or other authority).
  17. If ‘execution’ were construed to include ‘recognition’ in Art 55 there could be no circumstance in which the recognition application expressly contemplated by Art 54(2) could ever be made against a Contracting State.  This would render the recognition procedure in Art 54(2) perpetually unavailable against a Contracting State and would have the consequence that the obligation to recognise an award in Art 54(1) as binding could never be engaged.  In every case against a Contracting State, the competent court in Art 54(2) would be met with a plea of foreign state immunity and recognition would be unavailable.  Such a construction of Art 54(2) and Art 55 would be perverse.
  18. For completeness, two matters should be noted.  First, this problem does not arise where a Contracting State seeks to enforce an award against an investor.  In such a case, no question of foreign state immunity ever arises.  However, whilst this may be accepted, it does not provide any plausible justification for reading Art 54(2) and Art 55 so as to have the otherwise empty operation implied for them by Spain’s construction.  Secondly, it may be noted that the fact that recognition is wholly distinct from enforcement (including, if necessary, execution) is also reflected in the heading to Section 6: ‘Recognition and Enforcement of the Award’ where Art 54 and Art 55 are contained.
  19. For those reasons, Art 55 does not apply to recognition proceedings and is unavailable to modify the meaning of Art 54(1) and (2) in relation to such proceedings.  It is true, as Spain correctly points out, that there are some parts of the ICSID Convention where ‘enforcement’ must include ‘recognition’.  For example, Art 50 (which is contained in Section 5 of Chapter IV) provides a mechanism by which the parties may submit a request for interpretation of an award to the Tribunal which rendered it via the Secretary-General of ICSID.  Art 50(2) allows the Tribunal considering that request to ‘stay enforcement of the award’.  I accept the submission, in this context, that ‘enforcement’ would include an application for recognition.  A similar jurisdiction is conferred by Art 51 in relation to the discovery of facts after the award which are thought decisively to affect the outcome.  Article 51(4) gives the Tribunal an analogous power to stay the award pending resolution of that issue.  Again, I would accept that in that context ‘enforcement’ must extend to recognition.
  20. However, relevantly both those provisions occur in Section 5 whereas Art 54 and Art 55 occur in Section 6.  Section 5 is entitled ‘Interpretation, Revision and Annulment of the Award’ and deals with the powers and functions of the Tribunal in relation to those matters.  The powers and functions of the Tribunal in relation to awards rendered is clearly a matter entirely distinct from the recognition and enforcement of such awards by a Contracting State.  In the latter context, it is clear from the text of Art 54 that ‘enforcement’ cannot include ‘recognition’ for the reasons I have already given.  Admittedly this conclusion results in the word ‘enforcement’ having a broader meaning in Section 5 than it has in Section 6 but this construction fits comfortably with the respective subject matter of each Section and is, by far, a preferable outcome to a construction of ‘enforcement’ in Section 6 which neuters the central obligation imposed on Contracting States to recognise an award as binding.III.  HAS SPAIN SUBMITTED TO JURISDICTION BY ACCESSION TO ART 54?
  21. The question then arises whether Art 54(1) and (2) constitute Spain’s agreement to submit to the jurisdiction of the Federal Court in a recognition proceeding.  The answer is that they do.  Art 54(2) is in terms Spain’s agreement with Australia that the Respondents may apply to a competent court for recognition and, as noted above, the Federal Court has been designated as a competent court for the purposes of Art 54.  Spain has therefore agreed to submit to the jurisdiction of this Court in relation to a recognition proceeding.  Article 55 can have no impact on that conclusion because it has no application to recognition proceedings.
  22. The view that a plea of immunity is not available in recognition proceedings is well-established and Spain’s contentions are notable for their heterodoxy: Benvenuti & Bonfant v People’s Republic of the Congo, Cour d’appel, Paris (26 June 1981) 1 ICSID Reports 368 at 371; 108 Journal du Droit International 843 at 845 (‘Benvenuti’); Société Ouest Africaine des Bétons Industriels (SOABI) v Senegal, Cour de cassation (11 June 1991) 2 ICSID Reports 341; 118 Journal du Droit International 1005 (‘SOABI’); Liberian Eastern Timber Corporation (LETCO) v Liberia, United States District Court for the Southern District of New York (12 December 1986) 2 ICSID Reports 383 at 387-388 (‘LETCO’); Lahoud v The Democratic Republic of Congo [2017] FCA 982 at [20] per Gleeson J (‘Lahoud’).The proceeding at first instance was a recognition proceeding
  23. The preceding conclusion will lack utility unless the proceeding at first instance was relevantly a recognition proceeding.  What is a recognition proceeding?  Art 54(2) does not stipulate how an application for recognition is to be made and the question is therefore governed by the relevant domestic law of the Contracting State in which recognition is sought.  Procedures differ between jurisdictions.
  24. Many civilian jurisdictions have a procedure known as exequatur where a foreign judgment or arbitral award is recognised by a domestic court.  After the grant of an exequatur a party may subsequently seek execution.  It is established in relation to the ICSID Convention that recognition under Art 54(2) may be afforded by the grant of an exequatur: Benvenuti at 845.
  25. In the United States the practice which appears to have been adopted by the United States District Court for the Southern District of New York in relation to recognition under Art 54(2) involves an order in this form (LETCO at 384):

    …it is ORDERED that the annexed arbitration award, as rectified, in favour of LETCO be docketed and filed by the Clerk of this Court in the same manner and with the same force and effect as if it were a final judgment of this Court…

  26. In Australia, the position is not entirely clear. However, it appears that the recognition under Art 54(2) may be afforded by entry of judgment on the award or by making an order granting leave to enforce the award ‘as if it were a final judgment’ of this Court. This emerges from the domestic legislation governing ICSID awards. In Australia the ICSID Convention is given effect to by ss 31 to 38 of the International Arbitration Act which between them constitute all of Part IV of that Act. Section 35 provides:

    35  Recognition of awards

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

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

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

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

  1. The interpretation of this provision is not altogether without difficulty.  It does not, in terms, confer an entitlement on a party to seek recognition of an award but instead refers only to enforcement.  On the other hand, it is headed ‘Recognition of awards’ so that there is a degree of tension between the heading and what the provision appears to say.
  2. Other provisions in Part IV are relevant to the ascertainment of the meaning of s 35(4). Section 34 proceeds on the assumption that s 35 deals with both the recognition and enforcement of an award. It operates to make Part IV an exhaustive code in relation to the recognition and enforcement of an ICSID award. It provides:

    34  Investment Convention awards to prevail over other laws

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

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

    (b)      an award under this Part.

  3. If s 35 does not apply to recognition proceedings under Art 54(2) then the effect of s 34 will be to prevent the possibility of recognition of the award as an award to which 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) (‘New York Convention’) or 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) (‘UNCITRAL Model Law’) (which are also given effect by the International Arbitration Act) might otherwise apply.
  4. So construed, s 35 would appear to achieve an outcome contrary to the plain words of Art 54(2). Article 54(2) requires Australia to provide a mechanism for a party to apply to a competent court for recognition of an award. This is relevant because, in general, a construction of the International Arbitration Act which gives effect to Australia’s international obligations should, if possible, be preferred. As Gleeson CJ stated in Plaintiff S157/2002 v Commonwealth of Australia [2003] HCA 2; 211 CLR 476 at 492 [29]:

    where legislation has been enacted pursuant to, or in contemplation of, the assumption of international obligations under a treaty or international convention, in cases of ambiguity a court should favour a construction which accords with Australia’s obligations.

  5. This is particularly so in light of s 32 which gives the ICSID Convention the force of law in Australia:

    32  Application of Investment Convention to Australia

    Subject to this Part, Chapters II to VII (inclusive) of the Investment Convention have the force of law in Australia.

  6. If the word ‘enforced’ is not construed to include ‘recognised’ then s 35(4) will not give effect to the recognition procedure required by Art 54(2). The heading to s 35 and the specification by s 34 that Part IV is a code with respect to the recognition of awards under the ICSID Convention strongly suggest that Parliament intended s 35 to include an entitlement to apply for recognition. Such a conclusion would involve reading ‘enforced’ in s 35(4) as including ‘recognised’, a meaning which it can in my opinion comfortably accommodate.
  7. On the other hand, having concluded that ‘recognise’ and ‘enforce’ are distinct concepts in Art 54 there is perhaps something anomalous about concluding that they are not distinct for the purposes of s 35, particularly where Part IV is evidently intended to give effect to the ICSID Convention. This consideration may tend in the opposite direction to suggest that ‘enforced’ should not include ‘recognised’.
  8. However, if that were correct, it would leave the recognition procedure unaccountably missing from the provisions which itself would infringe Australia’s obligations under Art 54. On balance, it seems to me that the preferable construction of s 35(4) is one in which ‘enforced’ includes ‘recognised’.
  9. That conclusion makes it unnecessary to consider whether the Court would, in any event, have jurisdiction arising from the conferral on this Court of jurisdiction in matters arising under a law of the Parliament by s 39B(1A)(c) of the Judiciary Act 1903 (Cth). Here the thinking would be that s 32 gives the force of federal statute law to Art 54(2) itself which thereby becomes a surrogate federal law under which a federal matter may directly arise. The same reasoning supports this Court’s jurisdiction in the recognition of arbitral awards under the UNCITRAL Model LawTCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533 (‘TCL’) at 543 [2] per French CJ and Gageler J and 561 [52] per Hayne, Crennan, Kiefel and Bell JJ. There would appear to be no relevant distinction insofar as federal jurisdiction is concerned between the position of this Court under the UNCITRAL Model Law as explained in TCL and under the ICSID Convention.
  10. There may, however, be a difficulty with this approach which relates to s 34. To the extent that s 39B(1A)(c) confers a jurisdiction on this Court to entertain a recognition proceeding, it may be arguable that it is one of the ‘other laws’ referred to in s 34. If so, it may not be an available source of jurisdiction. In light of the manner in which I would construe s 35(4), however, it is not necessary to form a view on that issue.
  11. I therefore conclude that the Court has jurisdiction to entertain a recognition proceeding under s 35(4). So to conclude does not, however, assist in identifying the procedural features of a recognition application. The question of procedure will be governed by the domestic law of the Contracting State in whose territory recognition is sought. Nevertheless, Art 54 and Art 55 provide some guidance on the legal consequences of recognition and from these consequences some guidance, limited perhaps, may be gleaned as to its procedural features.
  12. The purpose of recognition is to give effect to the stipulation of Art 54(1) that each Contracting State (here, relevantly, Australia) will recognise the award as binding.  Because it is binding, a party may seek to enforce its pecuniary obligations as if they were a final judgment of a court of that State: Art 54(1).  But the binding effect of an award may also be asserted by other non-pecuniary methods which include, as French CJ and Gageler J observed in TCL at 552 [23], a plea of former recovery or the assertion of a res judicata or issue estoppel. Further, the binding effect extends not only to the pecuniary obligations imposed by the award but also to its non-pecuniary terms.
  13. What Art 54(2) requires of a Contracting State is a procedure which will result in relief which, if granted, will have those kinds of effects.  Furthermore, the procedure must be such as to enliven in a party with the benefit of an award an entitlement to apply for the kind of ‘execution’ referred to in Art 54(3).  As the primary judge, with respect, correctly observed the expression ‘the laws concerning the execution of judgments’ can only refer to judgments which exist (for completeness, I reject out of hand Spain’s submission that an application for a pre-trial asset seizure order can be described as a form of execution).  But this does not mean that Art 54 requires that recognition should be afforded only by means of the entry of a judgment.  It is instead merely to be understood as a reference to a body of law.
  14. What Art 54(1) does require, however, is that the enforcement of an award’s pecuniary obligations will proceed ‘as if it were a final judgment’.  So viewed, Art 54(3) then furthers this fiction.  The award-cum-as-if-judgment is to be executed (or enforced – it really does not matter) by applying to the award the law which ordinarily applies to the execution (or, on Spain’s submissions, enforcement) of judgments.
  15. So whatever recognition constitutes as a matter of local procedure it nevertheless must be sufficient to enliven the execution (or, as Spain submits, enforcement) procedures which Art 54(3) expressly contemplates.  And, as noted, it must also be sufficient to enable the entry of pleas of res judicata and the like.
  16. As a matter of Australian law, it is possible that one way of achieving these outcomes is to enter judgment in the amount of the pecuniary obligations imposed by the award.  Such a judgment has all the procedural qualities just described.  It can give rise to a plea of res judicata, it can be used by way of a plea of prior satisfaction and its existence fits tidily into a legal framework that contains the ‘laws concerning the execution of judgments’ referred to in Art 54(3).  If execution is available against the other party to the award it will be a straightforward procedural matter to apply for it if a judgment has been entered.
  17. The statutory framework governing arbitral awards under the New York Convention is contained in Part II of the International Arbitration Act and is materially different to the provisions dealing with the ICSID Convention under Part IV. Nevertheless, it seems well-established in relation to such awards that recognition is afforded by the entry of a judgment: Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; 201 FCR 535 at [71]-[72] per Foster J (and the cases there collected). It seems difficult to identify any point of principle which would justify a departure from that practice in the case of ICSID awards.
  18. On the other hand, it is also possible that recognition may also be granted by means of an order that the award be recognised ‘as if’ it were a judgment of the Federal Court.  This was the approach of French CJ and Gageler J in TCL at 551 [21] in relation to awards under the UNCITRAL Model Law although their Honours were clear that this was not the only procedure available (‘An appropriate order, although not necessarily the only appropriate order … would be an order that the arbitral award be enforced as if the arbitral award were a judgment or order of the Federal Court’: at [24]).  Gleeson J used this ‘as if’ form of order in Lahoud which is the same procedure adopted by the United States District Court for the Southern District of New York in LETCO.
  19. In my view, either approach may be procedurally open and, if that is the case both would be essentially equivalent to an exequatur.  My tentative preference would be for the former procedure.  The process of relying upon an award in another court for the purpose of establishing a res judicata is likely to be more straightforward, at least from a practical perspective, if recognition takes the form of a Federal Court judgment rather than the possibly more perplexing order for non-initiates that the award has the effect as if it were a judgment of the Federal Court.  Similar practical considerations may suggest that an application to this Court’s registry for enforcement remedies such as a writ of execution may run more smoothly if what is entered is an actual judgment.
  20. The relief which was sought by the Respondents at first instance was as follows (figures in points 4 and 5 as they appear in the original):

    Orders sought

    The Applicants, being parties to an arbitral proceeding, apply to the Court to enforce an award under section 35(4) of the International Arbitration Act 1974.

    The Applicants seek the following orders:

    1.           Pursuant to s 35(4) of the International Arbitration Act 1974 (Cth), the Applicants have leave to have the award of the International Centre for Settlement of Investment Disputes in Case No. ARB/13/31 against the Respondent dated 15 June 2018 as rectified by the Award dated 29 January 2019 enforced as if it were a judgement of the Court.

    2.           A declaration that the Respondent has breached Article 10(1) of the Energy Charter Treaty by failing to accord fair and equitable treatment to the Applicants’ investments.

    3.           The Respondent pay the Applicants EUR101,000,000.00.

    4.           The Respondent pay the Applicants interest on the amount of EUR101,000,000.00 from 20 June 2014 to 15 June 2018 at the rate of 2.07%, compounded monthly, and interest from 16 June 2018 to the date of payment at the rate of 2.07%, compounded monthly.

    5.           The Respondent pay the Applicants USD635,431.70 as a contribution to the payment of their share of the costs of the proceedings and GBP2,447,008.61 as a contribution to the payment of their legal representation costs and expenses.

    6.           Pursuant to s 43(1) of the Federal Court of Australia Act 1976 (Cth), the Respondent is to pay the Applicants’ costs of this proceeding as agreed or assessed.

  21. Some of this relief seems not to have been pressed, although elements of prayers 1, 3, 4, 5 and 6 can be seen in the orders eventually made by the trial judge set out at [14] above. In any event, the primary judge reasoned that the appropriate way to recognise an award was to enter judgment on it: [78]. Despite that conclusion, this was not the order his Honour in fact made. Instead, by order 1 his Honour granted the Respondents leave under s 35(4) of the International Arbitration Act to enforce the award against Spain and by order 2 ordered it to pay EUR101,000,000 rather than entering judgment in that sum (together with ancillary orders). There are problems, with respect, with both of these orders although it is difficult to see that the trial judge could have been expected to apprehend what they were, given the way the case was presented.
  22. Although the grant of leave under s 35(4) in order 1 partially tracks the language of that provision, it omits the words ‘as if the award were a judgment’ of the Federal Court. Further, on its face it leaves open the possibility that enforcement may now proceed without any further consideration of the issues arising under Art 55. It is plain from the trial judge’s reasons that he intended no such operation for the order but it is an operation it appears to have.
  23. The requirement of order 2 that Spain pay the Respondents EUR101,000,000 may also be seen as an order requiring Spain to do something, whereas under the process of recognition what occurs is that the award is put on the same footing as if it were a final judgment, no more and no less.
  24. In my view, orders 1 and 2 should be set aside as they do not reflect a correct approach to recognition.  It is possible that order 2 should have been in the form of a judgment for EUR101,000,000 or the ‘as if’ order contemplated in TCL.  I would set aside order 3 and order 4 (which relate to interest and the costs of the arbitral proceeding) for the same reason.
  25. I would hear the parties further on what form recognition should take.  There was no argument before this Court on appeal on this issue and I apprehend the same was true before the trial judge.  This has the procedural consequence that the appeal must be allowed to permit the correction of the form of recognition although the substantive conclusion of the trial judge that Spain was not entitled to rely upon a plea of foreign state immunity stands vindicated.
  26. On appeal, Spain submitted in writing that the Respondents had not put their case below as being one purely concerned with recognition but had instead characterised the application as one for recognition and enforcement.  It submitted that it was too late for the Respondents now to submit that it was purely a case of recognition.  Spain did not seek to elaborate on how the trial was conducted.  The Respondents claim that a submission was made to the trial judge at T66.1ff that the relief sought was in the nature of recognition.  There it was said:

    And coming back to your Honour’s question about the “or”, there’s nothing in even the French or Spanish version that talks of immunity from recognition.

    One way in which this court recognises an international award as being – as having the status of a judgment of this court is by making a declaration that it does have that status, and the question is what flows from that.

  27. I incline to the view that this was not sufficient to raise the point.  However, it makes no difference.  The issue is directly raised by ground 3 of the Respondents’ amended notice of contention and was addressed in their written submissions in the Full Court.  Although Spain submitted that it was too late for the matter to be raised it did not point to any species of procedural prejudice occasioned to it by the alleged late raising of the matter.  Further, it did not make any substantive submission as to why the proceeding could not be characterised as a recognition proceeding although it had an abundant opportunity to do so in this Court.
  28. Generally speaking a party is bound on appeal by the way their case was put at trial which reflects the public interest in the finality of litigation: University of Wollongong v Metwally (No 2) [1985] HCA 28; 60 ALR 68 (‘Metwally (No 2)’) at 70 per the Court. Nevertheless, it has also been accepted that where a question of law is raised for the first time on appeal but proceeds on the same proven or admitted facts, it may nevertheless be expedient in the interests of justice to entertain it: O’Brien v Komesaroff [1982] HCA 33; 150 CLR 310 (‘O’Brien’) at 319 per Mason J. O’Brien initially confined the principle’s application to ultimate appellate courts but it is now accepted that it extends to intermediate courts of appeal as well: Coulton v Holcombe [1986] HCA 33; 162 CLR 1 at 8 per Gibbs CJ, Wilson, Brennan and Dawson JJ. Further, as Metwally (No 2) shows at 71, in some cases it may appear that a decision was made not to run a point at trial in which case the party will be held to their election save perhaps in ‘exceptional circumstances’.
  29. In this case, the point is not so much the raising of a fresh ground but rather the narrowing of a ground pursued at trial.  On the assumption that the Respondents did not squarely put their case at trial as one only of recognition, it is clear nevertheless that they did put it as one of recognition and enforcement.  What they now wish to say is, therefore, not by way of supplement but rather in the nature of a subtraction.  On the assumption that such a narrowing is governed by the principles in cases such as Coulton v Holcombe (a proposition I doubt), nevertheless I would still grant leave if necessary to pursue the matter in that fashion.  The issue is solely whether the relief granted by the primary judge can be legally characterised as recognition within the meaning of Art 54(2).  This involves no evidence and is purely a question of law.  Further, it is a question of law decisive of this appeal and of considerable importance for the operation of the ICSID Convention.  The ground also reflects the way the self-same issue has been approached by other courts considering the operation of Art 54(2): BenvenutiSOABILETCO and Lahoud.
  30. The conclusion that the proceeding was a recognition proceeding means that Art 55 has no application. Consequently, for the reasons I have already given, Art 54(2) operates as an agreement by Spain not to raise any immunity it would otherwise have and hence to submit itself to the jurisdiction of the competent court referred to in that article. There is therefore an agreement within the meaning of s 10(1) and (2) and immunity is not available under s 9. However, for the reasons I have given, the appeal must be allowed on a limited basis so as to hear further argument on the form that recognition should take.IV.  SPAIN’S SUBSIDIARY ARGUMENT: MEANING OF ART 55 NOT CLEAR UNTIL DECLARED BY THE INTERNATIONAL COURT OF JUSTICE
  31. I have explained above that the dispute as to whether ‘execution’ in Art 55 includes the concept of enforcement is beside the point because the proceeding was a recognition proceeding to which Art 55 does not apply.  Whether, in that circumstance, ‘execution’ includes ‘enforcement’ in Art 55 is presently therefore of no moment.  The opinion of the International Court of Justice on the issue, whilst definitive, would be definitive on an issue which does not matter.  Spain’s secondary argument therefore passes wide of the mark.
  1. However, out of deference both to the submissions of the parties on the issue as well as the careful, detailed and cogently reasoned analysis of the primary judge, it is appropriate to make some short remarks about it.
  2. Both the primary judge and I arrive at the same ultimate forensic destination which is the proposition that Art 55 has no application to Art 54(2) in relation to the proceeding which is actually before the Court.  However, the journeys which we take to get there differ, although they are each no less scenic.
  3. As I have explained, I see Art 54(2) as drawing a distinction between recognition, on the one hand, and enforcement and execution, on the other and read Art 55 as not applying to the former.  Since I characterise the present proceeding as a recognition proceeding this leads me to conclude that Art 55 has no application to the proceeding.
  4. The trial judge perceived a different dichotomy, that between recognition and enforcement, on the one hand, and execution, on the other.  His Honour construed Art 55 as only applying to execution.  Since he characterised the proceeding as one for recognition and enforcement this led him to the same conclusion that Art 55 did not apply to the present proceeding.
  5. The central proposition underpinning his Honour’s conclusion was that ‘execution’ could only refer to steps which took place after judgment.  This followed from the reference in Art 54(3) to ‘the laws concerning the execution of judgments’.  That law took as its point of departure its application to judgments which necessarily existed.  In that sense, ‘execution’ had to involve a reference to procedural steps which in domestic law post-dated judgment.  In his Honour’s view, the current proceeding was a proceeding for recognition and enforcement of the award and what was sought in it necessarily antedated the existence of a judgment.  Consequently, because ‘execution’ in Art 55 was only concerned with post-judgment procedural steps it necessarily followed that it could not apply to pre-judgment steps such as, and including, an application for recognition and enforcement.  Since it could not apply to the present proceeding, it followed that Spain had submitted itself to jurisdiction by Art 54(2).
  6. Had it been necessary to address this issue, I would have respectfully differed from the primary judge although only with considerable diffidence.  I would have done so because I accept Spain’s submission that ‘execution’ and ‘enforcement’ are essentially synonymous in Art 54 and Art 55 and conclude, further, that they both bear the broader meaning of ‘enforcement’.  Spain’s reasons for this turned on the French and Spanish texts of the treaty which are equally authoritative.  The problem in a nutshell is this: wherever the word ‘execution’ appears in the English text, the French word ‘l’execution’ appears in the French text and the Spanish word ‘ejecutar’ (or variants of that word) appear in the Spanish text.  By itself this does not cause a problem.  What does cause a problem, however, is that wherever the word ‘enforce’ (or ‘enforcement’) appears in the English text, the self-same words – ‘l’execution’ and ‘ejecutar’ – appear in the French and Spanish texts.
  7. Contrary to the Respondents’ submissions, one does not need to know what these words mean to see the nature of the problem to which they give rise.  The English text observes a distinction between ‘execution’ and ‘enforcement’ because the words are different but this distinction is not extant in the French and Spanish texts.
  8. The rules applicable to the interpretation of the ICSID Convention are, in substance, to be found in the Vienna Convention on the Law of Treaties. Opened for signature 23 May 1969. 1155 UNTS 331 (entered into force 27 January 1980) (‘Vienna Convention’).  Although as a matter of treaty law the Vienna Convention does not apply to the interpretation of the ICSID Convention (the conclusion of the ICSID Convention having preceded the inception of the Vienna Convention and the Vienna Convention having no retrospective application: see Art 4), it makes no difference as the treaty is ‘no more than an indorsement or confirmation of existing practice’: Thiel v Federal Commissioner of Taxation [1990] HCA 37; 171 CLR 338 at 349 per Dawson J and ‘the interpretation provisions of the Vienna Convention reflect the customary rules for the interpretation of treaties’ (at 356 per McHugh J).
  9. There was no dispute between the parties that the ICSID Convention had been done in English, Spanish and French.  The Convention’s testimonium records this fact: ‘DONE at Washington, in the English, French and Spanish languages, all three texts being equally authentic…’.  Article 33(1) of the Vienna Convention provides that where ‘a treaty has been authenticated in two or more languages, the text is equally authoritative in each language’.   Article 33(3) then provides that the ‘terms of the treaty are presumed to have the same meaning in each authentic text’ which is to an extent in tension with the linguistic imperatives of Art 33(1).  This tension is resolved in Art 33(4) which requires that where a difference in meaning emerges which cannot otherwise be resolved by ordinary principles of interpretation ‘the meaning which best reconciles the texts, having regard to the object and purpose of the treaty, shall be adopted.’
  10. The disjunct between the Spanish and French texts, on the one hand, and the English text, on the other, can be resolved in only one of two ways.  Either the English text can control the French and Spanish texts or they can control the English text.  If the English text is to control then one must import into the French and Spanish texts the distinction observed in the English.  In the French text, this would require giving ‘l’execution’ the meaning of ‘enforce’ or ‘enforcement’ where those words appear in the English text.  But where the word ‘execution’ appears in the English text, the word ‘l’execution’ would need to bear the meaning of ‘execution’.  A similar approach would need to be taken to the word ‘ejecutar’ in the Spanish text.
  11. The upshot is that the meaning of ‘l’execution’ and ‘ejecutar’ would, on this construction, vary by reference to their location within Art 54 and Art 55 and to the corresponding wording of the English text.
  12. If, on the other hand, the Spanish and French texts control the English text then this necessitates eliding the difference between ‘execution’ and ‘enforcement’ and, in effect, making them synonymous.  On this reading, the meaning of both ‘execution’ and ‘enforcement’ become a single concept which corresponds with ‘l’execution’ and ‘ejecutar’.  Since ‘execution’ is narrower in meaning than enforcement (which can, as a matter of ordinary language, include ‘execution’) the upshot is that ‘execution’ should be expanded in meaning to encompass ‘enforcement’.
  13. The problem may now be seen.  If ‘execution’ in Art 55 means ‘enforcement’ in this broad sense, then Art 55 applies to any proceeding for enforcement in that sense.  Of course, the primary judge characterised the present proceeding as a proceeding for recognition and enforcement.  To avoid the conclusion, therefore, that Art 55 applied to the present proceeding (so characterised) his Honour therefore had to reject the second construction (where the French and Spanish texts control the English text) and embrace the first (where they do not).
  14. This is Spain’s complaint.  It submits that this is not a construction which, as a matter of interpretation, should be preferred.  I agree.  It is much more likely that ‘execution’ and ‘enforcement’ should be given the same meaning to bring them into line with the Spanish and French texts than it is that the words ‘l’execution’ and ‘ejecutar’ fluctuate in meaning depending on where they appear.  The linguistic violence involved in the former approach is much less than that involved in the latter.
  15. This is also the view of Professor Schreuer in The ICSID Convention: A Commentary (2nd ed, Cambridge University Press, 2009) at pp 1134-1135 (citations omitted):

    Art. 54(1) uses the word “enforce” twice. Art. 54(2) also refers to “enforcement”. By contrast, Art.54(3) uses the word “execution” twice. This would suggest that the words “enforcement” and “execution” stand for different concepts. But a look at the equally authentic French and Spanish texts of the Convention yields a different picture. The French text consistently uses “l’exécution” five times in paras. 1, 2 and 3 of Art. 54. Similarly, the Spanish text is consistent in using “ejecutar” and “ejecuten” in Art. 54(1), “ejecución” in Art. 54(2) and “ejecutará” and “ejecución” in Art. 54(3). This means that a distinction between enforcement and execution cannot be sustained on the basis of the French and Spanish texts.

    The three texts are equally authoritative and must be reconciled. Under Art. 33(4) of the 1969 Vienna Convention on the Law of Treaties, when a comparison of the authentic texts discloses a difference of meaning which cannot be reconciled by the Convention’s other rules on interpretation, the meaning which best reconciles the texts, having regard to the object and purpose of the treaty, shall be adopted. In the case of Art. 54 of the ICSID Convention, the interpretation that best reconciles the three texts would appear to be that the words “enforcement” and “execution” are identical in meaning. This is more plausible than the alternative of giving different meanings to the same French and Spanish words in paras. 1 and 2 on the one hand and in para. 3 on the other.

    The Convention’s drafting history yields no information that would explain this inconsistency. The answer may simply lie in the circumstances of the work on this Article which took place under great time pressure and is described by Broches as being characterized by great fluidity, sometimes bordering on confusion.

  16. Although Professor Schreuer refers here to the Vienna Convention, at footnote 65 to the second of these paragraphs he observes ‘The Vienna Convention on the Law of Treaties is not, technically, applicable to the ICSID Convention but reflects customary international law on this point.’ An essential part of the view expressed in the passage above turns on the application of the rules of treaty interpretation applicable to inconsistent multilingual treaties.  However, as Professor Schreuer also noted there is a lively academic debate about the distinctions which may exist between enforcement and execution in Art 54.  Professor Schreuer collects this commentary in footnotes 70 and 71 at p 1135.  Whilst he thought that none of these uses of ‘enforcement’ and ‘execution’ were inherently incorrect, he thought it best to stay away from this issue and focus on their shared distinction from recognition.  This is a view, with respect, which I share.
  17. The primary judge analysed the material in these two footnotes closely and concluded that they supported a distinction in Art 54 between execution and enforcement: [156]-[161]. I agree with his Honour that this material supports that distinction. However, none of the articles in question deals with the problem identified by Professor Schreuer that the Spanish and French texts are incapable of supporting any such distinction. Although I can see in English plain differences between the concepts enforcement and execution, this Court is bound to apply the customary rules reflected in the Vienna Convention to the interpretation of a treaty in three different languages. If the material in the two footnotes had addressed itself to the tri-lingual problem identified by Professor Schreuer then I might take a different view. However, none does and they do not therefore seem to engage with the point he made.
  18. The primary judge apprehended at [150]-[152] that there was a tension with Professor Schreuer’s view that execution and enforcement are interchangeable for the purposes of Art 54 but that Art 55 only applies to the immunity from execution.  At p 1153 Professor Schreuer said this:

    Art. 55 only applies to immunity from execution. It does not apply to immunity from jurisdiction. The question of immunity from jurisdiction does not arise in the context of the Convention.

    Therefore, State immunity cannot be used to thwart proceedings for the recognition of an award.

  19. The primary judge expressed the tension in these terms (at [152]):

    This view stands in tension with Professor Schreuer’s view, articulated in respect of Art 54, that enforcement and execution are the same and interchangeable. If they were, then Art 55 would not have the limited scope that he gives to it, unless execution has different meanings in Arts 54 and 55. That is not a satisfactory solution.

  20. I respectfully differ from this.  At p 1136, having surveyed the interpretative carnage to which the words ‘enforce’ and ‘execute’ have given rise Professor Schreuer said this:

    The best that can be suggested at this stage is that great caution should be exercised when using the word “enforcement” in the context of Art. 54. This Commentary uses “enforcement” as meaning the same as “execution” unless indicated otherwise.

  21. In light of that observation, I do not see that the tension the primary judge perceived arises.  The principal reason for this is the caution urged in the first sentence.  The Professor’s view is that insofar as Art 54 is concerned one should exercise great care in the use of the word ‘enforcement’.  The second sentence is a more general statement (‘This Commentary’) and contrasts with the first sentence (‘in the context of Art 54’).  I do not think that Professor Schreuer was suggesting anything so straightforward as the statement that enforcement and execution were synonymous in Art 54.
  22. That having been said, one can well understand why the primary judge was driven to his approach of giving the different meanings to ‘execution’ and ‘enforcement’.  Since his Honour had characterised the proceeding as being for recognition and enforcement it followed that to have concluded otherwise would have resulted in Art 55 applying to the proceeding and his Honour thereafter being forced to accept Spain’s dyspeptic plea of foreign state immunity.  Having surveyed the background to the ICSID Convention and the travaux préparatoires his Honour was abundantly satisfied that such an outcome could not be fairly said to have been contemplated by anyone.  His Honour’s thorough analysis of that material is unanswerable and indeed Spain did not attempt to submit to the contrary.  I agree with his Honour’s conclusions to which I have nothing useful to add.
  23. But I do not think that the interpretative pressure his Honour felt was real.  In fact, what really mattered about the proceeding was that it was a recognition proceeding to which, on no view, could Art 55 apply.  So viewed, the flawed outcome which his Honour correctly perceived flowed from Spain’s submission could be evaded even if ‘enforcement’ and ‘execution’ were treated synonymously in the English text.
  24. So in that way I differ respectfully from the primary judge.  However, as I have already explained, it leads me to the same conclusion which his Honour reached.
  25. A number of matters should be noted for completeness.  First, I reject the Respondents’ submission that what Professor Schreurer said about this problem was inconsistent with what he had said about Art 55.  As I have explained, there is no contradiction.  The Professor was of the view that Art 55 did not apply to proceedings for recognition.  That is this case.  Secondly, it is not necessary to consider Spain’s submission that the UK Supreme Court’s decision in Micula v Romania [2020] UKSC 5; 1 WLR 1033 (‘Micula’) assists it on the construction question.  Had it been necessary, I would have seen considerable force in the Respondents’ submission that whilst the Supreme Court did make remarks supportive of Professor Schreuer’s view as to the equivalence of enforcement and execution in Art 54(3), this was in quite a different context and without a focus on the issue in the present appeal.
  26. In those circumstances, I accept that Spain’s construction of ‘execution’ and ‘enforcement’ is correct.  Consequently, the primary premise on which its subsidiary argument rests – ambiguity – is not established.
  27. In any event, even if I had arrived at the contrary view that the English text should control the French and Spanish texts I would have arrived at that conclusion by applying the principles of treaty interpretation reflected in the Vienna Convention.  Having done so, there would be no remaining ambiguity so far as this Court is concerned.  It is possible, I accept, that the International Court of Justice could render an opinion on the meaning of Art 54 and Art 55 for Art 64 of the ICSID Convention allows Contracting Parties to submit to that court any question of interpretation they have been unable to resolve.  Its opinion would, no doubt, be more definitive than this Court’s opinion.  But that does not mean that this Court’s opinion is not definitive in the meantime.  The Court has determined what Spain agreed to.  There is simply no room after that conclusion for a contention that somehow it can be said that it has not agreed.V.  OTHER MATTERS
  28. The appellate jurisdiction of this Court to review the primary judge’s conclusion that Spain was not entitled to rely upon s 9 turns upon the identification of error in the trial judge’s reasons: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 at [30] per Allsop J. I do not think the primary judge erred in his conclusion that Spain was not entitled to rely upon a plea of foreign state immunity. Whilst I differ from the primary judge on the issue of the meaning of ‘execution’ in Art 55, I do not think the difference is material to the outcome of the appeal. I do think, however, that error is shown in the form of recognition granted by the primary judge.
  29. Apart from the central issues, Spain’s written and oral submissions in this Court identified a cacophony of other errors claimed to have been committed by the primary judge.  Leaving aside those which deal with the question of foreign state immunity, these submissions (and the two omnibus grounds of appeal with which, from time to time, they occasionally intersected) have no relevance.  Even if the Court accepted that the errors were established so that the Court’s review jurisdiction was enlivened, his Honour did not err in his ultimate conclusion that foreign state immunity was not available in the current proceeding.  There is no formal utility therefore in assessing their merit.
  30. However, I would make the following brief remarks:
  31. I do not accept that his Honour erred in the sequencing with which he approached the ICSID Convention and the Immunities Act. It is plain that his Honour began with the Immunities Act and then turned to the ICSID Convention. But even if he had not done that I fail to see why this could matter. Both the Act and the Convention had to be interpreted. As the Respondents correctly submitted, the order in which one does this is immaterial.
  32. I do not accept Spain’s submission that his Honour had created a new exception to foreign state immunity beyond the exceptions set out in s 10. The primary judge asked himself the question in s 9, posed for himself the question of whether there was an exception in s 10, correctly apprehended that this turned on whether there was an ‘agreement’ and then assessed whether the ICSID Convention constituted such an agreement.
  33. I do not accept that Part IV of the Immunities Act has any relevance to the questions presently before the Court. Part IV is entitled ‘Part IV Enforcement’. Part IV does not apply until a Court has concluded that a foreign state has no immunity from jurisdiction. So much is clear from s 7(4):

    Part IV only applies where, by virtue of a provision of Part II, the foreign State is not immune from the jurisdiction of the courts of Australia in the proceeding concerned.

  1. In this case, the question is whether the exception in s 10(1) (which is in Part II) has been established. Until that question has been answered Part IV has no legal consequences since it is incapable of application by reason of s 7(4). As a matter of logic, it is impossible for Part IV to have any impact on the question of whether an exception in Part II has been engaged since its application necessarily post-dates any determination that an exception applies. Accordingly, Part IV is irrelevant to any issue presently before the Court.
  2. The question of whether the reference to the laws relating to immunity from execution in Art 55 is a reference to Part IV of the Immunities Act or the whole of the Immunities Act is, likewise, an irrelevant question. Since Art 55 has no application to a recognition proceeding the question does not arise in the present case. If and when the Respondents seek to execute their award, then Art 55 will be relevant.
  3. The Respondents pursued an argument that s 34 of the International Arbitration Act (above at [44]) excluded the operation of the Immunities Act. This was on the basis that the Immunities Act fell within the expression ‘Other laws relating to the recognition and enforcement of arbitral awards’ which are declared by s 34 not to apply to an ICSID award. The primary judge rejected this argument. In my view, the issue does not arise since Spain is not entitled to rely on the immunity conferred by s 9 of the Immunities Act under that Act’s own provisions. The implications of the Respondents’ submissions are not necessarily fully manifest in the current appeal. For example, if the Immunities Act is one of the laws referred to in s 34, this may have serious consequences when the time comes to consider how the Respondents’ judgment might be enforced under Part IV. This Part provides for an immunity from execution against the diplomatic and military assets of a foreign state which, if this argument be correct, will be lost. Australia may well have international obligations in that regard which would be necessary inputs into the interpretative task. In that circumstance, I would prefer to express no view on the issue until such time as the question actually arises. For the same reason, I prefer to express no opinion on the question of whether the International Arbitration Act impliedly repeals the Immunities Act.
  4. I do not accept Spain’s contention that it is assisted by the words ‘as if’ in Art 54(1).  Here the argument was that Art 54(1) requires the pecuniary obligations imposed by the award to be enforced ‘as if’ they were a final judgment of a domestic court.  Spain submits that it would then have been open to it to raise foreign state immunity as a reason why the judgment should be vacated and if the judgment could be vacated on that basis it must therefore be open to resist its initial entry on the same basis.  Spain cited Micula to show that a stay of a judgment resulting from an ICSID award may, in principle, be obtained.  Whilst I accept the internal logic of this submission when considered strictly in a vacuum, the argument of course must prosper, if at all, in the hostile atmosphere of Art 54.  It shows clearly that foreign state immunity is not available in a recognition proceeding.  Once it is accepted, as it must be, that the Respondents are entitled recognition under domestic law and that that domestic law is itself merely the instantiation of the recognition procedure to which Spain itself has explicitly agreed by means of the solemn public act of acceding to a treaty, it follows for the reasons already given that there can be no plea of foreign state immunity available to it whether before judgment or, even on the approach in Micula, after judgment. The problem it has is that the immunity has been lost by reason of an agreement within the meaning of s 10(2) of the Immunities Act.
  5. I do not accept that there is any substance in Spain’s submission that the mere fact that Spain had agreed to an arbitration in Art 26 of the ECT did not entail that it had waived its foreign state immunity.  The correctness of the submission need not be assayed for the question is not whether Art 26 of the ECT effects a submission to jurisdiction; it is whether Art 54(2) of the ICSID Convention does.VI.  APPLICATION FOR LEAVE TO INTERVENE
  6. At the hearing of the appeal the European Commission sought leave to intervene in the proceeding.  The Court dismissed the application for intervention at that time and said that it would provide reasons for this in due course.  My reasons for refusing leave to the European Commission’s application to intervene are as follows:
  7. The arbitration which took place between Spain and the Respondents under the ICSID Convention occurred because Spain is a party to the ECT and because by Art 26 of the ECT Spain agreed to arbitrate disputes with residents of other Contracting Parties.   The Respondents are residents of Luxembourg and the Netherlands, both of which are also Contracting Parties under the ECT.  Spain, the Netherlands and Luxembourg are also members of the European Union.  The European Commission wishes to contend that Art 26 properly construed does not constitute an offer to arbitrate and that, if to the contrary it does, it is unlawful as between members of the EU as a result of European constitutional law.
  8. These are, without doubt, most interesting questions. Leave to intervene should, however, be refused for two reasons. First, it is irrelevant to the question before this Court which is whether Spain is entitled to rely on a plea for foreign state immunity. No doubt the issues which the Commission wishes to ventilate are relevant to the jurisdiction of the arbitral tribunal but its jurisdiction (or perhaps more precisely the absence of its jurisdiction) is not a matter which the Court can consider under s 35(4) of the International Arbitration Act. The sole issue for the competent court under Art 54(2) is whether the party seeking the recognition of the award has presented a certified copy of it. This Court has also had to consider the additional legal question of whether a plea of foreign state immunity may be maintained in such a proceeding. Neither of those issues is affected by the meaning of Art 26 of the ECT or whether Art 26 is lawful under EU law.
  9. Secondly, even if that were not so, the present argument was not advanced by Spain to the trial judge and is not advanced by it on appeal.  The Court would therefore be called on to resolve an issue which does not form part of the matter between the parties and consequently is not within the jurisdiction of the Court: Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16; 209 CLR 372 at [22], [27] per Gleeson CJ, [72] per Gaudron and Gummow JJ, [249] per Hayne J.
  10. In terms of the intervention rule, r 36.32(2)(a) of the Federal Court Rules 2011 (Cth), I do not therefore accept that the European Commission’s contribution would be ‘useful’.VII.  ORDERS
  11. I propose the following orders:

    (1)          The appeal be allowed.

    (2)          Orders 1, 2, 3 and 4 of the orders made on 24 February 2020 are set aside.

    (3)          The appeal is stood over to a date to be fixed for further argument on the form of order for the recognition of the award and otherwise for the disposition of the appeal including on the question of costs.

    (4)          The parties should confer and formulate draft orders providing for the delivery of written submissions on these issues with a page limit of 10 pages per submission.

I certify that the preceding one hundred and seven (107) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.

 

Associate:

Dated: 1 February 2021

REASONS FOR JUDGMENT

MOSHINSKY J:

  1. I have had the considerable benefit of reading in draft the reasons for judgment of the Chief Justice and of Perram J.  I agree with the orders proposed by Perram J.  I agree with Perram J’s reasons, subject to the point made by the Chief Justice in [9] of his reasons: whether the French and Spanish languages have a penumbra or range of meanings would be a matter of evidence.  I also agree with the additional reasons given by 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 Moshinsky.

 

Associate:

Dated:       1 February 2021

 

One Sector Pty Ltd v Panel Concepts Pty Ltd [2021] QDC 54

DISTRICT COURT OF QUEENSLAND

 

Case Name: One Sector Pty Ltd v Panel Concepts Pty Ltd [2021] QDC 54
Medium Neutral Citation: [2021] QDC 54
Hearing Date(s): 19 March 2021
Date of Orders: 8 April 2021
Decision Date: 8 April 2021
Before: Barlow QC DCJ
Decision: Application dismissed
Catchwords: ARBITRATION – ARBITRATION AGREEMENT – ARBITRATION AGREEMENT AS GROUND FOR STAY OF COURT PROCEEDINGS – POWER OF COURT TO STAY – VALID ARBITRATION AGREEMENT – Plaintiff sub-contracted defendant to complete construction work – Plaintiff suing defendant for breach of contract – Sub-contract includes dispute resolution clause – Dispute resolution clause includes potential referral to arbitration – Whether clause amounts to arbitration agreement under Commercial Arbitration Act.

 

ARBITRATION – ARBITRATION AGREEMENT – ARBITRATION AGREEMENT AS GROUND FOR STAY OF COURT PROCEEDINGS – POWER OF COURT TO STAY – TIME FOR APPLICATION –Plaintiff suing defendant for breach of contract – Plaintiff successfully sought default judgment – Defendant applied to have default judgment set aside – Defendant filed affidavit in support of application to set aside judgment – Whether statements in affidavit describing proposed defences amounted to first statement on the substance of the dispute.

Legislation Cited: Commercial Arbitration Act 2013 (Qld), s 8
Cases Cited: CPB Contractors Pty Ltd v Celsus Pty Ltd (2017) 353 ALR 84, considered

 

Gilgandra Marketing Co-operative Ltd v Australian Commodity & Marketing Pty Ltd [2010] NSWSC 1209, considered

 

Pathak v Tourism Transport Ltd [2002] 3 NZLR 681, cited

Texts Cited: NIL
DIVISION: Civil
Parties:  

ONE SECTOR PTY LTD
(Plaintiff/Respondent)

v

PANEL CONCEPTS PTY LTD

(Defendant/Applicant)

Representation: Counsel:

 

S Colditz, for the plaintiff

J Marr, for the defendant

 

Solicitors:

 

Active Law for the plaintiff

Robinson Locke Litigation Lawyers for the defendant

File Number(s): BD 2957/2020
Publication Restriction: NIL
Decision under appeal: NIL

 

JUDGMENT

Introduction
1. The defendant was a sub-contractor of the plaintiff – the head contractor – under a contract for the construction of an industrial complex. The plaintiff sues the defendant for damages for breach of that contract.

2. The defendant applies for a stay of the proceeding, pursuant to s 8(1) of the Commercial Arbitration Act 2013, so that the parties may refer their dispute to arbitration pursuant to the contract.

3. Subsection 8(1) of the Act provides:
A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

4. “Arbitration agreement” is defined in s 7, in essence, as a written agreement to submit to arbitration disputes that have arisen or may arise between the parties.

5. The contract in this case is apparently a standard form of subcontract drawn by the plaintiff. Its operative part (the general conditions) is not long. Clause 25, upon which the defendant relies, is headed “Dispute Resolution.” It is set out in the annexure to these reasons.

6. The defendant’s principal contention is that none of the steps referred to in clause 25 has been taken and therefore the parties remain obliged, by clause 25.1, to comply with the steps set out in the balance of the clause before the plaintiff may continue with this proceeding. Therefore it seeks a stay of this proceeding. The parties agree that an order staying the proceeding is an effective way of the court referring the parties to arbitration under s 8.

7. The plaintiff submits that the parties have taken the steps provided in clauses 25.2 to 25.4 (a notice of dispute, followed by a without prejudice conference), but it says that, after the conference, the defendant did not issue a further notice of dispute, under clause 25.5, setting out the details of the dispute and referring it to arbitration. Nor have the parties otherwise agreed on arbitration which, the plaintiff contends, is an alternative route for arbitration (that is, by a separate agreement).

8. The plaintiff opposes a stay on a number of grounds:
(a) first, there is no arbitration agreement, as the preconditions to the operation of the contractual requirement that the parties arbitrate their differences have not been met;
(b) secondly, the defendant made this application too late – in particular, after it had, in this proceeding, submitted its first statement on the substance of the dispute;
(c) thirdly, any arbitration agreement in the contract is inoperative as the defendant has chosen to participate in this proceeding rather than to arbitrate and it should be held to that choice.

Is there an arbitration agreement?

9. The defendant contends that clause 25 constitutes an arbitration agreement. The parties must therefore comply with the steps provided in that clause before they may litigate. But the plaintiff contends that none of the steps taken by the parties to date was a step under clause 25 or, if any action purported to be such a step, it was taken too late. Therefore there is no current or operative agreement that the disputes the subject of this proceeding be referred to arbitration.

10. The plaintiff submits that only clause 25.5 permits one party, in the circumstances described in that clause, unilaterally to refer disputes to arbitration. A party may do so only after the following steps have occurred:
(a) one party has given to the other a notice of dispute under clause 25.2;
(b) the parties have held a without prejudice conference, either within 7 days of the giving of the notice of dispute under clause 25.3 or later under clause 25.4 if either party is a member of the Queensland Master Builders Association;[1]
(c) if the parties do not settle at a conference, one party has given the other a second notice of dispute and referred the dispute to arbitration.

11. Unless those steps are taken within the time periods stated, then arbitration may only occur if the parties agree to proceed to arbitration. In the event of such an agreement, clauses 25.6 to 25.9 apply. Otherwise, either party may commence and proceed with litigation.

12. In his submission, Mr Colditz, counsel for the plaintiff, sought to distinguish between a unilateral referral to arbitration under clause 25.5 and a bilateral, separate agreement under clause 25.6. The basis of this distinction was the reference, in clauses 25.6 and 25.9 to “the parties” referring or failing to agree to refer a dispute to arbitration. Mr Colditz submitted that clauses 25.6 to 25.9 did not apply to a unilateral referral under clause 25.5. Rather, those clauses refer to the possibility that, in the absence of a unilateral referral, the parties may agree jointly to refer their dispute, to arbitration. In this case, there was no unilateral referral, nor have the parties separately agreed to refer their dispute to arbitration. Therefore, there is no arbitration agreement.

13. I respectfully disagree with that construction. The contract is not well drawn, but clearly clauses 25.6 to 25.8 apply to an arbitration to be conducted after one party requires referral under clause 25.5. The references to “the parties” should be construed as referring to either party. Otherwise clauses 25.6 to 25.8 would be redundant (being entirely dependent on there being a fresh agreement to arbitrate). Furthermore, the reference, in clause 25.9(c) to a referral to arbitration under clause 25.6 is clearly an error, as the only method of referring a matter to arbitration is under clause 25.5.

14. The effect of clauses 25.5 to 25.9 is that:
(a) if the parties have had a without prejudice conference after a notice of dispute under clause 25.2 was given, then either party may give the other another notice of dispute setting out details of the dispute then existing (which may not be all the original disputes) and, by that notice, elect to refer to arbitration the items of dispute set out in the notice;
(b) if either party makes such a referral and the parties cannot agree on an arbitrator, the method of selection of an arbitrator set out in clauses 25.6 and 25.7 will be used to have one appointed;
(c) if neither party gives the other a notice of dispute and referral to arbitration (under clause 25.5) within 7 days of a conference under clause 25.3,[2] or if a conference did not take place due to the refusal of the party given the original notice of dispute, either party may commence litigation about the disputes set out in the original notice of dispute.

15. Clause 25 as a whole is clearly an arbitration agreement.
Was the defendant’s application for a stay made too late?

16. The plaintiff contends that the defendant sought to refer the dispute to arbitration too late, as the first occasion on which the defendant, by its solicitor, mentioned referral to arbitration was on 9 March 2021, after it had successfully applied to have a default judgment against it set aside. In support of that application, the defendant’s solicitor swore an affidavit in which he said,[3]I am informed by John Hennessy and believe that the Defendant has a Defence and a Counterclaim, being:
(a) At all times, the Defendant was ready and willing to complete the work pursuant to the subcontract, including rectifying any alleged defects. However, the Plaintiff prevented the Defendant from performing work because the Defendant was denied access to site. As the Plaintiff prevented the Defendant from performance, by the doctrine of prevention, it cannot take advantage of its own default and allege breach of contract by the Defendant.
(b) The Plaintiff’s claim for alleged liquidated damages includes claim for a period caused by the Plaintiff itself which prevented earlier performance. The Plaintiff only gave access to site after 4 December 2018. As such the liquidated damages claim seek to take advantage of delay caused by the Plaintiff. Further, the period of time includes time when the Defendant was prevented from performance due to exclusion from site.

17. Counsel for the plaintiff submitted that those paragraphs comprise the defendant’s “first statement on the substance of the dispute,”[4] in which case the defendant became disentitled to file its application seeking a stay after it filed that affidavit.

18. Mr Colditz referred me to several authorities that have considered what amounts to a “first statement on the substance of the dispute.” I have also reviewed the discussion of the section and its equivalents in other jurisdictions in Commercial Arbitration Act 2010 (NSW) (Annotated) published by Westlaw AU.

19. I preface my consideration of this issue by noting that a court should attempt to construe the Act in a manner consistent with the UNCITRAL model law on international commercial arbitration, on which the Act is based.[5]

20. In CPB Contractors, at [91]-[92] Lee J referred to two decisions of other Courts. Of particular assistance is that of Slattery J in Gilgandra Marketing Co-operative Ltd v Australian Commodity & Marketing Pty Ltd [2010] NSWSC 1209. His Honour commenced his decision by remarking, at [1], that the case illustrated that a party operating under the Act may need to decide early to pursue a stay application.

21. In Gilgandra, the plaintiff commenced an action for a debt allegedly owed and obtained an interlocutory injunction restraining the defendant from dealing with the goods sold to it by the plaintiff. Directions were made for pleadings and a prompt trial. The defendant filed an unconditional notice of appearance and then took other steps, including applying to set aside the injunction. Some months later, it filed its defence and, on the same day, a motion seeking a stay of the proceeding to enable arbitration under the sale agreement. Slattery J held that it was not entitled to a stay.

22. At [49] to [53], his Honour considered a number of New Zealand decisions on when a party’s first statement on the substance of the dispute is made. His Honour extracted the following passage from a learned article[6] summarising those decisions:
It has been variously held that the following constitute a “party’s first statement on the substance of the dispute”:
(a) a notice of opposition and affidavit in opposition to an application for an interim injunction;
(b) an originating application for an order setting aside a statutory demand and supporting affidavit;
(c) an affidavit in reply in a summary judgment application in which the plaintiff raises matters which are the subject of an arbitration agreement in reliance on which the plaintiff subsequently seeks to stay proceedings brought by the defendant;
(d) proceeding with a claim after making an application for interim relief with reference to an arbitration agreement but failing then or immediately after the resolution of the interim relief application to apply for a stay, so adopting the statement in the interim relief application as a statement on the substance of the dispute.

23. Slattery J went on to say:
“the principles stated in a decision in Pathak v Tourism Transport Ltd[7] show that a defendant who opposes interim relief in Court and fails to seek a stay or protest jurisdiction in respect of the substantive dispute at an early time under Article 8(1) will be prevented from seeking a stay. … Heath J found that had a stay been sought by the plaintiff immediately after the resolution of the interim relief application it would have been granted … [but] because the plaintiff had proceeded with the Court action and therefore adopted the earlier statement made in the interim relief the plaintiffs had therefore submitted their first statement on the substance of the dispute and that it was too late then to seek a stay.

24. Notably, in Pathak, Heath J referred to a number of other New Zealand decisions on the equivalent provision to s8(1) of the Queensland Act. In one,[8] it was held that, in filing a response to an interim injunction application, the defendant had submitted to the court’s jurisdiction. Its notice of opposition to the interim injunction application and its affidavits in support constituted a statement on the substance of the dispute.

25. In another,[9] the Master held that an affidavit filed on behalf of the applicant to set aside a statutory demand was a “first statement on the substance of the dispute”.

26. Heath J concluded, most relevantly, that “a defendant who opposes interim relief and fails to seek a stay (or protest jurisdiction) in respect of the substantive dispute will also be prevented from seeking a stay.”[10]

27. Slattery J, after referring to those decisions, concluded at [54] that the defendant’s opposition to the plaintiff’s application for interim relief was its first statement on the substance of the dispute. But even if that were not the case, its failure to seek a stay immediately afterwards and its conduct in cooperating over some two months in bringing the proceeding on for hearing, even before a formal defence was filed, was a continuing adoption by it of its first statement at the interlocutory hearing.

28. Returning now to CPB Contractors, having briefly referred to the New Zealand cases, Lee J concluded at [92] that they –
supported the principle that a respondent which opposes interim relief and fails to seek a stay or protest jurisdiction in respect of a substantive dispute at an early time would be prevented from seeking a stay.

29. Lee J went on to refer to decisions of courts of Singapore and Hong Kong. In particular, his Honour quoted this observation from the Court of Appeal of Singapore:[11]

It now seems to be fairly settled that a “step” is deemed to have been taken if the applicant employs court procedures to enable him to defeat or defend those proceedings on their merits and/or the applicant proceeds, from a procedural point of view, beyond a mere acknowledgment of service of process by evincing an unequivocal intention to participate in the court proceedings in preference to arbitration.

30. Lee J concluded that the State in the case before him had not made its application for a stay prior to filing its first response on the substance of the dispute and therefore was not entitled to a stay of the proceeding.
31. Counsel for the plaintiff in this proceeding submitted that the sworn statements as to the defences available to the defendant in this proceeding were in common with the common feature in all the cases, namely that they constituted statements that “contained what the party in question said about how the substantive dispute in the primary proceedings should be determined.”[12]

32. In its application to set aside the default judgment,[13] the defendant in this case also sought an order that it have 28 days from setting aside the judgement within which to file a notice of intention to defend and defence. It did not seek an order staying the proceeding for the purpose of an arbitration. I have set out above what Mr Robinson deposed to about the defences available to the defendant. On 1 March 2021, the day before the proposed hearing of its application, the defendant consented to an order that it file and serve its notice of intention to defend and defence by 23 March 2021.

33. It was not until its solicitors wrote to the plaintiff’s solicitors on 9 March 2021[14] that the defendant first raised the arbitration agreement, purported to refer the dispute to arbitration and foreshadowed making this application for a stay of the proceeding to enable arbitration to take place.

34. One might ordinarily think that the phrase “first statement on the substance of the dispute” would be referring to a formal document that makes a claim in court proceedings or responds in detail to the claim. The phrase is used in the Model Law because it applies to many countries with different procedural requirements. In the Australian context, one might consider that it refers to such documents as a statement of claim and a defence, or perhaps an affidavit supporting an originating application. In contrast, one might think, a short description of the bases of defences available in an affidavit to set aside a default judgment might not constitute such a statement. This is particularly so when courts have decided that a plaintiff’s application for, or opposing, an interim injunction, which must include evidence setting out the factual basis for the application, does not comprise such a statement.

35. However, the almost unanimous weight of authorities in which equivalent provisions have been considered is to the effect that a party who submits to a court’s jurisdiction in a proceeding concerning the subject matter of an arbitration agreement and, in that proceeding, makes some statement of the nature of its claim or defence, except where a proposed claimant invokes a court’s jurisdiction and power to grant interim relief, is thereafter prevented from seeking a stay under s 8 or its equivalents. While I am not bound by those authorities, I am not persuaded that they are clearly wrong. In the circumstances, I should follow them.

36. In its application to set aside the judgment, it was not necessary for the defendant to demonstrate to the court that it has a good arguable defence, because the application was based on the basis that the judgment was irregularly entered.[15] It could have sought to set aside the judgement on that basis and, at the same time, sought a stay. It did not do so. Instead, it sought to set aside the judgment and to seek an order that it file its unconditional notice of intention defend and a defence. In support, Mr Robinson described, although in short compass, the defences on which the defendant apparently intended to rely.

37. Having regard to the weight of authority, I conclude that Mr Robinson’s description of those defences do constitute the defendant’s first statement on the substance of the dispute. It is therefore now too late for it to seek a stay under s 8.

38. That conclusion makes it unnecessary for me to consider and determine the plaintiff’s third ground of opposition to the application. However, I will record that the defendant’s application, by which it not only sought to set aside the default judgment but also sought an order that it file a notice of intention to defend and a defence, as well as its consent to that latter form of order, seem clearly to constitute an election to defend the litigation in this proceeding rather than by arbitration. This third ground therefore does seem to have merit.

39. The defendant’s application must be dismissed. I shall hear from the parties on costs and directions for the next step in the proceeding.

Subcontract clause 25

25. Dispute Resolution

25.1 Except to the extent that any litigation that may be commenced for injunctive relief in relation to any matter arising out of or in connection with the Subcontract Agreement, the requirements of this clause are a condition precedent to either party commencing (or, if wrongly commenced, continuing) litigation.

25.2 If a dispute or difference arises out of, or in connection with, the Subcontract, either party may give the other party a written notice of dispute setting out the details of the dispute including any amount in dispute.
‘Without Prejudice’ Conference

25.3 The parties shall arrange, and participate in, a ‘without prejudice’ conference between them, or their authorised representatives, in an attempt to resolve the dispute or difference set out in the notice of dispute within 7 Days after the giving of the notice of dispute.

25.4 Subject to one of the parties being a member of the Queensland Master Builders Association:
(a) if either party gives a written notice to the Queensland Master Builders Association and the other party requesting that the Queensland Master Builders Association appoint a person to facilitate discussion in a ‘without prejudice’ conference, the Queensland Master Builders Association may appoint such a person; and
(b) On any appointment of a person by the Queensland Master Builders Association under Clause 25.4(a), the parties shall permit that person to make suitable arrangements for, and to facilitate discussion in, the ‘without prejudice’ conference.

Mediation or Arbitration

25.5 If the parties fail to resolve all of the dispute or difference set out in the notice of dispute during the ‘without prejudice’ conference, or if the party given the notice of dispute fails to participate in a ‘without prejudice’ conference within 7 Days after the giving of the notice of dispute, then either party may give the other party a written notice of dispute setting out the details of the dispute including any amount in dispute and may refer all or any part of the dispute or difference to mediation or arbitration.

25.6 If the parties refer all or any part of the dispute or difference set out in the notice of dispute to mediation or arbitration but fail to agree on the person to be appointed as the mediator or the arbitrator, then either party may give a written notice to the President of the Queensland Master Builders Association and the other party requesting that the President appoint (as the case may be):
(a) a mediator to facilitate the mediation; or
(b) An arbitrator to decide all or that part of dispute or difference referred to arbitration.

25.7 If either party gives a notice under Clause 25.6, the President shall give to the parties a written notice setting out the name and contact details of (as the case may be):
(a) the mediator appointed by the President to facilitate the mediation; or
(b) The arbitrator appointed by the President to decide all or that part of the dispute or difference referred to arbitration.

25.8 On the giving of a notice under Clause 25.7, the parties shall:
(a) request the mediator or the arbitrator named in the notice to make suitable arrangements for (as the case may be) the mediation or the arbitration; and
(b) Participate in (as the case may be) the mediation or the arbitration and pay the costs of the mediation (including the costs of the mediator) or the costs of the arbitration (including the costs of the arbitrator) in equal shares unless otherwise agreed by the parties or decided by the arbitrator.

25.9 If the parties fail to:
(a) agree to refer any part of the dispute or difference set out in the notice of dispute to mediation or arbitration within:
(i) 7 Days after the ‘without prejudice’ conference; or
(ii) If the party given the notice of dispute fails to participate in a ‘without prejudice’ conference 14 Days after the giving of the notice of dispute, or
(b) resolve all of the dispute or difference set out in the notice of dispute during any mediation,
Then either party may commence litigation in relation to any part of the dispute that is not:
(c) agreed to be referred to mediation or arbitration under Clause 25.6; or
(d) Resolved during any mediation.

25.10 Notwithstanding the giving of a notice of a dispute, the parties shall, subject to the Subcontract, continue to perform the Subcontract.

________________________________________

[1] Neither party is a member of the QMBA.

[2] That period of 7 days derives from clause 25.9, which I consider applies to a referral by either party under clause 25.5 (or indeed by both parties). If there is no referral within 7 days of a conference, either party may commence litigation.

[3] Affidavit of Malcolm Robinson filed on 24 February 2021, paragraph 8 (errors in original).

[4] Commercial Arbitration Act, s8

[5] CPB Contractors Pty Ltd v Celsus Pty Ltd (2017) 353 ALR 84, [43]. The model law was produced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the “New York Convention”.

[6] Tómas Kennedy-Grant QC, “The New Zealand Experience of the UNCITRAL Model Law: A Review of the Position as at 21 December 2007” (2008) 4 AIAJ 1.

[7] Pathak v Tourism Transport Ltd [2002] 3 NZLR 681.

[8] The Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66.

[9] Anderson Switchboards & Electronic Ltd v Schneider Electrical (NZ) Ltd (High Court, Auckland, M 1215-IM00, 16 January 2001), a decision of Master Kennedy-Grant.

[10] Pathak, 692.

[11] Carona Holdings Pte Ltd v Go Go Delicacy Pte Ltd [2008] 4 SLR 460; [2008] SGCA 34, [55]. Emphasis in the original.

[12] Quoting from Mitchell J in Australian Maritime Systems Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52, [93].

[13] Court document no 9, filed on 24 February 2021.

[14] Affidavit of Paul Jason Hick filed by leave on 19 March 2021, “PH-6”, pp 339-341.

[15] A defendant may almost always have an irregularly entered judgment set aside as of right: Cusack v De Angelis [2008] 1 Qd R 344, [36].

Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd [2021] QSC 75

Supreme Court of Queensland

 

Case Name: Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd
[2021] QSC 75
Medium Neutral Citation: [2021] QSC 75
Hearing Date(s): 12 February 2021
Date of Orders: 19 April 2021
Decision Date: 19 April 2021
Before: Henry J
Decision:
  1. The parties are referred to arbitration pursuant to s 8(1) Commercial Arbitration Act 2013 (Qld).
  2. Cairns Supreme Court proceeding 571/20 is stayed.
  3. The court will agree to hear the parties as to costs, if costs have not been agreed by 9.15am 28 April 2021 (leave given for out of town parties to appear by telephone or video-link).
Catchwords: ARBITRATION – ARBITRATION AGREEMENT – DEFINITIONS AND FORM OF ARBITRATION AGREEMENT – ARBITRATION AGREEMENT AS GROUND FOR STAY OF COURT PROCEEDINGS – where the applicant defendant engaged the plaintiff respondent as sub-contractor for roadwork construction – where the plaintiff respondent complains it was required to complete work and incur associated costs beyond that contemplated by the original agreement – where the plaintiff respondent alleges it is owed money for this additional work – where the plaintiff respondent says the applicant defendant should be estopped by convention from denying that the plaintiff respondent is entitled to reasonable additional remuneration or damages or compensation pursuant to ss 236, 237 Australian Consumer Law for loss suffered as a result of the applicant defendant’s alleged unconscionable conduct – where the plaintiff respondent requests an order in relation to the return of a bank guarantee – where the applicant defendant relies upon an arbitration clause in the contract to refer the parties to arbitration and permanently stay the proceeding – where the plaintiff respondent contends the matter ought not be referred to arbitration as its claim does not rely on the contract and rather arises by operation of law outside the contract – whether there is an “arbitration agreement” as per s 8(1) Commercial Arbitration Act 2013 (Qld) – whether the application has been “brought in a matter which is the subject of the arbitration agreement” – whether the agreement is “null and void, inoperative or incapable of being performed” – whether the matter should be referred to arbitration – whether the proceeding should be stayed.
Legislation Cited: Australian Consumer Law (Cth), s 20, s 21, s 236, s 237

Commercial Arbitration Act 2013 (Qld), s 7, s 8

Cases Cited: Astro Vencedor SA v Mabanaft [1971] 2 QB 588, applied.

 

Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99, cited.

 

Commandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, distinguished.

 

CPB Contractors Pty Ltd v Celsus Pty Ltd (2017) 353 ALR 84, applied.

 

Duncombe v Porter (1953) 90 CLR 295, applied.

 

Francis Travel v Virgin Atlantic Airways (1996) 39 NSWLR 160, applied.

 

Hi-Fert v Kiukiang Carriers (1998) 90 FCR 1, distinguished.

 

IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, explained.

 

Incitec Ltd v Alkimos Shipping Corporation [2004] FCA 698, cited.

 

Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196, distinguished.

 

McCann v Switzerland Insurance (2000) 203 CLR 579, cited.

 

Methanex Motonui Ltd v Spellman [2004] 1 NZLR 95; [2004] 3 NZLR 454, cited.

 

Re Hohenzollern Actien Gesellschaft and City of London Contract Corp (1886) 54 LT 596, applied.

 

Roose Industries Ltd v Ready Mixed Concrete Ltd [1974] 2 NZLR 246, explained.

 

TCL Air Conditioner v Federal Court (2013) 251 CLR 533, applied.

 

Westfield Management v AMP Capital (2012) 247 CLR 129, applied.

 

Woolf v Collis Removal Service [1948] 1 KB 11, applied.

 

Yeshiva Properties No 1 Pty Ltd v Lubavitch Magal Pty Ltd [2003] NSWSC 615, distinguished.

Texts Cited: NIL
Category: TRIAL
Parties:  

CIVIL MINING & CONSTRUCTION PTY LTD

ABN 18 102 557 175

(applicant)

 

v

 

CHESHIRE CONTRACTORS PTY LTD

ABN 75 124 700 385

(respondent)

Representation: COUNSEL:
M Jonsson QC for the applicant defendant
M Hindman QC for the plaintiff respondentSOLICITORS:
O’Connor Law for the applicant
Clayton Utz for the respondent
File Number(s): SC No 571 of 2020
Publication Restriction: NIL
Decision under appeal: Referred to Arbitral Hearing

 

Judgement:

 

Introduction

The applicant defendant, Civil Mining & Construction Pty Ltd (CMC), was contracted by the Queensland Department of Transport and Main Roads (TMR) as principal for roadworks construction (the project).  CMC sought the aid of a civil engineering roadworks sub-contractor to perform some of the works.

CMC entered into a written sub-contract (the contract) with the plaintiff respondent, Cheshire Contractors Pty Ltd (Cheshire).  A dispute has arisen between CMC and Cheshire, which alleges it is owed money by CMC in connection with the works Cheshire performed for CMC.  Cheshire filed a claim against CMC in this court seeking money owing in the sum of $1,393,616.80 plus GST, interest thereon and the return of a bank guarantee.

Rather than file a defence, CMC countered with the present application which relies upon an arbitration clause in the contract to refer the parties to arbitration and permanently stay the proceeding.

Cheshire contends the matter ought not be referred to arbitration for reasons including that its claim does not rely on the contract and rather arises by operation of law outside the contract.

Background

 

In carrying out the subcontracted works, Cheshire was obliged by the contract to comply with the performance requirements of TMR’s specifications.  The specifications required construction under the contract to use only materials that complied with the material specified therein, and not use any material that did not comply with the specifications (out of spec material).  The specifications of material anticipated to be found in the earth in the vicinity of works in a project of this kind will not always meet expectations, resulting in greater than anticipated expense.

During the performance of Cheshire’s work, out of spec material was encountered in at least 12 locations on the site of the contract works. On eleven occasions CMC allegedly gave Cheshire a direction on how to integrate or otherwise deal with the out of spec material.

Cheshire notified CMC of its intention to make a claim arising from the use of out of spec material.  CMC requested Cheshire provide it with a letter upon which CMC could base a latent condition claim on TMR for the use of out of spec material.  Cheshire complied.  This is the genesis of Cheshire’s current complaint, in effect, that CMC in serving its own interests procured Cheshire to make a claim for remuneration on a basis different than that contemplated by the contract.  Following receipt of that letter, CMC stated to Cheshire that the letter would not suffice as a variation claim and suggested amendments to the document.  Cheshire amended its out of spec claim letter accordingly and again submitted it to CMC.

Cheshire contends the parties consensually departed from the contract by agreeing that they would progress their dealings on the mutual assumption and convention that the latent conditions encountered by Cheshire in the course of excavation could not have been anticipated by them at the time of tender for the contract works.  It was also agreed, allegedly, that the requirement to complete road excavation and road embankment work operations with out of spec material would need to be reasonably remunerated additionally to the remuneration already allowed under the contract in respect of excavation and embankment works.  Further, it was allegedly agreed that CMC would make payment to Cheshire for its work involving use of out of spec material on a basis consistent with any payment it received from TMR for its claim to be made on TMR.

In March 2016 CMC made a claim on TMR for use of out of spec material (CMC’s Latent Condition Claim), seeking payment for it.   In April of 2016, CMC again requested Cheshire to provide further information and Cheshire made a claim on CMC for payment of Cheshire’s out of spec claim.

During July and August 2016, CMC and TMR engaged in dispute resolution meetings in regard to CMC’s Latent Condition Claim. In the course of those meetings CMC and TMR jointly appointed a third-party engineer to independently assess and value CMC’s Latent Condition Claim.

CMC received an approval and payment from TMR for CMC’s Latent Condition Claim under the Head Contract, (the TMR Payment). This was the amount of $2,507,975.00 as certified for payment for two of the applicant’s progress payments and the amount of $2,597,462.00 approved as ‘variations’ – being $1,643,975.00 for ‘Latent Conditions’ and $953,667.00 for ‘VVA-092 Latent Condition Claim’.

On about 9 November 2016 Cheshire issued a final progress claim for the amount of Cheshire’s out of spec claim.  By letter of 23 November 2016, CMC responded saying the amount it proposed to pay was $0.00.  The letter explained in denying Cheshire’s claim “for a purported latent condition” it relied upon clauses 2.1.1 and 13 of the contract’s general conditions.  Clause 13 imposed temporal and other requirements for the submission of claims.  Clause 2.1.1 provided:

 

“2.1.1       The Subcontractor agrees and accepts the obligation to fully inform itself on site conditions and all documents furnished by CMC, prior to it tendering for the Subcontract Works and to fully satisfy itself regarding all the conditions, risks, contingencies and other circumstances which might affect its performance of the Subcontract Works. In particular, the Subcontractor shall accept the obligation to thoroughly investigate all matters regarding the relevant site, surface and sub-surface conditions. No increase in the Subcontract Sum will be allowed for the Subcontractor’s failure to ensure that it is fully informed regarding all the circumstances relating to its performance of the Subcontract Works. Also CMC shall not be liable for any additional cost which may be incurred by the Subcontractor in the event that different site, surface and sub-surface conditions are experienced by the Subcontractor to those which may be shown in the Subcontract documents provided by CMC, the information in such documents being provided by CMC for indicative purposes only.” (emphasis added)

In short, CMC’s position was that Cheshire’s claim for payment did not conform with the contract’s temporal requirements and money was not payable under the terms of the contract because Cheshire assumed the risk of encountering out of spec material.

In February 2020 Cheshire gave notice of dispute seeking referral to mediation pursuant to clause 12 of the contract which in part provides:

“12.  Disputes

 

12.1         Early resolution

 

It is mandatory that the Parties comply with this clause before a dispute or difference is referred to mediation.  Disputes or differences arising between the Parties shall be negotiated between the Parties with the bona fide intention of resolution without unreasonable delay. …

 

12.3         Settlement of unresolved disputes or differences

 

12.3.1       If disputes or differences arising between the Parties cannot be resolved pursuant to clause 12.1 then either party shall refer such disputes or differences to a CMC Director and in the case of the Subcontractor means (sic) a Company Director or Partner of the Subcontractor of the respective Parties in writing.  Within 7 days of receipt of the written referral of such disputes or differences to Company Directors, Directors shall meet or otherwise confer to hold good faith discussions in an effort to resolve the disputes or differences by amicable agreement.

 

12.3.2       Should the parties fail to reach agreement in accordance with clause 12.3.1 the Parties agree that the disputes or differences shall within 14 days from the receipt of the written referral pursuant to clause 12.3.1 be referred to mediation.  Either party may refer the dispute or difference to ACDC in writing requesting the appointment of a mediator.  The mediation shall be conducted in accordance with the Australian Commercial Dispute Centre (“ACDC”) mediation Rules and Procedures, and the Chairperson of the ACDC or the Chairperson’s nominee will select the mediator and determine the mediator’s remuneration.  The Parties agree that the costs of any mediator appointed shall be borne equally between the Parties.” (emphasis added)

 

It will be relevant later in these reasons that where clause 12 refers to “disputes or differences” such references are to the description at the outset of clause 12.3.1, namely “disputes or differences arising between the Parties”.

A mediation proceeded on 4 August 2020 but was unsuccessful.  Cheshire did not further pursue the dispute resolution process.

Cheshire complains it was required to complete work and incur associated costs beyond that contemplated by the originally contracted Subcontract Works. By making and pursuing what was in effect CMC’s out of spec claim, Cheshire alleges it lost the opportunity to make an alternative claim for damages or remuneration under and in compliance with the contract. Cheshire argues CMC is, or ought to be, estopped by convention from denying that Cheshire is entitled to reasonable additional remuneration in respect of excavation and embankment works. Cheshire claims it is entitled to payment by CMC in the sum of $1,393,616.80 plus GST as reasonable remuneration for works done by the respondent or alternatively, the same sum as damages or compensation pursuant to ss 236, 237 Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010 (Cth)) for loss suffered as a result of CMC’s allegedly unconscionable conduct.

Further, Cheshire seeks an order that CMC return a bank guarantee issued by Westpac Banking Corporation in the sum of $48,430.41 or that the applicant notifies Westpac Banking Corporation that Cheshire’s bank guarantee has been lost and that the applicant no longer has any interest in that guarantee.  Cheshire provided the guarantee as security in satisfaction of clause 7.7.1 of the contract.  The defects liability period under the contract expired on 21 October 2016.  By a letter dated 9 November 2016, Cheshire requested CMC to return the remaining security.  It is alleged CMC has not made a call on the bank guarantee, has failed or refused to release to Cheshire the bank guarantee and failed or refused to confirm that the bank guarantee has been lost but is no longer required.

The ensuing reasons will, for ease of explanation, consider whether the present application should succeed on the premise that the claim is for relief based on estoppel by convention or statutory unconscionable conduct and does not seek the additional order about the bank guarantee.  Having done so the reasons will then return to the fact the claim also seeks the order about the bank guarantee and consider whether that makes a difference to the outcome otherwise of the application.

The legislated obligation to refer to arbitration

 

In bringing its application to refer the parties to arbitration and stay the proceeding, CMC contends it and Cheshire are parties to an arbitration agreement under the contract and the matters the subject of the proceeding fall within the ambit of that arbitration agreement.

If that contention is correct the court is obliged to refer the parties to arbitration pursuant to s 8(1) Commercial Arbitration Act 2013 (Qld) (the Act) which provides:

“8 Arbitration agreement and substantive claim before court

 

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

 

CMC’s application has met the timeframe stipulated by s 8(1) so the determinative questions arising from the remaining elements of s 8(1) are:

 

(a)          Is there an “arbitration agreement”?

 

(b)          Is CMC’s Supreme Court claim “brought in a matter which is the subject of the arbitration agreement”?

 

(c)          Should this court find the agreement “null and void, inoperative or incapable of being performed”?

 

As will become apparent from reasons below, the answers to those questions are, respectively, yes, yes and no.

Definition of an arbitration agreement

 

Section 7 of the Act relevantly defines an arbitration agreement as follows:

“7 Definition and form of arbitration agreement

 

(1)     An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

 

(2)     An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. …” (emphasis added)

 

The term “defined legal relationship”, used in s 7(1), is not defined by the Act.

Arbitration clause 12.3.3

 

The purported arbitration agreement is here said to be in the form of clause 12.3.3 in the contract.  It falls within clause 12 about dispute resolution, earlier passages of which are quoted above.  Following the mediation clause at 12.3.2, clause 12.3.3 provides:

 

“12.3.3      If the disputes or differences have not been settled within six (6) weeks (or such other period as may be agreed to in writing between the parties) after the appointment of the mediator, the disputes or differences shall be referred to arbitration by either Party in accordance with and subject to The Institute of Arbitrators and Mediators Australia (Queensland Chapter), Rules for the Conduct of Commercial Arbitrations. In any arbitration both Parties shall be entitled to be legally represented. The parties shall appoint an arbitrator within 7 days of referral to arbitration. If the Parties fail to agree on the identity of the arbitrator, the Parties agree that the President, for the time being of the Institute of Arbitrators and Mediators Australia, is on written request from a Party to appoint an arbitrator to hear and determine the disputes or differences. The Parties agree that they will not be able to proceed to arbitration unless clause 12.3.2 has first been complied with.” (emphasis added)

It is not suggested in the present context that the above use of the term “differences” additionally to “disputes” carries any significance.  These reasons will approach consideration of the matter on the basis a difference is a form of dispute and refer for convenience to disputes rather than to both disputes or differences.

 

Consideration

 

Cheshire argues the purported arbitration agreement at clause 12.3.3 does not meet that aspect of the definition at s 7(1) of the Act which speaks of an agreement to submit to arbitration disputes which have arisen or which may arise between the parties “in respect of a defined legal relationship”. It argues clause 12.3.3 fails to define the requisite “disputes or differences” to which it refers by reference to any identified legal relationship, whether contractual or otherwise, and so, absent the articulation of a defined legal relationship within clause 12.3.3, it cannot be an arbitration agreement.

In support of its argument that the defined legal relationship, if there is one, must be ascertainable from the purported arbitration clause, Cheshire referred to the following observation by French CJ and Gageler J in TCL Air Conditioner v Federal Court:[1]

“[P]arties who enter into an arbitration agreement for commercial reasons ordinarily intend all aspects of the defined relationship in respect of which they have agreed to submit disputes to arbitration to be determined by the same arbitral tribunal.”[2]

 

However, that passage does not suggest a requirement that the defined relationship must be ascertainable from the arbitration clause considered in isolation.  Such a requirement would be contrary to orthodox principles of construction, particularly that the whole of the relevant instrument is to be considered in construing its meaning.[3]  Clause 12.3.3 falls for interpretation in the broader context of the document as a whole, which is that it is a clause within a contract.  Clause 12.3.3’s references to the “The Parties” is to the parties to the contract, that is, CMC and Cheshire.  They have a defined legal relationship in that they are parties to a contract.

 

This answers only part of Cheshire’s argument. Cheshire complains that clause 12.3.3 does not contain any description of the nature of the disputes so as to indicate, consistently with the s 7 definition, that they are disputes arising between the parties in respect of their defined legal relationship as parties to the contract. The purported agreement says nothing as to the nature of the disputes other than that they are disputes arising between the parties. For this reason, Cheshire contends clause 12.3.3 fails to meet the s 7 definition of an arbitration agreement.

In support of that argument Cheshire emphasised referral to arbitration causes the significant result of denying the right of adjudication by a court.  In submitting that ought not occur unless it is clear the denial was intended, Cheshire cited the following observation of Fullagar J in Duncombe v Porter about a general principle of interpretation:[4]

 

“Rights which exist at common law or by statute are not to be regarded as denied by words of dubious import.  Before any such denial is accepted, it must appear with reasonable clarity from the language used that the denial is intended.”[5]

 

In the present case, it is implausible having regard to the language of clause 13.3.3 that no denial at all was intended.  It is the breadth of that denial which is the real issue.

In considering whether the language of clause 13.3.3 is sufficiently clear to deny Cheshire the court-based pursuit of its claim it is necessary to consider the meaning of the clause in the context of the contract in which it appears.  These reasons earlier concluded the legal relationship of CMC and Cheshire is a defined one, namely the relationship of parties to a contract.  Such a relationship is defined not merely by the contract’s specific provisions as to the legal rights and obligations existing between the parties but also by the general law applicable to such contracting parties.  Indeed, it has been observed it will be sufficient to constitute a defined legal relationship between parties if there exists a relationship which gives rise to “the possibility that one is entitled to some form of legal remedy against the other”.[6]

 

It is a reasonable inference, premised upon the circumstance that clause 12.3.3 forms part of the contract into which the parties entered, that the disputes to which it refers are, at least, disputes in respect of the rights and obligations conferred and imposed by that contract.   Cheshire would argue even this inference goes too far and CMC would argue it does not go far enough.

Three relevant general principles of interpretation tell against Cheshire’s argument.  The first, already noted, is that the whole of the relevant instrument is to be considered in construing its meaning.  The second is commercial contracts should be construed to give effect to their commercial purpose.[7]  This contract’s purpose was the performance of paid works, which supports the interpretation that disputes about payment should be caught by clause 12.3.3.   The third interpretive principle is that arbitration clauses should not be construed narrowly.[8]  On this point, in Incitec Ltd v Alkimos Shipping Corporation[9] Allsop J, as he then was, observed:

 

“The clear tide of judicial opinion as to arbitration clauses, where the fair reading of them is not confined, is to give width, flexibility and amplitude to them.”[10]

 

The application of these principles compels the inference that the disputes to which clause 12.3.3 refers are, at least, disputes in respect of the rights and obligations conferred and imposed by the contract in which the clause is found.  But how much further does it reach, if at all?

CMC’s argument at its most extreme would in effect have it that clause 12.3.3’s reference to disputes arising between the parties encompasses any disputes arising between them.  However, there is nothing in the contract to fuel the objective attribution of such a free form intention, unconstrained by the context of the contract within which it is found and the limits of the legal relationship it defines.

CMC relied upon some cases in which clauses referring “all disputes” (or disputes described in similarly broad language) to arbitration were upheld, despite the uncertain breadth of their description.[11]  Significantly, none of these cases suggest the range of such disputes is to be regarded as unlimited by the context of the source document.  To the contrary, the clauses in those cases were read down to conform with that context.

 

The cases in this field vary in articulating the degree or nature of connection the dispute must have with that context.  However, some common threads can be identified.

In Re Hohenzollern Actien Gesellschaft and City of London Contract Corp[12] the contract, for the supply of locomotives and boilers, provided for arbitration of “[a]ll disputes”.  Payment was conditional upon the purchaser’s engineer’s certification that the locomotives and boilers had been received in working order.  Certification was not forthcoming and it was optimistically argued there was no dispute because certification was a condition precedent to entitlement under the contract.  Lord Esher MR observed:

 

“Now, of course “all disputes” cannot mean disputes as to matters that have no relation at all to the contract.  But I think that those words are to be read as if they were “all disputes that may arise between the parties in consequence of this contract having been entered into”.  I think that, as my brother Mathew pointed out in the court below, there being all these clauses in the contract as to any of which a dispute might arise, this last clause was added to settle them all.”[13] (emphasis added)

 

In Woolf v Collis Removal Service[14] the arbitration clause related to “any claims upon or counterclaim to any claim made by the contractors”.  The plaintiff claimed damages for a breach of contract and or negligence because of loss and damage of goods stored in a location other than the warehouse which the plaintiff had contracted with the defendants to have the goods stored at.  The decision to stay the action pursuant to s 4 Arbitration Act 1889 was upheld on appeal, Asquith LJ observing:

 

“The arbitration clause in the present case is, as to the subject matter of claims within its ambit, in the widest possible terms.  That clause is not, in terms, limited to claims arising “under” the contract.  It speaks simply of “claims”.  This, of course, does not mean that the term applies to claims of every imaginable kind.  Claims which are entirely unrelated to the transaction covered by the contract would no doubt be excluded; but we are of opinion that, even if the claim in negligence is not a claim “under the contract”, yet there is a sufficiently close connexion between that claim and that transaction to bring the claim within the arbitration clause, even though framed technically in tort.”[15] (emphasis added)

 

In Astro Vencedor SA v Mabanaft,[16] there was a claim in tort for wrongful arrest of a chartered ship, which arrest had occurred to secure damages allegedly owed in connection with a claim the shipowner had wrongfully stopped discharging oil during the charter contract.  The claim about stopping the oil was caught by the arbitration clause, which covered “[a]ny dispute arising during the execution of this charter-party”.  The issue was whether the claim in tort was also within the scope of the arbitration clause.  Lord Denning MR, with whom the rest of the court agreed, concluded it was, observing the arrest was “the follow-up to” and “so closely connected to” the claim about stopping the oil as to be within the scope of arbitration.[17]  This approach echoes Lord Asquith’s test of sufficiently close connection in Woolf.  Its reference to the chain of causal connection likewise echoes Lord Esher’s test of consequential connection in Hohenzollern.

 

In Roose Industries Ltd v Ready Mixed Concrete Ltd,[18] a contract for the supply of metal chips and so-called “all-in” materials referred to both categories in a number of its clauses, but the clause relating to quality mentioned metal chips only.  The purchaser sought a declaration or alternatively rectification in order to require the “all-in” materials to conform to the same standard specification as for metal chips.  An arbitration clause applied to “[a]ny dispute which may arise between the parties to this agreement”.  However the primary judge refused a stay of the action to permit arbitration on the basis the arbitrator would have no jurisdiction to order rectification, that being “clearly outside the arbitration clause”.  That decision was reversed by the New Zealand Court of Appeal which observed:

 

“In our view, the court should restrict the operation of such a wide clause no further than necessary, and on that reasoning should exclude, in the words of Asquith LJ in Woolf v Collis Removal Service …, only claims which are entirely unrelated to the commercial transaction covered by the contract.  Here, the essential question in dispute is whether the parties intended that the “all-in” materials should be required to conform to the standard specification.  That seems to be very much a question arising out of that commercial transaction.  With great respect …, we cannot agree that the particular dispute is not within the arbitration clause.”[19] (emphasis added)

 

In IBM Australia Ltd v National Distribution Services Ltd,[20] IBM agreed to supply systems integration services, including IBM hardware and software.  A dispute arose regarding the suitability of the hardware and software which manifested as an alleged breach of the Trade Practices Act 1974 (Cth) for misleading or deceptive conduct. The relevant arbitration clause was expressed to govern “any controversy or claim arising out of or related to this agreement or the breach thereof”. In concluding there was no basis to exclude from arbitration claims arising under the Trade Practices Act, Handley JA observed the words “related to this agreement or the breach thereof” should not be read down, noting:

 

“These words can only have been added to include within the submission claims other than in contract such as claims in tort, and restitution, or in equity.  I can see no basis for excluding claims arising under statutes which grant remedies enforceable in or confer powers on courts of general jurisdiction.”[21]

 

In the same case, after engaging a lengthy review of the authorities, Kirby P observed:

 

“From the foregoing trend of authority, both in Australian and overseas courts, it can be seen that an arbitration clause, expressed in the language of the clause here under consideration, is not to be narrowly construed.  It is sufficiently wide to include claims for rectification and for relief on the ground of misrepresentation or mistake. …  Whilst it is true that the conduct complained of as being in breach of the Trade Practices Act (Cth) is alone sufficient to enliven the provisions of that Act and whilst such provisions do not depend upon the agreement of the parties, such considerations do not determine the simple question posed. That question is whether the misrepresentations alleged are “related to this agreement or the breach thereof”. It is enough to say that, in this case, it was open to … determine that the relationship was made out on the pleadings.”[22] (emphasis added)

 

In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways,[23] an agency agreement between an English principal and an Australian agent for air passenger transport contained an arbitration clause referring “[a]ny dispute or difference arising out of this Agreement” to arbitration.  The dispute arising was a claim for damages for breach of contract, alternatively equitable damages “arising out of an unconscionable departure from representations and/or a common assumption made and induced by the defendant”.  A clause of the agreement had provided the agreement could be terminated at any time on three months’ notice, however it was allegedly subsequently promised or represented by the English principal there would be no termination until the end of 1995.  Notwithstanding this, the English principal gave notice of termination in 1994.  The English principal’s alleged representation was said to have induced a common assumption that there would be no termination until the end of 1995 and was also said to have been a representation involving misleading or deceptive conduct under the Trade Practices Act.  The primary issue for determination by the New South Wales Court of Appeal was whether the claims concerning the purported termination having regard to the alleged representation, estoppel and misleading conduct gave rise to a dispute or difference arising out of the agency agreement.

 

Gleeson CJ, with whom Meagher JA and Sheller JA agreed, distinguished Allergan Pharmaceuticals Inc v Bausch & Lomb Inc[24] where Beaumont J held an arbitration clause did not cover a dispute under the Trade Practices Act, the agreement merely being part of the background to the alleged contraventions so that the dispute did not arise out of it.  Gleeson CJ observed:

 

“In the present case the alleged contravention of the Act arose out of a representation concerning the duration of the agreement, and the appellant’s claims concern its purported termination.  The agreement is not merely the background to the dispute.  The dispute is about the agreement, and its performance, and whether it was properly and lawfully brought to an end.”[25]

 

That reasoning has the effect that a dispute pursuing rights said to arise outside a contract should nonetheless be regarded as arising out of or closely connected with the contract where the dispute turns upon whether or not the parties’ rights are constrained by the strict operation of the terms of the contract.  The present case appears to involve just such a dispute, in that CMC relies upon the strictures of the contract’s payment provisions in contending Cheshire is not owed more, whereas Cheshire relies on CMC’s conduct to ground a right to further payment notwithstanding the contractual provisions upon which CMC relies.

In this respect both the present case and Francis Travel are distinguishable from Hi-Fert v Kiukiang Carriers,[26] on which Cheshire placed reliance.  In that matter the issue of current relevance was whether a cargo owner’s claims met the requirement of the arbitration clause of the charter contract that they arose from the contract.  The claims alleged the charterer of a vessel conveying the cargo had engaged in misleading and deceptive conduct, made negligent misrepresentations and breached collateral warranties.  Those claims related to conduct said to have induced the cargo owner to have entered into an addendum contract.  The Full Court of the Federal Court considered the alleged loss would not have been suffered but for the entry into the addendum contract, as distinct from the charter contract, and concluded the claims did not arise out of the charter contract.[27]  In contrast, in the present case there is only said to be one contract and the work performed by Cheshire would not have been performed but for the entry into that contract.

 

Cheshire also relied upon Inghams Enterprises Pty Ltd v Hannigan,[28] where the New South Wales Court of Appeal reversed a primary judge’s determination that a claim for damages for breach of contract fell within the scope of the arbitration subclause of the dispute resolution clause in the contract.  The clause was relevantly worded as, “the Dispute concerns any monetary amount payable and/or owed by either party to the other under this Agreement” (emphasis added).  The New South Wales Court of Appeal concluded Mr Hannigan’s claim for unliquidated damages was not a claim for an amount payable or owed “under” the contract.  Meagher JA, agreeing with Bell P, observed:

 

“The distinction between monetary amounts which are payable or owed “under a contract” and remedies which arise by operation of law is a recognised and meaningful one.  Whereas ‘liquidated damages’ are recoverable in satisfaction of a right of recovery created by the contract itself and accruing by reason of breach, unliquidated damages for breach of contract are compensation assessed by the court in accordance with common law principles for loss occasioned by breach.

It follows that the notified dispute does not concern a monetary amount payable or owed by Inghams to Mr Hannigan under their agreement and accordingly it is not a dispute referred to arbitration by clause 23.6.1.”[29]

 

That conclusion was an inevitable result of the arbitration clause’s specific confinement to disputes concerning any monetary amount payable or owing “under” the agreement.  The present clause has no such specificity.  There is nothing in it to suggest it ought to be read down as applying only to amounts payable under the contract as distinct from amounts payable by operation of law.  Indeed, the parties’ decision to impose no qualification on the nature of the disputes referred to in clause 12.3.3 of the contract supports a liberal width being given to the degree of connection the disputes should have with the contract in order to come within the clause’s reach.

 

Section 8 of the Act directs attention to the matter which is the subject of Cheshire’s claim in the Supreme Court. That matter might be stated in various ways but at its most fundamental it is the question of whether Cheshire should be paid more than it already has been for works it was contracted to perform. Admittedly, that question arises out of the conduct relied upon to raise an entitlement to payment other than pursuant to the contract. But it is also, to adopt the language of Roose Industries, very much a question arising out of the commercial transaction to which the contract gave rise.

A dispute about the question is a dispute arising between the parties out of the commercial relationship created by the contract.  But for that relationship, Cheshire would not have been performing the works for CMC for which it seeks more payment.  The connection between the contract and the performance of the work gives the dispute the degree of close and consequential connection with the contract which is contemplated by authorities such as Hohenzollern, Woolf and Astro Vencedor.  Further, consistently with the quality contemplated in Francis Travel, the dispute turns upon whether or not the parties’ rights are constrained by the strict operation of the terms of the contract or whether events between the parties should found a right to payment beyond the terms of the contract.   These features in combination compel the conclusion that Cheshire’s claim has been brought in a matter which is the subject of an arbitration agreement.

That conclusion must result in the application succeeding, unless the court finds the arbitration agreement is null and void, inoperative or incapable of being performed. Cheshire argued clause 12.3.3 is inoperative.

In part that argument relied upon the same arguments unsuccessfully advanced in contending the clause is too vague or uncertain to meet the s 7 definition. In support of that contention Cheshire additionally cited Yeshiva Properties No 1 Pty Ltd v Lubavitch Magal Pty Ltd,[30] apparently as an example of a case considering reference to “all” disputes where such language was considered too uncertain to leave the matter to arbitration.  However, consideration of that matter does not assist by parity of reasoning because its relevant facts were considerably vaguer than the present case, including the absence of a formal document and lack of intention to be bound until such a document was executed.  For reasons already given as to the proper interpretation of clause 12.3.3, the clause was not so vague or uncertain that contractual effect ought not be given to it.

 

Cheshire’s written outline of argument indicated inoperability would be argued on the basis that Cheshire’s reliance upon estoppel by convention precluded reliance upon the contract including the arbitration agreement,[31] citing CPB Contractors Pty Ltd v Celsus Pty Ltd[32] and that case’s reference to the Singapore High Court decision in Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd.[33]  In CPB Contractors, after referring to Dyna-Jet, Lee J concluded an arbitration agreement will be inoperative where it has ceased to have effect, though how it may cease to have effect will vary in individual cases.[34]  His Honour concluded a construction arbitration agreement did not cease to have effect by reason of a mediated agreement not involving the builder or a completion deed clause establishing a further consolidated arbitration process.

 

In the present case Cheshire’s reliance upon estoppel by convention merely seeks to establish a right to payment not provided for by the contract.  The pursuit and existence of such a right does not appear to be inconsistent with the continued operation of the contract and its arbitration clause.

In oral argument Cheshire’s argument broadened to the submission that its complaints of statutory unconscionability were non-arbitrable.[35] It was argued there is an implicit public interest dimension to the category of unconscionability relied upon in ss 20 and 21 Australian Consumer Law.  It was highlighted, for example, that those sections allow the court to have regard to industry codes of conduct (not that such codes are said to be relevant to Cheshire’s claim).  Cheshire placed reliance upon an observation of Allsop J in Commandate Marine Corp v Pan Australia Shipping Pty Ltd[36] that a common element to the notion of non-arbitrability in the context of international arbitration is that a sufficient element of legitimate public interest in the disputed matters makes the enforceable private resolution of the dispute outside the national court system inappropriate.  However, that is not the context with which the present matter is concerned.

 

It is uncontroversial that, as the plurality observed in Westfield Management v AMP Capital,[37] the policy of the law is against enforcing contractual arrangements which “operate to defeat or circumvent a statutory purpose or policy according to which statutory rights are conferred in the public interest, rather than for the benefit of an individual alone”.  However, is also well established it is an implied term of an arbitration clause that the arbitrator should reach a decision according to the existing law of the land and should exercise every right and discretionary remedy given to a court of law.[38]  Cheshire has not demonstrated how reference to mediation in the present context would deprive it of the protection of the provisions of the Australian Consumer Law on which its claim relies.  The arbitrator will be obliged to determine Cheshire’s disputed right to payment considering those provisions to the extent they are relevant to the facts as found by the arbitrator.

 

The above analysis demonstrates there is no substance to Cheshire’s arguments as to inoperability.  On the materials presently before the court[39] it has not been shown the court should make a finding pursuant to s 8 that the arbitration clause is inoperative.

 

If follows s 8 of the Act requires this court to refer the parties to arbitration pursuant to clause 12.3.3 of their contract.

That conclusion has been arrived at on the premise that the claim is for relief based on estoppel by convention or statutory unconscionable conduct and does not seek the additional order about the bank guarantee.  Enlarging consideration now to the matter of the bank guarantee does not alter the conclusion, indeed it fortifies it.  In oral submissions Cheshire’s counsel categorised the foundation of the order as being part of its unconscionability case.[40]  That is not apparent from Cheshire’s pleading.  In any event the provision of the bank guarantee was a contractual requirement, so any dispute as to its return inevitably involves a sufficiently close and consequential connection with the contract that it is a matter which is subject to clause 12.3.3.

 

Conclusion

CMC has made good its argument that the parties should be referred to arbitration pursuant to s 8 of the Act.

CMC’s application also sought a “permanent stay” of Cheshire’s proceeding.   In the present context the integrity of the reference can be safeguarded simply by a stay.  It will in effect operate as a stay of permanent effect unless, in consequence of some event or decision in the arbitration process, the dispute cannot be determined by arbitration.  Such a development could ground an application to lift the stay.

On the face of it costs should follow the event but I will allow the parties an opportunity to be heard.

Orders

 

My orders are:

  1. The parties are referred to arbitration pursuant to s 8(1) Commercial Arbitration Act 2013 (Qld).

 

  1. Cairns Supreme Court proceeding 571/20 is stayed.

 

  1. I will hear the parties as to costs, if costs have not been agreed in the meantime, at 9.15am 28 April 2021 (out of town parties having leave to appear by telephone or video-link).

 

 

Citations:

[1] (2013) 251 CLR 533.

 

[2] (2013) 251 CLR 533, 550 [16].

 

[3]        See for instance the oft-cited observations on this principle by Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99, 109.

 

[4] (1953) 90 CLR 295.

 

[5] (1953) 90 CLR 295, 311.

 

[6]        Methanex Motonui Ltd v Spellman [2004] 1 NZLR 95, 121 [85]; endorsed on appeal [2004] 3 NZLR 454, 471 [62].

 

[7]        See for example, McCann v Switzerland Insurance (2000) 203 CLR 579, 589.

 

[8]        See for example, Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, 165; Commandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45.

 

[9] [2004] FCA 698.

 

[10] [2004] FCA 698, [36] (citations omitted).

 

[11]       Applicant’s submissions in reply [15]; Roose Industries Ltd v Ready Mixed Concrete Ltd [1974] 2 NZLR 246 (and other cases cited therein).

 

[12] (1886) 54 LT 596.

 

[13] (1986) 54 LT 596, 597.

 

[14] [1948] 1 KB 11.

 

[15] [1948] 1 KB 11, 18.

 

[16] [1971] 2 QB 588.

 

[17] [1971] 2 QB 588, 595.

 

[18] [1974] 2 NZLR 246.

 

[19] [1974] 2 NZLR 246, 249.

 

[20] (1991) 22 NSWLR 466.

 

[21] (1991) 22 NSWLR 466, 487.

 

[22] (1991) 22 NSWLR 466, 477.

 

[23] (1996) 39 NSWLR 160.

 

[24] (1985) ATPR 40-636.

 

[25] (1996) 39 NSWLR 160, 166-167.

 

[26] (1998) 90 FCR 1.

 

[27] (1998) 90 FCR 1, 17, 22 (per Emmett J with whom Branson J agreed and Beaumont generally agreed).

 

[28] (2020) 379 ALR 196.

 

[29] (2020) 379 ALR 196, 245 [150] – [151] (citations omitted).

 

[30] [2003] NSWSC 615 [52]; Plaintiff’s outline of argument [18].

 

[31] Plaintiff’s outline of argument [19].

 

[32] (2017) 353 ALR 84, 98-100.

 

[33] [2016] SGHC 238 [166].

 

[34] (2017) 353 ALR 84, 100.

 

[35]       T 1-33 L 11 (the submission included reference to the complaint of estoppel by convention but the argument which developed focussed upon the complaints of statutory unconscionability).

 

[36] (2006) 157 FCR 45, 98.

 

[37] (2012) 247 CLR 129.

 

[38]       Government Insurance Office v Atkinson Leighton Joint Venture (1981) 146 CLR 206, 234-235, 246-247.

 

[39]       A qualification added in deference to the possibility this court is not presently possessed of all information which may be put before an arbitrator – see Rinehart v Rinehart (No 3) (2016) 257 FCR 310, 347.

 

[40]       T 1-34 L 42.

 

First Solar (Australia) Pty Ltd, in the matter of Lyon Infrastructure Investments Pty Ltd v Lyon Infrastructure Investments Pty Ltd (No 2) [2021] FCA 109

Court of Appeal
Supreme CourtNew South Wales

 

Case Name: First Solar (Australia) Pty Ltd, in the matter of Lyon Infrastructure Investments Pty Ltd v Lyon Infrastructure Investments Pty Ltd (No 2)
Medium Neutral Citation: [2021] FCA 109
Hearing Date(s): 5 February 2021 – 16 February 2021
Date of Orders: 18 February 2021
Decision Date: 18 February 2021
Before: STEWART J
Decision: There be judgment against the first defendant in the sum of $6,016,686.70 plus interest from 31 July 2020.

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

Catchwords: ARBITRATION – domestic commercial arbitration – application for order in the terms of the award pursuant to s 54(1) of the Federal Court of Australia Act 1976 (Cth) – where no order was made referring a proceeding or part of it to arbitration pursuant to s 53A(1) – where parties by consent sought a stay of the proceeding pending the determination of the arbitration – whether consent orders for the stay should be varied to add an order under s 53A(1) – whether the award is “in relation to a matter in which the Court has original jurisdiction” pursuant to s 54(1) and r 28.14(1) of the Federal Court Rules 2011 (Cth) – controversy submitted to arbitration is a federal matter – dispensing with certain formal requirements – money judgment in the terms of the award granted
Legislation Cited: Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) s 18

Corporations Act 2001 (Cth) s 471B

Federal Court of Australia Act 1976 (Cth) ss 53A(1)–(1A), 53AA, 54

International Arbitration Act 1974 (Cth) Pts II–IV, Schs 1–3

Judiciary Act 1903 (Cth) s 39B

Federal Court Rules 2011 (Cth) rr 28.14, 41.06

Commercial Arbitration Act 2010 (NSW) ss 1, 35

Commercial Arbitration Act 1984 (NSW) s 33 (repealed)

Arbitration Act 1996 (UK) s 101

Arbitration Act 1950 (UK) s 26(1) (repealed)

Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Opened for signature 10 June 1958. 330 UNTS 3 Art 1 (entered into force 7 June 1959)

Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Opened for signature 18 March 1965. 575 UNTS 159 (entered into force 14 October 1966)

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)

Cases Cited: Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2019] NSWSC 193
Cargill Australia Ltd v Oroonoka Pty Ltd [2011] NSWSC 620
Continental Grain Co v Bremer Handelsgesellschaft mBH (No 2) [1984] 2 Lloyd’s Rep 121
Fencott v Muller [1983] HCA 12; 152 CLR 570
FG Hemisphere Associates LLC v Democratic Republic of Congo [2010] NSWSC 1394
First Solar (Australia) Pty Ltd, in the matter of Lyon Infrastructure Investments Pty Ltd v Lyon Infrastructure Investments Pty Ltd [2018] FCA 1666
Hyundai Engineering & Steel Industries Co Ltd v Two Ways Constructions Pty Ltd (No 2) [2018] FCA 1551Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2021] FCAFC 3
Leveraged Equities Pty Ltd v Huxley [2010] NSWCA 179
Mahaffy v Mahaffy [2018] NSWCA 42; 97 NSWLR 119
Mahaffy v Mahaffy [2013] NSWSC 245
Norsk Hydro ASA v State Property Fund of Ukraine [2002] EWHC 2120 (Comm)Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; 148 CLR 457
Re Wakim; Ex parte McNally [1999] HCA 27; 198 CLR 511
Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; 287 ALR 315
Siminton v Australian Prudential Regulation Authority (No 3) [2008] FCAFC 89; 168 FCR 140
Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; 201 FCR 535
Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (No 2) [2011] FCA 206; 277 ALR 441
Xiadong Yang v S&L Consulting Pty Ltd [2008] NSWSC 1051
Texts Cited: NIL
Category: Corporations and Corporate Insolvency/ Commercial and Corporations
Parties: BETWEEN:

FIRST SOLAR (AUSTRALIA) PTY LTD

Plaintiff

 

AND:

 

LYON INFRASTRUCTURE INVESTMENTS PTY LTD

First Defendant

 

LYON INFRASTRUCTURE INVESTMENTS 1 PTY LTD (IN LIQUIDATION)

Second Defendant

 

LYON SOLAR PTY LTD (IN LIQUIDATION)

Third Defendant

Representation: Counsel for the Plaintiff:               G P Gee

Solicitor for the Plaintiff:               Marque Lawyers

Counsel for the Defendants:       The defendants did not appear

File Number(s): NSD 1652 of 2017
Publication Restriction: NIL
Decision under appeal: N/A
 Court or Tribunal: Federal Court of Australia
  Jurisdiction:
  Citation: [2021] FCA 109
  Date of Decision: 18 February 2021
  Before: Stewart J
  File Number(s): NSD 1652 of 2017

 

REASONS FOR JUDGMENT

 

STEWART J:

 

Introduction

 

By interlocutory application, the plaintiff, First Solar (Australia) Pty Ltd, seeks an order in the terms of an arbitration award as follows:

 

The First Defendant pay the Plaintiff damages plus interest in the amount of $6,016,686.70.

I have resolved that the plaintiff should have relief in the form of judgment in its favour in the sum awarded plus interest.  In order to explain why I have reached that conclusion, it is necessary to set out some background.

 

Background

As explained by Markovic J in First Solar (Australia) Pty Ltd, in the matter of Lyon Infrastructure Investments Pty Ltd v Lyon Infrastructure Investments Pty Ltd [2018] FCA 1666 (the first judgment), by amended originating process filed on 21 December 2017 the plaintiff sought, on the one hand, relief against Lyon Infrastructure Investments Pty Ltd (the first defendant) and, on the other hand, relief against Lyon Infrastructure Investments 1 Pty Ltd (Lyon 1) (the second defendant) and Lyon Solar Pty Ltd (the third defendant).

In respect of Lyon, the plaintiff sought an order that its registration as a company be reinstated and that, following such reinstatement, it be wound up.

As against Lyon 1 and Lyon Solar, the plaintiff sought declarations that Lyon 1 and Lyon Solar hold the assets of Lyon, secured in favour of the plaintiff, on trust, or as bailee for the plaintiff and that Lyon 1 and Lyon Solar have no right, title or interest in those assets; an order that a receiver be appointed to Lyon 1 and Lyon Solar; damages for breach of trust, or, in the alternative, an account of profits; an order that Lyon 1 and Lyon Solar deliver up the assets to the plaintiff, in the alternative, to Lyon; and, damages for inducing Lyon’s breach of contract: the first judgment at [2].

Following an order by a registrar of this Court on 18 October 2017, Lyon was restored to the register with effect from 19 October 2017.

On 24 November 2017, an order was made by Markovic J to stay the proceeding between the plaintiff and Lyon pending the determination of an arbitration between them.  That order is recorded as having been made by consent, although the circumstances of its making are not otherwise disclosed in the evidence.

On 2 November 2018, Markovic J stayed the proceeding as between the plaintiff and Lyon 1 and Lyon Solar pending the determination of the arbitration between the plaintiff and Lyon.  The reasons for that stay are set out in the first judgment.

Thereafter, the plaintiff commenced arbitration proceedings against all three of the defendants and the three mutual directors of the defendants.  Lyon 1, Lyon Solar and the directors submitted to the arbitration and confirmed their agreement to be bound by the determination of the arbitration between the plaintiff and Lyon.

Lyon 1 and Lyon Solar were wound up with effect from 17 October 2019. The result was that the principal proceeding as against those defendants, which was in any event stayed pending the finalisation of the arbitration, was automatically stayed by operation of s 471B of the Corporations Act 2001 (Cth). Also, on 23 October 2019 the arbitration was stayed as against those parties. The arbitration proceeded, however, against Lyon and the directors.

On 10 July 2020, the arbitrator, Mr Daniel Meltz, published a partial final arbitral award in Sydney.  The award was partial in the sense that it set out the arbitrator’s findings on the disputes between the parties but gave them the opportunity to make further submissions on final orders, interest and costs.

As found by the arbitrator, the agreement to arbitrate was contained in a Deed of Variation to a Loan Agreement dated 19 May 2016 between the plaintiff and Lyon.  It provided for the referral of the dispute for resolution by final and binding arbitration in Sydney in accordance with the rules of the Australian Disputes Centre (ADC) and for the arbitration to be conducted by a single arbitrator appointed in accordance with the ADC Rules.

The claims by the plaintiff against Lyon were for repayment of a loan plus interest and for breach of a “take-or-pay agreement” in connection with the supply of solar modules.  The arbitrator found that the loan agreement was valid and that the loan was due and repayable with interest.  The arbitrator also found in favour of the plaintiff on the “take-or-pay agreement” claim, finding that the plaintiff was entitled to damages in the amount of US$3.25m plus interest.

Lyon raised a set-off claim in the arbitration. The basis for the claim was that the plaintiff engaged in misleading and deceptive conduct in contravention of s 18 of the Australian Consumer Law (ACL) in representing in a “Price Warranty” that its solar panels were competitive in the Australian renewable energy market in terms of their price, performance and the terms on which they were supplied.  The arbitrator rejected the set-off claim.

The plaintiff’s claim against the directors in the arbitration was also for misleading and deceptive conduct contrary to the ACL.  The claim was rejected by the arbitrator.

On 31 July 2020, the arbitrator published his final arbitral award.  The award is in the following terms:

Lyon Infrastructure pay First Solar damages plus interest in the amount of AUD$6,016,686.70; and

Each party pay their own costs.

On 6 August 2020, the solicitor for the three defendants in the action filed a notice of ceasing to act.  He gave as the defendants’ last known addresses for service the addresses of their registered offices.  In the case of Lyon 1 and Lyon Solar that was the address of the liquidator.  The plaintiff gave notice of its interlocutory application to the defendants at those addresses but the defendants did not oppose the relief that was sought or appear at the hearing.

Consideration

 

Domestic, not international, arbitration

The first point to note about the arbitration is that it was not an international arbitration and enforcement of the award is therefore not governed by the International Arbitration Act 1974 (Cth) (IAA).  In that regard, the award is not an arbitral award “made in the territory of a State other than the State where the recognition and enforcement of [the award is] sought” as referred to in Art I of the New York Convention (Convention on the Recognition and Enforcement of Foreign Arbitral Awards) adopted in 1958 by the United Nations Conference on International Commercial Arbitration, the English text of which is set out in Sch 1 to the IAA.  The award is therefore not to be enforced under Pt II of the IAA.

Also, the arbitration was not an international commercial arbitration as referred to in Art 1 of the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended on 7 July 2006, the English text of which is set out in Sch 2 to the IAA. The award is therefore not to be enforced under Pt III of the IAA. The award is also not an award of the International Centre for Settlement of Investment Disputes under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States signed by Australia on 24 March 1975, the English text of which is set out in Sch 3 to the IAA.  The award is therefore not to be enforced under Pt IV of the IAA.

Because the arbitration is not an arbitration to which the Model Law (as given effect by the IAA) applies and at the time of the conclusion of the arbitration agreement the parties to the arbitration agreement had their places of business in Australia, the arbitration is a domestic commercial arbitration as referred to and defined in s 1 of the Commercial Arbitration Act 2010 (NSW). Ordinarily, such an award would only be enforceable in a state court pursuant to s 35 of the Commercial Arbitration Act or one of its analogues in another state.

The plaintiff nevertheless invokes s 54(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) in seeking enforcement of the award in this Court.  That section is relevantly in the following terms:

54       Arbitration awards

(1)           The Court may, upon application by a party to an award made in an arbitration (whether carried out under an order made under section 53A or otherwise) in relation to a matter in which the Court has original jurisdiction, make an order in the terms of the award.

 

Significantly, notwithstanding that the stay of the principal proceeding in this Court pending the arbitration was made by consent, no order was made pursuant to s 53A(1) of the FCA Act. That section empowers the court, but only with the consent of the parties (see s 53A(1A)), to refer the proceedings in the court, or any part of them or any matter arising out of them, to arbitration.

The plaintiff submits that the relief that it seeks, namely “an order in the terms of the award”, is justifiable on one of two alternative bases under s 54.

First, the plaintiff submits that notwithstanding that there was no referral by the court under s 53A(1), the fact that the parties by consent sought a stay of the proceeding as against Lyon pending the determination of the arbitration indicates that their failure to seek an order under s 53A(1) was clearly an oversight that can now be remedied by the application of the slip rule. Secondly, the plaintiff submits that the arbitration was in any event “in relation to a matter in which the court has original jurisdiction”. It is convenient to deal with each of these bases in turn.

 

Referral under s 53A(1)

I am not satisfied that there is any justification to vary the consent orders of 24 November 2017 by adding an order, ex post facto, under s 53A(1) that the proceeding or part of it be referred to arbitration. The principal reason for that is that it is not apparent that the subject matter of the arbitration was necessarily part of the proceeding, or was a matter arising out of the proceeding, that was then before the court.

Section 53A(1) only enables the court by order to “refer proceedings in the Court, or any part of them or any matter arising out of them” to arbitration. Whilst it may be that the plaintiff’s claims in the arbitration, namely the claim for repayment of the loan and for damages for breach of the “take-or-pay agreement”, formed part of the plaintiff’s claim that Lyon be wound up, and in that sense formed part of the proceeding or were matters arising out of the proceeding, that is not clear on the evidence. It is even less clear that the other claims in the arbitration, being Lyon’s set-off claim and the plaintiff’s claims against the directors, formed part of the proceeding or arose out of the proceeding in the court.

It is to be noted that the referral of a proceeding or part of a proceeding to arbitration under s 53A(1) has substantial consequences beyond the recognition or enforcement of an award under s 54. Notably, under s 53AA the arbitrator in such an arbitration may apply to the court for leave to refer a question of law arising in the arbitration to the court. That is not a mechanism that is otherwise available to an arbitrator. It is therefore not lightly to be inferred that parties intended, but accidentally overlooked to seek, a referral to arbitration under s 53A(1) when they sought a stay of a proceeding in favour of an arbitration.

It is apparent that the agreement to arbitrate, being the Deed of Variation dated 19 May 2016, was concluded some 18 months before the plaintiff filed the originating process in the proceeding.  The arbitration was conducted pursuant to that agreement, rather than pursuant to any implied or tacit referral by the Court of anything before the Court to arbitration.

There is therefore no basis for the plaintiff to rely on s 53A(1) to justify enforcement of the award under s 54.

 

A matter in which the court has original jurisdiction

Rule 28.14 of the Federal Court Rules 2011 (Cth) (FCR) sets out certain requirements with regard to an application for an order in terms of an arbitration award as follows:

28.14   Applications for order in terms of an award

 

(1)       A party may apply to the Court for an order in the terms of the award if:

 

(a)       the matter has not been referred to the arbitrator by the Court; but

 

(b)       the matter is a matter in which the Court has original jurisdiction.

 

(2)           A party who wants to make an application under subrule (1) must file an originating application, in accordance with Form 50.

 

(3)       The application must be accompanied by:

 

(a)       a copy of the arbitration agreement; and

 

(b)       a copy of the award; and

 

(c)       an affidavit stating:

 

(i)          the material facts demonstrating why the Court has original jurisdiction in the matter that is the subject of the award; and

 

(ii)         the extent to which the award has not been complied with, at the date the application is made; and

 

(iii)        the usual or last-known place of residence or business of the person against whom it is sought to enforce the award or, if the person is a company, the last-known registered office of the company.

 

(4)       The application may be made without notice.

 

Note:    Without notice is defined in the Dictionary.

 

Rule 28.14(1)(b) restates the requirement of s 54 that in order for the court to make an order in the terms of the award the matter that was the subject of the arbitration must be a matter within the original jurisdiction of the court. The Federal Court has original jurisdiction in respect of any matter arising under any laws made by the Parliament other than a criminal matter: Judiciary Act 1903 (Cth), s 39B. That directs attention to what is a “matter”, particularly in a case such as the present where federal and non-federal “claims”, seeking to use that word neutrally, are made in the same proceeding.

The concept of “matter” as a justiciable controversy, identifiable independently of the proceedings which are brought for its determination and encompassing all claims made within the scope of the controversy, has long been accepted: Fencott v Muller [1983] HCA 12; 152 CLR 570 at 591–592 per Gibbs CJ and 603 per Mason, Murphy, Brennan and Deane JJ. When a court which can exercise federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to the resolution of the whole matter between the parties: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd [1981] HCA 7; 148 CLR 457 at 475 per Barwick CJ.

What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships.  The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues and controversy are defined and the claims for relief are set out.  But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter.  See Fencott v Muller at 608.

There will ordinarily be a single controversy and, therefore, a “matter” if all the claims arise out of “a common substratum of facts”: Philip Morris at 512 per Mason J; Re Wakim; Ex parte McNally [1999] HCA 27; 198 CLR 511 at [75] per McHugh J. Further, though the facts upon which a non-federal claim arises do not wholly coincide with the facts upon which a federal claim arises, it is nevertheless possible that both may be aspects of a single matter arising under a federal law: Fencott v Muller at 607.

Applying those broadly stated principles to the present case, it is to be observed from the arbitrator’s awards that all the claims in the arbitration arose from a common substratum of facts. In particular, Lyon’s set-off claim which, it will be recalled, alleged breach by the plaintiff of s 18 of the ACL and which was hence a federal matter, was integrally part of the dispute between the plaintiff and Lyon with regard to repayment of the loan and breach of the “take-or-pay agreement”. The same is true of the plaintiff’s claims for breach of s 18 of the ACL against the directors of Lyon. Those claims arise under a law of the Parliament and thus invoke federal jurisdiction.

In those circumstances I am satisfied that the award made in the arbitration is “in relation to a matter in which the Court has original jurisdiction” as referred to in s 54(1) of the FCA Act and r 28.14(1) of the FCR.

 

Dispensing with certain formal requirements

The plaintiff acknowledges that it has not met the requirement of r 28.14(2) of filing an originating application in accordance with Form 50. Rather, it has filed an interlocutory application within the existing proceeding. Form 50 identifies the documents that should accompany the application, which are the same as those required by r 28.14(3). The plaintiff’s interlocutory application satisfies all those requirements, save that it is not accompanied by a copy of the arbitration agreement. However, the relevant terms of the arbitration agreement are set out verbatim in the arbitrator’s partial final arbitral award. Also, there was no dispute before the arbitrator as to the agreement to arbitrate or the arbitrator’s jurisdiction. There is therefore nothing significant in the plaintiff’s oversight, and no prejudice attaches to it.

In the circumstances, there is equally no prejudice attaching to the plaintiff not having sought relief in the terms of the arbitral award by way of originating application.

For those reasons, on the plaintiff’s application I dispense with the requirements of r 28.14 that the application be brought by way of originating application and that it be accompanied by a copy of the arbitration agreement.

 

The proper form of order

The question arises as to the proper form of the order that I should make.  That is because of the distinction between granting judgment against Lyon in a particular amount, on the one hand, and ordering Lyon to pay that amount, on the other, which was seen by the Full Court in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2021] FCAFC 3 at [63]-[65] per Perram J (Allsop CJ and Moshinsky J agreeing) to have some significance, subject to further submissions and determination still to be made in that case. As pointed out on behalf of the plaintiff in this case, the significance in that case was because of the need, in that case, to distinguish between the recognition of an award and its enforcement. That need does not arise in the present case.

The power under s 54 of the FCA Act is expressly a power to “make an order in the terms of the award”. The award requires Lyon to “pay [the plaintiff] damages plus interest in the amount of AUD$6,016,686.70”. For that reason the plaintiff seeks an order in those terms, rather than, for example, “judgment in the sum of $6,016,686.70 plus interest”. The plaintiff is nevertheless content to have an order in the latter form.

In Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd (No 2) [2011] FCA 206; 277 ALR 441, Foster J (at [13]) observed that “[c]ourts in this country and elsewhere have accepted that the appropriate way of recognising and enforcing a foreign monetary arbitral award is for the enforcing court to enter judgment or make an order for payment which reflects the terms of the award” (my emphasis).  His Honour then cited a number of cases both in Australia and in England.  See also Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; 201 FCR 535 at [3] and [113] per Foster J.

 

Insofar as Australian cases are concerned, it is to be noted that s 33 of the Commercial Arbitration Act 1984 (NSW) and its analogues in other states, being the Commercial Arbitration Acts that preceded the current uniform state Commercial Arbitration Acts that apply the terms of the UNCITRAL Model Law to domestic arbitration, provided that where leave to enforce an award is given “judgment may be entered in terms of the award”. Under that provision, there are numerous cases where awards that were phrased in the form “that A pay B $X” were enforced in court by orders in the form of “judgment for A against B in the sum of $X” or similar, i.e., judgment for a certain sum rather than an order to pay that sum. See, for example, Xiadong Yang v S&L Consulting Pty Ltd [2008] NSWSC 1051 at [3], [10] and [15] per Hammerschlag J; FG Hemisphere Associates LLC v Democratic Republic of Congo [2010] NSWSC 1394; Cargill Australia Ltd v Oroonoka Pty Ltd [2011] NSWSC 620 at [7] and [12] per Hammerschlag J; Leveraged Equities Pty Ltd v Huxley [2010] NSWCA 179 at [16] per Allsop ACJ (Macfarlan JA and Handley AJA agreeing); Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; 287 ALR 315 at [9] and [152] per Martin CJ (Buss and Murphy JJA agreeing). That approach is not, however, universal. See, for example, Hyundai Engineering & Steel Industries Co Ltd v Two Ways Constructions Pty Ltd (No 2) [2018] FCA 1551 at [24] per O’Callaghan J.

Insofar as English cases are concerned, I note that s 101 of the Arbitration Act 1996 (UK) employs the same language, namely that if leave to enforce an award is given then “judgment may be entered in terms of the award”.  Section 26(1) of the Arbitration Act 1950 (UK) also used that wording.  In Continental Grain Co v Bremer Handelsgesellschaft mBH (No 2) [1984] 2 Lloyd’s Rep 121, Bingham J entered judgment under the 1950 Act in a certain sum against the award debtor on an award that had awarded sums of money for damages.

In Norsk Hydro ASA v State Property Fund of Ukraine [2002] EWHC 2120 (Comm) at [6]-[7] and [18]-[19], Gross J held, with reference to the 1996 Act, that an order providing for enforcement of an award must follow the award allowing true “slips” and changes of name to be accommodated, but that an order naming a different party to the party named in the award was not such an order. No criticism was made of the fact that the judgment had been in the form of judgment for a sum of money whereas the award had been in the form of an order to pay.

It is apparent from the cases that I refer to that where it is provided that judgment may be made “in terms of the award” – and I interpolate to add that I do not consider the wording “in the terms of the award” in s 54 to signify any different meaning – it does not mean that the judgment must be in exactly the same words as the award. Rather, it means that the terms of the judgment must give effect to the award, or the “judgment or order must reflect the Award and cannot differ in any material way from the terms thereof”: Traxys Europe at [72]. That that is so is borne out by consideration of the circumstance where part of an award has been paid, such as that envisaged by r 28.14(3)(c)(ii) which requires evidence of the extent to which the award has been complied with as at the date the application for an order under s 54 is made. If part of a money award has been paid there would be no justification for an order for payment of the whole amount of the award, but only for the balance. If “in the terms of the award” meant “in the actual/exact words of the award” then no order enforcing the partially paid award would be possible. That could not have been the intention.

It is also to be observed that in this Court “judgment” includes an “order”: FCA Act, s 4; Traxys Europe at [73]. There is therefore no significance in s 54 providing for an “order” to be made in the terms of the award rather than for a “judgment” being so made.

One of the reasons why it is said that an order that the defendant pay a sum of money may be different in effect to a judgment against the defendant in that sum is because it may be contemptuous of the former order but not of the latter judgment for the defendant to fail to pay.  There is some complexity to that debate which involves, amongst other things, consideration of the history of imprisonment for civil debt and, in some courts at least, the difference, if any, between judgment and order.  It is sufficient for present purposes to note that the position is not clear.  See Mahaffy v Mahaffy [2013] NSWSC 245 at [59] per Garling J, Mahaffy v Mahaffy [2018] NSWCA 42; 97 NSWLR 119 and Bellerive Homes Pty Ltd v FW Projects Pty Ltd [2019] NSWSC 193. In the latter case, a judgment in the form of “the first defendant is to pay [the first plaintiff] the sum of …” was treated as a judgment debt and it was held that civil contempt proceedings could not be brought against a debtor for failing to pay a judgment debt: at [10] and [128] per N Adams J. In Siminton v Australian Prudential Regulation Authority (No 3) [2008] FCAFC 89; 168 FCR 140 at [24] per Spender ACJ and Lander and Buchanan JJ, it was held that failure to pay a fine that was ordered to be paid as punishment for contempt could itself found a contempt, but the broader question of the possibility of contempt for failure to pay a money judgment or an order to pay money was not dealt with. It is also to be observed that in the Federal Court there can be no punishment for contempt for failing to comply with an order unless the relevant order is endorsed to that effect as required by r 41.06 of the FCR.

In the circumstances, my view is that the better course is to enter judgment sounding in money, rather than to order payment of a sum of money.  That course avoids the debate about contempt, it is in conformity with what seems to me to be the predominant practice, and it gives the plaintiff what it needs and is entitled to.  It also avoids complications that might otherwise arise if and when it comes to apply for the issue of a writ of execution.

Conclusion

For those reasons, there should be judgment for the plaintiff against Lyon (the first defendant) in the sum of $6,016,686.70 plus interest from the date of the award, namely 31 July 2020.  The plaintiff does not seek the costs of the interlocutory application.

I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.

**********

 

 

Rinehart v Rinehart [2020] NSWSC 68

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

 

JUDGMENT

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

 

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

 

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

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

The panoply of interlocutory motions as at 15 July 2019

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

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

    inter alia

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

    Commercial Arbitration Act 

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

Summary of my conclusions

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

Context in which Bianca has commenced the present proceeding

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

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

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

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

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

Background to the present dispute

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

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

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

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

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

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

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

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

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

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

DISTRIBUTION COVENANT

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

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

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

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

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

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

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

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

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

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

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

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

  1. Clause 7, relevantly, provides that:

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

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

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

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

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

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

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

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

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

  1. Clause 9.3 provides that:

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

  1. Clause 11 provides that:

PLEA IN BAR

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

  1. Clause 15.1 provides, relevantly, that:

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

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

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

20.2 Confidential Arbitration

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

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

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

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

SIGNED BY

GEORGINA HOPE RINEHART

as trustee of the Hope Margaret

Hancock Trust in the presence of …

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

Constituent documents

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

(a) The Trustee may:

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

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

Other proceedings

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

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

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

Relevant provisions of the Commercial Arbitration Act

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

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

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

16. Competence of arbitral tribunal to rule on its jurisdiction

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

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

Relevant principles

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

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

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

Bianca’s submissions

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

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

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

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

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

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

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

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

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

Defendants’ submissions

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

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

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

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

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

Determination as to threshold question

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

Section 8 Referral/Stay

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

Construction of the arbitration agreement

The earlier decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bianca’s submissions as to the question of precedent

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

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

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

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

Defendants’ submissions

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

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

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

Determination

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

Requirements of s 8

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

Characterisation of the “matter”

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

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

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

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

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

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

Statement of claim

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

Defences under the Hope Downs Deed

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

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

Gina’s submissions as to “matter”

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

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

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

HPPL’s submissions as to “matter”

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

Bianca’s submissions as to “matter”

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

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

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

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

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

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

[…]

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

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

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

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

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

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

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

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

Determination

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

Bianca’s s 247A application

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

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

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

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

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

Gina’s submissions

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

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

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

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

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

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

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

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

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

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

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

HPPL’s submissions

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

Bianca’s submissions

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

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

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

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

Determination

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

143 Clause 29.2 of the Investment Agreement on its proper construction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 8 Case Management Stay

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

Case Management Stay

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

Gina’s submissions

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

HPPL’s submissions

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

Bianca’s submissions

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

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

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

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

and at T 280:

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

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

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

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

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

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

Abuse of process stay

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

Bianca’s submissions

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

Determination

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

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

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

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

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

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

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

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

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

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

  1. At [59], their Honours said:

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

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

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

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

Bianca’s unconscionability motion (motion viii)

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

Bianca’s submissions

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

HPPL’s submissions

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

Gina’s submissions

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

Determination

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

Conclusion

For the above reasons, I make the following orders:

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

**********

Nu-Fortune Gold Ltd v Roxbury Trading Pty Ltd [No 3] [2019] WASC 469

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : NU-FORTUNE GOLD LTD -v- ROXBURY TRADING PTY LTD [No 3] [2019] WASC 469

CORAM : ALLANSON J

HEARD : 17 DECEMBER 2019

DELIVERED : 20 DECEMBER 2019

FILE NO/S : CIV 2354 of 2019

BETWEEN : NU-FORTUNE GOLD LTD

First Plaintiff

ECO MINERALS RESEARCH LTD

Second Plaintiff

AND

ROXBURY TRADING PTY LTD

First Defendant

PAUL JAMES KENNEDY

Second Defendant

Arbitration – Where applicants seek stay of counterclaim and referral of part of dispute to arbitration – Where applicants filed affidavit and submission in response to application for summary judgment – Whether action brought in a matter the subject of an arbitration agreement – Whether stay of proceedings and referral requested before applicant’s first statement on the substance of the dispute

ALLANSON J:

Background

  1. In about March 2016, Paul Richard Hanna, Paul James Kennedy, Roslyn May Kennedy, Nu-Fortune Gold Ltd and Robert Alan Jacobs, as administrator of Roxbury Trading Pty Ltd, entered into Heads of Agreement. The effect of the agreement was that Roxbury would come out of administration and Nu-Fortune would acquire various mineral tenements.
  2. Clause 15 of the Heads of Agreement provided for dispute resolution. Relevantly it applied ‘if a dispute should arise between Kennedy, [Nu‑Fortune] and or Hanna’. The dispute resolution procedure required notice of dispute, with a meeting for the purpose of resolving the issue. By cl 15(c), if resolution could not be achieved, ‘an independent arbitrator shall be appointed to determine a fair and reasonable outcome in the matter’. Further provision was made for the appointment of an arbitrator.
  3. Nu‑Fortune and Eco Minerals Research Ltd brought an action against Mr Kennedy and Roxbury for breach of the terms of a sublease of land described as the Menzies State Battery.
  4. Roxbury and Mr Kennedy have counterclaimed against Nu‑Fortune, Eco Minerals and Mr Hanna.
  5. By summons filed 19 November 2019, the Nu‑Fortune parties sought orders that the parties be referred to arbitration pursuant to cl 15 of the Heads of Agreement and the Commercial Arbitration Act 2012 (WA), and the proceedings be stayed.
  6. On 20 November 2019, Nu‑Fortune filed a form 14 summons for referral to arbitration pursuant to s 8 of the Commercial Arbitration Act and r 16(1) of the Supreme Court (Arbitration) Rules 2016 (WA).
  7. On 21 November 2019, I programmed the application through to a hearing.

The history of the proceedings

  1. On 1 August 2019, the Nu‑Fortune parties brought an action pursuant to a Deed of Sublease entered into between Western Australian Mint as landlord, Roxbury as tenant and the plaintiffs as subtenants over the Menzies State Battery. On 21 August 2019, an interim injunction was granted, giving the Nu‑Fortune parties possession of the Menzies State Battery and restraining the Kennedy parties from interfering with possession.
  2. On 4 September 2019, the Kennedy parties filed a defence and counterclaim.
  3. On 12 September 2019, after a contested hearing, the injunction was continued until further order of the court.
  4. By the counterclaim, the Kennedy parties pleaded terms of the Heads of Agreement, including that, by cl 6, Nu-Fortune agreed to engage Mr Kennedy on an annual salary of $150,000 and reimburse him for all reasonable personal expenses incurred by him in the course of his engagement. The Kennedy parties further pleaded a variation to the agreement by which Mr Kennedy’s services would be provided by Roxbury, and Nu‑Fortune would pay Roxbury.
  5. The defence and counterclaim have since been amended three times, but the substance of the dispute has not changed.
  6. On 10 October 2019, Roxbury and Mr Kennedy applied by summons for summary judgment on part of the counterclaim for the payment of money owing by Nu‑Fortune to either Roxbury or Mr Kennedy for his services.
  7. In response, Nu‑Fortune filed two affidavits: an affidavit of Wayne Alan Sims, filed 28 October 2019, as to steps taken by Nu‑Fortune to have the dispute referred to arbitration under cl 15 of the Heads of Agreement; and an affidavit of Mr Hanna, filed on 29 October 2019, setting out a factual response and deposing that Nu‑Fortune has a good defence to the claim. Nu‑Fortune also filed submissions in opposition to the application for summary judgment.
  8. On 19 November 2019, the Nu‑Fortune parties filed a chamber summons for a stay of proceedings and for an order that the parties be referred to arbitration pursuant to cl 15 of the Heads of Agreement and the Commercial Arbitration Act.

The Commercial Arbitration Act 2012 (WA)

  1. The present application requires consideration of s 8(1) of the Commercial Arbitration Act.

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

  1. It is not in dispute that the Nu‑Fortune parties first requested the court to refer the parties to arbitration by the summons of 19 November 2019. Relevantly, the section raises these questions: is the Kennedy parties’ action brought in a matter which is the subject of the arbitration agreement in cl 15 of the Heads of Agreement; and when did the Nu‑Fortune parties first submit a statement on the substance of the dispute?
  2. In Four Colour Graphics Australia Pty Ltd v Gravitas Communications Pty Ltd [2017] FCA 224 [17] ‑ [19], Gleeson J considered the question of what matter was the subject of the proceedings before the court. Her Honour said (citations omitted):

A ‘matter’ for the purposes of s 8(1) means some right or liability in dispute which is susceptible of settlement as a discrete controversy… or a claim for relief of a kind proper for determination in a court.

A ‘matter’ for the purposes of s 8(1) may or may not comprise the whole dispute in any given court proceeding… ‘there may, of course, be more than one “matter” [in the proceeding], and some only of these may be capable of settlement by arbitration’.

Ordinarily, the nature and extent of the ‘matters’ involved in a court proceeding are to be ascertained from the pleadings and from the underlying subject matter upon which the pleadings, including any defence, are based.

  1. With respect I adopt that statement.

The counterclaim

  1. At counterclaim [17], the Kennedy parties plead the making of the Heads of Agreement, and at [18] the following material terms:

(a) By clause 2 that upon Nu-Fortune giving notice as required by clause 3, Hanna cause the issued capital of Nu-Fortune to be held 30% by a nominee of Kennedy and Mrs Kennedy (Nominee) and 70% by Hanna;

(b) By clause 3 that Nu-Fortune carry out the work specified therein to ascertain whether it wished to commence mining on Called Bank and Oakley or either of them;

(c) By clauses 3 and 4 that if Nu-Fortune was satisfied with the results of the said work and thereby wished to mine the mining leases or either of them:

(i) Nu-Fortune give notice as specified therein and carry out mining operations thereon as set out in clauses 5 to 13 (stage 3);

(ii) Hanna use his shares in Nu-Fortune to fund the work contemplated and required by clauses 3 and 4 and thereby enable Nu-Fortune to fulfil its obligations under the heads of agreement, without affecting the percentage of the issued capital held by the Nominee;

(iii) By cl 4(a) Nu-Fortune cause Roxbury to be released from administration, whereupon inter alia Roxbury transfer Oakley to Nu-Fortune and Kennedy transfer Called Back to Nu-Fortune.

(iv) Nu-Fortune purchase mining equipment pursuant to cl 4(b).

(v) by clause 6 Nu-Fortune engage Kennedy as therein specified for an annual salary of $150,000 and reimburse him for all reasonable personal expenses incurred by him in the course of his engagement.

(vi) By clause 8:

(A) Nu-Fortune have an option to treat the Tailings (on the Battery Land) (Option);

(B) After payment of the costs of any upgrade or modification to the gold processing plant on the Battery Land and operating costs, the proceeds from such treatment be shared equally between Roxbury and Nu-Fortune.

(vii) By clause10 that Kalchoice be paid a [Royalty] of 4% of the gross proceeds from mining of inter alia the mining leases (Royalty).

(viii) By cl 11 the board of directors of Nu-Fortune be comprised of Hanna, Kennedy and an independent director to be determined.

  1. Kalchoice Pty Ltd is the trustee of a superannuation fund of which Kennedy and Mrs Kennedy are beneficiaries, and appears to be the entity referred to in the Heads of Agreement as ‘Kennedy Entity’. References to ‘Kennedy’ in the Heads of Agreement mean any, all of or any two of Mr Kennedy, Mrs Kennedy and Kennedy Entity: cl 1.
  2. At [27], the Kennedy parties plead a variation to the Heads of Agreement by which Mr Kennedy’s services were to be provided by Roxbury.
  3. At [29], the Kennedy parties plead a further term that ‘in effect by clause 4(a)(iii)’ Nu-Fortune have the exclusive right to mining certain other tenements owned by Mr and Mrs Kennedy, and Roxbury for so long as Nu-Fortune met all expenditure required thereon.
  4. The Kennedy parties plead matters arising out of an arrangement between Nu‑Fortune and CSIRO to enable Nu‑Fortune to treat the tailings pursuant to cl 8 of the Heads of Agreement: [32] – [43].
  5. The Kennedy parties also plead a case in misleading or deceptive conduct causing them to execute the sub-lease of the Menzies State Battery: [44] ‑ [50].
  6. The Kennedy parties claim damages for breach of the Heads of Agreement ([52] ‑ [58]); damages for conversion of a quantity of the tailings and specified equipment from the Menzies State Battery ([59] ‑ [62]); and relief pursuant to the Australian Consumer Law.

The submissions of Nu‑Fortune

  1. Significantly, the Nu‑Fortune parties accepted that this is not a case where a stay would be granted as a matter of discretion. The court should only refer the parties to arbitration if the matter comes within s 8 of the Commercial Arbitration Act.
  2. The Nu‑Fortune parties’ oral submissions departed substantially from their written submissions.
  3. In written submissions, it was argued that all of the matters raised by the counterclaimants arise out of the Heads of Agreement, except for the challenge to the sublease of the Menzies State Battery. Further, the Nu‑Fortune parties submitted that Roxbury was a party to the Heads of Agreement and bound by the terms of cl 15; alternatively, Roxbury’s claim for payment was derived from a claim originally held by Mr Kennedy and was pleaded in the alternative to his claim. In summary, all of the claims in the counterclaim were subject to the arbitration provision.
  4. At the hearing of the application, however, the Nu‑Fortune parties submitted, in effect, that the only parts of the dispute that were subject to the arbitration agreement in cl 15 were in counterclaim [52] ‑ [53] and [56] ‑ [58]. That is:

(1) failure to continue to mine one or both of the Called Bank and Oakley mining tenements: [52] ‑ [53];

(2) failure to treat the tailings at the Menzies State Battery: [56] ‑ [57];

(3) allowing Kalchoice’s share of the issued capital of Nu‑Fortune to fall below 30%: [58(a)];

(4) failing to account for the gold recovered from its mining operations or tailings: [58(b)];

(5) failure to pay royalty or account to Kalchoice: [58(c)]; and

(6) causing Mr Kennedy to be removed from the board of Nu‑Fortune and failing to appoint an independent third director: [58(d)].

  1. The Nu‑Fortune parties further conceded that the part of the counterclaim on which the Kennedy parties had applied for summary judgment was not within the arbitration agreement. I doubt that concession was correctly made, and it is not how I understood the position initially put in the summary judgment application, but it is immaterial to my decision on the application for referral.
  2. The Nu‑Fortune parties submitted that the affidavit of Mr Hanna, filed in opposition to the summary judgement application, was not a statement on the substance of the dispute and that they had made no statement on the substance of the dispute.
  3. The Nu‑Fortune parties also submitted that, while they had filed an affidavit and submissions in the summary judgment application, they had, in effect, reserved their position with regard to s 8 of the Commercial Arbitration Act.

Analysis

  1. The arbitration agreement in cl 15(a) of the Heads of Agreement provides for the resolution of ‘a dispute … between Kennedy, [Nu‑Fortune] and or Hanna’. As a matter of construction I would read cl 15 as confined to a dispute related to the Heads of Agreement.
  2. The counterclaim should be regarded as the action for the purposes of s 8. By reference to the counterclaim, that action includes the disputes pleaded in [52] to [58], being disputes as to alleged breaches by the Nu‑Fortune parties of the terms of the Heads of Agreement.
  3. The chamber summons seeking summary judgment on part of the counterclaim is limited to only part of the action: the liability of the Nu‑Fortune parties to pay amounts owing under the Heads of Agreement, or a variation of it, to Roxbury, alternatively to Mr Kennedy.
  4. The affidavit of Mr Hanna in opposition to the application for summary judgment was sworn 24 October 2019 and filed on 29 October 2019. The substance of Mr Hanna’s answer to the summary judgment application was that Nu‑Fortune entered into the Heads of Agreement in reliance on representations made by Mr Kennedy about what capital and working capital was required for Nu‑Fortune to generate a profit. The Heads of Agreement did not contain all of the matters agreed, and did not include a term that the payment to Mr Kennedy or Roxbury would only continue beyond the amount budgeted if the company was at that time generating profits from the treatment of ore through the Menzies State Battery. Mr Kennedy was not able to arrange for the gold bearing ore that he claimed was on the tenements to be treated profitably.
  5. Mr Hanna deposed that Nu‑Fortune expended considerable amounts of money at the direction of Mr Kennedy and Roxbury endeavouring to explore, mine and treat the claimed gold bearing ore at the tenements and the tailings at the Menzies State Battery, but was not able to generate a profit and generated significant losses. In about February 2019, Mr Kennedy ceased to provide services and commenced taking steps that were detrimental to the interests of Nu‑Fortune; in particular he sought to prevent the transfer of tenements to Nu‑Fortune.
  6. Mr Hanna stated that, as a result of false and misleading conduct of Mr Kennedy or Roxbury, Nu‑Fortune had suffered significant loss and damage. Mr Hanna stated his belief that Nu‑Fortune has a counterclaim against Mr Kennedy and Roxbury for engaging in false and misleading conduct, breach of contract, and negligence, and that the Nu‑Fortune parties have a good defence to the claim.
  7. The Nu‑Fortune parties filed submissions in opposition to the application for summary judgment on 5 November 2019. The submissions were consistent with Mr Hanna’s affidavit including submissions that the Heads of Agreement did not set out all of the terms and conditions, and that Nu‑Fortune had suffered loss and damage in excess of the claim now made by the Kennedy parties in reliance upon misleading representations. The Nu‑Fortune parties submitted that they had an equitable set off against any claim, exceeding the amount of the claim, and ‘such that it is bound up with and impeaches the claim’.
  8. Section 8 of the Commercial Arbitration Act requires the court to consider whether Nu‑Fortune has submitted its first statement on the substance of the dispute, that is, a statement about how the substantive dispute in the primary proceedings should be determined: see Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52 [92] ‑ [93]; CPB Contractors Pty Limited v Celsus Pty Limited (formerly known as SA Health Partnership Nominees Pty Ltd) [2017] FCA 1620; (2017) 353 ALR 84 [91] ‑ [94].
  9. The affidavit of Mr Hanna, together with the submissions filed on the application for summary judgment, in my view, go well beyond the limited basis on which summary judgment was sought and set out what the Nu‑Fortune parties have to say on the substance of the dispute.
  10. Although the Nu‑Fortune parties submitted that they had reserved their position regarding arbitration at the time of their response to the summary judgment application, the affidavit of Mr Sims and the letter attached to it cannot be properly construed as a reservation of rights. In any event, the terms of s 8 do not, in my opinion, allow for a party to reserve its rights. A party that wishes for a dispute to be referred to arbitration, should seek a stay or protest jurisdiction in respect of the dispute.
  11. If there is a discretion to stay, in circumstances where a party has submitted its first statement and cannot rely on the mandatory terms of s 8, the Nu‑Fortune parties conceded at the outset that a stay should not be ordered on that basis.
  12. The application for an order staying the proceedings and referring the matter to arbitration should be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

CG

Associate to the Honourable Justice Allanson

20 DECEMBER 2019