Rinehart v Rinehart [2020] NSWSC 68

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

 

JUDGMENT

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

 

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

 

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

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

The panoply of interlocutory motions as at 15 July 2019

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

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

    inter alia

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

    Commercial Arbitration Act 

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

Summary of my conclusions

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

Context in which Bianca has commenced the present proceeding

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

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

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

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

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

Background to the present dispute

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

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

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

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

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

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

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

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

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

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

DISTRIBUTION COVENANT

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

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

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

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

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

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

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

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

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

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

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

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

  1. Clause 7, relevantly, provides that:

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

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

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

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

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

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

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

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

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

  1. Clause 9.3 provides that:

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

  1. Clause 11 provides that:

PLEA IN BAR

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

  1. Clause 15.1 provides, relevantly, that:

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

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

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

20.2 Confidential Arbitration

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

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

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

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

SIGNED BY

GEORGINA HOPE RINEHART

as trustee of the Hope Margaret

Hancock Trust in the presence of …

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

Constituent documents

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

(a) The Trustee may:

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

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

Other proceedings

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

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

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

Relevant provisions of the Commercial Arbitration Act

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

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

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

16. Competence of arbitral tribunal to rule on its jurisdiction

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

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

Relevant principles

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

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

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

Bianca’s submissions

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

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

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

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

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

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

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

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

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

Defendants’ submissions

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

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

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

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

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

Determination as to threshold question

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

Section 8 Referral/Stay

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

Construction of the arbitration agreement

The earlier decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bianca’s submissions as to the question of precedent

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

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

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

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

Defendants’ submissions

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

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

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

Determination

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

Requirements of s 8

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

Characterisation of the “matter”

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

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

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

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

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

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

Statement of claim

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

Defences under the Hope Downs Deed

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

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

Gina’s submissions as to “matter”

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

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

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

HPPL’s submissions as to “matter”

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

Bianca’s submissions as to “matter”

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

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

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

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

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

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

[…]

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

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

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

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

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

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

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

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

Determination

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

Bianca’s s 247A application

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

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

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

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

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

Gina’s submissions

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

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

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

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

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

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

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

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

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

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

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

HPPL’s submissions

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

Bianca’s submissions

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

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

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

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

Determination

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

143 Clause 29.2 of the Investment Agreement on its proper construction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 8 Case Management Stay

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

Case Management Stay

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

Gina’s submissions

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

HPPL’s submissions

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

Bianca’s submissions

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

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

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

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

and at T 280:

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

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

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

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

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

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

Abuse of process stay

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

Bianca’s submissions

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

Determination

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

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

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

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

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

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

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

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

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

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

  1. At [59], their Honours said:

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

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

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

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

Bianca’s unconscionability motion (motion viii)

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

Bianca’s submissions

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

HPPL’s submissions

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

Gina’s submissions

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

Determination

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

Conclusion

For the above reasons, I make the following orders:

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

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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

A v OOO ‘Insurance Company Chubb’ & Ors [2019] EWHC 2729 (Comm) (15 October 2019)

Neutral Citation Number: [2019] EWHC 2729 (Comm)
Case No: CL-2019-000572

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
15/10/2019

B e f o r e :

MRS JUSTICE CARR
____________________

Between:

A
Claimant

– and –

 
(1) OOO “Insurance Company Chubb”
(2) Chubb Russia Investments Limited
(3) Chubb European Group Se
(4) Chubb Limited

Defendants

____________________

Mr Steven Gee QC and Mr William Buck (instructed by Shearman & Sterling LLP) for A
Mr David Bailey QC and Mr Marcus Mander (instructed by Kennedys Law LLP) for the Defendants

Hearing date: 15 October 2019
____________________

HTML VERSION OF JUDGMENT APPROVED
____________________

Crown Copyright ©

 

Mrs Justice Carr:

Introduction

    1. These are proceedings for anti-suit relief by way of injunction, together with associated relief, against four defendants in respect of proceedings in Russia (“the Russian Proceedings”) commenced by the First Defendant (“Chubb Russia”), a Russian insurance company which is part of the Chubb Insurance Group. The proceedings are said to have been issued in breach of and disregarding a written arbitration agreement providing for arbitration in London.
    2. The Claimant (“A”) is an international construction and engineering joint stock company. It entered into a contract dated 27 June 2012 with Energoproekt Closed Joint Stock Company (“Energoproekt”) for boiler and auxiliary equipment installation works at the Berezovskaya Power Plant (“the Contract”) (“the Plant”). Clause 50 of the Contract (“Clause 50”) contained what is said to be the arbitration agreement between the parties. It provided for arbitration under the rules of the International Chamber of Commerce with a seat in London and using the English language. There were also terms in the Contract concerning insurance at Article 32, for example, providing for all risk coverage of A’s works on the project as well as a subrogation waiver and the provision for limited liability.
    3. The Contract was the subject of an assignment of rights and obligations dated 21 May 2014 between A, Energoproekt and EON Russia (“Unipro”) whereby Unipro replaced Energoproekt as the contracting party with A under the Contract.
    4. Chubb Russia issued an insurance policy to Unipro which it alleges covered losses arising out of a fire at the Plant on 1 February 2016. Chubb Russia alleges that it paid out some US$400 million to Unipro in respect of those losses. It claims to be subrogated to the claims of Unipro under Russian law and to be entitled to sue in Russia in its own name in respect of those claims.
    5. Chubb Russia notified a claim in respect of losses at the fire to A in April 2019. A rejected the claim (albeit not to Chubb Russia but Unipro), stating that its works were unrelated to the fire. It made reference to the provisions of the Contract, why there was no subrogation and invoked the arbitration clause in Clause 50.
    6. Chubb Russia has issued the Russian proceedings against ten other respondents alongside A including by reference to claims in tort/delict under Russian law. The respondents are collectively said to be liable “solidarily” for “jointly caused harm”.
    7. The present application has been listed before me as a matter of urgency following directions on paper by Mr Justice Teare on 30 September 2019, whereby he permitted service of the claim form and this application on Chubb Russia in Moscow, on the Third Defendant (“Chubb Europe”) in France, and the Fourth Defendant (“Chubb Holding”) in Switzerland. The validity of the claim form was also extended to a period of 18 months.
    8. My understanding is that service of the claim form and this application has been effected on the Second Defendant (“Chubb Investments”) and Chubb Europe, but not Chubb Russia or Chubb Holding, although Kennedys Law LLP have recently indicated that they are now authorised to accept service on behalf of Chubb Russia.
    9. The current application is made ex parte but on notice to the Defendants. A seeks, first, a mandatory order against Chubb Russia requiring it to cause the Russian courts to grant a stay and withdrawing/waiving its claims against A. Secondly, for interim purposes only against Chubb Europe, a mandatory injunction requiring it to procure and cause Chubb Russia to take the necessary steps to comply with the mandatory order against it, to instruct Chubb Russia to take those steps and restraining Chubb Europe from instructing, procuring or causing Chubb Russia to take any steps to continue with the claim in the Russian proceedings against A. The broad allegation against the Second to Fourth defendants is that they are “pulling the strings” behind the Russian proceedings. A also seeks an order dispensing with service of the application notice on all Defendants except Chubb Investments.
    10. The application, as I have indicated, has been listed as a matter of urgency on the basis that A has issued a motion for stay of the Russian proceedings which is due to be heard on Wednesday of next week, being 23 October 2019.

Procedural history

    1. A letter of claim was sent to A by lawyers for Chubb Russia on 24 April 2019. A did not respond directly to Chubb Russia or its lawyers, although it appears that it did write in response to Unipro.
    2. On 25 May 2019 Chubb Russia commenced the subrogation action in the Russian proceedings. It contends that it was fully entitled to do so and, in doing so, has in no way acted in contravention of any arbitration agreement, including Clause 50.
    3. On 29 May 2019 A discovered that Chubb had issued the Russian proceedings. A statement of claim was received by A on 6 June 2019. In the statement of claim Chubb Russia seeks compensation of losses by way of subrogation concerning the fire alleging defects of the supplied equipment, violations of the law requirements during engineering, construction and installation, as well as deviations during development phases. A is said in the statement of claim to be the general contractor, something which A says is a misrepresentation since it played only a limited role to perform its particular subcontract.
    4. On 3 June 2019 A received the first ruling of the Russian court which essentially raised queries about Chubb Russia’s claim.
    5. On 29 July 2019 A received a second ruling from the Russian court in which Chubb Russia was asked for further information and given time to cure outstanding deficiencies.
    6. On 4 September 2019 A received a third ruling from the Russian court dated 3 September 2019, accepting Chubb Russia’s claim and formally initiating proceedings.
    7. On 13 September 2019 A wrote to Mr Joseph Wayland, general counsel for the Chubb Insurance Group raising questions on the merits and, amongst other things, pointing to clause 50 asking for the Russian proceedings to be withdrawn on 16 September 2019. Mr Wayland’s response was to ask for reasonable time to provide a considered response. An email on 20 September 2019 indicated that that the position within the Chubb Insurance Group was still being investigated.
    8. The present claim was issued on 16 September 2019. Further, on 17 September 2019 A issued the motion for a stay in Russia to which I have already referred. A has objected to the Russian court’s jurisdiction on grounds, amongst others, that the dispute between the parties should be referred to ICC arbitration in London. As indicated, this motion is to be heard next Wednesday.
    9. Chubb Russia submits that the purpose of this present application appears to be an attempt by A to pre-empt the Russian court’s right to decide its own jurisdiction by obtaining a determination from the English court on the same question in advance of the hearing on 23 October 2019.
    10. On 23 September 2019 A issued its application for leave to serve out of jurisdiction and interim injunctive relief. On 30 September, as already indicated, Mr Justice Teare gave directions. He declined to make directions for an urgent hearing to take place, but commented that the matter appeared urgent to him and that A could apply on notice for a one-day hearing between the parties. The application before Mr Justice Teare was supported by a short skeleton argument on behalf of A and two short affidavits from A’s chief counsel of international affairs.
    11. On 2 October 2019 A obtained a hearing date for its application for interim injunctive relief of 15 October 2019. Kennedys Law LLP for the Defendants opposed such a hearing and suggested a hearing for mid to late November 2019.

Current position

    1. Bundles for today’s hearing were received by the court last Friday, 11 October 2019. Evidence from the Defendants, in the form of a witness statement from Mr Michael Wells of Kennedys Law LLP, was served on the same day. Over the weekend, following an indication that that would be when the court was in a position to pre-read, the court received a helpful “Executive Summary” of the Defendants’ case.
    2. On Monday, that is to say yesterday, at 10am, the court received a full skeleton from the Defendants. At 1.10pm the court received a skeleton argument from A, together with a supplemental document addressing some of the authorities relied upon by the Defendants. The skeleton was not cross-referenced; it contained no list of issues; it was not accompanied by a chronology, nor any reading list. It does not comply with Appendix 5 of the Commercial Court Guide.
    3. Each skeleton cited some 20 to 30 authorities, albeit with some overlap. I find it difficult to accept that paragraph F.13.3 of the Commercial Court Guide has been respected. No authorities bundle was received until 9.30 am today, and then only from the Defendants. Those bundles contained 45 authorities, four textbooks and two articles.
    4. Further, yesterday, a new bundle of evidence was received from A containing for the first time a Russian law expert report and an affidavit from the partner at Shearman & Sterling LLP, solicitors acting for A. The bundle contained over 300 pages. Amongst other things, reading the expert report, there appears to be a dispute between the parties as to whether there is a proper basis for joint liability as Chubb Russia asserts.
    5. Overall, as matters stood at the end of play yesterday, the court had been provided with some 1,400 pages of material, ignoring authorities bundles.
    6. Around 00.30 this morning A’s representatives emailed certain documents now cross-referenced to my clerk. At 9.30am today I received a note from A on “Options regarding the hearing on 23 October in Russia” together with a chronology.
    7. During the course of the hearing I queried the absence of what appeared to me to be a key contractual document. I was informed that that document was indeed missing from the material so far before me. There were in fact two further bundles available but which had not been provided to the court (volume H), which contained that document. Those materials had not been formally exhibited, but I was handed the first bundle H to consider. I was also provided with a copy of the (three) authorities bundles for A for the first time during the course of the hearing. Those bundles, as became apparent even during the course of the limited submissions that I have heard so far, proved themselves to be incomplete.
    8. It is apparent to me that, whichever way one considers the issues before the court, and despite the powerful submissions of Mr Gee QC for A, this is not a narrow, single-issue case. A very large number of issues are raised: even if only on an alternative basis, what is the proper governing law of Clause 50, the effect of Russian law, whether there are strong or good reasons not to grant an anti-suit injunction, whether there is any proper basis for relief against Chubb Europe. It is, on any view, a heavy application within the meaning of the Commercial Court Guide.
    9. In the normal course of events, paragraph F.6 of the Commercial Court Guide would have applied. In particular, the applicant’s skeleton, reading list, time estimate and chronology would have been needed to be provided by 4pm, at least two clear days before the hearing (ie 4pm on Thursday, 10 October).
    10. At the outset of today’s hearing, I raised my concerns as to the appropriateness of proceeding at all today in the light of the procedural position facing the court. I heard short but focused submissions on both sides on my central concerns.

Ruling

    1. Having considered carefully the submissions on both sides, and the overriding objective of dealing with cases justly and at proportionate cost, I have concluded that there is a number of reasons why I should not proceed to consider granting the relief sought by A today.
    2. First, it is not at all clear to me why A’s application was issued ex parte in the first place, as opposed to inter partes and then on short notice. The fact that a matter is urgent does not mean that it should proceed ex parte.
    3. Secondly, A has been on notice of the Russian proceedings since late May 2019, yet the current application was not made until mid to late September 2019. Any crisis on timing is, in my judgment, of A’s own making. The fact that the Russian proceedings were not accepted or formally commenced in the Russian courts until early September is not to the point: from May 2019 there was a clear threat, and on A’s case, breach, by Chubb Russia from May 2019 onwards. There was always a clear risk of a tight timetable in Russia upon formal acceptance of the proceedings. A appears at all times to have had ready access to Russian lawyers who would have been in a position to advise of possible procedural developments and timetables upon formal commencement of the proceedings. If the risk to A’s assets and business in Russia is as great as A says, one would have expected earlier action on its part.
    4. Thirdly, there is on the material identified before me to date no compelling reason why A’s claim for anti-suit relief has to be heard today or, indeed, before next Wednesday. This is not a question of saying that the application is premature, or that it would be premature to grant the application because the Russian courts have not yet ruled on the stay motion before them. It is simply identifying that no obvious real prejudice has been identified to A if its claim for relief is heard after the Russian courts have dismissed (or not) A’s motion for a stay. This is so even if the Russian courts on 23 October 2019 begin their consideration of the merits. One is not at the judgment stage where there is a risk of irreparable harm through damage to A’s operations in Russia, a risk which, of course, exists wherever the matter is to be litigated.
    5. Fourthly, the circumstances in which the order from Mr Justice Teare was sought are unfortunate. There was a failure of full and frank disclosure by A of the fact that the Contract containing Clause 50 is expressly governed (even if only in part, on A’s case), by Russian law. Attachment 17 to the Contract defines the applicable law as Russian law. Nor did A refer to its own motion for a stay to the Russian court in which A positively asserts and relies on the fact that the Contract is expressly governed by Russian law. Chubb Russia’s argument by reference to Russian law was, in my judgment, one which was always obviously going to raise its head. It has been, at least until this morning, been advanced (or at least understood by the Defendants) as the central issue in the application, namely what is the governing law of Clause 50.
    6. A accepts, fairly, that it should have included Attachment 17, Articles 4.1 and 4.2 of the Contract, and its motion for a stay in Russia in its evidence on the application to Mr Justice Teare. It makes due apologies. The errors are said to have been the product of the burden of work at the time. Mr Gee has emphasised before me the huge pressure under which his team have been operating in three different time zones and in circumstances of urgency.
    7. Fifthly, and perhaps more fundamentally for present purposes, it is clear that the relief sought by A is, at least arguably, not only interim relief. Its effect would be (at least possibly) final. I note that A’s Russian law expert contends that upon the Russian courts effectively dismissing without prejudice Chubb Russia’s claim, that there would be nothing to stop Chubb starting again if the anti-suit claim were to fail. To this Mr Bailey QC for Chubb Russia not unreasonably makes the point that he has not been able to counter this new point made by A’s Russian law expert for the first time yesterday in any evidence. However, on instruction he says that Chubb Russia’s position is very much to the opposite effect: there would be very grave obstacles in the path of Chubb Russia seeking to revive its claim against A in circumstances where there had been an earlier dismissal by consent. Thus, the court is being asked to make a mandatory order with potentially far-reaching, permanent consequences, something which it will not do lightly or without the merits being fully and properly ventilated.
    8. As to that, exploring the merits – even scratching their surface this morning – has only served to deepen my concerns as to the preparedness of this matter for fair determination today.
    9. In submission, Mr Gee made clear that, in fact, his primary case is that the proper governing law of Clause 50 is completely irrelevant. This is not something that I had understood from his skeleton, nor had Mr Bailey. Rather, Mr Gee bases his primary case on the proposition that the choice of London as a seat for arbitration means without more that the English courts have supervisory jurisdiction to grant anti-suit relief, irrespective of the governing law of the arbitration agreement. Mr Bailey describes this as an entirely novel point of law.
    10. Exploration of the merits has also served to reveal a complete lack of clarity (and certainly lack of confidence on both sides) as to precisely what test this court should be applying. Mr Gee submitted that I should determine, and could readily and without difficulty, determine the question of relief and construction without hesitation on an outright basis. But he went on to say, on an alternative basis, for the purpose of granting the injunctive relief, I need only be satisfied that there would be a good arguable case in A’s favour. Mr Bailey countered that by reference to the case of Transfield Shipping Inc v Chipin Xinfa Huayu Alumina Co Ltd [2009] EWHC 3629 (affirmed in Ecobank Transnational Inc v Tanoh [2016] 1 WLR 2231 at [74] to [77]). He submits that the appropriate test is that I would have to be satisfied that there was a high degree of probability that A was entitled to the relief which it sought.
    11. In light of all of the above, I have reached the conclusion that the case is not ready for a fair hearing. Beyond the very late service of evidence and the late service of A’s skeleton, as I have indicated during the course of submissions and in this judgment, A’s skeleton does not comply with Appendix 5 (or paragraph F.6.5) of the Commercial Court Guide.
    12. In circumstances such as these where the court is being required to digest a huge amount of material in a very short timeframe, I would wish to emphasise the importance of clear, succinct and tightly focussed skeleton arguments from both parties.
    13. The skeleton of A as applicant needed to identify crisply the issues in the case and the test(s) that needed to be applied. I accept Mr Gee’s submissions to the court that he laboured long and hard over the weekend to produce the skeleton that he has, and that he has done so to the best of his ability. It does, to my mind, nevertheless, beg the question as to why preparation of A’s skeleton did not commence much earlier, even if Chubb Russia’s skeleton was going to emerge later in the day and require modification/updating to A’s case. A was the applicant. It had sought and obtained today’s hearing date. As I indicated, the structure of A’s skeleton was difficult to follow; there was no reading list or time estimate; there was no cross-referencing until documents were sent to my clerk shortly after midnight this morning; there was no chronology provided until very shortly before the court sat. In particular and as a matter of substance, the skeleton failed to identify the relevant issues and test(s) succinctly for the court at the outset.
    14. This court strives at all times to assist court users, often in circumstances of urgency. However, in order to be able to provide that service, it needs proper assistance from the parties, including intelligible skeleton arguments which identify the issues and the relevant test(s) in a clear structure and all in accordance with Appendix 5 of the Commercial Court Guide (and, on heavy applications, paragraph F.6.5 of the Commercial Court Guide).
    15. There are further evidential difficulties, such as that the evidence on Russian law is incomplete, in particular, so far as Chubb Russia’s position is concerned.
    16. Given the range of issues arising, the number of authorities cited, the fresh evidence on Russian law and the state of preparedness overall, I have also concluded that one day today would simply be insufficient time for the matter properly to be disposed of. I consider that with due preparation and properly focussed and structured written submissions, one day should be sufficient, but the case is clearly not ready for that to be achieved today.
    17. I would also add that, so far as Chubb Europe is concerned, the application raises some particular complexities which would take some time to unravel if the application for interim relief against Chubb Europe were to be pursued.

Conclusion

  1. In short, I am not persuaded that I should proceed to consider further granting urgent interim injunctive relief today in the light of all these matters. It is impossible for the court to consider the relevant issues properly in the time available. The time crisis is, in my judgment, largely of A’s own making. There was a failure to put all relevant material before Mr Justice Teare, and ultimately and as matter of pragmatism, the case appears to me to be in chaos today. As Mr Gee himself was forced to agree, it is at least in disarray. It would not be fair to either party to proceed on such an important matter today in such circumstances. As I have indicated, with further directions for a further hearing, the position should be capable of effective disposal in a day, but for today’s purposes I am not prepared to let the matter proceed further substantively.

Maco Group Pty Ltd v Johns Lyng Commercial Builders Pty Ltd (Civil Claims) [2019] VCAT 1815 (22 November 2019)

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL DIVISION
CIVIL CLAIMS LIST VCAT REFERENCE NO. C4998/2019

CATCHWORDS
Commercial Arbitration Act 2011 sections 1AC(1) and 1AC(3), interpretation of the Act to achieve its paramount object, section 7 meaning of “arbitration agreement”, section 8(1) – Subway Systems Australia Pty Ltd v Ireland [2014] VSCA 142 – Thiess v Collector of Customs and Others [2014] HCA 12; (2014) 88 ALJR 514 – PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301.
.
APPLICANT
Maco Group Pty Ltd ACN: 613 930 957
RESPONDENT
Johns Lyng Commercial Builders Pty Ltd ACN: 088 343 453
WHERE HELD
Melbourne
BEFORE
Deputy President I. Lulham
HEARING TYPE
Hearing
DATE OF HEARING
15 November 2019
DATE OF ORDER
22 November 2019
DATE OF REASONS
22 November 2019
CITATION
Maco Group Pty Ltd v Johns Lyng Commercial Builders Pty Ltd (Civil Claims) [2019] VCAT 1815

ORDER

  1. The Respondent’s costs of its application for summary dismissal, or alternatively a stay, of this proceeding are reserved.
  1. Any application for costs shall be made in writing by 16 December 2019, but shall not be accompanied by an assessment of the costs or an itemised bill of costs.
  1. The proceeding is otherwise stayed.
  1. The parties are referred to arbitration.

I. Lulham
Deputy President

REASONS

  1. This proceeding arises from excavation works performed by the Applicant for the Respondent, as a sub-contractor at a site called the Yarra Ranges Civic Centre. The Respondent is a commercial builder.
  1. In its Application filed 8 July 2019 the Applicant sued for payment of $127,857.00. The Applicant does not seek an injunction or a declaration. The Applicant has not engaged a legal practitioner and it has filed documents in a fairly ad hoc fashion. Mr Malik Ahmad, director, prepared the Applicant’s documents and represented it at the hearing on 15 November 2019.
  1. In the Application form filed to initiate this proceeding the Applicant wrote that it was relying on the Australian Consumer Law and Fair Trading Act 2012 (page 1), and that it was claiming payment for goods and services including rock breaking and the digging of footings (page 3). It wrote that the Respondent had rejected the Applicant’s invoices, and disclosed that there are disputes over the calculation of rock volume, whether material excavated from the site was rock at all, and whether rock was rippable or non-rippable (the significance of which would lie in the rates for payment). The Applicant wrote that it was entitled to be paid for rock breaking at the rate of $300.00 per hour, as agreed at a tender meeting (page 4).
  1. Even though the Applicant emailed to the Tribunal copies of several documents, when issuing the Application, it is clear that the Tribunal would need some form of pleadings to clarify the issues and the basis of the claim. Clearly the Applicant was alluding to a subcontract in some form, by referring to an agreement made at a tender meeting, but its express reliance on the Australian Consumer Law and Fair Trading Act 2012 potentially raises many issues under the Australian Consumer Law which might include misleading and deceptive conduct, unconscionable conduct, and unfair terms.
  1. At the first directions hearing on 23 September 2019 the Respondent foreshadowed an application for summary dismissal of the proceeding under section 75 of the Victorian Civil and Administrative Tribunal Act 1998 or an application for a stay. Orders were made for the Respondent to file and serve any affidavits in support by 15 October 2019, for the Applicant to file and serve affidavits in opposition by 5 November 2019, and for the hearing of the Respondent’s applications on 15 November 2019.
  1. The basis of the Respondent’s applications is that the subcontract between the parties includes a dispute resolution clause which compels the parties to engage in private mediation or arbitration and which thus prevents either party from suing the other in a Court or in this Tribunal.
  1. Clearly then the first question is whether the parties executed a contract containing such a clause. Only if they did, do questions of enforceability and relevant legislation arise.

Is the subcontract recorded in the “Subcontract Services Agreement”?

  1. The Respondent has been represented by legal practitioners from the outset. It filed and served affidavits of Messrs Luke Edwards, Ahmad Pour and James Turnbull all sworn 15 October 2019. Mr Edwards is the Respondent’s Senior Site Manager, Mr Pour is the Respondent’s Contracts Administrator, and Mr Turnbull is a legal practitioner.
  1. The three short affidavits exhibit a Subcontract Services Agreement dated 1 May 2019, and other documents.
  1. Mr Edwards deposed that two copies of the Subcontract were delivered to the site on 8 April 2019, for Mr Ahmad to sign when he came to the site. On 9 April 2019 Mr Ahmad attended the site and went through an induction process, signing a document entitled “Safe Work Method’s Statement” (which is given the acronym SWMS which the parties call the “swims”) and Mr Edwards gave Mr Ahmad both copies of the Subcontract. Mr Ahmad sat down on the desk adjacent to Mr Edwards and commenced reading it and filling it out. On 11 April 2019 Mr Pour realised that the Subcontract had not been signed and asked Mr Malik to come to the site office. In the presence of Mr Edwards and Mr Pour on 11 April 2019, Mr Ahmad signed the two copies of the Subcontract, and Mr Edwards witnessed him writing his signature on the Subcontract.
  1. Mr Pour deposed that on 11 April 2019 he went to the site to collect the Subcontract, and on his arrival realised that it had not been signed. He asked Mr Malik Ahmad of the Applicant to meet him at the site office, and at that meeting Mr Ahmad signed the Subcontract in the presence of Mr Pour and Mr Edwards. Mr Pour deposed that he had witnessed Mr Ahmad writing his signature on the subcontract.
  1. Mr Turnbull deposed to other matters.
  1. The Applicant filed an affidavit by Malik Ahmad on 14 November 2019. However, because the Applicant did not engage a legal practitioner, Mr Ahmad’s affidavit is, objectively, disorganised and in parts is in the form of a submission or argument rather than a deposition as to facts. It did not properly exhibit documents, and in the hearing on 15 November 2019 Mr Ahmad referred to documents which were not referred to in the affidavit. I will come to these irregularities below.
  1. Mr Ahmad denied that the Applicant executed the Subcontract Services Agreement. In substance the Applicant contends that the subcontract was made in a meeting on 5 April 2019, and that to the extent that it was recorded in writing, it is evidenced by a document headed “Vetting Notes” which contains a list of 38 items or subjects and which has been signed by Mr Ahmad.
  1. This document is in 3 columns, the third of which was blank and was designed to be filled in with a tick or a cross. The first 2 columns are printed. The first column lists each item number 1 – 38; the second column sets out the topic [for example, item 9 “Control measures for noise and dust generated from works under this subcontract”]; and the third has the heading “In contract” followed by an explanation that a tick means ‘yes’ and a cross means ‘no’.
  1. As the Vetting Notes do not mention dispute resolution, the Applicant’s point is that there is no dispute resolution clause or “arbitration agreement” within the meaning of the Commercial Arbitration Act 2011  in the parties’ contract.
  1. On the issue of whether the Applicant executed the Subcontract Services Agreement, Mr Ahmad’s affidavit was vague and contradictory. I do not mean this in a pedantic sense, but instead as a matter of substance. Relevantly it said that Mr Ahmad signed the Vetting Notes at around 4:00pm on 5 April 2019 at the Respondent’s office, and the “SWMS Contract Agreement” at around 7:00am on 11 April 2019. At paragraph 3V the affidavit says:

“The Respondent is claiming my signature on the subcontract agreement which I am not aware if I ever signed. This signature is no way closer to my signature, we can use the services of signature expert to verify this”. (emphasis added)

  1. Mr Ahmad used an equivocal expression – even given that English is apparently his second language – “which I am not aware if I ever signed” being vastly different from, for example, “I did not sign the Subcontract Services Agreement”.
  1. The Tribunal must be fair to both parties, and this can present some practical difficulties when dealing with self-represented parties. Legal practitioners prepare documents carefully, and ambiguities or omissions in a document prepared by legal practitioner can be far more significant than one prepared by a self-represented litigant. In making submissions for the Applicant Mr Ahmad positively said from the Bar table that he had not signed the Subcontract Services Agreement.
  1. The fact that he made that assertion when not on oath raised a number of possibilities: I could disregard the submission on the basis that it was inconsistent with his affidavit; I could hear an application by the Applicant for an adjournment to enable time for a supplementary affidavit to be filed and served and, if I granted the adjournment over the Respondent’s objection, then deal with the inevitable application for costs by the Respondent; or I could permit Mr Ahmad to give supplementary evidence orally, which would avoid the need to adjourn. If Mr Ahmad was to give further evidence, the Respondent should have the opportunity to cross examine him, even though the parties would not be cross-examined on their affidavits. There was a discussion about these matters in the hearing and the parties consented to Mr Ahmad giving supplementary evidence orally, and being subject to cross-examination. This was an imperfect solution but seemed better than any alternative. I could not envisage permitting Mr Ahmad to give supplementary evidence orally without being cross examined, as it was plain that his supplementary evidence would be inconsistent with the equivocal statement in his affidavit.
  1. Mr Ahmad gave evidence on affirmation. He stated briefly in chief that he positively had not signed the Subcontract Services Agreement.
  1. When he was cross-examined, Mr Ahmad’s attention was drawn to a wide array of documents that he had signed, and it was put to him that the signatures on those documents were identical to what purported to be his signature on the Subcontract Services Agreement and that it followed that he had executed that document. Mr Ahmad denied that he had signed the Subcontract Services Agreement.
  1. I found Mr Ahmad’s evidence in cross examination to be quite unedifying, evasive, unrealistic and unbelievable, and I reject his evidence that he did not sign the Subcontract Services Agreement. I am satisfied that Mr Ahmad was motivated to give that evidence as a means of taking the dispute resolution clause and “arbitration agreement” out of the picture. I find that he signed the Subcontract Services Agreement, for these reasons:

(a) the signatures on the documents that Mr Ahmad said he had signed, and his disputed signature on the Subcontract Services Agreement, are essentially identical. I do not purport to be a “handwriting expert”, but one does not have to be an expert to recognise a person’s signature. Of course there are slight differences in the various signatures, but it would be all the more remarkable if the signatures were entirely identical. Additionally, in addition to there being a signature, several of the documents have Mr Ahmad’s name written near the signature in capital letters, and those versions of his name in capital letters are essentially identical. The name in capitals and the signature are written in the same pen (and the signatures of others are in different pens) which leads me to conclude that Mr Ahmad wrote both.

(b) Mr Ahmad admitted that he had received the Subcontract Services Agreement, but said he did not sign it. He did not volunteer any reason for this, plausible or otherwise. A person might say, for example, that having received a draft subcontract they declined to sign it because it was inconsistent with previous negotiations. Mr Ahmad gave no explanation.

(c) If Mr Ahmad did not sign the Subcontract Services Agreement, then someone in the Respondent’s camp must have forged his signature. Why would an officer of the Respondent do that? It makes no sense to suggest that this would have occurred.

(d) If Mr Ahmad did not sign the Subcontract Services Agreement, then the witness Ahmad Pour not only signed a false document when inserting his signature as witness, but he lied on oath in his affidavit. Similarly, Mr Edwards would have lied on oath in his affidavit. I reject this as a possibility.

(e) In the hearing, Mr Ahmad described the Respondent’s head contract as having a contract value of around $24 million. The Respondent did not seek to deny or contradict that description. It would be highly unusual in my view for a commercial builder to not execute proper subcontracts in a project of that size. Put another way, it would be highly unusual for a commercial builder to only record its subcontract in a document headed “Vetting Notes” where that document identifies topics, says (where ticked) that the topics are in the subcontract, but then contains no contractual provisions about them itself.

  1. Mr Ahmad made other statements in his affidavit, which tie in with the Applicant’s reliance on the Australian Consumer Law and Fair Trading Act 2012. In paragraphs 3 and 7 he says that the Respondent misled and deceived the Applicant, to induce it to enter a subcontract at a low price, by misrepresenting the site of the works as not being a “union site” when it was, in the knowledge that union requirements would increase the costs incurred by the Applicant to perform its works; and in representing by conduct and silence that the “Vetting Notes” recorded the terms of the subcontract.
  1. Somewhat contradicting that last point, at paragraph 9 Mr Ahmad deposed that the Respondent had accepted the Applicant’s tender letter, which not only stated the Applicant’s price but also incorporated the Applicant’s ‘terms and conditions’, which do not contain an arbitration agreement.
  1. As I conclude that the Applicant executed the Subcontract Services Agreement, I reject the Applicant’s submission that the subcontract was created by the Respondent’s acceptance of the Applicant’s tender letter.

Is the dispute resolution clause enforceable?

  1. Clause 32 of the Subcontract Services Agreement is as follows:

32.1 Notwithstanding the existence of a dispute, the Subcontractor shall at all times continue to fulfil all obligations under the Subcontract and comply with all directions given by the Builder.

32.2 A party claiming that a dispute has arisen under this Subcontract shall within 7 calendar days of the dispute arising, give written notice to the other party providing particulars of the dispute and designating as its representative a person with authority to settle disputes and the other party shall promptly give notice in writing to the first party of its representative with authority to settle the dispute.

32.3 The designated persons shall within 7 calendar days of the giving of the notice of dispute, meet and in good faith and without prejudice, seek to resolve the dispute.

32.4 If the dispute is not resolved within 28 calendar days of the giving of the notice of dispute, either party may, by giving written notice to the other, submit the dispute to mediation in accordance with, and subject to The Resolution Institute Australian Rules for Mediation of Commercial Disputes. The costs of the mediation will be borne in equal portions by the builder and the Subcontractor.

32.5 If the dispute is not resolved at the mediation, either party may, by giving written notice to the other, refer the dispute to arbitration. Such arbitration shall be affected by a single arbitrator who shall be agreed by the parties, or failing agreement within 7 calendar days after receipt by the other party of the notice in writing given under this clause, then by the Chairperson for the time being of The Victorian Chapter of The Resolution Institute. The arbitration shall be conducted in Melbourne. To give valid notice under this clause, the Subcontractor must first provide security for costs for the benefit of the Builder in the amount of 10 per centum of the amount claimed to the Master Builders Australia Inc and provide evidence of such payment to the Builder at the same time as giving the notice.

32.6 The exhaustion of the above dispute resolution process is a condition precedent to the right of the Subcontractor to commence court proceedings in relation to the dispute, but nothing here in shall prejudice the right of either party to seek injunctive or urgent declaratory relief in respect of any matter arising under the subcontract.

  1. The Respondent’s submission was that clause 32 was an “arbitration agreement” within section 7 of the Commercial Arbitration Act 2011. It satisfied sub-section 7(1) which says:

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.

  1. This is strengthened by sub-sections 1AC(1) and 1AC(3) which say:

(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.

(3) This Act must be interpreted … so that (as far as practicable) the paramount object of this Act is achieved.

  1. It is further strengthened by clause 34 of the Subcontract Services Agreement which states that the document constitutes the entire agreement between the parties.
  1. Section 8(1) of the Commercial Arbitration Act 2011 says:

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. In his affidavit Mr Turnbull, legal practitioner for the Respondent, deposes that a dispute has arisen between the parties; that having regard to clause 32.6 the Applicant issued this VCAT proceeding in August 2019 in breach of the Subcontract, and that on 17 September 2019 he had sought the Applicant’s consent to the VCAT proceeding being stayed pending the exhaustion of the dispute resolution process under the Subcontract.
  1. Additionally, Mr Turnbull deposes that at the first directions hearing on 23 September 2019 he had submitted that the VCAT proceeding should be stayed in compliance with the dispute resolution clause.
  1. Paragraphs 2 and 3 of the Order made at the directions hearing on 23 September 2019 are consistent with this statement. I am satisfied that the Respondent has sought to have the dispute dealt with in arbitration before “submitting the (Respondent’s) first statement on the substance of the dispute” within the meaning of sub-section 8(1).
  1. The Respondent submitted that VCAT is a “court” for the purposes of sub-section 8(1), relying on the decision of the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland. That case arose from a dispute under a franchise agreement which contained an arbitration clause, where the franchisees issued a proceeding in VCAT alleging that Subway had breached the franchise agreement. VCAT had held that because it was not a “court” it was not obliged to refer the dispute to arbitration under sub-section 8(1). An appeal by Subway to a single judge was dismissed, but Subway succeeded in its appeal to the Court of Appeal. The three appeal Justices reached the same conclusion, for different reasons, reflecting the complexity which can bedevil the task of statutory interpretation.
  1. Maxwell P emphasised the national characteristic of the Commercial Arbitration Act 2011, which Act had enacted as domestic law of Victoria a Model Law adopted by the United Nations Commission on International Trade Law. Maxwell P said at paragraph 7 that, for the purposes of that Act, VCAT “was indistinguishable from those other adjudicative bodies of the State which bear the title ‘court’ ”, and that for the purposes of that Act it is a court.
  1. Beach JA analysed the matter from paragraphs 73 to 89 by noting the different meanings of the word ‘court’ in different contexts; the absence of a definition of ‘court’ in the Commercial Arbitration Act 2011 but that Act’s occasional use of the expression ‘the Court’; that the word ‘court’ in section 41 does not and could not mean VCAT; and the High Court’s approach to statutory construction in Thiess v Collector of Customs and Others which was to begin with the consideration of the statutory context and not to make a fortress out of the dictionary when seeking the meaning of legislation. He concluded at paragraph 90 that he was “driven towards a conclusion that the underlying purpose of the [Commercial Arbitration Act 2011] was not merely to express a preference for low cost speedy arbitrations over longer more expensive court trials – but rather, and partly in the interests of uniformity, to express a preference for holding parties to their bargains that in terms involve preferring arbitration of whatever kind has been agreed between the parties over State sponsored dispute resolution (no matter how cost efficient or time effective the relevant state body or arm might prove to be)”. In a footnote His Honour said, “(I)t does not seem to me to be relevant to examine the efficiency or otherwise of a particular tribunal when determining the proper construct of …s8 of the Act”. At paragraph 91 His Honour concluded that the word ‘court’ in section 8 includes VCAT.
  1. Kyrou JA also held that the word ‘court’ in section 8 includes VCAT. His Honour said this arose from the ordinary rules of statutory construction.
  1. The Respondent also submitted that nothing turned on the different meanings of “shall” and “may” in clauses 32.2 and 32.5. In particular, that the latter clause provided that a party “may, by giving written notice to the other, refer the dispute to arbitration” did not make the clause any less of an “arbitration agreement” or a clause which merely allowed parties the option of using arbitration.
  1. The Respondent relied, in support of this submission, on the High Court’s decision in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service. That case arose under a building contract, in which PMT was the builder and Parks and Wildlife was the principal. PMT had issued a notice of dispute for an arbitration, but had done so out of time, and had applied for an extension of time under the arbitration statute applicable in the Northern Territory at the relevant time. Similarly to clause 32.6 of the Subcontract in this VCAT case, the building contract in PMT provided that “no proceedings in respect of a matter at issue (in arbitration) shall be instituted in any court unless and until the arbitrator has made (an) award in respect of that matter at issue”.
  1. At first instance PMT succeeded in obtaining an extension of time. In the appeal by Parks and Wildlife to the Northern Territory’s Court of Appeal, that Court held that there was no power to extend time and did not examine other issues. PMT appealed to the High Court. The five judges in the High Court ruled that PMT’s appeal be allowed, but divided 3-2 as to the reasons.
  1. Relevantly to the Respondent’s submission, Brennan CJ, Gaudron and McHugh JJ set out the relevant clause in the contract relating to arbitration, clause 45.
  1. It used the words “shall” and “may”, saying :

(a) The Contractor shall, not later than 14 days after the dispute or difference arises, submit the matter at issue in writing to the Superintendent for decision and the Superintendent shall give his decision …

(b) If the Contractor is dissatisfied … he may, not later than 14 days after the decision by the Superintendent is given to him, submit the matter at issue, in writing to the Principal for decision …

If the Contractor is dissatisfied with the decision given by the Principal … he may not later than 28 days after the decision … is given to him, give notice in writing to the Principal requiring that the matter at issue be referred to arbitration … If, however, the Contractor does not, within the said period of 28 days, give such a notice to the Principal requiring that the matter at issue be referred to arbitration, the decision given by the Principal pursuant to the last preceding paragraph shall not be subject to arbitration.

  1. Section 48 of the relevant legislation empowered the Court to extend a time limit “in or in relation to an arbitration”. Brennan CJ, Gaudron and McHugh JJ said that the Court of Appeal approached clause 45 as meaning that it was only when the Contractor had given notice to the Principal requiring the dispute to be referred to arbitration that it had taken a step “in or in relation to an arbitration”. Until the Contractor took that first step of giving that 14 day notice to the Superintendent, it was open to the Contractor to elect to pursue the claim in the Courts or by arbitration.
  1. Their Honours said that the Court of Appeal doubted that the second part of clause 45 was an “arbitration agreement” within the meaning of the Act, because that definition required both parties to be bound, then and there, to refer their disputes to arbitration. An agreement that gave one party an option to submit a dispute to arbitration did not fall within the definition.
  1. At pages 307 – 310 their Honours discussed a line of authorities commencing in 1975 under arbitration legislation which has since been repealed, and which was not made to adopt the Model Law that is now reflected in the Commercial Arbitration Act 2011. That line of authority had distinguished between agreements that referred disputes to arbitration and those which gave the parties a right of election. Their Honours said that in the authorities there had been “a focus on the textual consideration that ‘arbitration agreement’ (in the statute) was defined as an “agreement to refer present or future disputes to arbitration” not as “an agreement referring disputes to arbitration”.
  1. At page 310 their Honours said that statutory definitions had to be construed according to their natural and ordinary meaning unless some other course was clearly required, and that it was of fundamental importance that limitations and qualifications are not read into a statutory definition unless clearly required by its terms or its context. It should be noted here that their Honours were speaking in 1995, and that the arbitration legislation to which they were referring did not include an equivalent of sub-section 1AC(3) of the Commercial Arbitration Act 2011. Their Honours said:

The words “agreement … to refer all present or future disputes to arbitration” in section 4 of the Act are, in their natural and ordinary meaning, quite wide enough to encompass agreements by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition … (W)hen it is given its natural and ordinary meaning, the definition [of ‘arbitration agreement’] is clearly satisfied by clause 45 even if, as was held by the Court of Appeal, clause 45 does not preclude the Contractor from pursuing its claim in the courts”. (emphasis added)

  1. In conclusion, then, the Respondent submitted that VCAT was bound by section 8 of the Commercial Arbitration Act 2011 because it was a ‘court’ for the purposes of that section; that clause 32 of the Subcontract was an “arbitration agreement”; and that by its use of the word “must” section 8 obliged VCAT to refer the dispute to arbitration.
  1. The Applicant did not make submissions in reply in relation to the construction of the Subcontract, the legislation or any authorities. This was probably unsurprising as it had not engaged a legal practitioner. The Applicant repeated its allegations that the Respondent had misled it in relation to the execution of the contract documents. To the extent that these allegations would support claims for damages for misleading and deceptive conduct and/or unconscionable conduct, they are matters which could be brought in an arbitration.
  1. The Applicant did not submit that the Subcontract, and clause 32 in particular, contained unfair terms. Again this is unsurprising as the Applicant had not engaged a legal practitioner, and further because making submissions of that nature would be inconsistent with the Applicant’s primary and unsuccessful argument that it had not executed the Subcontract. It goes without saying that because the Applicant did not raise it, the Respondent was not on notice of any such argument and did not lead any evidence or put any submissions on the topic.
  1. In view of the Tribunal’s obligation to afford the parties natural justice, I can do no more than point out that section 23 of the Australian Consumer Law provides that a term of a small business contract is void if it is unfair and the contract is a standard form contract. It appears that the Subcontract is a “small business contract” as defined. It is arguable that the Subcontract is a “standard form contract”: on the one hand, its design is such that similar forms appear to have been used by the Respondent in its dealings with other subcontractors, but on the other hand, the presence of the Vetting Notes which allow the parties to agree on whether topics are ‘in’ or ‘not in’ their subcontract may be relevant under section 27(2). Whilst there are statements in Subway Systems Australia Pty Ltd v Ireland  to the effect that the cost of a dispute resolution mechanism is irrelevant to the construction of section 8 of the Commercial Arbitration Act 2011, the rather extraordinary obligation of the Applicant, imposed by 32.5 of the Subcontract, to “first provide security for costs for the benefit of the (Respondent) in the amount of 10 per centum of the amount claimed” seems to fall squarely within the example of an unfair term given in section 25(k) of the Australian Consumer Law.
  1. If section 23 applied, there would be a question of whether it rendered the whole of clause 32 void, or only parts of it.
  1. I note that in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service clause 45 set time limits within which the parties were to serve documents on each other, but that the clause as quoted lacked some of the detail of clause 32 of the parties’ Subcontract in this case. Whilst these matters were not raised by the Applicant, and again the Tribunal’s obligation to afford the parties natural justice means that it is not its role to find arguments on behalf of parties, I note in passing that Mr Turnbull did not depose to:

(a) whether any demand for payment sent by the Applicant to the Respondent constituted a written notice of dispute within clause 32.2;

(b) the existence of Rules for Mediation of Commercial Disputes, of the Resolution Institute, referred to in clause 32.4;

(c) as to the existence of the office of Chairperson or the existence of The Victorian Chapter of The Resolution Institute; or

(d) as to the ability of The Master Builders Australia Inc (which I gather is distinct from Master Builders Victoria, though possibly affiliated on some level) to accept payments by way of security for costs.

  1. At paragraph 10 of his affidavit Mr Turnbull deposed that the Applicant had failed and refused to comply with the dispute resolution process, but if that process expressly imposed procedures which were in effect non-existent, it would be an open question as to whether clause 32 could be “construed” to make it operative, or whether the arbitration agreement was rendered “null and void, inoperative or incapable of being performed” as set out in section 8(1), even leaving aside section 23 of the Australian Consumer Law.
  1. The matters referred to in paragraphs 50-54 were not raised in the Respondent’s application and I say no more about them.
  1. In view of the manner in which the application for summary dismissal or a stay was made and argued, and sub-sections 1AC(1) and 1AC(3) of the Commercial Arbitration Act 2011, I am compelled to find in favour of the Respondent. The Respondent submitted that the appropriate form of the Order was that the proceeding be stayed and the parties be referred to arbitration. This form of words does not amount to a mandatory injunction, but is instead the form of words required by section 8(1) of the Commercial Arbitration Act 2011.

I. Lulham

Deputy President

22 November 2019

K & J Townmore Construction ltd. v Kildare and Wicklow Education and Training Board [2019] IEHC 666 (11 October 2019)

[2019] IEHC 666
THE HIGH COURT
[2018 No. 1096 S]
BETWEEN
K&J TOWNMORE CONSTRUCTION LIMITED
PLAINTIFF
AND
KILDARE AND WICKLOW EDUCATION AND TRAINING BOARD
DEFENDANT
JUDGMENT of Mr. Justice David Barniville delivered on the 11th day of October, 2019
Introduction
1.       This is my judgment on an application by the defendant, Kildare and Wicklow Education
and Training Board, for an order pursuant to Article 8(1) of the UNCITRAL Model Law on
International Commercial Arbitration 1985 (as amended, 2006) (the “Model Law”)
referring the parties to arbitration in respect of the disputes the subject of these
proceedings under the terms of an arbitration agreement which the defendant contends is

in existence and binds the parties. The plaintiff resists the application.

 

2.       This judgment is not to be confused with the judgment I delivered in proceedings
between the same parties on 21st December, 2018, (K&J Townmore Construction Ltd v.
Kildare and Wicklow Education and Training Board [2018] IEHC 770 (unreported, High
Court, 21st December, 2018); “Townmore No. 1”), which concerned a different dispute in

respect of a different agreement.

 

Overview

 

3.       The plaintiff, a building contractor, and the defendant, a statutory board, are parties to a
building contract dated 28th October, 2015, under which the defendant engaged the
plaintiff to carry out construction works at St. Conleth’s Community College in Newbridge,
Co. Kildare (the “contract”). The contract is in the form of the “Public Works Contract for

Building Works Designed by the Employer” (the “PWC form”).

 

4.       The parties have been in dispute in relation to a whole range of issues concerning the
contract since 2016. Various dispute resolution procedures and processes have been put
in place and pursued by the parties since then. They include an expert determination
procedure and an unsuccessful conciliation. The expert determination procedure led to a
number of determinations being issued in favour of the plaintiff who has relied on those
determinations in these proceedings, which the plaintiff is seeking to have entered in the
commercial list and in which the plaintiff seeks summary judgment for just under €3
million. The defendant has opposed the plaintiff’s application for entry of the proceedings
in the commercial list and, in the present application, has sought an order under Article
8(1) of the Model Law referring the dispute between the parties which is the subject of
these proceedings to arbitration in reliance on a provision of the contract (Clause 13.2).

The plaintiff opposes that application.

 

5.       There is a dispute between the parties as to the impact and effect of the expert
determination procedure on the dispute resolution procedures provided for in the
contract. A further complicating factor which arises in this case is that during the course
of the proceedings, and while the defendant’s application for an order under Article 8(1)
of the Model Law was awaiting a hearing, the parties engaged in a conciliation procedure
on certain agreed terms. That conciliation procedure encompassed the disputes between
the parties which were the subject of the expert determination procedure and are the

subject of these proceedings as well as other disputes between the parties which are not.

 

6.       In summary, the defendant contends that the court should make an order under Article
8(1) of the Model Law referring the disputes the subject of the proceedings to arbitration
under Clause 13.2 of the contract. The defendant argues that the expert determination
procedure initially agreed between the parties in August 2016, and expanded in January
2017, disapplied, supplanted or replaced the conciliation provisions in Clause 13.1 of the
contract with respect to the issues the subject of the proceedings but left intact and
enforceable the arbitration provisions contained in Clause 13.2. The defendant contends,
therefore, that there is an “arbitration agreement” between the parties for the purposes
of Article 8(1) of the Model Law which covers the disputes the subject of the expert

determination procedure and these proceedings, which should be enforced by the Court.

 

7.       The plaintiff resists the defendant’s application on a number of grounds. Essentially, it
contends that the arbitration agreement contained in Clause 13.2 is “inoperative” under
Article 8(1) of the Model Law as the expert determination procedure was intended to, and
did, replace not only the conciliation provisions in Clause 13.1 of the contract but also the
arbitration provisions contained in Clause 13.2. The plaintiff says, therefore, that there is
no operative arbitration agreement in respect of the disputes the subject of the
proceedings. The plaintiff also relies on the terms of the parties’ agreement in August
2018 to engage in the conciliation procedure encompassing the issues in the proceedings
as precluding the defendant from relying on the arbitration agreement in Clause 13.2 of
the contract. The defendant contends that the conciliation agreement does not preclude
it from relying on the arbitration agreement but rather expressly preserved the parties’
respective positions including the defendant’s entitlement to seek recourse to arbitration

under Clause 13.2.

 

8.       I have concluded, for the reasons set out in detail in this judgment, that the defendant
has failed to establish that the arbitration agreement in Clause 13.2 of the contract
applies to the disputes the subject of these proceedings. Therefore, the requirements of
Article 8(1) of the Model Law have not been satisfied by the defendant. Furthermore,
insofar as any burden rests on the plaintiff, I have concluded that the plaintiff has
demonstrated that the arbitration agreement in Clause 13.2 of the contract is
“inoperative” with respect to the disputes the subject of the proceedings by reason of the
agreement for expert determination entered into between the parties in August 2016, and
expanded in January 2017. In my view, the effect of that agreement was to disapply or
supplant both the conciliation provisions contained in Clause 13.1 and the arbitration
provisions in Clause 13.2 with respect to the disputes the subject of the proceedings
(leaving those provisions applicable to disputes not covered by the proceedings). That, in
my view, is the correct interpretation of the agreement for expert determination and its
impact and effect on the provisions of Clause 13.1 and Clause 13.2 of the contract.
9.       In light of that conclusion, it is strictly speaking unnecessary for me to consider the
proper interpretation of the conciliation agreement and its impact on the defendant’s
entitlement to have recourse to the arbitration provisions in Clause 13.2 of the contract.
However, in my view, there is nothing in that conciliation agreement which undermines
the conclusion I have reached in relation to the interpretation and impact of the
agreement for expert determination. On the contrary, the terms of the conciliation
agreement are inconsistent with the defendant’s entitlement to rely on Clause 13.2 of the
contract in relation to the issues which are the subject of these proceedings. In those

circumstances, I must refuse the defendant’s application.

 

Factual background

 

10.       I set out in this section of my judgment the relevant factual background which is taken
from the affidavits sworn in connection with the defendant’s application. I have also had
regard to the affidavits sworn in connection with the plaintiff’s application for summary
judgment and its application to enter the proceedings in the commercial list. There is no

real dispute between the parties on the relevant facts.

 

11.       The plaintiff and the defendant entered into the contract on 28th October, 2015, under
which the plaintiff, as contractor, agreed to carry out construction works at St. Conleth’s
Community College for the defendant, as employer. The contract was in the PWC form
and contained certain dispute resolution procedures in Clause 13. Clause 13.1 provided
for conciliation. Clause 13.2 provided for arbitration. While the plaintiff and the
defendant agreed in their submissions to the Court that the conciliation provisions in
Clause 13.1 are optional whereas the arbitration provisions in Clause 13.2 are mandatory,
I do not wish to be taken as agreeing with or endorsing that consensus, as I explain

below.

 

12.       Disputes arose between the plaintiff and the defendant during the course of 2016. The
plaintiff sought to invoke the conciliation provisions in Clause 13.1 of the contract.
However, the plaintiff claims that its attempts to do so were ignored by the employer’s
representative (the “ER”) under the contract. Ultimately, however, agreement was
reached between the parties in August 2016 to enter into an expert determination
process under which LEA Consulting Limited was appointed as what was termed a
mediator/expert” (the “expert”) on certain agreed terms. The initial terms of
engagement of the expert were set out in a letter dated 12th August, 2016, and were
agreed by the parties. A draft determination was issued by the expert in December 2016,
following which it was agreed between the plaintiff and the defendant that the terms of
engagement of the expert would be revised and expanded. Revised terms of engagement
were issued by the expert and signed by the parties on 23rd January, 2017, (the
“agreement for expert determination”). Both the initial terms of engagement and the

revised terms of engagement were set out in the agreement for expert determination.

 

Revised Terms of Engagement

 

13.       Under that agreement, the parties agreed to refer certain disputes and differences to the
expert for expert determination. Initially, it was agreed that the expert would seek to
arrive at a determination of the “contractual position of the parties”. In the revised terms
of engagement, however, it was agreed to confer an expanded jurisdiction and powers on
the expert. Under Clause 2, the plaintiff and the defendant agreed to “take up and
consider Binding any Determination, or series of Determinations, within [10] working
days of receipt by the Parties of a Notice of Publication of such Determination or series of
Determinations” (underlining in original). The revised terms of engagement then
repeated the contents of paras. A, B and C of the original terms and added a series of

new provisions in relation to the jurisdiction and powers of the expert at para. D.

 

14.       At para. A, it was agreed between the parties that by submitting to expert determination
on the terms agreed, the parties were taken to have conferred on the expert the
jurisdiction and powers set out “to be exercised insofar as the Law allows and in [the
expert’s] discretion as they may judge expedient for the purpose of ensuring the just and

expeditious economical and final determination of the dispute referred to [the expert]”.

 

15.       Paragraph B provided that the expert should have jurisdiction to:-
“1. Determine any matter pertaining to the Agreement [including any matter of
Quantum] or any question of Law pertaining to the Agreement. Determine any
question as to their jurisdiction, or any question of good faith or dishonesty arising
from the dispute and order any party to furnish such further details of its case, in

fact or in Law, as the [expert] may require….”

 

16.       Paragraph D provided as follows:-
“For the avoidance of doubt, and without limiting in any way the Jurisdiction and
powers of the [expert] as noted above, [the expert] will have the jurisdiction and
power to:
1.       Direct the parties as to how the process of the Determination of Quantum is
to be administered, including the timetabling of submission of information,
responses, periods for issuing of Determinations and any other matter
necessary to allow Determinations to be Notified and become Binding on the
Parties.
2.       Direct the Parties, so as to ensure that the process of the Determination of
Quantum is administered in an economical and efficient manner.
3.       Expand their jurisdiction to incorporate new items raised by the Parties,
should either party desire to have such items determined under these
Revised Terms of Engagement.
4.       Direct the Parties as to the payment of/or deduction of monies accruing to
either of the Parties on foot of any Notice of a Determination, or series of
Determinations.
5.       Decide matters which are the subject matter of ‘stale’ referrals to Conciliation
by the Parties under Clause 13 of the [contract].
6.       Decide any matter necessary to regularize the Agreement, in order to allow
for all matters falling within the jurisdiction of [the expert] to be Determined.
7.       Assume the powers (but not the obligations or liabilities) [of] the ER for the
purposes of administering the Agreement and/or to regularize any matter
which is as a result of a failure of the ER on behalf of the [defendant] to

administer the Agreement.”

 

17.       The revised terms of engagement evidencing the agreement for expert determination
recorded the parties’ agreement to be bound by the terms and conditions set out in the
revised terms and by any determination or series of determinations issued by the expert
in accordance with the jurisdiction and powers given to it by the parties as set out in
those revised terms. It was also agreed by the parties that such determinations would be
documents which are in the contemplation of the Agreement formed between the Parties

on the 28th October, 2015” (i.e. the contract).

 

Defendant’s dissatisfaction with expert

 

18.       In the period following his appointment in early 2017, the expert issued a number of
determinations. The defendant was not satisfied with the manner in which the expert
determination process was proceeding and sought unilaterally to withdraw from the
process in a letter sent to the expert on 15th September, 2017. In that letter it was
indicated that the defendant wished to withdraw from the process and to terminate the
engagement of the expert. The letter indicated that as a result of the purported
termination, the defendant did not accept the expert’s jurisdiction to make any further

determinations from the date of the letter.

 

19.       The plaintiff informed the expert, by letter dated 29th September, 2017, that it wished
the expert determination process to continue in accordance with the agreement between
the parties. The expert took the view that it was not open to one party to terminate the
expert determination process on a unilateral basis and so informed the defendant in a

letter dated 2nd October, 2017.

 

20.       The defendant sent a more detailed letter to the expert on 21st November, 2017, setting
out various issues which it had with the revised terms of engagement of the expert and
with the manner in which the expert had conducted the process. The defendant
contended that the expert determination process had extended beyond what was
intended or what the defendant expected and that the expert had no jurisdiction to
proceed with the process. In the same letter, the defendant contended that the
agreement for expert determination could not have given rise to any amendment to the
contract (a point not now pursued by the defendant which contends that the expert
determination agreement did amend Clause 13.1 of the contract, but only that provision,
with respect to the issues which were the subject of the expert determination process).

Determinations in relation to payment

 

21.       Notwithstanding that exchange of correspondence, the expert did not cease acting and
issued a number of further determinations in the course of 2017 and 2018, some of which
determined sums in respect of “fair valuation” of claims made by the plaintiff and directed
that sums contained in the determinations be included in the next interim payment
certificate in respect of the works carried out under the contract. The plaintiff included
the sums so determined by the expert in its applications for payment by the defendant.
However, the ER did not certify the sums as a result of which the plaintiff was unable to

issue invoices to the defendant for payment of those sums.

 

22.       In a letter dated 18th May, 2018, the plaintiff requested the expert to exercise the power
contained in para. D.7 of the agreement for expert determination (as set out in the
revised terms of engagement) to assume the power of the ER to certify the payments
referred to in the determinations or, alternatively, to direct the defendant to pay the sums
allegedly due. The expert issued a further determination on 22nd May, 2018, to the
effect that the relevant determinations could be considered as a “certificate” within the
meaning of the relevant provisions of the contract. On 24th May, 2018, the plaintiff sent
a series of invoices to the defendant seeking payment of the sums referred to in the
determinations. The invoices totalled €2,954,147.22. They were not paid by the

defendant.

 

23.       The plaintiff’s solicitors wrote to the defendant on 25th June, 2018, seeking payment and,
in default of payment, threatening proceedings. In the absence of a response from the
defendant, the plaintiff’s solicitors wrote again on 12th July, 2018, seeking payment and

threatening proceedings.

 

24.       The defendant’s solicitors replied on 13th July, 2018. In that letter, the defendant’s
solicitors made express reference to the dispute resolution provisions in Clause 13 of the
contract under which, they contended, the parties were required to refer disputed matters
to conciliation and, if the issues were not resolved at conciliation, the parties were obliged
to refer them to arbitration. It was contended that the terms of the contract were
compulsory and could not be amended. It was indicated, therefore, that the defendant
would seek to rely on the arbitration provisions contained in Clause 13 (Clause 13.2) and,
in the event that the plaintiff issued proceedings, the defendant would bring an
application seeking an order referring the parties to arbitration under Article 8(1) of the
Model Law. The defendant’s solicitors referred to the expert determination process as
being an alternative to the conciliation process under the contract which was entered into
by the parties in the hope of resolving the disputed issues. They stated that the
defendant was not satisfied with how the expert process was conducted and withdrew
from that process in September 2017, in the hope that matters could be settled directly
between the parties. The defendant’s solicitors then referred to the fact that a number of
determinations were issued by the expert following the defendant’s withdrawal from the
process and without its input. They described the process as being “flawed” and asserted
that the determinations were not valid. Finally, the defendant’s solicitors contended that
although the agreement for expert determination provided that the determinations issued
by the expert would be “binding” on the parties, they were not stated to be “final”. They
asserted that the expert determination procedure was designed to replace the conciliation
process under the contract and not the arbitration agreement.
25.       The plaintiff’s solicitors replied on 13th July, 2018, rejecting those various contentions
and asserting that the agreement for expert determination did constitute an amendment
of the contract (as permitted under Clause 1.9.3 of the contract) and disapplied the
conciliation and arbitration provisions in Clause 13.1 and Clause 13.2 of the contract. In
those circumstances, it was contended that there was no arbitration agreement in
existence in respect of the issues between the parties which were the subject of the
expert determination procedure and that the defendant, therefore, had no entitlement to

seek to have those issues referred to arbitration.

 

Conciliation Agreement

 

26.       Prior to the issue of proceedings by the plaintiff, the plaintiff and the defendant, who were
already engaged in a conciliation process in respect of different disputes and in which
Ciaran Fahy had been appointed conciliator in March 2018, agreed to expand that
conciliation process to include the disputes between the parties which were the subject of
the expert determination procedure. I should note, however, that it is not entirely clear
whether the conciliation process was taking place under provisions of Clause 13.1 of the
contract or on some other basis. In any event, the parties agreed to expand that process
and did so on certain terms which were set out in a letter sent by Mr. Fahy to the parties

on 16th August, 2018, which was signed by both parties (the “conciliation agreement”).

 

27.       The plaintiff relies on the terms of the conciliation agreement in support of its contention
that the defendant has no entitlement to rely on the arbitration agreement contained in
Clause 13.2 of the contract with respect to the disputes the subject of these proceedings.

I should, therefore, refer to the relevant provisions of the conciliation agreement.

 

28.       It was agreed between the parties in the conciliation agreement that the conciliation was
intended to encompass “all claims arising under the contract in an effort to achieve

agreement on a final account figure” (para. 1).

 

29.       At para. 2, the conciliation agreement provided as follows:-
“This increase in the scope of the conciliation is without prejudice to the expert
determination process engaged in by the 2 parties and which has resulted in [the
plaintiff’s] claim for payment of the sum of €2,954,147.22 on foot of invoices
submitted to the [defendant] under cover of letter dated 24th May 2018 (the
‘Determination Claim’). The Parties agree to reserve their rights in respect of the
Determination Claim which shall remain, in all respects, unaffected by the

Conciliation save to the extent provided in this agreement.”

 

30.       It was envisaged under para. 3 of the conciliation agreement that the plaintiff would issue
and serve High Court proceedings in respect of the sums claimed by it which were the
subject of the determination claim (i.e. which were the subject of the expert
determination process). It was agreed that those proceedings would be discontinued if

agreement was reached on all matters in dispute (para. 4).

 

31.       Paragraph 5 provided as follows:-
“If a recommendation is made and either party issues a notice of dissatisfaction
under subclause 13.1.9, the following shall then apply:
a. [The plaintiff] may choose to refer all matters to arbitration under subclause
13.2 or
b. [The plaintiff] may, alternatively, continue with the Proceedings, in respect of
the expert determinations, while referring the balance of claims to
arbitration.
c. If any Court refuses to enforce the expert determinations, [the plaintiff] at
that stage may refer the claims in question to arbitration under subclause
13.2 and
d. For purpose of subclause 13.1.11, [the conciliator] will determine the sum of

money payable under 13.1.11 (1).”

 

32.       A timetable was then set out. The conciliation agreement was signed by both parties.

Commencement of proceedings and application for entry into the Commercial List

 

33.       As envisaged in the conciliation agreement, the plaintiff issued these proceedings on 29th
August, 2018, seeking payment of the sum of €2,954,147.22 on foot of the invoices
submitted following the determination by the expert. The plaintiff then sought to enter

the proceedings in the commercial list and sought summary judgment in that amount.

 

34.       The defendant opposed the application to enter the proceedings in the commercial list on
various grounds, including on the ground that the agreement for expert determination
amended the conciliation provisions of the contract and not the arbitration provisions and
that, therefore, the defendant was entitled to have the matter referred to arbitration. Dr.
Deirdre Keyes, who swore the affidavit on behalf of the defendant for the purpose of
opposing the plaintiff’s application for entry into the commercial list, made it clear that
she was not commenting on the substance of the dispute between the parties. For that
reason, she did not outline the reasons for the defendant’s view that the expert

determination process had been conducted in an unsatisfactory manner.

 

35.       The plaintiff’s application for summary judgment and to enter the proceedings in the
commercial list was adjourned from time to time to enable the defendant to bring the
present application for an order under Article 8(1) of the Model Law referring the parties

to arbitration in respect of the issues the subject of the proceedings.

 

Application for order under Article 8(1) of the Model Law

 

36.       The defendant brought the present application on 5th October, 2018. The application was
grounded upon another affidavit of Dr. Keyes sworn on 4th October, 2018. In very brief
summary, Dr. Keyes asserted that the agreement for expert determination amended
Clause 13.1 and replaced conciliation with the expert determination procedure agreed.
She asserted that the agreement for expert determination did not amend or replace the
arbitration provisions contained in Clause 13.1, which subsisted. In short, however, Dr.
Keyes contended that the arbitration agreement between the parties contained in Clause
13.      2 of the contract continued to exist notwithstanding the agreement for expert
determination and that the court should, therefore, make an order referring the parties to

arbitration in respect of the disputes the subject of the proceedings.

 

37.       A replying affidavit was sworn by Denis Lahart on behalf of the plaintiff on 21st
November, 2018, for the purpose of resisting the defendant’s application. Mr. Lahart
asserted that the agreement for expert determination replaced both the conciliation
provisions in Clause 13.1 and the arbitration provisions contained in Clause 13.2 for
various reasons. Mr. Lahart also sought to rely on the conciliation agreement and
contended that the terms of that agreement precluded the defendant from seeking to
refer the dispute the subject of the proceedings to arbitration. He explained that the
conciliation process conducted under the terms of the conciliation agreement was

unsuccessful and did not lead to a resolution of the issues between the parties.

 

The Issues

 

38.       The parties agree that the agreement for expert determination (the terms of which were
recorded in the revised terms of engagement) did amend, replace or supplant part of
Clause 13 of the contract insofar as the disputes which were the subject the expert
determination procedure were concerned. The difference between the parties is the
extent to which it did. The defendant contends that the agreement for expert
determination amended, supplanted or replaced only the conciliation provisions contained
in Clause 13.1 in respect of those disputes but left intact the arbitration provisions

contained in Clause 13.2.

 

39.       The plaintiff, however, contends that the agreement for expert determination amended,
supplanted or replaced both the conciliation provisions in Clause 13.1 and the arbitration
provisions in Clause 13.2 with respect to those disputes. The essential issue which I have

to decide on this application is which of those respective contentions is correct.

 

40.       A further issue which requires consideration is whether the conciliation agreement made
between the parties in August 2018, in any way affects the defendant’s entitlement to

seek to rely on the arbitration provisions contained in Clause 13.2

 

41.       In addressing those issues, I will first refer briefly to the approach which the court is
required to take in considering an application for an order under Article 8(1) of the Model
law. I will then proceed to consider the provisions of Clauses 13.1 and 13.2 of the
contract and the extent to which either or both of those provisions may have been
affected by the agreement for expert determination. That will involve a consideration of
the proper interpretation of the expert determination agreement and of Clause 13.2 of the
contract in accordance with established principles of Irish law governing contractual
interpretation. Having set out my conclusions on the proper interpretation of the expert
determination agreement and its effect on the provisions of Clause 13 of the contract, I
will then turn to consider the conciliation agreement and whether it has any relevance to
the defendant’s application.

Article 8(1) of Model Law

 

42.       The defendant seeks an order under Article 8(1) of the Model Law referring the parties to
arbitration in respect of the dispute the subject of the proceedings. Article 8(1) provides
as follows:-
“A court before which an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party so requests not later than when submitting
his 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.”

 

43.       The Model Law has force of law in the State and applies to both international commercial
arbitrations and domestic arbitrations where the seat of the arbitration is Ireland (s. 6 of
the Arbitration Act 2010) (the “2010 Act”). As I observed in Ocean Point Development
Company Ltd (In Receivership) v. Patterson Bannon Architects Ltd & ors [2019] IEHC 311
(unreported, High Court, 10th May, 2019) (“Ocean Point”), a judgment delivered after the
present application was heard,:-
“In order for the provisions of Article 8(1) of the Model Law to be engaged, various
requirements must be satisfied. First, an action must have been brought before the
court in respect of a dispute between the parties. Second, the action must concern
a ‘matter which is the subject of an arbitration agreement’. Third, one of the parties
must request the reference to arbitration ‘not later than when submitting his first
statement on the substance of the dispute’. If those requirements are satisfied, the
court must refer the parties to arbitration (the word ‘shall’ is used). The only
circumstances in which the court’s obligation to refer the parties to arbitration does
not arise is where the court finds that the arbitration agreement is (i) ‘null and void’
or (ii) ‘inoperative’ or (iii) ‘incapable of being performed’. The onus of establishing
the existence of one or more of these disapplying factors rests on the party who
seeks to rely on them (see Sterimed Technologies International v. Schivo Precision
Ltd [2017] IEHC 35 (per McGovern J at para. 12, pp.4-5)).” (Ocean Point, para. 26,

p. 12).

 

44.       As I further observed in Ocean Point (at para. 27, p. 13), the Irish Courts have
consistently held that where the requirements of Article 8(1) of the Model Law are met,
the court is subject to a mandatory obligation to refer. That principle and the
complementary approach taken by the Irish courts to support the arbitral process was
previously stressed and applied by me in Townmore No. 1. In that case, I endorsed the
observations previously made by the High Court (McGovern J.) in BAM Building Ltd v.
UCD Property Development Company Ltd [2016] IEHC 582 (unreported, High Court, 20th
October, 2016) (“BAM”), Go Code Ltd v. Capita Business Services Ltd [2015] IEHC 673
(unreported, High Court, 27th October, 2015) and Kellys of Fantane (Concrete) Ltd (In
Receivership) v. Bowen Construction Ltd (In Receivership) & anor [2017] IEHC 357
(unreported, High Court, 1st June, 2017) (“Kellys of Fantane”).
45.       There is no dispute between the parties as to the mandatory obligation imposed on the
court under Article 8(1) of the Model Law. The question which arises, however, on this
application is whether the matters the subject of the proceedings are the subject of an
arbitration agreement, being one of the requirements which must be met before Article
8(1) of the Model Law is engaged. The defendant’s case is that Article 8(1) applies in that
the proceedings do concern a “matter which is the subject of an arbitration agreement
namely, Clause 13.2 of the contract. The plaintiff disputes the application of Clause 13.2
as it contends that that clause was disapplied by the agreement for expert determination
and that, therefore, there is no applicable arbitration agreement. Thus, it asserts that
one of the essential requirements for the application of Article 8(1) has not been satisfied.
In the alternative. the plaintiff argues that the arbitration agreement (in Clause 13.2 of
the contract) is “inoperative” within the meaning of that term in Article 8(1) and that,
therefore, the mandatory obligation contained in Article 8(1) to refer the parties to

arbitration does not apply.

 

46.       As the party seeking to invoke the court’s jurisdiction under Article 8(1) of the Model Law,
the defendant bears the initial burden of establishing that the various requirements for
the application of Article 8(1) are satisfied. In particular, it bears the burden of
establishing that the proceedings concern a matter or matters which is or are the subject
of an arbitration agreement. If the defendant discharges that initial burden, the burden
then shifts to the plaintiff to establish that the arbitration agreement is “inoperative

under Article 8(1).

 

47.       The parties are in agreement that the approach which the court is required to take in
determining whether an arbitration agreement exists is to give full judicial consideration
to the issue rather than approaching the question on a prima facie basis. It is now well
established that that is the correct approach for the court to adopt in determining whether
an arbitration agreement exists: Lisheen Mine v. Mullock & Sons (Shipbrokers) Ltd
[2015] IEHC 50 (unreported, High Court Cregan J., 12th January, 2015) and Sterimed
Technologies International Ltd v. Schivo Precision Ltd [2017] IEHC 35 (unreported, High
Court McGovern J., 27th January, 2017). Therefore, that is the approach which I will
adopt in determining whether an arbitration agreement exists between the parties for the

purposes of Article 8(1) of the Model Law.

 

48.       The exercise which the court is required to undertake in considering the present
application is somewhat different to that which often arises in applications to refer parties
to arbitration under Article 8(1) of the Model Law or in applications to stay proceedings
under the pre-existing legislative regime, where the dispute concerns the scope of an
admitted arbitration agreement. In such cases, the issue is often whether the dispute
between the parties which is the subject of the litigation falls within the scope of the
arbitration agreement and the court is required to interpret the arbitration agreement in
order to resolve that dispute. In undertaking that exercise, the courts have developed
principles for the interpretation of an arbitration agreement. Those principles are derived
from the decision of the House of Lords in Fiona Trust & Holding Corporation & ors v.
Privalov & ors [2007] 4 All ER 951; [2007] UKHL 40 (“Fiona Trust”) which has been
followed and applied in several Irish decisions (including O’Meara v. The Commissioners of
Public Works in Ireland and Ors [2012] IEHC 317 (unreported, High Court Charleton J.,
25th July, 2012); BAM; Kellys of Fantane; and Achill Sheltered Housing Association CLG
v. Dooniver Plant Hire Ltd [2018] IEHC 6 (unreported, High Court McGovern J., 12th
January, 2018). I endeavoured to summarise those principles in my judgment in
Townmore No. 1 as follows:-
“(1) In construing an arbitration agreement, the court must give effect, so far as the
language used by the parties will permit, to the commercial purpose of the
arbitration agreement.
(2) The construction of an arbitration agreement should start from an assumption or
presumption that the parties are likely to have intended any dispute arising out of
the relationship which they entered into to be decided by the same body or
tribunal. In other words, there is a presumption that they intended a ‘one-stop’
method of adjudication for their disputes.
(3) The arbitration agreement should be construed in accordance with that assumption
or presumption unless the terms of the agreement make clear that certain
questions or issues were intended by the parties to be excluded from the
jurisdiction of the arbitrator.
(4) A liberal or broad construction of an arbitration agreement promotes legal certainty
and gives effect to the presumption that the parties intended a ‘one-stop’ method
of adjudication for the determination of all disputes.
(5) The court should construe the words ‘arising under’ a contract and the words
‘arising out of’ a contract when used in an arbitration agreement broadly or liberally
so as to give effect to the presumption of a ‘one-stop’ adjudication and the former
words should not be given a narrower meaning than the latter words. Fine or ‘fussy’
distinctions between the two phrases are generally not appropriate.” (para. 53, pp.

22-23).

 

49.       However, these principles are of limited assistance in the context of the present
application as the parties accept that the presumption of a “one-stop” method of
adjudication of disputes which underlies those principles has been displaced on the facts.
Both parties accept that the dispute resolution provisions in Clause 13 of the contract
have been amended, supplanted or replaced as regards the disputes which were the
subject of the expert determination procedure. On the defendant’s case there are two
stops. The first is expert determination in accordance with the agreement for such
determination. The second is arbitration under Clause 13.2 of the contract. On the
plaintiff’s case, there is a “one-stop” place for the adjudication and resolution of the
relevant disputes but it is not by arbitration in accordance with the arbitration agreement
contained in Clause 13.2 of the contract. Rather, it is under the expert determination
procedure agreed between the parties with the parties then being free to litigate to
enforce their claims.
50.       The crux of the issue between the parties is the impact and effect of the agreement for
expert determination on the provisions of Clauses 13.1 and 13.2 of the contract. The
resolution of that issue turns on the proper interpretation of the agreement for expert
determination. Whether or not the court approaches the interpretation of that agreement
by reference to the burden on the defendant to establish that there is in existence an
arbitration agreement between the parties covering the dispute the subject of the
proceedings or by reference to the burden on the plaintiff of establishing that an
otherwise applicable arbitration agreement is “inoperative” under Article 8(1) of the Model

Law makes little practical difference in the context of the present application.

 

Interpretation of expert determination agreement

 

51.       Before looking again at the terms of the agreement for expert determination and the
respective contentions of the parties as to the effect of that agreement on the provisions
of Clauses 13.1 and 13.2 of the contract, I should draw attention to some of the relevant

parts of those provisions.

 

Clauses 13.1 and 13.2 of the contract

 

52.       Clause 13.1 of the contract contains detailed provisions providing for the conciliation of
disputes between the parties to the contract. I do not propose to set out the provisions of
Clause 13.1 in full, not least because the parties agree that the provisions of Clause 13.1
have been disapplied by the agreement for expert determination with respect to the
disputes the subject of the expert determination procedure. However, the scheme
provided for under Clause 13.1 is relevant as it bears upon the interrelationship between
Clause 13.1 and Clause 13.2 and on the question of whether Clause 13.2 can survive in
circumstances where Clause 13.1 has been disapplied by the agreement for expert

determination with respect to the disputes encompassed by that procedure.

 

53.       Under Clause 13.1.1, if a dispute arises under the contract, either party “may, by notice
to the other, refer the dispute for conciliation under this sub-clause 13.1…”. Clause 13.1
then provides for a structure and timetable for the conduct of the conciliation. There is a
time limit for the appointment of a conciliator and provision for the appointment of such a
conciliator in default of agreement within that period. There is then provision for the
furnishing of information and material to the conciliator and for the conciliator to consult
with the parties in an attempt to resolve the dispute by agreement. It is expressly
provided that the conciliator is not an arbitrator and that the 2010 Act and the law
relating to arbitration does not apply to the conciliation. There is then provision for what
is to happen if the dispute is not resolved by agreement within the specified period (42
days or longer, if agreed). In such a situation, the conciliator is required to give both
parties a written recommendation. If either party is dissatisfied with the
recommendation, it may (within 42 days of receipt of the recommendation) notify the
other party, setting out various matters. If the conciliator has not given a
recommendation within 42 days following appointment, either party may give notice of
dissatisfaction. In either case either party “may” refer the dispute to arbitration under
Clause 13.2 (Clause 13.1.9).
54.       There is then provision for what happens if the conciliator gives a written
recommendation and neither party gives notice of dissatisfaction within 42 days of receipt
of the recommendation. In such circumstances, the recommendation is stated to be
conclusive and binding on the parties, and the parties agree to comply with it”. In such
a situation, if a party fails to comply with the recommendation, the other party “may…
refer the failure itself to arbitration under sub-clause 13.2” (Clause 13.1.10). It is
expressly provided that this may be done without limiting that party’s “other rights” and it
is also provided that it is not necessary to go through the conciliation procedure again

before the party is permitted to refer the matter to arbitration.

 

55.       There are then detailed provisions for what is to happen in circumstances where the
conciliator has recommended the payment of money and a notice of dissatisfaction is
given. The party must make the payment recommended by the conciliator provided
certain conditions are satisfied: the other party must refer the dispute to arbitration and
provide a bond for payment (Clause 13.1.11). There is then provision for what is to occur

when the dispute is “finally resolved” if it is found that an overpayment has been made.

 

56.       It can seen, therefore, that Clause 13.1 contains quite a detailed and prescribed structure
for the conduct of conciliation under its provisions and provides for the entitlement of one
or more of the parties to refer the dispute to arbitration under Clause 13.2 at various
stages of the process. It is agreed between the parties that the agreement for expert
determination disapplied the conciliation provisions in Clause 13.1 with respect to the

matters referred to the expert for determination.

 

57.       Clause 13.2 provides as follows:-
“Arbitration
Any dispute that, under sub-clause 13.1, may be referred to conciliation shall,
subject to sub-clause 13.1 be finally settled by arbitration in accordance with the
arbitration rules identified in the Schedule part 1N. For purposes of those rules, the
person or body to appoint the arbitrator, if not agreed by the parties, is named in

the Schedule, part 1N.”

 

Key question and legal principles

 

58.       In considering the respective contentions of the parties as to the interpretation and scope
of application of the agreement for expert determination, one of the questions to consider
is whether, notwithstanding the various references in Clause 13.2 to Clause 13.1, which
the parties agree has been disapplied in respect of the relevant disputes, Clause 13.2
continues to subsist and to have effect in respect of the disputes the subject of the

proceedings.

 

59.       As noted earlier, while the parties are in agreement that where Clause 13.1 and Clause
13.      2 subsist, recourse to conciliation is optional and it is open to a party to decide to skip
conciliation and to proceed straight to arbitration if it wishes. While this is not an issue
which arises directly in this application, I should indicate that I do not wish to be taken as
endorsing this agreed position. It seems to me that it is much more likely having regard
to the language used in Clauses 13.1 and 13.2 and to other provisions of the contract
(such as Clause 10.5.4) that, in the absence of agreement between the parties, it is
mandatory to invoke the conciliation procedure in Clause 13.1 before being in a position
to proceed to arbitration under Clause 13.2. I note that is the view taken by Tom Wren in
Public Works in Ireland: Procurement and Contracting (Clarus Press, 2014 at paras. 17–

10 and 17–41, pp. 716 and 729).

 

60.       The parties are in agreement as to the legal principles to be applied to the interpretation
of the agreement for expert determination. They both agree that the applicable principles
are those set out by Lord Hoffman in Investors Compensation Scheme Ltd v. West
Bromwich Building Society [1998] 1 WLR 896 (“ICS”) and in the many judgments of the
Superior Courts in Ireland which have approved and applied those principles. There is,
however, a dispute between the parties as to the application of those principles in the

interpretation of the agreement for expert determination.

 

Defendant’s submissions

 

61.       In summary, the defendant contends that on its proper interpretation, the agreement for
expert determination does not provide for a “final” and “binding” determination of the
issues by the expert. Rather, the agreement describes the determinations of the expert
as merely being “binding”, which the defendant contends is analogous to a decision of an
adjudicator on a dispute relating to payment under a construction contract as provided by
the Construction Contracts Act 2013 (the “2013 Act”). Under s. 6(10) of the 2013 Act,
the decision of the adjudicator is “binding” until the payment dispute is “finally settled” by
the parties or a different decision is reached on the reference of the payment dispute to
arbitration or in court proceedings. The defendant contends that the absence in the
agreement of a provision that the expert’s determinations are to be “final and binding” is
significant as that term is commonplace in the construction industry where the parties
intend that a determination be definitive. The defendant submits that a determination
which is stated to be “binding” (Clause 2 of the agreement) is less definitive than one

which is stated to be “final and binding”.

 

62.       The defendant points to the provisions of Clause 13.1.10 of the contract where it is stated
that a recommendation of a conciliator is “conclusive and binding” on the parties if no
notice of disatisfaction is given within the requisite period. The defendant also draws
attention to the terms of Clause 13.2 where reference is made to a dispute which may be
referred to conciliation under Clause 13.1 being “finally settled” by arbitration in
accordance with Clause 13.2. The defendant argues that if a conciliator’s
recommendation is “conclusive and binding” and yet can only be “finally settled” by
arbitration under Clause 13.2, it would not make sense for the parties to agree that an
expert’s determination, which is merely stated to be “binding”, could have more definitive
consequences. It argues that under the scheme of Clause 13.1 and Clause 13.2,
arbitration is always intended to be the ultimate dispute resolution process under the
contract, including where it is sought to enforce a “conclusive and binding
recommendation by a conciliator (under Clause 13.1.10). The defendant, therefore,
submits that on its terms the agreement for expert determination did not provide for the
expert’s determination to be final and binding and to preclude the parties’ entitlement to

have recourse to the arbitration provisions in Clause 13.2.

 

63.       In support of its interpretation of the scope of application of the agreement for expert
determination, the defendant seeks to rely on a letter from the plaintiff to the defendant
dated 11th September, 2017, in which it was asserted by the plaintiff that the defendant
had suggested that the parties “should waive their rights to conciliation…” and that this
indicates that it was only the conciliation provisions in Clause 13.1 which were being
disapplied by the agreement for expert determination and not the arbitration provisions in

Clause 13.2.

 

64.       In support of its contention that Clause 13.2 subsists notwithstanding the agreement for
expert determination, the defendant submits that Clause 13.2 survived that agreement
and continues to subsist notwithstanding the disapplication of Clause 13.1. It contends
that Clause 13.2 does not require the continued existence of Clause 13.1. The defendant
submits that the references to Clause 13.1 in Clause 13.2 mean only that there must
have been a dispute which could at one stage have been referred to conciliation. It says
that the disputes which the parties agreed would be dealt with by expert determination
were disputes which could have been referred to conciliation under Clause 13.1 and a
conciliation could have taken place (had the parties not agreed to disapply the provisions
of Clause 13.1 in respect of those disputes). The defendant submits that at the time the
contract was entered into, Clause 13.1 was in the contract and the disputes which
subsequently arose between the parties could have been referred to conciliation under
that provision. It asserts that notwithstanding the disapplication of Clause 13.1, the
disputes which were agreed to be dealt with by expert determination were disputes which
could have been referred to conciliation. As part of this aspect of its submission, the
defendant places some stress on its contention that the referral of disputes to conciliation
under Clause 13.1 is in any event optional whereas the referral to arbitration under
Clause 13.2 is mandatory. As I have indicated earlier, while I do not believe that it is
necessary conclusively to determine that issue on this application, I do not believe that a

proper interpretation of Clauses 13.1 and 13.2 supports such a contention.

 

65.       Finally, the defendant rejects the contention that the conciliation agreement precludes it
from seeking to refer the relevant disputes to arbitration under Clause 13.2. It submits
that a proper interpretation of the conciliation agreement is that the parties’ respective
positions were reserved under the conciliation agreement and that nothing in that

agreement precludes it from seeking to refer the disputes to arbitration.

 

Plaintiff’s submissions

 

66.       The plaintiff contends that on the proper application of the principles set out in ICS and
approved by the Irish courts, the correct interpretation of the agreement for expert
determination is that the agreement had the effect of disapplying the conciliation
provisions in Clause 13.1 and the arbitration provisions in Clause 13.2 with respect to the
disputes which were dealt with by the expert. It submits that, contrary to the defendant’s
contention, the agreement for expert determination does expressly provide for the
determinations of the expert to be both “final” and “binding”. However, even if the
agreement only expressly provided that the determinations of the expert were “binding
rather than “final and binding”, that would not undermine its case. This is due to the
status of a determination of an expert under Irish law, where the default position is that
such a determination is final and binding and only open to challenge on certain very
limited grounds. The plaintiff accepts that the default position can be altered by
agreement between the parties but contends that there was no such agreement in the
present case. The plaintiff relies on a series of cases in support of its contention as to the
status of a determination of an expert. The plaintiff says, therefore, that on its proper
interpretation the agreement for expert determination encompasses the entirety of the
dispute resolution procedures agreed between the parties in place of those contained in

Clauses 13.1 and 13.2 of the contract.

 

67.       The plaintiff objects to the admissibility in evidence of its letter to the defendant of 11th
September, 2017, as an aid to the interpretation of the agreement for expert
determination. It contends that the letter is inadmissible by virtue of the third principle
set out by Lord Hoffman in ICS, as amounting in effect to a declaration of subjective

intent which is inadmissible as an aid to interpretation of a contract.

 

68.       The plaintiff further submits that once Clause 13.1 of the contract is disapplied (as the
defendant accepts is the case), Clause 13.2 cannot survive on a standalone basis. In
particular, the plaintiff submits that Clause 13.2 cannot survive in circumstances where
none of the disputes between the parties which were the subject of the expert
determination could be referred to conciliation under Clause 13.1 as the effect of the
agreement for expert determination was to disapply the application of that sub-Clause.
Once Clause 13.1 was disapplied then there was no dispute which could be referred to
conciliation and, therefore, no dispute to be “finally settled” by arbitration under Clause
13.2. The plaintiff disagrees with the defendant’s contention that all that is necessary is
that it was at one point open to the parties to refer the relevant disputes to conciliation
under Clause 13.1. The plaintiff’s position is that once the parties agreed to expert
determination in respect of the relevant disputes, those disputes could not be referred to
conciliation under Clause 13.1. Once the relevant disputes could not be referred to
conciliation under Clause 13.1, the plaintiff contends that it is not possible for them to be
referred to arbitration under Clause 13.2. The plaintiff goes further and suggests that if
the defendant wished to rely on Clause 13.2 in respect of those disputes, it ought to have
sought rectification of Clause 13.2 in order to substitute references to the agreement for

expert determination in place of the references to Clause 13.1 in Clause 13.2.

 

69.       Finally, the plaintiff seeks to rely on the conciliation agreement as precluding the
defendant from seeking to invoke the arbitration provisions contained in Clause 13.2 in
respect of the disputes which were the subject of the expert determination process. It
argues that a proper interpretation of the conciliation agreement is that the parties’
respective positions with regard to the disputes the subject of the expert determination
process were reserved or preserved save to the extent provided for in the conciliation
agreement and that the conciliation agreement does in fact make express provision for an
alteration of the parties’ rights in that regard. In particular, the plaintiff contends that the
conciliation agreement entitles it, in certain circumstances, to refer matters to arbitration

or to continue its proceedings but does not entitle the defendant to do so.

 

Substance and defendant’s complaint about the expert determination process

 

70.       Before setting out my conclusions on the proper interpretation and application of the
agreement for expert determination, I must deal with an incidental point made by the
plaintiff. The plaintiff has taken issue with the failure by the defendant to set out in any
detail the basis on which the defendant claims to be entitled to impugn the relevant
expert determinations. It points to the fact that the defendant has referred in only very
general terms to its dissatisfaction with the expert determination process and merely

states that it regarded that process as being “unsatisfactory”.

 

71.       While the plaintiff did not press the point, it was obviously advanced in an attempt to
undermine the defendant’s application. I am not satisfied that the point has any merit. It
is clear from the affidavit evidence and from all of the correspondence that there is a
dispute between the parties in relation to expert determination process. The essential
issue in this application is whether that dispute or those disputes will be resolved by an
arbitrator under Clause 13.2 or by a court in the course of these proceedings. It is not for
the court to get into or comment upon the detail or merits of that dispute or those
disputes. I completely agree with the following observations of McGovern J. in BAM:-
“It is not for the courts to inquire whether one party’s position under the dispute is
tenable or not, or whether there is a ‘real and genuine dispute’ to be referred to
arbitration. A decision on the merits of the parties’ disputes is one for the arbitrator

to make.” (BAM, para. 24, p. 12).

 

72.       In the context of the present case, the decision on the merits of the parties’ disputes in
relation to the expert determination process will be for an arbitrator under Clause 13.2 of
the contract (if the defendant is correct) or the court in the context of these proceedings
(if the plaintiff is correct). I should add that the correspondence sent by the defendant to
the expert following its purported unilateral withdrawal from the expert determination
process does set out in a little more detail the nature of the defendant’s dissatisfaction
with the expert determination process. It is evident from that correspondence and, in
particular, the defendant’s letter to the expert of 21st November, 2017, that the
defendant will seek to make the case, for example, that the expert exceeded his
jurisdiction in performing his role under the expert determination procedure.
Decision on interpretation of expert determination agreement 

Legal Principles

 

73.       It is well established, and the parties are in agreement on this, that the principles to be
applied in the interpretation of a contract are those set out by Lord Hoffman in ICS which
have been endorsed and applied in several decisions of the Supreme Court such as
Analog Devices B.V. v. Zurich Insurance Company [2005] 1 IR 274; [2005] IESC 12
(“Analog Devices”), ICDL v. European Computer Driving Licence Foundation Ltd [2012] 3
I.R. 327; [2012] IESC 55 (“ICDL”) and Law Society of Ireland v. Motor Insurers’ Bureau
of Ireland [2017] IESC 31 (unreported, Supreme Court, 25th May, 2017) (“MIBI”). It is
unnecessary to set out the ICS principles in this judgment. However, I have applied them
in interpreting the agreement for expert determination and in considering the extent of
the impact of that agreement on Clauses 13.1 and 13.2 of the contract. The parties are
in dispute about the application of one of the ICS principles, namely, the third principle.
That principle, as set out by Lord Hoffman in ICS, is as follows:-
“(3) The law excludes from the admissible background the previous negotiations of the
parties and their declarations of subjective intent. They are admissible only in an
action for rectification. The law makes this distinction for reasons of practical policy
and, in this respect only, legal interpretation differs from the way we would
interpret utterances in ordinary life. The boundaries of this exception are in some

respects unclear. But this is not the occasion on which to explore them.” (p. 913)

 

74.       The dispute between the parties concerning the application of this principle is relevant to
the defendant’s reliance on the terms of the plaintiff’s letter of 11th September, 2017,

and I consider it in that context below.

 

75.       In addition to the ICS principles, I should also make reference to two further statements
of the approach which the court should take in interpreting a contract. The first
statement is to be found in the judgment of Griffin J. in the Supreme Court in Rohan
Construction Ltd v. Insurance Corporation of Ireland Plc [1988] I.L.R.M. 373 (quoted with
approval by the Supreme Court in several subsequent decisions such as Analog Devices
and ICDL), a case concerning an insurance policy, where he said:-
“It is well settled that in construing the terms of a policy the cardinal rule is that
the intention of the parties must prevail, but the intention is to be looked for on the
face of the policy, including any documents incorporated therewith, in the words in
which the parties have themselves chosen to express their meaning. The Court
must not speculate as to their intention, apart from their words, but may, if
necessary, interpret the words by reference to the surrounding circumstances. The
whole of the policy must be looked at, and not merely a particular clause.” (p. 377)
(emphasis added).
The observations made by Griffin J. in relation to the interpretation of an insurance policy

apply equally to the interpretation of a non-insurance contract.

 

76.       The second statement is that made by Keane J. in the Supreme Court in Kramer v. Arnold
[1997] 3 I.R. 43, where he said:-
“… in any case where the parties are in disagreement as to what a particular
provision of a contract means, the task of the court is to decide what the intention
of the parties was, having regard to the language used in the contract itself and the
surrounding circumstances.” (p. 55).
77.       I will apply those principles in interpreting the agreement for expert determination in
order to determine the extent of the effect of that agreement on the provisions of Clauses

13.1 and 13.2 of the contract.

 

78.       As I noted earlier, there are a number of other principles which apply to the interpretation
of an arbitration agreement and which are derived from the decision of the House of Lords
in Fiona Trust and several Irish cases which apply those principles. The gist of those
principles is that where the parties have agreed that disputes be referred to arbitration,
there is an assumption or presumption, unless the contrary is clear in the agreement, that
the parties intended that arbitration would be a “one-stop” procedure to resolve or
determine their disputes. As I indicated earlier, those principles are of limited application
or assistance to the defendant in the present case in circumstances where the defendant
accepts that there is no “one-stop” procedure to resolve or determine the relevant
disputes between the parties under the contract. On its case, there will be two stops,
namely, expert determination and then arbitration. In those circumstances, when it
comes to interpreting Clause 13.2 of the contract, those principles for interpreting an
arbitration agreement (which were summarised by me in Townmore No. 1) are of limited,

if any, application in the present case.

 

Terms of Expert Determination Agreement

 

79.       Turning to the agreement for expert determination itself, it will be recalled that the terms
of the agreement are set out in the revised terms of engagement. I identified earlier
what appear to me to be the relevant provisions of that agreement. The agreement for
expert determination does not expressly state the effect that it is intended to have on the
contract and, in particular, on the dispute resolution provisions of the contract contained
in Clause 13. The only express references in the agreement for expert determination to
the contract between the parties are:-
(i) in the introduction (where the contract is referred to);
(ii) in the operative part of the agreement (under the heading “It is hereby agreed
where reference is made to the plaintiff and the defendant as being parties to the
contract);
(iii) in para. D of the schedule setting out the jurisdiction and powers of the expert (as
expanded in January 2017) where it is provided, at D5, that the expert was to have
power to decide matters which were the subject of “stale” referrals to conciliation
by the parties under Clause 13 of the contract;
(iv) at D6, where the expert was given the jurisdiction and power to decide any matter
necessary to “regularise” the contract;
(v) at D7, where the expert was given the jurisdiction and power to “assume the
powers (but not the obligations or liabilities) [of] the ER for the purpose of
administering the [contract] and/or to regularize any matter which is as a result of
a failure of the ER on behalf of the [defendant] to administer the [contract]”); and
(vi) in the attestation paragraph at the end of the agreement for expert determination,
where the parties agreed that determinations made by the expert would be

documents … in the contemplation of the [contract]”.

 

80.       However, given that the defendant accepts that the agreement was intended to disapply
the conciliation provisions contained in Clause 13.1 with respect to the disputes referred
for expert determination, it is necessary to proceed on the basis that, at the very least,
the parties intended the agreement for expert determination to have that effect. The
critical issue in the case is whether it had the more extensive effect of also disapplying
the arbitration provisions contained in Clause 13.2 of the contract with respect to the
relevant disputes, as the plaintiff contends. Whichever version is correct, it is
unfortunate, to say the least, that neither the parties nor the expert, when preparing and
signing the agreement, made express reference to the intended effect of the agreement

on Clauses 13.1 and 13.2 of the contract.

 

81.       The defendant has advanced various reasons in support of its contention that the
agreement for expert determination merely disapplied the conciliation provisions
contained in Clause 13.1 of the contract. The plaintiff, in turn, has advanced various
reasons in support of its contention that the agreement was intended also to disapply the
arbitration provisions contained in Clause 13.2. I am satisfied, for the various reasons set
out below, that the case advanced by the plaintiff is to be preferred than that advanced
by the defendant and that, on its proper interpretation, the agreement for expert
determination did have the effect of disapplying the Clause 13.2 as well as Clause 13.1

with respect to the disputes referred by the parties for expert determination.

 

Final and Binding

 

82.       The first reason advanced by the defendant was that the agreement for expert
determination provided that the determinations issued by the expert would be “binding
but did not provide that they would be “final and binding”. The defendant contends that
this indicates that the agreement was intended to replace only the conciliation provisions
of the contract. The plaintiff disagrees and submits that the parties did agree that
determinations issued by the expert under the agreement would be “final” and “binding”.
I agree with that submission. When construing the agreement, it is necessary to construe
the agreement as a whole and not to focus unduly on particular terms in isolation. As
observed earlier, that point was made clear by Griffin J. in the Supreme Court in Rohan
Construction and expressly endorsed by the Supreme Court in Analog Devices and ICDL.
The construction put forward by the defendant, in my view, fails to recognise the
importance of construing the contract as a whole. The defendant has unduly focused on
one provision of the agreement for expert determination, namely, Clause 2, and has, in
my view, failed properly to take into account other provisions of the agreement. It is true
that Clause 2 of the agreement when setting out the initial terms of reference for the
expert determination stated that the parties considered that the determination to be
issued by the expert would be “binding”. Clause 2 of the agreement, incorporating the
revised terms of engagement of the expert, again recorded the parties’ agreement that
any determination or series of determinations to be issued by the expert would be
binding”. However, it is wrong in principle merely to focus on the provisions of Clause 2.
Paragraph A of the schedule setting out the jurisdiction and powers of the expert (in both
the original terms of engagement of the expert and in the revised terms of arrangement)
is in the following terms:-
“By submitting to Expert Determination under the foregoing rules, the Parties shall
be taken to have conferred on [the expert] the following jurisdiction and powers to
be exercised insofar as the Law allows and in [the expert’s] discretion as they may
judge expedient for the purpose of ensuring the just and expeditious, economical

and final determination of the dispute referred to [the expert].” (emphasis added).

 

83.       It is necessary to read Clause 2 of the agreement for expert determination with para. A of
the schedule to that agreement. When read together, and construing the agreement as a
whole, it is clear that the parties intended that determinations issued by the expert would

be both “final” and “binding”.

 

84.       The defendant seeks to argue that the reference in para. A of the schedule setting out the
jurisdiction and powers of the expert must be read subject to the earlier reference to the
determination being “binding” in Clause 2 of the agreement. The defendant argues this
by reference to the words “under the foregoing rules” in para. A. However, I do not agree
with that argument. There is nothing at all inconsistent, in my view, between the
reference in para. A of the schedule to the determination being “final” and what is stated
earlier in Clause 2 to the effect that the determination is “binding”. This is not a case,
therefore, of construing what is said in para. A by reference to what is said earlier in
Clause 2 where there is an inconsistency between the two provisions. There is no such
inconsistency. In my view, therefore, the reference to “final” in para. A of the schedule is
not qualified, restricted or limited by the earlier reference in Clause 2 to the
determinations of the expert being “binding”. The two provisions must be read together

in light of the court’s obligation to construe the agreement as a whole.

 

85.       While the defendant submits (in its written submissions and in oral submissions to the
court) that the phrase “final and binding” is commonplace in the construction industry
(and elsewhere) and is used where parties intend to provide for a definitive determination
(in contrast to the use merely of the term “final”), no evidence to that effect was put
before the court. This argument is not dealt with in the affidavit sworn by Dr. Keyes for
the purpose of grounding the defendant’s application to refer the parties to arbitration.
Nor is it dealt with in any of the other affidavits sworn on behalf of the defendant in
resisting the plaintiff’s application to enter the proceedings in the commercial list. If it
had been, it would have been open to the plaintiff to deal with the issue by way of
responding evidence. However, the plaintiff did not have the opportunity of doing so. In
those circumstances, I cannot accept that there is any evidence before the court of a
particular practice in the construction industry or elsewhere under which participants in
that industry use a particular form of words when they intend the outcome of a process to
be more definitive than merely “binding”.
86.       However, even if there were admissible evidence before the court on which to make such
a finding of fact nonetheless I would not have regarded such evidence as being sufficient
to displace the intention of the parties as appears from the words used by them in the
agreement for expert determination. The agreement uses the words “final” and
binding”, albeit not in the same paragraph. Despite that, however, it seems to me that
having regard to the requirement to construe the agreement as a whole, the fact that the
parties have used both words indicates quite clearly to me that it was their intention that
determinations to be issued by the expert under the procedure set up by the agreement
for expert determination would be both “final” and “binding”. The failure to use those
words in the same paragraph or as part of the same phrase does not, in my view, afford
any support for the defendant’s contention that the parties did not intend such

determinations to have a “final” and “binding” consequence for the parties.

 

87.       However, even if the parties had not used the words “final” and “binding” in the
agreement for expert determination, that would not, in itself, undermine the finality or
conclusiveness of the determinations issued by the expert under the agreement. Both
parties accept that the default position, in the case of any expert determination, is that
the determination will be final and binding (subject, as we will see, to the very limited
potential for challenge). Indeed, that point was quite properly accepted by the defendant
having regard to the observations of Hogan J. in the Court of Appeal in Dunnes Stores v.
McCann [2018] IECA 238 (unreported, Court of Appeal, 23rd July, 2018) (“Dunnes

Stores”).

 

88.       Having referred to a short description of the process of expert determination in a leading
text in that area (John Kendall’s Expert Determination (London, 1996)), Hogan J. stated
that:-
“Determination by expert can thus be regarded as a ‘simple, informal, cost-
effective, confidential and final form of dispute resolution’: see Brown and Marriott,
ADR Principles and Practice (London, 3rd ed.) at 141…” (para. 3, p. 2) (emphasis

added).

 

89.       Hogan J. continued:-
“While adjudication by expert is quite common in the context of commercial
adjudication in this jurisdiction – and, indeed, has been common for some time –
what is, perhaps, surprising is that this would appear to be the first occasion in
which the scope of this jurisdiction has been explored in any reserved judgment by
any Irish appellate court. It is perhaps idle to consider why this is so, but it possibly
reflects a traditional understanding as to the finality of the slightly rough and ready
character of the adjudication by expert jurisdiction and the general futility of any
legal challenge to the outcome of any such adjudication.” (para. 4, p. 2) (emphasis

added).

 

90.       Hogan J. was even more explicit on the point later in his judgment where he stated:-
“As I have already hinted elsewhere in this judgment, the entire object of
adjudication by expert is to achieve a speedy and final resolution of the dispute,
even if the ultimate conclusions and the reasoning contained in the expert’s
adjudication is not always perfect or completely justified on the evidence…” (para.

44, p. 16) (emphasis added).

 

91.       These observations are particularly relevant to the present case. Even if the parties had
not made express provision in the agreement for the determinations of the expert to be
final” and “binding”, the default position would, in any event, have been that they were
final and binding. It would have been open to the parties to agree in their agreement
that the determinations of the expert did not have such final and binding effect.
However, it seems to me that the agreement would have to make that clear in light of the
default position that expert determinations have such effect. I do not believe that the
agreement for expert determination at issue in this case can properly be construed as
displacing or altering the default position, as I have described it. On the contrary, I am
satisfied that on its express terms, the agreement does provide for the determinations

issued by the expert to be both “final” and “binding”.

 

92.       In any event, I do not see any real or substantial distinction, at least on the facts of this
case, between a term in an agreement which provides that an expert determination is to
be “binding” and one which provides that it is to be “final and binding”. I am not saying
that there may never be distinction between those two terms, in different circumstances.
However, I do not see that any such distinction exists in the context of the present case.
Some examples can be given where there is no real or substantial difference between the
two terms. Prior to the enactment of the 2010 Act, the law on arbitration in Ireland was
governed by the Arbitration Acts 1954-1998. Under s. 27 of the Arbitration Act 1954 (the
“1954 Act”) it was provided that, unless a contrary contention was expressed in the
arbitration agreement, the agreement was deemed to contain a provision that the award
would be “final and binding” on the parties and persons claiming under them.
Notwithstanding this, it was open to the parties to challenge an award on the particular

grounds set out in the 1954 Act.

 

93.       Under s. 7 of the Arbitration Act 1980 (the “1980 Act”), a New York Convention award (an
award made in pursuance of an arbitration agreement in the territory of a state which is a
party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards
1958), which was enforceable under the 1980 Act, was required by s. 7 to be treated as
binding” for all purposes on the persons between whom it was made. The section did

not state that the award was to be “final and binding” and yet it had that effect.

 

94.       Under s. 23 of the 2010 Act, an award made by an arbitral tribunal under an arbitration
agreement is, unless otherwise agreed by the parties, to be treated as “binding” for all
purposes on the parties between whom it was made. Section 23 does not refer to such
awards as being “final and binding” and yet they are (subject to the very limited grounds
on which such awards can be disturbed under the 2010 Act and the Model Law). Article
35 of the Model Law also expressly provides for (foreign) awards to be recognised as
binding” (see s. 23(4) of the 2010 Act and Article 35 of the Model Law). Article 35 does
not provide that such awards are “final and binding”. However, they have that effect

(subject to the limited grounds on which recognition or enforcement may be refused).

 

95.       In passing, I note that under s. 58 of the Arbitration Act 1996 (which governs the position
in England and Wales), unless otherwise agreed by the parties, an award made by a
tribunal pursuant to an arbitration agreement is stated to be “final and binding” on the
parties and on any persons claiming through or under them (similar to s. 27 of the 1954

Act in Ireland).

 

96.       These statutory provisions, in my view, demonstrate that there is no difference in
substance between an award which is stated to be “final” and one which is stated to be
final and binding” under the relevant legislation. In each case, the effect of the award is
that it is final and binding, subject to whatever provisions in the relevant legislation allow
for challenges to be brought to such awards. A similar conclusion can, in my view, be
drawn between an expert determination which is stated to be “final” and one which is
stated to be “final and binding”. In either case, the determination may be open to

challenge on very limited grounds (as we shall see shortly).

 

97.       That leads me to a further point made by the defendant in support of its position as to the
effect of the expert determination agreement. The defendant argues that the status of a
determination made by the expert under the agreement for expert determination is
analogous to the decision of an adjudicator in the case of construction contracts under s.
6 of the 2013 Act. Under s. 6(10) of the 2013 Act, the decision of an adjudicator is stated
to be “binding until the payment dispute is finally settled by the parties” or a different
decision is reached at arbitration or in proceedings in relation to the adjudicator’s
decision. The defendant contends that the expert’s determination under the agreement
has a similar status. I do not agree. Section 6(10) of the 2013 Act provides expressly for
the status of a decision of an adjudicator under that statutory regime. The binding nature
of the adjudicator’s decision is expressly qualified or conditioned by the words used in the
subsection. The decision is “binding” but only binding “until” the payment dispute is
finally settled” by the party or a different decision is reached either at an arbitration or in
court proceedings. There is no such qualification in the agreement for expert
determination in relation to the “binding” nature of the expert’s determination. I do not
agree, therefore, that the status of the expert’s determination under the agreement is

analogous to the status of an adjudicator’s decision under the 2013 Act.

 

Status in Law of Expert Determinations

 

98.       Whether or not an agreement which provides for expert determination expressly provides
that the determination made by the expert under that agreement is “final and binding” or
simply “binding”, the determination will still be open to challenge, albeit on very limited
terms (unless those grounds have been expressly excluded by the agreement of the
parties). This is clear from the authorities on expert determination which were drawn to
my attention by the parties. The position was helpfully summarised in G. Brian
Hutchinson’s Arbitration and ADR in Construction Disputes (Roundhall, Dublin, 2010) as
follows:-
“It is decidedly difficult, however, to challenge a determination made by an expert
acting fairly and within the scope of his or her jurisdiction. … Only in cases where
the expert has acted manifestly unfairly – e.g. where there has been fraud or
collusion – or where the expert has exceeded the terms of reference, will the court
intervene: see: O’Mahony v Patrick O’Connor Builders (Waterford) Ltd & ors
[2005] IEHC 248; Jones v Sherwood Computer Services plc [1992] 1 W.L.R. 277.”

(para. 18–14, p. 136)

 

99.       In one of the cases cited by Hutchinson, O’Mahony v. O’Connor [2005] 3 IR 167;
[2005] IEHC 248 (“O’Mahony”), Clarke J. in the High Court stated:-
“10.2 There is no doubt that there is ample authority for the proposition that where
parties agree to be bound by the report of an expert, such report cannot be
challenged in the courts on the ground that mistakes have been made in its
preparation unless it can be shown that the expert had departed from the
instructions given to him in a material respect or had in some way acted in bad
faith, see Jones v. Sherwood Services Plc [1992] 1 W.L.R. 277.…” (para. 51, p.

184; para. 10.2)

 

100.       Later in his judgment, Clarke J. stated:-
“I agree that that passage [from John Kendall: Expert Determination (3rd ed., London,
2001)] represents the law in this jurisdiction. Ultimately the process which the
expert is to engage in is the one specified in the agreement between the parties.
However the default position is that the expert is free to initiate his own lines of
enquiry and use his own expertise. He is only limited in that regard by express
terms in the contract between the parties which conferred jurisdiction upon him and

which may limit the extent of that freedom.…” (para. 53, p. 185; para. 10.3).

 

101.       As it happened, in that case, the court held that the valuation of the expert was not
binding on the parties as the expert had failed to give the plaintiff any notice of his
intention to make his report final in the absence of representations from the plaintiff. The
court held that an expert, before proceeding to give a final determination, had to give a
defaulting party notice of this intention to do so. O’Mahony does, however, indicate the
limited circumstances in which an expert’s determination can be challenged. This is
similarly demonstrated by the decision of the Court of Appeal in Dunnes Stores where
Hogan J. expressly endorsed what was said in Brown and Marriott ADR Principles and
Practice (London, 3rd ed.) that the circumstances in which an adjudication by an expert
can be challenged are “very limited” and that in practice “only fraud or excess of
jurisdiction will cause the expert’s decision to be set aside” (Brown and Marriott at 144,

quoted by Hogan J. in Dunnes Stores at para. 3, p. 2).

 

102.       Similar statements on the limited extent to which an expert’s determination is reviewable
by a court can be seen in the decision of the Court of Appeal of New South Wales in
Australian Vintage Ltd v. Belvino Investments (No. 2) pty Ltd [2015] NSWCA 275 (24th
June, 2015). In that case, the court held that the question of whether an expert’s
determination was reviewable depended on whether the determination was made in
accordance with the contract, i.e., whether or not the expert carried out the task which he
or she was contractually required to undertake. If the expert in fact carried out that task,
the fact that he or she made errors or took irrelevant matters into account would not
render the determination open to challenge. However, if the expert did not perform that
task, but rather performed some different task, or carried out the task in a way which was
not within the contemplation of the parties to the contract, objectively ascertained, then
the determination would be liable to be set aside. That was so notwithstanding that the
relevant contract contained a provision to the effect that the expert’s decision was to be
final and binding”. The court accepted that such a clause made very little difference to
the question. Bathurst CJ. stated:-
“To the extent that the decision was made in accordance with the terms of the
contract, it will be final and binding. To the extent that it is not, it will be subject to

review.” (at para. 85).

 

103.       In Re Benfield Greig Group plc [2000] 2 BCLC 488, one of the issues concerned whether a
valuation carried out under the terms of a company’s articles of association which
provided that the valuer’s decision was to be “final and binding” was open to challenge.
The articles also expressly provided that the valuer would be acting as expert and not as
arbitrator. In her judgment in the High Court of England and Wales, Arden J. held that
the effect of the articles was that the determination of the expert was final and binding.
Those words were actually used in the articles of association at issue in that case.
However, Arden J. referred to an earlier decision of the Court of Appeal in Baber v.
Kenwood Manufacturing Co Ltd [1978] 1 Lloyd’s Rep 175 where there was no express
provision that the valuation was to be final and binding but the Court of Appeal treated it
as such on the basis that the valuers were expressly stated to be acting as experts and

not as arbitrators.

 

104.       It can be seen, therefore, that even where a determination of an expert is not stated to
be “final” and “binding” it will be treated as such by virtue of the expert’s status as expert
rather than arbitrator and the decision of the expert will only be open to challenge on the
very limited circumstances demonstrated by the case law to which I have referred.
Ultimately, therefore, once the expert is acting as expert and not in some other capacity
such as an arbitrator, unless the relevant agreement provides otherwise, the decision or
determination of the expert will be treated as final and binding and will only be subject to
challenge on the very limited grounds referred to in the cases. That is so irrespective of
whether the decision or determination of the expert is expressly stated to be “final” or

final and binding”.

 

105.       Consequently, even if the agreement for expert determination did not make express
provision for the expert’s determinations to be both “final” and “binding” they would be
treated as such by law (unless the agreement otherwise made clear, which it does not in
the present case). In my view, therefore, even if the agreement had merely provided
that the determinations of the expert were to be “binding” and not “final” and “binding
(contrary to my earlier conclusion), that would be of no assistance to the defendant and
would not support its contention that the determinations were not intended to be both

final and binding.

 

Defendant’s reliance on Clause 13.1.10

 

106.       Another argument advanced by the defendant is to compare what is said in Clause
13.1.10 of the contract in relation to a conciliator’s recommendation with what the
agreement for expert determination says in relation to the determinations of the expert.
Clause 13.1.10 of the contract provides that in the circumstances addressed in that sub-
clause the conciliator’s recommendation will be “conclusive and binding” and yet, the
defendant submits, a dispute in relation to such recommendation may be referred to
arbitration under Clause 13.2. The defendant argues that a recommendation which is
stated to be “conclusive and binding” but which can still be referred to arbitration under
the contract, must be more robust than a determination of an expert which is merely
stated to be “binding” in the agreement for expert determination. However, that does not
follow. First of all, I have already concluded that, construed as a whole, the agreement
for expert determination provides that the determinations of the expert are both “final
and “binding”. Second, the circumstances in which the conciliator’s recommendation is
conclusive and binding” under Clause 13.1.0 of the contract is where the conciliator
issues a recommendation and neither party gives notice of dissatisfaction within the
required time period. In those circumstances the recommendation will be “conclusive and
binding” on the parties and a failure to comply with it may be referred by the other party
to arbitration under Clause 13.2. That provision is of no application in the present case
where, on the defendant’s own case, Clause 13.1 has been dis-applied in respect of the
disputes referred for expert determination. Third, this argument ignores the status in law

of an expert’s determination as discussed in the cases referred to earlier.

 

Plaintiff’s Letter of 11th September, 2017

 

107.       In further support of its contention that the agreement for expert determination should be
construed as applying only to the conciliation provisions contained in Clause 13.1 of the
contract and not to the arbitration provisions in Clause 13.2, the defendant has sought to
rely on the terms of a letter from the plaintiff’s managing director, Keith Screeney, to the
defendant’s then chief executive officer, Sean Ashe, dated 11th September, 2017. The
defendant contends that this letter amounts to a piece of contemporaneous
correspondence between the parties in which it is said that the plaintiff conceded that the
agreement for expert determination was intended to replace only the conciliation
provisions of the contract. The defendant relies on a portion of that letter in which Mr.
Screeney, on behalf of the plaintiff, stated as follows:-
“As the Employer, and conscious of the potential exposure of your offices under the
Contract, you suggested that the Parties should waive their rights to Conciliation
with a view to engaging in alternative process which would be more cost efficient
and definitive.” (emphasis added).
108.       The defendant relies on this letter and, in particular, on this portion of the letter as
demonstrating that the parties agreed in the agreement for expert determination to

displace only the conciliation provisions of the contract and not the arbitration provisions.

 

109.       The plaintiff disputes the admissibility in evidence of this letter as an aid to interpretation
of the agreement for expert determination. It says that the agreement should be
interpreted by reference to the words used in the agreement and not by reference to what
one of the parties (in this case, the plaintiff itself) may have said in subsequent
correspondence. The plaintiff’s objection to the admissibility of the letter is stated to be
based on the parol evidence rule, under which verbal evidence may not be admitted in
order to add to, subtract from or vary or qualify the terms of a contract which has been
reduced to writing. The plaintiff’s objection appears also to be based on the third of Lord
Hoffman’s principles in ICS, which precludes the admissibility in evidence of declarations
of the subjective intent of one of the parties (except in an action for rectification). By
way of an alternative submission, the plaintiff argues that if the letter is admissible in
evidence, then the entirety of the letter must be looked at and construed as a whole

rather than one selective part of it.

 

110.       To counter the plaintiff’s objection to admissibility, the defendant argues that the part of
the letter on which it seeks to rely amounts to an admission against interest which, the

defendant contends, renders the letter admissible in evidence.

 

111.       I have had some difficulty in understanding the precise basis on which the defendant
argues for the admissibility of the letter and the precise basis on which the plaintiff argues
against its admissibility. It seems to me that the parties may have confused different
legal concepts in addressing this issue. It is well established, and is apparent from the
third of Lord Hoffman’s principles, that previous negotiations of the parties and
declarations of subjective intent (made prior to the conclusion of the contract) are
inadmissible in the interpretation of the contract. That is so whether the prior declaration
of intent amounts to an admission against interest in order to defeat a hearsay objection
or not. However, the plaintiff’s does not make a hearsay objection. The plaintiff’s
objection appears to be based on the parol evidence rule and on the third of Lord

Hoffman’s principles in ICS.

 

112.       However, I do not think that the parol evidence rule is engaged. Under that rule,
extrinsic evidence, such as correspondence predating the conclusion of a contract, would
not be admissible provided that the contract was reduced to writing (as the agreement for
expert determination was here) (see, for example, Ulster Bank v. Deane [2012] IEHC 248
(unreported, High Court McGovern J., 20th June, 2012) (at p. 6); Promontoria (Arrow)
Ltd v. Mallon [2018] IEHC 145 (unreported, High Court McGovern J., 22nd March, 2018)
(at p. 16)). Further, the parol evidence rule does not apply where what is sought by the
admission of the extrinsic evidence is to assist in the interpretation of the written

agreement as opposed to an amendment or variation of the agreement.

 

113.       Nor, in my view, does the third of Lord Hoffman’s principles in ICS, necessarily preclude
the admissibility in evidence of the plaintiff’s letter of 11th September, 2017. Prior
declarations of subjective intent would be inadmissible under that principle. However,
subsequent declarations of intent would not necessarily be inadmissible, although the
weight to be attached to any such subsequent declaration of subjective intent is another
question altogether. There is recent support for the admissibility in evidence of a
subsequent declaration of subjective intent. The issue arose in the MIBI case. In that
case, the Supreme Court considered relevant to the interpretation of the agreement at
issue in that case (the 2009 MIBI agreement) a letter from September 2014, sent on
behalf of the Minister for Transport (one of the parties to the relevant agreement) to the
MIBI (the other party to the agreement) which set out the Minister’s position as to the
interpretation and application of the relevant MIBI agreement. In the course of his
judgment for the majority of the Supreme Court, O’Donnell J. held that the court had to
take the letter as a representation of the position of the Minister, with the qualification
that it had not been tested in court. Taking the letter in that way, O’Donnell J. stated
that the letter offered “further important support for the interpretation advanced by the
MIBI” (para. 48). Having done so, O’Donnell J. stated that it was difficult to see how it
could be said that the agreement could interpreted “more broadly than the parties to the

Agreement itself [contended]”.

 

114.       It seems to me, therefore, that it is open to me to consider the terms of the plaintiff’s
letter of 11th September, 2017. However, the weight to be attached to the letter must
necessarily be of a significantly lower order than the letter in the MIBI case. In that case,
the relevant letter set out the views of one of the parties to the relevant MIBI agreement
which was precisely the same as the view held by the other party to that agreement. The
views of both parties to the letter were, therefore, identical. That is not the case with the
plaintiff’s letter of 11th September, 2017 as there is a dispute between the parties as to
the scope of application of the agreement for expert determination. Nonetheless, I have

had regard to the letter.

 

115.       It is true, as the defendant contends, that in the part of the letter relied upon by the
defendant, Mr. Screeney, on behalf of the plaintiff, refers to the defendant having
suggested that the parties “should waive their rights to Conciliation with a view to
engaging in alternative process which would be more cost efficient and definitive”.
However, that statement itself is equivocal and not determinative of the issue as to the
scope of application of the agreement for expert determination. The letter did not
expressly state that the parties agreed only to waive their rights to conciliation. Indeed,
the rest of the sentence on which the defendant mainly relies suggests that a wider form
of waiver was being referred to. The waiver referred to in the letter, while referring to
conciliation, was “with a view to engaging in alternative process which would be more
cost efficient and definitive”. I agree with the plaintiff that this suggests a wider form of
waiver than merely conciliation and is at least consistent with a waiver also of the
arbitration provisions in the contract. The next paragraph of the letter is also consistent
with such a conclusion in that reference is made to the process of expert determination
being suggested which “would allow both parties to put forward their respective cases in a
non-adversarial manner, with the findings of the Expert being accepted as Binding on the
Parties” (emphasis added). The next paragraph refers to the plaintiff consulting with its
legal advisers to confirm that the parties “with due regard to the contract in place, could
engage in, and be bound by the process proposed” (emphasis added). This is also
consistent with the process of expert determination being binding on the parties. So too
is a paragraph later in the letter where, referring to the expansion of the expert’s role in
the January 2017, it is said that the plaintiff was prepared to agree to that expansion on
the understanding that the parties “would formally attest to [the] Agreement and their
intention to [be] bound by the findings of the Expert”. There are several further
references in the letter to the “binding nature” of the process of expert determination
under the agreement between the parties. These references are all consistent at least
with the position adopted by the plaintiff concerning the effect of the agreement for

expert determination on the dispute resolution provisions of the contract.

 

116.       However, ultimately, it seems to me that the plaintiff’s letter of 11th September, 2017, is
pretty equivocal on the issue I have to decide. While there is a reference to a
conciliation, the other references appear to support the binding nature of the expert
determination process. All of those references are in correspondence which post-dated
the agreement and, while the letter is probably admissible for the reasons I have
mentioned earlier, little enough weight should, I believe, be given to it. To my mind, the
better way of approaching the interpretation of the agreement for expert determination is
to interpret that agreement by reference to its actual terms. I place little weight,
therefore, on the terms of the plaintiff’s letter of 11th September, 2017, one way or the

other.

 

Whether Clause 13.2 can survive disapplication of Clause 13.1

 

117.       Another issue between the parties is if the defendant is correct in its case as to the
application of the agreement for expert determination to the conciliation provisions in
Clause 13.1 of the contract only and not to the arbitration provisions in Clause 13.2,
whether Clause 13.2 can survive. The defendant says that it can, in that the references
in Clause 13.2 to Clause 13.1 must be treated as being disapplied in respect of the
disputes the subject of the expert determination process and the court must read in a

rider which in turn incorporates by reference the agreement for expert determination.

 

118.       The plaintiff argues that Clause 13.2 cannot survive the removal or disapplication of
Clause 13.1 in respect of the relevant disputes. The plaintiff advances two grounds for
that contention. First, it says that Clause 13.2 applies to disputes which, under Clause
13.      1, “may be referred to conciliation”. Such disputes can go to arbitration under Clause
13.      2. However, the plaintiff contends that the particular disputes which were the subject
of the agreement for expert determination do not fall within the category of disputes
which “may be referred to conciliation” as it was agreed that they would be dealt with by
expert determination. The plaintiff does not accept the defendant’s argument that all that
is required is that there was a dispute which could have been referred to conciliation and
all that was required, at the time the contract was entered into, was that there was a
possibility of the particular dispute being referred to conciliation. Second, the plaintiff
argues that if it is the defendant’s case that Clause 13.2 should be read, in the case of the
disputes referred for expert determination under the agreement between the parties, as
removing from Clause 13.2 the references to conciliation under Clause 13.1 and replacing
them with references to the agreement for expert determination, then the defendant

ought to have sought rectification of Clause 13.2.

 

119.       I cannot see how Clause 13.2 can be read in the manner suggested by the defendant.
The operation of Clause 13.2 depends on there being a dispute which could be referred to
conciliation under Clause 13.1. It will be recalled that Clause 13.2 says:-
“Any dispute that, under sub-clause 13.1, may be referred to conciliation shall,

subject to sub-clause 13.1 be finally settled by arbitration…”

 

120.       Clause 13.1.1 refers to a dispute arising under the contract which either party may refer
for conciliation under Clause 13.1. However, if the parties have agreed that certain
disputes will be dealt with by a different process, namely, expert determination, in place
of conciliation, those disputes may not be referred for conciliation under Clause 13.1.1.
They may not be referred for conciliation under that provision because the parties have
agreed that they will be dealt with in a different way, namely, by expert determination.
The defendant’s case is that the parties agreed that these particular disputes would be
dealt with by expert determination and not by conciliation. In my view, therefore, those
particular disputes are not disputes which “may be referred” to conciliation under Clause
13.      1. If they are not disputes which “may be referred” to conciliation under Clause 13.1,

then Clause 13.2 does not apply in respect of those disputes.

 

121.       To put it another way, a dispute which is the subject of the agreement for determination
is not a “dispute that, under sub-clause 13.1, may be referred to conciliation” under
Clause 13.2. If such a dispute is not a dispute which “may be referred” to conciliation
under Clause 13.1, then it is not a dispute which is required to be “finally settled by
arbitration” under Clause 13.2. Clause 13.2, therefore, has no application to a dispute
which the parties have agreed should be referred to expert determination in lieu of
conciliation. If it were intended by the parties that a dispute referred to expert
determination in place of conciliation was nonetheless one which the parties could refer to
arbitration under Clause 13.2, where it is dissatisfied with the expert’s determination, one
would have expected the parties to have made express provision for this, having regard
to the terms of Clause 13.2. They did not do so. They could have expressly agreed in
the agreement for expert determination that a party dissatisfied with the expert’s
determination of an issue could nonetheless refer that issue to arbitration under Clause
13.2. They did not do that. They could have agreed by some other means that disputes
referred to expert determination could nonetheless be subject to the arbitration provisions

in Clause 13.2. They did not do that either.

 

122.       It should be recalled that Clause 13.2 does continue to apply in respect of disputes which
were not referred for expert determination but which were dealt with in accordance with
the conciliation provisions of Clause 13.1. In respect of those disputes, the arbitration
provisions in Clause 13.2 continue to subsist and so rectification of Clause 13.2 would not
have been appropriate. However, in respect of the disputes which were referred to expert
determination, I cannot see how the provisions of Clause 13.2 can apply for the reasons

just mentioned.

 

123.       I have endeavoured to work out how Clause 13.2 might operate if it continued to apply in
respect of disputes referred to expert determination under the agreement between the
parties. Leaving aside the express references in Clause 13.2 to Clause 13.1 and disputes
which could be referred to conciliation under that latter clause, I cannot see how Clause
13.2 would operate. In the case of the conciliation provisions in Clause 13.1, there are
detailed procedural rules with time periods for the conciliator to give a written
recommendation, procedures for what is to happen if a party is dissatisfied with the
recommendation, provisions as to what happens where a recommendation is issued but
neither party expresses its dissatisfaction with the recommendation and provisions under
which one or other of the parties may be entitled or obliged to refer a dispute to
arbitration under Clause 13.2. Clause 13.1 contains a well-worked-out scheme or
structure for the conciliation and provides for how the process may move from conciliation
to arbitration. None of that is apparent from the agreement of expert determination. I
have referred earlier to the references in the agreement for expert determination to
Clause 13 of the contract. There is one reference (para. D5) which does not advance
matters. So far as I can see, there is nothing in the agreement for expert determination
providing for the circumstances in which a party dissatisfied with the expert’s
determination can seek to proceed to arbitration under Clause 13.2 of the contract. To
the extent that the defendant relies, as part of its argument for the co-existence of the
agreement for expert determination with Clause 13.2 of the contract, on an assertion that
recourse to conciliation under Clause 13.1 is optional whereas recourse to arbitration
under Clause 13.2 is mandatory, I have indicated earlier that I do not agree with that
argument. However, even if it were correct, it could hardly avail the defendant in
circumstances where it is accepted by both parties that the agreement for expert
determination did impose an obligation on the parties to refer the disputes the subject of
the agreement for expert determination. That is the route which the parties agreed to
take in respect of those disputes. That route was not an optional one once the parties
entered into the agreement for expert determination. I cannot agree with the defendant
that Clause 13.2 can continue to apply to disputes which the parties agreed would be

referred for expert determination in lieu of conciliation under Clause 13.1.

 

Conclusions on interpretation of Expert Determination Agreement

 

124.       Finally, in this context, I am satisfied that the terms of the agreement for expert
determination (providing for the revised terms of engagement dated 23rd January, 2017)
are wide enough to provide for the final and binding determination by an expert of the
disputes the subject of that agreement. I have referred earlier to the provisions of Clause
2 and paras. A, B, C and D of the schedule setting out the jurisdiction and powers of the
expert. They do confer on the expert the jurisdiction and power to make binding and final
determinations. While this is, of course, subject to a potential challenge on the limited
grounds discussed in the case law and authorities to which I have referred, they are not
amenable to arbitration under Clause 13.2. The effect of the agreement for expert
determination is, in my view, to disapply by necessary implication the arbitration
provisions in Clause 13.2. Further, as indicated earlier, the terms of Clause 13.2
themselves do not appear to me to be capable of accommodating a situation where
disputes which the parties agreed were being referred to expert determination could or
must nonetheless be referred to arbitration under Clause 13.2. All of these considerations
combined have persuaded me that the defendant has failed to discharge its burden of
establishing that the disputes which the parties agreed to refer to expert determination

are nonetheless the subject of the arbitration agreement contained in Clause 13.2.

 

125.       Alternatively, I am satisfied that the plaintiff has discharged the burden on it (if
applicable) of demonstrating that the arbitration agreement contained in Clause 13.2 is
inoperative” in the sense of not being capable of being operated or applied to the

disputes the subject of the agreement for expert determination.

 

126.       In those circumstances, I must refuse the defendant’s application for an order referring
the parties to arbitration under Article 8(1) of the Model Law in respect of the particular
disputes the subject of the application. In reaching this conclusion, I am giving effect to
the parties’ agreement and am not in any way undermining or diminishing the supportive
approach which the Irish courts take to arbitration and the arbitral process. That
approach stems from the respect and support given to the parties’ autonomy and their
agreement to arbitration as the means of resolving their dispute. Here, the effect of the
parties’ agreement to expert determination is to disapply the arbitration agreement. In
refusing the defendant’s application, I am merely giving effect to that agreement. My
decision does not mean that Clause 13.2 is not applicable in respect of disputes which

were not the subject of the agreement for expert determination.

 

127.       That is sufficient to dispose of the defendant’s application. However, since some reliance
was also placed by the plaintiff on the provisions of the conciliation agreement in order to
preclude the defendant from seeking to refer the disputes to arbitration under Clause
13.      2, I should briefly address what the parties have said about that agreement. Strictly
speaking, it is unnecessary for me to do so having regard to my conclusions in relation to

the interpretation and application of the agreement for expert determination.

 

Conciliation agreement

 

128.       I have referred earlier to the circumstances in which the parties entered into the
conciliation agreement as recorded in the letter from Ciaran Fahy, the conciliator, to the
parties dated 16th August, 2018. The conciliation agreement was yet a further effort by
the parties to resolve their disputes, this time by way of conciliation. It is common case
that the conciliation agreement encompassed not only the disputes which were the
subject of the agreement for expert determination but also other disputes between the
parties under the contract. The plaintiff contends that the conciliation agreement
provides another insurmountable obstacle for the defendant seeking to refer the disputes
which were the subject of the expert determination agreement to arbitration under Clause
13.2 of the contract. It argues that the express reservation of rights contained in Clause
2 of the conciliation agreement is qualified by the final sentence of Clause 2 which, it
contends, makes clear that the rights of the parties in respect of the claims which were
the subject of the agreement for expert determination were being reserved and would be
unaffected by the conciliation agreement “save to the extent provided in this agreement”.
The plaintiff says that the conciliation agreement does in fact affect those rights in the
manner envisaged by Clause 2. It contends that this was done by Clause 5 of the
conciliation agreement which confers on the plaintiff only the entitlement in the particular
circumstances provided for in that clause to refer matters to arbitration under Clause 13.2

of the contract.

 

129.       The defendant, however, submits that the conciliation agreement makes clear that the
rights of both parties were being reserved in the event that the conciliation did not
successfully resolve their disputes. It contends that among the rights reserved or
preserved by the conciliation agreement were the plaintiff’s right to maintain the
proceedings and the defendant’s right to seek to refer the relevant disputes to arbitration.
It contends that Clause 5 does not affect that reservation of rights and is permissive only
in terms, entitling the plaintiff to pursue claims or to seek to refer them to arbitration
under Clause 13.2 in the particular circumstances provided for in Clause 5. It submits
that the plaintiff only is mentioned in Clause 5 as it was the party which had a claim to
ventilate. The defendant does not accept that Clause 5 gave the plaintiff a unilateral right
to decide whether or not the claims the subject of the current proceedings should be

litigated or dealt with by arbitration.

 

130.       As I have indicated earlier, having regard to the conclusions I have reached in relation to
the interpretation and application of the agreement for expert determination, it is not,
strictly speaking, necessary for me to deal with the arguments made by the plaintiff in
reliance on the conciliation agreement. However, it is perhaps appropriate that I set out

in brief terms my conclusions on this issue.

 

131.       The conciliation agreement covers the disputes which were dealt with in accordance with
the agreement for expert determination as well as other disputes between the parties.
Insofar as the disputes which were the subject of the expert determination procedure is
concerned, I have concluded that the agreement for expert determination disapplies the
conciliation provisions in Clause 13.1 and the arbitration provisions in Clause 13.2 with
respect to those disputes. The position, therefore, which existed at the time the parties
entered into the conciliation agreement in August 2018, was that the parties had already
agreed to disapply Clause 13.1 and Clause 13.2 in respect of the disputes which were the
subject of the agreement for expert determination. Therefore, when it came to the
parties seeking to reserve or preserve their rights in respect of those particular disputes,
they were doing so in circumstances where Clause 13.1 and Clause 13.2 were disapplied
in respect of those disputes. That being the case, the effect of Clause 2 was not to
preserve any right which the defendant had to seek to refer those disputes to arbitration
under Clause 13.2 as that provision was already disapplied in respect of those disputes by
virtue of the agreement for expert determination. There is nothing in Clause 5 of the
conciliation agreement which reinstates or reapplies the provisions of Clause 13.2 so as to
confer on the defendant an entitlement to refer those particular disputes to arbitration.
132.       The defendant is not mentioned in Clause 5 of the conciliation agreement. It is the
plaintiff that is given the various options or entitlements in Clause 5 including the option
to refer the claims to arbitration in the event that the court refuses to enforce the expert
determinations (Clause 5(c)). Clause 2 of the conciliation agreement provided that the
parties’ rights were reserved and would remain unaffected “save to the extent provided in
[the conciliation] agreement”. Clause 5 did make provision to affect the rights of the
plaintiff but not of the defendant. It would have been open to the parties to make
express provision in Clause 5 to reapply or reinstate Clause 13.2 and to confer on the
defendant an entitlement to refer the disputes which were the subject of the expert
determination procedure to arbitration, if that is what the parties intended. However,
they did not include such provision in the conciliation agreement. Therefore, the
defendant’s position, which was reserved or preserved under Clause 2 of the conciliation
agreement and under which the defendant did not have the entitlement to refer the
disputes which were the subject of the expert determination procedure to arbitration
having regard to the terms of the agreement for expert determination, was not affected
or otherwise provided for in subsequent provisions of the conciliation agreement, such as
Clause 5. I am satisfied, therefore, that based on my interpretation of the agreement for
expert determination, the conciliation agreement does not confer on the defendant an
entitlement to refer the disputes the subject of that expert determination procedure to
arbitration under Clause 13.2 of the contract. The plaintiff is given the option of making a
reference to arbitration in respect of those disputes in the circumstances provided for in
Clause 5. Clause 5 does not confer on the defendant the option or entitlement of

referring those disputes to arbitration.

 

133.       If I am wrong in my interpretation of the agreement for expert determination, and if, at
the time the conciliation agreement was entered into, the defendant did have a right to
seek a reference to arbitration under Clause 13.2 of the contract, I would interpret Clause
5 as clearly affecting that right by conferring on the plaintiff only the right to refer
matters to arbitration in certain circumstances but not conferring such a right on the
defendant. The defendant’s position would, therefore, have been altered by Clause 5 of
the conciliation agreement as expressly permitted by Clause 2 of that agreement. In
either case, therefore, the defendant would not have the right to refer the disputes which

were the subject of the expert determination procedure to arbitration.

 

Summary of conclusions

 

134.       In summary, I have considered in this judgment the various arguments advanced by the
parties in support of and against the defendant’s contention that it is entitled to refer the
disputes the subject of the proceedings to arbitration in accordance with Clause 13.2 of
the contract between the parties. I have concluded that the agreement between the
parties to refer the disputes which are now the subject of these proceedings for expert
determination under an agreement made between the parties (as recorded in revised
terms of engagement dated 23rd January, 2017), on its proper construction, had the
effect of disapplying not only the conciliation provisions contained in Clause 13.1 of the
contract but also the arbitration provisions contained in Clause 13.2 with respect to those
disputes.
135.       In those circumstances, there is no arbitration agreement between the parties in respect
of those disputes. I have concluded, therefore, that the defendant has failed to discharge
the burden of establishing the existence of an arbitration agreement in respect of the
disputes at issue for the purpose of Article 8(1) of the Model Law. Alternatively, if the
burden is on the plaintiff to establish that the arbitration agreement is “inoperative
within the meaning of that term in Article 8(1) of the Model Law, I am satisfied that the
plaintiff has discharged that burden by demonstrating that by virtue of the agreement for
expert determination, the arbitration agreement contained in Clause 13.2 has been

disapplied with respect to the disputes which are now the subject of these proceedings.

 

136.       While, strictly speaking, not necessary to do so, I have also set out my views in relation
to the subsequent conciliation agreement reached between the parties. My views in
respect of that agreement do not affect the conclusions which I have reached in relation
to the defendant’s entitlement to seek a reference to arbitration in respect of the relevant
disputes under Article 8(1) of the Model Law. Rather, they are consistent with those

conclusions.

 

137.       In those circumstances, I must refuse the defendant’s application for the order sought
under Article 8(1) of the Model Law. I will hear the parties in relation to the terms of the

order to be made and on any other consequential issues.Result:     The defendants application was refused

Pluto Shipowning Inc v Able Glory Maritime Co Ltd [2019] FCA 1836 (10 October 2019)

FEDERAL COURT OF AUSTRALIA

Pluto Shipowning Inc v Able Glory Maritime Co Ltd [2019] FCA 1836

File number:
NSD 2023 of 2018
Judge:
RARES J
Date of judgment:
10 October 2019
Legislation:
International Arbitration Act 1974 (Cth) s 8
United Nations Conference on International Commercial Arbitration Convention, on the Recognition and Enforcement of Foreign Arbitral Awards done at New York on 10 June 1958 ([1975] ATS 25)
Cases cited:
The Ship “Sam Hawk” v Reiter Petroleum Inc [2016] FCAFC 26; (2016) 246 FCR 337
Date of hearing:
10 October 2019
Registry:
New South Wales
Division:
General Division
National Practice Area:
Admiralty and Maritime
Category:
No Catchwords
Number of paragraphs:
9
Counsel for the Plaintiff:
M Scott QC with E Levine
Counsel for the Defendant
The Defendant did not appear

ORDERS

NSD 2023 of 2018
BETWEEN:
PLUTO SHIPOWNING INC
Plaintiff
AND:
ABLE GLORY MARITIME CO LTD
Defendant
JUDGE:
RARES J
DATE OF ORDER:
10 OCTOBER 2019

THE COURT ORDERS THAT:

  1. The first partial final arbitration award dated 3 January 2018 in the matter of the arbitration between Pluto Shipowning Inc and Able Glory Maritime Co Limited be enforceable pursuant to s 8(3) of the International Arbitration Act 1974 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)

RARES J:

  1. This is an application to enforce a partial final award made on 3 January 2018 in London by the three arbitrators appointed pursuant to an arbitration agreement between the plaintiff, Pluto Shipowning Incorporated, as owners of Sea Pluto, and Able Glory Maritime Company Limited, as charterers of the ship under a charterparty made in Shanghai on 8 October 2014.
  2. The United Kingdom is a party to the United Nations Conference on International Commercial Arbitration Convention, on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958, known as the New York Convention. Pursuant to s8(3) of the International Arbitration Act 1974 (Cth), a foreign award being an arbitral award made in a country other than Australia in relation to which the Convention applies may be enforced by this Court, as if it were a judgment of this Court.
  3. I am satisfied that in October 2018 the arbitrators certified a true copy of the arbitration agreement embodied in the charterparty. Clauses 17 and 83 of the charterparty provided for London arbitration by three arbitrators in the event of a dispute.
  4. Following delivery of Sea Pluto to Able Glory under the charter party, Able Glory arranged with OW Bunkers, or one of its subsidiaries, for bunkers to be provided to the vessel. OW Bunkers invoiced both Able Glory and Pluto on 15 October 2014 for the supply of bunkers, in the sum of USD598,675.58. Payment was due 30 days from the date of supply, but as found in the partial final award, payment has never been made and the debt remains outstanding
  5. On about 18 March 2016, ING Bank NV, as assignee of OW Bunkers following its collapse, caused Sea Pluto to be arrested in Geelong, Victoria, in proceedings commenced in this Court, seeking to recover the debt. As a result of an undertaking providing security in the sum of USD1,234,000 by Skuld P&I Club on behalf of Pluto, the ship was released from arrest on 22 March 2016. Skuld required Pluto to counter-secure its letter of undertaking giving that security by placing USD1,357,400 with Skuld.
  6. On about 26 May 2016, Pluto began the arbitration proceedings in London against Able Glory. Able Glory appointed its own arbitrator, in accordance with the arbitration agreement, and both arbitrators then appointed a third. The arbitrators made the partial final award after a two-day hearing, at which each of Pluto and Able Glory appeared and was represented. The arbitrators concluded that Able Glory was liable to Pluto in respect of the claims by ING or OW Bunkers, by way of indemnity or damages for any liability that might be imposed on Pluto in Australia or in other countries, assuming that any such proceedings were reasonably defended and determined.
  7. They found that, notwithstanding the decision of the Full Court in The Ship “Sam Hawk” v Reiter Petroleum Inc [2016] FCAFC 26; (2016) 246 FCR 337, because ING and its assignor, OW Bunkers, had claimed against Pluto and arrested Sea Pluto in Australia, there was a real risk that in other countries, that recognise maritime liens that charterers can create on ships for the supply of necessaries, Sea Pluto could be arrested even though such liens are not likely to be recognised in Australia. Accordingly, notwithstanding that ING’s and OW Bunkers’ claim in Australia against the ship was objectively unsound under Australian law, Sea Pluto was still at risk of being arrested in other jurisdictions.
  8. The partial final award ordered Able Glory to put up counter-security in a form reasonably acceptable to Pluto and Skuld, to replace the security in the sum of USD1,357,400 provided in respect of the proceeding of this Court in March 2016 on behalf of Pluto. The arbitrators also awarded Pluto costs, which have not yet been assessed.

Conclusion

  1. I am satisfied that the subject matter of the partial final award was capable of settlement by arbitration under the laws in force in the United Kingdom, and that there is no apparent basis under s 8(5) or (7) of the International Arbitration Act at the present time not to enforce the award Accordingly, I will order that the partial final award be enforceable as an order of the Court.
I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Application by Port of Newcastle Operations Pty Ltd [2019] ACompT 1 (30 October 2019)

AUSTRALIAN COMPETITION TRIBUNAL

Application by Port of Newcastle Operations Pty Ltd [2019] ACompT 1

Review from:
The arbitration determination by the Australian Competition and Consumer Commission under section 44ZP of the Competition and Consumer Act 2010 (Cth) in relation to an access dispute between Glencore Coal Assets Australia Pty Ltd and Port of Newcastle Operations Pty Ltd
Catchwords:
COMPETITION – applications for review of the arbitration determination made by the Australian Competition and Consumer Commission in respect of access dispute between provider and user of a declared service – review to be conducted by way of ‘re-arbitration’ pursuant to s 44ZP of the Competition and Consumer Act 2010 (Cth) – where declared service is the right to access and use monopoly infrastructure assets at Port of Newcastle – where access dispute concerns quantum of charges levied for access and use of declared service and proper scope of application of such charges – how declared service to be interpreted and appropriate scope of application of arbitration determination – whether and how to account for contributions of service users in calculating regulated asset base – determination of projects that were the subject of contributions of service users – whether such projects would be undertaken by a hypothetical new entrant – determination of appropriate costs of such projects – determination of appropriate timeframe for such projects – consideration of impact of timeframe on interest – whether service provider able to recover costs of non-coal assets through arbitrated charges – whether to apply true-up for return on actual capital expenditure compared to return on forecast capital expenditure

IN THE AUSTRALIAN COMPETITION TRIBUNAL

ACT 2 of 2018
RE:
APPLICATION FOR REVIEW OF THE ARBITRATION DETERMINATION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION UNDER SECTION 44ZP OF THE COMPETITION AND CONSUMER ACT 2010 (CTH) IN RELATION TO AN ACCESS DISPUTE BETWEEN GLENCORE COAL ASSETS AUSTRALIA PTY LTD AND PORT OF NEWCASTLE OPERATIONS PTY LTD
BY:
PORT OF NEWCASTLE OPERATIONS PTY LTD

Applicant

TRIBUNAL:
MIDDLETON J (PRESIDENT)

MR R F SHOGREN (MEMBER)

DR D R ABRAHAM (MEMBER)

DATE OF DETERMINATION:

30 OCTOBER 2019

THE TRIBUNAL DETERMINES THAT:

The ACCC’s Final Determination made under s 44V of the Competition and Consumer Act 2010 (Cth) dated 18 September 2018, be varied by deleting Clauses 2.1, 2.2 and 6.1 and replacing them as follows:

2.1 The scope of the determination is confined to the terms and conditions of access where Glencore owns or, either directly or by agent, charters a vessel that enters the Port precinct and loads Glencore coal.

2.2 For the avoidance of doubt, the determination does not apply to:

(a) the terms and conditions of access to apply in respect of vessels carrying coal that are not owned, or have not been chartered, by Glencore;

(b) the terms and conditions of access for vessels other than those calling at the coal terminals at the Port; and

(c) any charges imposed by PNO other than the Navigation Service Charge and the Wharfage Charge.

6.1 The Navigation Service Charge payable by Glencore to PNO in accordance with this determination will be $1.0058 as at 1 January 2018.

IN THE AUSTRALIAN COMPETITION TRIBUNAL

ACT 3 of 2018
RE:
APPLICATION FOR REVIEW OF THE ARBITRATION DETERMINATION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION UNDER SECTION 44ZP OF THE COMPETITION AND CONSUMER ACT 2010 (CTH) IN RELATION TO AN ACCESS DISPUTE BETWEEN GLENCORE COAL ASSETS AUSTRALIA PTY LTD AND PORT OF NEWCASTLE OPERATIONS PTY LTD
BY:
GLENCORE COAL ASSETS AUSTRALIA PTY LTD

Applicant

TRIBUNAL:
MIDDLETON J (PRESIDENT)

MR R F SHOGREN (MEMBER)

DR D R ABRAHAM (MEMBER)

DATE OF DETERMINATION:

30 OCTOBER 2019

THE TRIBUNAL DETERMINES THAT:

The ACCC’s Final Determination made under s 44V of the Competition and Consumer Act 2010 (Cth) dated 18 September 2018, be varied by deleting Clauses 2.1, 2.2 and 6.1 and replacing them as follows:

2.1 The scope of the determination is confined to the terms and conditions of access where Glencore owns or, either directly or by agent, charters a vessel that enters the Port precinct and loads Glencore coal.

2.2 For the avoidance of doubt, the determination does not apply to:

(a) the terms and conditions of access to apply in respect of vessels carrying coal that are not owned, or have not been chartered, by Glencore;

(b) the terms and conditions of access for vessels other than those calling at the coal terminals at the Port; and

(c) any charges imposed by PNO other than the Navigation Service Charge and the Wharfage Charge.

6.1 The Navigation Service Charge payable by Glencore to PNO in accordance with this determination will be $1.0058 as at 1 January 2018.

REASONS FOR DETERMINATION

INTRODUCTION

  1. The two applications before the Tribunal concern a dispute between Port of Newcastle Operations Pty Ltd (‘PNO’) and Glencore Coal Assets Australia Pty Ltd (‘Glencore’) regarding the terms and conditions of access to the Port of Newcastle (the ‘Port’).
  2. PNO is the operator of the Port and Glencore is a user of the Port. PNO filed its application on 8 October 2018 (ACT 2 of 2018) and Glencore filed its application a day later on 9 October 2018 (ACT 3 of 2018).
  3. The Port is subject to the access regime contained in Part IIIA of the Competition and Consumer Act 2010 (Cth) (the ‘CCA’). Pursuant to that regime, and by Glencore’s notification dated 4 November 2016, the dispute between it and PNO was referred to the Australian Competition and Consumer Commission (the ‘ACCC’) for arbitration. As a result of that arbitration the ACCC determined the value of certain charges that PNO could levy on Glencore for access to the Port and the circumstances in which such arbitrated charges could be levied. The ACCC’s determination as to these matters was published in its Final Determination on 18 September 2018.
  4. Each application calls on the Tribunal to review the Final Determination by conducting a ‘re-arbitration’ pursuant to s 44ZP. The Tribunal’s function in applications of this kind is not to identify error in the relevant arbitration determination but to re-arbitrate the dispute between access seeker and access provider based on the information, reports and things referred to in s 44ZZOAAA.
  5. Whilst there was some disputation as to the material the Tribunal should consider in this re-arbitration, nothing turned upon this disputation in the Tribunal’s deliberations and its ultimate determination. Putting aside the report which Glencore asked the Tribunal to consider (to which we will return) there were a number of documents that were not taken into account by the ACCC, which are set out in an annexure to the ACCC’s submissions in each application, dated 5 April 2019. The Tribunal has not taken these documents into account, but as mentioned nothing turns on this for the purposes of the Tribunal’s deliberations and determination.
  6. The Tribunal will be referring to the ACCC’s Draft and Final Determinations as a convenient way to address the issues raised in the re-arbitration. In doing so the Tribunal follows the approach of the parties, although the relevant materials and arguments were strictly set out in the Statements of Reasons provided with each Determination, not in the Determinations themselves. The Tribunal is still undertaking a re-arbitration and not a review or appeal of the ACCC’s Final Determination. However, just as the applications were presented to the Tribunal by the parties, the task of the Tribunal does not require it to ignore the reasoning of the ACCC. In fact a great deal of the reasoning and the Final Determination itself remained non-contentious.
  7. For convenience’s sake, the ACCC’s Final Determination is annexed to these reasons as Annexure “A”. A document which identifies aspects of the Final Determination not in dispute, jointly prepared by the parties and the ACCC (at the request of the Tribunal), is annexed to these reasons in summary form as Annexure “B”.

BACKGROUND

  1. The Port is a major commercial shipping port and one of the largest coal export ports in the world. It is considered to be the only port from which it is commercially viable to export coal from the Hunter Valley coal fields in New South Wales (‘NSW’). The Hunter Valley coal industry and its associated supply chain is responsible for around 90% of NSW’s coal production and 40% of Australia’s total black coal production.
  2. Glencore is the largest exporter by volume of coal from the Port. Approximately 85% of the coal mined by Glencore is exported to global markets including Japan, South Korea, Taiwan, China and Europe. Thermal coal exported from the Port to these destinations competes with coal exported from other countries such as Indonesia.
  3. PNO has operated the Port since May 2014. Prior to this, the Port was operated by the State of NSW. In May 2014, the joint venture parents of PNO (Hastings Fund Management and China Merchants Group) acquired a 98 year lease from the NSW Government effectively privatising the Port’s assets. PNO is now jointly owned by The Infrastructure Fund (a wholesale investment fund under the trusteeship of Gardior Pty Ltd) and China Merchants Group. Under the terms of the lease, PNO has the power and authority to, amongst other things, fix and collect port charges pursuant to Pt 5 of the Ports and Maritime Administration Act 1995 (NSW) (the ‘PMAA’). Two such charges are relevant to this access dispute: the Navigation Service Charge (the ‘NSC’) (which is payable in respect of general use by a vessel of the Port and its infrastructure) and the Wharfage Charge (which is payable in respect of the availability of a site at which stevedoring operations may be carried out). After it assumed the role of Port operator, PNO implemented a restructure of its charges with the effect that the price for coal ships using the Port increased by between 40% and 60% for some vessel types. The charges applied by PNO to Glencore (and other users of the Port) were as follows:
    • Navigation Service Charge: $0.7286 per gross tonne in its 2015 port pricing schedule, and increased to $0.7553 per gross tonne in its 2018 port pricing schedule; and
    • Wharfage Charge: $0.0746 per revenue tonne.
  4. We observe that the NSC is applied by PNO at different rates to coal vessels, cruise vessels, and non-coal vessels (other than cruise vessels).

Declaration of services at the Port

  1. In the wake of PNO’s restructure of Port charges, Glencore made an application to the National Competition Council (‘NCC’) on 13 May 2015 for certain services at the Port to be ‘declared’ for the purposes of Part IIIA. The NCC issued its recommendation to the relevant Minister on 2 November 2015 which recommended the service not be declared on the grounds that it did not meet the requirement that declaration would promote a material increase in competition in at least one market other than the market for the service. The NCC was otherwise satisfied that all other criteria were met. On 8 January 2016, the Minister published his decision under s 44H(1) in which he decided not to declare the nominated service on the same basis as that recommended by the NCC.
  2. On 29 January 2016, Glencore applied to the Tribunal under s 44K for review of the Minister’s decision. The Tribunal set aside the Minister’s decision in Re Application by Glencore Coal Pty Ltd [2016] ACompT 6, and on 16 June 2016 declared the following service:

the provision of the right to access and use the shipping channels (including berths next to the wharves as part of the channels) at the Port of Newcastle (Port), by virtue of which vessels may enter the Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct.

(the ‘Service’)

  1. The precise drafting of the description of the Service is important. It is a matter to which we will return later in these reasons.

Notification and arbitration of the dispute

  1. Following the declaration of the Service, Glencore made a series of attempts to negotiate with PNO in respect of the terms and conditions upon which Glencore could access the Port. No agreement was reached and on 4 November 2016, Glencore notified the ACCC under s 44S(1) of the existence of an access dispute in relation to the Service. In its notification to the ACCC, Glencore described the dispute as follows:

Although PNO is currently providing access (and maintaining that it will always do so) the terms of access, in particular the navigation service charges for coal vessels, are unreasonable and Glencore is seeking to negotiate with PNO on reducing these charges to approximately their pre-privatisation levels (or pre-2015 levels as 2015 was the point at which PNO increased the charges, shortly after the Service was privatised and assets re-valued from $1.75 billion to $2.4 billion). Glencore submits that, at the very least, an economically efficient charge is likely to be significantly lower than the rates which are currently being applied by PNO.

  1. On 22 December 2016, the ACCC advised Glencore and PNO that:

(1) the pre-conditions for notification of an access dispute under s 44S had been met;

(2) an access dispute relating to the Service existed between Glencore and PNO; and

(3) the access dispute had been validly notified by Glencore.

  1. The ACCC also established a ‘Commission’ for the purposes of the access dispute arbitration pursuant to ss 44U to 44ZNA of the CCA.
  2. Between 22 December 2016 and 20 July 2018, the parties provided the ACCC with a considerable volume of information pertaining to the arbitration, and more specifically information to be used to determine appropriate regulated access prices for the Service.

Judicial review of the notification of the dispute

  1. On 9 October 2017, during the course of the arbitration, PNO filed proceedings against the ACCC and others in the Federal Court of Australia seeking judicial review in relation to the conduct of the ACCC’s arbitration. PNO and Glencore agreed to stay the arbitration while PNO’s challenge to the conduct of the arbitration was reviewed by the Court.
  2. PNO claimed that the arbitration had not been validly commenced by the ACCC and that pre-conditions for notification of the access dispute had not been satisfied. On 9 November 2017, the Federal Court dismissed PNO’s application and found that the ACCC should be permitted to complete the arbitration process without interference from the Court: Port of Newcastle Operations Pty Ltd v Australian Competition and Consumer Commission [2017] FCA 1330; (2017) 350 ALR 552.
  3. The arbitration resumed shortly after the Court’s judgment was handed down.

The ACCC’s Draft Determination

  1. On 20 July 2018, the ACCC published its draft determination (‘Draft Determination’) as required by s 44V(4), accompanied by a draft statement of reasons. PNO and Glencore were invited to make further submissions in light of the Draft Determination and did so. In its Draft Determination, the charges payable by Glencore as at 1 January 2018 on access to the Service within the scope of the determination were as follows:
    • Navigation Service Charge: $0.4685 per gross tonne; and
    • Wharfage Charge: $0.0746 per revenue tonne.

The ACCC’s Final Determination

  1. On 18 September 2018, the ACCC issued its Final Determination of the access dispute pursuant to s 44V(1)(b) along with a statement of reasons as required by s 44V(5), and an arbitration report. In its Final Determination, the charges payable by Glencore as at 1 January 2018 on access to the Service within the scope of the determination were as follows:
    • Navigation Service Charge: $0.6075 per gross tonne (ie an increase of $0.1390 as compared to the Draft Determination); and
    • Wharfage Charge: $0.0746 per revenue tonne (unchanged from the Draft Determination).
  2. Relevantly, the scope of the Final Determination was limited to access to the Service:

(1) where Glencore, either directly or by agent, charters a vessel to enter the Port precinct and load Glencore coal; and

(2) where Glencore makes a representation to PNO of the kind referred to in s 48(4)(b) of the PMAA that it has the functions of the owner of a vessel, or accepts the obligation to exercise those functions, in order to enter the Port precinct and load Glencore coal.

  1. The ACCC determined that the Final Determination did not apply to:

(1) the terms and conditions of access in respect of vessels carrying coal which have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA;

(2) the terms and conditions of access for vessels other than those calling at the coal terminals at the Port, and

(3) any charges imposed by PNO other than the NSC and the Wharfage Charge.

  1. We will return to this defined scope and to the meaning of a representation of the kind referred to in s 48(4)(b) of the PMAA later in these reasons.
  2. The Final Determination also provided for:

(1) ‘backdating’ provisions to the effect that the charges apply from the period starting 8 July 2016, being the date of declaration of the Service by the Tribunal as contemplated by s 44ZO(4)(b); and

(2) ‘five-year review’ provisions which contemplate a five-year review of the NSC involving a roll forward of the regulated asset base (the ‘RAB’) including actual capital expenditure which is incurred in the five-year period not funded by users (‘Five-Year Review’).

LEGISLATIVE CONTEXT

Competition and Consumer Act 2010 (Cth)

  1. Part IIIA of the CCA is concerned with third party access to certain ‘declared’ services such as the Port. In circumstances where the provider of a service and a user of a service cannot reach a commercial agreement on the terms and conditions upon which the user can access the service, either the user or the provider may notify the ACCC of an access dispute and request that the ACCC arbitrate. To this end, s 44S relevantly provides as follows:

(1) If a third party is unable to agree with the provider on one or more aspects of access to a declared service, either the provider or the third party may notify the Commission in writing that an access dispute exists, but only to the extent that those aspects of access are not the subject of an access undertaking that is in operation in relation to the service.

(2) On receiving the notification, the Commission must give notice in writing of the access dispute to:

(a) the provider, if the third party notified the access dispute;

(b) the third party, if the provider notified the access dispute;

(c) any other person whom the Commission thinks might want to become a party to the arbitration.

  1. Section 44B contains the definition of ‘third party’ among other terms:

“third party”, in relation to a service, means a person who wants access to the service or wants a change to some aspect of the person’s existing access to the service.

  1. Once a dispute has been notified to the ACCC, an arbitration is commenced. Relevantly, s 44U provides:

The parties to the arbitration of an access dispute are:

(a) the provider;

(b) the third party;

(c) any other person who applies in writing to be made a party and is accepted by the Commission as having a sufficient interest.

  1. And further, s 44V relevantly provides:

(1) Unless it terminates the arbitration under section 44Y, 44YA, 44ZZCB or 44ZZCBA, the Commission:

(a) must make a written final determination; …

on access by the third party to the service.

(2) A determination may deal with any matter relating to access by the third party to the service, including matters that were not the basis for notification of the dispute. By way of example, the determination may:

(a) require the provider to provide access to the service by the third party;

(b) require the third party to accept, and pay for, access to the service;

(c) specify the terms and conditions of the third party’s access to the service;

(d) require the provider to extend the facility;

(2A) Without limiting paragraph (2)(d), a requirement referred to in that paragraph may do either or both of the following:

(a) require the provider to expand the capacity of the facility;

(b) require the provider to expand the geographical reach of the facility.

(3) A determination does not have to require the provider to provide access to the service by the third party.

  1. We should at this juncture comment on the operation of s 44V(2), which was relied upon by Glencore in support of its contention on the scope of the arbitration. In short, Glencore contended that the terms of s 44V(2) were such to permit a determination making Glencore’s terms of access available to persons who access facilities at a berth to load coal onto a vessel, regardless of whether that person is the owner or charterer of the vessel. The Tribunal does not accept the expansive operation of s 44V(2) as contended for by Glencore.
  2. Access disputes within the context of Part IIIA are bilateral in nature. The consequence of the declaration of the Service was that a party (ie the person seeking access to the Service) had a right to negotiate with the provider of the Service. If they were unable to agree, then the party seeking access could notify the dispute to the ACCC. Access disputes are not intended to address rights of access by all users of a declared service. Further, the Final Determination under scrutiny in these applications does not deal with the general right of access by Glencore to the Port, but with the terms of access pertaining to that right of access already available. Glencore here is wanting a change to aspects of the existing access to the Service. The contest is thus as to the terms of the access already made available to Glencore, and relating to Glencore’s access as defined in the Service. Subsection 44V(2) allows the ACCC, in making a determination, some flexibility to deal with related matters to the access sought in Glencore’s notification. The inclusory matter mentioned in s 44V(2) suggests this by indicating matters, that were not the basis of notification of the dispute, which must nevertheless be related to the actual dispute between the parties as notified to the ACCC.
  3. The provision in s 44V(2)(d), which deals with the provider extending the facility (including expanding its capacity), is within the scope of determining ‘access by a third party’. This is because it deals with the provider needing to act in connection with the circumstances relating to the particular third party, who notifies or who has been notified of the access dispute, which currently existed and which gave rise to the request for the ACCC to arbitrate.
  4. In the present case, the Service consists of the provision of the right to access and use the shipping channel at the Port, by virtue of which vessels may enter the Port precinct, and load and unload at terminals within the Port precinct. The only circumstance in which Glencore could be said to be using the Service so defined is where it owns or, whether directly or by agent, charters a vessel to enter the Port precinct and load Glencore coal. We will return to this issue later in these reasons. However, it is important to appreciate that s 44V(2), whilst allowing for certain related matters to be dealt with by the ACCC that were not the basis for notification of the dispute, would not permit a change to the Service as defined and declared by the Tribunal on 16 June 2016.
  5. As we have already observed, the applications before us call on the Tribunal to conduct a ‘re-arbitration’ of the access dispute. In this sense, the Tribunal is not required to identify any form of error in the Final Determination having regard to, for instance, the mandatory considerations the ACCC is required to take into account. That said, it is nevertheless helpful to outline the ACCC’s obligations when arbitrating disputes under Division 3 of Part IIIA, particularly as these are also relevant to our determination.
  6. Section 44X sets out the matters that the ACCC must take into account in making final determinations in notified access disputes. At the time of the dispute being notified to the ACCC, it provided:

(1) The Commission must take the following matters into account in making a final determination:

(aa) the objects of this Part;

(a) the legitimate business interests of the provider, and the provider’s investment in the facility;

(b) the public interest, including the public interest in having competition in markets (whether or not in Australia);

(c) the interests of all persons who have rights to use the service;

(d) the direct costs of providing access to the service;

(e) the value to the provider of extensions whose cost is borne by someone else;

(ea) the value to the provider of interconnections to the facility whose cost is borne by someone else;

(f) the operational and technical requirements necessary for the safe and reliable operation of the facility;

(g) the economically efficient operation of the facility;

(h) the pricing principles specified in section 44ZZCA.

(2) The Commission may take into account any other matters that it thinks are relevant.

  1. We should observe that amendments have been made to the CCA since the time of notification to the ACCC, but the parties agreed that the amendments were of no significance to the dispute before the Tribunal.
  2. Relevant to subsection (aa), the objects of Part IIIA are set out in s 44AA:

(a) promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in upstream and downstream markets; and

(b) provide a framework and guiding principles to encourage a consistent approach to access regulation in each industry.

  1. Relevant to subsection (h), s 44ZZCA sets out three pricing principles:

The pricing principles relating to the price of access to a service are:

(a) that regulated access prices should:

(i) be set so as to generate expected revenue for a regulated service or services that is at least sufficient to meet the efficient costs of providing access to the regulated service or services; and

(ii) include a return on investment commensurate with the regulatory and commercial risks involved; and

(b) that the access price structures should:

(i) allow multi-part pricing and price discrimination when it aids efficiency; and

(ii) not allow a vertically integrated access provider to set terms and conditions that discriminate in favour of its downstream operations, except to the extent that the cost of providing access to other operators is higher; and

(c) that access pricing regimes should provide incentives to reduce costs or otherwise improve productivity.

  1. Also relevant to the ACCC’s role in arbitrations of access disputes are the statutory restrictions on final determinations. Section 44W provides that a determination of the ACCC has no effect if it would have any of the following effects:

(a) preventing an existing user obtaining a sufficient amount of the service to be able to meet the user’s reasonably anticipated requirements, measured at the time when the dispute was notified;

(b) preventing a person from obtaining, by the exercise of a pre-notification right, a sufficient amount of the service to be able to meet the person’s actual requirements;

(c) depriving any person of a protected contractual right;

(d) resulting in the third party becoming the owner (or one of the owners) of any part of the facility, or of extensions of the facility (including expansions of the capacity of the facility and expansions of the geographical reach of the facility), without the consent of the provider;

(e) requiring the provider to bear some or all of the costs of extending the facility (including expanding the capacity of the facility and expanding the geographical reach of the facility);

(ea) requiring the provider to bear some or all of the costs of maintaining extensions of the facility (including expansions of the capacity of the facility and expansions of the geographical reach of the facility);

(f) requiring the provider to bear some or all of the costs of interconnections to the facility or maintaining interconnections to the facility.

  1. Separately, the Tribunal’s role in re-arbitrations of access disputes is set out in s 44ZP. Relevantly, that section provides:

(3) A review by the Tribunal is a re-arbitration of the access dispute based on the information, reports and things referred to in section 44ZZOAA.

(4) For the purposes of the review, the Tribunal has the same powers as the Commission.

(5) The member of the Tribunal presiding at the review may require the Commission to give assistance for the purposes of the review.

(6) The Tribunal may either affirm or vary the Commission’s determination.

  1. Pursuant to s 44ZZOA, the Tribunal is required to make a decision within the ‘consideration period’. The consideration period is ordinarily a period of 180 days from the date of the application for review, but may be extended by written notice to the relevant Minister (see s 44ZZOA(7)), or extended in effect by agreement between the relevant parties (see s 44ZZOA(5)). The consideration period for the Tribunal’s determination of these applications is further addressed below.
  2. Pursuant to s 44ZZOAA, the Tribunal must have regard to all of the information that the ACCC took into account in connection with the making of its Final Determination, as well as any information that the Tribunal has requested under the powers set out in s 44ZZOAAA(4) or anything done as mentioned in s 44ZP(5) or any information or report given to the Tribunal under s 44ZP(5A). We address s 44ZZOAAA(4) below in the context of an application made by Glencore for the Tribunal to request and consider additional information that was not taken into account by the ACCC in connection with the making of its Final Determination.
  3. At the outset the Tribunal makes the following observations relating to these statutory provisions and their operation in these proceedings, particularly in relation to the important issue of ‘user contributions’ (to which we will return in more detail).
  4. It is clear from the mandatory considerations that the Tribunal can and must have regard to a range of matters in a determination. The weight to be given to each matter is a question for the Tribunal depending on the circumstances before the Tribunal. To the extent mandatory considerations pull in different directions, again this is a matter the Tribunal needs to consider and undertake a balancing exercise. It is essentially an evaluative exercise.
  5. Legitimate business interests of the provider are a factor to consider, and these need to be carefully considered and evaluated. This consideration is referred to expressly in s 44X(1)(a), the objects of Part IIIA (s 44AA) and the pricing principles (s 44ZZCA).
  6. It is important (as one aspect to consider) that the price and terms of access should provide an incentive to a service provider to efficiently (and in a timely fashion) invest in maintaining and improving infrastructure necessary to provide facilities at the Port. Prices that are too low can lead to non-investment or delayed investment, or the non-provision of some infrastructure services.
  7. The significance of this consideration is confirmed by the extrinsic materials to the Trade Practices Amendment (National Access Regime) Bill 2005 (Cth), which introduced the pricing principles. The Revised Explanatory Memorandum to that Bill notes (at [22.2]) that the pricing principles were introduced to address concerns that the potential for access regulation would deter investment in essential infrastructure, and that the pricing principles are intended to ensure that ‘the objects clause has more than just symbolic value, by providing effective market signals for the efficient use of existing resources and for future investment in infrastructure’. The Explanatory Memorandum goes on to explain (at [22.7]) that the pricing principle in s 44ZZCA(a)(ii) requires the ACCC to specifically factor in regulatory and commercial risks faced by service providers, to counter the perception that regulation favours service users:

The reference to regulatory risk in Pricing Principle (a)(ii) is intended to refer to the perception that the exercise of regulatory discretion will be undertaken in a heavy-handed, arbitrary or uneven fashion. While such perceptions may deter investment in any dysfunctional market subject to regulation, regulatory risk takes on greater importance for infrastructure investors, due to the length of time and expense required for service providers to respond to changes in a market, perceptions that regulatory decisions tend to be biased in favour of service users rather than service providers/investors, the scale of investment in infrastructure and the sunk nature of the assets. Pricing Principle (a)(ii) requires regulators specifically to factor in regulatory and commercial risks in setting access prices. This may assist to address perceptions that regulatory bias favours service users.

  1. The other matter to recall is that regulation under Part IIIA is not an end in itself, but rather, the means of promoting effective competition in upstream and downstream markets. In BHP v National Competition Council [2008] HCA 45; (2008) 236 CLR 145, the High Court reviewed the background against which the Competition Policy Reform Act 1995 (Cth) (the ‘1995 Act’) introduced Part IIIA to the Trade Practices Act 1976 (Cth) (the ‘TPA’). The Court quoted (at [13]) from the Second Reading Speech in the Senate on the Bill for the 1995 Act, where the Minister said:

The bill inserts a new Part into the [TPA], to establish a legal regime to facilitate third parties obtaining access to the services of certain essential facilities of national significance. The notion underlying the regime is that access to certain facilities with natural monopoly characteristics, such as electricity grids or gas pipelines, is needed to encourage competition in related markets, such as electricity generation or gas production. Access to such facilities can be achieved if a person seeking access is successful in having the service ‘declared’ and then negotiates access with the service provider.

  1. Glencore already has access to the Port, and this Tribunal has previously reached the view that it was not satisfied that increased access would promote a material increase in competition in the coal export market, or any other dependent market (see Application by Glencore Coal Pty Ltd [2016] ACompT 6 at [157]). These findings were made in the context of whether the service should be declared but are relevant to pricing and terms of access. For instance, there can be no competition-related justification to deduct $912.0 million from the optimised replacement cost (‘ORC’) for “user contributions” on the basis that the deduction will promote competition in related markets.
  2. A number of other matters should be mentioned relating to the statutory provisions under consideration, particularly in respect of ‘user contributions’. As initial observations we make the following comments.
  3. We do not see a deduction being made to the RAB for user contributions as consistent with allowing the Port to recover its efficient costs. Undoubtedly, the concepts of efficient costs and efficient operation appear in several provisions: ss 44X(1)(g), 44AA(a) and 44ZZCA(a)(i). However the efficient costs, pursuant to the methodology adopted by the ACCC, are those which a new entrant would incur, the depreciated ORC (‘DORC’) value. The concept of “efficiency” does not explain or justify any deduction of particular assets for historical reasons.
  4. Subsection 44X(1)(e) provides that in making a determination the ACCC must take into account the value to the service provider of extensions whose cost is borne by someone else. The Tribunal takes the view this factor is directed at situations where the determination requires the provider to extend the facility (for example by extending a train line to a third party’s mine) and is not applicable here.
  5. Then the question arises whether the deduction is justified as being in the interests of those who have a right to use the Service (s 44X(1)(c)) because it will ensure that users do not pay for the same assets twice: once through their initial investment and again through PNO’s charges. This presupposes, however, that the user has made an initial contribution with the expectation of receiving a future price benefit. In the present case, that assumption is not valid. However, we will return later to this issue in more detail.

Ports and Maritime Administration Act 1995 (NSW)

  1. Part 5 of the PMAA governs the imposition of various port charges on either the owner of the vessel in which cargo is loaded or the owner of the cargo being loaded. Ordinarily, such charges are payable to the relevant port authority (see s 68), but by virtue of the 98 year lease arrangement, these charges are payable to PNO in the case of the Port.
  2. As noted above, two charges are relevant to this access dispute: the NSC and the Wharfage Charge.
  3. Section 50 of the PMAA relevantly provides for the imposition of the NSC in respect of the general use by a vessel of the Port and its infrastructure as follows:

(1) A navigation service charge is payable in respect of the general use by a vessel of a designated port and its infrastructure…

(2) Unless the regulations otherwise provide, the charge:

(a) is payable on each entry by the vessel into any designated port, and

(b) is to be calculated by reference to the gross tonnage of the vessel

(4) A navigation service charge is payable by the owner of the vessel concerned.

  1. Section 61 of the PMAA also relevantly provides for the imposition of the Wharfage Charge in respect of the loading and unloading of cargo at the Port as follows:

(1) A wharfage charge is payable in respect of the availability of a site at which stevedoring operations may be carried out.

(3) The charge is payable:

(a) in the case of cargo that is unloaded at the site—by the person who, immediately after it is unloaded, is the owner of the cargo, and

(b) in the case of cargo that is loaded at the site—by the person who, immediately before it is loaded, is the owner of the cargo.

(4) To the extent, however, that the charge is not paid by the person indicated in subsection (3) as liable for its payment, the charge is payable by the person who, at the time payment is demanded by the relevant port authority, is the owner of the cargo.

  1. Relevantly, s 67 of the PMAA provides as follows:

(1) The relevant port authority may enter into an agreement with a person liable to pay any kind of charge under this Part.

(2) Such an agreement may make provision for or with respect to:

(a) fixing the amount of any charge payable by the person to the relevant port authority, and

(b) any other matter which the relevant port authority is permitted by or under this Part to determine in respect of the charge, and

(c) any right or privilege which by or under this Part accrues to the person liable to pay the charge, or which the relevant port authority may confer on the person.

(3) To the extent that provision is so made, the agreement displaces any determinations of the relevant port authority in relation to the charge or to the matter, right or privilege concerned.

  1. Importantly, the PMAA defines for the purposes of that Act the term ‘owner’ when used in the context of a vessel or cargo. In this respect, s 48 of the PMAA relevantly provides:

(1) In this Act, owner of a vessel or cargo means (subject to this section) the person who owns the vessel or cargo.

(2) A reference in this Act to the owner of a vessel includes a reference to:

(a) a person registered as the vessel’s owner in the relevant authority under the marine legislation or the National law or other certificate of registry for the vessel, or

(b) a person who has chartered the vessel.

(4) A reference in this Act to the owner of a vessel or cargo includes a reference to any person who, whether on the person’s own behalf or on behalf of another:

(a) exercises any of the functions of the owner of the vessel or cargo, or

(b) represents to the relevant port authority that the person has those functions or accepts the obligation to exercise those functions.

  1. This section, and more specifically s 48(4)(b), formed part of the basis for the scope of the determination defined by the ACCC in its Final Determination, and is a topic of contention between PNO and Glencore in this access dispute.
  2. Separately, Division 6A of the PMAA was introduced by amendments made on 26 November 2012. It allows the relevant port authority (PNO in the case of the Port) to levy on port users ‘infrastructure charges’ to fund investment in infrastructure projects such as the acquisition or development of land to be used as part of the port precinct, or the provision of services and facilities by the operator of the Port. As will be seen, this Division is relevant to one of the topics of contention raised in Glencore’s application regarding user contributions.
  3. Finally, we mention cl 11 of the Ports and Maritime Administration Regulation 2012 (NSW), which provides as follows relating to the responsibility of an ‘owner’ of a vessel to provide certain particulars to PNO relevant to the NSC:

The owner of a vessel in respect of which a navigation service charge is payable must, at such time as the relevant port authority requires, furnish the relevant port authority with the following particulars:

(a) the owner’s name and address,

(b) the name, identifying particulars and relevant voyage number of the vessel,

(c) the gross tonnage of the vessel,

(d) the port in respect of which the navigation service charge is payable,

(e) the date on which, the time at which, and the purpose for which, the vessel entered the port,

(f) such other information with respect to payment of the navigation service charge as the relevant port authority reasonably requests.

Maximum penalty: 20 penalty units.

PRELIMINARY ISSUES

  1. Before embarking on the parties’ submissions regarding the substantive aspects of the access dispute, it is appropriate to briefly address the two preliminary issues that arose as part of the case management of the applications before the Tribunal.

Extension of the statutory timeframe for the Tribunal’s determination

  1. As noted above, the Tribunal is statutorily required to make its determination on applications brought before it under Part IIIA within the ‘consideration period’, ordinarily a period of 180 days from the date of the applications save for the effect of any extensions of time or an agreement to disregard certain periods of time (see s 44ZZOA).
  2. PNO’s application was made on 8 October 2018 and Glencore’s application was made a day later on 9 October 2018. In the absence of any extension of time or an agreement to disregard certain periods of time, the ordinary application of the consideration period would require the Tribunal to make its determination as early as 6 April 2019.
  3. At the initial case management hearing of the applications, it became apparent that the hearing timetable agreed between the parties and the ACCC was such the applications would not – or rather could not, for a want of sufficient time for the parties and the ACCC to prepare – be heard by the Tribunal, much less decided by the Tribunal, prior to the date on which the Tribunal would be required to make and publish its determination. The parties and the ACCC subsequently gave further consideration to the most appropriate means by which to effectively extend the timeframe for the Tribunal’s determination on the applications to a date that afforded time for the applications to be heard and for the Tribunal to make its determination. Ultimately, it was considered that an agreement to ‘stop the clock’ pursuant to s 44ZZOA(5) was the most appropriate means.
  4. On 2 April 2019, the Tribunal issued a direction to memorialise its agreement pursuant to that subsection with each of the parties and the ACCC. By that direction, it was agreed that the period between 2 April 2019 and 15 July 2019 would be disregarded for the purposes of calculating the consideration period. The effect of this agreement was that the Tribunal would be required to make its determination on the applications before it by as early as 20 July 2019.
  5. Due to a number of factors, including the nature of the disputation between the parties and the complex issues that arose for determination, the Tribunal concluded that it would not be in a position to make its determination on the applications before it by that date. Accordingly, by notice dated 13 June 2019, the Tribunal advised the Treasurer, pursuant to s 44ZZOA(8) of the Act, that it would make its decision by 29 November 2019. In keeping with the requirements of that section, the Tribunal provided a copy of the notice to each of the parties and the ACCC and published a short form notice in The Australian newspaper. A copy of the notice to the Treasurer was also uploaded to the Tribunal’s website.

Glencore’s application for the Tribunal to request further information

  1. On 12 February 2019, Glencore made an application seeking that the Tribunal request additional information in the form of an expert report from Baggerman Associates, Marine Dredging Consultants, dated 12 February 2019 (the ‘Baggerman Report’).
  2. Pursuant to s 44ZZOAAA(4) the Tribunal may request such information that the Tribunal considers reasonable and appropriate for the purposes of making its decision on a review under Part IIIA.
  3. If so requested, that information must be considered by the Tribunal in addition to the information that the ACCC took into account (see s 44ZZOAA(a)(ii)), as noted above.
  4. Glencore contended that the Baggerman Report should be requested (and included in the materials considered by the Tribunal) because it would assist the Tribunal to make a fully informed determination in relation to the costs of dredging. Specifically, it was claimed that the Baggerman Report would shed light on whether, as contended by Glencore, dredging of the entrance channel to the Port could be undertaken with modern dredging equipment alone, or whether, as contended by PNO, additional and expensive steps (specifically drilling and blasting pre-treatment) would need to be undertaken before dredging could occur.
  5. On 27 February 2019, the Tribunal issued a memorandum to the parties and the ACCC which stated that it would refuse Glencore’s application, but that its reasons for doing so would be provided upon the publication of these reasons.
  6. Before proceeding further on this topic, we should mention the way in which Glencore put its request, recalling this is a request for Glencore effectively to rely upon another expert report commissioned by it in respect of issues that were before the ACCC.
  7. In support of its application, Glencore submitted:

Access disputes under Part IIIA are difficult matters for access seekers as they face an asymmetry in obtaining data as to the relevant cost structures that the access provider enjoys. The Baggerman Report addresses a critical gap in the material before the ACCC. In Glencore’s submission, its consideration is essential to permit the Tribunal to make a fully informed determination of an important issue in this proceeding, namely whether, as contended by Glencore, dredging of the Entrance Channel to the Port could be undertaken with modern dredging equipment alone (as was done, for example, at Walker Shoal near Darwin) or, as argued by PNO, whether substantial additional costs for pre-treating hard rock with drilling and blasting should be included.

  1. At the outset, we do not accept that the Baggerman Report “addresses a critical gap” in the material before the ACCC. It supplements that material, but there is no critical gap. Further, the consideration of the Baggerman Report is not “essential” to permit the Tribunal to make the informed decision of the issue identified by Glencore. The Tribunal already has material on this topic on which it can make an informed decision.
  2. In addition, the context in which it is sought to introduce the Baggerman Report is a factor to take into account.
  3. In the lead up to the Draft Determination, Glencore, through its consultant engineers, Arup, contended that modern ‘Cutter Suction Dredgers’ (‘CSDs’) are capable of dredging of the entire Port, including the hardest rock located at the Entrance Channel (referred to as ‘dredging direct’). To support its opinion, Arup referred to the dredging of Walker Shoal in Darwin in 2014 where ‘rock with a greater strength to the Entrance of Newcastle was dredged direct by the CSD, Athena’.
  4. PNO rejected this approach and, via its experts, AECOM, argued that the very hard rock at the Entrance Channel could not be dredged by CSDs and ‘would require the mobilisation of additional plant at significant cost’. AECOM also proffered the view that ‘[d]rilling and blasting then double handling with a TSHD [Trailer Suction Hopper Dredger] is also a much slower process than using a CSD’.
  5. Glencore and PNO were also unable to agree on the volumes and types of material that were required to be dredged, particularly from the Entrance Channel.
  6. In its Draft Determination, the ACCC accepted the position proposed by Arup:

… [B]ased on the evidence before it, the Commission has concluded that Arup’s modelling provides a more robust approach to estimating the volume and type of material to be dredged. This extends to the UCS and RQD figures. The Commission also notes that Arup’s proposed methodology to dredging is based on what it submits has occurred in practice on at least one occasion such that it goes beyond a theoretical exercise. The Commission considers that these two factors suggest that the use of more advanced technology as proposed in Arup’s report is an appropriate assumption for the purposes of a DORC valuation for this arbitration. This also informs the Commission’s consideration of dredging costs below.

  1. In response to this finding, on 17 August 2018, PNO provided the ACCC with new expert material to explain why Arup’s proposed dredging methodology was impractical. This included material claiming that the sea conditions at the Port restricted the use of a CSD for much of the year and that the rock type and strengths at the Port were incomparable with those at Walker Shoal. The ACCC was critical of PNO, noting that it could have provided this information earlier in the arbitration as it was aware of Glencore’s position well before the Draft Determination. Nevertheless, the ACCC had regard to the further material.
  2. Having received PNO’s additional material, on 17 August 2018, Glencore was required to provide any reply to the additional material from PNO within 10 days.
  3. On 3 September 2018, Glencore provided the ACCC with a further report by Arup, responding to PNO’s additional material with as much information as it could obtain in the time available to it. That report included revised geological modelling for the Port but noted that the geotechnical data for Walker Shoal was the subject of confidentiality to a third party and thus could not be disclosed at that time. Arup also sought to address the claim that sea conditions at the Port were not suitable for the economic use of a CSD. Arup pointed out that smaller dredgers had been employed at the Port throughout its history and assessed the ‘operating envelope’ of newer, significantly larger CSDs.
  4. In its Final Determination, the ACCC departed from the view it had expressed in its Draft Reasons and instead adopted the position argued by PNO: that pre-treatment of the rock with drilling and blasting was necessary. The ACCC took this view “specifically having had regard to the additional material submitted by the parties following the Draft Determination.”
  5. In our determination of whether to receive and consider the Baggerman Report, a number of matters needed to be considered.
  6. It is significant that the issues the Baggerman Report addressed were before the ACCC and well-known by the parties at least upon the delivery of the Draft Determination.
  7. The Baggerman Report addressed the following questions:

(1) the extent to which the Entrance Channel at the Port could, as a practical matter and had it not already been dredged, be dredged today using a modern CSD, without a requirement for drilling and blasting pre-treatment; and

(2) to the extent that a significant portion of the Entrance Channel could be dredged by use of a CSD, the approximate total cost of dredging (including any necessary drilling and blasting pre-treatment).

  1. In addressing these questions, Baggerman Associates:

(1) introduced background information regarding dredging technology, including CSDs and other methods such as drilling and blasting;

(2) considered the sea (wave) conditions in which modern CSDs can operate and considered independently collected data relating to the actual conditions experienced at the Entrance Channel over many years;

(3) considered the rock types and strengths that can be dredged by modern CSDs, analysed the geotechnical aspects of the rock at the Entrance Channel by reference to bore hole data, and compared them with rock conditions found at Walker Shoal – a project in which Baggerman Associates was intimately involved; and

(4) determined an economically appropriate work method for dredging the Entrance Channel and calculated the estimated costs of doing so. Reference was made to the volumes and geotechnical characteristics of the various materials to be removed, along with the specific production rates expected of modern dredging equipment operating at the Entrance Channel; and the real costs likely to be incurred in a commercial project.

  1. It cannot be said that any of these questions or issues were only raised by the Draft Determination.
  2. When on 17 August 2018, PNO lodged material in response to the Draft Determination, it included reports from Evers Consult on dredging and Akuna Dredging Solutions on dredging methodology and the assessment of hard rock at the Entrance Channel to the Port.
  3. Then on 3 September 2018, when Glencore lodged its submissions in reply to PNO’s submission on 17 August 2018, that submission noted as follows:
    1. The PNO Submission repeats a number of arguments already addressed by Glencore in previous submissions made to the ACCC in this arbitration and, in particular, many of these arguments have been addressed in Glencore’s submission dated 17 August 2018. As such, Glencore does not seek to address each argument in the PNO Submission and instead maintains and refers to Glencore’s previous submissions in this matter, and in particular, its submissions to the ACCC dated 17 August 2018…
    2. Enclosed with this submission is a report from Synergies Economic Consulting (Synergies Report) and a confidential report from Arup (Arup Report) which also respond to Direction 2 of the ACCC’s Direction.
  4. The Synergies report dated 3 September 2018 (referred to by Glencore) noted:

After considering the suite of reports that PNO has submitted, they, while lengthy, introduce only limited new information. In many instances, PNO’s submission restates material from previous submissions, to which we have previously responded.

  1. We accept that it may have been difficult for Glencore to respond to the Draft Determination and material put forward by PNO on 17 August 2018. However, Glencore acted by 3 September 2018 in providing the ACCC with a further report from Arup on the material then obtained and available, and significantly did not request an extension of time to put further material before the ACCC. Presumably, Glencore considered it did not need to put further material before ACCC: after all, the Draft Determination on this issue was in its favour.
  2. It was only upon its review of the Final Determination that Glencore wanted to rely on further material, as attested to in the affidavit of its solicitor (Mr Poddar) sworn 12 February 2019:
    1. Upon review of the Final Determination, I formed a view that the ACCC had relied on the Further PNO Material lodged on 17 August 2018 in response to the Draft Determination, and that Glencore had not had an adequate opportunity to address the matters which had impacted on the decisions reached by the ACCC in the Final Determination.
    2. As such, the need for Glencore to seek to engage an expert to provide an expert report in response to the Evers Report and Akuna Report did not become apparent until after publication of the Final Determination on 15 September 2018.
  3. As Mr Poddar also attested, to address the PNO material (once the decision had been made to obtain more information after the Final Determination was published) would require time and resources to access information and obtain inputs from wave specialists.
  4. Even accepting that Glencore could not reasonably have made available to the ACCC the Baggerman Report in the time limit it proposed, Glencore did not request an extension of time (presumably because it did not think it necessary) and, as we have indicated, the Baggerman Report covered issues well identified during the course of the arbitration before the Draft Determination was published.
  5. Then it is important to recall the statutory context.
  6. In a review of a final determination under s 44ZP, the Tribunal must only consider specified information. This primarily comprises the information the ACCC took into account in connection with the making of the determination to which the review relates, subject to the application of s 44ZZOAA.
  7. There are a limited number of other categories of information or material that the Tribunal must have regard to that provide a potential avenue for “new” material (that is, material the ACCC did not take into account in making the Final Determination) to be considered as part of the review process. Each of these exceptions is only enlivened essentially by the request of the Tribunal.
  8. In light of the above, the text and context make clear that s 44ZZOAA operates to limit the material that the Tribunal may consider in a review under s 44ZP. As such, to the extent “new” information is allowed into the review process it may only come via:

(1) a request from the presiding member of the Tribunal for the ACCC to give assistance to the Tribunal pursuant to s 44ZP(5);

(2) a request from the presiding member of the Tribunal by written notice requiring the ACCC to give information and to make reports for the purposes of the review pursuant to s 44ZP(5A);

(3) a request from the Tribunal for ‘such information that the Tribunal considers reasonable and appropriate for the purposes of making its decision on a review’ pursuant to s 44ZZOAAA(4).

  1. In connection with s 44ZZOAAA(4), the Tribunal must positively form a view that any information it requests is ‘reasonable and appropriate’ for the purposes of making its decision.
  2. As a starting proposition, where a party before the Tribunal urges it to request information that could reasonably have been made available to the ACCC before it made a final determination, it would not be reasonable for the Tribunal to request such information. This is because in order for the arbitration before the ACCC to have meaning, it is critical that the parties place before the ACCC all of the material that they consider to be relevant to the determination of the access dispute.
  3. In considering making any request for information, the Tribunal should also keep firmly in mind that the CCA provides for the Tribunal to make a decision within 180 days from when the application for review is made: s 44ZZOA. Although this period can be lengthened, either by agreement of relevant persons or by the Tribunal extending the time in which it has to make a decision, it is an indication that the Tribunal should be able, and should endeavour, to make decisions within that period unless there are exceptional circumstances. In this way, the time period in which it is intended that a decision will be made (referred to as the ‘expected period’ or the ‘consideration period’) should inform whether any request for ‘new’ information is reasonable and appropriate.
  4. Therefore, whether it is ‘reasonable and appropriate’ to request information will be necessarily informed by a consideration of the text and context of the ss 44ZZOAAA(4) and 44ZZOAA, including:
    • that the primary material on which the review is to be based is that which was before the ACCC when it made the determination, which indicates that the review process before the ACCC is to be a meaningful one, and one in which the parties have every incentive to place the material that they consider to be relevant to the resolution of the dispute before the ACCC; and
    • the limited timeframes in which the Tribunal has to make a decision, which indicates that it is not intended that there be any material broadening of the information that was before the ACCC when it made its final determination.
  5. Finally, we observe that Glencore submitted that it is in the public interest for the Baggerman Report to be received and considered by the Tribunal because of its ‘broader relevance to future access issues’. Undoubtedly this may be so in that any determination by the Tribunal with the Baggerman Report before it will be made public and so will have some ‘precedent’ value in that regard; but this is but one consideration to be taken into account.
  6. We accept that the Baggerman Report does contain information that is of general relevance to the declared services the subject of the arbitration.
  7. At a high level, it goes to the optimised replacement cost of the assets required to provide the Service, which as will be seen, represents a significant battleground in this access dispute. However, relevance is not the only focus of the inquiry invited by s 44ZZOAAA(4). Indeed, we consider that requesting the Baggerman Report pursuant to that subsection, and at the behest of Glencore, would not be in keeping with the purpose of the statutory power, keeping in mind the Tribunal’s role as re-arbitrator in applications of this kind is constrained in the material it may consider in this role.
  8. In respect of the specific subsection, the purpose of s 44ZZOAAA(4) is for the Tribunal to request information which it has identified as a means to fill a gap in its knowledge. It is not to be used to introduce new information – much less information which is the product of a commission of the party seeking to have it requested – that was not available at the time of the Final Determination. In this respect, the absence of any mechanism designed to be used by a party seeking to adduce new information for the Tribunal’s consideration is telling.
  9. The ACCC recognised in its Final Determination that although the arbitration was between Glencore and PNO and conducted on the basis of the issues and materials put forward by the parties, the Final Determination and the supporting statement of reasons may be relevant to other users in their future negotiations with PNO. Similar observations could be made about this review process undertaken by the Tribunal. Nonetheless, the benefit of the Tribunal’s consideration of the information for any future negotiations or arbitrations needs to be balanced against the intent of the regime: that the parties to an arbitration put all relevant information before the ACCC as the original decision-maker.
  10. Nevertheless, as we have already mentioned, this access dispute is bilateral in nature. It is open to the ACCC (and the Tribunal) to determine different terms and conditions of access to the Service for different users of the Service. We also mention that the Tribunal is not aware that any other user of the Service has notified any access dispute to the ACCC in relation to the Service.
  11. Further, any pricing methodology adopted in one arbitration may change in a later arbitration, particularly if changes in future events suggest different assumptions may be appropriate to adopt in any pricing approach.
  12. Therefore, whilst many considerations needed to be evaluated in determining whether it was reasonable and appropriate to request the Baggerman Report, in the end the proper approach was not to make any such request.
  13. Finally, it bears noting that the Tribunal was aware of the contents of the Baggerman Report and its relevance to the issues between the parties in this re-arbitration at the time it made its decision on the issue. The Tribunal did not consider it was reasonable and appropriate to request the Baggerman Report in view of the ACCC process, the information already before the Tribunal and the statutory context of the Tribunal’s task. We also observe that assuming the Tribunal has the power to request the Baggerman Report now it has had a hearing and considered the submissions of the parties, the Tribunal would still not consider it reasonable and appropriate to request (on its own motion) the Baggerman Report for the same reasons. The Tribunal still considers that it does not require the Baggerman Report to assist it in the re-arbitration and does not consider that any request for such information is reasonable and appropriate for the purpose of making its determination in this re-arbitration.

TOPICS OF CONTENTION

  1. PNO and Glencore identified seven topics of contention for the Tribunal’s consideration. In support of their positions, each made a series of written submissions (received between 1 March 2019 and 15 April 2019), presented oral argument before the Tribunal over six days between 6 and 13 May 2019, and provided subsequent documentation to the Tribunal.
  2. The ACCC also made submissions regarding each of the applications in accordance with the Tribunal’s directions dated 6 December 2018 and subsequent requests, which in effect required the ACCC to give assistance for the purposes of the Tribunal’s review pursuant to s 44ZP(5).
  3. The seven topics of contention are summarised below:

(1) the scope of the Final Determination;

(2) the ACCC’s deduction of user contributions from the RAB;

(3) the costs of channel dredging;

(4) the inclusion in the RAB of $145 million for the importation of reclamation bunding material, and the associated issue of user-funded reclamation bunding works;

(5) the length of the construction period and the associated issue of the amount of interest during that construction period;

(6) whether prices should be permitted to be set at a higher level than what represents an appropriate return on coal-related assets; and

(7) the true-up in respect of forecasted capital expenditure, and any difference between forecast capex and actual capex within each five-year period.

SCOPE OF THE FINAL DETERMINATION

  1. As noted above, the ACCC concluded that the regulated prices set out in its Final Determination would only cover access to the Service:

(1) where Glencore, either directly or by agent, charters a vessel to enter the Port precinct and load Glencore coal; and

(2) where Glencore makes a representation to PNO of the kind referred to in s 48(4)(b) of the PMAA that it has the functions of the owner of a vessel, or accepts the obligation to exercise those functions, in order to enter the Port precinct and load Glencore coal.

  1. For ease of reference, we will refer to the above as the first and second inclusive limbs, as appropriate, of the determination scope adopted by the ACCC.
  2. The ACCC also expressly excluded certain matters from the scope of its Final Determination. As noted above, these matters were:

(1) the terms and conditions of access in respect of vessels carrying coal which have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA;

(2) the terms and conditions of access for vessels other than those calling at the coal terminals at the Port, and

(3) any charges imposed by PNO other than the NSC and the Wharfage Charge.

  1. Again, for ease of reference, we will refer to the above as the first, second and third exclusive limbs, as appropriate, of the scope adopted by the ACCC.
  2. PNO and Glencore both challenged this scope of the Final Determination. PNO contended it was too broad, while Glencore contended it was too narrow. Further, and as we will indicate later, the ACCC suggested a revised scope different from that in the Final Determination.

PNO’s submissions

  1. PNO’s primary contention was that, having regard to the provisions of Part IIIA, the ACCC had no statutory power to extend the scope of its Final Determination to the circumstances described in the second inclusive limb. In the alternative, PNO contended that even if it was within the ACCC’s statutory power (which PNO denied), the inclusion of the second inclusive limb would reveal a failure by the ACCC to have had proper regard to the mandatory considerations set out in Part IIIA.
  2. PNO first turned to the description of the Service. It argued the focus of that description was access to and use of the Port’s shipping channels, including its berths. On PNO’s submission, that meant from both a practical perspective, and from the perspective of a proper construction of the description of the Service, that the only persons who could conceivably access or use the Service are persons that control a vessel (whether through direct ownership or a charter arrangement) for the purposes of loading or unloading at a terminal. This formed the foundation of PNO’s arguments against the ACCC’s adoption of the second inclusive limb in its determination scope.
  3. PNO then referred to a number of provisions of Part IIIA including ss 44S, 44U, 44V, 44W, 44ZO(4), 44ZV, 44ZY and the definition of ‘third party’ in s 44B. PNO also referred the Tribunal to a decision of the Full Court of the Federal Court of Australia, which held that in the context of Part IIIA the word ‘access’ should be given its ordinary meaning, being ‘a right or ability to use a service’: Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal [2017] FCAFC 124; (2017) 253 FCR 115. The net effect of the provisions and the authority referred to was said to be that the ACCC (and indeed the Tribunal) has statutory authority to make access dispute determinations only in respect of the ‘third party’ who sought to access the Service and who had notified the access dispute to the ACCC in accordance with the provisions of the CCA. In other words, the ACCC and the Tribunal only have the power to arbitrate a bilateral dispute between the relevant access provider and a (single) access seeker, not the power to arbitrate general terms of access between an access provider and all other persons.
  4. PNO then referred to s 48 of the PMAA which among other things, deems for the purposes of that Act a person to be an ‘owner’ of a vessel, where that person makes a representation that it has the functions of the owner or accepts the obligations of the owner through its conduct. On PNO’s submission, the purpose of this deeming provision was to assist the relevant port authority in recovering charges for use of port infrastructure.
  5. PNO submitted that the provisions of the PMAA (a State Act) were not intended to, and in any event could not for constitutional reasons, broaden the powers of the ACCC or the Tribunal to make access dispute determinations under the CCA (a Commonwealth Act). In other words, representations made pursuant to a section of the PMAA could not change who is in fact the owner of a vessel (when the word ‘owner’ is used in its ordinary sense) or alter the identity of the person who is in fact accessing or using the Service. It was on this basis that PNO contended that the second inclusive limb exceeded the ACCC’s power under Part IIIA to make a determination dealing only with the terms and conditions of access by the ‘third party’ that originally notified the dispute to the ACCC.
  6. PNO also identified certain unintended and undesirable consequences of the second inclusive limb. First, by allowing Glencore to take advantage of the ACCC’s arbitrated prices whenever a s 48(4)(b) declaration was made, Glencore could engage in a form of arbitrage. For example, Glencore could represent to PNO that it had undertaken to pay another user’s fee for accessing the Service thereby permitting that user, who was not a party to the ACCC’s arbitration, to take advantage of the regulated prices PNO must provide to Glencore. Second, and relatedly, if the second inclusive limb of the ACCC’s determination scope were allowed to stand without intervention from the Tribunal, PNO would have no certainty as to whom it is required to provide Glencore’s arbitrated terms of access which, on PNO’s submissions, would, contrary to s 44X(1)(a) of Part IIIA, fail to take account of the service provider’s legitimate business interests. This consequence, as it was described by PNO, was also argued as illustrative that – in the alternative world where the ACCC had statutory power to extend the scope of its determination in the manner identified in the second inclusive limb (which PNO denies) – the ACCC had, in any case, made its determination beyond power because it had plainly not taken into account PNO’s legitimate business interests by extending the scope to the second inclusive limb.

Glencore’s submissions

  1. Glencore contended that the scope for the ACCC’s determination was unduly restrictive on account of the first exclusive limb which expressly excluded the arbitrated NSC from applying in respect of vessels carrying coal which have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA. Glencore sought for the first exclusive limb to be excised from the scope.
  2. Glencore advanced this contention from two fronts. On one front, Glencore argued that in order to fulfil the purpose of declared services regime in Part IIIA, the Tribunal needed to approach the matter from a practical and commercial point of view. This meant taking a ‘substance over form’ approach by ensuring that no matter the precise manner in which Glencore and its customers choose to contract with one another, the arbitrated terms and conditions of access to the Port should apply when Glencore is exporting its coal from the Port. On the other front, Glencore urged the Tribunal not to take an overly restrictive view of what the Service actually is. It argued that whenever Glencore uses the Port and its associated facilities and infrastructure to load coal onto a vessel for export, it was ‘using’ or ‘accessing’ part of the Service within the meaning of Part IIIA, and therefore should be able to enjoy its arbitrated prices.
  3. Taking each of the fronts advanced by Glencore in turn, its primary submission in respect of the first was that because Glencore bears the ultimate economic cost of port charges in circumstances where vessels that are using the Service are chartered by Glencore’s customers and carrying Glencore’s coal, in order to effect the Final Determination, this practical and commercial reality should be recognised by excising the first exclusive limb, thereby extending the scope accordingly.
  4. In support of this, Glencore submitted that its coal is sold to export customers under a number of different contract types, but that no matter the type, Glencore seeks to sell coal at the most competitive price on a delivered basis. In some cases, Glencore will arrange for the transporting vessel, and in other cases, the customer will make those arrangements. Glencore submitted that in either case, market structure and dynamics are such that Glencore bears the ultimate economic burden of the NSC imposed by PNO for use of the Service in the form of lower delivered coal prices. It claimed that for the Final Determination to only to apply to circumstances where Glencore arranges for the delivery of coal to its customers – and to ignore instances where Glencore’s customers make such arrangements – risks undermining the utility of the application of the Part IIIA regime to the Port.
  5. On the second of Glencore’s two fronts, Glencore sought to emphasise that in circumstances where vessels using the Service are chartered by Glencore’s customers and carrying Glencore’s coal, Glencore is still a third party accessing or seeking access to the Service for the purposes of Part IIIA. It was said that by using or accessing the berthing boxes and the revetments associated with the berthing boxes for the purposes of loading coal into vessels, Glencore is accessing the Port’s infrastructure facilities which are a critical component of the Service as declared. Conversely, using the berthing boxes was not simply a matter of using an area of water otherwise unconnected with the Port infrastructure. In other words, once Glencore is using part of the Service (by loading coal onto vessels), the rest of the Service is incidental and likewise being used as a necessary incident of the loading of coal. Glencore willingly conceded that the relevant service is defined by the declaration of the Service, but pressed that it should be understood as including, consistent with the provisions of Part IIIA and in the context of the Tribunal’s determination in which it declared the Service, the facility and associated infrastructure by means of which the Service is provided.
  6. Glencore also pointed to the fact that it was subject to and liable to pay the Wharfage Charge no matter whether Glencore or its customers were responsible for chartering the relevant vessel. It effectively inferred from this that Glencore was using, or PNO was providing access to, the Service. On this basis, Glencore contended that it should have the benefit of its arbitrated prices in both the circumstances outlined in the ACCC’s determination scope, as well as in respect of vessels carrying coal which have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA.
  7. Glencore then proceeded to advance its first alternative submission, which we briefly canvassed above: that even if Glencore is not a user or access seeker of the Service when it loads its coal onto vessels at the terminal by virtue of s 44V(2), Glencore is still utilising the Service by using facilities which depend on the berthing box infrastructure. Glencore argued that the effect of this subsection was to open up any other matters relating to access such that, once it is accepted that Glencore is using certain facilities to load its coal onto vessels, and those facilities are supported by the berthing box facilities (which are, on Glencore’s submissions, expressly included within the Service), it follows that Glencore is a user of the Service whenever it is loading its coal onto vessels at the Port.
  8. Glencore then proceeded to advance its second alternative submission. Glencore began by observing that under the ACCC’s scope, PNO must charge the NSC at the regulated price when Glencore is the owner or charterer of the vessel transporting Glencore’s coal but may charge a higher unregulated NSC when someone else is the owner or charterer of the vessel transporting Glencore’s coal. Glencore then referred to the pricing principle found in s 44ZZCA(b)(i), which must be taken into account by the ACCC by virtue of s 44X(1)(h):

that the access price structures should … allow multi-part pricing and price discrimination when it aids efficiency …

  1. Glencore then submitted that the sort of price discrimination brought about by the ACCC’s scope, and more specifically the first exclusive limb of that scope, was not the sort that aided ‘efficiency’ as required under the pricing principle in s 44ZZCA(b)(i).
  2. Finally, Glencore made a submission directly in respect of s 48(4) of the PMAA. It contended that s 48(4) of the PMAA served as a useful mechanism to determine in what circumstances a person is accessing the Service. It was submitted that both when a formal representation is made pursuant to that section, and even when no such representation is made but Glencore is loading its coal onto another person’s vessel (with the implicit authority to do so, lest the tort of trespass be committed by Glencore against the ship owner), it is apparent that Glencore is using or accessing (within the meaning of Part IIIA) the Service. On that basis, Glencore contended that the ACCC was right to include the second inclusive limb as part of its defined scope.

ACCC’s submissions

  1. In its written submissions, the ACCC responded to the PNO and Glencore challenges to the scope of the Final Determination.
  2. In respect of PNO’s submissions, the ACCC contended that the imposition of legal liability to pay for a service is a strong indicator that the service is or will be supplied to that person, or is at least for their benefit. On this account, when Glencore makes a representation of the kind referred to in s 48(4)(b) – thereby making itself liable to pay the NSC – this suggests that Glencore is a user of the Service. The ACCC also dismissed PNO’s concerns about the implications of preserving the second inclusive limb of the determination scope. On the risk of creating an arbitrage opportunity, the ACCC submitted that the concern was overstated because it only applies where the representation is made in order for a vessel to enter the Port to load Glencore coal, meaning it only applies where Glencore coal is loaded. The ACCC considered it was unlikely that Glencore would deploy its potential arbitrage opportunity to grant its coal export competitors what would be, in essence, a reduction to those exporters’ cost base. On the spectre of there being uncertainty as to whom PNO would be required to offer Glencore’s arbitrated prices, the ACCC dismissed this on the basis that PNO would presumably be in a position to know when another person makes a representation of the kind referred to in s 48(4)(b) and therefore the circumstances in which Glencore will be considered to have made such a representation.
  3. However, the ACCC did at the hearing endorse PNO’s characterisation of the Service. Counsel for the ACCC said that the Service did not itself directly involve the loading and unloading of coal – it involved the accessing of the shipping channels and berths, a purpose of which was the loading and unloading of coal. Counsel for the ACCC also expressed support for PNO’s view that the Service, being relevantly described as ‘the right to access and use the shipping channels (including berths next to the wharves as part of the channels)’ did not strictly include use of or access to the wharves.
  4. In respect of Glencore’s submissions, the ACCC took issue with Glencore’s assessment that the determination scope would permit PNO to engage in price discrimination between economically identical transactions, that is, transactions for the sale of coal that are identical save for who of either the vendor or customer arranges for the transportation of the coal. The ACCC denied that the scope permitted such price discrimination and that such transactions are in any case economically identical. The ACCC contended that s 44ZZCA, which contains the pricing principle referred to by Glencore, only ever prevents price discrimination where a price falls within a determination. So to that extent, alleging price discrimination between a regulated price (which, as is apparent, falls within a determination) and an unregulated price (which falls outside of a determination) is circular.
  5. The ACCC also dismissed Glencore’s reliance on its liability to pay the Wharfage Charge as demonstrative of it using the Service. Counsel for the ACCC clarified that the question of whether or not the Wharfage Charge (and thereby the use of ‘sites’ for which it is levied) falls within the Service was not a live issue before the ACCC. Rather, before the ACCC, the parties had provided an agreed model of charges and the Wharfage Charge was fixed (that is to say, agreed).
  6. Separately, at the hearing before the Tribunal, the ACCC stated that, on further reflection, certain amendments should be made to clarify, but not substantively change, the meaning of the first inclusive limb of the determination scope. In response to this indication the Tribunal invited the ACCC to set out its proposed amendments to the scope, and it did so by a separate written document provided to the Tribunal following the hearing. That document explained that the ACCC considered the following amendments to clause 2 of its Final Determination were appropriate:

2.1 The scope of the determination includesis confined to the terms and conditions of access:

a. where Glencore owns or, either directly or by agent, charters a vessel tothat enters the Port precinct and loads Glencore coal, and / or

b. where Glencore falls within the extended definition of “owner of a vessel”makes a representation to PNO of the kind referred to in section 48(4)(b) of the Ports and Maritime Administration Act 1995 (the PMAAthat is has the functions of the owner of a vessel, or accepts the obligation to exercise those functions, in order toin respect of a vessel entering and using the Port precinct andin order to load Glencore Coal., as a consequence of which Glencore:

(i) is liable to pay the navigation service charge under section 50(4) of the PMAA; and

(ii) as a person liable to pay that charge, has the authority under section 67 of the PMAA to negotiate with the relevant port authority with respect to: fixing the amount of any charge payable by the person to the relevant port authority, and any other matter which the relevant port authority is permitted by or under Part 5 of the PMAA to determine in respect of the charge, and any right or privilege which by or under Part 5 of the PMAA accrues to the person liable to pay the charge, or which the relevant port authority may confer on the person.

2.2 For the avoidance of doubt, the determination does not apply to:

a. the terms and conditions of access to apply in respect of vessels carrying coal that have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in section 48(4)(b) of the PMAA,

ba. terms and conditions of access for vessels other than those calling at the coal terminals at the Port, and

cb any charges imposed by PNO other than the Navigation Service Charge and the Wharfage Charge.

  1. Counsel for the ACCC claimed that redrafting the scope in this manner would assist in making clear that whenever a person falls into the definition of ‘owner’ under the PMAA, then the determination applies.

Consideration

  1. Each of PNO, Glencore and the ACCC were in agreement that in determining the appropriate scope for the application of the determination, the starting point is the description of the Service, as declared by the Tribunal on 16 June 2016. We agree. To repeat it, the Service declared by the Tribunal on that date was:

the provision of the right to access and use the shipping channels (including berths next to the wharves as part of the channels) at the Port of Newcastle (Port), by virtue of which vessels may enter the Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct.

  1. Put simply, the debate between the parties and the ACCC regarding the scope of the determination is resolved by answering the question what it means to access or use the Service. No one suggested the phrase ‘right to’ altered or impacted on the proper construction of the Service. PNO says that to use or access the Service means to navigate the shipping channels of the Port. Because of this, only a person controlling or in charge of a vessel is able to use or access the Service, which means that Glencore is only using or accessing the Service when it owns or charters a vessel to transport its coal. On the contrary, Glencore says that to use or access the Service means using any part of facilities or infrastructure of the Port, including loading of Glencore coal onto a ship. In reaching this view, Glencore relies on the language which follows ‘by virtue of which’ and say that the activity of loading and unloading at relevant terminals is so central to the economic exercise that is the subject of the Service declaration, that to construct the Service in any other way would be unduly narrow. On the back of this approach, Glencore says that it is accessing or using the Service whenever it loads its coal on vessels (regardless of who controls them) because it uses or accesses part of the Port infrastructure to do so.
  2. Looking first to the terms of the Service, the primary focus of the declaration is on ‘the provision of the right to access and use the shipping channels’. The parenthetical language that follows is inclusive: ‘(including berths next to the wharves as part of the channels)’. It helps to clarify, almost in a ‘for the avoidance of doubt’ fashion, that the ‘right to access and use the shipping channels’ is not limited to the thoroughfares of those shipping channels which are used by vessels to navigate the Port. In other words, when reference is made to the shipping channels, it extends to the areas of those shipping channels that lie adjacent to the wharves.
  3. However, the crux of debate between PNO and Glencore as to the scope of the Service lies in the meaning given to the connecting phrase ‘by virtue of which’. In the Tribunal’s view, this connecting phrase describes the function of the shipping channels (as was contended by PNO), not the purpose of the Service (as was contended by Glencore). When one, as an exercise in interpretive analysis, substitutes ‘by virtue of which’ with other synonymous connecting phrases in the context of the description of the Service, such as ‘as a result of which’ or ‘through which’ or ‘by reason of which’, the language that follows (‘vessels may enter the Port precinct and load and unload at relevant terminals…’) strikes the reader as secondary to the primary thrust of the description of the Service, being access and use of the shipping channels. On our view, it describes the function of such access and use of the shipping channels. Glencore’s construction requires a reading which substitutes ‘by virtue of which’ with ‘in order for’ and replaces the modal verb ‘may’ with the preposition ‘to’. The effect of Glencore’s construction is to qualify access and use of the shipping channels by reference to the apparent purpose of such access and use, being to load and unload at relevant terminals. In this sense, Glencore calls for a construction whereby the words which follow ‘by virtue of which’ work to expand the meaning of the words which precede it. We do not consider this to be the correct manner in which to interpret the Service from a textual perspective, and favour PNO’s construction as a result.
  4. Looking second to the context of the declaration of the Service, PNO submitted in reply that notwithstanding the clear textual support for its interpretation in the definition of the Service, further support could be found in considering the original application made by Glencore for the Service to be declared. That document, dated 13 May 2015, made a series of references to the NSC (which, as already mentioned, is levied on the ‘owner’ within the meaning of the PMAA) and that otherwise placed the shipping channels as the physical infrastructure that is being used and accessed at the centre of Glencore’s application:

The Council has previously found that Australian shipping channels are natural monopolies in the certification of the Victorian Access Regime for Commercial Shipping Channels…

Access to the shipping channels at the Port of Newcastle is a natural “bottleneck” monopoly that it is submitted should be subject to Pt IIIA.

The uncertainty of future pricing for accessing the shipping channels also affects the competitive dynamics in operations in shipping and cargo.

The facilities used to provide the Service are the shipping channels and vessel berth areas (as described above) identified in the plan attached…

A navigation service charge is payable by the owner of a vessel or cargo in respect of the Service…

The Applicant appreciates that the current increase in navigation service charges may appear marginal in terms of initial percentages given the significant costs involved in large scale coal exports…

  1. Whilst certainly not decisive, we agree with PNO’s submission that these passages illustrate that the focus of Glencore’s initial application was on the shipping channels and the need to access those shipping channels by vessels. If, on the contrary, the focus of Glencore’s application and the Service as declared was not on the shipping channels and their use by vessels, a peculiar situation could arise whereby both the loader of the coal and the person in control of the transporting vessel could each amount to a ‘third party’ under Part IIIA. If that were so, both could claim to be using or accessing the same Service, which could give rise to circumstances where there is confusion as to which arbitrated terms of access to apply. An example was given by PNO to illustrate the point: assume that one of Glencore’s customers, which has chartered its own vessel to pick up Glencore’s coal from the Port, and assume further that that customer wants to negotiate terms and conditions of access with PNO that permit the customer to obtain preferential berth treatment. In that scenario, Glencore would advise its customer that Glencore has already arbitrated terms of access with PNO, and the customer would have no independent right to negotiate (and arbitrate, if need be) with PNO directly. The effect of this would be that Glencore’s arbitrated terms of access would bind other potential users of the Port so long as Glencore’s coal was being shipped.
  2. We should also indicate that for the reasons identified by PNO in its submissions and set out above, even if there was the power to determine the scope as defined by the ACCC or Glencore, the Tribunal considers it inappropriate and not consistent with the purpose of a declaration of a service under Part IIIA.
  3. We should also mention that the revised scope put forward by the ACCC during the hearing before the Tribunal and referred to above does not address the submissions raised by PNO. It also introduces a further uncertainty as to how PNO would determine whether Glencore exercises any of the functions of the owner of the vessel within the meaning of s 48(4)(a) of the PMAA. Therefore, even if the ACCC could have so defined the scope as it did, the Tribunal would now vary the scope in line with the reasons advanced by PNO.
  4. Finally, as to Glencore’s argument that its responsibility for paying various charges (including the Wharfage Charge) indicated that Glencore was an access seeker, no matter the precise circumstances of who chartered the vessel upon which coal was loaded, the Tribunal considers this to amount to ‘letting the tail wag the dog’. It is of little significance who is liable to pay, for instance, the Wharfage Charge. That is merely the product of the terms of the PMAA and the pricing schedule issued by PNO from time to time. The Wharfage Charge relates to different services and facilities, and reflects the level of facilities and services provided at a particular berth – such as berthing boxes, site offices, wharf sheets, pavements and worker amenities. On their own, the requirement to pay says nothing about whether or not the payee of a charge has access to and is the user of the Service. This must be determined in the context of the Part IIIA and the actual service declared thereunder. The only thing that matters in this respect is whether the use of certain infrastructure at the Port – whether it be the shipping channels, the berths, the wharves, or ‘sites’ within the meaning of the PMAA – equates to access and use of the Service.
  5. With this is mind it becomes apparent that there is no significance at all to be drawn from the fact that the Wharfage Charge (for instance) is levied on Glencore when it occupies sites at the Port under the provisions of the PMAA.
  6. In light of the above reasoning, we consider the scope of the application of the determination should be confined to where Glencore is the actual owner of the vessel, or either directly or by its agent charters a vessel that enters the Port precinct and loads Glencore coal. This is the access and use of the shipping channels that is properly the subject matter of the access dispute between PNO and Glencore, and the physical infrastructure that is being accessed and used.

USER CONTRIBUTIONS

  1. We have already touched upon this important area of the dispute before the Tribunal. Before setting out each of the parties’ submissions on the topic of user contributions, it is first necessary to explain the approach used by the ACCC in calculating the value of the assets required to provide the Service.

Overview of the calculation of the DORC

  1. Part IIIA does not mandate a particular pricing model to be applied when calculating charges that a service provider can charge users for accessing a declared service.
  2. In the present case, the ACCC calculated the appropriate charges for the Service using a Building Block Model (‘BBM’) produced by the parties to the arbitration with contents substantially agreed between them. Specifically, the parties agreed to use a modified version of the Australian Energy Regulator’s publicly available Post-Tax Revenue Model (‘PTRM’). As described by the ACCC in its Final Determination, the BBM is a ‘widely-recognised and relatively standard regulatory pricing model’. It is used to assess the maximum allowed revenue (the ‘MAR’) of a provider of a declared service as being equal to the sum of underlying components (or building blocks) consisting of:

(1) the return on capital (based on the value of the regulated asset base (‘RAB’) and the weighted average cost of capital (‘WACC’));

(2) the return of capital (or depreciation);

(3) the operating expenditure; and

(4) tax and various other components.

  1. In order to determine the RAB, the parties agreed for the ACCC to use the DORC methodology to value the assets required to provide the Service. A DORC valuation uses optimised replacement cost as its starting point. In essence, in assessing ORC one asks: what would be the cost of replacing the asset using the latest technology and methods of construction, and a design which is optimised to construct the asset and provide the required service in the most efficient way possible? To calculate the DORC, the ORC is adjusted to reflect the remaining useful life of the asset (in this case, the Port).
  2. The rationale for using the DORC methodology is that it is thought to mimic the pricing of a competitive market for the purposes of promoting competition in a related market. In a competitive market, incumbent firms are constrained by the threat of new entry to charge no more than the minimum efficient cost of their production. If any incumbent firm charges excessive prices, a new efficient operator can enter the market and replace the higher priced incumbent. Although the provider of a declared service is unlikely to face actual entry, its costs should not exceed the costs that would be incurred by an efficient hypothetical entrant. It is assumed that the hypothetical new entrant would build a competing facility in the most cost-efficient and optimised manner possible (or else itself be replaced by a more efficient rival), and seek to recover its costs and return on investment on that basis.
  3. In the case of the Port, and indeed in all cases, the application of the DORC methodology is a hypothetical exercise. A new entrant would not be able to build a competing facility to the Port, and in any case, the Port was not built with the latest technology and was not optimised in the manner conceived of by the DORC methodology. The methodology serves as a mere tool to calculate the RAB which is used as part of the BBM to arrive at the appropriate access charges for the Service.
  4. Using the DORC methodology, the ACCC calculated the optimised cost of replacing the Port, as at 1 January 2018, to be $2,169.5 million.
  5. Having calculated the optimised costs of replacing the Port, the ACCC then adjusted that figure downwards to take account of five instances in which improvements to the Port (specifically various dredging projects) had been funded or undertaken by third parties. The rationale for excluding the value of these projects from the asset base of the Port (or any other declared service) is that the relevant service provider should not be permitted to generate revenue from parts of an asset for which it was not responsible or did not pay. As a result of this exercise, the ACCC deducted $912.0 million from ORC. This reduced figure was used, together with an assessment of the remaining useful life of the port assets, to calculate the DORC. That, together with the other inputs, was then used to calculate the MAR, from which the access charges for the Service were derived. As a result of the deduction of the identified user contributions, PNO could not obtain any revenue in respect of approximately 42% of the value of assets of the Port.
  6. Before canvassing the submissions put to the Tribunal, it is useful to go into greater detail as to what the ACCC decided in respect of the deduction of user contributions and the approach that it adopted.

What the ACCC decided and its approach

  1. As explained earlier in these reasons, the ACCC set the NSC so as to recover the maximum allowed revenue, and it set the MAR by using an agreed modified version of the Australian Energy Regulator’s PTRM. A key building block in the PTRM is the RAB, valued at DORC.
  2. In its Final Determination, the ACCC wrote:

The parties have agreed to the use of a DORC methodology for the initial valuation of assets required to provide the Service, with depreciation to be assessed on a straight line over the useful life of the asset.

The asset value is an important input to the BBM as it informs the calculation for return on capital and depreciation. As such, the asset value will directly affect the MAR and, ultimately, prices.

The DORC methodology involves valuing an asset at the cost of replacing it with a technologically modern equivalent asset (MEA) that is:

  • optimised’ to provide the required service in the most efficient way possible
  • adjusted to reflect the remaining useful life of the asset.

Given the agreement between the parties, the Commission adopts the DORC methodology for the purposes of this arbitration. The Commission notes that there are several approaches that can be taken for the valuation of assets, and the DORC methodology is among the methods used by various regulators.

As discussed below, the DORC methodology values assets at the costs of a hypothetical efficient entrant to the market who will optimise the use of, operation of and investment in the asset. That is, it corresponds to the efficient costs of replacing the existing infrastructure with their modern equivalent to supply a given quantity and quality of output as would be expected in a perfectly contestable market.

The Commission therefore considers the use of the DORC methodology for valuing assets that then form the initial asset base contributes to ensuring that prices reflect efficient costs (sections 44X(1)(h) and 44ZZCA(a)(i)) while also ensuring that PNO is able to earn an appropriate return on its investment (sections 44X(1)(h) and 44ZZCA(a)(ii)). This is in the legitimate business interests of PNO (section 44X(1)(a)) and is also in the interests of those who have a right to use the Service (section 44X