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

FEDERAL COURT OF AUSTRALIA

 

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

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

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

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

 

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

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

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

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

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

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

THE COURT DIRECTS THAT:

 

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

5.           In the absence of any agreement:

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

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

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

 

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

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

First Applicant

 

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

Second Applicant

 

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

Third Applicant

 

AND:  BLUE DIAMOND GROWERS

Respondent

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

 

 

 

 

 

REASONS FOR JUDGMENT

MOSHINSKY J:

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

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

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

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

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

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

 

 

Associate:

 

Dated:       23 April 2021

 

 

SCHEDULE OF PARTIES

 

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

 

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

Supreme Court of NSW

 

 

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

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

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

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

 

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

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

Judgment

 

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

FACTS

 

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

Tender Teaming Agreement

 

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

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

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

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

Design Management Plan

 

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

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

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

Defendant provides drawings for tender

 

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

The tender

 

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

Work begins

 

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

Services Contract

 

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

Prior Services

 

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

PRIOR SERVICES

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

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

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

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

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

Limitation of liability

 

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

Choice of law

 

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

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

 

Finishing the job

 

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

Correspondence

 

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

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

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

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

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

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

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

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

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

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

These proceedings

 

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

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

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

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

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

SECTION 7

 

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

7   Enforcement of foreign arbitration agreements

(2)   Subject to this Part, where:

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

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

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

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

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

KOMPETENZ-KOMPETENZ

 

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

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

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

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

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

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

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

[This] approach … is to give significant weight to the authority of the arbitrator and to the principle of Kompetenz-Kompetenz recognised by s 16 of the CA Act [being in the same terms as Article 16 of the Model Law]. Under this approach, the Court does not reach a final view on the balance of probabilities in respect of the matters in s [7 of the International Arbitration Act], including the scope of the arbitration agreement. If there appears to be a valid arbitration agreement which prima facie covers the matters in dispute, the matter should be referred to the arbitrator to deal with questions of jurisdiction, including the scope of the arbitration agreement.

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

145   We think that any rigid taxonomy of approach is unhelpful, as are the labels “prima facie” and “merits” approach. How a judge deals with an application under [section 7 of the International Arbitration Act] will depend significantly upon the issues and the context. Broadly speaking, however, and with some qualification, aspects of the prima facie approach have much to commend them as an approach that gives support to the jurisdiction of the arbitrator and his or her competence, as recognised by the common law and by [Article 16], whilst preserving the role of the Court as the ultimate arbiter on questions of jurisdiction … . Broadly, the approach is consonant with the structure of the [International Arbitration] Act and the Model Law. However, it is difficult to see how the Court can exercise its power under s [7] without forming a view as to the meaning of the arbitration agreement.  Further, it may be that if there is a question of law otherwise affecting the answer to the question of jurisdiction, especially one that is confined, which might be dispositive, it might be less than useful for the Court not to deal with it. …

146 … it will often not be possible fully to delineate the metes and bounds of a dispute without fully hearing the dispute. To do so, that is to hear the facts to decide the width of the dispute, would undermine the practical and effective operation of s [7]. The application must be brought early (not later than when submitting the party’s first statement on the substance of the dispute). The boundaries of the dispute may be unclear, but it will have to be characterised on the material available to be assessed as to whether it can be seen to be the “subject of” the arbitration agreement. That latter assessment will require some stability or clarity as to the meaning of the arbitration agreement. The Court is then required to construe the clause, at least to the point of being satisfied that the disputes forming the matter are the subject of the agreement, or not, as the case may be. …

147 … It can be accepted that as a general rule, unless there is an established legal basis for refusing to do so, a court should, upon legitimate request, exercise jurisdiction conferred on it. However, s [7] is found in an Act of Parliament the paramount object of which is the facilitation of the work of impartial arbitral tribunals. One of the features of that facilitation is the express recognition of the authority of the arbitral tribunal to rule on its own jurisdiction. This includes, expressly, any objection “with respect to the existence or validity of the arbitration agreement”, including any objection with respect to the existence or validity of the arbitration agreement: s 16(1) [of the Commercial Arbitration Act being in the same terms as Article 16 of the Model Law]. Section [7] should be read with s 16(1) [of the Commercial Arbitration Act being in the same terms as Article 16 of the Model Law] and thus, the word “finds” should not be read as requiring that the matters in the proviso cannot be part of the reference to the arbitrator. …

  1. The Court observed, “Of course, if there is no sustainable argument that a matter or dispute can be characterised as falling within the agreement, it should not be referred to arbitration”: at [149]. But the enquiry should not travel into the merits of the case beyond determining whether the argument is sufficiently weak not to be sustainable; “That would be to usurp the role of the arbitrator. The Court’s role in [section 7] is not to act as a court of summary disposal filtering the matters that are suitable for arbitration”: at [149]. The Court should take a broad view characterising the dispute to assess whether it is the subject of the arbitration agreement, rather than engage substantially in the merits of the case: at [151]. Further, at [377]-[378]:

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

378 Thus, the words of Art 8 and s [7] should be read and given content against the background, first, that the Court is not required to decide the matters in the proviso [equivalent to s 7(5)]; secondly, that the competence principle is wide enough to permit the arbitral tribunal to decide any question of jurisdiction, including whether the arbitration agreement came into existence; and, thirdly, that that decision by the arbitral tribunal is not final, the Court having the final say on the question. A further consideration is that s [7] should, conformably with its language, be construed to facilitate, not impede, the process of arbitration: s [39(2)(b)(i)].

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

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

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

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

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

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

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

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

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

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

ARBITRATION CLAUSE

 

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

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

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

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

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

46.2   Notice of Dispute

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

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

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

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

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

(“Notice of Dispute”).

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

46.3   Negotiations

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

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

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

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

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

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

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

Services

 

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

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

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

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

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

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

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

As a minimum the following input will be incorporated:

•   Tender design; …

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

2.1   Commission

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

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

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

  1. Paragraph 2.5 of Annexure C provided:

2.5   Concept Designs

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

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

(b)   further develop the approved outline design solution:

(i)   ensuring all feasible concepts are reviewed; and

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

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

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

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

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

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

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

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

CONDITIONS

 

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

Power to impose conditions

 

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

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

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

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

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

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

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

Statute of limitations

 

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

70   Application of this Act

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

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

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

72 Commencement

(1)    For the purposes of this Division:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Australian Consumer Law

 

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

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

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

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

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

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

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

ORDERS

 

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

**********

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

FEDERAL COURT OF AUSTRALIA

 

 

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

 

1. The appeal be allowed.

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

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

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

(b) the respondent within seven days thereafter.

 

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

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

 

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

 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

Solicitor for the Appellant: Henry William Lawyers

Counsel for the Respondent: T D Castle SC

Solicitor for the Respondent: Cowell Clarke Commercial Lawyers

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

REASONS FOR JUDGMENT

ALLSOP CJ:

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

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

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

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

 

Associate:

 

Dated: 25 June 2021

REASONS FOR JUDGMENT

MIDDLETON J:

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

 

Associate:

 

Dated:       25 June 2021

 

REASONS FOR JUDGMENT

STEWART J:

 

Introduction

 

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

    2D          Objects of this Act

    The objects of this Act are:

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

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

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

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

    3            Interpretation

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

    arbitral award has the same meaning as in the Convention.

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

    8            Recognition of foreign awards

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

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

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

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

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

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

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

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

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

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

    39          Matters to which court must have regard

    (1)          This section applies where:

    (a)       a court is considering:

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

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

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

    (a)       the objects of the Act; and

    (b)       the fact that:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    (Emphasis added.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    (1)          The appeal be allowed.

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

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

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

    (b)          the respondent within seven days thereafter.

     

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

 

Associate:

Dated:       25 June 2021

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

DISTRICT COURT OF QUEENSLAND

 

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

 

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

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

 

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

 

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

Texts Cited: NIL
DIVISION: Civil
Parties:  

ONE SECTOR PTY LTD
(Plaintiff/Respondent)

v

PANEL CONCEPTS PTY LTD

(Defendant/Applicant)

Representation: Counsel:

 

S Colditz, for the plaintiff

J Marr, for the defendant

 

Solicitors:

 

Active Law for the plaintiff

Robinson Locke Litigation Lawyers for the defendant

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

 

JUDGMENT

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

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

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

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

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

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

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

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

Is there an arbitration agreement?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Subcontract clause 25

25. Dispute Resolution

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

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

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

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

Mediation or Arbitration

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

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

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

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

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

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

________________________________________

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

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

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

[4] Commercial Arbitration Act, s8

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

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

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

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

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

[10] Pathak, 692.

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

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

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

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

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

Venetian Nominees Pty Ltd V Weatherford Australia Pty Ltd [2021] WASC 137

SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

 

Case Name: VENETIAN NOMINEES PTY LTD v WEATHERFORD AUSTRALIA PTY LTD [2021] WASC 137
Medium Neutral Citation: [2021] WASC 137
Hearing Date(s): 15 FEBRUARY 2021
Date of Orders: 5 MAY 2021
Decision Date: 5 MAY 2021
Before: 5 MAY 2021
Decision: Application dismissed
Catchwords: Arbitration – Private arbitration award made concerning disputed apportionment of outgoings under a lease – Interim award determination made pursuant to issues in Arbitration Agreement – Challenge to set aside award under s 34(2)(a)(ii) and (iv) of the Commercial Arbitration Act 2012 (WA) – Application to Supreme Court to set award aside on alleged basis of plaintiff being unable to present its case or on the basis of alleged unfairness grievances as to arbitral procedure – Contention as to an ‘unpleaded’ argument being accepted and relied on by arbitrator – Contention of a failure to ensure a fair hearing by providing insufficient opportunity to respond by evidence – Whether present application permissible or whether a de facto appeal ‘dressed up’ under the guise of fitting within s 34(2)(a) of the Commercial Arbitration Act
Legislation Cited: Commercial Arbitration Act 2012 (WA), s 34(2)(a)
Cases Cited: AKN v ALC [2015] SGCA 18
Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 326
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Ivankovic v West Australian Planning Commission [2020] WASC 40
Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2011] WASCA 49
Spaseski v Mladenovski [2019] WASC 65
The State of Western Australia v Mineralogy Pty Ltd [2020] WASC 58
Texts Cited: NIL
Category: (In Chambers)
Parties:  

VENETIAN NOMINEES PTY LTD

Plaintiff

 

AND

 

WEATHERFORD AUSTRALIA PTY LTD

Defendant

Representation: Counsel:

 

Plaintiff : Mr M Hotchkin
Defendant : Mr M Howard SC & Ms S B Nadilo

 

Solicitors:

 

Plaintiff : Hotchkin Hanly
Defendant : Jackson McDonald

File Number(s): ARB 6 of 2020
Publication Restriction: NIL
Decision under appeal: NIL

 

JUDGMENT

KENNETH MARTIN J:

Linguistic camouflage aside, this is an attempted appeal by the plaintiff against a decision of an arbitrator delivered in a wholly private arbitration. There presents the problem. There is, by the clear words of the local arbitration statute, no appeal available against the adverse arbitral decision. No doubt by reason of that inconvenient obstacle, the present challenges directed against the arbitrator’s award decision have been grammatically cast as an alleged failure by the arbitrator to hear some of the plaintiff’s arguments and, alternatively the too frequently seen allegation of a denial of procedural fairness within the arbitration process. Curial challenges attempted against non-appealable award decisions continue to bedevil and undermine legislative policy endeavours to entrench arbitration as a quick, relatively inexpensive and final medium for private dispute resolutions. Unfortunately, too many unsuccessful arbitration participants still see it as worth their while to ‘roll the dice’ by manufacturing a pathway to a court, where strained procedural unfairness arguments rise to the fore as something of a last refuge of the desperate. Here, such challenges have been productive of delay to the successful party enjoying the fruits of the award and have necessitated an allocation of resources – equivalent to what would otherwise have been devoted to the hearing of a full blown appeal by way of a rehearing. This farcical position should no longer be entertained. Where the backdoor strategy is unsuccessfully deployed in future it should be met with a punitive costs sanction.

Background

The arbitration:

A wholly private arbitration was conducted in 2020 between the plaintiff, Venetian Nominees Pty Ltd (Venetian), and the defendant, Weatherford Australia Pty Ltd (Weatherford). The arbitration was conducted under the Commercial Arbitration Act 2012 (WA) (the CA Act) before Mr Marcus Solomon SC as the parties’ appointed arbitrator.
In the arbitration, Weatherford was the claimant. Venetian, a member of the Caratti Group of companies, was the respondent. The arbitration concerned a money dispute arising out of the parties’ written lease agreement of 13 November 2012 entered between Venetian as Lessor and Weatherford as Lessee (the Lease). The Lease is in evidence before the court on the current application, found attached to the affidavit of Michael Charles Hotchkin sworn 25 August 2020 at MCH1.
Procedural orders concerning a provision of pleadings and written submissions had issued in the arbitration prior the arbitral hearing across two days of March 2020.
Due to COVID-19 constraints which had prevailed at the time, the arbitral hearing was conducted remotely, utilising an audio-link between the arbitrator and the respective counsel for each of the parties.
At the heart of the arbitral dispute was a controversy over the true meaning of a phrase used within the text of cl 4.6 of the Lease.

Clause 4.6

The fiscal dispute between the lease parties ultimately concerned the correct level of the Lessor’s (ie, Venetian’s) apportionment of the outgoings for its land, known as lot 9009, and as were assessed and allocated by it to its Lessee.
The dispute had manifested under factual circumstances whereby the land area to be leased by Weatherford (known as the ‘Premises’) at the time the Lease was entered, was only a smallish component (roughly 11%) of the Lessor’s overall land at the relevant location. In that respect, cl 4.6 of the Lease read:

If any such Outgoings shall not be separately and wholly assessed or charged against the Premises then the Lessee shall pay to the Lessor within seven (7) days of written demand thereof that proportion thereof that the area of the Premises (as certified by the Lessor) bears to the total lettable area of the premises covered by the relevant assessment or charge (as certified by the Lessor). (emphasis in bold and noting the distinction between capital ‘P’ Premises (the leased area) and the lower case ‘premises’, in reference to the Lessor’s land).
The dispute arose because Weatherford, as Lessee, was complaining it had been overcharged by its landlord, Venetian, in respect of the proper proportion of outgoings payable by it to Venetian over time. Weatherford claimed that it had overpaid moneys by reason of Venetian’s erroneous prior apportionments of claimed outgoings. Weatherford contended Venetian had attributed too great a proportion of Venetian’s own outgoings to it (ie, to Weatherford) and Weatherford was claiming back its contended outgoings overpayments in the arbitration.
Venetian’s primary outgoings exposure arose because it, as a landowner, had received from various rating authorities such as the City of Swan, or the State entity responsible for issuing land tax, what were global rating or tax assessments issued levied by reference to the total area of Venetian’s landholding (lot 9009). As mentioned by cl 4.6 of the Lease, Weatherford, as Lessee, was only required to bear contractually to Venetian an appropriate proportion (by land area) of its Lessor’s outgoings. Ultimately, this contractual outgoings proportionate reimbursement liability to Venetian under the Lease distilled to a ratio calculation – over which the parties descended into disagreement. At the heart of the dispute was the true meaning of the phrase seen in cl 4.6 of the Lease, namely, ‘total lettable area of the premises covered’ vis-à-vis the outgoing assessment or charge to the Lessor.
As will be seen, the ratio or fractional calculation required by cl 4.6 can be mathematically described as: . The correctly ascertained fraction or ratio is then applied to Venetian’s total levied outgoings against its aggregate landholding area to derive the correct proportion of outgoings which may be properly levied under cl 4.6 to Weatherford under the Lease.
There had been no debate before the arbitrator, and there remained no debate before this court, that the numerator, or top line of the fraction reference to be used in the calculation (N), was the ‘area of the Premises’ of the Lessee (ie, the area of Weatherford’s leased land).
Next, the denominator (D) component is the ‘total lettable area of the premises covered by the relevant assessment or charge’ rendered to the Lessor (as in cl 4.6). It was the denominator input figure (D) which had generated the controversy in the arbitration.

It follows that even if I am wrong in my construction of clause 4.6 such that any common area over the larger lot is to be omitted from the calculation of the denominator, no such common areas were designated and certified in accordance with the requirements of the Lease.  (emphasis in bold)

The Premises, being the fractional input (N), is the square meterage of Weatherford’s tenancy area as identified in the Lease, namely some 31,600m2. That figure was wholly uncontroversial.
Item 1 in a Schedule to the Lease (see page 32 of the Lease) by reference to a term ‘Premises’ refers to ‘Corner Milly Court and Metal Circuit, Malaga, Western Australia having an area of approximately 31,600m2 as hachured on the plan attached hereto and erected on the Land together with the Lessor’s chattels[.]’
Item 2 of the same Schedule refers to ‘Land’. It refers to ‘Part Lot 9010 on Deposited Plan 66057 being Lot [blank] on Deposited Plan [blank] and being all of the land in Certificate of Title Volume [blank] Folio [blank][.]’
At this point it may be helpful for overall orientation purposes to pause to direct some attention to a useful diagram of Venetian’s land, and which shows Weatherford’s leased Premises. To that end, I refer to the affidavit of Mr Basil Georgiou sworn 19 October 2020, tendered on behalf of Weatherford. I refer in particular to attachment BG-27, page 405. I incorporate as Schedule 1 to these reasons a copy of the diagram as it is found at page 405 (the aerial plan).
As can be seen, the aerial plan identifies various features, including an overhead powerline pylon base, the leased area of Weatherford’s Premises, a hatched area in orange indicating so-called common areas (including a car park, access and driveway), a lot boundary line in green and a broken green horizontal line indicating what is a Western Power easement over Venetian’s land. To that end, see the key in the bottom left.
Weatherford’s Premises are found depicted at the bottom right‑hand corner of the aerial plan, marked as ‘Weatherford’.
The dispute

Because the parties could not resolve a dispute over the correct level of the proportion of outgoings payable by Weatherford to Venetian, they agreed to the appointment of a private arbitrator and hence, to Mr Solomon SC’s appointment in May 2019. That was effected by an arbitration agreement of 15 May 2019. By that agreement, the ‘dispute’ was defined in an attached document called ‘Agreed Issues for Determination’.
In simple terms, the ‘battle ground’ of the arbitral dispute, relevant to the present application, was over the correct total lettable area denominator input figure (D) to be used in the ratio exercise required to determine the correct apportionment of a component of the Lessor’s overall outgoings exposures, over to its Lessee.
Of course, as a matter of simple mathematics, given that the numerator area (N) input figure for the area of Weatherford’s Premises as Lessee is fixed (agreed at 31,600m2), then the higher the (area) figure used as the denominator input (D) in the fraction, then necessarily, the lower must be the ultimately calculated Lessee’s proportion of outgoings payable to its Lessor. The reverse also follows, so that the lower the number used as the denominator input (D), then the higher the end amount of outgoings payable by Weatherford to Venetian.
Hence, for a time and, indeed, right up until the start of the arbitral hearing before the learned arbitrator, it had been the contention of Weatherford as Lessee that the denominator input figure (D) – as a matter of the proper construction and interpretation of the phrase ‘total lettable area’ of the premises – was the entirety of the square meterage area of Venetian’s land.
Venetian had never apportioned outgoings to Weatherford on that basis in the past. Instead, Venetian had followed an outgoings apportionment methodology of reducing the area of the square meterage figure to be used in the denominator input figure (D) by deducting certain areas from out of its total land holding area. The Venetian deduction of areas approach achieved the end result of reducing the potential quantum level of the denominator figure (D) – and thereby increased mathematically the allocated proportion of outgoings ultimately claimed as payable by Weatherford to Venetian. But if the denominator figure (D) was to be numerically higher, then correspondingly, Weatherford’s as calculated outgoings exposure to Venetian would be lower.
In particular, two areas of Venetian’s land look to have been the subject of deduction against the aggregate cl 4.6 denominator input figure (D) calculated under the apportionment methodology of Venetian. First, in this category appears to be the area of land the subject of an easement over Venetian’s land held by Western Power – see the top right and across of the aerial plan (the easement area) scheduled to these reasons.
Under the parties’ starting pleadings at the arbitration, the argument to sustain a deduction of the Western Power easement area to reduce the level of (D) looks to have been advanced by Venetian – along the lines that an existence of such a registered easement area favouring Western Power had rendered that land area as being inappropriate or unsuitable for development by Venetian. It appears Venetian’s stance was that in consequence, all the easement area was not a ‘lettable area’, or even a potentially lettable area, within Venetian’s land for the purpose of cl 4.6. As a result, the easement area was not included in the denominator input figure (D) used to apportion the lease outgoings. As seen from the aerial plan in Schedule 1, the Western Power easement area within Venetian’s overall land holding (marked by broken green lines) is located some distance to the north and to the west of the Weatherford (leased) Premises.
A second broad area of land also deducted from out of the (D) figure by Venetian was attributable to the land areas as shown on the aerial plan as cross‑hatched in orange, referred to as the ‘common areas’. Some of the common areas are found some distance to the west of Weatherford’s Premises (save for an orange cross‑hatched area abutting and adjacent to the as identified Nick Scali (leased) premises, directly to the north of the Weatherford Premises).
Again the underlying issue was whether or not, by regard ultimately to the true meaning of the cl 4.6 phrase ‘total lettable area of the premises covered’, all these common areas of land within Venetian’s aggregate land could legitimately be deducted from the ultimately used denominator input figure (D). That, of course, would thereby contribute in the end to a higher eventual outgoings apportionment liability exposure for Weatherford than would otherwise be the case, had all those areas of land not been carved away from the level of the denominator input figure (D).
Ultimately, of course, the contention of Venetian as Lessor was and remained that such common areas over its land as were used for car parking, access and for driveways, were not, by reason of such common usage deployment, then to be assessed as a part of its lettable area, or as potentially lettable areas by Venetian.

Issues for determination

Before the arbitration hearing commenced, arguments between the parties over the correct apportionment of outgoings to Weatherford had essentially distilled to two major areas of conflict, as reflected in the parties’ Agreed Issues for Determination. The first battle ground to be resolved by the arbitrator was over the true meaning of the denominator phrase used within cl 4.6, namely, ‘the total lettable area of the premises’. Then, once a true meaning was ascertained, a second battle concerned the application of that true meaning to the underlying facts. A key question to be answered in this exercise was whether the areas of Venetian’s land as had been deducted away from the denominator input figure (D) used by Venetian, and so removing from (D) the Western Power easement area as well as the so-called common areas within Venetian’s land, were so legitimately deducted. Collectively, these two battles were known as ‘issue 1’ in both the arbitration and upon the present application.
As mentioned, Weatherford had first contended by its pleadings at the arbitration that the denominator input figure (D) should be the entirety of the square meterage of Venetian’s land – and for which a relevant outgoings assessment or charge had been levied against it by the relevant rating or taxation body. But a difficulty with that ambit submission, as the arbitrator eventually construed the phrase, was that if that had been the true meaning, then it was more likely that the chosen cl 4.6 terminology would have been more simple. Clause 4.6 could merely then have referred to the total area of the Lessor’s ‘land’. Instead, a distinct phrase and the word ‘premises’ in lower case was used. The as chosen words of cl 4.6, reasoned the arbitrator, suggested a somewhat different concept was (objectively) envisioned, and so not just the entirety of the area of the Lessor’s land (see Award pars 92 -93).
Conduct of the arbitration

As mentioned, the arbitration hearing was conducted on 31 March and 1 April 2020. Prior to the hearing, various procedural orders had been issued by the arbitrator to facilitate the hearing – see the attachments to Mr Hotchkin’s affidavit and attachments to the affidavit of Michael Andrew Daniels sworn 19 October 2020.
Given a prevalent COVID-19 pandemic afflicting Western Australia at the time and restrictions upon gatherings as then imposed, the arbitration was conducted remotely by telephone links over two days of hearing. There does not appear to be any issue taken by Venetian over the fact of the hearing taking place by audio-link.
The parties did not ever arrange for a transcript of the two days of arbitral hearing to be produced. As such, there was and is no independent verbatim record of what transpired across the hearing days. This is not at all satisfactory or acceptable in this court. In the context of a presently attempted challenge put against the award based on alleged unfairness in the overall process, or a failure to afford procedural fairness to Venetian – an absence of a verbatim transcript is simply hopeless towards reliably evaluating, after an event, what happened at the hearing from an overall fairness perspective. Affidavits relied on in this current application each contain accounts and recollections of the hearing – see Mr Hotchkin’s affidavit at pars 7, 11 – 14, Mr Georgiou’s affidavit at pars 5, 46 – 52, 54 – 56, 58 – 59, 61 -65, 70 – 76, and Mr Daniels’ affidavit at pars 31 -36. Mr Daniels’ affidavit also attaches various handwritten notes he made during the course of the arbitration hearing (see MAD-10 to MAD-12). There was no cross-examination upon any of this material at the hearing in this court. But this is all still a second best approach which, albeit not objected to by the respondent, is unsatisfactory and should not be repeated save in the most exceptional of circumstances.
Nevertheless, it is notable that Mr Hotchkin (par 13), Mr Georgiou (par 64) and Mr Daniels (par 66), all identify that at the conclusion of oral submissions, Venetian filed a Summary of Respondent’s Oral Submissions of 3 April 2020 (see Mr Hotchkin’s affidavit at MCH14). Those written submissions (and Weatherford’s responsive written submissions of 6 April 2020), were referred to by the arbitrator in the Award (reasons) (pars 60 – 61).
Legal principles bearing upon the present application by Venetian

I pause at this point to re-emphasise that upon the present application I am not concerned over any question about whether or not the arbitrator was right or wrong on his ultimate contractual interpretation of cl 4.6 of the Lease. As I began, I repeat that the present application of Venetian cannot and will not be determined in the manner of any kind of appeal against the Award. It is nothing of the sort. Rather, all I am concerned with is, for the purposes of Venetian’s present invocation of s 34(2)(a)(ii) and (iv) of the CA Act, whether (and without a verbatim transcript) Venetian can make good a serious contention that in the two-day hearing before the learned arbitrator it was, overall, either ‘unable to present its case’, or that the Award of the arbitrator upon issue 1 was made ‘on the basis of an arbitral procedure not in accordance with the Arbitration Agreement’ (see Venetian’s originating summons filed 26 August 2020).
In the end, Venetian’s s 34(2)(a)(ii) and (iv) contentions commonly distil to a similar basket of assembled grievances as articulated in Venetian’s originating summons under the ensuing pars 1, 2 and 3(a) – (j).
Notwithstanding the textual magnitude of what is found there, the essential nature of the underlying grievance looks to be that the learned arbitrator denied Venetian a fair hearing or, in other words, that the arbitral hearing was procedurally unfair to Venetian in some allegedly significant respects.
In Spaseski v Mladenovski [2019] WASC 65 commencing at [49], I have earlier discussed arbitral challenges by reference to observations of Menon CJ in the Singapore Court of Appeal decision AKN v ALC [2015] SGCA 18. In particular, I drew attention there to his Honour’s identification of the central notion of party autonomy and to the consequences of the parties’ choices made towards choosing to proceed by an arbitration. His Honour had observed at [37]:

… The courts do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases …
Menon CJ had referred to a policy of minimal curial intervention towards arbitral proceedings as being a mainstay of the Model Law – the adoption of which locally in this State is, of course, the basis for the significant structural changes that were made to West Australian law by the enactment of the CA Act in 2012, all of which I explained at some length in Spaseski at [49] and following.
In Spaseski at [56], I also cited Menon CJ’s observations concerning the ingenuity of lawyers towards circumventing the constraints against the challenging of an arbitrator’s award by appeal. Here, I need to repeat again from his Honour’s reasons in AKN v ALC at [38] this salient observation:

… That is not to say that the courts can never intervene. However, the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement. It follows that, from the court’s perspective, the parties to an arbitration do not have a right to a ‘correct’ decision from the arbitral tribunal that can be vindicated by the courts. Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process.
At [57] in Spaseski, I also identified article 18 of the Model Law, stipulating a need for equal treatment of parties in arbitration proceedings, expressed in terms that:

The parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party’s case.
At [58] in Spaseski, I emphasised the adjective ‘reasonable’ preceded the noun ‘opportunity’. See also my further observations in The State of Western Australia v Mineralogy Pty Ltd [2020] WASC 58 at [2] and [78] and then in Ivankovic v West Australian Planning Commission [2020] WASC 401 at [212] – [213], [220] and [222] concerning the limited scope for challenges against an arbitral award in the wake of the new regime of the CA Act in this State.
For present circumstances concerning Venetian’s expressed grievance to the effect that it was denied a reasonable opportunity to present its case concerning the true meaning of the critical phrase at issue between the parties within cl 4.6 of the Lease, I would reiterate the further observations of Menon CJ from AKN v ALC. They were made, of course, in relation to attempted appeals ‘dressed up’, essentially, to look like process grievances in order to circumvent a closed gate against appeals otherwise by the Model Law.
I re-emphasise the learned Chief Justice’s observations from [39] of AKN v ALC. His Honour had said:

In the light of their limited role in arbitral proceedings, courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration. A prime example of this would be a challenge based on an alleged breach of natural justice. When examining such a challenge, it is important that the court assess the real nature of the complaint. Among the arguments commonly raised in support of breach of natural justice challenges are these:

(a) that the arbitral tribunal misunderstood the case presented and so did not apply its mind to the actual case of the aggrieved party;

(b) that the arbitral tribunal did not mention the arguments raised by the aggrieved party and so must have failed to consider the latter’s actual case; and

(c) that the arbitral tribunal must have overlooked a part of the aggrieved party’s case because it did not engage with the merits of that part of the latter’s case.

Although such arguments may be commonly raised, more often than not, they do not, in fact, amount to breaches of natural justice.
At [61] of Spaseski, by reference to s 34(2)(b)(ii) of the CA Act, I also cited Croft J’s observations in the Supreme Court of Victoria in Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 326. His Honour had said at [42] – [43]:

As is clear from this passage, Art 18 of the Model Law – and, by implication, s 18 of the Act – does not invoke the principles of natural justice or procedural fairness developed in, for example, administrative law, or other common law principles not developed in the context of the Model Law. Such common law principles undoubtedly flow from the same jurisprudential source as Art 18 of the Model Law in that they are, fundamentally, concerned with fairness, equality and due process. Indeed, there are many circumstances where these principles may overlap with the requirements of [Art 18] and may produce similar outcomes. However, ultimately, the requirement of fairness and equality of treatment of the parties in arbitration is distinct from, and often more straightforward in its application than the position developed by the common law in various contexts.

The relevant test is to be drawn from the words of s 18 of the Act itself and may be stated as follows: ‘Were the parties treated with equality and was each party given a reasonable opportunity of presenting the party’s case?’ As is apparent from the reasons that follow, a failure to recognise and apply this test may result in the adoption of an impermissible judicial approach to the question of whether an objecting party was denied procedural fairness or natural justice in breach of the Act. Like any other provision of the Act which mirrors the Model Law, s 18 must not be viewed ‘through the prism of principles and doctrines not found in the Model Law or the New York Convention, and which may be peculiar to a particular domestic jurisdiction’. The temptation to approach the application of the Act in this way – the temptation of ‘domesticity’ – the temptation of ‘domesticity’ must be resisted in order to promote uniformity between the application of the Act and the application of the Model Law as required by s 2A of the Act and as emphasised by the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland. (footnotes omitted)
Bearing all these considerations in mind, the essential question here is whether Venetian, in a context of a two-day arbitral hearing in circumstances where the participating parties had been offered the opportunity by the learned arbitrator at the end of that hearing to file further written submissions and any extra materials – were treated with equality and whether Venetian overall was afforded a ‘reasonable opportunity’ to present its case. Contextually, it should be kept in mind as well that to the extent that Venetian acted in the past to reduce the square meterage of the input (D) to a level below the full area of its rated or taxed land, Venetian must be expected at the time of so acting to have held a basis for it excising those chosen areas from the denominator input figure (D) in producing its apportionment of outgoings to Weatherford. For Venetian to suggest unfair surprise in it being asked later to explain its land area excision rationale in conducting its derivation to arrive at the level of (D) that was used is, of itself, somewhat curious.
The ultimate issue of contractual interpretation concerning the phase ‘total lettable area’ used in the parties’ lease is a question of law (not fact) and about which there could be only one true meaning. Venetian faces a difficult hurdle in contending that a contended rival interpretation was not accepted by the arbitrator when it has no right to appeal against that determination.
Indeed, despite the many layers of lipstick, the essential nature of Venetian’s grievance is ultimately exposed to being that its advocated rival interpretation of the clause’s true meaning was rejected by the arbitrator. Such a grievance is not a true process grievance. It is a poorly disguised attempted appeal raised against a decision reached against it. Save to say, losing is not a violation of procedural fairness principles.
The arbitrator’s Award and determination

The arbitrator delivered reserved reasons for decision constituting his determination and forming a part of the Award, on 29 June 2020. By that determination over some 34 pages of reasons, the learned arbitrator comprehensively traversed the parties’ rival submissions and positions, over what ultimately was the parties’ basal dispute over the contested true meaning of the cl 4.6 phrase (being issue 1 for the arbitrator) at issue, namely ‘total lettable area’.

Meaning of ‘total lettable area’

The arbitrator’s consideration of this issue of law commences at par 67 of his reasons, referring to a leading local appellate authority discussing the orthodox principles of contractual interpretation, namely, Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 at [42]. The parties were not in any level of dispute over these principles. Hence, that starting platform was perfectly orthodox and appropriate.
It is necessary then to look even more closely at the arbitrator’s reasons underlying his eventual issue 1 determination.
Having considered the parties’ rival positions, the learned arbitrator eventually decided for himself the true meaning of the clause at issue. That was his obligation – irrespective of the parties’ rival stances.
The true meaning question, of course, was not a determination of fact, it was a determination of law. Having cited Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at [98] the learned arbitrator then proceeded to observe at Award pars 69 – 72:

… Thus, the meaning of clause 4.6 is to be determined by reference to what a reasonable business person would have understood by the phrase “total lettable area of the premises covered by the relevant assessment or charge”, having regard to the background knowledge of the surrounding circumstances….

It is necessary to begin with a consideration of the text of clause 4.6. As noted above, there is no dispute about what is meant by the area of the Premises or the area of the premises covered by the charge. The dispute centres on the meaning of the word lettable in the context of the clause.

In my respectful view, neither of the parties’ constructions sits entirely simply and easily with the word lettable.

The words plainly mean able to be let.
Referring to Weatherford’s submission as to the meaning of those words, the learned arbitrator then said at par 73:

As noted above, Weatherford’s construction requires the word lettable to include undeveloped land. In the usual context of commercial leasing it would be somewhat unusual to refer to undeveloped land as lettable, although it is not necessarily inapt to refer to cleared but undeveloped land as able to be let. In that regard, it may also be observed that the clause does not state immediately lettable or other words to that effect. The word lettable of itself, as a matter of plain language, is capable of encompassing land that is able to be let in due course even if it is not immediately available to be let.

Referring to Venetian’s rival proposal meaning of ‘lettable’, the learned arbitrator observed at par 74:

“… Venetian’s construction requires some embellishment of the text to clarify that it means land that is both developed and available for letting. I appreciate that Venetian contends that lettable of itself necessarily connotes land that is developed and is to be distinguished from ‘usable’, but as a matter of plain English there remains some strain in the proposition that developed land that a lessor resolved not to let (for example because it is to the lessor’s commercial advantage for some reason such as making it available as common area) is not area that is able to be let or capable being let. In addition, as I have observed, there is an element of immediacy in Venetian’s construction that is not mandated by the word lettable of itself. Venetian submitted that lettability is not a concept that speaks of ‘possibility’. But neither does it necessarily require immediacy or inevitability. As a matter of plain language, land may be able to be let even if it is not available to be let now, and even if it is ultimately never let.”

Next, commencing at par 75, the learned arbitrator observed that it was not possible simply from the bare text of cl 4.6 alone to determine its true meaning. In perfectly orthodox fashion, he determined it was necessary to look beyond the bare text to the surrounding circumstances and so to the background and genesis of the Lease, including to a progenitor Heads of Agreement of 10 January 2011 – identifying such matters under par 76(a) through (e) of his reasons.

Part of the facts as identified at the time of the parties’ earlier Heads of Agreement in reference then to Venetian’s lot 9009, were that the proposed leased premises to Weatherford had then constituted only approximately 11% of a much larger area of Venetian’s lot 9009.

On 29 August 2011, the parties entered their Agreement for Lease. The deed provided that Venetian would construct a facility and the parties would enter into a lease.

At par 80, the learned arbitrator identified some mutually known surrounding circumstances contextually prevailing at the time of the Agreement for Lease, noting the proposed leased premises were to be only a small part (approximately 10.3%) of the much larger lot in Venetian’s single ownership (lot 9009). At that time, the balance of lot 9009 had been cleared for potential development, but it ‘remained largely undeveloped’. An (objective) intention towards an eventual creation of an independent (ie, smaller) lot just for the premises leased to Weatherford out of a portion of lot 9009 was also identified (see par 80(f)).

With those surrounding facts then identified, the learned arbitrator returned to the differences as between the parties over their rival meanings as advocated for cl 4.6.
At this point, he observed upon, in effect, the pragmatics of their dispute in monetary terms over a correct apportionment of some of the Lessor’s outgoings exposure to its lessee, Weatherford. He duly observed at par 82:

“The real practical difference between the competing constructions relates to whether clause 4.6 requires Weatherford to contribute to the cost of outgoings for land that remained undeveloped or was common area – even if the common area was some distance from and did not provide any shared facility for the Premises. Having regard to the surrounding circumstances referred to at paragraph 80 above, in my view, it is most unlikely that a reasonable business person would have objectively understood clause 4.6 to require the lessee to bear a significant proportion of the cost of outgoings in respect of the very considerable areas of the lot 9009 that remained undeveloped or for common area that provided no utility to the Premises. This is especially so as the lessee would have no control, or even visibility, of the lot’s future development beyond a vague expectation that it was in the lessor’s interest to develop the balance of the lot in due course. (emphasis in bold)”

At par 83 of his reasons the learned arbitrator acknowledged Venetian’s submission concerning the true meaning of the phrase ‘lettable area’ and that its contention may not sit comfortably with including land that was cleared, but not yet developed. Nevertheless, in evaluating that submission, the learned arbitrator reasoned that Venetian’s preferred construction would expose it to other difficulties which, in the end, were more persuasive considerations (see pars 84 – 86, 89 – 90). The learned arbitrator now reasoned as follows:

[91] For those reasons, I do not accept that objectively construed, the Lease requires Weatherford to bear a proportion (in the circumstances that prevailed upon entry to the Lease, quite a significant proportion) of the outgoings that relate to the whole of the larger lot 9009 or 9010. I also consider that unwarranted ambiguities and potential difficulties arise with Venetian’s proposed construction of the clause.

[92] At the same time, I accept the submission of Venetian that:

(a) the clear choice in clause 4.6 of wording other than simply ‘Land’ as defined; and

(b) the references to ‘common area’ and (in my view, to a lesser extent) ‘complex’ in the Lease;

are strong indicators that clause 4.6 contemplates, as the denominator in the applicable ratio, an area different from, and less than, the ‘Land’.

I pause here to observe that notwithstanding Venetian’s multiple as expressed process grievances, in terms of an alleged unfair denial of a fair opportunity to present key arguments bearing upon its rival construction of cl 4.6, the learned arbitrator had in fact, accepted some important aspects of Venetian’s arguments as a matter of overall contractual construction (as now exposed under par 92). This was to reduce the scope and therefore the numerical area of the denominator input figure (D) to below the total square meterage area of Venetian’s land. This was against the starting rival contention of Weatherford.

That arbitrator’s constructional view as expressed at par 92 could, in the end, consequentially increase the ratio of outgoings to be apportioned to and payable by Weatherford. Success for Venetian in that degree can hardly be complained about.
But the learned arbitrator then proceeded to observe at par 94:

Weatherford responds to that challenge by accepting that the denominator can indeed be less than the Land where there is some regulatory impediment to the leasing of a portion of the larger lot. Venetian counters that no such prospect is evident in the Heads of Agreement, Agreement for Lease, or the Lease and nor was it ever in the contemplation of the parties. (emphasis in bold)

Reference to some ‘regulatory impediment’ so seen in par 94 grounds a key part of the unfair process grievances raised at this hearing by Venetian, in terms of a contended unfair inability to put arguments, or as a denial of fairness to it, by reason of the arbitral procedure followed. But having found that the denominator input figure (D) generated by the term ‘lettable area’ was not the whole area of the Lessor’s land, what the arbitrator was then doing at par 94, quite correctly on my view, was then seeking to identify any genres of areas of Venetian’s land which might be outside that meaning of ‘lettable area’. Any such excluded areas so found would only favour Venetian, not disadvantage it, in the apportionment of outgoings calculation to be conducted. That was not unfair to Venetian.

Areas to be excluded from ‘total lettable area’

Upon the rejection of the ambit denominator area meaning submission (‘lettable area’ being all of Venetian’s land), Weatherford also put a further and alternative submission to the arbitrator, concerning what could be (limited) excludable areas from the denominator input figure (D). Weatherford had, by senior counsel, postulated excising any area in the larger lot of Venetian that was shown to be constrained by some regulatory impediment against that area being lettable. This fall back alternative construction of Weatherford looks (without having a transcript) to have emerged, in effect, during oral arguments of counsel put during the arbitral hearing, as an aspect of the ultimate legal debates over the true meaning of the phrase ‘lettable area’ within cl 4.6.

Contrary again to the procedural unfairness submission of Venetian as was put to this court, I assess there to be nothing unfair or untoward to Venetian in the arbitration over a dispute over the true cl 4.6 interpretation of ‘lettable area’ in the arbitrator determining what areas of land fell within or outside of that criterion. The true meaning of ‘lettable area’ under cl 4.6 was at the very heart of the dispute between the parties.

Even if the submitted fall back construction of Weatherford only emerged during the arbitral hearing, the learned arbitrator at the end of a two day hearing had then afforded the parties an equal and very fair opportunity to make further submissions in writing and as well to tender any further materials that each side thought relevant. The opportunity afforded was generous and more than fair.

Nor on what I have before me (ie, with no transcript) can I ascertain that Venetian, through counsel, had ever sought to object at the hearing when Weatherford’s fall back interpretation had been raised by senior counsel to the arbitral exploration of this aspect of determining the true meaning of ‘lettable area’ within cl 4.6 of the Lease.
Venetian’s grievance as put to this court as to it being taken by surprise, or by not having an opportunity to tender evidence upon or over this aspect of the question of true meaning, is also misplaced. On my assessment, no factual evidence from Venetian could ostensibly bear upon the objective question of interpretation (law) concerning the true meaning of ‘lettable area’ within cl 4.6 of the Lease.

In any event, the learned arbitrator then continued at pars 95 – 96 of his reasons:

In addition, there is force in Venetian’s contention that in principle, if an area is indeed common area, then it is not lettable. Thus, as a matter of textual construction, the expression lettable area in the context of clause 4.6 needs to be understood in light of the fact that if an area is indeed ‘Common Area’ under the Lease, then it cannot be part of the lettable area.

In my view, the references to ‘common area’ and ‘complex’ are readily explicable in a manner that does not mandate the constructional conclusion urged by Venetian.
Evaluating the implications of finding many such common areas across the breadth of a large lot 9009, the learned arbitrator rendered this observation, at par 100:

In addition, the Lease does not refer to any common area that may exist in the whole of lot 9009 to serve any tenancy no matter how remote, or independent from the Premises, it might be. The references to common areas are largely qualified by reference to areas that serve the Premises or are used by the Lessee: clauses: 5.1.8, 5.5.1, 5.6.6. I agree with the submission made orally by counsel for Venetian that whether the common areas serve the Premises as a matter of fact, does not impact upon the proper construction of the Lease. Nevertheless, the references to ‘serve’ and ‘use’ in respect of common areas under the Lease are significant as a matter of proper construction, quite independently of the factual matters emphasised by Weatherford. (emphasis in bold)

[I note in passing that in the context of what is Venetian’s process grievance, as to the fairness of the arbitral hearing by way of an alleged unfair inability to engage with the arbitrator against the meaning ultimately arrived at by the learned arbitrator, that in fact, counsel for Venetian through his submission (as noted under par 100) had very directly engaged then with the arbitrator upon the concept of common areas served by the premises. The Venetian submission seen above in par 100 which was accepted by the learned arbitrator concerning the issue of construction of the Lease did just that].
The learned arbitrator then continued upon the topic of ‘common areas’ as a concept in terms of an area that may or may not present as appropriate to excise from the denominator by its meterage in the ‘Premises’ as ‘lettable’ or not:

[101] Clause 5.5.4 and clause 24 (definition of ‘Outgoings’) refer to common area without reference to service of the premises or use by the Lessee. However, both those clauses refer to the common areas of the complex ‘of which the Premises form part’. That serves to illustrate that a common area in the Lease contemplates a joint facility enjoyed within a ‘complex’ in common with other tenancies.

[102] Perhaps, most importantly, ‘Common Areas’ the subject of a substantive grant of tenure in clause 1, is a defined term in clause 24 set out at paragraph 27 above. The definition refers to areas intended by the lessor ‘to be for the use of lessees of the Land … and are so designated from time to time by the Lessor …’.

[103] In my view, it would be a curious construction of the words ‘for the use of lessees of the Land’ to include reference to a common area for the use of lessees on the lot that were some distance, and entirely separate, from and independent of the Premises and where that area was of no utility to the lessee the subject of the Lease.

[104] Further, a Common Area is an area which the lessor has ‘so designated’. The Shorter Oxford dictionary defines the word designate to mean point out or indicate. Pointing out and indicating, and thus designating, is not a unilateral act that can be done in the absence of some manifestation or communication to another. It is necessary to indicate or point out to someone else. In context, that designation in my view is required to be to the lessee. If Common Areas are the subject of the grant of tenure it seems to me most unlikely that on a proper construction, the lessor’s designation can be to some third party without notice to the lessee of the Lease.

[105] There was no evidence of a designation communicated to Weatherford of any common area that Venetian intended for Weatherford’s use in common with any other tenancy or that would serve the Premises. That is not surprising as lot 9009, at least in respect of a section leased to Weatherford, did not develop in a manner that lent itself to shared facilities, less still a ‘complex’.

The learned arbitrator continued as to a certification process for a common area at par 106:

Moreover, that outcome is reinforced by the terms of clause 4.6 itself which provides for a certification process in respect of both the area numerator and the denominator. It stands to reason that if the lessor has “designated” areas as common area for use by lessees, in order to provide a level of transparency and clarity, the lessor is required to ‘certify’ that area. There was no evidence of any relevant certification. Once again that is unsurprising in the circumstances.

At par 107 the learned arbitrator referred to the aerial plan (which was PL‑15 before him and which I have included as Schedule 1 to these reasons), showing various depicted areas on lot 9009 as common areas. The arbitrator said at par 107:

There was no evidence that Weatherford had been given notice or was even aware of those depictions. Perhaps more significantly, it became apparent that the depictions did not in any event reflect the manner in which the proportion under clause 4.6 had been calculated. Although this was in Weatherford’s favour, that is beside the point. The document rather reinforced the conclusion that there had been no ‘designation’ less still any certification, of common area under the Lease.

Another process grievance of Venetian is that it did not get the opportunity to engage by evidence. There is no substance in this grievance. What the learned arbitrator was doing was interpreting in surrounding context, the text of cl 4.6, which after the phrase ‘total lettable area of the premises’ had manifested the further words ‘as certified by the Lessor’.

It was entirely orthodox and proper for the learned arbitrator to identify and give some function to those surrounding words, in a context of Venetian’s challenged approach to the apportionment of outgoings to its Lessee.
As seen, Venetian’s cl 4.6 challenged approach had been to excise from the denominator figure (D) all areas that it unilaterally attributed as being common areas within its land and which were thereby, it considered, not lettable by it. Those area excisions from (D), mathematically, increased the proportion of Venetian’s outgoings that could be apportioned to and recovered from Weatherford.

At the arbitration hearing Venetian was always, in effect, defending the legitimacy of its outgoings apportionment approach taken by it as regards deducting all common areas from out of the lettable area figure in the ratio’s denominator. Venetian could hardly have been taken by surprise that in that overall context, the true meaning of the term ‘certification’ as it is used by cl 4.6 came under scrutiny as well within that overall context.

At par 108, the arbitrator recorded, dealt with and ultimately rejected a submission by Venetian (made orally by counsel) as to a notion of designation of common areas by reference to planning approval documents that duly identified car parks and public toilets. Likewise, a submission was put by Venetian to the effect that outgoings claim invoices as were issued to Weatherford by Venetian could in themselves constitute a sufficient lessor’s certification for the purposes of meeting cl 4.6. Such certification by invoice arguments were made, considered, but ultimately rejected by the learned arbitrator as matters of true construction of the term ‘certification’ in cl 4.6. There was a direct engagement upon this aspect of the dispute for Venetian through its counsel at the arbitral hearing at the time. There was no element of surprise or forensic prejudice. The issue was fought upon and lost fairly and squarely at the hearing.

Again, the question on the present application is not whether the learned arbitrator was right or wrong over that end determination. That issue is not up for any level of review in this court. There is no appeal.

The only issue is whether there was some ascertainable process deficiency by an absence of a fair hearing afforded to Venetian by it being denied a reasonable opportunity to engage with the overall process of interpretive evaluation concerning the true meaning of cl 4.6 of the Lease.

Clearly, as is recorded in par 108, Venetian did at the hearing actively engage with the ‘certification’ aspect of the controversy under cl 4.6 and the true meaning issues concerning the designation of common areas. Venetian, through counsel, made submissions to that end. Ultimately, some of Venetian’s submissions were not accepted. Losing does not equate to procedural unfairness.

Overall, I can discern (again with no transcript) no process or procedural failure adverse to Venetian. Venetian was not denied the reasonable opportunity to engage over these aspects of the controversy.
Paragraph 109 towards common areas under the learned arbitrator’s reasons displays that Venetian lost at two levels – as a matter of construction and then further, as a determination of fact. Paragraph 109 reads:

It follows that even if I am wrong in my construction of clause 4.6 such that any common area over the larger lot is to be omitted from the calculation of the denominator, no such common areas were designated and certified in accordance with the requirements of the Lease. (emphasis in bold)

At par 111 the learned arbitrator addressed a further submission by the parties, particularly Venetian, at the arbitration hearing concerning the force of a decision of the West Australian Court of Appeal. This was the decision in Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2011] WASCA 49. That was an appeal concerning the determination of the proportion of outgoings payable by lessees rendered in the particular circumstances of a different lease with different textual provisions. The learned arbitrator plainly evaluated the implications of this case authority. There was no process deficiency or unfairness in that approach.

Conclusion on construction of cl 4.6

Commencing at par 112, the learned arbitrator expressed his final constructional conclusions by reference to what he gave then as a ‘simple example’.
At this point he explained, by reference to the parties’ rival contentions, how as a matter of the true meaning of cl 4.6, the applicable ratio for a proper determination of the payment of outgoings ( ) was to be arrived at: see pars 113 – 117. Having explained the example and the results that would arise under Venetian’s and Weatherford’s rival constructions, the learned arbitrator concluded at par 118:

Under Venetian’s construction, the lessee would be making a significant contribution to the undeveloped area and common area that service other tenancies but not its tenancy. Assuming, common terms in the other leases the balance would be paid by the other lessees and the lessor would pay nothing for the outgoings associated with the undeveloped and unleased land.

The learned arbitrator, in terms of the as required task towards construing a commercial lease instrument and affording it a commercially sensible interpretation, was perfectly entitled to render that observation. As I will explain, that observation and the process under which it was arrived at do not manifest any process deficiency or unfairness capable of being legitimately challenged under the CA Act in this court where, again, there is no appeal.

Arbitrator’s ultimate conclusion on issue 1

Ultimately, on issue one 1, the arbitrator found:

[119] By reason of the matters set out above, in my view, the proper apportionment of Outgoings for which Weatherford is liable is determined under clause 4.6 on the following basis:

(a) the numerator is 31,600;

(b) the denominator is the whole area of the larger lot (lot 9009, 9010 or 9011 as the case may be), less:

(i) any area in respect of which there is a regulatory prohibition preventing it from being lettable. There was not evidence of any such area, and so I determine that this is not relevant to the calculation;

(ii) any Common Area designated by Venetian by overt manifest conduct communication to Weatherford of an area that served or was for the use of the Premises, and certified by Venetian for the purposes of clause 4.6. There was no evidence of any such area, and so I determine this is not relevant to the calculation.

[120] It is common cause that Weatherford has paid the Outgoings on the basis of Venetian’s construction. It has therefore overpaid.

[121] I therefore determine in accordance with the Agreed Issues for Determination document, that to the extent of the overpayment, Weatherford is entitled to deduct that amount from future payment to be made by Weatherford to Venetian under the Lease.

That concluded the learned arbitrator’s reasoning upon issue 1.
Venetian’s specific grievance with the concept of ‘regulatory prohibition’

Venetian’s primary challenge, by which it alleges it was unfairly unable to present its arbitral case, is that the concept of a ‘regulatory prohibition’ (that phrase as seen used in Award par 119(b)(i)) only emerged, at earliest, at the arbitral hearing.
Given the arbitration hearing was not transcribed, Venetian accepts it cannot be known with certainty how the concept of a ‘regulatory prohibition’ was first raised. It is said that the concept was either first raised by senior counsel for Weatherford during the arbitral hearing, or alternatively appeared for the first time in the Award. The uncertainty over this is unsatisfactory in this court.

A significant emphasis was placed on the fact that none of the pleadings exchanged prior to the hearing contained reference to any such concept. Venetian says that Weatherford’s statement of claim in the arbitration does not mention a ‘regulatory prohibition’ in its pleaded construction of cl 4.6. Nor, it is put, is there any basis to give rise to such an idea from the pleaded construction. Venetian argues then that ‘pleadings … are critical for fairly governing the conduct of a matter’ (Venetian’s written submissions dated 30 November 2020, par 25). Venetian heavily emphasises a fundamental rule of pleadings that the party who pleads a proposition is the party that is required to make good that proposition to the legal burden, including carrying any evidential burden.

An allied strand of Venetian’s expressed process grievance is that there was no basis for it to have anticipated from the text of the Lease (in cl 4.6 or otherwise) that a concept of ‘regulatory prohibition’ would arise, nor to consider and argue what it means. The implication of this was said by Venetian to have had the following impact (written submissions, par 26):

The significance of the belated idea of a ‘regulatory prohibition’ in the fair determination of the matter, when it was not a pleaded construction for clause 4.6 in the Defendant’s case, arises because there is no basis in the text of clause 4.6, or otherwise by reference to any other provisions in the Lease, that such a concept should properly have been anticipated by the Plaintiff, and if so, what it actually meant.

The significance of that concern is made evident by the Arbitrator’s finding that there was ‘no evidence’ of a regulatory prohibition, when:

(a) the only relevant evidence could have been of a ‘regulatory prohibition’ prior to the date of the Lease, and the Plaintiff’s point in an attempt to engage with the idea was that the absence of such evidence was a point in favour of the Plaintiff, not against it; and

(b) if the finding of there being ‘no evidence’ could only have been in respect of a ‘regulatory prohibition’ after the date of the Lease, then it is not capable in point of law of assisting in the proper construction of clause 4.6 of the Lease, and could not reasonably be anticipated as a possible finding by the Arbitrator.

Venetian says that if the arbitrator was impressed by the lack of evidence post-Lease execution, then that, and the fact that there was a lack of evidence would be used against it in a cl 4.6 construction, should have been put to Venetian.

Venetian argues that the onus that should have been on Weatherford to prove what the concept of a ‘regulatory prohibition’ meant, came to be shifted towards Venetian – in effect, to disprove the regulatory prohibition. Much is made of this, particularly from an evidentiary standpoint. Venetian says that as this point was not pleaded, it was not able to anticipate it would need to call evidence as to whether the phrase ‘regulatory prohibition’ was known at the time of the Lease, which would then go to the construction of cl 4.6.

Further, Venetian says that the reference to an ‘Easement’ in Weatherford’s arbitral pleading is relevant to the unfairness of the conduct of the arbitration, in that there was evidence of a ‘regulatory prohibition’ because of the terms of the Western Power easement, and the pleaded alternative of the easement was not engaged with by the arbitrator.

Venetian contends (written submissions, par 32):

The reason that the pleaded reference by the Defendant to the ‘Easement’ in paragraph 16 of the Defendant’s Statement of Claim is relevant to the unfairness of the conduct of the Arbitration is that, if the idea of a ‘regulatory prohibition’ relates to any form of prohibition asserted by any public authority (which is not addressed at all by the Arbitrator), then:

(a) there was evidence of such a ‘regulatory prohibition’ before the Arbitrator, because the terms of the Easement to Western Power pleaded at paragraph 16 of its Statement of Claim prohibited any development in the Easement area without its consent; and

(b) the existence of the Easement was the pleaded alternative to the Defendant’s case, yet the Arbitrator did not engage at all with that aspect of the Defendant’s alternative pleaded case, relying instead on an undeveloped idea which had not been pleaded or could otherwise have reasonably been anticipated in a way which differed from the express prohibition contained in the Western Power Easement Deed. (footnotes omitted)

Venetian says further that the shift of the legal and evidential burden to it, from Weatherford, particularly a departure from Weatherford’s pleading, constitutes failure to accord procedural fairness on the part of the arbitrator.
Weatherford by its submissions rejects all these contentions. It says, and emphasises, that at no point did Venetian ever object to the issue of regulatory prohibitions being raised – either the time the submission was made prior to, during or after the arbitration hearing.

Weatherford says that even if the arbitrator made findings of fact without probative evidence, which it denies, that would only trigger a review if such a finding results in real unfairness or practical injustice. Given Venetian did not raise issues as to evidentiary burden at the time of the arbitration hearing, nor in its subsequent written submissions, Weatherford says that no unfairness or injustice was suffered by Venetian.

As to the allegation that the burden of proof was shifted, Weatherford says that such an inquiry in truth, goes to challenge the merits of the arbitrator’s findings, and thus, in substance, is really an appeal against a finding of the award. It says Venetian’s ground is ‘dressed up’ as a breach of the arbitration procedure – an exercise the court must avoid engaging in (Weatherford’s written submissions dated 22 December 2020, par 52). Weatherford says that court should also avoid ‘bailing out’ Venetian for its strategic choice not to object to, nor to call evidence at the time the issue of a regulatory prohibition was raised. This, Weatherford says, was an intentional forensic decision by Venetian which it now obviously regrets, but that none of this is to the immediate point.

Finally, as to the argument that the Western Power easement constituted a ‘regulatory prohibition’ and was not a part of Weatherford’s alternate construction which it abandoned, Weatherford says the evidence shows that its alternate construction of cl 4.6 fell away, when Venetian amended its defence prior to the arbitration hearing. Again, this is said to be a strategic choice on the part of Venetian. Further, it is said that even if the arbitrator did not deal with or determine an alternate construction of Weatherford, it is difficult to see how that could lead to an unfairness suffered by Venetian (Weatherford’s written submissions dated 22 December 2020, par 57).
Venetian’s grievance with the concept of common areas

Whilst there is overlap between Venetian’s complaints about ‘regulatory prohibition’ and what it says regarding common areas, the ‘common areas’ issue was always squarely in play at the time of the arbitration hearing.

Venetian says that it presented and fought a case by reference to the terms of the Lease, and the context in which ‘common areas’ might arise from other terms of the Lease. However, it complains the arbitrator dealt with a point of the application of cl 4.6, rather than engaging in this construction of the clause. The application of cl 4.6 is said to not arise in any of the pleadings or submissions.

A particular grievance emphasis by Venetian is against the arbitrator making findings of fact as to the ‘certification’ or designation of common areas, or the factual lack thereof. Venetian says that the arbitrator conflated the task of construing cl 4.6 with a factual undertaking, as to whether the common areas had been designated or certified. If Venetian was to have been treated fairly and have reasonably anticipated that finding, it is said that Weatherford should have pleaded this in its arbitral reply pleading. This, according to Venetian, was not done. According to Venetian, the primary grievance over this not occurring is that the arbitrator should have told it (Venetian) that he would, as Venetian submits, depart from orthodox principles of construction by referring to evidence or apply the construction of ‘common areas’ as a figure to be excluded from the ‘lettable area’ calculation.

Venetian says that it suffered unfairness in presenting its case by the arbitrator departing from the pleaded case of the parties. This, according to Venetian, was because the arbitrator’s finding that Venetian, as Lessor, was ‘required’ to certify the common areas (Award par 106) had not arisen or emerged from the pleadings or oral submissions, and was inconsistent with the text of the Lease which only ’empowers’ Venetian, rather than ‘compels’ it.

A final point Venetian makes as to the alleged unfairness it suffered in process was that without warning from the arbitrator, it was unable to put in evidence about how ‘common areas’ are created within the property industry. I return to this argument later.

Weatherford, in reply submits that Venetian has misapprehended what was ‘in the ring’ before the arbitrator, whether by the pleadings, or otherwise. By this, Weatherford is saying that the issue of common areas was in play before the arbitration hearing – in particular, in Venetian’s opening submissions. Weatherford also says that over the time before the hearing the issue of common areas was a relevant issue. Not only that, but Weatherford says that from the Award it is clear that common areas were, in fact, in the arbitral arena (identifying Award pars 62 and 108).

Weatherford submits that arguments of unfairness in process as to the issue of common areas are without merit. First, it says that the submission that Venetian should have been put on notice about the application of common areas as a disputed issue, is wrong. Weatherford says that the requirement for the designation of common areas in the text of the Lease itself (cl 24) was central to Venetian’s case and was addressed by Venetian at the hearing – both orally and in writing.

Second, Weatherford says that Venetian had an opportunity to present evidence as to how the common areas are or were designated to tenants under any Lease in the relevant lot 9009, however, it made an election to not adduce any such evidence.

Finally, as to the argument that Venetian was denied an opportunity to dissuade the arbitrator of a view he ultimately reached, Weatherford says this is not to the point. Relying on Amasya at [55], it is said that the fact that the arbitrator might have arrived a different conclusion if the arbitration played out differently, is an irrelevant consideration.

Process unfairness: common areas

I turn to the aspect of the procedural grievance contention by Venetian that it was denied an opportunity by the arbitrator to lead evidence in support of its rival construction of the clause.

Venetian contends that it could have led expert evidence if it had been given proper notice of the ultimate construction conclusion reached by the learned arbitrator about how common areas in a lease are designated. To that end, an affidavit of Paul Edward Testar sworn 25 August 2020 was sought to be relied upon by Venetian at the present application. Mr Testar says in his affidavit that he is employed as the commercial property manager of the Caratti Group of companies (of which Venetian is a member) and has 30 years’ experience in the development, sale, leasing and management of commercial real estate.

Mr Testar commenced working for the Caratti Group in September 2013. His work involves management of its property portfolio, including about 50 real property assets across Western Australia at various metropolitan and country locations.
The expert evidence that Venetian complains it was denied the opportunity to lead, looks to be found as expressed under pars 11 through 16 of Mr Testar’s affidavit. This evidence is directed towards common areas – the concept that Mr Testar at par 10 says that he is very familiar with in the context of his commercial leasing experience.

At par 11 Mr Testar explains what he believes the notion of common areas normally include. He relates that they are typically shared by tenants in a complex and their customers, visitors and service contractors. But none of that looks to be particularly controversial or helpful. In my assessment, this evidence does not in any sense carry a potential impact concerning the present controversy over a process grievance.

At par 12, Mr Testar seeks to contend that in his experience that ‘Common area is rarely identified on a plan in a lease …’. However, I do not accept that Mr Testar is qualified to express such sweeping views about the contents of written leases generally, or their plans generally. This is obviously a diverse subject matter which must be almost infinite in its potential dimensions.

Likewise Mr Testar’s further observations under par 13 as to the size or measurement of common areas in a complex as being set out in a lease document. This proposed evidence from Mr Testar about what ‘lease documents’ generally provide towards common areas and their designations is equally, in my view, too broad. It is sweeping, generalised, unhelpful, of no weight and ultimately inadmissible.

Even more sweeping generalised observations by Mr Testar at his par 14 concerning tenancy complexes being subject to ‘ongoing development’ are so trite in terms of such complexes changing from time to time, as to be facile. They are unhelpful.

At par 15, Mr Testar purports to speak of a so-called practice of all landlords as being not to designate common areas ‘by specifically notifying each and every tenant during the term of each and every lease of any change to a common area’. Again in my view, such generalised attempted evidence was never admissible. And even if it were admitted, it could not possibly relevantly bear towards the key issue of construction confronting the learned arbitrator during the present hearing.
Likewise unhelpful is par 16, by Mr Testar’s reference to a designation of common areas by painted lines depicting car parking bays and the demarcation directing traffic in common driveways, etc. That purported expression of an expert opinion is again, simply too broad and ultimately, yet again, is wholly irrelevant to the construction exercise required to be undertaken by the learned arbitrator in reference to the phrase ‘lettable area’, used within cl 4.6 of the Lease.

Determination on present application under s 34(2) of the CA Act

The present application, as expressed, seeks to set aside the arbitral determination by a resort to s 34(2)(a)(ii) and (iv) of the CA Act, on a basis that Venetian was not able to ‘present its case’ to the arbitrator, or that the arbitral procedure was somehow unfair, by denying Venetian a reasonable opportunity to present its case. In the end, the contentions are untenable.

Venetian received an entirely fair two-day arbitral hearing. The process followed by the learned arbitrator, on my assessment, was perfectly fair. I repeat that an opportunity for the arbitrating parties to file even further materials given at the conclusion of two days of arbitral hearing, was afforded. The indulgence provided a more than fair opportunity to address any issues as regards further legal submissions or extra documentary expert evidence that Venetian may have wished to have further submitted, arising in the wake of the two days of hearing. But no extra evidence was sought to be added to Venetian’s case. Yet there is a process grievance raised to this court. That is truly breathtaking in its audacity.
Nor did Venetian ever complain to the arbitrator about being denied a fair or reasonable opportunity to present any part of its case at the hearing or afterwards.

An impression I hold, reading only the limited materials put before me (there being no transcript of the two days of arbitral hearing) is that the true underlying grievance Venetian complains over does not really concern the end meaning conclusion reached by the learned arbitrator. Rather, Venetian’s gripe is more against the arbitrator’s conclusion as to ‘regulatory prohibition’ – namely that ‘there was not evidence of any such area, and so I determine this is not relevant to the calculation’ (Award par 119(b)(i) and (ii)).

The construction conclusion of the learned arbitrator allowing Venetian the theoretical scope to reduce the denominator’s fractional number down to below the actual whole area of the larger lot of land owned by Venetian was actually a constructional conclusion reached in Venetian’s favour. A consequence would thereby, as a matter of mathematics theoretically, ultimately increase the proportion of the outgoings to be payable by Weatherford to its Lessor.

Within this overall framework it looks that the numerical areas of its land that Venetian in fact decided to excise against the denominator input figure (D) had included the subject Western Power easement area. The problem for Venetian at the hearing was that merely proving a bare existence of that easement alone was not enough for it to prove that this same easement area was thereby ‘not lettable’ by Venetian. That was a forensic failure on its part – no-one else’s.

Depending on how Venetian had run its arbitral case, it may have been open then for it to have led evidence upon that pragmatic factual utilisation question – in terms of the uses of the Western Power easement area of its land as not being lettable and so, for that area to be excisable from the denominator input figure (D) used in the fraction. But that was a question of fact over which the parties might then have been at odds at the hearing.

Venetian did not run a non-utilisation of the easement area case before the arbitrator at the hearing that way, as best I can ascertain from what is before me. It only tendered the easement document, thinking (presumably) that was enough. It was not.

At the time Venetian’s contention looked to be that a mere existence of a registered easement favouring Western Power had thereby prevented this part of its land from being developed and so, therefore, that the easement area affected was not lettable and so, further, that its area was excisable from the D figure.

That argument was ultimately not accepted at the hearing. But that is not a process grievance. That is just a badly run case.
Nor do I assess in the submissions of Venetian upon the present application complaining of a process failure any suggestion that Venetian might have tendered some tangible negative evidence – in terms of a (non) use and negative letting potential of the area of the Western Power registered easement.

Indeed, the terms of the easement itself, found within Mr Hotchkin’s affidavit at MCH13, explicitly envisage the easement area as retaining some utility for farming purposes (see page 256).

The point is that the true construction of cl 4.6 of the Lease was not really the problem for Venetian with the easement area. The true forensic problem was a lack of any evidence led by Venetian to engage with the interpretation as was reached by the learned arbitrator – which, as seen, actually favoured Venetian had it led the required factual evidence to a non‑utilisation end (if such evidence was ever available, of course).

Likewise, in respect of the arbitrator’s common areas conclusion and observation at par 119(b)(ii) to the effect that there was no evidence of a common area communicated to Weatherford ‘of an area that served or was for the use of the Premises … ‘. There was again a more than sufficient opportunity to engage over that issue at the hearing afforded to Venetian had it chosen to take it up. It did not.

Conclusion

In the end, on what is put before this court, it simply cannot be reliably shown that Venetian suffered a disadvantage by reason of being denied a reasonable opportunity to present its case, or that the arbitral hearing process overall was unfair to it. Venetian must accept that there is no appeal against the arbitrator’s Award and come to terms with that adverse result.
Consequently, the application advanced under Venetian’s originating summons of 26 August 2020 fails to demonstrate any basis for the court to intervene against the Award by under s 34(2)(a)(ii) or (iv) of the CA Act and is dismissed upon publication of these reasons.

I reserve other questions, including as to costs orders.

I will hear the parties as to the precise terms of an appropriate costs order in due course, if that is required.

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

Supreme Court of Queensland

 

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

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

Texts Cited: NIL
Category: TRIAL
Parties:  

CIVIL MINING & CONSTRUCTION PTY LTD

ABN 18 102 557 175

(applicant)

 

v

 

CHESHIRE CONTRACTORS PTY LTD

ABN 75 124 700 385

(respondent)

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

 

Judgement:

 

Introduction

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

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

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

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

Background

 

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

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

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

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

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

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

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

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

 

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

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

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

“12.  Disputes

 

12.1         Early resolution

 

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

 

12.3         Settlement of unresolved disputes or differences

 

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

 

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

 

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

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

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

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

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

The legislated obligation to refer to arbitration

 

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

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

“8 Arbitration agreement and substantive claim before court

 

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

 

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

 

(a)          Is there an “arbitration agreement”?

 

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

 

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

 

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

Definition of an arbitration agreement

 

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

“7 Definition and form of arbitration agreement

 

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

 

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

 

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

Arbitration clause 12.3.3

 

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

 

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

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

 

Consideration

 

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

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

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

 

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

 

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

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

 

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

 

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

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

 

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

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

 

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

 

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

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

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

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

 

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

 

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

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

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

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

 

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

 

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

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

 

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

 

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

 

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

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

 

Conclusion

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

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

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

Orders

 

My orders are:

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

 

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

 

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

 

 

Citations:

[1] (2013) 251 CLR 533.

 

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

 

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

 

[4] (1953) 90 CLR 295.

 

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

 

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

 

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

 

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

 

[9] [2004] FCA 698.

 

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

 

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

 

[12] (1886) 54 LT 596.

 

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

 

[14] [1948] 1 KB 11.

 

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

 

[16] [1971] 2 QB 588.

 

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

 

[18] [1974] 2 NZLR 246.

 

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

 

[20] (1991) 22 NSWLR 466.

 

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

 

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

 

[23] (1996) 39 NSWLR 160.

 

[24] (1985) ATPR 40-636.

 

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

 

[26] (1998) 90 FCR 1.

 

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

 

[28] (2020) 379 ALR 196.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

[37] (2012) 247 CLR 129.

 

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

 

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

 

[40]       T 1-34 L 42.

 

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

Court of Appeal
Supreme CourtNew South Wales

 

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

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

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

Corporations Act 2001 (Cth) s 471B

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

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

Judiciary Act 1903 (Cth) s 39B

Federal Court Rules 2011 (Cth) rr 28.14, 41.06

Commercial Arbitration Act 2010 (NSW) ss 1, 35

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

Arbitration Act 1996 (UK) s 101

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

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

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

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

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

FIRST SOLAR (AUSTRALIA) PTY LTD

Plaintiff

 

AND:

 

LYON INFRASTRUCTURE INVESTMENTS PTY LTD

First Defendant

 

LYON INFRASTRUCTURE INVESTMENTS 1 PTY LTD (IN LIQUIDATION)

Second Defendant

 

LYON SOLAR PTY LTD (IN LIQUIDATION)

Third Defendant

Representation: Counsel for the Plaintiff:               G P Gee

Solicitor for the Plaintiff:               Marque Lawyers

Counsel for the Defendants:       The defendants did not appear

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

 

REASONS FOR JUDGMENT

 

STEWART J:

 

Introduction

 

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

 

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

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

 

Background

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Each party pay their own costs.

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

Consideration

 

Domestic, not international, arbitration

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

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

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

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

54       Arbitration awards

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

 

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

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

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

 

Referral under s 53A(1)

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

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

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

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

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

 

A matter in which the court has original jurisdiction

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

28.14   Applications for order in terms of an award

 

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

 

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

 

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

 

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

 

(3)       The application must be accompanied by:

 

(a)       a copy of the arbitration agreement; and

 

(b)       a copy of the award; and

 

(c)       an affidavit stating:

 

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

 

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

 

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

 

(4)       The application may be made without notice.

 

Note:    Without notice is defined in the Dictionary.

 

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

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

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

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

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

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

 

Dispensing with certain formal requirements

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

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

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

 

The proper form of order

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

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

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

 

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

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

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

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

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

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

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

Conclusion

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

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

**********

 

 

Inghams Enterprises Pty Limited v Hannigan [2020] NSWCA 82 (04 May 2020)

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Hearing dates: 11 December 2019
Date of orders: 04 May 2020
Decision date: 04 May 2020
Before: Bell P at [1]; Meagher JA at [118]; Gleeson JA at [158]
Decision: (1)   Grant leave to appeal.

 

(2)   Allow the appeal.

 

(3)   Set aside orders (1) and (3) made by Slattery J on 16 September 2019.

 

(4)   Declare that the dispute the subject of the respondent’s Notice of Dispute dated 29 May 2019 is not required to be submitted to arbitration pursuant to cl 23.6 of the Queensland Broiler Chicken Growing Agreement between the parties dated 22 September 2015.

(5)   The respondent pay the appellant’s costs of the proceedings at first instance and on appeal.

Catchwords: ARBITRATION – multi-tiered dispute resolution clause – clause included as a component an arbitration clause for certain types of disputes – proper construction of arbitration clause and its scope – principles applicable to the construction of such clauses.

 

CONTRACT – dispute resolution clause – clause contemplating court proceedings in some circumstances and arbitration proceedings in other circumstances – proper construction of the clause – whether a claim for damages for breach of contract “concerned” a “monetary amount payable and/or owed” “under” the agreement.
CONTRACT – construction and interpretation – multi-tiered dispute resolution clause – principles applicable to construction of dispute resolution clauses.

CONTRACT – waiver – whether commencement of earlier court proceedings seeking declarations as to breach of contract resulted in waiver of right to submit claim for damages for breach of contract to arbitration.

Legislation Cited: Civil Procedure Act 2005 (NSW) s 26(1)
Foreign States Immunities Act 1985 (Cth) s 11(1)
Income Tax Assessment Act 1936 (Cth) s 160U(3)
International Arbitration Act 1974 (Cth)
Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) s 5(7)
Land Title Act 1994 (Qld) s 62
Supreme Court Act 1970 (NSW) s 101(2)(r)
Cases Cited: AAP Industries Pty Limited v Rehaud Pte Limited [2015] NSWSC 468
Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724
Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418; [1996] HCA 39
Armacel Pty Ltd v Smurfit Stone Container Corporation (2008) 248 ALR 573; [2008] FCA 592
Attorney General for New South Wales v Melco Resorts & Entertainment Limited [2020] NSWCA 40
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36
Australian Health & Nutrition Association Ltd v Hive Marketing Group Pty Ltd (2019) 99 NSWLR 419; [2019] NSWCA 61
Australian Securities Commission v Lord (1991) 33 FCR 144; (1991) 105 ALR 347
BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (2008) 168 FCR 169; [2008] FCA 551
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; (2013) 298 ALR 666
Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468
Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 58 FCR 365
Chan v Cresdon Pty Ltd (1989) 168 CLR 242; [1989] HCA 63
Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295
Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; [2006] FCAFC 192
Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35
Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64; [1991] HCA 54
Concut Pty Ltd v Worrell (2000) 75 ALJR 312; [2000] HCA 64
Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588
Corporate Affairs Commission (SA) v Australian Central Credit Union (1985) 157 CLR 201; [1985] HCA 64
Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169
Electricity Generation Corporation v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7
Energy Resources of Aust Ltd v Commissioner of Taxation (2003) 52 ATR 120
FAI General Insurance Co Ltd v Ocean Marine Mutual Protection & Indemnity Association (1997) 41 NSWLR 117
Faxtech Pty Ltd v ITL Optronics Ltd [2011] FCA 1320
Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2007] 4 All ER 951
Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 258 CLR 31; [2015] HCA 43
Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321
Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160; (1996) 131 FLR 422
Galafassi v Kelly (2014) 87 NSWLR 119
Gaynor v Attorney General of New South Wales [2020] NSWCA 48
Global Partners Fund Limited v Babcock & Brown Limited (in liq) [2010] NSWCA 196; (2010) 79 ACSR 383
Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190
Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170
Harding v Wealands [2007] 2 AC 1; [2006] UKHL 32
Hi-Fert Pty Ltd v Kiukiang Maritime Carriers (No 5) (1998) 90 FCR 1; (1998) 159 ALR 142
HIH Casualty & General Insurance Ltd (in liq) v RJ Wallace (2006) 68 NSWLR 603; [2006] NSWSC 1150
IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466; (1991) 100 ALR 361
Inghams Enterprises Pty Ltd v Francis Gregory Hannigan [2019] NSWSC 1186
Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR 936
JTA Le Roux Pty Ltd as trustee for the FLR Family Trust v Lawson [2013] WASC 293
Kraft Foods Group Brands LLC v Bega Cheese Limited (2018) 358 ALR 1; [2018] FCA 549
Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2017] NSWSC 203
Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 93 ALJR 1164
Mastrobuono v Shearson Lehman Hutton Inc. 514 U.S. 52 (1995)
McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65
Mineral Resources Ltd v Pilbara Minerals Ltd [2016] WASC 338
Mitsubishi Motors Corp v Soler-Chrysler Plymouth Inc 473 US 614 (1985)
Mobis Parts Australia Pty Ltd v XL Insurance Company SE [2016] NSWSC 1170
Morris-Garner v One Step (Support) Ltd [2019] AC 649; [2018] UKSC 20
Moschi v Lep Air Services Ltd [1973] AC 331; [1972] 4 WLUK 46
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110
Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited (1993) 43 FCR 439; [1993] FCA 346
Parnell Manufacturing Pty Ltd v Lonza Ltd [2017] NSWSC 562
Perovich v Whitton (No 2) (2016) 250 FCR 272; [2016] FCAFC 152
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827; [1980] 2 WLUK 146
Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14
PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2011] FCAFC 52
Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; [2007] HCA 53
Recyclers of Australia Pty Ltd v Hettinga Equipment Inc (2000) 100 FCR 420; [2000] FCA 547
Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 366 ALR 635
Rinehart v Rinehart (No 3) (2016) 257 FCR 310
Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95
Robinson v Harman (1848) 1 Exch 850; 154 ER 363
Rotheberger Australia Pty Ltd v Poulsen [2003] NSWSC 788
Royal Bank of Scotland plc v Babcock & Brown DIF III Global Co-Investment Fund LP [2017] VSCA 138
Samick Lines Co Ltd v Owners of the “Antonis P Lemos” [1985] AC 711
Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332; [1990] HCA 8
TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533; [2013] HCA 5
Tea Trade Properties Ltd v CIN Properties Ltd (1990) 1 EGLR 155
The Queen v Khazal (2012) 246 CLR 601; [2012] HCA 26
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17
Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56
Texts Cited: G B Born, International Commercial Arbitration (2nd ed, 2014, Wolters Kluwer)
A Briggs, Agreements on Jurisdiction and Choice of Law (2007, Oxford University Press)
M Davies (ed), Jurisdiction and Forum Selection Clauses in International Maritime Law (2005, Kluwer Law International)
M Davies, A S Bell, P L G Brereton and M Douglas, Nygh’s Conflict of Laws in Australia (10th ed, 2019, LexisNexis Butterworths)
D W Greig and J L R Davis, The Law of Contract (1987, The Law Book Company Limited)
J D Heydon, Heydon on Contract (2019, Lawbook Co)
D Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (3rd ed, 2015, Sweet & Maxwell)
K Lewison, The Interpretation of Contracts (5th ed, 2011, Sweet & Maxwell)
K Lewison, The Interpretation of Contracts (6th ed, 2015, Sweet & Maxwell)
Category: Principal judgment
Parties: Inghams Enterprises Pty Limited (Applicant)
Francis Gregory Hannigan (Respondent)
Representation: Counsel:
P S Braham SC, D Neggo (Applicant)
M S Henry SC (Respondent)Solicitors:
Paradise Charnock O’Brien (Applicant)
Hannigans Solicitors (Respondent)
File Number(s): 2019/307488
Publication restriction: N/A
 Decision under appeal  Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Duty List

Citation:

[2019] NSWSC 1186

Date of Decision:

16 September 2019

Before:

Slattery J

File Number(s):

2019/269478

HEADNOTE

[This headnote is not to be read as part of the judgment]

Inghams Enterprises Pty Limited (Inghams) entered into a chicken growing contract (the Agreement) with Mr Francis Gregory Hannigan (Mr Hannigan), under which Mr Hannigan received batches of one day old chicks from Inghams, grew them in sheds into chickens and returned them to Inghams. For this service, Inghams paid Mr Hannigan a “Fee”, as defined in the Agreement. The Agreement closely regulated the process of the supply of chicks and return of chickens, and the standard of care expected of Mr Hannigan whilst the chicks were in his custody.

On 8 August 2017, Inghams purported to terminate the Agreement and refused to supply chicks for growing to Mr Hannigan. On 30 August 2017, Mr Hannigan commenced proceedings in the Supreme Court seeking a declaration that Inghams’ purported termination of the Agreement was wrongful (the 2017 proceedings). He did not seek damages in those proceedings, but he reserved his rights in correspondence and before the Court. The 2017 proceedings were heard by Robb J, who entered judgment for Mr Hannigan on 29 March 2019, declaring in effect that Inghams had wrongfully terminated the Agreement. Inghams resumed supplying chicks to Mr Hannigan on or about 17 June 2019.

Mr Hannigan issued a Notice of Dispute to Inghams dated 29 May 2019, seeking damages from Inghams for loss of profits, based on Inghams’ failure to supply chicks to Mr Hannigan from 8 August 2017 (the purported termination date by Inghams) to 17 June 2019 (the resumed dated of supply). A mediation was unsuccessfully undertaken by the parties on 28-29 August 2019, and thus Mr Hannigan contended that cl 23.6 of the Agreement entitled him to refer the dispute to arbitration. Clause 23.1 of the Agreement provided:

“A party must not commence court proceedings in respect of a dispute arising out of this Agreement (“Dispute”) (including without limitation any Dispute regarding any breach or purported breach of this Agreement, the interpretation of any of its provisions, any matters concerning a party’s performance or observance of its obligations under this Agreement, or the termination or the right of a party to terminate this Agreement) until it has complied with this clause 23.”

Clause 23 made provision, in sub-clauses 3 and 4, for the initial informal and then formal mediation of disputes. Clause 23.6 provided as follows:

“If:

23.6.1   the Dispute concerns any monetary amount payable and/or owed by either party to the other under this Agreement, including without limitation matters relating to determination, adjustment or renegotiation of the Fee under Annexure 1 or under clauses 9.4, 10, 11, 12, 13 and 15.3.3; and

23.6.2   the parties fail to resolve the Dispute in accordance with Clause 23.4 within twenty eight (28) days of the appointment of the mediator

then the parties must (unless otherwise agreed) submit the Dispute to arbitration using an external arbitrator (who must not be the same person as the mediator) agreed by the parties or, in the absence of agreement, appointed by the Institute Chairman.”

Inghams commenced proceedings in the Supreme Court to restrain the referral to arbitration, and sought declarations that (a) Mr Hannigan’s damages claim did not fall within cl 23 of the Agreement and that (b) even if it did, Mr Hannigan had waived any entitlement to arbitrate the dispute under cl 23 because of his commencement of the 2017 proceedings.

The primary judge held that Mr Hannigan was entitled to refer his damages claim to arbitration under cl 23.6 of the Agreement.

The principal issues before the Court of Appeal were:

  1. Whether the primary judge erred in his construction of cl 23.6 of the Agreement, in finding that the claim for damages fell within cl 23.6.1 and could be referred to arbitration (the construction issue);
  2. Whether the primary judge erred in not finding that Mr Hannigan had waived his right to refer the dispute to arbitration, pursuant to cl 23.6 of the Agreement (the waiver issue).

The Court held (Meagher JA, Gleeson JA agreeing, Bell P dissenting), granting leave to appeal and allowing the appeal:

As to the construction issue:

  1. By Meagher and Gleeson JJA: the primary judge erred in his construction of cl 23.6 of the Agreement. The subject matter of the notified dispute, being a claim for unliquidated damages, was not a claim to or about an amount “payable” or “owed” by Inghams to Mr Hannigan under the Agreement, nor was it a dispute which affected or related to the negotiation, adjustment or determination of any such amount. As the claim did not concern a monetary amount payable under the Agreement, and as the obligation to pay damages for breach of contract was not created by or did not arise under the Agreement, the Court held that the dispute was not a dispute which fell within cl 23.6.1. Accordingly, the dispute was not one which must have, in the absence of any ad hoc agreement, been submitted to arbitration: [127]-[156]; [158].
  2. By Bell P (dissenting): the primary judge did not err in his construction of cl 23.6 of the Agreement. A liberal approach should be applied to the construction of the dispute resolution clause, based both on the legal principles applicable to dispute resolution clauses and a number of textual indications in cl 23.6.1, suggesting that the parties intended the clause to be construed broadly. Accordingly, the Dispute in question did fall within the ambit of cl 23.6, with Mr Hannigan entitled to pursue his claim for damages by way of arbitration: [68]-[107].
  3. Discussion by Bell P of dispute resolution clauses and the principles applicable to their interpretation: [48]-[67] (Bell P).

As to the waiver issue:

  1. By Meagher and Gleeson JJA: as the dispute was not required to be referred to arbitration, the waiver issue did not arise. However, agreeing with Bell P’s reasoning in this respect, if the dispute was required to be referred to arbitration, Mr Hannigan had not waived his right to insist that occur: [118]; [158].
  2. By Bell P: the primary judge did not err in finding that Mr Hannigan had not waived his right to refer the dispute to arbitration. There had been no unequivocal abandonment in or by reason of the 2017 proceedings of any right to arbitrate the question of damages for breach of contract at some time in the future. Further, cl 23.11 of the Agreement authorised court proceedings to be pursued for urgent declaratory relief, and the relief sought in the 2017 proceedings could be so characterised: [109]-[112].

Judgment

  1. BELL P: This is an application for leave to appeal from the decision of Slattery J (the primary judge) of 16 September 2019, concerning the proper forum for the determination of a claim for damages for breach of contract, the relevant contract being a standard form chicken growing contract (the Agreement) between Mr Francis Gregory Hannigan (Mr Hannigan) and Inghams Enterprises Pty Limited (Inghams).
  2. Mr Hannigan sought to have his claim referred to arbitration, pursuant to cl 23.6 of the Agreement but Inghams resisted, initiating proceedings in this Court to restrain the commencement or continuation of any arbitration and seeking declarations as to the proper construction of the Agreement.
  3. As shall be seen, the dispute resolution clause in the Agreement contemplates the litigation of some disputes in court proceedings and the arbitration of other disputes, following a preliminary mediation requirement. At first instance, the primary judge held that the claim for damages fell within the scope of the arbitration sub-clause and, accordingly, declined to restrain the commencement or continuation of the arbitration and dismissed Inghams’ proceedings: [2019] NSWSC 1186.
  4. Inghams seeks leave to appeal because of the fact that it was considered that the value of the outcome of the real issue in dispute, namely the question of forum, did not exceed $100,000 with the consequence that s 101(2)(r)of the Supreme Court Act 1970 (NSW) applied: see, generally, Gaynor v Attorney General of New South Wales [2020] NSWCA 48 at [13]-[20].
  5. Inghams raised two main issues on the prospective appeal:
  6. whether the primary judge erred in finding that the notified dispute between the parties must be referred to arbitration, pursuant to cl 23.6 of the Agreement; and
  7. whether the primary judge erred in not finding that Mr Hannigan had waived his right to refer the dispute to arbitration pursuant to cl 23.6 of the Agreement.
  8. In my opinion, leave to appeal should be granted in circumstances where final and injunctive declaratory relief was sought, the arguments were not free of complexity and called for a consideration of the principles applicable to the interpretation of a complex dispute resolution clause, and the ultimate commercial ramifications for the parties were significant.

The Agreement

  1. Under the Agreement entered into on 22 December 2015, Mr Hannigan receives batches of one day old chicks (referred to in the Agreement as “Birds”) from Inghams, grows them in sheds into chickens and returns them to Inghams. For this service, Inghams pays Mr Hannigan a “Fee”, as defined in the Agreement. The Agreement closely regulates the process of the supply of chicks and return of chickens, and the standard of care expected of Mr Hannigan whilst the chicks are in his custody.
  2. Inghams’ general obligations under the Agreement are defined in cl 3.1 and 3.2 of the Agreement, as follows:

“3.1    Subject to this Agreement, the availability of Chickens and the Grower’s capacity to raise those Chickens (in accordance with the terms and conditions of the Agreement), Inghams will supply Batches to the Grower and the Grower will accept and grow those Birds for Inghams in the Sheds.

3.2    Inghams will so far as is reasonably practicable supply the Grower with Batches at placement densities commensurate with the Commercial Growers or such other placement densities which may be agreed by Inghams with the Grower Representative from time to time but subject to variation:

3.2.1    in accordance with Annexure 3;

3.2.2    if the Grower requests that it receive a quantity of Birds for a particular Batch that is less than would be required pursuant to clause 3.2;

3.2.3    taking into consideration any relevant Animal Welfare Standards;

3.2.4    taking into consideration any broiler growing standards;

3.2.5    taking into consideration any other provision of this Agreement;    and/or

3.2.6    if Inghams’ farming standards change or if the breed or    genetics of the Chickens change.”

  1. One oddity of the Agreement which may present issues in the assessment of any claim for damages, irrespective of the forum in which that claim is determined, is that it does not appear to specify the number of Batches that Inghams will supply per year or during the life of the Agreement. The reference to “placement densities commensurate with the Commercial Growers” in cl 3.2 appears to reflect the fact that a grower such as Mr Hannigan is a member of a pool or collective and, by a complex series of formulae in Annexures 2 and 3 of the Agreement, the fee paid to and efficiency rating of any one grower in the pool is affected by his or her performance relative to other growers. It is not necessary to go into the complexity of such formulae, other than to note that they have implications for the calculation of the damages claimed in the present case and the potential complexity of that exercise.
  2. Mr Hannigan’s general obligations as Grower are provided for in cl 4, with cl 4.1 to 4.7 of the Agreement providing as follows:

“The Grower must:

4.1    accept each Batch delivered by Inghams to the Grower pursuant to this Agreement and raise the Birds in each Batch to the stage of maturity determined by Inghams;

4.2    raise the Birds in accordance with the Manual;

4.3    prepare the Sheds in readiness for each Batch;

4.4    be available or present on the Premises when each Batch is delivered;

4.5    place the Birds in the Sheds upon their delivery;

4.6    furnish all labour, utilities, water, electricity, litter, bedding and all other supplies (other than those Inghams agrees to supply under this Agreement) required to raise the Birds and comply with its obligations under this Agreement and the Manual;

4.7    provide adequate well-maintained Sheds for the Birds as required by the Manual …”

  1. Clause 9.1 of the Agreement provides that:

“For each Batch raised by the Grower and collected by Inghams from the Grower, Inghams will pay the Grower the Payment calculated on the basis of the Fee but varied as may be required by clauses 9, 10 and 11 and Annexure 1”.

  1. Clause 9.4 of the Agreement provides that:

“Inghams may deduct from the Payment:

9.4.1   any amount referable to the weight and/or number of Birds rejected as unfit for processing by Inghams; or

9.4.2   any amount referable to the weight of Birds that are unsuitable based on Animal Welfare Standards including but not limited to Paw Burns, Breast Blisters and Feed-in-Crop received from a Batch of Birds from the Growers premises (including the reasonable costs incurred to return the production process at Inghams’ processing plant to meet the relevant food safety standards). The Bird standards and relevant food safety standards are outlined in the Manual; and

9.4.3   any amount referable to Birds which are rejected by reason of the Grower failing to meet appropriate accreditation standards, meaning those Birds can only be processed as a non-accredited commercially grown Bird. In such cases the Fee paid to the Grower in respect of those Birds will be reduced to the current Collective Grower commercially grown Bird fee at that time;

if the number of Birds so rejected exceeds Inghams normal and reasonable expectations at such time”.

  1. Clause 10.1 of the Agreement provides that:

“From the commencement of this agreement Inghams will make Payments to the Grower calculated in accordance with Annexure 1 and Annexure 2”.

  1. Clause 7 of Annexure 1 highlights the complexity of the calculation of the Fee payable for chickens collected by Inghams from the growers, making provision for detailed adjustment by the application of productivity criteria. Again, it is not necessary to descend to further detail in relation to this calculation, other than to note that the calculation of a Fee payable (and thus the calculation of any damages for breach of contract) would not appear to be a straightforward exercise free from complexity.
  2. Clause 11 of the Agreement provides:

“11.1   Where the Payment to be paid to the Grower in respect of any Batch is less than 85% of the Fee in respect of that Batch as a consequence of a single event determined in writing by Inghams to be a disaster, then:

11.1.1   if the disaster is caused by any negligent or deliberate action by or on behalf of Inghams:

(a)   the Batch will not be assessed by reference to the Pool Payment System;

(b)   the Batch will not be considered during the determination of the Grower’s Efficiency Rating; and

(c)   the Grower shall be paid 100% of the Fee for the number of birds placed, reduced by the average mortality of the relevant period;

11.1.2   if the parties agree that Clause 11.1.1 does not apply and neither party is deemed to have caused the poor performance of the batch, the Grower shall be paid 100% of the group growing fee for all birds collected; or

11.1.3   if the parties agree that the Grower and Inghams have each partially contributed to the cause of the disaster, the Grower shall be paid a percentage between 65% and 100% of the group growing fee, as agreed between Inghams and the Grower Representative (or failing agreement, as determined in accordance with clause 23).

11.2    Where the Grower is not responsible for causing the disaster (as determined under Clause 11.1.1 or 11.1.2) the Batch shall be excluded from any determination of the Grower’s Efficiency Rating”.

  1. Clause 12 of the Agreement provides:

“12.1   The Grower will bear financial losses suffered by Inghams (limited to the cost of all goods supplied to the Grower in accordance with clause 3.2 and excluding all consequential and indirect losses) caused by the negligence of the Grower in raising the Birds, and Inghams may deduct such losses from any Payments due to the Grower subject to the Payment for the Batch in respect of which the losses were suffered being calculated on the basis of 100% of the Fee for all Birds collected.

12.2   Inghams will notify the Grower in writing if the Grower is to be held liable under Clause 12.1.

12.3   Inghams may collect from the Grower and/or raise (or arrange to be collected and/or raised) any Birds to which any losses under Clause 12.1 are referable, in which case:

12.3.1   Inghams will notify the Grower in writing of its intention to do so; and

12.3.2   Inghams may charge to and recover from the Grower the losses and all reasonable expenses incurred by Inghams in taking action under this Clause 12.3

12.4   Any dispute relating to the amount of any loss pursuant to this Clause 12 will be resolved in accordance with clauses 23.4 to 23.10 (inclusive), provided that Inghams will pay to the Grower within fourteen (14) days of the Friday of the week in which the last Birds in the Batch the subject of a notice under Clause 12.2 are collected by Inghams one half of the Payment determined by it to be due to the Grower in respect of the relevant Batch, with an adjustment to be made after the resolution of the Dispute”.

  1. Clause 15.3.3 of the Agreement provides:

“if any amendments to the Manual are likely to cause a material increase in the cost to the Grower of performing its obligations under this Agreement, the parties will re-negotiate the Fee having regard to the effect of the relevant amendments and in the absence of agreement the matter will be resolved in accordance with clauses 23.4 to 23.10 inclusive”.

  1. The Agreement contains a dispute resolution clause which is the central clause at issue in the present proceedings. Clause 23 relevantly provides:

“23.1   A party must not commence court proceedings in respect of a dispute arising out of this Agreement (“Dispute”) (including without limitation any Dispute regarding any breach or purported breach of this Agreement, the interpretation of any of its provisions, any matters concerning a party’s performance or observance of its obligations under this Agreement, or the termination or the right of a party to terminate this Agreement) until it has complied with this clause 23.

23.2   A party claiming that a Dispute has arisen must notify the other party to the Dispute in writing and set out details of the Dispute.

23.3   Each party must use its best efforts to resolve the dispute during the period of thirty (30) days (or such longer period not exceeding ninety (90) days as the parties may mutually agree) after a notice is given under clause 23.2 (“Initial Period”).

23.4   If the parties are unable to resolve the Dispute within the Initial Period (or any extension of that period which may be agreed in writing) then:

23.4.1   they must within a further seven (7) days appoint a mediator to mediate the Dispute; or

23.4.2   if the parties fail to agree on a mediator within that time, either of them may refer the Dispute for mediation to a mediator nominated by the then Chairman for the time being of the State Branch of the Institute of Arbitrators and Mediators Australia,

and the parties must thereafter mediate the Dispute.

23.5   The terms on which the mediation is conducted and the procedure for the mediation will unless otherwise agreed in writing between the parties and the mediator be in accordance with and subject to the Institute of Arbitrators and Mediators Australian (IAMA) Rules for the conduct of Commercial Mediation (or any rules substituted for those Rules by the Institute) applicable at that date.

23.6    If:

23.6.1   the Dispute concerns any monetary amount payable and/or owed by either party to the other under this Agreement, including without limitation matters relating to determination, adjustment or renegotiation of the Fee under Annexure 1 or under clauses 9.4, 10, 11, 12, 13 and 15.3.3; and

23.6.2   the parties fail to resolve the Dispute in accordance with Clause 23.4 within twenty eight (28) days of the appointment of the mediator

then the parties must (unless otherwise agreed) submit the Dispute to arbitration using an external arbitrator (who must not be the same person as the mediator) agreed by the parties or, in the absence of agreement, appointed by the Institute Chairman.

23.7   The parties agree that the arbitration of any matter referred for arbitration will be undertaken by the arbitrator in accordance with and will be governed by the IAMA Arbitration Rules.

23.8   The parties must use their reasonable endeavours to enable the arbitrator to make a determination as quickly as possible and the arbitrator must (unless otherwise agreed in writing) make that determination within 2 (two) months of accepting the appointment. For that purpose the parties agree to co-operate with the arbitrator and each other in fixing a timetable and taking such steps as are required under that timetable or as may otherwise be reasonably directed by the arbitrator in order to enable the arbitrator to complete the arbitration with[in] that period.

23.9   The written determination of the arbitrator of any matter referred is final and binding on the parties (except for manifest error or fraud).

23.10    Each party must (as applicable):

23.10.1   unless otherwise agreed bear its own costs of resolving a Dispute in accordance with this Clause 23 (other than the costs of an arbitration) and bear equally the fees and proper out of pocket expenses of the mediator and any other third party expenses (including venue hire) related to the mediation; and/or

23.10.2   bear in the proportions and to the extent determined by the arbitrator the costs of the arbitration and any related costs.

23.11   Nothing in this Clause 23 shall prevent the making of an application to the court by any party to the dispute for urgent injunctive or declaratory relief”.

The 2017 proceedings and the proceedings at first instance

  1. Before considering the proceedings at first instance, an earlier set of proceedings between the parties should be noted.
  2. On 8 August 2017, Inghams purported to terminate the Agreement and refused to supply chicks for growing to Mr Hannigan, who maintained in response that the Agreement was still on foot. Inghams contended that there was a chicken growing relationship between the two parties which was not governed by the Agreement because of Mr Hannigan’s failure to sign and return the Agreement document. Alternatively, Inghams contended that even if it were bound by the terms of the Agreement, it was entitled to terminate it on account of Mr Hannigan’s breach, due to his alleged failure to feed thousands of chickens in contravention of animal welfare standards, and because of his alleged failure to provide Inghams, from time to time, with certain documents relating to the weight of the chickens.
  3. Mr Hannigan commenced proceedings in the Supreme Court on 30 August 2017 (the 2017 proceedings), seeking a declaration that Inghams’ purported termination of the Agreement was wrongful. He did not, however, seek damages in those proceedings and did not (and has never) terminated the Agreement. The speed with which proceedings were commenced reflected their urgency from Mr Hannigan’s perspective. His business and livelihood were under threat and he wanted the Agreement to continue, seeking a declaration in effect that it remained on foot. At [29]-[30] of his judgment, the primary judge observed that:

“Mr Hannigan’s decision not to include a claim for consequential loss was a deliberate one, constrained as it was, he says, by the commercial circumstances he faced. Mr Henry SC, who also appeared for Mr Hannigan in the 2017 proceedings, explained this to Robb J at a directions hearing on 10 May 2018, in the following terms:

‘HENRY:   There’s no claim for damages presently, and I’m not suggesting it would arise in these proceedings. The position on that front is that the plaintiff has reserved its position. Whether it at a later point in time brings a claim for damages is obviously yet to be seen. Frankly, the reason for that approach was to try to have this resolved as soon as possible, because the position is that there’s a farm with substantial chicken sheds on it which are empty and have been empty since – I can’t recall the date in particular, but it would be late August last year.

So the proceedings were brought in the hope to have the question of termination resolved as expeditiously as possible without being delayed by complicating things with further claims for damages and the associated time and cost associated with it. So the plaintiff won’t be claiming damages in these proceedings, but that shouldn’t be taken as – that’s why it’s confined in the way it is.’

The commercial reasoning behind this approach is understandable. Mr Henry SC’s then statement to the Court is consistent with Mr Hannigan’s evidence adduced in these proceedings about his state of mind at the time. He was not cross-examined in these proceedings and his affidavit evidence is accepted. Mr Hannigan explained, ‘I wanted to have that dispute determined as quickly as possible’. He has six chicken sheds on his property, which collectively housed approximately 210,000 chickens. The logistics and costs of running those sheds are substantial. For that reason he said, ‘I wanted certainty as to whether the Contract remained on foot as soon as possible’. His belief was that ‘the quickest way in which I was likely to obtain that certainty, by a judgment of the Court, was to confine the matters in dispute in the [2017] proceedings’. He not unreasonably believed that bringing a claim for damages in the 2017 proceedings would delay, complicate and increase the costs of the 2017 proceedings. Consistently with the position, his counsel stated to the Court, he certainly thought, as he said, that, ‘throughout the course of the [2017] proceedings I believed that I had reserved my position to claim damages at a later point if I had such a claim’.”

  • The 2017 proceedings were heard by Robb J who entered judgment for Mr Hannigan on 29 March 2019, declaring in effect that Inghams had wrongfully terminated the Agreement: Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321. Inghams resumed supplying chicks to Mr Hannigan on or about 17 June 2019.

Subsequent claim for damages and jurisdictional dispute

  • Mr Hannigan issued a Notice of Dispute to Inghams dated 29 May 2019, seeking damages from Inghams for loss of profits, based on Inghams’ failure to supply chicks to Mr Hannigan from 8 August 2017 (the purported termination date by Inghams) to 17 June 2019 (the resumed date of supply).
  1. The “Details of Dispute” were relevantly outlined as follows:

“1.    Inghams Enterprises Pty Ltd have failed to supply chickens to Francis Hannigan (Avoca Vale Farm) from 8th August 2017 to 17th June 2019 (date estimated)[.] Inghams Enterprises Pty Ltd are in breach of the Contract for not supplying chickens.

  1.    Francis Hannigan has suffered financial loss as a result of Inghams Enterprises Pty Ltd not supplying chickens being 661 days x $3,031.70 per day being $1,992,055.70.
  2.    Francis Hannigan claims:-

(i)   $1,992,055.70

(ii)   Damage to sheds – from lack of use (estimated $150,000.00);

(iii)   Electricity – locked into Contract with supplier (details to be    supplied);

(iv)   Interest (Estimated $100,000.00);

(v)   Legal fees (estimated $50,000.00 plus legal fees on Supreme Court proceedings).

(vi)   Miscellaneous $20,000.00

  1.    The Initial Period (Clause 23.3) commences on Thursday 30 May 2019 and ceases 30 days thereafter – 29 June 2019.
  2.    For your ease of reference Clause 23 is attached.”
  3. A mediation was unsuccessfully undertaken by the parties on 28-29 August 2019 and thus Mr Hannigan contended that cl 23 of the Agreement entitled him to refer the dispute to arbitration (see at [18]above).
  4. Inghams commenced proceedings in the Supreme Court to restrain the referral to arbitration, and for declarations that (a) Mr Hannigan’s damages claim did not fall within cl 23 of the Agreement and that (b) even if it did, Mr Hannigan had waived any entitlement to arbitrate the dispute under cl 23 because his commencement of the 2017 proceedings meant that he had abandoned reliance upon cl 23 at that time.

The primary judgment

  1. The primary judge held that Mr Hannigan was entitled to refer his damages claim to arbitration under cl 23 of the Agreement, and that he had not waived that entitlement by commencing the 2017 proceedings.
  2. After referring to the familiar principles concerning the interpretation of commercial contracts articulated by the High Court in cases such as Electricity Generation Corporation v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7 (Woodside) and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd(2015) 256 CLR 104; [2015] HCA 37 (Mount Bruce), the primary judge observed (at [56]) that “[w]ithin the broad canons of construction laid down by cases such as Woodside and Wright Prospecting, arbitration clauses draw specific considerations into focus.” In this respect, his Honour referred to the well-known decision of Gleeson CJ in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165 (Francis Travel), where the Chief Justice observed that:

“An extensive examination of the many cases dealing with the meaning and effect of various common arbitration clauses in contracts was undertaken by Hirst J in Ethiopian Oilseeds v Rio del Mar [1990] 1 Lloyd’s Rep 86. As his Lordship demonstrated, the expression ‘arising out of’ has usually been given a wide meaning. Some older cases, such as Crane v Hegeman-Harris Co Inc [1939] 4 All ER 68 and Printing Machinery Co Ltd v Linotype & Machinery Ltd [1912] 1 Ch 566, which held that arbitration agreements expressed in a certain manner or entered into in certain circumstances did not permit an arbitrator to deal with a claim for rectification, have been confined by later authorities to their special facts, and should not now be regarded as indicating the correct general approach to problems of this kind.

When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.”

The primary judge noted that these principles were further discussed by Bathurst CJ in Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95 (Welker), and by the Full Court of the Federal Court of Australia in Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170 (Hancock Prospecting). He referred in particular to Bathurst CJ’s observation in Welker at [121] that, irrespective of the language of the clause, the Court should not apply a presumption that parties are likely to have intended all of their disputes to be decided by the one tribunal.

  1. The essence of the primary judge’s reasoning is contained in [59]-[66] of the primary judgment. His Honour began by noting the breadth of the word “concerns” in cl 23.6 of the Agreement, stressing that it was not confined to claims in debt or amounts payable or that may be calculated as payable arising under express terms of the Agreement: at [59]. His Honour then observed (at [60]) that:

“Giving appropriate emphasis to the word ‘concerns’ in clause 23.6 readily accommodates within the words of the Contract the considerations that Gleeson CJ emphasised in Francis Travel about the approach to be considered in construing arbitration clauses.”

  1. His Honour then accepted the submission by senior counsel for Mr Hannigan that the reference to cl 12 in cl 23.6 provided a telling answer to Inghams’ submission that the Agreement contemplated that arbitration was to be used solely for monetary disputes, such as in relation to the calculation of a Fee under the various formulae contained in the Agreement.
  2. The submission accepted by the primary judge was that “clause 12.1 defies that proposition.” As the primary judge held (at [62]), “[n]o monetary amount is able to be directly calculated from clause 12, as being payable under the Contract. Rather, clause 12 in substance describes no more than a claim for damages that Inghams may have, as its words bear out: ‘the Grower will bear financial lossessuffered by Inghams’.” (emphasis in original).
  • The significance of this submission lay in the fact that no genus of dispute could be derived from the specific clauses referred to in cl 23.6.1 to suggest what did and did not fall within the scope of the arbitration agreement constituted by that sub-clause. This was only emphasised, in the primary judge’s opinion, by the fact that that clause used the words “including without limitation”: at [63].
  • The primary judge then observed (at [64]) that:

“…Inghams’ construction of clause 23 introduces a degree of arbitrariness to the operation of the clause that does not seem consonant with the predictable operation of a clause designed to provide rapid certainty in a commercial contract. As Mr Henry SC points out, if Mr Hannigan received chicks and performed his part of the bargain by growing them and they were in turn collected by Inghams, ordinarily the Fee calculated in accordance with clause 9 would become due to Mr Hannigan. Mr Hannigan could attempt to recover the fee by suing on clause 9 as an action in debt. In that case, clause 23.6.1 would operate to allow the dispute to be referred to arbitration. Alternatively, Mr Hannigan could sue to recover the money as damages for breach of contract, that is, a breach of the obligation to pay the Fee. In these circumstances, clause 23.6.1 would, on Inghams’ construction, not operate to allow referral of the dispute to arbitration. Such inconsistency in outcome between two modes of suing for non-payment of the same fee could hardly have been intended by the contracting parties.”

His Honour continued (at [65]):

“… it does no violence to the words of clause 23.6.1 to see that in an action for breach of contract the calculation of the quantum of the ‘monetary amount payable and/or owed by either party to the other under this agreement’ is the measure of the ultimate damages that may be awarded for breach of this Contract. What is actually payable as a Fee under the Contract would be a critical integer in any damages calculation at the suit of Mr Hannigan. At least in that sense, it can be said without difficulty that the dispute ‘concerns’ such ‘money amounts’.

  • On the question of waiver, the primary judge held that the bringing of the 2017 proceedings was not an abandonment of a right to seek damages in a subsequent arbitration, that Mr Hannigan had reserved his right to do so and that this was apparent from the terms of [24] of the earlier decision in the 2017 proceedings, in which Robb J had said:

“Thirdly, it is notable that, by his prayers for relief, Mr Hannigan only seeks declarations that the parties are bound by a particular agreement, and that Inghams’ 8 August 2017 letter did not terminate the agreement. Mr Hannigan has not sought any consequential relief, either in the nature of orders obliging Inghams to implement the agreement, or ordering Inghams to pay damages to Mr Hannigan for breach of the agreement. As Inghams ceased to deliver chickens to Mr Hannigan after it purported to terminate the agreement, it may be imagined that Mr Hannigan may have suffered some damage. The Court does not know what Mr Hannigan’s aspirations are concerning the possible continuity of the performance of the agreement, if it is found by the Court to be valid and to continue in effect. The Court does not know what course Inghams proposes to take in that event. If Mr Hannigan succeeds in these proceedings, the only result will be that he will establish that he has an agreement in terms of the Inghams Agreement, and that the agreement has not been terminated. Mr Hannigan will apparently be satisfied with that outcome, and Inghams has not suggested that Mr Hannigan’s claims are incomplete as he has not sought in these proceedings all of the relief to which he may be entitled. As the parties have been content to proceed on that basis, so will the Court.”

  1. Further, the primary judge characterised the 2017 proceedings as falling within cl 23.11 of the Agreement, concluding that Mr Hannigan’s “election to take the course of commencing proceedings in the Court comes within an exception to clause 23 in the Contract and is not incompatible with his present attempts to use of [sic] clause 23”: at [82].

Submissions on appeal

  • As noted at [5]above, Inghams raised two issues which may conveniently be labelled “the construction issue” and “the waiver issue”.

The construction issue

  1. In relation to the construction issue, Inghams contended that the primary judge erred in his construction of cl 23.6 of the Agreement, submitting that the correct construction of cl 23.6 is as follows:

“a.    it applies only where the dispute concerns the monetary amount – the monetary amount must itself be the subject matter of the dispute;

  1.    the phrase payable and/or owed means that the monetary amount must be a liquidated amount due for payment (which the amount claimed in the dispute notice is not, because it is not a payment actually earned by Mr Hannigan for raising chickens); and
  2.    it must arise “under the agreement” such that the obligation to pay is found in a clause of the agreement (rather than as a secondary obligation to pay damages).” (emphasis in original).
  3. In written submissions, Inghams raised the following textual considerations as to why its construction of the clause should be preferred:
  4. As a matter of ordinary language, a dispute “concerns” a monetary amount payable under an agreement if it is a dispute about the monetary amount. It is not sufficient that one integer in the calculation of a disputed claim is a monetary amount that would have been payable under the Agreement had different circumstances come to pass.
  5. The scope of cl 23.6 is to be construed by reference to the differently and more broadly drafted cl 23.1, with such difference in drafting weighing heavily against a broad reading of cl 23.6. In this respect, it was submitted that the primary judge’s construction of cl 23.6 tended to remove that distinction.
  6. The “list” of matters referred to in cl 23.6.1 includes matters relating to “determination, adjustment or renegotiation of the Fee” or a number of other specified clauses, all of which concern the manner of calculation or adjustment of various monetary amounts payable under the Agreement. It was submitted that, although the list was obviously not intended to be exhaustive, using as it did the phrase “including without limitation”, it was nonetheless relatively narrow in its scope.
  7. The use of the phrase “payable and/or owed” suggests that damages claims were not intended to be covered, as the word “payable” connotes a legally enforceable obligation to pay. In this respect, reference was made to Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190 at [118ff]. It was submitted that there was no legally enforceable obligation to pay damages for breach of the Agreement pending the judicial determination of Mr Hannigan’s claim and that no money could be “owed” until determination of the claim. Thus, it was submitted that the dispute in the present case did not concern any amount “payable and/or owed” by Inghams.
  8. The need for amounts payable to be payable “under the agreement” maintained a distinction between primary obligations to pay money (which might be owed or payable under the Agreement) and secondary obligations arising upon breach (which might become payable upon judgment being given by reason of the judgment, but which are not ever payable “under the agreement”).
  • In oral submissions, Mr Braham SC who appeared on behalf of Inghams attacked the primary judge’s reliance on Francis Travelto justify a broad interpretation of the language used in cl 23.6. He submitted that Gleeson CJ’s observations in that case proceeded on the basis, to use the Chief Justice’s language at 165,that the parties were “unlikely to have intended that different disputes should be resolved before different tribunals”. In the present case, however, Mr Braham suggested that the parties had contemplated this very outcome, drawing a distinction in this regard between the language of cl 23.1 and 23.6.1. As such, it was submitted, there was no justification for construing cl 23.6 broadly.
  1. Mr Braham also submitted in oral argument that “[t]he Agreement clearly needed a rapid dispute resolution procedure for fee calculation and it was provided by [cl] 23.6.1”.
  2. Mr Hannigan submitted that Inghams’ submissions should be rejected for the following reasons:
  3. Inghams’ submissions involved form prevailing over substance. For example, if Mr Hannigan fulfilled his contractual obligations by growing chicks and, in breach of its obligations, Inghams refused to pay him, he could recover the outstanding money by an action in debt or an action for damages for breach of contract. Although both actions would seek recovery of the same unpaid amount, on Inghams’ construction of c 23.6.1 of the Agreement, the former action would have to be determined by arbitration, whereas the latter action would have to be determined by a court.
  4. The dispute the subject of Mr Hannigan’s damages claim need not be confinedto an amount payable and/or owed under the Agreement. As specified under cl 23.6.1 of the Agreement, provided it “concerns” such an amount, the dispute will fall within the relevant clause. In view of the primary judge’s finding at [65] that the Fee payable to Mr Hannigan under the Agreement would be a “critical integer in any damages calculation at the suit of [the respondent]”, the dispute the subject of that claim relates to or is connected with the amount payable and/or owed under the Agreement.
  5. Inghams’ submission that the monetary amount must be a liquidated amount due for payment was at odds with the terms of cl 23.6.1, and its submission that cl 23.6.1 applies only to primary obligations, but not secondary obligations, is misplaced.
  6. Inghams’ submission that no monetary amount was payable within the meaning of cl 23.6.1 of the Agreement because there “is no legally enforceable obligation to pay damages for breach of the agreement pending the judicial determination of Mr Hannigan’s claim” was incorrect. Referring to Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 58 FCR 365 at 375,it was submitted that an entitlement to damages accrues upon breach of contract. Further, it was submitted that it did not follow from the fact that the quantum of damages may not be ascertained at the date of breach that there is no legally enforceable obligation to pay damages.

The waiver issue

  1. On the waiver issue, which arises only if its submissions in relation to the construction issue are not accepted, Inghams submitted that the primary judge erred in finding that Mr Hannigan had not waived his right to refer the dispute to arbitration.
  • Inghams submitted that Mr Hannigan did not follow cl 23 of the Agreement in commencing the 2017 proceedings in court. Consequently, it was submitted that Mr Hannigan was now prevented from asserting any right to have the current dispute referred to arbitration for two reasons:

“First, by commencing and conducting the Earlier Proceedings in this Court, Mr Hannigan acted in a manner inconsistent with his right to have the questions in those proceedings determined in an arbitration, thereby waiving that right: Expense Reduction Analysts Group Pty Ltd v Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641… the waiver now extends to the damages claim.

Secondly, if Mr Hannigan’s construction of clause 23.6 is accepted, then it was open to Inghams to resist the Earlier Proceedings on the basis that the subject matter of the case was required to be submitted to arbitration. Inghams did not do so. The conduct of the parties in conducting the Earlier Proceedings to final judgment indicates an agreement between them not to submit the dispute to arbitration. The present dispute is just a continuation of the dispute the subject of the Earlier Proceedings. It is not open to Mr Hannigan to now act inconsistently with the agreement that the dispute would be resolved in Court.”

  1. Mr Hannigan responded on the basis that the question whether Inghams lawfully terminated the Agreement on 8 August 2017 (being the subject of the 2017 proceedings) and whether he was entitled to damages for breach of the Agreement post 8 August 2017 were disparate matters. As the primary judge held at [81], the 2017 proceedings primarily concerned events leading up to and including Inghams’ invalid letter of termination dated 8 August 2017. The current proceedings, on the other hand, concerned Inghams’ failure to supply chicks after 8 August 2017.
  2. It was submitted that, as held by the primary judge at [79], “there was a sound reason” for Mr Hannigan not claiming damages for breach of the Agreement in the 2017 proceedings. The issue in the 2017 proceedings was whether Inghams’ purported termination of the Agreement was valid. Mr Hannigan’s position was that it was invalid, that he did not accept the repudiation constituted by the invalid notice of termination, and that the Agreement remained on foot. Accordingly, unlike the position that would have occurred had the repudiation been accepted and the Agreement terminated with the accrual of a right to loss of bargain damages, Mr Hannigan could not have claimed the damages the subject of his current claim at the time of the 2017 proceedings.
  3. Further, Mr Hannigan submitted that cl 23.11 of the Agreement provided that nothing in cl 23 shall prevent the making of an application to the court by any party for urgent injunctive or declaratory relief. As the primary judge held at [82], this “is exactly what Mr Hannigan sought in the 2017 proceedings”. Mr Hannigan thus submitted that there was no inconsistency between, or waiver consequent upon, his approaching the Court for declaratory relief in 2017 and subsequently seeking to have a damages claim referred to arbitration.
  4. Additionally, Mr Hannigan submitted that the 2017 proceedings did not fall within cl 23.6.1, and therefore could not have been submitted to arbitration, as they did not concern any monetary amount payable or owed under the Agreement.

Consideration – the construction issue

  1. Dispute resolution clauses may be crafted and drafted in an almost infinite variety of ways and styles. The range and diversity of such clauses may be seen in the non-exhaustive digest of dispute resolution clauses considered by Australian courts over the last thirty years, which is appended to these reasons.
  2. Dispute resolution clauses may be short form or far more elaborate, as illustrated by the cases referred to in the Appendix. They may be expressed as service of suit clauses: see, for example, HIH Casualty & General Insurance Ltd (in liq) v RJ Wallace (2006) 68 NSWLR 603; [2006] NSWSC 1150 (HIH Casualty). They may provide for arbitration: see, for example, TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia(2013) 251 CLR 533; [2013] HCA 5 (TCL Air Conditioner). They may be standard form: see, for example, Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; [2006] FCAFC 192 (Comandate). They may be bespoke: see, for example, Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 366 ALR 635 (Rinehart). They may be exclusive or non-exclusive: see, for example, FAI General Insurance Co Ltd v Ocean Marine Mutual Protection & Indemnity Association (1997) 41 NSWLR 117 at 120-124 (FAI). They may be asymmetric: see, for example, Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588. They may be optional: see, for example, Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110 (Paharpur); HIH Casualty. They may and often will be coupled with choice of law clauses: see, for example, Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418; [1996] HCA 39. They may be multi-tiered, providing first for a process of mediation, whether informal or formal, or informal and then formal, before providing for arbitral or judicial dispute resolution: see, for example, Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169; Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; (2013) 298 ALR 666.
  3. Dispute resolution clauses are just as capable of generating litigation as any other contractual clause, and the law reports are replete with cases concerned with the construction of such clauses. The cases referred to in the Appendix supply a sample.
  4. Such clauses have also spawned specialist texts and monographs (eg. D Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (3rd ed, 2015, Sweet & Maxwell); A Briggs, Agreements on Jurisdiction and Choice of Law(2007, Oxford University Press) (Briggs); M Davies (ed), Jurisdiction and Forum Selection Clauses in International Maritime Law (2005, Kluwer Law International)) and journal articles too numerous to list. It is not without significance to note in this context that, in his fifth edition of The Interpretation of Contracts (2011, Sweet & Maxwell) (Lewison), Sir Kim Lewison added a chapter devoted to the interpretation of dispute resolution clauses. This chapter is expanded in the most recent, sixth, edition of Lewison, published in 2015. See also M Davies, A S Bell, P L G Brereton and M Douglas, Nygh’s Conflict of Laws in Australia (10th ed, 2019, LexisNexis Butterworths) at 7.59 – 7.78.
  5. The question raised by this appeal is purely one of construction. It is accordingly desirable to begin by identifying the principles applicable to the construction of a dispute resolution clause.

Legal principles applicable to the construction of dispute resolution clauses

  1. It has been rightly observed that “the starting point is that the clause should be construed, just as any other contract term should be construed, to seek to discover what the parties actually wanted and intended to agree to”: Briggsat 4.58; Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR 936at [30]-[33]. In Australia, of course, the search is for the parties’ intention, objectively ascertained: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52.
  2. In short, the orthodox process of construction is to be followed: Hancock Prospecting at [167]; Rinehartat [18]. Thus, a dispute resolution clause, like any other clause of a commercial contract, must be construed by reference to the language used by the parties, the circumstances known to them and the commercial purpose or objects to be secured by the contract: see Woodside at [35]; Mount Bruce at [47].
  3. Further, as the plurality observed in Woodside at [35], citing Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56 at [82], a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
  4. Contextual considerations are also important, as the High Court’s decision in Rinehart (at [26]ff) illustrates. The context in which the dispute resolution clauses had been entered into in the two deeds under consideration in Rinehart bore heavily upon the interpretation in that case of the expression “dispute under this deed”. The plurality (at [26]) cited with approval the observations of the Full Court of the Federal Court of Australia in Hancock Prospecting(the decision under appeal in the High Court), that “[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”: see Hancock Prospecting at [193]. In his separate judgment in Rinehart, in agreement with that of the plurality on the question of construction, Edelman J observed at [83] that:

“Every 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 acontextual. ”

  1. It is also axiomatic that, in the construction of a contract including an arbitration agreement or an arbitration clause in a commercial agreement, as with the interpretation of a statute, a particular contractual clause or sub-clause must not be construed in isolation but as part of the contract as a whole: Australian Broadcasting Commission v Australasian Performing Right Association Ltd(1973) 129 CLR 99 at 109; [1973] HCA 36; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16]; Mastrobuono v Shearson Lehman Hutton Inc.514 U.S. 52 (1995). In the former case, Gibbs J (as he then was) famously said (at 109):

“It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another.”

  1. One consequence of this is that the same clause, or the same phrase in a particular clause, may not bear an identical meaning from case to case: see FAI at 120-124for a discussion of cases where identically worded jurisdiction agreements have been given different constructions.
  2. In the context of dispute resolution clauses, whether they be arbitration or exclusive jurisdiction clauses, much authority can be found in support of affording such clauses a broad and liberal construction. A particularly well known statement in this area of discourse is that of Gleeson CJ in Francis Travelto which the primary judge referred and which has been reproduced at [28] In Francis Travel, Gleeson CJ referred to the decision of the United States Supreme Court in Mitsubishi Motors Corp v Soler-Chrysler Plymouth Inc473 US 614 (1985). In that case, at 626, the Supreme Court said that “as with any other contract, the parties’ intentions control, but those intentions are generously construed as to issues of arbitrability.” (The Court’s reference to “arbitrability” was, in context, a reference to the scope of the arbitration agreement.)
  3. In Welkerat [118], Bathurst CJ made reference not only to Francis Travel but also to the similarly well known observations of Allsop J (as he then was and with whom Finn and Finkelstein JJ agreed) in Comandate at [164], namely that:

“The authorities … are clear that a liberal approach should be taken. That is not to say that all clauses are the same or that the language used is not determinative. The court should, however, construe the contract giving meaning to the words chosen by the parties and giving liberal width and flexibility to elastic and general words of the contractual submission to arbitration.”

  1. See also Global Partners Fund Limited v Babcock & Brown Limited (in liq) [2010] NSWCA 196; (2010) 79 ACSR 383 at [60](Global Partners), per Spigelman CJ who identified the rationale for the broad construction of arbitration and exclusive jurisdiction clauses in the following passage (at [67]):

“A significant purpose of an exclusive jurisdiction clause is to ensure that all disputes are determined in a coherent manner by a single jurisdiction. There is a clear commercial interest in minimising the possibility of a dispute being determined by multiple tribunals, with the consequent prospect of divergent findings. Furthermore, the parties, in advance, have determined that a particular jurisdiction is acceptable to them, both in terms of the speed and efficacy of its civil dispute resolution procedures and for the competence and skill of its judges and lawyers.”

  1. A similar rationale had been identified by French J (as he then was) in Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited (1993) 43 FCR 439 at 448; [1993] FCA 346, where his Honour noted that:

“When the language of the arbitration clause in question is sufficiently elastic, then the more liberal approach of the courts to which Kirby P and others have referred can have some purchase. A wide construction of such clauses can be supported on the basis advanced by Clarke JA that it is unlikely to have been the intention of the parties to artificially divide their disputes into contractual matters which could be dealt with by an arbitrator and non-contractual matters which would fall to be dealt with in the courts. When, as here, the parties have agreed upon a restricted form of words which in their terms, and as construed in the courts, limit the reference to matters arising ex contractu, there is little room for movement.”

  • In TCL Air Conditioner at [16], French CJ and Gageler J observed that “… parties who enter into an arbitration agreement for commercial reasons ordinarily intend all aspects of the defined relationship in respect of which they have agreed to submit disputes to arbitration to be determined by the same arbitral tribunal”.
  1. In Australia, unlike other jurisdictions, the process of contractual construction of dispute resolution clauses has not been overlaid by presumptions cf the jurisdictions surveyed in G B Born, International Commercial Arbitration(2nd ed, 2014, Wolters Kluwer) at 1325-1338. Thus, in Welker at [122], Bathurst CJ, although not eschewing the liberal approach that had been adumbrated in both Francis Travel and Comandate to the construction of arbitration clauses, rejected the adoption of a presumption that had arguably commended itself to the House of Lords in Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2007] 4 All ER 951. To quote from Lord Hoffmann’s speech, the presumption was that the court should, in the construction of arbitration clauses, “start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal”, and that the clause should be construed in accordance with that presumption, “unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction”: at [13]. The Full Court of the Federal Court in Hancock Prospecting (at [193]) treated Fiona Trust as not saying anything different in substance from Francis Travel and Comandate (the latter case being itself referred to in Fiona Trust at [31]).
  2. In Rinehart, the plurality indicated that the appeals could be resolved with the application of orthodox principles of construction, which required consideration of the context and purpose of the Deeds there under consideration, without reference to Fiona Trust: at [18]. In his separate judgment, Edelman J described as a “usual consideration of context” the fact 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”: at [83]. This may have been to treat the considerations underpinning cases such as Francis TravelComandateand Fiona Trust as not necessarily giving rise to a presumption, but rather as stating a commercially commonsensical assumption. It may be observed that Lord Hoffmann’s speech in Fiona Trust(at [13]) slides from the language of “assumption” to that of “presumption”.
  3. The proper contemporary approach was eloquently articulated in the following passage in Hancock Prospecting(at [167]) which I would endorse:

“The existence of a ‘correct general approach to problems of this kind’ 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’. None of that, however, is to say that the process is rule-based rather than concerned with the construction of the words in question. Further, there is no particular reason to limit such a sensible assumption to international commerce. There is no reason why parties in domestic arrangements (subject to contextual circumstances) would not be taken to make the very same common-sense assumption. 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. For completeness, it may be noted that principles of construction relevant to the question of the natureof a dispute resolution clause (that is, as to whether or not it is exclusive or non-exclusive, as opposed to its scope) have been valuably identified and discussed by Giles J (as he then was) in FAI at 126-127.

Clause 23

  1. Clause 23 of the Agreement, extracted at [18]above, is what might be styled a “multi-tiered” dispute resolution clause. Clause 23.1 contemplates, by implication, that court proceedings may be commenced by a party, but proscribes the commencement of court proceedings “until it has complied with this clause 23”. Clause 23 makes provision, in subclauses 3 and 4, for the initial informal and then formal mediation of disputes. It also provides in subclause 6 for arbitration of certain types of dispute if there is a failure to resolve the dispute at formal mediation. Clause 23.11 also preserves the ability of the parties to have recourse to the court for urgent injunctive or declaratory relief.
  2. It has been observed by the doyen of private international law scholars (see Briggsat 4.55-4.56) that:

“… sometimes a clause will be encountered in which the parties appear to have agreed that a court has jurisdiction, and that disputes may or will be arbitrated. One reaction may be that this is incoherent, and that it has been brought about by the thoughtless copying of precedents. The case-law approaches the interpretation of such clauses, or combinations of clause, however, in a more constructive way. One sensible interpretation, which a court may strive to reach, is that the parties have agreed to submit to arbitration, and that the role of the court is that of supervision of the arbitration, but if neither side refers the dispute to arbitration, the jurisdiction agreement takes effect as the unchallenged provision for dispute resolution. Or to put it another way, the parties agree to the jurisdiction of the court (to be mutually exclusive or not mutually exclusive, as the case may be), but if one party exercises the right to refer the dispute to arbitration, this is thereafter the agreed means of dispute resolution, and the role of the court is supervisory if it is also the seat of the arbitration.

More difficulty arises if the clause appears to make reference to arbitration mandatory, while also providing for the jurisdiction, exclusive or otherwise, of the courts. Where this happens, incoherence is avoided by interpreting the agreement as though the reference to arbitration were optional rather than mutually mandatory. And this may be the only plausible way to make sense of such an arrangement. For reference to arbitration is never fully mandatory: if neither party elects to refer the dispute to arbitration, no third party is going to do it for them.” (footnotes omitted).

  1. One of the decisions footnoted by Professor Briggs in the above passage was that of the Supreme Court of New South Wales in HIH Casualty. The relevant clauses under consideration in that case have been reproduced in the Appendix to these reasons.
  2. Although the Agreement in the present case meets the description in the first sentence of the passage from Briggsextracted at [69] above, cl 23 of the Agreement differs significantly from the articles of the reinsurance policy that were the subject of consideration in HIH Casualty, although those articles, like cl 23, appeared to contemplate both litigation of disputes arising under this Agreement in “any competent Court in the Commonwealth of Australia” and the arbitration of “[d]isputes arising out of this Agreement or concerning its validity…”. The challenge for the Court in HIH Casualty was to ascertain whether the proceedings that had been commenced in the Supreme Court should be stayed in favour of arbitration. In the present case, the situation is the converse, namely whether a foreshadowed arbitration should be restrained in favour of litigation.
  3. Articles XVIII and XIX in the reinsurance policy in HIH Casualty differed in their language in many respects, but most conspicuously, for present purposes, in the use of the prepositional phrase “dispute arising under this Agreement” in Article XVIII, on the one hand, and the different prepositional phrase “[d]isputes arising out of this Agreement” in Article XIX, on the other hand. The Court held (at [98]) that:

“where, as here, a dispute arises under the policies, provided that the dispute is not in effect a claim for a confirmed balance [in which case it cannot be the subject of a reference to arbitration], HIH has an option to require that dispute to be litigated pursuant to Article XVIII in a competent court in the Commonwealth of Australia of its choosing or, alternatively, to submit that dispute for determination by way of arbitration.”

  1. Later in his reasons, Einstein J observed (at [116]) that:

“It is also true that construing the policy as a whole as providing HIH with an option to litigate or arbitrate also satisfies the injunction contained in Australian Broadcasting Corporation v Australasian Performing Right Association, namely to construe a contractual document as a whole with a view to insuring an harmonious reading of all the clauses.”

  1. The decision in HIH Casualty did not turn upon the difference in prepositional language between Article XVIII and XIX of the reinsurance policy. In the present case, however, Mr Braham sought to attribute much significance to the breadth of the prepositional phrase “arising out of this Agreement” in cl 23.1 by way of contrast to what he submitted was the narrower language in cl 23.6.1, viz“the Dispute concernsany monetary amount payable and/or owed by either party to the other under this Agreement” (emphasis added).
  2. It is true that the expression “arising under this agreement” has often been held to be narrower in compass than the phrase “arising out of this agreement” (see, for example, Welker at [123]per Bathurst CJ), but it has not always been narrowly construed, as the High Court’s recent decision in Rinehart  In some cases, it has been equated with the phrase “arising out of”: see Samick Lines Co Ltd v Owners of the “Antonis P Lemos” [1985] AC 711 at 727. The Full Court of the Federal Court described it in Hancock Prospecting as an “elastic relational phrase”: at [205].
  3. It must also be appreciated in the present case that cl 23.1 of the Agreement plays a very different role to that played by Article XVIII, for example, in the reinsurance policy considered in HIH Casualty. Unlike Article XVIII, cl 23.1 is not a service of suit or form of jurisdiction clause at all. Rather, it has two principal functions. First, it defines the term “Dispute” in unquestionably broad terms, and that term is then used in the balance of cl 23. Second, it proscribes the commencement of court proceedings by a party, until that party “has complied with this clause 23”. That, of course, includes cl 23.6.1 to the extent it is engaged.
  4. The broadly defined term “Dispute” is employed in cl 23.6.1. Thus, the Dispute in question, which may be the subject of arbitration, may be one arising out of the Agreement including, for example, a dispute “regarding any breach or purported breach of the Agreement”. This follows from the definition of “Dispute” in cl 23.1, and the use of that defined term in cl 23.6.1. The critical question then becomes, for the purpose of determining if the dispute in the present case was required to be submitted to arbitration, whether or not it “concerns any monetary amount payable and/or owed by either party to the other under this Agreement”. That is a question of construction and characterisation.
  • In answering that question, the principles of construction I have sought to identify and summarise at [53]-[67]above should be applied. Apart from the fact that the parties were in an ongoing commercial relationship, there was nothing of particular significance going to matters of context that was relied upon by the parties to inform the proper construction of cl 23 generally, and cl 23.6.1 in particular. The focus then necessarily must be on the language employed by the parties in the Agreement.
  1. I have already noted the broad definition of “Dispute” in cl 23.1, and the fact that that broadly defined term is carried into cl 23.6.1. The next key word to be considered in cl 23.6.1 is the word “concerns”. This is a relational term of indeterminate ambit. It, like any other connecting or prepositional phrase, will take its meaning from its context, which includes the manner in which dispute resolution clauses have been construed in contemporary case law: see Hancock Prospectingat [165]; Welker at [221]and compare, in the case of statutory interpretation, Attorney General for New South Wales v Melco Resorts & Entertainment Limited [2020] NSWCA 40 at [86].
  2. Whilst the usual caution is to be applied to consideration of the meaning of a term in other contracts or instruments, some recent examples of judicial consideration of the meaning of the term “concerns” may be given. In PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission[2011] FCAFC 52 at [197], the verb “concern”, in the context of “in so far as the proceeding concerns”, was giving the meanings “relate to; be about; affect or involve”. However, in the earlier decision of Australian Securities Commission v Lord (1991) 33 FCR 144; (1991) 105 ALR 347 at 352, the Federal Court held that the term “concerns” (in relation to the phrase “concerns the management or affairs of a body corporate”) had a narrower ambit than the phrase “relates to”.

Segment #4

Segment #5

  1. MEAGHER JA: I agree with Bell P that the applicant, Inghams, should have leave to appeal. The question in the appeal is whether Mr Hannigan’s contested claim against Inghams, for damages for breach of contract is a dispute which “concerns any monetary amount payable and/or owed by either party to the other under” the chicken growing agreement between them (cl 23.6.1). I agree also with the President’s conclusion that if that dispute is required to be referred to arbitration Mr Hannigan has not waived his right to insist that occur.
  2. As the President observes that question is “purely one of construction” and accordingly to be determined by the application of orthodox principles of construction. Those principles provide that the meaning of the terms in a commercial contract, such as here, is to be determined objectively and accordingly by reference to what a reasonable person in the circumstances of the parties would have understood those terms to mean: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47](French CJ, Nettle and Gordon JJ). That inquiry requires attention to the language of the contract, the commercial context which it addresses and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65 at [22] (Gleeson CJ). Those principles do not describe a process which is rule based, rather than concerned with the construction of the words in question in their context. Nor is that process overlaid by assumptions or presumptions which cannot be justified as informing what a reasonable person would have understood the words to mean in their commercial context: Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170 at [167] (Allsop CJ, Besanko and O’Callaghan JJ).
  3. For the reasons which follow it is my view that Mr Hannigan’s claim for breach of Inghams’ general obligation to supply chickens (cl 3.1) is not a dispute within cl 23.6.1 and accordingly not one which must, in the absence of any ad hoc agreement, be submitted to arbitration. The primary judge erred in concluding otherwise: Inghams Enterprises Pty Ltd v Francis Gregory Hannigan [2019] NSWSC 1186.

The chicken growing agreement

  1. The relevant terms of this agreement are extracted by the President at [7]-[18]. The “general obligations” of the parties (cll 3 and 4) describe their respective obligations in relation to the growing of the chickens. On Inghams’ part those obligations fundamentally include to supply one day old chicks, feed and the technical services required for Mr Hannigan to perform his primary obligation, which is to “raise” those chicks in his shed facilities in accordance with a detailed Manual supplied by Inghams. There follow a provision making clear that at all times the chickens remain the property of Inghams (cl 6), and provisions governing the collection of the chickens for processing (cl 7) and Inghams’ rights of access to the grower’s premises (cl 8).
  2. Clauses 9 to 13 address the payment obligations of the parties, principally Inghams’ obligation to make ongoing payments to the grower for the term of the agreement, initially a period of five years. In essence Inghams agrees, in relation to each batch of chickens raised and collected, to pay the grower a Fee calculated on a per chicken basis. That Fee is to be adjusted annually, following negotiations and after taking account of defined “productivity criteria”. In addition the grower may be entitled to an additional payment calculated in accordance with a “Pool Payment System”, which takes account of the productivity of the grower measured against the productivity of a pool of growers (cll 9.1, 10.1 and Annexures 1 and 2).
  3. There follow provisions which qualify the ordinary position that the grower receives payments determined in accordance with Annexures 1 and 2. First, where the payment to the grower in respect of a batch is less than 85 per cent of the Fee as a consequence of a single event determined by Inghams to be a “disaster”, a different regime applies for the determination of the Fee. It does so depending on whether the disaster has been caused by the action of Inghams, neither of the parties or is attributable partially to each of them (cl 11).
  4. Secondly, Inghams is entitled to deduct from any payment due to the grower financial losses suffered by it (limited to the cost of all goods supplied to the grower and excluding all consequential and indirect losses) as a result of the grower’s negligence in raising the chickens (cl 12.1). Inghams may also “charge to and recover from the grower” losses and expenses incurred in collecting and raising any chickens to which cl 12.1 losses are referrable (cl 12.3). Thirdly, in the event that the compulsory slaughter of chickens is required by any statutory authority Inghams is required to pay to the grower part of any financial compensation received by it in respect of that destruction (that part to be calculated in accordance with a specified formula) (cl 13).
  5. Finally, in addition to Annexures 1 and 2 providing for variations and adjustments to the annual Fee, cl 15.3.3 provides that in the event that the Manual with which the grower must comply (cl 4.2) is amended, the parties agree to “renegotiate the Fee having regard to the effect of [any] relevant amendments”.

The chicken supply dispute

  1. Mr Hannigan’s formulation and notification of the relevant dispute is extracted in the President’s judgment at [24]. It is constituted by Mr Hannigan’s contested claim to damages for breach of Inghams’ general obligation to supply, during the period 8 August 2017 to 17 June 2019, batches of chicks in accordance with the terms of the agreement. The ordinary measure of damages for loss sustained by such a breach is the amount required to place Mr Hannigan in the same position in money terms as he would have been in had the contract been performed: Robinson v Harman (1848) 1 Exch 850; 154 ER 363 at 855;365 (Parke B). Applying that measure, the matters to be taken into account will ordinarily include the payments to which Mr Hannigan would have been entitled, on the hypothesis that chicks had been supplied, raised and collected (in whole or in part) during the relevant period, as well as the variable and other costs which would have been, but were not in fact, incurred by him in so doing.

The dispute resolution clause

  1. The relevant provisions of the dispute resolution clause are extracted by the President at [18] It is convenient nevertheless to set out cll 23.1, 23.6, 23.8 and 23.11 in these reasons:

23.1 A party must not commence court proceedings in respect of a dispute arising out of this Agreement (“Dispute”) (including without limitation any Dispute regarding any breach or purported breach of this Agreement, the interpretation of any of its provisions, any matters concerning a party’s performance or observance of its obligations under this Agreement, or the termination or the right of a party to terminate this Agreement) until it has complied with this clause 23.

23.6 If:

23.6.1   the Dispute concerns any monetary amount payable and/or owed by either party to the other under this Agreement, including without limitation matters relating to determination, adjustment or renegotiation of the Fee under Annexure 1 or under clauses 9.4, 10, 11, 12, 13 and 15.3.3; and

23.6.2   the parties fail to resolve the Dispute in accordance with Clause 23.4 within twenty eight (28) days of the appointment of the mediator

then the parties must (unless otherwise agreed) submit the Dispute to arbitration using an external arbitrator (who must not be the same person as the mediator) agreed by the parties or, in the absence of agreement, appointed by the Institute Chairman.

23.8 The parties must use their reasonable endeavours to enable the arbitrator to make a determination as quickly as possible and the arbitrator must (unless otherwise agreed in writing) make that determination within 2 (two) months of accepting the appointment. For that purpose the parties agree to co-operate with the arbitrator and each other in fixing a timetable and taking such steps as are required under that timetable or as may otherwise be reasonably directed by the arbitrator in order to enable the arbitrator to complete the arbitration with[in] that period.

23.11 Nothing in this Clause 23 shall prevent the making of an application to the court by any party to the dispute for urgent injunctive or declaratory relief.

  1. Clause 23.1 prohibits each party from commencing court proceedings in respect of the universe of disputes “arising out of” their agreement and that prohibition applies until the relevant party “has complied with this clause 23”. There is no reason to construe this provision narrowly. The rational assumption of a reasonable person in the position of the parties would be that the provisions of this clause should apply to all of the disputes relating to their agreement. Approaching the construction of this overriding provision by reference to such an assumption is merely an application of the objective theory of contract.
  2. This clause also recognises the breadth of the types of dispute which may arise and, particularly, that they may arise before or after the time for performance or observance of an obligation, no distinction in that context being drawn between what the agreement describes as “general” obligations and those providing for the payment of money.
  3. The matters which must be complied with respect to all disputes “arising out of” the agreement are that any dispute be notified to the other party (cl 23.2), that the parties use “best endeavours” to resolve that dispute (cl 23.3), and that if the dispute cannot be resolved it must thereafter be mediated (cll 23.4, 23.5).

Clause 23.6.1

  1. Clause 23.6.1 provides that a subset of the universe of disputes arising out of the agreement must then be referred to arbitration. The necessary characteristic of disputes in that subset is that they “concern” “any monetary amount payable and/or owed by either party to the other under this Agreement”. This language does not suggest this characteristic has to be the defining or only characteristic which those disputes bear: Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 258 CLR 31; [2015] HCA 43 at [187](Nettle and Gordon JJ).
  2. That composite description requires that subject matter be “any” “monetary amount” which is “payable and/or owed” by one party to the other where the attribute of being “payable and/or owed” is qualified by the words “under this Agreement”. There must then be a sufficient relationship between the dispute and that subject matter such that the former “concerns” the latter.
  3. What is immediately apparent is that cl 23.6.1 does not purport to refer to arbitration any dispute “arising out of this Agreement” or, for that matter, any dispute “under this agreement”. Here, subject to the qualification introduced by cl 23.11 in relation to “urgent injunctive or declaratory relief”, the parties clearly intended that only a subset of the disputes within the universe of disputes “arising out of” their agreement must be resolved by arbitration: cf Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd(1996) 39 NSWLR 160 at 165 (Gleeson CJ); Hancock Prospecting Pty Ltd v Rinehart at [167] (Allsop CJ, Besanko and O’Callaghan JJ); and Fiona Trust Holding Corporation v Privalov [2007] UKHL 40; [2007] 4 All ER 951 at [13] (Lord Hoffman).
  4. Furthermore, whilst cl 23.6.1 requires attention to the sense in which the expression “under this Agreement” is used, it does not do so in relation to its use in a clause referring all disputes answering that description to arbitration. Accordingly whether there is any distinction in that context between disputes “arising under” and disputes “arising out of” an agreement is a controversy which does not arise in this case: see Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 at [18]-[25](Kiefel CJ, Gageler, Nettle and Gordon JJ).
  5. The question as to the meaning of the expression “under this Agreement” used in relation to an amount “payable and/or owed” remains. As Lindgren J observed in Energy Resources of Australia Ltd v Commissioner of Taxation (2003) 52 ATR 120 at [37]the word “under” admits of “degrees of precision and exactness on the one hand, and of looseness and inexactness on the other” making it “necessary to have regard to the context in order to identify the meaning of the word intended in a particular case.” See more generally The Queen v Khazal (2012) 246 CLR 601; [2012] HCA 26 at [31] (French CJ); and Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [102] (Leeming JA) (There the guaranteed money in question was defined to mean “all amounts (including damages) that are payable, owing but not payable or that otherwise remain unpaid … on any account at any time under or in connection with” the relevant agreement).

“monetary amount payable”

  1. The expression “monetary amount payable” describes an amount of money that is or may become liable to be paid, and accordingly “payable”. Thus it can refer to an amount that will from time to time fall due for payment, as well as to an amount due for payment. These different senses in which the word “payable” may be used, are discussed by Hoffman J (as his Lordship then was) in Tea Trade Properties Ltd v CIN Properties Ltd (1990) 1 EGLR 155 at 158,in a passage cited in K Lewison, The Interpretation of Contracts (6th Ed, 2015, Sweet & Maxwell) at p 367. Thus an amount that will from time to time fall due as a fee, which is the subject of negotiation or variation or adjustment, will at that time nevertheless be a “monetary amount payable”. That expression is to be contrasted with the expression “monetary amount owed” which describes an amount liable to be paid, due for payment and unpaid. The use of the joining words “and/or” recognises that the money amounts which these expressions describe may overlap.

“under this Agreement”

  1. The description of such amounts as “payable and/or owed” “under” the agreement directs attention to the source of the underlying payment obligation and whether the agreement governs or controls its existence, as the following three cases demonstrate. In Chan v Cresdon Pty Ltd (1989) 168 CLR 242; [1989] HCA 63 a lease of land contained a provision by which a person, who was a party to the lease, guaranteed the performance by the lessee of its obligations “under this lease”. The majority (Mason CJ, Brennan, Deane and McHugh JJ) considered that the word “under” referred “to an obligation created by, in accordance with, pursuant to or under the authority of, the lease. The obligation which arose under the common law tenancy at will [did] not answer this description” (at 249).
  2. The appeal in Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 concerned the “time of disposal” of assets for the purpose of determining the year of income in which a net capital gain accrued. Where the “asset was acquired or disposed of under a contract” Income Tax Assessment Act 1936 (Cth), s 160U(3)deemed the time of disposal to be “the time of the making of the contract” (at [33], [34], [37]). The plurality (Gleeson CJ, Gaudron, McHugh and Hayne JJ) held (at [42]) that “the words ‘under a contract’, in s 160U(3), direct attention to the source of the obligation which was performed by the transfer of assets which constituted the relevant disposal”. In that case an agreement of 31 May 1991 “was the source of the obligation which [Sara Lee] discharged” by performance of its obligation to transfer on 30 August 1991.
  3. Finally, in Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; [2007] HCA 53 the question was whether the registration of a transfer of two Torrens title mortgages vested in the transferee a right to recover moneys owed under a loan agreement which was separate from, but secured by, one of the mortgages. Land Title Act 1994(Qld), s 62 defined the “rights” transferred as including the right “to recover a debt or enforce a liability under the mortgage”. The Court (Kiefel J, Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ agreeing) held that the right to recover moneys under the loan agreement was not assigned, observing at [55] that this conclusion was confirmed by the words “under the mortgage” in s 62(4):

The word ‘under’ with respect to an obligation ‘under this lease’, has been held to refer to an obligation created by, in accordance with, pursuant to, or under the authority of the lease. Likewise the words ‘under a contract’ in a statute may direct attention to the source of the obligation in question; and a decision ‘under an enactment’ to the statute to which the decision sought to be reviewed owes, in an immediate sense, its existence. [citations omitted]

  1. Returning to the language in the growers’ agreement, the words “payable and/or owed” when used in relation to “a monetary amount” describe an obligation owed by one party to the other and the use of the phrase “under this Agreement” with respect to that obligation identifies their contract as its source. That is the natural and ordinary meaning of this language and there is nothing in the text or context which suggests that a reasonable person in the circumstances of the parties would have understood it to mean otherwise.

“including without limitation”

  1. The inclusion in cl 23.6.1 of the list of “matters relating to [the] determination, adjustment or renegotiation of the Fee under Annexure 1” is wholly consistent with the subject matter of the reference to arbitration being disputes concerning payment obligations under the agreement. The words introducing that list – “including without limitation” – convey that the listed matters are not intended either to restrict the matters which would otherwise fall within the language of the preceding description or to narrow the construction of that language by reason of any genus of the matters listed. As to that being the function of such an inclusive “definition” see Corporate Affairs Commission (SA) v Australian Central Credit Union(1985) 157 CLR 201 at 206-207 (Mason ACJ, Wilson, Deane and Dawson JJ); [1985] HCA 64.

“Dispute concerns”

  1. The purpose for the parties’ agreement that disputes which “concern” payment obligations should be referred to arbitration emerges in cl 23.8. By that provision the parties agree to “use their reasonable endeavours to enable the arbitrator to make a determination [of such disputes] as quickly as possible”. Their commercial reasons for doing so, particularly from the perspective of the grower, are obvious. In argument this Court was informed that a batch of chickens takes between 35 and 45 days to be raised and collected, thus allowing for the delivery of batches every two months or so. In Mr Hannigan’s case that meant that up to six batches a year might be raised, with the potential for over 200,000 chickens in each of those batches. In such a short cycle and high turnover business, an expeditious dispute resolution procedure directed to payment obligations under the agreement seeks to ensure continuity of cash flow, from the perspective of the grower, and ongoing certainty as to the costs of production, from the perspective of Inghams.
  2. It follows that the connecting word “concerns” should be given sufficient “width and flexibility” to ensure that any dispute which relates to the negotiation, adjustment, determination or performance of a payment obligation “under this Agreement” is submitted to arbitration. Doing so, a dispute will “concern” a payment obligation under the agreement if the dispute is about such an obligation, which will be the case where there is a claim to payment or for damages for breach of such an obligation; if the dispute affects or involves or relates to such a payment obligation which would be the case where there is an issue concerning the negotiation, adjustment or determination of any fee to be paid; or if there is a dispute as to an entitlement of a party to deduct any sum from a payment which it is otherwise liable to make. These examples are obviously not exhaustive. However they recognise that the relational word “concerns” will be satisfied if a dispute relates to or is about or affects or involves a money payment obligation under the agreement.

Is the chicken supply dispute one within cl 23.6.1?

  1. The subject matter of the notified dispute is a claim for unliquidated damages for breach of Inghams’ obligation under cl 3.1. It is not a claim to or about an amount “payable” or “owed” by Inghams to Mr Hannigan under an express or implied term of their agreement. Nor is it a dispute which affects or relates to the negotiation, adjustment or determination of any amount “payable” or “owed” under such a term. The argument that Mr Hannigan’s claim concerns a monetary amount payable under the agreement proceeds as follows. First, it is said that a claim to “compensatory damages” will result in a judgment or award for a monetary amount which, when determined, will be “payable”. For the purposes of argument, that much may be accepted.
  2. The second part of the argument addresses the qualification that the obligation which makes that amount “payable” is created by, or in accordance with the parties’ agreement. This part of the argument is put in two ways. First, it is said that the amount of damages once awarded is payable “under” the agreement because the measure of damages includes as an element an amount which would have been payable had the agreement been performed. To that extent the quantum of those damages is said to be “governed or controlled” by the agreement. It is not however contended that the source of the underlying obligation to pay damages is the agreement, or that the contract says anything about the amount recoverable and how it is to be calculated.
  3. The second way in which the argument is put is captured in the judgment of the President at [88]-[90]. It is that damages for breach of contract may be treated or described as an amount payable under a “secondary obligation” of the agreement following the breach of a primary obligation. In support of that analysis reference is made to the statements of Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331 at 350and Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 848-849, and the statement of Kiefel CJ, Bell and Keane JJ in Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 93 ALJR 1164 at [12] that:

the right to damages for loss of bargain that arises in such a case [a termination for wrongful dismissal] is, in this respect, no less a creature of the contract than the right to recover sums that become due before its termination.

  1. However, none of those statements suggest that the obligation to pay damages for breach of contract is created by or arises under the contract. On the contrary, Lord Diplock’s analysis in Lep Air Services and Photo Production acknowledges that the so-called “secondary obligation” arises “by operation of law” or by “implication of the common law”, which is the same thing. The description of the right to loss of bargain damages following a termination for wrongful dismissal as a “creature of the contract” does not take this analysis any further.
  2. The orthodox and uncontroversial position remains as stated by Nettle, Gordon and Edelman JJ in Mann v Paterson Constructions at [195]:

Traditionally, the remedial obligation to pay damages for breach of contract has been understood as an obligation “arising by operation of law”. Whether or not there is any role for the objective or manifested intention of the parties in ascertaining boundaries of liability in an award of damages, the proposition that the award of damages is somehow a product of the agreement of the parties as an alternative to performance is not easily reconciled with several established notions at law and in equity, including the normative principles which govern the quantification of damages and the grant of specific performance and injunctions on the basis that damages are an “inadequate” remedy. The parties contract for performance, not damages. In short, as Windeyer J said, “[i]t is … a faulty analysis of legal obligations to say that the law treats a promisor as having a right to elect either to perform his promise or to pay damages. Rather … the promisee has ‘a legal right to the performance of the contract’.” (citations omitted)

  1. It is equally wrong, as a matter of legal theory, to suggest that the assessment of unliquidated damages for breach of contract is “governed or controlled by” the contract simply because the measure of damages at common law takes account of benefits which would have been received as a result of performance. The position is as stated by Gageler J in Mann v Paterson Constructions at [83]:

Contracting parties are, of course, at liberty to determine by contract the “secondary” obligations, which are to arise in the event of breach or termination of the “primary” obligations they have chosen to bind them. Even where the parties have not so determined, it may for some purposes be appropriate to describe obligations that the common law imposes to pay damages for breach of contract as “secondary” obligations which, in the event of termination by acceptance of a repudiation, are “substituted” for the primary obligations. However, it would be artificial as a matter of commercial practice and wrong as a matter of legal theory to conceive of contracting parties who have not addressed the consequences of termination in the express or implied terms of their contract as having contracted to limit themselves to the contractual remedy of damages in that event.

  1. The distinction between monetary amounts which are payable or owed “under a contract” and remedies which arise by operation of law is a recognised and meaningful one. Whereas ‘liquidated damages’ are recoverable in satisfaction of a right of recovery created by the contract itself and accruing by reason of breach, unliquidated damages for breach of contract are compensation assessed by the court in accordance with common law principles for loss occasioned by breach: Rotheberger Australia Pty Ltd v Poulsen [2003] NSWSC 788 at [27](Barrett J); Galafassi v Kelly (2014) 87 NSWLR 119 at [178] (Gleeson JA, Bathurst CJ and Ward JA agreeing). That distinction has been endorsed as one which it is “essential” to maintain: Galafassi at [177].
  2. It follows that the notified dispute does not concern a monetary amount payable or owed by Inghams to Mr Hannigan under their agreement and accordingly it is not a dispute referred to arbitration by cl 23.6.1.

The reasoning of the primary judge

  1. It remains necessary to consider three aspects of the primary judge’s reasoning in support of his contrary conclusion that cl 23.6.1 includes a contested claim to unliquidated damages for breach of a non-money payment obligation under the agreement.
  2. The first is his Honour’s conclusion at [62] that the inclusion of the reference to cl 12 in the list in cl 23.6.1 is inconsistent with the description of the relevant subject matter of the clause as limited to claims to enforce payment obligations arising under the agreement because cl 12 describes no more than a claim for damages. As the President ventures at [32] the significance of the argument accepted by the primary judge may lie in the fact that no “genus of dispute could be derived from the specific clauses referred to in cl 23.6.1 to suggest what did and did not fall within the scope of the arbitration agreement”. However that observation does not take account of the words “without limitation” which indicate that no constructional inference regarding the meaning of the descriptive definition should be drawn from any shared features or lack of shared features of the matters included in the list.
  3. More significantly, the primary judge’s analysis gives a narrower meaning to the word “concerns” than is consistent with the purpose of cl 23.6 and overlooks the application of cl 12.1 which permits Inghams to deduct losses to be borne by the grower “from any Payments due to the Grower” for the relevant batch. Thus any dispute as to the fact or amount of such loss necessarily “concerns” a “monetary amount” “payable” “under” the agreement because of the entitlement by cl 12.1 of Inghams to deduct any amount to which it is entitled from that “monetary amount”.
  4. The second is that the primary judge considered at [64] that on the construction urged by Inghams, cl 23.6.1 would have the consequence that a claim in debt for non-payment of a fee due under cl 9.1 would be referred to arbitration whereas a claim to damages for the same breach would not. His Honour described that inconsistency in outcome as “hardly [to] have been intended by the contracting parties”. In this respect the primary judge’s analysis again depends on a narrower construction of the connecting term “concerns” than I consider it should be given, as appears above, particularly at [142]-[143]. If the notified dispute involves a claim for damages for breach of cl 9.1, that dispute bears a sufficient relationship to a “monetary amount payable” under the agreement because the claim is for breach of such an obligation. Accordingly, the dispute is about or involves that monetary obligation, and in that sense is a dispute which “concerns” it. Therefore no inconsistency in outcome arises.
  5. Thirdly, the primary judge at [65] considered that because one integer in the assessment of Mr Hannigan’s damages was the amount which would have been received under cl 9.1 had the supply obligation been performed, the relevant dispute could be said to “concern” “monetary amounts” payable under the agreement. The difficulty for this argument is identified above at [145]. Whilst the assessment of damages may involve attention to amounts which would have been paid or payable had the contract been performed, the dispute in this respect does not relate to or involve a monetary amount that is or may become liable to be paid so that it answers the description of an amount “payable” under the agreement. Rather that dispute concerns an amount which might have been payable in a hypothetical counterfactual adopted for the purpose of assessing damages under the common law.

Conclusion

  1. For these reasons I would make the following orders:
  2. Grant leave to appeal.
  3. Allow the appeal.
  4. Set aside orders (1) and (3) made by Slattery J on 16 September 2019.
  5. Declare that the dispute the subject of the respondent’s Notice of Dispute dated 29 May 2019 is not required to be submitted to arbitration pursuant to cl 23.6 of the Queensland Broiler Chicken Growing Agreement between the parties dated 22 September 2015.
  6. The respondent pay the appellant’s costs of the proceedings at first instance and on appeal.
  7. GLEESON JA: I agree with the orders proposed by Meagher JA and with his Honour’s reasons.

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Decision last updated: 04 May 2020

 

Sharma v Military Ceramics Corporation [2020] FCA 216 (20 February 2020)

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FEDERAL COURT OF AUSTRALIA

Sharma v Military Ceramics Corporation [2020] FCA 216

File number:
NSD 2003 of 2019
Judge:
STEWART J
Date of judgment:
20 February 2020
Date of publication of reasons:
26 February 2020
Catchwords:
PRACTICE AND PROCEDURE – application to adjourn interlocutory application made informally immediately prior to hearing – delay – prejudice to parties, other litigants and administration of justice if application granted
ARBITRATION – international commercial arbitration – application to set aside arbitral award under Art 34 of the UNCITRAL Model Law on International Commercial Arbitration – interlocutory application to summarily dismiss set aside application as being out of time – whether application to set aside filed within three months of arbitral award being received by the applicant as required by Art 34(3) of the Model Law – when arbitral award was received

ORDERS

NSD 2003 of 2019
BETWEEN:
SANJAY SHARMA
Applicant
AND:
MILITARY CERAMICS CORPORATION
First Respondent

VIPUL ARORA
Second Respondent

RAM LALL KHETAN
Third Respondent

NITISH KHETAN
Fourth Respondent

JUDGE:
STEWART J
DATE OF ORDER:
20 FEBRUARY 2020

THE COURT ORDERS THAT:

  1. The applicant’s application for an adjournment of the hearing today (both the case management hearing and the hearing of the first respondent’s interlocutory application filed on 9 January 2020) made by email to the Associate of Stewart J and received at 5:45am AEDT on 20 February 2020 is dismissed.
  2. In consequence of Art 34(3) of the UNCITRAL Model Law on International Commercial Arbitration being Sch 2 to the International Arbitration Act 1974 (Cth) the Originating Application filed on 29 November 2019 be summarily dismissed.
  3. The applicant pay the first respondent’s costs of the proceeding.
  4. The first respondent have leave to make an application for a lump sum costs order to a Registrar of this Court.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWART J:

INTRODUCTION

  1. Before me on 20 February 2020 was the first respondent’s interlocutory application to summarily dismiss the applicant’s originating application. There was also an application on behalf of the applicant to adjourn the hearing of the first respondent’s interlocutory application to a date at the end of April or in May 2020.
  2. I dismissed the adjournment application and granted the first respondent the relief sought in its interlocutory application by summarily dismissing the originating application. That was in the application of Art 34(3) of the UNCITRAL Model Law on International Commercial Arbitration (being Schedule 2 to the International Arbitration Act 1974 (Cth) (IAA)) which requires an application to set aside an arbitration award – which is what the applicant’s originating application sought – to be made within three months of the applicant receiving the award.
  3. These are my reasons for making those orders.

BACKGROUND

  1. The first respondent, Military Ceramics Corporation (MCC), is a company incorporated in the British Virgin Islands.
  2. The applicant and each of the second, third and fourth respondents are citizens of India and are resident in India. I shall refer to them as the Indian parties. From what is stated in the arbitration award to which further reference is made below, the Indian parties appear to be business people.
  3. In March 2012, MCC and the Indian parties concluded a joint venture agreement. It provided for disputes to be resolved by arbitration with the seat of the arbitration being Sydney, Australia, and for the arbitration to be conducted in accordance with the rules of the Australian Centre for International Commercial Arbitration (ACICA). The law governing the March 2012 agreement was expressed to be the law of Hong Kong.
  4. In September 2014, MCC commenced arbitration proceedings against the Indian parties in relation to a dispute said to arise under the March agreement. In December 2014, ACICA appointed Ms Kim H Rooney, a Hong Kong barrister, as sole arbitrator.
  5. In the arbitration proceeding the applicant nominated a particular email address as being his address for the purposes of notice in that proceeding. Without identifying the address, I shall refer to it as the Sanya Builders email address. Thereafter, correspondence over more than three years with regard to the conduct of the arbitration was apparently conducted with the applicant at that email address. The applicant was legally represented and participated from time to time in the arbitration proceeding, but at other times he did not participate.
  6. On 4 April 2018, Ms Rooney published her final award in the arbitration. The award reflects it as having been signed and dated in Sydney on that date. In terms of the award, the Indian parties are to pay MCC various sums totalling approximately US$5.8 million, AU$333,000 and HK$138,000 including costs. Provision is also made in the award for interest on the principal sums at 8% per annum.
  7. In August 2018, MCC commenced proceedings in the High Court of Delhi in India to enforce the final award in India. I shall refer to this as the Indian proceeding.

THE PROCEEDING IN THIS COURT

  1. On 29 November 2019, the applicant commenced a proceeding by originating application in this Court in which he sought relief setting aside the final award and costs against MCC. That relief was said to be sought under Art 34 of the Model Law which deals with recourse against an arbitral award. Article 34(2) of the Model Law sets out various limited grounds on which an arbitral award may be set aside at its seat.
  2. Subject to other provisions of Pt III of the IAA, s 16(1) of the IAA gives the Model Law the force of law in Australia. In terms of Art 1(1) of the Model Law, it applies to international commercial arbitration. An arbitration is international if the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different states (i.e. countries) (Art 1(3)). It is common ground that the Model Law applies in this case – the applicant relies on it to set aside the award and MCC relies on it to summarily dismiss the set aside application.
  3. The originating application recorded that the applicant’s solicitor on record was Mr Tony Soubris of Soubris & Associates Lawyers in Hurstville, Sydney. The significance of this will shortly become apparent.
  4. In the applicant’s affidavit filed in support of the originating application he identified numerous grounds to the application to set aside the award. They cover a wider range of matters including such things as error of law and errors in assessing the evidence. Few of the grounds, if made out on the facts, would qualify as grounds to set aside an award under Art 34(2) of the Model Law.
  5. After having commenced the proceeding, the applicant did not apply for leave to serve the originating process on MCC. Further, he did not serve the originating process on MCC.
  6. MCC first learnt of the applicant’s originating application in this Court on 16 December 2019 when the applicant served a copy of the originating application in the Indian proceeding. There was a call over listed in the High Court in Delhi on 18 December 2019. The originating application in this Court was filed in the High Court in Delhi just in time for that call over. I infer that that was for the purpose of opposing or perhaps delaying or staying that proceeding.
  7. As it happens, the matter was not called on 18 December 2019 in Delhi because the judge allocated to hear the case was ill. The matter was relisted in the High Court of Delhi for 24 February 2020. As will be seen, that date has some significance.
  8. Also on 16 December 2019, my Associate emailed Mr Soubris suggesting that the matter be listed for a first case management hearing on 6 February 2020. It was anticipated at that time that the applicant would in the meanwhile do whatever was required to serve the application, if it had not already been served, and to notify the respondents of the date for the first case management hearing.
  9. On the same day, Mr Soubris replied to my Associate asking that the matter be listed for 20 February 2020 or thereafter to suit his convenience. That email was copied to the applicant at the Sanya Builders email address which had the consequence, as will be seen, that subsequent correspondence to and from my Associate was also sent to that address.
  10. On 17 December 2019, Mr Greg Willis, a solicitor and a director of MCC, wrote by email to Mr Soubris pointing out that the originating application had not been served and that it was out of time because of the three month time limit provided for in Art 34(3) of the Model Law. Mr Willis also set out details of the occasions on which he contended that the applicant had received the final award which commenced the running of time, such that the originating application was filed well outside the three months allowed.
  11. By email on 17 December 2019, my Associate emailed Mr Soubris (copied to the Sanya Builders email address) notifying that the matter was listed for a case management hearing on 20 February 2020. At that stage, no respondent had entered an appearance.
  12. Given that the notice to Mr Soubris, who was unambiguously on record for the applicant at that time, was also copied directly to the applicant, the applicant can be taken to have known from 17 December 2019 that the matter was listed for a hearing on 20 February 2020, i.e. the applicant was given more than two months’ notice of the hearing.
  13. On 9 January 2020, Mr Willis on behalf of MCC filed a notice of address for service in accordance with the rules, as well as the interlocutory application referred to above (at [1]) and a supporting affidavit.
  14. In that regard, Art 34(3) of the Model Law, on which the interlocutory application was said to be based provides as follows:

An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal.

  1. No request had been made under Art 33 so the reference to that provision in Art 34(3) is not relevant for present purposes.
  2. On 6 February 2020, Mr Soubris filed a notice of intention of ceasing to act for the applicant. The notice was in accordance with Form 7 of the Federal Court Rules 2011 (Cth) (FCR). It stated that after seven days from the date of service of the notice, Mr Soubris would file in the registry a notice that he had ceased to act as the applicant’s lawyer in the proceeding and that the applicant must, within five days after that notice, file in the registry a notice of address for service.
  3. Rule 4.05(1) of the FCR requires the notice to be served on the party who the lawyer represents, and r 4.05(2) requires the party to file a new notice of address for service within five days of the lawyer’s notice being filed. I infer that Mr Soubris served the notice on the applicant as he was required to do by the rule, because that is what he was required to do and because, as will be seen, the applicant did not later say that Mr Soubris had not served the notice on him.
  4. On the hearing of the adjournment application, Mr Willis tendered an email dated 8 February 2020 as evidence that on that day he served on Mr Soubris the interlocutory application, MCC’s genuine steps statement, MCC’s notice of address for service, the supporting affidavit, and an outline of submissions in support of the interlocutory application. The submissions had been filed on that day.
  5. The email stated that the documents that were attached were “stamped copies”, by which I infer that they were the copies that had been issued by the Court and that bore the stamp of the Court. The copy of the interlocutory application that was served on Mr Soubris therefore included the Court’s “notice of filing and hearing” form bearing the Court’s stamp and the signature of the Registrar. That form gave notice that the interlocutory application was listed for hearing on 20 February 2020 at 9:30am.
  6. It is thus apparent that at a time when Mr Soubris was still on record for the applicant – even before the expiry of the minimum period of seven days provided for in r 4.05(1)(b) – he received notice of the interlocutory application being listed for 20 February 2020. The applicant was thus given proper notice of that listing. In that regard, r 17.01(2) of the FCR requires that a party be given at least three days’ notice of an interlocutory application. Here the applicant was given 12 days’ notice. That was over and above the more than two months’ notice that he had in any event been given of the first case management hearing for the same date and time.
  7. On 12 February 2020, my Associate sent an email to the parties requesting them to confer with regard to appropriate orders to be made on 20 February 2020. The email was sent to the applicant’s Sanya Builders email address.
  8. On 13 February 2020, Mr Willis wrote to my Associate copying the applicant (at the Sanya Builders email address) and Mr Soubris asking that the interlocutory application be determined on 20 February 2020 on account of the fact that the matter would next be before the High Court of Delhi on 24 February 2020. Plainly, Mr Willis hoped that the originating application could be dismissed before the matter was called in Delhi on 24 February so that the fact of a pending application to set aside the award could not be relied on to delay or stay the Indian proceeding.
  9. Mr Willis gave evidence on affidavit that in India litigation moves at “glacial speed” and it is not uncommon for a straightforward case to take up to 12 years before a judgment is given. He was clearly seeking to minimise the opportunities for further delay in the Indian proceeding. I infer that if the originating application in this Court remained on foot on 24 February 2020 when the Indian proceeding was called, there was a real risk that the Indian proceeding would be significantly delayed. Such delay would cause MCC significant prejudice.
  10. On 19 February 2020 soon after 9:00am, my Associate emailed the parties (including Mr Soubris and the applicant at the Sanya Builders email address) advising that it was the Court’s intention that the interlocutory application would be heard on 20 February 2020. This email in effect served to confirm the notification of the listing for that day that had been given to Mr Soubris by Mr Willis on 8 February 2020.
  11. The email also pointed out that Mr Soubris had not yet withdrawn as solicitor for the applicant because he had not filed a notice of ceasing to act in accordance with Form 8, notwithstanding the passage of seven days since him having filed his notice of intention to withdraw.
  12. Later that day, Mr Soubris filed his notice of ceasing to act.
  13. Shortly before 6:00am on 20 February 2020, my Associate’s inbox received an email from Kapil Kher, the applicant’s advocate and solicitor in the Indian proceeding. The email was in the applicant’s name in which he requested an adjournment of the hearing on 20 February 2020 to a date at the end of April or in early May 2020. In summary, the applicant’s grounds were as follows:

(1) that on account of some misunderstandings on the quantum of fees chargeable by Mr Soubris he had ceased to act on 19 February 2020;
(2) the applicant is resident in India and unable to represent himself on 20 February 2020 “because of distance and travel times between the two countries” and it will not be possible for him to appear at the hearing;
(3) the applicant’s father had died in the month of January 2020 in respect of which the applicant has to perform certain rituals and will not be able to travel to Sydney for at least a month to attend a hearing and to engage the services of another lawyer.

  1. When the matter was called on 20 February 2020, a person identifying himself as Mr Vivek Sharma, the nephew of the applicant, appeared on behalf of the applicant. Mr V Sharma is not a lawyer and has no rights of appearance in the Court. Mr Willis, who appeared for MCC, did not object to Mr V Sharma’s appearance and I therefore gave him leave to address the Court on the applicant’s behalf.
  2. Mr V Sharma referred to the email from the applicant cited above and requested on behalf of the applicant that the matter be adjourned for the period of time indicated in the email. Mr V Sharma did not raise any new grounds for the adjournment.
  3. Notably, in neither the email nor in Mr V Sharma’s address to the Court was it contended that the applicant had not had ample notice of the interlocutory application being listed for 20 February, or that Mr Soubris’s withdrawal had taken the applicant by surprise. He had had notice of the listing from 17 December 2020 and of Mr Soubris’s intended withdrawal from at least 6 February 2020.

REFUSAL OF THE ADJOURNMENT

  1. The High Court made clear in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; 239 CLR 175, that the types of matters that should be considered in the context of an adjournment application include: (a) the explanation for the adjournment; (b) the detriment to other parties; and (c) the detriment to the court and other litigants. That is not an exhaustive list.
  2. On the basis of the facts set out above, I took into account the following matters in refusing the applicant’s application for an adjournment of MCC’s interlocutory application.
  3. First, the applicant has delayed in the prosecution of this case. As indicated above, the originating application was filed on 29 November 2019, but it was never served and no application to serve outside of the jurisdiction was ever made. The applicant appears to have been content to have had the proceeding filed for the purpose of relying on it in the Indian proceeding without actually progressing the proceeding in this jurisdiction.
  4. Second, there is no suggestion that the applicant has been unable to appoint lawyers to represent him or that he does not have the means to ensure that his interests are properly represented. While he was participating in it, he was represented in the arbitration proceeding, he is represented in the Indian proceeding and he commenced the proceeding in this Court represented by a solicitor and a barrister. Moreover, the evidence of Mr Willis on affidavit is that the applicant manifests as a wealthy man with interests in real estate development, hotels and restaurants. In short, the applicant’s explanation for the need for the adjournment is unconvincing; to the extent that there is a need it has been created by him.
  5. I have had regard to the applicant’s difficulties arising from the death of his father to impact on his ability to travel. I do not accept that they prevented him from being reasonably able to appoint lawyers to represent him at the hearing in Sydney on 20 February 2020.
  6. Third, the applicant has not identified any basis upon which it might be suggested that the interlocutory application would not succeed; he has not filed any evidence and he has not identified any defence to the interlocutory application. The only suggestion is in his affidavit in support of the originating process in which he says that he received the final award on 2 October 2019.
  7. However, he does not say in terms that he did not also receive it at an earlier time, and, as will be seen, the evidence on the interlocutory application that the applicant in fact received the award much earlier than that is very strong. The applicant received notice of MCC’s contentions in that regard by email to Mr Soubris on 17 December 2019 (see at [20] above]) and he received MCC’s evidence in support of those contentions, and MCC’s submissions based on that evidence, on 8 February 2020 (see at [28] above), yet he never sought to dispute let alone answer that case.
  8. The applicant also does not suggest that the Court has the power to extend the time period of three months provided for in Art 34(3) of the Model Law or, if there is such a power, that there is any basis to exercise it in this case. It is thus not necessary to decide whether the time limit can be extended. The different positions on this question in a number of different jurisdictions are explored by Anselmo Reyes IJ in the Singapore International Commercial Court (SICC) in BXS v BXT [2019] SGHC(I) 10 at [25]-[41]. His Honour concluded that there is no discretion in the SICC to extend the time period.
  9. In the absence of an express power given to the court in other legislation to extend the time period, which is the position in respect of this Court, the balance of authority heavily favours there being no power to extend the time period: Emerald Grain Australia Pty Ltd v Agrocorp International Pte Ltd [2014] FCA 414; 314 ALR 299 at [8]; Hebei Jikai Industrial Group Co Ltd v Martin [2015] FCA 228; 324 ALR 268 at [61]- [63]; ABC Co v XYZ Co Ltd [2003] SLR 546 at [9]; PT Pukuafu Indah v Newmont Indonesia Ltd [2012] 4 SLR 1157 at [29]-[30]; Opotiki Packing & Coolstorage Ltd v Opotiki Fruitgrowers Co-operative Ltd (In Receivership) [2003] 1 NZLR 205 at 210 [12] and 219 [13]; Downer-Hill Joint Venture v Government of Fiji [2005] 1 NZLR 554 at [31] and [62]; Moohan v S. & R. Motors [Donegal] Ltd [2009] IEHC 391 at [3.4]; Todd Petroleum Mining Co Ltd v Shell (Petroleum Mining) Co Ltd [2014] NZCA 507; [2015] 2 NZLR 180 at [57]; Kyburn Investments Ltd v Beca Corporate Holdings Ltd [2015] NZCA 290; 3 NZLR 644 at [62].
  10. Although, as explained, it is not necessary to decide the point, and it would be undesirable to do so without there having been any contradictor, I agree with the New Zealand Court of Appeal that “the whole scheme of the [Model Law] is to restrict court review of arbitration awards both with respect to grounds and time”: Opitiki at 220 [19]. In the words of the Full Court in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2014] FCAFC 83; 232 FCR 361 at [109] per Allsop CJ, Middleton and Foster JJ, the Model Law requires for its efficacy “the swift and efficient judicial enforcement and recognition of contracts and awards”. That underlying policy also supports the proposition that the Court lacks the power to extend the time in Art 34(3).
  11. It is thus unlikely that even if the applicant had some basis to apply to extend the time period, and he made such an application, there would be any power in the Court to accede to such an application.
  12. The result is that on the available evidence there is simply no purpose in any adjournment; it would merely serve to delay what otherwise appears to be inevitable.
  13. Fourth, I took into account the overarching purpose of the civil practice and procedure outlined in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (FCA Act), namely to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.
  14. In my view, the applicant had ample notice of the listing of the interlocutory application, and of his solicitor’s intention to withdraw from representing him, yet he made no other arrangement to be legally represented at the hearing to oppose the interlocutory application. Moreover, he offered no defence to the interlocutory application. To have adjourned the interlocutory application to another day may have resulted in significant prejudice to MCC because of the possibility of further delay in the Indian proceedings and it would have served no identifiable legitimate purpose.

THE DISMISSAL OF THE PROCEEDING

  1. The adjournment application having been refused, the question of MCC’s interlocutory application arose for decision. In that regard, r 17.04 of the FCR provides that an interlocutory application can be heard and determined in the absence of a party if there was service of the interlocutory application and the party does not appear.
  2. As indicated above, Art 34(3) of the Model Law requires an application for setting aside an award to be made within three months “from the date on which the party making that application had received the award”. Bearing in mind that the applicant’s originating application for relief against the arbitral award was issued on 29 November 2019, the question is whether the applicant “had received the award” on or before 29 August 2019, i.e. three months’ earlier.
  3. MCC adduced the following evidence in support of its case that the applicant had received the award before 29 August 2019.
  4. First, MCC submitted that the applicant received the award from ACICA on 6 April 2018. The evidence in that regard is as follows.
  5. By letter dated 6 April 2018, Ms Deborah Tomkinson, the Secretary General of ACICA, wrote to the parties to the arbitration proceeding saying that ACICA had been asked by the arbitral tribunal to communicate its final award dated 4 April 2018. The letter stated that the final award is “enclosed” and that hard copies of the award would follow by courier.
  6. The letter was sent under cover of an email dated 6 April 2018 which was addressed to, amongst others, the applicant at the Sanya Builders email address and the applicant’s nominated counsel in the arbitration proceeding, namely Mr Kuldeep Rai SC, a Delhi advocate.
  7. The face of the email records that the attachments to it included the letter which I have referred to and the final award.
  8. Although he does not say what the source of his knowledge on the point is, Mr Willis in his affidavit says that a printed copy of the letter enclosing the final award was also sent by ACICA using a courier to the applicant’s postal address but that it was not accepted at that address.
  9. At no stage did the applicant dispute that he had received the award as an attachment to the email from Ms Tomkinson 6 April 2018. Moreover, by s 161 of the Evidence Act 1995 (Cth) it is presumed that he did receive the email and the attachment. There is nothing to raise sufficient doubt so as to displace that presumption.
  10. In the circumstances, I find that the applicant received the award on that date which was nearly 17 months before the commencement of the three month period preceding the date that the set aside proceeding was filed, or, simply put, some 20 months prior to the filing of the originating application in this Court..
  11. Second, MCC submitted that the applicant also received the award via the enforcement proceedings in India on 12 February 2019. The evidence in that regard is as follows.
  12. MCC commenced the Indian proceeding on 27 August 2018 by filing an enforcement petition pursuant to Pt II of the Indian Arbitration Act. The enforcement petition contained within it, as required by the Indian Arbitration Act, a notarised copy of the original of the final award.
  13. MCC’s Indian advocate, Mr Mohit Singh of P&A Law of New Delhi, sent a copy of the enforcement petition (including the award) to the applicant at his Sanya Builders email address on 12 February 2019 by email in two parts. Mr Singh deposed to an affidavit of service in the Indian proceeding which recorded that the High Court of Delhi had ordered that the applicant could be served “via all permissible modes including email” and that that had been done by serving a complete set of the enforcement petition including “documents” (which I understand to include the award) by email on the respondent on 12 February 2019.
  14. Mr Singh’s affidavit attached the two emails which showed that they were sent to the applicant at the Sanya Builders email address on 12 February 2019 and that they had as attachments a document titled “Enforcement Petition under 47 & 49…” in two parts.
  15. In the circumstances, I find that the applicant received the final award by email on or about 12 February 2019. That was some six months before the commencement of the three month period prior to the applicant’s proceeding being filed in this Court, or, nine months prior to the filing of the originating application in this Court.
  16. Third, MCC submits that the applicant received the final award by it being furnished to his solicitor in Sydney on 6 August 2019. The evidence in that regard is as follows.
  17. Mr Willis annexed to his affidavit a letter from ACICA to Mr Soubris dated 6 August 2019 which referenced the arbitral proceedings between MCC and the Indian parties. Relevantly, the letter stated as follows:

We refer to our previous correspondence in this matter, including our email to you dated 9 October 2018.
We also acknowledge receipt of your letter to the Australian Centre for International Commercial Arbitration (ACICA) dated 18 July 2019.
We understand you are authorised to act on behalf of Messrs Sanjay Sharma and Nitish Khetan in relation to the above-reference arbitration proceedings, which are closed.
Pursuant to your request, we enclose a certified copy of the original of the Final Award dated 4 April 2018 in the above-reference arbitration.
In relation to the other documents you have requested ACICA to provide you a copy, we are currently considering that request, including in light of the comments, if any, received from the Sole Arbitrator and the Claimant. …

  1. Mr Willis also tendered a courier’s waybill dated 6 August 2019 evidencing the shipment of a package of 0.8 kg from ACICA to Mr Soubris.
  2. In the applicant’s affidavit supporting the originating process he deals with the question of when he received a copy of the final award. In a heading in the affidavit it is stated “I/Mr Sharma did not have a signed copy of the Final Award…” Thereunder, the affidavit states that the address to which most of the written communications during the arbitration were sent to the applicant was not his address. That address is a physical address. The affidavit does not canvass the receipt of documents by email.
  3. The affidavit also deals with Mr Soubris having obtained documents from ACICA in September 2019 which were then made available to the applicant on 2 October 2019 which is when he says that he received the final award. These are apparently the documents referred to in ACICA’s letter of 6 August 2019 as being under further consideration. The affidavit does not deal with Mr Soubris’s receipt of that letter and the enclosed final award, save that it says that he was on an overseas holiday with his family from late July 2019 until 10 September 2019. In particular, the affidavit does not explain why receipt by Mr Soubris’s office of the final arbitration award on or about 6 August 2019 should not be taken as receipt by him of the award on that date. Nor does the affidavit say that the award was not forwarded to the applicant by Mr Soubris’s office in the absence of Mr Soubris.
  4. As the applicant’s affidavit was not read on the interlocutory application and he was not available for cross-examination, what he states in it is not strictly speaking evidence on the interlocutory application. I nevertheless take it into account for completeness to show that even if it was evidence in the interlocutory application it would not prove that the applicant did not receive the final award, at least in a deemed sense through it having been received at his solicitor’s office, on or about 6 August 2019.
  5. In the circumstances, I find that the applicant received a copy of the final arbitral award on or shortly after 6 August 2019. That was several weeks before the commencement of the three month period prior to the filing of the originating application in this Court. In view of my findings above that the applicant had in any event received the award on two earlier occasions, nothing turns on his receipt of the award on this third occasion.
  6. It follows, in the words of s 31A of the FCA Act and r 26.01(1)(a) of the FCR, that the applicant has no reasonable prospect of successfully prosecuting the proceeding and it should be summarily dismissed. The costs should follow the event.
I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stewart.

Associate:

Dated: 26 February 2020

Rinehart v Rinehart (No 2) [2020] NSWSC 235 (23 March 2020)

Supreme Court
New South Wales
Case Name:
Rinehart v Rinehart (No 2)
Medium Neutral Citation:
[2020] NSWSC 235
Hearing Date(s):
On the papers
Decision Date:
23 March 2020
Jurisdiction:
Equity
Before:
Ward CJ in Eq
Decision:
In proceedings 2017/86718

1. Subject to further order, pursuant to s 8(1)(a) and (e) of the Court Suppression and Non-publication Orders Act 2010 (NSW), order that paragraphs 14 to 17 of the affidavit sworn 28 February 2020 by Timothy Ignatius L’Estrange be kept confidential and not be made available nor disclosed to any person other than the legal representatives of the parties in connection with this proceeding anywhere in the Commonwealth for a period of five years.

2. Pursuant to s 26 of the Civil Procedure Act 2005 (NSW), order the parties to mediation, such mediation to take place within three months of the making of these orders.

3. Order that the costs of the mediation (namely, the fees and disbursements of the mediator or mediators and any venue, equipment, or related service costs) are to be dealt with in accordance with order 2 of the orders made today in proceedings 2011/285907.

4. Direct the parties to seek to agree on (and jointly to appoint) a mediator or mediators for the purposes of the said mediation within one month of the making of these orders and direct the parties to notify the associate to Ward CJ in Eq by 17 April 2020 of the agreed identity of the said mediator(s) or, failing agreement, their proposed choice of mediator(s) (in which case Ward CJ in Eq will nominate the mediator(s) to be appointed).

5. Direct the parties, within seven days of the conclusion of the mediation, the parties are to inform the associate to Ward CJ in Eq as to whether settlement has been reached at the mediation and of any orders sought to be made in relation to the proceedings in that regard.

6. Liberty to the parties to apply to the associate to Ward CJ in Eq on three days’ notice.

7. Order Bianca Hope Rinehart, as trustee for the Hope Margaret Hancock Trust, to pay the costs of the defendants of, and incidental to, the second defendant’s amended notice of motion dated 15 July 2019 and filed on 16 July 2019, and the first defendant’s amended notice of motion dated 26 June 2019 (including the hearings of 23 May 2017, 27-28 August 2018, and 15-19, 23 and 25 July 2019), such costs to be paid on an indemnity basis and to be payable forthwith.

8. Order Bianca Hope Rinehart, as trustee for the Hope Margaret Hancock Trust, to pay the costs of the first defendant (on the ordinary basis and payable forthwith) of the hearings to set aside subpoenas issued by Bianca Hope Rinehart in these proceedings to the Institute of Public Affairs, CEF Pty Ltd and the Hon Barnaby Joyce MP (see Rinehart v Rinehart [2018] NSWSC 1102).

9. Order that the existing costs orders made in favour of the second defendant in respect of its application to set aside a notice to produce issued to it by Bianca Hope Rinehart, as trustee for the Hope Margaret Hancock Trust (see Rinehart v Rinehart [2019] NSWSC 759) be varied such that the costs be payable forthwith.

In proceedings 2011/285907

1. Pursuant to s 26 of the Civil Procedure Act 2005 (NSW), order the parties to mediation, such mediation to take place within three months of the making of these orders.

2. Order that the costs of the mediation (namely, the fees and disbursements of the mediator or mediators and any venue, equipment or related service costs) be borne (subject to any agreement between all the relevant parties to the contrary) in equal one-sixth shares by each of the Rinehart family members (i.e., Bianca (in her personal capacity), John, Hope, Ginia and Gina) and Hancock Prospecting Pty Ltd.

3. Direct the parties to seek to agree on (and jointly to appoint) a mediator or mediators for the purposes of the said mediation within one month of the making of these orders and direct the parties to notify the associate to Ward CJ in Eq by 17 April 2020 of the agreed identity of the said mediator(s) or, failing agreement, their proposed choice of mediator(s) (in which case Ward CJ in Eq will nominate the mediator(s) to be appointed).

4. Direct the parties within seven days of the conclusion of the mediation to inform the associate to Ward CJ in Eq as to whether a settlement has been reached at the mediation and of any orders sought to be made in relation to the proceedings in that regard.

5. Liberty to the parties to apply to the associate to Ward CJ in Eq on three days’ notice.

Catchwords:
COSTS — Party/Party or indemnity basis — General rule that costs follow the event — Whether costs should be ordered on an indemnity basis — Whether costs should be paid forthwith

JUDGMENT

  1. HER HONOUR: On 14 February 2020 (see Rinehart v Rinehart [2020] NSWSC 68, to which I will refer as the February Judgment), I ruled on a number of interlocutory motions in an ongoing dispute involving members of the Rinehart family. As in earlier decisions involving these parties, I refer to the Rinehart family members by their first names.
  2. Relevantly, in 2017, after obtaining judicial advice to the effect that she would be justified in so doing (see Bianca Hope Rinehart trading as trustee of the Hope Margaret Hancock Trust [2017] NSWSC 282), Bianca commenced proceedings in this Court, in her capacity as trustee of the Hope Margaret Hancock Trust (HMH Trust), against her mother (Gina) and others, seeking 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 Hancock Prospecting Pty Ltd (HPPL) (this being proceeding no 2017/00086718, to which I will refer as the Oppression Proceeding).
  3. In an earlier proceeding, still not finally disposed of, to which I will refer as the Trustee Proceeding (proceeding no 2011/00285907), Bianca and her brother, John, had sought the removal of Gina as trustee of the HMH Trust; and, after Gina’s resignation as trustee and the appointment of Bianca as the replacement trustee, there were (and continue to be) disputes as to the documents required to be produced to Bianca by Gina as the outgoing trustee of the HMH Trust (or the process by which they are to be produced).
  4. By the time of the hearing before me in July last year, which culminated in the February Judgment, a number of interlocutory motions had been filed (some in the Trustee Proceeding and some in the Oppression Proceeding). The underlying substantive dispute by then was as to the claims made in the Oppression Proceeding, Bianca’s stated central aim in which proceeding being the recovery and protection of trust assets.
  5. For the reasons set out in the February Judgment, I referred the parties to arbitration in respect of all matters other than Bianca’s application for relief pursuant to s 247A of the Corporations Act 2001 (Cth) (the s 247A application), and I stayed the balance of the Oppression Proceeding pending the determination of that arbitration. I made various orders as to the disposal or stay of the then extant interlocutory motions and I directed the parties to file brief written submissions on two issues: first, as to the costs orders that should be made consequent upon the determination of the said motions and, second, as to my stated intention (of the Court’s own motion) to refer the parties to mediation (i.e., without having heard and determined on its merits the motion filed by Gina on 14 August 2018 in the Oppression Proceeding seeking that very relief).
  6. The parties filed brief submissions pursuant to the directions so made. Bianca then filed reply submissions on the costs issues and the defendants filed further submissions in response to Bianca’s reply submissions. Included among the initial round of submissions were brief submissions filed by the solicitor acting for Hope Rinehart Welker (the third defendant in the Trustee Proceeding), she being a respondent to Gina’s 14 August 2018 mediation motion, and one of the beneficiaries of the HMH Trust. Hope did not appear at the hearing of the stay applications before me in July last year but does wish to participate in any mediation that is ordered in respect of the underlying disputes (see her submissions below).
  7. When the Rinehart document production dispute was before me for directions on 19 March 2020, I made orders in relation to the referral of the matter for mediation indicating that I would shortly publish my reasons for that decision together with my reasons for the orders then yet to be made in relation to costs. These are those reasons.

Referral to mediation

  1. I will deal first with the issue as to whether (and in what time frame) the parties should be referred to mediation because, as it transpires, that is the least contentious of the two issues on which I sought submissions; and, as noted above, I made orders last week when the matter was before me for directions to put this in place.
  2. As I indicated in the February Judgment (at [37]), I consider it to be overwhelmingly in the interests of the administration of justice (and, in particular, 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. Since argument on Gina’s motion seeking referral to mediation had been deferred when the other interlocutory motions were before me, as a matter of procedural fairness (particularly given that Bianca had not been prepared to consent to a referral to mediation at that stage) I gave the parties an opportunity to make submissions as to the making of such a referral of the Court’s own motion. The position of the parties in relation to the proposed referral for mediation, as gleaned from those submissions, can be summarised as follows.
  3. Bianca does not now object to a referral to mediation. Her stated concern (as has been raised consistently both when the motions were before me and in her latest submissions) was to ensure that she has relevant documentation prior to any mediation in order to be able to participate meaningfully in such a mediation; her position being that the mediation is more likely to be successful if the current “informational disparity” between the parties is remedied (or at least remedied to an extent). In written submissions, Bianca’s Counsel has adverted to negotiations taking place between the parties as to document production which it is hoped will address or ameliorate that concern. (Unsurprisingly, I am not privy to those negotiations or discussions; and I understand that they are not the subject of the communications between solicitors that were put before me on a different issue at the directions hearing last week.) Nevertheless, Bianca submits that, in any event, any mediation should occur as soon as practicable and by no later than 15 April 2020. I am not aware of the significance of that particular time frame (but it would seem by now to be optimistic, being less than a month away).
  4. Hope actively supports the referral to mediation (and has indicated that she would wish to participate in any such mediation, as a party to the Trustee Proceeding, and as a beneficiary of the HMH Trust). Hope does not wish to be heard as to the time frame for any such mediation other than to note (as is apparent from the material on the court file) that there are a number of parties to, and a number of legal representatives involved in, the present proceeding; and (which is not so readily apparent at least from a quick perusal of the court file) that the location of the parties and their legal representatives is geographically disparate. That said, Hope’s position is that she will take all reasonable steps to accommodate a time frame convenient to the other parties to the proceeding and their respective legal representatives.
  5. Gina consents to the referral to mediation of the parties in both the Oppression Proceeding and the Trustee Proceeding, submitting that it is appropriate that the referral be made in each of those proceedings because the judgment was given in each of those proceedings (given that there had been motions filed in each of those proceedings) and that this will ensure that all parties interested in the “interconnected” disputes will be referred to mediation (which Gina says will be necessary if there is to be any resolution of those disputes). It is noted that not all the beneficiaries of the HMH Trust are parties to the Oppression Proceeding but that they are all parties to the Trustee Proceeding.
  6. As to the timing of the foreshadowed mediation, Gina submits that any mediation should not take place until the respondents to the arbitration presently before the Honourable Wayne Martin QC AC, the Honourable Kevin Lindgren QC AO, and Mr Michael Hwang SC (the Martin Arbitration) (that arbitration being the culmination of the referral/stay applications that were the subject of the Full Court Decision and High Court Decision referred to in the February Judgment) have put on their defences (or such later date as any party may seek). It is said that this will permit the parties properly to define the issues between them in the Martin Arbitration and will therefore increase the chances of a resolution of the “interconnected” disputes. The likely timing of such defences is addressed in a confidential affidavit sworn 28 February 2020 by Gina’s solicitor (for portions of which a suppression order is sought, and will be granted, to maintain the confidentiality of the arbitration process presently on foot). Suffice it to say that the timing of steps in relation to the Martin Arbitration seems presently to be undetermined (and, as such, the timing proposed by Gina for the scheduling of the arbitration would not meet the expectation expressed at [39] of the February Judgment that the referral to mediation take place within the near future and not be postponed to some indeterminate future time).
  7. Gina has also made submissions as to the costs of any such mediation. She notes that she, her four children and HPPL are the central parties to the disputes to be referred to mediation and says that, on one view, the appropriate course would be to have each of those parties bear one-sixth of the costs. However, for simplicity, she has proposed that the costs of the mediation be borne as to half by her and HPPL and as to the other half by her children.
  8. Finally, HPPL consents to the referral of this matter to mediation (and, indeed, suggests that there would be utility in the parties mediating all the extant disputes, including those now the subject of the proceedings in the Supreme Court of Western Australia, and/or the issues referred to what has been referred to as the French Arbitration and the Martin Arbitration, respectively).
  9. HPPL’s reasons for supporting the proposal for mediation are, in essence, that it is a party to numerous disputes involving the parties to the present proceedings; that all of its shareholders are parties to at least one of the disputes involving the parties and a number of the disputes concern some of its most valuable assets; and that, for HPPL, the disputes “are a diversion of management time and commercial focus away from its day-to-day commercial activities and operations the ultimate object of which is to create wealth for the company and its shareholders”.
  10. As to timing, HPPL submits that any mediation should occur on a date convenient for all parties to the proceeding and confirms that it will generally make itself available to participate in any mediation.

Determination

  1. As is apparent from the above, there is now no opposition from any of the parties to the referral of the parties to mediation and I therefore made such an order when the matter was before me last week. While I consider that there is considerable force to the observation of HPPL that there would be utility in a mediation of all of the extant disputes involving the Rinehart family members and HPPL’s assets, it is not within my remit to order other parties to proceedings in other courts or arbitral tribunals to participate in a mediation of those other disputes. I do, however, note that there is nothing to stop the parties that are here being referred to mediation from seeking to have other parties join consensually in the mediation, or from including in the scope of the mediation matters the subject of disputes that are presently before other courts and arbitral tribunals (with a view to trying to reach a commercial resolution of those disputes, perhaps including other entities in any such settlement).
  2. As to the timing of the mediation, I was not prepared to leave it to an indeterminate future time (particularly when the timing of steps to be taken in the Martin Arbitration, at least at the time of the submissions made in the present proceedings, is unknown). Bearing in mind: the number of parties and their representatives; any practical difficulties arising out of disparate geographical locations of the parties and their representatives; the uncertainty as to the status of the document production process which should currently be underway in relation to the documents of the trust; and the differing views of the parties as to the proposed timing of the mediation, I considered that it was appropriate to make orders that provide for a mediation to take place within three months. It seemed to me that this would be ample time for the parties (well-resourced as they must be in order to be in a position to fund all this ongoing litigation and arbitral proceedings) to put themselves in a position to be able productively to participate in a mediation (and, if there is a difficulty with that timing or an acceptable reason to defer the mediation once commenced, it is open to the parties by consent to put forward a proposed varied timeframe for the mediation).
  3. As to the costs of the mediation (other than the parties’ own costs, of course), I considered that they should be borne in equal one-sixth shares by each of Gina, HPPL and the four children (and that Bianca should bear her share of the costs in her personal capacity since, although Bianca brings the Oppression Proceeding in her capacity as trustee, the underlying disputes are also disputes in which she has an obvious personal interest, and otherwise the beneficiaries of the HMH Trust would bear an increased proportion of the costs of the mediation). I made orders accordingly.

Costs

  1. Where there is more dispute between the parties is as to the costs orders now to be made.

Bianca’s position

  1. Bianca, with one qualification, accepts that (on the basis of the general rule that costs follow the event) she should pay the costs of the applications that resulted in the making on 14 February 2020 of orders 1, 2, and 3 (i.e., the orders referring the parties to arbitration, staying the proceedings, and staying various of the extant interlocutory motions). Bianca, in her further submissions in reply to the defendants’ costs submissions, opposes any order for those costs to be on an indemnity basis; opposes the making of any forthwith costs order; and opposes any order as to the reserved costs of earlier applications to set aside compulsory processes (subpoenas and a notice to produce). I will deal with those reply submissions in due course.
  2. The qualification to Bianca’s acceptance that there should be costs orders made against her, is that Bianca submits that the costs relating to the stay of the s 247A application should be costs in the cause of that application. Bianca makes that submission for the following reasons.
  3. First, it is noted (as is certainly the case) that the s 247A application remains undetermined (pending the arbitration). Bianca says that the parties have twice prepared for a “full hearing” on the s 247A application: once, in mid-2018 (in the course of which hearing the application was adjourned), and again in mid-2019. Bianca says that the costs of the preparation for that application are not necessarily wasted; and that the application remains ready to be determined as and when the stay ceases to operate.
  4. Pausing here, the procedural history of Bianca’s attempts to have the merits of the s 247A application heard (in advance of or separately from the other interlocutory motions if necessary) has been dealt with in previous judgments. I simply here note that it has consistently been the defendants’ position that it was not appropriate for me to embark upon such a hearing (and, indeed, that it was not open to me to do so, on the basis that the s 247A application fell within the scope of the parties’ arbitration agreement). It is not useful here to restate the arguments that were put on that issue; other than to note that costs incurred in preparation for the “full hearing” of that application must be taken to have been incurred in the knowledge that, if the defendants’ arguments were accepted (albeit against my preliminary view as expressed in the course of those arguments), then those costs might either be wasted or, at the very least, might end up being duplicated at a later time.
  5. Second, Bianca notes that HPPL’s notice of motion as originally filed on 21 April 2017 in the Oppression Proceeding did not seek an order temporarily staying the s 247A application; rather, HPPL’s case then was that the application was covered by the arbitration agreement (and, if not, that the application should be dismissed or permanently stayed), which Bianca notes was something that was ultimately rejected by me. It is noted that it was not until 15 July 2019 (the first day of the hearing of the stay applications that were determined in February this year) that HPPL sought to amend its motion to seek a temporary stay of the s 247A application pending determination of an arbitration.
  6. Third, and to similar effect to the above submission, Bianca says that Gina’s 26 June 2019 notice of motion sought as its primary relief a referral of the whole of the matter (including the s 247A application) to arbitration and that Gina’s position as to any part of the proceedings not so referred was that there should be a permanent or temporary stay. Again, it is noted that the application for referral or, alternatively, a permanent stay, of the s 247A application was rejected.
  7. Thus, Bianca submits that the costs relating to the s 247A application should be carved out of any other costs order.

HPPL’s position

  1. It is convenient next to turn to HPPL’s position in relation to costs.
  2. HPPL seeks an order that Bianca pay its costs of and incidental to the amended notice of motion filed by it on 16 July 2019 (the HPPL Stay Application) on an indemnity basis and payable forthwith, including the costs of and incidental to the hearings on 23 May 2017, 27-28 August 2018, and 15-19, 23, and 25 July 2019. HPPL also seeks orders in relation to the costs of two further applications in the proceeding.
  3. First, of the hearings to set aside the subpoenas issued by Bianca to the Institute of Public Affairs (IPA), CEF Pty Ltd (CEF) and Senator Barnaby Joyce MP, those subpoenas (the Subpoenas) having been set aside (in whole or in part) with an order made at that time reserving costs (see Rinehart v Rinehart [2018] NSWSC 1102, to which I will refer as the 2018 Subpoena Judgment). HPPL seeks an order that Bianca pay its costs (on an indemnity basis and payable forthwith) of those hearings.
  4. Second, of HPPL’s successful application to set aside a notice to produce issued to it (the HPPL Notice to Produce) (see Rinehart v Rinehart [2019] NSWSC 759, to which I will refer as the 2019 Notice to Produce Judgment). Bianca was ordered to pay the costs of that application on the ordinary basis. HPPL now seeks an order that those costs be paid forthwith (but does not seek to vary the basis on which those costs are to be assessed).

General order as to costs

  1. Generally, as to the costs of the HPPL Stay Application, the orders are sought by HPPL under s 98(1) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) and rr 42.1 and 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), on the basis of the general rule that costs follow the event. As indicated above, Bianca does not contest this (other than that she seeks to carve out of any such costs order the costs of the yet to be determined s 247A application); and hence it is not necessary to consider the authorities relied upon by HPPL in its submissions in support of the proposition that costs are ordinarily awarded in favour of a party who successfully obtains a stay of proceedings in favour of arbitration (HPPL citing Ansett v Malaysian Airline System (No 2) [2008] VSC 156 at [20] per Hollingworth J; Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253 at [47], [49] per Marshall J; Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10(S) at [6]- [25], [33] per Martin CJ; In the matter of Ikon Group Limited (No 2) [2015] NSWSC 981 at [25] per Brereton J as his Honour then was; Novawest Contracting Pty Ltd v Brimbank City Council [2015] VSC 679 at [34] per Vickery J).
  2. HPPL presses for the whole of its costs of the Stay Application, including the costs of and incidental to each of the hearings referred to above, without any carve-out for the costs of the s 247A application, for the following reasons.
  3. First, HPPL says that it succeeded on all issues on the HPPL Stay Application: namely, that, over Bianca’s opposition, the primary relief HPPL sought was granted (the parties were referred to arbitration on all matters except the s 247A application and there was a stay of the whole of the proceedings). HPPL further points to the fact that I had indicated in the February Judgment that, had the primary relief not been granted, the alternative relief sought would have been granted and the proceeding stayed on case management grounds or on the basis that its continuation was an abuse of process (see at [31]-[32] of the February Judgment).
  4. Second, HPPL says that the overwhelming focus of the hearing in July 2019 was the respective stay applications; that the time spent dealing with the remaining motions (other than the unconscionability application) was negligible; and that the time spent on the unconscionability application arose in the context of whether it should be heard before the stay applications (and, therefore, HHPL says that the costs of that application are costs of or incidental to the HPPL Stay Application; but in any event, it is said that HPPL was in all material respects the successful party in respect of the unconscionability application – it being ultimately stayed pending the outcome of the arbitration).
  5. Third, HPPL submits that the costs of the 23 May 2017 hearing (as to the timetabling of the various interlocutory applications then before me) which were reserved (see [42]-[43] of Rinehart atf The Hope Margaret Hancock Trust v Rinehart [2017] NSWSC 803) and the costs of the 27 and 28 August 2018 hearings (which were also largely also reserved – see [149]; [152] of the 2018 Subpoena Judgment) are costs of and incidental to the HPPL Stay Application (it being said that HPPL was successful in persuading me not to hear the s 247A application in advance of the Full Court or the High Court decisions and that HPPL’s submissions on sequencing were ultimately accepted). (HPPL says that the question of costs was not dealt with at the hearing on 27/28 August 2018 beyond a submission on 28 August 2018, referring to the course of debate at T 80, T 81, T 86.)
  6. Fourth, it is submitted that no other order is appropriate in the circumstances. HPPL says that it has not engaged in any disentitling conduct that would cause the costs discretion not to be exercised in its favour; that no issues were improperly or unreasonably raised; that HPPL did not engage in conduct, raise any issues or engage in any argument that unnecessarily increased the length of the hearing (but, rather, acted consistently and reasonably in its position as to sequencing and relief, which position was ultimately vindicated).

Application for costs on indemnity basis

  1. As to HPPL’s submission that costs should be paid on an indemnity basis (invoking s 98(1)(c) of the Civil Procedure Act and r 42.5 of the UCPR), HPPL makes the following submissions.
  2. First, HPPL relies on a letter sent by its solicitors on 13 April 2017, shortly after the commencement of the Oppression Proceeding, to Bianca’s solicitors (a copy of which was in evidence at the hearing of the stay applications) in which HPPL proposed that there be a temporary stay of the proceedings until the determination or other resolution of the Federal Court proceeding (and that questions as to whether the proceedings should be further stayed, including as to whether they should be stayed in favour of arbitration or as an abuse of process, be deferred).
  3. HPPL submits that this was an open and genuine offer of compromise and notes that the principles applicable to Calderbank offers (see Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586, at 596-597, per Lord Cairns with whom Scarman LJ and Sir Willmer agreed) have been said to apply to open offers (citing Curtis v Harden Shire Council (No 2) [2015] NSWCA 45 (Curtis v Harden) at [14] (per Bathurst CJ, Beazley P, as Her Excellency then was, and Basten JA). It is submitted that, had HPPL’s proposal been accepted, then none of the costs in question would have been incurred.
  4. HPPL submits that Bianca’s failure to accept that offer was unreasonable. It says that the letter set out in detail why the proceeding was an abuse of process and needed to be stayed in light of the inconsistent claims Bianca had made in other proceedings and the applicable arbitration agreement; and that the letter made clear that Bianca “was in an obvious and intractable position of conflict” if she did not accept HPPL’s proposal. HPPL says that it had repeatedly made clear to Bianca that its directors could not responsibly approve the payment of further dividends (the primary relief sought against HPPL) under s 254T of the Corporations Act 2001 (Cth) given the existence of Bianca’s claims in other proceedings for ownership of the Hope Downs tenements, other tenements, and other HPPL assets. HPPL’s position is that Bianca’s conduct in suing HPPL in other proceedings was in fact the cause of the very conduct claimed in the Oppression Proceeding to be oppressive.
  5. Second, it is said that Bianca’s conduct in opposing the stay sought by HPPL was unreasonable conduct, or “relevant delinquency”, concerning the conduct of the case (in the sense considered in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at 89 per Gaudron and Gummow JJ). Reference is made to my observations in the February Judgment as to the continuation of these proceedings being an abuse of process in light of the overlapping issues and inconsistent claims for relief made by her in proceedings in other fora (see [32], [603] of the February Judgment); and it is noted that such an abuse of process may justify an indemnity costs order (citing Australian Beverage Distributors Pty Ltd v Evans & Tate Premium Wines Pty Ltd (2007) 69 NSWLR 374; [2007] NSWCA 57 (Australian Beverage Distributors) at [149] per Beazley JA, as Her Excellency then was; Hodgson and Santow JJA agreeing).
  6. Third, it is said that Bianca engaged in unreasonable conduct or “relevant delinquency” by failing to obtain judicial advice about continuing the proceedings. It is submitted that Bianca’s failure to obtain judicial advice was sufficiently unreasonable so as to justify an indemnity costs award because it involved the breach of an undertaking to the Court that she not “commence or continue proceedings on behalf of the Trust in a court … without the advice of the court” (see Hancock v Rinehart [2015] NSWSC 646 at [383], Order [1](d) per Brereton J, as his Honour was then). It is submitted that the failure to obtain advice to continue the proceeding (noting my observations at [44]-[47] of the February Judgment) was acute given the serious position of conflict in which Bianca placed herself by continuing the proceedings at the same time as pursuing inconsistent claims in the Federal Court and in Western Australia.
  7. Fourth, HPPL points out that Bianca’s resistance to the HPPL Stay Application was not something about which she had “no choice”, and nor did she obtain judicial advice to resist the HPPL Stay Application. Both of these matters are said further to compound the unreasonableness of Bianca’s opposition to the HPPL Stay Application and to militate in favour of an award of costs on an indemnity basis.
  8. Finally, HPPL says that Bianca’s conduct in seeking to agitate the unconscionability application was unreasonable (noting again in this context that there is no suggestion that Bianca obtained judicial advice to do so). It is said that doing so was directly contrary to the High Court’s determination that “[i]t could not have been understood by the parties to these Deeds had any challenge to the efficacy of the Deeds was to be determined in the public spotlight” (Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 (Rinehart v Hancock) at [44], per Kiefel CJ, Gageler, Nettle and Gordon JJ); and it was also directly contrary to the approach taken by Le Miere J in the Supreme Court of Western Australia (Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd (No 10) [2018] WASC 407 (Le Miere (No 10) Decision) at [154]-[160]). HPPL maintains that seeking to have the unconscionability application heard in open court had no reasonable prospects of success.

Application for a forthwith costs order

  1. As to the application that HPPL’s costs should be paid forthwith, HPPL refers to Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 (Morningstar) at [11]-[13], where Barrett J, as his Honour then was, summarised three principal grounds on which such an order may be made, namely where: the costs order is relevant to a discrete, separately identifiable aspect of the proceedings; there is some unreasonable conduct by the party against whom the costs have been ordered; or it is likely to be a long time before the final disposal of the proceedings.
  2. HPPL maintains that each of those factors is here applicable and that, both separately and collectively, they justify a forthwith costs order.
  3. As to the first of the three principal grounds identified in Morningstar, HPPL submits that the issues raised on its stay application are “generally distinct and separately identifiable” from substantive aspects of the case and (though, having regard to the history of this matter, I am unable to share this optimistic view of the world) unlikely again to arise. It is said that the arbitration questions are discrete questions and that, although the inconsistency in Bianca’s positions is an issue not limited to the present application, the consequence of that inconsistency (namely, a stay) is in substance directed to the HPPL Stay Application. Thus it is submitted that this interlocutory hearing ought relevantly be characterised as a distinct and complete part of the proceeding.
  4. As to the second, HPPL reiterates its position that Bianca’s conduct in maintaining these proceedings, while simultaneously advancing inconsistent positions in other proceedings, was an abuse of process and unreasonable (referring to the February Judgment at [32]). Further, it says that other aspects of Bianca’s conduct of the proceeding were unreasonable and led to an unnecessary increase in hearing time and resources (in particular, service of substantive submissions on the unconscionability application when it was listed only for directions); and the service of “voluminous” material, the vast bulk of which is said not to have been referred to at the hearing (citing Morningstar at [18]).
  5. As to the third, HPPL says that a significant period of time (“most likely several years”) is likely to pass before final disposal of the proceedings, which will only occur after the conclusion of the arbitration.
  6. Reliance is again placed in this context on the 13 April 2017 letter, which sets out what HPPL maintains was the appropriate course to have been taken (and which would have avoided these costs). Hence the application for a forthwith costs order.

Additional costs orders

  1. As to the additional costs orders sought (the costs of the setting aside of the Subpoenas, to which reference has been made above, and the HPPL Notice to Produce), HPPL says the following.
  2. As to the Subpoenas, it is noted that (other than an order in favour of CEF for its costs) costs were reserved. HPPL accepts that it did not apply to set aside the subpoenas. It says that its concern (as summarised in the 2018 Subpoena Judgment at [77]-[82]) was that the subpoenas ought not prejudice or interfere with HPPL’s asserted right to have the dispute (and the production of documents) dealt with in arbitration; and hence it sought to have the subpoenas dealt with after the determination of the HPPL Stay Application or for production only on a confidential basis. It is noted that the subpoenas were in fact set aside, so that it was not necessary to consider HPPL’s arguments. HPPL argues that its position was advanced consistently with, and in support of, the HPPL Stay Application and, therefore, HPPL submits that, as with the costs of that application, Bianca should pay HPPL’s costs of the subpoena hearing on an indemnity basis and forthwith for the same reasons.
  3. As to the notice to produce (the subject of the 2019 Notice to Produce Judgment), the further order that HPPL now seeks is that the costs (which have been ordered already to be paid to it) be payable forthwith, for the reasons set out already in relation to the forthwith costs order that is more generally sought.

Gina’s position

  1. Gina similarly submits that Bianca should pay the defendants’ costs of the proceedings to date on an indemnity basis and forthwith.
  2. The basis on which the costs order is sought in respect of the whole of the proceedings to date (as opposed to the costs of and incidental to the motions that were determined) is that Gina argues that the relevant “event” (for the purposes of r 42.1 of the UCPR, namely the obtaining of a stay of the proceedings) in effect disposed of the other interlocutory motions that were then before the Court (as itemised at [17] of the February Judgment), and also practically disposed of or dealt with all other issues in the proceedings to date. (It appears here to be contemplated that such an order would include the costs of motions that were stayed or not otherwise dealt with on their merits at the time.)
  3. Gina says that, in the alternative, she should have her costs of each of the motions identified at [17] of the February Judgment (save for motions (v) and (vi) which have already been dismissed with no order as to costs – see at [29] of the February Judgment), because, in respect of these motions, to the extent that costs have been incurred they were incurred only because Bianca did not consent to staying these proceedings or to having the motions seeking to stay the proceedings heard first (referring to [18], [20]-[28] of the February Judgment). It is said that if that position had not been taken costs would not have been so incurred.
  4. In respect of Gina’s notice of motion filed 14 August 2018 (seeking an order to refer the disputes between the parties to mediation), it is submitted that it is appropriate to make that order given that I am minded (of my own motion) to make such a referral.
  5. Gina also seeks her costs of the amended notice of motion filed 14 June 2018, seeking orders setting aside the three subpoenas to which reference has been made above (in respect of which costs were reserved until after the hearing of Bianca’s s 247A application, other than in respect of CEF’s costs – see the 2018 Subpoena Judgment at [149]). Gina notes that she was successful in setting aside the bulk of the subpoena served on CEF and in setting aside the bulk of the subpoena served on the IPA (and was wholly successful in setting aside the subpoena to the Hon. Barnaby Joyce MP).
  6. As does HPPL, Gina seeks her costs on an indemnity basis (pursuant to s 98(1)(c) of the Civil Procedure Act and r 42.5 of the UCPR). That application is made for much the same reasons as those put forward by HPPL, namely that, by opposing the stay sought by Gina, Bianca engaged in unreasonable conduct or “relevant delinquency” concerning the conduct of the case (Gina citing not only the authorities referred to above but also Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88 (Coshott v Prentice) at [138] (per Siopis, Katzmann and Perry JJ) and Johnson v Denwest Nominees Pty Ltd [2017] WASCA 200 (Johnson v Denwest Nominees) at [113]-[114] (per Murphy, Mitchell JJA and Pritchard J)). Gina also argues that Bianca engaged in relevant delinquency” by failing to obtain judicial advice to continue the proceedings in light of the applications to stay the proceedings (it being said that the continuation of the proceedings, and the opposition to the applications to stay the proceedings, involved contentions which would (or at least could) adversely impact on the value of the Trust), and by deciding to disavow the Hope Downs Deed (and to adopt a “no choice but to litigate mentality”) without the advice of the court.
  7. Gina similarly argues that pressing for the determination of the “unconscionability motion” before the determination of the respective stay applications was hopeless (on the basis that that position plainly offended the separability principles and was squarely covered by the judicial determinations to which HPPL has referred). It is submitted that Bianca “ought to have known better, given it was not the first time she had engaged in such conduct unsuccessfully”. Gina also argues, in similar vein, that it should have been obvious to Bianca that the proceedings would be stayed given the conflicting positions she was adopting in different fora (submitting that a procedural stay of the proceedings was inevitable, by reference to the matters referred to in the February Judgment at [31]).
  8. Gina places weight on the fact that Bianca did not accede to the proposal put forward by HPPL in its solicitors’ letter dated 13 April 2017 (though it does not appear that Gina herself proffer any such proposal); noting that the proposal was for a stay of the proceedings and that they have now been stayed. As does HPPL, Gina invokes the principles applicable to Calderbank offers (citing not only Curtis v Harden but also ACN 074 971 109 Pty Ltd (as Trustee for the Argot Unit Trust) v The National Mutual Life Association of Australasia Ltd (No 2) [2012] VSC 177 at [32] per Croft J). It is submitted that the 13 April 2017 letter was a genuine offer of compromise and it is said that the failure of Bianca to accept this offer was unreasonable, in light of the comprehensive explanation set out in the letter as to why the proceeding needed to be stayed.
  9. As to the making of an order that these costs be payable forthwith, Gina similarly relies on what was said in, inter aliaMorningstar and Pavlovic v Universal Music Australia Pty Ltd (No 2) [2016] NSWCA 31 (Pavlovic) at [15] (per Bathurst CJ, Beazley P, as Her Excellency then was, and Meagher JA). It is submitted that, in practical terms, the stay of the proceedings is likely to be the end of the court proceedings, with the dispute to be resolved by arbitration; and that there is still “some considerable distance to go” before the parties’ dispute is finally determined such that it is “appropriate that the successful party obtain the fruits of its costs order now” (as was said in Pavlovic at [15]). It is said that the complaints brought by Bianca will not be stultified by her being required to pay costs forthwith (cf the costs judgment in the Full Court of the Federal Court in Hancock Prospecting Pty Ltd v Rinehart (No 2) [2017] FCAFC 208 at [6], per Allsop CJ, Besanko and O’Callaghan JJ), noting the evidence that Bianca has received substantial dividends over recent years of: $45 million (FY18), $75 million (FY17), $42 million (FY16) and $37 million (FY15). It is submitted that the matters relied on for the making of an indemnity costs order also support the making of a forthwith costs order (referring to Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277 at [37]- [39], per McColl JA, Allsop P (as his Honour then was) and Handley AJA agreeing).
  10. Gina additionally seeks an order that the costs which Bianca was ordered to pay in relation to Gina’s successful application to set aside a subpoena to the Commonwealth Bank (see the 2019 Notice to Produce Judgment) now be paid forthwith.

Bianca’s further submissions on costs (and defendants’ responses thereto)

Indemnity costs

  1. As to the defendants’ application for costs on an indemnity basis, Bianca contends that none of the matters relied upon by the defendants warrants the making of such an order. Bianca emphasises that the ordinary rule is for costs to be ordered on the party and party basis (citing Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 232; [1993] FCA 801 per Sheppard J); and says that the circumstances of the present case do not meet the test for a special costs order of the kind sought (referring, inter alia, to Sony Computer Entertainment Australia Pty Ltd v Dannoun (No 2) [2001] FCA 1530 at [4], per Lindgren J). (The defendants do not cavil with the former proposition; simply with the latter; in particular that this does not take into account all circumstances where indemnity costs may be ordered.)
  2. As to the matters relied on by HPPL in support of an indemnity costs order (the 13 April 2017 letter; the observations as to an abuse of process; the failure to obtain judicial advice; and HPPL’s other complaints as to the alleged unreasonableness of her conduct), Bianca responds as follows.
  3. First, insofar as reliance is placed on the 13 April 2017 letter, Bianca points out that there is no presumption that, if an offer which is later vindicated in proceedings is rejected, there should be an award of indemnity costs (citing Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [9], per Bathurst CJ; Allsop P, as his Honour then was, and Beazley JA, as Her Excellency then was, agreeing). Bianca also notes that simply because an offer is a “reasonable” one does not meant that its rejection warrants an award of indemnity costs (citing CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75], per Moore, Finn and Jessup JJ).
  4. Bianca also notes that the offer was not made by Gina and says that, on its face, it was not sent (or made) to Gina. It is submitted that Bianca’s acceptance of the offer would not itself have achieved anything. In particular, it is said that there is no evidence that Gina was amenable to the proposed offer “despite the fact that she belatedly adopts it in her costs submissions”.
  5. Bianca emphasises that the primary relief proposed in the offer (a stay of the proceedings pending “the determination or other resolution of the Federal Court Proceeding”) is not the relief that was ultimately obtained. (That is hardly surprising, since by the time of the ultimate relief the Federal Court Proceeding had itself been referred to arbitration, the referral/stay motions in that proceeding being the subject of the Full Court Decision and that of the High Court in Rinehart v Hancock.) Bianca says that it was not unreasonable not to consent to a stay pending resolution of the Federal Court proceeding given that it was not known how long those proceedings would run, nor “whether a “temporary stay” was likely to be more in the nature of a “semi- permanent” stay”. Bianca points to the statement in the letter to the effect that HPPL intended “vigorously” to defend the Federal Court proceeding, as suggestive of the label of “temporary stay” being inapt.
  6. Insofar as the offer was predicated on the proposition that there was an inconsistency between the asset claims in the Federal Court proceedings and the complaint about failure to pay dividends in the Oppression Proceeding, Bianca maintains that the offer failed to explain why, even if Bianca’s position in the Federal Court proceedings were to be wholly vindicated, that would mean that HPPL could not pay (and could not have paid) dividends. Indeed, Bianca maintains that HPPL has still not explained why that is so (though to my recollection such an explanation was proffered in the course of submissions on the hearing of the stay applications – including by reference to s 254T of the Corporations Act 2001 (Cth); and see HPPL’s reply submissions below). In any event, Bianca says that there can have been no inconsistency between the Federal Court proceedings and, for example, the s 247A application (and therefore there was no basis for a wholesale stay of the Oppression Proceeding as was proposed by HPPL in the 13 April 2017 letter).
  7. Bianca further maintains that, insofar as the offer proposed a stay in favour of arbitration, it was not unreasonable for her to reject that offer. Bianca notes that, at the time of the offer, the prevailing decision in this jurisdiction on the arbitration agreement was the Court of Appeal Decision (Rinehart v Welker [2012] NSWCA 95; (2012) 95 NSWLR 221); the Full Court decision (Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170) not having been handed down until 27 October 2017, more than 6 months after the offer; and the High Court decision (in Rinehart v Hancock) not until 8 May 2019, more than two years after the offer. Bianca says that it is not known how HPPL and Gina’s applications would have been determined had the prevailing position on the arbitration agreement remained as it was at the time of the offer.
  8. Bianca also points to the time provided for acceptance of the offer, noting that the time for which an offer is open has been said to be a highly relevant factor to its reasonableness (and referring, by way of example, to Kiefel v State of Victoria [2014] FCA 411 at [53], per Tracey J; and Keays v JP Morgan Administrative Services Australia Limited [2012] FCAFC 100; (2012) 224 IR 406 at [133]- [135] per Besanko J (Gray J agreeing at [1]; North J agreeing at [7]), where the offer was open for seven days, which was described as “a short period” (at [135])). It is noted that, in the present case, the offer was made at 6:16pm on 13 April 2017 (the day before Good Friday that year) and the offer closed at midday on 19 April 2017; i.e., it was effectively open for acceptance for less than 1½ business days. Bianca says that there was no manifest urgency (in the sense of a pending hearing date) and maintains that it “would be quite extraordinary to make an award of indemnity costs now on the basis of an offer that was open for 1½ days more than two years before the hearing”.
  9. Complaint is also made by Bianca that the offer lacked clarity (noting that in Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 it was said (at [24], per Goldberg J) that an offer must be “couched in such terms as enable the offeree to make a carefully considered comparison between the offer made and the ultimate relief it is seeking in all its aspects”). It is noted that the offer did not attach proposed consent orders; that it proposed that questions as to whether there should be a stay pending arbitration be “deferred”, without identifying to when they were to be deferred; and that it did not explain what was to be done as to costs of HPPL’s proceedings to date (nor what was to be done as to Gina’s costs).
  10. Bianca also points to the response that was sent by her solicitors on 19 April 2017, explaining why the proposal was not accepted (a copy of which letter was in evidence on the hearing of the stay applications), and says that the defendants have not addressed that response in their submissions (let alone explained why it was unreasonable).
  11. I interpose here to note that, in reply submissions, while it is not suggested that the time for which an offer is open for acceptance is not relevant to the reasonableness of the offer (or its rejection), both defendants maintain that the complaints here made as to the insufficiency of the period in which the offer was open for acceptance and as to the clarity of its terms should be rejected. HPPL says that the timing of the offer was informed by the matters referred to explicitly or implicitly at paragraphs 41 and 42 of the offer, namely: the pending return date for the statement of claim, and the fact that any request for a stay in aid of a referral to arbitration must be made no later than when submitting the party’s first statement on the substance of the dispute. HPPL says that in these circumstances, the timeframe proposed was reasonable.
  12. In any event, the defendants both point out that Bianca was able to consider (and reject) HPPL’s proposal within the timeframe requested, without seeking any extension of time and with no complaint that the offer was unclear (nor, I might add, any request for its clarification). Gina notes that Bianca rejected the offer on 19 April 2017 (the day it closed), rather than seeking more time and submits that is obvious, from the way that Bianca has conducted herself, that even had the offer been open for more time Bianca would have rejected it and resisted the stay of the proceedings in the manner she did.
  13. As to Bianca’s submission that her acceptance of the offer would not itself have achieved anything (because Gina was not a party to it), HPPL says that this is irrelevant from HPPL’s perspective. Acceptance of the offer would have dealt with the future conduct of the proceedings insofar as they involved HPPL and thus is relevant to HPPL’s costs.
  14. HPPL further says that the fact that the primary relief proposed in the offer was not the relief ultimately obtained in this proceeding is not to the point, noting again that I had made clear (at [603] of the February Judgment) that the grounds for a case management stay were made out and that it would have been granted if a stay in aid of a referral to arbitration had not instead been granted. Thus, HPPL says that even if it was not unreasonable for Ms Rinehart to reject a stay in favour of arbitration, there were no reasonable grounds to oppose a stay of proceedings on case management grounds.
  15. HPPL cavils with the proposition that the offer failed to explain why HPPL could not pay dividends even if Bianca’s position in the Federal Court proceedings was vindicated (pointing to paragraphs 16 and 17 of the offer which HPPL says explained, in clear terms, why dividends could not be paid in light of the inconsistent proceedings). HPPL also points to the explanation it provided in submissions at the hearing of the stay application (as summarised at [554] and [566] of the February Judgment).
  16. HPPL says that Bianca’s response to the 13 April 2017 offer (tellingly) largely ignored the primary basis for HPPL’s proposal (the fundamental inconsistency in her positions) and simply suggested that HPPL could pay dividends in any event (referring to paragraph 7.6 of the 19 April 2017 response). HPPL says that Bianca’s failure to engage meaningfully with the inconsistency (or HPPL’s detailed explanation as to why the inconsistency warranted a stay), renders her response to the offer unreasonable.
  17. Finally, on the offer of compromise issue, Bianca reiterates her submission that there is no basis for an order that Bianca pay the costs of the whole of the proceeding to date (including the costs of the yet to be determined s 247A application) on any basis, let alone on the indemnity basis (see [23]ff above).
  18. As to Bianca’s reply submissions concerning the s 247A application, Gina notes that that application has been stayed because, as put forward, it raised factual matters the subject of the disputes falling under the arbitration clause (referring to [30], [34] of the February Judgment); and says that, therefore, the costs of the “presently formulated” s 247A application should properly be the subject of a costs order.
  19. Secondly, Bianca responds to the reliance placed by the defendants on the observations made by me in the February Judgment on the abuse of process issue. Bianca notes (and this is not and could not be disputed by the defendants) that I found that it was not an abuse of process for Bianca to commence this proceeding (see at [32] of the February Judgment). On that basis, Bianca argues that on no view can the “abuse of process” argument warrant an award of indemnity costs in relation to the whole of the proceedings. It is submitted by Bianca in this context that if (which she clearly does not accept) any abuse of process arose after commencement of the proceeding, it could only justify an award of indemnity costs from the time the abuse of process arose.
  20. Bianca says in this regard that neither Gina nor HPPL has identified any particular time from which they say they should have indemnity costs nor have they identified any step in the proceedings to date which has amounted to an abuse of process. Bianca says that there was no finding that any step in the proceedings to date has involved an abuse of process by Bianca. Rather, it is said that insofar as I concluded that a “continuation of the present proceedings … would amount to an abuse of process” (see at [603] of the February Judgment), this should be understood as the Court acting to prevent an abuse of process before it arises (and it is said that it is not open to seek indemnity costs on the basis that there has been an abuse of process which has never occurred). Emphasis is also placed on the lack of any finding (or suggestion by Gina or HPPL) that the continued maintenance of the present proceedings would be an abuse of process because it would be unjustifiably oppressive to Gina or HPPL.
  21. Bianca argues that the cases referred to in the defendants’ submissions are distinguishable or not analogous; or that they do not stand for any relevant proposition in favour of the defendants’ indemnity costs argument. Bianca distinguishes Australian Beverage Distributors on the basis that the Court of Appeal there hypothesised that costs orders had been made because the trial judge had found an abuse of process; Coshott v Prentice, because the indemnity costs order was made because the applications were “without any merit and represented an attempt to mislead the Court in serious ways” (at [138]); and Johnson v Denwest Nominees, because the indemnity costs were ordered where the proceedings were an abuse of process because they were an oppressive attempt to relitigate that which had been already decided.
  22. In reply submissions on the abuse of process issue, the defendants disavow any proposition that the commencement of the proceeding was an abuse of process but maintain their position that the continuation of the proceedings (i.e., the taking of any further steps in the proceedings while Bianca was prosecuting inconsistent claims in other jurisdictions) was an abuse of process. The defendants say that there was a finding that the continuation of the proceedings was an abuse of process (referring to [32] and [603] of the February Judgment) by way of the continuation of these proceedings.
  23. Gina’s position is that all costs incurred by her arose by reason of Bianca persisting to prosecute these proceedings (resisting the stay applications, insisting that her own motions be heard first or at the same time as those stay motions, pressing her own motions and issuing the Subpoenas (which were set aside on application by the defendants)), and that each and every such step taken by Bianca in continuation of the proceeding constituted an abuse of process. Alternatively, Gina says that the indemnity costs order could be limited to the particular motions identified in [4] of Gina’s costs submissions (filed on 28 February 2020) on the basis that costs in respect of those motions were only incurred because Bianca did not consent to staying these proceedings or to having the motions seeking to stay the proceedings heard first (i.e. they were incurred by the continued maintenance of this proceeding).
  24. Gina maintains that on a proper reading of [603] of the February Judgment, there was in fact a finding that Bianca’s conduct amounted to an abuse of process because of the overlapping issues and inconsistent claims for relief, premised on inconsistent positions raised in different capacities (referring also to the use of the present tense in the finding [32] of the February Judgment; and to the observations I made at [45] of the February Judgment), pointing out that the reference there to the “inconsistency argument” is a reference to the abuse of process which Gina says was ultimately found.
  25. As to the lack of an express finding that continued maintenance of the proceedings would be an abuse of process because it would be “unjustifiably oppressive to Gina or HPPL”, Gina says Bianca’s submission is premised on a mistaken view of the circumstances in which indemnity costs will be ordered. In any event, it ignores what was said at [45] of the February Judgment, and the recognition (at [588] of the February Judgment) of the prima facie vexation or oppression that arises from overlapping or inconsistent proceedings (see Henry v Henry [1996] HCA 51; (1996) 185 CLR 571 at 591, per Dawson, Gaudron, McHugh, and Gummow JJ; [1996] HCA 51); and the delay and increased costs which will arise if Bianca were permitted to continue with this proceeding (see [594] and [601]-[602] of the February Judgment).
  26. Insofar as Bianca seeks to distinguish them on the facts, Gina says she relies on the principle contained in Australian Beverage DistributorsCoshott v Prentice, and Johnson v Denwest Nominees that an abuse of process is sufficient to engage the broad discretion to order indemnity costs.
  27. Similarly, HPPL says that there was a finding of abuse of process (at [32] of the February Judgment) and that the taking of any step beyond the filing of the statement of claim (or requiring HPPL to take any step in response to the statement of claim) gave rise to the abuse of process.
  28. Turning then, thirdly, to the defendants’ contention that Bianca engaged in delinquency by failing to obtain judicial advice to continue the proceedings, Bianca takes issue with the suggestion (raised for the first time in costs submissions) that there has been a breach of the undertaking given to the Court and recorded in Hancock v Rinehart [2015] NSWSC 646 at [383] (1(d)). Bianca says that such a finding would amount to a contempt of court (which would undeniably be a serious finding to make) and says that such a finding is not one that can fairly be made in the present circumstances.
  29. In this regard, Bianca says that there is no basis for any contention (express or oblique) that Rein J was not made aware of the potential applicability of the arbitration agreement and the potential for a referral/stay application to be made on that basis; and that to assert non-disclosure of material facts by experienced counsel and solicitors is a serious assertion, which should not be entertained. It is said that unless it is established that Rein J was not made aware of the risk that Gina or HPPL would seek to have the matter referred to arbitration, Bianca should not be criticised for not seeking further advice if and when that risk eventuated.
  30. Pausing here, there is to my mind a distinction between a suggestion that there was a non-disclosure of material facts to Rein J on the judicial advice application (which I emphasise is a suggestion that has neither been made in the present case nor supported on the evidence) and a submission that judicial advice should have been sought at a later stage when a decision was made by Bianca to resist an application for a referral to arbitration or stay of the proceedings. There was, and is, no suggestion that Rein J was misled as to any material facts on the judicial advice application. However, the fact remains that the advice that Bianca obtained that she was justified in commencing the proceeding did not in its terms include (not does it appear implicitly to encompass) advice that Bianca was or would be justified in resisting an application for the referral of the proceeding to arbitration (were such an application subsequently to be made).
  31. Returning to Bianca’s reply submissions on this issue, Bianca also submits that Gina’s construction of the undertaking given to the Brereton J is artificial. It is said that, read fairly and in context, Bianca’s undertaking that she would “not commence or continue proceedings on behalf of the Trust in a court” refers to the commencement of new proceedings and the continuation of proceedings brought by or against the HMH Trust that were in existence at the time of Bianca’s appointment as trustee. It is said that, if it were otherwise, the undertaking would be inherently ambiguous as it would be impracticable (if not impossible) to determine, upon pain of a finding of contempt, when a proceeding that had been commenced with judicial advice should be taken to be “continued” in a manner that required a further judicial advice application before a further step could be taken. It is submitted that the undertaking should not be construed in such a fashion in the absence of the clearest words.
  32. Further, Bianca submits that a focus by Gina and HPPL on questions of compliance with judicial advice is misdirected since costs are compensatory, not punitive (citing Northern Territory of Australia v Sangare [2019] HCA 25; (2019) 93 ALJR 959 at [30] per Kiefel CJ, Bell, Gageler, Keane, and Nettle JJ). It is said that it is no part of the Court’s function to award indemnity costs in order to punish Bianca for an asserted breach of the undertaking, even if such a breach could be proved.
  33. Responding to Bianca’s reply submissions as to the delinquency said to have arisen from the failure to obtain judicial advice to continue the proceedings, Gina’s position is that her construction of the undertaking (that judicial advice would be received before commencing and maintaining proceedings on behalf of the HMH Trust), is consistent with the important differences between commencing proceedings and maintaining them (referring to [32], [44] and [603] the February Judgment) and with the fact that Rein J approved the commencement of this proceeding but expressly reserved the question of where the proceedings should ultimately be maintained in light of the various other disputes (see Bianca Hope Rinehart as trustee of The Hope Margaret Hancock Trust [2017] NSWSC 282 at [40]).
  34. Gina says that the relevant delinquency is the failure to obtain judicial advice, in light of the undertaking; and that this does not amount to a finding of contempt (which, it is noted, involves a finding of deliberate or contumacious defiance with Court orders, citing Witham v Holloway (1995) 183 CLR 525 at 530, per Brennan, Dean, Toohey, and Gaudron JJ; [1995] HCA 3). Gina emphasises that any finding as to breach of the undertaking would be a finding on an interlocutory application for costs.
  35. In any event, regardless of the applicability of the terms of the undertaking Bianca provided, Gina’s complaint is that Bianca has failed to explain why she did not obtain judicial advice concerning the continuation of these proceedings “in the face of the referral/stay motions and in light of her competing personal claims”. Gina says Bianca also has failed to establish that any consideration was given to whether the proceedings should be maintained at the time the judicial advice application was made (reference being made in this context to what I said in the February Judgment at [46]; and the observations there made at [44], which it is not necessary here to repeat). It is suggested that Bianca’s failure to put on evidence as to the matters to which reference was made at [44] of the February Judgment (as to whether particular matters were raised before his Honour on the judicial advice application) may give rise to a relevant inference.
  36. As to the complaint that indemnity costs would be punitive, Gina says that the indemnity costs are not sought to punish Bianca for her misconduct but, rather, to compensate the defendants for having incurred costs as a result of Bianca’s delinquency (again citing Oshlack).
  37. As to the alleged delinquency on the part of Bianca concerning the pursuit of the unconscionability motion, Gina accepts that this could only justify indemnity costs incurred in relation to that motion (including the application to have that motion referred to arbitration). Gina submits that the unconscionability motion obviously came within the scope of the High Court’s finding concerning challenges to the efficacy of the Hope Downs Deed (citing Rinehart v Hancock at [43]-[44]) and says that there was therefore no issue as to whether the “governed or controlled” test had been overruled in that respect, because it was directly covered by what the High Court held. Gina maintains that this disposes of Bianca’s submission as to why pressing the unconscionability motion before the stay motion had been determined was not hopeless in light of the High Court’s finding at [44]. As to Bianca’s submissions concerning whether it was obvious that the proceedings would be stayed, Gina says that these merely reassert the arguments she made during the hearing (and points to the findings made at [31] and [603] of the February Judgment).
  38. On the breach of undertaking issue, HPPL argues first that the mere fact that a breach of an undertaking is serious and has not been expressly raised before in the substantive proceeding is not a reason to disregard it on the question of costs. Second, HPPL says that it is unremarkable that a party’s conduct of the proceedings will only be ventilated for the first time on a costs argument (as the conduct will often be irrelevant to the substantive relief). Third, and finally, HPPL argues that, in any event, Bianca has had an opportunity to respond to HPPL’s submission that she breached the undertaking; that she did not deny it; and that she elected not to respond to its substance. HPPL says that in these circumstances, having regard to the breach of undertaking on the question of costs cannot be said to be unfair.
  39. HPPL says that its submission as to the failure to obtain judicial advice is not as to whether Rein J was informed about the arbitration agreement and the potential for a stay application (though HPPL says that there is no evidence that this occurred); rather, its position is that Bianca resisted the stay application and sought to challenge the Hope Downs Deed in these proceedings without seeking judicial advice to do so. HPPL says that it is clear from his Honour’s reasons that Rein J gave no such advice and that Bianca can be criticised in these circumstances because her failure to obtain judicial advice breached the undertaking she gave to Brereton J.
  40. Like Gina, HPPL says its application for indemnity costs is not seeking costs on a punitive basis. Rather, HPPL says that it was required to take steps and incur costs in this proceeding which, in HPPL’s submission, almost certainly would have been avoided had Bianca sought judicial advice as to this aspect of the matter (because Bianca was unlikely to obtain judicial advice to continue this proceeding while maintaining inconsistent claims in other jurisdictions); and therefore it seeks orders to compensate it for costs that, in its submission, it should never have had to incur.
  41. Turning to the next argument to which Bianca responded in reply submissions (the submission that the unconscionability application was hopeless and/or unreasonably pursued, with the result that indemnity costs should be awarded), Bianca says that, at most, the contention could touch only costs incurred in dealing with the unconscionability application (which she notes “was itself only listed for directions”, and did not involve any evidence on the part of Gina or HPPL), and that this could not warrant a general indemnity costs order.
  42. Pausing here, HPPL argues that Bianca’s acceptance in these submissions that the unconscionability application was only listed for directions is a sufficient basis for the conclusion that it was unreasonable for Bianca “to waste the parties’ time and resources in nevertheless seeking to agitate the application”.
  43. Bianca submits, further, that she should not be criticised for pursuing the unconscionability application in circumstances where Le Miere J had found that a similar (but not identical) argument offended the separability principle (referring to the Le Miere (No 10) Decision). It is noted that that application had been brought by Bianca in her personal capacity and that Le Miere J’s judgment was under appeal. It is said that that appeal, if successful, would not have “undone” a referral to arbitration in these proceedings made in the face of Bianca not taking the unconscionability point. Bianca says that had she not taken the point, Gina and HPPL might very well have later submitted that she should was subject to an Anshun estoppel (see Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 at 602-604, per Gibbs CJ, Mason and Aickin JJ; [1981] HCA 45) or should otherwise have been precluded from arguing the point on a later occasion.
  44. To this, HPPL says that the contention by Bianca that it is not unreasonable for her to repeatedly press materially the same unsuccessful argument in different courts should be rejected. HPPL maintains that it is plain, given the authorities referred to in its earlier submissions, that the unconscionability application had no reasonable prospects of success. In particular, HPPL says that “[r]ecycling a failed argument with no reasonable prospects of success is precisely the kind of unreasonable conduct that should sound in an award of indemnity costs”.
  45. As to the submission that the unconscionability motion was contrary to the separability principle (as held at [636] of the February Judgment) and was covered by the High Court decision in Rinehart v Hancock at [44] (as to which Bianca says there was not an express finding in the February Judgment), Bianca submits that, at best, that is a submission that Gina and HPPL’s arguments were found to be persuasive. Bianca says that it does not mean that it was unreasonable for Bianca to put a different position; nor, a fortiori, does it mean that it was so unreasonable for Bianca to put such an argument that an award of indemnity costs is now justified. Further, it is said that to submit that the unconscionability motion was squarely covered by the High Court decision so as to make it unreasonable to put any different approach fails to take account of the (reasoned) debate before me as to how the High Court’s decision in Rinehart v Hancock sat with the Court of Appeal’s decision on the meaning and scope of the arbitration agreement.
  46. Bianca says that the submission that “it should have been obvious” that the proceedings would be stayed “given the conflicting positions [Bianca] was adopting in different fora” also rises no higher than a submission that Gina and HPPL’s submissions on inconsistency were ultimately accepted by the Court. It is said that there was nothing unreasonable in Bianca submitting: that any inconsistency would arise only at the time of judgment, and should not prevent (at least) the filing of a defence and the service of evidence by Bianca; that HPPL had not established that it had insufficient funds available to declare dividends to the trust even if the Federal Court “asset” claims were resolved wholly against HPPL; and that the Court’s remedial armoury in a breach of trust and oppression suit was sufficiently flexible to ensure that there would be no double recovery (and it is noted that I did not reject any of these submissions).
  47. Finally, insofar as HPPL refers to the “no choice [but] to bring the current proceedings as trustee” submission, Bianca says that this is not relevant to the present issue; emphasising that Bianca obtained judicial advice that she was justified in commencing the present proceeding.
  48. In answer to the above argument, HPPL says that it did not say that indemnity costs should be awarded because Bianca submitted that she had no choice to bring the current proceedings as trustee; rather, that HPPL’s point is that Bianca did have a choice as to whether to oppose the stay application. HPPL says that Bianca’s submission that she was duty bound as a trustee to bring this proceeding is irrelevant in determining whether her decision to resist the stay application was reasonable.

Forthwith costs order

  1. As to the application for a forthwith costs order, Bianca says that there is no sufficient reason here to “order otherwise” than as provided under the UCPR (see rr 42.7(1) and (2) of the UCPR).
  2. Bianca says that Gina and HPPL do not assert some special cash flow need to obtain their costs now (and says that having regard to their financial resources, they could hardly do so). Bianca maintains her position that there is no unreasonable conduct on her part which would justify such an order. Further, it is said that it is a matter of speculation as to how long the arbitration will go (noting that no findings have been made on that issue).
  3. Bianca also says that the applications determined on 14 February 2020 are not readily characterised as “discreet, separately identifiable aspect[s]” of the proceedings, referring to the fact that the s 247A application remains alive. It is said that this can be said of “virtually any interlocutory application” and should not alone justify the orders sought.
  4. It is submitted that it would be unjust for Gina and HPPL to obtain their costs immediately; and that a number of their arguments were accepted only on a prima facie basis, to be finally determined by the arbitrator (referring, in particular, the arguments as to “party” addressed at [197]-[200] of the February Judgment). It is submitted that Gina and HPPL are effectively seeking their costs now for work that they would otherwise have had to do to put the arguments before the arbitrator, and which they might ultimately lose before the arbitrator.
  5. HPPL argues that the above submissions for Bianca wrongly conflate the stay applications with the underlying proceedings which are the subject of the stays. HPPL says that the fact that it made submissions on certain factual matters on a prima facie basis, which will be addressed on a final basis at arbitration, does not detract from HPPL’s success on those issues on these particular applications.
  6. Finally, Bianca points to the position taken by the Full Federal Court on a similar forthwith costs application by Gina and HPPL (see Hancock Prospecting Pty Ltd v Rinehart (No 2) [2017] FCAFC 208). It is noted that the Full Court rejected such an application, Allsop CJ, Besanko, and O’Callaghan JJ saying (at [6]):

… there is no reason why in justice these costs should be paid forthwith. The costs will be large. That is a result of how both sides have treated the applications. With some exception in oral address, no stone has been left unturned, no opportunity for opposition passed up, and no proposition in writing expressed otherwise than to the fullest. Should the costs be payable forthwith that would raise the real risk of stultification of the substantive complaints of the first and second respondents to the appeal. That would be a matter of some real injustice. If the first and second respondents’ complaints are legitimate (whether to be vindicated in an arbitration or court proceeding) they would amount to very serious wrongs.

[Emphasis in the original]

  1. It is submitted that there is no reason here to adopt a different approach. Bianca says that all parties have approached this litigation in substantially the same manner as was described by the Full Federal Court; that the costs will inevitably be large and that a payable forthwith order raises a real risk of stultification of the substantive complaints which would be productive of injustice. Further, it is said that if Bianca’s corporate governance and oppression complaints are legitimate (whether to be vindicated in arbitration or in court proceedings) they would amount to very serious wrongs.
  2. HPPL says that there are two material differences between the position here and the position considered in the costs decision of the Full Federal Court. First, HPPL notes that Bianca was a party to the Federal Court proceeding in her personal capacity whereas here, she is a plaintiff in her capacity as the trustee of the HMH Trust (with, it is said, extraordinarily valuable revenue streams and assets). HPPL says that there is no suggestion that Bianca is not being indemnified from the HMH Trust assets. Second, HPPL says that there is no evidence before this Court of a risk of stultification of the proceedings and no evidential foundation for such a submission. In particular, it is said that there is no evidence that the HMH Trust is unable to indemnify Bianca for her costs of this proceeding.
  3. Similarly, Gina says that Bianca does not assert that a forthwith order would result in stultification of the proceedings and has not addressed the evidence identified in Gina’s 28 February 2020 costs submissions as to the dividends received by Bianca in FY15-FY18. Gina says that there can be no risk of stultification as a result of the costs order being paid forthwith, so that the approach of the Full Federal Court is inapplicable (and says that the fact that Bianca has now filed a notice of intention to appeal demonstrates that there is no risk of stultification).
  4. Gina further says that: there is no principle that a defendant must have a “cash flow need” to obtain a forthwith order; it is patently clear, not speculation, that the various arbitrations have “some considerable distance to go” (noting that Bianca’s counsel accepted during the hearing of the stay applications the proposition that the determination of the arbitral proceedings would be “years away” (see T 321.5-6; T 322.38)); and that the costs to date have been associated with preliminary but discrete, and separately identifiable aspects. Further, it is said that even if this application was not discrete, it would be only a reason not to make costs payable forthwith concerning it, but not as to the balance of the motions. Gina further submits that the s 247A application, as presently formulated, is discrete from any isolated s 247A application which may be made in the future in this proceeding.
  5. Gina also says that there is no injustice by reason of the First Defendant’s arguments having only been accepted on a prima facie basis, noting that that was the relevant threshold. Gina says it cannot be the case that the costs incurred on these motions would have been incurred in arbitration in any event, since the focus of the stay hearings was not upon the merits of the underlying claims, as it will be before the arbitrators (and says, further, that those arbitrators will be responsible for the appropriate costs orders following determination).

Other costs issues

  1. Insofar as Gina and HPPL seeks costs in relation to Gina’s application to set aside the three Subpoenas determined on 17 July 2018 in Rinehart v Rinehart [2018] NSWSC 1102 (the 2018 Subpoena Judgment), Bianca points to the fact that I had previously concluded that costs on that issue “should be reserved until after the hearing of the s 247A application” (see 2018 Subpoena Judgment at [149]). Bianca again notes that the s 247A application has not been heard or determined; and says that neither Gina nor HPPL has identified any reason why he or it “should be entitled to re-litigate” that conclusion.
  2. Bianca says that, in any event, HPPL should not have its costs in relation to the Subpoenas determined in the 2018 Subpoena Judgment, noting that: HPPL did not apply to set aside the Subpoenas; and that HPPL’s contentions in respect of those subpoenas were not determined. It is submitted that there is therefore no “event” which costs can follow. (So far as HPPL contends that it should have those costs on an indemnity basis, Bianca says that that contention should be rejected for the same reasons as put forward in response to HPPL’s general application for indemnity costs.)
  3. Gina’s position is that at the time that the costs of the applications to set aside the Subpoenas the subject of the 2018 Subpoena Judgment were reserved the s 247A application was to be heard along with the stay motions (see Rinehart atf The Hope Margaret Hancock Trust v Rinehart [2017] NSWSC 803). Gina submits that given the change in circumstances the reserved costs should be dealt with now. Similarly, HPPL says that circumstances have changed, noting that the costs in question were reserved at a time when the s 247A Application was set down for hearing. HPPL says that the s 247A Application is unlikely to ever be heard “at least in the same form in which it was stayed”, because of the likelihood that similar relief may be sought from an arbitrator; and that in those circumstances, it is appropriate that the question as to the reserved costs should now be revisited.

Determination

  1. As already noted, there is no issue raised by Bianca as to the making of an order for costs (on the ordinary basis) in respect of the motions that were determined on 14 February 2020 on the basis of the usual order that costs follow the event (see r 42.1 of the UCPR).
  2. Two issues have arisen as to the ambit of such an order: first, whether (as Bianca contends) there should be a “carve-out” for costs referable to the s 247A application that has not yet been determined (and has simply been stayed pending the outcome of the arbitration); and, second, whether (as Gina contends) the order should be an order for the whole of the proceedings to date (on the basis that the relief granted has practically disposed of all extant issues in the proceedings), or should encompass certain of the interlocutory motions that were not dealt with on their merits (such as the unconscionability motion).
  3. As to the second of those issues, I do not consider that an order for costs in respect of the whole of the proceedings to date is warranted. Presumably some costs will have been incurred in the proceedings by the defendants to date that relate to the substance of the dispute not to the interlocutory motions as such (say, for example, in a review of the pleaded claims for the purpose, if nothing else, of advising as to the scope of the proceedings and, perhaps, in preparation for a defence of the proceedings). I see no basis for an assumption that all of the costs incurred to date are costs of, or incidental to, the particular interlocutory motions that were the subject of the hearing and determination before me in July last year. That said, I accept that the costs of the interlocutory hearings in 2017 and 2018 are properly characterised as (or predominantly as) costs of, or incidental to, the costs of the respective stay applications. Debates going to the sequence in which the respective motions were to be heard, for example, largely turned on the stay applications.
  4. Nor do I consider that costs orders should be made in relation to motions that were either before me only for directions and have now been stayed (the unconscionability motion) or were listed before me but not the subject of a hearing on the merits (the mediation motion). As to the mediation motion, even though the same result has now been achieved as was sought by that motion, it has been of the Court’s own motion. Moreover, it is difficult to see that much in the way of separate costs (other than the preparation and filing of the motion) would have been incurred in relation to that motion, since the focus of the hearing(s) to date was on other matters (in particular, the stay applications).
  5. Therefore I propose to confine the costs orders to costs of, and incidental to, the particular motions that were determined by me. If there is a dispute as to whether aspects of the sequencing debate are properly to be regarded as incidental to the respective stay applications (notwithstanding the observations I have made above), that can be dealt with in due course on a costs assessment.
  6. The more difficult issue is the first of the above two issues, namely as to the carve out sought in respect of costs incurred in relation to Bianca’s s 247A application. For the reasons set out in the February Judgment, I did not refer that application to arbitration. I concluded that Bianca’s s 247A application, though arbitrable, was not per se a dispute caught by cl 20 of the Hope Downs Deed and thus was not required to be referred to arbitration. Therefore, it has not yet been determined on its merits and, indeed, I contemplated that there might be 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 the Oppression Proceeding and hence unconnected to the dispute the subject of the matters that I was contemplating would then be referred to arbitration), such that I was not prepared to rule out the possibility of entertaining a discrete s 247A application even pending the determination of the arbitration.
  7. But for the qualification I make below, I consider that there would be force to Bianca’s submission that the appropriate order would be to carve out of the costs order costs referable to preparation for the s 247A application (that has not yet been heard).
  8. The qualification I make is that, notwithstanding that I did not refer Bianca’s s 247A application to arbitration with the balance of the matters in dispute in the proceedings, I did consider that it should be stayed pending determination of the arbitration (because the hearing of that application 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 would be open to Bianca to seek production of documents in the context of the arbitration). Therefore, albeit for a somewhat different reason, perhaps, HPPL and Gina did succeed in persuading me that the s 247A application should not now be heard.
  9. Both HPPL and Gina made very clear at all stages in the various sequencing debates their position that the s 247A application should not be heard at this stage (albeit that their principal contention was that it should be referred to arbitration). To the extent that Bianca pressed for it to be heard and proceeded to serve material or take other steps in aid of that application, which then caused the defendants to incur costs against the possibility that Bianca would be successful in persuading me to proceed to determine it, it seems to me that Bianca should bear the costs consequences of that forensic decision. I am fortified in that view by the 13 April 2017 letter. Bianca was well and truly on notice, from a very early stage of these proceedings, of the contention by HPPL that it was inappropriate to continue with the proceedings pending the resolution of the Federal Court proceedings (and/or other curial or arbitral proceedings) and, further, that questions would or were likely to arise as to issues of abuse of process or the like as a result of the perceived inconsistency in Bianca’s position (as well as the potential for an application to stay the proceedings for a referral to arbitration).
  10. Moreover, although it was not necessary (in light of my other findings) separately to determine the application for a stay of the proceedings on the alternative bases put forward (being the stay on the grounds of case management principles or, alternatively, as an abuse of process), I was of the view that a stay on those bases would have been warranted (see at [31]-[32] of the February Judgment). Therefore, had the outcome of the interlocutory motions turned on those issues, the result would still have been in Gina and HPPL’s favour in that the proceedings would have been stayed on those bases (and the s 247A application would still remain yet to be determined).
  11. In those circumstances, I do not consider that a “carve-out” from the overall costs orders is warranted in respect of costs incurred in relation to the s 247A application at least so far as those costs can be characterised as being incurred incidental to the preparation for and hearing of the respective stay applications. To that extent, the costs order in favour of the defendants should encompass those costs.
  12. The two further issues that have been raised in relation to costs are: first, the basis on which any costs order(s) should be made (i.e., whether on an indemnity or party and party basis) and, second, the time when such costs should be payable (i.e., whether the costs should be payable forthwith).
  13. As to the claim for the costs orders to be on an indemnity basis, I accept that on one view HPPL and Gina are here in a different position because the 13 April 2017 letter on which HPPL relies was not an offer put forward (nor, at least so far as I can see, adopted) by Gina. A party seeking to invoke the Calderbank principles would ordinarily be the party who made the relevant offer (not another party seeking in hindsight to take the benefit of the making and non-acceptance of that offer). Certainly, I was not taken to any authority in which a party who did not make the relevant offer nevertheless obtained a special costs order by reference to such an offer. However, it is not ultimately necessary to determine this (some might say esoteric) issue because of the conclusion I have reached as to the other bases on which the claim for indemnity costs is put by Gina (see below).
  14. As to HPPL, and the application of the Calderbank principles to the offer that it made, I consider that there is force to the submission that it was unreasonable for Bianca not to accede to the proposed stay (or at the very least not to do so without judicial advice that she would be justified in resisting an application for a stay or for a referral to arbitration). I have referred in my earlier reasons to the striking overlap between the issues and inconsistency in the claims for relief made by Bianca (albeit in different capacities) in different proceedings and in different fora. In Commonwealth of Australia v Gretton [2008] NSWCA 117, Beazley JA, as Her Excellency then was, noted the public policy considerations that underpin the making of favourable costs orders where a Calderbank offer has been made (see at [41], quoting from Leichhardt Municipal Council v Green [2004] NSWCA 341 at [14] per Santow JA), those being the encouragement of settlement of disputes as soon as possible and the discouragement of wasteful and unreasonable behaviour by litigants. Those considerations are manifestly applicable in the present case. Having regard to those factors, the non-acceptance by Bianca of HPPL’s proposal for a stay of the Oppression Proceeding would, in my opinion, subject to the matters referred to below, warrant the making of indemnity costs orders in relation to HPPL’s Stay Application.
  15. It is however relevant to consider the timing of the offer and its terms, i.e., to consider whether it was not unreasonable for Bianca not to accept the offer based on the time available for its acceptance (which was indeed a short period) and/or on the basis of the complained lack of clarity in the terms of the offer. As to the former, effectively the offer allowed less than a week because of the intervening public holidays. However, it was not suggested at the time that Bianca was incapable of considering or dealing with the offer in that time frame. As to the latter, no complaint as to the clarity of the terms there proposed was raised at the time. Therefore, I would not conclude that for those reasons it was not unreasonable for Bianca not to accept the offer.
  16. Relevantly, however, insofar as the offer was predicated on the Court of Appeal’s construction of the arbitration clause being incorrect, at the time the offer was made there was a judgment binding on any first instance judge in this Court as to the construction of the relevant clause. Bianca cannot be criticised for proceeding on the assumption that that construction would be correct.
  17. On balance, therefore, I would not conclude that it was unreasonable for Bianca to have rejected the offer at the time that she did.
  18. As to the other bases on which indemnity costs are sought, my view (as I explained in the February Judgment) is that, although justified in commencing the proceedings, there is and would be an abuse of process in the vexing of the defendants (and particularly, in this case, HPPL) by the maintenance of inconsistent claims across different jurisdictions. Once that became apparent (as, in my opinion, it must have done at a very early stage – and certainly once this was drawn explicitly to Bianca’s attention in the 13 April 2017 letter), the continuation of the proceedings certainly bore the hallmarks of an abuse of process (see, for example, 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; and see [591]-[592]ff of the February Judgment).
  19. Relevantly, at [603] of the February Judgment I said:

603. 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. [Emphasis added]

  1. If it was not abundantly clear from the February Judgment that I was of the view that it would be an abuse of process for Bianca to continue the proceedings at that stage and that the spectre of such an abuse of process arose at the time that the inconsistency between, and multiplicity of, proceedings involving overlapping claims became apparent. In that sense, while it may not have been an abuse of process, as such, to resist the application for a stay (insofar as there was a reasonable argument to be put forward against the requirement for such a stay under the Commercial Arbitration legislation – see the Commercial Arbitration Act 2010 (NSW); Commercial Arbitration Act 2012 (WA)), to allow Bianca to press on with those overlapping and inconsistent claims would have been in my opinion to condone an abuse of process. The precise point at which such an abuse of process might be said to have arisen does not seem to me to be material in circumstances where the costs orders are made in relation to the respective Stay Applications (not the proceedings as a whole). What is relevant is that, as from 13 April 2017 Bianca was on notice of the concerns that had been raised in that regard and chose to proceed with the matter (and, relevantly, to resist the applications for a stay) regardless of the potential abuse of process.
  2. I consider that, at the time of the 13 April 2017 letter (if not indeed before, having regard to the undertaking to which the defendants have referred), and at the latest when the Full Federal Court Decision and High Court Decision were handed down, it was incumbent on Bianca as trustee (if she wished to be protected from adverse costs consequences of this kind) to seek judicial advice as to whether she was justified in continuing to resist a referral to arbitration or in refusing to accede to a temporary stay of the proceedings.
  3. It is not necessary (nor is it appropriate in the absence of an opportunity for Bianca to be heard on this particular issue) to delve into the question whether such conduct involved any breach of an undertaking to the Court. In this regard, it sufficies to point to the authorities which make clear the need for trustees to consider the making of appropriate judicial advice applications before incurring costs as a trustee in litigation – see, in particular, Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42, where the High Court said (at [72]) that:

72. It is, therefore, not right to see a trustee’s application for judicial advice about whether to sue or defend proceedings as directed only to the personal protection of the trustee. Proceedings for judicial advice have another and no less important purpose of protecting the interests of the trust.

  1. See also Bovaird v Frost [2009] NSWSC 917, where Brereton J, as his Honour then was, noted (at [32]) that it was both desirable and prudent for trustees promptly to obtain judicial advice as to possible proceedings lest it otherwise be suggested that the trustees “have been gambling with money that is not their own”.
  2. True it is that there was a basis on which a reasoned argument could be (and was) maintained to support the resistance to the respective stay applications (and it was not until a later point in the course of the proceedings that the inconsistency between the Court of Appeal Decision and the Full Federal Court Decision emerged). However, at all relevant times, there were overlapping and inconsistent claims in multiple fora; and, ultimately, whatever the outcome of the Commercial Arbitration stay argument, there were obvious case management and other grounds to warrant a stay of the proceedings.
  3. I accept that the making of indemnity costs orders is not intended to be punitive; but I see such an order in this case not as punitive but as intended to reflect the unreasonableness or delinquency in conduct on Bianca’s part, for which the defendants should be compensated.
  4. As to the submissions to the effect that the unconscionability motion (which I emphasise has not yet been heard on its merits despite the debate as to the sequencing of and basis for that motion during the course of the hearing of the stay applications) was hopeless on its face or had no reasonable prospects for success, I would not go so far as to say that. However, its belated appearance in the array of interlocutory motions and, more significantly, its appearance after the dismissal of an almost identical motion in the Western Australian proceedings, reinforces my concern as to the stance here adopted by Bianca in resisting the referral to arbitration and/or stay of the present proceeding (particularly without having sought judicial advice as to whether she was justified in so doing). In the February Judgment I noted my concerns as to the same issues and factual disputes being raised across a variety of jurisdictions and proceedings. That remains my very real concern.
  5. What amounts to unreasonable conduct in the context of costs applications (albeit in a different context) has been considered in Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624-625 per McHugh J; [1997] HCA 6 (Lai Qin)). His Honour there said that:

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. [Citations omitted]

  1. Elsewhere (see Renton v Kelly [2018] NSWSC 1377 at [56], Baller Industries Pty Ltd v Mero Mero Leasing Pty Ltd [2019] NSWSC 1067 at [19]- [20]), I have noted that the use of the word “so” in the above passage indicates a level of unreasonableness which is established by the circumstances in which the costs were incurred. It is also relevant here again to emphasise the overriding mandate in respect of the conduct of litigation in this Court (see s 56 of the Civil Procedure Act) is for the just, quick and cheap resolution of the real issues in dispute. The proliferation of disputes across the country raising overlapping issues, coupled with the resistance to the referral of the present disputes to arbitration in circumstances where elsewhere the same or very similar disputes have already been referred to arbitration (and against the background emphasised by the High Court in its decision in relation to the very same arbitration agreement the subject of the present stay applications – Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; 93 ALJR 582), is in my opinion “so unreasonable”, in the sense considered in Lai Qin, as to warrant an indemnity costs order in relation to the respective stay applications.
  2. For those reasons I have concluded that it is appropriate to order that the costs of, and incidental to, the respective stay applications be borne by Bianca on the indemnity basis.
  3. As to the application for orders that the costs be payable forthwith, as noted above the relevant principles have been stated in Morningstar and are well known (see, for example, Sayour v Elliott (No 2) [2018] NSWSC 146 at [44]). In the present case, I am persuaded that such an order is appropriate, because of the likely delay in the overall disposition of the substantive disputes in the proceedings. I accept that the stay applications raised relatively discrete issues (as to the arbitration agreement and the like), and I consider that Bianca’s conduct in persisting with the applications (without the benefit of judicial advice as to whether she was justified in resisting a referral to arbitration) has the requisite element of unreasonableness to satisfy the Morningstar test. I am not persuaded that there has been established any real risk of stultification of claims if such an order is made. Nor am I persuaded that the case is on all fours with the situation described by the Full Federal Court in its costs decision in this regard. True it is that in the history of my case management of the proceedings all parties have taken, from time to time, tendentious positions and appear to have spared little expense in litigating up hill and down dale. However, the very fact that all parties may be criticised for such behaviour makes it important here to draw a line in the sand (particularly having regard to the mandate of s 56 of the Civil Procedure Act).
  4. Finally, insofar as the reserved costs of the contested subpoena applications are concerned, I consider it appropriate for those costs to be borne by Bianca in circumstances where the Subpoenas were issued in support of the proposed s 247A applications (and were pressed in the face of disputes as to the referral of the substantive disputes to arbitration). It cannot be said that nothing relevantly has changed since those costs were reserved. What has changed is that the disputes between the parties have either been referred to arbitration or stayed; and there is no reason to believe that they will be disposed of in the near future. That is a sufficient change in circumstance to warrant the reconsideration of the question of costs. In my opinion, it is appropriate for the costs now to be determined (because the proceedings are now otherwise stayed) and that costs should follow the event. However, I would not order those costs to be on an indemnity basis (as I am not persuaded that the factors that led to the making of such an order in relation to the stay applications apply with equal force to the subpoena applications); nor would I order HPPL’s costs to be met of an application that it did not make even though I accept that it was not unreasonable for it to make the submissions that it did on this issue (and the fact that they were not determined was due to the success of the application by Gina to set aside the Subpoenas). Moreover, to the extent that HPPL’s costs were incurred in order to protect its position in relation to the arbitration the subject of the stay applications, I consider that those costs would be incidental to the stay applications and recoverable in that context.
  5. The Subpoena application costs and the (already ordered) costs of the application to set aside the HPPL Notice to Produce, should be payable forthwith for the reasons set out above in relation to the other costs orders.

Orders

  1. For the reasons set out above, I make the following orders:

In proceedings 2017/86718 (Oppression Proceeding)

(1) Subject to further order, pursuant to s 8(1)(a) and (e) of the Court Suppression and Non-publication Orders Act 2010 (NSW), order that paragraphs 14 to 17 of the affidavit sworn 28 February 2020 by Timothy Ignatius L’Estrange be kept confidential and not be made available nor disclosed to any person other than the legal representatives of the parties in connection with this proceeding anywhere in the Commonwealth for a period of five years.

(2) Pursuant to s 26 of the Civil Procedure Act 2005 (NSW), order the parties to mediation, such mediation to take place within three months of the making of these orders.

(3) Order that the costs of the mediation (namely, the fees and disbursements of the mediator or mediators and any venue, equipment, or related service costs) are to be dealt with in accordance with order 2 of the orders made today in proceedings 2011/285907.

(4) Direct the parties to seek to agree on (and jointly to appoint) a mediator or mediators for the purposes of the said mediation within one month of the making of these orders and direct the parties to notify the associate to Ward CJ in Eq by 17 April 2020 of the agreed identity of the said mediator(s) or, failing agreement, their proposed choice of mediator(s) (in which case Ward CJ in Eq will nominate the mediator(s) to be appointed).

(5) Direct the parties, within seven days of the conclusion of the mediation, to inform the associate to Ward CJ in Eq as to whether settlement has been reached at the mediation and of any orders sought to be made in relation to the proceedings in that regard.

(6) Liberty to the parties to apply to the associate to Ward CJ in Eq on three days’ notice.

(7) Order Bianca Hope Rinehart, as trustee for the Hope Margaret Hancock Trust, to pay the costs of the defendants of, and incidental to, the second defendant’s amended notice of motion dated 15 July 2019 and filed on 16 July 2019, and the first defendant’s amended notice of motion dated 26 June 2019 (including the hearings of 23 May 2017, 27-28 August 2018, and 15-19, 23 and 25 July 2019), such costs to be paid on an indemnity basis and to be payable forthwith.

(8) Order Bianca Hope Rinehart, as trustee for the Hope Margaret Hancock Trust, to pay the costs of the first defendant (on the ordinary basis and payable forthwith) of the hearings to set aside subpoenas issued by Bianca Hope Rinehart in these proceedings to the Institute of Public Affairs, CEF Pty Ltd and the Hon Barnaby Joyce MP (see Rinehart v Rinehart [2018] NSWSC 1102).

(9) Order that the existing costs orders made in favour of the second defendant in respect of its application to set aside a notice to produce issued to it by Bianca Hope Rinehart, as trustee for the Hope Margaret Hancock Trust (see Rinehart v Rinehart [2019] NSWSC 759) be varied such that the costs be payable forthwith.

In proceedings 2011/285907 (the Trustee proceeding)

(1) Pursuant to s 26 of the Civil Procedure Act 2005 (NSW), order the parties to mediation, such mediation to take place within three months of the making of these orders.

(2) Order that the costs of the mediation (namely, the fees and disbursements of the mediator or mediators and any venue, equipment or related service costs) be borne (subject to any agreement between all the relevant parties to the contrary) in equal one-sixth shares by each of the Rinehart family members (i.e., Bianca (in her personal capacity), John, Hope, Ginia and Gina) and Hancock Prospecting Pty Ltd.

(3) Direct the parties to seek to agree on (and jointly to appoint) a mediator or mediators for the purposes of the said mediation within one month of the making of these orders and direct the parties to notify the associate to Ward CJ in Eq by 17 April 2020 of the agreed identity of the said mediator(s) or, failing agreement, their proposed choice of mediator(s) (in which case Ward CJ in Eq will nominate the mediator(s) to be appointed).

(4) Direct the parties, within seven days of the conclusion of the mediation, the parties are to inform the associate to Ward CJ in Eq as to whether a settlement has been reached at the mediation and of any orders sought to be made in relation to the proceedings in that regard.

(5) Liberty to the parties to apply to the associate to Ward CJ in Eq on three days’ notice.