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Commercial Arbitration Act 1984 (NSW) s 33 (repealed)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Arbitration Act 1950 (UK) s 26(1) (repealed)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
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Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2007] 4 All ER 951
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Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321
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Inghams Enterprises Pty Ltd v Francis Gregory Hannigan [2019] NSWSC 1186
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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.

Jacobs Group (Australia) v Commonwealth of Australia [2020] VSC 127 (20 March 2020)

IN THE SUPREME COURT OF VICTORIA
Not Restricted

AT MELBOURNE

COMMERCIAL COURT

ARBITRATION LIST

S ECI 2019 05245

JACOBS GROUP (AUSTRALIA) PTY LIMITED (ACN 001 024 095)
Applicant
– and –
THE COMMONWEALTH OF AUSTRALIA (AS REPRESENTEDBY THE DEPARTMENT OF DEFENCE)

Respondent

JUDGE:
RIORDAN J
WHERE HELD:
Melbourne
DATE OF HEARING:
12 February 2020
DATE OF JUDGMENT:
20 March 2020
CASE MAY BE CITED AS:
Jacobs Group (Australia) v Commonwealth of Australia
MEDIUM NEUTRAL CITATION:
[2020] VSC 127

ARBITRATION – Application for leave to appeal under s 34A of the Commercial Arbitration Act 2011 (Vic) – Whether agreement not to modify rights of appeal under prior Act constituted agreement to appeal under s 34A – No agreement to appeal.

STATUTORY INTERPRETATION – Whether agreement to appeal under s 34A of the Commercial Arbitration Act 2011 (Vic) must expressly or implicitly refer to the section – Principles of statutory interpretation considered – Not necessary for agreement to reference s 34A.

TABLE OF CONTENTS

HIS HONOUR:

1 By originating application for leave to appeal against award filed 20 November 2019, the applicant applies under s 34A of the Commercial Arbitration Act 2011 (Vic) (‘2011 Act’) for leave to appeal on a question of law in respect of a Partial Award dated 21 August 2019 made against the applicant in the sum of $3,424,970.35.

2 By summons filed 12 February 2020, the respondent applies for the proceeding to be dismissed on the ground that it is incompetent for lack of jurisdiction. On that day I ordered that:

Pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015, the question of whether having regard to the terms of s 34A(1) of the Commercial Arbitration Act 2011 (Vic) the Court has jurisdiction to hear the application for leave to appeal, is to be tried before the trial of the proceeding.

Contractual arrangements

3 On 28 April 2011, the applicant and the respondent entered into a Design Services Contract (DSC-1 2003) (‘the Contract’) under which the applicant agreed to provide the respondent with services for the AIR 9000 Phase 5C Facilities Project at the Townsville Royal Australian Air Force Base. The Contract included the following provisions in cl 12.13 by which disputes could be referred to arbitration:

(a) Arbitration pursuant to this clause will be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce (‘ICC Rules’) current at the time of the reference to arbitration and as otherwise set out in this clause….

(c) Nothing in this clause is intended to modify or vary the rights of appeal contained in the Commercial Arbitration Act 1984 (Vic). For the avoidance of doubt, the second sentence of Article 28(6) of the ICC Rules (in force from 1 January 1998) or its equivalent in any subsequent version of the ICC Rules shall not apply.

4 Clause 1.2 of the Contract provided:

In this Contract, unless the context otherwise indicates:…

(h) references to any legislation or to any section or provision of any legislation include any:

(i) statutory modification or re-enactment of or any statutory provision substituted for that legislation, section or provision; …

5 Article 28(6) of the International Chamber of Commerce Rules of Arbitration (‘ICC Rules’) at the relevant time provided:

Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.

6 On 16 August 2017, the respondent requested an arbitration of the matters contained in an unresolved notice of dispute issued on 18 August 2016.

7 On 21 August 2019, the arbitrator issued the Partial Award.

Legislative regime

8 Section 38 of the Commercial Arbitration Act 1984 (Vic) (‘1984 Act’) provided for what has been described as an opt-out regime for judicial review of awards. Specifically, it provided as follows:

(1) Without prejudice to the right of appeal conferred by subsection (2), the Court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law on the face of the award.(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.

(3) On the determination of an appeal under subsection (2) the Supreme Court may by order—

(a) confirm, vary or set aside the award; or

(b) remit the award, together with the Supreme Court’s opinion on the question of law which was the subject of the appeal, to the arbitrator or umpire for reconsideration or, where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration—and where the award is remitted under paragraph (b) the arbitrator or umpire shall, unless the order otherwise directs, make the award within three months after the date of the order.

(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement—

(a) with the consent of all the other parties to the arbitration agreement; or

(b) subject to section 40, with the leave of the Supreme Court.

(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that—

(a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and

(b) there is—

(i) a manifest error of law on the face of the award; or

(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.

(6) The Supreme Court may make any leave which it grants under subsection (4)(b) subject to the applicant complying with any conditions it considers appropriate.

9 With respect to agreements to exclude rights of appeal, s 40(1) of the 1984 Act provided:

Subject to this section and section 41—(a) the Supreme Court shall not, under section 38(4)(b), grant leave to appeal with respect to a question of law arising out of an award; and

(b) no application may be made under section 39(1)(a) with respect to a question of law—

if there is in force an agreement in writing (in this section and section 41 referred to as an exclusion agreement) between the parties to the arbitration agreement which excludes the right of appeal under section 38(2) in relation to the award or, in a case falling within paragraph (b), in relation to an award to which the determination of the question of law is material.

10 On 17 November 2011, the 2011 Act came into operation. Section 34A provides for what has been described as an opt-in regime for judicial review of awards. With respect to appeals to the Court against awards, s 34A relevantly provides:

(1) An appeal lies to the Court on a question of law arising out of an award if—(a) the parties agree, before the end of the appeal period referred to in subsection (6), that an appeal may be made under this section; and

(b) the Court grants leave.

(2) An appeal under this section may be brought by any of the parties to an arbitration agreement.

(3) The Court must not grant leave unless it is satisfied—

(a) that the determination of the question will substantially affect the rights of one or more parties; and

(b) that the question is one which the arbitral tribunal was asked to determine; and

(c) that, on the basis of the findings of fact in the award—

(i) the decision of the tribunal on the question is obviously wrong; or

(ii) the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and

(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the Court to determine the question.

11 Section 43 of the 2011 Act provides that the Act applies to all existing arbitration agreements, except where the arbitration commenced before the commencement of the Act. Specifically, it provides:

(1) Subject to subsection (2)—(a) this Act applies to an arbitration agreement (whether made before or after the commencement of this Act) and to an arbitration under such an agreement; and

(b) a reference in an arbitration agreement to the Commercial Arbitration Act 1984, or a provision of that Act, is to be construed as a reference to this Act or to the corresponding provision (if any) of this Act.

(2) If an arbitration was commenced before the commencement of this Act, the law governing the arbitration and the arbitration agreement is to be that which would have been applicable if this Act had not been enacted.

(3) For the purposes of this section, an arbitration is taken to have been commenced if—

(a) a dispute to which the relevant arbitration agreement applies has arisen; and

(b) the arbitral tribunal has been properly constituted.

12 Both parties referred to s 1AC of the 2011 Act which, under the heading ‘Paramount object of Act’, provides:

(1) The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.(2) This Act aims to achieve its paramount object by—

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

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

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

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

Does the Court have jurisdiction to give leave to appeal under s 34A of the 2011 Act?

13 It is common ground that, for the Court to have jurisdiction, it must be satisfied that the parties have ‘agree[d] … that an appeal may be made under this section’, being

s 34A of the 2011 Act.

14 The issues requiring determination are:

(a) whether cl 12.13 of the Contract constitutes an agreement that an appeal could be made against an award (‘the first contention’); and

(b) whether such an agreement must relate expressly or implicitly to an appeal ‘under this section’, being s 34A (‘the second contention’).

Respondent’s submissions

15 The respondent submitted that the Court does not have jurisdiction to consider this appeal because the pre-condition contained in s 34A(1)(a) of the 2011 Act is not satisfied.

16 With respect to the first contention, it was submitted as follows:

(a) At most, cl 12.13 of the Contract constituted an agreement to leave open appeal rights under the 1984 Act. It did not constitute an agreement to allow the parties a right of appeal. An agreement not to opt out of the appeal rights under the 1984 Act does not amount to a positive agreement to opt in to the appeal rights arising under the 2011 Act.

(b) Reference to the objects of the 2011 Act supports a strict reading of the parties’ rights to appeal arbitral awards.

(c) The 2011 Act was not a statutory modification or re-enactment of the 1984 Act. In any event, a reading of cl 12.13 which incorporates the 2011 Act does not change the requirement for an agreement.

17 With respect to the second contention, it was submitted as follows:

(a) From the plain meaning of the text, any agreement to appeal only satisfies s 34A if it expressly or implicitly relates to an appeal ‘under this section’.(b) An agreement to appeal on a matter of law generally is not sufficient to satisfy the subsection because an appeal under s 34A is of a particular type and subject to the restraints on the grant of leave under subsection (3).

(c) The fact that s 34A would effectively negate all appeals under prior arbitration agreements is a necessary consequence of Parliament specifically making the legislation retrospective.

Applicant’s submissions

18 On behalf of the applicant, it was submitted as follows:

(a) By cl 12.13 of the Contract the parties agreed that, subject to leave of the Court, either could appeal against an award on a question of law.

(b) The requirement under s 34A of the 2011 Act that the agreement be for an appeal ‘under this section’ refers to an agreement for an appeal on a question of law.

19 In support of the first contention, it was submitted that:

(a) Section 38(4) of the 1984 Act provided two independent avenues for an appeal on a question of law arising from an award being:

(i) agreement of the parties (s 38(4)(a)); and/or

(ii) leave of the Court (s 38(4)(b)).

(b) Accordingly, cl 12.13(c) constituted an agreement by the parties that each had a right of appeal from an award on a question of law if the Court granted leave. By cl 12.13(c), the parties intended to commit themselves to preserving the right of appeal.

(c) This objective intention is supported by the fact that cl 12.13 excluded the operation of art 28(6) of the ICC Rules, which arguably could have been construed as an agreement to restrict the right of appeal.

(d) The decisions in ASC AWD Shipbuilder Pty Ltd v Ottoway Engineering Pty Ltd and Ashjal Pty Ltd v Elders Toepfer Grain Pty Ltd are distinguishable on the basis that none of the arbitration clauses in those cases contained a specific provision preserving the right of appeal such as cl 12.13.

20 With respect to the second contention, it was submitted that the respondent’s contention that the agreement must specifically contemplate an appeal under s 34A:

(a) is unnecessarily formalistic;

(b) would have the consequence that all agreements to appeal on questions of law prior to the 2011 Act would be ineffective; and

(c) is not supported by the explanatory memorandum.

21 The applicant did not press its claim based on an implied term.

Authorities

22 In ASC v Ottoway, the Full Court of the Supreme Court of South Australia considered whether a commercial contract incorporating an arbitration agreement contained an implied term that an appeal may be made under the South Australian equivalent of s 34A of the 2011 Act. The circumstances were as follows:

(a) On 4 September 2009 the parties entered into a commercial contract which provided that any dispute was to be referred to and finally resolved by arbitration in accordance with the Institute of Arbitrators and Mediators Australia Rules for the Conduct of Commercial Arbitrations.

(b) At the time of entering into the contract, commercial arbitrations in South Australia were governed by the Commercial Arbitration and Industrial Referral Agreements Act 1986 (SA) (‘1986 SA Act’), which relevantly included s 38(4) in identical terms to the 1984 Act.

(c) By the Commercial Arbitration Act 2011 (SA) (‘2011 SA Act’), the 1986 SA Act was repealed and appeals from arbitral awards became regulated by s 34A, which is in identical terms to s 34A of the 2011 Act.

(d) The arbitration had commenced after the commencement of the 2011 SA Act and, in November 2016, the arbitrator made an award in favour of the appellant.

23 The trial judge found that the contract contained an implied term that constituted the necessary agreement under s 34A.

24 The Full Court allowed the appeal against the decision of the trial judge on the basis that:

(a) an implied term giving the parties a right of appeal was not necessary to give business efficacy to the contract; and(b) there was nothing in the ‘express terms of the contract, its manifest purpose [or] the matrix in which it was made’, which irresistibly led to the necessary presumed intention.

25 In Ashjal v Elders, Hammerschlag J considered whether a term could be implied in the following similar circumstances:

(a) The plaintiff and defendant were parties to two contracts for the supply of wheat, both dated 23 July 2010. The terms of the contracts provided that disputes were to be resolved by arbitration in accordance with the Grain Trade Australia (‘GTA’) Trade Rules, which incorporated the GTA Dispute Resolution Rules.(b) At the time the parties entered into the contracts, the Commercial Arbitration Act 1984 (NSW) (‘1984 NSW Act’) was in force, which included ss 38(2) and (4) in the same terms as the 1984 Act.

(c) The defendant was successful under an award dated 17 November 2011 and the plaintiff sought leave to appeal.

(d) At the time of the award, the Commercial Arbitration Act 2010 (NSW) was in force, which contained s 34A(1) in the same terms as the 2011 Act.

26 The plaintiff contended that there were implied terms in the contracts that either party may appeal on a question of law with the leave of the Court.

27 His Honour applied the tests established in BP Refinery Westernport Pty Ltd v Hastings Shire Council and rejected the plaintiff’s contention for the following reasons:

(a) The tests had to be met at the time of entering into the contracts and, at that time, the 1984 NSW Act gave a right of appeal with leave or by agreement. Therefore the implied terms were not necessary to give the contracts business efficacy.

(b) Given the state of the legislation at the time of entering into the contracts, the terms contended for were not obvious.

(c) Article 13 of the GTA Dispute Resolution Rules adopted by the contracts contemplated the possibility of amendment to the legislation and therefore the implied terms would contradict the express terms of the contracts.

Does cl 12.13 of the Contract constitute an agreement that an appeal could be made against an award?

28 The question is determined by whether, on a proper construction, the agreement of the parties not to modify or vary the rights of appeal contained in the 1984 Act was an agreement that an appeal could be made against an award.

Principles of construction in commercial contracts

29 To construe the terms of a commercial contract, the Court asks ‘what a reasonable businessperson would have understood those terms to mean’. To answer that question, ‘the reasonable businessperson [is] placed in the position of the parties’, and the Court applies the following principles:

(a) The terms are construed objectively and the subjective intentions of the parties are irrelevant.(b) The objective approach requires reference to the text and its ordinary meaning, together with:

(i) the context, being the entire text of the contract including matters referred to in the text; and(ii) the purpose.

These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words’. Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.

(c) Unless a contrary intention appears in the contract, the court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result, and should construe it so as to avoid a commercial nonsense. However, the court does not weigh the commerciality of the agreement, and business commonsense is a topic on which reasonable minds may differ.(d) If, after completion of this process, the language used in the contract ‘is ambiguous or susceptible of more than one meaning’, then evidence of surrounding circumstances external to the contract (‘surrounding circumstances’) is admissible to assist with interpretation of the contract (‘the ambiguity requirement’).

(e) Surrounding circumstances are:

events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating.

(f) However, ‘evidence of the parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible. Although evidence of prior negotiations is admissible to establish objective background facts known to both parties and the subject matter of the contract, evidence of negotiations reflective of actual intentions and expectations is not receivable.(g) Post contractual conduct is inadmissible to construe the terms of the contract. However, the parties’ subsequent communications may be relevant to determine whether the parties intended to enter into a binding contract.

30 Despite the above rules, evidence of surrounding circumstances may be admissible to establish that:

(a) an expression has a particular meaning in business custom or usage;

(b) a particular interpretation was either rejected or accepted by the parties; or

(c) the contract should be rectified.

Further, at common law, a court may supply, omit or correct words to avoid absurdity or inconsistency.

Conclusion

31 I reject the applicant’s submission that cl 12.13 is an express agreement that the parties would have a right to appeal any award on a question of law for the following reasons:

(a) On a plain reading, cl 12.13 does not confer on the parties any such right.(b) The effect of not excluding a party’s rights under s 38 of the 1984 Act was that a party could appeal on a question of law with:

(i) the consent of the other parties; or(ii) leave of the Court.

By including cl 12.13, the parties plainly intended not to exclude rights of appeal under the 1984 Act. However, the clause says nothing about:

(i) whether one party would consent to the other appealing pursuant to s 38(4)(a) of the 1984 Act; or(ii) the intention of the parties if the rights of appeal under the 1984 Act were amended.

(c) The fact that the parties made it plain that they did not intend to exclude their appeal rights, as they could in an exclusion agreement under s 40(1) of the 1984 Act, does not lead to the conclusion that the parties were obliged to consent to an appeal under s 38(4)(a) of that Act. It is even clearer that cl 12.13 cannot be read as an agreement that each party would consent to the other having a right to appeal on a question of law under any amending Act.(d) Although, unlike the above authorities, the Contract was not silent on the question of appeals against awards, cl 12.13 said no more than that the parties did not intend to modify or vary the rights of appeals under the 1984 Act. Accordingly, I would adapt the words of Chief Justice Kourakis in ASC v Ottoway and say:

It is one thing to recognise that the obvious effect of the [contract expressly not excluding] the question of appeals against awards was that either party was at liberty to seek permission to appeal if the statute so allowed and quite another to leap from that to a presumption that the parties intended to preserve that power for each other by contractually binding themselves to assist the other to appeal against an award made in their favour. It may appeal to one person’s sense of fairness that there be such a term, but the removal of judicial review might be welcomed by another for its greater efficiency.

(e) Neither do I consider that the interpretative provision, being cl 1.2 of the Contract, assists the applicant. It simply provides that references to any legislation includes references to any statutory modification or re-enactment. That has the effect that cl 12.13 can be read as follows:

Nothing in this clause is intended to modify or vary the rights of appeal contained in the Commercial Arbitration Act 1984 (Vic) or the Commercial Arbitration Act 2011 (Vic). For the avoidance of doubt, the second sentence of Article 28(6) of the ICC Rules (in force from 1 January 1998) or its equivalent in any subsequent version of the ICC Rules shall not apply.

Reading the clause in the above manner would not constitute an express agreement by the parties to consent to an appeal against an award on a question of law.

32 Accordingly, I find that the parties did not agree that they have a right of appeal under s 34A.

Must an agreement to appeal relate expressly or implicitly to an appeal under s 34A?

33 This question gives rise to an issue of statutory construction. The alternative constructions of s 34A(1)(a) put by the parties are that:

(a) the agreement must expressly or implicitly refer to an appeal under s 34A (the respondent’s construction); or

(b) the agreement must be of the type of appeal provided under s 34A, being an appeal on a question of law (the applicant’s construction).

Principles of statutory interpretation

34 The primary object of statutory construction is to construe the relevant provision so that its legal meaning is consistent with:

(a) the language of the relevant provision, being the text; and

(b) the legislative purpose of the statute.

The legal meaning is ‘the meaning that the legislature is taken to have intended [the provision] to have’. It may or may not be the same as the literal meaning.

35 Accordingly, in statutory construction, the focus is on the text and the legislative purpose as follows:

(a) The primacy of the text has been emphasised by the High Court. It has been said that the process of statutory interpretation starts and ends with the text.

(b) To ascertain the legislative purpose, the Court first considers the text of the relevant provision in its context. The context means:

(i) the whole of the Act or other instrument;

(ii) the existing state of the law;

(iii) the mischief that the statute was intended to remedy; and

(iv) the history of the legislative scheme.

36 Section 35(b) of the Interpretation of Legislation Act 1984 (Vic) provides that ‘[i]n the interpretation of a provision of an Act … consideration may be given to’ extrinsic material to ascertain the purpose of the legislation, even if the language is clear and unambiguous. I emphasise the word ‘may’ because if the meaning of the text is plain ‘there is no occasion to look to the extrinsic material’. As the Court of Appeal has said in respect of this section:

(a) ‘it would be inappropriate to resort to parliamentary debates in order to seek to create an ambiguity in a section which is otherwise, at least in relative terms, clear’; and(b) ‘the court needs to be careful not to permit recourse to this section to undermine its primary function of seeking to ascertain the intention of the legislation from the content of the Act itself’.

This section does permit ‘a court to consider the purposes of an Act in determining whether there is more than one possible construction’, but such material cannot displace the meaning of the statutory text.

37 If the literal meaning of the text is consistent with the identified legislative purpose, the literal meaning will be accepted as the legal meaning.

38 However, if the literal meaning conflicts with the identified legislative purpose, a departure from the literal meaning may be justified. The resultant tension was described by Francis Bennion in Statutory Interpretation:

Consideration of the enactment in its context may raise factors that pull in different ways. For example the desirability of applying the clear literal meaning may conflict with the fact that this does not remedy the mischief that Parliament intended to deal with.

39 Examples of conflicts between the literal meaning and the identified legislative purpose, which have justified departure from the literal meaning, include where:

(a) The literal meaning would conflict with other provisions of the statute;

(b) The literal meaning is inconsistent with the purpose of the statute;

(c) The literal meaning is incapable of practical application; or

(d) Adoption of the literal meaning would lead to a result that is absurd, unreasonable or anomalous.

40 If it is determined that such a conflict exists, the approach to reconciliation of the conflict is as follows:

(a) First, if an alternative construction is to be adopted as the legal meaning, it is necessary that the alternative construction is ‘reasonably open’ and ‘consistent with the language in fact used by the legislature’. This is necessary because ‘the task remains the construction of the words the legislature has enacted’. ‘The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions’.

(b) Section 35(a) of the Interpretation of Legislation Act 1984 (Vic) provides that ‘a construction that would promote the purpose or object underlying the Act … shall be preferred to a construction that would not promote that purpose or object’. The choice is only between a purpose that will promote the purpose and one that will not. The section is not directed to the choice ‘as to the construction which “will best achieve” the object of the Act’. 

(c) If the inconsistency between the literal meaning and the legislative purpose is the result of ‘simple, grammatical, drafting errors which if uncorrected would defeat the object of the provision’, an alternative construction, which is consistent with the legislative purpose, may be more ‘readily’ adopted.

(d) After the identification of an alternative construction, the legal meaning will be determined by balancing:

(i) the strength of the literal meaning as against the alternative construction; and

(ii) the extent to which these meanings are consistent with the promotion of the legislative purpose.

41 This balancing exercise has been explained by the High Court as follows:

(a) ‘If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.’

(b) ‘[I]nconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which … is reasonably open and more closely conforms to the legislative intent’.

Conclusion

42 In my opinion, s 34A is capable of bearing both meanings for which the parties contend, but should be read as requiring an agreement for the parties to appeal on a question of law. It does not require the parties:

(a) to expressly or implicitly recognise that the appeal is under s 34A; or(b) to even be aware of the section at the time of the agreement.

43 My reasons for this conclusion are as follows:

(a) I reject the respondent’s submission that an appeal under s 34A is effectively sui generis because it is subject to the restraints on the grant of leave under subsection (3). Section 34A(1) contains two independent requirements being:

(i) an agreement with respect to the appeal; and(ii) leave of the Court.

The leave requirement is separate and distinct from the agreement to appeal ‘to the Court on a question of law’. The constraints on leave in subsection (3) are similarly distinct and it is not necessary for the agreement to make reference to the leave requirement or the constraints on leave.

(b) The paramount object of the Act is to facilitate resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense and to enable parties to agree about how their commercial disputes are to be resolved. If the parties agree that they may appeal on a question of law, leave is still a requirement and the purpose of the Act is not furthered by a technical need for the agreement to appeal on a question of law to reference the particular section of the 2011 Act under which it is brought.(c) The 2011 Act plainly contemplates regulating arbitration agreements from before and after its commencement. If the parties to an arbitration agreement entered into before the commencement of the 2011 Act were contractually bound to consent to an appeal on a question of law, the respondent’s interpretation would render the agreement unenforceable because it would not relate to an appeal ‘under this section’, being s 34A. I should only come to such a conclusion if I am reasonably certain that this was the legislative intention. As Dixon CJ explained in Maxwell v Murphy:

The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events.

For reasons expressed above, I do not have reasonable certainty that Parliament had such an intention.

(d) With respect to s 34A, the explanatory memorandum to the 2011 Act states:

Clause 34A enables an appeal to the Supreme Court (or another court agreed by the parties as referred to in clause 6) on a question of law, if the parties have agreed prior to the commencement of arbitration that such appeals may be made and the Court grants leave.

It is apparent that this makes no reference to a requirement that the agreement refer to s 34A appeal rights and provides no support to the respondent’s submissions.

Orders

44 I propose to dismiss this proceeding and will hear the parties on the question of costs.

Maco Group v Johns Lyng Commercial Builders Pty Ltd (Civil Claims) [2020] VCAT 281 (6 March 2020)

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL DIVISION

CIVIL CLAIMS LIST VCAT REFERENCE NO. C4998/2019

CATCHWORDS
Costs application – sections 109(1), 109(2), 109(3)(a)(v) & (vi), and 109(4) of the Victorian Civil and Administrative Tribunal Act 1998 – Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd 81 ALR 397 – Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 – Classic Period Homes Pty Ltd v Rattle [2007] VCAT 2209.
APPLICANT
Maco Group ACN: 613 930 957
RESPONDENT
Johns Lyng Commercial Builders Pty Ltd ACN: 088 343 453
WHERE HELD
Melbourne
BEFORE
Deputy President I. Lulham
HEARING TYPE
Costs application
DATE OF HEARING
26 February 2020
DATE OF ORDER
6 March 2020
DATE OF REASONS
6 March 2020
CITATION
Maco Group v Johns Lyng Commercial Builders Pty Ltd (Civil Claims) [2020] VCAT 281

ORDER

  1. The Applicant shall pay the Respondent’s costs of and ancillary to its application to stay the proceeding, dated 15 November 2019, to be assessed by the Costs Court on a standard basis under the County Court Scale.
  1. The Respondent’s applications for costs to be assessed on an indemnity basis, and for costs to be paid by Mr Malik Ahmad personally, are dismissed.

REASONS

  1. The Applicant claims to be entitled to $127,857.00 from the Respondent for work performed as a subcontractor. In communications to the Tribunal the Applicant has said that the withholding of this money has put it in a parlous financial position and has made it impossible to afford legal practitioners. Because the dispute is at such an early stage (and indeed the VCAT proceeding has been stayed, save for the question of costs), there is no detailed response from the Respondent although one can imply that it denies liability.
  1. The Applicant’s proceeding was issued on 8 July 2019. It was stayed under the Commercial Arbitration Act 2011 on 22 November 2019: see Maco Group Pty Ltd v Johns Lyng Commercial Builders Pty Ltd [2019] VCAT 1815. I refer to some paragraphs of the Reasons for that decision below.
  1. In an Application filed 12 December 2019 the Respondent applied for an order that the Applicant and/or Mr Malik Ahmad pay the Respondent’s costs of and ancillary to its application to stay the proceeding, dated 15 November 2019.
  1. Costs are sought against Mr Ahmad personally as the “representative” of the Applicant in the stay application within the meaning of section 109(4) of the Victorian Civil and Administrative Tribunal Act 1998.
  1. The effect of the Respondent’s successful stay application was to bring the VCAT proceeding to an end, but as is clear from the above, the Respondent does not seek its costs of the whole proceeding, but only of the stay application.
  1. It is implied, though, that the Respondent’s fallback position should it not be awarded indemnity costs and/or costs against Mr Ahmad, is that it be awarded costs on a standard basis against the Applicant. It is not an all or nothing application.
  1. There is no doubt that the outcome of the Respondent’s stay application was an emphatic success for the Respondent. That does not end the Applicant’s claim to $127,857.00. A helicopter view would be that it “merely” requires the Applicant to bring its claim before an arbitrator, but the Applicant’s disclosure of its parlous financial position shows that – commercially – the Applicant may be shut out from bringing its claim because of the expense that would be incurred in providing its share of funds as security for the arbitrator’s fees and expenses and, perhaps, the fees that might be charged by the nominating body to appoint the arbitrator.
  1. The decision in [2019] VCAT 1815 shows that various submissions that might have been open to the Applicant in the stay application were not argued. I am satisfied that this reflected the Applicant being self-represented. The Applicant was able to engage Counsel for the costs application, who made appropriate submissions in respect of section 109 of the Victorian Civil and Administrative Tribunal Act 1998, with special emphasis on the requirement in s109(3), that the Tribunal be satisfied that it is “fair” to award costs before it can do so.
  1. For the reasons set out below, I conclude that it is fair to award costs of the stay application against the Applicant on a standard basis, to be assessed on the County Court Scale. Fairness must be assessed objectively, and I consider the Applicant’s submissions on that concept to be subjective even though I appreciate the difficulty faced by small businesses in affording litigation. I reject the Respondent’s applications for indemnity costs and for costs against Mr Ahmad personally.
  1. Omitting text which was not referred to by either party, sections 109(2) & (3) of the Victorian Civil and Administrative Tribunal Act 1998 say:

(2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding.

(3) The Tribunal may make an order under subsection (2) only if satisfied that it is fair to do so, having regard to—

(a) whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as—

(v) attempting to deceive another party or the Tribunal;

(vi) vexatiously conducting the proceeding;

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law;

(d) the nature and complexity of the proceeding;

(e) any other matter the Tribunal considers relevant.

Section 109(3)(d)

  1. Section 109(3)(d) is relevant, in that the proceeding was sufficiently complex to warrant the Respondent engaging legal practitioners. It involved a substantial sum; a contract for the performance of excavation works; calculations to determine the sum which could be claimed by the Applicant; a dispute between the parties as to what constituted the contract, including whether it contained an arbitration agreement; and at least implied allegations of misleading and deceptive conduct, unconscionable conduct, and unfair terms.

Section 109(3)(a)(v)

  1. The Respondent submitted that sub-sections 109(3)(a)(v) & (vi) were satisfied because it was plain that the parties’ contract contained an arbitration agreement, and that not only did the Applicant issue the VCAT proceeding in the face of that agreement which was said to have effectively “forced” the Respondent to bring its application for a stay, but that Mr Ahmad gave evidence that he did not sign the written Subcontract Services Agreement, which in effect amounted to the Applicant making allegations of fraud by the Respondent and by its employees Messrs Pour and Edwards. Paragraphs 23 and 24 of the Reasons in [2014] VCAT 1815 were particularly relied on.
  1. In response the Applicant submitted that, properly understood, paragraphs 23 and 24 of the Reasons did not record an explicit finding that the Applicant, and Mr Ahmad, had sought to deceive. They merely recorded the rejection of Mr Ahmad’s evidence. The Applicant submitted that the concept of deceit requires that a person intended to mislead, and that the Tribunal’s Reasons do not reveal a finding of that intention. To make a finding of deceit would be akin to finding that Mr Ahmad had committed perjury, which could only properly be made to a very high standard of proof.
  1. I do not accept that the Respondent was forced to bring an application for a stay. The Respondent could have chosen not to enforce the arbitration agreement and, as a party to an extant VCAT proceeding, simply defended itself in that proceeding and even brought a counterclaim. The Respondent’s choice to incur the expense of engaging an arbitrator is a commercial decision. If both parties participated in a Tribunal proceeding, the existence of the arbitration agreement would not invalidate the Tribunal’s decision.
  1. However, once the Respondent put the Applicant on notice that it required the dispute to be referred to arbitration under the arbitration agreement, the Applicant’s only sensible option was to concede the point. It is not as if the hearing of the stay application on 22 November 2019 was some sort of ambush. The Respondent raised the issue at the first directions hearing on 23 September 2019, and filed affidavits in support in October 2019. Exhibit JT2 to the Affidavit of James Turnbull was a letter from the respondent’s solicitors to the applicant dated 17 September 2019 calling on the Applicant to comply with the arbitration agreement, and foreshadowing the stay application if the Applicant declined.
  1. The Applicant opposed the application for a stay by denying – not questioning – the existence of the arbitration agreement. As is set out in paragraphs 8 – 26 of the Reasons in [2014] VCAT 1815, Mr Ahmad filed an affidavit in which he deposed, “The Respondent is claiming my signature on the subcontract agreement which I am not aware if I ever signed”. Then in the hearing on 22 November 2019 Mr Ahmad gave evidence orally that he positively had not signed the Subcontract Services Agreement. As I said in paragraphs 23 & 24 I found Mr Ahmad’s evidence to be unedifying, evasive, unrealistic, unbelievable, and motivated by a desire to take the arbitration agreement out of contention.
  1. That was greater than a mere rejection of Mr Ahmad’s evidence in favour of the evidence of other witnesses. I also stated, in paragraph 23 of the Reasons, that his evidence, if true, would imply that someone in the Respondent’s camp must have forged Mr Ahmad’s signature, that Mr Pour of the Respondent had signed a false document when inserting his signature as a witness to Mr Ahmad’s signature, and that Mr Edwards would have lied on oath in his affidavit. These were very serious findings in relation to Mr Ahmad’s evidence.
  1. Objectively, the giving of that evidence was an attempt to deceive the Tribunal. The Applicant’s conduct unnecessarily disadvantaged the Respondent, by causing it to incur legal costs in bringing the stay application and by delaying resolution of the dispute by failing to take the requisite steps to appoint an arbitrator. The criterion in sub section 109(3)(a)(v) is satisfied.

Section 109(3)(a)(vi)

  1. In substance the Respondent submitted that the same matters arising under sub section 109(3)(a)(v) also satisfy the criterion of vexatious conduct under sub section 109(3)(a)(vi). The Applicant submitted that the conduct could not be vexatious because it was engaged in when the Applicant was self-represented.
  1. I reject the Applicant’s submission. A self-represented litigant can certainly act vexatiously. That word is somewhat emotive when used in a lay sense, but when used in a legal context is more objective. The Applicant issued the VCAT proceeding in the face of the arbitration agreement; declined the Respondent’s invitation of 17 September 2019 to comply with the arbitration agreement; opposed the Respondent’s application for a stay; and lost the application for a stay after Mr Ahmad gave contradictory evidence, in his affidavit and then orally, which was found to be unbelievable.
  1. I am satisfied that the Applicant’s conduct was vexatious and that the criterion in sub section 109(3)(a)(vi) is satisfied. Again, the Applicant’s conduct unnecessarily disadvantaged the Respondent, by causing it to incur legal costs in bringing the stay application and by delaying resolution of the dispute by failing to take the requisite steps to appoint an arbitrator.

Section 109(3)(c)

  1. As to subsection 109(3)(c), plainly the relative strengths of the parties’ positions in the context of the arbitration agreement and the stay application favour the Respondent.
  1. In the above circumstances, I have no hesitation in finding that it is fair to order the Applicant to pay the Respondent’s costs of the stay application on a standard basis.

Indemnity costs

  1. I reject, though, the Respondent’s application for costs to be assessed on an indemnity basis. It must be remembered that on the rare occasions that a Court orders costs on an indemnity basis, it does so in the context of the Courts’ practice of costs – on a standard basis – following the event. In that context, an order for the payment of indemnity costs is just a step up from the norm, in recognition of serious misconduct of the party against whom the order is made. In VCAT, section 109(1) states the starting position, or context, that each party is to bear their own costs unless an order is made to the contrary.
  1. Mr Ahmad’s evidence is a serious matter. The rest of the stay application, though, is a fairly standard situation in which one party’s position in a matter succeeds.
  1. The Respondent relied on Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd 81 ALR 397. A claim for misleading and deceptive conduct was pleaded by the applicant, and an individual – Mr Dellal – was joined as having aided and abetted that conduct. At the end of the proceeding Mr Dellal sought costs against the Applicant.
  1. In the Federal Court of Australia, costs usually follow the event. Accordingly the issue before the Court was whether Mr Dellal should have costs awarded to him on a standard basis, or on a higher basis of solicitor and client or indemnity costs.
  1. In his Judgment, Woodward J refers to Fountain’s “ill-drawn statement of claim”, the “long and tortuous course” of the litigation, and that His Honour was forced to do the best he could “with the meagre material” before him.
  1. His Honour found that there had been nothing to be gained by joining Mr Dellal as a respondent because the case against him was hopeless from the outset. However, His Honour said that on the material before him he was unable to say that it was unreasonable for the applicant and its advisors to issue the proceeding and to join Mr Dellal (and other directors) at the beginning of the matter in 1983. It is difficult to reconcile those two conclusions.
  1. However, in late 1985 a decision of the High Court on the liability of persons for aiding and abetting misleading conduct was delivered, and His Honour said that by early 1986 any legal practitioner practising in the field should have known that the applicant had no possibility of success against Mr Dellal. His Honour said that from that point the proceeding against Mr Dellal was vexatious: “There was no sufficient grounds to continue the case … And the applicant’s purpose in doing so, if indeed there was a purpose, can only have been to add to any pressures on the respondents generally to settle the action. The other possibility is that the case against (Mr Dellal) was pursued for no good purpose at all – due to inertia and carelessness”.
  1. Even having made these robust criticisms of the applicant’s conduct of the proceeding, His Honour said that he regarded the matter as a “borderline” case. He awarded costs in Mr Dellal’s favour on a standard basis up to 31 January 1986, but effectively on an indemnity basis thereafter. As to that latter period, His Honour said:

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

  1. In citing this case, the Respondent relied on an earlier passage which might be said to be more conservative than the passage above. His Honour reviewed authorities on the awarding of solicitor and client costs, as distinct from costs on a standard basis, and said:

It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but in all cases I have considered, there has been some further factor which has influenced the exercise of the Court’s discretion – for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties.

  1. The Respondent submitted that the Tribunal’s rejection of Mr Ahmad’s evidence in the stay application, discussed above, recognised that the Applicant had made an allegation of fraud knowing it to be false. Naturally the Applicant rejected that submission.
  1. In my view, His Honour’s final conclusion of principle, that it is vexatious to continue a proceeding where the applicant, properly advised, should have known that he had no chance of success is all the Respondent needs to rely upon. It does not have to prove that Mr Ahmad knowingly made a false allegation of fraud.
  1. However, Fountain Select was decided in the context of costs following the event being the default position, and the question being whether costs to be assessed on a higher basis should be awarded. In VCAT the equivalent jump is between the parties bearing their own costs, and any costs being awarded.
  1. The Respondent also relied on Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189. In that case, the plaintiff was unsuccessful and it conceded that it should pay the first defendant’s costs on a standard basis. The first defendant sought costs on an indemnity basis.
  1. Paragraph 5 of Harper J’s judgment shows that the plaintiff had made a rapid retreat in the litigation. It had asserted rights in a trade mark, and rights to prevent the defendants from selling goods by reference to that mark or image. It also obliquely implied that the defendants were selling goods under non-genuine trademarks. The plaintiff confronted the first defendant in his shop on 28 April 2000; issued the proceeding on 5 June 2000; and then discontinued immediately on being confronted by the first defendant’s “stern proclamation of inviolability.”
  1. At paragraph 7 Harper J drew together the authorities on when a Court should depart from its usual course of awarding costs on a standard basis, in the course of which he cited Fountain Selected Meats.
  1. At paragraph 11 His Honour opined that indemnity costs should not be awarded too easily, because to do so would be to unnecessarily discourage potential litigants from bringing their disputes to the Courts, given that success can seldom be guaranteed because a party cannot predict with certainty the Court’s likely conclusion on contested facts. But he went on:

The position changes where a litigant acts dishonestly in the litigation, or where the rights and privileges of a litigant are flouted or abused. Then, the rationale for refusing to order that the losing party indemnify an opposite party against that party’s costs is less compelling. Indeed, costs are more frequently if not invariably awarded on an indemnity or like basis … where findings of dishonesty or serious misconduct have been made against the party ordered to pay.

  1. Harper J declined to order costs on an indemnity basis, despite finding that the plaintiff had no standing to bring proceedings based on the trademarks or in passing off. His Honour was not satisfied that the plaintiff in fact appreciated the hopelessness of its position. The plaintiff’s surprising ignorance was at least as likely the reason for the commencement of the proceeding as was the hypothesis that the plaintiff sought to gain an illegitimate advantage from doing so.
  1. I do not consider that Ugly Tribe assists the Respondent. Mr Ahmad’s evidence was rejected in strong terms. However, as with Fountain Select Meats, it was decided in the context of costs usually following the event, which is not the position in VCAT, and the Court awarded standard costs being the default position. Additionally, whilst it could not be said that a self-represented litigant has a license to act recklessly, it is possible that in the absence of legal advice the Applicant and Mr Ahmad did not in fact appreciate the hopelessness of the Applicant’s position in relation to the arbitration agreement.
  1. Further, as a creature of statute VCAT must exercise its powers in accordance with section 109 of the VCAT Act. How judges exercise their discretion in Court proceedings, where the discretion is not as codified, can never dictate how VCAT is to apply that section.

Costs against Mr Ahmad

  1. Section 109(4) says:

If the Tribunal considers that the representative of a party, rather than the party, is responsible for conduct described in subsection 3(a) or (b), the Tribunal may order that the representative in his or her own capacity compensate another party for any costs incurred unnecessarily.

  1. Section 62(3) provides that a company may be represented by a director, and so section 109(4) cannot be said to only apply to “representatives” who are legal practitioners. Whilst the Tribunal has made a few orders under this section against legal practitioners, in the case of Classic Period Homes Pty Ltd v Rattle [2007] VCAT 2209 it made an order for costs against a director of the applicant company.
  1. In seeking an order against Mr Ahmad the Respondent essentially ran the same points as it did in relation to subsections 109(3)(a)(v) & (vi). However, whilst obviously Mr Ahmad gave unsatisfactory evidence, he did so as an officer of the Applicant company. The evidence related to the contract between the Applicant and the Respondent.
  1. There is no evidence before the Tribunal as to whether the Applicant’s decisions to commence the proceeding in the Tribunal in the face of the arbitration agreement, and to decline the Respondent’s invitation of 17 September 2019 to withdraw the proceeding, was made solely by Mr Ahmad or after receiving legal advice.
  1. In the circumstances I consider that the costs order should be limited to the Applicant and that no costs should be awarded against Mr Ahmad personally.

THE STATE OF WESTERN AUSTRALIA -v- MINERALOGY PTY LTD [2020] WASC 58 (28 February 2020)

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION : THE STATE OF WESTERN AUSTRALIA -v- MINERALOGY PTY LTD [2020] WASC 58

CORAM     :   KENNETH MARTIN J

HEARD     :   7 FEBRUARY 2020

DELIVERED:   28 FEBRUARY 2020

FILE NO/S  :   GDA 13 of 2019

BETWEEN :   THE STATE OF WESTERN AUSTRALIA

Appellant

AND

MINERALOGY PTY LTD

First Respondent

INTERNATIONAL MINERALS PTY LTD

Second Respondent

Catchwords:

Arbitration – Application for summary dismissal of proceeding – Whether Commercial Arbitration Act 1985 (WA) or Commercial Arbitration Act 2012 (WA) applicable to the relevant award – Avenue of wider potential challenge against the award under Commercial Arbitration Act 1985 challenged as untenable – Whether arbitrator can determine the jurisdiction of an appeal to set aside an award – Consideration of transitional provisions of Commercial Arbitration Act 2012 – Whether an arbitration had been commenced – Considerations of when the dispute arose and whether an arbitral tribunal had been constituted – Whether arbitrator functus officio post first award and fresh reference by same parties to former arbitrator for new determination – Where dispute and constitution of arbitral tribunal found to occur post commencement of Commercial Arbitration Act 2012 only avenue of relief is under that Act

KENNETH MARTIN J:

 

Introduction

The summary dismissal applications

  1. I am dealing with two applications made on 8 November 2019, by each of the first and second respondents (Mineralogy and International Minerals) respectively.  At times I will refer to Mineralogy and International Minerals collectively as ‘the respondents’.  Both corporations apply for the summary dismissal of the appellant’s (the State’s) proceeding GDA 13 of 2019.  By the action GDA 13 of 2019, the State seeks leave to appeal and to appeal against an arbitral award made by the Hon Michael McHugh AC QC (Mr McHugh) on 11 October 2019 (the 2019 Award).
  2. The essential contention of both respondents (as applicants for summary dismissal) is that the State’s attempt to challenge aspects of the 2019 Award (via GDA 13 of 2019) through utilising the appeal and review regime of the former now repealed Commercial Arbitration Act 1985 (WA) (the 1985 Act), rather than under the narrower review regime of the subsequent Commercial Arbitration Act 2012 (WA) (the 2012 Act), is erroneous. The respondents contend that GDA 13 of 2019 is so fundamentally misconceived and without merit that it is unarguable and so ought be dismissed in the court’s inherent jurisdiction. If the respondents’ challenges are correct, then there is no dispute that summary dismissal should follow. The State accepts that if I find the appeal to be incompetent, I have the power to dismiss, essentially as part of the ordinary course of administering the court’s process: see ts 5. See also Walton v Gardiner[1993] HCA 77; (1993) 177 CLR 378, 393 (Mason CJ, Deane & Dawson JJ) as applied by Steytler P in Commonwealth of Australia v Albany Port Authority[2006] WASCA 185 [20] – [21]. However, there exists strong dispute over the respondents’ challenges.

The appeal (GDA 13 of 2019)

  1. It is apparent from the State’s form 83 appeal notice of 31 October 2019, ostensibly lodged pursuant to Rules of the Supreme Court 1971 (WA) O 65 r 10 and thereby commencing GDA 13 of 2019, that the State would seek thereby to invoke s 38(2) of the former 1985 Act to challenge components of the 2019 Award.
  2. Omitting the particulars provided, the State’s form 83 notice as filed seeks to raise two grounds of appeal – in respect of which leave to appeal is sought, pursuant to s 38(4)(b) of the former Commercial Arbitration Act 1985.  The two grounds of appeal the subject of the State’s form 83 appeal notice read in the following terms (absent their particulars):

    1.           The Arbitrator erred in law in determining that the appellant’s single breach of contract gave rise to two distinct causes of action for different damages.

    2.           By reason of the error in ground 1, the Arbitrator erred in law in declaring that the respondents are not foreclosed from further pursuing claims for damages arising from any breach or breaches of the Iron Ore Processing (Mineralogy Pty Ltd) Agreement.

  3. The observed reference in ground 2 above to the Iron Ore Processing (Mineralogy Pty Ltd) Agreement (the State Agreement) is a reference to an agreement that is found in sch 1 of the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA) to which agreement the State of Western Australia and the respondents were all parties. Schedule 1 identifies the State Agreement as being made on 5 December 2001. Relevantly, the State Agreement contains the parties’ arbitration submission clause, cl 42, reading in the following terms (cl 42(1)):

    Any dispute or difference between the parties arising out of or in connection with this Agreement the construction of this Agreement or as to the rights duties or liabilities of the parties or any of them under this Agreement or as to any matter to be agreed upon between the parties under this Agreement shall in default of agreement between the parties and in the absence of any provision in this Agreement to the contrary be referred to and settled by arbitration under the provisions of the Commercial Arbitration Act 1985 and notwithstanding s 20(1) of that Act each party may be represented before the arbitrator by a duly qualified legal practitioner or other representative.

The relevant West Australian arbitration legislation

  1. The contention of both Mineralogy and International Minerals under their respective summary dismissal applications is straightforward.  Essentially, they contend that the former 1985 Act was repealed at the coming into force of the substantive provisions of the 2012 Act.

The 2012 Act

  1. The provisions of the 2012 Act took effect substantively in Western Australia from 7 August 2013.  To that end, see s 1B(b) of the 2012 Act and Western Australia, Government Gazette, No 142 (6 August 2013) at 3,677.
  2. A repeal of the former 1985 Act was effected by s 44 which is to be found within pt 11 of the 2012 Act.  So much is straightforward.
  3. Nevertheless, pt 10 of the 2012 Act contains transitional provisions which bear upon the present arguments.
  4. Towards the respondents’ summary dismissal arguments, it is necessary to review the terms of s 43 found within pt 10 of the 2012 Act.  Section 43 addresses the designated law of the State governing an arbitration and arbitration agreement, for circumstances where an arbitration was already commenced (in effect) before 7 August 2013.  Section 43 reads:

    43.          Savings and transitional provisions

    (1)          Subject to subsection (2) –

    (a)          this Act applies to an arbitration agreement (whether made before or after the commencement of this section) and to an arbitration under such an agreement; and

    (b)          a reference in an arbitration agreement to the Commercial Arbitration Act 1985, or a provision of that Act, is to be construed as a reference to this Act or to the corresponding provision (if any) of this Act.

    (2)          If an arbitration was commenced before the commencement of this section, the law governing the arbitration and the arbitration agreement is to be that which would have been applicable if this Act had not been enacted.

    (3)          For the purposes of this section, an arbitration is taken to have been commenced if –

    (a)          a dispute to which the relevant arbitration agreement applies has arisen; and

    (b)          the arbitral tribunal has been properly constituted.

  5. Section 7 of the 2012 Act contains an elaborate definition of the term ‘arbitration agreement’.  However, for present purposes, there looks to be no dispute about the arbitration clause that is cl 42(1) within the State Agreement fulfilling that description and so meeting the term ‘arbitration agreement’ as it is used under s 43 of the 2012 Act as now seen.
  6. Hence, prima facie, the observed reference to the 1985 Act made in cl 42(1) of the parties’ agreement would, post 7 August 2013, be read by reason of s 43(1)(b) as directing to the replacement 2012 Act, as regards those parties’ further disputes arising thereafter.
  7. Next, I direct attention to the terms of s 43(2), as regards the transitional provisions made applicable to circumstances where an arbitration ‘was commenced‘ before commencement of s 43 of the 2012 Act. Where s 43(2) is engaged, the law governing an already commenced arbitration and the arbitration agreement, is stipulated to be the former commercial arbitration legislation, namely, the 1985 Act.
  8. As also now seen by s 43(3), the process of ascertainment as to whether or not an arbitration ‘was commenced’ before the commencement of s 43 (ie, before 7 August 2013) requires the fulfilment of the conjoint, dual criteria as set by s 43(3)(a) and (b).
  9. In essence then, in order for the governing law of the arbitration (and the agreement) to be other than the 2012 Act, the parties’ dispute (arising under their relevant agreement) needs to have arisen temporally prior to 7 August 2013.  Along with that first touchstone, it also needs to be shown that the relevant arbitral tribunal was ‘properly constituted’ before 7 August 2013.

Evidentiary materials and sundries

  1. The evidentiary materials relied upon by the parties for the purposes of resolving the present applications can be identified as follows.  In addition to the parties’ written submissions, the following evidence was adduced:

    (a)          the second respondent, International Minerals, read and relied upon two affidavits of Mr Shane Robert Bosma, affirmed 8 November 2019 and 24 January 2020;

    (b)          the first respondent, Mineralogy, in addition to relying upon the evidentiary materials under Mr Bosma’s affidavits, also read and relied upon an affidavit of Mr Clive Frederick Palmer, affirmed 24 January 2020; and

    (c)          the State tendered four books containing the arbitral documents put before Mr McHugh for the purposes of the parties’ 2018 reference to him – which culminated in the 2019 Award.

  2. I will also note formally that Mr Shaw, who is the Queensland based lawyer of record for the first respondent, Mineralogy, wished it to be recorded that albeit he made some brief verbal submissions for his client at the hearing, he undertook that task as a solicitor and not as counsel.

The parties’ rival arguments

Mineralogy and International Minerals

The 2019 Award

When the relevant dispute arose

  1. As mentioned, the essential contention of both Mineralogy and International Minerals is that the parties’ submitted dispute, which thereafter became the subject of Mr McHugh’s 2019 Award, was essentially an interpretative dispute arising under the State Agreement as to the effect and implications of an earlier award made by the same arbitrator for the same parties on 20 May 2014.  Hence, axiomatically, that the parties’ dispute resolved under the 2019 Award arose after 7 August 2013.

When the arbitral tribunal was constituted

  1. But beyond that point, both respondents then argue further that even if they were to be ascertained as wrong about when this dispute arose, nevertheless, it is demonstrably clear that Mr McHugh was not constituted as the arbitral tribunal for that interpretative dispute (as resolved under his 2019 Award) until he had accepted an appointment as the parties’ agreed arbitrator to resolve that dispute.  That constituting event, it is said, was only in December 2018, obviously then at a time well after 7 August 2013.  It is the primary contention of Mineralogy and International Minerals that Mr McHugh was constituted as their arbitrator under the consent directions as approved and issued by Mr McHugh to the parties at 20 December 2018, to determine a further dispute arising under the agreement then referred to him by these parties.
  2. It is a matter of historic fact that Mr McHugh had earlier been engaged as arbitrator by these same parties to resolve a dispute arising under the State Agreement and which became the subject of his arbitral award, issued on 20 May 2014 (the 2014 Award).  In resolving that dispute, Mr McHugh had been determining a dispute which had arisen and in respect of which he was clearly appointed as their arbitrator, well prior to 7 August 2013.
  3. Hence, as regards that arbitration and Mr McHugh’s 2014 Award, the terms of s 43(2) of the 2012 Act look clearly to be engaged, as regards making the law governing that arbitration and appointment to be the 1985 Act.
  4. But there was subsequent disputation over the legal implications of that 2014 Award.  The base position of the respondents on their respective applications seeking summary dismissal of GDA 13 of 2019 is, that viewed from both a temporal and legal perspective, it is overwhelmingly clear that Mr McHugh’s 2019 Award may only be the subject of a possible curial challenge taken to this court under the later regime of the 2012 Act and the ‘set aside’ provisions of s 34 of that Act.
  5. Further, Mineralogy and International Minerals point out as well that there has been no ‘agreement’ for a purpose of possibly engaging with s 34A(1)(a) of the 2012 Act.  Hence, there could be no question of any ‘appeal’ by the State under the 2012 Act against the 2019 Award.
  6. Nor, they say, can there be any possible engagement of the transitional provisions of s 43(2) of the 2012 Act towards the 2019 Award.  Their contention essentially is that these conclusions are demonstrable from the terms of and the timing of the arbitration that culminated in the 2019 Award.

Jurisdiction

  1. Even further, Mineralogy and International Minerals say that even if none of that were the case, it is only for this court and for no-one else (and certainly not the arbitrator) to determine the jurisdiction of a court to hear an appeal or an application to set aside an arbitral award.  To that end, they say, any observations by the arbitrator upon the applicable arbitration legislation governing his arbitration (or agreement) are simply not relevant.  They argue that such observations are not to the point and, essentially, are not binding on me.

The State

The 2019 Award

  1. The State contends to the contrary or says at least that its position is at least arguable as to the former 1985 Act and so cannot be summarily terminated.  It directs particular reference at two early paragraphs within the 2019 Award.  Mr McHugh’s reasons, on their face, appear to be fully incorporated within the terms of the 2019 Award.  As such, going forward a reference to ‘reasons’ should be read as a reference to the substantive body of paragraphs making up the 2019 Award.
  2. In the next section of the reasons I will set out the ten (10) commencing paragraphs of the reasons of Mr McHugh which form, as I assess it, a part of his overall 2019 Award.  Mr McHugh’s reasons ultimately extend to some 122 paragraphs across 41 pages prior to the concluding page which sets out five specific declarations or orders – also under the heading of ‘Award’.  I will also set out his 2019 Award conclusion paragraphs.

The 2018 Disputes

  1. It will be seen from Mr McHugh’s commencing reasons that one of the disputes referred to Mr McHugh in 2018 by the parties for his arbitral resolution was an issue referred to as the ‘Finality Issue’.  This issue required a resolution of a dispute about whether or not Mineralogy and International Minerals were effectively barred or prohibited by the legal effects of the 2014 Award (under principles of res judicata, issue estoppel or by Anshun estoppel) against them subsequently (to the 2014 Award) prosecuting a claim or claims against the State for damages for breach of contract – namely, for a breach of the State Agreement.  As will be seen by his 2014 Award, Mr McHugh had determined against the State (upon the issue of breach) as regards cl 7 of the State Agreement.  This was in reference to Mineralogy’s submission of a proposal to the relevant Minister and the Minister’s failure then to consider that submission as a relevant proposal.
  2. A question in dispute posed to Mr McHugh by the parties in 2018 was whether or not his 2014 Award now would inhibit the breach damages claims Mineralogy and International Minerals as were sought to pursue against the State post May 2014 by reason of the ascertained breach of the State Agreement by the State.
  3. The 2019 Award of Mr McHugh concluded there were no relevantly applicable legal inhibitions against Mineralogy and International Minerals pursuing breach damages arising from the 2014 Award.  He declared that Mineralogy and International Minerals could pursue their claims for breach damages for the as ascertained (at 2014) breach of the State Agreement.

GDA 13 of 2019

  1. Under GDA 13 of 2019 the State seeks to curially challenge in this court aspects of Mr McHugh’s 2019 Award by proceeding under the appeal and review provisions of the 1985 Act, which the State contends still apply and permit that course to be taken.

The 2019 Award

Three features to be highlighted

  1. It may be helpful, before turning to the reasons and the concluding declarations of Mr McHugh, to highlight three particular features of the 2019 Award.  First, I would direct attention at critical paragraphs 9 and 10, which are strongly emphasised by the State in resisting the present summary dismissal application.
  2. The State’s contention essentially is that paragraphs 9 and 10 convey Mr McHugh’s determination as to his jurisdiction under the former 1985 Act in going about resolving a so-called ‘First’ and ‘Second Damages Claims’ (as seen defined).
  3. The State submits that those determinations under pars 9 and 10 of the arbitrator as to his jurisdiction are conclusive and that they presently remain unchallenged.  Therefore, it is put, in effect, that they must in turn bind this court as regards the contended applicability of the applicable law under the 1985 Act.  That in turn determines, it seems, the legislative regime of an appellate challenge open to the State in challenging the 2019 Award under GDA 13 of 2019.
  4. Second, I would direct attention to Mr McHugh’s reference (to be seen at par 2) to three ‘Preliminary Issues’, as referred to him by the parties, as a ‘further arbitration‘.
  5. Third, I direct specific attention at Mr McHugh’s references in pars 7 and 8 of his reasons (and, indeed, also again at par 105, but which I will not cite) recording the parties’ agreement before him, that he was then ‘functus officio‘, in respect of the arbitration the subject of the 2014 Award.
  6. The State, by its resistance arguments, explains those references to ‘functus officio‘ on the basis that there had been only general agreement about that position, which general agreement it is said was subject to the parties’ ‘particular’ agreement that Mr McHugh would have jurisdiction to determine the matters as referred to him by pars 1.1(a) and 1.2(a) of the proposed orders made on 20 December 2018.  Those orders in turn were said to be (historically) based upon a letter of the State of 17 June 2014.
  7. The State says that the parties had agreed that Mr McHugh held the arbitral jurisdiction to determine what was decided by the 20 May 2014 arbitration:  see par 36 of the State’s amended written submissions of 5 February 2020.

Reasons and final award

  1. Under Mr McHugh’s 2019 Award, Mineralogy and International Minerals are, from a nomenclature perspective, respectively referred to as ‘Applicants’.  In turn, the State of Western Australia is referred to as the ‘Respondent’.
  2. Under a commencing heading ‘Award’, the 2019 Award proceeds as follows:

    1.           By an Award made on 20 May 2014 in an arbitration between the above parties (the First Arbitration), I held that a document described as a Proposal to develop the Belmont South Iron Ore Project was a Proposal (the BSIOP Proposal) for the purposes of the Iron Ore Processing (Mineralogy Pty Ltd) Agreement (the State Agreement) made between those parties.  I further held that the Premier of Western Australia, as Minister for State Development, had failed to give a decision within the time limit required by clause 7(2) of the Agreement and noted that this failure was a breach of the Agreement.

    2.           The parties have now referred to me a further arbitration to determine three preliminary issues concerning whether the Applicants have a right to damages for the breach of the State Agreement.  At the time of referral, those issues were:

    (a)          whether the Applicants’ right to recover damages (the First Damages Claim) was heard and determined in the May 2014 Award and whether they are now precluded from pursuing that claim (the Finality Issue);

    (b)          alternatively, if the First Damages claim was not determined in that Award and remains to be determined in that arbitration, whether I should adjourn those proceedings to allow the Respondent to apply to the Supreme Court of Western Australia under section 46 of the Commercial Arbitration Act (WA) 1985 to terminate the arbitration (the Section 46 Issue);

    (c)          whether there has been inordinate and inexcusable delay on the part of the Applicants in conducting another or alternative damages claim and conducting  a claim that the Minister had erred in subsequently making the carrying out of the Proposal subject to 46 conditions.  If there had been such delay, whether those claims should be dismissed under section 25(2) of the Commercial Arbitration Act (WA) 2012 (the Section 25 Issue).

    3.           By letters to the Applicants dated 22 July 2014, that is, after the publication of the May [2014] Award, the Minister exercised his power under clause 7(1)(c) of the State Agreement to impose conditions precedent to the giving of his approval to the BSIOP Proposal.

    4.           The Applicants claim that the conditions precedent were so unreasonable that the Minister’s decision constituted a breach of the State Agreement, and the Applicants seek damages in respect of that breach (the Second Damages Claim).

    5.           Alternatively, in the event that the conditions precedent imposed in respect of the BSIOP Proposal are not found to be so unreasonable as to give rise to a breach of the State Agreement, the Applicants claim that they have referred to arbitration the reasonableness of the Minister’s decision pursuant to clause 7 of the State Agreement (the Clause 7 Claim).

    6.           The Applicants have not particularised the nature of the damages they claim in respect of either the First Damages Claim or the Second Damages Claim.  However, as the Respondent pointed out, the act of the Minister on 22 July [2014] in imposing conditions on carrying out the BSIOP Proposal was an acceptance that the Proposal was valid.  His breach in refusing to accept the Proposal was valid did not continue after that date.  It follows then that:

    (a)          the First Damages Claim must be a claim for damage sustained by the Applicants between the submission of the BSIOP Proposal in August 2012 and the Minister’s decision on 22 July 2014; and

    (b)          the Second Damages Claim must be a claim for damage sustained by the applicants after the Minister’s decision on 22 July 2014.

    7.           The parties now agree that I am functus officio, in respect of the First Arbitration which was the subject of the 20 May 2014 Award and that I have no continuing jurisdiction in respect of that arbitration.  As a result, the [S]ection 46 [I]ssue which was originally referred to me can no longer be an issue.

    8.           Although the parties do not dispute that I am functus officio in respect of the First Arbitration, they disagree as to what was determined by the [May 2014] Award in that arbitration.  The Respondent contends that in those proceedings the Applicants sought to have determined a limited claim for damages for the Minister’s breach of the Agreement and are now precluded from claiming any further damages for that breach.  The Applicants contend that they are entitled to pursue a general claim for damages (the First Damages Claim) in respect of the Minister’s breach.  Their contention is based on the assertion that, in the earlier arbitration the only claim in respect of damages was for a Declaration that the Applicants were entitled to damages for any costs that they would incur in connection with any further environmental approvals that were required as a result of being unable to substantially commence the project by 22 December 2014.

    9.           The First Damages Claim arose in an arbitration, which was commenced before the commencement of the Commercial Arbitration Act 2012 (WA) (CAA (2012)). However, s 43(2) of the CAA (2012) provides that the law governing the arbitration is that which would have been applicable if the CAA (2012) had not been enacted. This means that the Commercial Arbitration Act 1985 (WA) (CAA (1985)) governs the First Damages Claim.

    10.          Accordingly, the First Damages Claim involving what the Respondent called the ‘Finality Issue’ has to be determined by reference to the CAA (1985). In contrast, the Second Damages Claim and the Clause 7 claim were disputes that arose in 2014 after the CAA (2012) had commenced and have to be determined under that Act.

  3. I also set out the concluding paragraph of the 2019 Award which precedes the last five paragraphs that appear under the word ‘Award’.  These concluding components say:

    122.         Having regard to the issues to be determined by me as minuted in the Proposed Directions dated 20 December 2018, I make the following Declarations and Order.

    AWARD

    1.           DECLARE that the Applicants’ right to recover damages was not heard and determined in the Award of 20 May 2014.

    2.           DECLARE that the Applicants are not foreclosed from further pursuing claims for damages arising from any breach or breaches of the State Agreement.

    3.           DECLARE that the Award of 20 May 2014 was a Final Award which terminated the First Arbitration and that the Arbitrator has no jurisdiction to adjourn the proceedings to allow time for the Respondent to apply to the Supreme Court under section 46 of the Commercial Arbitration Act 1985 (WA) to terminate the First Arbitration.

    4.           DECLARE that there has not been inordinate and inexcusable delay on the part of the Applicants in progressing the Second Damages Claim or the Clause 7 of the State Agreement claim.

    5.           LIBERTY TO APPLY in respect of the above Declarations.

    Perth

    11 October 2019       Michael McHugh

    Arbitrator

Two satellite proceedings

  1. Before turning back to the substance of the parties’ rival contentions concerning the summary dismissal applications, I should note two further surrounding actions.

ARB 9 of 2019

  1. First, I should record that the State has commenced another proceeding in this court, namely, ARB 9 of 2019, by originating summons against Mineralogy and International Minerals.  By this proceeding, the State seeks to challenge the 2019 Award by proceeding under s 34 of the 2012 Act.
  2. ARB 9 of 2019 was commenced on 4 December 2019.  It is effectively stood over pending my further directions – to be issued in the wake of the determination of the present summary dismissal applications in GDA 13 of 2019.  Effectively, the State is seen by the further proceeding of ARB 9 of 2019 to be preserving its (less preferred) arbitral review position in the event its present arguments are not accepted.

ARB 12 of 2018

  1. Next, I should note a proceeding that was commenced as ARB 12 of 2018 by Mineralogy and International Minerals against the State on 2 August 2018.
  2. That proceeding had sought orders pursuant to the 2012 Act, via s 11(3), appointing another distinguished retired judge to be appointed as those parties’ sole arbitrator to:

    … determine the dispute between the plaintiffs and the defendant as to the defendant’s liability to pay damages to the plaintiffs consequent upon the Minister’s failure to consider the plaintiffs’ proposal dated August 2012 for the Balmoral South Iron Ore Project pursuant to clause 6 of the [State Agreement] (‘the Dispute’).

  3. Albeit the proceeding has been listed for directions before me on several occasions post its 2018 commencement, the proceedings have essentially not progressed.  The further referral to Mr McHugh in December 2018 by the parties likely explains that.  As such, that appointment proceeding in ARB 12 of 2018 may now be redundant.
  4. Nevertheless, it stands over for further directions as well, likewise pending resolution of the present controversy.

The 20 December 2018 proposed directions

  1. I divert briefly to incorporate the explicit terms of the parties’ agreed 20 December 2018 proposed directions, seen as referred to by Mr McHugh at par 122 of the 2019 Award, as earlier set out at [41].
  2. It will be remembered it is the joint contention of Mineralogy and International Minerals in seeking summary dismissal that it is demonstrable by reference to the terms of the transition provision, s 43(3)(b) of the 2012 Act, that Mr McHugh as the parties’ nominated arbitral tribunal to determine a dispute (which came ultimately to be the subject of the 2019 Award) was only ‘constituted’ upon the parties’ reference of those disputes to him in December 2018.  That was, of course, long after the commencement of s 43 of the 2012 Act (at 7 August 2013).  The arbitration conducted by Mr McHugh culminating in his 2019 Award was plainly not commenced before 7 August 2013.  Consequently, say both Mineralogy and International Minerals, the regime of laws under the former 1985 Act is not applicable to this award.
  3. On 20 December 2018, Mr McHugh issued the proposed directions seen below:

    Mineralogy Pty Ltd and International Minerals Pty Ltd v State of Western Australia

    Arbitration Proceedings before the Hon. Mr McHugh AC QC

    Minute of Proposed Directions

    20 December 2018

    1.           Issues for determination

    1.1          The Claimants have referred the following claims to the Arbitrator for determination:

    (a)          A claim for damages consequent upon the Minister reusing to accept the Claimants’ August 2012 submission (BSIOP Proposal) as a proposal under the Iron Ore Processing (Mineralogy Pty Ltd) Agreement (State Agreement), which refusal was in breach of the State Agreement as determined in the Award of 20 May 2014 (the First Damages Claim).

    (b)          A claim for damages consequent upon the Minister purporting, by letter of 22 July 2014, to require alterations to, and to impose conditions precedent to approval of, the BSIOP Proposal, which the Claimants assert was so unreasonable as to constitute a breach of the State Agreement (the Second Damages Claim).

    (c)          In the alternative to 1.1(b), if the conditions purported to be imposed were not so unreasonable as to give rise to a breach of the State Agreement, whether the decision of the Minister of 22 July 2014 was reasonable for the purposes of clause 7 of the State Agreement.

    1.2          The parties agree that the following issues are to be determined by the Arbitrator:

    (a)          The Res Judicata Issue:  whether, as the Respondent contends in the Respondent’s solicitor’s letter dated 17 June 2014, the Claimants’ right to recover damages was heard and determined in the Award of 20 May 2014, and the Claimants are now foreclosed from further pursuing damages.

    (b)          The Section 46 Issue: whether the arbitrator should apply, or should adjourn the arbitration proceeding to allow time for the Respondent to apply, to the Supreme Court under section 46 of the Commercial Arbitration Act 1985 (WA), as raised in the Respondent’s solicitor’s letter to the Arbitrator dated 3 September 2018.

    (c)          The Section 25 Issue: whether, as the Respondent contends, there has been inordinate and inexcusable delay on the part of the Claimants in progressing the Second Damages Claim and the claim outlined at [1.1(c)] above, and, if so, whether those claims should be dismissed, or other directions should be made pursuant to section 25(2) of the Commercial Arbitration Act 2012 (WA).

    (d)          Subject to the outcome of 1.2(a) and 1.2(b), whether the Claimants are entitled to an award of damages pursuant to the First Damages Claim.

    (e)          Whether the Claimants are entitled to an award of damages pursuant to the Second Damages Claim.

    (f)           The quantum of damages (if any) payable by the Respondent to the Claimants.

    (g)          If the Claimants are not entitled to an award of damages pursuant to the Second Damages Claim, whether the decision of the Minister of 22 July 2014 was reasonable for the purposes of clause 7 of the State Agreement.

    6.           Next Preliminary Conference

    6.1          The matter is adjourned to a preliminary conference not before 19 May 2019 for the purposes of programming delivery of written submissions and a hearing of the Res Judicata Issue, the Section 46 Issue and the Section 25 Issue.

    (Signature)

    Michael H McHugh AC QC

    Arbitrator

The parties’ submissions (and considerations thereof)

Mineralogy and International Minerals

  1. By par 4 of its further written submissions of 24 January 2020 the second respondent, International Minerals (with these submissions being agreed with and supported by Mineralogy) contends:

    4.           For an arbitral tribunal to be ‘properly constituted’, the arbitrator must have communicated to the parties his or her acceptance of the nomination:  Kudeweh v T & J Kelleher Builders Pty Ltd [1990] VR 701 at 710-5. In the present case, when the arbitral tribunal was thus ‘properly constituted’ is clear, and beyond contest relevant to the present application, from the following evidence:

    a.           The present Respondents commenced an arbitration by notice of dispute dated 7 November 2012, in which the relevant dispute was described as, ‘The dispute involves the Minister’s refusal to consider a proposal for the development of a project under the [State Agreement].‘:  see affidavit of Shane Robert Bosma sworn 24 January 2020 (Second Bosma Affidavit) at annexure SRB-13.

    b.           Mr McHugh was appointed as arbitrator for that dispute by order of the Honourable Chief Justice Wayne Martin on 19 March 2013:  see Second Bosma Affidavit at annexure SRB-14.

    c.           Mr McHugh delivered the 2014 Award on 20 May 2014 (affidavit of Shane Robert Bosma sworn 8 November 2019 (First Bosma Affidavit) at annexures SRB-1.

    d.           Between 20 May 2014 and 20 December 2018, Mr McHugh took no steps as arbitrator.

    e.           Following delivery of the 2014 Award, a new dispute arose between the parties as to the effect of the 2014 Award on the present Respondents’ right to recover damages consequent upon the 2014 Award.

    f.            In August 2018, the present Respondents commenced proceeding ARB 12 of 2018 in this Court seeking to have the Honourable Ray Finkelstein AO QC appointed to arbitrate their claim for damages.

    g.           By the correspondence of annexures SRB-2 and SRB-3 to the First Bosma Affidavit, the parties agreed to refer to Mr McHugh the question of [to] whether the 2014 Award prevented the damages claims being pursued, and they defined that dispute as the ‘Res Judicata Issue’.

    h.           On 20 December 2018, Mr McHugh executed the directions proposed by the parties to resolve the ‘Res Judicata Issue’ and thereby communicated to the parties his acceptance of appointment as arbitrator for that dispute:  see First Bosma Affidavit at annexure SRB-4.

    i.            The arbitral hearing on the ‘Res Judicata Issue’ occurred on 10 September 2019:  see First Bosma Affidavit at annexure SRB-5.  At that hearing, all parties accepted that Mr McHugh was functus officio with respect to his 2013 appointment and his 2014 Award, and thereafter litigated the ‘Res Judicata Issue’ accordingly:  see First Bosma Affidavit annexure SRB-5 at p 76 lines 26-32, and pp 97-100.  Critically, this was the first point raised by Mr McHugh with counsel for the State at p 76 and Mr McHugh himself stated that ‘this is a new Arbitration‘:  p 99, line 46.

    j.            Mr McHugh confirmed that the 2019 Award was delivered in a ‘further arbitration‘ in paragraph 2 of the 2019 Award:  see First Bosma Affidavit annexure SRB‑5 at p 117.

    k.           Subsequent to the 2019 Award, the present Respondents approached Mr McHugh to have him make further directions to progress the substantive damages claims.  In response, by email of 22 November 2019, Mr McHugh indicated that, in his understanding, he had not agreed to arbitrate the damages claims:  see Second Bosma Affidavit at annexure SRB-15.

    [I note, however, as regards the above, that during the hearing before me it was explained by the learned Solicitor-General for the State that, subsequently, Mr McHugh has agreed to arbitrate the damages claims and will issue directions accordingly to that end (see ts 66 – 67).]

  2. Essentially, the blunt but fatal (if accepted) submission by Mineralogy and International Minerals is that the factual history collected under par 4 above demonstrates (at par 5):

    … the arbitral tribunal was only ‘properly constituted’ for the purposes of s 43(3)(b) on 20 December 2018.

  3. In essence then, International Minerals (with Mineralogy agreeing) contends by par 9 of their written submissions:

    9.           Simply put, there was no dispute that arose prior to 7 August 2013 that was determined in the 2019 Award.  The issues determined by the arbitrator in the 2019 Award all arose – and can only have arisen – after delivery of the 2014 Award.  This may be illustrated by the fact that there would have been no dispute fit for, nor capable of, referral to arbitration (or any other means of litigation) at lest until after the existence of the 2014 Award and the parties coming into dispute in relation to its effect.

    10.          Accordingly, both of the events in s 43(3) of the CAA 2012 occurred after 7 August 2013, and the arbitration and the Award were governed by that Act, not by the CAA 1985.

  4. On the face of it, International Minerals and Mineralogy’s submissions under pars 4, 9 and 10 as set out as regards s 43(3)(a) and (b) not being engaged above present to me as correct.
  5. Mr McHugh’s determination of the ‘Finality Issue’ (as it is defined under par 2(a) of the 2019 Award) is further explained at par 64 of the 2019 Award.  As explained, the ‘Finality Issue’ actually required the resolution of three sub-issues as to possible application of principles of res judicata, an engagement of an issue estoppel which prevented relitigation of the first damages claim and, further or additionally, an estoppel arising under the principles explained by the High Court of Australia in Port of Melbourne Authority v Anshun Pty Ltd(1981) 147 CLR 589 being applicable.
  6. The ‘Finality Issue’ had involved assessing the legal effects of the 2014 Award.
  7. But those as submitted legal questions were not to be answered subjectively by Mr McHugh.  The required legal analysis could, or would, have been applied by another arbitrator, or Judge, who might equally have been asked to resolve the same questions.  The key point is that the ‘Finality Issue’ as submitted was a fresh interpretative dispute arising as between the parties under the State Agreement.  Necessarily, it was a fresh dispute only arising following the 2014 Award.  That was post 7 August 2013.  Hence, it is the new 2012 Act regime of laws that is applicable to the 2019 Award.
  1. For the purpose of determining the ‘Finality Issue’, Mr McHugh had been approached and duly engaged by the same parties in 2018.  But the ‘Finality Issue’ might well have been the subject of a referral to another arbitrator that the parties had agreed upon, or that the court appointed at that time (and hence, the as seen commencement of ARB 12 of 2018).
  2. There was, of course, an obvious convenience and utility by a re‑engagement of Mr McHugh in 2018.  Nevertheless, the process to be conducted by Mr McHugh under the 20 December 2018 proposed directions towards resolving the res judicata, issue estoppel and Anshun estoppel disputed and submitted issues was a fresh or, using the arbitrator’s own (2019 Award par 2) terminology, a ‘further arbitration’ to be conducted.
  3. Irrespective of arguments about the historic origins of the ‘legal disputes’ over what the 2014 Award actually carried consequently as regards breach damages issues, it is plain, by reference to the terms of the s 43(3)(b) transitional provision of the 2012 Act, that Mr McHugh was only ‘constituted‘ to resolve these newly referred disputed issues in 2018. That further arbitral reference to him in 2018 had been long after the coming into operation of s 43 of the 2012 Act at 7 August 2013.

The State

  1. The burden of arguments to the contrary as put by the State, on my respectful assessment, reads and puts far too heavy an emphasis on pars 9 and 10 of the 2019 Award as now seen.
  2. In the first place, the State seeks to characterise the par 9 and 10 observations as being a determination of the jurisdiction of the arbitrator, as explained there, as by reference to the 1985 Act.  I respectfully disagree.  That is not my reading of the two paragraphs, when assessed in overall context.
  3. At their highest, they see the arbitrator’s reference to ‘the law‘ governing the earlier arbitration and so, to the 1985 Act which ‘governs the First Damages Claim’. That and the following reference by Mr McHugh at par 10 to the ‘Finality Issue’ being determined ‘by reference to the CAA (1985)’, do not, on my assessment, say or mean that the arbitrator’s jurisdiction as regards determining the ‘Finality Issue’ and the ‘First Damages Claim’ as referred in that context, were grounded then upon the former 1985 Act.
  4. In any event, even if that were the meaning intended by those pars 9 and 10 observations of the arbitrator (which I do not accept to be the case), the observation would not be correct as a matter of law in my assessment.

Jurisdiction

  1. Clearly, the jurisdiction of the arbitrator fundamentally arises out of the parties’ contract.  Here, it arises from cl 42(1) of these parties’ State Agreement.
  2. Moreover, the exercise of pursuing a curial challenge within this court against the 2019 Award is both distinct to, and very different to the anterior issue of the source of the arbitrator’s own jurisdiction to hear and resolve the parties’ as referred dispute to him.
  3. An appeal to a court is a creature of statute, not of the common law.  Thus, it is only for the court, not for the arbitrator, to decide what is the applicable legislative regime, if any, conferring any appeal or review rights as against an arbitral award, as earlier made by an arbitrator.
  4. For present circumstances, nothing seen as written by Mr McHugh at pars 9 and 10 of the 2019 Award could bind this court as regards resolving the legal question of ascertaining what regime of local arbitration legislation is applicable to the circumstances of the State’s attempt at challenging some or all of the determinations as made by Mr McHugh under his 2019 Award.
  5. The references seen under pars 9 and 10 of the 2019 Award are merely to the regime of surrounding laws of this State seen as applicable to the conducting of arbitrations by Mr McHugh under the parties’ multiple references to him to act as their arbitrator, at different times.
  6. The State, as explained by the Solicitor‑General, contends that Mineralogy and International Minerals have not sought to review the arbitrator’s decision about Mr McHugh’s jurisdiction to make his res judicata award declaration:  see par 30 of the State’s amended written submissions of 5 February 2020.  The submission proceeds, however, upon the State’s contended interpretation of pars 9 and 10 of the 2019 Award which, again respectfully, I cannot accept.  I do not read those paragraphs as indicating any decision made by the arbitrator as to his jurisdiction to render his award by declaration and orders.  Correctly understood, Mr McHugh’s jurisdiction arose from the combination of cl 42 of the State Agreement where the parties agreed to submit their disputes to an arbitration, the parties’ referrals to him of their disputes to that end, and ultimately, his accepting of the referral in December 2018.
  7. Viewed in the context of the three (3) preliminary issues resolution task submitted to Mr McHugh in December 2018 (ie, ‘[a]t the time of referral’, see par 2 of the 2019 Award), the ‘Finality Issue’ required Mr McHugh to conduct the observed assembly of the procedural history surrounding the first arbitration.  The history task involved, in part, an appreciation and identification of the regime of arbitral laws as had been applicable to that first arbitration in 2014.  Within that assembly exercise, however, there was a specific, explicit and repeated acknowledgement of the inescapable legal conclusion that Mr McHugh was at then, functus officio as regards the first (2014) arbitration.  That legal conclusion relevantly led to the consequence then seen under par 7 of the 2019 Award – to the effect that the so‑called ‘Section 46 Issue’ as it had been attempted to be referred to Mr McHugh, was thereby problematic and so, ‘can no longer be an issue’:  see again par 7 of the 2019 Award.
  8. The ‘Section 46 Issue’ arguments and a foreshadowed adjournment application by the State founded on the premise of a mooted application to court under s 46 of the 1985 Act, was simply untenable, for circumstances where Mr McHugh was functus officio as regards his 2014 Award, as the parties then accepted.
  9. Another of the observed premises underlying that ‘Section 46 Issue’ was that the first damages claim ‘remains to be determined in that arbitration‘ (see par 2(b) of the 2019 Award).  Whilst there, with respect, is a level of dual definitional confusion seen as between pars 2(a) and 8 of the learned arbitrator’s reasons, in terms of two given definitions for ‘the First Damages Claim’, the effect of the legal conclusion seen stated under par 7 as regards the ‘Section 46 Issue’ being untenable, is crystal clear.

Functus officio

  1. The further submission of the State by its attempt to distinguish a level of general agreement over the arbitrator being functus officio, but subject to particular agreement about his jurisdiction is, with respect, also not persuasive:  see par 36 of the State’s amended written submissions.  Spent means fully spent.  There can be no half measures applicable to a status of functus officio, after the 2014 Award.
  2. In any event, whether or not there was unqualified agreement as to Mr McHugh being functus officio as regards his 2014 Award, is ultimately irrelevant.  The condition of functus officio arises as a matter of law, not by reason of agreement.  Clearly, in December 2018 Mr McHugh was functus officio as regards the first 2014 arbitration.  The consequence was that there needed to be a fresh arbitral reference to him in 2018, for him to act as the same parties’ arbitrator once again.  That new reference was duly effected under the parties’ 20 December 2018 proposed directions.  A fresh arbitration was constituted upon Mr McHugh’s acceptance of his appointment to conduct a ‘further arbitration’ at 20 December 2018.
  3. For the purposes of a temporal assessment as is required by s 43(3)(b) of the 2012 Act Mr McHugh was only ‘constituted’ to conduct a further arbitration at 20 December 2018.
  4. Consequently, on my assessment, the 2019 Award may only be the subject of a possible limited challenge before this court under the regime of the 2012 Act by reference to s 34 thereof (and generally see my reasons in Spaseski v Maldenovski [2019] WASC 65 as to that exercise).

Conclusion

  1. In the end, I must accept the submissions of Mineralogy and International Minerals to the effect that the State’s application for leave to appeal and to appeal by GDA 13 of 2019 is untenable.  On that basis, GDA 13 of 2019 must be dismissed under the inherent jurisdiction of the court.  The State’s recourse in this Court against Mr McHugh’s 2019 Award, if any, is only under the 2012 Act.
  2. That still leaves, of course, it open to the State to pursue ARB 9 of 2019 and, as I indicated to the parties, they should confer as to further directions to be made in that proceeding, following receipt of the reasons resolving the present application.
  3. To that end, the parties should now confer and within a period of 14 days from the provision of these reasons provide my Associate with an agreed, or, if not agreement, their respective minutes of proposed orders and directions for:

    (a)          GDA 13 of 2019;

    (b)          ARB 9 of 2019; and

    (c)          if required, ARB 12 of 2018.

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

 

DW
Associate to the Honourable Justice Martin

 

28 FEBRUARY 2020

Tayar v Feldman [2020] VSC 66 (2 March 2020)

IN THE SUPREME COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL COURT

ARBITRATION LIST

S ECI 2019 01970

COREY STEPHEN TAYAR
Applicant
v
PINCHUS FELDMAN
First Respondent
JOSEF FELDMAN
Second Respondent

JUDGE:
LYONS J
WHERE HELD:
Melbourne
DATE OF HEARING:
2 December 2019
DATE OF JUDGMENT:
2 March 2020
CASE MAY BE CITED AS:
Tayar v Feldman
MEDIUM NEUTRAL CITATION:
[2020] VSC 66

ARBITRATION – Enforcement of award – Commercial Arbitration Act 2011 (Vic) s 35 – whether threshold requirement that arbitration be ‘domestic commercial arbitration’ pursuant to s 1(1) – threshold requirement met.

ARBITRATION – Commercial Arbitration Act 2011 (Vic) – ‘domestic’ commercial arbitration in s 1(3) – ‘arbitration agreement’ in s 7 – whether requirement to define matters referred to arbitration in writing – agreement required matters referred to be set out in statement of claim – no statement of claim – arbitration proceeded without objection – agreement not void for incompleteness or uncertainty – agreement valid and enforceable – no requirement under ss 1(3) or 7 that matters referred to arbitration be in writing – waiver of contractual requirement for statement of claim under s 4.

ARBITRATION – Commercial Arbitration Act 2011 (Vic) – domestic ‘commercial’ arbitration in s 1(3) – rental dispute arising from ‘commercial’ dispute – wages dispute unrelated to ‘commercial’ dispute.

ARBITRATION – Enforcement of award – Commercial Arbitration Act 2011 (Vic) ss 35 & 36 – no power to enforce under s 35 where no sum ascertainable from award – grounds for refusal of enforcement under s 36 – inadequate reasons for award – discretion to decline refusal of enforcement where grounds established – discretion where enforcement would be unfair or prejudicial – refusal to enforce award where inadequate reasons.

HIS HONOUR:

1 INTRODUCTION

1 In this proceeding, the Applicant, Rabbi Corey Stephen Tayar, seeks an order pursuant to s 35 of the Commercial Arbitration Act 2011 (Vic) (‘the CAA’) to enforce an arbitral award made on 9 May 2013 (‘the Award’).

2 The Award relates to payment of moneys pursuant to three successful claims determined at arbitration owed to the Applicant by the Respondents, Rabbi Pinchus Feldman and his son Rabbi Yosef Feldman. Those claims, accounting for adjustments of amounts already paid, accrue to an award of $1,849,570.02. The claims that the Applicant seeks to enforce (adopting the numbering used in the Award) are:

2.1 repayment of loans advanced to the Respondents and interest totalling $1,635,802.00 (‘Claim 1’) less an adjustment of $120,400 already paid;

2.2 an amount of $320,168.02 which the Applicant deposes is the ‘intended amount awarded’ for outstanding rental payments owed by the Respondents to the Applicant (it is unclear to what property the rental agreement relates) (‘Claim 2’);  and

2.3 an amount of $14,000.00 which the Applicant deposes is the ‘intended amount awarded’ for outstanding salary payments (‘Claim 4’). 

3 There were two other claims (Claim 3 and Claim 5) which were determined in the Award but which the Applicant does not seek to enforce.

4 By interlocutory application, the Respondents seek orders refusing recognition or enforcement of the Award pursuant to s 36 of the CAA. In summary, they rely upon four principal contentions.

5 First, the arbitration agreement between the parties (the ‘Agreement’) did not sufficiently identify in writing the matters to be referred to the arbitral tribunal: the Agreement expressly provided that the ‘Disputed Matters’ were to be set out in written points of claim which were never provided. As a result, the Respondents submitted that there was no ‘domestic commercial arbitration’ as defined in s 1 of the CAA and no enforceable or valid ‘arbitration agreement’ as defined in s 7 of the CAA. They submitted that these were threshold issues which were required to be met before an order could be made under s 35 of the CAA. Alternatively, they submitted that these matters were grounds on which the Court should refuse to enforce the Award under ss 36(1)(a)(i), (iii) or (iv) of the CAA.

6 Second, the Respondents submitted that central to Claim 1 was a claim for five properties which the Applicant and the Respondents had agreed would be transferred to the Applicant if the alleged loans were not repaid. However, not all of the owners of these properties were parties to the Agreement. As a result, the Respondents submitted this rendered the Agreement invalid as an arbitration agreement and that the Court should refuse to enforce the Award under s 36(1)(a)(i) of the CAA. Further, they submitted that this issue could not be overcome by the Applicant only to seeking to enforce that part of the Award relating to the loans and not that part of the Award relating to the lien over these properties.

7 Third, the Respondents submitted that there were no reasons given for the findings in the Award that:

(1) the Applicant owed the money to the Respondents on Claim 1; or

(2) for Claims 2 and 4.

8 They submitted that this was in breach of s 31(3) of the CAA which had been incorporated into the Agreement. As a result, the Respondents submitted that the Court should refuse to enforce the Award under s 36(1)(a)(iv) of the CAA.

9 Fourth, the Respondents noted that the Award in respect of Claims 2 and 4 did not provide for the payment of a sum certain. As noted above, the Applicant deposed in this proceeding as to the proper quantification of the ‘intended amount awarded’ on those Claims. In these circumstances, the Respondents submitted that the Court cannot enforce, and should not enforce, the Award in respect of Claims 2 and 4.

10 As to the first contention, for the reasons that follow, I have concluded that:

(1) it is a threshold issue to the enforcement of an award under s 35 of the CAA that the award relates to a ‘domestic commercial arbitration’ as that term is defined in the CAA;

(2) the Agreement was valid and binding, and was an ‘arbitration agreement’ under the CAA;

(3) the arbitration in respect of Claims 1 and 2 was a ‘domestic commercial arbitration’ and the Award in respect of them is entitled to be enforced under s 35 of the CAA; and

(4) the Respondents have not established a proper basis for the Court to refuse to enforce the Award under ss 36(1)(a)(i), (iii) or (iv) of the CAA.

11 As to the second contention, for the reasons that follow, I have concluded that not all of the owners of the properties need to be parties to the Agreement for it to be an ‘arbitration agreement’ to which the CAA applies. As a result, the Respondents have not established a proper basis for the Court to refuse to enforce the Award under s 36(1)(a)(i) of the CAA.

12 As to the third contention, for the reasons that follow, I have concluded that the reasons for the Award published 9 May 2013 (the ‘Reasons’) were adequate in respect of Claim 1. However, no part of the Reasons deals in substance with the underlying basis for Claims 2 nor 4, which are now sought to be enforced. As a result, I would refuse enforcement of the parts of the Award dealing with Claims 2 and 4.

13 As to the fourth contention, in light of my conclusions on the third contention this is unnecessary to decide. For completeness, however, I have concluded that as the Award in respect of Claims 2 and 4 did not set out the amounts to which the Applicant was entitled or the basis upon which those amounts could be calculated on the face of the Award, the Court cannot and should not enforce the Award in respect of these Claims.

14 The consequence of these conclusions is that I would enforce the Award in respect of the monetary relief in Claim 1 only.

2 EVIDENCE

15 At the hearing of this proceeding, the Applicant relied upon the affidavits of:

(1) the Applicant affirmed 6 May 2019, 1 November 2019 and 9 December 2019;

(2) Andrey Levitin affirmed 4 May 2019 translating the Award; and

(3) Menachem Raskin affirmed 3 June 2019 translating the reasons for the Award.

16 The Respondents relied upon the affidavits of:

(1) the First Respondent affirmed 4 July 2019, 11 September 2019 and 4 December 2019;

(2) the Second Respondent affirmed 4 July 2019, 12 September 2019 and 4 December 2019; and

(3) Peter Schwarz (the Respondents’ solicitor) affirmed 11 September 2019.

17 The Respondents objected to [2] of the second Tayar affidavit which set out the substance of exhibit ‘CST-4’, which was also objected to. That exhibit was an article from the Australian Jewish News dated 3 June 2013 relating to the arbitration and the Award. Rabbi Tayar produced the article as evidence that the Respondents ‘publicly accepted the arbitration hearing and the validity of the Award’. In my view, this paragraph and the exhibit are hearsay and are not admissible for that purpose. I have not had regard to them for the purpose of determining this proceeding.

18 I note in passing that the affidavits of the Respondents relied upon other bases for declining to enforce the Award. In oral argument counsel for the Respondent confined the Respondents’ contentions to those in the written submissions dated 11 November 2019.

3 BACKGROUND

19 The Applicant worked at the Yeshivah Centre operated by the Respondents. During his time working there, the Applicant made a series of advances or loans to the Respondents for the purposes of meeting the ongoing expenses of the Centre, which he claimed had not been repaid. It would appear that as part of the arrangement to advance funds, five parcels of land owned by the Respondents and others were pledged to the Applicant but which were to be returned if the advances were repaid. This arrangement, whereby the person who advances the funds is categorised as an investor seeking to derive profit from investing capital rather than as a lender seeking to derive interest from a loan, is known in Hebrew as ‘Heter Isko’ or ‘Isko’. There was a related dispute about whether the Respondents had authority to pledge these parcels of land on behalf of all the owners.

20 Further disputes arose between the parties. Relevantly, there was a further dispute about the non-payment of the rent of the Applicant’s home by the Respondents. The Applicant asserted that the Respondents had agreed to do so given that the loans to the Respondents had exhausted the Applicant’s funds to meet his rent. There was a further dispute in relation to non-payment of salary for work done by the Applicant.

21 The parties entered into the Agreement to refer the disputes to arbitration on or about 4 March 2013. The Agreement provided that the arbitration was to be conducted by a panel of three rabbis in accordance with the principles of Orthodox Jewish Law, known by the Hebrew term ‘Halacha’. The parties to the Agreement were the Applicant, the Respondents and the agreed arbitrators: Rabbis Heimlich, Donenbaum and Raskin (the ‘Arbitral Panel’).

22 There was some dispute as to where and when the Agreement was signed. At the hearing, in response to questions from me, both counsel said that it was signed on the first day of the hearing of the arbitration in Melbourne. Later in the hearing, counsel for the Respondents sought to withdraw that concession as he had been instructed that the First Respondent was in Sydney on the first day of the arbitration. I asked for further affidavits to be filed on this issue. These were the affidavits of the Applicant and each of the Respondents affirmed in December 2019 referred to in [15]-[16] above.

23 I note in passing that in the affidavits filed before the hearing, the First Respondent (who lives in Sydney) deposed that he was not present at the arbitral hearings but that he authorised the Second Respondent to appear for him. This was confirmed by the Second Respondent.

24 In the subsequent affidavits, the Respondents were vague. The First Respondent deposed that he did not attend the arbitration and did not believe he signed the Agreement on the day of the arbitration but could not recollect where or when he did sign it. The Second Respondent deposed he could not recall with certainty when or where he signed the Agreement and said no more.

25 The Applicant deposed that to the best of his recollection:

(1) on the morning of the arbitration hearing on 4 March 2013, the First Respondent (who was in Sydney) emailed him a copy of the signature page of the Agreement signed by the First Respondent;

(2) the Applicant printed out the page and took it to the arbitration hearing;

(3) the Agreement was signed by the Applicant and the Second Respondent in the presence of Rabbi Raskin before the hearing; and

(4) the Agreement was then signed by the Arbitral Panel and the hearing commenced.

26 I accept the evidence of the Applicant as to how the Agreement was signed, namely on the first day of the arbitration hearing on 4 March 2013.

4 THE AGREEMENT

27 I will now turn to the Agreement itself. The recitals to the Agreement provide that:

  1. Disputes have arisen between the Parties concerning certain transactions between them during the period from 2007 to date [4 March 2013], including certain loans, rents, salary payments, the ownership of properties and other matters.
  2. Pursuant to this Agreement, an Arbitral Panel will be appointed to determine the Disputed Matters in accordance the [sic] processes set out in this Agreement.

28 The definition of ‘Disputed Matters’ in cl 1 of the Agreement states that it means ‘the matters described in Schedule 1 to be determined by the Arbitral Panel and made subject of an Award’. Schedule 1 describes the Disputed Matters as:

The matters to be determined by the Arbitral Panel are to be determined by the Statement of Claim, Statement of Defense [sic] and Cross Claim (if any) and the Reply and Deference [sic] to Cross Claim (if any) to be filed in the arbitration as directed by the Arbitral Panel.

29 The Agreement provides in summary that the Arbitral Panel would act as an arbitral tribunal under the CAA and would conduct the determination of the Disputed Matters in accordance with the CAA and the Rules set out in Schedule 2. Relevantly, Rule 4 provides that, subject to s 28 of the CAA, the parties agreed that the Arbitral Panel may determine any question that arises for determination in the course of the arbitration in relation to the substance of the Disputed Matters by reference to the principles of Orthodox Jewish law (i.e. the Halacha) including its references to local law and local custom.

5 ARBITRAL HEARINGS

30 On the evidence before me, there were at least two hearings as part of the arbitration, but on dates which I do not know. As noted above, the First Respondent was not present at the arbitral hearings but authorised the Second Respondent to appear for him. I note that the Second Respondent deposed that, in addition to being fluent in ‘English, Hebrew and Hebrew/Aramaic legal languages’ he is ‘very familiar with Jewish legal documents and [has] an in depth knowledge of Jewish commercial law’.

31 The Award records in relevant part:

Parts of the decision mainly based on claims frankly made by the Parties on a court hearing and on the claims expressed orally on the second hearing of the Court (as the Court was unable to approve the claims sent and written via email).

32 I note the Second Respondent deposed that the first part of this sentence should properly be translated as:

The contents of the decision are mainly based on the claims which were frankly stated by the Parties at the sitting of the Rabbinical Court.

33 On the evidence before me, there was no document which further identified the Claims like a statement of claim or defence as envisaged by Schedule 1 to the Agreement. Rather, the Claims were further identified by oral submissions during the hearing of the arbitration which immediately followed the execution of the Agreement. There is no evidence to the effect that the Respondents opposed this course at the time or sought an adjournment to ensure the claims for determination by the Arbitral Panel were further identified, as envisaged by the Agreement.

34 I note that the Second Respondent has deposed that the Claims were made ‘entirely orally’ by the Applicant and the response was made entirely orally by the Second Respondent on behalf of himself and his father. The Reasons also suggest that the Second Respondent’s wife gave evidence. The translation reads in part: ‘and in this case Mrs Feldman (wife of R’ Yosef) said to the Court that half of the house that [sic] is in her name …’.

35 Other than the terms of the Award, the Reasons and the matters set out above, there is little evidence before me as to how the hearings were conducted or the documents that were relied upon. It does not appear to be in dispute that the Applicant relied upon at least one document relating to the amount of the advances outstanding. However, that document is not in evidence before me.

36 Regardless, there is no dispute that all five Claims were the subject of evidence and submissions before the Arbitral Panel or that the Respondents were afforded procedural fairness in relation to those five Claims.

6 THE REASONS AND THE AWARD

37 The Arbitral Panel published the Award and the Reasons for the Award to the parties on 9 May 2013. The Award provides:

The Court has decided the proceedings to be held in the Holy Language [Hebrew], Yiddish and English, as required for proceedings and evidence etc., as well as due to the fact those languages are understandable both to the court and the parties involved, also the court decision will be delivered to the parties in the Holy Language[.]Parts of the decision mainly based on claims frankly made by the Parties on a court hearing and on the claims expressed orally on the second hearing of the Court (as the Court was unable to approve the claims sent and written via email).

Claim 1 – the claim on the whole property or a part thereof located at 67&69 Penkivil Street, 7 Park Street, Office within the Adler Building, Dormitory Building

Court decision: The mentioned properties remain in possession of the defendants and nevertheless the defendants are obliged to pay the amount of $1,635,802 to the plaintiff. However, the lender retains a lien on the properties up to the value of the aforementioned amount.

Claim 2 – the claim regarding $17,815.47 pcm rental agreement

Court decision: The defendants must pay the entire amount of the rental agreement $17,815.47 pcm, as agreed between the parties initially (including all outstanding payments, which have not been paid completely yet). This obligation continues until the defendants pay the entire above mentioned amount mentioned in claim 1. Regarding the monthly payments from that time till [sic] September 2013, it depends on the details of initially made agreement and needs further clarification by the Court.

Claim 3 – the claim of apartment rental payment of $850 per week

Court decision: Mr. Joseph Feldman must pay the entire amount of the claim related to the rent that has not yet been paid.

Claim 4 – the claim regarding salary

Court decision: The defendants must pay the entire amount of the salary (that has not yet been paid) to the plaintiff for all the time of his service at the office etc., but not for the time after he resigned from work.

Claim 5 – the claim regarding redundancy payments

Court decision: At the moment, the defendants are exempt from compensating the plaintiff.

38 The Reasons are brief and, on their face, are not entirely clear. They are based very much upon the Halacha. The Reasons record that the Arbitral Panel considered ‘all parts of the Halacha’ and consulted ‘great Torah scholars who sit in judgment around the globe’.

39 The Reasons relate almost entirely to Claim 1, namely the loans or advances, the agreement to transfer property in relation to the advances, the advances outstanding at the time of the hearing and the interest thereon. It is not apparent that there are any reasons relating to Claims 2 or 4.

40 The Arbitral Panel issued a supplemental award on 2 March 2014 correcting the Award. This supplemental award and the circumstances which led to it are not relevant to the issues which I now have to determine. A change was made to Claim 3 reflected in the Award set out above.

41 The Applicant issued these enforcement proceedings pursuant to s 35 of the CAA on 6 May 2019, nearly six years after the Arbitral Panel made the Award. The reason for the delay was not explained. The Respondents issued their application for refusal of enforcement under s 36 of the CAA on 11 September 2019.

7 THE CAA

7.1 The operation of the CAA

42 The CAA provides a statutory framework for the resolution, review and enforcement of a particular kind of arbitration, namely ‘domestic commercial arbitrations’. This is made plain s 1(1) of the CAA (in Part 1 entitled ‘General Provisions’) which provides:

This Act applies to domestic commercial arbitrations.

43 Further, s 2(1) of the CAA defines ‘arbitration’ as ‘any domestic commercial arbitration whether or not administered by a permanent arbitral institution’.

44 I note in passing that the note to s 1(1) of the CAA records that the International Arbitration Act 1974 (Cth) (‘IAA’) covers international commercial arbitrations and the enforcement of foreign arbitral awards. As will become evident in these reasons, both the IAA and the CAA are based upon the provisions of the UNCITRAL Model Law on International Commercial Arbitration (the ‘Model Law’) and the jurisprudence in relation to both statutes is very much influenced by each other and the jurisprudence in relation to the Model Law.

45 However, in construing the provisions of the CAA, I have been mindful of the common law principles of statutory construction, in particular that the task of statutory construction is to construe the language of the relevant provision consistently with the language and purpose of all of the provisions of the statute containing the provision.

46 Section 1(3) sets out when an arbitration is ‘domestic’. It provides:

An arbitration is domestic if–(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia; and

(b) the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration; and

(c) it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.

47 Section 1(4)(b) relevantly provides for the purposes of subsection (3) that:

(b) if a party does not have a place of business, reference is to be made to the party’s habitual residence.

48 There is no definition of ‘commercial’ in the CAA for the purposes of the phrase ‘domestic commercial arbitration’. However, the note to s 1 of the CAA entitled ‘Model Law note’ provides:

The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.

49 Part 2 of the CAA is headed ‘Arbitration Agreement’. Section 7 provides the definition and form of a valid arbitration agreement under the CAA. It relevantly provides:

(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.

(3) The arbitration agreement must be in writing.

(4) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.

[…]

(7) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. […]

7.2 Parts 3 to 7 of the CAA

50 Parts 3 and 4 of the CAA relate to the composition and the jurisdiction of the arbitral tribunal respectively. Section 16(4) provides that a plea that the arbitral tribunal does not have jurisdiction must be raised not later the submission of the statement of defence. Section 16(7) provides that the arbitral tribunal may later admit such a plea if it considers the delay is justified. I note that these provisions relate to the competence of the tribunal to rule on its own jurisdiction, rather than challenges to the jurisdiction of the tribunal in later court proceedings.

51 Part 5 of the CAA relates to the conduct of the arbitration. Section 23(1) provides that, subject to contrary agreement or a direction of the arbitral tribunal, the claimant must state the facts supporting his or her claim, the points at issue and the relief or remedy sought and the respondent must state his or her defence in respect of these particulars unless the parties have otherwise agreed as to the required elements of such statements.

52 Part 6 relates to the making of an award and the termination of the arbitral proceedings. Section 31 relevantly provides that:

(1) the award must be made in writing and signed by the arbitrators (s 31(1)); and

(2) the award must state the reasons upon which it is based unless the parties have agreed that no reasons are to be given (s 31(3)).

53 Part 7 is headed ‘Recourse Against Award’. It provides the mechanism by which a party may set aside or appeal from an arbitral award. Under the CAA, the powers of the Court to set aside or appeal from an arbitral award are limited. This is consistent with:

(1) the central tenet of arbitration, namely that it provide an agreed mechanism for a dispute between the parties to be resolved privately and finally; and

(2) the policy of ‘minimal curial intervention’ in arbitration.

54 Section 34 provides the limited bases upon which a party to the arbitration may seek to set aside an arbitral award. Section 34A provides the bases upon which an appeal lies from an arbitral award. In summary, an appeal only lies on a question of law arising out of an award if the parties agree that an appeal may be made or if the Court grants leave. Section 34A(3) provides that the Court must not grant leave unless certain preconditions are satisfied including that the determination of the question will substantially affect the rights of one or more of the parties. These provisions are not at issue in this proceeding.

7.3 Part 8 of the CAA

55 The limited nature of curial intervention in arbitral proceedings is also reflected in Part 8 of the CAA entitled ’Recognition and Enforcement of Awards’. Section 35 of the CAA is entitled ‘Recognition and enforcement’. It provides:

(1) An arbitral award, irrespective of the State or Territory in which it was made, is to be recognised in this State as binding and, on application in writing to the Court, is to be enforced subject to the provisions of this section and section 36.(2) The party relying on the award or applying for its enforcement must supply the original award or a copy of the original award.

(3) If the award is not made in English, the Court may request the party to supply a translation of it into English.

56 At this stage it is appropriate that I refer to Order 9 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2018 (Vic) which contain this Court’s Arbitration Rules (the ‘Arbitration Rules’). Rule 9.21 outlines the procedural requirements for an application to enforce an arbitral award pursuant to s 35 of the CAA. It provides that the application must be accompanied by the documents referred to in s 35 and an affidavit stating:

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

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

57 Section 36 of the CAA outlines the grounds upon which recognition or enforcement of an award may be refused. I note in passing that these grounds for the most part mirror the grounds upon which an award may be set aside under s 34 of the CAA. Section 36 provides:

(1) Recognition or enforcement of an arbitral award, irrespective of the State or Territory in which it was made, may be refused only–

(a) at the request of the party against whom it is invoked, if that party furnishes to the Court proof that–(i) a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of the State or Territory where the award was made; or

(ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the party’s case; or

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

(iv) the composition of the arbitral tribunal 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 State or Territory where the arbitration took place; or

(v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the State or Territory in which, or under the law of which, that award was made; or

(b) if the Court finds that–

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

(ii) the recognition or enforcement of the award would be contrary to the public policy of this State.

58 In the context of enforcement proceedings, a prima facie right to recognition and enforcement of the award has been described as ‘consonant with the common law view that the issuing of an arbitral award gives rise to an implied promise that the award will be honoured’. As French CJ and Gageler J said in TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (a case involving an application to enforce an award under s 8 of the IAA):

Enforcement of an arbitral award is enforcement of the binding result of the agreement of the parties to submit their dispute to arbitration, not enforcement of any disputed right submitted to arbitration.

59 The role of the Court under ss 35 and 36 of the CAA is understood to be limited to the enforcement of contractual obligations arising from the arbitration agreement: it is not to determine substantive disputes between the parties as to fact and law, those being the realm of the arbitral tribunal. The Court is concerned with the ‘structural integrity of the arbitration proceedings’. As a result, the arbitral award should be enforced unless any of the grounds contemplated by s 36 apply.

7.4 Waiver under the CAA

60 There is another provision of the CAA which is relevant. Section 4 provides a statutory waiver of a right to object in certain circumstances. It provides that:

A party who knows that any provision of this Act from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating the party’s objection to such non-compliance without undue delay or, if a time-limit is provided for stating the party’s objection, within such period of time, is taken to have waived the party’s right to object.

61 As to the provisions in the Act from which a party may derogate, the authorities and texts suggest that this relates to provisions which expressly state something like ‘unless the parties otherwise agree…’, ‘subject to contrary agreement …’ or ‘the parties are free to …’. An example is s 10(1) of the CAA which provides that the parties are free to determine the number of arbitrators to sit on a tribunal.

7.5 Severance

62 There is one other legal issue I wish to address at this stage. As is evident, the Applicant only seeks enforcement of certain Claims under the Award. I am of the view that the Court may only enforce part of an award provided the portion not sought to be enforced is clearly separate and divisible so that no injustice occurs. The common law position was set out in ACN 006 397 413 Pty Ltd v International Movie Group (Canada) Inc, namely that severance is not possible unless the residue to be allowed to stand is not affected by the part of the Award that is rejected.

63 The New South Wales Court of Appeal applied the same principles in the context of the enforcement and setting aside provisions of the International Arbitration Act 1974 (Cth) in Aircraft Support Industries Pty Ltd v William Hare UAE LLC. In that case, the appellant argued that reference to severance in certain of the provisions meant that severance of aspects of an arbitral award was otherwise unavailable. Bathurst CJ disagreed and stated:

If the argument promoted by Aircraft Support is correct, the result would be surprising. In Evans v National Pool Equipment [1972] 2 NSWLR 410, Jacobs JA (as his Honour then was) pointed out that not since before the time of King James I had an award which was void in part been considered to be void altogether. His Honour cited with approval the statement in the 8th ed of Russell on Arbitration (F Russell, E Pollock and H Russell, A Treatise on the Power and Duty of an Arbitrator: and The Law of Submissions and Awards, 8th ed, Stevens and Sons, 1900) to the effect that, provided the bad portion is clearly separate and divisible, the residue can be enforced: see also ACN 006 397 413 Pty Ltd v International Movie Group (Canada) Inc [1997] 2 VR 31 at 38 following (International Movie Group).

[…]

… it would be surprising, to say the least, if an Act designed to assist international trade and commerce by enforcement of foreign awards was required to be construed to take away a centuries old power to partially enforce awards where no injustice flows as a result.

64 In light of the above, I am satisfied that the same principles of severance apply to awards under the CAA.

8 CONTENTION 1

8.1 Submissions

65 As noted in the Introduction to these reasons, the principal issue in relation to the first contention relates to whether the Disputed Matters referred to the Arbitral Panel for arbitration were sufficiently identified in writing in the Agreement or as envisaged by Schedule 1 of the Agreement. The Respondents relied upon this principal issue in number of different ways.

66 They relied upon this principal issue as part of certain threshold matters to enforcement. The Respondents submitted that there are two threshold issues to be determined before the Court can make an order under s 35 of the CAA. The first issue is whether this is a ‘domestic commercial arbitration’ to which the CAA applies. The second issue is whether there was a ‘valid’ arbitration agreement submitting the parties’ disputes to arbitration. Each of these issues requires the Court to consider the consequence of the fact that the documents referred to in Schedule 1 of the Agreement, which were to set out the Disputed Matters to be determined by the Arbitral Panel, were never provided.

67 The issue of whether there is a ‘domestic commercial arbitration’ has two components. The first component is whether the arbitration is ‘domestic’. This is in issue in this proceeding because s 1(3)(b) of the CAA provides that an arbitration is ‘domestic’ if the parties ‘have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration’. The Respondents contended that s 1(3)(b) was not satisfied in this proceeding as the Disputed Matters were not reduced to writing.

68 The second component is whether the arbitration is ‘commercial’. The Respondents concede that Claim 1 is commercial but dispute that Claims 2 and 4 are commercial as they relate to the unpaid rent for the Applicant’s residence and unpaid employment entitlements.

69 The second threshold issue raised by the Respondents also relates to the fact that the Disputed Matters were not reduced to writing as envisaged by Schedule 1 of the Agreement. As such, at the commencement of the arbitration, the Disputed Matters to be determined pursuant to the arbitration were not defined. The Respondents submit that without these documents:

(1) the Agreement is void for uncertainty or incompleteness;

(2) as a fundamental aspect of the Agreement between the parties, referring disputes to arbitration, is not in writing, there is no ‘arbitration agreement’ pursuant to s 7 of the CAA; and

(3) the arbitration was beyond the scope and operation of the CAA.

70 Further, in the event that these are not threshold matters, the Respondents relied upon the absence of any written statement of the matters in dispute to submit that the Court should refuse to enforce the Award under s 36. This is because:

(1) pursuant to s 36(1)(a)(i), there was no valid ‘arbitration agreement’ under Victorian law;

(2) pursuant to s 36(1)(a)(iii), the Award dealt with disputes not contemplated by or not falling within the terms of submission to arbitration set out in the Agreement, or contained decisions on matters beyond the scope of the submission to arbitration; and

(3) the arbitral procedure was not in accordance with the Agreement of the parties.

71 The Applicant disputed that there were any threshold issues of this kind for the purposes of s 35 of the CAA. The Applicant pointed to the limited nature of the matters to be satisfied under s 35 of the CAA and r 9 of the Arbitration Rules. There was no dispute in this case that those matters had been complied with. The Applicant submitted that, once the matters in s 35 and r 9 had been satisfied, the only challenge available was on the grounds set out in s 36.

72 In this regard, the Applicant noted that:

(1) the onus was on the Respondent to establish the grounds in s 36(1)(a);

(2) if any of those grounds is established, the Court may then exercise its discretion to refuse to recognise or enforce the award;

(3) the Court will not ordinarily do so unless it results in real unfairness or prejudice.

73 Further, the Applicant contended that the failure to provide the statement of claim as envisaged by Schedule 1 to the Agreement did not render the Agreement void for uncertainty or incompleteness or otherwise not an arbitration agreement under s 7 of the CAA.

74 This is because the Applicant contended that, on the proper construction of the Agreement, either ‘all’ disputes between them or, alternatively, the disputes referred to in Recital A were to be determined by the Arbitral Panel. The Applicant submitted that the word ‘matters’ in Schedule 1 ‘either refers to the [sic] part A of the Recitals or should be interpreted as “all matters” which is consistent with the Parties’ conduct before and during the course of arbitration’. He referred to the matters set out in Recital A. This is in a context where the Agreement was signed on the first day of the arbitration before the Arbitral Panel. The Applicant noted that it was not contended that the Respondents were denied procedural fairness at the arbitration.

75 As to the requirement that the arbitration agreement must be in writing under s 7(3) and/or s 1(3) of the CAA, the Applicant relied upon s 4 of the CAA, namely that the Respondents waived their right to object to the non-compliance with the requirements under the CAA or the Agreement that the disputes referred to arbitration be in writing.

8.2 Approach to determining Contention 1

76 As is evident, there are a number of overlapping issues in the submissions of the parties. Before considering the legal issues relating to the operation and application of ss 35 and 36, there are some issues of central importance to the determination of this proceeding. Those issues relate to the Respondents’ submission that the failure to identify the ‘Disputed Matters’ in the Agreement or otherwise in writing means the requirements of s 1(3)(b) and/or s 7 of the CAA have not been satisfied and/or that the Agreement is not ‘valid’.

77 It is important to recall that questions of whether a valid, binding and enforceable agreement has been entered into are to be determined according to common law principles, including relevantly uncertainty and incompleteness. Once that matter has been addressed, it is necessary to consider whether the requirements imposed by the CAA in relation to the Agreement in s 1(3) and/or s 7 have been met. As a result, I will first consider:

(1) is the Agreement binding and enforceable?;

(2) have the requirements of s 1(3)(b) and s 7 of the CAA been met?; and

(3) has there been any waiver under s 4 of the CAA?

78 In light of my conclusions on those matters, I will address the operation of ss 35 and 36 in relation to the first contention.

8.3 Is the Agreement binding and enforceable?

79 Questions of uncertainty may go to whether the contract is void for incompleteness, in the sense that some essential term has not been agreed, or void for uncertainty, in the sense that some essential term is so vague that no meaning can be given to it. The task of the Court is to construe the document according to the ordinary canons of construction to determine these questions. However, a contractual construction that renders a commercial agreement certain is generally to be preferred to one which does not. So there is a principle that what can be made certain is certain. It means in substance that if the relevant matter is ascertainable, the contract will not be incomplete or uncertain.

80 As stated by Wootten J in Austra Tanks:

A number of different situations give rise to problems of uncertainty in contracts. Without attempting to be exhaustive, they include the following …A fourth situation is where the parties deal with a matter, but instead of defining their obligations precisely or presently, use words which call for some inquiry. A matter may be left for determination by some nominated authority, even by one of the parties themselves; or for calculation by reference to future events or information not presently available; or for determination by reference to some standard. In all these cases the fundamental approach is id certum est quod certum reddi potest – the contract is good if the inquiry for which the words call is one which will lead to a sufficiently certain result.

81 I note that the principles in Austra Tanks were relied upon by Adamson J in Passlow v Butmac Pty Ltd, in concluding that a dispute resolution clause which included an arbitration clause was not unenforceable by reason of uncertainty or incompleteness.

82 In the present case, the Agreement contains details of the parties, the Arbitral Panel and how the arbitration was to be conducted. Having recorded in Recital A that disputes had arisen between the parties ‘concerning certain transactions between them during the period from 2007 to date [4 March 2013], including certain loans, rents, salary payments, the ownership of properties and other matters’, the Agreement provided that the Disputed Matters were to be referred to arbitration. Schedule 1 contains the means by which the Disputed Matters were to be identified, namely by the subsequent filing of a statement of claim by the Applicants and a defence by the Respondents. In these circumstances, at the time the Agreement was made, I conclude that there was a binding, valid and enforceable agreement between the parties.

83 I can see no issue of validity or enforceability in the parties agreeing to identify the particular disputes to be referred to arbitration subsequent to the Agreement being entered into. Indeed, many arbitration agreements provide a mechanism for defining disputes which ‘may arise’ between the parties to be referred to arbitration. Such an arbitration agreement does not itself set out the particular disputes which are to be referred. That can only take place at a later point in time. However, it is clear that these kinds of arbitration agreements are valid and binding arbitration agreements under the CAA notwithstanding the precise nature of the dispute is yet to be identified.

84 In my view, the real complaint of the Respondents, at the level of validity and enforceability, is that the Applicant failed to file a statement of claim in accordance with the terms of the Agreement. On its face, that non-compliance may amount to a contractual breach. But in my view, that does not mean that there was not a valid and binding agreement. Rather, it means that the Respondent had the right to complain about that breach: i.e. to seek enforcement of that term of Agreement or to terminate the Agreement for breach. However, that issue is not relevant to the question of whether the Agreement on its face was void for incompleteness or uncertainty.

85 It is inherent in my conclusion that I reject the Applicant’s construction of the matters referred to arbitration set out it at [74] above. It is also inherent in my conclusion that I reject the submission by the Respondents that the statement of claim was incorporated into the Agreement by Schedule 1.

8.4 Does the Agreement comply with s 1(3)(b) and s 7 of the CAA?

86 In summary the Respondent submitted that, given that the Respondents had not agreed in the Agreement or another document in writing about the Disputed Matters to be referred to the Arbitral Panel, the requirements in s 1(3)(b) and ss 7(3) and (4) had not been satisfied.

87 It is appropriate to set out the relevant sections again. Section 1(3) of the CAA provides that an arbitration is ‘domestic’ if:

(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia; and(b) the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration; and

(c) it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.

88 Section 7 of the CAA relevantly provides:

(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.

(3) The arbitration agreement must be in writing.

(4) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.

[…]

(7) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. […]

89 In order to assess the Respondents’ submissions, it is necessary to consider the nature of the agreement required by these sections and the formal requirements imposed by them, which differ from the foundational contractual requirements above. I will deal with each in turn. But as these reasons make plain, I consider the Respondents misconceive the nature of the requirements in each of s 1(3)(b) and s 7 of the CAA.

90 Section 1(3)(b) first requires that the parties have agreed that ‘any dispute’ that ‘has arisen or may arise between them’ is to be settled by arbitration. It also requires that agreement is in ‘the arbitration agreement or in any other document in writing’.

91 In my view, the Agreement satisfies the first requirement of s 1(3)(b). As set out above, it provides that the Disputed Matters are to be settled at arbitration by the Arbitral Panel and sets out the mechanism or procedure for how the Disputed Matters are to be identified, namely by the Applicants filing a statement of claim pursuant to Schedule 1. In this case, as the Agreement is in writing, it satisfies the second requirement in s 1(3)(b).

92 Section 7(1) of the CAA first requires 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. Section 7(3) requires that agreement ‘must’ be in writing. Section 7(4) provides that it is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.

93 In my view, the Agreement satisfies the first requirement of s 7(1). As set out above, it provides that ‘certain disputes’ are to be settled at arbitration by the Arbitral Panel, namely the Disputed Matters. It sets out the mechanism or procedure for how the Disputed Matters are to be identified, namely by the Applicants filing a statement of claim pursuant to Schedule 1. As that Agreement is in writing, it satisfies the requirement in s 7(3).

94 In my view, the real complaint of the Respondents, at the level of the CAA, is that either s 1(3)(b) and/or s 7 requires the actual matters to be referred for determination by the Arbitral Panel to be in the writing. I am unable to discern any such requirement on the proper construction of these sections. This is in the context, noted above, that many arbitration agreements relate to disputes which ‘may arise in the future’: those disputes can only be identified at a later point in time. In my view, such agreements clearly fall within s 1(3) and s 7, each of which refer to agreements relating to disputes that ‘may arise between’ the parties.

95 Of course, the facts in this case are different. Indeed in my view, they are unusual. As set out above, I have found that the Agreement was signed by the First Respondent in Sydney and emailed to the Applicant in Melbourne on the day of and before the hearing commenced. I have also found that the Agreement was signed by the Applicant and the Second Respondent in the presence of Rabbi Raskin on the day of and before the hearing in fact commenced.

96 One would have expected that the statement of claim would have been filed before or during the early stages of the hearing on that day. However, in the circumstances in which the Agreement was executed, there is no reason to doubt that the parties were aware of how the Disputed Matters were to be defined under Schedule 1. On the evidence before me, there is no reason to doubt that the parties were aware that the Applicant had failed to file a statement of claim in accordance with that Schedule. The Second Respondent deposed to having not drafted a statement of defence because he had not received a statement of claim from the Applicant.

97 Further, there is no reason to doubt that the parties were aware of the matters that were in fact the subject of hearings and determination by the Arbitral Panel. There was no suggestion to the contrary in the evidence or in the submissions before me. The Respondents did not object about the failure to file a statement of claim at any time during the two days of hearing or before the Award was delivered.

98 That is not to say that I do not consider, in the ordinary case, that parties to an arbitration should specify in writing the subject matter of the disputes to be referred to arbitration. Such a practice avoids the problems which might arise if the nature of the subject matter of the disputes are not properly identified including allegations that there was a want of procedural fairness. However, in the unusual circumstances of this case, it is not asserted by the Respondent’s that they were in any way prejudiced or denied procedural fairness by reason of the Applicant’s failure to provide a statement of claim.

99 As a result, I consider that the Agreement does comply with s 1(3)(b) and s 7 of the CAA as there is no requirement under those provisions for the particular matters referred to an arbitrator to be in writing. Further, and as a consequence, I do not consider that the arbitration was beyond the scope of the CAA.

8.5 Waiver

100 It is then necessary to consider the issue of waiver under s 4 of the CAA raised by counsel for the Applicants. For convenience I will set out that section again:

A party who knows that any provision of this Act from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating the party’s objection to such non-compliance without undue delay or, if a time-limit is provided for stating the party’s objection, within such period of time, is taken to have waived the party’s right to object.

101 Counsel for the Applicant submitted that s 4 operates in this proceeding to prevent the Respondents from relying on the absence of statements of claim and defence defining the Disputed Matters as non-compliance with any written requirement under s 7(3) and (4) of the CAA. By logic, that submission would also apply to any written requirement in s 1(3)(b). He submitted that the parties conducted the arbitration understanding what disputes had been referred and the requirement for statements of claim and defence was a procedural matter that could be derogated from. As such, s 4 operated to waive the Respondents’ right to object to the lack of written points of claim.

102 Counsel for the Respondent argued that the requirement under s 7 of the CAA to have an arbitration agreement that is in writing cannot be derogated from, such that s 4 does not operate to allow that requirement to be waived. So too, by logic, that submission would also apply to any written requirement in s 1(3)(b).

103 Counsel referred to the UNCITRAL commentary on the Model Law equivalent of s 4 set out above. It provides that the Model Law ‘contains specific rules concerning objections with regard to certain fundamental defects such as a lack of a valid arbitration agreement or the arbitral tribunal’s exceeding its mandate’. Counsel suggested that these rules relate to non-derogable provisions of the CAA and should be contrasted with the power of waiver of derogable requirements available under s 4. As to the provisions from which a party may derogate, I refer to my comments in [61] above.

104 I accept that this is so. But this argument proceeds on the premise that the CAA requires that the matters to be referred to the arbitrator to be in writing. For the reasons set out in section 8.4, I do not accept that premise.

105 It is important to note that s 4 may apply to waiver of any provision of the CAA from which the parties may derogate and ‘any requirement under the arbitration agreement has not been complied with’. It is the second kind of waiver that assumes some importance for the purpose of the proceeding. That second kind of waiver relevantly requires two elements:

(1) a party knows that any requirement under the arbitration agreement has not been complied with; and

(2) that party proceeds with the arbitration without stating the party’s objection to such non-compliance without undue delay.

106 As set out in [95] to [99] above, I am satisfied that the Respondents knew of the requirement under the Agreement for the matters to be determined by the Arbitral Panel to be identified in a statement of claim and nevertheless proceed with the arbitration without objection. The First Respondent provided signed execution pages of the Agreement to the Applicant on the first day of the hearing. The Second Respondent signed the Agreement on the first day of the hearing. As set out in [30] above, the Second Respondent deposed that he is very familiar with Jewish legal documents and has an in-depth knowledge of Jewish commercial law. I have inferred, in absence of evidence suggesting anything to the contrary, that the Respondents read and understood the Agreement at the time. The Respondents did not object at any time in the arbitration process to the Applicant’s failure to provide a statement of claim. As a result, I have concluded that the Respondents waived their right to object to the Applicant’s failure to do so.

107 In light of these conclusions, I will now turn to the specific legal issues relating to ss 35 and 36 of the CAA.

8.6 Domestic Commercial Arbitration is a threshold issue

108 I have formed that the view that before considering the enforcement of an Award under s 35 of the CAA, there is a threshold issue as to whether the arbitration is a ‘domestic commercial arbitration’. This is because, pursuant to s 1(1) of the CAA, the CAA only applies to ‘domestic commercial arbitrations’.

109 I am conscious that there is no express requirement to this effect in s 35 of the CAA. I am also conscious of the procedural and evidentiary requirements imposed on an applicant by r 9.21 of the Arbitration Rules for an application under s 35. I am conscious too of the limited nature of curial intervention generally under the CAA, including Part 8.

110 However, reading the CAA as a whole, I consider that the power of the Court to enforce an arbitral award only arises where there is a domestic commercial arbitration to which the CAA applies. Though often not in issue, it is a requirement of establishing the Court’s jurisdiction to enforce the Award under s 35. Of course, very often, the existence of a ‘domestic commercial arbitration’ will not be in issue. Nevertheless, I remain of the view that the Applicant under s 35 of the CAA must establish that the Award was in respect of a domestic commercial arbitration.

8.7 Is this arbitration domestic?

111 As set out above, there are three requirements to be met for the arbitration to be a ‘domestic’ arbitration under the CAA. Section s 1(3) of the CAA provides that an arbitration is domestic if:

(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia; and(b) the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration; and

(c) it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.

112 As to the requirement in s 1(3)(a), as noted above, s 1(4) of the Act provides in substance that if a party does not have a place of business, one has regard to that party’s habitual residence. In the case, it is not in issue that the place of business or habitual residence of each of the Applicant and the Respondents was in Australia when the Agreement was made.

113 As to the requirement in s 1(3)(c), it is not in issue that the Model Law as given effect by the IAA does not apply to this arbitration.

114 As to the requirements in s 1(3)(b), for the reasons set out in [91]-[91] above, I am of the opinion that the Agreement satisfies the requirements of s 1(3)(b). As a result, I am satisfied that this arbitration was a ‘domestic’ arbitration.

115 For completeness, in reaching this conclusion, I have considered whether ss 1(3)(a) and (b), when referring to an ‘arbitration agreement’, refer to an ‘arbitration agreement’ as defined in s 7 of the CAA (a ‘s 7 Arbitration Agreement’). On balance I consider that it is a reference to a s 7 Arbitration Agreement.

116 This is for three main reasons. First, the concept of ‘arbitration agreement’ as defined in s 7 is of central significance under the CAA. Second, ss 1(3)(a) and (b) each refer to an ‘arbitration agreement’ which is a defined term under s 2 of the CAA, with the definition contained in s 7. Third, s 1(3)(a) refers to ‘an arbitration agreement’ and s 1(3)(b) refers to ‘the arbitration agreement’. The change from the indefinite article in s 1(3)(a) to the definite article in s 1(3)(b) suggests that it is this same arbitration agreement referred to in both sub-sections.

8.8 Is this Arbitration Commercial?

117 For the CAA to apply, s 1(1) also requires that the arbitration must be ‘commercial’. To assist in determining what this means, s 1 of the CAA sets out the Model Law note on the interpretation of the word ‘commercial’ referred to at [48] above.

118 It is clear that the CAA intends to give a wide interpretation to when an arbitration is commercial. It covers ‘matters arising from all relationships of a commercial nature, whether contractual or not’. The Model Law note sets out a non-exhaustive list of relationships of a commercial nature, which is wide-reaching.

119 As to Claim 1, I consider that the advances paid by the Applicant to the Respondents which are the subject of this Claim gave rise to a commercial relationship such that the dispute was commercial for the purposes of the CAA. This position accords with the inclusion of financing transactions in the non-exhaustive list set out in the Model Law note.

120 As to Claim 2, I am satisfied that the rental payments that are the subject of this Claim are sufficiently intertwined with the advances relating to Claim 1. As I set out more fully below, Claim 2 is only dealt with briefly in the Reasons. However, Claim 2 is addressed in the context of the advances that are the subject of Claim 1. Further, there is in evidence an email dated 31 March 2012 leading up to the arbitration which records that the First Respondent and his wife “agreed to pay my rent for the house we currently occupy in lieu of my permission to allow you to borrow more against 67-69 Penkivil Street for the sake of your business and Yeshivah”. I consider that I may have regard to this evidence in determining whether the arbitration is ‘commercial’ for the purposes of s 1(1) of the CAA. In these circumstances, I am satisfied that the subject matter of Claim 2 arises from the commercial relationship between the Applicant and the Respondents.

121 As to Claim 4, the UNCITRAL commentary suggests clearly that employment disputes are not covered by the definition to be given to ‘commercial’ in this context. It expressly provides:

Not covered are, for example, labour or employment disputes and ordinary consumer claims, despite their relation to business. Of course, the fact that a transaction is covered by the model law by virtue of its commercial nature does not necessarily mean that all disputes arising from the transaction are capable of settlement by arbitration.

122 Likewise, the learned author of Commercial Arbitration in Australia notes that an employment relationship will likely not be considered ‘commercial’ for the purposes of s 1. He cites the Alberta High Court’s decision in Borowski v Heinrich Fiedler Perforiertechnik GmbH in support of this proposition. In that case, Murray J made the following comments in respect of the contract in question, in the context of whether an arbitration was an ‘international commercial arbitration’:

[T]he evidence before this Court does not alter the fact that this was a contract of employment giving rise to the status of master and servant and was not a contract for services to be performed either by an agent or by an independent contractor. This is not the type of relationship which one would consider to be a ‘commercial’ legal relationship or as containing an agreement which one might describe as an ‘international commercial arbitration agreement’. The relationship between the Plaintiff and Defendant has none of the earmarks of a “commercial” relationship as outlined in the dictionary definitions and indeed by our Court of Appeal and the Supreme Court of Alberta …

123 With respect, I agree with Murray J’s conclusion. On its face, Claim 4, being a claim for wages, is not commercial. Further, while I am conscious that the term ‘commercial’ should be given a wide interpretation, I am not satisfied on the evidence before me that Claim 4 arises from relationships of a commercial nature between the Applicant and the Respondents of the kind which are the subject of Claims 1 and 2. As a result, I have concluded that Claim 4 does not fall within the scope of a ‘commercial arbitration’ under the CAA.

8.9 Conclusion on s 35 application

124 Thus, I have concluded that Claims 1 and 2 are both ‘domestic commercial arbitrations’ under the CAA. Further, I am of the view that the other matters of which the Court must be satisfied have been established in this proceeding, namely:

(1) pursuant to s 35(2) of the CAA, the Applicant has provided to the Court a copy of the original Award and an English translation of the Award;(2) pursuant to r 9.21(2) of the Arbitration Rules, the Applicant’s supporting affidavit exhibits the documents referred to in s 35(2) of the CAA and states the extent to which the Award has not been complied with and the last known address of each of the Respondents; and

(3) pursuant to r 9.21(1) of the Arbitration Rules, the Applicant’s application was made in the correct form.

125 The Court is thus entitled to enforce the Award in respect of Claims 1 and 2 subject to two matters.

126 First, can the Court enforce an award under s 35 when the award itself does not quantify the amount owing or the basis upon which it can be calculated? This is the fourth contention raised by the Respondents and relates only to Claim 2. I will deal with the fourth contention later in these reasons. However, I have concluded that the Court cannot enforce the Award in respect of Claim 2 under s 35 of the CAA.

127 Second, should the Court refuse to enforce the Award pursuant to s 36 of the CAA? This involves consideration of the first, second and third contentions. I will now deal with the grounds for refusal of enforcement in the context of the first contention.

8.10 Conclusion on s 36: Grounds for refusal of enforcement

128 The Respondents relied upon the absence of any written statement of the matters in dispute to submit that the Court should refuse to enforce the Award under s 36 of the CAA. This is because:

(1) pursuant to s 36(1)(a)(i), there was no valid ‘arbitration agreement’ under Victorian law;

(2) pursuant to s 36(1)(a)(iii), the Award dealt with disputes not contemplated by or not falling within the terms of submission to arbitration set out in the Agreement, or contained decisions on matters beyond the scope of the submission to arbitration;

(3) the arbitral procedure was not in accordance with the agreement of the parties.

129 As is evident from this summary and the summary of the submissions in section 8.1 above, there is a complete overlap with these grounds and the issues addressed in sections 8.3, 8.4 and 8.5. For the reasons set out in those sections, I have concluded that:

(1) the Agreement was a valid, binding and enforceable contractual agreement;

(2) the Agreement was an ‘arbitration agreement’ as defined in the CAA;

(3) there was no obligation under the CAA to provide written notice of disputes in fact referred to the Arbitral Panel;

(4) notwithstanding the statement of claim was not filed, the parties were aware of the matters that were in fact the subject of submission to the Arbitral Panel and the Respondent did not object at any time prior to the delivery of the Award; and

(5) as a result, the Respondents waived their right to object to the disputes not being defined in writing in a statement of claim in accordance with the terms of the Agreement.

130 For completeness, in the circumstances set out in [129] above, I do not consider that the Respondents have established on the evidence that the Award dealt with disputes not contemplated by or not falling within the terms of submission to arbitration set out in the Agreement, or contained decisions on matters beyond the scope of the submission to arbitration.

131 As a result, the Respondents have not established the grounds set out in s 36 relied upon relating to the first contention.

132 Given this conclusion, it is not necessary for me to determine whether I would refuse to enforce the Award under s 36(1) of the CAA in respect of Claim 1 on these grounds. However, in the event that I am wrong, it is appropriate that I express shortly my view as to whether I would refuse to enforce that aspect of the Award.

133 First, I have concluded that, by reason of the use of the word ‘may’ in the chapeau to s 36(1) of the CAA, the Court has a discretion to refuse enforcement of an award even if the grounds under s 36(1) are made out. In reaching this conclusion, I have relied upon the judgment of Croft J in Indian Farmers, a case in relation to the International Arbitration Act 1974 (Cth). In that case, Croft J relied upon the commentary of Professor Born in International Commercial Arbitration relating to the enforcement provisions of the New York Convention, in particular the discretion given to the Court by Article V, which is couched in very similar to terms to s 36 of the CAA. His Honour concluded that the Court retained a discretion under the equivalent provision of the IAA.

134 I am satisfied that the comments of Croft J and of Professor Born in his commentary apply equally to the enforcement provisions of the CAA such that the Court has a discretion to decline refusal of enforcement of an award.

135 Second, I have formed the view that the discretion must align with the grounds for curial intervention more generally: that is, that the Court should intervene where there is unfairness or prejudice or the award is beyond the scope of the arbitration agreement. As the Chief Justice of Singapore, Menon CJ, stated in AKN v ALC:

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 courts’ 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.

136 So much is made clear in respect of enforcement proceedings by the decision of the Full Federal Court in TCL Air Conditioner (Zhongshan) Company Ltd v Castel Electronics Pty Ltd, in which the Court noted in relation to breaches of natural justice under the Model Law enforcement provisions:

There is sometimes, however, a tendency of some to speak of a technical or minor breach of the rules of natural justice: see for instance the primary judge here at J[30]. To the extent that such expression may be acceptable in some contexts, it will be important to recognise that for the discretion under Arts 34 and 36 to be exercised, real unfairness or real practical injustice will need to be demonstrated. Whilst the IAA does not use phraseology of “prejudice” as does the Singapore Act, such a notion inheres in the conceptions of fairness, unfairness, practical justice and practical injustice. Thus, the expression of view by the Court in Soh Beng Tee at [65] that “only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied” can be seen to be concordant with a notion that real unfairness or real practical injustice must be demonstrated.

137 The Full Court’s comments apply equally to the CAA. In my view they are consistent with the limited role the Court has to play in arbitral proceedings. As such, I consider that the discretion under s 36 of the CAA ought only to be exercised to refuse enforcement of an Award where to enforce it would lead to real unfairness or prejudice, or it is beyond the scope of the arbitration agreement.

138 Third, for the reasons set out above, in this case I am not satisfied that the failure to reduce to writing the Disputed Matters caused any practical unfairness or prejudice in any way to the Respondents. None was asserted by the Respondents at the arbitral hearings, before the Award and the Reasons were finalised, or in this proceeding.

139 As a result, I would enforce the Award in respect of Claim 1.

9. CONTENTION 2

140 Counsel for the Respondents submitted that the Court should refuse to enforce the Award in respect of Claim 1 because the Respondents were not the sole registered owners of the land securing the advances made. Counsel for the Respondents noted that the Award in respect of Claim 1 related to both monetary and proprietary relief, and that the propriety relief was in the form of a lien over five parcels land. The registered owners of two of the parcels of land, and the joint owners of the remaining three parcels at the time of arbitration were not parties to the Agreement. This was not disputed by the Applicant.

141 As a consequence, counsel for the Respondent submitted that because the Agreement was not between all parties to the dispute this rendered it ‘invalid’, relying upon s 36(1)(a)(i) of the CAA to refuse enforcement.

142 Counsel for the Applicant submitted that the joint ownership of the land with entities that were not party to the arbitration does not render the Agreement invalid. Further, he submitted that no practical injustice occurred against those entities in this case. This is because the Applicant did not seek to enforce that part of the Award in respect of Claim 1 relating to the lien.

143 In my view, I do not consider that the fact that the Respondents jointly owned the five parcels of land with entities that were not party to the arbitration renders the Agreement invalid.

144 In Giedo Van Der Garde BV v Sauber Motorsport AG, Croft J discussed the arbitrability of a dispute where there were interested non-parties in the context of an enforcement claim under the IAA. His Honour stated that:

A dispute does not lose its “arbitral quality” merely because a non-party or parties have an interest in the outcome of the arbitration. Indeed, to find otherwise would be to undermine the essence of arbitral proceedings as fundamentally contractual. While non-parties may suffer prejudice as a result of an arbitral proceeding to which they are not parties, arbitral proceedings are necessarily inter partes in nature and, as such, whether the arbitrator could have heard the other drivers [as non-parties] is not a matter for this court.

145 His Honour’s comments are of some relevance to the determination of this issue. In my view, the fact that some owners of the properties securing Claim 1 are not parties to the Agreement does not render that agreement or the arbitration invalid. This is because those non-parties are not bound by the Agreement or the Award made pursuant to that agreement. It follows, in my view, that the non-involvement of the other registered proprietors does not bear on the application of the enforcement provisions of the CAA in this proceeding.

146 Further, the application for enforcement does not relate to the lien over the properties owned by the non-parties, but only to the amount owed by the Respondents. In the event that I am wrong and the failure to join these non-parties renders the Agreement invalid for the purpose of s 36(1)(a)(i), in the exercise of my discretion, I would not refuse to enforce the monetary component of Claim 1 of the Award. This is because enforcement of the monetary component of the Claim does not prejudice the Respondents or the non-parties. To the contrary, it allows the Applicant to seek recovery of the money which the Arbitral Panel found was owing by the Respondents.

10 CONTENTION 3

147 The Respondents contended that the Court should refuse to enforce the Award because the Reasons provided were inadequate. The Respondents submitted that the Arbitral Panel failed to discharge their mandate to conduct an arbitration in accordance with s 31(3) of the CAA as required by the Agreement. As noted above, that section relevantly requires that an award ‘must state the reasons upon which it is based’. As a result, the Respondents submitted that for the purposes of s 36(1)(a)(iv) of the CAA, the conduct of the arbitration was not in accordance with the agreement of the parties.

148 In this regard, counsel for the Respondents relied upon the decision of the High Court in Westport Insurance Corporation v Gordian Runoff Limited. In that case, the majority (French CJ, Gummow, Crennan and Bell JJ) adopted the standard of reasons required from an arbitrator set out by Donaldson LJ in Bremer Handelsgesellschaft mbH v Westzucker GmbH [No 2]. His Lordship considered that:

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

149 Counsel for the Respondents contended that there is no process of reasoning present in the Reasons. Rather, the Reasons merely summarise the evidence and state the conclusion, such that there is no nexus between the Reasons and the Award now sought to be enforced.

150 In support of the adequacy of the Reasons given by the Arbitral Panel, counsel for the Applicant referred to the decision of Thomas Au J of the High Court of Hong Kong in R v F. In that case, his Honour noted that:

Of course, the reasoning process expressed in an award must be one that the readers of the award (who are mostly if not always the parties themselves only) can understand how and why the conclusion is reached on a particular issue. However, the way the reasons expected to be given in an arbitral award for a particular issue should be proportional to the complexities of how that issue is contended (or not contended) before the arbitral tribunal. Depending on how the issues are contended, the reasons do not necessarily need to be elaborate or lengthy, provided they could be understood in its proper context. It must be borne in mind that an arbitration award is the result of a private consensual process, which is intended and expected to be cost effective, and shorn of complexities and technicalities.

151 In my view, Au J’s comments are not at odds with the High Court’s decision in Gordian Runoff. Rather, they merely suggest that in determining whether the arbitral tribunal’s reasons are adequate, the Court may take into account:

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

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

152 Taking these matters into account, there must still be some reasoning process setting out how the tribunal came to its decision. When considering the adequacy of reasons the Court is not concerned with assessing the merits of the reasons given for an award beyond determining whether they adequately indicate how the arbitral tribunal came to its decision. In the context of enforcement proceedings, Croft J in Giedo noted that:

In this respect the court does nevertheless stress that this enforcement application does not involve anything in the nature of a merits appeal from the award. Indeed, it is not the function of the court to investigate this issue, save to indicate that on the basis of the material, including the submission to arbitration, it was clearly open to the arbitrator to make the relevant findings as set out in the award.

153 With these principles in mind, I now turn to consider the adequacy of the Reasons.

154 The Reasons are not easy to understand. The language is often disjointed. These issues may be the result of the translation or the way in which the original Reasons were written.

155 The Reasons focus predominantly on the dispute over the advances that were the subject of Claim 1: nearly all of the three pages of the Reasons deal with Claim 1. That is understandable given that it was the largest claim before the Arbitral Panel. Without assessing the merits of the Reasons, I note that the Reasons on Claim 1 set out the relevant arguments, the Halachic principles upon which they rely, and the conclusions arrived at consequential to those facts. As such, in my view, they are adequate.

156 As to Claim 2, it is referred to in a very limited way on the third page of the Reasons. The Reasons provide:

And consequently we have come to the conclusion that regarding the principal which is approximately 1,000,000 certainly he is liable to pay and concerning the portion of 831,360 which is the amount of profits of the obligation to pay the Interest, and this is dependent on the doubt concerning the law of Interest alone therefore the claimant will receive a third of the main amount as is the custom of Courts that where a doubt exists one receives a third, also on the matter of the rental agreement that remains an obligation they are obligated to pay, also all of the loans (small ones relatively) that were done as separate deals that were done at a stage after the large deal of the 1,831,360 they are obliged to pay the principal (126,000)…

157 The Reasons do not set out any facts relevant to the conclusion that there remains ‘an obligation’ to pay rent or why the conclusion was reached.

158 As to Claim 4, the Reasons do not appear to mention this Claim at all.

159 In these circumstances, the Reasons do not on their face satisfy the requirements to give reasons as required by s 31(3) of the CAA in respect of Claims 2 and 4. As a result, in the exercise of my discretion, I would refuse to enforce the Award in respect of Claims 2 and 4 under s 36(1)(a)(iv) of the CAA.

11 CONTENTION 4

160 In light of my conclusions in respect of the third contention, it is unnecessary to decide the fourth contention. However, it is appropriate that I set out my views on this contention.

161 The Respondents submitted that the Award in respect of Claims 2 and 4 did not set out the amounts to which the Applicant was entitled. In these circumstances, the Respondent submitted that the Court cannot enforce the Award in respect of Claims 2 and 4. This is because it is not part of the role of the Court in an application under s 35 to determine, on the basis of evidence not produced before the Arbitral Panel, the amount to be paid under the Award.

162 The Award relevantly provides:

Claim 2 – the claim regarding $17,815.47 pcm rental agreementCourt decision: The defendants must pay the entire amount of the rental agreement $17,815.47 pcm, as agreed between the parties initially (including all outstanding payments, which have not been paid completely yet). This obligation continues until the defendants pay the entire above mentioned amount mentioned in claim 1. Regarding the monthly payments from that time till [sic] September 2013, it depends on the details of initially made agreement and needs further clarification by the Court.

[…]

Claim 4 – the claim regarding salary

Court decision: The defendants must pay the entire amount of the salary (that has not yet been paid) to the plaintiff for all the time of his service at the office etc., but not for the time after he resigned from work.

163 As to Claim 2, while the Award refers to an agreement to pay $17,815.47 per calendar month, the period of time over which it is to be paid is not addressed. It refers to ‘as agreed between the parties initially’ but does not record when this was. It indicates that the monthly payments ‘from that time till [sic] September 2013, it depends on the details of initially made agreement and needs further clarification by the Court’. Thus it would appear that the amount referred to earlier in the Award of $17,815.47 per calendar month may require some unspecified and unascertained reduction.

164 As to Claim 4, the Award does not refer to a period of employment or a rate of pay.

165 As noted above, the Applicant deposed in this proceeding as to the quantum of those claims. In [11] of his affidavit affirmed on 9 May 2019 he relevantly deposed:

I am seeking an award of $1,849,570.02 comprising:11.1 $1,635,802.00, being the amount awarded under claim 1 of the Award

11.2 $320,168.02 being the intended amount awarded under claim 2 of the Award, which was calculated in 2014 and advised to the Second Respondent, who did not dispute it, and to the arbitrators then,

11.3 $14,000 being the intended amount awarded under claim 4 of the Award, which was calculated in 2014 and advised to the Second Respondent, who did not dispute it, and to the arbitrators then…

166 Counsel for the Applicant properly conceded that, as these calculations were not in evidence and were not included in the Award, there was a difficulty with enforcing the Award for the amounts claimed in respect of Claims 2 and 4.

167 As set out above, I am conscious of the limited nature of curial intervention generally under the CAA, including s 35. I am conscious too of the need to avoid a narrow or pedantic operation of the section. But s 35 section only allows a Court to recognise and enforce an ‘award’. In my view, given the absence of a sum certain in respect of Claim 2 or 4 or a means of determining each amount on the face of the Award, there is not an award capable of recognition and/or enforcement. This is consistent with the decision of Muir J in Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd (No 1). It may be different if the means of determining the amount is evident from the reasons for the award. However, it is unnecessary for me to decide this issue because the Reasons in this case do not provide a means for calculating the amounts in respect of Claims 2 and 4.

168 In the circumstances of this case, the Court cannot recognise or enforce the Award in respect of Claims 2 and 4 under s 35 of the CAA.

12. CONCLUSION

169 As a result I have concluded that the monetary component of Claim 1 of the Award should be enforced. In the course of reaching this conclusion, I have considered whether the monetary component in Claim 1 can be severed from the unenforceable aspects of the Award. Consistent with the principles set out in [62] to [64] above, I have concluded that it can be severed.

170 This is because the Award in respect of Claim 1 is not so mixed up with the unenforceable aspects of the Award that it cannot be severed. It was decided on its own basis and stands on its own reasons that are not contingent upon or otherwise affected by the aspects of the Award that I have concluded above are unenforceable. Severance of the Award in respect of Claim 1 does not result in any injustice to the Respondents. In these circumstances, I consider that severance is available and I would enforce only the monetary component in Claim 1.

171 Further, I consider that the amount awarded in respect of Claim 1 ought to be adjusted to take into account the amounts acknowledged by the Applicant as having already been paid by the Respondents. This adjustment is of $120,400.00. As such, the amount enforced will be $1,515,402.02. I wish to hear from the parties on the questions of interest and costs.

Rainbow Builders Pty Ltd v State of Queensland [2020] QSC 25 (20 February 2020)

Rainbow Builders Pty Ltd v State of Queensland [2020] QSC 25 (20 February 2020)

Last Updated: 2 March 2020

SUPREME COURT OF QUEENSLAND

CITATION:
Rainbow Builders Pty Ltd v State of Queensland [2020] QSC 25
PARTIES:
RAINBOW BUILDERS PTY LTD (ACN 111 506 720)(Applicant in 14202/19/Respondent in 14161/19)

v

STATE OF QUEENSLAND THROUGH THE DIRECTOR GENERAL, DEPARTMENT OF HOUSING AND PUBLIC WORKS

(Respondent in 14202/19/Applicant in 14161/19)
FILE NO/S:
BS 14202 of 2019 and BS 14161 of 2019
DIVISION:
Trial Division
PROCEEDING:
Application filed 20 December 2019 and Application filed 19 December 2019
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
Delivered Ex Tempore on 21 February 2020
DELIVERED AT:
Brisbane
HEARING DATE:
20 February 2020
JUDGE:
Jackson J
ORDER:
The order of the Court on application of BS 14202 of 2019 is that:
  1. The application is dismissed.
The order of the Court on application of BS 14161 of 2019 is that:
  1. The Further Interim Award No 2 made by the arbitral tribunal on 30 September 2019 in the domestic commercial arbitration between the parties conducted under the Commercial Arbitration Act 2013 be enforced.
CATCHWORDS:
ARBITRATION– RECOURSE AGAINST AWARD– GROUNDS FOR REMITTING OR SETTING ASIDE– MISCONDUCT– DENIAL OF NATURAL JUSTICE– where Rainbow Builders applied to set aside the September Award under section 34(2) of the Commercial Arbitration Act 2013 (Qld) – where the State applied to enforce the September Award under section 35 of the Act– where in the alternative the State applied to enforce an earlier award from August 2019– where if the September Award is set aside Rainbow Builders applied for declaratory relief that the August Award is not a final determination– where Rainbow Builders resisted the enforcement of both Awards pursuant to section 36 of the Act– where Rainbow Builders submit that the September Award should be set aside as they did not have a reasonable opportunity to present their case– where Rainbow Builders also submit that the September Award should be set aside as the parties where not treated with equality– where the court ordered that the application be dismissed and the September Award be enforced.Commercial Arbitration Act 2013 (Qld), s 18, s 19, s 34, s 35, s 36(1)

Resolution Institute Arbitration Rules 2016, Article 17 sub (1), Article 27 sub (3), Article 27 sub (4)

Balfour Beatty Power Construction Australia Pty Ltd v Kidston Gold Mines Limited [1989] 2 Qd R 105, cited

Mango Boulevard Proprietary Limited v Mio Art Proprietary Limited [2018] 1 QR 245, discussed

The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 132, discussed

Westminster Chemicals & Produce Limited v Eichholz & Loeser [1954] 1 Lloyd’s Reports 99, cited

Jackson J:

On 30 September 2019 Ian Miller, as sole arbitrator constituting the arbitral tribunal in an arbitration under the Commercial Arbitration Act 2013, between Rainbow Builders Proprietary Limited and The State of Queensland through the Director-General of the Department of Housing and Public Works, made an award in writing entitled “Further Interim Award Number 2-30/09/2019” in 76 pages and incorporating or cross-referring to another document signed and dated by the arbitrator on that date entitled “Addendum Number 2” which I’ll call the “September Award”.

By these cross-applications Rainbow applies to set aside the September Award under section 34(2) of the Act, and the State applies to enforce the September Award under section 35 of the Act. Alternatively, the State applies to enforce an earlier award made in the same arbitral proceeding by the same arbitrator signed and dated 28 August 2019.

In the event that the September Award is set aside or not enforced Rainbow applies for declaratory relief that the August Award is not a final determination of the issues in dispute which it purported to decide.

In relation to both awards, Rainbow resists enforcement, and seeks that enforcement be refused under section 36 of the Act on the same or similar grounds that it deploys to have the September Award set aside.

Each of the September Award and the August Award is in the nature of a partial award, as I used that term in Mango Boulevard Proprietary Limited v Mio Art Proprietary Limited [2018] 1 QR 245. Such an award is liable to be set aside under section 34 of the Act.

The underlying dispute arose out of a construction contract for Rainbow to build home units at Labrador, entered into in or about 20 March 2012 which I will call “the contract”.

On 10 September 2013 the superintendent issued a certificate of practical completion under the contract. As at the date of practical completion the sum of $57,750, excluding GST, was held by the State as retention monies.

Clause 47.1 of the General Conditions of Contract provided that in the event of a dispute either party may give a notice of dispute in writing. Clause 47.2 provided for the referral of the dispute to arbitration if it could not be resolved.

On 13 December 2016 Rainbow issued a payment claim for payment of the retention monies.

On 4 January 2017 the State issued a payment schedule rejecting the payment claim.

On 14 February 2017 Rainbow gave notice of dispute under clause 47.1.

On 12 April 2017 Rainbow gave notice referring the dispute to arbitration under clause 47.2. Ian Miller was appointed as the arbitrator.

On 14 September 2017 the arbitrator’s agreement was sent to the parties.

On 19 October 2017 the arbitrator convened a preliminary conference. By that date the solicitors for the parties had completed the document entitled “Arbitrator’s Agenda” and signed it on behalf of their respective clients. Under the heading “Nature of Proceedings” in that document the parties recorded that there was a counter-claim by the State for the approximate amount of $410,000 in relation to defective workmanship.

Further preliminary conferences were held on 19 December 2017 and 25 September 2018.

From 17 December 2018 to 19 December 2018 the issues in dispute in the arbitration were heard at an oral hearing which I will call the “December Hearing”. The parties were represented. Evidence was adduced from lay and expert witnesses.

One witness was Neil Burchall. Mr Burchall was a quantity surveyor who prepared a report as an expert witness as to the estimated costs of repair relevant to the State’s counter-claim.

Mr Burchall was not cross-examined on the report at the December Hearing. That hearing adjourned for the arbitrator to decide the dispute by making an award on all issues except interest and costs which were to be deferred.

On 12 February 2019 the arbitrator made an award headed “Interim Award” in 75 pages signed by him, and dated 12 February 2019 which I will call the “February Award”. Pages 42 to 53 inclusive concern part of the State’s counter-claim designated as “12 Wet Areas and Directions to Rectify.” From pages 42 to 49 inclusive the arbitrator considered whether the waterproofing in the wet areas was carried out in accordance with the contract and the original tendered design as detailed for the wet areas. The arbitrator found that it was not.

From pages 50 to 53 the arbitrator considered the question of quantum of the rectification costs for that breach, concluding that he sought the submissions on a number of matters raised from both parties before making an award for that item of the counter-claim.

In the summary of the February Award on page 75, in a section headed “Award to the Respondent” the arbitrator described his award for the item of the State’s counter-claim described as “12 Waterproofing to Wet Areas” as “Determination Pending.”

On 19 February 2019 the State provided hearsay evidence from Mr Burchall as to the meaning of the relevant part of his report.

On 22 February 2019 Rainbow responded, relying on a further affidavit that it had obtained from Ahmad Mousali and objecting to the hearsay evidence that had been provided to the arbitrator as to the meaning of Mr Burchall’s report.

On 22 March 2019 Mr Burchall produced a supplementary report that the State provided to the arbitrator. The supplementary report dealt with matters not covered in the first report, and estimated the costs of the rectification of the wet areas in the sum of $455,375.19.

On 26 April 2019 Rainbow provided a written response to Mr Burchall’s supplementary report to the arbitrator.

On 17 May 2019 the arbitrator wrote to the parties stating that he would proceed to determination so as to amend the Interim Award as appropriate.

On 5 June 2019, following further correspondence in the meantime, Rainbow requested that the arbitrator disqualify himself for reasonable apprehension of bias. He did not do so. I note that apprehension of bias is a ground of the application to set aside the September Award but it was not pressed in written or oral submissions as a separate ground.

On 18 June 2019 a further supplementary report by way of letter from Mr Burchall was provided to the arbitrator by the State.

On 1 July 2019 Rainbow sought time to consider, and respond to the further evidence of Mr Burchall.

On 12 July 2019 Rainbow advised the arbitrator that it had not had the opportunity to cross-examine Mr Burchall on the matters in his supplementary reports, and reserved the right to do so.

On 20 July 2019 Rainbow provided a report to the arbitrator by Matthew Lee, a quantity surveyor, in response to Mr Burchall’s further supplementary report, and in reliance on Mr Lee’s report made written submissions as to the amount that should be allowed by the arbitrator as the reasonable costs of rectification of the wet areas.

On 9 August 2019 the arbitrator dated and signed a document entitled “Further Interim Award” in 78 pages, together with attached editing notes, a spreadsheet of the valuation of Mr Burchall’s supplementary report of 22 March 2019 and clarifications, and a further section headed “Wet Areas Rectification Further Interim Award Number 2” in nine pages, which I will call the “August Award”.

Pages 44 to 56 substantially replicated the February Award with minor amendments. The further section headed “Wet Areas Rectification Further Interim Award Number 2” dealt with the quantum of the State’s counter-claim for that item, or items. The conclusion reached was that the total sum was to be awarded in favour of the State for the relevant items of rectification was $218,995.11, exclusive of GST. However, sub-paragraph (vii) on page 5 concluded that there was no definitive evidence that an item previously referred to in Mr Burchall’s report or reports as “Corian Benchtops” was for shower linings as in Mr Burchall’s letter of 18 June 2019, and sought further clarification evidence.

On 22 August 2019 the State forwarded an email, attaching the statutory declaration of David Trotter, with attachments to provide clarification as to the areas in which the Corian sheeting was installed, and associated costs.

On 28 August 2019 the arbitrator wrote to the parties stating that it appeared clear, from the prior document, that the “Corian Benchtops” in Mr Burchall’s report were in fact Corian wall sheeting and seeking clarification and advice as to whether those were extra wall costs, and additive to the amount of the quantum of the award.

On 3 September 2019 the State responded, confirming that the costs for the Corian wall sheeting had not been included in the other wall costs tabulated in Mr Burchall’s supplementary report, and that those costs were separate and additional.

On 17 September 2019 the arbitrator wrote to the parties referring to his letter of 28 August 2019, and observing that Rainbow had made no response. He advised that accordingly he intended to accept the Corian sheeting used in the wet areas as costs in the rectification, and to incorporate them in the award in due course.

On 20 September 2019 Rainbow responded asserting, in my view incorrectly, that at no time was a response sought from Rainbow by the arbitrator in respect of that issue. The letter concluded by seeking clarification as to whether the arbitrator sought further submissions or evidence from the claimant in respect of the cost of replacement of solid surface sheeting in wet areas, or rectification works to the wet areas generally. In fact the arbitrator had not sought further submissions or evidence in relation to the rectification works of the wet areas generally.

On 30 September 2019 the arbitrator made the award headed “Further Interim Award Number 2” dated 30 September 2019 which I have referred to as the September Award. The document headed “Addendum Number 2” held that the Corian costs were for wall panels in wet areas, and awarded the State $50,152.78 for those costs; that amount was included in the table in the Further Interim Award Number 2.

Counter-claim outside the scope of the arbitral reference

Rainbow contends that the only dispute, the subject of the reference to arbitration, was Rainbow’s claim for payment of the retention monies as reflected in the notice of dispute, and notice of dissatisfaction delivered by Rainbow.

In my view that point must be rejected.

First, by 19 October 2017 Rainbow, by its solicitors, had agreed to submit the State’s counter-claim for the approximate amount of $410,000 in relation to defective workmanship as part of the arbitral proceeding.

Second, thereafter, the preliminary conferences, pleadings and hearing of evidence over three days in the December Hearing, and the steps leading to the February, August and September Awards were all carried out without any objection by Rainbow to the jurisdiction of the arbitrator to deal with the State’s counter-claim on the basis that it was not part of the dispute submitted for determination by the arbitrator.

It is trite law that parties may, by agreement, expand the scope of their dispute from an original subject matter of reference, and that a party who agrees to do so will be bound by their conduct, either as a matter of implied agreement, or waiver, or estoppel. See, for example, under earlier arbitration statute laws, Westminster Chemicals & Produce Limited v Eichholz & Loeser [1954] 1 Lloyd’s Reports 99, 105 and Balfour Beatty Power Construction Australia Pty Ltd v Kidston Gold Mines Limited [1989] 2 Qd R 105, 116.

Neither of the parties submitted that the provisions of the Act altered the operation of those principles of law.

Reasonable opportunity of presenting party’s case

By section 18 of the Act:

“The parties must be given a reasonable opportunity of presenting the parties’ cases.”

By section 34(2)(a)(ii):

“A ground on which an arbitral award may be set aside is if the party making the application was unable to present the party’s case.”

Two points raised by Rainbow may be considered under this heading. First, Rainbow complained that it did not have the opportunity to cross-examine Mr Burchall in respect of his supplementary reports. Second, Rainbow complained that the arbitrator proceeded to award the claimed Corian costs by the September Award without giving it the opportunity to present submissions or provide evidence. In my view both allegations must be rejected.

As to Mr Burchall’s supplementary reports, although Rainbow reserved its right to cross-examine Mr Burchall in its letter of 12 July 2019, after furnishing Mr Lee’s report under cover of its letter dated 20 July 2019, it did not seek an opportunity to cross-examine Mr Burchall. Instead, it made a written submission relying on Mr Lee’s report that the reasonable costs of rectification of bathroom wet areas were no greater than a certain amount. In my view Rainbow thereby impliedly invited the arbitrator to proceed to determine that issue. On 23 July 2019 the State requested the arbitrator not to proceed further until it could provide an appropriate response. On 29 July 2019 the State provided that further response, including a submission that the arbitrator should proceed to award the full amount properly, and reasonably incurred by the State in rectifying the defective work on the basis of Mr Burchall’s expert evidence. On 31 July 2019 Rainbow responded, submitting Mr Lee’s report must be considered. At no time during this correspondence was any request made to cross-examine Mr Burchall.

As to the September Award, following the State providing Mr Trotter’s statement and annexures to the arbitrator on 22 August 2019, the arbitrator clearly requested both parties to clarify, and advise as to the appearance that the Corian benchtops in Mr Burchall’s reports were in fact Corian used as Corian wall sheeting, not in the benchtops as Mr Burchall had postulated, and as to whether the extra Corian wall costs were not included in the other wall costs tabulated in the supplementary report.

Following that, on 17 September 2019 the arbitrator noted that the claimant made no response, and advised his intention to accept those costs and incorporate them in the award. The award was not made until 30 September 2019. In the interim period Rainbow sent an argumentative letter to the arbitrator, as I find misstating that no prior request for clarification had been made to Rainbow, and asking the arbitrator to clarify whether he sought further submissions or evidence from the claimant in respect of items by way of rectification works to the wet areas generally, as well as replacement of solid surface sheeting in wet areas.

In my view those facts do not reveal any inability on Rainbow’s part to present its case in relation to the Corian costs.

Treating the parties with equality

Section 18 of the Act also provides that the parties must be treated with equality. And section 34(2)(b)(ii) provides that an arbitral award may be set aside by the court if the court finds that the award is in conflict with the public policy of the State. On these grounds Rainbow makes a number of complaints about the arbitral process.

First, Rainbow complains that at the conclusion of the oral hearing on 19 December 2018 the arbitrator was to decide the dispute in respect of all issues. He did not, in fact, do so in the February Award.

In effect, Rainbow seeks to draw an analogy between the arbitral proceeding in the present case, and a common law trial where judgment is reserved, after which time a party would only be granted leave to reopen its case in accordance with well-known principles. See The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2009] NSWSC 132 at paragraphs 4 to 8 where the principles are articulated, and some of the leading cases are collected, as an example.

Rainbow submits that in this arbitral proceeding it was wrong for the arbitrator to defer a decision on quantum of the counter-claim for rectification costs of the wet areas in order to give the State the opportunity to put in further evidence and submissions. The State submits that the arbitrator’s power to do so by a partial award is supported by the rules under which the arbitration was conducted for the purposes of section 19 of the Act being the Resolution Institute Arbitration Rules.

Article 17 sub(1) of those rules provides that:

“Subject to the Rules an Arbitral Tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality.”

Article 27 sub (3) provides that:

“At any time during the arbitral proceedings the Arbitral Tribunal may require the parties to produce documents, exhibits or other evidence.”

Article 27 sub (4) provides that:

“The Rules of Evidence do not apply, and the Arbitral Tribunal shall determine the admissibility, relevance, materiality, and weight of the evidence offered.”

However, none of those rules deals explicitly with the power of an arbitrator to make a partial award when all issues have been submitted for determination, and the hearing of the arbitration on all issues concluded. Nevertheless, the power of an arbitrator to make a partial award is not in dispute, and it is recognised by the Act.

In my view it was not a failure to treat Rainbow with equality, for the arbitrator not to finally determine the wet areas rectification costs quantum in the February Award. In the relevant part of Mr Burchall’s first report there was some lack of clarity of expression. Further, when read fairly, the report did not fully deal with the costs that were claimed by the State.

By not determining the question of that quantum on the inadequate evidence that was before him, the arbitrator can be said to have disadvantaged Rainbow by exposing it to the risk that eventuated of the State repairing its case by producing further and better evidence, but in my view that is not sufficient to conclude that Rainbow was not treated with equality within the meaning of section 18, or that the arbitrator proceeded in a way that was in conflict with the public policy of the State within the meaning of section 34(2)(b)(ii).

In amplification of this ground of challenge, Rainbow made other submissions in writing and orally that I acknowledge. But in my view it is unnecessary to say more to dispose of the question whether the arbitrator’s decision to make a partial award in the February Award was a step that constituted not treating Rainbow with equality.

Next, Rainbow submits that the disagreement between the supplementary reports of Mr Burchall, on the one hand, and the report of Mr Lee, on the other hand, required that the arbitrator engage in further processes before resolving those differences by decision, either by requiring a joint meeting of experts and a joint report, or by cross-examination.

In my view the arbitrator was not required to do either. As to a joint meeting of experts, and a joint report, neither of the parties requested it, and it is not a procedural pre-condition to deciding disputed question of expert opinion. As to cross-examination, I have already dealt with the fact that Rainbow did not ultimately request cross-examination itself. Itis hardly sensible to suggest that in those circumstances the arbitrator was required of his own motivation to do so. In any event, in my view, any failure to do so did not amount to not treating Rainbow with equality; nor did it amount to proceeding in conflict with the public policy of the State.

Rainbow makes cognate complaints in relation to the September Award. It complains that for a second time the arbitrator did not finally decide the issue of the wet areas rectification quantum to the extent that he sought further clarification about the Corian costs. Rainbow complains that, yet again, when the State had not presented sufficient or clear enough evidence to justify an award for those costs in making the August Award, the arbitrator made a partial award that excluded that item of dispute from decision.

It is understandable, in my view, that a party to a proceeding which has been brought and heard with a view to the final resolution of the dispute might feel aggrieved when not once, but twice, the decision maker defers resolution of issues included in the dispute, so as to give the opposite party the opportunity to repair its case. In my view there may well be a case in which to do so time and again would amount to not treating the parties with equality within the meaning of section 18 of the Act, and constitute a conflict with the public policy of the State for the purposes of section 34 subsection (2) (b)(ii).

It is also understandable that Rainbow feels aggrieved by some of the contents of the August Award. In particular, the statement at paragraph (xxvi) on page 7, that Rainbow did not present evidence against the counter-claim originally, and chose not to examine Mr Burchall at the December Hearing is one that lacks any logical force, and amounted to a gratuitous criticism not relevant to the decision that was before the arbitrator on the basis of Mr Burchall’s supplementary reports, and Mr Lee’s report as at August 2019.In the arbitrator’s defence I observe that it was a submission positively made to him by the State’s lawyers but it would have been better not repeated in the award.

However, in the present case the reservation for further consideration of the Corian costs was a single, separate item in small evidentiary compass, although valued at over $60,000. Given the limited nature of the further clarification, and opportunity accorded to the State to further repair its case, whilst giving the opportunity to Rainbow to make any response, I do not conclude that the arbitrator did not treat Rainbow with equality for the purposes of section 18.

In my view it must be practically recognised that in construction disputes, at times, there are many items to be considered, and it may be that an arbitrator, in doing so, will require relatively limited additional evidence or assistance from the parties in the course of considering the arbitral award to be made.

For those reasons, in my view, Rainbow’s application to set aside the September Award should be dismissed.

It becomes unnecessary therefore to consider any further questions as to the legal effect of the August Award.

It must also follow, in those circumstances, that an order should be made that the September Award should be enforced under section 35 of the Act as the grounds on which enforcement may be refused, contained in section 36(1) of the Act, that mirror the grounds of the application to set aside the September Award are not made out.

The orders I have concluded that should be made are that:

  1. on application 14202 of 2019 the order of the court is that the application is dismissed;
  2. on application 14161 of 2019 the order of the court is that the Further Interim Award Number 2, made by the arbitral tribunal on 30 September 2019, in the domestic commercial arbitration between the parties conducted under the Commercial Arbitration Act 2013 be enforced.

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

FEDERAL COURT OF AUSTRALIA 

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

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

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

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

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

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

 

ORDERS

THE COURT ORDERS THAT:

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

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

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

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

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

ORDERS

NSD 602 of 2019
BETWEEN:

INFRASTRUCTURE SERVICES LUXEMBOURG S.A.R.L.

First Applicant

 

ENERGIA TERMOSOLAR B.V.
Second Applicant

 

AND:

KINGDOM OF SPAIN

Respondent

 

 

JUDGE:

STEWART J

DATE OF ORDER:

24 FEBRUARY 2020

THE COURT ORDERS THAT:

 

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

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

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

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

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

 

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

 

REASONS FOR JUDGMENT

STEWART J:

INTRODUCTION

[1]

BACKGROUND

[4]

The relief sought

[4]

Background to NSD601

[9]

The ECT

[12]

The ICSID arbitration

[16]

Spain’s application for annulment of the Award

[21]

Background to NSD602

[25]

The ICSID arbitration

[27]

Spain’s request for rectification of the Award

[30]

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

[32]

THE PROCEEDINGS IN THIS COURT

[37]

Spain’s immunity claim

[37]

The applicants’ case on immunity

[39]

THE IMMUNITIES ACT

[44]

The ALRC Report

[44]

Part II – Immunity from jurisdiction

[46]

Part IV – Enforcement

[59]

THE ARBITRATION ACT AND THE INVESTMENT CONVENTION

[68]

The Arbitration Act

[68]

The Investment Convention

[79]

Interpretation of the Investment Convention

[83]

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

[89]

Some terminology

[89]

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

[95]

Object and purpose

[114]

The preparatory materials

[117]

The French and Spanish texts of Arts 53-55

[136]

Commentary on the Investment Convention

[145]

The foreign cases

[162]

Conclusion

[173]

SUBMISSION TO JURISDICTION

[177]

SECTION 34 OF THE ARBITRATION ACT

[202]

IMPLIED REPEAL

[204]

CONCLUSION

[209]

 

INTRODUCTION

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

    BACKGROUND

    The relief sought

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

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

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

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

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

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

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

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

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

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

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

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

    Background to NSD601

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

    The ECT

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

    The ICSID arbitration

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

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

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

  8. The award requires Spain to pay the applicants:

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

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

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

    Spain’s application for annulment of the Award

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

    Background to NSD602

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

    The ICSID arbitration

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

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

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

  18. The award required Spain to pay the applicants:

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

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

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

    Spain’s request for rectification of the Award

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

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

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

    THE PROCEEDINGS IN THIS COURT

    Spain’s immunity claim

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

    The applicants’ case on immunity

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

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

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

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

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

    THE IMMUNITIES ACT

    The ALRC Report

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

    Part II – Immunity from jurisdiction

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

    9  General immunity from jurisdiction

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

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

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

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

    10       Submission to jurisdiction

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

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

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

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

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

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

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

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

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

    Part IV – Enforcement

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

    Part IV—Enforcement

    30       Immunity from execution

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

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

    THE ARBITRATION ACT AND THE INVESTMENT CONVENTION

    The Arbitration Act

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

    34       Investment Convention awards to prevail over other laws

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

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

    (b)       an award under this Part.

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

    35      Recognition of awards

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

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

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

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

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

    The Investment Convention

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

    Recognition and Enforcement of the Award

    Article 53

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

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

    Article 54

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

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

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

    Article 55

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

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

    Interpretation of the Investment Convention

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

    Article 31.  GENERAL RULE OF INTERPRETATION

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

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

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

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

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

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

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

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

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

    Article 32. SUPPLEMENTARY MEANS OF INTERPRETATION

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

    (a)       Leaves the meaning ambiguous or obscure; or

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

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

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

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

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

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

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

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

    Some terminology

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

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

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

    Object and purpose

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

    The preparatory materials

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

    The foreign cases

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

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

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

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

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

    Conclusion

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

    SUBMISSION TO JURISDICTION

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

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

    (Emphasis added.)

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

    SECTION 34 OF THE ARBITRATION ACT

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

    IMPLIED REPEAL

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

    CONCLUSION

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

Associate:

Dated: 24 February 2020