Australian International Islamic College Board Inc v Kingdom of Saudi Arabia

[2012] QSC 259

SUPREME COURT OF QUEENSLAND

CITATION:

Australian International Islamic College Board Inc v Kingdom of Saudi Arabia & anor [2012] QSC 259

PARTIES:

AUSTRALIAN INTERNATIONAL ISLAMIC COLLEGE BOARD INC. IA 30976
(plaintiff)
v
KINGDOM OF SAUDI ARABIA
(first defendant)
HIS EXCELLENCY AHMAD IBN MOHAMMED AL SAIF
(second defendant)

FILE NO/S:

2720 of 2012

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

10 September 2012

DELIVERED AT:

Brisbane

HEARING DATE:

20 June 2012

JUDGE:

Martin J

ORDER:

Declare that the proceeding has not, for want of jurisdiction, been properly started.

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – JURISDICTION AND GENERALLY – GENERALLY – where the Foreign States Immunities Act 1985 (Cth) provides immunity from jurisdiction of Australian courts for foreign states in defined circumstances – where plaintiff submits s 11(2)(b) does not apply – whether claim is in respect of a scholarship or a payment of a like kind – whether the proceeding has not been properly started for want of jurisdiction

PROFESSIONS AND TRADES – LAWYERS – DUTIES AND LIABILITIES – SOLICITOR AND CLIENT – ACTING AGAINST FORMER CLIENTS – where solicitors for the defendants previously acted for the plaintiff in a planning matter – where plaintiff alleges solicitors acquired highly confidential information about plaintiff – where solicitors engaged in planning matter were in a separate group – whether solicitors for the defendants should be disqualified

Foreign States Immunities Act 1985 (Cth), s 3, s 11
Legal Profession (Solicitors) Rules 2007, r 4

Aircraft Leasing Ltd v United States (2005) 12 VR 340
Zhang v Zemin (2010) 79 NSWLR 513

COUNSEL:

R Mitry (solicitor) for the plaintiff
SL Doyle SC with JJ Baartz for the first and second defendants

SOLICITORS:

Mitry Lawyers for the plaintiff
Cooper Grace Ward for the first and second defendants

1. There are two applications before the court.

1. The first in time is by the first and second defendants. They seek declarations that:

(a)        This proceeding has not, for want of jurisdiction, been properly started by reason of the Foreign States Immunities Act 1985 (Cth) (“the Act”).

(b) Alternatively, that the plaintiff’s claim and statement of claim have not been properly served in accordance with the requirements of the the Act.

1. The second application is by the plaintiff. It seeks an order that Cooper Grace Ward, the solicitors for the defendants “be disqualified from further representing the First and Second Defendants in this proceeding for breach of Rule 4 of the Legal Profession (Solicitors) Rules 2007”.

Disqualification of solicitors

1. The plaintiff relies on the following:

(a)        In 2009 the plaintiff retained Cooper Grace Ward to act for it in an appeal in the Planning & Environment Court.

(b)        In an affidavit of Keysar Trad it is said that the solicitors developed an intimate knowledge of the operation of the College, its governing board and the financial difficulties that they were facing.

(c)        Mr Trad says that the members of the board of the college are very concerned that the solicitors for the defendants have acquired highly confidential information about the College while they previously acted for the College in the appeal.

(d)        Further, it is said that they are concerned that this confidential information may inadvertently be used by the solicitors in these proceedings.

1. The plaintiff referred me to “Rule 4 of the Legal Profession (Solicitors) Rules 2007”. Those rules were replaced on 1 June this year by a new set of rules called the “Australian Solicitors Conduct Rules”. Those rules contain the following, relevant provision:

“10.      CONFLICTS CONCERNING FORMER CLIENTS

10.1 A solicitor and law practice must avoid conflicts between the duties owed to current and former clients, except as permitted by Rule 10.2.

10.2 A solicitor or law practice who or which is in possession of confidential information of a former client where that information might reasonably be concluded to be material to the matter of another client and detrimental to the interests of the former client if disclosed, must not act for the current client in that matter UNLESS:

10.2.1 the former client has given informed written consent to the solicitor or law practice so acting; or

10.2.2 an effective information barrier has been established.”

1. A “conflicts search” was carried out by the solicitors for the defendants. The fact that the firm had acted for the plaintiff previously did not show up because the planning matter was in the name of an individual on behalf of the Australian Islamic Education Trust, rather than in the plaintiff’s name.

1. The term “effective information barrier” is not defined in the rules but it is reasonably clear from the context that it is conceptually the same as what has been referred to previously as “Chinese Walls”[1].

   [1]          Asia Pacific Telecommunications Limited v Optus Networks Pty Limited [2007] NSWSC 350

1. The solicitors for the defendant have filed affidavits which establish that:

(a)        The lawyers who were engaged in the planning matter were in a separate group within the firm.

(b)        Of the three lawyers engaged for the plaintiff at that time, two have left the employment of the firm.

(c)        Mr Russo, who is the partner with the carriage of this action, has deposed to not having spoken to the partner who had the carriage of the planning matter and undertakes not to discuss the proceeding or the planning matter him.

1. In these circumstances, the requirements of the establishment of an effective information barrier are satisfied. In any event, none of the material which was disclosed to Cooper Grace Ward in the planning matter was demonstrated to have any relevance to the current application or the current proceeding brought by the plaintiff. Even if I was of the view that there might be some possibility of confidential information being improperly used (which I do not), then I would not restrain Cooper Grace Ward on this application because it, as will become apparent, requires only that I consider the state of the pleadings and the operation of the Foreign States Immunities Act 1985 (‘the Act’).

Foreign States Immunities Act 1985

1. Section 9 of the Act provides:

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

1. Section 3(1) of the Act defines a “foreign State” to mean:

“a country the territory of which is outside Australia, being a country that is:

(a)        an independent sovereign state; or

(b)        a separate territory (whether or not it is self‑governing) that is not part of an independent sovereign state.”

1. The definition of “foreign State” is extended under s 3(3) of the Act by providing that it includes a reference to the executive government or part of the executive government of a foreign State.

1. It was not in contest that each of the defendants falls within the definition of a “foreign state”. See also Zhang v Zemin (2010) 79 NSWLR 513.

The exclusion from the Act

1. It is pleaded by the plaintiff that:

(a)        It provides educational services to persons of Muslim faith from preparatory year to class 12 and to both Australian and international students;

(b)        The Ministry of Higher Education of the first defendant provides scholarships to nationals of the first defendant to study overseas;

(c)        In the period from 2005 to 2008, the plaintiff received funding from both the Commonwealth and State Governments with respect to a number of its students who were children of Saudi scholarship recipients;

(d)        These payments, in the amount of $2,140,361.68, had been made on the basis that the relevant students were Australian citizens; and

(e)        These payments were made in error as the students were not Australian citizens and the plaintiff has been required to repay this amount.

1. The plaintiff claims that it is entitled to payment of this sum, or an amount equivalent to it by way of damages, from the defendants under two agreements it alleges are in existence:

(a)        The first agreement: It is alleged that the Ministry of Higher Education provided assurances to the plaintiff that the costs of educating the children of Saudi scholarship recipients who were studying at the college and who were not Australian citizens would be met by the first defendant. In consideration of that promise the plaintiff provided educational services to children of Saudi scholarship recipients.

(b)        The second agreement: This was an agreement between the plaintiff and the second defendant whereby the second defendant agreed that the outstanding amount would be repaid by both the first and second defendants, in consideration of the plaintiff forbearing from suing the first defendant and from making public the issue of non payment.

1. Unless there is an applicable exclusion from the immunity, the defendants are not subject to the jurisdiction of this Court. The plaintiff submits that the court may hear this proceeding because the defendants do not have immunity due to the operation of s 11 of the Act.

1. Section 11 provides as follows:

“11       Commercial transactions

(1)A foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction.

(2)         Subsection (1) does not apply:

(a)       if all the parties to the proceeding:

(i)  are foreign States or are the Commonwealth and one or more foreign States; or

(ii)       have otherwise agreed in writing; or

(b)  in so far as the proceeding concerns a payment in respect of a grant, a scholarship, a pension or a payment of a like kind.

(3)  In this section, commercial transaction means a commercial, trading, business, professional or industrial or like transaction into which the foreign State has entered or a like activity in which the State has engaged and, without limiting the generality of the foregoing, includes:

(a)       a contract for the supply of goods or services;

(b) an agreement for a loan or some other transaction for or in respect of the provision of finance; and

(c)  a guarantee or indemnity in respect of a financial obligation; but does not include a contract of employment or a bill of exchange.”

1. Whether or not either or both of the alleged agreements were commercial transactions within the meaning of the Act need not be finally determined. Subsection (1) of section 11 does not apply because the proceeding concerns a payment in respect of “a grant, a scholarship, a pension or a payment of a like kind”.

1. The pleading identifies that the claim is made with respect to payments relating to the cost of educating the children of Saudi scholarship recipients. Mr Mitry who appeared for the plaintiff argued that the circumstances of this case did not come within the provisions of s 11(2)(b). He sought to rely upon definitions contained in the Migration Regulations 1994 to elucidate the meaning of “scholarship”. They, being contained in unrelated legislation, are not relevant.

1. Mr Mitry also relied upon the decision of the Full Court of the Federal Court of Australia Australian Competition and Consumer Commission v P T Garuda Indonesia Ltd (2011) 192 FCR 393 which has, since the hearing, been upheld by the High Court of Australia – P T Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33. It is not relevant to these proceedings. That case considered whether a civil penalty proceeding concerned a “commercial transaction”. It did not deal with the exception of “scholarships” from the operation of s 11.

1. The term “scholarship” does not have a technical meaning in these circumstances. I respectfully agree with Adam J in Re Leitch (deceased) [1965] VR 204 where he said,at 206:

“… I am not prepared to hold that according to common usages of speech, or by reason of any authoritative definition, the word ‘scholarship’, in the absence of expressed purposes or conditions attached to it, connotes anything more than the grant of an emolument, normally in a sum of money, to a scholar selected on merit or upon some other rational criterion.”

1. The assurance alleged to have been made to the plaintiff is that the first defendant would meet “the costs of educating those children”. That is, that the first defendant would be responsible for paying a sum of money for the education of children of Saudi scholarship recipients. That brings it within the exclusion in s 11(2)(b).

1. It was argued by Mr Doyle SC that the second agreement was not a “commercial transaction”. The meaning of that term was examined in P T Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33 where the following appears:

“37. The term "commercial transaction" as it appears in s 11(1) is defined in s 11(3) as meaning:

‘a commercial, trading, business, professional or industrial or like transaction into which the foreign State has entered or a like activity in which the State has engaged and, without limiting the generality of the foregoing, includes:

(a) a contract for the supply of goods or services;
(b) an agreement for a loan or some other transaction for or in respect of the provision of finance;and
(c) a guarantee or indemnity in respect of a financial obligation; but does not include a contract of employment or a bill of exchange.’

38. The express statement in s 11(3) "without limiting the generality of the foregoing" precludes resort to the ejusdem generis principle to limit the generality of the preceding words in the definition of "commercial transaction". In Leon Fink Holdings Pty Ltd v Australian Film Commission - #, Mason J said of the statute under consideration there:

‘In this case the words 'without limiting the generality of the foregoing' evince an intention that the general power should be given a construction that accords with the width of the language in which it is expressed and that this construction is not to be restricted by reference to the more specific character of that which follows. The clause therefore operates to negative the restrictive implication which might otherwise have been derived from the presence of the specific power to lend contained in par (a).

39. Section 11(1) denies the immunity in a proceeding, otherwise conferred on an entity such as Garuda by s 9 and s 22, by stating that there is no immunity "in so far as" this proceeding "concerns" what is "a commercial transaction". The term "concerns" is not further explicated by the text of the Acthttp:// - #.

40. Garuda accepts that the proceeding may involve an investigation "at an evidentiary level" into contracts for carriage of freight by Garuda, from which to infer purpose or likely anti-competitive effect, or the giving effect to the impugned arrangement or understanding within the meaning of the provisions of the TPA. However, Garuda submits that it is critical for the operation of s 11(1) of the Act that the ACCC does not plead the terms of any such contract, nor seek any remedy by way of variation, rescission, compensation or otherwise with respect to any of the contracts for the carriage of freight by Garuda. Further, it is said to be critical that no party to any such contract, or person claiming to have suffered loss by reason thereof, joins in the proceeding.

41. In sum, the submission for Garuda is that the proceeding does not seek to vindicate any "private law right" in respect of any freight contract and that, absent this, s 11(1) of the Act does not apply to deny immunity. This postulated dichotomy between private and public law as controlling the meaning of "concerned" in s 11(1) should not be accepted.

42. The definition of "commercial transaction" fixes upon entry and engagement by the foreign State. It does not have any limiting terms which would restrict the immunity conferred by s 9 and s 22 to a proceeding instituted against the foreign State by a party to the commercial transaction in question. Further, it should be emphasised that the definition does not require that the activity be of a nature which the common law of Australia would characterise as contractual. The arrangements and understandings into which the ACCC alleges Garuda entered were dealings of a commercial, trading and business character, respecting the conduct of commercial airline freight services to Australia. The definition of a "commercial transaction" is satisfied.”

1. The width of the definition is such that I cannot be satisfied, on the material available, that the second agreement is not a commercial transaction. Even if it is characterised correctly as political arrangement designed to avoid embarrassment it might still come within the definition if that is not the only characterisation available on the facts. It is not necessary to reach a conclusion on this.

1. Section 11(2)(b) concerns “proceeding … in respect of a … scholarship … or a payment of a like kind”. The expression “in respect of” has been described as having “the widest possible meaning of any expression intended to convey some connection or relation between two subject matters”.[2]

   [2]Powers v Maher (1959) 103 CLR 478, 484-5.

1. If the second agreement was a commercial transaction it would be subject to the exclusion. Even if one were to take the payments allegedly to be made as not being strictly a “scholarship”, they would still fall within the catch all provision of “a payment of a like kind”. In any event, the exclusion is sufficiently wide to capture the alleged second agreement.

1. The proceeding, the subject of this application, falls within the exclusion in s 11(2) of the Act.

1. This Court has no jurisdiction by reason of the Act to determine this proceeding. I declare that the proceeding has not, for want of jurisdiction, been properly started.

1. I will hear the parties as to any further orders.