CBI Constructors Pty Ltd & Anor v Chevron Australia Pty Ltd

[2023] HCATrans 166

[2023] HCATrans 166

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P5 of 2023

B e t w e e n -

CBI CONSTRUCTORS PTY LTD

First Applicant

KENT PROJECTS PTY LTD

Second Applicant

and

CHEVRON AUSTRALIA PTY LTD

Respondent

Application for special leave to appeal

GORDON J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON FRIDAY, 17 NOVEMBER 2023, AT 1.24 PM

Copyright in the High Court of Australia

GORDON J:   I will announce appearances in this matter.

MR J.C. SHEAHAN, KC appears with MR B. YIN for the applicants.  (instructed by Clayton Utz)

MR S.L. DOYLE, KC appears with MR S.J. DAVIS for the respondent.  (instructed by Norton Rose Fulbright)

GORDON J:   Mr Sheahan.

MR SHEAHAN:   Thank you, your Honours.  The issues in this case arise at the intersection of two questions of considerable importance for arbitral practice.  One is the expressly limited scope for curial intervention.  The second is the frequent resort by arbitral tribunals exercising the flexibility that is given them by the parties and by the Act to separate issues for determination in the course of one dispute or a series of disputes.

The first ground of appeal, which captures the first two of the three special leave grounds, can be seen to arise quite neatly, in our respectful submission, from paragraph 63 of the reasons of the primary judge, at application book 25.

GORDON J:   So, this is the question whether what is described as the contract criteria case is able to be run in the second interim award hearing?

MR SHEAHAN:   Yes, as a consequence of the second interim award hearing.

GORDON J:   Thank you.

MR SHEAHAN:   What your Honours will see in paragraph 63 is an acknowledgement, a concession, of the respondents.  It:

acknowledges that where an arbitral tribunal has (erroneously) concluded a party is not precluded from advancing certain claims by reason of –

estoppel, res judicata and so on, there will be:

an error of law.

But, significantly, the primary judge says:

Chevron accepts that any such error of law ultimately will not –

in the judge’s emphasis:

bear against the jurisdictional authority of the arbitral tribunal.

Can I ask your Honours to note three things about that.  The first is the concession was correct.  It is supported by a series of decisions that appear on the next page.  The second is that the preclusionary rules that are referred to by the primary judge are all predicated one way or another on a final binding determination of a claim or an issue between the parties by a competent tribunal.  The third thing is that, as the primary judge emphasises, an erroneous finding of preclusion or non‑preclusion:

will not bear against the jurisdictional authority of the arbitral tribunal.

In other words, the court cannot interfere with the conclusion that there was not a prior final and binding determination of the claim.

BEECH‑JONES J:   Mr Sheahan, is that directed to the finding in an interim award or a finding in some other arbitral or court body?

MR SHEAHAN:   It would apply to either.

GORDON J:   You have listed three cases there, including BTN from Singapore.  The Hong Kong Court of Final Appeal recently in C v D handed down a decision directed to this question as well.  Does that at all impact upon this submission?

MR SHEAHAN:   No, it does not.  In fact, the majority of the findings ‑ ‑ ‑

GORDON J:   I should be fair, that is right.  Justice Ribeiro’s judgment was accepted by the Chief Justice and two other Justices, and Justice Gummow seemed to adopt a different view of the land.

MR SHEAHAN:   They all reached the same conclusion.

GORDON J:   That is true.

MR SHEAHAN:   On this question, four of the five members of the court referred to the relevant decision of the Singapore Court of Appeal with evident approval.  At paragraph 53, I think.  For our purposes ‑ ‑ ‑

GORDON J:   The reason why I ask, then – is the principle seen at least to that extent, subject to Justice Gummow’s view, well‑settled?

MR SHEAHAN:   They do.

GORDON J:   This is application of those principles to these facts?

MR SHEAHAN:   The application of those principles to these facts, first of all, supports the concession that was made, and in our submission, it highlights a tension – a plain tension – between the outcome arrived at by the Court of Appeal, and the position for which we contend.

That concession, as recorded by the trial judge, in our respectful submission, should have been the end of the matter.  Should have been.  What happened, in fact, was that both the primary judge and the Court of Appeal went on to act in a manner – on the face of it, at least – inconsistently with that concession, because they found that the Tribunal’s conclusion that there had not been a preclusionary prior final determination was wrong, in their view, and they treated that conclusion as bearing against the jurisdictional authority of that Tribunal.  The way they did this, the way they achieved this apparently inconsistent outcome – we would say, actually inconsistent outcome – was that they treated the question of the prior final determination as subject to a different approach if done under the rubric of a functus officio inquiry.

The critical thing to appreciate in that respect is that the functus officio argument contradicts the position arrived at by the Tribunal within its jurisdiction.  That is, the Tribunal had reached the conclusion within its jurisdiction that there was no final prior determination of the whole issue, the functus officio argument is predicated upon the opposite.  There are several problems with this.  First, functus officio itself.  Justice Akenhead – one of the arbitrators – as a High Court judge had said previously that it was not a term of art, and the majority of the Full Court of the Federal Court of Australia has made a similar point, in a case we refer to in our application at paragraph 24.  It is not a doctrine with any substantive legal content, rather, it is a label or a description applied to circumstances for the purposes of explaining why a power, function, or duty can no longer be exercised or performed again.

GORDON J:   Do you accept that that kind of analysis, regardless of the label, is directed at determining what it is the parties have agreed to have resolved by the Tribunal and whether or not what has been agreed has been resolved?

MR SHEAHAN:   I think this the answer to your Honour’s question.  All of this, we accept, has to be brought within a section 34(2)(a)(iii) rubric.  That is the only power to intervene that is engaged here, and that depends upon there being a question as to the scope of what was submitted to arbitration.  Here, that question is:  what was the residual scope of what was submitted to arbitration?  That is how it came to be.

GORDON J:   That is right.  There was the bifurcation of liability and quantum, and the question is:  is this in the second bracket or only in the first?

MR SHEAHAN:   Yes.  Our short point about this is that where the Tribunal, within jurisdiction, has made a finding, interpreting the effect of its own procedural orders, and the context of the parties’ conduct, and the pleadings, and so on, as to whether there had been a preclusionary final determination of all issues in the case, that is a given.  In examining the scope question – what is the residual scope – the court has to take that as a given; it cannot simply review it.

To put it slightly differently, you cannot treat the Model Law as providing a charter for a sort of forensic Schrodinger’s cat, where, as between the same two parties, a fact is true in one place and false in another place.

BEECH‑JONES J:   Sorry, since we are into quantum theory, what is the fact that is true in one place and untrue in another?

MR SHEAHAN:   The fact is whether, having regard to the proper interpretation of the Tribunal’s procedural orders, all issues of liability had been determined by the first interim award.  The Tribunal said they had not.  They said, we did not think we were doing that, the parties could not have thought we were doing that, when you look at the language, and so – there were many debates about many things brought into play in reaching that conclusion.  The Court of Appeal disagreed with them all, basically.  They came up with different conclusions as to the meaning of what the Tribunal had said and done in its procedures in the conduct of the arbitration.

GORDON J:   And why is that not a question about targeting the Tribunal’s authority, as distinct from determining whether or not that claim is admissible in the language adopted by the authorities?

MR SHEAHAN:   The scope of the submission to arbitrate here would certainly have carried with it, in our respectful submission – this is really our second ground, but I will deal with it now – the proper interpretation of the procedural orders of the Tribunal itself.  In other words, you would take the parties as having agreed, in submitting their dispute for arbitration, that the Tribunal would make procedural orders and would be the decision‑maker as to what those orders meant and their effect, as opposed to the court.  All those decisions about the meaning and effect of the Tribunal’s orders were within the scope of the parties’ submission to arbitration.

The only thing that was left was implementing those orders as interpreted.  All of that was within scope.  When you look at this question through a section 34 scope lens and all the integers of the conclusion that this matter had not been finally determined by a prior award, all the integers are matters within the scope of the submission to arbitrate and the Tribunal merely gave effect to its conclusions about that.

BEECH-JONES J:   If a tribunal issued what looked to be a final award and then a question arose as to whether, say, it had dealt with all the claims or something, who would decide whether they had, in fact, resolved the dispute or not?  Would that be a court question or would that be an arbitral tribunal question?

MR SHEAHAN:   So, a tribunal issued a final award ‑ ‑ ‑

BEECH-JONES J:   It said final award.

MR SHEAHAN:   Final award, and disposed of the claim one way or the other, and then they came back a week later of their own motion or on someone’s application and said, we have had second thoughts, we want to have another go, we could have expressed that better, perhaps we made an error, that would plainly be, in the relevant sense, outside scope, and the court would look at what had happened and make up its own mind about that.  But we are not in that situation because, as we submit, all the integers to the question, was there a final preclusionary decision at an earlier time, all the integers are the proper interpretation of the Tribunal’s own orders – its own procedural orders.  Those things are all within scope. 

So, once you bring all that material into play and you reach the conclusion there was no final preclusionary decision at an earlier time, that is the end of the matter.  The court can look to decide is there a scope question, but it cannot ignore or depart from those decisions about the effect of the previous orders because all those decisions are within scope.  To go back to your Honour’s example, the subsequent revised award is plainly outside of scope, and the court can say that.  But here the position is different.

GORDON J:   One of the ways that you might look at the first interim award is to say that it was a final award on liability and what was left was quantum.

MR SHEAHAN:   That is what the primary judges in the Court of Appeal, in effect, have done.  But they have done that – as your Honours can see by looking at the Court of Appeal’s reasons at application book 204 and following – by the process that I described before, going through and interpreting procedural orders of the Tribunal.  So, paragraph 102 commences:

On the proper construction of par 1(a) of Procedural Order 14 –

And there follow over a couple of pages – there is an in‑depth examination of various procedural orders – 14, 15, 15A and 17.  At 111 they talk about:

The objective meaning and effect of Procedural Orders 14 and 15 (and 15A) –

And then in 113 there is a conclusion, and then at 114 the critical conclusion.  Our point is that what was not open to the court was to go back and revisit the proper interpretation of all those procedural orders when the Tribunal had done that exercise, and that exercise of interpreting its own procedural orders was within its jurisdiction.

Similarly – so this is ground of appeal 2 – for ground of appeal 1, the West Australian courts had no power to ignore the decision of the Tribunal that there had been no preclusionary prior determination of all the issues in the case in deciding a question of res judicata or issue estoppel, just put that to one side for the purposes of deciding functus officio.  It could not do that because those decisions about res judicata and issue estoppel were within scope, they were within the jurisdiction.

BEECH‑JONES J:   That does not sound like it adds anything to ground 1.  As in, once you get – if it is correct, that goes to jurisdiction, and that was a matter for the court, was it not?  There is no question of deferring to the Tribunal’s assessment of its own jurisdiction.

MR SHEAHAN:   No, but what we are addressing is not deferring to the Tribunal’s assessment of its own jurisdiction.  What we are addressing is deferring to the Tribunal’s assessment of matters within – acknowledged, agreed undeniably within its jurisdiction, which become integers for a later debate about jurisdiction.

GORDON J:   It is two ways of looking at the one coin, is it not?  One is to say, I think you have integers which are the Tribunal’s own, or procedural orders they are entitled to interpret themselves and make their own assessment of whether or not it is A or B, first, as a challenge to the question about the authority of the Tribunal, having made those procedural orders, as to whether or not they go to the jurisdiction of the Tribunal to proceed further.

MR SHEAHAN:   All we say, your Honour, is that in that context where the earlier decisions about issue estoppel or about the many procedural orders that have been made avowedly within jurisdiction, those findings stand, otherwise you produce the intolerable situation where for one purpose you have facts that are true and for another purpose they are false.  You have the absurd situation which results from the Court of Appeal’s judgment that if this – if the arbitral tribunal deciding the second matter had been dealing with a decision of another tribunal, not itself, there would be no question of functus officio, no basis for challenging its determination and the contractual rights claimed – the second claim – would be continuing.

GORDON J:   I do not know about that.  It may very well be that the view was taken that there is nothing the parties have agreed X and this is now X plus Y and therefore that there is no party agreement to go further.

MR SHEAHAN:   But on the hypothesis I am putting to your Honour, the interim award two is decided in exactly the same way by the same group of people on the same materials, it is just that the people deciding interim award one are different people.  On that analysis, the second decision would just be a res judicata judgment.  Just res judicata.  There would be no functus officio question, just res judicata.  In that situation, the same reasons apply to the same suite of considerations.  Just a few different names in the first part would create a situation where there would be no such – no jurisdictional argument.

The Court of Appeal’s decision is that this functus officio point can arise and can only arise if the res judicata problem arises from a tribunal’s own earlier judgment.

GORDON J:   I think we have your point, Mr Sheahan.

MR SHEAHAN:   And that, we say, is absurd.

GORDON J:   Thank you.  Mr Doyle.

MR DOYLE:   Yes, your Honours.  Your Honours, as to the first point, if it is correct – what our learned friends submit – it means an arbitral tribunal not only is competent to make decisions about the existence of its jurisdiction, it is able to do so conclusively and exclusively, which has never been the law.  In our submission, the primary judgment of the Court of Appeal approached the matter in an orthodox way.  They concluded that the first award dealt with all issues of liability.  The Contract Criteria Case they found, correctly, was an issue of liability.  Accordingly, the Tribunal no longer had jurisdiction to reopen or revisit that issue, an issue of liability. 

It followed that the second award was made entirely outside the scope of the submission to arbitration, which is captured by the language of section 34(2)(a)(iii), unless there was some new referral.  This section, in fact, contemplates that that is a circumstance in which the court can intervene to satisfy the award.  What is challenged, really, is because the facts which are relied upon for that conclusion also are the same, or many of the same facts, that led to a different legal conclusion, which is directed to the question – which operates only between the parties as to whether one of them is precluded by estoppel from pleading and advancing a case. 

Now, that is something which directly operates on the – that is the preclusionary estoppel question.  That is something which only operates on the parties, and we accepted below if that was the only issue, that would not be one which was open to be challenged under section 34(2)(a)(iii), and that is the concession that our friend took you to.  But if your Honours go to the very next paragraph of the primary judge’s reasons, you can see, in paragraph 64, the nature of the contention which was advanced: 

it is accepted that such errors –

that is, a preclusionary estoppel error:

will not assist Chevron upon a set aside application under CAA s 34(2).  That leaves only one potential argument . . . by the issue of the first interim award) became functus officio – upon all issues of liability in the arbitration –

et cetera.  That was the gravamen on the debate which followed.  Now, the challenge really suggests that if an issue – one of preclusionary estoppel, which of itself will not be jurisdiction – somehow precludes the court’s jurisdiction under section 34(2)(a)(iii) to deal with the question which is obviously jurisdictional.  If there is a contention that the Tribunal has delivered a final award on all issues of liability, that is a jurisdictional question, and that is something for which the right of review is afforded under section 34(2)(a)(iii). 

There is no special leave point, in our submission, in respect of this question.  The language of the section itself does not suggest that a jurisdictional challenge is somehow disqualified from being so, because the facts upon which it relies are inconsistent with facts the Tribunal decided in respect of some other legal conclusion.  Secondly, the proposition that the Court of Appeal adopted as to the Tribunal being functus accords with established principle.  The reason why the Tribunal is functus is because the scope of its jurisdiction is determined by the agreement between the parties.

The parties have submitted an issue to tribunal to be decided once, without the power to revisit it and decide it a second time.  That is the question here:  was it open to the court to conclude?  On the facts, it plainly was that the Tribunal had already decided all issues of liability and lacked the authority of the parties to decide it again.  The question, ultimately, is whether the second award dealing with the contract criteria case was one which they could not have heard because they had exhausted their jurisdiction in delivering the first award.

It is an inversion, really, to say that because some other question, admittedly relying upon the same facts, would – if that was all the Tribunal had done – have been within jurisdiction, to then argue that you cannot examine whether the reconsideration of the liability question was a matter of jurisdiction.  Our learned friends point to what they describe as an absurd or illogical distinction between the case where the Tribunal is considering its own earlier decision or considering an earlier decision of someone else.  The difference is, of course, essential and consistent with principle.  The core principle, which underlies our application, was that the jurisdiction of the Tribunal is set by the agreement of the parties.

It is only where the Tribunal has made the earlier decision that the question of functus officio can arise.  If the earlier decision is made by some other tribunal, then what has been referred to – the extant Tribunal – is consideration of whether, in light of that earlier fact, the parties can advance a particular claim.  So, of course there will be a difference, different legal principles are at play, and that is in fact the BTN v BTP case, where the arbitration was the second tribunal considering the effect of an earlier court’s decision.  It is not an absurd distinction, it is a distinction which derives from a matter of principle, from the nature of arbitration which derives from the authority of the parties, essentially, to decide things only once.

For those reasons, we submit there is no special leave question in respect of this first point.  The decision below, on the facts, is plainly right.  It is consistent with principle.  There is no direct challenge to the applicability of section 34(2)(a)(iii) to deal with an application based upon a tribunal being functus officio.  This case has not shown to be of any general importance.  Not one other case is said to be outstanding depending on the outcome of this one. 

The suggestion that this decision somehow affects the utility of tribunals bifurcating decisions can be put aside.  In fact, this decision gives utility to tribunals bifurcating decisions.  What is the point of bifurcating and having the parties go through the hearing about all issues of liability unless it means that the Tribunal cannot come back and revisit an issue of liability subsequently.  Your Honours, there is no contrary decision of any intermediate appellate court in this country, or indeed in any Model Law jurisdiction.  This Court of Appeal is plainly consistent with principle and there is no proper basis for special leave in respect of it.

Your Honours, as to the second topic which is raised as to the standard of review – that is, assuming for the moment it is right that the Court had the power under section 34(2)(a)(iii) to review the majority’s decision – our learned friends contend before you that there is a special leave question as to the standard of review, whether it should afford the Tribunal absolute or substantial deference.  That, too, is not a point for special leave, in our submission, for a number of reasons which I deal with briefly.

There is just no warrant for that in the language of section 34(2)(a)(iii), which we have addressed in our written submissions.  No point below was taken in the grounds of appeal as to this question, although there were some submissions made about deference to be afforded.  Ultimately, as we have said in our written submissions, a concession was made that once due allowance was made to the reasons of a tribunal, if the court concluded the Tribunal had erred in finding it had jurisdiction, the court would have to set it aside under the relevant section.

Thirdly, the standard which the Court of Appeal applied, has been uniformly adopted.  It has been adopted in this Court in the analogue provision of section 36, which is concerned with the recognition of foreign awards.  The relevant language is the same in the TCL Air Conditioner decision, which we referred in our argument.  It was the same test as applied by the United Kingdom Supreme Court in the decision of Dallah Co v Ministry of Religious Affairs.

In respect of Model Law provisions, the same as our section 34(2)(a)(iii), the test has been adopted in the Ontario Court of Appeal, in the British Columbia Court of Appeal, in the Singapore Court of Appeal, and, indeed, by the Chief Justice in the Hong Kong Court of Final Appeal, in C v D.  All of these cases we have referred to in our written submissions.

In response to that, our learned friends refer it to – suggest that we have been selective in our reference to authority and refer to a first instance Alberta decision and a first instance decision from Quebec which predate all of the decisions I have just referred your Honours to.  They refer, also, to a Supreme Court decision of Oxford Health Plans v Sutter.  I do not know if your Honours have – it is one of our learned friends’ decisions, but if your Honours have it handy – if not I will read out the relevant parts. 

It is clearly distinguishable.  It is not a decision on the Model Law at all.  It does not use language analogous to our section 34.  In that case, a dispute was referred to arbitration between the parties, and the issue arose as to whether that dispute could be conducted as a class action.  The judgment records that “The parties agreed that the arbitrator should decide” that question.  After noting that agreement, the opinion of the court includes, as a footnote:

We would face a different issue if Oxford had argued below that the availability of class arbitration is a so-called “question of arbitrability.”  Those questions – which “include . . . whether a concededly binding arbitration clause applies to a certain type of controversy” – are presumptively for courts to decide . . . A court may therefore review an arbitrator’s determination of such matter de novo absent “clear[] and unmistakabl[e]” evidence that the parties wanted an arbitrator to resolve the dispute.

So that even that case, which is relied upon against us, is consistent with the standard which was employed by the Court of Appeal in this case.  Finally, your Honours, whatever deference needed to have been paid to the arbitrators – the majority’s reasons – was plainly paid.  Both the primary judge and the members of the Court of Appeal went through, at length, the various points which were made by the majority, dealt with them, explained why they were wrong, and ultimately concluded that they overlooked or mischaracterised the effect of many of the pleadings, particulars, submissions, and procedural law as leading to the first hearing, so that it is impossible for there to be scope for any further deference to those reasons in those circumstances.  For that reason, in our submission, the second point is not one which justifies the grant of special leave.

Those are our submissions.

GORDON J:   Thank you, Mr Doyle.  Anything in reply, Mr Sheahan?

MR SHEAHAN:   Just a couple of points, your Honours.  Our learned friends highlight the distinction between functus officio and res judicata – two separate legal doctrines.  They are, of course.  But as appears from the Court of Appeal’s judgment at paragraph 110, on page 208, the same findings underpinned both.  The truth of the matter was that in this case, functus officio was just a corollary of the fact that there was a finding – was or was not a finding of res judicata arising from a decision of the same tribunal.  It is not a separate doctrine, it is just a corollary of the same proposition.

BEECH‑JONES J:   It might be answering two questions.  One question is here, have you decided this dispute, whereas the res judicata question is, is there something binding between the parties.  So, the same facts giving rise to two inquiries.  If you had a public tribunal, and there was a point which they determined some complaint – anything from the Dog Act to anti‑discrimination – a contention that that Tribunal was now going on, having already decided, would be looked at in functus officio terms, going to jurisdiction.  What is different here?

MR SHEAHAN:   Same parties, same tribunal.  So, it is the one question answered in terms of res judicata or in terms of functus officio by reference to exactly the same criteria:  has there been a final and binding determination by a competent tribunal of this set of claims?

BEECH‑JONES J:   That would be Schrodinger’s cat, would it not?  Because the res judicata is within jurisdiction, and jurisdiction is not within jurisdiction.

MR SHEAHAN:   Yes, and in our submission, that highlights the error in what has occurred.  Secondly, our learned friends submit that there are no wider consequences flowing from the decision of the Court of Appeal.  It has already been the subject of critical comment by learned authors, the Professor Jones and Mr Walker – the authors of the leading Australian textbook on commercial arbitration – have noted it as a “surprising” outcome.  We refer to this in our written application.  Mr Thomas KC, in the Global Arbitration Review, has also made critical observations about these decisions.  Your Honours can confidently conclude that people drafting arbitration clauses will have regard to these decisions in determining where they will seat arbitrations going forward, and, in our submission, it puts Australia out of step with the biggest arbitral jurisdictions in our part of the world.

Those are our submissions.

GORDON J:   Thank you, Mr Sheahan.  The Court will adjourn to consider the course that it will take.

AT 2.00 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.01 PM:

GORDON J:   There will be a grant of leave in this matter.  How long do you think it will take, Mr Sheahan?

MR SHEAHAN:   Two‑thirds of a day.

GORDON J:   Do you agree, Mr Doyle?

MR DOYLE:   I think it will take the whole day.

GORDON J:   Well, less than a day.  A day, but no more.  I would ask that you speak to the registrars in order to facilitate a conduct of the appeal.

MR SHEAHAN:   Thank you, your Honours.

GORDON J:   Adjourn the Court to 2.30 pm, please.

AT 2.02 PM THE MATTER WAS CONCLUDED