Esso Australia Resources Ltd & Ors v The Honourable Sidney James Plowman (Minister for Energy and Minerals)

[1994] HCATrans 230

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M119 of 1993

B e t w e e n -

ESSO AUSTRALIA RESOURCES LTD,
BHP PETROLEUM (NORTH WEST
SHELF) PTY LTD and BHP

PETROLEUM (BASS STRAIT) PTY LTD

Appellants

and

THE HONOURABLE SIDNEY JAMES
PLOWMAN (THE MINISTER FOR
ENERGY AND MINERALS), GAS

AND FUEL CORPORATION OF

VICTORIA and GENERATION

VICTORIA (formerly State

Electricity Commission of

Victoria

Respondents

ESS0(2) 1 8/3/94

MASON CJ
BRENNAN J

DAWSON J

TOOHEY J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 8 MARCH 1994, AT 10.22 AM

Copyright in the High Court of Australia

MR A.J. MYERS, QC:  May it please the Court, I appear with

MR R.McK. ROBSON, QC and MR S.G. O'BRYAN on behalf

of the appellants.	(instructed by Middletons Moore
& Bevins)

MR R.A. FINKELSTEIN, QC:  May it please the Court, I appear

with my learned friend, MR D.M. MacLEAN, for the
first respondent, the Minister. (instructed by the

Victorian Government Solicitor)

MR B.J. SHAW, QC: If the Court pleases, I appear with my

learned friends, MR I.C.F. SPRY, QC and

MR P.J. KENNON, OC, for the Gas and Fuel

Corporation. (instructed by C.D. Devlin)

MR P. BUCHANAN, QC: If the Court pleases, I appear with my

learned friend, MR P.J. JOPLING, for the third

respondent, now called Generation Victoria.

(instructed by Freehill Hollingdale & Page)

MASON CJ: Yes, Mr Myers.

MR MYERS:  An outline of argument has been provided to the

Registrar, and I take it that it has now found its

way to Your Honours.

MASON CJ:	Yes.
MR MYERS:	It was provided at the same time to my friends.

The issues in the appeal are primarily two: first, whether the arbitrations between the appellants and

each of the second and third respondents

respectively are private in the sense that

strangers are to be excluded for the hearing; and

secondly, whether information and documents

disclosed by one party to an opposing party in the

arbitration is to be treated in confidence unless

the disclosure is authorized by statute.

Your Honours, two arbitrations under separate

gas supply agreements with respectively the SECV

and Gas and Fuel Corporation commenced about two

years ago or a little longer. Your Honours, the

arbitration clauses in each of those contracts are

not in the court book and they are not, I see, in

any of the judgments. They are, and they can be

provided to Your Honours and will be now, however,

exhibits to the affidavit of Bryan Williams sworn

17 September 1992, which is in the appeal book at

page 92 and they are respectively BGW3 and BGW4.	I
do not hand to the Court the whole of the gas
supply agreements, but simply the arbitration
provisions of each of them; the arbitration provisions, of course, constituting separate and
ancillary contracts.

Esso(2) 2

In each arbitration, the producers, that is

Esso and BHP, said that the utility should not disclose documents or information of a private character supplied to it in the arbitration other

than for the purpose of the arbitration or unless

required by statute. The general nature of the

information is disclosed, for example, in the

affidavit of Mr Bloking, which is in the appeal

book at page 194. There are several affidavits to

the same effect, but Mr Bloking's provides a

convenient place to see what is the information.

It is page 193. On page 195, paragraph 4, it is

said that:

it is anticipated by the Producers that a

considerable amount of documents and

information may need to be revealed concerning

their Bass Strait operations ..... the following

kinds of information are likely to be

revealed:

Cost information relating to the production of

all petroleum products.

Price, volume and revenue information relating to the sale of all petroleum products.

Accounting and financial information relating

to the Producers' accounts of the Bass Strait

operations.

Technical operating information relating to

the Producers' gas producing operations.

Reserves information relating to gas supplies

in Bass Strait hydrocarbon reservoirs.

Marketing information relating to contract

negotiations and settlements concerning the

Producers and their customers.

Then in paragraphs 5, 6, 7, 8 and 9 Mr Bloking goes

of and why the producers regard it as confidential. on to elaborate upon what that information consists I shall not read those parts.

While Your Honours have this Court book open

may I take you to page 194 because there is there
another passage which can be conveniently referred

to. The utilities refused, sufficient to say, to

agree to treat information and documents supplied

in the course of the arbitration as confidential in the sense that I have mentioned, and said that they

were entitled to supply that information to any

third party and that, for example, is made clear in

paragraph 2 of the affidavit in quotations from

Esso(2) 3 8/3/94

passages in the argument before the trial judge

Mr Justice Marks. Mr Finkelstein said:

ttit will be the plaintiff's case that the executive can require instrumentalities to

provide whatever information the Government

needs from time to time or wants from time to

time, and the Government, once it has that

information, will be free to use it in

whichever way the Government sees fit,tt

And, Dr Spry says:

ttit goes wider than the Government. We

might feel we need to tell our commercial

customers certain things about the arbitration

and others .. ,tt

In the event the Minister commenced

proceedings for declarations, and at page 15 of the

appeal book the terms of the declarations are set

out, if I may take the Court to that:

A declaration that any and all

information disclosed to the Corporation in

the course of its arbitration with Esso and

BHPP is not subject to any obligation of

confidence. That is the Gas and Fuel Corporation. And:

B A declaration that any and all

information disclosed to the Commission -

the SECV, that is -

in the course of its arbitration with Esso and

BHP Bass Strait is not subject to any

obligation of confidence.

McHUGH J: But they are not the declarations that were

finally sought, are they?

MR MYERS:  No, they are not, Your Honour. It developed a

little and I will come in a moment to what

declarations were finally sought. Having commenced

those proceedings on 2 June, the utilities were

quick to defend and, for example, on page 18, is

the Gas and Fuel Corporation defence.

The Corporation admits the allegations made in

each of the paragraphs numbered 1 to 44 (both

inclusive) of the plaintiff's statement of

claim.

Esso(2) 4 8/3/94

The defence of the SECV, which begins at page 20,

was a little more particular but in the end it

admitted, on page 22, paragraphs 36 to 34, and they

are the nub of the claim for the declarations.

The producers counter-claimed, and the counter-claim begins at page 40 of the appeal book.

That is wrong. It does not begin at page 40, the

actual counter-claim is set out at page 40, it

begins much earlier than that. It begins at

page 24. At page 40 they claim:

A declaration that the GFC arbitration is to

be conducted in private -

first issue -

and that any documents or information supplied

by any of the parties to any other party

thereto in or for the purpose thereof are to

be treated in confidence as between each such

party and the arbitrators and umpire except

for the purpose of the arbitration;

And over the page a similar declaration in relation

to the SEC arbitration. The history of what

declarations were sought at various times is set

out in the judgment of Mr Justice Brooking in the

Full Court, which begins at page - - -

BRENNAN J: Before you go on, can I just - this, if I may

say so, seems to be a practice in Victorian appeal

books to make it difficult to identify who the

parties are. The plaintiff is the Minister?

MR MYERS:	Yes.
BRENNAN J:	The defendants are who, respectively, numbered 1

onwards?

MR MYERS:  The plaintiffs were the Gas and Fuel Corporation

and the State Electricity Commission.

BRENNAN J: That is Nos 1 and 2?
MR MYERS:	Yes.
BRENNAN J:	No 3?

MR MYERS:  That is all. I beg Your Honour's pardon, no.

Then, Esso Australia Resources Ltd, BHP Petroleum

(North West Shelf) Pty Ltd - - -

BRENNAN J: Perhaps it might be easier, Mr Myers, if one of

your juniors or perhaps your instructing solicitor

could just give us a piece of paper listing the

Esso(2) 8/3/94

names of the parties with their respective

entitlements and the number.

TOOHEY J:  I think if you look at page 16a it might provide

the information.

BRENNAN J:	I am indebted to my brother Toohey for that.
MR MYERS:	I am, too, Your Honour.
McHUGH J:	Mr Myers, before you go on, could you just

explain to me the practical working out of the

declarations that you seek in your counter claim.

Is your claim restricted only to documents or

information which is supplied to the other side and

then used in the arbitration and is there no claim

made for information that is, in effect, put

forward by you but which has not been provided to

the other side, for example?

I am answering the question, but just with one

prefatory remark.	The dispute arose at an early
pleadings and particulars provided and discovery.	point of the arbitration, when there were to be each of the utilities, "You will treat the information and documents provided to you in the
arbitration in confidence, will you not, in
accordance with the decision of the Court of Appeal
in Dolling-Baker", that was the nub of the letter.

So that the only issue, at that point, could

have been pleadings, particulars, discovery.

Neither of the arbitrations had progressed to a

point where there was a hearing or there was an

award. So the relief from that time on has been

framed in the terms in which it has because of the

circumstances in which it arose.

McHUGH J:  Does the arbitration envisage that each party

will provide the other side with copies of

witnesses' statements and matters of that - - -

MR MYERS: It does.

McHUGH J:  What about that sort of information?

MR MYERS: Well, that would be information provided within

the terms of these declarations that are sought.

McHUGH J:	Is there any distinction between the totality of information that is either supplied to the other
side or put before the arbitrator, and what you
claim here? Is this a narrower or does it
encompass everything?

Esso(2) 6 8/3/94

MR MYERS: It does not encompass in its terms, for example,

information that is public already. It only

encompasses information and documents provided by

one side to the other. So it does not encompass

the totality of that which might come into

existence in the course of the arbitration.

Your Honour, may I just go on. The

GFC arbitration has not progressed to the point

where there have been any directions for exchange

of statements, let alone for a hearing. The

SECV arbitration has progressed to the point where

there have been directions for exchange of

statements, and that will occur in about a week and

a hearing date has been set for early May.

His Honour Mr Justice Brooking, from page 380

on, sets out the various declarations that have

been sought, or the history of the arbitration and,

beginning at page 382 continuing to 383, the

various declarations that were sought.

Mr Justice Marks, who heard the matter at first

instance, made orders set out on pages 366 and 367.

The declarations that His Honour made are set out

on page 367.

May I direct Your Honours' attention to that

page. Following the decision of the Full Court,

the only declarations of His Honour

Mr Justice Marks that stood and now stand are

declaration C and declaration F. They are in the

same form except that the first refers to Gas and

Fuel and the second to SEC. Going to

declaration C:

Gas and Fuel is not restricted from disclosing

information to the Minister and third persons

by reason only that:-

(a) the information was obtained by it from

Esso/BHP in the course of or by reason of

arbitration pursuant to the 1975 Sales

Agreement; and

(b) the information has not otherwise been

published.

Mr Justice Brooking, with whom Mr Justice Smith

agreed below, criticized the framing of that
declaration and declaration F but none the less

said that they would allow it to stand.

Mr Justice Tadgell would not have allowed

declaration C and F to stand because he was unhappy

with the way in which they were expressed in the

circumstances of the case.

Esso(2) 8/3/94

The matter was further refined when it came

before this Court on the application for special

leave and the orders now sought begin at page 468

of the Court book. On page 469 the declarations

sought by the appellants are set out over to

page 470. They are expressed in the terms in which

the special leave was given:

(c) on the Appellants' counterclaim declare

that -

that it is an implied term of the
arbitration agreement, which is clause 23

of the 1975 Supply Agreement between the

Appellants and the Second Respondent,

that the Second Respondent is not

entitled to disclose otherwise than for the purpose of the arbitration pursuant to the 1975 Supply Agreement, information

and documents disclosed to the Second

Respondent by the Appellants for the

purposes of the arbitration with which

the Second Respondent would not otherwise

have been supplied unless disclosure is

authorised by statute;

and (ii), which reflects the equatable claim:

that the Second Respondent is bound not

to disclose otherwise than for the

purpose of the arbitration pursuant to

the 1975 Supply Agreement, information

and documents disclosed to the Second

Respondent by the Appellants for the

purposes of the arbitration with which

the Second Respondent would not otherwise

have been supplied unless disclosure is

authorised by statute.

TOOHEY J:  So we are not concerned with categories of

documents, other than the broad category of

documents that were provided for the purpose of the

arbitration?

MR MYERS: That is so.

TOOHEY J: Within that broad category you do not seek to

isolate specific groups of documents and contend

that confidentiality or the like attaches to those,

but perhaps not to others?

MR MYERS:  No, we do not. We do not however claim, and have

never claimed, confidentiality for documents that

are public to which the utilities are entitled by

some other right, not under the arbitration. So

confidentiality is claimed for those documents and

information supplied in the course and for the

Esso(2) 8/3/94

purposes of the arbitration, which are not public

documents and - - -

MASON CJ: Well, does your declaration, as sought in (i) and

(ii), precisely express that exception or

qualification?

MR MYERS:	The words, "with which the Second Respondent would not otherwise have been supplied", are
intended to express that qualification,
Your Honour.
MASON CJ:	It is rather an oblique way of doing it, is it

not?

MR MYERS: It may be so, Your Honour. In the course of the

special leave application, there was a good deal of

argument about this matter and eventually they were

the words that were used to express the special

leave application and Their Honours who dealt with

it on that occasion identified, as I recall, those

words as encompassing or as including documents which were not public and to which there was no

other entitlement to.

McHUGH J:  What about the case of inequity, would that be

covered by this declaration?

MR MYERS:  I beg Your Honour's pardon, I did not catch what

Your Honour said.

McHUGH J: Information that was iniquitous, that showed some

iniquitous conduct on the part of your people, for

example.

MR MYERS: If, for example, the documents that were

disclosed in the course of the arbitration showed,

incidentally, a murder that had been committed or

contained an admission concerning the commission of

a murder, for example, that is the sort of case

that Your Honour is putting to me, I think - - -

McHUGH J: Perhaps defrauding the public.
MR MYERS:	Whether there are some sorts of exceptions

required by what might be described loosely as

public policy, perhaps, is a matter which might be

debated. If pressed, I could not contend that

documents that disclosed an inequity, as

Your Honour has put it, would be protected by

confidentiality. I do not believe I could. I must

also concede, as is obvious, that that is not

encompassed by those words. But any implied term

of a contract or any equitable principle would

yield to that sort of consideration and it is

sufficient, in my submission, for the Court to make

a declaration in relation to this arbitration and

Esso(2) 9 8/3/94

to lay down a rule generally if it need be in

broader terms that do not expressly refer to an

inequity. One of Their Lordships in the Spycatcher

case, I think, referred to a possible exception on

the basis of public policy.

One way of dealing with the inequity case,

Your Honour, which is perfectly consistent with the framing of the general declaration that we are

seeking, is to say that is a case in which relief

will not be granted. When one is looking at the

application of an equitable principle, in

particular, the discretion to withhold relief can

take account of such cases.

McHUGH J: But the problem is that - I see, it is because it

is a declaration, it is not an order that you are

seeking.

MR MYERS: It is a declaration, Your Honour, that is all,

yes, and I trust Your Honour understands, as I have

explained, that this arose very early in the

arbitration, and the way that the litigation came

before the Court on the Minister's action certainly

did not permit one to look at categories of

documents, for example.

Your Honours, the other issue, that of the

privacy of the arbitration, is raised by the
notices of contention. The Full Court decided that

a private arbitration was private in the sense that

strangers are to be excluded from the hearing of

the arbitration. The respondents have contended by

notices, which are set out at the end of the appeal

book, beginning on page 472, that the Full Court
was wrong in so deciding.

The pleadings concerning the question of

privacy of the arbitration are short. At page 54
of the appeal book in paragraph 9 at lines 18,

SECV:	admits that it was an implied term of the SEC
Sales Agreement that any arbitration conducted
thereunder would be heard in private, but
otherwise denies the allegations contained in paragraph 77.

Notwithstanding that admission, they now contend

that the arbitration is not private.

The Gas and Fuel Corporation dealt with the matter in its pleading on page 48 of the appeal

book, paragraph 13. It said:

Esso(2) 10 8/3/94

It does not plead to the allegation that

there were implied terms of the 1975 Sales

Agreement -

this is line 20, Your Honours -

that any arbitration conducted thereunder

would be in private as that allegation does

not relate to any issue in dispute between the

parties.

Again, notwithstanding that pleading, they have

raised a contention before this Court that

the - - -

DAWSON J:  What does that mean: it does not relate to any

issue between the parties? Is that an admission?

MR MYERS:  It does not plead, it does not admit or deny and

therefore one would take it that there is a denial,

yet in its expressed terms it alleges there is not

an issue. I cannot make any more of it than

appears on the paper, Your Honour. In any event, a

notice of contention is now filed in this Court

that the Full Court was wrong in deciding that the

arbitration was private.

May I take Your Honours to the outline of

argument. On the second page one begins, really,

with the question in 1.3 which Your Honour the

Chief Justice raised with me. We take the phrase

"with which that party would not otherwise have

been supplied" to encompass only private

information or documents and not information or

documents which are "public property and public

knowledge". The authorities that are there

referred to I will come back to in due course.

Concerning the privacy of the arbitration,

which is really the starting point for an

understanding of this matter, it is our submission

that the agreement to arbitrate includes an implied

term that the arbitration be conducted in private.

It is almost so fundamental to the conception of an

arbitration between parties before their chosen

arbitrator that one hesitates even to call it an

implied term. It is inherent in the agreement that

the parties have made that this will be a private

proceeding. The nature of the agreement is that

the parties will have their dispute heard by an

arbitrator and nothing more.	They have not agreed
to arbitrate the dispute before strangers.	They

have agreed to arbitrate the dispute before the

arbitrator, and no more.

This sort of view of an arbitration was

expressed in The "Eastern Saga", which is the first

Esso(2} 11 8/3/94

case on the appellants' list of authorities and to

which I should like to take Your Honours. There

are two references given, an All England reference

and a Lloyd's reference. It does not matter really which Your Honours have got because I want to go to

the second-last paragraph of the reasons

eventually. The question before Mr Justice Leggatt

was whether two disputes which were very closely

related could be consolidated because it would be

convenient. Each had been referred to arbitration

and each arbitration related to closely connected

facts. Right at the end of his judgment in the

penultimate paragraph His Lordship said:

It seems to me that, as is graven on the heart

of any commercial lawyer, arbitrators in the position of these arbitrators enjoy no power to order concurrent hearings, or anything of that nature, without the consent of the

parties. The concept of private arbitrations

derives simply from the fact that the parties

have agreed to submit to arbitration

particular disputes arising between them and

only between them. It is implicit in this

that strangers shall be excluded from the

hearing and conduct of the arbitration and

that neither the tribunal nor any of the

parties can insist that the dispute shall be

heard or determined concurrently with or even

in consonance with another dispute, however

convenient that course may be to the party

seeking it and however closely associated the

disputes in question may be.

We respectfully adopt the reasoning that underlies

His Honour's approach. It springs from the nature of the arbitration.

May I refer Your Honours then to the decision

in Dolling-Baker v Merrett, which is the third case

on the list of authorities. Questions about

discovery arose, in the course of which the Court

of Appeal, consisting of Lord Justices Fox, Parker

and Ralph Gibson, considered the nature of an

arbitration. In Lord Justice Parker's reasons at

pages 1213 to 1215, His Lordship dealt with the

matter. At page 1213D:

We were invited, therefore, to consider

whether this was a case where there ought to

be production -

of documents from an arbitration.

It was not contended on behalf of the first

defendant that the fact that the documents

were prepared for or used in an arbitration,

Esso(2) 12 8/3/94

or consist of transcripts or notes of evidence

given, or the award, confers immunity. It

could not, in my judgment, successfully be so

contended. Nor is it contended that the

documents constitute confidential documents in

the sense that "confidentiality" and
"confidential" documents have been used in the

court. What is relied upon is, in effect, the

essentially private nature of an arbitration,

coupled with the implied obligation of a party

who obtains documents on discovery not to use

them for any purpose other than the dispute in

which they were obtained. As between parties

to an arbitration, although the proceedings

are consensual and may thus be regarded as

wholly voluntary, their very nature is such

that there must, in my judgment, be some

implied obligation on both parties not to

disclose or use for any other purpose any

documents prepared for and used in the

arbitration, or disclosed or produced in the course of the arbitration, or transcripts of notes of the evidence in the arbitration or

the award, and indeed not to disclose in any

other way what evidence had been given by any

witness in the arbitration, save with the

consent of the other party, or pursuant to an

order or leave of the court. That

qualification is necessary, just as it is in

the case of the implied obligation of secrecy

between banker and customer.

It will be appreciated that I do not

intend in the foregoing to give a precise

definition of the extent of the obligation.

It is unnecessary to do so in the present

case. It must be perfectly apparent that, for

example, the fact that a document is used in

an arbitration does not confer on it any

confidentiality or privilege which can be

availed of in subsequent proceedings. If it

is a relevant document, its relevance remains.

But that the obligation exists in some form

appears to me to be abundantly apparent. It
is not a question of immunity or public

interest. It is a question of an implied

obligation arising out of the nature of

arbitration itself. When a question arises as

to production of documents or indeed discovery

by list or affidavit, the court must, it

appears to me, have regard to the existence of

the implied obligation, whatever its precise

limits may be.

Then His Lordship goes on. I do not think I need

to read the rest of that passage.

Esso(2) 13 8/3/94

Your Honours, there are a great many

authorities in which it has been said that an

arbitration is private. The first thing that we

contend for is that on the authorities the

Full Court of the Supreme Court of Victoria was

correct in determining that the arbitrations in

these instances are private in the sense that
strangers are to be excluded from the hearing of

the arbitration, no more as a first step.

Your Honours, I will not read each of the

authorities that is listed under 2.4 in the outline

of argument. The precise pages are referred to;

but in each of them there is a judicial statement
or a statement by the textbook writer as to the

privacy of the arbitration.

MASON CJ: Is that put on the basis of implied term, or is

it put on the basis on which it appears to have

been put in the two cases to which you have so far

referred us, that the parties have agreed upon

something that is essentially private in character?

MR MYERS: That the parties, in the end, have agreed upon

something that is essentially private in character.

So that one cannot - that is the limit and extent

of the parties' agreement. It is sometimes

expressed in terms of an implied term, and I am

conscious that we have done so, in part, in putting

these submissions, and the Full Court of the

Supreme Court of Victoria did so when it reached

its conclusion at page 397 of the appeal book.

Mr Justice Brooking said:

I think we should recognize a rule of law that

it is an implied term of arbitration

agreements (which the parties may exclude if

they choose) that arbitrations should be heard

in private in the sense of in the absence of strangers as just defined unless the parties consent to the presence of a stranger.

That is line 25, I am sorry, Your Honour, down to

line 30. Above, at line 5, His Honour says:

I speak of proceedings being conducted in

private in the sense that strangers are absent

and I would define strangers as persons whose

presence is not necessary or expedient for the

proper conduct of those proceedings.

MASON CJ: But if the parties have expressly agreed on

something that is, in essence, private, surely

there is no basis on which you can imply a term as

a matter of law?

Esso(2) 14 8/3/94

MR MYERS:  It is inherent, Your Honour, in what they have

agreed. It is not express in the sense that the

parties have said in a document or orally, "We

agree that strangers should be excluded from the

arbitration.". What they have done is agree to an

arbitration, an arbitration of their dispute

between this person and no one else.

MASON CJ:  Which has certain characteristics recognized in

law as attaching to it.

MR MYERS:  Yes. So, Your Honour, I would prefer to put it

in terms of it is inherent in the agreement. It

falls somewhere between - - -

MASON CJ:  I mean, that is only a way of disguising which of

the two approaches you are making. You are just

putting a label that enables you to straddle both

horses, even though they may be moving in opposite

directions.

MR MYERS:	If Your Honour pleases, if I am pressed to say, as a matter of construction of the agreement.
BRENNAN J: No doubt.	That still does not answer the

question though, does it? If it is an implied term

problem, then one goes to a line of authorities

which will take you to an inquiry with respect to

the utilization of the documents produced. It may

be a very different inquiry from that which you

would go to if it is a question of either custom or

inherent nature of that which is agreed to.

MR MYERS:  Yes.

MASON CJ: Essentially, this is an argument about the

foundation for the decision on the critical

question which is the next step.

MR MYERS:  Yes, it is.

MASON CJ: This has no utility in itself as far as the

dispute between the parties is concerned, as I

understand it.

MR MYERS:  No, it does now, Your Honour, because it is

contended now that strangers could be present at

the arbitration.

MASON CJ: 

I know, but the reason why that is being

contended is because your opponents think it is
going to advantage them in this argument.

MR MYERS:  Your Honour, that may be so. They certainly did

not contend it below.

Esso(2) 15 8/3/94

MASON CJ:  They did not contend it below because it was not

a live issue in terms of its practicality. It is a

live issue now only because its significance in

terms of its bearing on the critical question has

been perceived.

MR MYERS:  I do not dissent from that, Your Honour.

TOOHEY J: There is another aspect, Mr Myers, which I do not

invite you to comment on at this stage, because no

doubt you will come to it, but if we are in the

area of agreement, express or implied, and we are not concerned with categories of documents, other than the broad category of documents produced for the purpose of the arbitration, it is a bit

difficult to see what role equitable principles

play, because, as I say, if you are coming to that

later on, I do not ask you to comment now.

MR MYERS:  May I, Your Honour. We only claim protection or

confidentiality for private documents, which are

handed over for the purposes of the arbitration and

it is those two factors upon which we rely and

nothing more, and we claim this protection for all

documents of that category.

TOOHEY J: But do you say that is a protection which is

supported by equitable principles?

MR MYERS:  Yes.

TOOHEY J: Apart from the question of express or implied

terms, to which you have been referring?

MR MYERS:	Yes, we do.
McHUGH J:	What about evidence extracted in

cross-examination in the arbitration? Is that

private information that cannot be published?

MR MYERS:  Yes, it is, Your Honour.

McHUGH J:  And what is the basis upon which that information

is protected?

MR MYERS: Well, if it is private information, as one would

expect it to be generally, it may not be, but if it

is, in the sense that it is not information in the

public domain, it is information that is provided

simply for the purposes of the arbitration; it is

provided because of the arbitration and for the
purposes of the determination of the dispute. It

is the circumstances in which that private

information is provided which attract the

protection. Looking at it in another way, why on

earth should a person who gets private information

Esso(2) 16 8/3/94

in such circumstances be able to use it for any

purpose whatever?

TOOHEY J:	But you are using "private" not in the sense of confidential in the way that that term is
ordinarily understood; you are really saying that
any information that is made available in the
course of the arbitration which is not somehow public, whatever that might mean, carries with it
an obligation of non-disclosure. That may be the
strength of the argument and it may also, of course, prove to be its weakness, I do not know.
MR MYERS:	It is because of the circumstances in which it is

provided. The information is provided for the

purposes of determining the private dispute and, we

say, the person who gets the information for the

purposes of determining the private dispute - it
being private information, in that sense - who is
not otherwise entitled to that information, should

not be allowed to use it for any purpose he wishes.

DAWSON J:  Why not? And the answer is because the

arbitration is private.

MR MYERS:  Because the arbitration is private, and he got it

in the course of or for the purposes of the

arbitration.

May I move on to the next principal

submission?	The first issue is the privacy of the
arbitration.	The second concerns the protection of

information or documents provided in the

arbitration. The appellants contend that it is an

incident of a private arbitration that a party is

not entitled to disclose otherwise than for the

purpose of the arbitration information or documents

disclosed to that party by the opposite party, for

the purposes of the arbitration, with which that

party would not otherwise have been supplied,

unless disclosure is authorized by statute.	We say
that this is certainly an implied term, and it

grows out of the nature of the arbitration as a

private proceeding between the parties.

BRENNAN J:  By that do you mean it is essential to imply

that term in order to maintain the privacy which

has been agreed.

MR MYERS:  Yes, that is, in the end, what it boils down to,

Your Honour. That is putting it very generally and

bluntly, but that is what it boils down to. If the

opposing party can disclose everything that happens

in the arbitration, can disclose to the newspaper
all the documents that have been provided, the

privacy of the arbitration is affected, destroyed

probably.

Esso(2) 17 8/3/94

DAWSON J: Really what is at issue here is whether the

utilities, which are government utilities, can

disclose to the government information which they
receive in the arbitration, the government not

being a party in the arbitrations.

MR MYERS:  If there is a statutory power that authorizes

that, we must acknowledge that we are subject to

it.

DAWSON J: But, that is the issue here, is it not?

MR MYERS:  No, that issue has not arisen here. What the

government utilities say is that they want to be

able to disclose it to anyone, as Dr Spry said "to

customers and others".	We do not, for a moment,
say - - -

DAWSON J: But, it is the Minister in the action who is

claiming that they can disclose.

MR MYERS:  Your Honour, we do not for a moment say, and we

never have said, that the information and documents

cannot be disclosed for the purposes of the

arbitration. If it is necessary for the - - -

DAWSON J:	The Minister is the plaintiff, is he not?
MR MYERS:	The Minister is the plaintiff, yes.
DAWSON J:	He is saying that these government utilities can

disclose information to him which they derive from

the arbitrations. If he is not saying that, what

is he saying?

MR MYERS:  He is certainly saying that. We do not deny it

as far as concerns disclosure for the purposes of

the arbitration. If they need to get instructions
from the Minister, or if there is disclosure

authorized by the statutes under which are there

constituted, for example. We do not deny that. We

never have, and the relief that we seek does not

deny it.

McHUGH J:  What about the award of the arbitrator, Mr Myers,

can that be disclosed?

MR MYERS:  The first thing is this: the question has not

arisen. In my submission, it cannot be disclosed
except as authorized by statute. That probably

means except as far as necessary, for example, for

the purposes of instituting an appeal against the

arbitrator's decision or in some way calling the

arbitrator's decision in question.

Esso(2) 18 8/3/94

McHUGH J: Supposing one of the corporations is a listed

company and wants to notify the stock exchange it

set an award made against it at $100 million.

MR MYERS:  Your Honour said "wants to". If it is authorized

by statute, or required by statute and the stock

exchange rules are given a statutory force under

the Corporations Law - - -

McHUGH J:	They are now, but let us go back a decade or so.
MR MYERS:	"Want to" is not sufficient.  "Authorized" or

"required by statute", however, we concede, but

"want to" - not sufficient.

DAWSON J:  The Minister is the Minister responsible for these utilities, is he?

MR MYERS:  Yes, he is. Or he was, a lot has changed

recently. He still is. Mr Finkelstein says that

he still is. I accept that.

BRENNAN J:  What does that mean, though, "responsible"?

Does it mean administratively responsible for

administering the Acts under which they are constituted or does it mean something else?

MR MYERS:  It does not really mean much more than that.

They have to provide certain reports to him. He

has to answer questions in Parliament because he is

administratively responsible for them.

Your Honours, the argument in the second way

is really set out in writing on pages 4 and 5.	The
starting point is to really identify the

arbitration agreement as a separate contract. That

is trite law, of course, but the House of Lords

says it, Lord Roskill says it in Bremmer Vulkan v

South India Shipping Company, especially at

page 953.	I will not read the passage,
Your Honours.	And it says it being a separate
contract it is subject to the same laws, rules,
principles as any other contract.	So the question

is whether it is necessary to imply this term, that

we seek to have implied, to give efficacy to the

private arbitration.

We say that in relation to this separate recognised class of contracts and arbitration

contract it is necessary to give efficacy to the

private nature of the arbitration to imply a term such as we seek. We refer Your Honours to - that

is said in substance in paragraph 3.5.

MASON CJ:  Now, is this the implication of a term as a

matter of law, or is it the implication of a term

Esso(2) 19 8/3/94

in accordance with contractual principles such as

The "Moorcbck"?

MR MYERS:  The implication as a matter of law, Your Honour.

It has not been put otherwise and I do not.

MASON CJ:	Some of the language you are using points in another direction altogether. It points in the
direction of The "Moorcock", British Petroleum v
Shire of Hastings?
MR MYERS:	Your Honour, I certainly do not put it that way.
BRENNAN J:	I am not sure that I understand the way in which you are putting it in that case.
MR MYERS:	In order to preserve the private nature of the

arbitration, it is necessary to imply a term such as we contend for, that information and documents provided for the purposes of the arbitration ought

not to be disclosed except for the purposes of the
arbitration or as required by statute, or as

authorized by statute.

BRENNAN J:  Why is that not The "Moorcock" and

British Petroleum?

MR MYERS: Well, it follows from the nature of the contract

rather than from the circumstances of the

particular contract.

BRENNAN J: But it is not so much the nature of the contract

which leads you to that; the contract is one which

provides for a private arbitration; that is, one

which excludes strangers. You say, once you have

got that contract, it is necessary, in order to

give business efficacy to that contract, to imply
another term; that other term being that there

should be no disclosure by those who are entitled

to be present of what transpires.

MR MYERS:  We put it as following from the nature of the

contract rather than any particular circumstances

of a particular contract.

McHUGH J:  You treat it as though it was a term implied by

the Sale of Goods Act or that is implied by law, is

it? It is in the second category of the implied

terms that are referred to in Liverpool CC v Irwin

rather than a Moorcock.

MR MYERS:  We do so put it, yes, Your Honour, because we

start from this private nature of the contract.

McHUGH J: It is an incident of law.

Esso(2) 20 8/3/94

MR MYERS:  Yes, and if that private nature is not bolstered

by such an implied term, then it will be defeated.

It is necessary, as a matter of law, to give effect

to the contract that there be such a term
implied.It is undoubted, in our submission,

that -

DAWSON J: That seems to equate privacy with secrecy.

MR MYERS:	No, not secrecy, Your Honour.
DAWSON J:	And you can conduct proceedings in private and

rely on the discretion of the people who are there

not to disclose it outside, but the same procedures

are still in private.

MR MYERS:  But if they say that they are not going to

observe the privacy of the proceedings, in the
sense that they are not going to restrain
themselves from providing the documents and
information to any third party, then it is not

proceedings, in the sense that there is an absolute

secrecy that one is protecting, but the privacy.

shroud over them at all; we just say that the

documents and information that are provided for the

purposes of this resolution in private of this

private dispute should be treated as private and

not disclosed except for the purposes of the

dispute or as required by law.

TOOHEY J:	Mr Myers, does an arbitrator have comparable powers to a judge in attaching confidentiality
provisions to particular evidence?
MR MYERS:	No, he does not.
TOOHEY J:	Do you mean he has no such power at all?
MR MYERS:	I believe that is so.
TOOHEY J: Is that simply because the statute provides no

such power?

MR MYERS:  Because his position springs from the agreement

of the parties. He is there performing a function

in accordance with the agreement of the parties.

TOOHEY J: Save that the arbitration statute might confer

some power.

MR MYERS:  The Commercial Arbitration Act allows him to give

directions and so on, but we would not believe that
that would include a direction to treat something

as confidential, for example, which the parties

said that they did not wish to treat as

confidential, or either of them.

Esso(2) 21 8/3/94

TOOHEY J:	In any event, you do not rely on any such power; you cast your net more widely than that.
MR MYERS:	Yes, we do.

BRENNAN J: Is it from the Commercial Arbitration Act that

arbitrators acquire the compulsory powers to obtain

information?

MR MYERS:  No. Before there were statutory provisions

empowering arbitrators to order discovery or

something of that kind, arbitrators could not do so

except with the consent of the parties.

BRENNAN J: In relation to these two agreements, they are

made, I take it, in contemplation of the

arbitration laws of Victoria?

MR MYERS:	Yes.
BRENNAN J:	So that the compulsory powers contained in those

laws are transported into, incorporated into, or

referred to at least, by the agreements?

MR MYERS:  Your Honour, the Commercial Arbitration Act was

enacted in 1984. This agreement was 1975 if we are
talking about the Gas and Fuel Corporation
agreement. It has been varied several times since.

One could not speak with any confidence about any

supposition as to what precise law the parties had

in mind when they entered into agreements. The

Commercial Arbitration Act has been amended from

time to time, and indeed it has been amended in the

course of these arbitrations.

BRENNAN J: Is there anything to indicate what is meant by

"Arbitration Act

the term, of the State of clauses?

MR MYERS:

May I respectfully inquire which one does

Your Honour have?

BRENNAN J:  I think in both of them the phrase which I just

mentioned appears identically, "The Arbitration Act

of the State of Victoria".

MR MYERS:  The gas and fuel agreement, for example, was

entered into on 1 January 1975. Clause 23, which I

think Your Honour is reading from, has not, I

believe, been amended since then although other

parts of the agreement have certainly been amended,

as the front indicates, up until February 1986.

BRENNAN J:  It may be irrelevant but if it is necessary for

any purpose to refer to the statute law of Victoria

for the purposes of deciding this case, are you in

Esso(2) 22 8/3/94

a position to indicate what is the statute to which

one should have reference?

MR MYERS:	Not at the moment, Your Honour.
McHUGH J:	But may not that be the strength of your case,

that if, as Harman and other cases decide, there is

confidentiality attaching to documents which are

compulsorily discovered for the purpose of court

proceedings then, similarly, confidentiality ought

to attach to documents compulsorily discovered by

law in an arbitration?

MR MYERS:  Yes, Your Honour, certainly, except in this sense

that, in the end, one gets back to the agreement
between the parties. It is because of the

agreement between the parties that the Arbitration

Act has some effect.

McHUGH J: But if you did not have an Arbitration Act, it

was an arbitration on the corn exchange in England

or something where the parties are just voluntarily

submitting to an arbitrator, it might be arguable

that if you furnish information to the arbitrator
there is just no confidentiality attaching to it.

I do not say - - -

MR MYERS:  Certainly the case is stronger in virtue of the

fact that there are procedures for compelling

discovery, for example, in the arbitration law, as

it has obtained in Victoria at any time, that

affects these agreements. But in the end, in my

submission, Your Honour, I have to, I think, get

back to the agreement as the source of the right,

if I am contending that it is an implied term.

Your Honours, again not to labour the point,

but it would be a curious result if parties in
court proceedings, where there is compulsory
discovery, would have the protection that the

documents that were discovered could not be

used - could not be disclosed, I should say,

perhaps - except for the purposes of the court
proceedings where, in an arbitration, that were not

so.

McHUGH J:  The distinction may be that in the court

proceedings, once the documents are tendered, that

is the end of the matter, it is only when they are

not tendered - - -

MR MYERS: Well, Your Honour, not according to Harman v the

Home Office - - -

McHUGH J:  I appreciate you cannot use it for certain

purposes; you cannot sue on it, for example, but in

terms of the information itself - - -

Esso(2) 23 8/3/94

MR MYERS:  In virtue of it being a public proceeding?

McHUGH J: Yes.

MR MYERS:	When the contents of a document are public, they are public, and so there is nothing attaches
thereafter, of course.
BRENNAN J:	No doubt it is curious, but in order to put it

into an appropriate forensic setting, the cases dealing with discovery in court proceedings are founded, are they not, upon the court's exercise of

its coercive power in contempt to insist upon the

implied undertaking being observed by those who

require it? Now, we do not have that remedy in the

case of arbitrations.

MR MYERS:  I accept that, Your Honour.

BRENNAN J: So, we are looking for some alternative basis on

which this is founded. It seems to me that there

is a problem, it may be no more than that, but the

problem is that if somebody has a statutory right conferred by the arbitration law then you must be

seeking to say that the agreement is something

which limits the exercise of that statutory right

or controls the benefit which is acquired by

exercise of the statutory right to wit, the

acquisition of the information.

MR MYERS:	I do, Your Honour.
BRENNAN J:	I just want to understand the basis on which it

is put - - -

MR MYERS:	I do, and in the end I must come to the agreement which is the source - and must be the source - of
the implied term.  I cannot put it on the basis of
the power of the court to deal with contempt, or an
implied undertaking, or whatever. I must come to
the agreement, and that is how we put it. All it
said in relation to discovery in court proceedings
is really to say would it not be anomalous if, in
an arbitration where the party suppose they have
the protection of privacy, and go there to
arbitration for that benefit, find that they have less protection in that regard than those who
accept the publicity of court proceedings.
McHUGH J:	I must say it strikes me as strange that an

insurance company which insists on arbitration may

have to face up to the fact that the next day the

whole proceedings are broadcast on 60 Minutes or

some other programme, but it is a question of what

is the legal basis upon which you can - - -

Esso(2) 24 8/3/94

MR MYERS:  We put two bases and we have since the beginning.

I really put the first one, that is an implied

term. The other is on the basis of equitable

principles, and may I move to that. That begins in

clause 4.1. We put it that the duty of confidence

is imposed by equity because the information has a

necessary quality of confidence about it, which is

the phrase that is used in all these cases, and the

information has been imparted in circumstances

importing an obligation of confidence. Why does

the information have the necessary quality of

confidence about it? Because it is not public

information, it is private information. In some of

these cases there is an exception for mere

tittle-tattle, and so on.

Your Honours, the cases in this Court in

recent times in which the matter has been dealt
with are set out in paragraph 1.3, that is to say,

what is information which is private. Most

recently some of Your Honours discussed in Johns v

Australian Securities Commission, Your Honour the

Chief Justice in the Commonwealth v John Fairfax,

Mr Justice Deane in the Moorgate Tobacco case, the

English courts, the Court of Appeal in the

Spycatcher case, the Attorney-General v Times

Newspapers, Lord Justice Bingham, and in the House

of Lords, especially Lord Griffiths and Lord Goff.

Then one can go back further to the decision of

Mr Justice Megarry in Coco, and finally, of course,

to Lord Greene's decision in Saltman Engineering v

Campbell Engineering.

Nothing more is identified in any of those

statements than that the information is not public.

It has the quality of confidence about it because it is not public information. That quality of confidence, or information having that quality, is

protected where it is imparted in circumstances

importing an obligation of confidence. We say

again, quite simply, that because of the private

nature of this dispute resolution mechanism of an

arbitration the information is imparted in

circumstances importing an obligation of

confidence.

The fundamental consideration is that the

information or documents are provided in the course

of and for the purposes of a private arbitration;

it is nothing more or less than that. I do not

propose to read to Your Honours the references that
are set out by page in 1.3 or indeed in 4.1; they

are perfectly familiar and the effect of them may

be stated as shortly as I have.

McHUGH J: But Mr Myers, the information that you have - I

take it it has already been supplied, has it?

Esso(2) 25 8/3/94

MR MYERS:	To a large extent, yes.
McHUGH J:	Now, what was the source of your obligation to

supply it? Was it done voluntarily or was it done

in relation to some compulsion?

MR MYERS:  It was done because of directions given by the

arbitrators. It was done in every case in
pursuance of directions for the provision of

pleadings, particulars and discovery.

Your Honours, I have already put that we

accept that disclosure for the purposes of the

arbitration or as authorized or required by statute

are not inconsistent with the case and, indeed,

have always been conceded by the appellants.

May I turn to paragraph 6.3 and just say a few

words about the declaratory orders of the trial

judge that are left standing. Whatever the outcome

of the submissions that have been put already, in

my submission those orders 6C and 6F on page 367

ought not to stand. They are simply too wide and

imprecise and they are incomplete and confusing

having regard to the issues between the parties,

because it has never been contended that, for

example, disclosure for the purposes of the

arbitration or disclosure as authorized by statute,

was not permitted. Mr Justice Tadgell, in his

reasons, advanced some criticisms of the drafting

of those orders, which we say are correct. May it

please the Court, they are the submissions on

behalf of the appellants.

MASON CJ:  Thank you, Mr Myers. Mr Finkelstein.

MR FINKELSTEIN: May it please the Court. If I could have

handed to the Court a summary of our submissions
and some copies of decisions from the United States
that are not readily available, LEXIS obtained

copies of cases, and I think some textbook

references, again US references. So far as the Minister is concerned, two

questions arise, one on our notice of contention,

namely whether all arbitrations must be conducted

in private in pursuance of some implied contractual

obligation to that effect, and secondly, whether by

reason of that privacy if it exists or

independently of that privacy but in accordance

with some implied term of an arbitral contract or

in accordance with some equitable principle, the

utilities are precluded from disclosing information
obtained from other parties to the arbitration to

the Minister.

Esso(2) 26 8/3/94

I should say at once that the statutory rights

of the Minister .differ in the case of each utility.

So far as the State Electricity Commission is

concerned, the Minister has a reasonably unfettered

right to call for information. I refer the Court

to the relevant provisions of the sixth schedule of

that Act where it is to be found.

DAWSON J:	Which Act is it, Mr Finkelstein?
MR FINKELSTEIN:	State Electricity Commission Act 1958 which has in part now been replaced by legislation that
has come into operation this year, but a much
limited right to obtain information from the Gas
and Fuel Corporation under the Gas and Fuel
Corporation Act 1958.  The relevant provision of
the sixth schedule to the State Electricity
Commission Act is regulation 4(2):

For the proper conduct of his public business

the Minister shall be entitled at all times to

put himself into direct communication with all

officers and employees of the Commission and

also to see all documents papers and minutes

which he requires either for Parliament or
himself and to be supplied with copies
thereof, and also to avail himself of the
services and assistance of any officer or

employee. There is no corresponding power in the Minister to

obtain information from the Gas and Fuel

Corporation, probably largely because of the

history of the Gas and Fuel Corporation.	It was an
amalgam ultimately of a number of private

companies. It has articles of association just

like most private companies have. There is a

general obligation on the Gas and Fuel Corporation
to publish accounts annually, that sort of
obligation, but no direct power in the Minister to
go to that statutory body to obtain information, as

there is under the SEC Act.

BRENNAN J:  Has this subclause of the sixth schedule ever figured in this litigation thus far? Is it a point

at issue between you and - - -

MR FINKELSTEIN: No, it could not be. It has never been

disputed by Esso BHP that if there is a statutory,

either, obligation on a utility to provide

information or a right given by statute to the

Minister or to anybody else to obtain information

that a private agreement could override a statutory

right or a statutory obligation. That has never

been an issue.

Esso(2) 27 8/3/94

BRENNAN J: Is this the end of the case for practical

purposes?

MR FINKELSTEIN: No, it is not. All that it means is that

so far as the SEC is concerned, the Minister is

able to get basically whatever information he
acquires. It is another question, though, what the
Minister may be entitled to do with that

information. That is to say, if it is correct that

all information provided during the course of the

arbitration is confidential in the sense that it is

information that a court of equity would protect

against misuse, then I suppose somebody might say

that if the Minister obtains that information he

becomes the holder of confidential information and

might be prohibited from using it, although the

schedule to the Act says he can obtain it for his

public purposes.

But bear in mind that the concession that my

learned friend, Mr Myers, indicated was being made

at this stage - not so much a concession but a

point not in issue, and it is a concession that was

made throughout the hearing, by which I mean both

at the Full Court and at the trial - was that

information could be provided by either utility

independently of any statutory right to pass it on

or statutory right in the Minister to obtain it to

government or at least to the Minister but to be

used for the purposes of the arbitration.

So that the case has always been put by Esso

BHP that it is true, statute apart, that the

Minister is entitled to the information but he must

use it for the purposes of the arbitration; as he

said, just a few moments ago, for the purposes, for

example, of giving instructions to the utilities

about settlement or some other aspect of the

arbitral process. That is not an acceptable

position so far as the Minister is concerned,

neither in the case of SEC information, which is

said to be capable of protection by a court of

equity because it is all confidential, or said to

protectable in the way that a court of equity

protects confidential information; nor is it

acceptable generally.

Can I turn to the privacy question. It is

true that the Full Court held that an arbitration

is private; by which I mean the Full Court said

that all arbitrations, presumably apart from those
required by statute, because there are arbitrations

that are mandated by statute, and presumably also

excluding arbitrations that are established by

court order, because under the rules of our court
in Victoria and presumably the rules of other

courts as well, the court can appoint an arbitrator

Esso(2) 28 8/3/94

to resolve some or the whole of the dispute that
comes before the court. Leaving aside those types

of arbitrations, all arbitrations agreed between private parties have, as an implicit term of the

arbitral contract, that strangers must - to use the

language of the Full Court - be excluded from the

hearing and conduct of the arbitration unless their

presence is consented to; and that means consented

to by the arbitrating parties, not as might be

directed or requested or suggested by the

arbitrator himself.

Now, the first point that we want to make is

that just assume that the Full Court was right

about that. It by no means follows that if the

arbitration must be held in a private place with

persons other than the arbitrating parties not
being present as a matter of contract, it does not

follow, logically or at all, that what takes place

in the arbitral process is confidential.

If an arbitration is to be conducted in

private, it does not mean any more than the

arbitration will take place in a private place not

a public place, for example a court which is a

public place, and even if it carries with it a

contractual obligation to keep strangers out that

does not tell you anything at all, in our

respectful submission, about what the parties

themselves may or may not do with the whole of the
information that is passed from one to the other

during the arbitration process. Not only that, it

is a distinction which is well recognised, that is

a distinction between privacy on the one hand and

confidentiality or non-publication on the other, by
courts, although not that clearly in the arbitral

context but certainly in a curial context.

It has been said on many occasions that an

in camera order made by the court or a tribunal,

that is to say that court proceedings will take

place in private, that is excluding strangers from

the proceeding, does not tell you anything about

whether you can publish outside the court

proceeding what took place during the in camera

hearing.

There are two cases to which we refer on that

point; one curial and one in relation to tribunal. the case about court proceedings is the well-known case of Scott and Scott, (1913) AC 417 in the

speech of Lord Atkinson at 453 where His Lordship

says of an in camera order means no more than the

hearing will be in private, nothing else, and a

decision of Your Honour Mr Justice McHugh from

New South Wales, John Fairfax & Sons v Police

Tribunal of New South Wales, (1986) 5 NSWLR 465 at

Esso(2) 29 8/3/94

481, last eight or so lines on the page. In fact

the key passage, apart from the last - it is the

whole of the last eight lines beginning with, "But

I cannot see any justification for holding that a

power" - this deals with the power of a tribunal to

make a non-publication order, statutory body. But

the important passage to which we draw attention is

the last three lines, where Your Honour

Mr Justice McHugh says:

In my opinion there is no similarity between a power to exclude people from proceedings -

that is having a private hearing -

and a power to prohibit publication by either

those who are permitted to attend -

that is those who are there at the private hearing,

or anybody else. And we draw that distinction; we

say it is a correct distinction between - - -

McHUGH J: 

The New South Wales Justices Act, I think

section 32, used to make committal proceedings
heard in private but -

MR FINKELSTEIN: 

It had nothing to do with what you could do

outside.

McHUGH J: Well, the proceedings were published anyway,

rightly or wrongly.

MR FINKELSTEIN: Lord Atkinson makes that distinction, or

makes that point in Scott v Scott, he says, "in

camera means in camera, nothing more." Does not

tell you about what you can or what you cannot do

outside the courtroom. We just have to cite a

simple example to make our point. Take a

shareholders' meeting of a private company, or a

shareholders' meeting of a public company.	The
shareholders' companies law requires annual
meetings to be held.	Such meetings may well be

held in private, that is, anybody other than

shareholders may not be permitted to attend, and if

you hold the meeting in a private room, you can

enforce it, you just bar anybody who is not a

shareholder, and being a shareholder there is a

right to attend, a person as a non-shareholder has

no right to attend. So you can have a meeting in

private, and compel that privacy, but it does not

tell you anything about the obligations that might

be imposed on the people who are entitled to attend the meeting in relation to what they can do outside the meeting. Something else might; maybe the

quality of what is said, or the content of what is

said, but not the fact of privacy itself.

Esso(2) 30 8/3/94

More importantly, it is our contention that

apart from saying that the Full Court erred in

holding that it was an implied term of every

arbitral contract that the arbitration must be

conducted in private, it is our principal

submission, on this point, that whether or not an

arbitration is to be conducted in private is a

matter of procedure, that is to say, how the

arbitration is to be conducted. That procedure can

be determined in a number of ways, actually three.

The arbitration agreement itself may set out the

procedure, it might actually provide consensually

one of those procedural matters, including others. how the arbitration is to proceed; privacy being down the procedure then, in our submission, it is for the arbitrators to decide procedural matters including the right of parties to attend or not attend.

The source of the arbitrator's power comes

about potentially in three ways. It has sometimes

been said that it is an implied term of an

arbitration agreement that parties confer on the

arbitrator the power to determine procedural

matters. The second edition of Russell on

Arbitration, 1856 edition, at pages 113 and 172

makes that assumption.

It has been so held in at least two cases,

London Export Corporation v Jubilee Coffee Roasting

Co Ltd, (1958) 1 WLR 271, at 278 through to 280, it

was a decision of Mr Justice Diplock, as he then

was. The relevant passage is at the top of

page 280 from the second line:

Rather should the courts start with the

presumption that, in confiding their disputes,

not to the courts of law, but to an arbitral

tribunal of their own choice, the parties

intended to confer upon that tribunal a

discretion as to the procedure it should adopt

to arrive at a just decision; and the court

will not lightly assume a limitation on that
discretion -

London Export Corporation was accepted as correctly

stating the principle of the powers of arbitrators

by Mr Justice O'Brien in New South Wales in the

case of Haddad v Norman Mir Proprietary Limited,

(1967) 2 NSWR 627, at page 683.

The Americans seem not so much to put the

position of the arbitrator's power on the basis of

an implied term of the contract, constituted by the

arbitral agreement, but rather they seem to say

that when parties confer on an arbitrator the power

Esso(2) 31 8/3/94

to determine their dispute, then they are in effect

making the arbitrator their judge and that judge,

the private judge, can determine whatever procedure

is necessary for him to undertake the task.

Reference for that, we rely on American

Jurisprudence, second edition, volume 5

paragraph 30, which is page 453, and an American, I

think it is a Federal decision, Dana v Dana, 157 NE

623, at page 625, second column, the first full

paragraph from line 5:

The arbitrators, under the unrestricted

form of submission, which was at common law,

were to determine the mode of procedure, and
were not bound by technical rules.

Bremer Vulkan v South India Shipping, to which reference has been made, (1981) AC 909, at page 984

in the speech of Lord Diplock, suggests that it may

not be a question of implied term, just power,
because of the appointment of an arbitrator. It is

about seven lines down from the top of page 984:

Whereas in an arbitration there is no fixed

pattern of procedure; what steps are to be

taken by each party in a particular

arbitration and the time-table which each

party must observe are matters to be

determined by the arbitrator.

So there it seems to be just a question of power

rather than some implied obligation in a

contractual sense between the parties to the

arbitration. I should say that in all likelihood

in any event the power to deal with procedural

matters and the power to deal with who shall or

shall not be present during the course of an

arbitration is, at least in modern times in

Victoria, statute based. Under the current

Commercial Arbitration Act, section 14 confers wide

powers on arbitrators, with qualification; the

qualification is that there might be something
different in the Act and it is also subject to the

agreement between the parties. Section 14 provides

that:

Subject to this Act and to the arbitration

agreement, the arbitrator or umpire may

conduct proceedings under that agreement in

such manner as the arbitrator or umpire thinks

fit.

Now that is different language than the language of

the legislation that existed before 1984. The 1958

Arbitration Act, which the 1984 Arbitration Act replaced and, I think it is probably true to say,

all arbitration Acts in Victoria for this century,

Esso(2) 32 8/3/94

contained a provision which is set out in the 1958

Arbitration Act in the schedule. I should say,

section 4(2) of the 1958 Arbitration Act includes

deemed provisions into arbitral contracts. The

deemed provisions that are included in arbitral

contracts are found in the second schedule of the

1958 Act and in the schedule there was an

obligation in the following terms - it is:

(f) The parties ..... shall ..... all other

things which during the proceedings on

the reference the arbitrators or umpire

may require.

So, one way or another, by force of statute, the

arbitrators had power to give directions about the

manner in which an arbitration is to proceed, so

that for example, when directions, as you know,

directions have been made for discovery and witness

statements and particulars and pleadings and the

like, independent of statutory power, the

arbitrators could make such directions, because the

procedural matters about which the arbitrators,

independent of statute, would have the right to

give directions, it being implicit in their

appointment, because you confer on them the power

to act as judge and therefore make necessary

orders, but if there was ever an argument about it,

statute clearly empowers the arbitrators to so act.

On the question of attendance of parties, we

would say that that falls fairly and squarely

within the power of the arbitrator to decide who

will and who will not, or who may and who may not,

attend during the course of a hearing. It has been

assumed that the arbitrator has that power. It has been assumed not only by - I will not say this is a

universal assumption made by every textbook writer,

but it is clear that in the United States such an

assumption has been made and part of the bundle of

documents that we have handed up to the Court,

behind the outline there are some photocopied pages

from an American textbook, Domke on Commercial

Arbitration.

It is as up to date as we could get it. It is

the 1990 revised edition. It is a two-volume work.

I would not say that it is an authoritative

textbook but it is a well-known United States

publication on arbitrations and we have copied the section, which is chapter 24, Conduct of Hearings.

We draw the Court's attention to page 362 in

section 24:01.	The pages are numbered down the
bottom.	The second last paragraph:

Before the parties make the opening

statements -

Esso(2) 33 8/3/94

this is at the commence at the hearing of the

arbitration -

the arbitrator may, at his discretion,

determine whether persons other than the

parties may attend the hearing. Those having

an interest in the arbitration should, as a

principle, not be excluded, unless both

parties wish to keep them out. The attendance

of persons other than the parties can pose a

practical problem with wide implications.

The legal reason for that is, if you are present

during the course of an arbitration but you are

interested in the outcome in a commercial sense you

might be bound by the arbitration, so that there

may be a danger in a party wanting to stay and

listen, although he does not take part in the

arbitral process himself. Apart from the textbook,

there is at least one United States case which

assumes that the presence of a stranger - and by

"stranger" in this context I mean a person who is

not a party to the arbitral dispute, that is not a

contracting party to the arbitration agreement, nor

his lawyer.

There is an American case which certainly

proceeds on the assumption that it is within the

arbitrator's power to decide whether a stranger

shall be present. The case of McKinney Drilling

Company v Mach 1 Limited, 359 A.2d 100, a decision

of the Court of Special Appeals of Maryland. A

question of whether an award ought to be set aside

because the arbitrator had in attendance a person

who was commercially interested in the outcome of

the arbitration, he was a competing tenderer for a

particular job. At page 104 of the decision there

is a passage which plainly proceeds on the

assumption that it was for the arbitrator to decide

who will and who will not attend when Judge Gilbert

says:

If the foregoing reasons were not enough to

vacate the award, we observe that the

arbitrator permitted Maloney's

vice-president -

Maloney being the competing company -

to attend all sessions and testify, even

though all witnesses were to be sequestered.
Maloney, although not a party to the
arbitration, had an interest in the outcome.
Based on that decision by the arbitrator,

Judge Mathias could have believed that the

arbitrator exceeded his power in permitting

Esso(2) 34 8/3/94

Maloney's presence and participation, and,
thereby denied Mach procedural fairness.

TOOHEY J: Are you suggesting, Mr Finkelstein, that against the objection of both parties to an arbitration an

arbitrator may throw the proceedings open to the

public?

MR FINKELSTEIN:  The arbitrator could do it but his decision

to do it in those circumstances may not be a proper

decision and it may affect the arbitral process,

but that is not because of some contractual right

that the two parties have, but it is rather because
the arbitrator in those circumstances may have

acted improperly on the reference.

BRENNAN J: 

Do his contractual powers ever extend beyond

making the decision as to who is entitled, having
regard to the contract, to attend?

MR FINKELSTEIN: 

The parties could so contract but, in our

submission - if the parties so contract and say

unambiguously that at this arbitration there will

be four people from each side and no other - and

you can imagine a circumstance of that occurring,

not an arbitration agreement as part of a larger

agreement, but a dispute arising which is not a

dispute that requires resolution by an arbitration

process but the parties agree to have a particular

dispute resolved by the arbitration process and
they could say, "If the parties there stipulate in
the contract that the only people who shall attend
during the course of this arbitration are three
representatives of one party and three

representatives of the other", and identify them, and say, "These are the three people to attend on

each side", then the arbitrator would be bound by

that and so would the parties.

BRENNAN J:  What if the question was, "I would like my

consulting engineer to attend and to assist me in

the conduct of this", and the other side said, "We

might pick up information which will be of use to	don't want the consulting engineer here because he
him outside.", can the arbitrator not then decide whether or not the consulting engineer is entitled
to attend?

MR FINKELSTEIN: Most certainly, but - - -

BRENNAN J:  Would he not have to decide it by reference to

principles of law which are invoked here by your

opponents?

MR FINKELSTEIN:  He would decide how the arbitration should

be properly conducted and, in deciding how the

arbitration should be properly conducted, you would

Esso(2) 35 8/3/94

take into account what the parties' wishes might be on a particular question such as presence of others

and, not only that, the reasonableness of those

wishes or the bases for those wishes. So that if a

person says, "I don't want X to attend for the

following reasons", then it is for the arbitrator

to decide whether they are good or bad and he will

make a ruling on that, but if on the facts of the

case the arbitrator properly weighs up the case

that has been put to him on the question of

attendance, then it is not an answer to say that

the contract says how we shall proceed; it is for

the arbitrator to decide.

McHUGH J:  Does that mean that the arbitrator could say,

"This case is of vital interest to the industry;

I'll admit the press"?

MR FINKELSTEIN: In our submission, there may be - it would

be a very rare case, but there may be an

exceptional case where you could say, "I'll admit

the press." I just imagine, as a practical

reality, that that is not likely to be commonplace

or anything like that. It would require an

exceptional case, but the power is there. Or, for

example, if you go back to the confidential

information cases where - the drug company case

where the drug company sought to restrain its

employee from publishing that particular drugs

manufactured by the company were a danger to

health, and they were widely-used drugs. So the

question in that case was whether confidence should

exist or not.

But let us say during the course of an

arbitration facts like that come out where the
arbitrator thinks at the request of a party -

because I am not suggesting that the arbitrator could do this of his own motion; he is there to decide a dispute between parties - but at the

request of a party in special circumstances, and

they may be very special circumstances, the

arbitrator might permit strangers to listen.

The question in each case is whether the

arbitrator has exercised that power properly, not

whether, in our submission, the power exists but

merely whether it has been properly exercised in a

particular case.

There are three English cases to which we want

to -

DAWSON J:  The guiding principle is what, how best to decide

the dispute rather than how best to protect

confidentiality, on the one hand, or how best to

Esso(2) 36 8/3/94

ensure that the proceedings receiving publicity, on

the other?

MR FINKELSTEIN:  It may be a question how best to protect

confidentiality if the material before the

arbitrator is confidential material. It may be a

question. If the arbitration is what you might

call the typical arbitration, because here we are

not dealing really with a dispute between Esso BHP

and two government utilities, here we are dealing

with every arbitration contract and most of them

are building contracts. I do not know whether any

book do surveys on it but most of them are building

contracts.

In a typical building contract there may be no

confidential information passing at all. When I

say "confidential information", I mean information

which a court of equity would protect, although not

necessarily information in the public domain. In

that circumstance, the arbitrator would not

necessarily be looking to protect confidentiality

because it may not be an issue.

McHUGH J:  But take insurance companies, surely one of the

reasons insurance companies are so keen on

arbitration is because nothing is ever heard of

what happens in the cases. Is that just a

commercial reason?

MR FINKELSTEIN: Yes, and that may be the practical result

of people arguing out their claims against each
other in a place other than a court of law which is

public.

McHUGH J: But if your argument is right, an arbitrator

could go around after the arbitration and discuss

the facts of the arbitration at his/her

professional association, tell the world about

everything.

MR FINKELSTEIN: Yes, I will come to
McHUGH J:	The only ..... would be the market-place, that

people would not use that arbitrator again. It

strikes me as extraordinary. I do not think that

is the ordinary expectation of people who go to

arbitration.

MR FINKELSTEIN: It may not be but I will take you shortly

to circumstances where it is absurd to think that

certain people outside the arbitration cannot be

provided with information about the arbitral

process. I will come to that. At the moment, can

I just deal with the three cases that assume that

the arbitrator - that is English cases - has power

Esso(2) 37 8/3/94

to determine who shall and who shall not be present

during an arbitration.

I will just make reference to three early

English cases:  In re Haigh, 45 ER 838. I will not

take the Court to passages in any of the cases.

The second is Tillam v Copp, 136 ER 857, and

Hewlett v Laycock, 172 ER 261. The question in

each of those cases was whether an arbitrator acted
correctly in excluding a particular person from an

arbitration, each case proceeding on the assumption

that the arbitrator had the power to do that, that

is, decide who would or who would not be present

during the course of the arbitration.

It is not necessarily the greatest point in the world, but the Arbitration Act itself assumes

that proceedings before an arbitrator will not

remain private in the sense that outsiders will be

excluded from hearing about it forevermore because

either an award or before an award stage, sort of quasi-interlocutory steps, to a court and thus

there are many proceedings under the

bring facts about an arbitration and information

pass from one party to another during the course of

an arbitration before a court, but more importantly

before a public place. The relevant sections, I

will just run through them quickly: section 17(1),

that is summons as to parties and to produce

documents; section 18, which entitles the court to

punish a person who refuses to give evidence;

section 26(1), application to consolidate

arbitration proceedings where the court will have

to know what the arbitrations are about before a

proper order for consolidation might be made.

McHUGH J:  That section is unnecessary in your view. have to contend that at common law You

Mr Justice Leggatt 's decision in The" Eastern Saga"

case was wrong.

MR FINKELSTEIN:  No, it is a different question. The

question whether, if I choose X as my arbitrator, I

can have my case heard with another case at the
same time and have Mr X act as arbitrator for each,

may not have to be answered by the question whether

arbitrations are private. It is just that, "I've

appointed Mr X, I want him to do my arbitration, I

do not want him to do another arbitration." In

other words, when I have appointed the arbitrator

and he has acted on the reference, or accepted the

reference, then he is my arbitrator. I can insist

on him doing my job, and you do not have to answer

that question by references to privacy. It is just
that once he has taken the reference then he deals

with my arbitration.

Esso(2) 38 8/3/94

McHUGH J:  Was the reasoning, not the decision, that was

wrong of Mr Justice Leggatt?

MR FINKELSTEIN:  The answer is correct, but you do not need

any notions of privacy to bar consolidation. That
is the arrangement between the arbitrating parties
and the arbitrator. Just quickly through the other

sections, section 33, enforcement of an award,

section 38, judicial review of awards. You have to

bring them into court, and not only the award

itself, but often evidence, documents and so on.

Section 39, where the courts can determine preliminary points rather than the arbitrator himself; section 44, removal of arbitrator. You often have to bring facts before the court - not often - almost certainly have to bring facts about the conduct of the arbitration, what has happened

and so on for removal. Finally, section 53, power

of the court to stay proceedings in favour of

arbitration where often the analysis is: what is

the nature of a dispute, what issues are likely to

be covered in the dispute before the arbitrators as
compared with in court to see whether the court

process should be stayed.

One could say that proceedings under the

Arbitration Act, the ones under the specific sections that we referred to and others, come within the exception allowed for in the supposed

implied term, that is disclosure is authorized by

statute. But the proceedings to which we have

drawn attention that are capable of being brought under the Arbitration Act, if authorized in these

proposed implied term means required, there is

certainly nothing required; you do not have to go

to court and make an application under any of the

sections in the Arbitration Act to which we have

referred. There is nothing in the Act which says,

"I authorize you to avoid your contractual
obligation and impart the information; it's a

voluntary choice."

It is a voluntary choice whether you go to

court and make an application of one sort or
another that is permitted by the Act and when you

do that by reference to material that is produced

or information which is supplied to you during the

course of an arbitration, that is not conduct

authorized by statute. It is your choice whether

you want to make an application under an empowering

provision. So that what the Act allows you to do

is not covered or permitted by the type of implied
term suggested by the appellants.

I want to turn to say something about the implication of terms generally before I come to say

Esso(2) 39 8/3/94

some specific things about the two implied terms in

question.

It is clear - and it has been made clear here

and it should not be forgotten - that at every

stage of this proceeding, the trial, on appeal and

here, Esso BHP have said, "We are not relying on

the BP refineries implied term". It is not an ad

hoc term to be implied in this particular contract,
having regard to the nature of the contracting

parties and the subject-matter of the contract, the

subject which may give rise to disputes; that is it

is a gas sale contract and it has an arbitration

clause in the gas sale contract. They do not say

that it is because it is a gas sale contract and

because of who the parties are and because of the

nature of the information which might be provided -
although they try and say it in part, as they did,

by taking the Court to the affidavit which says to the Court, what is the type of information that is

provided during the course of the arbitral
proceedings between Esso BHP and SEC and Gas Fuel.

All of that is not to the point because here the question is: are the implied terms to be imported

into every arbitral contract, unless the arbitral

contract expressly says otherwise?

The courts have made it clear that the test to

be applied is twofold: to imply a term is a legal

incident of a class of relationships, the term must

be both reasonable and necessary. What

"reasonable" means, I suppose, is clear enough.

What "necessary" means is not always fully

explained. We would contend for this meaning of

necessary, that if the provision contended for is

not in the contract, the contract would be rendered

futile. That is to say that common sense will

require the implication to be made in order that

the main purpose of the contract will be fulfilled.

Hancock, (1893) 2 QB 177, at 181, the question of Part of that language comes from Miller v

whether there was an obligation on landlord in

respect of tenancy of part of a building to enable

proper access through stairs in the building to get

to the demised premises. If proper access was not

obtained then the tenant could not get to his

demised premises. Lord Justice Bowen, in a passage which is cited time and time again, on implications by law, as opposed to ad hoc implications, at 181,

half-way down the page, in a sentence which begins

with the words, "It seems to me that", it is a bit

below half-way, His Lordship says:

It seems to me that it would render the whole

transaction inefficacious and absurd if an

implied undertaking were not assumed on the

Esso(2) 40 8/3/94

part of the landlord to maintain the staircase

so far as might be necessary for the

reasonable enjoyment of the demised premises. That notion of necessity, that is, to leave the

term out would result in an "inefficacious"

contract, or would constitute an "absurd" result

has been accepted regularly as the appropriate
test. In Liverpool v Irwin, (1977) AC 239 - I will
not take the Court to the passages, but I will give

page references - in the speech of Lord Wilberforce at 254, in the speech of Lord Salmon at 262, in the speech of Lord Edmund Davies at pages 266 and 269,

and I think the other law lord who looked at the
issue was - Lord Fraser I do not think addressed it

directly, but I know Lord Fraser agreed with

Lord Wilberforce - Lord Cross adopted the

Lord Denning test of reasonableness, and now is

clearly wrong.

Lord Denning had, in the Court of Appeal, said the only test for the implication of the term, even as a matter of law, is that it is reasonable. Lord

Cross agreed, but none of the other Lordships did.

Now, that test of inefficacious contract or that

meaning of necessary, the general test in Liverpool

v Irwin, has been accepted by the Privy Council in

Tai Hing Cotton v Lin Chong Hing Bank, ( 1986) 1 AC 80 at pages 104-105 - I will not take the Court to

pages in these cases, just give the Court

references - by the New Zealand Court of Appeal in
Leisure Centre Ltd v Babytown Ltd, (1984)

1 NZLR 318, and by the Supreme Court of Canada in

Canadian Pacific Hotels v Bank of Montreal,

40 DLR (4) 385 at 431.

TOOHEY J: But if the implication is necessary to make the

contract efficacious, what is the role of

reasonableness?

MR FINKELSTEIN:  The courts say "reasonable and necessary".

If it is necessary to make the contract work,

generally speaking it is likely to be reasonable,

but one could envisage some circumstances where it

might be unreasonable from the point of view of a

particular contracting party, but - - -

McHUGH J: But that is not the test, is it, because you do

not look at the particular contract or the

particular parties?

MR FINKELSTEIN: That is exactly right. Lord Wilberforce

said one word "necessity". Most of the other Law

Lords and most of the other judges have said

"reasonable and necessary", but Lord Wilberforce

has said, "It can be summed up in one word,

'necessity'" and His Lordship no doubt had in mind

Esso(2) 41 8/3/94

something like Your Honour's question, if that is
what "necessary" means in that context, then how
could it ever be unreasonable.

We do want to draw attention, but only in passing reference, it may be that the Court of

Appeal in New South Wales has moved back towards

the "reasonableness approach" rather than the

"necessity requirement" in a recent decision

Renard Constructions v Minister for Public Works

(1992) 26 NSWLR 234.

McHUGH J: When it came up here, I think we refused special

leave, did we not?

MR FINKELSTEIN:  That is right. Mr Justice Priestley at

page 261, especially from line E and following,

seems to have understated the position somewhat,

where His Honour says:

It seems to me that the word necessity,

when used in the cases analyzed by

Mr Justice Hope -

that is a reference to Castlemaine Tooheys - -

McHUGH J:  What reasons did we give for refusing leave; that

the decision was clearly right?

MR FINKELSTEIN:  I hope not, Your Honour.

was not being used in the absolute sense. In

regard to classes of contract to which

particular implications have been recognised

as attaching, it is not possible to say that

the implication was always necessary, in the

sense that the contracts could not have worked

without the implied term. Contracts of sale,

contracts of employment, and leases are three

classes of contract to which such terms have

been attached. In all cases it would have

been possible for the main purposes of the

contracts to have been attained without the
implications the judges have held they

include. The rules in regard to each of them

have come into existence not because in the

particular cases giving rise to recognition of

the implication it has been thought that it

would be impossible for such contracts to be

made and carried out without the implications,
but because the Court decided it would be
better or more appropriate or more reasonable

in accordance with the contemporary thinking
of the judges and parties concerned -

That seems to us to be slipping back into the

Lord Denning, Lord Chelsea approach which is wrong.

Esso(2) 42 8/3/94

It is not what is more reasonable; it is what is

necessary. His Honour Mr Justice Priestley refers

to contracts of sale, having in mind, no doubt,

sale of goods and the implications made by law that

goods are going to be of merchantable quality. If

you do not imply that term, then the contract does

not work in a real sense. That is, you have a

futile contract if you can sell a chattel and the

chattel cannot do what it is meant to do - if it is

a car, drive; if it is a lawnmower, mow lawns;

whatever it might happen to be. So that the

examples that His Honour gives do not prove his

point and whether they do or whether they do not,

the test that he there articulates does not conform

with the accepted test in every ultimate appellate

court.

About the implication of terms generally, in addition to saying that the requirement, as

Lord Wilberforce says, can be summed up with the

word "necessity", I make some additional points.

First, it is accepted or should be accepted that a

court should be slow in implying a new category of

implied term for the first time. Maybe that is

common sense, but at least the Court of Appeal said

so.	The "Choko Star;' (1990) 1 Lloyd's Rep 517 at
526.
Secondly - and this is a slightly different

point - when the courts imply as a legal incident of every contract of a particular class, when the courts do that, they have in mind a class of

contract. It is our submission not only on this

aspect of the case when we are dealing with the

implication of contractual terms, but also when we

look at the breach of confidence claim, that

contracts made with the Crown or agencies of the

Crown or statutory corporations have to be looked

at differently.

That principle has been recognized at least on

three occasions: one by Your Honour Justice McHugh

in Attorney-General (UK) v Heinemann Publishers

P/L, (1987) 10 NSWLR 86 at 190 to 191, in a passage

that was cited with approval in a breach of

confidence claim, Smith Kline v French Laboratories

v Secretary Department of Community Services and

Health, the Full Court of the Federal Court,

is on page 191 about 10 lines from the top of the

28 FCR 291 at 303. The relevant passage in

page, after the reference to Norwich Pharmacal Co

and Viscount Dilhorne's speech, where Your Honour

said:

But the relationship between the modern State and its citizens is so different in kind from

Esso(2) 43 8/3/94

that which exists between private citizens

that rules worked out to govern the

contractual -

we emphasize that -

property, commercial and private confidences

of citizens -

we emphasize that as well -

are not fully applicable where the plaintiff
is a government or one of its agencies.

Private citizens are entitled to protect or

further their own interests, no matter how

selfish they are in doing so. Consequently, the publication of confidential information

which is detrimental to the private interest

of a citizen is a legitimate concern of a
court of Equity. But governments acts, or at

all events are constitutionally required to

act, in the public interest. Information is

held, received and imparted by governments,

their departments and agencies to further the

public interest. Public and not private

interest, therefore, must be the criterion by

which Equity determines whether it will

protect information which a government or

governmental body claims is confidential.

It is true that in the last couple of lines

Your Honour is concentrating attention on the role

of the Court of Equity and information to be

protected which is government information, but the
passages that we have read make it clear, and we

would say, with respect, correctly, that
contractual rules and rules about confidences are

to be worked out differently in the case of

dealings with government and government departments

and agencies when compared with relations between

private citizens. The Smith Kline case was an example of a case

where complaint was made about the misuse of

confidential information received by government.

That is, it is not a case as was Heinemann where

the government was seeking to protect its

information. Smith Kline was the reverse.

Smith Kline had provided information to government

and was complaining about the manner in which

government had used that information.

Can I come back to dealing with the particular

implied terms, and what I said I would do, that is

give examples why neither term that is sought to be

implied is made out.

Esso(2) 44 8/3/94

First as to the implied term for privacy. The

implied term does not satisfy the test for

necessity in this sense at least, that either by

reference to the powers that an arbitrator has

conferred on him because he has been appointed by

parties to arbitrate the dispute or because of the

arbitrator's statutory powers given by the

Commercial Arbitration Act and forerunner

legislation, if forerunner legislation be relevant,

the arbitrator has the power to exclude people or

allow people to be present. If the arbitrator has

that power, and we contend that he does have that

power, then there is no necessity to imply any term

between contracting parties dealing with who shall

and who shall not be present during the course of

an arbitration.

Secondly, the term is not necessary in the

sense that the main object of the arbitral

contract, treating it as a separate contract for

the time being, can be carried out without the
term. That is, what an arbitral agreement is is a

means of resolving a dispute which might otherwise

have to be resolved in some other arena, like a

court. The dispute can be, and no doubt will be

resolved satisfactorily and properly, without any

concern about who will or who will not be entitled

to attend and hear. In other words, the main

object of an arbitral contract is to resolve a

dispute. That main purpose will be fulfilled

without the implication of the term. It is

unreasonable, in any event - - -

TOOHEY J: Of course, if you add the word "privately" -

MR FINKELSTEIN: Then you answer the question by asking

that.

TOOHEY J: That is right.

MR FINKELSTEIN:  We say that you cannot - - -

TOOHEY J:  But there is an element of begging the question in whichever way you formulate that proposition.

MR FINKELSTEIN:  I start off a bit more purely. I do not

say that I am trying to protect the private

arbitration. Our submission is that you have an

arbitral contract and you have to determine whether

privacy is a necessary incident of that. If you

say that an arbitration agreement has to be

private, then an arbitration agreement has to be

private and you have to protect that privacy.

TOOHEY J:  You do not have to say that but you might say the

main purpose of an arbitration is to resolve a

Esso(2) 45 8/3/94

dispute privately. If you said that then you come

out with a dif fe·rent answer at the other end.

MR FINKELSTEIN:  An answer to that is that begs the

question. The question is whether there is an

obligation of privacy and you do not test that by

saying that it is private or you do not come to the

answer for that question by saying it is private.

TOOHEY J:	No, but you were seeking to test it by reference to the object of the process. All I was suggesting
to you is that you merely have to add one word and
the object of the process dictates the answer.

MR FINKELSTEIN: Yes, I accept that, but it is unreasonable,

in any event. I will ask the Court to look at the

various factors taken into account by Mr Justice Brooking in looking at the

unreasonableness of the implied term which is the

subject of the main argument. But a simple

example - and it is important not to lose sight of

the fact that simple examples are more useful

because the type of arbitration with which this

case is particularly concerned, if you look at the

SEC and Gas and Fuel arbitrations they are not

typical arbitrations, they are massive when

compared with common everyday arbitrations.

But the example that we cited to the Full

Court on the appeal was: if you have a simple

building contract - you have to assume for this
purpose that most arbitrations are building

arbitrations but the textbooks tell you that in any

event - where a spouse enters into the building

contract, has a dispute with the builder, the

builder has a dispute with the building owner, it

is to be arbitrated and the parties think it is

over a relatively small sum of money, they are not

going to engage lawyers and the like or even if

they do engage lawyers to help them, can it be

said - I suppose at the end of the day people will

but can it be said that a spouse who has got a	have a different common sense view to the question	fight with a builder about a matrimonial home can
be compelled to exclude the partner from the
arbitration; that is it affects them both, in the
sense it is the house that they live in, and the question whether the cupboards are going to have to
be rebuilt or not or whether they have to spend
another $5000 getting another builder to build the
cupboards affects them both, not in a legal sense,
but in a practical real sense - well, the legal
word is "unreasonable" but ordinarily we use a
slightly different word to suggest that the spouse
must, by conflict, be excluded from the arbitral process although he or she - - -

Esso(2) 46 8/3/94

McHUGH J:	So should you really test the application or the existence of the legal proposition by such an
example any more than you would test whether or not
the deliberations of jury as a secret by reference
to whether or not a husband or a wife is likely to
tell a spouse of what was going on.  They are not
very good examples, are they?

MR FINKELSTEIN: But if the question is, as some have said,

that it has got to be both reasonable and

necessary, the question is whether the Court will

impose, that is as a rule of law, an obligation which in the example, silly though it might be,

excludes such a person from an arbitration.

McHUGH J: Well, take cabinet dealings; they are supposed to

be confidential. Now, you would not test whether

or not they are secret or confidential by the
likelihood of whether a cabinet minister would tell

his or her spouse.

MR FINKELSTEIN:  No, at the moment I am not talking about

outside the arbitration process, one person

speaking to another. I am addressing myself to the

question can the other, that is the person who is

not a party to the contract, can it be reasonably

said that as a matter of law that person must be

excluded from the hearing? That is a different
point about talking about it afterwards. That
comes up under the next implied term, but here just

a simple question can such a person - should, not

"can" - should, as a matter of law, such a person

be excluded? We say that that is so unreasonable

against common sense standards, that that tells
against such an implied term, in its absolute

sense, being imposed.

MASON CJ:  We might adjourn now and allow that powerful

proposition to sink in, Mr Finkelstein.	We will
resume at 2.15.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.20 PM:

MASON CJ: Yes, Mr Finkelstein, we adjourned as you were

developing this example of yours.

MR FINKELSTEIN:  I have decided to move on to the next

point, if the Court pleases. No more examples for

Esso(2) 47 8/3/94

awhile. I want to deal with the implied term about

confidentiality or non-disclosure.

First, it is an obligation which has not been assumed to exist so far as arbitrations are

concerned, as is made out in a number of cases. I

am leaving aside at the moment Dolling-Baker and

the case which has followed Dolling-Baker in

England, but leaving aside those two cases, it is not an obligation which has been assumed to exist

to Australia and in the United States.

So far as Australia is concerned the relevant case is Alliance Petroleum Australia No Limited v Australian Gas Light Company, (1983) 34 SASR 215, decision of Mr Justice Bollen approved by the Full

Court. Just quickly, the case concerned a subpoena

issued to produce documents to an arbitration and

the party served with the subpoena was concerned about the confidentiality of the documents to be

produced, and sought to resist the subpoena on that ground. Mr Justice Bollen dealt with the issue - a

number of issues but this one in particular, that

is the one relating to confidentiality or, we would

say, recognition of lack of confidentiality of

arbitral proceedings - at pages 229 and following.

At 229, second last paragraph, His Honour says:

Mr Williams' submission is that no balancing

process is appropriate, that the mere fact

that the documents sought contain confidential

information is not sufficient to invalidate

the subpoenas, that there must be more before
that can be done, that there is no more here,
that the arbitrators can devise adequate means

to protect the confidential information and

that, therefore, there is no oppression in

requiring compliance with the subpoenas.

Towards the foot of the page there is further

reference to counsel's argument in point (iv),

third-last line, page 229, in summarizing the

arguments of counsel:

Although perfection of protection is

impossible the arbitrators can adequately

protect the confidential information.

The court agreed that the arbitrators had power to

protect confidential information. That appears

from pages 231 to - - - -

McHUGH J: But may not that indicate what the true basis of

this whole case is about? The parties have

concentrated on whether there is an implied term of

confidentiality, but perhaps it inheres in the

concept of arbitration. Just in the same way as if

Esso(2) 48 8/3/94

the ~ar council and the law institute agreed on a
game of cricket, there would not be an implied term

that there would be 11 players. It would inhere in

the very nature of what the agreement was about.

There you have a dictionary of content having

regard to the rules of cricket, but why is it not

the very nature of arbitration that there is

confidentiality and the part an implied term plays

is as to exceptions to it.

That is to say, you say, "Is there as a matter of business efficacy implied in this agreement an

exception in these circumstances to allow
confidential information to be released for this or that purpose?" That would be quite consistent with

what Mr Justice Bollen was saying in that

particular case because it was dealing with quite a

different issue, namely that the arbitrator has

himself got power to protect the confidential

information.

MR FINKELSTEIN:  Can I say a number of things about it.

Leaving aside the question that it has never been put on the basis that it is just, as it were,

wrapped up in the arbitral process, what this case

and others demonstrate is that - first of all, in

the AGL case Mr Justice Bollen said that

arbitrators have a power to protect confidential

information. That is, what the Court does by

saying that is make an assumption that there is

nothing inherent in the arbitral process which, as

it were, by magic protects information, but that

arbitrators when they exercise their powers to make

orders of an interlocutory type, give directions of

an interlocutory type, they can protect it.

Some American cases which I will take the

Court to assume no confidentiality at all in the

arbitral process. The English cases, Dolling-Baker

and Hassneh, to a limited extent have said that

there is some aspects of the arbitral process that

can be protected and as Hassneh makes clear, it is	on the basis of an implication of a contractual
term. In that case the Court said it was a term
derived from custom and usage, that is not the legal incident type implied term, but another way that you can get a term implied into a class or
grouping of contracts. We would say that there is
nothing inherent in the notion of an arbitration
which requires confidentiality. If you are going
to look for confidentiality in the true sense, that is to say to protect any impartation of or
disclosure of any information, that has got nothing to do with all arbitrations.

McHUGH J:  I am talking about private arbitrations. I mean,

statutes provide for arbitrations.

Esso(2) 49 8/3/94

MR FINKELSTEIN:  I am limiting the submissions that I am

making to private arbitrations in the sense that
private parties agree to the arbitral process.

McHUGH J: It has always struck me that the reason people want private arbitration is simply so that their

business will not be broadcast to the full world at

large. Now, I know as a matter the lawyers tend to

talk about what goes on in arbitrations, but then lawyers also tend to talk about what clients have

said in a general way; that does not mean that

there is no confidentiality.

MR FINKELSTEIN:  The difficulty is, with respect, that the

answer may differ, that is, whether something

should be regarded as confidential may differ

arbitration to arbitration, depending on

subject-matter of the arbitration, the nature of
the contracting parties, the identity of the
contracting parties to an arbitral agreement and

the particular subject-matter to be determined.

McHUGH J: That was what I was putting to you, that one

starts, in effect, with a presumption that there is

a cloak of confidentiality over the arbitration,

but the subject-matter, the circumstances or some

other, may create exceptions, to give business

efficacy to the agreement, may be necessary.

MR FINKELSTEIN:  We, with respect, would suggest the

approach should be rather different; that there is

no general approach to all arbitrations but you may

import some sort of obligation, that is, import the

obligation, not to create the exception to the

obligation, into particular arbitrations. That is

not to say -

McHUGH J: This is on a Moorcock basis?

MR FINKELSTEIN: That is exactly right. That is, pick your

facts and look on a particular factual situation:

what is it that is being arbitrated? Let us say	you have got a patent agreement or something like
that where it is inherently probable that true secret information might come up in the
arbitration. If that is the type of dispute which
is being arbitrated, then maybe you have an ad hoc
implied term about confidentiality. But if you have got a neighbourhood dispute between adjoining owners about where the fence should go or a
building dispute about whether the cupboards are build correctly or not, there is nothing inherent
in the nature of the dispute nor in the identity of
the parties to that dispute which says that that
should be confidential, that is, secret to the
whole world.

Esso(2) 50 8/3/94

That does not depend on the question whether

the arbitration is to be conducted in private,

excluding strangers, but it just says that, having

regard to the sort of information that will be

imparted during the course of that sort of dispute,

it would not be regarded as a wrong for one party

to tell a third party - family member, neighbour,

friend, whatever it might be, that is a civil

wrong - about what happened about whether his

cupboard was built correctly or not. But you can

take facts of another case, like an agreement about

intellectual property and say, "In that particular

case, because of what's going to be looked at

during the arbitration, and because of the

agreement itself and the subject-matter of the

agreement which is going to be brought up in the

arbitration, that you may have to import some

obligation." But that is on an ad hoc basis and I

do not say - and we have never submitted - that a

term, never along the lines for which the

appellants contend because it is just so broad that

it must be wrong, but a modified term cannot go in

respect of a particular contract.

McHUGH J: Including this contract?

MR FINKELSTEIN: It has never been argued. It may or may

not but that is not the point. That really cannot

be the point because the appellants have rested

their case always on the Lister or Irwin implied

term and never on an ad hoc implied term. The

arguments would have been completely different and one would have led evidence; one would have looked

at the surrounding circumstances at the time the

agreement was entered into to see what sort of

things could have been disputed; one would have had

to analyse in the first instance the whole of the

sales agreement and go through it clause by clause

to say, "Well, if you've got a dispute about

clause 1 could that bring up true and confidential

information. If you've got a dispute about

clause 10 could that bring up true and confidential

information.". If you want to go through that

analysis you may or may not come up with an answer.

But in this particular case, you imply ad hoc some

provision about confidentiality. But that is not

the exercise and never has been and the appellants

have made it clear that they do not want to argue

that case. That might tell you something about

whether it would work or not, for this particular

contract, and it may never have worked for this

particular contract but I do not say it could not

work for some contracts.

One can envisage a lot of contracts where the

presumed intention - which is what you are looking

at for the ad hoc implied term - of the parties

Esso(2) 51 8/3/94

would lead to the, "Yes, it goes without saying

that they would treat this as secret." but, if I am

worrying about my cupboard and whether that is

built correctly or not, why would a reasonable
person presume that if I win that dispute I should

not go and say, "Well, look, I've just got $10,000

from my builder and I can go build a new cupboard."

With the greatest respect we say it is just

not a proper characterization to say that every

arbitration, no matter what the subject-matter,

must carry with it an obligation of

confidentiality, not to deny, however, that some

might.

BRENNAN J:  In the case of those that might, then the cover

would be complete in respect of any information?

MR FINKELSTEIN:	No, never.
BRENNAN J:	Some information?
MR FINKELSTEIN:	No.

BRENNAN J: In respect of what?

MR FINKELSTEIN: Confidential information, that is secret

information.

BRENNAN J: Meaning, thereby, that which has not been

public, or something else?

MR FINKELSTEIN:  No, something else. I will come to it, but

in substance it would be information which, if

published, would cause detriment or likely cause

detrimental. That is if it is commercial

information cause commercial detriment or if it is

personal information cause embarrassment or

ridicule or something like that.

Now, you can fit that in to the way that the equity cases articulate the problem when they deal

with confidential information, but we do not accept

that it is a correct test to decide what type of

information is to be protected, that it is just to
be classified as information not known to the

public, or not in the public domain. That, we

would say, is incorrect.

All I want to say about Mr Justice Bollen is at pages 231 and 232. His Honour says what an

arbitrator might be able to do to protect

confidential information, leaving completely out of

the question the possibility and therefore, in our

respectful submission, denying the existence of

some contractual right, or something inherent in

the arbitral process itself that would provide

Esso(2) 52 8/3/94

protection. He says you give directions about

non-publication, or transcribers, the shorthand

people not revealing information and so on.

TOOHEY J: It is clear, is it, Mr Finkelstein, that those

matters referred to at the foot of page 231 are not

said to spring from any statutory provision.	One
of them clearly is section 70 -

MR FINKELSTEIN:  One yes, the others no.

TOOHEY J: But, is it clear that the others have no

statutory foundation?

MR FINKELSTEIN:  In Victoria there would be the general

power -

TOOHEY J:  No, I was thinking in relation to

Justice Bollen's remarks.

MR FINKELSTEIN: Specifically? No. There will no doubt be

a piece of South Australian legislation equivalent

to the Victorian Arbitration Act which gives to an

arbitrator power to give directions for the conduct

of the arbitration, but there is nothing specific

that says secrecy and so on because, although the

Victorian Act is now slightly different to what it

was in 1958, before then my recollection is that

most of the States legislation, which derived from

England, was pretty much the same.

There are three United States cases which

proceed on the assumption that there is nothing confidential about material produced during the

course of an arbitration, and I think we handed up

to the Court this morning photocopies of each of those cases. I will not take the Court to them, but each of them is an example of an acceptance by

the court that material generated during the course

of an arbitration is not per se confidential.	The
three cases are United States of America v
Panhandle Eastern, 118 FRO 346, Industrotech

Constructors Inc v Duke University, 67 NC App 741,

and it is also in 314 SER (2nd series) 272, and the

last case is just from LEXIS, Giacobazzi Grandi v

Renfield, US Dist. case. Those cases were referred

to by Mr Justice Brooking in his decision as cases

which exemplify a denial of the proposition that is

generally accepted that arbitral proceedings are

confidential.

The provision contended for is both

unreasonable and not necessary in the Irwin sense.

I do not want to give too many examples of why it

is unreasonable, but Mr Justice Brooking certainly

gave some. I will leave aside the spouse one, I

think His Honour referred to that, but an

Esso(2) 53 8/ 3/94

arbitrating party disclosing to his banker

information about the arbitration. A banker might

have a commercial interest, but no legal interest

in the outcome of the arbitration. An insurer is a

useful example, it is useful because one of the

English cases takes it up, but in an unusual way, as well.

If a party is involved in a dispute which is

the subject of arbitration but happens to be
insured in respect of a claim made against him, the
way that the implied term which is contended for

reads, it would deny the possibility or the

permissibility of the insured telling the insurer,

"(a) there's a claim, (b) this is what the

subject-matter of the claim is, (c) here's a claim

form setting out all relevant facts. Please

indemnify me if I lose the arbitration." Under the

confidentiality provision which is articulated by

the appellants, that would be contrary to contract.

That is an unreasonable result.

There is also a difference, and it may be an

important difference between the way that the

current obligation is being cast and the way that

it was cast in the past. One of the points about

these sorts of implications is: it really must be

clear and absolutely necessary but it keeps

changing. Initially what was sought was

prohibition against use of information. You will

see that from the form of order set out at page 385

in volume 2 of the appeal book, where

Mr Justice Brooking, in the part of the judgment

where he deals with the history of the implied term

that was being asked for variously - there it is

against use.

Now use is not the criteria; it is disclosure.

That means that the party to the arbitration gets

the information, can use it in some way not to do

with the arbitration, might make personal use of

that information to do something, but cannot
disclose it to a third party.	The obligation is

cast exceptionally widely. That is one of the

complaints we will make when I deal with the

equitable side of the case, but it is against all
information regardless of its character; that is to

say, regardless of its secrecy or regardless of its

importance. The only test is: is it in the public

domain or not.

The two English cases that stand in our way

are Dolling-Baker to which the Court has already

been referred and Hassneh Insurance Co of Israel

v Mew, (1993) 2 Lloyd's Rep 243. As the Court has

been told, Dolling-Baker imposes an obligation of

confidence based on the notion, which is expressed

Esso(2) 54 8/3/94

in Lord Justice Parker's judgment at page 1213E,

on:

the essentially private nature of an

arbitration -

but not by itself -

coupled with the implied obligation of a party

who obtains documents on discovery not to use

them for any purpose other than the dispute in

which they were obtained.

Privacy was not enough. Now as to the obligation

in relation to discovery, our submission to the

Court is that it has no relevance at all to the

issues that the Court of Appeal was considering and

therefore what we are considering here.

Home Office v Harman, (1983) AC 280, to which

reference has already been made, in the speech of

Lord Keith at page 308, first His Lordship makes it

quite clear that the obligation has got nothing to

do with confidentiality. He says that between F

and G on page 308, three lines below where the

letter F appears:

The implied obligation not to make improper

use of discovered documents is, however,

independent of any obligation existing under

the general law relating to confidentiality. the interests of the proper administration of

justice. It is owed not to the owner of the

documents but to the court, and the function
of the court in seeing that the obligation is
observed is directed to the maintenance of
those interests, and not to the enforcement of

the law relating to confidentiality.

Lord Diplock also makes it clear in his speech at

page 304 that it is ''an undertaking given to the
court".	Now, because it is an undertaking given to

the court, as many cases make clear,

Riddick v Thames Board Mills Ltd, (1977) 1 QB 881

being an example, you can go to the court and ask

to be released from the undertaking.	You cannot do
that to arbitrators.	When the reference is over,

arbitrators do not have any function to fulfill.

So that whilst the Home Office v Harman type

obligation exists, it exists subject to the party

being relieved from it in a way that has no place

in arbitrations.

The other point we want to make about the

Home Office v Harman analogy is that it is limited

in its operation, as the cases show, to documents

Esso(2) 55 8/3/94

produced as a consequence of the court exercising

coercive powers, whether it is to make discovery or

answer interrogatories, and the cases have gone so

far as to say, if the court orders witness

statements to be produced pre-hearing, then the

undertaking might exist in respect of those types

of documents as well, but it is because of the

court's coercive powers.

In Dolling-Baker the Court of Appeal said that

the obligation of confidentiality which it was

imposing in arbitrations was subject to court

order. You will see that in Dolling-Baker at 1213

at about point G of the page. Again,

Lord Justice Parker in the last three lines of the

paragraph, so that he imposes the obligation:

not to disclose in any way what evidence had

been given by any witness in the arbitration,

save with the consent of the other party, or

pursuant to an order or leave of the court.

That qualification is necessary, just as it is

in the case of the implied obligation of

secrecy between banker and customer.

We would say that no court in Victoria would have jurisdiction to grant leave if leave was

asked. If an obligation is owed as a matter of

contract, a court does not have jurisdiction to
relieve a party from that sort of obligation. We,

quite frankly, do not see how Lord Justice Parker

thought that the High Court in England had the

requisite power. The qualifications articulated by

Lord Justice Parker in Dolling-Baker were not

regarded as sufficient and they were amplified in

the Hassneh case.

Might I say, however, that Mr Justice Colman,

who decided Hassneh, said at page 246 - sorry,

(1993) 2 Lloyd's Rep, 243 at page 246, second

column, that the foundation for the implied

obligation, recognized by Lord Justice Parker in

Dolling-Baker could come about in two different

ways. You will see this from the last two

paragraphs in the second column where

Mr Justice Colman says:

It is to be observed that

Lord Justice Parker identifies an "implied

obligation" as the basis for the

confidentiality attaching to documents used in

or engendered in the course of an arbitration.

Such an obligation can exist only because it

is implied in the agreement to arbitrate and

like any other implied term must be capable of

reasonably precise definition. The

Esso(2) 56 8/3/94

implication of the term must be based on

custom or business efficacy.

What His Lordship there is saying is that, in

effect, of the three bases for implying a term the

ad hoc implied term, BP Refinery-type implied term,

the Lister implied term or a term implied by custom

and usage, the two possibilities that he recognizes
are the ad hoc implied term and custom and usage.

You will see from the last paragraph on that page that His Lordship implies the obligation of confidentiality from a universal practice adopted

in London for hundreds of years. That is to say,

His Lordship says that the implication for

confidentiality comes about as a matter of custom

and usage, not as a matter of the implication of a

term as a rule of law, as an incident to all

classes of contracts of this type.

McHUGH J:  Mr Finkelstein, something has just occurred to me

which embarrasses me considerably, but I own shares

in BHP.	Would you bring that to the attention of
all the respondents' counsels.	I am sorry, I just

suddenly realized that the second appellants are

subsidiaries of BHP.

MR FINKELSTEIN:  I am sure it will not make any difference

to anybody, although if they win the arbitration

the shares might go up a bit.

McHUGH J: Yes, thank you. I am terribly sorry about that.

It just suddenly occurred to me when I saw that

name.

MR FINKELSTEIN:  Hassneh was required to recognize

exceptions to the rule of confidentiality over and

above those recognised in Dolling-Baker, namely

consent of the court and leave of the parties.	In
Hassneh what was accepted conduct not infringing

the obligation of confidence was something akin to

commercial necessity and the right to bring the

arbitral process to court in order to challenge some aspect of it. The commercial need type point

was worked out because of the similar rights that
banks have in relation to customer information.

Tournier's case sets out the obligation of

confidence that a banker has and sets out the

exceptions, and one of them is a commercial

necessity type exception, and that was accepted in

Hassneh as appropriate, again going beyond

Dolling-Baker and bringing the arbitral award to

court was also accepted as appropriate.

A point that we made before the Full Court,

which was accepted by the Full Court and which we

urge upon this Court, is that if you try and essay

the circumstances in which it would be proper for a

Esso(2) 57 8/3/94

contracting party - I mean a contracting arbitral

party - to make use of information provided to him

du~ing the course of an arbitration, no class or category can be stipulated with any precision at

all. That is you cannot say that you can use it -

it is confidential except in this circumstance, or
it is confidential except in these three

circumstances. The only circumstances allowed for

by the appellants is when required by statute.

Dolling-Baker does not agree with that and

Hassneh does not agree with that, in any event.

But what we say is impossible to achieve is a

proper definition of the exceptions and because

that cannot be done that demonstrates that the

implied obligation cannot exist.

Can I move then to the equitable claim. There

is an initial difficulty about the equitable claim.

There are a series of cases which suggest, perhaps not as explicitly as they might, but they would be

in circumstances where parties have a contract and

are seen to be regulating their relations in the

contract itself; then, if the contract is deficient

in some way in giving protection that a party

wants, equity will not intervene.

That has been a principle which has been

applied on a number of occasions to claims for
protection of confidential information where the
contract itself has not either expressly or by the
implication of an appropriate term given rise to

the protection sought.

The three cases which say that you cannot go

to equity at all:  Vokes, Ld v Heather - I will not

take the Court to passages in the cases -

62 RFC 135, at pages 141 to 142; Faccenda Chicken

Ltd v Fowler, (1987) 1 Ch 117, at page 135 and

following; and a relatively recent unreported

decision from the Supreme Court of Western

Australia, Corporate Farming Pty Ltd v Eden Bay Pty

Ltd. It is an unreported decision of

Mr Justice Murray, judgment delivered on 28 January

1992.       We have provided the Court in our bundle

with not the whole of the judgment - it is very

very lengthy and most of it is irrelevant - but

from about pages 54 through to 56 or thereabouts

the relevant passage appears and that is the part

of the case that we have copied for the Court.	If
the Court wants the whole of the judgment we can
provide that as well.

The Equity textbook by Meagher, Gummow &

Lehane, 3rd ed, accepts the principle - it is at

paragraph 4101 and, I suppose, not untypically the

authors say:

Esso(2) 58 8/3/94

To the extent that there are cases to a

contrary effect they are wrong.

It must be said that it cannot be an absolutely

correct statement to say that if the contract does

not give the protection equity never will because

one can instance cases where a contract creates

fiduciary obligations, principal agent, contract

creates a trust, trustee and beneficiaries, joint

venturers and so on. In those circumstances, where

the contract itself creates a fiduciary

relationship between the contracting parties then

it is difficult to conceive of equity not providing

protection although the contract may not give it

even if you fail in the attempt to imply a term.

The fiduciary relationship that exists will impose

the requisite obligation and it may be an

obligation in confidence.

But, in our case, when we do not have a

fiduciary relationship coming about because there

is an arbitral agreement or because there is a gas

supply contract then we would submit that the

principles accepted by Meagher, Gummow and Lehane

and exemplified in the three cases to which we have

referred are correct and you cannot go to equity at

all to protect the information; it is either

contract or nothing.

However, if we are wrong about that, then the basis for equity's intervention will be the

elements of the claim for confidence that are

described by Mr Justice Megarry in Coco v AN Clark,

(1969) RPC 41. There His Lordship set out three

criteria or elements: first, that the information

must have the necessary quality of confidence. The appellants have said that that test is satisfied by the information not being in the public domain. We

dispute that. You do find statements when the

equitable claim is broadly described. You do find statements to that effect, that that is the nature

of confidential information.

That is the thing that falls within the first

head of Mr Justice Megarry's three points, but many

cases show that there has to be something special

about the information - not only special, but it is

information which is often described as secret

information. A good Victorian example of a court

inquiring into the nature of the information to see
if it is protectable by equity is Ansell Rubber

Company v Allied Rubber Industries, (1967) VR 37, at page 50, a decision of Mr Justice Gowans, where

he, at page 50, looking at American textbooks and I

think American cases - looking at the statement at

the bottom of page 49, top of page 50, he looks at

the nature of the information to decide whether it

Esso(2) 59 8/3/94

is truly secret, including facts like to what

extent does the party seeking the protection

himself keep the i1tformation secret.	How does he
treat it himself?

To a similar effect is what was said by

Justice Deane in Moorgate Tobacco v Philip Morris,

156 CLR 414, especially at pages 438 and 439. At

438, after the reference to The Commonwealth v John

Fairfax, Justice Deane says:

Like most heads of exclusive equitable

jurisdiction, its rational basis does not lie

in proprietary right. It lies in the notion

of an obligation of conscience arising from

the circumstances in or through which the

information was communicated or obtained.

Relief under the jurisdiction is not

available, however, unless it appears that the

information in question has "the necessary

quality of confidence about it" (per

Lord Greene MR, Saltman) and that it is

significant, not necessarily in the sense of

commercially valuable (see Argyll v Argyll)

but in the sense that the preservation of its

confidentiality or secrecy is of substantial

concern to the plaintiff.

Of course, the reference to Argyll shows that it is

not limited to commercially sensitive information

because there was secrets.

MCHUGH J: Marital - - -

MR FINKELSTEIN: Marital communications but, if you look at

the order sought in Argyll and granted, it was

expressed in terms of secrets of the marriage.

Argyll is reported in (1967) 1 Ch 302.	The order
sought is at 317:

"Secrets of the plaintiff relating to her

private life, personal affairs or private

conduct -

The order was not granted in precisely those terms

because what the court did was go through the
proposed publications, what was permissible to be
published and what was going to be impermissible,

and restrained only portions of the proposed

article or series of articles.

But it is "Secrets of the plaintiff", language

adopted by Mr Justice Deane. His Honour was not
just looking at information and asking the

question, "Is this public or not?" That is not

enough, and that is exemplified when you look at

Esso(2) 60 8/3/94

page 439, about 11 lines from the top of the page,

after the word "Australia", His Honour says:

there was nothing in the evidence nor in the

nature of that information that established
that it was regarded by Loew's as confidential

or that it was, in fact, confidential.

Smith Kline and French Laboratories, (1991)

28 FCR 291, has a similar approach in the Full

Court of the Federal Court, at page 302, the last

two lines:

To determine the existence of confidentiality

and its scope, it may be relevant to consider

whether the information was supplied

gratuitously or for consideration; whether

there is any past practice of such a kind as

to give rise to an understanding -

that is, an understanding not to use it. But then

comes the important portions:

how sensitive the information is; whether the

confider has any interest in the purpose for

which the information is to be used; whether

the confider expressly warned the confidee

against a particular disclosure or use of the

information - and, no doubt, many other

matters.

Now the test cannot be, we would submit, that it is

just non-public; the test has to be more than that

and you determine whether information is

protectable by a court of equity by looking at a

whole range of things, but looking generally at

whether the information is truly secret and

regarded by the parties as secret. Argyll v Argyll

is not a bad example, marital communication; it is

not every marital communication which is

information which ought not to be disclosed or that

it would be contrary to some equitable obligation

to disclose it. It is particular types of marital

communications, ones which were described in the

order sought as secret marital communications.

The current claim for the equitable obligation

is bad because it covers every type of information
that might be disclosed during the course of the
arbitration, whether it is important or
unimportant, significant or not significant,

harmful to Esso BHP if released or not harmful to

Esso BHP if released and equity will not go that

far, in our respectful submission.

The next requirement of Mr Justice Megarry is

that the information must be imparted in

Esso(2) 61 8/3/94

circumstances importing an obligation of

confidence. We say that that does not necessarily

follow from an arbitral contract for the reasons

that were said earlier. There is nothing in the

provision of the information for the purposes of
resolving a dispute by arbitration that carries

with it the consequence that the reasonable

outsider would say that all that information, which
is passed across, trivial or not trivial, important
or not important, is given across in circumstances
importing an obligation of confidence.

The last requirement of Mr Justice Megarry is

that there must be an unauthorized use of the
information, to use His Lordship's words, to the
detriment of the party communicating the

information. Mr Justice Megarry himself expressed

some uncertainty about whether the element of

detriment was necessary. He said that at page 48,

middle of the page, mid paragraph, His Lordship

said:

Thirdly, there must be an unauthorised

use of the information to the detriment of the

person communicating it. Some of the

statements of principle in the cases omit any

mention of detriment; other include it. At

first sight, it seems that detriment ought to

be present if equity is to be induced to

intervene; but I can conceive of cases where

a plaintiff might have substantial motives for

seeking the aid of equity and yet suffers

nothing which could fairly be called

detriment -

and he cites the example of protecting a third

party. The cases since Coco have, in our

respectful submission, made the question of

detriment an essential element of the claim.

Argyll was a case where what was being protected

was information which, if disclosed, would cause

personal embarrassment and ridicule.

Seager v Copydex, (1967) 2 All ER 415, at 417,

a decision of the Court of Appeal in England where

the relevant judgment to which I am going to refer

was that of the Master of the Rolls, Lord Denning,

makes detriment a requirement. His Lordship says

in the middle of 417 at point F:  '

The law on this subject does not depend on any

implied contract. It depends on the broad

principle of equity that he who has received

information in confidence shall not take

unfair advantage of it. He must not make use

of it to the prejudice of him who gave it

without obtaining his consent.

Esso(2) 62 8/3/94

Your Honour Mr Justice Mason in Commonwealth v

John Fairfax & Sons, 147 CLR 39, 51 to 52, we would

say, with respect, accepted detriment as an

element. Of course the principal issue determined

in Fairfax was how does government protect its

information but when dealing generally with the

equitable claim, at page 51, in the paragraph which

begins with the word "however", just below half-way

down the page:

the plaintiff must show, not only that the

information is confidential in quality -

again looking at the quality of the information

itself -

and that it was imparted so as to import an

obligation of confidence, but also that there

will be "an unauthorised use of that

information to the detriment of the party

communicating it" (Coco ..... ) -

Then it is a question of what sort of detriment the

government needs to show as opposed to a private

party, but the opening words of the next paragraph:

The equitable principle has been

fashioned to protect the personal, private and

proprietary interests of the citizen -

and then going over the page to the top of page 52:

It may be a sufficient detriment to the

citizen that disclosure of information

relating to his affairs will expose his

actions to public discussion and criticism.

That is the Argyll-type problem, but it is nevertheless detriment, and Smith Kline also

accepts detriment as a requirement, at page 304.

Now, the question of detriment is really - I

suppose it is interesting. The question is whether

disclosure to the detriment is a separate element
or you actually use the notion of detriment to help

define what is or what is not confidential

information by looking at the quality of the

information. I know that it seems to be accepted

wisdom, according to the authorities, that

detriment is the third of three elements, or

publication to detriment, but we would rather

suggest that the question of detriment should be

looked at in terms of deciding whether particular

information, which is not in the public domain, is

confidential or not; that is if it is information

which, if published, will cause detriment, that

tells you that it is the type of information which

Esso(2) 63 8/3/94

has the necessary element of confidentiality about

it which justifies the protection of the court of

equity rather than treating it as a separate head.

I suppose it does not really matter how you

look at it, but we think that that probably

correctly focuses attention on what it is that the

court of equity will protect. Now, I have, so far,

said nothing about how government is affected by

all of this. What you do know from the affidavit

material and in particular - I will not read the

Court the passages, but it is the affidavit of

Mr G.B. Williams which begins in volume 1 of the

appeal book, page 93, but relevantly it is page 105 and following. He explains the role of government,

that is to say the executive, in the affairs of the

two utilities.

The two utilities who supply gas and

electricity to the citizens of Victoria ar~ private and commercial. What the affidavit

material says is that in setting tariffs that the

utilities charge, that is a decision which is made

not by the utilities themselves - they make

recommendations, they have a view about it - but in

the end it is a decision made by the cabinet. The cabinet has to make that decision because often it is a question of whether if costs go up, for

example, if the increased costs are to be borne by

the consumers of gas and electricity, or to be

borne by the utilities and, indirectly, by

government.

So that the executive has a central role in

deciding very important issues so far as the
utilities are concerned, including when, how and if

prices are going to go up, and knowledge about the

affairs of the arbitrations and things like what

are the merits of each case, whether Esso BHP might

succeed in the arbitrations and pass on to the

utilities the rent resources tax, which is now	payable to the Commonwealth, or not, is taken into	account by the Treasury in planning the affairs of
the State.

Consistently with what Your Honour

Mr Justice McHugh said in the Heinemann case, when a person is providing information to a government

agency or to a government statutory body, he does

not and should not be seen to be, and should not be

governed by the same rules as, providing

information to a private citizen. When government

or government instrumentality buys gas for the

purposes of producing fuel or energy for use in the

State, a whole lot of considerations, political and economic, come into consideration but economic in

the main, so that it is necessary for the proper

Esso(2) 64 8/3/94

workings of government, as the affidavit seeks to

essay, that information be provided by the
utilities to the government not for the purposes of

the arbitration, not for use in the arbitration

itself - that is, have the Minister advise, or

cabinet look and see whether the Minister should

tell the utilities to settle on particular terms,

but just government economic planning. But that is

not permissible by the terms of the order sought.

I have to correct one thing that I said about

the power of the utilities to provide information

to the State.	I have given to the Court references
to the State Electricity Commission Act.	As at

January this year - and what I said to the Court

this morning was perfectly correct about the

position as it was at the time of trial and at the

time of the appeal to the Full Court, but I think

my learned friend, Mr Myers, said things move a bit

in Victoria. What the position now is that the SEC

still technically exists but substantially carries

out no functions. It has been replaced by a new

statutory body called Generation Victoria, and the
legislation which set it up is the Electricity

Industry Act 1993, which came into operation, I think it is 1 January this year.

What was established was a series of statutory

bodies which take over what the SEC used to do,

they are all defined now as electricity

corporations. By section 64 of the Electricity

Industry Act, property and rights of the SEC can be

allocated to one or other of the new electricity

corporations. I think that all this Court needs to

know is anything to do with this case has been

allocated to Generation Victoria, but that is not

the only electricity corporation, but the powers

that existed in the past are now different.

Section 26 of the Electricity Industry Act

gives the responsible Minister, that is under

administrative arrangements the responsible

Minister, and the treasurer, acting jointly, the

power to give direction to the Electricity

Corporation and control to the Electricity

Corporation.

Now, we would assume that when the treasurer

and the responsible Minister have joint power to

direct and control, it is implicit in that that

they will be provided with whatever information

they need to be provided with in order to give

direction and exercise control. The new Act does

not say that they are entitled to it but the fact

that they have got the power to give directions and

control the new corporations, it must follow that

they have got the power to require those

Esso(2) 65 8/3/94

corporations to provide information so that the

Minister and the treasurer can do what parliament

says they are entitled to do. But that still does

not affect the position so far as the Gas and Fuel

Corporation is concerned. Its position is as I

explained to the Court earlier.

The last thing I want to deal with is the form

of the orders that were made, being those parts of

the extant orders of Mr Justice Marks that appear

at pages 366 and 367 of volume 2 of the appeal

book. Our submission on the point is short. Those

orders were properly made and express what was

clearly intended, as appears from the reasons for

judgment of both the trial judge and the Full Court

in Victoria, namely that there is no - although

putting it in the negative in a sense, what those

orders direct attention to is that there is no

restriction on the publication of information, or

use of information, merely by reason of the fact

that it passed through the arbitral process.

In other words, the form that those directions

take make it clear that the implied contract

argument was lost, that the wide confidentiality

claim in equity was lost, but do not deny the

possibility that specific information, which might
be truly confidential, might not be capable of
protection. That is the sense of those orders, and

we would say that there is no reason why, even if

all else fails, that those orders should go. May

it please the Court, they are our submissions.

MASON CJ:  Thank you, Mr Finkelstein. Mr Shaw?

McHUGH J: Is there repetition in clause 1.3 of the

submissions, or have I missed something?

MR SHAW:	I hope the answer is, "No", it is simply a growth.
MASON CJ:	The author became enamoured of the expression

"general run" at that stage.

MR SHAW:  If the Court pleases. We do not wish to repeat

what is conceded by my learned friend,

Mr Finkelstein; we adopt it. We do not wish to

repeat what is in our outline of submissions and

merely refer the Court to it. But there are a few

things which we desire to add to what was said by

my learned friend, Mr Finkelstein, which we hope
may be of some use.

One may get what one might call an arbitration contract in circumstances in which a dispute has

arisen between two parties and, in order to resolve

it, they enter into an arbitration contract for its

resolution. Or one may get a contract of a general

Esso(2) 66 8/3/94

kind, like a building contract or a contract for

the sale of goods or a contract for the carriage of

goods or all sorts of contracts which contain in

them a clause which provides for the possibility

that disputes of some unspecified kind may arise at

some unspecified time in the future and in which a

mechanism or procedure is provided to deal with

those presently unidentified disputes which may

never arise. The sort of situation one has here is

that kind of situation.

My learned friend, Mr Myers, this morning

referred to the Bremmer Vulkan case as justifying

the proposition that in such a circumstance the

arbitration clause was to be treated as a separate

contract and, indeed, that expression is used in

that case by one of Their Lordships. But the

reference at the two pages my learned friend

referred to as supporting the proposition is a

reference to Heyman v Darwins where the question

was whether or not, when a contract was brought to

an end in circumstances where there was no dispute

about it having come into existence in the first

place but there was either a fundamental breach and

the repudiation was accepted or the contract had

been frustrated, whether in those circumstances the

arbitration clause survived. It was held that it

did in the circumstances of that case and on the
terms of that clause just as, in other such
circumstances, other clauses might also survive;

for example, clauses limiting the amount of

damages, it may be.

So that, in our submission, when one is in a

situation like this, one does look at and

understand the arbitration clause in the light of

the context in which it appears and, in this case,

it is one clause in a very long and complex

contract, over 100 pages long in our case - I am

not sure in the case of the SECV, but equally long,
no doubt - in which substantial parties on each

side have set out to define their relationships in

the terms in which they wished.

In this case, as in many other cases, as one would expect, the contract for the sale of the gas

contains in it no provisions expressly providing

for confidentiality between the parties in relation

to the other matters that the contract regulates.

Yet it is said: here we have this particular

clause which somehow or other in a context
involving no confidentiality, that element is

introduced.

McHUGH J:  What do you say about what I put to

Mr Finkelstein after lunch, that the notion of confidentiality inheres in the whole concept of

Esso(2) 67 8/3/94

private arbitration subject to the effect of any

Codelfa terms?

MR SHAW:  Your Honour, that observation, it is submitted, is

beside the submission I was just making. It may

be - we would submit not - true what Your Honour

says but, if it is true, it is true of a clause in

a contract which contains many complex provisions

which themselves do not provide for

confidentiality. So that one has this new element

introduced into this very complex and detailed

arrangement which suddenly introduces an element

not there before.

McHUGH J:  Can we understand this question of

confidentiality in relation to these clauses

without seeing the whole of the contract?

MR SHAW:  Your Honour, if the question was a question about

the implication of a term on the BP refinery, the

answer is, "No, you could not. But since that is

not the question, the answer would seem to be, "I

suppose you can." All I am really saying is this:

if you have, say, a dispute arising - and I will

use this contract, although the principle is said

to apply to every contract - you have a contract

which contains a provision, as our contract does,

that the goods supplied shall be of a certain

quality. There is no provision that the parties

are not to reveal to anybody else that the contract

provides that the gas was to have a certain

chemical constituency, say.

So one can say to one's consumers, the general public, "We're supplying you with gas and it's

being supplied to us and we're supplying it to you

on the basis it has this and this constituents,

perfectly safe." Then everybody's second gas stove

blows up and there is a question as to the quality

of the gas. We have a look around and we say, "It

didn't meet the terms of the contract." The

suppliers say, "Yes, it did." The dispute cannot

be settled; it goes to arbitration. Answer is:

did not. It had 47 times too much something

terribly explosive. We cannot tell anybody.	It
seems a very strange result.	We could tell them it

was meant to be X; we cannot tell them it was not

X.       We can say, "Your stove blew up", because they

told us that; we cannot say why.

McHUGH J:	What is the law in Victoria in relation to your cause of action arising out of the arbitration?
Absent a Scott v Avery clause, do you sue on the award in Victoria or are you still in effect suing
on the contract, the award only being evidence of the breach?

Esso(2) 68 8/3/94

MR SHAW:	You register the award.
McHUGH J:	You register the award.
MR SHAW:	But all I am saying is, here you have a

contract -

McHUGH J: It has force as a judgment then, does it?

MR SHAW: Yes, Your Honour. All I am saying is this, here

you have a contract about the sale of goods say,

like many other contracts, like Mr Finkelstein's

company, no secret about what the covet ought to be

or what the gas ought to be; in fact everybody has

been told what it ought to be. If you then have a

dispute about whether or not the - whatever it is

that is supplied - does not meet the specification

and it is only revealed in the course of an

arbitration pursuant to the arbitration clause that

it did not meet those specifications, there is said

to be - because that information has been supplied

to us in the arbitration, we are not allowed to

tell anybody. In our submission, that is a

surprising result.

Take another example, say they stopped supplying gas and everybody's gas refrigerators

stop and no restaurants can cook any dinners, or

whatever it might be, and they rely on the force

majeure clause, and we say that it does not meet

those provisions and they say it does. It goes to

arbitration; it did not. You cannot tell anybody

what the situation was, according to them. All I

am really saying is that here is a clause stuck

into something which is essentially

non-confidential and yet it is said that when you

investigate whether or not the perfectly open

provisions of the contract have been met, you

cannot say whether they have or not, because you

have only discovered in the course of an

arbitration and, in our submission, that is not a

sensible outcome.

Really it even goes a bit further than that

here, because the dispute here is not a dispute of

a kind which I have been using as illustrations; it

is a dispute of a different kind. It is a dispute

about the proper operation of the contract in the

new circumstances which have arisen by reason of

the imposition of this new tax and the contract

provides that, in certain circumstances, the price

of the gas is to be adjusted. The whole question

is how does the contract operate in these new

circumstances. So it is not a matter of breach,

but a matter of the operation of the contract in

the new circumstances.

Esso(2)	8/3/94
McHUGH J:	I understand that, but I will have to go back to

first principles and read all these cases, but my

understanding, right or wrong, has always been,

perhaps just instinctively, that the whole purpose

of private arbitration was to avoid publicity

concerning the dispute and concerning - - -

MR SHAW: Well, Your Honour, it may be that in

New South Wales people are very secretive, it may be. But there is certainly evidence -

McHUGH J:	I saw what Mr Justice Brooking said.
MR SHAW:	And there is evidence actually in the case on the affidavits that are referred to in paragraph 3.2.2
at the top of page 4, a whole series of affidavits
saying that practitioners in the area did not
realize that this was so.

Leaving aside the fact that neither Victorian

judges nor Victorian practitioners were aware of

this necessity, discernible though it might have

been in New South Wales, Your Honour, even in

New South Wales it might be that people go to

arbitration not in order to keep their affairs

private, they might not care tuppence. What they

might want is either a very speedy resolution,

which they feel they get that way, or they might

want very expert decision makers -

McHUGH J: That is certainly one of the primary reasons for

arbitration. Perhaps New South Wales is more

secretive, but it is amazing in a closely knit

profession such as the New South Wales bar, at

least of yesteryear, what went on in arbitrations

just was not common knowledge around the bar.

MR SHAW:  Yes, but Your Honour put to me, if I may hold

Your Honour's words against you, that the whole
purpose was to keep it secret. But when,

Your Honour, I put to Your Honour, "Well, there are

these other reasons you might do it," obviously

when one thinks about it there are.

McHUGH J: There certainly are, there is no doubt about it.

Speedy decision making, the expert - - -

MR SHAW: All I am really saying is, "Yes sure, you might do

it for that reason and, if you did, wouldn't you

say so?" There is 150 pages to say it in. They

did not.

McHUGH J: What about some of the arbitrators in England and

various classifications where in effect they hear the parties but you do not have counsel. He will

just go and in fact make his own investigations,

might even travel over the continent and interview

Esso(2) 70 8/3/94

people over there, then comes back and issues a

report. Now, is.there no obligation of

confidentiality of the arbitrator in that?

MR SHAW:  Your Honour, there might be. The arbitrator might

be in a special position. But, I think it was

Your Honour this morning who asked, "What about

cross-examination? What about the witnesses?" It

is to be remembered that here we have an entirely

voluntary agreement, all of it, including the voluntary assumption, either by express term or because it is the essential nature of arbitration, or because there is an equitable - it all arises out of the obligation having been adopted by the
arbitration clause, the whole process is voluntary.

parties.

But what about the witnesses? What about some

cross-examination, some documents that are put to

somebody in cross-examination? What is the point

of this confidentiality if these people are not

bound, and how are they bound? There is no powers

of the Court to say, "You say a word outside of

here and you are in the clink". There really is
not any point, we would say. Unless this veil of

secrecy stops everybody's mouth, what is the point?

And how can it stop everybody's mouth?

McHUGH J: Yes, the point you make about the witnesses is a

powerful point, I suppose. It is one thing to say

that the parties can be restrained, but can a

witness be restrained concerning the evidence he

gave in front of the arbitrator?

MR SHAW:  The other thing is, what does one say? Somebody

stands up and says to a witness, "Look at this,

what do you say about this? Has that been supplied

by the appellants?". It has been put to a witness

in cross-examination. What does it mean? Here are

these terms about information supplied which would

not be otherwise supplied. My learned friend said

this morning that means it excludes information to

which we were otherwise entitled. It certainly

does not say that. How he gets that, I do not

know. It just says that it would not otherwise

supplied.

They have said to us they will not give us the

information, perhaps. Perhaps they should, perhaps

they are bound to. But they have not and they

would not. Perhaps they would rather not get their

price rise and supply of the information, so they

would not. The obligation is a perfectly general
obligation in respect of all sorts of information,
some of which might matter nothing at all. One is

asked by them in relation to totally unspecified

Esso(2) 71 8/3/94

information, which in the end may have no

significance at all, some of it, but they are not

allowed to breathe a word about any of it.	In our
submission, it is not sensible. If the Court
pleases.

MASON CJ: Thank you, Mr Shaw. Yes, Mr Buchanan?

MR BUCHANAN:  Your Honour, we have copies of our outline of

submissions.	I shall not traverse all the matters
that are referred to in the outline.	A large

number of them have been canvassed quite

extensively already. Can I just say something,

though, about the formulation of the declarations

which are sought. They have, as has been observed,

travelled through various modifications and changes

in the course of this litigation from the trial

judge to the Full Court and finally to here.

At one point before the trial judge, the information said to be the subject-matter of the

term which was contended for by the appellants was

described in terms of information which was private

to the appellants. The declaration in terms which

is now sought is limited to information or

documents disclosed by the appellants with which
the respondents would not have been supplied. But

it seems from the submissions made this morning

that the element or qualification of privacy in

terms of a description of the information or

documents has come back in.

The way in which the declaration is framed is

one which is not limited to information and

documents emanating from the appellants unless it

is inherent in the description of documents that

would not otherwise be supplied. On its face, it

would seem to embrace, for example, evidence which

is given or information supplied by the appellants
in the course of the arbitration, limiting it to

the sorts of issues with which this arbitration is

concerned, dealing with, for example, the way in

which the oil and gas industry operates in Canada

or the way in which rent resource tax legislation

in some other part of the world operates and how it

is that one can, in various sorts of industries by

way of analogy, allocate costs and revenue to

particular products produced a field that brings

forward gas, oil and other things and how you can

allocate those costs and revenue between different

customers who take the gas, the oil and the other

things.

It also, it seems from the form of declaration

it takes, covers or might cover information and

documents which emerge in the evidence of witnesses

called by the appellants. The description in the

Esso(2) 72 8/3/94

declarations is one of information and documents

disclosed by the appellants. At one level that

might be limited to the documents, for example,

which come forward in discovery directly from the

appellants and information which it puts forward

directly in the form of, say, pleadings or

particulars.

At another level it might embrace evidence

which is given in the course of the arbitration by

persons who are employees of either of the

appellants. At yet another level, and slightly

more remote, it might embrace matter by way of

information or documents which comes forward from

persons who are not employees of either of the

appellants but independent witnesses called by them

to advance their case. For example an independent

auditor or accountant who produces a model which is

a means of allocating costs in composite oil and

gas fields, is that information which is put

forward by the appellants.

There are, it would seem, unless one takes the

simple view that a shroud of secrecy does indeed

fall entirely over the arbitration so that it

covers everything, there are very grave problems in formulating an implied term which covers what ought

to be covered and covers what need not be covered

or, in some cases, which the parties would

certainly not intend to be covered.

DAWSON J:  What do you say about the power of the arbitrator

to give directions in relation to specific pieces

of information which may appear to be confidential?

MR BUCHANAN:  Yes, we say that he does have that power and

that one of the principal reasons, in our

submission, why it is not necessary to bring in

this absolute rule to apply to all arbitrations is

the existence of that power, the existence of the

doctrine of ad hoc implication which enables a

court to find in appropriate circumstances in

appropriate contracts that there is an obligation

of confidence and to mould it and its width to suit

the particular circumstances of that contract.

And finally, the obligation which equity enforces in respect of true confidences to restrict

their use in a way which might be either

unconscionable or cause harm to another person.

All of those matters are ones which tell against

the need to bring in an absolute rule which suffers

all the vices and difficulties which have been

brought forward before the Court today.

BRENNAN J:  How is the arbitrator's power enforced?

Esso(2) 73 8/3/94

MR BUCHANAN: In general terms, Your Honour, I think it is

going too far to say that the arbitrator has a

power to give relief in respect of the disclosure

of information which comes forward in the course of
the arbitration and really, I think, at the end of

the day, it would probably be necessary to resort

to the Court in respect of that.

BRENNAN J: Seeking relief on what basis?

MR BUCHANAN:  Either on the basis that indeed the parties

have undertaken a contractual obligation to

preserve confidentiality or on the basis that
equity would operate to prevent unconscientious use
of information or information which was either the

property of some person or the disclosure of which

would cause them detriment, economic or personal.

BRENNAN J: In practical terms, the arbitrator has not got

any powers. Putting it another way, the Court has
no more and no less powers than it would have if

the arbitrator has no powers.

MR BUCHANAN:  Yes. The Court certainly has sufficient

powers and I think it is right to say that the

arbitrator - if he does achieve some measure of

confidentiality, it is only because he moulds the

procedures which he uses to conduct the

arbitration, and if he is ingenious perhaps he

might be able to use those procedures to in fact

create a de facto confidentiality, but short of

that, with respect, Your Honour is right.

DAWSON J:  He has got power by contract to give directions

and therefore the parties are contractually bound

by any lawful directions which he gives.

MR BUCHANAN:  Yes, that is so, Your Honour. The question I

would think is, what is the legitimate -

DAWSON J:	He cannot enforce it himself but - - -
MR BUCHANAN:	Yes, and the legitimate subject-matter of the

directions themselves. He certainly has power to

give directions; in the first place they are

directions about the way in which the arbitration

will be conducted. It might be a matter of some

doubt as to whether they are directions which touch

what parties do, and witnesses do, once they leave

the arbitration room.

The other problems we would see in respect of

formulating with any precision a general rule which

is to apply in all arbitration, is one which

attaches to the exceptions to the general rule.	As
the Court knows, at one point and for sometime
below, the exception which was put forward to

Esso(2) 74 8/3/94

render acceptable the starkness of the general rule

was that it was subject to lawful exception, and

that has now become an exception due to statutory

obligation.

That is an exception which is, no doubt, designed to operate satisfactorily as far as these

particular litigants are concerne1. Public

authorities, by and large, have ooligations which

are to be found in statute, and an exception framed

in the way in which this one is might often answer

the needs of the Gas and Fuel Corporation and

Generation Victoria. But, most other people, and

most other people who go to arbitration, are bound

by many obligations, a lot of them having no

foundations at all in statute, but rather in their

personal relationships, either arising out of
contract or arising out of some other circumstances

that affect the way in which they have to deal with

people. I have in mind, for example, the

contractual and good faith obligations which attach

to somebody who has entered into a contract of

insurance or is proposing to do so, the obligations
of disclosure which, in some circumstances, are

placed upon those who are trustees vis-a-vis the

beneficiaries, and the same with those who occupy

fiduciary relationships, one, themselves and
others.

Those sorts of obligations which might, in certain circumstances, require disclosure, and

disclosure of things which arise in the course of arbitration, are not ones which are recognized as being able to be disclosed without breach of the

very term which is put forward by the appellants.

So that effectively, what the appellants would have is that one form of contractual obligation,

namely the obligation contained in the general term
that they propound here, is to have priority over

all other obligations other than those which are

based upon statute. So that, in advance of knowing

what particular facts are and what the consequences

might be, a contractual obligation, a breach of

which presumably sounds in the remedies which the

court can give, prevents somebody from effectively
fulfilling in particular cases obligations which

they have to others.

BRENNAN J: That is rather like saying that the legal owner

cannot account to cestui que trust because there is

a charge on the property, is it not?

MR BUCHANAN:  Yes, that might be so, and in particular cases

it might be satisfactory that the obligation which

a trustee owes to his beneficiary should give way

to this particular obligation. My point is the

Esso(2) 75 8/3/94

more modest one, Your Honour, of whether, in

advance of knowing what the facts are and what the

consequences might be for particular people, the

Court is being asked to lay down a general rule

which in effect creates a priority in a theoretical

absolute sense.

BRENNAN J: That problem does not arise if the obligation of

confidentiality is rooted in contract, does it? I

can see that it can arise if it is dependent solely

upon equitable principles but if it arises solely

out of contract, then can there be any complaint if

there is a general contractual obligation of

confidentiality?

MR BUCHANAN: Complaint on the part of - if I could take

this example, Your Honour:  a man engages in

arbitration about the state of his building, and in
the course of that arbitration he learns from

information which comes forward from the other

party to the arbitration - suppose he be the
builder and the first party is the owner - that the
building suffers from some serious defect that

renders it peculiarly liable to the risk of being

consumed by fire.	He wishes to insure that
building against that very risk.	He only knows of

the circumstances that render it liable to fire,

and peculiarly liable to fire because of what came

forward from the other party to the arbitration.

He is then placed in the position where he

simply cannot obtain insurance for his building

because if - without, that is, breaching the

contractual obligation which he has undertaken. He

is obliged to tell his insurer what the material
facts are. It is either one of two things; either

the obligation of good faith he owes to his insurer

gives way to contractual obligations he has

previously undertaken and qualifies that duty of

good faith so that the insurer is penalized - he

does not know what is material to the risk - or

else the person who is seeking the insurance gets	insurance which is flawed or cannot obtain it, or
at least cannot obtain it on the terms on which he ought to which would be reflected, presumably, by
terms of the insurance, a higher premium and the
like, which would adequately cover him.

A difficulty we would see with the term in the

way in which it was formulated is that it has this

general effect which cannot be conditioned to meet

the needs of particular people.

BRENNAN J:  I can see that with great practical difficulty

in the example that you give. Is that not inherent in the nature of contracts where parties are by law

acknowledged to have sufficient power to create

Esso(2) 8/3/94

their own charter of obligations and rights inter

se?

MR BUCHANAN: That is so, Your Honour.

BRENNAN J:	And it has a particular impact if the subject matter of the contract is information.
MR BUCHANAN:	With respect, that is so but information, of course, is an area where the problems are thrown up
more starkly.  What this proposed term does is
bring forward into an area of resolution and
dispute, which is a very common one, very
widespread indeed, an obligation which will create
these sorts of problems in the future when there is no need for it. I appreciate that in a sense it is
an answer to say, "But these sorts of problems do emerge anyway because people undertake conflicting
obligations and are placed in positions where they
have to choose between obligations to one person and another" .

With respect, it is not a complete answer

because this is a rule which of itself will create

a very wide and large number of these sorts of

difficult problems which are unnecessary. That is,

the problems themselves are unnecessary because

relief in terms of preserving the confidentiality

of truly secret information coming forward in

arbitrations can be preserved otherwise.

BRENNAN J: Let me just press you a little further because

it seems to me that this is getting, at least for

my mind, very close to the nub of the case. If the

contract had said, "And all information which is

acquired by either party pursuant to this

arbitration clause shall be kept confidential",
expressly, the problems that you have just referred

to would necessarily arise.

MR BUCHANAN:  Yes they would.

BRENNAN J:  They could be dealt with, I suppose, in some

instances by the kind of solvents of contractual

liability such as public interest exceptions.

MR BUCHANAN: 

Yes, Your Honour.

BRENNAN J: 

And it may be that that might work in this case

but is not the essential problem one simply of
construction of the contract?

MR BUCHANAN: With respect - - -

BRENNAN J:  On this approach. I am speaking only of the

contractual approach not the equitable approach.

Esso(2) 77 BUCHANAN, 8/3/94

MR BUCHANAN:  Yes, that is right. But in Your Honour's

example what one or rather two parties to an

arbitration agreement have done is to expressly and

consciously undertake a particular obligation of
confidence and presumably, properly advised, would

and are placed in a

know what the potential consequences of that are. contractual obligations

position where they must breach one or the other,

they have in a sense walked into it with their eyes

open. We would say that vice of the present case

is if one puts on everybody who goes to arbitration

an obligation of a like sort whether the

arbitration is between the members of a family over
something trivial or whether it is an arbitration

between important bodies of the type we have here

and no matter what the dispute is, after all, the

essence of arbitration is just that it is a method

of resolving disputes by an adversarial process before somebody who acts as an arbiter and that

form of resolution of dispute is one which is

extraordinarily widespread, formal and informal,

ranging to all sorts of ways in which people submit

their disputes to resolution in that way.

We suppose that the term which is propounded

here is not one that applies just to commercial and

arbitration set up in an elaborate way, but to the

most informal of arbitrations, pursuant to a parole

agreement which has no detail at all.

With respect, the sort of problem that

Your Honour has in mind was no doubt apparent to

Mr Justice Colman in the Hassneh case, where he

formulated an exception to the rule which he

perceived flowed from Dolling-Baker, which allowed

the commercial interests of one of the parties to
the arbitration to disclose information to serve

those interests. His Lordship was dealing with a

situation where one party to an arbitration then

wanted to carry the subject-matter of the dispute

onto somebody else who was responsible for it, from

a reinsurer to the broker who got him into the

inadequate reinsurance contract.

His Lordship thought that the Dolling-Baker

principle did indeed cover the award which was
necessary to be put forward if the broker was to be

pursued, but adumbrated an exception to the general

principle, which was, in effect, that to prosecute
rights or defend claims by others, that the award

could be disclosed to that extent, so that that was an effective qualification. But His Lordship based that qualification upon an examination of what

members of the Court of Appeal had said in Tournier's case, one dealing with bankers'

confidentiality, where each member of the court had

Esso(2) 78 8/3/94

found, in slightly different terms, that the

bankers' obligation of confidence was subject to an
exception where the interests of the bank required

disclosure; they had in mind dealing with third

parties in respect of the customer's account and

also, to some extent, dealing with matters that

came forward from the customer himself.

Now, we would see Hassneh as being not a

satisfactory formulation of a general exception

which meets peoples' needs. It was almost an

ad hoc exception formulated to meet the needs of

that party who needed to carry on his dispute

beyond the parties to the arbitration to another party, and needed to use what had emerged in the

arbitration to further that aim. But, there must

be a very large number of other cases of unknown

type where, in order to meet the justice of the

situation, the court will need, like His Lordship
in that case, to fashion another exception, and we
would say that a general rule which applies in this

fashion, that is an implied term of this peculiar

type, is really not the answer to the needs of any

of the parties to this arbitration agreement.

Finally, Your Honours, just one thing I wanted

to say, which I do not think has been mentioned

yet, of the way in which the general rule and,

indeed, the equitable obligation advanced by the
appellants operates in this particular case.

Your Honours will have seen that in our contract, that is the SEC contract in clause 19.S(b), there

was a procedure set out whereby if a new tax was

imposed upon the sellers they would notify the

buyer, SEC, of it, tell them of the amount, and the

method and distribution of the tax so that the

buyer could see why it was that a proportion of the

tax was added on to his bill. He was not just to

be told the amount, he was to be told how the amount was to be calculated, the very sort of

information which is very much at the heart of the

arbitration itself.

That information was to be supplied before any

arbitration was undertaken, and what the party has

obviously contemplated was that we would find out
about the amount that was sought, we would find out

about the way in which it was allocated to our gas,

and we would have an opportunity of looking at the

details, looking at the information, and making up

our mind as to whether we would accept it, or we

would not; whether we would argue about, and

perhaps agree about it or not. And only in the

event that we did not accept it, and only in the

event that we did not agree about it, was there to

be arbitration.

Esso(2) 79 8/3/94

That information was not supplied to us before the arbitration commenced and it was supplied to us

on the basis that, "Well, you'll get it. It'll be

in the particulars that you'll get in our claim in

the arbitration." By that means in effect what

happened was that information which could not be
rendered confidential by the term or the obligation

which is now put forward by the appellants

effectively fell under the umbrella of that cloak

of secrecy simply because the information formerly

not confidential suddenly became so simply because

of the form in which it came forward. We would say

that that is a good example of the randomness of

the rule and how it can operate and does operate

here to give information a protection, not because

of anything intrinsic about the information, but

because of merely the machinery by which it comes

forward to one of the parties.

MASON CJ:  We do not seem to have this at all, or was it one

of the ones that - 25 was handed up ..

MR BUCHANAN:  I am sorry, I do not think it has been handed

up, Your Honour.

MASON CJ: But in any event, we were handed copies of two of

the clauses this morning, one from each agreement.

We have not got this one; you can hand it up.

MR BUCHANAN:  I will do that, but it can be found in the

appeal book.

MASON CJ:	You can give us the reference to it.
MR BUCHANAN:	It is page 316, if Your Honour pleases, clause 19.5(b). It is set out in the context of
19.5 as a whole, so that Your Honour will see what
goes before it.

MASON CJ:  Thank you, Mr Buchanan. The Court will now

adjourn until 10.15 tomorrow morning.

AT 4.16 PM THE MATTER WAS ADJOURNED

UNTIL WEDNESDAY, 9 MARCH 1994

Esso(2) 80 8/3/94