IMC Aviation Solutions Pty Ltd v Altain Khuder LLC

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2011 0017
IMC AVIATION SOLUTIONS PTY LTD	Appellant
v
ALTAIN KHUDER LLC	Respondent

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JUDGES:	WARREN CJ and HANSEN JA and KYROU AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	29-30 March 2011
DATE OF JUDGMENT:	22 August 2011
MEDIUM NEUTRAL CITATION:	[2011] VSCA 248
JUDGMENTS APPEALED FROM:	Altain Khuder LLC v IMC Mining Inc & Anor [2011] VSC 1 (Croft J) Altain Khuder LLC v IMC Mining Inc & Anor (No 2) [2011] VSC 12 (Croft J)

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ARBITRATION AND AWARDS – Enforcement of foreign arbitral award – Application for enforcement order – International Arbitration Act 1974 (Cth) s 8(2) – Applicant must discharge evidentiary onus on prima facie basis that: (1) award was made by foreign arbitral tribunal granting applicant relief against respondent; (2) award was made pursuant to an arbitration agreement; (3) applicant and respondent both parties to arbitration agreement – Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763, considered – Mere provision of arbitration agreement and arbitral award insufficient to discharge evidential onus where respondent does not appear as party to either document on its face – International Arbitration Act 1974 (Cth) s 9(1) – Applicant failed to discharge prima facie evidential onus that respondent party to arbitration agreement – Application for enforcement order ought to have been rejected.

ARBITRATION AND AWARDS – Enforcement of foreign arbitral award – Application for enforcement order – Once applicant’s evidential onus discharged then respondent has legal onus of satisfying Court that application should be refused – Respondent’s ability to resist enforcement limited to grounds in International Arbitration Act 1974 (Cth) ss 8(5), (7) – Standard of proof – Balance of probabilities – Respondent denying that it is proper party to arbitration agreement must do so pursuant to International Arbitration Act 1974 (Cth) s 8(5)(b) – Had Court been satisfied that prima facie evidential onus discharged, whole of evidence indicated that respondent not a party to arbitration agreement – Defences pursuant to ss 8(5)(b), (c) and 7(b) made out – Application for enforcement order ought to have been rejected.

ARBITRATION AND AWARDS – Foreign arbitral awards – Foreign law – Court not bound by finding of arbitral tribunal or foreign court that respondent party to arbitration agreement or arbitral award – Court not bound by finding of arbitral tribunal or foreign court that respondent given proper notice of arbitration – Court may itself consider questions of foreign law applicable to dispute.

ARBITRATION AND AWARDS – International Arbitration Act 1974 (Cth) – Enforcement of foreign arbitral awards – Meaning of ‘pro-enforcement policy’ – International Arbitration Act 1974 (Cth) ss 2D, 3, 8, 9, 39.

ESTOPPEL – Enforcement of foreign arbitral awards – Whether respondent who fails to challenge jurisdiction of arbitral tribunal or resist award in supervisory jurisdiction estopped from resisting enforcement in Australia – Respondent who denies being party to arbitration agreement not obliged to participate in arbitration or take any steps in supervisory jurisdiction – Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763.

PRACTICE AND PROCEDURE – Enforcement of foreign arbitral award – Application for enforcement order – Should proceed inter partes when extrinsic evidence required to establish respondent a party to arbitration agreement.

COSTS – Proceeding to enforce foreign arbitral award – Ordinary principles apply –Unsuccessful attempt to resist enforcement order by award debtor does not of itself constitute special circumstances justifying award of indemnity costs.

EVIDENCE – Enforcement of foreign arbitral award – Application for enforcement order – Evidence in support of application – Objections to admissibility of evidence should be ruled on at time made – Dasreef Pty Ltd v Hawchar [2011] HCA 21 (22 June 2011).

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr G J Digby QC with Mr N McAteer	HopgoodGanim Lawyers
For the Respondent	Mr H Foxcroft SC with Mr P Megens, solicitor	Mallesons Stephen Jaques

WARREN CJ:

This is an appeal against a decision of a judge of the Trial Division to order the enforcement of a foreign arbitral award made in favour of the respondent and against the appellant.

The appeal concerns the interpretation of the International Arbitration Act 1974 (Cth) (the ‘Act’), which provides a mechanism for enforcing foreign arbitral awards. The critical issue is how the Act applies in a situation where the alleged award debtor is not expressly named as a party to the arbitration agreement pursuant to which the award was made.

This matter is unusual. It required this Court to decide an issue which is ordinarily uncontroversial in enforcement proceedings. The unique circumstances of this case have made a complex investigation into that issue unavoidable. However, as I will explain in my reasons, in all but the most unusual cases, applications to enforce foreign arbitral awards should involve only a summary procedure.

For reasons that will follow, the learned judge erred in his interpretation of the Act. Accordingly, I would allow the appeal.

Background

The respondent, Altain Khuder LLC (‘Altain’) is a mining company incorporated in Mongolia. The appellant, formerly known as IMC Mining Solutions Pty Ltd and now called IMC Aviation Solutions Pty Ltd (‘IMC Solutions’), is a company incorporated in Australia with a registered office at Level 40, Riverside Centre, 123 Eagle Street, Brisbane. IMC Solutions shared its office with IMC Mining Inc (‘IMC Mining’), a company incorporated in the British Virgin Islands. Mr Stewart Lewis was, at all material times, the CEO and a director of IMC Solutions and was, from the date of its incorporation (27 June 2007), until 4 September 2009, managing director of IMC Mining.

On 13 February 2008, a contract called the Operations Management Agreement (the ‘OMA’) was executed. The OMA named ‘ALTAIN KHUDER LLC’ and ‘IMC MINING INC, a company incorporated in the British Virgin Islands, of Level 40, Riverside Centre, 123 Eagle Street, Brisbane’ as parties. The proper identity of the party named as ‘IMC MINING INC’ in the OMA was disputed. Altain contended that ‘IMC MINING INC’ was not a reference to IMC Mining, but to IMC Solutions. Be that as it may, the OMA does not contain any express reference to IMC Solutions.

Pursuant to the OMA, Altain appointed ‘IMC MINING INC’ as ‘Operations Manager’ of the Tayan Nuur iron ore mine in the South West of Mongolia. The OMA contained the following dispute resolution clause:

16.1 The resolution of any and all disputes under this Agreement shall first be addressed through good faith negotiations between Altain Khuder LLC and IMC Mining Inc. All disputes between Altain Khuder LLC and IMC Mining Inc arising under this Agreement shall be referred to and considered by arbitration in Mongolia according to Mongolian or Hong Kong Law

The precise nature of IMC Solutions’ involvement in the Tayan Nuur mine is also disputed. However, IMC Solutions contends it was performing work on the mine as a sub-contractor pursuant to a ‘Consulting Services Agreement’ executed with IMC Mining some time after 13 February 2008.

The arbitration

In early 2009, a dispute arose concerning the provision of services to Altain. In a memorandum dated 5 March 2009 addressed to ‘IMC Mining Inc’, Altain purported to terminate the OMA with immediate effect. On 12 May 2009, Altain commenced arbitral proceedings against ‘Australian “IMC Mining Inc” company’ for USD6.2 million paid pursuant to the OMA, and for unliquidated damages. On 2 July 2009, Altain filed an additional claim, also against ‘”IMC Mining Inc” company of Australia’, for USD320,577. On 24 July 2009, ‘”IMC Mining Inc” company of Australia’ filed a counter-claim against Altain for USD1 million. Neither the claims nor the counter-claim make any express references to IMC Solutions.

On the same day, the arbitral tribunal (the ‘Tribunal’) conducted a preliminary hearing and published its rulings in a document entitled ‘CASE DISPUTE RESOLUTION PROCEDURE’. The document refers to the parties to the arbitration as ‘G. Batdorj, director of “Altain Khuder” Co,. Ltd, Mongolia’ as ‘Claimant’ and ‘”IMC Mining Inc” company of Australia’ as ‘Respondent’. The document states that ‘the case shall be resolved according to legislation of Mongolia’ and that ‘[t]he Arbitration Proceeding shall be held in Mongolian language’. The document does not expressly refer to IMC Solutions.

On 15 September 2009, the Tribunal conducted the arbitration and published its award (the ‘Award’). No IMC personnel attended the arbitration. The only parties named in the award are ‘Altain Khuder LLC, Mongolia’ as ‘Plaintiff’ and ‘IMC Mining Inc., Australia’ as ’Defendant’. The address of the ‘Defendant’ was stated to be ‘British Virgin Islands, of Level 40, Riverside Centre, 123 Eagle Street Brisbane Qld, Australia’. The written reasons in the fifteen-page Award make five references to IMC Solutions. The first three are on page 12:[1]
Thus, the misunderstanding arisen between the Parties during their performance under the Operations Management Agreement for the Iron Ore Project grew deeper and the Defendant no longer submitted its performance reports to the Plaintiff. At the same time, the Operations Manager of the Defendant failed to cooperate with the geology and other staff professionals of the Plaintiff to have its reports approved. Nonetheless, neither Defendant, nor IMC Mining Solutions Pty Ltd presented project cost details and budget expenditure reports.
IMC Mining Solutions Pty Ltd failed to direct the Defendant towards release and submission of project cost details and expenditure reports although Stewart Lewis, a management member of IMC Mining Solutions Pty Ltd, signed the Operations Management Agreement for the Iron Ore Project dated 13 February 2008 on behalf of the Defendant.
The Defendants failure to release and submit annual work report and cost expenditure report led the Parties to repudiation of the Agreement. Upon its receipt of the Notice of Termination by the Plaintiff dated 5 March 2008, the Defendant informed the Plaintiff of its termination of the Agreement
[1]All errors in the excerpted parts of the parties’ documents are original.
On the following page, the Award states:
None of the Defendant or IMC Mining Solutions Pty Ltd supplied project cost details or expenditure reports to the Plaintiff properly. Nor did they issue or sign a document, whereby they reviewed their performance under the Agreement.
The fact that Stewart Lewis, a management member of IMC Mining Solutions Pty Ltd, signed the Operations Management Agreement for the Iron Ore Project dated 13 February 2008 on behalf of the Defendant proves that IMC Mining Solutions Pty Ltd has been involved in the project implementation from the very beginning.
The final order of the Tribunal on page 14 is in the following terms:
Pursuant to Article 34, Article 35, and Article 37 of Law on Arbitration of Mongolia and Article 42 and Article 44 of Arbitration Rules, it is AWARDED as follows:
1.IMC Mining Inc. Company of Australia Pay to Altain Khuder LLC of Mongolia, the sum of US$5903098.2 (five million nine hundred three thousand ninety eight point two dollars) to remedy the Statement of Claim by the Claimant;
2.The arbitration fee paid by Altain Khuder LLC of Mongolia, the sum of US$60212 (sixty thousand two hundred twelve United States Dollars), remains as the arbitral deposit. The arbitration fee against the remedy of US$5903098.2 (five million nine hundred three thousand ninety eight point two dollars), the sum of US$50257.7 (fifty thousand two hundred fifty seven point seven dollars), is payable by IMC Mining Inc. Company of Australia and is transferable to Altain Khuder LLC of Mongolia.
3.IMC Mining Solutions Pty Ltd of Australia, on behalf of IMC Mining Inc. Company of Australia, pay the sum charged against IMC Mining Inc. Company of Australia pursuant to this Arbitral Award.
4.This Award is final and binding. [Emphasis added].
On 23 October 2009, Altain applied to the Khan-Uul District Court to verify the Award. On 23 November 2009, the court made the following order:
L. Oyun, as a judge of Khan-Uul district court, received a request on 23rd October, 2009 from the Claimant: “Altain Khuder” LLC in regards to verifying the arbitral award charged against the Defendant: IMC Mining Inc Company.
…
I satisfied the request to be legitimate.
It should be noted the Arbitral award is enforceable pursuant to the New York Convention, 1958.
In accordance with the provision 184.3 of the article 184, and 123.1 of article 123 of the Civil Procedure Code, it is
1.Verify the Award #77 of the Mongolian National Arbitration Center at the Mongolian National Chamber of Commerce and Industry dated 15 September, 2009.
2.Note that the Award is to be enforced in accordance with the New York Convention, 1958.
3.Aware that there is no right to appeal on the Judge Order.
I observe that the Award appears to render unarguable the respondent’s position that the words ‘IMC MINING INC’ in the OMA are in fact a reference to IMC Solutions. Certainly, the Tribunal does not appear to have approached its decision on this basis.

Enforcement proceedings in the Supreme Court of Victoria

On 14 July 2010, Altain filed an originating motion in the Trial Division seeking enforcement of the Award against IMC Mining and IMC Services. Pursuant to Practice Note No. 2 of 2010, Altain did not serve this motion on either IMC Solutions or IMC Mining and a hearing was conducted ex parte. On 20 August 2010, the trial judge made orders for the enforcement of the Award against both IMC Mining and IMC Solutions in the amount of USD5,903,098.20 plus the arbitration fee of USD50,257.70, interest and costs calculated on a party and party basis. Provision was made for either of the defendants to apply to set aside the order within 42 days of service.

On 21 September 2010, IMC Solutions applied to set aside the order insofar as it applied to itself. Its application was principally founded upon its assertion that it was not a party to the arbitration agreement in pursuance of which the Award was made. The learned judge heard that application on 30 September, and 4, 5 and 12 November 2010. On 28 January 2011, his Honour dismissed the application and published reasons. However, in expectation that an appeal would be filed against his decision, his Honour stayed that order insofar as it concerned IMC Solutions until 4.00 pm 4 February 2011. Altain then applied for an order that IMC Solutions pay its costs on an indemnity basis. On 3 February 2011, the learned judge granted that application and provided reasons (the ‘First Costs Decision’), but his Honour also stayed the orders until 4.00 pm 4 February 2011.

On 3 February 2011, IMC Solutions filed a summons seeking leave to appeal the original ex parte decision, the decision to refuse to set that original decision aside and the First Costs Decision. The Court of Appeal having nominated a return date of 11 February 2011, IMC Solutions applied to the learned trial judge for a further stay of his Honour’s enforcement decision and the First Costs Order until the date of return. His Honour dismissed that application and ordered IMC Solutions to pay Altain’s costs on an indemnity basis (the ‘Second Costs Decision’).

Subsequently, this Court granted IMC Solutions leave to appeal all of the decisions of the learned judge below, and stayed those orders until the determination of the appeal.

The appeal was heard on 29 and 30 March 2011.

Estoppel by prior decision of a supervisory court

Before turning to the issue of statutory construction, it is necessary to consider the threshold question of whether IMC Solutions is estopped from resisting enforcement on the basis that it is not a party to the arbitration agreement. The learned judge held that IMC Solutions was:

estopped from denying the validity of the arbitration agreement, and from denying that it is a party to the arbitration agreement as a result of the extent of its participation in the arbitration proceedings, and having regard to the unchallenged decision of the Arbitral Tribunal as contained in the Award (in the particular circumstances of its participation in the arbitration proceedings; again, as discussed below).[2]

[2]Altain Khuder LLC v IMC Mining Inc [2011] VSC 1, [98].

As that passage demonstrates, his Honour’s decision regarding estoppel was based on a factual finding that IMC Solutions participated in the arbitration proceeding. This finding relied heavily on the two affidavits of Mr Batdorj filed by Altain.[3] During the hearing of the application to resist enforcement of the Award, IMC Solutions raised a series of objections to the admissibility of evidence contained in those affidavits. His Honour declined to rule on those objections at the time they were raised, but indicated that he would do so later. Counsel for IMC Solutions concurred with this approach.[4] For reasons that are unclear, his Honour did not rule on those objections at a later stage of the hearing, or address the issue of admissibility in his reasons for judgment. The objections were not pressed, and counsel appear to have been content to allow the hearing to conclude without the objections being revisited.
[3]Ibid [85], [88]–[89], [98], [108], [110].
[4]Transcript (4 November 2010) 21. A detailed description of the manner in which this material was dealt with below is set out below at [208]-[217] in the joint judgment of Hansen JA and Kyrou AJA.

My overview of the Batdorj affidavits indicates that many, if not most, of these objections were strongly arguable. At critical points in the two affidavits, the deponent asserts his opinion and draws conclusions rather than simply describing the events of which he had first hand knowledge.[5] It was a necessary precondition to relying upon these affidavits that the judge address the objections raised by IMC Solutions. The failure of the judge to do so means that his Honour’s decision on the issue of estoppel was determined, at least in part, on the basis of inadmissible evidence. Therefore, it must be set aside.
[5]See for example [72] of the affidavit dated 29 June 2010.

I express no view on the existence of an estoppel. However, having ruled upon the admissibility of the disputed evidence, the judge should have determined whether an estoppel existed on the following basis.

First, it was unnecessary to decide on the choice of law rules applicable to any of the various types of estoppel that may have been relevant in this case. It is settled law that a party that wishes to rely on foreign law in Australian courts must plead and prove it.[6] Otherwise, the court will assume that the foreign law is identical to the law of the forum.[7] Neither party suggested in their pleadings or submissions that the question of estoppel is governed by Mongolian law or the law of a jurisdiction other than Victoria. Accordingly, that question fell to be determined in accordance with Australian principles of common law and equity.
[6]Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491, [70]–[71].
[7]Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331, [116].

Secondly, in accordance with those ordinary Australian principles, the award debtor’s conduct in respect of the arbitration proceeding and any relevant proceedings brought before the courts of the supervisory jurisdiction may have given rise to an issue estoppel, estoppel by convention or some other established category of estoppel. The Act contains nothing to suggest that it was intended to exclude the application of ordinary principles of estoppel.[8]
[8]See Dallah Real Estate & Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763 (‘Dallah’).

Thirdly, the manner in which estoppel has been used to preclude an alleged award debtor from resisting enforcement in other jurisdictions was not determinative. Australian principles of estoppel are not necessarily identical to those applicable in other jurisdictions.

Construction of sections 8 and 9 the Act

It is necessary to determine who bears the onus of proving whether IMC Solutions is a party to the arbitration agreement. This is a question of construction of the Act, particularly ss 8 and 9.

The Act implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (‘New York Convention’) which the Act attaches as a Schedule. Sections 8 and 9 relevantly provide:

8 Recognition of foreign awards
(1)Subject to this Part, a foreign award is binding by virtue of this Act for all purposes on the parties to the arbitration agreement in pursuance of which it was made.
(2)Subject to this Part, a foreign award may be enforced in a court of a State or Territory as if the award were a judgment or order of that court.
…
(3A)The court may only refuse to enforce the foreign award in the circumstances mentioned in subsections (5) and (7).
…
(5)Subject to subsection (6), in any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may, at the request of the party against whom it is invoked, refuse to enforce the award if that party proves to the satisfaction of the court that:
(a)that party, being a party to the arbitration agreement in pursuance of which the award was made, was, under the law applicable to him or her, under some incapacity at the time when the agreement was made;
(b)the arbitration agreement is not valid under the law expressed in the agreement to be applicable to it or, where no law is so expressed to be applicable, under the law of the country where the award was made;
(c)that party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his or her case in the arbitration proceedings;
(d)the award deals with a difference not contemplated by, or not falling within the terms of, the submission to arbitration, or contains a decision on a matter beyond the scope of the submission to arbitration;
(e)the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(f)the award has not yet become binding on the parties to the arbitration agreement or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made.

…
(7)In any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may refuse to enforce the award if it finds that:
(a)the subject matter of the difference between the parties to the award is not capable of settlement by arbitration under the laws in force in the State or Territory in which the court is sitting; or
(b)to enforce the award would be contrary to public policy.

(7A)To avoid doubt and without limiting paragraph (7)(b), the enforcement of a foreign award would be contrary to public policy if:
(a)the making of the award was induced or affected by fraud or corruption; or
(b)a breach of the rules of natural justice occurred in connection with the making of the award.

…

9 Evidence of awards and arbitration agreements
(1)In any proceedings in which a person seeks the enforcement of a foreign award by virtue of this Part, he or she shall produce to the court:
(a)the duly authenticated original award or a duly certified copy; and
(b)the original arbitration agreement under which the award purports to have been made or a duly certified copy.

…
(5)A document produced to a court in accordance with this section is, upon mere production, receivable by the court as prima facie evidence of the matters to which it relates.

Section 39 requires a court which is considering exercising a power under section 8 to enforce or refuse to enforce a foreign award, interpreting the Act, or interpreting an agreement or award to which the Act applies, to have regard to:

(a) the objects of the Act; and
(b) the fact that:
(i)arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and
(ii)awards are intended to provide certainty and finality.

The objects of the Act referred to in s 39(2)(a), are set out in s 2D as follows:

(a)to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and
(b)to facilitate the use of arbitration agreements made in relation to international trade and commerce; and
(c)to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and
(d)to give effect to Australia’s obligations under the [New York Convention] …

Finally, s 3 provides the following relevant definitions of terms used in Part 2:
(1) In this Part, unless the contrary intention appears:
agreement in writing has the same meaning as in the Convention.
arbitral award has the same meaning as in the Convention.
arbitration agreement means an agreement in writing of the kind referred to in sub article 1 of Article II of the Convention.
…
Convention means the [New York Convention]…
…
foreign award means an arbitral award made, in pursuance of an arbitration agreement, in a country other than Australia, being an arbitral award in relation to which the Convention applies.
…
(4)For the avoidance of doubt and without limiting subsection (1), an agreement is in writing if:
(a)its content is recorded in any form whether or not the agreement or the contract to which it relates has been concluded orally, by conduct, or by other means; or
(b)it is contained in an electronic communication and the information in that communication is accessible so as to be usable for subsequent reference; or
(c)it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.
(5)For the avoidance of doubt and without limiting subsection (1), a reference in a contract to any document containing an arbitration clause is an arbitration agreement, provided that the reference is such as to make the clause part of the contract.
IMC Solutions’ submission on the construction of ss 8 and 9 can be summarised as follows. Section 8(1) imposes a jurisdictional ‘threshold requirement’ that the award creditor needs to discharge before an award can be enforced under the Act. The award creditor needs to satisfy the enforcing court, on the balance of probabilities, that the award sought to be enforced is binding under s 8(1). This requires the award creditor to prove that the award debtor is a party to the arbitration agreement in pursuance of which the award was made. It is only after the award creditor has discharged this legal onus that s 8(3A) then places the onus on the award debtor to establish one of the limited defences in sub-s (5) and (7) if the award debtor wishes to resist enforcement. Section 9(1) merely describes the procedure for enforcement and does not detract from the onus imposed by s 8(1).

In contrast, Altain’s submission, which was accepted by the learned judge below, was as follows. Section 8(1) must be read subject to s 8(3A) and s 9(1). There is no legal onus on the award creditor to prove the elements of s 8(1). The award creditor can enforce the award by simply producing the two documents referred to in s 9(1). Further, the ‘agreement’ referred to in s 9(1) need not name the award debtor as a party. Once the award creditor has produced the two documents, the onus falls on the award debtor to establish one of the defences in sub-s (5) and (7). The defence that an award debtor was not a party to the arbitration agreement can be made only under s 8(5)(b), by arguing that the award is not ‘valid’ as against that award debtor. The award debtor carries the legal burden of establishing this.

Both parties made extensive reference to international authorities. Insofar as the Act implements an international treaty, Australian courts will, as far as they able, construe the Act consistently with the international understanding of that treaty.[9] Uniformity also accords with the Act’s stated purpose to facilitate the use of arbitration as an effective dispute resolution process.[10]
[9]Rocklea Spinning Mills Pty Ltd v Anti-Dumping Authority (1995) 56 FCR 406, 421.
[10]Section 2D.

No Australian court and few foreign courts have considered the present issue.[11] Most of those foreign courts have held that whether an award debtor is a party to the relevant arbitration agreement falls to be considered as a defence under their equivalent to s 8(5)(b), rather than as a threshold issue.[12] Senior counsel for the respondent submitted, in the broad, that these decisions were determinative of the approach that this Court should take to construing the Act.
[11]Eg, Dardana Ltd v Yukos Oil Co [2002] 1 All ER (Comm) 819 (‘Dardana’); Aloe Vera of America Inc v Asianic Food (S) Pte Ltd and Another [2006] SGHC 78 (‘Aloe Vera’); Dallah [2011] 1 AC 763 (‘Dallah’); Sarhank Group v Oracle Corp, 404 F3d 657 (2^nd Cir, 2005); Javor v Francoeur (2003) 13 BCLR (4^th) 195.
[12]Eg, Dardana [2002] 1 All ER (Comm) 819; Dallah [2011] 1 AC 763; Aloe Vera [2006] SGHC 78.

Ultimately, this Court is required to construe an Australian statute. That process must be performed in accordance with established principles of Australian statutory interpretation. International case law may be useful and instructive, but it cannot supersede the words used in the Act. The weight to be accorded to such authority will depend upon the similarity of the language used in foreign statutes being construed to the terms of the Act.

Applying the principles of statutory interpretation binding upon this Court, I am unable to accept Altain’s position for four reasons.

First, Altain’s construction would render s 8(1) superfluous. It should be rejected because an alternative construction is open which gives that section meaning and effect.[13] I will set out that alternative construction later in my reasons.
[13]Pearce and Geddes set out the large number of authorities to this effect at ¶2.26 of Statutory Interpretation (7^th ed, 2011). As Griffith CJ observed in Commonwealth v Baume (1905) 2 CLR 405, 414 this was held to be an accepted common law rule as early as 1688:

Secondly, s 8(1) cannot be read subject to s 8(3A). Sub-section 8(3A) was enacted to reverse decisions holding that, in addition to the defences set out in sub-s (5) and (7), the enforcing court has a residual discretion to refuse enforcement on other grounds.[14] In my view, it is most unlikely that the enactment of s 8(3A) was intended to radically modify the overall scheme of the enforcement provisions of the Act. Further, it is clear that before the award creditor can enforce the award, it must at least produce the documents required by s 9(1). The award debtor can therefore ‘resist enforcement’ by arguing that the documents produced by the award creditor do not meet the description set out in s 9(1).[15] It follows that, contrary to the absolute language in which s 8(3A) is expressed, the award debtor can resist enforcement on a ground other than the grounds in ss 8(5) and 8(7). In my view, s 8(3A) simply circumscribes the defences on which the award debtor can rely to resist enforcement once the award creditor has discharged some preliminary burden. Section 8(3A) says nothing about what that preliminary burden is.
[14]Revised Explanatory Memorandum, International Arbitration Amendment Bill 2010, 7.
[15]Cf Aloe Vera [2006] SGHC 78, [27].

Thirdly, since an award is only binding on the parties to the arbitration agreement pursuant to which it was made, it must be possible for the award debtor to resist enforcement on the ground that it is not a party to that agreement. Sections 8(5) and 8(7) make no express provision for raising such a defence. Section 8(5)(b) allows an award debtor to resist enforcement on the grounds that the arbitration agreement is “not valid” under the relevant law. Yet an arbitration agreement pursuant to which the award was made may be perfectly valid without the award debtor being a party to it. The question of whether a contract is valid and the question of whether a person is a party to that contract are treated as distinct issues by the common law. It is artificial to frame an argument that a person is not a party to an agreement as an argument that the agreement is not valid vis-à-vis that person. In my opinion, Altain’s construction of s 8(5)(b) does violence to the words of s 8(5)(b).

In support of its construction, Altain pressed upon this court two United Kingdom decisions, Dardana and Dallah, in which Altain’s reading of the equivalent provision in the Arbitration Act 1996 (UK), s 103(2)(b), was accepted. This Court is confined in the weight which it is able to accord to those decisions by the terms of the Australian Act. Section 8(1) makes a foreign arbitral award ‘binding by virtue of this Act … on the parties to the arbitration agreement in pursuance of which it was made’ [emphasis added], not on the parties to the award. In contrast, s 101(1) of the United Kingdom Act provides that ‘an award shall be recognized as binding’ not on the parties to the applicable arbitration agreement, but ‘on the persons as between whom it [the award] was made’. To the extent that those contrasting provisions compel differing results, this Court is required to give effect to the Act rather than follow Dardana or Dallah.

Finally, it is unnecessary to interpret ss 8 and 9 in the manner advocated by Altain in order to achieve the objects of the Act, which are, broadly speaking, to facilitate the expeditious and economical enforcement of foreign arbitral awards in Australian courts. As I will explain in detail, a more harmonious and coherent interpretation is available which fully achieves these objectives. For the reasons set out below, my conclusions in respect of that interpretation may be summarised as follows:

1.The words ‘arbitration agreement’ in s 8(1) mean ‘purported or apparent arbitration agreement’.
2.Section 8(1) requires the award creditor to show, on the balance of probabilities, that:
i.there is a purported or apparent arbitration agreement;
ii.the award creditor and award debtor are parties to that agreement; and
iii.there is an award made against the award debtor in pursuance of that agreement.

3.The words ‘arbitration agreement’ in s 9(1)(b) means an agreement of the kind referred to in s 8(1), i.e. a purported or apparent arbitration agreement to which the award debtor and the award creditor are parties.
4.Section 9(5) assists the award creditor to establish the elements of s 8(1).
5.The expression ‘prima facie evidence’ in s 9(5) means evidence that, in the absence of contrary evidence, is conclusive proof of the relevant fact.
6.The effect of s 9(5) is that, in the absence of contrary evidence, the mere production of the two documents referred to in s 9(1) is always sufficient to establish the elements of s 8(1) on the balance of probabilities.
7.The award creditor must satisfy the enforcing court that the two documents it has produced in purported compliance with s 9(1) meet the description of ss 9(1)(a) and 9(1)(b). Normally, the documents will speak for themselves and the award creditor will not need to do anything other than simply produce the documents.
8.In the unusual case where the arbitration agreement does not expressly name the award debtor as a party, the agreement will not, on its face, be an agreement of the kind referred to in s 9(1)(b). In that case the award creditor will need to lead extrinsic evidence to show, on the balance of probabilities, that the award debtor is a party to the arbitration agreement pursuant to which the award was made.
9.Leaving aside the grounds under ss 8(5) and 8(7), enforcement of a foreign arbitral award will usually follow a brief, summary procedure. This does not mean that the enforcing court is failing to act judicially. Rather, it means that the Act assists the award creditor through an evidentiary deeming provision in s 9(5). The effect of the deeming provision is that the mere production of the original arbitration agreement and the original award (or duly certified copies of these documents) will normally be sufficient to discharge the burden the Act places on the award creditor.
10.Once s 8(1) is satisfied, the award debtor may only resist enforcement of the award by relying on one of the grounds in ss 8(5) and 8(7).
11.To establish a defence under s 8(5) the award debtor must prove any facts constituting the defence (including, where applicable, the content of foreign law) on the balance of probabilities.
12.The difficulty of proving a defence pursuant to s 8(5) will depend on the particular defence relied upon. While the standard of proof that applies to the defences under s 8(5)(a)–(e) is the normal civil standard, the onus placed on the award debtor in respect of those defences can be properly described as a heavy onus. In accordance with ss 2D and 39, the court’s general starting position is that most arbitral tribunals properly discharge their duties and correctly determine their jurisdiction and that most arbitral awards, subject to formal requirements, should be enforced. The defences in s 8(5)(a)–(e) constitute allegations that are serious. An enforcing court will not be persuaded lightly that it is more likely than not that such an allegation is correct.

This interpretation accords with the language, text and structure of the Act, as well as its purposes, for the following reasons.

Section 8(5)(b) states that the court may ‘refuse to enforce the award’ if the award debtor proves that the ‘arbitration agreement is not valid’. It is clear that the words ‘arbitration agreement’ in s 8(5)(b) cannot mean an actual valid arbitration agreement, otherwise it would be a contradiction to say that the ‘arbitration agreement’ is not valid. It follows that ‘arbitration agreement’ in s 8(5)(b) means a purported or apparent arbitration agreement. It is unlikely that Parliament intended the words ‘arbitration agreement’ to have one meaning in s 8(5)(b) and a different meaning elsewhere in s 8. It follows that the words ‘arbitration agreement’ in s 8(1) also mean an apparent or purported arbitration agreement. This is consistent with the pro-enforcement policy of the Act.[16] Further, there is nothing anomalous about s 8(1) making an award made in pursuance of a possibly invalid arbitration agreement ‘binding’. This is because section 8(1) is expressed to be ‘[s]ubject to this Part’. An award made in pursuance of a purported agreement is only ‘binding’ subject to Part II of the Act, which includes a defence of invalidity in s 8(5)(b).
[16]The New York Convention is widely recognised in international arbitration circles as having a ‘pro-enforcement’ policy: see, eg, Dallah [2011] 1 AC 763, [101] (Lord Collins); International Council for Commercial Arbitration, ICCA’s Guide to the Interpretation of the 1958 New York Convention (2011) xi.

The words ‘prima facie evidence’ in s 9(5) can have two possible meanings. The first meaning is ‘evidence’ that is sufficient to make a finding of fact open.[17] The second meaning is ‘evidence’ that, in the absence of contrary evidence, is conclusive proof of a fact.[18] As Cross on Evidence points out, when the words ‘prima facie evidence’ are used in a statute, they usually have the second meaning.[19] Given the objects of the Act, I conclude that Parliament intended the words ‘prima facie evidence’ in s 9(5) to have that stronger second meaning.
[17]JH Heydon, Cross on Evidence [Service 135, April 2011], ¶1600.
[18]Ibid, ¶1605.
[19]Ibid.

Section 8(1) sets out the circumstances in which a foreign award is binding under the Act while ss 8(5) and 8(7) deal with defences to enforcement. Section 8(1) is analogous to a provision establishing the elements of a cause of action. One would ordinarily expect such a provision to impose a legal burden of proof on the plaintiff in respect of each element. Further, it is clear that an award debtor can resist enforcement of the award on the ground that it is not a party to the arbitration agreement. As I have already explained, to treat this ground for resisting enforcement as falling within the invalidity defence in s 8(5)(b) would be to seriously strain the language of s 8(5)(b).

Once it is understood that ‘arbitration agreement’ in s 8(1) means a ‘purported or apparent agreement’, and that s 9(5) provides a powerful aid to the award creditor, it becomes possible, consistently with the objects of the Act, to give s 8(1) a natural reading which imposes a threshold legal burden. As the award debtor will appear, absent exceptional circumstances, as a party on the face of the arbitration agreement, ordinarily, the award creditor will easily discharge this legal burden.

It follows from accepting that s 8(1) requires the party-hood of the award debtor to be established as a threshold issue by the award creditor, that an assertion by an award debtor that it is not a party to the arbitration agreement will be treated differently by the courts to an attempt by an award debtor to rely on any of the grounds set out in ss 8(5) and (7). It also follows that in the former case, the onus is on the award creditor to prove, on the balance of probabilities, that the award debtor is a party, whereas in the latter case the award debtor bears the onus of making out one of the grounds for resisting enforcement.

At first glance, it may appear strange to elevate the question of party-hood to a threshold issue above other vitiating factors related to jurisdiction, such as validity, which are addressed as defences for which the award debtor bears the onus of proof. This position is not anomalous. Rather, it reflects a sensible policy decision by the legislature to place the onus on the award debtor to impugn the agreement or the award where the documents presented to the court pursuant to s 9(1) appear regular on their face, but to require the award creditor to explain an apparent irregularity on the face of the documents. The cumulative effect of ss 8(1), (3A), (5) and (7) and 9(1) and (5) is to encourage the use of arbitration and the recognition of foreign awards by creating a legislative presumption of regularity founded upon documentary proof. That presumption guards against the unnecessary risk and expense to an award creditor should they be required to re-litigate issues in Australian courts already decided by an arbitral tribunal. It guards against the risk that award debtors will seek to avoid their obligations by exploiting the inherent difficulty and expense associated with foreign enforcement. It is a necessary consequence of such a policy decision, and not a form of inconsistency or unfairness, that questions of prima facie irregularity be dealt with differently from questions of regularity that are not readily apparent on the face on the documents.

However, where an award debtor does not appear on the face of the arbitration agreement, but is a party to the award, the award and any decision of a supervisory court verifying that award will be a factor relevant to the decision whether the award debtor is a party to the arbitration agreement pursuant to which it was made. The reasoning process by which the tribunal has concluded that they are a party, the terms in which the award describes the award creditor and their liability, and the nature of the verification process will, amongst other factors, affect the weight to be accorded that document.

It is necessary to explain in greater detail the standard of proof required to satisfy the court that a defence set out in s 8(5) has been made out. There is nothing in the language of the Act to suggest that s 8(5) intended to impose a standard of proof different from the usual civil standard on the award debtor. Nevertheless, it is uncontroversial that the cogency of evidence required to discharge the civil standard of proof will depend upon the issue sought to be proved. [20]
[20]Briginshaw v Briginshaw (1938) 60 CLR 336, 362 (Dixon J).

Sections 8(5)(a)–(e) require the enforcing court to be satisfied that a foreign award is tainted by either fraud or vitiating error on the part of the arbitral tribunal. Given that the Act declares arbitration to be ‘an efficient, impartial, enforceable and timely method by which to resolve commercial disputes’, the enforcing court should start with a strong presumption of regularity in respect of the tribunal’s decision and the means by which it was arrived at. The enforcing court should treat allegations of vitiating irregularity as serious. A correspondingly heavy onus falls upon the award debtor if it wishes to establish such an allegation on the balance of probabilities. Furthermore, the conduct of the parties to the agreement at each of the various stages prior to an enforcement order being sought in these courts, and its consistency with the defence subsequently asserted, will be a relevant fact to consider when deciding whether that burden has been discharged to the necessary standard.

Indemnity Costs

As I would allow the appeal, I need not determine how costs should have been awarded. However, were it necessary to do so, my view would be as follows.

A decision to award indemnity costs against an unsuccessful party is dependant upon there being ‘circumstances of the case … such as to warrant the Court … departing from the usual course’ of awarding costs on a party and party basis.[21] Such a departure will only be countenanced in the presence of special circumstances.[22] Unsuccessfully resisting enforcement of a foreign arbitral award is not an established category of special circumstances in Australia. However, as Harper J observed in Ugly Tribe Co Pty Ltd v Sikola, ‘[t]he categories of special circumstances are not closed’.[23]
[21]Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233. See also, Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435.
[22] Australian Electoral Commission v Towney (No 2) (1994) 54 FCR 383, 388.
[23] Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [8].

In Hong Kong, the decision of Reyes J in A v R has formed the basis for a number of decisions in which the failure to successfully resist the enforcement of a foreign arbitral award has been treated as justifying departure from the ordinary orders as to costs.[24] That decision was based upon three considerations. First, award creditors should be entitled to expect that enforcement courts will enforce awards made in their favour and applications to resist enforcement should be exceptional. Secondly, unsuccessful award debtors would be in breach of their overarching obligations under the Hong Kong Civil Justice Reform (‘CJR’) to assist the court in achieving just, cost-effective and efficient resolution of disputes. Thirdly, the losing award debtor should bear the full costs consequence of bringing an unsuccessful application to dissuade them from pursuing ‘unmeritorious challenges.’
[24][2009] 3 HKLRD 389, 400-401 [67]-[72]. See also, Wing Hong Construction Ltd v Tin Wo Engineering Co Ltd [2010] HKEC 918; Taigo Ltd v China Master Shipping Ltd [2010] HKCFI 530 [13]-[16].

The learned judge below found that such considerations applied with equal force in Victoria, ‘both from an arbitration perspective and also from the perspective of legislation such as that contained in the Civil Procedure Act and in the Hong Kong CJR.’[25] Therefore, failure to successfully resist a foreign arbitral award by an award debtor should be treated as a category of special circumstances in which indemnity costs may be awarded against that party by a Victorian court. Nevertheless, his Honour stated:

It should be … stressed that the finding of a category of special circumstances in this context does not mean that it would follow, inexorably, that a special costs order would be made. The award of costs is discretionary and the exercise of that discretion depends on the particular circumstances. Nevertheless in an arbitration context that discretion should be exercised against the backdrop of the considerations discussed.[26]

[25] First Costs Decision, [20].

[26]First Costs Decision, [21].

Insofar as his Honour mistakenly characterised the substantive decision which he was required to make as an application to resist enforcement of the Award by IMC Solutions pursuant to ss 8(5) and (7), his Honour’s understanding of the basis on which the discretion as to costs should be exercised, and the considerations relevant to that decision, was erroneous. It is unnecessary for me to express a view on whether the approach of Reyes J in A v R should be followed in Victoria. What is clear, however, is that the terms and objects of the Act will be a relevant factor to be considered when exercising the discretion to award costs.

The arbitration business practice note

Finally, at present, arbitration business in the Trial Division of this Court is governed by Practice Note No. 2 of 2010. Paragraph 10 of that Practice Note states:

An application to enforce a foreign award pursuant to the International Arbitration Act 1974 (section 8), should, as far as possible, comply with the requirements of Chapter II, Rules 9.04 and 9.05.

Rule 9.04 is concerned with enforcement of an arbitration award, whilst r 9.05 is concerned with endorsement and service of the enforcement order. Under r 9.04(b), unless the Court otherwise orders, an application for leave to enforce an award as a judgment or order of the Court may be made without notice to any person.

Where a party seeks to enforce a foreign arbitral award, and it is necessary to lead extrinsic evidence to establish that the documents on which they rely satisfy the requirements of s 9(1), the judge should ordinarily direct the award creditor to give notice to the award debtor, and the enforcement proceedings should proceed inter partes. Practice Note No. 2 of 2010 should be amended to reflect this clarification.

Disposition of the appeal

IMC Solutions was not named as a party on the face of the OMA. Therefore, as a threshold issue, Altain had the legal burden of establishing before the trial judge, on the balance of probabilities, that IMC Solutions was a party to the arbitration agreement in pursuance of which the Award was made. The learned judge fell into error by placing the onus of proof on IMC Solutions. Accordingly, the issue of whether IMC Solutions was a party to the arbitration agreement needs to be re-decided again according to law. The issue of whether the respondent was estopped from resisting enforcement in Australia also falls to be re-decided.

The parties invited the Court, in the event that this appeal was successful, to re-decide the application for enforcement rather than remit the matter to the Trial Division. Without the benefit of any rulings on the admissibility of the large volume of extrinsic material relied upon by the respondent to support its enforcement application, such an invitation essentially required this Court to embark upon the time-consuming process of re-conducting a trial at first instance. In my view, this was inappropriate in the circumstances of this appeal. Nevertheless, the majority having accepted that burdensome invitation, it is unnecessary for me to express a concluded view on the manner in which this appeal ought to have been disposed.

- - -

HANSEN JA
KYROU AJA:

TABLE OF CONTENTS

Introduction and summary............................................................................................................. 25

The International Arbitration Act and the New York Convention........................................ 29

(a) The International Arbitration Act......................................................................................... 29

( b) The New York Convention................................................................................................... 34

Facts..................................................................................................................................................... 36

(a) Events preceding the arbitration........................................................................................... 36

(b) Commencement of the arbitration and events leading to the Award........................... 39

(c) The Award................................................................................................................................. 45

(d) Verification of the Award by the Mongolian District Court........................................... 48

(e) Letter of demand...................................................................................................................... 48

Enforcement proceeding in the Trial Division of this Court................................................... 49

Judgments below.............................................................................................................................. 50

Leave to appeal to the Court of Appeal....................................................................................... 54

Grounds of appeal........................................................................................................................... 55

Ground 3: Onus of proving that IMCS was a party to the Arbitration Agreement............ 56

(a) Preliminary observations on the interpretation of the Act.............................................. 56

(b) Matters to be proved by the award creditor on a prima facie basis............................... 59

(c) Parties’ submissions on whether s 8(3A), s 8(5) and s 8(7) are subject to s 8(1)............. 63

(d) Decision on whether s 8(3A), s 8(5) and s 8(7) are subject to s 8(1)................................. 65

(e) Standard of proof under s 8(5) and (7)................................................................................. 74

(f) Application of the onus principles to the present case..................................................... 77

....................... (i) The trial judge should not have made the ex parte order against IMCS77

(ii) Evidence relevant to the enforcement of the Award and objections to the evidence78

........ (iii) No prima facie evidence that IMCS was a party to the Arbitration Agreement99

Grounds 5 and 9: This Court’s power to determine Tribunal’s jurisdiction over IMCS 110

Ground 4: Did the Tribunal find that IMCS was a party to the OMA?.............................. 123

Ground 7: Did IMCS consent to arbitrate?............................................................................... 124

Grounds 2, 10 and 12: Did IMCS receive proper notice?....................................................... 124

Ground 6: Nature of judicial verification of an award under Mongolian law.................. 124

Grounds 8 and 11: Estoppel........................................................................................................ 126

Grounds 16 and 17: Indemnity costs orders............................................................................. 129

Remaining grounds of appeal..................................................................................................... 135

Conclusion and proposed orders................................................................................................ 136

Introduction and summary

In this judgment, the following expressions have the meanings stated:

Act	International Arbitration Act 1974 (Cth)
Additional Claim Document	Altain’s additional written claim dated 2 July 2009 against ‘”IMC Mining Inc” company of Australia’.
Altain	Altain Khuder LLC
Arbitration Agreement	Clause 16.1 of the OMA.
Award	The award of the Tribunal made on 15 September 2009.
CEO	chief executive officer.
Claim Document	The document dated 11 May 2009 by which Altain commenced an arbitration proceeding and filed a written claim with the MNAC.
Convention	The Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration.
ex parte order	The order made on 20 August 2010 granting leave to Altain to enforce the Award as a judgment of this Court.
First Costs Decision	The costs decision made on 3 February 2011: Altain Khuder LLC v IMC Mining Inc [No 2] [2011] VSC 12 (3 February 2011).
IMC Response Document	A document headed ‘IMC Response to AKL Arbitration Claim’ filed with the MNAC on 16 June 2009.
IMCM	IMC Mining Inc.
IMCM Power of Attorney	The power of attorney dated 16 June 2009 executed by IMCM in favour of Bevan John Jones.
IMCS	IMC Aviation Solutions Pty Ltd, previously known as IMC Mining Solutions Pty Ltd
Interim Award	The interim award published on 10 July 2009 removing the arbitrator that had been appointed by ‘”IMC Mining Inc” Company of Australia’, and directing that a new arbitrator be appointed by the chairman of the MNAC.
Lehman	Lehman, Lee & Xu, a Mongolian law firm.
MNAC	Mongolian National Arbitration Center.
Mongolian District Court	Khan-Uul District Court of Mongolia.
Mongolian District Court Order	The order of the District Court of Mongolia dated 23 November 2009.
Mr Batdorj’s affidavits	Mr Batdorj’s first affidavit and Mr Batdorj’s second affidavit.
Mr Batdorj’s first affidavit	The affidavit affirmed by Gendenpil Batdorj on 29 June 2010.
Mr Batdorj’s second affidavit	The affidavit affirmed by Gendenpil Batdorj on 26 October 2010.
Mr Jones’ affidavit	The affidavit affirmed by Bevan John Jones on 21 October 2010.
Mr Jones’ Powers of Attorney	The powers of attorney dated 16 June 2009 executed by Mr Jones in favour of two lawyers of Lehman.
Mr Lewis’ affidavit	The affidavit sworn by Stewart Charles Lewis on 14 October 2010.
Mr O’Donahoo’s affidavit	The affidavit sworn by Ian Peter Scott O’Donahoo of Allens Arthur Robinson on 18 October 2010.
OMA	The operations management agreement dated 13 February 2008 executed by Altain and IMCM in relation to the Project.
Practice Note	Supreme Court of Victoria, Practice Note No 2 of 2010, ‘Arbitration Business’.
Preliminary Hearing	The preliminary hearing conducted by the Tribunal on 24 July 2009.
Preliminary Hearing Document	The document executed by the Tribunal on 24 July 2009 in relation to the Preliminary Hearing.
Professor Tumenjargal’s opinion	The expert opinion dated 14 October 2010 of Professor Mendsaikhan Tumenjargal in relation to Mongolian law.
Project	Tayan Nuur Open Cut Iron Ore Project in Mongolia.
Rules	Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (Vic)
Second Costs Decision	The costs decision made on 4 February 2011.
Subcontract	The contract between IMCM and IMCS to which reference is made at [88] below.
Substantive Decision	Altain Khuder LLC v IMC Mining Inc (2011) 246 FLR 47.
Tribunal	The three arbitrators at the MNAC that made the Award.
UK Act	Arbitration Act 1996 (UK) c 23.

This appeal against orders made by a judge in the Trial Division raises important questions about the International Arbitration Act 1974 (Cth) (‘Act’), including the nature of the jurisdiction of Australian courts in enforcing foreign arbitral awards, the onus on the award creditor in seeking leave to enforce an arbitral award, the onus on the award debtor in seeking to resist such enforcement, and the basis for the award of costs in such proceedings.

The orders were made on 28 January, and 3 and 4 February 2011, respectively in a proceeding commenced by originating motion filed on 14 July 2010 in which the respondent, Altain Khuder LLC (‘Altain’), sought leave to enforce as a judgment of this Court a foreign arbitral award (‘Award’) against IMC Mining Inc (‘IMCM’) and the appellant, IMC Aviation Solutions Pty Ltd, which was previously known as IMC Mining Solutions Pty Ltd (‘IMCS’).

The Award was made on 15 September 2009 by three arbitrators (‘Tribunal’) at the Mongolian National Arbitration Center (‘MNAC’). The Award required IMCM and IMCS to pay to Altain the amount of $US5,903,098.20 and an arbitration fee of $US50,257.70; the terms of the Award are set out at [108] below. The Award was made pursuant to cl 16.1 of an operations management agreement that was executed by Altain and IMCM on 13 February 2008 (‘OMA’) in relation to the Tayan Nuur Open Cut Iron Ore Project in Mongolia (‘Project’).

Clause 16.1 of the OMA contained an arbitration agreement (‘Arbitration Agreement’) as follows:

16. DISPUTE RESOLUTION
16.1The resolution of any and all disputes under this Agreement shall first be addressed through good faith negotiations between Altain Khuder LLC and IMC Mining Inc. All disputes between Altain Khuder LLC and IMC Mining Inc arising under this Agreement shall be referred to and considered by arbitration in Mongolia according to Mongolian or Hong Kong law.

On 20 August 2010, pursuant to the originating motion, Altain applied to the judge ex parte for leave to enforce the Award as a judgment of this Court. The judge granted leave and ordered that there be judgment for Altain in accordance with the terms of the Award, as follows:

(a)that IMCM pay the amount of US$5,903,098.20 plus the arbitration fee amount of US$50,257.70 to Altain; and
(b)that IMCS is liable to pay, for and on behalf of IMCM, the amount of US$5,903,098.20 plus the arbitration fee amount of US$50,257.70 to Altain,

together with interest under the Penalty Interest Rates Act 1993 and an order that IMCM and IMCS pay Altain’s costs of the proceeding on a party and party basis (‘ex parte order’). The judge further ordered that IMCM and IMCS may apply within 42 days after service of the order to set aside the order, and stayed enforcement of the Award until the expiration of that time or determination of an application to set aside.

On 21 September 2010, IMCS filed a summons seeking the setting aside of the orders in so far as they related to it, and a range of other orders including security and a stay on enforcement of the Award pending determination of the summons. The summons came on for hearing before the judge on 30 September when, after some discussion, it was adjourned and was heard by him over three days in November 2010. IMCM made no such application.

On 28 January 2011, the judge, in accordance with reasons he published that day (‘Substantive Decision’),[27] dismissed IMCS’s summons, reserved the question of costs, and stayed enforcement of the Award until 4 pm on Friday 4 February 2011 or further order.
[27]Altain Khuder LLC v IMC Mining Inc (2011) 246 FLR 47.

Then, having heard counsel on the matter of costs on 31 January 2011 and having also received written submissions, on 3 February the judge ordered, in accordance with reasons he published that day (‘First Costs Decision’)[28] that IMCS pay Altain’s costs on an indemnity basis, and stayed that order until 4 pm on Friday 4 February or further order.
[28]Altain Khuder LLC v IMC Mining Inc [No 2] [2011] VSC 12 (3 February 2011).

The above orders for a stay until 4 pm on 4 February were made on the basis that IMCS would act with due expedition to seek to be heard in the Court of Appeal on that day for a continuation of the stays. Although papers had been filed, and the Court of Appeal had made procedural directions, the matter was not heard in the Court of Appeal on 4 February. In that situation, on 4 February IMCS sought from the judge an extension of each stay for seven days but the judge, considering that IMCS had not acted with what he considered due expedition in the circumstances, refused to extend either stay and ordered IMCS to pay Altain’s costs of the application on an indemnity basis (‘Second Costs Decision’).[29] In short reasons given at the conclusion of argument, the judge stated that he based the Second Costs Decision on two matters, namely, the reasons in the First Costs Decision and the reasons given earlier that day for refusing to extend the stays which reasons, it would appear, were concerned with the ongoing procedure to which Altain was being put in enforcing the Award.
[29]The judge did not publish separate reasons for the Second Costs Decision.

As it transpired, only seven days later, on 11 February 2011, the Court of Appeal granted a stay of execution of the judgment and the costs orders. The stays have been continued until the hearing and determination of this appeal. In that situation, no question is now raised as to the judge’s refusal to extend the stay. The only attack made upon the orders of 3 and 4 February is on the award of costs on an indemnity basis. The Court of Appeal has granted leave to appeal from those orders and from the orders of 28 January 2011.

For the reasons that follow, the appeal should be allowed and, in so far as they relate to IMCS, the impugned orders set aside.

The International Arbitration Act and the New York Convention
(a) The International Arbitration Act

Both Australia and Mongolia have acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards that was adopted in 1958 by the United Nations Conference on International Commercial Arbitration (‘Convention’).[30] The Act gives effect to Australia’s obligations under the Convention, which is set out in Schedule 1 to the Act.
[30]The Convention is generally known as the ‘New York Convention’.

The following provisions of the Act are relevant to this appeal:

2D Objects of this Act
The objects of this Act are:
(a)to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and
(b)to facilitate the use of arbitration agreements made in relation to international trade and commerce; and
(c)to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and
(d)to give effect to Australia’s obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty fourth meeting; …

Part II – Enforcement of foreign awards
3 Interpretation
(1) In this Part, unless the contrary intention appears:
agreement in writing has the same meaning as in the Convention.
arbitral award has the same meaning as in the Convention.
arbitration agreement means an agreement in writing of the kind referred to in sub article 1 of Article II of the Convention.
…
Convention means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty fourth meeting, a copy of the English text of which is set out in Schedule 1.
…
foreign award means an arbitral award made, in pursuance of an arbitration agreement, in a country other than Australia, being an arbitral award in relation to which the Convention applies.

…
(4)For the avoidance of doubt and without limiting subsection (1), an agreement is in writing if:
(a)its content is recorded in any form whether or not the agreement or the contract to which it relates has been concluded orally, by conduct, or by other means; or
(b)it is contained in an electronic communication and the information in that communication is accessible so as to be usable for subsequent reference; or
(c)it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

(5)For the avoidance of doubt and without limiting subsection (1), a reference in a contract to any document containing an arbitration clause is an arbitration agreement, provided that the reference is such as to make the clause part of the contract.

…
8 Recognition of foreign awards
(1)Subject to this Part, a foreign award is binding by virtue of this Act for all purposes on the parties to the arbitration agreement in pursuance of which it was made.
(2)Subject to this Part, a foreign award may be enforced in a court of a State or Territory as if the award were a judgment or order of that court.
(3)Subject to this Part, a foreign award may be enforced in the Federal Court of Australia as if the award were a judgment or order of that court.
(3A)The court may only refuse to enforce the foreign award in the circumstances mentioned in subsections (5) and (7).
…
(5)Subject to subsection (6), in any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may, at the request of the party against whom it is invoked, refuse to enforce the award if that party proves to the satisfaction of the court that:
(a)that party, being a party to the arbitration agreement in pursuance of which the award was made, was, under the law applicable to him or her, under some incapacity at the time when the agreement was made;
(b)the arbitration agreement is not valid under the law expressed in the agreement to be applicable to it or, where no law is so expressed to be applicable, under the law of the country where the award was made;
(c)that party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his or her case in the arbitration proceedings;
(d)the award deals with a difference not contemplated by, or not falling within the terms of, the submission to arbitration, or contains a decision on a matter beyond the scope of the submission to arbitration;
(e)the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(f)the award has not yet become binding on the parties to the arbitration agreement or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made.

(6)Where an award to which paragraph (5)(d) applies contains decisions on matters submitted to arbitration and those decisions can be separated from decisions on matters not so submitted, that part of the award which contains decisions on matters so submitted may be enforced.
(7)In any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may refuse to enforce the award if it finds that:
(a)the subject matter of the difference between the parties to the award is not capable of settlement by arbitration under the laws in force in the State or Territory in which the court is sitting; or
(b)to enforce the award would be contrary to public policy.

(7A)To avoid doubt and without limiting paragraph (7)(b), the enforcement of a foreign award would be contrary to public policy if:
(a)the making of the award was induced or affected by fraud or corruption; or
(b)a breach of the rules of natural justice occurred in connection with the making of the award.

…

9 Evidence of awards and arbitration agreements
(1)In any proceedings in which a person seeks the enforcement of a foreign award by virtue of this Part, he or she shall produce to the court:
(a)the duly authenticated original award or a duly certified copy; and
(b)the original arbitration agreement under which the award purports to have been made or a duly certified copy.

…
(5)A document produced to a court in accordance with this section is, upon mere production, receivable by the court as prima facie evidence of the matters to which it relates.

…
Part V – General matters
39 Matters to which court must have regard
(1) This section applies where:
(a) a court is considering:
(i)exercising a power under section 8 to enforce a foreign award; or
(ii)exercising the power under section 8 to refuse to enforce a foreign award, including a refusal because the enforcement of the award would be contrary to public policy; or

…
(b)a court is interpreting this Act …; or
(c)a court is interpreting an agreement or award to which this Act applies; or

…

(2) The court … must, in doing so, have regard to:
(a) the objects of the Act; and
(b) the fact that:
(i)arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and
(ii)awards are intended to provide certainty and finality.

(b) The New York Convention

The following provisions of the Convention are relevant to this appeal:

ARTICLE I
…
2.The term ‘arbitral awards’ shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.

…
ARTICLE II
1.Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
2.The term ‘agreement in writing’ shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.
…
ARTICLE III

Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
ARTICLE IV
1.To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a)The duly authenticated original award or a duly certified copy thereof;
(b)The original agreement referred to in article II or a duly certified copy thereof.

…

ARTICLE V
1.Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a)The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b)The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c)The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d)The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e)The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

2.Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a)The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b)The recognition or enforcement of the award would be contrary to the public policy of that country.

Facts

Set out below is an outline of relevant facts based largely on the contemporaneous documentary evidence that was before the trial judge.

(a) Events preceding the arbitration

IMCS was incorporated on 4 May 1995.[31] At all relevant times, Stewart Charles Lewis was a director and the chief executive officer (‘CEO’) of IMCS, the registered office of which was located at Level 40, Riverside Centre, 123 Eagle Street, Brisbane, Australia.
[31]Prior to 22 January 2007, the company was known by different names. The changes in name are not material.

Altain was incorporated in Mongolia on 10 November 2006. At all relevant times, Bazar Radnaarbazar (known as ‘Mr Bazar’) was the CEO and chairman of Altain.

IMCM was incorporated in the British Virgin Islands on 27 June 2007. Mr Lewis was the managing director of IMCM until he resigned as a director on 4 September 2009.

In November 2007 and January 2008, Mr Lewis met representatives of Altain to discuss the Project.

On 29 January 2008, IMCS submitted to Altain a ‘Proposal to Complete a Mine Operations Development Plan for [the Project]’.

On approximately 10 February 2008, a draft of the OMA was provided to Altain.

On 10 February 2008, Altain provided to Mr Lewis by email Mr Bazar’s written comments on the draft OMA. The first comment was that the parties to the agreement were to be ‘Altain Khuder LLC’ and ‘IMC Mining Inc’. The seventh comment proposed wording for a dispute resolution clause which was in the terms set out at [68] above.

On 13 February 2008, Altain and IMCM executed the OMA pursuant to which Altain appointed IMCM as the operations manager for the Project. We have already referred to cl 16.1 of the OMA at [68] above. It will be recalled that cl 16.1 referred to the parties by their full names; that is, it referred to ‘Altain Khuder LLC’ and ‘IMC Mining Inc’. Other relevant provisions or features of the OMA were as follows:

(a)The parties to the OMA were described as ‘ALTAIN KHUDER LLC a company incorporated in Mongolia (Altain Khuder)’ and ‘IMC MINING INC, a company incorporated in the British Virgin Islands, of Level 40, Riverside Centre, 123 Eagle Street, Brisbane, Australia (IMC)’.
(b)Clause 1.2 defined ‘Operations Manager’ as ‘IMC Inc’ and stated that that company was ‘responsible for the operations management of the [Project]’.
(c)Clause 5 set out the obligations of ‘IMC’ under the OMA, including the appointment of an ‘IMC Operations Manager’ and an ‘IMC Director’ and the provision of services by IMC’s ‘existing Brisbane-based geologists and mining engineers’.
(d)Clause 13.2 stated:
IMC may Deal With any or all of its rights and obligations under and in connection with this agreement in favour of a Related Body Corporate (including, for example, IMC Mining Inc, a company incorporated in the British Virgin Islands) that executes a covenant in favour of Altain Khuder to observe and perform IMC’s obligations under this agreement to the extent of the Dealing.

In paras 12 and 24 of his opinion, Professor Tumenjargal explained how all co‑obligors can become parties to an arbitration agreement that is executed by only one of them. The evidence discussed at [290] above, which establishes on the balance of probabilities that IMCM did not enter into the OMA as the agent or representative of IMCS, also establishes that IMCM and IMCS were not co-obligors. IMCM alone contracted to provide services to Altain and was assisted in the provision of those services by IMCS, IMC Mongolia LLC and other companies. The absence of a direct contractual relationship between Altain and IMCS, whether under the OMA or otherwise, is confirmed by the fact that, when it terminated the OMA, Altain gave notice of termination to IMCM only. Altain did not give any notice of termination to IMCS, whether under the OMA or any other contract.

Paras 13 and 14 of Professor Tumenjargal’s opinion are not relevant to the present case.

It follows that none of the bases set out in Professor Tumenjargal’s opinion for IMCS becoming a party to the Arbitration Agreement was applicable. Even if we had been satisfied that one of those bases was applicable, according to Professor Tumenjargal’s opinion, the Tribunal could not lawfully treat IMCS as a party to the Arbitration Agreement without first giving it notice of any proposal to treat it as a party to the Arbitration Agreement and an opportunity to make submissions on the issue.

As stated at [204](n) above, Mr Lewis deposed that no notice was received by IMCS that Altain had made a claim against it; that Altain was intending to apply to the Tribunal for any order against it; or that the Tribunal was considering making any order against it. Mr Jones gave similar evidence.[171] Although Mr Batdorj asserted repeatedly that IMCS was given notice that the Tribunal was treating it as a party to the Arbitration Agreement and to the arbitration proceeding, these assertions are not supported by any of the contemporaneous documents. His assertions cannot be regarded as admissible evidence, let alone probative evidence.
[171]See above [205](e).

The trial judge held that IMCS had failed to establish that it was not involved in any relevantly significant way in the arbitration,[172] and that it was more probable than not that IMCS was well aware of the nature and progress of the arbitration proceeding and was able to present its case in the proceeding.[173] It appears that these findings were based on his Honour’s earlier finding that IMCS had been represented by Mr Jones and Mr Baatar at the Preliminary Hearing, and had agreed that the Tribunal had jurisdiction to hear the dispute.[174] For the reasons that we have already given, these findings were not open to his Honour.
[172]Substantive Decision, 107 [112]. See also above [117](m).
[173]Substantive Decision, 106 [110]. See also above [117](l).
[174]Substantive Decision, 92-3 [85]. See also above [117](g).

In the Award, the Tribunal observed that the Claim Document and notice of the arbitration hearing had been served on ‘the Defendant’, namely, IMCM.[175] Had the Tribunal given any notice to IMCS, it surely would have noted this in the Award. The absence of any reference to IMCS being served with any document strongly indicates that no document connected with the arbitration was served on it.
[175]See above [108](c) and (e).

We are satisfied on the balance of probabilities that the procedural requirements set out at paras 30, 32, 33 and 35 of Professor Tumenjargal’s opinion for making a non-signatory to an arbitration agreement a party to that agreement or the subject of an arbitral award were not complied with in relation to IMCS. Accordingly, under Mongolian law, IMCS did not become a party to the Arbitration Agreement and was not subject to the Tribunal’s jurisdiction. It follows that the Arbitration Agreement was not valid – in the sense of being legally effective as against IMCS – and that IMCS has discharged its legal onus to establish the ground set out in s 8(5)(b) of the Act for resisting enforcement of the Award against it.

Ground 4: Did the Tribunal find that IMCS was a party to the OMA?

Under cover of ground 4, IMCS submitted that the trial judge erred in finding as a matter of fact that the Tribunal had determined that it had jurisdiction to make an award against IMCS on the basis that IMCS had consented to the arbitration or that there was a common enterprise between IMCS and IMCM or that there was some other relationship of legal responsibility.

As discussed at [286] above, the judge did not, in terms, make any of the findings of fact set out at [298] above.

At [281] to [285] above, we concluded that the Tribunal did not make a finding that IMCS was a party to the Arbitration Agreement. To the extent that his Honour made a contrary finding, he fell into error because such a finding was not open on the evidence.

In any event, even if the Tribunal had found that IMCS was a party to the Arbitration Agreement or that there was some other basis under Mongolian law for it to assert jurisdiction over IMCS, this Court has considered this question for itself and has concluded that IMCS has discharged its onus to establish the ground set out in s 8(5)(b) of the Act for resisting enforcement of the Award against it.[176]
[176]See above [289] to [297].

Ground 7: Did IMCS consent to arbitrate?

We have already discussed this issue at [289] above.

Grounds 2, 10 and 12: Did IMCS receive proper notice?

Under cover of grounds 10 and 12, IMCS submitted that, in the light of the totality of the evidence and having regard to IMCS’s objections to the admissibility of Altain’s evidence, the trial judge erred in finding that it was not open to IMCS to rely on the defence or ground in s 8(5)(c) of the Act, namely, that it did not receive proper notice of the arbitration proceeding or was not given an opportunity to be heard in the arbitration proceeding.[177]
[177]Substantive Decision, 106 [110]. See also above at [117](l).

Under cover of ground 2, IMCS submitted that the trial judge erred in failing to determine IMCS’s objections to the admissibility of Mr Batdorj’s affidavits.

We have already considered these issues. At [293] to [297] above, we concluded that IMCS did not receive notice of any proposal that it be treated as a party to the Arbitration Agreement or the arbitration proceeding. At [208] to [230] above, we concluded that the judge should have ruled on IMCS’s objections.

It follows that IMCS has discharged its onus to establish the ground set out in s 8(5)(c) of the Act for resisting enforcement of the Award against it.

Ground 6: Nature of judicial verification of an award under Mongolian law

Under cover of ground 6, IMCS submitted that the judge erred in finding that the courts of Mongolia had satisfied themselves by proper inquiry that the requirements of the Mongolian Civil Code applicable to the Award had been made out because there was no expert evidence before this Court on Mongolian law relating to judicial verification of arbitral awards.

The relevant passages in the Substantive Decision are as follows:

The evidence was that the courts of Mongolia, a civil law jurisdiction, having been asked to verify the award would, in approaching that task, act not merely as a ‘rubber stamp’ for the evidence presented by one party, but satisfy themselves by proper inquiry that the requirements of the Mongolian civil code which are applicable have been made out. The Mongolian courts verified the award.
…

It was also submitted by the plaintiff that not only is the Award not able to be challenged in the Mongolian courts, but the Mongolian courts have in fact verified the Award and the findings of the Arbitral Tribunal. The first Batdorj affidavit exhibits an order from Judge L. Oyun, a judge of the Khan-Uul District Court (being a competent court of record in Mongolia) dated 23 November 2009 in which Judge L. Oyun verified the Award, concluding that it was a legitimate award under Mongolian law and is capable of being enforced in accordance with the New York Convention. It was also noted that Judge L. Oyun’s Order is expressed to be final.
Articles 40, 42 and 43 of the Mongolian Law on Arbitration provide for a verification process for arbitral awards. Under these provisions, the successful party who has an award made in its or their favour (the award creditor, in this case Altain Khuder, the plaintiff) may apply to the Mongolian courts to have the award verified if the other party or parties (the award debtor or debtors, in this case the defendants) do not pay the award sum. Under Articles 42.7 and 43 of the Mongolian Law on Arbitration, the court can choose to make the verification order or not. It will verify the order if there are ‘good reasons’ to do so. One of the matters which the court will consider is whether any of the matters set out in Article 40 would justify the court not making the verification order. It is significant in the present circumstances that the Article 40 provisions identified by Article 43 are those listed in Article 40.2, provisions which reflect in large part the provisions of paragraph 1 of Article V of the New York Convention; provisions which are, in turn, reflected in the provisions of sub-s 8(5) of the [Act].[178]

[178]Substantive Decision, 85-6 [75], 97 [91]-[92] (citations omitted).

It is clear from the above passages that the only specific finding that his Honour made about what the Mongolian courts did in relation to the Award, as distinct from what they would be expected to do in relation to awards generally, related to the fact and terms of the Mongolian District Court Order. His Honour accurately described that order. Accordingly, ground 6 must fail.

Grounds 8 and 11: Estoppel

As set out at [117] above, the trial judge made the following statements and findings in relation to estoppel:

(a)a ruling by a supervising court at the arbitral seat may raise an issue estoppel binding on the courts at the place of enforcement;[179]
(b)IMCS is estopped from denying the validity of the Arbitration Agreement and from denying that it is a party to the Arbitration Agreement as a result of the extent of its participation in the arbitration proceeding, and having regard to its failure to challenge the Award in the Mongolian courts (in the particular circumstances of its participation in the arbitration proceeding);[180]
(c)the evidence of use by IMCM and IMCS of a common logo and brand supported Altain’s suggestion that they acted as some form of common enterprise or operated under some other relationship of legal responsibility, or are estopped from asserting otherwise;[181] and
(d)on the basis of the evidence that went towards establishing that IMCM and IMCS were for all intents and purposes treated as the same entity, or are estopped from asserting otherwise, it was more probable than not that IMCS was well aware of the nature and progress of the arbitration proceeding and was well able to present its case in that proceeding. IMCS did not discharge the onus of proving that it did not receive proper notice or an opportunity to be heard and, accordingly, did not establish the defence in s 5(8)(c) of the Act.[182]

[179]Substantive Decision, 83 [70].

[180]Substantive Decision, 100 [98].

[181]Substantive Decision, 103-4 [105].

[182]Substantive Decision, 106 [110].

The precise nature of the estoppels that his Honour found and the factual and legal bases for them are not clear.

Altain’s submissions clarify how the matter is put. Altain’s written outline stated that the judge found two different estoppels, namely an issue estoppel and estoppel by conduct. The former was based on the Mongolian court having verified the award and IMCS not having challenged that finding. The latter was based on the extent of IMCS’s participation in the arbitration proceeding and not having challenged the Award. As to the failure to challenge the Award in the Mongolian courts, Altain referred to the observation of Lord Collins JSC in Dallah that the option of challenging an award in the supervising courts of the seat of arbitration and resisting enforcement of an award in the enforcing court ‘are not mutually exclusive, although in some cases a determination by the court of the seat may give rise to an issue estoppel or other preclusive effect in the court in which enforcement is sought’.[183] Altain also referred to the observation of Sir Anthony Mason in Hebei,[184] following a discussion of the roles of a supervising court and an enforcement court, that:

What I have said does not exclude the possibility that a party may be precluded by his failure to raise a point before the court of supervisory jurisdiction from raising that point before the court of enforcement. Failure to raise such a point may amount to an estoppel or a want of bona fides such as to justify the court of enforcement in enforcing an award … Obviously an injustice may arise if an award remains on foot but cannot be enforced on a ground which, if taken, would have resulted in the award being set aside.[185]

[183]Dallah [2011] 1 AC 763, 835 [98]. Altain also referred to Aloe Vera [2006] SGHC 78, 197-8 [51]-[52].

[184][1999] 2 HKC 205.

[185]Hebei [1999] 2 HKC 205, 230.

In Altain’s oral submissions it was said that there were three estoppels, an estoppel that arose as a matter of fact, estoppel of record or issue estoppel. As to the factual estoppel or estoppel by conduct, the following was submitted. Factual estoppel was based on IMCS’s conduct in participating in the arbitration proceeding in the capacity of a party. Having so participated and without complaining about the jurisdiction of the Tribunal, IMCS allowed the Tribunal to assume jurisdiction over it. Altain conceded that in such circumstances IMCS would have become a party to the arbitration and accordingly there was no room for an estoppel.

Estoppel by record was said to be constituted by the judge’s finding that at the Preliminary Hearing on 24 July 2009 IMCS submitted to the jurisdiction of the Tribunal and signed the record of that hearing. When queried as to whether these matters were merely factors relevant to the alleged estoppel by conduct, Altain submitted that they could be regarded as distinct in that at the very latest IMCS became a party to the arbitration at the Preliminary Hearing.

The issue estoppel was that identified above.

There is no substance in these submissions.

In so far as the alleged estoppels are based on his Honour’s finding of fact that IMCS participated in the arbitration proceeding, was represented at the Preliminary Hearing and agreed to the Tribunal’s jurisdiction, we have already concluded that these findings were not open on the evidence.[186] In our opinion, the evidence does not support any other factual basis for the alleged estoppels.
[186]See above [239].

In so far as the alleged estoppels were said to arise from IMCS’s failure to apply to the Mongolian courts to set aside the Award, they are based on an error of law.

The question whether an estoppel may arise when a person seeking to resist enforcement of a foreign arbitral award has not sought to challenge the award in the courts of the seat of arbitration was considered in Dallah. Lord Mance JSC stated:

In its written case Dallah also argued that the first partial award gave rise, under English law, to an issue estoppel on the issue of jurisdiction, having regard to the [award debtor’s] deliberate decision not to institute proceedings in France to challenge the tribunal’s jurisdiction to make any of its awards. This was abandoned as a separate point by Miss Heilbron in her oral submissions before the Supreme Court, under reference to the [award debtor’s] recent application to set aside the tribunal’s awards in France. But, in my judgment, the argument based on issue estoppel was always doomed to fail. A person who denies being party to any relevant arbitration agreement has no obligation to participate in the arbitration or to take any steps in the country of the seat of what he maintains to be an invalid arbitration leading to an invalid award against him. The party initiating the arbitration must try to enforce the award where it can. Only then and there is it incumbent on the defendant denying the existence of any valid award to resist enforcement.[187]

[187]Dallah [2011] 1 AC 763, 810 [23]. See also at 834-5 [98] (Lord Collins JSC).

With respect, we agree with Lord Mance JSC’s observations.

In the present case, IMCS, which denied that it was a party to the Arbitration Agreement, was not obliged to participate in the arbitration proceeding or to apply to the Mongolian courts to set aside the Award. In the circumstances of this case, IMCS’s failure to take these steps cannot give rise to an estoppel precluding it from denying that it was a party to the Arbitration Agreement or from challenging the validity of that agreement in this Court.

Grounds 8 and 11 are made out.

Grounds 16 and 17: Indemnity costs orders

At [72] and [73] above, we referred to the First and Second Costs Decisions. Grounds 16 and 17 attack the costs orders on the basis that no special circumstances existed that could warrant ordering costs on an indemnity basis. The grounds do not otherwise attack the orders that IMCS pay costs. The consequence of that is that if IMCS failed on its preceding grounds of appeal it submitted to orders for costs but on a party and party basis. As it happens, by reason of our above conclusions, IMCS succeeds and both costs orders will be set aside with consequential orders including as to costs. In the circumstances it is not strictly necessary to deal with grounds 16 and 17. However, lest we be wrong in our conclusions, and because we heard full submissions, it is appropriate that we consider the matter.

In the First Costs Decision, the judge referred to the usual rule that is applied by Australian courts, namely, that costs are ordered to be paid on a party and party basis unless there are special circumstances in a particular case that warrant the exercise of the court’s discretion to order costs on a different basis.[188]
[188]Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 232-4.

Special circumstances may be found where, for instance, the unsuccessful party has made serious unfounded allegations, pursued the proceeding for an ulterior purpose, wasted the Court’s time, committed a contempt of court or engaged in some other improper conduct.[189] But in each case it is a question to be determined in the light of the particular facts and circumstances. It should also be noted that r 63.28 of the Rules provides that costs in a proceeding which are to be taxed shall be taxed on a party and party basis, a solicitor and client basis, an indemnity basis or such other basis as the Court may direct. Any basis of assessment under which a party may recover costs greater than party and party is regarded as a special order requiring the existence of circumstances that warrant its making. An order for costs as between solicitor and client is just as much an order requiring special circumstances for an exercise of judicial discretion as is an order for costs on an indemnity basis, the only difference between those bases being in relation to the person who bears the onus of establishing reasonableness or unreasonableness as the case may be; see r 63.30 and r 63.30.1.
[189]Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (14 June 2001) [7]; Talacko v Talacko [2009] VSC 579 (11 December 2009) [45]-[52].

Before his Honour, IMCS submitted that there were no special circumstances in the present case that warranted an award of indemnity costs. Altain submitted that the fact that IMCS was unsuccessful in resisting the enforcement of a foreign arbitral award was sufficient to establish special circumstances.

His Honour referred to the decision of Reyes J of the Hong Kong Court of First Instance in A v R[190] and to subsequent decisions in that jurisdiction, including the decisions of Saunders J in Wing Hong Construction Ltd v Tin Wo Engineering Co Ltd[191] and Taigo Ltd v China Master Shipping Ltd,[192] which applied A v R. In A v R, Reyes J said:

Parties should comply with arbitration awards. A person who obtains an award in his favour pursuant to an arbitration agreement should be entitled to expect that the court will enforce the award as a matter of course.
Applications by a party to appeal against or set aside an award or for an order refusing enforcement should be exceptional events. Where a party unsuccessfully makes such application, he should in principle expect to have to pay costs on a higher basis. This is because a party seeking to enforce an award should not have had to contend with such type of challenge.
Further, given the recent introduction of Civil Justice Reform (CJR), the court ought not normally to be troubled by such type of application. A party unmeritoriously seeking to challenge an award would not be complying with its obligation to the court under O.1A r.3 to further the underlying objectives of CJR, in particular the duty to assist the court in the just, cost-effective and efficient resolution of a dispute.
If the losing party is only made to pay costs on a conventional party-and-party basis, the winning party would in effect be subsidising the losing party’s abortive attempt to frustrate enforcement of a valid award. The winning party would only be able to recover about two-thirds of its costs of the challenge and would be out of pocket as to one-third. This is despite the winning party already having successfully gone through an arbitration and obtained an award in its favour. The losing party, in contrast, would not be bearing the full consequences of its abortive application.
Such a state of affairs would only encourage the bringing of unmeritorious challenges to an award. It would turn what should be an exceptional and high-risk strategy into something which was potentially ‘worth a go’. That cannot be conducive to CJR and its underlying objectives.
Accordingly, in the absence of special circumstances, when an award is unsuccessfully challenged, the Court will henceforth normally consider awarding costs against a losing party on an indemnity basis.[193]

[190][2009] 3 HKLRD 389.

[191](Unreported, Hong Kong Court of First Instance, Saunders J, 3 June 2010) [8]-[14].

[192][2010] HKCFI 530 (17 June 2010) [13]-[16].

[193][2009] HKLRD 389, 400-1 [67]-[72].

The judge concluded that it appeared ‘to be the settled principle in Hong Kong that the Court of First Instance will generally award indemnity costs against an unsuccessful party in an application to challenge or resist enforcement of an arbitral award.’[194] The judge then noted that Altain submitted that the Hong Kong approach should be applied because (a) IMCS had unsuccessfully sought to set aside the enforcement orders, and (b) the Civil Procedure Act 2010 (Vic) strengthened the analogy with the Hong Kong approach. What was analogous was the overarching purpose in s 7 of the Civil Procedure Act ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’ and the overarching obligation of a party directed to achieving that purpose.
[194]First Costs Decision, [14].

Furthermore, the judge noted, Altain submitted that IMCS knew, or should have known, that its prospects of success were limited by the narrow grounds in the Act and the onerous burden to establish them. As to this, the judge referred to IMCS’s repeated but failed submission that Altain lacked candour in the ex parte hearing, to IMCS’s threshold issue being un-supportable, and that IMCS found itself in a predicament ‘as a result of its own decisions as to its participation, or otherwise, in [the arbitration] proceedings.’[195]
[195]First Costs Decision, [18].

The judge then noted that IMCS submitted that the Hong Kong approach should not be followed, that it would ‘turn on its head’ the settled approach to the award of costs in Victoria, and indeed Australia, on the basis of the statement of principles by Harper J in Ugly Tribe Pty Ltd v Sikola.[196]
[196][2001] VSC 189 (14 June 2001).

His Honour then stated:

It is made very clear by Harper J and the other authorities to which reference was made in Ugly Tribe Co Pty Ltd v Sikola that the categories of special circumstances are not closed. In my view, the considerations which moved Reyes J and Saunders J in the Hong Kong cases, to which reference has been made, apply with equal force in Victoria, both from an arbitration perspective and also from the perspective of legislation such as that contained in the Civil Procedure Act and in the Hong Kong CJR.
It should, however, be stressed that the finding of a category of special circumstances in this context does not mean that it would follow, inexorably, that a special costs order would be made. The award of costs is discretionary and the exercise of that discretion depends on the particular circumstances. Nevertheless in an arbitration context that discretion should be exercised against the backdrop of the considerations discussed.[197]

[197]First Costs Decision, [20]-[21] (citation omitted).

On the basis of the above considerations, his Honour ordered IMCS to pay Altain’s costs on an indemnity basis.

The judge’s order of 4 February 2011 by which IMCS was ordered to pay, on an indemnity basis, Altain’s costs of IMCS’s unsuccessful application for an extension of the stay of the ex parte order, was based on similar considerations. At the hearing of IMCS’s application for an extension of the stay, his Honour said:

I think the costs order should be made on the same basis as the costs orders on 3 February in favour of the plaintiff for the reasons indicated in that judgment and also having regard to my reasons today for rejecting the stay.[198]

[198]Transcript of Proceedings, Altain Khuder LLC v IMC Mining Inc (Supreme Court of Victoria, Croft J, 4 February 2011) 57.

His Honour’s ruling for rejecting the stay is not included in the transcript. His reasons, however, are apparent from the discussion preceding the ruling. In essence, his Honour stated the following: that he granted an extension of the stay of the ex parte order until 4.00pm on 4 February 2011 on the expectation that IMCS would file with the Court of Appeal an application for a stay by 28 January 2011 and that the Court of Appeal would hear the application on 4 February 2011; and that, in filing its application for leave to appeal and a stay on 3 February 2011, IMCS had failed to act urgently and had failed to ensure that the Court of Appeal was placed in a position to be able to hear the stay application on 4 February 2011.

With great respect to his Honour, we can find nothing in the Act or in the nature of the proceedings that are available under the Act which of itself warrants costs being awarded against an unsuccessful award debtor on a basis different from that on which they would be awarded against unsuccessful parties to other civil proceedings.[199] Accordingly, his Honour acted on a wrong principle[200] in embracing the approach that has been adopted by the Hong Kong Court of First Instance. We note also that the Civil Procedure Act 2010 was not in force when his Honour heard this proceeding. Even if it were in force, it would not have warranted the order he made.
[199]The matters set out in s 8(10) of the Act, which are preconditions to the making of an order for costs in certain circumstances, are consistent with the usual rule set out at [324] above.
[200]House v The King (1936) 55 CLR 499, 505.

In proceedings under the Act, as in other civil proceedings, costs will ordinarily be awarded against the unsuccessful party on a party and party basis unless the successful party can establish special circumstances. The principles for determining the existence of special circumstances are well established. Special circumstances, if they exist, are found in the facts of the case at hand, and the exercise of the judicial discretion is not otherwise conditioned on whether those facts are comprehended by a category of case or cases in which a special order has been made. The fact that an award debtor fails to establish a ground for resisting enforcement of a foreign arbitral award cannot, of itself, constitute special circumstances. Nor can a finding that the award debtor’s case was ‘unmeritorious’ if all that is meant by that expression is that the award debtor failed to persuade the Court to accept his or her evidence and submissions.[201]
[201]Parsons, 508 F 2d 969, 978 (2^nd Cir, 1974).

In the present case, had his Honour been correct in refusing to set aside the ex parte order for the reasons given by him, there would have been nothing special about the circumstances of the proceeding – including the conduct of IMCS and its submissions – that would have warranted the making of an indemnity costs order.

We are also of the view that there was nothing special about the circumstances in which his Honour decided to refuse to extend the stay of the ex parte order that warranted the making of the indemnity costs order of 4 February 2011.

On 3 February 2011, IMCS filed with the Court of Appeal a notice of appeal and applications for leave to appeal (if leave be required) from the orders of 28 January 2011, and the orders of 3 February 2011 and a stay of those orders, with supporting documentation. That was within four business days of the publication of the Substantive Decision. The Court of Appeal Registry marked IMCS’s summonses as to be heard on ‘a date to be fixed’. It was, of course, for the Court of Appeal to determine in the light of apparent urgency when the applications would be heard. Neither IMCS nor Altain, nor the judge, could control that. In our opinion IMCS acted reasonably in approaching his Honour for an extension of the stay when it was not able to secure a hearing before the Court of Appeal prior to the expiry of the stay at 4 pm on 4 February 2011.

Furthermore, the transcript of the hearing discloses that it was anticipated that the Court of Appeal would hear the matter on 11 February 2011, a mere seven days later. Not only is that what happened but, on 11 February the Court of Appeal stayed execution under the judgment of 28 January 2011 and the costs order of 3 February 2011 and on 2 March 2011 the stay was extended to include the order made on 4 February 2011.

In our opinion, attending only to relevant considerations, his Honour ought to have extended the stay for a further seven days as IMCS sought.

In any event, as IMCS has succeeded on the appeal, all of the costs orders made below will be set aside.

Remaining grounds of appeal

As mentioned at [197] above, IMCS did not press ground 1, namely, that Altain had not discharged its obligation of candour during the ex parte hearing on 20 August 2010.

Although grounds 13, 14 and 15 were not abandoned, they were not listed in IMCS’s ‘Key Issues’ document. Accordingly, they can be dealt with very briefly. Those grounds alleged that, by reason of the errors set out in grounds 7, 8, 10 and 11, the trial judge erred in finding that IMCS had not discharged its onus of establishing:

(a)under s 8(5)(d) of the Act, that the Award deals with a difference not contemplated by, or falling within, the submission to arbitration, or contained a decision on a matter beyond the scope of the submission to arbitration (ground 13);
(b)under s 8(5)(e) of the Act, that the composition of the Tribunal or the arbitral procedure was not in accordance with the parties’ agreement or the law of Mongolia (ground 14); and
(c)under s 8(7)(b) of the Act, that enforcing the Award would be contrary to public policy (ground 15).

As we have concluded that IMCS was not a party to the Arbitration Agreement and did not submit to the arbitration, grounds 13 and 14 are not engaged.

In relation to ground 15, s 8(7A)(b) makes it clear that the enforcement of a foreign award would be contrary to public policy if a breach of the rules of natural justice occurred in connection with the making of the award. We have already concluded that the Tribunal made the Award without giving prior notice to IMCS that it proposed to make any order against it.[202] In these circumstances, the Tribunal breached the rules of natural justice and, accordingly, enforcement of the Award in Australia would be contrary to public policy.[203] Ground 15 is made out.
[202]See above [293]-[297].
[203]Para 2(b) of art V of the Convention makes it clear that the public policy that is relevant under s 8(7)(b) is the public policy of the country in which an award is sought to be enforced. In the present case, the public policy of Australia is applicable.

Conclusion and proposed orders

For the above reasons, we would allow the appeal and set aside all the orders made below in so far as they relate to IMCS.

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In The King v. Berchet a case decided in 1688, it was said to be a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent.
(footnotes omitted)

[2011] VSCA 248

22 August 2011