Michael Wilson & Partners Limited v Nicholls

[2011] HCATrans 141

[2011] HCATrans 141

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S67 of 2011

B e t w e e n -

MICHAEL WILSON & PARTNERS LIMITED

Appellant

and

ROBERT COLIN NICHOLLS

First Respondent

DAVID ROSS SLATER

Second Respondent

TEMUJIN SERVICES LIMITED

Third Respondent

TEMUJIN INTERNATIONAL LIMITED

Fourth Respondent

TEMUJIN INTERNATIONAL FZE

Fifth Respondent

GUMMOW ACJ
HAYNE J
HEYDON J
CRENNAN J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 31 MAY 2011, AT 10.18 AM

Copyright in the High Court of Australia

____________________

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friends, MR M. WALTON, SC and MR D.F.C. THOMAS, for the appellant.  (instructed by Clayton Utz Lawyers)

MR G.C. LINDSAY, SC:   May it please the Court, I appear with MS G.W. McGRATH, SC, and MR A.D.B. FOX, for the respondent.  (instructed by Henry Davis York).

GUMMOW ACJ:   Yes, Mr Walker.  You have a summons to dispose of first, do you not?

MR WALKER:   May I dispose of it by telling the Court that we do not wish to proceed on it.

GUMMOW ACJ:   This is the summons filed on 25 May?

MR WALKER:   That is correct.

GUMMOW ACJ:   So we should simply order the summons be dismissed, I suppose?

MR WALKER:   Yes, your Honour.

GUMMOW ACJ:   What do we do about costs?  I would think the respondent should have their costs of the summons.

MR WALKER:   There is nothing I can say against that, your Honour.

GUMMOW ACJ:   All right.  So the summons is dismissed with costs.

MR WALKER:   May it please the Court.

GUMMOW ACJ:   To make it quite clear, we have a volume of the appeal papers headed “Confidential Material”.

MR WALKER:   Yes.

GUMMOW ACJ:   Insofar as there is any order specially classifying that material as distinct from the ordinary material in the appeal book, such an order is discharged.

MR WALKER:   May it please the Court.

GUMMOW ACJ:   Yes, Mr Walker.

MR WALKER:   May I express my regret that the Court has been concerned with an application.  There are references in the written submission and there may be, simply for identification purposes, reference to the contents of the confidential volume.  It is going to be difficult to avoid that because that is what it is called.

GUMMOW ACJ:   The previously confidential volume, I think.

MR WALKER:   It is clear, however, that it does not mean what it says and I am sorry about all of that.  Your Honours, this case concerns this case and another case as the letter from the Court with which I wish to grapple immediately makes plain, with respect.  In that other case, which I will call the London arbitration, the parties were the consequence of an arbitration agreement and of arbitral procedures which in the absence of fresh and special arbitration agreements would confine the parties to the London arbitration to Mr Emmott, the principal wrongdoer so far as my client was concerned, and my client.  My client is the moving party claiming relief, which as the Court’s letter makes clear, included importantly now an account. 

In the London arbitration eventually – and I stress eventually, that is, after the outcome in the New South Wales proceedings – there were conclusions amongst others adverse to Mr Emmott in favour of my client such as one sees in confidential page 177, paragraph 8 ‑ ‑ ‑

GUMMOW ACJ:   Do we not first have to begin with the – you used the expression, “the parties”.

MR WALKER:   Yes.

GUMMOW ACJ:   That obscures something, does it not?

MR WALKER:   I do need – if I can simply go to ‑ ‑ ‑

GUMMOW ACJ:   It obscures the genesis of the United Kingdom activity in a contract between parties to which Mr Lindsay’s clients are strangers.

MR WALKER:   Were not parties, quite.

GUMMOW ACJ:   Yes.

MR WALKER:   It is not intended to obscure it, indeed I want to try and highlight that.  A contract which formed a relationship which by milestone achievements produced the effect of partnership, as the arbitrators held, included procedures for private arbitration, private and exclusive of obviously strangers to that contract and strangers to the arbitration agreement.  It concluded in a finding which - several findings - some of which are consistent with the New South Wales proceedings, some of which are not ‑ ‑ ‑

GUMMOW ACJ:   But a root problem and systemic problem in a way is that a lot of modern commercial litigation, of which this is an example, may have its genesis in the contract between A and B but in the nature of things there turns out to be litigation involving third parties who are strangers to the contract.

MR WALKER:  Yes.

GUMMOW ACJ:   To fully resolve the controversy, the necessary and proper parties are the lot of them. 

MR WALKER:   Yes.

GUMMOW ACJ:   And then one controversy really, one matter, but that is bifurcated by reason of the arbitration.

MR WALKER:  Indeed.  It is bifurcated in this case but it is easy, particularly when one contemplates just the jurisdictions invoked in this case, it is easy to see it may be broken into many more than two.

GUMMOW ACJ:   There is the added complication here of the international convention as well.

MR WALKER:  Yes.  Now, the conclusion, which was in favour of us, consistent between London and Sydney is, as I say, a finding – not the only finding of wrongdoing but a clear one – against Mr Emmott that he had been guilty as a fiduciary of deliberate, serious and dishonest breaches of his fiduciary obligations.  In short – and we think for all practical purposes in this argument – an accurate summation of what is consistently found, both in the London arbitration and in the antecedent Sydney findings at trial, was that Mr Emmott, in breach of obligations both contractual and of character fiduciary, assisted those who also assisted him - the respondents, of course, in this Court, relevantly the natural persons Messrs Nicholls and Slater - in setting up and trading in and diverting opportunities to the business that I will call Temujin.  Though there were obscure ‑ ‑ ‑

GUMMOW ACJ:   There was some debate, was there not, as to who controlled Temujin?

MR WALKER:   Yes, I am bound to say – and though there were obscurities noted in both the London arbitration and the Sydney court concerning who it was who had equity and the control of Temujin the contributions in kind of professional services and the diversion commercially of lucrative opportunities is clear on the behalf of all three men in favour of Temujin and there is no dispute possible surely at this stage that Mr Emmott owed obligations that he very seriously breached.  So far so good, those are the consistencies.  There emerge important differences and I cannot avoid the expression, I think I have to call them inconsistencies. 

If I can now directly grapple with the letter from the Court so as to frame what I am about to address I hope so as to provide a proper answer to the matters raised by the Court’s letter.  Proposition 1 is correct, although not complete, that is, yes, there was an account sought from a defaulting fiduciary.  There was a range of relief sought, some of which would have required, in due course, an election and the arbitrators, in passages to which I will be taking your Honours, make clear that they understand the basic, fundamental, alternative character in particular of the claim for damages or compensation, on the one hand, and the claim for an accounting on the other. 

I should say something about the expression “account”.  It is used in at least two different senses in the material of claim and decision before this Court, that is, the claim in London, the claim in New South Wales, the decision in London, the decision in New South Wales.  It is used in the sense of an account of profits by which an election is made against damages or compensation on the other hand to take that which the claimant may never have been able to earn themselves but which the defaulting fiduciary must disgorge.  It requires, of course, confidence in the demonstration that there is true profit.

On the other hand, there is the accounting which includes claims and cross‑claims and is a once‑and‑for‑all exercise of a kind that it can be seen was plainly intended by the arbitrators in London to ensue and which we accept, in answer to the second sentence of proposition 1 in the Court’s letter, necessarily meant that we by seeking an account in such an account had to submit to sums flowing in the other direction, whether by just allowances or otherwise.

CRENNAN J:   There was always the possibility of set‑off, was there not, because ‑ ‑ ‑

MR WALKER:   Expressly so.

CRENNAN J:   ‑ ‑ ‑ Mr Emmott had a one‑third interest in the plaintiff company.

MR WALKER:   Quite.  I will be taking your Honours to the arbitrator’s forms of orders, but the answer is that both of those matters are explicit in the orders and in a familiar fashion.  That second sense of accounting is more general and informs and is informed by the arbitrator’s decision that in truth my client, MWP, was a vehicle for what I will call partnership relations. 

Without needing to bother about language such as “deemed” or “quasi partnership”, the directions to do justice by the accounting order by the London arbitrators expressly requires, as their reasons further elaborate, a treatment between the parties as if they were partners with a dissolution at a date which the arbitrators explain as designed to do practical justice so as to ensure what they call themselves compensation, probably, as they later clarify, calculated to be, if anything, liberal in favour of my client.  I will come to those details later.  So proposition 1 is, yes, correct with the further explanation I have given.

Proposition 2 is, with respect, also correct, but in similar fashion not complete, that is in the same way as in London there had been the array of relief sought, some of which were alternative and would require, in due course, an election, so in Sydney there was an array of relief sought including, again, compensation or damages on the one side and on the other side an account of profits which plainly would be alternative.  If they both could not be had there would be a choice made and there was a choice made in Sydney for compensation.

GUMMOW ACJ:   Looking at proposition 2, knowing assistance may be described, perhaps, as derivative of a primary obligation of the defaulting fiduciary.  Presumably there cannot be double recovery?

MR WALKER:   No.  The only way there could be recovery in excess of what I will call restitution of loss would be ‑ ‑ ‑

GUMMOW ACJ:   These are difficult questions, yes.

MR WALKER:   Yes, and I do not suggest there are neat answers.  Can I raise and put some propositions in answer to Justice Gummow as follows?  First, whether you use an expression like “derivative” for the knowing assistance claim or “subsidiary” or “dependent” or “consequential”, the idea is the same that it is a liability which comes about because another person, not the party sued for knowing assistance, because another person with a particular character has themselves had imposed a liability.

To be more concrete, obviously in this case there is the defaulting fiduciary, Mr Emmott, and his two knowing assistants.  The two knowing assistants, Nicholls and Slater, are made liable because of three people’s conduct.  All three people’s conduct is necessary.  There must be the conduct of the defaulting fiduciary, Mr Emmott, and there must be their own conduct with requisite states of mind – they are called knowing assistants - to make them liable.  Without their own conduct they will not be liable, notwithstanding Mr Emmott is and if Mr Emmott is not liable - is not liable as a defaulting fiduciary then it makes no sense.  There is no substrate or foundation for a claim against them of knowing assistance.

GUMMOW ACJ:   Could the measure of equitable compensation differ?

MR WALKER:   Not of equitable compensation. 

GUMMOW ACJ:   The causation factors might not be different?

HAYNE J:   Surely one could be less than the other?  The knowing assistants could be liable for less than the principal.

MR WALKER:   Yes, what I am thinking of is that there may be a range of conduct – I should not say a range.  There may be a whole set of conduct by the defaulting fiduciary and for ease of reference may I suggest that there are five episodes and it lends itself to a case like the following because there are different clients or customers who are said to have been seduced or whatever, or opportunities lost.

It could fall out that the knowing assistants were liable only for, say, the three of five because in two of five the principal – as it is convenient, if inconvenient for my argument – the principal fiduciary was able to carry out two of the depredations utterly unassisted.  So in such a case it would appear on the face of things that the person in Mr Emmott’s position would end up having to pay more compensation, if compensation be assessed, than the person in Nicholls’ and Slater’s position if they were ordered to pay compensation.  That is because the Nicholls figure would pay for the five losses and the Nicholls and Slater people would pay only for the three.

That does not mean, in fact, that there is a difference of measure between them, it simply means that the knowing assistance is only for some but not all of the defaulting fiduciary’s wrongdoings.  For the same wrongdoing, that is, for the wrongdoing that is knowingly assisted, in principle, in our submission, the measure of compensation must be the same; indeed, in principle that surely is the whole point of a knowing assistant’s liability, that you are liable because knowing of the fiduciary nature and the fiduciary breach you assisted in the fiduciary, diverting the opportunity, say, away from the plaintiff.

HAYNE J:   Conversely, could the knowing assistant in any circumstance be liable for more than the defaulter?

MR WALKER:   Well, now, when the remedy against both is compensation the answer must be no, that is, it ought to be exactly commensurate, subject to different times of recovery – I think this is an immaterial point – so that interest be it either out of court or in court might be different, leave that aside – but a thought that does occur arises from this alternative set of remedies that might be gained, might be sought, and if there was an election for an account of profits in one case against one of say the principal but for compensation against the knowing assistants.

HAYNE J:   That presupposes sequential action.

MR WALKER:   No, it does, and sequence is very important.

HAYNE J:   Yes, exactly so, and thus the premise for this set of answers is that not only there is but commonly could be sequential action rather than a solution which is, if you like, imposed on the problem through the mechanism of necessary and proper parties with singular action.

MR WALKER:   Yes, and I want to elaborate my answer to Justice Hayne’s last questions.

GUMMOW ACJ:   Likewise questions of set‑off may be different too.

MR WALKER:   Yes.

GUMMOW ACJ:   Hence the great need for one resolution of one overall controversy.

MR WALKER:   The great desirability.  Calling it a need may be very frustrating in international – trans‑national questions.  Could I come back to ‑ ‑ ‑

GUMMOW ACJ:   In a way your client brings it on himself by pursuing his arbitral rights.

MR WALKER:   It needs to be answered in relation to that.  There is a contractual promise to arbitrate.

HAYNE J:   Yes, contracted away is the other tendentious way to put it to you, Mr Walker.

MR WALKER:   Yes, it is.  That is true.  Could I go back to answering questions?

HAYNE J:   But what is the answer?  At some point in your argument, you are going to have to squarely face the fact of whether your client, because your client made a voluntary arrangement about arbitration achieves a result that differs from the result that would obtain absent arbitration – a result that would obtain absent arbitration largely, maybe not exclusively through, as I said, the mechanism of necessary and proper parties.

MR WALKER:   Quite.  Just to develop that last point a bit further before trying to answer the question, one recognises in long‑arm jurisdiction provisions, at least in this country and in England and Wales, that there have long been provisions which will extend the jurisdiction precisely for the beneficial purpose that Justices Gummow and Hayne have raised with me to ensure that ‑ ‑ ‑

GUMMOW ACJ:   And joined with notions of principles of lis alibi pendens, too.

MR WALKER:  Yes.

GUMMOW ACJ:   Where there was partial and concurrent court proceedings and those principles enable the whole thing to be brought under the one umbrella.

MR WALKER:   Yes.  So I accept that the arbitration contract with the promise it represented to, on one view, enshrine fragmentation of a larger dispute between multi parties, is something that I have to confront.  There is no straightforward answer to it suggested by any of the authorities.  This case, on our research, is the first time it has been confronted particularly in as confronting an appearance as abuse of process and that is why temporal sequence – the sequence of events in London and in Sydney, we submit, is very important. 

But I stress I accept, as a matter of argument, that the sequence of events argument that I am going to elaborate – I hope fairly soon – does not of itself answer the concern that Justice Hayne has raised with me.  The sequence of events does not dissolve the fact that before any of this dispute we had already, by the contract for arbitration, which would exclude other parties and which gave rise as a foundation to a serious threat on the part of Mr Emmott to seek an anti-suit injunction with respect to any attempt to join him in New South Wales, we accept that that was potential, even before this dispute started.  That may turn out to be immaterial.  There is no authority that says so, but this is an issue that this Court has seized of in relation to the abuse of process, we think.

Can I come back to the possibility of different outcomes as between the knowing assistants, on the one hand, and the defaulting fiduciary on the other?  The possibility, at least in theory, ought to be considered, as I say, of an election being made differently as presumably it could be made differently if they were all being dealt with in the same proceeding as between different defendants.

It would appear to be a rather odd way to exercise the election, that is whether you are confident there are profits to be disgorged, whether you are nervous about being able to show that you could have earned them in any event, that would all, of course, add up to an account of profits choice, or, whether you are persuaded that the profits earned by the defendants or by the defaulting fiduciary with knowing assistants, are profits which, but for the wrong would have been in your pocket, hence making compensation attractive, those are matters that one would have thought will always sensibly, out of self‑interest, produce the same choice as between the different defendants.

But at least the possibility exists and it might arise where the proceedings, as in this case, have been different – separate proceedings with separate evidence.  I suppose the theoretical possibility presents itself with different elections and with different elections obviously different outcomes might follow because the measures are quite different.

GUMMOW ACJ:   I think you have been dealing with 1 and 2.  Have you got to 3 yet?

MR WALKER:   No, I have not.  May I, however, before leaving 2 note this?  The prime inconsistency that I earlier referred to between London and Sydney is that in London - and one picks this up, in particular, in the arbitrator’s section 8 starting at 177, but for the present purposes going immediately to 183 – it is confidential 183 - at the foot of that page, paragraph 8.22.  I am going to come back to this passage later in relation to relief, but you see that first and second sentences of 8.22, which is a finding made after findings were made in Sydney. 

I am going to come to the sequence of events in a little moment, but it is important to note that that is a finding of fact made on the evidence before the arbitrators to the effect that what they call clients like Sokol - and for all practical purposes one can treat that as a very important emblematic client, most lucrative relevantly.  That is the one associated with Mr Sinclair, to whom you may have seen references, and there was striking evidence given and accepted in London, I am bound to say also to similar effect in Sydney in a passage to which I will come later by Justice Einstein, to the effect that yes, Mr Sinclair would follow the – Mr Emmott, who was his original contact, and Mr Nicholls, who had become subsidiary, but also attractive to him, and not Mr Wilson, and some unkind things said.

In that very same paragraph I should draw to attention at this point that in the last sentence, that is at about lines 10 and following on page 184, there is one of the passages in the arbitrator’s reasons which show that they were well aware of the existence and contents of the New South Wales judgment which had then already been made final.  Another reference which makes it even clearer that they had that judgment before them and understood its contents is to be found at the preceding page, 164 in paragraph 6.2, at about line 45.

GUMMOW ACJ:   Sorry, 164?

MR WALKER:   Page 164, paragraph 6.2 there is a Jones v Dunkel matter being treated by the arbitrators and one sees a reference to the findings of the Supreme Court in the last sentence about line 45.  In the last sentence of 8.22 on page 184 there is, again, reference to the outcome in the Australian court, as the arbitrators call it, which is part of the reasoning, or at least a comment in support of their discretionary shaping of relief where plainly the arbitrators are not considering the outcome in New South Wales as in some way destructive of or doing violence to the adjustment of rights and obligations that they try to achieve by the accounts they later devise.

We draw to attention that the liability found against Temujin, which is also, of course, the liability against Nicholls and Slater, that the arbitrators there refer to is being called in aid by the arbitrators because if Mr Emmott has equity in Temujin, and they are not finding that and that remained obscure, then he will also, as it were, have something taken out of his skin in favour of my client by that means, and the clear suggestion, and it is not contradicted anywhere else in these reasons, is that the arbitrators saw nothing wrong with that. 

I am going to come later to some reasoning of theirs in so‑called clarification which made it plain that they deliberately, as it were, in the absence of anything approaching exactitude tried to do some practical justice with an understanding that some aspects of what they were instituting would be biased in favour of my client and one could almost read between the lines the comment “and none the worse for that given Mr Emmott’s delinquencies”.  

It means then, in further answer to what is proposition 2 in the Court’s letter, yes, we did seek the defaulting – for those who knowingly assisted the defaulting fiduciary to pay compensation and that compensation was a fact known to the arbitrators when they decreed their account in a way that they plainly did not consider as cutting across what they were doing.  Indeed, if anything, seemed to fit as some kind of complementary part of a scheme for the doing of practical justice.

We then come to question 3 in the Court’s letter.  In the New South Wales proceedings, of course there is nothing in the nature of a res judicata constituted by the result of the accounts.  There are a number of obvious reasons for that, and forgive me for spelling out the obvious.  The first is that there is no call for the past participle because the accounts have not yet been struck.  There have been orders made for them.  They have been suspended pending determination in the High Court of Justice in London of a challenge to the extent to which the arbitrators went in ordering relief.  I say nothing about the nature or merits of that challenge, but it is an explanation historically of why there is not yet a result of the account.  We do not know whether Mr Emmott is owed or owes, for example, and we certainly do not know a sum, but it is to be ‑ ‑ ‑

CRENNAN J:   The decision has been reserved, has it?  Is that right?

MR WALKER:   I do not even think it has reached that stage, and I apologise, I am ill informed.  In any event, there is no decision, but what matters for us is that there is no result to an account.  It has to be emphasised – forgive me if I repeat this occasionally – that the matter of consistency between London and Sydney with which I started remains throughout.  Mr Emmott was a delinquent fiduciary in respects including the diversion of clients or the failure to prevent – or try to prevent I should say – diversion of clients.  That remains the basis for the ordering of the relief. 

Now, the fact that he was also to be treated as a one‑third partner is the reason why, amongst other circumstances touched on by the arbitrators, which are not in question between the parties, that, of course, there needs to be an account in both directions, a once‑and‑for‑all accounting.  The inconsistency comes, as I say, when it came to the necessity in a compensation claim to prove that there had been opportunities lost, that we would have got the profits if they had not.

Plainly enough, that is critical to a claim for compensation such as we elected for in Sydney; it is not critical for a partnership accounting, but obviously it does not matter a hoot in an account of profits.  Now, this is not an account of profits, “account” is used in the more general, encompassing, once‑and‑for‑all sense as between partners upon dissolution, but with the special adjustments directed by the arbitrators to take account of delinquencies.

HAYNE J:   Well, it is accounting in part as on wilful default, is it not?

MR WALKER:   It is, and furthermore it is expressly, in manners to which I will come, devised by the arbitrators so as to provide what they themselves expressly call a more appropriate way of compensating.  Now, it has to be said – and there is no challenge to the propriety of that tailoring of the relief – that at this point the argument by which in orthodox terms I am contrasting as necessary alternatives, compensation and account, gets a little blurred, I have to accept, because compensation is seen as one of the reasons for the particular shaping of the accounts.

Nonetheless, it remains true that in the accounting the way in which it has been devised, I have to accept, includes what the arbitrators have held in paragraph 8.22, to which I have drawn attention, they are not satisfied the clients would have stayed, and in the passages that we have set out in our three page – cited in our three‑page document at paragraph 1(d) the references starting appeal book volume 2, 699 and following – I will not take your Honours to them unless it becomes necessary – they are passages that we urge properly read - and they are not very clear or explicit – properly read they can only be understood as a finding by Justice Einstein that there can be a claim either for an account of profits or for compensation for lost profits.

Now, there are real difficulties with that I am bound to say on the face of the findings, but that is what appears in his Honour’s reasons to that effect.  That is where the real inconsistency between London and Sydney resides.

GUMMOW ACJ:   Can you just explain that again?

MR WALKER:   In Sydney there was an election for compensation against the knowing assistants.  It is common ground and it is recited as such or as trite law by both the arbitrators and the judge that for the compensation claim the causal link must be that but for the knowing assistants’ and the defaulting fiduciary’s wrongdoing, the plaintiff would have enjoyed and received the proceeds in question – call them the profits for ease of reference - in other words, by an analogy - one of those cases where the analogy is near perfect between equity and common law on the point.  The London arbitrators, as I have showed you, simply reject as a matter of fact that that is so, for a number of reasons to do with Mr Nicholls and Slater ‑ ‑ ‑

GUMMOW ACJ:   That what is so?

MR WALKER:   That we would have enjoyed the profits but for the wrongdoing because there are findings – Mr Sinclair’s is the most dramatic example – that they would not have stayed with us, they would have gone, I think, in goodwill’s case ‑ ‑ ‑

CRENNAN J:   Elsewhere.

MR WALKER:   In a goodwill case I think that means they are dogs.

GUMMOW ACJ:   Yes.

MR WALKER:   Dog goodwill, rather than cat goodwill and the third one, of course, rat goodwill. 

GUMMOW ACJ:   Rat goodwill.

MR WALKER:   Yes.  But they followed the person and given that it is legal services, perhaps understandably.  So that is the real inconsistency between the cases. 

GUMMOW ACJ:   There is no inconsistency by reason of an election in London for an account?

MR WALKER:   No.  There has not been an election in London.  We have had given to us, pressed on us – depends on your view – a fully worked out set of relief – perhaps I should come to that right now – which has the effect of casting as an accounting what needs to be done, among other things, in order to recognise Mr Emmott’s property – one‑third interest – and to take from Mr Emmott that which is necessary according to the arbitrators to compensate us for his wrongdoing.  So there may be a mixture of ideas but it is by an accounting and to and fro – to and fro. 

GUMMOW ACJ:   So it is designed to achieve a measure of compensation?

MR WALKER:   Absolutely.  I have to make that good.  Can I start with the first of their references to what they proposed to do – page 184 in the confidential volume, paragraph 8.23.  The first item is, and intended to be, like a partnership dissolution accounting.  So there is the value of the firm at the date that reflects the farewell symphony decamping one by one of the three over about six months or so.  That is the beginning of the depredations.  Then there is an explanation as to how that will assist in doing the practical justice of preventing the wrongdoer from keeping the fruits of his wrongdoing.  Then there is a reference at about line 29 to his one‑third share needing to be ascertained as to its value.

Paragraph (ii) is a necessary item obviously in relation to doing the once‑and‑for‑all accounting.  So is (iii).  So is (iv) – secret profits being profits that he should have shared with MWP and so is (v), again because he was not free consistently with his duty to work for Temujin before 1 July 2006.  Then in 8.24 there is a reference to an inquiry as to the value of the loss of opportunity.  That is, frankly, a compensatory element, as we see it.  Then the wash‑up payments, if I can jump to 8.26, one sees that there is to be an explicit balancing exercise, what they call set‑off, and the orders for payment are for, together with that set‑off device, what is found owing ultimately in a net sense either by one or by the other.

GUMMOW ACJ:   Can we just go back to 8.17 where it starts.

MR WALKER:   They reject (i) and (ii) pretty promptly.

GUMMOW ACJ:   Yes.  They say (iii) and (iv), surely correctly, are alternatives.

MR WALKER:   Alternatively, that is common ground.

GUMMOW ACJ:   Yes.  Where do they say which alternative they are applying?

MR WALKER:   They do not, and that is why I draw to attention the fact that there are both accounting and compensatory elements in the combination of 8.23 and 8.24, but there is further explanation to which I am going to come.  Could I draw to your Honours’ attention at 182, paragraph 8.20.  That, of course, puts in a nutshell the difference which makes relevant the finding about clients not ‑ ‑ ‑

GUMMOW ACJ:   I think the words “and is not payable without proof of loss” may control what follows.

MR WALKER:   Yes.  It renders meaningful what 8.22 has as its opening finding; you have not lost it if you were not going to keep them.  In 8.21 there is the explanation as to why an accounting, because they are really partners, is the basic framework of relief.  That is a further answer to Justice Gummow’s question, yes, there is an explanation, but it is not framed in terms of election.  It is framed in terms of doing practical justice, as you will see in their explanation.

HAYNE J:   But what is notable about 8.24 is that, for the reason given in 8.22, nothing is to be allowed for Sokol.

MR WALKER:   Exactly.  That is the inconsistency.

HAYNE J:   That is the chief financial distinction, is it not?

MR WALKER:   Yes.  I cannot avoid the word “inconsistency”.  There is an inconsistency, because we think – can I say this tentatively – that those cited passages in Justice Einstein’s reasons we think his Honour must be saying – he uses the expression – perhaps I should take you to one of them so that it is not too mysterious.  I will just take you to the first of them.  It is page 699, paragraph 427.  It suffices for present purposes to describe the Chilisai Phosphate project as a Sokol account which can be treated as sufficiently lucrative to be cared about. 

The formula which his Honour I think uses there for the first time and repeats later in these other paragraphs we have cited is that “the plaintiff is entitled to an election between remedies”.  I did point out this is not explicit or clear.  It is not.  It is all very well to say one is entitled to remedies, but you may – and the history shows that occasionally parties do make the wrong election, that is, they choose the dud, there is nothing there.  In any event, we have read in terms of the ultimate outcome – and here I am afraid I have to mention the figure of $4 million, that his Honour does order compensation. 

We put the outcome, together with these observations which are repeated deal by deal to support the proposition in this Court that what his Honour in the Supreme Court was finding was that these were both lost opportunities and also profits to be disgorged, but you would have to choose between disgorging of profit where you would not have to prove that you would have got the job yourself or diverted lost profit, that is, the loss that the arbitrators were talking about that must be proved “I would have had it but for the wrong”.

We read 427 and the others in that same model as, in effect, his Honour saying you had better choose between account of profits or compensation, but either is available.  Then when you see that we do elect for compensation and he does give $4 million it follows, so we submit, that these are findings which do present the inconsistency between London and Sydney that matters for the abuse of process argument, with which I am grappling.

I cannot leave 427 on its own without, I think, having to show your Honours 267.  Now I am doing that because of what I have already shown you in the arbitrators, their paragraph (iv), 8.22.  Your Honours may recall I referred to Mr Sinclair giving dramatic evidence in London.  Well, he also did so in Sydney and page 642, paragraph 267, just above line 60 there is the same conclusion and I should, for completeness, draw to attention paragraph 270 on the next page.

Now, I am bound to say I cannot find in the reasons a link between that and paragraph 427 on page 699, but there it is.  It certainly shows that as to the same factual question or the same case, to use Reichel v Magrath language, that there was, both in London and in Sydney, a question whether Mr Sinclair’s Sokol deals represented deals which, but for the delinquency, would have been enjoyed by my client - that seems to be what Justice Einstein had held - or whether they represented deals that could not give rise to a compensation claim, even if they could give rise to an account of profits claim.

That is the best I can, in answer to Justice Gummow’s question, the arbitrators do not, in this part of their reasons or, indeed, anywhere talk in terms of an election, but rather of drafting relief to meet the occasion.  The actual orders fully drawn up I do not think I need to dwell on any of the detail, but they are to be found at 186, 189 of the confidential volume and they are a more fully worked out set of orders and then there comes, starting at page 190, an informative document called “Clarification” and this is the arbitrator’s response and in I think near complete measure rejection of grievances raised concerning what they had done or not done on behalf of my client.

Could I draw to attention simply because it is a very neat summary without having to go to detail on the theme of the consistency between London and Sydney the finding about liability concerning setting up Temujin at 191, about line 25?  They accurately, with respect, summarise their more detailed findings in their earlier reasons:

found that Mr. Slater was the instigator and leading spirit behind the establishment of Temujin, that he enrolled Mr. Nicholls, and that Mr. Emmott went along with it –

et cetera.  Now, there are the knowing assistants and the defaulting fiduciary; that is a common theme between London and Sydney.

HEYDON J:   What does it matter whether or not there is an actual inconsistency between the reasoning of Justice Einstein and the reasoning of the arbitrators?  Is not the respondent’s point the potentiality his reason why there is an abuse of process?

MR WALKER:   In answer to your Honour’s question, yes, it does matter for reasons I will try to make good if I may later, and yes it is certainly true that we understand the argument against us to lie in mere potentiality.  Indeed, I am going to grasp that in particular in developing my argument about temporal sequence, and I may be in trouble obviously because depending when one first sees potential I have already conceded that as soon as we enter the contract with an arbitration agreement which might exclude other people, be they tortfeasors or knowing assistants, then one can say there was potential. 

One could also say perhaps so as to try and commence some ridicule of that notion that there is potential as soon as you start trading trans‑nationally, that there will be difficulties in gathering into one jurisdiction or one proceeding all relevant players.  So potentiality is something that needs to be considered carefully, but in answer to Justice Heydon’s question, yes, we do understand that we face that as an argument regardless, as it were, of whether there was comforting coincidence or alarming difference between the decisions of the two tribunals, yes.

GUMMOW ACJ:   It seems to me this question of inconsistency may really arise only if and when there is an attempt in New South Wales to register any judgment – I suppose that is the expression – which is eventually obtained in the United Kingdom, and that is a long way off.

MR WALKER:   Yes, your Honour.  A further use we make of that fact is that it highlights the difference between a supposed clash, actual or potential, between private arbitration on the one hand and public administration of justice in a court, which is the present situation.

GUMMOW ACJ: Yes, it depends what you mean by “clash”. We are used to these questions because we puzzle endlessly over section 109 of the Constitution, but you see what I mean?

MR WALKER:   Yes, I do, and we call that in aid.  There is not at the moment two judicial decisions, nor is there judicial machinery, that is the sheriff, engaged in the same jurisdiction in what I will call opposite directions concerning enforcement of obligations.  Could I come then to 193 ‑ ‑ ‑

GUMMOW ACJ:   Bearing in mind that this is not a case of injunctive relief, this case is going to resolve itself into money claims, or money sums, by entry of some judgment.

MR WALKER:   Yes.  The arbitrators were adamant about that.  They considered and rejected a number of claims, including claims described as proprietary and they very much insisted that it was money, certainly before Justice Einstein, the same is true and there were proprietary claims, but this Court is not concerned with them.  At page 193 could I draw to attention the passage at about line 25:

not satisfied that MWP suffered any loss by the mere establishment of Temujin as a competitor in the market place.  There was no evidence that MWP lost the opportunity to attract new clients because of Temujin’s existence.  All the evidence . . . was directed to the loss of business from MWP’s existing clients who transferred, first part –

and then starts there elaboration of their reasons for their relief:

The most difficult part of our remit was to fashion an appropriate remedy for Mr. Emmott’s breaches of fiduciary duty (and no doubt contract) during 2006.  We rejected MWP’s claim to damages . . . we gave our reasons para 8.22 ‑

That is the paragraph where they said not satisfied that they would have stayed –

We found a basis for awarding MWP damages for the fact that Mr. Emmott spent time which he should have spent on MWP’s affairs in assisting Temujin . . . but this would plainly be modest.  There were simply too many imponderables . . . Mr. Emmott should either (i) have given proper notice of his intended departure or (ii) told Slater and Nicholls that he would not join them; and in either case have told Mr. Wilson –

Mr Wilson is the principal of my client –

He should also have advised his clients that while he remained at MWP he could not accept joint instructions from Temujin without Mr. Wilson’s consent.  It is impossible to reconstruct what would have happened in either event.

So that, as it were, they are explaining that they had cleared the decks in terms of compensatory or damages claim and they say –

The probability is that, had Mr. Emmott given notice, Mr. Wilson would have terminated the Emmott Agreement straightaway . . . then Mr. Emmott would have been free to join Temujin immediately and the clients would have needed no inducement to follow him.

Of course, it had already been held by the arbitrators that that would have happened –

Had he opted to stay with MWP, the clients, who wanted to retain the continuing services of Mr. Nicholls almost as much . . . probably have sought to instruct Temujin and MWP jointly –

as there had been evidence about that:

In the end, and bearing in mind (i) that MWP was itself in serious (but non‑repudiatory) breach . . . [by denying] the one third share . . . and (ii) that Mr. Wilson became aware of the sharing of clients with Temujin from a reasonably early stage and sensibly accepted a fait accompli, we concluded that damages would be unquantifiable and constitute an inadequate remedy and that it was necessary to fashion a more appropriate means to compensate MWP.

So this is not an election by a party, but a choice by a bench as to what the situation between these parties ‑ ‑ ‑

GUMMOW ACJ:   That is what I wanted to ask you.  I do not quite understand.  If one goes back to paragraph 8.17, it says, “The first three are cumulative”, no doubt, “(iii) and (iv) are alternative”, but they are alternative at the election of a party, are they not?

MR WALKER:   Yes.

GUMMOW ACJ:   Not the choice of a judge.

MR WALKER:   No.

GUMMOW ACJ:   Or in this case, the choice of the arbitrator.  What indication is there here that there ever was such an election?

MR WALKER:   There is not any, and I do not want to tread on any toes in London, but it may be that that goes to the challenge that is reserved.

GUMMOW ACJ:   I see.

MR WALKER:   Or at least partly.  Certainly it may inform the desire to make such a challenge.  In any event, at 194, in the next paragraph, about line 25 and following, there is an explanation that I will not read but is worth attention.  It is an explanation of the form of the accounts both as to the date and what is in and what is out, which shows that it is designed to take from the wrongdoer a financial recompense of my client for his wrongdoing.

Now, it would be unfair to call it a rough and ready fashion, but it is avowedly a method that disdains the necessary factual clarity, say, of a damages claim.  But the purpose that the arbitrators describe as informing their tailoring of relief is repeatedly a matter of compensation.  They accept that there is probably an inherent bias in favour of my client on at least one account.  But one can gather that that does not trouble them in the scheme of things, bearing in mind the difficulties created for devising a remedy by the wrong of Mr Emmott in the first place.

You see that there is a kind of a trade off.  Rats and mice claims are, as it were, thrown away at the end and that is at the last sentence of that paragraph at about line 40.  So, that is how the arbitrators did it and I stress they did it well knowing of the outcome in New South Wales and that Temujin had been ordered to pay what they call damages – compensation, in fact, and, in our submission ‑ ‑ ‑

GUMMOW ACJ:   In the New South Wales proceedings was there clearly an election?

MR WALKER:   I am so sorry.  Yes, there was.  There was clearly an election. 

GUMMOW ACJ:   It is reflected in Justice Einstein’s reasons?

MR WALKER:   Yes.

GUMMOW ACJ:   Can you just find that when you get a chance?

MR WALKER:   I will just have that turned up, your Honour. 

GUMMOW ACJ:   Unless we understand these basic mechanics we cannot get into questions of abuse of process because we do not know what the process was.  

MR WALKER:   No, quite.  Appeal book 779 in volume 2, paragraph 21.

GUMMOW ACJ:   Yes, thank you.

MR WALKER:   So I have been saying that the relevant inconsistency was the difference to be gathered from Justice Einstein’s prior finding that equitable compensation could be had for these diverted profits, which involves the proposition they would have been earned by us but for the wrong, and the rather clearer and opposite conclusion, at least for the bulk of the matters – the deals – by the London arbitrators on the same point - after they had and had read and understood and apparently accepted as complementing their overall scheme of relief the outcome in New South Wales.  Now, I need to go back in order to try and finish an answer to one of your Honours concerning the possibility of what was called overcompensation.

GUMMOW ACJ:   I am sorry to interrupt, Mr Walker, but Justice Einstein’s decision predated the arbitrator’s decision.  That is obvious.

MR WALKER:   Yes, I am going to come to that in just a moment, yes ‑ ‑ ‑

GUMMOW ACJ:   The question of abuse of process has to be decided at what time?  If there is such a doctrine at what time do you assess its existence and application?

MR WALKER:   At the point where the threatened different outcome is sought.  I will leave that there at the moment and elaborate that in just a moment.

HEYDON J:   Let us get one thing plain.  Justice Einstein’s judgment was before the arbitrator’s award, but your London proceedings, in effect, began on 14 August 2006.

MR WALKER:   It is all in the chronology.  Could I ‑ ‑ ‑

HEYDON J:   Is it?  Yes.

MR WALKER:   I am so sorry, your Honour.  Would it be convenient for me to give all the dates all at once?

HEYDON J:   Well, I have the chronology in front of me.  The appellant’s chronology ‑ ‑ ‑

MR WALKER:   I am so sorry, your Honour?

HEYDON J:   The appellant’s chronology?

MR WALKER:   Yes, and that is where it comes from, yes.  But the arbitration commenced on 14 August 2006.  The New South Wales proceedings commenced on 9 October 2006.  The arbitration hearing commenced on 10 November 2008.  The New South Wales hearing, that is the final hearing, commenced on 15 June 2009.  The arbitration hearing concluded on 24 February 2009.  The New South Wales hearing concluded on 10 September 2009. 

The interim award – it is called the second interim award, it is the one with the reasons for relief – in London was 22 February 2010 and as I have shown it is clear that the arbitrators had and treated as material to which they could refer though, of course, not as evidence against Mr Emmott, the judgment in New South Wales.  The date of the judgment in New South Wales is – they are several – the reasons were delivered on 6 October 2009.  The relief reasons were given on 11 December 2009 and final orders on 11 December 2009.

The New South Wales proceedings thus accomplished rendered final were available to, used by, referred to by the arbitrators when they gave their first and only explanation of their findings on 22 February 2010, followed, of course, by the clarification to which I have made recent reference.

GUMMOW ACJ:   But so far as we know there was no point taken before the arbitrators that they should not have regard to what Justice Einstein had decided because his decision was made in abusive proceedings.

MR WALKER:   No, that was certainly not put. 

GUMMOW ACJ:   I would not have thought so because their Honours – the arbitrators then went on to deal with it, of course.

MR WALKER:   No, no, quite and they are, as it were, unperturbed by the parallel existence of and the outcome with damages, as they called it, for Temujin.  Damages for Temujin is also for Nicholls and Slater and the arbitrators plainly are not taking any distinction.  I should say something about abuse of process.  There was an argument about abuse of process in Sydney at trial, which is not the abuse of process argument in the Court of Appeal or in this Court, and I just note that because your Honours will see many references to it.

GUMMOW ACJ:   What was that about?

MR WALKER:   I really should leave my friend to explain it, but ‑ ‑ ‑

GUMMOW ACJ:   Yes, all right.

MR WALKER:   It is a basis that ‑ ‑ ‑

GUMMOW ACJ:   That is sufficiently damming it, Mr Walker, I think for the moment.

MR WALKER:   I am sorry, your Honour.  I think it had to do with disparate jurisdictions, and of course, it is against the background that we had the arbitration agreement, the threat of an anti‑suit injunction, et cetera.

GUMMOW ACJ:   Anyhow, I took you off your course ‑ ‑ ‑

MR WALKER:   Not at all, your Honour.  So could I move then to this question of temporal sequence?  It thus emerges from the order of events that the defaulting fiduciary had relief sought against him, he being the beneficiary of a partnership‑style arrangement, a feature of the claim between him and my client utterly absent from our claim against the knowing assistants and Temujin.  They were not going to get any allowance in an accounting for being our partners, they never were.  They were just those who had committed depredations against us as former employees, and as knowing assistants most importantly of our defaulting fiduciary, Mr Emmott.

So there was a huge difference which was going to be reflected in any accounting between any claim, whether heard together or separately, as between Mr Emmott on the one hand and Messrs Emmott and Slater on the other.  That is the first point that, in our submission, means that in the language of question 3 in the Court’s letter, of course, in the case against the knowing assistants that thing which loomed largest in the taking of accounts between us and Mr Emmott, namely, the one‑third partnership interest, was going to play no part, would not bind if one chooses to put it that way, in our claim against the knowing assistants.

They could not take advantage or somehow slipstream the fact that he was going to get an allowance to be levied against what he had cost us by his delinquencies for the value of his one‑third share measured at the deemed date of imagined dissolution at the end of 2005.  So it cannot be that in its basic structure the account between us and Emmott could simply be taken over had it existed and been struck before Justice Einstein made his compensation orders – it could not be that even if it had preceded and been known that it would have been taken over.

HAYNE J:   Well, is that a point that says more than that the result of the account could not be taken over?  The question is surely whether items in the account are to be taken over.

MR WALKER:   It is, but it is only some items, and what I have ‑ ‑ ‑

HAYNE J:   Yes, of course, but that does not lead inexorably to the conclusion that no item should be taken over because the ultimate result cannot.

MR WALKER:   No, it does not.  I am going to have to go further in order to deal with an item by item transfer, as it were, or carry over.  But it suffices to show that simply because figurative language may describe Mr Emmott as the principal or the main pivot of the loss – the defaulting fiduciary for whom the others are derivative, consequential, ancillary, subordinate - it is enough to destroy the notion that the result as between him and us must be reflected by way, for example, of imposing a ceiling on a result between us and the knowing assistants.  It could not be so because he gets credit for a one‑third value and they cannot possibly get that.

Now, Justice Hayne has really, with respect, required that one moves from that proposition, which we do not think will be contested, to the question whether but as to the findings or items in the account which represent the losses of diverted profits – the so‑called compensation that the arbitrators say will be done by their taking of accounts, does that get carried over?  The first and immediate answer to that is why would anyone ever be talking about carrying over findings not yet made in an account not yet struck so as to impeach a judgment which was handed down, complete and final, covering all such items between the claimant – the same claimant – and the different parties, the knowing assistants, and had already been done before the account was ordered and, of course, long before the account was struck. 

In other words, why is it being done retrospectively so as to pin the badge of abuse of process on a case which simply proceeded on the evidence before the judge which struck the judge as justifying the implicit finding on the balance of probabilities that these were, in fact, diverted or lost opportunities or profits, his duty being to decide the case on the evidence before him and he did that. 

No one put before him under the present rubric of abuse of process – leave aside the one that was historically fought and rejected – no one put before the trial judge that it will be an abuse or a legal error or there will be a scandalous inconsistency produced if your Honour – and then how does one finish the sentence?  If your Honour does what – decides before London, that is one possibility; decides differently from London to which the inquiry would be well, what has London done?  Well, nothing yet, your Honour; or – so it would be a retrospective thing – decide and if it turns out to be different, it will be impeached.  If it turns out to be the same all will be well, that seems odd.

In our submission, this leads then to the next set of inquiries which would necessarily be raised which could be summed up as sauce for the goose, sauce for the gander.  If those are the kind of matters that ought to have troubled the New South Wales court, what should have troubled the London arbitrators?  We can put hypotheticals aside, we have the actual here. 

They knew what had happened in New South Wales.  They too had a duty to decide the case before them, different parties, different body of evidence, does not matter how similar the evidence was, different body of evidence, different counsel, different mode of presentation, different system of law, though not too much should be made of that bearing in mind that choice of law issues in both cases seem to have resolved into some kind of Macquarie swamp of people choosing not to be worried about it with Kazakhstan and various Caribbean jurisdictions being involved.  In our submission, you cannot seriously ‑ ‑ ‑

GUMMOW ACJ:   Would these arguments about an absence of abuse of process equally run if what had happened in London had been a purely judicial proceeding?

MR WALKER:   They would not equally run.  I would be deprived of one of the arguments you have seen in our written submissions, to which I will be making brief reference later, but all other aspects of them would run.  Indeed, the notion of suggesting that you could find a character in London judicial proceedings instead of the arbitration which could have served the function of presenting the New South Wales proceedings as an abuse, though the New South Wales proceedings were decided before the London proceedings were, is really very difficult.  The one and only criterion capable of being articulated would be that Mr Emmott was what I will call the principal, and I have tried to deal with that already. 

It does not matter whether a principal or ancillary, the money is the money, the loss is the loss, the wrong is the wrong.  You do not rank  people by reference to, as it were, the lead conspirator or the peripheral character.  If they are all liable for conspiracy, then one cannot say they all must – all their cases must be determined as the case against the lead one was. 

That is why, as Justices Hayne and Gummow raised with me at the outset of the hearing, to avoid between judicial determinations such unacceptable but, I would submit, inevitable consequences of separate hearings we have had for a long time procedurally requirements or powers, or a combination of the two, by dint of necessary and proper parties and by dint of avoiding through lis alibi pendens and other doctrines, through avoiding the same event, I think is the best way to call it, the same event in the world being proved differently, materially differently, when it plays a part in a number of different cases.

GUMMOW ACJ:   If there had been a suit in the Chancery Division, Mr Nicholls and the other respondents would have been necessary proper parties on one view of it, but Mr Emmott, also a necessary and proper party, would have turned around, I suppose, and pleaded the arbitration clause and we are back to where we were before.

MR WALKER:   Yes.  He said you cannot do that, you have agreed not to sue us in New South Wales.  That is why it came about and then one asks have you planted the seed of an abuse of process when you enter into one of those things which, with respect, are the darlings of the legal commercial establishment, namely an arbitration agreement with or without a forum clause and surely not ‑ ‑ ‑

HAYNE J:   That becomes the root question in the case, does it not?

MR WALKER:   Yes, it does.

HAYNE J:   Whether the fact of the arbitration clause leads inevitably to separate proceedings or does not.

MR WALKER:   Yes, and it is our submission that it would be a large and unpalatable bite to swallow to say that you enter an arbitration agreement, which may be, in commercial terms, a necessary adjunct of doing business particularly trans‑nationally because by the arbitration agreement both systems, tribunals and forums, locations can be selected in advance by people who may have very disparate expectations, some of them not so wed say to the rule of law as others.  So there are immense practical reasons to support and not to present as fraught with hidden dangers entry into arbitration agreements.

One of the advantages from parties to an arbitration agreement - not without its countervailing problems, of course – is that it excludes the presence of others, both in terms of confidentiality, secret hearings, private hearings, but also in terms of complications.  So that in the absence of special statutory and sometimes very rarely agreement provisions in arbitration one of the advantages seen is that I know that if I have a dispute arising under this contract or relationship I will just have it with that other party and I will have it in London before three arbitrators, chosen in a particular way, applying or not a system of law as chosen by the parties, subject only to the review in the High Court of Justice in London and that is it.

MR LINDSAY:   It is in their submission.  I will have to take that on notice, your Honour. 

GUMMOW ACJ:   Your juniors will find it.

MR LINDSAY:   Yes.  In any event, the difference between us, which one finds referred to in a couple of places in the judgment of Justice Basten, is that the appellant says you make your judgment as at the date the refusal application is made and that is it, and we put the proposition that the relevant question ultimately is, are the orders under appeal, that is the final orders, affected relevantly by bias?  Mr Walker kindly draws to my attention, in the appellant’s submissions, footnote 21 on page 10. 

In our submission, that demonstrates the artificiality of the approach that is advanced on the appellant’s side and it is in that context that it becomes material to look at the course of the trial.  It was in that context again that we draw attention to the failure of the primary judge even to address our submissions about the credit of Mr Wilson.  It is not necessary for your Honours to delve into those submissions, although they are available in the respondent’s supplementary appeal books that have been prepared ‑ ‑ ‑

HEYDON J:   Sorry, can I just interrupt.  If we look at your written submissions, respondent’s case affirmatively stated, paragraph 22 seems to deal with pre-trial things and paragraph 23 seems to include things during the trial like Mr Wilson’s credit, the unsupportable award of $4 million and costs orders.  Mr Walker allows you paragraph 23, but not 22.

MR LINDSAY:   Yes.

HEYDON J:   While we are on that, in paragraph 22 there is reference in (e) to “consistent with a bias”, and (f) speaks of:

a predisposition to see the proceedings through a prism presented to him by the applicant . . . including a predisposition –

in three ways, and (g) says –

that manifestation of a pre-disposition –

That is the language of actual bias, is it not?

MR LINDSAY:   It may be.  It certainly may be.  We would submit that it is also relevant to the question of the objective test to be applied with a fair‑minded observer.

HEYDON J:   An actual bias hurdle is a harder hurdle to jump.

MR LINDSAY:   Yes.

HEYDON J:   Are you putting it that way, because if you are, it creates a certain type of problem, and 23 says “predisposition” again.

MR LINDSAY:   The Court of Appeal held that it was a reasonable apprehension of bias, but it stopped short of investigating a question of bias and it did that in circumstances in which we put our case that way.

GUMMOW ACJ:   Sorry, put your case which way?

MR LINDSAY:   An apprehension of bias rather than bias.  We never articulated the extra step.  Whether it would be open to us now to allege that he was biased, I would need to think about that, but, in our submission, it is not necessary for us to rise to that point.  It is a strong apprehension of bias, in our submission, that flows from all the objective factors, including the fact that his Honour appeared to demonstrate a particular predisposition.  Perhaps I will reflect on that overnight, if I may.

HEYDON J:   If you are not pressing actual bias, the question is should we draw a line through (e), (f), (g) and the whole of paragraph 23?

GUMMOW ACJ:   Or you need to rewrite them.

MR LINDSAY:   That is something I think I should reflect on rather than just deal with it on the run.

GUMMOW ACJ:   Yes, we will come back to that tomorrow.

MR LINDSAY:   I will come back tomorrow if I may.  If I may for the moment at least move on then to deal with the question of the London arbitration in the quarter of an hour or so that remains?  In our submission, it is important to bear in mind that the temporal aspects of the appellant’s case do not arise unless it succeeds on one or other of the bias or waiver questions.  We submit that the Court is quite correct to test any suggestion of abuse of process against a specific factual matrix.  In this case a primary difference between the parties, in our submission, is that the appellant invites the court to give effect and primacy to its private arbitration agreement, whereas we submit that the focus is at all material times on the maintenance of the integrity of the processes of the Supreme Court of New South Wales and protection of those processes against abuses of process.

GUMMOW ACJ:   Now, what would the abuse be?

MR LINDSAY:   The abuse would be running or seeking to obtain inconsistent verdicts and enforcing them or attempting to enforce them opportunistically and in a manner that was involving inconsistency.

GUMMOW ACJ:   What would the inconsistency be?

MR LINDSAY:   Ultimately, on the facts of this particular case, the inconsistency related to the findings affecting the major claims that were advanced by the appellant involving the companies of Mr Sinclair and Mr ‑ ‑ ‑

GUMMOW ACJ:   That is findings, not verdicts.  You use the word “verdict” which suggests money.

MR LINDSAY:   In this particular case, given that the course of events that has happened where we do have the London arbitration award on ‑ ‑ ‑

GUMMOW ACJ:   It is only interim award.

MR LINDSAY:   Yes, it is an award on liability and, in our submission, the fact that there might be an accounting that works through that order or that interim award does not stop it from being binding.  If one takes the comparable jurisprudence relating to an order for accounts in the New South Wales proceedings, an order for an account is a final order, even if the accounts are yet to be taken.  We provide the references to authorities there. 

Here, what the appellant is attempting to do is to maintain against the respondents a judgment, not only different in terms of amount, but also different in terms of attribution of liability, particularly in connection with the claims referrable to Messrs Sinclair and Schoonbrood.  In our submission, that is an abuse of process in the context of the principle in Reichel v Magrath.  That is the substance of that. 

This case, in large measure, falls away if the determination adverse to the appellant in the arbitration relating to Messrs Sinclair and Schoonbrood is given force and effect.  All that is left are two relatively minor claims relating to Kangamuit Seafoods and the Lancaster Group.  We have given the references in our submissions as to the amount of money involved in those and, even those, run the gauntlet of the set‑off order that was made by the arbitrators. 

I do not know whether I have answered your Honour’s question or departed from it, but on the facts of the case as we have them now, the abuse of process that is involved is the appellant trying to overcome its defeat in the London arbitration to enforce a substantial judgment against the respondents who are, at most, accessorily liable when they failed against the principal or the alleged principal wrongdoer.

CRENNAN J:   Does it make a difference to that argument, the enforcement of the foreign arbitration order seems to be a long way off?

MR LINDSAY:   In our submission, it does not make a difference.  If there was an attempt to do that, it might aggravate the abuse of process, but, in our submission, our arguments do not depend upon there being an attempt to register a judgment here, having registered one in the UK, because what is still attempted to be done here is to run a case which is fundamentally inconsistent with one that has been fought and lost against the principal wrongdoer and that ‑ ‑ ‑

HAYNE J:   At what point did that abuse first emerge?

MR LINDSAY:   My friend did draw your Honours’ attention to the allegations about abuse of process that were of a different character and they related to the conduct of the proceedings and they need to be identified for the purpose at the moment of putting them to one side but at the same time recognising that in circumstances where somebody such as the appellant attempts to run different cases in different jurisdictions, there may be a variety of different sorts of abuse.

The particular abuse of process here arose either upon the publication of the arbitrator’s award or upon the persistence of the appellant in seeking to have the proceedings before the primary judge proceed to judgment before the arbitration was determined and either of those in our submission could be characterised as an abuse of process.  In this particular case we had invited everybody to await the arbitration and we have had that debate, but that is a factor that is never very far away.

GUMMOW ACJ:   Just looking at your paragraph 35 in the respondent’s submissions where you emphasise that the process is that of the Supreme Court of New South Wales, and then looking at Mr Walker’s outline, his issue 1, paragraph 3, is your answer to that that you are not seeking to extend the abuse of process to commercial arbitral awards at all, because the abuse, as it were, will usually be outside the judicial process of the court.  It would be something else.

MR LINDSAY:   The fact that the question is asked and asked in those terms, demonstrates a difference in principle between us.  If the question is, am I aware of a case applying Reichel v Magrath that is on all fours with this one, the answer is no, I am not, but, in our submission, it is not a matter of extending a principle to commercial arbitration.  It is a matter of protecting the integrity of the court processes here in circumstances where abuse arises from the pursuit of the arbitration.  So that, in our submission, it is not a matter of extension, it is a matter of application of the existing principle.

GUMMOW ACJ:   In Reichel itself it was an ecclesiastical tribunal, was it not?

MR LINDSAY:   Yes.

GUMMOW ACJ:   Was it two actions?

HAYNE J:   I thought it was two actions, was it not, one against the Bishop of Oxford and then one against the clergyman who actually got the benefit of the living.  Magrath was the clergyman appointed and the previous action had been Reichel v Bishop of Oxford, I think.

MR LINDSAY:   I stand corrected.  I am sure your Honour is right.

HAYNE J:   Very Trollopian.

GUMMOW ACJ:   Yes, that is right.  The first was in the Chancery Division and the second was in the Queen’s Bench Division.

MR LINDSAY:   That is right.  I apologise for my ‑ ‑ ‑

HAYNE J:   It is the holder of the benefice and those who present it.

MR LINDSAY:   One of the difficulties in talking about abuses of process is that it is necessary to acknowledge that abuses might come from a number of directions.  So one needs to be very careful about the formulation of general principles, both being too broad in the formulation of them and stepping into error by assuming the classes of abuse are closed.  It is very fact‑specific, but in our submission this particular case falls directly within Reichel v Magrath and the fact that there are no other cases precisely in point of which we are aware does not detract from that.

HAYNE J:   Leave aside whether an analogy can be drawn with Reichel, is the species of abuse of which you complain a use of the processes of the Supreme Court of New South Wales for a purpose or purposes for which those processes are not intended?

MR LINDSAY:   We made submissions broadly to that effect and that is in the context of the other matters to which Mr Walker drew attention.

HAYNE J:   The next question is how are they being used for a purpose, et cetera?

MR LINDSAY:   That branch of the case, I do not think, has been agitated here and I do not think we put our case here on that basis.  We did run a broader abuse of process ‑ ‑ ‑

GUMMOW ACJ:   You may be in trouble unless you get a sharper focus.  That is what is being put to you.  You may benefit with a sharper focus.  Perhaps you can weigh that overnight, I think, Mr Lindsay.

MR LINDSAY:   I think I will take that opportunity.

GUMMOW ACJ:   We presently propose to list the next appeal not before 12 noon tomorrow.  Does that seem realistic to both sides?

MR LINDSAY:   From my perspective, yes.

GUMMOW ACJ:   We will list the next appeal not before 12 noon tomorrow and we will now adjourn until 10.15.

AT 4.12 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 1 JUNE 2011