Olex Focas & Anor v Skodaexport Co Ltd

[1997] HCATrans 54

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M66 of 1996

B e t w e e n -

OLEX FOCAS PTY LTD and OLEX PTY LTD

Applicants

and

SKODAEXPORT COMPANY LIMITED

First Respondent

HONGKONGBANK OF AUSTRALIA LIMITED

Second Respondent

Application for special leave to appeal

DAWSON J
GUMMOW J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 14 FEBRUARY 1997, AT 12.09 PM

Copyright in the High Court of Australia

MR G.H. GARDE, QC:   If the Court pleases, I appear with my learned friend, MR M.C. GARNER, for the applicant.  (instructed by Freehill Hollingdale & Page)

MR P.B. MURDOCH, QC:   May it please the Court, I appear with my learned friend, MR M.N. CONNOCK, for the respondent.  (instructed by Maddock Lonie & Chisholm)

DAWSON J:   The Deputy Registrar certifies that she has been informed by Messrs Baker & McKenzie, solicitors for the second respondent in this matter, that the second respondence does not wish to be represented at the hearing of the application for special leave to appeal and will submit to any order of the Court save as to costs.  Yes, Mr Garde.

MR GARDE:   If the Court pleases, there are, it is submitted, important questions of principle that would justify the grant of special leave to appeal in the present case.  In particular, we highlight the question of the principles which are applicable to an application by an appellant exercising a right of appeal, as we did in this case, from an interlocutory decision for a stay of the decision appealed from or for interlocutory injunctions pending the hearing and determination of the appeal.  There are questions which arise as to the true scope of the principles in Wilson v Church, referred to in our summary of argument and - - -

GUMMOW J:   This was a case about an interlocutory injunction to call upon this financial instrument, was it not?

MR GARDE:   Yes, your Honour, in substance.

GUMMOW J:   Which is a large step to grant an injunction in such a case.  One does not ordinarily enjoin presentation of letter of credit, for example.

MR GARDE:   Yes, your Honour, it is a large step and there - - -

GUMMOW J:   In the absence of a fairly well grounded prima facie case of fraud.

MR GARDE:   At common law, yes, your Honour.

GUMMOW J:   Not at common law, in equity; an injunction we are talking about.

MR GARDE:   Yes, your Honour.  There was an interlocutory injunction granted - - -

GUMMOW J:   There may be a Mareva injunction as well, I suppose, is a possibility.  That was not pursued here.

MR GARDE:   It was sought, your Honour, but not uphoed by his Honour Mr Justice Batt.

GUMMOW J:   That is right.  So, where is the general point of principle?  Is the general point of principle that in applying section 80 of the Trade Practices Act and the injunctive power that confers, one ignores the principles that come out of a general commercial law as regards these instruments and the interposition of equitable remedies on an interlocutory basis to disrupt the crankshaft of commerce, as it has been called?

MR GARDE:   The point of general principle relates to the administration of justice and the opportunity of parties to pursue an appeal to the Court of Appeal.  A lot transpired in this case is that his Honour Mr Justice Batt did grant an interlocutory injunction.  That interlocutory injunction was founded on section  51AA of the Trade Practices Act.

GUMMOW J:   It was found on section 80.

MR GARDE:   Yes, and on - - -

GUMMOW J:   What is the source of the power to grant the injunction for a contravention of the Act which you say is found in 51AA.  Let us put it in right order.

MR GARDE:   If your Honour pleases.

GUMMOW J:   The question is is there any error in the application of section 80, that is the question.

MR GARDE:   Yes, your Honour.  His Honour Mr Justice Batt did hold that an interlocutory injunction should be granted and our concern with that is that the interlocutory injunction granted was not sufficiently wide.  The interlocutory injunction which was granted was directed at restraining the payment of various sums of money under mobilisation and procurement advance guarantees.  No injunction was granted by Mr Justice Batt in relation to performance guarantees, and in relation to the mobilisation - - -

GUMMOW J:   But you say there should have been an injunction in respect of the performance guarantees, do you not?

MR GARDE:   And the balance of moneys outstanding under the mobilisation and procurement guarantees, yes, your Honour.

GUMMOW J:   What I am putting to you is that would be a very big step.

MR GARDE:   His Honour was satisfied on the material and so held that the conduct of the first respondent was unconscionable.  Certainly unconscionable to sufficient extent to found the grant of an interlocutory injunction under section 80 of the Trade Practices Act.  There was only the one demand that was made and it was made in relation to all of the guarantees.  The whole lot, in other words, were called up at once.  Now, what his Honour did was to say, “I am satisfied to a sufficient extent to grant an interlocutory injunction that there has been unconscionable conduct but I will constrain the extent of the injunction to” something like $5.2 million of the $6.2 million outstanding “under the mobilisation procurement guarantees and not at all in relation to the performance guarantees”.

A fundamental issue which did arise was as to the interaction between section 51AA of Trade Practices Act recently introduced which applies to overseas trade and commerce, as here, and, on the other hand, what I will call traditional equitable principles that arise in this field of law.  The law in Australia has, we contended, and his Honour - - -

GUMMOW J:   It does not mean that on every occasion where there is some reasonable suggestion of unconscionable conduct that there has to be an interlocutory injunction under section 80.  There are other factors enter into the situation when you have this sort of commercial instrument.

DAWSON J:   And you have this very big hurdle to overcome that you are seeking special leave to appeal in an interlocutory matter.

MR GARDE:   Yes, we accept that that is so.

DAWSON J:   Really, what you were wanting overall - I know that an injunction was granted below, but you are really seeking security for a result in the actual trial, assuming that the trial would be favourable to you.  Now, a Mareva injunction may get you some distance along that road but you have been refused that and that is not before us.  That is, in essence, what you are asking for, is it not?

MR GARDE:   Yes.  In the ultimate, your Honour, we certainly would be seeking to restrain the payment of moneys overseas which is the basis of the claim that is brought in the court.  But the immediate - - -

DAWSON J:   When you have had your interlocutory applications below, they have resulted in a particular result.  Now, why should this Court intervene?

MR GARDE:   We have, your Honour, an appeal as of right to the Court of Appeal.  We have exercised that right.  We do desire that our appeal not be rendered nugatory prior to its hearing by the Court of Appeal.

DAWSON J:   But it is an interlocutory appeal.

MR GARDE:   It is, your Honour, an interlocutory appeal.  It is also an appeal as of right under the Supreme Court Act and we would submit that the Wilson v Church principle as followed in the other cases cited in the summaries of argument on both sides extends to, not only an interlocutory situation where it is as of right but also, of course, other cases as of right generally.  But the fact that is important is that the appeal is as of right and on that basis we submit that the Wilson v Church principle is applicable and should have been applied.  Now, there may be some doubt as to whether the extent of the Wilson v Church principle - - -

DAWSON J:   There may, but this is not the case in which to test the propositions you want tested.  There is a trial to be had and it is for the trial court to say what the circumstances are in which the trial should be held, it is said.

MR GARDE:   We submit, if the Court pleases, that it is fundamental to the administration of justice that if a party does have a right of an appeal to a Court of Appeal, as we have here, provided for under statute, that in the course of the exercise of interlocutory decision making it is incumbent on the Court to preserve the situation so that the appeal is not rendered nugatory.  We are faced with the unfortunate predicament at this time where our appeal is scheduled to come on for hearing as soon as it can be heard, a speedy hearing having been indicated by the court, but have been denied interlocutory relief that would give the appeal substance in terms of its outcome.  By reason of the denial of the interlocutory relief, the funds, of course, are gone.

GUMMOW J:   Why will it be rendered nugatory?

KIRBY J:   As I read the papers, the respondent has now entered an appearance without prejudice to its contentions.  This is not forum non conveniens, so you have got them before the court.  They are a large international corporation.

MR GARDE:   We do have the first respondent now before the court and the difficulty we face is that the transmission - - -

KIRBY J:   In a sense, that may be an outcome of all this interlocutory skirmish.  But, anyway, they are here now.

MR GARDE:   Yes.  The position is the first respondent has entered an appearance as your Honour describes.  The reason why the appeal is effectively rendered nugatory is that the first respondent has no presence in Australia and, in addition, the consequence of the failure to grant interlocutory relief is that the funds, of course, are carried overseas and finish up in the Bahamas or absolutely anywhere in the world, never to be seen again.  It was for that reason that we sought to hold the position in some convenient and appropriate way - - -

GUMMOW J:   The first respondent is a very significant corporation.  It is not suggested it secretes its funds not only in the Czech Republic but in some tax haven in the West Indies, is it?

MR GARDE:   There is no evidence, your Honour, that - - -

GUMMOW J:   It has a considerable international reputation to maintain, surely.

KIRBY J:   It would not look good if they simply vanished from the scene against an Australian judgment.

GUMMOW J:   They want to do more business, I would imagine.

MR GARDE:   If that is so, if the Court pleases, but there is no evidence that the first respondent is a significant international corporation with ongoing interests of that type.  His Honour Mr Justice Batt did refer, in his reasons for decision, to the fact that the first respondent was carrying out as head contractor or project manager a substantial pipeline project in northern India but other than that state of affairs there was no evidence of the ability of the first respondent to honour any subsequent judgment that might be given by the Court of Appeal.  So that we do and have always faced the very significant problem that once the moneys are gone, they are gone, and we are put in difficulty even if the appeal should be successful.

The position in terms of the reasons for decision of the Court of Appeal is clear.  There is not a great deal which is said in their Honours’ reasons for decision which are set out at page 10 of the application book, and I desire to take the Court briefly to those reasons for decision.  In substance, we contend that the Court of Appeal did not address the principal submissions that were made on the basis of the Wilson v Church principle other than in a limited way.  Certainly, there does not appear anywhere in the reasons for decisions of their Honours any exposition, as far as we can see, of the principles that should govern the situation where there is an appeal as of right brought to the Court of Appeal and in circumstances where there is an application based on the Wilson v Church principle before the court.

At page 11 of the application book, his Honour the presiding judge, Justice of Appeal Brooking, held that, at line 22:

I would say only that I am not persuaded that the appellants should have any wider or any further injunctions pending the determination of the appeal than those granted by Batt J and that the application made should accordingly be refused.

His Honour simply stated that that was his view and held accordingly.  The other two members of the Court of Appeal, Mr Justice Tadgell and Mr Justice Charles - and their reasons for decision are found at pages 12 through to 14.  His Honour Mr Justice Tadgell said:

I do not see this case as one in which it can legitimately be said, as the appellants contended, that it is sought to preserve the status quo.  Rather, as it seems to me, it is a case in which an attempt is made to disturb the status quo with respect to the ability of the first‑named respondent to call on the performance bonds.

As to that, we submit that the characterisation of our application as one made to disturb rather than to preserve the status quo has important implications.  In the context of applications for interlocutory injunction both at first instance and to preserve the subject matter of an appeal, we submit that that is a wrong approach to the whole concept of status quo; that the status quo ought not be determined by assuming that the defendant has the right which it asserts because that is the very right which is under challenge in the proceedings.  Otherwise, we would submit, that every plaintiff seeking an interlocutory injunction to restrain the exercise of a purported right by a defendant would fail on the basis that the status quo was sought to be disturbed rather than preserved by the injunction application.         We would seek to challenge the concept that the status quo is to be determined by assuming that rights asserted by the defendant which are under challenge have in fact been exercised or are capable of lawful exercise. 

His Honour Mr Justice Charles, over the next three pages, particularly highlights the impact on banks under the Bolivinter principle and we do not dissent from the concern that his Honour has in relation to the position of banks but, of course, it did not arise on the application which was under consideration.  There was no doubt that the Bank had no particular difficulty or problem and the Bank had already submitted to the jurisdiction of the court and was in no doubt or dilemma whatever.

The fundamental issue or one of the fundamental issues that arises before the Court of Appeal on the hearing of the appeal against the reasons for decision of Mr Justice Batt relates to the extent of the section 51AA in its present form in this field of bank and commercial guarantees and a fundamental issue is the extent to which the concept of unconscionable conduct as found in section 51AA of the Trade Practices Act has now altered the law as it was stated in Bolivinter and in subsequent cases which are referred to by his Honour; Edward Owen Engineering being an important case.

We submit that when the decided cases are examined and the Wilson v Church principles are taken into consideration, there is a significant issue in the administration of justice, both in relation to this individual case and in general as to the extent of the Wilson v Church principle in the context of appeals which are of an interlocutory nature but are also as of right to courts of appeal.  We are in the predicament that as our application here is made in first instance to the Court of Appeal, this Court is the only court which we can approach in relation to the decision that was made by the Court of Appeal upon a summons made directly to it.

The decision of the Court of Appeal was made in the background of a series of interim injunctions restraining the exercise of the suggested right to call the various bank guarantees by Justice Hampel and subsequent judges of the court, followed by the determination of an application for an interlocutory injunction by Mr Justice Batt, and at the conclusion of that particular application Mr Justice Batt did grant continuing injunctions to permit our application to be brought to the Court of Appeal which subsequently occurred.

So, at the first time upon this interlocutory application before the Court of Appeal we found ourselves in the predicament where, as a consequence of the orders which were made by the Court of Appeal we

were without any protection in relation to the bulk of the funds which were in dispute.  So, if the Court pleases, we come to this Court seeking to have that matter rectified.

We submit, in relation to the administration of justice generally and in this particular case, that the duty of a court pending the hearing of an appeal as of right to ensure that the appeal, if successful, is not nugatory is an important consideration as is the preservation of the utility of appeals as of right to a Court of Appeal and the whole question of what is the status quo pending the hearing and determination of an appeal as of right.  The position where appeals are by leave is different.  There is a separate series of decisions referred to in our learned friend’s summary of argument.  That is not this case.  The Wilson v Church line of authority is, we submit, applicable to this class of case and it is important to establish the rights of appellants to the preservation of their position so that appeals, if brought as of right, are not nugatory in the outcome.

They are the matters which we rely on, if the Court pleases, in bringing this application and, in substance, we rely on those two classifications, namely, the Wilson v Church line of authority, its scope and extent, and secondly, the question of the meaning of the status quo;  how is it to be determined in the context of interlocutory application, and whether the ruling of the court in this case that we were not legitimately seeking to preserve the status quo is soundly based.  They are the matters which we rely on, if the Court pleases, in the course of our application for special leave.

DAWSON J:   Thank you, Mr Garde.  The Court need not trouble you, Mr Murdoch.

In Paringa Mining & Exploration Co Plc v North Flinders Mines Ltd (1988) 165 CLR 452, at 458, it was observed that:

In general, the orderly administration of justice would be impeded if this Court intervened in interlocutory proceedings in a matter pending in a court of trial.  It is the responsibility of a court of trial to determine the course of interlocutory proceedings, subject to appeal to the relevant intermediate appellate court. 

The applicant would have the Court depart in this case from that general principle but has failed to show any exceptional circumstances which would justify that course.  Accordingly, special leave to appeal is refused.

MR MURDOCH:   If it please the Court, in our submission, we ask the Court to give consideration to the question whether, in these circumstances, the order for costs which ought follow the event ought to be indemnity costs in the way of solicitor and own client costs.  In our submission, this application was hopeless from beginning to end for the several reasons that we set out in our submissions.  In our submission, there is no good reason why our client should be out of pocket one cent for an application of this nature and we would ask the Court to make, in these circumstances, an order that the costs be paid on a solicitor own client basis.

KIRBY J:   Did you give notice to your opponent that that was your intention?

MR MURDOCH:   Yes, if the Court pleases.  In our outline of argument, page 9, under the question of costs, paragraph 23, we submitted that special leave should be refused with costs awarded on a solicitor and own client basis.

DAWSON J:   As to costs, do you have anything to say?

MR GARDE:   Yes, if the Court pleases.

DAWSON J:   Just one moment.  The Court does not intend to accede to the submission made by Mr Murdoch in relation to solicitor and client costs.  Can you say anything about costs merely following the event?

MR GARDE:   No, your Honour.

DAWSON J:   The application for special leave to appeal is refused with costs.

MR MURDOCH:   If the Court pleases.

DAWSON J:   Adjourn the Court sine die.

AT 12.32 PM THE MATTER WAS CONCLUDED