Republica Democratica De Timor Leste & Anor v Lighthouse Corporation Limited & Anor

[2020] HCATrans 63

[2020] HCATrans 063

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M163 of 2019

B e t w e e n -

REPUBLICA DEMOCRATICA DE TIMOR LESTE

First Applicant

ESTADO DA ELECTRICIDADE AGUA E URBANIZACO

Second Applicant

and

LIGHTHOUSE CORPORATION LIMITED IBC 051 557

First Respondent

LIGHTHOUSE CORPORATION PTY LTD ABN 25 343 263 433

Second Respondent

Application for special leave to appeal

KEANE J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO SYDNEY

ON FRIDAY, 29 MAY 2020, AT 9.33 AM

Copyright in the High Court of Australia

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MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR J.B. KAY HOYLE, for the applicants.  (instructed by DLA Piper Australia)

MR M.R. SCOTT, QC:   If the Court pleases, I appear with MR C.P. YOUNG, SC and MR P.E. ANNABELL for the respondents.  (instructed by Johnson Winter & Slattery)

KEANE J:   Yes, Mr Walker. 

MR WALKER:   If it please your Honours.  Your Honours, when there is an application for the stay of proceedings in courts of this country on grounds that the court in question is a clearly inappropriate forum, the premise of course of the application is that the jurisdiction of the court in question has been regularly invoked and that there is thus what has sometimes been described as the prima facie right for the moving party to continue its litigation to a conclusion.  That is the premise. 

It so happens that in this country, as a choice of law rule, devised no doubt for default of any imaginable federal alternative, that when in relation to contract disputes there is involved an issue about the distance or terms of the contract then that logically anterior question to the resolution of any dispute about rights and liabilities under the contract will be determined by the law of the forum. 

EDELMAN J:   Is that because the question is one about whether the contract itself has been formed?

MR WALKER:   Yes, it is. That is why I call it ‑ ‑ ‑

EDELMAN J:   Is this really a case about contract formation or is this a case where questions are questions of validity such as misrepresentation, capacity, illegality, and so on?

MR WALKER:   It is both, your Honour.  There certainly are foreshadowed, as your Honours will have read, issues cognate with those that Justice Edelman named in the second alternative, but there is a question about formation, particularly as to what terms were incorporated by the dealings between the parties producing the requisite consensus ad idem. 

Now, that also engages the question as to whether, as your Honours know, there are express choice of law clauses for lex causae – that is, the law to determine the application of the contract of the facts proved – depending upon what standard terms, as they are called, were incorporated in the dealings which are said to have produced a contract at all.

EDELMAN J:   Do you submit that the question for incorporation of terms into a contract is one that must always be governed by the lex fori?

MR WALKER:   Yes, on the law of this country as it stands, not challenged in the courts below, not sought to be canvassed by us in an appeal for which we seek special leave, that falls squarely within the principle that not only the formation of a contract but that which is inextricable to ascertain the formation of a contract – that is, what terms have been agreed – will all be governed by lex fori, because there is no other possibility.  You cannot look over and assume an outcome to that dispute in order, for example, to use the law in a putative choice of law clause nor, for that matter, to look to the effect of the terms on conduct in different jurisdictions because ‑ ‑ ‑

EDELMAN J:   But this is not a case where it is all of the terms.  This is only some of the terms on the incorporation of terms issue.  So there is an executed contract, query whether it is binding or not, but there is an executed contract and there is no dispute about the existence of some - many of the terms of that contract.

MR WALKER:   That is correct, your Honour.  We have made that clear.  But of course the existence of a contract as the basis of the private regime regulating rights and liabilities of the parties under the contract is inextricable from ascertaining what its terms are.  They are not separate inquiries.  When one asks has a contract been made one is asking what are the terms with contractual force that bind the putative parties.

EDELMAN J:   Can that be right?  If one of the undisputed terms of the contract were the choice of law clause would you still be saying that because there are some other terms that are disputed the lex fori is the forum that governs the law in relation to incorporation of those terms?

MR WALKER:   No, if that were the case in hand, and there were one, assurance that there would be a contract and, two, whatever else its terms there would be an express choice of law provision in it, then it would be appropriate for the court, not because lex fori is going to determine the question what are the terms of the contract, but because the court would know (a) there is going to be a contract and (b), whatever the dispute about other terms there is no dispute about express choice of law, then (c), of course the court, in the familiar way that first Justice Gordon spoke about and then this Court repeated in somewhat broader terms in Zhang, of course the court should look to, as a material consideration, the fact that the forum court’s own law will be the party’s chosen law as lex causae.  But that is not this case.

EDELMAN J:   So the difference in this case is that one of the terms that is sought to be incorporated is a choice of law term, and that makes all the difference as to the lex causae.

MR WALKER:   No, it does not make all the difference to the lex causae.  It makes all the difference to the use that can be made of the fact that it will be lex fori that determines the approach to ascertain what are the terms of this contract.  It will be Australian contract law rather than for, say, Timorese contract law, which will determine the outcome of the dispute concerning whether or not the terms of a contract will include an express choice of law clause, among other terms, but it does include that question.

Now, your Honours, what that means is that this is a case that provides an opportunity for the Court to consider what we submit is the fundamental distinction between a choice of law rule which requires, for want of any imaginable better alternative, the law of the forum to be applied to what I will call the anterior question of the existence of the contract and the related question of what the terms are of the contract, on the one hand, and, on the other hand, lex causae in the sense of that system of law which will provide the rules and principles to determine the outcome of a dispute about rights and liabilities under the contract as thus established.  They are separate and distinct.

The law in this country, in our submission, is very plain as to the significance of the latter in a clearly inappropriate stay argument and your Honours will have seen all the parties bring the changes on the expression first in the plurality reasons in Voth 171 CLR 566 where, as your Honours will recall, first there is a paraphrase of a statement by Justice Gaudron from Oceanic Sun, which included the expression:

that the selected forum should not be seen as an inappropriate forum if it is fairly arguable that the substantive law of the forum is applicable in the determination of the rights and liabilities of the parties.

Before proceeding to what the plurality actually said about that statement we interpolate to make this point.  The determination of the rights and liabilities of the parties there should not be understood – this is our contention and it is contested and it is, in our submission, an interesting doctrine that needs this Court’s attention – that should not be understood as embracing the anterior question:  is there a contract and, if so, what are its terms?  There is of course neither in Oceanic Sun nor in Voth any occasion for that distinction to have been drawn.

What the plurality said about that statement by Justice Gaudron was that the substantive law of the forum is a very significant factor in the exercise of the court’s discretion.  Now, that is elliptical, to put it mildly.  The substantive law of the forum one needs to understand as being the lex causae for determining rights and liabilities of the parties.  That must be what their Honours are referring to.

What their Honours said is that that was a very significant factor and your Honours will note the similar language of the decisions against us in the courts below, including the notion of what I might call an insuperable barrier.  That is why we would say the discretion of course should be re‑exercised but in accordance with proper principle.

Your Honours will recall as well that in Zhang, to which we have drawn attention, 210 CLR at 504, paragraph 26, that passage in Voth is described by the plurality there as showing that a material consideration is whether it is fairly arguable that the substantive law of the forum is the lex causae and what we are urging is that the conceptual distinction to which we have drawn attention in our written application is a distinction that was not alive and had no materiality and got no consideration in this Court’s important holdings in those two authorities.  This case throws up that distinction in operation. 

KEANE J:   But does it, Mr Walker?  I am looking at paragraph 68 in the Court of Appeal’s reasons at page 57 of the application book where their Honours say:

In our view, based on the findings of the tribunal, the terms of the documents and the agreed facts, it is at least arguable that the law of the cause will be Victoria.  This supports the conclusion that the Victorian Court is not ‘clearly inappropriate’. 

The proposition that it is at least arguable that the law of Victoria is the law of the cause, is that not a problem for us, if you like, in taking up this matter, to deal with the question of principle that you are seeking to agitate, that what their Honours say is as a matter of principle a sufficient basis for their conclusion in the application of the Voth test?

MR WALKER:   The short answer is yes, that is a matter that requires scrutiny at the level of special leave.  May I explain why it should survive that scrutiny and special leave should be granted?  It is the case that – and it would be fatuous for us to contend otherwise – it is fairly arguable as a matter of what is in prospect over a juristic horizon that lex causae will be Victorian.  One only has to look at the terms, the incorporation of which is in dispute, to see that. 

So is there a chance, a real chance worthy of consideration that the law of Victoria will provide the substantive regime by which rights and liabilities under the putative contract will be determined?  The short answer is yes.  But it is to be seen from the antecedent part of the consideration of the Court of Appeal starting at page 54 in paragraph 55 and continuing thereafter that the determination of the issue was, to put it mildly, materially influenced, in fact we submit it is plain by the sequence and expression of reasons that it was the dominating factor that it would be lex fori to determine this anterior question to determine the existence of the contract, and of course the necessary accompaniment to that finding, the terms of a contract.

It is for those reasons that the discretion – it is a discretion – has been exercised under the material influence of a matter which we submit must be extraneous in order to avoid circularity, or in order to avoid the clearly inappropriate jurisdiction ‑ ‑ ‑ 

EDELMAN J:   Why could circularity not be avoided simply by saying, well, insofar as there are terms that are sought to be incorporated into this contract, and the corporation of those terms is in dispute, we put them to one side and we examine the contract itself as executed without those terms, and the undisputed contract, albeit its binding nature being disputed, is one which has at least a clearly arguable connection with the State of Victoria.

MR WALKER:   Your Honour, I do not want to be heard to say that there is anything wrong with the method that your Honour posits, and if that is the end of my application so be it.  Our point is that is not what was done.

EDELMAN J:   But then all you would be urging then is - you would just be urging us to grant special leave for the purposes of providing alternative reasons to the same conclusion.

MR WALKER:   No, that, with respect, assumes, your Honour, that the exercise of discretion, guided by a proper understanding of the principles…..this two‑stage question of choice of law, is inevitably going to be in favour of the application and that is not the case, in our submission.  It is not the way their Honours reasoned below.  Their Honours plainly regarded ‑ ‑ ‑

KEANE J:   Well, apropos of that, Mr Walker - I do not mean to cut you off, but following up Justice Edelman’s question, if one goes to page 61 of the application book and looks at paragraph 82, the Court of Appeal say:

Having considered the material as a whole, had it been necessary to decide the question of forum for ourselves, we would have come to the same conclusion.  Even putting to one side the fact that the law of the forum is to be applied in the determination of whether a contract exists, there are substantial connecting factors to Victoria.

Then their Honours to say that there are substantial connecting factors to Timor Leste as well, but then they say:

Like his Honour, however, we are not persuaded that Victoria is a clearly inappropriate forum.  Even on the applicants’ arguments the choice of law in relation to contract formation would not alter that conclusion.

Does that not mean that Justice Edelman was right when he said that we will end up writing an essay to the effect that the Court of Appeal was right for different reasons, or for partly different reasons?

MR WALKER:   That is something that your Honours should be concerned about.  We are not asking you to do that and if that is how your Honours see the upshot of our application then it should be dismissed.  My argument that that is not what we seek is, of course, founded on the fact that what we seek is special leave for an appeal to correct the error about the approach that their Honours did take. 

Of course paragraph 82 stands there to demonstrate an available argument that, had the case been reasoned differently, nonetheless the same outcome would have ensued.  Our submission, we are entitled to have had an exercise of the discretion properly informed and in our submission, paragraph 82 should not be read as what I will call a freestanding or self‑contained fallback alternative way of determining the case.

The discretion, which is obviously one that involves a drastic outcome one way or the other, is one which, in our submission, ought always be exercised in accordance with principle and if it has been misinformed as to principle there ought to be no room for what I will call a criminal appeal proviso‑style approach unless there are matters founded

with sufficient cogency as to provide two equally operating separate modes of reasoning of the same outcome.

Unless paragraph 82 or the reasoning that culminates in paragraph 82 is thus read then, in our submission, this is a decision where we have suffered what is arguably a misapplication of principle – a misapplication of principle that has, as it were, the butcher’s thumb in the scale. 

As soon as somebody sues in an Australian court, on this reasoning, if there be a contract dispute in question – an international trade will always involve something about a contract – then the moment that there is an element of dispute concerning contract formation or the terms of the contract there is a material consideration against a clearly inappropriate forum being held which, we submit, is down completely to the uncontrolled decision to invoke jurisdiction and provide no element of substance of a kind that choice of law and clearly inappropriate otherwise is only concerned with for favouring the local forum.

Without repeating myself, your Honours, those are our submissions.

KEANE J:   Thanks, Mr Walker.  Yes, Mr Scott.

MR SCOTT:   If the Court pleases.  Your Honours have, at the last point, identified our best point by reference to paragraph 82 in the Court of Appeal reasons.  It is useful to recall what sits underneath that in the first instance judge’s reasons which your Honours will find in the application book as a recording of the submissions made by the parties on forum non conveniens commencing at application book 26, paragraph 77 and following.

Those paragraphs summarise matters that were uncontested before the Court of Appeal about the factors which were said to disqualify the Victorian Supreme Court as an appropriate forum.  Amongst those raised – I could have given a better reference to your Honours – 69 on application book 25 – was reference to Timorese law at paragraph 71, the usual reference to the domicile and location of witnesses of course and a proposition about the applicable procurement system of Timorese law, at paragraph 73.

Then, at 77, his Honour recorded our submission about the incorporation of the terms point that Mr Walker has spoken to.  We note on the way through to the ultimate paragraph, 87, would be the offending expression “major impediment”, that his Honour recognised the distinction of the different test that applies under Spiliada principles at paragraph 84.

It is at that point that we reach his Honour’s consideration which was the subject of approval by the Court of Appeal for reference that your Honours went to a moment ago in paragraph 87.  It is to be recognised that a major platform of this application for special leave is the proposition that there was an error in the exercise of discretion by describing the application of the laws of the forum as a “major impediment”.  In fact, what the primary judge decided and the Court of Appeal accepted was that it was a major impediment to the defendant’s argument, and that argument was predicated on a reference to the establishment of East Timorese law. 

The East Timorese law was the subject of findings of fact by the primary judge, application book 22, paragraph 55, where in effect his Honour did not accept that the evidence was sufficient to establish to a reasonable satisfaction how the transactions fall within the relevant laws and the same proposition was picked up by the Court of Appeal, application book 61, paragraph 80, just before the passage that your Honour Justice Keane took our learned friend to.  Paragraphs 80 and 81, the Court of Appeal again made a finding of fact. 

The difficulty that that presents for the purposes of the exercise that the applicants would seek to conduct and resolve in what they say is an issue that is an interesting issue that has arisen in light of perhaps, say, Voth, 565, is that the facts as they presently stand will never rise to the level where anything other than Victorian law will apply because to say otherwise is to speculate about the application of East Timorese law and so it will follow that the law of the forum will apply to formation, term identification and each and every other stage of the inquiry. 

EDELMAN J:  So your submission is that law of the forum automatically applies to any question of incorporation of a term or any question of capacity?

MR SCOTT:   It will apply, your Honour, to everything unless and until there is a proof that some other choice of law rule will apply to impose a foreign law. 

KEANE J:   But you are not saying that it applies qua lex fori, you are saying that it applies qua lex causae on the basis of the connecting factors with Victoria and the absence of a viable candidate to the alternative? 

MR SCOTT:   With respect, your Honour, just so.  This was not a case where ‑ ‑ ‑

EDELMAN J:  But where you have a contract such as here which is an executed contract, albeit one where there are some disputes including disputes as to some of the terms, why is there not always going to be an open and available approach of saying, well, apart from the disputed causes which is the legal system that is most closely connected to the contract?

MR SCOTT:   With respect, your Honour, an entirely valid inquiry which is susceptible of proof.  The point I am making is that the stay court has to make an assessment of its suitability based on the evidence before it at the time.  That was the significance of the courts below identifying the defect and the proof of Timor Leste about the content of the foreign law that would apply and its significance. 

EDELMAN J:   Yes.

MR SCOTT:   It cannot be a theoretical exercise at that stage.  The level of principle, your Honours, without wishing to make the subject matter appear unnecessarily interesting, there is no question that our position is that when this Court said in Voth at 565, extracted conveniently at application book 56 at Court of Appeal reasons 62, that it was relevant to consider the extent to which the law of the forum is applicable in resolving the rights and liabilities, that our position is that it is relevant to consider extent in that respect when identifying whether there is a contract – where that is contested as here – and the content of that contract. 

It must be so, because the Voth court did not express it in binary terms, as if to say, if the law applies, it was a relative evaluation of the extent, and that exposes, with respect, the device behind this application because although no ‑ in fact, an overt challenge to the clearly inappropriate forum test is denied, in substance the premise of circularity that is identified, or the postulate of neutrality, is just such an attack.

To contend that, the application of the law of forum to something as fundamental as contract formation and the contract claim is neutral just because if the claim had been brought in Timor Leste, the law in Timor Leste might apply to that question, is to buy into a comparison between jurisdiction.  The only question with which the courts below were properly concerned was the extent to which the law of Victoria would apply in resolving lasting liabilities.  If the Court pleases.

KEANE J:   Thanks, Mr Scott.  Mr Walker, anything in reply?

MR WALKER:   No, it would be repetitive, your Honours.

KEANE J:   Thanks, Mr Walker.

This application is concerned with matters of practice and procedure.  The determination of the proposed appeal would not depend on any question of principle, the resolution of which would justify the grant of special leave to appeal.  The proposed appeal would, in the particular circumstances of the case, enjoy insufficient prospects of success to warrant the grant of special leave to appeal.  The application should be dismissed with costs.

MR WALKER:   May it please the Court.

KEANE J:   The Court will now adjourn for a few minutes to enable the Court to be set up for the next hearing.  Adjourn the Court, please.

AT 10.02 AM THE MATTER WAS CONCLUDED