Republica Democratica de Timor Leste v Lighthouse Corporation Limited
[2019] VSCA 290
•6 December 2019
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0062
| REPUBLICA DEMOCRATICA DE TIMOR LESTE | First Applicant |
| and | |
| ESTADO DA ELECTRICIDADE AGUA E URBANIZACO | Second Applicant |
| v | |
| LIGHTHOUSE CORPORATION LIMITED IBC 051 557 | First Respondent |
| and | |
| LIGHTHOUSE CORPORATION PTY LTD ABN 25 343 263 433 | Second Respondent |
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| JUDGES: | MAXWELL P, NIALL and EMERTON JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 9 August 2019 |
| DATE OF JUDGMENT: | 6 December 2019 |
| MEDIUM NEUTRAL CITATION: | [2019] VSCA 290 |
| JUDGMENT APPEALED FROM: | [2019] VSC 278 (Almond J) |
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PRACTICE – Action – Stay – Proceedings for breach of contract – Proceedings commenced in Victoria – Whether ‘clearly inappropriate’ forum – Judge refused stay – Dispute over contract formation, identification of contract terms – Law of forum applicable to determination of those questions – Whether relevant factor – Proceedings involve sovereign state and its public infrastructure – Whether judge took into account ‘special character’ of contract dispute – No error in exercise of discretion – Leave to appeal refused – Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 applied.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr P H Solomon QC with Mr J B Kay Hoyle | DLA Piper |
| For the Respondents | Mr M R Scott QC with Mr C Young | Johnson Winter & Slattery |
MAXWELL P
NIALL JA
EMERTON JA:
Introduction
The first applicant is the sovereign state of the Democratic Republic of Timor‑Leste (‘Timor’). The second applicant is a government department of Timor responsible for, amongst other things, Timor’s management and supply of electricity (together, ‘the Government’ or the applicants).
The respondent corporations (together, ‘Lighthouse’ or the respondents) commenced a proceeding against the applicants in the Supreme Court of Victoria, alleging breach of an agreement for the supply of fuel which, they allege, was made between them and the Government. There is a dispute as to whether any concluded agreement was entered into and, if it was, as to its terms.
The applicants applied by summons to have the proceeding stayed or dismissed. The application was put on two bases. The first was that the Supreme Court had no jurisdiction to entertain a claim which challenged the lawfulness of conduct by the sovereign state of Timor. For this purpose the applicants relied on the common law ‘act of state’ doctrine.[1] The alternative basis was that the Supreme Court of Victoria was a ‘clearly inappropriate forum’ to determine the dispute. A judge of the Trial Division rejected both contentions.[2]
[1]An alternative argument based on the provisions of the Foreign Sovereign Immunities Act 1985 (Cth) was abandoned at the hearing.
[2]Lighthouse Corporation Limited v Republica Democratica de Timor Leste [2019] VSC 278 (‘Reasons’).
In this Court, the applicants challenge the judge’s finding in relation to forum only. They contend that the discretionary decision of the judge ought to be set aside on account of vitiating error. In that event, they seek that this Court re-exercise the discretion.
For the reasons that follow, we would refuse leave to appeal.
The pleadings
The critical paragraphs of the amended statement of claim, shorn of their particulars, are as follows:
Fuel Supply Agreement
5.On or about 22 October 2010, the plaintiffs and the defendants entered into an agreement (the Fuel Supply Agreement) providing for inter alia:
(a)the sale and supply by the plaintiffs to the defendants of not less than six million litres of high speed diesel fuel per month over a six year period;
(b)the supply by the plaintiffs to the defendants of eight emergency power generators, without charge, but subject to certain conditions including that the fuel used in the generators was exclusively supplied by the plaintiffs; and
(c)payment for the high speed diesel to be made by the defendants to the plaintiffs by way of an irrevocable documentary letter of credit, which was to be posted no less than 20 days prior to the loading of the shipment of fuel.
…
6.On or about 18 November 2010, the plaintiffs and the defendants varied the Fuel Supply Agreement to, inter alia, require the plaintiffs to provide interim storage facilities at Port Caravela for the fuel delivered by the plaintiffs pursuant to the Fuel Supply Agreement.
…
7.On or about 26 November 2010, the plaintiffs and the defendants varied the Fuel Supply Agreement for a second time to provide, inter alia, as follows:
(a)the Democratic Republic of Timor Leste would only need to pay for the storage for the fuel delivered pursuant to the Fuel Supply Agreement for the first twelve months;
(b)the supply period would be extended from six years to seven years; and
(c)a 15,000,000 litre fuel storage terminal would also be constructed at Port Caravela as part of the plaintiffs’ investment in Timor-Leste.[3]
[3]Emphasis in original.
Lighthouse pleaded that the contract was in writing and comprised a number of signed documents (‘the Fuel Supply Agreement’). In addition, Lighthouse relies on three documents said to be incorporated by reference into the Fuel Supply Agreement:
(a)the Standard Terms and Conditions Applying to the Sale of Goods (‘Standard Terms’);
(b)the General Terms and Conditions of Supply dated October 2010 (‘October General Terms’); and
(c)the General Terms and Conditions of Supply dated December 2010 (‘December General Terms’).
Lighthouse contends that, in accordance with the terms of these documents, the contract, and any dispute arising from it, are to be governed by the laws of Victoria. Thus, cl 17.1 of the Standard Terms provides that:
[t]he Contract shall be interpreted in accordance with and in subjection to the laws of the Commonwealth of Australia, in the State of Victoria, unless stipulated otherwise in any applicable Special Conditions of Contract.
Clause 19.1 of both the October and December General Terms provides that:
[t]he Contract shall be interpreted in accordance with the laws of the Commonwealth of Australia, Victoria, unless stipulated otherwise in the Contract.
(We will refer to each of these clauses, said to have been incorporated into the contract, as a ‘proper law clause’.)
We also note that cl 17 of the October General Terms, under the heading ‘Resolution of Disputes’, provides:
17.1The Purchaser and the Supplier shall make every effort to resolve amicably by direct informal negotiation any disagreement or dispute arising between them under or in connection with the Contract.
17.2Any Supplier that claims to have suffered loss or injury due to a breach of an obligation imposed on the procuring entity, by law may seek review in accordance with the applicable public procurement law of the Buyer, or the standard laws applicable to Suppliers, under Commonwealth laws of Australia.
As is discussed below, Lighthouse submitted the dispute for arbitration in the International Centre for Settlement of Investment Disputes (‘ICSID’). The ICSID tribunal (‘the tribunal’) found that Timor had not consented to arbitration, and dismissed the arbitration for want of jurisdiction. In the course of doing so, the tribunal concluded that a contract had been made between the parties and that the October General Terms — but not the Standard Terms or the December General Terms — were incorporated.[4]
[4]Lighthouse Corporation Pty Ltd v Democratic Republic of Timor-Leste (Award, International Centre for Settlement of Investment Disputes, Case No ARB/15/2, 22 December 2017) [238], [239], [278], [282] (‘Award’).
It is on this finding that Lighthouse, by way of a notice of contention, seeks to erect an estoppel preventing the applicants from denying that:
(a) the Fuel Supply Agreement was made on 2 December 2010; or
(b) the proper law clause in the October General Terms formed part of the agreement.
The defence
The applicants have yet to plead their defence. However, for the purposes of the applications before the judge, they filed an affidavit affirmed by their solicitor, Liam Thomas Prescott on 30 April 2018 who deposed to a summary of the legal contentions that the applicants would pursue in defence of the proceeding.
In summary, should the matter proceed, the applicants would contend that there was no binding contract between the Government, Lighthouse and Zebra Fuels Ltd (‘Zebra’). They also dispute the identification, meaning and contractual significance of the reference in the signed documents to ‘Standard Terms and Conditions Applying to the Sale of Goods’. The applicants would also dispute that the two versions of the General Terms were incorporated into the contract, at least partly on the basis that they were not provided to the Government at the relevant time.
Further, or in the alternative, the applicants would contend that the Government was induced to enter into the negotiation process on the basis of fraudulent misrepresentations made by Lighthouse. Mr Prescott deposed:
In order for the Government to enter into any contract with Lighthouse and [Zebra], the Prime Minister (and other officials) was required to follow certain processes mandated by the Constitution of Timor-Leste and more generally under Timorese law. None of these processes were undertaken because the Government considered that the arrangements with Lighthouse and [Zebra] were preliminary and provisional.
At no stage did Lighthouse take any step to follow the Government’s guidelines on procurement in relation to the first proposal or any subsequent proposal, or make any approach to the Government’s agencies or departments as advised. Its attempts to secure an agreement with the Government were outside the process and designed to avoid it. In addition, although Lighthouse claimed to be the majority shareholder of [Zebra], it never carried out any of the necessary steps, under Timorese law, to become a shareholder in [Zebra] and at no stage was it ever a shareholder in [Zebra] (thereby making it unable to perform, at the outset, a significant aspect of the final proposal concerning the development at Port Caravela).
The representations made by Lighthouse to the Government were false or misleading and the Lighthouse companies (in the form of Mr Jacobs, their sole director) knew them to be false or misleading.
The facts
The following emerges from the statement of facts agreed upon for the purpose of the hearing of this application.
From March 2010, Lighthouse, in conjunction with a Timorese Company, Zebra, commenced negotiations with Timorese officials for the supply of high speed diesel fuel and submitted a proposal to the Government. That proposal was rejected as it had not been submitted during Timor’s tendering process. Lighthouse was advised of the relevant Government guidelines on procurement.
In September 2010, discussions resumed, resulting in Lighthouse and Zebra submitting a revised proposal for the supply of power generators (in addition to fuel) to meet urgent electricity shortages and power blackouts. Lighthouse and Zebra advised the Government that the generators would be supplied from Cummins South Pacific Pty Ltd (‘Cummins’). Lighthouse claimed an exclusive agency relationship with Cummins.
On 20 October 2010, Lighthouse and Zebra met in Dili with the then Prime Minister of Timor, His Excellency Xanana Gusmão (‘the then Prime Minister’), and the then Secretary of the second applicant, Mr Pereira, to discuss the proposals (‘20 October meeting’).
On 22 October 2010, Lighthouse sent the Government a document entitled ‘the Supply for Allocation and Contract’ (‘SAC’) and another document that we will refer to as the ‘Contribution Summary’. Documents in similar form were part of the Further Proposal. The then Prime Minister, Mr Pereira, Lighthouse and Zebra signed the SAC. The SAC referred to the Contribution Summary, which stated that ‘Lighthouse “Standard Terms and Conditions Applying to the Sale of Goods” will apply’.
At the end of November 2010, further documents were signed by the then Prime Minister, Mr Pereira, Lighthouse and Zebra. They contemplated the construction of a fuel storage facility at Port Caravela by Zebra and the supply of barges by Lighthouse to store the supplied fuel, pending construction of the storage facility in Port Caravela.
On 3 December 2010, the Timorese ambassador to Australia visited the Cummins facility in Melbourne. The visit was arranged to show the ambassador the proposed generators. The ambassador discussed an installation and training program for Timorese operators of the generators and a proposed Dili inspection.
On 5 December 2010, Lighthouse and Mr Sean Magee of Zebra requested that the Government provide a letter of credit in favour of Lighthouse, on the basis that the signed documents obliged the Government to start taking delivery of seven million litres of fuel per month for a period of seven years, along with free delivery of the generators. The Government refused the request, and Lighthouse did not supply any fuel or generators.
Lighthouse alleges, and the Government disputes, that on 7 December 2010, the Government was emailed copies of the Standard Terms, and that the Second Addendum incorporated, by reference, the December General Terms. Lighthouse also claims, and the Government disputes, that Lighthouse was provided with the October General Terms.
In early 2011, following an order placed by Lighthouse with Cummins, two generators were supplied to Timor. Cummins charged Lighthouse for the supply of the generators, and Lighthouse provided an invoice to the Government for an amount that exceeded the cost price of the two generators by 200 per cent.[5] The Government then paid the cost price for the generators to Cummins directly.
[5]Reasons [32].
During the first half of 2011, Lighthouse continued to press the Government to provide the letter of credit, and the Government continued to refuse to do so. Lighthouse claims that the Government’s failure or refusal to deliver a letter of credit was in breach of the signed documents.
On 19 August 2011, the Government’s solicitors sent a notice to Lighthouse, purporting to terminate ‘any agreement’ between the Government and Lighthouse, on the basis that Lighthouse had misrepresented the existence of an exclusive agency relationship with Cummins, and had misrepresented the experience and financial capacity to provide infrastructure and to make provision for the supply of fuel.
The ICSID Arbitration
In December 2014, Lighthouse commenced an arbitration against Timor, pursuant to the rules of the ICSID. Lighthouse claimed that the tribunal had jurisdiction to hear the matter. The question of jurisdiction was determined as a preliminary question, and, on 22 December 2017, the tribunal determined that it had no jurisdiction and published a detailed award.[6]
[6]Award.
As indicated, the question of jurisdiction turned on whether Timor had consented to arbitration. Three potential sources of jurisdiction were relied on by the respondents: the provisions of the contractual arrangement for the supply of fuel and generators; the Timor-Leste Foreign Investment Law;[7] and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (‘ICSID Convention’).[8]
[7]Foreign Investment Law 2005 (Timor-Leste) (Law No 05/2005).
[8]Award [1].
In order to resolve that jurisdictional question, the tribunal was required to make findings on the terms of the contractual arrangements between the parties. Before the tribunal, the respondents relied on contractual arrangements comprising three interrelated agreements. The respondents contended that an ICSID arbitration clause was incorporated into the contractual arrangements by the Standard Terms or the December General Terms.
Having received evidence about the provision of the documents and the course of negotiations, the tribunal concluded that the contract included, by incorporation, the October General Terms, but not the Standard Terms or the December General Terms.[9] As the October General Terms did not include a consent to arbitration clause, and contemplated that any dispute would be resolved in domestic courts, the tribunal held that the contract did not contain consent to arbitration.[10] Although not relevant for present purposes, the tribunal also concluded that it did not have jurisdiction on the other two bases asserted by the respondents. In the result, jurisdiction was declined.
[9]Ibid [238], [239], [278], [282].
[10]Ibid.
Judge’s decision
The judge rejected the act of state defence principally on the basis that the dispute was, in substance and in its terms, a commercial transaction of a private law character. This conclusion was based both on the pleaded allegations and on the position which the Government had adopted in the ICSID arbitration. There, as his Honour noted, the applicants had sought to defeat an argument that the transaction was an ‘investment’ for the purposes of the ICSID Convention by asserting that it was ‘an ordinary commercial transaction’. As his Honour noted, the Government contended before the tribunal that Lighthouse had ‘promised to supply goods for profit in an ordinary commercial cross-border transaction. It just so happens that the buyer was a sovereign nation.’[11]
[11]Reasons [50].
The judge held that a transaction does not reflect an act of state merely because a state is party to it or a member of the executive has executed the transaction.[12] Further, the judge noted that s 11(1) of the Foreign States Immunities Act 1985 (Cth) provided that a foreign state was not immune from the jurisdiction of the courts of Australia, insofar as the proceeding concerned a commercial transaction.[13]
[12]Ibid [52].
[13]Ibid [56]–[57].
In relation to the attack on the chosen forum, the judge noted that a party who has regularly invoked the jurisdiction of a competent court has a prima facie right to insist upon the exercise of the jurisdiction and have the claim heard and determined.[14] Further, the judge noted that, although a court has jurisdiction to stay a proceeding where the local forum is clearly inappropriate for the determination of the claim, such a course should only be taken ‘with great care’ or ‘extreme caution’.[15]
[14]Ibid [60], citing Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197, 241, 243 (Deane J) (‘Oceanic’).
[15]Reasons [61]–[63], citing Oceanic (1988) 165 CLR 197, 244 (Deane J). See also Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 554 (Mason CJ, Deane, Dawson and Gaudron JJ) (‘Voth’).
The judge then set out the applicable principles in a way which attracted no criticism on the present application. We shall return to the principles below.
In applying those principles, the judge noted the applicants’ reliance on the following features. First, it was submitted that Victorian law did not apply because the Fuel Supply Agreement was insufficiently certain to form a binding contract and that the standard terms were not incorporated. Secondly, they submitted that they did not receive a copy of the standard terms. Thirdly, they contended that the allegations of fraudulent misrepresentation, which depended upon conversations and meetings which took place in Timor, would be governed by Timorese law.
The judge acknowledged that key meetings between the parties occurred in Timor and the documents were signed in Dili.[16] Accordingly, the fact that there will be local witnesses, interpreters and reference to local laws may provide a basis for the view that Timor is the more appropriate forum.[17] As his Honour correctly stated, however, the appropriate test was whether Victoria was a ‘clearly inappropriate’ forum for determination of the dispute.
[16]Reasons [84].
[17]Ibid.
His Honour’s conclusion was expressed in the following terms:
Likewise for present purposes, the disputed questions as to whether the contract has been made and whether it includes the term that the contract is to be governed by the law of Victoria is are [sic] matters for the law of the forum. In my view, this is a major impediment to the defendants’ argument that the current forum is ‘clearly inappropriate’. But this is not the only reason. Having considered the material and the respective submissions of each party, there are significant connecting factors to Victoria. In the circumstances, I am not satisfied that Victoria is clearly an inappropriate forum in which to permit the action to proceed. In this regard, I have taken into account the expert evidence to the effect that courts in Timor Leste could hear and determine the proceeding and would accord procedural fairness to the parties.[18]
[18]Ibid [87].
Ground of appeal and notice of contention
The applicants sought leave to appeal on the single ground, namely, that the judge ‘failed to exercise judicially’ the discretion to stay the proceedings on the basis that Victoria was a clearly inappropriate forum.
By notice of contention, Lighthouse asserted that, by reason of findings made by the tribunal, the applicants are estopped from denying that the Fuel Supply Agreement was made on 2 December 2010 or that it incorporated the proper law clause in the October General Terms.
The principles
In Voth v Manildra Flour Mills Pty Ltd (‘Voth’),[19] the High Court held that a defendant will ordinarily be entitled to a permanent stay of proceedings instituted against it and regularly served upon it within the jurisdiction, if the defendant persuades the local court that, having regard to the circumstances of the particular case, and the availability of an alternative foreign forum to whose jurisdiction the defendant is amenable, the local court is a ‘clearly inappropriate forum’ for determination of the dispute.[20]
[19](1990) 171 CLR 538.
[20]Puttick v Tenon Ltd (2008) 238 CLR 265, 276 [27] (French CJ, Gummow, Hayne and Kiefel JJ) (‘Puttick’), citing Voth (1990) 171 CLR 538, 549, 565.
The principle is a manifestation of the broader power reposed in a superior court to stay proceedings if they are oppressive, vexatious or an abuse of process, or are productive of injustice in the particular case.
In many cases, the Court said, the application of the ‘clearly inappropriate’ test — which focuses on the inappropriateness of the local forum, rather than on the appropriateness of any other forum — is likely to yield the same result as an inquiry as to which of the two fora is the ‘more appropriate forum’.[21] Further, the inquiry will inevitably involve an assessment of the relevant ‘connecting factors’, including the nature of the dispute and cause of action, the law to be applied, the location of the cause and the location of witnesses.
[21]Voth (1990) 171 CLR 538, 558 (Mason CJ, Deane, Dawson and Gaudron JJ).
The fact that the law of the forum provides the governing law of the cause may be important, but is not necessarily determinative. So much follows from the choice of law rules which permit a local court to apply the law of a foreign jurisdiction. It may be that the existence of a much stronger connection with a foreign forum may justify a conclusion that the local court is clearly inappropriate notwithstanding that the law of the cause may not be the law of the foreign forum.
The onus remains on the party seeking the stay to establish that the chosen forum is clearly inappropriate. The test is a stringent one that requires the party seeking a stay to establish not only that the local forum is inappropriate, but that it is clearly so.[22] This indicates that ‘something more than merely balancing relevant considerations is required’.[23]
[22]Murakami v Wiryadi (2010) 268 ALR 377, 388 [53] (Spigelman CJ) (‘Murakami’).
[23]Ibid.
These principles are not in dispute.
The applicants’ submissions also accepted the following propositions. First, the decision of the judge was discretionary and, accordingly, appellate intervention depended on the identification of an error of the kind identified in House v The King (‘House’).[24] Senior counsel for the applicants disavowed any contention that the decision of the judge was not reasonably open (so as to fall within the residuary category of error in House). Rather, there was said to be specific error on the part of the judge, which we shall shortly identify.
[24](1936) 55 CLR 499. See, for example, Murakami (2010) 268 ALR 377, 385–6 [32]–[35], 389 [54]–[55] (Spigelman CJ, McColl JA agreeing at 408 [166], Young JA agreeing at 408 [167]).
Secondly, where the formation of an alleged contract is in issue, the relevant law to be applied to the question of contract formation is the law of the forum.
Thirdly, if the governing law (or ‘proper law’) of the contract was the law of Victoria, that would be ‘a powerful factor’ in favour of Victoria not being an inappropriate forum. The applicants submitted, however, that this Court could not be satisfied that any of the ‘proper law’ clauses had been incorporated into the agreement.
Ground of appeal: is Victoria a clearly inappropriate forum?
Applicants’ submissions
The applicants contended that his Honour had made two specific errors. The first was in treating as effectively dispositive the fact that Victorian law, as the law of the forum, governed the question whether or not a contract had been formed and (if it had) the identification of its terms. Properly understood, the applicants submitted, this factor was neutral — it neither helped nor hindered their argument.
Secondly, it was said, the judge failed to have regard to the fact that the alleged agreement was made by high public officials of Timor, concerned government procurement of significance to the State, and would involve analysis of Timorese procurement laws and constitutional principle. While these matters were taken into account in rejecting the act of state defence, they were impermissibly ignored on the forum question.
The applicants submitted that the connections with Victoria are insubstantial, ‘tangential to the main issues’ and tenuous. These connections include that some meetings took place in Australia; some correspondence was sent to Australia; there was one visit by the Timorese ambassador to the Cummins facility in Victoria; loss and damage occurred in Victoria; and some witnesses residing in Australia might have to give evidence in the proceedings.
On the other hand, the applicants submitted, the dispute has a number of ‘very substantial’ connections with Timor. These connections include:
(a)the fact that the background negotiations and interactions between the parties took place almost exclusively in Timor, or by reference to communications directed to Timorese officials in Timor;
(b)the principal negotiations in respect of the proposed transaction took place in Timor;
(c)the Fuel Supply Agreement involved the supply of fuel into Timor and the construction of port infrastructure in Timor (through the use of a Timorese concessionaire);
(d)the majority of documents to be produced and considered are located in Timor;
(e)a significant number of witnesses would need to be called who are resident in Timor, including the relevant Timorese officials, a former Prime Minister and a current ambassador; and
(f)a range of evidence would be required to be called about Timor’s public procurement system, the power to enter into infrastructure agreements and Timorese commercial and governmental practice.
Respondents’ submissions
Lighthouse contended that the applicants had failed to establish any error of a kind that would permit appellate intervention. There was no error of principle in the judge’s reasons. Questions of contract formation were governed by the law of the forum, on the present state of the authorities, and the dispute about the proper law of the contract was not properly to be resolved on a stay application.[25]
[25]Puttick (2008) 238 CLR 265.
No error was shown simply because an appellate court would or might have exercised the discretion differently. The failure must have resulted in the decision being ‘clearly wrong’. In particular, the fact that inadequate or excessive weight was given to some factors was not in itself a sufficient basis for an appellate court to substitute its own discretion for that of the trial judge.[26] Whilst some factors pointed to Victoria and some pointed to Timor, it was said, none of the factors (either individually or taken together) demonstrated that the Supreme Court of Victoria was a ‘clearly inappropriate forum’.
[26]Australian Health & Nutrition Association Ltd v Hive Marketing Group Ltd [2019] NSWCA 61 [15] (Bathurst CJ and Leeming JA), citing Gronow v Gronow (1979) 144 CLR 513, 537 (Aickin J).
Consideration of the ground of appeal
Was the choice of law on contract formation and terms a neutral consideration?
The judge observed that the law of the forum would be applied in determining whether a contract had been made, and in identifying its terms. It followed that the law of the forum would determine whether one or more of the ‘proper law’ clauses was incorporated. On the present application, the applicants did not seek to challenge either of those propositions, observing that they accorded with the present state of authority.
As to the first proposition, the applicants accepted that the approach taken by the judge reflected the settled position, at least for the purposes of an intermediate appellate court. In Trina Solar (US), Inc v Jasmin Solar Pty Ltd,[27] Beach J, with whom Dowsett J agreed, held that the choice of law to determine whether there is a consensus ad idem between the parties is the law of the forum.[28] In arriving at that conclusion, Beach J distinguished between questions as to, on the one hand, whether a contract exists and, on the other, the validity and interpretation of the contract, mode of performance and consequences of breach. In relation to these latter questions, the law to be applied is that which the parties have chosen or purported to choose or, in the absence of express choice, that which would be the putative proper law.
[27](2017) 247 FCR 1.
[28]Ibid 28 [128]. See also reasons of Greenwood J at 9–14 [28]–[46].
It is not necessary on the present application to determine the outer boundaries of the elements that fall within the formation of the contract, or the concept of consensus ad idem. The applicants accepted that those issues would encompass the question of whether or not the putative contracting parties had the capacity to enter into legal relations.
As to the second proposition, the applicants, after referring to the observations of Brennan J in Oceanic Sun Line Special Shipping Co Inc v Fay,[29] accepted that the law of the forum determines the terms of the contract, including the issue of which, if any, terms have been incorporated. It follows that, if the proceeding remains in Victoria, the question as to whether there was a contract formed between the applicants and the respondents will be determined by the law of Victoria. Victorian law will also apply to the identification of the terms of that contract and the determination of whether the contract includes one of the ‘proper law’ clauses.
[29](1988) 165 CLR 197, 225.
The judge regarded these matters as a ‘major impediment’ to the applicants’ argument that the Supreme Court of Victoria is a clearly inappropriate forum.[30] The applicants submitted that this conclusion involved specific error because, properly analysed, the two propositions accepted by the judge were ‘neutral’ as to the choice of forum. According to the written case, this was so because the question of whether a contract was formed was ‘anterior to, and not determinative of’ the respondents’ substantive case under the Fuel Supply Agreement.
[30]Reasons [87].
The written case advanced the following submission in the alternative:
In any event, this factor may be relevant but it is not determinative. Its application is dependent upon an invoking of jurisdiction; if the applicants had commenced proceedings in Timor then Timorese law would have been the law of the forum. Its application is thus purely adventitious on the commencing of an action.[31]
[31]Citations omitted.
The respondents submitted that the applicability of the law of the forum was not a neutral factor. They pointed out that, because of the defences foreshadowed by the applicants, the threshold issues in the litigation would be whether there was a binding agreement and — if there was – what its terms were. As already noted, the applicants (as defendants) deny that a binding contract was ever entered into. In the alternative, they contend that — if there was indeed a concluded agreement — it did not include any of the ‘proper law’ clauses.
We would uphold the respondents’ submission. As they pointed out, it would be contrary to established principle for the applicability of the law of the forum to be viewed as a ‘neutral’ factor on an application of this kind. They draw attention to what was said in Voth, where the High Court plurality affirmed that,
in deciding whether it has been established that the chosen forum is clearly inappropriate, the extent to which the law of the forum is applicable in resolving the rights and liabilities of the parties is a material consideration. In this respect Gaudron J stated in Oceanic Sun, as a qualification to her endorsement of the view of Deane J, 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. We agree with Gaudron J that the substantive law of the forum is a very significant factor in the exercise of the court’s discretion, but the court should not focus upon that factor to the exclusion of all others.[32]
[32](1990) 171 CLR 538 566 (citations omitted, emphasis added). See also Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491, 504 [26] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ).
There are, of course, other questions which will have to be determined in the litigation once the threshold questions of contract formation and the identification of terms have been resolved. The question of which law applies to the resolution of those questions will depend, in part, on whether it is concluded that one or other of the ‘proper law’ clauses was incorporated into any concluded agreement.
But that does not alter the fact that, in important respects, the substantive law of Victoria will be ‘applicable in the determination of the rights and liabilities of the parties’. On the authorities, therefore, it was well open to the judge to view that feature of the case as weighing significantly against the contention that Victoria was a ‘clearly inappropriate’ forum. Precisely what weight it was to be given was a matter for the judge. This ground of appeal must be rejected.
In the circumstances, it is not necessary to seek to determine whether, apart from the question of contract formation and the identification of the terms of the contract, the law of the cause is that of Victoria or Timor. The outcome of that question depends on which, if any, of the documents relied on by the applicants were incorporated into the contract.
As previously indicated, in the ICSID arbitration the tribunal accepted that the Fuel Supply Agreement incorporated the October General Terms.[33] However, those terms were only one of three documents which the respondents contended were incorporated. The respondents submitted that the contract also included the Standard Terms and the December General Terms. As already observed, the October General Terms provided for the choice of law in relation to interpretation of the contract and the resolution of disputes in different ways.
[33]Award [238], [239], [278] and [282].
The October General Terms appear to treat choice of law questions that apply to contract interpretation differently from those relevant to the law relating to the dispute.[34] It follows that even if the respondents establish the existence of the contract and its terms, the choice of law may still be a matter of controversy.
[34]See cl 17 of the October General Germs set out above at [9].
In the circumstances, it is not desirable for this Court to undertake a detailed factual and legal analysis in order to resolve the application for a stay. Those matters are best left to the trial judge.[35] However, we would not regard the matter as entirely neutral and therefore to be ignored in the question of forum. 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’.
Did the judge fail to have regard to the nature of the contract and identity and status of the contracting parties?
[35]Puttick (2008) 238 CLR 265, 275 [21] (French CJ, Gummow, Hayne and Kiefel JJ); Murakami (2010) 268 ALR 377 [64]–[65] (Spigelman CJ).
As noted earlier, the second specific error was said to be the judge’s failure to take into account the special character of the contract and its subject matter. The judge should have factored in, it was said, the ‘obvious inappropriateness’ of a dispute involving the sovereign state of East Timor, and the then Prime Minister, being litigated in Victoria. Counsel submitted that the position was comparable to that of an Australian Prime Minister being required to give evidence in a foreign forum in litigation about an Australian infrastructure contract.
The contention for the respondents was that these considerations had been fully, and appropriately, addressed by the judge in dealing with the applicants’ arguments on foreign state immunity. They had no place in the consideration of arguments about the appropriateness of the forum.
In our view, there was no error. To the extent that the ‘sovereign state’ considerations were also relevant to the ‘plainly inconvenient’ question, we are not persuaded that the judge overlooked them. The fact that the judge did not mention those matters in his statement of conclusion on the forum question is a reflection both of the nature of an application such as this and of the manner in which the arguments were presented to his Honour.
First, in Voth the majority said:
[W]e respectfully agree with the substance of the advice contained in the speech of Lord Templeman in Spiliada, namely, that the primary judge should ‘be allowed to study the evidence and refresh’ his or her memory of the relevant law ‘in the quiet [of his or her Chambers] without expense to the parties’; that he or she should not be burdened by unhelpful reference to other decisions on other facts; and ‘that submissions will be measured in hours and not days’. The qualification is that we think that, in the ordinary case, counsel should be able to furnish the primary judge with any necessary assistance by a short, written (preferably agreed) summary identification of relevant connecting factors and by oral submissions measured in minutes rather than hours. There may well be circumstances in which the primary judge may conclude that it is desirable to give detailed reasons balancing the particular weight to be given to the presence or absence of particular connecting factors and explaining why the local forum is or is not a clearly inappropriate one. Ordinarily, however, it will be unnecessary for the primary judge to do more than briefly indicate that, having examined the material in evidence and having taken account of the competing written and oral submissions, he or she is of the view that the proceedings should or should not be stayed on forum non conveniens (i.e. ‘clearly inappropriate forum’) grounds.[36]
We understand this to mean that a court considering an application for a stay on this ground is not usually required to give detailed reasons for its decision.
[36](1990) 171 CLR 538, 565 (Mason CJ, Deane, Dawson and Gaudron JJ) (citations omitted).
Secondly, it is necessary to read the reasons as a whole. As we have noted, the judge in ruling on the ‘act of state’ argument squarely addressed all of the relevant considerations concerning the nature of the transaction and the status of the Government as a party. In the circumstances, it could not be concluded that those considerations were ignored on the second branch of the application.
Thirdly, and in any event, the applicants’ submissions to the judge on the forum question did not identify the ‘sovereign state’ point as a separate and distinct consideration. The focus of those submissions, both in writing and orally, was on questions of location (of witnesses and documents) and on the geographical connection of the transaction to Timor. The only reference in the written submission to Timor as a sovereign state was in a list of nine ‘Other factors’ said to be relevant to the forum question. The issues relating to the governmental status of the agreement and the signatories were principally ventilated in the context of state immunity and understandably so. The reasons of the judge reflect this circumstance.
In saying that, and contrary to the submissions of the respondents, we do not regard the nature of the contract or the identity of the signatories as irrelevant to forum.
In Amwano v Parbery (‘Amwano’),[37] Finkelstein J stayed a class action brought in the Federal Court of Australia concerning a dispute about the operation of the Nauru Phosphate Royalties Trust, a trust established by the law of Nauru. The proceedings were stayed on the basis that the proceeding would depend on the proper construction on several identified articles in Nauru’s Constitution and a number of Nauruan statutes.[38] His Honour held that an Australian court should only as a last resort, if at all, give meaning and content to the constitution of a foreign country.[39] Further, in the judge’s opinion, the factual aspects dependent on evidence from Nauruans about the position in Nauru, meant that to run the action in Australia would place an unreasonable burden on the defendant trust.[40] In arriving at that conclusion Finkelstein J held that it was not necessary for him to consider state immunity, which had also been argued, demonstrating the potential for overlap between the two concepts.
[37](2005) 148 FCR 126.
[38]Ibid 131 [18].
[39]Ibid.
[40]Ibid 131 [19].
In Garsec Pty Ltd v His Majesty the Sultan of Brunei (‘Garsec’),[41] the New South Wales Court of Appeal upheld the primary judge’s decision that the fact that the action would involve the consideration of immunities afforded by the Constitution of Brunei favoured the matter being heard in the courts of Brunei. The primary judge had applied the approach taken by Finkelstein J in Amwano in holding that an Australian court would be slow to entertain a proceeding that involved the interpretation and construction of a constitution of another state.[42]
[41][2008] NSWCA 211.
[42](2005) 148 FCR 126. See also Moti v The Queen (2011) 245 CLR 456.
In Plaintiff M68/2015 v Minister for Immigration and Border Protection,[43] French CJ, Kiefel and Nettle JJ noted the caution with which Australian courts should interpret the constitutional validity of the legislation of another country.[44] Even allowing for that caution, where it is necessary to do so in a properly constituted suit, it is not the case that an Australian court cannot discern and apply the law of the foreign state, even where that law is a primary constitutional text.
[43](2016) 257 CLR 42.
[44]Ibid 72–3 [48].
The fact that some caution is required on the part of Australian courts in the interpretation of constitutions of other countries, will be relevant in the determination of questions concerning whether an Australian court is a clearly inappropriate forum. To an extent, there will be an overlap with the principles that apply in relation to state immunity. However, the issues are fundamentally different.
In this case, the applicants did not identify with any precision the laws of Timor that were said to regulate the capacity of the Prime Minister to enter into the Fuel Supply Agreement. Even at this early stage, we would have expected a keener focus on the relevant laws in order to establish that they render this Court a clearly inappropriate forum. Similarly, unlike the position in Garsec, it was not argued that the then Prime Minister had an immunity or special defence based on his status. It might also be added that the arbitration, at which the then Prime Minister gave evidence, took place in Sydney.
Further, as we have explained, reading the judge’s reasons fairly and as a whole, we are not persuaded that the judge ignored the matters complained of by the applicants. Rather, his Honour’s finding that the dispute was, in its terms, a commercial transaction essentially of a private law character and the failure to identify, with precision, the particular Timorese laws that may require interpretation and application also provide, in part, the explanation for why his Honour was unpersuaded that the Supreme Court of Victoria was a clearly inappropriate forum. In the circumstances, we are not satisfied that the judge ignored these matters when he considered the forum question.
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. There is no significant impediment for the evidence to be given in Australia. That is what occurred in the arbitration which took place in Sydney. Some of the negotiations were undertaken in Victoria, and the claimed loss arises in Australia. Of course, there are many factors that point to Timor being an appropriate forum. 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.
Notice of contention: estoppel
Parties’ submissions
The respondents referred to the ICSID arbitration and contended that the tribunal made a finding that an agreement was made on 2 December 2010, which incorporated general terms providing that the law of Australia applied.[45] They submitted that the tribunal’s finding binds as an issue estoppel.[46] Further, they stated that the arbitration was heard in Sydney, which, they submitted, disarmed the applicants’ contention that there are any practical impediments to this jurisdiction.
[45]Award [238].
[46]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 597 (Gibbs CJ, Mason and Aickin JJ).
The applicants submitted that the respondents’ contention proceeded on a misconception about the nature of the issues before the tribunal and what the ICSID award determined. They submitted that no estoppel was made out.
The applicants submitted that issue estoppel is informed by considerations of finality and fairness, and is a rule that ‘operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment’.[47] For the estoppel to arise, the factual findings must be fundamental to the decision, rather than subsidiary or collateral.[48]
[47]Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 517 [22] (French CJ, Bell, Gageler and Keane JJ) (citations omitted).
[48]Milfoil Pty Ltd v Commonwealth Bank of Australia Ltd [2017] VSCA 256 [85] (Santamaria JA), discussing Blair v Curran (1939) 62 CLR 464, 532 (Dixon J).
The applicants contended that no issue estoppel arises for the following reasons. First, the jurisdictional determination by the tribunal was on the basis of assumed facts, that were ultimately to be determined during any merits phase. The jurisdictional phase took place on the assumed footing that the Fuel Supply Agreement was a contract. Secondly, the matters canvassed in relation to terms of the contract were on a preliminary basis, and were not the central matters to be addressed by the tribunal. Thirdly, in any event, the question of incorporation under domestic law did not arise and was not determined.
Consideration of notice of contention
The judge did not determine whether an issue estoppel arose from the finding made by the tribunal that there was an agreement made between the parties.[49] His Honour took that course, in part, on the basis that it was at least arguable that Timor had reserved its position as to the correctness of the matters alleged by the respondents, including whether the arrangements had contractual force.[50]
[49]Reasons [59].
[50]Ibid.
The central issues at trial will involve a consideration of whether a contract was formed; the identification of its terms; whether there was a breach and, if so, what, if any, remedy should be granted. The identification of the terms of the contract will involve disputed questions of fact and the consideration of detailed evidence on the course of negotiations and the exchange of documents.
It is not appropriate on the present application, which is concerned with forum, to determine those contested questions of fact. For similar reasons, whether, and to what extent, the tribunal’s findings gave rise to an issue estoppel binding the parties, is a matter of some complexity and may, in effect, finally determine the terms of the contract. In our view, those matters are better resolved at trial, where the judge is in a position to assess all of the competing arguments. The reasons given by the judge as to why he did not determine the issue estoppel remain sound and applicable to the present circumstances.
In the circumstances, we are not disposed to resolve the notice of contention.
Disposition
We would refuse leave to appeal.
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