Rinehart & Anor v Hancock Prospecting Pty Ltd & Ors; Rinehart & Anor v Georgina Hope Rinehart & Ors

[2018] HCATrans 90

[2018] HCATrans 090

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S302 of 2017

B e t w e e n -

BIANCA HOPE RINEHART

First Applicant

JOHN LANGLEY HANCOCK

Second Applicant

and

HANCOCK PROSPECTING PTY LTD (ACN 008 676 417)

First Respondent

HANCOCK MINERALS PTY LTD (ACN 057 326 824)

Second Respondent

TADEUSZ JOSEF WATROBA

Third Respondent

WESTRAINT RESOURCES PTY LTD (ACN 009 083 783)

Fourth Respondent

HMHT INVESTMENTS PTY LTD (ACN 070 550 104)

Fifth Respondent

ROY HILL IRON ORE PTY LTD (ACN 123 722 038)

Sixth Respondent

HOPE DOWNS IRON ORE PTY LTD (ACN 071 514 308)

Seventh Respondent

MULGA DOWNS IRON ORE PTY LTD (ACN 080 659 150)

Eighth Respondent

GEORGINA HOPE RINEHART (IN HER PERSONAL CAPACITY AND AS TRUSTEE OF THE HOPE MARGARET HANCOCK TRUST AND AS TRUSTEE OF THE HFMF TRUST)

Ninth Respondent

HANCOCK FAMILY MEMORIAL FOUNDATION LTD (ACN 008 499 312)

Tenth Respondent

150 INVESTMENTS PTY LTD (ACN 070 550 159)

Eleventh Respondent

HOPE RINEHART WELKER

Twelfth Respondent

GINIA HOPE FRANCES RINEHART

Thirteenth Respondent

MAX CHRISTOPHER DONNELLY (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF THE LATE LANGLEY GEORGE HANCOCK)

Fourteenth Respondent

MULGA DOWNS INVESTMENTS PTY LTD (ACN 132 484 050)

Fifteenth Respondent

Office of the Registry
  Sydney  No S303 of 2017

B e t w e e n -

BIANCA HOPE RINEHART

First Applicant

JOHN LANGLEY HANCOCK

Second Applicant

and

GEORGINA HOPE RINEHART (IN HER PERSONAL CAPACITY AND AS TRUSTEE OF THE HOPE MARGARET HANCOCK TRUST AND AS TRUSTEE OF THE HFMF TRUST)

First Respondent

150 INVESTMENTS PTY LTD (ACN 070 550 159)

Second Respondent

HANCOCK PROSPECTING PTY LTD (ACN 008 676 417)

Third Respondent

HANCOCK MINERALS PTY LTD (ACN 057 326 824)

Fourth Respondent

TADEUSZ JOSEF WATROBA

Fifth Respondent

WESTRAINT RESOURCES PTY LTD (ACN 009 083 783)

Sixth Respondent

HMHT INVESTMENTS PTY LTD (ACN 070 550 104)

Seventh Respondent

ROY HILL IRON ORE PTY LTD (ACN 123 722 038)

Eighth Respondent

HOPE DOWNS IRON ORE PTY LTD (ACN 071 514 308)

Ninth Respondent

MULGA DOWNS IRON ORE PTY LTD (ACN 080 659 150)

Tenth Respondent

HANCOCK FAMILY MEMORIAL FOUNDATION LTD (ACN 008 499 312)

Eleventh Respondent

HOPE RINEHART WELKER

Twelfth Respondent

GINIA HOPE FRANCES RINEHART

Thirteenth Respondent

MAX CHRISTOPHER DONNELLY (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF THE LATE LANGLEY GEORGE HANCOCK)

Fourteenth Respondent

MULGA DOWNS INVESTMENTS PTY LTD (ACN 132 484 050)

Fifteenth Respondent

Applications for special leave to appeal

KIEFEL CJ
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 18 MAY 2018, AT 9.53 AM

Copyright in the High Court of Australia

____________________

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR G.E.S. NG, for the applicants.  (instructed by Yeldham Price O’Brien Lusk Lawyers)

MR N.C. HUTLEY, SC:   If the Court please, I appear with my learned friends, MR I.C. COLQUHOUN and MR J.J. HUTTON, for the first to eighth respondents in number S302 and for the third to tenth in number S303.  (instructed by Corrs Chambers Westgarth)

MR S.G. FINCH, SC:   If it please the Court, I appear with my learned friend, MR C.N. BOVA, for the eleventh and ninth respondents in S302 and the first and second respondents in S303.  (instructed by Speed and Stracey Lawyers)

KIEFEL CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, there can scarcely be any doubt as to the importance of the decision from which we seek special leave to appeal.  In particular, there is laid out in the reasons what can only be described, if not overturned, as an extremely far and apparently authoritative enunciation of matters of principle concerning the judicial approach to the interpretation of arbitration agreements in their most important aspect, namely, the scope of the disputes within the agreement to arbitrate.

Next, of course, there is the critically important matter in the legislated approach to the enforcement of arbitration agreements by the staying of litigation which, in this country, is articulated by the combination of sections 8 and 16, to which your Honours have seen the written submissions focused.

If this Court were not to grant special leave, two matters in particular of fundamental importance applying to each of those issues will be determined, settled, in the law of this country by these Full Court reasons.  For the following reasons, that, in our submission, ought not to occur.

Arbitration clauses are, of course, contractual terms.  They are ultimately, with all the need to consider context, efficacy and commerciality, matters to be determined by the meaning of words. 

In relation to the agreements – not all of them, but the important agreements where the dispute clause uses the very familiar, often used expression “disputes under the deed” et cetera – there has been an approach which, in our submission, fundamentally departs from the need to give attention to the particular wording.

In the course of doing so, significantly for this Court’s approach to the grant of special leave, as the court at the apex of both common law and statutory interpretation exercises of judicial power, we have the out and out rejection by the Full Court of a recent New South Wales Court of Appeal approach on that very matter.  Your Honours appreciate I am referring to Rinehart v Welker, to which their Honours in the Full Court turned, starting at application book 278.  The conclusion of the reasoning concerning Rinehart v Welker is, in our submission, in itself a matter redolent of the appropriateness of a grant of special leave. 

GAGELER J:   You would simply need to rely on the first sentence of paragraph 205, I think, to make that point good.

MR WALKER:   I was going to lead up to that, but I am happy to go straight there.  The professional courtesy with which their Honours used the expression in its second sentence, “to the necessary point of clarity”, concerning their achieved disagreement with Chief Justice Bathurst is, in our submission, highly indicative of a matter upon which this Court should be the next and last word.

The course of reasoning includes what I might call a policy of interpretation informed by an English‑inspired liberality, so‑called, with respect to the interpretation of arbitration dispute clauses.  That ought to be enough to suggest that here is an issue concerning judicial method in the interpretation of arbitration agreements worthy of this Court’s attention because, by and large, it is, in our submission, dangerous as a matter of principle to argue in circular fashion that there is a special class of contract – here, an arbitration agreement – that requires a special approach to interpretation in the absence of established jurisprudence such as one found with respect to sureties and insurance policies.

In our submission, the grounds for this supposed doctrine of liberality by which one abolishes what would otherwise be linguistically indicated differences of meaning ‑ ‑ ‑

KIEFEL CJ:   You say it converts “under” to “in connection with”?

MR WALKER:   Very much so.  Your Honours have seen we have written that.  It is, with great respect, almost explicit in their Honours’ reasons in the Full Court.  There are indications of the unease that that evoked, even in their Honours’ thinking in, for example, page 282, paragraph 202.  The fact is, as their Honours have recognised, shorn of the pressure with respect to the section 8 and section 16 issue, there is a wealth of case law observing, as one would expect when construing contracts, that the phrase “under this deed” could well have produced a diametrically different answer to the question “is a particular dispute within an arbitration agreement” from another phrase such as “arising out of or in connection with or in any relating to this deed”.

It is for those reasons that, in our submission, on the first of the issues, which we accept presents as a matter of contractual interpretation, the very way the Full Court has addressed this stands at the moment as authority in this country against the authority of the New South Wales Court of Appeal for a special distinction eliding or abolishing approach to the language chosen in an arbitration agreement.  That, with respect, does not derive any support from the essentially consensual – that is, contractual – footing of the jurisdiction of arbitrators rendered effectively compulsory by section 8.  It is for those reasons, in our submission, that that first argument alone for those agreements which use that prepositional phrase is one apt for determination by this Court.  Her Honour at first instance was right.

The second issue is, of course, an issue which concerns an Australian statutory form of words.  The relevant provisions, which have a very long political history, traced by their Honours in the Full Court, comes about in circumstances where we know for sure that there was a very conscious understanding of what other jurisdictions, including the jurisdiction ordinarily regarded as the closest to us, namely, England and Wales, or the United Kingdom – had enacted themselves.

In our submission, what has occurred in the passage of reasoning – application book 322 and following – has been that there has been adopted, if I may say so with respect, holus‑bolus the policy reasoning articulated both in and out of court in the United Kingdom which affects the so‑called separability point.

It results in the law in this country, if special leave be not granted so that an appeal cannot succeed, holding that, notwithstanding the absence of any wording in our statutes to this effect, there cannot be consideration of what has been called the proviso in section 8 unless the putative impugning of the arbitration agreement turns on facts which stand apart from and are entirely self‑contained in their operation in relation to the arbitration agreement as opposed to the contract as a whole.  That has no textual footing whatever in this country.

KIEFEL CJ:   You say the same facts can be applied to avoid the deeds and to rescind the arbitration agreements?

MR WALKER:   Absolutely.  One need only consider duress or fraud to see that, were it otherwise, there would be inexplicable policy being made manifest by an interstitial reading by the court of the statute.  It has to be interstitial because there are no words to this effect.

The clue, with respect, to why, in England, there have been judicial pronouncements, particularly Lord Hope in Fiona Trust, to whose dicta we have drawn attention, there are indications as to how this has occurred.  This is not the place, and this is certainly not the time, to levy a criticism, that is, of that approach, even in accordance with what I will call English law.  But for our law, if one goes to application book ‑ ‑ ‑

KIEFEL CJ:   Lord Hope went a little further than the other members of the court. 

MR WALKER:   Yes, absolutely.

KIEFEL CJ:   What about Lord Hoffmann’s approach?

MR WALKER:   Lord Hoffmann is the one that I wish to address exactly now.  At pages 323 and 324 of the application book it conveniently sets out in paragraph 354 the statutory background that is the foundation for the approach which produced, among other things, Lord Hoffmann’s dicta, in section 7 of the United Kingdom’s 1996 Act.

Your Honours will note that it, in positive terms, expresses a command which is to be contrasted with the negative description that we find in subsection 16(3) of our statute.  In the United Kingdom, subject to agreement otherwise by the parties, an exception that has no significance for the present purposes, an arbitration agreement shall not be regarded as invalid et cetera because that other agreement of which it forms part is invalid et cetera, and it shall, for that purpose, be treated as a distinct agreement. 

It need hardly be said that the terms of our section 16, which you will find conveniently at 374, among other places, stands in stark contrast.  Subsection (3) simply says:

A decision by the arbitral tribunal that the contract –

that is, the whole of which an arbitration agreement may be part:

is null and void does not of itself entail the invalidity of the arbitration clause.

Possibility, not requirement.  In our submission, there could not be a stronger linguistic indication that there is no holus‑bolus transfer to this country of the jurisprudence, including by judicial dicta, of this notion that, for the proviso to operate in section 8, there must be a case arising from the dealings between the parties that produced the purported arbitration agreement that singles out and is focused only on the arbitration agreement. 

It is commercially unlikely, to say the least, that vitiating factors, including fraud, duress and the like, misrepresentation, should be selected for that special treatment by reference to whether or not they concern and concern only – that is, specifically – the arbitration agreement and not the rest of the agreement in which the arbitration agreement itself is found.  That is psychologically and commercially so unlikely as to give rise to the question:  what possible policy, in the sense of purpose, could inform that reading of the statute?

When one then comes to what Lord Hoffmann said in the passage quoted by their Honours in the Full Court, at application book 324, paragraph 357, in our submission his Lordship is, at several points in the passage that I will not read, clearly – one might say, overtly and deliberately – glossing the statute by going beyond even the words in the United Kingdom statute.  That cannot possibly stand as an appropriate footing for what has turned out to be an extraordinary gloss on the Australian statute.  Their Honours in the Full Court simply do not explain how or why that jurisprudence ought to have been such a massive influence on the reading of the Australian statute.

KIEFEL CJ:   Your ground 3 simply takes this up and says, here is the relevant error.

MR WALKER:   Yes.

KIEFEL CJ:   So that takes it no further.  We might be assisted to hear from Mr Hutley at this point.

MR HUTLEY:   If your Honour pleases.  Can I deal with the first question.  The proposition that parties would be rationally minded to achieve the determination of disputes in one venue is hardly surprising.  Except to the extent that in their submissions in reply, at application book 443, at 8 to 10, the applicants are driven to suggesting that this evident rationality is limited to, as they describe it, businessmen, we say there is nothing in this point worth the consideration of the Court.

KIEFEL CJ:   But in relation to ground 1, you have two different opinions of two courts.  That is usually a fairly strong indicator of a grant of special leave.

MR HUTLEY:   I do confront that difficulty, but, with all due respect to the Court of Appeal’s judgment, the point in the case, the construction which they adopted, was really a minor point in that case – of the most minor because the case really went on a factual issue that the events had nothing to do and were not addressed by the Hope Downs deed.

KIEFEL CJ:   But it is nevertheless a construction which the Full Court accepts was different from theirs.

MR HUTLEY:   I understand, your Honour.  If I am wasting my time, your Honours will no doubt tell me very quickly.

KIEFEL CJ:   I am trying.

MR HUTLEY:   I thought that was coming.  If your Honours are minded to grant special leave on the point, I can say no more, although we would say this ‑ ‑ ‑

KIEFEL CJ:   Is there anything you can say against it?

MR HUTLEY:   We say this:  the construction adopted by the Court of Appeal was governed and controlled.  Unfortunately, to be under the relevant deed, the dispute had to be governed and controlled by the clause.

KIEFEL CJ:   That is the whole point, whether or not there should be some limitation on its operation.

MR HUTLEY:   The Full Court brings this out.  Logically, that leads to absurdity because, for example, if one sues for breach of the covenants in the agreement and the defence is it never happened, it may not be governed and controlled by the agreement and therefore is not under the agreement.

GAGELER J:   That is a pretty good argument to make in the appeal, I think, Mr Hutley.

MR HUTLEY:   Your Honour, that is really what informed the Full Court’s disagreement with the construction arrived at by the Court of Appeal.  We say it is clearly right, because the Court of Appeal’s judgment proves too much.  You cannot have a dispute under the agreement because the agreement may not govern the dispute.  That is that point.

As to the second point, there was not and has never been any dispute between the parties that a doctrine of separability exists; that is, there are two different agreements.  That seems to be common ground, and it was common ground in the court below, in the Full Court ‑ that is why no dispute is directed to it – that the attack on the arbitration agreement had to be an individualised attack upon it.  That was accepted.  That is why your Honour finds no debate in the judgment about the point which our learned friends now seek to advance at all.

KIEFEL CJ:   But the Full Court accepted the approach of Lord Hope that there had to be facts specific to the arbitral agreement itself.

MR HUTLEY:   Your Honour, with respect, by fact specific, there had to be matters which were related to the arbitration agreement.  Obviously, there can be overlap.  A good example would be if one represented, in entering into an agreement, that you should agree to the arbitration agreement because the contract only covered a very small scope of issues.  If that representation was wrong, that would go both to the agreement and to the arbitration agreement. 

The Full Court did not suggest that they had to be distinct.  In fact, in the judgment they acknowledge that sometimes they will overlap.  But they did say – this was common ground before the Full Court – that the attack had to be directed to the arbitration agreement.  The complaint, it could not just be, “I signed the document because of event A”.  If event A is solely related to the substantive rights and obligations then it was common ground that was not sufficient.  That is why it was pleaded in the way it was by the applicants, in an attempt to create that nexus. 

So your Honours do not have a case on that point where this point has been debated in the Full Court.  So for that reason it is not an appropriate vehicle, because what is sought to be done now is basically to retreat from the doctrine of separability at all and say, “If I allege a fact and say I executed the document in relation to it, that goes both to the arbitration agreement and to the substantive agreement”.  If that is the case, that would amount to a fundamental departure in this country from jurisprudence which applies throughout the common law world in relation to arbitration agreements.  That is, in effect, what our learned friends are seeking to do. 

When one analyses in point of detail what was alleged and the way the Full Court does it, which is at 387, is the conclusion to the analysis, and that takes one back.  That is the paragraph where that conclusion is arrived at, where they say it is unrelated, et cetera.  We say that follows inexorably from the analysis which the court undertook of the attacks on the Hope Downs deed and arbitration agreement, at 99 to 104, where, in effect, the Full Court analyses the attacks which are mounted by the applicants upon the two agreements and, in effect, discloses those which are directed to the arbitration agreement and those which are directed to the substantive obligations in the Hope Downs deed, excepting the arbitration agreement.  No attack is put at all on that analysis. 

GAGELER J:   The argument that is put against you is really now one that is almost purely of statutory construction.  Are you saying it is an inappropriate vehicle to examine that argument?

MR HUTLEY:   No, but it is not one purely of statutory construction.  It is not driven by the statute; it is a principle of the common law.  It is not solely the statute.  The statute has not determined that you cannot attack arbitration agreements except directly.  It does not say that.  Nor does it say it in England.  It is a common law principle which the courts have adopted in the United Kingdom and, until our learned friend rose, here too. 

In essence, what is being done here is a submission that the separability doctrine simply should be washed away and its appeal causation.  That is a fundamental change in the principles of common law. 

If it is right, arbitration agreements are valueless as separate agreements.  Any attack on the main agreement, because they will be in the same document, will lead immediately to a causation argument:  “I executed the arbitration agreement in reliance on A”, that is, in effect, the case that is brought.

If the Court wishes to, in effect, think that there are reasonable prospects, or prospects, of this Court departing from arbitration law throughout the world then this is an appropriate vehicle to determine that.  But that is what this case.  Your Honours will not have been taken at all by my learned friends to the detail of fact in the pleading which they rely upon in relation to this point.  In other words, they move it over to a statutory argument.  The statutory argument is, in effect, a smokescreen, with all due respect to the elegance of my learned friend. 

The real question is:  is there a common law doctrine of separability?  If there is not, and your Honours think that this Court should consider whether to depart from the rest of the common law world – in fact, the entire world, so far as we are aware – then, your Honours, it is an appropriate vehicle.  But if it is not then this is not an appropriate vehicle in relation to this point at all, because there is no identification of anything specific to the arbitration agreement beyond those parts which the Full Court accepted – the cost, et cetera.  Other than that, it is just causation.

In our respectful submission, the second point is not an appropriate vehicle.  It has no reasonable prospects of success.  As to the first point, I will not say any more; I have heard that.  Those are our submissions, if your Honours please.  Your Honours, I am reminded, and for that point it is paragraph 360 of the judgment of the Full Court, at 325.  It says:

The doctrine of separability recognised by s 16 of the CA Act was in fact part of the common law of Australia as enunciated by the Court of Appeal of New South Wales in Ferris v Plaister . . . That position conforms with the common law of England –

In other words, what our learned friends are seeking to do here is, in effect, to take Australia out in a wholly individual position where the doctrine of separability exists and, effectively, arbitration agreements become not separate agreements in any meaningful sense because they will always be a causation argument:  “I signed the document because”.  If that is sufficient to, as it were, make an attack on the arbitration agreement, the doctrine is at an end.  Those are our submissions, if the Court pleases.

KIEFEL CJ:   Thank you.  Yes, Mr Finch.

MR FINCH:   If the Court pleases.  Your Honours, I was going to adopt my learned friend, Mr Hutley’s, submissions in respect of ground 1, but, given how that is going, I might stay silent on that matter and move straight to ground 2, in particular whether it is an appropriate vehicle.

Your Honours will recall that ground 2, which your Honours see at application book 364 to 365, posits three challenges to the Full Court’s dealing with the doctrine of separability, and the first is in paragraph 2(f).  They pay some close attention to what is actually said.  We say it gives rise to our submission about it not being an appropriate vehicle.  Your Honours see on page 365 of the book that ground 2(f) contains the complaint that the Full Court misunderstood the doctrine and proceeded on the basis that:

an arbitration agreement could only be null and void for the purposes of those provisions on the basis of facts, matters or circumstances distinct from those that form the basis for impugning the contract in which the arbitration agreement is contained –

The short answer to that proposition is, first, that the Full Court did not in fact proceed on that basis at all and, secondly, that no point of principle is involved. 

Before I elaborate on that, can I draw your Honours’ attention back to the material findings which predicated that.  They are the findings at application book 333, if your Honours go back to paragraph 385, where they commence.  There is an analysis which starts at the bottom of that page, 333, at paragraph 385.  That analysis internally refers back to paragraphs 99 to 105, to which my learned friend, Mr Hutley, has already referred, and I will not go back to those. 

Would your Honours just observe, though, on page 334, in the course of paragraphs 386 and following, their Honours say:

It is doubtful whether there can be said to be any independent attack whatsoever on the arbitration agreement.  Virtually the entirety of the validity claims are directed without discrimination to both the main agreement and the arbitration agreements.  There are only two matters –

this is the bit that we would underline:

(identified in paras 288 and 290 . . . which can possibly be seen as directed to the arbitration agreements distinctly and specifically –

that is, the privacy matter and the payment‑for matter.  Their Honours go on to elaborate on that in ways which I do not need to spend any time on.

Those findings as to the correct pleading characterisation of what attack was in fact made on the arbitration agreements themselves, as distinct from the operative provisions of the deed, are not the subject of challenge.

The court next passes to consider the doctrine in ways which are relevant today, at paragraph 341 and following.  If your Honours go back to page 319 of the book, that discussion starts at paragraph 341, towards the bottom of the page.  I can pass over most of it, except to notice this:  at page 320, in the course of paragraph 343, if your Honours observe at about line 13, their Honours say towards the end of that line:

The invalidity of the main contract does not necessarily entail the invalidity of the arbitration clause. 

The wording there does not enliven the bright‑line distinction that my learned friend, Mr Walker, posits between section 7 and section 16:

One significance of the doctrine is that an attack by one party on the validity of the whole agreement is not taken necessarily to be an attack on the arbitration agreement –

Can I pass to about line 23:

Thus, the doctrine (as we discuss below) requires that there be a distinct and separate attack on the arbitration clause itself for the validity of the arbitration agreement –

We emphasise here that what has to be distinct and separate are not the facts and circumstances which may be common to the attack on the operative provisions of the deeds and the attack on the arbitration clauses.  What has to be distinct and separate is the attack itself.  It may well be that the facts and circumstances which ground those two separate attacks are in some cases the same ones, but those facts and circumstances have to enliven two distinct attacks.

That is complete orthodoxy.  There is no departure at all from any of the rules about this area that have been developed either here or overseas.  What their Honours are not doing, with respect, is, if one turns back to ground 2(f), proceeding on the basis that the facts and circumstances have to be distinct.  So what is recited in ground 2(f) is not in fact what their Honours did.  They did not fall into that error.

If I can just emphasise a couple of points.  If we look to paragraph 346 and following, there is a history which I can pass over.  Can I just pause at paragraph 356, where their Honours continue to deal with the history, in particular with Fiona Trust and Lord Hoffmann’s remarks, to which attention has already been drawn.  In quoting those remarks, their Honours do not depart from the position that they started out with; that is, one has to discern a separate attack. 

The only purpose of reciting these remarks is to emphasise that point.  Nothing in the remarks that are set out in paragraph 356 either requires or receives any endorsement from the Full Court to the effect that the facts and circumstances themselves must be different.  There are other bases for the same point being made, if one looks very briefly at paragraph 359, although one can see the conclusion:

It can be accepted that there may be allegations or complaints about the validity of the main agreement in question that are relevant to any attack on the arbitration agreement. 

One only has to read that sentence to see that ground 2(f) is not made out and is not an accurate description of what their Honours did.  Whether or not there is a distinction between section 7 and section 16, for the reason of mischaracterisation, for the Full Court’s reasons in 2(f), that part of the application does not form a sufficient basis for special leave, and there is no cross‑fertilisation between ground 1 and any part of ground 2 or ground 3.

GAGELER J:   You have dealt with (f).  Do (g) and (h) follow or do you need to deal with them separately?

MR FINCH:   Ground 2(g) is, in a sense, consequential, but I will deal with them separately, your Honour.  They are subject to the same vice, although (3) has a conceptually separate vice which I will deal with in a moment.

Ground 2(g), your Honours might recall, if we look back at page 365 of the book.  It is said there, your Honours see, that the Full Court erred in:

failing to take into account a relevant consideration, namely, the entirety of the applicants’ case attacking the validity of the Arbitration Agreements, as distinct from –

and then it is those two bits which were identified in the pleading which were found to actually attack the arbitration agreement. 

A number of observations might be made about ground 2(g).  First, it is really merely derivative of ground 2(f) and suffers from the same vices that 2(f) does, which is that if the Full Court was not doing as was posited in 2(f) then 2(g) falls with it, and the Full Court was not doing that.

More important, perhaps, the second point we would make is that, if we observe closely the wording of 2(g), internally there is a vice which is immediately apparent.  It says:

failing to take into account . . . the entirety of the applicants’ case attacking the validity of the Arbitration Agreements –

not attacking the deeds as a whole or attacking specifically the operative clauses. 

This brings up the point that I mentioned earlier:  there is no challenge to the Full Court’s characterisation of what attack was actually made on the arbitration agreements.  That finding was that only two attacks were made on the arbitration agreement, and they are the two mentioned in the second part of 2(g).  So 2(g) posits a distinction which in fact does not exist.  The Full Court found that the attack in the first half of 2(g) constituted the same things as the attack in the second half of 2(g).  Again, there is a mischaracterisation of what the Full Court did and a misunderstanding of the consequences of not challenging the Full Court’s finding as to what was attacked in the pleading in connection with the validity of the arbitration agreements.

A third point which is worth noting in connection with 2(g) is that, even though the Full Court correctly apply the doctrine in focusing as they did on the actual challenges to the arbitration agreement, in terms of the practical exercise of their discretion they went on to recognise a practical reality which was slightly different to that.  If your Honours would be good enough to turn to the book, at page 335, in a paragraph to which I will have to come back in connection to ground 3.  If your Honours would be good enough to look at paragraph 393, towards the bottom half of the page.  At about line 42, the relevant section to which I wish to refer occurs:

Further it may conceivably in argument (though we do not think it validly should) –

that is their adherence to correct principle:

become entangled in matters of complaint against the substance and validity of the deeds –

that is the generic attack on the whole of the deeds or the substantive or operative provisions of the deeds:

or at least the context of these matters.  The parties to the litigation –

here their Honours display understatement:

have displayed an intensity of application to every matter in dispute that makes us consider that the prospect of holding the parties to a short hearing centred upon these two issues is unlikely.

As a matter of practical effect, what are their Honours there doing?  They are saying, “Strictly, we should focus on the two matters that focus upon the attack on the arbitration agreement.  As a matter of practical reality, however, when exercising our discretion about whether to send this matter off to arbitration, we have regard to the fact that, in reality, that sort of narrowness of focus is unlikely to happen”.

When one turns to what their Honours actually did in terms of the exercise of their discretion, as a matter of high generality they did not fall into the sort of error posited by 2(g).  They correctly, with respect, maintained what they ought to have done.  They did focus on that question but, when it came time to exercise their discretion, they quite properly said, “This is going to get very fuzzy around the edges.  That very fuzziness, though, mitigates against going to court about this”.

KIEFEL CJ:   Mr Finch, if the applicants were successful on appeal on ground 1 but failed on grounds 2 and 3, where would the matter stand?

MR FINCH:   Just there, your Honour.  The debate would focus on the “under” or “in connection with” debate, but the rest of the matter would fall to be considered depending on what your Honours said about that.  Your Honours do not need to consider any part of ground 2 or ground 3.  That is why I said there is no cross‑fertilisation.  Your Honours do not need to consider 2 or 3 if your Honours do consider 1.  I am not suggesting, for instance – this may not have been the point of your Honour’s question – that if I succeed in persuading your Honours not to grant leave in respect of 2 or 3, that means that your Honours should because of that decline in respect of ground 1.

KIEFEL CJ:   Thank you for that.

MR FINCH:   I was going to close this matter on 2(g) briefly by saying this.  The relevance of their Honours’ remarks that, although their focus should be on the two grounds of challenge to the arbitration agreement, we will broaden our field of view because of the practical realities of the matter, why does that mitigate in favour of their exercise of discretion in favour of arbitration?  The answer to that your Honours find back at application book 263. 

Their Honours spent quite a bit of time on this area, but I will just quote from what seems to be a relatively uncontroversial paragraph, paragraph 148 on that page, an extract from the A v B Case that your Honours have seen before.  If your Honours look at the second half of the extracted portion, the court was there considering what it was that might mitigate in favour of either going to arbitration or staying in court to determine such a challenge.  At about six or seven lines down:

Whether the latter course is adopted may in many cases depend heavily on the extent to which the resolution of that issue will involve findings of fact which impact on substantive rights and obligations of the parties which are already in issue and whether in general the trial can be confined to a relatively circumscribed area of investigation or is likely to extend widely over the substantive matters in dispute between the parties.  If the latter is the case the appropriate tribunal to resolve the jurisdictional issues is more likely to be the arbitration tribunal –

That is the relevance of their Honours’ remarks later on when they say, “We recognise that, despite the narrow focus of the actual attack, a broader attack is likely to arise in one way or the other, and that itself mitigates in favour of the reference to arbitration”.  So their Honours’ discretion did not miscarry.  For those reasons, 2(g) is also not an appropriate vehicle for special leave to enliven any of these points.

If your Honours then look at 2(h), it looks at the paragraph that we have just been looking at.  Just pausing at page 365 of the application book, it is said that their Honours erred in:

taking into account an irrelevant consideration and usurping the role of any arbitral panel by considering the apparent strength, or lack thereof, of the applicants’ case –

Our learned friends can refer to paragraph 393 in that same paragraph, back at page 335 of the book, in support of that assertion.  If your Honours could go back to it, it is in the first half of that paragraph at the bottom of page 335.  Their Honours said there:

This means that it is unnecessary to deal with the primary judge’s exercise of discretion to the effect that the Court should hear the proviso application about the arbitration agreements.  Thus, we must consider the question afresh.  In our view the relevant considerations are in short compass. 

The sole focus of the attack on this is this remark:

The separate attack is ill‑formulated, resting on the narrow foundation identified above.  As such it has an inherent lack of apparent strength given that the two features are well‑understood characteristics of commercial arbitration. 

We have made just a couple of observations then about this.  First, their Honours’ remark is correct, and plainly so.  Second, the Full Court had already dealt with the reasons for considering matters like this.  At a high level of generality, it can be summarised this way:  if it may be said that there is available a strong challenge, whether of fact or law, in a relatively narrow compass then that points towards the court resolving the challenge rather than the arbitration.  The converse is true.  That reasoning lies behind their Honours’ mentioning of this factor. 

There are some examples of that reasoning earlier in the judgments.  I will take your Honours to two places.  One is in paragraph 148, at application book 263, which your Honours have already seen.  That was in connection with, if your Honours go back to that page, that same paragraph which I will not read again.  Your Honours have already absorbed what was there.

Another example is, if one looks to paragraphs, turning back a few pages, 141 and following, there is a lengthy section where their Honours deal with a proper approach to an application under section 8.  Can I just underline a couple of bits for your Honours’ consideration there.  In the course of paragraph 141, in the second half of paragraph 141, after the reference to section 16:

Under this approach, the Court does not reach a final view on the balance of probabilities in respect of the matters in s 8, including the scope of the arbitration agreement.  If there appears to be a valid arbitration agreement which prima face covers the matters in dispute, the matter should be referred to the arbitrator to deal with questions of jurisdiction, including the scope of the arbitration agreement.  With one important qualification –

et cetera.  That catches the eye, of course, when their Honours mention the qualification.  Their Honours mention that qualification again in the last three lines of that page.  The qualification is again mentioned in paragraph 145, but your Honours see the actual qualification over at page 262 of the book, in the remaining part of paragraph 145 as it appears on that page, the relevant part starting at about line 10:

However, it is difficult to see how the Court can exercise its power under s 8 without forming a view as to the meaning of the arbitration agreement.  Further, it may be that if there is a question of law otherwise affecting the answer to the question of jurisdiction, especially one that is confined, which might be dispositive, it might be less than useful for the Court not to deal with it.

Again, this is another example of the court deploying the sort of reasoning that I referred to earlier.

The point that I seek simply to make is the court correctly viewed the strength or otherwise of a challenge to the arbitration agreement as one of the factors which might influence the exercise of discretion and they have given a couple of examples of how that might work.  So 2(h) also does not give rise because it is very fact specific in this case, evolving to an analysis of what the pleading said about two items of particular interest that the applicants ought to raise.  It does not raise any points of principle that your Honours would find useful to deal with.

Can I deal last with ground 3.  If your Honours turn back to page 365, ground 3 is not subsumed into paragraph 2; that is, it is not part of the doctrine of separability challenge.  It appears to be a stand‑alone challenge but it is not the subject of a clearly defined separate attack in the written submissions.  It is lumped together with ground 2 in the written submissions but they are conceptually separate to the points raised here.

GAGELER J:   I thought it was put by Mr Walker that ground 3 really followed from ground 2 in his argument.

MR FINCH:   We would be so bold as to disagree with that proposition.  The point we want to make about ground 3, your Honour, is this.  We say that the complaint as set out in ground 3 is, with respect, misconceived.  There were a number of matters taken into account by her Honour, as your Honours may recall, factors which might be said broadly to favour the court’s hearing of the challenge to the arbitration agreement rather than an arbitral tribunal.

One example of one of those points is set out by the Full Court at page 291 of the book.  If your Honours would be good enough to turn back to that page.  In paragraph 239 on that page their Honours are dealing, amongst other things, with the list of factors that her Honour the trial judge dealt with as influencing the exercise of her Honour’s discretion.  They extract paragraph 666 from the judgment below, and I will not read it out but your Honours see from the introductory lines:

the following considerations nevertheless favour a trial on the application –

meaning a trial in court, and your Honours can scan item (3) for yourselves.  I will not read it out to save time.  Now, the point that we make about this,

and their Honours made about this, with respect, quite correctly, is in paragraph 240 and following at the bottom of this page:

Ms Rinehart and the HPPL parties complain about these findings.  For the reasons expressed below, we agree with those complaints.  These conclusions –

that is, her Honour’s listing of that as a reason:

go beyond the limits of the proceedings bound by the orders made as to conduct of the hearing . . . The hearing was conducted on the basis that issues such as fully informed consent and undue influence were not to be decided.  As the primary judge observed –

and their Honours set out that.  At 241:

The material before the Court and the structure of the hearing provided no basis for a conclusion that there was no sustainable argument to resist the validity claims.

That finding is not challenged.  That is, in terms relevant to ground 3 there is an unchallenged finding by the Full Court that her Honour took into account a factor in the exercise of her discretion which she was obliged not to take into account.  So the challenge under ground 3, with respect, is misconceived.

KIEFEL CJ:   I see the light, Mr Finch.

MR FINCH:   As your Honour – and for the reason I said earlier, 2 and 3, I acknowledge, do not lead across into 1.  They are our submissions, if the Court pleases.

KIEFEL CJ:   Yes, Mr Walker.

MR WALKER:   Your Honours, may I start with the question of the relation between the grounds.  The first sentence of 393 on application book 335 shows that the Full Court proceeded on the basis that they were exercising the discretion in the appeal by way of rehearing because they considered it unnecessary to deal with the primary judge’s exercise of discretion by reason of what I might call anterior error having been detected.  One of those anterior errors, of course, is the subject of our ground 1.  Ground 3 picks up exactly that conclusion in the first sentence of paragraph 393.  Their Honours’ failure, we allege, in error was not to consider and, we submit, dismiss a challenge under House v The King to her Honour’s exercise of discretion.

KIEFEL CJ:   The errors to which you point go no further than those identified in grounds 1 and 2.

MR WALKER:   They depend on them, ultimately, yes.

GAGELER J:   Well, wholly.

MR WALKER:   Yes, I do not mean there is something else, I mean that at the end of the day it follows from.

GAGELER J:   But it is a distraction, is it not, ground 3 is a distraction.  It is unnecessary for you to make the point.

MR WALKER:   If it be unnecessary in order to ground complete appellate relief then no breath should be devoted to it…..I accept that.  It may be, as it were, a point of argument to say that their Honours did not deal with an appeal against a discretion because of an anterior step they took which step was, we say, wrong.  Yes, that is correct.  That is, it does follow – ground 3 does follow from the other grounds, I accept that there is raised a question whether it matters if we succeed on those grounds, yes.  Strictly speaking the – that is all I want to say about that.

Now, as to the grounds which on page 365 are labelled (f), (g) and (h), in our submission, there is error in the vindication attempted of the way in which the Full Court approached the matter.  To remind your Honours, in the reasons of the Full Court, the words of Lord Hope that were emphasised in their quotation from his Lordship’s reasons, are words which, quite plainly, require ‑ see paragraph 358 on page 324:

facts which are specific to the arbitration agreement.

It may be that their Honours even went further themselves, though it suffices for our purposes that there is a special leave question thrown up by their evident acceptance of the way in which Lord Hope put it in 358, but if I could concentrate, your Honours, on page 334 of the application book – I should say 333, starting at paragraph 383, about line 15, where their Honours are positing things hypothetically before they turn to the particular case, their Honours entertain a notion of an attack:

properly distinct that satisfies the separability principle and that is founded on a mixture of fraud and unconscionability which may be seen to make voidable the agreement which has nothing to do with the main dispute.

Now, that is an extremely problematic formulation, that is, fraud and unconscionability which is said to be confined to the arbitration agreement.  Why that would be a policy indication distinguishing between the fraud and unconscionability which embraces the arbitration agreement and say a pricing formula is never explained either in these reasons or in any of the jurisprudence drawn upon to produce them. 

On page 334 in paragraph 386 and 387 and 388, there is a collection of epithets making two things clear which we offer in refutation of what my learned friend, Mr Finch, has said.  The first thing is the separateness that is not the overlap that was said to be accepted by their Honours and the second is the distinction between an attack, as my friend put it, and the facts upon which the attack was placed.

Let me elaborate.  In paragraph 386, your Honours see it starts with talking about an “independent attack” and then there is an acceptance in the next sentence that there are validity claims – “Virtually the entirety . . . are directed without discrimination”.  There is a hopeful sign for a notion of overlap.  It is the last reference to “overlap” and that is a statement which their Honours then obviously use as saying and what we concentrate on is only the part that does not overlap.  That is the error. That is what is certainly a special leave question – “distinctly and specifically” is the next description you find in the next sentence.

At the beginning of 387, it is the “factual elements” that are unrelated that matters to their Honours.  It is not this idea ‑ I do not know whether it is a juristic concept, a cause of action, it is the facts.  Of course, if my friend, Mr Finch, was really forced to concede, if the facts can be the same without falling the wrong side of the separability principle, if the facts can be the same, why would not the nature of the attack such as induced by fraud, unconscionability or misrepresentation.  The notion of the juristic label needing to be separate is, in our submission, absurd and lacks any policy footing explained in any of the jurisprudence.

So, in 388, it can be seen that what their Honours were looking for but, in our submission, wrongly seeking was this idea of a separate attack meaning, as I say, a self‑contained one that puts aside the overlap with which this discussion commenced in the second sentence of 386.  The last sentence of 388 makes that crystal clear:

All the other factual complaints are directed to the substantive deeds and are not separately directed to the arbitration clauses.

But, of course, they started by accepting that they are directed to the arbitration clauses, not uniquely.

GAGELER J:   Does paragraph 386 contain a misunderstanding of the pleading?

MR WALKER:   No, no, it is correct that there are two matters which are specifically directed to the nature of the arbitration agreement and that the other matters are matters shared, if you like, producing not only agreement to the arbitration agreement but agreement to the rest of the deed as well.  That is correct.  It is totally unnecessary which is why this is a good vehicle.  It is totally unnecessary for us to differ from that.  Their Honours do correctly characterise the fact that there is overlap.

Now, in short, the principle which my friends seem to be contending for is this is a jurisprudence that somehow permits the focusing artificially on that which is the non‑overlap part of an attack on an arbitration agreement as the way in which one addresses the separability principle.  There is no jurisprudence to that effect apart from a possible reading of Lord Hope, in our submission.  It is for those reasons, in our submission, that this provides a very good vehicle to test the very important questions of principle about which, if I may, make one last comment.  It is not just a matter of common law.  We have, as their Honours ‑ ‑ ‑

KIEFEL CJ:   So the Full Court accepts that section 16 states the common law.

MR WALKER:   Exactly.  So, it is a matter of interpreting the provision.  If it please your Honours.

KIEFEL CJ:   The Court will adjourn to consider the course it will take.

AT 10.50 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.52 AM:

KIEFEL CJ:   There will be a grant of special leave limited to ground 1.  Would the parties please ensure that their solicitors obtain a copy of the directions necessary for the matter.

AT 10.52 AM THE MATTER WAS CONCLUDED