South Ausn Superannuation Fund Investment Trust v Leighton Contractors

[1996] HCATrans 142

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide   No A8 of 1996

B e t w e e n -

SOUTH AUSTRALIAN SUPERANNUATION FUND INVESTMENT TRUST

Applicant

and

LEIGHTON CONTRACTORS PTY LTD

Respondent

Application for special leave to appeal

BRENNAN CJ
McHUGH J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO CANBERRA

ON WEDNESDAY 24 APRIL 1996, AT 2.31 PM

Copyright in the High Court of Australia

MR D.M.J. BENNETT, QC:   May it please the Court, I appear with my learned friend, MR J.M. WILKINSON, for the applicant.  (instructed by Thomsons)

MR M.N. RICE:   May it please the Court, I appear with my learned friend, MRS L. DAW, for the respondent.  (instructed by Floreani Coates & Co)

BRENNAN CJ:   Thank you.  Yes, Mr Bennett?

MR BENNETT:   Your Honours, arbitration has become a very frequent method of settling disputes in Australia, and in 1986 the law was consolidated in a uniform Arbitration Act passed by all the States and territories.  Largely, of course, the procedural aspects have been assimilated by that legislation to litigation, particularly in relation to substantive advantages. 

This case concerns two issues which arise on the construction of that Act; the first is whether the arbitrator has power to order indemnity costs, and the second is whether the arbitrator has power to order interest on costs, specifically compound interest.

Might I take your Honours to page 19 of the application book?  The first issue arises under section 34(1) set out at the top of that page.  That, as your Honours see, provides:

“Unless a contrary intention is expressed in the arbitration Agreement, the costs of the arbitration...shall be in the discretion of the arbitrator -

so one starts with a broad discretion.  There were then three specifics:

who may -

(a)  direct to and by whom and in what manner the whole or any part of those costs shall be paid;

(b)  tax or settle the amount...

(c)  award costs to be taxed or settled as between party and party or as between solicitor and client.

Now, we submit that permits - well, the argument against us, of course, is that paragraph (c) is exhaustive.  It creates an expressio unius in relation to the introductory paragraph and indemnity costs are, of course, more than solicitor and client.

KIRBY J:   These are well-known categories after all.

MR BENNETT:   Yes, your Honour.  We have three answers to that.  The first is that one does not apply the expressio unius rule and that the preamble is not cut down by paragraph (c).  That is a very short proposition of construction.  The second is that the phrase “as between solicitor and client” comes from the South Australian Act of 1991 which, in turn, comes from the English Arbitration Act of 1889, and that at that time, solicitor and client costs meant what we now call indemnity costs.  There are some cases we have which illustrate that, one where a judge says that he is awarding costs as between solicitor and client, “because the defendant ought not to have to pay one farthing of the costs of this improper litigation”.

What happened, of course - it is one of those circular developments in the law - one started off with costs as between party and party and the costs as between solicitor and client, then the courts started saying, “Well, when you have solicitor and client costs, there still have to be some limits.”  Those limits gradually became more significant until solicitor and client costs were a long way of being a full indemnity, and then the concept of indemnity costs developed over the last ‑ ‑ ‑

KIRBY J:   This is illuminating, but by 1986 the concept of indemnity costs was well‑known and known in statutes.

MR BENNETT:   I accept that, your Honour, but what we say is this was a statute which simply picked up what had been there before with a statute in pari materia and that the meaning which the words formerly had should be given to them.

BRENNAN CJ:   When you say “formerly had”, the meaning which the words had as expounded in the developing law on the subject?

MR BENNETT:   Your Honour, we would put it a little differently.

BRENNAN CJ:   I understand you would, but why?

MR BENNETT:   One could put it in either way.  Why, one asks, as a matter of policy, would the draftsman have chosen to give less power to an arbitrator than a court in that area where there might equally in arbitration as in litigation be cases where indemnity costs are appropriate?  We would submit the reason is fairly apparent, that the old Act was taken and just simply the phrase repeated.

KIRBY J:   That is one possibility.  Another possibility is that Parliament, knowing the distinction, deliberately chose solicitor and client to hope to keep costs in arbitrations lower.

MR BENNETT:   That is a possibility, your Honour, although if that had been done, one would have thought it would have said “but not on an indemnity basis”, bearing in mind that in the old Act as at the day before this Act came into force under the section then “costs as between solicitor and client” must have meant full indemnity costs.  So that is the second way we put it.  The third way we put it is that clause 13.07 of the arbitration agreement, which is in a standard form which applies to most building arbitrations in Australia - and that is also on page 19 in paragraph 4 - says:

The costs of a submission, reference and award ... shall be in the discretion of the ... Arbitrator -

And your Honours will observe that section 34(1) begins with the words, “Unless a contrary intention is expressed”.

KIRBY J:   That was clearly intended to pick up that provision and to make it clear that this was the discretion of the arbitrator, that that was the general power, simply the same language as the Act and then the Act goes on to make these other provisions.  There is nothing more ample in 13.07.

MR BENNETT:   No, your Honour, but the omission is significant because if the section had been in the form of 13.07 there is no doubt there would have been power to order indemnity costs.  Why then, if the person drafting the agreement chooses to put the preamble to the subsection in, which has one meaning on its own, without something that cuts it down in the rest of the subsection, why should not one as a matter of construction say that is something which goes wider than the section, as it is permitted to do by the section itself?  So that is the third argument.

KIRBY J:   It is permitted to do and does not do it very clearly, on that sort of argument.

MR BENNETT:   It does it sufficiently clearly, we would submit.  The words have a clear meaning; one simply gives them that meaning.  Again, one has to come to the policy submission, why would one assume that there was a desire to cut this down.  Bearing in mind that the policy is to encourage arbitration, it does not encourage arbitration if a litigant knows that it might get indemnity costs from a court if there is a totally unmeritorious defence, but it cannot get those costs from an arbitrator.

KIRBY J:   There is nothing in the second reading speech or in any of the documents that throw light on this?

MR BENNETT:   No.  So that is the first issue.  The second issue is a related issue and would your Honours please go to page 24.  Your Honours see section 32 is set out at the top of that page and the phrase is:

where the arbitrator...makes an award for the payment of money, the arbitrator.....have power to direct that interest -

et cetera.  And the court held that that is a code and that there is no power to order interest on costs.  We say first that the section is not a code.  It was held in a Victorian case not to be a code.  That is Leighton Contractors v Kilpatrick Green (1992) 2 VR 505, which we have referred to.  It is a Full Court decision in Victoria.

BRENNAN CJ:   That is a very different case from this, is it not?

MR BENNETT:   It concerns compound interest.  Your Honour, it is very different, but the importance of it is that it held ‑ ‑ ‑

BRENNAN CJ:   Not on costs.

MR BENNETT:   No, that is so.  It was on the question of whether interest included compound interest, but the court said one could not treat the section as a total code; one had to read it more widely.  But more importantly, we would submit that the phrase “makes an award for the payment of money” includes an award for the payment of costs.  One can test that, of course, by looking at it from the point of view of a successful respondent who has all the claimants’ claims dismissed and obtains an order for costs.  That is, we would submit, an award for the payment of money and that is what was held by the Supreme Court of New South Wales in McWilliam Wines v Liaweena (1993) 32 NSWLR 190, which I have referred to on page 25.  There, the decision was that under the same wording appearing in a section of the Supreme Court Act, “make an order for the payment of money”, that included an order for the payment of costs and, therefore, there was power to award interest.  It was Mr Justice Rogers who made that decision.

It is my submission that an award for costs is an award for the payment of money and therefore there is power to direct interest on it.  Secondly, we submit in any event the section is not a complete code in that area.  Again, one has the same factor that one has in relation to the first part of the case.  It is desirable that persons arbitrating should know that they have the same or equivalent rights to those which they would have in litigation and there is no reason of policy why interest should not be awarded on costs if a party pays them out.  In our respectful submission, the decision of the court in this area is erroneous and different in two material aspects from interstate decisions.  We would submit that that, apart from anything else, makes the case appropriate for special leave.

To summarise, it is my submission that the issues are important.  In this case they involve very substantial sums of money.  Each issue involves something over $1 million, on my instructions.  This was a very long arbitration and the costs are many millions of dollars.  The events occurred many years ago, so both the question of interest and the question of the basis on which costs can be ordered do involve substantial sums.  But the issues are important generally.  They are important for arbitrations throughout Australia and it is important that litigants making the decision should not be faced with uncertainties in the law on these questions, that arbitrators should not be faced with these uncertainties, particularly where there are differences between the different States.

For those reasons it is my respectful submission that special leave should be granted.

BRENNAN CJ:   We need not trouble you, Mr Rice.

The Court is of the opinion that the decision of the Full Court of the Supreme Court of South Australia is not attended with sufficient doubt on either of the issues raised by this application to warrant a grant of special leave.  Accordingly, it is refused.

MR RICE:   If it pleases the Court, I seek an order for costs.

BRENNAN CJ:   Do you have anything to say?

MR BENNETT:   Nothing I can say, your Honour.

BRENNAN CJ:   Special leave will be refused with costs.

AT 2.44 PM THE MATTER WAS CONCLUDED