TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia and Anor
[2012] HCATrans 277
[2012] HCATrans 277
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S178 of 2012
B e t w e e n -
TCL AIR CONDITIONER (ZHONGSHAN) CO LTD
Plaintiff
and
THE JUDGES OF THE FEDERAL COURT OF AUSTRALIA
First Defendant
CASTEL ELECTRONICS PTY LTD
Second Defendant
FRENCH CJ
HAYNE J
CRENNAN J
KIEFEL J
BELL J
GAGELER J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON TUESDAY, 6 NOVEMBER 2012, AT 10.15 AM
Copyright in the High Court of Australia
MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MS N.L. SHARP, for the plaintiff. (instructed by Norton Rose Australia)
MR A.J. MYERS, QC: May it please the Court, I appear with MR D.L. BAILEY, for the second defendant. (instructed by Browne & Co Solicitors and Consultants)
MR J.T. GLEESON, SC, Acting Solicitor-General of the Commonwealth of Australia: May it please the Court, I appear with my learned friends, MR M.J. O’MEARA and MS D.M. FORRESTER, for the Attorney‑General for the Commonwealth intervening. (instructed by Australian Government Solicitor)
MR W. SOFRONOFF, QC, Solicitor-General of the State of Queensland:May it please the Court, I appear with my learned friend, MR G.J.D. DEL VILLAR, for the Attorney‑General for Queensland intervening. (instructed by Crown Law Brisbane)
MR M.G. HINTON, QC, Solicitor-General of the State of South Australia: If the Court pleases, I appear with my learned friend, MR D.F. O’LEARY, for the Attorney‑General for South Australia intervening. (instructed by Crown Solicitor (SA))
MR S.G.E. McLEISH, SC, Solicitor-General for the State of Victoria: If the Court pleases, I appear with my learned friend, MR G.A. HILL, for the Attorney‑General for Victoria intervening. (instructed by Victorian Government Solicitor)
MR G.R. DONALDSON, SC, Solicitor-General for the State of Western Australia: May it please the Court, I appear with my learned friend, MS M.J. PATERSON, for the Attorney‑General for Western Australia intervening. (instructed by State Solicitor (WA))
MR J.G. RENWICK, SC: May it please your Honours, I appear with MR S. ROBERTSON, for the Attorney‑General for New South Wales intervening. (instructed by Crown Solicitor (NSW))
MR A.S. BELL, SC: May it please the Court, I appear with my learned friend, MR J.A. REDWOOD, seeking leave on behalf of the Australian Centre for International Commercial Arbitration Limited, the Institute of Arbitrators and Mediators Australia Limited and the Chartered Institute of Arbitrators (Australia) Limited. (instructed by King and Wood Mallesons) My clients seek leave pursuant to the summons to appear as amici. We filed written submissions, as your Honours know, and part of the
application or the summons is also to grant leave to address the Court for a short period.
FRENCH CJ: The Court will grant you leave to intervene, but limited to the written submissions.
MR BELL: If it please the Court.
FRENCH CJ: Thank you. Yes, Mr Walker.
MR WALKER: Your Honours, this is an application with respect to the purported exercise of jurisdiction by the Federal Court, which purported exercise culminated last Friday, as I think your Honours are now aware, in the delivery of a judgment, the media neutral citation of which is [2012] FCA 1214. I trust your Honours have copies of that now.
Your Honours, the effect of Justice Murphy’s decision of 2 November was to reject the attack on the award or awards by my client and to enforce or announce an intention to make orders yet to be made by way of enforcement of those awards. The argument that we are here to present today is one which might be regarded in light of such powerful legislative statements as are found in section 39 of the Act as being in the nature of crying against the spirit of the times. We are told in section 39 – commanded - that whenever a court is exercising functions with respect to these matters under the International Arbitration Act that by subsection (2) compulsory regard is to be had to what is called:
the fact that:
(i)arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes –
We accept, in opening this argument, that our argument which is about the enforcement provisions, in particular, is one which amounts to saying that you can have too much of a good thing if the good thing in question is the shrinking of judicial intervention – as it is called – in the arbitral process and in the treatment of an award after it has been made. The nub of our argument is that the enlisting of the Federal Judiciary – by the provisions to which I am about to come – has gone too far by removing the essential body of decisional independence which is a hallmark of the exercise of judicial power.
Can I start the relevant provisions with section 16 of the Act where, as your Honours appreciate, the Model Law is given force? As your Honours have seen in our written submissions, we have noted – though it is not of present central significance – that that is given force along with the choosing of so‑called “Option I” in Article 7 of the Model Law, to which I will come briefly in a moment.
Section 16, of course, refers to that which is defined in section 15(1) as the Schedule to English Text of the Model Law to which I will come in a moment. Section 16 is, since the 2010 amendments, accompanied by section 21 which has the effect, of course, in cases where it applies, of driving out an option of choosing to be regulated by a, in particular, State arbitration legislative scheme which, as is well known, at relevant times has included what might be called, and sometimes is strictly called, appeals.
Could I then go in the Schedule 2 English Text of the Model Law to Article 5 which is at the heart of the matter. It has been described by the UN Secretary responsible as “the innovative Article 5”. The question in this case is whether the ramifications of Article 5, and in particular the limitations of Articles 34, 35 and 36, to which I will be coming, whether they combine to impact upon the way in which Chapter III of the Constitution operates in a way which, as I say, has gone too far.
While in the vicinity of Article 5, I draw to attention, as I had mentioned, Article 7 where one sees the option which has been selected for the definition of “ARBITRATION AGREEMENT”. It is, of course, significant, as has been noted in written arguments against us, that an arbitration agreement is at bottom, or at the beginning, a private consensual arrangement, it “is an agreement by the parties”, et cetera. That, however, as we shall be putting, is but the beginning of the matter.
Could I then, passing briefly over Article 6 which is the method by which the court is designated for certain functions, come immediately to the combination of Articles 34, 35 and 36 in Chapters VII and VIII of the Model Law. In relation to what is called recourse to court against an arbitral award, the pattern of the Model Law which is of explicit exhaustiveness on its subject matter is to prevent any recourse except such as are permitted by paragraphs (2) and (3) of Article 34. I need not dwell on them at the moment because paragraph (2) of Article 34 is paralleled in Article 36 to which I shall come.
But, your Honours see in particular that there is, by subsection (3), a relatively strict time limit for the making of application to a court for setting aside an award. Chapter VIII, which will form the central focus of our argument, in Article 35, requires that an award “shall be recognised as biding”. Justice Murphy plainly proceeded in that fashion in the decision which was handed down on Friday.
FRENCH CJ: I take it at some stage you are going to take us through the mechanism by which, under the Federal Court Rules and/or Act, effect is given to that provision.
MR WALKER: Yes, I am, your Honour. We have touched on that in our written submissions and I will be coming to the provisions, both of the Act and of the Rules. Justice Murphy has also, to a degree, touched on that in his reasons. Your Honours, under Article 35 one sees that enforcement is mandatory, subject to the balance of 35 and Article 36, see paragraph (1).
Under Article 36 there is, by contrast, a discretionary refusal. The discretion is the subject of discussion and decision on a fall back basis by Justice Murphy in Friday’s decision. One sees in Article 36 that there is, modelled on Article 5 of the Convention, which is Schedule 1 to the Act, one sees that there are these criteria for enlivening the discretion to permit refusal of enforcement. There is first the incapacity of a party to the agreement, chosen in this country by Option I of Article 7.
One sees also there the validity question raised in relation to “the agreement” with a choice of law provision. Then there are in (ii) and (iii) there are matters of process concerning notice of the appointment of arbitrator or inability to present case. They are obviously germane to what is picked up later in relation to public policy to which I will be coming. In (iv), there are important matters of process concerning the composition of the tribunal. Then, in (v) there is important matter of process in terms of what I might call “rightness for enforcement”.
MR GAGELER: Why do you limit (iii) to process?
MR WALKER: I do not limit it to process in terms of avoiding any subsequent consequence. There are hugely consequential matters of substance by a decision in an award which purports to decide matters not submitted by the parties, for example. They are process in terms of not attending to the merit of a decision but rather as to whether the decision is one which is a proper subject matter of the process the parties have chosen to which the model law is attached. In particular, in (iii) one sees that the proviso is one which seeks to rescue that which was within process to the extent it can be.
The procedural substantive contrast is one which has all its usual difficulties in boundaries and overlaps in the argument about this Model Law. Perhaps, a better word for me to have used was that (iii) eschews any issue of merit of decision as opposed to whether the subject matter of the decision falls within the scope of the agreement of the parties to submit to arbitration.
Then, under subparagraph (b) of paragraph (1) of Article 36, there are the very important issues of subject matters not being capable of settlement by arbitration. And then the perhaps not entirely distinct, perhaps somewhat overlapping category which is simply captured by that elusive phrase “public policy” in subparagraph (ii). That is:
recognition or enforcement of the award would be contrary to the public policy of –
in this case Australia. In relation to that public policy provision, could I take your Honours back to section 19 of the Act where there are found provisions which, we suppose, are at the heart of the contentions made against us by a number of the interveners. There one sees that included, though not by way of exhaustive definition, in the notion of being contrary to public policy of Australia, is first that which has been “induced or affected by fraud or corruption”, the importance of which is self‑evident which need not be touched on any further. Then the one which is significant for the issues today, what is called:
(b)a breach of the rules of natural justice [having] occurred in connection with the making of the interim measure or award.
It is that which, in our submission, raises a question of significance as to whether a breach of the rules of natural justice is a method by which the correctness in law, I stress, the correctness in law of an award can ever be challenged. In short measure, we submit, no it does not.
Could I, in relation to correctness at law, then take your Honours back in the Model Law to Article 28 which, in our submission, is a critical and central provision. Article 28 has within it, of course, a possible consensual exclusion of its main provisions – see paragraph 3 – namely, the possibility with express party authority to:
decide ex aequo et bono or as amiable compositeur –
Subject to that, the effect of paragraph (1), in particular, paragraph (2) as a corroborative provision and, also, paragraph (4) – but to a lesser degree – is to emphasise that the choice of arbitration to which by the Act the Model Law applies, is a choice for decision in accordance with law. It is not, simply, a choice for the decision or say‑so of the persons designated as arbitrators. It is for their decision in accordance with law.
It is there where the nub of our argument appears, because the enforcement of an award as one which has proceeded from decision in accordance with law is one which, therefore, raises the spectacle of a court enforcing an award with its Article 28 character, notwithstanding, for example, plain or manifest error of law on its face.
Your Honours, we have in item 5 of the written outline, given reference to that part of the Model Law upon which I do not wish to dwell in detail, which provide what we have called “machinery” to facilitate the arbitral process. The key aspect of those provisions which we raise by way of anticipatory answer, so to speak, against some of the contentions raised against us in writing, is this.
They show, if there could be any doubt about it, that this is by no means a process which is rooted in, and depends for its power on, the law of contract – that is the private consensus given the force of law to be administered by a court. Rather, it is a process for decision in accordance with law – Article 28 – to which processes of the court, the compulsory mechanisms for enforcing court orders, are enlisted and adapted by those provisions for facilitating the process.
HAYNE J: Can you restate that? You were making some contrast – I did not follow it. What was the contrast?
MR WALKER: It is a contrast of the kind to which the court has referred in distinguishing the private contract – which is the beginning of an arbitration agreement – and the exercise of sovereign power which is the section 16, picking up and giving force to Article 5, and all these facilitating provisions, subpoenas, et cetera, et cetera, by which it can be seen that the arbitration process is a legislated scheme – that is, enlisting the sovereign power of Australia ‑ ‑ ‑
HAYNE J: Well, the two intersect.
MR WALKER: Of course they do.
HAYNE J: Yes, but is your proposition any more sophisticated or complicated than that?
MR WALKER: Probably not. I say it is raised in anticipation, your Honour. There is an argument against us that says, in effect, that an answer to our arguments about this law having gone too far in the enlistment of the court in enforcement is simply that this is nothing more than that enforcement of a contract and, in our submission, it is a deal more than the enforcement of a contract. Article 28, for example, is one which requires a certain approach to arbitral decision‑making and that is a character which it bears when an award is brought to court for enforcement.
CRENNAN J: When you say it is more than enforcement of a contract, you do not in any sense get away from the fact that essentially you are dealing with a private agreement, it is just that some legal consequences follow as a result of the statute.
MR WALKER: Quite so. The private agreement is the source of the attachment to these parties’ conduct of the consequences which the statute, incorporating the Model Law, brings in its train. That is, as with respect Justice Hayne has pointed out, in a sense an unremarkable proposition, that being true of a number of different classes of contract. One can think, for example, of insurance policies and many contracts for the lending of money.
CRENNAN J: So, there is a private agreement to have a dispute settled by arbitration, just speaking in very simple terms.
MR WALKER: Yes.
CRENNAN J: What happens when an award is made in relation to that private agreement to have the dispute settled in a particular way? Is there some sort of merger once an award is made? Is there accord and satisfaction? Is there a new agreement to be bound by the award?
MR WALKER: Here is where the historical resort to the courts, in particular for enforcement, means that a simple answer, as it were, at common law will not suffice because ‑ ‑ ‑
HAYNE J: Why not?
MR WALKER: Because, one does not see enforcement – maybe it could have historical, but that route was not chosen, your Honour.
HAYNE J: Yes. Forensically inconvenient, Mr Walker, but what is the sophistication that you are wanting to inject?
MR WALKER: That making the award a rule of court, or having the statutory enforcement provisions, which have now been in existence for over a century and with which we are dealing in its latest version here, means that it is to be distinguished in that regard from what might otherwise be seen as simple enforcement of a contract. There is no equivalent to an award being made a rule of court or an award being the subject of an enforcement operation in, what I will call, ordinary contract, where the parties sue one another, either for specific performance or for damages for breach.
Maybe the law could have taken the term of simply saying that for failure to honour an award there is nothing more than an action in assumpsit for breach of contract. That could have been, no doubt, an elegant solution. It was not taken. For those reasons, though there are obvious resemblances in terms of the consequences between the parties, particularly in terms of the way in which one comes to court with an accord and satisfaction, it is not framed as an accord and satisfaction. It is framed as, pursuant to rules of court, an enforcement of the award.
HAYNE J: Is it relevant to observe that as between the contracting parties there has been an accord and satisfaction or some other termination of rights as they once existed and creation of new rights?
MR WALKER: Yes, is the answer. One point I tried to make by reference to Article 28, however, is that this is not on all fours with the familiar notion of parties choosing the determination of a third person – sometimes called an expert or a determiner – in order to supply the substance or content of rights between them. The most frequent mundane example is the person who values the performance of work in a building contract.
HAYNE J: No, this is the creation of new rights and the ‑ ‑ ‑
MR WALKER: It is the supply of the content of an agreed right, “I shall be paid the reasonable price”.
HAYNE J: It is the creation of new rights and the elimination of old rights, is it not?
MR WALKER: It is certainly taking a step in the process between the parties from what I will call general terms of agreement to having crystallised that so as to say, “Now, my right is to be paid $300. It started off as a right to be paid the reasonable value. The parties agreed the mechanism would be to have the architect value. The architect has now valued. That fact being proved the right is now $300.” It is not a new right in the sense that the parties’ original agreement continues to be the reason why one owes the other $300. No further agreement has intervened.
HAYNE J: But that is central to your argument, is it not?
MR WALKER: No.
HAYNE J: You have to make good the proposition as part of your argument that the rights under the contract to due performance, et cetera, subsist beyond the arbitral award?
MR WALKER: No, your Honour. Indeed, it suffices. Indeed, it advances our position to point out that the parties’ rights in relation to which they were in dispute – one has to add that phrase – those rights, in relation to which they were in dispute, have now been reduced by the award to the specific content declared or found by the award.
FRENCH CJ: That is by reason of the arbitral agreement.
MR WALKER: By reason of the arbitral agreement having operated, so the parties having agreed to put in train a process to which, of course, this public law also applies, the statute and the incorporated Model Law.
FRENCH CJ: To which these legal consequences attach?
MR WALKER: Quite.
FRENCH CJ: Can you, just to help me, what is the precise current mechanism in the Federal Court for the enforcement of an award? Because I am looking at the Federal Court Rules and there is a reference to section 35(4) of the Act but that seems to apply to investment treaties. I am just not quite clear how it works with the kind of arbitration we are dealing with now.
MR WALKER: The short answer is it is not clear and section - your Honours, perhaps the proper place to start is section 54 of the Federal Court Act where under subsection (1) the application to the court which was made in this case – the decision on Friday looks forward to orders being made in accordance with section 54.
FRENCH CJ: This is a particular kind of arbitration, is it not, “a matter in which the Court has original jurisdiction”?
MR WALKER: Yes, the words in parenthesis “or otherwise” capture, of course, our arbitration.
FRENCH CJ: Is your arbitration in relation to a matter in which the court has original jurisdiction?
MR WALKER: Your Honour, this, as I apprehend it, was the subject of the earlier proceedings before earlier decision.
FRENCH CJ: Yes, I am just asking the question.
MR WALKER: Yes.
FRENCH CJ: It is a question of construction of 54(1).
MR WALKER: It is and at the moment – and we are obviously not on appeal from anything in that regard – at the moment it is held between these parties that the court has jurisdiction under section 54 by reason of section 39 of the Judiciary Act to entertain the enforcement proceedings. We had contested that but it has been decided against us.
FRENCH CJ: Well, it has jurisdiction by virtue of the International Arbitration Act, does it not?
MR WALKER: Quite.
FRENCH CJ: Well, that is the source of jurisdiction and I am just wondering what 54 is doing.
MR WALKER: It is prescribing the means by which upon application orders can be sought to be made “in the terms of the award”. Then under subsection (2), to provide for the enforcement of that order, that which has been made in terms of the award as if it, that is, the order, had been made in an action in the court, so in original jurisdiction by the court.
FRENCH CJ: So it does not matter that the arbitration itself, the dispute submitted to arbitration, is not a matter in respect of which the court will have had original jurisdiction?
MR WALKER: Section 54 seems to proceed on that basis, yes.
FRENCH CJ: Well, how does the court get jurisdiction to deal with that?
MR WALKER: Your Honour appreciates that my client had actually argued this proposition.
FRENCH CJ: Yes.
MR WALKER: They are bound by the determination from which there is not an appeal, at least at present. So I am bound to point out that we have submitted our contentions in relation to that to Justice Murphy. We have lost, and the answer was, in short, that jurisdiction is had by the Federal Court by reason of section 39 of the Judiciary Act, and the International Arbitration Act. I am not, as I understand it, at liberty to contest that otherwise than in an appeal. Your Honours, the Chief Justice has asked me about rules and I think we have set this out in our written submissions. There were what I will call old rules but they were not germane. Order 68 ‑ ‑ ‑
FRENCH CJ: That is now 28.4, I think, is it not?
MR WALKER: Yes.
FRENCH CJ: Or 28.5, I am sorry, international arbitration; that is, Division 28.5 of the rules.
MR WALKER: Yes. Your Honours, we have drawn to attention by the material noted in our outline at item 7, the second reading speech. This is not a case where recourse to a second reading speech is necessary for any of the statutory or indeed common law purposes, but it is, with respect, a neat and accurate description of a step being taken of a kind which, in our submission, does raise the question has it crossed a line?
In another way of putting things, one cannot say of this statute that it is simply the latest iteration of a centuries long tradition of matching private arbitral agreements with means by which courts can (a) assist, (b) enforce and (c) supervise awards.
HAYNE J: Why not?
MR WALKER: It is rather that it is the first two remain in full vigour under this Act, but the third, the supervision, has been reduced to a rump which contains highly significant matters, none of which goes to the merit or correctness in law of the adjudication of the arbitrators.
That is the novel intent of Article 5 of the Model Law, which has, if the International Arbitration Act is within power in this regard, reduced for awards covered by it the supervision of the court below a standard that previously has always been available.
HAYNE J: Other than by removal of error on the face?
MR WALKER: That is it, your Honour.
HAYNE J: That is it?
MR WALKER: That is it. It is error.
HAYNE J: Error on the face?
MR WALKER: Well, error on the face is that which I am able to say, as a matter of common law, was always available. There have been, of course, statutory, both manifestations and variations of that, plus extensions of that. Your Honours dealt with one of those forms of legislative intervention in Gordian, section 38 of the Commercial Arbitration Act as it then stood.
HAYNE J: But do I understand where we have just got to, Mr Walker? Correct me if I am wrong. Where we have got to is you advert to the fact that there has been historical enforcement of arbitral awards?
MR WALKER: Yes.
HAYNE J: You point to the absence of availability of a complaint of error on the face of the award?
MR WALKER: Yes, error of law.
HAYNE J: Error of law on the face. That, you say ‑ ‑ ‑
MR WALKER: Goes too far.
HAYNE J: ‑ ‑ ‑is the distinguishing feature?
MR WALKER: Yes, it is. That is our case. That is why we keep emphasising, as we do in items 8, 9 and 10 of the outline, that which is critical for our argument, which, with respect, Justice Hayne has relevantly noted just now, that it is critical to our proposition that a process which at common law would formerly have been subject to the implied term that matters would be decided in accordance with law ‑ ‑ ‑
HAYNE J: No, no, no. That is too broad, is it not, if you are relying only on error on the face?
MR WALKER: No. The doctrine of interference for error on the face is a means by which effect was given to the implied promise that it would be exercised in accordance with law. In other words, that implication has never carried the notion that there would be a de novo investigation of the matter in order to canvas findings or conclusions of law or to settle any question of law. There needs to be a distinction observed between the means by which the expectation of decision in accordance with law will be supervised – historically, at common law, the doctrine of error on the face of the award, historically under various statutes in various times and places, by extensions of the notion of the face, by extension of the award to include reasons and, in particular, by the invention of the so‑called appeal to which, as I say, the Court has recently given attention in Gordian.
HAYNE J: Now, each of those steps was a statutory step?
MR WALKER: Yes.
HAYNE J: None of them was rooted in the common law, I think. There was no obligation to give reasons at common law?
MR WALKER: That is so. They all bore a resemblance but added things were not available at common law. I think it is fair to say, when one reviews the history, that the statutes, until this statute, were all enlarging, albeit in a regulated way, the capacity for judicial intervention.
HAYNE J: Whether the 19th century English Arbitration Act was consistent with preservation of supervision through the mechanism of error on the face was itself a matter of high controversy at the time, was it not?
MR WALKER: Yes, your Honour. Had that controversy been settled in binding fashion other than the way it was then our arguments about Chapter III, as at 1900, no doubt would need to be very differently based. But we are able, as it happens, to point to the fact that this statute has gone further in withdrawing the capacity for a court to have its judicial power invoked to supervise for error of law in any way at all – that is, the merits of the correctness of the decision at law. That is novel.
We have noted, though I do not, of course, need to take your Honours to it, the authority that we have cited in our reply submissions – namely, Mr Justice Kitto in Civil and Civic (1967) 116 CLR 273 at 284. We do not apprehend that that is truly a subject of difference between those represented at the Bar table, though perhaps we may hear later. In our submission, it is a fundamental and elementary proposition that the process is, as I say, not for the ipse dixit or say so of an individual but rather for a process which lends itself to reasoning with greater or lesser cogency about law and its application to found facts.
KIEFEL J: But it is one thing to say that the Act removes a particular supervisory role error on the face and it is another to say, as I think your argument goes to, that there is no content to the court’s jurisdiction.
MR WALKER: Yes, it is. They are different things, I agree, with respect.
KIEFEL J: Yes, because you have to deal with Articles 34 and 36. Why is that not sufficient?
MR WALKER: Because it contains no capacity to entertain complaint about the law being incorrectly applied – that is, an error of law having been committed. The standard which is at the heart of the process, decision in accordance with law, which under the statute is imposed willy‑nilly, unless of course ex aequo et bono has been agreed between the parties, that is imposed regardless of whether the parties had thought about that.
KIEFEL J: What is different from recognition and enforcement of foreign judgments in relation to error?
MR WALKER: Your Honours, the differences that we propose in order to avoid the embarrassment of simply being assimilated to the position of foreign judgments is to emphasise that it is the recognition, according to Australia’s sovereign power, of another sovereign power’s judicial processes.
KIEFEL J: Despite error, even where it is shown. That is what the case law says; even where error is shown.
MR WALKER: Quite so. Your Honours appreciate that that is because, in our submission, the relations between two sovereigns, with respect to the enforcement by the judicial arm of one of the outcomes in the judicial arm of another, is fundamentally different from the relation between the sovereign power of Australia and a private arbitral award falling within the description caught by the International Arbitration Act.
KIEFEL J: Or is it because the parties have bound themselves to the determination of the foreign court?
MR WALKER: The parties, of course, may not have bound themselves by agreement. It may be that their conduct has brought ‑ ‑ ‑
KIEFEL J: No, but they are treated as a form of estoppel by the domestic court, are they not?
MR WALKER: Yes. So the exercise of jurisdiction in the foreign court is regarded here as an outcome to which the parties to it are bound, yes, but, in our submission, bound by reason of the exercise of the other sovereign’s power, which is not the case with an arbitration award.
KIEFEL J: You say there is no analogy to the parties binding themselves to the outcome of an award even with error?
MR WALKER: It is quite impossible to say there is no analogy.
KIEFEL J: But is that because you say there is an implied term in the parties’ agreement that depends upon there being no error on the face of the award?
MR WALKER: I would not, with respect, express it quite that way, because the very idea of error on the face is rather different from saying no error of any kind. Your Honours will recall in section 38, considered in Gordian, there is the alternative of strong evidence of, et cetera, manifest or strong evidence of. The implied term is simply that the award to be given ‑ ‑ ‑
KIEFEL J: According to law.
MR WALKER: ‑ ‑ ‑is to be given according to law. Now, human imperfection means that it would be pushing it far too far to mean that is a guarantee of no error. It would be no more true in the arbitral process than it could be in the ordinary court process.
KIEFEL J: So you say we are talking about two entirely different subjects when we talk about ‑ ‑ ‑
MR WALKER: Foreign judgments and ‑ ‑ ‑
KIEFEL J: I accept that they are two different subjects, but within the context of arbitrations and the court’s role or supervisory jurisdiction. Your notion that there has to be retained a supervisory jurisdiction for error on the face is a totally different subject matter from considering what the parties have bound themselves to.
MR WALKER: Yes. It would be artificial to suppose that parties have bound themselves in terms, perhaps supplied by an implied term, one could posit, perhaps. That carries the apparatus of whatever may occur in judicial supervision. That would be going too far, no doubt. The International Arbitration Act like, I think, all arbitration acts, or most that I can think of, does not concern itself with whether or not the parties like what the statute will impose. It takes the circumstance of an arbitration agreement within the definition of the statute and says the following consequences follow in terms, in particular for present purposes, of judicial supervision.
CRENNAN J: The parties could, of course, agree to be bound by the arbitrator’s opinion on a question of law.
MR WALKER: Your Honours in particular will recall that statute has from time to time and place to place recognised that and given the parties the autonomy, for example, to agree that there shall be no so‑called appeal. You can do that by private agreement. That is one thing. There have been statutes that recognise that as well.
HAYNE J: There have been cases which have held that, where the issue committed to the arbitrator is the determination of a point of law, the fact that the court would arrive at a different view is not to the point of development.
MR WALKER: Quite so. That is what you might call the very point. The very point of the submission is to get this panel’s determination.
HAYNE J: Yes, just so, but your proposition about implied term, that the arbitration must be according to law, means, does it not, that in an action for enforcement of the award, as distinct from the processes of registration of the award, it is always a defence to an action for enforcement of the award that an error of law was made?
MR WALKER: That is the starting point which, in our submission, recognised historically a relation which now we submit section 71 presents as having some irreducible element. The question in this case: have we identified an irreducible element which this statute purports to shrink, to go beyond?
HAYNE J: I suspect, but do not know, that the proposition that in an action for enforcement, error of law, whether patent or latent, is always a defence is itself a large proposition, not I think established. Maybe I will be pointed to where it has been, but I would be glad of any assistance I can have which would point me to a case which so decides.
MR WALKER: There will not be a case that so decides if only because of the inclusion of “latent” in that formulation.
HAYNE J: Just so.
MR WALKER: It will be quite impossible to show anything. Indeed, one ‑ ‑ ‑
HAYNE J: That shows the difficulty of implying the term of the generality that you assert, does it not?
MR WALKER: It is not what I assert, your Honours; it is what Mr Justice Kitto said. But, with respect, the stricture that Justice Hayne has expressed is accepted by us. When one turns to the more precise and focused inquiry, what is it, if anything, about the agreement between the parties which speaks to the question of subsequent judicial supervision? It is not, in our submission, possible to say either as a matter of principle or authority that there is anything in the nature of an implied term that explicitly encompasses, describes, prescribes, what may happen hereafter in the courts.
It is appropriately expressed as generally as Mr Justice Kitto expressed it – he is not the only person who has done so – because in a sense it goes without saying; we are making a contract which itself is a social construct given meaning only by law and we are in dispute about whether it has been breached, which itself is a concept given meaning only by law. We want the dispute settled. We want to know does the contract mean what (a) says or (b) says, has it been breached as (a) asserts and (b) denies, and we want a remedy if it has been. All of that, in our submission, it ought go without saying is something that is to be done according to law rather than, as has been said in the cases, flipping a coin or consulting an astrologer.
KIEFEL J: Are you not driven, though, to find something in the agreement between the parties? Is it not your case that there has to be a controversy of this kind before the court rather than the controversy which is made up of the matters which go to enforcement or non‑enforcement of an award?
MR WALKER: In a sense, yes, your Honour.
KIEFEL J: We are talking about two totally different things. The question is: why does there have to be this particular controversy about error of law on the face of the award before the court?
MR WALKER: There may never be any such issue between the parties. There may only ever be process issues, such as the arbitrators have gone beyond that which was submitted for their determination.
KIEFEL J: But are you not saying the Act goes too far in taking this away?
MR WALKER: Yes.
KIEFEL J: Why? Is it not fundamental to what you are saying that this particular controversy must remain before the Court? I just do not understand why.
MR WALKER: If I were committing us to a proposition as large as the first phrase that your Honour puts then I am not going to be able to supply a reason why. That is not our case. We are not trying to revive or distort or exhume any old, perhaps fictitious, judicial or legal professional prejudice against arbitration. We are not trying to say that it is a depreciable process that ought not be lent any assistance by the courts. In particular, we are not saying, how could we, that Chapter III of the Constitution prevents there being a system for arbitration, including enforcement of both foreign awards and arbitral awards in this country.
We are simply saying that if you enlist a court in enforcement of a process which, not by agreement only but by force of law, is to be decided according to law, Article 28 and section 16, when you enlist a court in that it is going too far and further than has ever been gone before for the court to be required, compelled, to make its order for the award, notwithstanding error on the face. Now, we confine ourselves to error on the face rather than error because, historically, acceptance of what I will call some measure of error has been at least as true, probably more true, of the relation of supervising courts to arbitrations as the relations of appellate courts to courts lower in the hierarchy. Some error is accepted as not worth the systemic effort of identification and correction.
KIEFEL J: Are you able to provide the terms of the order that the court would make to enforce the award which conveys – my memory about orders for enforcement of awards is failing me?
MR WALKER: By reason of section 54, the Federal Court Act and as, with respect, if within jurisdiction Justice Murphy has held – see paragraph 191 of Friday’s reasons – the order is to be made in the terms of the award and that will require an order for the payment of the net amount, plus the payment of the assessed costs.
HAYNE J: Why would you not make an order in terms of section 8(3) of the Arbitration Act:
a foreign award may be enforced in the Federal Court of Australia as if the award were a judgment or order of that Court.
Which is to say, the award for X-dollars, plus costs, may be enforced as if ‑ ‑ ‑
MR WALKER: It is not a choice between the two. Section 54 contemplates, as it were, both those aspects. The first aspect, no doubt, a salutary one in terms of regularity and transparency of the court’s records, is to have a court order in the terms of the award, to use the statutory expression. That is what is required.
That which follows is not expressed as if it requires a separate or identifiable order to make it so, but that is not to say that it would be inappropriate for a court to order that the terms of the award set out in orders 1 and 2 above may be enforced as if, et cetera. That is really more a note of legal consequence.
KIEFEL J: Putting the decision about the terms of the order aside, section 8(3) nevertheless makes it plain that it is not a judgment of the court for the money sum, does it not?
MR WALKER: Critically so, yes.
GAGELER J: Mr Walker, could I ask you a couple of questions of construction of two articles of the Model Law? One is Article 7, Option I.
MR WALKER: Yes.
GAGELER J: When it refers to the parties agreeing “to submit to arbitration all or certain disputes” could those include disputes as to questions of law?
MR WALKER: Yes.
GAGELER J: And could they include disputes that exclude disputes as to questions of law?
MR WALKER: Could parties make an agreement that would not involve any application of law?
GAGELER J: That does not put within the jurisdiction of the arbitrator a question of law.
MR WALKER: I may not have understood your Honour’s question. The agreement “to submit to arbitration all or certain disputes which have arisen” is a phrase which invites the choice either of a completely general description of a kind that is familiar, all disputes arising under or in relation to, et cetera, or it may be, as one sees particularly in some commodities, trade areas, disputes about certain aspects could that involve an agreement between the parties which excludes any question of law. It is very hard to imagine why people would be bothered to do that, but I suppose what I will call a pure quality dispute under a sale of goods or commodities might lend itself to such a thing.
GAGELER J: The other question is about Article 28. Now, you read the words “in accordance with such rules of law as are chosen by the parties” as requiring the arbitral tribunal to act correctly according to those rules of law?
MR WALKER: Yes, “in accordance with” is the phrase that I attach to for that outcome.
GAGELER J: Yes. Is that borne out by the extrinsic materials to which reference can be made under section 17 of the Act?
MR WALKER: Our examination of that material has not thrown up anything that we have drawn to attention in our written submission, and for a reason. We have not found, we think, anything relevant, apart from general propositions concerning efficiency, uniformity and the move against curial intervention – and exhaustiveness, I should say; exhaustiveness of prescription.
I do not think we have found anything which explains, in the manner in which the statute permits recourse, the expression “in accordance with” as having lost or not being intended to include one of its colloquial and legal connotations, namely, conformity of the outcome with the rules. I will have the material we have looked at in several different ways, several times, looked at again in case there is something I can supply specific in answer to Justice Gageler’s question, but no, we do not think there is anything in the travaux that does that – that says “in accordance with” is not to be construed as requiring conformity with.
Now, having said that however, as your Honours appreciate, the combination of Articles 5 and, relevantly, 35 and 36, also, of course, 34 in relation to set aside is such as to show by silence, by the non‑inclusion of anything to do with error, be it on the face or not, that there can be no judicial intervention to correct error or to set aside error. And, that is, as I say, the novel step which we challenge in this case, as leading to an illicit impact in terms of Chapter III on the Federal Court.
FRENCH CJ: Just coming back for a moment to the enforcement provision, 8(3) has to do with foreign awards, 35(4) of the International Arbitration Act has to do with awards under investment treaties, so, you find - and it was agitated before Justice Murphy – 54 as the, as you like, the enforcement mechanism for the Federal Court.
MR WALKER: Yes.
FRENCH CJ: Now, 35 of the Model Law does not prescribe such a mechanism, does it?
MR WALKER: No.
FRENCH CJ: So, that is left open, as it were?
MR WALKER: Yes.
FRENCH CJ: It does not have to be a mechanism which treats the award as a judgment of the court or an order of the court?
MR WALKER: No. And, there is, how shall I say, in the travaux and not just travaux preparatoire, but also commentary thereafter, there is – I am trying to be polite – a lack of clarity or specificity about what it may mean in the many systems that may be affected by this to recognise ‑ ‑ ‑
FRENCH CJ: Article 35 which is part of our domestic law does not raise a Brandy point, does it?
MR WALKER: No. Not of itself, no.
FRENCH CJ: No.
MR WALKER: So, recognised as binding and, upon application in writing to the competent court, enforced are expressions which leave open the possibilities that we see, for example, in section 54, and leave open a variety of choices. That is an unremarkable consequence of a treaty.
FRENCH CJ: But, if one is looking to constitutional validity, one is focusing on these provisions of the International Arbitration Act and the Model Law, is not one?
MR WALKER: Yes, only, yes.
FRENCH CJ: Rather than the accident of particular rules or provisions of the particular court in which the jurisdiction happens to be exercised.
MR WALKER: Yes, your Honours, these provisions, particularly 5, 34, 35, 36, that is the Articles of the Model Law, given force of law by section 16 of the Act coupled with the machinery provisions to which we have made reference, they are the grounds upon which we say, of course, though private consensus is at the origin of how this system works in any particular case, it is the force of law which is given, willy‑nilly in many respects, of the parties’ desires, which renders this case, our matter, not susceptible of proper analysis by treating it as simply a private contract and its enforcement and in our submission picks up the observations made in a very different statutory context by the Court in Westport v Gordian (2011) 244 CLR 239 at 261 to 262, paragraph 20, in particular, to which we have given reference in item 13 of our written outline.
Matters related to, if not on all fours with the issues that we seek to ventilate in this case, are within the observation in paragraph 23 of the same judgment about issues that were not before the Court in Westport v Gordian. That is why, as we put in item 14 of our outline, this is a legislative scheme which requires the Federal Court to behave in a particular way.
We have drawn to attention - these are the issues covered in items 16 and 17 of our written outline - the way in which, under section 16, Articles 5, 34, 35, 36, by what they contain and what they do not contain, omit, eliminate, in this scheme any possibility of correcting error, even that which was at common law confined by the requirement to find it on the face, let alone, of course, the later necessary refinements of that which expanded the notion of face or even invented the notion of appeal.
FRENCH CJ: When you speak of the supervisory power of the Court which is limited, what are you talking about?
MR WALKER: I am using shorthand to describe that which was involved in the doctrine of review for error on the face. I accept that I should not assume the conclusion by simply talking about a supervisory jurisdiction as if repeating the expression; it means there must be one. Another way of putting our point in this case is, can the Parliament require the court to make an order bereft of any decisional role to which, of course, it would bring its decisional independence as to the absence of error on the face. In our submission, no, one cannot because it is one of the hallmarks, obviously, of a court’s decision as opposed to the decision perhaps of other kinds of decisional organs that there will be an addressing of what the law is and how it applies to the particular case in a way which is calculated as the Court has said in paragraph 20 of Westport v Gordian, calculated to contribute to:
the maintenance of public confidence in the manner of [judicial powers] its exercise and in the cogency or rationality of its outcomes –
et cetera.
FRENCH CJ: It is not so much a matter to be judged by what might have been there in another circumstance and has been, as it were, lost. It is a question of examination of the function that is conferred upon the court and a question whether ‑ ‑ ‑
MR WALKER: Yes, yes.
FRENCH CJ: That is really what we are focusing on.
MR WALKER: We could not seriously put this argument without referring to what I will call the history, not least that which was well established, however fraught its history had been, by 1900. But I accept entirely the way the Chief Justice has put it, that it would not be an appropriate form of constitutional argument to say there is something which has always existed which Parliament has now taken away. That would be fatuous, bearing in mind the role of much legislation is to confine former liberty or licence in ways when the elected representatives think that is appropriate.
So, we are not saying that there was some irreducible minimum in relation to that which historically had been the supervision of awards. That is not the talisman. We say there is an irreducible minimum that a court must do when a court does what a court does, and it is best conveyed perhaps by the opprobrious metaphor that one sees in cases like Kable, a court is not to be a mere rubber stamp. That does not mean, however, that a court is not allowed to receive by way of a so‑called factum a deal of compressed settling of a dispute or delineation of an issue by an external and anterior step outside the court. Of course you can have that.
Another way of putting our point is to say the factum in this case of the award is like the factum in Totani of the Attorney‑General’s acceptance of the Commissioner’s view of an organisation. It packed too much in of substance so as to leave the court, in making its order, in a position which denied it what the Chief Justice called the decisional independence which is at the heart of the exercise of a judicial power.
By decisional independence in this case in particular we mean the capacity to decide, albeit within the limits that the common law and statutes have imposed, whether or not this thing meant to be in accordance with law is free of either apparent or manifest or exhibited error of law such that a court of law should not lend its assistance to its enforcement. That is the ‑ ‑ ‑
HAYNE J: That analogy which you seek to draw does not take account of the essentially consensual process which precedes the generation of the award. Totani concerned the application of the power of the State throughout the process. This is preceded by a consensual submission, participation in, et cetera, of an award.
MR WALKER: Yes.
HAYNE J: Does not the analogy there break?
MR WALKER: Well, no, but account has to be taken of reasoning such as one sees, I suppose, in Breckler (1999) 197 CLR 83, where voluntariness, cognate I suppose with consensus, was a highly significant matter in the factors that decide that case. The short answer to Justice Hayne’s inquiry is this. No, our argument does not leave out of account the consensus with which an arbitral process is stamped. It is a process that has its character from a private consensus.
It rather observes that on top of that consensus, and we would say regardless of the terms of that consensus because you cannot contract out – see section 21 – there is a system, regime, by which the Federal Court is enlisted to enforce, none of that can be done by consensus. So, that the consensus is the indispensible origin in any particular case of the process operating, but that is no more significant than saying consensus between an insurer and an insured is the private consensual origin for the application to them in their circumstances of statutes regulating conduct under or in relation to an insurance policy.
KIEFEL J: Do you say though that on an application for enforcement brought before the court that there is no matter for the court to determine?
MR WALKER: There is certainly a matter, there is ‑ ‑ ‑
KIEFEL J: A controversy?
MR WALKER: There is the authenticity of the award, the existence and authenticity of the award is enough to make it a matter. There would be all the issues that might arise, if we are thinking about enforcement, under Article 36. They are very much matters and they are, with respect, matters which are within the heartland of the judicial power to decide. Our contention is they are not enough. That they may or may not be indispensible, maybe they are indispensible. Many of them, of course, go to the alleged consensus, which is the arbitration agreement, or they enforce the consensus by requiring the award to be kept the limits of the submission.
But, what they do not do is to give the court any chance to say, this award which announces itself as being in accordance with such and such a system of law, can be seen on its face to have departed from that in a material fashion. That, in our submission, striking at, if one likes, the bargain of the parties every bit as savagely as an award which goes outside what the parties have, by consensus, submitted to the arbitrators. The arbitrators have done something other than what the parties’ bargain required to be done.
GAGELER J: And if the parties have agreed that the question of law is to be determined by the arbitrators, does the submission still stand?
MR WALKER: It has to because unless one does distinguish between these cases supposedly where the very point is that for which the arbitrators have been selected from cases where there are matters of law which, per force, come up as one, for example, enforces a contract. Yes, we submit that the possibilities in the absence of legislated capacity to give up a right to approach the court, that the judicial role cannot require a court of law, a Chapter III court, relevantly, to make an order enforcing the resolution of a dispute, which under Article 28 is to be in accordance with law, notwithstanding manifest error of law.
CRENNAN J: So, you would impute to every private arbitration agreement an implied term that the parties will only agree to be bound by an award if it is legally correct?
MR WALKER: No. That is one of the reasons why we treat the private agreement as merely the beginning of the inquiry. It is the statute that does all of that, your Honour. I think I said earlier it would be artificial – I could add to that, contrived or over‑elaborate.
CRENNAN J: Back to Article 28?
MR WALKER: Yes. I will just say it is section 16, Article 28, there it is. You do not have to investigate either Moorcock implication, under our system of law that is, or terms implied by law. You do not have to investigate any of that. Much of it would be entirely fantastic if one were actually regarding the psychology or sociology of the particular parties.
One simply says, our Parliament has said this is what, willy‑nilly the parties, is the effect of their arbitration agreement. We have simply observed by drawing to attention Mr Justice Kitto’s dictum in Civil and Civic, that there is, obviously, a genuine – if by now a somewhat remote relation – between that and what one would impute to parties under some, if not all, commercial relationships. But, no, for us it is simply the force of enactment that does it, and that is all.
KIEFEL J: But, even so, parties agree upon arbitration with knowledge of the laws which will operate upon the award.
MR WALKER: Your Honour, yes.
KIEFEL J: So, they are agreeing to arbitration in the knowledge that there is going to be limited grounds for refusing recognition.
MR WALKER: I suppose there are number of answers to that. One might cheerfully accept the proposition that they ought to be treated as if they knew all that. That is one thing. It might be very difficult, however, reflecting on parties and their understanding of the law, actually to attribute real knowledge, let alone understand.
KIEFEL J: The reason I raise this is that I am still struggling to understand why there has to be this controversy for the court to resolve if, by way of whichever operation of a combination of consent between the parties are imputed, consent or operation of the Act upon the parties’ agreement to arbitration, you are left with no possible controversy in relation to error of law.
MR WALKER: Your Honour, our objection to the statutory regime contemplates a case where there is a controversy about whether the award proceeds on the basis of an erroneous understanding of, or application of, the law. I will call it an error of law. In such a case, under this regime, the Federal Court must enforce – I was about to add an “unless”, I will not – must enforce, so long as what I am going to call the formal requirements are satisfied in terms of proving the existence and authenticity of the award.
Resistance to enforcement can involve some very important matters which are directed to process rather than to correctness, albeit to extremely important matters of process such as, does the arbitration agreement have the requisite character, such as would be investigated in a dispute about the capacity of a party, the validity of the agreement under the relevant law, and equally important matters, such as the confinement of the arbitrators to the issues committed to them
Further, of course, fundamentally important matters to do with fraud and corruption. The public policy, as we have put, and I do not need to elaborate now, as we have put in the written submission, public policy is not a banner under which correctness in law can be canvassed, it not being against the public policy of Australia that an arbitral panel, any more than a court, may commit an error.
Rather, in our submission, the whole matter comes down to this: a court whose core function is the ascertainment of the applicable law, correct understanding of it and application of it to the situation in hand, whether that be disputed facts or agreed facts does not matter, is being required by these provisions to make an order lending the enforcement mechanisms of the court and entering into the records of the court as one of its orders, the terms of an award which may wear on its face that it is not in accordance with law. Bearing in mind that arbitral panels need not be composed of lawyers at all, it is not fantastic to suppose that huge misapprehensions of law may be manifest.
HAYNE J: Why should we not read Article 28 as committing the decision of questions of law to the arbitrators finally?
MR WALKER: Well, your Honour, that is the alternative candidate, yes.
HAYNE J: Why is it not the better view, particularly of 28(2), or if you are going to fasten on the opening words of 28(1), read as a whole, is not 28 directing itself, in part at least, to – is it ex aequo et bono, see 28(3), choice of law, 28(1), as designated, or 28(2), no designation, the arbitrators are to determine which are the relevant conflicts rules?
GAGELER J: Does it matter, for the purpose of that argument, whether or not Article 28 requires the arbitrator to get the law right?
MR WALKER: In a sense, no, that we do not or could not really sensibly say that to borrow language from another area of discourse, it is a jurisdictional limit that the arbitrator must be right. We do not say that, we could not say that, any more than one would say that is true of a court decision.
GAGELER J: So, what is the relevance of either an implied term or Article 28 to the proposition that you make?
MR WALKER: The relevance of Article 28 to the proposition we put is that an arbitral award, unlike what I am going to call a certificate of a valuer’s opinion, is overtly understood by everyone participating as a party or observing the operations of the courts of law, to be a process intended to be carried out in accordance with law.
Now that is pregnant with the possibility of error, of course and that would not undercut the authority of the arbitrator. From that step we then come to what the Federal Court is asked to do, and that is all we are focusing on what the Federal Court is asked to do. As in Brandy, with the obvious differences that have been pointed out, the Federal Court is being asked to give, by its order, effect in the sense of enforcement to the factum in this case supplied by the arbitrator’s award. That would be, in our submission, fine so far as it did not encompass cases where the Court could see that the thing which was to be reproduced in the terms of its order – and that is how it would come about – contains or betrays an error.
It does not add to my argument to add the epithet manifest, but a manifest case is the case that, in our submission, threatens the detraction from the position of the Chapter III Court, to which we appeal in our case. References to the IMC decision were in the course of what we will call a straw man argument against us. Of course the applications, within the jurisdiction of the Federal Court to set aside, or to enforce respectively, including the answer to enforcement, of course they are matters and, of course, they are justiciable and, of course, what the Court is doing is what courts do.
The case that we are putting is that it so happens by the combination of Articles 5, 34, 35 and 36, that there is left out of account something that a Chapter III Court should not be asked to do, that is, have its processes lent to what the Court regards as an error. Now, of course, State provisions such as have been drawn to attention by a number of the interveners, of course, they illustrate that there is no uniquely constitutionalised requirement; this is rather in the nature of what I will call a threshold question, so far and no further is the essence of our case. There is an infinite variety of expedients which can be adopted so as to preserve the propriety of a court faced with a request that it, by its order, compel people to act not in accordance with what the law would require but oppositely.
If the case is important enough, or if there is leave then, in our submission, there can be an adequacy of that possibility preserved for the Court and we are not here to argue that there is any inadequacy in the model proposed by the State legislation, that would be for another day, perhaps if Justice Stevenson’s decision is not regarded as having settled it.
Justice Hayne raised with my learned friend, Mr Myers, the question whether a critical, but questionable, characterisation of the scheme was to the effect that the Court was being called upon to adjudicate, in a sense, the dispute between the parties. That is, the dispute to which the arbitration agreement attaches. And, in our submission, no, it is no part of our argument, nor is it a necessary part of our argument, so that my disavowal of it means defeat, that the Court must retain some residuum of some requisite magnitude or importance of involvement in settling the dispute. That dispute has become a matter in the past for the parties because pursuant to their agreement – their prior accord – there has been produced an award which finds and crystallises their rights and obligations respectively.
The Court’s involvement, to the degree that we propose is a bare minimum necessary for constitutionality, in withholding the order of the Court from something which displays error, for example, error of law, is not to adjudicate the dispute – far from it. It is simply to set aside that which has to that point provisionally been proposed as the settlement of the dispute. That, of course, is made quite concrete by the fact that the Court’s remedy would not, in such a case, ever involve saying anything about the merits of the dispute at all. It would be simply left for the process to work its way through but this time so as to leave no trace of error.
CRENNAN J: What if the prior accord is analysed this way: that the parties subject themselves, by the arbitration agreement, to the risk of error of law on the face of the order?
MR WALKER: That is clearly correct, with respect. Every time a decision‑maker is chosen, be it by the will of the people in Parliament giving a court jurisdiction, or an administrator decision‑making powers, or private parties choosing a valuer, a certifier or an arbitrator, people are being ‑ ‑ ‑
CRENNAN J: Enforcing an award in those circumstances could hardly compromise the institutional integrity of the Court.
MR WALKER: Your Honour, that is something with which we have to contend. We have to, to succeed, persuade your Honours that here we have, as a matter of degree which has become a difference in kind, moving beyond the acceptance which is systemic of the possibility of error including the acceptance that most of them cannot be remedied, there is not time enough.
On the one hand, unexceptionable, raises no constitutional problem, and on the other hand that which is presented, we say, by this form of legislation where even the most glaring error must go unremarked, and then, and this is the clincher in our argument, and then an order of the Court granted with all that follows from that including, of course, the necessary respect for court processes. That, in our submission, is what threatens the institutional integrity in the sense that we have sought to identify.
Reference was made to Tuta 127 CLR 253. It is to be recalled, of course, that the approach taken to the face of the record divided the Court in that case and, in our submission, those are the very kinds of matters which both at common law – see Elstob itself – plus under various statutes can and in appropriate cases ought to be the subject of refinement, adaptation, experimentation and the like. None of those go to constitutionality so long as there be, as I say, no requirement, come what may, for the Court in all cases to proceed to give its orders in order to require people to act in a way that the Court can see is wrong as a matter of law.
Your Honours, reference has been made to Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570. This is in this Court a consideration of that which the House of Lords had looked at in Kelantan v Duff Development (1923) AC 395 in a way which has been taken up in the other authorities to which reference has been made this afternoon. We simply wish to draw to attention apropos the reference of the very question or reference specifically of a question of law matter that has been raised several times today, that it is by no means clear as some paraphrases would have it as to that position.
If one goes to page 581 in the reasons of Chief Justice Knox and Mr Justice Gavan Duffy, about the middle of the page there is the general proposition that:
an award may be set aside for an error of law appearing on the face of it; and no doubt a question of construction is (generally speaking) a question of law.
And then comes one of these phrases:
But where a question of construction is the very thing referred for arbitration, then the decision of the arbitrator upon that point cannot be set aside by the Court only because the Court would itself have come to a different conclusion. If it appears by the award that the arbitrator has proceeded illegally –
a word which we interpolate, rhetorically at least, picks up the concern which we would seek to excite by our argument, that is, having a court knowingly and forced, hogtied, into by its order of court advancing what it regards as unlawful is, in our submission, the thing that threatens in Chapter III terms. Going back to the quotation:
for instance, that he has decided on evidence which in law was not admissible or on principles of construction which the law does not countenance –
And that, of course, will quite often be a possibility particularly with lay arbitrators in relation to contractual cases.
HAYNE J: I may be mistaken, Mr Walker, but I have a memory that there was some subsequent criticism, in the Court, of that, acted “illegally”.
MR WALKER: Yes, there is. I think in Tuta there are ‑ ‑ ‑
HAYNE J: Is it Tuta? But somewhere it is said that that is perhaps expressed too broadly or loosely, I think.
MR WALKER: Yes, your Honour, your Honour is right. I think it is Tuta. It might actually be Hancock. No, it is Mr Justice Starke in Hancock itself I think.
HAYNE J: Is it?
MR WALKER: Yes, and his Honour, if I may put it this way, overcame his natural diffidence and ‑ ‑ ‑
HAYNE J: She was renowned.
MR WALKER: Yes. Page 591. I hope this is what your Honour is recalling. Having referred to the Lord Chancellor’s qualifying words, this is about a third of the way down that page, his Honour goes on to say:
This passage is somewhat different of application. What, asks Irvine C.J., is the meaning of the phrase “proceeded on wrong principles of construction”? and what, may I ask, is covered by the words “otherwise been guilty of some error in law”? Some day, no doubt, the passage will be elucidated, but a decision can be reached in this case without endeavouring to expound the qualification made by their Lordships.
So, there is, and I am actually drawing to attention that obscurity for this purpose: we do not have what I might call with clarity permitting a principle to be discerned, a clear and discrete category of case where the court has regarded it as appropriate to proceed regardless of error. There are judicial statements to just that effect, including Kelantan, but there is also the way in which the Lord Chancellor adds what Mr Justice Starke calls those qualifying words.
We are drawing it to attention, it may only be a straw in the wind, to this effect: that it would be, in our submission, a further step raising questions about it is constitutionality for legislation positively to require a court to lend the force of its orders to that which it regards as, to use that expression, an illegality.
That stands in stark contrast from deciding not to lend its assistance to investigate whether there has been an error. That, after all, was one of the common law’s, if you like, systemic self‑defence approaches when confining the face of the award doctrine to face of the award.
FRENCH CJ: Sorry, the Court only comes to regard something as an illegality if it entertains an argument that there is.
MR WALKER: Quite, and so much of what we are addressing would never come to pass and that is why I have framed my argument around the error, which I have sometimes called manifest, adopting well‑known language, and framed it according to the common law doctrine, which has been excluded by Article 5, namely face of the award. It is perhaps given some piquancy in Tuta. That was where there was a decision, which it may be supposed, had some controversy about it in the Supreme Court of New South Wales. I am not saying it was right or wrong, but parties were contending oppositely about its correctness.
It could not reach this Court on appeal and the majority of the court held that by recitation of decision in accordance with it in the award it had become within the purview of the face of the award doctrine and could, therefore, be looked at to see whether it, the Supreme Court decision thus incorporated in the award, showed error.
Now that, in our submission, does bring this case in accordance with the extremely broad analogy, by no means exact, that we have invoked in our written submission with Kirk. That brings in play that kind of principle.
FRENCH CJ: This statutory framework does not create a situation, does it, putting to one side the common law, in which the court in effect condones an illegality or it may appear to condone an illegality.
MR WALKER: We are tending to that end, yes. It is part of that same conceptual mass to which we are appealing, that is, it is of the essence of a court that it tries to get the law right. Of course, it is also practical in human institutions that it understands it cannot try to get everything right all the time.
FRENCH CJ: But if the nature of the proceeding is such that it is not asked about that ‑ ‑ ‑
MR WALKER: Quite. Then much of my argument does not get force. Of course, that is partly the practical intent, obviously, of the face of the award doctrine. Much could be – indeed, self-described cynics have said it is not much of a grand principle if, in effect, a bit of secretarial or clerical care will prevent it from being applied or not. Nonetheless, it is a principle to which, in our submission, one can have regard when asking whether a new-fangled statute, as this one is, a new one that has positively required for the first time ‑ ‑ ‑
FRENCH CJ: It sounded like you were out of deliverance country there.
HAYNE J: I know some of us are getting on, Mr Walker, but really.
MR WALKER: Yes. It was confessedly an innovation. This was designed to be pushing out further. The only question is have they pushed too far? That is all. May it please the Court.
FRENCH CJ: Thank you, Mr Walker. The Court will reserve its decision. The Court adjourns until 10.15 tomorrow morning.
AT 3.28 PM THE MATTER WAS ADJOURNED
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