TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia & Anor

[2012] HCATrans 172

[2012] HCATrans 172

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

Application for an order to show cause

GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 23 JULY 2012, AT 9.33 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC:   If it please your Honour, I appear with MR S.J. FREE for the plaintiff.  (instructed by Norton Rose Australia)

MR D.L. BAILEY:   If your Honour pleases, I appear on behalf of the second defendant.  (instructed by Browne & Co Solicitors & Consultants)

HIS HONOUR:   There is a submitting appearance from the parties constituting the first defendant.  Yes, Mr Walker.

MR WALKER:   Your Honour will have seen that this arises out of a point not taken in earlier stages in the dispute between the parties.  You will already have also seen that that point is made with some vehemence against us in the written submission from the second defendant.  Our answer to that, and I accept we need to have an answer to it, is that it is quite obviously a very important point.  There are some differences obviously to be observed in the statute between the treatment of foreign awards and, by implication, non‑foreign awards.  While that has been the subject of a first instance decision as to jurisdiction of the Federal Court ‑ ‑ ‑

HIS HONOUR: That is the one reported in 287 ALR 297?

MR WALKER:   Yes, your Honour.  That is obviously not one that touches to the slightest degree upon the Chapter III question that we seek to ventilate.  Could the point have been thought of earlier and raised earlier?  Yes.  But it is the kind of point which would lend itself in the ordinary way to preclusion in an appeal to the Full Court of the Federal Court?  The answer is no.  Suttor v Gundowda certainly does not touch matters of this kind where the facts could not have been affected one jot or tittle by reference to whether the point had been taken.  It is a very important matter to understand about the statute.

HIS HONOUR:   Just before you go any further, may your complaint not be moot if you succeed in the application presently reserved by Justice Murphy?

MR WALKER:   Yes, is the short answer, of course.

HIS HONOUR:   When did the judge conclude that hearing?

MR WALKER:   On 26 April or thereabouts.

HIS HONOUR:   How many days roughly was ‑ ‑ ‑

MR WALKER:   Three days.

HIS HONOUR:   Three days.

MR WALKER:   It involved substantive argument about – and I am putting this very generally – the adequacy of evidentiary material.

HIS HONOUR:   Of evidentiary material?

MR WALKER:   It is natural justice via public policy, which is the mode of resistance, and I am instructed that that involved, among other aspects, principally a grievance that award had been made without any material to support it.  If we succeed in that, there is no qualification to the proposition.  Of course it will be moot.

HIS HONOUR:   If you do not succeed there, what are the grounds that you say you would have put under what I might call the old system of arbitration statutes but cannot, and we are shut out from doing, under this new system?  There seems to be, unless you can point to some prejudice, you have another sort of problem.

MR WALKER:   Yes.

HIS HONOUR:   Prejudice of that sort.

MR WALKER:   No.  The case does not present what I will call a difference of regime injunction for us.  We do not suffer prejudice of that kind. 

HIS HONOUR:   What I am trying to get to is, under the old system a question of law would be a central part of the system, a complaint about an error of law.  That seems to be shut out here unless it can be brought in under public policy or procedural fairness.

MR WALKER:   Quite so, yes.  Otherwise they are almost exclusively what I will call jurisdictional in a particular sense.

HIS HONOUR:   Yes.  At the moment, having looked at the papers shortly, I cannot see what would be a complaint as to error of law on the face of this very lengthy award.

MR WALKER:   No.  Your Honour, I will not say it defies credulity, but it would be an extraordinary task to look at that award and to say error of law, for example, by lacking attention to issues.  I am not saying that what has been done might not involve in another context something that might be characterised as error of law.  It is an error of law to make a finding without evidence obviously and, as I understand it ‑ ‑ ‑

HIS HONOUR:   It seems to be within the parameters of this natural justice idea, does it?

MR WALKER:   That would be the way I would put it.  Your Honour, my point is this.  There is no old system, new system difference that we can point to that enhances our claim to take this Court’s attention now.  I cannot say that.  Our point simply for why this should go ahead in this Court now is simply the importance of the point, the completeness with which it deals with our grievance if it is the only point left to us.  Now, I make it clear, as I understand our position, we would be giving consideration, if things do not go ahead in this Court now, to an appeal in any event against the jurisdictional determination by Justice Murphy.  This point that we wish to raise that we have brought to this Court’s attention transcends that of course.  It is an extra point.

HIS HONOUR:   Yes.  No, I was not thinking of remitter.  Now, it may be said against you that these complaints about invalidity is something you have to live with because you consented to this contractually.  What would be the answer to that?

MR WALKER: That no amount of private contract, indeed, that is part of the vice of the whole notion, that an arbitration system, whether sanctioned purely by contract or by statute or by a combination of both as is the case here, one of the vices would be the notion that by agreement there can be a by-passing of the division of governmental function in our Constitution and it would be, in our submission, an absurdity to say that persons who, particularly unwittingly as many foreign persons will, find themselves agreeing with an arbitral system that has certain attributes to be supervised by the Australian court system would thereby, as it were, talk themselves into a fictitious validity for an Australian law.

The validity of the law in question is obviously at the heart of matters because the Articles 35 and 36 function is an extremely important one required under the Model Law to be allocated by the contracting state to particular organs and it presents for each country a choice made not by parties to arbitration contracts, but by that state party’s constitution and legislature. We submit that there is an argument that needs to be had about whether the Constitution simply does not permit the legislature to do what it has done.

Now, we know – see Part II of the Act – that in certain circumstances Australia not only can but did affect the Model Law, modify the Model Law in relation to just this kind of function.  The question raised by this case which is foundational and very important for parties other than just us is whether or not what they have left in Part VIII ‑ ‑ ‑

HIS HONOUR:   It may be relevant to the considering the consent point, the private consent point, is that what is now sought is the exercise of public power by the invocation of the enforcement mechanism.

MR WALKER:   Quite.  We surely cannot be said to have waived an objection which perhaps we alone would have had standing to raise but for the matter that is said to constitute a waiver.  In our submission, it is precisely the governmental, that is, the public, function assigned to the Federal Court in this case which prevents an effective answer of you were content with this, you signed up.

HIS HONOUR:   If the matter is to stay in this Court, what is the best mechanism of getting it before the Full Court?  I would have thought there would not be any disputed factual material really.

MR WALKER:   No.  That is precisely the case.  Could I hand up ‑ ‑ ‑

HIS HONOUR:   Everyone is entranced by special cases these days.  I do not know why.

MR WALKER:   Yes, they are, is the short answer.

HIS HONOUR:   Why cannot the application for an order nisi with a supporting affidavit and any affidavit in response that Mr Bailey’s side wants to put on simply be referred into the Full Court for a hearing for a final relief in the first instance?

MR WALKER:   Of course it could, with respect.  Of course it could.  Your Honour’s reference to the entrancing reflects ‑ ‑ ‑

HIS HONOUR:   I know.

MR WALKER:   ‑ ‑ ‑ the gloom I felt from recent experiences.  As soon as I saw these short minutes, which I will nonetheless hand up because of some dates that needed to be modified given the march of time – your Honour, we of course are not wed to any virtue, if there be any, of a special case over and above what your Honour has just proposed, in particular, the vehicle of an affidavit to convey facts which are just not contradicted.  Nothing could be better in terms of a factual foundation – has a great deal to commend it, and unless my learned friend on that point could point to something, we would certainly adopt your Honour’s suggestion.

HIS HONOUR:   Now, I am, however, loath to set machinery too much in motion if this exercise turns out to be moot.

MR WALKER:   Yes.

HIS HONOUR:   What I am thinking, gentlemen, is there is not a great deal involved in its preparation.  It can be got ready but stood over pending – stood over for listing I am trying to say – until it is clear ‑ ‑ ‑

MR WALKER:   To examine how things then stand.

HIS HONOUR:   How things stand at the first instance level in the Supreme Court of Victoria.  The judge could deliver his reasons but not make orders if that would be appropriate.

MR WALKER:   Yes.

HIS HONOUR:   That has been done before.  I have done it myself before in the Federal Court.

MR WALKER:   Yes.

HIS HONOUR:   So at least the Full Court then would have the benefit of the necessary background that may be provided by his reasons as to the dimension of the litigation.

MR WALKER:   Yes, your Honour.  In light of that, what your Honour has just said, is there is really no point in spending any time this morning on the notion of interim injunction.

HIS HONOUR:   No, I would not have thought so.  I do not think we should rush to enjoin judges in the Federal Court for interim injunctions.

MR WALKER:   No.  Your Honour, could I say something about this notion of being moot?  It is rendered moot when finally we win.  Leave aside matters of form, looking at matters of substance, legal and commercial, you do not finally win until the last opportunity for a result to be reversed has been enjoyed.  That will not happen at first instance.  So this is not about to be rendered moot.

HIS HONOUR:   No.

MR WALKER:   Unless my friend causes me to faint with shock and say that if we win before Justice Murphy they will not be doing anything to complaint about that, then it will not be moot in the ultimate sense.  That is why the intervention of this Court would not be untimely in the sense of being premature and would not by hypothetical in the sense of not affecting issues between the parties.  If it please your Honour.

HIS HONOUR:   Yes, Mr Bailey.

MR BAILEY:   If the Court pleases.  Your Honour will have read the short submissions on behalf of the second defendant.  Unless your Honour wants me to take you through the chronology, what is put is that there have been four occasions at least in the course of the Federal Court proceeding when the plaintiff might have raised this point; at the hearing initially before Justice Murphy in September last year when the jurisdictional point was taken with some vigour by the plaintiff and then when Mr Justice Murphy was considering his decision at that stage, he invited the parties, through his associate, in November to put forward any submissions about the Judiciary Act as it might apply to the jurisdiction of the Federal Court.  So we say that was another opportunity there. 

Then, of course, when Justice Murphy handed down his reasons in January there was another opportunity because his Honour invited the parties to outline the timetable for the matter going forward from there.  Once he decided the Federal Court had jurisdiction to enforce a Model Law award made in this country, then obviously there was a hearing next to determine the application to set aside the awards and to enforce the award, and that was heard in April and, again, another opportunity at that stage, your Honour.

So the plaintiff to now come before the Court and raise a point which one would have thought must have been considered at some point as to whether the whole scheme under the International Arbitration Act giving effect to the Model Law was constitutionally valid or not, would have been considered.  In fact, in the recent decision of the High Court in Gordian Runoff, the Federal Attorney intervened to raise a point about whether ‑ ‑ ‑

HIS HONOUR:   He did.

MR BAILEY:   That was a reasons case.

HIS HONOUR:   Yes.

MR BAILEY:   That ought again have triggered my friend’s instructors to consider the constitutionality of what they are now seeking to put forward.

HIS HONOUR:   I understand all of that, but this is legislation of considerable public importance for the conduct of these dispute resolution mechanisms and once the point is out there, as it is now, it will have to come to the Court sooner or later and in that aspect it should be sooner rather later, but having to balance against the particular position of the parties in this case, that is the problem.

MR BAILEY:   Yes.  Well, my client would say they have been waiting now since December 2010 to enforce an award.

HIS HONOUR:   I know.

MR BAILEY:   Your Honour, just in relation to ‑ ‑ ‑

HIS HONOUR:   How much was the award, by the way?

MR BAILEY:   The award is about, off the top of my head, 2.4 million, I think, in favour of my client and then there was a further award for costs of 700,000‑odd in January 2011.

HIS HONOUR:   That is carrying interest?

MR BAILEY:   Yes, at five per cent.  It is not a great rate of interest as court interest goes, but, yes, five per cent interest.  Your Honour did raise the question of the private nature in arbitration.  Looking at the case my friend puts forward in support of the position that there is a constitutional issue, and that is that the arbitrator is somehow exercising a judicial power, your Honour, I do not see how that – it may be that what arbitrators do is like court exercising its power, but that power is derived not from any statute, it is derived from the arbitration agreement of the parties.  So, as I understand it, the principle behind an arbitration, the parties by contract have said to each other they will have certain matters referred for the determination of a third person and they will be bound by that and it has the effect of an accord and satisfaction, in effect, and that is why the courts have not regarded that traditionally as being an ouster of the court’s jurisdiction.  So the courts act as an ancillary to the arbitration to say, well, they will enforce the contract of the parties by allowing the parties to either sue on the award to enforce it or to enforce it under the court’s procedures conferred by statute. 

HIS HONOUR:   Modern arbitration statutes do not just deal with awards in money sums, do they? 

MR BAILEY:   No, your Honour.

HIS HONOUR:   They provide for specific performance orders, injunctions.

MR BAILEY:   Yes.

HIS HONOUR:   Once you get into that territory, you get an enlistment of a court in the enforcement stage which can have an impact on third parties.  For example, a banker, in effect, intermeddles in the performance of an injunction by paying out when he should not pay out, that sort of thing, even though the banker has not obviously not been a party to this private agreement.  So I think the 19th century cases did not have to cope with some of these sophistications we now have in the system.  That is part of the problem I think.

MR BAILEY:   Yes.  I was thinking more recently of – there is a High Court decision in the – I am sorry, we did not provide any authorities, your Honour, because we did not think we would get into the merits this morning – but Dobbs v National Australia Bank which underlines the fact that ‑ ‑ ‑

HIS HONOUR:   Yes, right.

MR BAILEY:   ‑ ‑ ‑ an arbitration does not oust the jurisdiction of the court, but it gives effect to a contract of the parties to have their dispute determined that way, at least at first instance anyway.

HIS HONOUR:   Yes.  When I was a solicitor acting for banks, we used to offer a prayer up for the good health of Dobbs’ Case very regularly.

MR BAILEY:   It was the famous certificate case.

HIS HONOUR:   Yes.  There was some judgment of Lord Denning throwing some doubt on it which we used to worry about.  Yes.

MR BAILEY:   I do not know what else I can say further, your Honour.  The written, unless – I do not want to tediously take you through the chronology which you will have read ‑ ‑ ‑

HIS HONOUR:   I will look at that, yes.

MR BAILEY:   ‑ ‑ ‑ but just to say, my client certainly feels at the long end of a long drawn out dispute and facing another round, so to speak ‑ ‑ ‑

HIS HONOUR:   Yes.  A short form commercial cause might have been able to be long since over.

MR BAILEY:   Yes.

HIS HONOUR:   That seems to be the lesson of arbitration systems.

MR BAILEY:   Your Honour was discussing with my friend the possibility that you would at least allow the Federal Court to have the first instance ruling but at the same time allow – well, if there is commonality of facts,

and I suspect there is in this case – that on our side we would put in a short affidavit and then we are ready to move ‑ ‑ ‑

HIS HONOUR:   I think so, yes.

MR BAILEY:   ‑ ‑ ‑ but at least know what the Federal Court held on the matter.

HIS HONOUR:   Yes.  That must be of assistance to the Full Court.  Even if there is a rumbling about an appeal from the primary judge that that issue, I think that would help the Full Court.

MR BAILEY:   Yes.  Well, I do not think I can urge your Honour any further in relation to the chronology.

HIS HONOUR:   All right.  We will see what Mr Walker ‑ ‑ ‑

MR BAILEY:   My client would prefer to hear what happens below and take it from there.  Thank you, your Honour.

HIS HONOUR:   Thank you.  Yes, Mr Walker.

MR WALKER:   Your Honour, I have nothing to add.  In relation to that last matter, if your Honour was so minded, we would respectfully suggest that the affidavit my friend foreshadows to supplement or answer our affidavit be on in a reasonably short time.

HIS HONOUR:   What further affidavits would you want to put on?

MR WALKER: I do not think any, your Honour. Perhaps we should be given a very short time to ponder that. In particular, it may be that some of the process at first instance might usefully be before the Court. I confess it is not obvious how that could affect the reading of the statute in light of the Constitution.

HIS HONOUR:   No, that is right.  That goes to ‑ ‑ ‑

MR WALKER:   Mootness perhaps.

HIS HONOUR:   Mootness perhaps, yes.

MR WALKER:   A not unimportant question of jurisdiction in itself but one which, if I may so, might ‑ ‑ ‑

HIS HONOUR:   It seems fairly heroic to say that under this federal law – I have looked at it, but it seems fairly heroic to say the Federal Court of all

courts does not have jurisdiction in this matter.  There is very lengthy affidavit of Mr McKimmie filed on 4 July.  Is that your primary affidavit?

MR WALKER:   Yes.  It is lengthy because it attaches the award which ‑ ‑ ‑

HIS HONOUR:   That is right.

MR WALKER:   ‑ ‑ ‑ adds very little, if anything, to the nature of the issue.

HIS HONOUR:   The application for an order to show cause has service affidavits, are there not?

MR WALKER:   Yes.

HIS HONOUR:   Two of them.

MR WALKER:   Yes, that is right.

HIS HONOUR:   That is it, is it not?  Wait a minute.

MR WALKER:   That is it.  From our part, it really would be reasons at first instance which would most obviously add on both areas that counsel have noted to your Honour and that is all.  We would suggest that perhaps that means, if your Honour were minded to go that way, that the case should be directed to come back at some interval from today or sooner if the reasons are handed down by Justice Murphy sooner.

HIS HONOUR:   Yes.  Thank you.

As indicated, I would not make that order for remitter of the matter.  I think the appropriate mechanism for getting the dispute before the Full Court of this Court would be to refer in the application for an order to show cause for hearing on a final basis, the supporting material to be the affidavits filed by the plaintiff and the second defendant.  These should not present issues of factual dispute.  I also, however, think that it would be appropriate not to proceed to list the matter before the Full Court until the primary judge, if I can use that expression, has had the opportunity to deliver the reasons which he presently has under reservation in the Victoria Registry of the Federal Court.

Accordingly, what I propose is:

1.The plaintiff file and serve on or before 27 July 2012 any further affidavits in addition to that of Mr D.C. McKimmie filed on 4 July 2012.

2.The second defendant file and serve any affidavits on which it relies on or before 17 August 2012.

3.Stand over the application before me at Sydney with a Melbourne video link, if that is appropriate, at 9.30 am on Tuesday, 21 August 2012.

That may be deal with Melbourne counsel’s situation.

MR BAILEY:   Yes.  Thank you, your Honour.

4.Direct the Registrar to supply a copy of the transcript of today’s proceedings to the Registrar of the Federal Court to be forwarded to Justice Murphy of that Court.

His Honour will then know what is going on.

5.Costs of today reserved.

Is there anything else, gentlemen?

MR WALKER:   If it please the Court.  No, thank you, your Honour.

MR BAILEY:   I forgot to mention before, your Honour, the request for a change of venue, but if we have a hearing by video link ‑ ‑ ‑

HIS HONOUR:   I think that will solve the problem.

MR BAILEY:   Yes.  Thank you, your Honour.

HIS HONOUR:   Very well.  I will now adjourn.

AT 10.06 AM THE MATTER WAS ADJOURNED