Tesseract International Pty Ltd v Pascale Construction Pty Ltd
[2023] HCATrans 160
[2023] HCATrans 160
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Adelaide No A9 of 2023
B e t w e e n -
TESSERACT INTERNATIONAL PTY LTD
Appellant
and
PASCALE CONSTRUCTION PTY LTD
Respondent
GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 15 NOVEMBER 2023, AT 10.00 AM
Copyright in the High Court of Australia
MR B.W. WALKER, SC: May it please the Court, I appear with my learned friends, MR T.J. MARGETTS, KC and MR L.J. CONNOLLY for the appellant. (instructed by Macpherson Kelley)
MR F.P. HICKS, SC: May it please the Court, I appear with my learned friend MR W.V. McMANUS for the respondent. (instructed by Kennedys (Australasia) Partnership and FBR Law (as known Agent))
GAGELER CJ: Mr Walker.
MR WALKER: May it please your Honours. The starting point is the statute concerning the decision or rules for an arbitration governed by the Commercial Arbitration Act by way of a general proposition, which is uncontroversial between these parties and currently in this country. The Act is a mixture of international influence and local stipulation. Section 28 of the Commercial Arbitration Act 2011 distinguishes between the party choice of the:
rules of law as . . . applicable to the substance of the dispute.
That is subsection (1), and that which may follow from the designation by the parties, subsection (2), or:
Failing any designation –
by the application of the relevant:
conflict of laws rules –
subsection (3), for the choice of that decision or law. In this case, it is uncontroversial – and for obvious reasons – that it was the law of South Australia, being an Australian jurisdiction. Of course, that means the amalgam of the common law of the Commonwealth, the legislative law of the Commonwealth and, of course, the legislative of the State. Subsection (4) of section 28 contemplates though with no particular footing in this case, particular agreement between parties to an arbitration for what are called:
such other considerations as are agreed –
by them to decide the dispute. And subsection (5) returns to the notion of contract and, bearing in mind the epithet commercial contains a traditional reference to “the usages of the trade”. Those are, as I say, familiar and in large part traditional but modernised provisions concerning the decisional law that must be applied pursuant to an arbitration agreement.
In this case, that law was and is still agreed by the parties to be as determined by the parties by their agreement in light of the circumstances bringing into play the choice of law to be the law of South Australia, including what we have labelled the “proportionate liability law”, being a portmanteau expression designed to convey both the South Australian provisions of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 as well as the relevant provisions of the Competition and Consumer Act2010 (Cth).
As your Honours understand, there may be, in controversy between other parties, a proper understanding of the state of the jurisprudence in this Court as it had obtained and been applied for a considerable period preceding the enactment of these provisions concerning the application in arbitrations of statutory provisions not linguistically couched so as expressly to refer to arbitral tribunals. The well‑known, perhaps foundational example is that to which both parties have drawn attention and which was the subject of argument and a consideration in the court below, namely, the decision in GIO v Atkinson‑Leighton (1981) 146 CLR 206 in this Court, which, in particular, concerned the putative application in arbitration proceedings of what was then the new statutory provision empowering a court – I stress, “court” – to order interest on damages – I stress “damages” – in proceedings – I stress “proceedings”.
That was understood to be – and it only matters for present purposes that it was understood to be – in contradistinction from what the common law permitted. One need not get into the scholarly debate about whether, in fact, the common law already had all the seeds of that in terms of recovery of consequential loss. It was understood to be an addition to the armoury of a common law court, the Supreme Court of New South Wales in that case, to compensate a plaintiff by ordering pre‑judgment interests. As your Honours know, and we need not dwell on it, the reasoning of the High Court in what I will call GIO largely partakes of conclusions concerning an implication probably – though this may not matter – of law by reference to what Mr Justice Stephen explained as being the matter lying behind a principle by which section 94 permitted pre‑judgment interests as being that:
arbitrators must determine disputes according to the law of the land.
Now, that has been a much‑quoted expression and it needs to be teased out somewhat. It is incomplete to the point of being incorrect unless one adds, of course, subject to or if that is in accordance with the choice of the parties. Nothing, of course, in Sir Ninian’s reasons suggests that he was ignorant of that fundamental proposition about the consensual foundation and shaping of arbitral proceedings.
Now, subject to that qualification, which is of no moment in our case, that is one of the well‑known articulations of the principles upon the basis of which we submit that, to the extent it can be, an important phrase, I accept, the provisions of the proportionate liability law which are clearly part of the law of South Australia were to be applied in the resolution of the dispute between the parties to the arbitration agreement.
As your Honours know, Mr Justice Mason took an approach which, though similar too, is couched in somewhat different language. His Honour used the language directly of “implication”, and this is at the well‑known passage at page 247, from which we quote in our paragraph 25 of our submissions, his Honour said:
There is to be implied in the submission an authority in the arbitrator to award interest conformably with s. 94 because the Supreme Court is given . . . a supervisory function –
Now, I interpolate, the supervisory function in the days of that Arbitration Act is rather different from the supervisory function committed to the Supreme Court by the Commercial Arbitration Act, but there is still a supervisory function. His Honour added:
and because an award of an arbitrator is enforced as if it were a judgment or order of the Court (s. 14).
That remains, also, thematically similar. We have drawn to attention an observation, it rises no higher than that, by Chief Justice Barwick in dissent. We quoted in paragraph 27; I need not dwell on it. The observation upon which we rely, as your Honours see, comes in particular from his Honour’s comment at the end of the passage we have quoted:
So much, I think, may be granted.
His Honour then went on to talk about what might be called, in his Honour’s judgment, the intractable nature of the explicit language of the statute. So, the state of the law might have been understood as having been pronounced in this Court, notwithstanding the references to principles and notwithstanding the reference to law of the land and things lying behind principles, it might have been understood in a particularly stilted way as being the law only concerning section 94 of the Supreme Court Act1970 (NSW) and the award of interest by arbitrators. That would be, in our submission, an impossibly crabbed reading of the reasoning.
So, it was understood in Codelfa, and in the other cases to which I am going to make very brief reference, that, of course, the matter extended more generally – Codelfa 149 CLR 337. By the time one comes to Codelfa, the notion of applying statutes, the explicit wording of which did not encompass, in any express fashion, arbitral proceedings and indeed used language contrary to that, namely, court rather than arbitration, was treated as a given, and in Codelfa the question then became a working out, a manner of working out, which would be required, we accept, case by case according to the particular statutory provision which one party said could and the other party said could not be applied in an arbitration.
Again, dealing with section 94, that is, pre‑judgment interest in the Supreme Court of New South Wales, in Codelfa, in the passage from which we quote in paragraph 28 – I do not need to read it – using the language that treats the implication as accomplished refers to that which is necessarily modified, refers to the notion of terms being modified when the terms are imported into the submission, and in particular refers to an approach by which the arbitration and the award are to be assimilated to court proceedings. We do not suggest that that is a word of specific or hard‑edged import, but it is unmistakable in the motivation of the implication being to reduce what we would submit would be called immaterial, inapposite or arbitrary differences between court and arbitral proceedings.
In short, that this is part and parcel of the approach by which the courts seek to foster and facilitate dispute resolution by resort to arbitration rather than to frustrate it. Hence the reference in Codelfa, again, to the notion of the parties’ agreement arming arbitrators with implied authority; and using the figure of speech of arbitration having “taken the place of court proceedings”. That, of course, is even more clear in the more modern Arbitration Acts, which, as your Honours know, have cut back very considerably, almost to nothing, what used to be the so‑called stay jurisdiction of the courts.
It is in that last passage from which we quote 368 in Codelfa that your Honours will find the incessantly‑repeated figure of speech of “moulding”, which cannot be given, again, any particularly hard‑edged meaning, but it is an expression of a concept by which no difficulty is experienced in the Court – that is, this Court – in reading for their application in arbitrable proceedings, statutory references, in that case, to court, or proceeding, or judgment, as being capable of being moulded, bearing in mind the underlying principle that arbitration has taken the place of the court proceeding by an agreement that the court will be astute to uphold – those are expressions which, where their analogous content in an arbitration, such as arbitrator, arbitration, award, et cetera.
Your Honours know that later dealing by courts in the country with the question of arbitral power by reference to statutes, not in terms referring to arbitral proceedings, as part and parcel of the substantive law for the discrete resolution chosen by the parties to the arbitration agreement has progressed to consider other substantive provisions apart from what might be called the ancillary, though very important, jurisdiction to order pre‑judgment interests.
We have drawn to attention – we do not to dwell on them by taking your Honours to them – what might be called the landmark decisions in the New South Wales Court of Appeal, which have stood for over 30 years. IBM 22 NSWLR 466 was the important first step, highly significant to the efficiency and social worth of dispute resolution by arbitration of permitting appropriate submissions to arbitration – that is, agreements between parties by way of an arbitration agreement, to incorporate claims under section 52, so that if the submission or the agreement could encompass section 52, the question was, nonetheless, were the terms of the Commonwealth statute intractable in the fashion that Chief Justice Barwick had argued in dissent in GIO, so as to permit only a court, as referred to, to grant relief.
As your Honours know, in that first important step, the Court of Appeal decided that the answer to that was, no, there is no such intractability and that the moulding referred to in Codelfa was the appropriate course to follow. The language of Mr Justice Kirby as President of the Court of Appeal in the extract that we have set out in our paragraph 33, it uses language which, again, captures the notion of an implication and that is which carried by the implication. Your Honours will see this notion of a proposition that:
the powers conferred upon such a court by statute may be taken to be agreed within the submission to the arbitrator.
Now, I draw that to attention because nothing in our argument treats, as it were, asymmetrically, the importance of consent or agreement or contract as a foundation of the arbitral jurisdiction. That is, we do rely upon that consent carrying with it, by the implication stemming from GIO and talked about, for example, in IBM, the court powers that are part and parcel of the law of the land in relation to such disputes. But we accept – indeed, in an appropriate case, we would assert – that that would be subject, of course, to agreement to the contrary to be gathered from the words used by the parties, whether expressly or by implication, that is, from their words in their arbitration argument.
EDELMAN J: Is that really to say, then, that the ultimate question in this case – as in perhaps most cases where this law of this land‑type question arises – is, really, just which laws did the parties expressly or impliedly intend to have applied to the arbitration?
MR WALKER: Yes. And that will have as a subsidiary question where that choice of, I will call it, decisional law is very general, such as the law of New South Wales – leaving aside its conflicts laws – is one possibility which one will find sometimes expressed. With or without that exception, if there is something as general as the law of New South Wales, then it may lead to subsidiary questions, some of which may be expressed in similarly contractual terms.
That is, it may be that from somewhere else inadmissible circumstances on in other wording of the parties’ arbitration agreement that there is exclusion of certain aspects of liability. I have in mind in particular that contracting parties may impose either ceilings on damages that may be recovered for certain causes of action, they may impose much shorter limitation periods than the law of the land would require, or they may even forbid certain forms of courses of action such as – for what is sometimes called in contracts of a kind your Honours will all have seen – forbidding claims for so‑called consequential loss for breach of certain obligations.
Those are the tailoring by the parties which would then lead to subsidiary questions being raised and answered notwithstanding the choice of law be so general as, say, the law of New South Wales. It would be subject to those contractual requirements and that is reflected in the provisions of section 28 of the South Australian Arbitration Act, to which I have already drawn attention.
EDELMAN J: So, the two questions, really, that this appeal boils down to are whether or not the express or implied intention of the parties is to be determined by reference to laws which are capable of being applied to the arbitration – and the respondent says these laws are not capable of being applied – or whether the default rule which would not include, for example, procedural laws and some other laws in that broad category where the default rule would not extend to provisions of this type.
MR WALKER: That is right. Now that may be, in actual fact, just one question. That is, those are two ways – maybe not the only two ways – of approaching the question of whether the general choice – in this case the choice is made without the parties’ designation, so‑called, but because of the application of the choice of law rules contracts.
EDELMAN J: They may be different questions if, for example – by testing it by reference to this example, that if the parties have expressly provided for incorporation of a proportionate liability scheme, there may still be a question of whether or not, on the approach taken by the Court of Appeal, the proportionate liability scheme was one that was even capable of being moulded and applied to the arbitration. But without that express provision, there may be a separate question: should the parties be taken to have impliedly provided to include that in a way that it might be said they have not impliedly provided for other procedural types of provision?
MR WALKER: Yes, is the short answer. In the course of my following argument, I will come back to some of those matters. We do, however, say it is proper to start with the proposition that whether by designation – not this case – or by the application of conflicts of laws rules – this case – where something as general as the law of New South Wales is the decisional law, that will be all law which can sensibly be understood as applying in an arbitration. Let me tease out that last reference.
Obviously enough, the law – and it is law – including delegated legislation, including rules of court which dictate how an action at law is to be conducted in the Supreme Court, has no application, and I mean no application in an arbitration. That is why the Commercial Arbitration Act has its own code in that respect and parties can choose, as your Honours know also, arbitral procedural rules. So, of course, there are rules which by definition do not apply in arbitration, they being rules, whether statutory, delegated legislation or rules of court, which are for the purposes of judicial proceedings. They are thereby, of course, not for the purposes of arbitral proceedings.
That does not mean the parties cannot say that the arbitrator should proceed in accordance with, say, Judicature Act proceedings at a particular iteration of that code with such modifications as the arbitrator sees fit. That might be a very efficient way of providing for case management. But we are not in that area here because it is not merely procedural to insist that a party may not be ordered to pay more than their proportionate liability for wrongdoing.
That, in our submission, as we have submitted, was and is a fundamental alteration of the common law concerning the contractual relations between parties where wrongdoing can include breach of contract that causes loss other than nominal, and it works an exception to a fundamental doctrine of the common law, solidary liability, which of course had the effect, as your Honours know, of casting the risk of the insolvency of several wrongdoers on the wrongdoers who were not insolvent rather than on the wronged party, the plaintiff.
GLEESON J: Mr Walker, is one way of framing the inquiry first to ask whether the parties’ agreement to arbitrate covered the claims, and the claim could include the defence here, which is the proportionate liability defence, and then, if the answer to that is yes, is there some legal constraint external to the parties’ agreement which forecloses the arbitration of those claims or, in this case, that defence?
MR WALKER: Yes, that will be, with respect, nearly always a useful and very often a complete way of dealing with it. Your Honour uses the notion of external to the parties, by which I understand your Honour to say that is willy‑nilly in the terms of their agreement. That is, whether they purported to agree so or otherwise, the law would say that cannot be done.
GLEESON J: Well, one of the reasons I have – just to be clear, what I am thinking there is that, as I understand it, the way that the respondent is putting this is that if the concurrent wrongdoers consented to participate in the arbitration, then they would have no problem with dealing with this issue.
MR WALKER: That is right. Yes, exactly so. As your Honours know, we make much of that, and I am going to circle back to that for sure. May I, in that same context, make it clear that as we understand the reasoning in the court below and our friends’ submissions – and I do not suggest either of them is obscure; understanding is not difficult – there is an acceptance in both that there could be an arbitration agreement that says this dispute is to be decided in accordance with the law of South Australia, including its proportionate liability law.
GORDON J: Well, that is one of the mechanisms that has been identified in the literature as a mechanism for addressing that issue.
MR WALKER: Yes, it is, but your Honour is – I am sorry, your Honour.
GORDON J: It is all right.
MR WALKER: I was about to say that it would be very odd if, as a matter of doctrine, a radical difference would emerge depending upon whether you added what is logically a tautology. It is to be decided in accordance with the law of New South Wales, including – and then you can name any part of the law of New South Wales, it is logically a tautology.
EDELMAN J: But it is only a tautology if your premise is correct, that the law of New South Wales is intended by the parties to pick up and include the proportionate liability regime. We know that it does not include some aspects.
MR WALKER: No. Can I try to directly address that. It is still linguistically a tautology because it is not the parties’ choice of the word, the phrase “the law of New South Wales”, that works any exclusion from it. Yes, it is the parties’ agreement to arbitrate which removes from it things which can apply only in court litigation. That is so obvious it is to go without saying. But otherwise, the reference to the substantive law of New South Wales as being the decisional rules to determine their dispute in the arbitration will carry everything that the law permits to be carried by that expression.
So, I accept, with respect, that the analysis will always require, as Justices Edelman and Gleeson have required me to confront, asking whether there is something that is raised by the putative assertion of an aspect of the substantive law of New South Wales as a decisional rule which rubs up against something which is beyond the capacity of the parties to permit or force by agreement.
GORDON J: This has been described as – and I never know how to pronounce the word properly – the arbitrability of the issue.
MR WALKER: I am going to come to ‑ ‑ ‑
GORDON J: And there are, I think, three aspects. One is, of course, the things which are not the context or ever to be considered which you would have identified, fines and things like that; one is government issues, those public policy things; and the third is this category of third parties, and in a sense that is where we are at. We are looking to see what it is about that issue and whether this proportionate liability regime sits within that exclusion for third parties or whether it does not.
MR WALKER: Your Honour, it is tempting for me to say yes, because, in our submission, we can knock that one over, but I think I am bound to say it is not just the third‑party point.
GORDON J: No, I accept that, but it is the consequence of the application of the proportionate reliability regime raises issues about third parties, and one of the aspects which is interesting is – your reliance on GIO is itself interesting because when one looks at the Commercial Arbitration Act, one sees the Parliament having legislated for things which it wants the arbitration to be able to deal with, including things like specific performance and costs, and interest in the way in which it was GIO and extending it. It would have been very easy, would it not, for the Act to say, well, also we are going to pick up this other weird thing which happens to sit outside the arbitration. It may not, it may be that it is in that field which you would say is able to be the subject of resolution by an arbitrator, but they are the issues that I think are in play at the moment.
MR WALKER: Yes, I agree with all of that. Your Honours know we very strongly take issue with the notion that proportionate liability is “weird”. That is, it does not involve any public policy notion, in our submission. It works a radical change to the law, like much legislation, and it works an alteration to the law for what are perhaps unusually clear reasons of a perceived mischief. That mischief came about because the risk of insolvency of other wrongdoers, and insolvency obviously when incorporated entities with limited liability at play in risky enterprises is not always, how shall I say, simply an unfortunate matter of trading conditions. They can be ‑ ‑ ‑
STEWARD J: Why do you reject the public policy issues?
MR WALKER: There is not, in the reasoning in the court below, nor in the argument against us, a proposition that it is for reasons of public policy that proportionate liability cannot be applied, cannot be enforced in an arbitration.
STEWARD J: That is so, but the Act is a calibrated readjustment of rights and liabilities which assumes curial determination and, in particular, joinder of third parties as part of that balancing exercise.
MR WALKER: No, but I understand your Honour’s point to me, yes.
STEWARD J: You do not think that raises public policy issues?
MR WALKER: There are distinctly public policy reasons both for and against (a), the enactment of the proportionate liability scheme at all and (b), those aspects of it, including the possibility of joinder of other wrongdoers, to which your Honour has referred. To use a more old‑fashioned language, in particular, the common law, or any law administered by judges in our kind of system, has always regarded it as a cardinal tenet that is part of the policy of the law to pay close regard to the notion that persons not parties to a case may be affected by its outcome. That, of course, is far too general to posit a rule – and I will come back to that.
There is a more particular aspect of the public policy, certainly not the policy of the law in the general sense of that expression, which manifestly was the occasion for the enactment of the proportionate liability regime. That included a perception – your Honours will recall the classic example of the auditor with the least moral responsibility for the disaster being the only one with enough money and a decent insurance policy to be worth suing, with worthless rights of contribution under the statute against the insolvent or the imprisoned.
Against what are from time to time raised by lobbyists, namely impending financial disaster in the system of insurance so important to our kind of society, there was widespread and important law reform proposed, which at all points was understood to be by reference to what was regarded as now inappropriate policy whereby the risk of insolvency fell on wrongdoers rather than on the wronged. This is not a place, mine is not an argument in which one would canvass the virtues, the merits, of the different views taken. The enacted law is clear. A choice was made, and it was made for a purpose, namely, to ensure that that risk was shifted back from where the common law had it on the wrongdoers, and each one of them severally, back to the plaintiff, and erecting for the plaintiff a requirement in arguing for the amount of damages for which any particular wrongdoer was liable to establish – according to what is fair and equitable – the responsibility, proportionately, of that particular wrongdoer for the overall loss.
That obviously is a radical change to the law. One way of framing the questions in this case is really to be supposed that the existence of what I will call a usually judicially‑favoured arbitral system – system of dispute resolution by arbitration – with the GIO notion of in accordance with the law of the land, when the law of the land is chosen for the dispute to be resolved, is it really to be supposed that that purpose would be realised only in cases which were litigated and not arbitrated. In our submission, that is an impossible proposition to spell out either from the travaux préparatoires, which are entirely silent on any such arbitrary proposition, or as a matter of text. There is nothing in the proportionate liability regime that says in terms that this is not to apply in cases where the parties have chosen to arbitrate.
Now, I accept the challenge for me is to show that it was wrong in the court below to hold that, nonetheless, there are aspects of, or features of, the proportionate liability regime which renders it incapable of being determined by arbitration, and it is at that point that I have sought to identify that, as we understand it, it seems clear that both in the court below and from our opponents, the position is, had the words been sufficiently clear – by a phrase such as, including the proportionate liability regime – then there would be no difficulty in what is sometimes called “arbitrability”, sometimes called “amenability to arbitration”, and sometimes called “capable of being determined by arbitration”. I will come back to some of those phrases.
BEECH‑JONES J: Mr Walker, do you understand that that also extended the circumstance where there was no specific inclusion of proportionate liability, but say there were three parties to this contract, and in the arbitration between, say, the three of them, the two putative defendants invoked the proportionate liability provisions?
MR WALKER: There is no question that, as we understand the reasoning below and the argument from my friends, there would be no problem with that at all. It would be utterly straightforward, just as courts below this Court have held that, if parties to an arbitration agreement have between them an issue as to one’s liability to contribute under statute to the other for a wrong against another party – not a party to an arbitration agreement – there is absolutely no difficulty with that being arbitrated.
Just as between plaintiff and defendant, the statutory question of contributory negligence – I stress, the statutory question of contributory negligence, with its reference to what the circumstances of the case require as a matter of justice – can be determined, an everyday proposition in arbitrations – so, in our submission, contribution – so long as they are all parties to the arbitration agreement. So, in a multi-party arbitration, whether by one arbitration agreement or by the possibility of either by consent or, in an appropriate case, by statutory compulsion, a consolidation so‑called of two arbitrations, nobody is saying, least of all the reasoning in the court below, that there is some infirmity in the way in which arbitrators proceed and what they can do which prevents, notwithstanding everyone’s earnest agreement to the contrary, an arbitration enforcing the proportionate liability regime.
That is why, in our submission, the notion of arbitrability, amenability or capability, is a red herring in this case, because everyone agrees that it could be done. And, in our submission, it is there that lies the germ of the fatal error in the reasoning below, and there I do circle back to what Justice Gordon has asked me concerning the effect on third parties, so‑called, those effects, I will spell out in a bit more detail – but jumping ahead in order to complete my answer to Justice Gordon, this is not a case where the statute posits a scheme in which, in order for proportionate liability to be enforced between the plaintiff and defendant, if I can use those simple terms, there must be the capacity for other wrongdoers – I will call them “third parties” – to be joined. That is not the scheme.
Now, if that were the scheme, that is, if the substantive provision imposing proportionate liability was conditioned in terms by a phrase such as, in the event that all or some, or all a majority – and you can see the policy problems – of the other wrongdoers can be joined, what do you add? And are solvent? As soon as you start going down that policy ground, you can see what an ineffective move all of this would have been against the identified mischief, but if the law had said if and only if everyone named in the field of battle can be joined, then proportionate liability will be the regime. Now, Parliament took, for fairly obvious policy reasons, a decision to the contrary of that with an inherent – indeed, to a degree, as I will come, explicit – effect upon third parties.
GLEESON J: That was never the case at common law. It was always the case that these were separate causes of action.
MR WALKER: No, that is right. At common law, solidary liability meant that the plaintiff had the luxury of just choosing the slowest‑moving, richest defendant, and leaving for him, her, or usually it, the joy of pursuing people in cross-claims. And, as your Honours know, when cross‑defendants could be found and in good time, it did not follow that they were all going to be determined in the same proceeding.
STEWARD J: It may be right that the scheme is not conditioned upon all defendants being joined, but there may be a point of view that says that in return for the risk being shifted to the plaintiff, at least the plaintiff has the right to join those parties who are ascertained as being potential wrongdoers.
MR WALKER: I have to deal with that. Could I deal with that when I am construing the statute?
STEWARD J: Of course.
MR WALKER: I entirely accept what your Honours says – that has to be addressed.
GAGELER CJ: Mr Walker, section 28(3) is based almost word-for-word on Article 28(2) of UNCITRAL Model Law, which is applied in arbitrations all over the world, but particularly in New York. New York has had a proportionate liability regime for a very long time. Have you been able to find any case law or commentary that has considered the equivalent question in that jurisdiction?
MR WALKER: No, in the treatises there is not the faintest suggestion that this has been some fundamental or inherent discordance whereby arbitrators are faced with invidious and impossible tasks, or some yawning gulf still appears between litigation and arbitration. It is that last, in particular, which must underline Sir Ninian’s reference to the law of the land and to the idea of “assimilation”, or arbitration taking the place of. None of that is necessarily required by the terms of at least the older arbitration statutes, but it was quite plainly seen as a proper and purposive way of interpreting those statutes to facilitate, rather than hinder, the resolution of disputes by arbitration.
And, in our submission, when the law of the land quite plainly says in general terms, you will not be able to sue one of several wrongdoers for the whole of your loss if that person is, in the sense explained, responsible only for a portion of that loss, it would not be permitting a dispute to be resolved in accordance with the law of the land if that simply became available because there was an antecedent arbitration agreement which simply referred to the law of the land.
It is for those reasons, in our submission, that one does need to winkle out whether or not the objection has to do with non‑arbitrability in the sense that you do not have criminal, family, or wardship, et cetera, claims in arbitration – it is not that obviously – not amenable to in the sense that it is not the kind of thing that an arbitrator can do in the same way as something is not justiciable in the sense that governmental policy is not something that judges do. It is certainly not that.
It is the very stuff of arbitral competence and decision‑making to look at four people who each had a hand in a building falling down and work out who had the major or minor roles, and there is nothing magic about judges when they do that, and there is certainly no deficiency in the capacity of arbitrators to do that. So, it is not ‑ ‑ ‑
GORDON J: In relation to that submission, I assume in response to the answer you gave to Justice Steward, you are going to take us through the Law Reform Act and just identify the bits which would not be able to be picked up from the regime, or the consequences of those aspects which would ‑ ‑ ‑
MR WALKER: Yes. Can I make this clear at the outset, everything can be picked up. It is just that, like everything else in an arbitration, it requires consent.
GORDON J: So, putting aside consent, though, assume ‑ ‑ ‑
MR WALKER: But one should never put aside consent when you are talking about arbitration, because it is key ‑ ‑ ‑
GORDON J: I think this is in response – raises a question raised by Justice Gleeson. If we start with the agreement, we are really having a question about what does the law of South Australia mean for the purposes of these parties.
MR WALKER: And it means all the law of South Australia, which is not evidently incapable of being applied in an arbitration – so requirements about attending on the Supreme Court Registry, et cetera, et cetera, or filing praecipes, et cetera, none of that has to do with an arbitration, so that does not apply. But everything else does.
GORDON J: So, you are left with, really – the nub of your argument, then is to answer and address the “rough edges” as they were described by the court below as to whether or not they lead to a different conclusion.
MR WALKER: The rough edges are those which are susceptible of moulding. So, an arbitrator and a court have only one thing in common, that is, adjudicative authority. Otherwise, they are utterly different.
BEECH-JONES J: Mr Walker, could I ask you about section 11 at some point, when you get to that?
MR WALKER: Can I promise that that will be a focal point of my argument?
GORDON J: We are all very interested in section 11.
BEECH‑JONES J: Yes, we are.
MR WALKER: So are we, your Honour, so are we. I have been seeking to develop our proposition 5 – and it may be that it is a theme that will come back, not just fifth in order, but bearing that in mind, could I take you to, please – and we are going to use the South Australian Act mainly – as your Honours have seen, we see no difficulty for our side of the argument in such differences as do exist between the State and Commonwealth enactments. If anything, and I do not want to make too much of this, the Commonwealth position is somewhat more mouldable, so to speak. But to put it another way, the South Australian Act is the one which, in the court below was seen as in particular presenting the difficulty.
Could I draw to your Honours’ attention, without dwelling on any of them, that all the key expressions defined in section 3, both subsections (1) and (2), are expressions which are perfectly general in their obvious application to the relations between parties who may be joined in a dispute concerning whether one has wronged the other – nothing, in other words, special to judicial or arbitrable proceedings, arbitral proceedings.
One sees in section 4(1) a similar proposition which could not be clearer. The liabilities under “the law of torts”, under “a contractual duty of care” and “under statute” certainly and most obviously includes, in section 4(1)(b) – it is not confined to it but that is the obvious way in which one can impute to the legislators who enacted in these terms a thoroughgoing understanding, after all, from their own statute books, that many a dispute about liability for breach of a contractual duty of care would be arbitrated. The exclusions that one sees in section 4(2) and again, I would not want to make too much of this, do not obviously include anything by reference to arbitration.
The provisions of section 6 and 7 are, of course, familiar provisions being re-enacted and consolidated. But I draw them to attention because they are, of course, general propositions about what people in this relation, that is, claimed victim and wrongdoer of these particular forms of harm and wrongdoing, will be subject to so far as the law of the land is concerned. I do not need to dwell on them, they are very familiar kinds of claim. Nobody, we think, has ever suggested or, if they have ever suggested, it is now lost in the obscurity of disagreement by everyone else, that those claims cannot be subject to arbitration.
And, in particular, such trigger phrases such as one would find familiarly in 7(2)(b), which is the pivotal provision for decision-making with respect to contributory negligence: “just and equitable” never put anyone off with respect to arbitrability. How could it?
GORDON J: Can I ask you about whether the same sort of argument applies to section 6(8)?
MR WALKER: Yes. That is a provision which, in our submission, is moulded to the case of arbitration by reading, in the case of “judgment in an action”, et cetera, the possibility of arbitral awards. All of which, of course, can ultimately be enforced by an order of court. Section 6, which is, as I say, a long‑established radical departure from the common law, as is section 7 a radical departure, contributor negligence is no longer a defence but merely a way to diminish recovery.
BEECH‑JONES J: Mr Walker, can I ask you just a question about the answer you gave to Justice Gordon about section 6(8). I think – was your answer directed to the circumstance of:
An action for contribution –
in the arbitration:
may be brought even though –
MR WALKER: There is that, but also, conversely, if you look at (8)(b):
has obtained judgment against that person –
that is, has received satisfaction through an award.
BEECH‑JONES J: So, you are then looking at the subsequent case in a court and, in that case, reading the phrase “judgment in an action” has been given ‑ ‑ ‑
MR WALKER: As being an award.
BEECH‑JONES J: ‑ ‑ ‑ as a reference to the arbitration award.
MR WALKER: Yes, but would also include to a subsequent arbitral proceeding, seeking contribution.
BEECH‑JONES J: At that point, are we really talking about moulding within the arbitration?
MR WALKER: We are only talking about moulding in the, we submit, non‑alarming sense, that in place of judgment, one has award; in place of court, one has arbitration, et cetera, in the example that Justice Gordon has raised with me.
GORDON J: I was, really, raising it both ways; both positive and negative to your argument, I think.
MR WALKER: I appreciate that, your Honour, but the positive for me is, in our submission, that section 8 is a provision which can work whether you posit – well, obviously it works if you posit two litigations. We say, of course, it can also apply for two arbitrations and it can apply for a first litigation and a second arbitration, and a first arbitration and a second litigation, and that the whole purpose of assimilating the position of arbitration to litigation would be defeated if such obvious and non‑difficult moulding were not capable of being understood as it is in practice understood to be available for section 6 and its interstate equivalents and section 7 and its interstate equivalents.
I stress, these are very familiar parts of the law to such an extent that people whose practices depend upon section 7 call themselves common lawyers. I mean, the fact is that these are claims which – as the Passlow decision by Justice Adamson, to which we have drawn attention in our submissions, show, these are claims which, without any difficulty, are able to be made in an arbitration.
GORDON J: Is there a limit to the extent to which you can mould?
MR WALKER: Of course, there will be, and one of the problems ‑ ‑ ‑
GORDON J: Sorry to ask a silly question, but ‑ ‑ ‑
MR WALKER: No, no, your Honour. One of the problems with figures of speech, of course, is that you can have more or less violent things being done all under the bland expression, “moulding”. I accept that there may be on a continua point at which you are talking about distortion, not moulding, that you are depriving provisions of an essential aspect of their meaning by the attempted so‑called “moulding”. None of that is true in this case. Nowhere near it. This is, in our submission, an extremely common or garden so‑called “moulding”.
Now, I do not want to be heard in favour of continuing that figure of speech, “moulding”. Rather, in our submission, the notion of an implication might be a handier one so long as it is understood to be a sui generis implication of law.
BEECH‑JONES J: Mr Walker, I am sorry to be obtuse in what I will call “adapting”. This concept of adapting takes as its origin the notional agreement of the parties. When we are talking about a court proceeding, which is asking whether an earlier arbitral award is a judgment given, there is no scope for moulding or adaptation, is there? There is simply the parties that the new defendant – defendant two, who was not in the arbitration – is entitled to say, apply the statute and therefore ‑ ‑ ‑
MR WALKER: I think that is right, yes.
BEECH‑JONES J: ‑ ‑ ‑ to invoke this, would that not defendant have to say what happened in the earlier arbitration, was it a judgment given, would they not?
MR WALKER: Yes, and that actually brings us into the Bitumen area that we have referred to in our submissions where their Honours left open a question as to whether you would understand “liable” – your Honour will remember – as being something which can be produced as an outcome by an arbitral award or by agreement. But your Honour is right, I accept the correction. In the case of a later piece of litigation, and people raising an earlier arbitration, it does not stem from the agreement of the parties to the arbitration agreement by which in section 8 there would be – by reference, I think, to a kind of Bitumen approach – a requirement to observe the outcome of the award as if it had been a judgment of a court.
GORDON J: Sorry to be really silly again. That means that in (b), “obtained judgment” means obtained arbitral award.
MR WALKER: In the case we are positing, yes, where there was an earlier arbitration or later litigation.
GORDON J: Does that mean that is met by the – “registration” is the wrong word, but recognition of it as a judgment in the court?
MR WALKER: Yes, your Honour, it would be, in our submission, a most puzzling, and I suspect in the arbitral community, if I can call it that, disturbing development that awards are to be enforced as if they were orders of court but they are not going to have an effect on subsequent proceedings as if they were orders of the court.
I do not mean this as a tactical retreat, but can I just say that these are side issues because we do not have anything like that here. The question reserved in this case concerned an arbitration agreement and what flows from the fact of the arbitration agreement and the selection of the law of South Australia as the decisional rule. We are not talking about a case where litigation follows an arbitration between overlapping – that is, different parties – as section 6(8) has as one of the possibilities to be dealt with. We are not concerned about arguing the matter, I have already suggested how it would be resolved, but it is not relevant, in our submission, one way or the other to the outcome of this case.
STEWARD J: But we do need to be concerned with the possibility of future litigation, because if you are right, the plaintiff will have to sue the other wrongdoer potentially in court.
MR WALKER: Unless they can get them to agree to arbitration – well, they already have an agreement to arbitration.
STEWARD J: Of course, of course. And if you are wrong, the defendant might have to seek contributions in some way from the other wrongdoer in subsequent proceedings.
MR WALKER: Yes. It is worse in that last case. Why is it worse? Because the evident intent of altering the state of affairs between first plaintiff and first defendant – namely, proportionate liability only – will not happen by a process of somehow disapplying that general law of South Australia from their dispute. Why? Because they have chosen arbitration, which has a destructive effect on the capacity of their choice of law to be given effect.
That, in our submission, is all anomalous, and not to be found in any explanation of the mischief or the means to address the mischief by which the proportionate liability scheme is enacted. Can I come then to the provisions that do govern directly our case, which is section 8 – this is “Part 3 – Apportionable Liability”. No one, least of all the court below, suggests that the words:
If a defendant’s liability on a claim for damages is apportionable, the liability is limited under this section.
are words which themselves allowed Chief Justice Barwick, perhaps, such as to exclude that being a decisional rule between parties to an arbitration agreement. In other words, the moulding, so‑called, by which you read “defendant” for “respondent”, that must be the most unexceptionable and almost negligible matter to be considered. If you are talking about a claim for damages, well, one can be pedantic about that.
Those are words which manifestly are intended to work the change to the law of the land for the purpose of rescuing the insurance market, to which I have already made reference. In subsection (2), a familiar means – I say “familiar” because, after all, there were the precursors in section 6 and section 7 over generations, and subsection (2) of section 8, the familiar notion – very familiar sense, contributory negligence became the daily stuff of courts of a fair and equitable yardstick to find out what is called a percentage of damages by reference to extent of responsibility, including by reference to others whose acts or omissions caused or contributed to the harm. None of that is alien, obviously, to the capacity of an arbitrator to make a decision. It is not non‑arbitrable or non‑amenable, or incapable in that proper sense.
They are obviously enough terms which, first of all, and primarily, speak to the position between what I will call plaintiff one and defendant one – that is, it is a binary. That plaintiff can only get from that defendant the amount which is produced by applying the approach in subsection (2). In terms, that does not involve any of those other persons being present or, of course, solvent. The whole point of this was it does not matter whether they are going to be solvent or not.
If they are, by the way, completely insolvent, we come down to the utterly sterile question: can the case not proceed, unless somebody is – at who knows whose expense – sitting at the Bar table to represent a hollow shell, which, if liquidators have worked quickly enough, of course, may be dissolved? Do they get reinstated simply in order to be a named defendant? None of that would be in accordance with a practical, sensible understanding of this scheme – that is, the combination of arbitration and proportionate liability – and it is important to recall that subsection 8(2) does not posit by any syllable of its wording on the availability or the common sense of joining anybody else from that class of “other wrongdoers”, an expression which is parenthetically emphasised as to be not connected to the particular proceeding by insisting that they include wrongdoers who are not party to the proceedings.
So, in a court, the one and only defendant can say, I can only be liable for five per cent of your loss, given the facts and what is just and equitable, and the plaintiff cannot say, but nobody else is worth suing. That was what Parliament intended, and whatever one thinks about the merits of those of policy, that is the law – and that is the law of South Australia. There is no reason that those steps of claim and answer, and justification that I have just referred to for litigation cannot be taken at arbitration. There is nothing about an arbitration that would prevent that. That is why section 11 is important – and I am headed there, I promise.
Your Honours then see in subsection (4) a mandatory mode of proceeding which posits again the way in which the court proceeds, notwithstanding that not all so‑called “other wrongdoers” are before the court. And (4)(d), in particular, has to be understood by reference to section 8(2)(b). So, it is only the defendants who are before the court who will suffer judgment. And the judgment against that one defendant or those defendants – that is, parties to those proceedings – will not include, unless the findings of fact produce that outcome, 100 per cent of the plaintiff’s loss. That is the whole point of the procedure in subsection (4). Subsection (5) is an evident safeguard against overpayment. Query whether, given the equity, that was necessary, but it is an obvious safeguard.
I do not need to dwell on section 9, except to draw to attention that nothing in it supposes that everything – everything – between all possible participants in the dispute, has to be done in the one proceeding. Now, section 10 is the subject, if I may say so, of a slip by the court below. It is not true that section 10, if one takes the approach we do, does not hold out any benefit in an arbitration. Of course, it requires the so‑called “moulding”, but, in our submission, there is absolutely no reason to regard that as an exception to the particularly straightforward way of saying, well, if you have agreed to arbitrate a case which chooses the law of South Australia with its proportionate liability regime, you will need as a defendant to comply with section 10.
Now, one of the things about section 10 is that it is not naïve about the circumstances which gave rise to this litigation or its perceived need, namely, insolvent other wrongdoers. And by “insolvent”, your Honours can take it, it includes people that no one would be bothered to spend money on either bankrupting or winding up. So, not worth powder and shot. Section 10 obviously contemplates that there will be information which can then be used by way of investigation, and it can be used in a number of different ways. It could be used by the plaintiff to satisfy itself that it is not worth powder and shot on the others, in which case, the case will proceed against the joined wrongdoer – now, this is in litigation – without the other wrongdoer being heard, let alone being ordered to do anything. But the proportion of that wrongdoer’s contribution to the harm, will be determined and, obviously, if it is more than zero, that will be in favour of the defendant who is present to be sued.
Another possibility is that the plaintiff will use the information and that obtained from the other person identified in their case against the defendant they have joined – again, without joining that other party. So, they enlist the concreter, say, to make good their case for 100 per cent or close to 100 per cent liability of the structural engineer, for example.
Of course, the third possibility is the one which has loomed excessively large in the reasoning against us, namely, upon such a person being identified, they will be sued. Money will be spent, effort will be expended on suing them to judgment. And, in our submission, that is a case which, in practice, will practically always involve the involvement of insurers. And, if your Honours will forgive a further reference to practice – hence my repeated emphasis on the significance of consent when considering an arbitration system – of all the people on Earth likely to agree if they do not settle at mediation to a sensible consolidated arbitration, it will be insurers.
In other words, there is something unrealistic or merely theoretical in us saying – and this is all looking forward to section 11 – but, of course, you have to take into account that, just as all the parties in an arbitration are only parties to an arbitration by their consent, there can be – and is, in practice – the addition of what are sometimes called ad hoc arbitration agreements – but that does not alter their character one whit – that is, arbitration agreements made in light of a dispute which has already broken out rather than simply to regulate disputes that may or may not happen in the future.
That, in our submission, when one looks at section 10, shows that of course there is value to be gained, even if there is no joinder. I stress in many cases, as Parliament obviously understood, hence this whole law reform, you will have identified people not worth suing, which means that in litigation you will have a person, the plaintiff, whose rights will be affected by reference to the position of a third party never before the court by reason of the defendant pointing to that third party and saying, it is 90 per cent responsible for the plaintiff’s harm.
GAGELER CJ: Mr Walker, would that be a convenient time to take the morning adjournment?
MR WALKER: I am so sorry, your Honour, yes.
GAGELER CJ: We will come to section 11 afterwards.
AT 11.14 AM SHORT ADJOURNMENT
UPON RESUMING AT 11.28 AM:
MR WALKER: Your Honours, in reading section 11 – of course, one goes back to the principal provision which is section 8 – there is no link between the circumstances posited as possible in section 11 and the general application of section 8. Section 11 thus significantly starts with the word “if”. It is not an essential part of the scheme that what section 11 deals with ever come to pass.
Your Honours might guess from the state of affairs that the legislature obviously had in mind when passing this radical reform, it was understood that, in many cases, there would be no powder and shot expended after the first and only proceeding. But, in any event, the point remains clear that a drafting choice is clear to demonstration that the application of section 8 as a decisional rule between a so‑called plaintiff and a so‑called defendant applies regardless of whether there is ever any later proceeding.
Section 11, which refers to the position of proceedings brought by a plaintiff that may be compared with proceedings covered by sections 6 and 7 in that regard, is the place where one finds, I accept, a kind of effect on someone that might be called, relevantly, a third party. Let me explain. By definition, there is a distinction being observed in section 11 which gives it the sting in its operation between wrongdoers who were a party to the first action – those are the wrongdoers whose proportionate liability is referred to as one of the determined matters in paragraph 11(b) – and those who were not a party to the action. And some, if not all, of those might be regarded as the wrongdoers referred to the first line of the section:
separate actions . . . against wrongdoers –
Note how those wrongdoers are described. They are:
wrongdoers who are entitled to a limitation of liability under this Part –
That, in our submission, flows from the position concerning the law of the land, being section 8. The position chosen by Parliament to reflect the enjoyment of that right, if it can be called one – that entitlement, to use the language of the section – is by means of the avoidance of re‑litigation, re‑arbitration in an appropriate case of three specified matters.
It would be idle for us not to accept that particularly paragraph (a) is significant for the purposes of so‑called third parties, by which I mean other wrongdoers not party to the antecedent action – the antecedent adjudication, perhaps, to use a neutral expression – because if it is a particularly high, generous, liberal assessment of plaintiff’s notional damages, then it presents more risk to somebody proportionately liable. We accept that.
But of course, the other side of the coin is if the notional damages were modest or, rather, restrained, then that obviously works to the benefit of a defendant who will not be subject to a claim by a plaintiff who, having been tipped off by disappointment the first time around, does a better job the second time around. That will not be available.
And one can see in an overall adjustment of rights, including insurable liabilities, as being the focus of Parliament’s attention, one can see how that policy has been determined. There is no question of validity of the legislation. It is simply a matter of giving effect to it. There is certainly no indication that the binding effect for the three matters referred to in section 11 is intended, in any sense, to qualify section 8.
Now, 11(b) is in an equal position. It would be idle for me to deny that it might not, in an appropriate case, be considered a real burden to a party who had not heard about it, to say that the wrongdoer who was a party to the action actually should have been held liable to 80 per cent, not a modest 20 per cent, it being, so to speak, the opposite of a zero-sum game. But of course, the other side of the coin also applies.
It is, in our submission, a familiar matter of res judicata that third parties can be affected by the state of affairs between a plaintiff and a defendant in proceedings that did not include those third parties, whether by way of leaving a plaintiff dissatisfied so as they will have an incentive to pursue a so-called third party, or not. That is not the kind of effect which casts any light, in our submission, on the capacity of arbitration to take the place of litigation with the appropriate moulding, substantive provisions such as we have proposed.
When one looks at 11(c), the same is also the case. It may be favourable or unfavourable depending upon findings of fact for a so-called third party – by which I mean another wrongdoer not joined in that antecedent action – to suffer the determined outcome of a contributory negligence argument which may obviously not be quite so damaging to the plaintiff’s position as the other wrongdoer not party to the first action may have wished.
Those are legislative choices made of a kind which, in our submission, and as we have indicated in our written submissions, are by no means alien to a scheme by which nonetheless there can be, and should be, applied the proportionate liability scheme in the arbitration between a plaintiff and a putative wrongdoer.
STEWARD J: Mr Walker, do you accept that in the event that you win, and let us say your liability is said to be 50 per cent of the loss or damage suffered by the claimant, that the claimant will not be restrained by section 11 in its pursuit of the third-party wrongdoer subsequently?
MR WALKER: No, not restrained, there are parameters in which that will proceed.
STEWARD J: But could the claimant seek, for example, from a third party, 70 per cent of the loss or damage suffered?
MR WALKER: I am sorry, I forgot your Honour’s first number, it was ‑ ‑ ‑
STEWARD J: Fifty per cent.
MR WALKER: Fifty per cent and 70, which is more than a hundred.
STEWARD J: Yes – this is designed to stop that happening, in a curial world, stop the plaintiff from double dipping. But if the first proceeding is an arbitration fixing liability 50/50, how would section 11 then prevent the plaintiff ‑ ‑ ‑
MR WALKER: I think one goes back to section 8(5), which refers to what section 4 describes as:
a case involving apportionable liability –
because the case posited under section 11 will be a case involving apportionable liability.
GORDON J: But (5) just sets the amount, does it not?
MR WALKER: It puts a ceiling.
GORDON J: Yes, caps – a ceiling.
MR WALKER: And that was my answer to the 50 plus 70.
GORDON J: Okay.
STEWARD J: All right.
MR WALKER: That is all it does, Justice Gordon, yes.
STEWARD J: What about a situation where, in the arbitration, the arbiter decides that the third party is liable to only 30 per cent of the loss or damage? So, 50 per cent for you, 30 per cent for the third party. What would then stop the plaintiff seeking 50 per cent up to the cap?
MR WALKER: Your Honour, 11(b) gives you – those who were there first time around, that is fixed. Section 11(c) gives you the plaintiff’s contribution, that is fixed. Section 11(a) gives you the total from which they are subtracted, and 8(5) means you are not going to get more than 100 per cent.
BEECH‑JONES J: Sorry, Mr Walker, the premise of your answer is section 11 operates on the arbitral award in the same way as a judgment of a court?
MR WALKER: Yes, it is. Yes, it is, and under 12(2), which is concerned with what I will call subsequent actions, there is a so‑called general rule – I am at a loss to tell your Honours why it is called a “general rule” as opposed to a “rule” – because there are not exceptions, I think, that are germane at all. The word “however”, in subsection (3) does its work, but as a general rule it is to exactly the same effect, surely, as 8(5), namely, the aggregate amount of damages cannot exceed the relevant amount. Being:
in a case involving apportionable liability – the amount fixed in the judgment first given as the plaintiff’s notional damages –
which is a reference back, surely, to 11(a), and the note, not unnaturally, also takes one back to section 8.
STEWARD J: So, Mr Walker, is your answer to Justice Beech‑Jones premised on the Court reading the judgment first given as including an award in a Bitumen and Oil sense?
MR WALKER: Yes, exactly so.
STEWARD J: Yes, I see.
MR WALKER: Were it not to do so, you would have done two things, each of which, in our submission, is entirely inappropriate, bearing in mind the state of the law when these provisions were enacted. The first is that, in a way which depends upon the accidents of how many people have arbitration agreements or care to enforce them, in light of a finding in this case, that would be entirely adventitious as to the effect it will have on the supposed problem in the insurance market. Whereas, what we propose is something that at least says that all such claims will now fall under the proportionate liability regime. The second ‑ ‑ ‑
BEECH‑JONES J: Mr Walker, could I ask you this: in the answer – you are saying that judgment first given refers to the arbitral award, does that firstly depend on whether or not there has been an action in a court to enforce it, or is it just in its own terms?
MR WALKER: I am going to say, in its own terms. It is because of the potential of the court enforcement that it is treated in that fashion. In other words, you do not need to go to court if an award is honoured, and nearly all of them are without court orders. It does not become a lesser being for the purposes of our GIO argument – or Bitumen argument.
BEECH‑JONES J: The follow‑up question I had was: if there was a concern on the part of the defendant who is not a part of the arbitration, that there was something of collusion or something like that, is there some means by which they can, presumably under the Act, the public policy grounds or something of that kind, to say that arbitral award should not be, effectively, given effect to, to invoke section 11? Please take it on board if you need to.
MR WALKER: No, this will be it, subject to your Honour’s other questions.
BEECH‑JONES J: That is the only other question.
MR WALKER: What your Honour raises invites attention to the state of affairs concerning an award, and one may posit a profit for judicial imprimatur as a project to enforce. We know, under the Commercial Arbitration Act that there are specified grounds for that to be resisted. Why I have hesitated is that I am not aware of any way in which those statutory grounds – which include public policy – invite third parties with a possible consequential affectation to be heard. I am sorry, I had just never come across it.
GLEESON J: I wonder, but Mr Walker, it is interesting, looking at section 36 of the Commercial Arbitration Act to see that the grounds for refusing recognition are divided into two different categories. One is:
at the request of the party against whom it is invoked –
which is quite a broad expression.
MR WALKER: Yes, it is mostly an inter‑parties matter. I confess, however, complete ignorance of any case in which that phrase “the party against whom it is invoked” has been ingeniously understood as meaning a party, not a party to the arbitration agreement, but against whom the outcome of the award is wielded, for example, under section 11 or under a Bitumen notion. I am sorry, your Honours, I have simply never come across it, I suppose – I must say ‑ ‑ ‑
GORDON J: What about 36(2)?
MR WALKER: That might be argued ‑ ‑ ‑
GORDON J: What about 36(1)(b)(ii)?
MR WALKER: That is the public policy exception, which is ordinarily understood to be the means by which fraud is raised, it used to be differently, but it seems to be a state pretty much around the world with respect to that expression that the public policy is against fraud. Again, I confess ignorance as to whether any court has ever decided – on my research, no court here that has ever found that in the meaning of 36(1)(b)(ii) that a person who is an other wrongdoer for the purposes of proportionate liability – not a party to the arbitration or its award – could be heard, could, as it were, bustle into the court and say: I wish to be heard, why this should not proceed to enforcement.
Justice Beech‑Jones raised the question of collusion. Much collusion will, of course, be fraudulent – if not all – and in our submission, one needs to be careful about interpreting these interlocking schemes by reference to what I am going to call egregious abuse that does not ordinarily ‑ ‑ ‑
GORDON J: One of the reasons why it might be relevant, just to at least consider it for a moment, is because the basis upon which this regime was set up was to encourage – and I use the word “encourage”, not “compel” – resolution of all of these issues in one proceeding.
MR WALKER: Now, that ‑ your Honour, thank you for that reference which takes one back in the Commercial Arbitration Act to section 1C(2)(b).
GORDON J: Yes.
MR WALKER: But could I emphasise – and your Honours have seen this in our written submissions, and it is important, please forgive the repetition – the whole of the arbitral system depends upon consent. I do not mean it cannot be affected by things other than consent, of course it can be, it is regulated, but it all depends upon consent of the parties, and those who agree to arbitration either before a dispute has arisen or after know that if they do not involve all affected persons as parties to that agreement, then a feature of their agreed regime for dispute resolution is that leftover issues will have to be dealt with elsewhere. That, after all, is not confined to arbitration, if you do not sue everybody in one case, you may have to sue others in another case in court.
In our submission, the notion that the court attributes to parties to arbitration an understanding that it is the consent to participate and be bound that defines the parties to an arbitration and, therefore, provides, I suppose, a virtue, sometimes of secrecy, sometimes of limited issues, that is a trade‑off that involves the fact that you may need to go somewhere else, either a fresh arbitration agreement if you have one or litigation if you do not have one, and, in our submission, none of that is such as to indicate that there are any parts of the law of South Australia that should not be invokable between parties who, after all, live in a place where the law says the plaintiff can only get so much of its damage as was caused by the defendant whom the plaintiff has sued in court and, we submit, against whom they make a claim in arbitration.
STEWARD J: That is really the nub of your argument, is it not?
MR WALKER: Yes, it does not matter ‑ ‑ ‑
STEWARD J: It may not be perfect, but you signed up to it.
MR WALKER: Yes. Your Honours, there is a deal that could have been said, some of it was, against this so‑called reform, and being troubled by its effect on other parties or parties who come to the attention of an adjudicator only after the event is part of it. But, in our submission, with insured liabilities in particular, and we know that that was the main territory thought to be addressed by this kind of case, but after all, it is for breaches of duties of care and it is not personal injury, so it is fairly clear the kind of case such as the one before your Honours to which these provisions were directed.
In our submission, it would be an inappropriate disapproval of those aspects of policy for the Court to hold that this proportionate liability regime is, in the sense that Justice Doyle used it in the court below, not amenable to or not arbitrable, it is not capable of being – it is, it is well and truly able to be done, the only question is whether it is carried along by the implication upon which we rely.
GAGELER CJ: Mr Walker, can I just go back a step or two. I totally understand the argument that in applying South Australian law as an arbitral tribunal is required to do under section 28(3), one can give the apportionment of liability provisions applicable to the arbitration a modified operation. When you get to section 11, however, which is concerned with subsequent events ‑ ‑ ‑
MR WALKER: Yes.
GAGELER CJ: ‑ ‑ ‑ why should the word “judgment” mean anything other than an order of the court, which may well be an order of the court under section 35 of the Commercial Arbitration Act, but why should it just include an award in the absence of such an order?
MR WALKER: Can I start from the fact that if there were such an order, then there would not be much moulding to be applied.
GAGELER CJ: Well, it would apply in its terms ‑ ‑ ‑
MR WALKER: Well, quite so. So, in other words, you would not be bothered to explore the fact that this is an order that enforces an award, rather than an order that comes from an adjudication in the court. In our submission, on Bitumen grounds, the notion of an award that somebody has not perfected by order having a radically different effect for the purpose of dispute resolution, including the anticipatory or suppressing effect that section 11 has on later proceedings, would be, in our submission, an odd outcome.
However, I stress, if that were the case, so be it, it would not affect the application of section 8, which, in our submission, does not need section 11 and which is our main aim. We want section 8 to apply. We want to be able to argue, before an arbitrator, that the law of the land says, you cannot get an award against us for more than is determined under the proportionate liability scheme we caused you.
GAGELER CJ: Just one more question, the last sentence of your paragraph 9 of your outline of submissions says:
section 11 does not operate to determine the rights of a third party.
Is that a bit overstated?
MR WALKER: It is very general. Only in the respects I have referred to, there is otherwise adjudication to be done. In particular, it does not determine the liability of a so‑called third party. They can still say, not liable, they can still say, liable for one per cent.
GORDON J: So, if I apply that to the facts of this case, if you are right about the proportionate liability regime applying, then if you could get consent of the other party, they will be joined to the arbitration. If there is no consent, you will institute proceedings.
MR WALKER: If it is worth doing so.
GORDON J: Yes.
MR WALKER: Only if it is worth doing so.
BEECH-JONES J: So, that sentence in your outline, is that really meant to say, it does not operate – it does operate to effect rights, but it does not operate to ‑ ‑ ‑
MR WALKER: Does not determine them ‑ ‑ ‑
BEECH-JONES J: ‑ ‑ ‑determine them.
MR WALKER: It does not – by the terms of the award, put paid to all dispute. It does not.
BEECH-JONES J: Do I understand you have answered the Chief Justice to say, look, your argument still works in terms of the whole proportional provisions if the word “judgment” first given is referable to a judgment that gives effect to an arbitral award?
MR WALKER: So, if it does that, then the whole scheme can operate; but if there were no such judgment, and contrary to my principal argument, then that would not impair the argument we have for the main target of our exercise, which is to have section 8 apply.
May it please the Court.
GAGELER CJ: Yes, thank you. Mr Hicks.
MR HICKS: Thank you, your Honours. Your Honours, can I start by referring initially to some statements of principle that were made in the decision of Rinehart v Hancock Prospecting by your Honour Justice Edelman. It is in the joint bundle of authorities at volume 3, part C, page 357. Forgive me for reading it out, but it is not being quoted in our written submissions, so I would like to make reference to it – and it says:
At its heart, commercial arbitration is based upon ‑ ‑ ‑
GORDON J: Sorry, Mr Hicks, I am lost. Where are we – at what page?
MR HICKS: I am sorry, it is page 357 of the joint bundle of authorities.
GORDON J: And what paragraph of the report is it?
MR HICKS: Paragraph 87.
GORDON J: Thank you. I apologise.
MR HICKS: Not at all. It says:
At its heart, commercial arbitration is based upon the agreement of the parties to a form of alternative dispute resolution. An arbitration clause, in which the parties consent to the resolution of disputes by arbitration, will often be part of a package of rights and duties agreed by the parties. As a general rule, therefore, third parties who do not incur the burdens of the other provisions of the contract should not be entitled to take the benefit of an arbitration clause. Nor should a third party be compelled to go to arbitration by a clause to which it has not agreed. This general rule is not unique to arbitration clauses. It is a basic tenet of justice that a voluntarily assumed obligation should not be imposed upon a person without some manifestation by the person of an undertaking to be bound by the obligation.
Your Honours, this is the point at which we take a fundamentally different view to the appellant with respect to the question of arbitration and the agreement to go to arbitration. As we have sought to articulate in our written submissions, the agreement to arbitrate disputes is usually made in the broader context of a commercial bargain and the parties’ choice that the determination of the disputes shall be, as between them, to the exclusion of the role, interests, and position of third parties in respect of their parties and liabilities is often critical and a strategic part of the commercial transaction.
We submit that, fundamentally, parties agree to go to arbitration so that their disputes are resolved as between them and them alone. That agreement may be as between, simply, as in this case, a builder and a consultant engineer, but it may be in the broader case between, say, an owner, a builder and a consultant engineer where there is a tripartite agreement. In those circumstances and in either of those forms of agreement, it is clear, in our submission, that what the parties have agreed is that their disputes and liabilities shall be determined as between them and them alone, to the exclusion of the role, interests and rights of third parties.
And that necessarily leads to the conclusion that the proportionate liability regimes which involve an apportionment quite plainly of a level of responsibility but which, as an integral feature, incorporate the capacity for joinder and the ability of a claimant to, in a single set of proceedings, have all issues of liability determined and to recover as far as possible its total loss from all parties that are present in the proceedings.
It is the opportunity of the plaintiff to do so which is at the heart of the regime both under the Commonwealth and the South Australian legislation, and its application to arbitration without that integral feature was fundamentally that which caused the South Australian Court of Appeal to conclude as they did that the apportionment regime was not applicable either by reference to the operation of section 28 of the Commercial Arbitration Act or by reference to the jurisprudence flowing from GIO v Atkinson‑Leighton Joint Venture as to the implication of a term conferring authority upon the arbitrator or clothing the arbitrator with the capacity to make or grant rights and remedies as between those parties that were before the particular arbitrator.
That integral feature of the regime has been recognised by this Court and the fact that the proportionate liability provisions operate as a scheme or regime in the decision of Hunt & Hunt, which is also in the joint bundle. Again, it is in part C, volume 3, and we refer to the passages commencing at paragraph 10, page 289 of the joint bundle, or 624 of the reported volume, and the observations there made as to the proportionate liability being a regime, starting at about 10 lines down in paragraph 10, and then the final statement in paragraph 10 that:
It is therefore necessary that the plaintiff sue all of the wrongdoers in order to recover the total loss and, of course, the risk that one of them may be insolvent shifts to the plaintiff.
The fact that the regime requires a defendant to invoke it and it does not simply apply absent such an invocation is made quite clear further in the decision of Hunt & Hunt at paragraph 16 where it was stated that:
The evident purpose of Pt 4 is to give effect to a legislative policy that, in respect of certain claims such as those for economic loss or property damage, a defendant should be liable only to the extent of his or her responsibility. The court has the task of apportioning that responsibility where the defendant can show that he or she is a “concurrent wrongdoer”, which is to say that there are others whose acts or omissions can be said to have caused the damage the plaintiff claims, whether jointly with the defendant’s acts or independently of them. If there are other wrongdoers they, together with the defendant, are all concurrent wrongdoers.
Your Honours, the practice in respect of the proportionate liability regimes has been to require the provision of the information that is the subject of section 10 of the South Australian legislation not merely as a matter of general benefit so that others in another set of proceedings can be identified and action taken against them to the extent that anyone would wish to do so having regard to their solvency, but, most importantly, those provisions have been considered to be applicable and requiring to provide the plaintiff with the opportunity, which is evidently envisaged and provided for within each of the proportionate liability regimes, wherever they are found within any jurisdiction of this country, for a plaintiff to join those parties so that it has the opportunity, in a single set of proceedings, to have all matters of liability heard, to have judgment and damages recovered once and for all, and so that it is not then put to the cost and risk of having to commence separate proceedings severally in different places with all of the attendant risk associated with inconsistent findings and inadequate recoveries.
Can I hand up a decision – it is a first instance decision from the New South Wales Supreme Court. I only provide it simply as an indication as to how the courts have been approaching the issue of the provision of information and the requirements for compliance with the notice provisions associated with each of the proportionate liability regimes. It is a decision of his Honour Justice Stevenson, of GC Group Company Pty Ltd v Bingo Holdings Pty Ltd. I am one short, am I? I am sorry. Thank you.
Your Honours will see at paragraph 20 of the decision that I have handed up, section 35A of the New South Wales legislation, which in effect encompasses – if not precisely, then certainly in substance – each of the provisions as to notice that one finds in section 10 of the South Australian legislation and in the Commonwealth legislation as well. The relevant passages that I wish to draw your Honours’ attentions to is the start of paragraph 39, where Justice Stevenson observed that in the New South Wales legislation:
Section 35A does not, in terms, “require” a defendant to do anything. Rather it provides that if a defendant believes a “particular person” may be a concurrent wrongdoer but fails to identify that particular person to the plaintiff, the defendant may be ordered to pay costs that the plaintiff thereby unnecessarily incurs.
Further then, in paragraph 40, Justice Stevenson observed that:
the section has been construed as imposing a duty on a defendant who invokes the proportionate liability provisions. The duty involves identifying the “particular persons” . . . thus complementing that defendant’s entitlement to seek to limit its liability by reason of those “particular persons’” alleged responsibility for damage.
In paragraph 41, reference is made to the decision of Justice Hammerschlag in Ucak v Avante Developments which set out, in a way which has been applied in New South Wales since – and we will come to, also in Queensland – the requirements for pleading with a proportionate liability and apportionment.
Further in the decision of HSD Co Pty Ltd v Masu Financial Management, his Honour Justice Rothman held that:
The fundamental principle underpinning the promulgation of legislation permitting proportionate liability is that persons, who are one only of a number who have occasioned the same damage, should bear the damage proportionately to the number of persons who are responsible.
The obvious precondition to limiting liability . . . is to prove that those others have caused the damage and are legally responsible for it.
There is a complementary duty . . . on the defendant, who invokes the provisions, to inform the plaintiff of relevant information on any person, who may be a concurrent wrongdoer, in default of which there are consequences in costs.
GAGELER CJ: Is there any suggestion in the case law that a failure to comply with section 10(1) and its equivalents gives rise to anything other than the possibility of being ordered to pay costs? Is there any other form of enforcement that is contemplated?
MR HICKS: Not in the statutes, but I am aware, for example, his Honour Justice McDougall, writing extrajudicially, has observed that if a defence of proportionate liability is not pleaded – and, obviously, the original principle that the party that asserts must prove applies – but if the matter is not pleaded properly, or pleaded at all, then those provisions are not invoked, they do not apply by default. In any event, one could not simply adduce evidence and ‑ ‑ ‑
EDELMAN J: Well, they work like a limitation period in that respect.
MR HICKS: Indeed. The analogy with a limitation period is somewhat tenuous – if I can say it that way – because the limitation periods traditionally have been thought to be procedural when one looks at the cases such as Verwayen where a limitation period can be waived or, indeed, Price v Spoor of this Court where it was held that a limitation defence could in fact be contracted out. The jurisprudence or the juridical thinking associated with that matter was that they were procedural defences associated with when proceedings had been commenced and, hence, went to the remedy rather than the right and therefore were capable of waiver and contracting out.
It might be thought that these provisions fall into a different category, given that they were – at least when one looks at the decision at first instance and the manner in which the case has proceeded – not thought to be procedural, and there are obviously cases associated with that and they were referred to in the Court of Appeal decision. But, nonetheless, we would submit that certainly the manner in which the courts – all courts, as far as the respondent is aware, at first instance, have considered or engaged with the proportionate liability regimes is that they must be invoked by pleading, that a defendant actually has to identify a concurrent wrongdoer. The reason for that is quite plain when one looks at the proportionate liability provisions, because they can only arise if another wrongdoer is identified. If you are singular wrongdoer, a fortiori, there is no concurrency with any other wrongdoer, so they must be pleaded.
There is certainly, when one looks at the first instance decision that I have handed up to answer the Chief Justice’s question, a consideration of the matter in the Queensland Court of Appeal in the decision Meandarra Aerial Spraying Pty Ltd v GEJ Geldard Pty Ltd, which identified the pleading requirements associated with a defence of this kind, and the necessity to identify the existence of a particular person. That Queensland decision considered the Victorian authorities as well, particularly Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd.
BEECH-JONES J: Mr Hicks, can I just stop you there. I am a little bit lost. Why cannot an arbitrator insist on this level of specification in the documents filed under section 23 of the Arbitration Act, which are akin to a pleading?
MR HICKS: The arbitrator could if that were a matter that could be raised in the arbitration. There is no doubt that, as a matter of the points of claim or points of defence that were required to be provided in accordance with that legislation, it may necessarily need to identify, with sufficient precision or specificity, who the concurrent wrongdoer was or was said to be, and there may be more of them.
The importance of this decision, and we rely upon it for the proposition as to the manner in which the practices developed and the reason for the provision of this information not simply being a benefit of somewhat limited utility, if I can put it that way, simply by being told that there is someone else in conformance with section 10, as we understand the appellant put the case, but that the fact that you cannot join them or that they may or may not choose or elect to be joined is neither here nor there. It does not diminish the benefit.
The real benefit that Justice Stevenson observed, having looked at these authorities and having moved through what is stated in paragraph 44 concerning the practice note associated with these sorts of claims in the commercial, technology and construction list, is the conclusion at paragraph 45 that these notice provisions – in this particular case:
s 35A should be seen as complementary to s 35(1) and as requiring a defendant who seeks to invoke s 35(1) to limit its liability for the alleged damage by reference to the asserted responsibility of another person, to identify that other concurrent wrongdoer to the plaintiff with sufficient particularity to enable the plaintiff, if so advised, to join that party as a defendant.
We say that that observation goes to the very heart of the scheme, and what the South Australian Court of Appeal described as the balancing of risk and burden that the scheme as a whole created, by not simply providing for a defendant to call in aid in section 8, and in effect be entitled to the benefit of that without more, we submit that, as the Court of Appeal found at first instance, the entitlement or the opportunity to join those parties which the defendant who is the subject of action – and a statement of claim being joined to those proceedings so that all issues of liability, all damages, and all judgments can be entered against those parties that are capable of being present, that opportunity was a significant matter that was placed on the scales in favour of a plaintiff having regard to what was described as the radical change to the common law whereby the plaintiff would only be entitled to recover against a particular defendant to the extent that that particular defendant’s responsibility for the loss was established upon the pleaded case brought forward by the defendant.
So, we submit, as the Court of Appeal said, those benefits, that opportunity that was specifically encompassed, encouraged – perhaps not compelled at least in all jurisdictions, although I would note that in Victoria under its apportionment legislation, apportionment can only be made as between those who are parties or present at the action, so it presents perhaps one end of the spectrum as to how these things have been involved. But nonetheless, the fact that the right of joinder and the entitlement to joinder, which is specifically granted leave for in the Commonwealth legislation and otherwise envisaged as operating within the South Australian legislation by the decision of the Court of Appeal at first instance, is a fundamental matter which takes the proportionate liability regime outside “the law” for the purposes of section 28(3) of the Commercial Arbitration Act, which is a strong indicator that the parties by implication – absent express consent – intended that it be applied because it is going to then be implied in a partial and incomplete way and for the benefit of one party alone.
Thirdly, that it does not represent the law of the land having regard to the manner of approach in GIO v Atkinson‑Leighton, both because in its terms the law of the land is the whole scheme. It is not simply parts such as section 8 in the South Australian legislation which provides certain benefit to one party, it is a whole scheme or whole regime.
GLEESON J: But, Mr Hicks, does your argument not depend upon the right of joinder being of some value?
MR HICKS: It is the opportunity of joinder, we would submit, in answer to your Honour’s question. It may not have value in all cases, I have to accept that, because there may be cases in which a concurrent wrongdoer is identified who is insolvent, or, if a natural person, no longer with us. I understand that. But that would then be to change the regime so as to only apply in particular circumstances or cases and not others.
What we submit is that when one considers the regime as a whole, and it is important to bear in mind that the question posed by way of – stated question under the Commercial Arbitration Act in South Australia did concern the whole of Part 3 and the whole of the equivalent provisions under the Commonwealth legislation, not simply section 8 or, in particular, section 87, subsection – I do not have it in mind – which specifically allows for limitation of liability. The question was whether the whole of the regime applies.
STEWARD J: Mr Hicks, what I think you are really saying is that the version of proportionate liability that Mr Walker seeks to have apply is not the law of South Australia. The law of South Australia is that there is a balancing, on the one hand, of a shift of risk to the plaintiff in return for the plaintiff having the opportunity to join those other wrongdoers who have been identified or which the defendant has disclosed. What will be applied in your arbitration is not the law of South Australia but a distorted version of it.
MR HICKS: Precisely.
STEWARD J: And that is the nub of your case.
MR HICKS: It is the nub of our case, and it was at the heart of what the Court of Appeal found, that what was being propounded – and, indeed, there are passages within the Court of Appeal’s decision in which it was observed quite clearly that there were aspects of the law within Part 3 of the South Australian legislation that could be applied.
So, for example, to go back to your Honour Justice Beech‑Jones’ question, no doubt that there could be an adequately articulated statement as to concurrent wrongdoing in the context of arbitration, but to allow that to go forward within the scheme of Part 3, to simply focus on the State legislation for the moment, is not to apply the law of South Australia. It is to apply a certain part of it – a distortion of it – that benefits one party without the attendant or cognate benefits that the balancing act that the scheme strikes in this radical change to the question of liability was intended to be afforded to the plaintiff.
That opportunity is not simply to be told that there are, or may be, other concurrent wrongdoers, but the opportunity to have them brought to the one set of proceedings for the benefit of cost, so as to ensure that there is no risk of inconsistent findings; to ensure that recovery, to the extent that it is at all possible, is addressed in that one set of proceedings by a judgment with several orders associated with proportionate liability to the extent that the current or attendant defendants there are responsible for it. That opportunity and that benefit is at the fundamental heart, is an integral part of the scheme of proportionate liability, and it simply cannot be given effect, or any meaningful effect, in the context of an arbitration.
BEECH‑JONES J: Mr Hicks, if the wrongdoer – sorry, if the defendant wrongdoer identifies another wrongdoer who is a party to the arbitration agreement, you would accept that you could apply the proportionate liability provisions?
MR HICKS: We would. The reason we would accept that is that it could be reasonably assumed or inferred that if there was a tripartite arbitration agreement, to use the example I took earlier – so, to take a very simple example, an owner engages a builder and engages an engineer for the purpose of certain work. The three of them agree that, insofar as there is any dispute that arises between them or their respective contracts, they will submit to arbitration. The three of them, then – something happens. The owner says, I made $100, because the work has not been as it ought to have been.
It is quite clear that, in that example and that arrangement that as between the builder and the engineer, who are each said to be potentially liable for the claim of the owner for the $100, they could, as between them, within the confines of their agreement to arbitrate, have a debate and have a contest as to which of them was liable for the $100 or some part of it. That is perfectly open, and would be consistent with the parties agreeing to submit their disputes as between them to arbitration. Where it does not, or cannot, extend is that if there was another party – say, an architect within that tripartite agreement, who each of them wanted to say, well, actually, the architect might have some responsibility for all this and we want to point to them, that is where it falls down.
BEECH-JONES J: So, the minute one of them identifies a non-party to the contract, proportionate liability is out the window for everyone.
MR HICKS: Yes, well, insofar as that third party is concerned. They could still contest or have the issue as between the two of them addressed as a matter of proportionate liability, but we would submit that they could not invoke or assert that proportionate liability regime by pointing to a person who was not within the four corners of the arbitration agreement and had not agreed to submit to an arbitral award in respect of any potential liability.
GAGELER CJ: Now, in that scenario, are you talking about section 28(3), or you are talking about section 28(1), or section 28(5)?
MR HICKS: All of them. We would certainly be saying insofar as there is an agreement between them, that informs what their decision is – that informs what the confines of the arrangement are. In respect of section 28(3) and the question of what quote unquote “the law” is, we maintain that, yes, choice is important, choice is foundational to the whole approach and regime associated with apportionment and arbitration, but the choice to go to arbitration, the choice to arbitrate, is itself a reflection of what law you intend, or what law is intended or should be applied to the arbitral process.
So, under section 28(3), which is a default provision associated with which substantive law applies following arbitration where there is no specific or expressed designation by the parties, the question then arises – and this is the question the Court of Appeal answered – what is “the law” that the arbitration or the arbitral tribunal has to apply? That necessarily involves asking the same question as to whether or not that law is or ought be considered capable of application within an arbitral context. We submit that the Court of Appeal correctly decided that it was not because of what I have described as the integral feature: the balancing act associated with the ability to have all issues of liability, to have all matters determined within the context of a single set of proceedings.
JAGOT J: Mr Hicks, could I just ask this to expand on the examples. So, assume two parties are parties to an arbitration agreement. The respondent in that arbitration agreement says, well, I say I am only 50 per cent responsible, party C is 50 per cent responsible; communicates with party C saying, there is an arbitration on, I am going to say I am 50 per cent responsible and you are 50 per cent responsible, and if I end up being 100 per cent responsible in the arbitration, I will sue you for the 50 per cent. And C says, well, I will agree to be a part of the arbitration.
Then are you saying, no, A, the claimant in the arbitration can say, no, I do not agree to that, I want my 100 per cent against B? That seems to be the consequence of what you are saying – the law of the State, because they have not agreed in advance – in that example, does B get to join – and C is willing to come in because it does not want to be sued later and it would rather be there and say, no, I am not 50, I am 30. What then is the position? Does C get to come in irrespective of A saying, no, actually, I would still prefer to have my 100 per cent against B? Because, if that is the case, you have two different types of distortions, as you put it, of the law. The law is you are not meant to get 100 per cent against B, you are only meant to get the proportional amount. So, how does it cut?
MR HICKS: It may cut a number of different ways depending on what happens. But to take the point which is, as I understand it, A takes action against B, alleging loss in the context of an arbitration agreement. B asserts that C has some responsibility for that and wishes to bring C into the arbitral arrangement so as to place A in the position of recovering against either B or C, depending on the findings that are made.
JAGOT J: Or both.
MR HICKS: Or both. We would submit that the choice to go to arbitration in the context of that agreement is one whereby B has agreed that it will be liable without recourse or reference to third parties. So, A would be within its rights to say, no, I do not want to bring party C in, my arbitral agreement is with you. You agreed, within the context of any disputes that might arise between us, that they would be determined without reference to the rights, interests, or role of any third parties, and I am going to hold you to that bargain. And we would submit that party A would be perfectly entitled to do that.
JAGOT J: No, that is fine. I just needed to understand what the answer was. Thank you.
GORDON J: Is that answer founded on provisions which underpin the convention itself that, in a sense, the award cannot deal with a dispute that is not contemplated by the agreement?
MR HICKS: It is, answered in the context of the convention, because the convention is based upon a bilateral agreement as between parties. It is purely a matter of the entities that agree to arbitrate agreeing that their dispute will be determined as between them in accordance with the law that they choose.
Of course, in the Federal Court decision of Comandate, that came in issue because there were claims that were sought to be raised in the context of what was in the Trade Practices Act which, because the parties were going to be submitting themselves to English law, may not be applied. And the full Federal Court said well, that was your choice, that is where you go, and that is what you get. That was perfectly entitled – and that was to respect the sanctity and the fundamental provision or matter which is the agreement to arbitrate. The agreement to arbitrate is an agreement between those who enter into it voluntarily to submit their disputes for determination as between them and no other.
GLEESON J: Well, it depends on what the disputes are to be submitted to arbitration.
MR HICKS: Indeed, and that then may go to the question of the scope of what is within the arbitral clause, but in this case, as is so often found – from recollection, I think the contract referred to all disputes that may arise under or in accordance with the contract, so those very wide words have become commonly used in the context of commercial transactions to capture everything, effectively, that might go wrong.
EDELMAN J: Mr Hicks, it seems to me, and correct me if I am wrong, but you may be running together two different points, each of which may have their strengths and weaknesses. One point starts from the perspective of what is the applicable law from the perspective of the arbitration, and your point broadly seems to be that one of the policies of the proportionate liability scheme will be defeated at least in some cases, and therefore cannot reflect the intention of the parties if that core policy of the ability to have all of your disputes resolved in the one place is defeated.
A different point seems to be, though, that if one starts by asking what the default rule is in determining the intention of the parties, the default rule is that the parties have agreed to determine their disputes as to liability entirely by reference to the responsibility just between the two of them. Now, they seem to me to be two different points. One is concerned with defeating the policy of the law and what could be, in those circumstances, the applicable law in this instance, and the other is concerned with what a default rule is for what the parties should be taken to have agreed in the absence of any express or implied provision otherwise.
MR HICKS: I understand the point, and insofar as certain circumstances dovetailed into each other, and perhaps one has become informative of the other in the way that they should not, then I would not seek to press that. But we certainly – and it may very well be the way in which the argument has simply developed ‑ ‑ ‑
EDELMAN J: But neither of them is absolute, as I understand your argument. So, the parties could agree to incorporate proportionate liability. They could do so expressly, or possibly impliedly in a tripartite agreement, at least as between them, and the policy of the applicable proportionate liability regime would not necessarily be defeated in some cases.
MR HICKS: No, and we accept it as we did before the South Australian Court of Appeal – and we do here – that if a party wished to accept for the purposes of an arbitration that it may not recover 100 per cent from a respondent by invocation of, in particular, section 8 of the South Australian legislation, and foregoes expressly, and in full knowledge, the balance of the regime which it would ordinarily be entitled to – parties are free to do that. Parties are free to take whatever steps they wish to do so, as long as it is quite clear as a matter of expression that that is what they had done, and that is what they intended to do.
The difficulty we have in this case – and again we come back to the question of whether or not these regimes apply to this arbitration – is that there is no suggestion that that has been the case at all. There is no suggestion that what was agreed when the matter was referred to – when an arbitration arrangement was agreed, that a party in the position of Pascale Construction had accepted, with knowledge and expressly, that it may not be entitled to recover 100 per cent of whatever loss that it says it may have incurred from Tesseract International, and that it may have to look elsewhere to recover the balance of that loss.
That obviously has occurred in the context of the arbitration agreement being made at the outset, as is the usual case. These arbitration agreements are part of a commercial transaction which is made, and everyone hopes will never devolve into dispute, but frequently do. So, the question is: what was the intention or the apprehension of the parties at the time? But we certainly do not suggest that if a party in the position of Pascale Construction had expressly said – or, indeed, it could be implied having regard to the whole context of their dealings – we will have an arbitration agreement, we accept that Tesseract International can invoke proportionate liability, and we will be left to our chances in any subsequent proceedings against whoever it might be that could be a concurrent wrongdoer in those circumstances, then that is possible.
It is simply not what happened, and it simply could not be inferred or implied as to what happened, having regard to the dealings and the arrangements between these parties in particular, and it certainly could not be said that that is what occurred by operation of the default provisions under section 28(3) of the Commercial Arbitration Act.
JAGOT J: Could I ask this question. Leaving aside the form of the particular 2001 South Australian legislation – not that I have looked, but I am assuming that there is contributory negligence and proportionate liability legislation all around the country – what if the form of this legislation differed? For example, had some initial provision saying something like, the common law, excluding reduction of damages on the event of the plaintiff’s contributory negligence, or requiring the defendant to be 100 per cent liable for the loss, are abolished. What if those common law aspects were abolished by the statute because they were being replaced by contributory negligence and proportionate liability in accordance with the statute, and you are an arbitrator in such a State that just happens to take that form? There is nothing to fall back on. How does that all work? They do not exist anymore.
MR HICKS: Well, if they do not exist anymore, then I would have to concede that the arbitrator and the parties would be left in a very different statutory or legal regime associated with the recovery of damages. The only thing I could answer to that question is that they do exist and they do apply, absent the provisions of these proportionate liability regimes. There are certainly provisions in other legislative regimes in other places which have a different approach with respect to the application of the proportionate liability regimes.
In the Court of Appeal decision of South Australia, extensive reference was made to the decision of the Tasmanian Court of Appeal in the case of Aquagenics and the decision at first instance of Justice Beech in Curtin University of Technology v Woods Bagot. Each of the legislative regimes in those jurisdictions allowed for contracting out. So, much of what was said in each of those cases concerned whether, having regard to submission to arbitration, the parties had effectively contracted out from the statutory scheme or regime of proportionate liability, and in each case it was found that they had.
The approach, I should say, of the Tasmanian Court of Appeal in Aquagenics was at least observed to be consistent with a similar exercise, although it did not concern arbitration, in respect of contracting out under the New South Wales Act in the decision of ‑ ‑ ‑
JAGOT J: I am sorry, but no one is saying you cannot contract out, are they? I mean, you could have contracted out of anything, could you not?
MR HICKS: The legislation is silent in South Australia. It is prohibited in Queensland, I should say, to contract out.
JAGOT J: Sure, okay.
MR HICKS: It is silent – there is certainly no express provision that we can point to, to say that there has been that sort of contracting out that is expressly permitted. We do say that the choice to go to arbitration is effectively a contracting out, if I can put it that way, associated with the regime of proportionate liability, having regard to the other observations that we make and submit with respect to the operation of these schemes.
EDELMAN J: Is that what was held in those two cases, that it was the choice to go to arbitration that amounted to contracting out?
MR HICKS: The choice to arbitration represented a contracting out for the purposes of each of the State legislative regimes such that they were not able to be applied. There was some differing view taken in Tasmania concerned with whether or not there was an implied power conferred, and consideration was given in that case by Justice Evans, as I recall, to whether or not there should be a term implied of that kind, having regard to the usual principles associated with BP Refinery (Westernport) and those sorts of cases, and her Honour said no.
I am sorry, the decision that I was searching for, failingly, of the New South Wales Court of Appeal was Perpetual Trustee v CTC Group (No 2) [2013] NSWCA 58, and it is the observations of Justice Macfarlan at paragraph 12, with whom Justices Barrett and Meagher agree, that the approach that was concerned there with contracting out in respect of the Civil Liability Act, which was held to be available under the New South Wales legislation, was consistent with the approach to contracting out, taking in Aquagenics.
So, there is no doubt, in our submission, that the statutory regimes are capable of modification and application by agreement between the parties. We do not have an express agreement, I must concede, associated with contracting out in this particular case, but we do say, as the Court of Appeal found, that when one considers the whole of each of the regimes together with the approach to arbitration, which is necessarily inter se in terms of the resolution of disputes between the parties, that the effect of it is that those proportionate liability regimes were not available to be invoked in this particular arbitration.
STEWARD J: Mr Hicks, can I ask you a question? In the event that you are right and Mr Walker is left with all the liability, his club will no doubt want to seek some form of contribution from Mr Penhall. Do you accept that – for the purposes of section 6 of the Law Reform Act – that Mr Walker will be a person who is liable in damages by reason of the arbitral award, who then may seek contribution? In other words, did you accept the Bitumen and Oil reading of section 6 that would include an arbitral award?
MR HICKS: We would perhaps not be as liberal, if I can put it that way, and we would submit that the arbitral award would need to be enforced by way of judgment, so as to fit within section 6. In order to seek the contribution that is envisaged by section 6, a party in the position of my friend’s client, who had an award made against it within the context of that private arbitral tribunal, would need to have it registered, enforced ‑ ‑ ‑
STEWARD J: So, Mr Walker’s client would need to be delinquent in terms of the arbitral award, triggering your client seeking to enforce it?
MR HICKS: I am not sure if it would necessarily need to be delinquent, but it would certainly – it could ‑ ‑ ‑
STEWARD J: Section 35 is not a section that has to apply in every arbitration, it is only where you need to enforce.
GLEESON J: But you would not care, would you, because you have your award against ‑ ‑ ‑
MR HICKS: We would not be troubled by it, but we would have thought that they could, under section 35 or section – well, section 35, principally, able to enforce the award, or at least have it registered for the purposes of obtaining a judgment. It would not need us to take the step of enforcing it and demanding payment or anything else.
We would submit that section 35, consistent with the approach taken to the Commercial Arbitration Act and its objects when one interprets it, would certainly allow my friend’s client to then enter that award as a judgment so as to, in terms, bring itself within section 6 for the purpose of seeking contribution against Mr Penhall to the extent that Tesseract International considered that it was able to do so and to prove such a case. Certainly, the judgment would then also represent all those matters of damages, loss, liability, those sorts of things which would ordinarily need to be addressed for the purposes of any claim for contribution.
GAGELER CJ: Mr Hicks, where were we up to in your outline of oral submissions?
MR HICKS: I notice the time. I think the answer is just about there, but rather than sit down and then reflect over lunch that I have missed something, could we perhaps take a minute earlier? I will reflect over the luncheon adjournment. I may come back – and I will inform my friend, of course, if I nothing further to say, but I will certainly try to confine myself appropriately – and that might mean saying nothing.
GAGELER CJ: All right. We will take the luncheon adjournment now.
AT 12.44 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.14 PM:
MR HICKS: Can I indicate to the Court that I am almost finished. There is just one matter that I wanted to take the Court to in respect of the decision of GIO v Atkinson‑Leighton. Other than that, we rely upon the writing, including the three‑page summary that we provided. Could I ask your Honours to go to the joint appeal bundle and GIO v Atkinson‑Leighton, which is in volume 3, part C, and the decision of his Honour Justice Stephen which relevantly starts on page 264.
STEWARD J: Could you give Commonwealth Law Report page numbers?
MR HICKS: Of course, yes. The Commonwealth Law Report page is 235. The passage that I wish to draw your Honours’ attention to, which is one that I understand our friends also refer to, starts at about point B on the page, which is:
The principle to be extracted from this line of authority is that, subject to such qualifications as relevant statute law may require, an arbitrator may award interest where interest –
Now, we emphasise the words “subject to such qualifications as relevant statute law may require” and, as the South Australian Court of Appeal did, we say that the qualifications as the relevant statute law may require in this case are such that the proportionate liability regimes under each of the Commonwealth and State legislation do not apply. The next part of the passage at this particular point is:
What lies behind that principle is that arbitrators must determine disputes according to the law of the land.
We have addressed that already in the context of section 28(3), prior to the luncheon adjournment. And a little bit further down:
Subject to certain exemptions, principally related to forms of equitable relief which are of no present relevance and which reflect the private and necessarily evanescent status of arbitrators, a claimant should be able to obtain from arbitrators just such rights and remedies as would have been available to him were he to sue in a court of law of appropriate jurisdiction.
We submit that the proportionate liability regimes are such, requiring – or involving, I should say, the opportunity to join parties so as to have all matters of liability and recovery of loss dealt with in a single set of proceedings, that arbitrators are simply not in a position to afford a claimant “just such rights and remedies as would have been available” were suit taken in a court of law.
Now, we appreciate, as we apprehend it, that our friends say that the reference to “rights and remedies” in this case should be construed narrowly and refer only to such rights and remedies as would be available as against a defendant entitled to apportionment, by reference to those particular provisions which limit liability to responsibility, such as section 8.
We submit that that narrower reading should not obtain and that the authority or the principle derived from this passage in Justice Stephen’s decision should be considered in the broader sense, and with regard to all matters which each of the proportionate liability schemes or regimes incorporate in their terms and in their whole. In a similar way, we would refer your Honours to the judgment of Justice Mason, as he then was, in the same decision, which is at page 246 of the Law Reports, and page 275 of the joint bundle of authorities. At about point D of the page, the passage starting:
For my part, I do not think that the answer to the question should depend on what was decided in Edwards over one hundred years ago . . . The real question, as it seems to me, is whether there is to be implied in the parties’ submission to arbitration a term that the arbitrator is to have authority to give the claimant such relief as would be available to him in a court of law having jurisdiction with respect to the subject matter.
We say it is to the same effect. The question of relief, remedies, or rights should be given the broader sense in which they are envisaged to operate within each of the proportionate liability schemes, and consistent with this decision, I should say, from which so much of the jurisprudence with respect of this area has come, the question of rights, remedies, or relief should be given a broader and ordinary meaning in the context of those regimes, and where, as we submit, it is inevitable to conclude that a claimant will not have such rights, remedies, or relief before an arbitrator, then this line of authority supports the conclusions of the Court of Appeal and the position of the respondent that these regimes are inapt and inapplicable to arbitration.
EDELMAN J: Mr Hicks, given that this submission concerns what is to be implied in the parties’ submission to arbitration, is there any reason why we should not have the agreement before us?
MR HICKS: There is none, other than ‑ ‑ ‑
EDELMAN J: I take it, it would have been one of the exhibits to the affidavits in the Court of Appeal.
MR HICKS: Yes, it was, as I recall it. I think the relevant terms or passages are recounted in the Court of Appeal.
EDELMAN J: Well, they are summarised in the Court of Appeal, but it is not quite clear how section 28(3) is applied from the terms of the agreement, or precisely what the terms said.
MR HICKS: My recollection is – and it is a little while ago – that there was no designation as to the law of the contract, or the law that was to be applicable. It was simply not in issue that it was the law of South Australia. It may have been characterised that that was agreed by the parties. Certainly, it was the common position before the Court of Appeal, which, in fact, was the place where it was dealt with at first instance, but it is also true that the Court of Appeal has recorded that as somehow invoking or involving section 28(3). I think there was some comment about that made in the intervener’s submissions, which we have not really addressed at all, but certainly, to answer the principal question, there is no reason why it is not here. Unfortunately, it simply is not. Excuse me a second. We can provide it, if it would be of assistance.
GLEESON J: So, what was said in paragraph 43 of the Court of Appeal’s judgment seemed a little inconsistent with what followed, which was that:
the parties agreed to resolve their dispute in accordance with the substantive law of South Australia –
MR HICKS: Yes. It was certainly the common position before the Court of Appeal that the relevant law was that of South Australia. That was agreed.
GLEESON J: So, that is paragraph 58 of the Court of Appeal’s judgment, is that correct?
MR HICKS: Yes. It must be said that the final sentence, which says:
The applicable law, for the purposes of s 28(3), is the substantive law of South Australia.
may not – and in fact does not, I would submit – reflect in fact what occurred, which was there was an agreement, so that 28(1) would be the appropriate provision engaged, if it be of any significance.
BEECH-JONES J: Sorry, do you say in the substantive agreement between the parties, not in the proceedings, there was a designation of a law of South Australia?
MR HICKS: No, there was not. The contract itself did not expressly stipulate that the law of the contract, or, indeed, the law for the purposes of determination of disputes, was that of South Australia. But, given that the parties were in South Australia, the project was in South Australia, and there was nothing taking it outside of South Australia, it was simply commonly accepted that the law of South Australia was the applicable law.
GAGELER CJ: This is not very clear to me now. I thought that the entire case had proceeded on the basis that the applicable statutory provision was section 28(3). Are you saying that is not correct?
MR HICKS: I am saying – excuse me. Certainly, the case has proceeded before the Court of Appeal on the basis that it is section 28(3).
GAGELER CJ: And that is ‑ ‑ ‑
MR HICKS: We do not wish to gainsay that now.
GAGELER CJ: Right, thank you. Is there a reason why the contract cannot be provided to us?
MR HICKS: Not for our part.
GAGELER CJ: Mr Walker?
MR WALKER: I know it is in the record. There is absolutely no reason why you should not have it.
GAGELER CJ: If you could provide that to us within two days?
MR HICKS: We will attend to it immediately.
GAGELER CJ: Thank you.
MR HICKS: Your Honours, subject to those matters and any other questions you may have, those are the submissions for the respondent.
GAGELER CJ: Thank you. Mr Walker.
MR WALKER: May it please your Honours. The contract as the subject of reference, by paraphrase, also in paragraph 6 of the reasons in the Court of Appeal – core book page 25 – and that quotes part of the arbitration agreement, namely, disputes arising “in connection with this Contract”. I do not need to elaborate the fact that it has been common ground therefore that an allegation about misleading and deceptive conduct to be regulated under section 18 of the Competition and Consumer Act is within issues falling within the agreement to arbitrate.
That, perhaps, provides a way to apply to a deal of what has been said by our learned friends, because with respect to section 18, which is found in the same statute as contains the proportionate liability provisions of the federal kind in this case, it is quite impossible to posit some simulacrum of section 18, or some alternative to section 18, or even worse, some absence of section 18 as regulating those commercial regulations, which springs into being by reason of the parties’ choice to arbitrate. That must be some kind of mechanism operating, at least in the South Australian statute, that underlies what our friends argue in vindication of the outcome below, namely, that because there is arbitration, not litigation, the law to govern the dispute does not include that part of the law of South Australia, which is section 8 of the South Australian Law Reform Act.
If we go to the federal position, there is no relevant common law which is abolished by section 18. There may or may not be some concurrency or overlap, but that is not the point. Section 18 does not disappear as something that regulates the conduct of parties, for example, to a contract if they are corporations conducting themselves in trade or commerce with respect to misleading and deceptive conduct.
That does not disappear depending on whether you litigate or arbitrate. In our submission, it can hardly be said that the addition to the statutory scheme for the imposition of liability for such conduct in breach of section 18 ‑ ‑ ‑
GLEESON J: Section 18?
MR WALKER: Section 18 of the Competition and Consumer Act. So, if I said section 52, it would all feel more natural, but it is section 18. Your Honours, our point is that the law of the land includes section 18. That is because it is Australian federal law, it is part of the law of South Australia. And, in our submission, the fact that there is then added to the Competition and Consumer Act the proportionate liability provisions which bear tolerable relation, though not exact, to the State equivalents, is really important in appreciating what it means for the parties to choose either before the facts occurred which give rise to a dispute or after all those facts have occurred, and there can be no difference doctrinally between those two.
It could not possibly mean that section 18 disappears in a wisp of smoke no longer available to regulate the rights and liabilities between these parties with respect to alleged misleading and deceptive conduct. Of course, it exists. The fact that it may mean that the possible role of so‑called third parties – by which I mean parties not party to the arbitration – is no more significant than if there was no arbitration at all and section 18 was simply litigated.
BEECH‑JONES J: Mr Walker, can I ask you about those provisions and their third parties in sections 87CF and 87CG?
MR WALKER: Could I pick it up at 87CD, which is the equivalent – and, of course, it is not an exact equivalent, bearing in mind the different nature of these statutes – of section 8. Now, section 8 does rather more than section 87CD does in terms of abolishing common law, but 87CD is functionally the same. Namely, it says there is going to be apportionment for apportionable claims. That regulates the nature of the liability that a defendant to such a claim can have enforced against it.
In section 87CE, we have the functional equivalent, though not the equivalent exactly, of section 10 of the State scheme, and one sees that in section 87CE it is plain from the language – we say the same is true of section 10 – that the consequence of somebody not supplying such information is a consequence in costs. Under section 87CG, the possibility of subsequent proceedings is contemplated, and under CG(2) there is that same cap as is functionally provided in particular by section 12(2), but by the other provisions I have referred to in the State system.
BEECH-JONES J: It is a bit narrower than section 11, though, is it not?
MR WALKER: Yes, it is.
BEECH-JONES J: It does not work, for want of a better phrase, to the disadvantage of third parties in the same way section ‑ ‑ ‑
MR WALKER: That is one of the reasons why I said in chief, if anything, the federal scheme has less problematic consequences in terms of the operation of section 11 if there has been an arbitration. Of course, if the section 18 claim that we wish to raise can be apportioned then we are willing to take that, of course.
GAGELER CJ: Mr Walker, you refer to it as a section 18 claim. That, of course, is the norm of conduct, but it is ‑ ‑ ‑
MR WALKER: I am sorry, the claim for the remedies which follow upon breach of that norm, and of course it goes back to the days which started with the IBM decision to which I have referred where section 52 was held to be arbitral, notwithstanding that in that decision and at that time not everything that section 87 – leave aside section 82 – of the Trade Practices Act made available could be granted by way of relief in the arbitration. That simply led to the familiar proposition that something was non‑arbitral or not amenable to arbitration or to be held by some process of interpretation excluded by the meaning of an arbitration agreement if not all of the remedies in the statutory scheme in question could be administered by an arbitrator.
That would make that decision systemically. It has strong and deep reasons of legal policy to support it in terms of the support for an arbitral system that can take the place of litigation. With those changes, which might be regarded as constraints, but obviously are regarded in many respects as being advantageous rather than disadvantageous, such as privacy, et cetera.
It follows, then, that the mere fact that you cannot get everything that the – in the old days, the Trade Practices Act provided, with respect to breaches of what was then section 52. At first it was thought that you could not avoid contracts, it probably remained the case that anything truly the nature of an injunction was unavailable, none of that was regarded as an objection in principle to those disputes nonetheless being arbitral. The fact that there were restraints or constraints simply came with the fact that the Court would regard, with some equanimity, namely, that people who choose arbitration choose it with its features. They should not be regarded, necessarily, as disadvantageous. Under CG, it is different from section 11.
Could I draw to attention, also, 87CH. Obviously enough, that is not available in an arbitration, but, in our submission, there is no indication that that granting of power to a court is to be seen as somehow, in a way utterly unexplained in the authorities, altering the substantive law of the Commonwealth, as it happens, that will be administered in an arbitration.
Now, we think the solution to that to be gained between the lines and the reasons below and in our friend’s argument, is that by choosing arbitration – and it must be before or after the dispute has arisen – one has tailored the law so as to prevent any state of liability to which proportionate liability would apply from being the law governing the relations to be adjudicated. That is a massive effect to have been accomplished between the lines. With not the slightest hint in any of the descrying of a mischief and devising of a means to address it, let alone anything else in the travaux préparatoire to indicate that anything so radical was being done.
EDELMAN J: Do you say that Aquagenics was wrongly decided?
MR WALKER: Yes, I do. In our submission, when one looks at the – it may be fustian, but it is traditional fustian about arbitration that you see in section 1C of the Commercial Arbitration Act, to which we have already drawn attention. This, in our submission, is a startling outcome that a choice of arbitration has had this effect on substantive law regulating conduct between each other, including matters of such self-evident public policy importance as engaging in misleading and deceptive conduct between parties in a trading relation. All of that is, in our submission, far more than a hint or clue that the approach taken below is wrong.
In our submission, it leads one to ask this – fundamental questions: what are the issues in dispute that are within the arbitration agreement? They certainly include whether or not there has been misleading and deceptive conduct within the meaning of section 18 causing loss. They certainly also include whether there has been breach of a contractual duty of care within the State statute, which was – to remind your Honours – section 4, the application of the State statute, which says nothing about arbitration in paragraph 4(1)(b), to which I have already drew attention. It simply says:
This Act applies to . . .
. . .
(b)a liability in damages for breach of a contractual duty of care –
The arbitration clause in this case manifestly includes within it issues in dispute concerning whether there has been a breach of a contractual duty of care, and if so, loss caused for which damages are available, and that is precisely the description of what the State Law Reform Act applies to. So, we have a tick in the box of does the arbitration agreement call up the two kinds of liability – the words of the statute in question – the two kinds of liability which are relied upon between these parties, that is, section 18, the federal claim, and contract, the State claim.
That being so, one would simply ask is there anything in the law – you could start with GIO – which means that notwithstanding the plain central placement of those disputes within that arbitration agreement, nonetheless either, one, the fact of arbitration agreement – that would be perverse – or, two, the terms of this arbitration agreement – none has been pointed to – somehow require – not by a form of moulding but rather by a kind of butchery – somehow require removing section 18 from those things which may actionably regulate the trading conduct of these people, or the contractual duty of care as something about which the disappointed party may complain.
Now, that would be quite extraordinary. There is no indication that the apparently socially useful parallel availability of arbitration as a method of dispute resolution will silently work such an effect upon the social and legal relations of such parties, and it has never been hitherto suggested in anything like those violent terms in any of the reasoning to which your Honours have had your attention drawn. We submit there is nothing in principle to support this at all.
In our submission, one then comes to this question, picking up, first, the State matter. If, to pursue the line of thinking, the fact that the parties have agreed to arbitrate – to use a phrase I have adapted from Justice Edelman’s remark – and therefore to have worked out between themselves as parties what the state of liability is as between them as parties to an arbitration agreement, where does one find that having an effect on the statement that is the enactment of liability that you find in section 8 of the State Act?
Because section 8 is, just like sections 7 were re‑enacting earlier abolitions and reversals of the common law, section 8 is doing the same. And it does so in terms which do not differ according to whether the claim comes to be litigated or arbitrated, and liability is a word obviously apt – indeed, accurate in every sense – to describe that state of affairs of legal relation which is the subject of arbitral adjudication pursuant to this arbitration agreement. That it is the liability which is being determined by arbitration. It is that liability which will become binding by court order upon registration, et cetera.
Your Honours, it is then a sequence of rhetorical questions. If this effect of it being an arbitration where the only grievance is a relatively indeterminate one about section 11, and a rather more pointed one about section 10, and no compulsory joinder being available under present statutes regulating commercial arbitration – if that be the problem, then what is the outcome of the reading of these statutes which emphasises, in particular, section 10? Apparently, the outcome is that some regime different from section 8 applies between these parties, and lo and behold, it turns out to be the regime that existed before section 8 was enacted at all.
The parties, by agreement, cannot work, and Parliament does not, as it were, set up a provisional, ad hoc repeal of section 8 according to whether people have agreed to arbitrate or not. There is, as it were, no default position – that is, in default of section 8 applying – to regulate the question of solidary or non‑solidary, that is, proportionate liability. All of that rather indicates that we have moved a million miles away from the notion of arbitration being a sensible, parallel course of dispute resolution, which has its differences, including what might be called its constraints, compared to litigation, but will, if choice of law is the law of a law district – which it is in this case, by dent of ordinary choice of law rules – then it comes with all such law as may include statutory provisions requiring so‑called moulding.
Now, that is why we sought to emphasise in‑chief, and contrary to the way in which my friend has put it, that section 10 – I will not quote exactly, but I think my learned friend referred to it as being a fundamental part of the scheme. It is not a fundamental part of the scheme. Everything that section 8 carries in its train in an adjudication either by a court or by an arbitrator of the alleged liability owed by one to the other can happen without section 10 information being handed over.
Someone may be recalcitrant concerning section 10 – and I am not talking about case management directions superseding all of this. One hopes that they will be as available in arbitration as in a court. But in terms of section 10 as part of a legislative scheme, it does not have any such effect, and the same is true, obviously, with what we have drawn to your Honours’ attention about 87CE in the federal scheme.
GLEESON J: I had thought that Mr Hicks identified section 11 as the fundamental provision, but I am not sure that that changes your submission.
MR WALKER: No, so had I at first – and the transcript will no doubt record it. Section 10, really, has swum into a far sharper focus in our friend’s vindication of the outcome below. I do address both sections 10 and 11 in reply. I do not have, I think, anything properly to add to what I have already said about section 11, not because it is unimportant, but because it has been said.
With respect to what we perceived to be a real emphasis in its own right on section 10, we submit that one should not be misled by approaches to what I will call pleading and particulars and, for that matter, proof, which you will find explicitly or implicitly dealt with by the decisions to which my learned friend has referred, being case management decisions in supreme courts. Can we say this about those approaches: obviously, it is for somebody in my client’s position to prove in litigation or in arbitration to the appropriate degree the responsibility which underlies the proportionate liability of somebody other than a party before either the court or the arbitration, it does not matter which. So, he who asserts must prove.
Now, the onuses will be a rather interesting exercise because ultimately the plaintiff also has to prove not simply a breach of the contractual or statutory norm, but also has to prove causation of loss and has to withstand, in light of all the evidence and argument, such contrary or unfavourable arguments as may arise under proportionate liability. But, obviously, somebody in our position is going to have to draw to attention and make out to the requisite degree for the purposes of proportionate liability being assessed the role of somebody else. That is unremarkable and says nothing whatever about the capacity of that exercise to be decided by an arbitrator as well as by a judge.
It is for those reasons that – in fact, it is by the fact that whether you call it strictly “pleading” in a court and in an arbitration, indeed, I regret to say that in neither places are they, perhaps, strictly “pleading” anymore, but in terms of clear and efficient statement in writing of the nature of the case to be made and enabling it to be understood, what facts fall to be proved and with whose onus of proof, et cetera, et cetera. Those are matters which, obviously, indicate the equal capacity of an arbitration as well as of a litigation to deal with the question of proportionate liability in the face of the absence from the arena of somebody said to be liable, and proportionately so.
There is one small detail about those cases. It may be that, as my learned friend argued it, they are to be understood as holding that there cannot be proportionate liability ever if the party claiming the benefit of it cannot name – and perhaps give an address for, et cetera – the person. As it happens, one need only go to the example that one finds appended to subsection 8(4) of the State Act and give it a slight tweak of the facts to show that one would be very cautious before going down that route. Why I am raising this point is that we apprehended that our friend was saying, well, look, section 10 is important because the way it has been understood is that there has to be, in effect, an embedded pleading against the missing persons before the defendant who has been impleaded can call in aid proportionate liability.
As it happens, the example given is of arson. True, it is involving an arsonist who can be found and named and joined. But, alas, it is not unrealistic to say that many an arson, including one where the arson is in fact witnessed – that is, by eyewitnesses or by cameras – can nonetheless not be identified or found, either by the police or by those who wish to sue him or her. Is it really to be supposed that the proportionate liability regime under which an arsonist may be up for the lion’s share of responsibility, is to be defeated in its intended protection of insured defendants – let me be cynical for a moment, their insurers, if you like – from what happened under solidary liability? Namely, I can only find the person who made the fire equipment, cannot find the person who set the fire, but it does not matter; under solidary liability I have got the whole of the damages payable by a well‑insured, respectable, corporate defendant, and I do not have to worry about the likely pennilessness of the unfortunate wretch who set the fire.
Now, that is utterly at odds with the evident intent of this statutory scheme, and we would urge caution about assuming that these practice decisions are decisions that say – regardless, by the way, whether it be arbitration or litigation – that it does not apply unless there can be persons named in such a way as to be able to join them, because you cannot sue them as John Doe.
In our submission, too much can be made of the supposed criticality – a word which, in our submission, is entirely tendentious in this argument – of section 10. It is not critical. It is not critical in litigation for the imposition of the proportionate liability as the ceiling of a defendant’s exposure under section 8. It is no doubt an alleviation in some cases, depending upon the capacity to find, join and get financial satisfaction from another party. It is no doubt an alleviation in some such case of the overall scheme, but it is not critical. It is not a prerequisite. And in our submission, therefore, there fades this supposedly drastic difference in the operation of the scheme as between what can be done in arbitration without, currently, any kind of compulsory joinder and what can be done in litigation.
It is for those reasons, in our submission, that section 10 does not have the effect any more than section 11 does, for the reasons we have already put, of depriving the parties of the law of the land, being the law chosen by them, South Australia, both Federal and State proportionate liability provisions as those which govern between them, just those two arbitrating parties, their situation. May it please your Honours.
GAGELER CJ: Mr Walker, can I just ask a question about the relief you seek if you are successful in the appeal? There is a single rolled up question, which was answered no. Your notice of appeal says it should be answered yes. Is there any refinement of that, or not?
MR WALKER: I must say, I apologise for the barbarism “and/or” appearing in the question, but I do not think that is of any ‑ ‑ ‑
GAGELER CJ: You are not responsible for that, I think.
MR WALKER: I am not going to disclaim responsibility. I think the proper thing to do is to say I am responsible, but I apologise for it. I do not think that is something that we need worry about in any order in this Court. We would be satisfied with the answer being yes. May it please the Court.
GAGELER CJ: Thank you.
BEECH‑JONES J: Mr Walker, sorry, could I just briefly ask you one question about 87CF of the Competition and Consumer Act?
MR WALKER: Yes.
BEECH‑JONES J: That is a provision that a party in your client’s provision might seek to rely on, if they were later sued by another wrongdoer who was not a party to the arbitration. I think, from your earlier answers in relation to section 11, you say, we do not need that, but say I was worried about the position of other defendants. Would the enforcement of an arbitral award which reflected an assessment under Part VIIIA be a judgment given under this part?
MR WALKER: Part VIA?
BEECH‑JONES J: Part VIA, sorry. I said VIIIA. Part VIA.
MR WALKER: Yes. Or so we would say everywhere it would be convenient to say so, yes. That would not be a distortion.
May it please your Honours.
GAGELER CJ: Thank you, Mr Walker. The Court will reserve its decision in this matter and will adjourn until 10.00 am tomorrow.
AT 2.54 PM THE MATTER WAS ADJOURNED
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