Zhu v Treasurer of New South Wales

[2004] HCATrans 200

[2004] HCATrans 200

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S616 of 2003

B e t w e e n -

PETER TAO ZHU

Appellant

and

THE TREASURER OF THE STATE OF NEW SOUTH WALES

Respondent

GLEESON CJ
GUMMOW J
KIRBY J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 15 JUNE 2004, AT 10.21 AM

Copyright in the High Court of Australia

MR J.C. KELLY, SC:   If it please the Court, I appear with my learned friends, MR S.A. BENSON and MR M.F. GALVIN, for the appellant.  (instructed by Walker Hedges & Co)

MR B.W. WALKER, SC:   May it please your Honours, I appear with my learned friend, MR M.B.J. LEE, for the respondent.  (instructed by Corrs Chambers Westgarth)

GLEESON CJ:   Yes, Mr Kelly.

KIRBY J:   You will have to speak up, Mr Kelly, because we have no amplification today and otherwise I will not hear you.

MR KELLY:   Thank you, your Honour.  Your Honours, this is an appeal from a decision of the Supreme Court of New South Wales Court of Appeal in proceedings in which the appellant, Mr Zhu, succeeded at first instance before her Honour Justice Bergin in a claim against the Sydney Organising Committee for the Olympic Games on a cause of action for intentional interference with a certain agency agreement.  It was an agency agreement that had been made on 11 March 1999, that is to say in the one year before the Olympic Games, with a company known as TOC Management Services Pty Limited, which was then the trustee of a thing called the Olympic Club. 

The Olympic Club was an affiliation marketing device put into place under a unit trust, the beneficiaries of which were SOCOG, the Australian Olympic Committee and an entrepreneurial body called Synthesis Pty Limited.  Its function was to promote the sale of tickets and interest generally in the Olympic Games and it sought to attract a large number of members in Australia and by various promotions it sought to attract, indeed, several hundreds of thousands of people to join the club and join in the spirit of the occasion.  In consideration for that, those persons would receive various merchandising, ticket opportunities and the like. 

Mr Zhu’s agency agreement was entered into upon terms which entitled him to sell international memberships of the Olympic Club, that is to say, memberships to people in the People’s Republic of China who were intending to come to the Olympic Games ‑ ‑ ‑

KIRBY J:   Now, that agreement was with TOC, not with SOCOG. 

MR KELLY:   Correct. 

KIRBY J:   That may be a relevant, or even important, matter.

MR KELLY:   Yes, your Honour.  SOCOG was not only one of the beneficiaries of the trust who would share in the successes of this marketing venture, but it also had representatives on the club committee, in particular, a Mr Paul Reading, who was the commercial director of SOCOG.  He sat on the club committee of the Olympic Club, relevantly, throughout 1999 when the events in question occurred.  Before Justice Bergin, the appellant put his case on the basis that the interference with the agency agreement occurred in three distinct ways:  firstly, something that we have labelled in our written submissions “the inconsistent dealing”; secondly, what we have labelled as “the instruction to terminate”; and, thirdly, the arrest. 

In short, as the 1999 calendar year ticked over and Mr Zhu was up in China setting up a network of subagents in preparation for selling international memberships of the Olympic Club as a component of a travel and accommodation package that he was intending to supply to residents of the People’s Republic of China, the fortunes of the club started to slip.  It did not attract sufficient members in Australia to render it a viable, ongoing concern and there came a time when SOCOG entered into an agreement called a deed of termination and release under which SOCOG effectively took over the club, terminated the trust under which TOC Management Services had hitherto been operating as trustee, and, thereafter, it, SOCOG, managed and conducted the affairs of the club in-house, keeping, of course, confidential the fact of its financial failing.

The inconsistent dealing was put forward before Justice Bergin as an intentional interference with the agency agreement because it had the effect of disabling and preventing the trustee from performing the bargain from the point of view of the club.  Some of the sorts of things that the trustee, on behalf of the club, had promised to provide to international members were things like mail-outs and welcome kits and, of particular importance, invitations to the opening ceremony dress rehearsal.

KIRBY J:   But what was SOCOG expected to do?  It was a statutory authority and the club was going broke.  It had to do something.  It could not just allow it to continue to expend money with the reputation of the Games and SOCOG’s responsibilities at stake.

MR KELLY:   In the relevant awkward few months before this inconsistent dealing was entered Mr Zhu paid some $260,000 for the agency and its extension and as part of that consideration for the issue of blocks of memberships he was ‑ ‑ ‑

KIRBY J:   But that was before SOCOG took over the running of the club.

MR KELLY:   Within a few weeks, yes, your Honour, but Mr Zhu was, in effect, one of the principal providers of funds for the club, which funds were then taken into SOCOG when it took over the assets and undertakings of the club, but it did not take over Mr Zhu’s contract.  Various other contracts were taken over by SOCOG but not Mr Zhu.  Mr Zhu’s contract was left with the trustee as a bare trustee, incapacitated and disabled from performing the bargain from its part.

KIRBY J:   Mr Reading seems to have had a suspicion about Mr Zhu from the beginning.

MR KELLY:   Totally misplaced.

KIRBY J:   He did not give evidence, did he?

MR KELLY:   He did not, no.  He is a gentleman who, in his capacity as commercial director of SOCOG, had other problems, if I can leave the matter at that point.

GUMMOW J:   In the Supreme Court there were three defendants, were there not?

MR KELLY:   Yes, your Honour.

GUMMOW J:   None of which is here.

MR KELLY:   Correct.

GUMMOW J:   How has that come about?

MR KELLY:   One defendant, the trustee itself, went into liquidation and the proceedings against it were stayed.

KIRBY J:   That is the trustee of the club.

MR KELLY:   Yes.

GUMMOW J:   That is the second defendant, TOC.  Have we particulars of that?

MR KELLY:   I can provide them to your Honour.  The other defendant was Mr Keith Wyness, who was the managing director of the trustee.  He made certain representations.  Against him in the original pleading there is an action for misleading and deceptive conduct which was settled and the claim against him discontinued.

GUMMOW J:   So he dropped out.  That proceeding was discontinued against him, was it? 

MR KELLY:   Yes. 

GUMMOW J:   That left SOCOG, which is dissolved. 

MR KELLY:   It dissolved, but all of its assets and undertakings were firstly taken over by the Olympic Co‑ordination Authority.  Then, when it fulfilled its function of mopping up after the Olympics, all of the assets, undertakings and liabilities were devolved upon the Treasurer for the State of New South Wales.

GUMMOW J:   Now, is it a legislative step that brings SOCOG into the Olympic Co‑ordination Authority?

MR KELLY:   Yes, your Honour.  I think we have given a short reference to it in our written submissions ‑ ‑ ‑

GUMMOW J:   Well, there is an Olympic Co‑ordination Authority Dissolution Act of 2002.

MR KELLY:   Yes, your Honour.

HEYDON J:   I think the history is this, is it not, Mr Kelly, that on 31 October 2001, section 55 of the SOCOG Act transferred the assets, rights and liabilities of SOCOG to the Olympic Co‑ordination Authority, and at that stage this action was on foot and probably had just finished being tried.

MR KELLY:   Yes, your Honour.

HEYDON J: Then, on 1 July 2002, section 6 of the Olympic Co‑ordination Authority Dissolution Act 2002 transferred those assets, rights and liabilities from the Olympic Co‑ordination Authority to the Treasurer. Does that correspond with ‑ ‑ ‑

MR KELLY:   Yes, that is as we understand it, your Honour. 

GUMMOW J:   Section 13 of that Act repealed the SOCOG Act as well.

MR KELLY:   Yes, your Honour.

KIRBY J:   I wondered about this because no point is taken on the devolution of the rights and duties on the Minister, but may it not be desirable that we have on a piece of paper the material that Justice Heydon has just put to you so that we can trace it through and can we be assured that the Minister, as a Minister of the Crown, does not have a separate responsibility or separate entitlements or rights or privileges which SOCOG did not have.  I mean there is nothing raised about this, but can we safely put all of that to one side?  There is no immunity of the Crown here that we need to be concerned with?

MR KELLY:   I believe we can put it safely to one side.  It was raised in ‑ ‑ ‑

KIRBY J:   I see a Bill is going through the New South Wales Parliament, but as far as I am concerned they are still Ministers of the Crown.

MR KELLY:   Certainly, that is right.  May we take on board what your Honour has said and deliver to the Court a short note making sure that there is no problem in that regard. 

GLEESON CJ:   Yes, thank you.

MR KELLY:   The second interference, one we describe as the instruction to terminate, arises out of circumstances in which Mr Reading spoke with Mr Wyness in or about August and essentially said to him, words to the effect, “Who is this Peter Zhu, I have seen some documents suggesting some form of agreement with him, we do not want any loose cannons.  Stop what you are doing in China”.  That instruction to terminate was put into effect by Mr Wyness later in the year, in particular, on or about 5 November 1999 when Mr Wyness issued a certain communication in writing to Mr Zhu telling him, in effect, that the contract was at an end.

That conduct we characterise as a wrongful repudiation of the agency agreement and Mr Zhu refused to accept it.  There was an issue in the case - indeed the principal issue in the case was whether that notice of termination was valid and effective by reason of the fact that although the grounds it sought to put forward were manifestly defective they were not sought to be maintained by SOCOG.  Other available grounds were alleged and in the course of the hearing before Justice Bergin the burden of SOCOG’s defence against that claim was a contention that there was a wide range of other breaches of contract of which the trustee could avail itself and that, therefore, the conduct of SOCOG in inducing a breach of the agency agreement by the trustee did nothing other than cause a lawful termination of the agency agreement.  As to that matter, however, Justice Bergin was against SOCOG on all of the facts and the interference was found in favour of Mr Zhu.

The third interference is the arrest.  The arrest of Mr Zhu took place on 6 December 1999.  In short, when attempts were made to get rid of Mr Zhu and he refused to lie down SOCOG called in aid a special purpose police squad, part and parcel of the Olympic Intelligence Centre, the squad otherwise known as the Olympic Intelligence Strike Force.

KIRBY J:   Was this set up to deal with terrorism?

MR KELLY:   Yes, your Honour. 

KIRBY J:   It is perhaps a bit of a warning to us. 

MR KELLY:   Yes, your Honour.  Rather than go to the team of lawyers with which SOCOG was also equipped, the officers concerned went a few floors down in the same building and went to the police squad and, to cut a long story short, a Detective Sergeant Nicholls was responsible for the arrest of Mr Zhu when he returned to Sydney ‑ ‑ ‑

GUMMOW J:   Are these members of the New South Wales police service, are they?

MR KELLY:   Yes, your Honour.  Mr Zhu, on 6 December, was planning to launch his sales campaign at a press conference in Shanghai.  The evidence accepted by Justice Bergin was to the effect that after an early morning meeting with Detective Nicholls and other police officers at which it was agreed that SOCOG would work as a team with the police and, above all, stop the conference if certain events took place in China, the result being that Mr Zhu returned immediately to Australia ‑ ‑ ‑

CALLINAN J:   Was there any claim, for example, re damages, against anybody?

MR KELLY:   Yes, your Honour. 

KIRBY J:   And awarded.

MR KELLY:   $200,000.

GLEESON CJ:   What did they charge him with, having an inconvenient contract?

MR KELLY:   No, they charged him with falsely representing that he was an authorised agent of the Olympic Club and when he presented his ‑ ‑ ‑

GUMMOW J:   Is that a criminal offence?

MR KELLY:   No.

KIRBY J:   There might have been hidden away there in some regulations some offence to protect the club.

MR KELLY:   It was suggested that he might have been using a false appearance of authority to obtain a financial advantage.  There was certainly one transaction afoot which was the first sale of a parcel of some 25 memberships which were to be presented in a ceremonial fashion in Shanghai to the 25 most successful workers of the Wu Liang Ye brewery, which is a very large state‑owned brewery in Shanghai, who was, in effect, Mr Zhu’s first customer.  They were all lining up with the television cameras ready to record the important event but, firstly, one of Mr Zhu’s subagents was arrested and Mr Zhu rushed back to Australia to sort the matter out and he was arrested at Sydney Airport.

GUMMOW J:   Can you tell me this, Mr Kelly, this so‑called club, memberships of this club, were there any agents other than Mr Zhu who were operating outside Australia?

MR KELLY:   Yes, your Honour.

GUMMOW J:   Under purported authority to do so from the club?

MR KELLY:   Yes.  What had happened, Mr Zhu had spent a lot of time and effort setting up a network of agents in the People’s Republic of China readying himself for the launch ‑ ‑ ‑

GUMMOW J:   I understand all that, but were there other people doing it in other countries, under similar arrangements to his?

MR KELLY:   There were several agreements which had been signed by the trustee, but which had not been put into effect yet.  Indonesia and Bangladesh spring to mind.

KIRBY J:   Did they have the approval of the Home State Olympic Committee?

MR KELLY:   I do not think either of those had reached that point before these calamitous ‑ ‑ ‑

KIRBY J:   Because that was the complaint about this arrangement, was it not, that it had gone ahead – or was one of the complaints – gone ahead without the approval of SOCOG, gone ahead without the approval of the Chinese Olympic Committee.

MR KELLY:   Not at the time.  At the time the club, under the stewardship of the committee – in particular Mr Reading – was altering its budget and working in anticipated profits as early as April of 1999.

KIRBY J:   Well, at the time there does not seem to have been anything except Mr Reading’s suspicions and his belief that Mr Zhu was a loose cannon, and he seems to have set about taking it on himself to terminate the arrangement and to have Mr Zhu arrested.

MR KELLY:   Yes, your Honour.

KIRBY J:   It is really a pretty shocking story.

MR KELLY:   That is precisely what happened.

KIRBY J:   No wonder Justice Bergin was offended by it.

MR KELLY:   Yes, your Honour.

GUMMOW J:   But was there any evidence of any complaint by the Chinese National Committee to the Australian Committee?

MR KELLY:   Certainly not, no.

GUMMOW J:   That people were getting on their turf and taking their money, in effect.

MR KELLY:   Certainly not, your Honour, quite the opposite.  The evidence is that Mr Zhu went up to China almost immediately ‑ ‑ ‑

GUMMOW J:   Just before you go – am I right in understanding that under the Olympic Charter, which is expressed in somewhat ethereal terms, but in fact involves money, exploitation of rights is for national committees?

MR KELLY:   Definitely, yes.

GUMMOW J:   So these activities in China, without the assent of the Chinese National Committee, would be against the charter, but not if they did have the consent or acquiescence of the National Committee in China.

MR KELLY:   Correct, and we will be submitting in due course that, properly read and understood, the charter excludes foreign OCOGs, like SOCOG, completely from the Chinese marketplace.  This was a contract for its entire performance in China.  Under the charter the only party with a say when it came to approval is the Chinese Olympic Committee, and it is obliged to work together with the executive board of the International Olympic Committee, but there is no role at all for anybody else; none whatever for SOCOG.

KIRBY J:   Well, except that, as I understand it, TOC had allowed some of its notepaper to be given to Mr Zhu and the Australian symbols were to be on the boomerangs that were in the plastic bags.

MR KELLY:   Yes.

KIRBY J:   And there were various other factual links whereby it might be thought that Mr Zhu was representing the Australian Olympic Committee.

MR KELLY:   One would not go quite so far as that last element in your Honour’s proposition, but certainly TOC provided him with some letterhead, it provided him with some of these plastic bag things as samples, and it also provided him with two documents in the nature of a letter of introduction, or an authority, addressed “To Whom It May Concern” and stating that Mr Zhu was an authorised agent of the Olympic Club for the purpose of selling international memberships as a component of travel and accommodation packages.  That document is on a piece of paper which has the Olympic Club logo in the top right‑hand corner.  So to that extent, yes, one does see Mr Zhu with a piece of paper in China with “SOCOG” – or Olympic related “Intellectual Property” marked on it.

But the charter makes it perfectly plain that even the intellectual property of a foreign OCOG is exclusively the preserve of the National Olympic Committee.  The evidence is that Mr Zhu attended upon a gentleman by the name of Mingde Tu.  Mr Tu, who is the secretary‑general of the Chinese Olympic Committee, and also one of the vice‑ministers of the State Sports Department in China ‑ but senior sports administrators are also senior government officials.  He attended later in the year also with Mr Yu, who was the vice‑president of the Chinese Olympic Committee and also another vice‑minister of the same department.

Those gentlemen each gave Mr Zhu and his project their entire support.  They were on full notice of what his intentions were and they offered to give him whatever support he wished.  So, far from there being any protest in China about Mr Zhu’s intended activities, he was welcomed with open arms, because it meant that here was an opportunity for up to 10,000 residents of the People’s Republic of China to actually go to the Olympic games.

HEYDON J:   Do you have a finding or a good bit of evidence to support that line of reasoning that you have just submitted?

MR KELLY:   Yes, I think we have quite a few good bits, your Honour.  May I put together a short note on that?

HEYDON J:   Yes.  Just one other thing.  Do you concede or do you dispute – just leaving aside this question of the Chinese Organising Committee’s position and the Chinese government’s position – that it would have been open to SOCOG to get an injunction out of the Supreme Court in Sydney against the conduct of the plaintiff in China?  In other words, do you accept there was a breach of section 12?  Do you accept that section 12 extended to China?

MR KELLY:   It is a complex matter ‑ ‑ ‑

GUMMOW J:   Well, it involves the relationship between SOCOG and the Australian Olympic Committee, for a start.

MR KELLY:   Yes, your Honour.

GUMMOW J:   What is that relationship?  SOCOG is just a New South Wales statutory corporation which includes board members from the AOC.

MR KELLY:   In the documentation which led to and established the Olympic Games, including the host city agreement, one sees a network ‑ ‑ ‑

GUMMOW J:   That is an agreement between whom?

MR KELLY:   That is an agreement between quite a few people, including the City of Sydney.  SOCOG, when it was brought into existence, became party to an agreement under which it agreed to join in and become a party to that host city agreement, for the host city agreement preceded the incorporation of SOCOG.  The other ‑ ‑ ‑

HEYDON J:   That was between the IOC, the Council of the City of Sydney and the AOC.

MR KELLY:   Yes, your Honour.

HEYDON J:   As you say, that preceded the enactment of the New South Wales statute that created SOCOG.

MR KELLY:   Yes.  There is a series of other instruments pursuant to which SOCOG became a party to it, after it was constituted.

GUMMOW J:   Members of SOCOG in turn were on the board of the trustee, were they not? 

MR KELLY:   Yes, and controlling it.

GUMMOW J:   What no one seems to have appreciated at the SOCOG level was the distinct roles of national committees under the charter.

MR KELLY:   They may not have ‑ ‑ ‑

GUMMOW J:   They seem to have loosened this creature, the trustee, on the world to go around selling these memberships in other countries.  There is no express limitation imposed by them on the trustee.

MR KELLY:   Yes, your Honour, although the terms of the agreement did call for ‑ ‑ ‑

GUMMOW J:   I just mention that because they then seem to visit the consequences of what may be their ineptitude upon the wretched contractor from the trustee.

MR KELLY:   Without doubt, your Honour.  And to the extent that the Court of Appeal found an equal or superior right of some description, characterised as a duty, to procure termination of the agreement, even if one can find such a duty, it did not address the question of the scope of the duty. 

GUMMOW J:   Or its source.

MR KELLY:   Indeed.  Does the duty extend so far as to entitle SOCOG to cause Mr Zhu to be arrested?  Quite a remarkable proposition to find a positive duty wide enough to give rise to a duty to arrest.

KIRBY J:   Just pausing there, you will remember that at the special leave hearing the Chief Justice cautioned that it is very easy to get upset about this arrest which looks like the act of a third world country rather than Australia, but there was interposed between the representation to the officers of the New South Wales Police and the actual arrest an independent exercise of discretion, was there not, by a police officer?

MR KELLY:   That was the issue, indeed, the only issue which SOCOG ran before Justice Bergin in relation to the arrest.  Its answer to the case was that Detective Sergeant Nicholls exercised a perfectly independent discretion ‑ ‑ ‑

KIRBY J:   Now is that still in issue before us?

MR KELLY:   Certainly not, no, your Honour, because Justice Bergin rejected that.  Justice Bergin found as a fact that SOCOG did cause Detective Sergeant Nicholls to arrest ‑ ‑ ‑

KIRBY J:   So we can regard that as a closed issue?  It can be accepted that SOCOG’s representation leaning on the police secured, as it was intended to secure, the arrest of Mr Zhu when he arrived back in Australia?

MR KELLY:   Yes, your Honour, because there was a ground of appeal to the Court of Appeal on that precise point – did SOCOG cause the arrest or did it not and that ground of appeal was abandoned.

GLEESON CJ:   This seems to be a new form of alternative dispute resolution.

MR KELLY:   Yes, your Honour.

GLEESON CJ:   But what is the connection between the arrest and the breach of contract?

MR KELLY:   The inconsistent dealing and the instruction to terminate, they are each direct interferences with the contractual relations.  The arrest is an indirect interference.

HEYDON J:   If SOCOG had locked him up for four months, that would have been a direct interference.  Instead they persuaded the police to lock him up for 12 hours and take away all his documents and passport.

KIRBY J:   And to take away his passport.

MR KELLY:   Take away his passport, all of his documents and notified all of the international policing agencies, ASIO, Interpol, everybody, in effect.  Well, one is familiar with the cases in which workmen have been deprived of their tools.  Here, Mr Zhu was effectively locked out of China and prevented from going to China and discharging his agency.

GUMMOW J:   But passports are federal matters.  What has a New South Wales policeman to do with them - impounding someone’s passport without some statutory mandate?

MR KELLY:   What has a New South Wales policeman to do with any aspect of this matter?  It does indicate a most unfortunate consequence of putting together, as a working machine for the purposes of achieving something like organising and carrying out an Olympic games, bringing together teams of police officers and all sorts of other people and putting them within the one working entity.  At that point one sees the rights of the citizen being rather too readily expended in the interests of the organisers of the Games.  That is what happened here.

GLEESON CJ:   Well, did the arrest and the consequences of the arrest make it impossible for him to pursue his activities in China?

MR KELLY:   Yes, your Honour.  The arrest literally prevented him from carrying out his work, and, indeed, on that point ‑ ‑ ‑

KIRBY J:   I thought I saw a contest about this in the written submissions and you made the point you are now making that effectively, he was locked up for a short time, he lost his papers, his passport and he was put onto the warning lists of police all around the world, so that as a matter of practicality, it became very difficult for him to pursue his Chinese venture?

MR KELLY:   Yes.  Indeed, your Honours will have seen my learned friend’s written submissions seek to agitate a factual question and somehow sever the event of the arrest from the event of any loss, but in the proceedings before Justice Bergin the case that SOCOG ran was precisely to the opposite effect.  It made a positive submission to her Honour to the effect that it was the arrest which caused all of Mr Zhu’s loss and damage and severed any connection when it came to the earlier interferences.  That submission we have appended a copy of the relevant sentence to our submissions in reply.  Your Honour will see that in terms SOCOG maintained what it is now seeking to dispute.  Indeed, if I may go just one step further, your Honours will have seen that in the written submissions it is somehow suggested that the way the case was conducted in the court below the arrest is irrelevant. 

It is suggested, I think in paragraphs 8 and 9 of my learned friend’s written submissions, that the way the case was conducted below, it was never part of the case that the arrest was itself an interference with contractual relations but, your Honour, my learned friend not being in the case when it was heard has overlooked other parts of SOCOG’s written submissions perhaps, including – and if I may take your Honours to the bundle of documents entitled “APPELLANT’S SUPPLEMENTARY MATERIALS UNDER PARAGRAPH 7(i) OF PRACTICE DIRECTION”, the thinner volume, in that volume we have copied the written submissions of the parties to Justice Bergin which went before the Court of Appeal in the form of a supplementary black appeal book. 

If I may just take your Honours to page 115 of that volume, there your Honours will see an outline of submissions of the first defendant on the topic of justification and on page 115 under the heading “WHAT IS REQUIRED TO BE JUSTIFIED” counsel identifying three incidents of alleged tortious interference:  the inconsistent dealing, the instruction to terminate and:

the “independently unlawful” enlisting of the New South Wales Police Service in causing the arrest of the plaintiff –

So there is simply no substance in any suggestion that this case was conducted below upon the basis that the arrest was not itself an incident of alleged tortious interference.  Your Honours will see that in paragraph 8 it is said that:

The fact that some of SOCOG’s conduct is said to be “independently unlawful” may be relevant for the correct categorisation of the tort . . . Irrespective of the categorisation (and despite some questioning . . . it is submitted the defence of justification is available –

in such a class of case.  So in the forefront of SOCOG’s conduct of its own defence one sees the very subject matter which is sought to be denied in the written submissions before this Court.  Indeed, your Honours will see on the following page, 116, that there are three categories of conduct said to have been engaged in by the plaintiff which give rise to SOCOG’s justification.

In each case, breach by Mr Zhu of this deed poll, breach by Mr Zhu of the Sydney 2000 Games (Indicia and Images) Protection Act and serious breach of the contractual and fiduciary duties owed by Zhu to the trustee.  One thing your Honours do not see there is any suggestion that the contract itself was a contract which required any unlawful behaviour or permitted Mr Zhu to exploit the intellectual property of the Olympic movement in China.  In each case one see breaches.  One does not see any attack on the contract.

GLEESON CJ:   Just pausing there, at this stage of the litigation that we have now reached, is there any issue or continuing issue about any of those three categories of justifying conduct?

MR KELLY:   Well, none of them were proved.  In each of them SOCOG failed.  The criticism directed at Justice Bergin was that she did not proceed to go on and deal with the separate defence of justification to the tort, but that is because the same substratum of facts was offered up pursuant to the contract case, under which SOCOG is saying, “Hang on, if we induced anything, all we induced the trustee to do was to effect a lawful termination”.  So her Honour decided all of the facts against SOCOG.

HEYDON J:   Is not the precisely correct answer to the Chief Justice’s question this, that in paragraph 10(c) Justice Bergin decided against SOCOG, and SOCOG did not revive that contention in the Court of Appeal because it abandoned relevant grounds of appeal?  Correct?

MR KELLY:   Yes. 

HEYDON J:   As to (b), “Breaches”, that is still alive because they are arguing that the breaches existed before the termination.  They did not know about them, query, but, whether they knew about them or not, the fact that they did not rely on them does not matter; they were available to be deployed now as justification.  Is that not so?

MR KELLY:   That is their argument ‑ ‑ ‑

HEYDON J:   Yes.

MR KELLY:    ‑ ‑ ‑ but the problem with the argument is that it assumes they have proved the breach.

HEYDON J:   Well, let us just clear the stage, as it were.  As to (a), that is a topic which the Court of Appeal decided against SOCOG, which they now wish to contend was wrongly decided, by their notice of contention.

MR KELLY:   Yes, but each of these propositions is founded upon a breach or breaches, the individual factual matter, and none of that was found by Justice Bergin in their favour.

HEYDON J:   I will just take (b):

the Breaches by Zhu of the terms of the Sydney 2000 Games (Indicia and Images) Protection Act 1996 (Cth) –

Did that Act apply to conduct in China?  Secondly, if it did, was it breached?

MR KELLY:   The way we put it, your Honour, is as follows.  The breaches that were alleged are the breaches identified in Schedules 5 and 6 ‑ ‑ ‑

GUMMOW J:   Where do we see that?

MR KELLY:    ‑ ‑ ‑ to the major submission.  Schedules 5 and 6 are at pages 90 through to 94 of this bundle.

HEYDON J:   Does that not go way beyond breaches of the 1996 Act?

MR KELLY:   Yes, your Honour, but none of those breaches, none of the factual matters, were found in SOCOG’s favour.

HEYDON J:   Yes.  I am perhaps a little simple‑minded.  I would just like someone at some stage to say, “Look at those two pages of the appeal book, they are pictures of a logo.  Look at that statute, section 12(1).  Use of that in China someone says was a breach of that statute”.  Apparently Mr Walker says that, but do you agree?

MR KELLY:   No, we do not, your Honour.

HEYDON J:   Is that because the statute does not apply to China? 

MR KELLY:   That is right, your Honour.

HEYDON J:   Right, so you say it has no extraterritorial effects sufficient to extend it to China.

MR KELLY:   Yes, but the law for performance of the contract is the law of China.

GUMMOW J:   Wait a moment, we are looking at section 12(1) of the 1996 Act?  Is that right?

MR KELLY:   Section 12(1), yes.

GUMMOW J:   Section 12(1), “must not use”.  Ordinarily, and, in particular, in an intellectual property statute, that means “must not use in Australia”, and the Acts Interpretation Act will support that, of course.

MR KELLY:   Yes, your Honour.  The additional complication here is that as between the parties to the charter, which include the COC and SOCOG, they have agreed as between themselves that the COC is the entity with exclusive power over intellectual property of the Olympic movement in China.  That, we contend, not only excludes SOCOG ‑ ‑ ‑

GUMMOW J:   If this applies in China it would exclude them.

MR KELLY:   It would make a nonsense of it.

GUMMOW J:   Which would be a real farce, I would have thought.

MR KELLY:   If there is a duty, it is to SOCOG to grant whatever licence might be necessary if there is one.

GUMMOW J:   Yes, but if Mr Walker’s construction of section 12(1) is correct and it does apply in China, it would restrict the National Committee of China.

MR KELLY:   Yes, your Honour.  What is more, we have also pointed in our submissions to a concession which we understood had been made by SOCOG at the trial to the effect that it was not alleged against Mr Zhu that he broke any law in China.  We have appended a copy of that – we have referred to it in our written submissions.

GUMMOW J:   Well, was it said he was breaking 12(1) by activities on his part in Australia?

MR KELLY:   That is as far as it can go, yes, your Honour.  The high‑water mark of any breach of section 12 has to be some activity between – in effect on the way to the airport or some threatened activity the following year when the residents of the People’s Republic of China come to Australia, enter this jurisdiction and perhaps are carrying their plastic bags and perhaps are getting their accommodation provided in Sydney.

GUMMOW J:   But it was not a consequence of this collection of agreements that Mr Zhu was a licensed user?

MR KELLY:   Correct.  He was not ‑ ‑ ‑

GUMMOW J:   Because he did not measure up under section 14, is that right?

MR KELLY:   It appears to be the fact that he was not named on the register as a licensed user.  But if that be so, that was because SOCOG failed to do what it engaged, we say, to do under the charter to ensure that the Chinese Olympic Committee could enjoy its rights.  The ordinary principles – Mackay v Dick would apply.

HEYDON J:   Just because you are not on the register of licensed users does not necessarily mean that you are not a user to whom SOCOG has given a licence, does it?

MR KELLY:   Yes, your Honour.

HEYDON J:   The burden of proof in proving justification rests on the defendant.

MR KELLY:   Certainly.  Yes, your Honour.

HEYDON J:   The defendant has to prove the negative that it did not consent.

MR KELLY:   Yes, your Honour.

HEYDON J:   The defendant’s affairs seem to have been somewhat disorganised in August and September.

MR KELLY:   And it tendered nothing at the trial.  It did not call Mr Reading.  In fact, the reason we have, as one of the issues in this case, the question whether a principle akin to Shepherd’s Case applies to the tort as well as in contract, is that it cannot be said for one minute that it ever entered Mr Reading’s head or anybody else’s head that in, for example, causing Mr Zhu to be arrested they were seeking to protect the intellectual property rights of the Olympic movement.  Quite the opposite.  The evidence is that in the preceding days and weeks, to use Justice Bergin’s word, Mr Reading and Ms Ford, his manager, were shuffling between the alternative of giving Mr Zhu back his 260,000 or providing him with 742 of these plastic kit bags; trying to work out which of the two would be the cheaper alternative.  The mere fact that they had in mind as an alternative the provision of the 742 bags meant that they had in mind giving him merchandise with the Olympic marks on it permitting him to use it.

HEYDON J:   But that might be a licence.

MR KELLY:   Yes, your Honour.

HEYDON J:   Your point is really that it is operating at a rather grubby and mundane level well below this, as it were, idealistic protection of the symbols of the Olympic movement that will cause the whole Games to be taken away from Sydney.

MR KELLY:   Yes, your Honour.  That was the entire concept of omission.  To protect the intellectual property rights of the Olympic movement and save the Games was added by way of amendment a year or more after the case had started.

HEYDON J:   Do you remember offhand what that date was?

MR KELLY:   I can get it for your Honour.

HEYDON J:   Yes, thank you. Just one other thing – in construing the reach of section 12, does not one have to take into account section 6(b)(i) of the particular Act?

MR KELLY:   One does.

HEYDON J:   That seems to suggest that if trade with foreign countries is involved, it would extend that far?

MR KELLY:   Subject to what is meant by “trade with foreign countries”.  If that is given a – is that to be read and understood to be trade amongst individuals in foreign countries, or is it trade with the country in the sense of with some national entity?

HEYDON J:   Well, if a person takes, as it were, materials from Australia and goes to China and tries to interest Chinese citizens to come to Australia the following year, is that trade?  Is that foreign trade?

MR KELLY:   At its highest it is a promotional activity that any trade would only occur the next year if and when people came to the country.

KIRBY J:   Your client was engaged in trade or commerce with China, was he not?

MR KELLY:   He was engaged in trade and commerce with residents of China, not the country itself.

KIRBY J:   But that is a very fine distinction, because they are residents in that country the trade is with that country.

MR KELLY:   In that sense, yes, your Honour.

GUMMOW J:   As O’Sullivan v Noarlunga Meat told us, a long while ago, use for commercial purposes by any person in the course of trade with a foreign country may be use in Australia and in O’Sullivan v Noarlunga Meat it was slaughtering the animals in South Australia.

MR KELLY:   Yes.

GUMMOW J:   But they were to find their way – they were under contract to be sent out of the country, but the relevant use still may need to be use in Australia.

MR KELLY:   Yes, your Honour.  The unique circumstance in this case is that the contract is entirely for performance in the People’s Republic of China where there is for sale a travel and accommodation package for persons, residents of the People’s Republic of China coming to this country.

KIRBY J:   What precisely was the case that you ran as the purpose of the arrest?

MR KELLY:   The purpose of the arrest was to stop Mr Zhu’s marketing activities in China by stopping the launch of his project.  There is a file note in evidence detailing a conversation that took place at an early morning meeting on the Friday before the arrest and it contains the words “Stop the conference”, and it goes on to refer to the likelihood that the conference will give rise to a large number of, in effect, sales.  So that the purpose of the arrest was quite specifically to stop Mr Zhu in the actual discharge of his agency function.  That is the way we ran the case and her Honour so found because of this remarkable piece of evidence that said as much.

KIRBY J:   Was it part of your case that it was also to avoid the alternative course which was being toyed with of making a few plastic bags with some boomerangs?

MR KELLY:   No.  In effect, the opportunity to enlist the aid of the police to bring this matter to an end helped SOCOG out of the agonising decision whether it should provide them with the money or the bags.  The money, above all, it wanted to hang onto because it was $260,000 which Mr Zhu had paid for this agency and that $260,000 represented, in terms of the Olympic Club, a large sum of money, whereas the production of the plastic bags would have been relatively inexpensive.  They were toying with that alternative, could not make up their mind, but then along came an opportunity to work as a team with the police and cause the arrest of Mr Zhu’s subagent, Mr Liao, first and foremost and then Mr Zhu himself.

GUMMOW J:   Is the 1996 Commonwealth Act still in force?

MR KELLY:   I believe it is, your Honour. 

HEYDON J:   There is a letter from Mr Hedges of 8 June saying the Act has not been repealed but because of section 55 it ceased to have effect from 31 December 2000.  It is a letter from Mr Hedges to the Registry.  And Mr Hedges is correct.

GUMMOW J:   It has gone, has it not?  It would have to be because otherwise there would be a real question about validity of a federal Act which permanently restricted the use of the phrase “Sydney Games”.

MR KELLY:   Yes, your Honour.

GUMMOW J:   That is the message of the Bicentennial Act Case, Davis v The Commonwealth.

MR KELLY:   We would like to have an opportunity to double check that, your Honour, and make sure it is absolutely correct.

HEYDON J:   Yes.  In the version of the Act which appears in the appellant’s materials under paragraph 7 it seems to be correct.

KIRBY J:   But there is no point, is there, that by reason of its not having effect it does not have effect in this litigation?  It is continued for the purpose of this litigation, presumably.

MR KELLY:   As we understand it, yes, your Honour.

KIRBY J:   I have not seen any point to the contrary. 

MR KELLY:   Correct.  I only hesitate because the materials that we have in our bundle were the materials that were placed indeed by SOCOG before the Court of Appeal and I want to make sure that nothing has happened in recent times.

HEYDON J:   Do you now maintain an argument that, in fact, there was a licence to be found in this way, that SOCOG seems to have known something about the plaintiff and SOCOG seems to have known something about the activities of the trust via the club committee on which it had two representatives and that even though it might not be possible to find a piece of paper executed by SOCOG authorising the plaintiff in doing what he did, the course of events from 8 March 1999 until the spring of that year means that SOCOG had by conduct authorised the plaintiff to do what he was doing?  Is that an argument you advance or not?

MR KELLY:   We would like to go a little bit further, your Honour, and say that by operation of section 11 of the SOCOG Act SOCOG is duty bound in the exercise of its functions to take into account the charter, as far as practicable ‑ ‑ ‑

GUMMOW J:   No, to the fullest extent practicable.

MR KELLY:   ‑ ‑ ‑ to the fullest extent practicable, when combined with paragraph 11 of the charter which confides all rights to Olympic‑related intellectual property in the People’s Republic of China to the Chinese Olympic Committee, that SOCOG is duty bound to provide a licence for ‑ ‑ ‑

HEYDON J:   It might have an impact on some other part of the case, but you can be duty bound to provide a licence and not provide it and that leaves the notional licensee unlicensed.

MR KELLY:   Except that if one has a duty to grant such a licence and one fails to grant it, that is a factor which would preclude it from asserting that Mr Zhu was not relevantly licensed.

HEYDON J:   Well, that is a sort of estoppel-type of argument.  I think it can be used within the pleadings as showing how artificial the justification defence is.

MR KELLY:   Although, your Honour, I have to say that we have not in any stage of the case on any earlier date thought of the proposition that your Honour has just put, we would warmly embrace it and we would seek to supplement it by the duty to which we make reference.  Section 11, your Honours will have observed, was raised by the Court of Appeal in its judgment.  Section 11 was not pleaded as a font for any duty to procure termination of this agency agreement in the pleadings in this case, nor was it ever made the subject of a submission.  The highest that your Honours will see SOCOG formulating a duty ‑ ‑ ‑

HEYDON J:   It referred to its:

status and function as the Organising Committee for the Sydney 2000 Games ‑ ‑ ‑

MR KELLY:   Yes, that is the one.  That duty we would say does not rise higher than a duty to obtain injunctive relief.  That is their duty, if they had one.  If there was a problem, a proper characterisation of their duty is to exercise their statutory right of standing, not to exceed it.  In the context of this case it is boldly asserted that SOCOG has an equal or superior legal right to protect the intellectual property rights of the Olympic movement.  It points to Edwin Hill and such like, but plainly it has acted in excess of any such right, acted in excess of any power, because it cannot be suggested that it has any power of arrest or any right to arrest, let alone a duty to arrest.  So the arrest as an interference in its own right cannot possibly be within any such statutory power; it is outside it.  So too is taking any step vis‑a‑vis China, with no power at all in China, no right or duty in China, the whole of its activities in procuring termination of the contract can have no effect other than to pre-empt the Chinese Olympic Committee in the performance of its duty.  In that way, it is acting in excess of power and, therefore, the equal or superior legal right to which SOCOG points simply does not assist; it does not go far enough; it does not cover either of the events which it needs to.  So we make that additional submission.  Do you Honours see in our written submissions we have basically put forward six propositions ‑ ‑ ‑

GUMMOW J:   Perhaps before we do that, Mr Kelly, does it come down to this, that what is against you is paragraphs 184 and 185 of the Court of Appeal judgment?

MR KELLY:   Yes, your Honour.

GUMMOW J:   Plus the notice of contention point.

MR KELLY:   Yes, your Honour.

GUMMOW J:   And where do you say – that is at 3259?  What is the break in the reasoning in 184 and 185 that you would impose?  Where did it go wrong?

HEYDON J:   You say it went wrong in line 3 of paragraph 185, do you not? 

That agreement if allowed to remain in place required continued illegal conduct . . . by Zhu ‑ ‑ ‑

MR KELLY:   Yes.

HEYDON J:   And you say it did not require anything.  It cast obligations on the plaintiff to make sure his conduct was lawful.

MR KELLY:   Correct, yes.

HEYDON J:   He may have been in breach of those obligations, but that was a matter that could have been resolved by speaking to him, and, if he would not be spoken to, by getting an injunction to stop him.

MR KELLY:   Yes, your Honour.  That is our ‑ ‑ ‑

HEYDON J:   But there were many things he could do under the contract lawfully.  So that is where the flaw in the reasoning is.

MR KELLY:   Yes, your Honour, and that is the point that we boldly entitle our preliminary point.

HEYDON J:   Yes.  Your point is that the respondent did not say, by way of notice of contention, “Maybe the Court of Appeal was a bit exaggerated.  Just go back to our pleadings and you will see there is the mission”.  You take the technical point that there is no notice of contention that can defend paragraph 184 and 185 in terms other than the reasoning they themselves employ. 

MR KELLY:   Definitely, yes, your Honour.  The notice of contention seeks to resurrect the deed poll. 

HEYDON J:   The deed poll. 

GLEESON CJ:   By the way, do you oppose that application in relation to the notice of contention?

MR KELLY:   Yes, we do, your Honour, because the notice of contention on its face is embarrassing, because it asserts breaches of an entitlement arising by reason of breaches of obligations under the deed poll.

KIRBY J:   We would have to hear the argument, would we not?  I mean, I do not know how we could knock it out as a preliminary matter.

HEYDON J:   It is six months or so late, to start with.

MR KELLY:   But your Honours are not let into the secret of which breaches.  You are left to guess which breaches.  No such breaches have been found.  It fails at the threshold as a notice of contention, because it does not let one fairly know what the contention is.  If my learned friends were then to particularise the breaches they would undoubtedly be taking your Honour back to those reams of details in Schedules 5 and 6, or pick out some of them and try and show which one of those should have been found to be a breach.  Her Honour Justice Bergin did not find any of them to be breaches.  The Court of Appeal has proceeded upon an assumption that there were some, and SOCOG comes to your Honours’ Court maintaining the same assumption, but there are not any.  If there are some hidden away, they have not been ‑ ‑ ‑

KIRBY J:   Well, it is rather disarming of Mr Walker to say that it is really late thought that has led to this matter being put before the Court late.  Normally, the lateness itself would be cured if everybody is here ‑ ‑ ‑

MR KELLY:   Sure.  Yes, your Honour.

KIRBY J:    ‑ ‑ ‑ but my problem is that without a better knowledge of the details of the facts, it is pretty hard to resolve here and now the point that you are making concerning the adequacy of the particularisation of the notice of contention. 

MR KELLY:   Except, of course, your Honour, there is none at all.  When your Honour looks to the notice of contention, it does not identify any breach at all.  We are left in the dark.  That is the sort of defect which one could point to in opposing the application, but, of course, it is capable of being cured if my learned friend were to produce some particulars of it.

If convenient, I will deal swiftly with my six propositions.  The first of them has, in effect, just been covered.  Our preliminary point is that this contract did not require any illegal conduct or permit Mr Zhu to exploit; it did precisely the opposite.  Our second proposition is that SOCOG did not have a duty to procure termination of the agency agreement; it had a duty not to interfere.  That is our point based on the charter, which confides exclusively rights to the Chinese Olympic Committee when it comes to the exploitation of intellectual property rights in China.

Our third proposition is that the scope of any duty, if one can find one, did not extend so far as to include a right to act unlawfully, unlawfully in the Rookes v Barnard sense of interfering with the contract, or, in the sense of acting independently unlawfully, in this case by causing the arrest of Mr Zhu and depriving him of his liberty.  One sees no submissions in my learned friend’s material to justify a finding of any duty which would make so bold as to entitle SOCOG to conduct itself unlawfully in any respect at all.

Our fourth proposition is that a principle akin to that in Shepherd’s Case does not apply in tort.  There there is a relatively recent decision of the Privy Council, to which I will take your Honours in due course, which appears to be squarely on the point, although we did not discover it and none of parties brought it to the attention either of Justice Bergin or the Court of Appeal.  Our fifth proposition is ‑ ‑ ‑

KIRBY J:   Is Shepherd’s Case, remind me, is that the case that if an employer finds subsequently a ground for dismissal even though the employer did not have it at the time that it can rely on that ground?

MR KELLY:   Yes, your Honour, so in the context of this case ‑ ‑ ‑

KIRBY J:   It seems a rather dubious sort of principle, but I suppose it is well entrenched, very protective of employers.

MR KELLY:   Yes, it has been around for a long time.

KIRBY J:   We sacked you without any reason, we did not know of any reason at the time but later we found a reason.  Did we not have a case from Queensland a bit similar to this?  It is a question of how one analysed it.  It may be that because of the personal nature of employment relationships you should not be obliged to take the person back because of a later found reason, but going as it were retrospectively to improve the quality of dismissal seems very dubious.

MR KELLY:   In the context of the tort of intentional interference with contractual relations one would think there is even less room for it where the gravamen of the tort is intention, and if by definition this matter is not present to one’s mind at all when one is interfering and one thinks of it, or one’s lawyers cleverly think of it a few years later, can that seriously be called in aid of justification?

KIRBY J:   Well, yes but is the answer to it - I mean, the respondent is invoking the statute.  The statute is the written law.  The statute is the written law that has higher authority than any common law rights as between the parties.  The duty of courts is to give effect to the statute because it is the will of Parliament.  If it is valid that has to be given effect.  The fact that they did not think of it is not really to the point if it applies of its force in terms.  Is that not correct?

MR KELLY:   I would like to have an opportunity to suggest otherwise for this reason.  Your Honours would be aware, of course, of the decision of James v The Commonwealth where Mr James had his contracts for the sale of dried fruit interfered with by various Commonwealth officers who were threatening to proceed to court and enforced various provisions under a dried fruit Act and certain regulations, and by reason of that threat Mr James did not proceed with his commercial transaction.

In due course, the relevant regulations were found to be invalid by reason of the Constitution. Under those circumstances it was held by Justice Dixon that provided the person is acting bona fide and in purported exercise of his statutory duty then his conduct would not be an unjustifiable interference. Where a person does have a statutory duty but is not acting bona fide or in purported exercise of that duty but is acting, for example, for an improper purpose – soliciting a bribe – or acting in purported performance of something altogether different, then, in our submission, seeing as the gravamen of the tort is intention, those matters are relevant to his state of mind and they disqualify him from calling in aid the statute, even if it might otherwise literally apply.

KIRBY J:   It is the matter of the construction of the Act and of the quality and characterisation of the activities of SOCOG in purported compliance with the Act, that is to say retrospectively purported compliance with the Act, but if it falls within a statutory authority then what has the intention got to do with it?  If it is in law authorised by Parliament to do something, what is the purpose or intent?  How is that relevant?

MR KELLY:   The intention is the gravamen of the tort.

KIRBY J:   I know it is the tort, but I am talking about the field of public law.  I am talking about statutory operation, not private rights in tort.  If the statute applies, it expels the tort.

MR KELLY:   That is the question, your Honour, rather than the answer.  My submission is that the nature of the tort and the nature of the defence of justification are such that what falls for consideration is the nature and the quality of the intentions which are brought to bear.  If, of course, that is a misstatement of the nature of the tort or misstatement of the essential nature of the defence of justification, then my proposition falls away.  If an officer with a statutory duty to inspect motor vehicles for fruit and make a decision about the dumping of any fruit that might be infected by fruit fly, he has a duty, for example, in the case of a particular bag of apples to cause them to be thrown into the bin but what, in fact, he does is attempt to solicit a bribe and in the course of making threats in that regard causes a truckload of apples to go into the bin, then the tort of intentional interference with contractual relations can be made good and the defence of justification denied even though he may well have had a statutory duty in relation to those same parcels.

GUMMOW J:   On this question of statutory duty, it may be worth looking at our decision in Puntoriero v The Water Administration Body 199 CLR 575. One does not ordinarily construe a conferral of statutory powers, a conferral of statutory authority to commit wrongs, and if it is there, one would expect then to be an indemnity in the statute. That is what was the subject of that case.

MR KELLY:   I am indebted to your Honour for that.  That is squarely this case, because no matter how you look at it – indeed, it has never been submitted in the past on behalf of SOCOG ‑ ‑ ‑

GUMMOW J:   So this notion of higher right and justification is something of a furphy, it seems to me, in the light of that starting principle as to how you read statutes, because the higher right has to be found in the statute, does it not?  That is what they were saying in the Court of Appeal.

MR KELLY:   Certainly, your Honour.

GUMMOW J:   And if it is found in the statute, you do not need a doctrine of justification.

MR KELLY:   Quite so.

GUMMOW J:   It is in the statute.

MR KELLY:   And if it is not in the statute, then as a right or a duty it simply does not exist.

GUMMOW J:   And if it is not in the statute, you cannot use the common law to eke it out.

MR KELLY:   It simply does not exist.  That is what we have here.  There is no statutory power, let alone a right or a duty, (a) to arrest, (b) to have any dealings in relation to intellectual property of the Olympic movement in China.  On those two bases, the justification as found falls away.  Our fifth proposition is that interference by unlawful means is incapable of being justified. 

Now, of course that proposition has sometimes been described as dogma and other theories have been put forward in academic writings to suggest other tests.  For the purposes of the present appeal, however, we would contend that no matter how you look at the relevant behaviour, the arrest and the interference with the business in China, no matter which characterisation one looks at, the interference in this case is not justified, so it may not be necessary for that question ultimately to be determined in these proceedings. 

Finally, we contend that regard should be had to all of the relevant circumstances bearing on the interference, including any failure on the part of the defendant to avail itself of a means to assert its rights in a way which involves no illegality, relevantly make an application for an injunction.  They are the several propositions upon which we rely and we have set out our argument in our written submissions.  Rather than weary your Honours with the detail of those submissions, that is the way I would ‑ ‑ ‑

GLEESON CJ:   In an application for an injunction, who would be the appropriate parties to the proceedings?  In particular, who would be the defendants?

MR KELLY:   Section 43 of the Indicia Act creates, in effect, a special purpose application to vindicate any suggestion or any claim that a defendant has breached or threatened to breach section 12 of that Act.  In a case such as the present, one would need to identify very carefully the conduct which is said to be a contravention.  Who exactly is misusing a piece of intellectual property?

For example, if it was suggested that Mr Zhu’s written authority to act as an agent with the SOCOG marks upon it, if it was suggested that that was the contravention or threatened contravention, that act is the act of TOC and it might then be an appropriate defendant.  If the act were of a different type, and one would need to characterise it first, then Mr Zhu could be the appropriate defendant, or one of his subagents.  Unless and until one has specifically identified the conduct which is complained about, one would be unable to identify the parties.

GLEESON CJ:   What about the Chinese authorities?

MR KELLY:   Well, to the extent that they are a party to – they need to be made, in certain classes of case, a party to an application because they would have an interest.  If the Chinese authorities on the one hand are saying to Mr Zhu, “Go for it.  This is good for China and the Olympic movement in the People’s Republic” they may need to be joined as a party, but one needs to have the precise conduct identified first.

GUMMOW J:   No, it is really saying one contract is weaker than the other.

MR WALKER:   Not weaker than, but that the observance, or the service I should say, of the interests of the defendant under its contract or statutory position outweighs by a calculus that is not explained in the authorities as to what is relevant and what is not relevant.  Lord Justice Romer famously sets out a plainly general and non-exhaustive list that outweighs the interests of the plaintiff in the contract which has ex hypothesi been breached.

GUMMOW J:   Is there any finding here, for example, if we are going into this balancing activity, that Mr Zhu knew of this infirmity?

MR WALKER:   No, I do not think there is any evidence ‑ ‑ ‑

GUMMOW J:   In his position that was being given ‑ ‑ ‑

MR WALKER:   No, I do not think there is any evidence of that.  To the contrary is one of the passages I drew to attention in his witness statement.  Now that, of course, raises the question why did we not inform him of the hopelessness of the position, but that does not, in our submission, really answer the question of justification or not.

GLEESON CJ:   It is one thing to say “This contract is illegal” and it seems to me that it is another thing to say “This contract can only work if all sorts of people consent to various things and there can be no guarantee that they will give their consent.  Indeed, they have set their faces against this contract working.”  The second proposition, it seems to me, might go to the question of damages, but at the moment I have difficultly seeing that you are in the area of justifying inducing a breach if you are confronted with the second type of situation as distinct from the first.

MR WALKER:   Well, your Honour, we are in that position because we plainly induced their repudiation of this contract.  We are in that position in turn because of her Honour’s findings not challenged that such shortcomings as Mr Zhu had exhibited were not such as to permit summary dismissal as opposed to the notice provisions in the contract so that, as it were, the termination was without right; therefore, a repudiation.

Now, that is why we are in the territory because what some people have called the prima facie tort is thus made out.  We do not deny at the time we said what we said at paragraph 115, on 3052.  We do not deny that we knew what we were talking about, terminate the relationship.  We did not have to know or appreciate every fine nuance of its terms.  So there is the knowledge which, to adopt Justice Lindgren’s approach in Allstate, will serve as the finding of intention.  That is against us and we accept it.  We accept, as I have just put, that this was a repudiation thus in breach ‑ ‑ ‑

GLEESON CJ:   As a matter of history of the litigation, it was only at a very late stage, was it not, that these various aspects of the vulnerability of the contractual position of Mr Zhu were invoked as justification?  The justifications that were invoked originally were different.

MR WALKER:   Yes.  My friend is, with respect, quite correct.  The matter well and truly reflected in the costs order in the Court of Appeal that the slip by the learned trial judge in relation to deciding the whole of the justification case is readily explicable by the vast overwhelming preponderance of attention at trial to matters which are no longer ventilated, that is, no breach of contract at all, no repudiation justified termination.  So we do accept the description and the strictures that your Honour the Chief Justice has noted.  They are there.  They are unarguably there.

GUMMOW J:   Now, since Justice Heydon last wrote on this subject there are I think at least three publications worth looking at.  There is an article in 45 Modern Law Review 241, 93 Harvard Law Review 1510 and an article by Professor Partlett – he teaches in the deep south but has the virtue of being an Australian – in 66 Tulane Law Review 771.  The Americans would answer your quest by saying the freedom of competition overcomes the sanctity of the other contract, and that is a large proposition too, given the provisions of Part IV of the Trade Practices Act.

MR WALKER:   I was about to say I do not want to adopt it because, in our submission, the common law would not proceed appropriately from the authorities and decisions as they presently stand directly to something as generalised as (a) freedom of competition, let alone (b) to sanctity of contract.  Neither ‑ ‑ ‑

HEYDON J:   But you are running a sort of doctrine of efficient interference with contract, efficiently induced breach.  You are saying it was more efficient to wreck the contract than to get an injunction to stop him performing it unlawfully.

MR WALKER:   Yes.  I fear that is a fair description of the nub of part of my argument, yes, your Honour, and that it says of justification that it is not an adjudication involving a commentary on the attractiveness of conduct, but it is an adjudication that requires commentary on the entitlement to have acted to protect or advance your interests of a kind that the law regards as not inferior to, and I would go further in this case because of the facts of this case, and antecedent to a contract which threatens to cut across your own interests.  It is the threatening to cut across which is the key to why ours is, in fact, a superior right.

Now, that will not exhaust possible justification to the tort, but it is as far as the Court needs to go in this case.  We do not have property in the sense that we would prefer to use that expression, so the Court should not enter upon that matter.  We do not have positive legislated enactment authorising, as it were, the tort, so the Court should not go into that area.  We do have a set of ‑ ‑ ‑

GUMMOW J:   You have Oliver Wendell Holmes “bad man”, I think.

MR WALKER:   I have to be careful not to attach that to the wrong person.  Maybe that should be attached to the club, and that may be awkward bearing in mind our position on the committee.

GUMMOW J:   Yes, exactly.

MR WALKER:   Now, I should recognise those problems, they are problems of a kind that Justice Callinan has raised in another context. 

HEYDON J:   Even the bad man had to pay damages. 

MR WALKER:   Yes, that is one of the reasons I just said ‑ ‑ ‑

HEYDON J:   And the man who persuades the bad man to do it might have to do the same.

MR WALKER:   That then comes down to what might be called good or bad reasons for doing what you did, and that conjures up Sir George Rich’s pungent summary rebutting what he called, in Shepherd v Felt & Textiles (1931) 45 CLR 359, the “ancient heresy”. The passage in mind, that your Honours are familiar with, is at 371. In the quite distinct but, we would submit, evocative context of contract, his Honour said:

The question is whether the defendant was entitled to do what it did, not whether the reason why it exercised the rights it in fact had was a good or bad one.

In our submission, that is critical not only to the nature of justification, which may be valid, but also to answer my friend’s points about this being a lawyer’s point after the event.  Now, partly I have answered the question about it being a lawyer’s point by reference to the material, the evidentiary sequence that shows there was always a concern – on the findings, sincere, if not properly chased through – about the commercialising in China, contrary to the Olympic Charter, of these rights.  So that was always a concern.  This is not just a lawyer’s point, though, of course, the pleading is a lawyer’s artefact, as is the argument, both here and in the Court of Appeal. 

As to the entitlement – which was the right word to be used in the bipartite decision in Shepherd v Felt & Textiles – the analogy in this tort is the interest of the defendant which is served by the termination brought about by the inducement.  The interest here is in our capacity to honour our own preceding obligations themselves, with no whiff of illegality, impossibility or hopelessness, in the face of a contract which would cut across our obligations, in particular, the obligation to which attention was drawn to ensure that third parties observe the restrictions which we had undertaken to observe in the chain of title for the intellectual property involved.

That then leaves the question, should we not have done, as it were, the gentlemanly thing?  We had had a mediation with the club about it going broke.  Why did we not have a mediation with Mr Zhu about the unfortunate hopelessness of what he had been led to believe he was entitled to do?  (a) I concede and accept entirely that that method of approaching, whether it be a formal mediation or simply conversation of an open kind, would have been nicer, without any doubt, and I do not mean that so as to belittle that possibility at all, but ‑ ‑ ‑

GLEESON CJ:   Mr Zhu was never given the opportunity to go back to Mr Yu, who had that conversation you took us to earlier, and say to him, “Look, I am sorry, I really do need that written consent now for this reason.”

MR WALKER:   That is why, your Honour will have noticed I have never talked about the hopelessness of the Chinese Olympic Committee fulfilling one of those conditions; I have only talked about the hopelessness of SOCOG not fulfilling the other.

GUMMOW J:   Sorry, could you explain that, Mr Walker?

MR WALKER:   There are two persons who would need to give consents, at least – and I am only concentrating on two – the NOC China and SOCOG.  I have said that hopelessness only comes from SOCOG precisely because, as your Honour the Chief Justice points out, it may be another dinner, it may be another trip, it may be reference to loss of face, et cetera.  The Chinese-Australian trouble would plausibly have led to the rapid Olympic requirement for written consent being achieved.  I accept that.  That is why I did not rely upon the NOC consent as being that which would render it hopeless.

GLEESON CJ:   Yes, that is part of the difference between a contract being difficult and a contract being impossible.

MR WALKER:   Yes.  I accept that we are in the somewhat unattractive position that we are relying upon our own determination.

GUMMOW J:   Exactly, to found your own superior right, to disrupt someone else’s contractual relations.

MR WALKER:   So I have to attend to that.  I attend to that in this fashion.  What we were doing was in accordance with instruments by which we were antecedently bound.  What we were doing by refusing consent was in accordance with that, bearing in mind that SOCOG was not entitled to permit anything outside Australia.

GUMMOW J:   Yes.

CALLINAN J:   Yes.  Can you say that without qualification?  Might it have been entitled to do so with IOC consent?

MR WALKER:   Yes.

CALLINAN J:   Well, you have to qualify it that way, and ‑ ‑ ‑

MR WALKER:   I am sorry, I mean SOCOG alone.

CALLINAN J:   And if China were prepared to consent, if NOC China were prepared to consent, why would not IOC China consent?

MR WALKER:   If the AOC had agreed to a revamp of the agency agreement and there was NOC, you may not have needed IOC approval to merchandising in China.  That is, if you had rewritten the agency agreement with AOC agreement, and you had the Chinese Olympic Committee approval to merchandising in China, then it could have happened, but SOCOG acting alone could not achieve any of that. 

CALLINAN J:   Would there not have been an obligation upon SOCOG in accordance with what was said in St Martin’s Investment Trust at least to try to get those consents?

MR WALKER:   No.

CALLINAN J:   Why not?

MR WALKER:   There is no contractual privity nexus between us and Mr Zhu at all.

CALLINAN J:   But did that not change once you took over the club or TOC?

MR WALKER:   No.

CALLINAN J:   Were you not effectively in the nature of a novation almost, an implied novation?

MR WALKER:   No.

HEYDON J:   That is what was attempted.  It was a defective novation.

MR WALKER:   There is no novation pleaded in this case and none demonstrated.

HEYDON J:   I know that, but the fact is that is what the people thought they were doing in July and August.  They just said, “Let us step into their shoes”.

MR WALKER:   I am not sure they thought that they were doing that in terms of all the obligations.  They certainly said ‑ ‑ ‑

HEYDON J:   Well, they wanted the benefits.

MR WALKER:   ‑ ‑ ‑ “Let us make sure membership contracts are honoured”.  They certainly wanted to do that.

CALLINAN J:   What were the precise terms of their press release?

MR WALKER:   I do not know, your Honour.

CALLINAN J:   I think it is here, is it not, in Justice Sheller’s judgment?  It is in Justice Sheller’s judgment.  I just cannot pick it up.

HEYDON J:   It is on page 3044, paragraph 94, “Members Entitlements Remain Unchanged”.

CALLINAN J:   Yes:

SOCOG was to “assume sole control of the Olympic Club” and that all parties recognised the “synergistic benefits –

Leaving aside the dishonesty involved in that, it seems to have been right and true to say that SOCOG was solely the controller at that stage.

MR WALKER:   That is what I have said, your Honour, yes. 

CALLINAN J:   Why was not SOCOG then, to all intents and purposes, TOC and thereby obliged to do everything that it was reasonably required to do to enable the agreements with Mr Zhu to be carried into effect?

MR WALKER:   Partly because this is not a means by which it became subject to any contractual burdens at all.  At the risk of saying something once too often, we have certainly not had any benefit and burden doctrine pleaded against us at all.

GUMMOW J:   No, I know, but you are trying to draw us into the broad uplands, or perhaps a swamp, of justification.  Once you draw us into that all sorts of nasties pop out.

MR WALKER:   I accept that.  That is why I have to deal with the fact that we are responsible for what your Honour says is the so‑called soi‑disant superiority of the right we then say justifies what we did.

GUMMOW J:   Yes.

MR WALKER:   I accept I have to defend that and that is not a pleading point, but what I am saying is there was never any contract case against us and, not surprisingly, in our submission, here there was no novation, let alone any other contract.  But, may I say, if one had gone down that road there would be difficulty in the fact that there is an express term in relation to SOCOG’s approval which it is within the absolute discretion of SOCOG to withhold.  It would be, in our submission, contrary to contractual reasoning to draft into a contract of that kind an obligation not to exercise your absolute discretion but to trammel it by always trying to give consent.

CALLINAN J:   But it gets itself into an impossible position then.  On the one hand, it says, “We’ve got an absolute discretion whether to withhold or grant consent ‑ ‑ ‑

MR WALKER:   Mr Zhu agreed to that.

CALLINAN J:    ‑ ‑ ‑ but, on the other hand, we are controlling a legal personality which has undertaken to do certain things which require our consent”.

MR WALKER:   But, your Honour, there is no obligation on the club to procure SOCOG’s consent, there never was ‑ ‑ ‑

CALLINAN J:   Well, I suggest there is.  There is an implied obligation of the kind that lies upon every party to a contract, to do whatever is reasonable to carry it into effect. 

MR WALKER:   The obligation was on Mr Zhu to apply for consents.

CALLINAN J:   To facilitate his applications for consent.

MR WALKER:   Your Honour, there is no suggestion there was any non‑facilitation by anybody.  SOCOG’s absolute discretion meant that Mr Zhu could not complain that SOCOG had exercised an absolute discretion.  He accepted that risk.  That is explicit in his contract.  Furthermore, in terms of controlling the fate of an enterprise requiring SOCOG’s approval, we were no more in control of it after we took the club directly into us – whatever that means – as we were when the contract was first made, because from beginning to end SOCOG had an absolute discretion whether to say green light or red.  That did not alter.  What we did, for reasons best known to others, is to bring the contract to an end precipitously, thus in breach.

GLEESON CJ:   Mr Walker, how long do you think you will need to finish your argument?  There is no great urgency.  I think the next case after you on the list is only a half day case, anyway.

MR WALKER:   I think I will need at least another 40 minutes, I am sorry.

GLEESON CJ:   Mr Kelly, how long do you think you will be in reply?

MR KELLY:   Probably the same, or less.

GLEESON CJ:   All right.  We will adjourn until 10.15 tomorrow morning, and we will say that the next case will be not before 11.15.

MR WALKER:   May it please the Court.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 16 JUNE 2004