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Supreme Court of the ACT |
LIGHTSOURCE TECHNOLOGIES AUSTRALIA PTY LTD v POINTSEC
MOBILE TECHNOLOGIES AB
[2011] ACTSC 59 (12 April 2011)
PRIVATE INTERNATIONAL LAW – service out of jurisdiction
– validity of service – non-service of supporting affidavit –
service of Originating
Application with different date from that ordered –
irregularity not invalid – Court Procedures Rules 2006 (ACT) rr
6505, 6507 – Court Procedures Act 2004 (ACT) s
68(1).
PRIVATE INTERNATIONAL LAW – service out of
jurisdiction – setting aside order for service – whether grounds for
making order for service.
ARBITRATION – the submission and
the reference – whether matter capable of being subject to arbitration
– found to be capable
of being arbitrated.
ARBITRATION
– the submission and the reference – stay of litigation and refer al
to arbitration – whether arbitration to be
conducted under the law of a
Convention country – International Arbitration Act 1974 (Cth) s
7.
ARBITRATION – the submission and the reference –
stay of litigation and referral to arbitration – whether stay should be
ordered
– Commercial Arbitration Act 1986 (ACT) s
53.
Civil Procedure Rules (UK), r 6.9
Supreme Court
Rules (British Columbia Reg 221/90), r 13(3)
Supreme Court Civil Rules
(British Columbia Reg 168/2009), r 4-5(3)
Service and Execution
of Process Act 1992 (Cth), s 16
International Arbitration Act 1974
(Cth), ss 3(1), 7, Sch 2
Trade Practices Act 1974 (Cth), ss 51AA,
51AC
Insurance Contracts Act 1984 (Cth), s 8
Court
Procedures Rules 2006 (ACT), rr 40, 111, 1606, 6501, 6505, 6506, 6507,
6510
Court Procedures Act 2004 (ACT), s 68
Commercial
Arbitration Act 1986 (ACT), s 53
Supreme Court Rules 1987
(SA)
Supreme Court Rules 1900 (QLD), O 93 r 17
Industrial
Relations Act 1996 (NSW), s 106
Insurance Act 1902 (NSW),
s 19
Halsbury’s Laws of England (Butterworths: London,
1991) 4th ed v 2
K & S Corporation Ltd and Anor v
Number 1 Betting Shop Ltd & Ors [2005] SASC 228
The Duke Group
Ltd (In Liq) v Alamain Investments Ltd (In Liq) and Ors [2005] SASC 411
Australian Commercial Research and Development Ltd v ANZ McCaughan
Merchant Bank Ltd [1990] 1 Qd R 101
BAS Capital Funding Corporation
and Ors v Medfinco Ltd & Ors [2004] 1 Lloyd’s Rep 652
Leal v Dunlop Bio-processes International Ltd [1984] 1 WLR
874
Richard Crookes Constructions (Qld) Pty Ltd v Wendell [1990] 1 Qd
R 392
Golden Ocean Assurance Ltd & World Mariner Shipping v Martin
[1990] 2 Lloyd’s Rep 215
Phillips and Anor v Symes & Ors (No
3) [2008] EWCA Civ 311; [2008] 1 WLR 180
Olafsson v Gissurarson (No 2) [2008] EWCA Civ 152; [2008] 1 WLR
2016
Savcor Pty Ltd v Catholic Protection International APS [2005] VSCA 213; (2005) 12
VR 639
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Amin Rasheed
Shipping Corporation v Kuwait Insurance Co [1984] 1 AC 50
The Duke
Group Ltd (In Liq) v Alamain Investments Ltd (In Liq) & Ors [2005] SASC
411
Cockburn v Kinzie Industries Inc (1988) 1 PRNZ 243
Fenbury
Ltd (In Liq) and Ors v The HongKong and Shanghai Banking Corporation Ltd
& Anor [1996] SASC 5957
Kuwait Asia Bank EC v national
Mutual Life Nominees Ltd [1991] 1 AC 187
Turbide v Orrell (BCSC,
Master Horn, C973476, 6 June 1998, unreported)
Cook and Ors v Parcel,
Mauro, Hultin & Spaanstra, P.C. (1997) 143 DLR (4th)
213
Humane Society International Inc v Kyodo Senpaku Kaisha Ltd [2006] FCAFC 116; (2006)
154 FCR 425
Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading
Ltd [2005] FCA 1102
Flakt Australia Ltd v Wilkens & Davies
Construction Co Ltd [1979] 2 NSWLR 243
Tanning Research Laboratories
Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332
Hi-Fert Pty Ltd and Anor v
Kiukiang Maritime Carriers Inc (No 5) and Anor (1998) 90 FCR 1
Elders
CED Ltd v Dravo Corporation (1984) 59 ALR 206
American Diagnostica
Inc v Gradipore Ltd (1998) 44 NSWLR 312
Timic v Hammock
[2001] FCA 74
Recyclers of Australia Pty Ltd and Anor v Hettinga
Equipment Inc and Anor [2000] FCA 547; [2000] 100 FCR 420
La Donna Pty Ltd v Wolford
AG [2005] VSC 359; (2005) 194 FLR 26
Comandate Marine Corp v Pan Australia Shipping
Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45
Pacific Carriers Ltd v BNP Paribas
[2004] HCA 35; (2004) 218 CLR 451
Reardon Smith Line Ltd v Hansen-Tangen [1976]
1 WLR 989
Seeley International Pty Ltd v Electra Air Conditioning BV
[2008] FCA 29; (2008) 246 ALR 589
TCL Airconditioning (Zhongshan) Co Ltd v Castel
Electronics Pty Ltd [2009] VSC 553
Ethiopian Oilseeds & Pulses
Export Corp v Rio del Mar Foods Inc [1990] 1 Lloyd’s Rep
86
Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd
(1996) 39 NSWLR 160
Government of Gibraltar v Kenney [1956] 2 QB
410
Dowell Australia Ltd v Triden Contractors Pty Ltd [1982] NSWLR
508
Elkateb v Lawindi (1997) 42 NSWLR 396
Incitec Ltd v Alkimos
Shipping Corporation and Anor [2004] FCA 698; (2004) 206 ALR 558
O’Connor v
LEAW Pty Ltd (1997) 42 NSWLR 285
Pavey & Matthews Pty ltd v Paul
[1987] HCA 5; (1987) 162 CLR 221
Allergan Pharmaceuticals Inc and Anor v Bausch
& Lomb and Anor [1985] FCA 369
Alstom Power Ltd v Eraring
Energy [2004] FCA 706
Transfield Philippines Inc & Ors v Pacific
Hydro Ltd and Ors [2006] VSC 175
Metrocall Inc v Electronic Tracking
Systems Pty Ltd (2000) 52 NSWLR 1
ACD Tridon v Tridon Australia
[2002] NSWSC 896
Ferris v Plaister (1994) 34 NSWLR 474
A Best
Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170
Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA
110
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982)
149 CLR 337
Building & Engineering Constructions (Aust) Ltd v Property
Securities No 1 Pty Ltd [1960] VicRp 104; [1960] VR 673
Shanghai Foreign Trade
Corporation v Sigma Metallurgical Co Pty Ltd and Ors (1996) 133 FLR 417
Akai Pty Ltd v People’s Insurance Company Ltd [1996] HCA 39; (1996) 188 CLR
418
HIH Casualty & General Insurance Ltd (In Liq) v Wallace [2006] NSWSC 1150; (2006)
68 NSWLR 603
Atlantic Shipping and Trading Co Ltd v Louis Dreyfus and
Co [1922] 2 AC 250
Smeaton Hanscomb & Co Ltd v Sassoon
I Setty Son & Co [1953] 2 All ER 1471
Eisenwerk Hensel
Bayreuth Dipl.–Ing Burkhardt GmbH v Australian Granites Ltd [2001]
1 Qd R 461
GWJ Blackman & Co SA v Oliver Davey Glass Co
Pty Ltd & Noel Searle Pty Ltd [1966] VicRp 77; [1966] VR 570
Thomas (WC) & Sons
Pty Ltd v Burge (Australia) Pty Ltd; General Produce Co Third Party [1975]
801
Huddart Parker Ltd v Ship “Mill Hill” [1950] HCA 43; (1950) 81 CLR
502
Plummer v Delaforce [1964-5] NSWR 1550
O’Neill &
Clayton Pty Ltd v Ellis & Clark Pty Ltd (1978) 20 SASR
132
Abigroup Contractors Pty Ltd v Transfield Pty Ltd and Anor (1998)
217 ALR 435
Channel Tunnel Group Ltd and Anor v Balfour Beatty
Construction Ltd [1993] AC 334
Petersville Ltd and Anor v Peters (WA)
Ltd (1997) ATPR 41-566
Savcor Pty Ltd v State of New South
Wales [2001] NSWSC 596; (2001) 52 NSWLR 587
Mulgrave Central Mill Co Ltd v Hagglunds
Drives Pty Ltd and Anor [2001] QCA 471; [2002] 2 Qd R 514
Warnervale Concreting Pty
Ltd (In Liq) v Abigroup Contractors Pty Ltd [2002] NSWSC 452
Stevens v
Trewin & van den Broek [1968] Qd R 411
Commonwealth v Adelaide
Steamship Industries Pty Ltd (1974) 24 FLR 97
Ahmed Al-Naimi v
Islamic Press Agency [2000] 1 Lloyd’s Rep 522
Origin Energy
Resources Ltd v Benaris International NV and Anor [2002] TASSC 50
Etri
Fans Ltd v N M B(UK) Ltd [1987] 1 WLR 1110
Taunton-Collins v Cromie
and Anor [1964] 2 All ER 332
No. SC 138
of 2007
Judge: Refshauge J
Supreme Court of the ACT
Date: 12 April
2011
IN THE SUPREME COURT OF THE )
) No. SC 138 of
2007
AUSTRALIAN CAPITAL TERRITORY )
LIGHTSOURCE TECHNOLOGIES AUSTRALIA PTY LIMITED
Plaintiff
V
POINTSEC MOBILE TECHNOLOGIES AB
Defendant
ORDER
Judge: Refshauge J
Date: 12 April 2011
Place: Canberra
THE COURT ORDERS THAT:
1. The application be dismissed.
1. The defendant, Pointsec Mobile
Technologies AB, is a Swedish company which develops and markets enterprise
security software for
the protection of the privacy of data and credentials on
desktop and mobile computers.
2. The plaintiff, Lightsource Technologies
Australia Pty Ltd, is an Australian company which resells software and related
services
which it has obtained from suppliers such as the defendant.
3. On 2
October 2003, the plaintiff and the defendant entered into an agreement,
described as the “PMT Partner Agreement Australia”
(the Agreement),
whereby the defendant granted to the plaintiff a non-exclusive, non-transferable
right to market and distribute
certain of the defendant’s software
products and services in the Australian Capital Territory on the terms and
conditions set
out in the Agreement.
4. The Agreement contained a clause
about disputes and the governing law. That clause, cl 12.8, provided:
Any dispute, controversy or claim arising out of or in connection with this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration administered by the Arbitration Institute of the Stockholm Chamber of Commerce (the SCC Institute).
The Rules for Expedited Arbitrations of the Arbitration Institute of the Stockholm Chamber of Commerce shall apply, unless the SCC Institute, taking into account the complexity of the case, the amount in dispute and other circumstances, determines, in its discretion, that the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce shall apply. In the latter case, the SCC Institute shall also decide whether the arbitral tribunal shall be composed of one or three arbitrators. Arbitration shall take place in Stockholm, Sweden, in the English language.
The construction, validity, interpretation and performance of this Agreement shall be construed and governed by the substantive laws of Sweden.
5. The Australian Department of Defence began to evaluate the security software
and, in November 2003, there were discussions between
officers of the plaintiff
and defendant with a view to the latter’s software being made available
for such evaluation.
6. From 2004, officers of the plaintiff undertook work
necessary to prepare to sell licences for the defendant’s software to
the
Department and ultimately this software was included as a product approved by
the Defence Signals Directorate of the Department
to be included on the
Directorate’s Evaluated Products List.
7. For reasons not presently
relevant, the plaintiff then decided that it would tender for sale of the
licences to this software jointly
with another Australian company, Compucat
Research Pty Ltd (Compucat). The response to the Request for Proposal was
submitted by
these two companies on 7 April 2006.
8. The plaintiff apparently
persuaded the defendant to reduce its price for sale of the software licences to
the Department. The
defendant alleges that the plaintiff then set a price to
the Department that effected an increase in the plaintiff’s margin
on the
sales.
9. Subsequently, however, an Australian incorporated company, Pointsec
Mobile Technologies Pty Ltd (PMT Australia), established by
the defendant, made
direct contact with Compucat and the two apparently proceeded to exclude the
plaintiff from the supply of the
software to the Department.
10. A series of
letters and emails passed between the parties and, later, their lawyers, in
which various claims and counter-claims
were made about the issue of the
payments claimed by the plaintiff to be due from the defendant and the behaviour
of the parties.
11. On 28 November 2006, the defendant sent a letter to the
plaintiff purporting to terminate the Agreement.
12. On 16 March 2007, the
plaintiff commenced these proceedings, claiming, in summary, in its Originating
Application:
13. On 10 April 2007, Master Harper granted leave to the plaintiff to serve the
Originating Application and a supporting affidavit
of Leonard Victor Beacham
(without the exhibits) on the defendant’s registered head office in
Stockholm, Sweden.
14. On 13 July 2007, a sealed copy of the Originating
Application and a copy of the supporting affidavit, together with translations
of those documents, a copy of the order of Master Harper and some other
documents not presently relevant, were delivered to a female
employed at the
office of the defendant in Stockholm.
15. On 16 August 2007, the defendant
filed a conditional Notice of Intention to Respond under r 111 of the Court
Procedures Rules 2006 (ACT) (the Rules).
16. On 13 September 2007, it filed
an Application in Proceeding seeking that service of the Originating Application
be set aside,
a stay of the proceedings and other similar orders. That
Application was filed within the 28-day period referred to in r 111(3)
and (4) of the Rules.
17. For reasons that are not entirely clear, that
application did not come on for hearing until 28 May 2008. After the hearing, I
reserved my decision.
The Procedural History
18. The plaintiff’s
Originating Application was filed and dated on 16 March 2007. It was supported
by an affidavit of Leonard
Victor Beacham, affirmed on 27 February 2007, and to
which were exhibited a large bundle of documents including the Agreement, the
Response to the Request for Proposal and correspondence and email communications
between the plaintiff, Defendant, PMT Australia
and their respective
lawyers.
19. Also filed on that day was an Application in Proceedings seeking
leave to serve the Originating Application and supporting affidavit
on the
defendant at its “registered office” in Sweden. Curiously and, no
doubt, inadvertently, the first order sought
service of “the originating
application dated 2 March 2007”. Presumably, that was a typographical
error or, perhaps,
the Originating Application had been earlier prepared and
expected to be filed on that date. That would be consistent with the date
of
Mr Beacham’s affidavit.
20. There was no Originating Application
dated 2 March 2007 on this file and the Application in Proceedings can only have
been intended
to refer to the only Originating Application filed in these
proceedings, namely that dated 16 March 2007.
21. An affidavit of Paul
Fabian Hynes affirmed on 12 March 2007 was also filed on 16 March 2007. It
purported to be made in support
of the Application in Proceedings in which it
was described as such. It deposed to the registered office of the defendant, it
asserted
Mr Hynes’ belief that the plaintiff’s claim, as set out in
the Originating Application and supported by Mr Beacham’s
affidavit, had
reasonable prospects of success. It was also directed, however, to the question
of translation of documents for service,
for it referred to the fact that all
correspondence and documents that were the basis of the claim were in English.
This appears
directed to the order sought in the Application in Proceedings for
dispensation from r 6510(2)(c) of the Rules which requires translation
of
documents to be served. Rule 6510 provides for service outside Australia in a
country which is a signatory to and has ratified a Convention on service of
documents
for, inter alia, legal proceedings.
22. The Application in
Proceedings came on for hearing on 26 March 2007 and in the absence of any
appearance by any party, the application
was dismissed.
23. A further
Application in Proceedings was issued by the plaintiff on 30 March 2007, also
relying on the affidavit of Mr Hynes,
and in identical terms to the earlier
Application in Proceedings, including as to the error in the date of the
Originating Application.
That appears to have come before the Master on 10
April 2007, when his Honour made, according to the annotation on the court
record,
“Orders 1 and 3 in the Application of 30 March 2007”. His
Honour did not give leave to dispense with translation of
the relevant
documents, except for the substantial exhibits to Mr Beacham’s
affidavit.
24. I note also that the order taken out referred to an
Application in Proceedings of 10 April 2007. The actual Application in
Proceedings
was, in fact, dated 30 March 2007 but returnable on 10 April 2007.
It would appear that the return date was mistakenly taken for
the date of the
Application.
25. While the court is, of course, responsible for the accuracy
of the orders made, it is the solicitors for the plaintiff who prepared
it (see
r 1606(3) of the Rules).
26. It is clear to me that the reference to the
wrong date for the Originating Application came about because of the error in
the
order as sought in the Application in Proceedings.
27. Such errors are
regrettable and efforts should be made to ensure that they do not occur. More
care is needed in preparation of
documents, especially documents of or for
filing in the court, as they are not only a record of the proceedings, often for
important
public purposes, but also required to inform parties or potential
parties of the course of the proceedings.
28. It appears that the Originating
Application and affidavit of Mr Beacham were then translated into Swedish and
the English and
Swedish versions, together with the Certificate Identifying the
Exhibits to Mr Beacham’s affidavit, the Master’s Order
and a
covering letter from the plaintiff’s solicitors, were sent to a process
server in Sweden who deposed in an affidavit
made on 13 July 2007 that they were
all handed to a female employee at the headquarters of the defendant in
Stockholm, Sweden. There
was no issue in the proceedings as to whether this
mode of service complied with any applicable Convention.
29. As noted above
(at [15] and [16]), on 16 August 2007 a conditional Notice of Intention to
Respond was filed by the defendant and
on 13 September 2007, the Application in
Proceedings with which I am now concerned was filed.
The Challenge to the
Proceedings
30. In helpful, extensive submissions, the Defendant’s
Submissions, dated 12 November 2007, filed in support of the orders sought
in
the Application in Proceedings, the defendant made the following claims about
the proceedings, namely that:
(a) the defendant was not validly served with
the plaintiff’s Originating Application;
(b) the order granting leave
to serve the Originating Application should be set aside; and
(c) the
proceedings should be permanently stayed in favour of arbitration in Sweden in
accordance with cl 12.8 of the Agreement.
31. The plaintiff challenged each
of these claims.
32. I shall deal with each in turn.
Valid
Service
33. The initial thrust of the defendant’s challenge to the
service of the Originating Application, set out in the Defendant’s
Submissions, was based on the failure of the plaintiff to serve a copy of the
affidavit of Mr Hynes as required by r 6507 of the
Rules.
34. Subsequently,
the defendant filed a document entitled Defendant’s Supplementary
Submissions, dated 27 November 2007, in
which it noted the discrepancy
between the dates of the Originating Application and of the document that the
Master’s Order
gave leave to serve and submitted that no service had taken
place at all, for no Originating Application dated 2 March 2007 had been
delivered to the Head Office of the defendant at all.
35. It is clear that
the affidavit of Mr Hynes was not served in Sweden. An additional affidavit of
service disclosed that it was
served on the Canberra solicitors of the defendant
on 26 September 2007.
36. The plaintiff had sought leave to serve the
Originating Application outside Australia under r 6505 of the Rules, which
provides:
(a) an originating process if service outside Australia is not allowed under rule 6501 (Service Outside Australia – service of originating process without leave); or
(b) a counterclaim or third-party notice if service outside Australia is not allowed under rule 6502 (Service outside Australia – counterclaim or third-party notice); or
(c) a document in a proceeding other than an originating process, counterclaim or third-party notice.
(2) An application for leave under this rule must be supported by affidavit or other evidence –
(a) for an originating process mentioned in subrule (1)(a) – establishing the plaintiff’s belief that the plaintiff has a good cause of action; and
(b) showing in what place or country the person on whom the document is to be served is, or probably may be found; and
(c) stating the grounds on which the application is made.
37. Rule 6501 sets out the circumstances where an originating process may be
served outside Australia without leave and enumerates a large number
of
circumstances where there is what might be regarded as traditional connections
with this Territory such as ordinarily to found
this court’s
jurisdiction.
38. It is conceivable that some or all of the unconscionable
conduct the subject of the claims made by the plaintiff occurred in this
Territory such as to bring the proceedings within r 6501, but neither party
submitted that this was so, and I will proceed on the
basis that r 6505
applies.
39. In that event, r 6507 then provides:
(2) If a document is served outside Australia with the court’s leave, a copy of each of the following must be served with the document:
(a) a sealed copy of the order giving leave;
(b) each affidavit filed in the court in support of the application for the leave;
(c) an exhibit mentioned in the affidavit.
40. The Master’s Order of 10 April 2007 dispensed with the requirement in
r 6507 (2)(c).
41. It was common ground that the affidavit of Mr Hynes was
not served with the Originating Application as required by this rule.
42. It
seems to me also that the Application in Proceedings and the order should have
noted Mr Beacham’s affidavit as supporting
the Application since it
set out the details of the claim. It was clearly necessary for the Master to
have regard to it for an understanding
of the nature of the claim. Indeed, the
order itself referred to it as a “supporting affidavit”, though, of
course,
it was a supporting affidavit to the Originating Application.
43. To
obtain leave to serve out of the jurisdiction requires the applicant to show a
good arguable case. As Debelle J said of a
relevantly identical rule in the
South Australian Supreme Court Rules 1987 (SA) in K & S Corporation Ltd and
Anor v Number 1
Betting Shop Ltd & Ors [2005] SASC 228 (K & S
Corporation) (at [92]):
Considerations of comity and restraint require that a plaintiff seeking leave to serve out of the jurisdiction should satisfy the Court that he has a good arguable case. This is not to require the Court to satisfy itself that the plaintiff will succeed on the merits. Instead, the Court will examine whether the plaintiff has a probable cause of action: Société Général de Paris v Dreyfus Brothers (1887) 37 Ch D 215 per Lindley LJ at 225. The same proposition was expressed in these terms in Metall Und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at 434:
While the court cannot at this stage determine whether the plaintiff, if given leave, will succeed, it must be satisfied that the plaintiff has a good chance of doing so.
44. See also The Duke Group Ltd (In Liq) v Alamain Investments Ltd (In Liq) and
Ors [2005] SASC 411 (at [8]).
45. In K & S Corporation, Debelle J held,
over the defendant’s objection, that an affidavit was not necessary for
the grant
of leave and that a properly drawn statement of claim could suffice
(at [45]):
When seeking leave to serve out of the jurisdiction, a plaintiff must demonstrate that he has a good arguable case and that there is a real and substantial connection between this Court and the defendant or the subject matter of the litigation. The reasons for that conclusion will be given later in this judgment. Where a statement of claim has been properly drawn, it will, as a general rule, be possible to decide after an examination of the terms of the statement of claim whether those two tests have been satisfied. As the majority of the High Court said in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [52], in a context only slightly different,
Often enough, the statement of claim will reveal all that is necessary to know whether the plaintiff’s claim is of the requisite kind.
46. In those circumstances, the affidavit of Mr Beacham was critical. It stood
effectively as the Statement of Claim. While the
affidavit of Mr Hynes
dealt with the formal matters, it could not deal with the substantive claim in
the way that Mr Beacham, a participant
in the events, could do so. Mr
Beacham’s affidavit, of course, was what was served and with a Swedish
translation as well.
47. It seems to me that the defects in the order and the
failure to serve the affidavit of Mr Hynes are not fatal.
48. As to the
failure to serve the affidavit of Mr Hynes, it is clear to me that failure to
comply with r 6507(2) does not render
service invalid. That is not the terms of
the rule. It would have been easy enough so to provide, as in s 16 of the
Service and Execution of Process Act 1992 (Cth). The rule itself refers to
service of the Originating Application clearly implying that service of that
document is an independent
step to the service of the other documents mentioned
in r 6507.
49. In any event, the purpose of the rule is to ensure that the
person served is given full information about the proceedings. The
affidavit of
Mr Beacham, which was served, with a translation, was, in that context, perhaps
more important then that of Mr Hynes
for it gave a detailed account of the
plaintiff’s claims and how they were said to arise. While the affidavit
of Mr Hynes
was not irrelevant, it perhaps provided less information that a
foreign defendant would need to know.
50. Certainly, a foreign defendant
which wished to challenge the order for service, such as under r 40(1)(c), would
be helped by some
of the evidence in the affidavit of Mr Hynes.
Nevertheless, it was ultimately provided. The real substance, however, that the
foreign
defendant would need to address was in Mr Beacham’s
affidavit, which was served.
51. It is not true that, if failure to serve
documents, such as the affidavit of Mr Hynes, does not render service of
the originating
process invalid, there is no sanction for breach. The court
could do a number of things: require the plaintiff to serve the omitted
documents at its own expense, adjourn proceedings until served and order costs
of the adjournment and so on.
52. I am satisfied that the failure to serve
the affidavit of Mr Hynes with service of the other documents, including the
Originating
Application, has not rendered that service invalid or
ineffective.
53. The other error is somewhat more problematic. As McPherson
J said in Australian Commercial Research and Development Ltd v ANZ
McCaughan
Merchant Bank Ltd [1990] 1 Qd R 101 (at 107):
It is certainly true that at one time strict compliance with the requirements for issuing or serving a writ of summons or other process out of the jurisdiction was insisted upon, and that virtually any departure from them tended to be regarded as fatal. Several of the authorities are referred to in the learned judgment of Master Lee in Hunter v Singh [1986] 1 Qd R 106, at 120-125. In that case the Master held that defects in a notice in lieu of writ served in Fiji rendered it ineffective for the purpose of service there and that the proceedings could not be validated under the provisions of O 93 r 17 of the Rules.
54. As Collins J said in BAS Capital Funding Corporation and Ors v Medfinco Ltd & Ors [2004] 1 Lloyd’s Rep 652 (at [216]:
Proper service is particularly important in international cases, where the basis of jurisdiction is service.
55. McPherson J, however, considered that O 93 r 17 had a wider operation and
permitted the plaintiff to rely on the delivery of
a Writ of Summons as
effective service despite the defect that it had been served without leave and
that the endorsement was not
in such a form as to show that the subject matter
of the action came within the rules permitting service out of the jurisdiction
and did not identify each claim in respect of which cross-vesting laws were
involved.
56. It is now clear that failure to obtain leave is an irregularity
which can be waived by a party or the court: Leal v Dunlop Bio-processes
International Ltd [1984] 1 WLR 874.
57. The judicial trend of not visiting
with the sanction of invalidity failures strictly to comply with the provisions
about service
out of the jurisdiction has continued.
58. In Richard Crookes
Constructions (Qld) Pty Ltd v Wendell [1990] 1 Qd R 392, the Queensland Rules
provided that, for service out of the jurisdiction, only a notice of writ should
be served and the writ itself
should not be served. It was submitted that, in
that case, where both the notice and writ were served contrary to the rules, the
service was a nullity and an abuse of process. Cooper J, however, held (at 398)
that service of the writ did not taint the service
of the notice, which his
Honour held to be effectively served.
59. The Court of Appeal of England and
Wales had to consider validity of service in Golden Ocean Assurance Ltd &
World Mariner
Shipping v Martin [1990] 2 Lloyd’s Rep 215 (the Golden
Mariner). In that case, a number of underwriters were sued in the English
Courts, some of whom were out of the jurisdiction. Writs were served on six
such defendants, but the writ served on each was for
a different defendant and
not addressed to the defendant on which the writ was served. The writs were,
however, impeccable in form,
content and every other respect. The court at
first instance held that this amounted to no service at all, but on appeal, the
Court
of Appeal held that the service was effective, but irregular and capable
of cure. As Lloyd LJ said (at 219) “[t]his was grossly
defective. But
service, or purported service, it remained”.
60. In addition, one
defendant was served only with a form of acknowledgment of service of the writ,
but not the writ itself. The
Court of Appeal, by majority, held also that this
was irregular service, but service, and capable of cure.
61. More recently,
in Phillips and Anor v Symes & Ors (No 3) [2008] EWCA Civ 311; [2008] 1 WLR 180 (often cited as
Phillips v Nussberger), the House of Lords had to consider whether service out
of England of certain documents was
valid. The originating process itself had
been removed from the bundle of documents for service, though a German
translation of
it together with particulars of the claim had been properly
delivered to the defendant with the other required documents. Lord Brown
of Eaton–under-Heywood (with whom Lord Bingham of Cornhill and Lord Rodger
of Earlsberry agreed) held that the court could
dispense with service under r
6.9 of Civil Procedure Rules (UK) and continued (at 189-90):
There can be no question here but that the second and third defendants were served with ‘an equivalent document’: they had not only the German translation of the omitted claim form but the detailed particulars of claim (in both English and German) as well.
62. The House of Lords approved what the Court of Appeal had said and done in
The Golden Mariner and applied that approach to hold
that service was
effective and that the court was not merely retrospectively validating what was
invalid.
63. While this has many differences from the present case, it does
appear that a court should not be too hasty to find service invalid.
64. In
Olafsson v Gissurarson (No 2) [2008] EWCA Civ 152; [2008] 1 WLR 2016, the Court of Appeal was
required to consider the situation where an Icelandic businessman had issued
proceedings in England against
a defendant domiciled in Iceland in respect of an
alleged libel published in England. The relevant documents were delivered to
the
defendant who read, understood and retained them, but service did not comply
with Icelandic law.
65. The Court of Appeal dismissed the appeal against an
order dispensing with service, Sir Anthony Clarke MR said (at 2028:
[32]):
In my judgment, on the particular facts of this case, where the claim form was issued in time and delivered to the defendant within the period for service by a method of service which the claimant and his solicitors could reasonably have thought was a reasonable method of service, and where the defendant knew precisely what the claim was from the claim form, it would be unjust and contrary to the principle of the overriding objective that cases should be determined justly to refuse the relief.
66. It seems to me on the basis of these authorities that the service here was effective but irregular. Section 68(1) of the Court Procedures Act 2004 (ACT):
(2) The court may make an order declaring that any proceeding is valid despite any formal defect or any irregularity.
67. Ultimately, the defendant did not seek a declaration that the service was
void but that the service should be set aside because
of the accumulated errors
and irregularities. The defendant expressly eschewed any claim that it was
prejudiced. It did rely, however,
on the need to treat foreign entities, not
prima facie subject to the court’s jurisdiction, with considerable respect
and fairness,
certainly valid points to be made. It was submitted that it could
be disrespectful in this sense for a foreign defendant to be required
to come to
the jurisdiction, no doubt at expense, and then have to prove
prejudice.
68. Section 68(1), however, denies to irregular service invalidity
unless I am of the opinion that substantial injustice has been caused or that
the
injustice cannot be remedied by an order of the court. In my view, despite
the cogent arguments of the defendant, there is no injustice
here and none was
identified by the defendant. In coming to this view, I rely on the following
matters:
(a) the parties had corresponded about their issues in dispute and
the defendant knew that proceedings were in contemplation;
(b) the
defendant, through its counsel, did not identify the incorrect date of the
Originating Application in its Outline of Submissions
and it was not until
supplementary submissions were filed about a fortnight later that the matter was
raised, strongly suggesting
that there had been no misleading of the
defendant;
(c) the defendant seemed well able to respond effectively to the
proceedings;
(d) the defect was not egregious, though it was a serious one,
albeit, an error likely to be explained as above;
(e) the defendant had come
to Australia to conduct business and had even apparently established a company
here for that purpose;
(f) the plaintiff, though contributing, through its
carelessness, to the error, had not behaved in a way that disentitled it to the
relief provided by the section; and
(g) no prejudice had been asserted or
shown that the defendant suffered.
69. I reject this ground of
challenge.
Setting aside the order for service
70. The defendant’s
second challenge was to the Master’s order itself, which it was said
should be set aside on two grounds:
(a) the plaintiff’s affidavit in
support of the application for that order did not state the grounds on which
that order was
sought, as required by the Rules;
(b) the order granting
leave should in any event not have been made having regard to the circumstances
of these claims.
71. The court is given power under r 40(1)(c) of the Rules
to set aside an order for service of an originating process. The Rules
do not
set out any criteria or circumstances under which this power should or should
not be exercised.
72. In addition, a person affected by an order obtained ex
parte without notice always has a right to approach the court and have
the
application reheard: Savcor Pty Ltd v Catholic Protection International
APS [2005] VSCA 213; (2005) 12 VR 639 (at 646; [20]) per Gillard AJA (with whom Ormiston
and Buchanan JJA agreed).
73. The defendant first says that the affidavit of
Mr Hynes was not sufficient to justify the order for leave, in that it did not
set out the grounds on which the order was sought. This is required under r
6505(2)(c) of the Rules set out above (at [36]).
74. Mr Hynes deposed
relevantly in his affidavit:
75. It, thus, complied with the requirements of r 6505(2)(a) and (b) of the
Rules.
76. In my view, the Master must have had regard to the affidavit of
Mr Beacham in coming to the view that there were reasonable grounds
for
making the order in compliance with r 6505(2)(a) of the Rules. That affidavit
was expressly referred to in paragraphs 3 and
5 of the affidavit of Mr Hynes.
Insofar as it was referred to in paragraph 5 of that affidavit, it could almost
be said to be incorporated
by reference. Certainly, it would have been
inevitable that the Master would have had regard to it in the same way as a
statement
of claim would be considered. See Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
(at 574; [52]). I am prepared so to find.
77. In my view, the grounds
referred to in r 6505(2)(c) of the Rules are intended at least to encompass the
circumstances and basis
for the claim made by the plaintiff against the
defendant. It would also include the circumstances and basis for showing that
there
was such a connection with the jurisdiction of the court to satisfy the
court that the order should be made.
78. I accept that when the
plaintiff’s lawyers appeared before the Master, they should have asked the
Master to read the affidavit
of Mr Beacham (and probably did so) and that
this should have been disclosed on the order. This is an omission that is of
concern
but I am not prepared to hold that it discloses that a proper
consideration was not given to the application, particularly in the
light of the
very clear reference in paragraph 5 of the affidavit of Mr Hynes to that of Mr
Beacham.
79. The defendant, nevertheless, claimed that there was not
sufficient basis for the order to have been made and it should be set
aside for
that reason.
80. The defendant pointed out that, although the grounds on
which an application may be granted are not specified in the Rules, the
court’s discretion must be limited by some appropriate principles.
Reference was made to the power of the court to grant such
leave and thereby, on
service, assume jurisdiction, in the commonly used term of “an exorbitant
jurisdiction”. As Lord
Diplock (with whom Lord Roskill, Lord Brandon of
Oakbrook and Lord Brightman agreed) said in the House of Lords in Amin Rasheed
Shipping
Corporation v Kuwait Insurance Co [1984] 1 AC 50 (at 65-6):
My Lords, the jurisdiction exercised by an English court over a foreign corporation which has no place of business in this country, as a result of granting leave under R.S.C., Ord 11, r.1(1)(f) for service out of the jurisdiction of a writ on that corporation, is an exorbitant jurisdiction, i.e., it is one which, under general English conflict rules, an English court would not recognise as possessed by any foreign court in the absence of some treaty providing for such recognition. Comity thus dictates that the judicial discretion to grant leave under this paragraph of R.S.C., Ord. 11. R.1(1) should be exercised with circumspection in cases where there exists an alternative forum, viz. the courts of the foreign country where the proposed defendant does carry on business, and whose jurisdiction would be recognised under English conflict rules.
81. Nevertheless, since that approach was enunciated, the courts have recognised that changes in society have called for a re-assessment of the precise approach. Thus, Gaudron, McHugh, Gummow and Hayne JJ noted in Agar v Hyde (at 570-1):
Considerations of comity, and consequent restraint, have informed many of the reported decisions about service out of the jurisdiction. It is, however, important to notice that rules of court, or local statutes, providing for service outside the jurisdiction are now commonplace – at least in jurisdictions whose legal systems have been formed or influenced by common law traditions. Further, as the Court of Appeal rightly noted in its reasons in these matters, contemporary developments in communications and transport make the degree of ‘inconvenience and annoyance’ to which a foreign defendant would be put, if brought into the courts of this jurisdiction, ‘of a qualitatively different order to that which existed in 1885’
The considerations of comity and restraint, to which reference has so often been made in cases concerning service out of the jurisdiction, will often be of greatest relevance in considering questions of forum non conveniens. The starting point for the present inquiry, however, must be the terms of the Rules, not any general considerations of the kind just mentioned.
(Footnotes omitted)
82. It is, then, in this context that the application for leave is to be
made.
83. Rule 6505 of the Rules has no counterpart in many jurisdictions.
South Australia, New Zealand and some Canadian provinces are
exceptions. An
analysis of the cases was undertaken by Debelle J in K & S Corporation and
Anor v Number 1 Betting Shop Ltd &
Ors. In The Duke Group Ltd (In Liq) v
Alamain Investments Ltd (In Liq) & Ors [2005] SASC 411, White J summarised
those principles that Debelle J drew from his analysis as follows (at
[8]):
(Footnotes omitted).
84. In Cockburn v Kinzie Industries Inc (1988) 1 PRNZ 243, Hardie Boys J commented of the equivalent New Zealand High Court Rules (at 247) as follows:
... I consider that r220 must be construed in a way that gives it practical effect. I do not think that it was intended to refer only to proceedings in which the Court already has jurisdiction. If it were, there would be little point to it. I think it clear that it was intended to enable the Court to assume jurisdiction in every kind of case which it is otherwise competent to deal with. This intention has been obscured by the use of the word ‘jurisdiction’ in the clause ‘which the Court has jurisdiction to hear and determine’.
85. It was said in Fenbury Ltd (In Liq) and Ors v The Hong Kong and Shanghai
Banking Corporation Ltd & Anor [1996] SASC 5957 that those remarks were
approved by the Privy Council in Kuwait Asia Bank EC v National Mutual Life
Nominees Ltd [1991] 1 AC 187 (at 198), but it appears that the comment
there recorded was simply a submission of counsel for the respondents and not a
statement
of approval by the Board, though (at 217) the Board did adopt
what Hardie Boys J had to say about forum non-conveniens in that case,
implying
some approval of the approach in the case.
86. Service was permitted in much
the same way in British Columbia under r 13(3) of the Supreme Court Rules
(BC Reg 221/90), since
repealed, and rr 4-5(3) of the Supreme Court Civil Rules
(BC Reg 168/2009).
87. In Turbide v Orrell (BCSC, Master Horn, C973476, 6
June 1998, unreported) Master Horn said (at [6]):
[6] I refer, for convenience sake, to a decision of my own in Exta-Sea Charters Ltd v Forma Log Ltd (1991) 48 CPC (2d) 36 (BCSC) in which case I held that to invoke the discretion of the court under Rule 13(3) to order service upon a defendant out of the Province, there must be a real and substantial connection between:
(a) the defendant and British Columbia, or
(b) the cause of action and British Columbia; or
(c) the thing being litigated over and British Columbia; or
(d) a person and British Columbia where the status of that person is the issue.
I held that in considering whether to make an order under Rule 13(3) considerations of forum conveniens play no part.
88. See also: Cook and Ors v Parcel, Mauro, Hulten & Spaanstra, P.C. (1997)
143 DLR (4th) 213.
89. Of course, as noted in K & S Corporation
(see [43] above), the court does not try the action to ascertain if it will
succeed
on the merits; it is only necessary to show that there is a probable
cause of action in which the plaintiff has a good chance of
doing so, without
assessing the strength of the plaintiff’s claim.
90. In this case,
using the list of principles enunciated by White J (see [83] above), I assess
the case as follows.
1. There does seem to me to be a good arguable case. It
seems that the plaintiff could fairly claim it was substantially responsible
for
the effort needed to obtain the supply contract from the Department, that it
brought Compucat into the arrangements and that
the defendant has attempted to
subvert that arrangement in a way that could be described as unconscionable.
Whether this will be
proved is another matter. I consider there is a good
arguable case.
It is true that this is based on the material in the affidavit
of Mr Beacham and the exhibits to it, but, as I have already noted,
I consider
that that affidavit was properly before the Master when the order for leave to
serve the defendant was made.
2. It seems to me also that there is a real and
substantial connection with the Territory. The supply contract to the
Department
is one that was negotiated in the Territory: the supply will, no
doubt, be largely provided in the Territory.
3. The amount claimed is clearly
substantial, in the hundreds of thousands of dollars.
4. Comity and restraint
has, of course, nothing to do with political considerations. While there may be
special circumstances where
political considerations may be taken into account
in deciding whether an action should be permitted to proceed, it would not
ordinarily
be relevant where the legislature has permitted the court to accept
jurisdiction. See Humane Society International Inc v Kyodo Senpaku
Kaisha
Ltd [2006] FCAFC 116; (2006) 154 FCR 425 (at 430; [10] to [13]) per Black CJ and Finkelstein J
and (at 434-5; [38]) per Moore J (who dissented from the final order on other
grounds). I note that the defendant has now chosen to have a presence in
Australia, to the extent that it has registered a subsidiary
here which acts as
a very active agent for it and which has been actively involved in the matters
giving rise to the cause of action
here. Given that all the relevant activities
seem to have taken place in Australia and that there is not a strong connection
with
Sweden, other than as the location of the defendant and, I can only
speculate, the development and creation of the software, I do
not see that the
exercise of jurisdiction by this Court is an overreach or is likely to cause
offence to Sweden.
5. As noted above, in considering these matters, I have
given consideration to the affidavits of both Mr Beacham (and the exhibits
to
it) and Mr Hynes.
91. I decline to set aside the order granting leave for
service of the Originating Application.
Stay of proceedings
92. Much of
the argument in this case was directed towards the question raised in the
defendant’s Application in Proceedings,
namely whether there should be a
stay of proceedings because of cl 12.8 (see [4] above).
93. The defendant put
this claim on four bases:
(a) section 7 of the International Arbitration Act
1974 (Cth);
(b) Article 8 of the UNCITRAL Model Law set out in Schedule 2 of
the IA Act;
(c) section 53 of the Commercial Arbitration Act 1986 (ACT);
and
(d) in the exercise of the Court’s inherent power and jurisdiction
to stay proceedings before it, including in conjunction with
the exercise of the
above powers.
94. I shall deal with each in turn.
(a) International
Arbitration Act 1974 (Cth) (IA Act)
95. The IA Act is concerned with the
recognition and enforcement of foreign arbitral awards and the conduct of
international arbitrators.
It also gives force of law to the UNCITRAL Model Law
on International Commercial Arbitration (Model Law) adopted by the United
Nations Commission on International Trade Law on 21 June 1985, the English text
of which is set out in Sch 2 of the Act. The Model
Law will be considered
below.
96. As Allsop J said in Walter Rau Neusser Oel und Fett AG v Cross
Pacific Trading Ltd [2005] FCA 1102 (Walter Rau Case) (at [30]):
The IA Act was Australia’s domestic legislative response to its international obligations under the United Nations Conference on International Commercial Arbitration and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 (the ‘New York Convention’), which appears at Schedule 1 to the IA Act.
97. Part II of the IA Act relates to Enforcement of Foreign Awards and includes s 7 which provides for the enforcement of foreign arbitration agreements. The section, relevantly, provides:
(a) the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;
...
(d) a party to an arbitration agreement is a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country;
this section applies to the agreement.
(2) Subject to this Part, where:
(a) proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and
(b) the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;
on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.
...
(5) A court shall not make an order under subsection (2) if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.
98. This is in similar terms to Article II of the New York Convention.
99. It
is to be noted that, where s 7 of the IA Act applies, then a party may apply for
a stay of proceedings and the court is obliged
to grant such a stay and refer
the parties to arbitration. Where the section applies and the conditions are
met, the court has no
discretion to refuse a stay. See Flakt Australia Ltd
v Wilkens & Davies Construction Co Ltd [1979] 2 NSWLR 243 (at 245,
250); Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169
CLR 332 (at 350).
100. For the section to apply, so far as these proceedings
are concerned, there are four preconditions:
(a) there is an
‘arbitration agreement’ within the meaning of s 3(1) of the IA
Act between the parties to the court proceedings;
(b) the agreement falls
within one or more of pars (a) to (d) of s 7(1) of the IA Act, with the
result that s 7 of the IA Act applies
to that agreement (s 7(1) of the IA
Act);
(c) the proceedings have been instituted in a court by a party to the
arbitration agreement to which s 7 applies against another party
to that
agreement (s 7(2)(a) of the IA Act); and
(d) those proceedings involve
the determination of a matter that, under the arbitration agreement, is capable
of settlement by arbitration
(s 7(2)(b) of the IA Act).
101. As to (a),
s 3(1) of the IA Act defines ‘arbitration agreement’ as
follows:
“arbitration agreement” means an agreement in writing of the kind referred to in sub-article 1 of Article II of the Convention;
102. The same sub-section defines “Convention” as follows:
“Convention” means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting, a copy of the English text of which is set out in Schedule 1.
103. Sub-article 1 of Article II of that Convention (in Schedule 1 to the IA Act) is in the following terms:
Article II
104. It seems to me that cl 12.8 is an arbitration agreement. Though the
defendant did not concede this, there was no real dispute
about it. It refers
in terms to the settlement of “[a]ny dispute, controversy or claim ...
finally ... by arbitration”.
It refers to the defined legal relationship,
namely the Agreement, which creates a legal relationship, defined by its terms,
and
the dispute, controversy or claim required by the Agreement to arise out of
or in connection with the Agreement seems relevantly
to cover the requirement
that it be “in respect of” the legal relationship. Clause 12.8 is
in relevantly similar terms
to the clause considered in Hi-Fert Pty Ltd and Anor
v Kiukiang Maritime Carriers Inc (No 5) and Anor (1998) 90 FCR 1, where
that clause was held to be an arbitration agreement.
105. The Agreement will
clearly operate to refer those matters capable of settlement by arbitration to
arbitration and so all these
conditions are fulfilled. I hold the clause to be
an arbitration agreement.
106. As to (b), s 7(1)(a) and (d) of the IA Act are
both relevant. Evidence was adduced from which I am satisfied
that:
(a) Sweden is a Convention country and cl 12.8 provides for arbitration
under the Rules of the Arbitration Institute of the Stockholm
Chamber of
Commerce; and
(b) The defendant is incorporated in and carries on business
in Sweden.
107. The place of incorporation of a company has been said to be
taken to be the place of residence of the company: Elders CED Ltd
v Dravo
Corporation (1984) 59 ALR 206 (at 208).
108. As a result, the conditions in s
7(1) (a) and (d) are satisfied, save for the question of whether the arbitration
is governed
by the law of Sweden. That is something on which there was no
direct evidence. It is not expressly provided for in cl 12.8. That
clause
does, however, provide that the arbitration shall take place in Stockholm,
Sweden.
109. In American Diagnostica Inc v Gradipore Ltd (1998) 44 NSWLR 312,
Giles CJ Comm D said (at 324):
The seat of the arbitration is not necessarily where it is held, although where the parties have failed to choose the law governing the conduct of the arbitration it will prima facie be the law of the country in which the arbitration is held because that is the country most closely connected with the proceedings: see James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 607, 609, 616; Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd’s Rep 446 at 453-454; Bank Mellat v Helliniki Techniki SA [1984] QB 291 at 301.
110. This, however, does not appear to be sufficient to show what is required by
s 7(1)(a), namely that “the procedure in relation
to arbitration ... is
governed ... by the law of a Convention country”.
111. The Rules by
which the arbitration procedure is required to be governed under the Agreement
are promulgated by the Arbitration
Institute of the Stockholm Chamber of
Commerce. There is no material which satisfies me that these Rules form part of
the law of
Sweden. See Timic v Hammock [2001] FCA 74 (at [15]).
112. I
am satisfied that the matters in s 7(1)(d) of the IA Act have been made out but
for this latter reason am not satisfied of
the matters set out in s 7(1)(a),
that is that the procedure is governed by the law of Sweden.
113. As to (c),
the parties to the arbitration agreement are the parties to these proceedings
and so the provisions of s 7(2)(a) of
the IA Act are satisfied.
114. Finally,
as to (d), the question of whether the proceedings are capable of being settled
by arbitration is somewhat more complicated.
In approaching this issue, I have
been much assisted by the detailed, comprehensive and illuminating submissions
of Mr G J Nell
SC, counsel for the defendant. In them, he
submitted that this requires identification of the matter (or matters) involved
in the
court proceedings (see s 7(2)(b) of the IA Act).
115. The
term “matter” was considered by McLelland J in Flakt Australia Ltd v
Wilkins & Davies Construction Co Ltd
(at 250), namely:
In my opinion, the word ‘matter’ in s 7(2)(b) denotes any claim for relief of a kind proper for determination in a court. It does not include every issue which would, or might, arise for decision in the course of the determination of such a claim.
Deane and Gaudron JJ, in Tanning Research Laboratories Inc v O’Brien (at 351), quoted this passage with approval and, went on to say (at 351):
In the context of s 7(2), the expression ‘matter ... capable of settlement by arbitration’ may, but does not necessarily, mean the whole matter in controversy in the court proceedings. So too, it may, but does not necessarily encompass all the claims within the scope of the controversy in the court proceedings. Even so, the expression ‘matter ... capable of settlement by arbitration’ indicates something more than a mere issue which might fall for decision in the court proceedings or might fall for decision in arbitral proceedings if they were instituted. See Flakt [[1979] 2 N.S.W.L.R., at p 250]. It requires that there be some subject matter, some right or liability in controversy which, if not co-extensive with the subject matter in controversy in the court proceedings, is at least susceptible of settlement as a discrete controversy.
See also Elders CED Ltd v Dravo Corporation (at 210).
116. There need, however, be no exact identification between the subject matter of the proceedings and of the arbitration or, indeed, between the actual parties. As Deane and Gaudron JJ put it (at 353):
Section 7(2) of the Act is concerned with ‘proceedings [which] involve the determination of a matter ... capable of settlement by arbitration’. Its operation is thus not confined to proceedings in which the parties seek the same relief as might have been sought in arbitration proceedings. Because s 7(2) has this wider operation, the question whether a person is claiming through or under a party to the arbitration agreement is necessarily to be answered by reference to the subject matter in controversy rather than the formal nature of the proceedings or the precise legal character of the person initiating or defending the proceedings.
117. The matter, the subject of the proceedings, is to be ascertained from the
pleadings and from the underlying subject matter upon
which the pleadings
(including, where relevant, the defence) are based: Recyclers of Australia Pty
Ltd and Anor v Hettinga Equipment
Inc and Anor [2000] FCA 547; (2000) 100 FCR 420 (at 426,
[18]). Here, it is to be ascertained from the Originating Application and the
affidavit of Mr Beacham.
118. The subject matter of the proceedings may be
adequately summarised as unconscionable conduct claimed to have been committed,
to the detriment of the plaintiff, by the defendant in its dealings with the
Department and with Compucat in connection with licensing
of the
defendant’s software and the provision of related services, as well as in
refusing to supply licences and services to
the plaintiff under the Agreement,
such claims being made both at common law and under the Trade Practices Act
1974 (Cth), ss 51AA and 51AC, as well as a declaration that the defendant has
been unjustly enriched at the expense of the plaintiff,
entitling the plaintiff
to damages or equitable compensation.
119. The next issue, then is whether
that matter is capable of settlement by arbitration under the terms of the
arbitration agreement:
Tanning Research Laboratories Inc v O’Brien
(at 350); La Donna Pty Ltd v Wolford AG [2005] VSC 359; (2005) 194 FLR 26 (at 29; [16]);
Recyclers of Australia Pty Ltd and Anor v Hettings Equipment Inc and Anor
(at 426; [21]).
120. This involves two steps, namely whether the matter
as so identified falls within the scope of the arbitration agreement and,
secondly, whether it is a claim that is able to be disposed of by
arbitration.
121. The first step involves the construction of the Agreement,
governed by the ordinary rules of contractual interpretation. See
the Walter
Rau Case (at [41]) where Allsop J referred to the authorities requiring
“a liberal approach” to the meaning
of arbitration clauses. His
Honour further explained this in Comandate Marine Corp v Pan Australia Shipping
Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 (Comandate) (in a passage with which Finn and
Finkelstein JJ agreed), where his Honour said (at 87; [165]):
This liberal approach is underpinned by the sensible commercial presumption that the parties did not intend the inconvenience of having possible disputes from their transaction being heard in two places. This may be seen to be especially so in circumstances where disputes can be given different labels, or placed into different juridical categories, possibly by reference to the approaches of different legal systems. The benevolent and encouraging approach to consensual alternative non-curial dispute resolution assists in the conclusion that words capable of broad and flexible meaning will be given liberal construction and content. This approach conforms with a common-sense approach to commercial agreements, in particular when the parties are operating in a truly international market and come from different countries and legal systems and it provides appropriate respect for party autonomy.
122. His Honour referred to some thirteen authorities from which, among many
others, it was said this approach can be “discerned
in, and distilled
from”.
123. In particular, it requires the court to determine the
meaning of the clause “by what a reasonable person in the position
of [the
parties] would have understood [it] to mean”: Pacific Carriers Ltd v BNP
Paribas [2004] HCA 35; (2004) 218 CLR 451 (at 462). The court there cited with approval what
Lord Wilberforce said in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989
(at 995-6), namely:
In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
124. As Mansfield J said in Seeley International Pty Ltd v Electra Air Conditioning BV [2008] FCA 29; (2008) 246 ALR 589 (at 595; [24]):
Where there is an agreement to arbitrate, there are sound commonsense and commercial reasons why the scope of the disputes agreed to be arbitrated should be robustly assessed.
125. Nevertheless, as Hargrave J said (at [18] to [20]) in TCL Airconditioning (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2009] VSC 553, after a careful analysis of the authorities:
In Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd, Allsop J stated:
There is no legal rule that a dispute necessarily falls within an arbitration clause unless the court can be persuaded with ‘positive assurance’ that the clause is not susceptible of any meaning that would include the dispute within the clause ... There is no legal presumption at work.
Similarly, in ACD Tridon v Tridon Australia, Austin J stated that there was no presumption in favour of arbitrability.
In my opinion, the statements by Allsop J and Austin J that there is no legal presumption at work are correct, and have not been altered by anything said by Allsop J in Comandate Marine or by Lord Hoffman in Premium Nafta Products.
(Footnotes omitted).
126. I have much of the relevant material about the circumstances of the
Agreement in the affidavit of Mr Beacham.
127. Neither party, however,
submitted that there were particular principles or issues in Swedish law that
would require me to construe
the Agreement and the arbitration clause in it in a
particular way or, more importantly, in a way inconsistent with the approach
outlined above. I shall do so.
128. Broadly, this appears to require me to
facilitate rather than impede the operation of the arbitration clause and the
agreement
of the parties that it represents though without a presumption in
favour of arbitration. I will take a liberal and not narrow approach
to cl
12.8.
129. It is, of course, expressed in wide terms, both as to the subject
matter of the referral (‘any dispute, controversy or
claim”) and as
to the relationship of these to the Agreement (“arising out of or in
connection with”). It is also
wide in its reference to the linked matter,
namely the Agreement but also its breach, termination or invalidity.
130. An
extensive examination of the many cases which use the term “arising out
of” was undertaken by Hirst J in Ethiopian
Oilseeds & Pulses Export
Corp v Rio del Mar Foods Inc [1990] 1 Lloyd’s Rep 86. As summarised by
Gleeson CJ (with whom
Meagher and Sheller JJA agreed) in Francis Travel
Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 (at 165),
his Honour found that this phrase has usually been given a wide meaning. Thus,
as Sellen J said in Government of Gibraltar
v Kenney [1956] 2 QB 410 (at
421-2):
...it is quite clear that “arising out of” is very much wider than “under” the agreement. This clause very widely incorporates a difference or dispute in relation to ‘any thing or matter “arising out of” as well as “under” the agreement and, in my view, everything which is claimed in this arbitration can be said to be a dispute or difference in relation to any thing “arising out of”’ the agreement.
It is true that a quantum meruit is a quasi-contract and arises, in a sense, on an implied contract and not on any express agreement, but, in my view, in the circumstances of this case (although it may not be in all cases) the quantum meruit is an incident which arises out of the contract. It is not a remedy for breach nor does it arise on frustration, but it is an incident, which does arise as a consequence of the contract or “arising out of” it.
131. As Allsop J said in Walter Rau Case (at [53]) these words “encompass
more than merely arising as a contractually classified
complaint...”. His
Honour went on to say (at [56]) that the words “reflect the practical
rather than theoretical, meaning
to be given to the word ‘contract’
out of which the disputes may arise.”
132 So far as cl 12.8 refers also
to “dispute ... in connection with”, I note that Yeldham J said
of such a phrase in
Dowell Australia Ltd v Triden Contractors Pty Ltd [1982]
1 NSWLR 508 (at 515), that the phrase
...should be restricted no further than necessary and should ... exclude only claims entirely unrelated to the commercial transaction covered by the contract.
133. See also Elkateb v Lawindi (1997) 42 NSWLR 396 (at 402).
134. The
phrases “arising out of” and “in connection with” should
not be read down: Incitec Ltd v Alkimos
Shipping Corporation and Anor [2004] FCA 698; (2004)
206 ALR 558 (at 564; [32]).
135. In this case, applying these principles,
the arbitration clause appears wide enough to cover claims for quantum meruit
(Elkateb
v Lawindi (at 402-3); O’Connor v LEAW Pty Ltd (1997) 42 NSWLR
285 (at 303)) and, therefore, for unjust enrichment, since quantum meruit is
based on a restitution claim based on unjust enrichment:
Pavey
& Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 (at 255).
136. It was
also submitted that both phrases were wide enough to encompass the claims made
under the Trade Practices Act. This is an area in which there has been some
controversy.
137. In Allergan Pharmaceuticals Inc and Anor v Bausch &
Lomb Inc and Anor [1985] FCA 369, Beaumont J held (at [34]) that contraventions
of sections of the Act “arise exclusively from the statutory provisions
themselves”
and not from any contractual relationship between the parties.
This approach was followed in Hi-Fert Pty Ltd and Anor v Kiukiang
Maritime
Carriers Inc (No 5) and Anor (at 15-23) where it was held (at 23) that the
relevant agreement, which contained the arbitration
clause, was “no more
than the background against which the conduct occurred”. See also Alstom
Power Ltd v Eraring Energy
[2004] FCA 706 (at [6]). The court further held
that, coupled with a reference to the arbitration under English legislation, a
reference there
to the contract being governed by English law was an indication
that “the parties did not intend that claim arising out of
statute would
be resolved by arbitrators in London” (at 23).
138. That approach,
however, has now been apparently overruled by Comandate where Allsop J (with
whom Finkelstein J and, on this issue,
Finn J agreed) held that neither case
should be followed, thus bringing the Federal Court into line with the NSW
jurisdiction as
expressed in Francis Travel Marketing Pty Ltd v Virgin Atlantic
Airways Ltd. That latter case accepted that claims under the Trade Practices
Act were amenable to arbitration. His Honour did, however, accept in Commandate
(at 93; [186]) that where a claim under the Trade Practices Act involved the
deception of the public (as opposed to a party) questions of whether it arose
out of the contract may arise.
139. That, however, is not the situation
here. In this case, the precise nature of the plaintiff’s case is not
able to be definitely
ascertained in the absence of particulars. Doing the best
I can, however, it seems to me that it covers the following
elements:
(a) unconscionability – dealing directly with Compucat when
it was aware that the tender to the Department had been lodged jointly
by the
plaintiff and Compucat; refusing to pay the commission said to be due under the
Agreement; terminating the Agreement; supplying
software and licences
independently of the plaintiff.
While the first and last of these are not
breaches of the Agreement, they can only be seen as unconscionable in the
context of the
Agreement. For example, without the Agreement, the
plaintiff’s participation in the tender would have been at least much less
valuable and its risk greater. It is only the existence of the Agreement that
gives any colour of unconscionability to the dealings
between the defendant and
Compucat.
(b) Quantum meruit – failing to pay commissions that would
have been due under the Agreement if the ongoing supply had been
affected under
it and which would recompense the plaintiff for the work done in the tender
process;
(c) Unjust enrichment – failing to pay commissions that would
have been due under the Agreement if the ongoing supply had been
effected under
it and which permitted the defendant to keep the full price of the software and
licences, which was available to the
defendant because of the work done by the
plaintiff.
Both of these clearly rely on the Agreement, even though the
claims are for moneys that are not due under the Agreement, but would
have been
if the defendant had neither terminated it nor dealt directly with
Compucat.
(d) Termination of the Agreement – terminating it unfairly or
unreasonably or unconscionably.
Clearly this is arising from the
termination of the Agreement.
140. It seems to me that each of these is a
claim that arises in connection with the Agreement. It is integrally connected
with and
certainly not unrelated to the commercial transaction in the Agreement
(see [132] above).
141. Thus, following the approach taken in Transfield
Philippines Inc & Ors v Pacific Hydro Ltd and Ors [2006] VSC 175 (at [87]),
I conclude that the unconscionable conduct includes conduct that is expressed to
be included in the arbitration clause
and it thus falls within the scope of the
clause.
142. The second element is the question of whether the dispute is of
a type that can properly be the subject of arbitration. The
Full Bench of the
Industrial Relations Commission of New South Wales put it this way in Metrocall
Inc v Electronic Tracking Systems
Pty Ltd (2000) 52 NSWLR 1 (at 21;
[63]):
The final question to be considered, therefore, is whether the subject matter of the proceedings is one that is ‘capable of settlement by arbitration’. As Deane J and Gaudron J observed in Tanning Research Laboratories Inc v O’Brien (at 351):
... The words ‘capable of settlement by arbitration’ indicate that the controversy must be one falling within the scope of the arbitration agreement and, perhaps, one relating to rights which are not required to be determined exclusively by the exercise of judicial power.
That is, although a necessary condition of the conclusion that a matter is ‘capable of settlement by arbitration’ is the finding that the controversy is one within the scope of the arbitration agreement, that finding may not be sufficient for that conclusion. Although the other members of the court did not consider this aspect we do not consider that the conclusion of Deane J and Gaudron J in this respect is inconsistent with the approach of the other members of the court and we therefore consider that we are obliged to apply it. We have already dealt with the first of these issues and now turn to the second issue as to whether it was open to the parties to agree to confer on a private arbitrator the power to resolve proceedings under s 106 of the Industrial Relations Act.
143. In ACD Tridon v Tridon Australia [2002] NSWSC 896, Austin J carefully
examined this issue. He identified two kinds of limitations. The first (at
[185] to [188]) concerned whether
the arbitrator had jurisdiction to decide if
the contract containing the arbitration clause is a valid contract. His
Honour’s
conclusion may need to be revised in the light of decisions such
as Ferris v Plaister (1994) 34 NSWLR 474. See, also, Comandate (at
101-105; [218] to [229]). That question, however, does not arise
here.
144. The second limitation was of the kind referred to by Gaudron and
Deane JJ in Tanning Research Laboratories Inc v O’Brien.
Austin J
explained it in ACD Tridon v Tridon Australia as follows (at [189]):
Second, the types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a winding-up order or a decision that an agreement is exempt from the competition rules of the EEC under Article 85(3) of the Treaty of Rome. [footnotes omitted]
145. Thus, in Metrocall Inc v Electronic Tracking Systems Pty Ltd, the court
there held that a claim under s 106 of the Industrial Relations Act 1996 (NSW)
was not capable of being the subject of an arbitration because the section is
aimed at contracts which are against the public
interest so that, when dealing
with them, the Commission is exercising a function not merely in the manner of
ordinary inter partes
litigation but so as to achieve a public interest in the
achievement of the industrial objectives set out in the Act (at 28;
[28]).
146. Similarly, a winding up by the Court is a matter in which there
is a public interest and requires court involvement: A Best
Floor Sanding Pty
Ltd v Skyer Australia Pty Ltd [1999] VSC 170 (at [18]).
147. Austin J also
indicated that where the judgment will affect rights and interests of third
parties the claim is not appropriate
to be the subject of arbitration and that
is an important consideration which may take the dispute out of the realm of
arbitration.
In this sense, it replicates the comment of Beaumont J in
Allergan Pharmaceuticals Inc and Anor v Bausch & Lomb Inc and Anor
(at
[35]).
148. A further limitation, albeit of a slightly different, but
related, kind is where a person not parties to the arbitration clause
are
necessary parties. As the Western Australian Court of Appeal said in Paharpur
Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110 (at [43]):
On the contrary, where a party to an arbitration agreement makes the same claim against both the other party to the arbitration agreement and a person who is not a party to the arbitration agreement – with the result that, so far as it involves the latter, the dispute cannot be referred to arbitration – it will generally be equally difficult to ascribe to the parties to the arbitration agreement an intention that in such an event the dispute should be fragmented and that the liability of the party to the arbitration agreement and that of the third party respectively should be determined in different forums.
149. The approach to this second limitation was summed up by Allsop J in Comandate (at 98; [200]) as follows:
The types of disputes which national laws may see as not arbitrable and which were the subject of discussion leading up to both the Convention and the model law are disputes such as those concerning intellectual property, anti-trust and competition disputes, securities transactions and insolvency. It is unnecessary to discuss the subject in detail. (See generally A Redfern and M Hunter, Law and Practice of Commercial Arbitration, 4th ed, Thomson/Sweet and Maxwell, London, 2004 at 138 et seq; M Mustill and S Boyd, Commercial Arbitration 2001 Companion, Butterworths, London, at 70-76; D St. J Sutton , J and Gill, Russell on Arbitration , Sweet and Maxwell, London, 2003 at 12-15.) It is sufficient to say three things at this point. First, the common element to the notion of non-arbitrability was that there was a sufficient element of legitimate public interest in these subject matters making the enforceable private resolution of disputes concerning them outside the national court system inappropriate. Secondly, the identification and control of these subjects was the legitimate domain of national legislatures and courts. Thirdly, in none of the travaux préparatoires was there discussion that the notion of a matter not being capable of settlement by arbitration was to be understood by reference to whether an otherwise arbitrable type of dispute or claim will be ventilated fully in the arbitral forum applying the laws chosen by the parties to govern the dispute in the same way and to the same extent as it would be ventilated in a national court applying national laws.
150. None of these matters apply here, however, and do not suggest that the
current claim is one not susceptible of arbitration.
Accordingly, s 7(2) of the
IA Act applies.
151. That, however, is not the end of the matter, for s 7(5),
if applicable, prevents s 7(2) from mandating a stay. That section,
set out
above (at [97]), applies where the arbitration clause or agreement is
“null and void, inoperative or incapable of being
performed”. In my
view, the agreement (clause) here is not null and void (as to the meaning of
which, see Comandate (at 99-101;
[207] to [216]).
152. Whether an
arbitration agreement is inoperative or incapable of being performed does not
seem to have been the subject of a great
deal of judicial scrutiny.
153. A
number of common law doctrines have been held to render an arbitration clause
inoperative. For example, in La Donna Pty Ltd
v Wolford AG, Whelan J held that
the right to apply for a stay under s 7(2) of the IA Act was a private right and
could be waived.
This can be a waiver in a “stronger sense” where a
party has made an unequivocal choice between alternatives so as to
have
abandoned its right to arbitration. Whelan J also referred to what he called
“waiver in the weaker sense” where
there was conduct which may
preclude a successful application based on the exercise of the court’s
discretion.
154. Waiver was also considered in detail by Austin J in ACD
Tridon v Tridon Australia Pty Ltd. That does not apply here.
155. Other
common law doctrines include where the arbitration agreement has ceased to exist
because of its frustration (see Codelfa
Construction Pty Ltd v State Rail
Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337) or its repudiation (see Building
& Engineering Constructions (Aust) Ltd v Property Securities No 1 Pty
Ltd [1960] VicRp 104; [1960] VR 673).
156. As the governing law of the Agreement is the law of
Sweden, I am not sure how the court should deal with those issues. It may
be
that I should follow Bainton J in Shanghai Foreign Trade Corporation v Sigma
Metallurgical Co Pty Ltd and Ors (1996) 133 FLR 417, where his Honour was
considering a contract the proper law of which was, he found, the Peoples
Republic of China, but held (at 427):
I do not know and have not by either party been informed as to the law of the PRC [Peoples Republic of China] relating to the enforceability of such an arbitration agreement. But in my view the question of whether or not this Court should stay these proceedings must be determined by applying the laws in force in this State. The applicants for the stay appear to have been of the same view because their Amended Notice of motion expressly relies upon s 7 of the International Arbitration Act 1974 (Cth) and Article 8 of the UNICITRAL Model Law which has the force of law in Australia pursuant to s 16 of that Act.
157. It would appear that an arbitration agreement could also become inoperative
through operation of statute. For example, it appears
that this occurred
because of the operation of the Insurance Contracts Act 1984 (Cth) s 8
where the statute itself provides for the proper law of the contract regardless
of any express provision to the contrary in the agreement
in Akai Pty Ltd v
People’s Insurance Company Ltd [1996] HCA 39; (1996) 188 CLR 418.
158. In HIH Casualty
& General Insurance Ltd (In Liq) v Wallace [2006] NSWSC 1150; (2006) 68 NSWLR 603, Einstein J
referred (at 619; [40]) to the breadth of the operation of s 7(5) and held that
s 19 of the Insurance Act 1902 (NSW), which provided a statutory option to
arbitrate or litigate, overrode s 7(2) of the IA Act in the sense that it made
the arbitration
agreement inoperative where a party chose to
litigate.
159. The plaintiff submitted that cl 11.7 of the Agreement rendered
the arbitration agreement inoperative in this case. That clause
is in the
following terms:
No action or claim of any type relating to this Agreement may be brought or made by Partner or PMT more than six (6) months after Partner or PMT, as the case may be, first knew or should have known of the basis for the action or claim.
160. The plaintiff submitted that this meant that the arbitration agreement was
inoperative or incapable of being performed. It
certainly bars the commencing
of a claim outside the six month period and, to this extent, renders the
arbitration agreement inoperative
and, arguably, incapable of being
performed.
161. Limitation clauses may, however, bar claims for actions as
well. Such clauses are commonly referred to as “Atlantic Shipping”
clauses; see Atlantic Shipping and Trading Co Ltd v Louis Dreyfus and Co [1922]
2 AC 250. Those clauses, however, bar the claim, not merely the ability to
commence the arbitration. Commonly, they use phrases such as “where
this
provision is not complied with the claim shall be deemed to be waived and
absolutely barred”. This, of course, makes
it clear that the cause of
action itself is barred and undermined. I can see no element of this in cl
11.7.
162. Such limitation clauses are said to be of two types,
“claim-barring clauses” and “remedy-barring clauses”.
The two are defined in footnotes to paragraph 652 in Halsbury’s Laws of
England (Butterworths: London, 1991) 4th ed v 2 as
follows:
163. For a judicial description of this distinction, see Smeaton Hanscomb &
Co Ltd v Sassoon I Setty Son & Co [1953] 2 All ER 1471 (at 1473)
per Devlin J, though his Honour there held that a clause similar to cl 11.7 was
a claim-barring clause.
164. Whilst I am inclined to the view that cl 11.7 is
a remedy-barring clause, it is not necessary for me finally to decide that.
If
I were to be wrong in this, then the defendant would have a good defence to the
claim which it could plead in the proceedings.
Of course, it is not obliged to
do so. I do not consider that affects the question I have to
decide.
165. The defendant made three points in relation to this. In the
first place, he challenged the construction of the clause asking,
rhetorically,
“Would a businessman really agree on the arbitration clause that would
have this effect?”. There are two
answers to this. In the first place,
the cases disclose examples of where this is the precise effect of the clauses
in commercial
contracts which have been entered into by businessmen. In the
second place, there are ways of drafting a clause to give the effect
for which
the defendant contends, if that is really what is contended, and those ways have
not here been used. I should reasonably
defer to the words of the Agreement.
166. In the second place, it was contended that the effect of the clause as
so construed was that by delay, the party who is to bring
the claim can
circumvent the arbitration. That again, is, perhaps an argument to justify not
construing the clause as only a remedy-barring
clause. The party could then
defeat any subsequent proceedings by pleading the bar. Leaving that aside,
either party has the power
at any time to refer a matter to arbitration and the
defendant knew by at least early August 2006 that there was a dispute. Indeed,
the plaintiff’s lawyer threatened proceedings, which could have been a
trigger to refer the dispute to arbitration. Arbitration
is not like
litigation, where a plaintiff must make out a claim; either party can refer a
dispute for settlement. Again, of course,
I note that there are a number of
reported (and, no doubt, more unreported) cases where this is how the clause was
construed.
167. Thirdly, it was submitted that there was still work for the
arbitrator when cl 11.7 was operative, for if a claim was submitted
to the
arbitrator, he or she would still have to decide whether the claim was within
time. It seems to me that this does not make
the arbitration clause operative
or capable of performance. The waiver or abandonment of a claim similarly
leaves the clause with
similar power but prevents the claim being settled by
arbitration. An arbitrator could conceivably be required to decide whether
the
arbitration agreement had been waived or abandoned. The effect of the time bar
here is, in my view, relevantly equivalent to
waiver or abandonment. The
arbitration agreement is inoperative or incapable of performance as a mechanism
to resolve the dispute.
168. If, as noted above, waiver or abandonment
renders the arbitration clause inoperative or incapable of performance, so, in
my view,
does a time bar.
169. As a result, I consider s 7(5) of the IA Act
applies. I have already found that the preconditions in s 7(1)(a) of the Act
have
not been made out. Accordingly, I am not bound to grant a stay under s
7(2) of the IA Act.
170. This, of course, does not mean that the proceedings
in this court are not time barred, for that depends upon the true construction
of cl 11.7 on which I have not heard full argument. In any event, it is a
matter for the defendant as to whether to raise the time
bar in the proceedings
in this court and, if so, to make out that it applies.
171. It may be that if
the defendant had undertaken not to raise cl 11.7 in the arbitration or
consented to a condition of the stay
to that effect, s 7(5) of the IA Act might
not have been applicable. I did not, however, hear argument on that and I leave
it undecided.
(b) UNCITRAL Model Law article 8
172. Article 8 of the
UNCITRAL Model Law, which is Schedule 2 to the IA Act and given force of law by
s 16 of the IA Act, is in the
following terms:
Article 8: Arbitration agreement and substantive claim before court
(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.
173. It operates independently of s 7 of the IA Act but is in very similar
terms. It applies to “international commercial
arbitration” (art
1(1)) which requires the parties at the time an arbitration agreement is
concluded to have their places of
business in different countries (contracting
States). This requirement is met here, where the plaintiff’s place of
business
is in Australia while that of the defendant is in Sweden.
174. It is
clearly a commercial contract and no submission was made contrary to
that.
175. Section 21 of the IA Act permits the parties to agree that the
Model Law will not apply to the settlement of the dispute. The
Agreement does
not expressly so provide. There is no evidence before me that the parties have
otherwise so agreed.
176. Clause 12.8 does, however, specify that the Rules
for Expedited Arbitration of the Arbitration Institute of the Stockholm Chamber
of Commerce or alternatively the Rules of the Institute shall apply. Does this
implicitly exclude the Model Law?
177. In Eisenwerk Hensel Bayreith Dipl
– Ing Burkhardt GmbH v Australian Granites Ltd [2001] 1 Qd R 461, Pincus
JA (with whom Thomas JJA and Shepherdson J agreed) held (at 466; [12]) that by
opting for one form of arbitration, the parties
showed an intention not to adopt
a different system. I respectfully agree.
178. I have perused the Rules for
Expedited Arbitration and there are real differences between it and the Model
Law.
179. In my view, the parties have agreed in the arbitration agreement to
proceed other than in accordance with the Model Law, which
does not apply.
Accordingly, article 8 does not require me to refer this matter to
arbitration.
(c) Commercial Arbitration Act 1986 (ACT) s 53
180. The
defendant submitted that I could exercise power under s 53 of the Commercial
Arbitration Act. That section relevantly provides:
(1) If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to subsection (2), apply to that court to stay the proceedings and that court, if satisfied –
- (a) That there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and
- (b) That the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration;
May make an order staying the proceedings and may further give such directions with respect to the future conduct of the arbitration as it thinks fit.
181. There are three conditions for proceedings under this section. They are
that:
(a) a party to an arbitration agreement commences proceedings in a
court against another party to that agreement;
(b) the proceedings are in
respect of a matter that the parties have agreed is to be referred to
arbitration pursuant to the arbitration
agreement; and
(c) the application
for a stay has not been made after the applicant has filed pleadings or taken
any step in the proceeding other
than filing a notice of intention to respond or
defence.
182. It is quite clear that requirement (a) is satisfied. On the
basis of my findings above (at [140]), requirement (b) is also
satisfied.
183. As to requirement (c), I have noted above (at [16]) that the
Application in Proceedings was filed within the time limited by
the Rules and
was, in fact, the document next filed on the Court file after the Notice of
Intention to Respond. Condition (c) is
satisfied.
184. As a result, I have
power to order a stay, if satisfied that:
(d) there is no sufficient reason
why the matter should not be referred to arbitration in accordance with the
agreement; and
(e) the applicant was at the time when the proceedings were
commenced and still remains ready and willing to do all things necessary
for the
proper conduct of the arbitration.
185. As to (e), the affidavit of Ms
Steinbrich of 12 September 2007 deposes at paragraph 15:
I refer to clause 12.8 of the PMT Partner Agreement (a copy of which is at Exhibit “NS-1”). Pointsec is ready, willing and able to do all things necessary for the proper conduct of an arbitration in Sweden administered by the Arbitration Institute of the Stockholm Chamber of Commerce for any claim that Lightsource may wish to make against Pointsec, and has been so ready, willing and able since prior to the commencement of these proceedings.
186. There was no countervailing evidence and she was not cross-examined.
Subject to one matter, I am satisfied of condition (e).
187. That one matter
is as to the effect of the time bar. It could be argued that, in these
circumstances, a party who proposes to
plead in the arbitration (if there is, as
there is in litigation, a discretion) the time bar can be said to be ready,
willing and
able to do all things necessary for the proper conduct of the
arbitration. I accept that this is a rather startling proposition.
I have not
heard argument on it and, in view of my opinion on condition (d), I do not need
to come to a decision on it.
188. Turning then to condition (d), the
defendant submitted that there was no sufficient reason why the matter should
not be referred
to arbitration. In GWJ Blackman & Co SA v Oliver
Davey Glass Co Pty Ltd & Noel Searle Pty Ltd [1966] VicRp 77; [1966] VR 570, the Full Court
of the Supreme Court of Victoria observed (at 574):
In form the section throws upon the party to a submission, who desires that the agreement for a submission should be enforced, the burden of satisfying the court that there is no sufficient reason why the matter should not be referred in accordance with the submission. But in applying the section the courts have consistently acted on the view that the parties should be kept to their bargain unless strong reasons are shown why an action commenced in defiance of the agreement for a submission should be allowed to continue. In substance it is the party who is resisting the application for a stay who has the burden of satisfying the court that there are strong grounds for refusing to allow the dispute to be determined in accordance with the submission.
189. In Thomas (WC) & Sons Pty Ltd v Burge (Australia) Pty Ltd; General
Produce Co Third Party [1975] VicRp 78; [1975] VR 801, the Full Court affirmed (at 805) that the
burden lay on the party commencing the court proceedings to show that there was
sufficient
reason for not staying the proceedings. The court also accepted
“that the bias in favour of granting a stay was particularly
strong in the
case of a contract with an international element”. This is clearly stated
by the High Court in Huddart Parker
Ltd v Ship “Mill Hill” [1950] HCA 43; (1950) 81
CLR 502 (at 508-9).
190. Various bases have been identified by the courts and
amounting to a sufficient reason for not referring a matter to arbitration.
Where there are complex issues of law and no or little dispute of fact, the
matter should not ordinarily be referred to arbitration:
Plummer v Delaforce
[1964-5] NSWR 1550 (at 1556); O’Neill & Clayton Pty Ltd v Ellis
& Clark Pty Ltd (1978) 20 SASR 132 (at 134).
191. Similarly where there
are likely to be a multiplicity of proceedings if the matter or part of it
proceeds by arbitration with
attendant costs and possible inconsistent verdicts,
a stay would seem undesirable: Abigroup Contractors Pty Ltd v Transfield Pty
Ltd and Anor (1998) 217 ALR 435 (at 451). That may not in all cases,
however, be sufficient of itself to warrant a stay: Channel
Tunnel Group Ltd
and Anor v Balfour Beatty Construction Ltd [1993] AC 334 (at 353). Some aspects
of the application of local legislation may preferably be heard by courts with
appropriate jurisdiction;
thus Lockhart J in Petersville Ltd and Anor v Peters
(WA) Ltd (1997) ATPR 41-566 held (at 43,847) that a court with special
expertise in dealing with complex legal and factual issues, such as market
definition,
competition and anti-competitive behaviour under the Trade Practices
Act should be preferred in such cases to arbitration.
192. If a party to the
proceedings is not amenable to arbitration, that is also a reason not to stay
the proceedings: Savcor Pty
Ltd v State of New South Wales [2001] NSWSC 596; (2001)
52 NSWLR 587 (at 600). The risk here is also of a multiplicity of
proceedings with the possibility of inconsistent verdicts: Mulgrave Central
Mill Co Ltd v Hagglunds Drives Pty Ltd and Anor [2001] QCA 471; [2002] 2 Qd R 514 (at 530). See
also Warnervale Concreting Pty Ltd (In Liq) v Abigroup Contractors Pty Ltd
[2002] NSWSC 452.
193. There are, however, a number of reasons for not
referring the matter to arbitration:
• the proceedings under the Trade
Practices Act may not be susceptible of determination in Sweden under Swedish
law and are better dealt with in Australia by courts well familiar
with the
statutory (and common law) concepts of unconscionability;
• the
proceedings have a strong connection with Australia where, no doubt, most of the
relevant witnesses are and where all
the relevant conduct
occurred;
• the arbitration is now time-barred;
• the
plaintiff has foreshadowed that there are other persons who could be joined to
the proceedings who are not party to the
arbitration agreement and who,
therefore, could not be party to the arbitration, though none have yet been
joined.
194. None of these matters by themselves would constitute a reason of
sufficient substance to justify the refusal of a stay. Indeed,
some are rather
weak and would not of themselves justify overriding the apparent contractual
intention of the parties.
195. It seems to me that the matter is finely
balanced but, on balance, I consider that, taken together, these matters amount
to a
sufficient reason why the matter should not be referred to arbitration in
accordance with the agreement.
(d) Inherent jurisdiction
196. The
defendant sought, in the alternative, that I should stay the proceedings in the
exercise of the inherent jurisdiction of
the court. There were, however, no
significant submissions made under this head.
197. There seems no doubt that
a court has such inherent power. See Stevens v Trewin & van den Broek
[1968] Qd R 411; Commonwealth v Adelaide Steamship Industries Pty Ltd (1974)
24 FLR 97 (at 100, 113). This, of course, requires a finding that the
proceedings are an abuse of process.
198. In Ahmed Al-Naimi v Islamic Press
Agency [2000] 1 Lloyd’s Rep 522, Waller LJ said (at 525):
The only other point I would make so far as the above approach is concerned is that it must not be overlooked that the court has an inherent power to stay proceedings. I would in fact accept that on a proper construction of s 9 it can be said with force that a court should be satisfied (a) that there is an arbitration clause and (b) that the subject of the action is within that clause, before the court can grant a stay under that section. But a stay under the inherent jurisdiction may in fact be sensible in a situation where the court cannot be sure of those matters but can see that good sense and litigation management makes it desirable for an arbitrator to consider the whole matter first.
199. See also Origin Energy Resources Ltd v Benaris International NV and Anor
[2002] TASSC 50 (at [42]).
200. On this issue, Woolf LJ in Etri Fans Ltd v N
M B(UK) Ltd [1987] 1 WLR 1110 said (at 1114):
I prefer the submission of Mr Boyd that there is such an inherent jurisdiction in the court. In particular, in order to protect itself in relation to attempts to abuse the process of the court, the court has undoubtedly very wide powers of staying proceedings. However, as Mr Boyd concedes, because here the area covered by that inherent jurisdiction has been the subject of detailed and precise Parliamentary intervention, the circumstances in which the court will grant a stay under its inherent jurisdiction in situations dealt with by the statutory provision, but where it could or would not do so in exercise of its statutory jurisdiction, will be rare. The jurisdiction is truly a residual one principally confined to dealing with cases not contemplated by the statutory provisions.
201. It seems to me that there is no abuse of process here. Indeed, the reasons
for not granting a stay under s 53 of the Commercial Arbitration Act are
powerful reasons for not granting a stay under the court’s inherent
jurisdiction. I decline to do so.
Conclusion
202. As a result of these
findings, the application must be dismissed. I shall hear the parties as to
costs.
Postscript
203. It appears that on 28 May 2009, Compucat was joined
as a party to the proceedings. Compucat is not a party to the Agreement.
That
joinder does not appear to have been opposed by the defendant, though the record
is unclear.
204. That joinder, had it been effected in the original
Originating Application, would have been a powerful basis for holding that
the
proceedings were not capable of resolution by arbitration, though this would in
part depend on the precise nature of the claim
against that new defendant. See
Panharpur Cooling Towers Ltd v Paramount (WA) Ltd (at [43]); Savcor Pty
Ltd v New South Wales (at
600).
205. It would also be a powerful factor for
refusing a stay under s 53 of the Commercial Arbitration Act. The risk of a
multiplicity of proceedings and inconsistent verdicts is too great. See
Taunton-Collins v Cromie and Anor [1964] 2 All ER 332 (at 333, 334).
I certify that the preceding two hundred-and-five (205) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.
Associate:
Date: 12 April 2011
Counsel for the Plaintiff: Mr C
Robinson
Solicitor for the Plaintiff: Moray & Agnew
Counsel for the
Defendant: Mr G J Nell SC
Solicitor for the Defendant: Snedden Hall &
Gallop
Date of hearing: 28 May 2008
Date of judgment: 12 April 2011
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