WFA Pty Limited (formerly Waterfurnace Australia Pty Limited) v Hobart City Council S91/2000 [2000] HCATrans 784 (15 December 2000)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S91 of 2000

B e t w e e n -

WFA PTY LIMITED (FORMERLY WATERFURNACE AUSTRALIA PTY LIMITED)

Applicant

and

HOBART CITY COUNCIL

Respondent

Application for special leave to appeal

GAUDRON J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 15 DECEMBER 2000, AT 3.37 PM

Copyright in the High Court of Australia

MR B.M. O'BRIEN: If your Honours please, I appear on behalf of the applicant. (instructed by Windevere Bellman)

MR C.G. GEE, QC: May it please the Court, I appear with my learned friend, MR I.D. FAULKNER, for the respondent. (instructed by Toomey Maning & Co)

GAUDRON J: Yes, Mr O'Brien.

MR O'BRIEN: Thank you, your Honours. The special leave point in this case can, I think, be stated with certain brevity, namely, whether it is possible, as a matter of law, to contract out of the application of the rules of natural justice in respect to a private or commercial arbitration. If I may begin by addressing - - -

GAUDRON J: Are you suggesting that the whole arbitration clause is void?

MR O'BRIEN: No, I am not, your Honour. I am suggesting that the award is void.

GAUDRON J: Well, the arbitration clause, you accept, does not require natural justice?

MR O'BRIEN: In the events which happened, that is correct.

GAUDRON J: And this is not a point that you raised below?

MR O'BRIEN: It was raised, as I understand it, below, yes, and certainly in the Court of Appeal. The point which is now being agitated here was described by - - -

GAUDRON J: I thought the point was that your argument below was that there should have been natural justice, that - - -

MR O'BRIEN: Yes. Yes, we say there should have been natural justice, despite what the clause provided - - -

GAUDRON J: Even though the clause did not provide.

MR O'BRIEN: Yes.

GAUDRON J: Therefore, the clause was, to that extent, invalid, void?

MR O'BRIEN: No, that the award is void and the award should be set aside because it was obtained in breach of the rules of natural justice. Not that it necessarily follows that the clause is void.

GAUDRON J: But you accept that the clause authorised what was done now, do you?

MR O'BRIEN: Yes. If I may address the vehicle question first.

GAUDRON J: Well, I think you should because you have a number of things against you in terms of whether this is a suitable vehicle. First of all, the question is about an extension of time within which to challenge an award. Ultimately, that is the ultimate question. You have the terms of the arbitration clause to contend with, and you have the further question whether the Supreme Court of New South Wales had jurisdiction. They are all matters that seem to me to go to the question whether this is an appropriate case for the grant of special leave.

MR O'BRIEN: Dealing with the question of the vehicle first, the issue that is before this Court as an application for special leave, which is the issue that was before the Court of Appeal, is the issue which was determined by the learned trial judge, Justice Hunter, as a preliminary question. If I can take your Honours to the application book on page 15 and also on page 1, at lines 7 to 15 on page 15 and at lines 11 to 20 on page 1, there the learned trial judge makes it abundantly clear that he had first made an order that a preliminary question be tried. That preliminary question was, put briefly, whether, if he were to grant an extension of time, it would be an exercise of futility.

In order to resolve that preliminary question, his Honour had to do one of three things: he had to either make findings of fact, or there had to be an agreement of fact, or he had to assume facts. His Honour really did not make any findings of fact other than one finding that there had been a denial of natural justice.

There is a dispute as to whether there was an agreement as to the facts or whether, in the alternative, what had happened at first instance was that my learned friend, Mr Faulkner, invited the court to resolve this question as a preliminary question on an assumption of facts and that the case would be treated in the same way as you would treat a demurrer. You would actually assume that the plaintiff's case at its highest could not succeed. That was the burden which Mr Faulkner took upon himself, and which the judge accepted was suitable to be treated as a preliminary question.

His Honour, presumably treating - regarding the facts by reference to the case that the plaintiff can put at its highest, the plaintiff could not succeed, even though the plaintiff had been denied natural justice and even though it had sought to tender further evidence to meet the case that was put against it and which took it by surprise. He did that because, in his view, the arbitration clause clearly stipulated that the procedure adopted by the arbitrator was one which precluded him from allowing further evidence to be tendered, unless the tender of that further evidence was by consent, which it was not.

Now, we say that the learned trial judge fell into error - and we say respectfully the learned trial judge fell into error - because we say that as a matter of law an arbitration award which is made in the exercise of judicial power - - -

GAUDRON J: Well, it is not, for a start.

MR O'BRIEN: If what your Honour is saying that we are talking of industrial arbitrations - - -

GAUDRON J: We are talking arbitration.

MR O'BRIEN: Then, if I could refer your Honour to a whole series of cases which I referred to in my summary of argument. The decision in Brook and Delcomyn - - -

GAUDRON J: There may be a requirement to act judicially, but that is quite a different matter from an exercise of judicial power.

MR O'BRIEN: Well, if I could test that proposition this way, your Honour. If a final and conclusive determination which binds the parties so as to become a res judicata between the parties, if that can only be done in the exercise of judicial power, then it must follow that an arbitration award, which has a res judicata effect - - -

GAUDRON J: No, it does not follow at all - but, anyway, do not waste your 20 minutes on it - because an arbitrator's award does not enforce itself.

MR O'BRIEN: No, I agree, it does not enforce itself, but then neither does a judgment. A judgment is merely a declaration of the rights and liabilities of the parties. There are other mechanisms at law which enforce a judgment - - -

GAUDRON J: All right. I suggest that you do not waste your 20 minutes on this though.

MR O'BRIEN: It is our submission that an award, in order to have a res judicata effect as between the parties, must be a determination made by a judicial tribunal and the determination must, in itself, be judicial, and for support of that proposition I rely on the texts Bower and Turner, the second edition thereof, and this is stated at page 29 of that text. That proposition, in my respectful submission, is supported not only by Brook and Delcomyn, also by the English Court of Appeal in - sorry, I cannot pronounce the name - and also by the Victorian Supreme Court in a decision of Justice Lush in the case of Patras v The Commonwealth, which is referred in my outline of argument.

It is my respectful submission that if an award is obtained in breach of the rules of natural justice, the decision does not constitute a judicial decision within the meaning of that term as used in the doctrine of res judicata and that the award is not, therefore, res judicata; it is not, therefore, binding on the parties; it cannot effect a final and conclusive resolution of the dispute between the parties; and it is as an award, and in and of itself, void, and there is, therefore, nothing to which the mechanisms of enforcement can act upon, because it is nothing, in my respectful submission, more than - - -

GAUDRON J: Well, then if you be right in that, you do not need the intervention of any court.

MR O'BRIEN: But we are entitled to bring an application to, as it were, set the record straight under section 42 of the Commercial Arbitration Act, and so that even if the award is a nullity, we are entitled to have the record expunged, and that is the procedure and the mechanism which we sought to bring before the New South Wales Supreme Court.

Your Honour Justice Gaudron raised earlier on the question of whether the New South Wales Court of Appeal had jurisdiction - - -

GAUDRON J: No, whether any New South Wales court had jurisdiction.

MR O'BRIEN: I think by reference to that your Honour was raising the question of what is the law which governs the arbitration? Is it New South Wales law or is it Tasmanian law? I imagine that is the point your Honour was making. In my respectful submission, the authorities are clear that the law governing questions of procedure in an arbitration are governed by the law of the place where the arbitration is conducted. In this case, the arbitration was conducted by teleconference, with the arbitrator sitting in Sydney and with one party sitting in Hobart and the other party sitting in Adelaide. In my respectful submission, the arbitration was conducted in the place where the arbitrator sat, which is Sydney.

GAUDRON J: Where did he give his award?

MR O'BRIEN: And he gave his award in Sydney. He published his award in Sydney. The authority for the law of the arbitration is governed by the law of the place where the arbitration is conducted is a decision of the House of Lords in James Miller & Partners Ltd v Whitworth Street Estates (1970) AC at 583. You will also see a discussion of this principle in the third edition of Sykes & Pryles Australian Private International Law at pages 149 to 150. So, in my respectful submission, the appropriate court for this application to have been brought is the courts of New South Wales and, in particular, the Supreme Court of New South Wales. In my respectful submission, it was clearly the court which had jurisdiction.

If I may return to the point of principle in relation to whether or not an arbitrator exercises judicial power. If I could remind your Honours of the decision of this Court given last year in the case of Bass v Permanent Trustee [1999] HCA 9; 198 CLR 334, I think a copy of which you have before you. If I could refer your Honours to page 355 of that decision. There your Honour Justice Gaudron and your Honour Justice Callinan together with the Chief Justice and Justices McHugh, Gummow and Hayne, said at 355:

The purpose of a judicial determination has been described in varying ways. But central to those descriptions is the notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy.

Further on, at page 356, your Honours said:

It is true that some have seen the use of the declaratory judgment as little more than the giving of an advisory opinion. However, one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties.

Likewise, on page 357, your Honours said, in relation to the decision of the Full Court of the Federal Court, in respect:

It does not finally resolve -

that is, their expression of opinion -

the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings.

In my respectful submission, the gravamen, the fundamental point which your Honours put in Bass was that it is in the very nature of the exercise of judicial power that when that power is exhausted, when that power has been completed, one has a final and conclusive determination of the question of fact. The controversy is quelled. You have, in effect, a res judicata. That is exactly what happens in an arbitration. An arbitration would be next to pointless if the award was not res judicata as between the parties.

So, in my respectful submission, it would involve, accepting the proposition that one can have a controversy resolved to the point of finality without there every having been an exercise of judicial power, and from the passages which I have read to the Court from Bass, that would not be supported by those authorities, in my respectful submission. Furthermore, if one goes to some of the old authorities, that proposition does not seem to have been questioned.

In particular, if I could take your Honours to the case of In re Dawdy and Hartcup (1885) 15 QB 426. At pages 429 to 430, Lord Esher there stated that an arbitration which was conducted under what was then the Common Law Procedure Act of 1854, which is the original legislation from which the commercial arbitration Acts of Australia were based - for an arbitration to be conducted under that provision, the arbitration had to involve an exercise of judicial power.

These authorities were discussed by his Honour Justice Lush in Ajzner v Cartonlux Pty Ltd [1972] VicRp 107; [1972] VR 919, and on pages 928 to 932 his Honour Justice Lush discussed a number of the old authorities. Those authorities were in turn subsequently discussed in 1975 in a case called Hammond v Wolt [1975] VicRp 10; [1975] VR 108. On pages 112 to 113 his Honour Justice Menhennitt discussed the authorities and likewise came to that same view, that it involved an exercise of judicial power. Also, in England in The Government of Ceylon v Chandris (1963) 1 Lloyd's Rep 214, at page 225, his Lordship Justice Megaw, discussed those authorities. More recently, the proposition has been considered and adopted by Lord Scarman, who was in dissent in a case called Bremer Valkan v South India Shipping [1981] AC at 909. At 997 Lord Scarman made the observation that it was an exercise of judicial power.

His Honour, the then President of the New South Wales Court of Appeal, President Kirby, as he then was, and appeal Justice Priestley adopted that passage in the case of Commonwealth of Australia v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662. The relevant passage is to be found at 677. Furthermore, the decision, as I said earlier, of Brook and Delcomyn [1864] EngR 418; (1864) 16 CB(NS) 403, at page 418; [1864] EngR 418; 143 ER 1184 at page 1190, and that is a judgment of Justice Willes. Again, it says that the arbitrator is exercising judicial power.

It is my submission that it follows from an exercise of judicial power that a determination can be final and conclusive and that an award will only be final and conclusive if, not only the Tribunal is judicial, but the decision is judicial. A decision is not judicial if it is made in breach of the rules of natural justice. For that proposition there is your Honours' judgment in Kable, with which your Honours no doubt are familiar. There is also the judgment of his Honour Justice McHugh in Kable v Director of Public Prosecutions. In addition to that, there is also the joint judgment in Bass v Permanent Trustee, at page 359. There your Honour said:

Judicial power involves the application of the relevant law to facts as found in proceedings conducted in accordance with the judicial process. And that requires that the parties be given an opportunity to present their evidence and to challenge the evidence led against them.

That, again, was a decision - a joint judgment of all the Court save and except for Justice Kirby.

CALLINAN J: If everything you say is right, what would you say, however, about Justice Powell who said that the proceedings should have been dismissed as an abuse of process anyway?

MR O'BRIEN: That was not the issue that was before his Honour Justice Hunter, because the only issue that was ever before him was the issue on the preliminary question. Many of those issues which have been raised in my friend's summary of argument just simply do not arise, and that is one of them. What his Honour was saying, "Let us put to one side the abuse of process; let us put to one side the question of delay; let us put to one side, indeed, the argument of waiver, and so on. Let us just simply consider one question, and one question only, `Can the plaintiff possibly succeed, even if we accept the plaintiff's case as its highest?'". His Honour said, "No, it cannot and, therefore, I do not need to go any further; I do not need to look into the question of abuse of process; I do not need to look into the question of waiver or delay" - - -

CALLINAN J: But Justice Powell said that the proceedings ought to have been dismissed as constituting an abuse of process.

MR O'BRIEN: But that was not the issue that was before the Court of Appeal. What was before the Court of Appeal was a decision made by Justice Hunter. That was a determination on the preliminary question.

CALLINAN J: Well, it seems to me it is a holding against you by Justice Powell.

MR O'BRIEN: And in any event - if I could put it this way - at the time of the hearing before the Court of Appeal and at the time of this application before this Court, there is only one relevant proceeding and that is a proceeding in this Court. If the abuse of process argument has any merit at all, it is only because it relies on that passage of the High Court in Henry v Henry. That passage simply says that where you are running two proceedings at the same time, there is an abuse of process, but where one proceeding has been struck out, as it has, then you no longer have an abuse of process, I would respectfully submit.

GAUDRON J: Yes, thank you, Mr O'Brien. We need not trouble you, Mr Gee.

Given the nature of the issue decided, namely, whether time should be extended to set aside the award of an arbitrator and given the terms of the arbitration clause pursuant to which that award was made, this is not a case which might appropriately attract the grant of special leave to appeal. Accordingly, special leave is refused with costs.

AT 4.01 PM THE MATTER WAS CONCLUDED