Zhu v Treasurer of State of New South Wales [2003] HCATrans 495 (2 December 2003)

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Zhu v Treasurer of State of New South Wales [2003] HCATrans 495 (2 December 2003)

Last Updated: 8 December 2003

[2003] HCATrans 495

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S36 of 2003

B e t w e e n -

PETER TAO ZHU

Applicant

and

THE TREASURER OF THE STATE OF NEW SOUTH WALES

Respondent

Application for special leave to appeal

GLEESON CJ
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 2 DECEMBER 2003, AT 11.34 AM

Copyright in the High Court of Australia

MR J.C. KELLY, SC: May it please the Court, I appear with my learned friend, MR S.A. BENSON, for the applicant. (instructed by Walker, Hedges & Co)

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

GLEESON CJ: Yes, Mr Kelly.

MR KELLY: The issue at the threshold of the proposed appeal, your Honours, is whether a principle akin to that in Shepherd v Felt & Textiles of Australia Ltd applies to the defence of justification to the tort of intentional interference with contractual relations in the same manner that that principle applies in the law of contract. Your Honours will doubtless have seen from the papers that the context in which that issue arises is one in which the defendant sought and successfully before the Court of Appeal relied upon a defence of justification of a type in which it brought into existence, or relied upon or called in aid, an equal or superior right. Indeed, the Court of Appeal went so far as to formulate an equal or superior duty, a duty to interfere.

GLEESON CJ: What was the basis of that duty; the illegality of the proposed arrangements?

MR KELLY: We would respectfully contend, your Honours, that the basis for the duty was a misapprehension, firstly, of a matter of fact and, secondly, a misapprehension of the application and terms of clause 11.2 of the Olympic Charter. In broad answer to your Honour’s question, yes, the concept of illegality lay at the base of the so-called duty.

Your Honours will in the context appreciate that this is not a case in which the respondent contends that it purported to exercise any such duty at the point where it interfered with the contract. What it rather appears to be is that the duty was an afterthought. The duty deals with the protection of intellectual property rights in certain Olympic indicia and images. At the point when SOCOG moved to interfere with the applicant’s contract and when he refused to yield to their original direct attempts to induce a breach, they moved to have him arrested. In the context of this case it is important – I believe it is common ground – that there be no suggestion that SOCOG was entitled to cause the arrest of Mr Zhu.

GLEESON CJ: What is the significance of the arrest? I understand the colour that it adds to the circumstances, but what did it have to do with the breach of contract?

MR KELLY: It is very significant in this sense, your Honour, that if one were a defendant acting in execution of a statutory duty and one is acting bona fide, then a defence of justification may well be available. But in this case there was no power to cause arrest, there was certainly no duty to cause arrest - - -

GLEESON CJ: What is the connection between the arrest and the breach of contract, or the termination of the contract?

MR KELLY: The actual arrest caused Mr Zhu to yield to the efforts thus far to bring his agency to an end. The arrest deprived him of his passport and his ability to travel to China, which was the territory in which the agency was to be executed, and it at a very basic level deprived him of his ability to physically carry out the contract.

GLEESON CJ: I must have misunderstood the case then. I thought the form of interference with contractual relations was persuading or directing that other company, whose name escapes me for the moment, to terminate the contract on a spurious ground.

MR KELLY: Yes, your Honour. That is the first ground. That is a direct interference but Mr Zhu refused to yield to that interference. He refused to accept that company’s repudiation and it was not until - - -

HEYDON J: It was not repudiated. Mr Zhu did not accept that repudiation..... - - -

MR KELLY: Yes, and the contract remained on foot.

HEYDON J: - - - disabled from performance by what Mr Justice Sheller called an ill-considered infringement of his basic rights as an Australian citizen, which sounds like unlawful arrest.

MR KELLY: Yes, your Honour. They had finished him off by having him arrested when he - - -

GLEESON CJ: So the repudiation by TOC was, as they say, a thing writ in water. What was it that brought the contract to an end?

MR KELLY: The actual act of bringing the contract to an end was Mr Zhu’s acceptance of the course of conduct which was the wrongful repudiation of the contract induced by SOCOG at a time and in circumstances when he was disabled from physically performing it because he was arrested, had his passport taken away and could not go back to China to do the work.

CALLINAN J: And malicious prosecution too, was it not? He was actually charged, was he not?

MR KELLY: Absolutely, yes, your Honour. The unchallenged finding of Justice Bergin in paragraph 388 was that this conduct was intended to harm Mr Zhu. Of course, it was unlawful. It was unlawful in the sense acknowledged by Justice Sheller, picking up on the general principle in Trobridge v Hardy, to the effect that any restriction on a person’s liberty is a breach of his most fundamental common law rights.

GLEESON CJ: What was the basis on which, you having got that far, the Court of Appeal decided against you?

MR KELLY: The Court of Appeal firstly at this threshold decided against us by determining that it was not necessary as a matter of principle for a defendant in these circumstances to have present in his mind the execution of the duty upon which he now calls in aid. Justice Hodgson articulated the point.

GLEESON CJ: What was the duty? The duty to do what?

MR KELLY: The duty was expressed as a duty to bring an end to the contract in order to terminate Mr Zhu’s conduct of his agency, which was said to be - - -

GLEESON CJ: Did the means by which you bring an end to the contract matter?

MR KELLY: We contend it most certainly does, especially where, as here, the means were in excess of the lawful authority which is otherwise relied upon as the duty to interfere. If there was a duty – and that is in issue and I will come to that in a moment if I may, your Honours – the ambit of the duty did not extend so far as to induce a breach of a contract. If there was a duty to bring about termination, that duty would not and could not extend to an unlawful termination.

HEYDON J: They could have got an injunction.....without interfering with the contractual rights.

MR KELLY: Yes, your Honour, but the duty did not, for example, extend to authorising activities which SOCOG otherwise had no statutory power to authorise.

GLEESON CJ: Can I just get this clear. Did TOC breach the contract?

MR KELLY: Yes.

GLEESON CJ: What was the breach?

MR KELLY: It repudiated the contract.

GLEESON CJ: But an unaccepted repudiation is a thing writ in water.

MR KELLY: Yes.

GLEESON CJ: So what was it that brought the contract to an end but an acceptance of the repudiation by the other party?

MR KELLY: That is correct, your Honour, but one is looking at a course of conduct in which the repudiation was continuing. It was finally accepted and it was accepted by reason of the fact that Mr Zhu had been arrested and was no longer in a position in fact to continue performance. So the act of termination was his acceptance of the wrongful repudiation.

GLEESON CJ: So in your case SOCOG got at both parties to the contract? They persuaded TOC to repudiate the contract and then ultimately they persuaded your client to accept the repudiation by unlawful means?

MR KELLY: Yes. We put forward the arrest as an indirect interference with the contract, itself a tortious interference. One could deprive a person of his tools of trade, block his physical access to his place of work. There is a litany of circumstances held to amount sufficient to indirect interference by unlawful means, and we say that causing a person’s arrest is one of those absent a power to arrest.

GLEESON CJ: Do you have an answer to the argument that the contract between TOC and your client was illegal?

MR KELLY: Yes, your Honour. I think the answer is to be found by proceeding to the analysis put forward by the Court of Appeal. Its reasoning really commences at page 258 and goes on to 259 and is in substance contained in paragraph 185. At the foot of page 258 in the judgment of Justice Sheller, his Honour says:

That agreement if allowed to remain in place required continued illegal conduct not only by Zhu but by others. The agreement permitted Zhu commercially to exploit intellectual property owned by the IOC on behalf of the Olympic Movement in a country outside Australia, the Peoples Republic of China, without the consents of any of the Olympic bodies who were required to consent and in particular by the relevant Chinese bodies.

That pivotal proposition is wrong.

CALLINAN J: Why would there not have been an obligation on TOC and perhaps also on SOCOG to try to obtain those consents?

MR KELLY: Quite so, your Honour, but even before one reaches that point this analysis is wrong at the pivotal point where it asserts that the contract may proceed without the consent of the Olympic bodies. Clause 9.1 of the agency contains – at page 183 it is set out. In paragraph 28, clause 9.1(a), a covenant by Mr Zhu that he shall:

Do all things and sign all documents reasonably necessary to obtain the appropriate and required approvals and authorisations from the Government of the Peoples Republic of China and the Chinese Olympic Committee.

GLEESON CJ: What about the OIC?

MR KELLY: Under the Olympic Charter the power to authorise the exploitation of indicia from other OCOGs in a foreign NOC, National Olympic Committee, is allocated to the National Olympic Committee. Under the Olympic Charter there is no party other than the Chinese Olympic Committee who has jurisdiction over the exploitation of Olympic-related intellectual property in China. So for his Honour to say that this contract authorised Mr Zhu to commercially exploit intellectual property in China without the consent of the relevant Chinese bodies is simply factually false because the contract provides in effect the opposite and the evidence is that Mr Zhu removed himself to China almost immediately after the date of execution of the agency agreement and before its commencement date and met and spoke with Mr Mingde Tu, the secretary-general of the Chinese Olympic Committee, and obtained from that gentleman what is described in the evidence as the macro support of that authority.

CALLINAN J: Mr Kelly, TOC was completely the creature of SOCOG, was it not?

MR KELLY: Yes, your Honour. TOC was a trustee of a trust established with three original beneficiaries: SOCOG, the Australian Olympic Committee and an entrepreneurial body. When it ran into financial difficulties, SOCOG took it over, took all of its assets and most of its liabilities and managed and operated it. It took as part of the assets - - -

CALLINAN J: And misrepresented to the public what was happening too, as I read the findings.

MR KELLY: Absolutely, your Honour. Yes, the press release referred to something called synergies to be enjoyed by everybody, whatever a synergy is, but what it really amounts to is the fact that they took Mr Zhu’s $260,000 in cash to start off with and all of its other cash assets. They did not honour the trustee’s side of the bargain with Mr Zhu, namely to provide him with various forms of assistance and the like, including the getting of approvals for his draft documentation. Then come the crunch, SOCOG determined that it did not wish to deal with Mr Zhu and effectively directed the trustee to get rid of him.

GLEESON CJ: You keep talking about a threshold point which has a certain implied threat in it. How many other points are there apart from the threshold point?

MR KELLY: I think, your Honour, the four issues that we pose as special leave questions represent the substance of the case.

GLEESON CJ: How long would the case take?

MR KELLY: One day plus. What it raises in this threshold question is whether there needs to be present to the mind of the defendant the right that he claims to be exercising if he is to call in aid in effect Shepherd.

HEYDON J: That is not a threshold point. If you win on it, you win, do you not?

MR KELLY: Yes, your Honour.

HEYDON J: Even if you do not win on that, you might win on the illegality of the arrest as something incapable of justification.

MR KELLY: Absolutely, yes, your Honour.

HEYDON J: The third point you might win on is that they should not have been as aggressive as they were but they should simply have asked him to stop and if he failed, get an injunction.

MR KELLY: Absolutely.

CALLINAN J: And the real point, Mr Kelly, is whether Shepherd v Felt & Textile can be applied in an unqualified way in relation to inducement of breach of contract as opposed to reliance upon an after-discovered breach.
There is no necessary equivalence between those two. That is your argument.

MR KELLY: Yes, your Honour, and especially in a context where, with the development of this tort, the focus is upon the intention. If the intention is the gravamen of the tort and intention must be proved by a plaintiff, ought not logically intention be the gravamen of the defence of justification?

GLEESON CJ: Was it pleaded or argued against you that if the contract between Mr Zhu and TOC was illegal, he could not get damages for an induced or forced breach of it?

MR KELLY: No, it was not, your Honour, but there was no challenge to the assessment of the damages in the Court of Appeal. Indeed - - -

GLEESON CJ: I am just puzzled that the concept of illegality arose in the case at the point of, as it were, justifying the action of SOCOG but did not arise at the point of questioning your client’s entitlement to substantial damages for losing the benefit of his contract.

MR KELLY: Yes, your Honour, and probably because the principal head of claim was loss of opportunity and when assessing the value of the opportunity, all exigencies and contingencies and the like of course are taken into account. All SOCOG had to do was to give the necessary approval, for example, so it would be out of the game completely. We already had in substance the approval of the Chinese Olympic Committee. The concept of illegality was raised at the heel of the hunt with not much enthusiasm other than that shared between my learned friend and the Court of Appeal. One is not talking about, for example, illegality at the point of formation of the contract, so this is not one of those News Limited-type cases where, if the contract was illegal and void from the very outset, then there is no contract to induce the breach.

GLEESON CJ: Thank you, Mr Kelly. Yes, Mr Walker.

MR WALKER: Your Honours, I am sorry to say the case would not take more than a day. I should make that clear. Second, we accept, as our written submissions make it clear, that the four issues arise as the applicant has put it. Third, we say this is certainly an inappropriate vehicle in relation to the aspect of the case turning upon the method or atmosphere created by the arrest. Could I take your Honours to page 231 of the application book because there are the pleadings which stand in contrast with how my learned friend described the arrest in his argument today where he refers to it as constituting indirect interference.

GLEESON CJ: I have had some difficulty relating the fact of the arrest to the issues in the case.

MR WALKER: One does not find in the biography of these proceedings any place where greater clarity can be brought than in 18b of the pleading at 231 of the application book. I do not suggest that that is clear. It is obscure because it says:

to the extent that the conduct of [SOCOG] included direct interference with the contractual rights of the plaintiff –

and it is fair to say the whole gravamen of the case was that it did –

when [SOCOG] caused the plaintiff to be arrested –

your Honours will note there is no adverb there, “unlawfully” –

that conduct is –

and that is the conduct of SOCOG –

as a matter of law, incapable of being justified.

There was no issued joined, leaving aside questions of parties and the like, on the unlawfulness of the arrest. It was alleged as an event which, perhaps not surprisingly, attracted the description by Justice Bergin, echoed by Justice Sheller to which my friend has referred, where there was not a cameo case within the case of the well-known tort of unlawful arrest. For that matter, nor was there evidence of why what I will call the detention from his otherwise intended business activities constituted in any way the well-known interference with economic relations, for example, that might have rendered the arrest in itself the cardinal fact in a freestanding cause of action. Rather, one sees that it is said to be – and I do not say this deprecatingly – as a matter of flavour something which renders - - -

CALLINAN J: I do not know about that, Mr Walker. It is not very well expressed. I agree with - - -

MR WALKER: Could I take your Honours back for another sample in the process of the expression of it on 225, paragraph 24. It is quite clear by the reference back to paragraph 23 that the conduct in question is the conduct instructing TOC to terminate. The terminate instruction involved TOC in due course repudiating. There is the breach of contract which was induced.

CALLINAN J: It says “In furtherance of its said conduct”.

MR WALKER: That is right. In our submission, in furtherance of the conduct of instructing TOC to terminate the agency agreement, the arrest is, to paraphrase the Chief Justice, not easily related to conduct of instructing TOC to terminate.

CALLINAN J: Well, it is in furtherance of it.

MR WALKER: Your Honour, the conduct is telling TOC to take certain steps under its contract with the plaintiff.

CALLINAN J: And “Will it help you out by getting him arrested?”

MR WALKER: Your Honour, there is no evidence of that whatever and there is no evidence that it had the effect of enhancing TOC’s willingness to repudiate. TOC never had the slightest unwillingness to repudiate, for reasons your Honour has already perceived, concerning its relation in its dire financial straits. Your Honours, this was a case about a man who claimed in Australia benefits of conduct in China, and the benefits included the supply of services in Australia, the supply of material in Australia as well as from Australia; commerce between Australia and China was also involved.

He claimed to have the right to exploit intellectual property which it is common ground is originally and ultimately the property of and under the control of the OIC. Justice Sheller traces the somewhat ramified course by which the host city contract, the SOCOG Act itself, the Indicia & Images Act of the Commonwealth and the establishment and licensing agreement between SOCOG and TOC preserves ultimately and explicitly to the OIC, not only to another NOC but to the OIC and its executive board, control over the exploitation of the intellectual property.

CALLINAN J: But SOCOG was surely under an obligation?

MR WALKER: Never pleaded and not the subject of - - -

CALLINAN J: We will come to the pleadings shortly. It may be so obvious, Mr Walker, that it does not have to be pleaded, that SOCOG was under an obligation to do everything that was reasonably necessary to enable TOC’s contract, of which it was fully aware, to be carried out.

MR WALKER: Your Honour, that would be quite difficult to have demonstrated without making a contract between Mr Zhu and SOCOG. There is a deed poll but the poll means we are not talking about mutual obligations at all. There was no pleading not because it was obvious but because it defied even the ingenuity of my learned friends to find a relation between SOCOG and Mr Zhu whereby SOCOG owed enforceable obligations, presumably sounding in damages, if it did not use something ill defined but presumably best endeavours to persuade an NOC quite beyond its territorial competence because OCOGs, organising committees, have territorial competence only within the country of the host city.

That is why it was not pleaded. It was not an issue and, in our submission, that is why the claim came down to this tort claim by which the undoubted breach, subject to the question of illegality which your Honour the Chief Justice has raised, was committed by the repudiation at the instructions of SOCOG. That is why in the Court of Appeal – and I stress, only in the Court of Appeal – all other issues being conceded or decided against us and not reventilated, it was justification only which was in question.

CALLINAN J: Mr Walker, can you tell me what happened when TOC effectively failed? What happened in relation to it and SOCOG?

MR WALKER: What I will call its obligations, and certainly those that I think your Honours must recall, those involved in the public face of the Olympic Club at the time, were taken over by SOCOG.

CALLINAN J: Taken over by SOCOG. Was there a novation of the contract or something of that kind?

MR WALKER: No, there was not.

CALLINAN J: But SOCOG acted as if it were a party to the contract, is that right?

MR WALKER: Yes.

CALLINAN J: So we have a Metropolitan Railway v Brogden sort of situation. The parties acted as if they were bound by the contract.

MR WALKER: No, there was never any case alleged of what I will call claiming to be the contracting party of any kind. Indeed, the fact alleged was as a third party wrongly, tortiously, instructing the contracting party. So that at the nub of the case, notwithstanding the circumstances which may have given rise to thoughts such as your Honour has raised, absolutely essential to their whole claim against someone who was solvent as opposed to insolvent, was the distinction between the solvent SOCOG and the insolvent TOC. So there is no alter ego, no conventional estoppel, nothing of that kind in this case.

GLEESON CJ: Consistently with the award of damages by Justice Bergin, putting to one side the amounts of exemplary and punitive damages, if TOC had remained solvent, those damages would have been awarded against TOC for breach of contract?

MR WALKER: Yes, your Honour. The illegality question that your Honour raised with my learned friend really did not arise because, as my learned friend has pointed out in written submissions and on his feet and as we conceded – this was the framework of our case about justification – there were ways in which ventures of the kind intended between TOC and Mr Zhu could have been done properly. They were not done properly. So-called macro approval could not possibly amount to compliance with the provisions of the Olympic Charter that have been extracted by Justice Sheller, neither alleged properly nor anywhere near proved or found that there had been anything in the nature of prior written approval. The very notion of an indulgence or estoppel unwittingly by the IOC or by the NOC – and the NOC is more than one person at a lunch – is, in our submission, unthinkable and that is why it does not appear, no doubt.

GLEESON CJ: Insofar as there was illegality, did it take the form of the contravention of a statute?

MR WALKER: Your Honour, that was certainly the way in which the Court of Appeal held that, although it also took the form of threatened breaches of the Olympic Charter by activities being permitted otherwise than through the proper channels.

GLEESON CJ: I am just not sure what the concept of a breach of the Olympic Charter means.

MR WALKER: It is not a breach by Mr Zhu because he is not bound by the Olympic Charter.

CALLINAN J: Parts of it were never enacted in New South Wales.

MR WALKER: The Olympic Charter?

CALLINAN J: Yes, in relation to SOCOG.

MR WALKER: I wish I could say in one sentence what the Olympic Charter was in terms of its juristic basis, but it suffices to say that by statute, by the constitutive statute of SOCOG, section 11, the Olympic Charter is recognised by the Parliament of New South Wales and SOCOG is commanded to take into account to the fullest extent practicable that first in the list of matters, the second of which is the host city contract, in exercising its functions.

Under the Olympic Charter NOCs and OCOGs and the AOC and the COC – that is Australia, China and Sydney Organising Committees – have obligations in relation to complying with IOC paramount supremacy in relation to intellectual property. It is not the case, as my learned friend put to your Honours, that the Chinese Olympic Committee could, contrary to the wishes of the IOC’s Executive, grant any particular waiver of any particular requirement of the charter. Half share of revenue, for example, is, as the provisions set out by Justice Sheller make clear, a mandatory, not a negotiable, requirement of the kind of venture which Mr Zhu intended to carry out.

So that in terms of the obligations of SOCOG under State statute given standing under the Commonwealth statute, for example, if there had been any injunctive proceedings brought, it was the use of the intellectual property, not merely threatened but actually carried out by the plaintiff, which justified the colloquial description of him and those, including TOC, involved in that exercise as loose cannons. It is not to be forgotten – and the Court of Appeal did not forget it – that the IOC had the right ultimately to withdraw the Olympics from Sydney if there were breaches of the charter by SOCOG. Yes, you could breach the charter if you were SOCOG.

For those reasons it was simply a matter of ascertaining whether Mr Zhu was authorised to do that which he claimed to do. He claimed to be using the intellectual property which included the familiar rings, for example, as well as the names and designations which are both controlled under the Commonwealth Act, referred to in the State Act and are the subject of the Olympic Charter, itself referred to in both the State Act and in section 3 of the Commonwealth Act, because under section 3 of the Commonwealth Act the internationalism is explicit. The objects to be advanced to the extent possible include serving, that is fulfilling, the obligations of, amongst other things, the Olympic Movement and the Olympic Charter.

GLEESON CJ: On your case he made the fundamental mistake of assuming that TOC had the authority it represented itself as having?

MR WALKER: That is right. Your Honours may have noticed in the written submissions against us that there are no words at all devoted to what I will call chain of title. That is because in fact that was common ground. There was no grant of any right to TOC by SOCOG to do anything outside Australia. If territoriality matters in this case – and it ultimately does not – it is that TOC never had any right as licensee/sub-licensor to authorise Mr Zhu to do those things in China.

Indeed, the term my learned friend last relied upon in his argument really indicates to what extent that was fully appreciated by Mr Zhu because it showed him incompletely, inexactly but in general terms, that it depended upon the unfettered discretion of others, the Chinese Government, although that has nothing to do with the Olympic Movement, and Chinese NOC – it might be thought there is an intimacy between those two – before he could proceed to exploit anything. Against that background, there has never been alleged and could not be said to be any obligation in SOCOG to do that which the Olympic Charter does not permit it to do, namely authorise IOC’s intellectual property to be used in the territory of another NOC.

CALLINAN J: But it permits it to make representations to facilitate the - - -

MR WALKER: There has never been any suggestion that we – that is my client’s predecessor – came under any obligation of that kind at all.

CALLINAN J: TOC was clearly under an obligation to do everything it could possibly do, was it not?

MR WALKER: One could imagine that a breach of warranty of authority would have been a lay-down misere but there can be no - - -

CALLINAN J: Was not TOC under an obligation to do everything it could to enable the contract to be performed?

MR WALKER: Not quite, because that implication by law is cut back. Your Honours do not have the full contract, but it is cut back by a number of provisions which make it clear where the risk lay in relation to IOC, AOC, SOCOG, governmental authorities and their discretions.

CALLINAN J: But that is not an answer. The risk might rest there but it does not mean that a party is entitled to walk away from its contract. It is still bound to do what it can to see that it is carried out.

MR WALKER: Subject to, as I say, those allocations of risk. Someone to whom the risk can be allocated can scarcely say it is to be borne by the other party.

CALLINAN J: Including making representations to SOCOG so that it in turn might also be able to influence international bodies that did have the power to consent.

MR WALKER: But that does not impose any obligation actionable by Mr Zhu on SOCOG.

CALLINAN J: No, but it may be very relevant to SOCOG’s actions in inducing a breach of contract.

MR WALKER: The difficulty for this Court would be that, were special leave granted on a footing such as your Honour has raised, first, it is outside the application; second, outside the draft notice of appeal; third, outside the argument hitherto put; and fourth, would require the ventilation of facts where the record is incomplete because that issue was not before the trial judge. So there would be a Suttor v Gundowda point.

GLEESON CJ: Was it common ground that SOCOG induced a breach of the contract?

MR WALKER: Yes. Let me rephrase that. It was common ground that that which was a breach of contract was brought about at the instruction of SOCOG.

GLEESON CJ: Right. What was it that was actually done that brought about the breach of contract?

MR WALKER: A written direction.

GLEESON CJ: Yes, a written direction to do something. What was it that had the effect of bringing the contract to an end?

MR WALKER: Your Honour goes to bringing the contract to an end. Our concentration and properly the court’s concentration was on the breach, a continuing breach, as my friend points out.

GLEESON CJ: What form did the breach take?

MR WALKER: In turn, a communication by TOC to Mr Zhu repudiating the contract, saying, “Thank you very much for your effort. It’s over”.

GLEESON CJ: But unless he had proof of that, that is nothing.

MR WALKER: Quite, but it was a breach.

HEYDON J: Except that you can recover damages for it.

MR WALKER: You could get a dollar, and you would probably get more than that.

HEYDON J: Would it have mattered whether he terminated or not?

MR WALKER: No, that is my point. The ultimate termination merely affects the way in which the law proceeded to quantify loss.

GLEESON CJ: So the breach was a decision by TOC not to perform its contract, whatever that might involve?

MR WALKER: Yes. They wrote a letter which was a “Dear John” letter: “It’s all over, finished. Thank you very much.” It was a clear repudiation. We accepted that in the Court of Appeal. That is, we did not persist in an appeal against contractual justification by TOC.

GLEESON CJ: So SOCOG instructed TOC - - -

MR WALKER: To bring it to an end.

GLEESON CJ: - - - one way or another that contract was not going to be performed.

MR WALKER: That is right, the loose cannon. We cannot have these loose cannons. So that the whole case came down in the Court of Appeal focusing on the justification issue by reference to SOCOG’s obligations, and we do not shrink from that notion – not merely rights, they are correlative in this case – which had to do with the not unimportant, clearly superior by reference to two public Acts being involved plus the Olympic Charter which was referred to and to the extent I have noted contained within the terms of those statutes. Those were clearly superior rights within the meaning of the otherwise very well-established law which is stated in terms amply flexible enough to deal with circumstances of this case which we can safely say will not be repeated for a very long time to come. May it please your Honours.

GLEESON CJ: Mr Kelly.

MR KELLY: Just three short points, your Honours. Firstly, even if one accepted everything that my learned friend has put to the Court, significantly he has not addressed the threshold question, namely whether as a matter of principle the right upon which he relies to justify had anything to do with his conduct. In this case any question relating to intellectual property of the Olympic Movement did not enter the picture at all until literally a year or so after the proceedings were commenced when the defence is amended.

Indeed, to indicate the quality of mind being brought to bear by the relevant officers of SOCOG at the pertinent time, one turns to paragraph 111 at page 219 where there is a short but pithy passage. Justice Sheller is referring to Mr Reading, who is the relevant officer of SOCOG, together with Ms Ford and Ms Williams, the SOCOG in-house lawyer. Your Honours see at paragraph 111 his Honour records:

Ford advised Williams and Reading that it would be “far cheaper to put together some kits than to refund the money” and that if they decided to provide the kits “it may close the matter once and for all which would be a really good thing”.

These kits are plastic bags and other bits and pieces of paraphernalia which contain a couple of boomerangs and the relevant logo.

SOCOG, far from travelling at this lofty height of protecting the integrity of the Olympic Movement and Olympic-related intellectual property in China, was preoccupied with a much more humble task. How could they keep Mr Zhu’s $260,000 and not give him anything for it? “Shall we cobble together a few plastic bags?” What a good idea that was. That is the quality of the conduct of SOCOG and anything travelling at this loftier level is an afterthought with the benefit of legal advice having absolutely nothing to do with the facts of this case, hence the threshold question.

What is more, nothing my learned friend has said derogates from the two other fundamental propositions: one, that whatever lawful authority SOCOG may have had to protect intellectual property, it did not extend to causing the arrest of Mr Zhu as a means of enforcing its will; and secondly, if it was to act lawfully, it had available means to protect intellectual property, namely applying for an injunction, and the principle in BWIU v Odco plainly applies.

GLEESON CJ: If you were to receive a grant of special leave in this matter, you might need to work out a way of explaining the facts that relate the fact of the arrest to the cause of action a little more clearly than is done at the present time.

MR KELLY: Yes, your Honour. I think for present purposes I could do no better than adopt the way Justice Hodgson expressed it in the opening sentence of paragraph 219 where his Honour said:

However, the arrest was alleged in the Statement of Claim only as one of the means of bringing about the wrongful interference with Zhu’s contract –

It was an act of wrongful interference.

CALLINAN J: Would your notice of appeal need any attention? Does your notice of appeal raise that squarely?

MR KELLY: I think it does, your Honour, yes, in paragraph 2(d) and paragraph 7. In paragraph 12 of course, we contend that all of the facts, all of the findings of Justice Bergin which gave rise to the entitlement to exemplary damages and aggravated damages, they too are all facts and circumstances relevant to a proper determination of the threshold question of justification.

GLEESON CJ: Thank you, Mr Kelly.

MR KELLY: May it please the Court.

GLEESON CJ: In this matter there will be a grant of special leave to appeal.

AT 12.20 PM THE MATTER WAS CONCLUDED