Zhu v Treasurer of the State of New South Wales [2004] HCATrans 200 (15 June 2004)

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Zhu v Treasurer of the State of New South Wales [2004] HCATrans 200 (15 June 2004)

Last Updated: 15 June 2004

[2004] HCATrans 200

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S616 of 2003

B e t w e e n -

PETER TAO ZHU

Appellant

and

THE TREASURER OF THE STATE OF NEW SOUTH WALES

Respondent

GLEESON CJ
GUMMOW J
KIRBY J
CALLINAN J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

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

Copyright in the High Court of Australia

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

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

GLEESON CJ: Yes, Mr Kelly.

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

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

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

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

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

MR KELLY: Correct.

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

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

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

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

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

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

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

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

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

MR KELLY: Totally misplaced.

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

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

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

MR KELLY: Yes, your Honour.

GUMMOW J: None of which is here.

MR KELLY: Correct.

GUMMOW J: How has that come about?

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

KIRBY J: That is the trustee of the club.

MR KELLY: Yes.

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

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

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

MR KELLY: Yes.

GUMMOW J: That left SOCOG, which is dissolved.

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

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

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

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

MR KELLY: Yes, your Honour.

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

MR KELLY: Yes, your Honour.

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

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

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

MR KELLY: Yes, your Honour.

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

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

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

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

GLEESON CJ: Yes, thank you.

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

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

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

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

MR KELLY: Yes, your Honour.

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

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

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

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

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

MR KELLY: Yes, your Honour.

KIRBY J: And awarded.

MR KELLY: $200,000.

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

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

GUMMOW J: Is that a criminal offence?

MR KELLY: No.

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

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

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

MR KELLY: Yes, your Honour.

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

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

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

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

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

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

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

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

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

MR KELLY: Yes, your Honour.

KIRBY J: It is really a pretty shocking story.

MR KELLY: That is precisely what happened.

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

MR KELLY: Yes, your Honour.

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

MR KELLY: Certainly not, no.

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

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

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

MR KELLY: Definitely, yes.

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

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

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

MR KELLY: Yes.

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

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

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

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

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

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

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

MR KELLY: It is a complex matter - - -

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

MR KELLY: Yes, your Honour.

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

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

GUMMOW J: That is an agreement between whom?

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

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

MR KELLY: Yes, your Honour.

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

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

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

MR KELLY: Yes, and controlling it.

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

MR KELLY: They may not have - - -

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

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

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

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

GUMMOW J: Or its source.

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

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

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

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

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

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

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

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

MR KELLY: Yes, your Honour.

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

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

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

KIRBY J: And to take away his passport.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MR KELLY: Yes.

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

MR KELLY: That is their argument - - -

HEYDON J: Yes.

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

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

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

HEYDON J: I will just take (b):

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

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

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

GUMMOW J: Where do we see that?

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

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

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

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

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

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

MR KELLY: That is right, your Honour.

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

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

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

MR KELLY: Section 12(1), yes.

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

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

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

MR KELLY: It would make a nonsense of it.

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

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

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

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

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

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

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

MR KELLY: Correct. He was not - - -

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

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

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

MR KELLY: Yes, your Honour.

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

MR KELLY: Certainly. Yes, your Honour.

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

MR KELLY: Yes, your Honour.

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

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

HEYDON J: But that might be a licence.

MR KELLY: Yes, your Honour.

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

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

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

MR KELLY: I can get it for your Honour.

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

MR KELLY: One does.

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

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

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

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

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

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

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

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

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

MR KELLY: Yes.

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

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

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

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

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

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

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

MR KELLY: I believe it is, your Honour.

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

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

MR KELLY: Yes, your Honour.

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

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

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

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

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

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

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

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

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

GUMMOW J: No, to the fullest extent practicable.

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

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

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

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

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

HEYDON J: It referred to its:

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

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

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

MR KELLY: Yes, your Honour.

GUMMOW J: Plus the notice of contention point.

MR KELLY: Yes, your Honour.

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

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

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

MR KELLY: Yes.

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

MR KELLY: Correct, yes.

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

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

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

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

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

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

HEYDON J: The deed poll.

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

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

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

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

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

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

MR KELLY: Sure. Yes, your Honour.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GUMMOW J: On this question of statutory duty, it may be worth looking at our decision in Puntoriero v The Water Administration Body [1999] HCA 45; 199 CLR 575. One does not ordinarily construe a conferral of statutory powers, a conferral of statutory authority to commit wrongs, and if it is there, one would expect then to be an indemnity in the statute. That is what was the subject of that case.

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

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

MR KELLY: Certainly, your Honour.

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

MR KELLY: Quite so.

GUMMOW J: It is in the statute.

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

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

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

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

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

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

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

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

GLEESON CJ: What about the Chinese authorities?

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

If one adopts the language in paragraph 185 of the Court of Appeal’s judgment, and nothing more and nothing less was involved, if it was alleged that this particular agency agreement “required continued illegal conduct not only by Zhu but by others”, if that were so then – if that was one’s allegation, then you would need to apply for an injunction against Mr Zhu and against those others, whoever they might be. In this case, of course, SOCOG did nothing.

GUMMOW J: The higher right, if one is going to talk about that, is the statutory right to get this remedy, which is a federal right - - -

MR KELLY: Yes, your Honour. It is brought into existence for a special purpose. It is most surprising that it is not employed, except in a context such as the present, where in fact there was never a complaint about any of this. SOCOG was going along with it quite nicely. SOCOG received and retained the whole of the money, the 260,000, and did not disgorge that until ordered to do so by Justice Bergin.

KIRBY J: Puntoriero was a case that involved an exemption from liability clause. That was a matter on which views differed in the court. There is nothing like that in this Act, is there? Or is there?

MR KELLY: No. The relevant sections are set out in the - - -

GUMMOW J: But you would want one. If you were the office boy at SOCOG you would be looking for one.

MR KELLY: Yes, your Honour, some residual power.

GUMMOW J: Because you would be committing - - -

MR KELLY: There is certainly a provision to the effect that – and here I am looking at – there is certainly a provision to the effect that the remedies provided under Division 3 of the Indicia Act – I am looking at page 74 of this bundle.

KIRBY J: Which section?

MR KELLY: Section 47.

GUMMOW J: Section 54 - - -

MR KELLY:

(1) The remedies provided under this Division are in addition to remedies provided by any law (whether a law of the Commonwealth or a law of a State or Territory) that confers any rights or powers on SOCOG - - -

GUMMOW J: And section 54 is important too. It is a section 109 clause, or an oust – a limitation of 109 clause.

MR KELLY: But “remedies” in this context means legal remedies, not self-help.

KIRBY J: There does not seem to be anything like the exemption debated in Puntoriero.

MR KELLY: No, nothing in the nature of an exemption at all, your Honour. May I take your Honours just very shortly to the decision of the Privy Council in SOS?

GUMMOW J: Is that the appeal from the Gambian - - -

MR KELLY: Yes, your Honour. That is in [1996] UKPC 11; [1996] 1 WLR 987.

GUMMOW J: You rely on page 993G?

MR KELLY: Yes, your Honour.

KIRBY J: Is this the passage you quoted in your submissions?

MR KELLY: It is, yes, your Honour. This is a case in which the gentleman who was employed as the director of the orphanage operated by the international aid agency SOS Kinderdorf was entitled under his contract of employment with the second defendant to the use of a house and a car, and his contract was interfered with by the first defendant effectively turning off his electricity and taking away the car, causing all his frozen food to rot.

The question was whether another fact which came to the attention of the defendants after these unhappy events could be relied upon by either of them under the British equivalent of Shepherd’s Case. That additional fact was that the year before Mr Bittaye had loaned a considerable sum of money belonging to the orphanage to a friend of his and put an IOU in the safe. It was held that the employer could rely upon that fact as additional support for termination but not so the party who was interfering with his contract. The portion upon which we rely is the portion indicated by your Honour, where it is maintained as a matter of principle that for the purpose of the defence of justification to this tort one has to be able to justify one’s conduct at the time it occurred, not by reference to something that one learns on some other occasion.

KIRBY J: Now, just tell me – in your written submissions you said it was important to resolve the matter in issue by reference to principle. Now, what is the principle that upholds that conclusion?

MR KELLY: We contend, your Honour, that the principle is that the gravamen of the tort and the gravamen of the defence are intention. If matter is not present to the mind of the interferer at the time of the interference, it is not available to him or her as a means of justification, because what this tort is looking at and focusing on and what the defence of justification as a matter of principle we contend should similarly focus on is the quality of mind for this is an intentional tort. Accidental excuses are not available. That is as far as we can take it.

KIRBY J: I understand that and that may be right. A question was raised in the special leave hearing as to whether or not at some later stage, that is to say in the working out of the damages that flow, if it subsequently be discovered that there was a basis for acting, that from that point the damage may not be recoverable because of the subsequently discovered foundation for what was done tortiously originally. Now, is there anything in that point?

MR KELLY: I do not think there is, your Honour. I think that may well have been a manifestation of the SOCOG argument, which is that the arrest has nothing to do with this case and was not before the court, when your Honours see from the judgment of Justice Bergin it was squarely before the court and her Honour’s account of the issues is the best indication of what the matter was before the court in addition to the written submissions to which I have taken your Honours today. The only defence to the arrest component of the interference is the threshold question whether SOCOG caused it or not and that, indeed, is expressed in the clearest possible terms in the written submissions to which I took your Honours earlier today, to which I should just take your Honours back, to page 118 - - -

KIRBY J: I asked you a question whilst you were dealing with the Privy Council authority, is there anything else in it that you wanted to deal with?

MR KELLY: No, your Honour, I think that is the point, but it is a decision of very high authorities squarely to the effect that ex post facto justification is really not available.

KIRBY J: And that is because the social wrong that the law is addressing is the wrong of intentional interference and you have to have the excuse for the intention and the tort at the time you do that interference.

MR KELLY: Yes.

KIRBY J: It is not something you dream up or advise of later.

MR KELLY: Yes, because it - - -

KIRBY J: I can understand all that unless it be founded in a higher law, that is to say the statute, but that is something Mr Walker will have to address.

MR KELLY: And in any event that will determine - - -

KIRBY J: And if the Parliament has spoken in a way that is relevant and subject to interpretative principles about how one interprets what Parliament has said, that is going to bump away a common law tort every time.

MR KELLY: Yes, I could not offer an argument against that proposition, but one does not have that in this case. One has a grab bag of excuses thought up afterwards - - -

KIRBY J: They certainly were a - the first one that was given was that he had not paid the extra sum and that was evidenced by a document signed by the person who raised that objection. Really, talk about Dad’s Army.

MR KELLY: Yes, your Honour. I was just about to take your Honours finally to page 118 of the thin volume of supplementary materials, paragraph 11 on page 118. Your Honours will see the final proposition in SOCOG’s case in their submissions on justification before Justice Bergin:

Additionally, the Court will need to have reference to the entire factual matrix out of which arose the alleged actionable conduct. The Court would need to have regard to a number of factors including the failure to establish any relevant wrongful intention on the part of SOCOG in its entry into the Deed of Release: the impecuniosity of TOCMS . . . the relationship between SOCOG and other members of the “Olympic Family” who were also the recipients of rights conferred under the Deed executed by Mr Zhu and the failure –

and this is the important part -

explained elsewhere, of establishing a causal connection between SOCOG’s conduct and the arrest of the plaintiff.

The only proposition offered in defence of the arrest case is that it was not caused by SOCOG but, of course, Justice Bergin found that it was. That is the way we put our submission.

GLEESON CJ: Just before you leave us, can I take you back to paragraph 185 of the Court of Appeal?

MR KELLY: Yes, your Honour.

GLEESON CJ: In particular, the second and third sentences of that paragraph. The second sentence of paragraph 185 talks about something that the agreement required and the third sentence talks about something that the agreement permitted and what the agreement is said to have permitted was exploitation of intellectual property without the consent of, for example, the Chinese authorities.

MR KELLY: Which, of course, is squarely wrong because it was a term of the contract that Mr Zhu get consent.

GLEESON CJ: If the only permission, properly understood, granted by the contract was a permission to do something with the consent of anybody whose consent was necessary in the place where you are going to act, how does the permission, subject to that consent, become a requirement to act without the consent?

MR KELLY: It does not.

GUMMOW J: In the end, that is what the case is about, is it not?

MR KELLY: Yes, your Honour. Mr Zhu paid his money on 8 March, signed the agency agreement on 11 March and removed himself to China on 23 March and attended upon Mingde Tu, that man who was seen on television jumping up and down with the brown suit on when Beijing was awarded the Games, the secretary-general of the Chinese Olympic Committee and vice-minister of State in the sports department.

KIRBY J: What has the brown suit got to do with it?

MR KELLY: Just to reminisce, your Honour.

HEYDON J: Colour and movement.

MR KELLY: And that gentleman gave Mr Zhu what is translated, but uncontested in the evidence, macro support.

GLEESON CJ: If Mr Zhu were a person of normal commercial prudence, he would probably seek out the necessary consent in the People’s Republic of China.

MR KELLY: He asked for a letter and was told that the way the sports department works the Games would probably be over by the time they had managed to type it up.

GLEESON CJ: Tell me what happened under the Court of Appeal’s decision to Mr Zhu’s $260,000?

MR KELLY: There is an alternative claim before Justice Bergin for return of the 260,000 upon the basis of a total failure of consideration. If everything that had been said against us was so, then Mr Zhu had paid his 260,000 for nothing.

KIRBY J: But you got the blank letterhead?

MR KELLY: Yes, we did get some blank letterhead, but it was of no value.

KIRBY J: It cannot be a total - - -

GLEESON CJ: But under the order of the Court of Appeal, what happened to the $260,000?

MR KELLY: We retained the $260,000. SOCOG conceded that the 260,000 plus interest upon it was repayable to us as on a total failure of consideration, and the Court of Appeal set aside the judgment of Justice Bergin and, in lieu thereof, ordered that we be paid the 260,000 plus interest.

GLEESON CJ: Thank you.

GUMMOW J: Where do we see that order?

KIRBY J: The relief you seek is the restoration of the judgment at trial?

MR KELLY: Yes, your Honour.

GLEESON CJ: Where is that order about the 260,000?

HEYDON J: Page 3274, order 4.

MR KELLY: Thank you, your Honour.

GLEESON CJ: Yes, Mr Walker.

MR WALKER: The notion of an equal or superior right does represent, on what might be called the authorities collectable in a treatise footnote on this area of the law, somewhat of a will-o’-the-wisp. In particular, the notion of the alternative equal or superior shows that those using the concept are plainly not thinking in the terms that Justice Gummow has, with great respect, correctly brought to the forefront, namely the positive command of enacted law.

GUMMOW J: No, but I have been looking at the Shell Oil Case, 37 SR 394 at 415 to 416, Sir Frederick Jordan’s judgment which, in a way, is the most sensible discussion on this subject. He is using the expression in relation to common law rights, in particular proprietary rights. It is property over contract.

MR WALKER: Yes, although, of course, the analysis has suffered in various places and times because they have been assimilated completely, property and contract, in various discussions but, with respect, we accept what your Honour has said. That is an expression, equal or superior, which leaves out of account fundamentally - - -

GUMMOW J: It is the same sort of idea which he would have had in mind given the time, 1937. It is the same sort of idea that informed Cowell v Rosehill Racecourse whereby the contractor is turned into a trespasser in exercise of the ownership right.

MR WALKER: Yes. Now we have to accept - you only have to read the so-called authorities on the point – we have to accept that a jurisprudence that goes no further than, and I quote “the good sense of the tribunal to know what side of the line the case falls on” is one which requires more detailed exposition of whatever that approach describes when one comes to the facts of the case, and I will, as I must, confront some of the facts – I hope all the relevant facts of the case including the ugly ones.

KIRBY J: You are leaving the application for the notice of contention to the end, are you?

MR WALKER: May I come to that when I come to that point, but thank you, your Honour, for reminding me of another aspect. My learned friend has not on his feet addressed what we apprehend to be in his submissions an application for leave to amend the originating process. That application, which I think he has made in his written submissions in reply, is resisted by us. Your Honours will recall that it is made in terms of inserting the averment or statement that the arrest was unlawful.

Now, I do not think my friend has either in written submissions here or below, or in the way the case has ever been framed below, or, to be fair, in the written submission in which that application is found, he has never alleged that the policeman committed the familiar tort of wrongful arrest. What has always been very clear is that we have been accused, for the purposes of the jurisprudence of the tort of procuring a breach of contract, of using unlawful means.

GLEESON CJ: Well, the policeman is not a party to the proceedings, is he?

MR WALKER: That, of course, is the first obvious objection to raising by way of argument or with the solemnity of an appeal any such allegation. So the tort of wrongful arrest is no part of this case.

KIRBY J: But why would he want that? Why does he want to include that averment? What is the necessity of it, given the findings he has and the position that you now adopt?

MR WALKER: Your Honour, I am not game to argue my learned friend’s application.

KIRBY J: He has not pressed it, or he has not raised it.

MR WALKER: I simply raise it in order to note that it has not been pressed. In our submission, we would wish to be heard on it because of what it says about the nature of the causes of action raised in this case. If it is not persisted in, I will not spend any time on doing that.

KIRBY J: As between himself and yourself as successor to SOCOG, he can make suggestions that the arrest was unlawful, but he does not seek any remedy against the police constable or any damages against him because he is not a party.

MR WALKER: He cannot seek this Court, with respect, to make a finding against a policeman for acting upon information which, in the world of whispers held against us, was the result of Ms Ford, in particular, but others as well, for whom we are responsible, speaking to the policeman. In other words, no doubt it was a deliberate decision not to sue the police for wrongful arrest because the police presumably acted entirely reasonably, as they must quite often, on the basis of information which was wrong.

Now, there may be another tort which a pleader would have thought about altogether different in which Ms Ford, or SOCOG, would have been the defendant, namely, the tort of procuring an arrest analogous with malicious prosecution. That also was not sued on. That is why the pleading point to which I shall return when I come to the question of facts is a very important one. It is also why I now raise the question of the leave to amend. In our submission, no such amendment ought to be entertained, but if my learned friend is to argue for it, we would seek an opportunity to respond to the way in which he puts it, as it is presently raised.

HEYDON J: The trial judge found that there was an indirect interference with the plaintiff’s contractual rights.

MR WALKER: Yes.

HEYDON J: That requires some independently unlawful act. Is not the unlawful act the - - -

MR WALKER: And her Honour applied the epithet “unlawful” to our conduct.

HEYDON J: Is not the independently unlawful act the procurement falsely of an arrest, or the procurement on the false arrest?

MR WALKER: One could be forgiven for thinking that a pleader who characterised the conduct of SOCOG in causing the arrest as unlawful for the purposes of the tort of indirectly interfering with contractual relations must have considered whether to sue SOCOG directly for the tort of maliciously procuring the arrest. On the other hand, the evidence to which I will come perhaps provides the clue as to why that tort was never alleged, because the evidence does not include the cunning or malign motive in relation to the arrest that your Honours might be forgiven for thinking is contained in my learned friend’s use of the word “purpose” this morning in answer to a question from the Bench.

The evidence to which I will take your Honours shows that Ms Ford was, for inadequate reason upon the judge’s findings that we do not challenge, suspicious of the validity of the 25 show certificates to be presented at the brewery in Shanghai, was suspicious of what I will call the whole exercise and, of course, was acting against this background, that there had been preceding, that is, preceding her involvement, interest by the police in the whole of the Chinese connection – it had to do with immigration control in particular, “influx of criminals” to use a phrase – plus she came in and did not do her homework well or quickly enough and criticised by her Honour but never convicted of either fraud or malign motive of the kind that one would expect in a tort of maliciously procuring the arrest of a person analogous with malicious prosecution.

Her Honour records a submission that Ms Ford spoke to the police recklessly indifferent to the truth of what she was telling them concerning the existence of authority to sell memberships in China. But we do not find any finding which could be described as explicit, plain or clear that Ms Ford had committed, in effect, the tort of deceit, had acted fraudulently and had certainly procured an arrest by what she knew or ought to have known was a lie. Rather, the criticism is in terms of carelessness, lack of diligence in getting on top of the file and a general climate of suspicion which was, to paraphrase her Honour’s findings, unworthy of these bodies.

HEYDON J: But she said that Ms Ford behaved in a reprehensible fashion.

MR WALKER: Yes.

HEYDON J: And consciously and contumeliously disregarded the plaintiff’s rights.

MR WALKER: Yes, and the word “disgraceful” is also attached to my client’s conduct or my client’s predecessor’s conduct quite specifically in relation to the arrest. I cannot and would not back away from those epithets, your Honour. The criticisms made of the dealings with the police are criticisms with which I have to deal. Whether they are fatal to my argument or not, we do not seek to move away from those criticisms. But what they do not include is the attribution to Ms Ford or anybody else on behalf of SOCOG of the state of mind which would have led a pleader, who obviously thought of many, many things, if one looks at the originating process in this case, to plead a tort of maliciously procuring the arrest. That is not pleaded. Whatever the amendments sought in the written submissions in reply in this Court may mean, they simply attach an epithet “unlawful”. That is an unobjectionable raising of a matter of law, but - - -

KIRBY J: You have lost me, Mr Walker. We have enough on our plate in this case to deal with without going to things that were not pleaded, are not an issue, concerning people who are not parties. It just seems completely irrelevant.

MR WALKER: Your Honour, there is an application made against me. The application is made against me to amend - - -

KIRBY J: Is your concern that the Court may, in expounding its reasons, go beyond the epithets used by Justice Bergin at first instance?

MR WALKER: Yes, in describing either the arrest as unlawful, that is, the policeman committed a tort or perhaps an offence, and, second, that SOCOG by its servants or agents acted so as itself to have committed a tort of maliciously procuring the arrest, neither of which was pleaded. The first has the objection to which the Chief Justice has drawn attention at least, and the second has the objection to which I have drawn attention – they are not findings of fact, nor was there factual exploration at trial apt to permit that to be done at this last moment.

KIRBY J: But why would we go into this, given that the issue before us is intentional interference in a contract?

MR WALKER: Your Honour, with respect, that is my position as well. Why go into it? I have gone into it now because there is an application for leave to amend made against us in writing.

KIRBY J: I did not hear a word raised about it.

MR WALKER: In this Court advocacy is both written and spoken, and I do not understand we are encouraged to touch on every point that is in our written submissions when, I would think - - -

KIRBY J: I hope not.

MR WALKER: And so that is why I have raised it. In our submission, we, as I say, need an opportunity to respond, if, for example, in purported reply my learned friend were to say anything about that application for leave to amend.

HEYDON J: You say this was a lawful arrest?

MR WALKER: Yes, by the policeman, a lawful arrest. That is, policemen may arrest people notwithstanding that the information upon which they reasonably do so turns out to be false – indeed, may turn out to be a black lie by the person who provides it.

HEYDON J: You do not dispute that the trial judge’s findings that there was an indirect interference with the agency agreement - - -

MR WALKER: I cannot.

HEYDON J: - - - per medium of this arrest was correct?

MR WALKER: Your Honour, her Honour finds that it was unlawful in a passage which uses the word “therefore” in a somewhat obscure fashion. Can I take your Honours to it in volume 3131, paragraphs 387, 388. The second sentence of 387:

I am satisfied that but for the information provided by SOCOG that the Certificates were not genuine and the failure to provide the information in relation to the civil dispute that had arisen –

those are causation matters –

the plaintiff would not have been arrested on 6 December 1999. I am satisfied that SOCOG’s conduct caused the plaintiff’s arrest and the subsequent seizure of all his documents relevant to the conduct of his agency.

SOCOG’s inducement of DS Nicholls in the circumstances of the existence of the plaintiff’s Agency Agreement –

that is, the inducement of the detective sergeant –

was therefore unlawful –

and it would appear that “therefore” simply calls back the notion of the causation. Now, the submission I referred to is recorded at 385, second sentence:

It is also submitted that such allegation was made with reckless indifference to the truth, bearing in mind that Ford was aware of 657 or 743 memberships which the plaintiff was entitled to allocate.

Of course, that is a little bit of a non sequitur. Such an entitlement does not mean the certificates are genuine, of course, but that was the submission. One does not find a finding about that and a finding about the honesty of an important witness is one that cannot be made or found between the lines.

One can then go to 438 in her Honour’s reasons for this reference, just after the word “disgraceful” to which I referred:

The level of suspicion in this world of whispers of Ford and others at SOCOG was fuelled by a lack of proper information, a lack of effective communication within SOCOG and with its enquirers, a lack of sensible commercially sound inquiries of the people of whom inquiries should have been made, a refusal to deal in good faith with or even speak to the people who had been appointed as agents of the Club and a willingness to become embroiled in what I am satisfied was a disastrous “team” approach to what was thought by the police, on the information provided to them by SOCOG, to be an international conspiracy to defraud and damage the Club.

Now, that, in our submission, is not a set of findings of fraud; it is a set of findings of reprehensible and careless conduct.

HEYDON J: What is a refusal to deal in good faith except fraud?

MR WALKER: That does not mean fraud, certainly not. What it means is not taking the direct approach of saying to Mr Zhu, “Hey, what is all this about?” instead of whispering to the police, “I do not know what this is about.” That is what that means, your Honour. It is certainly not a finding of fraud or deception on her part.

KIRBY J: The suggestion is that public officers acting under a statute, instead of rushing off downstairs to see a group of policemen and have the person arrested, would have said, “Look, we have a problem and we think we have a problem on our hands here. We don’t believe that this club have any right to allow you to use the intellectual property in China and we don’t want you to be using it here”.

MR WALKER: Yes. I lose this case, your Honours, if - - -

KIRBY J: This is how public officers are supposed to act under statute.

MR WALKER: I do not want to say a word against any of that, appearing, as I do, for the Minister. All I want to say is that we lose if (a) there is a defence of justification where we concede we bear the onus and in the evidentiary battle and then the evaluative exercise finally performed in this Court it suffices that there were better, more civilised ways of achieving what was achieved by the means - - -

KIRBY J: It is not just civilised or politeness. I mean, after all a person lost his liberty here.

MR WALKER: You can use the word “decent” from - - -

KIRBY J: He was humiliated. He lost his, no doubt, respect in his own country. He lost contractual rights. All of this followed from really a disgraceful course of events by public officers purporting to act under public power.

MR WALKER: What I will not be arguing in my attempt to justify is that these are epithets which were wrongly applied by the Court of Appeal who adopted them, or by the trial judge. My exercise is a narrower one, albeit it has a wide effect. I have just conceded that we ought to lose if it suffices in law that there be easily seen, as it may easily be seen here, that there were ways more consistent with decent dealing or civilised behaviour of achieving the end which we call in aid in our defence of justification. That is, if it be the law that you have to show you took the best route and if you cannot show you took the best route you must lose justification, then I must lose, because how could I possibly say this was the best route? It was characterised by – it is being kind to my people, no doubt, to say “bumbling”. Certainly, the paragraph to which I have just referred, 438, contains findings with which I have to contend, not so as to back away from them, but to live with them.

GUMMOW J: Paragraph 438 is under the heading which started at 424 “Exemplary damages”.

MR WALKER: Yes, it is. Now, none of this, of course, because of the way in which your Honour misapprehended the defence of justification, came into the justification exercise, however, they are findings of fact which are good for all purposes, I accept, and, as it happens, I would also accept that the kind of epithets which are the targets of a plaintiff seeking exemplary damages will be very much grist to their mill in seeking to rebut a defence of justification. I have to accept that. The cases, whether they be American, which talk about propriety, or the English cases using words such as “decent”, what decent people would do, do call up - - -

KIRBY J: That sounds very English.

MR WALKER: Does it not? It is an Australian quality as well, your Honour, and one that peculiarly applies as a cannon of judgment against public organs, organs of government. In our submission, the whole discourse in those paragraphs under the heading of “Exemplary damages” is relevant to the justification burden I seek to discharge.

Could I then take you to 452, bearing in mind what your Honour Justice Heydon has, with great respect, challenged me with in relation to the finding of unlawful means, indirect interference. There her Honour uses the expression, “wrongfully interfered . . . by causing his arrest”. There is no further analysis than that. Finally, at 456 one finds that the criticism made by her Honour in this context is in rejecting the notion that my client submitted below that “it was not responsible, or did not cause, the plaintiff’s arrest”, et cetera. For aggravated damages, she said:

However the fact that one co-operates with the police does not remove a requirement to act responsibly, indeed, the need for clarity of approach and the provision of accurate information –

That, plus what follows, in our submission, is very far from finding that the hapless Ms Ford lied to the police so as to bring about some truly nefarious plot by which the police locked this workman’s tools up – that is, by which the police got this man off the scene of travel between Australia and China and without the papers by which he could communicate, et cetera.

That does not appear to be reflected in any of her Honour’s findings. The language to which I have just taken your Honours, supported by the earlier detailed findings to be found in the first instance judgment concerning Ms Ford’s actual suspicions – that is, her subjective state of mind was suspicious. It was not deceitful or fraudulent; it was suspicious. It was unreasonably - - -

KIRBY J: She probably caught it from Mr Reading. Mr Reading started off by being very suspicious, but he would never confront the appellant, he would never put it to him. Really, it is a very shabby story. Whether it leads anywhere in law is another matter. There was a case recently in a country not far from Australia where something like this happened, and you expect sometimes these things to happen in third world countries, but you do not expect them to happen in Australia.

MR WALKER: Your Honours, it is not a mater really of cultural expectation from any particular nation or society - - -

KIRBY J: It is not cultural expectation; it is a matter of law.

MR WALKER: And that is my point.

KIRBY J: It is a matter of what the law requires public officers in this country to do.

MR WALKER: Quite so. That is the law asks for standards of conduct in various areas relevant to this case which we accept make relevant inquiries of fact and adjudications of conduct in terms of the epithets that have been levelled against us and that we do not challenge. So whether it be exemplary damages, aggravated damages or justification in relation to this tort, they are all relevant. As I say, there is a very rapid route to defeat for us if it simply suffices to say that a course of conduct which attracted those epithets by definition could not justify because it attracted those epithets. We seek to contest that.

Could I then go back to where, in our submission, one could start, although it may be that there is a choice about the proper starting point. We choose not the Olympic Charter, though there would be others who would say that is the fountain of everything, we start with the Commonwealth statute. Now, apropos a number of the matters that your Honours have raised with my learned friend in argument, may I try to eliminate some aspects of what might otherwise have been arguments as follows.

Your Honours have not read any reference to the familiar doctrine of authorising a tort because I do not argue that the statute does that in the sense, for example, of the 19^th century public enterprise statute authorising a dam to be built in a particular way where by necessity what would otherwise be nuisance, et cetera, must be authorised. With respect, my learned friend is correct in his submission, which this Court should accept, that neither this Act, that is, the Indicia Act, nor the SOCOG Act could sensibly be read as to permit, let alone require, SOCOG to act unlawfully. Now, that, of course, is at this stage in my argument a somewhat bloated word, depending, as it does, upon matters of the kind that are rendered acute by the arrest.

However, it would not prevent SOCOG from taking steps either under a contract to which it was a party or in relation to contracts in which it becomes interested, such as in this case, in such a way as to render itself civilly liable. So when the word “unlawful” is unpacked, it cannot be that these statutes withdraw authority if after the event it turns out that SOCOG has defaulted in observance of a provision of one of the many, many - - -

GUMMOW J: You mean authority in the sense of ultra vires?

MR WALKER: Yes. That is an elementary point - - -

GUMMOW J: As a matter of corporation law.

MR WALKER: It is an elementary point that needs to be made, because otherwise the word “unlawful” simply operates in my learned friend’s argument to say that this was tortious, unlawful; therefore there is nothing to be found in the statutes to support it. In our submission, that is not right. However, we accept that nothing in the nature of crime can be obviously spelled out of the authorities granted by any of these Acts.

In this Court the question of the territorial reach of the Indicia Act has now been raised from the Bench. As your Honours have observed from the reasons in the Court of Appeal, it played no part whatever in the analysis in that court. A reason for that, your Honours might well think, includes some of the concessions which my learned friend appropriately made this morning to the effect that there was conduct, in this case in the Australian Territory, undoubtedly governed by this law such as the preparation of the kit for dissemination in China lodged with the Olympic Club, the trustee, for approval pursuant to the agency agreement and pursuant to the deed poll. That is, here was a kit which used material including all the otherwise forbidden words of association and logos – it had a club logo on it – and the request was, “Approve this for my use in China”. Your Honours will find that in the trial judge’s reasons as findings in volume 14, pages 3047 to 3048, paragraphs 106 and 107.

So that there was, on any view of it, in the course of what was already commercial conduct extending between and linking Australia and China by Mr Zhu a use within the meaning of section 11 of the Indicia Act of the words and symbols protected by that Act.

HEYDON J: I am sorry to interrupt. The TOC logo consisted of, among other things, the emblem of the 2000 Games. That logo itself was infringing you say.

MR WALKER: It needed a licence, yes.

HEYDON J: I am sorry to be tedious, but which pages of the appeal book show us the TOC logo?

MR WALKER: I have been trying to find that. May I take that on notice for after the adjournment? I do apologise. I had anticipated that. I - - -

HEYDON J: Assume one were the duty judge when someone came in to say, “There is this fellow running around committing torts and we want to stop him in the next half hour. Here is an affidavit and that is what he is doing”, just something like that, not 14 volumes.

MR WALKER: Yes, I am sorry I cannot do it just like that, which is what I would like to have done.

GUMMOW J: This word “licence” seems to have developed some mystique in this litigation too. It just means consent which may be inferred from the inactivity of this gentleman to whom these materials were provided at 106. Nothing happened. You did not get a response.

MR WALKER: Yes. Do not forget that is not SOCOG’s desk.

GUMMOW J: No.

MR WALKER: And that is important because SOCOG’s licence was necessary.

GUMMOW J: Well, there is a question of sub-licence too.

MR WALKER: I will have to track through that chain but, your Honour, may I say first about - - -

GUMMOW J: Was SOCOG not licensed to sub-license? Is that the commercial sense of it all?

MR WALKER: SOCOG had licensed the trustee to behave in certain ways in Australia.

GUMMOW J: To get it down to tin tacks, Mr Walker, is there any written licence to SOCOG?

MR WALKER: To SOCOG?

GUMMOW J: Yes.

MR WALKER: Yes, it does come in the host city contract, to which it intervened, to use the jargon, and it comes - - -

GUMMOW J: Well, we had better look at it.

MR WALKER: Yes, I am going to take your Honours through what I will call “the chain”. Justice Sheller has done that, and, in our submission, the difficulty in grappling with the notion of Mr Zhu as ultimately permitted to do what he was doing comes out when one looks at that chain. The trustee had no right to pass to him. That was understood by the parties, which is why the deed poll existed, which ensured that it was SOCOG, not the trustee, who would control. Ultimately, SOCOG – for somewhat different purposes, but in similar fashion to my friend – we would characterise as a body which was itself not a free agent, bound in many ways, not least by the statutory requirement in the terms that your Honours have already heard in relation to the Olympic Charter.

Now, those are matters which, in our submission, cannot be ignored when one comes to consider the reach of the Commonwealth statute. We do not argue that the Chinese Olympic Committee, in anything it did or did not do, was breaching any provision of this Act, because there is no evidence that the Chinese Olympic Committee presumed to do anything in Australia.

GLEESON CJ: Who are the “others” referred to in paragraph 185 in the second sentence?

HEYDON J: Is it the subagents?

MR WALKER: The subagents are what we suppose is mainly intended. It may also include officers of the trustee.

GLEESON CJ: Thank you.

MR WALKER: Your Honours, as Justice Heydon has pointed out, the application of the statute, quite apart from the common territorial extension in section 5, includes in familiar constitutional nexus form, the extension to certain conduct in subparagraph 6(b)(i) to which the - - -

GUMMOW J: Section 6 is the sort of provision that is found in the Trade Practices Act. It is a constitutional peg provision.

MR WALKER: Yes, that is right, and in - - -

GUMMOW J: Section 5, however, is a geographical reach section - - -

MR WALKER: Yes, so we have the familiar - - -

GUMMOW J: - - - and it tells you where the use is taking place.

MR WALKER: Yes.

GUMMOW J: It may be in international commerce, but it is a use in Australia.

MR WALKER: Your Honour, I am not going to contest any of that and my submission really has been anticipated, with respect, by your Honour, but you have to read sections 5 and 6 together. The subject matter of 5 is territory, the subject matter of 6 is conduct, because it uses the notion of “use”, and it would be most odd - indeed, there is no warrant for it in the words, to read section 6 as having a territorial effect directly in terms of where does this law constitute governing law over and above section 5? But, of course, it has a different species of extraterritorial effect just as control of an abattoir in the hinterland has an effect on what can be delivered to Saudi Arabia or to California. It has an effect, but that does not mean, of course, that it has or purports to operate extraterritorially as sovereign law.

GUMMOW J: Does this Act create any offences?

MR WALKER: Yes, it does - - -

GUMMOW J: Or does it just create a series of legal norms which are enforceable simply by the court processes in civil action under Part 5?

MR WALKER: It has the concept of contravention of section 12 in section 13A, and - - -

GUMMOW J: It does not, does it? You simply go to Part 4 Division 3, “Remedies”.

MR WALKER: Yes. There are all the Customs forfeiture provisions before that.

GUMMOW J: Yes, indeed.

MR WALKER: Which are quite important, but there is no offence provision – I am not sure whether there purported to be offence provisions and regulations - - -

GUMMOW J: There may be something in the Crimes Act that would get caught up, I do not know.

MR WALKER: Your Honours, we accept that this is not a statute which on the face of it would be construed so as to have reached as sovereign law into the mainland of China; nor for that matter to have the effect that what one does in China and in China alone falls under the aegis of this statute. That I am bound to argue, as it were, against myself – though it is not against my argument – comes from a number of matters. First of all the Olympic Charter is clearly relevant to be taken into account, and in ways that we have put in writing and which the Court of Appeal, Justice Sheller’s reasons set out, it is impregnated with the territoriality of national Olympic committees; impregnated with it to the extent that, as your Honour Justice Gummow pointed out in relation to intellectual property, there is specific provision made, not merely encouraging but requiring the local Olympic bodies to achieve whatever protection registration so-called they can get in their local systems.

When one then comes to subsection 10(2), to use an example, one finds that the way in which events overseas are dealt with in this statute include consequences when goods are imported. So that, applying Games (Indicia and Images) to goods in China is shown quite explicitly in subsection 10(2) to be dealt with not directly by a prohibition on such application, far from it, but by the consequences upon importation by reason of the deemed extension of that notion applied in subsection 10(2). That is a very clear indication that this is not a statute which can straightforwardly or simplistically be interpreted as governing conduct in China. It does so in a particular way only.

HEYDON J: The international members – did they get their infringing merchandise in China, or did they get it given to them when they came into Australia?

MR WALKER: We know that some of them were going to get something in Shanghai. We know that material was delivered in Australia and we know that use was requested – that is, use in China and in Australia – by the approval which sat on the desk pending interpretation by a therapeutic masseuse in the passage to which your Honour has - - -

KIRBY J: That itself is a very odd thing.

MR WALKER: “Extraordinary” is the expression and I will not seek any qualification of that either, your Honour. Whether, of course, it is sitting on the table with only that interaction being the attention paid to it, whether that amounts to acquiescence and licence was not pleaded and is not a case and certainly there is no finding about that.

Mr Wyness was on no view of matters an office manager par excellence. Now, there may be some other comments that might have been made about him as well, but the action against him was settled and discontinued. That, of course, is not attributable to SOCOG. Sitting on the club committee did not make us responsible for the delinquent handling of paperwork and it has not been suggested that it did.

KIRBY J: No, but, as I understood it, it was suggested that it did put you on notice of the club, its way of operation, the fact that it was getting members, the fact that Mr Zhu by inference was such a member, and that it was in the interests of the Olympic Games to get people from China to come to Australia. Instead of that, people for whom you are now appearing formulated in their mind a deep suspicion of Mr Zhu. They never confronted him with it. They just went ahead and arrested his colleague and then summoned him back to Australia and then arrested him here though he was a citizen. I mean it is a most extraordinary shocking tale. If you had made a film about it, you would find it hard to believe that such things happened in this country – at least I would.

MR WALKER: Another way of looking at it, if you made a training film out of it, it may indicate to policemen, to public servants and to anybody with responsibility for setting in train drastic State force, the high importance of checking your facts. It may be that with all the epithets that my client’s conduct has attracted it may be that that is all one can spell out of the trial judge’s findings.

KIRBY J: Yes, but, Mr Walker, the law does not sit silent in these circumstances. It sends messages and the best way to send messages is by judgments and verdicts. A verdict of $4 million would be more likely to bring the message home to the public service of New South Wales and police officers than a little wrap over the knuckles and the return of the $300,000. Training films may not work. A verdict of this kind is the sort of thing that may work.

MR WALKER: Your Honour, we would urge against the decision of a matter involving matters of principle applied to particular conduct of the theory that either great corporations or polities shape their conduct according to awards of damages - - -

KIRBY J: But we are dealing here with a public authority whose office has interfered in a contract, so it is said.

MR WALKER: And, your Honour, nothing I have put in writing or on my feet, nor will put on my feet, amounts to any claim of any immunity. In answer to something that your Honour raised with my learned friend, no, there is nothing special about our position in hearing in the fact that I now appear for a Minister of the Crown, nor is there anything special in terms of immunity given by the fact that SOCOG was a creature of statute and part of the so-called Olympic movement.

However, the question remains, it being subject to law, what does the law permit it to do in relation to what has been held to have been a breach of contract? There is nothing in the authorities so far and nothing described in the principles relied upon by my learned friend which would single out the public authority status of SOCOG as a reason why it should have less resort to the doctrine of justification, such as that is, than a private person. So in that way the statutory public authority status of SOCOG remains to the forefront but not by way of giving it immunity and not by way of exposing it to greater liability.

On the other hand, we accept, as we must, that its status and its officers serving public purposes means that judgments can and should be expressed about its conduct in terms which would not be applicable to private persons. I accept that. It is the exertion of official authority.

GLEESON CJ: Is that a convenient time, Mr Walker?

MR WALKER: May it please your Honour.

GLEESON CJ: We will adjourn until 2.15 pm.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.19 PM:

GLEESON CJ: Yes, Mr Walker.

MR WALKER: Your Honours, one of the standout features of the way in which the plaintiff, now appellant, ran the case is that, put in a number of ways, his position was always clear that what he was doing in China was permitted, perhaps required, by the arrangements he had with the trustee of the club.

What I want to turn to now is what might be called the chain of title in relation to the intellectual property and the commercialising of the Olympic Games, which will include in the main use of intellectual property, in order to show that that is simply not correct. There is an alternative reading other than frank error of the two sentences in paragraph 185 of Justice Sheller’s reasons as follows. The alternative reading is that in the events which included SOCOG’s manifest determination not to approve the endeavours in China it would have been exactly as his Honour described it thenceforth.

Now, that is important also for our argument in relation to justification because against the beguiling plea that we should have been well behaved, as it were, and gone to court, either for an injunction under the statute or query an injunction against the club to restrain it from breaching negative covenants under the contract, against that it can be said that once it became clear as it was - and I will take your Honours to the brief detail – once it became clear that SOCOG was not going to give the consent it was not obliged to give and which lay within its absolute discretion, as Mr Zhu knew, then going to court is simply a more time consuming and expensive way of achieving the termination which was directed as early as September 1999.

None of that answers in terms the use made of the circumstances of the arrest by my learned friends, but it can be said of those circumstances that they did not bring about the breach of any contract by the club, and when I come finally to the pleading in relation to that, it is clear that that is the way in which the arrest was put. What that means, in effect, is that there may or may not have been a valuable contractual right to damages against the trustee of the club. Justice Sheller opines that there would have been, a sentence immediately following the putatively two wrong or erroneous sentences in paragraph 185 - - -

KIRBY J: Well, that was no use, was it, because they were in liquidation.

MR WALKER: I was about to say, but that was no use. Hence this case, because they had run out of money. There may have been breach of warranty of authority claims, also of no use. It is not, in our submission, the hallmark of a straightforward tort claim that it simply steps in to fill a gap that insolvency leaves in relation to the viability of a cause of action directly in contract.

GUMMOW J: But it has never been said of the tort that the plaintiff has first to sue the other party to the contract.

MR WALKER: No, absolutely not. But the converse is also true. The tort does not spring into existence because the contractual cause of action is for reasons of solvency or related extraneous circumstances not useful to the plaintiff.

GLEESON CJ: It is not relevant, I think, to any issue in this appeal, but how did Justice Bergin, when calculating damages for the tort, deal with the question of the insolvency of the club?

MR WALKER: She did not, no. I think, and I am speaking third or fourth hand - - -

HEYDON J: The plaintiff could get as many verdicts as the plaintiff liked, but only get satisfied as to one of them and any defendant could - - -

MR WALKER: Yes. I think, in particular, the Chief Justice is referring to the fact that the parlous state of the club meant that it may not have been around to support any international membership sold.

GLEESON CJ: Is it relevant to the damages you get for inducement of a breach of contract if the other party to the contract was insolvent and could not have performed it?

MR WALKER: In terms of any element of loss of a chance as there would be in the assessment of damages, normally, yes, but I am now speaking subject to correction, I hope from my side if I am wrong, namely that the so-called deed of termination and release saw us assuming the membership obligations of the Olympic Club. I do not think I would be getting instructions to walk away from everything that that means in terms of the capacity therefore for Mr Zhu to have commercialised. I think that is an answer to your Honour the Chief Justice’s question.

GLEESON CJ: Yes, thank you.

KIRBY J: But this was not an issue really, was it?

MR WALKER: No, it was not. Your Honours have seen the, as it were, chain of title in a number of different guises. Could I try this abbreviated version to highlight the matters that are important to the argument I have just noted, the argument that says because SOCOG was not obliged to and certainly did not approve of these excursions into China it was a doomed exercise which would either be confirmed as or rapidly would become illegal if performed in the manner that Mr Zhu has always maintained he was entitled to perform it.

Hence, the inappropriateness of requiring preparatory and, in our submission, wasteful inefficient steps such as letters before action, such as direct negotiation, such as talking, such as litigation. It is an argument in favour of brusque efficiency which involves the proposition that justification is ultimately something that turns upon a determination of entitlement and that brusquerie will not eliminate the essential character of entitlement.

GLEESON CJ: Does the circumstance that SOCOG did not approve and would not have approved the venture in China mean that the agreement was illegal, or does it simply mean that a condition upon which the agreement took effect would not have been fulfilled?

MR WALKER: The latter. This was not an agreement illegal in its inception or inevitably illegal in its performance as of the day it was made. It was a contract under which the plaintiff, the appellant, was behaving illegally, for the reasons we have submitted. That was curable, that is the historical illegality would always remain an historical illegality but for the future it could have been cured but for the fact that an essential step item in the cure was withheld by us. SOCOG had determined it did not want this. For those reasons it would have remained – that is, to use Justice Sheller’s words, it would have remained or continued to be illegal.

It must be that his Honour was thinking in those terms because (a) there is no discussion of illegality as at and by reason of inception, and (b) he goes on in the very next sentence to posit a right of action damages. It is not possible, with respect, to impute to Justice Sheller the notion that one could get damages for an inability or a prevention of being able to perform an illegal act pursuant to a contract. By that interpretation of the elliptical nature of those three sentences in paragraph 185, of course, we do not need a notice of contention, but I will come back to that matter later.

Can I start with the SOCOG Act, the constitutive statute of New South Wales. Your Honours have already been taken to the most important elements of it. Can I simply emphasise that under section 6, there is corporate, that is, quasi natural person, capacity. Under section 8, functions are imposed, amongst other ways, by the Act itself. They must be exercised for the purpose of the “primary objective”. Section 9 lays down the primary objective, being:

to organise and stage the Games . . . in accordance with the rights and obligations conferred and imposed under the Host City Contract.

It is clear that the organising and staging of Games involves, obviously, a deal of marketing. Parliament thought of that specifically in section 10(2)(d), where one will notice that:

establishing a marketing program in consultation with the International Olympic Committee and the Australian Olympic Committee –

So that entities in the Olympic movement, set up by the Olympic Charter, are at the heart of the identity and functions, and therefore powers and authorities, of the entity for whom my client now stands in.

The specific function in paragraph 10(1)(a) of:

becoming a party to the Host City Contract; and

(b) performing its obligations under –

that are, in our submission, reinforcing of that comprehensive role which will certainly include the use of intellectual property and the commercialising of emblems and signs, but as soon as one talked about that, then the rights of SOCOG need to be ascertained in order to work out what SOCOG could grant to others.

One should then go to the Olympic charter in Justice Sheller’s reasons, the passage in which these are expounded and to an extent discussed, 14 appeal book 3188, paragraphs 33 and following. In the Olympic Charter your Honours will have noted in particular that under clause 7.7 of the by-law to rules 12, 13, 14, 15, 16 and 17 – see 3190 - there is an obligation on organising committees, and your Honours will find this in the appeal book at page 767, to:

protect their Olympic emblems, in the manner described above -

which included registration and the like -

as well as in other countries as decided in consultation with the IOC Executive Board.

Without the IOC Executive Board then there is nothing. Under by-law 10, the OCOG, SOCOG:

wishing to use its Olympic emblem for any advertising, commercial or profit-making purposes whatsoever –

which would certainly include the licence here –

either directly or through third parties, must comply . . . and ensure its observance by such third parties.

Of course, that is done by the repeated stipulation in the documents to which we come that the charter shall be observed. Then one finds in 11:

All contracts or arrangements . . . by an OCOG, shall be signed or approved by the NOC –

that means the Australian Olympic Committee in this case –

and shall be governed by –

certain principles: 11.2 – for a start there is territoriality in 11.1. In 11.2 it is clear that:

the Olympic emblem of an OCOG as well as any other Olympic-related symbols, emblems, marks or designations of an OCOG –

and they are those which the club had –

may not be used for any advertising, commercial or profit-making purposes whatsoever in the country of an NOC –

China –

without the prior written approval of such NOC -

not subsequent and not conversational. I will come to actually what happened in China in a moment. It certainly does not amount to any waiver by SOCOG of its duties to see to the observance of that requirement. That is no mere paperwork - - -

GUMMOW J: Sorry, where do you say duty to observe?

MR WALKER: The duties are coming up in relation to the charter.

GUMMOW J: No, the duty of SOCOG. Where does that come from?

MR WALKER: From 11.2, “the Olympic emblem of an OCOG . . . may not be used for any - - -

GUMMOW J: I realise that. How does the Olympic document there at page 768 generate a duty on the part of SOCOG?

MR WALKER: It generates a duty (a) because of section - - -

GUMMOW J: Duty to do what?

MR WALKER: A duty not to permit its emblems to be used in China without the prior written approval of NOC, see clause 10.

GUMMOW J: Yes, 10(1)(b).

MR WALKER: Not paragraph 10(1)(b) of the Act, bye-law 10 in the Olympic Charter, the bye-laws under rules 12, 13, 14, 15, 16 and 17, imposes a duty directly on OCOG when making third party use of its Olympic emblem not only to comply, but to ensure its observance by such third parties, which would include, obviously, the club and the club’s subagent or agent, Mr Zhu.

GUMMOW J: This Olympic Charter – it is not the Charter of the United Nations.

MR WALKER: No, it is not. It has a meaning for our law, that is, the municipal law being applied in this case, because of its incorporation by reference sub modo in the Sydney Organising Committee for the Olympic Games Act 1993, section 11(a). The difficult expression is:

take into account, to the fullest extent practicable –

So its function of establishing marketing is to take into account the charter, which bespeaks obligations in relation to third parties of a kind, classically, through whom or with whom you will be conducting marketing arrangements.

GUMMOW J: Duty to whom?

MR WALKER: You mean, your Honour, who - - -

GUMMOW J: You keep using this word “duty”, which, as we know, is a jurisprudential minefield. Now, duty to whom of imperfect obligation?

MR WALKER: It is not imperfect. There could have been an order in the nature of mandamus against SOCOG brought by, say, a minister, under section 11.

GUMMOW J: Are you sure about that?

MR WALKER: It is not bereft of enforceability, the obligation in section 11 - - -

GUMMOW J: Well, you postulate mandamus for a moment. Any others? Mandamus in the instance of a minister. Any others?

MR WALKER: The host city contract gives rise to contractual obligations.

GUMMOW J: Yes.

MR WALKER: That is it, apart from there would also be duties to respect the property and intellectual property - - -

GUMMOW J: They are imposed by the federal Act.

MR WALKER: - - - in particular, those which are the AOC’s registered marks.

GUMMOW J: Where do they come from?

MR WALKER: They come from the 1987 Commonwealth statute, your Honour.

GUMMOW J: Yes, but that is statute.

MR WALKER: Now, I almost said they come from the charter.

GUMMOW J: Well, they do not.

MR WALKER: They do not. Not in law, but they come about - - -

GUMMOW J: These Olympic people seem to elevate themselves by a process of self-levitation.

MR WALKER: Quite, yes. I accept all of that. I am not saying the charter is, as it were, something to be seen as a source of law here.

GUMMOW J: No.

MR WALKER: It has the status I have tried to explain by reference to its place in certain statutes and contracts. It happens to be historically the reason why there is a 1987 Commonwealth Act. The AOC clearly lobbied government in order to obtain it, but it is no more constitutive of the rights than that. 11.2, therefore, in the charter has to be recognised whenever one sees a reference to the charter in either the statute or the contracts. I think one can pass over the charter at that stage and move to the host city contract. Page 3192 in Justice Sheller’s judgment sets out the relevant parts there, but in the appeal book, 865 – that is in - - -

CALLINAN J: Volume 4.

MR WALKER: Volume 4, thank you, one will find as well – now, this is a contract to which SOCOG later became a party by so-called intervention.

GUMMOW J: Yes, that is at page 898.

MR WALKER: Yes, as contemplated at page 859. Page 861 contains clause 13. That refers to standard form third party agreements. At 865, 866, 867, clauses 33, 34 and 35 relate to so-called symbols and emblems and the like, and in particular there is the contractual power of the IOC Executive Board to deal with the Olympic marks, 33(b). Material default under the contract, seen line 40 on 866, includes a failure to have achieved the legal protection referred to in 34. Page 867, in the middle of the page, line 30 - - -

CALLINAN J: Mr Walker, just before you leave 866, if you look at the last paragraph on that page, what does that mean? It says:

The City, the NOC and OCOG shall ensure that any and all trademark and/or copyright registrations obtained/applied for by the OCOG in any and all countries –

Does that contemplate that the city and OCOG might license people internationally, that is, out of Australia?

MR WALKER: No. It is the sentence immediately preceding that it refers to, namely, there is an obligation to use:

best efforts to ensure the international protection of its emblem and mascot –

That may, in turn, carry with it, as it would anywhere, subject to contrary stipulation, some power of licensing, but your Honour will - - -

CALLINAN J: Some power to license out of Australia.

MR WALKER: But those sentences do not achieve that, no.

CALLINAN J: But they seem to recognise the possibility that it could occur.

MR WALKER: No, there is no recognition here of possibility of licensing anybody.

CALLINAN J: Is there not reference elsewhere to - - -

MR WALKER: Not in those two sentences, I am sorry.

CALLINAN J: But elsewhere in the host city contract, is there not?

MR WALKER: Yes, there is.

CALLINAN J: And then it is contemplated that the city, NOC and OCOG will, in effect, have rights over those which they will then be obliged to assign to the IOC after the Games are over.

MR WALKER: But they all, as it were - - -

CALLINAN J: Is that right though, after the Games - - -

MR WALKER: - - - go home at the end of the Games, as it were, after a wash-up period. The next place to go is to the establishment agreement. Your Honours will find in Justice Sheller’s extracts that this commences at 3171.

KIRBY J: Which paragraphs again?

MR WALKER: I am going directly to paragraph 7 on 3172 and paragraph 8 on 3173 and, in particular, I want to take your Honours to clause 25 which is set out on 3173.

CALLINAN J: What page of the appeal book?

MR WALKER: In the appeal book the establishment agreement starts at 930 and the particular passage, your Honour, is at 962 just above line 30.

The critical element is that the trustee will not, in (a):

without the prior written permission of SOCOG, which SOCOG may withhold in its absolute discretion, represent, hold out . . . in any way that it has any connection or association with SOCOG, the IOC, the Games or the 1988 or 2000 Australian Olympic teams (Teams).

And then in (b) that is continued:

Except as expressly permitted in this agreement or in a Transaction Document . . . they have no right to use any intellectual property belonging to SOCOG, the IOC and the AOC, including but not limited to –

(c) . . . the Trustee and Synthesis agree that, without the prior written consent of SOCOG, which SOCOG may withhold in its absolute discretion, it (sic) has no right to use and it will not use for any purpose, including but not limited to . . . any words, phrases –

etcetera. And then over the page, one sees that that refers to:

SOCOG, the IOC and the AOC, the Games or any of the
Teams; or

(2) use the words ‘Olympic’, ‘Games’, ‘Sydney 2000’;

et cetera.

GUMMOW J: There was to be a licence agreement, was there not?

MR WALKER: Yes, that is the next one to which we come.

GUMMOW J: That is a transaction document.

MR WALKER: Yes, your Honour.

GUMMOW J: So what 25(a) is saying, amongst other things, except if permitted by the licence agreement, etcetera.

MR WALKER: That is right. That reference to transaction documents is at 938 line 10. Now, while in the same vicinity, at 964, one finds a reference in clause 27 to the very important marketing restriction deed. The deed poll, that is the deed poll as it is now called in this case, is a standard stipulation. It was not made for Mr Zhu. Mr Zhu had to execute it because the club at least complied with this one of its obligations:

The Trustee will procure that each person to whom it deals . . . executes a deed in the form of the document comprised in Annexure F (Marketing Restriction Deed) in favour of SOCOG under which –

in essence –

SOCOG’s prior written permission.

Now it is called here:

the person agrees, amongst other things, not to represent, hold out, promote or advertise its connection with SOCOG, the AOC or the Games without SOCOG’s prior written permission.

The error in the Court of Appeal that we wish to argue in the alternative on our notice of contention, as we argued in the Court of Appeal, was a reading of the deed poll influenced by an event unknown to us, the 8 March 1999 letter of introduction from the club to Mr Zhu so as to have one of the ancillary provisions, clause 5 of the deed poll, swallow up the whole of what, in clause 27, the club had accepted as a description of the intent of the marketing restriction deed.

HEYDON J: But it was known to SOCOG, was it not?

MR WALKER: I am sorry, your Honour?

HEYDON J: The 8 March 1999 document was known to SOCOG.

MR WALKER: Not at the time it was sent, no.

HEYDON J: But it was known to Mr Reading by August, was it not?

MR WALKER: Yes, which is a long time after it was already being used, your Honour. My point is that it was not known at the time - - -

HEYDON J: But Mr Reading never told us, of course, when he did find out.

MR WALKER: No.

HEYDON J: He could have found out earlier than August.

MR WALKER: Everything could have been known about the dealings with Mr Zhu very promptly by appropriate interrogatories properly answered very early in the piece on the committee. I accept that. However, there were not many alerts, as I shall show from the evidence. Now, could I then go to the licence agreement, which one finds in volume 6 of the appeal book - - -

GUMMOW J: Just before you leave that, Justice Callinan reminds me, that at page 946, clause 6(a) - - -

MR WALKER: Those schedule 1 benefits are found at 966 and following.

GUMMOW J: Yes, and they include at 967 merchandising rights.

MR WALKER: Yes.

CALLINAN J: And it is SOCOG who has to provide them:

SOCOG or the AOC, or both will provide or make available - - -

MR WALKER: Yes. What one finds in that last dot item is that:

• SOCOG will review any proposals put forward by the Trustee in respect of special Club merchandise and/or access to SOCOG merchandise –

That has nothing to do with this case.

CALLINAN J: What are you referring to now, I am sorry?

MR WALKER: The foot of page 967, “Special collectables/merchandise”. So the Olympic benefit to be provided or made available by SOCOG is described in terms of SOCOG reviewing proposals put forward by the trustee. The agency agreement - - -

CALLINAN J: That does not alter the fact that SOCOG has undertaken to provide or make available “a fair and equitable mix, range and quality of the Olympic Benefits provided by it.” That is in 6(b).

MR WALKER: Yes, your Honour, but when I go to the Olympic benefit in question that I was asked to address my attention to, merchandise, one does not find there anything which obliges SOCOG to give any approval to plastic satchels in Shanghai, for example - - -

GUMMOW J: Who were Ollie, Syd and Millie?

MR WALKER: That is right.

GUMMOW J: Who were they, or what?

MR WALKER: I am sorry, I thought your Honour knew.

GUMMOW J: No.

MR WALKER: They were – and I am going to forget – a caricature platypus, echidna and kangaroo, maybe.

GUMMOW J: Well, there was to be “Privileged photo opportunities” with them.

MR WALKER: Yes, they were figures that failed dismally because of a competing private enterprise wombat, from recollection, but they were going to be enormously lucrative, and probably were. So there is nothing in the content of that Olympic benefit which has ever been called in aid or could now be called in aid - - -

CALLINAN J: Well, it would review in good faith, surely.

MR WALKER: Yes, your Honour, but there is no evidence here that there was anything put forward to SOCOG at all in relation to the agency agreement, assuming it fell within collectables and merchandise, which it does not. Nothing was said of that kind.

CALLINAN J: Well, it would help me if you would tell me precisely what we are talking about. What was it that the appellant was doing in China that was contrary to what he should have been doing, or, indeed, anywhere else?

MR WALKER: He was selling by use of verbal and graphic connection with the Sydney Olympic Games - - -

CALLINAN J: He was selling – I am sorry?

MR WALKER: He was selling memberships of the club and associated travel and accommodation packages - - -

CALLINAN J: Including tickets?

MR WALKER: It is not possible to say he was selling tickets. He was more correctly selling an opportunity to obtain certain tickets.

CALLINAN J: How could tickets be sold without reference to the Olympics and to the three rings or whatever it is?

MR WALKER: You cannot, that is why you need SOCOG’s prior approval for everything he had done.

CALLINAN J: Assuming you have a right, and I know there is a question about this, but assuming you have a right to sell tickets, then surely you have a right to promote to some extent and to refer to the symbols and indicia and images.

MR WALKER: Can I anticipate, your Honour?

CALLINAN J: Yes.

MR WALKER: Your Honour is now asking me about the rights of the trustee, not Mr Zhu, because the trustee is the party here.

CALLINAN J: And it depends on what rights the trustee in turn conferred upon Mr Zhu.

MR WALKER: No, it first depends upon what rights the trustee had and we are about to come to that, because the rights the trustee had were limited to Australia, as Justice Sheller and Justice Hodgson point out. So the licence is an important limitation on what Mr Zhu could have achieved. Could I take your Honours to volume 6, 1140 and following, because this is the high-water mark of what could have been given to Mr Zhu because it was what was given to his grantor.

KIRBY J: Would you repeat the page?

MR WALKER: Page 1140, volume 6, may it please your Honour. This is the licence agreement. The preambles A, B and C are relevant, as is F on page 1141.

GUMMOW J: Now, SOCOG had a member on the constituent body of the trustee, did it?

MR WALKER: I am sorry, your Honour, of?

GUMMOW J: On TOC?

MR WALKER: On the committee, yes.

GUMMOW J: Of TOC?

MR WALKER: Yes.

HEYDON J: I think it did not have anyone on TOC. It had two people on the club committee which administered the trust.

MR WALKER: I am sorry, that is what I said, the club committee.

HEYDON J: I think it is what you said, but Justice Gummow’s question was whether there was anyone on TOC.

MR WALKER: No.

HEYDON J: Right.

MR WALKER: The TOC was for all intents and purposes what I call an outside private corporation with a good idea, as it were.

GUMMOW J: Yes, it turned out to be a bad idea.

MR WALKER: A very bad idea. The club committee was given, as your Honours have seen, a pseudo or quasi board of directors role.

GUMMOW J: There would be big questions as to whether the committee were not acting as directors, in my mind, within the meaning of the Corporations Law.

MR WALKER: And, with respect, a question which probably ought to be answered affirmatively, not explored but - - -

GUMMOW J: Yes, and I think we can say SOCOG at least had de facto membership of the governing entity of TOC.

MR WALKER: With all the, for my argument, undesirable consequences that comes in its train, your Honour, I am bound to say yes. The very fact that we achieved by order the letter of termination demonstrates that.

GLEESON CJ: Well, you did not induce the breach of contract by supplication?

MR WALKER: No, it was by order and dictation, admittedly to somebody who was about to go broke.

GLEESON CJ: Is that what went wrong with this commercially, that the insolvency of TOC produced the consequence that the benefits that should have come through TOC to SOCOG were going to go to a lot of creditors?

MR WALKER: Yes. Your Honour may recall that ticketing and membership had some kind of relatively indirect connection with limited forms of ticketing, was generally, as I think the evidence recorded in the judgment shows, a subject of real controversy, and this was looming to be yet another debacle.

GLEESON CJ: There were allegations of elitism - - -

MR WALKER: A rich list.

GLEESON CJ: - - - in the allocation of tickets – a terrible sin.

MR WALKER: That is right.

KIRBY J: Especially with an organisation with such high moral standards behind it.

MR WALKER: Quite. No discrimination, but you have to speak English or French or Spanish, I think.

HEYDON J: Just going back to this director question, was it not all made explicit in the establishment agreement? They agreed that the members of the club committee would have similar duties to those of the board of directors.

MR WALKER: Yes. That is the provision I was drawing to attention, that quasi or pseudo board of directors role - - -

KIRBY J: Not pseudo; it is real.

MR WALKER: I have actually accepted a suggestion raised to me by Justice Gummow that de facto directorship would appear to follow for anybody who actually took office and acted on that committee. Now, that has not played any part hitherto in this case, but I would be bound to - - -

GUMMOW J: It helps one understand what was going on though.

MR WALKER: - - - say it does not embarrass us any more than the circumstances do anyhow to deal with that. Now, the Olympic Charter comes in in the licence agreement and this is obviously contractual in effect. At 1145, clause 2.1, all provisions are subject to the charter which prevails, unless it is contrary to Australian law - no such contrariety has been raised in this case. Then on 1146 there is 3.1 – I do not want to read these. Your Honours have seen them in Justice Sheller’s reasons. The important one is 3.1(b), because it is appendices A1 and A2 which describe the rights and opportunities which are granted during the term. They are as recorded in Justice Sheller’s judgment and as found at pages 1166 and 1167. They both start off “The right in Australia”.

GUMMOW J: What about the opportunities?

MR WALKER: There are apparently also opportunities in Australia. I think that comes from the right to use emblems in connection with promotion. A right to do something in connection with promotion constitutes an opportunity.

Nothing there gives any colour to the notion on which we failed in the court below and in which my client failed before Justice Bergin that the deed poll should be read down in its plain language of a marketing restriction in relation to SOCOG because this, that is the agency agreement between Mr Zhu and the club, was one under which the club had given him the right- and the expression used in the deed poll is grant the right, any Olympic body has grant the right to use material. Well, you cannot grant a right if it is beyond your power. There was no grant. There was no right. That can be found in this element in the chain of title.

Clause 3.3 on 1148, in particular, is the club logo which is in the control, ultimately, in this agreement of SOCOG, ultimately that is the IOC, of course, and 3.4 claims to be “pursuant to the Olympic Charter”, SOCOG approving the use of “the Olympic Marks in Australia”. And then the “avoidance of doubt” provision in 1149 makes it very clear that there is no right to authorise third persons, “except as expressly permitted in this Agreement” and none has been relied upon. At 3.10, the foot of 1150, a prohibition on entering into “inconsistent” arrangements and for all those reasons it is clear that SOCOG had not given to the club the right to do anything without SOCOG’s prior permission in relation to the use of the club logo.

Your Honour Justice Heydon asked about the club logo earlier. An example of that will be found at 1178 in appendix D to this agreement and they were, or a form of that was described by Mr Wyness as being on the bundle of documents which sat waiting on his desk when forwarded for approval in Australia by Mr Zhu.

HEYDON J: Just show me one instance, though, of a clear breach of section 12(1). I think this morning you said, “In China conduct would not be a breach of section 12(1)”.

MR WALKER: Unless something was brought back, no.

HEYDON J: You said that paragraph 106 of the judge’s judgment, which was the handing over of the bundle of documents onto Mr Wyness’ desk - - -

MR WALKER: Paragraphs 106, 107.

HEYDON J: Yes. That cannot be a breach though, can it? That was a request for permission. It cannot be a breach if you are asking to do something you are entitled to ask for although the person requested can refuse. There is nothing commercial about it. It is not marketing. It is not a trademark use.

MR WALKER: The entirety of that transaction is commercial.

HEYDON J: In that case it means that the plaintiff could never and, for that matter, the TOC perhaps could never have got SOCOG’s consent because your reasoning seems to extend, as it were, commercial use into every use including a request for future commercial use.

MR WALKER: No. They are not authorised to use the logo until they have prior approval. They can ask for the prior approval without using the logo.

HEYDON J: My point is this, the mere passage of events described in paragraphs 106 and 107 are not commercial use, are they?

MR WALKER: We submit they are, very much so.

GUMMOW J: Why? Commercial use?

MR WALKER: Yes, commercial. An integral part of a marketing program.

GUMMOW J: Well, if you write to someone and you say, “This is a copy of your trademark. Do I have permission to use it in commerce? Can I have a licence?”, that is not an infringement.

MR WALKER: Your Honour, I do not know, with respect, that it is as simple as that being the case here, though. This is - - -

GUMMOW J: It is certainly commercial in some sense, but it is not commercial in the relevant sense.

MR WALKER: This is a kit that had been put together and we know had already been the subject of some use. There is relevance in it, certainly.

CALLINAN J: Can you speak up a little bit, please, Mr Walker?

MR WALKER: I am so sorry, your Honour.

GLEESON CJ: Unfortunately, none of us are being amplified today.

MR WALKER: I am sorry, your Honours. In answer to Justice Heydon, I am told that not reproduced in the appeal book are the matters which are to be found in volume 1, page 91, the particulars by us, item 13 being the document used to sell travel and accommodation packages.

HEYDON J: Just one moment, volume 1, page 91, did you say? Volume 1, page 91 is a bit of transcript.

MR WALKER: I am so sorry, it is the appellant’s first paragraph 7(i) book. I am wrong again. It is the supplementary materials. I do apologise, page 91 - - -

HEYDON J: Paragraph 13 on that page?

MR WALKER: Yes, I am told that they are not reproduced. That is not a complete answer to your Honour’s question. If I have anything else I shall give it before I sit down.

HEYDON J: This will not do, though. One has to look at these documents and see where they were used, for what purpose they were used, by whom they were used.

MR WALKER: Yes.

HEYDON J: So are we ever going to get them? Mr Justice Sheller, with all due respect to his extremely detailed reasoning, does not actually set out some prohibited uses and say “Section 12 forbids that. Look at the definitions of this. You will see that that document used there falls within that definition, therefore, illegality”. We have to be satisfied of that, have we not? Maybe it is very easy to do.

MR WALKER: No, it is not. I can assure your Honour I would have given it to you already if it is easy to do. If I can do it, I will do it before I sit down. I am not asking for any supplementation.

GLEESON CJ: I think what we would like to have is just the clearest single example of breach of the statute that was necessarily involved in this contractual arrangement.

MR WALKER: Your Honours, I have given already my best example.

HEYDON J: Paragraph 106?

MR WALKER: Yes.

GUMMOW J: Which is what?

MR WALKER: Which is paragraph 106, 107 of Justice Bergin’s reasons. What your Honour has already asked me about has not been commercial.

GUMMOW J: I see.

GLEESON CJ: Incidentally, Justice Sheller records in paragraph 184 that SOCOG conceded that Mr Zhu was entitled to damages against TOC. How come, if the agreement was illegal?

MR WALKER: Well, I cannot remember, your Honour, whether there was – if I can recall, your Honour, I will tell you. But certainly we never accepted that this was illegal in its inception or inevitably illegal from its inception in performance. We have never put that. That does not answer your Honour’s question, I accept.

GUMMOW J: It was not illegal then rendered illegal by any statute in the way that was involved in Fitzgerald v Leonhardt, for example, in [1997] HCA 17; 189 CLR 215?

MR WALKER: No, your Honour.

GUMMOW J: What is meant then by the word “illegal”?

MR WALKER: In those sentences in Justice Sheller’s reasons, the best I can do is what I offered immediately after the adjournment, that it means that we were not going to give our approval, therefore, they would not be able to fulfil a condition.

GUMMOW J: That is not illegal.

MR WALKER: No. I was about to say the word “illegal” may be artless for that and because of the territoriality aspects it has brought in this Court but not below such illegality as would be presented by the application of section 12 of the Commonwealth Act would not in itself without more be brought about by exercises throughout the provinces of China.

GLEESON CJ: It is a bit more like impossibility, is it not?

MR WALKER: Yes, or a standstill having been reached that nothing further can happen. It would not be frustration because the parties have turned their minds to the contingency and provided for it.

GLEESON CJ: But a condition on which it depended for its legal operation was never going to be satisfied.

MR WALKER: That is right. Now, I do not suggest that that is appropriately captured by the word “illegal”, but doing the best we can in a judicial reasoning that includes getting damages, in our submission, that is the closest we can get to.

GLEESON CJ: As a matter of practical reality, did IOC control SOCOG?

MR WALKER: Practical reality, yes.

GLEESON CJ: And did SOCOG control the club?

MR WALKER: Yes.

HEYDON J: Presumably AOC and SOCOG would tend to march in step because any trouble between - - -

MR WALKER: No.

HEYDON J: - - - SOCOG and Senor Samaranch would be something of great concern to AOC, would it not?

MR WALKER: But Minister Knight would then be involved and whichever Premier – Premier Carr would be involved.

HEYDON J: But you had four votes on the committee. The AOC and the SOCOG votes were four in number and Mr Wyness makes five.

MR WALKER: Yes, but if your Honour is asking about according to Hoyle how it would operate, probably what your Honour says is right, yes.

HEYDON J: According to Hoyle it did not control it, but according to Realpolitik it did.

MR WALKER: Well, Realpolitik includes money, of course, which comes from taxpayers. Now, could I then take your Honours to – in the licence agreement, further, in clause 3.7 your Honours will see - - -

GUMMOW J: What page?

MR WALKER: Page 1150 of volume 6.

GUMMOW J: Thank you.

MR WALKER:

The Trustee shall exercise the rights and opportunities granted under this Agreement:

(a) . . . in compliance with the Olympic Charter –

and in our submission, that prevents incursion into another NOC’s territory, for reasons we have already put. Finally, could I take you to 1156, clause 9.1. One has in (c) the entitlement to terminate, that is, to remove the trustee that which would, on the appellant’s case, be an inconsistent dealing upon breach of a material obligation constituted by any of the following events, namely, the use of an Olympic mark “otherwise than in accordance with this Agreement” et cetera, et cetera, without such use “being remedied” et cetera.

Now, that remedy provision might at first sight seem to tell against the peremptory intervention by which or for which we are sued. Given that SOCOG was not going to consent, in our submission, this was simply to anticipate an inevitable position of breach by the Trustee.

GLEESON CJ: Mr Walker, if this entire agency agreement was from the beginning in a state of dependency, in the sense that for its lawful performance it required the approval of SOCOG and perhaps others like the IOC, how do we get into the area of, as it were, an acknowledged inducement of a breach of contract that required justification? Why are we not, or why were we not, in the position in which the person or the organisation or the people upon whom this agreement was from the inception dependant were simply saying, “We do not intend to give our consent, full stop”?

MR WALKER: I suppose the first answer to that is, we were not asked. The club committee was not shown the agency agreement. That is the first thing. Things were done, purportedly under the agency agreement before the committee knew about anything other than international memberships in very general terms. I am going to come to those facts in a moment.

GLEESON CJ: But if all that Justice Sheller was talking about when he was talking about illegality was that the agreement for its lawful performance was conditional on the consent of SOCOG and perhaps others, then to deal with that under the rubric of justification for procuring a breach of contract seems a very indirect process of reasoning.

MR WALKER: Yes.

GLEESON CJ: Why did not SOCOG say, why could they not say, in the litigation, “Too bad, we do not consent, and you were vulnerable from the beginning because you needed our consent”?

MR WALKER: I am not able to explain to your Honour why the pleading is as it is, or, for that matter, why – your Honour will recall that the letter of termination which eventually went from the trustee to Mr Zhu is a letter no particular of which was, as it were, persisted in. I mean, it even said that he had not sold enough - - -

HEYDON J: It was not persisted in because Justice Bergin steamrolled it so flat that it was incapable of revival.

MR WALKER: Yes, but some of it went even before that juggernaut did its work. The notion that he had not sold enough tickets is really extraordinary, because there had been a deal made about just that.

CALLINAN J: Mr Walker, was there any evidence about what happened to the money that Mr Zhu paid to - - -

MR WALKER: I much regret to tell your Honour there is. We kept it, for reasons which I did not try to justify in the Court of Appeal.

CALLINAN J: That was over $200,000.

MR WALKER: 260,000.

CALLINAN J: $260,000-odd, and when you say, “We kept it”, did it get into SOGOC’s hands?

MR WALKER: Ultimately, yes.

CALLINAN J: So SOGOC, to coin a phrase, trousered the money but repudiated the agreement paid under it?

MR WALKER: Yes.

CALLINAN J: And continued to resist repayment of the money?

MR WALKER: Until the Court of Appeal.

GLEESON CJ: That might provide part of the answer to the question I just asked you.

MR WALKER: It might, yes. It does not necessarily all fall out into a neat scheme, though, when those are the facts. Could I take your Honours in volume 5, 1055, in the agency agreement. This is ultimately where Mr Zhu said he got his rights. I have already addressed on why the club could not give him what he claimed, because it is very important to note that he does not claim – still does not claim here – that all he got was a right to hope that SOCOG would approve, et cetera. He claims he was entitled to do what he did. He resisted breaches of contract.

CALLINAN J: Mr Walker, I probably should know the answer to this, but can you help me? There was a section 52 claim, was there not, or a misrepresentation claim. What happened to that? And that was brought against all of the parties, was it not?

MR WALKER: Yes, it was not determined, but I am not quite sure why. I am afraid I would have to defer to my friend - - -

CALLINAN J: It did not have to be, I suppose.

MR WALKER: No, although - - -

CALLINAN J: Say you were to win, why should that not go back for redetermination?

MR WALKER: Can I take that on notice? It is not immediately obvious what the answer to that is. It may have to do with the position the plaintiff took below, but I do not want to talk about that because I do not know. Page 1055, volume 5, clause 9.1, the obligation was on Mr Zhu, not on the trustee, to get all the appropriate and required approvals and authorisations from, among other things, the Chinese Olympic Committee. That does include, obviously, the kinds of consents and compliance with the Olympic Charter required by the State Act and the host city contract, as well as the Indicia Act. Clause 9.1(b) is even more explicit, and, with respect, is not appropriately dealt with by the trial judge at all. He is to refrain from using it for:

promoting, marketing or selling any services other than the International Memberships and the Agent agrees to execute the Marketing Restriction Deed Poll –

Then for what is ironically called:

For the sake of clarity, the Marketing Restriction is to extend to, but not be limited to the sale of –

the very things that he gave evidence in his damages claim with the be all and end all of the lucrative opportunity, namely:

the sale of travel schemes, arrangements or tickets to Australia . . .

(c) To obtain the written approval of the Company prior to utilising the Sydney 2000 Olympic Club Logo –

Now, that is the stuff that lay on Mr Wyness’ desk; that is not a SOCOG requirement. So whatever else might be said about 9.1(c), 9.1(a) and 9.1(b) cast upon him a risk to do things. There is no evidence whatever that he observed those obligations and restraints.

HEYDON J: But does the burden not rest on you on that?

MR WALKER: Yes, but when I say no evidence, I will now go to, for example, the evidence in relation to China. It is conveniently all laid out in the trial judge’s findings starting at 3039 and I want to emphasise precisely completely different points from those that my learned friend has already taken you to. In the conversation which concludes with dinner in relation to a stipulation for prior written consent we have at 3040 about line 15:

difficult under our system to give you an official letter.

At 3040, line 27:

it would be very difficult for me to give you such a letter. You know what our system is like.

Now, that has nothing to do with slow typing.

As the Vice Minister, I have to be very careful about giving letters.

Line 42:

that would still be a problem.

That is “just to say you support” it. In our submission, those are matters which cannot be overlooked when one considers the state of evidence concerning Mr Zhu’s capacity to do anything even within the terms of the agency agreement. Of course the agency agreement itself was purporting to grant a right which they did not have, as a power. They did not have any rights to use any marks anywhere but in Australia, from which it follows they could not license it to be used anywhere but Australia and certainly not in the territory of another NOC.

It is for those reasons that in the sense of the impossibility of SOCOG giving approval that, in our submission, notwithstanding the way in which is was accomplished, the inevitable and proper result of what was achieved by bringing this contract to an end ought to be regarded as rendering our conduct justified.

GUMMOW J: What about 3041, lines 10 to 20?

MR WALKER: I think they are ones my learned friend has referred to:

you do not need a letter. The market is open, you can do what you like . . . You may tell everybody that I have given you my support.

It perhaps only indicates that the statute of frauds is not an outmoded requirement and is sound policy. In our submission, the Olympic Charter is very clear. It had to be complied with by reason of the contract. It required prior written consent. NOCs would otherwise be in conflict with each other and the IOC about the money because it is about sharing money. In our submission, Mr Zhu plainly knew he had not got what he was meant to have and thought he would put up with what he did have. That is not an informality or mixture of governmental and Olympic duties of a kind that affects SOCOG in its position feeding justification at all. It is for those reasons that the reasoning of both Justice Sheller and Justice Hodgson on what was inevitable concerning the breach is, in our submission, to be preferred.

HEYDON J: So you do not accept that it is possible that the plaintiff could have dealt in China without using indicia and images covered by the 1996 Act?

MR WALKER: I am sorry, of course I do. It was what he was determined to do that was impossible. We were not going to - - -

HEYDON J: Yes, but in a sort of more orderly world, would not someone from SOCOG have said to him, “We have been let down badly by Wyness. You perhaps have been let down badly, too. We have to tell you that you can’t use these marks”.

MR WALKER: Yes.

HEYDON J: Would he not, or his lawyers, be entitled to say, “Well, maybe he can’t use the marks, but he is entitled to go on performing the agency agreement lawfully”?

MR WALKER: Yes. I doubt whether he would have bothered, because it would not be a very good marketing approach to talk about “a large athletic event somewhere in the south” as being what you were inducing people to pay money for.

HEYDON J: Well, did he say that in cross-examination?

MR WALKER: No. What is clear from his case is that without the capacity to sell the package with the Olympic connection, there was no opportunity that he would have taken up. It is in Olympic packaging, merchandising, that he was given damages for.

HEYDON J: If he just had some pieces of paper with no logos on them - - -

MR WALKER: You are not allowed to mention Sydney or Olympics, for example.

CALLINAN J: You are not allowed to mention Sydney or Olympics?

MR WALKER: Yes.

HEYDON J: This is a pretty extensive claim.

GUMMOW J: Or Sydney Games. That is another forbidden phrase.

MR WALKER: Or the year.

CALLINAN J: “Do you know what is happening in Sydney in 2000”? You cannot say that?

MR WALKER: It is selling to people who do know. Presumably, you are not allowed even to wink, because that might be a breach as well.

CALLINAN J: Well, there are some things that just are not capable of protection.

GUMMOW J: Yes.

MR WALKER: Quite so. The Bicentennial Act Case illustrates some of the – if I may put it this way – sillinesses of over-reaching statutes in that regard.

CALLINAN J: But it was not just the Olympic Games. There was an obligation to carry out a cultural program, too.

MR WALKER: Yes.

CALLINAN J: Well, could you not mention the cultural program?

MR WALKER: They would all be Olympic – they are all Olympic.

CALLINAN J: So you could not say there is a program, a blank program associated with a blank major sporting event in a very large city in Australia in 2000. You could not say that?

MR WALKER: You might be able to say it if you did it like that, but that may not be the largest Chinese market, people who know what you mean in the blanks. In practical terms, if you could not push the Olympics as the Olympics, then this was not - - -

GUMMOW J: You could not sell the tickets.

MR WALKER: You could not sell – well, not just the tickets, the whole package.

CALLINAN J: Well, if you had a ticket and you handed it over, presumably it had something about the Olympics on it; your seat number at the Olympics on a certain day in Sydney.

MR WALKER: Yes.

GUMMOW J: It would have those discs on it.

MR WALKER: It had the three beasts as well, your Honour.

CALLINAN J: But if you had lawfully come by a ticket, you could not sell it anywhere except in Australia, is that what you are saying?

MR WALKER: No. It is making commercial use of it which would have been forbidden, that is, you could not beat up the trade. I am reminded that in the appeal book volume 4, at page 707, paragraph 43 of Mr Zhu’s evidence in-chief, the extremely obvious is stated by him. There is no doubt he has a grievance, and it is against anybody located who, in a way recognised as actionable by the law, created in him the understanding referred to in paragraph 45 on that same page, 707.

In our submission, SOCOG never became obliged by any species of duty, be it in honour or law, to do anything to accommodate what he was doing from which it followed that, deplorable as the circumstances, that is the facts of the arrest, the facts of the misinformation are, in fact deplorable as the letter of termination was from the club, what it brought about was something which was in accordance with the entitlements of the parties.

GLEESON CJ: Did SOCOG decide to get rid of this entire concept of an Olympic Club?

MR WALKER: No, it kept the club going in a sort of way. In fact, the tax recorder announced that they would be honoured - - -

CALLINAN J: They concealed what really happened. They put out a press release and said - - -

MR WALKER: They did not expose the debacle or the insolvency.

CALLINAN J: Synergistic benefits, they said, would be derived from the new arrangement and they represented that the club would continue to exist and all existing memberships would remain in place. Is that not right?

MR WALKER: Yes, and I am incapable of supporting the PR.

CALLINAN J: It is just false. There are no synergistic benefits. It concealed the real reason.

MR WALKER: I accept that, but this did not constitute or inform a tort committed by us against Mr Zhu.

CALLINAN J: That is why I was asking about the section 52 claim.

MR WALKER: Yes. Mr Zhu was not caused any harm by people not being told the truth and being told something other than the truth about what happened when the club collapsed. He was not caused harm by that. In fact, ironically, people in his position, had he continued to have the connection, may have been benefited from it.

HEYDON J: If he had been told the truth he might have been better off. He might have obtained an injunction to prevent the conduct of SOCOG.

MR WALKER: Yes. It can be said that if everybody involved, but in answer to your Honour’s question, principally Mr Zhu of course, had been told what was afoot then we certainly would not be here and if we were it would be on different issues. May I rapidly, to make good that point in terms of what, as it were, was happening, go to some facts which rebut the notion urged on you that we were, as it were, complicit in the Chinese adventure in a sense of acquiescence in such a way that you might even begin to think of spelling out a licence either for statutory or contractual purposes.

Now, it has not been alleged against us, it is certainly not arguable, in our submission, given the following matters - this is against SOCOG I am talking about, not, of course, the club. The club did take upon itself the impossible task of purporting to authorise to give what it could not give because it did not have. It is conveniently laid out in the trial judge’s findings starting at volume 14, 3027, paragraph 46. This is the earliest time of what I will call official concern. This is Wyness, the club, writing what can only be described as a disingenuous letter to McClatchy for the AOC approached by individuals wishing to develop travel and accommodation packages and it refers to China. Well, they had not only been approached with China, they had done a deal:

We would greatly appreciate if you could advise those National Olympic Committees -

that is China, so there was a real awareness at club level of the problems the charter presented, as found by her Honour at 3028, paragraph 47, “no mention of the Agency Agreement” in Wyness’ letter.

Then there is the club committee meeting of 15 April 1999 and, interestingly, at the top of page 3029 in paragraph 51, the minutes of that:

no international activity is to be undertaken unless approved by SOCOG, AOC, NOC and IOC –

so this is the opposite of acquiescence. Then there is a baggage search. We were not the only ones who, as it were, sooled police on. There was a pre-existing concern, baggage search with one of the subagents, Chang or Zhang. He became, as it were, a 40 per cent entrepreneur in this exercise. One sees in paragraphs 52, 53 references to the police involvement.

Can I take your Honours over to paragraph 61 on page 3033. Again, the police were writing to SOCOG, not the other way around. An intelligence report, persons of interest, which is a euphemism, involved in the exercise, and there was a concern about the immigration matter, offering to help people with visas. Paragraph 64 a reference to criminal indices. We then go to paragraph 70 where on 16 June SOCOG wrote to the club “disturbed” to hear about the appointment of selling the club in Singapore. In fact, there had already been such an appointment:

the Club had ““no rights offshore unless they have been signed off by the IOC, SOCOG, and the National Olympic Committee of the relevant country” –

The point was being made very clearly, and this is the opposite of us being complicit in the club, in what the club had already done:

“nor have we given you the right to sell TOC in Singapore or other offshore territories”.

GUMMOW J: Was the letter of 16 June a response to 29 March?

MR WALKER: I am not sure you can say that, your Honour, no, although I regret to say the correspondence is such that that interval of time would be consistent with that. On 29 March, which is found in volume 4, 722, that the bold cursive note of a discussion with Mr Wyness on 14 April 1999 is by Mr Grover of the AOC:

because it involved SOCOG marks believe SOCOG will need to write to the NOCs involved.

So, again, the very opposite of agreement in the notion of a sufficient authorisation by what had already been granted by the club in favour of Mr Zhu. Paragraph 72, 25 June, AOC, that is McLatchey, writes to Moore, that is SOCOG and asked whether there had been any response to that letter of 16 June, and there is discussion about international memberships at a contemporaneous committee meeting and a reference to a letter to NOCs with regard to the so-called International Olympic Club of a kind which is consistent with the notion “you need to get clearances from them”.

Then paragraph 100 and 101 on page 3046 introduced the unfortunately misspelled “loose canons”. It does not have to do with a degenerate cathedral close; it has to do, obviously enough, with the idea that things are happening which are serious and apparently out of control. That is, in fact, however much a stab in the dark, it was a very accurate description of what had happened in terms of selling in China.

In our submission, we do not need the Commonwealth Act. The Olympic Charter referred to in the contracts will suffice, in our submission, to support us in (a) our refusal that we do not have to justify to give consent and (b) in bringing to an end a contract which was by reason of (a) hopeless of further commercial exploitation.

GUMMOW J: That is a very large proposition.

MR WALKER: And productive of dangerous confusion and continued actions incongruent with the Olympic Charter.

GUMMOW J: A large proposition of law, I mean, your second proposition.

MR WALKER: It is not a proposition of law, it is not a rule - - -

GUMMOW J: It is, because it proceeds from a particular meaning of justification.

MR WALKER: Yes, it involves the proposition that justification need not look to either enacted law or a so-called superior property right as the sole source.

GUMMOW J: Well, what else will do?

MR WALKER: In our submission, a competing contractual right will do. We had them. We were obliged under the host city contract, and under the establishment agreement we had rights as well, and a competing contract is - - -

GUMMOW J: Is there any authoritative discussion that supports that proposition about competing contracts? The world is full of competing contracts.

MR WALKER: Yes, not in this area. The closest one gets are cases where there was not actually a breach of contract such as in Allen v Flood where there are two contracts involved, the contract by the shipwrights, the contract by the iron workers. So there are two contracts and they do not, in fact, compete although it can be said that ultimately they did come down to competition, but it fails of authoritative application to this case because there was no breach of the contract with the shipwrights when the ship owners put them off. To have the real justification, in the sense we have to argue it, we have to have breach because what Justice Bergin found is that the matters of concern as between Mr Zhu and the club were matters, in effect, that should have and could have been the subject of the notice provisions provided for in the contract, thus no summary dismissal and thus the letter of termination was - - -

GUMMOW J: Does it have to be an earlier contract in point of time as to its formation?

MR WALKER: No, in principle - - -

GUMMOW J: It can be later in terms of its formation?

MR WALKER: In principle, in this case they are earlier, but we are not arguing that the principle requires temporal priority. Temporal priority will be a circumstance describing the relations between the three parties involved, the putative tortfeasor and parties to the contract which will undoubtedly be a relevant circumstance to justification, but - - -

GUMMOW J: This doctrine of justification if it exists really has to be some proposition of the law of tort.

MR WALKER: Yes.

GUMMOW J: It is formulated as if it is some sort of equitable defence.

MR WALKER: Alas, yes.

GUMMOW J: If it is an equitable defence you might have an unclean hands problem of some significance.

MR WALKER: Yes, it is not equitable - - -

GUMMOW J: Now, that, however, is washed away, is it, and we are just having this justification idea - - -

MR WALKER: Did we have rights? Did we have status and/or rights, and rights is what I am employing, which imports certain duties, if I may use that fraught word again, your Honour, in relation to our constitutive statute, the host city contract, our constitutive statute, the Olympic Charter, the host city contract, the Olympic charter and the Indicia Act, which was built into some of them as well? In our submission, that was something that, as it happens in this case strongly in favour of us, preceded the gaining of the supposed rights to which we objected ultimately.

GUMMOW J: Does this cut across notions of privity?

MR WALKER: No, in the sense that we wish to preserve privity.

GUMMOW J: You are a stranger to this contract.

MR WALKER: Yes, very strongly, we wish to preserve privity, we are not involved vicariously in any way with one side of the contract. We were antagonistic to both.

CALLINAN J: But at the date of the termination, the club or TOC was in all respects acting in accordance with the wishes and requirements of SOCOG, is that not right?

MR WALKER: Yes, that is why I have answered the control questions as I have.

CALLINAN J: It was a director under the code. SOCOG was a director by definition, because - - -

MR WALKER: Can I simply flag this, your Honour. It is not clear for how long it had been at the behest of SOCOG. Clearly, the club committee had not succeeded in very effective direction hitherto, but, subject only to that qualification, what your Honour is putting to me, with respect, is borne out by such facts as are proved about the committee and certainly the facts that are proved about the direction to terminate – although your Honours will recall the direction to terminate is given in September, but nothing happens until November. This is scarcely a direct puppet string.

CALLINAN J: But there was no question that SOCOG’s wishes were going to be carried out. They may have been delayed in being carried out - - -

MR WALKER: It would be unrealistic for me to deny that.

CALLINAN J: - - - but that was just another instance of incompetence by Mr Wyness, was it not, that he took so long to do it?

MR WALKER: It may be explained by other people as well.

CALLINAN J: There may have been Mr Reading’s involvement at that stage. Assuming SOCOG is a director at all material times, what flows from that?

MR WALKER: Well, directors are not liable for their corporations’ actions under contract.

CALLINAN J: No, the director is SOCOG.

MR WALKER: Yes.

CALLINAN J: If the company is liable - - -

MR WALKER: It does not make a director liable.

CALLINAN J: If the director is acting illegally, it does, if the director is not acting diligently. Is that right?

MR WALKER: Yes, your Honour.

CALLINAN J: The director is failing to act honestly and diligently.

MR WALKER: That would be an action by the club, I think your Honour is referring to there. Ironically, if - - -

CALLINAN J: Cannot creditors also sue under that head?

MR WALKER: In certain circumstances, yes, your Honour. Ironically, if SOCOG were a director, I think Said v Butt would make levelling against it the tort of inducing the breach of the company’s contract at least problematical.

HEYDON J: O’Brien v Dawson, Mr Justice Starke.

MR WALKER: That is a possibility I am afraid that has not been explored hitherto.

CALLINAN J: No, it has not been explored, certainly, and I am just wondering whether that might make it critically important that a stance is adopted by your client. In fact, I do not think you contend to the contrary. You do not want to resile from any of the stances that have been adopted by your client.

GUMMOW J: What makes your rights that you have been talking about superior as well as anterior, if it is not something in the law of property?

MR WALKER: Could I load something else into the question in answering it, your Honour. The expression seems to be “equal to or superior” in some of the authorities, and may I therefore deal with it in two parts. What makes it superior is that our contracts, having been formed beforehand, had the effect of limiting what could be granted by their contract, and their contract was being sought to be used in a way which was inconsistent with our rights and obligations under the network of contracts and statutes to which I have referred.

GUMMOW J: You say what could be granted. What does that mean? Put in terms of property law or put in terms of contract law?

MR WALKER: In terms of contract but also in terms of a licence. I would hesitate, with respect, to characterise the licence in question as one which would automatically be analogised with property. But whether it be called property or not, it was an invalid grant, that is, there was no capacity to grant the licence. It was not a licence which is supposedly granted. That is the error in the deed poll decision by the Court of Appeal.

Now, the superiority comes, therefore, from the temporal sequence and from the inconsistency of the claimed conduct under the second contract, their contract, with the position that we were vitally involved in, concerned in, in relation to the intellectual property and the commercialising of the Games, in which we had positive duties of stewardship, not merely passive duties of ownership.

GUMMOW J: But assume X agrees to go and work for Y for 12 months, to start next week. Then he goes and agrees with Z to go and work next week for 12 months. How do you get – he has made inconsistent engagements. Why is there any superior or inferior right, as between X and Y?

MR WALKER: I think that may be a case, your Honour, where the notion of an equal right comes in and it may then be that in such a case, depending who won the war of persuasion, the temporal sequence would be critical. If the first employer persuaded the employee not to take up the job with the second employer, in our submission, the approach taken in the authorities – which is extremely general, we accept – is one which would say that contract - - -

GUMMOW J: It is not taking any authorities from this Court, so they do not instruct my thought one bit at the moment. The only thing that instructs me at the moment is what Sir Frederick Jordan said.

MR WALKER: Well, your Honour, Sir Frederick Jordan - - -

GUMMOW J: And he was puzzled too, but he found some tabula floating past, which is the notion of property rights. But you cannot solve this question of justification without first solving what it is this tort is designed to protect. What are the interests that are at stake? What is the tort seeking to do?

MR WALKER: Well, that appears to be explained by the notion that the benefit of a contract is a form of property.

GUMMOW J: Well, that just cannot be right.

MR WALKER: From which it follows that if there is any policy of the law to be seen in the tort, then it has to do with - - -

GUMMOW J: Breach.

MR WALKER: - - - the respect to be given to contractual undertakings so that there ought to be consequences upon breach. So the law of breach of contract of the law of binding the contractual parties is the first pacta observanda. Then, by a step of reasoning which is, in fact, not explained in the authorities at all, it is said that it is in some circumstances wrong and in other circumstances not wrong to bring about the breach by a person of a contract with another.

GUMMOW J: Or to bring about directly what you could bring about indirectly by exercise of some “superior rights”.

MR WALKER: No – well, the cases to date have not analysed it in terms of what might be called justification, recognising a short cut to a long way round.

GUMMOW J: The Architects Case does, does it not? The Architects Case in England. The financier had security over the development. They put more money in on terms that the architect was sacked. They could have brought the whole thing down by exercising their security.

MR WALKER: Just.....rights, yes. That certainly does not present an analogy with our case - - -

GUMMOW J: No.

MR WALKER: - - - unless you do start begging the question by describing the contracts as lumps of property, as it were, or property rights which are exercisable partly by dint of statute, regardless of contracts. Your Honour, in answer to your question, “What does the tort protect?”, in my submission, though feeble, the only explanation that the books and the principle to be gathered from them so far yield is that it protects those contracts which, it is said, third parties cannot interfere with. That simply shifts the inquiry, and that is why the jurisprudence of the good sense of the tribunal as to what side of the line the case lies - - -

GUMMOW J: That sounds like an equitable defence, which it is not, by definition.

MR WALKER: No, but, with respect - - -

KIRBY J: Should we not be looking at what the text writers say about this, instead of speculating in our own mind?

MR WALKER: I am not speculating, your Honour. What I have been putting to you is paraphrase. It is collected in the materials in the written submissions put before you by both parties. The text writers do not speak with one voice. We have tried to draw to attention, as have our friends, where they differ - - -

GUMMOW J: One of them was here, but the other ones just utter cries of anguish, really.

MR WALKER: Yes.

KIRBY J: Do I recollect that this case was the subject of a case note in the Sydney Law Review? Do you remember that?

MR WALKER: I do not know, your Honour. I am sorry.

KIRBY J: Has it been the subject of any commentary that you are aware of?

MR WALKER: Not that I am aware of.

GUMMOW J: This is a hard torts case. You just get case notes on negligence - - -

HEYDON J: It is in the latest edition of Balkin and Davis. It is mentioned favourably in the sense that it is accepted as a law, but the author of a torts textbook must accept, obviously, decisions of intermediate Courts of Appeal as the law.

MR WALKER: Yes.

KIRBY J: What was your best submission as to what the policy that the law of tort was getting at here? Is it a matter of, as it were, public peace, like the law of trespass, that it is preventing third parties from interfering in the contractual relationships which the English law traditionally regarded as important to those who were involved, or is it something different from that? One thinks, in the trade union situation, of interference by outsiders in the contractual relations that are now dealt with under the Trade Practices Act.

MR WALKER: It is a balancing exercise.

GUMMOW J: That immediately sounds a bell.

KIRBY J: That is an old phrase that we get thrown at us all the time. We are constantly on that tightrope balancing.

MR WALKER: I am sorry, it is a metaphor familiar to the law, a metaphor nonetheless - - -

KIRBY J: I am not hearing you, I am afraid. I am sorry, it is not your fault, but I do not hear you.

MR WALKER: I am sorry, it is a metaphor, but it is familiar to the law. It may be difficult as a metaphor, but the notion that the court looks at the two positions and says that the one has weightier claims to favour than the other is an extreme - - -

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GUMMOW J: Yes, exactly.

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

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

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

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

MR WALKER: That then comes down to what might be called good or bad reasons for doing what you did, and that conjures up Sir George Rich’s pungent summary rebutting what he called, in Shepherd v Felt & Textiles [1931] HCA 21; (1931) 45 CLR 359, the “ancient heresy”. The passage in mind, that your Honours are familiar with, is at 371. In the quite distinct but, we would submit, evocative context of contract, his Honour said:

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

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

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

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

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

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

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

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

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

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

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

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

GUMMOW J: Yes.

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

MR WALKER: Yes.

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

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

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

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

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

MR WALKER: No.

CALLINAN J: Why not?

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

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

MR WALKER: No.

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

MR WALKER: No.

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

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

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

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

HEYDON J: Well, they wanted the benefits.

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

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

MR WALKER: I do not know, your Honour.

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

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

CALLINAN J: Yes:

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

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

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

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

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

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

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

GUMMOW J: Yes.

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

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

MR WALKER: Mr Zhu agreed to that.

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

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

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

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

CALLINAN J: To facilitate his applications for consent.

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

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

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

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

MR KELLY: Probably the same, or less.

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

MR WALKER: May it please the Court.

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