Severstal Export GmbH v Bhushan Steel Limited [2013] HCATrans 282 (8 November 2013)

Last Updated: 13 November 2013

[2013] HCATrans 282

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S103 of 2013

B e t w e e n -

SEVERSTAL EXPORT GmbH

Applicant

and

BHUSHAN STEEL LIMITED

Respondent

Application for special leave to appeal

FRENCH CJ
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 8 NOVEMBER 2013, AT 11.56 AM

Copyright in the High Court of Australia

MR I.M. JACKMAN, SC: May it please the Court, I appear with my learned friend, MR I.C. COLQUHOUN, for the applicant. (instructed by King & Wood Mallesons)

MR A.S. BELL, SC: May it please the Court, I appear for the respondent. (instructed by Jones Day)

FRENCH CJ: Yes, Mr Jackman.

MR JACKMAN: Your Honours, this case provides a stark illustration of how readily Mareva-type orders are now given. To be fair to the Court of Appeal, the court did refer and referred repeatedly to freezing orders being in the nature of an exceptional remedy and not lightly to be given but, in our respectful submission, the case itself shows that those propositions now have very little, if any, meaningful content.

The position can be contrasted with the way in which a remarkably similar case was decided about 15 years ago at a time when Mareva orders were regarded as truly exceptional and not likely to be made. We have given the Court reference to Reches v Tadiran (1998) 85 FCR 514, a decision of Justice Lehane. Can I ask your Honours to go to the report, in particular at page 518. His Honour rather neatly summarised the nature of the case a little below letter D on page 518, where his Honour says:

Accordingly, this case raises, in a striking way, a question which does not seem to have been directly confronted in any reported case: whether it is appropriate to restrain a respondent which is a foreign corporation –

That is the same as us –

from removing or depleting its sole asset within Australia –

Again, that is our case, proceeds of cheques sitting in a bank account in Sydney –

in circumstances where: (a) the removal or depletion is in the ordinary course of business –

That would be so, we have no reason to leave several million dollars in Australia, given we do not conduct business here –

(b) the respondent is a major and profitable corporation with very substantial assets, particularly current assets –

and in our case the finding is that our net current assets are in the order of 400 million Swiss francs, roughly A$400 million–

(c) there is nothing to suggest that the respondent is likely to “default”: that is, to decline to pay a judgment debt and to resist, other than by grounds properly available to it under the law, enforcement of a judgment against it –

Again, that is the effect of findings by Justice Sackar not disturbed on appeal –

and, (d) the respondent resides, and principally carries on its business, in a jurisdiction where enforcement is possible under a reciprocal regime for the registration of judgments.

There is a slight variation in the facts of our case. Justice Lehane was dealing with a case where the substantive proceedings were actually brought in Australia, whereas in our case the substantive proceedings in question are in India and one might think that would make a court even more reluctant to grant a freezing order than was the case in Reches, although the question of reciprocal enforcement does arise in our case for a slightly different reason.

Now, if I can go to the heart of the Court of Appeal’s reasoning at page 87 of the application book, there is only one basis and a very, very thin basis at best on which the court found that there was any:

evidence from which the primary judge could be satisfied there was a danger that a prospective Indian judgment would not be satisfied if the proceeds of the cheques were remitted to Switzerland.

FRENCH CJ: This was the arguability of clause 27 of the Code.

MR JACKMAN: Article 27 of the Swiss Code, that is right, and the reasoning is really contained in paragraph 69. In the fourth line the court let us down somewhat gently by recognising the matter was “finely balanced”, but his Honour the Chief Justice expresses an opinion:

there was evidence –

meaning some evidence –

from which the primary judge could reach that degree of satisfaction.

There is then reference to the fact that in the Indian proceedings we have in a verified defence pleaded res judicata and what is called section 11 of the Civil Procedure Code which is issue estoppel or cause of actual estoppel.

FRENCH CJ: Now, what are you asking the High Court to do? Are you asking the High Court to find that his Honour got it wrong and there was no evidence?

MR JACKMAN: Correct. No evidence - - -

FRENCH CJ: That is the special leave point?

MR JACKMAN: Yes. No evidence to justify a finding that there was a danger that if the proceeds of the cheques were remitted to Switzerland the judgment would go unsatisfied. It is a special leave point not just because of the error in the particular case before the Court, but also because this case is probably the starkest illustration and a perfect vehicle for the proposition that freezing orders are granted almost for the asking now. Despite the court’s articulating the principle that they are exceptional and not likely to be granted, there is really nothing on which the court can base a finding of a danger.

FRENCH CJ: You are putting it as a visitation case, are you?

MR JACKMAN: Yes, but there is a public importance in the matter because of the trend of decision making on freezing orders that they are available almost for the asking and this case is a perfect vehicle for it because of the rather pure way in which the issue arises, namely, we say, an absence of evidence on which any judge could be properly satisfied of a danger of funds being put beyond the reach of creditors. Now, can I focus on the last two sentences in paragraph 69 which reveal the error in the reasoning? The second-last sentence advances a – first of all, just before that, his Honour the Chief Justice says:

there is nothing to suggest that the appellant would not take the same point –

a res judicata or issue estoppel point –

in enforcement proceedings in Switzerland –

Be that as it may, there is nothing to suggest any illegitimacy in that or that that points towards any risk of default. Now, then the second-last sentence:

There is no evidence as to how a Swiss Court would apply Article 27 in such circumstances.

There are several things we say about that. One is that it is not our onus on the receiving end of an application for a freezing order to negative the proposition there is a danger, so that an evidentiary vacuum could only work for our benefit, but we go further to say that there is not an evidentiary vacuum here. The evidence in fact supports us, and it does so for two reasons. The first is the general presumption that is referred to in paragraph 66 on the previous page, that is:

In the absence of evidence of foreign law, it is generally presumed that foreign law is the same as the law of the forum.

Now, there is an obvious exception to that when one is dealing with a taxation issue as in Damberg v Damberg, or if one is dealing with a very fine point of civil procedure as arose in the other case referred to, Boele, in which the question was whether someone was served by – service had an address for service in court proceedings.

GAGELER J: Mr Jackman, the Court has before it evidence of your client pleading the content of Swiss law in proceedings in India.

MR JACKMAN: No, not at all. We pleaded Indian principles of res judicata and cause of action estoppel, nothing to do with Swiss law. We pleaded Indian defences to an Indian cause of action in India. That is one reason why the so-called verification of the defence does not really go anywhere. It is an Indian law they are verifying. As a matter of Indian law, there is a defence along those lines. The Indian lawyer is not saying anything about Swiss law at all. The extrapolation is that if the Indian judgment were sought to be enforced in Switzerland, then a similar point would be taken under Swiss law. That is how it arises. The verification does not do that job. If I can go on with the reasoning at the foot of page 86, his Honour says:

Even if it could be assumed that what has been described as cause of action estoppel rests on some great or broad principle likely to be part of any given legal system –

that is an assumption which we would respectfully submit is obvious that every legal system has a principle of finality of judgments which corresponds in some way to res judicata and cause of action estoppel, but we are talking here not just about any given legal system, we are talking here about the Swiss legal system. What his Honour goes on to say is that –

it would not be appropriate to assume that a statutory provision of a civil law country was embodying such a principle including its limitations.

Then his Honour says it cannot be assumed:

an attempt to resist enforcement based on Article 27 would fail because no res judicata, issue estoppel or cause of action estoppel would have arisen under the law of Australia.

Now, we dispute that, not just because of the general presumption that in the absence of proof one does presume that the foreign law is to the same effect as Australian law, but because in this context, namely, the enforcement of foreign judgments, we know that there is substantial reciprocity of treatment between Switzerland and Australia. We know that because Switzerland is included in the regulations to the Foreign Judgments Act and you only get included in those regulations if you satisfy the Governor-General that there is substantial reciprocity of treatment.

So there is not an evidentiary gap. There is a presumption in our favour, and it is a presumption that is fortified by the fact that Switzerland is included in our Foreign Judgments Act, which can only happen if there is substantial reciprocity of treatment. That then takes me to the last sentence in paragraph 69, which is structured around a rather curious double negative that it did not seem to his Honour that:

it is open to conclude that such a position would not be arguable.

First of all, the double negative here does not make a positive because it is entirely consistent with complete neutrality. Second, the double negative rather conceals the fact that whether a danger exists is not a matter which we have an onus to negative, it is an onus which Bhushan had to satisfy the court of; and third, the question of arguability very much lowers the threshold from the conventional wisdom that the reference to danger in the relevant rule is a reference to a real danger, not some theoretical one or something which is no more than barely arguable.

It is that last sentence that is the attempt by the court to overcome the evidentiary gap in the second-last sentence as the word “however” indicates and, in our submission, it cannot do that job. So what one has is the grant of a freezing order where, in our submission, there is an absence of any evidence of danger that we would put ourselves beyond the reach of a judgment creditor and it is illustrative of what has been a general trend in grant of Mareva-type relief over the last 10 or 15 years which waters down the nature of the remedy to such an extent that it can no longer be said consistently with principle that this is an exceptional remedy not likely to be granted.

FRENCH CJ: What do you say about the reasoning in paragraph 63 and 64?

MR JACKMAN: There is undoubtedly – we do not dispute the inference that we may seek to resist enforcement of an Indian judgment in Switzerland in reliance on Article 27. That inference is open.

FRENCH CJ: Yes.

MR JACKMAN: So what, we say, if an Article 27 defence has no merit and on the evidence in this case it would be completely meritless.

FRENCH CJ: Yes.

MR JACKMAN: It would be completely meritless we know because the same argument was run before Justice Simpson by, ironically enough, by Bhushan Steel in trying to get a stay of enforcement of our Swiss judgment in Australia and her Honour said, well, there is not even the same subject matter. The Delhi proceedings are based on contract Nos 3, 4 and 5 and the Swiss proceedings are based on contract No 6, so you cannot say there is even a common subject matter.

The material that I was going to in terms of the presumption of foreign law being the same as the law of the forum in the absence of evidence operates to indicate that on the evidence in this case a defence that my client might raise in Switzerland based on Article 27 would have no merit. That is the - - -

FRENCH CJ: So the argument really reduces to the proposition that absent any evidence, there is no basis for assigning some risk of non-enforceability?

MR JACKMAN: That is so.

FRENCH CJ: Simply because you have no basis to assess the risk.

MR JACKMAN: Well, it is more than that. It is not only no basis to assess the risk but on the evidence that was actually available before the court there was no risk, and the word “risk” is a somewhat, in itself perhaps, a somewhat watered-down version of the tests under the rule of a danger which is rightly construed as a real danger.

FRENCH CJ: Well, it is all probability, is it not, of something bad happening?

MR JACKMAN: Quite, quite.

FRENCH CJ: Which may be zero, it may be 50, it may be one, so the word “real” just picks it up somewhere along that spectrum.

MR JACKMAN: It does, but it states the threshold at a far higher level than a mere test of arguability of a defence that on the evidence had no merit. It is only a potential defence because there is no judgment from the Delhi proceedings, they have not even been heard and therefore no - - -

FRENCH CJ: Was there ever anything said about how long it will be before they are heard?

MR JACKMAN: There was a little evidence of that but I think we are already well beyond the estimates that were given at first instance on that front.

FRENCH CJ: Is that right?

MR JACKMAN: To be fair, the estimates were fairly loose.

FRENCH CJ: Okay, thank you, Mr Jackman.

MR JACKMAN: May it please the Court.

FRENCH CJ: Yes, Dr Bell.

MR BELL: Your Honours, my friend’s opening gambit that these orders are a dime a dozen, how readily given, is completely unsubstantiated. One would expect to see in his written submissions citation of dozens of these decisions. He has not done so and there is no basis for the Court proceeding with that assertion. That is the first proposition.

The second proposition is this. This is not a special leave case. It was not quite clear from my friend’s answer to your Honour the Chief Justice’s question about whether it was put only as a visitation case or not. It is clearly not a matter which raises any question of public importance or principle. What we have emphasised in our written submissions, the dialogue between my learned friend and Chief Justice Bathurst, and this is set out in application book 105, where the Chief Justice - - -

FRENCH CJ: He said if it was open then cadit quaestio.

MR BELL: So the familiar question and then a later passage where this question of whether a danger existed was conceded by Mr Jackman to be a question of fact, so whether a finding of fact was open to the trial judge. That is how the Chief Justice approached it, and one sees that in various passages of his judgment which mirror the language of his dialogue with Mr Jackman, so application book 84, paragraph 60; application book 87, paragraph 69 and 70, the Chief Justice used the language was it “open” to the trial judge, et cetera.

So that was the prism in which the appeal to the New South Wales Court of Appeal was argued. Therefore, the only special leave question or the only question that could arise on an appeal to this Court is whether the Court of Appeal erred in some important way or involving a matter or high principle in finding that a conclusion on a question of fact was open to the primary judge. Now, I am not familiar with the criteria for special leave having been altered but that satisfies none of the criteria.

We have used the word “mundane” in our written submissions twice very deliberately. This is a mundane matter involving a very familiar process involving now a statutory provision involving a question of fact: is there a danger in all the circumstances? The trial judge addressed it. The Court of Appeal said it was open to him to reach the conclusion he did. So what this Court is being asked to do is to engage in the facts again. What then are the merits of the application as a visitation case? Zero, for these reasons, your Honour, and we deal with this in paragraph 22.

FRENCH CJ: What do you say about the last sentence in 69:

it does not seem to me that it is open to conclude that such a position would not be arguable.

I think it is at least a double negative. What does it tell us?

MR BELL: Yes, but what his Honour said was – two stages. Is there a danger that Severstal will take this position in Switzerland? Conclusion, yes, they have taken the position in India, albeit with reference to Indian law, but res judicata arising from earlier Swiss proceedings, and there is the connection with Switzerland there. Now, we have one fairly surreal situation - - -

FRENCH CJ: They have not disavowed the invocation of Article 27.

MR BELL: They have not disavowed it, and that was very important. So we have the extraordinary thing of Mr Jackman saying, well, yes, that inference is open but we will take it but do not worry, it has got no prospect of succeeding. The court was not entitled to find that if we – there was a danger that we would take that position, that we would not take it seriously and responsibly with a view that it had merit. That is how the Court of Appeal reasoned.

The Court of Appeal indicated they may not have reached the same conclusion as Justice Sackar, but Mr Jackman this morning gave it away again because when he took the Court to page 87 of the application book, he described the material as “a thin basis at best”. If it is there, and the Court of Appeal was correct to say it was there, that there was no basis, it would have been an error for the Court of Appeal to interfere and it is no part of this Court’s constitutional or public role to be entering into a question of fact between parties involving a relatively minor, small financial amount particularly where, in one sense, this is all interlocutory because this is the point we make in the final paragraph of our written submissions, namely that the orders are not permanent, they are expressed to only last until certain proceedings in India are completed.

Liberty is being granted by the primary judge to apply to extend, vary or discharge the injunction. Severstal has not availed itself of that liberty and there is a protection through the undertaking for damages which was obviously proffered. So an attempt to dress this up as a visitation case is about as optimistic as the attempt to dress this case up as involving some matter of high principle, and the whole premise on which it is put, namely that there has been a surge in these orders is not substantiated and, for what it is worth, not correct, in my experience.

FRENCH CJ: Thank you. Yes, Mr Jackman.

MR JACKMAN: We have nothing in reply, your Honours.

FRENCH CJ: Thank you.

The making of the order the subject of the application for special leave in this case turned upon the primary judge’s view that there was a danger that any judgment secured by the respondent in proceedings in India would not be able to be satisfied because of the possibility that its enforcement could be resisted in Switzerland pursuant to Article 27 of the Swiss Federal Code of Private International Law. The making of the order turned upon a view of the facts taken by the primary judge. The approach taken by the Court of Appeal to the primary judge’s decision does not reflect any error of principle or otherwise which would warrant the grant of special leave. Special leave will be refused with costs.

AT 12.19 PM THE MATTER WAS CONCLUDED