Rinehart & Anor v Hancock Prospecting Pty Ltd & Ors; Rinehart & Anor v Georgina Hope Rinehart (In her personal capacity and as trustee of the Hope Margaret Hancock Trust and as Trustee of the HFMF Trust) & Ors [2018] HCATrans 234 (13 November 2018)

Last Updated: 13 November 2018

[2018] HCATrans 234

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S143 of 2018

B e t w e e n -

BIANCA HOPE RINEHART

First Appellant

JOHN LANGLEY HANCOCK

Second Appellant

and

HANCOCK PROSPECTING PTY LTD (ACN 008 676 417)

First Respondent

HANCOCK MINERALS PTY LTD (ACN 057 326 824)

Second Respondent

TADEUSZ JOSEF WATROBA

Third Respondent

WESTRAINT RESOURCES PTY LTD (ACN 009 083 783)

Fourth Respondent

HMHT INVESTMENTS PTY LTD (ACN 070 550 104)

Fifth Respondent

ROY HILL IRON ORE PTY LTD (ACN 123 722 038)

Sixth Respondent

HOPE DOWNS IRON ORE PTY LTD (ACN 071 514 308)

Seventh Respondent

MULGA DOWNS IRON ORE PTY LTD (ACN 080 659 150)

Eighth Respondent

GEORGINA HOPE RINEHART (IN HER PERSONAL CAPACITY AND AS TRUSTEE OF THE HOPE MARGARET HANCOCK TRUST AND AS TRUSTEE OF THE HFMF TRUST)

Ninth Respondent

HANCOCK FAMILY MEMORIAL FOUNDATION LTD (ACN 008 499 312)

Tenth Respondent

150 INVESTMENTS PTY LTD (ACN 070 550 159)

Eleventh Respondent

HOPE RINEHART WELKER

Twelfth Respondent

GINIA HOPE FRANCES RINEHART

Thirteenth Respondent

MAX CHRISTOPHER DONNELLY (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF THE LATE LANGLEY GEORGE HANCOCK)

Fourteenth Respondent

MULGA DOWNS INVESTMENTS PTY LTD (ACN 132 484 050)

Fifteenth Respondent

Office of the Registry
Sydney No S144 of 2018

B e t w e e n -

BIANCA HOPE RINEHART

First Appellant

JOHN LANGLEY HANCOCK

Second Appellant

and

GEORGINA HOPE RINEHART (IN HER PERSONAL CAPACITY AND AS TRUSTEE OF THE HOPE MARGARET HANCOCK TRUST AND AS TRUSTEE OF THE HFMF TRUST)

First Respondent

150 INVESTMENTS PTY LTD (ACN 070 550 159)

Second Respondent

HANCOCK PROSPECTING PTY LTD (ACN 008 676 417)

Third Respondent

HANCOCK MINERALS PTY LTD (ACN 057 326 824)

Fourth Respondent

TADEUSZ JOSEF WATROBA

Fifth Respondent

WESTRAINT RESOURCES PTY LTD (ACN 009 083 783)

Sixth Respondent

HMHT INVESTMENTS PTY LTD (ACN 070 550 104)

Seventh Respondent

ROY HILL IRON ORE PTY LTD (ACN 123 722 038)

Eighth Respondent

HOPE DOWNS IRON ORE PTY LTD (ACN 071 514 308)

Ninth Respondent

MULGA DOWNS IRON ORE PTY LTD (ACN 080 659 150)

Tenth Respondent

HANCOCK FAMILY MEMORIAL FOUNDATION LTD (ACN 008 499 312)

Eleventh Respondent

HOPE RINEHART WELKER

Twelfth Respondent

GINIA HOPE FRANCES RINEHART

Thirteenth Respondent

MAX CHRISTOPHER DONNELLY (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF THE LATE LANGLEY GEORGE HANCOCK)

Fourteenth Respondent

MULGA DOWNS INVESTMENTS PTY LTD (ACN 132 484 050)

Fifteenth Respondent

KIEFEL CJ
GAGELER J
NETTLE J
GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 13 NOVEMBER 2018, AT 10.01 AM

Copyright in the High Court of Australia

____________________

MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MR G.E.S. NG, for the appellants in both cases. (instructed by Yeldham Price O’Brien Lusk Lawyers)

MR N.C. HUTLEY, SC: If your Honours please, I appear for the first eight respondents in proceeding S143 and the third to tenth respondents in S144 with my learned friends, MR I.C. COLQUHOUN and MR J.J. HUTTON. (instructed by Corrs Chambers Westgarth)

MR P.J. BRERETON, SC: May it please the Court, I appear with MR C.N. BOVA and MR S.A. LAWRENCE for the first and second respondents in matter S144 and the ninth and eleventh respondents in matter S143. (instructed by Speed and Stacey Lawyers)

KIEFEL CJ: The Court granted leave to the Australian Centre for International Commercial Arbitration to file written submissions as amicus curiae. The Court refused the application of Wright Prospecting Pty Ltd to intervene in the proceedings. Reasons for that refusal will be provided in the reasons for judgment on the appeal. Yes, Mr Walker.

MR WALKER: If it please your Honours. Your Honours, the single point in our appeals turns on the meaning of a phrase in which there appears a humble but important preposition - the word “under”. It raises, however, more than simply the meaning of a single word in an important phrase in a particular contract or deed. It raises questions concerning the approach to the interpretation of such instruments, in particular, as to whether something special is called for in relation to arbitration clauses generally, or perhaps more specifically, arbitration clauses between commercial people.

KIEFEL CJ: I am sorry to interrupt you at such an early point, Mr Walker, but at some point we would be assisted by an identification of the nature of the dispute in question.

MR WALKER: Yes.

KIEFEL CJ: It is summarised very briefly, I think, by the Full Court at, I think, paragraph 158.

MR WALKER: Yes.

KIEFEL CJ: But an identification of the dispute would be of assistance given that the pleadings were not completed and, therefore, the issue is not really identified.

MR WALKER: Yes. May I take up that last point in particular. As your Honours have seen, part of our argument is, of course, that the expression “dispute” and the related expression “difference” in the chapeau to clause 20, that I think you will find at page 122 of our further materials, and it is reproduced in the reasons for judgment, is first used in a context, namely notification, as being the first step of a relatively elaborate dispute resolution process involving a possible phase of mediation, which will, of course, occur thereby regarding identification of a dispute before anything like pleadings have been even first essayed let alone refined.

So that picks up what the Chief Justice has drawn to attention, that there is a difference between a proper understanding of what the dispute is when it first arises, so as to be subject or not to clause 20, and the dispute as it eventually became crystallised and very elaborately, and in very sophisticated form, advanced in the pleadings that were before Justice Gleeson at first instance.

GORDON J: There were no pleadings. There was a statement of claim.

MR WALKER: I am sorry.

GORDON J: That is the difficulty; there is no defence.

MR WALKER: I am sorry. When I say “the pleadings”, I mean “the pleading”.

GORDON J: Yes, I understand.

MR WALKER: The claim was advanced in a very sophisticated and elaborate form.

GORDON J: They have never been asked to put on a defence to that claim at any point.

MR WALKER: Asked? I do not think so. A request by us, I do not think is what your Honour is

GORDON J: No, I mean either by order or management in order to crystalise the issues.

MR WALKER: No. As your Honours appreciate, the stay application is seen as something that has to be confronted first.

GORDON J: Possibly.

MR WALKER: It certainly seemed that way. It was in these proceedings, in particular, and it raises a question – that is, the absence of a defence – which, in turn, informs not only the clause 20 question but certainly the clause 20 question – that is, even on our reading of the expression “under this deed” – what does one do by way of anticipating a defence?

We have adopted, as your Honours appreciate, the same approach as informed the reasoning of the New South Wales Court of Appeal in Rinehart v Welker on that point. Your Honours will recall the Chief Justice’s reasoning about how a dispute raised by a plaintiff’s claim does not necessarily, perhaps at all, fall to be characterised as a dispute under a deed simply because a provision of a deed is relied upon by way of answer in a defence.

GAGELER J: But, as I understand his Honour’s reasoning, it might.

MR WALKER: Yes. I am going to have to come

GAGELER J: It is very difficult for me to understand where the dividing line is.

MR WALKER: I cannot say your Honour’s comment comes out of the blue for me. I am going to go to those passages in his Honour’s reasoning.

GAGELER J: Mr Walker, will you also advance an affirmative argument as to what is encompassed by the expression “dispute under this deed”?

MR WALKER: Not affirmative in terms of comprehensive for all purposes.

GORDON J: For these purposes?

MR WALKER: For our purposes – I understand Justice Gageler is asking, do I cast my argument other than saying whatever it is, this is not it.

GAGELER J: Correct.

MR WALKER: Not really. I am going to attempt that. There are some very easy examples that the parties have assembled in their written submissions, for example, of what is a dispute under this deed. I do not understand your Honour is asking me simply to repeat those really obvious ones.

GAGELER J: No. One rendering dispute under the deed is a controversy in which a right, or perhaps a defence provided by the deed is in issue.

MR WALKER: Yes.

GAGELER J: What do you say to that, for example?

MR WALKER: That that is too broad – the “is in issue” is too broad and in particular will not meet the case of the binding existence or the valid operation of a deed. Those are cases where you can certainly say those matters are in issue. But they would not, in our submission, ever fall within the phrase “under this deed” because they are anterior to, separate from, and in at least one of those cases would conclude in a finding that the deed did not exist, certainly did not bind.

GAGELER J: It might depend on the sequence of pleading, might it not?

MR WALKER: Or claim and answer, yes.

GAGELER J: Or claim and answer and reply or rejoinder as the case may be.

MR WALKER: Very much reply and rejoinder, yes.

GAGELER J: So it can turn on the sequence in which issue is joined in the dispute.

MR WALKER: There is no doubt that the context, the second in which in the clause 20 decision has to be made, cannot be divorced from the actual dealings between the parties including what I am going to call their disputatious dealings, which means claims, answers and through the various iterations, the replies to answers and rejoinders to replies to answers may involve. There is no doubt about that.

GORDON J: If that is right then I think the question that the Chief Justice asked you at the outset is to ask whether or not paragraph 158 on the core appeal book at 281 is a complete or sufficient description of the dispute, given what you have just described as the context in which that dispute arises and I ask that question for this reason, that if one went, for example, and looked at a pleading which is the only thing we have and one looked at paragraph 31 of the pleading, it seems as though that description of the dispute may be a bit narrow.

MR WALKER: Your Honour uses the word “narrow”. It appears in a pleading where

GORDON J: No, I meant 158, the way in which the Full Court has described it.

MR WALKER: I am sorry. It is certainly terse and we would, with great respect, draw to your Honours’ attention the way in which her Honour at first instance, in rather more detailed fashion, addressed the very question the Chief Justice has asked me. The Full Court did not dissent from or purport to correct anything that Justice Gleeson said in the passage. Your Honours will see it starting at page 80 of the book in her Honour’s paragraph 165 and following.

It introduces the nomenclature of validity claims and substantive claims. The narrative continues by a paraphrase and to a degree some interpolation based on submissions from the pleading by her Honour for many pages and your Honours will understand that what her Honour had before her was supplemented, that is, it was not simply the pleading, it was supplemented by circumstantial material upon which both parties relied for opposite purposes such as the matter raised at page 100 in her Honour’s reasons, paragraphs 284 and following, the socalled unsworn affidavit by one of my clients.

I am not sure – in answer to the Chief Justice’s question it is, I think, doomed to failure to attempt, as it were, a different form of summary for that which her Honour sets out, with respect, clearly, though at great length, in that part of the section of her reasons headed “Facts”. It will not do justice to the dispute to say that it concerns grievances about trust and fiduciary obligations said to be excited by and to have been breached in the context of very large mercantile interests in mining. That does not do it justice but it is accurate.

KIEFEL CJ: They are the background to the Hope Downs deed.

MR WALKER: Yes.

KIEFEL CJ: The deed was meant to be the resolution of them, was it not?

MR WALKER: Yes, it resolved

KIEFEL CJ: So it is the entry into the deed. Is it just the Hope Downs deed, though? There is a document following it that is impugned as well.

MR WALKER: There is a later deed as well and there is, of course, the adherence to the deed by my client, Mr Hancock, that is in question.

KIEFEL CJ: Who did not actually sign the deed

MR WALKER: That is right.

KIEFEL CJ: but he acknowledged it.

MR WALKER: Comes into it later, yes.

GORDON J: Can I just test one question and I will be quiet. The proposition you just put to the Chief Justice: is it the position or you accept that it does start with the entry into the deed?

MR WALKER: No.

GORDON J: When I read the materials I had thought the way in which you put your submissions, and the reason why I ask whether 158 of the Court of Appeal judgment is complete and accurate, is that the allegations concerned events back when Mr Hancock Senior was alive all the way through and including a contention that I understood Mr Hutley put in the Court of Appeal that he even questioned in his defence or intends to the existence of what is known as the HFMF Trust.

MR WALKER: Yes, yes. I am sorry if I misspoke. The disputes between the parties, as my extremely brief sample summary was intended to convey, relate to matters, concern differences predating the deed. Indeed, the deed is an important integer, the validity of which is attacked by us in recognition of its importance precisely because it comes halfway through the narrative, not at the very beginning of the narrative. So we are certainly are not seeking to advance the substantive claims as claims that stem from the deed. That would be obviously under clause 20. We say that we have claims to which the deed is ineffective as an answer because we also have the validity claims about the deed.

GAGELER J: Absent the validity claims, is there an acknowledgment that the releases in the deed would be an answer?

MR WALKER: I do not know that I can say that comprehensively that they would be to the very forefront of the argument.

EDELMAN J: Does that not then mean that there is, at least, a dispute under the deed?

MR WALKER: There is no question there is a dispute under the deed, which can be framed as follows. If it is valid, do its terms have an effect by way of release or otherwise on the socalled substantive claims or any of them sought to be raised by us? There is no doubt about that. And that is why it makes sense, on appropriate instructions, for us to raise the validity claims. There is no doubt that, but for the validity claims, there would be a claim of the most obvious kind falling under clause 20.

EDELMAN J: Why does that not mean, then, that there is any dispute under the deed?

MR WALKER: I think I have already said there obviously is a dispute under the deed. If it be valid

EDELMAN J: Why would that not engage clause 20, then?

MR WALKER: Because it would not cover the dispute that we raise concerning its validity. Now, clause 20 does raise a question, not itself specifically, but its genus raises the question as to whether such wording can permit an outcome by which a tincture of clause 20 dispute drives disputes not within clause 20 into some – I think it is probably a no man’s land because they would not be within the agreement to arbitrate but the question would be: what is the effect with respect to a stay?

Now, that is what we call the “case management” questions which, were we to succeed in this case, means that the matter, with great respect, should be remitted to her Honour so that her Honour may take account of the section 16 correction administered by the Full Court and not before this Court and any other considerations that seem appropriate to her Honour when evaluating the proper course of events with respect to anything which is arbitral compared to anything which may simply be stayed in order to be postponed until after an arbitration has been heard. That depends upon the outcome in this Court.

GAGELER J: Mr Walker, I am sorry, I will just ask one more question – which goes back to an earlier question – and then I will be silent. If the pleading had taken a different course here – if you had raised the substantive claims to which the release in the deed is pleaded as an answer and then you had, in a further pleading, disputed the validity of the deed, would there be a dispute under the deed?

MR WALKER: There would be a dispute under the deed but the body of the dispute would not be under the deed, no. The vast bulk of those disputes would not be under the deed, no. And, in a sense, that kind of case – which might even by a paradigm not only applicable to our case but also useful for your Honours in considering the significance of the rival contentions this can be said. A claimant advances a grievance upon which a claim for relief is based. The defendant against whom the claim is advanced says there is an answer other than simple denial – a special answer – in this case, a release. That does not have to be a good answer in order for it to be advanced as an answer.

It will, obviously, in most cases, turn on the proper interpretation of the instrument by which the putative release is created. In some cases, that would lend itself, in the absence of an arbitration clause, for example, to consideration of case management such as a preliminary and separate issue to save months and months of litigation that might be determined by simple characterisation of a claim and an application of a release provision.

Now, if there is an arbitration clause attached to the operation of the release, then that question – whether the release covered this claim, and that must be apparent before knowing whether the claim is a good one or not, simply this is the claim, this is the dispute – would lend itself, obviously, to an arbitration. And, the substantive claims would not lend themselves to an arbitration because they, of course, refer to matters external to – anterior to – the release which, coming later, blocked the litigation by the claimant and those claims would be stayed, obviously, pending arbitration of the application of the release.

If the release was held by the arbitration not to apply, those claims could go ahead. If the arbitration held the release did apply, that would be the end of the case. But the fact that the pleaded release, with its appended arbitration clause, is an answer by a claim does not mean that the whole of the claim becomes arbitral, that is, it falls within the arbitration agreement.

Our case adds this very important component. We do not simply take the position that, as a matter of interpretation, the claims that we make do not fall within a deed, the validity of which we accept by way of the release provisions. We do not say that. What we say is those provisions do not bind us and they do not bind us because of vitiating circumstances attending their entry and that is what I call the validity claims what has been called the validity claims.

Now, that is an answer, of course, which, if correct, means there is never any question of applying the release, however it be interpreted, to the claims, because the release does not bind.

GORDON J: Does that same argument extend to the arbitration clause itself?

MR WALKER: Well, the answer is that that – partly that section 16, and I am struck dumb by the special leave decision that section 16, we have what the Full Court has said about that. There is a statutory separation which overcomes what might otherwise have been the logic; that is, after all, the purpose of that legislation in all the places where it was enacted. It was to overcome what might have been thought to be the almost facetious logic that says what I am arguing about, the existence of an obligation, you cannot hold me to an arbitration concerning the enforcement of that obligation.

The logic was, of course, in many cases, so strong that you will find survivals of it, to which I am going to draw your attention, in the authorities that were in question in the issue that is before this Court, the distinction that the Full Court draws in their consideration to and fro of the breadth of the phrase with the word “under” in it, included, as your Honours will appreciate, what appears to be an exceptional different case in relation to pleas of non est factum and the like.

And I am going to develop an argument concerning what follows from that as a matter of reasoning and, therefore, as relevant principle. But, the answer to Justice Gageler’s question is that if the putative release brandished as an answer to a substantive claim is then, itself, attacked as not existing, not binding in law because of circumstances vitiating its purported creation, and that will not be, for the reasons that we have advanced in writing and which I will try to elaborate, that will certainly not be within the arbitration clause.

GAGELER J: And, as I understood your earlier argument, even the claim to which the release is pleaded as an answer is not within the scope of the arbitration clause.

MR WALKER: Ordinarily it will not be because those claims will not – it happens to be true in this case and, in the paradigm I am dealing with, it would always be true that those claims are claims which, but for the release, would be good. That is, they existed as claims before the release came into existence. The release comes into existence and affects them in their prior existence, by either controlling or abolishing their enforcement.

By definition then inherently, they do not arise from the deed, they are not governed or controlled by the deed except in the sense of the putative release. They did not come into existence because of the deed and they are not given legal shape by the deed. It is for those reasons that they would certainly not fall within the arbitration clause. In the example I gave, if there was no attack on the validity of the arbitration – of the deed with its arbitration clause and release then, of course, the effect of the release on those substantive claims would be arbitral. That would be the evident purpose of the arbitration clause with respect to the release.

KIEFEL CJ: The discussion that you have been having with the Court does not, of course, affect the construction of the arbitral provision.

MR WALKER: Not directly, no.

KIEFEL CJ: But it might be said to be directed to consequences which follow one approach or another.

MR WALKER: Very much so which, as your Honours have seen from the exchange written submissions, we accept is a very important part of this argument.

KIEFEL CJ: But it is not a consequence that flows from the construction of the arbitral provision, it is really more a question of calming the Court about the practicalities of why there should be a separate – it should be seen as a separate question which can be determined away from, more particularly, the release questions which would be caught by the arbitral provision.

MR WALKER: Yes. That was the end of my answer to your Honour’s question.

GAGELER J: Thank you.

MR WALKER: I do not say that because I were to have any dream of holding your Honour to what appeared to be a promise that you would not speak again

GAGELER J: I have already broken that.

MR WALKER: Your Honours, as you have seen from our outline of oral argument, I had started on the proposition that we advance in 4, in particular. It is familiar, I think not really in contest between the parties that the way in which the provisions of clause 20 operate there needs to be something recognisable as a dispute or a number of disputes being also captured by the word “difference” as you see in that chapeau at a point where, as it were, it is first manifest.

Now, we accept that a dispute or difference does not manifest itself by a state of mind of a claimant. It requires some difference, some controversy by some indication. There is no dispute in this case about that stage having been reached but it will be reached relatively early and long, of course, before there is anything like a pleading. Clause 20 makes that crystal clear by the elaborate provisions for exhaustive mediation attempts before one gets to the arbitration provision.

I think I have said all I want to say then about proposition 5. In proposition 6 we attempt, on the basis of the material in our written submissions, to advance an approach to the meaning of “dispute”, which will make sense in the circumstances of the deed of release against the background with which your Honours are familiar - a defended claim or set of claims, the notion of it being unitary and indivisible that can be put to one side, surely, that is capable of being resolved or determined independently of any other claim. So it can have a life of its own. It makes sense for it to be advanced, defended and determined on its own.

EDELMAN J: Could I test that proposition by asking whether, if there were a claim, for example, to an injunction or to restrain on the basis of one of the undertakings in the deed and that were then met by a validity claim, the validity claim then would not be independent of the claim to restrain, would it, but the claim to restrain would be under the deed?

MR WALKER: So far as that goes, that is correct – that is, in that sequence of events, if that had been, say, the firstever deployment of the deed to the detriment of the plaintiff then one can see that, it being raised as an answer would have been the occasion for its validity being impugned. But it is not true that the validity of the deed is not capable of it being advanced separately and determined meaningfully without any other claim.

It is in that latter sense that we contend in our proposition 6 that the validity of the deed is never merely adjectival to some other substantive dispute. The validity of the deed, which, on its face, purports to impose considerable restrictions on inhibitions on conduct, is something which could meaningfully be raised, advanced and determined all on its own. It is in that sense that it is separate.

We do not say that one will not see in the narrative of a particular dispute as in the one before this Court it being raised as an answer, the occasion for that being provided by the other party. You will see that very commonly, but the dispute about the deed and its validity is certainly something that can be raised on its own and determined meaningfully on its own. It is certainly not moot.

Could I then take your Honours to the reasoning in the Full Court, in particular picking up the matter in the book at page 282, at paragraph 163, after their Honours have noted that Justice Gleeson had followed the Court of Appeal in Rinehart v Welker.

The passage of reasoning which is the critical one – I will not take your Honours to it in detail but it goes for several pages – includes references to Fiona Trust in the House of Lords, to which I will be coming back in rather more detail, and of course to Francis Travel in the New South Wales Court of Appeal, to which I will also be coming back in more detail.

At paragraph 193, some of those threads are pulled together and on page 292 in that paragraph emphasis is given by their Honours at about line 15 to the correct general approach, a phrase borrowed from Chief Justice Gleeson, in Francis Travel:

that sensible parties do not intend to have possible disputes that may arise heard in two places.

I am going to come back to that in particular. There is then repeated the theme of these reasons, namely, that that leads to a requirement for interpreting words liberally. Now, liberally means so as to comprehend more rather than less of the disputes or differences in question in the arbitration clause.

Then their Honours express what we think is the core meaning that they refer to in later critical passages as follows, about line 22:

Seeking to give the phrase some amplitude one would construe the phrase as including a dispute that contained a substantial issue that concerned the exercise of rights or obligations in the agreement, or a dispute that concerned the existence, validity or operation of the agreement as a substantial issue, or a dispute the resolution of which was governed or controlled by the agreement.

Your Honours appreciate that that casts a very wide net. Some of those elements would not include our validity claims. So, our validity claims are not governed or controlled by the agreement whose validity is in question. The existence or validity of the agreement is obviously an anterior question to the existence of the agreement as a binding one. The operation, of course, is a relatively ambiguous expression which involves at the very least interpretation but also the allocation of rights and obligations according to that interpretation.

EDELMAN J: By “existence” does not the Full Court mean “continuing existence”?

MR WALKER: No, I think it just means “existence” so that if there is a factor which prevented it from ever binding, that would be a factor which goes to its existence.

KIEFEL CJ: A condition precedent or something like that.

MR WALKER: That would be one possibility but also are vitiating factors a forgery, for example, to use an example from one of the cases.

EDELMAN J: Well, vitiating factors are not necessarily matters that concern the existence because, as you know, the agreement is in existence until it is rescinded.

MR WALKER: Yes, your Honour, and if continued existence means the question of what is sometimes called void ability I realise the words can produce judicial allergies but if one means that it is one of those circumstances which vitiate from the beginning ab initio but require an election so to do, and the election may be exercised so as not to rescind ab initio, then in that sense continued existence is within the concept of existence to which their Honours are referring but the word existence is more than simply the question as to whether there is a right by election to rescind ab initio. The word existence would be, with respect, most inapt as a precise description of that particular species of a broader genus.

So, one then has, of course, the most obvious – working backwards – the most obvious matter within their Honours’ phrase, given some amplitude, namely, an issue concerning the exercise of rights or obligations in the agreement; of course, that falls under. So you have got here a mixture of matters which start with an obvious description of that which will fall in the phrase “using under”, namely, concerning the exercise of rights or obligations in the agreement. You end with ones which are equally obvious, the resolution of which was governed, or controlled, by the agreement – the subordination that the preposition obviously conveys in a way familiar from the Constitution and the Judiciary Act.

But, one has in the middle this alternative added – they dispute the concerns, the existence, validity or operation of the agreement. I will put to one side as not mattering for present purposes, I do not think, the notion of operation and one then looks to existence or validity. “Existence” is a word which certainly includes – if it is not confined to – matters which attend the purported creation of the agreement. “Validity” will certainly include that as well but may also extend to cases where, either by external law such as an inconsistent statute or by some other operation, say of the law of contract, an agreement has lost the force which, at law, it would have but for that circumstance.

Those are matters which, in our submission, cannot be put to one side when examining the intended import – objectively understood – of the phrase which includes the preposition “under”. And, that line – that sentence in paragraph 193, in our submission, notwithstanding all that has preceded it, is not supportable as a matter of the proper approach to the interpretation of such provisions and is not supportable, indeed, by case law except, we think, that which was said to constitute the fresh start in England and Wales to which I will be coming back.

Immediately to be contrasted with that – as we have invited your Honours to do – is what one finds in paragraph 204 on page 295 of the book. Again, the selfdescribed liberal construction is there said to be one that:

can be seen to cover a dispute which is framed by claims that are said to be met by pleading the deed, which in turn is said to be liable to be set aside for wrongful conduct that does not amount to a plea that the deed never existed whether by a plea of non est factum, or some other circumstance.

An expression which immediately involves the proposition that if there was a plea that the deed never existed by reason, say, of non est factum or forgery, then it seems to follow in their Honours’ reasoning that that would not be a dispute included within the phrase:

“any dispute under this deed” –

Their Honours go on by way of explanation, but not in a way that truly explains how that exception can fit with what was said in paragraph 193, as follows:

In these circumstances, the deeds, in their operation if valid, and by reason of their invalidity if not, lie at the heart of the dispute.

There is no doubt about that. The validity claims have the deeds at the heart of the dispute. Being at the heart of the dispute is scarcely an appropriate figure of speech by which to advance an interpretative paraphrase of the expression “under this deed”. Again, selfdescribed, their Honours say:

Reading the words liberally, we cannot see how such a dispute is not to be viewed as a dispute under the deed –

That, obviously, can be contrasted with other ordinary prepositions such as “about” the deed, or “in connection” with the deed:

if those words are read with liberality –

Now, that “liberality” is the tendentious proposition that an arbitration clause should include as much as one can imagine by which I intend, of course, not to be saying should be read to include as much as the words permit because that is the law but rather going beyond what the words permit so as to imagine how these parties might be in dispute and to, therefore, say that an arbitration clause using that expression will comprehend all those disputes.

Their Honours then use an expression at the end of paragraph 204, “at this level of abstraction” and we, with great respect, would interpolate that this is not a question of either “conceptualisation” to use an expression from Fiona, or “abstraction” to use an expression from this Full Court. This is a question of trying to interpret the words chosen by the parties. This is not, as it were, a standard concept which is evoked by whatever words the parties use, a standard concept because it is an arbitration clause and whatever the words used they will always have the same standard outcome.

GORDON J: Is that not what they are saying in the first sentence in 204? They start from an assumption which seems to infect – not in a negative sense, but infect the way in which they look at it.

MR WALKER: It pervades it, yes, your Honour, it does.

GORDON J: “Pervades” is probably a better word. Is that

MR WALKER: I am going to come to that quite directly.

GORDON J: All right. I will be quiet.

MR WALKER: It is related to the matter I was talking about. It particularly concerns the notion that one attributes to parties. Sometimes it is called commercial parties – a desire, which is then taken to inform the effect of the words they choose to give effect to their desire to have as many disputes as may be imagined contained within the terms and that is the departure which was recognised, in our submission, in English authorities, in particular, to which Chief Justice Gleeson turned and then after the House of Lords had made their fresh start was well and truly recognised by Chief Justice Bathurst in the passages to which I am about to come.

KIEFEL CJ: I do not think Chief Justice Gleeson used the word “assumption”, though, did he?

MR WALKER: Perhaps I should take you to that immediately. It is Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, tab 11 in the book of authorities. On page 165 of the report his Honour refers, just after letter B, to the “extensive examination of the many cases”. That is a technique which, I think, in the argument against us should now be regarded as old hat and undesirable – in our submission, the contrary of course is the case:

An extensive examination of the many cases . . . undertaken by Hirst J in Ethiopian Oilseeds v Rio del Mar [1990] 1 Lloyd’s Rep 86.

It is not all that long ago, your Honours, 1990. That was a case which concerned the expression “arising out of” but also of course considered other phrases including those using the preposition “under”. The Chief Justice, having referred to that authority, then gives voice between C and D to that which, in answer to the Chief Justice I think is to be taken as what our Full Court referred to as “the assumption”:

When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of –

I stress “arising out of:

the agreement, their agreement should not be construed narrowly. They are unlikely to have intended –

That is the assumption, if you like:

that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.

Now that, I think, is what has been taken in our Full Court as a mandate for the liberal approach by which differences between phrases would appear to be wellnigh abolished. I say wellnigh abolished because I have already pointed out there is, we submit, a flaw in the reasoning by which one advances the notion that the liberality requires all imaginable disputes to be included, but it would not extend, when the phrase “under” is used, to validity claims turning on the operation of the doctrine, say, of non est factum and I would add as well, bearing in mind its relevance in other cases, forgery.

Now, the Chief Justice at letter E said, in a way that we do not think has been challenged, that “That decision” - Ethiopian Oilseeds - “and the reasoning underlying it” - and his Lordship, as I shall show, certainly saw differences between different phrases:

reflects the current state of the law in New South Wales -

The question really in this case is whether that current state of the law in Australia and thus in New South Wales has been altered by something that has happened in the meantime. We submit no, nothing has happened in the meantime. In 1996 Chief Justice Gleeson was clear to demonstration about that proposition, as one sees at page 166 of the report, at letter B.

Now, it is convenient at that point to pick up the passage or passages containing the reasoning to which Chief Justice Gleeson was there referring - Ethiopian Oilseeds & Pulses Export Corporation v Rio del Mar Foods Inc [1990] 1 Lloyd’s Rep 86, tab 8 in the book of authorities here. I do not want to dwell overlong on the detail of the review to which Chief Justice Gleeson had referred. Could I draw to attention a matter that Chief Justice Gleeson must have had in mind when writing the passage that gives rise to our Full Court’s assumption. At page 95 of the report, lefthand column, last paragraph, commencing “I need only say that I respectfully agree” with a text writer’s – with Mr Justice Thomas:

I would be very slow to attribute to reasonable parties an intention that there should in any foreseeable eventuality be two sets of proceedings. Rectification, misrepresentation and negligent misstatement are unlikely to raise questions more difficult than those an arbitrator under this form of contract must already resolve. The privacy of an arbitral tribunal is likely to be more, not less, welcome that the publicity of proceedings in Court –

et cetera, et cetera. However, then on page 96 of the report, lefthand column, just after halfway down, his Lordship refers to a 1989 Court of Appeal decision, Fillite (Runcorn) Ltd and AquaLift and drawing, in particular, attention to the distinction that arises producing different outcomes depending upon the words of the arbitration agreement.

GORDON J: It is interesting that that follows on from his citation of Mustill and Boyd in the context of “arising out of” on the previous page where

MR WALKER: Yes.

GORDON J: Recognise that although those words “arising out of” are very broad, they themselves do not cover a dispute as to whether there was ever a contract at all.

MR WALKER: Yes, that is right. “In relation to” or “in connection with” have on the other hand been very often interpreted so as to include whether the thing was made even without section 16 separability.

GAGELER J: Is this based on some difference in the textual meaning of those different terms or is it based on the course of judicial exposition of them, Mr Walker, because it is very difficult for me

MR WALKER: It is the former as demonstrated by the latter, which is the answer that I must give.

GAGELER J: Of course.

MR WALKER: I would not be referring to case law otherwise. I would simply say you have the text agreed by these parties and judicial interpretation of similar but different words in different transactions will be of no assistance. That is not the way I am arguing this case. I am saying that there will be great assistance to be gathered from an approach taken. But “the golden rule”, and I use that expression deliberately as well, the golden rule has nothing to do with specific aspects of arbitration. It has to do with the principles adumbrated time and time again in this Court, concerning the interpretation of instruments.

KIEFEL CJ: Do you say that the position taken by the Chief Justice in Francis Travel by reference to this case exceeds in any way the approach which this Court has to date taken, which imputes to parties to commercial agreements a sense of if not pragmatism a sensibility and commercial awareness of outcomes.

MR WALKER: No. your Honours will not be surprised to hear me say there is no excess whatever in his Honour’s conclusion or reasoning, or reliance on authority. It is orthodox, we submit.

KIEFEL CJ: You say the turn happens at Fiona Trust.

MR WALKER: And it is a turn which is contrary to the fundamental tenets of the way this Court approaches the interpretation of instruments. It is, with respect, similar to an approach taken to implied terms that this Court dealt with in Commonwealth Bank v Barker – that is, the English court exhibits treating as special that which does not require to be treated as special and which principle, and pragmatic principle, urges ought be decided by the application of universal principles.

That is what Chief Justice Gleeson was doing. It is a universal principle, of course, that if you can you should interpret words so as to produce sensible, as opposed to puzzling, outcomes. That is not confined to commercial contracts. It has probably been most uttered in the context of commercial contracts.

KIEFEL CJ: And is the arbitration clause here to be taken as a commercial arbitration clause?

MR WALKER: No. Your Honours have read what we have written on that. I can perhaps jump ahead and put that point

KIEFEL CJ: I will not take you out of sequence.

MR WALKER: I can deal with it immediately. The point in particular is that which we make in 11(d) of our outline. It does not need to be dwelled on. This is commercial in many senses – to do with the nature of the property, the sheer scale of the wealth in question – but it is also, of course, a family arrangement.

Just as landed aristocrats of the 18th century might be offended to see their family settlements described as “commercial instruments”, notwithstanding that they had to do with a lot of wealth, so here, in our submission, it will not do as a description simply to call this commercial in the same way as one might call an insurance policy or a charter party or a lone contract a commercial instrument.

There is no doubt that Mr Justice Hirst saw no difficulty or error in the distinction according to different words being used that he drew to attention on his page 96. He notes, of course, the neat division of opinion in Heyman v Darwins on exactly a similar point.

On page 96, righthand column, the quotation from Lord Brandon is one which includes an acceptance of a difference of what I will call width, breadth or narrowness, depending upon your taste in pejorative language, stemming from the use of words such as “arising under” or, what his Lordship called there the wider expression “connected with”. They are familiar matters.

It is for those reasons, in our submission, that when one sees that his Lordship ends with his conclusion on the main point on page 97, righthand column:

Stepping back and viewing this body of authority as a whole, it seems clear that while “arising under” standing alone would probably not cover rectification for the reasons given in the Fillite case –

et cetera. Now, that is

EDELMAN J: What about the passage at the bottom of the rightcolumn of page 96 where, after considering the approaches of Viscount Dilhorne and Lord Salmon, he ultimately concludes that that approach does not apply for section 20(2)(h) in the 1981 Act but says:

I do not doubt that, in some contexts, such as an arbitration clause in a commercial contract, it would be right to treat the first of these two expressions as the equivalent of the second.

MR WALKER: Yes, your Honour, context will enable all sorts of things but there is no context here that would say “under” is the same as “in connection with”.

EDELMAN J: Because this is a very different context from an arbitration clause in a commercial contract?

MR WALKER: Yes.

EDELMAN J: This is more like the section 20(2)(h) in the 1981 Act?

MR WALKER: Your Honour, I would not go so far as to compare it with statutory wording, no. In our submission, you will – the emphasis that is necessary for our Australian purposes is that Chief Justice Gleeson was clearly approving this approach which was a discriminating approach, not an approach which homogenised all the different phrases. The approach, the “reasoning”, as Chief Justice Gleeson calls it, included emphasis being given by Mr Justice Hirst to what the Court of Appeal had done in Fillite which his Lordship says and I quote:

It is implicit in his judgment –

that is Lord Justice Slade’s judgment:

that he regarded “under” as significantly narrower than “out of” or “connected with”.

Now, that was not being swept away by his Lordship. That is why I drew to attention the passage at 97 righthand column:

Stepping back and viewing this body of authority as a whole –

GORDON J: But the important point about that passage at 97 is what then follows. It is talking about “in the present context”, so it goes on, one accepts there is differences, one accepts there is differences in language and that they may have different meanings but the critical aspect

MR WALKER: Is always context. I accept that entirely, your Honour. I had started that way. I will not retreat from it.

GORDON J: That is what Justice Gleeson was addressing when he was dealing with it.

MR WALKER: Yes, but, in our submission, both Justice Gleesons were doing it – Chief Justice Gleeson and Justice Gleeson, first instance in this case, did that correctly. What we get from that is that Francis Travel cannot be seen, should not have been seen in this Full Court as sweeping away distinctions. The Chief Justice went to pains to approve that which came not from a supererogatory and inappropriate exercise but from an exercise that provided reasoning that he said represented the law in New South Wales and it was review in consideration of how words may operate in a particular instrument that accepted that some might be narrower than others, some might be wider than others in what they would comprehend within an arbitration clause. That is the point we get from it. You do not just homogenise and all of them should be as wide as one can imagine.

GAGELER J: Are you going to take us to Fillite?

MR WALKER: I was not going to. The passage in Fillite that I rely upon is the one that is quoted there. I was not going to take you to Fillite, your Honour, I have not put it on the list.

GAGELER J: It is just paraphrased here. It suggests that “under” was sufficiently wide to capture a dispute which concerned obligations created by or incorporated in the contract. I just wonder what was meant by that?

MR WALKER: I cannot answer that question. I have looked at Fillite but nothing springs to my mind that answers your Honour’s question, I am sorry. I was not intending to take you to it because I am trying to get from it what, in this country, in the reasons of Chief Justice Gleeson, should be seen as the reasoning which his Honour and his Honour’s colleagues were holding as recently as 1996 to be the proper approach and what I get from it is that differences between words can produce different outcomes and with an arbitration clause they can be described as outcomes that are narrower or wider. That is what I get from it because that is really at odds with the approach, apart from the unexplained concession in their paragraph 204 of the Full Court, in our case.

Your Honours, I have now dealt with propositions 7 and 8 in our outline. We draw to attention in 8 in particular that the references that their Honours make to, in this country, a famous and important jurisdictional use of the word “under”, that is in the Constitution and the Judiciary Act, in their Honours paragraph 200. It really does not go anywhere. We are not suggesting it should, although the word “under” is not a blank cypher in either the Constitution, the Judiciary Act or the deed in this case. But their Honours draw from that this, the word “under” is capable of “varied relational reach” and that picks up what Justice Gordon was putting to me which, with great respect, I accept unreservedly, namely, that context can produce different outcomes, depending, as their Honours say, on the context.

Now, the broader construction that they there refer to, we suggest with respect, is what you will find on page 292 about line 25 to which I had drawn your particular attention earlier. Now, what their Honours are really just saying there is, well, that is the reach that we have determined but it does not provide any explanation as to why or how the word “under” should not have been given what might be called its obvious semantic content.

In proposition 9, we wish to develop slightly further what follows from the unelaborated exception by their Honours in their paragraph 204. If non est factum does not fall within the notion of a dispute under this deed, then one asks what is it that distinguishes it from other cases of vitiating circumstances which give rise, say, to an equity to rescind or at common law to an election to rescind ab initio, and I do stress ab initio, and the

EDELMAN J: Is not the difference that within the one, it is a claim either this is not my deed or, in a different case, I am not a party to this deed, I have nothing to do with it, and in the other the deed is valid and binding and has been for a period of time, subject to any later election to rescind or possibly at common law an act that might amount to a rescission?

MR WALKER: Doctrinally, there is no doubt of that difference and that may be what informs their Honours’ exception in their 204, but for the following reasons we submit that is not much of a difference to explain such a radical difference of outcome. Whether it

EDELMAN J: It would be, if they could not rescind. If there were a bar to rescission, then the agreement remains on foot.

MR WALKER: Yes, but, your Honour, whether it is non est factum, forgery, denial of an agent’s authority, to name three ways in which you could say this is not my agreement, nothing to do with me, in each case you have to raise it. I do not mean that there is given what the law calls in an ASL v Sargent sense an election, but the truth is you do have to conduct your case and you have to take a position and you have to answer reliance on something by saying why does not this bind.

So, it is just as true in non est factum forgery or a lack of authority that you, the party, sought to be charged with the instrument in question, that you will have to raise why it does not bind – the contention that it does not and why. And that is exactly the same as when you say, this was induced by fraud – I, having detected the fraud, have rescinded the instrument ab initio – it must be treated as never having bound me, subject, of course, to the equities of what I will call “adjustment”.

In our submission, in every substantive sense, the position of the parties on the one hand to a non est factum case or, on the other hand, to a fraudulent procurement of a contract, surely would be seen as being in justice the same. That is, in each case, they make an answer that says, I am not bound by this because of factors which, in law, mean I should not be. There cannot be a difference between void and voidable in the matters here or election and not election because, as I say, regardless of those juristic concepts, in a dispute you must take your stance. You cannot secretly plead non est factum. You cannot keep to yourself your claim about fraud.

And it is for those reasons, in our submission, that the idea that there could be a distinction is one which, ironically, means that it is really the reasoning thus teased out of the exception in their Honours’ 204 which exhibits the kind of lawyers excessive subtlety to which Chief Justice Gleeson – repeating earlier references – was turning his deprecatory attention in Francis Travel. Those are not the – that is not, in our submission, a principled approach. It comes about because of an impulse under the banner of liberality – or liberal interpretation – to include everything that might be imagined within the realm of disputes, notwithstanding the particular choice of wording to describe that which is to be arbitrated.

Can I then come to the proposition 11(a) which tackles headon the idea that informs, we think, the approach to socalled liberal interpretation which your Honours will have seen in Comandate – the judgment of Justice Allsop earlier – as well, of course, throughout these reasons? It is simply not true of arbitration in general – and, in particular, on the delineation of the disputes which are within an arbitration clause by the words of the arbitration clause – that it has as either its effect – or, we would submit, therefore its likely usual intention – to permit all the efficiencies which are obtainable in a Judicature Act court.

It is a very familiar proposition with which this Court has grappled. Michael Wilson is a relatively recent example. But the effect of an arbitration agreement may be to wall off part of a dispute which would, in a flash, be recognised otherwise in a superior court exercising a commercial jurisdiction as requiring a multiplicity of parties, appropriate crossclaims in order that all matters in dispute be settled as efficiently as possible.

In our submission, one need only consider the usual case, or the common case I should say, of a claim in relation to engineering works and related insurance liabilities, where in the absence of statutory provisions permitting it, there will be an intended, that is an overtly produced separation of the arbitrated engineering claim from the litigated insurance claim where there are many common issues, including factual issues.

That is not an accident. It is not an unfortunate product. It has to do with what I will call the privacy, that is the restriction of the parties as well as the confidentiality of their forum which is the hallmark of an arbitration agreement. So we submit that at bottom this notion that an arbitration agreement bespeaks a liberality in the sense of all matters in dispute, I stress, that could be imagined, is simply wrong and overlooks entirely that one of the intended purposes of arbitration is that you will not be held up by other parties with their appended claims. You will not be involved in the efficient commercial litigation in a court, but you will be privately just, you too, working out your disputes in the agreed manner so long as they fall within the arbitration agreement.

KIEFEL CJ: That might be a convenient time.

AT 11.15 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.29 AM:

MR WALKER: Could I complete what I wanted to say concerning their Honours’ approach to the socalled assumption or assumptions of rational commercial parties, proposition 11(b), and to do so source the matter in the reasons of the House of Lords in Fiona Trust & Holding Corporation v Privalov [2007] EWCA Civ 1329; [2007] 4 All ER 951, tab 10 in the bundle.

NETTLE J: It is remarkable it was never reported in the authorised report. I suppose you would say it is hardly remarkable at all.

MR WALKER: Your Honour, I am very tempted to some such response but I really cannot say that. It is remarkable, as a former law report editor, I would say, yes. At page 956 in paragraph [5] his Lordship – that is, Lord Hoffmann – there, as in other parts of his reasoning, tends to compress or collapse or combine questions of legal policy so as to apply to both of the issues that were before the court, which included not only interpretation but separability. In paragraph [5] his Lordship says, as must be true:

Arbitration is consensual. It depends upon the intention of the parties as expressed in their agreement. Only the agreement can tell you what kind of disputes they intended to submit to arbitration. But the meaning which parties intended to express by the words which they used will be affected by the commercial background and the reader’s understanding of the purpose for which the agreement was made.

So far, so good, and not different from this country’s law - and then:

Businessmen in particular –

and I interpolate by way of note that that really is not completely apposite to our case:

are assumed to have entered –

and there is the assumption:

into agreements to achieve some rational commercial purpose –

Not a very heroic assumption and of course not at all special to arbitration clauses. It might even be said that that is true not only of agreements entered into but all their conduct commercially. You might be assumed to be intending to achieve some rational commercial purpose. That really is nothing other than a grandiose view describing the selfinterest that drives commerce:

and an understanding of this purpose will influence the way in which one interprets their language.

Now, that is the base from which his Lordship makes a considerable leap by way of fresh start, which I hope to show to your Honours.

Paragraph [6] contains, as your Honours appreciate, a very resounding advertisement for the commercial arbitration for which London is so much the seat. It is, as my friend says, a form of marketing not only of the arbitrators but also of the courts. They want quick, efficient adjudication. They do not want partiality in proceedings before a national jurisdiction.

Then [7], building on that:

If one accepts that this is the purpose of an arbitration clause –

and it has to be said that is rather more difficult to apply in the antipodes –

its construction must be influenced by whether the parties, as rational businessmen, were likely to have intended that only some of the questions arising out of their relationship –

Let me interpolate. Relationships between people may not be fully contained within or by, let alone governed by, the instruments which they from time to time enter by way of commercial agreement. The law recognises that by distinguishing conceptually between fraudulent or negligent misstatement before and inducing the making of a contract and the terms of the contract themselves. That is not artificial and it is not hair splitting.

So the relationship, such as the reliance that might produce a duty of care with respect to careless words before a contract is made, might be much broader than an agreement. Then his Honour asks some rhetorical questions in paragraph [7] and by the end of that paragraph the matter has become this clear:

If, as appears to be generally accepted –

which, if I may say so, is a superb use of the passive voice:

there is no rational basis upon which businessmen would be likely to wish to have questions of the validity or enforceability of the contract decided by one tribunal and questions about its performance decided by another, one would need to find very clear language before deciding that they must have had such an intention.

Let me interpolate an obvious example. Common or garden building case arbitrations for humble residential erections will often have a nomination clause whereby it will be an architect or engineer who decides the question of the performance of the contract. It is not at all obvious in such a case that one would want questions of rectification, the equity of rectification, or the common law and equitable remedy for fraud antecedent to the making of the contract to be in the hands of an engineer or architect.

So the broad generalisation that his Lordship essays in paragraph [7] is, with respect, rickety in its foundations. It will apply to some, but not all. It cannot be uttered as a generalisation, let alone one that could be, as it were, incorporated into the body of doctrine concerning the interpretation of contracts.

In paragraph [8], his Lordship is turning to the second question, what I will call the separability issue and ends by wondering whether there could be any conceptual reason, as his Lordship puts it at letter d:

why parties who have agreed to submit the question of the validity of the contract to arbitration should not be allowed to do so.

So the question in our case is the premise of that question to which his Lordship is there talking about. Paragraph [9], his Lordship then turns to what might be regarded in his Lordship’s view as an atavistic state of the law to be departed from.

Paragraph [10] of course refers to the legislation of which our section 16 is our example. Then paragraph [11] comes back to the question of interpretation. He refers to the case law, refers to Fillite which obviously had some prominence in argument, and then in paragraph [12] deals with the whole in a way which is quite opposite from the way that Chief Justice Gleeson had dealt with it.

KIEFEL CJ: Mr Walker, is it of any note that the clause in Fiona Trust was both a clause giving jurisdiction to the English courts as well as an arbitral clause?

MR WALKER: It certainly explains the encomium on the English courts as supervising courts, to which his Lordship refers, but I cannot say it

KIEFEL CJ: In the view – in the liberal approach – in the view that was taken but I think in the passages you have read it is focused only upon the arbitration rather than the position of the courts.

MR WALKER: Of the jurisdiction, yes. I do not think there is

KIEFEL CJ: Or whether that is one of the consequences, if you read down.

MR WALKER: It might be.

KIEFEL CJ: Perhaps I should leave you to read on. But there would be a consequence, if you read down this clause, for the jurisdiction of the courts as well as arbitration.

MR WALKER: There might be.

KIEFEL CJ: Because it is the

MR WALKER: The whole is induced by bribery – so it is alleged.

KIEFEL CJ: Any dispute arising under appears in clause 3(b) which is the jurisdictional clause.

MR WALKER: Yes, yes.

KIEFEL CJ: It is (c) which follows that picks up from that jurisdiction and gives it to arbitration.

MR WALKER: Yes, yes.

KIEFEL CJ: I have diverted you.

MR WALKER: I think the answer is that you will not find any specific or explicit reference by his Lordship to that being a factor which produces the outcome.

KIEFEL CJ: No.

MR WALKER: The reasons really do come in paragraphs [12] to [15] to which I am about to turn.

KIEFEL CJ: There might be something in what Lord Hope said at paragraph [28] but perhaps we could leave that for later.

MR WALKER: I am certainly coming to that. In [12], his Lordship sweeps away the case law – the review of which and the reasoning coming from which was accepted by Chief Justice Gleeson as the law in New South Wales – as being cases that produce distinctions which reflect no credit upon English commercial law. His Lordship applauds Lord Justice Longmore’s approach which is to draw a line under the authorities so they can make a fresh start. We, with great respect, urge that the Full Court, in our case, does not sufficiently recognise that Fiona Trust overtly stands apart from the approach which until then – until our case – had been the approach in this country.

KIEFEL CJ: Do you say that was a deliberate policy decision by the House of Lords?

MR WALKER: Yes, yes and announced as such. Do not engage in the judicial technique that Chief Justice Gleeson did and which he had endorsed. Instead, make this fresh start. It is a fresh start that is said to be justified in ways that are not a sound foundation for a change in the common law. It is justified developments which have occurred in this branch of the law – one interpolates a little caustically – what do you mean, a branch of law concerning arbitration clauses? If it is the branch of law concerning the interpretation of commercial instruments, it is very difficult to understand – and, in particular, by the adoption of the principle of separability in the statute.

Well, I am not saying that statute law reform can have no effect on the common law but one must be very careful about the way in which one supposes it to have occurred. His Lordship then ascribes a perfectly reasonable motive to the legislators there. It is not correct, the consequence that:

section 7 will not achieve its purpose if the courts adopt an approach to construction –

et cetera, because, in our submission, the separability principle operates quite apart from the anterior question what is the subject matter of this arbitration agreement. Once you have ascertained the subject matter of the arbitration agreement, then the arbitration agreement itself operating separably can survive whatever arises which casts adverse light on the validity of the contract otherwise. That will, of course, depend as to its moment upon whether the arbitral issues include or not the validity of the whole of the contract. Then at [13] the overt assumption is made:

parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship –

That is what I mean when I say anything that one could imagine:

which they have entered or purported to enter to be decided by the same tribunal.

Now, I interpolate, it is not at all obvious that issues like forgery or bribery or corruption would be seen as raising the same desirable subjection to arbitral jurisdiction as performance, breach, et cetera, et cetera. There is an assumed conclusion in the confidence with which this assumption is expressed by his Lordship. There is not a demonstration of the fact that there are no sensible differences between some issues and others as to their likely suitability for arbitration.

In paragraph [14] part of a decision from 1970 of the Bundesgerichtshof is cited which, of course, without being unfair to that court is a selected conclusion and it expresses a conclusion but it expresses it in the manner which raises rather than answers all the questions for this Court. The judges, in translation, say:

“There is every reason to presume –

So there is a policy concerning what might be called a starting position:

that reasonable parties will wish to have the relationships created by their contract and the claims arising therefrom, irrespective of whether their contract is effective or not –

That is the logical paradox that had been raised in the common law jurisprudence previously:

decided by the same tribunal and not by two different tribunals.”

GORDON J: Are we to read [13] as, in effect, reflective of [14] in the sense that – are we to read “relationship” as picking up this idea created by the contract rather than the broader context in which you put it earlier?

MR WALKER: I think so. There is no suggestion here that his Lordship was thinking about the very common case of precontract tort claims, for example, statutory claims akin to tort like Trade Practices Act. There is, in our submission, an insufficiency of discussion by his Lordship of those aspects of the bundling together that he is urging in paragraph [13] and without consideration of that, in our submission, it is difficult to see why there would be a presumption bearing in mind that antecedent tortious misleading conduct is, alas, not unknown in commerce and whether or not you want to include that within your arbitrated disputes or not is something which the judges had to work out and they, in this country, worked it out by reference to what the words chosen by the parties in the arbitration clause properly understood would produce.

GORDON J: So your two complaints about paragraph [13], as I understand it, are it starts from a presumption rather than from – from the language used.

MR WALKER: Yes.

GORDON J: Without context.

MR WALKER: That is right. Now, Lord Hope makes that even more clear. Can I take your Honours to his Lordship’s reasons on page 961, paragraph [26] and, without disrespect, this seems to be the school of commercial drafting that says near enough is good enough, and it does remind one of some of the policies that are produced on the run almost literally at Lloyds.

No contract of this kind is complete without a clause which identifies the law to be applied and the methods to be used for the determination of disputes.

He is saying that if clause 41 which, as he said in paragraph [25] is a clause:

where the overall purpose is clear, the parties are unlikely to linger over the words which are used to express it –

near enough is good enough. So his Lordship then says:

It is kind of clause to which ordinary businessmen readily give their agreement so long as its general meaning is clear. They are unlikely to trouble themselves too much about its precise language or to wish to explore the way it has been interpreted in the numerous authorities, not all of which speak with one voice.

Well, this is setting up a straw man. It is not relevant to the interpretation of contracts, let alone the judicial interpretation of contracts, how much of a risk people may take in signing where their underlings or advisors tell businessmen they should sign. In paragraph [26] at the end, Lord Hope has no doubt about the creativity which he is exercising – letter “f”:

The proposition that any jurisdiction or arbitration clause in an international commercial contract should be liberally construed promotes legal certainty.

In a sense, so long as one understands what “liberally” means, and then we find out a bit of its content:

It serves to underline –

what his Honour calls:

the golden rule

and this is not a golden rule recognisable in any jurisprudence of contract or interpretation of instruments in our law:

that if the parties wish to have issues as to the validity of their contract decided by one tribunal and issues as to its meaning or performance decided by another, they must say so expressly.

Now, one could, and should, partly respond to that but if I choose words which, by their meaning, include the one but not the other that is express. This is to introduce an approach which, in our submission, had no precedent and their Lordships evidently appreciated that there was no precedent. It was a fracture with the previous tradition. Then it ends up with something which is, as it were, categorical rather than consensual:

Otherwise they will be taken to have agreed on a single tribunal for the resolution of all such disputes.

His Honour is not precise about what they mean and, in particular, no discussion there whatever about precontract dealings of a kind so commonly the cause of dispute between parties who had intended to be contracting parties at one stage. The pejorative dismissal by way of this fractural rupture with the jurisprudence can be seen in paragraph [27] between letters “h” and “j”:

The simplicity of the wording . . . indicates to the reader that he need not trouble himself with fussy distinctions as to what the words ‘arising under’ and ‘arising out of’ may mean.

Decades of practice, if you are talking about businessmen and their contracts, the decades of practice in published as shown in published law reports surely counted for more than that dismissal.

Then in paragraph [28] we turn, as the Chief Justice suggested to consequences, overtly. It starts of course with a consequence which is simply an assumed conclusion; they are deprived of the benefit of having all the disputes decided in one forum. It should not be assumed, by the way, that that is always an unalloyed benefit. One need only, as I say, consider a fraud case before an architect. I do not mean to be rude about architects. I just mean that you would not ordinarily choose an architect for a fraud case, and then it proceeds:

The jurisdiction clause does not say where disputes about the validity of the contract are to be determined –

but the short answer is, where you may sue, which may be more than one place, will be in the nature of things. The fact that it is not spelled out in a clause is of no moment to interpreting the breadth of the claims which are within the clause. Then there is use of a concept of:

The default position is that such claims would have to be brought in the jurisdiction where their opponents were incorporated –

There is nothing reliable or default or inadequate about ultimately territorial presence being a root of jurisdiction. It is entirely a healthy and contemporary proposition, not an ancient and unreliable one. Then, there is a rhetorical question about sensible businessmen agreeing to this and, in our submission, this is pushing the notion of examining the man in the pinstripe on the Clapham omnibus completely beyond the weight that it can bear. The rhetorical question:

If the parties have confidence in their chosen jurisdiction for one purpose, why should they not have confidence in it for the other

is again an assumed conclusion. If they have not chosen it for the others, there is your answer, they did not. And then the sequence of questions all come down to one thing, whatever the words are, they ought, unless a court was compelled by irresistible use of language, it ought to be every dispute that can be imagined and, therefore, validity as well.

In paragraph [30], his Lordship appears to have attached the notion of haphazard interpretations to the course of case law. Well, of course, context of particular instruments, particular parties will produce the right outcomes in their cases and the interpretation of instruments does not proceed as a matter of stare decisis. We all know that. It does not mean that there is not wisdom and guidance to be gathered, particularly in areas as routine and significant as the construction of either releases or arbitration clauses, to name just two.

It is for those reasons, in our submission, that one cannot see in Fiona Trust an approach to the problem which is in accordance with the Australian approach. Now, the Australian approach, as your Honours appreciate, is the one that we relied upon below and urge again here. I could do so fairly quickly, that is

KIEFEL CJ: Mr Walker, I should say for the benefit of you and the other parties that if this matter is likely to run past today the parties ought not be so concerned to constrict their arguments on this rather important issue. If necessary the Court will extend the hearing into tomorrow.

MR WALKER: May it please the Court. I was about to go to Rinehart v Welker [2012] NSWCA 95; (2012) 95 NSWLR 221, tab 18 in the book. I do not want to review it all – your Honours will have seen it but, in particular, at the report, page 247, moving from general principles about contractual interpretation or interpretation of instruments, his Honour turns, then, in paragraph 117 to the now wellknown passage in Francis Travel.

Similar remarks by Justice Allsop in Comandate, and then in paragraph 120 his Honour seeks to ensure that there is a consistency in doctrine, in principle, with the general principle and that must be, with respect, correct. His Honour refers to Justice French’s decision in Paper Products. I do not want to add to what we have written about it but, in our submission, for the reasons I am about to come to, the Full Court did not, in our submission, provide convincing reasons for regarding Justice French’s approach as wrong.

Chief Justice Bathurst’s conclusion, at the end of paragraph 120, is one that sits entirely happily with the position we take, not least because it has, as its core, that this is an exercise in the interpretation of the words used. Paragraph 121, with respect, correctly and in the governing framework of Australian law, the Chief Justice held that it was not appropriate to adopt the fresh start from Fiona.

There has been some criticism, we think, of the Chief Justice’s expressions in paragraph 121 as to whether it, as it were, overstates what was being done in Fiona. We, with great respect, urge that what his Honour says is a temperate and accurate description in paraphrase and conclusion of what the House of Lords was doing by their own lights.

His Honour did carefully and appropriately take account of what courts of equal intermediate appellate status had said about the matter but, in our submission, no error is shown in the preference by his Honour for the approach taken.

Your Honours are, by now, familiar with the selected, as it must be, approach to the body of case law that one sees exemplified in paragraph 123. Then there is a long passage from paragraph 124 which evocatively starts in Justice French’s reasons:

“Case citations and examples could be multiplied but there is little point.

Not because of the approach that Fiona was taking but because there are general propositions to be gathered, which include of course attending to differences when different words are used, which is the purpose of that long passage collected by Chief Justice Bathurst from Paper Products.

I do not want to add to what we have written about Justice Warren’s decision in BTR Engineering [2000] VSC 246. It is not appropriate simply to dismiss that as a judgment depending, as it were, on quotation from the Shorter Oxford English Dictionary. It very much takes the same approach that Chief Justice Gleeson had taken and included, of course, consideration of a long course of case law.

Could I draw to attention, I think with respect to some of the questions I have been asked, in particular, by Justice Gageler this morning? On page 249, 250, in paragraphs 127 through to 129, in particular – I will not dwell on any part of it – there is a discussion which attends to the question, or questions, that arise with respect to reliance upon the deed in which the arbitration agreement is found in defence against claims.

GAGELER J: What is the outcome? I do not quite understand.

MR WALKER: At the foot of 127, his Honour says those matters do not lead to:

the outcome –

being:

governed or controlled by the Settlement Deed –

These, of course, were what I will call “trust obligation claims”.

GAGELER J: He puts a proposition at the top of 249:

It seems to me that consistent with the authorities to which I have referred, if the outcome of the dispute was governed or controlled by the Settlement Deed, then there would be a dispute under the Settlement Deed irrespective of whether the claimant was invoking or enforcing some right created by the Settlement Deed.

Is that consistent with your submission?

MR WALKER: Yes. He was, there, answering an argument that says – and responding to Justice Brereton holding the view that the words “under the deed” involved enforcing or invoking:

some right created by the Settlement Deed.

About which, we say, yes it does but it need not be confined to that.

GAGELER J: All right.

MR WALKER: And that is what Chief Justice Bathurst was responding to. He was saying, no, you can go further “governed or controlled by”. But, the validity claim is not governed or controlled by the deed, the validity of which is in question, obviously.

GAGELER J: If you go then to paragraph 135, the first sentence, “If the settlement deed” – I will not read it.

MR WALKER: If it were valid, then that is in accordance with what I put before the break.

GAGELER J: So, it is only the validity claims, in your submission, that fall outside the arbitration clause.

MR WALKER: That is right. You cannot make us arbitrate by these words – the validity of the deed in which these words are found.

GAGELER J: So, you distinguish, I think, between your substantive claims and validity claims. So, is it your

MR WALKER: We are bound to arbitrate the question. If the deed is valid, we are bound to arbitrate the question, whether it operates to release claims that we would otherwise advance. That is the way I put it before the break, that is the way we put it. That is the most obvious, if you like, arbitral claim about releases in the deed – do they attach to a particular claim? And, as your Honours appreciate, it releases – if you think of John Grant v Grant – you have got releases which have general – expressed by general words and then particular cases come along and one has to find out, is this something that fits within the release, even without worrying about logical problems or validity, and the like; just, is it based upon facts that are within the purview of those that are contained and the familiar problems about releases that appear to be for all time until the crack of doom, et cetera.

That is an issue which, as I say, is the paradigm of arbitrated matters with respect to the meaning, operation of the release and its outcome will be governed or controlled by the meaning and operation of the release. That may, of course, then have, depending upon its outcome, a green light or red light effect on those claims, but the validity claims are different in that regard.

A merely incidental point is noticed by us in our paragraph 11(c). It is really just a “sauce for the goose, sauce for the gander” argument by us. It is not central to our position. I have already dealt in anticipation with 11(d). Paragraph 11(e) is another way we answer this notion of the socalled assumption. If anything, the very fact of the many cases – and we respectfully draw to attention what Justice Austin has assembled in ACD Tridon v Tridon Australia [2002] NSWSC 896. It is in our book but I do not need to take you to it.

It is plain there was what I am going to call a tradition, a wellunderstood tradition whereby the words you chose and its connective effects could have substantive outcomes, widening or narrowing the ambit of disputes contained within an arbitration clause. That was the Australian position. That is why the English position is a radical and opposite departure, but it is also a background against which one would not dismiss as trifles or lawyers’ quibbles the differences that had been earnestly detected according to context of particular instruments and particular parties for many, many decades.

And we make the point that picking up one of the comments for an opposite effect in Fiona, as we point out at the end of our 11(e), it would have been very easy to have substituted one of the phrases which had, at the time this deed was made, for many years been held broad enough to include anterior claims such as rescission or rectification.

In paragraph 12, we return to something I have probably already sufficiently covered in answer to some of your Honours’ questions. By the way, there is a typographical error there, when the internet notation went in. The fourth line should be paragraph 11(a) and (e), not 10, of course.

It is, in our submission, of the very nature of an arbitration clause that you have corralled off its subject matter from all the other issues as well as related parties which would, no doubt, be put together in litigation. That is the first thing. The second thing is unless you assume, as the English approach would appear to have at its most extreme version, that an arbitration clause should be read as encompassing all disputes that can be imagined, then there is nothing for it but to construe the words which have been chosen to describe them. That, in our submission, is what as a matter of orthodoxy both Chief Justice Bathurst did in Rinehart v Welker and what Justice Gleeson did at first instance in this case.

We then turn in 13 to Mackender v Feldia which adopts some prominence in some of the reasoning against us. It is, in our submission, a very problematic authority in this area. May I take you to it? It is tab 14 in our book [1967] 2 QB 590. May I take your Honours directly to Lord Justice Diplock otherwise relying upon what we have written about this? At page 602 is a discussion that may be apropos some of the matters that Justice Edelman has raised with me this morning. At about letter E:

A claim that a contract is void for illegality does not raise any issue as to whether or not the parties in fact agreed to the terms of the policy . . . It concedes that they did, but asserts that their agreement gave rise to no legally enforceable rights or duties.

So, there is a subtle and, with great respect, fair description being given, exposition being undertaken by his Lordship of these juristic differences. It goes on:

It thus raises no dispute about the consensus ad idem –

and that becomes the light motif of this part of his reasons. If there is a dispute about the consensus ad idem the suggestion is different things will follow from the wording of the arbitration clause:

But the alternative claim of the underwriters to avoid the contract for nondisclosure –

which was the case here:

of a material fact –

was argued, and then those fatal descriptions, “ably argued”, that means by the counsel who lost, “whether there was a contract at all”. His Lordship there refers to the notion of:

a putative objective proper law, a concept which I find confusing –

The argument, he says, is “misconceived”, “arising under the policy” was the expression at hand here. His Lordship immediately turns to what I will call the precise and juristic analysis of these different, vitiating possibilities. So, you see on page 603 between A and B the facts:

are alleged not to have resulted in an agreement at all (i.e. where there is a plea of non est factum) and the question is whether there was any real consensus ad idem, it may well be that this question has to be determined by English law . . . that is not the position when underwriters seek to repudiate –

is the word he chooses and is being used in the sense either the same as or similar to a now oldfashioned usage to describe what I think in this country is now called accepting a repudiation thereby rescinding not ab initio, not ab initio, the contract as to future performance. We think, with respect, that is the usage being employed because of what follows in the next paragraph. His Lordship says, between C and D:

among the incidents or legal characteristics in English law of a contract of insurance (which distinguishes it from most other contacts) –

So, this is not being simply treated as any contract with vitiating nondisclosure:

is the right of the insurer, if he discovers that some material fact has not been disclosed . . . to elect either to continue to perform the contract and to require its continued performance by the assured, or to repudiate the contract, that is to say, to treat it as at an end so far as concerns any future performance. If he elects to repudiate –

et cetera, the consequences are spelled out by his Lordship –

KIEFEL CJ: Was avoidance or nondisclosure a term of the agreement the insurance contract?

MR WALKER: I could not see that

KIEFEL CJ: I cannot seem to find it.

NETTLE J: It is because it is a contract of the utmost good faith, so if there was nondisclosure, it gives right to a rise of a decision.

KIEFEL CJ: Yes.

MR WALKER: As your Honours all know, however, sometimes as an act of supererogation, that is explicitly spelled out. I could not find

KIEFEL CJ: It does not appear to.

MR WALKER: I was interested to know that myself and could not find that, I am afraid.

GORDON J: What about the point at the bottom of page 603 and the top of 604 where the rejection of the assimilation

MR WALKER: Yes. I wanted to draw to attention the passage that really starts at G on 603. His Lordship has been referring to that which is, with respect, elementary but important, that:

a “voidable” contract . . . does not mean that the contract never existed

And then resists the elision of distinction between “avoidance of a voidable contract” and non est factum to which Justice Gordon has drawn attention. Then refers to other vitiating circumstances such as nondisclosure or innocent misrepresentation and describes as specious, glittering and of no value, that argument.

I am not quite sure that it is true anymore that the driving explanation of the equity of rescission is that the apparent consent is no consent. And I do not think it was ever thus, really. With respect, his Lordship may be erecting a bit of a straw man here. And yes, it is true, what is really meant is that the party did in fact consent but would not have done so if he had known then what he knows now. Well, that is, if one might say so, from a master of the common law, a good common law explanation of it, also works in equity; interestingly, his Lordship puts forward, however, to one side in this decision.

EDELMAN J: Well, that may be for diplomatic reasons, given that he was sitting with Lord Denning who decided Car and Universal v Caldwell on the basis of an act being sufficient rather than an election and operation of the court to rescind

MR WALKER: I was not aware that the books recorded that I should have read Lord Diplock as acting diplomatically, your Honour. But your Honour, with great respect, might be right.

Now, in our submission, Lord Denning adds nothing; that is, Lord Diplock’s discussion is the more detailed. They, in our submission, seem to be coming very close to treating the position under that policy as if it were a matter as in an ordinary contract where the right to repudiate, to use that expression, depends, of course, upon the terms of the contract governing one’s ability to do so.

The reasoning could have been, with respect, perhaps more precisely set out by their Honours but one thing is clear, there is no discussion here as to how the expression “arising under”, as a matter of language, would embrace attacks on the validity of an agreement.

KIEFEL CJ: Just returning to our earlier discussion about there being no express term but utmost good faith, having consequences, is it simply the case here that the law implies a term?

MR WALKER: I think it comes from an earlier time from

KIEFEL CJ: So, it is not actually

MR WALKER: later 19th century talk of implication but, with great respect, functionally the effect is the same, that is, the body of law which governs this relationship includes the doctrine of utmost good faith which carries in its train

KIEFEL CJ: Which gives rights to a party.

MR WALKER: A right to – exactly. Now, that operates functionally the same way as, say, a late 19th century implied term might have but we did not need a late 19th century implied term because we already had uberrimae fidei. May it please your Honours.

KIEFEL CJ: Yes, Mr Hutley.

MR HUTLEY: Thank you, your Honours. Your Honours have received I think our threepage outline. I do not know if your Honours have had an opportunity to read it and if not, your Honours might take the opportunity.

KIEFEL CJ: Yes, Mr Hutley.

MR HUTLEY: Thank you, your Honour. Just by way of outline, we also rely on and adopt the witness submissions on behalf of Mrs Rinehart, which have been filed to the same effect as our own. As to the submissions on behalf of the Australian Centre for International Commercial Arbitration, we rely on those submissions but in particular paragraphs 40 to 45 where they deal with the adoption of the Fiona Trust line of authority in other jurisdictions, particularly New Zealand, Hong Kong and Singapore.

Now, our learned friends seek to persuade your Honours that Fiona Trust does not accord with the law in Australia – that is, in its outcome because the actual decision of the House of Lords was that an arbitration clause that used the words “any dispute arising under this charter” covered the dispute as to whether the charter was validly rescinded on the basis that it had been procured by bribery.

Of course, the Full Court, at paragraph 173 on page 285 of the core appeal book made clear that they did not consider that the arguments about Fiona Trust were critical to the resolution of the appeals because the Full Court considered that the authorities, such as the statement by Chief Justice Gleeson in the Travel case, to which we will be coming, were sufficient, were the law in this country - was the law in this country and was sufficient, with other authorities, to lead to the same conclusion.

They did express the view that they did not consider that Fiona Trust was at odds with that position but this case does not, as it were, turn upon the adoption of the precise process of reasoning in Fiona Trust by this Court. We say, properly understood, if one goes through the authorities, in fact on a proper reading of all the authorities the result which the Full Court came to is the correct authority irrespective of the precise process of reasoning in Fiona Trust.

But our learned friends characterise Fiona Trust as authority for the proposition that it really means that any arbitration clause will be construed on the basis that it covers all claims that can be imagined. The word “imagined” does not appear in any of the speeches in the Lords for the reason that that is not what the Lords were saying.

Can I then turn to our proposition? The first proposition, as it were – as it speaks – deals with the issue for determination. To understand that, one has to say a little a bit – without troubling your Honours overly long – about the notice of appeal. Your Honours will find that at page 392. Ground 1 contends that:

The Full Court erred in:

(a) finding that the arbitration clauses in . . . the Hope Downs Deed . . . extend beyond disputes, the outcomes of which would be governed or controlled by those Deeds -

That is a quote from the approach taken by the Court of Appeal in Rinehart v Welker. As will become apparent, both our learned friends’ written submissions, our learned friends’ outline and – accept in passing – our learned friends seek to walk away from that test. For reasons we will come to in due course they basically have to because it leads to absurd results.

The second ground at 1(b) – we will deal with the precise detail of that test when we come to proposition 12 in our outline. The second ground 1(b) contends that the Full Court erred in:

failing to find that the claims for relief advanced in prayers 35 to 41 of the appellants’ Originating Application –

perhaps, more properly, dispute or disputes involving those claims:

were not matters the subject of apparently valid arbitration agreements.

Now, if your Honours would go to pages 5 and – those prayers your Honours will find at pages 5 and 6 in the core book, sorry, in the pleading paragraphs, pages 12 and 13. This is the relief about which the parties are in dispute and how the appellants define “dispute” for the purpose of this appeal. At the outset, however, it should be noted that your Honours are only here concerned with challenges to the deed in contradistinction to the arbitration clauses in the deed. Your Honours are not concerned with any challenges to those. That limits actually the paragraph of the prayers with which your Honours are concerned to parts of

GORDON J: Sorry, can I just understand that, Mr Hutley, before you leave?

MR HUTLEY: Yes.

GORDON J: When you say they are not challenging the arbitration clauses they are challenging the deeds, is that right given the pleading that was before her Honour at first instance and, in particular, paragraph 31 of that pleading?

MR HUTLEY: Your Honour, can I just tell your Honour where it got to. The Full Court held that there was – your Honour appreciates that the principle of separability

GORDON J: I do.

MR HUTLEY: requires a bespoke attack upon the arbitration clause. The Full Court determined that there was but a shadow of an attack on the arbitration clause, something to do – and I will give your Honours the paragraph – with confidentiality and cost.

GORDON J: I know that. My point is – I know it is not the subject of a ground of appeal but is that right, given the way the pleading exists in the respondent’s further material, or are we stuck with that finding?

MR HUTLEY: Your Honour is stuck with - special leave was refused in relation to any matter in relation to that and, secondly, the arbitration agreement – and this is an important question, a point – does not itself confer jurisdiction to determine the validity of the arbitration agreement. That is done by section 16(1) of the Act, which gives competence competence. With respect, my learned friend occasionally shifted in his submissions to attacks on the deed as including the arbitration agreement.

GORDON J: That is because of the way it is pleaded before her Honour.

MR HUTLEY: Yes, but your Honours are only concerned with so much of these prayers as are seeking the deed without the arbitration agreement – what might be called the main agreement, as opposed to the arbitration agreement within the deed. That is all your Honours are concerned with upon the - the validity claims which have been referred to are claims which do not seek to set aside the arbitration agreement. They seek to set aside the main agreement, the arbitration agreement not being impugned because the Court of Appeal – the Full Court held that the pleading did not constitute a sufficient attack upon the arbitration agreements to satisfy the principles of separability.

It was on that point that your Honours refused special leave and were only concerned with the very limited question: do those attacks for undue influence, et cetera, fraud, upon the provisions of - and I will refer generally to the Hope Downs deed because it is convenient – the Hope Downs deed which, in effect, involve substantive rights, obligations and immunities and not the arbitration agreement.

GORDON J: I am going to ask one more question and then I am going to be quiet. Is it the position that paragraph 31 of the statement of claim, which attacks the Hope Downs deed, including the arbitration clause of that deed, which is then reflected in paragraphs 288 and 290 of the pleading

MR HUTLEY: I am going to come to that.

GORDON J: is not an attack on the arbitration clause or the arbitration agreement? Is that what you are saying?

MR HUTLEY: It was found as a matter of law that the pleading of those matters not being directed to the arbitration agreement they were not challenges which satisfied the requirements of separability to a specific challenge directed to the arbitration agreement. That fundamental principle, your Honour, is what in effect has changed in respect of the common law essentially in the 1990s.

The older decisions, which I will come to, were all against a background, going back to Heyman v Darwins and before, that an arbitrator could not determine in any binding fashion a challenge to the agreement which embodied the arbitration clause, could not do it. Now, the principle of separability which is accepted and has been accepted in this country since the 90s and is the fundamental principle which underwrites all arbitration is that the arbitration agreement being a bespoke independent agreement you can – you have to challenge that by reference

GORDON J: I accept that principle – there is no disagreement as I understand it but the question is, is the fact and this position

MR HUTLEY: It is not before your – it is not before your Honours.

GORDON J: It is not before us, so we are stuck with a finding that the extent of the dispute is that raised by 288 and 290 as some sort of – is that the position?

MR HUTLEY: That the only attack on the arbitration clauses was a very minor one and arguably a very minor one and that has been set - pursuant to the proviso of section 8 that has been stayed and will be determined by the arbitrator. That has been determined on the pleadings of this case, and so your Honours are not dealing with that, and, your Honours, at paragraph 388 in the judgment of the Full Court on page 346 of the Court.

GORDON J: It is a very odd position given paragraph 31 of the pleading.

MR HUTLEY: Your Honour, for reasons which, with respect, would take lengthy time to expose, the Full Court’s judgment was clearly right for one had to track through and see how it was done as a matter of pleading. I am going to take your Honours through the pleadings - when I come to a number of issues in relation to this matter. But that is the first point.

Could I then go to prayer 35? That is on page 12. That is an injunction under section 80 of the Trade Practices Act restraining Mrs Rinehart and my client from enforcing releases and arbitration clauses in the deeds. That of course is a form of relief which assumes the continued legal effectiveness of the deeds and seeks to impact upon their operation.

EDELMAN J: Sorry, which paragraph?

MR HUTLEY: Prayer 35, your Honour, at the bottom of page 12. Could I then move to 36? That seeks a declaration that each of the deeds – and in this sense I am using it in the sense of the main agreement – a void ab initio against – that is my learned friend’s client, Ms Rinehart. So that also assumes that the deeds remain in effect.

If one then moves, if one could, to prayers 40 and 41, your Honours will see this is in the section dealing with the relief on behalf of my learned friend’s client, Mr Hancock. It seeks a similar injunction in 40 and then 41 seeks a declaration that each of the releases are void ab initio as against Mr Hancock. Prayer 42 seeks similar injunctions; 43 is not actually the subject of the notice of appeal but that would seem to be an oversight.

GORDON J: The famous 37.

MR HUTLEY: Yes. I was going to come back – 37 is dealing with the arbitration clauses.

GORDON J: That is the flip side.

MR HUTLEY: So they are not

NETTLE J: They are not what?

MR HUTLEY: They are not of concern to your Honours. Can I jump back to 38, if I might, and 38 seeks a declaration pursuant to section 21 that the execution of Mrs Rinehart, in her capacity as trustee of each of, et cetera, is a void ab initio, is a fraud on the power. Then it seeks a declaration pursuant to 21, that insofar as each constitutes - that is to deal with the arbitration, I pass over that. So again that seeks a declaration it is void by reason of being a fraud on the power.

Now, that assumes that - each of these prayers assumes either the deed continues in existence and it is only void as against a particular individual parties - either it is injuncted from being enforced as against those parties or, yes, that is what it seeks. We have made a reference in our note to Alati v Kruger [1955] HCA 64; 94 CLR 216 at 224, point 2, where the Court explained that avoidance in law and equities is always an act of a party and:

The function of a court in which proceedings for rescission are taken is to adjudicate upon the validity of a purported disaffirmance as an act voiding the transaction ab initio, and, if it is valid, to give effect to it and make appropriate consequential orders -

Of course, if there is a common law ground of avoidance and restitutio in integrum is possible then the contract can be avoided once that communication takes place to the other party, whereas in equity, the contract is avoided when the court makes the order, which is discretionary and may include orders aiming to restore the party substantially and practically to the status quo.

Now, of course, also in law and equity relief may be refused if the contract has been affirmed and in this case, as the form of relief sought recognises, there are other parties to the deeds and the deeds are sought to be rescinded only against the appellants. So the dispute is as to whether the Court should recognise the deeds have been avoided ab initio as against the appellants or make an order to that effect as well as injunctive relief in certain circumstances.

The respondents are contending that they are deeds and the rights created by those deeds are binding upon the appellants. The appellants are saying that they have avoided the deeds and there are no rights currently subsisting under them or at least the Court should make an order that there be an order to that effect.

This is a dispute fundamentally concerning the rights created by the deeds at least as a matter of history. It is a dispute about what has been or is to be the fate of those rights. To use a shorthand it can be said to be a dispute about the continued legal effect of the deeds, that is, whether the rights should continue to be recognised as effective or whether the Court should instead recognise that they have or are to be avoided and taken to be so from the moment of their creation. Now, we say they are disputes relating to rights and obligations in the deed.

EDELMAN J: Or to use the Full Court’s expression, “disputes about the continued operation” – or operation.

MR HUTLEY: Quite. Precisely, your Honour. It is – and we will come to it – a dispute caused and solely caused operatively by the fact that legal relations were brought into existence by these deeds. The fons et origo of these claims is the fact that an agreement was achieved in the deeds which agreement had an arbitration clause appended to it in a legal context where, because of the principles of separability, an attack upon the main agreement is no attack upon the arbitration agreement.

What we say seems to be driving the appellant’s argument is the notion that words like “dispute” under this contract can simply never, as a matter of ordinary English, comprehend a dispute whether or not the contract should or has been or is liable to be rescinded against only a limited number of parties to the agreement.

We should say something before we leave our first proposition as to what is meant by sustainable argument. The Court of Appeal – the Full Court dealt with this at paragraphs 141 to 152 in the core appeal book, pages 272 to 277. There has been a debate in respect of countries which have adopted legislation based upon the model law and have instantiated provisions of dealing with what is to happen and when is to happen the application for the stay or the sending to arbitration.

There is a debate about what is called the prima facie approach and the full merits approach and the Full Court – and this is not challenged – observed that a rigid taxonomy was unhelpful but that the prima facie approach had much to commend it, particularly when it came to characterising dispute which must necessarily be done at an early stage in the proceeding.

That is also similar to the question of characterisation of dispute which would have to take place under the relevant arbitration clauses which notionally should have occurred at the time of dispute between the parties leading to a mediation structure if it is a dispute under the arbitration, but in fact the dispute in this case because of the approach taken by the plaintiffs – the appellants never went through that step and in effect the dispute was manifested by the statement of claim.

Now, that is not to say had there been, as it were, discussion beforehand the substantive points in the statement of claim and the substantive points of defence which I will come to, your Honours, upon which the case was conducted would not have been exposed in the process of identifying that the parties were in dispute in point of fact.

But that is not to gainsay the observation made by the Full Court that even allowing for all that the precise metes and bounds of that which is the dispute is apt not to be, as it were, made concrete at the time at which applications of the variety with which your Honours are concerned had to take place because, as your Honours know, under the Act my client – anyone who wishes to rely upon section 8 has to take it at the first available opportunity, in essence.

Therefore, these applications are taken before you plead. They just are. They have to be because if one goes to section 8(1) – and your Honours will find this in volume 1 of the joint book behind tab 3 – your Honours will see:

A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute

GORDON J: One would expect that would be a defence.

MR HUTLEY: Well, your Honour, when your Honour was in the Federal Court, I understand your Honour used to ask people “What is this case about?” sometimes on the first return date and that is when, in modern litigation circumstances, one is called upon to identify with precision, as much precision as you can the substance of the dispute.

In times gone by and in certain courts maybe your Honour’s observation about defence may be correct, but certainly not in the Federal Court. Therefore one has to, in identifying the substance of the dispute as a matter of practicality when the application is made, rely upon that which is pleaded and that which is exposed on behalf of the disputing party.

I will come to the detail of that in a moment, but one thing which was made perfectly clear –your Honours can see it from paragraph 4 in the judgment of the Full Court at page 233 in the core book:

The respondents are yet to file a defence to the pleading, but the case before the primary judge and on appeal proceeded on the assumption that the respondents (or at least those that appeared) deny every material allegation of wrongdoing.

That particular paragraph becomes relevant – I will not take your Honours to it again – when we come to the application for leave to pursue the crossappeal.

KIEFEL CJ: That might be a convenient time, Mr Hutley.

MR HUTLEY: If your Honours please.

KIEFEL CJ: The Court will adjourn until 2.15.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

KIEFEL CJ: Yes, Mr Hutley.

MR HUTLEY: Thank you, your Honour. I was just finishing off our first proposition by reference to what the Full Court had said at pages 272, 277 of the core appeal book, paragraphs 141 to 152, concerning the approach to the issue of the sustainable argument. But the point to observe beyond what I have said is the court concluded in determining whether the dispute was the subject of an apparently valid arbitration agreement they required what they describe as some stable meaning to be given to the terms of the agreement. So, some conclusions as to the proper construction of the arbitration agreement had to be arrived at.

Can I turn to the second proposition and the second proposition is no more than this. We say that when one views the approach taken by the Full Court at paragraph 163 and following, page 282 of the core appeal book, to the question of construction of the relevant arbitration agreement they applied and were astute to apply as they, of course, had to, the binding authority upon them in this Court. You can see that from 163 of the references to the numerous decisions of relatively recent dates within this Court considering these questions of construction. At 165 they turn to the question that whether:

The assessment of what reasonable persons would have in mind –

and they are astute there also not to refer to commercial – people of commerce – they were reasonable persons:

in the situation of the parties can be influenced by what courts have said about such contracts or the market or environment in which they are made.

We would say that is clearly right and I do not think our learned friends challenge any of that. How one approaches the construction may well be affected by such considerations. We submit that is no gloss upon – they were of course correct in that.

There is then a reference to Comandate – which has received some criticism by my learned friend, if somewhat slighting – because in Comandate the court was seeking to adopt the approach expressed by Chief Justice Gleeson in Francis Travel – an approach embraced wholeheartedly by our learned friends. Then they say at 167:

The existence of a “correct general approach to problems of this kind” does not imply some legal rule outside the orthodox process of construction; nor does it deny the necessity to construe the words of any particular agreement. But part of the assumed legal context is the correct general approach which is to give expression to the rational assumption –

et cetera and then refers to - and then it goes on before they come to Fiona Trust. We just submit that the Court was there applying wholly conventional principles of construction.

As to our learned friend’s contention that the parties to the relevant deed are not business people and some principles should be differently applied because of the existence of a family relationship, we submit that this was a contract, as has been found, dealing with a very large commercial interest. There are unchallenged findings that the Hope Downs deed and the April 2000 deed are documented commercial transactions, that is the Full Court’s judgment at paragraphs 130 to 132 and 137 at core book 269 to 270.

We submit if people, even though related, enter into large commercial contracts with one another, they are relevantly business people for the purposes of that contract. It is a commercial contract; it is part of their business.

KIEFEL CJ: They are trusts, are they not?

MR HUTLEY: There were trusts involved, your Honour, but, with respect, even trusts can be instruments of business and when one goes into the history of why these trusts were set up, they were trusts set up with evident tax objects involved, as appears from the allegations in the statement of claim. So, trusts themselves are instruments of business and

KIEFEL CJ: They arose out the estate of the late Lang Hancock, did they not, and his companies?

MR HUTLEY: They were created - it is quite complex, the history. Some were created before

KIEFEL CJ: Yes.

MR HUTLEY: Some came out of instruments, some were created in anticipation of, by agreements, in anticipation of, but, in our respectful submission, having regard that this was a commercial contract and that is not disputed, no relevant

KIEFEL CJ: The deed itself was a commercial agreement, is your point?

MR HUTLEY: Yes, exactly, so found, not disputed. Can I then turn to the third proposition in our outline. Now, the reason for this proposition is that the choice of a broader meaning increases the likelihood that all disputes that arise from one transaction or relationship, and by that I mean the relationship with which the agreement is concerned, and I will come back to that, will be able to be decided in the same forum.

The corollary of that is that it minimises the prospect of fine, one might say captious distinctions of no substantive significance driving the selection of forum. We say that is, in effect, the force of the observation of Chief Justice Gleeson in the Francis Travel decision, and your Honours have been taken to the passage in the joint authorities, volume 2, tab 11 at page 165D, where his Honour observed that it was objectively unlikely that parties would intend that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues or the ingenuity of lawyers. We understand that is embraced by our learned friends.

Now, that was addressed by the Full Court at paragraphs 166 to 186 of the judgment. The Full Court considered general observations on the construction of arbitration clauses made by the Full Court in Comandante, Francis Travel, then going on to consider Fiona Trust. I will come to that in due course. Also two members of this Court, the Chief Justice – then Chief Justice French and your Honour Justice Gageler in TCL Air Conditioners v Judges of the Federal Court of Australia - I will come back to that quote in a moment.

Now, the Full Court concluded that Fiona Trust did not depart from orthodox principles of construction. What in another case is support is that a common sense contextual assumption, sometimes expressed by the Court as presumption, and one might observe a language used by your Honour Justice Gageler in agreeing with the Chief Justice in TCL – a common sense contextual assumption could be made that parties to an arbitration agreement, intend that all disputes arising out of the relationship were to be decided by a single body and that the words chosen by the parties which, as the Full Court said, remain determinative were to be interpreted in the light of that assumption, that is, if they are reasonably capable of bearing that meaning, supporting that assumption, presumption or inference of what reasonable parties do, there would be no reason to depart from it.

Now, that the court considered that the text was ultimately determinative appears from paragraph 178 and 182 of their reasons. Further, the court repeatedly referred to the ordinary English meaning of “under” and your Honours can see that throughout paragraphs 168 to 172. Their concern about that is demonstrated by paragraph 196 where their Honours referred to the dictionary definitions in the Shorter Oxford Dictionary and the breadth of possible uses of the word “under” which that demonstrated.

We would also make the point that the construction question is now to be addressed – and this leads into our proposition 4 – in the light of the principle of separability. The Full Court’s judgment deals with that at paragraphs 341 to 360, core appeal book 331 to 337. It contains an account of the development of the principle and its acceptance into AngloAustralian law of the 1990s in Harbour Assurance v Kansa General Insurance Company Ltd – I am going to take your Honours shortly to that in due course – and Ferris v Plaister in New South Wales.

The principle is now one aspect of it is codified in section 16, namely, that the arbitration clause which forms part of the contract is to be treated as an agreement independent of its other terms.

KIEFEL CJ: Mr Hutley, the Full Court does not appear to have dealt with the question of separability as one going to the construction of the arbitral clause itself. It has dealt with it separately but I infer you are creating a platform about separability as an aid to construction, to explain the movement, although you might not call it a movement, away from orthodoxy in Fiona Trust.

MR HUTLEY: Your Honour, I am going to come to those cases. The fundamental point we make and we seek to observe upon that when your Honours come over to paragraph 8 of our outline is that all the cases which my learned friends refer to as important cases, the English ones, were essentially done in a context before separability was adopted. So they simply were not concerned with the question with which your Honours are concerned with, namely, the aptitude or aptness of the language adopted in this clause to deal with a challenge to what I have called the “main agreement”.

KIEFEL CJ: But neither did the House of Lords in Fiona Trust, did they?

MR HUTLEY: Yes, that is exactly what

KIEFEL CJ: They dealt with separability as a distinct issue but not as a platform for construction.

MR HUTLEY: Quite. They saw “it” as it were as the reason to have a fresh look, in our respectful submission, that is

KIEFEL CJ: Perhaps you could take us to the passages.

MR HUTLEY: I will just have the passage – in the context of the Act being adopted. I will just get those passages out, your Honour. If your Honours go to tab 10, 958 in the speech of Lord Hoffmann at e:

I think that a fresh start is justified –

KIEFEL CJ: I am sorry, which paragraph number was that?

MR HUTLEY: I am sorry, your Honour, paragraph [12], the second half of [12] at about point letter e, “I think” et cetera.

KIEFEL CJ: But the developments in the branch of the law is the more liberal approach, is it not?

MR HUTLEY: Sorry:

That section was obviously intended to enable . . . to give . . . reasonable commercial expectations –

about justifying – is the adoption of the principle of separability by Parliament in section 7. So it is separability.

KIEFEL CJ: This is the common law following statute law? It is a rather large subject to enter upon lightly, Mr Hutley.

MR HUTLEY: The common law actually preceded the statute in Harbour Assurance in England. What his Honour seems to have – his Lordship took the view is that principle which statutorily was instantiated by section 7 was a reason for a fresh look. But the separability has been – was adopted in – and I will take your Honours to the decision in, I think, 1992 in Harbourside in England and in 1994 in Ferris v Plaister in New South Wales as part of the common law – not the statute law, the common law.

So, in a case like this we are asking about the terms of an independent agreement constituted by the arbitration clause although often physically attached to the main agreement. It is important that that point is kept in mind because of that physical attachment questions such as non est factum and the like, invariably go to both instruments, not necessarily but almost – i.e. it is not my deed is apt to attach to the signature and the signature is the signature which is common to the two contracts.

So, that is why, usually and there has never been a case where a non est factum case has arisen where the arbitration clause is in a different agreement to the main contract. It is conceivable, if you have an arbitration clause in a general clause is, I agree to arbitrate all deeds executed by the parties to this arbitration clause hereafter and there was a deed where there was a debate about non est factum, you would say that is covered by that arbitration clause, even if it was under.

NETTLE J: You would not be frustrated?

MR HUTLEY: Not the arbitration clause, no, because you might have an arbitration about whether there is a non est factum. I am just saying, that is a theoretical possibility. One cannot draw too much from this debate about non est factum and the point my learned friend sought to draw because non est factum is just structurally different to a fraud case and undue influence case because the latter take as their point of departure, you have got an effective agreement and add to that the principle of separability and no challenge to the arbitration agreement relevantly.

And we submit that, as we put in our fourth proposition, as the objective circumstances going to the construction of an arbitration clause may include court decisions and the state of the law, the point we make is where the chosen dispute resolution process is arbitration, then the parties have objectively chosen a dispute resolution process which treats the arbitration agreement as a matter of law as separate on the main agreement, thus inuring it at law from many challenges to the main agreement and the legal purpose of that distinction historically was to enable arbitrators to deal with challenges to what I have called the main agreement.

By choosing arbitration, in the context of that state of the law, objectively indicates, in our respectful submission, if the language of the arbitration agreement permits of it, a conclusion and a likely conclusion that the parties would intend that such challenges be determined pursuant to the arbitration agreement. Of course, that only comes into play where there is a constructional or interpretive choice because of the range of possible reasonable meanings of the clause but if such a constructional choice confronts a decisionmaker, in our respectful submission, that objective circumstances, about the nature of arbitration, would lead to a conclusion in favour that conclusion.

Could I turn to our fifth proposition? Now I wish to deal with the position with respect to the deeds with which we are concerned. The Full Court summarised the relevant context at paragraph 203 at page 295 of the core book. We set out in our written submissions a more detailed account of the evidence and the relevant deeds and your Honours will see those, in our submissions, at paragraphs 17 to 28. It is – and I will not repeat all of the facts, of course – but it is useful to turn to the deeds themselves which are in the appellants’ further materials. And, can we start with the 2005 deed of obligation and release which your Honours will find commencing at 73 – the substantive portions of which – and the parties – are identified at 75 and then there are some recitals at 76.

This is the deed which Mr Hancock, one of the appellants, agreed in April 2005 and then a few months later said it was not binding upon him because he had been subjected to undue influence. Can I turn to the recital on page 76? Would your Honours note D and E, particularly, which recites the commercial interests and sensitivities of the Hancock Group and reference to the dangers of disputes about ownerships being publicly aired? Recital E – I will not read it out, of course – there is a description of HPPL’s business which is a business of longterm, complex, largescale mining projects and what it necessitates is:

long term consistent business plans, and many dealings with third parties on a strictly confidential basis, and the contrary –

et cetera. Your Honours might note F but your Honours need not be too concerned with that. Then can I take you to page 86 and clause 11? The covenantor, being Mr Hancock, acknowledges that he:

acts wholly without duress in making this Deed and that prior to the execution by the Covenantor hereof he has had and obtained independent advice on all matters relating to or which are the subject of this Deed. The Covenantor shall be responsible to pay and discharge all costs –

et cetera. And then “The other signatories” also make that acknowledgement and “without” et cetera. Now, that is a deed which your Honour will also note, at 75, my learned friend’s other client was a party to.

Next, can I take your Honours to the Hope Downs Deed, commencing at 99. The accession deed by Mr Hancock your Honours will find at 127. If I can take your Honours through a little bit of this, to the definition of “claim”. Your Honours will see the recitals and then claim. “Claim” is broadly defined. If your Honours go to (d) on page101, at about line 40, your Honours will see:

without limitation of subclauses (a) and (b) includes any claim made in any proceeding or any discontinued proceeding and any documents to support such claim and without limitation and for clarity in the case of the Proceedings includes the unsigned draft affidavit of JLH

I would like to say something about that. These claims were released later on and I will take your Honours to that but the important point was at first instance Ms Rinehart, the appellant, contended that those claims did not relate to her because it only related to claims by John Hancock.

Her Honour, Justice Gleeson, at first instance, found that there was no sustainable argument that those claims related to Ms Rinehart. The Full Court disagreed with that and said that there was. It is not under challenge, so one does not have to go through it. That debate, that issue has been sent to arbitration. That means Ms Rinehart – and this is the way it has been conducted and it has so been found – will seek to establish all the causes of action to which that affidavit adverts, which were all the causes of action, and establish them. Then she will argue, having established that, these releases do not respond to them.

Although there is a sustainable argument the releases do, that is ultimately a matter for the arbitrator to determine when he or she, when they – because there will be three of them – have looked at the entirety of the claims made and made factual findings about them and then related them to the true construction of this contract.

Ms Rinehart maintains that on a true construction of this contract when she demonstrates what the claims are she is not affected by them at all. And that has been determined to be a matter which will be the subject of our arbitration. So there will be a full hearing of all of what we will call the substantive claims in an arbitration.

Can I then take your Honours over to a few definitions, if I might, back to the agreement.

EDELMAN J: Could you give me that paragraph where the Full Court held that it either did or might relate to Ms Rinehart?

MR HUTLEY: I will have the paragraph turned up for your Honour. Now, while that is being done, your Honours will drop down on page 101, your Honours will see a reference to the deed of obligation and release. That is the document I took you to, so this is a document which is expressly referred to in this deed – it is at paragraphs 228 to 230 at core book 301, your Honours.

Now, if one then goes over, if one can, to the next page your Honours will see “Hancock Group” is defined. It means:

HPPL, and any Related Body Corporate –

and “Related Body Corporate” is defined at 103, at about point 4. Then there is “Hancock Group Interests”:

Hancock Group Interests mean:

(a) the Hancock Group’s interest in the Hope Downs Tenements –

Your Honours will see those defined further down the page:

and the Hope Downs Joint Venture –

similarly so defined:

(b) all other mining tenements, licences, permits and interests therein currently held by any member of the Hancock Group including without limitation any joint venture . . .

(c) any partnership or royalty interests, choses in action –

et cetera, and then I have taken your Honours to “Hope Downs Tenements”. Your Honours will note “Hope Downs Net Cash Flow After Tax” – that is just noted. And also just note related parties. If your Honours go over to 104, clause 3:

3(ii) All parties to this deed which or who were parties to the Deed of Obligation and Release reaffirm and ratify the Deed of Obligation and Release and all their obligations and releases thereunder.

So they thereby recognise the critical importance of confidentiality and longterm interests of this organisation. They incorporate those recitals that I took your Honours to:

3(iii) The parties acknowledge that the obligations of the Hancock Group, due to HDIO’s ownership and interest in the Hope Downs –

may include various things. Now, these are essentially commercial recognitions by commercial people. This is not, in effect, settling how much I am going to get out of mum’s will. These are vital, complex commercial interests these parties are acceding to, agreeing and recognising. Clause 4:

The parties acknowledge that at all material times the Hancock Group Interests have been and remain beneficially owned by the Hancock Group member that purports to own them including, without limitation, the Hope Downs Tenements –

And then your Honours will see a reference to “HDIO”. “HDIO” is the company that was not a party to this agreement, although a party to the dispute and the suit below, and it is seeking leave to appeal in relation to the “through or under” point, which I will come to in due course. But that is a recognition, a fundamentally commercial act. Then there is a detailed distribution covenant, which is, in effect, broadly speaking, a promise that the children of Mrs Rinehart, as shareholders, will get 25 per cent of the free cashflow out of this company, from Hope Downs.

Now, clause 6 sets out the releases:

Each party . . .

(a) releases and discharges each of the other parties hereto now and in the future from any Claims,

(b) Irrevocably covenants not to take any proceedings against any of the other parties to this deed in relation to any matter arising in any jurisdiction, in respect of the Claims;

(c) Withdraws and forever abandons . . .

wherever and whenever arising, whether;

(iv) known or unknown –

et cetera. Then there follows a series of undertakings under clause 7:

Each of the parties to this deed undertakes with each of the other parties to this deed -

(a) that they will not at any time do, nor attempt to do nor encourage, nor assist in any way any other party or third party to do anything which could have an adverse impact on the Hancock Group’s rights under –

various agreements, including the joint venture agreement with respect to Hope Downs joint venture. Now, just stop there for a moment. Having regard to the recognition of the damage which could happen to somebody this company, if, as it were, the matters which had been adumbrated by John Hancock in the affidavit, are agitated publicly because of the impact it can have on their commercial interests just in respect of the Hope Downs joint venture, let alone every other commercial interest of this company, the idea that these parties would have understood objectively that the appellants here were free, if they wanted to challenge these agreements, by reference to the facts going to these interests, that that would happen publicly just has to, in our respectful submission, to be stated to be thought to be absurd.

This is in a context where the occasion for this deed is that John Hancock, after entering into the earlier deed and acknowledging it had all the independent advice in the world and free will, has attacked that deed on the basis of undue influence. That is the 2005 deed. The occasion for the Hope Downs joint venture is his challenge to the 2005 deed.

Our learned friend’s position is but if he did it again, did it again, the parties objectively would have imagined that this matter which would vitally affect their interest if publicised, would take place in public, just has to be - a moment’s reflection - stated to be - come to the conclusion it is absurd unless the language they chose in the arbitration agreement compels that result.

GORDON J: What is the position of Bianca, though?

MR HUTLEY: She is in exactly the same position because if she runs the – any person, it does not have to be Bianca, could not be known whether it was Bianca, it could have been one of the other children, could have been one of the other persons who were parties to this agreement, if any of them wanted to go into the world and start challenging these interests by attacking this deed, according to our learned friends – objectively reasonable individuals, whether you call them business persons or anything else, would have imagined the parties were perfectly content for that to happen. It is just, with respect, and was treated properly by the Full Court as ridiculous.

Now, can I go back to the deed. I was now turning to clause 7 which your Honours will find at page 107. I dealt with 7(a). Clause 7(b) has particular significance because one of the ways in which the Full Court disposed of this – one of the bases of disposal of the case was to rely on 7(b) and 7(b) is that is, the parties agree:

not to challenge the right of any member of the Hancock Group to any of the Hancock Group Interests at any time.

Then, if your Honours would note the control of Mrs Rinehart in 8. I can pass over 9. Your Honours come to then “Confidentiality”:

No party may disclose any information in respect of this deed or in respect of any correspondence or negotiations between the parties or their legal advisers in relation to the subject matter of this deed, or any matters relating thereto except:

(a) for the purpose of enforcing this deed –

and then there are some obligations. Clause 11 provided for an ability to “Plea in Bar”:

On and from the Effective Date each party may plead this deed in bar to any Claim or proceeding the subject of a release

et cetera. Then there are the “Acknowledgements” at 12:

Each party acknowledges that (except as set out in this deed) it:

(a) enters into this deed freely and voluntarily based upon its own information, investigation, and subject to 12.3 legal advice; and

(b) does not execute this deed as a result of or in reliance on any promise, representation, advice, statement, opinion or information . . .

12.2 This deed applies and the execution parties hereto are hereby bound irrespective of whether those parties waive or do not waive . . .

12.3 Each party who executes this deed acknowledges that he, she or it acts wholly without duress or undue influence –

et cetera, and then it goes on. Then one comes to clause 20. It says

EDELMAN J: I suppose you would say that the question of whether or not, for example, there has been duress or undue influence, if that were to be or to fall outside the notion of “under the deed” then there may be an incongruity with the acknowledgements which, by definition, must be under the deed?

MR HUTLEY: Yes, your Honour, and I was about to come to that in the context of what the mediation was at 20, which my learned friend – “Confidential Mediation” starts at 20:

In the event that there is any dispute under this deed –

Now, a deed can also, I say, be an instrument - that is, because of the principle of severability the deed is also under this instrument. The instrument embodies rights and obligations and it is not arising out of or arising under. It is in the event there is any dispute under this deed:

then any party to [this] deed who has a dispute with any other party to this deed shall forthwith notify the other party or parties with whom there is the dispute –

So it is predicated upon, in effect, as it were, a debate having taken place such as to identify a dispute. It is not predicated, if one is within the deed, that one has gone to court and started with a statement of claim. It is probably predicated on the idea that the men and women involved and organisations will communicate, setting out in effect in detail their positions and realise they are in dispute and broadly speaking, the metes and bounds of it because any dispute with the other party:

shall forthwith notify the other party or parties with whom there is the dispute and all other parties to this deed . . . and the parties to this deed shall attempt to resolve such difference in the following manner.

Confidential Mediation

(a) the disputing parties shall first attempt to resolve their dispute by confidential mediation –

Now, it appears to be contemplated that that which is the subject of the confidential information is the same as that which has been fleshed out to, in effect, engage the clause. Now, these things have to be read sensibly in the sense that they could be evolving. So the question of what is sent to, as it were, confidential arbitration may be slightly different from that which started at day one when they went to the confidential mediation, the dispute and differences and it may have been fleshed out in all that and, in effect, other points may have arisen, et cetera, over time and they set out what they are to do and then

NETTLE J: Each of those is, in effect, “my” - being a party’s entitlement under this deed.

MR HUTLEY: Yes.

NETTLE J: To what am I entitled and to what am I not entitled under the terms of this deed?

MR HUTLEY: Well, we say one of the things you are entitled to under the terms of this deed is the rights under the deed

NETTLE J: Certainly.

MR HUTLEY: and if you are having a battle about whether you are entitled to them all, somewhat odd that you might have a battle as to whether one right has been terminated because of breach of contract and on

NETTLE J: No, no, I understand what you say

MR HUTLEY: I may be missing the force of your Honour’s point.

NETTLE J: What is provided for in this clause, and, indeed, all of the clauses to which you have taken us, is that when there is any dispute about each party’s entitlement under the deed or arising out of the deed, they go to arbitration.

MR HUTLEY: Quite.

NETTLE J: But what is said here by the other side is not that I wish to have determined my rights under the deed. I want to have determined that I have no rights or obligations under the deed because it should be set aside either in equity or at law or under statute.

MR HUTLEY: I understand, your Honour. But the predicate to that is there was a deed – there was a deed and the question

NETTLE J: I take the distinction between non est factum to the extent that there is one and section 82 of the Trade Practices Act.

MR HUTLEY: Quite. I understand that, with respect, your Honour, and if you ask the question what is meant by a “dispute under the deed”, a dispute under the deed is whether, we say, as a matter of history or future that deed has given you secure rights.

NETTLE J: I follow that but the point – whether it is good or bad, I do not know – but the point that is put against you is, I was induced to go into this deed by a lot of misrepresentations and lies and lord knows what else. I never would have had you not told me that and I therefore should not be stuck with the rights and obligations under this deed.

MR HUTLEY: I agree. I accept that, but once you have the principle of separability that does not tell you very much. The real point is you have agreed to arbitrate any dispute under the deed and one of the disputes, we say, under the deed, that is the main agreement, is whether your rights are secure.

NETTLE J: It is true that I had agreed to do so but only if I was not induced fraudulently or otherwise to go into it.

MR HUTLEY: Not the arbitration agreement.

EDELMAN J: Unless you had an attack on clause 20.

MR HUTLEY: Unless you had an attack on clause 20 – and there is not.

NETTLE J: Which is gone, by reason of the Full Court’s holding.

MR HUTLEY: Yes.

GORDON J: Subject to 288 and 290.

MR HUTLEY: Subject to the limited way in which it is put.

GORDON J: Which is very limited.

MR HUTLEY: It is the very small thing. That, in effect, has been stayed to – there was not a proviso hearing in relation to that and that has gone to the arbitrator for the arbitrators to determine – but they cannot determine it finally, that point, because you have a right of appeal if that is found against you. That is the discretion which has to be reexercised about that particular little attack on the arbitration if your Honours are against us in respect of the validity claims. They are not ever to be the subject of a proviso hearing. They have nothing to do with a proviso hearing. They are either arbitrable or not.

But we say the trick that our learned friends – and to quibble our learned friends ultimately focus on moving from the main agreement to the arbitration agreement without clarity. The moment you excise the arbitration agreement from any of this – and “under the deed” means under the main agreement, relevantly – the question then is – and you ask, rhetorically, what is the most important question you can imagine under this agreement between these parties – whether the rights are secure, whether today you have the rights which you undoubtedly at one time had on entering into this agreement because at the time this arbitration agreement says, “any dispute under this deed” that was referring to, relevantly, read this deed to mean the main agreement – that was referring to a set of rights and obligations which existed in law. It is any dispute under that undoubted agreement. We say the quintessential

EDELMAN J: Unless one were to have a non est factum claim or a claim which said there was no agreement ever.

MR HUTLEY: Quite. The problem with non est factum, as I said – since it is in the same document and you have signed it, you are going to have a pretty good attack on the arbitration agreement. That is why they never really arrive but I take this. But we say it is just clear to demonstration and I will take you to all the cases. All the cases use language before separability and if you read the language it strictly in terms applies to avoidance cases – clearly, because it is a dispute relating to the terms of the agreement.

KIEFEL CJ: Where are we in relation to your outline, Mr Hutley?

MR HUTLEY: I am sorry. I am just taking

KIEFEL CJ: I should say what I said before in relation to this matter going into next day did not mean a substantial part of tomorrow. Other parties are expecting to start.

MR HUTLEY: I understand that, your Honour. I am just taking your Honour through the terms. Now, I think I am down to six, if your Honours please. I would like to take you now, to make good the point about – I have taken your Honours to the objective surrounds and circumstances, namely the 2005 agreement, the attack on that, then the contract.

I made the submission that objectively the parties would not expect, if one challenged the Hope Downs deed, if you took the simple step of challenging the Hope Downs deed by reference to the historical facts which it was supposed to quell, the parties could reasonably be thought to have imagined that could be fully debated in open court and that is exactly what this pleading by our learned friends says it can do.

GORDON J: For my part, I find that difficult as a bald assertion to accept wholeheartedly because is it the position that all of those facts that are the subject of the pleading are covered by what was known beforehand objectively? We had this discussion with Mr Walker. It is about the context and about the history that gives rise to it. We start in 1998 and move forwards.

MR HUTLEY: I understand that, your Honour. The only point I am seeking to make is that the validity claims, that is the attacks on the main agreement, involve the proof of all the disputes which were referred to in the draft affidavit of Mr Hancock referred to in the agreement and our learned friend’s case is they are able, through the process of challenging the deed, to run all those cases in public, all of them, because their challenge to the deed – that is, to the main agreement – involves an assertion of all those matters, every one of them.

So those substantive cases which it is agreed are covered by the deed – that is what was found and it is not challenged – will now be run as the basis for the undue influence, fraudulent misrepresentation, et cetera, et cetera. I would just like to show you how that is done, if I could, shortly through the pleading. It will not take long and I will only do it with respect to the Hope Downs deed.

If your Honours take up the pleadings from our further materials and start at 288 that identifies what is said to be the underlying purpose of the Hope Downs deed. Your Honours note 288.2:

to prevent the beneficiaries of the HMH Trust from advancing claims . . . concerning the ownership of the Hope Downs Tenements and Roy Hill Tenements –

and shareholders, et cetera, called “the past misconduct”. At 288.3, to protect Mrs Rinehart:

the other relevant directors . . . from claims by the beneficiaries in terms of the past misconduct -

At 288.4:

to effect a unilateral settlement -

Then at 288.5:

to preclude, through the HDD arbitration . . . from conducting any public litigation . . . in which the past conduct may become publicly known . . .

(b) to prevent any public disclosure of the facts pleaded in Sections 8 – 16 -.

Sections 8 to 16 are essentially the substantive cases. Then 289 similar allegations are made at 289.4 and 289.7. Then one starts, in effect, the, what are called this is Ms Rinehart’s claims for relief in relation to the Hope Downs agreement. This is hers and I am only going to go through hers, very almost identical for Mr Rinehart. At 292 there are a series of what is called misrepresentations.

GORDON J: Is not 290 important? Maybe I misheard you and you took us to 290, but I thought 290

MR HUTLEY: Yes, 290 deals with the arbitration agreement, your Honour. I am keeping that separate for the reason I have indicated.

GORDON J: I see. I see.

MR HUTLEY: Your Honour, I know it is there - I am keeping it separate for that reason. Can I then go to 294 and 295?

The Great Benefits Misrepresentation was false . . . far outweighed . . . for the reasons set out in paragraphs 288290 above.

Now, that, for the reasons I have indicated, will take you back to the substantive provisions to run all the substantive claims as part of the challenge to the deed. That is repeated in 295 and your Honours will see that also in 298.2. The fraudulent concealment claim at 307, your Honours will see the reference at 307.3(a) to sections 817, the same.

The misleading and deceptive conduct cases at 309 and 310 suck in paragraphs 291 to 300 and therefore they are the same; exactly the same for 315 for material nondisclosure and 322. Then one comes to unconscionable conduct at 327. That rerunning of the entire case takes place through the device of 329.10 and the particulars to it which takes you back to paragraph 292 and therefore allows one to run the entire case.

That is dealt with also in a similar manner at 339 and 340. Similarly done with respect to undue influence at 342 and duress at 345 and 346, and also done for breach of trust and fraud on the power through 350.4 and 352. Then, Mr Hancock’s claim is dealt with at 359 and following and I will not take your Honours through them. They do exactly the same.

So, in other words, the validity claims fold in their entirety all the substantive claims and will involve the running of them in public with all contrary to the aim, object and purpose of each one of these deeds.

GORDON J: The difficulty about that is that that is their complaint.

MR HUTLEY: I understand that, your Honour.

GORDON J: And 288 and 290 is the very complaint that you seek to rely upon.

MR HUTLEY: I understand that, your Honour, but it is not going to the arbitration agreement.

GORDON J: We will have a separate debate about that. Let us deal with this first point that

MR HUTLEY: Your Honour, that is their complaint and one is asking a dispute under this agreement objectively allows of the possibility, we will say, of a fight about the enforceability of – and I will come to the detail of that in a little while - such an agreement. But we say objectively how would these parties have imagined - not intended if the words of the arbitration clause allowed it not to extend to preventing that which they were going to extreme lengths and acknowledged was harmful to the interests of these companies of which they were shareholders.

KIEFEL CJ: On this basis you would not then need to rely upon English authorities and any overtly liberal construction. You would say this is entirely contextual. So this is a distinct argument about context?

MR HUTLEY: Your Honour, we say, in effect, that is what the Full Court was saying and I am going to take your Honours to the paragraphs when the Full Court says that this is relevant. The context is relevant to the decision and they refer to exactly these matters which I am referring to.

KIEFEL CJ: So their Honours are referring to the English authorities for completeness?

MR HUTLEY: They are saying – they are referring to the English authorities for the assistance of a principle which they say is consistent with the statement of Chief Justice Gleeson in Francis Travel that an objective, reasonable construction takes regard to the proposition that parties would wish all their disputes to be determined in one place.

KIEFEL CJ: But your point is that the Full Court did not rest their reasons upon that.

MR HUTLEY: Quite, and I will come to that. I am now at 8, your Honours. Now, at 8 this is where one gets into the authorities. The proposition is really two propositions. Our learned friends contend that in circumstances where the parties have been taken to have been mindful of possible validity challenges - and this is in their reply submissions and adverted to in my learned friend’s submissions - they should be further taken to have chosen under this deed deliberately to exclude such challenges. Now, they refer to various authorities in support of that and I will have to take your Honours through some of them my learned friend did.

I made the observation - and we put that in the point - is that authorities before the 1990s simply were not considering the question could a challenge to the main agreement, what we call now the main agreement, be under a dispute arising under the deed because you could not have that. It seems to be common ground between us that the notional legal advisor would not take a construction of a peculiar contract and words in it as determinative of the question in respective of another contract.

Although our learned friends accept in principle that these prepositional phrases are, in effect, context related, my learned friend constantly referred to that but then, in effect, took your Honours to cases and repeatedly says that is the only way to do it.

Now, in our respectful submission, those two approaches are inconsistent. We say these prepositional phrases – and we have referred later on in our note to the observations of this Court in Wright Prospecting where “through and under” was referred to as a prepositional phrase which, as the Court observed and all judges agreed in this – in effect, is highly context dependent as to their meaning. We say that is peculiarly the case with respect to a clause such as this.

Now, of course, sometimes where there are contracts which are standard form contracts, a determination by a court as to the meaning may well have significance for the construction of it, albeit a separate contract being a standard form. In Ferris v Plaister, which is in volume 1, tab 9, the relevant clause is at 497 and 498. I will just give you this observation. Justice Mahoney, at 498C, observed upon the fact that he was dealing there with a standard form building contract. His Honour referred at 498F to:

a legitimate predisposition to conclude that the draftsman intended the words used by him to be construed in the light of the recent judicial considerations of them.

We say that must be clearly correct. Now, our learned friends challenge Mackender v Feldia – and I will come to that in a little while – but they rely upon the Paper Products decision, which is volume 2, tab 7, and the ACD Tridon decision. Neither of those cases was concerned with an attack on validity. Neither of them were dealing with a contract in the terms of our contract or having a similar context throughout contract.

Thus, with respect, we say nothing about the correctness or incorrectness of the decision in point, but they can be of little or no assistance in answering the questions which are before your Honour. Similarly, the BTR decision, the firstinstance decision of her Honour Justice Warren, as she then was - firstly, the clause was quite different to our clause – I am not going to trouble your Honours with it; your Honours can see it at page 108 of the bundle. It was involving the respective rights and obligations under this purchase agreement. That was the dispute.

Now, in our respectful submission, whether the decision was right or wrong it is of little assistance. The choice of “govern and control” may have been apposite for that particular contract, but it certainly is not, as it were, the only construction of the word “under” in a context such like this.

NETTLE J: Mr Hutley, do you adopt the Full Court’s criticism of Justice French’s treatment of restricted in Paper Products?

MR HUTLEY: Yes, with respect, yes. With respect, the problem with these terms is restricted in comparison to what in what context. My learned friend now adjures a need to, as it were, give an exhaustive expression of the connotation of the meaning of “dispute under the deed”. That is contrary to their written submissions where they say the floor of the Full Court was not, as it were, finding a pithy paraphrase. My learned friend accepts it is not. Therefore, the task is to address the particular issue which confronted the Court and asks the question, does this clause, in this context, as it were, provide for determination by arbitration of this dispute. That is not to say that one does not, ultimately, look to a meaning of the clause but one does not seek to undertake an exhaustive exercise of working out every possible meaning.

That is one, with respect, of the flaws of the Chief Justice the Court of Appeal’s approach where they said without any addressing of possible range of possible disputes that “dispute under the deed” had to mean governed and controlled. That was exactly what was wrong, with all due respect. Perhaps, it was sufficient to the task before them because the relevant disputes had arisen after the date of the deed and had nothing to do with the deed. Strictly speaking, it was unnecessary to deal with it.

But, I want to say something about Mackender v Feldia, if I can? That is volume 2, tab 14. It concerned an exclusive jurisdiction clause, the only case determined before the acceptance of separability which concerns a dispute about validity. If your Honours go to 596F, your Honours will see the relevant clause. At 597D, your Honours will see that the underwriters sued in English courts asking:

the policy be declared void for illegality and voidable for nondisclosure –

i.e. on the basis that the insured was conducting a diamond smuggling operation.

Lord Denning addressed the question at 598 and what the argument was. He says, below B, near C:

he says that owing to the nondisclosure, there was no true contract – no real consent by the underwriters – and that, on this basis, the contract itself falls down, including even the foreign jurisdiction clause.

At C to D, Lord Denning observes the position might be different in non est factum, but different where the contract, voidable for:

nondisclosure, is “a dispute arising under” the policy –

And, one sees the words:

It only makes it voidable.

Then:

If they avoid it, it is avoided in this sense, that the insurers are no longer bound by it. They can repudiate the contract and refuse to pay on it.

We have given you some papers out of Hardy Ivamy which shows that the word “repudiate” in this context dealing with a Lloyd’s policy means a void. It does not have a contractual context. I will take your Honours shortly to it.....and we have also given your Honours a reference your Honours will see it under this tab to Halsbury’s Laws of England, 2nd edition, and the relevant pages. There is no doubt that the English law had been and had been for many years, that the obligation of uberrimae fidei did not come out of the contract, was not an implied term, was an independent principle of law.

Secondly, the effect of avoidance was to avoid the contract ab initio such that if one wished to recover the premium, one sued in what was then called quasi contract, a restitutionary claim. In other words, you had no contractual right to recover the policy. You recovered it upon a consideration which had totally failed by reason of the avoidance. So, in other words, Lord Denning and Lord Diplock, who were somewhat expert in the insurance field, particularly Diplock, were under no misapprehension as to what they were talking about here. They were talking about exactly analogous legal position to what we have here.

In particular, the foreign jurisdiction clause is not abrogated. Now this, we submit, is the beginning of the separability doctrine. Lord Denning, in effect, is saying it would be absurd if the contract to give jurisdiction would fall with the avoidance ab initio of the policy and then he goes on and says:

A dispute as to nondisclosure is “a dispute arising under” the policy and remains within the clause: just as does a dispute as to whether one side or other was entitled to repudiate the contract

And there he is using repudiate in the contractual sense because that is what they were dealing with Heyman v Darwins. Now, can your Honours then go to Lord Diplock and my learned friend has taken you through them so I will not. Again the distinction, your Honours, between non est factum and claims consent vitiated, in our respectful submission, other than that, I do not think I have anything to observe upon.

But I just wanted to take your Honours to one or two things. The Halsbury’s your Honours will find that in the bundle which your Honours have, the new bundle which your Honours have, if your Honours go to page 87 in that book, the relevant section on insurance, your Honour sorry, start at 79, paragraph 585 about the duty of good faith. At about point towards the bottom of the substantive paragraphs:

This duty is imposed by the nature of the contract of insurance; it is a common law duty, as opposed to a contractual duty

That distinguished it from warranty claims. Warranty claims which were obviously an aspect of insurance were contractual claims. Sometimes they had the effect of avoidance if the warranty was not complied with at inception but otherwise warranty claims merely terminated the contract from the moment of the warranty being breached.

If your Honours then go to 87, it deals with at 653 the return of premium:

A right to the return . . . therefore arises where the policy is void ab initio, as, for instance, where it is ultra vires . . . or where it is avoided by reason of some breach of the duty of good faith –

and then it takes character.

Now, your Honours, that reflects what this Court said, and I will not take your Honours to it, in Khouri v GIO [1984] HCA 55; 165 CLR 622 and we have referred to the relevant paragraphs at paragraph 78 of our submissions. The Court rejected an argument the insurer’s duty was properly to be seen as an implied term of the contract and your Honours the reference we have given you a reference to what is said at page 636.

Further, in the further material we have put in Hardy Ivamy General Principles. The section on nondisclosure starts at page 122. This is the edition 62 of the book, I do apologise, 62 of the book, thank you. Then, at 65 there is a discussion of the basis of the duty. We have put the 5th edition, that is at 86 before, in effect, severability has come in.

KIEFEL CJ: What the common law duty does, as Halsbury points out, is to give a right of avoidance to the insurer. That is a question arising under the agreement, is it not, whether that right can be exercised because there are, as is pointed out in the footnotes to Halsbury, sometimes cases where the right is lost. So, does that not explain why that is under the agreement?

MR HUTLEY: But that is exactly the same as the right to avoid for fraud. If you affirm the contract, you lose the right, exactly

KIEFEL CJ: That may well be but that is the position.

MR HUTLEY: I agree with you. That is why we say it is exactly analogous. Our learned friend says we accept exactly what your Honour says and we say a right to avoid for fraud is exactly the same, analytically it is identical. Effectively, one has to say that this decision was wrong to uphold with our learned friends. That is why the Court and that is why the Court observes that many of the decisions which had looked at this or analogous problems had not had quoted to them Mackender v Feldia and that is what is observed by the House of Lords in Fiona Trust. The fundamental importance of this decision had been missed by various courts.

I will just give your Honours – at 65 in the book there is a discussion of is it an implied term and at 157, your Honours will see and there is a discussion also at 157 – there is a reference to “Statement by BIA and Lloyd’s”, this is a policy statement at about 68 in the book, 157 in the volume:

Except where fraud, deception or negligence is involved, an insurer will not unreasonably repudiate liability . . . [of] a policyholder:

i on the grounds of nondisclosure

That is the sense of repudiation which Lord Diplock and Lord Denning were referring to. It is – that means denounce, avoid.

Now, as to the position, we have also in this new book, can we give your Honours – we have included Union of India v E.B. Aaby’s Rederi. Now, unfortunately in the book, your Honours it came to your Honours from the All Englands and that is wholly our fault and we apologise for that, your Honour. We have arranged for your Honours to have the authorised report free.

Now, this was a decision, the relevant dealing with an arbitration agreement. Now, in the speech of Viscount Dilhorne, he observed at 814 that:

In Heyman v Darwin Ltd . . . Lord Porter said that the words “arising out of a contract” have a wider meaning than the words “under a contract,” a view which was repeated by Sellers J. in Government of Gibraltar v. Kenney . . . Although the words are different, I must confess my inability to discern any difference in their content.

Lord Salmon at 887A said the same:

Lord Porter did not, however, define this difference, and I confess that I find difficulty in understanding what it is. Nor do I think that it has any significance –

et cetera. Lord Reid at 804 agreed with the observations of Lord Salmon. Lord Simon of Glaisdale agreed with the views of the other Lords.

Now, so the decision in Ethiopian Oilseeds which is at volume 1, tab 8 of the authorities, upon which our learned friends place so much store and your Honours were taken to the passage. One of the points about this case which has to be kept in mind, if your Honours go to 87 at 224 in the book, your Honours will see the clause it is under Arbitration (a), in the second column at about point 8:

Any dispute arising out of or under this contract shall be settled –

et cetera. Now, if one goes to 97 in the report – sorry, if you go to 95, he refers to, at about point 9, a statement:

I need only say that I respectfully agree. I would be very slow to attribute to reasonable parties an intention that there should in any foreseeable eventuality be two sets of proceedings.

He then refers to Fillite. I will come back to Fillite. We got the decision for your Honours over the adjournment. He observes upon Union of India. He refers to The Antonis P. Lemos above and the statement of Lord Brandon:

With regard to the first point, I would readily accept that in certain contexts the expression “arising out of” may, on the ordinary and natural meaning of the words used, by the equivalent –

I think it must be “be the equivalent”:

of the expression “arising under”, and not that of the wider expression “connected with”. In my view, however, the expression “arising out of” is, on the ordinary and natural meaning of the words used, capable, in other contexts, of being the equivalent of the wider expression “connected with”.

One of the difficulties with “arising out of” and “arising under” is really, in effect, a metaphor which seeks to, in effect, produce as it were a spatial distancing between what is the contract and what comes out of it and “arising under” has a similar one. “Arising out of” seems to be on the ground pushing upwards; “arising under” seems to be hovering in the air pushing downwards.

Really, when one thinks about it, with all due respect to their Lordships, little can really be derived by way of distinction between them. That is the force of what their Lordships were saying in the Union of India Case. Since “arising out of” seems able to be the equivalent of “arising in connection with”, it seems to follow that “arising under” could be “arising in connection with” and my learned friend agrees that “arising in connection with” could involve a challenge to the validity of the main agreement.

Now, this sort of debate may give some force to the observation of Lord Hoffmann about these distinctions not, as it were, being the finest hour of English commercial law.

KIEFEL CJ: That is what English commercial law has done for a very long time.

MR HUTLEY: The finest hours have been, to a degree, lengthy in relation to this, with respect.

KIEFEL CJ: As his argument here.

MR HUTLEY: I sound like I am doing well. But, your Honour, the point we do make is that these distinctions are highly contextualised – that is, it does depend upon citing the agreement in the context of the agreement and the

KIEFEL CJ: I think we have understood that point, Mr Hutley.

MR HUTLEY: As your Honour pleases. Could I deal shortly with Fillite. The relevant clause your Honours will find in this print at page 3 at about the second last paragraph:

Any dispute or difference . . . arising under these Heads of Agreement

The claims your Honours will see at 4, at about point 3.

GORDON J: I have only got every second page.

MR HUTLEY: I am sorry, your Honour; I do apologise.

KIEFEL CJ: Yes, we have 1, 3, 5, 7, 9.

MR HUTLEY: Saved by the bell, by our friends. Thank you; very good. Thank you, your Honours; I do apologise. Your Honours will find the relevant clause at page 70, at about point 5. Your Honours will then find the claims at 72, in their pleading, claiming various matters.

GORDON J: Sorry – what was that page, Mr Hutley?

MR HUTLEY: Page 72, your Honour. Moving over to 76, there are the relevant paragraphs which are long, and bold, to the left. The second last paragraph:

In my judgment, on the ordinary and natural meaning of words, the phrase ‘disputes arising under a contract’ is not wide enough to include disputes which do not concern obligations created by or incorporated in that contract.

We say these disputes concern exactly that because the contracts undoubtedly exist. There is further discussion, referring to Justice Evans in Overseas Union, which our learned friends have relied upon in their written submissions but I think I will move through. If one then moves over to Lord Justice Nourse’s judgment. He says:

The preposition ‘under’ presupposes that the noun which it governs already has some existence.

And that is all. And that thing which it governs has some existence et cetera:

It operates in time as well as in space. I think that it means ‘as a result of and with reference to’.

And we say these claims are a result of a contract and they are by reference to a contract. That is all they are.

GORDON J: It, again, excludes the misrepresentation claims.

MR HUTLEY: It may exclude

GORDON J: As Lord Justice Nourse did.

MR HUTLEY: Quite, but the misrepresentation claim was not attacking the contract. The misrepresentation claim was for damages. That is the point and that is exactly the position which Justice French was concerned with.

NETTLE J: What about collateral warranty?

GORDON J: Collateral warranty, exactly, or contract

MR HUTLEY: The collateral warranty has – the collateral warranty, he says, in effect, because the collateral warranty is a promise which is not in the contract.

NETTLE J: It is part of the consideration to the contract.

MR HUTLEY: I accept that and therefore one could debate whether that was in reference to the contract. He came on one side of it, but we say it is completely different if you are talking about whether the contract in effect whether these rights which, undoubtedly, exist will continue to exist. Even he observed he had some doubts about that at the outset, when he was considering it.

The next case I should take your Honours to is Harbour Assurance. This is the case which led to the adoption of the separability principle and some reference was made to it. This is 707, if your Honours would go to that – from B to E. The case related to voidness by reason of illegality, if your Honours see 707B to D. Your Honours will see at E:

“All disputes or differences arising out of this agreement –

If your Honours go to 713, at about point F, your Honours will see the argument advanced by Mr Longmore which bears a lot of close references to the arguments of our learned friends. At 714, at about C:

It was then submitted that since the words in the present clause “arising out of” the contract are for this purpose no wider than “under” the contract . . . then, as in Fillite . . . where the word was “under”, the present clause presupposes that the contract was in existence and not void for illegality. The words do not apply to the issue as to whether the contract was in existence or void.

In my judgment, Steyn J, was right to hold that, as a matter of construction of the contract, the present clause covers the issue of illegality, and his conclusion does not conflict with the judgment of Nourse L.J. in the Fillite case . . .

The question whether all the promises contained in the agreement were rendered invalid and void at the time when the parties signed the documents by the illegality of the agreement, is, in my judgment, a dispute arising out of the agreement.

Then, your Honours will just note 719 in the judgment of Lord Justice Leggatt at about E to F, where he refers again to “Mr. Longmore argued” and then he says at F:

But there is no issue about the making of the arbitration agreement, and it is undoubtedly out of the retrocession agreement that, on account of the contention that it is void for lack of an insurable interest, the dispute between the parties arises.

GORDON J: That is not us.

MR HUTLEY: No, no, but we would say, with respect, the dispute arises here because there was the main agreement due to – the dispute arises under that agreement. That is the dispute about the rights in relation to that agreement. I have referred to you what your Honours said at paragraph 96 in Mount Bruce Mining about:

the protean quality of the phrase “through or under” must be acknowledged. The nature and extent of the connections between things comprehended by a prepositional phrase of this kind depend on the context in which, and the purpose for which, the phrase is used.

We would say that is exactly the same as what one is dealing with here. In our new book, your Honours will see the wider range of definitions of the word “under” which are available. If your Honours go to pages 5 to 9 your Honours will see the Shorter Oxford and if your Honours go over to page 6 there is “under” and under I and II there are various meanings including “On performance of or with respect to”, “In a state of condition of; having regard to, taking account of” and the like which your Honours will see towards the bottom of the page. So, in other words, there is a larger range.

Thus, we say the correct approach is to posit the dispute and ask is it proper as a user of English to say that the dispute is under the relevant deed. That is, in our submission, exactly what the court did at paragraph 193 in the core book, page 292. There it gave content to the English words by observing that the phrases could be construed as including a dispute that contained a substantial issue:

that concerned the exercise of rights or obligations in the agreement, or a dispute that concerned the existence, validity or operation of the agreement –

We make the observations we have about non est factum:

as a substantial issue -

I return to that at paragraph 204 over at 295 where they said a liberal construction:

can be seen to cover a dispute which is framed by claims that are said to be met by pleading the deed, which in turn is said to be liable to be set aside for wrongful conduct that does not amount to a plea that the deed never existed . . . In these circumstances, the deeds, in their operation if valid, and by reason of their invalidity if not, lie at the heart of –

and, in fact, we say, are the fons et origo of the dispute. They cause and operate it. Can I then turn to proposition 10? Then we say even assuming in the appellant’s favour that the relevant dispute is only as to the continued legal effect of the deeds, that dispute is properly regarded as under and I have taken your Honours through the relevant authorities, particularly the decisions of the House of Lords which I have taken your Honour to and the other decisions.

The only other decision I would refer to is the decisions of Overseas Mutual Assurance v AA Mutual and your Honours will find that in the joint authorities, at volume 2, tab 16. At 69 your Honours will see in the first column at about point 7 the clause which is quite different. However, our learned friends in their submissions have relied upon it. At paragraph 67 they have relied upon the proposition at about point 6 in the first column

KIEFEL CJ: Is that page 67?

MR HUTLEY: Yes, your Honour:

There is, I suggest, a broad distinction which may be drawn between those clauses which refer to arbitration only those disputes which may arise regarding the rights and obligations which are created by the contract itself, and other clauses which show an intention to refer some wider class or classes of disputes.

“Under” relates to the former and we say that is a proper description of a dispute with respect to the operation of the clause by reason of the matters sought to impugn it in the validity claims in this case, even though that decision was arrived at before separability was recognised.

GAGELER J: Are you going to say anything more about Chief Justice Bathurst’s judgment?

MR HUTLEY: I am going to come to that in a moment when we come to Rinehart v Welker, and this is our eleventh proposition I think, your Honour, the starting point about is that the Full Court found and accept that the dispute about the ownership of the underlying is a dispute under the deed.

We then go to Rinehart v Welker at tab 18, and your Honours will see this particularly at paragraph 148 at page 555 in the bundle - accepted that the dispute can embrace both claims made and foreshadow defences to those claims. That is at 148 in the judgment of the Chief Justice, with whom Justice Young agreed. Justice McColl at paragraph 207 made a similar observation. We say that approach is correct and we understand our learned friends accept that.

The next point is that in the present proceedings, the claims that the deeds are not effective are bought in substance as in anticipated reply to the reliance in the dispute which is obviously foreseen by my clients upon the deeds. In essence, their claim is they assert they own the assets and our response is: you have acknowledged that you do not and you have released you do not and you have promised never to say this. Their response is: we wish to, relying upon those very events, challenge the main agreement and say that there are no longer any rights under it or the court should determine there should no longer be any rights under it. And, in substance, we rejoin to that or rebut that by saying: you affirmed that contract when you sought to enforce it in an arbitration before Mr Fitzgerald of Queen’s Counsel to seek to recover moneys due under it in 2012.

That is in effect the dispute which was before the court, not on the basis of pleadings but as fleshed out in the opportunities of the parties to say what are we fighting about.

Now, their Honours, at the Full Court recognised that the controversy had that structure at paragraph 158. We say that there is no reason why that concept of dispute should be read narrowly because there is no predetermined legal requirement that a dispute be of a particular character. It is a question of fact what the metes and bounds of the dispute are and we say it is not to the point to say you could have formulated the case as a simple declaration to avoid the deeds.

That was not the dispute in fact which in fact arose. We say, for the reasons I have already given, even if they had said that, that would still be a dispute under the deed for the reasons we have advanced because it is a dispute with respect to rights and obligations arising under the deed, i.e., the negation but we say as an extra point if you choose to make a dispute of the breadth of character of the one we have, it is to that dispute that the question must be directed: is it a dispute under the deed? It is undoubtedly the case that large parts of it are by agreement under the deed because there is no challenge to those aspects of the Full Court’s findings about the claims and the pleading of the response, the releases and the like.

That is accepted to be disputes under the deed and we say it is an inseparable part of that dispute. The selfsame dispute is the assertion that the deed should be or have been set aside by reason of the substantive claims and their dealings in entering the deed. So we say that is a dispute under the deed and the logic of the Court of Appeal’s reasons would suggest that, subject to the point of “governed and controlled by” which I am coming to. Now, that definition was first applied

GORDON J: Is this “governed or controlled by”?

MR HUTLEY: Yes, this is the 12th proposition. That test was first referred to by her Honour Justice Warren, as the Chief Justice then was, in BTR Engineering v Dana Corporation which your Honours will find in the joint authorities, volume 1, tab 5. What her Honour did was adopt a part of a dictionary definition and the Full Court expressed the view that that was unpersuasive, at paragraph 196.

The test was then adopted by Chief Justice Bathurst in Rinehart and the first thing to note about the “governed and controlled” test is that it seems to require that the outcome of the dispute will necessarily be governed and controlled by the terms of the deed, that is, if there is an argument that something outside the terms of the deed is what will govern and control the dispute, the dispute is not within the clause.

That is exactly what his Honour found – the Chief Justice found, if your Honours would go to the judgment at tab 18 and to what he said in paragraph 133 in relation to the conventional estoppel defence sought to be advanced. His Honour held that the deed would not govern or control because it would depend upon matters including detrimental reliance and so forth. So, in other words, if one has to step an inch outside the metes and bounds of the deed it is no longer governed and controlled by the deed.

In fact, that was put in this case to the extent that when reliance was sought to be put – placed by us upon a covenant in the Hope Downs deed by way of equitable defence my learned friend’s predecessor argued you could not say that clause governed and controlled, the deed was governed and controlled because the principles of equity had to be relied upon to bring about that result. That is how extreme it is.

We submit that the “govern and control” test leads to absurd results. The plea of statute of limitations to a breach case would seem to deny that the deed would govern and control the dispute, because that will depend upon circumstances outside the deed. A defence of laches to an action for an injunction to restrain a breach of the deed would have the result that the deed would no longer govern and control the dispute.

Now, our learned friends in their submissions, particularly in reply, seem to acknowledge that it might produce various difficulties in this regard and they seem to move away from a strict govern and control to something like a govern and control light, namely, if the deed gets pleaded you might be able to rely on something outside. What the limits of that are are wholly obscure. “Govern and control” would seem to lead to absurd conclusions, in our respectful submission. The fact that our learned friends really do not rely upon it now or in detail bespeaks the acceptance of that proposition.

Now, we turn to our last proposition, 13, on appeal. We say that even if a “govern and control” test applies the dispute as to the continued legal effect of the deeds is governed and controlled by clause 7(b). Can I remind your Honours of clause 7(b). That is the promise – and your Honours will find that in the appellant’s further materials at page 108.

Clause 7(b) is a promise not to challenge the right of any member of the Hancock Group to the Hancock Group interests at any time. What the validity claims involve is a bald attempt to challenge those interests. They all – I took your Honours to the pleadings – go back to the cases made that those interests are not the interests of the Hancock Group but are relevantly beneficially those of the children.

There was a promise not to challenge ownership of the mining interests and that is what they are doing. There are concurrent findings that the purpose and substance of the validity claims sweep the way clear for the highly valuable substantive claims which themselves explicitly challenge my client’s ownership of the Hancock Group interests in breach of clause 7(b).

We referred to the Full Court at 158, 201 and her Honour the primary judge at 640. We say there is a sustainable argument and the end of this hearing that we will be entitled to a final injunction against the appellants for bringing a claim seeking to avoid the contracts. The parties have agreed to a special area of complete isolation from challenge and that is the area about the interests and we say we have a sustainable argument where we will get final relief preventing them from bringing those.

The argument might be with respect to the fraud claim which has been asserted and the assertion is made that the fraudulent representations have led to a termination of the agreement by the Act outside the court, i.e. already avoidance, that 7(b) cannot lead to injunctive relief. However, this will be an instance where equity will enable us to set up the promise as a defence. We have referred to McDermott v Black [1940] HCA 4; (1940) 63 CLR 161 at 186 to 188. At paragraph 233, the Full Court accepted that there was a sustainable argument – we will deal with 7(b) where they dealt with that argument – and they found that that was sustainable and that conclusion was confirmed at 249:

Thirdly, related to the second point, arguably the claims to set the deeds aside are challenges to the rights of the Hancock Group members to Hancock Group Interests and so can be seen to be themselves in breach of and controlled by the Hope Downs Deed. At least, there is a sustainable argument that they can be so characterised.

Thus, that was the final point and, really, there is no answer to that proposition and we say that is the end of it. The three reasons - and I have covered them all - of the Full Court are at 247, 248, 249. They are three independent - or not wholly independent - bases upon which they held that the arbitration agreement applied to the validity claims. I have dealt with each of the three. We dealt one on the assumption that the disputes are solely the validity claims; secondly, that the validity claims are part of a dispute; and, thirdly, the section 7(b) argument and that is what wish to submit in relation to the appeal. Can I now turn shortly to the proposed notice of crossappeal?

KIEFEL CJ: Can I ask what the parties’ realistic time estimates are for completing their arguments? Mr Hutley on the crossappeal?

MR HUTLEY: I will finish the crossappeal - it is 5 past. I will finish in 20 minutes at the outside, your Honour.

KIEFEL CJ: Yes, Mr Brereton.

MR BRERETON: Less than half an hour, perhaps

KIEFEL CJ: Mr Walker.

MR WALKER: I do not imagine the reply will be much more than about 20 minutes, but Mr Ng will be presenting it so I do not wish to constrain him.

KIEFEL CJ: Thank you. The Court will sit on until a quarter past 5 and then we will see where we are.

MR HUTLEY: Now, as your Honours know, the proposed crossappeal concerns the question of whether the three companies in the Hancock Group – Hope Downs Iron Ore Pty Ltd, which everybody refers to as HDIO; Roy Hill Iron Ore, which everybody refers to as RHIO; and Mulga Downs Iron Ore, MDIO – fall within the extended definition of “party” in section 2(1) of the Commercial Arbitration Act because they are claiming “through or under”. Now, there are two preliminary matters. First, we need an extension of time because the application was filed two days late. We do not understand that there is any opposition to that.

KIEFEL CJ: Yes, you have that extension.

MR HUTLEY: Thank you, your Honour. We seek leave to - on the basis broadly to deal with what appears to be a disagreement, particularly between the decision of the Victorian Court of Appeal in the decision in Flint Ink NZ Ltd v Huhtamaki Aust Pty Ltd & Anor [2014] VSCA 166; (2014) 44 VR 64 as to the scope of the extended definition of “party” in the Act, as interpreted by this Court in Tanning Research v O’Brien 169 CLR 332.

The Full Court at paragraph 319 declined to adopt the approach taken by the Victorian Supreme Court Court of Appeal in Flint Ink and we say that was an error of approach. Now, the relevant context can be summarised as follows. HDIO, RHIO and MDIO hold certain title to certain valuable mining tenements, those mining tenements having been transferred to them by other members of the Hancock Group, namely, Hancock Prospecting Pty Ltd – HPPL, as it is called; the parent company of the Hancock Group – and Westraint Resources Pty Ltd, which was formerly known as Hancock Resources Ltd.

The position is summarised in the Full Court’s reasons at page 316 of the joint book, in paragraphs 291 to 293. In summary, HDIO is the subsidiary of HPPL and it holds title to the Hope Downs tenement, having acquired those tenements from HPPL on or about 11 September 1997 – that is 291 in the reasons. RHIO is also a subsidiary of HPPL and it was incorporated on 1 February 2007. Shortly afterwards, on 16 November 2007, RHIO acquired title to the Roy Hill tenements.

MDIO is another subsidiary of HPPL. MDIO acquired title to the Mulga Downs tenements from HRL on 10 February 2009. Importantly, for present purposes, both HPPL and HRL were parties to the Hope Downs deed and the 2007 deed, but HDIO, RHIO and MDIO were not.

The appellants’ claims against HDIO, RHIO and MDIO differ in form but are similar in substance. The appellants seek declarations that those three companies hold their respective mining tenements upon constructive trust and orders for an account of profits on the basis that HPPL and HRL, relevantly, only transferred the legal title to the mining tenements to those companies. In other words, they were held by HPPL and HRL upon constructive trust, relevantly for the plaintiffs.

Your Honours can see this from the statement of claim and if your Honours go to the respondents’ further materials and I can take your Honours - one is probably all that is really necessary. I will give you the references to the others. Your Honours can see at 228 and following at page 52 in the book

KIEFEL CJ: I am sorry, which book is this, Mr Hutley?

MR HUTLEY: This is the respondents’ further materials, your Honour.

KIEFEL CJ: At 228.

MR HUTLEY: Yes, your Honour - page 52, paragraph 228. It says:

At all material times, HPPL was, through GHR, aware of the matters pleaded at Sections 10, 11 and 13.

Your Honours can take it from me that they are the allegations of impropriety dealing with the taking away from the children of those assets. Then it says:

By its execution of the Debt Reconstruction Deed and the Deed of Acknowledgement –

HPPL:

was knowingly involved in GHR’s breaches of –

fiduciary duty and the like. At paragraph 230:

As a consequence of its execution . . . HPPL received legal title to the Hope Downs Tenements -

At 231:

On or about 11 September 1997, HPPL transferred legal title to the Hope Downs Tenements . . .

Then it says “By virtue of those facts”. Now, similar allegations – although the factual circumstances are different – are made at paragraphs 143 to 148 in relation to Roy Hill and at paragraphs 260 to 271 at page 57 in relation to Mulga Downs.

Mulga Downs is slightly different in form because it was dependent upon that company being part of what is called the HFMF, the Hope Margaret Hancock Trust, at the time of the transfer of shares in HRL to HPPL in 1998. That is in the statement of claim at 262. The Full Court worked on the basis that the claim being maintained was one of an institutional constructive trust and your Honours will see that in their reasons at 315, joint appeal book 324. They say there is:

a key allegation of the applicants that the transferors at no stage held the beneficial interest in the relevant tenements.

The appellant’s claims against these three companies are therefore substantially identical to and closely independent with the claims against HPPL and HRL themselves. First, HPPL and HRL did not hold full legal and beneficial title of the tenements at the time of transfer to these companies, the cross –appellants. Secondly, those transferors and the transferees of the mining tenement had the same knowledge of the alleged breaches of fiduciary duty of Mrs Rinehart by reason of her common directorship of those companies.

So in other words, the reason the subsidiaries are knowingly involved or knowing recipients is because they are controlled subsidiaries and the mines of the relevant companies go back to Mrs Rinehart. Mrs Rinehart did wrong. HPPL and HRL hold on constructive trust. RHIO and MDIO, because Ms Rinehart controls them, took with knowledge of the wrongs.

As I took your Honours to paragraph 4, all parties are going to vehemently contest the truth of all the allegations in this case. That is the way it was conducted, thus, the crossappellants will defend their claims. In doing so, they argue that they will in point of fact be claiming through or under HPPL and HRL as parties to the arbitration agreement and, for that matter if it was necessary, Mrs Rinehart, but it does not matter, because their defence, in effect, wholly depends upon the defence of the companies from which they received it and the acts of their officers.

True it is they are knowingly involved and therefore it could be seen as an independent cause of action against my clients, subject to the releases which I will come to, but as a matter of practicality, the three companies’ success will be a function of the success of their holding companies. They are merely pass throughs – pass twos really rather than pass three.

The Full Court rejected that argument at 289 to 323 and they are encapsulated in their judgment at 317. Their Honours refer to what was said by Justices Brennan and Dawson in Tanning. They first say it was necessary to establish a legal relationship between the party to the arbitration agreement and the third party companies relevant to the defence.

The Full Court held that the fact that my clients - the crossappellants were related parties was not sufficient to establish such a legal relationship and the only relationship was then factual - one can turn - constituted by the transfer of the title to the mining tenements. But we submit that that connection when seen in the way we have put it, is exactly the connection factually and institutionally which would mean that they are defending through or under their holding companies. Then, secondly, the court said:

the releases and other covenants in the deeds [were not] essential element of the defences of a party to the arbitration agreements and of the third party companies in the relevant sense . . . they are highly likely to raise the defences, but they are not bound to do so.

Now, I will come to the releases which I have taken your Honours through, and your Honours will see – recall that there were releases of all claims against HPPL and Mrs Rinehart and HRL.

We say that at least any transfer after that date – which was the case with RHIO and MDIO – would take free of any notice of any alleged breach. They could rely upon the releases because the releases put the relevant companies in a position to freely deal with the titles. We have set in the new book of materials the decision

EDELMAN J: Does your submission really amount to claiming “through or under” being an expression that effectively means claiming or defending by the same, or substantially the same claims?

MR HUTLEY: Substantially reliant upon, substantially factually dependent upon the position of a party. There is something awfully strange, with respect, when one has regard to the – if one goes to the Arbitration Act which says its overarching purpose – and this is in section 1C, behind tab 3 in the authorities – that:

The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.

We have here wholly owned subsidiaries who are receiving title within a group who allege to hold it upon constructive trust because of the conduct of the companies from which they receive it within the group and it is found that the definition of “party” will not allow those subsidiaries to have arbitrated substantially the same factual inquiries, precise factual inquiries, as going to be determined between the parties to the arbitration agreement.

GAGELER J: Mr Hutley, I am sorry, does this definition come from the model law?

MR HUTLEY: No, your Honour. The model law does not have this extended operation. It is in the international Arbitration Act – and your Honours, Tanning is dealing with the international Arbitration Act but it is not in the model law.

KIEFEL CJ: What is the cause of action of the three companies in question? What defences – I am sorry, what claims do they seek to rely upon – how would you describe them?

MR HUTLEY: There are two characters, your Honour – one, denial. We rely upon, in effect, the fact that those from whom we receive the title – our holding companies – say they are not liable.

KIEFEL CJ: They have a defence.

MR HUTLEY: Quite.

KIEFEL CJ: You do not have a derivative defence. They can put the matter. How are you claiming under them?

MR HUTLEY: We say claimed “through and under”, as this Court said, is a broad flexible concept and it extends to situations where the character of the defence is substantially reliant upon the circumstances going to the defence of a party to the deed.

KIEFEL CJ: But you are claiming “also” rather than “through and under”, are you not? I mean you might have a case that you will have to claim “under” by reference to the same rights if, for example, that party refused to put the defence forward and you were exposed.

MR HUTLEY: Yes.

KIEFEL CJ: But whilst - if they are going to run the defence does it not mean you do not have a derivative claim?

MR HUTLEY: But, your Honour, if they run the defence and win that is not an estoppel in favour of us.

NETTLE J: Unless you are joined?

MR HUTLEY: Unless we are there.

EDELMAN J: So you really want to treat the “party” definition as a necessary or proper partytype provision?

MR HUTLEY: Well, as long as it is fair to say that you are claiming by way of defence “through or under” and we say the object of this is to ensure that disputes are quelled by arbitration. The curiosity of this, just on that element, is that they can rerun this case wholly against us, after the event, in circumstances where we are only liable because they are liable and we are only knowingly involved because we had exactly the same controllers.

KIEFEL CJ: What is your special leave point on this?

MR HUTLEY: Well, our special leave point is that the court has constrained the meaning to this idea as the defence has to be some way acquired by, derivative, as opposed to the observations of your Honour Justice Nettle in the Flint Ink Case

KIEFEL CJ: So you say it is a point of general principle?

MR HUTLEY: It is a point of general principle. We say that this case is the locus classicus, if it is ever going to work, where one should allow a “through or under” defence and you can see it simply from the pleading which I have taken your Honours to. Their Honours became diverted by thinking it is a case of just because we are subsidiaries. It was not that case, it was never that case. The case is

GORDON J: Well, no, they rejected it on the basis that you had received a transfer of assets; that the identity was not of itself sufficient.

MR HUTLEY: Quite, and we say, with respect to their Honours - and I am not going to go through your Honour Justice Nettle’s judgment which was commented on favourably of course in Mount Bruce - that these phrases - it was a flexible, pragmatic provision which was designed to achieve, as it were, efficient outcomes as long as you could properly say that the defence was through and under.

Now, with respect to Mulga Downs and Roy Hill companies, there is a further point because they acquired their titles after the Hope Downs deed and the Hope Downs deed effected a release of all the relevant claims. Now, after those releases we submit those two companies, HPPL and HRL, were free to dispose those assets to anyone and the mere fact that that company might have had notice of a claim which was released, the facts giving rise to a claim which was released, cannot make that subsidiary, that acquirer liable as a constructive trustee.

We say that - we have referred to the authorities in this Court of Caraher v Lloyd [1905] ArgusLawRp 61; 2 CLR 480 at 501 to 503 where it says if a claim against title to property is released by a settlement agreement, then the claim is extinguished and cannot be enlivened against a third party which acquires title to the property.

NETTLE J: I suppose they say, though, that Ms Rinehart’s evil knowledge is imputed to you and thus the effect of the release is vitiated as against you just as much as it is against her.

MR HUTLEY: I only get to this if I have won the “under” point.

NETTLE J: Yes.

MR HUTLEY: So I am assuming that is successful. If your Honours are against me in relation to the “under” point then this is really, in effect an attack on the validity case. We would still get there strictly under on the substantive point, but I can see the argument against it in those circumstances.

But if we have won the “under” point on the deed, the “through or under” here, in our respectful submission, is the most compelling variety because their position is in effect wholly a creature of the position of their sellers, who are the beneficiaries of the deed, and their sellers’ involvement. That subject matter is going to be the subject of the arbitration.

GAGELER J: You may have covered this, but what is your answer to the Full Court’s reliance on paragraph 309 on a passage in the joint judgment of Justices Brennan and Dawson in Tanning?

MR HUTLEY: I will come to that, your Honour.

GAGELER J: It seems pretty clear and it seems pretty clearly against you.

MR HUTLEY: Yes, but your Honour, if one goes to the full judgment of Justice Brennan, it says on page 100:

In the first place, as sub-s. (2) speaks of both parties to an arbitration agreement, a person who claims through or under a party may be either a person seeking to enforce . . . The subject of the claim may be either a cause of action or a ground of defence. Next, the prepositions “through” and “under” convey the notion of a derivative cause of action or ground of defence, that is to say, a cause of action or ground of defence derived from the party. In other words, an essential element of the cause . . . must be or must have been vested in or exercisable by the party before the person claiming through -

We say “derived from” can be in effect factually derived from.

GAGELER J: I know you say that, but they do not seem to be saying that.

MR HUTLEY: Well, in our respectful submission, they do not say that has to be assigned. If one goes to what Justice Gaudron and – it says:

Section 7(2) of the Act is concerned with “proceedings [which] involve the determination of a matter . . . Because s. 7(2) has this wider operation, the question whether a person is claiming through or under a party to the arbitration agreement is necessarily to be answered by reference to the subject matter in controversy rather than

GORDON J: That is your problem. Here you have joint control, a controller of both, so the knowledge that is attributed to MDIO and the other entities arises irrespective of and separate from.

MR HUTLEY: With respect, we acquire but Mrs Rinehart is equally a party to the deed.

GORDON J: Maybe, but these entities exist and have knowledge attributed to them separately from.

MR HUTLEY: I accept they can and I have no difficulty with that. Obviously they can, but we say “through or under” means - is not, as the Court says in Mount Bruce, a flexible concept to be addressed depending upon the circumstances and Justices Brennan and Dawson should not be taken to have said that that is the only circumstance in which one can be through or under.

KIEFEL CJ: Their Honours were dealing with the position of the liquidator.

MR HUTLEY: Quite.

KIEFEL CJ: Hence the reference to vesting.

MR HUTLEY: Quite, with respect, your Honour, and we say the words should be given the simple, as it were, ambulatory meaning which your Honour Justice Nettle referred to in Flint Ink – I can take your Honours to the passages where your Honour dealt with the matter. Your Honours will find that in the extra materials. Your Honours will find that commencing – the judgment commences – can I say there is a slight problem with the citation in respect of Flint Ink in Mount Bruce.

The citation to paragraphs is out by one in each case. That is as a result of the fact that for some reason in the Federal Law Reports the paragraph numbers are different from the Victorian Reports. Anyway, that is just a difficulty which has arisen. Your Honour turned to this at page 78 in the report. Your Honour referred to:

According to high authority . . . is a relatively flexible concept -

and then says – then they refer to the whole passage. Then one goes down to:

a company being a subsidiary of a parent company which is party to an arbitration agreement . . . and a company being a parent of a subsidiary company which is party to an arbitration agreement

KIEFEL CJ: Sorry, which paragraph are you reading from?

MR HUTLEY: I am reading from the quote from Tanning, at paragraph 58.

NETTLE J: Just at the bottom of page 78.

KIEFEL CJ: Yes, thank you.

MR HUTLEY: Then:

when claims are brought against both companies based on the same facts –

We say that is in essence what we have here:

The meaning of the phrase “through or under a party” must be ascertained not by reference to authority but by reference to the text and context of s 7(4).

In the first place, as subs (2) speaks of both parties to an arbitration agreement –

Then it goes on. That is when they refer to the derivative concept. They have expressed it in much broader terms by reference to broader concepts before they get to that. Then, your Honour referred to Justices Deane and Gaudron’s statement and your Honour then referred to what:

Counsel for Huhtamaki Australia stressed the observation of Brennan and Dawson JJ that the prepositions “through” and “under” convey the notion of a derivative cause of action –

In effect, the point your Honour Justice Gageler observed with me:

He submitted that their Honours should be taken to have meant that a claimant or defendant is not properly to be regarded as claiming “through or under a party” to an arbitration agreement unless asserting a claim or defence which was available to the party and to which the claimant or defendant has succeeded by way of assignment or legal process in effect . . .

I do not accept that submission. Tanning does not dictate that the notion of “through or under a party” is so limited. The authorities to which Brennan and Dawson JJ referred with apparent approval imply that the notion of “through or under a party” is considerably broader than that.

Then they refer to RousselUclaf v GD Searle and your Honour refers to them. Then your Honour refers – moving down through 60 - your Honour refers to:

Similarly, in Ryan & Sons v Rhone Poulenc Textiles SA, the United States Court of Appeals, Fourth Circuit, held that the question whether an arbitration agreement encompasses a dispute depends on whether the factual allegations underlying the claim are within the scope . . . Consequently, an arbitration clause which provided for the reference to arbitration of “all disputes . . . It followed that, where charges against a parent company and its subsidiary were based on the same facts and were inherently inseparable, the court could refer claims against the parent to arbitration . . .

It is true, as Brennan and Dawson JJ said in Tanning, that the meaning of “through or under a party” for the purposes of s 7(4) is to be ascertained by reference to the text . . . But, as it appears to me, that observation was intended to convey that, although it had not previously been held that a liquidator could be regarded as claiming

through or under the company to which he is appointed, their Honours considered that reference to the text and context of s 7(4) dictated that a liquidator should be so regarded. As such, their reference to the text and context of s 7(4) implies a relatively broad conception of the requirement that an essential element of the cause of action or defence must be or must have been vested in or exercisable by the party. That is also consistent –

Then that goes on to refer to another decision. Now, they contrast the decision involving Swedish Motors and that was really the converse of what your Honour was dealing with in that case, but that case was quite different to these. Your Honour observed that that case was dealing – 67 - with claims which your Honour said were completely independent.

Now, that is, we say with respect, your Honours – I am not going to go through all your Honours – your Honours’ approach to “through or under” was the sort of flexible, in our respectful submission, correct approach when looked at in the context of legislation of this variety, which is seeking to quell efficiently such arbitrations, and a construction such as the Court of Appeal adopted leads to the absurdity of multiplicity where the subsidiaries are, in effect, mere functionaries of the conduct of their holding companies.

KIEFEL CJ: I see the time, Mr Hutley.

MR HUTLEY: Your Honour, I will say no – that is all we wish to say, your Honour.

KIEFEL CJ: Yes, thank you. Mr Brereton.

MR BRERETON: Thank you, your Honour. Your Honours, we adopt the written and oral submissions propounded by the Hancock Prospecting respondents. What I propose to say is some brief matters by way of supplementation, but we adopt those submissions. We also adopt the written submissions filed by ACICA as amicus curiae. Hopefully, your Honours have our threepage proposition document.

KIEFEL CJ: Yes.

MR BRERETON: I propose to stick quite closely to that and I can probably jump over some of the propositions because Mr Hutley has covered them quite forcibly.

NETTLE J: I am sorry, Mr Brereton. Could you speak up just a little please - it is a bit hard to hear.

MR BRERETON: I am sorry, your Honour. We submit that it is important in the resolution of this appeal to focus on the circumstances that give rise to the question of construction that is before the Court. We submit that a difficulty with my learned friends’ submissions is that they tend to be overly abstracted from the underlying matters that gives rise to the question of construction in this case and we submit that the concern ought to be to construe the deeds, and most obviously the Hope Downs deed, upon which there has been focus, to the extent necessary to apply those deeds to the facts or matters that have occurred.

Our proposition 2 briefly identifies the circumstances giving rise to the question of construction. I do not think I need dwell on that. Proposition 3 seeks to identify in short terms the constructional question that actually arises and we say that that question can be characterised as a determination of whether the dispute, or potentially disputes, under the Hope Downs deed, is confined to the substantive claims, whether it extends both to the substantive claims and the validity claims.

Mr Hutley has taken the Court through the pleading, which identifies the substantive claims. And the Full Court concluded, and it is not challenged, that all of the substantive claims are under the deed. That is true, notwithstanding the fact that at the arbitration, and maybe expected, that the substantive claims will be defended on their merits and not merely on the basis of the terms of their releases in the Hope Downs deed and other deeds.

So the substantive claims involve the underlying allegations of wrongdoing by my client et cetera – will involve the plea, effectively by way of defence of the releases, that they are the substantive claims but the substantive claims cannot be thought to be defended in due course merely on the basis of the releases. So that will all be a part of the arbitration and it is not challenged that those matters are under the deed.

GAGELER J: Is that outcome consistent with Chief Justice Bathurst’s analysis?

MR BRERETON: That may turn on how one construes under the deed. There is an important difference. The critical difference in this case in that the substantive claims all predated the deeds and there is a substantive argument that the releases operate as a defence, whereas in Rinehart v Welker the wrongdoing postdated the deeds and it was not thought to be a sustainable argument that the releases responded to the underlying claims.

Proposition 4 identifies her Honour’s, the primary judge’s, conclusions and we note, as Mr Hutley has said, that there were three, essentially distinct but to some extent related, reasons why her Honour’s conclusions were found to be in error. And we submit that my learned friend’s submissions are really principally directed at the first of the three reasons and largely overlook and do not address the second and third reasons. And I will come back, briefly, to one or two matters in relation to that.

Coming to our fifth proposition, my learned friend’s submissions mount some attack on the Full Court’s reasons by seeking to deprecate the use of presumptions or assumptions in the context of contract construction. In paragraph 10 of my learned friend’s written submissions inchief, a distinction is drawn between the adoption of a presumption on the one hand and the orthodox process of construction as if the adoption of presumptions is not consistent with the orthodox process of construction. We submit that use of presumptions and assumptions is commonplace and entirely consistent with the orthodox approach to contract construction.

We wish to take the Court briefly to two decisions which we have made available to your Honours. The first is, no doubt most of it will be known by hearts, the decision of the Electricity Generation Corporation v Woodside Energy (2014) CLR 640, and that wellknown paragraph in the decision of the plurality is at paragraph 35, the decision of Chief Justice French and Justices Hayne and Crennan and the current Chief Justice.

I just wish to remind your Honours that in the second part of paragraph 35 the Court picked up some observations by Lady Justice Arden in Re Golden Key and observed that:

unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties ... intended to produce a commercial result”.

At the very heart of commercial construction is an assumption and, we submit, that the presumption arising in this case in the context of arbitration clauses can properly be seen as a specific manifestation of that more general assumption.

KIEFEL CJ: It is an assumption of rationality really. It is a little bit – it is in a slightly different category to the assumptions that are referred to by the House of Lords.

MR BRERETON: Well, the assumption in relation to the arbitration clauses is expressed in terms of what are rational – what rational parties to an arbitration clause would anticipate.

KIEFEL CJ: But Lady Justice Arden is referring to an assumption that a commercial – a sensible commercial result was required. But on one view, the House of Lords is talking about an assumption about the scope of operation of a clause. It is rather different.

MR BRERETON: Well, it is we would submit different in that it is a more specific and direct presumption or assumption because both words are used

KIEFEL CJ: Yes.

MR BRERETON: and it is a reflection of what rational parties to an arbitration agreement can ordinarily be presumed to anticipate subject, of course, to it being addressed otherwise by the plain words.

EDELMAN J: It is not really saying much more though than that when you look to what reasonable parties or reasonable persons in the position of contracting parties would intend, you assume that they would intend reasonable consequences.

MR BRERETON: That is so. Yes. The other decision is

KIEFEL CJ: While we have you interrupted, could I just ask you this. You said you adopted the submissions of the HPPL parties. Were you also adopting the argument with respect to context which might effectively put all of this to one side?

MR BRERETON: We do.

KIEFEL CJ: Thank you.

MR BRERETON: The other decision I wish to take the Court to is the decision of this Court in Darlington Futures Ltd v Delco Australia [1986] HCA 82; (1986) 161 CLR 500. To some extent this picks up on the point made in the ACICA written submissions. This is the leading authority of this Court dealing with exclusion clauses. If I could take your Honours to page 509, at about point 2 of the page, their Honours Justices Mason, Wilson, Brennan, Deane and Dawson refer to this Court having in the past authoritatively stated:

the approach to be adopted in Australia to the construction of exclusion and limitation clauses –

and there is a reference to Sydney Corporation v West. And moving over to page 510, at about point 2 of the page, their Honours observe:

Subsequently in Thomas National Transport (Melbourne) Pty. Ltd. v May & Baker (Australia) Pty. Ltd, Windeyer J., though dissenting in result, stated that the effect of an exclusion clause must be “resolved by construing the language that the parties used, read in its context and with any necessary implications based upon their presumed intention”.

In that passage from Justice Windeyer’s judgment his Honour went on to consider various construction rules. He used the expression “rule or guide to construction”. There are a number of such guides or rules of construction in relation to exclusion clauses that have not been held by this Court to be wrong or inapplicable.

His Honour Justice Windeyer recognised that the task – that a court, of course, is to ascertain what was the bargain made and not to modify it. But there are presumptions applying in this area of exclusion clauses that assist a court and the parties to properly construe exclusion clauses – matters such as the Four Corners Rule. Their Honours continued at about point 5:

These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity.

Contra proferentem is perhaps another guide or rule of construction. Dropping down to the last five lines:

And the principle, in the form in which we have expressed it, does no more than express the general approach to the interpretation of contracts and it is of sufficient generality to accommodate the different considerations that may arise in the interpretation of a wide variety of exclusion and limitation clauses in formal commercial contracts –

That stated a principle, we would submit, which is on allfours with Woodside, Mount Bruce and recent statements of this Court but it recognises that the use of “presumed intention” is part and parcel of contract construction. Indeed, we submit that the fundamental idea behind the objective theory of contract lies in making presumptions about intention.

If I could move to proposition 6, I just wish to say something very briefly about Rinehart v Welker. We submit, properly read, the decision in Fiona Trust does not elevate presumption over the plain meaning of the words of a contract. Chief Justice Bathurst did not go so far as to say that Fiona Trust did do that but observed that it may have done that. We submit that contract construction – if the wording of the contract is plain, construction is easy. Presumptions assist where the meaning is not plain. Presumptions may also assist in ascertaining whether the meaning is plain.

Proposition 7, I think I can move through, save to observe that in TCL Air Conditioner, in the judgment of Chief Justice French and Justice Gageler, the language, the presumed or imputed intention was used in that judgment, we say completely consistently with a proper approach to the orthodox approach to contract construction.

Proposition 8, we seek to explain why the presumption assists in this case and we identify two potential constructions that arise, two meanings that are open on the language of the contract at (a), which is essentially the conclusion of the primary judge, the words “any dispute under this deed” could extend only to contests in relation to claims which may be controlled or governed by the terms of the deed, on the basis the deed is valid, enforceable and not subject to any other legal impediment. Alternative construction (b) is that the language extends to capture those disputes about how and what and whether something is covered by the deed.

Mr Hutley has addressed that matter in some detail and I will not repeat it. We say that the presumption that it is applicable in this case, assists the Court in choosing construction (b), the wider construction rather than the narrower construction, construction (a) and that ultimately is why we say the Full Court is correct in concluding, as it did at paragraph 247, that the phrase “under the deed” is wide enough to cover the validity claims.

Proposition 9 deals with this matter: the presumption that has been addressed so far acknowledges that the parties to an arbitration clause would wish to have disputes heard by the same decisionmaker. That must be particularly true and strong in circumstances where there are interrelated disputes that concern intertwined factual and legal matters as we have here, whereas here, the validity claims and the substantive claims are strongly interrelated for various reasons, most of which have been canvassed by Mr Hutley.

The inconvenience of separating out the controversy with some parts to be heard by an arbitrator, other parts by a court, is particularly problematic and, we submit, that a rational and reasonable approach to the arbitration clauses in this case would indicate that the parties would not anticipate that where there were differences or disputes that were not independent or intertwined, they would not anticipate or expect, it cannot be presumed that they would intend for those matters to be heard otherwise than in one place.

We know that they contemplate arbitration occurring because there is an arbitration agreement. An arbitration agreement, you have matters that are undoubtedly subject of the arbitration clause. It may be presumed that the parties intended that in identifying the parameters of the relevant dispute, all of those matters that are dependent upon one another, a complete identification of the dispute insofar as those matters interrelate, one may presume the parties would have intended for them to be heard together by one decisionmaker and it must be the arbitrator.

Mr Hutley has taken the Court through most of the clauses in the Hope Downs deed. I will not go back to it, but you will recall that the arbitration clause features in clause 20 that starts with “confidential mediation”. Confidential mediation requires, as a first step, that where there is a dispute, one party must notify the other party forthwith. In effect, what we now can be confident about is that the appellants ought to have notified a dispute forthwith, because there is a dispute under the deed. They did not do that. We are faced with a statement of claim.

But in a process that contemplates that there be a mediation, the part of a mediation involves identifying the parameters of the dispute, would be a very strange thing if that mediation leading to an arbitration, contemplated relevantly here, that the substantive claims would be subject of the mediation, but the validity claims would not, because how is a mediation going to succeed unless all of the relevant matters are relevantly before the mediator, likewise in relation to any subsequent arbitration.

Proposition 11 deals with the overlap between the substantive claims and the validity claims. There is the overlap Mr Hutley addressed in some detail concerning the fact that, to a large extent, the validity claims, themselves, are based on the substantive claims and the two cannot be divorced. Secondly, there is the point that Mr Hutley made in relation to the operation of clause 7(b) of the Hope Downs deed which was the second reason why the Full Court concluded that the primary judge was in error, expressed at paragraph 249 of the judgment at page 305.

Their Honours held there that there is overlap because – there is a sustainable argument that the claims to set aside the deeds are, themselves, a breach of and controlled by the Hope Downs deed. And, Mr Hutley, we submit, correctly, said that there is no answer to that proposition. The appellants submit, in their reply submissions at paragraph 7, that what the Full Court did was to conflate the content of the validity claims with the appellants’ conduct in advancing those claims and they submitted that the content of the validity claims is separate from and anterior to the conduct in advancing those claims.

We submit that that cannot be right, essentially again for the reasons that Mr Hutley advanced, and that is that the validity claims do not exist independently of the claims. That is true of all the validity claims for the reasons that Mr Hutley put, most obviously in relation to injunctions as to enforceability. The invalidity claims and the conduct in advancing the claims the content of the invalidity claims and the conduct in advancing the claims cannot be separated temporarily or substantively.

On proposition 12, could I ask your Honours to go to paragraph 215 of the Full Court’s reasons at page 297 of the book? This is another overlap that I do not think Mr Hutley referred to. At paragraph 215 their Honours observed:

there is a sustainable argument that (subject of course to the validity of the Hope Downs Deed) cll 6(a), (b) and (c) and 7(b) of that deed –

that is to say the Hope Downs deed:

released the validity claims in relation to the 2005 Deed of Obligation and Release.

So a substantive claim or a claim that is governed and controlled by the Hope Downs deed is one that applies to the validity claim in relation to the earlier deed. Again, demonstrating the overlap and demonstrating that even on the construction advanced by my learned friends, if that is the construction, the govern and control test, this is an example where a govern and control test would result in the subsequent deed governing and controlling the validity claim in relation to the earlier deed.

Proposition 13, my learned friends submit that at the time of entry into the Hope Downs deed any competent legal practitioner in Australia would have been conscious of the decisions in ACD Tridon and Paper Products and that there was a reasonable likelihood that the phrase “any dispute under this deed” might be construed as referring to matters ex contractu.

We submit that that is an unsafe and dangerous basis to approach the question of construction for a number of reasons. We would submit that a person at the time of entering into those deeds could claim to be competent legal practitioner and not be aware of, for example, an unreported decision of the Supreme Court of New South Wales. Another legal practitioner may be aware of those decisions and aware of an argument that those decisions were problematic in view of other decisions in the development of the law of severability.

We also observe that the – putting the focus, of course, on different phrases – some of the cases refer to the language “arising under”. We do not have the word “arising” in our deed; it is just “under the deed”. No one, I think, has suggested that there was any authoritative decision that analysed that precise form of language at the time of entering into the deeds.

If I could finally go to paragraph 175 of the judgment at page 286. There the Full Court refers to the decision of the Court of Appeal in Fiona Trust and observes that there have been different cases and different approaches. Mr Hutley has referred to Heyman v Darwins and to Union of India and the observations of Viscount Dilhorne and Lord Salmon, and a reference to Mackender v Feldia. Then Lord Justice Longmore set out the passage at page 286. His Honour refers to Fillite, which your Honours have been taken to, and observes at the end of that extract:

Mackender v Feldia was not cited; nor was The Playa Larga. It is difficult to think that if they had been cited the judgments would have been expressed in the terms they were.

If I could ask your Honours to briefly turn up the decision in Ethiopian Oilseeds, which is at tab 8 of volume 1. Mr Walker and Mr Hutley advanced this decision so I will deal with it briefly. At page 96, at about twothirds of the way down the first column, there is the reference to Fillite and to the decisions of Lord Justices Slade and Nourse and we adopt what my learned friend says about Fillite. At page 97, it was at about point 2 of the page, second column, that is where their Honours:

Stepping back and viewing this body of authority as a whole, it seems clear that while “arising under” standing alone would probably not cover rectification for the reasons given in the Fillite case, “arising out of” in the present context should be given a wide interpretation

Now, so it was Fillite that led to the observations in Ethiopian Oilseeds which my learned friends rely on, but as Lord Justice Longmore observed in the Court of Appeal and similar observations were made in the House of Lords, that the decision in Fillite is perhaps problematic because Mackender v Feldier was not cited and so his Honour observed that it was difficult to think that if they had been cited, the judgments would have been expressed in the terms they were. Of course, it was Ethiopian Oilseeds that Chief Justice Gleeson referred to in Francis Travel.

Lastly – second lastly, perhaps – Justice Gordon asked a question of Mr Hutley about the position of Ms Rinehart after Mr Hutley had made some submissions about Mr Hancock and her knowledge of – I will provide, your Honour, a reference at paragraph 73 through to 75 of the judgment of the Full Court their Honours effectively observe that Ms Rinehart was aware of the position that Mr Hancock had taken shortly before the Hope Downs deed was entered into.

Finally, we submit that, as a general proposition, in a perfect world the law would be clear and contracting parties would always use clear language, but that is not the real world. In construing contracts – commercial contracts – the process is grounded upon sensible presumptions about intentions and that is the way that the law deals with the real world of contractual intercourse. They are the submissions

KIEFEL CJ: Thank you, Mr Brereton. Mr Walker, before we rise could I ask you, is Mr Ng going to deal with the reply proper together with the responses to the application for special leave and the argument put on that

MR WALKER: Yes.

KIEFEL CJ: or are you doing the reply proper?

MR WALKER: No, Mr Ng will deal with all of that.

KIEFEL CJ: Well, if Mr Ng has the advantage of being able to refine his arguments more shortly overnight. We will adjourn until 9.30 am tomorrow for pronouncement of orders and then until 10.00 am.

AT 5.13 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 14 NOVEMBER 2018