Cheung Kong Infrastructure Holdings Limited v BlueScope Steel Limited

The Application of the Relevant Principles to the Present Case 39 As is apparent from the facts and matters noted at [9]-[14] above, the arbitration is well advanced. Liability has been determined and the Arbitrator is now moving to hear and determine all questions of damages or compensation. Other remedies may also be under consideration. I have been told that the remedies hearing is likely to take place in early 2011. 40 BlueScope has outlined its case for a stay or summary dismissal, in very broad terms, as follows: (a) CKI and Ironsands brought five counter-claims in the arbitration. One of these claims comprises an allegation that Toward and NZ Steel breached two express warranties given by them in the Share Sale Agreement by failing to disclose to CKI and Ironsands certain information relating to the customers of NZ Mining; (b) The subject matter of the alleged non-disclosure is the same subject matter which underpins the allegations in the proceedings in this Court to the effect that BlueScope (and Merrill Lynch) failed to disclose to CKI and to Ironsands material information concerning the customers of NZ Mining which failure amounted to misleading and deceptive conduct within the meaning of s 52 of the Trade Practices Act and s 9 of the Fair Trading Act; (c) The non-disclosures could have been characterised as breaches of the New Zealand Fair Trading Act. Had they been so characterised, damages for those non-disclosures could have and should have been pursued in the arbitration; (d) CKI is seeking to recover in the proceedings in this Court damages for at least some of the loss which it seeks to recover in its counter-claims in the arbitration; and (e) By bringing proceedings in this Court, CKI is undermining the arbitration. It is seeking to re-litigate factual matters dealt with in the arbitration at very considerable cost. The Court should hold CKI to its promise to resolve all disputes in connection with the Share Sale Agreement by arbitration. It should also enforce the confidentiality provisions of the Share Sale Agreement. 41 There is insufficient material before me at the moment for me to assess the strength of BlueScope's contentions in support of its claim for a stay or summary dismissal of the proceedings in this Court. I do not have any documents from the arbitration and I have not been taken to the relevant New Zealand law. It is apparent from CKI's Written Submissions that there will be a vigorous contest when BlueScope and Merrill Lynch seek a stay or summary dismissal of the current proceedings. 42 For present purposes, I propose to assume (without deciding or assessing in any way) that BlueScope has an arguable case for a stay or for summary dismissal. It seems to me that, unless I decide that its case for a stay or summary dismissal is hopeless, this is the approach which I should take. CKI did not submit that I should conclude on the material before me that BlueScope's case for a stay or summary dismissal is hopeless. 43 In its initial Written Submissions, BlueScope described the justification for the Notice to Produce in the following way: 12. The determination of whether these proceedings are an abuse of process involves a precise identification of the issues in each set of proceedings and the nature and significance of the evidence in the earlier proceedings (Rippon v Chilcotin (2001) 53 NSWLR 198 at 204 [32]-[33]). The focus is on the substance of the two proceedings, rather than form, and involves a consideration of the type of evidence which would be called in the later proceedings and its overlap with the first proceedings (Trawl Industries v Effem Foods (1992) 36 FCR 406 at 418 (Gummow J)). 13. By the Amended Notice to Produce, BlueScope calls for production of the witness statements relied on in the arbitration, the transcript of the hearing, the agreed bundle of documents and any other documents tendered in the hearing and the second interim award of the arbitrator by which (it is understood) it was determined that NZS and Toward were not bound by an election to pursue specific performance. 14. A review of the interim award and the closing submissions of the parties reveals that three BlueScope employees (Charlie Elias, Adrian Chng and Matthew Pond), two NZS employees (Martin Hacon and John Hetherington) and two CKI employees (Victor Luk and Eddy Tsang) gave evidence on topics that overlap with the issues raised in these proceedings. 15. It is submitted that production of the statements, transcript and tender documents is necessary so that BlueScope can identify precisely how the evidence given in the arbitration will overlap with the evidence that can be anticipated will be called in these proceedings. Production of the interim award is necessary to understand the basis on which the damages part of the arbitration is proceeding. 44 In Rippon v Chilcotin Pty Ltd 53 NSWLR 198, the purchasers of a business brought an action in the District Court of NSW against accountants who had prepared certain financial statements, claiming damages on the basis that the accountants had made negligent misrepresentations in those statements. 45 Some time earlier, the same plaintiffs (that is to say, the purchasers of the business) had sued the vendor of the business on the grounds that a warranty as to the accuracy of some of those financial statements had been breached and that, by annexing those statements to the contract for sale of the business, the vendors had misrepresented the true position and thus contravened s 52 of the Trade Practices Act. In the earlier proceedings against the vendor, the purchasers had succeeded in their contract claim but had failed in their claim pursuant to s 52 of the Trade Practices Act. 46 In the proceedings against the vendor, the trial Judge had found that the person who controlled the purchasers had not relied upon the accuracy of any of the figures in the financial statements annexed to the contract for sale of the business but had rather relied upon the contractual warranty to cover the position in the event that the figures turned out to be inaccurate. 47 In Rippon v Chilcotin Pty Ltd 53 NSWLR 198, the accountants who were sued in the District Court moved to have the action in that Court permanently stayed on the basis that it was an abuse of process. The District Court Judge declined to grant the stay. The accountants appealed to the NSW Court of Appeal. 48 It was clear that the defendant parties in the two actions brought by the purchasers were different. It was thought that the doctrine of res judicata did not apply. It also appears that the appellant in Rippon v Chilcotin Pty Ltd 53 NSWLR 198 took the view that the principles explained by the High Court in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 602 did not apply, although the Court of Appeal thought that this apparent concession may have been incorrectly made. 49 In the end, however, the case on appeal in Rippon v Chilcotin Pty Ltd 53 NSWLR 198 was run upon the basis that neither the doctrine of res judicata nor the extended principles explained in Port of Melbourne Authority v Anshun Pty Ltd 147 CLR 589 were applicable. However, the Court of Appeal held that the principles in Reichel v Magrath (1889) 14 App Cas 665 at 668 did apply. 50 In Rippon v Chilcotin Pty Ltd 53 NSWLR 198 at [28]-[33] (pp 203-204), Handley JA said: 28 The present proceedings are an attempt to litigate or re-litigate issues which were either decided in or are barred by the earlier proceedings. In substance, ignoring the camouflage, the purchasers are attempting to re-litigate the issue of reliance on the 1991 figures which they lost. If they cannot succeed against anyone in respect of the 1991 figures because they did not rely on them, they could hardly succeed in establishing reliance on the earlier figures. 29 The judge also held that the issue of reliance on the expertise of the accountants had not been litigated in the Supreme Court and that a finding of reliance on that expertise would not conflict with the findings of Brownie J. This is true enough but ignored the fundamental fact that the purchasers would first have to prove that they relied upon the figures themselves before the question of reliance on that expertise could even arise. If they did not rely on the figures, they could not possibly have relied on the expertise required for their production. 30 The substance of the matter therefore is clear. The purchasers, disappointed with their bargain, sued their vendor in contract and in misrepresentation. They lost their case in misrepresentation and were disappointed with their modest recovery in contract. A few weeks before the expiration of the limitation period they sued the accountants for what is in substance the same misrepresentations. In the first proceedings they had to prove that they relied upon those misrepresentations. This turned on the evidence of Mr Hoefl, the contemporary documents, and the surrounding circumstances. The purchasers lost that issue and seek to re-litigate it against the accountants on substantially the same evidence in the hope that this time Mr Hoefl will be believed. 31 In Haines v Australian Broadcasting Corporation (at 414), Hunt CJ at CL distilled the following statement of principle from the authorities: "There are obviously limitations to striking out pleadings or causes of action as an abuse of process upon the basis stated in Reichel v Magrath ... The issue determined in the earlier case which is sought to be litigated in the later case must be one which the party propounding it in the latter lost in the former ... It must be an issue which was necessarily determined in the earlier case, and one of importance to the final result. It must have been properly argued - by which I mean that ... the tribunal which decided it was an appropriate one to do so, that the parties were appropriate contradictors and that the issue was regarded by them as one of importance ... In normal circumstances, the decision disposing of the issue must have been a final one ... There may also be circumstances in which, notwithstanding the absence of an appeal, it is clear that the earlier decision has overlooked some binding authority, or that it has caused the unsuccessful party a manifest injustice ... all the circumstances of the determination in the earlier case may be considered ... ."