Gujarat NRE Coke Limited v Coeclerici Asia

Federal Court of Australia (Full Court)|2013-09-30|Before: Mr J, Foster J, Allsop CJ, Middleton JJ

THE COURT 1 On 7 August 2013, the Court (Foster J) made a declaration and orders recognising and enforcing an award of three London arbitrators (Messrs Hamsher, Martin-Clark and Moss) in favour of the respondent to the appeal, Coeclerici Asia (Pte) Ltd (to which we will refer as Coeclerici), against the appellants, Gujarat NRE Coke Limited (to which we will refer as Gujarat Coke), and Mr Shri Arun Kumar Jagatramka, for USD 8,804,336.42 and GBP 12,232.85 and ordering the appointment of receivers of shares held by the appellants in Australia: see Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882. The appellants appeal against that declaration and those orders. 2 The essence of the complaints of Gujarat Coke and Mr Jagatramka on appeal was that the primary judge erred in not concluding that they had been denied procedural fairness by the arbitrators. Thus, they submitted, the award should not have been enforced under the International Arbitration Act 1974 (Cth) because of the engagement of s 8(5)(c) and of s 8(7)(b) and (7A), in substance because of a denial by the arbitrators of natural justice in connection with the making of the award. The primary judge comprehensively set out the statutory provisions. It is unnecessary for us to do so. 3 For the following reasons, the appeal should be dismissed with costs. The arbitrators did not deny the appellants procedural fairness and so did not breach the rules of natural justice, and the appellants were able to present their case because they were given a reasonable opportunity, in all the circumstances, to present their case. 4 The seat of the arbitration was London; the governing law was English, as was the lex arbitri. There was no suggestion in the submissions of the parties that there was any relevant difference between the rules of natural justice under English law and under the common law of Australia.

The primary judge's reasons 41 The essence of the primary judge's conclusion was that the appellants had an ample opportunity to put their case to the arbitrators. Further, his Honour concluded that the issue as to the adequacy of the opportunity had been decided by Judge Mackie QC and was the subject of an issue estoppel. 42 For the reasons below, we agree with the learned primary judge's conclusion (and the same conclusion of Judge Mackie QC) that the appellants were given a reasonable opportunity to be heard.

A reasonable opportunity to be heard 43 The first matter to appreciate is that the consequences of the failure to pay the USD 600,000 under the Payment Agreement was not the referral of a dispute to a separate or different arbitration. Clause 8 of the Payment Agreement referred the dispute to the three arbitrators as "the Tribunal". It then became a question for them, in the arbitration before them, as to whether an event had occurred to lift the suspension of the arbitration. This was the point (correctly, if we may respectfully say) being made by Judge Mackie QC in the first sentence of [22] of his reasons. It is not correct, as some of the submissions of the appellants sought to do, to treat the matters thrown up by the appellants' failure to pay as requiring the mechanical application of the LMAA rules, concerning exchange of submissions, and any evidence and the filling in of the questionnaire. The arbitrators were entitled to resolve this issue in the arbitration by such procedure as they chose as long as it gave a fair and reasonable opportunity to the appellants to put their case. 44 Secondly, there is a clear relationship between the quality of the point being raised and the length of time to be given and the procedure to be employed to resolve the point. Here, the arbitrators thought that both the implied term point and the capacity point were so lacking in merit that nothing could be gained by any further explication. No complaint is made (nor was one articulated before Judge Mackie QC) about the arbitrators' treatment of the capacity argument in this fashion. Rather, the gravamen of the argument on appeal was that the implied term point was real, of substance, and worthy of some time for its development. It was submitted that the view of the arbitrators that the point was hopeless and incapable of being improved on explication, given time, was both precipitate and wrong. 45 The submissions as to the worth and substantiality of the implied term point were, in significant part, put in the submission in reply in this Court. It was put that the term should be implied as a matter of fact, as a matter of law and as a matter of custom and usage. No such elaboration was made before either the arbitrators or Judge Mackie QC. There was ample time to do so between 4 and 14 February 2013. 46 In any event, the assertion of an implied term as a matter of fact or as based on custom and usage was hopeless. 47 First of all, there was an absence of clarity as to the expression of the term. Also, as expressed in Bentleys' email of 7 February in para 2, the term was inconsistent with cl 2 of the Payment Agreement, where the amounts and dates were unequivocally stated. 48 Secondly, the term will only be implied in fact if the business people concerned would have (objectively) said "of course" to the inclusion of the term. It would have been astonishing if a party in Coeclerici's position had said "of course" to this. It would have transformed precise, definite and shortly expressed payment obligations allowing for an award to be handed down in a few months, at the latest, should there be default, into an indeterminately, and perhaps almost permanently, suspended arbitration: More likely, "of course not", than "of course". 49 Thirdly, no evidence or hint of evidence to support the notorious, certain, legal and reasonable nature of custom and usage was identified before us: cf Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; 160 CLR 226 and Sagar v H Ridehalgh & Son Ltd [1931] 1 Ch 310. No question of custom or usage was suggested to the arbitrators. Given the absence of identification of any foundation for it in the ample time that has elapsed prior to this appeal, we would not be prepared to hold that any more time than that which was made available by the arbitrators would have been of any utility. In any event, it was hopeless as inconsistent with the clear express terms of cl 2. 50 The third way of putting the implied term was that it was a term implied by law. This way of putting the matter was enunciated in written submissions in this Court in reply. The term (presumably that enunciated in para 2 of the email of Bentleys of 7 February) was said to be supported by what was said by Scrutton LJ in Ralli Brothers v Compania Naviera Sota y Aznar [1920] 2 KB 287 at 303-304 where the following appears: But in my opinion at the present day, in the absence of very special circumstances, cases which decide that a contracting party who has undertaken to do something in a foreign country is not relieved from his obligation by the fact that such an act is, or becomes, illegal in that foreign country are wrongly decided … . I should prefer to state the ground of my decision more broadly and to rest it on the ground that where a contract requires an act to be done in a foreign country, it is, in the absence of very special circumstances, an implied term of the continuing validity of such a provision that the act to be done in the foreign country shall not be illegal by the law of that country. This country should not in my opinion assist or sanction the breach of the laws of other independent States. 51 In Ralli, freight on a cargo of jute was by the contract required to be paid in Barcelona. Spanish law prohibited freight greater than a certain amount to be paid. The contract called for an act contrary to the law of the place of performance. This contract did not require an act to be performed in India. It was submitted that there was debate as to whether India was the place of performance. Plainly Singapore was. There was no basis to conclude that performance was contractually to be undertaken in India. 52 In any event, the appellants had over a week to articulate these matters (and they knew previously that they would have to do so). They had no right to some leisurely expanse of time to think up and develop points. This was an international commercial arbitration, about payment of a debt admitted to be due, and outstanding for months. The arbitrators were not only entitled, but obliged, to act with proper despatch. That entitlement and obligation inhered in their authority taken from the consent of the parties. They were entitled and obliged to assess the worth of the points raised, and give them the despatch in disposition they thought appropriate, deploying all their accumulated experience as arbitrators. Another arbitrator, perhaps foreseeing the time and expense the applications before Judge Mackie QC, Foster J and us have taken up, may have put them on a strict timetable of one or two weeks. They did not. They had the courage of their convictions as to the hopelessness of the points raised. They thought they had given the appellants a reasonable opportunity to explain their apparent default. The supervising court of the seat agreed with them. Foster J agreed with them. We agree with them. 53 The above being our views, there is no basis for concluding that there was a breach by the arbitrators of the rules of natural justice for the purposes of the International Arbitration Act, s 8(7A). Paragraphs 8(5)(c) and 8(7)(b) are not enlivened. 54 In these circumstances, it is unnecessary to discuss the text and operation of the International Arbitration Act, s 8, including the scope of the notion of public policy in s 8, and the notion of natural justice in that context in s 8(7A).

Issue estoppel 55 The primary judge also relied upon issue estoppel. Given our views on the appellants having had a reasonable opportunity to put their case, it is strictly unnecessary to deal with this issue. Nevertheless, it is appropriate to deal with some matters. 56 The primary judge referred at length to the reasons of Judge Mackie QC. He said that the question of whether the appellants had a reasonable opportunity to present their case in the arbitration was decided by Judge Mackie QC as a fundamental part of the reasoning that was employed in declining to set aside the award upon the application of the appellants. The primary judge concluded that issue estoppel was capable of application when the issue had been determined in a prior judgment in a foreign court and he cited in support of that proposition the decision in Armacel Pty Ltd v Smurfit Stone Container Corp [2008] FCA 592; 248 ALR 573 at 580 - 583 [56] - [82]. The primary judge noted that before Judge Mackie QC the appellants had submitted that they were shut out on 4 February 2013 by the arbitrators from making submissions in support of their opposition to the making of the award sought by the respondent, and that they had also submitted that thereafter they were not afforded a reasonable opportunity to put their case. The primary judge noted that this second proposition was based upon "the very same emails as were tendered before me in support of grounds 1 and 2 of the respondent's amended notice of grounds of opposition" (at [102]). 57 The primary judge concluded that the issues raised in the proceeding before him had been determined by the English High Court of Justice and could not be re-litigated before him. He said that there was an issue estoppel. 58 The primary judge also went on to say that it would be generally inappropriate in any event for this Court, being the enforcement court of a Convention country, to reach a different conclusion on the same question as that reached by the court of the seat of arbitration. He noted that the English Court was the court of the seat of arbitration and that under the United Nations Conference on International Commercial Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the International Arbitration Act 1974 (Cth) any application to set aside the award must be made in that court. The trial judge said that it would be a rare case where it would be appropriate for this Court, as an enforcement court of a Convention country, to reach a different conclusion on the same question as that reached by the court of the seat of the arbitration. 59 The appellants submitted that the primary judge erred in deciding that the English Court had decided the same issue as the issue before the primary judge. We reject that contention. 60 An issue estoppel only arises in relation to those matters which a prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion. As Sir Owen Dixon said in a well-known passage in Blair v Curran [1939] HCA 23; 62 CLR 464 at 532: Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. 61 It is true, as the appellants submitted, that the relevant statutory provisions in the case before the English Court were different from subss 8(5), (7) and (7A) of the International Arbitration Act. The statutory provisions in issue in the proceeding before the English Court were subss 68(2)(a) and (c), and s 33(1) of the Arbitration Act 1996 (UK), to which we have already made reference. The concepts of a "serious irregularity" and "substantial injustice" are not found (at least expressly) in subss 8(5), (7) and (7A) of the International Arbitration Act. 62 It is also true that the basic exercise before the English Court was different from the exercise before the trial judge. The English Court was considering a challenge to the arbitration award, whereas the trial judge was considering whether the award, being a foreign award, should be enforced. Nevertheless, we think that the English Court did decide the key issue which was the issue before the primary judge. The key issue before the primary judge, whether formulated under the rubric of subss 8(5)(c), (7) and (7A) of the International Arbitration Act, was whether the appellants had been given a reasonable opportunity to present their case at the arbitration. One of the elements of a serious irregularity under s 68(2) of the English Act is a failure to comply with s 33. A failure to comply with s 33 includes a failure to give each party an opportunity to put its case. Judge Mackie QC considered this issue directly in [23] of his reasons, which we have earlier set out. 63 The conclusion of Judge Mackie QC in the last sentence of [23] was indispensable to the final result - the rejection of the challenge to the award. In fact, once the conclusion had been reached the challenge could not succeed. 64 Both parties made detailed submissions on whether issue estoppel operates in circumstances where an Australian court is considering whether to refuse to enforce a foreign award on the grounds identified in subss 8(5)(c) and (7) of the International Arbitration Act. The issue is one of importance and of potential difficulty. It is not resolved in a clear way by any authority binding on this Court: see generally IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248; 282 ALR 717 at 724-725 [26] per Warren CJ; Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46; [2011] 1 AC 763 at 834-835 [98] per Lord Collins; Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [2003] 380 HKCU 1 at [48] - [53] per Burrell J. 65 We do not propose to attempt a resolution of the issue, because we think that a prompt judgment is desirable in this case and, at the very least, the primary judge was correct to hold that it will generally be inappropriate for this Court, being the enforcement court of a Convention country, to reach a different conclusion on the same question of asserted procedural defects as that reached by the court of the seat of arbitration. We endorse and apply the following observations of Colman J in Minmetals Germany GmbH v Ferco Steel Ltd [1999] 1 All ER (Comm) 315 as to the weight to be given to the views of the supervising court of the seat of the arbitration. That experienced commercial judge said at 331: In a case where a remedy for an alleged defect is applied for from the supervisory court, but is refused, leaving a final award undisturbed, it will therefore normally be a very strong policy consideration before the English courts that it has been conclusively determined by the courts of the agreed supervisory jurisdiction that the award should stand. Just as great weight must be attached to the policy of sustaining the finality of international awards, so also must great weight be attached to the policy of sustaining the finality of the determination of properly referred procedural issues by the courts of the supervisory jurisdiction. I use the word 'normally' because there may be exceptional cases where the powers of the supervisory court are so limited that they cannot intervene even where there has been an obvious and serious disregard for basic principles of justice by the arbitrators or where for unjust reasons, such as corruption, they decline to do so. However, outside such exceptional cases, any suggestion that under the guise of allegations of substantial injustice procedural defects in the conduct of an arbitration which have already been considered by the supervisory court should be reinvestigated by the English courts on an enforcement application is to be most strongly deprecated. (emphasis added) 66 In this case there is nothing to suggest that it falls within one of the exceptional cases identified by Colman J. 67 Thus we agree with the primary judge's conclusion as to the appropriateness of not departing from the conclusion of Judge Mackie QC, as the second ground which the primary judge identified under the rubric of "issue estoppel" and that is sufficient for the purposes of this case. 68 It may be that considerations of the kind expressed in the views of Colman J in Minmetals would also have relevance if we were of the view that there was a procedural defect amounting to a breach of the rules of natural justice and if we were called on to consider the question whether, in the light of the supervising court's views, the award should nevertheless be enforced. It is unnecessary to deal with this question.

Appointment of receivers 69 The final issue raised in this appeal related to the appointment of receivers to take control of and sell the relevant shares. 70 It was not disputed that the Court had the power of appointment of receivers in aid of enforcement. 71 The argument before the primary judge was whether it was appropriate to appoint a receiver where a freezing order was in place and a charging order could be made to protect the interests of the respondent. Importantly for the appellants, the charging order would have included a moratorium of three months, in that the respondent could not within that time commence proceedings to take the benefit of the charge arising under the charging order. 72 It also seemed to be argued before the primary judge that if he was considering appointing receivers (and not making a charging order), then a moratorium of three months should be expressly included in the order of appointment of the receivers. 73 Before us, Senior Counsel for the appellants did not dispute the appropriateness of a receiver being appointed, but submitted that the primary judge either did not turn his attention to imposing a three month moratorium, or otherwise failed properly to exercise his discretion in not so ordering the three month moratorium. 74 We do not accept these submissions. 75 The primary judge correctly identified the guiding principle in the appointment of receivers in aid of enforcement: what is just and convenient in all the circumstances of the case. As he said, this is the language of the applicable legislation. 76 In applying this principle, the primary judge made a number of orders and accepted undertakings by the appellants - these relevantly included the appointment of receivers and the continuation of freezing orders. As the learned primary judge said at [115], all these measures were taken to protect the respondent's "legitimate entitlement to practical enforcement of its monetary judgment and order for costs". 77 In addition, the primary judge did in fact stay the receivership orders for a period of time, expressly on the basis of giving the appellants an opportunity to pay the award debt. 78 Whether the primary judge directed his mind to a specific three month period or not, he clearly balanced the interests of the appellants by granting a stay to give them some time to pay the award debt, and the need to protect the legitimate interests of the respondent. 79 We consider that the learned primary judge properly undertook the task required of him in considering what was just and convenient. 80 This is an instance where the award relates to the prepayment of money by the respondent to the appellants which has not been repaid, where the supervisory court of the arbitration has rejected an attempt by the appellants to set aside that award, and where the primary judge concluded that the case for resisting enforcement of the award was "utterly unmeritorious". 81 In addition, there was some evidence before the primary judge, although not relied upon by him, that without the appointment of the receivers, there may well have been an impediment to the distribution of the proceeds of any sale of the shares to the respondent. 82 Therefore, it has not been shown by the appellants that the learned primary judge misapplied the "guiding principle" he correctly stated was the approach he proposed to take in considering the appropriateness of appointing receivers. 83 Further, the failure to order any further moratorium or stay of the receivership orders over the period of indulgence already given by the primary judge has not been shown to be an appellable error.

Orders 84 The appeal should be dismissed with costs. I certify that the preceding eighty-four (84) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop and Justices Besanko and Middleton.

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