background
103 The essential background facts are not in issue.
104 Jasmin, an Australian entity, wanted to purchase solar panels from Trina US. Jasmin conducts a business installing solar photovoltaic power generation systems. Jasmin alleges that in July 2012, Jasmin and Trina US entered into an arrangement for Trina US to supply solar panels to Jasmin. It is alleged that on 25 July 2012, Jasmin issued a purchase order to Trina US under that arrangement. Subsequently, negotiations took place to formalise a written agreement.
105 Apparently, in August 2012 discussions took place between Jasmin and Trina US that a US-related entity of Jasmin, namely JRC, would be the purchaser of the panels and would place any relevant purchase orders with Trina US.
106 The course of the relevant communications and negotiations has been set out at [30] to [42] of the primary judge's reasons. There has been no challenge to the accuracy of his Honour's recitation.
107 On 12 November 2012, a written agreement was executed by Trina US and JRC, but not Jasmin (the Supply Agreement). Salient features of the Supply Agreement are the following:
(a) First, the parties to the Supply Agreement were described as JRC (the Buyer) and Trina US (the Seller); see also, for example, cl 3.1. Jasmin was not described as a buyer. Moreover, on the face of the document there was no reference to JRC acting as an agent for Jasmin. As I have said, Jasmin did not execute the document.
(b) Second, cl 5.5.1 provided:
Concurrently with the Effective Date, Buyer's parent company (Jasmin Solar Pty. Ltd.) shall guarantee payment for each shipment that the Buyer has issued an official Purchase Order and which has been delivered and received in good order by Buyer.
I note at this point that it might be said that the guarantee obligation is in tension with any suggestion that JRC was acting as an agent for Jasmin.
(c) Third, the Supply Agreement also distinguished between a party and its affiliates (see for example, cl 8.2 and cl 14.2).
(d) Fourth, cl 10 set out a governing law provision stipulating the laws of the State of New York as "govern[ing] the validity of this Contract, the interpretation of its terms, and the interpretation and enforcement of the rights and duties of the parties hereto".
(e) Fifth, cl 11.1 contained an arbitration clause in the following terms:
Any dispute or controversy or difference arising out of or in connection with this Contract including its existence, validity or termination, between the parties hereto shall be submitted to a meeting of senior management within fifteen (15) days of written notice of a dispute. If the meeting is unsuccessful, the dispute shall be submitted to binding arbitration. Such arbitration shall be administered by the American Arbitration Association in accordance with its commercial arbitration rules in effect at the time of the arbitration. The place of the arbitration shall be New York, New York [sic]. The Parties shall arrange for the arbitration to commence no later than ninety (90) days after the date of the demand for arbitration.
(f) Sixth, cl 14.4 also provided:
Third Party. Nothing in this Contract is intended to confer on any person who is not a party hereto any right to enforce any term of this Contract.
Again, it might be thought that this clause was in tension with any agency between JRC and Jasmin.
108 On 13 May 2014, Trina US, relying upon the arbitration clause in the Supply Agreement, commenced arbitral proceedings in New York against both JRC and Jasmin asserting breaches of the Supply Agreement.
109 On 15 May 2015, Jasmin filed a motion in the arbitration seeking orders that it be removed from the arbitration on the basis that it was not a party to the Supply Agreement and accordingly not a party to the arbitration agreement constituted by cl 11.1.
110 After a hearing on 5 June 2015, the arbitrator on 16 June 2015 handed down her preliminary award on that issue, determining that Jasmin was a party to the Supply Agreement and that, accordingly, it was bound by the arbitration clause (Interim Award).
111 The final hearing of the arbitration took place between 27 October and 29 October 2015. Apparently, Jasmin took no steps and did not participate therein.
112 Subsequently, on 30 September 2015 Jasmin commenced proceedings in this Court against Trina US and Trina Solar Australia Pty Ltd (Trina Australia). Trina US and Trina Australia are related, with Trina Australia conducting the business of Trina US in Australia. The allegations made by Jasmin have been summarised by the primary judge at [10] to [29] of his reasons, which I do not need to repeat. The principal claims made against Trina US and Trina Australia are for contraventions of the Australian Consumer Law for misrepresentation and misleading or deceptive conduct, with Trina US as the alleged principal contravener and Trina Australia as an entity "involved in" the contraventions.
113 It is in this context that Jasmin sought leave to serve the originating process in the US on Trina US. Trina US objected to such leave being granted on the basis that to do so would be an exercise in futility by reason that the proceeding against it would be inevitably stayed under s 7(2) of the IA Act by reason of the arbitration provision in the Supply Agreement which constituted an arbitration agreement to which Jasmin was a party. In essence the primary judge rejected that argument.
114 Subsequent to his Honour's decision, I would also note that the arbitrator handed down her Final Award on 21 January 2016.
RESIDUAL DISCRETION - GENERAL
115 The only issue that has been challenged is his Honour's consideration of the exercise of the residual discretion as to whether to refuse leave. His Honour's determination as to the satisfaction of the three conditions stipulated in rule 10.43(4), namely, first, that there was a prima facie case (see [50] to [54]), second, that the proceeding was of kind mentioned in rule 10.42 (see [55] to [63]) and, third, that the Court has jurisdiction (see at [64]), has not been challenged.
116 The existence of the residual discretion was not in doubt (see [66]). Nor was it in doubt that one matter relevant to the residual discretion was whether, if leave to serve out was granted, the proceeding might be stayed (see Quinlan v Safe International Försäkrings AB [2005] FCA 1362 at [26] and [27] per Nicholson J), in this case by operation of s 7(2) of the IA Act.
117 Now the residual discretion to refuse leave is not at large in the sense that if the three necessary conditions for leave have been satisfied, there must be a good if not compelling reason why nevertheless leave should be refused in the face of such satisfaction.
118 If a stay of the proceeding would be granted or this was inevitable, then that could provide a compelling reason for the exercise of the residual discretion to refuse leave. Before his Honour, Trina US recognised as much. Trina US couched its submissions before his Honour in terms that "it would be futile to serve Trina US because the proceedings would subsequently be stayed by application of s 7(2)". But if all that could be established was that a stay might be granted or that it was reasonably arguable, but all of this below the threshold of inevitability or a strong case for a stay, then it may not be appropriate to exercise the residual discretion to refuse leave. Rather, the appropriate course may be to grant leave to serve out, and to then allow the respondent to apply for a stay of the proceeding under s 7(2) of the IA Act on proper material. It is inappropriate to be definitive on such questions given that a discretion is being exercised and each case will turn on its own circumstances. But the context of the application that his Honour was dealing with is not unimportant.
119 Generally, questions of leave to serve out are to be dealt with expeditiously, as his Honour did in the present case. A mini trial of whether a stay would be granted ought not to be carried out under the umbrella of the availability and exercise of any residual discretion associated with an application to serve out of the jurisdiction an originating process, except in the clearest case. And that is all the more so if such a mini trial entails the consideration and resolution of intricate issues relating to private international law. Unless a case for a stay is inevitable or strongly made out, alternatively expressed it is not reasonably arguable that no stay would be granted, the better course is to grant leave to serve out and to deal with the stay question at a later stage by application at the behest of the respondent.
120 The primary judge rightly held that in considering the question of the residual discretion he was not finally determining the stay question (see at [163], [165] and [166]). Indeed, at [165] his Honour said that "[t]his is not a final determination of any issue concerning whether Trina US is entitled to a stay of the proceedings" (my emphasis). I take that reference, in its breadth, to apply to the choice of law questions that his Honour discussed, although at times his Honour in other parts of his reasons did express himself in more definitive terms. But in the context of dealing with the exercise of the residual discretion, his Honour could not finally determine the stay question or the associated question of whether Jasmin was a party to the relevant arbitration agreement including the related choice of law question.
121 The primary judge found that the appropriate law to apply to the question of whether Jasmin was a party to the arbitration agreement was the law of the forum (see at [106]). I agree with his Honour for the reasons that I will later elaborate on. But in the context of considering the exercise of the residual discretion, in my view his Honour strictly only needed to go so far as to find that it was reasonably arguable that the law of the forum was to be applied. And on any view of the authorities that choice of law was reasonably arguable.
122 Trina US asserts that his Honour was in error in the conclusion expressed as to choice of law (see at [106]). I disagree. But as I have said, his Honour needed only to have gone so far as to say that the law of the forum was reasonably or strongly arguable as the appropriate choice of law to justify the refusal to exercise the residual discretion to refuse leave. But even if one was to conclude that his Honour expressed himself too definitively and one could not be so definitive, then I would not in any event exercise the residual discretion any differently to his Honour.
123 On the basis that the appropriate law to apply to the question of whether Jasmin was a party to the arbitration agreement was the law of the forum (ie Australian law), his Honour then turned to the question of whether Jasmin was a party. As to this, his Honour only dealt with the issue in a preliminary way and, in that context, said (see at [108] et seq) that he did not "presently accept that Australian law would treat Jasmin as a party to the Arbitration Agreement" and that he was "not presently satisfied that JRC entered the Supply Agreement as agent for Jasmin" (see at [141]). Apart from the choice of law question, there has been no substantive challenge to such a preliminary analysis or determination, assuming that the law of the forum applies. I note that ground 1(b) of the notice of appeal asserts that the primary judge "erred in deciding that Jasmin was not bound by the arbitration agreement". His Honour did not finally determine that question; moreover, nothing was advanced beyond the lex fori question.
124 His Honour dealt with two other issues (described by him as issues 3 and 4) which are not the subject of appeal and on which it is not necessary to say anything further.
125 It is appropriate to now turn to the choice of law question considering both common law principles and their intersection with relevant provisions of the IA Act. But as I have said, it is not necessary to reach definitive conclusions on these questions in considering whether his Honour appropriately considered and chose not to exercise the residual discretion in favour of refusing leave.
CHOICE OF LAW - COMMON LAW
126 Trina US contended that Jasmin was a party to the arbitration agreement constituted by cl 11.1 of the Supply Agreement. His Honour identified cl 11.1 as the "arbitration agreement" for the purposes of s 7(2) of the IA Act. The question was whether Jasmin was a party thereto.
127 For present purposes, I will put to one side s 7(2) of the IA Act and consider the question of what law applied to determine the question of whether Jasmin was a party to the arbitration agreement, applying common law choice of law principles. His Honour identified the answer to that question as being the law of the forum.
128 Like his Honour, I consider there to be a distinction between two types of scenarios: (a) the choice of law to determine whether there is a consensus ad idem between the parties; and (b) the choice of law to apply where one is dealing with the validity and interpretation of the contract, mode of performance and consequences of breach. As to the second scenario, it is not in doubt that the law to apply is that which the parties have chosen or purported to choose, alternatively the law which would be the putative proper law in the absence of express choice. As to the first scenario, I consider that the appropriate choice of law is the law of the forum.
129 First, questions concerning whether the parties have reached consensus ad idem are different to questions of validity. The latter concept assumes that an agreement has been made and looks at issues as to whether the same is, inter alia, enforceable, voidable or void.
130 Second, it is counter-intuitive to suggest that the choice of law to assess consensus ad idem should be that set out in an agreement that an entity says it is not a party to because there was no consensus ad idem. That would be to assume what was to be proved. As his Honour described it: "a party cannot pick itself up by the bootstraps provision when there has been no determination that it binds the other party" (see at [7]).
131 Third, and by analogy, it is counter-intuitive to apply a putative proper law, ie the proper law of the contract that the parties would have chosen if there had been a consensus ad idem, where one entity says that there has been no consensus ad idem.
132 Fourth, no relevant distinction is to be made between, on the one hand, asking whether person X has manifested consent to agree with person Y (ie displayed a consensus ad idem with person Y) and, on the other hand, asking whether person X has manifested consent to agree with persons Y and Z, where persons Y and Z had previously agreed with each other. In the present case, X is Jasmin, Y is Trina US and Z is JRC.
133 In essence, the primary judge applied the lex fori. In my opinion, this was consistent with the preponderance of precedent in Australia.
134 In Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 (Oceanic), Brennan J (at 225) and Gaudron J (at 260 and 261) both stated (obiter) that the issue of consensus ad idem was to be governed by the lex fori. Contrastingly, Deane J (at 255) stated that "[t]he question whether those transactions and actions resulted in a binding contract between the parties must, in my view, be determined by reference to the law of New South Wales - the locus contractus". But arguably this statement in the context of Oceanic may be seen as consistent with the position adopted by Brennan and Gaudron JJ that the lex fori applies to questions of consensus. But irrespective of whether Deane J's statement can be reconciled with the observations of Brennan and Gaudron JJ, I see no good reason not to follow their obiter observations.
135 Further I note that the lex fori has been applied in Venter v Ilona MY Ltd [2012] NSWSC 1029 at [25] to [27] per Rein J and in Hargood v OHTL Public Company Ltd [2015] NSWSC 446 at [23] per Davies J.
136 Trina US has not identified any binding Australian authority that supports its proposition that the putative proper law (as distinct from applying the law of the forum) ought to apply at the first step in establishing consensus ad idem. Indeed, Trina US's arguments would appear to conflate the issue of consensus ad idem with the formation of a legally binding contract. The former element is a necessary but not sufficient condition to establishing the latter element. Let me linger briefly on two Australian authorities referred to in the course of argument by Trina US.
137 Homestake Gold of Australia v Peninsula Gold Pty Ltd (1996) 20 ACSR 67 concerned whether, where it was accepted that there was consensus ad idem, guardians could bind a minor. But the observations of Young J (at 75) do not address the choice of law for determining the consensus ad idem. White Cliffs Opal Mines Ltd v Miller (1904) 4 SR (NSW) 150 did not address the choice of law question dealing with consensus ad idem in terms, but rather proceeded on the narrow factual ground (at 154) that the correspondence exchanged between the putative parties implied that the law of New South Wales "was to be taken as the law governing the contract" and that "the directors could not, by their cablegram, alter the basis on which the correspondence was conducted". In any event, such cases do not justify putting to one side the observations of Brennan and Gaudron JJ in Oceanic.
138 Further, the overseas authorities identified by Trina US, most of which I note were not drawn to the attention of the primary judge, are not expressly inconsistent in their ratios with the proposition that the determination of consensus ad idem (as distinct from the broader question of the formation of a legally binding contract) can proceed by applying the lex fori.
139 Trina US contended that there have been various English decisions which establish that at common law the putative proper law of the contract determines whether the parties, and which parties, have reached agreement. In my view these cases do not significantly assist Trina US. The discussion of the choice of law in those cases has usually been obiter or unclear. In any event, I would not refrain from applying the observations of Brennan and Gaudron JJ in Oceanic.
140 Albeko Schuhmaschinen AG v The Kamborian Shoe Machine Co Ltd (1961) 111 LJ 519 (Albeko) turned purely on the factual question that posting of the letter of acceptance was not established. The finding by Salmon J that the proper law of the contract was Swiss Law was obiter.
141 Compania Naviera Micro SA v Shipley International Inc (The "Parouth") [1982] 2 Lloyd's Rep 351 concerned whether there was an arguable case that there was a binding contract between the parties to which English law applied for the purposes of Order 11 r 1(1)(f) (the English rule dealing with leave to serve out of the jurisdiction). The contract documents relied upon provided for arbitration with London as the arbitral seat. It was conceded that there was a good arguable case that there was a binding contract. There was also a good arguable case that that contract had English law as its proper law. That sufficed to bring the matter within Order 11 r 1(1)(f). Accordingly, references to Dicey & Morris on the Conflict of Laws were obiter and Mackender v Feldia AG [1967] 2 QB 590 was not referred to. Whether Compania Naviera Micro SA was ultimately a party to the contract remained to be determined at trial. In any event the lex fori and the putative law of the contract were both English. Further, in Chevron International Oil Co Ltd v A/S Sea Team (The "T.S. Havprins") [1983] 2 Lloyd's Rep 356, Staughton J applied, for the purposes of Order 11, the lex fori to determine whether there was a contract.
142 As against Trina US' contention, Mackender v Feldia AG [1967] 2 QB 590 at 603 per Diplock LJ provides some support for the proposition that in determining whether there is a consensus ad idem, the lex fori should be applied rather than the putative proper law; but I accept that his observations only provide qualified support.
143 Union Transport plc v Continental Lines SA [1992] 1 WLR 15 concerned the application of the Brussels Convention, which generally provided that persons domiciled in convention States were to be sued in their state of domicile. Lord Goff of Chieveley (at 23) made reference to the putative proper law of the contract, but it is not clear that his observations relate to the consensus ad idem issue.
144 In Marc Rich & Co AG v Societa Italiana Impianti PA (The "Atlantic Emperor") [1989] 1 Lloyd's Rep 548, there was no doubt that the parties had entered into a contract.
145 In Habas Sinai Ve Tibbi Gazlar Istihsal v VSC Steel Co Ltd [2014] 1 Lloyd's Rep 479, the question was whether an agent had authority to enter into a contract that extended to one with the arbitration clauses. There was no dispute that a contract had been entered into between the parties. Similar considerations apply to Midgulf International Ltd v Groupe Chimique Tunisien [2010] EWCA Civ 66. There was no dispute that a contract had been entered into; the issue was whether it contained an arbitration clause. Likewise, National Navigation Co v Endesa Generacion SA (The "Wadi Sudr") [2009] 1 Lloyd's Rep 666 is of little assistance.
146 More generally, many English decisions after 1 April 1991, when the Rome Convention (Convention on the Law Applicable to Contractual Obligations 1980) came into operation in the United Kingdom, are of limited assistance as they have been influenced by that Convention. The Rome Convention requires the application of the putative proper law even to the question of consensus ad idem although this is not absolute (cf articles 4 and 8 with the rider in sub-article 2 of article 8). Accordingly, any further excursion through the English jurisprudence is of limited assistance.
147 Trina US has also referred to the Canadian decision of Timberwest Forest Ltd v Gearbulk Pool Ltd [2001] BCSC 882 for support that the putative proper law applied. Now it may be accepted that this case provides some limited support. But Cullen J stated that the determination of the issues in that case was not affected by the choice of law (at [24]). Moreover, the issue in that case was not purely a consensus ad idem question but rather which bills of lading applied to govern the relationship.
148 In relation to the United States of America, Trina US referred to the Restatement (Second) of Conflict of Laws s187 (1971) but it is of little assistance. It states that the "law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue". "Comment a." to that section states that the "rule of this Section is applicable only in situations where it is established to the satisfaction of the forum that the parties have chosen the state of the applicable law". Then in dealing with "impropriety or mistake" at "Comment b." it is stated "[w]hether such consent was in fact obtained by improper means or by mistake will be determined by the forum in accordance with its own legal principles". These passages of the Restatement do not substantially assist Trina US.
149 Generally, I have difficulty with Trina US' contention that the putative proper law of the contract applies to determining whether there is consensus ad idem. The rationale for applying the putative proper law of the contract is that it accords with the intent of the parties, but that is the very matter in issue in the present context.
150 Trina US has said that the approach taken by the primary judge is apt to produce illogical outcomes. First, it refers to a factual situation not unlike that in Albeko but with the roles reversed. It posits that the English or Australian party posts an acceptance of an offer which is never received. Assume it contains a Swiss choice of law term. Also assume that under Swiss law, acceptance is complete upon receipt only. It is said that the approach taken by the primary judge leads to the English or Australian court concluding there is a contract between the parties by which they have selected Swiss law to govern that contract, but when applied means there is no such contract. It is said that the outcome of this international commercial arrangement would depend entirely on the place where proceedings were commenced. Contrastingly, it is said that if the putative proper law was applied, the Australian or English court would form a view consonant with the view of the Swiss law. Second, Trina US also submits that the same kind of difficulty arises when, by the law of the forum (English or Australian), consideration is required to make a promise binding but that is not a requirement of the putative proper law.
151 These perceived anomalies are interesting but not definitive. As to the so-called first anomaly, that does not overcome the paradoxical position identified by his Honour. Moreover, the dicta in Oceanic should be followed. As to the so-called second anomaly, that is moving beyond consensus ad idem. What I have said is not inconsistent with applying the putative proper law to questions of consideration.
152 More generally, Trina US would have us engage in questions of characterisation such that any contractual question should be dealt with either under the proper law of the contract or the putative proper law. But I consider such a generalisation to be unhelpful. It conceals relevant distinctions concerning various aspects of contract formation and validity. Moreover, it is inconsistent with the dicta in Oceanic.
153 Finally on this aspect, part of the grounds of appeal asserts that his Honour "should have given greater recognition to the Interim Award". But I do not see how the fact of the Interim Award or its content directly affects either the choice of law or the proper construction of the IA Act.