19 minute read
Federal Court Judgments
By Dan Star QC, Anthony LoSurdo SC
and Joanne Sheperd
Insurance – practice and procedure
Insurer not entitled to rely on s28(3) of Insurance Contracts Act 1984 (Cth) – estoppel – distinction between concise statements and pleadings
In Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2021] FCAFC 121 (9 July 2021) the Full Court heard an appeal determining separate questions in insurance litigation. The respondent (Delor) is the body corporate for a complex of apartment buildings in far north Queensland. The buildings were constructed in 2008/2009 and various issues in relation to the eaves of the buildings had arisen by late 2014. Before any works were undertaken to repair certain defects, there was substantial roof damage to the buildings on 28 March 2017 during Tropical Cyclone Debbie. Shortly before the cyclone, Delor had taken out a policy of insurance for public liability and property damage to the buildings with the appellant (Allianz). Delor notified a claim under that policy of insurance. The parties proceeded on the basis that Allianz’s underwriting agency which it controlled (SCI) had agreed to indemnify. Subsequently, SCI gave notice that it would rely on s28 of the Insurance Contracts Act 1984 (Cth) (Act) and would pay $nil on the basis of alleged non-disclosure by Delor. Delor commenced proceedings and orders were made for two issues to be determined before the other issues in the proceedings, namely: • whether Allianz was entitled to reduce its liability to nil under the
Act
• whether by some operative rule or principle, Allianz was not able to rely on s28.
The primary judge (Allsop CJ) determined the first issue favourably to Allianz. However, on the second issue, the primary judge found Allianz was estopped from resiling from the representation made in an email that the claim by Delor would be honoured and indemnity provided and not by reference to s28(3) of the Act; Allianz had waived any entitlement to adopt a position based on an assertion of right under s28(3) of the Act; and in seeking to resile from the representations made by the relevant email and in seeking to rely on a non-disclosure of Delor, Allianz failed to act towards Delor in relation to the resolution of the claim with the utmost good faith contrary to s13 of the Act.
The appeal by Allianz was dismissed. A considerable part of its complaint on appeal was to the effect that the primary judge’s decision rested on an understanding of the estoppel case that was not advanced below (at [39]). The Full Court considered closely the nature of the estoppel case that was put by Delor at trial. This involved considering (a) the nature of Delor’s case as to material detriment as disclosed by the concise statement and how it came to be amended; (b) the written submissions; (c) the opening submissions at the hearing; and (d) the way the estoppel case was dealt with in the course of closing submissions (at [138]; see also [155]-[203]). As the matter proceeded by concise statement and concise response instead of pleadings, the Full Court made detailed observation on the nature and purpose of a concise statement (at [140]-[154]). A concise statement is not a de facto pleading (at [148]). A concise statement and concise response, unlike pleadings, are not conceived as a comprehensive statement of all the matters that must be established in order for a claim or defence to succeed (at [144]). Mackerracher, Derrington and Colvin JJ stated: “If a claim that is at the heart of the case that a party seeks to advance at the final hearing is not to be found in the concise statement then there will need to be an application for leave to amend that will be dealt with in accordance with the established procedural law as to late amendments to alter a case. However, where the nature of a claim is broadly disclosed by the concise statement, it is fundamental to the new approach of case management that a party cannot sit by passively and insist upon some strict curtailment of the case that may be run by reference to pleading rules. Both parties have a duty to expose the real issues. Where an issue is properly raised concerning the particular nature of an aspect of the concise statement then the party relying on that statement must assist in clarifying the position. And where an issue is expressed broadly in a concise statement and the other party considers that it will be unfair to its forensic preparation of the case for the issue to remain stated in such broad terms, then it behoves that party to seek clarification. The request may be met with the response that the clarification will be provided by affidavits and witness statements or the delivery of a statement of issues in due course. However, it may be the case that fairness dictates that earlier disclosure is required in which case the Court will make appropriate orders by way of case management. But what the party cannot do is save up its complaint that the case is stated too broadly until the conduct of the final hearing and then maintain that no detailed case can be run because no such case has been disclosed. To do so is to treat the concise statement as having the same character as a pleading which it is not. It is also to adopt a strategic and technical approach of a kind that is inconsistent with the obligation imposed upon parties and their lawyers by Part VB of the Federal Court of Australia Act (at [149]).
Bankruptcy – Insolvency – Evidence Law
The process of inferential reasoning – Jones v Dunkel where a witness has already been subjected to a compulsory examination
In El-Debel v Micheletto (Trustee) [2021] FCAFC 117 (30 June 2021) the trustees in bankruptcy of the bankrupt (Trustees) alleged that all or part of the purchase price for four properties registered in the names of parties associated with the bankrupt had been provided by him. On that basis, the Trustees claimed that the whole or part of the interests of those associated parties in the properties were held on resulting trust for the bankrupt. The Trustees sought declarations pursuant to s31(f) of the Bankruptcy Act 1966 (Cth) to the effect that each of the properties formed part of the property that was divisible among the creditors of the bankrupt. The primary judge upheld the claims by the Trustees. Appeals were brought by the bankrupt and associated parties to him. One of the many issues raised on appeal concerned the primary judge’s use of the bankrupt’s absence as a witness as a basis for concluding that the bankrupt funded the certain properties in circumstances where reasoning in that manner was impermissible (at [95(3)]). This and other issues led the Full Court to state legal principles and authorities concerning the process of inferential reasoning in civil proceedings (at [98]-[107]). The Full Court considered the rule in Jones v Dunkel, namely that the unexplained failure by a party to call a witness may, in appropriate circumstances, support an inference that the uncalled evidence would not have assisted the party’s case (at [105]). Relevantly, the Court considered the application of Jones v Dunkel in circumstances where a party has been required to submit to a compulsory examination concerning matters the subject of subsequent proceedings and the transcript of the examination has been relied on in those proceedings (at [207]-[217]). Markovic, Derrington and Colvin JJ stated: “It may be that the fact that a party has submitted to a compulsory examination in which questions were directed to the matters in issue could be advanced as a particular reason why there is no reasonable expectation that the party would again give evidence as to the same matters, the evidence having already been given and tested” (at [211]). However, the Court rejected the submission that Jones v Dunkel should not be applied in any case where the witness had already been subjected to a compulsory examination (at [212], [216]-[217]).
Arbitration
International arbitration – enforcement of award – where supervisory court appointed the arbitral tribunal – whether enforcing court should accept composition of the arbitral tribunal was in accordance with the agreement of the parties – comity.
Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company [2021] FCAFC 110 (25 June 2021) (Allsop CJ, Middleton and Stewart JJ) The principal issue in these proceedings was whether an award should be enforced in circumstances where the appellant (‘Hub’) contended that the composition of the arbitral tribunal was not in accordance with the agreement of the parties as envisaged by s 8(5)(e) of the International Arbitration Act 1974 (Cth) (‘IAA’) notwithstanding that the tribunal was appointed by a court at the seat of the arbitration in Qatar. There was an additional issue as to whether the Court should exercise its discretion to recognise and enforce the award in issue.
Section 8(5)(e) of the IAA
Section 8 of the IAA provides that a foreign award is binding for all purposes on the parties to the award and may be enforced in the Federal Court as if the award were a judgment or order of that court.
The court may only refuse to enforce the foreign award in the circumstances mentioned in subsections (5) and (7). Relevantly, s 8(5)(e) provides that ‘…in any proceedings in which the enforcement of a foreign award is sought…, the court may, at the request of the party against whom it is invoked, refuse to enforce the award if that party proves to the satisfaction of the court that the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place…’.
Background
The respondent (‘ECQ’) the award creditor, is a company incorporated in Qatar. Hub, the award debtor, is a company incorporated in Australia. In 2010, ECQ and Hub entered into a contract for Hub to supply and install street lighting equipment and accessories, and street furniture and accessories, in Doha, Qatar. Relevant contractual provisions included that: (a) if any dispute could not be amicably resolved and was referred to arbitration, the ‘Arbitration Committee’ was to consist of three members, one chosen by each of the parties and the third member by the two party appointees. If a decision could not be reached in relation to the third member the appointment of that member could be referred by either party to the Qatari Courts for determination (Art. 46) (b) the contract was made in the State of Qatar and is subject to the laws of the State of Qatar (Art. 47). (c) English was the ruling language of the contract and accordingly all matters relating to the contract shall be in English (Art. 50). In August 2011, ECQ paid US$820,322.16 to Hub under the contract as an advance payment. However, in 2012 ECQ decided not to proceed with the contract and sought repayment of the money paid under the contract.
ECQ did not send a notice to Hub pursuant to the contract giving Hub an opportunity to appoint one member of the arbitration committee. Instead, in June 2016, ECQ filed a statement of claim in the Plenary Court of First Instance of the State of Qatar in reliance on Art 195 of Law No. 13 of 1990 promulgating the Civil and Commercial Code of Procedure (Qatar) of the Qatari Civil Procedure Code (‘Art 195’) seeking orders that the Court appoint an arbitral tribunal of three arbitrators including an arbitrator nominated by ECQ. Hub did not participate in the Qatari Court proceeding. The Qatari Court made orders in January 2017 appointing an arbitral tribunal. Thereafter, the arbitral tribunal sent to Hub’s nominated address six notices in English about the conduct of the arbitration between April 2017 and
July 2017, with the arbitration being adjourned on three occasions due to Hub’s failure to attend. Hub did not participate in the arbitration proceeding. On 1 August 2017, the arbitral tribunal issued an award, in Arabic, obliging Hub to pay ECQ amounts totalling in excess of $1,045,000.
The appeal
Hub appealed the determination of the primary judge who made orders for the recognition and enforcement of the award. Two broad issues were raised on appeal.
The appointment of the arbitral
tribunal: The first issue was whether Hub could resist enforcement of the award in Australia on the basis that the arbitral tribunal was not appointed in accordance with the parties’ agreement, notwithstanding the appointment of the tribunal by the Qatari Court. The Court observed that the contract provided the customary way for each party to a dispute to appoint an arbitrator and for the two arbitrators so appointed to appoint the third member of the tribunal. Art 195 provided, in the customary way, for the court at the seat of the arbitration to appointment arbitrators where the parties’ agreed procedure has failed. The Court determined that Art 195 did not provide for the court to appoint arbitrators contrary the parties’ agreed procedure simply because the parties are in a contractual dispute. If that were the case, then the court could always appoint arbitrators, regardless of what the parties had agreed. This would be contrary to the fundamental premise underlying arbitration, and the court’s enforcement of arbitration awards, which is that the jurisdiction of the tribunal arises from the agreement or consent of the parties. The Court found that the Qatari Court proceeded upon a misapprehension as to the facts. It appointed the tribunal because, as it understood the position, ECQ had invoked the Art 46 procedure but Hub had failed to respond. However, it had not done so. In these circumstances, under Qatari law the composition of the arbitral tribunal was not in accordance with the agreement of the parties and the basis to resist enforcement of the award in reliance on s 8(5)(e) of the IAA was established. ECQ submitted that Hub’s remedy was to seek to set aside the appointment of the arbitral tribunal or the award at the seat and that, as a matter of comity, the Court should regard the decision of the Qatari Court as effective until set aside.
The Court, however, determined that there was no detraction from the principle of comity by not enforcing the award because the Qatari Court acted on a misapprehension of the true position in appointing the arbitral tribunal. Further, the Court stated that Hub had the right (subject to the question of discretion) under the law of Australia to not have enforced against it an arbitral award by an arbitral tribunal that was not composed in accordance with what it had agreed. The discretion: The essential question identified by the Court was whether, as a matter of discretion, the award can or should be enforced notwithstanding that, first, the arbitration proceeding was conducted in Arabic, not English, and, second, the arbitral tribunal was prematurely appointed by the Qatari Court, both contrary to the procedure agreed by the parties. Contrary to the submission by Hub, the Court found the primary judge was correct to conclude that the language irregularity had no prejudice to Hub because it had received notices of the arbitration in English and it had elected not to participate, and that the immateriality of the irregularity would fully justify the exercise of the enforcement discretion notwithstanding the irregularity. However, the Court determined that the composition of the arbitral tribunal other than in accordance with the agreement of the parties was fundamental to the structural integrity of the arbitration; ‘it strikes at the very heart of the tribunal’s jurisdiction’ (at [104]). Thus, the Court would not exercise the discretion to enforce the award.
Conclusion
The appeal was allowed with the consequence that the orders and declaration of the Court at first instance were set aside and substituted with an order that the proceedings be dismissed.
Arbitration – Practice And Procedure
Enforcement of arbitration award – discretion of court to down judgment notwithstanding the parties’ settlement
In Hub Street Equipment Pty Ltd v Energy City Qatar Holding Company [2021] FCAFC 110 (25 June 2021) the Full Court allowed an appeal from a judgment enforcing an arbitration award under s8(3) of the International Arbitration Act 1974 (Cth). The substantive issue in the appeal concerned whether the composition of the arbitral tribunal was in accordance with the agreement of the parties. The matter also raised a question as to whether the Court can or should proceed to hand down its judgment notwithstanding that the proceedings have “settled in principle”. On 21 June 2021, the Court was in full agreement as to the judgment to be handed down and intended to hand down judgment on 23 June 2021, subject to administrative matters. The parties were to be notified on the morning of 21 June 2021. On that same morning (21 June), the appellant with the consent of the respondent sent an email to the Court stating: “These proceedings have settled in principle, although the settlement remains subject to its terms being carried out. Should that occur, the parties anticipate that they will seek the leave of the Court to discontinue the appeal within 30 days. We are informing the Court of this development as a courtesy”. The Court communicated to the parties that it had intended to hand down judgment on 23 June 2021, and requested that the parties communicate as soon as possible their view as to whether the judgment should be handed down. The parties did not respond to this or another Court communication.
Allsop CJ (with whom Middleton and Stewart JJ agreed) held that “important considerations of public policy and public interest support the judgment in this case being handed down” (at [5]); namely: • the appeal raised points of law of general interest and it is in the public interest that these views are made the subject of a published judgment in order to facilitate the development of the law, and the provision of guidance to others (at [6])
• the judgment corrects errors of both law and fact in the judgment below (at [7]) • the stage at which preparation of judgment had reached was a relevant consideration (here, the judgment was complete at time of notification) (at [8]) • “whilst nothing in these reasons is intended to derogate from the dictum . . . that ‘the law . . . encourages reasonable settlements’, the parties had a long time in which they could have settled their dispute. They did not do so. The
Court is unaware of the nature of the
Bankruptcy
Appeal against order setting aside bankruptcy notice – whether the notice was issued for an improper purpose - whether it was an abuse of process – appeal allowed
Nobarani v Mariconte [2021] FCAFC 96 (Allsop CJ, Farrell And Derrington JJ) The parties were involved in long running probate proceedings. While Mrs Mariconte won at first instance, the ultimate result of the proceedings was that Mrs Mariconte was ordered to pay Mr Nobarani’s costs of the original trial, the appeal to the New South Wales Court of Appeal, and the appeal to the High Court. These costs were to be paid out of the estate, by Mrs Mariconte, on a trustee basis. The proceedings were remitted to the Supreme Court of New South Wales where Mr Nobarani sought and obtained judgment for restitution of the original costs he had paid to Mrs Mariconte in the amount of approximately $141,000 (including interest). During the remitted proceedings, Mr Nobarani declined to seek relief for his restitution claim by way of execution against Mrs Mariconte’s property. After judgment was obtained, a Bankruptcy Notice for approximately $142,000 (including interest) was issued by the Official Trustee and was ultimately served on Mrs Mariconte after a failed mediation. Mrs Mariconte filed an application seeking an order that the Bankruptcy Notice be set aside as an abuse of process on the basis that Mr Nobarani knew Mrs Mariconte was not insolvent.
The primary judge inferred that the Bankruptcy Notice had been issued to pressure Mrs Mariconte in the context of ongoing probate proceedings, including mediation, such that it ought to be set aside as an abuse. This was inferred from matters such as Mr Nobarani’s failure to take any other enforcement action including by way of issuing a letter of demand or taking enforcement against Mrs Mariconte’s house when that was offered to him in the remitted probate proceedings. Mr Nobarani appealed.
The issues
The principal issues on appeal were whether the order setting aside the Bankruptcy Notice ought, itself, be set aside where:
(a) the matters relied on by the primary judge were not identified in the application, addressed in the evidence or put to Mr Nobarani in cross examination; (b) it had not been apparent or established that Mrs Mariconte was, in fact, solvent at the time that the application was issued; and (c) the availability of other remedies was irrelevant to whether the Bankruptcy Notice was properly issued.
The decision
The appeal was allowed. Per curiam, the Court affirmed the general principles relating to setting aside for abuse including that the applicant bore a ‘heavy onus’ of establishing the purpose with which the process was issued and that the purpose was improper. Further, the time at which to establish an abuse is the time at which the process was issued.
At first instance, Mrs Mariconte had not established that she was solvent, or that Mr Nobarani ought to have perceived her as such at the time at which the Bankruptcy Notice was issued. It was, therefore, not possible for the application to set aside to succeed on the basis on which it had originally been advanced.
Relying on the reasoning of Heerey J in Cavoli v Etl [2007] FCA 1191, the Full Court held that it is not a precondition to the issuing of a bankruptcy notice that a demand for payment be made or that other avenues of recovering the debt be exhausted. Further, it is not an abuse of process to issue a bankruptcy notice for the purpose of having a debt paid, so long as the creditor intends to invoke the Court’s bankruptcy jurisdiction if it is not. In the present case, the Court was satisfied that there was no evidence that Mr Nobarani did not intend to rely upon Mrs Mariconte’s failure to comply with the Bankruptcy Notice as constituting an act of bankruptcy pursuant to s 40(1) (g) of the Bankruptcy Act 1966 (Cth) on which he might then base a petition under s 44. Accordingly, Mrs Mariconte had not satisfied the onus of proof which she bore to establish that fact.
Further, there was nothing improper in Mr Nobarani preferring to use the bankruptcy process rather than causing Mrs Mariconte’s property to be sold given the risks which attend that alternative form of enforcement as well as the risk that any recoveries obtained may be clawed back by any subsequently appointed trustee in bankruptcy. In the result, the Court set aside the application and the orders of the primary judge, but granting an extension of the time for Mrs Mariconte to comply with the Bankruptcy Notice.
Dan Star QC is a Senior Counsel at the Victorian Bar, ph (03) 9225 8757 or email danstar@vicbar.com.au. The full version of these judgments can be found at www.austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment. Anthony LoSurdo SC is a barrister, arbitrator and mediator in 12 Wentworth Selborne Chambers, Sydney, and Lonsdale Chambers, Melbourne.
Joanne Sheperd is a barrister in 12 Wentworth Selborne Chambers, Sydney
