Jurisdiction - Australia
Australia – 10 Commercial Litigation Significant Developments In 2014.

28 December, 2014


Legal News & Analysis – Asia Pacific – Australia – Dispute Resolution


As we approach the end of 2014, it is timely to reflect on events during the year. While there were many important developments, here are our thoughts on ten significant developments in commercial litigation in Australia during 2014.


1. High Court provides some clarity on contractual interpretation
2. High Court on implied term of mutual trust and confidence
3. Fiduciary relationships in commercial contracts: party autonomy prevails
4. Waiver of privilege risk highlighted in communications with insurers
5. High Court revisits duty of care in relation to economic loss
6. Full Court ruling on apportionment spells future High Court appeal
7. Competition laws can apply to tenders for Government rights or licences
8. High Court deals twice with managed investment schemes: withdrawals under Part 5C.6 and in specie distributions
9. Ongoing growth in class actions and litigation funding
10. Australia shows continued support for International Arbitration
Finally, we make some comments looking ahead to 2015.


1- High Court Provides Some Clarity On contractual Interpretation


The approach to contractual interpretation has received further significant judicial attention this year, with the High Court handing down its decision in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7 (Woodside) and subsequent decisions of intermediate courts of appeal.


Prior to the Woodside decision, there had been some uncertainty as to the proper approach to contractual construction following a decision of three justices of the High Court inWestern Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 (Jireh) in which special leave to appeal was refused. In Jireh, comments were made to the effect that it is not permissible to construe a contract using surrounding circumstances where no ambiguity had first been established.


It was difficult for practitioners to reconcile those comments in Jireh with the position articulated in a number of intermediate appellate decisions that context or surrounding circumstances were part of what could be taken into account in construing a contract. The two positions stemmed from a difference in the interpretation of the ‘true rule’ outlined by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 (Codelfa) some decades earlier.

Following the Woodside decision and subsequent applications of it, the uncertainty has generally been resolved against the Jireh position. In Woodside, the majority held that the terms of a commercial contract would be determined by what a reasonable businessperson would have understood those terms to mean having regard to:


  1. the language used by the parties,
  2. the surrounding circumstances known to them, i.e., the factual matrix or context, and
  3. the commercial purpose or objects to be secured by the contract.


The High Court did not appear to consider it necessary to find ambiguity in the language before adopting this contextual approach.


A number of subsequent decisions this year of intermediate appellate courts have adoptedWoodside as authority for the contextual approach to construction.


In particular, the decision in Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 (Mainteck) clearly conveyed the NSW Court of Appeal’s view of the state of the debate. In Mainteck, the Court:


  • accepted that it was permissible to construe words in their context. The conclusion that a legal text is ‘clear’ simply means that there is nothing in the context which detracts from its ordinary literal meaning,
  • said that the approach in Woodside was not inconsistent with the true rule in Codelfa,
  • noted that the Woodside approach did away with the difficulty of identifying what is meant by ambiguity, and
  • made clear that whilst evidence of purpose and context could expand the scope of litigation, it would not render vague, divorced or contested surrounding circumstances relevant to the construction exercise.


The decision in Mainteck was approved in September 2014 by the Full Court of the Federal Court in Stratton Finance Pty Ltd v Webb [2014] FCAFC 110.


There do, however, remain some contrary views. For instance, in December 2014, the Victorian Court of Appeal in State of Victoria v Tatts Group Limited [2014] VSCA 311 cited Woodside but went on to say that surrounding circumstances can only be considered when the meaning of the language is ambiguous or susceptible to more than meaning. InTechnomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164, the Western Australia Court of Appeal made comments indicating that it was not clear to it whether the debate had been conclusively resolved in Woodside.


Key Lesson


While there remain some uncertainties, the position now seems to be clearer that Courts will have regard to context in construing contractual terms, without the need to first identify ‘ambiguity’. As such, parties to disputes involving matters of construction should consider how context may inform the construction exercise.


2. High Court On Implied Term Of Mutual Trust And Confidence


In the decision in Commonwealth Bank of Australia v Barker [2014] HCA 32, the High Court unanimously held that there is no implied term of mutual trust and confidence (the Implied Term) in Australian employment contracts.


In reaching its decision, the High Court found that the history of the development of the Implied Term in the United Kingdom (UK) is not applicable in Australia. The Implied Term, as recognised in the UK, provides that employers and employees will not, without reasonable cause, conduct themselves in a manner likely to destroy or seriously damage the relationship of trust and confidence between them.


The case concerned Mr Barker, an employee who had commenced working at the Commonwealth Bank of Australia in 1981. In 2009, Mr Barker was informed that his position as Executive Manager had been made redundant. He was then put on paid leave and later advised that his employment would be terminated.


The Court held:


  • The Implied Term did not answer the criterion of necessity required to support its implication by law, as it imposes obligations which are wider than what is necessary.
  • Recognising the Implied Term would be a step beyond the legitimate law-making function of the courts as it involves complex policy considerations and is a matter more appropriate for the legislature to determine.

Key Lessons


Employers in Australia now face less uncertainty as to the existence and extent of the Implied Term in their contracts with employees. Employers should, however, recognise that it remains possible for the term to be implied by fact in the circumstances of a particular contract, for example, if an employer’s policies regarding trust and confidence are expressly incorporated into employment contracts.


The Court was also careful to note that its judgment should not be taken as reflecting upon the questions of whether there is a general obligation to act in good faith in the performance of contracts, or whether contractual powers and discretions may be limited by good faith and rationality requirements.


3. Fiduciary Relationships In Commercial Contracts: Party Autonomy Prevails


Academic debate regarding the role of fiduciary law has this year intersected with the case law in a direct and revealing manner.


The year commenced with a provocative article by Professor Paul Finn, Fiduciary reflections (2014) 88 ALJ 127, detailing the author’s concern regarding the current direction of fiduciary law in Australia. Among other issues that he tackled, Professor Finn argued that the decisions in Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) 295 ALR 760 and ASIC v Citigroup Global Markets Australia Pty Ltd [No 4] (2007) 160 FCR 35 erroneously approached the question of whether a fiduciary relationship arose in the context of particular commercial transactions. In essence, the question, as he saw it, was one of characterisation of the relationship, rather than pure contractual construction. According to Professor Finn, as an instrument of public policy, fiduciary obligations could arise regardless of the rules set by the parties.


Questions over the correct approach to allegations of fiduciary duties in the context of commercial agreements received critical High Court scrutiny in the City of Sydney’s application for special leave to appeal in Streetscape. The Court declined special leave in circumstances where Counsel for the City of Sydney referred in oral argument to Professor Finn’s article: City of Sydney v Streetscape Projects (Australia) Pty Ltd [2014] HCATrans 30. Tellingly, in declining special leave the Court noted that in that case, a breach of the alleged fiduciary duty also constituted a breach of contract. As such, it provided support for the view of the Court below that, frequently, equity will have no work to do in the case of a well-documented bargain negotiated at arm’s length.


In A response to Professor Finn’s “fiduciary reflections” (2014) 88 ALJ 314, Herbert Smith Freehills partners Andrew Eastwood and Luke Hastings further argued that in the case of relationships constituted by contract, the orthodox approach to the question whether a fiduciary obligation arises, as taken in Streetscape, is one of construction. In so doing, the terms of the contract are paramount.


In the subsequent decision of Howard v Commissioner of Taxation [2014] HCA 21, the High Court reinforced that view, warning against attempts to ascribe a fiduciary character to commercial relationships without regard to the protective rationale of fiduciary law. The High Court further noted that the scope of fiduciary duties owed must accommodate to the particulars of the underlying relationship which gives rise to the duty so that it is consistent with the scope and limits of that relationship.


Key Lessons


The High Court’s swift disposal of the application for special leave in Streetscape should provide some comfort to parties relying on a contractual exclusion of fiduciary obligations. While an express term may not be determinative, courts are likely to approach the question of whether a fiduciary obligation exists, and if so, its scope, with reference to the primacy of party autonomy.


4. Waiver Of Privilege Risk Highlighted In Communications With Insurers


A decision of the Federal Court in Asahi Holdings (Australia) Pty Ltd v Pacific Equity Partners Pty Limited (No 2) [2014] FCA 481 is a useful reminder (and cautionary tale) of the risks associated with waiver of privilege and the care which must be exercised when providing privileged documents to insurers.


The decision involved Asahi, the buyer of a business, providing a privileged report to its warranty and indemnity insurer for the purpose of making a claim under an insurance policy in relation to alleged breaches of warranty by the vendors of the business. A parallel claim against those vendors in respect of the same breaches of warranty was the subject of separate litigation.


The vendors sought access to the privileged report on the basis that privilege had been waived when it was provided to the insurer. The Court found that Asahi acted in a manner inconsistent with the maintenance of privilege over the report when it was provided to the insurer and that, accordingly, privilege had been waived. The key reasons for this conclusion were:


  • disclosure to the insurer was voluntary – the policy did not require Asahi to provide to the insurer information protected by legal professional privilege,
  • Asahi and the insurer did not have a common interest at the time the report was provided. The insurer had not indicated it was likely to grant indemnity under the policy, and in fact the insurer’s interests were more aligned with those of the vendors, in proving that breaches of warranty had not occurred, and
  • neither the terms of the policy nor the duty of utmost good faith required the insurer to keep the report confidential, and no agreement between Asahi and the insurer as to confidentiality could be implied from the circumstances.

Key Lessons


The decision highlights that in dealings with insurers a key consideration will be whether there is a common interest between the policyholder and the insurer.


In a practical sense, this will only be clear once the insurer has confirmed in writing indemnity under the policy (even if that confirmation is subject to a general reservation of rights, as is usual practice in the insurance industry). Even then, steps should be taken to seek agreement from the insurer to treat the documents as confidential, use them only for certain specified purposes and restrict further dissemination.


5. High Court Revisits Duty Of Care In Relation To Economic Loss


In Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36, the High Court considered whether a builder of a strata development, Brookfield Multiplex Ltd (Brookfield), could owe a duty of care to an owners corporation (representing the purchasers of a commercial property) for works completed under contract with the vendor of the property.


The case centred on an action brought by the Owners Corporation Strata Plan 61288 (Owners Corporation) against Brookfield in relation to the construction of a 22 storey building consisting of residential and serviced apartments. Brookfield had completed this construction under a contract with the developer. The developer then sold the property to individual investors under a standard form contract, which provided that the owners were to lease the properties to Park Hotels Pty Ltd who would operate the serviced apartments.


The Owners Corporation contended that Brookfield owed them a common law duty to take reasonable care to avoid economic loss resulting from latent defects in the common property of the complex.


In four separate judgments, the seven justices concluded that no duty was owed by Brookfield to the Owners Corporation. The Court distinguished Bryan v Maloney (1995) 183 CLR 609 which had held a builder owed a duty of care to a subsequent purchaser.  In finding that no duty was owed to the Owners Corporation, the Court placed reliance on the following factors:


  • The contract between the developer and Brookfield was negotiated by sophisticated and well informed parties, which considered in detail how defects in the complex would be remedied. Further, the contracts between the developer and the purchasers gave the purchasers specific contractual rights with respect to defects in the property. This indicated that the parties had thought about the issue and had expressly agreed on how any defects would be fixed and who bore the liability of fixing the defects.
  • The purchasers of the property were not vulnerable, in the sense that they could protect themselves from the risk of defects through the terms of the sale contract. If they did not agree with the terms of the sale contract, they could have invested their monies elsewhere.


Key Lessons


The case provides some useful guidance from the High Court on the existence of duties of care to avoid pure economic loss and the existence of concurrent contractual obligations and common law duties.


It will be interesting to see if the decision is subsequently relied upon beyond the construction industry. The findings and comments by the Court as to the duties of care in light of the sophistication of the parties and the detailed contractual provisions may have equal application to other commercial arrangements. The existence of clear, unambiguous and detailed contractual terms may make any tortious duties much harder to establish and successfully prove.


6. Full Court Ruling On Apportionment Spells Future High Court Appeal


The recent decision in Wealthsure Pty Ltd v Selig [2014] FCAFC 64 (Wealthsure) has brought some confirmation to the application of the proportionate liability regime under theCorporations Act 2001 (Cth) (the Act).


The proportionate liability regime under the Act limits the liability of defendants for the loss suffered by a plaintiff. Where the regime applies, ‘concurrent wrongdoers’ are only liable to pay damages to the extent that the Court considers they contributed to the harm in question. The legislative regime prevents ‘deep pocket defendants’ from being targeted exclusively, when there are other individuals who were also at fault. The regime also places the risk of an insolvent defendant back on the plaintiff, rather than other defendants bearing a higher burden. The provisions apply principally to loss suffered as a result of contravention of s1041H of the Act (misleading or deceptive conduct).


A question arises when claims for the same damages arising from essentially the same set of facts are brought under both ‘apportionable’ and ‘non-apportionable’ provisions. Where one of the claims is ‘non-apportionable’, the plaintiff may seek to recover 100% of the damages from a particular defendant. However, the Court’s conclusions in Wealthsuresuggest that liability may be apportioned where the loss suffered is caused by a number of contraventions, as long as one of these contraventions is of s1041H and the loss suffered with respect to all contraventions is the same.


At first instance, Lander J held that proportionate liability provisions applied in respect of the causes of action based on s1041H, but not to those that did not rely on s1041H, despite it being common ground between the parties that the losses flowing from all causes of action were the same.


On appeal, the Full Court of the Federal Court concluded that the proportionate liability provisions were not to be restricted to one cause of action. Besanko J noted that while it might be ‘surprising’ that the proportionate liability provisions applied to causes of action removed from the proscribed application to misleading or deceptive conduct, it is common for one set of facts to give rise to a number of causes of action. Accordingly, it would be ‘artificial’ if the application of the proportionate liability provisions could be avoided by pleading one cause of action and not another.


This decision is at odds with the decision of the Full Court of the Federal Court in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65 (Bathurst), which was handed down 7 days later on 6 June 2014. The majority in Bathurst agreed with Lander Jʹs analysis and conclusions at first instance and their Honours declined to adopt the approach taken in Wealthsure.


Pending Appeal


There has been a grant of special leave to appeal to the High Court in respect of theWealthsure decision. It is expected the High Court will take this opportunity to resolve the conflict between the two Federal Court authorities.


7. Competition Laws Can Apply To Tenders For Government Rights Or Licences


On 20 November 2014, the Full Court of the Federal Court confirmed that compulsory examination notices issued by the ACCC to Moses and Paul Obeid under s155 of theCompetition and Consumer Act 2010 (Cth) (CCA) were valid.


The Obeids had sought declarations that the notices had not been validly issued as they did not concern matters within the scope of the CCA. The s155 notices related to arrangements alleged to have been made between certain companies in the context of an Expression of Interest (EOI) process conducted by the NSW Department of Primary Industries for coal exploration licences in the Mount Penny and Glendon Brook areas.


The Obeids contended that the notices were invalid primarily for two reasons.


  • First, it was argued that the CCA could not apply to the alleged arrangements, because the rights the subject of the EOI process were not ‘services’ within the meaning of s4 of the CCA. That argument rested on the proposition that statutory licences or rights are not provided, granted or conferred in ‘trade or commerce’, as arguably required by the s4 definition.
  • Secondly, it was argued that the CCA’s cartel ‘bid-rigging’ prohibitions could not apply to the alleged arrangements, because those prohibitions required the relevant arrangement to pre-date the ‘request for bids’.


The Full Court rejected both arguments.


The Implications

The Full Court’s reasoning has important implications for firms that tender to acquire statutory rights or licences, and for bidding processes generally.


The decision confirms that it cannot be assumed that acquiring statutory licences or rights from the Government falls outside the scope of a ‘service’ under the CCA.


  • The Court will consider the relationship or dealing as a whole between the relevant Government entity and the firm seeking to acquire the right or licence. It will consider whether the firm is engaged in ‘trade or commerce’ in acquiring the right or licence, and whether the Government entity is using commercial criteria and endeavouring to reap a commercial return.
  • The Court will also apply the ordinary meaning of ‘service’, in addition to the kinds of services recorded in s4 of the CCA. This theoretically could mean there are circumstances where there are ‘services’ to which the CCA applies that are not supplied in ‘trade or commerce’.


The language of the CCA’s ‘bid-rigging’ provisions refer to arrangements ‘ensuring that in the event of a request for bids’, certain outcomes follow. The Full Court has firmly rejected the notion that this language imports any temporal limitation. Specifically, the ‘bid-rigging’ provisions are not restricted to situations where the relevant bid-rigging arrangement was made before the request for bids was made, or before the bid itself was made.


8. High Court Deals Twice With Managed Investment Schemes: Withdrawals under Part 5C.6 And In Specie Distributions


Two particularly noteworthy judgments on managed investment schemes have been considered by the High Court this year and have clarified or confirmed the law in key respects.


Withdrawals Under Part 5C.6 Of The Corporations Act 2001 (Cth)


The decision in MacarthurCook Fund Management Limited v TFML Limited [2014] HCA 17 clarified what constitutes a withdrawal from a managed investment scheme (MIS) within the meaning of Part 5C.6 of the Corporations Act 2001 (Cth) (the Act).


Part 5C.6 imposes certain requirements in relation to a member’s ability to withdraw from an illiquid MIS.


The High Court held that a member “withdraws” for the purposes of Part 5C.6 if, by some act of volition on the part of the member, the responsible entity returns the whole or part of the member’s contribution. A member does not withdraw where the redemption occurs without volition on the part of the member, including where:


  • the responsible entity exercises a power compulsorily to redeem the interest of a member, or
  • the responsible entity performs an obligation to redeem which arises under the terms of issue of a class of interests, where that obligation must be performed independently of any act by the member.


The Court distinguished between the creation of a separate contractual obligation for a responsible entity to redeem an interest, and the creation of an obligation for the responsible entity to redeem as part of the terms of issue for an interest. In the latter scenario, the element of volition necessary for there to be a withdrawal for the purposes of Part 5C.6 does not exist.


Managed Investment Scheme Not Authorised To Make In Specie Distribution


In Wellington Capital Limited v Australian Securities and Investments Commission [2014] HCA 43, the High Court considered whether, as alleged by ASIC, an in specie distribution of shares by the responsible entity of a registered MIS to unit holders was beyond power.


The Court unanimously held that the distribution was beyond the responsible entity’s powers under the scheme’s constitution, and that the responsible entity had thereby contravened s601FB(1) of the Act.


A key term in the scheme’s constitution provided that the responsible entity had:

all the powers in respect of the Scheme that is legally possible for a natural person or corporation to have and as though it were the absolute owner of the Scheme Property and acting in its personal capacity.


On the basis of this term, the responsible entity submitted that it had the powers of a corporation, including those provided for in s 124 of the Act which enable a company to distribute the company’s property amongst members, in kind or otherwise.


In reaching its decision, the Court said that the powers of a responsible entity are determined by the terms of the scheme constitution in light of such enhancements or constraints as are provided by statute, and subject to statute, the general law relating to trusts to the extent that is applicable.

When the above term was construed in the context of the constitution as a whole, it was clear that it did not relate to the circumstances in which assets or capital forming part of the scheme property could be returned to unit holders. The term was facultative only – it equipped the responsible entity to deal with the scheme property as though it was the absolute owner of that property in dealings with external third parties. It did not however grant power in respect of intramural dealings involving non-consensual transfers of property to unit holders.

The Court found support for this limiting and purposive interpretation in the other terms in the constitution. The constitution, properly construed in light of the relevant provisions of the Act, confined the return of capital to unit holders to the winding up process and to cash payments annexed to the periodic distribution of income.


Key Lessons


The MacarthurCook case resolves some of the uncertainty around the application of the withdrawal rules in Part 5C.6 of the Act. In particular, it provides underwriters or equity funders with more certainty in circumstances where the creation of the funder’s interest is for a defined term, after which time, it is to be redeemed without requiring any act of volition by the funder.

The Wellington Capital case confirms that responsible entities must ensure that any exercise of power complies with the constitution for the scheme, and the law. A general clause which purports to confer broad powers may not be effective to authorise all actions when properly construed, particularly where the purported exercise of power has the capacity to affect the interests of members.


9. Ongoing Growth In Class Actions And Litigation Funding


There continues to be ongoing growth in the third party litigation funding industry in Australia. A significant number of domestic and international funders are now actively involved in Australian class actions.


There are a number of issues on the immediate horizon which are likely to see fundamental changes to the funding industry in Australia.


  • First, on 3 December 2014, the Federal Government released the Productivity Commission’s final report on Access to Justice Arrangements, which addresses issues regarding private funding of litigation (among other things). The Commission has recommended that litigation funders be subject to a licensing regime to ensure that funders meet certain capital adequacy requirements and ethical standards. The Commission did not go as far as to specify the requirements or identify which regulatory agency should oversee the licensing regime. Separately, earlier this year, the Commonwealth Attorney-General, Senator George Brandis, indicated that greater regulation of third party litigation funders was necessary and made public statements regarding a review of the funding industry. No specific reforms have been proposed, but we expect that the review will consider the appropriateness of prudential requirements on funders to maintain a minimum asset base in Australia and will likely reflect some of the findings by the Productivity Commission.
  • Secondly, the Productivity Commission recommended in its final report to lift the restriction on lawyers’ ability to charge contingency fees, subject to appropriate consumer protections. In doing so, the Commission recommended that the discretion of the current courts to award adverse costs against non-parties, including litigation funders, should also apply to lawyers who wish to charge contingency fees. The issue of contingency fees has been, and will continue to be, furiously debated in Australia.  If introduced, the immediate effect will likely be to embolden plaintiff law firms to directly fund class actions in light of the significant financial returns available.  Some commentators have raised concerns that this will result in a greater number of class actions being commenced.
  • Finally, the Federal Court is presently hearing an application by the lead representatives in the class action against Allco Finance Group, seeking Court approval to establish a “common fund”.


The Allco class action is currently funded by International Litigation Funding Partners Pte Ltd. The common fund is in effect a means of securing (in the form of a Court order) at the outset an identified recovery rate for the funder from all putative claimants. If the application is granted, a percentage of any settlement or judgment sums received by group members will be paid to the funder, without the need for the funder to enter into individual contracts with group members.

There are a number of issues that will likely be ventilated before the Court in considering the appropriateness of a common fund. These include:


  • difficulties the Court might have in assessing the appropriateness of a percentage return to the funder at the outset of the proceedings,
  • a broader doctrinal question as to whether litigation funding should be imposed on group members who have not signed a contract.


One further concern with the common fund is that it will encourage a ‘race to file’ proceedings so that the funder can ensure it is the relevant common fund recipient. Should it be approved, the common fund mechanism is likely to encourage a continued growth in the funding industry as funders will be able to maximise the potential return they can achieve from funding a class action.


10. Australia Shows Continued Support For International Arbitration


This year there have been several important cases in the international arbitration space confirming Australian courts’ support for international arbitration.


In 2014, the Full Court of the Federal Court handed down its reasons for dismissing TCL Air Conditioner (Zhongshan) Co Ltd’s (TCL’s) appeal from the Court’s decision in Castel Electronics Pty Ltd v DCL Air Conditioner (Zhongshan) Co Ltd (No 2) [2012] FCA 1214. The Court held that an international commercial arbitration award will not be set aside or denied recognition or enforcement as a result of a failure to accord a party procedural fairness under Articles 34 and 36 of the Model Law unless there is ‘demonstrated real unfairness or real practical injustice in how the international litigation or dispute resolution was conducted or resolved.’ Following this decision, Castel has pursued enforcement proceedings against TCL in China, but has not succeeded in obtaining payment to date.


In addition, several court decisions were handed down in 2014 confirming Australian courts’ commitment to upholding agreements to arbitrate and the finality of arbitration awards. For example:


  • The Federal Court’s decision in Armada (Singapore) Pte Ltd (Under Judicial Management) v Gujarat NRE Coke Limited [2014] FCA 636 concerned the enforceability of three foreign arbitral awards in Australia. In determining that the awards were binding, Foster J held that the applicant had satisfied the requirements of section 9 of theInternational Arbitration Act 1974 (Cth) (IAA).
  • In William Hare UAE LLC v Aircraft Support Industries Pty Ltd [2014] NSWSC 1403, the Court held that section 8 of the IAA should be construed so as to allow enforcement of part of an arbitral award where severance is possible. In that case, Darke J found that there was a breach of natural justice in respect of one part of the relevant arbitral award, and refused to enforce that portion of the award. However, his Honour held that the remainder of the award was enforceable in accordance with section 8(2), and severed the part of the award affected by breach of natural justice accordingly.
  • In Subway Systems Australia Pty Ltd v Ireland [2014] VSCA 142, the Victorian Court of Appeal considered whether a party to an arbitration agreement could avoid arbitration by seeking to bring its claim before a statutory tribunal, in this case, the Victorian Civil and Administrative Tribunal (Tribunal). The issue turned on whether the Tribunal was considered a “court” within the meaning of s 8 of the Commercial Arbitration Act 2011(Vic), which requires a court to refer a matter the subject of an arbitration agreement to arbitration if a party requests. Acting Appeal Justice Kyrou (in the minority) found that the Tribunal was not a court. However, Maxwell P and Beach JA found that the Tribunal was a court within the terms of s 8 and accordingly that the Tribunal was precluded from hearing and determining the dispute.

Looking Ahead To 2015


Looking ahead to 2015, the Wealthsure appeal will be heard in the High Court and the Federal Court will release its decision in the Allco class action ‘common fund’ application (as is mentioned above).


It will also be of interest to monitor the NuCoal constitutional challenge which was filed in the High Court in August this year. This challenge follows the NSW Parliament passing theMining Amendment (ICAC Operations Jasper and Acacia) Act 2014, which removed NuCoal exploration licences for three mining sites.


NuCoal seeks to challenge the legislation on the basis that the Act removing the licences is an exercise of punitive judicial power by the NSW Parliament and also infringes on NuCoal’s literary and artistic works, inconsistent with the Copyright Act 1968 (Cth).


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For further information, please contact:


Leon Chung, Partner, Herbert Smith Freehills

[email protected]


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