FEDERAL COURT OF AUSTRALIA

Rinehart v Rinehart (No 3) [2016] FCA 539

ORDERS

THE COURT ORDERS THAT:

1.    Insofar as the interlocutory applications dated 3 and 23 December 2014 relied upon the arbitration agreement in the Porteous settlement deed, the applications be dismissed.

2.    There be a trial of the question whether any of the following agreements is null and void, inoperative or incapable of being performed within the meaning of s 8(1) of the Commercial Arbitration Act 2010 (NSW) or the Commercial Arbitration Act 2012 (WA):

(a)    Clause 14 of the 2005 deed of obligation and release;

(b)    Clause 20.2 of the Hope Downs deed;

(c)    Clause 9.2 of the 2007 HD deed;

(d)    Clause 16 of the 2009 deed of further settlement; and

(e)    Clause 11 of the 2010 deed of variation.

3.    Costs of the interlocutory applications dated 3 and 23 December 2014 be reserved.

4.    The matter be listed for a case management hearing on Thursday, 30 June 2016 at 9:30 am.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INDEX

GLEESON J:

1    This judgment deals with two interlocutory applications made by the first respondent (“Mrs Rinehart” or “GHR”) and several of the other respondents (“HPPL respondents”). Mrs Rinehart is the daughter of the late Langley George Hancock (“Mr Hancock senior” or “LGH”) and the mother of the applicants (“Ms Rinehart” or “BHR” and “Mr Hancock” or “JLH”). The HPPL respondents have various relationships with Mrs Rinehart.

2    By her interlocutory application dated 23 December 2014, Mrs Rinehart seeks an order pursuant to s 8(1) of the Commercial Arbitration Act 2010 (NSW) (“NSW Act”) that the parties to this proceeding be referred to arbitration in respect of the matters the subject of the proceeding, an order that the proceeding be dismissed or permanently stayed or, in the alternative, various orders pursuant to s 8(1). Section 8(1) provides:

(1)    A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

3    By para 9 of their interlocutory application dated 3 December 2014, the HPPL respondents (comprising the second respondent (“HPPL”), third respondent (“HML”), fifth respondent (“Mr Watroba”), sixth respondent (“HRL” or “WRL”), seventh respondent (“HMHTI”), twelfth respondent (“HDIO”), thirteenth respondent (“RDIO”) and the fifteenth respondent (“MDIO”)) seek an order that the proceeding be stayed.

4    In support of their application, the HPPL respondents rely on s 8(1) of the NSW Act or alternatively s 8(1) of the Commercial Arbitration Act 2012 (WA) (“WA Act”), which is in identical terms.

5    In the main proceeding, the applicants seek extensive relief, based substantially upon allegations of misconduct by Mrs Rinehart since the death of Mr Hancock senior in March 1992, and concerning the administration of one or more trusts of which the applicants are beneficiaries. Mrs Rinehart and the HPPL respondents contend that the applicants are disentitled from seeking that relief because they are contractually bound to resolve the disputes that are the subject of the proceeding by arbitration.

6    Mrs Rinehart supported the interlocutory application made by the HPPL respondents and adopted their submissions.

7    The eighth respondent (“150 Investments”) consents to the orders sought by the interlocutory applications. The other respondents (being the fourth respondent (“HFMF”), the ninth respondent (“Ms Welker” or “HRW”), the tenth respondent (“Ms Ginia Rinehart” or “GHFR”), the eleventh respondent (“Mr Donnelly”) and the fourteenth respondent (“MDI”)) did not appear on the interlocutory applications. However, in correspondence, MDI consented to claims affecting MDI being stayed pending an arbitration in respect of those claims, and consented to those claims being determined by confidential arbitration.

8    Ms Welker and Ms Ginia Rinehart are also Mrs Rinehart’s children.

The case made by Mrs Rinehart and the HPPL respondents

9    The interlocutory applications are based on deeds executed by various of the applicants and respondents between September 2003 and November 2010. Six of the deeds are alleged to contain an “arbitration agreement” within the meaning of s 8(1). Those six deeds, described in more detail later in the judgment, are:

(1)    the Porteous settlement deed;

(2)    the 2005 deed of obligation and release;

(3)    the Hope Downs deed (executed in about August 2006);

(4)    the 2007 HD deed;

(5)    the 2009 deed of further settlement; and

(6)    the 2010 deed of variation.

10    As against Ms Rinehart, Mrs Rinehart and the HPPL respondents rely on the Porteous settlement deed, the Hope Downs deed and the 2007 HD deed.

11    As against Mr Hancock, they rely on all six deeds (noting that the reliance on the Hope Downs deed against Mr Hancock is based on his execution of the 2007 HD deed).

12    In brief, Mrs Rinehart and the HPPL respondents say that, by executing the deeds, the applicants have “repeatedly given up any right they may once have had to bring the claims now made in the statement of claim”. Further, they have “repeatedly agreed that any such claim is to be resolved by way of confidential arbitration proceedings”.

The applicants’ response

13    The applicants oppose the orders sought by Mrs Rinehart and the HPPL respondents.

14    As to five of the alleged arbitration agreements (being those other than the agreement to arbitrate in the Porteous settlement deed), the applicants allege that the execution of the deeds in which those agreements are contained was procured by misconduct on the part of Mrs Rinehart and HPPL. In the main proceeding, the applicants claim injunctive relief to restrain the enforcement of the arbitration clauses contained in the 2005 deed of obligation and release, the Hope Downs deed, the 2007 HD deed, the 2009 deed of further settlement and the 2010 deed of variation. They also seek declarations that those deeds and the arbitration clauses contained in them are void ab initio.

15    The applicants also dispute that s 8(1) applies in this case on several grounds. First, they dispute that s 8(1) applies to this Court as a court exercising federal jurisdiction because it is not “picked up” by s 79 of the Judiciary Act 1903 (Cth) (“Judiciary Act”).

16    If s 8(1) binds this Court pursuant to s 79, then the applicants dispute that s 8(1) applies because it is concerned only with “domestic commercial arbitrations”, being the subject matter of the NSW Act and the WA Act (individually and collectively “commercial arbitration legislation”). The applicants say (in summary) that the relationships between them and the respondents are not commercial relationships and, accordingly, any arbitration of disputes between the applicants and the respondents would not be a commercial arbitration.

17    If an arbitration between the applicants and the respondents of the matters in dispute in this proceeding would be a “domestic commercial arbitration”, then the applicants dispute that the pre-conditions for an order under s 8(1) are satisfied in this case.

18    If the pre-conditions to an order under s 8(1) are satisfied, then the applicants submit that, before granting the interlocutory relief sought, the Court should decide whether the arbitration agreements upon which the respondents rely are “null and void, inoperative or incapable of being performed” within the meaning of this proviso to s 8(1).

QUESTIONS FOR DETERMINATION

19    The parties identified the following 17 questions for determination (to which I have made minor adjustments to recognise the HPPL respondents’ reliance on the WA Act):

(1)    What is the meaning and operation of s 1(1) of the commercial arbitration legislation?

(2)    What factors are relevant to determining whether the commercial arbitration legislation applies?

(3)    Does there need to be a commercial relationship between the parties in order for an arbitration to be a domestic commercial arbitration?

(4)    If so, have GHR and each of the HPPL respondents demonstrated that there was a commercial relationship between each of them and each of the applicants, as a result of which any arbitration between them should be characterised as a domestic commercial arbitration?

(5)    Have GHR and each of the HPPL respondents met their burden of proving that the commercial arbitration legislation applies as between each of them and the applicants?

(6)    If the commercial arbitration legislation applies, what facts must the party seeking referral of the parties to arbitration establish in order to engage s 8(1)?

(7)    To what standard of proof must those facts be established:

(a)    does it require GHR and the HPPL respondents to demonstrate an arguable case or sustainable argument that the matter(s) in the court proceedings are the subject of an arbitration agreement; or

(b)    does it require GHR and the HPPL respondents to prove, on the balance of probabilities, that matter(s) in the court proceedings are the subject of an arbitration agreement?

(8)    Which, if any, of the respondents to these proceedings are “parties” to a deed containing an arbitration agreement with one or both of the applicants?

(9)    Have GHR and the HPPL respondents met their burden of proving that the matter(s) in the current proceedings are “the subject of an arbitration agreement” within the meaning of s 8(1) of the commercial arbitration legislation? If so, which “matters” constitute:

(a)    a dispute “under” the 2005 deed of obligation and release, the Hope Downs deed or the 2007 HD deed?

(b)    a dispute “arising out of, relating to or in connection with” the Porteous settlement deed, the 2007 CS deed, or the 2009 deeed of further settlement and the 2010 deed of variation?

(10)    Does the Court have discretion to decide or not decide whether the arbitration agreement is null and void, inoperative or incapable of being performed?

(11)    If the Court does have discretion, should the Court direct that there be a trial before this Court on the question whether the arbitration agreements applicable to those matter(s) identified in answer to agreed question (9) are null and void, inoperative or incapable of being performed for the purposes of s 8(1), on any one or more of the following grounds:

(a)    undue influence;

(b)    duress;

(c)    unconscionability;

(d)    fraudulent concealment;

(e)    mispresentation;

(f)    misleading and deceptive conduct;

(g)    fraud on a power?

(12)    Can the proviso in s 8(1) apply where an arbitration agreement is voidable rather than void?

(13)    If the Court determines that s 8(1) is engaged with respect to one or more of the matters in the proceedings, what should happen to those matters which are not the subject of an arbitration agreement?

(14)    Is s 8(1) binding on this Court pursuant to s 79 of the Judiciary Act?

(15)    If the Court determines that the commercial arbitration legislation does not apply or that GHR and the HPPL respondents have not met their burden of proving that any matter(s) in the proceedings are the subject of an arbitration agreement, does the Court otherwise have the power to stay the proceedings and refer the parties to arbitration?

(16)    If so, should the Court exercise its discretion to do so?

(17)    On the assumption that answers favourable to the respondents are given to the questions stated above, what form of order staying the proceedings or referring them to arbitration is appropriate to give effect to the Court’s reasons?

20    I have addressed the agreed questions in the course of addressing the following issues:

(1)    The proper construction of s 8(1). This issue requires consideration of agreed questions (1), (2), (3), (6), (7), (10) and (12).

(2)    The Court’s powers to make the orders sought (agreed questions (14) and (15)).

(3)    Whether s 8(1) applies to the facts of this case. This issue requires consideration of agreed questions (4), (5), (8) and (9).

(4)    The consequences that flow from the conclusions about the application of s 8(1) in this case. This issue raises, at least potentially, agreed questions (11), (13), (16) and (17).

SUMMARY OF CONCLUSIONS

21    For the reasons given below, I have concluded that:

(1)    Section 79 of the Judiciary Act “picks up” s 8(1) of the commercial arbitration legislation;

(2)    The NSW Act does not apply in this proceeding to the alleged arbitration agreement in the Porteous settlement deed, because it is not an agreement to submit to arbitration any dispute between the applicants and Mrs Rinehart or any of the HPPL respondents. If that conclusion is wrong, none of the claims in the proceeding is a matter which is the subject of the alleged arbitration agreement because the release in clause 3.9 of the Porteous settlement deed does not cover any claim made in this proceeding. It was not suggested that the WA Act applies to the Porteous settlement deed;

(3)    The other five arbitration agreements relied upon by the applicants are arbitration agreements within of s 8(1) of either the NSW Act or the WA Act because they are apparently valid arbitration agreements within the meaning of s 7(1);

(4)    The following matters in the proceeding are the subject of an apparently valid arbitration agreement, in that there is a sustainable argument that the outcome of those claims is governed or controlled by the Hope Downs deed:

(a)    the claims in prayers 8, 23, 24, 27.2 and 28.1 to 28.3 of the originating application, concerning the ownership of shares in HPPL, by reason of clauses 20.2 and 7(e) of the Hope Downs deed;

(b)    the claims in prayers 15 and 29 which seek declaratory relief as to the ownership by HDIO and HPPL respectively of the Hope Downs and Nicholas Downs tenements, by reason of clauses 20.2 and 7(b) of the Hope Downs deed;

(c)    the claims in prayers 48 to 51, which appear to concern the rights of Mrs Rinehart and HPPL to “deploy” the Hope Downs deed.

(5)    The following matters in the proceeding are the subject of an apparently valid arbitration agreement, in that there is a sustainable argument that the matters form part of a dispute under the Hope Downs deed within the meaning of clause 20.2, by reason of their close connection with the claims for relief identified in (4) above and the fact that the parties against whom the relief is claimed are parties to the Hope Downs deed:

(a)    the claims in prayers 9 to 14, 27.1, 28.4 and 28.5 of the originating application concerning the ownership of HPPL shares;

(b)    the claims in prayers 16, 17, 20 and 21 of the originating application, concerning the Hope Downs tenements;

(c)    the claims in prayers 22, 25 and 26 of the originating application, concerning the 1988 Agreement (described below);

(d)    the claims in prayers 30 and 31 of the originating application, concerning the Nicholas Downs tenements.

(6)    The following matters in the proceeding are the subject of an apparently valid arbitration agreement, being clause 16 of the 2009 deed of further settlement:

(a)    the claims in prayers 42 to 44 of the originating application, concerning the rights arising out of the 2007 HD deed and the 2007 CS deed against Mr Hancock;

(b)    the claims in prayers 45.1, 45.2, 46.1, 46.2 and 47 of the originating application concerning the operation of the release and the arbitration clause in the 2009 deed of further settlement;

(7)    The following matters in the proceeding are the subject of an apparently valid arbitration agreement, being clause 11 of the 2010 deed of variation:

(a)    the claims in (6) above; and

(b)    the claims in prayers 45.3, 46.3 and 47 of the originating application concerning clause 11 of the 2010 deed;

(8)    The following matters in the proceeding are not the subject of an apparently valid arbitration agreement:

(a)    the claims for relief in the following prayers in the originating application

(i)    prayers 4 and 5 (against RHIO);

(ii)    prayers 18 and 19 (against HDIO);

(iii)    prayers 32 to 34 (against MDI and MDIO).

(b)    the disputes between the applicants, Mrs Rinehart and HPPL concerning ownership of the Roy Hills tenements arising from the claims made by prayers 1 to 3, 6 and 7 of the originating application;

(c)    the disputes between Ms Rinehart, Mrs Rinehart and HPPL concerning the enforceability of the releases and arbitration clauses in the Hope Downs deed and the 2007 HD deed, arising from prayer 35;

(d)    the disputes between Ms Rinehart, Mrs Rinehart and those HPPL respondents who are signatories to the Hope Downs deed and the 2007 HD deed concerning the validity of those deeds, arising from prayers 36 and 37;

(e)    the disputes between Ms Rinehart and Mrs Rinehart concerning her conduct in executing the Hope Downs deed and the 2007 HD deed, arising from prayers 38 and 39;

(f)    the disputes between Mr Hancock, Mrs Rinehart and the HPPL concerning the validity and enforceability of provisions of the 2005 deed of obligation and release, arising from prayers 40 and 41;

(9)    Insofar as there are matters in the proceeding that are the subject of an arbitration agreement, the Court should exercise its discretion to decide whether any of the five arbitration agreements is null and void or inoperative within the meaning of s 8(1).

APPLICATION OF COMMERCIAL ARBITRATION LEGISLATION

22    Agreed questions (1) to (3), (6) and (7) concern the factual circumstances in which the commercial arbitration legislation and, in particular, s 8(1) may apply. Questions (10) and (12) also concern the proper interpretation of s 8(1).

Preliminary observations

23    The commercial arbitration legislation is based upon the UNCITRAL Model Law on International Commercial Arbitration, as adopted by the United Nations Commission on International Trade Law on 21 June 1985 with amendments as adopted by that Commission in 2006. The English text of the Model Law is set out in Schedule 2 to the International Arbitration Act 1974 (Cth) (“International Arbitration Act”).

24    In TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5; (2013) 251 CLR 533 (“TCL”) at [11], French CJ and Gageler J noted that “[t]he analytical commentary published by the UNCITRAL Secretariat to accompany the 1985 draft of the UNCITRAL Model Law (the UNCITRAL analytical commentary) spelt out that the UNCITRAL Model Law was ‘designed for consensual arbitration’, which the UNCITRAL analytical commentary explained to mean ‘arbitration based on voluntary agreement of the parties’.”

25    The development of the Model Law was explained by Maxwell P of the Victorian Court of Appeal in Subway Systems Australia Pty Ltd v Ireland [2014] VSCA 142. His Honour referred to the Explanatory Note from the UNCITRAL Secretariat which accompanied the Model Law, including the following statement:

Recent amendments to arbitration laws reveal a trend in favour of limiting and clearly defining court involvement in international commercial arbitration. This is justified in view of the fact that the parties to an arbitration agreement make a conscious decision to exclude court jurisdiction and prefer the finality and expediency of the arbitral process.

26    At [16], Maxwell P said:

Article 8 of the Model Law is concerned with court jurisdiction in the substantive sense, not the adjectival sense. The manifest purpose of art 8 is to ensure that, where parties have agreed to arbitrate their disputes, any recourse to a ‘court’ is precluded. The purpose of the Article is to impose an obligation on the ‘court’ in effect to enforce the agreement to arbitrate, by requiring that it decline to exercise jurisdiction over the dispute and instead refer the parties to arbitration.

27    Article 8(1) of the Model Law is in identical terms to s 8(1) of the commercial arbitration legislation except that the word “shall” is used instead of “must”. The UNCITRAL analytical commentary on the draft text of the original version of the Model Law (which contains Article 8 in its final form) states:

Article 8 deals with an important ‘negative’ effect of an arbitration agreement. The agreement to submit a certain matter to arbitration means that this matter shall not be heard and decided upon by any court, irrespective of whether this exclusion is expressed in the agreement.

28    The correct application of s 8(1) is complicated where, as here, there are disputes as to the enforceability of the asserted arbitration agreements, and as to the scope of those agreements. As appears below, the commercial arbitration legislation enshrines, in s 16, the doctrine of kompetenz-kompetenz by which arbitrators are empowered to decide for themselves whether they have jurisdiction under an arbitration clause, although their decision is provisional in that either party has the right to apply to the court to have the jurisdictional question reopened and reconsidered in full.

29    The scheme of the commercial arbitration legislation is intended to discourage the court (and, in some cases, may prohibit the court) from intruding into the remit of the arbitral tribunal’s kompetenz-kompetenz. However, the court must first be satisfied that s 8(1) is engaged on the facts of the case. In Albon (t/a NA Carriage Co) v Naza Motor Trading SDN BHD (No 3) [2007] EWHC 665 (Ch); [2007] 2 All ER 1075 (“Albon”), Lightman J considered a submission that the doctrine of kompetenz-kompetenz precluded the court from intervening in the arbitral process where the arbitral tribunal is seized of the issue of its own jurisdiction and in particular, from intervening on the issue of whether or not an arbitration agreement has been concluded. He concluded (at [20]):

Whilst the doctrine of ‘Kompetenz-Kompetenz’ (which is given effect in a domestic arbitration by s 30 of the [Arbitration Act 1996 (UK)]) provides that the arbitral tribunal shall have jurisdiction to determine whether the arbitration agreement was ever concluded, it does not preclude the court itself from determining that question. There are two reasons why the court must have jurisdiction to rule on whether the arbitration agreement was concluded. The first is that the rule of law in general and subject only to limited exceptions requires that a party should not be barred from access to the court for the resolution of disputes unless the grounds for such bar are established. A bar on the ground of the alleged conclusion of an arbitration agreement (in general and subject only to limited exceptions) is not established unless and until the court has ruled on the issue whether it has been concluded. The second is that, unless and until it is held that the arbitration agreement has been concluded, the compelling factors requiring respect for the terms agreed regarding arbitration do not come into play or at any rate do not come into play with their full force and effect.

Relevant statutory provisions

30    The provisions set out below are taken from the NSW Act. Relevantly, there are identical provisions in the WA Act.

31    The long title to the NSW Act is “[a]n Act relating to the conduct of commercial arbitrations; to repeal the Commercial Arbitration Act 1984; and for other purposes”. Section 1C is entitled “Paramount object of Act”. It provides:

(1)    The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.

(2)    This Act aims to achieve its paramount object by:

(a)    enabling parties to agree about how their commercial disputes are to be resolved (subject to subsection (3) and such safeguards as are necessary in the public interest), and

(b)    providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly.

(3)    This Act must be interpreted, and the functions of an arbitral tribunal must be exercised, so that (as far as practicable) the paramount object of this Act is achieved.

32    Section 1 provides relevantly:

1 Scope of application

(cf Model Law Art 1)

(1)    This Act applies to domestic commercial arbitrations.

Note. The International Arbitration Act 1974 of the Commonwealth covers international commercial arbitrations and the enforcement of foreign arbitral awards.

(2)    The provisions of this Act, except sections 8, 9, 17H, 17I, 17J, 35 and 36, apply only if the place of arbitration is in New South Wales.

(3)    An arbitration is domestic if:

(a)    the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia, and

(b)    the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration, and

(c)    it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.

(4)    For the purposes of subsection (3):

(a)    if a party has more than one place of business, the place of business is that which has the closest relationship to the arbitration agreement, and

(b)    if a party does not have a place of business, reference is to be made to the party’s habitual residence.

33    The following note appears at the end of s 1:

Model Law Note. The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.

34    Section 2(1) contains the following relevant definitions:

arbitration means any domestic commercial arbitration whether or not administered by a permanent arbitral institution.

party means a party to an arbitration agreement and includes:

(a)    any person claiming through or under a party to the arbitration agreement, and

(b)    in any case where an arbitration does not involve all of the parties to the arbitration agreement, those parties to the arbitration agreement who are parties to the arbitration.

35    Section 2A provides:

2A    International origin and general principles

(cf Model Law Art 2A)

(1)    Subject to section 1C, in the interpretation of this Act, regard is to be had to the need to promote so far as practicable uniformity between the application of this Act to domestic commercial arbitrations and the application of the provisions of the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) to international commercial arbitrations and the observance of good faith.

(2)     

Note.     This section differs from the Model Law. Art 2A (1) has been changed as a consequence of the application of the Act to domestic (instead of international) commercial arbitrations. Art 2A (2) is omitted because it is covered by the provision referred to in section 1C (4). Subsections (3) and (4) reflect section 17 of the International Arbitration Act 1974 of the Commonwealth.

(3)    Without limiting subsection (1), in interpreting this Act, reference may be made to the documents relating to the Model Law of:

(a)    the United Nations Commission on International Trade Law, and

(b)    its working groups for the preparation of the Model Law.

(4)    Subsection (3) does not affect the application of section 34 (Use of extrinsic material in the interpretation of Acts and statutory rules) of the Interpretation Act 1987 for the purposes of interpreting this Act.

36    By s 7(1), an “arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not”.

37    An arbitration agreement may be in the form of an arbitration clause in a contract: s 7(2).

38    Section 16 provides relevantly:

16    Competence of arbitral tribunal to rule on its jurisdiction

(1)    The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.

(2)    For that purpose, an arbitration clause which forms part of a contract is to be treated as an agreement independent of the other terms of the contract.

(3)    A decision by the arbitral tribunal that the contract is null and void does not of itself entail the invalidity of the arbitration clause.

Note.    The Model Law provides that such a decision does not “ipso jure” entail the invalidity of the arbitration clause.

(4)    A plea that the arbitral tribunal does not have jurisdiction must be raised not later than the submission of the statement of defence.

…

(8)    The arbitral tribunal may rule on a plea referred to in subsection (4) … either as a preliminary question or in an award on the merits.

(9)    If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within 30 days after having received notice of that ruling, the Court to decide the matter.

(10)    A decision of the Court under subsection (9) that is within the limits of the authority of the Court is final.

Domestic commercial arbitration

39    The parties argued at length over the meaning of “domestic commercial arbitration” and, in particular, “commercial arbitration” in the commercial arbitration legislation.

40    Mrs Rinehart explicitly accepted that s 8(1) will have no application unless the arbitration to which the parties are to be referred would be a domestic commercial arbitration.

Agreed questions (1) and (2): What is the meaning and operation of s 1(1) of the commercial arbitration legislation? What factors are relevant to determining whether the legislation applies?

41    Section 1(1) identifies the scope of operation of the commercial arbitration legislation. Relevantly, it limits the legislation’s application (and, accordingly, the application of s 8(1)) to agreements to submit disputes to domestic commercial arbitration within the meaning of the legislation. Consequently, an agreement to submit a dispute or disputes to an arbitration which would be of a kind other than a “domestic commercial” arbitration is not an agreement to which the commercial arbitration legislation applies.

42    It follows that, in order to apply s 8(1), it is necessary to be satisfied that an arbitration to which the parties would be referred would be a domestic commercial arbitration.

43    At [31] of the Report of the Secretary-General: possible features of a model law on international commercial arbitration (1981) UN Doc A/CN.9/207, the original drafters of the Model Law Note below s 1 (which first appeared as a note to the Model Law) referred to the differentiation of commercial arbitrations from arbitrations of a different nature:

[The term ‘commercial’] has by now gained a sufficiently clear meaning, at least as a modifier to arbitration, thus excluding arbitrations of a different nature such as those in labour disputes or family law matters.

Meaning of “domestic” commercial arbitration

44    The three criteria for an arbitration to be “domestic” are set out in s 1(3).

45    For criterion (a), it is necessary to identify the “parties” to an “arbitration agreement”. The “parties” are to be identified by reference to the extended definition of “party” in s 2(1). As noted above, the meaning of “arbitration agreement” is contained in s 7.

46    The applicants argued that the commercial arbitration legislation is concerned with commercial disputes between business people, based on the requirement in s 1(3)(a) that the parties to an arbitration agreement have their “places of business” in Australia. However, s 1(4) explicitly contemplates that a party to an arbitration agreement may not have a place of business.

47    The applicants’ case was that neither of them conducted any relevant business with the necessary consequence that neither of them had a place of business at any relevant time. However, they did not suggest that their habitual residences, at the time of execution of each of the deeds, were not in Australia.

48    In my view, the effect of s 1(3)(a), read with s 1(4)(b), is that criterion (a) will be satisfied where a party has his or her habitual residence in Australia even though they have no place of business in Australia. This criterion is directed to the parties’ physical connection with Australia, as opposed to the nature of their activities (which is the subject of the requirement that an arbitration be “commercial”).

49    For criterion (b), it is necessary to identify an agreement that any dispute that has arisen or may arise between the parties is to be settled by arbitration. This criterion requires interpretation of the alleged arbitration agreement (or any other relevant document) to determine whether the parties have agreed that a particular dispute is to be “settled by arbitration”.

50    For criterion (c), it is necessary to find that the arbitration the subject of the agreement is not an arbitration to which the Model Law applies. The applicants did not dispute that criterion (c) was satisfied for each of the alleged arbitration agreements.

Meaning of domestic “commercial” arbitration

51    It appears from s 1C(1) and (2) that the commercial arbitration legislation is concerned with the resolution of “commercial disputes”. A natural interpretation of the word “commercial” when qualifying the word “arbitration” is that it refers to arbitration of commercial disputes. The note to s 1 indicates that the term “commercial” should be given a wide interpretation, and that commercial disputes generally arise from a transaction between parties who have a relationship of a commercial nature. However, the legislation does not expressly require the identification of a commercial relationship between the parties to an arbitration agreement.

52    The adjective “commercial” is defined in the Macquarie Dictionary online, relevantly, to mean:

adjective

1.    of, or of the nature of, commerce.

2.    engaged in commerce.

3.    capable of returning a profit: a commercial project.

4.    capable of being sold in great numbers: is the invention commercial?

5.    setting possible commercial return above artistic considerations.

6.    preoccupied with profits or immediate gains.

…

53    The word “commerce” is defined, relevantly to mean:

noun

1. interchange of goods or commodities, especially on a large scale between different countries (foreign commerce) or between different parts of the same country (domestic commerce or internal commerce); trade; business.

54    The parties agreed that the concept of “commercial” in the commercial arbitration legislation is not confined by domestic law principles, recognising that the legislation has its origins in the UNCITRAL Model Law and having regard to s 2A.

55    In Chief Executive Officer of the Australian Sports Anti-Doping Authority v 34 Players [2014] VSC 635 (“ASADA”) at [11], Croft J set out the following extract from Holtzmann HM and and Neuhaus JE, A Guide to the UNICITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Kluwer Law, 1994) (“Holtzmann and Neuhaus commentary”) :

(ii)    ‘Commercial’. In the early stages of drafting the Model Law, the Working Group recognized the difficulties of defining the term ‘commercial’. Various suggestions were advanced, including use of the words ‘trade’, ‘commerce’, ‘economic transaction’, or ‘business’, but no comprehensive definition of the term was found. As the Secretariat noted in its commentary on the Working Group’s final draft, conventions on international commercial arbitration do not define the word. The view appears to have been that the compound term ‘commercial arbitration’ is widely used and has acquired a sufficiently clear meaning.

...

The footnote itself states that the term ‘commercial’ was to be given a wide interpretation, and this call is repeated throughout the legislative history. In particular, the Commission and Working Group reports emphasize that the term is not to be construed in accordance with national law definitions of ‘commercial’ in certain civil law countries, some of which include only those relationships dealt with in the commercial code or only transactions between ‘commercial persons’ (i.e., merchants). This concern arose out of experience with the provision in the New York Convention that allows States to restrict the Convention to awards arising out of ‘legal relationships ... which are considered as commercial under the national law of the State’ making the restriction. The view was that this proviso had resulted in an excessively narrow interpretation.

In both the Working Group and the Commission, attempts were made to make explicit in the Law this intent not to limit ‘commercial’ to transactions with merchants. Amendments to the footnote were offered that would have stipulated that the Law applied ‘irrespective of whether the parties are “commercial persons” (merchants) under any given national law’ or, in another version, ‘regardless of the nature or character of the parties’. Some delegations feared, however, that such a provision might be interpreted as touching upon the question of State or sovereign immunity. It was widely agreed that the Law is not intended to confer immunity on States that have waived it under the applicable rules (such as by engaging in non-governmental activities or signing arbitration clauses), nor to lift that immunity where it has not been waived. In the end, the Commission found that the footnote expressed sufficiently clearly that the ‘commercial’ nature of a relationship for purposes of the Model Law did not depend on the nature of the parties, and that view was further stipulated in the Report of the session.

The list of examples of commercial relationships is, by its terms, not exhaustive; it is intended merely to illustrate that the term is to be interpreted broadly. The Secretariat noted, for example, several relationships that were not included in the list, but should be considered to be ‘commercial’ within the meaning of Article 1, including arrangements to supply electrical energy or to transport liquefied gas via pipeline, and ‘non-transactions’ such as claims for damages arising in a commercial context. This is not to say that the term ‘commercial’ is boundless. The legislative history also provides examples of relationships that were not meant to be included in the term, in particular, labor and employment disputes and ordinary consumer claims. In addition, Article 1(5) of the Law places an additional limitation on the scope of relationships that are subject to the Law: no matter may be submitted to arbitration under the Model Law if it is not arbitrable under municipal law or if it may be submitted to arbitration only under other provisions of law. See the discussion of Article 1(5), pages 38-39 infra.

(Footnotes omitted)

56    The New York Convention mentioned in the Holtzmann and Neuhaus commentary is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting, referred to in s 2D(d) of the International Arbitration Act.

57    In deciding that proceedings conducted by the Australian Football League Anti-Doping Tribunal were not “commercial” for the purposes of the Commercial Arbitration Act 2011 (Vic), Croft J had regard to relevant contractual provisions which indicated that the proceedings were properly characterised as a labour or employment dispute. The fact that “a variety of more commercial provisions were “mixed” with what may be described as player entitlement, engagement and employment provisions [did] not detract from the labour or employment characterisation” (at [56]).

58    The HPPL respondents referred to the following statement in the Analytical Commentary contained in the Report of the Secretary General to the Eighteenth Session of UNCITRAL (1984) UN Doc A/CN.9/264:

19.    The footnote, while not giving a clear-cut definition, provides guidance for an autonomous interpretation of “commercial”; it does not refer, as does the 1958 New York Convention … to what the existing national law regards as commercial. Therefore it would be wrong to apply national concepts which define as commercial, for example, only those types of relationship dealt with in the commercial code or only those transactions the parties to which are commercial persons.

20.    This latter idea of preclusion had been expressed in a previous draft of the footnote by the words … ‘irrespective of whether the parties are “commercial persons” (merchants) under any given national law’. This wording, which was exclusively intended to clarify that the commercial nature of the relationship is not dependent on the qualification of the parties as merchants (as used in some national laws for distinguishing between commercial and civil relationships), was nevertheless deleted lest it might be construed as dealing with the issue of State immunity.

59    The HPPL respondents also referred to Canadian authority construing the term “commercial” broadly. For example, in Carter v McLaughlin (1996) 27 OR (3d) 792, the question was whether an arbitration agreement or award arising from a dispute over a contract for sale of residential property was “commercial”. Rutherford J concluded that it was, saying (at 798 b-d):

In my view, the arbitration agreement between the parties to this application and the resulting award should be viewed as being “commercial” within the meaning of that term as used in the International Commercial Arbitration Act of Ontario and the UNICITRAL Model Law it implements in this Province. While the sale of the home … was unconnected to the regular business activity of either party that, in my view, is insufficient to remove the transaction from the scope of what is meant by the term “commercial” in the legislation. The transaction was done in a business-like way, with the assistance of professional realtors and within a legal framework appropriate for a transaction involving a large sum of money. It bears all the earmarks of what goes on in trade and commerce except that the parties were not “commercial persons” … in regards to that transaction.

The Analytical Commentary to which the Ontario statute specifically refers for assistance in the interpretation of the Model Law, tells us that the Commissioners drafting the Model Law anticipated the term “commercial” being given a broad interpretation so as to embrace matters arising from all relationships of a commercial nature. The Analytical Commentary also suggests that were it not for concern as to its possible effect on the doctrine of State Immunity, a consideration irrelevant to this case, the footnote to article 1 would have stated that the broad interpretation intended for the term “commercial” would mean inclusion of commercial relationships irrespective of whether the parties are commercial persons or merchants under any given national law.

60    While the parties agreed that the word “commercial” should not be confined by analogous domestic law concepts, the HPPL respondents submitted that statements of Australian courts about the meaning of “trade or commerce” do help to elucidate the width or minimum content of the concept. In Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 at 167, in considering the scope of the Trade Practices Act 1974 (Cth) (“Trade Practices Act”), Deane J said:

The terms “trade” and “commerce” are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phrases of development of trade, commerce and commercial communication, the terms are clearly of the widest import (see, generally, W. & A. McArthur Ltd. v. State of Queensland (1920) 28 CLR, at pp 546 et seq and Bank of New South Wales v. The Commonwealth (1948) 76 CLR, at pp 284 et seq, 381 et seq). They are not restricted to dealings or communications which can properly be described as being at arm’s length in the sense that they are within open markets or between strangers or have a dominant objective of profit-making. They are apt to include commercial or business dealings in finance between a company and its members which are not within the mainstream of ordinary commercial activities and which, while being commercial in character, are marked by a degree of altruism which is not compatible with a dominant objective of profit-making.

61    Deane J’s statement was applied by a Full Federal Court in Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 at [26] to [27]. In finding that the College had a commercial relationship with practitioners, Branson and Stone JJ referred to matters including fees charged and revenue generated from the sale of texts and the conduct of seminars and courses, and the considerable amount of revenue generated by the College.

62    In my view, having regard to the language of s 1C of the commercial arbitration legislation, an arbitration will be a “commercial” arbitration if it involves the resolution of a commercial dispute. A “commercial” arbitration is typically an arbitration to resolve a dispute between parties arising from a commercial relationship, typically although not invariably, at arms’ length. Typically, such disputes are not governed by any specific regime for arbitrations or other alternative dispute resolution, in contrast to the position in many jurisdictions for employment, family law and consumer disputes.

63    I accept that an arbitration is not a “commercial” arbitration merely because it involves a party which is a corporation, association or individual which carries on business: cf. ASADA at [52]. I also accept that the inclusion of a variety of commercial provisions in a contract will not necessarily render a dispute arising out of that contract a commercial dispute, as Croft J concluded in ASADA.

64    On the other hand, where a dispute is conducted in the manner of commercial litigation, for example, where the parties retain commercial legal advisers to conduct the dispute and where the dispute concerns multiple complex factual and legal questions about ownership of valuable assets, those matters frequently indicate the high financial stakes in the dispute. Features of this kind frequently demonstrate the commercial nature of a dispute.

65    A commercial dispute may arise from the terms of a contract between parties even though the parties do not have a pre-existing commercial relationship, although not every contractual dispute is also a commercial dispute.

66    In my view, a dispute is aptly described as a commercial dispute where it concerns ownership of commercially valuable assets and entitlements to profits generated by those assets. Typically, such disputes will arise from a relationship based on shared ownership of the relevant assets or contractual agreements concerning entitlements to profits generated by the assets. However, as this case illustrates, a dispute may arise over ownership of valuable commercial assets where those assets form part of a deceased estate or a family trust.

67    Mrs Rinehart and the HPPL respondents did not contend that the applicants had any relationship with any of the respondents of the kinds listed in the Model Law Note to s 1. However, the written submissions filed on Mrs Rinehart’s behalf argued that the relationships from which the present dispute arises are commercial and that this is demonstrated by the following matters:

(1)    The various interests of the parties in HPPL and the assets of the Hancock Group;

(2)    The commercial activities of the corporate respondents;

(3)    The terms of the deeds relied upon by Mrs Rinehart and the HPPL respondents;

(4)    References to resolution of disputes under commercial arbitration legislation in some of the deeds; and

(5)    The identities of the various parties to the deeds.

68    The HPPL respondents pointed to various features of the circumstances in which disputes between the parties arose which would cause an arbitration of those disputes to be a “commercial arbitration”. The HPPL respondents identified the following factors as relevant to characterising a putative arbitration as a “commercial” arbitration:

(1)    the nature of the parties;

(2)    the circumstances in which the alleged arbitration agreement was entered into;

(3)    the terms of the arbitration agreement;

(4)    the subject matter of the dispute to be arbitrated;

(5)    the issues raised for determination in the dispute;

(6)    the conduct of the parties in relation to the dispute; and

(7)    the manner in which the arbitration can be expected to be conducted.

69    I accept that each of the factors set out above may have a bearing on the characterisation of a dispute as a “commercial dispute” and hence an arbitration of that dispute as a “commercial arbitration”.

70    The applicants emphasised the familial relationship between the applicants and Mrs Rinehart and facts which, they argued, demonstrated the absence of any “commercial relationship” between the applicants and the respondents. They also emphasised that the dispute is substantially concerned with the affairs of a family trust (or, as they argued, two family trusts). The applicants’ case was presented as one arising from strong feelings of personal hurt and, perhaps, animosity, resulting from their beliefs that they have been wronged by their mother. The applicants contended that the dispute in this proceeding should be characterised as a dispute about a family trust arrangement, albeit one involving substantial assets.

71    In my view, the applicants’ characterisation of the dispute is not necessarily inconsistent with its characterisation as a “commercial dispute”. However, it draws attention to features of the case which may affect the application of s 8(1) and which are unusual in commercial contexts. In particular:

(1)    The alleged arbitration agreements are all contained in agreements for the resolution of disputes about entitlements following the death of Mr Hancock senior, as distinct from agreements to engage in commercial activity; and

(2)    The claims made by the applicants, and which are said to be the subject of the arbitration agreements, concern their disputed entitlements which ultimately arise from their status as grandchildren of Mr Hancock senior rather than from any commercial activity.

Agreed questions (3) and (4): Does there need to be a commercial relationship between the parties in order for an arbitration to be a domestic commercial arbitration? If so, have GHR and each of the HPPL respondents demonstrated that there was a commercial relationship between each of them and each of the applicants, as a result of which any arbitration between them should be characterised as a domestic commercial arbitration?

72    As to agreed question (3), no. For the reasons given above, there must be a commercial dispute. Giving the word “commercial” a wide interpretation, there may be circumstances in which parties to a commercial dispute are not, and have not been, in a relationship of a commercial nature (beyond any such relationship created by the dispute itself). The commercial nature of the dispute may arise from issues about ownership of commercial assets, or entitlements to profits, or other features of the context of the dispute which reveal an underlying concern with the making of profits or commercial gains.

73    Accordingly, agreed question (4) does not arise. However, in case I am wrong, I have made findings below about whether the applicants had a commercial relationship with any of the respondents at relevant times.

Requirements to establish application of commercial arbitration legislation

74    In my view, based on s 1, in order to establish that the commercial arbitration legislation may apply to their respective interlocutory applications, Mrs Rinehart and the HPPL respondents must prove the following matters:

(1)    An “arbitration agreement” to which the applicants, Mrs Rinehart, HPPL respondents and the other respondents are “parties”. This involves identifying:

(a)    an agreement to arbitrate, being an agreement by the parties to submit to (domestic commercial) arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship;

(b)    the parties to any such agreement;

(2)    That the parties have their places of business or habitual residence in Australia;

(3)    That the parties have agreed that the disputes that have arisen between them are to be settled by (domestic commercial) arbitration; and

(4)    That the disputes to which any arbitration agreement applies are commercial disputes, so that an arbitration of those disputes would be a commercial arbitration.

75    Concerning matter (2), it was not disputed by either party that all parties to the proceeding have either their relevant place of business or their habitual residence in Australia.

Proof of arbitration agreements

76    In this case, the parties are at issue as to the enforceability of various of the alleged arbitration agreements. They also dispute the scope of the alleged arbitration agreements. Mrs Rinehart and the HPPL respondents contend that these issues should be resolved by arbitration in accordance with s 16 of the commercial arbitration legislation. The applicants contend that they should be determined by this Court.

77    The HPPL respondents observed that s 16 empowers an arbitral tribunal to rule on its own jurisdiction, enshrining the arbitral principles of separability and kompetenz-kompetenz in the legislation. I have mentioned kompetenz-kompetenz earlier in these reasons. The principle of severability is also reflected in s 7(2) of the legislation, which provides that an arbitration agreement may be in the form of an arbitration clause in a contract. In Merkin R, Arbitration Law (LLP, 2004) , the principle was explained as follows (at 5.40):

[T]he arbitration clause is treated as a separate contractual undertaking: under the concept of separability, the obligation to go to arbitration is distinct from the main contract, so that disputes as to the scope, or even the existence, of the main contract can be arbitrated.

78    In Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 (“Comandate”) at [219], Allsop J (as his Honour then was) explained that the doctrine of separability has two aspects of importance:

First, the arbitrator can be seen to have a clear basis of jurisdiction to decide whether the substantive contract was void or voidable or should be rescinded, without destroying his or her own authority or jurisdiction to arbitrate. Secondly, and underpinning this first question, the invalidity of the substantive contract does not necessarily entail the invalidity of the arbitration clause.

79    In Fiona Trust and Holding Corp v Privalov [2007] UKHL 40; [2007] 4 All ER 951; [2008] 1 Lloyd’s Rep 254 (“Fiona Trust”), the House of Lords held that the doctrine of separability required direct impeachment of the arbitration agreement before it could be set aside. In that case, there was an inference that the owners’ agent had been bribed to consent to the main agreement, but that did not show that he had been bribed to enter into the arbitration agreement. Accordingly, the arbitration agreement had to be given effect and the parties who invoked the arbitration agreement were entitled to a stay of proceedings. The judgment of Lord Hoffman emphasises the business context in which the relevant arbitration agreement was made. At [19], he noted that “[i]t would have been remarkable for [the agent] to enter into any charter without an arbitration agreement, whatever its other terms had been”.

80    As a matter of construction of s 8(1), by itself and in the context of s 16, it is plainly not necessary to establish, on a final basis, the validity or enforceability of the asserted arbitration agreement in order for the commercial arbitration legislation to apply. Section 8 contemplates the possibility of an arbitration agreement which is “null and void, inoperative or incapable of being performed”.

81    In Joint Stock Company ‘Aeroflot Russian Airlines’ v Berezovsky [2013] EWCA Civ 784; [2013] 2 CLC 206; [2013] 2 Lloyd’s Rep 242 (“Berezovsky”) at [72] to [74], Aikens LJ (Mann J and Laws LJ agreeing) said:

How should the court deal with an application to stay under s 9 of the AA 1996?

72.    It is necessary first to analyse the structure of section 9(1) and (4) of the [Arbitration Act 1996 (UK)], to see where the burden lies and what standard of proof is required when there is an application for a stay of proceedings because one side asserts that two parties are bound by an arbitration agreement to submit the disputes being litigated to arbitration and the other side asserts that there was no concluded arbitration agreement or it is is [sic] “null and void”. Section 9(1) and (4) are based on Article II of the New York Convention 1958. That stipulates that each Contracting State “shall” recognise arbitration agreements in writing and it further obliges a court of a Contracting State to refer the parties to arbitration if requested to do so by one of the parties in the context of an action in a matter which is the subject of an arbitration agreement, unless the court “finds that the said agreement is null and void, inoperative or incapable of being performed”.

73.    That has been translated into the terms of section 9(1) so as to give a party the right to apply for a stay of proceedings “in respect of a matter which under the [arbitration] agreement is to be referred to arbitration”. Therefore, it seems to me in principle that there is a burden on the party asserting that there is (a) a concluded arbitration agreement as defined in the 1996 Act, and (b) that it covers the disputes that are the subject of the court proceedings, to prove that this is the case. This is borne out by the authorities: [See eg: Fiona Trust at para 36 per Longmore LJ; Albon v Naza Motor Trading Sdn Bhd (No 3) (2007) 2 Lloyd’s Rep 1; [2007] 2 All ER (Comm) 513 at para 15 per Lightman J; JSC BTA Bank v Ablyuzov [2011] 2 Lloyd’s Rep 129 at paras 31 to 33 per Christopher Clarke J; The Barito [2013] EWHC 1240 (Comm) at paras 49 and 50 per Popplewell J]. If the party seeking a stay cannot prove both (a) and (b), then there is no jurisdiction to grant a stay under section 9(1) and (4) of the [Arbitration Act 1996 (UK)]. However, if the court considers that it cannot decide those issues for itself in a summary fashion on the written evidence, it has two other options, as this court made clear in Ahmed Al-Naimi (T/A Buildmaster Construction Services) v Islamic Press Agency Inc [[2000] CLC 647 at 650-2]. It can direct an issue to be tried, pursuant to CPR Pt 62.8(3), or it can stay the proceedings (under its inherent jurisdiction) so that the putative arbitral panel can decide the issue of the existence of the arbitration agreement, pursuant to section 30 of the [Arbitration Act 1996 (UK)]. If the court decides that it will and can determine whether or not there was a concluded arbitration agreement on the written evidence before it, then, in my view, the authorities establish that it is for the party asserting the existence of the concluded arbitration clause to prove it on a balance of probabilities. As I point out below, the position appears to be different if the court decides, on an application for a stay, that it cannot, on the materials before it, determine whether there was a concluded arbitration agreement.

74.    Under section 9(4) [of the Arbitration Act 1996 (UK)] the court “shall grant a stay” unless “satisfied” that the arbitration agreement is “null and void, [or] inoperative…”. This means, in my view, that once the first party has established the existence of an apparently concluded relevant arbitration agreement and that it covers the matters in dispute in the proceedings, it is for the party resisting a stay to “satisfy” the court that the apparently existing arbitration agreement is “null and void”. That was the position under the old law, ie. section 1 of the Arbitration Act 1975, which provision first gave statutory effect in English law to the New York Convention. This court has said that this remains the position under the [Arbitration Act 1996 (UK)], albeit without elaborating on its reasoning.

(Footnotes omitted)

82    On an application for enforcement of a foreign arbitral award, the Victorian Court of Appeal (Hansen JA and Kyrou AJA) in IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248; (2011) 38 VR 303 at [135] and [136] accepted that the scheme of the New York Convention, reflected in s 9 of the International Arbitration Act, gives “limited prima facie credit to apparently valid arbitration awards based on apparently valid and applicable arbitration agreements”, citing Lord Mance JSC in Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46 at [30].

83    In Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57 (“Tomolugen”), the Singapore Court of Appeal was required to consider whether court proceedings between two parties fell within the scope of an arbitration clause. At [28], Menon CJ (delivering the judgment of the Court), noted that “any determination made by the court on the existence and scope of the arbitration agreement may well intrude into the remit of the arbitral tribunal’s kompetenz-kompetenz”. Speaking generally, Menon CJ said (at [25] and [26]):

It is often said that an arbitral tribunal’s jurisdiction is based on the consent of the parties as manifested in the arbitration agreement concerned. But, it is also established that an arbitral tribunal has the jurisdiction to determine the existence and extent of such consent. The arbitral tribunal’s jurisdiction to determine its own jurisdiction – known as kompetenz-kompetenz – cannot be based entirely on the parties’ consent. This form of jurisdiction necessarily precedes and exists independently of such consent. The arbitral tribunal may, in the exercise of its kompetenz-kompetenz, conclude that there was never any consent by the parties to refer their disputes to arbitration, and as a consequence, that it had no jurisdiction to begin with.

The potential circularity that this entails is broken by Art 16 of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”), which has the force of law in Singapore: s 3 of the [International Arbitration Act (Cap 143A, 2002 Rev Ed)]. Article 16 embodies the kompetenz-kompetenz principle, and it confers on an arbitral tribunal the jurisdiction to “rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement”.

(Emphasis in original)

84    The disputes in Tomolugen concerned alleged oppression or unfairly prejudicial conduct towards a minority shareholder, and whether the Court should stay proceedings under s 6 of Singapore’s International Arbitration Act (Cap 143A, 2002 Rev Ed). Section 6 was substantially similar to s 8(1), providing:

Enforcement of international arbitration agreement

6.-(1)    Notwithstanding Article 8 of the Model Law, where any party to an arbitration agreement to which this Act applies institutes any proceedings in any court against any other party to the agreement in respect of any matter which is the subject of the agreement, any party to the agreement may, at any time after appearance and before delivering any pleading or taking any other step in the proceedings, apply to that court to stay the proceedings so far as the proceedings relate to that matter.

(2)    The court to which an application has been made in accordance with subsection (1) shall make an order, upon such terms or conditions as it may think fit, staying the proceedings so far as the proceedings relate to the matter, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed. …

85    After reviewing the position under the Model Law, England, the Hong Kong Special Administrative Region and Canada, Menon CJ concluded that:

63    … a Singapore court should adopt a prima facie standard of review when hearing a stay application under s 6 of the IAA. In our judgment, a court hearing such a stay application should grant a stay in favour of arbitration if the applicant is able to establish a prima facie case that:

(a)    there is a valid arbitration agreement between the parties to the court proceedings;

(b)    the dispute in the court proceedings (or any part thereof) falls within the scope of the arbitration agreement; and

(c)    the arbitration agreement is not null and void, inoperative or incapable of being performed.

86    In my view, the language of ss 8(1) and 16 and the authorities set out above lead to the conclusion that the existence of an apparently valid arbitration agreement is sufficient to satisfy the first of the factual requirements for the general applicability of the commercial arbitration legislation in this case. This will generally be established by the tender of an executed agreement containing a clause which, properly construed, is an arbitration agreement within the meaning of s 7(1).

87    There remains the question, considered below, whether the Court should decide whether an apparently valid arbitration agreement is “null and void, inoperative or incapable of being performed”. The applicants accepted that, if the respondents proved the existence of an arbitration agreement, then the burden shifts to the applicants to demonstrate that the relevant arbitration agreement is “null and void, inoperative or incapable of being performed”.

“Parties” to an arbitration agreement

88    Where it is contended that persons other than signatories to an agreement containing an arbitration clause are parties to the agreement, by reason of the definition of “party” in s 2(1), it is necessary to consider whether any such person is a person claiming through or under a party to the arbitration agreement.

Agreement that the disputes that have arisen between the parties are to be settled by (domestic commercial) arbitration

89    This is generally a matter of interpretation of the asserted agreement to arbitrate.

Whether disputes are commercial disputes

90    This question requires consideration of the proper characterisation of identified disputes, by reference to the factors identified above.

Section 8(1)

Agreed question (6): If the commercial arbitration legislation applies, what facts must the party seeking referral to arbitration establish in order to engage section 8(1)?

91    The parties agreed that the party seeking referral to arbitration must establish that this proceeding is brought in a “matter” which is the subject of an “arbitration agreement” and that the party has requested the referral not later than when submitting the party’s statement of the substance of the dispute: cf Seeley International Pty Ltd v Electra Air Conditioning BV [2008] FCA 29 at [12]; (2008) 246 ALR 589; Berezovsky at [73]. Satisfaction with the second requirement was not in issue.

92    Accordingly, in order to engage s 8(1), Mrs Rinehart and the HPPL respondents must establish that this proceeding is brought in a matter which is the subject of an arbitration agreement. Determining whether a matter is the subject of an arbitration agreement requires the identification of the matter or matters in the proceeding, the existence of one or more arbitration agreements and the scope of the arbitration agreement or agreements: cf ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 at [99] (“Tridon”).

“Matter”

93    Article 8(1) of the Model Law, as incorporated into New Zealand law by the First Schedule to the Arbitration Act 1996 (NZ), was considered by Randerson J in Carter Holt Harvey Ltd v Genesis Power Ltd (No 2) [2006] 3 NZLR 794. His Honour held at [57]-[58]:

[57]    … As noted by Holtzmann and Neuhaus at 302:

[Article 8(1)], which directs courts to refer parties to arbitration, is modelled on Article II(3) of the New York Convention. Thus, like that Convention, the action before the court must be “in” the same “matter” that is the subject of the arbitration agreement and not “merely related” to it or “involved” in it, as some proposed during the debate by the Commission.

[58]    The mere fact there may be some connection between the court proceeding and the matter which is the subject of an arbitration agreement is not sufficient to engage Article 8(1). There must be a direct relationship between the matter before the court and the matter which is the subject of the arbitration agreement. Ordinarily, this is likely to arise where the relationship between the two is sufficiently close as to give rise to a material risk of conflicting decisions on fact or law.

94    A “matter” for the purposes of s 8(1) means some right or liability in dispute which is susceptible of settlement as a discrete controversy: cf Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332 (“Tanning Research”) per Deane and Gaudron JJ; Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd [2014] VSCA 166; (2014) 289 FLR 30 (“Flint Ink”) at 39 [31] per Warren CJ, at 51-54 [84]-[89] per Nettle JA (as his Honour then was); Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253 at [44]-[47] (“Amcor”), or a claim for relief of a kind proper for determination in a court: Flakt Australia Ltd v Wilkins & Davies Construction Co Ltd (1979) 39 FLR 267; [1979] 2 NSWLR 243 at 250; (1979) 39 FLR 267; nearmap Ltd v Spookfish Pty Ltd [2014] NSWSC 1790 at [65] (“nearmap Ltd”).

95    A “matter” is something more than a mere issue that falls for decision: cf Tanning Research per Deane and Gaudron JJ.

96    In Comandate, Allsop J said in construing s 7(2)(b) of the International Arbitration Act:

[235] The phrase “a matter” is apt to be understood at a level of generality by reference to the arbitration agreement. This conforms with the views of all the justices in Tanning Research Laboratories Inc v O’Brien [[1990] HCA 8;] (1990) 169 CLR 332 at 344-45 and 351-52 and McLelland J in Flakt Australia Ltd v Wilkins & Davies Construction Co Ltd [1979] 2 NSWLR 243 at 250. See also Metrocall Inc v Electronic Tracking Systems Pty Ltd (2000) 52 NSWLR 1. It is plain that the phrase “a matter” cannot have the full connotation of the phrase in the Constitutional sense: Tanning Research at 351. This is so because it is linked to the terms of the arbitration agreement. It is the matter, the differences between the parties, the controversy between the parties, which, under the agreement, the parties have agreed to submit to arbitration. Thus, some issue may be part of the overall controversy or matter in the sense understood in federal jurisdiction: Fencott v Muller (1983) 152 CLR 570 at 608 and Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 585-86, but not fall within the scope of the arbitration clause. Recognising how the word “matter” is used in Art II Subart 3 and the content of Art II Subart 1, the word “matter” in s 7(2)(b) can be seen to be a reference to the differences between the parties or the controversy that are or is covered by the terms of the arbitration agreement. That is, such part (or all) of the differences that fall within the scope of the arbitration agreement. It is that body of differences which is to be capable of settlement by arbitration.

…

[238] The above approach conforms to the requirement expressed in Tanning Research to ascertain the “matter” by reference to the subject matter in dispute and the substantive questions for determination in the proceedings and, necessarily, by reference to the scope of the arbitration agreement.

97    A “matter” for the purposes of s 8(1) may or may not comprise the whole dispute in any given court proceeding: Tanning Research per Deane and Gaudron JJ; Flint Ink at 53 [87(c)] per Nettle JA; Casaceli v Natuzzi SpA [2012] FCA 691; (2012) 292 ALR 143 at 158 [48]; Amcor at [45]-[47]. As Beaumont J observed in Administration of Norfolk Island v SMEC Australia Pty Ltd [2004] NFSC 1 at [107] “there may, of course, be more than one ‘matter’ [in the proceeding] and some only of these may be capable of settlement by arbitration”.

Scope of arbitration agreement

98    In Rinehart v Welker [2012] NSWCA 95 (“Rinehart v Welker”), the New South Wales Court of Appeal considered the interpretation of the Hope Downs deed, including the arbitration clause (clause 20) in that deed.

99    At [114], Bathurst CJ stated that the approach to construction of arbitration clauses is no different to the construction of any other contractual provisions. Thus, the following general principles, stated by the plurality in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40], apply:

It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

100    Bathurst CJ (at [117]) cited with approval the following passage from the judgment of Gleeson CJ in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 (“Francis Travel”) at 165:

When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.

101    Under Australian law, there is no legal presumption in favour of arbitration. That is to say, in construing arbitration agreements, courts will not presume that a dispute falls within the scope of an arbitration clause unless the court can be persuaded otherwise: Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 at [41] (“Walter Rau”); Tridon at [123] (Austin J); TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2009] VSC 553 at [17]-[20] (Hargrave J).

102    Nevertheless, some courts have taken a “liberal approach” to the construction of arbitration clauses, whereby “words capable of broad and flexible meaning will be given liberal construction and content”: Comandate at [164] and [165] (Allsop J); see also Walter Rau at [41]-[42] (Allsop J) (noting, however, that the liberal approach “does not entitle one to give the words in question meaning which they do not bear”).

Agreed question (7): To what standard of proof must the facts identified by question 6 be established:

(a)    does it require an arguable case or sustainable argument that the matter(s) in the court proceedings are the subject of an arbitration agreement; or

(b)    does it require GHR and the HPPL respondents to prove, on the balance of probabilities, that matter(s) in the court proceedings are the subject of an arbitration agreement?

103    For the reasons given above, Mrs Rinehart and the HPPL respondents must prove, on the balance of probabilities, the existence of an apparently valid arbitration agreement. There is a separate question as to the standard to which they must prove that a matter is the subject of such an agreement.

104    On behalf of Mrs Rinehart and the HPPL respondents, it was initially argued that it is sufficient to demonstrate an “arguable” case or a “sustainable argument” that the matter or matters in the proceeding are the subject of an arbitration agreement, relying on Rinehart v Welker and Hancock v Rinehart [2013] NSWSC 1352; (2013) 96 ACSR 76 (“Hancock v Rinehart 2013 (Bergin CJ in Eq)”). In written submissions filed after the hearing, the HPPL respondents sought to rely on the decision in Robotunits Pty Ltd v Mennel [2015] VSC 268; (2015) 297 FLR 300 (“Robotunits”) to argue that an articulated claim or defence which falls within the scope of the arbitration agreement is sufficient to conclude that there is a matter the subject of the arbitration agreement.

105    The applicants submitted that the Court must determine whether or not the claims made by the applicants are matters that are the subject of an arbitration agreement on the balance of probabilities, citing in Golden Ocean Group Ltd v Humpuss Intermoda Transportasi Tbk Ltd [2013] EWHC 1240 (Comm); [2015] All ER (Comm) 1025; [2013] 2 Lloyd’s Rep 421 (“Golden Ocean”) at [59(2)] and Berezovsky at [74]. However, the applicants accepted that the “sustainable argument” test “arises where a party asserts that a claim gives rise to a dispute “under” a deed because a release in the deed absolutely bars a claim and therefore “governs or controls” the outcome. This submission uses the language of clause 20 of the Hope Downs deed, as construed by Bathurst CJ in Rinehart v Welker. As a matter of logic, if the “sustainable argument” test applies in this circumstance, then it must also apply where the asserted dispute arises from the application of a release by reason of an arbitration agreement which applies to a dispute “arising out of” a deed.

106    In Golden Ocean, Popplewell J summarised the principles applicable “to a situation where C brings proceedings against D in relation to matters which D claims, but C disputes, are governed by an arbitration agreement which confers Kompetenz-Kompetenz on the arbitral tribunal”. At [59(2)], Popplewell J stated, in relation to s 9(1) of the Arbitration Act 1996 (UK), that “to bring himself within the scope of s 9, D must establish that … an agreement [to arbitrate] was concluded, and that its terms apply to the underlying dispute”. At [59(5)], his Honour said:

… It is not enough for him to show merely an arguable case that he is party to a concluded arbitration agreement which has agreed to refer to arbitration the matters in respect of which C has brought the proceedings. Unless the court is satisfied that that is so, there is no jurisdiction under the section to stay proceedings. The court must therefore determine the dispute if it affects the question whether D comes within s. 9(1). If it cannot do so on the written evidence at the hearing of the application, it must direct a trial of that issue before granting a stay under s 9. If may, however, decline to direct a trial of the issue and grant a stay under its inherent jurisdiction without resolving the issue.

107    The passage relied upon from Berezovsky is set out at [82] above, and contains a statement to similar effect to the statement of Popplewell J at [59(2)] in Golden Ocean.

108    In Rinehart v Welker, the appellants (Mrs Rinehart and Ms Ginia Rinehart) had sought a stay of proceedings before the Supreme Court of New South Wales, relying on clause 20 of the Hope Downs deed. The primary judge rejected the stay application, finding that the relevant dispute was not one “under” the Hope Downs deed (being the language of clause 20). Bathurst CJ (Young JA agreeing) held that a dispute is “under this deed” if the outcome of the dispute is governed or controlled by the deed, regardless of whether the claimant is invoking or enforcing a right created by the deed. At [135], Bathurst CJ said:

If the [Hope Downs deed] had the effect of barring the claims of the respondents, then it would follow that the dispute in question was governed or controlled by the [Hope Downs deed] as the outcome would be regulated by its terms. However, the mere fact that these assertions were made does not mean that it automatically follows that the whole claim is a dispute under the [Hope Downs deed]. The primary judge, in my opinion, was entitled to examine the claim to form a view as to whether he could properly conclude, in the light of the evidence available, that the assertion that the claim was barred by the [Hope Downs deed] was sustainable: see Channel Tunnel Group Limited v Balfour Beatty Construction Ltd [1993] AC 334 at 356. This was particularly the case when each party made extensive submissions on the issue and none suggested there was any further material which may become available which would be of assistance to the Court on the issue of construction of the clause in question. It was also relevant, in my opinion, to look at the strength of the assertion to determine whether, as a matter of discretion, a stay of the whole or any part of the proceedings should be granted.

109    In Hancock v Rinehart 2013 (Bergin CJ in Eq), her Honour applied the reasoning of Bathurst CJ to applications for a stay and referral under s 8(1) of the WA Act. At [98], her Honour noted that all parties proceeded on the basis that, in determining whether there was a dispute “under” the Hope Downs deed, it was necessary to determine whether assertions that the claims made in the proceeding were barred were “sustainable”. At [130], her Honour concluded that the success of the applications “depends on the availability of a sustainable argument that any conduct of which the plaintiffs were aware at the time of execution of the Deed that would ground a claim against the defendants would be released by the Deed”.

110    In Robotunits, Croft J considered an application for a stay of proceedings and referral to arbitration under s 7(2)(b) of the International Arbitration Act. His Honour rejected a contention that any matter for determination in a proceeding must be “sustainable”, that is, it must have reasonable prospects of success, in order to constitute grounds for a stay. Croft J’s decision draws attention to the distinction between the question of whether a matter falls within the scope of the arbitration agreement, and the question of whether there is a sustainable argument in support of a matter said to fall within the scope of an arbitration agreement. While his Honour concluded that there was no “sustainability requirement” under s 7(2)(b), Croft J proceeded on the basis (from [43]) that it was necessary to decide whether determination of the identified matter fell within the scope of the arbitration agreement, “or, in other words, whether the parties intended those matters to be settled by arbitration”. Implicitly, this decision was made on the balance of probabilities.

111    There are overseas authorities supporting the contention that an arguable case or sustainable argument that the matter(s) in the relevant court proceedings are the subject of an arbitration agreement is sufficient to engage a provision analogous to s 8(1). As appears above, the decision of the Singapore Court of Appeal in Tomolugen supports a conclusion that the applicants must establish only a prima facie case that the matters in the proceeding (or any part thereof) fall within the scope of the arbitration agreement. There is also the Canadian decision of Gulf Canada Resources Ltd v Arochem International Ltd (1992) 66 BCLR (2d) 113, cited in Hancock v Rinehart 2013 (Bergin CJ in Eq) at [87] to [88]. The test stated in this case has been approved in P. Elliot & Co. Ltd v FCC Elliot Construction Ltd [2012] IEHC 361 at [49]. Canadian authorities show a preference for the prima facie approach: Union des consommateurs v Dell Computer Corp [2007] 2 SCR 801 at [940.1]-[943.2]. The courts of the Hong Kong SAR have also adopted the prima facie approach: Private Company “Triple V” Inc v Star (Universal) Co Ltd [1995] 2 HKLR 62 at 65, cited with approval in PCCW Global Ltd v Interactive Communications Service Ltd [2007] 1 HKLRD 309.

112    The Singapore Court of Appeal recognised that its approach differed from the English approach as set out in Berezovsky. At [67], the Court justified its approach on the basis that to require the Court to undertake a full determination of an arbitral’s jurisdiction could significantly hollow the kompetenz-kompetenz principle of its practical effect.

113    The HPPL respondents argued that the approach in Robotunits is consistent with the allocation of power to the arbitral tribunal in s 16(1) to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. It also involves construing s 8(1) in a way which avoids the possible problem of needing to hear a substantive matter on its merits in order to decide whether to refer it to arbitration.

114    Robotunits is an Australian authority of direct relevance. However, I am not convinced that it is authority for a lesser degree of scrutiny than that adopted in Hancock v Rinehart 2013 (Bergin CJ in Eq.). The argument considered and rejected in Robotunits was whether, to constitute a “matter” within s 7(2)(b) of the International Arbitration Act, it was necessary to find that the matter was the subject of an arbitration act and was, in addition, sustainable. The relevant matter, whether shareholders agreements provided a legal or equitable basis for Mennel to cause Robotunits to make a payment, did not raise difficult questions about the scope of the arbitration agreement.

115    In my view, the approach in Robotunits is consistent with the approach articulated in Berezovsky, which I respectfully consider to be correct for the reasons given by Aitkens LJ. Thus, in my view, the correct approach is to decide on the balance of probabilities whether, on the proper interpretation of the relevant arbitration agreement, a matter arising in the proceeding falls within the scope of the agreement. This will generally involve a characterisation of the matter, without an assessment of the merits of the disputes arising from the matter. However, in some cases, it may be necessary to consider the merits of a claim or defence said to be the subject of an arbitration agreement in order to be satisfied that there is a relevant “matter”. For example, if the application of the release is a matter which falls within the scope of an arbitration agreement, the mere fact that the release’s application is asserted will not justify a finding as to the existence of a matter the subject of the arbitration agreement if there is no sustainable argument that the release potentially operates to bar or preclude the claims the subject of the dispute.

Agreed question (10): Does the Court have discretion to decide or not decide whether the arbitration agreement is null and void, inoperative or incapable of being performed?

116    The applicants submitted that the Court is obliged to consider and determine whether any relevant arbitration agreement is “null and void, inoperative or incapable of being performed”.

117    Conversely, Mr McClintock SC submitted that the language “unless it finds” in s 8(1) requires the Court to make a decision as to whether to embark upon an inquiry about whether the proviso in s 8(1) is engaged, which the Court would not do in this case because that would require the Court to deal with the merits of the applicants’ substantive claims.

118    The applicants’ submission was based on the judgment of Emmett J in Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1. In that judgment, his Honour said (at 13-14):

Where a statute confers an entitlement on one party as against another party, a court having jurisdiction in relation to such an entitlement would be bound to exercise that jurisdiction, whether or not the statute is framed in terms which purport to impose a duty on the court or in terms which purport to create an entitlement in one of the parties. In other words, s 7 [of the International Arbitration Act] does not purport to direct the manner and outcome of the exercise by the Federal Court of its jurisdiction. The section merely lays down a general rule under which a party to an arbitration agreement is entitled to have that arbitration agreement given effect by the relevant court.

Section 7 lays down a substantive rule of law that an arbitration clause in a contract is to be given priority over all other clauses to the extent that it is to be enforced in substitution for any other clause. A statute providing that particular contractual terms may not be enforced would be valid. The effect of s 7 is simply that all contractual terms in a contract which contains an arbitration clause are not to be enforced in proceedings in a court. Nor are secondary delegations arising from breach of such a contract.

In the present case, the Court must consider and determine whether or not the prerequisites for the granting of a stay have been established. The Court must also determine whether the arbitration agreement comprised in cl 34 is null and void, inoperative or incapable of being performed and must consider whether conditions should be imposed on the stay. All of those determinations involve the exercise of the judicial power of the Commonwealth.

119    I do not consider that Emmett J’s reasons should be taken to require the Court to make a finding as to whether a relevant arbitration agreement is “null and void, inoperative or incapable of being performed” in every case. His Honour’s reasons record a conclusion expressed in the context of the particular case. In my view, the language of s 8(1) indicates that the court has a discretion as to whether to consider the question whether an agreement is “null and void, inoperative or incapable of being performed”. In particular, I accept the submission made on behalf of the HPPL respondents that the word “unless” in s 8(1) indicates that the Court has a discretion about whether to make a determination that the arbitration agreement is “null and void, inoperative or incapable of being performed”.

How should the discretion be exercised?

120    In Mrs Rinehart’s written submissions, it was argued that the extent to which the Court will undertake an enquiry into the validity of the arbitration agreement is likely to depend on the circumstances of the case, citing Comandate at [215]. At [215] to [217], Allsop J said:

215    … The extent to which the court will undertake the enquiry called for by Art 8 of the Model Law (and Art II of the New York Convention and s 7(5) of the International Arbitration Act) may well depend upon the circumstances of the case. Certainly, the notion of the court “finding” the state of affairs, referred to in Arts 8 and II and s 7(5), assumes a responsibility of the court.

216    Where the court has before it a claim that the arbitration agreement should be set aside ab initio because of misrepresentation inducing it, that is not an allegation easily able to be disposed of in an interlocutory motion for a stay. Nor is it likely that the court or another court will have already given a judgment on the issue, given the hypothesis that one party seeks to send the dispute to arbitration. In such a circumstance, if there is no other ground made out to resist a stay, the court may well retain the issue of the avoidance of the arbitration agreement. If the claim for nullity or voidness is properly directed to the arbitration clause itself, the need for the court to deal with the issue can be readily appreciated, even accepting the doctrine of separability (to which I will come shortly). See in particular the comments of Steyn J (as his Lordship then was) in Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1992] 1 Lloyd’s Rep 81 at 86 and see generally Anglia Oils Ltd v Owners and/or Demise Charterers of the Marine Champion [2002] EWHC 2407 (Adm), El Nasharty v J Sainsbury Plc [2004] 1 Lloyd’s Rep 309 and O’Callaghan v Coral Racing Ltd [1998] EWCA (Civ) 1801. It is the practice of some courts to permit this question to go to the arbitrator, particularly if the issue is not clear or manifest: see the cases referred to and discussed in Merkin, R [Arbitration Law (LLP, 2004)] at [8.30] especially at footnote 7 at 261.

217    The circumstances here do not require answers to these questions. I am prepared to proceed (without being taken to have decided the issue) on a basis favourable to Pan, that a claim under the Trade Practices Act for an order avoiding the arbitration agreement ab initio answers the description of ‘null and void’ and that if a credible case for such is made out the Court should not grant a stay and should allow that issue to be heard by the Court before any arbitration.

121    The relevant passage from Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1992] 1 Lloyd’s Rep 81 at 86, to which Allsop J referred, is as follows:

Circumstances directly impeaching the arbitration agreement

The foundation of an arbitrator’s authority is the arbitration agreement. If the arbitration agreement does not in truth exist, the arbitrator has no authority to decide anything. Similarly, if there is an issue as to whether the arbitration agreement exists, that issue can only be resolved by the Court. For example, if the issue is whether a party ever assented to a contract containing an arbitration clause, the issue of lack of consensus impeaches the arbitration agreement itself. Similarly, the arbitration agreement itself can be directly impeached on the ground that the arbitration agreement itself is void for vagueness, void for mistake, avoided on the ground of misrepresentation, duress, and so forth. All such disputes fall outside the scope of the arbitration agreement, no matter how widely drawn, and are obviously outside the arbitrator’s jurisdiction. The scope of the principle of the separability of the arbitration agreement only arises for consideration where the challenge is directed at the contract, which contains an arbitration clause. This fundamental distinction requires the Court to pay close attention to the precise nature of each dispute.

122    In Berezovsky at [79] and [80], Aikens LJ said:

79.    In theory I suppose the court could order that there be a trial of an issue to determine whether the arbitration agreement was “null and void” or “inoperative”. But if the evidence and possible findings going to the issue of whether the arbitration agreement is “null and void” or “‘inoperative’” also impinge on the substantive rights and obligations of the parties the court is unlikely to do so unless such a trial can be confined to “a relatively circumscribed area of “investigation”. (A v B [2006] EWHC 2006 (Comm); [2007] 1 All ER (Comm) 591; [2007] 1 Lloyd’s Rep 237 at 261 per Colman J, quoted in JSC BTA Bank v Ablyazov [2011] 2 Lloyd’s Rep 129 at 50.) Otherwise, in such a case, where the court is satisfied of the existence of the arbitration agreement and that the matters in dispute are within its scope, then logically it must be for the arbitral tribunal finally to decide the “section 9(4) matters”, assuming it has compétence-compétence to do so. (A v B [2007] 2 CLC 157 at 133–139 per Colman J …). In such a case, the right course for the court to take is to grant a stay under section 9(4) and let the arbitral tribunal get on with determining the dispute.

80.    In JSC BTA Bank v Ablyazov Christopher Clarke J held that, in circumstances where the court could only definitively decide the question of whether the arbitration clause was “null and void” by deciding the substantive issue between the parties and that was not a realistic option, either at the interlocutory stage or by directing a trial of the issue, then, for the purposes of section 9(4), it was sufficient for the applicant for a stay to satisfy the court that there was an arguable case that the arbitration clause was valid. This was because if it did so, then it must follow that the party resisting a stay could not discharge the burden on it of “satisfying” the court that the agreement was null and void. ([2011] 2 Lloyd's Rep 129 at 31, 33, 36, 46 and 49.) In Golden Ocean Group Ltd v Humpuss Intermoda Transportasi Tbk Ltd Popplewell J emphasised that if the court can itself resolve the issue of whether the arbitration agreement is “null and void” (or “inoperative”), then a “merely arguable case” that the arbitration agreement is a valid one will not suffice to obtain a stay under section 9; it only does so if the court cannot decide or it cannot or will not direct an issue to be tried, for reasons outlined above.

123    In support of this passage, Aikens LJ cited A v B [2006] EWHC 2006 (Comm); [2007] 1 All ER (Comm) 591; [2007] 1 Lloyd’s Rep 237 (“A v B”) at [133] to [139]. A v B arose out of an agreement to settle a dispute between two brothers who had carried on business together. According to the headnote, the agreement required a relatively complex structure of preliminary steps to be taken in respect of the temporary disposition of disputed assets, the standstill of pending proceedings, the withdrawal of criminal proceedings against A in the Bahamas and the parties’ facilitating the work of the arbitrator and the procedures to be adopted in the arbitration. It was also an agreement that all outstanding disputes would be determined by B on the basis that he would be given extremely wide powers for that purpose and that the parties waived objections which they might otherwise have had to B acting or continuing to act in his capacity as sole arbitrator. The arbitration commenced with its seat in Geneva. Just over a year later A issued proceedings against the defendants claiming a declaration that the arbitration agreement was void and had been rescinded in English and Swiss law and that all orders or awards made or purported to be made by B were void and unenforceable. Colman J concluded that, in the circumstances of that case, it would be an inappropriate exercise of the court’s discretion to order a trial of the issue whether the arbitration agreement was “null and void etc”. At [137] and [138], Colman J said:

137.    The structure of Section 9 of the [UK Arbitration Act] leaves no doubt that once the existence of an arbitration agreement has been established by the applicant, a stay will be granted unless one of the section 9(4) matters is established. The respondent to the application must therefore make good the existence of one of those matters. If the court is unable to determine whether it is so satisfied on the witness statements before it, consideration has to be given to whether to order a trial of the issue or whether a stay should be granted and the question of substantive jurisdiction under s 9(4) left to the arbitrators. Whether the latter course is adopted may in many cases depend heavily on the extent to which the resolution of that issue will involve findings of fact which impact on substantive rights and obligations of the parties which are already in issue and whether in general the trial can be confined to a relatively circumscribed area of investigation or is likely to extend widely over the substantive matters in dispute between the parties. If the latter is the case the appropriate tribunal to resolve the jurisdictional issues is more likely to be the arbitration tribunal, provided it has Kompetenz-Kompetenz.

138.    Section 9 applies both to domestic and foreign arbitrations. In the latter case there is likely to be the conjunction of a foreign seat and an arbitration agreement governed by the law of that seat. It follows that the section 9(4) matters will probably have to be determined by reference to that body of law. In such a case where the arbitral tribunal has Kompetenz-Kompetenz, this court should be slow to displace the regime which the parties have agreed for the determination of such matters of jurisdiction. The emphasis in modern international arbitration law is to maximise the arbitrators’ opportunity to determine their own jurisdiction: see in particular the judgment of Thomas J in Vale Do Rio Doce Navegacao SA v Shanghai Bao Steel Ocean Shipping [2002] 2 All ER (Comm) 70; [2002] 2 Lloyd’s Rep 1; [2000] CLC 1200.

124    In Golden Ocean, at [59(7)] Popplewell J identified the following factors which are likely to be of significance in deciding whether to order the trial of the “arbitrability issue” under s 9(1) or s 9(4) of the Arbitration Act 1996 (UK), or whether to grant a stay under the court’s inherent jurisdiction to permit the arbitrability issue to be resolved by the arbitral tribunal:

(a)    Whether the arbitrability issue is likely to fall to be resolved by the court in any event, for example in the context of enforcement of an award. If so, this will be a powerful factor in favour of the court deciding the issue rather than leaving it in the first instance to the arbitral tribunal.

(b)    Whether the resolution of the arbitrability issue will involve findings of fact or law which impact on the substantive rights and obligations of the parties in relation to their underlying dispute, or only affects the question whether such rights and liabilities are arbitrable. In the latter case, the court can conduct the inquiry without risk of interfering with D’s right to have his chosen tribunal decide the disputes, because if the issue is resolved in D’s favour, there will be a stay in favour of the tribunal without the court having trespassed into considering issues which affect the merits of the underlying dispute. On the other hand where, as is not uncommon, the determination of the issue whether there is an effective agreement to arbitrate is bound up with the issues which arise in relation to the underlying dispute, there is a balance of prejudice to each party to be taken into consideration. It may be more efficient and just to leave the arbitrability issue to be dealt with by the tribunal where, if the issue is resolved in D's favour, he can at the same time obtain an award on the merits from his chosen tribunal. Against this is to be weighed the risk of any prejudice to C in being subjected to the process and decision of a tribunal on which he may not have agreed to confer jurisdiction.

(c)    The length and cost of the inquiry into the arbitrability issue and how quickly it will be resolved. Where the issue cannot be resolved without a lengthy investigation, the court will be reluctant to order the issue to be tried in advance of the arbitration. This will be especially so where the trial of the issue is likely to extend widely over the substantive matters in dispute between the parties, in which case considerations of cost and convenience may be decisive: ordering a trial of the arbitrability issue will normally be inappropriate where the trial cannot be confined to a relatively circumscribed area of investigation.

(d)    Whether there have been or will be related proceedings addressing the arbitrability issue between the same or other parties. If the arbitrability dispute has been or will be addressed or resolved in other proceedings, the court will be anxious to do what it can to minimise the risk of inconsistent judgments and provide for orderly case management.

(e)    The degree of connection between the arbitrability dispute and England. In this context the law applicable to the arbitrability issue may be of significance. Where the law governing the issue of the existence, effectiveness or applicability of the agreement to arbitrate is English law, that will be a factor in favour of the issue being resolved by the English court rather than a foreign tribunal, unless it is clear that there is no real dispute as to the legal principles, or that the foreign tribunal is as well placed to apply those principles as an English court. Other relevant factors in this context will include the relative convenience for the parties of contesting the arbitrability question before the English court, on the one hand, or the arbitral tribunal on the other. Factors such as the location and language of witnesses and documents and other factors commonly taken into account when considering the Spiliada discretion will here be relevant. Also relevant in this context would be the potential applicability of an English jurisdiction clause if the agreement to arbitrate did not exist or was ineffective or inapplicable, as in Claxton.

(f)    The strength of the arguments on the arbitrability issue. The court will not conduct a mini trial in determining whether to direct a trial of the issue. But as in other interlocutory contexts, if the court can determine on a brief perusal of the materials before it that one party has a very strong case on the arbitrability issue, the court will take this into account.

(g)    The nature and quality of the arbitral tribunal and arbitral process, including the supervisory jurisdiction of the curial court. Where the English court declines to resolve the issue and leaves it to the Kompetenz-Kompetenz of the tribunal in the first instance, C has the comfort that if he is right in his contention that there is no applicable or effective agreement to arbitrate, he will have the opportunity to establish that before the tribunal, which will then decline jurisdiction. The degree of comfort will depend upon the quality of the tribunal and of the arbitral process, supported by resort to the courts having supervisory jurisdiction over the arbitral process. The degree of prejudice to C in requiring him to entrust the issue to a tribunal with whom it may transpire he has not agreed that it should be entrusted will depend upon the degree to which the tribunal can be trusted to reach the correct answer.

Agreed question (12): Can the proviso in s 8(1) apply where an arbitration agreement is voidable rather than void?

125    It has been suggested that the exceptions to mandatory referral to arbitration ought to be narrowly construed: Joseph D, Jurisdiction and Arbitration Agreements and their Enforcement (3rd ed, Sweet & Maxwell, 2015) at [11.47].

The applicants must impeach the arbitration agreements

126    The applicants accepted that the proviso to s 8(1) applies to arbitration agreements, as distinct from any wider agreement in which the arbitration agreement is contained. In Walter Rau, Allsop J explained what is required, in relation to the proviso in s 7(5) of the International Arbitration Act (at [89] to [91]):

89    … Thus, what is required for s7(5) to be engaged and to justify the matter of avoidance for fraud or otherwise not being referred to the arbitrator for decision, is that the fraud or vitiating conduct be directed to the arbitration clause itself: see for example Prima Paint Corp v Flood & Conklin Manufacturing Co [[1967] USSC 172;] 388 US 395, 402-404; Ferris v Plaister; QH Tours; Morton v Baker, Einfeld J, 25 March 1993; and Harbour Assurance Company (UK) Ltd v Kansa General International Co Ltd.

90    The conclusory assertions in the amended application are insufficient because the facts pleaded in the proposed second amended application do not raise a claim directed to the arbitration clause. There is no reason why, on the assumption that the arbitrator has been invested contractually to resolve issues of the avoidance of the substantive contract, that he or she should not do so. Apart from assertion, unsupported by a claim directed specifically to the arbitration clause, there is no basis to conclude that these claims satisfy s 7(5).

91    This approach conforms with an operation of s 7 of the IA Act in accordance with the fostering of the aims of the New York Convention and the Model Law. To allow the assertion of voidness or of the entitlement of avoidance, unsupported by a pleaded claim directed at the arbitration clause, to defeat a stay under s 7(2) would undermine the intent of the operation of the New York Convention and the IA Act which was intended to give it effect. To quote Judge Schwebel, as cited by Kirby P in Ferris v Plaister, at 488-489:

2.    If a party could avoid arbitration by the mere assertion that the principal agreement is invalid, it would be a very simple way to avoid arbitration or to delay the resolution of the dispute by arbitration . A court would then have to determine whether the contract was valid at its inception. Then the parties would need to arbitrate the rest of their dispute. The advantages of a single arbitration would thereby be lost. Yet, by agreeing to the arbitration clause, that was the imputed contractual intention of the parties.

...

4.     Without separability, a court would be required to consider the substance of the dispute. This would be necessary to determine whether the arbitrator was correct to find that the agreement was valid so that the arbitrator had jurisdiction. To allow this would conflict with the international and local law precluding a review of awards on the merits and holding parties to their agreement to submit disputes to arbitration.

    (Italics in original)

127    Similarly, in Fiona Trust, Lord Hope said (at [35]), concerning the appellants’ claim that they were entitled to rescind the contract because it was induced by bribery:

Allegations of that kind, if sound, may affect the validity of the main agreement. But they do not undermine the validity of the arbitration agreement as a distinct agreement. The doctrine of separability requires direct impeachment of the arbitration agreement before it can be set aside. This is an exacting test. The argument must be based on facts which are specific to the arbitration agreement. Allegations that are parasitical to a challenge to the validity of the main agreement will not do.

Null and void

128    In Comandate, Allsop J at [209]-[214] referred to international commentary and case law as follows:

As to the phrase “null and void”, two major texts on the New York Convention and the Model Law: van den Berg AJ, [The New York Arbitration Convention of 1958 (Kluwer, 1981)] and [Holtzmann and Neuhaus commentary] respectively, reveal that there was very little discussion about the meaning of the phrase in the meetings and Working Groups leading to the two instruments: see generally van den Berg AJ, op cit at 154-161 and [Holtzmann and Neuhaus commentary] at 302-307. At 156, van den Berg says the following about the phrase:

The words may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning. It would then cover matters such as the lack of consent due to misrepresentation, duress, fraud or undue influence.

…

It may be added that the words ‘null and void’ etc. would also apply the question of capacity of a party to agree to arbitration, which question is to be decided under his personal law or another law which a court may hold applicable to this issue according to its conflict rules.

Mustill M and Boyd S, Commercial Arbitration (Butterworths, 1989) at 464 express the view that the phrase ‘null and void’ includes circumstances not only where the arbitration agreement has never come into existence, such as when there was no concluded bargain, but also the case where an arbitration agreement has come into existence but has become void ab initio, eg by rescission on the ground of misrepresentation. These comments concerned s 1 of the Arbitration Act 1975 (UK) which contained the following in respect of granting a stay of court proceedings:

… the court, unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings.

Professor Merkin, on the other hand, in Arbitration Law (LLP, 2004) at [8.32] says 63 that an arbitration agreement is not null and void if it is merely voidable, at least until it has been avoided.

The authors of Russell on Arbitration (22nd ed, Sweet and Maxwell, 2003) made the following comment about [when] the phrase as it appears in s 9 of the Arbitration Act 1996 (UK) [will apply] at 302:

The court is satisfied that the arbitration agreement is null and void. This will be the case where the arbitration agreement (as opposed to the main contract) was never entered into or where it was entered into but has subsequently been found to have been void ab initio, …

Section 9 of the Arbitration Act 1996 (UK) is relevantly in the following terms:

On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.

The United States courts appear to take a narrow view of the content of “null and void” conformable with a perceived declared policy in the New York Convention of enforceability of agreements to arbitrate. In Chloe Z Fishing Co Inc v Odyssey Re (London) Ltd 109 F Supp 2d 1236 (2000) (SD Cal 2000) Gonzalez J, applying Oriental Commercial and Shipping Co (UK) Ltd v Rosseel NV 609 F Supp 75 (1985) (SDNY 1985), said at 1241:

[U]nder Article II, § 3, an agreement to arbitrate is ‘null and void’ only when it is subject to internationally recognised defenses such as duress, mistake, fraud, or waiver, or when it contravenes fundamental policies of the forum nation.

129    Allsop J did not determine whether a contention that an arbitration agreement is liable to be declared void under s 87 of the Trade Practices Act was sufficient to engage the “null and void” proviso, or whether it was necessary for the arbitration agreement to be “null and void” at the time of the application for the stay.

130    In Rhone Mediterranee Compagnia Francese Di Assicurazioni E Riassicurazoni v Lauro 712 F. 2d 50 (3rd Cir, 1983) at [19], the Court discussed the interpretation of the “null and void”, and said:

[W]e conclude that the meaning of Article 11 section 3 which is most consistent with the overall purposes of the Convention is that an agreement to arbitrate is “null and void” only (1) where it is subject to an internationally recognized defence such as duress, mistake, fraud or waiver ... or (2) when it contravenes fundamental policies of the forum State. The “null and void” language must be read narrowly, for the signatory nations have jointly declared a general policy of enforceability of agreements to arbitrate.

131    In Bautista v Star Cruises 396 F. 3d 1289 (11th Cir, 2005) at 1294-1295, the Eleventh Circuit Court of Appeal held that:

The [New York] Convention’s ‘null and void’ clause ... limits the bases upon which an international arbitration agreement may be challenged to standard breach-of-contract defences. ... [The ‘null and void’ clause] “must be interpreted to encompass only those situations – such as fraud, mistake, duress, and waiver – that can be applied neutrally on an international scale.”

132    The term “null and void” has also been considered by the English courts. Lightman J cited US case law in Albon in construing s 9(1) and (4) of the Arbitration Act at [18]:

My construction of s 9(1) is entirely in accord with s 9(4) and (again subject only to minor qualifications) with the authorities on that section. Section 9(4) assumes that an arbitration agreement has been concluded and it provides for the situation where issues arise whether that concluded agreement is or may be in law ‘null and void, inoperative or incapable of being performed’. In this context ‘null and void’ means ‘devoid of legal effect’. This is made clear by the decision in 1983 of the United States Court of Appeals for the Third Circuit in Rhone Mediterranee Compagnia v Achille Lauro (1983) 712 F.2d 50.

133    In Albon, the question was whether the relevant agreement was a forgery. Following Albon, the English courts have largely construed the meaning of “null and void” to be “devoid of legal effect”. For example, in Hashwani v Jivraj [2010] EWCA Civ 712; [2011] 1 All ER 50; [2010] 2 Lloyd’s Rep 534, the Court of Appeal held that an arbitration agreement was void by reason of the operation of the (now repealed) Employment Equality (Religion and Belief) Regulations 2003 (UK). These regulations provided that a term of a contract was void where it contravened the prohibitions set out in the Regulations.

134    Similarly in Accentuate Ltd v Asigra Inc [2009] EWHC 2655 (QB); [2009] 2 All ER (Comm) 738; [2009] 2 Lloyd’s Rep 599, Tugendhat J lifted a stay based on the argument that the arbitration agreement between the parties was null and void because it purported to apply a foreign law (the law of Ontario) which did not give effect to mandatory provisions of the law of the European Union, namely, an agent’s entitlement to compensation under the Commercial Agents (Council Directive) Regulations 1993 (UK) (implementing the European Union’s EC Directive 86/653).

135    In Sun Life Assurance Company of Canada v CX Reinsurance Company Ltd [2003] EWCA Civ 283; [2004] Lloyd’s Rep IR 58, the English Court of Appeal found an arbitration clause to be null and void because the wider agreement, of which the arbitration agreement was part, was never formally signed. The common intention of the parties was that they were negotiating on the basis that the agreement would require authorised signatures to indicate each company’s assent. Since these signatures had never been obtained, following the orthodox rules of contract, the parties were never bound and the arbitration clause did not apply (at [38] and [45]).

136    In Golden Ocean, Popplewell J summarised the relevant principles as follows (at [59(3)]):

If s 9(1) is fulfilled, s 9(4) requires the court to grant a stay unless satisfied that the arbitration agreement is null and void, inoperative or incapable of having effect. Examples of disputes which will engage this subsection are where C alleges that the arbitration agreement is vitiated by fraud or misrepresentation, or that the agreement is void for illegality, mistake or duress.

137    Based on these authorities, in my view, an arbitration agreement vitiated by fraud or misrepresentation, or made under duress or undue influence, will be “null and void” within the meaning of s 8(1). In those cases, the validity of the agreement is liable to be impugned from its commencement (subject to questions such as affirmation or waiver) with the result that the arbitrator’s jurisdiction may be found never to have existed.

Can the proviso apply to claims under the Trade Practices Act?

138    In this case, the applicants seek relief under the Trade Practices Act based on conduct alleged to amount to fraudulent concealment of relevant facts: see, for example, paras 369 and 378 of the statement of claim, concerning the 2005 deed of obligation and release. The relief sought includes orders pursuant to s 87(2)(a) declaring arbitration agreements void, for example, clause 14 of the 2005 deed of obligation and release (originating application prayer 40.2) and clause 20 of the Hope Downs deed (originating application prayer 37.1).

139    The power under s 87(2)(a) of the Trade Practices Act to declare a contract void ab initio does no more than confer a power to make a declaration in accordance with the legal validity of the contract: Trade Practices Commission v Milreis Pty Ltd (1977) 29 FLR 144; (1977) 14 ALR 623 at 638-639 and 645-646. Thus, the claim for statutory relief requires a finding that a relevant agreement is vitiated, from its inception, by fraud.

140    Accordingly, I am satisfied that, in an appropriate case, the proviso in s 8(1) can apply to a claim for a declaration pursuant to s 87(2)(a) of the Trade Practices Act that an arbitration agreement is void ab initio.

Standard of proof

141    Mrs Rinehart and the HPPL respondents submitted that “finds” in the proviso means “finds on the balance of probabilities”. The applicants’ submission was that, where the party resisting referral establishes a “credible case” that the proviso applies, the Court should decline to refer the parties to arbitration and should allow that issue to proceed to a final hearing. I do not understand these submissions to be inconsistent.

142    In Berezovsky at [77]-[78], Aikens LJ (with whom Mann and Laws LJJ agreed) concluded that the standard of proof in respect of the proviso in respect of the corresponding provision in s 9(4) of the Arbitration Act 1996 (UK) was the balance of probabilities. As the Lord Justice observed: “After all, it is for the court finally to decide the issue of whether or not to refuse a stay because the arbitration agreement is ‘null and void’ or ‘inoperative’. No other tribunal has or can have this jurisdiction”.

143    At [79] and [80], set out earlier, Aikens LJ then considered how the court should decide whether to conduct a trial on the issue of the application of the proviso.

144    The finding of a “credible” argument does not necessarily entail a final decision to refuse to refer the parties to arbitration. Rather, it justifies consideration of whether to exercise the Court’s discretion to decide, on a final basis (and by reference to findings on the balance of probabilities), whether the proviso applies to an arbitration agreement.

145    These applications were heard on the express basis that the Court would not make any factual findings about whether the asserted arbitration agreements are vitiated by fraud or other misconduct as a result of the hearings of the applications to date. The agreed questions reflect this limitation on the scope of the matters for decision.

COURT’S POWER TO REFER PARTIES TO ARBITRATION AND STAY PROCEEDINGS (AGREED QUESTIONS (14) AND (15))

Is s 8(1) “picked up” by s 79 of the Judiciary Act?

146    Agreed question (14) is: “Is s 8(1) of the commercial arbitration legislation binding on this Court pursuant to s 79 of the Judiciary Act?”

147    Section 79(1) of the Judiciary Act provides:

(1)    The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

148    This Court exercises federal jurisdiction. The content of the law to be applied is determined by ss 79 and 80 of the Judiciary Act. Unless the Constitution or a law of the Commonwealth otherwise provides, s 79 of the Judiciary Act will pick up the laws of the States, including the common law choice of law rules, subject to any statutory modifications: John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503 at 531; Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 193 (“Bond Corporation”); Re 700 Form Holdings Pty Ltd [2014] VSC 385.

149    In Northern Territory v GPAO [1999] HCA 8; (1999) 196 CLR 553 at [80], Gleeson CJ and Gummow J said:

The objective of s 79 is to facilitate the particular exercise of federal jurisdiction by the application of a coherent body of law, elements in which may comprise the laws of the State or Territory in which the jurisdiction is being exercised, together with the laws of the Commonwealth, but subject always to the overriding effect of the Constitution itself … The law of a State of Territory which is to operate as a surrogate law of the Commonwealth is to be measured beside other laws of the Commonwealth.

150    Mrs Rinehart and the HPPL respondents contend that s 8(1) of the NSW Act is picked up by s 79 of the Judiciary Act because its application is a question of procedure and so governed by the law of the forum under the common law choice of law rules in force in New South Wales (or, if an issue of substance, because the common law choice of law rules have been modified by s 8(1) of the NSW Act which, properly construed, is directed to all arbitration agreements brought before a court in New South Wales, whatever their governing law).

151    The applicants contend that s 53A of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”) “otherwise provides”. Section 53A is in the following terms:

Arbitration, mediation and alternative dispute resolution processes  

(1)    The Court may, by order, refer proceedings in the Court, or any part of them or any matter arising out of them:

(a)    to an arbitrator for arbitration; or

(b)    to a mediator for mediation; or

(c)    to a suitable person for resolution by an alternative dispute resolution process;

in accordance with the Rules of Court.

(1AA)    Subsection (1) is subject to the Rules of Court.

(1A)    Referrals under subsection (1) (other than to an arbitrator) may be made with or without the consent of the parties to the proceedings. Referrals to an arbitrator may be made only with the consent of the parties.

(2)    The Rules of Court may make provision for the registration of awards made in an arbitration carried out under an order made under subsection (1).

(3)    This section does not apply to criminal proceedings.

152    Section 53A concerns, relevantly, the Court’s power to refer proceedings in the Court, or any part of them or any matter arising out of them to an arbitrator for arbitration. It does not provide for the compulsory referral of parties to arbitration, which is the subject matter of s 8.

153    In Latteria Holdings Pty Ltd v Corcoran Parker Pty Ltd [2014] FCA 880; (2014) 224 FCR 519 at [47], Mortimer J explained the correct approach to determining whether a federal law “otherwise provides” as follows:

At [17] of Austral Pacific [Group Ltd (in liq) v AirServices Australia (2000) 203 CLR 136; [2000] HCA 39], Gleeson CJ, Gummow and Hayne JJ stated that, in determining whether a federal law “otherwise provides” for the purposes of s 79, a court is to ask whether the federal law would so reduce the ambit of the State law that the provisions of the federal law are irreconcilable with the provisions of the State law. The “covering the field” approach, drawn from decisions concerning s 109 of the Constitution of the Commonwealth, is not to be taken: GPAO [[1999] HCA 8; (1999) 196 CLR 553;] at [78]-[83] per Gleeson CJ and Gummow J, at [135] per Gaudron J, at [254] per Hayne J. In Austral Pacific, the plurality held that the federal law was silent on the legal question to which the State law applied, evincing a legislative intention to “leave such matters for the operation of State or Territorial legislation ‘picked up’ by s 79” and therefore the federal law did not “otherwise provide” for the purposes of s 79 of the Judiciary Act. To frame the question another way, as Gleeson CJ and Gummow J put it in GPAO at [84], does the federal law “leave room” for the State law, or a provision of it, to operate? As the authorities demonstrate, what is “picked up” as surrogate federal law may be an entire legislative scheme, a portion of a scheme, or a particular provision within a scheme.

154    The applicants’ argument was that s 53A preserves the Court’s discretion whether to refer the parties to arbitration, in contrast to s 8(1) which purports to make referral mandatory in certain circumstances. Further, s 53A only permits referrals to an arbitrator with the consent of the parties, in contrast to s 8(1) which may mandate referral in the absence of consent.

155    The applicants acknowledged that other federal courts have “picked up” state law arbitration provisions applying s 79: see, for example, Thomas v Star Maid International Pty Ltd [1999] FCA 911(“Star Maid”) at [2]; Heller Financial Services Ltd v Theiss Contractors Pty Ltd [2000] FCA 802 (“Heller”) at [1]. But, the applicants said, in each case (with one exception), the relevant state provision was expressed in discretionary, rather than mandatory terms. The exception is Amcor [2013] FCA 253, but in that case there was no issue between the parties about the application of the Arbitration Act 1928 (Vic) or that it was picked up and applied by s 79.

156    In Bond Corporation, French J (as he then was) held that this Court might stay its own proceeding by virtue of s 53 of the Commercial Arbitration Act 1985 (WA) on the strength of s 79. His Honour noted (at 205) that the possible operation of s 79 in relation to a State law empowering State courts to stay their proceedings pending the determination of an arbitration was referred to, but not decided, in Lady Carrington Steamship Co Ltd v The Commonwealth [1921] HCA 49; (1921) 29 CLR 596. In Huddart Parker Ltd v Ship Mill Hill [1950] HCA 43; (1950) 81 CLR 502, Dixon J held that the High Court had power under s 5 of the Arbitration Act 1928 (Vic) to stay the proceedings. The applicants noted that s 53A was not in force at the time of the decision in Bond Corporation. Although s 53A commenced before the decisions in Heller and Star Maid, there was no reference to s 53A in either case.

157    In Re 700 Form Holdings Pty Ltd [2014] VSC 385, Robson J held that s 8 of the Commercial Arbitration Act 2011 (Vic) applied to an oppression claim brought under s 233 of the Corporations Act 2001 (Cth), although he did not refer to s 79. Leave to appeal has been granted.

158    In my view, s 53A does not affect the ambit of s 8(1). Section 53A confers a power on the Court to refer parties to arbitration with their consent. It is silent as to the question of proceedings in a matter which is the subject of an arbitration agreement, and as to the question of enforcement of rights arising from an arbitration agreement.

159    Accordingly, in my view, s 8(1) of the NSW Act is binding on this Court pursuant to s 79 of the Judiciary Act despite s 53A of the Federal Court Act.

Power to stay proceedings

160    The precise question agreed by the parties is:

15.     If the Court determines that the commercial arbitration legislation does not apply or that GHR and the HPPL respondents have not met their burden of proving that any matter(s) in the proceedings are the subject of an arbitration agreement, does the Court otherwise have the power to stay the proceedings and refer the parties to arbitration?

161    The Court has a general power to control its own proceedings and that power extends to enable it to order a stay of proceedings: Bond Corporation at 203.

162    In Recyclers of Australia Pty Ltd v Hettomga Equipment Inc [2000] FCA 547; (2000) 100 FCR 420 at [65] to [66], Merkel J said:

65    In the event that a proceeding includes matters that are not capable of being referred to arbitration, but the determination of which is dependent upon the determination of the matters required to be submitted to arbitration, a court may, in the exercise of its discretion, stay the whole proceeding: see Tanning Research at 216 per Brennan and Dawson JJ. A court may also exercise a discretion to impose terms that the arbitration of the arbitrable claims not proceed prior to the determination of the non-arbitrable claims where the arbitrable claims are seen to be subsidiary to or significantly less substantial than, but overlapping with, the non-arbitrable claims: see Hi-Fert at 167-168 cf Dodwell & Co (Aust) Pty Ltd v Moss Security Ltd (unreported, Federal Court, Wilcox J, No 130 of 1990, 11 April 1990) [at [5] and [7]]. The discretion may also be exercised to stay the proceeding where the non-arbitrable claims are the ancillary claims.

66    The broad discretion arises as part of the exercise of a court's general power to control its own proceedings. The basis for the discretion is that the spectre of two separate proceedings – one curial, one arbitral – proceeding in different places with the risk of inconsistent findings on largely overlapping facts, is undesirable: see Dodwell & Co per Wilcox J at [5] and [7], Hi-Fert at 167-168 and McDonnell Dowell Smith East Asia Pty Ltd v State Electricity Commission (unreported, Supreme Court, Vic, Beach J, No 5035 of 1996, 24 November 1998) [at [22] to [24]].

163    The application for a stay of the proceeding is dependent upon some or all of the parties to the proceeding being referred to arbitration. I accept that, in those circumstances, the Court has power to stay the proceedings. See Albon at [24] and Golden Ocean at [50].

FACTS

164    This section of the judgment sets out the facts relied upon by Mrs Rinehart and the HPPL respondents in support of their contentions that the parties must or should be referred to arbitration, and the proceeding stayed. It also sets out facts relied upon by the applicants in support of their contention that the applications should fail or, alternatively, that the Court should order a trial of the question whether the proviso in s 8(1) applies to the extent that s 8(1) is otherwise engaged.

“Substantive claims” and “validity claims”

165    For the purpose of determining whether there are matters that are the subject of an arbitration agreement within s 8(1), it is necessary to identify, at least in broad terms, the allegations made by the applicants in this Court and their claims for relief based on those allegations.

166    The HPPL respondents divided the applicants’ case in the main proceeding into two categories: “substantive claims”, being “claims” of alleged misconduct by HPPL and Mrs Rinehart pleaded in paras 128 to 274 of the statement of claim, and “validity claims”, being “claims” pleaded in paras 275 to 506 of the statement of claim. The “substantive claims” generally concern the manner in which valuable mining assets changed hands and in which the financial positions of HPPL and HFMF have been altered, allegedly to the detriment of the applicants. The events pleaded mainly, but not entirely, precede the execution of the deeds containing the alleged arbitration agreements.

167    The “validity claims” concern mainly the circumstances in which the applicants came to execute the various deeds containing the alleged arbitration agreements. They also include claims based on alleged misconduct seeking to deploy or give effect to the deeds.

168    The relief sought in prayers 1 to 34 of the originating application broadly corresponds with the “substantive claims”. The relief sought in prayers 35 to 47 broadly corresponds with the “validity claims” which challenge the validity or enforceability of the various deeds. Prayers 48 to 51 seek relief arising from complaints about the manner in which Mrs Rinehart and HPPL have conducted themselves, in the context of litigation between them and the applicants, since 5 September 2011.

169    The respondents have not filed defences in the proceeding. However, it is reasonable to assume that the important elements of the applicants’ case will be contested in due course: cf Rinehart v Welker at [130].

Factual findings sought by the applicants

170    The applicants proposed 17 findings “based on [their] unchallenged evidence”. Several of the proposed findings concerned the absence of a “commercial relationship” at various times. I have made findings about that matter.

171    Other proposed findings concerned whether HPPL or GHR “exerted influence over” either of the applicants on particular occasions and the circumstances in which the applicants executed various deeds, being circumstances that are said to affect the validity of the deeds. I have not made findings about those matters, having noted that I would not address those issues on 15 April 2015.

Background to the main proceeding

172    The background goes back to the 1980s.

173    Mr Hancock senior was the founder of the Hancock group of companies, which included HPPL, HFMF and Zamoever Pty Ltd (“Zamoever”). He was the controller of the Hancock group of companies until his death. Mr Hancock senior was allegedly responsible for the discovery and acquisition by the Hancock group of vast iron ore resources in the Pilbara region of Western Australia.

174    HPPL, incorporated on 25 November 1955, was controlled by Mr Hancock senior from 25 November 1955 until his death and, since then, has been controlled by Mrs Rinehart. HPPL’s primary business is in relation to iron ore mining in the Pilbara region of Western Australia.

175    HFMF was incorporated in 1972 as a company limited by guarantee. In 1986, its objects were expanded to include business activities.

176    Mrs Hope Margaret Hancock was the wife of Mr Hancock senior and a one third shareholder in HPPL during her lifetime. She died in 1983. Upon her death, her shares in HPPL passed to Mr Hancock senior.

177    After the death of Mrs Hancock, Mr Hancock senior married Rose Porteous (“Mrs Porteous”).

178    According to the statement of claim, by about 1985 disputes had arisen between Mr Hancock senior and Mrs Rinehart regarding his relationship with Mrs Porteous and his dealings with assets of HPPL.

179    The statement of claim pleads, relevantly, that:

(1)    On 22 June 1988, Mr Hancock senior and Mrs Rinehart entered into an agreement, referred to as the “1988 Agreement” setting out the terms of the arrangements between them concerning the future ownership of HPPL and HFMF;

(2)    The 1988 Agreement provided that, upon Mr Hancock senior’s death, 51% of HPPL would be held by Mrs Rinehart while the other 49% of HPPL and 100% of HFMF would be owned by Mrs Rinehart’s four children, that is, the applicants, Ms Welker and Ms Ginia Rinehart (collectively, the “children”);

(3)    It was a term of the 1988 Agreement that, upon Mr Hancock senior’s death and when Mrs Rinehart’s youngest child, Ms Ginia Rinehart, reached the age of 25, the children’s entitlement would be 15.6% of the ordinary and special cumulative shares held by the “HMH Trust” and absolute ownership or control over HFMF, which would give them ownership or control over the 33.3% shares in HPPL held by HFMF with a total interest of 49%.

180    Section 5 of the statement of claim is entitled “Creation of the HMH Trust and the HFMF Trust”.

181    As to the HMH Trust, the statement of claim alleges that:

(1)    It was established, pursuant to a written agreement between Mr Hancock senior and Mrs Rinehart made in 1988, by a deed of settlement dated 28 December 1988;

(2)    At all material times:

(a)    the trustee of the HMH Trust was Mrs Rinehart;

(b)    the beneficiaries were the children in equal shares;

(c)    the principal asset of the HMH Trust was and is its shares in HPPL.

182    Zamoever was registered as a company on 3 March 1989.

183    As to the HFMF Trust, para 105 of the statement of claim alleges:

On 20 March 1992, in furtherance of the terms of the 1988 Agreement, LGH executed a deed (the 1992 Deed) by which he formally declared in writing that he held the whole of his legal and beneficial interest in his 2 shares in Zamoever upon trust for the children of GHR (being JLH, BHR, HRW and GHFR) as tenants in common in equal shares (the HFMF Trust).

(emphasis removed)

184    The existence of the HFMF Trust is central to the applicants’ claims in this proceeding.

185    In an unsworn affidavit prepared by Mr Hancock in around 2005 (“Mr Hancock’s unsworn affidavit”), Mr Hancock stated, relevantly:

106.    On 20 March 1992, LGH executed a deed (the “Share Purchase Supplementary Deed and Hancock Group Arrangement” … stating at Clause 5 that he held the shares in Zamoever on trust for my mother’s children absolutely as tenants in common in equal shares upon the same terms as to the appointment of trustee as the Trust, and to vest on the same date as the Trust. Clause 5 does not say the shares are to be held on identical terms as the Trust, and it would appear the intention was to create a separate trust. I believe LGH’s intention, manifested in the Plan, the Supplementary Share Deed and his Will, was that the Trustee of the Trust would not only hold the one third shareholding in HPPL which LGH gifted to the Trust on 27 December 1988, but also would hold the shares in Zamoever, in trust purely for my mother’s children, as a second Trust (the “Zamoever Trust”). Alternatively, if I am wrong, LGH intended the Zamoever shares to form part of the Trust, to be held purely for my mother’s children …

186    In support of the existence of the HFMF Trust, the applicants rely upon admissions by Mrs Rinehart and HPPL in Supreme Court of Western Australia proceedings CIV 2121 of 1992 (“proceeding CIV 2121/1992”) brought by Mrs Porteous which, the applicants contend, are to the effect that Mr Hancock senior declared himself a trustee of the whole of his interest in shares in Zamoever for Mrs Rinehart’s children.

187    Mrs Rinehart argues that the allegation made in Mr Hancock’s unsworn affidavit as to the existence of the Zamoever Trust is the same allegation made in these proceedings as to the existence of the HFMF Trust.

188    The statement of claim alleges that the terms of the HFMF Trust and the HMH Trust provided for Mr Hancock senior to be the trustee of both trusts during his lifetime, for Mrs Rinehart to become the trustee of both trusts upon his death, and for both trusts to vest on the 25th birthday of Mrs Rinehart’s youngest child.

189    That child, Ms Ginia Rinehart, reached the age of 25 on 6 September 2011.

The position at the time of Mr Hancock senior’s death

190    At the time of his death on 27 March 1992, the applicants were aged 15 and 16 respectively.

191    The applicants allege that, at the time of Mr Hancock senior’s death, HFMF held the following valuable assets:

(1)    A 33.3% shareholding in HPPL;

(2)    Exploration licences for the Hope Downs tenements;

(3)    Applications for exploration licences for the Roy Hill tenements;

(4)    A 50% share of the legal and beneficial title to mining tenements now known as Nicholas Downs tenements; and

(5)    A 100% share of the legal and beneficial title to the mining tenement now known as the Mulga Downs tenement.

192    The Hope Downs, Roy Hill and Mulga Downs tenements are valuable iron ore resources. The statement of claim alleges that the Nicholas Downs tenements comprise a ferruginous manganese deposit in the Pilbara region of Western Australia.

193    For her part, and without attempting to state Mrs Rinehart’s position exhaustively, Mrs Rinehart’s case is that beneficial ownership of the Hope Downs tenements was always with HPPL.

Mrs Rinehart’s roles and duties after Mr Hancock senior’s death

194    The applicants claim that, following Mr Hancock senior’s death, Mrs Rinehart became the trustee of each of the HMH Trust and the HFMF Trust.

195    The applicants also allege that, at or shortly after Mr Hancock senior’s death, Mrs Rinehart became:

(1)    The chairman and controlling mind of HPPL;

(2)    A director and the controlling mind of Zamoever;

(3)    A director and the controlling mind of HFMF;

(4)    A director and the controlling mind of HRL;

196    It is also alleged that at or shortly after Mr Hancock senior’s death, Mrs Rinehart controlled 51% of the shares in HPPL. The statement of claim pleads that HFMF’s financial statements as at 30 June 1992 recorded HFMF’s 33.33% shareholding in HPPL as a non-current asset with a value of $43,320,000, and exploration licences for areas including the “Hope Downs No 1 iron ore deposits” as non-current assets with a value of $40,011,664.

197    Section 7 of the statement of claim is entitled “GHR’s fiduciary duties arising out of the 1988 agreement”. At para 124, it pleads that Mrs Rinehart owed fiduciary duties to her children in relation to the interests conferred upon them by the 1988 Agreement.

Alleged misconduct prior to 2003

198    In Mr Hancock’s unsworn affidavit, he claims that, following her father’s death, Mrs Rinehart embarked upon “a sustained campaign to return assets to HPPL which she considered were the rightful property of the family, HPPL being the family company”. At para 141 of the unsworn affidavit, he says:

In pursuing the transfer of ownership of various assets from HFMF to HPPL, my mother failed to recognise her duty as trustee of the [HMH] Trust, and the Zamoever Trust of which she became a trustee on LGH’s death. By divesting the Zamoever Trust of its assets in the manner she subsequently did, my mother caused the Trust to lose significant assets, as HFMF, controlled by Zamoever, was supposed to be controlled by the Zamoever Trust…

1992 appropriation of Roy Hill tenements (section 8 of statement of claim)

199    The applicants allege that, almost immediately after Mr Hancock senior’s death, Mrs Rinehart caused HRL to give up its pursuit of valuable exploration licences over the Roy Hill tenements.

200    Underpinning this complaint is an allegation that HRL was then a wholly owned subsidiary of HFMF.

201    The alleged facts are that exploration licence applications made by HRL were marked “refused” in the records of the Western Australian Department of Mines and Petroleum on about 30 May 1992 (that is, about two months after Mr Hancock senior had died). On about 27 August 1992, Mrs Rinehart caused HPPL to apply for exploration licences for the same or substantially the same tenements. On 2 January 1993, the relevant minister granted HPPL each of the exploration licences sought.

202    A particular bone of contention concerns whether Mrs Rinehart falsely stated to the applicants that she personally discovered the Roy Hill tenements.

203    The applicants allege that Mrs Rinehart used her knowledge of the earlier exploration licence applications to obtain a benefit for HPPL at the expense of HRL (being a wholly owned subsidiary of HFMF).

204    The misconduct alleged against Mrs Rinehart comprises:

(1)    breach of her alleged duties as trustee of the HFMF Trust to act honestly and in good faith;

(2)    acting for an improper and ulterior purpose;

(3)    using her position as alleged trustee of the HFMF Trust to gain an advantage for herself; and

(4)    breach of her alleged fiduciary duties as trustee of the HFMF Trust.

205    The applicants allege that a consequence of Mrs Rinehart’s misconduct was that HRL “was deprived of the commercial opportunity to obtain valuable mining assets which would have been recorded as assets of HRL and, indirectly, HFMF” at the time of the “debt reconstruction” pleaded in section 11 of the statement of claim, and explained in more detail below.

206    In oral submissions, Mr Hutley SC, counsel for the HPPL respondents, noted that, on the applicants’ case, HPPL never held beneficial title to the Roy Hill tenements. In this regard, Mr Hutley SC noted the allegation, at para 146 of the statement of claim, that, on about 16 November 2011, HPPL transferred legal title to the Roy Hill tenements to RHIO.

Relief sought

207    By prayers 1 to 8 of the originating application, the applicants seek, in summary, a declaration that RHIO has held and holds the Roy Hill tenements on constructive trust for the children, and for consequential relief in the nature of an account of profits made by Mrs Rinehart, RHIO and HPPL from the use of the tenements or equitable compensation for the children’s lost opportunity to profit from exploiting the tenements.

208    In her written submissions, Mrs Rinehart contended that the relief sought gives rise to a matter subject to all of the arbitration agreements, except for clause 9.2 of the 2007 HD deed.

1992 to 1994 manipulation of HFMF’s financial position (section 10 of statement of claim)

209    In summary, the applicants complain that Mrs Rinehart took steps to “engineer” the present position in which she holds 76.55% of the issued shares of HPPL, rather than 51% as allegedly provided for by the 1988 Agreement. As a result, it is alleged, the children’s interest in HPPL was reduced from 49% to 23.45%.

210    Paragraphs 155 to 176 of the statement of claim set out a series of allegations which may be summarised as actions taken by Mrs Rinehart, through HFMF and HPPL, allegedly intended to devalue HFMF. In particular, it is alleged that on 23 July 1993, HPPL commenced legal proceedings seeking a declaration that the Hope Downs tenements were held on constructive trust for HPPL by HRL. It is also alleged that Mrs Rinehart caused HFMF and HRL to cease contesting the constructive trust claim.

211    The applicants claim that the decision to cease contesting the constructive trust claim meant that the ownership of the Hope Downs tenements was transferred to HPPL and HFMF’s non-current assets decreased by at least $40,011,664. They claim that this decision, and other decisions made prior to July 1995, resulted in:

(1)    A $77,871,422 decrease in the net assets recorded in the HFMF financial statement for the year ended 30 June 1994, reducing net assets from $61,730,338 in 1993 to negative $27,595,965 in 1994;

(2)    The loss of HFMF’s principal income generating assets;

(3)    The Roy Hill tenements not being recorded on the balance sheet of HRL as an asset of HRL;

(4)    The loss of HFMF’s ability to earn income independently or separately from its entitlement to dividends from HPPL; and

(5)    A significant diminution in HFMF’s bargaining power in any future dealings with HPPL.

212    It is alleged that, on or about 11 September 1997, HPPL transferred legal title to the Hope Downs tenements to HDIO.

213    The misconduct alleged against Mrs Rinehart comprises:

(1)    breach of her alleged duties as trustee of the HFMF Trust to act honestly and in good faith;

(2)    acting for an improper and ulterior purpose;

(3)    using her position as alleged trustee of the HFMF Trust to gain an advantage for herself; and

(4)    breach of her alleged fiduciary duties as trustee of the HFMF Trust.

214    In addition, it is alleged that Mrs Rinehart’s conduct was in breach of the 1988 Agreement.

Relief sought

215    By prayers 15 to 21 of the originating application, the applicants seek, in summary, similar relief to the relief sought in connection with the Roy Hill tenements. That is, a declaration that HDIO has held and holds the Hope Downs tenements on constructive trust for the children, and for consequential relief in the nature of an account of profits made by Mrs Rinehart, HDIO and HPPL from the use of the tenements or equitable compensation for the children’s lost opportunity to each profits from exploiting the tenements.

216    Again, in her written submissions, Mrs Rinehart contended that the relief sought gives rise to a matter subject to all of the arbitration agreements, except for clause 9.2 of the 2007 HD deed.

1995 “debt reconstruction” (sections 11 and 13 to 16 of statement of claim)

217    There was a debt reconstruction deed dated 24 October 1995 (“debt reconstruction deed”) made by HFMF and HPPL, and a deed of acknowledgement and release made by HFMF, HPPL and HRL. Recital C to the debt reconstruction deed stated that, as at the date of the deed, HFMF’s liabilities exceeded its assets and it was unable to discharge its debts to HPPL.

218    The applicants complain that, in December 1995, HFMF’s shares in HPPL were converted into ordinary shares and were purchased by HPPL for $9.3 million which, it is alleged, was below the fair value of HFMF’s shares in HPPL.

219    The applicants allege that the buy-back of HFMF’s 33.3% shareholding in HPPL had the effect of increasing Mrs Rinehart’s shareholding in HPPL from 51% to 76.55%.

220    The misconduct alleged against Mrs Rinehart is the same as in [213] above.

221    As against HPPL, it is alleged that it was knowingly involved in Mrs Rinehart’s various breaches of duty as alleged trustee of the HFMF Trust and her fiduciary duties and that, by its execution of the debt reconstruction deed and the deed of acknowledgement and release, it participated “in a fraudulent and dishonest design, together with GHR, for the purposes of conferring a benefit on HPPL, being full legal and beneficial title to the Hope Downs tenements”.

222    At section 16 of the statement of claim, the applicants allege that the 1992 to 1994 manipulation of HFMF’s financial position and the 1995 debt reconstruction involved breaches by Mrs Rinehart of her obligations under the 1988 Agreement.

Debt reconstruction relief sought

223    The relief sought is in prayers 8 to 14 of the originating application, by which the applicants claim:

8.    A declaration that GHR:

8.1    holds, and has held since about December 1995, 25.55% of the ordinary shares in HPPL;

8.2    holds, and has held since about December 1995, 25.55% of the cumulative special shares in HPPL; and

8.3    held, since about December 1995 until she disposed of them to [150 Investments], 25.55% of the preference shares in HPPL,

on constructive trust for BHR, JLH, HRW and GHFR.

9.    A declaration that 150 Investments holds, and has held since it acquired them 25.55% of the preference shares in HPPL on constructive trust for BHR, JLH, HRW and GHFR.

10.    An order pursuant to s 175 of the Corporations Act 2001 (Cth) that HPPL rectify its register of members to reflect that the shares referred to in orders 8 and 9 are held beneficially for BHR, JLH, HRW and GHFR.

11.    An order that GHR provide an account of profits to the Applicants in relation to the benefits obtained by her from her and 150 Investments’ ownership of the shares held on constructive trust referred to in orders 8 and 9.

12.    In the alternative to order 11, an order that GHR pay equitable compensation to the Applicants in respect of lost income from the shares held on constructive trust referred to in orders 8 and 9.

13.    An order that 150 Investments provide an account of profits to the Applicants in relation to the benefits obtained by it from the ownership of the shares held on constructive trust referred to in order 9.

14.    In the alternative to order 13, an order that 150 Investments pay equitable compensation to the Applicants in respect of lost income from the shares held on constructive trust referred to in order 9.

224    In addition, prayers 22 to 26 seek relief to enforce the 1988 Agreement or for damages for breach of the agreement, and prayers 27 and 28 seek the following relief:

27.    Damages pursuant to s 82 of the [Trade Practices Act] and or s 236 of the Australian Consumer Law (Cth) (ACL) in respect of the loss and damage suffered by the applicants arising from the unconscionable conduct of GHR in: