27 December, 2015
As the year draws to a close we have (as in past years) reflected on some of the most significant commercial litigation developments in 2015. Our article discusses 10 of these and highlights some key lessons and implications going forward.
1. High Court confirms broad interpretation of contractual phrase
2. Practice of settling civil penalty proceedings confirmed
3. Sovereign risk and protection from unforeseeable government conduct
4. Limitations on proportionate liability regime clarified
5. High Court addresses freezing orders over Australian assets
6. Door ajar for market-based causation in shareholder class actions
7. Full Court rejects artificial allegations of price-fixing between principals and agents
8. Penalties doctrine up for consideration in the High Court
9. The limits of shareholder activism confirmed
10. Australia continues to take steps in being pro arbitration
Looking ahead to 2016
Some of the important judicial developments this year will continue to take shape next year as appeals are heard and/or judgments are delivered in the High Court. In particular:
- in relation to the penalties doctrine, the Full Federal Court’s judgment this year in Paciocco v ANZ Australia and New Zealand Banking Group Limited [2015] FCAFC 50 (Paciocco), is on appeal to the High Court, with a hearing set down for February 2016. Following its restatement on penalties in Andrews v ANZ (2012) 247 CLR 205, the High Court will once again in 2016 be asked to consider whether certain credit card late fees and other exception fees are penalties. We discuss Paciocco in item 8 below.
- in competition law, the ACCC is seeking leave to appeal to the High Court the Flight Centre decision which was one of two Full Federal Court cases (the other involving ANZ) in which the Court rejected the ACCC’s artificial allegations of price-fixing between principals and agents. We discuss the Flight Centre and ANZ cases in item 7 below.
- in the area of sovereign risk, we expect that the High Court will issue judgment next year in the Tabcorp and Tatts compensation claims against the State of Victoria. We discuss developments on the question of sovereign risk in item 3 below.
In addition, as part of the Federal Court’s National Court Framework, the Federal Court intends to issue new Practice Notes in 2016 governing how it operates, to assist with the creation of a nationally consistent and simplified practice.
1. High Court confirms broad interpretation of contractual phrase
In the decision of Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 89 ALJR 990 (Mount Bruce Mining) the High Court provided further guidance on the proper approach to contractual interpretation, by taking a broad and flexible approach to the phrase ‘deriving title through or under’ a corporation. In determining the scope of that phrase, the High Court looked to the language, context and commercial reality in which the contract was drafted.
In its decision, the High Court reaffirmed the approach in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640 and Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, and found that:
- the rights and liabilities of the parties under the contract are determined objectively, by reference to the text, context and purpose;
- the terms of a commercial contract will be determined by reference to what a reasonable business person would have understood those terms to mean;
- if an expression in a contract is unambiguous, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning; and
- sometimes, reference to events, circumstances and things external to the contract may be necessary to determine what the parties intended. The court may consider how the contract was created, the market in which the parties operate and assume that the parties intended to produce a commercial result. However, evidence of the parties’ statements and actions reflecting their actual intentions and expectations are inadmissible.
The High Court expressly left open the important question (on which intermediate courts of appeal are divided) as to whether ambiguity must be shown before a court interpreting a written contract can have regard to surrounding circumstances. However, the High Court did hold that statements made in Western Export Services Inc v Jireh International Pty Ltd (2011) 86 ALJR 1, to the effect that ambiguity must first be established, created no precedent and were binding on no one.
The High Court ultimately held that Mount Bruce Mining (MBM) was liable to pay royalties for ore won from the Channar A site to Wright Prospecting Pty Ltd and Hancock Prospecting Pty Ltd because:
- in accordance with the natural and ordinary meaning of the contract, Channar A was a physical area within the MBM Area;
- the phrase ‘deriving title through or under’ should be broadly construed. The phrase is not constrained to formal succession, assignment or conveyance. A ‘close practical or causal connection’ was sufficient and the High Court found that this connection did exist between MBM and the entities holding the relevant mining lease.
The broad approach taken towards phrases such as ‘deriving title through or under’ a corporation highlights the importance of clear drafting in the case of contractual agreements. Drafters should also have the contextual framework to the agreement in mind.
Our briefing on the High Court case is available on our website.
2. Practice of settling civil penalty proceedings confirmed
Earlier this year, the Full Federal Court delivered a curve ball to regulators and respondents seeking to agree on a penalty in civil penalty proceedings in the case of Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2015) 229 FCR 331.
Applying the decision of the High Court in Barbaro v R (2014) 253 CLR 58 (Barbaro), which related to submissions as to penalty in criminal sentencing hearings, the Full Court in its May 2015 judgment found that the courts could not receive, or act on, submissions from parties on an agreed penalty or the range within which a penalty should fall in the case of civil penalty proceedings.
The Full Court decision threatened to alter the long-standing practice for negotiated outcomes with regulators. It had become common in proceedings brought by regulators, including the ACCC and ASIC, to reach a resolution between the parties by way of negotiated settlement. This would be achieved by the regulator and the respondent approaching the court with an agreed statement of facts and an 'agreed penalty', requesting that the court convert that penalty into formal orders.
However, on appeal to the High Court in a decision delivered on 9 December 2015, the High Court has unanimously allowed appeals by the Commonwealth of Australia and the CFMEU and CEPU overturning the Full Federal Court decision: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46.
In three separate judgments, their Honours held that the decision in Barbaro does not apply to civil penalty proceedings and a court is not precluded from receiving and, if appropriate, accepting an agreed or other civil penalty submission. There were ‘basic differences’ between a criminal prosecution and a civil penalty proceeding which made the application of Barbaro to civil proceedings incorrect. The nature of criminal prosecutions and civil penalty proceedings are fundamentally different and the penalties imposed in each serve different public functions. Further, the role of a prosecutor in a criminal proceeding is different from the role of a regulator in a civil penalty proceeding.
The High Court observed that there is an important public policy involved in promoting predictability of outcomes in civil penalty proceedings and that ‘the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and respondents.’
This decision restores certainty to the practice of respondents agreeing facts and penalties with a regulator in civil penalty proceedings.
The Court held there was ‘nothing odd or exceptionable’ about a court approving an agreed settlement of a civil proceeding. This does not of course mean that agreements will just be ‘rubber stamped’ by the courts. The High Court emphasised throughout its decision that a court is not bound by the figure suggested by the parties and could only accept an agreed penalty if it considered that the penalty was appropriate.
3. Sovereign risk and protection from unforeseeable government conduct
Three significant developments in 2015 highlighted that sovereign risk continues to be a reality for businesses dealing with Australian government entities. This year, there were a number of instances of unforeseeable government conduct causing loss to businesses for which no adequate legal remedy was available. At this stage, Courts continue to demonstrate a reluctance to develop a doctrine of administrative estoppel or substantive legitimate expectation to address this perceived unfairness. The three following examples highlight those risks and demonstrate that, in certain circumstances, there may be means available to mitigate the effect of sovereign risk on commercial interests.
Tabcorp / Tatts case
In 1994, the State of Victoria granted Tabcorp Holdings Limited (Tabcorp) and Tatts Group Limited (Tatts) a duopoly in the ownership and operation of gaming machines. Tabcorp and Tatts paid substantial consideration to the State for the licences and the Gambling Regulation Act 2003 (VIC) (the Gambling Act) provided the State would make a terminal payment to Tabcorp and Tatts upon the expiry of its licences and the grant of new licences (the terminal payment provision). In 2008, the State amended the Gambling Act and established a new regulatory regime resulting in what the Victorian Court of Appeal considered an ‘emasculation’ of the terminal payment provisions without any terminal payment or other compensation.
Tabcorp and Tatts commenced proceedings in both contract and statute seeking compensation from the State of Victoria. Tabcorp and Tatts were unsuccessful in their statutory claims. In Tabcorp Holdings Limited v The State of Victoria [2014] VSCA 312 (the Tabcorp case) the Court was critical of the State for reneging on an earlier representation, but did not provide a legal remedy on the basis of their interpretation of the statute. This was the case even if it resulted in ‘manifest unfairness’.
In the related decision Tatts Group Ltd v State of Victoria [2014] VSCA 311 (the Tatts case), Tatts’ contractual claim for compensation was upheld. The Court of Appeal held that Tatts was entitled to compensation because the State and Tatts had negotiated a written agreement which included the State’s promise to pay a terminal payment.
In November 2015, the High Court heard appeals concerning the compensation claims of Tabcorp and Tatts. The decisions are currently reserved for judgment.
East West Link Project
The Victorian Government’s decision to cancel the East West Link Project gave rise to potential claims from a consortium comprised of Australian and foreign businesses. In September 2014, the former Victorian Liberal Government contracted to build an 18-kilometre toll road with the consortium. In November 2014, Labor won the state election and cancelled the Project in line with their election promise.
At this time Premier Daniel Andrews stated that he ‘would not rule out’ passing legislation to avoid paying compensation. The cancellation caused significant concern regarding the presence of sovereign risk when contracting with government, raised by domestic and international contracting companies and the ambassadors of France and Spain. The negotiations were resolved in June 2015.
Amendments to the Mining Act
In Duncan v NSW; NuCoal Resources Limited v NSW; Cascade Coal Pty Limited v NSW (2015) 89 ALJR 462; [2015] HCA 13, the High Court unanimously dismissed a challenge to the validity of amendments to the Mining Act 1992 (NSW) (the Mining Act) which had cancelled three mineral exploration licences without compensation.
This decision followed the ICAC’s finding of corrupt conduct in 2013 in relation to the issuing of specific licences and the recommendation that legislation be considered to cancel them. The Parliament enacted the Mining Amendment (ICAC Operations Jasper and Acacia) Act 2014 (NSW) (the Amendment Act), which inserted a schedule into the Mining Act and cancelled the licences.
In finding that the Amendment Act was a termination of rights that had previously been conferred by statute, as opposed to an exercise of judicial power, the High Court held that ‘legislative detriment cannot be equated with legislative punishment’.
4. Limitations on proportionate liability regime clarified
Last year, we reported on the decision of Wealthsure Pty Ltd v Selig (2014) 221 FCR 1 (Wealthsure) in the Full Court concerning the application of the proportionate liability regime under the Corporations Act 2001 (Cth) (the Corporations Act. At issue in the case was the question of whether the proportionate liability regime under the Corporations Act limits the liability of defendants for the loss suffered by a plaintiff to the extent of each defendant’s responsibility for the plaintiff’s loss. This issue is particularly important in claims involving deep pocketed defendants.
The Wealthsure Full Court decision issued last year was at odds with a subsequent Full Court decision handed down 7 days later in ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1 (Bathurst). Wealthsure was appealed to the High Court and it was expected that the High Court would take the opportunity this year to resolve the conflict between the two Federal Court authorities.
This has now occurred – in Selig v Wealthsure Pty Ltd (2015) 320 ALR 47; [2015] HCA 18, the High Court has put to rest the uncertainty in relation to the proportionate liability regime in the Corporations Act.
The appeal to the High Court focused solely on whether Div 2A (the proportionate liability provisions) applied so that the plaintiffs’ loss and damage should be apportioned between the respondents in respect of all of the claims or whether Div 2A was limited to only the claims based on contraventions of s 1041H (misleading or deceptive conduct).
The High Court found that the terms of the proportionate liability provisions of Div 2A were clear and applied only to a claim based upon a contravention of s 1041H. The proportionate liability provisions do not extend to claims based upon conduct of a different kind (such as other statutory causes of action).
The end result of the Selig v Wealthsure Pty Ltd litigation was that the solvent defendants had to bear 100% of the losses suffered by the investors, even though the Court concluded that when the other (insolvent) defendants’ culpability and the plaintiffs’ contributory negligence was considered, the solvent defendants were only culpable for 51% of the losses.
The implications of the High Court’s decision are that where there are breaches outside s 1041H and the equivalent provision of the ASIC Act, the proportionate liability regime will not apply. As such, it is expected that plaintiffs will continue to rely on multiple causes of action (in addition to s 1041H) so as to circumvent the proportionality regime and solvent defendants will be more likely to be liable for 100% of the plaintiff’s loss even if they are only partly responsible.
5. High Court addresses freezing orders over Australian assets
Since the mid-1970s, courts have recognised that they have the power to freeze a defendant’s assets while legal proceedings are on foot in that same court.
What was unclear until the High Court’s decision this year in PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015] HCA 36 (Bayan v BCBC) was whether an Australian court could grant a freezing order over a defendant’s Australian assets in aid of an overseas legal proceeding.
Bayan v BCBC arose from the collapse of a joint venture between BCBC Singapore (BCBC) and Indonesian company Bayan Resources (Bayan). BCBC brought proceedings against Bayan in the High Court of Singapore seeking substantial damages. Those proceedings are ongoing.
Singaporean judgments are not enforceable in Indonesia. Indeed, no foreign judgments are. Singaporean judgments are however enforceable in Australia under the Foreign Judgments Act 1991 (Cth) (the Foreign Judgments Act). Bayan’s only asset outside of Indonesia is a 56% shareholding in Perth-based mining company, Kangaroo Resources Ltd (KRL).
This led BCBC to seek a freezing order over Bayan’s shareholding in KRL from the Supreme Court of Western Australia. The only connection to Australia was the fact that BCBC intends to enforce the Singapore judgment in Australia.
The WA Supreme Court granted the freezing order on an ex parte basis. Bayan challenged the freezing orders, arguing that Australian courts lacked the power to grant a freezing order in aid of an anticipated foreign judgment. Bayan was unsuccessful at first instance and in the Court of Appeal of Western Australia.
On appeal, the High Court unanimously held that the power to grant a freezing order in relation to an anticipated foreign judgment,
which would be registrable in Australia under the Foreign Judgments Act, is within the inherent jurisdiction of Australian superior courts.
The High Court’s judgment in Bayan v BCBC has significant legal and commercial implications for Australian companies doing business overseas as well as dispute resolution generally. An Australian plaintiff embroiled in litigation overseas may take steps to protect its position in an Australian jurisdiction if the foreign defendant has Australian assets. On the other hand, the High Court’s decision may encourage foreign plaintiffs to seek to freeze the Australian assets of Australian defendants in proceedings overseas to seek to protect their position or for strategic leverage.
The significance of the decision is not restricted to Australian litigation. An overseas plaintiff who may ultimately obtain a foreign judgment registrable in Australia may seek to take advantage of the High Court decision if the foreign defendant has assets in
Australia.
6. Door ajar for market-based causation in shareholder class actions
A decision this year of the Full Federal Court has opened the way for plaintiffs to argue the theory of market-based causation in shareholder class actions.
Typically, shareholder class actions brought in Australia relate to the circumstances in which listed securities are acquired by the plaintiffs. There has been an ongoing debate on the applicable test for causation in Australian shareholder class actions and the validity of the theory of market-based causation under Australian law.
Under a market-based theory of causation, the market is said to efficiently price the value of any material information to the securities. It follows that a failure to disclose adverse material information leads to an inflation of the price of the security. The loss claimed is the difference between the inflated price at which the plaintiffs purchased their securities and the true value of the securities had the correct disclosures been made. By deploying the market-based theory of causation, a plaintiff may claim damages for loss without having to prove direct reliance on a specific disclosure failure made by the defendant company.
Until recently, there had not been any appellate level decisions on the validity of market-based causation in shareholder class actions under Australian law. However, on 3 September 2015, the Full Court of the Federal Court of Australia handed down a judgment in Caason Investments Pty Ltd v Cao [2015] FCAFC 94 (Caason) which accepted that market-based causation is reasonably arguable and that pleadings relying on market-based causation should proceed to final hearing.
The majority in Caason also held that arguably there is no principle that reliance is necessary to establish causation in shareholder class actions and recognised that market-based causation arguably advances the policy underpinning the Corporations Act by protecting investors.
It is important to note that the decision in Caason only reflects that market-based causation is arguable; whether that theory will ultimately be vindicated is yet to be seen. Nevertheless, this decision represents a major statement of support for market-based causation and will likely encourage shareholder class actions, given plaintiffs may not need to prove direct reliance in order to establish causation and recover compensation.
The Caason decision followed a judgment delivered by Justice Perram on 4 March 2015 in Grant-Taylor v Babcock & Brown Limited (In liq) (2015) 322 ALR 723; [2015] FCA 149, in which his Honour accepted in obiter that shareholders do not need to prove direct reliance to recover compensation for losses arising from a defendant’s failure to comply with continuous disclosure laws.
We are yet to see how the Court will grapple with the legal issue of how market-based causation should be applied in a final hearing, although this may be ventilated in a number of shareholder class actions which incorporate market-based causation claims and are currently set down for trial in 2016. The potential acceptance of market-based causation under Australian law will likely contribute to a further proliferation of shareholder class actions in Australia.
7. Full Court rejects artificial allegations of price-fixing between principals and agents
In two separate decisions this year, the Full Court of the Federal Court rejected ACCC allegations of price-fixing arrangements between principals and their agents.
In Australian Competition and Consumer Commission v ANZ Banking Group Limited [2015] FCAFC 103, the ACCC alleged that an agreement between ANZ and a mortgage broker limiting the refund the mortgage broker could give on ANZ loans constituted price-fixing. Although the mortgage broker did not supply loans, the ACCC argued there was an Australian market for the supply of ‘loan arrangement services’ in which loan providers (such as ANZ) and brokers compete. The Full Court rejected this and held that ANZ branches and franchisees were not providers of loan arrangement services. Rather, ANZ simply provided loans while brokers provided services to customers.
In Flight Centre Limited v Australian Competition and Consumer Commission [2015] FCAFC 104, the ACCC alleged that Flight Centre attempted to fix prices with certain airlines in the supply of distribution and booking services on international passenger air travel. The Full Court rejected this, and rejected the existence of a separate market for booking and distribution services. Instead, the Court held that the supply of booking and distribution services was ancillary to the supply of international passenger air travel, in which Flight Centre acted as agent for the airlines.
Although these decisions do not stand for a general proposition that a principal will never be found to compete with its agents, they do indicate that generally speaking, it is acceptable for a principal to impose restrictions on the manner and price at which an agent distributes the principal’s goods or services.
These decisions also serve as a reminder that market definition under the Competition and Consumer Act does not turn on artificial distinctions in the services that firms supply. This reinforces the theme of earlier Full Court decisions, such as ACCC v Metcash (2011) 198 FCR 297, where the Court held that market definition must be based on commercial reality.
The ACCC is appealing the Flight Centre decision to the High Court.
8. Penalties doctrine up for consideration in the High Court
The Full Court decision in Paciocco & Anor v Australia and New Zealand Banking Group Limited [2015] FCAFC 50 (Paciocco) continues the debate on the scope of what charges are considered to be penalties, and sets the scene for an appeal to the High Court next year.
The case concerns a challenge to various bank fees charged by ANZ. It was argued that either the fees were penalties or that the fees were unconscionable, unfair or unjust. At first instance, the Court held that only the late credit card payment fees were penalties and none of the disputed fees were unconscionable, unfair or unjust. ANZ appealed to the Full Federal Court and Mr Paciocco cross-appealed. In relation to the penalties issue, the Full Court allowed ANZ’s appeal, holding that none of the fees, including the late payment fees, were penalties.
The Full Court applied the High Court’s approach in Andrews v ANZ Banking Group (2012) 247 CLR 205, namely that a clause providing for the payment of a sum upon breach of contract or as security for the fulfilment of a primary obligation will be a penalty clause if the amount to be paid is not a genuine pre-estimate of loss and is ‘extravagant’ in relation to the loss that could be conceivably suffered by the other party. The Full Court found that any inquiry into loss was to be prospectively assessed at the time of entering the contract, rather than ex-post.
The decision demonstrates that all circumstances need to be considered when determining if a fee is extravagant, however, the parties do not need to express, negotiate or set out the sum by reference to an estimate of damage. Importantly, increases in ANZ’s loss provisions and the cost of regulatory capital were considered as part of the relevant losses that can be considered.
The decision highlights the divergent approaches to penalty clauses taken by Australian and UK Courts. In Paciocco, Allsop CJ confirmed that the difference between a penalty and a genuine pre-estimate of loss is ‘central to the operation of the penalty doctrine’.
This marks a contrast to the approach recently adopted in the UK in Cavendish Square Holding BV v Talal El Makdessi; Parking Eye Limited v Beavis [2015] 3 WLR 1373. The UK Supreme Court rejected a clear delineation between penalty clauses and genuine pre-estimates of loss. The majority stated: ‘The fact that the clause is not a pre-estimate of loss does not therefore, at any rate without more, mean that it is penal’. Under the UK approach, a clause that imposes an obligation on a defaulting party to pay an amount exceeding a genuine pre-estimate of loss might not be penal if the party has a legitimate interest in stipulating the sum.
Special leave to appeal to the High Court was granted in Paciocco in September 2015.
The appeal provides a further opportunity for the High Court to consider the principles relating to penalty clauses (and their application). It may be that the High Court will move away from the Full Court’s approach, adopting a position similar to the UK Supreme Court. If so, this may make it more difficult for consumer groups to challenge standard form contracts used by banks and utility providers.
9. The limits of shareholder activism confirmed
The decision this year in Australasian Centre of Corporate Responsibility v Commonwealth Bank of Australia (2015) 107 ACSR 489 confirmed that shareholders cannot control or direct the management of a company in circumstances where responsibility for that management is vested exclusively with the directors.
The case concerned resolutions proposed for a CBA general meeting by the Australasian Centre of Corporate Responsibility (ACCR) (which represents over 100 members of CBA entitled to vote at a general meeting).
The ACCR gave notice to CBA pursuant to s 249N of the Corporations Act of proposed resolutions relating to a number of
environmental concerns. The first resolution proposed that the directors provide the shareholders with a report outlining various environmental issues. The second (as an alternative to the first) sought to express the shareholders’ concerns regarding the absence of the report in the proposed first resolution. The third proposal (an alternative to the first two resolutions) was in the form of a special resolution to amend CBA’s constitution to include a requirement that the annual report would disclose certain environmental information each year.
CBA did not include the first two proposals in its AGM notice as they were ‘matters within the purview of the Board and management of the Bank’ and were therefore ‘not valid and capable of being legally effective.’ The third resolution was put to the members. ACCR sought declarations from the court that each of the three proposed resolutions could validly be moved at an AGM of CBA.
Davies J dismissed the application. Her Honour reiterated the principle that shareholders in a general meeting cannot interfere in the board’s exercise of powers where those powers are exclusively vested in the board. The result of this is that ‘if the company’s constitution gives the board the power to manage the company’s business, the directors are exclusively responsible for the management of the company and shareholders cannot control the directors… or direct [them] to exercise that power in a particular way.’
As CBA’s constitution vested authority for the management of the company in its directors, and the first and second resolutions went directly to matters concerning CBA’s management, CBA was not required to put the resolutions to its AGM. ACCR also argued that the resolutions did not purport to control CBA’s management but merely express an opinion of the shareholders. Her Honour rejected this argument, noting that ‘the general meeting cannot by resolution express the members’ opinions as to how the board should exercise powers exclusively vested in it by the constitution of the company.’
10. Australia continues to take steps in being pro arbitration
Legislative changes, changes to institutional rules and judicial decisions in 2015 have contributed to Australia’s move towards being a more ‘pro-arbitration’ jurisdiction. These developments seek to address concerns with efficiency in the conduct of arbitration proceedings and demonstrate an increasing preparedness to enforce foreign arbitral awards in Australian courts.
The Australian Parliament made important amendments to the International Arbitration Act 1974 (Cth) (IAA) this year – the first since its last review in 2010. The changes, contained in the Civil Law and Justice (Omnibus Amendments) Bill 2015, came into effect on 13 October 2015. These changes are a positive development for arbitration in Australia and signify a shift towards a more ‘pro-arbitration’ jurisdiction. Key changes to the IAA include:
- Broader enforcement of arbitral awards: Australian courts now have the power to enforce foreign arbitral awards made in countries which are not a party to the New York Convention. This change provides companies with operations or business partners in countries that are not parties to the Convention, including a large number of African nations, Timor Leste, PNG and Taiwan, with greater certainty that any arbitral awards made in their favour will be enforced.
- Proceedings confidential unlss parties opt out: Under the amendments, the default position is that all arbitral proceedings will be confidential unless parties choose to opt-out.
- Resisting enforcement where a party lacks capacity: Under the amendments, a party can resist enforcement of an award where any party to the arbitration agreement lacked contractual capacity at the time the arbitration agreement was made. Formerly, only the party lacking capacity could resist enforcement.
Also this year, ACICA announced in November 2015 that its Board had formally approved new Arbitration Rules and Expedited Arbitration Rules. The rules will come into effect on 1 January 2016. The changes aim to reflect developments in international arbitration practice, and to increase the efficiency and fairness of proceedings, taking into account the amounts of money involved in the dispute and the complexity of the issues.
In the courts, the principles set out in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 232 FCR 361, that the courts will only set aside an arbitration award for reasons of procedural fairness if there has been real practical unfairness and real practical injustice amounting to a breach of natural justice, have been applied consistently in a number of 2015 cases: Sauber Motorsport AG v Giedo Van Der Garde [2015] VSCA 37 and Aircraft Support Industries Pty ltd v William Hare UAE LLC (2015) 298 FLR 183.
For further information, please contact:
Andrew Eastwood, Partner, Herbert Smith Freehills
andrew.eastwood@hsf.com
