Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc

90 FCR 1
159 ALR 142

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(Judgment by: Beaumont J.)

Hi-Fert Pty Ltd
v Kiukiang Maritime Carriers Inc

Court:

Judges:
Beaumont J.Branson J.
Emmett J.

Subject References:
CONSTITUTIONAL LAW
whether s 7(2) of the International Arbitration Act 1991 constitutes an intrusion upon the judicial power vested in the Federal Court by Chapter III of the Constitution
whether s 7 confers on an arbitrator the judicial power of the Commonwealth.
CONTRACT
meaning of the term 'charter' in the Charter Party and the Time Charter
meaning of the phrase 'arising from' in the Charter Contract
whether claims for breach of duty and negligence 'arise from' the Charter Contract
whether s 7 of the International Arbitration Act applies to claims arising from the Charter Contract.
ARBITRATION
whether a claim under s 82 of the Trade Practices Act can be a claim arising from the Charter Contract
application of arbitration clause to causes of action arising under the Trade Practices Act
whether reference to English law in the Charter Contract excludes the operation of the Trade Practices Act
whether there is an implied term that claims under the Trade Practices Act would be settled by arbitration.
ADMIRALTY
effect of s 11(2) of the Carriage of Goods by Sea Act on arbitration clause
difference between the Sea Carriage of Goods Act 1924 and the Carriage of Goods by Sea Act
whether Federal Court a clearly inappropriate forum for conduct of proceedings.

Legislative References:
Carriage of Goods By Sea Act (Cth) - s 11
Sea-Carriage of Goods Act 1924 (Cth) - s 9
International Arbitration Act 1974 (Cth) - s 7
Trade Practices Act 1974 (Cth) - s 52

Case References:
Allergan Pharmaceuticals Inc. v Bausch & Lomb Inc. - (1985) 7 ATPR 40-636, referred
Akai Pty Ltd v People's Insurance Company Ltd - (1996) 188 CLR 418
Australian Building Construction Employees' and Builders Labourers' Federation v The Commonwealth - (1986) 161 CLR 88
Compagnie des Messageries Maritimes v Wilson - (1954) 94 CLR 577
Ethiopian Oilseeds v Rio del Mar Foods Inc - [1990] 1 LloydsRep 86
Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd - (1996) 39 NSWLR 160
Government Insurance Office (NSW) v Atkinson-Leighton Joint Venture - (1981) 146 CLR 206
H A Bachrach Pty Ltd v Qld - (1998) 156 ALR 563
Henry v Henry - (1996) 185 CLR 571
IBM Australia Limited v National Distribution Services Ltd - (1991) 22 NSWLR 466
Mir Brothers Developments Pty Ltd v Atlantic Constructions Pty Ltd - (1984) 1 BCL 80
Mitsubishi Motors Corporation v Soler Chrysler-Plymouth, Inc. - 473 US 614 (1985)
Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd - (1993) 43 FCR 439
Philip Morris Inc v Adam P. Brown Male Fashions Pty Ltd - (1981) 148 CLR 457
Oceanic Sun Line Special Shipping Co Inc v Fay - (1988) 65 CLR 197
QH Tours Ltd v Ship Design & Management (Aust) Pty Ltd - (1991) 33 FCR 227
Red Sea Insurance Co. Ltd v Bouygues SA - [1995] 1 AC 190
Soeimany v Soeimany - (1998) 3 WLR 811
Tanning Research laboratories Inc v O'Brien - (1990) 169 CLR 332
Westacre Investments Inc v Ju$goimport-SPDR Ltd - (1998) 3 WLR 771

Other References:
Dicey and Morris, The Conflict of Laws, 12th ed., (Lawrence Collins, Ed.) Vol. 1
Dutson, Choice of Law in Tort in Domestic and International Litigation (1998) Australian Business Law Review Vol. 26, 238
Hill, The Law Relating to International Commercial Disputes, 2nd ed. (1998)
Merkin, Arbitration Law
Russell on Arbitration (1997) 21st ed.
Whincop and Keyes, Statutes' Domains in Private International Law: An Economic Theory of the Limits of Mandatory Rules (1998) Sydney Law Review Vol. 20, 435

Hearing date: 7 September 1998, 8 September 1998
Judgment date: 24 November 1998

Sydney

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Judgment by:
Beaumont J.

INTRODUCTION

The background to this appeal is described in the reasons of the two earlier judgments of this Full Court (Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (1998) 155 ALR 94 ; Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No. 2) (1998) 155 ALR 328 ) and in the reasons of Emmett J here, which I have had the advantage of reading.

The several judgments of the primary Judge, Tamberlin J, are also now reported (Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (1996) 150 ALR 54 ; Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No. 2) (1997) 150 ALR 345 ). Since I am in general agreement with the reasons of Emmett J, I propose only to add a few observations on the main issues.

THE CONSTITUTIONAL VALIDITY OF s 7 OF THE INTERNATIONAL ARBITRATION ACT 1974

In H A Bachrach Pty Ltd v Qld (1998) 156 ALR 563 , Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ said (at 567-8):

"The authorities recently considered in Nicholas v The Queen [(1998) 151 ALR 312 ] show that there may be circumstances in which legislation will be found invalid upon the ground that it involves a usurpation of or interference with judicial power, or an impermissible interference with the exercise of judicial power. Liyanage v The Queen [(1967) 1 AC 259] is an example. However, as Mason J pointed out in R v Humby; Ex parte Rooney [(1973) 129 CLR 231 at 250] the circumstance that a statute affects rights in issue in pending litigation does not necessarily involve an invasion of judicial power.

In this regard, the distinction between powers that are exclusively judicial and those that take their character from the body or tribunal on which they are conferred is important. A statute affecting litigation with respect to the guilt of a particular individual or group of individuals charged with criminal offences will involve quite different considerations from one affecting litigation as to rights which the Parliament may choose to have determined either by a judicial or non-judicial body."

Their Honours referred to the following observations of the Court in Australian Building Construction Employees' and Builders Labourers' Federation v The Commonwealth (1986) 161 CLR 88 (at 96-7):

"It is well established that Parliament may legislate so as to affect and alter rights in issue in pending litigation without interfering with the exercise of judicial power in a way that is inconsistent with the Constitution.

Chapter III contains no prohibition, express or implied, that rights in issue in legal proceedings shall not be the subject of legislative declaration or action.' (Reg v. Humby; Ex parte Rooney).

So, in Nelungaloo Pty. Ltd. v. The Commonwealth, the validity of the Wheat Industry Stabilization Act (No. 2) 1946 (Cth) was upheld, notwithstanding that the Act validated an order for the acquisition of wheat, the validity of which was in issue in the proceedings.

It is otherwise when the legislation in question interferes with the judicial process itself, rather than with the substantive rights which are at issue in the proceedings. Liyanage v. The Queen was such a case where the legislation attempted to circumscribe the judicial process on the trial of particular prisoners charged with particular offences on a particular occasion and to affect the way in which judicial discretion as to sentence was to be exercised so as to enhance the punishment of those prisoners.

Here the situation is very different. The Cancellation of Registration Act does not deal with any aspect of the judicial process. It simply deregisters the Federation, thereby making redundant the legal proceedings which it commenced in this Court. It matters not that the motive or purpose of the Minister, the Government and the Parliament in enacting the statute was to circumvent the proceedings and forestall any decision which might be given in those proceedings."

DOES s 7 IMPERMISSIBLY INTERFERE WITH THE JUDICIAL PROCESS?

Although the answer is not easily reached because questions of degree are involved, in my opinion, s 7 is, on balance, valid: such interference with the judicial process as does occur is kept within permissible limits. This is achieved by the reservation to the Court of a power to impose appropriate conditions upon the grant of a stay. Absent the Court's power to impose conditions, there would, in my view, have been considerable force in the argument that s 7 was invalid.

It may be noted that there was no suggestion of constitutional invalidity when the operation of s 7 was considered by the High Court in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 .

THE CONSTRUCTION AND OPERATION OF THE ARBITRATION CLAUSE

Apart from the preliminary constitutional point, this emerged as the main issue in the appeal.

Some of the context of the provision for arbitration in the charter party should be mentioned; in particular, by cl 20 it was provided:-

"Vessel's holds to be clean, dry and free from residue of any previous cargoes before commencement of loading to the satisfaction of an independent inspector appointed and paid for by Charterers."

However, the charter party says nothing about the manner in which any such inspection is to be conducted.

The arbitration clause (cl 34) is in the following terms:

"Any dispute arising from this charter or any Bill of Lading issued hereunder shall be settled in accordance with the provisions of the Arbitration Act, 1950, and any subsequent Acts, in London, each party appointing an Arbitrator, and the two Arbitrators in the event of disagreement appointing an Umpire whose decision shall be final and binding upon both parties hereto.

This Charter Party shall be governed by and construed in accordance with English Law.

The Arbitrators and Umpire shall be commercial men normally engaged in the Shipping Industry.

Any claim must be in writing and claimant's Arbitrator appointed within six months of the Vessel's arrival at final port of discharge, otherwise all claims shall be deemed to be waived."

As Emmett J has noted, in their proceedings in this Court, the appellants have made a number of claims in the alternative, including the "Non-Contractual Claims" which are based on representations said to have been made in Australia by one Australian company to another in September 1995 as to the inspection system which had been adopted. These representations are said (a) to constitute misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 ; (b) to have been made negligently; and (c) to involve the breach of a collateral warranty.

The words in the provision which are presently material are: "[a]ny dispute arising from this charter or any Bill of Lading issued hereunder...".

Since the contract's chosen proper law is English law, that law will govern its interpretation (see Dicey and Morris, The Conflict of Laws, 12th ed., (Lawrence Collins, Ed.) Vol. 1 at 578; Hill, The Law Relating to International Commercial Disputes, 2nd ed. (1998) at 474).

It appears that there is no English authority on the words "arising from" in the present kind of context and that these are not terms of art or words that have a special or technical significance (see the discussion of other provisions in this area in Russell on Arbitration (1997) 21st ed. at 60-2; Merkin, Arbitration Law, paras 4.52-4.54).

In my opinion, for our purposes the key expression in the provision is the preposition "from". In the present context this preposition is used to show the origin of something (see The Cambridge International Dictionary of English).

WHAT WAS THE ORIGIN OF THE "NON-CONTRACTUAL CLAIMS"?

In my opinion, their origin was the making of the specific representations alleged to have been made in September 1995 rather than the charter party or bill of lading. If it be shown that those representations had not been made, the "Non-Contractual Claims" could not have been litigated. That is, whilst the charter party and the bill of lading are background matters, their terms and their operation are not ingredients in the "Non-Contractual Claims". In that sense, those claims are independent and free-standing.

This conclusion is reinforced by a consideration of the practicalities which the parties clearly had in mind. In choosing arbitrators with commercial backgrounds, the parties indicated a choice for the practical solution of disputes of the kind referred to the arbitrators. But to read cl 34 as contemplating a reference to such persons of a problem of considerable private international legal complexity, let alone the application of a foreign (Australian) law in the form of the Trade Practices legislation, would seem to contradict a desire for a practical outcome. We should not attribute such a bizarre intention to these parties. It is not likely that they intended to refer to these arbitrators in London any dispute however remotely connected with the charter party or the bill of lading and however special its legal characteristics in terms of English law. It appears that there is no counterpart of the Trade Practices Act 1976 in England. The consumer protection provisions in Part V of the Trade Practices Act were derived from American legislation and constitute an exhaustive code in the field covered (see Philip Morris Inc v Adam P. Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 543). In Philip Morris, Wilson J said (at 543):

"It will be observed that the jurisdiction which the Federal Court derives from this Act is wholly statutory. Parts IV and V create the duties and obligations, and Pt VI is an exhaustive enumeration of the remedies that are available in the event of a contravention of any of the provisions of those Parts. The Act provides a code which neither requires nor permits resorts to any other law in the determination of the rights, duties and liabilities which it creates."

In these circumstances, I need not consider the questions that would have arisen had I been of the view that cl 34 was, on its true construction, capable of applying to "Non-Contractual Claims". These questions raise difficult issues for determination, if necessary, on another occasion (see Red Sea Insurance Co. Ltd v Bouygues SA [1995] 1 AC 190; Akai Pty Ltd v People's Insurance Company Ltd (1996) 188 CLR 418 ; Westacre Investments Inc v Jugoimport-SPDR Ltd [1998] 3 WLR 771 at 795-7; Soeimany v Soeimany [1998] 3 WLR 811 at 819-823; Mitsubishi Motors Corporation v Soler Chrysler-Plymouth, Inc. 473 US 614 (1985); Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 25 ACLR (NSW) 6; Whincop and Keyes, Statutes' Domains in Private International Law: An Economic Theory of the Limits of Mandatory Rules (1998) Sydney Law Review Vol. 20, 435 at 446-7; Dutson, Choice of Law in Tort in Domestic and International Litigation (1998) Australian Business Law Review Vol. 26, 238; Russell op. cit. at 15-16; Hill op. cit. at 625-6).

ORDERS

I agree with the orders proposed by Emmett J.