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Armstrong’s lawyers get 20 days to amend the Complaint

In the US Federal Court , Texas Judge Sam Sparks has given Lance Armstrong’s lawyers 20 days to amend the Complaint  seeking a temporary restraining order against USADA, filed in Federal Court on 8 July 2012. The Judge, in accordance with the Federal Court Rules which require the Complaint to provide a “short and plain statement”, noted that the original Complaint was lengthy, 80 pages, and included “allegations” that were wholly irrelevant to Armstrong’s claims”.

(Original Complaint attached).

Lance Re-files in Federal Court

Lance Armstrong’s lawyers have re-filed an (amended) Complaint  seeking a temporary restraining order against USADA. The Judge had previously rejected the form of the Complaint (too long, 80 pages, containing “allegations” that were wholly irrelevant to Armstrong’s claims”), because it was not in accordance with the Federal Court Rules which require the Complaint to provide a “short and plain statement”. In substance Lance is trying to halt the process which requires him, next, to file an response to the USADA charges, leading to an initial hearing before a 3 member panel from the American Arbitration Association.

(The Amended Complaint will be attached when available.)

Lance’s Action Headed for Federal Court Determination

On 10 July 2012, Lance Armstrong’s lawyers re-filed the  (Amended) Complaint  seeking Orders as follows:

a.       An injunction staying the USADA requirement that by 14 July 2012 Lance elect to go to AAA arbitration or accept sanctions (this date was later extended, by agreement with USADA, for 30 days, to allow this Federal Court proceeding to be determined).

b.       A permanent injunction staying USADA from imposing sanctions (including disqualification of previous results) on the basis of the facts in the USADA charging letter.

c.        Declarations that USADA lacks jurisdiction to bring the charges asserted in the USADA charging letter.

d.       Damages against USADA.

e.        Costs.

 

The Amended Compliant is attached below.

 

Lance’s team makes multiple arguments in the Complaint, including:

  1. USADA’s procedures, designed primarily for cases where there have been positive results, do not afford Armstrong due process.
  2. Armstrong has not had a charging document that fairly tells him the claims that he must defend (not even when they occurred, which rules apply?).
  3. Armstrong has no guarantee of a hearing by the Tribunal with final say (the AAA panel is appealable to CAS, which need not decide to hold a hearing).
  4. Armstrong has no right to cross-examine his accusers (citing the Greg Lemond example, where Floyd Landis was refused the right to cross-examine, yet the Lemond statement was accepted).
  5. Armstrong has no right to an impartial arbitration panel (CAS members all appointed, limited term, paid, by USOC, incentivised therefore to side with USADA, very limited examples of athletes succeeding).
  6. Armstrong would have no right to exculpatory evidence, contrary to the legal position in a criminal trial.
  7. Armstrong would have no right to disclosure by USADA of witness agreements, contrary to the legal position in a criminal trial.
  8. Armstrong would have no right to disclosure by USADA of investigative witness statements, contrary to the legal position in a criminal trial.
  9. Armstrong would have no right to obtain full disclosure by USADA of laboratory analyses, nor impartial assessment whether the laboratory procedures are accurate (and the panel can be comfortably satisfied that any improper procedure did not cause an adverse finding).
  10. Under USADA’s procedures, Armstrong has no right of review by a USA court.
  11. The charges are outside the 8 year limitation period.
  12. USADA improperly induced witnesses, in violation of the WADA Code provisions (requiring reduction in ineligibility periods on this ground only after charges are brought and a period of ineligibility has been determined). Further, the offering of inducements violates federal law in relation to offering inducements for sworn testimony.
  13. The Review Board process, meant to be a check on abusive charging decisions, was circumvented, in USADA hand-picking the neutral experts, not providing the evidence supporting the charges to the Review Board, and having ex parte communications with the Review Board. The Review Board did not issue a considered evaluation. Armstrong was not given adequate notice of the charges or opportunity to respond.
  14. USADA is using information collected I the grand jury process.
  15. Lance having retired, USADA does not have jurisdiction, UCI does.

 

The key argument, it seems to me, is that USADA’s processes would deny Lance his right to due process under the Fifth Amendment, particularly relevant given that Lance is substantially (massively) affected by the outcome, and is in the extra-prone to injustice category of the “non-analytical positives” (athletes charged albeit that they have not had a positive test result against them.

 

Noting that USADA has not yet been required to respond, the arguments look (to me) strong in favour of Lance’s request for interim court intervention. If this assessment is right, we can expect a temporary stay, and Orders giving USADA the chance to respond, sometime before 12 August 2012 (within the 30 days agreed extension between Lance and USADA).

 

 

 

The legal arguments Lance v USADA

Lance v USADA – The Legal Arguments

In June 2012, USADA sent charging to Lance Armstrong (and others). Those letters were the first formal step in the anti-doping prosecution by USADA. This process raises big legal issues, partly, due to the athlete involved, but equally, this will be the most important case yet of the “non-analytical positives” (prosecution of an anti-doping violation in the absence of a failed test).

Background to the “Non-Analytical Positive” Cases:

Since the BALCO cases commencing in September 2004, the WADA Code, and all sports codes, have provided for the prosecution of athletes in the absence of an analytical positive test result. Michelle Collins was suspended for 8 years (USADA had sought a life ban) based on email evidence and blood and urine test results that evidenced a pattern of doping. Michelle Collins had never failed a drug test, and denied doping.

Interestingly, Michelle Collins had relied on her Fifth Amendment (due process) right against self-incrimination. The CAS Tribunal, however, agreed with USADA that this right did not apply outside criminal cases, and that it was open to CAS to draw an adverse inference against her. CAS repeated this approach for Chryste Gaines and Tim Montgomery.

CAS suspended Michelle Collins for 8 years, on the rationale that that BALCO athletes who admitted guilt, and cooperated by giving evidence against others, such as Kelli White, had been suspended for 2 years, BALCO athletes who admitted guilt, but would not cooperate by giving evidence against others, such as Alvin Harrison and Regina Jacobs, had been suspended for 4 years, Michelle Collins had not been shown by USADA to have “trafficked” or encouraged others, so a lifetime ban was not warranted, Michelle Collins’ failure to plead guilty warranted double the suspension of BALCO athletes who admitted guilt, but would not cooperate by giving evidence against others.

There have followed, in the USA, Chryste Gaines (2 years), Tim Montgomery (2 years), in Australia, Mark French (cyclist) and Sevi Marinov (weightlifting national coach) (drugs found in their rooms, both suspended at the initial 1 member CAS hearing, both then successful on appeal to the 3 member CAS), Olga Yegoreva and others (7 Russian athletes with manipulated samples) and Boevski  and others (3 Bulgarian weightlifter with manipulated samples) (all suspended where samples were manipulated, albeit no evidence that they had done the manipulating themselves), and others.

The key legal question has always been whether these non-analytical positive athletes should be entitled or not to the same Fifth Amendment due process protections afforded to any criminal defendant? or something less on the basis that they are contractually bound to the processes decided by the sports federations to which they belong?

Lance Armstrong is the latest in this line. He is looking like a defendant who may take the argument further than ever before.

Lance’s Federal Court Action

Lance, like always, was invited by USADA to put material before the USADA Review Board (an athlete protection mechanism designed to require USADA to establish a sufficient basis for the process to proceed to a hearing), contesting whether there was sufficient in the USADA charging letter to charge Lance. Lance’s response was that USADA had failed to disclose the proposed witnesses or their evidence, he was unable to know/answer the charges made against him, that USADA was treating the review board as a rubber stamp, effectively seeking to deny him the protection of that review board process, that USADA had obtained evidence wrongly, in trading concessions/reduced penalties, etc, (the “jailhouse snitch” argument), for evidence, and in obtaining evidence leaked from the now-discontinued grand jury process, that the only 2 identifiable claims against Armstrong (the Swiss lab tests from 2001 where the lab director had since denied the tests were sufficient to found a violation, and USADA providing, raw data only, no expert analysis, 2009/2010 blood test results, which showed no abnormality and had been published on Armstrong’s own website at the time as proof of the opposite) had no merit. In addition, Lance said, most of the material was outside the 8 year limitation period. USADA, conversely, said, in response, that it had ten-plus witnesses (without naming them, or setting out what they would say), who would say that Armstrong doped, trafficked, and participated in a conspiracy. The USADA Review Board decided in favour of USADA.

On 10 July 2012, Lance Armstrong’s lawyers filed an (Amended) Complaint before Judge Sam Sparks in the Federal Court, Texas Division, seeking an injunction staying the USADA requirement that Lance, within 3 days, elect to go to AAA arbitration or accept sanctions (this date was later extended, by agreement with USADA, for 30 days, to allow the Federal Court proceeding to be determined), a permanent injunction staying USADA from imposing sanctions (including disqualification of previous results) on the basis of the facts in the USADA charging letter, declarations that USADA lacked jurisdiction to bring the charges asserted in the USADA charging letter, plus damages against USADA and costs.

Lance’s team makes multiple arguments in the action:

  1. USADA’s procedures, designed primarily for cases where there have been positive results, do not afford Armstrong due process.
  2. Armstrong has not had a charging document that fairly tells him the claims that he must defend (not even when they occurred, which rules apply?).
  3. Armstrong has no guarantee of a hearing by the Tribunal with final say (the AAA panel is appealable to CAS, which need not decide to hold a hearing).
  4. Armstrong has no right to cross-examine his accusers (citing the Greg Lemond example, where Floyd Landis was refused the right to cross-examine, yet the Lemond statement was accepted).
  5. Armstrong has no right to an impartial arbitration panel (CAS members all appointed, limited term, paid, by USOC, incentivised therefore to side with USADA, very limited examples of athletes succeeding).
  6. Armstrong would have no right to exculpatory evidence, contrary to the legal position in a criminal trial.
  7. Armstrong would have no right to disclosure by USADA of witness agreements, contrary to the legal position in a criminal trial.
  8. Armstrong would have no right to disclosure by USADA of investigative witness statements, contrary to the legal position in a criminal trial.
  9. Armstrong would have no right to obtain full disclosure by USADA of laboratory analyses, nor impartial assessment whether the laboratory procedures are accurate (and the panel can be comfortably satisfied that any improper procedure did not cause an adverse finding).
  10. Under USADA’s procedures, Armstrong has no right of review by a USA court.
  11. The charges are outside the 8 year limitation period.
  12. USADA improperly induced witnesses, in violation of the WADA Code provisions (requiring reduction in ineligibility periods on this ground only after charges are brought and a period of ineligibility has been determined). Further, the offering of inducements violates federal law in relation to offering inducements for sworn testimony.
  13. The Review Board process, meant to be a check on abusive charging decisions, was circumvented, in USADA hand-picking the neutral experts, not providing the evidence supporting the charges to the Review Board, and having ex parte communications with the Review Board. The Review Board did not issue a considered evaluation. Armstrong was not given adequate notice of the charges or opportunity to respond.
  14. USADA is using information collected from the grand jury process.
  15. Lance having retired, USADA does not have jurisdiction, UCI does.

The substantive complaint by Lance Armstrong is that USADA’s processes deny him his Fifth Amendment right to due process. This argument has usually failed. But the circumstances here militate towards that due process right, maybe more so than in previous instances.

On 19 July 2012, USADA filed a Notice of Motion to Dismiss Lance Armstrong’s Action seeking an injunction to restrain the USADA anti-doping violation process. USADA’s key grounds:

  1. The Ted Stevens Olympic and Amateur Sports Act (“Sports  Act”) (a federal Act establishing arbitration as the exclusive forum for eligibility disputes in sports) pre-empts Armstrong’s claims.
  2. Armstrong has failed to exhaust his administrative remedies (a strong historical, factor relevant to the court’s discretion, against granting an injunction).
  3. Armstrong’s claims must be arbitrated (Lance, like all athletes, has regularly contracted to be bound by the arbitration process).
  4. Armstrong’s claims fail on the merits.

The USADA argument, on its face, is the traditional view, adopted by the courts in previous cases, (eg Mary Decker Slaney’s case), ie that Congress has determined, in clear terms, that USOC and USA Cycling are the bodies best able to deal with such disputes. Further, the courts have, consistently, required a person to exhaust their administrative remedies before seeking court intervention in relation to those processes. On this basis, USADA says, the Federal Court must dismiss, or at least stay, the court action pending the arbitration process.

The Federal Court action will be hard fought. Both sides raise valid arguments. Judge Sparks may or may not prefer the long-held view argued by USADA. Either way, we can expect to see the Judge’s ruling on this important legal argument, before 12 August 2012 (when the 30 day agreed USADA extension runs out), referred, by whoever loses, in the Appeals Circuit.

On balance, the due process argument seems to be at least worthy of better court examination, not to be dismissed simply because, right or wrong, that is what courts have always done previously. The difference, here, might be the enormous stature of Lance (not merely as an athlete, but as a cancer messiah), and the overdue court examination of the unusual position of the athletes charged on circumstantial evidence rather than a failed test.

John McMullan

26 July 2012

Lance (and UCI) further argues the USADA Jurisdiction

On 3 August 2012, Lance Armstrong’s legal team filed a response to USADA’s 19 July 2012 Motion to Dismiss.

 

USADA’s substantive arguments:

  1. The Ted Stevens Olympic and Amateur  Sports Act (“Sports  Act”) (an Act establishing arbitration as the exclusive forum for eligibility disputes in sports) pre-empts Armstrong’s claims.
  2. Armstrong has failed to exhaust his administrative remedies (a strong historical, factor relevant to the court’s discretion, against granting an injunction).
  3. Armstrong’s claims must be arbitrated (Lance, like all athletes, has regularly contracted to be bound by the arbitration process).
  4. Armstrong’s claims fail on the merits.

Armstrong’s key arguments in response:

1.        UCI, not USADA, has jurisdiction under the UCI Anti-Doping Rules (on which USADA relies in its charging letter) because:

a.       UCI collected the samples relied upon by USADA;

b.       UCI “discovered” the claimed violation (WADA Code, Article 15.3: “results management and hearings are the responsibility of and shall be governed by the procedural rules of the Anti-Doping Organization that initiated and directed Sample collection”).

c.        UCI has jurisdiction over Lance, as retired cyclist, as the organisation having jurisdiction at the time of claimed violations (pre- 13 August 2004, UCI’s anti-doping rules provided that they alone apply to international events, the charging letter refers to violations between 1996 and 2005, no specific conduct alleged after 13 August 2004);

d.       UCI asserts jurisdiction and has directed USADA not to proceed further. (In fact, UCI released a written statement on 7 August, following exhibiting its correspondence to USADA in this case on 6 August 2012 , confirming its direction to USADA, and publicly criticizing the due process aspects of USADA’s process in relation to Lance Armstrong and the 5 related respondents).

e.        UCI also has exclusive jurisdiction under the WADA Code

f.         USADA has no jurisdiction to bring a consolidated action against 6 people (There is no WADA Code violation for participating in an alleged doping conspiracy).

2.        The Sports Act applies only to amateur athletes, not Lance.

3.       Even if the Sports Act applied, it would not pre-empt this challenge, ie a common law and Fifth Amendment due process challenge (not an eligibility dispute).

4.      Armstrong should not have to go through the arbitration process, where that arbitration process is the subject of challenge over jurisdiction.

5.     Armstrong did not, in fact, agree to the arbitration process, saying:

a.       USADA has the burden of proving any agreement to arbitrate;

b.       USADA has not established any agreement to arbitrate (the USADA Protocol relied upon by USADA do not apply to Armstrong, his annual international licence are governed by the UCI Anti-Doping Rules);

c.        Armstrong’s membership of USA Triathlon has no relationship to the matters alleged in the charging letter.

 

USADA argue that the courts have traditionally taken the view, in previous cases (eg Mary Decker Slaney’s case), that Congress has determined, in clear terms, that USOC and USA Cycling are the bodies best able to deal with such disputes. The court, in Mary Decker Slaney’s case, had, in fact, veered away from a review of the validity of a drug test: “an endeavour (a court) cannot partake in”). Armstrong, in response, refers to the Tonia Harding case, and other cases, where the court had concluded that judicial intervention was warranted : “where the association has clearly breached its own rules, that breach will imminently result in serious and irreparable harm tp the plaintiff, and the plaintiff has exhausted all internal remedies”.

 

The USADA  jurisdiction argument took a dramatic twist over the weekend. UCI released a statement on Saturday (7 August), disputing that USADA has jurisdiction, and directing USADA to refer its files to UCI. Surprisingly, UCI went beyond this and expressly condemned USADA’s processes, on the basis of due process, in particular:

  1. 3 respondents banned for life, because they did not respond to USADA charging letter;
  2. USADA refused to provide UCI with evidence that the 3 respondents had received the USADA charging letter;
  3. no neutral review of the evidence relied upon by USADA;
  4. the 3 respondents banned for life were not given the evidence relied upon by USADA;
  5. the 2 respondents due to file a defence by 15 August 2012 have not been given the evidence relied upon by USADA;
  6. according to the World Anti-Doping Code and UCI’s Anti-Doping Rules that USADA claims to apply, the UCI is the authority having results management for this case.

 

A copy of the UCI statement is attached. The most damning (for USADA) part of the UCI statement:

 

For the UCI it is clear that USADA claims an authority that it does not have and uses procedures that violate basic principles of due process.

 

This action is listed for hearing on 10 August 2012 (before the 30 day agreed USADA extension runs out). Judge Sparks, of course, may or may not prefer the long-held view argued by USADA. Either way, we can expect to see an appeal from the Judge’s ruling on this important legal argument, referred by whoever loses, in the Appeals Circuit.

 

John McMullan

6 August 2012

Judge Sparks Denies Lance an Injunction, but leaves door open

On 23 August 2012, Judge Sam Sparks dismissed Lance Armstrong’s suit in the US District Court Western District of Texas (Austin) of the Federal Court, asking for an injunction to restrain USADA from proceeding against him . The judgment is attached below.

 The Judge found:

  1. Armstrong’s due process claims lack merit.
  2. The court lacks jurisdiction over Armstrong’s remaining claims, or alternatively declines to grant equitable relief.

 The key issue for the Judge in finding the due process complaints lacked merit was that Lance’s challenges are anticipating unfairness rather than being subject to them now. Lance’s challenges:

(a)     that he was not provided a adequate charging document;

(b)     that he has no guarantee of a hearing before CAS;

(c)      that he has no right cross-examine/confront witnesses against him;

(d)     that he has no right to an impartial panel;

(e)     that he has no right to disclosure of exculpatory evidence;

(f)      that he has no right to disclosure of cooperation agreements or inducements provided by usda;

(g)     that he has no right to obtain investigative witness statements;

(h)     that he has no right to obtain full disclosure of laboratory analyses or an impartial assessment of their accuracy;

(i)       that  he has no right to judicial review of the arbitrators’ decision by a US court;

are all based on speculation of bias (rather than actual bias).

 Judge Sparks said:

 “Like the Supreme Court, this Court declines to assume either the pool of potential arbitrators, or the ultimate arbitral panel itself, will be unwilling or unable to render conscientious decision based on the evidence before it.”

 Further, the Judge reasoned:

 “Further, Armstrong has ample appellate avenues open to him, first to the Court of Arbitration for Sport … where he is entitled to de novo review, and then to the  courts of Switzerland, if he so elects.”

 The Judge, however, dismissed the suit without prejudice, ie Lance can come back if things develop. Further, Judge Sparks expressed some judicial (and welcome) views on the USADA processes.

 His Honour was critical of USADA’s process:

 “As the Court stated at the hearing, ….. the deficiency of USADA’s charging document is of serious constitutional concern. Indeed, but for two facts, the Court might be inclined to find USADA’s charging letter was a violation of due process, and to enjoin USADA from proceeding thereunder. First, it would likely of no practical effect: USADA could easily issue a more detailed charging letter, at which point Armstrong would presumably once again file suit, and the parties would be back in this exact same position some time later, only poorer for their legal fees. Second, and more important, USADA’s counsel represented to the Court that Armstrong will, in fact, receive detailed disclosures regarding USADA’s claims against him at a time reasonably before arbitration, in accordance with routine procedure. The Court takes counsel at his word. With the understanding that Armstrong has received all the process he is due at this time, and will receive adequate notification of the charges against him in time to prepare a defense, the Court rejects Armstrong’s …. challenge. …… ”

 Judge Sparks then concluded that the Federal Court had no jurisdiction. The Sports Act had (“whether or not this was a good choice is, of course, debatable”) determined that sports eligibility questions would be decided through arbitration rather than federal lawsuits.

 His Honour referred to the Mary Decker Slaney case, noting that the court had said: “… when it comes to challenging the eligibility determination of the USOC, only a very specific claim will avoid the impediment to subject matter jurisdiction that (the Sports Act) poses”. The Slaney court had quoted the Tonia Harding case, in the Oregon District Court as follows:

 “There the court cautioned that…… ‘courts should rightly hesitate before intervening in disciplinary hearings held by private associations …. Intervention is appropriate only in the most extraordinary circumstances, where the association has clearly breached its own rules, that breach will imminently result in serious and irreparable harm to the plaintiff, and the plaintiff has exhausted all remedies.’ Yet, while carving out this limited exception to the preemption created by the Amateur Sports Act, the opinion forewarned that while examining whether internal rules had been complied with, the courts ‘should not intervene in the merits of the underlying dispute.’ ”

 Judge Sparks held, ultimately, that:

  1. Armstrong was not in danger of irreparable harm. The USADA jurisdiction issue, itself, was to be determined by the arbitrators. Further, any finding by the arbitration panel might, itself, be overturned by CAS. “In short,  any harm Armstrong might suffer is, at this point, entirely speculative.”
  2. Armstrong has not exhausted his internal remedies, namely the arbitration procedures in the USADA Protocol. Judge Sparks: “If the panel’s resolution is manifestly unjust and devoid of any reasonable legal basis, Armstrong may have a judicial remedy; but this court cannot act on the basis of a hypothetical injury.”
  3. Armstrong’s agreement with USOC bound him contractually to submit his due process concerns, themselves, to the arbitration process.

 

Finally, His Honour determined that, even apart from his decision on jurisdiction, if he did have such jurisdiction he would decline an equitable remedy, firstly because, for the above reasons, Armstrong was not in danger of irreparable harm, and secondly because , as a matter of international comity, the court declined to: “circumvent the longstanding system of international arbitration in Olympic sports by unilaterally enjoining that system’s operation”.

 Judge Sparks finished with a comment for USADA:

 “…. there are troubling aspects of this case, not least of which is USADA’s apparent single-minded determination to force Armstrong to arbitrate the charges against him, in direct conflict with UCI’s equally evident desire not to proceed against him….

 The events in USADA’s charging letter date back fourteen years, span a multitude of international competitions, and involve not only five non-citizens of the United States who were never licensed in this country, but also one of the most well-known figures in the history of cycling. As mystifying as USADA’s election to proceed at this date and in this manner may be, it is equally perplexing that these three national and international bodies are apparently unable to work together …..  

 So now we wait for Lance’s next step. The appeals circuit? or AAA arbitration, starting off with a serious argument on jurisdiction?

John McMullan

23 August 2012

 

Lance Armstrong: The next of the non-analytical positive cases?

The attached letters between USADA and Lance Armstrong’s legal team are the first formal step in the anti-doping prosecution by USADA. The process will be, potentially, the most important case to date due to  the athlete involved, but equally, the most important to date “non-analytical positive” (prosecution of an anti-doping violation in the absence of a failed test).

Lance’s response to USADA’s charging letter, the initial step prior to the review board process (an athlete protection mechanism designed to require USADA to establish a sufficient basis for the process to proceed to a hearing) was generally as follows:
1. USADA fails to disclose the proposed witnesses or their evidence, Armstrong is unable to know/answer the charges made against him. USADA is treating the review board as a rubber stamp, effectively seeking to deny Armstrong the protection of that review board process.
2. USADA has obtained evidence wrongly, in trading concessions/reduced penalties, etc, (the “jailhouse snitch”argument), for evidence, and in obtaining evidence leaked from the now-discontinued grand jury process.
3. The only 2 identifiable claims against Armstrong (the Swiss lab tests from 2001 where the lab director has since denied the tests were sufficient to found a violation, and USADA providing, raw data only, no expert analysis, 2009/2010 blood test results, which show no abnormality and which were published on Armstrong’s own website at the time as proof of the opposite) have no merit.
4. Most of the material is outside the 8 year limitation period.

USADA, conversely, says that it has ten-plus witnesses, who will say that Armstrong doped, trafficked, and participated in a conspiracy.

The process is likely, in my view, to showcase the critical justice issues that are thrown up in this key area of “non-analytical positives”. The likelihood is that Lance will challenge, in the USA courts, the level of acceptable proof against an athlete charged on the basis of evidence, not including a failed test, and the USADA/Court of Arbitration for Sport regime generally.

About time.

John McMullan

Dr Bruce Malcolm Reid v Australian Football League

 

Doc Reid re-argues Lance’s Legal Argument – Time for the Courts to Intervene?

 

In Dr Bruce Malcolm Reid v Australian Football League, Supreme Court of Victoria, Proceeding No SCI 2013 04575, the universally respected Essendon Football Club doctor, Dr “Doc” Reid, is arguing for declarations and an injunction to restrain the AFL from hearing the disciplinary charges against him, and asking that such charges be heard by an independent arbiter.

 

The charges against Dr Reid are limited to that he:

 

  1.       “was part of the decision-making processes of the Club in respect of the development and implementation of a scientifically pioneering program relating to the administration of supplements to its players, knowing that:

 

(a)     the program was to push the legal limit;

 

(b)     the program involved innovative supplement practices and compounds;

 

(c)     the program involved the use of allegedly beneficial, if exotic, mysterious and unfamiliar compounds;

 

(d)     the program’s ftness strategy and use of supplements varied sharply from prior practices at the Club;

 

(e)     the program involved injecting players with an unprecedented frequency.”
(Particulars Paragraph 3)

 

  1.        “made no direct inquires of ASADA in relation to whether AOD-9604 was a prohibited substance”;
    (Particulars Paragraph 21(b))
  2.       was a person named in an Essendon protocol concerning the use of supplements circulated on 15 January 2012;
    (Particulars Paragraph 17)
  3.       failed to take adequate steps to ensure that the Protocol was properly implemented after becoming aware that substances had been administered that had not been approved.
    (Particulars Paragraph 32-35)

 

In Dr Reid’s case, on a careful reading of the charges, even if correct, (the charges are 100% contested), at worst it might be said that Dr Reid was not sufficiently interventionist.

 

There is zero suggestion in the charges (or anywhere else) that Dr Reid ever administered, or supported the use of administering, any performance enhancing drug. (In fact, Dr Reid’s letter dated 17 January 2012, and James Hird’s text message on 30 January 2012, suggest that Dr Reid positively opposed any such practice.)

 

Dr Reid makes the usual athlete/accused argument, ie that the sports establishment hearing structure is weighted against the athlete/accused, and that he is denied a fair hearing. The AFL runs the usual sports establishment defence, ie that it is simply a matter of contract, to which the athlete/accused previously committed, and that the sports establishment is the body best equipped to deal with such claims.

 

These arguments are particularly key given that Dr Reid is , like all of the category of athletes who have been charged with performing enhancing drugs charge , on the basis of evidence rather than a failed drug test (collectively called “non-analytical positives”), charged on as yet un-substantiated evidence. In their case, though the punishment in relation to the performing enhancing drug charges is no less than an athlete accused who fails a drug test, and though the mere fact of being charged will usually disrupt or end their sports career, and some instances, including Dr Reid, may have even worse consequences, the accused has none of the enduring protections of a criminal accused.

 

In substance, the non-analytical positive athlete/accused usually complains that they are being denied a fair hearing (in the USA, denied the Constitutional right to “due process”). There seems to be substantial strength in their complaints.

 

The Legal Arguments:

 

Dr Reid has previously made the following legal arguments to the AFL Commission in relation to the request for an independent arbiter to be appointed:

 

1.       The AFL Commission is not a body that is equipped to provide a fair hearing, for the following reasons:

 

a.        the complexity of the case, including (complex) legal issues;

 

b.       the case will be of lengthy duration;

 

c.        because of a and b, and because the Charge may affect Dr Reid’s professional reputation, the case therefore requires a full-time arbiter;

 

d.       reduced prospect of error and appeal if heard by an appropriately qualified person;

 

e.       less likelihood of interlocutory applications to the Supreme Court in the running of the case;

 

f.         issues of relevance and publicity in this case require a an arbiter less likely to be affected by extrinsic factors;

 

g.        Dr Reid’s legal case includes highly perjorative submissions about the AFL;

 

h.       A case involving a medical professional’s reputation is in a special category;

 

i.         Dr Reid cannot get a just hearing from the AFL Commission, after it has involved itself in the approval of the settlements with the other defendants.

 

2.       Bias, both actual and apprehended, on the part of the AFL Commission.

 

In this proceeding, Dr Reid asserts that the AFL Commission cannot hear the charges against him in an unbiased manner because of:

 

  1.        Conflict

 

a.        The charges raise factual matters already considered and determined by the AFL Commission.

 

b.       The determination of the charges raises questions about conduct by the AFL.

 

  1.       Comments

 

a.        “a most unfortunate matter”

 

b.       “it might be a lonely day” (for Dr Reid);

 

c.        “We can’t let – no matter how clever they were in disguising what they were doing, we can’t ever let a group of people take hold of a player group in the way that this group did. That must never happen again”

 

d.       “responsibility, I think, has not been easy to assign, but I think it has been reasonably assigned”

 

e.       “frankly, what happened [at Essendon] is probably the worst thing that has happened in a footy club”

 

The AFL has not yet delivered its arguments. We can guess that those arguments will include:

 

  1.        that athletes and support personnel sign up to the AFL rules, as a matter of contract they commit to the process set out in those rules;
  2.        that the AFL Commission is well-equipped to adjudicate on this type of matter, because of its experience and expertise in this area;
  3.       the courts are not well-equipped to deal with the particular issues relating to sports enhancing performance drugs.

 

USA Decisions on this Type of Claim:

 

These arguments were, in fact, recently re-run in the USA by perhaps our most famous non-analytical positive accused athlete, Lance Armstrong. On 23 August 2012, Judge Sam Sparks in the US District Court Western District of Texas (Austin) of the USA Federal Court, dismissed Lance Armstrong’s suit asking for an injunction to restrain USADA from proceeding against him. The Judge found:

 

  1.        Armstrong’s due process claims lacked merit.
  2.        The court lacked jurisdiction over Armstrong’s remaining claims, or alternatively declined to grant equitable relief.

 

Firstly, Judge Sparks concluded that the due process complaints lacked merit, and that Lance’s challenges were anticipating unfairness rather than Lance having been subject to actual unfairness. Lance’s specific due claims had included:

 

  1.       that he was not provided an adequate charging document;
  2.       that he had no guarantee of a hearing before CAS;
  3.       that he had no right cross-examine/confront witnesses against him;
  4.      that he had no right to an impartial panel;
  5.        that he had no right to disclosure of exculpatory evidence;
  6.        that he had no right to disclosure of cooperation agreements or inducements provided by USADA;
  7.       that he had no right to obtain investigative witness statements;
  8.       that he had no right to obtain full disclosure of laboratory analyses or an impartial assessment of their accuracy;
  9.      that  he had no right to judicial review of the arbitrators’ decision by a US court;

 

Judge Sparks concluded that each of these complaints were based on speculation of bias (rather than actual bias).

 

Judge Sparks said:

 

“Like the Supreme Court, this Court declines to assume either the pool of potential arbitrators, or the ultimate arbitral panel itself, will be unwilling or unable to render conscientious decision based on the evidence before it.”

 

Judge Sparks reasoned that Armstrong was not in danger of irreparable harm if the USADA jurisdiction issue, itself, was to be determined by the arbitrators. Further, any finding by the arbitration panel might, itself, be overturned by CAS. “In short,  any harm Armstrong might suffer is, at this point, entirely speculative.”

 

His Honour was further confirmed in his view in that Lance had not (as yet) exhausted the avenues open to him:

 

“Further, Armstrong has ample appellate avenues open to him, first to the Court of Arbitration for Sport … where he is entitled to de novo review, and then to the  courts of Switzerland, if he so elects.”

 

Judge Sparks, however, dismissed the suit without prejudice, saying that Lance could come back if and when things developed (ie if and when he was in fact subjected to actual unfairness rather than anticipated unfairness).

 

Secondly, Judge Sparks concluded that the Federal Court had no jurisdiction under the USA Federal Amateur Sports Act, requiring such proceedings to be referred to arbitration. His Honour noted that the Sports Act had (“whether or not this was a good choice is, of course, debatable”) determined that sports eligibility questions would be decided through arbitration rather than federal lawsuits.

 

His Honour referred to the Mary Decker Slaney case, noting that the court had said there:

 

“… when it comes to challenging the eligibility determination of the USOC, only a very specific claim will avoid the impediment to subject matter jurisdiction that (the Sports Act) poses”.

 

The Mary Decker Slaney court had quoted the Tonia Harding case, where an Oregon District Court had said:

 

“There the court cautioned that ….

 

…. courts should rightly hesitate before intervening in disciplinary hearings held by private associations …. Intervention is appropriate only in the most extraordinary circumstances, where the association has clearly breached its own rules, that breach will imminently result in serious and irreparable harm to the plaintiff, and the plaintiff has exhausted all remedies.

 

Yet, while carving out this limited exception to the preemption created by the Amateur Sports Act, the opinion forewarned that while examining whether internal rules had been complied with, the courts ‘should not intervene in the merits of the underlying dispute.

 

(emphasis added)

 

Finally, Judge Sparks determined that, even apart from his decision on jurisdiction, if he had found that he had such jurisdiction he would have declined an equitable remedy, firstly because, for the above reasons, Armstrong was not in danger of irreparable harm, secondly because , as a matter of international comity, the court declined to: “circumvent the longstanding system of international arbitration in Olympic sports by unilaterally enjoining that system’s operation”.

 

As events turned out, Lance Armstrong ultimately chose not to challenge the sports drug charges, and later again, publicly admitted that the charges were true.

 

Conclusions

 

There can be no doubt that this case is serious. Doc Reid is universally regarded as having a brilliant, long, respected, and personally loved, life in football, faces potential public shame, the potential loss of his medical licence, and an unhappy end to that long career.

 

Yet Doc Reid, in the legal system, must run the same legal arguments that ultimately failed Lance Armstrong.

 

The Supreme Court will now determine this crucially important issue.

 

Can’t wait.

 

 

 

Middleton J Dismisses the Applications

Middleton J Dismisses the Applications

Essendon Football Club v Chief Executive Officer of the Australian Sports Anti-Doping Authority; James Albert Hird v Chief Executive Officer of the Australian Sports Anti-Doping Authority [2014] FCA 1019

 

On 19 September 2014, Federal Court Justice Middleton dismissed the EFC and Hird applications for  a declaration that “ the investigation conducted by ASADA … which was referred to as part of “Operation Cobia” … was ultra vires “,  and injunctions restraining ASADA from issuing any notice or relying on information obtained in the investigation, and a permanent injunction restraining ASADA from using any information from the investigation for any purpose under its Act. The joint investigation was, according to ASADA, was part of a wider investigation by ASADA under the Australian Sports Anti-Doping Authority Act 2006 (Cth) (‘the Act’) and Sch 1 (‘the NAD Scheme’) of the Australian Sports Anti-Doping Authority Regulations 2006 (Cth) (‘the Regulations’). EFC and Hird said that ASADA had no power to conduct the investigation in the way it was conducted (involving the use by ASADA of AFL “compulsory powers” and unauthorised disclosure of information), that the investigation was undertaken for improper purposes, and that ASADA breached its confidentiality obligations during the course of the investigation and in the provision to the AFL of an interim report.

See attached file titled “Middleton J Dismisses the Applications” for full analysis.

 

 

 

 

 

Essendon FC v ASADA : James Hird v ASADA

Essendon FC v ASADA : James Hird v ASADA

 Australian Federal Court Challenge mirrors Lance Armstrong’s Challenge in the USA Courts:

On 27 June 2014, Justice John Middleton in the Australian Federal Court will set out a timetable to a hearing in the legal challenges by Essendon FC and James Hird against ASADA’s legal process. Essendon FC and James Hird ask for a declaration that “ the investigation conducted by ASADA … which was referred to as part of “Operation Cobia” … was ultra vires “,  and injunctions restraining ASADA from issuing any notice or relying on information obtained in the investigation, and a permanent injunction restraining ASADA from using any information from the investigation for any purpose under its Act.

The show cause letters sent by ASADA last week to Essendon FC players are the first formal step in the anti-doping prosecution by ASADA. The process will be, potentially, the most important Australian sports drug case to date due to  the athletes involved, but equally, the most important case to date in Australia of a “non-analytical positive” (prosecution of an anti-doping violation in the absence of a failed test).

We recently saw a very similar legal challenge ahead of the review board process reference by Lance Armstrong. Lance’s response to USADA’s charging letter to him, (the initial USA step prior to the review board process, as in Australia, an athlete protection mechanism designed to require USADA to establish a sufficient basis for the process to proceed to a hearing) had been generally as follows:
1. USADA had failed to disclose the proposed witnesses or their evidence, Armstrong was unable to know/answer the charges made against him. USADA is treating the review board as a rubber stamp, effectively seeking to deny Armstrong the protection of that review board process.
2. USADA had obtained evidence wrongly, in trading concessions/reduced penalties, etc, (the “jailhouse snitch” argument), for evidence, and in obtaining evidence leaked from the now-discontinued grand jury process.
3. The only 2 identifiable claims against Armstrong (the Swiss lab tests from 2001 where the lab director has since denied the tests were sufficient to found a violation, and USADA providing, raw data only, no expert analysis, 2009/2010 blood test results, which show no abnormality and which were published on Armstrong’s own website at the time as proof of the opposite) have no merit.
4. Most of the material was outside the 8 year limitation period.

USADA, conversely, had said that it had ten-plus witnesses, all who would say that Armstrong doped, trafficked, and participated in a conspiracy.

Lance’s legal challenge ultimately failed, not because, as USADA had argued, such cases are never to be reviewed by the courts, but rather because, in Lance’s case, his claims of unfairness were premature.

The Essendon/Hird challenges, equally, ask the Australian Federal Court to stop the process, saying that the investigation is not in accordance with the ASADA legislation. Unlike Lance, however, their challenge is attacking an existing process, not a future one.

This is getting interesting.

Background to the “Non-Analytical Positive” Cases:

 

Since the BALCO cases commencing in September 2004, the WADA Code, and all sports codes, have provided for the prosecution of athletes in the absence of an analytical positive test result. Michelle Collins was suspended for 8 years (USADA had sought a life ban) based on email evidence and blood and urine test results that evidenced a pattern of doping. Michelle Collins had never failed a drug test, and denied doping.

 

Interestingly, Michelle Collins had relied on her Fifth Amendment (due process) right against self-incrimination. The CAS Tribunal, however, agreed with USADA that this right did not apply outside criminal cases, and that it was open to CAS to draw an adverse inference against her. CAS repeated this approach for Chryste Gaines and Tim Montgomery.

 

CAS suspended Michelle Collins for 8 years, on the rationale that that BALCO athletes who admitted guilt, and cooperated by giving evidence against others, such as Kelli White, had been suspended for 2 years, BALCO athletes who admitted guilt, but would not cooperate by giving evidence against others, such as Alvin Harrison and Regina Jacobs, had been suspended for 4 years, Michelle Collins had not been shown by USADA to have “trafficked” or encouraged others, so a lifetime ban was not warranted, Michelle Collins’ failure to plead guilty warranted double the suspension of BALCO athletes who admitted guilt, but would not cooperate by giving evidence against others.

 

There have followed, in the USA, Chryste Gaines (2 years), Tim Montgomery (2 years), in Australia, Mark French (cyclist) and Sevi Marinov (weightlifting national coach) (drugs found in their rooms, both suspended at the initial 1 member CAS hearing, both then successful on appeal to the 3 member CAS), Olga Yegoreva and others (7 Russian athletes with manipulated samples) and Boevski  and others (3 Bulgarian weightlifter with manipulated samples) (all suspended where samples were manipulated, albeit no evidence that they had done the manipulating themselves), and others.

 

The key legal question has always been whether these non-analytical positive athletes should be entitled or not to the same Fifth Amendment due process protections afforded to any criminal defendant? or something less on the basis that they are contractually bound to the processes decided by the sports federations to which they belong?

Lance Armstrong was the latest in that line. He was looking like a defendant who might have taken the argument further than ever before. As it turned out, Lance decided against continuing. But the USA Federal Court did not rule out intervening if the right circumstances ever came along.

Lance’s USA Federal Court Action

 

Lance, like always, was invited by USADA to put material before the USADA Review Board (an athlete protection mechanism designed to require USADA to establish a sufficient basis for the process to proceed to a hearing), contesting whether there was sufficient in the USADA charging letter to charge Lance. Lance’s response was that USADA had failed to disclose the proposed witnesses or their evidence, he was unable to know/answer the charges made against him, that USADA was treating the review board as a rubber stamp, effectively seeking to deny him the protection of that review board process, that USADA had obtained evidence wrongly, in trading concessions/reduced penalties, etc, (the “jailhouse snitch” argument), for evidence, and in obtaining evidence leaked from the now-discontinued grand jury process, that the only 2 identifiable claims against Armstrong (the Swiss lab tests from 2001 where the lab director had since denied the tests were sufficient to found a violation, and USADA providing, raw data only, no expert analysis, 2009/2010 blood test results, which showed no abnormality and had been published on Armstrong’s own website at the time as proof of the opposite) had no merit. In addition, Lance said, most of the material was outside the 8 year limitation period. USADA, conversely, said, in response, that it had ten-plus witnesses (without naming them, or setting out what they would say), who would say that Armstrong doped, trafficked, and participated in a conspiracy. The USADA Review Board decided in favour of USADA.

 

On 10 July 2012, Lance Armstrong’s lawyers filed an (Amended) Complaint before Judge Sam Sparks in the Federal Court, Texas Division, seeking an injunction staying the USADA requirement that Lance, within 3 days, elect to go to AAA arbitration or accept sanctions (this date was later extended, by agreement with USADA, for 30 days, to allow the Federal Court proceeding to be determined), a permanent injunction staying USADA from imposing sanctions (including disqualification of previous results) on the basis of the facts in the USADA charging letter, declarations that USADA lacked jurisdiction to bring the charges asserted in the USADA charging letter, plus damages against USADA and costs.

 

Lance’s team made multiple arguments in the action:

  1. USADA’s procedures, designed primarily for cases where there have been positive results, did not afford Armstrong due process.
  2. Armstrong had not had a charging document that fairly told him the claims that he must defend (not even when they occurred, which rules apply?).
  3. Armstrong had no guarantee of a hearing by the Tribunal with final say (the AAA panel is appealable to CAS, which need not decide to hold a hearing).
  4. Armstrong had no right to cross-examine his accusers (citing the Greg Lemond example, where Floyd Landis was refused the right to cross-examine, yet the Lemond statement was accepted).
  5. Armstrong had no right to an impartial arbitration panel (CAS members all appointed, limited term, paid, by USOC, incentivised therefore to side with USADA, very limited examples of athletes succeeding).
  6. Armstrong would have no right to exculpatory evidence, contrary to the legal position in a criminal trial.
  7. Armstrong would have no right to disclosure by USADA of witness agreements, contrary to the legal position in a criminal trial.
  8. Armstrong would have no right to disclosure by USADA of investigative witness statements, contrary to the legal position in a criminal trial.
  9. Armstrong would have no right to obtain full disclosure by USADA of laboratory analyses, nor impartial assessment whether the laboratory procedures are accurate (and the panel can be comfortably satisfied that any improper procedure did not cause an adverse finding).
  10. Under USADA’s procedures, Armstrong had no right of review by a USA court.
  11. The charges were outside the 8 year limitation period.
  12. USADA had improperly induced witnesses, in violation of the WADA Code provisions (requiring reduction in ineligibility periods on this ground only after charges were brought and a period of ineligibility had been determined). Further, the offering of inducements violated federal law in relation to offering inducements for sworn testimony.
  13. The Review Board process, meant to be a check on abusive charging decisions, was circumvented, in USADA hand-picking the neutral experts, not providing the evidence supporting the charges to the Review Board, and having ex parte communications with the Review Board. The Review Board did not issue a considered evaluation. Armstrong was not given adequate notice of the charges or opportunity to respond.
  14. USADA was using information collected from the grand jury process.
  15. Lance having retired, USADA did not have jurisdiction, UCI did. 

The substantive complaint by Lance Armstrong was that USADA’s processes denied him his Fifth Amendment right to due process. This argument had usually failed. But the circumstances here militated towards that due process right, maybe more so than in previous instances.

 

On 19 July 2012, USADA filed a Notice of Motion to Dismiss Lance Armstrong’s Action seeking an injunction to restrain the USADA anti-doping violation process. USADA’s key grounds:

  1. The Ted Stevens Olympic and Amateur Sports Act (“Sports  Act”) (a federal Act establishing arbitration as the exclusive forum for eligibility disputes in sports) pre-empted Armstrong’s claims.
  2. Armstrong had failed to exhaust his administrative remedies (a strong historical, factor relevant to the court’s discretion, against granting an injunction).
  3. Armstrong’s claims must be arbitrated (Lance, like all athletes, had regularly contracted to be bound by the arbitration process).
  4. Armstrong’s claims failed on the merits. 

The USADA argument, on its face, was the traditional view, adopted by the USA courts in previous cases, (eg Mary Decker Slaney’s case), ie that Congress had determined, in clear terms, that USOC and USA Cycling were the bodies best able to deal with such disputes. Further, the courts had, consistently, required a person to exhaust their administrative remedies before seeking court intervention in relation to those processes. On this basis, USADA said, the Federal Court must dismiss, or at least stay, the court action pending the arbitration process.

 

It seemed, then, that the Federal Court action would be hard fought. Both sides raised valid arguments. On balance, the due process argument seemed to be at least worthy of better court examination, not to be dismissed simply because, right or wrong, that is what USA courts had always done previously. The difference, here, seemed, possibly, the enormous stature of Lance (not merely as an athlete, but as a cancer messiah), and the overdue court examination of the unusual position of the athletes charged on circumstantial evidence rather than a failed test.

 The USA Federal Court – Judge Sam Sparks

 On 23 August 2012, Judge Sam Sparks dismissed Lance Armstrong’s suit in the US District Court Western District of Texas (Austin) of the Federal Court, asking for an injunction to restrain USADA from proceeding against him . (The judgment is on this website.)

  The Judge found:

  1. Armstrong’s due process claims lacked merit.
  2. The court lacked jurisdiction over Armstrong’s remaining claims, or alternatively declined to grant equitable relief.

 The key issue for the Judge in finding the due process complaints lacked merit was that Lance’s challenges are anticipating unfairness rather than being subject to them now. Lance’s challenges were all based on speculation of bias (rather than actual bias).

  Judge Sparks said: “Like the Supreme Court, this Court declines to assume either the pool of potential arbitrators, or the ultimate arbitral panel itself, will be unwilling or unable to render conscientious decision based on the evidence before it. ….  Further, Armstrong has ample appellate avenues open to him, first to the Court of Arbitration for Sport … where he is entitled to de novo review, and then to the  courts of Switzerland, if he so elects.”

 The Judge, however, dismissed the suit without prejudice, ie Lance could come back if things develop. Further, Judge Sparks expressed some judicial (and welcome) views on the USADA processes. His Honour was critical of USADA’s process:

 “As the Court stated at the hearing, ….. the deficiency of USADA’s charging document is of serious constitutional concern. Indeed, but for two facts, the Court might be inclined to find USADA’s charging letter was a violation of due process, and to enjoin USADA from proceeding thereunder. First, it would likely of no practical effect: USADA could easily issue a more detailed charging letter, at which point Armstrong would presumably once again file suit, and the parties would be back in this exact same position some time later, only poorer for their legal fees. Second, and more important, USADA’s counsel represented to the Court that Armstrong will, in fact, receive detailed disclosures regarding USADA’s claims against him at a time reasonably before arbitration, in accordance with routine procedure. The Court takes counsel at his word. With the understanding that Armstrong has received all the process he is due at this time, and will receive adequate notification of the charges against him in time to prepare a defense, the Court rejects Armstrong’s …. challenge. …… ”

 Judge Sparks then concluded that the Federal Court had no jurisdiction. The Sports Act had (“whether or not this was a good choice is, of course, debatable”) determined that sports eligibility questions would be decided through arbitration rather than federal lawsuits.

 His Honour referred to the Mary Decker Slaney case, noting that the court had said: “… when it comes to challenging the eligibility determination of the USOC, only a very specific claim will avoid the impediment to subject matter jurisdiction that (the Sports Act) poses”.

 The Slaney court had quoted the Tonia Harding case, in the Oregon District Court as follows:

 “There the court cautioned that…… ‘courts should rightly hesitate before intervening in disciplinary hearings held by private associations …. Intervention is appropriate only in the most extraordinary circumstances, where the association has clearly breached its own rules, that breach will imminently result in serious and irreparable harm to the plaintiff, and the plaintiff has exhausted all remedies.’ Yet, while carving out this limited exception to the pre-emption created by the Amateur Sports Act, the opinion forewarned that while examining whether internal rules had been complied with, the courts ‘should not intervene in the merits of the underlying dispute.’ ”

 Judge Sparks held, ultimately, that:

  1. Armstrong was not in danger of irreparable harm. The USADA jurisdiction issue, itself, was to be determined by the arbitrators. Further, any finding by the arbitration panel might, itself, be overturned by CAS. “In short,  any harm Armstrong might suffer is, at this point, entirely speculative.
  2. Armstrong had not exhausted his internal remedies, namely the arbitration procedures in the USADA Protocol. Judge Sparks: “If the panel’s resolution is manifestly unjust and devoid of any reasonable legal basis, Armstrong may have a judicial remedy; but this court cannot act on the basis of a hypothetical injury.
  3. Armstrong’s agreement with USOC bound him contractually to submit his due process concerns, themselves, to the arbitration process. Finally, His Honour determined that, even apart from his decision on jurisdiction, if he did have such jurisdiction he would decline an equitable remedy, firstly because, for the above reasons, Armstrong was not in danger of irreparable harm, and secondly because , as a matter of international comity, the court declined to: “circumvent the longstanding system of international arbitration in Olympic sports by unilaterally enjoining that system’s operation”.

      Judge Sparks finished with a comment for USADA:

     “…. there are troubling aspects of this case, not least of which is USADA’s apparent single-minded determination to force Armstrong to arbitrate the charges against him, in direct conflict with UCI’s equally evident desire not to proceed against him….

     The events in USADA’s charging letter date back fourteen years, span a multitude of international competitions, and involve not only five non-citizens of the United States who were never licensed in this country, but also one of the most well-known figures in the history of cycling. As mystifying as USADA’s election to proceed at this date and in this manner may be, it is equally perplexing that these three national and international bodies are apparently unable to work together …..  

The Australian Federal Court – Justice John Middleton

So now we wait for Essendon FC and James Hird, to take on ASADA, before Justice John Middleton in the Australian Federal Court.

The process is likely, in my view, to showcase the critical justice issues that are thrown up in this key area of “non-analytical positives”. The likelihood is that Essendon FC and James Hird will challenge, in the Australian courts, the level of acceptable proof against an athlete charged on the basis of evidence, not including a failed test, and the ASADA/Court of Arbitration for Sport regime generally.

About time.

 John McMullan

Is there an Out for Sharapova? TBC….

Is there an Out for Sharapova? TBC….

She said she had been taking meldonium on medical grounds since 2006 and that she was unaware that it was placed on WADA’s Prohibited List in January 2016. The media recently speculated that Maria Sharapova may plead a range of mitigating circumstances, including a retrospective application of the Therapeutic Use Exemption (TUE). A TUE allows an athlete to use, for therapeutic purposes only, an otherwise prohibited substance.

– A Belleville, LL.B., LL.M

Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217

In Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd, the Victorian Court of Appeal was considering the dispute resolution provisions under a Project Agreement for the design, construction, and operation of a biosciences research facility at Latrobe University. The parties were arguing as to the correct dispute resolution procedure under the Project Agreement in respect of three extension of time claims. At trial, the Supreme Court (Croft J) had referred to a number of Australian authorities, noted that the position is entirely dependent upon the proper construction of the relevant agreement, and decided that the particular disputes, under this agreement, were to be resolved by the “Accelerated Dispute Resolution Procedures”, essentially an expert determination procedure.

In the primary judgment, Garde AJA reasoned as follows:

Despite the arguments of the appellant, I am of the opinion that the construction of cl 26.16 adopted by the trial judge is correct.

As to the construction of cl 26.16, I note: 

(a)             the Project Agreement is the sole and exclusive repository of the agreement between the parties;

(b)             the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the language of the Project Agreement to create. The language of cl 26.16 and of cls 51 to 53 should be given its natural and ordinary meaning in the light of the Project Agreement as a whole;

(c)              clause 26.16 is expressed to apply to ‘any dispute about an extension of time claim’[1] or ‘acceleration under this cl 26’.  The use of the word ‘any’ suggests a comprehensive approach to the class of disputes identified in the provision;

(d)             clause 26.16 stands to be read as part of cl 26, and as part of the whole Project Agreement.  Clause 26 is a code dealing with ‘Time’.  Clause 26.16 is the provision in that code which describes how extension of time disputes are to be resolved.  Parts of that code involved the submission of Change Notices,[2] the grant of extensions of time by the Project Director,[3] and the unilateral extension of time by the respondent in its absolute discretion when it considers that any act or omission by it or certain other parties will, or is likely to, delay the appellant;[4]

(e)              clause 26.16 refers to any dispute about any extension of time or acceleration under cl 26.6 expressly including determinations or rejections by the Project Director under cl 26.9.  Decisions of the Project Director under cl 26.9 are well suited for ‘fast track’ determination by an Independent Expert;

(f)               the matrix of facts mutually known to the parties includes the background, object, context and commercial purpose of the Project Agreement, including the nature of claims and disputes as to extensions of time and acceleration, the significance of cl 26 and its provisions relating to time, and the role of the Project Director in seeking to resolve extension of time and acceleration disputes;

(g)             the right to refer a dispute under cl 26.16 is conferred on either party. As the word ‘may’ indicates, it is not obligatory for either party to refer a dispute but if neither party does so, the status quo will remain. Typically, although not invariably, the status quo will be the decision made by the Project Director under cl 26.9.  The use of the word ‘may’ in cl 26.16 gives either party a choice as to whether or not it seeks to invoke these provisions.  Such a construction is reasonable, and consistent with business efficacy;

(h)             the use of the word ‘may’ attracts a prima facie presumption that the word is to be understood in its natural meaning, that sense being permissive or facultative only.[5]  This is also the ordinary meaning of the word ‘may’ read in the light of the Project Agreement as a whole;

(i)               whilst the appellant contends that the exercise of cl 26.16 by one party requires the consent of the other party before the dispute is referred to the Independent Expert under cl 52, there is nothing in cl 26.16 which supports such a limitation on the operation of the right of each party to have the dispute determined under the Accelerated Dispute Resolution Procedures.  The exercise of the right conferred by cl 26.16 is open to ‘either party’;

(j)               if one party does refer a dispute for resolution under cl 26.16, there are a number of important consequences:

(i)                   first, the dispute is referred for resolution by an Independent Expert.  There is no reference to the Senior Negotiations procedure or to arbitration in cl 26.16;

(ii)                 secondly, cl 26.16 states that the dispute is to be resolved ‘in accordance with the Accelerated Disputes Resolution Procedures’.  This is a clear and unequivocal reference to cl 52;

(iii)                thirdly, cl 26.16 contemplates only the application of the Accelerated Dispute Resolution Procedures.  It directs that an Independent Expert must be instructed, and that those instructions must have regard to the Change Compensation Principles;

(k)              clause 26.16 requires the Independent Expert to act in accordance with the Accelerated Dispute Resolution Procedures;

(l)               the definitions in the Project Agreement support such a construction of the Project Agreement:

(i)                   the definition of ‘Accelerated Dispute Resolution Procedures’ makes express reference to cl 52, and not to cls 51 or 53;

(ii)                 likewise the definition of ‘Accelerated Dispute Panel’ makes express reference to cl 52 and not to cls 51 or 53;

(iii)                again, the definition of ‘Independent Expert’ makes express reference to appointment in accordance with cl 52, and does not refer to cls 51 or 53;  and

(iv)                clause 26.16 contemplates and proceeds on the basis of an Independent Expert determination under cl 52;

(m)            the construction adopted by his Honour gives cl 26.16 important work to do.  Clause 26.16 is intended as the gateway by which the code agreed by the parties as to ‘Time’ in cl 26 interacts with the dispute resolution process contained in cls 50 to 53.  By contrast, the appellant’s construction of cl 26.16 would give that provision very little work to do.  It is unlikely that this is what the parties intended when they agreed on cl 26.16 in the context of cl 26 which deals with the very important topic of time in a large building contract;

(n)             it is commercially efficacious for the parties to agree on dispute resolution procedures so that disputes as to the decisions of the Project Director concerning extensions of time directly engage the Accelerated Dispute Resolution Procedures.  Before making an extension of time decision under cl 26.9(a), the Project Director will already have taken into account all relevant evidence presented by the parties.[6]  Extension of time claims are notorious in building disputes and it is reasonable and sensible for them to be resolved using a ‘fast track’ process;

(o)             the range of disputes which can be referred under cl 26.16 is limited, and not co-extensive with the disputes that fall under cl 50.1. Consistently with its role as part of a code of provisions dealing with time, cl 26.16 applies to disputes about extensions of time or acceleration under cl 26;  and

(p)             the selection by the parties of Accelerated Dispute Resolution Procedures for the resolution of specified types of disputes necessarily means that other types of disputes will be resolved by a different process.  The parties in the Project Agreement provided for different types of disputes to be dealt with by different types of dispute resolution mechanisms.  This result is not capricious, unreasonable, inconvenient or unjust.  To the contrary, the reference to the Accelerated Dispute Resolution Procedures in cl 26.16 shows that the parties
intended to bypass the Senior Negotiations process contained in cl 51. They also decided not to directly engage the Arbitration procedures in cl 53.  Neither consequence is in any way unlikely or unreasonable, particularly given that in the typical extension of time case the Project Director will, and is required under cl 26.09(b) to, have taken into account all relevant evidence presented by the parties.  The result achieved by this construction is consistent with business efficacy.

 

His Honour concluded (and Maxwell P and Tate JA agreed) that the appeal should be dismissed.

 


[1]              Emphasis added.

[2]              Clauses 26.6 and 26.7.

[3]              Clause 26.9.

[4]              Clause 26.10.

[5]              Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51, 63 (Mason CJ); Ward v Williams (1955) 92 CLR 496, 505 (Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ).

[6]              Clause 26.9(b).

Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSC 437 (Vickery J)

In Lysaght Building Solutions Pty Ltd  v Blanalko Pty Ltd, the Judge in Charge of the Supreme Court of Victoria Technology, Engineering and Construction List (Vickery J) was considering the dispute resolution provisions under a design and construct contract for the construction of a rail freight terminal, a container paved area and a locomotive workshop together with associated facilities in Penfield, South Australia (though the Contract was governed by the law of Victoria). The General Conditions of Contract incorporated Australian Standard form of contract, AS4300-1995.

 

Summary Judgment:

 

The Contractor asked for summary judgment in respect of three unpaid payment claims, for approximately $3.13 million. The Principal claimed damages for breach of contract, and claimed a number of waivers and estoppels against the Contractor. His Honour ordered that the argument as to the principles to be applied in respect of summary judgment be argued before the Court of Appeal. His Honour then applied those principles. At paragraph 19, His Honour said:

 

The Court of Appeal determined the following upon the present state of authority, which I adopt and apply in these reasons:[1]

(a)           the test for summary judgment under s 63 of the  Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;

(b)           the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in General Steel;

(c)           it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;

(d)           at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

Payment Claims:

 

His Honour then set out Clause 42.1 of the General Conditions of Contract (the standard form provision) and reviewed the facts surrounding the unpaid payment claims.

 

His Honour referred to a number of authorities to be followed where a progress payment certificate was not properly issued by the Superintendent under Clause 42.1. At paragraphs 29-31:

 

In Daysea v Pty Ld v Watpac Australia Pty Ltd (“Daysea”)[2] the Court of Appeal of the Supreme Court of Queensland considered the position under a contract which contained provisions very similar to clause 42.1 of the AS4300-1995 standard form.  In that case the Superintendent failed to issue a progress payment certificate within the stipulated 14 days after receipt of a claim, but did so before the expiry of the 28 day period for payment.  The Court of Appeal accepted that if the Superintendent under an AS4300-1995 failed to respond to a claim for payment under clause 42.1 within 14 days, even if it did respond shortly thereafter, the Principal was still obliged to pay the amount of the claim.  Williams JA observed that a strict approach to the construction of clause 42.1 should be adopted at least with respect to the provisions for payment, set off and deductions, and this was so because of the consequences which flow from the issuing of the certificate.  His Honour reasoned as follows:

Of more significance is the decision of Rolfe J in Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215. The clause in question there was in the same terms as clause 42.1 here. The learned Judge found that the certificate issued by the Principal’s Representative did not satisfy the requirements of paragraph (a) to paragraph (f) of paragraph [4]. In consequence he said that “the Payment Certificate failed to comply with various contractual obligations as to its contents and that, accordingly, it was not a valid notice”. His reasoning for so concluding is set out in the following passage:

“… the effect of a Payment Certificate is to require the recipient to pay the amount stated. Failure to do so could lead to summary judgment and there is no right to dispute the amounts payable until the dispute resolution procedures are activated. Accordingly, the recipient of the certificate is required to pay money during the course of the contract which, at the end of the day, it may be found it does not owe. The requirement to pay money may lead to financial difficulties for the payer, just as the failure to receive money during the course of the contract may cause financial difficulties to the payee. Also the payee may not be able, at the end of the day, to refund any overpayment. Considerations such as these lead me to the conclusion that a certificate must comply strictly with cl 42.1 if it is to have the consequences specified”.

That reasoning is in my view compelling. As all of the cases I have just referred to establish, the consequences of issuing a certificate are serious. The proprietor is bound to pay the amount of the certificate notwithstanding that the amount is provisional only and subsequently may be found to be incorrect. Notwithstanding such considerations the proprietor must pay the amount specified in the certificate and take the chance that any excess can be recovered subsequently. Similarly, the contractor is not entitled to payment of anything more than the amount specified in the certificate though it may well be less than the progress claim made. Even though it may ultimately be found that the contractor was entitled to more, the recovery of any such amount must await the determination of disputes at the end of the contract.

Because of the consequences which flow from the issuing of the certificate strict compliance with the provisions of clause 42.1 is required …[3]

[Emphasis added]

 

Daysea was applied by Byrne J in Southern Region Pty Ltd v State of Victoria (No 3) (“Southern Region”).[4]

 

It follows that a certificate purportedly issued under clause 42.1 which does not satisfy the formal requirements of theclause is ineffective and invalid, or as Byrne J said in Southern Region: “… it was as if no certificate had issued at all.” 

 

(emphasis added)

His Honour then considered the principles to be adopted where the Contractor failed to support the payment claim with evidence and any information required by the Superintendent. His Honour referred to  the NSW Court of Appeal decision in Brewarrina Shire Council v Beckhaus Civil Pty Ltd . In that decision, the majority concluded that under clause 42.1 of AS2124–1992 the obligation of the Superintendent to issue a payment certificate in relation to a progress claim was subject to the condition precedent that the contractor support that claim with evidence of the amount due to it and with such information as the Superintendent might reasonably require.

 

His Honour referred to the Victorian Court of Appeal decision in Aquatec-Maxcon Pty Ltd v Minson Nacap Pty Ltd . The Court of Appeal, in adopting Brewarrina, said:

 

The decision is a recent, and carefully considered, decision by the New South Wales Court of Appeal which, so far as we have been told and so far as we are aware, is the only decision which currently exists on this particular point of construction of this paragraph of the clause. The point was argued by counsel for the appellant before the trial judge, in the course of which counsel referred his Honour to evidence which showed, or suggested, that the superintendent had repeatedly been seeking substantiation for the “one line variation claims”, and submitted that where the contractor persisted – in the face of opposition and request for further information – in submitting “one line claims” there must come a point where clearly the Progress Claim as presented is entitled to be regarded by the superintendent as not a claim within the meaning of clause 42.1. His Honour requested of counsel whether he (ie counsel) was able to show to him any authority where such an approach had been adopted to a claim, ie “where the claim has been treated by the court as being invalid for noncompliance …”. Trial counsel for the appellant conceded that he was not able to refer his Honour to any authority on the point; and his Honour then indicated to trial counsel for the respondent that he would not “trouble him” about the criticisms made of the progress claims.

 

His Honour, noting further that Warren CJ in Kane Constructions Pty Ltd v Sopov, while expressing some reservations regarding the application of Brewarrina and Aquatec as to the timing issue in the matter before her, had concluded that she was bound by the adoption of Brewarrina in Acquatec at the very least, or to regard Brewarrina as highly persuasive, concluded:

 

Accordingly, pursuant to clause 42.1 of the AS4300-1995 standard form contract, a failure by the contractor to support a payment claim with evidence and any information required by the Superintendent means that the Superintendent is not be obliged to issue a payment certificate to certify the payment of a progress claim.

(emphasis added)

 

His Honour concluded that on the facts before him, the Principal had a “real” chance of success on the material presented in the application, and concluded that summary judgment should not be awarded to the Contractor.

 

Stay Application – Section 8 Commercial Arbitration Act 2011 (Vic):

 

His Honour then addressed a claim for a stay of the Supreme Court proceedings pursuant to Section 8 of the Commercial Arbitration Act 2011 (Vic), on the grounds that there was an arbitration clause (the provision was the standard form Clause 47 of AS4300-1995). His Honour noted the important change between the new Act and the 1984 superseded Act. At paragraphs 125-126, 143 :

 

The use of the imperative word “must” in s 8(1), rather than the permissive “may”, which was employed  in the superseded Commercial Arbitration Act 1984, removes the court’s discretion to refuse to grant a stay, and renders the provision mandatory.  The only reason a court can refuse to grant a stay is if the arbitration agreement is found to be “null, void, inoperative or incapable of being performed”.[5]  This means that if the requirements of the section are met the Court has no choice but to grant a stay of the proceeding before it and refer the matter to arbitration.[6]

 

This may result in some inefficiencies in case management in some cases, arising from the potential for litigation on the same project being conducted before different tribunals. Nevertheless the statutory meaning is clear.[7]

 

……. It follows that 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.

 

(emphasis added)

Ultimately, His Honour decided that a stay should not be ordered in respect of certain parts of the claims, on the basis that the particular dispute was not, on the basis of other provisions of the Contract excluding a right of a party to institute proceedings to enforce payment under the Contract from the arbitration clause. In respect of the balance of the claims, His Honour ordered that those claims were to be referred to arbitration and ordered a stay.

 

 

 

 


[1]               Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158 [35].

[2]               Daysea v Pty Ld v Watpac Australia Pty Ltd (2001) 17 BCL 434.

[3]               Daysea Pty Ltd v Watpac Australia Pty Ltd (2001) 17 BCL 434, 439 [20]–[22].

[4]               Southern Region Pty Ltd v State of Victoria (No 3 ) (2002) 18 BCL 211.

[5]               D Jones, Commercial Arbitration in Australia (2nd ed, Lawbook Co., 2013) p 108.

[6] Although in the 2009 Consultation Draft Bill the provisions vested a discretionary power in the court  and more closely reflected s 53 of the Superseded Uniform Acts, following submissions from over 17 different organisations, the final Bill reflected s 8 of the Model Law.  The imperative “must” replaced the permissive “may” such that granting a stay is now mandatory unless the court finds that the arbitration agreement is “null, void, inoperative or incapable of being performed”. D Jones, Commercial Arbitration in Australia (2nd ed, Lawbook Co., 2013) p 110.

[7]               It has been noted that there will be situations that arise where matters are referred to arbitration as a consequence of the word “must” that would have been more efficiently conducted in court, for example, multi-party proceedings that will require arbitrations and potentially different findings of fact.  See: D Jones, Commercial Arbitration in Australia (2nd ed, Lawbook Co., 2013) p 111.

500 Burwood Highway Pty Ltd v Australian Unity Limited & anor [2012] VSC 596

In 500 Burwood Highway Pty Ltd v Australian Unity Limited & anor [2012] VSC 596, the Victorian Supreme Court (Justice Vickery) was considering the appointment of a quantity surveyor to facilitate an adjustment to the purchase price in a Contract of Sale for an aged care facility. the Contract of Sale provided for the purchaser to appoint an “independent” quantity surveyor to assess the cost of the works required to complete the development (that cost then to be deducted from the $35 million purchase price at settlement). The independent surveyor ultimately estimated the cost to complete at $2.86 million approx, but the Vendor had its own report, by a different quantity surveyor, estimated the cost to complete at $0.52 million approx. His Honour concluded on the particular facts that the expert report did not comply with the requirements of the Contract of Sale and was not binding on the parties.

 

His Honour reviewed a number of key legal principles in relation to expert determination:

Legal Principles as to the Role of a Contractually Appointed Expert

164.            An expert appointed under a contract is in a different position to an arbitrator and has a distinctly different range of duties. In Beevers v Port Philip Sea Pilots Pty Ltd[1] (“Beevers”), Dodds -Streeton J described the differences in the following terms:

A valuer acting as an expert unlike an arbitrator is generally not obliged to receive submissions from the parties. An arbitration is characteristically quasi-judicial and the parties intend that they should have the right to be heard if they so desire.  It is clear that, whereas a primary function of an arbitrator is to hear and resolve opposing contentions, in contrast, an expert is appointed to appraise value of loss or damage ‘by use of some special knowledge or skill … without being required to hear the parties.  It has been held that, due to the distinction between the arbitral and expert functions, a report by an expert will not be vitiated by the appearance alone of partiality.[2]

165.            In Beevers Dodds-Streeton J referred to Macro v Thompson (No. 3)[3] (“Macro”) with approval. Macro involved a valuation of shares in family companies was, under a pre-emption clause in the articles, committed to the companies’ auditor acting as an expert, rather than an arbitrator.  Robert Walker J stated that

[a]n expert entrusted with the duty of issuing certificates under contractual arrangements between two other parties is under a duty to act fairly and impartially, and the other parties implicitly contract on that basis.

Robert Walker J accepted that

[o]n the authorities as a whole I accept the submission made by Mr Rhys that when the court is considering a decision reached by an expert valuer who is not an arbitrator performing a quasi-judicial function, it is actual partiality, rather than the appearance of partiality, that is the crucial test.

His Honour adopted that view because –

[t]o hold otherwise would mean that auditors who have had a longstanding professional relationship with an association with one party to the contract might be unduly inhibited in continuing to discharge their professional duty to their client, by too high an insistence on avoiding even an impression of partiality.

In Macro, as noted by Dodds -Streeton J in Beevers, [4]Robert Walker J found that the auditor (while not guilty of fraud or collusion or any conscious and positive cooperation in forwarding the interests of one party) was extremely imprudent in seeking advice and information from the purchaser’s solicitor, with whom he discussed figures.  The auditor allowed the solicitor ‘to obtain a position of psychological ascendancy over him’ which the solicitor seemed to exploit.[5]

166.            Nevertheless, Robert Walker J, despite finding that “[the auditor] should have taken a much more independent line from the outset”, on the balance of probabilities was:

not persuaded that [the auditor] yielded sufficiently to [the solicitor’s] influence as to invalidate his valuation on the ground of partiality.[6]

167.            In the recent case of McGrath v McGrath (“McGrath”) [7] Pembroke J cited with approval the observations of the English Court of Appeal in Barclays Bank v Nylon Capital [8] which are to similar effect:

As I have said, there is no procedural code for expert determination, in contradistinction to arbitration. The activities of an expert are subject to little control by the court, save as to jurisdiction or departure from the mandate given. Unless the parties specify the procedure, the expert determines how he will proceed; it is rare for what might be perceived as procedural unfairness in an arbitration to give rise to a ground for challenge to the procedure adopted by an expert: see Kendall, Freedman & Farrell, Expert Determination, 4th ed (2008), ch 16.[9]

168.            For these reasons, unless required by the contract in question, the parties have no entitlement to insist that the expert adopt any particular procedure; or that the appointed expert seek their approval to the proposed determination; or that they are given any hearing or facility to provide input into the process. An expert is not obliged to afford to the parties procedural fairness in the manner required of a court or arbitration in a curial context. [10]  A certifying expert is not under an obligation to provide procedural fairness or natural justice in the absence of an express contractual provision, and there is none in the present case: Hounslow London Borough Council v Twickenham Garden Developments Ltd. [11] How the task is undertaken is in the hands of the expert, subject to anything to the contrary in the contract pursuant to which the appointment was made.

169.            This result is in part the product of the contract and what is to be gleaned from it as to the intention of the parties. When the parties appoint an expert, they usually do so because they agree to place reliance on the expert’s skill and judgment. They implicitly agree to accept and be bound by the determination. In the usual case, provided the decision is arrived at honestly and in good faith, the parties will not be able to re-open it and will be bound by the result.

170.            It is also in part the product of a particular body of expert experience, learning, skill and judgment which the parties wish to apply to the problem to be dealt with. This is to be applied in a manner which is untrammelled by procedural considerations, so that the specialist skills and insights of the expert can be freely applied to the issue.

171.            Finally, considerations of commercial utility are likely to be relevant factors. Efficiency, the production of a speedy and authoritative outcome and the elimination of the expense of a more elaborate procedure, undoubtedly play a part in parties selecting the contractual process of expert determination.

172.            Mistake or error in the process of the determination of the appointed expert will not invalidate a decision.[12] However, if the expert asks the wrong question or misconceives the function of the appointment, the task required to be performed by the contract will not have been fulfilled.[13] In this event, the determination will be exposed to being set aside.

173.            Parties to a contract who, by the terms of that contract, agree to submit a question to an independent expert, are bound by the determination of that expert acting honestly and in good faith.[14]

174.            Actual bias or partiality must be demonstrated in order to impugn the determination. Further, the party alleging actual bias by a decision-maker carries a heavy onus. So much was made clear in Minister for Immigration v Jia by Gleeson CJ and Gummow J.[15]

175.            As observed by Pembroke J in a recent decision on point, McGrath,the appearance of partiality is not sufficient even if made out.  McGrath concerned the appointment of an expert under a shareholders’ agreement to determine the value of a corporate group following a dispute between shareholders.[16]  The plaintiff shareholder sought to avoid the appointment of a particular expert to carry out the valuation on the basis of communications between that expert and one appointing shareholder prior to the expert’s formal engagement. The plaintiff’s application to avoid the expert’s appointment failed for want of evidence of partiality.[17]  Pembroke J held that, based as it was on an apprehension that, if appointed, the expert would fail to act impartially, the plaintiff’s case was akin to one of apprehended bias, which would not entitle the Court to prevent the expert from taking appointment.[18]  Pembroke J was thus not required to make findings as to whether or not the expert had breached his duty to act impartially (meaning without actual bias). His Honour made the following observations in McGrath:

The obligation on an expert to act impartially is of course a foundational requirement. It finds its source in an implied term that subsists in agreements of this kind: Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1 at [69]; Legal & General v A Hudson Pty Ltd at 335; Holt v Cox (1997) 23 ACSR 590 at 595. Within that constraint however, the expert may act as he likes and may give such opportunities to the parties to make submissions, and on what terms, as he alone considers necessary or appropriate. He may even choose not to do so – so long as he acts honestly and impartially.[19]

176.            In Beevers Dodds-Streeton J held that “a report by an expert will not be vitiated by the appearance alone of partiality”.[20]  Having referred to the orthodox position,[21] her Honour then introduced the concept of “a credible appearance or soundly based apprehension of partiality”.[22]  However, her Honour did not finally rule on the question on the facts of the case before her, finding it unnecessary to do so.

177.            To the extent that Dodds-Streeton J in Beevers opened the door to the prospect of the appearance of bias as being sufficient to call into question and bring down the determination of a contractually appointed expert, I do not follow the decision. Absent something in the contract which works against this outcome in a particular case, actual partiality and not the appearance of partiality is the critical test: Macro v Thompson (No 3).[23]  Such observations are consistent with the views expressed by the Court of Appeal concerning experts called upon to give independent opinion evidence, such experts not being disqualified from that role due to previous association with the parties; see FGT Custodians Pty Ltd (formerly Feingold Partners Pty Ltd) v Fagenblat.[24]

178.            There is a substantial body of further authority on the point. In Ceneavenue Pty Ltd v Martin, Debelle J took the conventional approach in adopting the view that actual bias is required.[25]  In Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd (No 2), Hargrave J referred to and approved the ruling in Macro that actual partiality, rather than the appearance of partiality, was necessary.[26]  In Kenros Nominees Pty Ltd v Tipperary Group Pty Ltd, Hollingworth J gave further approval to this approach, observing:  “All of the cases to which the parties referred deal with the setting aside of a valuation after it has been performed, on the basis of actual bias”.[27]  Other authorities are to similar effect in support of the orthodox approach.[28]

179.            This view of the law accords with sound policy.  Pembroke J in McGrath explained the policy considerations in the following terms:

When it comes to the principle of apprehended bias in relation to independent experts, I prefer the orthodox approach. To my mind, that approach accords with sound principle and persuasive authority. Too high an insistence on independent experts being required to avoid even an impression of partiality would not be in the interests of justice. It might, as it has in this case, encourage unwarranted challenges and unnecessary litigation by those too readily prone to suspicion and paranoia. The better course would be to allow the independent expert to complete his determination. [29]

180.            In the light of the weight of these authorities, 500 Burwood conceded that an apprehension of bias on the part of Mr Hogg is not a sufficient basis for setting aside the DCWC assessment.

181.            500 Burwood also concedes that Mr Hogg owed no obligation to accord procedural fairness or natural justice to 500 Burwood or AU. 

182.            Accordingly, in order to have the DCWC assessment set aside, 500 Burwood must show, on the balance of probabilities, either actual bias or lack of impartiality on the part of Mr Hogg rather than mere apprehension of it.[30]

…….

Assessment in Accordance with the Contract

Legal Principles

267.            The circumstances in which a court will intervene to overturn an expert determination, where the assessment is undertaken pursuant to a contractual mechanism, are very limited.

 

268.            In Beevers Dodds -Streeton J outlined the applicable principles in the following terms:

Historically, there has been a considerable degree of diversity in judicial identification of the deficiencies or flaws sufficient to vitiate an expert valuation.  The fundamental principle endorsed in modern Australian authority is that an expert valuation will be binding if it is within the terms of the contract.  Conversely, if an expert valuation can be said to depart from the terms of the contract, it will invite curial review and intervention.  The fundamental principle is very general, and its application will, in each case, depend on the terms of the particular contract.  The decided cases provide guidance on the construction of a contract under which an expert is appointed to determine a value or price.  An expert’s determination on discretionary matters is not
ipso facto immune from review, but where, by the contract, such matters are entrusted to the expert without the prescription of criteria or restrictions, whether express or implied, it has frequently been inferred that the parties intended to be bound by the expert’s bona fide judgment, even if it is in some way erroneous.  On the other hand, it has been inferred that the parties would not intend to be bound by gross errors of objective fact or mechanical calculation.  Further, the expert’s determination may fail to satisfy a term of the contract because, when construed in context, the term is held to bear a special meaning which was not addressed. [31]

269.            Recently, in TX Australia Pty Ltd v Broadcast Australia Pty Ltd (“TX Australia”) Brereton J described the potential scope of the enquiry, in a case such as the present, in the following terms:

In Legal & General Life of Aust Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314, McHugh JA recognised, and it has repeatedly been accepted, that the fundamental question is whether the exercise performed in fact satisfies the terms of the contract so as to make the determination binding. Absent fraud or collusion, a valuation is binding if it was made in accordance with the contract, and if so it is beside the point that it proceeded on the basis of error, or was a gross over or under value, or took into account irrelevant considerations [Legal & General Life of Aust Ltd v A Hudson Pty Ltd, 335-336 (McHugh JA); Holt v Cox (1997) 23 ACSR 590, 596 (Mason P)]. This does not mean that a valuation will stand regardless of error; it depends on the terms of the contract [Holt v Cox, 597 (Mason P)]. Accordingly, the question is whether the Expert’s determination binds the parties in accordance with their contract, and that depends on whether the Expert has performed the task allocated him by the contract, in a way that the contract makes binding on the parties. [32]

270.            In  Legal & General Life of Aust Ltd v A Hudson Pty Ltd (“Legal & General”) McHugh JA held[33]:

While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of the valuation, nevertheless the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case, the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuer may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into account or has failed to take into account matter which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract.[34]

[Emphasis added]

271.            Accordingly, the DCWC assessment contained in the DCWC Report may not be set aside by reason of error, such as a factual or arithmetic error, even if, in some cases, that error resulted in a “gross over or under value” where it was otherwise made under the terms of and within the scope of the governing contractual terms.[35]

272.            However, and conversely, an expert determination may be set aside where it has not been undertaken in accordance with the prescription contained in the contract under which the appointment of the expert was made.

273.            The distinction between those circumstances which may justify setting aside an expert determination and those which will not, was considered in Khayat Investments Pty Ltd v Winston Holdings Pty Ltd (No.2).[36] Martin CJ, with whom Newnes and Murphy JJ agreed, explained the test, in the context of a contractual appointment of an expert valuer under a lease, as follows:

If the determination accords with the terms of the lease, it binds the parties even though it might be the product of mistake or error. As McHugh JA observed in Legal and General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314:

‘By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision (335).’

However, if the determination of the rental payable does not accord with the lease agreement because, for example, it is not honest or is vitiated by collusion, or falls outside the scope of the provision in the lease because, for example, the valuer has assessed the wrong premises, the parties will not be bound, and one or other could seek a remedy setting aside the purported determination of the valuer, on the basis that it was not a valid determination under the lease. However, an error in the discretionary judgment of the valuer, or a mistake in the reasoning process, will not result in the invalidity of the determination unless it is of the limited kind to which I have referred, and which takes the purported determination beyond the scope of the powers conferred upon the valuer by the lease agreement (see also Campbell v Edwards [1976] 1 WLR 403, 407; Jones v Sherwood Computer Services plc [1992] 1 WLR 277, 287; TXU Electricity Ltd v Commonwealth Custodial Services Ltd [2003] VSC 88).[37]

274.            In TX Australia, Brereton J formulated an appropriate test and identified the task required of the Court where an expert determination delivered under a contract is challenged, in these terms:

[23] It is not in doubt that there will be an error of law, and that the determination will not be binding, if the Expert misconceived his function, asked himself the wrong question or applied the wrong test [Ex parte Hebburn Limited; Re Kearsley Shire Council (1947) 47 SR (NSW) 416, 420 (Jordan CJ); Avon Downs Pty Limited v Federal Commissioner of Taxation [1949] HCA 26; (1949) 78 CLR 353, 360 (Dixon J); Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, 208-209, [31] (Gleeson CJ, Gaudron and Hayne JJ)], as in that event, he would not have addressed himself to, nor performed, the task required of him by the contract.

[24]   Consideration of this ground requires analysis of two issues: first, what was the Expert’s task; and secondly, what did the Expert actually do. [38]

[Emphasis added]

  1. 275.            Accordingly, and by way of a summary of the legal position, the DCWC assessment may be set aside if the Court determines that it did not comply with the exercise required by the Contract to be undertaken

 


[1]               Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556.

[2]               Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556 [263] –[ 266].

[3]               Macro v Thompson (No. 3) [1997] 2 BCLC 36.

[4]               Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556 [268 – 270].

[5]               Macro v Thompson (No. 3) [1997] 2 BCLC 36 [64].

[6]               Macro v Thompson (No. 3) [1997] 2 BCLC 36 [66].

[7]               McGrath v McGrath [2012] NSWSC 578.

[8]               Barclays Bank v Nylon Capital [2011] EWCA Vic 826; [2012] Bus LR 542.

[9]               McGrath v McGrath [2012] NSWSC 578 [7].

[10]             Lahoud v Lahoud [2010] NSWSC 1297 [59]; Barclays Bank v Nylon Capital [2011] EWCA Cic 826; [2012] Bus LR 542 [37].

[11]             Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233, 258-60; Capricorn Inks Pty Ltd v Lawter International (Australasia) Pty Ltd [1989] 1 Qd. R. 8; cf Fletcher Construction Australia Pty Ltd v MPN Group Pty Ltd (unreported) Supreme Court, NSW, 14 July 1997 p.20.

[12]             Legal & General Life of Australia v A Hudson Pty Ltd (1985) 1 NSWLR 314, 334-336 (McHugh JA).

[13]             TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 [23] (Brereton J); AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd [2006] VSCA 173 [51].

[14]             See Campbell v Edwards [1976] 1 WLR 403, 407 per Lord Denning MR; followed in Baber v Kenwood Manufacturing Co Ltd and Whinney Murray & Co [1978] 1 Lloyds Rep 175 (Court of Appeal); Jones & Others v Sherwood Computer Services PLC [1992] 1 WLR 277; applied in Australia in Legal & General by McHugh JA. The critical distinction is between a mistake in process of the valuation or assessment where in the absence of dishonesty or partiality, the courts will not interfere, in contrast to a valuation or assessment which actually departs from the contract, where the courts will intervene.

[15]             Minister for Immigration and Multicultural Affairs v Jia  [2001] HCA 17.

[16]             McGrath v McGrath [2012] NSWSC 578.

[17]             McGrath v McGrath [2012] NSWSC 578 [16].

[18]             McGrath v McGrath [2012] NSWSC 578 [17].

[19]             McGrath v McGrath [2012] NSWSC 578 [12].

[20]             Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556 [266] and [300].

[21]             Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556 [263] – [272].

[22]             Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556 [300].

[23]             Macro v Thompson (No. 3) [1997] 2 BCLC 36.

[24]             FGT Custodians Pty Ltd (formerly Feingold Partners Pty Ltd) v Fagenblat [2003] VSCA 33.

[25]             Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1 [69] and [71].

[26]             Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd (No 2) [2008] VSC 478 [25].

[27]             Kenros Nominees Pty Ltd v Tipperary Group Pty Ltd [2009] VSC 524 [95].

[28]             See: Legal & General Life of Australia Ltd  v A Hudson Pty Ltd  (1985) 1 NSWLR 314, 335; Holt v Cox (1997) 23 ACSR 590, 595; Andrews v Queensland Racing Ltd (No. 2) [2009] QSC 364 [24] – [25]; Bernhard Schulte GmbH & Co KG v Nile Holdings Ltd [2004] 2 Lloyd’s Rep 352 372.

[29]             McGrath v McGrath [2012] NSWSC 578 [21].

[30]             McGrath v McGrath [2012] NSWSC 578 [16].

[31]             Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556 [295].

[32]             TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 [18].

[33]             Legal & General Life of Australia Ltd v A Hudson Pty Ltd [1985] 1 NSWLR 314; applied in Beevers v Port Philip Sea Pilots Pty Ltd [2007] VSC 556, Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd (No. 2) [2008] VSC 478, Kenros Nominees Pty Ltd v Tipperary Group Pty Ltd [2009] VSC 524 and McGrath v McGrath [2012] NSWSC 578.

[34]             Legal & General Life of Australia Ltd v A Hudson Pty Ltd [1985] 1 NSWLR 314, 335-6.

[35]             Legal & General Life of Australia Ltd v A Hudson Pty Ltd [1985] 1 NSWLR 314, 336.

[36]             Khayat Investments Pty Ltd v Winston Holdings Pty Ltd (No.2) [2011] WASCA 196.

[37]             Khayat Investments Pty Ltd v Winston Holdings Pty Ltd (No.2) [2011] WASCA 196 [10] – [11].

[38]             TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 [23] – [24].

WTE Co-generation and Visy Energy Pty Ltd v RCR Energy Pty Ltd and RCR Tomlinson Ltd [2013] VSC 314

In WTE Co-generation and Visy Energy Pty Ltd v RCR Energy Pty Ltd and RCR Tomlinson Ltd [2013] VSC 314, , the Victorian Supreme Court, Vickery J, the Judge in Charge of the Technology List, was considering an application for a stay on the basis that the plaintiff has not complied with a dispute resolution clause requiring a meeting between senior management. His Honour reviewed the cases and set out the principles applying as follows:

PULLING THE THREADS TOGETHER, THE FOLLOWING PRINCIPLES MAY BE STATED AS TO A STAY SHOULD BE GRANTED WHERE A CONTRACTUAL DISPUTE RESOLUTION PROCESS IS EXPRESSED TO BE A PRE-CONDITION TO LITIGATION, AND WHERE THE ENFORCEABILITY OF SUCH PROVISION IS PUT IN ISSUE: 1. The general rule is that equity will not order specific performance of a dispute resolution clause, notwithstanding that it may satisfy the legal requirements necessary for the court to determine that the clause is enforceable.  This is because supervision of performance pursuant to the clause would be untenable. 2. The Court may, however, effectively achieve enforcement of a dispute resolution clause by default, by ordering that a proceeding commenced in respect of a dispute subject to the clause, be stayed or adjourned until such time as the process referred to in the clause, is completed.  What is enforced by this means is not co-operation and consent of the parties but participation in a process from which consent might come. 3. A circumstance which will operate to preclude the ordering of a stay on this ground arises where the particular dispute resolution clause is determined to be unenforceable, as where for example, the clause is found to be uncertain. 4. Dispute resolution clauses in contracts should be construed robustly to give them commercial effect.  The modern approach to the construction of commercial agreements is generally to endeavour to uphold the bargain by eschewing a narrow or pedantic approach in favour of a commercially sensible construction, unless irremediable obscurity or a like fundamental flaw indicates that there is, in fact, no agreement. 5. Honest business people who approach a dispute about an existing contract will often be able to settle it.  If business people are prepared in the exercise of their commercial judgment to constrain themselves by reference to express words that are broad and general, but which nevertheless have sensible and ascribable meaning, the task of the court is to give effect to and not to impede such solemn express contractual provisions.  Uncertainty of proof does not detract from there being a real obligation with real content. 6. A dispute resolution clause in a contract, consistently with public policy in promoting efficient dispute resolution, especially commercial dispute resolution, requires that, where possible, enforceable content be given to contractual dispute resolution clauses. 7. The trend of recent authority is in favour of construing dispute resolution clauses where possible, in a way that will enable those clauses to work as the parties appear to have intended, and to be relatively slow to declare such provisions void either for uncertainty or as an attempt to oust the jurisdiction of the court. 8. The court does not need to see a set of rules set out in advance by which the agreement, if any, between the parties may in fact be achieved.  The process need not be overly structured.  However, the process from which consent might come must be sufficiently certain to be enforceable.  A contract which leaves the process or model to be utilized for the dispute resolution ill defined, or the subject of further negotiation and agreement, will be uncertain and unenforceable. 9. An agreement to agree to another agreement may be incomplete if it lacks  the essential terms of the future bargain. 10. An agreement to negotiate, if viewed as an agreement to behave in a particular way, may be uncertain, but is not incomplete.  The relevant question is whether the clause has certain content. 11. An obligation to undertake discussions about a subject in an honest and genuine attempt to reach an identified result is not incomplete. His Honour concluded on the facts that the stay should be refused, in particular, on the ground that the particular clause, requiring the parties to “meet to attempt to resolve the dispute or to agree on methods for doing so”, was unenforceable. His Honour noted that further agreement would be required before the process could proceed. At paragraph 46:

It is one thing for a court to strive to give commercial effect to an imperfectly drafted contractual clause, which is well accepted as the approach to construction of contractual terms.  It is also accepted that a valid dispute resolution clause does not require a set of rules to be set out in advance which directs the parties how an agreement is to be achieved, if agreement is possible.  But, as a minimum, what is necessary for a valid and enforceable dispute resolution clause, is to set out the process or model to be employed, and in a manner which does not leave this to further agreement.  It is not for the court to substitute its own mechanism where the parties have failed to agree upon it in their contract.  To do otherwise would involve the court in contractual drafting, which is a distinctly different exercise from contractual construction of imprecise terms.

Altain Khuder LLC v IMC Mining Inc & IMC Mining Solutions Pty Ltd [2011] VSC 1

In Altain Khuder LLC v IMC Mining Inc & IMC Mining Solutions Pty Ltd [2011] VSC 1, the Victorian Court of Appeal (Croft J, His Honour is, himself, an experienced international arbitrator) considered the procedures and principles relating to resisting enforcement on the basis of the defences or grounds for resting enforcement under the International Arbitration Act 1974 (Cth) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ( the “New York Convention”) 1958.

CAS decides on 2 year ban for Contador

The Court of Arbitration for Sport has decided that Alberto Contador Velasco, 3 time winner of the Tour de France, is guilty of an anti-doping violation, stripped him of a number of results, including the 2010 Tour de France victory, and given him a 2 year ban, back dated to August 2010.

On 21 July 2010, at the 2010 Tour de France, Mr Contador tested positive for a tiny amount of clenbuterol (a prohibited substance under the 2010 WADA Prohibited Substances List, listed as “Other Anabolic Agent”) from a urine test following a rest day after stage 16. Mr Contador believed that he may have eaten contaminated meat, leading to the result.

The process was submitted to the Comite Nacional de Competicion y Disciplina Deportive (CNCDD) of Real Federacion Espanola de Ciclismo (RFEC). In January 2011, the Spanish examining judge of the RFEC considering the anti-doping violation proposed, rejected by Mr Contador, a 1 year ban, (reducing the 2 year ban to 1 year on the basis of no significant fault or negligence). Subsequently, on 14 February 2011, the CNCDD acquitted Mr Contador, concluding:

  1. It was most probable that the result was due to eating contaminated meat. The low controls on meat production in Spain, plus the very low concentration of clenbuterol in Mr Contador’s body, suggested no voluntary doping. Mr Contador, in eating meat, even exercising maximum prudence, did not know/suspect that he was eating meat contaminated with a prohibited substance. This was not negligent behaviour.
  2. The extremely small amount of clenbuterol had not enhanced the athlete’s performance.

The UCI and WADA each appealed the RFEC decision to the Court of Arbitration for Sport (CAS). The appeals were consolidated and heard on 21-24 November 2011.

The UCI and WADA, separately, argued as follows:

  1. UCI met its burden of proof by establishing to “more than comfortable satisfaction” that Mr Contador had committed an anti-doping violation as the A and B samples presented a prohibited substance.
  2. Mr Contador is responsible for ensuring no prohibited substance enters his body. Mr Contador has the burden of proof to establish how a prohibited substance was in his body, and that he bears no fault or negligence (to avoid any sanction), or that he bears no significant fault or negligence (to reduce the sanction).
  3. Mr Contador must establish, on the balance of probabilities, that the contaminated meat was the source of the clenbuterol. UCI says he has not met this burden in this instance.
  4. The evidence, here, was more consistent with the clenbuterol being a result of a blood (doping) transfusion, and/or food supplements. The evidence suggests that the contaminated meat was not the source of the clenbuterol, rather it was more to be a result of doping practices.

Mr Contador argued as follows:

  1. On the balance of probabilities, the prohibited substance came from contaminated meat. Accordingly, Mr Contador bore no fault or negligence.
  2. The UCI and WADA theories re blood transfusion, and/or food supplements, should be rejected.
  3. If CAS disagrees with this view, then Mr Contador’s results following the 14 February 2011 RFED decision should not be set aside.

The CAS Panel advised the parties that it would hear from the many experts in expert’s’ conferences, where all experts dealing with the same issue were present.

The issues to be decided by the CAS Panel were:

  1. Did Mr Contador establish, to the required standard of proof, how the prohibited substance entered his system?
  2. If Mr Contador could establish, to the required standard of proof, how the prohibited substance entered his system, does he, in those circumstances, bear no fault or negligence or no significant fault or negligence?
  3. If required, what sanction should be imposed (how long a suspension? when should that start? which results would be disqualified? …. ).

The Panel concluded that the athlete bears the burden of proof to establish how the prohibited substance entered his system, and that he bears no fault or negligence or no significant fault or negligence, on the balance of probabilities.

In relation to the meat contamination theory, though satisfied that Mr Contador ate meat at the relevant time, and that it was a possibility that the meat was contaminated, the Panel was not prepared to conclude from a mere possibility that the meat was contaminated that an actual contamination had occurred.

In relation to the blood transfusion theory, the panel gave no weight to the “tainted environment”, or “in bad company” argument (ie that athletes in his team had, in the past, been involved in doping). On the basis of the evidence, the Panel concluded that the athlete’s blood parameters could not establish a blood transfusion. The Panel looked at a number of technical parameters, and ultimately concluded that although the blood transfusion theory is a possible explanation for the clenbuterol test result, in light of all the evidence, it was unlikely to have occurred.

The panel concluded, from the material before them, including that Mr Contador took supplements in considerable amounts, that athletes had frequently tested positive because of contaminated supplements, then the food supplement theory was a more likely possibility. Ultimately, however, the Panel did not conclude that this had occurred on the balance of probabilities.

The panel confirmed that, albeit that there were theories before it as to the cause of the clenbuterol test result, the burden of proof to establish how the prohibited substance entered his system, and that he bears no fault or negligence or no significant fault or negligence did not shift from the athlete. Accordingly, it found that Mr Contador has committed an anti-doping violation.

As there was no basis to reduce the usual penalty, Mr Contador was suspended for a period of 2 years.

As to the start date for the suspension, the Panel applied the discretion available where there had been substantial delays in the hearing process not attributable to the athlete, and concluded that Mr Contador’s suspension should be back dated to August 2010 on the following factors in particular:

  1. the failure by UCI and WADA to put material before RFEC;
  2. the CAS proceedings lasting over 9 months;
  3. the CAS proceedings being extended due to the athlete having to answer complex submissions in relation to the blood doping theory;
  4. the provisional suspension between August 2010 and Mr Contador’s acquittal on 14 February 2011.

The Panel, however, against Mr Contador’s submissions, concluded that Mr Contador’s results from the 2010 Tour de France and after were thereby disqualified

Cielo & ors v CBDA (the Brazilian National Swimming Federation)

In Cielo & ors v CBDA (the Brazilian National Swimming Federation), the Court of Arbitration for Sport was again considering the penalty to be applied in relation to athletes who registered positive anti-doping test results, where the cause was found to be an inadvertent ingesting of prohibited substances, from taking of contaminated supplements.

4 Brazilian swimmers had positive test results for Furosemide (a diuretic, on the prohibited list as a masking agent) at a Brazilian national swimming event (Maria Lenk) in May 2011. Each athlete accepted the A Test and waived the B sample analysis. The athletes had taken caffeine tablets, with the benefit of medical advice (caffeine is not a prohibited substance under the FINA Rules.) There was evidence from Mr Cielo (undisputed) that about 90% of elite male freestyle swimmers take caffeine at swimming events. The athletes, and team doctor, had taken extreme care in relation to the pharmacy, and taking of the caffeine tablets, without problem, for some months. At the Maria Lenk, in May 2011, however, all 4 had positive results. Ultimately, it was determined that the cause of the adverse test results was the contamination of the caffeine capsules by Furosemide. (There was evidence of an unusual, one-off, error, at the pharmacy.)

FINA agreed that the 2 pre-conditions for reduced penalty had been met:

  1. that the athletes had established how the Specified Substance entered their bodies;
  2. that the athletes had shown that the Specified Substance was not intended to enhance performance or mask the use of a performance enhancing substance.

The Tribunal concluded:

  1. The taking of caffeine was to be treated as a “supplement” rather than a “medication”.
  2. The degree of “fault” in this case was at the very lowest end of the spectrum contemplated by the FINA Rules/WADC. (It was difficult, the Tribunal concluded: “to see what, if anything,  else the athletes could have done reasonably or practically to avoid the positive test results”.)
  3. Under the FINA Rules/WADC, however, the defence of No Fault or Negligence was not available (see the detailed discussion of the relevant rules applying to this case).
  4. Accordingly, the Tribunal concluded the appropriate sanction to be a Warning.
  5. (In relation to 1 athlete, a previous sanction had been imposed. Rejecting an argument that a principle of proportionality ought to apply, the Tribunal imposed the minimum sanction of 1 year, and then, having regard to his waiving the B sample, exercised its discretion to start the 1 year from the date of his sample collection.)

In Asian Pacific Building Corporation Pty Ltd v Aircon Duct Fabrication Pty Ltd & Ors [2010] VSC 300 (1 July 2010)

In Asian Pacific Building Corporation Pty Ltd v Aircon Duct Fabrication Pty Ltd & Ors [2010] VSC 300 (1 July 2010), Justice Vickery (the Victorian Supreme Court Judge in Charge of the Technology and Construction List) was considering whether an adjudicator, in the absence of a response by the respondent, had adopted the claimant’s submissions as to value without making his own assessment, had erred. His Honour said:

12 I respectfully adopt the view tentatively expressed by Hodgson JA in relation to the New South Wales Act [1] in Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd, [2] as re-stated by Brereton J in Pacific General Securities Ltd & Anor v Soliman & Sons Pty Ltd & Ors: [3]

[T]he adjudicator’s duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim, and while the adjudicator may very readily find in favour of the claimant on the merits of the claim in the absence of a payment schedule or adjudication response, or if no relevant material is advanced by the respondent, the absence of such material does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining whether the construction work identified in the payment claim has been carried out, and what is its value.

13 The fundamental determination to be made by an adjudicator as to whether the construction work identified in the payment claim has been carried out, and what is its value, is derived from the provisions of the Act.

His Honour concluded that such a failure by the adjudicator would invalidate the determination:

21 A failure to conduct an adjudication of a payment claim, which requires as a minimum a determination as to whether the construction work the subject of the claim has been performed and its value (or whether the goods and services have been supplied and their value) is a failure to comply with a basic and essential requirement of the Act.

22 The absence of relevant material from the respondent, or the presentation of material in an incoherent fashion, does not entitle an adjudicator to simply award the amount of the claim without addressing its merits, namely, as a minimum, determining whether the construction work identified in the payment claim has been carried out, and what is its value.

23 Accordingly, there will not be a valid adjudication of a payment claim, within the meaning of the Act, if all the adjudicator does is reject the respondent’s contentions. As Brereton J said in Pacific General:[4]

… By allowing a claim in full just because a respondent’s submissions are rejected, without determining whether the construction work the subject of the has been performed and without valuing it – would bespeak of a misconception of what is required of an adjudicator. In traditional terms, it would be jurisdictional error resulting in invalidity.

24 In Plaza West Pty Ltd v Simon’s Earthworks (NSW) Pty Ltd [5] Hodgson JA, in explaining Firedam Civil Engineering Pty Ltd v KJP Constructions Pty Ltd [6] said:

Further, it appears that in Firedam the adjudicator, having decided the respondent’s submissions should be disregarded, simply adopted the amount specified by the claimant in the payment claim. If so, that would be a failure to perform the task required of determining the amount of the progress payment (if any) to be paid, having regard to the consideration[s] in s 22(2).[7]

25 Thus, putting the matter in terms of jurisdiction, the authority to validly adjudicate a payment claim is an authority which only may be exercised if the basic and essential functions required by the Act are undertaken by an adjudicator, namely and as a minimum, determining whether the construction work identified in the payment claim has been carried out, and what is its value (or determining whether the goods and services identified in the payment claim have been supplied and their value).

(emphasis added)

Landholder Acquisition Changes to Duties Act 2000 (Vic)

The Duties Amendment (Landholder) Act 2012 (Vic) has introduced new landholder duty provisions into the Duties Act 2000, in relation to acquisitions of interests in certain land holding entities, replacing the land rich duty provisions which have existed in Victoria since 1987. From 1 July 2012, acquisitions of interests in “landholders” (a company or unit trust scheme that has land holdings in Victoria with an unencumbered value of $1 million or more) are chargeable with duty at the rates applicable to land transfers.

Proposal to Reform Planning Scheme Zones in Victoria

The Victorian Minister for Planning has released a Discussion Paper in relation to proposed reforms to planning scheme zones in Victoria. The proposal aims to delete 9 zones, create 5 new zones, and amend 12 zones, as follows:

 

Delete 9 existing zones Create 5 new zones Amend 12 existing zones
Residential   1 Zone
Residential 2 Zone
Residential 3 Zone
Business 1 Zone
Business 2 Zone
Business 3 Zone
Business 4 Zone
Business 5 Zone
Priority Development Zone
Residential   Growth Zone
General Residential Zone
Neighbourhood Residential Zone
Commercial 1 Zone
Commercial 2 Zone
Low Density   Residential Zone
Mixed Use Zone
Township Zone
Rural Living Zone
Green Wedge Zone
Green Wedge A Zone
Rural Conservation Zone
Farming Zone
Rural Activity Zone
Industrial 1 Zone
Industrial 2 Zone
Industrial 3 Zone

 

Details of the proposed reforms are at: http://www.dpcd.vic.gov.au/planning/theplanningsystem/improving-the-system/new-zones-for-victoria

 

Hong Kong Mediation Bill Bulletin

On 30 November 2011, the Hong Kong Government introduced the Mediation Bill into the Legislative Council. The introduction of this bill into the legislative Council is an indication of the Governments desire to encourage parties to adopt mediation as a favoured alternative dispute resolution avenue.

The Government aim’s to promote and encourage timely resolution of disputes as well as protecting parties’ communications confidentiality throughout the process.

The mediation bill outlines provisions that allows for communications during mediation to be disclosed in very limited circumstances. In all other instances the bill aims to adequately protect communications, in case the dispute fails to settle. It also clearly defines ‘mediation’ as term.

The practice direction on mediation (PD31) which was enacted on 1 January 2010 does not make mediation compulsory for parties to civil litigation; however a party’s willingness to participate in the process has been looked upon more favourably by the Hong Kong Courts.

Proportionate Liability Reforms

The Standing Committee of Attorneys-General is currently reviewing issues in relation to proportionate liability legislation, in particular, national consistency in legislation, “contracting out”, forum shopping, potential for lengthy and costly litigation, and clarity/effectiveness of certain provisions. The Committee has released consultation draft model proportionate liability provisions and a Regulation Impact Statement, available at : http://www.scag.gov.au/lawlink/SCAG/ll_scag.nsf/pages/scag_consultdraftmodel

Civil Dispute Resolution Act 2010 (Cth)

The Civil Dispute Resolution Act 2010 (Cth) was passed on 24 March 2011 by the Commonwealth parliament, likely to come into operation in the next month. The Act relates to certain proceedings in the Federal courts. The Act:

  • requires civil litigants to take “genuine steps” to resolve their disputes prior to filing proceedings in court unless those litigants have sufficient reasons for not doing so or the relevant proceedings are “excluded proceedings”
  • requires both parties to file a “genuine steps statement”
  • requires lawyers acting for persons to whom the Act applies to advise their client of the genuine steps statement requirement, and assist them to comply with that requirement
  • gives the court power to have regard to a party’s compliance with the genuine steps requirements when exercising its general powers and functions and in exercising its discretion to award costs

Part 4 of the Act excludes certain proceedings from the genuine steps requirement, including proceedings relating to:

  • civil penalty provisions
  • criminal offences
  • decisions of certain Tribunals
  • appeals
  • Subpoenas, warrants

 

 

 

Civil Procedure Act 2010 (Vic)

 

The Civil Procedure Act 2010 (Vic) came into operation on 1 January 2011. The “overarching purpose” of the Act is the” just, efficient, timely and cost-effective resolution of disputes”. The Act provides that courts are to give effect to this purpose in interpreting and exercising their powers and functions in the conduct of civil proceedings. The Act creates “overarching obligations”, applying to all parties, lawyers, insurers, funders and expert witnesses, including:

 

  •          acting honestly at all times (section 17);
  •          only pursuing claims and defences that have a proper basis, on the factual and legal material available at the time (section 18);
  •          only taking steps reasonably believed to be necessary to resolve the dispute (section 19);
  •          co-operating with other parties (section 20);
  •          not misleading or deceiving (section 21);
  •          using reasonable endeavours to resolve a dispute by agreement (section 22) or narrowing issues (section 23);
  •         using reasonable endeavours to ensure costs are reasonable and proportionate to the complexity or importance of the issues, and the amount in dispute (section 24).

 

 

The Commercial Arbitration Act 2010 (NSW)

The Commercial Arbitration Act 2010 (NSW) came into effect on 1 October 2010. On 7 May 2010, the Standing Committee of Attorney-Generals of the States and Territories agreed to adopt the Model Commercial Arbitration Bill. NSW is the first State to pass that Bill. The Act aims to bring the domestic arbitration legislation in Australia more in line with international arbitration, in particular the UNCITRAL Model Law on International Commercial Arbitration (Model Law). The new Act, which came into force in NSW on 1 October 2010, removes the court’s discretion on whether to stay legal proceedings where there is a valid arbitration agreement, widens the powers available to arbitrators (eg arbitrators can order discovery, security for costs, issue a subpoena, …), imposes confidentiality, further limits appeal rights, …. The Act is expected to be introduced in all Australian states and territories.

Alabakis v Alabakis [2012] VSC 437

In Alabakis v Alabakis [2012] VSC 437, the Supreme Court (Macaulay J) was considering a Testator’s Family Maintenance claim by a daughter of the deceased’s second marriage, where the deceased was survived by his second wife, her daughter, three children from his first marriage, and two stepchildren. The plaintiff was the only child to receive nothing under the Will (though she had earlier received a substantial land gift).

Macaulay J adopted the principles set out by Hargrave J in McCann v Ward & Burgess [2012] VSC 63:

  1. Section 91 of the Administration and Probate Act 1958 (Vic)gives the court power to make an order for provision out of the estate where:
    1. the deceased had responsibility to make provision for the proper maintenance and support of the applicant; and
    2. the court is of the opinion that the will of the deceased does not make adequate provision for the proper maintenance and support of the applicant for the order.
  2. Whether the will makes adequate provision for the proper maintenance and support of the applicant is to be assessed by “‘by a consideration of the facts existing and the eventualities which might reasonably have been foreseen at the date of the testator’s death”.
  3. The court is to consider the matters set out in Section 91(4) (e)-(p) in considering the jurisdictional questions and the amount of any order.
  4. In determining the questions, the court must consider: “what provision a wise and just testator would have thought it was his or her moral duty to make for the applicant”.
  5. The testator is imputed to have been, at the time of death: “fully aware of all the relevant circumstances, including reasonably foreseeable eventualities existing at the date of death, whether or not actually known to the testator”.
  6. Should the two jurisdictional requirements be made, the court is to assess what order for further provision should be made, by reference to the state of facts as at the hearing date.
  7. The court should not transgress unnecessarily upon the testator’s freedom of testation but should proceed: “rather carefully and conservatively according to current community perceptions of the provision which would be made by a wise and just” testator.
  8. However, where an order for further provision will not unduly prejudice other beneficiaries for whom the deceased had a responsibility to make provision, the court adopts a reasonably generous approach, such that any further provision: “should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and strength may gradually fail”. Further: “where the size of the estate permits and there will be no serious prejudice to the rights of other beneficiaries, the court may order further provision beyond the immediate and likely future needs of the applicant”, providing a “nest egg” to guard against unforseen events.
  9. No inflexible approach can be taken in assessing the two jurisdictional questions or the amount of any order to be made for further provision, as each case will depend on its own facts.

In this case, His Honour concluded that the deceased did have a responsibility to make provision for the plaintiff. Ultimately, taking into account the financial resources and needs of the plaintiff, the second wife, and the other children, and the size and nature of the estate, His Honour concluded that the plaintiff was entitled to a further provision of $475,000.

Australian Football League & ESP Merchandise Pty Ltd v Hard On Sport Pty Ltd & David Sumiga

In Australian Football League & ESP Merchandise Pty Ltd v Hard On Sport Pty Ltd & David Sumiga [2012] VSC 475, the Supreme Court (Vickery J) was considering an application to set aside an Anton Piller order,  relating to the open sale by the defendants of AFL football merchandise without AFL authority.

The AFL and its licensee (ESP) claimed that the defendants in selling AFL merchandise without AFL authority:

  1. infringed the AFL’s copyright in AFL photographs;
  2. infringed the AFL’s trade mark rights in unauthorised AFL memorabilia, including guernseys, shorts, boots, names (including “AFL”, AFL club names, club nicknames, logos, images of the AFL premiership cup, the Brownlow medal, and the Norm Smith medal), posters, cards, photographs, etc;
  3. knowingly (or in a recklessly indifferent manner) induced AFL players to sign memorabilia without the AFL’s authorisation such that those players were breaching their contractual obligations to the AFL (and, in some instances, to ESP);
  4. misrepresented that unauthorised AFL memorabilia was, in fact, authorised by the AFL;
  5. were passing off unauthorised AFL memorabilia as authorised by the AFL.

No defence was made in relation to the copyright claim. (Section 10 of the Copyright Act 1968 (Cth) includes a photograph as “artistic work” whether the work is of artistic quality or not.

No defence was made in relation to the trade marks claim under Section 20 and 120 of the Trade Marks Act 1995 (Cth). The defendant, however, referred to Arsenal Football Club PLC v Reed . In that case, an unauthorised vendor sold Arsenal memorabilia outside the Arsenal ground. At trial, the court had found the vendor’s use of trade marked items as not being an indication of the origin of the goods sold, but rather, being a sign depicting club loyalty or affiliation. That decision, His Honour noted, was, however, overturned on appeal. Vickery J noted that the point remained arguable in Australia, but any defendant would face the persuasive precedent of the UK Court of Appeal.

The plaintiffs claimed that the defendants, breach of Section 18 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) misrepresented that unauthorised AFL memorabilia was, in fact, authorised by the AFL. His Honour concluded, on the evidence as it stood when the Anton Piller order was made, was “sufficiently compelling” to make the order. Similarly, His Honour concluded that case in relation to the defendants passing off unauthorised AFL memorabilia as authorised by the AFL, the evidence as it stood when the Anton Piller order was made was, also, sufficiently strong to make the order.

In relation to the inducing breach of contract claim, His Honour concluded that, in this instance, the evidence was not sufficiently strong (on this basis) to justify the issue of a search order, noting:

  1. the gravamen of the tort of inducing breach of contract is intention;
  2. in relation to the knowledge of the relevant contract, the question will always be whether the alleged wrongdoer had sufficient knowledge of its terms to appreciate that his conduct, if acted upon, would result in an interference with the contractual rights of the other party to the contract.

His Honour further noted that there was some argument in relation to the interpretation of the player’s obligations under the CBA in this respect.

Vickery J, in deciding whether AFL had made sufficient disclosure in obtaining the original order, reviewed the legal principles underlying the grant of Anton Piller order, noting the court’s emphasis, in Anton Piller KG v Manufacturing Processes Ltd, to the effect that such an order was at the “extremity” of the court’s powers, and that “such orders would rarely be made, and only where there was no alternative way of ensuring that justice was done to the applicant”. His Honour observed that it was “in recognition of the extraordinary nature of this remedy” that certain protections were built into the court’s Practice Note, the standard of proof, and the common law supporting the order.

His Honour reviewed the authorities in relation to the obligation on the plaintiff seeking an ex parte remedy to disclose all matters relevant to the exercise of the court’s discretion. In this instance, the defendants said that the plaintiff had not given full, frank disclosure in relation to:

  1. the plaintiff’s examination of the defendant’s Facebook page;
  2. the open, public, nature of the defendants’ business;
  3. signed items (approx 120-130) by the AFL Chairman (Vickery J concluded that would be potentially relevant to the inducing breach of contract claim);
  4. the AFL memorabilia market being widespread (approx 30-50 participants, over 20,000 items for sale on eBay);
  5. the plaintiff’s affidavit evidence being based on information from a commercial competitor of the defendants;
  6. arguments that (relating to inducing breach of contract claim) that there is no explicit prohibition on players signing memorabilia, and/or past players not being party to the current Collective Bargaining Agreement (Vickery J concluded that would be potentially relevant to the inducing breach of contract claim).

Ultimately, however, His Honour did not conclude that the omissions should lead to the Anton Piller order being discharged altogether, but rather, it should be discharged only in relation to those items based on the inducing breach of contract claim alone.

His Honour considered the following in relation to whether to extend the injunction and the balance of convenience:

  1. There was a strong prima facie case in relation to the causes of action pressed by the plaintiffs.
  2. Release of signed grand final jumpers into the market would have a devastating effect on the likely revenues to be gained from the AFL’s Premier memorabilia Program. Official AFL Memorabilia would be affected indirectly, the presence of unauthorised AFL memorabilia in the market would harm sales and revenue which ought to flow to the plaintiffs, and AFL clubs. AFL supporters buying memorabilia, knowing that funds will go back to the game and their AFL club are misled when they purchase unofficial memorabilia. Consumers do not easily recognise unauthorised AFL memorabilia. The unauthorised AFL memorabilia products would turn up on eBay, etc, sales of these products would likely be undocumented, evidence against the defendants would be lost. Accordingly, if an injunction was not granted, the plaintiffs would be at risk of serious damage that could not be compensated by damages.
  3. On the evidence, the defendants would be likely to continue to infringe the property rights of the plaintiffs if not restrained.
  4. Against this, the defendants would lose profits from supplying merchandise in the lead up to Christmas.  Further, the defendants would be unable to compete with competitors.
  5. The trial is set down for speedy hearing, commencing on 3 December 2012. In combination with the plaintiffs’ undertaking as to damages, the defendants would be protected.

On this basis, His Honour extended the injunction restraining the defendants from selling AFL memorabilia until further order.

Thiess Pty Ltd & Anor v Arup Pty Ltd & Ors [2012] QSC 185

In Thiess Pty Ltd & Anor v Arup Pty Ltd & Ors [2012] QSC 185, (10 July 2012), the Queensland Supreme Court (Applegarth J) was considering the terms of a Collaborative Consultancy Agreement (CCA) in relation to the Airport Link, Northern Busway (Windsor to Kedron) and East-West Arterial Gateway Projects, between Thiess John Holland (TJH) and Parsons Brinkerhoff Australia (PBA). TJH had engaged PBA as consultants for the design of the project. His Honour was asked to resolve whether, under the CCA, certain values of multipliers specified in the CCA were values agreed between the parties or were subject to audit by the Collaborative Agreement Auditor. His Honour concluded in favour of PBA, that the values were agreed between the parties and not subject to audit by the Collaborative Agreement Auditor.

His Honour considered the interpretation principles, reasoning as follows:

The proper interpretation of the contract is not determined in this case simply by competing contentions about which interpretation is the “more commercially sensible” construction. It is determined by the words of the agreement that were chosen by the parties, and the structure of Schedule 7.

His Honour reasoned in relation to the request for rectification:

These and other authorities appear to support the following propositions:

  1. The actual intention of each party is relevant in deciding whether they had the alleged common intention.
  2. The actual intention must have been disclosed.
  3. In determining whether there was the alleged common intention and the terms of the “prior consensus”, a Court is not confined to communications between the parties and their conduct from which the relevant intention may be inferred. Evidence of their subjective intention, including statements about their understanding of what was agreed, is admissible, and in some circumstances may be decisive.
  4. Where, however, the evidence given by a party about his or her subjective intention is inconsistent with the terms of their correspondence and/or conduct it may carry little weight.
  5. The existence or otherwise of a “common intention” (or prior consensus or prior concluded agreement) is determined on the basis of an objective assessment of the parties’ communications and conduct. Whilst evidence from a party about his or her subjective intention is admissible as to whether the alleged consensus was reached, the question of whether such a consensus existed and continued involves an objective assessment. The authorities suggest that the test is what an objective observer would have thought the intentions of the parties to be. In this regard, it is not the inward thoughts of the parties which matter but whether the alleged intention has been objectively manifested. To adopt the words of Street J, the intention on each side must be manifested “by some act or conduct from which one can see that the contractual intention of each party met and satisfied that of the other. On such facts there can be seen to exist objectively a consensual relationship between the parties.”

TJH had argued that there was a reasonable expectation that the multiplier was a genuine or reasonable estimate and that PBA had been acting in good faith in originally proposing them, and further, that it had a reasonable expectation of an auditor’s examination, and that if there was to be no such examination PBA would have disclosed this to TJH. His Honour summarised the cases:

[215] Silence or non-disclosure of information can be misleading or deceptive in various circumstances….. Whether silence constitutes misleading or deceptive conduct depends on all the relevant circumstances, and it is dangerous to essay any principle by which they might be exhaustively defined. However, “unless the circumstances are such as to give rise to the reasonable expectation that if some relevant facts exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist” …… Asking whether a reasonable expectation of disclosure exists is an aid to characterising non-disclosure as misleading or deceptive and has been described as a practical approach to the application of the prohibition in s 52.

[216] Sometimes a reasonable expectation of disclosure will not exist because parties to a commercial negotiation are not expected to disclose information which is confidential, and the starting point for their negotiations is the caveat emptor doctrine. On other occasions, a reasonable expectation of disclosure will exist because of the nature of the relationship, or because positive conduct or statements in the course of negotiations imply that a certain fact or matter exists or does not exist. A failure to qualify a statement made earlier in negotiations may be misleading or deceptive in the circumstances. Where, however, this is not the case, the reasonable expectation of disclosure of a certain fact must be found elsewhere. In this case, TJH seeks to source it by reference to the negotiation and entry into the Pre-Bid Agreement and the parties’ subsequent negotiations in relation to the commercial framework and the terms of Schedule 7, as pleaded in paragraph 85 of the second further amended defence and counterclaim. Whether conduct is misleading or deceptive or likely to mislead or deceive must be assessed on the basis of these facts and all the relevant circumstances.

Ultimately, His Honour concluded that there was no misleading and deceptive conduct in this instance, concluding that PBA should have the declaratory relief it sought.

 

 

 

Kutrovsky v. International Tennis Federation

In Kutrovsky v. International Tennis Federation, the Court of Arbitration for Sport was reviewing a decision by the ITF in relation to a 25 year old tennis player who had ingested methylhexaneamine (MHA) in an over the counter supplement called “Jack3d”. The ITF had decided that the player was to be suspended for 2 years.

The panel first dismissed an argument by the ITF that the Decision being appealed, was entitled to a fair measure of respect since, inter alia, it is cogent and well-reasoned, so that the Panel should not depart from it unless it identifies a compelling reason to do so. The panel confirmed that under Article R57 of the e Code of Sports-related Arbitration, the panel has “full power to review the facts and the

law on this appeal”, quoting Kendrick v ITF:

 

10.2  Rule 57 of the Code […] is phrased in the widest terms. The power is

firstly a “full one” and, secondly “to review the facts and the law”; i.e. both.

It has been described in awards too numerous to name as a de novo power.

…..

10.6  Where, as is the case with Article R57 of the Code, rules or legislation

confer on an appellate body full power to review the facts and the law, no

deference to the tribunal below is required beyond  the customary caution

appropriate where the tribunal had a particular advantage, such as technical

expertise or the opportunity to assess the credibility of witnesses.” (emphasis

added)

The panel then, in a detailed, reasoned, decision, reviewed decisions from earlier (and inconsistent) CAS panels had differed in the interpretation of WADA Article 10.4 (Elimination or Reduction of the Period of Ineligibility for Specified Substances under Specific Circumstances):

10.4 Elimination or Reduction of the Period of Ineligibility for Specified

Substances under Specific Circumstances

 Where an Athlete or other Person can establish how  a Specified Substance

entered his or her body or came into his or her Possession and that such

Specified Substance was not intended to enhance the Athlete’s sport

performance or mask the Use of a performance-enhancing substance, the

period of Ineligibility found in Article 10.2 shall be replaced with the

following:

First violation: At a minimum, a reprimand and no period of Ineligibility

from future Events, and at a maximum, two (2) years of Ineligibility. To

justify any elimination or reduction, the Athlete or other Person must produce

corroborating evidence in addition to his or her word which establishes to the

comfortable satisfaction of the hearing panel the absence of an intent to

enhance sport performance or mask the Use of a performance-enhancing

substance. The Athlete’s or other Person’s degree of fault shall be the

criterion considered in assessing any reduction of the period of Ineligibility.

Article 10.4 imposes 2 conditions on any reduction in penalty:

  1. the athlete must establish how the specified substance entered his/her body;
  2. the athlete must establish that such specified substance was not intended to enhance his/her sport performance.

In this case, the athlete argued that he did not know that he did not know that Jack3d contained MHA, did not know what MHA was, so he could not have taken MHA with intent to enhance his sporting performance. (Jack3d was labelled as containing “1,3-Dimethylamylamine HCI”, he did not know that “1,3-Dimethylamylamine HCI” was a synonym of MHA).

The panel reviewed a number of (arguably inconsistent Tribunal/CAS decisions) re supplements:

Foggo v National Rugby League

(Professional rugby league player, purchased/used Jack3d, adverse analytical finding for MHA. Club encouraged preworkout supplements.  Very limited formal anti-doping education. Athlete assured by store that product was clean, consulted conditioning coach, research on ASADA website. CASA sanction 6 months.

Duckworth v. U.K. Anti-Doping

Young rugby player ingested Jack3d. Checked every ingredient on label against Global Drug Reference website. Used product openly, confirmed with supplement salesman that the product was legal. Tested positive for MHA. Tribunal sanction 6 months.

Jasdeep Toor v. Canadian Anti-Doping Program

27-year old soccer player, no team doctor or trainer, no formal doping education, purchased Jack3d on recommendation of store (GNC) salesman.  Did not check labelled ingredients or speak with trainer or coach about product. Canadian tribunal noted: “the protein shake powder was sold by a reputable national vitamin supplement store over the counter.  The fact the product was marketed and sold over the counter while containing a banned substance cannot be ignored when the athlete’s degree of fault is assessed in this case”.  Tribunal sanction 2 months.

International Basket Federation v. Weeden,

Veteran basketball player purchased Jack3d at a supplement store while visiting the U.S.A. Used periodically during sport season. No antidoping education, no club specialist advice re supplement use. Little/no research about supplement. Tribunal sanction 6 months.

RFU v. Steencamp

Young athlete purchased “USN Anabolic Nitro” to assist with fatigue. Trainer pitched product as  “like a Red Bull but stronger”.  Athlete not in “anti-doping regime” before, limited education. Informed salesman that he was professional athlete subject to drug testing, and was aware that he needed to check out the ingredients. Tribunal sanction 3 months.

U.K. Anti-Doping v Dooler

Semi-professional rugby league player tested positive for MHA. Product called “Xtreme Nox Pump” taken to assist with aching muscles, fatigue and recovery. Athlete made internet searches against WADA List of Prohibited Substances, which did not readily identify that the product might contain MHA. Tribunal sanction 4 months.

Kendrick v. ITF

Veteran tennis player ingested unlabeled energy supplement to assist with jetlag. Had participated in various  anti-doping education programs. Because of his experience on tour, his anti-doping education, his “serious lack of due diligence” when taking an unlabeled drug, CAS panel sanctioned athlete for 8 months.

As to what an athlete must show to prove that he/she did not intend to enhance sport performance, the panel noted 3 possibilities as to an athlete’s state of knowledge:

  1. no knowledge that the product contained a specified substance (contamination cases);
  2. no knowledge that a substance contained in the product was a specified substance (as in this instance);
  3. knew that the product contained a substance and that it was a specified substance.

The majority ultimately concluded that the correct approach (this may be the final position following the revision of the WADA Code in January 2015) was the approach adopted in Foggo v National Rugby League. In a reasoned discussion as to the interpretation of Article 10.4, the majority of the panel concluded that the mere fact that the athlete did not know the product contained a specified substance did not itself establish the relevant absence of intent. The panel quoted Foggo:

WADC 10.4 would not be satisfied if an athlete believes that the ingestion of the substance will enhance his or her performance although the athlete does not know that the substance contains a banned ingredient. The athlete must demonstrate that the substance “was not intended to enhance” the athlete’s performance. The mere fact that the athlete did not know that the substance contained a prohibited ingredient does not establish absence of intent.

Ultimately, the panel concluded, in this instance that Article 10.4 was not applicable.

The panel then considered Article 10.5.2 (No Significant Fault or Negligence ). Article 10.5.2 provides:

10.5.2 No Significant Fault or Negligence

If an Athlete or other Person establishes in an individual case that he or she bears No Significant Fault or Negligence, then the  otherwise applicable period of Ineligibility may be reduced, but the reduced period of Ineligibility may not be less than one-half of the period of Ineligibility otherwise applicable …

The panel noted that, under this provision, an athlete was required to establish that his/her fault or negligence, viewed in the totality of the circumstances and having regard to the criterion for “No Fault or Negligence”, is not significant having regard to the doping offence. The panel reviewed the circumstances in this case: “….. against the fundamental duty that he or she owes under the Programme and the WADC to do everything in his or her power to avoid ingesting any Prohibited Substance”.

The factors taken into account by the panel:

Favourable

  1. actually did some research, Jack3d, WADA Prohibited List, “the most rational first step”;
  2. he would have never found the Specified Substance on the WADA Prohibited List, unfortunately not on the list as labelled;
  3. no anti-doping education provided to him by his federation, …;
  4. limited experience with anti-doping literature and processes;

Non-Favourable

  1. naïve to believe store salesman;
  2. did not seek guidance from the ITF or WADA;
  3. his enquiries with respect to the contents of Jack3d were inadequate, internet, did not contact any of the relevant sport or anti-doping organisations, Google search on “Jack3d” would have alerted to drug-testing issues.

Based on these factors, the CAS panel decided that the appropriate sanction was 15 months.

CH2M Hill v State of NSW [2012] NSWSC 963

In CH2M Hill v State of NSW [2012] NSWSC 963, the NSW Supreme Court (McDougall J) was considering a design and construct contract between a joint venture (CHBM) and Sydney Water of an upgrade to a sewerage  treatment plant at West Camden (His Honour that the project was “inevitably and not inappropriately” referred to as “the WC project”). CHBM and Sydney water were disputing whether damage to earthen lagoons in the plant was due to poor design or poor construction.

 The substantive design defects argued were:

  1. failing to specify an anchor trench or other form of perimtere seal;
  2. failing to specify under-drainage;
  3.  failing to guard against risk of the geosyntheitic liner (GCL) not performing because of cation exchange.

 The substantive construction defects argued were:

  1. failing to install the GCL using an anchor trench …;
  2. putting spikes through the GCL allowing in moisture;
  3. failing to construct/maintain with adequate drainage;
  4. failing to compact the earthworks;
  5.  failing to protect the GCL from the elemants.

 CH2M argued that it was an express and/or implied term that the design would be “fit in all respects for its intended purpose”. The government department (DOC) who designed the project initially denied that term formed part of the design contract but ultimately accepted that the term was was at least an implied term.

 McDougall J (a very experienced judge in the Construction List) concluded in relation to design that:

  1.  CHBM did not comply with GCL manufacturer’s guidelines requiring an anchor trench, did not seek DOC’s approval in relation to the anchor trench, and merely indicated (after the event) that the anchor spikes used would have the effect of preventing the GCL from moving while concrete was being poured;
  2. the use of anchor spikes made the GCL susceptible to moisture penetration;
  3. the substantive damage to the GCL was caused by leaving the GCL exposed to the elements for a considerable time after installation.

 McDougall J concluded in relation to the construction:

  1. CHBM failed to provide adequate site drainage (consistent with general construction practice);
  2. adequate protection did not end with the provision of the V-drains;
  3. adequate protection also required measures to prevent standing water from penetrating into the earthen embankments and behind the GCL, and protection of the GCL from the effects of  rainfall.

 McDougall J concluded that it was not incumbent on DOC to design under-drainage. Under-drainage would not have been required if the construction was adequate, and DOC did not have to design against every potential risk. The risk of accumulation of groundwater was remote to the point where the decision not to include under-drainage was justified. For those reasons, DOC did not breach its design obligations by designing without under-drainage. Further, DOC was entitled to proceed on the basis that its design, if followed, would have included an effective perimeter seal.

 McDougall J outlined some matters of principle in relation to the entitlement to corporate overheads:

 …. In Banabelle Electrical v State of New South Wales [2005] NSWSC 714, I referred to what Giles J said in Thiess Watkins White, and to what his Honour had said (to similar effect) in Bulk Materials (Coal Handling) Pty Ltd v Compressed Air and Packaging Systems (NSW) Pty Ltd (1997) 14 BCL 109 at 133 – 135. At [142], I drew from those cases the proposition that:

 “it is in principle wrong to make an allowance for recovery of an offsite (or head office, or fixed) overhead, or loss of profit, unless there is a basis for concluding that they could have been recovered or earned through the performance of other profitable work… where the effect of… delay is to prevent the contractor from undertaking other profitable work”.

 408 I remain of that view. Further, I remain of the view that the entitlement to corporate overheads is not just a question of principle, but is entirely fact-dependent. It must be shown that the breach of contract for which damages are claimed resulted in, among other things, the loss of opportunity to undertake profitable work, from which further work corporate overheads could have been defrayed.

 His Honour ultimately concluded that DOC did not breach its design obligations, the failures of the lagoons were caused by various deficiencies in CHBM’s construction work, including the unjustified omission of an anchor trench to secure the GCL, poor and uneven compaction of the embankments, and prolonged exposure of the GCL to the elements before the concrete panels were cast over it .

 

Skilled Group Ltd v CSR Viridian Pty Ltd & Anor [2012] VSC 290

In Skilled Group Ltd v CSR Viridian Pty Ltd & Anor [2012] VSC 290 (4 July 2012), Vickery J was considering a claim by Skilled Group for  monies due by way of a restitutionary quantum meruit for engineering work it performed , under a subcontract that was never executed between Skilled and Pilkington, at a glass manufacturing plant in Dandenong owned by CSR. Skilled said that no concluded subcontract had been made between Skilled and Pilkington because, the parties had never agreed on two essential terms of the proposed subcontracts, namely the dates for practical completion and the proposed milestone dates for the purposes of calculation of liquidated damages.

His Honour noted previous cases where, though no contract had been executed, by the parties proceeding to perform  the work, a contract had been formed. In relation to the formation of a contract, His Honour said:

94 In any determination as to whether a binding contract exists, it is the objective intent of the parties, as revealed in the factual context, that is the paramount consideration. The fact of agreement and its content is to be determined by the communications between the parties considered objectively. It is also legitimate to consider the factual context in which the communications took place. Regard may also be had to communications between the parties subsequent to the date of the alleged contract, at least to the extent to which those communications may inform the meaning of the language used by the parties in earlier exchanges between them which evidenced the fact of agreement and its content and defined the commercial context.

95 The subjective intention of the parties, as it may be expressed, for example in internal memoranda, or statements made by individuals as to as to subjective intention in the course of giving evidence, is generally inadmissible. However, in some circumstances such expressions of intention may amount to admissions and be admissible on that basis. However, care needs to be exercised in determining the content of any such admission.

His Honour considered the so-called “fourth class” of cases discussed in Masters v Cameron, where parties are content to be bound immediately and exclusively by the terms which they had agreed upon while at the same time expecting to make a further contract in substitution for the first contract, containing, additional negotiated terms, referring to Lord Loreburn, in Love & Stewart v S Instone & Co:

 

It was quite lawful to make a bargain containing certain terms which one was content with, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with he full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, none the less that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain.

 

 

His Honour concluded:

 

In my opinion, the parties reached agreement in this case in conformity with the fourth limb of Masters v Cameron as described by the High Court in Sinclair Scott. Their conduct clearly manifested an intention to elevate their commercial relationship beyond the clutches of the third class. …. By early May 2008 the parties reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms. At the same time the parties proposed to make a further contract in substitution for the first contract, containing negotiated additional terms relating to dates for practical completion of the three Sub-contracts and agreed milestone dates, upon which it was intended that the Sub-contracts would be formally executed……. 117 The factual analysis I have described, involving as it does the application of the fourth limb of Masters v Cameron, also goes to explain the negotiations between the parties which continued from early May 2008 as to dates for practical completion and milestone dates. What the parties were not about during this period was negotiating towards a set of original binding Sub-contracts, for by early May 2008 they were already bound to a concluded, but limited suite of bargains. What they were about was the negotiation of a new set of Sub-contracts in substitution for the already binding ones. The fact that the parties continued to negotiate for an alternative regime of dates, and this continued beyond early May 2008, had no bearing on the concluded bargains which were already in place. ……

 

In the light of the conduct described, I find it irresistible to conclude otherwise than implied contracts on the terms of the three Sub-contracts are to be inferred from the evidence and that these implied contracts operated to govern the Skilled works on the Project from the outset of their engagement.

 

His Honour concluded, therefore, that concluded subcontracts had been formed. Though no longer required, His Honour further concluded that, were it not possible to imply the existence of binding agreements, Skilled would have been estopped from denying the existence of the agreements as reflected in the three subcontracts.

 

 

Ipex ITG Pty Ltd (In liquidation) & Takapana Investments Pty Ltd v State of Victoria [2012] VSCA 201

In Ipex ITG Pty Ltd (In liquidation) & Takapana Investments Pty Ltd v State of Victoria [2012] VSCA 201, the Victorian Court of Appeal was considering a claim by an unsuccessful tenderer for a contract for the provision of ‘system integration services’ for the Parliament of Victoria. An evaluation plan had been prepared  but not distributed to tenderers. Ipex’s tender had been assessed as not demonstrating a good understanding of what Parliament was seeking under the project, and not representing value for money albeit that its tender price was low (Ipex’s tender price was around $2.8 million compared to the winner’s price around $7.8 million), and removed from further consideration.

 The trial judge held, and on appeal it was common ground, that there was a binding contract (‘the tender process agreement’) between Ipex and the respondent the express terms of which were contained in the Request for Tender (RFT). Ipex’s primary claim was for damages for breach of that contract.

 The Court of Appeal concluded:

  1. The method of evaluation identified in the RFT was, in fact, followed by the government.
  2. The requirement that price be kept out of the process until the “final decision point” was followed in that the price comparisons were left until the already assembled qualitative assessment and price comparisons were available to the evaluation team. (Even if this was wrong, this should be read in the context of the government not being bound to accept any tender.)
  3.  The evaluation, albeit involving subjective business judgments, had been objectively evaluated. This was not to be a “purely arithmetic exercise”.
  4. The trial judge had correctly assessed the misleading and deceptive conduct case, being based on the dismissal of the breach of contract claims, that claim being based on the same claimed departures from the RFT case.

 

 

 

 

 

Forrest v Australian Securities and Investments Commission [2012] HCA 39 (2 October 2012)

In Forrest v Australian Securities and Investments Commission [2012] HCA 39 (2 October 2012), the High Court (French CJ, Gummow, Hayne, Kieffel JJ, and Heydon J in a separate judgment) was considering whether Fortescue Metals Group ltd (FMG) and/or its chairman and chief executive, Andrew (“Twiggy”) Forrest had breached the Corporations Act 2001 in announcements to the ASX that it had entered into a binding agreement with Chinese corporations to build, finance, and transfer, a railway in the Pilbara.

The agreement was expressed to be binding, but envisaged detailed, further, agreements still to be agreed between the parties.

ASIC argued that the agreement was not a binding agreement, accordingly:

  1. FMG and Forrest had mislead and deceived in relation to a financial product in breach of Section 1041H;
  2. FMG had breached the continuous disclosure requirements of Section 674’
  3. Forrest had not exercised his powers/duties as a director with the degree of care and diligence required by Section 180(1).

On the legal question as to whether the agreement was, in fact, binding, Heydon J said, at paragraphs 92-93:

…. ASIC’s case thus boils down to the question whether Fortescue was right to call the agreement a binding contract. It was certainly a binding contract to negotiate further contracts within the intent of the agreement which would result in the railway being built. …. Was the agreement a binding contract to build the railway? Fortescue advanced numerous arguments for the view that it was because the parties had agreed, or provided for agreement on, all essential terms. There is force in many of those arguments, but difficulty in some….

The High Court concluded that:

  1. FMG’s statements were not misleading or deceptive or likely to mislead or deceive.
  2. Accordingly, ASIC had failed to demonstrate that FMG had breached the continuous disclosure requirements of Section 674.
  3. Accordingly, It was not shown that Forrest had not exercised his powers/duties as a director with the degree of care and diligence required by Section 180(1).

In Asian Pacific Building Corporation Pty Ltd v Aircon Duct Fabrication Pty Ltd & Ors [2010] VSC 300 (1 July 2010)

In Asian Pacific Building Corporation Pty Ltd v Aircon Duct Fabrication Pty Ltd & Ors [2010] VSC 300 (1 July 2010), Justice Vickery (the Victorian Supreme Court Judge in Charge of the Technology and Construction List) was considering whether an adjudicator, in the absence of a response by the respondent, had adopted the claimant’s submissions as to value without making his own assessment, had erred. His Honour said:

12 I respectfully adopt the view tentatively expressed by Hodgson JA in relation to the New South Wales Act [1] in Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd, [2] as re-stated by Brereton J in Pacific General Securities Ltd & Anor v Soliman & Sons Pty Ltd & Ors: [3]

[T]he adjudicator’s duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim, and while the adjudicator may very readily find in favour of the claimant on the merits of the claim in the absence of a payment schedule or adjudication response, or if no relevant material is advanced by the respondent, the absence of such material does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining whether the construction work identified in the payment claim has been carried out, and what is its value.

13 The fundamental determination to be made by an adjudicator as to whether the construction work identified in the payment claim has been carried out, and what is its value, is derived from the provisions of the Act.

His Honour concluded that such a failure by the adjudicator would invalidate the determination:

21 A failure to conduct an adjudication of a payment claim, which requires as a minimum a determination as to whether the construction work the subject of the claim has been performed and its value (or whether the goods and services have been supplied and their value) is a failure to comply with a basic and essential requirement of the Act.

22 The absence of relevant material from the respondent, or the presentation of material in an incoherent fashion, does not entitle an adjudicator to simply award the amount of the claim without addressing its merits, namely, as a minimum, determining whether the construction work identified in the payment claim has been carried out, and what is its value.

23 Accordingly, there will not be a valid adjudication of a payment claim, within the meaning of the Act, if all the adjudicator does is reject the respondent’s contentions. As Brereton J said in Pacific General:[4]

… By allowing a claim in full just because a respondent’s submissions are rejected, without determining whether the construction work the subject of the has been performed and without valuing it – would bespeak of a misconception of what is required of an adjudicator. In traditional terms, it would be jurisdictional error resulting in invalidity.

24 In Plaza West Pty Ltd v Simon’s Earthworks (NSW) Pty Ltd [5] Hodgson JA, in explaining Firedam Civil Engineering Pty Ltd v KJP Constructions Pty Ltd [6] said:

Further, it appears that in Firedam the adjudicator, having decided the respondent’s submissions should be disregarded, simply adopted the amount specified by the claimant in the payment claim. If so, that would be a failure to perform the task required of determining the amount of the progress payment (if any) to be paid, having regard to the consideration[s] in s 22(2).[7]

25 Thus, putting the matter in terms of jurisdiction, the authority to validly adjudicate a payment claim is an authority which only may be exercised if the basic and essential functions required by the Act are undertaken by an adjudicator, namely and as a minimum, determining whether the construction work identified in the payment claim has been carried out, and what is its value (or determining whether the goods and services identified in the payment claim have been supplied and their value).

(emphasis added)

Brakoulias v Karunaharan (Ruling) [2012] VSC 272 (20 June 2012)

The case related to the construction of section 59 of the Wrongs Act, and whether a statutory defence for medical practitioners in common law negligence existed. Mr Justice Macaulay concluded that it did. Toula Brakoulias was a 50 year woman who was placed on Reductil by her doctor, Dr Karunaharan, for weight loss. Four months after being placed on the drug, Mrs Brakoulias had a cardiac arrest, was deprived of oxygen for 26 minutes, and suffered serious and long term injuries. Mrs Brakoulias said that Dr Karunaharm was negligent in prescribing her the medication. Liability was the only issue. The proper construction of section 59 was considered for the first time by the Supreme Court of Victoria. Counsel for both parties put forward a series of arguments regarding the parties’ legal burden depending on the different constructions of section 59. His honour concluded that there were three possible approaches to the section; the exclusive standard approach, the evidentiary burden approach, and the defence approach, which he chose.

Cielo & ors v CBDA (the Brazilian National Swimming Federation)

In Cielo & ors v CBDA (the Brazilian National Swimming Federation), the Court of Arbitration for Sport was again considering the penalty to be applied in relation to athletes who registered positive anti-doping test results, where the cause was found to be an inadvertent ingesting of prohibited substances, from taking of contaminated supplements.

4 Brazilian swimmers had positive test results for Furosemide (a diuretic, on the prohibited list as a masking agent) at a Brazilian national swimming event (Maria Lenk) in May 2011. Each athlete accepted the A Test and waived the B sample analysis. The athletes had taken caffeine tablets, with the benefit of medical advice (caffeine is not a prohibited substance under the FINA Rules.) There was evidence from Mr Cielo (undisputed) that about 90% of elite male freestyle swimmers take caffeine at swimming events. The athletes, and team doctor, had taken extreme care in relation to the pharmacy, and taking of the caffeine tablets, without problem, for some months. At the Maria Lenk, in May 2011, however, all 4 had positive results. Ultimately, it was determined that the cause of the adverse test results was the contamination of the caffeine capsules by Furosemide. (There was evidence of an unusual, one-off, error, at the pharmacy.)

FINA agreed that the 2 pre-conditions for reduced penalty had been met:

  1. that the athletes had established how the Specified Substance entered their bodies;
  2. that the athletes had shown that the Specified Substance was not intended to enhance performance or mask the use of a performance enhancing substance.

The Tribunal concluded:

  1. The taking of caffeine was to be treated as a “supplement” rather than a “medication”.
  2. The degree of “fault” in this case was at the very lowest end of the spectrum contemplated by the FINA Rules/WADC. (It was difficult, the Tribunal concluded: “to see what, if anything,  else the athletes could have done reasonably or practically to avoid the positive test results”.)
  3. Under the FINA Rules/WADC, however, the defence of No Fault or Negligence was not available (see the detailed discussion of the relevant rules applying to this case).
  4. Accordingly, the Tribunal concluded the appropriate sanction to be a Warning.
  5. (In relation to 1 athlete, a previous sanction had been imposed. Rejecting an argument that a principle of proportionality ought to apply, the Tribunal imposed the minimum sanction of 1 year, and then, having regard to his waiving the B sample, exercised its discretion to start the 1 year from the date of his sample collection.)

Altain Khuder LLC v IMC Mining Inc & IMC Mining Solutions Pty Ltd [2011] VSC 1

In Altain Khuder LLC v IMC Mining Inc & IMC Mining Solutions Pty Ltd [2011] VSC 1, the Victorian Court of Appeal (Croft J, His Honour is, himself, an experienced international arbitrator) considered the procedures and principles relating to resisting enforcement on the basis of the defences or grounds for resting enforcement under the International Arbitration Act 1974 (Cth) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ( the “New York Convention”) 1958.