Clements v Simto Pty Ltd
[2001] WASCA 183
•20 JUNE 2001
CLEMENTS -v- SIMTO PTY LTD [2001] WASCA 183
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASCA 183 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:1/2000 | 9 MAY 2001 | |
| Coram: | STEYTLER J TEMPLEMAN J WHEELER J | 20/06/01 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed Cross-appeal allowed | ||
| PDF Version |
| Parties: | PHILLIP CLEMENTS SIMTO PTY LTD (ACN 009 050 637) |
Catchwords: | Practice and procedure Appeal and cross-appeal Appeal against decision that arbitration proceedings be terminated for undue and prejudicial delay pursuant to s 46 of the Commercial Arbitration Act 1985 Cross-appeal against the approval for the sale of the cause of action by the liquidator pursuant to s 477(2B) of the Corporations Law Turns on own facts |
Legislation: | Nil |
Case References: | Australian Coal and Sale Employees Federation v Commonwealth of Australia (1956) 94 CLR 621 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Jakovljevic v L & B Doslov [2000] WASCA 131 R v Lawrence [1982] AC 510 Birkett v James [1978] AC 297 Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 16 ACLC 1642 GA Listing and Maintenance (1994) 14 ACSR 308 Hughes v Gales (1995) 14 WAR 434 Levi & Anor v Stirling Brass Founders Pty Ltd, unreported; FCt SCt of WA; Library No 970209; 9 May 1997 Lewandowski v Lovell (1994) 11 WAR 124 Re Addstone (1998) 16 ACLC 1320 Re Astor Pty Ltd (1997) 15 ACLC 1412 Re Feasty's Family Restaurants Pty Ltd (1996) 28 ACSR 357 Re Imobridge Pty Ltd (2000) 18 ACLC 29 Re Movitor Pty Ltd (1996) 14 ACLC 587 Re Spedley Holdings Ltd (1992) 10 ACLC 1742 Ultra Tune Australia Pty Ltd & Ors v UTSA Pty Ltd (in liq) & Ors (1996) 14 ACLC 1610 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : CLEMENTS -v- SIMTO PTY LTD [2001] WASCA 183 CORAM : STEYTLER J
- TEMPLEMAN J
WHEELER J
- Appellant
AND
SIMTO PTY LTD (ACN 009 050 637)
Respondent
Catchwords:
Practice and procedure - Appeal and cross-appeal - Appeal against decision that arbitration proceedings be terminated for undue and prejudicial delay pursuant to s 46 of the Commercial Arbitration Act 1985 - Cross-appeal against the approval for the sale of the cause of action by the liquidator pursuant to s 477(2B) of the Corporations Law - Turns on own facts
Legislation:
Nil
(Page 2)
Result:
Appeal dismissed
Cross-appeal allowed
Representation:
Counsel:
Appellant : Mr R R Cywicki
Respondent : Mr N P Gentili
Solicitors:
Appellant : Atkins Downie
Respondent : Jackson McDonald
Case(s) referred to in judgment(s):
Australian Coal and Sale Employees Federation v Commonwealth of Australia (1956) 94 CLR 621
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Jakovljevic v L & B Doslov [2000] WASCA 131
R v Lawrence [1982] AC 510
Case(s) also cited:
Birkett v James [1978] AC 297
Corporate Affairs Commission v ASC Timber Pty Ltd (1998) 16 ACLC 1642
GA Listing and Maintenance (1994) 14 ACSR 308
Hughes v Gales (1995) 14 WAR 434
Levi & Anor v Stirling Brass Founders Pty Ltd, unreported; FCt SCt of WA; Library No 970209; 9 May 1997
Lewandowski v Lovell (1994) 11 WAR 124
Re Addstone (1998) 16 ACLC 1320
Re Astor Pty Ltd (1997) 15 ACLC 1412
Re Feasty's Family Restaurants Pty Ltd (1996) 28 ACSR 357
Re Imobridge Pty Ltd (2000) 18 ACLC 29
Re Movitor Pty Ltd (1996) 14 ACLC 587
Re Spedley Holdings Ltd (1992) 10 ACLC 1742
(Page 3)
Ultra Tune Australia Pty Ltd & Ors v UTSA Pty Ltd (in liq) & Ors (1996) 14 ACLC 1610
(Page 4)
1 STEYTLER J: I have had the advantage of reading the reasons for decision proposed to be published by Templeman J. I agree generally with them and with the orders which his Honour proposes.
2 TEMPLEMAN J: This is an appeal and cross-appeal from decisions of Anderson J on two applications. The first application was brought by Simto Pty Ltd, the present respondent, pursuant to s 46 of the Commercial Arbitration Act 1985. The respondent, which was the respondent in arbitration proceedings brought against it by Carob Industries Pty Ltd, now in liquidation, sought to have those proceedings terminated for undue delay. Anderson J held that there had been undue and prejudicial delay. He therefore concluded that the arbitration proceedings should be terminated. There is an appeal from that decision: not by Carob, but by Mr Phillip Clements, to whom Carob's liquidator sold its cause of action.
3 In the second application Anderson J approved the sale of the cause of action, pursuant to s 477(2B) of the Corporations Law. The respondent cross-appeals from that decision.
4 There was a third application: to lift the stay of the arbitration. The stay had been imposed following an earlier determination by Anderson J that the proceedings were being maintained unlawfully by the appellant.
5 Anderson J held that because he had approved the sale of Carob's cause of action to the appellant, Clements, the stay should be lifted. Nothing now turns on that decision.
6 It will be convenient to set out the background to the dispute in the words of Anderson J, as follows:
"In 1991, the respondent, Simto Pty Ltd, was engaged as the main contractor to construct two sea walls at Cape Lambert. In March 1991, Simto made a subcontract agreement with the applicant, Carob Industries Pty Ltd (In Liq) by which Carob agreed to cart various classes of earth materials required in connection with the construction of the two walls.
Carob carted a substantial quantity of material and claims that it has been short-paid for that work. Simto contends that Carob failed to cart the quantity of material which it contracted to cart and claims that it was put to expense in arranging for others to complete the work. Thus, there is a substantial claim by Carob against Simto and a substantial claim by Simto against Carob.
(Page 5)
- On 14 May 1992, Carob gave notice of a dispute under the subcontract agreement and on 8 June 1992 called for the nomination of an arbitrator. On 3 July 1992, Mr J G Foster was nominated by the Institute of Arbitrators, Australia. Shortly after, on 5 August 1992, the winding-up order was made placing Carob in liquidation and Mr V C Court was appointed liquidator. By notice of originating motion dated 19 November 1993 in the arbitration proceedings, Carob referred the question of the validity of the arbitration clause to the Supreme Court for determination. On 17 April 1996, Scott J held that there was no valid arbitration clause in the subcontract. Carob appealed this decision to the Full Court by notice of appeal dated 8 May 1996. On 17 January 1997, Simto filed a motion to stay the appeal on the grounds that the arbitration proceedings were being maintained under a champertous arrangement and were an abuse of process. For reasons which do not matter, the stay application was adjourned and the appeal went ahead. The Full Court handed down its decision on 22 May 1997, allowing the appeal and determining that there was a valid arbitration clause in the subcontract. By originating summons dated 26 May 1997, Simto brought an application in the arbitration proceedings seeking a stay of the arbitration proceedings on the ground that the proceedings were champertous and an abuse of process. The application was heard by me on 10 July and 2 October 1997 and on 11 December 1997 I held that the arbitration was, indeed, being maintained under a champertous arrangement between the liquidator and a Mr Phillip Clements, a peripatetic character who seems to never be at any one place or in any one country for any length of time. In the affidavits that he filed in the champerty proceedings, the picture that he attempted to paint was that he was not involved in any arrangement whereby he was funding the arbitration for a share of the award, but was merely acting as the liquidator's agent in instructing the solicitors. In Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd, unreported; SCt of WA; Library No 970692; 11 December 1997, I gave detailed reasons why that was not true. I held that Clements was maintaining the arbitration in the name of Carob and doing so without possessing any legitimate and genuine interest in the outcome of the arbitration. He did so for some five years - from some time in 1993 until the order I made on 11 December 1997 staying the arbitration proceedings on the ground of unlawful maintenance.
(Page 6)
- Now, nearly two years after that stay order was made, these applications have been made."
7 Anderson J then went on to deal with the question whether the arbitration should be terminated. In so doing, he summarised the relevant provisions of s 46 of the Commercial Arbitration Act. He said:
"It is the duty of each party to an arbitration agreement to exercise due diligence in prosecuting a dispute referred to arbitration: Commercial Arbitration Act s 46(1) and (2). A court will not terminate an arbitration for delay unless it is satisfied that the delay has been inordinate and inexcusable and will give rise to a substantial risk of prejudice to the other party. Commercial Arbitration Act s 46(3). The test is the same as the common law test. If there is inordinate and inexcusable delay, coupled with a substantial risk that it is not possible to have a fair trial of the issues in the action, or there is a likelihood of serious prejudice to the defendant, the proceedings will usually be brought to an end by the court. Lewandowski v Lovell(1994) 11 WAR 124, especially at 131; Hughes v Gales(1995) 14 WAR 434; Birkett v James[1978] AC 297 at 318; Ulowski v Miller[1968] SASR 277 at 280.
It seems that there are five main matters which are to be considered, they being the length of the delay, the explanation for the delay, hardship to the plaintiff if the action is dismissed and the cause of action left statute-barred, the prejudice to the defendant if the action is allowed to proceed notwithstanding the delay and the conduct of the defendant in the proceedings. Lewandowski v Lovell(supra) at 133."
8 In my view, this was the correct way to approach the matter. The appellant does not suggest otherwise.
9 In the next part of his judgment, Anderson J summarised the history of the proceedings. He said:
"In this matter, the delay has been quite extraordinary. The arbitrator was appointed on 3 July 1992 and the arbitration should have been disposed of long since. Some part of the delay can be explained by a dispute between the parties as to whether the agreement did contain an arbitration clause. Clements sought to resolve that dispute by bringing an originating motion to this Court in the name of Carob, seeking
(Page 7)
- determination of that question and subsidiary questions, including the validity of the appointment of the arbitrator, Mr Foster. He moved extremely slowly. It was not until November 1993 that the notice of originating motion was filed, that is, some 16 months after the arbitrator was appointed. No affidavit was filed in support of the originating motion until 24 August 1994 - another nine months. The originating motion was not actually served on Simto until 6 September 1994, 10 months after it was filed. There is no explanation for this delay. The affidavit in support was sworn by Clements who, I have held, was illegally maintaining the arbitration proceedings. In late 1995 through to early 1996, there was an unsuccessful attempt by Simto to terminate the arbitration for want of prosecution. There is no reason why that should have held up the main proceedings. Then there was the application to stay the proceedings on the ground that they were being unlawfully maintained and that occasioned some delay. However, the fact is that the proceedings were being unlawfully maintained. To the extent that the proceedings were being prosecuted at all, they were not being prosecuted by Carob, but by Clements in a most desultory fashion and pursuant to an unlawful arrangement. My decision was handed down in early December 1997. Here we are in December 1999 not one step further ahead. Nothing has happened between December 1997 and December 1999 which could give any excuse for inactivity, except for difficulties said to have been experienced by the liquidator in remedying the unlawful arrangement pursuant to which the proceedings were being conducted. In an affidavit dated 16 August 1999, the liquidator attempted to explain that delay. Essentially, it gets down to solicitors' delay. I cannot accept that excuse. It should have been a simple matter to terminate any unlawful arrangement with Clements and to enter into a proper arrangement pursuant to s 477(2)(c) of the Corporations Law. The agreement now presented for consideration by the court is a short, uncomplicated agreement."
10 The appellant does not take issue with the facts as recited by Anderson J: nor does he contend that Anderson J was wrong to view the matter globally as he did. Rather, the appellant focuses on the four periods which the respondent identified specifically, albeit in the context of a general complaint about delay. These periods are:
(i) From 24 June 1991 to 14 May 1992
(Page 8)
- (ii) From October 1993 to September 1994
(iii) From 11 October 1994 to October 1995
(iv) From 11 December 1997 to December 1998.
11 The first period commenced with the emergence of the dispute. It ended with the service of the Notice of Dispute which initiated the arbitration. The appellant submits that delay during this period is irrelevant because it pre-dated the commencement of proceedings. Such a submission is inappropriate here. That is because s 46(1) of the Commercial Arbitration Act imposes on each party to an arbitration agreement a duty "… to exercise due diligence in the taking of steps that are necessary to have the dispute referred to arbitration …".
12 The delay during this period is explained only partially. The liquidator referred to it in an affidavit sworn on 16 August 1999. He said that although the material events occurred before his appointment, the appellant had told him about the progress of the claim. In summary, it had become apparent by 31 May 1991 that the respondent would not permit Carob to survey the works so as to enable it to determine the precise amount of material carted. Following some later exchanges, the dispute "crystallised" on or about 31 October 1991. I note that no explanation was proffered for the delay of some six and a half months from then until the service of the Notice of Dispute.
13 The liquidator has also sought to explain the delays in the other three periods referred to above. He says, in substance, that they resulted from the dilatory conduct of his, or the appellant's, legal advisors. The appellant therefore submits that Anderson J was wrong in saying that the delays were attributable to the appellant's prosecution of the proceedings "in a most desultory fashion".
14 The appellant submits also that this was not a case in which there was no action at all on his side. Further, he submits that the respondent was being extremely difficult. The respondent initiated a number of what are described as "collateral proceedings", which are said to have had the effect of consuming the appellant's time and legal resources. These proceedings were an application for security for costs, an application to have the liquidator deal with the respondent's proof of debt, and an application to review his refusal to do so.
15 There is no evidence that these matters did have the effect attributed to them. However, we were invited to infer that they must have been significant distractions. That, I think, is somewhat doubtful. The
(Page 9)
- collateral proceedings were directed mainly at the liquidator, not at the appellant, who had the carriage of the matter pursuant to the unlawful agreement to which Anderson J referred in his reasons.
16 I am prepared to accept that there were delays on the part of the legal advisors concerned. Even so, that by no means explains all the delays identified by Anderson J. I am also prepared to assume, without deciding, that the respondent employed tactics calculated to delay the course of the arbitration.
17 However, none of that excuses the fact that after some eight years, the arbitration has hardly progressed beyond the preliminary conferences. No pleadings have yet been produced.
18 The liquidator is a man of considerable experience. The appellant is, or was, a barrister. There is no valid reason for professional men in their respective positions either to act in a dilatory manner, as the appellant did, or to tolerate delays by legal advisors. Nor is it acceptable, when faced with an obstructive opposing party, for such professionals to wring their hands and complain that life is being made difficult. They should be well aware that courts and arbitrators have wide powers to compel recalcitrant parties to comply with strict timetables and to ensure that matters are litigated or arbitrated with whatever degree of expedition may be required.
19 I therefore consider that in all the circumstances, the delays for which the liquidator or the appellant must be held responsible, were inordinate and inexcusable, within the meaning of s 46 of the Commercial Arbitration Act.
20 More to the point, since we are considering the exercise of a discretion by Anderson J, I am not persuaded that he was wrong in reaching that conclusion: see Australian Coal and Sale Employees Federation v Commonwealth of Australia (1956) 94 CLR 621 at 627 per Kitto J.
21 That is not, of course, the end of the matter. Even where there has been inordinant and inexcusable delay, the Court is not to terminate arbitration proceedings unless that delay:
"will give rise to a substantial risk of it not being possible to have a fair trial of the issues in the arbitration proceedings or is such as is likely to cause or to have caused serious prejudice to the other parties to the arbitration proceedings." (s 46(3)(b)).
(Page 10)
22 Anderson J dealt with this issue as follows:
"The long and the short of it is that it is some seven years since this arbitration was started and no useful step at all has been taken in the arbitration proceedings themselves. It is now more than eight years since the work was finished. Mr Caruso, who was the respondent's construction manager, has sworn an affidavit to the effect that over the years his recollection of events has faded to the extent that he now has difficulty recalling in detail the events which took place in 1991 and that is not in the least surprising. He has deposed that no site survey of the work done by Carob is now possible because the site has undergone structural change. In an affidavit sworn on 14 December 1995, Mr Caruso deposed to the fact that Simto's contract engineer, one Mattner, left the respondent's employment in June 1993, and its project engineer, one Francis, left Simto's employment in February 1992. Simto has no contemporaneous record of the quantity of material excavated and transported by the claimant."
23 The appellant submits that those findings do not, of themselves, establish the substantial risk or serious prejudice contemplated by s 46(3)(b). He submits that the principal question in issue is one of contractual interpretation rather than findings of credibility. Further, he submits, it is not clear what evidence Messrs Caruso, Mattner or Francis might give. Nor is it clear that Mr Mattner and Mr Francis, despite leaving the respondent's employment, are no longer available.
24 Although it may be true to say that the principal question in issue in the arbitration would involve contractual interpretation (although that is in dispute) it would also be necessary to determine the amount of material carted by Carob. Indeed, the liquidator has himself asserted that to be the case. In my view, the appellant could be in no stronger position. It must also be borne in mind, that the arbitration was concerned not only with Carob's claim against the respondent, but also, the respondent's counterclaim where there was an issue about the quantity of materials carted.
25 The evidence establishes that both Mr Francis and Mr Mattner dealt with Mr Nigel Spicer, a mining engineer, who in 1991, was employed by Carob to oversee its performance of the sub-contract.
(Page 11)
26 I accept that there is no evidence that Mr Mattner and Mr Francis are no longer available to give evidence. However, in all the circumstances, I consider it highly probable that, as the respondent's contract engineer and project engineer respectively, they would be essential witnesses in the arbitration.
27 I regard it as equally probable, particularly as they have long ago left the respondent's employment, that their recollection of relevant matters will have faded.
28 Considerations of this kind were discussed by this Court in Jakovljevic v L & B Doslov [2000] WASCA 131, adopting a passage from the judgment of McHugh J in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551. There, McHugh J referred to the statement by Lord Hailsham LC in R v Lawrence [1982] AC 510 at 517 that where there is delay, the whole quality of justice deteriorates.
29 The appellant then submits that the lack of site surveys results from the respondent's refusal to comply with its contractual obligations. It is submitted that because the respondent's attitude became clear very early in the proceedings the lack of site surveys cannot be attributable to delay by the appellant or the liquidator.
30 I do not accept this submission. The fact is that, as Anderson J said, as a result of the delays, it is no longer possible to carry out a site survey. The site has undergone a structural change. And the respondent has no contemporaneous record of material excavated.
31 I emphasise that the question which Anderson J had to consider was not whether a fair trial had become impossible or whether the respondent would in fact suffer serious prejudice if the arbitration was to proceed. The question was whether there was a substantial risk of an unfair trial or whether it was likely that the respondent might suffer prejudice.
32 I agree with Anderson J that, in all the circumstances, those risks existed. I am not persuaded, therefore, that Anderson J's discretion miscarried.
33 For these reasons, I would dismiss the appeal.
(Page 12)
The cross-appeal
34 Anderson J approved the sale of Carob's cause of action by the liquidator to the appellant pursuant to s 477(2B) of the Corporations Law. Although the proposed transaction had not been approved by the creditors (none of whom would have derived any benefit from the transaction) Anderson J gave his approval on the basis that:
"… It is in the company's interests and also in the interests of the community that the liquidator should be paid his proper fees and the winding-up concluded in an orderly manner."
- Anderson J accepted the submission made on behalf of the liquidator that, at the very least, a successful conclusion of the arbitration would provide funds to enable the liquidator to be paid his proper fees and to complete the liquidation.
35 The respondent accepts that it is not the role of the Court in an application of this kind, to undertake an independent assessment of a liquidator's proposal. The respondent accepts also that the Court will not generally withhold its approval of a transaction proposed by a liquidator who appears to have made a bona fide commercial assessment of the proposal.
36 The respondent submits, however, that approval should have been withheld in the present case because the proposed sale was of no benefit to the unsecured creditors or members of Carob: it would benefit only the appellant and the liquidator. And the liquidator had neither made a proper assessment of the proposal, nor sought to justify what Anderson J apparently assumed to be his proper fees.
37 While there is merit in these submissions, I do not think it necessary to reach any conclusion on the issues they raise. That is because, as Anderson J recognised, once the arbitration had been terminated, it was futile to approve the funding arrangement between the liquidator and the appellant.
38 As Anderson J rightly pointed out, it was not "entirely futile" for him to grant approval of the transaction at first instance. That was because an appeal lay as of right against his decision to terminate the arbitration. Had that appeal been successful, then the appellant would have been able to prosecute the arbitration. But as I would dismiss the appeal, I would also allow the cross-appeal.
(Page 13)
39 WHEELER J: I have the advantage of reading in draft the reasons of Templeman J, with which I agree, and have nothing further to add.
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