Doran Constructions Pty Ltd v Beresfield Aluminium Pty Ltd

[2003] HCATrans 612

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S204 of 2002

B e t w e e n -

DORAN CONSTRUCTIONS PTY LIMITED (In Liquidation)

Applicant

and

BERESFIELD ALUMINIUM PTY LIMITED

Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 MARCH 2003, AT 12.01 PM

Copyright in the High Court of Australia

MR A.S. MARTIN, SC:   May it please the Court, I appear for the applicant.  (instructed by Doyles Construction Lawyers)

MR S. GOLDSTEIN:   If the Court pleases, I appear for the respondent.  Mr Pembroke is unable to appear today.  (instructed by Hills Solicitors)

GLEESON CJ:   All right.  Yes, Mr Martin.

MR MARTIN:   Your Honours, this is a case where it is submitted the course of justice has gone awry to an extent requiring the attention of this Court.  The decisions of the trial judge and the Court of Appeal have resulted in proceedings before that court being dismissed without a hearing on its merits in circumstances where that should not have happened.  As your Honours are aware, proceedings related to arbitration proceedings which resulted in an interim award being signed and dated on 12 January ‑ ‑ ‑

GUMMOW J:   Not paid for.

MR MARTIN:   Not paid for in respect of at least part of the arbitrator’s fees, your Honour.

GLEESON CJ:   Is the relevant rule at page 5 paragraph 11?

MR MARTIN:   Yes, it is, your Honour.

GLEESON CJ:   In subparagraph (a) of that rule there is reference to “notice of the reasons” and in subparagraph (b) there is reference to “notice of the award”.

MR MARTIN:   Yes.

GLEESON CJ:   Does your submission depend upon a proposition that the two expressions mean the same thing?

MR MARTIN:   Insofar as notice is concerned, yes, your Honour.

GLEESON CJ:   That is the point, is it not?

MR MARTIN:   That is the point.  Notification of the award where there has not been agreement that the reasons should be separate and distinct from the award involve notification of the reasoned award and that the two particular rules should be read consistently with each other, otherwise an absurdity is produced.

GLEESON CJ:   Well, they should be read as meaning the same thing.

MR MARTIN:   Yes.

GLEESON CJ:   On the face of them, they mean quite different things, do they not?

MR MARTIN:   On the face of it, notice of the reasons does involve a different notion from notice of the award.

GLEESON CJ:   And there is a very practical reason why, in the conduct of an arbitration and, as Justice Gummow pointed out, the payment of an arbitrator, that distinction is maintained.

MR MARTIN:   Your Honour, we see that the particular framework of the rules as such, in relation to the date upon which an application can be made to challenge an award, should have no bearing upon whether fees to the arbitrator have been paid or not.

GLEESON CJ:   Well, there is nothing odd about a system that is designed to help arbitrators get paid.  That is a fairly integral aspect of the system of arbitration.

MR MARTIN:   Quite, your Honour, but we say these rules are not there for the purpose of ensuring that the arbitrator’s fees are paid.

GLEESON CJ:   No, but they are against a background of a practical problem, are they not?

MR MARTIN:   That may be so, your Honour, but we submit that the essential statutory purpose of the two rules in question is simply to enable a party to have the opportunity of receiving the reasoned award, being able to consider those reasons, obtain legal advice, determine what appeal grounds there may be for the drafting and lodging of the appropriate process to challenge that award.  That was the purpose of rule 5(a)(b), to give a losing party 28 days, an opportunity to do those things before exercising the circumscribed rights which are given to a losing party under the Commercial Arbitration Act to decide whether a challenge should be made to the arbitral award.

GLEESON CJ:   On page 41 in paragraph 38 and, in particular, in paragraph 39, reference is made to a long history of practice in relation to arbitration against which, I would have thought, these rules were framed.

MR MARTIN:   With respect, your Honour, the English practice dealt with a statutory setting which was different from this particular rule that we are concerned with.  The English practice dealt with the statutory setting of when an award is made and when an award is published.  That is not what we are concerned about here.  We are specifically concerned about whether the arbitrator gave notice of the award to, in fact, my client.  It is common ground that no such notice of the reasoned award was given to the applicant.  The trial judge held that the letter of 15 January, which is contained at page 4 paragraph 5 of the application book, simply where it sets out:

“My interim award has now been handed down.  This award is held by the Master Builders Association.  This award will not be handed to your company until you deposit [the sum] outstanding as per my previous correspondence” –

constituted notice of the award, that time ran.  Now, the difficulty for the applicant was that it had been placed in liquidation at that time.  It had not received the reasoned award.  It was not in a position to make any informed decision as to whether a challenge should be made. 

Now, we submit, your Honours, that the trial judge and the Court of Appeal failed to have proper regard to the statutory purpose of this rule and that is to afford a losing party the right to receive the reasoned award, to consider those reasons, to determine whether a challenge should be made.

GLEESON CJ:   Does that mean that time would begin to run when your client was able to afford to pay the fees?

MR MARTIN:   Not necessarily, your Honour.  It runs when notice of the reasoned award is given by the arbitrator to my client.

GLEESON CJ:   But all that stood between you and getting the award was payment of the fees, was it not?

MR MARTIN:   From a practical point of view, yes.

GLEESON CJ:   So that if it took you two or three years for the liquidation to progress to the stage where your client had enough money to pay the arbitrator’s fees, that is when time would begin to run.

MR MARTIN:   Yes, but the difficulty here is, your Honour, that my client was in liquidation at that stage and the payment of the fees was not a condition precedent of time running under the rules.  There are two distinct things that have to be looked at:  whether, strictly speaking, the rule was complied with or whether it was not, and the imposition of some requirement that outstanding fees be paid to the arbitrator was an impermissible gloss to be attached to the particular rule in question. 

In this case we are dealing with an informal arbitration proceedings and despite its informality, clearly there were some essential steps during the arbitral process that required formality.  This was one of the essential steps.

CALLINAN J:   Mr Martin, does the Commercial Arbitration Act contain a definition of “award”?

MR MARTIN:   Yes, it does, your Honour.

CALLINAN J:   Does it define it in such a way as to include the reasons?

MR MARTIN:   Yes.  It is found in section 29(1)(a) and that is in Mr Justice Ipp’s judgment at page 39 paragraph 33.

GUMMOW J:   There is a definition in section 4, is there not?

MR MARTIN:   Yes.

GUMMOW J:   It means “final or interim law”.  It does not help much.

MR MARTIN:   No, section 29(1)(a), your Honour, which says:

provides that, unless otherwise agreed in writing by the parties to the arbitration agreement, the arbitrator shall make the award in writing and include in the award a statement of the reasons for making the award.

So that the award was to include the reasons.  Your Honours, we say, because of the informality of such a proceedings, there were certain formal matters and a formal matter was ‑ ‑ ‑

CALLINAN J:   Just before you get to that, is it your submission then that the award is incomplete unless it contains a statement of the reasons for its making?

MR MARTIN:   That is the consequence of section 29(1)(a), that is so.

GUMMOW J:   When was that put in?  When was 29(1)(a) amended to include that?  I have a print of 1991 which does not have it, you see.

MR MARTIN:   I see, your Honour.  I cannot answer that, but certainly it was applicable at the relevant date that we are concerned with here.

GUMMOW J:   Did it postdate Part 72A?

MR MARTIN:   No, I do not believe so, your Honour.

GUMMOW J:   What is the date of Part 72A?

MR MARTIN:   I understood it came into operation at the same time the Commercial Arbitration Act came into operation.  It was in 1984.

GUMMOW J:   That was 1984.

MR MARTIN:   Yes.

CALLINAN J:   Well, how do you reconcile the rule with the definition?

MR MARTIN:   We say the two do not have to be reconciled.  Notification of the award included the definition of “award”, which was to include the reasons for the award.

GLEESON CJ:   You equate notice and notification.

MR MARTIN:   Well, I should be more accurate.  The giving of notice of the award should be equated with notification of the award.

GLEESON CJ:   The argument against you, as I understand it, is that you give notice of an award when you say, “The award is here in my safe or with my solicitors or wherever, and it contains the reasons and it can be picked up by you at any time you care to pay the fees.”

MR MARTIN:   Yes.

GLEESON CJ:   Now, I am interested in looking at it from the point of view of the other side, the other party to the arbitration.  How does the other party to the arbitration ever get to a situation where time is beginning to run, so long as a company in liquidation is simply not paying the arbitrator’s fees and therefore not in a position to collect the award?

MR MARTIN:   It was simply just a requirement as to whether the reasoned award be notified by the parties.  It was clearly open to the arbitrator to say, “Fees are outstanding.  I will not hand down my award at this stage until those fees are brought up to date.”  That was open to him.  He decided not to do that.  He decided to give notice to one party and we submit, not to the other party.  That is the inherent unfairness of it whereby my client’s rights have been taken away from him without that statutory condition being satisfied.

GLEESON CJ:   And was there any time limit, according to you, within which you were obliged to pay the fees?

MR MARTIN:   It was a contractual obligation pursuant to the arbitration agreement, obviously dependent upon the capacity of my client to pay the fees.  My client, at that stage, was ‑ ‑ ‑

GLEESON CJ:   Contractual obligations to pay money are not usually subject to a condition that the person obliged has the money available.

MR MARTIN:   But the arbitrator became an unsecured creditor, open to him to lodge a proof of debt in the liquidation of the applicant.  We submit that the non-payment of the arbitral fees would have no bearing on whether in fact this precondition, the giving of notice of ‑ ‑ ‑

GUMMOW J:   The payment of the fee would be a proper expense of the liquidation, surely.

MR MARTIN:   Yes, it would.  That is a matter for the liquidator and, indeed, the arbitrator, but it should not be the basis of denying the essential right of a losing party to know whether it has won or lost and to know the reasons for whether it has won or lost, before it can exercise its rights of seeking to challenge that award under the Commercial Arbitration Act.

Your Honours, if I could then move on to the second issue and that is whether section 500(2) of the Corporations Act rendered the giving by the arbitrator to the applicant of any notice of the award, assuming our first argument is incorrect, ineffective for the purposes of complying with rule 5(1)(b).

GLEESON CJ:   This is the point that Justice Santow dealt with, I think.

MR MARTIN:   Yes.

GUMMOW J:   Dealt with but did not decide, so ‑ ‑ ‑

MR MARTIN:   Justice Gummow is correct.  Justice Ipp expressly left this question open and Justice Mason ‑ ‑ ‑

GUMMOW J:   So did Justice Santow himself, did he not?

MR MARTIN:   Yes.  The basis upon which the majority, Justice Ipp ‑ ‑ ‑

GUMMOW J:  

I would therefore conclude that, were such point now capable of being taken on appeal, it should fail –

That leaves the profession in an awkward situation.

MR MARTIN:   Yes.  We submit that the 500(2) point we were unsuccessful on in the Court of Appeal because it was held that that point was not properly raised before the trial judge.  We submit that that was not correct; the point was raised.  If I can take the Court to paragraph 49 of the submission that is contained in the supplementary submissions of the applicant, page 7.  This was a written outline which was required to be submitted prior to the commencement of the hearing before Justice Brownie.  Paragraphs 49 and 50 expressly take the point that the arbitration was stayed as from 24 December – that was when the company went into liquidation – onwards.  The interim award was dated and signed 12 January 1998 and the notice of the award found by the trial judge was dated, of course, 15 January.

GLEESON CJ:   And is the proposition that the arbitration was a civil proceeding and that publishing the award, or giving notice of the award, or making the award, was a proceeding with the civil proceeding?

MR MARTIN:   Not publishing or making the award, your Honour.  What was regarded as a further step in the proceedings, in contravention of section 500(2), was the arbitrator who was a party to the arbitration giving notice of the award.  That was a further step against the applicant in the proceedings which contravened section 500(2).

GLEESON CJ:   Just remind me, at the time of the liquidation had he made the award?

MR MARTIN:   No.  The award was dated 12 January 1998, a month after the liquidation itself.  The notification was 15 January.

GLEESON CJ:   So you are not complaining about the making of the award?

MR MARTIN:   No.  The point is, we say that the notice was ineffective because it was a further step in the proceedings against the applicant which contravened section 500(2).  That was the submission that we made.  Justice Ipp, as we say, expressly left this point open.  Justice Mason agreed with Justice Ipp.  It was Justice Santow that went into the analysis of section 500(2) and dealt with the question as to whether the further step in the proceedings could be described as defensive or as neutral or whether, in

fact in this case, the notice itself was regarded as infringing section 500(2), and it was Justice Santow that held that, on the construction of section 500(2), the notice did not.  We submit that there is sufficient doubt in the wording of section 500(2), which is a piece of uniform legislation nationally ‑ ‑ ‑

GUMMOW J:   Well, you may be right, but I am just not sure this is the appropriate vehicle to deal with it.

MR MARTIN:   It is a straight question of statutory construction.  There are no additional facts that need to be looked at for the purpose of this construction.  It is simply whether in fact this further step, that is, the giving of notice, constituted a step in the proceedings against the applicant.  We submit that it does, that the construction placed by Justice Santow on section 500(2) placed impermissible glosses on the wording, that one cannot find any reference to the step being required to be anything other than defensive or neutral. 

His Honour regarded such steps, if they were defensive and neutral, as not contravening section 500(2).  That cannot be found in the language and the language has to be given full force and effect, that it is steps in the proceedings against, in this case, the applicant.  So, for those reasons we ask that there be a grant of special leave.

GLEESON CJ:   Thank you, Mr Martin.  Yes, Mr Goldstein.

MR GOLDSTEIN:   Thank you, your Honour.  Your Honour, in relation to the section 500(2) point, the reason why their Honours held that that was not properly before the Court of Appeal was because the matter was not argued at all in the court below.  Whilst there was a submission to that effect – and I can take your Honours to the judgment of his Honour Justice Brownie, but the way that the matter was conducted at first instance was that the first instance hearing was an application for an extension of time.

His Honour firstly had to decide whether or not a time had commenced to run and his Honour found that it had in relation to the interim award and the final award.  Then his Honour had to consider, having found that time had started to run from 15 January 1998, when the notice was given by the arbitrator, he then had to consider whether or not there was an entitlement to an extension of time. 

Now, his Honour applied the principle from his Honour Justice Cole in Technical Team Projects and considered that there were three elements that had to be satisfied in order to be entitled to a grant of an extension of time.  The first was that there was an explanation for the delay; the second was there was a substantial point to be argued and the third was that there would be some injustice suffered.  Now, for the purposes of the argument before his Honour Justice Brownie, it was conceded that there were substantial points to be argued and that included section 500(2).  So the point was not argued on that basis.  If I can take your Honours to page 14 paragraph 46 where his Honour says:

Weighing up the various considerations advanced by the parties and directing myself particularly to the considerations discussed by Cole J, it seems to me that the application for an extension of time should be dismissed.  I am prepared to assume in favour of the plaintiff, not just the concession made that there was a substantial point or points to be argued, but that the plaintiff’s case is stronger.  The matter has not been argued but prima facie the conduct of the defendant in proceeding to obtain the final award would ordinarily be regarded as a breach of the provisions of the Corporations Law.  As I say, I am prepared to assume all that in favour of the plaintiff but weighing up all the considerations, it seems to me that the application should be dismissed.

What happened, your Honours, was that the matter was not argued because what was being considered was an application for an extension of time.  It was not decided whether or not the section 500(2) point was a valid point and so when the matter came to the Court of Appeal the Court of Appeal found that it was not properly raised and therefore it was not open.  So it is my submission that for the same reason the matter is not properly ‑ ‑ ‑

GUMMOW J:   It is, in that circumstance, unfortunate that one judge went on to say so much about it, because this is a provision of enormous importance in the profession.

MR GOLDSTEIN:   Yes, I accept that, your Honour.

GUMMOW J:   Now there is this detached dicta out there by one member of the Court of Appeal.

MR GOLDSTEIN:   Yes.  Certainly there is nothing I can say to that effect, but perhaps he should not have said it, but, your Honour, he did.  In relation to the notice of award, the Court of Appeal found that the notice of the award means no more than notice of the fact that the award has been made and that it is available for collection.  That decision that the Court of Appeal made was consistent with previous findings on this point for the past 150 years and if the applicant’s interpretation were ultimately to be accepted, it would result in an absurdity of the kind that was referred to by his Honour Justice Ipp in the Archipelagos Case.  If I could just take you to that briefly, your Honours.  It is at page 44 paragraph 51, and your Honours will see that this has a lot of similarities to the present situation:

In The Archipelagos the respondent contended that the time for applying to set aside an award was to be calculated from the date of receipt of notice of the availability of the award.  The claimant contended, on the other hand, that the time was to be calculated from the date upon which it received the copy of the award, being the date on which they first had notice of the actual contents of the award.  Parker J said (at 291):

“The contention that the time should be calculated from the date of receipt of copies of the award is a bold one, for it is no less than a contention that what has been accepted as good law for 140 years is entirely wrong . . . ”

And remarked (at 293):

“It would be perfectly simply for a party to say: ‘I am very sorry; I tried on receiving notice of availability to get hold of a copy of the award with the utmost diligence but owing to various matters which were in no way my fault I could not get hold of it until a week before the period had expired and I therefore ought to have an extension of time’.  Such an argument would be an argument which would be perfectly good.  The alternative, which seems to me to be wholly untenable, is that time would not begin to run for a wholly indefinite period if neither side took up the award.  There it would lie in the offices of the arbitrator for months or even years and, when finally taken up, the party would be able to say: ‘The six weeks period has only started to run and the fact that I could have had this award by walking round the corner at any moment from the date upon which I receive notice of its availability cannot be held against me’.  Such a construction of the rule appears to me entirely unreasonable.  It has never been applied and I see no reason to hold, and I decline to hold, that it applies now”.

Now, this case has great similarities, your Honours, because, in fact, the award in this case has never been collected.  In theory, as we sit here today, time has not commenced to run.  True it is that there is an appeal on foot, because the applicants did obtain a copy, but not the copy that the arbitrator made available.  It received one indirectly.  But the situation that exists is that time has not yet commenced to run and may never commence to run.

CALLINAN J:   Before Justice Brownie, you relied upon, and I think you had a finding in your favour, of prejudice because of delay.

MR GOLDSTEIN:   Exactly.

CALLINAN J:   Do you rely upon that prejudice still as a ground for rejecting a grant of special leave now?

MR GOLDSTEIN:   Yes, your Honour, because, I mean, a party is entitled to put his affairs in order and the rule which speaks of notice of the award – and we say that notice is not knowledge ‑ ‑ ‑

CALLINAN J:   Well, you had a finding in your favour, that you were, in fact, prejudiced, you did various things and incurred expense.  That may have a relevance to the question of whether special leave is granted, I would have thought.

MR GOLDSTEIN:   Yes, it does and we certainly rely on that.  At page 45 paragraph 52, the Court of Appeal found that the interpretation contended by the applicant:

could give rise to delay and abuse.  This is a result inimical to the policy of the Commercial Arbitration Act.

As his Honour Justice Priestley said in State of New South Wales v Coya 4 August 1995, unreported: 

One object of the Act is to promote the private, prompt and speedy hearing of contractual disputes which the parties to the contract have agreed should be decided by arbitration. 

To find that the notice of the award is not given until one of the parties actually receives the award is completely opposite to the object of the Act, where a party could wait years and years before it decides to collect the award.  An example could arise where an arbitrator hands down an award, one of the parties collects the award, tells the other party, for example, what the award is in terms of the outcome, that party then does not decide to collect the award.  Some years later the party gets hold of the award by some means, sees that there is some error or thinks that there is some error of law from which he could appeal and then launches an appeal.  The result could be quite chaotic.

So, it is my submission that the idea or the concept that notice means the actual giving of the awards is quite an anathema to what is intended by the Commercial Arbitration Act and is, in my submission, inconsistent with the words what “notice of the award” means, notice being notice that the award is available for collection.

I should just point out one other matter to your Honours.  Part 72A rule 5 also allows for an extension of time.  In other words, if the party does not seek leave to appeal within 28 days, there is power within Part 72A rule 5(3) to be granted an extension of time, and the idea of being granted an extension of time is to overcome any prejudice that a party may suffer. 

So, in a situation where you have a party in liquidation who is without funds, if that is a valid reason and the court considers that to be a valid reason, then an extension of time can be granted and the matter can proceed.  But that was the very matter that was considered by his Honour Justice Brownie and what he determined was that, taking into account all the matters that have been raised, there was no entitlement to any extension of time and therefore that ought to have been the end of the matter.

The only other thing I would just point out to your Honours is that in the Court of Appeal their Honours dealt with the question about Part 72A rule 5, about the inconsistency at page 46 paragraph 58.  Again, the point they made was that:

This argument confuses the “notice” with the reasons themselves.  Under r 5(1)(a) the material date is the date on which notice of the reasons is given, not the date on which the reasons were given.  Again, under r 5(1)(b) the material date is the date on which notice of the award is given, not the date on which the award is given.  There is no inconsistency in the rule.

Those are my submissions, your Honours.

GLEESON CJ:   Thank you, Mr Goldstein.  Yes, Mr Martin.

MR MARTIN:   Just to deal with the matter Justice Callinan raised about prejudice, the way the matter progressed before Justice Brownie was, firstly, his Honour determined as a preliminary point as to whether time had already commenced to run.  If that matter was found in favour of the applicant, that is, that time had not commenced to run because notice of the reasoned award had not been given to the applicant, then it was unnecessary to consider the next matter which was the application seeking an extension of time to make an application to challenge the award. 

It was on that second application, after his Honour determined that notice of the reasoned award was not necessary, that notice had been given pursuant to the letter of 15 January, his Honour determining that against the applicant then considered the applicant’s application for an extension of time and then on that application his Honour made findings relating to prejudice.

CALLINAN J:   Is it correct that the award has not yet been collected?

MR MARTIN:   I think that may be the case but, as your Honour will see from the particular language of rule 5(1)(b), it was the arbitrator giving notice of the award to the applicant.

CALLINAN J:   Yes, but has your side seen the award?

MR MARTIN:   We have seen it, your Honour.  It has been given to us.

GLEESON CJ:   Yes, but you got it from somebody else.  You got it off the back of a truck.

MR MARTIN:   Yes, and that is the point.  That is the reason for that particular provision.  It is the arbitrator that has to give to the parties notice of the award to protect the sanctity of the process.  So it is the findings relating to prejudice, your Honours, which do not arise, we would submit, on this special leave application, because the point that is raised is the first point as a matter of construction of the language in rule 5(1)(b).

The second point is the English decisions, in particular the ones referred to by Mr Goldstein of Archipelagos, we say is an entirely different statutory setting.  It related to a different rule in the English practice concerning the making and publishing of awards and, with respect, cannot be of any assistance to the respondents on this application.

GLEESON CJ:   Thank you.  We will adjourn for a short time to consider the course we will take in this matter.

AT 12.35 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.37 PM:

GLEESON CJ:   The applicant seeks to raise two points.  The first concerns the meaning and effect of rule 5 of Part 72A of the Supreme Court Rules and the second concerns the meaning and effect of section 500(2) of the Corporations Act.  In relation to the point concerning the Supreme Court Rules, the Court is of the view that there are insufficient prospects of success of an appeal to warrant a grant of special leave.  In relation to the point concerning section 500(2) of the Corporations Act, the Court is of the view that, having regard to the manner in which the proceedings were conducted and dealt with in the courts below, the case is not a proper one for the granting of special leave to appeal.  In saying that, the Court is not to be taken to be expressing a view either way on the merits of the argument concerning section 500(2).  The application is refused with costs.

AT 12.40 PM THE MATTER WAS CONCLUDED