Doran v Beresfield
[2001] NSWSC 49
•8 February 2001
CITATION: Doran v Beresfield [2001] NSWSC 49 revised - 13/02/2001 CURRENT JURISDICTION: Equity Division
Construction ListFILE NUMBER(S): SC 55003/99 HEARING DATE(S): 07/02/01,08/02/01 JUDGMENT DATE:
8 February 2001PARTIES :
Doran Construction Pty Ltd (in liquidation) (Receiver and Manager Appointed) - Plaintiff
Beresfield Aluminium Pty Ltd - DefendantJUDGMENT OF: Brownie AJ
COUNSEL : Mr A.S. Martin SC - Plaintiff
Mr M.A. Pembroke SC & Mr S. GoldsteinSOLICITORS: Doyles Construction Lawyers - Plaintiff
Hills Solicitors - DefendantCATCHWORDS: Arbitratiion- appeal from award- date from which time for appealing runs- SCR P.72A R5 construed. - Otherwise, no question of principle. CASES CITED: Technical Team Projects Pty Ltd v Noble Dunn pty Ltd (1990) 20 NSWLR 221 at 231
Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (194) 12 BCL 59
Lewis v Cook (2000) NSWSC 191DECISION: Dismiss the motion with costs. Stoodover to 23/02/01 in the Directions List.
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
BROWNIE AJ
THURSDAY 8 FEBRUARY 2001
55003/99 - DORAN CONSTRUCTIONS PTY LTD (IN LIQUIDATION) (RECEIVER & MANAGER APPOINTED) v BERESFIELD ALUMINIUM PTY LTD
JUDGMENT
1 Pursuant to provisions of Part 31 Rule 2 I order that there be decided separately from any other questions in the case and before all the other questions of the case the question whether in the circumstances of this case the time fixed by Part 72A Rule 5 within which the plaintiff might bring proceedings under sections 38(4) and 42 of the Commercial Arbitration Act 1984 has yet commenced to run.
2 By notice of motion dated 27 April 1999 the plaintiff seeks an order that to the extent necessary it be granted an extension of time to lodge an appeal from two awards, one called an interim award and the other a final award, made in arbitration proceedings between the plaintiff and the defendant. I will deal first with the separate question that I just mentioned.
3 The plaintiff contracted to do certain building work. It then entered into a further contract with the defendant as subcontractor to the general effect that the defendant carried out some of work which the plaintiff had contracted to do. The subcontract contained an arbitration clause but in the event the parties supplemented that with a further arbitration agreement and eventually proceeded to arbitration.
4 After a lengthy hearing, but before publishing an award, the arbitrator wrote to the two firms of solicitors representing the plaintiff and the defendant on 12 December 1997. He referred to an earlier agreement to the effect that the parties be jointly liable for the costs of the arbitration, listed the amounts which had been paid by the plaintiff and the defendant respectively on account of those costs, noting that the defendant had paid $5,000 more than the plaintiff had paid at that stage. He asked the plaintiff to pay a further $10,000 into a trust account administered by the Masters Builders Association and asked the defendant to pay a further $5,000 into that account and he said, "My award should be complete around the middle of January 1998".
5 On 24 December 1997 the defendant went into liquidation. Mr Lewis was appointed as liquidator. On 15 January 1998, apparently unaware of the fact of the liquidation, the arbitrator wrote to the solicitors acting for the plaintiff and the defendant in these terms,
- "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".
6 The defendant paid the $5,000 requested of it and took delivery of a copy of the interim award, that is the award which dealt with all questions except the costs of the arbitration. It contained a statement of reasons.
7 The plaintiff has never paid the $10,000 requested of it and did not receive a copy of the interim award until December 1998.
8 The final award related only to the costs of the arbitration. The plaintiff received a copy of it rather earlier. The two awards which it received were received by it from someone other than the arbitrator.
9 The plaintiff was a subsidiary of Doran Constructions (Australia) Pty Ltd. It seems that both companies were ultimately controlled by Doran Holdings Pty Ltd and that all three companies were controlled by four persons named Doran , described as brothers. At some time not established by the evidence the Doran brothers wished to bring proceedings under sections 38(4) and 42 of the Commercial Arbitration Act 1984 so as to upset the awards. I will adopt the shorthand mechanism of describing these applications indiscriminately as "appealing".
10 Part 72 A Rule 5 fixes the time within which such an appeal should be brought. It is to be brought within 28 days of the "material date".
11 Subrule (1) provides,
- "In this rule material date means:
(b) in respect of any other award - the date on which notice of the award is given by the arbitrator to the person who wishes to apply or appeal to the Court."(a) in respect of an award which by agreement by the parties to the arbitration agreement may be made with reasons later - the date on which notice of the reasons is given by the arbitrator to the person who wishes to reply or appeal to the Court;
12 The plaintiff submits, and I accept, that clauses (a) and (b) of this subrule must be read together and that they must be read in the context of section 29 of the Commercial Arbitration Act which provides relevantly that an arbitral award must be in writing and must include a statement of the reasons for making the award.
13 The plaintiff contends that the time for commencing the appeal proceedings has not yet commenced to run because the arbitrator has not given to the plaintiff the awards, including the reasons for the awards. Factually this much is common ground, however, the rule speaks not of giving the awards to the plaintiff but of giving notice of the awards to the plaintiff and in my view this has been done.
14 What the arbitrator did in a practical sense was to assert a right of lien over the award, that is to say, for the moment, the interim award. Generally speaking, I do not need to discriminate today between the two awards. However, in the case of the interim award, he told the plaintiff in writing that the award had been "handed down" and when and where a copy of the award could be obtained.
15 The plaintiff had on previous occasions promised to pay the arbitrator's fees and had assented to the mechanism put in place for the payment of the fees into the trust account mentioned earlier. The plaintiff now suggests that the arbitrator had an obligation to do more and to take different steps to procure security for his fees. This submission seems to me to be unacceptable but irrelevant.
16 What happened in this case was that the arbitrator wrote a letter to the plaintiff. In my view, the effect of that letter was that it constituted notice of the award within the meaning of the rule.
17 The plaintiff's submissions, if accepted, would change the rule from being one, speaking of an arbitrator giving notice of his or her award to the party, to one speaking of the arbitrator giving his or her award to the party. If the plaintiff's further submissions were to be accepted and acted upon, this might necessarily result in arbitrators having to change the way in which they commonly take steps to see that they are paid but in my view this is an irrelevancy for present purposes.
18 What I have said so far is primarily directed to the interim award but I do not think there is anything significantly different so far as concerns the final award. I therefore answer the separate question posed by holding that the time fixed for bringing the awards has commenced to run..
19 The motion then asks for an extension of time. Again, I do not think that there is any significant difference between the two awards. I will speak primarily of the interim award but I do not think there is anything significantly different so far as concerns the final award.
20 The parties, in substance, joined together in accepting that if the plaintiff was to succeed in obtaining an extension of time in which to appeal, using that explanation in the colloquial sense I mentioned earlier, the plaintiff had to establish the three ingredients mentioned by Cole J in Technical TeamProjects Pty Ltd v Noble Dunn Pty Ltd (1990) 20 NSWLR 221 at 231, quoted with approval in Doran Constructions Pty Ltd v Health Administration Corporation of New South Wales (1994) 12 BCL 59 particularly at 61. I note that at page 61 the word "specific" should read "substantial".
21 For the purposes of the present argument the defendant considered that the plaintiff had demonstrated the second of the three matters mentioned by Cole J, but there was significant debate about the first and third of these matters.
22 I need to say more about the underlying facts. By the latter part of 1997, the plaintiff was in the position where it had on foot not just its arbitration against the defendant, but also litigation involving the University of Newcastle. Its conduct of both disputes was being funded by Doran Holdings.
23 On 16 December 1997 a number of things happened. Doran Holdings wrote and apparently delivered to the plaintiff a letter stating that Doran Holdings had decided to cease funding the conduct of the two disputes I have mentioned. The directors of the plaintiff met and resolved to take advice from Mr Lewis. The plaintiff prepared a report as to its affairs, stating it had been prepared for the purposes of "creditors voluntary winding up". That report showed that its liabilities vastly exceeded its assets without treating either the defendant or the University of Newcastle as a creditor. Steps were then taken to hold a meeting of creditors and such a meeting was held on 24 December 1997.
24 Earlier, the plaintiff had lent money to Doran Constructions (Australia) Pty Ltd. By November 1997 the amount of that debt was approximately 2.5 million dollars. On 28 November 1997 the directors of the plaintiff resolved that the plaintiff would forego this debt. Later, when both the plaintiff and Doran Constructions Australia were in liquidation, Mr Lewis brought proceedings against the liquidator of Doran Constructions (Australia), challenging this transaction on various grounds.
25 On 21 March 2000 Austin J held that the transaction was ineffective because there was no deed and there was no consideration, Lewis v Cook (2000) NSWS 191.
26 After the plaintiff went into liquidation, questions were raised about the conduct of its directors and they were in time examined under the provisions of the Corporations Law. The liquidator formed a view about their conduct adverse to those persons. The detail of this is not in evidence, nor does the present evidence include the evidence before the liquidator but the evidence does, it seems, show that the only possible sources of funds out of which unsecured creditors of the plaintiff, including the defendant, are likely to be the liquidation of Doran Constructions (Australia), about which I know practically nothing, and the contemplated proceedings against the directors of the plaintiff. These circumstances appear to have added ferocity to the battles which have been fought.
27 The defendant contends that the delay on the part of the plaintiff has not been satisfactorily explained. It points to six aspects of the conduct of the Doran interests as showing that the delay cannot be regarded as acceptable for present purposes and, in substance, that the delay may be attributed to the fault of the plaintiff.
28 As the plaintiff submits the relevant consideration is the conduct of the plaintiff which is now in liquidation rather than the conduct of others who are or were formerly associated with it but as a matter of practicality and commonsense, the present application is brought by the Doran brothers and by a company which they control, Doran Holdings, which is funding this application.
29 The first matter pointed to is that Doran Holdings withdrew the funding of the plaintiff at a time when, it should be inferred, the Doran brothers knew or expected that the result of the arbitration with the defendant might be adverse as it in fact was and the defendant links this with the transaction purportedly made on 28 November 1997.
30 Secondly, the plaintiff did not pay the $10,000 required by the arbitrator. Factually this is incontrovertible but the plaintiff says, in brief, that the defendant should have provided a copy of the interim award and later the final award to the plaintiff. The defendant described this as the height of impertinence. It is certainly provocative.
31 In the context, $10,000 was an almost trifling sum of money, large as most people might regard it. There is no evidence suggesting that Doran Holdings or the Doran brothers or the Doran interests more generally did not have this amount of money available. The plaintiff had promised to pay it, presumably upon the instructions of the Doran brothers and presumably because Doran Holdings had promised to fund the plaintiff, including in this respect. It was also suggested that the arbitrator could and should have waived his lien. This also seems to me to be an unattractive proposition but one which is irrelevant to the present question.
32 Thirdly, the Doran interests, to use a neutral expression because the evidence does not permit precision in this area, promised to pay $15,000 on account of the liquidator's fees at or about the time that the liquidator agreed to be appointed but they never paid this sum.
33 It seems clear enough that the Doran interests gave such a promise, although there is room for debate about precisely who gave the promise and precisely what its terms were. By September 1998 they had paid nothing. Mr Paul Doran, writing on the letterhead of the Doran Group of Companies, then wrote a letter acknowledging that, "Dorans would honour their undertaking" to pay $15,000 but "upon finalisation of the liquidation".
34 Fourthly, it was not until November 1998 that Doran Holdings agreed to provide anyone with a promise of indemnity so as to enable consideration to be given to the proposed appeal. This circumstance is contrasted with the decision of Doran holdings in December 1997 to discontinue the further conduct of the arbitral proceedings.
35 Sixthly, the defendant points to the failure of the plaintiff to call Paul Doran or any of his brothers on the present application or to explain the failure to do so. The defendant invites me to infer that neither Paul Doran nor his brothers could have given evidence helpful to the plaintiff on the present application. The plaintiff did not respond to this submission.
36 More generally, the plaintiff asserted that the defendant was not without fault. Indeed, on the plaintiff's submission, the fault lies largely, if not wholly, with the defendant.
37 The starting point is that the defendant should have provided the plaintiff with a copy of the award. Mr Gronow, a director of the defendant, explained his thinking. I accept him as a truthful and reliable, indeed an impressive witness. His view was that the defendant had paid its share of the arbitrator's fees and that if the plaintiff wanted the awards, it or those behind it should pay their share of the fees as had been promised.
38 For the plaintiff, Mr Martin SC, pointed to other circumstances said to show that the defendant was at fault. Generally speaking, these seem to me to be somewhat repetitive of the proposition that I have just summarised, or adjectival to that central proposition.
39 Further, he invited me to infer that the defendant deliberately chose not to give the plaintiff copies of the awards so as to hinder any attempt to appeal. I reject that submission and accept the evidence of Mr Gronow.
40 In summary, I find that the delay has not been explained in a satisfactory way. To the contrary, it arose from the failure of the Doran brothers or those companies they control to fund the matter.
41 As I said earlier, the amount to be provided was really quite insignificant in the overall scheme of things. It seems to me that the plaintiff has left it open to conjecture as to why the proposed appeal and the appeal itself had not been funded at an earlier stage.
42 The defendant pointed, as I have said, to the events of 28 November 1997 and to succeeding events, including the proceedings dealt with by Austin J, and the attempts made by the defendant and others to examine the directors of the plaintiff with a view to bringing proceedings against those directors. It may well be as the evidence has been allowed to lie that the decision to appeal was linked with those events. The way the evidence is allowed to lie leaves this open as a matter of conjecture.
43 The defendant also relied upon the proposition that it had been prejudiced by the delay in bringing the application. Stated very shortly, because most of the facts are not in question, the defendant incurred expense funding the public examination of the directors of the plaintiff and in generally related activities. Mr Gronow explained why this was done and what it was that had caused him to think in the way he did. As I have said, I accept his evidence.
44 The plaintiff fixed upon the fact that the date of execution of the deed by which the defendant agreed to provide the funding was 4 February 1998 by which time the present proceedings were to the knowledge of Mr Gronow on foot. His response, that he and the defendant were already committed in honour, if not as a matter of strict law, seems to me to be a sufficient one. It is probably irrelevant but courts ought not to encourage people to try to escape from moral obligations upon such a narrow view of the technicalities of the law, particularly where others have relied upon promises given.
45 In this case it seems to me to be clear that the liquidator had relied upon Mr Gronow's or the defendant's oral promises, even if they were unenforceable at law. In particular, the liquidator had initiated the procedure for the examination of the directors and had caused the process to be served before 4 February 1998. It was no doubt prudent of the liquidator to have pressed the defendant and/or Mr Gronow to formally execute an appropriate deed but assuming in the plaintiff's favour that there was no legally binding obligation until 4 February 1998. I accept the evidence of Mr Gronow as to his motivation and therefore the defendant's motivation.
46 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.
47 I am conscious that the question is whether the plaintiff has made good its application and that a good deal of what I have said relates not to the conduct of the plaintiff after it went into liquidation, but to the conduct of those who stand or formely stood behind the plaintiff. Nevertheless, it seems to me that in the circumstances of this case it is the conduct of those people which ought to be regarded as significant. It is as a matter of commonsense and practicality they who are seeking the present order. I dismiss the motion with costs.
48 I note the defendant's application that the amended summons be now dismissed with costs. The plaintiff seeks a short adjournment to consider its position having regard to the fact that there is an application still to be considered under section 44 of the Commercial Arbitration Act. I stand the matter over until 23 February 2001 in the directions list.
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I certify that this and the
preceding pages are a true copy of
the reasons for judgment herein of his
Honour Mr Acting Justice Brownie
Associate to
Mr Acting Justice Brownie
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