Indian Farmers Fertiliser Cooperative Ltd v Gutnick (No 2)
[2015] VSC 770
•22 December 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
ARBITRATION LIST
S CI 2015 05409
| INDIAN FARMERS FERTILISER COOPERATIVE LIMITED KISAN INTERNATIONAL TRADING FZE | First Applicant Second Applicant |
| v | |
| JOSEPH ISAAC GUTNICK LEGEND INTERNATIONAL HOLDINGS, INC | First Respondent Second Respondent |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 December 2015 |
DATE OF JUDGMENT: | 22 December 2015 |
CASE MAY BE CITED AS: | Indian Farmers Fertiliser Cooperative Ltd v Gutnick (No 2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 770 |
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ARBITRATION – Application to stay execution of a judgment enforcing a foreign arbitral award – Relevance of the context of international commercial arbitration – International Arbitration Act 1974 (Cth) – Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] FCA 918 – Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194 – Far Eastern Shipping Co v AKP Sovcomflot [1995] 1 Lloyd’s Rep 520 – Strandore Invest A/S v Soh [2010] SGHC 174.
PRACTICE AND PROCEDURE – Application to stay execution of a judgment pending an appeal – Matter properly to be decided by the Court of Appeal – Supreme Court (General Civil Procedure) Rules 2015, r 66.16.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | C.J. Horan SC | Ashurst Australia |
| For the Respondents | A.A. Monichino QC | Herbert Smith Freehills |
HIS HONOUR:
Introduction
The Respondents seek a stay of execution of the judgment delivered in this matter on 21 December 2015 on the basis that a proposed appeal will be rendered nugatory unless a stay is granted.[1] For the reasons that follow, I will grant an interim stay of execution of the judgment until 4 pm on 5 February 2016, or until such earlier time as the Court of Appeal otherwise directs.
[1]Indian Farmers Fertiliser Cooperative Ltd v Gutnick [2015] VSC 724.
For the sake of convenience, these reasons adopt the terminology used in Indian Farmers Fertiliser Cooperative Ltd v Gutnick.[2]
[2][2015] VSC 724.
Principles applicable to the grant of a stay of execution of a judgment
The Court has power to stay execution of a judgment under r 66.16 of the Supreme Court (General Civil Procedure) Rules 2015, and in its inherent jurisdiction. The Respondents submit that the principles governing the grant of a stay pending an appeal are the same in the context of a stay of a judgment enforcing a foreign arbitral award as they are for any other judgment of the Court.[3] Specifically, the Respondents submit that a stay may be granted if the Court is satisfied that:[4]
(a) the appeal enjoys reasonable prospects of success;
(b) the appeal will be rendered nugatory if a stay is not granted; and
(c)the grant of a stay will not cause serious prejudice to the [judgment creditor].[5]
[3]Outline of Submissions of the Respondents on Application to Stay Execution of the Judgment (22 December 2015) [13]; Transcript 4–6.
[4]Outline of Submissions of the Respondents on Application to Stay Execution of the Judgment (22 December 2015) [13].
[5]Maher v Commonwealth Bank of Australia [2008] VSCA 122, [27]. See also Hoskin v Victorian Civil and Administrative Tribunal [2015] VSCA 270, [28].
The Respondents submit that these principles were applied in the context of staying execution of a judgment enforcing a foreign arbitral award pending an appeal in Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd.[6] In that case, Katzmann J set out the relevant principles in relation to a grant of a stay pending appeal as follows:[7]
[6][2013] FCA 918.
[7]Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] FCA 918, [21]. See also Outline of Submissions of the Respondents on Application to Stay Execution of the Judgment (22 December 2015) [8].
(1)The starting point is that the successful party is entitled to the fruits of the judgment;
(2)The onus is on the applicant to demonstrate a proper basis for a stay that will be fair to all parties; it is not enough to simply file a notice of appeal;
(3) The applicant need not establish special or exceptional circumstances;
(4)The Court must weigh all relevant considerations, including the competing rights of the parties and the balance of convenience;
(5)The Court will not generally speculate about the applicant’s prospects of success in the appeal but may make a preliminary assessment as to whether there is an arguable case on the appeal and the strength of the parties’ respective cases will be relevant;
(6)Where there is a risk that the applicant will dispose of assets if a stay is granted, a stay may be refused; and
(7)Where there is a risk that absent a stay the appeal will be rendered nugatory, that will weigh heavily in the applicant’s favour. An appeal will be rendered nugatory where there is a real prospect that a successful appellant will not be able to be restored to its former position if the judgment against it is executed or where there is no reasonable prospect of recovering moneys paid pursuant to the judgment.[8]
[8]Federal Commissioner of Taxation v Myer Emporium Ltd (1986) 160 CLR 220 at 222–3.
I note that her Honour did not identify expressly whether the context in which the stay is being sought—in this case, the context of international commercial arbitration—is a relevant consideration. It may be that her Honour considered that the question of context was subsumed in one or more of the other principles set out above. Nevertheless, since her Honour’s judgment, the Full Court of the Federal Court have clarified that the international arbitral context is a relevant consideration upon the hearing of an application to stay execution of a judgment enforcing a foreign arbitral award.[9]
[9]Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194 at 197–8 [12]–[16], 200 [27], [30].
In my view, the statutory context in which a judgment is made is critical to the question of whether to stay its execution. In the present application, the policy of the Act—and by implication, the policy of the Model Law and the New York Convention—is relevant and provides an overarching framework for all determinations made in connection with international commercial arbitration.[10]
[10]Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194 at 197–8 [12]–[16], 200 [27], [30]; Far Eastern Shipping Co v AKP Sovcomflot [1995] 1 Lloyd’s Rep 520 at 524; Strandore Invest A/S v Soh [2010] SGHC 174, [11], [16].
In Cywinski v Deputy Commissioner of Taxation,[11] the Full Court held that the legislative context in question is critical when considering whether to stay execution of a judgment. Kaye J said that:[12]
On the hearing of an application for a stay of execution of a judgment for tax assessed by the commissioner, the court is required to give great weight to the policy of the Income Tax Assessment Act …
The governing Commonwealth legislation did, in that case, contain an express provision requiring such consideration. Nevertheless, having regard to the overwhelming implication to the same effect to be drawn from the provisions of the International Arbitration Act 1974 (Cth), the position in the present case is relevantly the same. Moreover, this position is made very clear in recent Australian court decisions.[13]
[11][1990] VR 193.
[12]Cywinski v Deputy Commissioner of Taxation [1990] VR 193 at 196.
[13]See, eg, Subway Systems Australia Pty Ltd v Ireland [2014] VSCA 142; Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd (2014) 289 FLR 30; TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387; Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194.
This issue was addressed more recently in the context of the Act in Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (“Elders”), where the Full Court of the Federal Court refused leave to appeal a refusal to stay a judgment enforcing a foreign arbitral award.[14] In that case—referring to the approach of the trial judge—Allsop CJ said:[15]
[14]The question of the stay was … one to be dealt with under the rules of Court, as his Honour did. The nature of the judgment and its source were, in my view, clearly available matters to be taken into account. I see no approach in his Honour’s reasons different from that. A clear, express and demonstrated public policy of the Australian Parliament is contained within the Act for the facilitation of the enforcement of international arbitral awards. That facilitation means their proper, efficient and timeous facilitation and recognition. To grant a stay would delay enforcement. That is not to say, however, that a stay of a judgment based on an international arbitration award should never be given, or that there should be some legal rule or consideration binding or affecting the exercise of that discretion.
…
[16]Thus, I do not see any likely appealable error whatsoever in how his Honour has framed the context in relation to the stay application being the international arbitral context.
[14](2014) 324 ALR 194.
[15]Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194 at 198 [14]–[16].
After referring to the objects of the Act in ss 2D and 39, Rares J added that the “discretion to grant a stay is available to prevent injustice and in circumstances where it is called for having regard to all the facts.”[16]
[16]Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194 at 200 [27].
And Middleton J added that:[17]
Once a court has decided to enforce an award, it should normally give full effect to that decision by directing the entry of an appropriate money judgment or making an appropriate order for payment. It must be recognised that any stay, particularly one for an indefinite period of time, would not give full effect to the timely enforcement of an arbitral award made in relation to international trade and commerce.
[17]Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194 at 200 [30].
The Respondents submit that Elders does not apply in the present circumstances because it did not concern an application for a stay of execution pending an appeal.[18] Rather, Elders concerned a stay of execution of a judgment enforcing an award pending the hearing and determination of a related arbitration between the same parties. Nevertheless, I am of the view that the statements of the Full Court of the Federal Court set out above are cast in sufficiently general terms so as to make them binding on this Court in the present circumstances. Indeed, as in Elders, the question of whether to grant a stay is to be determined in accordance with the rules of Court, and the nature of the judgment and its source are relevant matters to take into account.[19]
[18]Transcript 5–6.
[19]Cywinski v Deputy Commissioner of Taxation [1990] VR 193 at 196; Elders International Australia Pty Ltd v Beijing Be Green Import & Export Co Ltd (2014) 324 ALR 194 at 198 [14].
In addition to those considerations raised by the trial judge and on appeal in Elders, I would respectfully add that under s 39 of the Act, the Court must also have regard to the fact that arbitral awards are intended to provide certainty and finality.
I note that the applicable principles set out in the preceding reasons are also consistent with international jurisprudence on staying execution of a judgment enforcing an arbitral award under the New York Convention.[20] In Strandore Invest A/S v Soh (“Standore Invest”),[21] Loh J, sitting in the High Court of Singapore, set out the principles applicable to a stay of execution pending an appeal, which are broadly similar to those set out by the Court of Appeal in Maher v Commonwealth Bank of Australia,[22] and by Katzmann J in Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd.[23]
[20]See TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387 at 405 [75].
[21][2010] SGHC 174, [7].
[22][2008] VSCA 122 [17]–[27].
[23][2013] FCA 918, [21]. See above [3]–[5].
Having weighed the relevant facts, Loh J dismissed the application for a stay. His Honour commented that the award debtor had displayed a history of delinquency taking “every possible procedural step, defence and technicality, in an attempt to defeat and delay the Applicants’ claims against him.”[24]
[24][2010] SGHC 174, [8].
Loh J also commented on the difficulty that may face an applicant for a stay where a stay is sought in the context of international commercial arbitration. His Honour noted that an application for a stay of execution may be less readily available in this context:[25]
In this case, Soh does not have the untrammelled rights of a normal appellant before the appellate court. He is attempting to resist enforcement of an international arbitration award and his grounds are limited to those set out in the [International Arbitration Act (Singapore, cap 143A, 2002 rev ed)]. That is capable of objective assessment and that must be put in the balance when considering [whether to exercise the discretion to grant a stay.]
[25]Strandore Invest A/S v Soh [2010] SGHC 174, [11].
Loh J went on to quote from the judgment of Potter J, sitting in the Queen’s Bench Division, in the case of Far Eastern Shipping Co v AKP Sovcomflot (“Far Eastern Shipping”):[26]
[26]Strandore Invest A/S v Soh [2010] SGHC 174, [16].
16… [Potter J] went on to add, that it would rarely, if ever, be appropriate to order a stay in respect of a [New York] Convention award, when by definition under the Convention, the time for enforcement had arrived:[27]
I envisage that the Court will rarely, if ever, regard it as appropriate to make such an order in respect of a Convention award, when, by definition, under the Convention, the time for enforcement has arrived. Plainly the rationale of the Convention is aimed at the enforcement of foreign arbitral awards unless either the unsuccessful party is seeking to have it set aside in the country where the award was made (in which case an adjournment of the enforcement proceedings under s 5(5) may be appropriate) or there is some fundamental ground of objection on grounds provided for in s 5(2)–(4). I do not venture to speculate on what circumstance if any, might induce a court in another case to grant a stay in respect of a judgment upon a Convention award properly obtained. I am satisfied that none such exists in this case.
17I respectfully agree with those observations and like Potter J, I was satisfied that no valid grounds exist in this case for the grant of a stay pending appeal. I accordingly dismissed the application.
[27]Far Eastern Shipping Co v AKP Sovcomflot [1995] 1 Lloyd’s Rep 520 at 524.
The Respondents sought to distinguish Strandore Invest on its facts and submitted that the international arbitral context does not affect the general principles applicable to the grant of a stay of execution of a judgment.[28] For the preceding reasons, I reject this submission and I respectfully adopt the analysis in Far Eastern Shipping and Strandore Invest—in addition to that set out in Elders.
[28]Outline of Submissions of the Respondents on Application to Stay Execution of the Judgment (22 December 2015) [11]; Transcript 11–12.
Should a stay of execution be granted?
In light of these general principles, I am of the view that the policy underlying the Act speaks strongly against staying execution of a judgment enforcing a foreign arbitral award.
The Award has already been successfully enforced in the courts of the seat, being Singapore, and now the Award has also been enforced in Australia. In Singapore, the Respondents failed to raise any ground for refusing enforcement, and in this Court, the Respondents failed to establish that enforcement would be contrary to public policy. The Respondents have not sought to stay execution of the judgment enforcing the Award in Singapore.[29] The Respondents have therefore had ample opportunity to make submissions as to why enforcement ought be refused on the one hand, and as to any injustice that might be occasioned should a stay be refused on the other.
[29]Transcript 7.
It is important to bear in mind that the Respondents are sophisticated commercial parties engaged in international business dealings and have engaged experienced international counsel and lawyers to act on their behalf. The Act exists to facilitate the kind of international trade and commerce from which the Respondents draw significant benefit by encouraging the use of arbitration as a method of resolving disputes. The “trade-off” is that the Respondents—by choosing to arbitrate—acknowledge that arbitration is an enforceable and timely method of resolving disputes and that arbitral awards are intended to provide certainty and finality.
In light of the Respondents stated intention to expedite the filing and service of their application for leave to appeal,[30] and their undertaking to prosecute that application and the appeal itself with all due expedition,[31] I am of the view that this is a matter which is now properly to be decided by the Court of Appeal. Accordingly, the balance of convenience weighs in favour of granting an interim stay of one week or until such earlier time as the Court of Appeal has an opportunity to consider this matter. I note that this is the same course I adopted following judgment in the case of Altain Khuder LLC v IMC Mining Inc.[32]
[30]Outline of Submissions of the Respondents on Application to Stay Execution of the Judgment (22 December 2015) [2].
[31]Transcript 17.
[32](2011) 246 FLR 47; (2011) 276 ALR 733.
Given the time of year and the fact that the legal year does not re-open until 1 February 2016, I am prepared to stay execution of the judgment until 4 pm on 5 February 2016, or until such earlier time as the Court of Appeal otherwise directs. This is an interim stay of no more than five court days during a Law Term; unless the Court of Appeal hears the application in the meantime. I am of the view that the interim stay should be granted unconditionally on the grounds that there is no evidence before the Court as to the appropriateness of imposing a condition on the stay that the Respondents pay some or all of the judgment debt into court.
Conclusion and orders
For the preceding reasons and for the reasons published on 21 December 2015,[33] the following orders have been made:
[33]Indian Farmers Fertiliser Cooperative Ltd v Gutnick [2015] VSC 724.
(1) Pursuant to s 8(2) of the International Arbitration Act 1974 (Cth), the Final Award dated 7 May 2015 (the Award) in the matter of “An arbitration under the International Arbitration Act (Cap 143A) and pursuant to the Arbitration Rules of the Singapore International Arbitration Centre (4th edition, 1 July 2010) between Indian Farmers Fertiliser Cooperative Limited and Kisan International Trading Fze (Applicants) and Joseph Gutnick and Legend International Holdings, Inc (Respondents)” (ARB No. 019 of 2013; ARB No. 072 of 2013) (the Arbitration) be enforced as if it were a judgment or order of the Supreme Court of Victoria, and for these purposes the following orders are made:
(a) A declaration that the Shareholders Agreement dated 14 July 2008 between the First Applicant and the First Respondent and the Share Options Agreement dated 14 July 2008 between the First Applicant and the Second Respondent are rescinded.
(b) An order that the First Respondent pay to the Applicants the sum of US$28,050,000.00 together with interest from 14 July 2008 calculated at the rate of 5.33% per annum until the date of the Award.
(c) An order that the Second Respondent pay to the Applicants the sum of US$12,350,000.00 together with interest from 7 August 2008 calculated at the rate of 5.33% per annum until the date of the Award.
(d) An order that the Applicants are to pay the Respondents the sums of SG$96,262.65 and US$35,250 as costs in the Arbitration necessitated by or thrown away as the result of the amendments and the vacation of the original evidentiary hearing dates.
(e) An order that the Respondents pay to the Applicants 80% of their legal and other costs for the conduct of the Arbitration, to be taxed by the Registrar of the Singapore International Arbitration Centre (SIAC) if not agreed.
(f) An order that the Respondents bear 80% and the Applicants bear 20% of total costs of Arbitration which is SG$596,170.89, as determined by the Registrar of the SIAC.
(2) Subject to paragraph 4, the Respondents pay the Applicants’ costs of this proceeding on the standard basis.
(3) Execution of the judgment and orders set out in paragraphs 1 and 2 above be stayed until 4 pm on 5 February 2016, or until such earlier time as the Court of Appeal otherwise directs.
(4) The costs of and incidental to the Respondents’ application for a stay of the execution of the judgment and orders be reserved to the Court of Appeal in any application for leave to appeal from the judgment and orders dated 22 December 2015 in this proceeding.
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