Kay Group Holdings Pty Ltd & Ors v K & K Plastics Pty Ltd & Ors
[2008] VSC 179
•2 June 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
F5884
No. 7969 of 2005
| KAY GROUP HOLDINGS PTY LTD (ACN 005 792 727) & ORS | Plaintiffs |
| v | |
| K & K PLASTICS PTY LTD (ACN 111 858 863) & ORS | Defendants |
No. 5726 of 2008
| K & K PLASTICS PTY LTD (ACN 111 858 863) & ORS | Plaintiffs |
| v | |
| KAY GROUP HOLDINGS PTY LTD (ACN 005 792 727) & ORS | Defendants |
No. 5922 of 2008
IN THE MATTER of Section 38 of the Commercial Arbitration Act 1984
- and –
IN THE MATTER of an Arbitration before Mr FGA Beaumont QC
BETWEEN:
| KAY GROUP HOLDINGS PTY LTD (ACN 005 792 727) & ORS | Plaintiffs |
| v | |
| K & K PLASTICS PTY LTD (ACN 111 858 863) & ORS | Defendants |
No. 6166 of 2008
IN THE MATTER of Section 42 of the Commercial Arbitration Act 1984
- and –
IN THE MATTER of an Arbitration before Mr FGA Beaumont QC
BETWEEN:
| KAY GROUP HOLDINGS PTY LTD (ACN 005 792 727) & ORS | Plaintiffs |
| v | |
| K & K PLASTICS PTY LTD (ACN 111 858 863) & ORS | Defendants |
No. 6299 of 2008
| K & K PLASTICS PTY LTD (ACN 111 858 863) & ORS | Plaintiffs |
| v | |
| CLAYTON PROPERTY INVESTMENTS PTY LTD (ACN 093 758 251) | Defendant |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 May 2008 | |
DATE OF JUDGMENT: | 2 June 2008 | |
CASE MAY BE CITED AS: | Kay Group Holdings Pty Ltd v K & K Plastics Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 179 | |
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ARBITRATION – Award – leave to enforce – whether leave should granted notwithstanding pending appeal - whether leave should granted notwithstanding pending applications to set aside award – whether stay should be granted
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr George H Golvan QC and Mr R Greenberger | Russell Kennedy Pty Ltd |
| For the Defendants | Mr Nicholas A Frenkel | Efron & Associates |
HIS HONOUR:
On 23 May 2008, I handed down my reasons for decision in the application by the vendor parties in proceeding No 5922 of 2008 for leave to appeal against the interim award dated 31 March 2008 and given by the arbitrator on 2 April 2008. A number of miscellaneous matters remained.
Matters are a little complicated by the number of proceedings which are presently on foot between the parties regarding their disputes.
1.Proceeding No 7969 of 2005 brought by writ filed in the Commercial List (F5884) on behalf of the vendor parties
2.Proceeding No 5726 of 2008 brought by originating motion filed on behalf of the purchaser parties seeking leave to appeal against the arbitrator’s award pursuant to s 38 and to set the award aside for misconduct pursuant to s 42
3.Proceeding No 5922 of 2008 brought by originating motion filed on behalf of the vendor parties seeking leave to appeal against the arbitrator’s award pursuant to s 38 and also leave to enforce the award pursuant to s 33
4.Proceeding No 6166 of 2008 brought by originating motion filed on behalf of the vendor parties seeking to set the award aside for misconduct pursuant to s 42
5.Proceeding No 6299 of 2008 brought by writ filed on behalf of the purchaser against Clayton Property Investments ( “CPI” ) seeking relief against forfeiture and injunctive relief restraining CPI from taking possession of the Clayton property.
The Order of 16 May
Certain criticisms have been made of the orders made on 16 May. They are, by and large justified. I apologise to junior counsel for the vendor parties for misdescribing her. This slip has been rectified. Second, the order purported to extend the arbitrator’s stay on the giving of possession. This is, of course, not a matter which the court has power to order. The matter of the stay is dealt with in these reasons and in the orders which follow. Finally, the reservation of costs was not dealt with. This matter, too, is now addressed.
The Appeal
Notwithstanding my conclusion that there exists manifest error on the face of the award with respect to three questions of law, the parties still wish to press on with the appeal to argue whether these errors of law exist.
I refused the application of the vendor parties to add a new ground, reserving to them the right to renew this application before the appeal judge, if so advised. I refused leave at this stage because the leave application hearings had been concluded.
I gave directions with respect to the s 42 applications which are to be heard in early July.
Possession of the Clayton Property
Counsel for the vendor parties sought leave pursuant to s 33 to enforce the award as an order of the court. Paragraphs 12, 16, 17 and 19 of the award concern the question of the purchaser’s rights to possession of this property which is owned by CPI. Counsel for the purchaser parties did not oppose the application and I granted the leave sought. I am mindful that paragraph 16 is really the only paragraph of those which I have mentioned above which may be enforced. The remaining three paragraphs, in essence, provide the machinery for the giving of this possession.
In paragraph 17 of the award the arbitrator granted the purchaser a stay on the order for possession until 30 September 2008. This stay was conditional. The conditions included the payment of rent at the rate of $40,000 per month and the provision of the guarantee of payment by Mr Mochkin and Mr Tatarka. Another condition was the payment of $416,823 plus interest being arrears of rental for the period 2 September 2005 to 31 October 2007 and mesne profits from 1 November 2007 to 31 March 2008. The award also ordered the payment by 21 April 2008 of this sum by the purchaser parties.[1] Paragraph 19 provided that, in the event of default in any such payment, the stay of the possession order should dissolve and CPI is entitled to immediate possession.
[1]Para 10.
Since the making of the award all of the conditions set out in paragraph 17 have been fulfilled by the purchaser parties, except one. The sum of $416,823 was not paid by the due date; it was paid on 28 April. Accordingly, the stay was dissolved by operation of paragraph 19.
The arbitrator’s stay was in the nature of an extension of an undertaking given by CPI to Hollingworth J on 7 September 2007 that it would not disturb the purchaser’s possession pending the hearing and determination of proceeding No 7969 of 2005. Technically, the proceeding has not yet been determined but the award of the arbitrator dealt with this matter in paragraphs 12 and 18. CPI holds a signed consent in relation to the discharge of the undertaking which it is now permitted to file. It has now filed this document and, there being nothing said in opposition, I formally released CPI from the undertaking.[2] Any restraint upon the taking of possession by CPI must now depend upon an order which I may be persuaded to make.
[2]T86.
The issue then is whether I could and should defer possession to 28 September 2008 or some other date. This was opposed by the vendor parties who pressed for immediate possession.
Having heard argument, I determined that CPI was entitled to immediate possession but that I would grant a stay of three weeks, that is, to 13 June 2008 to enable it to vacate the premises in an orderly way. These are my reasons for that determination.
The arbitrator found that the purchaser held the Clayton premises as a “tenant in equity under the agreement for lease pending its entry into a lease of the premises from CPI”.[3] The terms of this tenancy were those in cl 6 of the sale agreement.[4] These terms included a provision that the period of the lease was three years plus an option of a further three years.[5] The term of the lease expired on 31 October 2007. As at that date the arbitrator found that the rental was in arrears for over two years, from 2 September 2005. The purchaser did not seek to exercise its option for a further term but remained in possession, not paying rent.
[3]Reasons, para 47(b).
[4]Reasons, para 46.
[5]Sale agreement, cl 6.2.
Before the arbitrator the purchaser set out the difficulties which it faced in moving its operations from the Clayton premises. The arbitrator was moved by this and granted the stay which I have mentioned, but imposing conditions because of his concern that CPI should suffer no prejudice.[6] It is important to note that the continuing possession of the premises was granted by the arbitrator as an indulgence and not in deference to any right in the purchaser to possession.
[6]Further reasons, paras 18, 23-27.
The submissions of the purchaser before me were put on three bases. First, that there now exists between CPI and the purchaser the relationship of landlord and tenant and that I should enjoin the landlord from disturbing the tenant’s quiet possession. In support of this, a writ has been filed on 22 May 2008 in proceeding No 6299 of 2008. Second, that the court should grant relief against forfeiture. Third, that in deference to the difficulties of the purchaser, the court should grant a stay to enable it to achieve an orderly vacation with minimum disruption to its business.
The gist of the first contention is that, by permitting the purchaser to remain in possession and by accepting rental and by the documentation which was executed in fulfilment of the conditions contained in paragraph 17 of the award, CPI granted and the purchaser accepted a lease for a term expiring on 30 September 2008 at a rental of $40,000 per month.
In order to obtain an injunction of the kind sought by the purchaser it must show a triable issue as to the existence of the tenancy. This it has not done. The documentation was provided and executed in compliance with the terms of the award. The purchaser was permitted to remain in possession, not by any agreement or acquiescence by CPI, but by the coercive power of the award. The agreement and the guarantee executed by the purchaser parties does not assert or create any lease. CPI is not a party to it.
The second contention was that I should grant relief against forfeiture. There are a number of difficulties. First, there is no lease which has been forfeited. The purchaser is an overholding former tenant. The breach for which it seeks relief is not a breach of a term to pay rental. The terms of paragraph 19 of the award show that the arbitrator considered that compliance with the paragraph 17 conditions must be strictly observed. An attempt to show that the purchaser had taken reasonable steps to comply with its obligation to pay the sum of over $400,000 has not been successful. The purchaser has known that it would have had to give possession and to pay that sum since mid-February when the arbitrator’s original reasons were published and, certainly, since 2 April 2008 when the revised reasons and further reasons were published and when the award was made. To my mind, its efforts since those dates have been insufficient.
Finally, the purchaser seeks an indulgence. I must confess that it has done little to warrant this. From the material before me it has shown itself remarkably reluctant to make any sacrifice in order to give the possession which it must inevitably give. Its continuing possession represents a disadvantage and a risk to CPI. There is mention in the bank documents to a downgrading of the credit of the purchaser and to the prospect that, in certain circumstances, it may be placed in administration. The worth of the guarantors is also a matter of concern. There is mention by Mr Tatarka of the possibility of his bankruptcy. I know nothing of his worth or that of Mr Mochkin. Notwithstanding this I indicated that I would give a stay of three weeks to enable the purchaser to vacate the premises in an orderly way.
The Enforcement of the Award
The vendor parties also seek leave to enforce paragraphs 4, 5, 6, 7, 8, 13, 15, 21, 22, 23, 24 and 25 of the award. These are essentially the award for payment of money by one or other of the parties. The difficulty with this application is the prospect that, upon appeal, parts of the award might be set aside or varied. In these circumstances, it was put on behalf of the purchaser parties that the application should be refused or, perhaps, deferred pending the outcome of the appeal. Counsel for the vendor drew to my attention the cases dealing with stay upon an order which is subject to appeal. In those circumstances, a stay will not ordinarily be given unless special circumstances are demonstrated. They said that, if their appeal is successful, the prospect is that the award against the purchaser will be increased rather than reduced. They said that the delay in payment pending appeal risks causing prejudice to their client. They mentioned, too, the evidence as to the prospect that the purchaser may go into administration and Mr Tatarka into bankruptcy.
I was reminded that each party seeks an order pursuant to s 42 setting aside the award. I express no view about the prospects of success of these applications. They appear to be based on the suggested errors of law by the arbitrator which were the basis of the cross-applications for leave to appeal which I have considered on the leave application.[7]
[7]As to which, see Jacobs, Commercial Arbitration – Law and Practice par [40.65] and the cases there referred to.
There is no suggestion that the vendor, if required to do so, will not be able to refund to the purchaser the sums which may be paid in accordance with the arbitrator’s award.
In the circumstances, I decline to order any stay on the enforcement of the sums awarded. I will give leave to the vendor parties to enforce those paragraphs of the award as if they were an order of the court. In the case of paragraphs 13 and 24 of the award, the money is payable by the vendor parties. If so advised, I would make a like order in favour of the purchaser parties in respect of these amounts so that it may be set off against the sums payable by them to the vendor parties in accordance with paragraph 25 of the award.
Subpoena
I declined to order that the confidential documents produced by Westpac Bank under subpoena should be made available for inspection by the vendor parties. The application for which the subpoena was issued has been determined. The documents should therefore be returned or disposed of.
Costs
The outstanding issue, then, is as to the costs of the various applications before me.
Proceeding No 7969 of 2005
CPI seeks the costs of its application to dissolve the undertaking given by it on 7 September 2007. I will order that the purchaser pay these costs to CPI as successful party.
The vendor parties sought leave to enforce the award. They were successful and should have their costs of this. These costs will include those relating to the application to stay the possession order since the short stay which I have granted was by way of indulgence.
Proceeding No 5726 of 2008
The purchaser parties as unsuccessful parties will pay the costs of the vendor parties’ application for leave to appeal.
The costs of the parties as to the directions for the hearing of the s 42 applications will be costs in that application.
The vendor parties’ costs of the purchaser parties’ application to set aside the banks’ subpoenas should be paid by the purchaser parties.
The purchaser parties’ costs of the vendor parties’ application to inspect the confidential subpoenaed documents should be paid by the vendor parties. These last two costs orders should be set off.
Proceeding No 5922 of 2008
The costs of the vendors parties’ successful application for leave to appeal should be included in the costs of the appeal. There was some complaint about the number of lawyers engaged by the vendor parties in this application. This is a matter for the Taxing Master.
Proceeding No 6166 of 2008
The costs of both parties of the directions given with a view to the hearing of the s 42 application should costs in that application.
Proceeding No 6299 of 2008
The application for relief against forfeiture and for injunctive relief which the purchaser brought informally against CPI was unsuccessful. CPI should have its costs of that application.
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