Perth Freightlines Pty Ltd & Ors v BM2008 Pty Ltd (in liq) & Ors
[2011] VSCA 218
•1 April 2011
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2011 0021
| PERTH FREIGHTLINES PTY LTD | |
| First Applicant | |
| and | |
| VFS GROUP PTY LTD (ACN 121 880 751) | Second Applicant |
| and | |
| STEVE ILIOPOULOS | Third Applicant |
| v | |
| BM2008 PTY LTD (in liquidation) | First Respondent |
| and | |
| MAURICE AUSTIN MACKENZIE | Second Respondent |
| and | |
| DIANE MARGARET COX | Third Respondent |
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JUDGES: | REDLICH and BONGIORNO JJA |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 1 April 2011 |
DATE OF JUDGMENT: | 1 April 2011 |
MEDIUM NEUTRAL CITATION | [2011] VSCA 218 |
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ARBITRATION – Award – Enforcement by court order – Application for leave to appeal out of time against making of order – Order not in terms of award – Notwithstanding possible error in order no material prejudice to applicants – Leave refused – Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd (No 1) [2005] 2 Qd R 174 – Commercial Arbitration Act 1984 s 33.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr D H Denton SC with Ms P Djohan | Belleli King & Associates |
| For the Respondents | Mr G T Bigmore QC with Mr D C Harrison | Cooper Mills Lawyers |
REDLICH JA:
I will ask my brother Bongiorno JA to deliver the first judgment.
BONGIORNO JA:
This is an application for leave to appeal out of time against a decision of Hargrave J enforcing an arbitral award pursuant to s 33 of the Commercial Arbitration Act1984.
The arbitration to which the application relates was conducted by the Honourable E W Gillard QC. It concerned a dispute which arose in relation to a contract dated 25 June 2008 for the sale and purchase of a business owned by the first respondent, now called BM2008 Pty Ltd (‘BM2008’). The sale was to another company, Perth Freightlines Pty Ltd (‘PFL’). There were a number of other parties to the contract, including VFS Group Pty Ltd (‘VFS’) and Steve Iliopoulos, who signed as guarantors. Clause 6.6 of the contract provided that VFS and Illiopoulos guaranteed the performance of PFL’s obligations under the contract.
The arbitrator entered upon the reference and, by an interim award dated 15 July 2009, awarded a sum of more than $2 million to BM2008. The interim award was in the following form:
(A)That the first respondent Perth Freightlines Pty Ltd pay to the claimant BM2008 Pty Ltd the sum of $2,320,485.20 together with interest to 15 July 2009 of $144,442.25 being a total of $2,464,927.40 plus interest of $890.04 per day until payment.
(B) That the second and third respondents VFS Group Pty Ltd and Steve Iliopoulos pay to the claimant BM2008 Pty Ltd any monies not paid by the company Perth Freightlines Pty Ltd pursuant to interim award 1.
(C) That the counterclaim brought by the respondents be dismissed.
According to the terms of the interim award, the liability of the guarantors was contingent upon the principal debtor not making a payment. No time was prescribed by the arbitrator for payment by the principal debtor, but it is not
insignificant that the arbitrator did not mention clause 6.6 of the contract or the liability of the guarantors in his statement of reasons for making the award, other than to note their existence.
The terms of the interim award were confirmed by the arbitrator in his final award dated 14 August 2009. The final award was in the following form:
A.That the first respondent Perth Freightlines Pty Ltd pay to the claimant BM2008 Pty Ltd (in Liquidation) the sum of $2,320,485.20 together with interest up to and including 14 August 2009 of $171,143.45 being a total of $2,491,628.65 plus interest of $890.04 per day until payment.
B. That the counter-claim of the respondents be dismissed.
C.Order that the first respondent pay 95% of the claimant’s costs of the claim on a solicitor-client basis, such costs to be taxed in default of agreement in the Supreme Court of Victoria.
D.Order that the respondents pay the claimant’s and cross respondents’ costs of the counterclaim on a solicitor-client basis, such costs to be taxed in default of agreement in the Supreme Court of Victoria.
E.That the second and third respondents pay to the claimant BM2008 Pty Ltd any monies not paid by the first respondent Perth Freightlines Pty Ltd to it, pursuant to the final award paragraphs A and C.
In due course, the applicants sought leave to appeal the interim and final awards, whilst the respondents sought leave to enforce the final award pursuant to s 33 of the Commercial Arbitration Act1984, which provides as follows:
An award made under an arbitration agreement may, by leave of the Court, be enforced in the same manner as a judgment or order of the Court to the same effect, and where leave is so given, judgment may be entered in terms of the award.
The matter was heard and determined by Hargrave J on 18 November 2009. His Honour refused the application for leave to appeal and granted the respondents leave to enforce the final award.[1]
[1] Perth Freightlines Pty Ltd v BM2008 Pty Ltd [2009] VSC 542.
During the hearing before Hargrave J, there was little discussion of the respondents’ application for leave to enforce the award. The only reference to this application in the transcript appears on pages 66–7, where his Honour referred to the application and counsel for the applicants stated that he had nothing to say in relation to it. He made a concession to the effect that if leave to appeal were not granted then the respondents would be entitled to leave to enforce the award.
After delivering judgment, Hargrave J made orders. His Honour then asked counsel whether they wished to say anything about the form of the orders. Counsel for the applicants referred to what he called ‘orders 3 and 4’, noting that these orders dealt with solicitor-client costs, and said that, subject to checking, he assumed that these orders were ‘pursuant to the award’. He also made comments to the effect that each of the applicants would be indebted by judgment as a result of Hargrave J’s orders. Specifically, in the course of seeking a stay of what he referred to as ‘order 2’, he said:
…the two corporate defendants and the individual, they are business people. Time is required to consider the position and not be face [sic] tomorrow with a statutory demand.
By ‘the two corporate defendants’ and ‘the individual’, counsel for the applicants was clearly referring to PFL and VFS on the one hand, and Iliopoulos on the other. His statement suggests that he believed that, unless a stay were given, the two corporate entities — PFL and VFS — could face statutory demands immediately.
Hargrave J’s order was authenticated on 18 December 2009 and, so far as is material to this application, is in the following form:
1.The Plaintiffs are given leave to enforce the final award made by the Honourable E William Gillard QC on 14 August 2009 in the arbitration between the parties.
2.There be judgment for the Plaintiffs as appears below.
3.The Defendants pay to the First Plaintiff BM2008 Pty Ltd (in liquidation) the sum of $2,577,072.49.
As is apparent from paragraph 2, the order did not refer to the guarantors separately but simply elided paragraphs A, C and E of the final award to combine the indebtedness of the principal debtor and the guarantors and make them jointly and severally liable.
It is now argued, in support of this application for leave to appeal out of time against Hargrave J’s order, that the order was not in the form of the final award, as required by s 33, which provides that judgment may be entered ‘in terms of the award’. Courts of authority have interpreted this provision strictly so as to require the court order to conform to the actual terms of the award and not just be expressed in terms ‘to the same effect’ as the award.[2] It is accordingly at least reasonably arguable that the order made by Hargrave J was not authorised by the Act. However, it appears that the order was acquiesced in by counsel for the applicants when it was made. Certainly, counsel’s comments immediately following the making of the order demonstrate that he understood that the order had the effect of making the three applicants jointly and severally liable for the full amount owed to BM2008.
[2]See Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd (No 1) [2005] 2 Qd R 174. See also Jugoslavenska Oceanska Plovidba v Castle Investment Co Inc [1974] QB 292.
Since Hargrave J’s order was authenticated it has been acted upon in various enforcement proceedings against the applicants in the federal insolvency jurisdiction, both at first instance and on appeal. No question of any error with respect to the form of the order has ever been raised.
The applicants are now arguing that it was not realised until the end of November last year that the order was or might be erroneous. It is common ground that at no time has any payment been made of the sum determined by the arbitrator to be owing by PFL to BM2008. On any construction of the award made on 14 August 2009, therefore, the guarantors’ liability had well and truly arisen by the time Hargrave J made his order three months later on 18 November 2009. Thus, at the time his Honour made the order, there was in fact a liability on the part of the guarantors to pay the amount unpaid by the principal debtor. Such has been the case ever since. At law, on the date of Hargrave J’s judgment, the respondents would have been entitled to an immediate judgment for the full amount owing against all three applicants. Had the defect, if it be a defect, in Hargrave J’s order been brought to anyone’s attention at any time in the past 15 months, steps could have been taken to obtain a judgment in precisely the terms of that order. The only impediment might have been procedural, and any procedural impediment could have been overcome either by amendment of the proceeding in which Hargrave J made his order to make the claim against the guarantors (if the defect had been discovered early enough) or by the institution of a separate proceeding. In neither case would the applicants have had any defence to such a claim, just as they have no defence now.
Counsel for the applicants in this Court suggested that, in certain theoretical circumstances, his clients could be prejudiced if Hargrave J’s order were allowed to stand. He referred to the possibility of the principal debtor becoming entitled to some form of insolvency relief which might affect the guarantors’ liability. Not only was he unable to spell out the mechanics by which the guarantors would be relieved of any liability by the principal debtor becoming subject to some form of company reconstruction, scheme of arrangement, or other relief, he conceded that there were no circumstances contemplated which might give rise to the possibility of such relief. Nor could he spell out how any such event would relieve the guarantors of their liability.
In short, counsel for the applicants was unable to point to any material prejudice which his clients might suffer if Hargrave J’s order were allowed to stand in its present form. There is no basis for an order granting the applicants an extension of time within which to appeal against Hargrave J’s decision. I would refuse the application.
REDLICH JA:
I agree. The proposed orders of the Court will be as follows:
1. The application by summons filed on 21 February 2011 that the applicants have leave to appeal out of time against the decision of the Honourable Justice Hargrave made on 19 November 2009 is refused.
2. The applicants pay the respondents’ costs of the application.
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