Shanghai Wool and Jute Textile Co Ltd v Phillip Jones Pty; Ltd and Anor
[2010] VCC 742
•28 June 2010 (Revised 29 June 2010)
| IN THE COUNTY COURT OF VICTORIA | Revised |
(Not) Restricted
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-03-01165
| SHANGHAI WOOL AND JUTE TEXTILE CO LTD | Plaintiff |
| v. | |
| PHILIP JONES PTY LTD and YIMIN ZHANG | Defendants |
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| JUDGE: | His Honour Judge Anderson |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 28 June 2010 |
| DATE OF JUDGMENT: | 28 June 2010 (Revised 29 June 2010) |
| CASE MAY BE CITED AS: | Shanghai Wool and Jute Textile Co Ltd v. Phillip Jones Pty Ltd & Anor |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0742 |
REASONS FOR JUDGMENT
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| Catchwords: | Practice and procedure – International arbitration – Leave to enforce award – s.8 International Arbitration Act 1974. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M. Sanger | Michael J. Kane |
| For the First Defendant | Mrs X. Zhang, a director (by leave) | |
| For the Second Defendant | Mr Y. Zhang in person | |
| HIS HONOUR: |
1 By summons dated 12 May 2010, the plaintiff sought leave to enforce an award made on 26 October 2007 by the China international Economic and Trade Arbitration Commission, and to enter judgment against the second defendant, Mr Yimin Zhang. The plaintiff’s
application was opposed by Mr Zhang on a number of grounds.
2 On 19 March 2003, the plaintiff commenced a proceeding in this court against the first defendant, Philip Jones Pty Ltd. Mr Zhang was, at the times relevant to the plaintiff’s claim, a director of the first defendant. The claim in the proceeding was for the balance of the purchase price of Worsted fabric sold by the plaintiff in Shanghai, China, to the first defendant in Melbourne, pursuant to a written sales contract dated July 2000 constituted by a sales confirmation document.
3 A defence was filed expressly denying that the agreement was between the company and the plaintiff. By order dated 24 February 2004, the plaintiff was given leave to join Mr Zhang as a second defendant. An amended statement of claim was subsequently filed, alleging in the alternative, that the agreement was made with the second defendant.
4 Mr Zhang made application, firstly, to dismiss the proceeding, and later, to stay the proceeding, on the basis that the written agreement contained an arbitration clause. The clause reads as follows:
“All disputes arising out of the performance of or relating to this contract, shall be provisional rules of procedure. The arbitral award is final and binding upon both parties”.
settled through amicable negotiation. In case no settlement can be reached
through negotiation, the case shall then be submitted to the Foreign Economic
and Trade Arbitration Commission of the China Council for the Promotion of
5 Mr Zhang’s application for a stay was dismissed in this Court. However, the Court of Appeal on 23 June 2006 ordered that “such part of the proceeding as is said to arise out of the ‘original sale agreement’ or the ‘alternative sale agreement’ described in the respondent’s further amended statement of claim dated 9 September 2004, delivered pursuant to leave granted by Judge Harbison on 19 August 2004, be referred to arbitration in accordance with Clause 5 of the sales confirmation”. The Court of Appeal also ordered that “there be a stay of the proceeding, pending the hearing and determination of the above arbitration or further order”.
6 An application for arbitration was submitted by Shanghai No. 2 Worsted Textile Ace Industrial Co Ltd (“Shanghai Worsted”) to the China International Economic and Trade Arbitration Commission on 16 August 2006, with what was described as an “Explanation” submitted by the plaintiff on 28 August 2006. The respondents to the arbitration were Mr Zhang and Philip Jones Import/Export, a business of which he was the sole proprietor. An Arbitration Tribunal was appointed to determine the dispute. On 18 May 2007, the plaintiff made a request to the Arbitration Tribunal to join the arbitration as a co-claimant with the original claimant, Shanghai Worsted.
7 The Arbitration Tribunal delivered an award in Beijing on 26 October 2007. Although Mr Zhang was informed of the proceedings and invited to participate, he declined to do so. In the award, the plaintiff was described as “the export agent” of Shanghai Worsted. The
Tribunal’s award involved the payment of moneys by the respondents in favour of both the plaintiff and Shanghai Worsted.
8 The application to enforce the award is made by the plaintiff pursuant to s.8 of the International Arbitration Act 1974. I am satisfied that the formalities of the application have been made out. In particular, I am satisfied that the original arbitration agreement has been produced to the Court. I have previously set out the terms of the arbitration agreement, which forms part of the sales confirmation document. I am satisfied that the award of the Arbitration Tribunal has been appropriately proved. The award was referred to by both parties before me in the form of an English translation. The document dated 11 January 2008 in evidence sufficiently satisfies me as to the authenticity of the award.
9 In his submissions to the Court, Mr Zhang gave an explanation as to the reason for his failure to participate in the arbitration. He said that six months before the arbitration commenced by Shanghai Worsted, he had himself commenced an arbitration in China. He said that his own reference to arbitration had been accepted on the basis that he would need to have the Court proceeding in Australia stayed. Mr Zhang said that it was for this reason that he made the application in this Court to strike out the proceeding and later to have it stayed, relying upon the arbitration clause. Mr Zhang said that after that matter had finally been decided by the Court of Appeal, the plaintiff had itself started the arbitration process in China. Mr Zhang said it was for this reason that he did not attend the arbitration. He said that this was a “protest”.
10 Although these matters were referred to in submissions by Mr Zhang, they are not referred to in the affidavit material filed by him in support of his two applications dated 7 and 18 June 2010. There is no reference in the award of the Arbitration Tribunal in China to any previous arbitration having been commenced pursuant to the arbitration clause in the sales confirmation document.
15 they were successful before the Court of Appeal and the Court ordered on 23 June 2006,
11 The award sets out in some detail, the processes followed by the Arbitration Tribunal, to give notice of its proceedings to the parties. The award notes that on 5 December 2006, the Commission “received a fax from the respondents about their mail addresses”. The Commission appears to have recommenced the procedures and noted that both parties had been informed of the requirement “to appoint arbitrators, submit defences and/or
counterclaim etc.” The award noted that “on 28 June 2007, the respondents returned the
above arbitration documents to the Arbitration Commission”.12 The Arbitration Tribunal held a hearing on 7 August 2007. It is noted in the award that “the respondents did not send any agents or representatives to attend the hearing, nor did they give any explanations”. A further opportunity was apparently offered to the
respondents to “submit any opinions on the substantive and/or procedural matters of this
case within seven days from receipt of this letter, and they could also request another
oral hearing to be held”. The award notes that no reply was received from the
respondents.13 The Court presently has before it three summonses. The plaintiff’s summons, dated 12 May 2010, seeks leave to enforce the award and judgment against the second defendant. Mr Zhang has filed two summonses, dated 7 June 2010 and 18 June 1010. The matters raised in the first summons appear to have been incorporated into the second summons. It is appropriate to refer to the matters raised in Mr Zhang’s summons dated 18 June 2010 as they set out the bases upon which Mr Zhang submitted that the award of the Arbitration Commission in China should not be enforced by this Court.
14 The matters raised in the first two paragraphs of the summons dated 18 June 2010, refer to previous costs orders made in this proceeding and the order for security for costs made by me on 12 October 2004.
In the Court of Appeal, both defendants appeared by the same counsel. As appellants, appearance on 11 May 2006”. There is no evidence, either from the Court file or otherwise, that the defendants (the appellants on the appeal) have ever sought to have those costs taxed. Although Mr Zhang appeared before me on this application personally, and his wife also attended the hearing to represent the interests of the first defendant, previously both those parties had from time to time been represented by solicitors, and it is apparent that various issues of costs in relation to both defendants would be presently outstanding.
16 I shall return to deal with the issues of costs at a later time, when I have determined the application. I do not consider, however, that the fact that there are outstanding issues of costs in the proceeding should, itself, be a bar to me considering the present application.
17 The associated issue arises out of the order I made on 12 October 2004. At that stage, the defendants’ application for a stay of the proceeding on the basis that the dispute between the parties should be resolved by arbitration in China, had been issued. I ordered that the application be adjourned for hearing in December 2004. The defendants had also made an application for security for their costs, and I ordered that “if the arbitration stay application is unsuccessful, the plaintiff shall, within 14 days of the final determination of the arbitration stay application, give security for the costs of the first and second defendants in defending this proceeding up to and including mediation, by depositing the sum of $12,000 in an interest bearing account”.
18 Although Judge Davey on 13 December 2004 declined to stay the proceeding, the defendants obtained leave to appeal against that decision and, as I have mentioned, on 23 June 2006 the Court of Appeal set aside the order of Judge Davey and stayed the proceeding pending the hearing and determination of certain issues which the Court of Appeal referred to arbitration in accordance with clause 5 of the sales confirmation document. On the application for leave to appeal from the order of Judge Davey, Nettle JA in the Court of Appeal was critical of the plaintiff’s failure to comply with my order that security for the defendants’ costs be provided in the event that the arbitration stay application was unsuccessful.
19 Mr Zhang submits that, by reason of my order in October 2004 and the plaintiff’s failure to comply with that order, the plaintiff’s application to enforce the award of the Arbitration Tribunal in China should be stayed until the security is provided. Although there was default pursuant to my order, the later orders of the Court of Appeal on 23 June 2006 effected a stay of the proceeding. In those circumstances, the immediate need for the security that had been anticipated by my order in October 2004 was no longer present.
20 It has been necessary for me to hear the present application before I can determine the objection of Mr Zhang to the application on the basis that security for costs was not provided pursuant to my order, when Judge Davey, on 13 December 2004, refused to stay the proceeding. I consider that the argument is not a bar to me determining the present application, although it may be an appropriate matter to consider when determining what costs orders I should make as a consequence of my determination on the present application.
21 The matter raised in paragraph 3 of Mr Zhang’s summons, dated 18 June 2010, is that by the award certain claims of the plaintiff were “raised and dismissed”. On page 17 of the award in paragraph 4, it is stated that, “the rest of the claimants’ claims is dismissed”.
On page 16 of the award, it is stated that, “The tribunal does not support the claimants’ claim that their actual cost of coming to Beijing shall be borne by the respondents, since the claimants did not specify the amount of such costs or submit any supportive evidence”. It is probable, in my view, that this is what is referred to as “the rest of the claimants’ claims” in paragraph 4 of the award.
22 Mr Zhang submitted that this paragraph must refer to the alternative claims made in this proceeding, particularly those made against the first defendant. I do not accept that submission, although, as I foreshadowed in discussion with plaintiff’s counsel, Mr Sanger, the Court should make consequential orders if the plaintiff is successful in seeking leave to enforce the award, that the claim against the first defendant in the proceeding be struck out, rather than the suggested draft order of Mr Sanger, that “The proceedings as against the first defendant be adjourned sine die”. In the proceedings before the Arbitration Tribunal in China, the claimants (including the plaintiff) presented their case on the basis that the debt that was owed to them was owed by Mr Zhang and his business, Philip Jones Import/Export and not by the company Philip Jones Pty Ltd. The plaintiff should not be permitted to pursue an inconsistent claim in this proceeding unless there is good reason shown.
23 Mr Zhang’s “claims of damages of lost profit to the sum of AU$211,920, resulting from
the plaintiff’s breach of contract”. Further paragraph 3 of Mr Zhang’s summons, dated 7
June 2010, asserted that the plaintiff’s claim should “be dismissed according to the
written contract between the parties”. Mr Zhang sought to make a number of submissionsThe matter raised in paragraph 4 of Mr Zhang’s summons dated 18 June 2010, refers to contrary to the provisions of the written contract comprised by the sales confirmation document, and suggesting that, pursuant to that contract, he himself had suffered substantial losses, which the Arbitration Tribunal had failed to take account of.
24 In summary, Mr Zhang’s arguments were as follows:
a. the contract between the parties was confined to the written document comprised by the sales confirmation document. It was submitted that Chinese law did not recognise the incorporation of terms inconsistent with the written document. Reference was also made to the document itself, which provided that the sales confirmation was “subject to neither modification or cancellation unless agreed upon by both parties”; b. the sales confirmation document provided that the terms of payment would be as follows: “pay for half of payment after selling all the cargo, the balance paid for at end of the year”. Mr Zhang referred to the allegations of the claimants records that there was a modification of “the means of payment”. Further,
although the sales confirmation document had provided for shipment on 10made in the arbitration, as set out from page 5 of the award. The award shipped on 5 November 2000”.
25 The award noted, on page 10 that in the absence of any submissions to the contrary from the respondents, the Arbitration Tribunal accepted the claimants’ request that it apply Chinese law to the case. On page 12, when the Tribunal came to state its
“opinions”, it referred to the contract as being the sales confirmation document and noted
that it was signed and stamped by both parties, including by Mr Zhang as the “buyer”.26 The Tribunal made findings that the relevant goods had been delivered to the respondents and, “the respondents partially fulfilled the payment obligation”. The Tribunal noted that the respondents had submitted “no opinions or evidence” against the amounts claimed by the claimants, and on that basis, the Tribunal made the award in favour of the claimants against the respondents;
27 I do not accept that leave should not be granted to the plaintiff to enforce the award on the basis that the Arbitration Tribunal had not properly considered the contract between the parties. Even if it were possible for me to go behind the express findings and the
decision of the Tribunal, that would not seem to be warranted by the circumstances of
the case.28 By paragraph 5 and 6 of Mr Zhang’s summons dated 18 June 2010, Mr Zhang submitted that certain provisions of the International Arbitration Act 1974 were not satisfied. The principal matter relied upon by Mr Zhang was that it would be contrary to public policy to enforce the award because the Arbitration Tribunal had improperly considered evidence of negotiations between the parties and this would be contrary to Australian law, including the UNCITRAL model law on international commercial arbitration.
29 The award in the recitation of the allegations made by the claimants refers, in a number of places, to negotiations between the parties. Mr Zhang specifically referred to a “payment plan” contained in a document dated 28 February 2001, and to negotiations on 26 and 28 May 2004. Mr Zhang exhibited to an affidavit a document in Chinese dated 28 February 2001, which has a notation upon it in English suggesting that it was the document referred to in the award. The document is clearly headed “without prejudice”. There is also a second document, dated 28 May 2004, and otherwise in Chinese, which is also headed “without prejudice”.
30 Although the award refers to negotiations between the parties which appear to have negotiations are set out in that part of the award which refers to the claimants’ allegations. It seems to me, on a fair reading of the award, that these negotiations are referred to because they resulted in promises on the part of Mr Zhang to make payments of part of the amount allegedly outstanding and, in certain cases, payments were in fact made to the plaintiff by Mr Zhang. In the decision reached by the Arbitration Tribunal, the Tribunal seems to use this information as evidence of the payments made, and in certain instances payments not made, by Mr Zhang in accordance with arrangements reached by him with the claimants during negotiations.
31 Under Australian law, negotiations to settle disputes which result in a concluded agreement may be referred to in evidence before a court or tribunal for the purpose of seeking to enforce the agreement reached. It may be that in the proceedings before the Arbitration Tribunal, the Tribunal did not seek to use evidence other than for that purpose. It is difficult, however, to conclude that this matter should, in any event, be a basis for not enforcing the award, as the Arbitration Tribunal had indicated that it was applying Chinese law, and there is no evidence before me of the content of the relevant Chinese law.
32 In my view, there is no basis for refusing to enforce the award of the Arbitration Tribunal. The tribunal followed open processes and gave Mr Zhang the opportunity to appear before it and to present whatever defences or counterclaims he wished to present. He chose not to participate in the arbitration. The present proceeding was stayed by order of the Court of Appeal, accepting Mr Zhang’s claim that disputes between the parties could only be determined by arbitration. Subsequently, Mr Zhang refused to take part in the arbitration, and it is difficult therefore for this Court to accept that there is any basis upon which he can properly complain of the decision made in his absence.
33 Mr Sanger has submitted that the appropriate judgment of the Court should be in the form ordered by Hall J in Transpac PTE Ltd v Buntoro [2008] NSWSC 671, where the award of the Singapore International Arbitration Centre was enforced by a judgment
involving the conversion of an award in United States dollars into Australian dollars,
converted as at the date of the award. The award in the present matter involved both
orders in American and Chinese currency and I propose, therefore, to follow the form of
order made by Hall J.
34 The orders I will make are as follows:
1
Leave to the plaintiff to enforce the final award of the China International Economic and Trade Arbitration Commission, being the China CIETAC Beijing Award no. 0499 dated 26 October 2007, in this Court as if the award had been made in this State in accordance with the laws of this State, and in the same manner as a judgment of this Court, with respect to the amounts set out in paragraph 2.
2
Judgment for the plaintiff against the second defendant in accordance with the terms of the award as follows:
a. claim, US$92,705.46 being A$101,661.87 as at the award date; b. interest on the claim, US$39,228.31, being A$43,018.21 as at the award date; c. continuing interest, at the rate of 0.021% per day, being US$19.468146 from 6 September 2006 to today, being 391 days, US$27,080.19, being A$29,696.44; d. lawyer fee, RNB10,000, being A$1,464.58 As at the award date; e. arbitration fee, RNB35,958, being AU$5,266.33 as at the award date. 3 The total of the amounts of paragraph 2(a) to (e) is US$159,013.96 together with RNB45,958, being A$181,107.43. Judgment in that total sum is entered for the plaintiff against the second defendant.
4 Unless the plaintiff, by 30 July 2010, notifies the Court in writing with a copy to each of the defendants, that it wishes to proceed in its claim against the first defendant and sets out the reasons for asserting an entitlement to proceed against the first defendant, notwithstanding the approach it took before the Arbitration Tribunal in China and the making of the orders in paragraphs 1-3 herein, an order will be made that the plaintiff’s claim against the first defendant will be struck out.
5 There will be a further hearing of the plaintiff’s summons, dated 12 May 2010, at a date to be arranged with the Associate to His Honour Judge Anderson convenient to the parties, to consider the following matters:
a.
whether the proceeding against the first defendant should be struck out or the plaintiff should be permitted to proceed with its claim against the first defendant and if so, on what basis;
b.
if the claim against the first defendant is struck out whether any, and if so what order should be made as to the first defendant’s costs of the proceeding;
c.
whether any allowance should be made in respect of the judgment ordered in paragraphs 2 and 3 in respect of the second defendant’s costs ordered by the Court of Appeal on 23 June 2006, or any costs order outstanding in this
Court;
d. whether the plaintiff’s costs of its summons, dated 12 May 2010, and of the second defendant’s summonses, dated 7 and 18 June 2010 should be ordered to be paid by the second defendant; e. whether an order should be made as to whether the plaintiff’s or second defendant’s costs of the proceeding should be ordered to be paid and, if so, in what terms. 6 The second defendant’s summonses dated 7 and 18 June 2010 are dismissed.
7 Reserve liberty to apply.
8 Stay execution on the order until 30 July 2010. Beyond that date, the order is further stayed in respect of $20,000 of the judgment in paragraphs 2 and 3 hereof until the matters referred to in paragraph 5 are resolved, or further order.
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Certificate
I certify that these 9 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 28 June 2010 and revised on 30 June 2010.
Dated: 30 June 2010
Caroline Dawes
Associate to His Honour Judge Anderson
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