Doran Constructions Pty Limited (In Liquidation) v Beresfield Aluminium Pty Limited

Doran Constructions Pty Limited (In Liquidation) v Beresfield Aluminium Pty Limited - [2002] NSWCA 95 - NSWCA 2002 case summary — Zoe

[31]

(iii) "defensive proceedings" against the company in liquidation; Skinner v Jeogla Pty Ltd [2001] NSWCA 15 at paras [13] and [15]. 7 "Proceeding" is itself an expression taking its meaning from its context. In the present context it is apt to include "a step in an action, cause or matter"; see "McPherson, The Law of Company Liquidation" (LBC, 1999) by Andrew Keay at 246. While, conceptually, an arbitrator as agent for the parties may take a step in the action, it would not be a step so characterised if it did not advance that action from the point of view of either of the parties. A mere anterior, preliminary, step by the Arbitrator, though prerequisite to a step by either party, does not meet that description. 8 To demonstrate this, it is necessary to analyse what the Arbitrator did and its legal consequence. The Arbitrator gave notice of an interim award by the Arbitrator. 9 The consequence of giving of such notice by the Arbitrator is to set time running for any appeal against the Arbitrator's determination, pursuant to Pt 72A r5 of the Supreme Court Rules, should either party elect so to appeal. If neither does so, it does not advance the action. While either party could appeal, in the present case it is indeed the Appellant that seeks to do so, being the company in liquidation. The Arbitrator by the giving of notice, is therefore taking only an anterior, preliminary step to lodging an appeal. That is not, a fortiori, a step in an action, cause or matter, given that even lodging the appeal itself has been held not to be such a step; Humber & Co (supra). There can be no difference in principle where it is the company in liquidation, as here, which is defending itself rather than the other party to proceedings as in Humber. Moreover, if lodging of an appeal be viewed as merely defensive, and thus outside s500(2), then the Arbitrator's anterior step being not even defensive but merely neutral, should a fortiori be outside s500(2). 10 The Appellant's argument moreover contains two contradictory propositions. The first is that leave is required to the Arbitrator giving notice of the award. The second is that leave is not required to the Appellant thereafter pressing its own challenge to that award. If both propositions were correct that carries an absurd consequence. For how could s500(2) of the Corporations Act be no impediment to the Appellant's own appeal, requiring no leave of the Court under s500(2), yet the Arbitrator's earlier, essentially neutral and preliminary anterior step, require such leave? The Appellant nonetheless seeks to characterise only the Arbitrator's notification as an "action or other civil proceeding", "proceeded with" against the company in liquidation. So stated, the incompatibility of the two propositions advanced by the Appellant is self-evident. 11 When the Arbitrator gives notice of the interim award for purposes of publication he simply brings into being the capacity of either party thereafter to appeal, so challenging the award. He thereby takes no step himself in the proceedings, in the sense of advancing either side's prosecution of their respective cases, beyond making it possible for each to appeal. Thus I would conclude that the Arbitrator's publishing of the notice, being but an anterior, preliminary requirement for either side to appeal, could not of itself require prior leave of the court under s500(2) of the Corporations Act. 12 I would therefore conclude that, were such point now capable of being taken on appeal, it should fail for the reason I have stated. As I have said, were the position otherwise, the Appellant would need the self-same leave of the Court for its current challenge to the Arbitrator's award. The Appellant could hardly contend that its challenge was merely defensive so obviating need for court leave, but not the prerequisite Arbitrator's notice. In so contending, the Appellant would both approbate and reprobate. Estoppel could not apply to obviate the statutory effect of s500(2), were it applicable, given that the statute operates of its own force. In fairness to the Respondent the position should not be left in doubt, given the Appellant's course at trial and now on appeal. For the reasons I have stated, summed up below, I conclude s500(2) could not apply to the Arbitrator publishing his award. 13 To sum up.

[49]

The English practice regarding the time within which to appeal 34 In England, prior to the Arbitration Act 1996 (UK), an application to set aside or remit an award had to be made within a stipulated time after the award was "made and published" to the parties: Bulk Transport Corporation v Sissy Steamship Company Limited (The "Archipelagos") [1979] 2 Lloyds Rep 289, Mustill and Boyd, Commercial Arbitration, 2nd edition, (1989) 567-568. 35 Section 70(3) of the Arbitration Act 1996 (UK) now provides that "[a]ny application or appeal must be brought within 28 days of the date of the award … ". An award is complete so far as the arbitrator is concerned, when it is signed: Hiscox v Outhwaite [1992] 1 AC 562 at 594 per Lord Oliver. Unless otherwise agreed by the parties, or decided by the arbitrator, the date of the award is the date on which it is signed by the arbitrator (s 54 of the Act). 36 Even after the Arbitration Act 1996, however, the concept of "made and published" remains of relevance in England. According to Russell on Arbitration, (1987) 21st edition para 6-067, where the parties have agreed that the tribunal shall "make and publish" its award, this must be complied with and the award is arguably not valid until it has been made and published. 37 It has been accepted in England since Brooke v Mitchell (1840) 6 M&W 473; (1840) 9 LJ Ex 269 that an award is made when it is complete and is published when the arbitrator gives notice to the parties that it is ready. In 1979, in The Archipelagos (at 291), Parker J noted that Brooke v Mitchell had been cited in Russell on Arbitration in substantially the same terms since the first edition in 1849 until the time of the case before him. 38 Mr Martin referred to s 55(2) of the Arbitration Act 1996, which provides that notification of an award involves service on the parties of copies of the award. But this section plays no part in determining when "publication" occurs or in determining the time limits for appeals. Publication in this context takes place when the parties have notice that the award has been made and is available to them, whether or not they have notice of the contents of the award (The Archipelagos, Russell on Arbitration, op cit paras 6-065 to 6067, Mustill and Boyd, op cit, at 567 to 568), and whether or not they have taken up the award (International Petroleum Refining and Supply STAD Limited v Elpis Finance SA (The "Faith") [1993] 2 Lloyds Rep 408). Where the parties have not agreed that the award should be published, the s 70(3) 28 day period commences when the award is signed by the arbitrator. In summary, the notification of an award under s 55(2) has nothing to do with the s 70(3) 28 day period. 39 In Macarthur v Campbell (1833) 5 B & AD 518 Denman CJ cited Tindal CJ in Musselbrook v Dunkin (1833) 9 Bing 605 for the proposition that: "An award is published when the parties have notice that it is within their reach on payment of such expenses as are just and reasonable".

[50]

Since these cases, in 1833, it has been accepted that notice that an award is available upon payment of the arbitrator's fees is good notice for the purposes of calculating time within which to appeal. Indeed it is the usual practice for arbitrators to retain their awards until their fees have been paid: see Russell on Arbitration op cit at para 4-099 and para 6-070 (cf s 56(1) of the Arbitration Act 1996). 40 Where an arbitrator advises parties that an award is available against payment of his or her fees, a delay in taking up the award may have serious consequences to a party seeking to appeal against the award: The Faith. The reason for this is that, as Russell on Arbitration op cit states at para 6-071, "Time runs from the date of the award, whether or not it has been delivered to the parties". 41 At first glance, there seems to be a difference between the English practice and Pt 72A r 5. Prior to the Arbitration Act 1996, under the English practice, time began to run after the award had been "made and published to the parties," rather than, as Pt 72A r 5(1) provides, from "the date on which notice of the award is given by the arbitrator". That difference, however, is not of significance. There is no material distinction between the concept of the award being "made and published to the parties" and the giving of notice of the award by the arbitrator (that is, the giving of notice that the award is available). In Brooke v Mitchell (at 476) Baron Parke recognised, as it was put by Parker J in The Archipelagos (at 291): "So far as the time moving under the Statute was concerned, it was notice that mattered". 42 The point to be made is that in England, for some 150 years until the Arbitration Act 1996, time commenced to run for the purposes of appealing against an arbitration award when the arbitrator informed the parties that the award was available for collection against payment of his fees. Since that Act, time begins to run even earlier, namely, from the date of the award.

[52]

The appellant's arguments 47 Mr Martin contended that the statutory purpose of Pt 72A r 5(1)(b) was to give the unsuccessful party 28 days from the date of receipt of the reasoned award to consider the reasons and to take appropriate steps to file and serve the processes necessary to commence an appeal under s 38 of the Commercial Arbitration Act. He submitted that a party would not be able to make a proper decision to exercise its rights of appeal without being allowed a period of that order for that purpose. 48 He submitted, therefore, that to construe "notice of the award" in r 5(1)(b) to mean anything other than the complete award including the reasons would be contrary to the purpose of the rule. I would pause at this stage to note that a corollary of this argument has to be that notice of the award must be taken to be receipt of the award (with reasons), not the mere giving of the award. Otherwise, the purpose, as submitted, would not be met. 49 Mr Martin sought to draw support from the prima facie view expressed by Rolfe J in Doran Constructions Pty Limited (In Liq) v Beresfield Aluminium Pty Limited (1999) NSWSC 1198 at para 86 to the effect that time under r 5(1)(b)) runs from the date on which the arbitrator gives notice of the reasoned award. This view was not supported by reference to authority. 50 I am not persuaded by these arguments. As The Archipelagos shows, the practice of calculating the time within which to appeal from the date on which notice of the availability of the award is given has been established for a very long time. There has long been general acceptance of its practical utility. There has been no movement for its reversal and we were not referred to any examples of reported cases where the practice has worked an unfairness to an appellant. 51 In The Archipelagos the respondent contended that the time for applying to set aside an award was to be calculated from the date of receipt of notice of the availability of the award. The claimant contended, on the other hand, that the time was to be calculated from the date upon which it received the copy of the award, being the date on which they first had notice of the actual contents of the award. Parker J said (at 291): "The contention that the time should be calculated from the date of receipt of copies of the award is a bold one, for it is no less than a contention that what has been accepted as good law for 140 years is entirely wrong …"

[53]

And remarked (at 293): "It would be perfectly simple for a party to say: 'I am very sorry; I tried on receiving notice of availability to get hold of a copy of the award with the utmost diligence but owing to various matters which were in no way my fault I could not get hold of it until a week before the period had expired and I therefore ought to have an extension of time.' Such an argument would be an argument which would be perfectly good. The alternative, which seems to me to be wholly untenable, is that time would not begin to run for a wholly indefinite period if neither side took up the award. There it would lie in the offices of the arbitrator for months or even years and, when finally taken up, the party would be able to say: 'The six weeks period has only started to run and the fact that I could have had this award by walking round the corner at any moment from the date upon which I receive notice of its availability cannot be held against me'. Such a construction of the rule appears to me entirely unreasonable. It has never been applied and I see no reason to hold, and I decline to hold, that it applies now". 52 The reasoning of Parker J is cogent and persuasive. It demonstrates that the contention of the appellant as to the meaning of "notice of the award" could give rise to delay and abuse. This is a result inimical to the policy of the Commercial Arbitration Act: Promenade Investments Pty Limited v State of New South Wales (1991) 26 NSWLR 184, confirmed on appeal at (1991) 26 NSWLR 203. 53 If the appellant were to be correct, it would not always be possible to establish with ease or certainty the date of service of an award. Moreover, as has been noticed by more than one commentator, the construction contended for could provide an incentive for a party to absent itself from the jurisdiction and make it difficult for service to be effected. These matters militate against the construction contended for by the appellant. 54 The ordinary meaning of the language used in Pt 72A r 5 is also against the appellant. The relevant phrase in the rule is "notice of the award"; "notice" of the award means something that is different from the award itself. 55 The distinction between "notice of the award" and the award itself is also underscored by the distinction between "notice" and "knowledge". It has been said that the word "notice" to a lawyer "means something less than full knowledge" (Goodyear Tyre and Rubber Company (Great Britain) Limited v Lancashire Batteries Limited [1958] 3 All ER 7 at 12 per Lord Evershed MR). A helpful statement, pointing up the distinction, was made by Hodson J in Cresta Holdings Limited v Karlin [1959] 3 All ER 656 at 657, namely: "I do not myself regard the word 'notice' as a synonym for the word 'knowledge'. Notice is a word which involves that knowledge may be imparted by notice, but 'notice' and 'knowledge' are not the same thing, although loosely one sometimes talks as if to act with notice and to act with knowledge were indeed the same". 56 In my view, r 5, by defining "material date" by reference to the date on which the arbitrator gives notice of the award, intends to convey that the material date commences when notice, within the ordinary meaning of the term, is given. It does not commence when a party receives a copy of the reasons for the award. 57 Mr Martin drew attention to the fact that r 5(1)(a) provides that, in the case where the parties agree that an award may be made with reasons given later, the material date is the date on which the arbitrator gives notice of the reasons for his or her decision to the person who wishes to appeal. Mr Martin submitted that, to be consistent, the material date under r 5(1)(b) should be the date on which the arbitrator gives reasons for the award, not merely the notice of the award. 58 This argument confuses the "notice" with the reasons themselves. Under r 5(1)(a) the material date is the date on which notice of the reasons is given, not the date on which the reasons were given. Again, under r 5(1)(b) the material date is the date on which notice of the award is given, not the date on which the award is given. There is no inconsistency in the rule. 59 I accept, as was submitted on behalf of the respondent, that "notice of the award" means no more than notice of the fact that the award has been made and is available for collection already. Accordingly, I would not uphold the contention of the appellant that time begins to run only from the date on which the award, including the arbitrator's reasons, is served upon the relevant party. In other words, in my view, the material date is the date on which notice of the award is given, not the date on which the reasons for the award are provided to the party concerned.

[55]

Notice of the final award 65 The arbitrator notified the parties that the interim award had "been handed down" and was available to the parties on payment of the agreed amount of his fees. The arbitrator, however, wrote no such letter and gave no such notice in respect of the final award. 66 The appellant was placed under a creditor's voluntary winding-up on 24 December 1997. On 20 January 1998 the liquidator of the appellant wrote to the arbitrator stating that the sum of $10,000 owing to the arbitrator in respect of his fees "must rank as an unsecured creditor's claim in the liquidation of the company". The liquidator said: "As liquidator of the company, I require your award to be able to ascertain the company's position and future course of action in this matter. Accordingly, could you please forward a copy of your interim award to this office." 67 The arbitrator replied by undated letter (that appears to have been written in January 1998), saying that he would not finalise the matter until the costs were addressed. He pointed out that he had directed the parties to submit reasons as to how he should award costs. He then stated: "4. … in the circumstances I am not prepared [sic] hand over the award. Any information or documentation should come from Beresfield Aluminium. 5. Only when this matter is finalised will my actual costs be known. This should be by the end of January 1998". 68 The final award was signed by the arbitrator and dated 12 March 1998. On that date the arbitrator delivered a complete copy of the final award to the respondent, the respondent having paid its share of the arbitrator's fees. On the same day, the respondent, having been requested by the liquidator of the appellant to do so, delivered a full copy of the final award to him. 69 Part 72A r5 defines material date by reference to the date on which notice of the award is given by the arbitrator. In my view, the giving of the notice by or on behalf of the arbitrator is a sine qua non of the establishment of the material date. Unless the arbitrator gives the notice, or the notice is given on his behalf, time does not begin to run. It would be manifestly absurd for legal force to attach to the giving of a notice, not in accord with the wishes of the arbitrator, but by some unauthorised person . 70 There was no evidence that the arbitrator personally gave notice of the final award to the appellant. 71 The only piece of evidence capable of supporting a finding that the arbitrator authorised the respondent to give notice on his behalf is the passage in the arbitrator's undated letter written in January 1998 to the liquidator of the appellant saying: "Any information or documentation should come from Berestield Aluminium". 72 Even had the quoted statement related to the final award, I would not have regarded it as an authority from the arbitrator to the respondent to give notice on his behalf to the appellant. In any event, that statement in the arbitrator's letter concerned the interim award. In my view, it is of no relevance in regard to the final award. 73 In my opinion, the arbitrator did not give notice of the final award to the appellant and therefore there is no "material date" as defined by Pt 72A r 5(1). Hence, the period of 28 days provided by Pt 72A r 5(3) has not commenced to run. 74 During the course of argument on appeal there was some suggestion that, by the very fact of appealing against the final award, the appellant recognised the existence of that award and was therefore precluded from contending that no notice of the award had been given (which, arguably, involved a contention that no completed award had yet been made). In my view, however, this argument cannot succeed. 75 The argument confuses the appellant's right of appeal with the procedural rules laid down by Pt 72A r 5. 76 The final award was complete when it was signed by the arbitrator: Hiscox v Outhwaite (at 594). The appellant was then entitled to exercise its rights of appeal conferred by s 38 of the Commercial Arbitration Act. The fact that the appellant, in exercising those rights, contends that notice of the completed award was not duly given to him cannot affect his rights of appeal under s 38. By maintaining that no notice of the completed award was given to him in accordance with Pt 72A r5, the appellant is asserting merely that the time period with which an appeal must be commenced has not begun to run. That is a very different thing from saying that there is no completed award. 77 I do not think that there is any need for me to say anything more about this argument. 78 Mr Pembroke SC (who appeared together with Mr Goldstein and Ms Catanzariti for the respondent), argued that the conduct of the appellant was such that it should be estopped from denying that it had received due notice of the final award, or that it would be unconscionable for the appellant to make such a denial. This is not an issue that appears to have been raised before Brownie AJ and he did not deal with it. In my view, the respondent should not be allowed to advance such an argument, depending as it does on a close examination of the facts, for the first time on appeal. 79 In the circumstances, I would uphold the appellant's argument that, in regard to the final award, it is not barred by Pt 72A r 5(3) from appealing under s 38(4) of the Commercial Arbitration Act or challenging that award pursuant to s 42 (at least to the extent, if any, that the final award is said to be vitiated by misconduct).

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(e) Had the appellant raised the s 500(2) point before Brownie AJ, the respondent would have applied under s 500(2) for leave nunc pro tunc to continue with the arbitration proceedings. Such an application was foreshadowed in the proceedings before Brownie AJ. 85 In my view, the thrust of these submissions must be accepted. True it is that the appellant was given leave to argue the s 500(2) point on the appeal. That, however, does not preclude the respondent from submitting before this Court that the way the appellant conducted the trial should disentitle him from raising this ground. After all, the issue was only faintly raised (and indirectly) in the leave application and it was not the subject of a decision in those proceedings. 86 In Coulton v Holcombe (1986) 162 CLR 1 Gibbs CJ, Wilson, Brennan and Dawson JJ said at 7-8: "In a case where, had the issue been raised in the court below, evidence could have been given which, by any possibility could have prevented the point from succeeding, this court has firmly maintained the principle that the point cannot be taken afterwards: See Suttor v Gundowda Pty Limited (1950) 81 CLR 418 and 438; Bloemen v The Commonwealth (1975) 49 ALJR at 219." 87 In my view, had the issue of s 500(2) been raised before Brownie AJ, relevant evidence could have been led by the respondent who, I am satisfied, would have made an application nunc pro tunc for the necessary leave. The respondent would have had a reasonable prospect of obtaining such leave. In the circumstances, to allow the appellant to argue the point for the first time in this Court would cause the respondent serious prejudice. 88 I would uphold the respondent's arguments on this question. I do not think it necessary, therefore, to address the substantive issue raised by the appellant's argument. 89 I would, however, point out that there is authority to the effect that, where proceedings have been pursued by a company after it has been ordered to be wound up, other parties may take "defensive proceedings" without leave: Skinner v Jeogla Pty Ltd [2001] NSWCA 15 at paras 13 to 16. 90 Whether this rule applies to steps taken by an arbitrator is open to question. 91 Moreover, as Spigelman CJ pointed out in Skinner v Jeogla at para 16: "It is not clear what is meant by 'defensive proceedings'". I doubt whether it can be said that the giving of notice of an award by an arbitrator could be said to be a defensive proceeding. It is, rather, more in the character of a neutral proceeding. The proposition that a party need not obtain leave under s 500(2) to respond to such a proceeding is also open to question. 92 In the light of my conclusion that the appellant should not be allowed to raise the s 500(2) issue, I shall leave these questions for final resolution at some future time.

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The appeal from the order made by Einstein J 93 As I have mentioned, before Einstein J the appellant sought leave to amend its summons to seek declarations that the arbitrator had no jurisdiction or power to award to the respondent the costs of the arbitration on an indemnity basis. 94 According to the appellant, the appeal in respect of the decision of Einstein J "raises one issue, namely, whether the proposed amendments were 'so obviously futile' that they would have been struck out if they appeared in the original pleading". 95 In my view, however, apart from the argument as to whether the arbitrator had power to award the respondent indemnity costs, there is an insuperable difficulty that faces the appellant. 96 The amendment that the appellant proposed and which was disallowed by Einstein J assumes that the arbitrator awarded the respondent the costs on an indemnity basis. The final award, however, does not mention the term "indemnity costs". The final award merely records the following statement by the arbitrator: "Having considered the detailed costs submitted to me by the sub-contractor [the respondent] I accept these costs to be fair and reasonable". 97 In fact, there is nothing in the final award that indicates that the arbitrator awarded indemnity costs. It may be unusual to award all the costs claimed. But, in theory, the costs submitted might all properly fall under rubric of party and party costs. Whether the costs were indeed "fair and reasonable" is a question of fact. No question of law arises. 98 In my view the appellant's appeal in regard to the final order does not pass the threshold. The ground of appeal, on close examination, does not concern a question of law. I shall, however, deal briefly with the substantive issues that are raised by this ground. 99 The Commercial Arbitration Act does not exclude this Court's jurisdiction under s 23 of the Supreme Court Act 1970 to intervene in all cases where an arbitrator acts beyond power. The Court will, however, intervene only in limited circumstances: Commonwealth of Australia v Cockatoo Dockyard Pty Limited (1995) 36 NSWLR 662. 100 In the Cockatoo Dockyard case the Court was concerned with whether procedural directions by an arbitrator were beyond power. These were interlocutory matters and were not susceptible of appeal under s 38 of the Commercial Arbitration Act. It was argued that this Court had no power to interfere with the arbitrator's decision. Kirby P (with whom Priestley JA agreed on this issue) found this to be an unacceptable proposition. He held that there were exceptional circumstances in which the Court would exercise its inherent powers of review or those conferred by s 23 of the Supreme Court Act to intervene in an arbitrator's decision. 101 The present case is entirely different to the Cockatoo Dockyard case. The decision of the arbitrator under challenge is the final award, not an interlocutory decision. There was ample opportunity for the appellant to have appealed under s 38 - had it complied with the time limits under Pt 72A r 5. The appellant is attempting to invoke the inherent jurisdiction of the Court and its powers under s 23 of the Supreme Court Act to overcome its dilatory conduct in allowing the time period under Pt 72A r 5(3) to elapse. Einstein J came to the conclusion that, in the circumstances, this is not a case where the Court should exercise its jurisdiction to intervene. In my view he was entirely correct. On this ground, also, I would dismiss the appeal against his decision. Summary and proposed orders 102 As regards the costs of the appeals, only a relatively small part of the argument concerned the final award. In my opinion the appropriate costs order in relation to the appeal against the judgment of Brownie AJ would be that the appellant pay two-thirds of the respondent's costs of the appeal. 103 I propose the following orders:

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