Larkden Pty Ltd v Lloyd Energy Systems

Judgment 1His Honour: This is an application pursuant to s 440D(1) of the Corporations Act 2001 (Cth) ("the Corporations Act") for leave to bring and continue proceedings against a company under voluntary administration.

BACKGROUND 2Between 25 July and 3 August this year there proceeded before Mr Stephen Wallace White (the arbitrator) an arbitration between the plaintiff (or Larkden) and the defendant (or Lloyd). Lloyd was claimant and cross-defendant. Larkden was respondent and cross-claimant. 3The factual background to the dispute is set out in Larkden Pty Ltd v Lloyd Energy Systems [2011] NSWSC 268 in which I ruled on a challenge to the arbitrator's jurisdiction ("the first judgment"). It is not necessary to restate the facts beyond what I said there. Save where otherwise stated, defined terms in the first judgment have the same meaning here. 4On 7 September 2011, the arbitrator published what he described as "draft reasons" dealing with the various claims and cross-claims motivated by Larkden and Lloyd respectively in the arbitration. 5In a section of his reasons entitled Relief-Tribunal Decision , the arbitrator determined, relevantly, as follows: 40.1 The parties should have the relief that they sought in their respective claims in which they were successful including specific performance. 40.2 However, whilst the Respondent is entitled to, amongst other things, a suitably moulded constructive trust the Tribunal's view is that a declaration against a third party to the arbitration, namely Solfast, or a declaration in rem is not appropriate or available. 40.3 That said having regard to the admissions made in paragraph 22 of the Reply the Tribunal is prepared if requested to make orders that the Claimant holds its shares in Solfast on trust for the Respondent or such other suitably moulded relief. 40.4 Further, the Tribunal is only prepared to find that the Respondent's submissions in relation to the constructive trust and fiduciary duties only extend as would arise ordinarily by reason of one holding the legal title of another as bare trustee and no further. 40.5 The tribunal's view is that parties should now agree on appropriate orders and if necessary the Tribunal will hear further submissions on this issue. 6On 9 September 2011, Larkden's lawyers wrote to Lloyd's lawyers seeking consent to a form of orders. 7On 13 September 2011, unbeknown to Larkden, the directors of Lloyd resolved that in their opinion, Lloyd was insolvent or likely to become insolvent at some future time and resolved that Ronald John Dean-Willcocks and Adam Farnsworth be appointed voluntary administrators ("the administrators") pursuant to s 439A of the Corporations Act. 8Larkden was informed of this development the following day. 9On 20 September 2011, after an exchange of correspondence in which Larkden urged the arbitrator to make orders and the administrators sought to defer the making of orders, the arbitrator published further reasons and made the following orders ("the Award"): (1)The Tribunal determines and declares that, pursuant to clause 5.4(a) of the Licencing Agreement dated 16 November 2001 between the Claimant and the Respondent ("the Head Licence"), the Respondent is entitled to be made owner of, and have assigned to it, all the rights, title and interest in the inventions embodied in: (a)the Solfast Patent Application (being PCT/AU2009/001278) ("the Solfast Patent Application"); and (b)the patent applications ("the Assigned Patent Applications") set out in Exhibit C to the Patent Assignment and Settlement Agreement dated 4 March 2010 between Ausra Inc and the Claimant ("the Ausra Settlement Agreement") as may be amended from time to time in accordance with the Ausra Settlement Agreement. (2)The Tribunal determines and declares that the Claimant holds on constructive trust for the Respondent all its rights, title and interest in Solfast Pty Ltd (including its Solfast Pty Ltd shares) on behalf of the Respondent. (3)The Tribunal determines and declares that the Claimant holds on constructive trust for the Respondent all its rights, title and interest in the inventions embodied in the Assigned Patent Applications. (4)The Tribunal orders, pursuant to section 33A of the Commercial Arbitration Act 2010 (NSW), that the Claimant specifically perform clause 5.4(a) of the Head Licence by: (a)immediately procuring Solfast Pty Ltd to execute a deed of assignment in the form of the Annexure A to these orders; (b)taking all necessary steps to file and prosecute the Solfast Patent Application in the name of the Respondent; (c)irrevocably nominating the Respondent as the Nominated Assignee of the Assigned Patent Applications and forthwith notifying Areva Inc in writing of the irrevocable nomination; and (d)taking all necessary steps to ensure that the Respondent's interests in the prosecution of the Assigned Patent Applications are protected and secured. (5)The Tribunal orders that the Claimant perfect the Respondent's interest in the Assigned Patent Applications by: (a)irrevocably nominating the Respondent as the Nominated Assignee of the Assigned Patent Applications and forthwith notifying Areva Inc in writing of the irrevocable nomination; (b)taking all necessary steps to ensure that the Respondent's interests in the prosecution of the pending Ausra Patent Applications are protected and secured. (6)The Tribunal orders that the Claimant furnish the Respondent with all necessary assistance as requested by the Respondent from time to time, in relation to any proceedings the Respondent may take against Solfast and/or Areva including, without limitation, any proceedings under sections 32 and 36 of the Patents Act 1990 (Cth), such assistance to include (without limitation) providing the Respondent with all documents in the possession, custody or control of the Claimant necessary for the Respondent to prosecute any claims against Solfast and/or Ausra under sections 32 and 36 of the Patents Act 1990 (Cth). (7)Costs Reserved. (8)Liberty to Apply 10Section 440D(1) of the Corporations Act provides as follows: Stay of proceedings (1)During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except: (a) with the administrator's written consent; or (b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes. 11Section 35 of the Commercial Arbitration Act 2010 (NSW) ("the Commercial Arbitration Act") provides as follows: Recognition and enforcement (1)An arbitral award, irrespective of the State or Territory in which it was made, is to be recognised in this State as binding and, on application in writing to the Court, is to be enforced subject to the provisions of this section and section 36. (2)The party relying on an award or applying for its enforcement must supply the original award or a copy of the original award. (3)If the award is not made in English, the Court may request the party to supply a translation of it into English. 12Section 36 of the Commercial Arbitration Act provides as follows: Grounds for refusing recognition or enforcement (1)Recognition or enforcement of an arbitral award, irrespective of the State or Territory in which it was made, may be refused only: (a)at the request of the party against whom it is invoked, if that party furnishes to the Court proof that: (i)a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of the State or Territory where the award was made, or (ii)the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the party's case, or (iii)the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced, or (iv)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the State or Territory where the arbitration took place, or (v)the award has not yet become binding on the parties or has been set aside or suspended by a court of the State or Territory in which, or under the law of which, that award was made, or (b)if the Court finds that: (i)the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State, or (ii)the recognition or enforcement of the award would be contrary to the public policy of this State. (2)If an application for setting aside or suspension of an award has been made to a court referred to in subsection (1) (a) (v), the Court may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security. 13On 26 September 2011, Larkden sued out of the Court a Summons, supported by a Commercial Arbitration List Statement, claiming the following relief: (1)Pursuant to section 440D(1) of the Corporations Act 2001 (Cth), leave to commence and prosecute these proceedings. (2)An order pursuant to section 35(1) of the Commercial Arbitration Act 2010 (NSW) recognising and enforcing the interim award made on 02 September 2011 by Stephen Wallace White (the Interim Award ) against the Defendant by making declarations and orders in the form set out in the Interim Award, namely: (a)a declaration that, pursuant to clause 5.4(a) of the Licensing Agreement dated 16 November 2001 between the Plaintiff and the Defendant (the Head Licence ), the Plaintiff is entitled to be made the owner of, and have assigned to it, all the rights, title and interest in the inventions embodied in: (i)the Solfast Patent Application (being PCT/AU2009/001278) (the Solfast Patent ); and (ii)taking all necessary steps to file and prosecute the Solfast Patent Application in the name of the Plaintiff; (iii)irrevocably nominating the Plaintiff as the Nominated Assignee of the Assigned Patent Applications and forthwith notifying Areva Inc in writing of the irrevocable nomination; and (iv)taking all necessary steps to ensure that the Plaintiff's interests in the prosecution of the Assigned Patent Applications are protected and secured; (b)an order that the Defendant perfect the Plaintiff's interest in the Assigned Patent Applications by: (i)irrevocably nominating the Plaintiff as the Nominated Assignee of the Assigned Patent Applications and forthwith notifying Areva Inc in writing of the irrevocable nomination; (ii)taking all necessary steps to ensure that the Plaintiff's interests in the prosecution of the pending Ausra patent Applications are protected and secured; and (c)an order that the Defendant furnish the Plaintiff with all necessary assistance as requested by the Plaintiff from time to time, in relation to any proceedings the Plaintiff may take against Solfast Pty Ltd or Areva Inc, or both, including, without limitation, any proceedings under sections 32 and 36 of the Patents Act 1990 (Cth), such assistance to include (without limitation) providing the Plaintiff with all documents in the possession, custody or control of the Defendant necessary for the Plaintiff to prosecute any claims against Solfast Pty Ltd or Ausra Inc, or both, under sections 32 and 36 of the Patents Act 1990 (Cth). (3)An order that the hearing of this proceeding be expedited. 14The application for leave under s 440D(1) of the Corporations Act was heard on 5 October 2011. 15Mr T M Mehigan of counsel appeared for Larkden. Mr C R C Newlinds SC with Mr N M Bender of counsel appeared for the administrators. 16The administrators opposed the grant of leave. 17On conclusion of the hearing, I granted leave as sought and provisionally fixed the remainder of the Summons for hearing on 2 and 3 November 2011. 18At the instance of the administrators I also made orders under s 439A(6) of the Corporations Act extending the convening period provided in s 440A(1) for the holding of the second meeting of Lloyd's creditors. 19I now publish my reasons for granting leave.