FEDERAL COURT OF AUSTRALIA
Hyundai Engineering & Steel Industries Co Ltd v Two Ways Constructions Pty Ltd  FCA 1427
FILE NUMBER: NSD 976 of 2018
JUDGE: O’Callaghan J
DATE OF JUDGMENT: 13 September 2018
CATCHWORDS: ARBITRATION – international arbitration – where award creditor brought proceedings to enforce award obtained in Singapore – where award debtor sought to set aside the award in part in the High Court of the Republic of Singapore – where award debtor applied under s 8(8) of the International Arbitration Act 1974 (Cth) to adjourn award enforcement – adjournment granted on condition that award debtor provide security for full amount of the award plus interest – where award debtor failed to provide security and then when into voluntary administration – application by award creditor under s 440D of the Corporations Act 2001 (Cth) for leave to proceed with enforcement application notwithstanding voluntary administration – leave granted
- Corporations Act 2001 (Cth), s 440D
- International Arbitration Act 1974 (Cth), s 8(2)
- Foxcroft v Ink Group Pty Ltd (1994) 15 ACSR 203
- Hyundai Engineering & Steel Industries Co Ltd v Alfasi Steel Constructions (NSW) Pty Ltd  FCA 1054
- Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 285 ALR 207;  NSWSC 1305
DATE OF HEARING: 13 September 2018
DIVISION: General Division
NATIONAL PRACTICE AREA: Commercial and Corporations
SUB-AREA: International Commercial Arbitration
NSD 976 of 2018
HYUNDAI ENGINEERING AND STEEL INDUSTRIES CO LTD
TWO WAYS CONSTRUCTIONS PTY LTD
THE COURT ORDERS THAT:
1. Pursuant to s 440D(1) of the Corporations Act 2001 (Cth), the applicant be granted leave to proceed against the respondent.
2. The further hearing of this proceeding is adjourned until 11:00am on 2 October 2018 in Sydney.
3. Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from transcript)
- These reasons for judgment were delivered ex tempore at the hearing on 13 September 2018 and accompany the orders set out above.
- This is a proceeding brought under s 8(2) of the International Arbitration Act 1974 (Cth), in which the applicant seeks, among other orders, an order that “the Final Award dated 9 March 2018 of Mr Alvin Yeo registered in the Singapore International Arbitration Centre Registry of Awards as Award Number 024 of 2018 on 13 March 2018 and notified to the parties by the Registrar of the Court of Arbitration of the Singapore International Arbitration Centre upon or about that date be enforced as a judgment of this court.”
- Voluntary administrators were appointed by the directors of the respondent company on 4 September 2018, nine days ago. As a result of that appointment, this proceeding is stayed by operation of s 440D of the Corporations Act 2001 (Cth). Section 440D(1) relevantly provides as follows:
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
(b) with the leave of the court and in accordance with such terms (if any) as the court imposes.
- This morning I heard an application by the applicant company (Hyundai) for leave to proceed in this proceeding pursuant to s 440D(1)(b). Mr CRC Newlinds of senior counsel appeared for the administrators. Mr JA Hogan-Doran appeared with Mr Ball for Hyundai.
- At the conclusion of oral submissions in relation to the application for leave to proceed, I made an order that such leave be granted. These are my reasons.
- In my view, the appropriate starting point for the consideration of an application for leave to proceed is that adopted by Hammerschlag J in Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd(2011) 285 ALR 207;  NSWSC 1305, in particular at  to .
- I agree with his Honour’s view that it is not appropriate to commence consideration of an application of this sort with an assumption that leave would only rarely be granted: cf Foxcroft v Ink Group Pty Ltd (1994) 15 ACSR 203 at 205. As Hammerschlag J said at -:
I respectfully take a view different to that of Young J and Austin J. It seems to me that an approach which commences with an assumption that leave will only rarely be granted or that the Court must approach this type of application with a degree of caution greater than that with which it would approach the exercise of any other discretion within a particular statutory context where it must be satisfied that appropriate circumstances exist for the making of an order imposes upon the applicant a standard higher than that which the section requires. This is an unwarranted confinement of the discretion.
The policy underlying Pt 5.3A, as evinced by s 435A, is to maximise the chances of the beleaguered company staying alive.
The stay of proceedings imposed by s 440D may facilitate the achievement of this object, amongst others, by
(a) affording the administrator time to assess and report on the company without the distraction of the proceedings;
(b) putting a brake on legal and associated costs;
(c) allowing time for the development of proposals which might preserve the value of the company as a going concern;
(d) giving the creditors time to consider their position for the purposes of the creditors’ meeting; and
(e) in appropriate circumstances, preventing a creditor from obtaining some advantage over other creditors or potential creditors.
Whilst the discretion under s 440D must be exercised with the objects of the Part in mind, it remains one at large. A stay is the starting point. There must be circumstances which warrant its displacement.
Every application must be considered on its own circumstances. There are infinite possible scenarios. There may be a flurry or a dearth of meritorious applications. Those circumstances need have no particular quality of rarity.
- I agree, with respect, with those observations and approach this application accordingly.
- I refer, without repeating them, to my reasons for judgment in Hyundai Engineering & Steel Industries Co Ltd v Alfasi Steel Constructions (NSW) Pty Ltd  FCA 1054. Those reasons should be regarded as incorporated into these reasons. In that decision, I ordered, among other things, that “Pursuant to subsection 8(8) of the International Arbitration Act 1974 (Cth), the proceedings be adjourned to 30 November 2018 … for further mention.” That adjournment was conditional upon the respondent providing security for the Award in the manner and period set out in other parts of the order in the sum of over $7.9 million. Those orders were made to permit the respondent (then named Alfasi) to pursue an application in the Singapore High Court partially to set aside the award. In the events that occurred, no security has been provided.
- At the hearing this morning, Mr Newlinds undertook on behalf of the administrators that, pending the hearing of any appeal in Singapore to set aside the award, Hyundai would, for voting purposes, be entitled to vote for the full amount of its debt, which, as I say, is in the vicinity of $7.9 million. Mr Newlinds informed the court that the administrators have not yet made a decision whether to proceed with the application in Singapore or whether the company has sufficient funds to run the case. All that Mr Newlinds was able responsibly to submit was that the proceeding is listed in Singapore for hearing on 14 November 2018.
- Mr Newlinds also said that a Deed of Company Arrangement should be put to creditors before the Singapore case comes on for hearing and that any such deed would, of course, deal with Hyundai’s debt. Mr Newlinds submitted that, in circumstances where Hyundai accepts, as it does, that it could not seek to enforce any judgment it obtains in this court until the administration takes its course, or until further order, and where the administrators agree to admit the whole of the debt for voting purposes unless and until the Singapore court rules otherwise, I should adjourn the leave application to enable the administration to work its course.
- In those circumstances, it was submitted that, although the relative prejudice of the parties was fairly evenly balanced, Hyundai would not suffer prejudice other than perhaps the cost of another days hearing in court. Mr Newlinds also submitted that he was not in a position to make any submission as to the merits of the application in Singapore.
- Mr Hogan-Doran submitted, in substance, that the administrators have had time enough to consider their position about the merits of the Singapore application and to review any legal advice previously received by the company about it.
- He also submitted, with some force, that the appointment of the administrators may be viewed as a third attempt to achieve an adjournment of this proceeding to enforce the award by backdoor means that could not be achieved through the front door.
- In my view, adopting the approach adopted by Hammerschlag J in Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd (2011) 285 ALR 207;  NSWSC 1305 it is appropriate to grant leave to proceed in this case. I cannot speculate on why the application for a stay made by the respondent before me in June 2018 was pressed or why it never paid any amount by way of security despite the court’s order that it do so. In the events that have occurred, however, as I observed to counsel, if the court had known in June what it now knows, I would have proceeded to hear and determine this proceeding in June.
- In my view, Hyundai should not be worse off as a result of the respondent’s failure to comply with the terms of the stay order.
- For those reasons, I made the order giving leave to proceed under section 440D of the Corporations Act 2001 (Cth).
- Upon making that order, Mr Newlinds made an application for a brief adjournment of this proceeding (he said something in the order of a week) to enable the administrators to offer assistance to the court in relation to this proceeding.
- The application was opposed, in substance, for most of the reasons that Mr Hogan-Doran advanced in support of his application for leave.
- I was initially inclined to the view that I should refuse the application for even such a short adjournment because, as I observed in my earlier reasons, Hyundai Engineering & Steel Industries Co Ltd v Alfasi Steel Constructions (NSW) Pty Ltd  FCA 1054 at , even if the respondents are successful in its Singapore application, the application will only bring a partial variation of the award, and it will still be bound to pay Hyundai something in the vicinity of $5 million. Nonetheless, in my view, a short adjournment is unlikely to cause any additional significant prejudice to Hyundai, and, accordingly, I will hear the parties as to a mutually convenient time to which the further hearing of this proceeding may be adjourned.