COMMONWEALTH OF AUSTRALIA vy COCKATOO DOCKYARDS PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY P and PRIESTLEY JA 1 July 1996, 15 August 1996 [1996] NSWCA 118 Arbitration — Complex commercial arbitration — Leave to appeal from order by judge to enforce interim award by arbitrator — Unconditional enforcement of arbitrator's award where other claim outstanding — Commercial Arbitration Act 1984 (NSW) s33, s38(4) Practice — Court of Appeal — Leave to appeal from order by judge to enforce interim award by arbitrator — Reasons for refusal Application for leave to appeal against order by judge to enforce arbitrator's award — Lengthy arbitration resulting in interim award in respect of commercial claim to Cockatoo Dockyard of $16m — Separate pollution claim by the Commonwealth yet to be determined — Submission by the Commonwealth that if Cockatoo Dockyard obtains unrestricted payment of the award it will dispose of the moneys and leave no amount for payment of a possibly successful claim by the Commonwealth in respect of the pollution claim — Whether arbitrator or judge in error in relation to the refusal to impose restrictions upon the enforcement of the interim award — Court not able to determine with certainty the likelihood of the award of a substantial sum to the Commonwealth on the pollution claim — Whether in an application for leave to appeal the Court should consider the imposition or otherwise of conditions upon any order for enforcement of the interim award — Commercial Arbitration Act 1984, s33, s38(4). ORDERS Leave to appeal refused with costs. Mahoney P and Priestley JA This is an application for leave to appeal against a decision of Bainton J given on 29 and 30 May 1996. It arises in relation to an aspect of an ongoing arbitration between the Commonwealth of Australia and Cockatoo Dockyard Pty Ltd ("the Company"). As proceedings are still pending in relation to aspects of that matter the Court has decided to depart from its general practice of not giving reasons for grant or refusal of leave to appeal and will indicate in summary form what has occurred in relation to the present application and why it has decided to refuse leave to appeal. 1. THE CONTEXT OF THE APPLICATION: In 1972 the Commonwealth and the Company made legal arrangements for the use by the Company of Cockatoo Island, in Sydney Harbour, for the Company to do work on Oberon Class submarines owned by the Commonwealth. By reason of events which took place, the Company claimed damages from the Commonwealth for breach of legal obligations of the Commonwealth. The Commonwealth claimed that the Company was liable to it for damages for (as it has been compendiously described) pollution. In 1993 those claims were referred to a private arbitration. 2 UNREPORTED JUDGMENTS The arbitration continued for a long time and with considerable complications. The arbitrator determined to deal with it in two parts called the commercial claim and the pollution claim. He determined to make an interim award first, in respect of the commercial claim, and then to deal with the pollution claim. The commercial claim, to the extent that it was successful, would result in the payment of money by the Commonwealth to the Company; the pollution claim, to the extent that it was successful, would result in the payment of money by the Company to the Commonwealth. The Commonwealth feared that if the commercial award were made first and it was required to pay money to the Company by virtue of it, that money would be disposed of (in payment of debt or otherwise) to the parent company of the Company, ANI Limited. The Commonwealth feared that, when the pollution award was made, the Company would have insufficient money to pay what it was ordered to pay. Accordingly, the Commonwealth asked the arbitrator, as part of or in relation to the commercial award, so to structure the award or the proceeding that this would not occur. It is to this that the present application is relevant. On 8 December 1995 the arbitrator, by an interim award, awarded the Company $16,179,595 in respect of the commercial claim. The pollution claim is still pending. The Commonwealth, pursuant to the Commercial Arbitration Act 1984 ("the Act') s38, applied to the Supreme Court for leave to appeal against the commercial award on the ground of alleged errors of law. Bainton J refused that application. At the same time, Bainton J granted an application by the Company for what was, in effect, leave to enforce the commercial award against the Commonwealth in accordance with s33 of the Act. The Commonwealth sought leave to appeal against both Bainton J's refusal of leave to appeal against the commercial award and against his Honour's order that the Company may enforce the commercial award pursuant to s33. This Court did not call on the respondent and accordingly now refuses leave to appeal in respect of the first matter. The present judgment is concerned with the second matter, the application for leave to appeal to this Court against his Honour's order under s33. 2. THE APPLICATION FOR LEAVE TO APPEAL AGAINST THE ORDER UNDER S33: It is understandable that the Commonwealth should seek to ensure that, if an award is made in its favour in respect of its pollution claim, the Company will have money to meet the award. Mr Rayment QC, for the Commonwealth, has submitted that the Company is presently in a financial state such mat (if the commercial claim award be put aside) it is unable to meet its obligations. In particular, he submits, it is substantially indebted to the ANI company. If the amount of the commercial award be paid to the Company without restrictions, it may effectively transfer it to the ANI company, either in payment of an indebtedness or by way of dividend or in some other way. Mr Rayment QC has pointed to a minute of discussions in which, as he suggests, the Company has threatened to do so. Therefore, the submissions have suggested, the Company should not be permitted to enforce the commercial award or restrictions should be placed upon its enforcement which will ensure mat the Company will retain moneys sufficient to meet such award as is made in the pollution matter. The Company's submissions suggest that no restrictions are appropriate in this regard. It is submitted that leave to appeal should not be given in respect of this matter. A number of reasons have been advanced in support of these submissions. It is not necessary to deal with all of them. The Company has pointed out that the WROMMONWEALTH OF AUSTRALIA v COCKATOO DOCKYARDS PTY LTD (Mahoney B and Priestley JA) arbitration commenced as long ago as February 1993. The hearing of the commercial claim occupied a long time, perhaps of the order of 170 days. Before the arbitrator determined that an interim award in respect of the commercial claim should be made, submissions were made to him in relation to the present matter. It was submitted for the Commonwealth that he had been asked not to make the interim award in respect of me commercial matter unless, by way of agreement or restrictions, the Commonwealth was safeguarded against the possibility that, in relation to the pollution award subsequently made, the Company would be able to pay what it should pay to the Commonwealth. What took place before the arbitrator in this regard was recorded; the Court has been referred to the relevant material. Insofar as there is a difference between the Commonwealth and the Company as to the effect of what then was done, it was a matter to be determined by the arbitrator. At least, the arbitrator was in a position of advantage in determining what was the meaning and effect of what then was said and done, in correspondence between the parties and in statements made to him. The arbitrator, in the context of making the interim commercial award, referred to the submission that, by restrictions or otherwise, it was appropriate to safeguard the Commonwealth's position in relation to the matters to which reference has been made. In the end, he concluded that he should make an interim award in relation to the commercial claim and that, in making it, he should not impose restrictions of the kind referred to. Insofar as his award and the form of it was the subject of.an application by the Commonwealth for leave to appeal, the matter was before Bainton J for consideration. The proceedings before Bainton J were dealt with at great length; the proceedings before him when the Commonwealth sought leave to appeal against the interim award and when the Company sought orders under s 33 in respect of enforcement of the interim award extended over some four days. The learned judge reviewed the matter at considerable length: his judgment, consisting of some 92 pages, dealt born with the question of leave to appeal under s38 and the application by the Company under s33. After considering each of them at some length - they are, of course, related - his Honour concluded that no error had been made in the making of the interim award by the arbitrator without, in effect, placing restrictions upon the obligation to pay the interim award and his Honour, considering the enforcement of the interim award for the purposes of s33, effectively authorised its enforcement without such restrictions. His Honour took into account all of the considerations upon which the Commonwealth relies in the present application for leave to appeal: it has not been suggested otherwise. The application to this Court for leave to appeal in respect of the two matters to which we have referred, was heard at some length. Both parties furnished detailed written submissions prior to the hearing of it. The Court heard oral submissions from me Commonwealth for some two hours and from the Company for some 15-20 minutes. The submissions made orally for the Commonwealth continued until a late hour and the Commonwealth was allowed to supplement its submissions in reply by writing. It has furnished 10 pages of written submissions and 94 pages of annexed material. The two related matters, in respect of the interim award upon the commercial claim and in respect of the enforcement of it have, accordingly, been considered by the arbitrator and passed upon in his making of the interim award; have been considered and passed upon by the judge in the hearing of a number of days and in his detailed judgment; and have been the subject of consideration before this Court. 4 UNREPORTED JUDGMENTS Mr Rayment QC, with appropriate frankness, conceded that the Commonwealth cannot point to any error made by the arbitrator or by the judge in relation to the refusal to impose restrictions upon the enforcement of the interim award by the Company: Mr Rayment based his submission that leave to appeal should be granted in this regard upon the claim that the decision of the arbitrator and/or of the judge is so far wrong that there must be inferred to be in it an error of law and, as the submission infers, an error of law appropriate for leave to appeal to this Court against what has been done. We do not think any error of this kind appears either from examination of the reasons given by the learned judge or from the terms or effect of the orders which his Honour made. There is, of course, the possibility or likelihood that, if the Company obtains unrestricted payment of the interim award, it will dispose of the moneys and leave no amount for payment of the award (if any) in favour of the Commonwealth in respect of its pollution claim. (No consideration was given during argument to whether, if the directors of the Company so dealt with the moneys for the purpose of defeating the Commonwealth's claim (if any) they would be acting in breach of the obligations placed upon them by the law in that regard. That matter may be put aside.) As has been said, the arbitrator and, in particular, the judge dealt with the matter upon the basis mat that might be done. But, it may be inferred, the arbitrator and, in particular, the judge had regard to the position of me Company. The arbitration commenced in 1993. The amount due to the Company, if the interim award be correct, is very substantial: the Company was awarded $16,179,595. It is not clear when the arbitration in respect of the Commonwealth pollution claim will be concluded or what the result of that claim will be. The Court was informed that the pollution claim had been before the arbitrator for some days following the making of me interim award. It was said that the Commonwealth desired to provide particulars, or fresh particulars, in respect of the claim. Such matters may be put aside. The result has been mat the Commonwealth has moved to remove the arbitrator for "misconduct". That application has been before the Court for some time and, the Court is informed, it is proposed to continue it before Rolfe J in February 1997. The Court is informed that some ten days have been allocated for the hearing of the Commonwealth's application. From such matters it may be inferred mat the Commonwealth's pollution claim will not be disposed of for a considerable time. If restrictions were imposed generally upon the use by the Company of the amount received from the interim award, it would be deprived of the use of that money for an indefinite period. The Court is not able to judge with certainty the likelihood of the award of any substantial sum to the Commonwealth upon the pollution claim. Suggestions were made from the Bar table as to inferences to be drawn from, as it was suggested, difficulty already met by the Commonwealth in this regard. Those matters are not to be taken into account for present purposes as they are not, it would appear, formally before the Court. But it is proper to infer that there is some justice in the Company's contention (as we infer it to be) that, having regard to the time that has passed, it should be entitled to enforce the interim award upon its commercial claim. Were the matter before this Court at first instance upon an application under s33, it would be proper for the Court to consider, inter alia, whether conditions could and should be imposed upon any order for enforcement of the interim award to ensure that the pollution claim was disposed of without undue delay WROMMONWEALTH OF AUSTRALIA v COCKATOO DOCKYARDS PTY LTD (Mahoney B and Priestley JA) and/or to ensure that, if the amount of the interim award were passed to the ANI company, that company would be obliged, in one way or another, to make such portion of it available as might be necessary to enable the Company to meet its obligations under the pollution award. Matters such as these are matters which could have been considered upon an original application. What is before this Court is an application for leave to appeal against, inter alia, the refusal by the judge to impose restrictions or conditions of such a kind upon the order for enforcement made under s33. It is proper for this Court to take into account the possibility of such restrictions or conditions being imposed as a condition of an order for leave to appeal. However, having considered all of the circumstances, this Court is not satisfied that this is a matter appropriate for the grant of leave to appeal. It is not prepared to infer, as Mr Rayment QC suggested that it should from the effect of what was done, that a relevant error must have occurred. The matter is one upon which, in the exercise of a judicial discretion, different conclusions might have been reached. The Court is not satisfied that the conclusion at which the judge arrived was wrong. In particular, it is not satisfied that, in reaching that conclusion, the judge was involved in any error which, for the purposes of an application for leave to appeal, would make it appropriate for such leave to be granted. Accordingly, when the hearing of the proceedings in the Supreme Court recommences, the issues then to be dealt with may be dealt with upon the basis that this Court has refused leave to appeal in respect both of the interim award as such and in respect of the decision of Bainton J under s33 to authorise enforcement of the interim award and not to impose restrictions upon that enforcement. The application is therefore dismissed with costs. Leave to appeal refused with costs. Counsel for the claimant: BW Rayment QC/DA Caspersonn Solicitors for the claimant: Australian Government Solicitor Counsel for the opponent: The Hughes QC/TJR Parker Solicitors for the opponent: Allen Allen and Hemsley