Berjaya Group (Aust) Pty Limited v Ariff [2007] NSWSC 174

New South Wales Supreme Court

CITATION : Berjaya Group (Aust) Pty Limited v Ariff [2007] NSWSC 174 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 05/03/07

JUDGMENT DATE : 5 March 2007

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

EX TEMPORE JUDGMENT DATE : 5 March 2007

DECISION : Orders for compulsory mediation

CATCHWORDS : PROCEDURE - mediation - where differences between commercial parties appear to be entrenched but susceptible of reasonable resolution - where moderating influences to be expected of solicitors appear to be unavailable - where several proceedings have failed to produce resolution - case for court to require parties to engage in mediation

LEGISLATION CITED : Civil Procedure Act 2005 , ss.26(1), 28(1)

CASES CITED : Ariff v Fong (2006) 59 ACSR 530 Re Carlovers Carwash Pty Ltd (2005) 54 ACSR 696

PARTIES : Berjaya Group (Aust) Pty Ltd, Berjaya Group (Cayman) Limited and Berjaya Group Berhad - Plaintiffs Stuart Karim Ariff - Defendant

FILE NUMBER(S) : SC 6450/06

COUNSEL : Mr P.M. Fordyce, Solicitor - Plaintiffs Ms R. Francois - Defendant

SOLICITORS : PMF Legal - Plaintiffs Deacons - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

MONDAY, 5 MARCH 2007

6450/06 BERJAYA GROUP (AUST) PTY LTD & 2 ORS v STUART KARIM ARIFF JUDGMENT 1 Before the court are an originating process and an interlocutory process filed by parties which I shall for convenience refer to together as "Berjaya". By the originating process filed in December 2006, they seek orders that would bring administration under a deed of company arrangement to a conclusion or recognise that it has concluded. By the interlocutory process filed on 16 February 2007 they seek the appointment of a receiver in respect of assets held or controlled by Mr Ariff, who was the administrator under the deed of company arrangement. The deed relates to four companies I shall call the "Carlovers companies". The deed was put in place more than three years ago, having been executed in December 2003. 2 Berjaya is the major shareholder and major creditor of the Carlovers companies. It accounts for more than 95% of the shares and debt. Berjaya maintains that control of the companies should be returned to it. As an immediate matter, Berjaya maintains that the assets of the Carlovers companies are in jeopardy and need to be taken into the protection of the court. It takes that stance because of what it regards as certain unexplained anomalies in financial documents concerning the relevant assets. 3 This is not the first time these parties have been before the court in relation to the affairs of the Carlovers companies. As long ago as September 2005, I delivered judgment in a matter involving Mr Ariff's remuneration: see Re Carlovers Carwash Pty Ltd (2005) 54 ACSR 696. At that point, no remuneration had been paid to Mr Ariff. This was because the remuneration fixing mechanisms had not operated on account of what I referred to as "tensions" between him and Berjaya which had led to a stalemate in the committees of creditors on which Berjaya was represented. The orders made in September 2005 were intended to facilitate determination of the remuneration by the court. But today, more than a year later, there has been no determination. 4 In May 2006, Berjaya succeeded in having ASIC appoint its representative Mr Fong as an "eligible applicant" to conduct Part 5.9 examinations in relation to the Carlovers companies. Mr Fong thereafter obtained the issue of examination summonses in respect of Mr Ariff and past and present members of his staff. Those cases were within s.596B, so that the applications had to be supported by an affidavit under s.596C. 5 In August 2006, I heard an application by Mr Ariff and others for an order under s.596C(2) giving them access to the confidential affidavit supporting the application for the issue of the examination summonses. That application was dismissed: see Ariff v Fong (2006) 59 ACSR 530. In the course of that judgment, I referred to the strong belief of Berjaya that Mr Ariff should bring his administration to a conclusion and hand control of the Carlovers companies back to Berjaya. I also referred to the close interest that Berjaya had taken in disbursements made by Mr Ariff and its attempts to obtain access to documents it considered necessary to an informed understanding of the financial aspects of Mr Ariff's administration, as well as an apparent about-face by Mr Ariff on a co-operative approach to inspection of records. 6 My refusal to make an order allowing Mr Ariff access to the confidential affidavit later became the subject of an appeal to the Court of Appeal, which appeal has yet to be heard. 7 Things were in the state I have described when the originating process and the interlocutory process now before me were filed. 8 The motion for the appointment of a receiver raises potentially serious allegations. It seems to me, at first blush, that it does so on evidence of matters that may turn out to have an innocent explanation, but at this stage, of course, one simply cannot tell. 9 The filing of the present proceedings marked a new departure in what is becoming an increasingly bitter dispute. I have a distinct impression that matters of pride and ego have become involved in a way that is not constructive. I also have a distinct impression that the respective solicitors have taken particularly entrenched positions. There is reference in paragraph [17] of the Ariff v Fong judgment to some aspects of the solicitors' correspondence to that point. The kind of tone described there seems to have continued. 10 I am not suggesting that any solicitor is doing otherwise that striving to serve the interests of the solicitor's client in a professional way and I of course have no way of knowing what instructions any practitioner is under. But I am concerned that, for whatever reason, the moderating influences that lawyers on both sides can often exercise in the interests of bringing their clients to an acceptable middle ground are unavailable here. 11 The underlying problems do not appear to be particularly complex. Mr Ariff wants his remuneration. Indeed, he is entitled to his remuneration and what he really wants is completion of the processes to quantify it. Berjaya, for its part, wants an insight into the financial aspects of Mr Ariff's administration – something that, as the holder of more than 95% of the shares and debt, it has more than a passing interest to understand. It also wants to resume control of the companies. On the surface, one would think that the desires or requirements on both sides are reasonable and that neither point of view should be too hard to accommodate. The parties need to be helped towards that accommodation. 12 I will therefore make an order under s.26 of the Civil Procedure Act 2005 referring the originating process and the interlocutory process to mediation. In doing so, I note that the possibility of referral to mediation of the court's own motion was foreshadowed by me both when the matter was last before me and by the Associate's email to the legal representatives last week; also that mediation is now not opposed by Mr Ariff, although it is opposed by Berjaya. 13 In addition, I will direct that the Registrar forward a copy of these reasons to the Registrar of the Court of Appeal with a request that consideration be given at that level to similar action in respect of the aspect of the overall dispute centred on the examination summonses. My aim is to cause the whole of the differences between Berjaya and Mr Ariff to be taken in hand by means of a process of mediation in which the totality of the grievances can be addressed. 14 Mr Ariff is a registered liquidator and an official liquidator. The immediate question of the safety and security of the assets in Mr Ariff's hands has been adequately dealt with by his undertaking given to the court today. It has been handed up in written form by his counsel, Ms Francois, and is in these terms: "On 5 March 2007 the defendant, Mr Stuart Ariff, undertakes to the court that the funds, if any, in his possession or control in relation to the deeds of company arrangement or funds belonging to the Car Lovers group will not be applied otherwise than in the course of those administrations." 15 I make the following orders: 1. Pursuant to section 26(1) of the Civil Procedure Act 2005 (the " Act "), the proceedings are referred to mediation. 2. Pursuant to section 28(1) of the Act, the costs of the mediation are to be paid 50% by the plaintiffs and 50% by the defendants. 3. The Honourable John Clarke QC is appointed as the mediator, subject to the defendant filing and serving a written consent of Mr Clarke by Wednesday 7 March 2007. 4. The parties have liberty to apply on 48 hours notice if the written consent in order 3 is not obtained. 16 I am told that the nominated mediator has indicated availability in the second half of March but needs to make a final check of possible conflicts before consenting to act. **********