Hyundai Engineering and Steel Industries Co Ltd v. Two Ways Constructions Pty Ltd

At a glance

Parties

Hyundai Engineering & Steel Industries Co Ltd (Korea) v. Two Ways Constructions Pty Ltd (formerly Alfasi Steel Constructions (NSW) Pty Ltd) (Australia)

Case no.

Federal Court of Australia, NSD 976 of 2018; [2018] FCA 1054 and [2018] FCA 1551

Court

Federal Court of Australia, New South Wales Registry (O'Callaghan J)

Underlying award(s)

SIAC final award of 9 March 2018 by sole arbitrator Alvin Yeo SC (seat Singapore), registered as award number 024 of 2018 on 13 March 2018

Forum and rules

Enforcement under s 8 of the International Arbitration Act 1974 (Cth) and the New York Convention; arbitration under the SIAC Rules (5th edition, 1 April 2013)

Treaty

Contract arbitration clause (clause 45.3 of the Sub-Subcontract); New York Convention

Sector

Construction; structural steel

Outcome

Enforcement adjourned on 13 July 2018 on condition of full security, which was not provided. On 2 October 2018 the award was enforced as a judgment of the Court, and the administrators' request for liberty to apply if Singapore varied the award was refused.

Amount

Award: AUD 5,584,148.39 (principal AUD 5,001,026.19 plus pre-award interest), USD 1,502,958.86 in costs, a 70/30 split of SGD 556,376.58 arbitration costs, and 5.33% post-award interest. The Court set security at AUD 7,900,542.41. The respondent was ordered to pay the costs of the enforcement proceedings.

The dispute

Hyundai, a Korean company, agreed in a Sub-Subcontract of 23 December 2013 to fabricate and deliver steel to Alfasi, an Australian company, for the Sydney International Convention Exhibition and Entertainment Precinct in Darling Harbour. The parties disputed responsibility for delay. Alfasi claimed AUD 19,120,000 in liquidated damages in a SIAC arbitration seated in Singapore. The sole arbitrator found that Alfasi's late and inadequate drawings were the main cause of delay. After set-off, he ordered Alfasi to pay Hyundai a net AUD 5,001,026.19, plus interest and costs. Hyundai sought enforcement in the Federal Court of Australia. Alfasi applied to the Singapore High Court to set aside parts of the award, arguing that the findings were beyond the scope of the submission and were made in breach of natural justice. In Australia it asked for an adjournment without security. Alfasi (later renamed Two Ways Constructions Pty Ltd) then went into voluntary administration, and its administrators asked for orders that would allow the Australian judgment to be adjusted if Singapore varied the award.

Key holdings

1. Section 8(8) of the International Arbitration Act 1974 (Cth), which reflects Article VI of the New York Convention, gives a wide discretion to adjourn enforcement and order security. The Court follows Esco v Bradken and the English sliding-scale approach in Soleh Boneh and IPCO. It applies that discretion with regard to the Convention's pro-enforcement bias. [2018] FCA 1054, ¶¶ 29–38
2. The Court accepted, as the parties agreed, only that the Singapore challenge was bona fide and arguable. On the sliding scale that favours full security. The case for security was 'overwhelming': even complete success in Singapore would leave about AUD 4.9 million payable. [2018] FCA 1054, ¶¶ 49–57
3. The award debtor bears the onus of justifying an adjournment without security. It is irrelevant that Hyundai sought no security under the contract or in the arbitration. Directors' undertakings did not help, because the debtor's evidence on its finances was opaque. The interest accruing until the Singapore hearing forms part of the security, because the delay results from the debtor's request for an adjournment. [2018] FCA 1054, ¶¶ 58–61
4. The Court adjourned enforcement only to 30 November 2018, not indefinitely. The adjournment was conditional on security of AUD 7,900,542.41 within 21 days. Alfasi was ordered to pay the costs of its application, because it had insisted unreasonably on an adjournment without any security. [2018] FCA 1054, ¶¶ 62–64
5. After the respondent failed to give security and went into voluntary administration, the Court enforced the award under s 8(3) as a judgment of the Court, on terms the parties agreed, and ordered the respondent to pay the costs of the proceedings. [2018] FCA 1551, ¶¶ 4, 9, 24
6. The Court refused to reserve liberty to apply for a variation of the judgment if the Singapore High Court later varied or set aside the award. Once entered, the judgment cannot be varied under r 39.05 or otherwise (Caboolture). Such a change would alter the order rather than supplement it. An order barring enforcement without leave was unnecessary, because s 440D of the Corporations Act 2001 already has that effect. [2018] FCA 1551, ¶¶ 12–20

Procedural history

1. 23 December 2013Hyundai and Alfasi conclude the Sub-Subcontract. It is governed by New South Wales law and contains a clause for SIAC arbitration in Singapore.
2. 29 February 2016Alfasi files a notice of arbitration under the SIAC Rules. Alvin Yeo SC is appointed sole arbitrator on 11 May 2016.
3. 13–22 June 2017Eight-day hearing in Singapore.
4. 9 March 2018Final award in Hyundai's favour. On 25 April 2018 the arbitrator refuses Alfasi's application for correction and interpretation under Rule 29.
5. 6 June 2018Hyundai files its application in the Federal Court of Australia to enforce the award. On 8 June 2018 Alfasi applies to the Singapore High Court to set the award aside in part.
6. 13 July 2018[2018] FCA 1054: enforcement adjourned to 30 November 2018 on condition of security of AUD 7,900,542.41.
7. 2018Security is not provided and the respondent enters voluntary administration. In [2018] FCA 1427 the Court grants a further adjournment and gives Hyundai leave to proceed under s 440D(1) of the Corporations Act.
8. 2 October 2018[2018] FCA 1551: the award is enforced as a judgment of the Court and judgment is entered in its terms. The administrators' proposed liberty-to-apply order is refused.

Tribunal, counsel and experts

For the claimant

Webb Henderson

For the respondent

Colin Biggers & Paisley · Frenkel Partners

Run a conflict check on these names →

Keywords

• enforcement of foreign award
• New York Convention Article VI
• International Arbitration Act 1974 s 8(8)
• adjournment pending set-aside
• security for award
• sliding scale
• Soleh Boneh
• Esco v Bradken
• SIAC
• Singapore set-aside
• voluntary administration
• Corporations Act s 440D
• liberty to apply
• variation of judgment
• liquidated damages
• extension of time
• steel fabrication
• Sydney International Convention Centre

Summary generated with AI from the published documents — refer to the award for the authoritative text.