IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248
The Victorian Court of Appeal allowed an appeal by an Australian company from orders enforcing against it, under the International Arbitration Act 1974 (Cth), a Mongolian arbitral award made under an arbitration agreement that did not name it, the judges agreeing that the award creditor had to show, at least on a prima facie basis, that the company was a party, but differing on the nature of that onus.
What the court decided
An operations management agreement, and its arbitration clause, named Altain Khuder LLC and IMC Mining Inc as the parties [67]–[68]. The appellant, an Australian company then called IMC Mining Solutions Pty Ltd and referred to here as IMC Solutions, was not named in the agreement [5]–[6].
The Mongolian tribunal's award named IMC Mining Inc as the defendant, but directed IMC Solutions to pay the sum awarded on that company's behalf [108]. The trial judge granted leave, without notice, to enforce the award against both companies, refused IMC Solutions' application to set that aside and ordered it to pay indemnity costs [69], [71]–[73].
Hansen JA and Kyrou AJA gave joint reasons and Warren CJ gave separate reasons, and all three would allow the appeal [4], [75]. On onus, Hansen JA and Kyrou AJA, two of the three judges, took one view [173] and Warren CJ another [41], [49].
In the joint reasons, the award creditor must first satisfy the court, on a prima facie basis, that a foreign tribunal made an award in its favour against the award debtor, that the award was made under an arbitration agreement and that both of them are parties to that agreement [135]. Producing the award and the agreement will not do that where, on their face, the award debtor was not a party, and the application should then proceed on notice [138], [140]. Their Honours held that the trial judge erred in making the order without notice against IMC Solutions [196].
Hansen JA and Kyrou AJA held that the ground in section 8(5)(b), that the arbitration agreement is not valid, includes the ground that the award debtor was never a party to it [166], [169], [173]. Once the court is satisfied on a prima facie basis that the award debtor was a party, the legal onus is on the award debtor to prove that it was not [173]. Their Honours said that the outcome of the appeal would have been the same had the legal onus been on Altain Khuder LLC [187].
All three judges accepted that the standard of proof under section 8(5) is the balance of probabilities, the proof needed depending on the seriousness of what is alleged [52], [192]. The difference is that Warren CJ described the award debtor's onus under section 8(5)(a) to (e) as heavy [53]. The joint reasons held that the trial judge erred in finding a heavy onus [189], [192].
Warren CJ held that section 8(1) places on the award creditor a legal burden, as a threshold issue, of proving on the balance of probabilities that the award debtor is a party to the arbitration agreement [43], [49]. Her Honour did not accept that a claim not to be a party falls within the invalidity ground in section 8(5)(b) [41].
Warren CJ held that the trial judge erred by placing the onus of proof on IMC Solutions, and that whether it was a party had to be decided again [62]. Her Honour regarded it as inappropriate for the Court of Appeal to decide the application itself but, the other judges having done so, found it unnecessary to express a concluded view on the manner of disposal [63].
At the parties' invitation, Hansen JA and Kyrou AJA decided the application themselves on the affidavit evidence rather than remitting it [63], [231]. On the whole of the evidence, they held that the trial judge could not have been satisfied even on a prima facie basis that IMC Solutions was a party, so Altain Khuder LLC failed to discharge its evidential onus [234], [260].
The joint reasons held that the tribunal had not decided that IMC Solutions was a party to the arbitration agreement, and that, whatever the capacity in which it was directed to pay, it was not that of a party [236], [281]–[283].
If the legal onus had been on IMC Solutions, their Honours held that it had made out the grounds in section 8(5)(b) and (c) and in section 8(7)(b) [261], [297], [306], [346].
The joint reasons held that the enforcing court can decide for itself whether the tribunal had jurisdiction over the award debtor [269]–[270]. Adopting a statement of Lord Mance JSC, they held that in the circumstances of this case IMC Solutions was not obliged to take part in the arbitration or to apply to set the award aside at the seat, so no estoppel arose from its not doing so [320]–[321].
Both sets of reasons held that the trial judge should have ruled on the objections to the award creditor's affidavits, and the joint reasons held those objections well founded [23], [218], [222].
On costs, which they found it not strictly necessary to decide, the joint reasons said that failing to establish a ground for resisting enforcement is not of itself a special circumstance justifying indemnity costs [323], [336].
Hansen JA and Kyrou AJA concluded that they would "allow the appeal and set aside all the orders made below", so far as they relate to IMC Solutions [347]. The orders set aside included both indemnity costs orders [323], [342].
Why it matters
All three judges said that where the arbitration agreement does not name the company against which enforcement is sought, the creditor needs evidence beyond the award and the agreement, and the application should ordinarily proceed on notice [43], [61], [140], [144]. In my view, solicitors acting for an award creditor should therefore check the parties named in the agreement before applying without notice.
The judges differed on where the legal burden lies on whether the award debtor was a party: on the creditor for Warren CJ, and on the debtor, once the creditor has a prima facie case, for the other two judges [49], [173]. Readers should check the current text of the Act and of any rules and practice notes on enforcement, and how later decisions have treated the different views on onus.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.