In the matter of Infinite Plus Pty Ltd

1. [1]

   GLEESON JA: Application is made by the first defendant (Ms Qian) for a stay of this proceeding brought by the plaintiffs, Mr Zhao and La Kaffa International Co Ltd, a company incorporated in Taiwan (La Kaffa (Taiwan)) claiming relief for oppression. The second defendant, Infinite Plus Pty Ltd (Infinite Plus or the company) has not appeared in the proceeding.

2. [2]

   Ms Qian primarily relies upon s 7(2) of the International Arbitration Act 1974 (Cth) (IAA) and Art 8(1) of the UNCITRAL Model Law on International Commercial Arbitration (Model Law), which is Sch 2 to the IAA. The Model Law is picked up and applied as Commonwealth law, subject to the provisions of Dvn 2, Pt III of the IAA, by s 16 of the IAA.

3. [3]

   The grounds of the application are that Ms Qian and Mr Zhao are parties to a shareholders purchase agreement (the shareholders agreement) that contains an arbitration agreement and accordingly Mr Zhao cannot continue an oppression claim under s 233 of the Corporations Act 2001 (Cth) or otherwise dispute in this proceeding the validity of an Expulsion Notice given by Ms Qian under the shareholders agreement, because those “matters” fall within the arbitration agreement. As against the La Kaffa (Taiwan), Ms Qian asks that the court, in the exercise of its power under s 67 of the Civil Procedure Act 2005 (NSW) or its inherent power to control its own process, stay the claims by La Kaffa (Taiwan) pending the outcome of the arbitration between Ms Qian and Mr Zhao.

Background

1. [4]

   The parties to the shareholders agreement, which is variously dated 20 June 2011 and 30 June 2011, are Chen Zhao (known as Charlley Zhao), Yang Yang Qian (known as Iris Qian), La Kaffa International Co Ltd, a company incorporated in the Cayman Islands (La Kaffa (Cayman)) and Infinite Plus.

2. [5]

   Infinite Plus has since April 2009 operated as a franchisor - recruiting, selling, supporting and supplying franchisees operating under the name “ChaTime”, suppling tea based cold beverages, as well as operating some stores in its own right.

3. [6]

   It is common ground that up until 30 June 2011, the 495,106 ordinary shares in Infinite Plus were by Mr Zhao as to 23 percent, Ms Qian as to 22 percent and La Kaffa (Cayman) as to 55 percent.

4. [7]

   The plaintiffs contend that La Kaffa (Cayman) transferred its shares in Infinite Plus to the second plaintiff, La Kaffa (Taiwan) by a document styled “shareholders purchase agreement”, dated 1 July 2011. Mr Zhao gave affidavit evidence that La Kaffa (Taiwan) now holds 55 percent of the shares in the company; however, the register of members of the company was not put into evidence. There is a question as to whether the terms of the 1 July 2011 agreement effectuated any transfer of shares from La Kaffa (Cayman) to La Kaffa (Taiwan). The agreement seems to have been prepared by a non-lawyer using parts of the earlier shareholders agreement referred to at [4] above, however it does not contain any operative provisions dealing with the transfer of the shares held by La Kaffa (Cayman). Rather, it seems to assume such a transfer has taken place in some unidentified manner.

5. [8]

   The shareholders agreement set out the objectives of the shareholders and provides that each shareholder must be just and faithful and provide full information to each other in relation to the affairs and activities of the Business (cl 2.3). “Business” is defined as the operation of retail businesses and a franchise operation associated with the sale of Asian-styled teas under the “ChaTime” brand name (cl 1.1(b)). Clause 3 deals with the appointment of the directors. Each of Mr Zhao and Ms Qian may nominate one director and La Kaffa (Cayman) may nominate up to three directors (cl 3.1). Clause 4 deals with procedures for board meetings and certain operational restrictions which require the unanimous approval of shareholders before any board decision was implemented.

6. [9]

   Clause 9 deals with certain restrictions on the transfer of shares without the prior written consent of the other shareholders in the company. Relevantly, subject to compliance with the requirement that the shares be first offered to the existing shareholders, shares may be transferred to a third party provided that the transferee has entered into a deed whereby the assignee agrees to assume all of the obligations on the part of the outgoing shareholder under the shareholders agreement and under the Constitution of the company: cl 9.2(d)(v). There is no evidence of La Kaffa (Taiwan) having entered into such a deed with the company or Ms Qian.

7. [10]

   Clause 10 provides a buy-out procedure following breach of the shareholders agreement. Clause 13 provides a dispute resolution mechanism. Clause 19 deals with choice of jurisdiction.

8. [11]

   It is necessary to refer in more detail to the terms of cls 10, 13 and 19.

9. [12]

   Clause 10 is headed “Buy-Out Following Breach” and relevantly is in the following terms:

10. [13]

    Clause 10.4 provides for a valuation process by an accountant acting as an expert, not as an arbitrator, if the shareholder on whom an Expulsion Notice is served disagrees with the value attributed to its interest in the company and seeks to have such interest valued by a third party.

11. [14]

    Clause 10.5 deals with the consequence of the service of an Expulsion Notice in the following terms:

12. [15]

    Clause 13 is headed “Dispute Resolution” and provides:

13. [16]

    Clause 19 is headed “Jurisdiction” and provides:

Background of the oppression proceedings

1. [17]

   The directors of the company are Ms Qian, Mr Zhao and three other persons who, according to an ASIC search, reside in Taiwan. Ms Qian’s precise management role in the company is a matter in dispute. In her affidavit Ms Qian said that she has been actively involved in the management and day-to-day operations of the company, both in her capacity as a director and her position as “Head of Franchise”.

2. [18]

   Mr Zhao said in his affidavit that he has acted as managing director of the company with the consent and agreement and/or acquiescence of Ms Qian and La Kaffa (Taiwan), and that Ms Qian’s role had been that of franchise management up until about July 2015, when family commitments prevented her fulfilling that role. (Ms Qian went on maternity leave in August 2015). Mr Zhao said that Ms Qian remained in franchise management, but with the assistance of a new general manager and franchise manager.

3. [19]

   Ms Qian returned to work in January 2016. On 23 February 2016, Ms Qian complained in an email to the other directors and shareholders of a number of matters, which she viewed as marginalisation. Subsequently, Ms Qian’s solicitors sent letters to the company raising concerns about the conduct of Mr Zhao and the company on 21 March 2016 and 25 April 2016. Specifically, Ms Qian complained that she had been excluded from the management of the company and that Mr Zhao had improperly used his position as a director of the company.

4. [20]

   On 25 August 2016, Ms Qian issued an Expulsion Notice to Mr Zhao under cl 10 of the shareholders’ agreement. That clause, the terms of which are set out above, provided for a buy-out procedure where one shareholder was in breach of the terms of the shareholders agreement. The Expulsion Notice set out alleged breaches by Mr Zhao of the shareholders agreement and specified the estimated value of Mr Zhao’s interest in the company to be $1,500,000.

5. [21]

   Mr Zhao’s solicitors responded by letter dated 19 September 2016 asserting that the Expulsion Notice was invalid and disputing the alleged breaches of the shareholders agreement. In turn, Ms Qian’s solicitors replied by a letter dated 30 September 2016 denying that the Expulsion Notice was invalid and giving further particulars of Mr Zhao’s alleged breaches of the shareholders agreement.

6. [22]

   On 7 October 2016, Mr Zhao commenced proceedings against Ms Qian and the company by filing a statement of claim which made allegations of oppression against Ms Qian and claimed relief under s 233 of the Corporations Act. That step was irregular. An application for relief under the Corporations Act should have been commenced by filing an originating process: Supreme Court (Corporations) Rules 1999 (NSW), r 2.2(1)(a).

7. [23]

   In his statement of claim Mr Zhao pleaded that:

   1. (1)

      at no time since 30 June 2011 has he breached the shareholders agreement by action or inaction or negligence, nor has he induced any other person to do so (par 27);

   2. (2)

      he regarded the expulsion notice as invalid (par 29);

   3. (3)

      he had addressed the complaints of Ms Qian where possible, and sought particulars of the alleged breaches which were vague, imprecise and did not permit him an opportunity to rectify the same should any actual breach lie behind the Expulsion Notice (par 30);

   4. (4)

      the further particulars provided by Ms Qian by letter dated 30 September 2016 did not allow Mr Zhao to properly understand, with any degree of precision, the nature of the alleged breaches and how, if appropriate, he might rectify them (par 31);

   5. (5)

      at no time in the course of the dispute has La Kaffa (Taiwan) had any input into any of these matters (par 32);

   6. (6)

      the interests of Infinite Plus are best served by Mr Zhao retaining his shares in the company and continuing his involvement as managing director (par 33);

   7. (7)

      although not a party to the shareholders agreement, La Kaffa (Taiwan) has not had any part in assessing whether or not Mr Zhao is, or was, in breach of any provision of the shareholders agreement and/or has rectified any relevant breach (par 34);

   8. (8)

      as a consequence, Ms Qian’s conduct in acting in the manner referred to above (whether with or without justification) amounts to conduct that is contrary to the interest of the members of the company as a whole, or oppressive to, or unfairly prejudicial to, or unfairly discriminatory against, Mr Zhao and La Kaffa (Taiwan) in their capacity as shareholders, or any other capacity within the meaning of s 232 of the Corporations Act (par 35). The particulars of this allegation include that insofar as the Expulsion Notice lacks a proper basis or is otherwise too vague or imprecise to permit Mr Zhao to properly understand the nature of the allegations made against him and/or to rectify the same, the service of such notice and Ms Qian’s reliance upon it, exposes Mr Zhao to forfeiture of the shares in the company, as well as threatening his continuation in the management and affairs thereof.

   9. (9)

      alternatively, if La Kaffa (Taiwan) is a party to the shareholders agreement, the Expulsion Notice was issued, and the subsequent actions of Ms Qian were taken, in breach of various clauses of that agreement such that her actions denied La Kaffa (Taiwan) the opportunity to have any input into the processes which Ms Qian has undertaken unilaterally (par 36).

8. [24]

   On 10 October 2016 Mr Zhao filed an originating process. Under the heading “Interlocutory Orders sought”, Mr Zhao sought an order “that the arbitration process, established by the shareholders agreement dated 30 June 2011, and in which process the plaintiff and the first defendant are currently engaged, be stayed until the determination of these proceedings.”

9. [25]

   The final relief sought by Mr Zhao under s 233 is variously expressed as follows:

10. [26]

    In his supporting affidavit sworn 17 October 2016, Mr Zhao repeated the allegations in his statement of claim.

11. [27]

    On 21 November 2016, Mr Zhao filed an amended originating process joining La Kaffa (Taiwan) as second plaintiff, and claiming a declaration that the Expulsion Notice is invalid. Otherwise the plaintiffs seek relief in the same terms as sought in the originating process, referred to at [25] above, except that order (a) has been amended to include reference to either Mr Zhao or La Kaffa (Taiwan) purchasing Ms Qian’s shares in the company at a price determined by the Court.

12. [28]

    It should be observed that if La Kaffa (Taiwan) is not a member of the company, it lacks standing to apply for an order under s 233: see Corporations Act, s 234(a) and Treadtel International Pty Ltd v Cocco [2016] NSWCA 360. Although this issue was referred to in passing in argument, the parties did not seek a determination on the present application of La Kaffa (Taiwan)’s standing under s 234 to claim relief under s 233.

13. [29]

    On 15 December 2016, Ms Qian issued a notice of arbitration under cl 13 of the shareholders agreement and Art 3 of the United Nations Commission on International Trade Law Arbitration Rules. She proposed that Mr Bailey SC be appointed as sole arbitrator and that the seat of arbitration be Sydney, Australia. The notice of arbitration identified the “Dispute” the subject of the referral as the issue of the Expulsion Notice by Ms Qian to Mr Zhao, the numerous breaches of the shareholders agreement by Mr Zhao detailed in the Expulsion Notice and Mr Zhao’s subsequent denial of those breaches (Recital C).

14. [30]

    By interlocutory process filed on 19 December 2016 Ms Qian seeks the following relief:

    1. (1)

       the proceedings be permanently stayed and the parties referred to arbitration pursuant to Article 8 of the UNCITRAL Model Law on International Commercial Arbitration.

    2. (2)

       in the alternative to order 1, the proceedings be stayed until final determination of the arbitral proceeding commenced by the first defendant against the first plaintiff pursuant to clause 13 of the Shareholders Purchase Agreement made between them on 30 June 2011, or until further order.

Relevant legislative provisions

1. [31]

   Section 7 of the IAA deals with the enforcement of foreign arbitration agreements. Section 7(1) provides:

2. [32]

   It is common ground that s 7 is engaged because La Kaffa (Cayman), being a party to the shareholders agreement, is registered in the Cayman Islands and therefore is domiciled in or is an ordinary resident of the Cayman Islands, which is a Convention country: s 7(1)(d). (It is not in dispute that the United Kingdom acceded to the New York Convention on 24 September 1974 and extended its accession to cover the Cayman Islands on 26 November 1980 with the reservation that the Convention is to apply to the recognition and enforcement of awards made in the territory of another Contracting State).

3. [33]

   Counsel for the plaintiffs also accepted that s 7 is engaged because the procedure in relation to the arbitration under cl 13 is governed by the law of Hong Kong, being the jurisdiction in which the Hong Kong International Arbitration Centre is based, and Hong Kong is a Convention country: s 7(1)(b). (Again, it is not in dispute that China acceded to the New York Convention on 22 January 1987 and extended its accession to cover Hong Kong on 1 July 1997 when it resumed sovereignty of Hong Kong from the United Kingdom).

4. [34]

   Section 7(2) of the IAA provides:

5. [35]

   The term “court” is defined in s 3(1) of the IAA to mean any court in Australia, and includes, relevantly, a court of a State. Hence the Court must stay the whole or part of this proceeding if it involves a matter (or matters) that are capable of being determined by arbitration under the relevant arbitration agreement. That question requires identification of the “matter” or matters the subject of the proceeding, and consideration of whether that matter or matters falls within the scope of the arbitration agreement.

6. [36]

   In addition Ms Qian relies upon Art 8 of the Model Law which provides:

7. [37]

   Ms Qian correctly submitted that the power given to the Court by Art 8 is separate and independent from the power given by s 7(2) of the IAA: WDR Delaware Corporation v Hydrox Holdings Pty Ltd [2016] FCA 1164 at [28] (Foster J).

8. [38]

   As indicated, Ms Qian also relies upon s 67 of the Civil Procedure Act 2005 (NSW) which provides that “[s]ubject to rules of court, the court may at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day.”

Submissions

1. [39]

   Ms Qian submitted that the oppression proceeding concerns the validity of the Expulsion Notice which was issued under the terms of the shareholders agreement and the alleged breaches of the shareholders agreement by Mr Zhao. The matters raised in the proceeding are said to concern a “dispute, controversy or claim arising out of or relating to” the shareholders agreement and/or are concerned with a “breach” of the shareholders agreement within cl 13. Accordingly, it was submitted, that the subject matter of the proceeding, as between Ms Qian and Mr Zhao, must be arbitrated in accordance with cl 13 of the shareholders agreement.

2. [40]

   In opposing a stay, counsel for the plaintiffs relied upon four arguments. First, that Ms Qian’s notice of arbitration is invalid.

3. [41]

   Second, that as a result of that alleged failure by Ms Qian to comply with the terms of the buy-out procedure under cl 10.5 of the shareholders agreement, Ms Qian lost her right to act upon the Expulsion Notice and the notice has, in effect, become stale.

4. [42]

   Third, that the dispute the subject of the oppression proceedings brought by the plaintiffs is not a dispute or claim within the ambit of the arbitration agreement in cl 13.

5. [43]

   Fourth, there are no circumstances which could warrant a stay of the claims brought by La Kaffa (Taiwan) given it is not a party to the shareholders agreement and is not bound by the terms of that agreement.

Decision

1. [44]

   The plaintiffs’ submitted that the notice of arbitration is invalid because it recorded in recital F that Ms Qian “intends to exercise her rights under clause 10.5 of the [shareholders agreement] and have the Dispute referred to arbitration in accordance with the Arbitration Agreement to do so.”

2. [45]

   The plaintiffs emphasised that cl 10.5 does not confer a right on anyone to have the matter referred to arbitration. Accordingly, the plaintiffs submitted, there is no dispute under the shareholders agreement that is currently subject, or one which might be subject, to an arbitration process. I reject this submission. It involves a mischaracterisation of the recitals in the notice of arbitration.

3. [46]

   As indicated, the “Dispute” identified in recital C of the notice of arbitration is the issue of the Expulsion Notice, the numerous breaches of the shareholders agreement by Mr Zhao as detailed in the Expulsion Notice and Mr Zhao’s subsequent denial of those breaches. Recital D recorded that on or about 30 September 2016 Ms Qian notified Mr Zhao, among other things, that unless he elected to have the “Dispute” referred to dispute resolution in accordance with cl 13 of the shareholders agreement, Ms Qian intended to exercise her rights under cl 10.5 of the shareholders agreement. Recital E recorded that Mr Zhao had not elected to have the Dispute referred to dispute resolution. The terms of a recital F are referred to at [44] above.

4. [47]

   On a fair reading of the recitals to the notice of arbitration, in particular recital F, Ms Qian did not purport to refer the identified “Dispute” to arbitration under cl 10.5. Ms Qian referred the “Dispute” to arbitration in accordance with cl 13; the reference in recital F to the referral to arbitration being in accordance with the “Arbitration Agreement” is a reference to the arbitration agreement in cl 13. This follows from the use of the expression “Arbitration Agreement” in recital C as the shorthand reference to cl 13. Read in context, the reference to cl 10.5 in recital F is simply a reference to Ms Qian’s rights to acquire the shares of the alleged Breach Shareholder, namely, Mr Zhao.

5. [48]

   The plaintiffs submitted that while there was a dispute at one stage that fell within the ambit of cl 13, as a result of the inaction of the parties and their conduct, that dispute has now effectively fallen away. This followed, the plaintiffs submitted, from the fact that Ms Qian did not tender the purchase price nominated in the Expulsion Notice of $1,500,000 on or before 25 September 2016, or at all. Reference was made to cls 10.3 and 10.5 of the shareholders agreement. The submission continued that as a result of the alleged failure to comply with the terms of the shareholder agreement, Ms Qian had lost her right to act upon the Expulsion Notice and the notice has, in effect, become stale. I reject this submission. It involves a misconstruction of cl 10.3 and ignores the relationship of dependency between the parties’ respective obligations under cl 10.5.

6. [49]

   First, as to cl 10.3, the Non-Breach Shareholder’s obligation to advise the Breach Shareholder if it does not accept that appropriate rectification activities have been undertaken, arises within seven days of “this determination” under cl 10.3(d). That is, the period specified in cl 10.3(d) for the giving of notice of such determination to the Breach Shareholder runs from the time of the “determination” by the Non-Breach Shareholder, not from the expiry of the 30 days rectification period referred to in cl 10.3(a). Accordingly the Expulsion Notice did not lapse because Ms Qian did not give notice to Mr Zhao until 30 September 2016 of her determination that she did not accept that appropriate rectification activities had been undertaken by him.

7. [50]

   Second, as to cl 10.5, the Non-Breach Shareholder’s obligation under cl 10.5(a) to pay the Breach Shareholder the price of the shares nominated in the Expulsion Notice is dependent on the obligation of the Breach Shareholder being ready, willing and able to assign their right, title and interest in the relevant shares to the Non-Breach Shareholder. That is made clear by the language of cl 10.5(b), when read together with cl 10.5(a). Clause 10.5(b) requires that the Breach Shareholder must “simultaneously” assign all of their right, title and interest in the shares to the Non-Breach Shareholder. The two provisions expressly contemplate that the transfer of shares will occur simultaneously upon payment of the nominated purchase price in the Expulsion Notice.

8. [51]

   The plaintiffs submitted that since the dispute concerning the Expulsion Notice has, in effect, ceased to exist, the claims the subject of the oppression proceeding brought by the plaintiffs are not a dispute within the ambit of the arbitration agreement in cl 13. I reject this submission. For the reasons given above, the “Dispute” referred to in the notice of arbitration has not ceased to exist.

9. [52]

   Next, the plaintiffs submitted that the claim the subject of the oppression proceeding is not a dispute or claim “arising out of or relating to this Agreement, or the breach … thereof”. This raises the proper construction of the arbitration agreement in cl 13 and the identification of the “matter” or matters raised by the proceeding.

10. [53]

    In Rinehart v Welker [2012] NSWCA 95 at [117] – [122], the Court of Appeal (Bathurst CJ, McColl and Young JJA agreeing) considered the correct approach to the construction of arbitration clauses generally. It is sufficient to refer to the passages at [117] – [120]:

11. [54]

    In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, Gleeson CJ observed at 165 that the expression “arising out of” has usually been given a wide meaning in the cases dealing with the meaning and effect of various common arbitration clauses. In that case, claims that the purported termination of an agency agreement was wrongful by reason of what had been represented during the course of the agreement, and that such termination was either ineffective or gave rise to an entitlement to damages or compensation was held to be a dispute arising out of the agency agreement.

12. [55]

    In Rinehart v Welker, the Chief Justice made the following observations at [123]-[125] concerning to the width of the words used in the arbitration clause in that case:

13. [56]

    In John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 Hammerschlag J remarked at [69] in relation to the words “arising out of”:

14. [57]

    It has also been said that a claim arises out of a matter, if it originates in, springs from, or has its foundation, in that matter: Walton v National Employers’ Mutual General Insurance Association [1973] 2 NSWLR 73 at 84 (Bowen JA), a case involving the construction of an exclusion clause in an indemnity policy.

15. [58]

    Ms Qian submitted that the matter or matters the subject of the oppression proceeding falls within the ambit of the arbitration agreement in cl 13 because the allegation of oppression is based upon Ms Qian’s purported exercise of her buy-out rights under cl 10.5 “whether justified or not”.

16. [59]

    Against this, the plaintiffs submitted that the conduct of Ms Qian, the subject of the oppression proceeding, does not involve a breach of the shareholders agreement; rather it arises out of breaches of the Corporations Act, specifically alleged “contravention” by Ms Qian of s 232. This submission proceeds upon the incorrect premise that s232 prohibits oppressive conduct and that conduct answering the description of oppression in s 232 necessarily involves a contravention of the Corporations Act. That is not so. Section 232 identifies the type of conduct which, if established, enlivens the Court’s discretion to grant relief under s 233. Further, conduct which is oppressive may or may not also involve a breach of the Corporations Act. As Black J explained in Byrne v A J Byrne Pty Limited [2012] NSWSC 667 at [44], ss 232 and 233 of the Corporations Act and their predecessors:

17. [60]

    As indicated, whether the claims in the oppression proceeding fall within the ambit of the arbitration agreement in cl 13 requires the identification of the “matter” or matters the subject of the oppression proceedings. Ordinarily, the nature and extent of the matters involved in a court proceeding are to be ascertained from the pleadings and from the underlying subject matter upon which the pleadings, including any defence, are based: Robotunits Pty Ltd v Mennel (2015) 297 FLR 300 at 311-312; [2015] VSC 268 at [19]. In WDR Delaware Corporation, Foster J said at [105] - [107].

18. [61]

    After referring to the passage in Tanning Research Laboratories v O’Brien (1990) 169 CLR 332 at 351-352, Foster J continued at [110]:

19. [62]

    Reference has been made above to Mr Zhao’s statement of claim, the plaintiffs’ amended originating process and Mr Zhao’s supporting affidavit. The essential claim made in the statement of claim is that by reason of the conduct of Ms Qian in issuing the Expulsion Notice in August 2016, based on alleged breaches of the shareholders agreement by Mr Zhao which had not been remedied, Ms Qian has engaged in oppressive conduct within the meaning of s 232 of the Corporations Act by purporting to exercise her rights to buy-out the shares in the company held by Mr Zhao. Relevantly, Mr Zhao denies the validity of the Expulsion Notice, he denies the alleged breaches of the shareholders agreement and he also denies his alleged failure to remedy such breaches. That, in my view, is a dispute arising out of or relating to the shareholders agreement and alleged breaches of such agreement.

20. [63]

    In Rinehart v Welker, Bathurst CJ referred at [169] – [170] to authorities which have held that parties can submit to arbitration issues involving rights conferred under statute and claims where the power to grant statutory remedies has been conferred on the court. Such cases include Francis Travel and IBM Australia Ltd v National Distribution Services Pty Ltd (1999) 22 NSWLR 466. The Chief Justice continued at [171] noting that a similar approach has been taken by the Court of Appeal of England and Wales, in Fulham Football Club (1987) Ltd v Richards [2012] 1 All ER 414 (permission to appeal to the Supreme Court refused by the Supreme Court). The Chief Justice referred with approval to the following comment of Longmore LJ (with whom Rix LJ agreed) (at [103]):

21. [64]

    The Chief Justice continued at [172]:

22. [65]

    In ACD Tridon v Tridon Australia [2002] NSWSC 896, Austin J stated that an oppression proceeding may be within the scope of an arbitration clause, subject to two limitations. The first is that an arbitrator does not have jurisdiction to determine whether the contract containing the arbitration clause is valid, and the second limitation is one of arbitrability. Austin J acknowledged at [194] that some types of relief available under s 233(1) may be of an “in rem” nature, such as an order for rectification of the share register of a company, and that may prevent reference of that power to an arbitrator. The comments of Austin J in ACD Tridon were strictly obiter as his Honour held that the arbitration clauses before him did not extend to the oppression proceeding under consideration.

23. [66]

    Counsel for the plaintiffs did not advance any submissions challenging the statements in Rinehart v Welker, or ACD Tridon. Other cases which have held that claims for relief under s 232 of the Corporations Act are capable of being resolved by arbitration include: Robotunits v Mennel at [66]-[69]; and WDR Delaware Corporation at [162]-[163].

24. [67]

    Subject to one matter, Ms Qian has made out a case for a stay under s 7(2) of the IAA of the claims by Mr Zhao in the oppression proceeding. The exception relates to the claim for relief in order 2(a) of the amended originating process, insofar as Mr Zhao claims an order that La Kaffa (Taiwan) purchase Ms Qian’s shares in the company. That claim cannot be referred to arbitration as, on the present state of the evidence, La Kaffa (Taiwan) is not a party to the shareholders agreement and is not a party to the arbitration.

25. [68]

    Nonetheless where possible the Court should avoid a multiplicity of proceedings, and it would be contrary to the just, quick and cheap resolution of the real issues in the proceeding (s 56 of the Civil Procedure Act) to permit Mr Zhao to pursue a single (and alternate) claim for relief whilst the other matters in the proceeding are stayed: cf Re 700 Form Holdings Pty Ltd [2014] VSC 385. Accordingly, Mr Zhao’s claim for relief in order 2(a) (as referred to in [67] above) should, in the exercise of the Court’s discretion under s 67 of the Civil Procedure Act, be stayed pending the outcome of the arbitration.

26. [69]

    The plaintiffs submitted that whatever the position between Mr Zhao and Ms Qian, the proceedings by La Kaffa (Taiwan) should not be the subject of any stay because that company is not a party to the shareholders agreement and is not bound by the terms of that agreement.

27. [70]

    I will address this submission on the assumption, favourable to La Kaffa (Taiwan), that it is a member of the company although it seems not to have executed a deed as required by cl 9.2(d)(v) of the shareholders agreement. That is, La Kaffa (Taiwan) has not assumed all of the obligations on the part of La Kaffa (Cayman) under the shareholders agreement.

28. [71]

    No argument was advanced by Ms Qian relying on s 7(5) of the IAA, that s 7(2) applies to La Kaffa (Taiwan) because its claim against Ms Qian is made through or under La Kaffa (Cayman), by reason of its holding of shares in Infinite Plus which were allegedly transferred to it by La Kaffa (Cayman), which is a party to the shareholders agreement. Section 7(5) provides:

29. [72]

    Ms Qian submitted that the claims of La Kaffa (Taiwan) ought to be stayed, as a matter of discretion, pending the outcome of the arbitration between Ms Qian and Mr Zhao.

30. [73]

    In support of this submission, Ms Qian referred to the approach taken in WDR Delaware Corporation where one of the claims for relief (the winding up order) was not arbitrable. Nonetheless Foster J stayed that claim pending the outcome of the matters referred to arbitration.

31. [74]

    Ms Qian also referred to Casceli v Natuzzi S.p.A. [2012] FCA 691 which involved a dispute between parties to a dealership agreement, relevantly the third applicant (Nataceli Pty Ltd) and the first respondent (Natuzzi SpA), which Jagot J found fell within an arbitration agreement in the dealership agreement. Some of the respondents were not parties to the arbitration agreement and their potential liability depended on the principal liability of Natuzzi. Some of the applicants also were not parties to the arbitration agreement; their claim was confined to a single claim based on alleged misleading or deceptive conduct in respect of one site. Her Honour dealt with the applicants’ submission against a stay at [48] – [49]:

32. [75]

    In the present case, the claims by Mr Zhao against Ms Qian are the principal claims in the oppression proceeding. No separate or additional conduct of Ms Qian is relied upon by La Kaffa (Taiwan) for its oppression claim; its claim is dependent upon Mr Zhao’s oppression claim. The essential matters in dispute are the alleged breaches of the shareholders agreement by Mr Zhao, whether those breaches were remedied, and whether Ms Qian’s Expulsion Notice is invalid, or if valid, whether the giving of such notice was nonetheless oppressive. Having regard to these matters it is inappropriate, in my view, that La Kaffa (Taiwan)’s oppression claim proceed whilst the arbitration between Ms Qian and Mr Zhao is pending.

33. [76]

    In the exercise of the discretion under s 67 of the Civil Procedure Act, the oppression claim by La Kaffa (Taiwan) should be stayed pending the outcome of the arbitration.

Conclusion and orders

1. [77]

   The requirements of s 7 of the IAA are satisfied. The matter, being the whole of the dispute between Mr Zhao and Ms Qian reflected in the claims in the oppression proceeding (except the claim involving an order that La Kaffa (Taiwan) purchase Ms Qian’s shares in the company) must be stayed. The balance of the proceeding by Mr Zhao and the proceeding by La Kaffa (Taiwan) should also be stayed, as a matter of discretion, to await the outcome of the arbitration.

2. [78]

   It follows that the plaintiffs’ interlocutory application for a stay of the arbitration process commenced by Ms Qian pending the determination of these proceedings must fail.

3. [79]

   As for referral of the matter or matters in the oppression proceeding to arbitration under Art 8 of the Model Law, counsel for Ms Qian ultimately submitted that the parties should be left to sort out the mechanics of referral of those matters to arbitration (T37, lines 47-48). No order is required at this stage.

4. [80]

   There is no reason why costs should not follow the event.

5. [81]

   Accordingly I make the following orders:

   1. (1)

      Pursuant to s 7(2) of the International Arbitration Act 1974 (Cth), this proceeding, to the extent that it involves any claim as between the first plaintiff and the first defendant (except the first plaintiff’s claim for relief that the second plaintiff purchase the first defendant’s shares in the company), be stayed until further order.

   2. (2)

      This proceeding otherwise be stayed pending the outcome of the arbitration between the first plaintiff and the first defendant under cl 13 of the agreement between, among others, the first plaintiff and the first defendant entered into on or about 30 June 2011 and styled shareholders purchase agreement.

   3. (3)

      The plaintiffs pay the first defendant’s costs of (a) the plaintiffs’ application for interlocutory relief in the amended originating process filed on 21 November 2016 and (b) her interlocutory process filed on 19 December 2016.