21 May 2015

Case Note - Giedo van der Garde BV V Sauber Motorsport AG

This article was written by Louise England.

1. Background

The decision of the Supreme Court of Victoria in Giedo van der Garde BV v Sauber Motorsport AG [2015] VSC 80 [1] was as fast as the subject matter at stake, the Second Applicant’s right to participate in the 2015 Formula One Season and specifically, the Melbourne Grand Prix on Sunday, 15 March 2015.  

The decisive judgments of the Court at first instance (Croft J) and the Court of Appeal (Whelan, Beach and Ferguson JJA) delivered in just eight days, act as a positive indication of the Supreme Court of Victoria’s efforts to be perceived as a facilitative, arbitration-friendly jurisdiction that is willing to commit its resources to encourage the effective resolution of disputes between parties. 

2. The facts

The Applicants, Dutch Formula One driver Giedo van der Garde and his management company (the “BV Company”), filed an Originating Application on 5 March 2015 to enforce an arbitral award made by sole arbitrator Mr Todd Wetmore (“Arbitrator”) on 2 March 2015 (“Award”).[2] The arbitration, held in London on 11 and 12 February 2015, was conducted pursuant to the Swiss Rules of International Arbitration.

The Award itself made orders in favour of the Applicants against the Respondent, the Swiss-incorporated and based Formula One company Sauber Motorsport AG (“Sauber”). In the Award, Sauber was ordered to:

…refrain from taking any action the effect of which would be to deprive Mr. van der Garde of his entitlement to participate in the 2015 Formula One Season as one of Sauber’s two nominated race drivers.[3] (“Order”)

The Applicants sought enforcement of the Award under section 8(2) of the International Arbitration Act 1974 (Cth) (“Act”) as if it were a judgment of the Supreme Court of Victoria. Enforcement was resisted by the Respondent and the two drivers who had been selected by Sauber (subsequent to van der Garde) to represent the team in the 2015 Formula One Season, Messrs Marcus Ericsson and Luiz Felipe de Oliveira Nasr (the “Other Drivers”).[4]

On 5 March 2015, the Court found that service of certain documents in accordance with the Hague Convention (which would have otherwise applied)[5] was, in all the circumstances, impracticable and ordered substituted service by service on the Australian Grand Prix Corporation, among other means.   

The hearing of the Originating Application took place on 9 March 2015, a public holiday in Victoria.  By way of written submissions filed on 8 March 2015 and at the hearing before Justice Croft, the Respondent resisted the enforcement of the Award relying on the following grounds: 

(a) Section 8(5)(d) of the Act – the Respondent contended that Sauber had never entered into an agreement with Mr van der Garde and that Mr van der Garde’s role in the arrangement between his management company and the Respondent was simply to give undertakings to support the performance of the obligations of the BV company.  

It followed, according to this submission, that the Award dealt with matters not contemplated by, or not falling within the terms of, the submission to arbitration, and further or alternatively, it decided matters beyond the scope of the submission to arbitration;[6]

(b) Section 8(7)(b) of the Act – the Respondent also sought to resist the enforcement of the Award on public policy grounds, namely:[7]

(i) the Order would have the effect that the Respondent would be compelled to engage in conduct that may endanger lives, place people in danger of serious injury, or negligently cause serious injury;

(ii) substantial breaches of the rules of natural justice occurred including that the Arbitrator made findings which were not contended for by the parties and the Other Drivers were not given an opportunity to be heard during the arbitral proceedings;

(iii) the Order was vague and uncertain; and

(iv) the enforcement of the Award and the Order would be futile in the form sought, as it did not oblige the Respondent to take any positive step.  Further, an order could not be enforced in the manner sought by the Applicants as there was no possibility of Mr van der Garde being able to participate in the Melbourne Grand Prix as a driver for the Respondent due to certain factual matters including the alleged impossibility of “fitting a seat” within the available time.

The Other Drivers also submitted that the matter was not capable of settlement by arbitration under the laws of Victoria, and therefore that the Court should refuse to enforce the Award under s 8(7)(a) of the Act.

3. Decision

On 11 March 2015, Justice Croft delivered his judgment and made an order enforcing the Award.

Justice Croft denied that section 8(5)(d) applied as the Arbitrators’ findings in relation to Mr van der Garde’s personal interest and rights in the context of the contractual arrangements between the parties was not beyond the contemplation of the parties or the scope of the submission to arbitration.[8]

As for the Other Drivers’ contention that the matter was not capable of settlement under the laws of Victoria, Justice Croft found that the subject matter of the dispute was clearly capable of settlement by arbitration.[9] Further, a dispute does not lose its “arbitral quality” merely because a non-party or parties have an interest in the outcome of the arbitration as arbitral proceedings are necessarily inter partes in nature.[10]

Finally, Justice Croft held that the enforcement of the Award would not be contrary to public policy either on the grounds that a breach of nature justice occurred with the making of the award, or on other grounds.[11] Further, there was no basis for argument that there had been a breach of natural justice brought about by the non-involvement of the Other Drivers in the arbitral proceedings.  

The Court reiterated, on two occasions, that any practical issues or problems with respect to enforcement of the Order may be the subject of an application to the Court for assistance, 24 hours a day, seven days a week.[12]

4. Appeal

Within hours of the delivery of Justice Croft’s decision allowing the application for the enforcement of the Award on 11 March 2015, an application for leave to appeal was filed by Sauber and the parties were required to appear before the Supreme Court of Victoria Court of Appeal that afternoon for initial submissions. This was followed by a substantive hearing of the application for leave to appeal and the appeal itself on 12 March 2015.  

In bringing the appeal, Sauber relied upon sections 8(7) and (7A) of the Act. An application was also made for a stay of the orders of Justice Croft made on 11 March 2015, however the Court declined this application, stating that this course was not in the interests of justice.[13]

In granting leave to appeal then dismissing the appeal, the Court held that Justice Croft did not err in making the orders from which Sauber sought leave to appeal.[14] The Court adopted the analysis of the Full Federal Court in TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311 ALR 387 and stated that Courts should not entertain a disguised attack on the factual findings or legal conclusions of an arbitrator ‘dressed up as a complaint about natural justice’.[15]

In brief written reasons handed down in the afternoon of 12 March 2015, the Court specifically addressed Sauber’s purported concerns as to legality and safety stating that “…these events are highly regulated” and that “…the regulators will ensure all safety requirements are complied with.”[16]

5. Contempt proceedings

Moments after the handing down of the Court of Appeal’s decision, the Applicants filed a Summons seeking:

(a) a declaration that Sauber was guilty of contempt of Court for failure to comply with an order of Justice Croft handed down on 11 March 2015 (which was not stayed); 

(b) that Ms Monisha Kalenborn-Narang, Sauber’s Chief Executive Officer, be committed to prison; and 

(c) that sequestrators be appointed over the real and personal estate of Sauber situated in the State of Victoria.  

A hearing was briefly conducted on 12 March 2015 and listed to continue on Saturday, 13 March 2015.  Negotiations were conducted between the parties in the intervening period.  A settlement that was satisfactory to the Applicants and to Sauber and Ms Kalenborn-Narang was reached in the morning of 13 March 2015 on which day the Court was briefly convened to attend to various procedural matters following the out-of-court settlement having been reached.

6. Conclusion

The hearing of the enforcement and appeal proceedings, and the contempt proceedings over an eight day period (commencing on a public holiday and completing on a Saturday) highlight the support that the Supreme Court of Victoria has for arbitration proceedings and their enforcement.

[1] Subsequently affirmed by the Court of Appeal in Sauber Motorsport AG v Giedo van der Garde BV & Anor [2015] VSCA 37 (“Appeal Judgment”).

[2] The Award was only a partial award but it was final with respect to the issue of Mr van der Garde’s asserted entitlement to participate in the 2015 Formula One Season.

[3] Giedo Van Der Garde BV & Giedo Gijsbertus Gerrit Van Der Garde v Sauber Motorsport AG (First Partial Award, 2 March 2015) SCAI Case No. 300315ER-2014, [339].

[4] The Honourable Justice Croft granted leave for the Other Drivers to be represented and heard at the hearing of the Originating Application to enforce the foreign arbitral award.

[5] The Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters done at the Hague on 15 November 1965 (“Hague Convention”) would have otherwise applied by reason of Supreme Court (General Civil Procedure) Rules 2005, order 80.

[6] This submission centered on the assertion that the Arbitrator wrongly proceeded on the basis that Mr van der Garde had a personal contractual right enforceable against the Respondent.

[7] Giedo van der Garde BV v Sauber Motorsport AG [2015] VSC 80 (“Primary Judgment”) at [7].

[8] Primary Judgment at [11].

[9] Primary Judgment at [19].

[10] Primary Judgment at [18].

[11] Primary Judgment at [20].

[12] Primary Judgment at [22] and [29].

[13] Appeal Judgment at [9].

[14] Appeal Judgment at [10].

[15] Appeal Judgment at [8].

[16] Appeal Judgment at [14].

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