Joint Venture Agreement - PDF

Case 10
WDR Delaware Corporation v Hydrox Holdings Pty Ltd1
Background
In this case, the Federal Court of Australia held that the winding up of the application which had
been made with regards to a joint venture, had to be stayed. However, the substantive matters
which were underlying in the dispute between the parties had to be referred to arbitration based
on the joint venture agreement2. In this case, a joint venture had been undertaken between
Woolworths and WDR, where the former was an Australian company and the latter a US based
company as a result of which an Australian based company was formed, by the name of Hydrox
Holdings, for operating Masters Chain of hardware store in the nation. A dispute occurred in
between the parties with regards to the operations of joint venture, particularly in the matter of
provision of information to the nominee directors of WDR, some voting of the directors of
Woolworths and the asserted termination of the JV agreement3.
As a result of this, WDR made an application for winding up of Hydrox before the Federal Court
based Corporations Act, 20014 particularly its sections 233(1)(a)5 or under section 461(1)(k)6. It
came to be presented in both the cases that they stemmed from the contention of the party
regarding the conduct of affairs of Hydrox being oppressive, or unfairly discriminatory/
1 [2016] FCA 1164
2 Sylvia Tee and Kate Varsos, Courts look beyond “winding up” order to determine arbitrability of claims (03
January 2017) <https://www.lipmankaras.com/2017/01/courts-look-beyond-winding-up-order-to-determine-
arbitrability-of-claims/>
3 Russell Thirgood and Erika Williams, Masters of their own destiny - Court upholds arbitration agreement between
Woolworths and Lowe's (06 October 2016) <https://www.lexology.com/library/detail.aspx?g=b32595b7-3601-496f-
a15a-b946e229ee7b>
4 Corporations Act, 2001 (Cth)
5 Corporations Act 2001, s233(1)(a)
6 Corporations Act 2001, s461(1)(k)

prejudicial against WDR, as they were a shareholder of this company. Woolworths attempted to
get a stay on this winding up process and stated that the dispute was between WDR and
Woolworths and hence, the same had to be determined on the basis of arbitration based on article
8(1) the UNCITRAL Model Law on International Commercial Arbitration or section 7(2)
International Arbitration Act 1974 (Cth)7.
Based on section 7(2), the court had to stay the court proceedings in between the arbitration
agreement where the proceedings covered determination of such a matter which could be
deemed as capable of being settled through arbitration. However, the claim made by WDR was
that the proceedings were not arbitrable as only the winding up matter had to be decided on
statutory basis. It was also claimed that winding up could not be arbitrated since the legal status
of a company is affected here which results in third parties being affected. This meant that this
subject only vested with the governmental authority for upholding the public interest in order to
make certain that the proper steps had been taken in fulfilling the liquidation process. The
purpose of International Arbitration Act’s section 7(2) was deemed to have been exceeded in the
made claims, as per Woolworths. It was argued that the matter had factual and legal disputes
making it arbitrable8.
The court was in agreement with the analysis of Woolworths regarding a majority of matters. It
was held that these were not enough grounds to wind up Hydrox and were breaches of contract,
wrongful conduct in asserting the termination of JV agreement in bad faith and on such grounds
which failed to justify the termination and lastly, wrongful conduct with regards to the sense of
corporate governance. These matters were deemed as capable of being referred to arbitration.
7 Herbert Smith Freehills LLP, Australian Federal Court Stays Winding Up Application To Allow Arbitration Of
Underlying Dispute (01 February 2017) <http://hsfnotes.com/arbitration/2017/02/01/australian-federal-court-stays-
winding-up-application-to-allow-arbitration-of-underlying-dispute/>
8 Ibid

When it came to the winding up of the JV Company, the court stated that the winding up was a
matter where there was no substantial public interest element. This was because there was no
issue of solvency and there was no attendance by the creditors in the court hearings and there
was no participation in the entire process. And as a result of this, the winding up proceedings
were stayed by the court and the matter was referred to arbitration, pending the determination of
arbitration. Once this process finished, the court would consider the arbitral awards with regards
to the winding up order to be made9.
Question 1
Whether the decision given by the Federal Court was right? Or whether the court erred in their
decision?
Answer 1
The decision had been rightly given by the court in this case as the same was based on the view
that no right of the general public was being infringed, which was the contention made by
WDR. As the points were rightly made by Woolworths, the court did not err in its decision. This
is with particular reference to the cases cited by the judges and these were the cases of Fulham
Football Club (1987) Ltd v Richards10, Re Quicksilver Glorious Sun JV Ltd11 and Tomolgen
Holdings Ltd v Silica Investments Ltd12.
Question 2
Would the verdict be different if Hydrox had a creditor group claiming a payment of $10,000?
9 Ibid
10 [2012] Ch 333
11 (2014) 4 HKLRD 759
12 [2015] SFGA 57