A recent judgment of the Supreme Court of Western Australia, Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia [2020] WASC 132 (available here), demonstrates that the use of interim measures to provide security for an amount in dispute can be a very powerful remedy when structured through the creation of a trust.

In a Singapore-seated arbitration between Dalian and Duro, the tribunal had ordered interim measures to secure (part of) the amount in dispute in the form of orders requiring an amount of money ($AUD27 million) to be placed in a solicitor’s controlled money trust account maintained by Duro’s solicitors, Clyde & Co. Duro subsequently entered voluntary administration, leaving Dalian with little recourse other than to pursue the trust money.

Justice Kenneth Martin of the Supreme Court of Western Australia found that Dalian was entitled to the trust money, thereby removing those funds from the resources available to the voluntary administrators.


The interim measures were made in the course of a Singapore seated arbitration between Dalian (an export company) and Duro (a mining and construction company) regarding an iron ore mine project in Western Australia. An interim procedural order made by the tribunal granted Dalian’s application seeking security for part of its claims in the arbitration and ordered Duro to pay $AUD27 million (‘trust amount’) into its solicitor’s trust account. This order was implemented through the execution of a Trust Agreement, with Clyde & Co holding the money as trustee.

Dalian was subsequently successful in the arbitration, securing a monetary award of $AUD53 million against Duro. Dalian commenced proceedings in the Western Australian Supreme Court seeking an order to compel Clyde & Co as trustee to pay the trust amount to Dalian. Duro entered voluntary administration three days later.

Dalian sought the release of the funds on the basis that it held an absolute beneficial entitlement to the trust money, whereas the voluntary administrators of Duro instructed Clyde & Co to maintain the status quo. The trust amount was the only significant asset held by Duro and the voluntary administrators were concerned that if Duro could not trade out of administration and Dalian were paid the trust amount, it would be impossible to recover the funds which were likely to be remitted by Dalian to a parent company in the People’s Republic of China. The effect would be to frustrate recovery steps by future liquidators against Duro’s assets on behalf of creditors. Conversely, if Dalian was not entitled to recover the trust amount, it faced the prospect of relying solely on enforcing its monetary award as an unsecured creditor.

The key issue was whether the trust amount belonged to Dalian or Duro.


The power to order security over a disputed amount in an arbitration

Dalian’s key argument was that Clyde & Co had express contractual and fiduciary obligations to pay the trust money to Dalian. Dalian argued that the funds comprising the trust amount were no longer the ‘property’ of Duro (within the broad meaning of Australia’s Personal Property Securities Act 2009 (Cth) (‘PPSA’) and Corporations Act 2001 (Cth) (‘Corporations Act’)). Rather, Dalian argued that, upon the making of the monetary award in Dalian’s favour, full beneficial ownership of the funds held by Clyde & Co vested in Dalian.

Duro’s argument was that, in seeking to implement the interim measures, all the Trust Agreement had achieved was to provide a fund held on trust exclusively and always for Duro (not for Dalian). In effect, (on Duro’s argument) the Trust Agreement was simply a means by which Duro’s assets were ‘frozen’ pending the outcome of the arbitration.

In this context, the Court made instructive comments on the power of arbitral institutions in Singapore to make orders or give directions to any party for ‘securing the amount in dispute’ under s 12(1)(g) of the Singapore International Arbitration Act (‘SIAA’). It rejected Duro’s argument and noted that the tribunal specifically chose to adopt relief by way of ‘security’ instead of lesser relief, such as freezing or asset preservation orders, that were also available under s 12(1) subparagraphs (h) or (i) of the SIAA. The Court considered that the reference to ‘security’ in the tribunal’s orders was a specific reference to the legislative wording ‘securing the amount in dispute’ in s 12(1)(g) of the SIAA.

The Court observed that the power under s 12(1)(g) of the SIAA extends further than to order security for a party’s costs (a more limited power that is a feature of the rules of Court in many jurisdictions). The Court found that the power under s 12(1)(g) of the SIAA was capable of being exercised in such a way as to create equitable rights over an amount of money placed in a trust amount.

What was the nature of the interests held?

Determining who was entitled to the trust amount after its creation depended on how the trust arrangements were construed and the nature of the equitable interests held by Duro and Dalian.

The nature of Dalian’s interest in the trust amount was (initially) a contingent equitable interest which had matured (upon Dalian obtaining the monetary award in its favour) into an absolute and unqualified beneficial entitlement in equity to receive the trust amount. The Court distinguished the holding of ‘security’ over a dedicated fund of money from a creditor’s claim against assets the subject of a freezing injunction. Crucially, the creditors claim against the assets the subject of a freezing injunction is a bare in personam claim whereas the security provided by way of the interim measures created (initially) a proprietary security interested and (after the monetary award) a perfected proprietary right vested to Dalian.

Did the appointment of voluntary administrators change anything?

Duro had a residual equitable interest in the trust money pursuant to the interim measures orders (i.e. the money would have been returned to Duro had Dalian been unsuccessful in the arbitration). Those circumstances gave rise to complex arguments as to whether the trust moneys constituted ‘property’ of Duro and/or a ‘security interest’ for the purposes of the PPSA and the Corporations Act.

The Court concluded that the trust amount was indeed a ‘security interest’ for the purposes of the PPSA (as it was a transaction that in substance secured payment or performance of an obligation). Dalian had not registered that security interest under Australia’s personal property security register. As a result, Dalian’s unregistered security interest under the PPSA was exposed to the potential vitiating effects of s 267 of the PPSA which vests unperfected security interests in the grantor (i.e. Duro) upon the grantor entering administration or an insolvency.

Fortunately for Dalian, Martin J held that Dalian’s security had ‘perfected’ upon the issuance of the monetary award which occurred before Duro went into voluntary administration. This was because the monetary award, supported by an order from the tribunal directing Clyde & Co to ‘immediately’ release the trust amount, transformed Dalian’s contingent equitable interest into a fully vested equitable entitlement to the trust amount. The circumstances satisfied the extended concept of possession in s 21(2)(b) and s 24(2) of the PPSA because Clyde & Co held the trust money (and actually possessed it in an bank account) from that point on exclusively for the benefit of Dalian. Duro’s residual equitable interest had been extinguished. On that basis, the Court rejected other arguments by Duro that the funds were captured by s 440B of the Corporations Act which would prohibit a transfer of any property in which Duro had an interest following the commencement of the voluntary administration without the consent of the administrator or the leave of the Court.


The case highlights that, in a subsequent administration or insolvency, a freezing injunction does not confer any superior interest in favour of the party which obtained those orders above that of any other unsecured creditor, whereas a security may create proprietary rights that would more effectively place the Award-creditor ahead of other creditors.

Much credit needs to go to the Singapore seated arbitral tribunal (comprised of Sir Vivian Ramsay QC as a Chair, with Dr Michael Hwang SC and Dr Robert Gaitskell QC) for, in the first instance, crafting the interim measures in the form of a security interest rather than the more traditional freezing order and then, subsequently, making orders requiring the ‘immediate’ release of the trust money (perfecting the equitable transfer of the property to Dalian).

Dalian was ultimately fortunate that the monetary award (and order for the ‘immediate’ release of the trust money) occurred prior to Duro entering voluntary administration. Dalian had a security interest under the PPSA which remained unregistered. Dalian therefore faced the risk that it’s secured interest over the trust money would be relegated to no more than an unsecured claim (pursuant to 267 of the PPSA) upon Duro entering administration. It was only a fortunate sequence of timing which had the result that Dalian’s interest had transformed from a contingent equitable right in the form of a security interest into an equitably owned proprietary right before Duro entered administration.

The case therefore serves as a cautionary tale to parties who obtain interim measures of protection from an arbitral tribunal providing security over assets to which Australia’s PPSA applies that they should take steps to register their security interest to best preserve the protection they have obtained in the event of a voluntary administration or insolvency.

For further information, please contact Brenda Horrigan, Head of International Arbitration (Australia), Chad Catterwell, Partner, Harry Thompson, graduate, or your usual Herbert Smith Freehills contact.

Brenda Horrigan
Brenda Horrigan
+61 2 9225 5536

Chad Catterwell
Chad Catterwell
+61 3 9288 1498

Harry Thompson
Harry Thompson
+61 2 9322 4951




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