BETWEEN : BAYSIDE CIVIL & DRAINAGE PTY LTD (ACN 065 070 733)

Arbitration - Application for a stay of this action pending arbitration

Commercial Arbitration Act 1985 (WA) s 53

1 MASTER BREDMEYER: This is an application by the defendant for a stay of the action pending a reference of the dispute to arbitration. The application is made under s 53 of the Commercial Arbitration Act 1985 (WA). At the conclusion of argument, I dismissed the application and I said that I would give reasons later. These are my reasons.

2 The plaintiff was a contractor engaged by the defendant to carry out earthworks, etc, on the defendant's subdivision at Busselton. They signed a contract, AS 2124-1992. The plaintiff's action is for payment of two progress certificates which issued on 14 July and 14 September 1999 respectively. The total of the sums in those certificates comes to $364,407.81. The plaintiff has applied for summary judgment for that sum. Prima facie the plaintiff has a strong case for payment under those certificates, as the law on this contract and on this topic has recently been established by our Full Court in Devaugh Pty Ltd v Lamac Developments Pty Ltd [1999] WASCA 280.

3 Clause 47 of the contract deals with dispute resolution. When a dispute occurs, a party is to deliver to the other a notice of dispute in writing, giving adequate details of the dispute. After giving that notice, the parties are to continue to enforce the contract and shall continue to comply with cl 42.1. That clause deals with progress claims and progress certificates for payment. Within 14 days of giving the notice of dispute, the parties must meet and confer at least once, preferably in the presence of the superintendent, and attempt to resolve their dispute and, if possible, to agree on a method of resolving it. In the event that the dispute cannot be so resolved, or if one party considers that the other is not making reasonable efforts to resolve the dispute, either party, by notice in writing delivered by hand or sent by certified mail to the other party, may refer the dispute to arbitration or litigation.

4 In this case, the plaintiff contractor gave notice of dispute to the defendant principal on 27 October 1999. That notice is 22 pages long. The parties conferred on 3 November 1999 and were unable to resolve their dispute. They agreed to meet again on 24 November.

5 On 12 November 1999, the plaintiff issued the writ in this action; i.e. in between the first and second meeting.

6 The second meeting went ahead on 24 November and did not resolve anything. At the conclusion of that meeting, the defendant's representative handed to the plaintiff's representative a notice referring the dispute to arbitration.

7 The defendant says that because of these steps taken, the plaintiff has made an election to go to arbitration and it cannot resile from that now. I do not agree with that. The plaintiff's notice of dispute of 27 October and the first meeting held on 3 November are neutral steps. They do not favour the arbitration path or the litigation path; they are steps required to be taken under cl 47 before a party goes to litigation or arbitration.

8 The issue of the writ on 12 November is a clear indication of the plaintiff's choice to go to litigation. The service of it on the defendant is the equivalent of notice under cl 47.2. It matters not, in my view, whether the writ was served by hand, ordinary post, or certified post. Nothing of consequence would depend on such a technicality.

9 The defendant's notice of arbitration of 24 November 1999 is too late to affect the plaintiff's action. It came after the writ and after the application for summary judgment was filed.

10 This contract does not contain a mandatory arbitration clause. Clause 47 is a permissive clause. The parties may go to litigation or arbitration. The plaintiff got in first. It went to court. The defendant has to persuade me on discretionary grounds in favour of a stay. The defendant has not done so in relation to this action, which is limited to the recovery of moneys under two progress certificates. This kind of claim is a very suitable one to be decided by the courts and, in most cases, is so clear-cut that it lends itself to a summary judgment application, as the Devaugh case illustrates. There is no inconsistency between arbitration of a building dispute on the big issues - which in this case are: who caused the long delays, was the contractor's work in part defective, and has the defendant a good claim under s 52 of the Trade Practices Act - and litigation to enforce payment of progress certificates. The two coexist happily. Even if the parties go to arbitration, cl 47.4 permits a party (usually it would be the contractor) to institute proceedings (i.e. court proceedings) to enforce payment on a progress certificate issued under cl 42. The payment of money under a progress certificate does not prejudice the right of a party to later dispute that the sum was not properly due and payable. It is but a provisional payment.

11 There is also nothing in the defendant's argument that this action is seeking to get payment of a sum of money which is greater than the superintendent's progress certificates and thus falls outside cl 47.4. The statement of claim shows clearly that the plaintiff is trying to enforce payment of two progress certificates. Whether the later certificates 3A, issued after the action began, are valid or not, does not change the nature of this action. It is an action to enforce payment of progress certificates and it falls squarely within 47.4.