BTR Engineering (Australia) Limited v Dana Corporation [2000] VSC 246

BTR Engineering (Australia) Limited v Dana Corporation [2000] VSC 246 - VSC 2000 case summary — Zoe

[30]

In my view the timing of the dispute notice in the context of the present matter is not a factor to be taken into account in the exercise of the discretion to stay the proceeding. My view is based upon the principles expressed in the authorities to the effect that the parties have agreed to resolve their disputes in a particular manner and having so agreed are bound by such arrangements unless there is good reason for a departure from the arrangements. In my view it is apparent that at the time the parties agreed to the provisions contained in clause 7.9 of the agreement they were or ought to have been aware of the various timing provisions contained in the other parts of the agreement, in particular, the requirement of 60 and 30 day negotiation periods in the context of the closing date provisions throughout the agreement and, in particular, the automatic termination provision contained in clause 12.3. In the circumstances I am satisfied that the timing of the matter is not an issue or factor that I should weigh in favour of the plaintiffs. They agreed to the terms of the agreement in its present form and they must be bound by it. Insofar as it is submitted that proceedings in the Commercial List will be heard and determined more quickly than an arbitration proceeding, again I am of the view that the plaintiffs were aware of these matters at the time they entered into the agreement including their acceptance of the framework contained in clause 7.9 of the agreement. Further, insofar as it is alleged by the plaintiffs that they will suffer actual or potential prejudice as a consequence of the resolution procedures contained in clause 7.9 of the agreement, it must be observed that they agreed to the agreement in its present terms including clause 7.9 and must be presumed, therefore, to have agreed to be subject to the actual or potential prejudice that may occur as a result of the application of the procedures contained in that clause. It follows, therefore, that the timing argument relied upon by the plaintiffs fails.

[41]

On the basis of the authorities what does the expression in clause 7.9 of the present agreement "a dispute involving their respective rights and obligations under this Purchase Agreement" mean? The word "under" means "governed, controlled, or bound by; in accordance with"[1]. The verb "to involve" means to "include or affect in its operation"[2]. Hence, in the present arrangement between the parties they have agreed to refer a dispute including or affecting their rights and obligations governed, controlled, or bound by or in accordance with the agreement. Consideration and analysis of the words used in clause 7.9 lead me to conclude that the parties intended to confine the matters to be referred to arbitration to matters relating to their rights and obligations under the agreement and not other matters such as allegations of misleading or deceptive conduct, negligent misstatement or fraudulent misrepresentation. This view is further supported by the specific exclusion contained in clause 7.9 of the agreement whereby it excludes any dispute "with respect to the determination of the Working Capital Adjustment which is to be resolved in accordance with section 2.9". The exclusion of disputes relating to adjustment and the specific resolution formula under section or clause 2.9 of the agreement leads me to conclude that the parties must be taken by the terms of clause 7.9 to have given specific consideration to the types of matters they intended to have referred to arbitration even to the extent of excluding certain matters. The matter that is excluded is of itself a contractual matter falling under the umbrella of the agreement itself. All these matters lead me to conclude that the parties gave strict consideration to confining their disputes to be referred to arbitration to such disputes arising specifically under the agreement and no other. In my view, therefore, the words used in clause 7.9 of the agreement distinguish it from the words used in the subject agreement in Government Insurance Office (NSW) v Atkinson-Leighton, Francis Travel Marketing and Ethiopian Oil Seeds. It follows, therefore, that I do not consider that the allegations made by the defendants in the dispute notice served under clause 7.9 of the agreement raising misleading and deceptive conduct, fraudulent misrepresentation and negligent misstatement are subject to the arbitration clause. A clear dichotomy can be drawn in my view.

[42]

Having formed that view the next question to be considered is whether or not those matters falling outside the arbitration provision contained in clause 7.9 of the agreement should be dissected and the balance of the matters properly constituting contractual disputes between the parties under the agreement ought be referred to arbitration. Each case needs to be considered on the basis of its own facts. On occasions the courts have considered that where some claims in a proceedings are within and other claims are outside an arbitration agreement the proceeding should not be stayed as regard those which are within the arbitration agreement: McGrath v O'Sullivan (1964) NSWR 436, 437; Thomas v Star Maid International Pty Ltd, supra at para. 17. However, if in the present instance only part of the proceeding is stayed it could lead to an unnecessary multiplicity of proceedings with attendant cost and prejudice and a risk of inconsistent findings of fact. At the present point the plaintiffs have delivered its statement of claim. The defendants are yet to deliver their defence and counterclaim, if any. However, it can be readily anticipated that in light of the matters contained in the notice of dispute delivered on 30 May 2000 that the allegations made therein of misleading and deceptive conduct, fraudulent misrepresentation and negligent misstatement will be ventilated in any defence or counterclaim. In my view no purpose would be served by sending part of the matters to arbitration by ordering a stay of confined ambit. Indeed, I would go so far as to say it would be inappropriate in the circumstances of this matter to impose a stay whereby the contractual dispute would go to an arbitrator pursuant to clause 7.9 but other issues would remain to be answered in the present court. In the exercise of the discretion I would adopt the approach taken in the authorities that a partial stay of proceedings that runs the risk of an unnecessary multiplicity of proceedings should be exercised against the granting of a stay: W.C. Thomas & Sons Pty Ltd v Bunge (Aust) Pty Ltd [1975] VicRp 78; (1975) VR 801, 805-806; Abigroup Contractors Pty Ltd v Transfield Pty Ltd, unreported judgment of Gillard J dated 16 October 1998; (1998) VSC 103.

At a glance

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Judgment (43 paragraphs)

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Legislation Cited (1)

Cases Cited (7)