BOSICH INVESTMENTS PTY LTD -v- MAPEL BUILDING PTY LTD [2009] WASC 104 (24 April 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : BOSICH INVESTMENTS PTY LTD -v- MAPEL BUILDING PTY LTD [2009] WASC 104

BETWEEN : BOSICH INVESTMENTS PTY LTD (ACN 008 806 488)

Arbitration - Litigation commenced - Stay application - Stay opposed - Arbitrator not holding legal qualifications - Whether sufficient basis to resist stay

Commercial Arbitration Act 1985 (WA), s 53(1)

Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144

1 KENNETH MARTIN J: This is an application by chamber summons of 8 October 2008, by which the first defendant, Mapel Building Pty Ltd (Mapel), seeks that pursuant to s 53 of the Commercial Arbitration Act 1985 (WA) (as amended) (the Commercial Arbitration Act), that these proceedings be stayed until further order. Essentially, Mapel seeks the stay to allow an arbitration, in which the second defendant (Mr Wallis) has been nominated and accepted appointment as the parties' arbitrator, to proceed. The second defendant has taken no part in this application and essentially, as is proper, stands by to abide the outcome of the application.

2 The situation is slightly unusual, in that the matter has been entered into the commercial and managed cases list (CMC list) of this court since 27 November 2008. It is necessary then that I recount a little of the history of the litigation to explain why a stay application is only being heard in April 2009.

3 Proceedings were commenced by writ of summons in this court on 12 September 2008. The plaintiff then had different legal representation. Essentially, the plaintiff's indorsement of claim upon its writ, sought a declaration that 'no binding contract was in existence between the plaintiff and the first defendant on 13 March 2008, alternatively that any such contract is void ab initio'. The plaintiff also sought an injunction to restrain Mapel from continuing the arbitration proceedings, given that they were proceedings on the shaky foundation of what it referred to as an alleged contract. An injunction was also sought to restrain the appointed arbitrator, the second defendant, from hearing or otherwise determining any disputes or differences between the plaintiff and the first defendant arising out of, or in relation to, what was again referred to as 'the alleged contract'.

4 Mapel, by its solicitors, entered an unconditional appearance to the plaintiff's proceedings following service of the writ, on 22 September 2008.

5 On 7 October 2008, the plaintiff filed a statement of claim, essentially seeking the invalidating relief to which I have already referred, plus further remedies pursuant to the Trade Practices Act 1974 (Cth) (alternatively pursuant to the Fair Trading Act 1987 (WA) and also directed towards seeking declarations that what it referred to as a 'building contract' executed on 13 March 2008, was void ab initio.

6 The next day (8 October 2008) Mapel filed its chamber summons for a stay of the litigation pursuant to s 53 of the Commercial Arbitration Act, essentially seeking to have an arbitration before the second defendant as arbitrator, proceed whilst this litigation was stayed.

7 Programming orders were then made by consent for the filing of affidavits in order to facilitate argument on the stay application pursued by Mapel, in conjunction with the filing and serving of written submissions.

8 On 27 November 2008, the stay application of Mapel, which had been set down for hearing on 3 December 2008 at a special appointment before the master, was deferred, on the basis that the litigation be included in the CMC list, and the stay application, if pursued, be dealt with at a directions hearing before a CMC judge. Some correspondence between the parties in this matter and in a related matter, CIV 2473 of 2008, indicated that the parties had then proposed to defer the hearing of 3 December 2008 of the stay application in a context of what loomed as a possible overall resolution of disputes between them. Obviously that did not eventuate.

9 On 27 February 2009, the plaintiff filed a notice of change of solicitors. The plaintiff's current solicitors commenced to act.

10 On 5 March 2009, some general directions were made in respect of the progression of the matter towards a trial, predicated upon the plaintiff foreshadowing filing and service of an amended writ of summons and an amended statement of claim, by 13 March 2009.

11 What was foreshadowed by the plaintiff's new solicitors came to pass on 13 March 2009.

12 In brief summary, the character of the plaintiff's claim against the first defendant underwent a significant change of direction. In essence, the plaintiff no longer contended for the voidness ab initio of an agreement of 13 March 2008, but instead now sought to raise altered challenges to that agreement, based upon the alleged existence of certain alleged conditions precedent as to its performance having not come to pass, and resulting in the eventual termination of the 13 March 2008 agreement, alternatively seeking relief based upon certain alleged (mis)representations which were contended by the plaintiff to give rise to a statutory basis for relief (including statutory rescission), or on the basis that such representations founded relief by way of promissory estoppel. That brief summary of the amended pleading does not purport to do justice to the complexities of the amended statement of claim of 13 March 2009. Rather, it is intended to explain a fairly significant change in tactical direction by the plaintiff's new legal advisers, moving well away from the early contention of the plaintiff that an agreement of 13 March 2008, was void ab initio.

13 Further directions were then made by the court on 19 March 2009, in the CMC list. Order 1 of those orders provided:

1. The first defendant file and serve on or before Friday 3 April 2009 any further affidavits and its Defence and any counterclaim (without prejudice to its rights under s 53 of the Commercial Arbitration Act 1985).

14 It will be seen from the words in parentheses within Order 1, that the first defendant, Mapel, expressly reserved its right to pursue its stay application, pursuant to s 53 of the Commercial Arbitration Act. That appears to have been Mapel's position at all times since it received the plaintiff's first statement of claim in the litigation. There was, for instance, no suggestion made as against Mapel that by its participation to date in the litigation or by the filing of pleadings, or its concurrence in directions made from time to time and in the CMC list, that there had been any waiver or abandonment of Mapel's stance, as regards intended pursuit of a stay favouring an arbitration over the advancement in lieu, of this litigation - and notwithstanding the entry of the matter into the CMC list.

15 It seems to me, in any event, that the change in tactical direction in the plaintiff's case, which occurred after the change of solicitors by the plaintiff to which I have referred, provides, in its own right, a sufficient justification for the first defendant's initial and limited participation in the resolving through this litigation what was, at an early point, then thought to be a short threshold issue - and potentially impacting against the underlying viability of an arbitration, ie, that the written agreement between the parties containing the arbitration clause relied on to pursue the arbitration - was itself void ab initio.

16 However, the plaintiff's departure from that stance in lieu of its pursuit of somewhat different causes of action as from March 2009, renders it just that the first defendant not be barred at this time from still seeking to press a case for the issues in dispute as between the parties to be resolved by arbitration, given the plaintiff's change of tactical position and the differing implications of that change as regards a preference for arbitration over litigation, or vice versa.

17 I note for completeness that on 3 April 2009, Mapel filed a Defence and Counterclaim. The first defendant seeks, as damages against the plaintiff, an amount of $2,075,373, as elaborated in the particulars to par 29 of the counterclaim. In addition, there are some further claims for unpaid progress claims.

18 It is necessary then to turn to s 53 of the Commercial Arbitration Act 1985 (WA), in the context of the first defendant's application for a stay of this litigation. Section 53 provides:

(1) If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to subsection (2), apply to that court to stay the proceedings and that court, if satisfied -

(a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and

(b) that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration,

may make an order staying the proceedings and may further give such directions with respect to the future conduct of the arbitration as it thinks fit.

53(2) An application under subsection (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance.

19 I should observe that, on the hearing of argument before me on 21 April 2008, neither party took any point concerning the potential implications of s 53(2) as raising any sort of inhibition against the pursuit by Mapel of the present application by chamber summons for a stay of this litigation. That was appropriate, given Mapel's chamber summons for a stay was filed on 8 October 2008, prior to any other step by it in these proceedings.

20 The first defendant filed and read an affidavit of Andrew Michael Roberts of 26 September 2008, in support of its application for the stay. Attachment AR 1 to that affidavit is a covering letter from the first defendant to Mr Gerald Bosich, of 20 February 2008. The first page of the 20 February letter refers to some six further documents as in total making up the 'Contract Documents'. The last document as referred to is the 'Master Builders Association Medium Works Contract' (MBAMWC). The MBAMWC is appended as attachment AR2 to Mr Roberts' affidavit, and contains some 35 standard conditions of contract. Condition 32 contains a relatively straightforward arbitration clause, the more significant components of which, I set out below as follows:

(a) Should any dispute or difference arise between the owner and the builder in connection with the contract then:

1. ...
2. ...
3. At the expiration of seven days following the giving of such notice, unless it shall have been otherwise settled, such dispute or difference may then be submitted for resolution by reference to Arbitration in accordance with the provisions of the Commercial Arbitration Act 1985.

(b) The Arbitrator shall be a person mutually agreed upon by the parties or, in the event that the fail to agree upon a choice within seven days of it being requested, then the Arbitrator shall be the President for the time being of the Master Builders Association of WA, or his nominee.

21 By a written outline of submissions of 3 April 2009, Mapel invokes s 53(1) of the Commercial Arbitration Act and contends, in effect, that the plaintiff has not demonstrated 'sufficient reason' why the matter should not be dealt with by way of arbitration, as envisaged by cl 32 of the Lump Sum Contract Conditions for Medium Works. Essentially, Mapel contends that the parties' bargain as to a process agreed to be employed for dispute resolution, should be enforced. Uncontroversially, Mapel also contends that the breadth of the words 'in connection with', as used by the arbitration clause are of wide import and would encompass resolution of claims seeking statutory rescission pursuant to s 87 of the Trade Practices Act 1974.

22 Ms Cahill, counsel for Mapel, elaborated upon these written submissions in oral argument. In particular, she referred to a case cited by the plaintiff in its written submissions, namely Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144, and contended that, correctly analysed, the reasons of Steytler J (as his Honour then was) in the Full Court, were actually supportive of the grant of a stay, rather than to the contrary, as the plaintiff contended. In that respect, she drew my attention to the following passage at [60] of his Honour's reasons:

It seems to me that it was plainly open to the learned Master to find, as he did, that while there are legal questions for determination (and I accept that those raised by counsel for the appellant might arise) the issues in this case are primarily questions of fact better suited to the determination of an arbitrator than that of a court. Of the nine legal issues identified by counsel for the appellant most involve mixed questions of fact and law with the factual component thereof being well suited to arbitration by an engineer. The legal issues appear to me, at this stage at least, to be largely straightforward although I do accept that in one or two cases difficult questions of law might arise. However, if a question or questions of that kind should arise there is, as counsel for the appellant acknowledged, always the option, provided by s 39 of the Act, to refer that question or those questions to the Supreme Court for determination if that course will produce a substantial saving in costs and if the question or questions are such as would be likely to be the subject of the grant of leave to appeal under s 38(4)(b) of the Act. (emphasis added)

23 On the other hand, the plaintiff, whilst not challenging Mapel's premise that this arbitrator is jurisdictionally empowered to deal with all issues the subject of its amended statement of claim, primarily contended that the legal flavour of the various complicated controversies it sees as arising, strongly favours its preference towards litigation, rather than allowing the arbitration commenced before the second defendant, as a lay arbitrator, to continue.

24 Mr Hotchkin frankly accepted in his oral submissions to me that had the selected arbitrator been a senior member of the legal profession, that the application for a stay would not, in all likelihood, have been resisted by the plaintiff.

25 Mr Hotchkin then referred me to the content of an affidavit of Bianca Longfield-Turner, sworn 17 April 2009 on behalf of the plaintiff, concerning a search made by the plaintiff over the internet for a curriculum vitae of the second defendant, Mr Wallis. Those internet searches could only locate a very brief profile of the second defendant via the Department of Treasury and Finance (WA) website, and which Ms Longfield-Turner appended as Annexure A to her affidavit. This search revealed only limited information about the second defendant, referring in rather brief terms to his commencement of work in his own building business after completion of his five-year apprenticeship in carpentry and joinery. It also mentions the second defendant's successful business, building homes, commercial buildings and factories, for 33 years, and finally notes that in 1980, the second defendant had completed his first arbitration award with reasons, and has since then, completed in excess of 100 further arbitral awards.

26 With no discourtesy expressed or intended to Mr Wallis, Mr Hotchkin submitted to me that the principal issues, which on his pleaded reformulation of the plaintiff's case after the change in legal representation, now raised complex and difficult questions of law. Some of these are to be seen in pars 3(c), (d) and (e) of the plaintiff's written submissions, and I refer to them in brief terms as follows:

1. Did discussions which took place between the parties on 13 March 2009 give rise to oral terms which were a component of the overall contract between the parties?
2. Did a combination of oral discussions and the terms of written documents establish a factual matrix such as to imply the pleaded terms into the contract, applying the test laid down in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337?
3. What terms, if any, should be implied into the contract between the parties?
4. Were the oral or implied terms such that they entitled the plaintiff to lawfully terminate the contract at the time that it did so? In this respect, the plaintiff pointed to the significance of the High Court's decision in Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537, as elaborated on in oral argument by Mr Hotchkin.

27 Mr Hotchkin next submitted that further important legal issues which were anticipated to arise here on his case, concerned the reasonableness of certain intervals of time which had elapsed without certain (building) approvals or finance coming to fruition, so that, in those circumstances, whether an eventual non-fulfilment of such matters within reasonable time (assuming that assessment is correct) would provide a platform for the contract to be brought to an end. In this respect, my attention was particularly drawn to par 9 of the amended statement of claim of 12 March 2009, especially subpars 9(b), (c) and (d), which contend for implied conditions precedent in the agreement between the parties, that require temporal assessments to be made as to whether:

(b) the plaintiff and the first defendant were required to take reasonable steps to procure the respective approvals pleaded in par 8 hereof;

(c) in the event that any approval was not procured within a reasonable time of the Agreement, then either party was entitled to terminate the agreement on notice to the other within a reasonable time thereafter; and

(d) at the time of the Agreement, a reasonable time by which all such approvals were required to be obtained before either party was entitled to terminate the agreement was 31 May 2008.

28 Whilst discussing the amended statement of claim, it is also appropriate for me to mention subpar 15(d), to which my attention was drawn by Ms Cahill. By this subparagraph, she submits that the plaintiff essentially accepts that Mapel 'is entitled to be paid its reasonable costs incurred in respect of the preliminary works undertaken by it up to 3 June 2008 pursuant to the Agreement, either under the Agreement or as a quantum meruit. However, the plaintiff goes on to say that Mapel has failed or refused to establish to the plaintiff's reasonable satisfaction what reasonable costs were incurred by it up until 3 June 2008.

29 Mr Hotchkin also submitted to me that issues of reliance arose here, both in respect of statutory remedies sought pursuant to the Trade Practices Act and by the plaintiff's claim for promissory estoppel, and that the complexity of these reliance issues was such, that they warranted the consideration of a court, rather than assessment by a lay arbitrator holding no formal legal qualifications.

30 During the course of argument, Mr Hotchkin essentially accepted that the plaintiff carried a persuasive onus, having regard to the terms of s 53(1) of the Commercial Arbitration Act, to demonstrate to the court's satisfaction, that sufficient reason had been shown for the disputes arising between the parties to be diverted away from arbitration, or, more precisely, away from this lay arbitrator.

31 But Mr Hotchkin contended that the matter should be assessed under s 53(1) of the Commercial Arbitration Act essentially on a balance of convenience basis, invoking in support par 32 of Steytler J's reasons in Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd. Mr Hotchkin said that while there might be some factual matters in dispute which would need to be resolved as part of a resolution overall of all legal controversies to which he referred, that this was nevertheless no obstacle towards the court itself resolving the factual controversies, rather than the second defendant in arbitration. He also contended that such facts as may be in dispute, did not unduly raise technical matters requiring a resort to particular building expertise, such as would then favour or warrant an evaluation by someone holding specialist building skills.

32 On the other hand, Ms Cahill, in reply, pointed out that in most arbitrations, an arbitrator will necessarily proceed to determine issues which will involve mixed questions of fact and law. She suggested that for a court to be dissuaded against granting a stay under s 53(1) of the Commercial Arbitration Act, that something more was required than merely to identification of an issue or issues, which had some component point of law involved. In her submission, there was no particularly novel issue of law arising from any of the issues as identified by the plaintiff in the present case, and that merely because mixed issues as to law and fact over alleged conditions precedent, implied terms, statutory rescission or contractual termination presented or may even be difficult, that was no sufficient inhibitor against the parties' bargain favouring dispute resolution by arbitration over litigation, being respected and upheld. Ms Cahill emphasised the importance of holding parties to their contractual bargains, and suggested that any attempt to 'water down' the instant bargain by contending that its arbitration submission clause was, in effect, 'buried' within a large, assembled collection of pro forma material, was not persuasive - once it was accepted that such nominated standard conditions containing the clause, did in fact represent a component part of the overall bargain.

33 In short, I agree with Ms Cahill's submissions in reply. The plaintiff, by the structure of s 53(1), carries the onus to persuade the court that there is a sufficient reason for the controversies presently at issue between the parties, not to be allowed to be resolved under arbitration. In the present case, the matter has been referred to the second defendant - an arbitrator with considerable experience and expertise in the area of building disputes.

34 I am not persuaded, merely by the fact that this arbitrator lacks formal legal qualifications, that this is a good or sufficient reason to inhibit the implementation of the dispute resolution mechanism, as selected by the parties under their bargain.

35 Indeed, it seems to me that there is nothing particularly unusual about legal arguments concerning conditions precedent to performance, implied terms, termination and reliance, being dealt with at an arbitration. In my experience, arbitrators commonly deal with such legal arguments, on a regular basis. Indeed, Mr Hotchkin's argument almost accepted as much, but nevertheless sought to contend that for this particular arbitrator, through lack of legal qualifications, the arbitration process would be inappropriate. But so expressed, that concern does not seem to me, with respect, to meet the language of s 53(1)(a), which refers to the process of an arbitration - rather than descending, I think, to any evaluation of the particular skills or attributes of a nominated arbitrator.

36 Furthermore, as Steytler J pointed out, in the passage I earlier cited from [60] of his Honour's reasons in Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd, there do exist mechanisms under the Commercial Arbitration Act for addressing scenarios where difficult questions of law ultimately arise in an arbitration.

37 It also seems to me that some of the foreshadowed legal controversies by the plaintiff, particularly those concerning looming required evaluations required over 'reasonable steps' to procure approvals, obtaining of approvals within 'reasonable time', or the elapse of reasonable times by which approvals were required to be obtained, may raise for potential consideration what are very much the sort of building industry-grounded assessments that an arbitrator with expertise in the building industry is most appropriately qualified to adjudicate upon, possibly over and above a member of the judiciary, who has no day-to-day experience of a local building industry or the many temporal compliance issues, associated with the timely performance of construction milestones in the building industry.

38 Accordingly, it is my ultimate assessment, that the plaintiff has not satisfied me that a sufficient basis has been demonstrated to resist the grant of a stay as sought by Mapel pursuant to s 53(1), and on that basis I propose to make orders in accordance with the plaintiff's chamber summons, namely that:

Pursuant to s 53 of the Commercial Arbitration Act 1985 (WA) proceedings herein be stayed until further order.

39 I would also propose that the plaintiff having unsuccessfully resisted Mapel's application to stay, should bear the costs of the application to be taxed, if not agreed.

40 I propose orders in these terms as being appropriate, but will hear the parties, should there not be a consensus as to the proposed orders.