5896/03 ROBERT ALEXANDER GREINERT V ROBERT JOHN JARRETT
JUDGMENT (Revised on 24 March 2004 to correct typographical errors)
1 HIS HONOUR: This is an application by the defendant, Mr Jarrett, for an order that the proceeding in this Court be stayed pending the hearing of a proceeding in the District Court of South Australia. The proceeding in this Court, like the proceeding in the District Court of South Australia, relates to a partnership dispute, with respect to a partnership for the recovery of a Lockheed P38 Lightning Aircraft from Papua New Guinea.
2 The plaintiff, Mr Greinert, is the secretary and head of restoration of the Historical Aircraft Restoration Society. The Society's business is the salvage and restoration of antique aircraft. It undertakes projects for public institutions such as museums, as well as for private individuals.
3 One of the major locations of salvage work is the highlands of Papua New Guinea. Much of the salvage work there has been done on behalf of the National Museum and Art Gallery of Papua New Guinea ("the Museum"). The Museum is the delegated authority of the State of Papua New Guinea for the control of all war surplus material from the Second World War, under the War Surplus Material Act 1952 (PNG).
4 Mr Greinert claims that, in about August 2000, he entered into an agreement with the Museum under which he was granted exclusive salvage rights over crashed and wrecked P38 Lightning Aircraft remaining in Papua New Guinea. Mr Greinert says that in about July 2001, Mr Jarrett approached the Museum to salvage some aircraft, and the Museum advised Mr Jarrett in August 2001 to liaise with Mr Greinert in view of the latter's rights.
5 Mr Greinert says that in about August 2001, Mr Jarrett and his wife asked him for assistance to restore a P38 aircraft that Mr Jarrett had on display at his aviation museum located in South Australia. As a result of their subsequent discussions, Mr Greinert lent some aircraft parts to Mr Jarrett. At a meeting in September 2002 the parties reached an initial agreement, according to Mr Greinert, that they would conduct a survey of potential sites of wrecked aircraft in Papua New Guinea with a view to recovering them for parts for their respective projects, and for the Museum, and possibly also to put together an aircraft for sale. In April 2003 Mr Jarrett submitted a draft partnership agreement, and on 2 June 2003 Mr Greinert proposed a revised partnership agreement, which would be confined to the recovery of one particular aircraft. That agreement was signed by both parties.
6 Clause 3 of the partnership agreement provided:
"3. The aircraft is to be mutually owned by the partners. In the event of any dispute between the partners, both parties agree to submit to arbitration by an independent person appointed by the President of the Law Society of NSW."
7 The agreement provided that when the aircraft was recovered, it would be shipped to Sydney for storage at a pre-arranged hangar at Bankstown Airport. It also provided that an authority for export from Papua New Guinea was to be obtained by Mr Greinert. Subsequently Mr Greinert made a request to the Museum for an export permit for the aircraft. The Museum issued the permit to Mr Jarrett on 5 June 2003, specifying the destination for export as Sydney.
8 In his affidavit, Mr Greinert gives evidence of the breakdown of the commercial relationship between himself and Mr Jarrett. I do not intend to deal with this evidence in detail. Mr Jarrett has not yet replied to it, instead making application for a stay of the proceeding in this Court.
9 It is sufficient for present purposes to outline Mr Greinert's evidence as follows. Mr Greinert says that he agreed to Mr Jarrett and his wife going to Papua New Guinea to carry out the salvage before he joined them there, but as they were also undertaking activities that were not covered by the partnership agreement, he declined their invitation to deposit $20,000 in an account to cover helicopter charges. Later they complained that he had made no contribution to helicopter costs, but he says that he repeatedly asked them for financial particulars which he did not receive. He says that Mr Jarrett did not, as intended, finalise an agreement with the local landowners in a timely fashion. Mr and Mrs Jarrett also complained, when the relationship soured, that he had not contributed any work to the salvage, but he says they told him not to bother coming to assist in the recovery because it would be completed quickly. In fact, however, some months elapsed and then Mr Jarrett proceeded to recover an aircraft and ship it to South Australia rather than to Sydney. Mr Greinert claims that this is the aircraft that was the subject of the partnership agreement.
10 The aircraft remains in Adelaide. Mr Jarrett is in Adelaide, and the documents relating to expenditure on behalf the partnership are held there. Mr Greinert lives in New South Wales.
11 On 15 October 2003 Mr Greinert's solicitor wrote to Mr Jarrett, by facsimile, requesting written confirmation that the salvaged plane would be delivered to the Sydney hangar in accordance with the partnership agreement, at Mr Jarrett's cost, and saying if that confirmation was not received by 5pm on 17 October, a proceeding would be commenced in this Court. There is evidence that the facsimile was transmitted at 12:16pm on that day.
12 On 17 October 2003 Mr Jarrett commenced a proceeding in the District Court of South Australia, No 1641 of 2003, by Inter Parte Summons and Statement of Claim, seeking a declaration that the partnership had been dissolved, and orders for the taking of partnership accounts and the distribution of partnership property.
13 The Statement of Claim alleges that a partnership agreement was entered into on 2 June 2003 for the parties jointly to retrieve a Lockheed P38 Lightning Aircraft from Papua New Guinea. It alleges that Mr Greinert agreed to deposit $20,000 into a bank account but did not do so, and that Mr Greinert failed to travel to Papua New Guinea or to assist in the acquisition and recovery of the aircraft. It alleges that Mr Jarrett bore all the costs of and incidental to the recovery of the aircraft. It says that after Mr Greinert repudiated the partnership agreement, Mr Jarrett arranged for the aircraft to be transported to Adelaide and the aircraft is in the possession control of Mr Jarrett, although Mr Greinert has demanded that it be delivered up.
14 The proceeding in this Court was commenced by summons filed on 24 November 2003. The summons seeks:
- an order restraining the defendant from taking any further steps in the South Australian proceeding until the conclusion of an arbitration provided for in clause 3 of the partnership agreement;
- a declaration that Mr Jarrett breached the conditions of the Museum's export permit by arranging for the aircraft to be transported to Adelaide rather than Sydney;
- a declaration that Mr Jarrett breached his obligation to Mr Greinert under the partnership agreement by arranging for the aircraft to be transported to Adelaide instead of Sydney;
- an order that Mr Jarrett comply with his obligation under the export permit and/or under the partnership agreement, by delivering the aircraft to Sydney for storage at Bankstown airport.
15 It is not clear from the evidence before me whether the initiating process for the South Australian proceeding or for the proceeding in this Court, as served in each case, was endorsed under the Service and Execution of Process Act 1992 (Cth). The copies of the originating process for each action that are in evidence do not bear any such endorsement.
16 Mr Greinert's defence to the South Australian proceeding was filed there on 14 January 2004. The defence alleges that the District Court of South Australia does not have jurisdiction, because:
· under clause 3 of the partnership agreement the forum for any dispute between the parties relating to the partnership is New South Wales;
· under clause 3 of the partnership agreement any dispute between the parties is to be submitted to arbitration by an arbitrator appointed by the President of the Law Society of New South Wales;
· the partnership agreement was made in New South Wales;
· the subject matter of the partnership agreement was to be performed in New South Wales.
17 The defence says that in the alternative, any right that Mr Jarrett had to bring the South Australian proceeding was merely due to the presence of the subject matter of the partnership agreement in South Australia, and it asserts that the presence of the subject matter in South Australia is due to breaches of contract, law and fraud.
18 By his defence Mr Greinert also denies that he is guilty of conduct prejudicially affecting the partnership business, or that he has repudiated the partnership agreement, or that he has accepted any repudiation of it by Mr Jarrett, and he asserts that the South Australian proceeding is vexatious and oppressive.
19 A status conference in the South Australian proceeding was held on 4 February 2004, and the proceeding was adjourned to 7 April 2004. Mr Jarrett has instructed his South Australian solicitor to seek an urgent hearing. An order was made that any application to challenge the jurisdiction of the District Court or to stay the South Australian proceeding pending an arbitration be lodged on or before 27 February 2004.
20 An application was in fact filed, out of time but by leave, on 17 March 2004. It seeks a stay of the South Australian proceeding pending determination of the proceeding in this Court, on the grounds that New South Wales is the appropriate jurisdiction for determination of the issues between the parties, and due to the presence of the arbitration clause in the partnership agreement.
21 Mr Jarrett's notice of motion in this Court seeking a stay of the proceeding in this Court, was filed on 2 March 2004. That is the application before me now. I have decided to grant the stay, as sought.
22 Where there are overlapping proceedings in two or more courts and an application is made for a stay of one of the proceedings, the Court hearing the application must perform a balancing exercise. It must place in the balance the basic tenet of Australian jurisprudence that, where jurisdiction exists, access to the courts is a right and not merely a privilege. It must weigh that right against the public interest in ensuring that the courts are not used as instruments of injustice, by the prosecution of proceedings constituting an abuse of process. The balancing exercise is well described in the joint judgment of Mason CJ, Dawson, Toohey and McHugh JJ in Williams vSpautz (1992) 174 CLR 509, 518-520.
23 In Commonwealth v Cockatoo Dockyard Pty Ltd [2003] NSWCA 192 (14 July 2003), Hodgson JA reviewed English and Australian case law and reached the following conclusions:
"[75] This review of the authorities demonstrates the cautious approach the Courts take when asked to stay proceedings as constituting an abuse of process. A clear case is required before such an order will be granted.
[76] Although there is a line of authority dating back, at least, to McHenry v Lewis (1883) 22 Ch 397 recognising that it is prima facie vexatious to bring two actions where one would suffice, the authorities also demonstrate that notwithstanding there being two concurrent actions, the identity of the parties, the factual substratum in each case and the legal basis of the respective claims brought forward in order must be closely scrutinised to determine whether a stay is warranted.
[77] Such scrutiny is essential where the Court's consideration of whether or not a stay ought be granted turns on what, at times, may require a delicate balancing exercise between the competing rights of the parties, as well as consideration of the public interest in the proper application of scarce judicial resources. The authorities also show that in cases falling short of abuse of process, orders may be moulded to cure difficulties falling short of abuse."
24 For reasons that will become plain, I do not regard this as for example of the common kind of case where a plaintiff brings similar proceedings in two courts. But those cases are analogous, to the extent that in the present case Mr Greinert seeks to assert the primacy of the arbitration agreement both in the South Australian proceeding and in the proceeding in this Court. It therefore seems to me appropriate, here, to pay attention to the criteria identified in paragraph [76] of his Honour's judgment.
25 Consideration of the identity and position of the parties is not determinative in this case. The parties to the South Australian and New South Wales proceedings are identical. One lives in South Australia and the other lives in New South Wales. Documents relevant to expenditure in the partnership are in South Australia, but there is nothing to indicate that the documents are of such volume that it would be difficult to transport them interstate, or to make photocopies and bring the copies into New South Wales. Nor does it appear that the majority of witnesses reside in one state rather than the other. Apart from the parties, evidence may be given by Mrs Jarrett, and possibly also from someone residing in Papua New Guinea. There would be some inconvenience if Mrs Jarrett has to travel to New South Wales from South Australia, but inconvenience to a single witness is not a major consideration, especially when the witness is married to one of the parties. If there is to be any witness from Papua New Guinea, there is no obvious difference in requiring that witness to attend in Sydney rather than in Adelaide.
26 In their submissions, both parties endeavoured to make something of the sequence of commencement of the proceedings: that is to say, first a letter threatening proceedings in New South Wales, then two days later, commencement of the South Australian proceeding, with the New South Wales proceeding commencing only five weeks later. In some cases it is appropriate to lay weight on the fact that the proceeding in one jurisdiction commenced before the other. If, however, the proceeding first initiated was commenced for the purpose of forestalling the threatened proceeding in the other jurisdiction, the motive of the party commencing the first proceeding might be held against him. Here, I am unable to say on the facts whether Mr Jarrett, commencing his proceeding in South Australia two days after receiving a letter from Mr Greinert's solicitors, was motivated by the desire to thwart Mr Greinert's intention to sue in New South Wales. It is possible that Mr Jarrett gave instructions only after receiving the letter, although that hypothesis assumes such swift action on the part of Mr Jarrett and his solicitor that I cannot treat it as more likely than not. The alternative hypothesis, no less likely, is that Mr Jarrett and his solicitor were already preparing the South Australian proceeding when he received the letter.
27 As to the factual substratum of the claims in the two proceedings, it seems to me that if both cases were allowed to run to trial, there would be a very substantial duplication of evidence. The questions going to dissolution of the partnership relate to alleged breaches on both sides - in the case of Mr Greinert, the allegations that he failed to contribute work and money to the enterprise, and in the case of Mr Jarrett, the allegations that he failed to provide financial information and caused the salvaged aircraft to be delivered to Adelaide in breach of the agreement. The factual allegations likely to be raised to support and resist Mr Greinert's claim for a mandatory order to bring the aircraft to Sydney, and the supporting declarations, will presumably cover much the same ground, assuming that Mr Jarrett defends the claim by asserting that Mr Greinert repudiated the agreement and brought it to an end. This suggests the desirability of allowing only one proceeding to run, and staying the other, on the grounds of cost and efficiency. There would be much less overlapping of evidence if the New South Wales proceeding were confined to an application for an injunction based on the arbitration clause, but there are other obstacles to that relief, as I shall explain.
28 It is when one considers the third factor mentioned by Hodgson JA, namely the legal basis of the respective claims, that the case for staying the proceeding in this Court becomes evident. The relief sought in the South Australian proceeding, accounting and distribution of assets pursuant to a dissolution of partnership, is relatively straightforward. In this Court, Mr Greinert seeks relief of two kinds, relating respectively to Mr Jarrett's alleged obligation to deliver the salvage aircraft to Sydney, under both the agreement and the export permit, and the arbitration clause.
29 As to Mr Jarrett's alleged contractual obligation to deliver the aircraft to Sydney, it is arguable that the partnership agreement has been terminated by repudiation and acceptance of repudiation, and consequently that there is no longer any such obligation. The determination of those matters would involve a substantial hearing, not dissimilar from the hearing of the application for orders upon the dissolution of the partnership. In my opinion, the primary remedy that the parties need is a proper accounting for the partnership assets (principally, and perhaps solely, the aircraft) and a distribution upon realisation of the asset or assets, rather than a determination as to whether the aircraft should be moved physically from one place to another. To the extent that the shipping of the aircraft to Adelaide rather than Sydney may have been in breach of the Museum's export permit, it is not easy to see how Mr Greinert has the standing to complain, but if he has, the complaint goes only to the physical transfer of the aircraft and not to the ultimate resolution of the dispute. These considerations point fairly strongly to the stay of the proceeding in this Court so that the consequences of dissolution of the partnership can be addressed in the proceeding in which that issue is raised.
30 The remaining question is whether considerations with respect to the arbitration clause point to a different outcome, as counsel for Mr Greinert strenuously contended.
31 The parties have expressly agreed that "in the event of any dispute", they submit to arbitration by an arbitrator selected pursuant to clause 3 of their agreement. The significance of such agreement was explained by Dixon J in Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502, 508-9, as follows:
"… the Courts begin with the fact that there is a special contract between the parties to refer, and therefore in the language of Lord Moulton in Bristol Corporation v John Aird & Co [1913] AC 241, at 259, consider the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutton LJ said in Metropolitan Tunnel and Public Works Ltd v London Electric Railway Co [1926] Ch 371, at 389, 'A guiding principle on one side and a very natural and proper one, is that parties who have made a contract should keep it.'"
32 The presence of an express agreement as to the manner of or place for the resolution of disputes does not deprive the Court of its discretion to refuse a stay, which exists in the inherent jurisdiction as well as under rules of court (Supreme Court Rules, Part 13 rule 5) and statutory provisions (see Commercial Arbitration Act 1984 (NSW), s 53, and Commercial Arbitration Act 1986 (SA), s 53). But where there is an express agreement, the Court's discretion should be exercised by granting a stay unless there is a strong cause for not doing so: The Eleftheria [1970] P 94, 99 per Brandon J; see also The Mill Hill, 81 CLR at 509 per Dixon J; Webb v Confederation of Australian Motor Sport Ltd [2002] NSWSC 1075 (Dunford J, 14 November 2002).
33 As Barrett J pointed out in Morrow v chinadotcom Corporation [2001] NSWSC 209 (28 March 2001), there are three conditions for a stay of proceeding to be justified on the basis of a dispute resolution clause. First, in order to avoid being void as an unlawful attempt to oust the jurisdiction of the Court, the provision must operate as a pre-condition of the parties' freedom to litigate rather than a purported denial of that freedom: Scott v Avery (1855) 5 HLC 811; Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600. Clause 3 of the partnership agreement appears to satisfy that requirement.
34 Secondly, the disputes which are the subject of the proceeding sought to be stayed must be within the scope of the contractual provision. In this respect the agreement of the parties will be given a broad construction. The need to adopt a broad construction is well recognised in the case of an international arbitration clause (see my review of the case law in ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 (4 October 2002), at [113]-[136]). But the proposition also holds good for a commercial arbitration agreement between locally-domiciled parties. In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, 165, Gleeson CJ said:
"Where the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument."
35 Although the arbitration agreement in the Francis Travel Marketing case was an international agreement, in the chinadotcom case Barrett J treated those observations as applicable in a domestic context, and I respectfully agree with him.
36 In the present case, the agreement of the parties to arbitrate their disputes is contained in a partnership agreement. It is probable that the commencement of the South Australian proceeding had the effect of terminating the partnership, if it had not been terminated prior that time, whether the partnership was governed by the Partnership Act 1891 (SA), s 32 or the Partnership Act 1892 (NSW), s 32. That does not necessarily mean, however, that the agreement to arbitrate has been terminated and is no longer enforceable. In the Francis Travel Marketing case, the agreement to arbitrate was contained in an agency agreement. The principal purported to terminate the agreement after various disputes had arisen. The agent contended that the principal was not entitled to terminate the agreement. The Court of Appeal of New South Wales held that the dispute as to whether the principal was entitled to terminate the agreement was governed by the arbitration clause in the agreement.
37 Here, there are disputes between the parties to the partnership agreement as to whether Mr Greinert repudiated the agreement by failing to contribute expenses and participate in the salvage work, and as to whether Mr Jarrett breached the agreement by shipping the salvage aircraft to Adelaide rather than Sydney. These disputes appear to fall within clause 3. The fact that the partnership may have come to an end (if it be so) does not entail that the partnership agreement is no longer relevant to the resolution of disputes between the former partners. It is plausible to argue that the arbitration clause, expressed as it is in very wide language, extends to disputes relating to whether the partnership agreement has been repudiated and terminated by acceptance of repudiation, and continues to apply notwithstanding the determination of the partnership by those events or the commencement of a proceeding for dissolution.
38 The third condition articulated by Barrett J in the chinadotcom case is that the agreed contractual process must possess sufficient definition and certainty to enable it to be meaningfully undertaken and enforced. That is more likely to be an issue where, as in that case, the agreement between the parties was for a form of mediation less well recognised than arbitration. Satisfaction of that condition does not appear to be an issue in the present case.
39 These considerations suggest, as counsel for Mr Greinert asserted, that there is a plausible argument for a stay of proceedings to permit an arbitration to take place. However, unlike the cases cited in argument, this is not a case where a party has sought to resolve a dispute by bringing a proceeding in this Court notwithstanding an agreement to arbitrate. Here the proceeding which is said to disregard the arbitration clause is in another court. A stay of that proceeding, whether under its rules of court or a statutory provision such as s 53 of the Commercial Arbitration Act of New South Wales or South Australia, is a matter for that court to decide.
40 In this Court, Mr Greinert seeks what is sometimes called an anti-suit injunction: see, for example, British Airways Board v Laker Airways Ltd [1985] AC 58; and generally, E I Sykes and M C Pryles, Australian Private International Law (3rd ed, 1991), p100ff. The power of this Court to restrain a person within its jurisdiction from bringing or continuing action in a foreign court is regarded as applicable where there are concurrent proceedings in the Supreme Courts of two States of Australia (Evers v Firth (1986) 10 NSWLR 22), and a fortiori the power is available where one of the courts is a District Court of another State.
41 However, while the jurisdiction is undoubted, it is to be exercised with great caution: Beecham (Australia) Pty Ltd v Roque Pty Ltd (1987) 11 NSWLR 1, at 3 per Kirby P, and 6 per Rogers AJA. There are very good reasons for that caution. As Sykes and Pryles explain, op cit at 105:
"Clearly these sentiments [of caution] are of great weight within a federal system such as Australia. Particularly since the establishment of the cross-vesting scheme, which provides for the transfer of proceedings, it would seem highly undesirable for one state court to attempt to control proceedings in another state court. The issue of a proper venue should be investigated in the court seized of the action."
42 It is true that in the present case, the anti-suit injunction is sought not merely on the ground that this Court would be a better forum than the District Court of South Australia, but specifically to enforce the arbitration clause. However, there is a mechanism for doing so in the District Court, and indeed, Mr Greinert has pursued that mechanism by applying in the District Court for a stay in reliance on the arbitration clause. In my opinion there is no good reason for this Court to intervene, by anti-suit injunction, when there is an adequate mechanism available for stay of proceedings and it is being employed.
43 My conclusion, therefore, consistently with the attitude to anti-suit injunctions adopted by the Court Appeal of New South Wales, is that the presence of the arbitration clause provides no basis for declining to stay the New South Wales proceeding, given that it is otherwise appropriate to do so. I shall therefore make an order in terms of paragraph 1 of the notice of motion, and hear the parties on the question of costs.