Huddart Parker Ltd v The Ship Mill Hill

refers claim to arbitration - power of court to stay proceedings pending arbitration - inherent power - application to Federal Court of s.53 Commercial Arbitration Act 1985 (WA) - direct

application - application by operation of s.79 Judiciary Act 1903

• principles regulating grant of stay - power to restrain party to arbitration ~- principles applicable - summary dismissal ~

Trade Practices Act 1974 ss. 52, 82 Commercial Arbitration Act 1985 (WA)s.53 Judiciary Act 1903 s.79

Federal Court of Australia Act 1976 s.23 Federal Court Rules 0.20, 0.11

Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502 G.W.J. Blackman & Co. SA v Oliver Davey Glass Co. Pty Ltd (1966) VR 570

ote . 2. W.C. Thomas & Sons Pty Ltd v Bunge (Australia) Pty Ltd [1975] VR » Halifax Overseas Freighters Ltd v Rasno Export ("The Pine Hill") (1958) 2 Lioyds Rep. 146

Tasmanian Pulp and Forest Holdings Ltd v Woodhall Ltd (1971) Tas. SR 330 ~

St. Justins Properties Pty Ltd v Rule Holdings Pty Ltd (1980) 40

FLR 282 Stack v Coast Securities (No. 9) Pty Ltd (1983) 154 CLR 261

BOND CORPORATION PTY LIMITED v THIESS CONTRACTORS PTY LTD AND OVE ARUP PTY LTD, ARUP PARTNERS PTY LTD AND OVE ARUP CONSULT PTY LTD NO. WAG 114 of 1986

IN THE FEDERAL COURT OF WESTERN AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION

restrained until further order from prosecuting an arbitration between the First Respondent and_ the Applicant in accordance with the Notice of Reference to Arbitration served by the First Respondent on 12

The First Respondent have liberty to apply to vary or

The Pirst Respondent's motion dated 16 December 1986 be

Note: Settlement and entry of orders is dealt with in

IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) GENERAL DIVISION )

This case concerns time and cost overruns in the performance of a contract for the provision of road and associated

The aggrieved developer sues both the civil engineer responsible for the conduct of the works (the first respondent) and the consulting and supervising engineers responsible for their design, cost and time estimates, tender documentation and

The first respondent says that 1t has not been paid by the applicant for all the work that it has done and wishes to

Under the terms of its contract it has referred that

claim to arbitration and 1t wishes the arbitration to proceed.

The applicant wants all matters in issue between it and the respondents resolved in this court and invites the first respondent to pursue its claim by way of cross claim in these

To effect that objective it now moves for an order restraining the first respondent from prosecuting the arbitration

The first respondent on the other hand seeks a_ stay of

the proceedings in this court, insofar as they relate to it,

In the alternative it moves for an order staying or dismissing generally the claim against it on the grounds that no reasonable cause of action is disclosed by the statement of claim and that so far as they relate to the first respondent the proceedings are frivolous or vexatious and an abuse of the process

The motions involve factual considerations which are not completely straight forward and it is necessary to refer in some detail to the history of the dispute and the background to the

The applicant owns land at Millenden, 11 kilometres north of the town of Midland which lies about 30 kilometres east

residential subdivision under the name "Brigadoon Country Estate".

The applicant engaged the second respondents to act as consulting and supervising engineers for road, earth and drainage

In November 1984 the second respondents provided the applicant with a cost estimate for work on stage 1 of the project. The estimate was $1,285,700.00. This figure was given prior to certain changes to the works which, according to the second respondents, would have altered their estimated total cost to

Tender documents for a Schedule of Rates Contract were prepared by the second respondents in January 1985 and tenders

published by the Standards Association of Australia were to be

Practical completion of the works was to be achieved by

Four companies tendered and the results of their tenders

As is apparent the lowest figure, that provided by the

first respondent, considerably exceeded the second respondents'

In a letter dated 13 February 1986 informing the applicant of the tender results the second respondents explained the shortfall between their estimate and the lowest price tendered

(a) The very short construction period. (b) Weather.

(c) The need to let a single large contract to produce

150 lots rather than staging the work as had originally been envisaged.

(d) The fact that the predicted volume of excavation in soft and hard rock based on the completed design, geological reports and an inspection of pegged alignments exceeded their intitial estimates.

"It 1s our considered opinion that you will not achieve substantial savings or meet your sales program by recalling tenders. The works cannot be staged using smaller contractors working simultaneously because of clashes with access to and from the gravel pit sites. We would therefore recommend that negotiations be conducted with the two lowest tenderers in order to reduce the price from (sic) $1,786,000.00 approximately and that the lowest of the resulting prices' be accepted."

Some discussion followed between the first and second

respondents. The second respondents wrote to the first on 19 February listing a number of "cost saving suggestions" arising out of the discussions in relation to certain elements of the works and as a consequence of which they sought adjustment of the

The first respondent replied by letter the following

day, 20 February, attaching a schedule of revised rates for some 6

Three further items were quoted at a reduced rate ina

There is no evidence of further discussion before 22 February when the second respondent sent a letter to the applicant advising it that they had conducted negotiations with the two lowest tenderers. The letter asserted that the negotiated price of the first respondent was now $1,764,953.00. Leighton Contractors were said to have reduced their price by $201,600.00

As the state manager for the first respondent Mr Jukes said in his affidavit, the cost savings which had been suggested by the first respondent to the second respondents were of an insignificant order when compared to the reduction claimed in the

The text of the second respondents' letter does not seem fully to reflect the fact that the contract in issue was a

The first respondent according to Jukes was at this time aware that certain changes were planned to the scope of the works but did not know how the second respondents had arrived at the reduced "negotiated price" and the reduction and scope of works

Ultimately on 11 April 1985, when the performance of the contract had been under way for a month, the first respondent did

receive a breakdown of the new total from the second respondents.

In the breakdown were a number of significant scope changes and other reductions which in Jukes' view "were designed to

He was not concerned with what he described as "this manoeuvre" as the contract was a Schedule of Rates Contract. He

"While the scope of the works had been reduced from that for which the first respondent had tendered and the

price reduced proportionately on the basis of the first respondent's tendered rates, the first respondent knew that if the second respondent subsequently increased the scope of works the first respondent would be entitled to be paid in accordance with the terms of the contract."

This statement according to counsel for the applicant, showed on the part of Jukes a cynical disregard for the

With all due respect I cannot accept that submission. On the material presently before the court, Jukes was simply adverting to the fact that if there were an alteration to the scope of the works the first respondent would be protected because

it was operating under a Schedule of Rates Contract.

Returning to the chronology, the second respondents, by their letter of 22 February recommended to the applicant that the

first respondent be appointed to perform the works.

That recommendation was accepted. On 12 March 1985 the

second respondents wrote to the first respondent in the following

instructed us to accept your tender for the works on a revised schedule giving a contract sum of $1,722,453.00 for a construction period of 21 weeks.

The contract start date is 13 March, 1985. Contract documents and schedule are being purchased and will be available shortly."

The first respondent commenced work on the site on 13

A formal instrument of agreement dated 21 May 1985 was

executed by the applicant and the first respondent. Documents

deemed to form and be read and construed as part of the agreement

General Conditions of Contract AS2124-81 The Drawing Scheduled in the Tender Documents

Specifications and Tender documents No. 3141, including Addendum No. l.

Letters from the second respondent dated i9 February 1985 and 12 March 1985 and 11 March 1985.

First Respondent's tender dated 12 February 1985 and its later letters dated 20 February 1985 and 15 March 1985.

The first respondent's telexes dated 20 February 1985 and 27 February 1985.

It is sufficient for present purposes to refer to clause 49.1 of the General Conditions which sets out a procedure for settlement of disputes. The clause provides inter alia, that, "all disputes or differences arising out of the Contract or concerning the performance or non-performance by either party of his obligations under the contract whether before or after the

completion of the works shall be determined as follows".

The procedures then prescribed require notification of a dispute to the engineer designated as "Superintendent". Any party dissatisfied with the Superintendent's determination may give notice in writing to the other party requiring that "the

The clause then sets out steps to be taken to select an

"(d) A reference to arbitration under this clause 49 shall be deemed to be a reference to arbitration within the meaning of the laws' related to arbitration in force in the State or Territory named in the Annexure hereto and the arbitration proceedings shall be conducted in that State or Territory. The arbitrator shall have all the powers conferred by those laws and it shall be competent for him to enter upon the reference without any further or more formal submission than is contained in this clause. The arbitrator shall also have the power to award interest."

According to the applicant's state property manager, Mr Bruce Buckley, there were extensive delays and _ practical completion was not achieved until 27 March 1986, some 30 weeks

Mr Jukes said in his affidavit that at the outset the scope of the works the first respondent was directed to perform was quite different from that on which it had tendered. Increases and changes ordered by the Superintendent resulted 1n the need to reprogramme the works so that they extended into the winter

The costs substantially exceeded the tender figure. The applicant says that to date it has paid the first respondent the sum of $2,774,573.00. The first respondent has an outstanding

On 16 June 1986 the first respondent notified the superintendent of a dispute pursuant to clause 49 of the General Conditions. Being dissatisfied with the superintendent's response, it referred the matter to arbitration on 12 September 1986. The notice of reference to arbitration described the

"(a) Payment of a reasonable sum or upon a quantum meruit for work (including variations) carried out by the contractor; and/or

(b) Payment pursuant to the contract for work (including variations) carried out by the contractor; and/or

ll. (c) Payment of other moneys pursuant to the contract; and/or (d) Damages; and {e) Payment of interest and the superintendent's rejection thereof." Detailed particulars were contained in a five volume

applicant enclosing the notice and supporting material said:-

"The reference to arbitration is made without prejudice to our right to pursue our claims by means of litigation should we so decide."

Discussion ensued between' representatives of the applicant and the first respondent in which the applicant evidently sought to persuade the first respondent that all matters in dispute should be resolved either by way of an arbitration to which the second respondents could be joined as a party, or in judicial proceedings in which the applicant would join the second

November 1986 the applicant instituted these proceedings.

Against the first respondent the applicant pleads that at the time of submitting its tender to the second respondents in

February 1985 it made various representations relating inter alia,

to its management and procurement ability and experience, its knowledge of and experience in the relevant ground and weather conditions, its competence in relation to the planning and execution of the works with a minimum of interruption due to wet weather, the availability to it of plant and labour necessary to complete the works promptly and its capacity to carry out the

These representations which it is said were made in trade or commerce to induce the applicant to engage the first respondent to carry out the works, are alleged by the applicant to

have been untrue and to have caused it to suffer loss and damage.

A further representation attributed to the first respondent and said to be untrue was that it was capable of doing the work for its initial tender figure and the reduced figure of

By this conduct also, the applicant was said to have

The third area in which the first respondent is said to have been guilty of misrepresentation was in connection with the tender process. According to the statement of claim the first respondent and Leighton Contractors colluded in the preparation of artificially depressed tender figures representing an amount

substantially less than that which they intended to charge for

carrying out the works and substantially less than the price at which other suppliers of such services in Western Australia would

The first respondent and Leighton Contractors it was alleged, intended at the time the arrangement was made that by submitting such tender to the second respondents consideration would not be given to tenders submitted by other suppliers of such services because the prices offered by the first respondent and

Mr Buckley who was cross examined by counsel for the first respondent was asked whether he was aware of any facts to support the allegation of collusive tendering in an exchange which

Q. Mr Buckley, are you aware of any facts which support that allegation?

A. At present, Mr Davis, no, I do not, but I understand the process from here is a discovery of documents, right, which I would like to see take place.

Q. Are you aware of any fact which suggests that those documents would throw up any such facts?

Q. Are you aware of anyone else in your corporation who has any such facts in their possession?

A. Our corporation is investigating that at the moment.

Q. Are you aware of anyone else in your corporation which has such facts in his or her possession?

Later in re-examination albeit of a leading character, he said that the applicant's belief as to the existence of a collusive tender was influenced by the size of the tenders submitted, the discrepancy between the -lowest tenders and the rest

of the field and the eventual actual cost of the project.

Following from the allegation of collusive tendering the statement of claim alleges that the first respondent by submitting

(a) That it was a tender arrived at independently of any other tender;

(b) That it was a realistic tender for the works; (c) That it was a competitive tender for the carrying

out of the works having regard to the nature and extent of the same.

By these false representations the applicant was again

The three groups of misrepresentations alleged against the first respondent are said to constitute misleading and deceptive conduct on its part and are relied upon to support claims for damages under s.82 of the Trade Practices Act 1974. Although not expressly set out in the statement of claim, it is evident that the applicant seeks to characterise the conduct of

the first respondent as contravening s.52 of the Act.

Later in re-examination albeit of a leading character, he said that the applicant's belief as to the existence of a collusive tender was influenced by the size of the tenders submitted, the discrepancy between the -lowest tenders and the rest

of the field and the eventual actual cost of the project.

Following from the allegation of collusive tendering the statement of claim alleges that the first respondent by submitting

(a) That it was a tender arrived at independently of any other tender;

(b) That it was a realistic tender for the works; (c) That it was a competitive tender for the carrying

out of the works having regard to the nature and extent of the same.

By these false representations the applicant was again

The three groups of misrepresentations alleged against the first respondent are said to constitute misleading and deceptive conduct on its part and are relied upon to support

claims for damages under s.82 of the Trade Practices Act 1974.

Although not expressly set out in the statement of claim, it is evident that the applicant seeks to characterise the conduct of

the first respondent as contravening s.52 of the Act.

In addition the applicant alleges that the first respondent has breached various express and implied terms of the

(a) Exercise due care,ski1l and diligence in carrying out the works.

(b) Pursue completion of the words with all due expedition.

(c) Complete the works by 10 October 1985, the revised completion date fixed by Ove Arup.

(d) Give proper consideration to and take into account in the carrying out of the works the weather conditions likely to prevail during the time when the works were to be carried out.

(f£) Make all proper enquiries as to the ground and weather conditions likely to prevail during the time when the works were to be carried out.

(g) protect the works from damage from rain and runoff.

(h) Ensure that sufficient plant and machinery was assigned to the works.

(i) Ensure that plant and labour assigned to the carrying out of the works was utilised to its maximum capacity.

(3) Co-operate with other contractors working on Brigadoon."

It is also contended that the first respondent was in breach of its common law duty to exercise reasonable care and skill in carrying out the works. Further, the statement of claim alleges in effect, that the first respondent fraudulently represented to the second respondent that it would be able to

As against the second respondents, the applicant alleges that they misrepresented their experience and expertise in design and supervision of land subdivisions, their ability to provide competent engineers with such experience, their ability to provide accurate estimates of subdivisional costs and their ability to provide accurate estimates of the costs of subdividing

These representations it is said were made in trade and commerce were false and caused the applicant to suffer damage. The applicant claims that as a result of its reliance upon the second respondent's advice it is likely to have to pay more than $5.4m in excess of the estimated total cost of the subdivisional

Further it is alleged, the second respondent represented to the applicant that the work could be carried out for about $1,786,000.00. At the time of the representation it was said the second respondents did not have and could not have any reasonable expectation that the works could be carried out for that amount. The representation 1s said to have constituted misleading and deceptive conduct. Again, the applicant pleads

that by reason of this advice it has suffered damage.

It was also contended against the second respondents that in breach of their contract with the applicant they failed to

exercise reasonable care, skill and judgment in the performance of

their duties as consulting and supervising engineers and in estimating the total cost to the applicant of subdividing the land. Extensive particulars of the alleged breach involving some

29 separate items are set out in the statement of claim.

It is also alleged the second respondents were in breach of their duty of care to the applicant in relation to the

performance of their duties and the provision of cost estimates.

By way of relief the applicant claims against them damages pursuant to Part VI of the Trade Practices Act, damages for breach of contract and for negligence and a declaration that they are liable to indemnify the applicant in respect of any

moneys which may be found due and owing to the first respondent.

The first respondent contends as set out in the affidavit of its general manager, Mr B.J. Campain, that the applicant is not acting in good faith in instituting its proceedings against the first respondent in this court. According to Mr Campain the only purpose for which the applicant has commenced proceedings is to bring about a situation whereby the first respondent will, for reasons of economy and efficiency, chose to abandon its contractual right to arbitrate its claims against the applicant alone and pursue its claims by cross

claiming in the proceedings, thereby enabling the applicant to

seek an indemnity from the second respondents. He says that while that situation might well result in economies for the applicant, the fact remains that the first respondent would, in non consensual curial proceedings have to incur additional delays and costs and in effect be deprived of its contractual entitlement to have its disputes resolved in a one on one arbitration with the

In support of the allegation that the claim brought by the applicant against the first respondent is not genuine, extensive reference is made in the affidavit to negotiations and discussions and some correspondence between representatives of the applicant and the first respondent over the period from December

The first respondent points to the following elements of

Its acknowledgement during the period that the first respondent was not responsible for the problems being experienced on the works.

Its apparent acceptance that the second respondents were to blame for the problem.

Its reluctance to settle the first respondent's claims for fear of jeopardising its position as against the second respondent.

The desire on the part of the applicant to involve the first respondent aS a party in any litigation with the second respondents.

The failure by the applicant to make any complaint of a breach of the Trade Practices Act by the first respondent until 10 October 1986.

The failure by the applicant to make any complaint of breach of contract, negligence or alleged fraud on the part of the first respondent until its

letter of 14 November 1986 which enclosed a copy of a proposed statement of claim.

Counsel for the first respondent submitted that the applicant had instituted these proceedings against the first

That purpose was, as counsel formulated it, to compel the first respondent to litigate in this court the contractual claim it has against the applicant contrary to its contractual

The purpose 1s said to be improper as, it is alleged, the applicant has no reasonable expectation of succeeding in its

claim for damages under the Trade Practices Act or otherwise.

In answer to these contentions, Mr Buckley in a supplementary affidavit, says that prior to the meeting held on 10 October 1986 the applicant was not in possession of any

substantial information about dealings between the respondents.

Arising from discussions with representatives of the second respondents shortly before the meeting on 10 October, the applicant warned the first respondent that unless the dispute as a whole could be resolved in tripartite proceedings either by way of litigation or arbitration, then the applicant would bring

After the meeting, according to Buckley the applicant was provided by the second respondents with records of various communications, representations and transactions which had taken

place before and after the contract was entered into.

Buckley says that the applicant has, in connection with these proceedings taken advice of two counsel including senior

The applicant admits that it would prefer to have the dispute between the parties resolved in one forum and by one method of dispute resolution and, said Buckley, he tried to persuade the respondents to such a course on a number of

Turning to the statement of claim filed by the applicant, it must be said there are some curious features about

Jukes' affidavit was not contradicted in its description of the first respondent as "a nationally prominent' civil engineering construction company with annual turnover in excess of $200,000,000". The company has, it is said, operated in the

Whatever the rights and wrongs of its execution of the

Brigadoon works, it is indeed a dramatic allegation which contends

in effect that the company has neither the management nor procurement capability nor the experience to undertake these

The first respondent's capacity to undertake the works is of course an issue that 18 logically distinct from its

performance of the contract in this particular case.

Further, to make good its claim that the first respondent misrepresented its capacity to do the work for the sums of $2,169,250 and $1,722,453 respectively, the applicant faces the considerable difficulty that the first respondent was tendering on

a Schedule of Rates Contract not on a lump sum basis.

It is in respect of this second group of representations

that the applicant accuses the first respondent of fraud.

This 1s a serious accusation indeed. On the evidence before the Court at present there appears to be a complete answer

Whatever initial impressions may emerge from the papers however it is not appropriate that on conflicting evidence, largely on affidavit and not substantially tested by cross

examination, I should draw any inference of mala fides on the part

Certainly the applicant desires to have all matters in

If the applicant were manufacturing a sham dispute with the first respondent where none existed solely in order to get the first respondent into the court, then that would constitute an

In Packer v Meagher (1984) 3 NSWLR 486 it was held that an action will be an abuse of process when a plaintiff uses the process of the court to effect an object not within the scope of the process or for a purpose other than that for which the action is properly designed or to serve some collateral advantage

To find in this case an abuse of process it would be necessary first to conclude that the applicant's claim against the first respondent is without merit. That is not to say that every

case of abuse of process arising from an improper purposes would

In my opinion, while the claim against the first respondent, on the material presently before the court, has a number of obstacles in its way, it is not possible to say that it

A fortiori 1t is not possible to say that the applicant is careless of the outcome of the proceedings as against the first

To find that there is bad faith on the part of the applicant is to make ae finding seriously adverse to its credibility. It 18 not a finding to be made on conflicting affidavits essentially untested by cross-examination. The evidence of Mr Buckley under cross examination does not support an

In my opinion, the evidence presently before me does not support the allegation of bad faith against the applicant in

connection with the institution or conduct of these proceedings.

The applicant has filed its statement of claim and the respondents have entered appearances. That entered by the second

Pursuant to clause 49 of the General Conditions the President of the Institute of Arbitrators has, at the request of the first respondent, nominated Mr William Brown to act as

arbitrator. By a letter dated 5 December 1986 Mr Brown gave

notice to the applicant and the first respondent that he intended to call a preliminary conference in the arbitration on Friday, 19

Pending the hearing of the motions presently before the court, the first respondent has taken no further steps in the arbitration and the date set down for the preliminary conference

The applicant's motion seeks an order that the first respondent, its servants or agents, be restrained until further order from prosecuting the arbitration between the respondents and the applicant in accordance with the notice of reference to

arbitration served by the respondents on 12 September 1986.

The first respondent moves for orders in the following

That the claim made by the application and statement of claim against the first respondent

herein be stayed until the determination by arbitration of the 1ssues between the applicant and

Alternatively, that the claim against the first respondent be stayed or dismissed generally on the grounds that:-

(i) no reasonable cause of action 1s disclosed by the statement of claim against the first

(ii) the proceeding against the first respondent is frivolous or vexatious;

(111) the proceeding against the first respondent 18 an abuse of the process of the court.

The court has a general power to control its own proceedings and that power extends to enable it to order a stay of

proceedings ~ Hughes Motor Service Pty Ltd v Wang Computer Pty Ltd

(1978) 35 FLR 346,351 per Bowen CJ; Muller v Fencott (1981) 53 FER

In the circumstances of this case however, consideration must be given to another source of power to stay these

The Act came into operation in 1986 and replaced the

By sub-s.3(2) it is expressed to apply to arbitration agreements whether made before or after the commencement of the

An "arbitration agreement" is defined by s.4 as an agreement in writing to refer present or future disputes to

Clause 49 of the General Conditions AS2124-1981 brings the agreement between the applicant and the first respondent into

The Supreme Court of Western Australia designated as "the Court" is, under that designation, given certain powers with respect to arbitrations including jurisdiction to hear appeals on

Section 53 of the Act however refers to courts generally

and is not limited to the Supreme Court in providing as follows:-

"53(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 sub-section (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 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.

(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.

(3) Notwithstanding any rule of law to the contrary, a party to an arbitration agreement shall not be entitled to recover damages in any court from another party to the agreement by reason that that other party takes proceedings in a court in respect

of the matter agreed to be referred to arbitration by the arbitration agreement."

The question arises whether the provision applies in relation to proceedings instituted in the Federal Court where such proceedings are in respect of a matter agreed to be referred to

It 1s unlikely as counsel for the first respondent seemed to suggest, that the State law is a direct source of power

It 1s the Parliament of the Commonwealth which 1s given by s.77 of the Constitution, legislative power to define the

The powers with which such courts are equipped in aid of the exercise of their jurisdictions are conferred by the Parliament of the Commonwealth as an incident of the express

legislative authority given to it by s.77 of the Constitution.

In John Robertson & Co. Limited v Ferguson Transformers

Pty Ltd (1973) 129 CLR 65, Menzies, Gibbs and Mason JJ expressed

the view that s.37 of the Limitation of Actions Act 1936 (S.A.)

did not apply directly to an action commenced in the South

"It was conceded by the defendant that this section cannot of 1ts own force apply to bar the present action. That concession was in my opinion, correct. The legislature of South Australia has no constitutional power to prescribe a limit of time within which proceedings may be brought in this Court or in any other federal court, and a statute of limitations enacted by that legislature must be construed as applicable only to proceedings in courts subject to the legislative power of South Australia: Pedersen v Young (1964) 110 CLR 162

"I am unable to perceive any basis on which the Parliament of South Australia could validly prescribe a rule of procedure to be applied directly in actions in the High Court. That topic, so it seems to me, is one which falls within the legislative power of the Commonwealth Parliament ((see Pedersen v Young per Menzies J. (1964) 110 CLR 162, at p.167)."

It is not necessary in this case however to consider

further the propounded direct application of s.53 of

"The laws of each State or Territory including the laws relating to procedure, evidence and the competency of witnesses, shall, except as otherwise provided by the Constitution or laws of the Commonwealth, be binding on all courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable."

The operation of s.79 in relation to a state law empowering state courts to stay their proceedings pending the determination of an arbitration was referred to 1n Lady Carrington

Steam Ship Co. Ltd v The Commonwealth (1921) 29 CLR 596.

There the plaintiff had instituted proceedings in the original jurisdiction of the High Court to recover compensation in respect of the requisitioning of its ship under the War

The Commonwealth applied for a stay of proceedings in the action under s.6 of the Arbitration Act 1902 (NSW) alleging that the parties had made a "submission" of the matter to

The court (Knox CJ, Higgins and Starke JJ) would have refused a stay on the basis that the proceedings could involve the determination of more than one point of law including a

Their Honours expressly declined to state any view on whether s.79 of the Judiciary Act empowered the court to grant a

stay under the provisions of the Arbitration Act although Knox CJ

at 599 said of the question that it "...may be a point of some

Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502 involved proceedings instituted in the Admiralty Jurisdiction

Two suits were commenced against the Ship Mill Hill and

Application was made by summons for a stay of the proceedings on the basis that certain provisions of an agreement between the ship's agent and the plaintiffs constituted a

Dixon J. (as he then was) dismissed the two summons' for a stay but in doing so held that the court had the power under s.5

of the Arbitration Act 1928 (Vic) to stay the proceedings.

"There is no express statutory power conferred upon this Court to stay, on such a ground, proceedings otherwise properly brought in its original jurisdiction. It is not a power that can arise otherwise than from statute. Section 79 provides that the laws of each State, including the laws relating to procedure, evidence and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all courts' exercising federal jurisdiction in that State in all cases to which they are applicable. This section is based on a provision of the law of the United States which has a

long and controversial history, originating as it does in the thirty-fourth section of the Judiciary Act of 1789. See for example Camden & Suburban Railway Co. v Stetsen (1900) 177 US 172. But section 79 is more widely expressed than the American provision and I think that it should be interpreted and applied liberally. Notwithstanding the doubts expressed in Lady Carrington Steam Ship Co. Ltd v Commonwealth (1921) 29 CLR 596, I should be prepared to regard such a provision as section 5 of the Victorian Arbitration Act 1928, corresponding to section 4 of the Arbitration Act 1889 of the United Kingdom, as made applicable to the High Court exercising its federal jurisdiction. cf. Cohen v Cohen (1929) 42 CLR 91, at p.99 and Musgrave v Commonwealth (1937) 57 CLR 514 at pp.531~-532, 543, 547, 548, 551."

The application of s.79 of the Judiciary Act has been considered in a number of decisions of the High Court and this court. I have been unable to find any other than that cited above which related to powers under state law to stay proceedings

Section 79 picks up state laws which, in their terms, apply to courts generally even though they are, as a matter of

construction, directly applicable to state courts only.

In John Robertson & Co. Limited v Ferguson Transformers Pty Ltd (1973) 129 CLR 65 at 95 Mason J. (as he then was) said:-

"To ensure that State laws dealing with the particular topics mentioned in the section are applied in the exercise of federal jurisdiction by courts other than State courts, 1t is necessary that State laws be applied according to the hypothesis that federal courts do not necessarily lie outside their field of application. Section 79 requires the assumption to be made that federal courts lie within the field of application of State laws on the topics to which it refers, at least in those cases in which the State laws are expressed to apply to courts generally."

Menzies J. at 80-81 agreed with the exposition of s.79

advanced by Mason J. A like view was expressed by Gibbs J. at

88-89. Problems may arise in the case of State laws which refer explicitly to a particular state court - Australian National

Airlines Commission v Commonwealth of Australia and Canadian

Pacific Airlines Ltd (1975) 6 ALR 433 at 435 per Mason J.

This case however is not a case in which the relevant

In that sense it is analogous to the case before Pincus

J. in Neilsen v Hempston Holdings Pty Ltd (1984) 65 ALR 302 where

the question arose as to the applicability in proceedings in this court of s.72 of the Common Law Practice Act (Qld) empowering Courts of Record in Queensland to award interest in judgments for

"The expression " a court of record" in the Queensland section means a Queensland Court of Record, but that does not prevent section 79 of the Judiciary Act from making it applicable in cases in this court. State statutes picked up by section 79, especially those relating to "procedure, evidence and the competency of witnesses", must be drawn so as to apply to State courts only and when section 79 makes such statutes binding

on "all courts exercising federal jurisdiction in that State.....". It must mean to make them binding as if they were referred to in the latter category of courts.

Here the state statute applies to Courts of Record generally and not merely to a particular named State Court; the problem referred to by Mason J. in Australian National Airlines Commission v Commonwealth of Australia (1975) 6 ALR 433 at 435-6 therefore does not arise."

Section 53 of the Commercial Arbitration Act 1985 applies to courts generally although as a matter of construction

it would be limited in its direct application to Western

Section 53 of the Commercial Arbitration Act in my opinion is therefore picked up by s.79 and made applicable to the

Application of Section 53 to the Present Proceedings

Given that 8.53 of the Commercial Arbitration Act is capable of application by virtue of s.79 of the Judiciary Act to proceedings in this court, the question then arises whether it

As already pointed out, the agreement between' the applicant and the first respondent 1s, by virtue of clause 49 of the General Conditions AS2124-1981 an "arbitration agreement"

within the meaning of that term as defined in s.4 of the

It has also been already pointed out that' the proceedings instituted in this court are proceedings in respect of a matter agreed to be referred to arbitration by the arbitration

agreement between the parties within the meaning of sub-s.53(1).

The first respondent has, as required by sub-s.53(2) not delivered pleadings or taken any step in the proceedings other than the entry of an appearance. I would not consider the alternative claims in the first respondent's motion by which 1t seeks summary stay or dismissal of the action as a step in the proceedings prior to its application for a stay pending the

Even if the filing of the motion including this claim for alternative relief, could be treated as such a step for the Purposes of sub~s.53(2), I would not hesitate if it were

necessary, to grant leave to enable the applicant to apply for the

stay. - See - Reliable Roof Treatments Pty Ltd v Citra Constructions Pty Ltd (1974) 1 NSWLR 285, 289.

There remain two conditions upon which the availability of the power depends and these are as set out in paragraphs (a)

As to the second of these conditions there is no dispute that the first respondent was at the time that this action was commenced, and still remains ready and willing to do all things

necessary for the proper conduct of the arbitration.

The remaining question is whether there is any sufficient reason why the matter should not be referred to

While the language of paragraph (a) of sub~s.53(1) might be thought to place a burden on the party moving for a stay to establish that there is no sufficient reason for the matter not to go to arbitration, such a construction would be inconsistent with

decisions on similar provisions in other state acts.

In Huddart Parker Limited v The Ship Mill Hill (supra)

Dixon J. speaking of s.5 of the Arbitration Act 1928 (Vic) saad at

"Under the statutory power expressed in section 5 of the Arbitration Act 1928 (Vict.) the court or the judge, assuming that the other necessary conditions are fulfilled, must be satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission. This language might appear to place the burden upon the defendant applying for a stay. But the courts begin with the fact that there 1s 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 p.259, consider the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutten LJ said in Metropolitan Tunnel and Public Works Ltd v London Electrical Railway (1926) Ch.371 at p.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". At the same time, as is shown by the two cases cited, the Court's discretion has not been restricted by any exclusive definition of the circumstances which will warrant a refusal of a stay; see per Lord Parker in Aird's case (1913) AC at p.260 and per Scrutten LJ in the Metropolitan Tunnel case (1926) Ch. at pp 389, 390."

This approach was followed by the Victorian Full Court

1n G.W.J. Blackman & Co. S.A. v Oliver Davey Glass Co. Pty Ltd (1966) VR 570 at 574 where in a joint judgment of Winneke CJ, Adam

"In form the section throws upon the party to a submission, who desires that the agreement for a submission should be enforced, the burden of satisfying the court that there is no sufficient reason why the Matter should not be referred in accordance with the submission. But in applying this section the courts have consistently acted on the view that the parties should be kept to their bargain unless strong reasons are shown why an action commenced in defiance of the agreement for a submission should be allowed to continue. In substance it is the party who is resisting the application for a stay who has the burden of

satisfying the court that there are strong grounds for refusing to allow the dispute to be determined in

That view was reaffirmed by the Victorian Full Court

more recently in W.C. Thomas & Sons Pty Ltd v Bunge (Australia) Pty Ltd [1975] VR 801 at 805.

Insofar as the motion for a stay relies upon the power of the court to regulate its own proceedings, there is no reason

to suppose that that power 1s cut down by the existence of s.53

and its application to the court by virtue of s.79 of the

Nevertheless, given that s.53 of the Commercial Arbitration Act 1985 applies to the case and that there is a line

of authority establishing principles for its application, those

principles may as a matter of discretion, be applied in the

exercise of the power more directly conferred on the court.

The claims made by the applicant against the first respondent are concerned to a substantial extent with the

performance by 1t of its contract with the applicant.

That is not to say that the precontractual representations alleged do not form a significant part of the

However insofar as it relates to the performance of the terms of the contract by the first respondent,the application relates to disputes or differences which arise out of the contract or concern the performance or non-performance by either party of

To that extent therefore, the matters raised by these proceedings as against the first respondent are within the scope of clause 49 of the General Conditions and, subject to the court's overriding discretion, the first respondent is entitled to have

The discretion to order a stay of judicial proceedings un favour of arbitration must be exercised according to the

There are nevertheless certain general considerations

The fact that a dispute raises questions of law of some difficulty or complexity is a consideration which may weigh

against the grant of a stay. - Lady Carrington Steam Ship Co. Ltd v The Commonwealth (1921) 29 CLR 596, Halifax Overseas Freighters

Ltd v Rasno Export ("The Pine Hill") (1958) 2 Lioyds Rep. 146,151;

Dillingham Construction Pty Ltd v Downes (1969) 90 WN (Part 1) (NSW) 258; O'Neill & Clayton Pty Ltd v Ellis & Clarke Pty Ltd

In The Eschercheim (1974) 3 All ER 307 on the other hand, Brandon J. attached only small importance to the argument that difficult questions of law or of mixed fact and law would be

The desirability of avoiding a multiplicity of proceedings and the possibility of inconsistent findings of fact by different tribunals is also a matter that weighs in the balance against the grant of a stay. - The Pine Hill (supra) at 151;

Taunton-Collins v Cromie (1964) 2 All ER. 332, 333, 334; Tasmanian

Pulp and Forest Holdings Ltd v Woodhall Ltd (1971) Tas. SR 330, 345-348.

The last mentioned case had some similarities to the

present in that the plaintiff sued its engineers, its builders and

the installers of certain equipment in connection with the

There was a possiblity of separate arbitrations between

the plaintiff and different parties 1f a stay were to be granted.

Neasey J. with whom Burbury CJ agreed observed at 346:-

"It is true there are a number of grave issues raised by

the pleadings against the engineers which are not raised

against the respondent; concerned primarily with the

designing done by the engineers. It would seem to me,

prima facie, that the resolution of those issues is

likely to be closely connected with resolution of the

issues common to both the engineers and the respondent.

That is to say, once responsibility is determined as ' between the engineers and the respondent for that which went wrong with the construction and operation of the mill (if and in so far as things did go wrong and either party was responsible), resolution of the issues which lie solely between the appellant and the engineers will probably at least be materially effected.

regard in the context as being relatively minor, and do

not explore in detail (such as procedural advantages ~

process possesses over separate arbitrations in a case

like this) would have been, to my mind, clearly . sufficient in the whole context to outweigh the strong ' bias in favour of arbitration which the parties

It can be said that 1n the present case as in that case, the resolution of issues between the applicant and the second respondents is closely connected with the resolution of issues

There have been cases involving chains of contracts, only one of which contained an arbitration clause and where third

and sometimes fourth and fifth party proceedings were involved.

Courts have nevertheless been prepared to stay proceedings as between those parties whose contract provided for

reference of their dispute to arbitration - Reid v Ericsson [1938]

In G.W.J. Blackman & Co. S.A. v Oliver Davey Glass Co. Pty Ltd [1966] VR 570 at 581 the Victorian Full Court said:-

",eeIt seems that the courts have not felt constrained to attribute much weight to the mere circumstance that a party to a submission has been made a defendant to litigation instituted by others as a ground for refusing a stay of third party proceedings which are covered by the submission."

• See also W.C. Thomas & Sons Pt Ltd v Bunge (Australia) Pty Etd [1975] VR 801.

Woodhall Limited (supra) Neasey J at 348 drew a distinction

between the chain of contract case and the case in which the plaintiff sues several parties all as co-defendants in the one

action and where many issues of fact are common to them all.

That with respect, is a distinction which I accept as

relevant for the purposes of the exercise of this discretion.

Further, the present case is one which falls into the

Whether a Stay Should Be Granted in the Present Case

In my opinion there 1S a= probability that the arbitration proceedings between the first respondent and the applicant will raise some questions of law which are not necessarily straight forward, particularly as to whether the first respondent is in the circumstances, entitled to be paid ona quantum meruit basis and as to whether the contract was

More importantly the arbitration will raise issues between the first respondent and the applicant which are closely related, if not common, to the issues raised between the applicant

There is a possibility that inconsistent findings of fact may emerge from the arbitration and from the proceedings in

There are issues of law raised in the proceedings in this court which are closely related to some of the questions that may arise in the arbitration and which cannot be resolved by

The question whether the first respondent has contravened s.52 of the Trade Practices Act 1974 is related to its

performance of the contract which will, it seems, be relied upon

by the applicant to falsify certain of the representations

That is not to make any comment about the strength of the applicant's case against the first respondent. As I have

already indicated, it is plainly not without difficulty.

In the end however I am of the view that in order to avoid a multiplicity of proceedings, the possibility of inconsistent findings and to enable the proper resolution of questions of law which may arise, the first respondent's motion for a stay of the proceedings pending the determination of the

Proposed Restraint on First Respondent In Arbitration Proceedings

The applicant seeks an order restraining the first respondent until further order from prosecuting the arbitration

The threshold question is whether or not the Court has

The substantive application as against the first respondent relies upon causes of action said to arise under s.82 of the Trade Practices Act. In such matters the court has

exclusive jurisdiction by reason of s.86 of that Act.

The controversy between the applicant and the first respondent in my opinion, embodies the applicant's claims in tort and contract which the Court may adjudicate upon in the exercise

of 1ts accrued jurisdiction - Fencott v Muller (1983) 152 CLR 570.

The first respondent's claim against the applicant which it has referred to arbitration is also in my opinion, a part of the same controversy. The kind of assessment involved in arriving at that conclusion is not susceptible of nice analysis but remains as was said in Fencott v Muller (supra), a matter of impression

That being so, the first respondent's claim against the applicant also falls within the accrued jurisdiction of this

Given that this court has jurisdiction in the relevant area, it would have the power under s.23 of the Federal Court of Australia Act to restrain the first respondent from proceeding to pursue a claim for further payments in the Supreme Court of the State pending the determination of the litigation in this court ~ St. Justins Properties Pty Ltd v Rule Holdings Pty Ltd (1980) 40 FLR 282. A fortiori the Court has power to restrain the first respondent from proceeding with its claim in the arbitration

I can see no reason why the principles applicable to an application to restrain a party to proceedings in this court from taking steps in proceedings in a state court are not appropriate where it is sought to restrain a party from taking steps in an

arbitration pending the outcome of litigation in this court.

The relevant principles are set out in the judgment of

Gibbs CJ and the joint judgment of Mason, Brennan and Deane JJ in

Stack v Coast Securities (No. 9) Pty Ltd (1983) 154 CLR 261, 285

It 1S perhaps sufficient to set out the relevant passage

"The first and paramount consideration in the exercise of this discretion is to do what is best in the interests of the litigants. In this respect the Federal Court can resolve the entire controversy; the Supreme Court cannot do so because the second limb of section 86 of the Act stands in its way. The court which can resolve the entire controversy has an obvious advantage. Generally speaking, 1ts determination of all the issues will be made more effectively and more expeditiously and at less expense than the resolution of the controversy which depends on determinations made by two courts in separate proceedings in which the issues are necessarily fragmented.

To offset this advantage offered by the Federal Court powerful countervailing reasons need to be shown. For example, it may appear that the federal issue is raised at such a late stage in the Supreme Court proceedings that 1t would be a waste of time and lead to needless expense and inconvenience not to proceed to a hearing in that Court. Or it may appear that the federal issue is so insubstantial or removed from the non-federal issues that the Supreme Court should proceed with the determination of those issues. It may even appear that the federal issue is but one of many issues making up the entire controversy and that it is indistinquishable

from one of the non-federal issues in the sense that the resolution of one necessarily leads to a resolution of the other. In such a case there will be stronger ground for allowing the action to proceed in the Supreme Court."

It is relevant in the present case to have regard to the

l. The arbitration proceedings have not gone beyond the point of the initial notice and appointment of arbitrator.

2. There is no real prejudice demonstrated by the first respondent were it to prosecute its claim as a cross claim in this court.

All disputes between all parties can be resolved in these proceedings.

There are overlapping issues as between' the proceedings in this court and the dispute referred to arbitration which would lead to inconsistent findings of fact and law as between the two tribunals.

This is not a case in which the resolution of the

arbitration proceedings would lead to a resolution of issues in this litigation.

It is of course, a relevant distinction to make that proceedings instituted by one party in a State Supreme Court are non-consensual in character whereas the availability of arbitration arises from the parties agreement to resolve their

However in my opinion, that consensual element cannot play any significant role at this point having regard to the decision already taken not to order a stay of the proceedings in

the Federal Court pending the determination of the arbitration.

It must be accepted that the first respondent cannot be compelled to bring into this court by way of cross claim, the claim against the applicant that it has referred to arbitration.

Whether it chooses to do so or not, is a matter for it.

Nevertheless general principle and the facts of this particular case including the desirability of avoiding inconsistent findings on questions of law or fact warrant an order restraining the first respondent from proceeding with its claim in

The continuance of the restraint so ordered will be reviewable in the light of the progress made by the applicant in prosecuting these proceedings. Should it emerge that' the applicant does not prosecute the proceedings in this court with all due diligence and speed, then it will be open to the first respondent to apply to set aside the restraint order and continue

The First Respondent's Motion to Stay or Dismiss the Proceedings

against 1t be stayed or dismissed generally on the grounds that:~

{i) No reasonable cause of action is disclosed by the statement of claim against the first respondent.

(11) The proceeding against the first respondent is frivolous or vexatious.

(ii1)The proceeding against the first respondent 1s an abuse of the process of the court.

This motion invokes 0.20 r.2 of the Federal Court Rules and attacks the application in 1ts entirety. It will not support an attack on parts of the statement of claim alleged to be

defectively pleaded or inadequately particularised .

Such an attack may be brought under 0.11 r.16 with the object of striking out the whole or any part of the impugned

In support of the first two grounds specified in the motion, counsel for the first respondent made criticisms of particular parts of the statement of claim relating to his client. These criticisms were made in support of what he described as the "basic submission that this document is so shot through with

I do not propose to deal with these items on a point by

It may be that there are parts of the statement of claim that are deficient and that such deficiencies may even support a

I am not satisfied however that the first respondent has

made out a case to stay or dismiss the entire claim against it.

In coming to that conclusion I bear in mind the well established principles regulating applications for summary

disposal of proceedings as enunciated in Dey v Victorian Railways

Commissioners (1949) 78 CLR 62 and General Steel Industries Inc. v

Commissioner for Railways (NSW) (1964) 112 CLR 125, 129 and the

As to the third ground in which the first respondent contends that the proceeding is an abuse of the process of the court, I have already indicated that in my view the

evidence does not allow me to reach that conclusion.

In the result I will accede to the applicant's motion

I hereby certify that this and the preceding forty seven (47) pages are a true copy of the Reasons for Decision of his Honour Mr Justice

Counsel for the Applicant : Mr S.J. Archer Solicitors for the Applicant: Robinson Cox Counsel for the First Respondent:

Mr L.E. James Solicitors for the Second Respondent: