Joel Passlow v Butmac Pty Ltd

Judgment 1In the substantive proceedings the plaintiff claims damages for injuries he suffered on 9 September 2007 when the fuel cap of a motorcycle he was riding became dislodged, as a result of which he was doused in fuel which ignited, causing substantial burns. The first and second defendants are alleged to be responsible for the manufacture, importation and supply of the motorcycle. The evidence reveals the second defendant to be the holding company of the first defendant. On 16 May 2010 judgment was entered against the third defendant, The Stable (Wagga) Pty Ltd, which supplied the motorcycle to the plaintiff. 2On 27 September 2011 the first and second defendants filed a cross-claim against KTM-Sportmotorcycle AG, a Swiss company which is alleged to have manufactured the motorcycle. The first defendant alleges that it is entitled to a contractual indemnity and both cross-claimants claim contribution and indemnity under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 ( the 1946 Act ). No defence has yet been filed to the cross-claim by reason of the cross-defendant's application for a stay referred to below. 3There are three notices of motion to be determined: (1)The cross-defendant's application for a stay of the cross-claim, at least in so far as it is brought by the first defendant; (2)The cross-defendant's application to set aside a notice to produce served by the cross-claimants (which has been withdrawn by consent, leaving only the question of costs to be determined); and (3)The cross-claimants' application for discovery from the cross-defendant of certain categories of documents.

The cross-defendant's motion for a stay of proceedings 4The cross-defendant seeks a stay of the cross-claim on the basis of its agreement with the first defendant entitled "Exclusive Importer Agreement" dated 1 March 2004 which had a duration of five years ( the Agreement ). A further agreement for the following five years in similar terms was subsequently entered into. It is common ground that the relationship between the cross-defendant and the first defendant is governed by the Agreement. Indeed, the first defendant relies on the indemnity in clause 15 as one of the bases of its cross-claim. 5The Agreement relevantly provides: " 15. Manufacturer's Indemnities The Manufacturer indemnifies and will keep the Importer indemnified from and against any loss, damage, costs or liability suffered or reasonably incurred by the Importer arising out of: (a) actions, claims or demands by any third party in respect of intellectual property infringement, where those claims arise from the Importer's use (as stipulated in this Agreement) of the required logo and image, the Trademark(s), or Products provided to the Importer by the Manufacturer; or (b) the Importer's obligation under this Agreement to make good warranty and guarantee claims attributable to the Manufacturer and comply with any Product recalls; or (c) any action, claims or demands made by a third party in respect of the design, manufacture or assembly of the Products supplied by the Manufacturer. 17. Alternative Dispute Resolution (1) Unless a Party has complied with clause 17 then despite anything set out in this Agreement that Party may not commence court proceedings or arbitration relating to any dispute arising from this Agreement except court proceedings seeking urgent interlocutory relief. (2) A Party claiming that a dispute has arisen under this Agreement must give written notice to the other party of the dispute designating as its representative in negotiations relating to the dispute its duly authorised person with authority to settle the dispute and the other Party given written notice must within 5 days of receipt of the notice give notice in writing to the other Party designating as its representative a duly authorised representative of that Party in negotiations relating to the dispute with similar authority. (3) The designated persons must, not later than 14 days after the last designation required by sub-clause (2), seek to resolve the dispute by negotiation. The 14 day period is intended to allow the representative of each party to make whatever investigations considered appropriate before commencing negotiations. (4) If the dispute is not resolved within the following 14 days (or within such further period as the representatives may agree is appropriate) the parties must within a further 14 days (or within such further period as the representatives may agree is appropriate) seek to agree on a process for resolving the whole or part of the dispute through means other than litigation or arbitration, such further negotiations, mediation, conciliation or independent expert determination and on: (a) the procedure and timetable for any exchange of documents and other information relating to the dispute; (b) procedural rules and a timetable for the conduct of the selected mode of proceedings; (c) a procedure for selection and compensation of any neutral person who may be employed by the parties in dispute; and (d) whether the parties should seek the assistance of a dispute resolution organisation. (5) The Parties acknowledge that the purposes of any exchange of information or documents or the making of any offer of settlement pursuant to this clause 17 is to attempt to settle the dispute between the parties. No Party may use any information or documents obtained through the dispute resolution process established by this clause for any purpose other than in an attempt to settle a dispute to this Agreement. (6) If after the expiration of the time established by or agreed to by sub-clause (3) the dispute remains unresolved then either party may in writing terminate the dispute resolution process provided for in this clause 18 and may then refer the dispute to arbitration pursuant to clause 18. 18. Arbitration (1) If a dispute arising under this Agreement is not settled pursuant to clause 17 then despite anything set out in this Agreement the dispute must be referred to arbitration in accordance with this clause 18 and shall be finally settled by binding arbitration in Singapore, conducted by a single neutral arbitrator ('Arbitrator') having (legal) experience in the field of the motorcycle-business and product manufacturing agreements and disputes. (2) The Arbitrator must be: (a) an arbitrator agreed upon by the Parties or, failing agreement, nominated by the president or similar officeholder of such society, organisation or association representing registered legal practitioners within Singapore at the request of either of the Parties; (b) appointed by the Parties within 14 days of the expiration of the 14 day period referred to in clause 17; ... (3) The arbitration must be conducted in Singapore: (a) the Arbitrator must observe the rules of natural justice and the rules of evidence; (b) a party may be represented by a qualified legal practitioner or other representative; (c) in accordance with the arbitration rules of the United Nations Commission on International Trade Law ("UNCITRAL") in force at the date of this Agreement; and (d) the Arbitrator must include in the arbitration award the findings on material questions of law and of fact, including references to the evidence on which the findings of fact were based. ... (8) Judgment on any award rendered in such arbitration proceedings shall be final and conclusive and enforceable by any court of competent jurisdiction." 6The International Arbitration Act 1974 (Cth) ( the Act ) makes provision for the conduct of international commercial arbitrations. It relevantly provides: " 2D. Objects of this Act The objects of this Act are: (a) to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and (b) to facilitate the use of arbitration agreements made in relation to international trade and commerce; and ... 7. Enforcement of foreign arbitration agreements (1) Where: (a) the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country; (b) the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a country not being Australia or a Convention country, and a party to the agreement is Australia or a State or a person who was, at the time when the agreement was made, domiciled or ordinarily resident in Australia; (c) a party to an arbitration agreement is the Government of a Convention country or of part of a Convention country or the Government of a territory of a Convention country, being a territory to which the Convention extends; or (d) a party to an arbitration agreement is a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country; this section applies to the agreement. (2) Subject to this Part, where: (a) proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and (b) the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration; on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter. (3) Where a court makes an order under subsection (2), it may, for the purpose of preserving the rights of the parties, make such interim or supplementary orders as it thinks fit in relation to any property that is the subject of the matter to which the first-mentioned order relates. (4) For the purposes of subsections (2) and (3), a reference to a party includes a reference to a person claiming through or under a party. (5) A court shall not make an order under subsection (2) if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed. ... 15. Interpretation ... "Model Law" means the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006, the English text of which is set out in Schedule 2. ... 16. Model Law to have force of law (1) Subject to this Part, the Model Law has the force of law in Australia. (2) In the Model Law: "arbitration agreement" has the meaning given in Option 1 of Article 7 of the Model Law. "State" means Australia (including the external Territories) and any foreign country. "this State" means Australia (including the external Territories). ... 27. Costs (1) The costs of an arbitration (including the fees and expenses of the arbitrator or arbitrators) shall be in the discretion of the arbitral tribunal. (2) An arbitral tribunal may in making an award: (a) direct to whom, by whom, and in what manner, the whole or any part of the costs that it awards shall be paid; (b) tax or settle the amount of costs to be so paid or any part of those costs; and (c) award costs to be taxed or settled as between party and party or as between solicitor and client; and (d) limit the amount of costs that a party is to pay to a specified amount. ... 39. Matters to which court must have regard (1) This section applies where: ... (b) a court is interpreting this Act, or the Model Law as in force under subsection 16(1) of this Act; or ... (2) The court or authority must, in doing so, have regard to: (a) the objects of the Act; and (b) the fact that: (i) arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and (ii) awards are intended to provide certainty and finality..." 7The Model Law is contained in Schedule 2 of the Act. It relevantly provides: " Article 7. Definition and form of arbitration agreement (As adopted by the Commission at its thirty ninth session, in 2006) (1) "Arbitration agreement" is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. ... Article 8. Arbitration agreement and substantive claim before court (1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. (2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court. ... Article 19. Determination of rules of procedure (1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. (2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence." 8It is common ground that clause 17 and clause 18 of the Agreement constitute an "arbitration agreement" within the meaning of s 16 of the Act. It is also common ground that the cross-defendant has requested, by the filing of its notice of motion, that the matter be referred to arbitration and has therefore complied with the requirement in Article 8(1) of the Model Law that the request be made "not later than when submitting his first statement on the substance of the dispute". 9The cross-defendant submitted that the Court is obliged to stay the cross-claim and refer the parties to arbitration by reason of the terms of s 7(2) of the Act and Article 8 of the Model Law (which has the force of law by reason of s 16 of the Act). 10The cross-claimants have raised several arguments against a stay, which I propose to consider and determine in turn.

The Agreement is null and void, inoperative or incapable of being performed 11The cross-claimants submitted that the obligation imposed on the Court to refer the parties to the cross-claim to arbitration does not arise under Article 8(1) because the Agreement is: "null and void, inoperative or incapable of being performed." 12They submitted that: (1)Clause 17 is incomplete and uncertain because it constitutes an agreement to agree and is unenforceable; (2)Because clause 18 depends on compliance with clause 17 it, too, is incomplete and uncertain; (3)Further, clause 18 is, of itself, incomplete and uncertain because it does not specify the process of arbitration with any degree of particularity and it makes no provision for costs. 13They submitted that clause 17 is incomplete and uncertain because of the mechanism set out in clause 17(4) which is, in substance, "an agreement to agree to another agreement" since it requires the parties to reach an agreement to resolve the dispute in some unspecified way. They relied on Elizabeth Bay Developments Pty Ltd v Boral Building Services Pty Ltd (1995) 36 NSWLR 709, in which a clause which required the parties to mediate the dispute prior to litigation did not set out a procedure for the mediation process other than the parties' presence or presentation, the mediator's discretion to hold private sessions and the requirement that the parties provide a short statement of issues. The clause was said by Giles J at 715 to be so open-ended to be unworkable, as the: "...process to which the parties had committed themselves would come to an early stop when, prior to the mediation, it was asked what the parties had to sign and the question could not be answered." 14The cross-claimants also relied on Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; 153 FLR 236 in which Einstein J held, at [69]-[70], that a clause requiring the parties to mediate the dispute prior to litigation was unenforceable on the basis of uncertainty because the administrative processes for selecting a mediator and determining the mediator's remuneration were not provided for. 15They submitted that clause 17(4) was unenforceable because a court would neither order specific performance of the clause, nor would damages for its breach ever be awarded since they would be incapable of quantification. 16I do not accept the cross-claimants' submissions that clause 17 is unenforceable or that clause 18 is thereby rendered inoperative. Although clause 17(4) imposes an obligation on the parties to "seek to agree on a process for resolving the whole or part of the dispute through means other than litigation or arbitration", clause 17(6) provides for a certain end to this process which then triggers a right in each party to refer the dispute to arbitration pursuant to clause 18. This is sufficient to distinguish the clauses from those considered in Aiton . In Aiton Einstein J said, at [74]: "To my mind, where parties agree to follow a dispute resolution procedure as a condition precedent to either party commencing proceedings, it is important that the parties be able to determine when that procedure has come to an end." 17In my view, clause 17 fulfils that criterion. In United Group Rail Services Limited v Rail Corp New South Wales [2009] NSWCA 177; 74 NSWLR 618, the Court of Appeal held that a contractual promise to engage in genuine and good faith legal obligations as part of a contractual procedure for dispute resolution was a binding obligation. It was neither incomplete nor void for uncertainty. 18In my view, the clauses under consideration in United Group Rail were not relevantly dissimilar from clauses 17 and 18 in the Agreement. They provided, as set out at [15] of the judgment: " [35.11] Negotiation If: (a) a notice of appeal is given in accordance with Clause 35.9; or (b) the dispute or difference for which the notice under Clause 35.1 has been given does not relate to a Direction of the Principal's Representative under one of the Clauses referred to in Attachment 'A', the dispute or difference is to be referred to a senior representative of each of the Principal and Contractor who must: (c) meet and undertake genuine and good faith negotiations with a view to resolving the dispute or difference; and (d) if they cannot resolve the dispute or difference within 14 days after the giving of the notice under Clause 35.1 or 35.9 (whichever is later), the matter at issue will be referred to the Australian Dispute Centre for mediation. [35.12] Arbitration If the senior representatives referred to in Clause 35.11 cannot resolve the dispute or difference or, where the matter is referred to mediation under Clause 35.11(d), the matter is not settled within 42 days after the giving of the notice under Clause 35.1 or Clause 35.9 (whichever is the later), or within such longer period of time as these representatives may agree in writing, the dispute or difference will be referred to arbitration..." 19After a detailed review of the authorities Allsop P (with whom Ipp and Macfarlan JJA agreed), said, at [74]: "With respect to those who assert to the contrary, a promise to negotiate (that is to treat and discuss) genuinely and in good faith with a view to resolving claims to entitlement by reference to a known body of rights and obligations, in a manner that respects the respective contractual rights of the parties, giving due allowance for honest and genuinely held views about those pre-existing rights is not vague, illusory or uncertain. It may be comprised of wide notions difficult to falsify. However, a business person, an arbitrator or a judge may well be able to identify some conduct (if it exists) which departs from the contractual norm that the parties have agreed, even if doubt may attend other conduct. If business people are prepared in the exercise of their commercial judgement to constrain themselves by reference to express words that are broad and general, but which have sensible and ascribable meaning, the task of the Court is to give effect to, and not to impede, such solemn express contractual provisions. It may well be that it will be difficult, in any given case, to conclude that a party has not undertaken an honest and genuine attempt to settle a dispute exhibiting a fidelity to the existing bargain. In other cases, however, such a conclusion might be blindingly obvious. Uncertainty of proof, however, does not mean that this is not a real obligation with real content." 20I consider clause 17 to be enforceable. In my view, it is neither uncertain, nor incomplete. Clause 17(4) imposes an obligation to seek to agree and clause 17(6) provides an endpoint to the obligation to negotiate, thereby triggering the right to refer the dispute to arbitration. Although breach of the obligation to "seek to agree" may be difficult to prove, this does not, as the passage set out above establishes, deprive the clause of its legal force and content. 21The cross-claimants submitted further that the unenforceability of clause 17 infected clause 18 since, as was found in Aiton at [71], in respect of the mediation clause and the negotiation clause: "The two are intended to walk together as a staged procedure, constituting the dispute resolution process as agreed between the parties." 22I accept that the two clauses must be read together and constitute a "staged procedure". However, in light of my findings on clause 17, clause 18 is not unenforceable by reason of any uncertainty in clause 17. 23The cross-claimants submitted that clause 18, although complete, was uncertain since it did not set out the process of arbitration to be followed. They submitted that Article 19 of UNCITRAL, which provides that the arbitral tribunal may conduct the arbitration in such manner as it thinks fit in the absence of agreement between the parties, did not fulfil the requirements articulated by Einstein J in Aiton at [69], that the rules "state with particularity the mediation model that will be used." 24I do not accept this submission. Article 19 confers ultimate power on the arbitral tribunal to determine matters of procedure. The Agreement is not void for uncertainty merely because such matters of procedure have not been determined in advance by the parties and expressed in the terms of the Agreement. As Wooten J said in Austra Tanks Pty Ltd v Running [1982] 2 NSWLR 840 at 843 : "A number of different situations give rise to problems of uncertainty in contracts. Without attempting to be exhaustive, they include the following... A fourth situation is where the parties deal with a matter, but instead of defining their obligations precisely or presently, use words which call for some inquiry. A matter may be left for determination by some nominated authority, even by one of the parties themselves; or for calculation by reference to future events or information not presently available; or for determination by reference to some standard. In all these cases the fundamental approach is id certum est quod certum reddi potest - the contract is good if the inquiry for which the words call is one which will lead to a sufficiently certain result." 25Because the procedure to apply in the arbitration is capable of being rendered certain, by the arbitral tribunal if the parties do not agree, clause 18 is not uncertain. 26The cross-claimants also submitted that clause 18 was unenforceable because it made no provision for the costs of the arbitration and that this was a matter which needed to be included to preserve the validity of the provision, which would otherwise be void for uncertainty. They relied on Einstein J in Aiton . They said that even though clause 18 provided that the arbitration was to be conducted in accordance with the arbitration rules of UNCITRAL, no express provision was made in those rules for costs. 27In response, the cross-defendant submitted that s 27 of the Act, which provides that the costs of the arbitration shall be in the discretion of the arbitral tribunal, would have a counterpart provision in the law of Singapore, such that costs could be determined. 28I do not consider that the absence of any provision for costs in the Agreement makes it any less enforceable, either because it lacks certainty or because it is incomplete. These clauses are distinguishable from those in Aiton . First, although the Model Law does not make provision for an award of costs, there are other potential sources of power for an award of costs, including the lex arbitri (the law of the seat). There may be provision for an award of costs under Singapore law (a matter about which no evidence was adduced) as there is under Australian law (see s 27 of the Act). Secondly, if the power to award costs is regarded as a matter of procedure, the arbitral tribunal would have power to determine it, in the absence of agreement between the parties, under Article 19 of UNCITRAL. According to Rana and Sanson, International Commercial Arbitration (2011) at [11.80], lawyers' fees are usually held to be procedural, except in the United States. Thirdly, even if there is no power to award costs, this does not make the Agreement unenforceable. It is neither uncertain nor incomplete on that ground, since the effect may be merely that no award of costs may be made. 29Since I do not find the Agreement to be "null and void, inoperative or incapable of being performed" I am obliged to refer the parties (the first cross-claimant and the cross-defendant) to arbitration. As Allsop J (as his Honour then was) said, in Comandate Marine v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; 157 FCR 45 at [197]: "Through s 16(1) of the International Arbitration Act, Art 8 of the model law has the force of law in Australia. It has the effect of an Act of the Commonwealth Parliament. Its command is simple. The court should refer parties to arbitration, unless it finds the arbitration agreement to be null and void, inoperative or incapable of being performed."

Does the whole of the cross-claim fall within the arbitration agreement 30The next question that arises is whether the whole of the cross-claim can properly be regarded as "relating to any dispute arising from" the Agreement within the meaning of clause 17 or "a dispute arising under this Agreement" within the meaning of clause 18. 31The cross-claimants accepted that, in so far as the cross-claim alleges a contractual indemnity, the dispute falls within the Agreement. However, they submitted that the claim for indemnity pursuant to s 5 of the 1946 Act does not. Accordingly, even if I were otherwise disposed, or indeed required, to stay the cross-claim, the cross-claimants submitted that I ought not do so in respect of the statutory claim for contribution. 32In a related submission, they submitted that the Court's obligation to refer the matter to arbitration did not arise because the determination of the claim for contribution was not "capable of settlement by arbitration" within the meaning of s 7(2) of the Act. 33Section 5 of the 1946 Act provides in part: " 5. Proceedings against and contribution between joint and several tort-feasors (1) Where damage is suffered by any person as a result of a tort (whether a crime or not): ... (c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought. (2) In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity." 34The cross-claimants relied on what Allsop J said in Comandate at [200], with particular emphasis on the passage underlined below: "The notion of "capable of being settled by arbitration" or "arbitrability" is also central to the Convention and the model law. These words are to be understood in both the Convention and the model law as dealing with the question whether the dispute is of the type that comes properly within the domain of arbitration... It is sufficient to say three things at this point. First, the common element to the notion of non-arbitrability was that there was a sufficient element of legitimate public interest in these subject matters making the enforceable private resolution of disputes concerning them outside the national court system inappropriate. Secondly, the identification and control of these subjects was the legitimate domain of national legislatures and courts. Thirdly, in none of the travaux preparatoires was there discussion that the notion of a matter not being capable of settlement by arbitration was to be understood by reference to whether an otherwise arbitrable type of dispute or claim will be ventilated fully in the arbitral forum applying the laws chosen by the parties to govern the dispute in the same way and to the same extent as it would be ventilated in a national court applying national laws." 35They submitted that the arbitral tribunal could not determine the claim for statutory contribution for two reasons. First, the amount of contribution under s 5(2) is "such as may be found by the court to be just and equitable" [Emphasis added]. Therefore only a court could make such a determination. Secondly, because the arbitral tribunal had no jurisdiction to determine whether, had the cross-defendant been sued by the plaintiff, the cross-defendant would have been liable, it could not determine whether any claim for statutory contribution arose. 36The cross-defendant submitted in reply that the cross-claimants' submissions were at odds with the result in Comandate in which it was held that the arbitral clause was sufficiently wide to encompass claims made by Pan under the Trade Practices Act 1974 (Cth). The cross-defendant also submitted that a liberal approach to the interpretation of arbitration agreements was appropriate and relied on what Allsop J said in Comandate , at [164]-[165]: "The authorities... are clear that a liberal approach should be taken. That is not to say that all clauses are the same or that the language used is not determinative. The court should, however, construe the contract giving meaning to the words chosen by the parties and giving liberal width and flexibility to elastic and general words of the contractual submission to arbitration. This liberal approach is underpinned by the sensible commercial presumption that the parties did not intend the inconvenience of having possible disputes from their transaction being heard in two places. This may be seen to be especially so in circumstances where disputes can be given different labels, or placed into different juridical categories, possibly by reference to the approaches of different legal systems. The benevolent and encouraging approach to consensual alternative non-curial dispute resolution assists in the conclusion that words capable of broad and flexible meaning will be given liberal construction and content. This approach conforms with a common-sense approach to commercial agreements, in particular when the parties are operating in a truly international market and come from different countries and legal systems and it provides appropriate respect for party autonomy." 37I consider there to be two answers to the submissions of the cross-claimants, both of which appear from the judgment of Allsop J said in Comandate , at [241]. 38First, it is a matter for the arbitrator and not for this Court to determine, applying relevant principles of conflict of laws, what part the statutory claim for contribution and claimed relied will play in the arbitration. As Allsop J said at [237]: "To interpret legislation implementing the Convention to operate only to refer to arbitration, such parts of the differences between the parties as are covered by the arbitration agreement that will be dealt with by the arbitrator in the same way that the staying court would deal with them, would be to undermine the Convention by infringing on the autonomy of the parties recognised by the Convention in the scope of the arbitration agreement." 39In any event, the claim for statutory contribution may be largely immaterial in light of the contractual indemnity in clause 15 of the Agreement (Cf. Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45; 147 CLR 589). However this will be a matter for an arbitrator. 40Secondly, as Allsop J said in Comandate at [241], there is an implied term in arbitration agreements: "...that the arbitrator is to have the authority to give the claimant such relief as would be available to it in a court of law having jurisdiction with respect to the subject matter: Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 at 246-7; 31 ALR 193 at 229 and Francis Travel [(1996) 39 NSWLR 160] at 167." 41It follows that the arbitrator has the power to determine whether the cross-defendant would have been liable if sued by the plaintiff and the amount that is "just and reasonable having regard to the extent of the [cross-defendant's] responsibility for the damage". 42Section 82 of the Trade Practices Act , which arose in Comandate , does not refer to a Court, but rather provides that a person who has suffered loss or damage by the conduct of another person that was done in contravention of various provisions of the Act may recover the amount of the loss by action against that person. However, s 80 expressly confers power on a Court to grant injunctions, and s 87 confers power on the Court to provide other relief. There was no suggestion in Comandate that any distinction ought be drawn, for the purposes of determining the arbitrability of the dispute, whether the claim was made under s 82 on the one hand, or s 80 or s 87 on the other. Accordingly, what was said in Comandate would not seem to be inapplicable to a claim under s 5 of the 1946 Act on the basis that there is a specific reference to a court in that section. 43Furthermore, to borrow the words of Allsop J in Comandate at [240], there is nothing inimical to Australian public policy or to the terms of the 1946 Act in commercial parties agreeing to commercial arbitration in Singapore. Here, if a stay is mandated under s 7 or Art 8, that is because of the operation of a law of the Parliament exhibiting the public policy considerations specified in s 2D of the Act. The 1946 Act is not being undermined; rather a law of the Commonwealth Parliament is in operation. 44In Comandate , the relevant law was also a Commonwealth law, the Trade Practices Act . The position is a fortiori in the instant case since the 1946 Act is a State law. 45I am fortified in my conclusion by the decision of Allsop J (as his Honour then was) in Incitec Limited v Alkimos Shipping Corporation [2004] FCA 698; 138 FCR 496 ( Incitec ). Although in that case, the parties had varied their agreement to substitute an exclusive jurisdiction clause for an arbitration agreement (which had the effect that the Court relevantly had a discretion whether to stay the proceedings), the question of construction arose whether the jurisdiction clause covered a cross-claim for equitable contribution and statutory contribution under s 5(1)(c) of the 1946 Act. 46In Incitec the shipowner, Alkimos Shipping Corporation ( ASC ), and Hyundai Merchant Marine ( Hyundai ) entered into a charterparty for the time charter of bulk carrier, the Alkimos . Hyundai chartered the Alkimos to Incitec for the carriage of fertiliser from the United States to Australia. Sumitomo loaded a second consignment of fertiliser but this was not shipped under Hyundai's charter with Incitec. When the Alkimos arrived in Newcastle the Australian Quarantine and Inspection Service refused to permit discharge of part of the fertiliser. 47Incitec sued both ASC and Hyundai. Sumitomo sued only ASC. Both proceedings were commenced in the Federal Court. ASC sought leave to cross-claim against Hyundai in both proceedings. Hyundai sought to stay the cross-claim on the basis of the foreign jurisdiction clause in the time charter which relevantly covered: "any dispute arising out of or in connection with this Contract" 48Allsop J in Incitec found that the dispute between the charterer and the owner as to responsibility inter se for cargo claims was integral to the substance and operation of the charterparty which was an agreement for the use of a ship to carry the goods of others. The subject of cargo claims was expressly dealt with by the agreement. His Honour considered, at [37], that although the claims for contribution were not contractual claims their determination will require consideration of the agreement. At [39], Allsop J rejected an argument made on behalf of ASC that the use of the 1946 Act raised rights and obligations which were separate from the agreement in the following terms: "Dr Bell's [ASC's] argument has to depend on emphasising, as he did, the fact that no right arising out of the Interclub Agreement was being enforced and that the use of the LR(MP) Act [the 1946 Act] and equitable contribution raised rights divorced from the time charter, not arising from the contract but imposed by domestic statute. I cannot agree. The words of the clause are wide and liberal. Plainly, cargo claim resolution inter se was intended to be covered. The precise local statutory right employed to vindicate such resolution does not affect that intended coverage." 49Allsop J's outline of the principles of interpretation that apply to the construction of clauses agreed between international commercial parties, at [31]-[32] of Incitec , has been approved by the Court of Appeal in Global Partners Fund Ltd v Babcock and Brown Ltd [2010] NSWCA 196 at [69] per Spigelman CJ, with whom Giles and Tobias JJA agreed. His Honour said: "...[T]his is a clause agreed between international commercial parties, in respect of a contract (the time charter) which might well produce through its performance and in its life disputes brought by third parties against one or other or both of ASC and Hyundai in possibly disparate and varied legal systems. That is the natural possibility to be taken to be known to both such contracting parties in the deployment and operation of a time chartered container/ bulk carrier such as the Alkimos. These participants in international commerce who did not share a common domestic legal system chose one of the leading dispute resolution centres in the world and one of the leading centres for maritime arbitration. These are all matters well known to the parties who chose the clause provided by BIMCO. No fact is apparent which would lead one to expect from the surrounding circumstances that the parties were intending any narrow construction to be given to the words or to conclude that the clause was directed to some part of the mutual commercial affairs of the parties reflected in the time charter, and not another. Also, the presence of cl 42 in the time charter and the consequent conclusion that the parties expressly agreed upon a clause in the time charter dealing with the resolution of the responsibility for cargo claims would lead one to be careful before one concluded that the words of the incorporated arbitration clause were not intended to cover rights and liabilities inter se arising out of third party cargo claims. The above considerations tend in favour of giving the words in question a wide or generous construction. The words themselves also lead one to conclude that what was intended was a reach of some width and liberality..." 50I consider this reasoning to be applicable in the instant case. The parties intended liability for claims by third parties to be covered by the Agreement. So much appears from the indemnity in clause 15. Although the words in clauses 17 and 18 of the Agreement are not identical to those in Incitec , there is no material difference.

Non-compliance with clause 17 51The cross-claimants also submitted that because there has been no compliance with clause 17, it would not be appropriate for this Court to refer the cross-claim to arbitration. They said that the right to refer a matter for arbitration was dependent on compliance with the procedures set down in clause 17. 52The cross-defendant submitted in response that to accept the submission would be to permit the first defendant to profit from its own breach since it had breached clause 17(1) by filing the cross-claim in these proceedings. 53I accept the cross-defendant's submission. But in my view there is a more fundamental reason why the dispute must be referred to arbitration notwithstanding that clause 17 has not been complied with: the obligation imposed on this Court to do so under s 7(2) of the Act and Article 8(1) of the Model Law is not dependent on the parties' compliance with the terms of the arbitration agreement. 54For the foregoing reasons I am obliged to stay the cross-claim in so far as it is brought by the first defendant and I refer that claim to arbitration, as I am required to do by s 7(2) of the Act.

The position of the second defendant 55As I have said above, the second defendant is the holding company of the first defendant. It is not a party to the Agreement. The second defendant maintains the cross-claim only against the possibility, however remote, that the Court will find that the plaintiff has made out his claim against it. No distinction is drawn in the statement of claim between the first and second defendants, both of which are alleged to have supplied, manufactured and imported the subject motorcycle. 56The cross-defendant submitted that even if I am not prepared to strike out the cross-claim brought by the second defendant I should stay the whole of the cross-claim on discretionary grounds since no substantial basis for the second defendant's liability to the plaintiff had been demonstrated. The cross-claimants submitted that it would not be appropriate to stay the whole of the cross-claim because it would leave the second cross-defendant exposed to the plaintiff's claim, since it is not party to the Agreement. 57I accept the cross-claimants' submissions. There is nothing on the face of the pleading to suggest that the claim is untenable. I do not consider that it is for the cross-claimants to bear the risk of this Court finding in favour of the plaintiff against the second defendant. Accordingly I decline either to strike out or to grant a stay of the cross-claim in so far as it is brought by the second defendant. 58Since the cross-claim is purely defensive, the plaintiff is at risk of being required to pay the costs of the cross-claim if it ultimately fails against the second defendant. These costs could, from the date of these orders, include both the second defendant's and the cross-defendant's costs of the cross-claim. Accordingly it is desirable that the plaintiff give early consideration to whether he wishes to maintain his claim against the second defendant.

Conclusions on the cross-defendant's notice of motion for a stay 59For the foregoing reasons I grant a stay of the cross-claim by the first defendant against the cross-defendant and refer the first defendant and the cross-defendant to arbitration in respect of the cross-claim. Because the cross-defendant has been almost wholly successful I order the first defendant to pay the cross-defendants costs of the motion. The precise form of orders will appear at the conclusion of these reasons.

The motions regarding production of documents by the cross-defendant 60Because the second defendant's cross-claim is still on foot, the cross-defendant is, following the making of orders consequent upon the reasons set out above, still an active party to the proceedings. It is therefore amenable to an order for discovery.

Whether an order for discovery ought be made in advance of the filing of a defence to the cross-claim brought by the second defendant 61The cross-defendant submitted that I ought not make an order for discovery since the issues have not been crystallised by the closing of pleadings on the cross-claim. 62While it is usual for discovery to follow the close of pleadings (since it is the pleadings which generally define the issues between the parties) this is not an invariable rule. Nor is the Court's power order discovery in UCPR 21.2 limited by reference to time or to an event such as the close of pleadings. The general rule that discovery cannot be had before pleading must give way to the demands of justice in particular instances and, in particular, where the application is not a "fishing expedition" and the nature of the claim has been made clear ( Gollin Holdings Limited v Adcock [1981] 1 NSWLR 691 at 696, per Rogers J). 63I consider that the nature of the cross-claim, which is a claim for indemnity, has been made sufficiently clear for the purposes of discovery by the filing of the statement of claim by the plaintiff and by the service of the expert report of Mr Simpson. There is no indication that the matters in issue between the plaintiff and the first and second defendants on the plaintiff's claim will not also be in issue in the cross-claim. Indeed correspondence between the legal representatives of the cross-claimants and the cross-defendants reveals that there is a dispute about whether the fuel cap was defective at all, and also possibly about whether the plaintiff was in fact riding a motorcycle of the model alleged. 64Furthermore the matter has been set down for final hearing commencing on 16 April 2012. It is therefore important that discovery be given as soon as possible in order that the first and second defendants can prepare the matter adequately.

Categories of documents 65The categories originally sought by the cross-claimants were refined and are set out in annexure "A" to the affidavit of Inga Kossowska affirmed on 13 March 2012. They are: "1. All documents in reference to the incident involving Joel Passlow that occurred on or around 9 September 2007. 2. All documents recording or referring to any investigation into and the cause or the possible cause of the failure of the filler cap with article number 770 07 008 044. 3. All documents recording or referring to the reason for the decision taken to recall motorcycles affected by the failure of the filler cap with article number 770 07 008 044. 4. All documents recording or referring to KTM-Sportmotorcycle AG'S inspection and investigation of Joel Passlow's motorcycle (VIN No VBKMXJ43XM174263). 5. A copy of the policy of insurance taken out by KTM-Sportmotorycycle AG in accordance with clause 16 of the Exclusive Importer Agreement entered into between Butmac Pty Ltd and KTM-Sportmotorcycle AG. 6. Copies of all communications between KTM-Sportmotorcycle AG and the insurer through which KTM-Sportmotorcycle AG holds a policy of insurance in accordance with clause 16 of the Exclusive Importer Agreement entered into between Butmac Pty Ltd and KTM-Sportmotorcycle AG." 66The cross-defendant's objection to the categories was as set out in its letter dated 6 March 2012 to the cross-claimants' solicitors as follows: "1. Category 1 remains too wide a category of documents and does not point, with precision, to the documents you seek. For our client to comply with this requirement would be unnecessary onerous. 2. Category 2 implies that there was a failure of the filler cap. The alleged failure is not specified. Our client does not admit that there was a failure of the filler cap and thus cannot comply with this requested category of documents in its current form. 3. Likewise, we repeat the above submissions as to Category 3. 4. As to Category 4, KTM Sportmotorcycle AG did not inspect or investigate motorcycle VIN No VBKMXJ43X7M174263 and, therefore, has no documents of the kind requested. Furthermore, our instructions are that, to the best of KTM Sportmotorcycle AG's knowledge and belief, motorcycle VIN No VBKMXJ43X7M17463 was not the motorcycle Mr Passlow was riding at the time of the accident. 5. As to Category 5 and 6, this does not seem to be a request relevant to the current case as pleaded. Your client's Cross Claim does not particularise the alleged breach by the First Cross Claimant of clause 16(c) of the Exclusive Importer Agreement. Further, no particulars of the alleged "breach" by our client of the Exclusive Importer Agreement have been provided for in your client's Cross Claim." 67The only amendment made to these objections at the hearing was that the cross-defendant withdrew its objection to category 5. 68The cross-defendant also relied on the affidavit of Adele Prenner sworn 13 March 2012. Ms Prenner is an in-house lawyer for the cross-defendant who lives in Austria. She deposes to the following: (1)the cross-defendant is a foreign company whose records are kept in Austria; (2)she has been advised by the cross-defendant's solicitors in Australia that they would be required to travel to Austria to examine its records to identify relevant documents; (3)in order to determine whether there are documents in the categories 1-3 and 5-6, there would need to be an extensive overview of documents by senior staff, some of whom may no longer be employed by the cross-defendant; (4)some of the documents covered by the categories were stored in an electronic folder which was corrupted and cannot presently be accessed. She believes the cost of recovering files from the corrupted folder to be around 10,450 euros. 69Objection was taken by the cross-claimants to the form of the evidence in (2) above. This is an interlocutory application. Evidence can accordingly be given in hearsay form. However, had the solicitor for the cross-defendant given evidence the cross-claimants could have tested the evidence which remains untested. Furthermore the weight to be given to such evidence is diminished by the fact that Ms Prenner does not distinguish between categories. 70I do not consider the evidence of Ms Prenner establishes that the categories of documents are oppressive in the circumstances of the instant case. The documents attached to the report of Mr Simpson dated 1 July 2010 (an expert retained by the plaintiff) include documents issued by KTM North America which relevantly state "KTM North America has determined that a defect which relates to motor vehicle safety exists in all abovementioned models equipped with the 770.07.008.044 (1/4 turn) fuel cap". The report also refers to evidence of over 5,000 leaking fuel tanks. Recall notices were issued by companies associated with the cross-defendant on 18 May 2007 and 23 May 2007 by reason of defective fuel caps. Prima facie the defect in the fuel cap referred to in the evidence described above is of the same order as, or may be related to, the alleged defect in the fuel cap which the plaintiff claims led to his injuries. 71It can therefore reasonably be expected that the cross-defendant has made some investigation of this phenomenon and its cause. 72I propose to give brief reasons for my rulings on each of the categories in turn. 73I allow categories 1 and 4 in terms. Any documents falling within these categories would be germane to the cross-claim. The evidence of oppression is not sufficient to permit me to conclude that there is anything particularly onerous about identifying and discovering any documents relating to the plaintiff's accident. Indeed, the cross-defendant says that there are no documents in category 4. Accordingly there is nothing oppressive about the category and it may be important for the second cross-claimant to be able to establish that no such inspection or investigation occurred. 74I allow categories 2 and 3 in terms. If any defect in the fuel cap of the motorcycle ridden by the plaintiff at the time of the accident was related to its manufacture it is likely to have affected many other identical fuel caps. That there is, or may be, a dispute about the model of the motorcycle ridden by the plaintiff at the time of the accident is not sufficient to deprive the second cross-claimant of access to documents which may tend to prove the reason for the failure of such fuel caps. 75There is no dispute about category 5, which the cross-defendant, by its counsel, accepted was appropriate. 76I consider category 6 to be too wide as presently drafted. It potentially covers communications which relate to topics other than insurance for the claim the subject of these proceedings, or similar claims. I consider that it should be modified by adding the following words after the word "communications": "relating to any claim arising from or connected with: (i) the failure of a filler cap with article number 770 07 008 044; or (ii) the claim by the plaintiff the subject of these proceedings." 77The second cross-claimant has substantially succeeded on its motion for discovery and, in my view, costs ought follow the event. The cross-defendant is entitled to have its costs of the motion to set aside the notice to produce, since the motion was not appropriate procedurally and the motion ought to have been, as the cross-claimants conceded, a motion for discovery.

Orders 78Accordingly, I make the following orders: Cross-defendant's amended notice of motion for stay filed on 14 March 2012 (1)Stay the cross-claim in so far as it relates to the claim by the first cross-claimant. (2)Refer the first cross-claimant and the cross-defendant to arbitration in respect of the cross-claim. (3)Permit the cross-claim to proceed against the cross-defendant, only in so far as it is brought by the second cross-claimant. (4)Vacate the direction made on 23 September 2011 requiring the cross-defendant to file its defence to the cross-claim by 7 November 2011. (5)Order the first cross-claimant to pay the cross-defendant's costs of the motion. Cross-defendant's notice of motion to set aside the notice to produce filed on 6 February 2012 (1)Order the cross-claimants to pay the cross-defendant's costs of the motion. Cross-claimants' notice of motion for discovery by categories filed on 13 February 2012 (1)Order the cross-defendant, pursuant to UCPR 21.2(1), to provide discovery of the following categories of documents: (a)All documents in reference to the incident involving Joel Passlow that occurred on or around 9 September 2007. (b)All documents recording or referring to any investigation into and the cause or the possible cause of the failure of the filler cap with article number 770 07 008 044. (c)All documents recording or referring to the reason for the decision taken to recall motorcycles affected by the failure of the filler cap with article number 770 07 008 044. (d)All documents recording or referring to KTM-Sportmotorcycle AG'S inspection and investigation of Joel Passlow's motorcycle (VIN No VBKMXJ43XM174263). (e)A copy of the policy of insurance taken out by KTM-Sportmotorycycle AG in accordance with clause 16 of the Exclusive Importer Agreement entered into between Butmac Pty Ltd and KTM-Sportmotorcycle AG. (f)Copies of all communications relating to any claim arising from or connected with: (i)the failure of a filler cap with article number 770 07 008 044; or (ii)the claim by the plaintiff the subject of these proceedings between KTM-Sportmotorcycle AG and the insurer through which KTM-Sportmotorcycle AG holds a policy of insurance in accordance with clause 16 of the Exclusive Importer Agreement entered into between Butmac Pty Ltd and KTM-Sportmotorcycle AG. (2)Order the cross-defendant to pay the cross-claimants' costs of the motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 March 2012