Manningham City Council v Dura

5. In my view the learned trial judge was correct in concluding that Section 13 of the Building Works Contract - JCC - D 1994 - when read in the context of the entire Contract, constitutes "an agreement .. to refer present or future disputes to arbitration" within the meaning of s.4(1) of the Commercial Arbitration Act 1984, notwithstanding that the right given to "either party" by clause 13.03 to refer a dispute "to arbitration or litigation" depends upon an election being made. This much seems to me to follow from the decision of the High Court in PMT Partners Pty. Ltd. (In Liquidation) v. Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 C.L.R. 301 at 310 per Brennan, C.J., Gaudron and McHugh, JJ. (See also: Turner Corporation Ltd. v. Austotel Pty. Ltd. (1992) 27 N.S.W.L.R. 592 at 595 per Giles, J). The fact that Section 13 contemplates that the disputes of the parties might be resolved by means other than arbitration does not, in my opinion, lead to the conclusion that their agreement was not "an arbitration agreement" within the meaning of the Act; nor to the conclusion that the Court's discretion to stay proceedings pursuant to s.53(1) of the Act is ousted.

8. Clauses 13.03 and 13.04, when read with each other, and in the context of the agreement, suggest to me that arbitration of disputes was the parties' preferred method of dispute resolution and the one which they intended would be adopted in the event that either party elected to refer a dispute to arbitration in compliance with those clauses. In my view, it was the parties' intention that a dispute would only be resolved by litigation if both parties were in agreement that such was the method to be adopted with respect to a particular dispute. Such an agreement would, no doubt, be inferred where one party, following negotiations, gave notice referring the dispute to litigation and the other party thereafter accepted that as the preferred method of resolution.

11. It was the appellant's contention in this Court that the agreement was not an "arbitration agreement" because clause 13.03 disclosed an intention that disputes were to be resolved, at the option of the parties, either by arbitration or litigation and there was no intention therefore to "refer disputes to arbitration". This contention rests on the proposition that clause 13.03 means that, once one party has given a notice referring a dispute to litigation, the other party loses whatever right he might have had to refer the matter to arbitration. I do not agree with this contention. There is nothing in the clause which suggests, in terms, that the right of the other party to refer the dispute to arbitration is lost. Rather, it seems to me that the clause re-affirms the right of the parties to litigate their dispute before the Court, if that is what they wish. However, the combined effect of clause 13.03 and 13.04 is, in my view, to give primacy to arbitration as the preferred method of dispute resolution agreed between the parties. This is because, whether or not one party has given notice of an intention to refer the dispute to litigation, there is nothing in the clause which prevents the other party from giving his own notice to refer the same dispute to arbitration and, if he does so, and complies with the provisions of clause 13.04, the consequence is, demonstrably, that from the time of the giving of the notice, the dispute (if not settled) is "referred to arbitration". I can see no reason to read into clause 13.03 the implication contended for by the appellant. Such a construction only promotes the unseemly "jostling for position" which occurred in this case.

14. Nor do I agree with the contention made by the appellant that, if its construction of clause 13.03 is not accepted, then the clause has "no work to do". In the first place, it enables the party giving the notice to signal to the other party that the "negotiation phase" of the dispute provided for in clause 13.02 is at an end; and secondly, if the party giving the notice elects for "litigation", it provides the other party with the opportunity to consider whether that method of resolution is to be preferred to arbitration. If, upon the receipt of the notice, he accepts it and joins in the subsequent curial proceedings, he will have (as I have noted) signalled his assent to that method of resolution and prejudiced his right to apply for a stay of those proceedings (s.53(2) Commercial Arbitration Act). Otherwise, as I see it, the contract contemplates that he may elect, in compliance with clauses 13.03 and 13.04, to refer the matter to arbitration and, if he does so, the Court's powers under s.53(1) of the Act are enlivened. Before the trial judge, the appellant conceded that the discretion given by the sub-section to grant a stay is to be exercised with a disposition in favour of maintaining the agreement between the parties where the dispute has been submitted to arbitration in accordance with that agreement. Whether or not that concession was correct, no error has been demonstrated which would entitle this Court to interfere with the exercise of his Honour's discretion.

19. Having had the advantage of reading the judgment about to be delivered by Mr. Justice Buchanan, I agree that this appeal should be dismissed, and for the most part for the reasons given by his Honour. I would add something, however, about the power which is apparently conferred on the parties to the relevant contract to elect between litigation and arbitration.

22. There are three issues on this appeal. The first is whether the applicant for the stay under s.53 of the Commercial Arbitration Act 1984 ("the Act") was "party to an arbitration agreement", as contemplated by s.53, with its opposite number in the litigation which it was seeking to stay. I agree with Mr. Justice Buchanan that Section 13 of this building contract does contain "an arbitration agreement" (as defined by the Act) to which both appellant and respondent were party, notwithstanding that under Section 13 a given dispute will be referred to arbitration only if certain pre-conditions are fulfilled.

25. In Hammond v. Wolt [1975] VicRp 10; [1975] V.R. 108, Menhennitt, J. took the view that the clause in the contract under which the parties there had an option to have differences referred to arbitration did not until the option had been exercised constitute an agreement to submit disputes to arbitration. That view has since been authoritatively rejected. The contract may contain an arbitration agreement notwithstanding that the reference of a particular dispute to arbitration will depend upon the exercise of an option. In reaching his conclusion, Menhennitt, J. drew upon the decisions of the High Court in John Grant & Sons Ltd. v. Trocadero Building and Investment Co. Ltd. [1938] HCA 20; (1938) 60 C.L.R. 1 and Plucis v. Fryer [1967] HCA 38; (1967) 126 C.L.R. 17. Both were relied upon to sustain the conclusion that there was no arbitration agreement in the case of Hammond, but, with great respect, both were concerned with a somewhat different aspect. As I read them, John Grant and Plucis were concerned with the question whether the terms of the contract in question were such as to prevent the commencement or maintenance of litigation. The most obvious way of ensuring that result was, in those days, by the adoption of a Scott v. Avery clause, according to which there was no cause of action except upon the award made in the arbitration. Where such a clause was adopted, the power of the Court to stay the litigation in favour of the arbitration was altogether excluded; for there could be no litigation without a cause of action. Thus the need, in a case under s.5 of the Arbitration Act 1958, to consider first whether the jurisdiction was excluded by the terms of the contract. That is not an issue nowadays, for s.55 of the Commercial Arbitration Act denies such force to a Scott v. Avery clause: such a clause now operates not to prevent litigation but only as an arbitration agreement, thereby admitting of the jurisdiction of the Court under s.53 to stay the litigation in an appropriate case.

28. I mention this because under the Arbitration Act 1958 it would have been very significant if the contract between the parties had expressly permitted the parties a choice between litigation and arbitration; that must have made it plain that litigation was not dependent wholly upon first obtaining an arbitrator's award. The only question then would have been whether or not to grant a stay under s.5. Nowadays, the question of stay or no stay is the only question arising, because s.55 has made it so. It follows that if the power to elect between litigation and arbitration is to have significance at all, it will be in a very different context from that in Hammond v. Wolt.

31. As already indicated, it has now been authoritatively established that an agreement to refer present or future disputes to arbitration may be found to reside in the parties' contract, notwithstanding that proceeding to arbitration in a given situation depends according to the contract upon one party or the other electing to that end - or indeed even if it depends only upon one party but not the other so electing: PMT Partners Pty. Ltd. v. Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 C.L.R. 301. That is consistent with the decision of the Court of Appeal in England in Pittalis v. Sherefettin [1986] Q.B. 868: see also the criticism of the contrary view in Russell on Arbitration (20th ed.) pp.38ff. It is of course common enough to find that the arbitration agreement, once identified, is called into operation only if certain conditions are fulfilled: for instance, if there is a dispute, if notice identifying the dispute is given, and so on. To add notice of election as a further condition is consistent with this pattern; and for present purposes there seems no significant difference between a right to elect which is conferred in terms of proceeding to arbitration and a right to elect to proceed to arbitration or to litigation. Indeed, each would seem to mean much the same, given that the contract between the parties cannot nowadays be so expressed as, in effect, to exclude litigation.

34. So much was, I think, accepted by the High Court in PMT Partners. In both the judgment of Brennan, C.J., Gaudron and McHugh, JJ. and the judgment of Toohey and Gummow, JJ., the conclusion was reached that there was an arbitration agreement to which s.48(1) of the Commercial Arbitration Act 1985 (N.T.) applied, even if one party had the right to elect to litigate or to arbitrate. It is true that the first judgment dealt specially with the point of construction, their Honours holding that the clause in question should not be read as conferring on the contractor the right "to elect between proceeding in the Courts and by way of arbitration prior to the giving of notice requiring arbitration" (at 313), but it was made equally plain that that opinion did not bear upon the conclusion that there was an arbitration agreement to which s.48 applied (at 313-4).

37. As in PMT Partners, so here it should be concluded that there is an "arbitration agreement" within the meaning of s.53 of the Act. Following the approach taken in PMT Partners, one need simply point to the final portion of clause 13.04 by which, upon compliance with the pre-conditions, "such dispute or difference (unless meanwhile settled) shall be and is hereby referred to arbitration ...". That that reference will be called into operation only when the conditions are fulfilled is now of no significance and that one such condition involves an election to arbitrate is of no moment, even if it is expressed as an election between arbitration and litigation.

40. The second issue is whether under the particular terms of Section 13 of this contract, the right to elect to proceed to litigate or to arbitrate is exhausted once one party or the other has given notice of election. Mr. Justice Buchanan is of opinion that it is not, and again I agree. The notice which is required by clause 13.03, and which is expressly made a pre-condition to litigation or arbitration, is not required so that whoever leaps first, wins. The provision for notice has been inserted so that the party to whom the notice is given is alerted to the fact that the other party regards the period of negotiation as at an end. One purpose of Section 13 is plainly to require negotiation before either litigation or arbitration is commenced: something must mark the end of that period and hence the requirement for this notice under clause 13.03. It would be altogether counter-productive, in such a scheme, to reward the first to become impatient with negotiation with the right to choose once and for all between litigation and arbitration. Notice by one party does not preclude notice by the other.

43. It follows that the Court's jurisdiction under s.53 was enlivened and the Court had a discretion to grant a stay, if it saw fit. The third issue, then, is the proper approach to be taken in the exercise of that discretion. The trial judge said this:

"As a general rule a court stays a proceeding where there is an agreement to arbitrate. The reason is obvious. The parties have made an agreement to that effect and the court should enforce it. The general rule should only be departed from if there is good cause. In Huddart Parker Limited v. The Ship (Mill Hill) [1950] HCA 43; (1950) 81 CLR 502 at p.508 Dixon, J. said -

`Under the statutory power expressed in s.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 defendants applying for a stay. But the Courts begin with the fact that there is a special contract between the parties to refer, and therefore in the language of Lord Moulton in Bristol Corporation v. John Aird & Co., consider the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutton L.J. said in Metropolitan Tunnel and Public Works Ltd. v. London Electric Railway Co., "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, and per Scrutton L.J. in the Metropolitan Tunnel Case.'

His Honour's observations apply to the present litigation. The court proceeds on the basis that the contract should be enforced. See also Halifax Overseas Freighters Ltd. v. Tasno Export, The Pine Hill (1958) 2 LI. Rep. 146 at 151 and G.W.J. Blackman & Co v. Oliver Davey Glass Co Pty Ltd & Anor [1966] VicRp 77; (1966) VR 570 at 573-4. Mr. Tiernan of counsel who appeared for the plaintiff accepted that there was a heavy burden resting on his client. He informed the court that his client was not relying upon any discretionary considerations as a ground for refusing the stay."

49. In argument there was some debate about whether there was or was not a "preference" in this contract for arbitration or whether, upon its proper construction, Section 13 displayed no bias either way. During argument I confess to having been somewhat attracted to the latter view but in the end I think that it presupposes the wrong question. Upon analysis the approach expounded in Huddart Parker does not depend upon perceiving in the relevant clause a bias towards arbitration. Rather it depends upon concluding that on the proper construction of their contract the parties have agreed to arbitrate the particular dispute. Thus, in Willesford v. Watson (1873) L.R. 8 Ch.473 at 480, Lord Selborne, L.C. said quite simply:-

"If parties choose to determine for themselves that they will have a domestic forum instead of resorting to the ordinary Courts, then since that Act of Parliament was passed a prima facie duty is cast upon the Courts to act upon such an agreement."

(His Lordship was referring to the Common Law Procedure Act 1854 s.11, the pre-cursor to s.5 of the Arbitration Act 1958 and, now, s.53 of the Commercial Arbitration Act 1985.) The Lord Chancellor's dictum was approved by the Court of Appeal in Law v. Garrett (1878) 8 Ch.D. 26 at 37: see also Lyon v. Johnson (1889) 40 Ch.D. 579, Vawdrey v. Simpson (1896) 1 Ch.166, Heyman v. Darwins Ltd. [1942] A.C. 356 at 388, Ford v. Clarksons Holidays [1971] 1 W.L.R. 1412 at 1416 and Fakes v. Taylor Woodrow Ltd. [1973] Q.B. 436 a 445. In Bristol Corporation v. John Aird & Co. [1913] A.C. 241 at 257-8 Lord Moulton suggested that, having included an arbitration clause, the parties had probably acted upon it in such a manner as to make it unfair for one or other of them to be allowed to depart from it once a dispute arose. However this may be, the cases I have cited make it plain that the underlying rationale remains that the parties, having agreed upon arbitration as the means of resolving their disputes, should not lightly be allowed to depart from that agreement once a dispute has arisen.

56. An argument might nonetheless be thought to exist that, in Section 13 of this contract, which lays down pre-conditions for both litigation and arbitration, it cannot be said that the parties have agreed upon arbitration as the means of resolving their disputes. Yet so to conclude would not, I think, be consistent with PMT Partners. In that case, much emphasis was placed upon the fact that, once the pre-conditions were fulfilled, the parties had agreed upon arbitration; and so much is inherent here in the concluding portion of clause 13.03 to which I have already made reference (that is, that upon completion of the necessary steps, "such dispute or difference (unless meanwhile settled) shall be and is hereby referred to arbitration ..."). That is what is critical to the conclusion that there is an arbitration agreement residing within Section 13 and, that being so, it seems to me to follow that the approach taken by the judge in this case, by reference to Huddart Parker, is still the correct one. It does not depend at all upon ascertaining, within the terms of the contract, a preference or a bias towards arbitration: it is enough that there is an "arbitration agreement" as defined which, upon completion of the necessary steps, will become operative. If it becomes operative, the dispute in question is referred by force of the parties' contract to arbitration and ordinarily it will not be appropriate to allow one party to depart from the bargain previously struck.

59. That is not to say that, when one party commences litigation, the stay will be granted if the other has taken no steps to render the arbitration agreement operative. I would agree, with respect, with what was said by Cole, J.A. in ABB Power Plants v. Electricity Commission of N.S.W. (1995) 35 N.S.W.L.R. 596 at 625:-

"If only one party has the contractual power of election, absent that election the other party has no right to insist upon arbitration. If either party has the right of election and neither party has exercised it in accordance with the contractual provision, that will also be a sufficient circumstance why the agreement should not be enforced because a pre-requisite for the operation of the agreement provision, namely election by one party, has not occurred. In either circumstance, the agreement to refer to arbitration contained in [the relevant clause of the contract] exists, and, if the subject matter of the litigation falls within the scope of that clause, operates to confer upon the court the power conferred by s.53. To litigate where there has been a valid election by either party to resolve the dispute by arbitration, is to act contrary to the arbitration agreement, thus permitting consideration of exercise of the power to stay the litigation. However, where there has been no exercise of a power of election by one or both parties having that power, s.53(1)(a) would not be satisfied, and nor, in many instances, would s.53(1)(b)."

Thus, although a relevant arbitration agreement is found to exist and the statutory power to stay is enlivened, the question must always remain whether, in the proper exercise of discretion, the stay should be granted; and, if the arbitration agreement has not yet been called into operation, that may be a very significant circumstance.

64. In this instance, one party gave notice to litigate and the other party gave notice to arbitrate. There is no reason to suppose that the latter did not effectively call the arbitration agreement into operation, unless only it was too late to elect to that effect because of the earlier notice to litigate. I have said that the one notice does not exclude the giving of the other and accordingly I agree with Mr. Justice Buchanan: this appeal should be dismissed.

69. By a contract dated 3 March 1997 the appellant ("the proprietor") engaged the respondent ("the builder") to construct a 51-bed hostel in Doncaster at a price of $3,600,000. Early in 1999, after a great deal of the work had been done, disputes arose between the parties which led to the proprietor announcing that the contract was terminated and barring the builder from the site. For its part the builder said that it accepted the proprietor's conduct as a repudiation of the contract and elected to terminate the contract.

72. This appeal will determine whether the disputes between the parties are to be resolved by litigation or arbitration.

75. The contract was in the form known as JCC-D 1994 issued by a committee comprising representatives of architects, builders and building owners and managers. Clause 13, which was headed "Dispute Resolution", provided:

In the event of any dispute or difference arising between the Proprietor (or the Architect on his behalf whether or not acting under paragraphs 5.02.01 or 5.02.02) and the Builder (subject to the provisions of Clause 6.09) at any time as to the construction of this Agreement or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith then either party may give to the other notice in writing which shall be delivered by hand or sent by certified mail adequately identifying the matters the subject of that dispute or difference and the giving of such notice shall be a condition precedent to the commencement by either party of proceedings (whether by way of litigation or arbitration) with regard to the matters the subject of that dispute or difference as identified in that notice.

Within ten (10) days after service of a notice of dispute referred to in Clause 13.01 the parties shall confer at least once, but at the option of either party and provided the Architect so agrees, in the presence of the Architect, to attempt to resolve the dispute and failing resolution of the dispute, to explore and if possible agree on methods of resolving the dispute by other means. At each such conference each party shall be represented by a person having authority to resolve the dispute in the course of the conference.

13.03 FURTHER NOTICE BEFORE ARBITRATION OR LITIGATION

In the event that the dispute cannot be resolved in accordance with the provisions of Clause 13.02 or if at any time either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may by further notice in writing which shall be delivered by hand or sent by certified mail to the other party refer such dispute to arbitration or litigation. The service of such further notice under this Clause 13.03 shall also be a condition precedent to the commencement of any arbitration or litigation proceedings in respect of such dispute.

At the time of giving the notice referred to in Clause 13.03 the party who wishes the dispute to be referred to arbitration shall provide to the other party evidence that he has deposited with the Chapter of The Royal Australian Institute of Architects or the Master Builders' Association, in each case of the State, Territory or place in which the Site is located, the sum of one thousand dollars ($1000.00) by way of security for costs of the arbitration proceedings. Subject to compliance with the provisions of Clause 13.03 and the foregoing provisions of this Clause 13.04 such dispute or difference (unless meanwhile settled) shall be and is hereby referred to arbitration pursuant to the succeeding provisions of this Section 13."

Subsequent provisions of clause 13 dealt with the conduct of an arbitration, the selection of the arbitrator, the appointment of an umpire, security for the costs of arbitration proceedings and the consolidation of disputes and awarding costs and provided for the continuation of the works during the resolution of a dispute.

87. On 14 January 1999 the proprietor issued a notice of dispute pursuant to clause 13.01 setting out certain differences between the parties. The parties attempted to resolve their differences by negotiation. A meeting was held on Friday 29 January 1999, which failed to resolve the dispute or to agree upon a means of resolving the dispute. On the following Monday the parties raced to secure the forum each desired to resolve the dispute. At 10.20 a.m. the proprietor delivered to the builder a notice pursuant to clause 13.03 referring the dispute to litigation. At 11.40 a.m. the builder delivered a notice referring the dispute to arbitration together with a receipt evidencing the deposit required by clause 13.04. At 12.04 p.m. the proprietor issued a generally endorsed writ in the Supreme Court seeking damages and a declaration arising from alleged breaches of the building contract by the builder.

90. On 15 February 1999 the builder issued a summons in the proprietor's action seeking a stay of the proceeding pursuant to the provisions of s.53(1) of the Commercial Arbitration Act 1984 ("the Act"). The sub-section provides:

"(1) If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to 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 the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration -

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

97. At the hearing of the application the proprietor did not lead any evidence; nor did it contend that there was sufficient reason why the matter should not be referred to arbitration. Instead, the proprietor contended that the contract dated 3 March 1997 was not an "arbitration agreement" within the meaning of the Act. Further, it contended that once the proprietor served its notice referring the dispute to litigation, the builder's ability to choose arbitration was extinguished, and any agreement to refer the dispute to arbitration was at an end. The judge rejected the proprietor's contentions. His Honour held that clause 13 of the contract was an "arbitration agreement" within the meaning of the Act, and that delivery by the proprietor of the notice referring the dispute to litigation did not preclude the builder from exercising its right to refer the dispute to arbitration. His Honour approached the question of a stay with "a strong bias in favour of maintaining the special bargain ..." to refer the dispute to arbitration (Huddart Parker Ltd. v. The Ship Mill Hill [1950] HCA 43; (1950) 81 C.L.R. 502 at 508 per Dixon, J.) and, as the proprietor had advanced no reason why the dispute should not be referred to arbitration, he granted a stay of the proceeding. The proprietor now appeals, and submits that the judge erred in rejecting its contentions.

100. An "arbitration agreement" is defined in s.4(1) of the Act as "an agreement in writing to refer present or future disputes to arbitration." The proprietor contended that to meet the definition an agreement must refer all disputes to arbitration only. As clause 13 contemplated both arbitration and litigation, the proprietor submitted that it was not an agreement to refer disputes to arbitration.

103. An agreement which upon its formation provides that the parties are bound to refer all disputes to arbitration is clearly an "arbitration agreement" within the meaning of the Act. In PMT Partners Pty. Ltd. (In Liquidation) v. Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 C.L.R. 301, it was held that the statutory definition also caught an agreement which enabled a party to choose arbitration as the means of resolving a dispute. The statutory definition was not limited to existing references to arbitration. Brennan, C.J., Gaudron and McHugh, JJ. said, at 310:

"The words `agreement ... to refer present or future disputes to arbitration' in s 4 of the Act are, in their natural and ordinary meaning, quite wide enough to encompass agreements by which the parties are bound to have their disputes arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition."

"... [T]he terms of the definition of `arbitration agreement' in s 4 of the Act extend to an agreement whereby the parties are obliged if an election is made, particular event occurs, step is taken or condition is satisfied (whether by either or both parties) to have their dispute referred to arbitration."

The agreement in that case did not mention litigation. It provided that every dispute arising out of the contract was to be decided by a procedure which required the builder to submit the dispute to the superintendent for decision, enabled the builder, if dissatisfied with the superintendent's decision, to submit the matter to the proprietor, and enabled the builder if dissatisfied with the proprietor's decision to refer the dispute to arbitration.

110. The agreement in the present case requires resolution of a dispute by arbitration once a notice of referral to arbitration has been given under clause 13.03 and provision has been made for the security required by clause 13.04. Thereupon, according to clause 13.04, the dispute "shall be and is hereby referred to arbitration." The agreement in terms contemplates that a dispute may be resolved by litigation, thereby making express that which was implicit in the agreement considered by the High Court in the PMT Case. However, it remains an agreement by which the parties are bound to have their disputes arbitrated if certain conditions are fulfilled. If a notice is properly given under clause 13.03 referring the dispute to arbitration and security for costs is provided, the dispute is referred to arbitration because the parties have already agreed that the dispute will be resolved by arbitration upon the occurrence of those events.

113. In my view it would be inconsistent with the approach of the High Court in the PMT Case to limit arbitration agreements as defined in s.4 of the Act to those which in terms contemplate the resolution of all disputes by arbitration. As the High Court held, the statutory definition is fulfilled if an agreement makes provision for arbitration, albeit there is no guarantee that there will be arbitration. The agreement in the present case makes provision for arbitration, and in my view is no less an arbitration agreement within the meaning of the Act because it recognises that litigation rather than arbitration may ensue in a particular case. An agreement which expressly commits all disputes to arbitration cannot prevent a party resorting to litigation. See Pena Copper Mines Ltd. v. Rio Tinto Company Ltd. (1911) 105 L.T. 846 at 851 per Fletcher Moulton, L.J.; Compagnie des Messageries Maritimes v. Wilson [1954] HCA 62; (1954) 94 C.L.R. 577, at 585-7 per Fullagar, J. I do not think there is any good reason why an agreement which operates in the same way should not be an arbitration agreement because it mentions what is possible in any event.

116. That conclusion is in line with the decision in Turner Corporation Ltd. v. Austotel Pty. Ltd. (1992) 27 N.S.W.L.R. 592, which concerned a building agreement in the form known as JCC-A 1985, a predecessor of JCC-D 1994. Clause 13.01 was in similar terms to clause 13.01 of the later form, including the reference to litigation as well as arbitration. However, the form JCC-A 1985 omitted the stage of private negotiation, simply providing that after ten days from the delivery of the notice of dispute, a party could refer the dispute to arbitration. The remaining provisions of both forms were to like effect. Giles, J. held that the agreement that, if notices were given, the dispute would be referred to arbitration was an arbitration agreement within the meaning of the Commercial Arbitration Act 1984 of New South Wales, notwithstanding that the agreement did not treat arbitration as inevitable. His Honour was principally concerned to explain why he would not follow Hammond v. Wolt [1975] VicRp 10; [1975] V.R. 108, in which it was held that an agreement giving a party an option to refer disputes to arbitration was not within the Act, a decision disapproved in the PMT Case. I respectfully agree with his Honour that the statutory definition catches not only agreements in which a party has the ability to elect arbitration as the means of resolving a dispute but also agreements which in terms contemplate litigation as an alternative to arbitration.

119. There remains the argument that, upon the delivery of the proprietor's notice of reference to litigation pursuant to clause 13.03, the proprietor was no longer a party to an arbitration agreement. It was said that clause 13.03 permitted only one notice to be given. Once a notice was given, the operation of the clause was spent.

122. According to this view of clause 13, whether a dispute can be resolved by arbitration depends entirely upon the terms of the first notice given under clause 13.03. If the first notice refers the dispute to litigation, arbitration ceases to be available. Yet the converse is not true: if the first notice refers the dispute to arbitration, the other party can still resort to litigation, for the courts will not compel a party to proceed with an arbitration to which he or she has agreed. Arbitration agreements are only enforced indirectly by the granting of a stay.

125. The service of the further notice the subject matter of clause 13.03 terminates private negotiation and ushers in arbitration or litigation. The sub-clause prevents arbitration or litigation until the period of private negotiation has ended. In my opinion there is no warrant for placing a gloss upon the words of clause 13.03 by reading it as if it provides that once a notice has been given pursuant to the sub-clause, no further notice can be given which has any effect, so that in addition to marking the end of the period of private negotiation and the introduction of litigation or arbitration, the delivery of one notice deprives another of any effect. The gloss is unnecessary, indeed mischievous. It replaces supervision of the choice of forum by a disinterested tribunal with a result determined by success in a race to deliver notices. The proprietor's construction is likely to induce disputing parties to cut short negotiation in order to gain the tactical advantage of selecting the forum to resolve the dispute. Further, if, upon the delivery of a notice referring a dispute to litigation, the operation of the clause is spent and there is no longer an "arbitration agreement" within the meaning of the Act, clause 13 is arguably not available for the resolution of any further disputes. On the other hand, if the delivery of a notice exhausts the operation of the clause only in respect of the dispute the subject matter of the notice, the contract is an arbitration agreement at some times and not an arbitration agreement at other times. I do not think it likely that the legislature intended that the power to grant a stay to enforce an election to arbitrate should turn upon which of the parties was the first to act.

128. In so concluding I do not overlook what was said by Ipp, J. in Geraldton Building Co. Pty. Ltd. v. Christmas Island Resort Pty. Ltd. [1992] 11 W.A.R. 40. Speaking of a building agreement which provided that if any dispute arose, either party to the agreement might give the other notice in writing of the dispute and at the expiration of seven days the dispute would be submitted to arbitration, his Honour said, at 46:

"It is implicit, in my view that the continued existence of a party's rights of election under a permissive arbitration clause is dependent upon whether the other party has taken any steps to exercise his or her rights of election. This is a necessary corollary of the inconsistency between legal proceedings and arbitration as a means of resolving disputes. Thus, if one party has elected to refer a dispute to arbitration, the right of the other to commence legal proceedings in respect of that dispute would be limited to reliance on the court's residual jurisdiction. Furthermore, if the party has elected, after a dispute has properly arisen, to institute action through the court, the other party's right to refer that dispute to arbitration falls away."

The context in which that statement was made may be a ground of distinction. But I am unable to accept that under cl. 13.03, where each party has a right to elect to refer a dispute to arbitration, one party loses the right to make that election simply because the other has earlier opted not to exercise that right but rather to proceed by way of litigation. Clause 13.03 does not so provide in terms and I can see no justification for importing that restriction.

133. On this appeal an alternative submission advanced by the proprietor was that the trial judge erred in imposing upon it as the party resisting the application for a stay, the burden of satisfying the Court that the application should be refused, although, as his Honour recorded, counsel who appeared for the proprietor before him "accepted that there was a heavy burden resting on his client" to show that there was sufficient reason why the dispute should not be referred to arbitration.

136. The language of s.53(1)(a) appears to cast upon the applicant for a stay of litigation the burden of satisfying the Court that "there is no sufficient reason why the dispute should not be referred to arbitration". However, the courts have taken the view that as the parties have entered into a contract referring all disputes to arbitration, they should be kept to their bargain unless good reason is shown to the contrary. See The Mill Hill, above, Blackman & Co. v. Oliver Davey Glass Co. [1966] VicRp 77; [1966] V.R. 570, at 574-5; Eaton v. Eaton [1950] VicLawRp 43; [1950] V.L.R. 233; Metropolitan Tunnel & Public Works Ltd. v. London Electric Railway Co. [1926] Ch. 371. The onus is one to remove a presumption created by evidence of the special agreement, not one resting upon a party to displace a statutory presumption arising under the section.

139. Commonly the agreements which have been regarded as giving rise to the presumption have provided that all disputes arising under or in relation to the agreements are to be resolved by arbitration. The agreement in the present case is not so straightforward. Clause 13 of the JCC-D 1994 form of contract contemplates resolution of disputes by negotiation, litigation or arbitration. If a dispute is not resolved by negotiation, either party may delivery a notice referring the dispute to arbitration or to litigation. That most of the provisions of clause 13 are concerned with arbitration may be no more than a reflection of the fact that whether there is to be arbitration, and to a significant extent the constitution of the arbitral tribunal and the procedures at arbitration, depend upon the agreement of the parties. In this respect arbitration is altogether different from litigation.

142. In Woolworths Ltd. v. Herschell Constructions Pty. Ltd. (In Liquidation) (unreported, Vic. Supreme Court, 19 June 1991) Smith, J. expressed the view that the terms of the JCC 1985 form of contract did not indicate a preference for arbitration over litigation. His Honour noted that under the terms of that contract either party could litigate immediately upon giving or receiving the first notice, but the party who wished to resolve the dispute by arbitration was required to wait for ten days before referring the dispute to arbitration. His Honour said, at p.14, "If anything, this would indicate a preference for court proceedings." The contract in the present case is different from that considered in Woolworths in that under the JCC-D 1994 form of contract reference to both arbitration and litigation alike must await the conclusion of private negotiation, thus removing any indication of a preference for litigation.

145. The question posed by the JCC-D 1994 form of contract is not whether it evinces a predisposition to litigation, but whether it either favours arbitration or is neutral. In my opinion the references to litigation in sub-clauses 13.01 and 13.03 are not the expression of on attitude of neutrality to the question whether arbitration is more or less desirable than litigation. I see the provision for notice before arbitration or litigation as consequential upon the introduction of the requirement that the parties must attempt to resolve a dispute by negotiation. In my view the reference to litigation is no more than is necessary to achieve that end. Were it not for the requirement that litigation be preceded by a notice which can only be given after unsuccessful negotiation to resolve a dispute, a party could avoid negotiation altogether by instituting legal proceedings as soon as a dispute emerged. Not only can the references to litigation in cl. 13 be understood as no more than necessary to bring about negotiation before a resolution is imposed upon the parties, but by the time any question of staying litigation under s.53(1) arises, notice to arbitrate will ordinarily have been given by the applicant for the stay under an operative "arbitration agreement" within the meaning of the Act, and the mechanism provided by the agreement will have been set in motion. The deposit required by cl. 13.03 will have been paid, and steps may have been taken to appoint an arbitrator. Accordingly, by the time the court is called upon to determine the application for a stay, the position will be the same as that under a special agreement requiring the reference of all disputes to arbitration.

148. While I agree with the proprietor's contention that whether a court entertaining an application for a stay under the Act approaches the question with a predisposition to arbitration must depend upon the terms of the agreement in question, I think that the agreement here is one which favours arbitration. In my opinion it exemplifies an intention that all disputes should be resolved by arbitration once private negotiation has failed. Accordingly, I do not think his Honour erred in adopting a bias in favour of arbitration.

151. For the foregoing reasons I would dismiss the appeal.