Nexus Energy Corporate Pty Ltd v Trident Australasia Pty Ltd

APPLICATION FOR LEAVE TO APPEAL 1 On 24 September 2010, the primary judge dismissed the application of the respondent (Nexus) for a stay of the whole of the primary proceeding. Nexus had applied for such a stay by notice of motion dated 10 August 2010. The basis of that application was that Nexus was entitled to refer to arbitration a dispute represented by the subject matter of the primary proceeding. Nexus now seeks leave to appeal against this decision. 2 The essence of the issue before the primary judge may be drawn from the reasons of the judgment of the primary judge in Trident Australasia Pty Ltd v Nexus Energy Corporate Pty Ltd [2010] FCA 1135. 3 On 25 June 2007, Nexus entered into an agreement with a company, TD Joint Venture Pty Ltd (TDJV) pursuant to which TDJV undertook to build an offshore pipeline between the Longtom Gas Field and the Patricia Baleen Gas Field in Bass Strait, Victoria for Nexus. 4 One of the subcontractors engaged by TDJV to work on the project was Trident. On 30 July 2007, TDJV and Trident entered into the subcontract referred to as the "Services Agreement". 5 The Services Agreement records that TDJV had been engaged to develop and perform engineering, procurement and installation services of the sub-sea pipeline systems for the Nexus Longtom Gas Project and that the contractor, TDJV, required the services of Trident in support of the project. 6 Without here setting them out in detail (they may be seen in the reasons of the primary judge) the Services Agreement contained clauses dealing with the obligations of the "Supplier" (a reference to Trident) and the "Contractor" (a reference to TDJV) in relation to scope of services, price schedule, maximum amount of Services Agreement, prices, schedule of services, payment terms, invoices as well failure to comply. 7 In relation to failure to comply, cl 14 of the Services Agreement provides: If the Supplier fails to comply with the requirements of Clauses 11 to 13 the Contractor may, at the Contractor's sole discretion and at Supplier's sole cost, impose any one or all of the following measures until such time as the Supplier has achieved full compliance: a) delay the commencement of the Services; b) suspend the performance of the Services; and/or c) refuse payment upon any invoice in respect of the Services. 8 Clause 20 of the Services Agreement then deals with the topic of the settlement of disputes as follows: SETTLEMENT OF DISPUTES All disputes arising out or related to this Services Agreement, if not amicably settled by the Parties, shall be finally settled under the Rules of the Conciliation and Arbitration of the International Chamber of Commerce by three Arbitrators appointed in accordance with the said rules. The arbitration venue shall be Perth Western Australia. (as appears in the original) 9 In June 2009, Nexus was informed that in order to ensure the expedited completion of the project, it had to pay the subcontractors directly. 10 In July 2009, an agreement (the 2009 Agreement, also referred to as the Letter Agreement by Nexus and the Order of Variation by Trident) naming TDJV, Trident and Nexus as parties was drawn up. The 2009 Agreement, which was signed by TDJV and Trident, but not Nexus, provides, in effect, for Nexus to pay moneys due for the performance of services by Trident under the Services Agreement, to Trident directly. Although Nexus did not sign the 2009 Agreement, it relies upon cl 2(c)(i) of the 2009 Agreement as comprising the arbitration agreement between itself and Trident. 11 Clause 2 of the 2009 Agreement provides as follows: 2. Payment Obligations (a) Nexus undertakes to pay directly to the Subcontractor all amounts lawfully due to the Subcontractor under the Subcontract for works and services provided by the Subcontractor to TDJV on and after the Effective Date, but TDJV must certify any payments as being due and owing before payment is made. (b) Nexus must make such payments on the terms provided for in the Subcontract but subject to the presentation of tax invoices and any other documentation required to be provided by the Subcontractor under the Subcontract as a condition of payment. (c) Nexus is entitled to: (i) the same rights to dispute liability for and to withhold payments under the Subcontract as TDJV would otherwise have been entitled to; and (ii) the same grace periods, notices of default and cure periods for default in payment under the Subcontract as TDJV would otherwise have been entitled to. (d) Payments by Nexus under clause 2(a) of this letter are to be applied by the Subcontractor strictly in respect of the invoices in respect of which those payments are made. (e) Nothing in this letter or elsewhere is to be taken as an implied obligation on the part of Nexus to make any payments to the Subcontractor in respect of works and services provided by the Subcontractor to TDJV before the Effective Date. However, Nexus may in its absolute discretion make such payments to the Subcontractor and, where it elects to make any such payment, it must specify to which invoices rendered by the Subcontractor to TDJV those payments are to be applied, and the Subcontractor must apply those payments accordingly. To the extent of those payments, the liability of TDJV to the Subcontractor for them is discharged. 12 Nexus contended and contends in this application for leave to appeal that cl 2(c)(i) comprises an agreement with it and Trident to settle their disputes under the 2009 Agreement, in accordance with the provisions in cl 20 of the Services Agreement. 13 The primary judge, at [16], formed the view that cl 2(c)(i) is only intended to confer on Nexus the right to rely upon the same grounds to resist payment of Trident's claims, as the principal contractor, TDJV, is entitled to rely upon under the Services Agreement, and that is all. It does not also permit Nexus in effect to call in aid the settlement of disputes arbitration procedure provided for by cl 20 of the Services Agreement. 14 The primary judge, at [18]-[20], set out three reasons why he did not consider that cl 2(c)(i) of the 2009 Agreement constituted the arbitration agreement contended for by Nexus: 18 First, there is a difference between the language of "disputing liability" used in cl 2(c)(i) of the 2009 Agreement and the language "settling disputes" used in cl 20 of the Services Agreement. It is one thing for parties to agree as to the basis on which a party will be able to dispute a liability to perform a primary obligation, but it is quite a different thing for the parties to agree as to the means by which disputes will be settled, once they have arisen. The fact that the parties used the language in cl 2(c)(i) of "disputing liability" rather than "settling disputes" militates against the construction contended for by Nexus. This is particularly so when meaningful effect can be given to a construction of cl 2(c)(i) which falls short of cl 2(c)(i) being construed as comprising an agreement between the parties as to the means whereby disputes will be settled. 19 Secondly, cl 2(c)(i) is the first of two subclauses which comprise clause 2(c). In my view, the construction of cl 2(c)(i) is informed by the content of cl 2(c)(ii) which uses the language of "grace periods", "notices of default" and "cure periods" - concepts which relate to performance of primary contractual obligations. This subclause seeks to give Nexus the benefit of these concepts as a means of qualifying Nexus's duty to perform its primary obligation under the 2009 Agreement, namely, to make payment on the presentation of a valid invoice. This also militates against Nexus's contention that cl 2(c)(i) comprises an arbitration agreement. The clause does not, in my view, comprise a separate agreement in relation to a discrete matter, namely settling disputes, which is distinguishable from the definition of primary contractual rights and obligations binding each of the parties. This distinction is also manifest by the fact that cl 2(c)(i) is part of cl 2 of the 2009 Agreement which is headed "Payment Obligations" - a primary obligation on Nexus; whereas cl 20 of the Services Agreement is a separate clause addressing the discrete topic of the settlement of disputes. 20 Thirdly, cl 2(c)(i) only addresses the position of Nexus. The absence of mutuality in cl 2(c)(i), in my view, further militates in favour of a construction that the clause is intended to address and qualify the performance of Nexus's primary obligation, namely, to make a payment, rather than comprising a separate arbitration agreement. 15 In light of his Honour's reasoning, the primary judge was not required to consider whether a stay should be granted or refused by reference to "discretionary" considerations.