Royal Society for the Prevention of Cruelty to Animals (Victoria) Incorporated v Marson Constructions Pty Ltd [2000] VSCA 38

5. The appeal must in my opinion succeed simply because, as a matter of fact, the conclusions on which the learned County Court judge founded his order staying the counterclaim were unwarranted. His Honour found that the dispute which is the subject of the counterclaim had been submitted by the respondent builder to arbitration conformably with the arbitration clause - 17.1 of the agreement between the parties. The clause (whose terms are set out by Callaway, J.A.) required that the party seeking to invoke it should have given the notice for which it provides "as soon as reasonably practicable". The point or event from which the soonness falls to be measured is not nicely prescribed in terms but it is, as I should read the clause, to be implied from the context. The evident purposes of the notice are to specify clearly the nature of a "question, difference or dispute" that has arisen between the parties and to call for the "point or points of issue to be submitted for settlement by arbitration." Obviously, such a notice can not be formulated before the subject "question, difference or dispute" has both arisen and become incapable of resolution by the parties to their mutual satisfaction. When that point is reached the arbitration clause may be invoked; and a party wishing to invoke it is obliged to do so "as soon as reasonably practicable" after that point. Equally obviously, there will in any case be room for debate as to when that point has been reached and, after it has been reached, as to when it becomes reasonably practicable to give a notice to the party against whom it is sought to invoke the arbitration clause. Any such debate will fall to be settled as a matter of fact.

"It would seem quite impractical and unreasonable to me to impose any burden upon the plaintiff to give a notice of dispute or difference with respect to the matters covered by the counterclaim prior to the defendant's having given notice of its intention to pursue its claim with respect to such matters by delivering its counterclaim on the 24th April last, particularly given the requirement placed upon the parties by Clause 17.1 to resolve their disputes "to their mutual satisfaction". Following the giving of the notice of counterclaim on 24 April 1998, in my view the plaintiff acted `as soon as reasonably practicable' in giving its notice of dispute or difference on 12 May 1998, immediately following judgment on the summary judgment application."

12. To reason in that way was, I think, erroneous. The error is well illustrated by the decision in Bulman v. Lakin[1]. There, the defendant when driving a motor car accidentally damaged railway crossing gates at 1.10 a.m. He gave the crossing keeper the index number of his vehicle but, when the keeper said he was going to inform the police, drove off without giving his name and address. Police attended the defendant's house at 2.20 a.m. and on other occasions between 9.40 a.m. and 10.40 a.m. on the day but were unable to see or interview him. It was not until 11 a.m. on the same day that the defendant called at the local police station, where he was seen by a constable, and then, for the first time, admitted being the driver involved in the accident. The defendant was charged on information with failing to report the accident at a police station or to a constable "as soon as reasonably practicable", contrary to s. 25(2) and (4) of the Road Traffic Act 1972. The information was heard by justices, before whom the defendant placed no explanation of his failure to report the accident until 11 o'clock in the morning although it had occurred at 1.10 a.m. The justices nevertheless dismissed the information because, as they explained in a case stated upon appeal by the informant to the Divisional Court, "We were of the opinion that it was not reasonable to expect the defendant to report the case earlier than he had done so." The appeal was allowed. Referring to the justices' conclusion, Lord Lane, C.J., with whom Lloyd, J. agreed, observed -

"One is bound to say that that is not the question which the justices had to decide. What they had to determine was whether the defendant had failed to report the accident at a police station or to a constable as soon as was reasonably practicable. As the accident took place at 1.10 a.m. and was not reported until 11 a.m., it seems to me that no reasonable bench of justices, instructing themselves properly, could possibly, without any explanation, have come to the conclusion that the defendant had failed to report the accident as soon as was reasonably practicable. If they had addressed their minds to the correct question, it seems to me that they would have come to the conclusion that the offence was clearly made out, as in my judgment it was."

16. By parity of reasoning it seems to me that here the learned judge did not turn his mind to the right question in deciding whether the time requirement in clause 17.1 had been complied with. The question for his Honour's determination was purely whether the plaintiff had given a notice under the clause "as soon as reasonably practicable" after the point at which it became entitled to give one. That question was to be decided not by considering whether it seemed to the judge, as he said, "...impractical and unreasonable... to impose any burden on the plaintiff to give a notice of dispute or difference with respect to the matters covered by the counterclaim prior to the defendant's having given notice of its intention to pursue such matters by delivering its counterclaim on the 24th April..." It is one thing to decide, as the judge appears to have done, that the evidence justified a conclusion that it was not reasonably practicable to give a notice before 24th April, and that the point at which the plaintiff became entitled to give one had not until then been reached. It is another thing altogether to say that such a conclusion justifies a decision that the notice given on 12th May was given as soon as reasonably practicable after the plaintiff became entitled to give it. There was no evidence at all to justify a conclusion that, the plaintiff having become entitled to give a notice on 24th April, it was not reasonably practicable to give it before or until 12th May. The judge appears to have accepted, in place of evidence, an assertion that the plaintiff was entitled to await the outcome of its application for summary judgment before giving a notice under the arbitration clause, or to have considered that it was reasonable for the plaintiff to take that course. In doing that the judge fell, as I think, into error of a kind similar to that into which the justices fell in Bulman v. Lakin. I cannot agree in any event that an obligation such as that imposed by the arbitration clause to take a step as soon as reasonably practicable contemplates that the step may be taken as soon as may be reasonably practicable for the convenience of the person bearing the obligation. In Anglo-American Oil Company Ltd. v. Port of London Authority[2] Pickford, J. construed a requirement for the transhipment of goods "as soon as practicable" to mean "as soon as practicable in the course of navigation and having regard to the facilities of the port, and not as soon as practicable with regard to the convenience of the merchant's business". An expression of the kind there under consideration falls, of course, to be construed in its own context and to be applied having regard to all relevant circumstances. In that case the words were not "as soon as reasonably practicable", as here; but I do not see the adverb as importing a degree of subjectivity such as to accommodate the individual convenience of a person on whom clause 17.1 casts an obligation to give a notice "as soon as reasonably practicable". The obligation is no doubt to be understood so as to be capable of application routinely and indifferently to all parties to the agreement of which it is an element, although the effect of its application will no doubt depend on the particular circumstances in which it falls to be applied.

19. The connotation of "soon" is commonly indefinite. I understand it as a versatile word allowing for or designating, according to the relevant circumstances, an adaptable period in much the same way as the expression "a reasonable time". In David Leahy (Aust.) Pty. Ltd. v. McPherson's Ltd.[3], I ventured a suggestion (apparently accepted by the Full Court[4]) that -

"The concept of `a reasonable time' is frequently encountered in the law and life, but thankfully it can seldom be necessary to define it, much less to ascertain the period that the concept connotes. Rather than being concerned to designate a reasonable time, the courts are confronted almost daily with the question whether, within a specific context, a reasonable time has or has not run, when reckoned towards or away from a given point or event. The question is usually answered in the course of a value judgment not calling for much analysis and sometimes, perhaps, intuitively. Often the question answers itself. A reasonable time obviously has no norm or yardstick except that dictated by its own circumstances, including the purpose for which it is to be gauged."

23. Much of that passage can be applied to plastic expressions like "soon", and cognates such as "as soon as", "as soon as may be", "as soon as possible" and "as soon as practicable". In the present case the relevant question, had it been asked, should have answered itself. Had the judge, once he had established 24th April 1998 as a terminus a quo, asked himself whether the notice had been given by the respondent as soon as reasonably practicable after that, the evidence required an answer that it had not. It was therefore, in my opinion, not open to the judge to hold that the arbitration clause had been properly invoked. Hence the stay of the counterclaim in the County Court should not have been granted.

26. Having come to that conclusion, I have strictly no need to consider the other principal point that was agitated on the appeal: whether the respondent, conformably with s.53(1)(b) of the Commercial Arbitration Act 1984, had shown itself to be ready and willing to do all things necessary for the proper conduct of the arbitration. I have had the benefit of studying in draft what Callaway, J.A. has written on that subject and respectfully concur in it. I would therefore uphold the appeal on that basis, too.

33. This appeal should, on the appellant's contentions, be determined simply by answering the question whether the respondent builder ("Marson") submitted the relevant dispute to arbitration pursuant to clause 17.1 of the general conditions of the Works Contract Agreement "as soon as reasonably practicable" by giving the notice it did on 12 May 1998. On the other hand the respondent argued that any answer in favour of the appellant was irrelevant to the respondent's application for a stay of the County Court proceeding pursuant to s.53 of the Commercial Arbitration Act 1984, which it obtained and which is the subject of the present appeal.

36. There were two aspects to the arguments advanced on behalf of the appellant, the first being that the reference was some five months or so late inasmuch as the "question, difference or dispute" arose when the appellant's project manager responded on 18 November 1997 to the respondent's invoice given 28 October 1997, by claiming liquidated damages for delay at the rate of $5,000 per week and then estimated to amount to a minimum of $45,000, or at the latest (which seems the preferable view) from the time when the respondent rejected that claim by refusing to accept the appellant's payment of $49,102.75 on 1 December 1997 proffered as full payment for amounts then due.[5] The alternative basis for accepting the appellant's contention as to the time of submission rests on the failure to give notice of the question, difference or dispute[6] until after the County Court judge had rejected the appellant's argument that it should be entitled to defend or set off the claim in reliance on the claim for delay, that is, until after the judge made an order on the application for summary judgment that the whole of the outstanding balance should be paid to the respondent. On this latter basis the delay would have been merely from 24 April 1998, when the defence and counterclaim were delivered, until the date of judgment on 12 May 1998 being in fact the day when the notice was given.

39. However it is first argued on behalf of the respondent that failure to comply with the terms of clause 17.1 of the works contract is irrelevant inasmuch as s.53(1) of the Commercial Arbitration Act 1984 does not require there to be a valid submission to arbitration on foot in order for a party to obtain a stay of court proceedings under that section. As I understood the argument, the question which on this view ought to be decided is whether a "matter" has been "agreed to be referred to arbitration by the agreement", so that it is irrelevant to a stay application whether or not the particular matter has in fact been referred to arbitration and whether or not that matter has been referred within time or could be referred within time to arbitration. So it was said that the only conditions which had to be satisfied are those which otherwise appeared in that sub-section, namely, that there was "no sufficient reason why the matter should not be referred to arbitration" and that the applicant for a stay was both when proceedings commenced and still was "ready and willing to do all things necessary for the proper conduct of the arbitration".

42. The argument relied upon by the respondent asserted that it is sufficient to know that the matter in respect of which the stay is sought was of a kind "agreed to be referred", not that it had in fact been referred by way of submission or otherwise pursuant to the terms of an arbitration clause. In other words it was contended that the effectiveness or otherwise of the reference was irrelevant to determining whether a stay should properly have been granted and that, the other conditions of the section having been satisfied, the stay had been properly granted in the present case. As long as one knew that it was the kind of matter which could be so referred pursuant to the arbitration clause, so it was said that that was sufficient for the purposes of the application under s.53. In particular, it was said that in certain cases there may be no reference or no submission at the time the application is made, for the object of the section is to cut off at the outset potential litigation in a court so as to allow it to be resolved by the parties' agreed method for resolution of disputes, namely arbitration. It may, so it was conceded, have some bearing on whether a party is "ready and willing" within para.(b) that it was not prepared and was not ready to serve a notice in conformity with the arbitration clause referring the matter to arbitration, but it was said that it was of no consequence that that step had not been taken if otherwise the conditions of the section were satisfied. The consequence of this argument was that it was contended that failure to show that the notice was not given as soon as reasonably practicable led to no consequences so far as this application was concerned, assuming that it was not so given.

45. To my way of thinking the argument takes an artificially narrow view of the effect of the clause. The only point in granting a stay is to enable a reference to arbitration to proceed to its natural conclusion, namely an award in conformity with the requirements of the arbitration clause. Assuming the construction placed on the words "agreed to be referred" is correct, so that there is no obligation by way of precondition to the exercise of the Court's jurisdiction that notice should have been given and a reference begun, that says nothing as to whether or not the Court may take into account in exercising its discretion under the section the ineffectiveness of a notice in fact given. More particularly it says nothing as to the Court's taking into account the ineffectiveness of a notice by reason of that not being given within the time stipulated, whether that be within a time as soon as reasonably practicable, or otherwise.

48. The Court should only act to stay a court proceeding if the consequence is that the parties' disputes will properly be resolved pursuant to the agreement upon which the applicant relies. If it is not possible, upon a proper consideration of the whole of the circumstances, for a reference to continue to conclusion, then there would be no point in granting a stay and it would be entirely improper to do so. This of course assumes that the defect so far as the reference is concerned is one which is incapable of remedy, for there may be an argument that, if a defect in the reference were merely procedural in the sense of relying on some technical breach of the clause, then the Court could not then put out of its mind the possibility that a proper notice might be then given by the relevant party. Reasoning of this kind might face difficulties in circumstances where the application for a stay was resolved many moons after the original notice was given, for the giving of a second notice might in those circumstances not satisfy a condition of the present kind in that it would not be given as soon as reasonably practicable, but that is only to point out difficulties which might occur on other occasions and in different circumstances.

51. In the present case the failure to refer the matter to arbitration by an appropriate notice must make it impractical for the clause to be otherwise invoked. If the basis for concluding that no effective reference to arbitration has been begun by an applicant, such as the present respondent, was that notice had not been given within time, then it would be impossible to say that any other notice given pursuant to the clause might be given as soon as reasonably practicable. So a decision to that effect in the present case would make any different conclusion based on a later reference impossible. If the notice given on 12 May 1998 were not given as soon as reasonably practicable, then no effective reference had been brought into existence by the respondent, and no later notice could cure that defect, thus making a stay granted then or later pointless, effectively stifling the litigation for no good purpose. So on this preliminary issue I would conclude that the Court may consider, for the purposes of determining the appeal and determining whether the stay in the present case was properly granted, the question whether under clause 17 the dispute was referred by notice "as soon as reasonably practicable".

54. It is therefore both relevant and necessary to determine whether the present dispute was effectively referred to arbitration, not specifically to show that the particular reference was defective but rather to demonstrate whether or not any reference at that time or thereafter would be defective. In other words the appellant may show that there could not have been an effective reference such as would justify a stay, as in those circumstances a stay would be pointless. Here, if the appellant established that on any view of the facts the notice to refer was so late that the respondent could not rely upon the arbitration clause or any reference thereunder, then it would also follow that in relation to this dispute no notice after 12 May 1998 would satisfy the terms of the arbitration clause inasmuch as the reference would likewise be out of time.

57. The particular issue in the present case must depend for its resolution upon ascertaining the time at which the relevant dispute arose. What thereafter was reasonably practicable had to depend upon the time available for the doing of the particular act. I should mention at this stage that there was very little direct evidence going to what was reasonably practicable, there being no evidence as to what occurred in the intervening months and virtually no evidence even after the filing of the writ as to what might be thought to be the relevant circumstances. The document itself shows that it could not have been hard to draft and otherwise prepare, so that any factors justifying delay could only have arisen out of correspondence and negotiations as to which there is no evidence, the onus seemingly being on the respondent to adduce such material as would justify deferring the giving of what otherwise might seem to be a simple notice. In truth the only fact which the respondent relied upon, if so it could be described, was an assertion in argument that it wished to await the outcome of the application for summary judgment before serving the notice of dispute.

60. To ascertain whether that notice was given as soon as reasonably practicable, one must first define the dispute which is identified in the notice ultimately given. Here the brief notice given on 12 May 1998 sets out, after four predictable but relevantly uninformative recitals, a statement that "the following questions, disputes or differences have arisen between them" and there then follow in paragraph 1 of the notice the following disputes:

"(1) What was the date on which the contractor completed the works? (2) Is the contractor entitled to have the date for substantial completion of the works extended by any, and if so what, period? (3) What is the date for substantial completion in the events which have occurred? (4) Is the principal entitled to any, and if so what, amount by way of liquidated or pre-ascertained damages for delay in completion?"

As the last sub-paragraph makes clear the issue is clearly whether there was "delay in completion" in the sense of a delay caused by an unjustified failure to complete by the date fixed for substantial completion.

65. The two ways in which the appellant proprietor informed the respondent of its complaint about completion of the works and the consequent delay appeared only in two documents some five months or so apart. The appellant primarily refers to and relies upon the brief notification given by Howie Herring & Forsyth Pty. Ltd., the project managers on behalf of the appellant on 18 November 1997. There in response to the progress claim No. 7 and invoice dated 28 October 1997 the project managers set out a number of figures by way of reconciliation with the respondent's claim but included by way of deduction an item:

". Liquidated and pre-ascertained damages Minimum nine weeks $45,000"

After stating that they were prepared to release a sum some $40,000 less than that claimed by the respondent, the project manager continued:

"Please note, there are significant incomplete works associated with your contract, which we require completed within (14) days. If these works remain incomplete after this period, we reserve the right to have these works completed by others, with associated payments being deducted from retention moneys held."

A few days later the lesser sum was paid, there being no indication that the respondent accepted the claim, nor that the appellant through its project consultants had abandoned it. As I have said, if there was any further correspondence on the matter, it has not been contained in the Appeal Book.

72. It might be said that the complaint made by the appellant in the letter of 18 November was very barely stated, such that it might not, if rejected, have provided sufficient evidence of a dispute of the relevant kind. On the other hand formality in this respect has never been thought to be essential and the simple assertion was that there had been a delay which had already extended for nine weeks from the stipulated date of completion. Whatever might be said in answer, delay in completion is clearly alleged and, if rejected, that ought to amount to a dispute within the meaning of the contract and thus, prima facie, a "matter" agreed to be referred to arbitration within the meaning of s.53. The critical question, then, is whether the litigation commenced by the appellant's counterclaim was "in respect of" that same matter. For this purpose there cannot really be any doubt that the counterclaim should be treated as a separate proceeding.

75. Thus it is necessary to see what matter was raised by the appellant's counterclaim, apparently served and filed on 24 April 1998. It appeared in the document headed "Defence and Set Off and Counterclaim", the counterclaim referring back and repeating the admissions and allegations set out in the defence and set off and continuing in paragraph 15 by stating: "By reason of the foregoing the defendant is entitled to liquidated and pre-ascertained damages from the plaintiff in the sum of $5,000 per week from 3 May 1997 to the date that the works reach substantial completion." There followed the customary allegation in paragraph 16 that by reason of those matters the defendant had suffered and continued to suffer loss and damage. The counterclaim sought specifically by way of relief a declaration "that the works had not reached substantial completion", a declaration that the appellant was entitled to set off its entitlement to liquidated and pre-ascertained damages and an order for further damages to be assessed.

78. The basis for the allegation of entitlement to liquidated damages at $5,000 per week from 3 May 1997 must be found, if anywhere, in the allegations contained in the defence and set off. There set out were a number of formal matters, including an admission that the appellant entered into the building agreement on 4 December 1996, followed by allegations as to the relevant terms for present purposes. It asserted that the date for substantial completion was 27 March 1997, referring to heading E on page 12 of the agreement. It likewise alleged an entitlement to liquidated damages in the sum of $5,000 per week for each week that the works remained incomplete, making appropriate references to the terms of the agreement, including a term that it was entitled to deduct from the security it held any moneys due to the defendant under the agreement. The appellant had then referred to the contract sum and the fact that "the date for substantial completion under the agreement was extended to 3 May 1997". The defence continued by denying that the respondent had duly brought the works to completion on or about 19 July 1997 (as the latter had claimed in paragraph 6 of its statement of claim) and further alleged in paragraph 8(c) that "the works have still not reached substantial completion". For the rest the appellant merely made allegations with respect to the sums claimed, admitting that it had not paid the respondent the sum which the latter had asserted as being owed to it. For the rest the defence denied the respondent's right to payment and concluded in paragraph 13 of this part of the pleading:

"By reason of the matters aforesaid the defendant is entitled to set off its entitlement to liquidated and pre-ascertained damages (which exceeds the sum claimed by the plaintiff) against the sum of $40,655.25 claimed by the plaintiff."

82. It may be seen that the appellant's claim remained in fact a simple claim that it was entitled to $5,000 per week for liquidated and pre-ascertained damages for delay, identifying the date from which the liability ran as being the date for substantial completion as extended by agreement, namely 3 May 1997. In my opinion there is no difference between that which is claimed by way of counterclaim and that which was raised by way of difference in the letter of 18 November 1997. The respondent must have been fully aware of all that it had to know in relation to that dispute at that date, or at the least from the time the appellant paid the lesser sum, namely on or about 1 December 1997. From that date, so far as the evidence reveals, there was a relevant dispute or difference between the parties which was capable of being referred to arbitration pursuant to the arbitration clause in the contract.

85. If that be the case, then in my opinion notice of that question, difference or dispute was not given "as soon as reasonably practicable" by the respondent to the appellant, within the meaning of cl. 17.1 of the contract. Counsel did not cite any authorities as to the meaning of that expression or similar expressions in the context of arbitration agreements, nor do I know of any myself[7], although it is an expression frequently used in quite different contexts such as the giving of notice to or by administrative agencies and in drink-driving legislation, to give but two examples. Its meaning, however, is sufficiently clear, as long as one bears in mind the distinction between the words "possible" and "practicable". In each case it is a factual decision dependent on what might be expected of a party in all the circumstances.

88. In the present circumstances, if one accepts as I do that the dispute was clearly and succinctly enough outlined in the letter of 18 November 1997, there seems to me to have been no good reason why appropriate notice thereof should not have been given well before 12 May the following year. Allowing for the fact that advice would ordinarily have to be sought by the builder as to the cost and other consequences of referring such a matter to arbitration and that some short time might be expected to draw the relevant notice, albeit that that might have been done by an experienced solicitor in an hour or less, nevertheless there was here more than sufficient time for the respondent to do all that was necessary before serving its notice.

91. As to the contention that the dispute was known by the end of November, the learned judge took less than a page to dispose of the appellant's argument and, with respect, in terms which do not appear to do other than assert that it was "quite impractical and unreasonable". There was a passing reference to the requirement in the clause that the parties might resolve their disputes "to their mutual satisfaction", by which I assume the judge meant to refer to the processes of mediation and the like, but there is no evidence to suggest that that course was adopted and, even if it were, they must have broken down by the beginning of March for that was the time when the respondent issued its writ. That leads me to this aspect. The burden rested on the respondent to show that some such event occurred of a kind which would have justified what seems to have been excessive delay in giving notice. Of course, by the time the writ was issued, the respondent must have been clear in its own mind that it wished to recover its money and did not then intend to take any steps to resolve the dispute raised by the appellant. It must have taken the view, borne out by its subsequent actions, that it had a right to be paid the sum in accordance with the invoice sent to the appellant, without any deduction, for by 20 April 1998 it had issued a summons for summary judgment seeking payment of the sum of $45,000 and thereafter resisted the appellant's claim that it had a right to set off the amount of its cross-claim so as to defeat the plaintiff's right to judgment. Although that matter was argued on 4 May and judgment rejecting the appellant's contentions was given on 12 May, the outcome, successful for the respondent, must have been clearly predictable, so clear that it has not been the subject of any appeal. In short the respondent must have known that, properly analysed, the appellant's counterclaim would have to be heard separately. Notice referring the dispute ought therefore to have been given before the issue of the writ.

94. The argument as to failure to give notice as soon as reasonably practicable was put in the alternative by the appellant. It said that even if the respondent were not sufficiently aware of the dispute before the commencement of proceedings, then it was aware of the precise nature of the dispute when the defence and counterclaim were served on 24 April 1998. It said that even in those circumstances, where the notice of dispute was given by 12 May 1998, the respondent had not acted with sufficient promptness to satisfy the terms of the clause. Again the learned judge's reasons are of little assistance, although I consider that his Honour's references to the impracticality and unreasonableness were primarily directed to this alternative claim which involved only some 18 days' delay.

97. If the material set out in the defence and counterclaim had been the first notice that the respondent received of the reason why the appellant was withholding payments of the claimed sum, whether or not its attempt to set off was justified, then such a period of 18 days may not in other circumstances have exceeded that which was reasonably practicable for the giving of the relevant notice, although when litigation is on foot some increased speed of action is ordinarily desirable. However, the respondent in the present case could in no way have been surprised to receive the counterclaim for, as far as the evidence reveals, that had been the only sticking point between the two parties since late November the previous year. If it were right to assert that it had insufficient knowledge of the precise dispute or difference, which assertion I have rejected, nevertheless it must clearly have been aware of the broad thrust of what the appellant was saying, namely that it had wrongly delayed completion and that it was liable to pay the appellant a penalty or other damages for that delay. There was nothing to suggest that the appellant had failed to pay because of its impecuniosity and so, whatever the legal rights and remedies should have been, the respondent would have been well aware that this complaint would have surfaced once proceedings were issued. Thus when it received the defence and counterclaim it could not have been surprised to find that the foreshadowed dispute was now reflected in the defence of set off and in the counterclaim. As the respondent must have been advised, that counterclaim would have to be heard separately, for it has sought and persisted in seeking summary judgment for the amount due on the invoice. If at that time the respondent had been minded to refer that matter to arbitration as the most appropriate way of dealing with it, then it should then and there have taken such steps as would have enabled the notice to be given as soon as reasonably practicable, which in the circumstances of the present case would have been no longer than a few days.

100. The respondent says that it was entitled to await the outcome of the application for summary judgment for it might then, if unsuccessful, have accepted the Court's jurisdiction to deal with the dispute. That, however, in my opinion, was a course which it took at its own peril, for if it were persuaded that arbitration was the most satisfactory method, then it should have given its notice of dispute forthwith, at least in the sense of putting in train the necessary steps to ensure that a notice was served as soon as reasonably practicable. If it had given such a notice promptly, then the effect of that notice could and should have been considered at the time of hearing the application for summary judgment by the respondent's taking out a summons to stay the counterclaim returnable on the same day. If the respondent had truly feared that the outcome may have allowed the set off and counterclaim to be available as a defence to its claim, then the question of that right could have been then resolved, as would also have been the consequences in law of having given the notice. At the one hearing it would have been possible to seek any necessary directions as would have flowed from the giving of the notice. One may have assumed that, since the respondent wished and had the right to have the dispute resolved by arbitration, then, upon this hypothesis, that arbitration would have first to be resolved before the plaintiff's claim could have been pursued to its conclusion. Whatever would have been the right order in those circumstances, the failure to give the notice before the hearing on 12 May was unreasonable, produced unnecessary complication and expense inasmuch as it required a further hearing to resolve the matter now the subject of appeal and deferred consideration of the consequences of the reference to arbitration unnecessarily.

103. In short, the respondent wished to have the best of both worlds, to see what might happen on the return of the application for summary judgment and then, if matters went well for it (as they did), to defer further the hearing of the defendant's counterclaim by giving notice of reference to arbitration. Those considerations cannot justify a conclusion that the notice was given as soon as reasonably practicable. It cannot be a proper use of the right given to a party to refer matters to arbitration pursuant to an arbitration clause; neither is it right to permit that delay if a condition precedent for its operation is the giving of notice "as soon as reasonably practicable".

106. On both aspects of the appellant's contentions, the respondent has failed to give notice of dispute within time, so that the arbitration has not properly been set on foot. Nor thereafter could any notice have been given which would have been given as soon as reasonably practicable, for obvious reasons. In those circumstances the arbitration clause could not be invoked by the respondent so that, as I have previously explained, it had by then no right to obtain a stay under s.53 of the Commercial Arbitration Act.

109. In my opinion therefore the respondent had no right to obtain a stay, so that, there being no need to examine the other matters raised by the appellant, the appeal must be allowed and the learned judge's order set aside. In consequence and in lieu of that order the application for a stay of the proceedings by way of counterclaim should be ordered to be dismissed with costs. Such directions as are necessary for the further carrying forward of the appellant's counterclaim ought to be referred to a judge holding directions hearings in the Building List in the County Court.

114. The appellant owner and the respondent builder entered into a contract on 4th December 1996 for the construction of an animal clinic and rescue centre. Clause 2 of the contract permitted the respondent to invoice the appellant by the 30th day of each month for that part of the work performed since the date of the previous invoice. The invoice for the month ended 30th October 1997 claimed $89,758. It was sent to the appellant under cover of a letter from the respondent dated 28th October 1997. The manager appointed under the contract replied by letter dated 18th November 1997, asserting that liquidated and pre-ascertained damages in the sum of $45,000 were due to the appellant. After making another adjustment with which we are not concerned, the manager said that it was prepared to pay $49,102.75. That sum was paid on 1st December 1997.

117. On 11th March 1998 the respondent filed a writ in the County Court claiming the difference between the amount invoiced and the amount paid. That sum was subsequently amended to $45,000. On 20th April 1998 it filed a summons for summary judgment. Four days later the appellant filed a defence and counterclaim, which alleged that the building works should have reached substantial completion by 3rd May 1997, that they still had not reached substantial completion and that the appellant was entitled to liquidated damages in the sum of $5,000 per week from 3rd May 1997 until substantial completion. Those allegations had been the basis on which the manager had asserted a right to liquidated and pre-ascertained damages in its letter of 18th November 1997.

120. On 12th May 1998 Judge Shelton gave summary judgment for the respondent in the sum of $45,000 together with interest and costs. His Honour held that the allegations in the defence and counterclaim afforded no defence. The appellant did not appeal against the summary judgment. Later on the same day the respondent served a notice of dispute pursuant to cl.17 of the contract[8]. The questions, disputes or differences specified in the notice were the same as those raised by the defence and counterclaim, to which I shall hereafter refer simply as "the counterclaim". On 25th May 1998 the respondent filed a summons seeking to have the counterclaim stayed pursuant to s.53(1) of the Commercial Arbitration Act 1984. On 12th June 1998 Judge Shelton granted the stay. It is against that order that the present appeal is brought by leave granted nunc pro tunc on 4th September 1998.

123. There are seven grounds of appeal, of which it is necessary or expedient to consider only two. Ground 4 was that the learned judge erred in finding that the respondent was, when the relevant proceedings were commenced, ready and willing to do all things necessary for the proper conduct of the arbitration as required by s.53(1)(b) of the Act. Ground 6 was that his Honour erred in finding that the respondent had given notice of dispute "as soon as reasonably practicable" within the meaning of cl.17.1 of the contract.

126. Section 53(1) reads:

"(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 further give such directions with respect to the future conduct of the arbitration as it thinks fit." (Emphasis added.)

Compare s.5 of the Arbitration Act 1958.

If any question, difference or dispute whatsoever shall arise between the Principal and the Contractor, upon or in relation to or in connection with the Contract, which cannot be resolved by the contracting parties to their mutual satisfaction, either party may, as soon as reasonably practicable, by notice in writing to the other party clearly specify the nature of such question, difference or dispute and call for the point or points of issue to be submitted for settlement by arbitration." (Emphasis added.)

The "Principal" is the appellant and the "Contractor" is the respondent.

140. At the hearing of the application for a stay counsel for the respondent said that, if his client had failed in its application for summary judgment, it would have pursued its claim against the appellant in the courts. On the appeal that was taken to mean that the respondent would not then have initiated arbitration proceedings in respect of the assertions in the manager's letter and the counterclaim. Subject to what follows, I am prepared to assume in favour of the respondent that it was reasonable for it to await Judge Shelton's decision on the summary judgment application. If that application had been refused, it might well have been sensible for both parties' claims to be litigated. The respondent had doubtless been advised that the dispute about substantial completion did not afford a defence to its claim but it wished to wait and see whether that advice was vindicated by the Court. The assumption relieves me of the task of considering the stricter view that the respondent was bound to back the judgment of its legal advisers without awaiting the result of the summons.

143. There remains the question whether, having regard to the period from 18th November or 1st December 1997 to 12th May 1998 as a whole, it could be said that the respondent had given notice "as soon as reasonably practicable" within the meaning of cl.17.1. There was no evidence explaining the delay between the manager's letter or its being carried into effect by payment of only part of the amount invoiced and the filing of the writ. The respondent was therefore bound to fail in its application under s.53 if it bore the onus of proof, in that application, that it had given notice of dispute as soon as reasonably practicable.

146. Mr. Tiernan endeavoured to meet that difficulty by relying on the way in which he understood the cl.17.1 ("as soon as reasonably practicable") point to have been relied on in the County Court.[9] He did not understand it to have been raised as a threshold issue: it was not contended that, because notice was not given as soon as reasonably practicable, no arbitration was on foot and there was no question of the claim being arbitrated: if the argument had been put that way, counsel said, the respondent might have applied for an extension of time under s.48. Instead the point had been relied on only as a "sufficient reason why the matter should not be referred to arbitration" within the meaning of s.53(1)(a).

149. I am not sure whether counsel's understanding of the argument below is correct. In his reasons for judgment on the application for a stay the learned judge dealt, under separate headings, with seven distinct issues. One of them was readiness and willingness in terms of s.53(1)(b); another was whether the notice of dispute had been given as soon as reasonably practicable as required by cl.17.1 and a third was whether there was no sufficient reason why the matter should not be referred to arbitration. His Honour said this on the cl.17.1 point:

"Clause 17.1 of the building agreement stipulates that notice requiring arbitration be given 'as soon as reasonably practicable'. The defendant submits that since the plaintiff pleads that the works required under the building agreement were completed in July 1997, an invoice in respect of them was delivered on the 28th October 1997 and the last payment for the building works was made by the defendant to the plaintiff on 1 December 1997, the plaintiff, in waiting until 12 May 1998, did not give notice requiring arbitration 'as soon as reasonably practicable'. I do not accept this submission. The matters in dispute here are those referred to in the defendant's counterclaim which was delivered on 24 April 1998. It would seem quite impractical and unreasonable to me to impose any burden upon the plaintiff to give a notice of dispute or difference with respect to the matters covered by the counterclaim prior to the defendant's having given notice of its intention to pursue its claim with respect to such matters by delivering its counterclaim on the 24th April last, particularly given the requirement placed upon the parties by Clause 17.1 to endeavour to resolve their disputes 'to their mutual satisfaction'. Following the giving of the notice of counterclaim on 24 April 1998, in my view the plaintiff acted 'as soon as reasonably practicable' in giving its notice of dispute or difference on 12 May 1998, immediately following judgment on the summary judgment application."

153. Once the writ was filed, it was understandable that the respondent should hold its hand pending the decision on the summary judgment application, but the delay in filing the writ called for explanation in face of the contractual requirement to give notice as soon as reasonably practicable and the events that had happened. That is true even if the burden of proof lay on the appellant to satisfy the Court that there was a sufficient reason why the matter should not be referred to arbitration. The language of s.53(1)(a) would suggest that that was not so, but see Huddart Parker Ltd. v. The Ship "Mill Hill"[10] and the cases referred to by Brooking, J. in S.J. Weir Pty. Ltd. v. Novarack Pty. Ltd.[11]

156. Ground 6 should probably be upheld, but I prefer to rest my decision on ground 4. It will be recalled that that ground was that his Honour erred in finding that, when the relevant proceedings were commenced, the respondent was ready and willing to do all things necessary for the proper conduct of the arbitration.

159. The date on which those proceedings were commenced was 24th April 1998, when the counterclaim was filed. At that stage the respondent was not ready, and was only conditionally willing, to give notice of dispute. In other words, it was not ready, and was only conditionally willing, even to initiate the arbitration. It matters not that, on the assumption made in its favour in [39], the respondent's unwillingness to initiate the arbitration at that stage was reasonable. The question posed by the statute is whether it was ready and willing. On 24th April 1998 it was not, because of a proceeding which it had brought and on which it first wished to obtain judgment.

162. The statutory language makes it clear that there must be readiness and willingness at the time the other party sues[12]. It is not difficult to see why that should be so. If the applicant is not then ready and willing to arbitrate, why should the other party not sue and why should its proceeding be stayed? Perhaps more than one answer is possible, at least to the second of those questions, but not in the face of the double barrelled requirement in s.53(1)(b).

165. Mr. Tiernan submitted that s.53(1)(b) is directed only to those things which are necessary for the proper conduct of the arbitration once it is on foot. He conceded that there was no authority to that effect and the submission stands in contrast with what was said by Menhennitt, J. in Hammond v. Wolt[13] and Cole, J.A. in ABB Power Plants Ltd. v. Electricity Commission of New South Wales[14]. The cases do not suggest that there is an invariable rule about failure or delay in giving a notice of dispute but, on the facts of this case, the respondent was not ready and willing on 24th April 1998 to do all things necessary for the proper conduct of the arbitration. That was not because of conduct on the part of the appellant other than its electing to defend the claim brought against it. The respondent was not ready to take the first step required by cl.17.1, because it had initiated litigation and wished to await the outcome of its application for summary judgment. I differ with reluctance from a specialist judge but I do not think his Honour's finding that the requirements of s.53(1)(b) were satisfied was open.

168. That conclusion makes it unnecessary to consider the other issues that were debated, but the simplicity of the basis on which I would decide the appeal should not be permitted to obscure the skill with which the case, including questions of law, was argued on both sides.

171. I would allow the appeal, set aside the stay granted on 12th June 1998 and order in lieu that the respondent's application therefor be refused. The counterclaim will then have to be tried in the County Court. I express no view as to whether that is convenient or not. It follows inexorably from the respondent's inability to satisfy the condition precedent to a stay in s.53(1)(b).

[1] [1981] R.T.R. 1.

[3] [1991] VicRp 77; [1991] 2 V.R. 367, at 378.

[5] This date seems largely a matter of inference since the date of payment appears only in paragraph 8 of the statement of claim, not denied in the defence, and there is otherwise no evidence as to conversations or correspondence at or about that time. One may assume that the respondent plaintiff was not content to accept that sum for it issued its proceedings for the balance on 11 March 1998. It appears uncertain, indeed unlikely, that the delay between the end of November and the ultimate giving of the notice was originally relied upon before the learned County Court judge, but equally there is little doubt, having regard to his reasoning at pp.180-181, that it was argued before him on that basis as one of the two alternative reasons for saying that the submission was not made as soon as reasonably practicable.

[6] I shall hereafter use the word "dispute" to cover all aspects of the expression "question, difference or dispute".

[7] Other than in Brunswick N.L. v. Sam Graham Nominees Pty. Ltd. [1990] 2 WAR 207 per Malcolm, C.J. at 208-209. The case was cited to the Court, but not this passage. It is not difficult to see why, for, although one would not wish to disagree with the outcome, the passage does not analyse the expressions, but merely expresses factual conclusions.

[8] The relevant provisions of that clause are set out later in this judgment.

[9] Neither counsel appearing before us appeared below.

[10] [1950] HCA 43; (1950) 81 C.L.R. 502 at 508-509.

[11] Unreported, Full Court, 4th May 1993 at 4.

[12] See, for example, Bell v. Sun Fire Insurance Office (1927) 29 Ll.L.Rep. 236 at 238; H.P. Brady Pty. Ltd. v. Kirsch [1936] VicLawRp 5; [1936] V.L.R. 44 at 47 and Carracher v. Colonial Mutual Life Insurance Society Ltd. [1968] V.R. 605 at 611. A commonsense approach is nevertheless required. A defendant, for example, may not be ready or willing to initiate an arbitration until it learns that proceedings have been commenced, or perhaps until it is served with the writ, but that does not mean that it was not ready and willing "at the time when the proceedings were commenced".

[13] [1975] VicRp 10; [1975] V.R. 108 at 116. Those observations must now be read subject to PMT Partners Pty. Ltd. v. Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 C.L.R. 301. Moreover, it is not necessary that a notice of dispute have been given when the proceedings are commenced but only, if it has not, that the applicant then be ready and willing to give it.

[14] (1995) 35 N.S.W.L.R. 596 at 620 and 625-626. See also Manningham City Council v. Dura (Aust.) Constructions Pty. Ltd. [1999] VSCA 158 at [17] per Phillips, J.A.