Savcor Pty Ltd v Solomon Corrosion Control Services Pty Ltd and Ors [2001] VSC 428

Supreme Court of Victoria|2001-11-23|Before: Byrne J

ARBITRATION - whether arbitration should be restrained to enable disputes to be resolved in court - whether court proceeding should be stayed in favour of arbitration.

On 24 October 2001 the plaintiff, Savcor Pty Ltd ("Savcor"), commenced this proceeding, No. 8081 of 2001, marked for entry in the Building Cases List against Solomon Corrosion Control Services Pty Ltd ("Solomon") and its director, Isaac Solomon, and the Roads Corporation. I shall refer to this proceeding as the Roads Corporation proceeding.

Before the court there were two applications brought in the Roads Corporation proceeding. The first, by summons filed on 24 October 2001 on behalf of Savcor, seeks orders consolidating the Roads Corporation proceeding with proceeding No. 7818 of 1999 and restraining the Roads Corporation on an interlocutory basis from proceeding with an arbitration which is on foot between it and Savcor. The consolidation application was on 26 October 2001 adjourned to 30 November 2001 with directions as to the filing of affidavits. The injunction application, which had a great deal of urgency about it, was adjourned for hearing on 1 November 2001. The second application, filed on 31 October 2001 on behalf of the Roads Corporation, seeks a stay of the Roads Corporation proceeding pursuant to s. 53 of the Commercial Arbitration Act 1984.

On 6 December 1999 Savcor had commenced proceeding No. 7818 of 1999 against a Danish company, Cathodic Protection International APS ("CPI"). This, the CPI proceeding, has until June of this year, been quiescent. It was only on 26 June 2001 that the defendant was served, but even so, little progress has since been achieved. In the CPI proceeding, too, Savcor has on 24 October 2001 applied for consolidation with the Roads Corporation proceeding. This application has also been adjourned to 30 November 2001.

The matter before the court on 1 November 2001 was the Savcor application in the Roads Corporation proceeding to stop the arbitration pending the hearing and final determination of that proceeding. I was told that a like application was made in the CPI proceeding but this does not appear on the court file. On that day, Savcor sought to amend its injunction application to seek, in the alternative, an order pursuant to R. 50.01 referring to the Arbitrator the disputes between Savcor and CPI and those between it and Solomon and Mr Solomon. I declined to deal with this application to amend for want of notice to affected parties, so that the cross-applications which proceeded on that day concerned the Savcor injunction restraining the arbitration and the Roads Corporation stay of the Roads Corporation proceeding.

Having heard argument, I formed the view that the Savcor injunction application should be refused and that the Roads Corporation stay application should be granted and I made orders to that effect. As requested, I now provide my reasons.

It was accepted by all parties that the court has power, pursuant to its inherent jurisdiction, to stay an arbitration where the interests of justice and the protection of its own process so requires.

In July 1995 Roads Corporation, then called Vic Roads, awarded to Savcor, then called Remedial Engineering Pty Ltd, a contract to design, supply, install and commission into monitored operation a cathodic protection system for the Phillip Island Bridge at San Remo[1]. In fact, the system which Savcor provided was designed and supplied by CPI pursuant to an agreement between CPI and Savcor[2]. The work was performed by 1997 when defects began to appear in the system. A number of complaints about the system were made by the Roads Corporation, including a complaint that a particular component of the system, titanium wire used to carry electric current to the bridge, had failed. Counsel for Savcor formally conceded before me that the cathodic protection system had failed and that it did so by reason of the failure of the titanium wire.

Solomon was engaged by the Roads Corporation as a specialist engineer to "act as its consultant in relation to the design, installation, commissioning into operation and monitoring the system". This is the general description of its retainer given by Nicholas Stephen Psaltis, a director of Savcor, in paragraph 5 of his affidavit sworn on 24 October 2001. It is expressed a little differently in paragraph 15 of the statement of claim. I was told that the Roads Corporation referred to Solomon for its opinion, Savcor's design proposals for the system, and that it made changes to these proposals to satisfy Solomon's requirements. It is said that all or some of the defects in the system are wholly or partly attributable to the input of Solomon.

Under the terms of the contract between Savcor and Roads Corporation there was a limited right to refer a dispute to arbitration. This right was available only to Savcor. Savcor availed itself of that right on 19 March 1997 when it referred to arbitration disputes regarding delays to the work and adjustments to the contract price. By this time the defects in the system were evident and the parties on 30 September 1997 entered into a further ad hoc arbitration agreement whereby the technical issues as to the system would be referred to the same Arbitrator. The Arbitrator accepted this and the arbitration proceeded thereafter on the basis that the Roads Corporation's complaints were incorporated in it. Points of claim and points of counterclaim were delivered in 1998 and the arbitration moved forward. I shall not recount its history; it is sufficient that the parties were on 1 November set to commence a hearing which was due to start by a conclave of experts on 8 November 2001. Hence the urgency of the Savcor injunction application.

In the meantime, after 1997 the arbitration passed from the hands of Savcor to those of its indemnity insurer after liability to indemnify was accepted by the insurer in April 1999. The conduct of the arbitration was undertaken by the insurer's solicitors from late 1999 and on 6 December 1999 they filed the writ in the CPI proceeding, but they did not serve it.

On 15 March 2001 Savcor's insurer was placed in provisional liquidation and on 7 May 2001 its present solicitors were engaged to act for it.

Although there were difficulties encountered in obtaining the Savcor files from the solicitors who had been instructed by the insurer, the arbitration has still moved forward. The writ in the CPI proceeding was served on 29 June 2001 and on 21 September 2001 a substantial statement of claim in that proceeding was filed.

On 18 June 2001 the Arbitrator rejected an application made by Savcor to adjourn the preliminary conference. On 3 September 2001 a further preliminary conference was held at which a detailed timetable leading to the arbitration hearing was established. The terms of this timetable had been substantially agreed by the parties both of which were represented at the conference. The preparation continued. As recently as 30 October 2001 Savcor served a 130 page document being its proposed amended reply and defence to counterclaim in the arbitration.

What is sought now, at the last minute , is a fundamental change in direction. I can understand that Savcor is reluctant to conduct its dispute against the Roads Corporation in arbitration and its associated disputes against other parties in court. I can understand that it would prefer, if possible, to avail itself of the protective provisions of s. 131 of the Building Act where other parties may be responsible for the defects of which the Roads Corporation complains. The fact, is, however, that this is what it agreed to four years ago and both the Roads Corporation and Savcor have invested substantial funds in implementing that decision. Part of this investment will be lost if the arbitration is abandoned.

Further considerations included the ongoing deterioration of the bridge and the change in complexion of the arbitration by reason of the formal concession of liability made by Savcor. I was pressed too with the consideration that the conduct of the arbitration had for most of its life been outside the direct control of Savcor. These matters which tend in different directions are of less significance than the fact of Savcor's late decision to repent its 1997 decision to arbitrate.

This dispute has been alive long enough. The administration of justice, which cares for arbitration as it does for litigation, as well as the interests of the parties, dictate that there should be finality to disputation and that parties who solemnly commit themselves and others to a course of conduct in the resolution of such disputation should be held to their commitment.

Accordingly, the injunction sought by Savcor was refused. The stay application of Roads Corporation was allowed, but only to the extent that matters subject to the arbitration agreement contained in the 1995 contract or that of 30 September 1997 require.

Arbitration Act 1984

At a glance

Court

Decision date

Before

Source

Judgment (19 paragraphs)

Parties

Legislation Cited (1)