Southern Region Pty Ltd v State of Victoria [2001] VSC 250

5. Before the court are two summonses. First is a summons filed on behalf of the Contractor on 9 July 2001 seeking summary judgment for the sum uncertified and directions for the proceeding as a proceeding managed in the Building Cases List. The second is a summons filed on 23 July 2001 on behalf of the Principal seeking a stay of the proceeding pursuant to s.30 of the Supreme Court Act 1986, alternatively, pursuant to the inherent jurisdiction of the Court, alternatively, pursuant to s. 53 of the Commercial Arbitration Act 1984. The application with which I am here concerned is the stay application.

8. The circumstances which give rise to the proceeding and to the stay application are a little complicated and I shall set them out as a chronology.

The building contract was entered into between the Principal and the Contractor or their predecessors. Its terms included the standard form agreement AS2124-1992 with certain modifications. The contract appointed a superintendent whose identity is not relevant for present purposes.

The date for practical completion as adjusted by the superintendent.

Practical completion was certified to have been achieved.

The Contractor served notice of dispute pursuant to cl. 47. I shall return to this document. As a consequence of this, the Contractor elected to refer the dispute to arbitration pursuant to cl. 47.2. An arbitrator has been appointed and has entered upon the reference.

The superintendent wrote to the Contractor indicating dissatisfaction with aspects of the security system and directed pursuant to cl. 37 that rectification work to that system be carried out and that a fresh defects liability period should apply with respect to the system. This period is to expire 12 months after completion of the system.

The superintendent invited the Contractor to submit its final claim pursuant to cl. 42.7.

The Contractor submitted its final claim seeking $7,698,951. Most, if not all, of this claim, comprised items which had been previously rejected and which were included in the Contractor's arbitration.

The Contractor re-submitted an amended final claim seeking the same amount. The amendments not relevant for my purposes.

The superintendent wrote to the Contractor and the Principal stating that he had determined, pursuant to cl. 42.8, that a final certificate could not issued due to the incompleteness of component parts of the works. The letter contained a further direction pursuant to cl. 37 that the Contractor rectify and completed certain listed items.

The time fixed by cl. 42.8 for the superintendent to issue a final certificate in response to the re-submitted final claim expired.

Following an exchange of contentious correspondence, the Contractor commenced this proceeding.

The Principal directed the superintendent to issue a final certificate.

A final certificate dated 20 July 2001 was issued showing a balance of $1,880,570 payable by the Contractor to the Principal.

The Principal served a notice of dispute pursuant to cl. 47.1. The subject matter of this dispute, broadly speaking, concerns the claims of the Contractor in this proceeding.

14. The Contractor's claim for the amount of the final claim depends upon the operation of cl. 42.1 which relevantly provides that:

"...where no payment certificate has been issued the Principal shall pay the amount of the Contractor's claim".

This obligation to pay is unaffected by the subsequent issue of a certificate out of time[2]. I am, of course, not concerned with the applicability nor the application of this cl. 42.1 to the present case.

19. The application before me is the Principal's application for a stay. Counsel for that party relied upon s.53 of the Commercial Arbitration Act 1984 and upon the Court's inherent jurisdiction. They submitted that the availability of the arbitral process to resolve the claim in respect of the uncertified final claim arose because it was or was about to be referred to arbitration pursuant to the Principal's notice of dispute of 24 July 2001. They said that the stay application was not brought on the ground that the entitlement of the Contractor to the sum claimed was in issue before the Arbitrator in the Contractor's arbitration of July 2000.

22. Counsel for the Contractor relied upon cl. 47 which is in the following terms:

""47. DISPUTE RESOLUTION 47.1 Notice of Dispute If a dispute between the Contractor and the Principal arises out of or in connection with the Contract including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute. Notwithstanding the existence of a dispute, the Principal and the Contractor shall continue to perform the Contract, and subject to Clause 44, the Contractor shall continue with the work under the Contract and the Principal and the Contractor shall continue to comply with Clause 42.1. A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration. 47.2 Further Steps Required Before Proceedings A party served with a notice of dispute may give a written response to the notice to the other party and the Superintendent within 28 days of the receipt of the notice. Within 42 days of the service on the Superintendent of a notice of dispute or within 14 days of the receipt by the Superintendent of the written response, whichever is the earlier, the Superintendent shall give to each party the Superintendent's written decision on the dispute, together with reasons for the decision. If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a written decision on the dispute within the time required under Clause 47.2 the parties shall, within 14 days of the date of receipt of the decision, or within 14 days of the date upon which the decision should have been given by the Superintendent confer at least once 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 any such conference, each party shall be represented by a person having authority to agree to a resolution of the dispute. In the event that the dispute cannot be so resolved or if at any time after the Superintendent has given a decision either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may, by notice in writing delivered by hand or sent by certified mail to the other party, refer such dispute to arbitration or litigation. 47.3 Arbitration Arbitration shall be effected by a single arbitrator who shall be nominated by the person named in the Annexure, or if no person is named, by the Chairperson for the time being of the Chapter of the Institute of Arbitrators Australia in the State or Territory named in the Annexure. Such arbitration shall be held in the State or Territory stated in the Annexure. Unless the parties agree in writing, any person agreed upon by the parties to resolve the dispute pursuant to Clause 47.2 shall not be appointed as an arbitrator, nor may that person be called as a witness by either party in any proceedings. Notwithstanding Clause 42.9, the arbitrator may award whatever interest the arbitrator considers reasonable. If one party has overpaid the other, whether pursuant to a Superintendent's certificate or not and whether under a mistake of law or fact, the arbitrator may order repayment together with interest. 47.4 Summary or Urgent Relief Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under Clause 42 or to seek urgent injunctive or declaratory relief in respect of a dispute under Clause 47 or any matter arising under the Contract." They accepted that a disputed claim for sums due under an uncertified claim fell within the terms of the first paragraph of cl. 47.1 and that this was an arbitration agreement for the purposes of s.53[3]. They contended, however, that a claim in respect of an uncertified claim should not be stayed, because it was specifically saved by cl. 47(4). Where the contract provides for the Contractor to sue to enforce payment under cl. 42 this right should not be denied simply because the Principal raised by way of defence to this claim matters which, in a different context, would be arbitrable and might therefore warrant a stay. It was pointed out that payments recovered in this way were received by the Contractor on account only, so that, in the event that it should appear that the certified sum or the uncertified claim were erroneous or unjustified, this sum would be recoverable in due course.[4]

26. I remind myself that in this application I am not concerned with the question whether the Contractor's claim in the proceeding pursuant to cl. 42 is likely to succeed, nor with the different question whether the Contractor is entitled, under the terms of the contract other than cl. 42, to the amount of $7.6M. My concern is whether the Contractor should be prevented from pursuing its claim under cl. 42 in the Court.

29. I accept that the other requirements of s. 53 have been made out. The Principal asserts and I accept that it is ready and will to arbitrate the matters contained in its July 2001 notice and that it will do so with due expedition. Its application has not been precluded by its having taken a step in the proceeding. There is no good reason to refuse the stay other than the presence of the right to litigate conferred by cl. 47.4.

32. Nevertheless I will refuse to exercise the jurisdiction conferred by s. 53 to order the stay sought. The power to order a stay is one which is historically based upon the respect which the court gives to the agreement of the parties to resolve their disputes in the manner of their choosing. This is not a case where the litigation involves a breach of an arbitration agreement, because cl. 47(2) contemplates that the disputant serving the notice may elect to litigate. It is, however, the case where the parties have expressly agreed to qualify their decision to resolve all of their disputes by the cl. 47(2) processes. The court will respect this agreement. It follows from this that the Principal is entitled to resist the claim for the uncertified final claim by raising any defence which is available to it under cl. 42. So long as the claim of the Contractor is a claim brought within cl. 47.4, it should be permitted to proceed.

35. Nothing was said in argument in support of s. 30 of the Supreme Court Act 1986 as a basis for the stay application. With respect to the inherent jurisdiction of the Court, I am of opinion that the jurisdiction ought not be exercised for the reasons that I have set above. This jurisdiction is a supervisory jurisdiction to prevent the abuse of the Court's or the arbitration process where the same dispute is or may be brought in two forums. Given the provisions of s. 53 of the Commercial Arbitration Act 1984, it would be an unusual case where this jurisdiction would be exercised to stay litigation in favour of a domestic arbitration where that statutory provision is inapplicable. This is not such a case.

38. I conclude, therefore, that the application of the defendant brought by summons filed on 23 July 2001 should be dismissed with costs.

[2] See Zauner Construction Pty Ltd v. No. 2 Pitt Street Pty Ltd [2001] VSC 154 at [17] and the cases there referred to.

[3] Manningham City Council v. Dura (Australia) Construction Pty Ltd [1999] VSCA 158; [1999] 3 VR 13.

[4] See cll. 42(1) para. 6, 42.6, 47.3 para. 4 and 47.1 para. 3.