Warnervale Concreting Pty Limited (In Liquidation) v Abigroup Contractors Pty Limited

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50037/02 - WARNERVALE CONCRETING PTY LIMITED (IN LIQUIDATION) v ABIGROUP CONTRACTORS PTY LIMITED JUDGMENT 1 HIS HONOUR: This is an application by the defendant for an order that the proceedings brought by the plaintiff, be stayed. 2 The proceedings relate to a series of claims by the plaintiff which arose after 18 December 1998 when the defendant, as main contractor and the plaintiff as sub-contractor, entered into a sub-contract in respect of concreting works required to construct a stadium at Graham Park, Gosford under a head contract between the defendant and the Gosford City Council. 3 The contract between the parties provided for a mechanism for the resolution of disputes. The relevant clauses are as follows: "47.1 Notice of Dispute If a difference or dispute (together call a 'dispute') between the parties arises out of or in connection with the Subcontract or the subject matter of the Subcontract, including (without limitation) a dispute concerning: (a) a Direction of the Main Contractor's Representative (b) a Claim then either party shall, by hand or by certified mail, give the other and the Main Contractor's Representative a written notice of dispute adequately identifying and providing details of the dispute. Notwithstanding the existence of a dispute, the parties shall, subject to Clause 47.4, continue to perform the Contract. Clauses 47.1, 47.2 and 47.3 shall not be mandatory if the only remedy sought by the Subcontractor is an order that the Main Contractor pay to it an amount which is not disputed to be due and payable under the Subcontract. 47.2 Conference. Within 7 days after receiving a notice of dispute, the parties shall confer at least once to resolve the dispute or to agree on methods of doing so. At every such conference each party shall be represented by a person having authority to agree to such resolution or methods. All aspects of every such conference except the fact of occurrence shall be privileged. If the dispute has not been resolved within 14 days of service of the notice of dispute, that dispute shall be and is hereby referred to arbitration. 47.3 Arbitration. If within a further 14 days the parties have not agreed upon an arbitrator, the arbitrator shall be nominated by the President of the Law Society of New South Wales. The arbitration shall be conducted in accordance with the Rules for the Conduct of Commercial Arbitration of the Institute of Arbitrators and Mediators Australia. 47.4 Summary relief. Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under the Subcontract or to seek injunctive or urgent declaratory relief." 4 Section 53 of the Commercial Arbitration Act 1984 provides the approach which the court should take to this dispute. That section is in the following terms: "53(1) If a party to an arbitration 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 … 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) 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. 53(2) An application under sub section (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance." 5 The section has been the subject of consideration and application in many cases. In IBM Australia Limited v National Distribution Services Pty Ltd (1991) 22 NSWLR 466 the Court of Appeal considered an arbitration clause which provided: "Any controversy or claim arising out of or related to this agreement or the breach thereof will be settled by arbitration." 6 The court held that a clause in these terms was so wide that the arbitrator was given the powers which a court might otherwise have. In that case, the clause was sufficiently wide to include claims for rectification and for relief on the ground of misrepresentation or mistake. In other words the arbitrator could deal with and determine matters going beyond the confined question as to whether either party had performed its obligations under the contract. 7 In his judgment, Clarke JA emphasised the necessity to ensure that in construing the agreement between the parties, the court did not require litigation of disputes relating to the contract in two places. He indicated that a court should endeavour to construe the parties' agreement so that all of the disputes should be determined in the same place. He said: "It is far more likely that they (ie the parties) intended that all disputes between them concerning the terms of the contract, the performance of it, and matters connected, in a real sense, with the contract, should be referred to the one tribunal for determination. For my part I would find it difficult to ascribe to the parties to a contract an intention to submit only part of a dispute to arbitral tribunal reserving the remainder for consideration by the Court as this would, on any view, be inefficient and costly." P 483 8 There is no doubt that a strong preference is to be given to agreements for arbitration when the parties have determined under the contract to follow this course. This is reflected in s 53 of the Commercial Arbitration Act which places the onus on the party resisting a stay of proceedings. This was reinforced by Gleeson CJ in Francis Travel Marketing Pty Limited v Virgin Atlantic Airways Limited (1996) 39 NSWLR 160-165 where his Honour said: "When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunals should be determined by fine shades of difference in the legal character of individual issues or by the ingenuity of lawyers in developing points of argument." 9 Recently in Savcor Pty Limited v State of New South Wales (2001) 52 NSWLR 587, Barrett J had occasion to consider the principles which should be applied in determining whether a court should hold the parties to their bargain and grant a stay pursuant to s 53. It is important to acknowledge that where parties have resolved to follow a particular course they should primarily be held to their bargain (Huddert Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502). However, there may be countervailing factors. · The fact that a dispute involves a question of law which was the position in Petersville Limited v Peters (WA) (1997) ATPR 41-566 where the dispute turned upon questions of market definition, competition within markets and anti competitive behaviour. · Where there may be a duplication of effort. · Where there may be a multiplicity of proceedings with the risk of inconsistent concurrent findings.

See Thomas v Star Maid International Pty Ltd (1999) FCA 911 and Moussa v Eski Export Pty Ltd (2000) FCA 1670 and the analysis of Gillard J in Abigroup Contractors Pty Ltd v Transfield Pty Ltd (1998) VSC 103 summarised by Barrett J at p 600. 10 In the present case the plaintiff claims under three headings:

(i) the amounts due and payable pursuant to progress claims; (ii) the damages for loss of profits/loss of contractual expectation claim; (iii) a claim under the Trade Practices Act . 11 Although the claims for amounts due and payable pursuant to the progress claims and damages for loss of profits are matters which clearly fall within the contract and could be determined pursuant to the arbitration clause, difficulties arise in relation to the trade practices claim. 12 That claim concerns an allegation that Mr J Clew, the project manager of the defendant, made material misrepresentations to a third party, Mr Michael Touma, about the termination of the plaintiff's contract on the building site. By a letter dated 11 June 1999, Mr Touma confirms that Mr Clew said to him: "Warnervale Concreting had been removed from the job as they did not have a sufficient team to complete the job." 13 The claim which the plaintiff seeks to make is that because of the remarks by Mr Clew the plaintiff failed to secure at least an opportunity to contract for major work being offered to the market by Mr Touma. Mr Touma is the project manager of a company known as Build Max Corporation Pty Limited which was undertaking works on a project known as Quay North. It is expected that at any trial of these allegations, Mr Touma will give evidence that had the reference from Mr Clew in relation to the plaintiff been favourable, sub contracts which had already been prepared would have been signed between Build Max and the plaintiff, which would have brought significant remuneration to the plaintiff. 14 It is submitted by the plaintiff that to determine this claim it will be necessary to determine whether the statement made by Mr Clew to Mr Touma was factually correct. That issue is closely intertwined with any factual findings which would have to be made in respect of the performance of the plaintiff under the contract. 15 In my opinion, there is substance in the plaintiff's submissions. Although the representation allegedly made relates to the quality of the work undertaken by the plaintiff pursuant to its contact with the defendant, the claim is not otherwise related to the contract and does not arise under it. There is a real prospect, if I was to grant the present stay, that separate proceedings would follow, one to litigate the contractual matters and the other to litigate the trade practices claim. This may involve the same factual questions being determined in two separate proceedings. 16 Authority does not require that in these circumstances, the parties should litigate in the court. However, bearing in mind the discretion afforded by s 53, it is a powerful reason to favour this course. The existence of more than one proceeding in respect of the same claims or matters is a situation which has been variously described as "not one to be readily accepted" (Qantas Airways v Dillingham Corporation (1985) 4 NSWLR 113 at 117), "a potential disaster" (El Amria [1981] 2 Lloyds Rep 119) and "absurd" (Huddart Parker Limited v The Ship Mill Hill (1950) 81 CLR 502 at 511). 17 In these circumstances I am persuaded that there is good reason why the matters should not be referred to arbitration. 18 Other matters were argued before me which I do not need to determine. The first matter is the submission by the plaintiff that because the defendant has already taken a step in the proceedings, other than entering an appearance, a stay should not be made. The step which is said to have been taken, was a request from the defendant's lawyer by letter dated 29 April 2002, for copies of all documents referred to in various paragraphs of the summons. It is said that the letter constitutes a notice to produce, a request for particulars or a request pursuant to s 166(a) of the Evidence Act 1995 (NSW). It is submitted that this letter provides evidence of an intention by the defendant to abandon any right to apply for a stay in favour of allowing the proceedings to continue. 19 It is further submitted by the plaintiff that because the defendant has not issued a notice of dispute and there is no evidence before me of a dispute, I could not be satisfied that the defendant is, bona fide, seeking to rely upon clause 47 of the sub-contract. Accordingly, it is submitted that the defendant has not yet taken a step which would bring the relevant clauses of the agreement into operation. See ABB Power Plants v Electricity Commission of New South Wales (1995) 35 NSWLR 596 at 625. In this respect, clause 47.1 of the sub-contract contemplates that proceedings may be instituted in the court to enforce payments due under the sub-contact in respect of which there is no dispute. 20 Having regard to my conclusion in relation to the fundamental issue in this matter, it is not necessary for me to determine these further issues. However, I am inclined to the view that the letter seeking documents is not relevantly a step in the proceedings. Rather, it was a request for information so that the defendant could understand the claim made against it for the purpose of determining what step, if any, the defendant would take in the proceedings. 21 In relation to the second matter, the defendant submits that the amount claimed by the plaintiff is disputed and that the amount will not be "due" under the sub-contract until there has been an adjudication of the claim. As there is no contractual machinery to make the amount due without adjudication, and as there has been no adjudication, the amount is not relevantly due and payable. Before I could determine this issue, the available evidence would require consideration and the matter further explored in submissions. This has not occurred and, in the circumstances, is not necessary. 22 In determining that I will not grant a stay, I have also had regard to the fact that the defendant is concerned that if required to litigate in the court, the dispute will be aired in public which would be avoided if the matter is arbitrated. I appreciate that parties provided for arbitration so that their disputes may be kept private but in my opinion, the difficulties to which I have referred are of overriding importence. Beyond the privacy matter, no actual prejudice is claimed by the defendant. If, as the plaintiff submits, questions of damage may be complex, it may be appropriate to consider whether that issue and any other issue should be the subject of a reference pursuant to Pt 72 of the Supreme Court rules. 23 Accordingly, I am of the opinion that a stay is not appropriate. 24 The defendant's motion is dismissed. The defendant has asked for an opportunity to make submissions in relation to matters of costs and accordingly I reserve the question of costs. **********

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