WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd

APPLICATION FOR A STAY

1. It is convenient to first consider the application for a stay. The Contractor seeks an order that these proceedings be stayed pursuant to the Commercial Arbitration Act, section 8(1) of which provides: (emphasis added) A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. A substantially similar provision exists in the International Arbitration Act 1974 (Cth) section 7(5), as well as the Uniform Commercial Arbitration Acts in each State and Territory.
2. The parties agreed that the disputes are "the subject of an arbitration agreement", being Schedule 3 of the D&C Deed (though the plaintiffs did not necessarily accept that the entirety of Schedule 3 constituted an "arbitration agreement"). However, the plaintiffs contend that the arbitration agreement is "inoperative" as, under the D&C Deed, a party must issue a notice of dissatisfaction on the conclusion of an expert determination before proceeding to arbitration: clause 6(a), Schedule 3. A notice of dissatisfaction is a condition precedent to arbitration: John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 (per Hammerschlag J). As such, there is presently no arbitration agreement in respect of which a stay of the proceedings might be ordered under section 8 of the Commercial Arbitration Act. The Contractor disagreed, submitting that the ejusdem generis principle suggests that "inoperative" should be read consistently with "null and void" and "incapable of being performed". Further, to construe "inoperative" as in John Holland would allow a party to flout the agreed dispute resolution process by commencing and prosecuting litigation without taking the required steps to fulfil the conditions precedent. John Holland was said to be inconsistent with authorities which do not appear to have been referred to in argument before Hammerschlag J.
3. As I noted in CPB Contractors Pty Ltd v DEAL S.R.L. [2021] NSWSC 820, an arbitrator has jurisdiction to determine whether a dispute falls within the scope of an arbitration clause and whether the arbitration agreement is operative, known as the kompetenz-kompetenz principle. This Court can determine such questions but, generally speaking, should leave these matters to the arbitrator unless the context in which these questions arise make it preferable for the Court to determine such matters: at [60]. Here, the parties agreed that it was preferable for the Court to determine whether the arbitration agreement was "inoperative" in this case.
4. Section 8(1) imports a presumptive validity of arbitral agreements, requiring the Court to order a stay unless the agreement is null and void, inoperative or incapable of being performed: The Rena K [1979] QB 377 at 392-93; Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 3) (1998) 86 FCR 374 at 393. As the High Court of Singapore explained in FirstLink Investments Corp Ltd v GT Payment Pte Ltd [2014] SGHCR 12 at [7]: The precise words used… in particular, that a stay shall be made 'unless' the court is satisfied that the arbitration agreement is invalid, strongly suggests the presumptive validity of an arbitration agreement. Once an arbitration agreement is shown to exist in that the applicant is a party to the arbitration agreement … the agreement is presumed to be valid unless proved to be otherwise.
5. As Croft J observed in Blanalko Pty Ltd v Lysaght Building Solutions Pty Ltd (2017) 52 VR 198; [2017] VSC 97, "inoperative" is a high bar to satisfy, where the onus lies on the party resisting a stay of proceedings on this ground: at [34], [38].

Meaning of "inoperative"

1. The phrase "null and void, inoperative or incapable of being performed" is taken from Article II(3) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed in 1958 (330 UNTS 3) - better known as the New York Convention - and Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration, which is modelled on the Convention (see, for example, UN Doc A/CN.9/264, art 8, para 2). The words have been described as "rather Delphic": Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 355 (per Lord Mustill).
2. As to how these words should be construed, the Act identifies the interpretive approach. First, section 1C of the Act provides that the Act must be interpreted so that (as far as practicable) the paramount object of the Act is achieved, being to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.
3. Second, section 2A(1) provides that, subject to section 1C, in the interpretation of the Act "regard is to be had to the need to promote so far as practicable uniformity between the application of this Act to domestic commercial arbitrations and the application of the provisions of the Model Law … to international commercial arbitrations and the observance of good faith." As such, the Court "must have in mind that the phrases are taken from an International Convention, so they should not be interpreted in an 'anglo-centric' way but in a broad, international sense": Joint Stock Company 'Aeroflot-Russian Airlines' v Berezovsky [2013] EWCA Civ 784 at [76] (per Aitkens LJ); see also Hancock Prospecting v Rinehart (2017) 257 FCR 442 at 535; [2017] FCAFC 170 at [366] (noting that the words "have their origins in an international instrument affecting different legal systems and different legal traditions"). Aitkens LJ also observed in Aeroflot-Russian Airlines at [99]: The whole point about the New York Convention… is that no exercise of judgment or discretion can be involved. Either the arbitration agreement is valid, in which case there must be a stay, or the court is satisfied that it is 'null and void' or 'inoperative' or 'incapable of being performed', in which case there is not. There is no halfway house in which a court can decide whether, on the facts, it would be an 'abuse of right' or 'inequitable' to rely on an otherwise valid arbitration agreement.
4. Third, section 2A(3) provides that, in interpreting the Act, reference may be made to documents relating to the Model Law made by the United Nations Commission on International Trade Law and its working groups for the preparation of the Model Law. However, I have found little assistance from the travaux préparatoires. As Howard M Holtzmann and Joseph E Neuhaus observed in A Guide to the UNCITRAL Model Law on International Commercial Arbitration (1989, Kluwer) at 305: The legislative history of Article 8 provides no other insights into the intended meanings of the terms "null and void, inoperative or incapable of being performed" … so their precise meaning must be left to future development.
5. Further, as Peter Binder notes in International Commercial Arbitration and Mediation in UNCITRAL Model Law Jurisdictions (Wolters Kluwer, 4th ed, 2019) at 148: … There seems to be no definition or further explanation to the exact meaning of these terms… Not one of the adopting states attempted to define this phrase either…
6. Likewise, learned scholar Professor Albert Jan van den Berg observed, "Neither the text of the Convention nor its legislative history gives much guidance as to how these words should be interpreted": Albert van den Berg, 'The New York Convention of 1958: An Overview' in Emmanuel Galliard and Domenico Di Pietro (eds), Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice (Cameron May, 2008) 39 at 52.
7. It is noteworthy that the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (United Nations, 2016) also observes, in relation to the substantially similar provision in the New York Convention: (emphasis added) Courts generally assess the standard of "inoperability" under the broader expression "null and void, inoperative or incapable of being performed" without any further distinction. However, the relevant case law suggests that the word "inoperative" covers situations where the arbitration agreement has become inapplicable to the parties or their dispute.
8. As to judicial consideration, generally, "inoperative" has been construed as ceasing to have effect for the future. An early judicial consideration of the words was by Kerans JA in Kaverit Steel and Crane Ltd v Kone Corp (1992) 8 WAC 346; (1992) 87 DLR (4th) 129, where his Honour considered "The proviso is an echo of the law about void contracts ('null and void'), unenforceable contracts ('inoperative'), and frustrated contracts ('incapable of being enforced')": at [52]. Consistently with this, in Lucky-Goldstar International (HK) Ltd v NG Moo Kee Engineering Ltd [1993] HKCFI 14, Kaplan J drew on the views expressed by Professor Albert Jan van den Berg (cited above) at [12]-[13]: Professor Albert Jan van den Berg … stated at p.158: "The word 'inoperative can be deemed to cover those cases where the arbitration agreement has ceased to have effect. The ceasing of effect to the arbitration agreement may occur for a variety of reasons. One reason may be that the parties have implicitly or explicitly revoked the agreement to arbitrate. Another may be that the same dispute between the same parties has already been decided in arbitration or court proceedings (principles of res judicata … )" He goes on to give other examples as for instance where the award has been set aside or there is stalemate in the voting of the arbitrators or the award has not been rendered within the prescribed time limit. Further he suggests that a settlement reached before the commencement of arbitration may have the effect of rendering the arbitration agreement inoperative …
9. Likewise in Bakri Navigation Company Ltd v 'Golden Glory' Glorious Shipping SA (1991) 217 ALR 152, Gummow J approved of the meaning of "inoperative" as considered by Sir Michael Mustill and Mr SC Boyd in The Law and Practice of Commercial Arbitration in England (1989, Butterworths), at 169: The expression 'inoperative' has no accepted meaning in English law, but it would seem apt to describe an agreement which, although not void ab initio, has for some reason ceased to have effect for the future. Three situations can be envisaged in which an arbitration agreement might be said to be 'inoperative'. First, where the … Court has ordered that the arbitration agreement shall cease to have effect …. Second … there may be circumstances in which an arbitration agreement might become 'inoperative' by virtue of the common law doctrines of frustration, discharge by breach, etc. Third, the agreement may have ceased to operate by reason of some further agreement between the parties.
10. In Bakri, the parties entered into a contract which contained an arbitration clause, but later entered into a deed of undertaking which excised the subject matter of the proceedings from the arbitration clause. Gummow J concluded that the deed of undertaking effected a variation of the arbitration agreement, although "the arbitration agreement is not thereby deprived of all effect in all circumstances that may arise from time to time hereafter. I would regard what was achieved as the rendering of the arbitration agreement inoperative or ineffective in respect of the claims involved in the present proceeding in this court": at 168. The same approach was taken in Shanghai Foreign Trade Corporation v Sigma Metallurgical Co Pty Ltd (1996) 133 FLR 417 and Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52 at [61] (per Mitchell J), where the arbitration agreement was "inoperative" as the agreement ceased to operate by reason of a further agreement between the parties.
11. In China Merchants Heavy Industry Co Ltd v JCG Corp [2001] 3 HKC 580, the Court of Appeal in Hong Kong considered that it was stretching the language of the Convention unduly to call an agreement conferring a right on a party to refer a dispute to arbitration 'inoperative' merely because the party chooses not to exercise that right: at 585. China Merchants was followed in Dyna-Jet Pte Ltd v Wilson Taylor Pacific Pte Ltd [2016] SGHC 238, where Vinodh Coomaraswamy J of the High Court of Singapore considered that an arbitration agreement was inoperative "at the very least" when it ceased to have contractual effect under the law of contract, such as discharge by breach, by agreement or by reason of waiver, estoppel, election or abandonment: at [162]. Further, the word "inoperative" contemplated the parties' contractual obligation to arbitrate their disputes ceasing to have effect or being discharged by events or circumstances arising outside the contract: at [170]. Dyna-Jet was followed by Lee J in CPB Contractors Pty Ltd v Celsus Pty Ltd (2017) 353 ALR 84; [2017] FCA 1620 at [62]-[68].

Tiered dispute resolution clauses

1. Turning to whether an arbitration agreement is "inoperative" if it requires the exhaustion of other dispute resolution procedures before arbitration, the issue arose for detailed consideration in Channel Tunnel Group. There, the contract contained a tiered dispute resolution mechanism requiring expert determination and then arbitration. The judge refused a stay of proceedings as there had not yet been a decision by, or even a reference to, the expert; the time for arbitration had not arrived. The Court of Appeal disagreed, staying the proceedings pursuant to the provisions of the Arbitration Act 1975 (UK) in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1992] QB 656; [1992] 2 All ER 609. Staughton LJ (Woolf and Neill LJJ agreeing) observed at 669: (emphasis added) Many types of contract provide for some preliminary step to be taken before there is an arbitration. I cannot see that this entitles a party to disregard the arbitration procedure altogether and start an action at law, merely because the preliminary step has not been taken. In many cases the arbitration agreement could be altogether bypassed if that were permitted …
2. The House of Lords upheld the decision of the Court of Appeal but on a different basis, staying the proceedings under the Court's inherent jurisdiction: at 343. As such, observations on the scope of the Arbitration Act 1975 (UK) were strictly obiter, although widely cited. It was common ground before the House of Lords (and thus presumably not argued) that the first stage of the procedure, being reference to the panel of experts, was not itself an arbitration, whilst the second stage was an arbitration: at 347. Lord Mustill (Lord Keith, Lord Goff, Lord Jauncey and Lord Browne-Wilkinson agreeing) acknowledged that, while there was "substantial force" in the submission that the relevant clause was not an agreement to submit to arbitration but an agreement to submit to a panel of experts, with the arbitrators providing no more than a contingent form of appeal, "I would have been prepared without undue difficulty to hold" that the clause was an arbitration agreement: at 353.
3. A problem arose, however, as the form of the legislation was in different terms to the Convention. Whilst the Convention (and section 8 of the Commercial Arbitration Act) required the Court to refer a matter to arbitration, the Arbitration Act 1975 (UK) required the Court to stay proceedings. Lord Mustill observed at 354: What springs to mind at once is that the application of this formula [in the Convention] to [this arbitration clause] requires the court to do the impossible, namely refer the dispute to the arbitrators, whereas it is to the panel of experts that the matter must first be sent if it is to be sent anywhere at all. If the English legislation had followed the Convention, as strictly speaking it should have done, it would have been hard to resist the conclusion that the duty to stay does not apply to a situation where the reference to the arbitrators is to take place, if at all, only after the matter has been referred to someone else. That is, Lord Mustill considered obiter that legislation in terms of section 8(1) (but not before the Court for consideration) may not apply where an application to refer a matter to arbitration is made at a stage where earlier dispute resolution procedures specified in the arbitration agreement have yet to be completed.
4. The views of Lord Mustill were not followed in Westco Air Conditioning Ltd v Sui Chong Construction & Engineering Co Ltd [1998] HKCFI 946; [1998] 1 HKC 254, where an arbitration clause provided that disputes should first be referred to an architect and, if either party was unhappy with the architect's decision or the architect failed to make a decision within 90 days, that party may require that the dispute be referred to arbitration. Findlay J considered that the clause was clearly an arbitration clause, notwithstanding that the parties agreed to submit their disputes to the architect in the first instance. As Findlay J observed: [9] An agreement that requires that the parties submit their disputes ultimately to arbitration, although it may also require the parties in the first instance to follow a procedure - such as, attempting an amicable settlement - is, to my eyes, an arbitration agreement… [11] … It matters not, it seems to me, that the parties must, firstly, take some other step before this is done. It cannot possibly have been the intention of the parties that, if one of them issues a writ before that step is taken, their joint wish to avoid proceedings at law is frustrated. And it would make a complete nonsense of the arbitration agreement if it were so that one party could issue a writ on the eighty-ninth day, that the court was not bound to grant a stay then, but it must grant it on the ninety-first day because the period has then expired. … [12] In my view, what the statute means when it says 'refer the parties to arbitration' is not 'refer the dispute to the arbitrators', as Lord Mustill suggests in relation to the Convention, but refer the parties to the process of arbitration that the parties have agreed to undertake, and, if this involves a preliminary step that the parties have agreed to, to complete that step. Accordingly, I find that the arbitration agreement is not "null and void, inoperative or incapable of being performed", and I am bound to refer the parties to the arbitration to which they agreed.
5. The same approach was taken by Lightman J under the Arbitration Act 1996 (UK) in Ashgar v The Legal Services Commission [2004] EWHC 1803 (Ch), albeit without reference to Channel Tunnel Group. A tiered dispute resolution clause provided options to dispute a decision by internal review or review by a Contract Review Body, followed by the option of mediation, failing which the dispute was referred to arbitration. The proceedings were stayed notwithstanding that an initial tier in the resolution process had yet to be undertaken. Lightman J simply accepted the assurance of the Legal Services Commission that a decision by the Contract Review Body could be obtained expeditiously: at [17].
6. In Siam Steel International Plc v Compass (Australia) Pty Ltd (2014) 293 FLR 260; [2014] WASC 415, the arbitration agreement required the parties to serve a notice of dispute, then confer and explore alternative methods of resolving their dispute before referring the dispute to arbitration. Le Miere J followed Bakri, holding that failure to give a notice of dispute did not render the agreement "inoperative" as the arbitration agreement had not ceased to have effect for the future in relation to the parties' claims: at [44]. Further, at [45]: An arbitration agreement is not inoperative in relation to particular claims merely because an arbitrator has not been appointed or a step that must be taken before an arbitrator is appointed has not yet been taken in relation to those claims. To construe 'inoperative' to cover such a situation would turn the exception … into a backdoor for a party wanting to escape the arbitration agreement. The effect of s 7 of the International Arbitration Act [s8(1), Commercial Arbitration Act] is that the parties are to be held to their bargain to arbitrate except relevantly where the arbitration agreement has ceased to have effect for the future at least in relation to the claims the subject of the action. Although neither party had given the other a notice of dispute, it was open to either party to do so and, if the dispute was not otherwise resolved, to refer the dispute to arbitration. As such, the Court must stay the proceedings and refer the parties to arbitration: at [52].
7. This brings us to John Holland, where the dispute resolution clause provided for negotiation, expert determination, then arbitration. Proceedings were commenced before negotiation or expert determination had taken place. Hammerschlag J held that the arbitration agreement was "presently inoperative" within the meaning of section 8(1) of the Commercial Arbitration Act: at [186]. In terms, the dispute resolution clause set out the "sequential procedure that is to be followed to resolve a Dispute" being, firstly, negotiation then, secondly, expert determination and, thirdly, arbitration. Further, the clause expressly stated, "it is a condition precedent to a party being entitled to refer a Dispute to arbitration … or to commence court proceedings (other than in the case of an application for urgent interlocutory relief) that the procedures referred to … first be complied with." His Honour held that the clause made compliance with the negotiation and expert determination steps a condition precedent to a party being entitled to refer a dispute to arbitration. At [190]-[191]: [190] Unless and until that condition is fulfilled, neither party can effectively refer a Dispute to arbitration. When that condition is fulfilled, the arbitration agreement becomes operative. [191] Were the arbitration agreement to be treated as operative, the consequence would be that the Court would have to refer the parties to arbitration in conflict with the contractual provisions they have agreed, bypassing important provisions, compliance with which may entirely obviate the need for arbitration. Importantly, whilst Hammerschlag J found that there was no right under section 8(1) to request the Court to refer the matter to arbitration and "its motion, to that extent, must be dismissed or at least stood over pending fulfillment of the condition precedent", the defendant was nonetheless entitled to a permanent stay in light of the dispute resolution clause: at [192]-[193]. An order was made staying the action: at [196].
8. A slightly different approach was taken by Hammerschlag J in Broken Hill City Council v Unique Urban Built Pty Ltd [2018] NSWSC 825, where the contracting parties had used an obsolete standard form contract which provided that the person to nominate an arbitrator was the President of the Australasian Dispute Centre, neither of which existed. As to whether an arbitration agreement was "inoperative", Hammerschlag J followed Lucky-Goldstar and observed at [31]: I take the term 'inoperative' in s 8(1) to mean having no field of operation or to be without effect. Whether an arbitration agreement is in this state is to be determined in the context of, and having regard to, provisions of the Act which may make it operative. His Honour observed that the Act was directed to ensuring that an arbitration agreement operated where the procedure for the appointment of an arbitrator failed: at [48], citing section 11 of the Commercial Arbitration Act. As such, the parties were referred to arbitration under section 8(1) of the Commercial Arbitration Act but the matter was stood over to enable the Court to deal with remaining issues, including the appointment of an arbitrator: at [56]-[57].
9. John Holland was approved in Blanalko and Transurban WGT Co Pty Ltd v CPB Contractors Pty Ltd [2020] VSC 476. In Blanalko, a dispute was referred to arbitration and the arbitrator gave an award determining the dispute apart from costs. Blanalko applied to the court to have its costs assessed and Lysaght sought a stay. Croft J held that the arbitrator's failure to determine part of the dispute did not render the arbitration agreement inoperative, "an arbitration agreement will not be inoperative … merely because it is not fully performed": at [37]. Whilst the arbitrator did not determine one of the issues submitted to arbitration and was not pressed to do so by the parties, this was not an obstacle which could not be overcome by parties who were ready and willing to perform the agreement: at [38]. His Honour added at [40]: … The Court will only refer a matter to arbitration where a party has the right to commence or continue an arbitration [citing John Holland]. No such right would exist here if a final award had been delivered and the jurisdiction of the arbitral tribunal thus terminated in accordance with s 32 of the CAA. …
10. In Transurban, Lyons J reviewed the meaning of "inoperative" from Bakri to John Holland. Lyons J noted that whether an arbitration agreement had become "inoperative" would most frequently arise where the focus was on whether the agreement ceased to have effect for the future given a subsequent agreement or conduct including waiver, estoppel or abandonment of a right to arbitrate: at [164]-[165]. John Holland was in a different category, where the arbitration clause did not become operative until a condition precedent was fulfilled. At [167]: I am not able to form a concluded view on the meaning of inoperative for the purpose of the proviso in this application. I consider this is a difficult issue. With respect, I agree with the decision of Hammerschlag J [in John Holland] where he concludes that an arbitration agreement may be relevantly inoperative for the purpose of s 8 of the Act where that agreement is subject to a condition precedent. In this regard, I note the word inoperative is a word of broad meaning.
11. Most recently in Karadag v Samkara Holdings Limited [2022] NSWSC 380, Ward CJ in Eq stayed proceedings in which the "matter" was subject of a tiered dispute resolution clause, requiring the parties to mediate then arbitrate: at [22]. Although a mediation had commenced but not concluded (despite several extensions of time) before the stay application was determined, her Honour considered it appropriate to refer the dispute to arbitration and stay the balance of the proceedings until the arbitration had been determined "noting the mandatory nature of s 8 of the Commercial Arbitration Act and the policy of the Court to honour such clauses": at [147]. Her Honour did not consider whether, by reason that the first tier of the dispute resolution provisions had yet to be completed, the arbitration clause was "inoperative".
12. Generally, "inoperative" has been interpreted across jurisdictions implementing the Convention and the Model Law as meaning that the arbitration agreement has ceased to have effect for the future, either for a specific type of dispute or at large. An arbitration agreement may be "inoperative" as it is unenforceable, has been amended by a further agreement, is the subject of res judicata, has been set aside by a Court, has been frustrated or discharged by breach or by reason of waiver, estoppel, election or abandonment or has otherwise been repudiated.
13. John Holland falls outside this rubric. It may be observed that Hammerschlag J was not taken to the authorities referred to in this judgment. Whilst John Holland was approved in Blanalko and Transurban, neither case concerned whether proceedings should be referred to arbitration notwithstanding that a preliminary step under a tiered dispute resolution clause had yet to be completed. (The case may also be distinguished as the arbitration agreement expressly provided, "It is a condition precedent to a party being entitled to refer a Dispute to arbitration … or to commence court proceedings … that the procedures referred to … first be complied with." Schedule 3 of the D&C Deed does not so provide.)
14. Whilst a more experienced commercial judge would be hard to find, I respectfully consider that, to the extent that John Holland is authority for the proposition that failure to complete preliminary steps in a tiered dispute resolution clause before arbitration makes the clause "inoperative", it should not be followed. Such a construction would undermine the object of the Act, depart from the interpretation of the term more widely and enable a party to bypass their contractual bargain to submit their disputes to arbitration by commencing proceedings before all preliminary steps have been completed: Channel Tunnel Group at 669 (per Staughton LJ). As Findlay J put it in Westco, "It cannot possibly have been the intention of the parties that, if one of them issues a writ before that [preliminary] step is taken, their joint wish to avoid proceedings at law is frustrated": at [11]. Or as Le Miere J stated in Siam Steel, "To construe 'inoperative' to cover such a situation would turn the exception … into a backdoor for a party wanting to escape the arbitration agreement": at [45].
15. I doubt that Hammerschlag J had such a result in mind. Rather, in both John Holland and Broken Hill City Council v Unique Urban Built, his Honour made facultative orders to hold the parties to their bargain to arbitrate, notwithstanding a failure to comply with the precise terms of the arbitration agreement, at least by the time that the application for a stay was heard. Hammerschlag J either stayed or stood over the proceedings until the preliminary steps required before arbitration had been completed.
16. As such, the arbitration agreement in the D&C Deed is "operative" notwithstanding that the expert determination phase has yet to be undertaken. As such, the Court "must" refer the parties to arbitration. The fact that preliminary steps must be taken before the Jurisdiction Dispute or Directions Dispute reaches the arbitration stage matters not. As the Court explained in Hancock Prospecting Pty Limited v Rinehart, section 8 "involves the referral to arbitration, by a stay of court proceedings": at [146]. In that case, the Court stayed the proceedings under section 8(1) "pending any arbitral reference between the parties or until further order": at [417], relevantly upheld by the High Court on appeal (Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514 at [81]. The same result was achieved, albeit by a different route, in Channel Tunnel Group. As Staughton LJ observed at 669: The defendant in the court proceedings who applies for a stay may not have any claim which he wishes to make against the plaintiff, or any other reason either to start an arbitration or to carry out any preliminary action before there can be one; he may merely wish to resist the plaintiff's claim. I can see no reason why he should not say to the plaintiff: "I dispute your claim. If you wish to pursue it, you must carry out the preliminary step and then proceed to arbitration."

INTERIM MEASURES

1. In matters governed by the Act, no court may intervene except where so provided by the Act: section 5. Section 9 provides that it is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant the measure. It remains to consider, therefore, whether any interim measure of protection should be granted before staying these proceedings. Section 17J of the Commercial Arbitration Act provides: Court-ordered interim measures (1) The Court has the same power of issuing an interim measure in relation to arbitration proceedings as it has in relation to proceedings in courts. (2) The Court is to exercise the power in accordance with its own procedures taking into account the specific features of a domestic commercial arbitration.
2. Whilst section 17J, by its terms, may suggest that the Court's power to order an interim measure accords with the Court's inherent jurisdiction to grant interlocutory relief, the Court must "tak[e] into account the specific features of a domestic commercial arbitration". As Lyons J observed in Transurban at [145]-[146]: [145] … the circumstances in which the Court will exercise its power under s 17J are limited. In Sino Dragon [Trading Ltd v Noble Resources International Pty Lte (2015) 246 FCR 479], Edelman J agreed with the comments of the Western Australian Court of Appeal [in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66] that the Court's power to grant interim measures under s 17J of the Act 'should be exercised very sparingly and in circumstances in which such orders were effectively the only means by which the position of a party could be protected until an arbitral tribunal was convened'. This places a significant restraint on the exercise of the Court's power to grant interim measures. [146] … the decision in Hancock [Prospecting Pty Ltd v DFD] Rhodes [Pty Ltd [2020] WASCA 77] is authority for the proposition that the general and residual powers of the Court are excluded by s 5 of the Act and that the Court has no power except as provided by the Act where a particular matter is governed by the Act. This would appear to include a removal of the Court's inherent or auxiliary equitable jurisdictions. Followed in Longboat Holdings Groupno3 v Zacole Pty Ltd [2021] VSC 280, [122] (M Osborne J).
3. The plaintiffs' submissions did not address how the interlocutory relief sought - an order that the Contractor must not take any action to refer the Directions Dispute to expert determination until the Jurisdiction Dispute is finally determined - fell within the Court's powers under section 17J of the Act. Such orders do not seek to protect the plaintiffs' position until an arbitral tribunal is convened but to, effectively, make directions in relation to the process to be followed by the expert in their determination - as to which dispute to hear first and separately from other disputes. I do not consider the interlocutory relief sought to be an appropriate interim measure under section 17J of the Act.

"URGENT INTERLOCUTORY RELIEF"

1. It will be recalled that section 9 of Schedule 3 to the D&C Deed provides, "Nothing in this Schedule 3 will prejudice any right a party may have to seek urgent interlocutory relief from a court in respect of a Dispute". The plaintiffs submitted that, whilst an expert could determine their own jurisdiction, clause 9 of Schedule 3 of the D&C Deed did not preclude the question of jurisdiction being resolved by the Court. Specific terms of the D&C Deed were said to be inconsistent with and override the Expert Determination Rules. Further, no expert had been appointed in the Directions Disputes to whom the question of jurisdiction could be submitted (no doubt, in part, as a consequence of the plaintiffs' insistence that the Contractor refrain from appointing an expert).
2. The plaintiffs submitted that if an expert decided (incorrectly) that they had jurisdiction to determine the Directions Disputes as un-Linked Disputes, or did not determine that matter in advance of the substance of the Directions Disputes, then the plaintiffs will be obliged to proceed through the entire process before having an opportunity to challenge the threshold issue in an arbitration. The plaintiffs' offer to resolve these proceedings on the basis that the expert first determine jurisdiction to determine the Directions Disputes as un-Linked Disputes and, if either party be dissatisfied with the determination, the balance of the determination be stayed pending arbitration of that threshold matter had been rejected. The plaintiffs therefore had no option but to seek relief from the Court. The Summons contemplated that any final matters be dealt with by an expert, akin to orders which terminate upon the occurrence of an event, such as the appointment of an arbitrator: Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 at [28]; Kawasaki Heavy Industries Ltd v Laing O'Rourke Australia Construction Pty Ltd (2017) 96 NSWLR 329; [2017] NSWCA 291 at [99]-[101].
3. As to whether the Court should grant interlocutory injunctive relief, the plaintiffs submitted that the Contractor, having received an unfavourable determination of a Linked Dispute - which the Contractor prosecuted with its legal team in the name of Asset Trustee - now sought to agitate the same matters as "un-Linked Disputes" as between the Asset Trustee and itself only in the guise of the Directions Disputes. The Contractor "wants another go" but at a different party, rather than following the D&C Deed, which gives it a right to take the Contamination Claim to arbitration with Transport for NSW as the contradictor. It was said that the Contractor was in breach of clause 3.3 of the D&C Deed. The Contractor's conduct was said to lack good faith in the face of the Linked Dispute Protocol and the fact that the concession was proposed by the Contractor's counsel. In doing so, it was said that the Contractor sought to relitigate the same issue litigated in 2020, this being an abuse of process. The Court in its inherent jurisdiction ought prevent this occurring. The plaintiffs sought an order timetabling two competing procedures so as to avoid the prejudice it would suffer if the Directions Dispute proceeds on a wrong footing before the wrong tribunal. Otherwise, the Contractor would seek to force the plaintiffs to through the entire process in the Directions Dispute, opposing the question of jurisdiction being determined separately from the merits of the dispute.
4. The plaintiffs submitted that there were serious issues to be tried as to whether the Directions Disputes were "un-Linked Disputes", whether disputes were brought in breach of the D&C Deed and / or a further collateral contract between the parties in the form of the Linked Dispute Protocol, whether the Contractor was estopped from bringing the Directions Disputes by reason of an issue estoppel or its conduct during the expert determination (Blair v Curran (1939) 62 CLR 464 at 531-532), or whether the Contractor was precluded from pursuing the Directions Disputes as un-Linked Disputes by reason of elections made during the expert determination. The plaintiffs submitted that there could be no doubt that the Directions Disputes - which concern the proper construction of clauses 11.10(e) and 11.10(ea) and other warranties in the D&C Deed - are Disputes "concerned with the same or substantially similar issues" to those regarding the rights, liabilities and obligations of Transport for NSW and the Asset Trustee under the Project Deed, as the same provisions appear in the Project Deed.
5. The plaintiffs submitted that the notion that the 7 July 2020 and 23 July 2020 correspondence were "Directions" strained credulity. On 7 July 2020, the plaintiffs simply provided the Contractor with correspondence concerning the already "Linked" contamination dispute. Having notified the Contractor that the contamination claim was a Linked Claim, the plaintiffs were contractually obliged to keep the Contractor regularly informed as to all steps taken in relation to the progress of the Linked Claim: clause 3.2(b)(iv), D&C Deed. Further, the suggestion that the Asset Trustee had given a Direction where Transport for NSW had not given a Direction was said to be contradictory. If Transport for NSW's letter to the Asset Trustee was not a Direction, then how could passing the letter on to the Contractor be a Direction, particularly where the Asset Trustee was contractually obliged to pass it on. As to the second direction, on 20 July 2020 the Asset Trustee simply advised that it would review the Contractor's design on the basis that it would include a Durability Solution, as that is what the Contractor said it was going to do by its notice dated 17 July 2020.
6. Further, the effect of the expert determination - which the Contractor had not sought to overturn and remains binding on it pursuant to clause 3.3 of the D&C Deed - is that works required to design and construct the tunnels to withstand the Sydney Park contamination for the design life of the tunnels were works within the scope of the D&C Deed. Accordingly, to the extent the 7 July 2020 and 23 July 2020 notices were Directions, they could only ever have been Directions to complete the work that is already within the Contractor's scope under the D&C Deed and could never be Directions to implement a Change to that scope.
7. As to the concession, the plaintiffs submitted that, even if the concession was made without the written consent of the Contractor, the concession would not have the effect of rendering the entirety of the agreement in clause 3.3(f) inapplicable to the Contamination Claim. It would only be "inapplicable" to the extent of the concession. The balance of the dispute, including the proper construction of the Project Deed and the D&C Deed, would remain a Linked Dispute and binding on the Contractor. Further, it was said that there was written consent, given the email from the Contractor's solicitor sent the next day, together with the fact that Contractor's counsel proposed the concession and could bind his client: Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [21] (per Bathurst CJ), at [150]-[154] (per Beazley P), and at [160] (per Meagher JA). Failing this, an estoppel by convention precluded the Contractor from relying on the matter: Heggies Bulkhaul v Global Minerals Australia (2003) 59 NSWLR 312; [2003] NSWSC 851 at [147]-[153]. Failing this, in proceeding to continue with the expert determination as a Linked Dispute, the Contractor was said to have made an election between two inconsistent rights, being the right to contend that the Contamination Dispute was no longer a Linked Dispute (and therefore, the expert lacked jurisdiction under rule 5(5) or rule 6(2)(c) of the Expert Determination Rules) and the right to proceed with the expert determination on the basis that the expert had jurisdiction: Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; [2019] NSWCA 185 at [86]. By Rule 6(2)(c), any objection to jurisdiction was required to be progressed expeditiously and it was not.
8. The plaintiffs submitted that the balance of convenience favoured the grant of relief as, in the absence of an injunction, the Asset Trustee would be forced to participate in an expert determination as a contradictor to - as opposed to advocate for - the Contractor's claims. Where the plaintiffs had given notices of Linked Dispute in respect of the Directions Disputes, failure to progress the Directions Dispute as Linked Disputes was said to be a breach of clause 3.3 of the D&C Deed as well as the Linked Dispute Protocol. This would put the Asset Trustee in breach of clause 3.3(c) of the D&C Deed if it later transpired that the Directions Disputes were Linked Disputes. That breach could not then be cured by the Asset Trustee. In addition, the Asset Trustee would not be able to recover its costs of the determination where the rules of Resolution Institute required each party to bear their own costs. Damages were said to be an inadequate remedy. The plaintiffs refuted that there was any relevant delay. Rather, the Contractor had not taken any steps in respect of the Contamination Claim since instructing the plaintiffs to issue a notice of dissatisfaction on 18 December 2020. It was not until 6 November 2021 that the Contractor asserted that the Directions Disputes were not Linked Disputes. Further, as a matter of policy, it was submitted that the Court would not order a status quo that risked one party being in breach of a contract pending the final determination of the ultimate issue.
9. The Contractor submitted that the relief sought by the plaintiffs was not "urgent" or "interlocutory". Rather than preserving the status quo, the plaintiffs sought by injunction to finally determine the dispute between the parties as to the appropriate method under the D&C Deed for resolving the Jurisdiction Dispute. The injunction would, on a final basis, ensure that the Jurisdiction Dispute was heard prior to referral of the Directions Disputes. Nor were the orders sought protective until the arbitral tribunal was convened. Rather, the plaintiffs sought to invoke the coercive processes of the Court to manipulate the timing or sequencing of dispute resolution procedures under the D&C Deed in a manner which was different to the contractually agreed process and limited what the tribunal may consider.
10. The Contractor submitted that it was not a breach of the D&C Deed for the Contractor to refer to expert determination an alleged dispute which, on final analysis, was not within the jurisdiction of the expert or to which the plaintiffs have a defence. The parties had clothed the expert with authority to decide his or her own jurisdiction. The Contractor, which contended that the dispute is not a Linked Dispute, is required by clause 32 of the D&C Deed to engage the processes of Schedule 3. If the Contractor is wrong, then those contractual processes will play out in the plaintiffs' favour but the Contractor does not breach the D&C Deed by engaging those processes.
11. The Contractor submitted that there was no serious question to be tried as the alleged bases for an injunction (breach of contract, issue estoppel, estoppel and election) were matters for the expert to determine, if raised by way of defence by the plaintiffs in response to referral by the Contractor. The Contractor submitted that just because Mr Rudge SC had proceeded on the basis that the Directions Disputes were Linked Disputes does not necessarily make it so; if, as a matter of the proper construction of the D&C Deed, the dispute is not a Linked Dispute, an 'upstream' expert determination cannot resolve that it is. The 'upstream' determination only affects the Contractor's rights in respect of that which is a Linked Dispute.
12. It was said that there could be no issue estoppel where Mr Rudge did not find responsibility for the contamination lay with the Asset Trustee at the Project Deed level, and therefore, the Contractor at the D&C Deed level. There was no consideration, discussion or finding as to the Contractor's position. There was no issue "necessarily established as the legal foundation or justification" of a conclusion in the previous determination: Blair v Curran at 531 (per Dixon J). Nor was there estoppel precluding the Contractor from treating the Directions Disputes as un-Linked Disputes. There was no detriment: Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-9 (per Brennan J). Nor was it arguable that the representation was conveyed by the conduct. The plaintiffs' case required it to be shown that the engagement of lawyers conveyed that the Contractor was committing to be bound by the outcome: Sullivan v Sullivan [2006] NSWCA 312 at [85] (per Hodgson JA, McColl JA agreeing). This contention was said to be unsustainable where the expert determination was made in response to a dispute between Transport for NSW and the Asset Trustee, not the Contractor. The suggestion of estoppel or election under the Linked Disputes Protocol was said to be destroyed by clause 2.7 of the protocol. An election requires "both an element of knowledge on the part of the elector and words or conduct sufficient to amount to the making of an election as between the two inconsistent rights which he possesses": Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 642 (per Stephen J, McTiernan J agreeing). The required words or conduct were absent.

Conclusion

1. A similar clause to section 9 of Schedule 3 to the D&C Deed, albeit without the requirement that the interlocutory relief be "urgent", was described by Davies J in 1144 Nepean Highway Pty Ltd v Leigh Mardon Australasia Pty Ltd [2009] VSC 226, as "not a way out, through the backdoor, to avoid the dispute resolution procedure … [The clause] enables a party to institute proceedings to obtain injunctive relief in the appropriate case. But the initiation of such proceedings is not a means by which one party may avoid the dispute resolution process where the claiming of injunctive relief is used as a mechanism to bring" proceedings in the Court: at [24].
2. Section 9 of Schedule 3 to the D&C Deed requires that the interlocutory relief be "urgent". Whether the relief sought is, in fact, urgent is a matter to be determined objectively: AED Oil Ltd v Puffin FPSO Ltd (2010) 27 VR 22; [2010] VSCA 37 at [27] (per Buchanan JA, Bongiorno JA and Croft AJA). Were it otherwise, the parties' preference that their disputes be decided by expert determination or arbitration "may be set at nought" if the ability to seek interlocutory relief is not limited to cases which are in fact urgent: AED Oil at [28]. AED Oil was followed in Green v Econia Ptv Ltd [2016] SASC 153, where Dart J added, "For a matter to be urgent, it must have the quality of requiring immediate attention": at [23]. In CPB Contractors Pty Ltd v JKC Australian LNG Pty Ltd [2017] WASC 112, Le Miere J considered an "urgent" matter to be "pressing; compelling or requiring immediate action or attention": at [37]; followed by Ward CJ in Eq in CPB Contractors Pty Ltd v Rizzani De Eccher Australia Pty Ltd [2017] NSWSC 1798 at [105], [119].
3. As the Contractor submitted, the plaintiffs' application is not 'urgent' as, if the Contractor refers the Directions Dispute to expert determination, then the plaintiffs can raise the Jurisdiction Dispute and the expert is empowered to determine the issue under rule 5 of the Expert Determination Rules. The issue raised by the plaintiffs - that the Directions Dispute is a Linked Dispute - is, if correct, a complete defence. If the plaintiffs wish to contend that the Contractor has breached the D&C Deed, then they should follow the agreed process by raising it before the expert as a reason they should decline to exercise jurisdiction. An expert appointed to determine the Directions Dispute has jurisdiction to make a determination in respect of that defence. This is not a reason that the plaintiffs' relief requires "immediate attention" by a Court.
4. I accept without hesitation that there are serious issues to be tried, as identified by the plaintiffs. I also accept without hesitation that the plaintiffs' case in respect of these issues is strongly arguable. But, according to the Dispute Resolution Procedure, these serious issues are to be determined by an expert then arbitrator, followed by an appeal to this Court under section 34A of the Commercial Arbitration Act on a question of law (subject to a grant of leave). The plaintiffs' pleadings accept as much, identifying serious issues "to be tried by the expert". In short, the plaintiffs seek interlocutory relief to ensure that these serious issues are determined by the expert in their preferred sequence. What the Court is being asked to do is to decide a question of procedure or jurisdiction, supplanting the expert's power under rule 5.5 and rule 9.1 of the Expert Determination Rules, contractually conferred by the parties under the D&C Deed. Granting the relief sought will, in effect, permit the plaintiffs to resile from their contractual bargain.
5. As to where the balance of convenience lies, there is no doubt that, if the Court does not grant the interlocutory relief sought, then the Contractor will refer the Directions Dispute to expert determination, the plaintiffs will refer the Jurisdiction Dispute to expert determination, and a hot contest will ensue before the expert as to whether the Jurisdiction Dispute should be heard first or whether all of the disputes should be heard together. Whilst the Contractor will seek to have all disputes determined together, the appropriate procedure including any separate question is a matter for the expert. If the plaintiffs do not persuade the expert that their suggested course should be adopted, then there is no doubt that the plaintiffs will incur costs in a composite expert determination which they will not be entitled to recover from the Contractor. But the Dispute Resolution Procedure envisages that a party, who is ultimately determined by an expert or arbitrator to have taken a path which was misconceived, is not obliged to pay the other side's costs of the expert determination or arbitration. That is the contractual bargain.
6. The plaintiffs have raised compelling arguments as to why the expert should determine the Jurisdiction Dispute in advance of the Directions Dispute. But it is a matter for an expert to determine whether this is an appropriate way to proceed. The fact that the plaintiffs cannot recoup the costs of defending the Directions Dispute does not make the proceeding "urgent", this being the consequence of the contract to which the plaintiffs bound themselves. It may, however, be a powerful reason why an expert may accede to the plaintiffs' request that the Jurisdiction Dispute be determined first. But given the bargain struck by the parties, I do not consider that the Court should grant interlocutory relief which interferes with, or modifies, the agreed process.

EXPERT DETERMINATION RULES

1. The plaintiffs also called in aid Rule 6.2(c) of the Expert Determination Rules of Resolution Institute. Rule 6 of the Expert Determination Rules provides: RULE 6 General Duty of Parties 1. The parties shall do all things reasonably necessary for the proper, expeditious and cost-effective conduct of the Process. 2. Without limiting the generality of the foregoing, the parties shall: a. be represented at any Preliminary Conference or meeting convened by the Expert by a person or persons with authority to agree on procedural matters; b. comply without delay with any direction or ruling by the Expert as to procedural or evidentiary matters; and c. where appropriate, take without delay any necessary steps to obtain a decision of a Court on a preliminary question of jurisdiction or law. "The Process" is defined to mean "expert determination of the Dispute in accordance with these Rules"; "The Dispute" means the disputed issues for expert determination in accordance with these Rules.
2. Rule 6 presupposes that the Process, that is, the expert determination, is underway when "necessary steps" are taken to obtain a decision from a Court on a preliminary question of jurisdiction or law. Rule 6.2(c) envisages that, in the course of an expert determination, an issue may arise on which it is "appropriate" that the Court's decision be obtained.
3. Here, there is no Process. Rather, a party seeks to delay the commencement of an expert determination, at least, in respect of a particular Dispute. While rule 6.2(c) appears to encompass both an application to the Court by all parties, or simply one party, to the expert determination, here, no expert determination has begun such that this rule is not enlivened.

ORDERS

1. For these reasons, I make the following orders: 1. Dismiss Prayers 6, 7 and 7B of the Amended Summons. 2. Order the plaintiffs to pay the defendants' costs of the plaintiffs' application for interlocutory relief. 3. Pursuant to section 8(1) of the Commercial Arbitration Act 2010 (NSW), stay the proceedings pending any arbitral reference between the parties or until further order. 4. Order the plaintiffs to pay the defendants' costs of the Notice of Motion filed on 26 February 2022.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 April 2022