Supreme Court of WA|2001-05-31

Western Australian Land Authority v Simto Pty Ltd [2001] WASC 136 (31 May 2001)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : WESTERN AUSTRALIAN LAND AUTHORITY -v- SIMTO PTY LTD [2001] WASC 136

Arbitration - Contract fully performed - Dispute arising some years after termination - Whether dispute resolution procedure stipulated in the contract to apply

ABB Power Plants Ltd v Electricity Commission of New South Wales (1995) 33 NSWLR 596

Charles Osenten & Co v Johnson [1942] AC 130

Commonwealth v Jennings Construction Ltd (1985) ACLR 19

Ferris v Plaister (1994) 34 NSWLR 474

Hampton Areas Australia Ltd v Boral Resources WA Ltd, unreported; SCt of WA; Library No 950306; 20 June 1995

Manningham City Council v Dura (Aust) Constructions Pty Ltd [1999] FSCA 158

PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301

QH Tours Ltd v Ship Design and Management (Aust) Pty Ltd [1991] FCA 637; (1991) 105 ALR 371

1 MASTER SANDERSON: This is the return of two chamber summonses, both issued by the defendant. By summons filed 23 March 2001 the defendant sought an order "pursuant to the inherent jurisdiction of the court" that the writ be struck out or alternatively stayed. As a further alternate order the defendant sought to have the proceedings stayed under s 47 and s 53 of the Commercial Arbitration Act 1985 ("the Act"). Pursuant to a chamber summons filed 30 April 2001 the plaintiff sought relevantly to have the action stayed under s 53 of the Act. The reason why the defendant issued two chamber summonses, and the appropriateness of that course of action, will become apparent later in these reasons.

2 The circumstances giving rise to the present dispute between the parties can be shortly stated. In large measure the facts are not in dispute. By agreement between the plaintiff and the defendant made on or around 19 June 1995, the plaintiff and the defendant entered into a contract pursuant to which the defendant undertook clearing and bulk earthworks on the plaintiff's property located in Baile Road, Canning Vale. The written contract comprised of nine separate documents which are specified in par 4.2 of the plaintiff's statement of claim. Among these documents was the "Formal Instrument of Agreement" ("the Agreement"). A copy of this document and all other relevant documents is to be found as an annexure to the affidavit of Joseph Anthony Caruso sworn 18 April 2001 (page 9). By cl 2(e) of the Agreement the General Conditions of Contract AS 2124 - 1992 are deemed to be incorporated in the Agreement (I note that par 4.2.5 of the statement of claim refers to the General Conditions of Contract AS 2124 - 1996. That would appear to be an error. Certainly the documents annexed to the Caruso affidavit include the 1992 version of the General Conditions. It was on this basis that the application was argued.)

3 Clause 42.8 of AS 2124 - 1992 deals with the final certificate. Relevantly, it reads as follows (at page 130):

"Unless either party, either before the Final Certificate has been issued or not later than 15 days after the issue thereof, serves a notice of dispute under Clause 47, the Final Certificate shall be evidence in any proceedings of whatsoever nature and whether under the Contract or otherwise between the parties arising out of the Contract, that the Works have been completed in accordance with the terms of the Contract and that any necessary effect has been given to all the terms of the Contract which require additions or deductions to be made to the Contract Sum except in the case of -

(a) fraud, dishonesty or fraudulent concealment relating to the Works or any part thereof or any matter dealt with in the said Certificate;

(b) any defect (including omission) in the Works or any part thereof which was not apparent at the end of the Defect's Liability Period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the Final Certificate; or

(c) any accidental or erroneous inclusion or exclusion of any work, plant, materials or figures in any computation or any arithmetical error in any computation."

4 Clause 47 deals with dispute resolution. For the purposes of this application cl 47.1 and cl 47.2 (alternative 1) are relevant. They are in the following terms (page 135):

"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

Alternative 1

Within 14 days after service of a notice of dispute, the parties shall confer at least once, and at the option of either party and provided the Superintendent so agrees, in the presence of the Superintendent, 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 presented 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 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."

5 The date for practical completion of the works was 18 September 1995 and the defects liability period expired 52 weeks after that date (see cl C.1 - page 41 of Caruso's affidavit). This was common ground between the parties. It was also common ground between the parties that a final certificate had issued pursuant to cl 42.8 of the General Conditions.

6 On 22 May 1997 a firm of engineers, Fraser Worley acting on behalf of the plaintiff wrote to the defendant advising that work on the Baile Road site had revealed that in several places vegetation had been buried in the earthworks. This, it was said, was a breach of the Agreement between the plaintiff and the defendant with respect to these earthworks. On 23 May 1997 the defendant replied to this correspondence denying any liability but offering to undertake remedial works on a fee for service basis. There followed an exchange of correspondence between Fraser Worley and the defendant in which the engineers maintained that the defendant was in breach of the Agreement and the defendant denied this was the case. While this correspondence was passing between the parties the defendant undertook certain work on the Baile Road site for which it invoiced the plaintiff and for which the plaintiff paid. The correspondence came to an abrupt end in July 1997.

7 Caruso says that he received further correspondence from the plaintiff in May 1999. He is unable to find a copy of that letter. However, he says that he was advised that test pits had been dug at the site and he was invited to inspect these pits. He did so and subsequent to the inspection he wrote to the plaintiff with his views on what was disclosed by these test pits. No further correspondence passed between the parties. The writ of summons in this matter was issued on 13 March 2001 and served the same day. On 23 March 2001 the defendant's solicitors wrote to the plaintiff's solicitors pointing out that the dispute resolution procedure under cl 47.1 the General Conditions of Contract had not been complied with and enclosing an unsealed chamber summons seeking to have the proceedings struck out or alternatively to stay the proceedings. On the same day the defendant's solicitors wrote a further letter to the plaintiff's solicitors indicating that they intended to follow the dispute resolution procedure laid down in cl 47.1.

8 On 9 April the plaintiff's solicitors wrote back stating their view that cl 47.1 was of no relevance and refusing to consent to either a stay of the action or dismissal of the writ. On 18 April the defendant issued a "Notice of Dispute" purportedly pursuant to the first paragraph of cl 47.1. This was served on the plaintiff as is required by the clause. On 27 April 2001 the plaintiff's solicitors wrote acknowledging receipt of the notice of dispute and again stating their view that cl 47.1 was of no relevance. They indicated that the plaintiff would not meet the defendant to discuss the claim. On 30 April the defendant issued a notice referring dispute to arbitration and wrote to the chairman of the Western Australian Chapter of the Institute of Arbitrators and Mediators Australia seeking appointment of an arbitrator. Again the defendant was relying on cl 47.

9 The defendant's position can be simply stated. It says despite the fact that the Agreement is fully executed the dispute resolution procedure set out in cl 47 survives. As a dispute has arisen in relation to works performed pursuant to the Agreement the procedure set out in cl 47 must be followed before any action can be commenced. In particular, it says that the plaintiff and the defendant are required to confer with or without the superintendent being present in an effort to resolve the matter. As this was not done before the issue of the writ either the writ should be struck out or it should be stayed. It was said that the order should be made either under the inherent jurisdiction of the court or pursuant to s 53 of the Commercial Arbitration Act.

10 Both in its written submissions and in counsel's oral submissions the defendant addressed the question of whether or not the proper order was to grant a stay under the court's inherent jurisdiction or whether s 53 of the Commercial Arbitration Act would justify the grant of a stay. It was concerned about the appropriate course to be adopted which led to the issue of two separate chamber summonses. Counsel referred to the decision of the Court of Appeal in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. However, counsel for the plaintiff indicated he took no point in relation to what was the appropriate basis for this application. He indicated that the plaintiff took the view if it was found that the dispute resolution in cl 47 survived and was still applicable, the relief ought be granted and the plaintiff took no issue as to the form of the relief.

11 Counsel for the plaintiff resisted the application on two separate but interrelated grounds. First, it was said that as the Agreement was fully executed and thus terminated, the dispute resolution procedure found in cl 47 was no longer applicable. Secondly, it was said that the claims made by the plaintiff were not directly related to the execution of the Agreement. Rather, it was submitted, the complaint related to the way in which the site had been left when the Agreement concluded. This, it was said, did not fall within the ambit of the dispute resolution in cl 47.

12 The second point can be dealt with quite shortly. The plaintiff in its statement of claim raises two causes of action, first in contract and secondly in tort. Both causes of action clearly arise out of the way in which the defendant executed the works. In my view there can be no doubt at all that this is precisely the sort of claim which is covered and was intended to be covered by the dispute resolution procedure found in cl 47.

13 In response to the argument that as the Agreement was fully executed, cl 47 was of no further application, counsel for the defendant relied upon the decision of Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144. This was a case where each party to a construction contract accused the other of repudiation of the agreement. Each party had purported to accept the other's repudiation. There was, consequently, consensus that the contract had come to an end. Prior to termination of the agreement the respondent had invoked the dispute resolution procedures in cl 47 - the agreement between the parties being subject to AS 2124. At first instance it was argued that as the contract had been terminated the dispute resolution procedure in cl 47 of the general conditions was of no further force and effect. At first instance (unreported; Library No 990052; 10 February 1999) I rejected that argument and concluded:

"In my view cl 47 of the General Conditions embodies an agreement between the parties to refer disputes to arbitration. Its provisions are not mandatory so that a party can at any stage decide to litigate. But once the requirements of the clause have been satisfied and a party gives notice of intention to seek the appointment of an arbitrator, then the respective obligations of the parties crystallise and an arbitration agreement comes into effect. That is an agreement which, although arising out of the Contract, is separate and distinct and continues with the life of its own irrespective of the fate of the contract. The parties have agreed on a dispute resolution procedure. They are bound by its terms."

14 It can be seen immediately that the decision at first instance was based on reasoning which is not applicable in this case. Here no dispute arose prior to termination of the contract. It could not be argued that the obligations of the parties had crystallised and an arbitration agreement had come into effect.

15 On appeal it was argued that once the contract was terminated the dispute resolution procedure found in cl 47 fell away. In the course of his judgment Steytler J summarised the appellant's argument on this point in the following way (at par 36):

"... counsel for the appellant contended before us, as had been contended before the learned Master, that on the proper construction of cl 47 the only disputes which fall within its compass are disputes which take place during the continued existence of the contract. He submitted that in circumstances in which both parties are in agreement that the contract is at an end, albeit one claims lawfully to have terminated it and the other claims to have accepted an unlawful repudiation, there is no scope for the operation of cl 47."

16 His Honour went on to examine counsel's reasoning and various clauses of the general conditions which, it was submitted, supported this conclusion. His Honour rejected counsel's submission. He said (at par 40):

"The opening paragraph of cl 47.1 makes it plain that any dispute between the contractor and the principal which 'arises out of or in connection with the Contract' may be made the subject of arbitration. Those are words of the widest import and, on their plain meaning, encompass a dispute as to the circumstances of termination of the contract, regardless of whether or not the parties regard the contract as any longer being on foot."

17 It is clearly the case that in reaching this conclusion his Honour was dealing with the specific circumstances which applied in the case in question. But in my view the way that the argument was framed by counsel and the fact that it was comprehensively rejected by the court make it plain that the dispute resolution provisions of cl 47 survive the termination of the contract. It may be that cl 47 survives for all purposes. At present it is unnecessary to decide that question. But in a situation such as this where the dispute clearly "arises out of or in connection with the contract" then the reasoning of the Full Court applies and the dispute resolution procedure is applicable.

18 Having reached that conclusion it is apparent that the defendant's application should succeed. The question then is whether the action ought be stayed or struck out. In my view it ought be struck out. Clause 47 provides, in effect, a condition precedent to the institution of proceedings. The plaintiff was contractually bound to comply with the requirement to negotiate and not to issue proceedings until it had done so. On that basis I think it appropriate that the writ be struck out and there be judgment for the defendant.

19 I will hear the parties as to the precise form of the orders.

Arbitration Act 1985

Western Australian Land Authority v Simto Pty Ltd [2001] WASC 136

At a glance

Court

Decision date

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Judgment (38 paragraphs)

Western Australian Land Authority v Simto Pty Ltd [2001] WASC 136 (31 May 2001)

Parties

Legislation Cited (1)

Cases Cited (4)