Hewatt Earthworks Pty Limited v Canberra Contractors Pty limited & Ors [2009] ACTSC 112 (4 September 2009)

Last Updated: 22 September 2009

HEWATT EARTHWORKS PTY LIMITED v CANBERRA CONTRACTORS PTY LIMITED & ORS
[2009] ACTSC 112 (4 September 2009)

CONTRACT – arbitration clause – application by defendant for stay of proceedings – onus on plaintiff to satisfy court stay should not be granted – stay ordered
ARBITRATION – arbitration clause in contract – Commercial Arbitration Act 1986 – application by defendant for stay of proceedings – onus on plaintiff to satisfy court stay should not be granted – stay ordered

Commercial Arbitration Act 1986, ss 17, 47, 57
Court Procedures Rules 2006, r111
Trade Practices Act 1974 (Commonwealth)
Commercial Arbitration Act 1985 (NT)
Commercial Arbitration Act 1984 (Victoria)

PMT Partners Pty Limited v Australian National Parks and Wildlife Services [1995] HCA 36; (1995) 184 CLR 301
Manningham City Council v Dura (Australia) Constructions Pty Limited [1999] VSCA 158; [1999] 3 VR 13
Savcor Pty Limited v State of New South Wales [2001] NSWSC 596; (2001) 52 NSWLR 587
IBM Australia Limited v National Distribution Services Limited (1991) 22 NSWLR 466

No. SC 878 of 2008

Judge: Master Harper
Supreme Court of the ACT
Date: 4 September 2009

IN THE SUPREME COURT OF THE )
) No. SC 878 of 2008
AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: HEWATT EARTHWORKS PTY LIMITED (ACN 008 623 309)

Plaintiff

AND: CANBERRA CONTRACTORS PTY. LIMITED (ACN 008 462 548)

GUIDELINE (A.C.T) PTY . LIMITED (ACN 008 462 548)

WODEN CONTRACTORS PTY. LIMITED (ACN 008 581 342) trading as

Federal Highway Joint Venture (ABN 58 079 082 362)

Defendants

ORDER

Judge: Master Harper
Date: 4 September 2009
Place: Canberra

THE COURT ORDERS:

That this action be stayed until further order, pending the resolution of the dispute the subject of the action by arbitration.

1. This is an application for a stay of proceedings pursuant to subsection 53(1) of the Commercial Arbitration Act 1986. That subsection is in the following terms:
53 Power to stay court proceedings

  (1)     If a party to an arbitration agreement 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, subject to subsection (2), 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)     that 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.

2. The dictionary to the Act defines an arbitration agreement as an agreement in writing to refer present or future disputes to arbitration.
Factual Background
3. The action sought to be stayed was commenced by the plaintiff in October 2008, as a claim for a debt or liquidated demand. The plaintiff claims the sum of $747,169.30 plus “contractual interest at a rate of 18% per annum pursuant to clause 42.9 of the contract between the parties”. The originating claim is accompanied by a statement of claim in which the plaintiff says that the defendants were contracted to construct and build a section of the Gungahlin Drive Extension. By a written agreement of 27 February 2006 between the plaintiff and the defendants, the plaintiff agreed to carry out bulk earthmoving works at rates set out in a schedule to the contract. The plaintiffs completed the work and submitted invoices in accordance with the contract. The defendants have not paid the amount claimed.
4. In November 2008 the defendants filed a conditional notice of intention to respond, and stated their intention to challenge the jurisdiction of the Court. Such a notice is provided for in rule 111 of the Court Procedures Rules 2006. Sub-rule 111(3) provides that if a defendant files a conditional notice of intention to respond, the defendant must apply within 28 days for an order under rule 40 setting aside the originating process. If the defendant does not do so, the conditional notice becomes an unconditional notice of intention to respond.
5. The defendant did not make any application within the period specified, and the notice has become unconditional.
6. In April 2009 the defendants made the present application for a stay of the proceedings. The stated grounds of the application are that the subject matter of the proceedings involves a dispute between the plaintiff as subcontractor and the defendants as head contractor under a subcontract agreement dated 27 February 2006; the defendants say that they have elected, in accordance with clause 47 of the subcontract agreement, to refer the dispute to arbitration, and that they are and remain ready and willing to do all things necessary for the proper conduct of the arbitration.
7. The application is supported by an affidavit sworn by Mr Peter Middleton, a director of the third defendant Woden Contractors Pty Limited. It is common ground that the three defendant companies are together the proprietors of a business name, Federal Highway Joint Venture.
8. Mr Middleton annexes to his affidavit a copy of what he asserts is the subcontract agreement between the plaintiff and the defendants. The document includes a schedule of rates, and includes the Australian Standard Subcontract Conditions AS 2545-1993 published by Standards Australia. These conditions include, at clause 42.8, arrangements for payment of the subcontractor’s final payment claim in accordance with a final certificate issued by the main contractor. Clause 47 (Dispute Resolution) sets out procedures to be followed in the event of a dispute between the subcontractor and the main contractor. Subclause 47.2 requires the parties to confer in the presence of a nominated superintendent to attempt to resolve the dispute, following which “. . . 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.”
9. Subclause 47.3 provides for arbitration by a single arbitrator agreed between the parties or appointed by the Institute of Arbitrators, Australia.
10. The copy of the subcontract in evidence is not executed by either party, and the plaintiff claims not to be bound by it for that reason. The documentation is dated, and I am satisfied that it was prepared on, 27 February 2006. I am also satisfied that the plaintiff submitted interim invoices to the defendant, and generally that both parties acted consistently with their taking the view that they were bound by the subcontract regardless of formal execution.
11. On 11 December 2008, the defendant submitted its final certificate to the plaintiff by fax. On 15 December 2008, the plaintiff served a notice, stated to have been issued in accordance with clause 47.1 of the subcontract conditions, disputing the final certificate and stating its reasons for doing so. The notice was signed by Mr GJF Hewatt, director of the plaintiff company.
12. The defendant responded on 17 December, appointing a meeting the following day to try to resolve the dispute. In that letter, faxed on 17 December, the defendant said that it elected to refer the dispute to arbitration in accordance with the subcontract if it was not resolved.
13. Mr Middleton deposes that on 18 December, he and two other representatives of the defendant met with Mr Hewatt in an unsuccessful attempt to resolve the dispute.
14. On 19 December, the solicitors for the defendant wrote to the solicitors for the plaintiff, referring to the unsuccessful settlement conference, and confirming their client’s intention to refer the dispute to arbitration. They foreshadowed the present application for a stay of these proceedings. The plaintiff’s solicitors replied that their client had elected to pursue the claim through litigation.
15. Mr Hewatt has affirmed an affidavit in response to the application. He says that the earthworks quantities stated in the contract documents submitted by the Australian Capital Territory to the defendant were incorrect, and that a substantial amount of excess spoil material had to be removed from the site. The contract documents did not include any item for this work. Mr Hewatt asserted an entitlement to charge for the spoil removal by reference to another Australian standard, the Standard Specification for Urban Infrastructure Works (Pay Item 205P3, Disposal of Spoil Material Offsite). Mr Hewatt says that Mr Hayford of the defendant subsequently told him that the Australian Capital Territory had not agreed to the rate of pay for removal of the spoil. This appears to be the basis of the dispute between the parties.
16. Mr Hewatt says in his affidavit that he has been advised by the plaintiff’s solicitors that it will be necessary to obtain documents for the resolution of the dispute from third parties, including the Australian Capital Territory, the superintendent and a firm of surveyors. He says that he has been further advised that following inspection of the documents which are produced, there is a possibility that the plaintiff may have claims available under the Trade Practices Act 1974 (Cth). He says it is also likely that his solicitors will want to administer interrogatories.
17. He annexes to his affidavit a draft of an amended originating application and statement of claim, which he says that his solicitors have advised should be filed and served.
18. Whereas the present statement of claim is one for breach of an identified contract in writing, the proposed amended statement of claim asserts an initial contract in writing, and a subsequent contract said to be partly in writing and partly oral. The second contract is said to incorporate the Standard Specification for Urban Infrastructure Works.
19. The plaintiff has not yet made any application to amend the statement of claim.
20. There is nothing in Mr Hewatt’s affidavit which would be capable of persuading a Court that any oral contract subsequent to the written contract, or any oral variation to the written contract, removed the arbitration clause from the agreement between the parties.
Legal principles
21. It is now well established that a clause such as the dispute resolution clause in the Australian Standard Subcontract Conditions (AS2545-1993) is an arbitration agreement. Brennan CJ, Gaudron and McHugh JJ said in PMT Partners Pty Limited v Australian National Parks and Wildlife Services [1995] HCA 36; (1995) 184 CLR 301 at 310:
. . .the words “agreement ... to refer present or future disputes to arbitration” ... are, in their natural and ordinary meaning, quite wide enough to encompass agreements by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition.
Their Honours were construing the Commercial Arbitration Act 1985 of the Northern Territory but the wording is relevantly identical with that of the Commercial Arbitration Act of this Territory.
22. In the same case, Toohey and Gummow JJ said at 323:
. . . Once [the arbitration clause] is engaged by the contractor submitting the matter at issue in writing to the superintendent under [the applicable subclause], the resolution of that issue by curial means is precluded by the contract.
23. Counsel for the plaintiff properly conceded during argument that clause 47 in the Standard Subcontract Conditions was an arbitration agreement within the meaning of the Commercial Arbitration Act.
24. The Court of Appeal of the Supreme Court of Victoria in Manningham City Council v Dura (Australia) Constructions Pty Limited [1999] VSCA 158; [1999] 3 VR 13 dismissed an appeal from a single judge who had ordered a stay of proceedings under the Commercial Arbitration Act 1984 (Victoria), in circumstances where one party had first delivered a notice referring the dispute to litigation, and an hour later on the same day, the other party had delivered a notice referring the dispute to arbitration. The judge at first instance approached the application for a stay with a strong bias in favour of maintaining the special bargain between the parties to refer the dispute to arbitration. Winneke P said at p. 15 that the effect of the Act was to give primacy to arbitration as the preferred method of dispute resolution agreed between the parties, in the context of a standard arbitration clause contained in a building agreement. Phillips and Buchanan JJ A in separate concurring judgments referred to established case law to the effect that parties who had entered a contract referring disputes to arbitration should be kept to their bargain unless good reason was shown to the contrary. The same principle has been accepted by the Supreme Court of New South Wales in Savcor Pty Limited v State of New South Wales [2001] NSWSC 596; (2001) 52 NSWLR 587 per Barrett J at 599, and by the Court of Appeal of the Supreme Court of Queensland in Mulgrave Central Mill Company Limited v Hagglunds Drives Pty Limited (2002) 2 Qd R 514. McPherson JA referred at para 13 in the latter decision to the desirability that standard conditions and uniform legislation should, as far as possible, be given the same meaning in jurisdictions throughout Australia, noting the general uniformity between the Commercial Arbitration Acts of the States and Territories.
25. It is apparent from the authorities, notwithstanding the fact that it is the defendant who brings this application, that the onus is upon the plaintiff to satisfy the Court that its discretion should be exercised against a stay. In this regard the plaintiff has made reference to the need to require production of documents by third parties, and the possibility that following production, the plaintiff will identify a cause of action under the Trade Practices Act 1974 (Cth), and also that the plaintiff may wish to interrogate.
26. Section 17 of the Commercial Arbitration Act specifically empowers the Court to issue a subpoena requiring a person to attend for examination and produce stated documents to an arbitrator. Section 47 of the Act gives the Court the same power to make interlocutory orders in relation to arbitration proceeding as it has in relation to proceedings in the Court: this would clearly extend to orders about interrogatories.
27. The Court of Appeal of the Supreme Court of New South Wales held in IBM Australia Limited v National Distribution Services Limited (1991) 22 NSWLR 466 that an arbitration clause expressed to govern “any controversy or claim arising out of or related to this agreement or the breach thereof” was wide enough to include, with the benefit of the cross-vesting legislation, claims for relief and other orders under the Trade Practices Act (per Kirby P at 477, Clarke JA at 485 and Handley JA at 488).
Conclusion
28. The plaintiff has not established any disadvantage it might suffer as a result of the dispute being determined by an arbitrator rather than by the Court, and has not discharged the onus upon it which might justify the refusal of a stay.
29. In the circumstances the defendants are entitled to the stay which they seek.
30. My provisional view is that the plaintiff should pay the defendants’ costs of the application, but I shall provide the parties with an opportunity to be heard before making any order as to costs.

I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 4 September 2009

Counsel for the plaintiff: Mr WL Sharwood
Solicitors for the plaintiff: Howes Kaye Halpin
Counsel for the defendant: Mr NA Nicholls
Solicitors for the defendant: Colquhoun Murphy Solicitors
Date of hearing: 11 June 2009
Date of judgment: 4 September 2009