Burton v Bairnsdale Shire [1908] HCA 57; (1908) 7 CLR 76 (18 September 1908)

Burton Plaintiff, Appellant; and The President, &c., of the Shire of Bairnsdale Defendants, Respondents.

Among the plaintiff's grounds of appeal is that under Order XIV. (A) of the Rules of the Supreme Court 1906 the application to enter judgment was out of time, more than ten days having elapsed from appearance. This may be so or not, but in the view on which I think this appeal should be determined, it is not material.

The main question upon which our judgment ought to proceed turns on the meaning and effect of the twenty-sixth general condition. Having regard to its terms, was not the respondent Shire entitled to ask for a stay of all proceedings in the action, and is not the plaintiff's remedy, if any, confined to a reference under that condition? That is the conclusion at which I have arrived by reason of the explicit and comprehensive nature of the clause. It applies inter alia to "any doubt dispute or difference ... concerning the said works or any of them or ... in respect of any extras additions enlargements deviations or alterations or any omission made in to or from the said works or any part of them ... or in relation to the exercise of any of the powers of the Council or the engineer under this contract or any claim made by the contractor in consequence thereof or in any way arising therefrom or in relation to any impediment prevention or obstruction to or in the carrying on of the works of this contract or any part thereof (or any extras additions enlargements deviations or alterations thereon or thereto or any of them or any part thereof) by the Council or the engineer ... or any claim made by the contractor in consequence thereof or in any way arising therefrom or touching or concerning the meaning or intention of this contract or of the specification or conditions or any other part thereof or any plans drawings instructions or directions ... or touching or concerning any certificate order or award which may have been made by the said engineer or in any wise whatsoever relating to the interest of the said Council or of the contractor in the premises or respecting any other matter or thing not hereinbefore left to the decision or determination of the engineer or to be governed by his certificate every such doubt dispute and difference shall from time to time be referred to and be settled and decided by the said engineer."

I cannot doubt that that clause covers everything which is claimed in this action. To whatever part of that clause one turns, one finds words sufficient to show that it was the intention of both parties that matters such as those which arise in this case should be referred to the arbitration of the engineer. It has been contended that the arbitration clause does not apply because of the termination of the original contract time before the cause of action, or part of it, arose. I do not think that objection can prevail. I am of opinion that, by the substitution of the new provision on 31st December 1906 for the original condition No. 15, the contract was altered as to the date of completion, but was not otherwise altered. That being so, I can find no reason for the argument that Clause 26 is not to apply.

There was a very great deal of debate as to whether the contract was rightly determined or not, it being the contention on the part of the defendants that it had been rightly determined by them after the notice given by the engineer on 9th March, and that the questions which arose touching the extras, additions, alterations, and so on, were part of the contract in such a sense that the assumption to determine the contract by the defendants by the formal notice under Clause 26 operated upon that as upon all the other parts of the contract. On the other hand, counsel for the appellant argued that, owing to the construction of the various clauses in general, the provisions attaching to the determination of the contract did not apply to the case of the extras, additions, alterations, &c., of which he complained, and which he said must necessarily throw him out of time. I think it is not right, inasmuch as this case may go to the arbitrament of the engineer, to express a decided opinion upon these respective contentions. It is enough to say that, had it not been for this explicit and sweeping arbitration clause, I might have been of opinion that this was not a case which was so utterly hopeless that it ought to be got rid of under the inherent jurisdiction of the Court, having regard to the cases of Bayne v. Riggall[1], and Goodson v. Grierson[2], to take two cases out of many, in which practically the ratio decidendi was that the jurisdiction referred to should not be exercised unless where the action brought is positively hopeless. A stay of proceedings may not only be had by resort to the inherent jurisdiction of the Court where there is an abuse of the process of the Court, but it may be had by resort to sec. 152 of the Supreme Court Act 1890 in respect of a contract where there is an agreement to refer to arbitration, always supposing the matters in question come within the terms of the agreement. Holding as I do that the matters which the plaintiff says are in dispute are wholly referable to arbitration, and so clearly referable that the matter is not arguable, I am of opinion that this Court has power under sec. 152 of the Supreme Court Act 1890 to stay the proceedings, leaving it to the plaintiff, if he is so advised, to go to an arbitration before the engineer.

I am of opinion also that the order of the Supreme Court dismissing the action was not quite the order to fit these circumstances, having regard to the section of the Supreme Court Act 1890 which I have mentioned. The proper order to make was an order staying proceedings, and that is the order I think this Court should now make. It will be for the plaintiff to choose, upon advice, how far he will go. It is somewhat scant comfort, no doubt, to the plaintiff to be told that he may have the benefit of an arbitration to be presided over by the engineer of the works whose determination is the subject matter of dispute. But under the law it seems to me that is the only remedy the plaintiff now has, that he has been tied up by the arbitration clause, that he cannot go on with his action, and that the only resort he can have is to arbitration under Clause 26.

I prefer not to go into many other matters referred to in argument in respect of which the arbitrator may be called upon to express an opinion, because it is desirable to leave his hands free as far as possible, in case further litigation, if I may so call it, takes place under the arbitration clause. There was one matter, however, to which I may refer. It is in respect of the line of authorities of which one is Walker v. London and North Western Ry. Co.[3]. In that case, upon the time for completion of a contract having expired, the works were still proceeding, and the contractor being long out of time, the defendants gave notice to the plaintiffs under the power in that behalf contained in the contract to avoid the contract, and thereupon took possession of the works and of the materials and implements of the plaintiffs. It was held that, upon the true construction of the contract, the clause with reference to the avoidance of the contract and the forfeiture of the contractors' implements and materials could only be enforced before the time originally fixed for the completion of the works had expired. I am of opinion that this case is completely distinguishable from that case and others in its line. In delivering the judgment of himself and Brett J., Archibald J. said[4]:—

Now the reason for the decision in that case, which followed that line of reasoning, was that there was no provision for extension of the time, and, the contractor having got out of time, the contractee could not resort to the penal clause which was framed to prevent delays during the time which was fixed, and which had already been exceeded. That is a course of reasoning which does not apply here because, although it was after the time originally fixed, there was a new covenant entered into which amounts, in my judgment, to this, that the only alteration of the original contract was that the time was extended from 23rd November 1906 to 23rd August 1907. That extension of nine months was granted not only in respect of the completion of the original works, but also in relation to all the other terms in the contract. Upon the execution of a deed like that it appears to me the reason upon which Walker v. London and North Western Railway Co.[7] was decided entirely ceases to apply to this case.

I am, therefore, of opinion that the appeal should be allowed; that the order appealed from should be discharged so far as it requires that judgment be entered in the action for the defendants; and that in lieu thereof all proceedings in this action should be stayed. As each party has succeeded in part, I think also that the justice of the case will be met by discharging so much of the order of the Full Court as relates to any costs.

As the application to Mr. Justice àBeckett was not made within ten days after appearance and there was no order under Order XIV. (A) of the Supreme Court Rules giving leave to make it later, it is quite clear that the judgment for the defendants directed to be entered by the Supreme Court cannot stand. The only question for our determination is, ought the action to be stayed?

The respondents contend that on the facts appearing in the affidavits they are entitled to invoke the power of the Court in two aspects—its inherent power to stay proceedings in any action which is an abuse of the process of the Court as being frivolous and vexations, and its power under sec. 152 of the Supreme Court Act 1890 to stay proceedings in any action where the parties have previously by a written instrument agreed to refer to arbitration the differences which are the subject matter of the action.

I agree with my learned brother Barton that the respondents have not shown that the action is frivolous and vexatious in the sense in which that expression is used in law. They rely upon a legal ground arising on the interpretation of the contract. If they are right it is plain that the action cannot succeed. It may be their contention is right; upon that I shall express no opinion, as it is the very matter which an arbitrator may have to decide. But we have to determine whether that question can be determined in this proceeding. Primâ facie, every litigant has a right to have matters of law as well as of fact decided according to the ordinary rules of procedure, which give him full time and opportunity for the presentation of his case to the ordinary tribunals, and the inherent jurisdiction of the Court to protect its process from abuse by depriving a litigant of these rights and summarily disposing of an action as frivolous and vexatious in point of law will never be exercised unless the plaintiff's claim is so obviously untenable that it cannot possibly succeed. See Bayne v. Riggall[8]. The respondents' counsel have no doubt brought forward very strong arguments to show that they have rightly determined the contract, and that the plaintiff has now no cause of action. On the other hand Mr. Arthur's argument for the appellant, though not establishing to my satisfaction that the respondents acted in contravention of the contract, has satisfied me that his contention is worthy of consideration, and is certainly not so obviously untenable as to justify its being summarily disposed of by a Judge in Chambers. In so far, therefore, as the respondents have invoked the inherent jurisdiction of the Court, they must in my opinion fail.

For the purpose of dealing with the other aspect of the Court's jurisdiction I take it for granted that all conditions exist which entitle the respondents to invoke the power of the Court under sec. 152 of the Supreme Court Act 1890. That being so, two questions only arise on the facts of this case. First, are the matters in controversy in this action included in the agreement to refer contained in the 26th general condition? Secondly, is the Court satisfied "that no sufficient reason exists why such matters cannot be or ought not to be referred to arbitration according to the agreement?"

In respect of those questions the Court acts on principles entirely different from those on which it acts in considering applications founded on the abuse of its process. It is the right of the applicant under sec. 152 to have the decision of the Court on the materials brought before it. The Court or a Judge, as the case may be, is the tribunal to decide there and then whether under the provisions of the section the applicant has made out his case for stay; if he has done so, he is entitled to the order. As to the latter of the two questions involved, I am completely satisfied that no reason exists why the matters in controversy in the action should not be referred. That is plain, I think, from the nature and subject matter of the contract. The other question involves the interpretation of Clause 26 of the general conditions, both in its own terms and in relation to the other conditions and to the contract generally.

The plaintiff's claim turns on the question whether the respondents, in putting an end to the contract by notice, rightfully exercised their powers under general Condition 11. General Condition 26 expressly makes referable to arbitration, amongst other things, any dispute or difference "in relation to the exercise of any of the powers of the Council or the engineer under this contract or any claim made by the contractor in consequence thereof or in any way arising therefrom," &c. Later on it includes a number of other subjects which are indirectly involved in the same matters of difference, and the condition concludes with these very comprehensive words:—"Or respecting any other matter or thing not hereinbefore left to the decision or determination of the engineer or to be governed by his certificate every such doubt dispute and difference shall from time to time be referred to and be settled and decided by the said engineer."

There can be no doubt that the matters in controversy in this action come within the express words of the portion of the condition which I have quoted. But it was urged by Mr. Arthur that the exercise by the respondents of their power under the 11th general Condition had the effect, to use its very language, "of absolutely determining the contract," and from that moment the contract came to an end for all purposes just as if it had never existed or had been rescinded by voluntary agreement of the parties, and that general Condition 26 therefore disappears with the rest of the contract. That position is, in my opinion, quite untenable. The exercise of the respondents' power to determine the contract by notice does not have the efféct of rescinding the contract. If the power was legally exercised it took away from the contractor any right to further proceed with the works. It effected also a forfeiture of his plant and materials and any moneys due to him under the contract in the defendants' hands. But for all the purposes of determining the rights of the parties the contract still exists, whether those rights are to be determined by a Court of Justice or by an arbitrator. There is no reason, therefore, why general Condition 26, which, as I have pointed out, clearly includes the matters in controversy in this action, should not have full effect given to its provisions.

For these reasons the respondents are entitled to an order under sec. 152 staying proceedings in this action, and in my view the learned Judge of first instance, and afterwards the Supreme Court, ought to have come to that conclusion. I am, therefore, of opinion that the judgment of the Supreme Court should be varied accordingly by substituting a direction to stay proceedings in place of the direction to enter judgment for the defendants. I agree with the view of my learned brother Barton as to costs.

The Full Court of Victoria stopped the action at the threshhold, and ordered judgment to be summarily entered for the defendants. The power to do so depends upon whether the case comes within either Order XIV. (A.) of the Rules of 1906 or the recognized circumstances in which the inherent jurisdiction is properly exercised. Order XIV. (A) is not relied on by the respondents. Their application under r. 1 of that Order was not made within the time limited by the rule, nor was the time extended. Learned counsel informed the Court that Hodges J. subsequently stated that the Court did not think it necessary to extend the time, and proceeded under the inherent jurisdiction.

The respondents accordingly rested upon that jurisdiction only. The Privy Council in Haggard v. Pelicier Frères[9], stated the broad general principles upon which it should be exercised. Lord Watson said:—"Their Lordships hold it to be settled that a Court of competent jurisdiction has inherent power to prevent abuse of its process, by staying or dismissing, without proof, actions which it holds to be vexatious. In Metropolitan Bank v. Pooley110 App. Cas., 210, at p. 214. the Lord Chancellor (the Earl of Selborne), speaking with reference to the dismissal of an action on that ground, said that:—The power seemed to be inherent in the jurisdiction of every Court of Justice to protect itself from the abuse of its own procedure. The same principle was again laid down by the House of Lords in Lawrance v. Norreys215 App. Cas., 210.. In that case the Appeal Court had refused to allow proof and dismissed the action, and Lord Herschell observed315 App. Cas., 210, at p. 219.:—It cannot be doubted that the Court has an inherent jurisdiction to dismiss an action which is an abuse of the process of the Court. It is a jurisdiction which ought to be very sparingly exercised, and only in very exceptional cases." Lord Watson for the Privy Council then added:—"In the remarks made by Lord Herschell, as to the caution with which the power of summary dismissal on such grounds ought to be exercised, their Lordships unhesitatingly concur."

These observations pronounced by the highest authority for us show the reason of the Court's exceptional action, and the great care which must be observed in its application.

The Full Court of Victoria have apparently dealt with the case as if it were before them in the ordinary course, and not as if the question were whether the plaintiff's action were an abuse of the Court's process, and should accordingly be at once interrupted and put out of Court as unworthy of further consideration.

I do not say what would probably be the result of construing Clauses 11 and 15 of the contract, if the case were absolutely before the Court for determination. It is enough for the present purpose to say that a very important question, the answer to which is not at all obvious, presents itself, as to whether the period of completion to which the contractor limited himself includes whatever extras, additions, and alterations, the engineer at any time before the expiration of that period, might direct. Dodd v. Churton[13], shows how carefully the contract must be looked at to answer that question. The contention cannot be regarded as unarguable or without substance. And although the appellant has not so far furnished much evidence as to the extent and character of the alterations in plans, regarding the matter as if the proper time had arrived when he was bound to do so, and the materials were nevertheless left as they are, yet, on the other hand, he ought not to be debarred from having an opportunity of more fully proving his case, because it cannot be said that the respondents have demonstrated the impossibility of those alterations affecting in fact the time for completing the original work, or that, if they did, the legal result would be unaltered. It appears to me, therefore, that it was not a case for the application of the extraordinary inherent jurisdiction, and that, exercising the caution which the Privy Council and the House of Lords are both careful to require, the order for summary judgment in favor of the defendants ought not to have been made.

Then as the action has to proceed, the next question arises under the statutory jurisdiction of the Court as to whether it should be permitted to go on in the ordinary course or be stayed and allowed to go to arbitration. That depends on the construction to be placed on Clause 26 of the contract. Unless the appellant has agreed to refer to arbitration the question whether the power of determining the contract was lawfully exercised by the respondents, no order to stay should be made. As Jessel M.R. said in Piercy v. Young[14]:—"It is the bounden duty of the Court to decide whether the matter in question is one which the party proposing the reference has agreed to refer to arbitration." If there has been such an agreement the Court's duty is laid down by Statute: Supreme Court Act 1890, sec. 152. On the corresponding English enactment Lord Selborne L.C. in Willesford v. Watson[15] used language very appropriate to the present case. He said:—"We are told that this is an arbitrary tribunal, final and without appeal, and so forth, and that these are not fit questions to go before the arbitrator. But I think that the legislature and the Act of Parliament under which the Court is now asked to act have given the answer to that argument. If parties choose to determine for themselves that they will have a domestic forum instead of resorting to the ordinary Courts, then since that Act of Parliament was passed a primâ facie duty is cast upon the Courts to act upon such an agreement."

The appellant contends, first, that the subject matter of the dispute is not within the terms of Clause 26. On the whole I think that Mr. Starke's argument should prevail. Whatever the consequences, the words are too comprehensive, and the general intention too clear, to cut down the primary meaning of the language used by the parties.

No sufficient reason has been alleged why the matter in dispute cannot be or ought not to be referred, the engineer is not shown to have taken up any biassed position, or any vindictive or fraudulent attitude, or to have disqualified himself in any way, and the situation is apparently, in fact, precisely what the parties contemplated as possible when the bargain was made.

In these circumstances the appellant ought to be bound by the agreement he has made, and the action stayed.

I concur. In my opinion the disputes between the plaintiff and the defendants are clearly within the clause in the agreement providing that disputes shall be settled by the engineer. The action ought, therefore, to be stayed, under sec. 152 of the Supreme Court Act 1890.

As for the order made by the Full Court of Victoria directing judgment to be entered for the defendants, we are informed that it was made under the general jurisdiction of the Court, apart from Order XIV (A). The application was made after the time allowed by that Order; there was no order extending the time; and the Full Court plainly intimated that the order was not made under the Rules, but under the inherent power of the Court to prevent abuse of its process. It is my opinion that the Full Court were led, by a very natural process, I admit, to take a wrong attitude. They dealt with the matter as if they were deciding it on the merits, whereas they had merely to decide whether there was anything in fact or in law that was fairly triable or arguable. They went into the dispute elaborately because the learned primary Judge had based his refusal of the defendants' application on a finding that the written contract had been abandoned and a new contract made. Chiefly because of this finding, we also have been taken over all the same ground in a three days' argument. The Full Court after examining the whole case presented came to a clear opinion that the plaintiff could not succeed, and determined to cut the matter short, and to give judgment for the defendants at once. I do not wish to pronounce finally as to matters which may come before the engineer. I may say, however, that I am not at all surprised to find the Full Court, on the materials before it, coming to so strong a conclusion, both as to the construction of the contract, and as to the alleged abandonment. But the fact that such a conclusion has been reached adverse to the plaintiff, is not a ground for ordering judgment against him without trial, and without full opportunities of proof of his alleged facts. The rule is that every plaintiff is entitled to have his action tried unless it can be shown obviously that the action is frivolous or vexatious, or otherwise an abuse of the process of the Court. A litigant is entitled to use, not to abuse, the process of the Court. The arguments put before us on behalf of the plaintiff, as to the construction of the agreement, and as to the effect of the facts stated in the letters, if proved, may not be sustainable; but they are not unworthy of serious discussion, not unworthy of evidence. It is surely absurd to argue for days as to a plaintiff's case being arguable. On an application to stay proceedings in an action under the general jurisdiction the test put by Mellor J. in deciding that the stay shall be ordered, was that the case could never get to the jury—that the plaintiff would manifestly be nonsuited: Dawkins v. Prince Edward of Saxe Weimar[16]. The general power under which the Court acted is certainly not wider than that given by Order XIV. when a plaintiff applies for summary judgment; yet under that Order it has been held that, if there is a triable issue. the defendant may defend, even though it may appear that the plaintiff is likely to succeed.

In the case of Jacobs v. Booth's Distillery Co.[17], an action was brought against two defendants upon a memorandum of charge and two promissory notes. One of the defendants did not defend. The other defendant, who had received an indemnity from his co-defendant, stated that he had been told that he incurred no liability by signing, and that he signed the memorandum and promissory notes relying upon that representation. On an application under Order XIV. a Master ordered the amount claimed to be paid into Court within seven days, with judgment if the sum was not so paid. This order was affirmed on appeal by Day J. and was again affirmed by the Court of Appeal. The case then came before the House of Lords. Lord Halsbury L.C. put the matter in a form which appears to be very conclusive and to settle the matter. He said[18]:—"There are some things too plain for argument: and where there were pleas put in simply for the purpose of delay, which only added to the expense, and where it was not in aid of justice that such things should continue, Order XIV. was intended to put an end to that state of things, and to prevent sham defences from defeating the rights of parties by delay, and at the same time causing great loss to plaintiffs who were endeavouring to enforce their rights." Lord James of Hereford said:—"The view which I think ought to be taken of Order XIV. is that the tribunal to which the application is made should simply determine, Is there a triable issue to go before a jury or a Court? It is not for that tribunal to enter into the merits of the case at all. It ought to make the order only when it can say to the person who opposes the order, You have no defence. You could not by general demurrer, if it were a point of law, raise a defence here. We think it impossible for you to go before any tribunal to determine the question of fact. We are not expressing any opinion upon the merits of the case. It appears to me that there is a fair issue to be tried."

So, under Order XXV., r. 4, there is power to strike out a pleading on the ground that it discloses no reasonable cause of action or of defence; and in any such case, or in case of the action being shown by pleadings to be frivolous or vexatious, the Court may order the action to be stayed or dismissed, or judgment to be entered. This rule applies to a wider area of cases than the general power; and yet it has been held not to apply except in plain or obvious cases; and if there is a point of law that requires any serious discussion, it should be set down for argument: Hubbuck v. Wilkinson[19]. The pleading must be "obviously frivolous or vexatious, or obviously unsustainable," if it is to be struck out (per Lindley L.J. in Attorney-General of the Duchy of Lancaster v. London and North Western Railway Co.[20]). The pleading must be "so clearly frivolous that to put it forward would be an abuse of the process of the Court": Young v. Holloway[21]. I think it would serve no purpose for me to add to what has been already said by my colleagues on the other points argued.

Appeal allowed. Order appealed from discharged. Parties to abide their own costs of all proceedings.

Solicitors, for the respondents, Hughes & Permezel for C. C. Greene & Son, Bairnsdale.

[1] [1908] HCA 39; 6 C.L.R., 382.

[2] (1908) 1 K.B., 761.

[3] 1 C.P.D., 518.

[4] 1 C.P.D., 518, at p. 531.

[5] L.R. 6 Q.B., 115.

[6] L.R. 4 C.P., 755.

[7] 1 C.P.D., 518.

[8] [1908] HCA 39; 6 C.L.R., 382.

[9] (1892) A.C., 61, at p. 67.

[10] 10 App. Cas., 210, at p. 214.

[11] 15 App. Cas., 210.

[12] 15 App. Cas., 210, at p. 219.

[13] (1897) 1 Q.B., 562.

[14] 14 Ch. D., 200, at p. 208.

[15] L.R. 8 Ch., 473, at p. 479.

[16] 1 Q.B.D., 499, at pp. 502-3.

[17] 85 L.T., 262.

[18] 85 L.T., 262.

[19] (1899) 1 Q.B., 86.

[20] (1892) 3 Ch., 274, at p. 277.

[21] (1895) P., 87, at p. 90.

High Court of Australia

Burton v Bairnsdale Shire [1908] HCA 57; (1908) 7 CLR 76 (18 September 1908)

HIGH COURT OF AUSTRALIA