Gilgandra Marketing Co-Operative Limited v Australian Commodities & Marketing Pty Ltd & Anor [2010] NSWSC 1209 (22 October 2010)

Last Updated: 25 October 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Gilgandra Marketing Co-Operative Limited v Australian Commodities & Marketing Pty Ltd & Anor [2010] NSWSC 1209


JURISDICTION:


FILE NUMBER(S):
2010/236326

HEARING DATE(S):
15 October 2010

JUDGMENT DATE:
22 October 2010

PARTIES:
Plaintiff-Gilgandra Marketing Co-Operative Limited
First Defendant-Australian Commodities & Marketing Pty Ltd
Second Defendant- MSC Mediterranean Shipping Company SA

JUDGMENT OF:
Slattery J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Plaintiff- A.C. Casselden
First Defendant- D. Nagle
Second Defendant- R. Arrage

SOLICITORS:
Plaintiff-Christopher Stephen Frawley, Macpherson & Kelley Lawyers (Sydney) Pty Ltd
First Defendant-James Roskov, Hancock Alldis & Roskov
Second Defendant-Stephen John Thompson, Middletons


CATCHWORDS:
Arbitration agreement
civil proceedings for interlocutory relief commenced in the Court
defendant applies for stay of proceedings
whether Commercial Arbitration Act 2010 applies to the proceedings
whether the defendant's application for stay of proceedings and request for referral to arbitration was made not later than the defendant submitted its "first statement on the substance of the dispute" within Commercial Arbitration Act 2010
HELD: defendant's application was made after its "first statement on the substance of the dispute"
proceedings not stayed.

LEGISLATION CITED:
Arbitration Act 1996 (NZ), s 8
Commercial Arbitration Act 1984, s 53
Commercial Arbitration Act 2010, ss 8, 9, Schedule 1
Sale of Goods Act 1923, ss 5(3), 46, 47(1)

CATEGORY:
Procedural and other rulings

CASES CITED:
Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44
Fisken & Associates Ltd v Frew (High Court, Dunedin CP33/01, 24 August 2001, Master Venning)
Hurihanganui v New Zealand Post Limited High Court, Auckland, M653/98, 3 June 1998, Potter J)
Pathak v Tourism Transport Ltd [2002] 3 NZLR 681
The Property People v Housing New Zealand Ltd (High Court, Auckland CP415/99, 7 December 1999, Salmon J)

TEXTS CITED:
Kennedy-Grant, QC, "The New Zealand Experience of the UNCITRAL Model Law: A Review of the Position as at 21 December 2007" (2008) 4 AIAJ 1

DECISION:
See paragraph 58 of judgment.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION



SLATTERY J

WEDNESDAY, 20 OCTOBER 2010

2010/236326 GILGANDRA MARKETING CO-OPERATIVE LIMITED v AUSTRALIAN COMMODITIES & MARKETING PTY LIMITED & ANOR

JUDGMENT

1 HIS HONOUR: The Commercial Arbitration Act 2010 (“the 2010 Act”) introduced in New South Wales a new system of commercial arbitration modelled on the United Nations Foreign Awards Convention, commonly referred to as the “New York Convention”. The 2010 Act replaces the uniform legislation enacted in the Commercial Arbitration Act 1984 (“the 1984 Act”). The 2010 Act markedly reduces the scope of the judicial discretion available to stay civil proceedings commenced in court in contravention of an arbitration agreement. This case illustrates that a party operating under the under the 2010 Act may need to decide early to pursue a stay application.

Introduction

2 In February and March 2010 Gilgandra Marketing Co-Operative Limited (“Gilgandra Marketing”) made a number of contracts for the sale of wheat to Australian Commodities and Marketing Pty Limited (“Australian Commodities”). Each contract was evidenced by a sale note attaching standard terms as to payment, as to the passing of title and as to arbitration in the event of disputes arising between the contracting parties. Gilgandra Marketing has now shipped wheat under these contracts, which has been exported from Australia to Bangladesh. The wheat now stands in containers in the possession of the carriers adjacent to Chittagong Harbour, Bangladesh.

3 Australian Commodities acknowledges that it is in breach of the payment obligations under the standard terms applicable to these contracts. Australian Commodities admits it owes Gilgandra Marketing approximately $2.5 million. Gilgandra Marketing claims that a larger sum is owed, the difference arises from a disagreement about the applicable rate per tonne for the wheat sold. Gilgandra Marketing commenced these proceedings by Summons on 15 July 2010 seeking damages for Australian Commodities’ alleged breach of contract and declarations that Gilgandra Marketing was entitled to possession of the wheat at Chittagong. By motion Gilgandra Marketing also sought that Australian Commodities be restrained from dealing with the wheat in Chittagong. Ball J granted the injunction. Brereton J expedited the proceedings on 10 September 2010 and listed them before me for hearing for 3 days commencing on 1 November 2010.

4 Ball J gave directions for the matter to be pleaded. On 23 September 2010 Australian Commodities filed its defence to Gilgandra Marketing’s Statement of Claim. On the same day Australian Commodities filed a Motion seeking a stay of the proceedings because of the parties’ agreement to submit any disputes arising out of their contracts to arbitration. The arbitration clause was in identical terms in every one of the sales contracts.

5 Australian Commodities contends that it is entitled to a stay of these proceedings based on the 2010 Act, s 8. Gilgandra Marketing contends that the stay application is governed by the Commercial Arbitration Act 1984, and in the alternative, by the Commercial Arbitration Act 2010. In either case Gilgandra Marketing submits that Australian Commodities is not entitled to a stay. The argument about these two enactments arises because the Commercial Arbitration Act 2010 commenced on 1 October 2010, after the commencement of these proceedings but before the stay argument on 15 October and before the hearing.

6 The result I find in this judgment is that the Commercial Arbitration Act 2010 governs Australian Commodities’ stay application. I also conclude that Australian Commodities is not entitled to a stay under the Commercial Arbitration Act 2010 and would not have been entitled to a stay under the Commercial Arbitration Act 1984 in any event. More detailed background is required to analyse the parties’ contentions.

Gilgandra Marketing sells wheat to Australian Commodities

7 Gilgandra Marketing and Australian Commodities made their first set of contracts for the sale of wheat commencing on 1 February 2010. The contracts incorporated the standard Trade Rules of the National Agricultural Commodity Marketing Association Inc (“NACMA”). The agreements provided for the sale of wheat by container. Gilgandra Marketing delivered the wheat pursuant to each of these contracts to Auscott Limited for packing and conveyance. Under these contracts Auscott delivered the wheat on Gilgandra Marketing’s behalf to three carriers Mediterranean Shipping Co (“MSC”), Nippon Yusen Kasai Line (“NYK”), and Malaysian International Shipping Corporation (“MISC”). These carriers transported the wheat by various vessels to Chittagong in February, March and April 2010.

8 The contracts contained an express term for the delivery of the wheat the subject of each contract within approximately 4 weeks and an express term that Australian Commodities would pay for the wheat 14 days from the relevant loading date and that time was of the essence.

9 The contracts contained the following provisions in relation to the ownership and the passing of title and in relation to arbitration:-

“OWNERSHIP AND PASSING OF TITLE: Unless otherwise specified by contractual agreement. Title to goods as well as risk of loss and/or damage shall remain with the Seller until the goods have been conveyed to the buyer at the designated point of conveyance.

...

ARBITRATION: If any dispute arises out of or relates to this contract or the breach, termination or subject matter thereof, the dispute shall be submitted to and settled by Arbitration in accordance with NACMA Arbitration Rules in the edition current at the date of the establishment of the Terms of Trade in the Contract, such rules forming an integral part of the Contract and of which both parties hereto shall be deemed to be cognisant.”

10 All the contracts were made during the February – March period 2010. Gilgandra Marketing alleges that it issued invoices totalling $3,619, 983.84 in respect of the transhipment of wheat under these contracts of which Australian Commodities has paid $702,307.00 leaving an amount outstanding on the plaintiff’s case of $2,917,677.84. These invoices issued in the period March – April 2010.

11 Gilgandra Marketing alleges that in early June 2010 in consideration for Australian Commodities agreeing to pay additional administration and financial fees that it agreed to consolidate the original contracts into a series of four contracts which were subject to the Grain Trade of Australia Limited (“GTA”) standard terms of conditions in force as at March 2009. The precise legal effect of this consolidation is an issue in these proceedings. Gilgandra Marketing alleges that its relevant effect was to substitute the GTA standard terms of conditions for the NACMA standard terms of conditions in each of the contracts.

12 The GTA standard terms of conditions contain identical Arbitration clause to the NACMA standard terms of conditions. However the GTA standard terms and conditions contain a different clause concerning ownership and passing of title, which was to the following effect:-

“OWNERSHIP AND PASSING OF TITLE: Risk in any goods supplied by the Seller to the Buyer shall pass to the Buyer when they leave the possession of the Seller however title shall not pass until payment in full has been received by the Seller. Until full payment is received the Buyer and/or it’s agents and 3^rd parties hold the goods as bailees only. On breach of any payment terms, the Buyer on its own behalf and on behalf of its agents and 3^rd parties authorises the Seller to enter any premises and retake possession of the goods without notice to the Buyer, its agents and 3^rd parties.”

13 The NACMA standard terms of conditions provided for the passing of title and risk upon conveyance to the designated point of conveyance, whereas the GTA standard terms of conditions provided for risk to pass to the buyer when the goods left possession of the seller but that title did not pass until payment in full had been received by the seller.

14 All the wheat under the contracts has been delivered for shipment and shipped from Sydney to Chittagong. Some wheat has been released to Australian Commodities but a substantial proportion of it has remained in containers at Chittagong. The three shipping lines MSC, MISC and NYK still hold the original bills of lading in respect of those containers.

15 Australian Commodities payment history under the contracts includes a last payment of $170,000 on 27 May 2010 for part of the wheat. Prior to that in April 2010 Australian Commodities provided Gilgandra Marketing with two cheques totalling $600,000 which were dishonoured. Gilgandra Marketing’s evidence is that there have been a number of requests for payment and that Australian Commodities has broken assurances of payment.

16 Australian Commodities gave Gilgandra Marketing a number of letters of assignment from Australian Commodities’ bank confirming that the bank holds revocable authorities to pay amounts received into Australian Commodities’ account in respect of the sale of the wheat to Gilgandra Marketing. Payments have not yet been made in accordance with those letters. Gilgandra Marketing decided to pursue its legal remedies for the unpaid purchase price.

Applications for Interlocutory Relief

17 The early course of these proceedings is material to Australian Commodities’ stay application. The proceedings were filed on 15 July 2010 when Pembroke J abridged the time for service of process to 11am on 16 July 2010 and stood the matter over to the duty judge at 10am on Monday, 19 July 2010. The matter was mentioned before Ball J on 21 July 2010.

18 On 20 July 2010 Gilgandra Marketing sought undertakings that Australian Commodities would not seek delivery of the bills of lading, which have not yet been delivered to it and would remit all amounts received by it from the sale of the wheat to Gilgandra Marketing. But Australian Commodities would not provide those undertakings.

19 On 22 July 2010 Gilgandra Marketing notified Australian Commodities that it would move that day to restrain Australian Commodities from dealing with the wheat in Chittagong. On only a few hours notice the matter was argued on the afternoon of 22 July 2010. Gilgandra Marketing read four affidavits at the hearing and the defendant called no evidence. As is not uncommon in the duty list, the matter was heard urgently and at short notice to the defendant.

The Arguments on 22 July 2010

20 Gilgandra Marketing argued at the hearing on 22 July that it would be entitled to relief on a final basis because it held a lien over the wheat or a right to take possession of it. Based upon the GTA terms and conditions in the consolidated contracts it claimed that as an unpaid seller title had not passed and that it still held a lien and a right of stoppage in transitu under Sale of Goods Act 1923, s 46. Ball J gave judgment on 23 July 2010 on the interlocutory application. He decided that there was not a serious question to be tried in relation to the existence of a lien because the goods had passed under the original contract with the NACMA standard terms. Ball J’s opinion at this interlocutory hearing was that the title to the goods had passed under the original contracts and that whatever may have been agreed in the consolidated contracts it could not displace the fact that title had already been passed under the original contracts.

21 Gilgandra Marketing’s alternative argument was that it was entitled to exercise a right of stoppage in transitu under Sale of Goods Act s46 because Australian Commodities had become insolvent and Gilgandra Marketing was an unpaid seller of goods which were still in the course of transit. Ball J accepted that there was a serious question to be tried in relation to this alternative issue.

22 Sale of Goods Act, s 46 provides rights to an unpaid seller in the following circumstances:-

“Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, the seller may resume possession of the goods as long as they are in course of transit, and may retain them until payment or tender of the price.”

23 Ball J found that there was a serious question to be tried in relation to each of the two issues that Sale of Goods Act, s 46 raises. The first issue is whether Australian Commodities has become insolvent. The second issue is whether the wheat has been delivered to Australian Commodities or is still in the course of transit.

24 His Honour found a serious question to be tried on the issue of solvency by applying the Sale of Goods Act, s 5(3) to the evidence before him. Sale of Goods Act, s 5(3) provides:-

“(3) A person is deemed to be insolvent within the meaning of this Act who either has ceased to pay his or her debts in the ordinary course of business or cannot pay his or her debts as they become due, whether the person has committed an act of bankruptcy or not.”

25 The evidence demonstrated that Gilgandra Marketing had not been paid on the due date, there was no arrangement for late payment between Australian Commodities and Gilgandra Marketing and; two cheques had been dishonoured; and despite assurances from Australian Commodities’ Managing Director that payments would be made, they were still outstanding.

26 His Honour also accepted that there was a serious question to be tried in relation to the second issue of whether or not the goods remained in the course of transit. Sale of Goods Act, s 47(1) provides:-

“(1) Goods are deemed to be in course of transit from the time when they are delivered to a carrier by land or water or other bailee for the purpose of transmission to the buyer until the buyer or the buyer’s agent in that behalf takes delivery of them from the carrier or other bailee.”

27 On the evidence before his Honour a substantial part of the wheat remained in the possession of the shipping agents who continued to hold the original bills of lading and the buyer’s agent had not yet taken delivery of them from the carrier.

28 Australian Commodities also contested Gilgandra Marketing’s submission that the balance of convenience favoured the grant of interlocutory relief. Australian Commodities submitted Gilgandra Marketing merely had a money claim and that damages were an inadequate remedy. Ball J did not accept that submission. His Honour pointed out that Sale of Goods Act, s 46 provides a proprietary remedy where a buyer is insolvent and that damages are not an adequate alternative if Gilgandra Marketing makes out a case that Australian Commodities is insolvent.

29 Australian Commodities did not advance evidence of particular prejudice or hardship arising from a grant of interlocutory relief. In the result Australian Commodities were restrained from dealing with the wheat. But Ball J gave leave to re-list the matter in the event that Australian Commodities wished to adduce further evidence as to the balance of convenience.

Directions and the Australian Commodities application

30 Other procedural orders relating to the future procedural conduct of the action were dealt with when Ball J gave interlocutory judgment on 23 July 2010. These orders were later amended. Australian Commodities foreshadowed an application for formal mediation on an urgent basis. Gilgandra Marketing called on a Notice to Produce to Australian Commodities seeking the production of documents. Australian Commodities foreshadowed mediation on an urgent basis and MSC was joined as a second defendant on the proceedings on an interpleader motion.

31 On 28 July 2010 Australian Commodities filed an unconditional appearance in the proceedings. On 29 July 2010 it filed a Notice of Motion to set aside a Notice to Produce issued by Gilgandra Marketing on 21 July 2010.

32 The defendant soon applied to change the interlocutory status quo created by Ball J’s decision of 23 July 2010. The matter came back before Ball J on 30 July 2010. Australian Commodities then sought to lead evidence from its Managing Director Mr Alam to support an inference that the delivery of the wheat by Gilgandra Marketing to Australian Commodities actually occurred in Sydney and that the shipment of the wheat to Bangladesh had been arranged by Australian Commodities and was not part of the course of transit under the original or the consolidated contracts. Australian Commodities took advantage of Ball J’s leave in relation to the balance of convenience. But the evidence adduced was really a challenge to his Honour’s interlocutory conclusion on 23 July that Gilgandra Marketing had a reasonably arguable case under Sale of Goods Act, s 46.

33 Ball J found that he could only discharge the injunction if he was satisfied that this evidence was new such that there had been a change of circumstance since the injunction was granted or that the evidence was not reasonably available to the defendant at the time of the hearing: Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44. His Honour was not satisfied that the evidence fell into that category and he concluded that the application really was in the nature of an appeal. His Honour found that the evidence adduced was not evidence that “could not reasonably have been raised by the defendant at the time” his Honour heard the matter. His Honour observed that Mr Alam had been present in Court when the matter was heard on 22 July and that Australian Commodities had declined to give any undertakings in respect of the wheat so that the parties could consider their matters further so that much of the urgency on 22 July was really of Australian Commodities own making. Accordingly his Honour dismissed the application, leaving an avenue of appeal open to Australian Commodities should they wish to pursue that course.

34 On 30 July 2010 Justice Ball also made further orders for the conduct of the proceedings which included orders for the return of Gilgandra Marketing’s Notice to Produce to the defendant, Australian Commodities’ application to set aside Gilgandra Marketing’s Notice to Produce and a timetable for both parties to serve evidence or further evidence and for Gilgandra Marketing to serve a Statement of Claim by 6 August 2010 and Australian Commodities to serve a Defence and Cross-Claim by 2 September 201 and for the matter to be referred to the Expedition List judge.

Leave to Appeal and Expedition of the Final Hearing

35 On 13 August the plaintiff filed a detailed Statement of Claim pleading each of the original contracts and the consolidated contracts and the all the shipments and invoices. On 20 August 2010 Australian Commodities filed a Summons seeking leave to appeal against Ball J’s decision on 23 July 2010. The relief sought on appeal was the dissolution of the injunction granted by Ball J.

36 Justice Brereton expedited the proceedings on 10 September 2010 and provisionally fixed them for hearing before me commencing 1 November 2010. In doing so Justice Brereton made detailed procedural orders by consent relating to the conduct of the proceedings up to the provisional trial date. It was recognised in directions hearings before me that the Summons for leave to appeal was unlikely to be heard before 1 November 2010.

37 Gilgandra Marketing served a Notice to Produce on 17 September 2010 returnable on 24 September 2010. On 22 September 2010 the solicitors for Australian Commodities foreshadowed in correspondence that it resisted production of the documents sought and requested information about their forensic purpose. Finally on 23 September 2010 Australian Commodities filed a Defence, a Motion seeking a stay of the proceedings and an affidavit of Mr Alam. It is not contested that this was Australian Commodities’ first notification to Gilgandra Marketing of an intention to seek a stay pursuant to the arbitration agreement.

38 A number of other procedural events occurred between the filing of the stay Motion on 23 September 2010 and argument on the Motion on 15 October 2010. Australian Commodities produced documents on 24 September 2010 before the Deputy Registrar and by correspondence later the same day. At the directions hearing before me on 12 October 2010 the stay motion was listed for hearing. It was argued on 15 October 2010 with the filing of supplementary written submissions on 18 October 2010.

The Legislative Provisions before and after 1 October 2010

39 Before the commencement of the 2010 Act on 1 October 2010, s 53 of the Commercial Arbitration Act 1984 governed the rights of parties to an arbitration agreement to stay civil proceedings pending delivery of an arbitral award. The 1984 Act, s 53 provides as follows:-

“(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) An application under subsection (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance.

(3) Notwithstanding any rule of law to the contrary, a party to an arbitration agreement shall not be entitled to recover damages in any court from another party to the agreement by reason that that other party takes proceedings in a court in respect of the matter agreed to be referred to arbitration by the arbitration agreement.”

40 From 1 October this year the 1984 Act was repealed and same subject is covered by the 2010 Act, which ss 8 and 9 provide as follows:-

“8(1) 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.

(2) Where an action referred to in subsection (1) has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

(9) 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.”

41 In these reasons I conclude that the 2010 Act governs the present application. This result follows from an application of the 2010 Act’s transitional provisions. The Court will deal with the following further questions:

(1) Which of the 1984 and 2010 Act applies to the determination of the present application?

(2) Should the proceedings be stayed under the 2010 Act?

(1) Which of the 1984 Act and 2010 Act applies?

42 The 2010 Act applies to the determination of the present application. Gilgandra Marketing somewhat faintly suggested that the 2010 Act did not apply to the defendant’s request for a stay and referral to arbitration. Australian Commodities submitted that the 2010 Act, not the 1984 Act applied. The savings and transitional provisions of the 2010 Act make clear that the Australian Commodities submission is correct. The 2010 Act Schedule 1, Savings, Transitional and Other Provisions provides:-

“1 Regulations

(1) The regulations may contain provisions of a savings or transitional nature consequent on the enactment of the following Acts:

this Act

(2) Any such provision may, if the regulations so provide, take effect from the date of assent to the Act concerned or a later date.

(3) To the extent to which any such provision takes effect from a date that is earlier than the date of its publication on the NSW legislation website, the provision does not operate so as:

(a)to affect, in a manner prejudicial to any person (other than the State or an authority of the State), the rights of that person existing before the date of its publication, or

(b)to impose liabilities on any person (other than the State or an authority of the State) in respect of anything done or omitted to be done before the date of its publication.

2 Savings and transitional provisions

(1) Subject to subclause (2):

(a)this Act applies to an arbitration agreement (whether made before or after the commencement of this Act) and to an arbitration under such an agreement, and

(b) a reference in an arbitration agreement to the Commercial Arbitration Act 1984, or a provision of that Act, is to be construed as a reference to this Act or to the corresponding provision (if any) of this Act.

(2) If an arbitration was commenced before the commencement of this Act, the law governing the arbitration and the arbitration agreement is to be that which would have been applicable if this Act had not been enacted.

(3) For the purposes of this clause, an arbitration is taken to have been commenced if:

(a) a dispute to which the relevant arbitration agreement applies has arisen, and

(b) the arbitral tribunal has been properly constituted.”

43 No regulations have been made “of a savings or transitional nature consequent upon the enactment of” the 2010 Act: Schedule 1, 1 Regulations.

44 Although the arbitration agreement in the original and the consolidated contracts was made before the commencement of the 2010 Act, that Act applies to the arbitration agreement and to an arbitration under such agreement: 2010 Act Schedule 1, 2 Savings and Transitional Provisions, clause (1)(a). No exception to the application of the 2010 Act is engaged: Schedule 1, 2 Savings and Transitional Provisions clauses (2) and (3). There was no arbitration commenced before the commencement of the 2010 Act.

45 The present application can therefore be determined under the 2010 Act.

46 The 2010 Act, s 8(1) requires the Court before which an action is brought which is the subject matter of an arbitration agreement, “if a party so requests” to “refer the parties to arbitration” if the statutory circumstances are established. The defendants’ Notice of Motion 23 September 2010 seeks an order 1 “that these proceedings be stayed pending arbitration”. The request for a stay “pending arbitration” is a sufficient request within the 2010 Act, s 8.

47 The only issue presented for the Court’s consideration in relation to the application of the 2010 Act, s 8 is whether the Australian Commodities request was “not later than when submitting the parties first statement of the substance of the dispute”. The parties did not contest that there was an “arbitration agreement” within the meaning of the 2010 Act, s 8. Nor did they advance any argument that the agreement was “null and void, inoperative or incapable of being performed”. The case was argued purely around the timing question.

(2) Should the proceedings be stayed under the 2010 Act?

48 Australian Commodities contends that it has requested the dispute between itself and Gilgandra Marketing be referred to arbitration no later than when it submitted a “first statement on the substance of the dispute” to the Court. It submits that its first statement on the substance of this dispute occurred when it filed its Defence on 23 September 2010. It says that the simultaneous filing of the Motion for a stay pending referral to arbitration is “not later than” that first statement. Gilgandra Marketing contests this and submits that Australian Commodities made its first statement when responding to the application for interlocutory relief on 22 July 2010. Gilgandra Marketing says that Australian Commodities 23 September 2010 request for referral to arbitration is well after this first statement, so that 2010 Act, s 8 does not require the Court to refer the dispute to arbitration.

49 Neither the researches of Counsel nor my own researches have been able to find any Australian authority considering the words of the 2010 Act, s 8 “submitting that parties first statement on the substance of the dispute”. The 2010 Act, s 8 has received extensive consideration in New Zealand which adopted the Uncitral Model Law for its domestic arbitrations in 1996. The Arbitration Act 1996 (NZ), s 8 is in relevantly identical terms to the 2010 Act, s 8. There are some additional words covering the circumstances in which s 8 does not apply in Arbitration Act 1996 (NZ). The precise problem which confronted the Court in the present proceedings has been considered in New Zealand, where principles have been developed which explain the operation of the 2010 Act, s 8 when an application for interlocutory relief has been made. The scholarship of Mr Kennedy-Grant QC has helpfully summarised the New Zealand law interpreting Arbitration Act 1996 (NZ), s 8 in these circumstances.

50 A convenient summary of the authorities in New Zealand as to when a party’s first statement on the substance of the dispute is made is stated by Mr Kennedy-Grant QC in his paper “The New Zealand Experience of the UNCITRAL Model Law” summarising Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 and other New Zealand authorities :-

“It has been variously held that the following constitute a “party’s first statement on the substance of the dispute”:

(a) a notice of opposition and affidavit in opposition to an application for interim injunction;

(b) an originating application for an order setting aside a statutory demand and supporting affidavit;

(c) an affidavit in reply in a summary judgment application in which the plaintiff raises the matters which are the subject of the arbitration agreement in reliance on which the plaintiff subsequently seeks to stay proceedings brought by the defendant;

(d) proceeding with a claim after making an application for interim relief with reference to an arbitration agreement but failing then or immediately after the resolution of the interim relief application to apply for a stay, so adopting the statement in the interim relief application as a statement on the substance of the dispute”.

51 Mr Kennedy-Grant QC relies for the summary propositions upon the following cases: Hurihanganui v New Zealand Post Limited High Court, Auckland, M653/98, 3 June 1998; The Property People v Housing New Zealand Ltd High Court, Auckland CP415/99, 7 December 1999 per Salmon J; Fisken & Associates Ltd v Frew High Court, Dunedin CP33/01, 24 August 2001 Master Venning and Pathak v Tourism Transport Ltd [2002] 3 NZLR 681.

52 These authorities are fully discussed in Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 itself. The principles stated in Pathak v Tourism Transport Ltd show that a defendant who opposes interim relief in Court and fails to seek a stay or protest jurisdiction in respect of the substantive dispute at an early time under Article 8(1) will be prevented from seeking a stay. In Pathak v Tourism Transport Ltd the parties were in dispute in relation to franchise agreement containing an arbitration clause. The plaintiff sought interim relief in the High Court of New Zealand but the application was resolved as a result of undertakings given by the defendant. The plaintiffs took further procedural steps in the Court and then filed an application for stay of the proceedings. Heath J found that had a stay been sought immediately after the resolution of the interim relief application that the stay would have been granted because of the operation of the equivalent of the 2010 Act, s 9 in Article 9 of the New Zealand Act. Heath J found that because the plaintiff had proceeded with the Court action and therefore adopted the earlier statement made in the interim relief the plaintiffs had therefore submitted their first statement on the substance of the dispute and that it was too late then to seek a stay.

53 Heath J considered all the New Zealand authorities as they applied to parties seeking a stay of civil proceedings where parties had initiated or resisted curial interim injunctive relief. And drew the following conclusions :-

“The authorities

[41] There have been a number of cases in which art 8 has been interpreted by this Court. I now consider those decisions.

[42] In The Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66, a defendant in curial proceedings sought a stay under art 8. The application was resisted by the plaintiff on the ground that the defendant had submitted to the jurisdiction of the Court. Salmon J concluded that in filing a response to an interim injunction application the defendant submitted to the jurisdiction of the Court. His Honour considered that certainty was desirable in matters of this type; he concluded that certainty was assured by giving the words of art 8(1) their ordinary meaning. Accordingly, Salmon J held that the notice of opposition to the interim injunction application and the affidavits filed in support did constitute a statement by the defendant on the substance of the dispute thereby depriving the defendant of the right to seek a stay. I refer in particular to para [24], p 71. At para [24] Salmon J said:

“[24] It is desirable that there be certainty in these matters. Certainty is assured by giving the words of art 8(1) their ordinary meaning. In my view it is clear that the notice of opposition to the interim injunction application and the affidavits filed in support thereof did constitute a statement by the defendant on the substance of the dispute. In order to be able to rely on art 8(1) the defendant should have applied for a stay at least prior to the hearing of the interim injunction application. Its failure to do so means that it cannot rely on art 8.” (Emphasis added.)

[43] Master Kennedy-Grant considered the issue in the context of a curial proceeding in which an amended statement of claim had been filed. In Hurihanganui v New Zealand Post Ltd (High Court, Auckland, M 653/98 3 June 1998) Master Kennedy-Grant said at p 3:

“I have no doubt that, whether or not the plaintiff’s original statement of claim filed at the same time as his application for an interim injunction should be regarded as his first statement on the substance of the dispute, his amended statement of claim filed on 7 May 1998 clearly should be regarded as that statement. That being so, his application for a stay is made later than when submitting his first statement on the substance of the dispute and thus is out of time.”

[44] In Coastal Tankers Ltd v Port Wellington Ltd (High Court, Wellington, CP 32/99, 18 February 1999) Doogue J considered an application by a defendant to stay injunction proceedings which was made without prejudice to an appearance under protest to the jurisdiction of the Court. The protest had been entered because of the existence of an arbitration agreement. Doogue J was prepared to grant the application. The judgment was concerned mainly with the question whether the interim injunction application should succeed. Accordingly, with respect, there is little of assistance to be derived from that decision.

[45] In Anderson Switchboards & Electronics Ltd v Schneider Electrical (NZ) Ltd (High Court, Auckland, M 1215-IM00, 16 January 2001) Master Kennedy-Grant considered whether the existence of an arbitration agreement to deal with disputes arising between the parties was sufficient to defeat a statutory demand which the applicant sought to set aside. The Master held that it was not. In relation to art 8(1) of the First Schedule to the Act, the Master took the view that the affidavit filed on behalf of the applicant was the “first statement on the substance of the dispute”; accordingly, an application for stay was out of time. Responding to para [24] of Salmon J’s judgment in The Property People Ltd, Master Kennedy-Grant, at p 6, took the view that where a party filed a substantive affidavit in a proceeding of that type it was its first statement on the substance of the dispute for the purposes of art 8.

[46] Finally, I refer to the decision of Master Venning in Fisken & Associates Ltd v Frew (High Court, Dunedin, CP 33/01, 24 August 2001). The issue for the Master was whether Mr and Mrs Frew had lost their right to refer the dispute to arbitration by failing to request a reference to arbitration when responding to the application for an interim injunction brought by the plaintiff. The Master, following Salmon J’s decision in The Property People Ltd held that the response was one which did deny Mr and Mrs Frew the right to seek a stay under art 8.

Conclusions

[47] In my view, a critical distinction is to be drawn between a party who initiates curial interim injunction proceedings in anticipation or in aid of arbitral proceedings and a plaintiff who does not. If proceedings are issued to seek an interim injunction without reference to the arbitration agreement, I am of the view that The Property People Ltd and the cases which follow apply to prevent a plaintiff who issues such proceedings from subsequently seeking a stay. Similarly, a defendant who opposes interim relief and fails to seek a stay (or protest jurisdiction) in respect of the substantive dispute will also be prevented from seeking a stay: see The Property People at para [24].

[48] This case is, however, different. The plaintiffs clearly contemplated the commencement of arbitral proceedings to resolve any disputes. If:

(a) the plaintiffs had relied expressly on art 9 of the First Schedule to the Act to justify the grant of an interim injunction; and

(b) the proceedings been initiated under the originating application procedure (as submitted by Mr Tingey),

the fact that the application for interim relief did not amount to a submission of the substance of the dispute to the jurisdiction of the Court would have been much clearer. But, in my view, the true test to be applied under art 8 is whether the plaintiffs submitted the substantive dispute to the jurisdiction of the Court. The reference to the “first statement on the substance of the dispute” (in art 8) must be read in that context.

[49] Had a stay been sought immediately after the resolution of the application for interim relief I would have been prepared to stay the curial proceedings.

[50] However, arbitral proceedings were not commenced immediately after the application for interim relief was resolved. Indeed, it is arguable that arbitral proceedings were not commenced until March 2002. During that time the plaintiffs had taken significant steps in the proceeding, including the seeking of further and better particulars of the statement of defence and providing further particulars of their statement of claim. In addition, a verified list of documents was sworn. It is no answer, in my respectful view, for Mr Katz to say that those steps were required by the case management process. If the plaintiffs wished to resolve matters by arbitration they were required to seek a stay. In my view, a stay should not be granted unless an application under art 8 is filed, at the latest, immediately upon resolution of interim relief issues.”

54 In my opinion Australian Commodities’ opposition to the Gilgandra Marketing’s application for interim relief before Ball J was Australian Commodities’ “first statement on the substance of the dispute”. Alternatively, even if were permissible within the scope provided by the 2010 Act, s 9 for Australian Commodities not to seek a stay during the application of interim relief, its failure to do so immediately afterwards and its conduct in co-operating over some two months in bringing these proceedings on for hearing in the Court, even before a formal defence was filed, are a continuing adoption by Australian Commodities of its first statement of the substance of the dispute at the interlocutory hearing. I draw these conclusions for the following reasons.

55 First, by the time Counsel for Australian Commodities had put argument on 22 July and 30 July 2010 he had advanced the substance of the dispute from the defendant’s point of view that now appears in its defence filed on 23 September 2010. He had argued orally that there was no equitable lien because property had already passed under the original NACMA terms. He had argued that Sale of Goods Act, s 46 did not apply because the goods were no longer in transit and there was no evidence that Australian Commodities was insolvent. He had pointed out that there was a dispute about the rate per tonne agreed between the parties for the sale of the wheat. And he had made the point that delivery under the contracts between the parties had occurred in Sydney and was not to take place in Chittagong. This is the substance of the matters now being contested in the filed defence.

56 Second, Australian Commodities had the option to apply immediately for a stay. It declined to give an undertaking on 22 July and the matter came on for hearing urgently. It could have sought a stay on the 22^nd in response to the injunction. It could have given an undertaking for a short period. It could have reserved its position by only putting argument on the balance of convenience not in relation to a serious question to be tried. Australian Commodities did not lead any evidence on 22 July but it did on 30 July 2010. In doing so it was not in my view seeking interim relief. The 2010 Act, s 9 does not have any application.

57 Third, Australian Commodities’ conduct since then 30 July 2010 includes a re-iteration of the proposed defence on 10 September 2010 at a time when these proceedings were set down for hearing. Participating in listing these proceedings for hearing in those circumstances was the re-statement of the matters already stated on 22 July 2010.

Conclusions and Orders

58 In the result I have found that the 2010 Act applies to the Australian Commodities’ application for a stay of these proceedings. But the application fails because Australian Commodities did not request a referral of the proceedings to arbitration not later than submitting its ”first statement on the substance of the dispute”. Australian Commodities’ application for referral to arbitration under the Commercial Arbitration Act 2010 is declined and the application for a stay is dismissed. I confirm the hearing of the proceedings on Monday, 1 November 2010 before me.

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LAST UPDATED:
22 October 2010