1144 Nepean Highway Pty Ltd v Leigh Mardon Australasia Pty Ltd
[2009] VSC 226
•11 June 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST C
No. 6530 of 2009
| 1144 NEPEAN HIGHWAY PTY LTD | Plaintiff |
| V | |
| LEIGH MARDON AUSTRALASIA PTY LTD | Defendant |
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JUDGE: | DAVIES J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29 May 2009 | |
DATE OF JUDGMENTS: | 11 June 2009 | |
CASE MAY BE CITED AS: | 1144 Nepean Hwy Pty Ltd v Leigh Mardon Australasia Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 226 | |
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CONTRACT – Construction of dispute resolution clause – Instigation of proceedings – Whether proceedings should be stayed due to dispute resolution clause – Whether the Court should exercise its discretion in staying the proceedings.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr CR Northrop | Bazzani Scully Brand |
| For the Defendant | Mr MH Whitten | Corrs Chambers Westgarth |
HER HONOUR:
The defendant by summons filed 14 May 2009 seeks an order that this proceeding be permanently stayed. The application is on the basis that the proceeding has been brought in breach of an agreed dispute resolution method contained in an agreement to lease dated 19 November 2008 (“the agreement to lease”) between the plaintiff as landlord and the defendant as tenant in relation to 1144 Nepean Highway, Highett.
The dispute resolution method is contained in clause 12 of the agreement to lease. Clause 12 provides as follows:
12 Dispute Resolution
12.1Notice of dispute
If a dispute or difference arises or the parties fail to agree in connection with any matter arising out of or relating to this agreement (except for any dispute or difference or failure to agree on the amount or payment of rent or outgoings under the Lease), either party may give the other party a notice of dispute in connection with this agreement (Dispute Notice).
12.2 Parties must attempt to resolve dispute
Any dispute must be referred to the Landlord’s representative and the Tenant’s representative who must meet together in an endeavour to resolve the dispute within seven Business Days of the giving of the Dispute Notice.
12.3 Referral of dispute
If within seven Business Days after delivery of a Dispute Notice, the parties have not been able to resolve the dispute either party may request that the dispute be referred to an appropriately qualified and experienced independent expert.
12.4 Appointment of independent expert
Subject to clause 12.6, a party receiving a request under clause 12.3 is not obliged to agree to the selection of an appropriately qualified and experienced independent expert. If the parties are unable to agree on an appropriate expert either party may request the appointment of an appropriate expert by:
(a) if the dispute involves the legal interpretation of this agreement or if the parties are unable to agree on whether the dispute involves legal interpretation of this agreement, either party may apply to the President of the Law Institute of Victoria or his nominee to appoint an independent practicing barrister or solicitor to resolve the dispute or to determine whether the dispute involves legal interpretation of this agreement, as the case may be;
(b) if the dispute involves a financial or accountancy matter, either party may apply to the President of the Victorian Chapter of the Institute of Chartered Accountants of Australia or his nominee to appoint a practising chartered accountant to resolve the dispute;
(c) if the dispute involves a matter connected with the construction of the Landlord’s Works or any part or parts thereof, either party may apply to the President for the time being of the Victorian Chapter of the Royal Australian Institute of Architects or his nominee to appoint a practicing architect to resolve the dispute; and
(d) in any case, the dispute must be referred to a qualified person appointed by the senior officer for the time being of an appropriate associate institute society or board to appoint an independent expert in the relevant field who is prepared to determine the dispute.
12.5 No legal proceeding
A party may not commence legal proceedings (except proceedings seeking interlocutory relief) in respect of a dispute unless this clause 12 has been complied with first.
12.6 Expert’s determination binding on parties
(a) Any person appointed under clause 12.3 and 12.4 must act as an expert and not as an arbitrator, and the expert’s written determination will be conclusive and binding on the parties.
(b) The expert’s fees and expenses must be shared equally between the parties.
12.7 Costs
The costs of any dispute resolution must be shared equally between all parties despite the result of the determination.
A dispute has arisen between the parties. The dispute is over a planning permit obtained by the plaintiff and whether the permit satisfied the requirements of clause 2.1 of the agreement to lease. Clause 2.1 provides:
2.1 Permits to be obtained
This agreement is subject to and conditional on the Landlord at its expense obtaining, by no later than 31 January 2009 the necessary town planning permit from the Responsible Authority to:
(a) allow the Premises to be used for the permitted use as specified in Item 8 of the Lease; and
(b) enable the Landlord to carry out and complete the Landlord’s Works.
It is common ground that the permit was not issued by 31 January 2009. The defendant then exercised its contractual right under clause 2.3 to give the plaintiff notice, on 2 February 2009, of termination of the agreement. Clause 2.3 provides:
2.3Termination
If, under this clause 2, the town planning permit is not obtained by the time required then this agreement will be determined by the Tenant or the Landlord by giving not less than 30 days prior written notice to the other party of its intention to terminate this agreement. If the conditions are satisfied before the expiration of the 30 day period then the notice of termination will be null and void and this agreement will remain in full force and effect.
Before the expiry of the 30 days, namely on 16 February 2009, the plaintiff obtained a permit (“the planning permit”) which, it claims, complied with clause 2.1. It appears that the defendant initially accepted that the planning permit complied with clause 2.1, and that the termination notice was thereby invalidated, but later took a different view. On 22 April 2009, the defendant sent the plaintiff a dispute notice, which the defendant contended invoked and binds the plaintiff to the dispute resolution process. The notice is in the following terms:
Agreement to Lease: 1144-1146 Nepean Highway, Highett
Notice of dispute under clause 12.1 of the Agreement to Lease
Date 22 April 2009
To 1144 Nepean Hwy Pty Ltd
ACN 088 461 634
c/- Drapac
30 Courtney Street
NORTH MELBOURNE VIC 3051
(Landlord)From Leigh Mardon Australasia Pty Ltd
ACN 072 977 292
1144 Nepean Highway
HIGHETT VIC 3190
(Tenant)This notice constitutes notice under clause 12.1 of the Agreement to Lease: 1144-1146 Nepean Highway (ATL) that a dispute or difference has arisen between the parties in relation to that agreement in respect of the following:
1.On or about 19 November 2008, the Tenant and the Landlord entered into the ATL. Clause 2.1 of the ATL (‘Permits to be obtained’) provided as follows:
‘This agreement is subject to and conditional on the Landlord at its expense obtaining, by no later than 31 January 2009 the necessary town planning permit from the Responsible Authority to:
(c) allow the Premises to be used for the permitted use as specified in Item 8 of the Lease; and
(d) enable the Landlord to carry out and complete the Landlord’s Works.’
2.Following the Landlord’s failure to have the necessary town planning permit in place by 31 January 2009, the Tenant gave notice on 2 February 2009 under clause 2.3 of the ATL of its intention to terminate the ATL (Termination Notice). In good faith, the Tenant believed that the Termination was invalidated on 16 February 2009 when the Landlord asserted that it had procured a planning permit that purportedly satisfied the requirements of clause 2.1 of the ATL (Planning Permit).
3.As recently advised to the Landlord, the Tenant now understands and believes that:
(a)the Planning Permit does not satisfy paragraph (a) of clause 2.1 of the ATL as it does not enable the ‘Premises’ to be used for the permitted use as specified in Item 8 of the ‘Lease’;
(b)the Planning Permit does not satisfy paragraph (b) of clause 2.1 of the ATL as it does not enable the Landlord to ‘carry out and complete the Landlord’s Works’ (as evidence by advice from Hyder Consulting Pty Ltd on 31 March 2009 that certain works could not proceed because the Landlord was still waiting to obtain the necessary planning permits); and
(c)as a result of paragraphs (a) and (b) above:
i.the Termination Notice remained valid after 16 February 2009;
ii.the ATL terminated on 4 March 2009.
4.The Landlord disputes the issues set out in paragraph 3 above.
The Tenant now refers this dispute to the Landlord’s representative and the Tenant’s representative in accordance with clause 12.2 of the ATL. Pursuant to clause 12.2 of the ATL, such meeting must be held on or before 30 April 2009 (being seven ‘Business Days’ from the date of this notice).
Peter Gome (Chief Financial Officer)
Leigh Mardon Australasia Pty Ltd
The parties met on or about 28 April 2009 in an attempt to resolve the dispute, but without success. On 7 May 2009, the defendant’s solicitors wrote to the plaintiff’s solicitors advising that the notice would not be withdrawn and seeking a response to the defendant’s proposed selection of an expert to determine the dispute. The defendant’s solicitors did not receive a response and by letter dated 12 May 2009, the defendant’s solicitors wrote to the Law Institute for the appointment of an independent practising barrister or solicitor to resolve the dispute in accordance with clause 12.4(a) of the agreement to lease.
On 12 May 2009 the plaintiff instituted this proceeding in the Commercial Court. The plaintiff, in its statement of claim, alleged that the planning permit satisfied the requirements of clause 2.1 and that the termination notice is null and void. Further and in the alternative, the plaintiff alleged that the defendant is estopped from asserting that the agreement has been terminated. Finally, the plaintiff alleged that it would be unconscionable for the defendant to depart from the assumption that the agreement remains on foot.
In the proceeding, the plaintiff seeks the following relief:
(a) A declaration that the agreement to lease remains in full force and effect.
(b)A declaration that the defendant is estopped from contending that the agreement to lease has been terminated by reason of the service of the notice on 2 February 2009.
(c)Injunctions, both interlocutory and permanent, restraining the defendant from taking any steps to refer the question of termination to the dispute resolution procedure contained in the agreement to lease.
The plaintiff also issued a summons for an interlocutory injunction restraining the defendant from taking any steps to terminate the agreement to lease or to refer the question of termination to the despite resolution procedure pending the hearing and determination of the proceeding. The plaintiff has not pursued that interlocutory relief. Instead it seeks a preliminary determination of the issue as to whether the planning permit satisfied clause 2.1 of the agreement to lease.
On 14 May 2009, the defendant issued the summons for a permanent stay of the proceeding on the basis that the process set out in clause 12 was not followed by the plaintiff before issuing this proceeding. On 21 May 2009, the defendant filed its defence. It alleged that the planning permit did not comply with the requirements of clause 2.1 and that the agreement terminated as at 4 March 2009 and, therefore, that the plaintiff is not entitled to the equitable relief it seeks. It also alleged that the plaintiff issued this proceeding in breach of clause 12.5 of the agreement to lease.
The plaintiff contended that the dispute resolution procedure in clause 12 does not govern the issues that arise in this proceeding. The gravamen of the plaintiff’s argument is that the dispute resolution procedure applies to disputes that arise in the course of the agreement – that is, disputes concerning the performance of the agreement, but does not extend to questions about the termination or existence of the agreement.
The relevant issues for determination are:
(a)whether the plaintiff’s claims as set out in the statement of claim fall within the scope of the dispute resolution clause that it agreed with the defendant; and,
(b)in the event that the claims do fall within that clause, whether the proceeding should be stayed.
Is the proceeding within the dispute resolution clause?
In my opinion the issues that the plaintiff raises for determination in this proceeding come within the dispute resolution procedure in clause 12 of the agreement for lease and the plaintiff is obliged to use that procedure to have the dispute resolved, unless the Court in its discretion refuses to stay the proceeding.
The relevant words of the clause are:
If a dispute or difference arises or the parties fail to agree in connection with any matter arising out of or relating to this agreement… (emphasis added)
The clause is capable of a very wide construction on the language used. The authorities indicate that the language should not be read down but be given the wide construction that the language permits and should be construed on its terms. The courts, generally, have taken a liberal approach to the construction of such clauses because the subject matter is dispute resolution. As the High Court stated in PMT Partners Pty Ltd (in Liq) vAustralian National Parks and Wildlife Service[1] “the subject matter … compels an approach which treats [the] clause as requiring the parties to have their disputes decided in accordance with the procedures specified – and only in accordance with those procedures, unless there is something which clearly indicates to the contrary”.[2] Such clauses should be given a construction that avoids different dispute resolution processes having to be followed depending on the issues in dispute between the parties. A liberal construction ensures that a dispute is able to be dealt with in its entirety by the dispute resolution procedure agreed on and also ensures that the clause is given full effect.[3] In Incitec Ltd v Alkimos Shipping Corporation[4] Allsop J observed, after reviewing authorities, that “[t]he clear tide of judicial opinion as to arbitration clauses, where the fair reading of them is not confined, is to give width, flexibility and amplitude to them.”[5] Gleeson CJ explained the rationale in Francis Travel v Virgin Atlantic Airways Ltd:[6]
When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.[7]
Thus, the approach to construction should be to give effect to the intention of the parties as expressed, unless there is something which clearly indicates that the ambit of the clause should be limited in some way.
[1](1995) 184 CLR 301.
[2]Ibid, 311-2 (Brennan CJ, Gaudron and McHugh JJ).
[3]PMT Partners Pty Ltd (in Liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301, 312 (Brennan CJ, Gaudron and McHugh JJ).
[4](2004) 206 ALR 558.
[5]Ibid, 564.
[6](1996) 39 NSWLR 160.
[7]Ibid, 165.
On its terms, the language of clause 12.1 is wide enough to cover all the issues in this proceeding. The words of the clause themselves “lead one to conclude that what was intended was a reach of some width and liberality”.[8] I do not accept that questions about the termination or existence of the agreement or entitlement to the equitable relief that the plaintiff seeks are not within the ambit of the language of clause 12. The words used in clause 12 are of the widest import and should be given their full meaning.
[8]Incitec Ltd v Alkimos Shipping Corporation (2004) 206 ALR 558, 564 [32] (Allsop J).
In Heyman v Darwins Ltd[9] the House of Lords gave a very wide construction to an arbitration clause which specified that “[i]f any dispute shall arise between the parties hereto in respect of this agreement or any of the provisions herein contained or anything arising hereout the same shall be referred to arbitration in accordance with the provisions …” and held that a dispute about whether a contract had been repudiated was within the scope of the arbitration clause. Viscount Simon LC stated:
… in a situation where the parties are at one in asserting that they entered into a binding contract, but a difference has arisen between them whether there has been a breach by one side or the other, or whether circumstances have arisen which have discharged one or both parties from further performance, such differences should be regarded as differences which have arisen “in respect “of,” [sic] or “with regard to,” or “under” the contract, and an arbitration clause which uses these, or similar, expressions should be construed accordingly.[10]
[9][1942] AC 356.
[10]Ibid, 366.
In Francis Travel v Virgin Atlantic Airways[11] the issue was whether the appellant’s claim that the purported termination of an agency agreement was wrongful by reason of the alleged conduct of the respondent involving representation, estoppel and misleading conduct in contravention of the Trade Practices Act 1974 gave rise to a dispute or difference “arising out of” the agency agreement and thus whether an arbitration clause in the agency agreement covered the dispute. Gleeson CJ held that the claim was a dispute “arising out of” the agency agreement.
[11](1996) 39 NSWLR 160.
In Dowell Australia Ltd v Trident Contractors Pty Ltd[12] Yeldham J held that an arbitration clause which provided for reference to arbitration “as to any matter or thing whatsoever arising … in connection” with the contract included reference to matters such as frustration, rescission and rectification.[13]
[12][1982] 1 NSWLR 508.
[13]Ibid, 515.
Here the dispute between the parties as to whether the agreement has come to an end arises out of and is plainly interrelated with the dispute about the planning permit’s compliance with the conditions of clause 2.1 and the effect of clause 2.3. Whether the planning permit satisfied the conditions in clause 2.1 plainly is a matter “arising out of” the agreement to lease. Whether clause 2.3 applied to void the termination notice also is a matter “arising out of” the agreement to lease. Whether the agreement was terminated thereby is also a matter “arising out of” clause 2.3 of the agreement. If there be any doubt as to whether the question of termination is one that “arises out of” the agreement which, in my view, there is not, the issue plainly “relates” to the agreement, as do the equitable claims which similarly have a material connection with the agreement to lease to bring them within clause 12. In my view, there is no compelling reason to read down the width of clause 12.1 to confine it to disputes which do not raise any claim about whether non compliance with a term of the agreement has brought the agreement to an end.
Should the proceeding be stayed?
The plaintiff submitted that the proceeding should not be stayed in the exercise of the Court’s discretion. In Incitec Ltd v Alkimos Shipping Corporation[14] Allsop J at 565 identified the principles to be applied in deciding whether to stay proceedings brought in defiance of an exclusive jurisdiction clause. His Honour observed that the discretion not to grant a stay requires substantial grounds and is “not a matter of mere convenience” – “[t]he question is one of the exercise of a discretion in all the circumstances, but recognising that the starting point is the fact that the parties … should, absent strong countervailing circumstances, be held to their bargain”.[15]
[14](2004) 206 ALR 558.
[15]Ibid 565-6 (Allsop J). See also Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334; Dance with Mr D Ltd v Dirty Dancing Investment Pty Ltd [2009] NSWSC 332 (Unreported, Hammerschlag J, 1 May 2009) [53].
It was submitted that as there is a real question as to whether the agreement has been terminated or not, there is a real question as to whether clause 12 continues to bind the parties. However, the termination of the contract, if that be the case, will not have brought the contract to an end for all purposes. The dispute resolution clause nonetheless binds the parties for the purpose of the dispute resolution process to be adopted to determine whether the agreement has been terminated.[16]
[16]Heyman v Darwins Limited [1942] AC 334; Codelfa Construcion Pty Ltd v State Rail Authority of New South Wales ( 1981) 149 CLR 337.
It was submitted that as the proposed preliminary question for determination would resolve whether the agreement has been terminated or not then it should be dealt with by the Court in this proceeding, it having been instituted, and not under the dispute resolution processes. That question, however, is within the ambit of the dispute resolution clause. In my view, the plaintiff should be held to its bargain to have that dispute determined in accordance with the clause 12 process.
Furthermore, clause 12.5 is not a way out, through the backdoor, to avoid the dispute resolution procedure. The purpose of clause 12.5 is evident. It enables a party to institute proceedings to obtain injunctive relief in the appropriate case. But the initiation of such proceedings is not a means by which one party may avoid the dispute resolution process where the claiming of injunctive relief is used as a mechanism to bring the party within the terms of clause 12.5, as it has been done here.
It was also submitted that the issues which the court action will determine, in particular the equitable claims, are not the kind of issues that are appropriate for the dispute resolution process. This was said to be because clause 12 does not specify appropriate procedures for dealing with such kinds of issues, differently or separately, and the issues are matters that require a particular expertise to determine. However, they are the kinds of issues that a suitably qualified lawyer appointed as the expert can determine. The appointment of a suitably qualified lawyer is provided for in clause 12.4(a) and (d). Moreover, the absence of procedures itself is no reason for refusing the stay. A similar argument in support of the exercise of discretion against a stay was put in Dance With Mr D Limited v Dirty Dancing Investments Pty Ltd.[17] Hammerschlag J rejected the argument, observing that:
So far as the procedures are concerned, none are specified in clause 20. That by no means connotes that the clause will not operate effectively. It is for the expert to proceed as he or she considers. Having regard to the width of clause 20 it does not seem to me that justice requires that the provision be bypassed to afford a party real or perceived forensic advantages which curial proceedings might provide but which expert determination will not. Both parties are in the same position and the expert determination procedure agreed has as its contemplation the quick disposition of the dispute without the procedural complexities of litigation.
The observation is equally apt in this case. So far as the procedures are concerned, although they are not specified in clause 12, that does not mean that an appropriate procedure cannot be formulated.
[17][2009] NSWSC 332 (Unreported, Hammerschlag J, 1 May 2009).
I am not satisfied that the plaintiff has established sufficient reason why the parties should not be held to their bargain. Accordingly, in my view, the plaintiff has not established that there are good reasons for the exercise of the Court’s discretion to refuse a stay.
Accordingly, I make the following orders –
1.The proceeding be stayed pending the determination by an expert concerning the subject-matter of the notice of dispute dated 2 April 2009.
2.There be liberty to apply generally.
3.The plaintiff pay the defendant’s costs of the summons filed 14 May 2009.
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