Admiral I Pty Ltd v Leighton Contractors Pty Ltd

[2005] NSWSC 1105

CITATION:	Admiral I Pty Ltd v Leighton Contractors Pty Ltd [2005] NSWSC 1105
HEARING DATE(S):	27/10/05
JUDGMENT DATE :	3 November 2005
JURISDICTION:	Equity Division Technology and Construction List
JUDGMENT OF:	Barrett J
DECISION:	Order for trial of claims in summons separately from cross-claim. Defendant's application for stay dismissed.

CATCHWORDS:	PROCEDURE - whether claims in summons should be tried separately from cross-claim - each involving same contract but separate allegations of modification by conduct at times two years apart - some commonality of witnesses whose credit might be attacked - further party added by cross-claim - cross-claim suitable for referal to referee - whether analogy with separate trial of liability and damages - PROCEDURE - application for stay where dispute resolution clause not observed - whether clause applicable - whether exception for "injunctive relief" activated - whether, in the circumstances, court would exercise discretion in support of the clause
CASES CITED:	ABB Engineering Construction Pty Ltd v Rail Freight Corporation [1999] NSWSC 1037 Australian National Industries Ltd v Spedley Securities Pty Ltd (1992) 26 NSWLR 411 Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502 Livesey v New South Wales Bar Association (1983) 151 CLR 288 Pioneer Park Pty Ltd v Australia and New Zealand Banking Group Ltd [2005] NSWSC 832 Tepko Pty Ltd v Water Board (2001) 206 CLR 1
PARTIES:	Admiral I Pty Limited - First Plaintiff Admiral II Pty Limited - Second Plaintiff Admiral III Pty Limited - Third Plaintiff Leighton Contractors Pty Limited - Defendant
FILE NUMBER(S):	SC 55061/05
COUNSEL:	Mr M. Dempsey SC/Mr D.T. Miller - Plaintiffs Mr M.A. Pembroke SC/Mr S.A. Kerr - Defendant
SOLICITORS:	Blake Dawson Waldron - Plaintiffs Mallesons Stephen Jaques - Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND
CONSTRUCTION LIST

BARRETT J

THURSDAY, 3 NOVEMBER 2005

55061/05 ADMIRAL I PTY LIMITED & 2 ORS v LEIGHTON CONTRACTORS PTY LIMITED

JUDGMENT

1 I am dealing with two notices of motion in these Technology and Construction List proceedings. One is a motion by the plaintiffs seeking an order that the proceedings on the amended summons be tried separately from and before the proceedings on the cross-claim. The other is a motion by the defendant that the proceedings on the amended summons be stayed.

Background facts

2 The parties’ disputes arise under and in relation to a contract by which the defendant was retained by the plaintiffs to carry out extensive refurbishment work on the Hilton Hotel in Sydney. It was a term of the written contract that the defendant, as contractor, would provide, as security for due and proper contractual performance by it, “two approved unconditional undertakings, each for $4,500,000 (four million five hundred thousand dollars)”. It was also provided that the plaintiffs, as principal, were to release one such security within 14 days after certification of practical completion and that the other was to be released “when required by Clause 42.6”. Clause 42.6 required release at a defined point of time after the end of a period referred to in provisions concerning defects rectification after practical completion. The point of time thus fixed was, in broad terms, slightly more than 12 months after certified practical completion. I shall refer to that point of time as the “clause 42.6 date”.

3 The defendant duly provided the two undertakings required by the contract. They were undertakings of the Commonwealth Bank. Thereafter, the parties engaged in discussions with the New South Wales railway authorities (which I shall, for convenience, call “NSW Rail”) about apprehensions that the work being carried out on the Hilton Hotel might damage the underground railway in the vicinity of Town Hall Station. Agreements were eventually entered into between the defendant and NSW Rail and, separately, between the plaintiffs and NSW Rail. It was a term of the agreements between the defendant and NSW Rail that the defendant would furnish to NSW Rail two securities, each for $4,500,000. To perform that term and, at the same time, to satisfy the pre-existing contract between the defendant and the plaintiffs, the two existing securities held by the plaintiffs were replaced by two new Commonwealth Bank undertakings, each for $4,500,000, in favour of both the plaintiffs and NSW Rail. The new securities were held by NSW Rail.

4 It was apparently a term of the arrangement between the defendant and NSW Rail that both securities would be surrendered by NSW Rail to the defendant within five business days after practical completion under the building contract. Practical completion is accepted, for present purposes, as having occurred on 28 June 2005. Thereafter, the defendant received both the undertakings from NSW Rail. The plaintiffs then asked that one of them be given to it so that it could hold it until the clause 42.6 date. The defendant did not meet this request. These proceedings were commenced on 27 July 2005, on which day an interlocutory order was made requiring the defendant, as an interim measure, to retain one of the undertakings and not to return it to the Commonwealth Bank. It will be necessary to say more about the interlocutory order presently. (I note that the order, as entered, does not refer to its having been made by consent but that Mr Pether, the defendant’s solicitor, refers to it in his affidavit of 14 October 2005 as having been made by consent and without admissions and this is borne out by the associate’s record of proceedings.)

5 On 23 September 2005, the defendant filed a cross-claim against the plaintiffs and their parent company. It will be described presently.

The claims of the plaintiffs

6 The plaintiffs’ substantive claims in the proceedings are confined to the matter of the $4,500,000 undertaking. The plaintiffs say that they have a contractual entitlement to have such an undertaking remain extant until the clause 42.6 date (which will occur after 28 June 2006) and to hold it until that time. In saying this, the plaintiffs rely not only on the original building contract but also on a further contract, not formally documented, said by them to have come into existence between the defendant and the plaintiffs as a result of the three-way discussions and correspondence involving the defendant, the plaintiffs and NSW Rail, coupled with separate discussions and correspondence between the defendants and the plaintiffs alone. The correspondence and discussions on which the plaintiffs rely occurred between late November 2002 and early January 2003. As most recently formulated, the plaintiffs’ claims are to be found in the amended summons filed on 5 August 2005.

The claims of the defendant

7 The defendant filed a cross-claim on 23 September 2005. The defendants to the cross-claim are the plaintiffs in the proceedings, plus an English company which is their parent. The complaint advanced by the defendant in the cross-claim is that the plaintiffs have, without contractual justification, withheld certain payments required by the building contract to be made by them to the defendant. The defendant says that, while the original contract may have allowed withholding on account of delay in relevant circumstances, the original timing provisions were later varied - in part by a formal agreement dated 30 May 2005 and in part by conduct and informal agreements in the period April – July 2005. It is further alleged by the defendant that the plaintiffs and their parent engaged in misleading or deceptive conduct in the June/July 2005 period. There is also an estoppel claim based on matters dating from that period.

8 A summary (sufficient for present purposes) of some of the issues involved in the cross-claim appears in Mr Davidson’s affidavit of 30 September 2005:

“The issues arising from the cross claim involve, amongst other things, a consideration of:
(a) whether the alleged oral and implied contract, described in the cross claim as the June Agreement, was made or concluded between Admiral and Leighton or whether the discussions were no more than without prejudice discussions which did not reach any concluded agreement;
(b) what are the terms of the June Agreement, if it is found that the June Agreement was made;
(c) whether Admiral and Hilton Group Plc ( Hilton ) are estopped from denying the existence of the June Agreement;
(d) whether Hilton induced a breach of the June Agreement by Admiral;
(e) whether Hilton engaged in misleading or deceptive conduct in relation to the June Agreement;
(f) whether Admiral engaged in misleading conduct in relation to the June Agreement;
(g) whether Leighton is entitled to an extension of the time for Practical Completion and Remaining Works Completion;
(h) whether the Superintendent should have certified that Practical Completion and Remaining Works Completion were achieved when it did so;
(i) whether Admiral is entitled to liquidated damages pursuant to the D&C Contract, including whether there has been any waiver of an entitlement;
(j) the quantum of the liquidated damages alleged to have been wrongfully deducted by Admiral;
(k) whether Admiral is entitled to withhold payments from the defendant pursuant to the terms of a Settlement Deed entered into on or about 15 April 2005;
(l) whether the deduction of liquidated damages and other money was a penalty;
(m) whether the facts, matters and circumstances allow the application of the prevention principle.”

The plaintiffs’ motion – submissions and analysis

9 This statement of the background facts is by way of preliminary to a consideration of the plaintiffs’ claim for an order that the proceedings on the amended summons be tried separately from and before the proceedings on the cross-claim. That claim is advanced by reference to rules 9.8, 28.2 and 6.22 of the Uniform Civil Procedure Rules, with each being put forward as a separate basis on which the order may (and should) be made. The underlying question is, however, the same, whichever provision is relied upon: is there such a degree of separateness as between the two claims that there is no real reason of procedure or efficiency for them to be dealt with by way of a single hearing?

10 The plaintiffs say, in support of their motion for a separate and earlier trial, that there is, in reality, no element of commonality between the claims in the amended summons and the claims in the cross-claim. The plaintiffs say that no common questions of fact are involved. They recognise that two persons associated with the project on behalf of the plaintiffs (Mr Lifschitz and Mr Pratt) played a part in the events relevant to the plaintiffs’ claims and the events relevant to the defendant’s claims. But, they point out, those events (or sets of events) were separated by more than two years, so that each represented a discrete episode having a meaning and significance quite separate from the meaning and significance of the other. The plaintiffs also say that there is no indication at this point that there is any dispute as to the facts pertinent to the two individuals or that the credit of either of them is likely to be attacked; but, even if it were to emerge that some such attack was made in the first proceeding heard, there is no reason why the second should not then be heard by a different judge.

11 It is also submitted on behalf of the plaintiffs that their claims possess a degree of urgency that does not attend the defendant’s claims. The utility of the remaining Commonwealth Bank undertaking will, the plaintiffs apprehend, come to an end at the clause 42.6 date in July 2006. As the plaintiffs view matters, if they are not, at the clause 42.6 date, physically in possession of the undertaking they will be denied the ability to present it to the Commonwealth Bank to make recovery in respect of anything for which it then stands as security – assuming, of course, that they are successful in their contention that the undertaking is meant to operate as security for them for that length of time. The plaintiffs say that, based on the estimates made by the solicitors on both sides (and not surprisingly), the litigation will be more protracted if the amended summons and the cross-claim proceed together; also that the hearing may well occur after the period relevant to the security has expired.

12 On the last matter, the defendant says that it will make no difference whether or not the plaintiffs obtain actual possession of the undertaking document before the clause 42.6 date, even if the plaintiffs are found ultimately to be entitled to it. The undertaking of the Commonwealth Bank is unlimited as to time. The bank is bound to honour it whenever it is presented. Thus, if the defendant should be found, in, say, late 2006, to be liable to deliver up the undertaking to the plaintiffs, the plaintiffs will then be in a position where they can enforce it for such moneys (including interest or other compensation for delay) as may be secured by it by reason of defects rectification or other relevant matters.

13 The plaintiffs do not agree. The security is at present affected by the interlocutory order made by consent on 27 July 2005. That order is to the effect that the defendant will not return the undertaking to the bank until the earliest of (a) the expiration of the period referred to in clause 42.6 of the contract; (b) the expiration of seven days from the giving to the plaintiffs of notice of the defendant’s intention to return the undertaking to the bank; and (c) “further order of the court” (no doubt an order allowing return of the undertaking to the bank). It follows that, if the clause 42.6 date arrives and neither event (b) nor event (c) has by then occurred so as to free the defendant from the constraint imposed by the order, that constraint will cease to apply on the clause 42.6 date, whereupon the plaintiffs will be exposed to the risk of seeing the security evaporate. And, of course, there will be no reason why the defendant would not, in those circumstances, cause it to evaporate immediately.

14 In my opinion, the defendant is right when it says, in abstract terms, that it makes no difference to the plaintiffs whether or not they have physical possession of the undertaking before the clause 42.6 date – assuming that there is in place some measure to ensure that the form of evaporation to which I have just referred is avoided if the proceedings are not then determined. At the same time, the plaintiffs are right when they say that, under the current regime, the evaporation possibility and risk are real and point to a need for their rights in respect of the undertaking to be defined before the clause 42.6 date. But this, it seems to me, is a product of the interlocutory regime rather than anything else. The plaintiffs gave an undertaking as to damages as the price for obtaining the interlocutory restraint binding on the defendant. They did so in circumstances where the proceedings they had commenced were related to the single issue of rights to the undertaking. It might be said that the concern of the plaintiffs to have the matter determined before the clause 42.6 date will be alleviated by a new interlocutory order extending the restraint until the determination of the proceedings as a whole (that is, both the claims in the summons and the cross-claim). But that would no doubt entail a new undertaking as to damages on the part of the plaintiffs, being an undertaking likely to be in place for a longer time and to entail, in case of failure by the plaintiffs in their claims, damages greater than those they envisaged as possible when they gave the original undertaking as to damages.

15 For that reason, I accept that prolongation of the proceedings by addition of the cross-claim (something which, on both sides, is accepted as entailing delay) is a legitimate concern of the plaintiffs and a matter to be taken into account in addressing the application to separate the hearing of the claims in the amended summons from the hearing of the cross claim.

16 I turn therefore to the contentions regarding commonality or overlap. There can be no doubt that the claims in the amended summons and those in the cross-claim overlap to the extent that it will be necessary to prove, in each case, the terms of the formal building contract. But that will be a straightforward and uncontentious matter. Thereafter, however, the tasks will diverge. The claims in the amended summons depend upon proof of matters relevant to the allegation that the original contract terms were varied in certain ways as a result of the discussions and correspondence in the period November 2002 to January 2003. The claims in the cross-claim depend upon proof of matters relevant to, first, the defendant’s performance of the contract (as to both work done and the timing and quality of that work) and, second, whether and, if so, how a new agreement made in the period April to July 2005 varied the contractual rights and obligations in respect of quality and timing of work. The defendant does not contend that there is commonality of factual substratum. What it does say is that it is inappropriate to order separate trials where both proceedings involve issues of fact which may call for findings on the credit of a witness or witnesses common to both proceedings. The defendant points out that the amended summons and the defence to it make it clear that Mr Pratt and Mr Lifschitz will be key witnesses in the dispute centred on events of November 2002 to January 2003. The defendant also points out that conduct of Mr Pratt and Mr Lifschitz are relied upon by it in advancing its cross-claim, with the result that, in the absence of relevant admissions in the defence to cross-claim filed by the plaintiffs on 26 October 2005, the evidence of those two persons will also play a key part in the litigation of the dispute involving events of April to July 2005. The credit of these two persons is thus likely to be in issue in relation to both disputes.

17 In resisting the plaintiffs’ motion, the defendant relies upon judicial statements about the general undesirability of a bifurcation of proceedings so that the issue of liability and the issue of damages are tried separately. In Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at p.55, Kirby and Callinan JJ observed that “[t]he attractions of trials of issues rather than of cases in their totality, are often more chimerical than real”. Their Honours continued:

“Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap.”

18 The defendant also relies upon observations of Rolfe J in ABB EngineeringConstruction Pty Ltd v Rail Freight Corporation [1999] NSWSC 1037. His Honour said at [15]:

“In my view, it would require an exceptional case for the Court to order a separate hearing of liability and damages when any witness is likely to give evidence on both issues. The reasons are obvious. A case should be conducted on the basis that the witness is cross-examined on all issues at the same time and in the context of all issues, because his or her evidence on one issue may impact on the acceptability of his or her evidence on the other. If there is not adherence to this practice difficult questions arise for the Court as to the extent to which cross-examination on the matter not being litigated should be allowed, and for the cross-examiner as to how far matters not in issue can and/or should be pursued, and how that evidence should be treated in the overall assessment of the witness. In my opinion, the cross-examiner should not be precluded, particularly where credit is in issue, from cross-examining on the issue of damages merely because the only matter being litigated is liability. That not only causes difficulties for the cross-examiner, but also for the Court. The Court may be prevented from making a fully informed assessment of the credibility of the witness if the cross-examination is truncated, or if certain contradictory material cannot be led because the cross-examination goes only to credit and not to an issue.”

19 These principles are firmly established in relation to separation of the issues of liability and damages (see also the recent decision of Einstein J in Pioneer Park Pty Ltd v Australia and New Zealand Banking Group Ltd [2005] NSWSC 832).

20 The plaintiffs submit that these approaches are not applicable here. In the present circumstances, they say, the case is not one of the same witnesses being involved in the same events, being events potentially relevant to both findings on liability for legal wrong and findings on the measure of damages flowing from the legal wrong. It is, rather, a matter of the same witnesses being involved in quite distinct sets of events separated by several years, where each set of events is relevant to a distinct range of factual findings going to both liability and damages (or other relief) for a distinct legal wrong.

21 The plaintiffs also point to two other matters. First, their parent company has been made a defendant to the cross-claim but is a stranger to the proceedings on the amended summons. Second, the defendant itself says in the cross-claim that the subject matter of it is suitable for reference out to a referee (in the way that is often appropriate where technical matters of adherence to construction contracts and specifications are in issue).

22 I do not think that the objections of principle to the separate trial of issues in a single case apply here. The present situation is really one in which two cases are to be run – one concentrating on the events of November 2002 to January 2003 and their significance to the contractual relationship of the plaintiffs and the defendant concerning the unconditional undertakings; and the other centred on events of April to July 2005 coupled with the extent of the defendant’s compliance with contract provisions as to actual building work. There will be overlap only to the very minor extent of proof of the uncontroversial matters concerning the formation and terms of the original building contract and to the extent that Mr Pratt and Mr Lifschitz are likely to be witnesses of fact in relation to the events of the two widely separated periods.

23 There cannot be, in my view, any apprehension that these two witnesses will give evidence that produces a risk of inconsistent factual findings in the two proceedings that will result if the plaintiffs’ motion is granted. But there is a risk that there could be inconsistent findings regarding the credit of one or both of them. The plaintiffs submit that, if the two cases are separated, that risk will be no more or less than the risk that arises where a judge who has made adverse credit findings in respect of a witness in one proceeding is later rostered to hear another proceeding in which that person is again to be a witness. As a matter of general principle (and absent some matter of necessity), a judge in that position might be expected to recognise the existence of an apprehension of bias and to decline to sit in the second case: Livesey v New South Wales Bar Association (1983) 151 CLR 288 at p.300. The plaintiffs pointed to Australian National Industries Ltd v Spedley Securities Pty Ltd (1992) 26 NSWLR 411 as showing how this general principle might work in a situation where one judge was scheduled to hear successive cases involving common (or substantially overlapping) parties and witnesses. The Livesey principle was there held, by a majority of the Court of Appeal, to require that the judge who had made substantial adverse credit findings in one proceeding not sit in a later proceeding, even though considerations of efficient case management related to familiarity with substantial matters of background would have made it desirable that he do so.

24 For reasons I have stated, such considerations of case management do not apply here. There is also the point in the present case that the claims in the cross-claim might well, in the first instance, go before a referee for decision in any event; added to which the cross-claim involves an additional party, being the plaintiffs’ parent company.

Decision on the plaintiffs’ motion

25 In my judgment, this is a case in which the claims upon the amended summons and the claims in the cross-claim can safely and appropriately be separated. I accept the plaintiffs’ submissions generally on that matter. In particular, I accept that, in light of the interlocutory order now in place, the plaintiffs will be prejudiced if the questions concerning the remaining unconditional undertaking are not resolved by the clause 42.6 date (I do not accept the defendant’s submission that it will be prejudiced if the undertaking is restored to the plaintiffs while wider contractual disputes remain unresolved: restoration to the plaintiffs would not alter or widen the rights of the plaintiffs as to reliance upon and enforcement of the undertaking). Linking of the questions about the undertaking with the defendant’s claims will produce a distinct possibility of that prejudice becoming real. I also accept the plaintiffs’ submission that the apt analogy is not with separation of issues (such as separation of liability and damages) but with the situation in which there will be witnesses common to what are really two proceedings and the only real risk of intersection is in the area of credit findings. That risk will be substantially reduced if the defendant’s claims in relation to the events of April to July 2005 are, in their entirety, referred out to a referee. And if the risk should, in the fullness of time, turn out to be real, it will be possible to deal with it by ensuring that another judge hears the second case. Considerations of efficiency do not indicate any need for one judge to hear both.

26 These factors, coupled with the fact that the cross-claim may well be referred to a referee and, in any event, involves an additional party, lead to the conclusion that the order the plaintiff seeks for separate trial of the claims on the amended summons and the cross-claim should be made.

The defendant’s motion – submissions and analysis

27 In contending that the proceedings on the amended summons should be stayed, the defendant relies on clause 47 of the building contract:

“47. DISPUTE RESOLUTION
47.1 Notice of Dispute
If a dispute or difference (hereinafter called a ‘dispute’) between the Contractor and the Principal arises in connection with the Contract or the subject matter thereof, including a dispute concerning:
(a) a direction given by the Superintendent; or
(b) a claim:
(i) in tort;
(ii) under statute;
(iii) for restitution based on unjust enrichment; or
(iv) for rectification or frustration;
then either party will deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute.
Notwithstanding the existence of a dispute, the Principal and the Contractor must continue to perform the Contract and, subject to Clause 44, the Contractor must continue with the work under the Contract and the Principal and the Contractor must continue to comply with Clause 42.1.
47.2 Further Steps Required Before Proceedings
(a) Unless otherwise expressly provided in the Contract, it is a condition precedent to the referral of a dispute to litigation that the parties to the dispute first follow and complete the procedures referred to in this Clause 47.2.
(b) If the Principal’s project director and the Contractor’s project director are unable to resolve a dispute within 10 Business Days (or such other time as agreed in writing between the parties) after receipt of a notice under Clause 47.1, either party may, by written notice to the other submit the dispute to the designated officers of those parties (Second Dispute Notice). The Second Dispute Notice must contain a copy of the first dispute notice, and particulars of the attempts made between the parties to resolve the dispute.
(c) The designated officers must:
(i) meet within 10 Business Days after receipt of the Second Dispute Notice (or such other time as agreed in writing between the parties);
(ii) meet in person (unless otherwise agreed in writing by the parties); and

(iii) each afford sufficient time for such meeting (or subsequent meetings as agreed in writing) as will provide a good faith, thorough exploration and attempt to resolve dispute.

(d) If a dispute is not resolved within 20 Business Days after receipt of the Second Dispute Notice either party may commence proceedings for the resolution of the dispute.
(e) For the purposes of this Clause 47.2 the designated officers are:
(i) Principal: nominated Vice President;
(ii) Contractor: Managing Director.
47.3 Not Used
47.4 Summary Relief
Nothing herein will prejudice the right of a party to institute proceedings to enforce payment due under the Contract or to seek injunctive or urgent declaratory relief in respect of a dispute under Clause 47 or any matter arising under the Contract.
47.5 Not Used ”

28 It is common ground that the plaintiffs did not give a notice under clause 47.1 before commencing the proceedings by its summons filed on 27 July 2005. They say that they were not required to do so because the relief sought in the original summons (and the amended summons) is within the description in clause 47.4, “injunctive or urgent declaratory relief”. The plaintiffs also say that the court should not, in any event, disrupt the course of the proceedings merely to require the clause 47 processes to be put into operation. The defendant says, however, that the clause 47.4 exception does not apply and that there is no reason why the plaintiffs should not be compelled, by means of a stay, to honour the promises they made in clause 47.

29 The applicability of the exception for “injunctive or urgent declaratory relief” must be determined by examining, in the first instance, the summons filed on 27 July 2005. In that summons, there are two prayers for declaratory relief (concerning the alleged obligation of the defendant to provide a $4,500,000 undertaking), a prayer for an order that the defendant deliver to the plaintiffs one of the two existing undertakings and an alternative prayer for an order that the defendant deliver a new undertaking. There is then a claim for an interlocutory order requiring the defendant to retain one of the existing undertakings and not to return it to the Commonwealth Bank. The amended summons filed on 5 August 2005 seeks generally similar substantive relief but omits the claim for the interlocutory order, such an order having been made by consent on 27 July 2005.

30 It might perhaps be argued that the claim for one of two alternative final orders directing the defendant to deliver an undertaking to the plaintiffs was a claim for “injunctive … relief”, in that the order might be classified as a mandatory injunction. More likely to be correct, it seems to me, is the conclusion that, in a contractual context such as this, such a claim partakes more of the nature of specific performance than injunction: see generally the discussion at p.537 of the sixth edition (2001) of I. C. F. Spry’s “The Principles of Equitable Remedies”. But the claim in the summons for the interlocutory order was, clearly enough, a claim for “injunctive … relief”. This is because it sought to restrain return of the undertaking to the Commonwealth Bank.

31 The summons filed on 27 July 2005 therefore included a claim – albeit of an interlocutory nature - for “injunctive … relief”. The proceedings instituted by that summons were accordingly, in terms of clause 47.4, “proceedings … to seek injunctive … relief … in respect of … any matter arising under the Contract”. It is true that the proceedings instituted by the summons were also proceedings seeking declaratory relief. On the face of things, there is nothing indicating that that relief was “urgent”. But that is beside the point from the perspective of clause 47.4. The fact that the proceedings commenced by the summons were proceedings in which claims including a claim for an injunction were advanced must mean that they were, at that time, within clause 47.4.

32 It makes no difference, in my view, that claims for declaratory relief (not obviously “urgent”) were the only claims remaining after the interlocutory application had been disposed of. Clause 47.2 is concerned with the commencement of proceedings – or, as it puts it, “referral of a dispute to litigation”. The contractual obligation is an obligation not to commence or initiate proceedings other than proceedings within the clause 47.4 description. But once any part of the relief sought is an injunction (“… to seek injunctive or urgent declaratory relief …”), the exception applies. Continuation of the proceedings after their commencement is not governed in any way by clause 47 and, since matters are to be judged at the time of initiation, it is not to the point that the injunctive claim is determined at an early point.

33 For these reasons, I accept the submission made on behalf of the plaintiffs that clause 47.2 does not apply in this case. I nevertheless proceed to consider briefly the question whether, if the clause had applied, the court should or would have insisted that the parties engage in the processes laid down by clause 47, with the proceedings being put into abeyance until they had done so.

34 The starting point in that inquiry is the proposition that, in general, parties should adhere to their contracts. It is sufficient to refer to the well-known statement of Dixon J in Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502 at pp.508-9:

“But the courts begin with the fact that there is a special contract between the parties to refer, and therefore in the language of Lord Moulton in Bristol Corporation v John Hard & Co , considers the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutton LJ said in Metropolitan Tunnel and Public Works Ltd v London Electric Railway Co , a guiding principle on one side and a very natural and proper one, is that parties who have made a contract should keep it.’”

35 There can be no doubt that, as the defendant submits, the court has, as part of its inherent jurisdiction, power to stay or adjourn a proceeding until an agreed dispute resolution process has been undertaken. This is an aspect of the jurisdiction related to abuse of process. Hence, where parties have agreed that they will not resort to litigation until after some agreed and sufficiently and unambiguously defined process of dispute resolution adopted by them in advance has been played out, it will usually be appropriate to insist that they do so.

36 The plaintiffs say that, if the application of clause 47.2 is not displaced by clause 47.4 (a proposition which, as previously stated, I do not accept), the general rule should not be applied here. Their first contention in support of that proposition is that the process in clause 47 is not sufficiently certain to be enforced. I therefore proceed to an examination of the clause.

37 I am satisfied that the event spelled out in clause 47.1 has occurred, in that a relevant dispute or difference has arisen. Indeed, as the above discussion shows, dispute or difference has arisen as a result of two separate sets of events which took place at different times. Neither party delivered by hand or sent by certified mail to the other a notice identifying the dispute (or either dispute), as envisaged by clause 47.1. It is, of course, to be noted that clause 47.1 applies to both parties and is mandatory: “… then either party will …” [emphasis added]. Clause 47.2 makes it clear that the giving of a notice under clause 47.1 is a condition precedent to the operation of the provisions in clause 47.2. It is true that, while clause 47.2 is concerned with a “dispute” and that term is defined by clause 47.1, the giving of a notice under clause 47.1 is not something that is essential to the existence of a “dispute” as defined. But clause 47.2 cannot operate unless there is such a notice. This is because the period in clause 47.2(b) – and, therefore, the periods in clause 47.2(c)(i) and 47.2(d) – cannot be identified in the absence of a notice.

38 In a case where a clause 47.1 notice is given, the effect of clause 47.2 is to create a “condition precedent to the referral of a dispute to litigation”. This must mean that, as a matter of contract, neither party is free to commence litigation unless the procedures in clause 47.2 have first been followed. The first requirement of clause 47.2 (imposed by clause 47.2(b)) is, in terms, no more and no less than a requirement to wait 10 business days (or some different agreed time). If, at the end of that period, a certain state of affairs is seen to exist, either party may give another notice to the other. Clause 47.2(c) says that, if such a further notice is given, non-parties to the contract (being the plaintiffs’ “nominated Vice President” and the defendant’s “Managing Director”) must do certain things. This must, I think, be construed as imposing upon each contracting party an obligation to procure its nominated officer to do those things or, at least, to use its best endeavours to cause the officer to do those things.

39 The only requirement imposed by clause 47.2(c) is that the nominated officers meet in person within a particular period and for a time deemed (by some undefined process no doubt involving, ultimately, an implied term as to reasonableness) sufficient to “provide a good faith, thorough exploration and attempt to resolve the dispute”. This, it is to be noted, is part of the description of the duration of a meeting, not a description of what is to happen at it. Thus, if it were seen that, on objective criteria, three hours would be sufficient to “provide a good faith, thorough exploration and attempt to resolve the dispute”, clause 47.2(c) would fix three hours as the duration of the meeting. But it would say nothing explicit about what was to happen at the meeting.

40 It is nevertheless clear that the parties have agreed that the giving of notices and the expiration of periods in accordance with clause 47 are things that should occur before either proceeds to litigation. I am prepared to consider the clause sufficiently certain to be enforceable, despite the absence of any clear reference to the holding of a meeting between the respective nominated officers.

41 But the defendant’s notice of motion needs to be considered in context. Before it was filed on 30 September 2005, the original summons had been filed by the plaintiffs (27 July 2005), the defendant had consented to the making of the interlocutory orders on the same day, the plaintiffs had filed the amended summons on 5 August 2005, the defendant had filed the defence to the amended summons on 2 September 2005 and the defendant had filed the cross–claim on 23 September 2005. The defendant had thus taken three active steps in the litigation before seeing fit to take the point not only that there should have been adherence to the regime in clause 47 but also that the proceedings in which it had itself chosen to be an active participant should be put into abeyance in the meantime. This gives to the defendant’s request that the court uphold clause 47 a distinctly hollow ring.

42 It is also relevant to have regard to the nature of the clause 47 process. It does not involve any third party decision-maker or facilitator. The parties have not agreed to abide by the decision of an expert or arbitrator, or to participate in a structured process overseen by a mediator or conciliator. They have agreed only that the dispute should be discussed between officers of the respective companies.

43 I am dealing here with two sophisticated commercial groups. Either could, at any time, have had its nominated executive telephone the nominated officer of the other with the suggestion that they meet to see whether they could resolve the disputes into which they had fallen. It does not take written contracts and formal procedures to bring about dialogue if, in the particular context, commercial common sense says that dialogue might be useful. The fact that no such contact has occurred suggests that commercial common sense has not so indicated. There is accordingly a strong indication that it would be futile to order such a meeting: if commercial common sense has not already brought the meeting about, it is fair to assume that it will serve no purpose. That of itself is good reason for the court not to compel resort to the clause 47 process.

44 There would be, in any event, no point in requiring at this stage adherence to the clause 47 procedure in its entirety. There is no need for a written statement setting out particulars of the dispute when there are already detailed pleadings supported by affidavits and a volume of lawyers’ correspondence. Nor is there any reason to have the matters discussed by the respective project directors who have no doubt played some part in the drawing of the battle lines that have now been drawn. It is conceivable, I suppose, that, although the designated senior officers have not seen fit to approach one another in a constructive commercial way, some dialogue between them may be conducive to settlement of litigation which is now well advanced – although the fact that unusually strong terms were used in the course of argument before me to describe the conduct alleged against the plaintiffs and their parent company in the cross-claim suggests that there may be no great predisposition towards constructive dialogue. The fact remains that either of them can pick up the telephone at any time and seek a meeting with the other.

45 Even if the clause 47.4 exception had not applied, the circumstances to which I have referred would have meant that the court would not stay the proceedings pending compliance with clause 47.2.

Disposition

46 I make the following orders:

1. Order that the proceedings on the amended summons be tried separately from the proceedings on the cross-claim.
2. Order that the defendant’s notice of motion filed on 30 September 2005 be dismissed.

47 I will hear the parties on costs and on the question of directions for the further conduct of the proceedings.

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