Aquagenics Pty Limited v Tasmanian Water and Sewerage Corporation (Southern Region) Pty Limited
[2013] TASSC 13
•19 April 2013
[2013] TASSC 13
COURT: SUPREME COURT OF TASMANIA
CITATION:Aquagenics Pty Limited v Tasmanian Water and Sewerage Corporation (Southern Region) Pty Limited [2013] TASSC 13
PARTIES: AQUAGENICS PTY LIMITED ACN 002 398 969
v
TASMANIAN WATER AND SEWERAGE CORPORATION (SOUTHERN REGION) PTY LIMITED (ACN 133 654 976) trading as SOUTHERN WATER
FILE NO: 606/2012
DELIVERED ON: 19 April 2013
DELIVERED AT: Hobart
HEARING DATES: 10 October 2012, 8 March and 11 April 2013
JUDGMENT OF: Holt AsJ
CATCHWORDS:
Statutes – Interpretation – Interpretation Acts and provisions – Preservation of rights, liabilities and legal proceedings on amendment, repeal, lapsing etc of Act or provision – Accrued rights, privileges and liabilities – What constitutes – Supervening legislation evincing contrary intention to saving operation.
Commercial Arbitration Act 2011 (Tas), s8(1).
Gilgandra Marketing Co-Operative Ltd v Australian Commodities and Marketing Pty Ltd [2010] NSWSC 1209 followed.
Aust Dig Statues [1053]
Arbitration – The submission and reference – Submission as a defence and as a ground for stay of proceedings – Stay of proceedings – Particular cases in which stay ordered – Referral to arbitration mandatory.
Commercial Arbitration Act 2011 (Tas), s8(1).
Aust Dig Arbitration [37]
REPRESENTATION:
Counsel:
Applicant: M E O'Farrell SC
Respondent: SP Estcourt QC (until 8 March 2013)
and C J Gunson (from 8 March 2013)
Solicitors:
Applicant: Toomey Maning & Co
Respondent: Page Seager
Judgment Number: [2013] TASSC 13
Number of paragraphs: 56
Serial No 13/2013
File No 606/2012
AQUAGENICS PTY LIMITED v TASMANIAN WATER AND SEWERAGE CORPORATION (SOUTHERN REGION) PTY LIMITED
trading as SOUTHERN WATER
REASONS FOR JUDGMENT Holt AsJ
19 April 2013
An application for a stay of court proceedings pending the conduct of a commercial arbitration under a building contract
On 6 February 2009 Aquagenics Pty Limited, as contractor, entered into a design and construct contract with Tasmanian Water and Sewerage Corporation (Southern Region) Pty Limited trading as Southern Water, as principal, for the design and construction of a water treatment plant at Swansea in Tasmania. The contract was governed by Australian Standard General Conditions of Contract AS4300-1995.
Pursuant to cl 42.1 of the contract Aquagenics was to submit to the contract superintendent regular claims for payment for the value of the work undertaken to the date of the claim. The contract superintendent was required to assess such claims and issue certificates stating the amount payable by the principal. If the contract superintendent failed to issue such a certificate within 14 days of receipt of the claim the principal became bound to pay the whole amount of the claim within 28 days of its lodgment with the contract superintendent. Such payments are specified not to be evidence of the actual value of the work or an admission of liability or that the work has been satisfactorily performed, but are payments on account with disputes referred to arbitration so that upon resolution of the arbitral dispute the amounts paid could be subsequently adjusted.
The purpose of this standard clause is to make progress payments payable as the contract progresses so that the contractor can maintain a cashflow as it performs its contractual obligations. The operation of such a provision was explained in Daysea v Watpac Australia Pty Ltd (2001) 17 BCL 434. Williams JA of the Queensland Court of Appeal, with whom the other members of the Court agreed, said at 438: "The significance of the clause … is that the progress payments are critical to the survival of the contractor and to the completion of the project."
On 2 June 2010 Aquagenics submitted a progress claim to the contract superintendent claiming the sum of $279,936.80. The contract superintendent failed to issue a payment certificate and so the amount claimed became payable by Southern Water 28 days later. Southern Water has not paid the claim in part or in full.
On 8 February 2011 Southern Water delivered a formal notice of dispute alleging a large number of matters including that Aquagenics had failed to perform some of the contract work and that other work was performed unsatisfactorily. There was also a claim that Aquagenics had failed to achieve practical completion by the due date resulting in Southern Water being entitled to set-off or recover $187,000 for liquidated damages for late completion as specified in the contract.
On 16 March 2011 Aquagenics submitted a response to the notice of dispute. In that response all of the claims of Southern Water were put in issue. The claim for liquidated damages was met with a claim, that as the contract superintendent had failed to issue extensions of time when required, the date for practical completion had been set at large so that there was no breach of the clause with no liquidated damages payable.
The dispute is yet to be referred to arbitration in accordance with the parties agreement to so refer such disputes under cl 47 of the contract.
On 18 October 2011 Aquagenics issued a writ against Southern Water in action 925/2011 claiming payment of the sum of $279,936.80 in accordance with the progress claim made on 2 June 2010. In the action Aquagenics also claims interest as specified in the contract being interest at the rate of 5% from the due date for payment compounded at six monthly intervals.
On 13 June 2012 Southern Water filed an amended defence which added a counterclaim in respect of the matters the subject of its notice of dispute issued under the contract on 8 February 2011. Counsel for Southern Water acknowledges that the claims in its notice of dispute are the same as the claims set out in its counterclaim.
Aquagenics did not file a defence to the counterclaim. Instead it filed an originating application in the Court on 11 July 2012 seeking an order staying proceedings on the counterclaim so that the matters in dispute in the counterclaim would be resolved by arbitration in accordance with the parties agreement that such disputes were to be resolved by arbitration. The application could and perhaps should have been brought by interlocutory application in the action, but nothing turns on this.
The hearing of the application for the stay commenced on 10 October 2012.
The law
Nine days before the commencement of the hearing, namely, on 1 October 2012, the Commercial Arbitration Act 2011 commenced. It repealed the Commercial Arbitration Act 1986 under which Aquagenics' stay application had been filed. Section 8(1) of the 2011 Act is as follows:
"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."
Argument on the stay application was completed on 10 October 2012, but both counsel based their submissions entirely on the legislation which had been repealed nine days earlier. Neither counsel informed me that the legislation upon which they based their submissions had been repealed. A few days later, when I discovered the repeal, I wrote to counsel inviting further submissions. The parties requested that the hearing not resume before late February. It resumed on 8 March.
Upon the resumption of the hearing, counsel for Southern Water submitted that the new Act did not have retrospective impact on Aquagenics' stay application and that the stay application should be dealt with under the discretionary power to grant a stay formerly contained in the Commercial Arbitration Act 1986, s53(1). The provision was as follows:
"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 … 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 of the future conduct of the arbitration as it thinks fit."
It is important to resolve the question of which legislation applies as under the old Act the power to stay was discretionary, but under the new Act there is no discretion and the parties must be referred to arbitration if the matter sought to be litigated in the Court is a matter which is the subject of an arbitration agreement and there is a timely application for referral and the arbitration agreement is not null and void, inoperative or incapable of being performed.
The Acts Interpretation Act 1931, s4, provides that its provisions apply except where otherwise expressly provided in the legislation being construed. The Acts Interpretation Act, s16(1), relevantly provides:
"Where an Act repeals any other enactment then, unless the contrary is expressly provided, such repeal shall not –
…
(c) affect any right, … acquired, accrued, or incurred under any enactment so repealed;
…
(e) affect any … legal proceeding, or remedy in respect of any such right, … as aforesaid –
and any such investigation, legal proceeding, or remedy may be instituted, continued, or enforced, and any such penalty, forfeiture, or punishment may be imposed as if the repealing Act had not been passed."
Further, as a general rule of statutory construction, but subject to contrary statements in the statute, procedural amendments have retrospective effect and other amendments do not. In Maxwell v Murphy (1957) 96 CLR 261, Dixon CJ said at 270:
"Perhaps there could be no more practical summary of the principle, which, as was said, emerges from the English and Canadian cases, than the following, - 'unless the language used plainly manifests in express terms or by clear implication a contrary intention - (a) A statute divesting vested rights is to be construed as prospective. (b) A statute, merely procedural, is to be construed as retrospective. (c) A statute which, while procedural in its character, affects vested rights adversely is to be construed as prospective.' - Dixie v. Royal Columbian Hospital (1941) 2 DLR 138, at pp 139, 140, per Sloan JA."
Counsel for Southern Water submitted that the new Act, s8, should not be given retrospective effect as it affects a right. The right asserted was a right vested in Southern Water to have its counterclaim determined by the Court subject only to the discretionary power to stay contained in the 1986 Act, s53.
This submission cannot succeed without it first being established that a right to have the dispute litigated in a court subject to a discretionary power to stay was a relevant right as described in the Acts Interpretation Act, s16, and the common law as set out in Maxwell v Murphy.
Counsel for Southern Water placed reliance on the decision in Esber v The Commonwealth (1991) 174 CLR 430. There the plaintiff's claim for a redemption of weekly entitlements by the payment of a lump sum under the Compensation (Commonwealth Government Employees) Act 1971 had been rejected and the plaintiff had commenced proceedings for a review of that decision by the Administrative Appeals Tribunal.Between the time of filing the application for review and the commencement of the hearing the legislation allowing redemption of the plaintiff's weekly entitlements was repealed. The court considered the Acts Interpretation Act 1901 (Cth), s8, which is in substantially the same terms as s16 of the Tasmanian Acts Interpretation Act. Mason CJ, Deane, Tooohey and Gaudron JJ said, in an obiter statement, at 446:
"… he had a right to have his claim to redemption determined in his favour if the delegate had wrongly refused his claim. To borrow a sentence from the judgment of Hope JA in NSW Aboriginal Land Council v. Minister (1988) 14 NSWLR 685, at p 694:
'The right might be said to be a conditional one, namely, conditional upon the relevant facts being established, but the right was nonetheless a right because it was conditional.'
Once the appellant lodged an application to the Tribunal to review the delegate's decision, he had a right to have the decision of the delegate reconsidered and determined by the Tribunal. It was not merely 'a power to take advantage of an enactment'. Nor was it a mere matter of procedure; it was a substantive right. Section 8 of the Acts Interpretation Act protects anything that may truly be described as a right, 'although that right might fairly be called inchoate or contingent'. This was such a right."
Esber is clearly distinguishable. There the claimed right was dependent on a determination rather than dependent on past events. The existence of Southern Water's rights is not dependent upon a determination by this court, but is ascertainable by reference to past events. Southern Water will still have its contractual rights ascertained and enforced regardless of whether the claim is litigated in the court or before an arbitrator. The point of distinction is neatly recited by Kirby J in Attorney General for the State of Queensland v Australian Industrial Commission & Ors (2002) 213 CLR 485. His Honour referred to Director of Public Works v Ho Po Sang [1961] AC 901 and said at par [137]:
"According to their Lordships in that case there is 'a manifest distinction between an investigation in respect of a right and an investigation which is to decide whether some right should or should not be given'. I would accept that dichotomy."
Counsel for Southern Water also referred to Colley v Futurebrand FHA Pty Ltd (2005) 63 NSWLR 291, a decision of the Court of Appeal, and Australand Corporation (Qld) Pty Ltd v Johnson (2007) QCA 302. However, like Esber, these cases concerned repealing legislation which if construed retrospectively would take away the final relief claimed. Like Esber such relief was of the type which could only be acquired by the determination of a tribunal or court and was not of the type acquired by reference to past events. Unlike Esber, in neither Colley nor Australand had proceedings been commenced before the repealing legislation came into effect and so the opportunity of taking advantage of the statutory provision had not been converted into a right prior to repeal. The cases do not assist Southern Water as its rights are not dependent upon a determination by this Court. Southern Water's rights remain ascertainable and enforceable through arbitration.
As Southern Water's contractual rights are not impacted by the repeal of the Commercial Arbitration Act and the enactment of the new Act s8, the new legislation does not attract the application of the rule against retrospectivity.
In any event, the 2011 Act expresses an intention that s8 is to apply retrospectively. Section 42 provides that Schedule 1 has effect with respect to savings and transitional provisions. Schedule 1, cl 2, is as follows:
"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 Schedule) and to an arbitration under such an agreement; and
(b) a reference in an arbitration agreement to the Commercial Arbitration Act 1986, 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 Schedule, 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."
The schedule by express words makes it clear that the 1986 Act would only continue to have operation in respect of arbitrations already commenced. It is common ground that no arbitration has commenced in respect of the current dispute between the parties.
The 2011 Act is part of uniform legislation. It came into effect in New South Wales in October 2010. Applying Schedule 1 Slattery J concluded in Gilgandra Marketing Co-Operative Limited v Australian Commodities and Marketing Pty Limited (2010) NSWSC 1209 at par42 that "[T]he savings and transitional provisions of the 2010 Act made it clear that" the new Act including s8 has retrospective effect. Accordingly, Slattery J dealt with an application for a stay, filed shortly before the new Act commenced, rather than under the legislation which had previously existed.
Counsel for Southern Water acknowledged that the practice in Australia is that as a matter of judicial comity a judge at first instance will usually follow the decision of another judge of co-ordinate jurisdiction unless satisfied that the decision was clearly wrong. See for example Macchia v Minister for Primary Industries & Energy (1992) 110 ALR 201 at 204 and MAIB v Young [2011] TASSC 26 at par8.
Counsel went on to submit that the decision in Gilgandra should not be followed as it was not the result of detailed analysis and was clearly wrong. He submitted that the words in s8 "A court before which the action is brought" [emphasis added] indicates prospective operation only. He further submitted that the savings and transitional provisions in Schedule 1, cl 2 only apply to arbitration agreements and do not have any impact on existing court proceedings, such as the present counterclaim and consequent application for a stay.
With respect, the word "is" in s8 has no temporal significance. It is there simply to identify the court which is to exercise the jurisdiction contained in the section. Further, the mandate in Schedule 1, cl 2(1)(a), is that the new Act applies to arbitration agreements made "before … commencement" of the 2011 Act. The combined effect of s8 and the Schedule is clearly that where the parties have agreed to refer disputes to arbitration the court in which such a dispute is sought to be litigated must refer it to arbitration provided, that there has been a timely request to do so and the agreement is not null and void, inoperative or incapable of being performed, regardless of when the arbitration agreement was made and regardless of when an application in respect of it is made.
In my respectful opinion Slattery J was plainly right in Gilgandra that s8 applies to stay applications heard after the new Act commenced regardless of whether the application was filed before commencement.
It follows that Aquagenics' application for a stay must be dealt with as if it were an application for referral to arbitration under the 2011 Act, s8.
Can the dispute be referred to arbitration?
It is not disputed that Southern Water's counterclaim contains exclusively arbitral matters. However, counsel for Southern Water submitted that an application of s8 cannot result in a referral to arbitration for the following reasons:
(1)The arbitration agreement ceased to exist when the parties performance obligations under the contract were brought to an end or that if the agreement survived the end of the performance obligations under the contract it had become inoperative or incapable of being performed.
(2)In any event, the claim of Southern Water for liquidated damages for late completion is a claim for payment of a debt and the contract specifically states that the arbitration agreement does not prejudice the right to pursue such claims in court.
Has the arbitration agreement ceased to exist or become inoperative or incapable of being performed?
It is common ground that the contract came to an end when Southern Water took out of the hands of Aquagenics the whole of the work then remaining to be completed.
The question is whether the arbitration agreement is an exceptional primary obligation which survives notwithstanding other performance obligations in the contract have come to an end.
In Moschi v Lep Air Services [1973] AC 331 Lord Diplock said at 350:
"Although this is the general rule as to the effect of rescission of the contract upon obligations of which it was the source, there may be exceptional primary obligations which continue to exist notwithstanding that the contract has been rescinded. These are obligations that are ancillary to the main purpose of the contract – which is, of course, that the parties should perform their primary obligations voluntarily. Mutual promises to submit to arbitration disputes arising as to the performance by the parties of their other obligations arising from the contract may be expressed in terms which make it clear that it was the common intention of the parties that their primary obligation to continue to perform these promises should continue notwithstanding that their other primary obligations had come to an end: Heyman v Darwins Ltd [1942] AC 356."
In Australia arbitration clauses of the type concerned in this case continue to apply even after a contract has come to an end by repudiation and acceptance. In Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981 – 1982) 149 CLR 337 Mason J (as he then was), with whom Aickin and Wilson JJ agreed accepted at 364 that a distinction is to be drawn:
"… between a contract void ab initio, in which event there is no valid submission to arbitration, and a valid contract which is subsequently repudiated, where acceptance of the repudiation leaves the contract, including the arbitration clause, on foot for the purpose of enforcement, though performance under the contract is at an end."
It follows that the arbitration agreement remains on foot.
Counsel for Southern Water referred to the requirement in the contract that disputes be notified to the contract superintendent who shall give a "written decision on the dispute, together with reasons for the decision" and that if the parties are dissatisfied with that decision or, alternatively, the contract superintendent fails to give a timely decision only then does the referral to arbitration clause operate. Southern Water did not serve its notice of dispute dated 8 February 2011 on the contract superintendent and Aquagenics did not serve its response to the notice dated 16 March 2011 on the contract superintendent. There is now no contract superintendent on whom such notices might be served.
In response counsel for Aquagenics referred to Eastern Metropolitan Regional Council v Four Seasons Constructions Pty Ltd [1999] WASCA 144. In that case the contractual preliminaries required to be fulfilled before arbitration was commenced involved the giving of notice to the contract superintendent. There Steytler J, with whom Pidgeon and Ipp JJ agreed said at pars42 and 45:
"42 If, as the first paragraph of cl 47.1 makes plain, the clause is intended to cover any dispute arising out of or in connection with the contract then it follows that the clause will cover a wide range of possible disputes the vast majority of which, no doubt, might occur during the continued performance of the contract. That being so there is every reason for the parties to agree that, in any such case, the contract will continue to be performed notwithstanding the existence of the dispute. However the mere fact that they have agreed accordingly cannot mean that they should, notwithstanding the plain meaning of the first paragraph of the clause, be taken to have intended that, where each of the parties asserts that the contract has been brought to an end (in this case for different reasons), disputes arising out of or in connection with the contract should no longer be capable of being referred to arbitration under the contract.
45 Similarly, it seems to me that there is nothing in the provisions of alternative 2 of cl 47.2 which supports the construction advanced by the appellant. If it be true that, in circumstances such as those which have occurred, the Superintendent is unlikely to give an impartial decision that cannot mean that disputes of that kind are not intended to be made the subject of arbitration. Alternative 2 makes it plain that if either party is dissatisfied with a decision of the Superintendent or, if he fails to give a written decision within the required time (and it may be that, in particular cases, the circumstances of the dispute are such that no useful purpose would be served by the Superintendent making a decision in respect of it), then, failing resolution, the matter can be referred to arbitration or litigation. There are many possible areas of dispute which might result in decisions of the Superintendent being challenged in circumstances in which the contract is still on foot. It is not suggested, and could not sensibly be suggested, that disputes of that kind should, merely because the procedure provided for in alternative 2 of cl 47.2 contemplates a decision by the Superintendent, be taken to fall outside the reach of cl 47.1. It is difficult to see why the situation should be any different in circumstances in which both parties regard the contract as being at an end."
Eastern Metropolitan Regional Council is clear authority that an arbitration clause in terms of the one currently under consideration will survive even after the parties performance obligations have come to an end and even if the agreed preliminary involvement of the contract superintendent becomes impossible. No authority to the contrary was cited. Consistently with the Court of Appeal decision in Western Australia I find that there remains in existence an arbitration agreement which has not become inoperative or incapable of being performed.
A submission that the counterclaim for liquidated damages for late completion should proceed in the court action
Counsel for Southern Water submits that, like Aquagenics' claim in debt for payment of its progress claim, Southern Water's claim for liquidated damages is also a claim in debt payable pending any contrary determination in arbitration proceedings. Reliance is placed on the contract cl 35.6 which is as follows:
"35.6 Liquidated Damages for Delay in Reaching Practical Completion
If the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for liquidated damages at the rate stated in Annexure Part A for every day after the Date for Practical Completion to and including the Date of Practical Completion or the date that the Contract is terminated pursuant to Clause 44, whichever first occurs.
If after the Contractor has paid or the Principal has deducted liquidated damages, the time for Practical Completion is extended, the Principal shall forthwith repay to the Contractor any liquidated damages paid or deducted in respect of the period to and including the new Date for Practical Completion."
Further, counsel relies on 47.4 which provides that the arbitration agreement does not "prejudice the right of a party to institute proceedings to enforce payment due under the contract".
Whether a debt exists and if so the amount of it is dependent upon determinations as to whether Aquagenics failed to achieve practical completion by the date for practical completion and, if so, when practical completion was achieved, if at all.
The contract contains the following definition:
"'Date for Practical Completion' means –
(a) where Annexure Part A provides a date for Practical Completion, the date; or
(b)where Annexure Part A provides a period of time for Practical Completion, the last day of the period,
but if any extension of time for Practical Completion is granted by the Superintendent or allowed in any arbitration or litigation, it means the date resulting therefrom;"
As noted earlier in these reasons, Southern Water's claim for $187,000 for late completion was the subject of Southern Water's Notice of Dispute dated 8 February 2011 and Aquagenics' response dated 16 March 2011. In its response Aquagenics claimed that there was no date for practical completion as time had been set at large by the failure of the contract superintendent to grant extensions of time which ought to have been granted under the contract. In addition, it appears from a particular in Southern Water's pleading that there is a dispute as to whether practical completion was achieved by Aquagenics prior to the parties obligations under the contract coming to an end on 20 July 2010. The particular includes the following:
"The plaintiff asserted that it had reached a state of practical completion by correspondence dated 31 March 2010 …"
The contract contains the following definition for ascertainment of the date of practical completion:
"'Date of Practical Completion' means –
(a)the date certified by the Superintendent in a Certificate of Practical Completion to be the date upon which Practical Completion was reached; or
(b)where another date is determined in any arbitration or litigation as the date upon which Practical Completion was reached, that other date;"
The definitions of "Date for Practical Completion" and "Date of Practical Completion" make it clear that ascertainment of these dates is an arbitral matter. Both dates are in dispute and until that dispute is resolved no order enforcing payment can be made unless the contract superintendent has stated that a payment for liquidated damages is due in a payment certificate issued under the contract. Southern Water does not claim the benefit of any such certificate.
Counsel for Southern Water placed reliance on my decision in Glenview Home Inc v Digital Telecommunication Systems Pty Ltd (2003) TASSC 62. That case concerned the discretionary power under the old Act, s53, to stay proceedings. The discretion to impose the stay was not exercised. There was no determination in that case that a disputed claim for liquidated damages was not an arbitral matter. Clearly, here, the disputed claim for liquidated damages is an arbitral matter and the parties agree that it is. Southern Water put the claim in its notice of dispute dated 8 February 2010 being part of the preliminary process specified in the arbitration clause in the contract. The case is of no relevance to the application of the new Act, s8. That provision requires arbitral matters to go to arbitration except in the limited circumstances specified in the provision. The Act provides for no exception in the case of disputed claims for liquidated damages.
Section 8 applies to the counterclaim for liquidated damages.
Determination
I have concluded that the Commercial Arbitration Act 2011, s8, has retrospective effect and so applies to Aquagenics' application for a stay. It makes mandatory, upon the timely request of a party, the referral of the parties to arbitration on arbitral matters, unless the arbitration agreement is null and void, inoperative or incapable of being performed. Here there is an arbitration agreement which I have found survived the termination of the parties performance obligations under the contract. All of the matters in the counterclaim are agreed to be arbitral matters. A timely request in the form of the application for a stay has been made. There was no contention that the agreement of the parties to refer such matters to arbitration is null and void. I have rejected Southern Water's contention that the arbitration agreement is now inoperative or incapable of being performed. I am now obliged by the Act, s8, to refer the parties to arbitration.
Would the outcome have been different had the Commercial Arbitration Act 2011, s8, not had retrospective effect so that the Commercial Arbitration Act 1986, s53, applied?
Counsel for Southern Water made submissions that Aquagenics was not ready and willing to do all things necessary for the proper conduct of an arbitration. The submissions on this point, however, were the same as the submissions in support of Southern Water's contention that the arbitration agreement had become inoperative or incapable of being performed. I have already found that this is not the case.
It was also submitted that referral of the counterclaim to arbitration would result in the duplication of issues being litigated in this court and in the arbitration. The submission is underpinned by the premise that the right to payment of a progress claim without set-off does not survive the termination of the contract. The argument is based on the standard provision in the contract that if the principal takes out of the hands of the contractor the whole or part of the work remaining to be completed the contractor shall not entitled to any further payment in respect of the work taken out of its hands unless, when such works have been completed the superintendent issues a payment certificate in favour of the contractor.
The arguments for and against a retrospective entitlement to suspend payment are set out in Aquatec Maxcon Pty Ltd v Minson Nacap Pty Ltd [2004] VSCA 18. In that case it was unnecessary for the Court of Appeal to resolve the question and it declined to do so. Similarly, I see no need for me to decide the question on the hearing of this application. If the notice taking the works out of the hands of Aquagenics suspended the entitlement to payment, Aquagenics will not succeed in its action and would have to await the outcome of the arbitration proceedings before it could recover any money from Southern Water. There would be no need for the court to consider Southern Water's claimed set-offs.
In considering the discretion I would have attached great weight to the fact that the parties had agreed that the matters the subject of the counterclaim were arbitral matters. In that regard, I would have been conscious of the observation of Evans J in Aquagenics Pty Ltd v Break O'Day Council [2010] TASFC 3 where his Honour said at par[43]:
"There is a wealth of authority to the effect that parties should be held to their contract and there is no injustice in this being so. See Hedges v Halliday (supra) at 57; Huddart Parker Ltd v The Ship Mill Hill [1950] HCA 43; (1950) 81 CLR 502 at 509; Akai Pty Ltd v People's Insurance Co Ltd (supra) at 438, and Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 9. Consistent with these authorities, it has long been held that in deciding whether or not there is no sufficient reason why a matter should not be referred to arbitration, a court is to give great weight to the consideration that the parties, by their contract, have agreed that arbitration should be the forum for settling any disputes which may arise. See Tasmanian Pulp and Forest Holdings v Woodhall Ltd [1971] Tas SR 330 at 332, 335 and 344, and Blackman & Co v Oliver Davey Glass Co [1996] VicRp 77; [1966] VR 570 at 574 – 575.
Accordingly, even if the applicable provision had been s53 the result would have been the same.
Order
The parties are referred to arbitration in action 925/2011 in respect of the matters which are the subject of the defendant's Defence Set-off and Counterclaim with the exception of those matters, being purely matters of defence, pleaded in pars1 – 14 inclusive.
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