Auburn Council v Austin Australia Pty Limited (in liquidation) - [2007] NSWSC 130

No judgment structure available for this case.

CITATION: Auburn Council v Austin Australia Pty Limited (in liquidation) [2007] NSWSC 130

HEARING DATE(S): 12/02/07, 13/02/07, 14/02/07, 15/02/07, 16/02/07, 19/2/07, 20/02/07, 21/02/07 22/02/07

JUDGMENT DATE :
6 March 2007

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Plaintiff's claims to relief not made out. Parties to bring in short minutes of order.

CATCHWORDS: Arbitration - Contract - Arbitration proceedings concerning contractual arrangement close to completion - Claimant placed into administration - Arbitration proceedings include cross claim by respondent - Court order for the provision of security for the respondent's future costs and staying claimants claim until provision of security - No order staying respondents cross-claim - Security for costs furnished extended period after order made - Respondent seeks declaration that the arbitration agreement ended as a result of claimant's repudiation and respondents acceptance of such repudiation or orders pursuant to s 46 of the Commercial Arbitration Act 1984 (NSW) terminating the arbitration - Whether repudiation made out - Whether delay on part of claimant in complying with court's order for security capable of constituting a breach of term implied in s 46 (1) of the Commercial Arbitration Act to exercise due diligence in taking of steps necessary to have dispute referred to and dealt with in arbitration proceedings - Implied obligation to progress arbitration being mutual - Whether delay would give rise to substantial risk of it not being possible for fair trial of the issues in arbitration proceedings or likely to cause serious prejudice to respondent - No effective termination of arbitration agreement possible by reason of one party's repudiatory delay where other party failed to take steps to have such delay addressed - Party not ready, willing and able to perform contract may not terminate contract notwithstanding the repudiatory conduct of other party - Whether respondent lost right to accept any repudiation of arbitration agreement by accepting security for funds moneys - Whether statements by the applicant concerning its beliefs as to when funding would be obtained for the provision of the security comprised repudiatory conduct or lack of due diligence on part of applicant in the taking of steps necessary to have the dispute dealt with in the arbitration proceedings - Leave to proceed against company in liquidation

LEGISLATION CITED: Arbitration Act 1950 (UK)
Commercial Arbitration Act 1984 (NSW)
Corporations Act 2001 (Cth)

CASES CITED: Alghussein Establishment v Eton College [1991] 1 All ER 267
Alginates (Australia) Pty Ltd v Thomson & Carroll Pty Ltd [1970] VR 570
Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229
Andre et Compagnie v Marine Transocean Ltd [1981] QB 694
Boodhoo v Attorney General of Trinidad and Tobago [2004] 1 WLR 1689
Blencoe v British Columbia (Human Rights Commission) [2000] 2 SCR 307
Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Carr v Fischer [2006] NSWCA 313
Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60
Commonwealth v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662
Crawford v AEA Prowting Limited [1973] QB 1
Dalgety & Co Ltd v The Australian Mutual Providence Society [1908] VLR 481
Duncan v Lowenthall [1969] VR 180
Dyer (Procurator Fiscal, Linlinthgow) v Watson [2004] 1 AC 379
Economides v Commercial Assurance Co plc [1998] QB 587
Elder’s Trustee and Executor Co Limited v Commonwealth Homes and Investment Co Limited (1941) 65 CLR 603
Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17
Gill Herron & Gardiner v Walton (1991) 25 NSWLR 190
GIO Australia Holdings Ltd v AMP Insurance Investment Holdings Pty Ltd and Another (1998) 29 ACSR 584
Goose v Wilson Sandford & Co [1998] TLR 85
Herron v McGregor (1986) 6 NSWLR 246
Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194
Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653
Jago v District Court of New South Wales (1989) 168 CLR 23
Krivoshev v Royal Society for the Prevention of Cruelty to Animals Inc [2005] NSWCA 76
Liverpool City Council v Casbee Pty Ltd [2005] NSWSC 590
Matthews v Smallwood, [1910] 1 Ch 777
Minion v Graystone Pty Limited [1990] 1 Qd R 157
Monie v Commonwealth of Australia (2005) 63 NSWLR 729
NAIS V Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 77
Newman v Victoria [unreported, Supreme Court of Victoria, McDonald J, 25 August 1995, BC9507248]
Oceanic Life Ltd v Insurance and Retirement Planning Services Pty Ltd (in liq) (1993) 11 ACSR 516
O'Connor v SP Bray Ltd (1936) 36 SR NSW 248
Ogilvie-Grant v East (1983) 7 ACLR 669
Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854
Peabody Resources Ltd v Macquarie Generation [unreported, Supreme Court of New South Wales, Einstein J, 19 November 1998, BC9806319]
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827
Queensland Trustees Ltd v Drysdale Hendy & Co [1992] 2 Qd R 625
Roebuck v Mungovin [1994] 2 AC 224
Sea Containers Limited v ICT Pty Limited [2006] NSWCA 327; [2006] NSWSC 134
Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359
Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567
Stollznow v Calvert [1980] 2 NSWLR 749
Williams v Frayne (1937) 58 CLR 710
Zimmer Orthopaedic Limited v. Zimmer Manufacturing Co Ltd [1968] 2 All ER 309

PARTIES: Auburn Council (Plaintiff)
Austin Australia Pty Limited (Defendant)

FILE NUMBER(S): SC 50138/06

COUNSEL: Mr TEF Hughes QC, Mr ID Faulkner SC, Mr MK Condon (Plaintiff)
Mr J Simpkins SC, Mr AA Henskens (Defendant)

SOLICITORS: Matthews Folbigg Pty Limited (Plaintiff)
Colin Biggers & Paisley (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Tuesday 6 March 2007

50138/06 Auburn Council v Austin Australia Pty Limited (in liquidation)

JUDGMENT

The proceedings

1 Auburn Council brings these proceedings against Austin Australia Pty Ltd seeking relief in relation to arbitration proceedings commenced in May 2001. The background to the disputes which led to the initiation of the arbitration concern the contractual arrangements whereunder Austin had been retained by the Council in March 1999 to provide project management services in relation to the redevelopment of the Council Chambers and in relation to the redevelopment of the Auburn Police Headquarters.

2 Austin’s claim was for approximately $4.5 million plus interest. The Council's cross-claim and setoff was for approximately $7 million plus interest.

3 Mr Bailey SC was appointed arbitrator and the arbitration hearing commenced on 7 April 2003. By December 2003 the arbitration hearing had not yet completed. On 31 December 2003 administrators were appointed to Austin and on 10 March 2004 liquidators were appointed.

4 On 8 March 2004 the court ordered inter alia:

· Austin to provide security for the Council's future costs of the arbitration in the sum of $325,000;

· that the arbitration proceedings be stayed until the security was furnished;

· that to the extent necessary the Council was granted leave to proceed with its cross-claim in the arbitration proceedings.

5 The security was only furnished on 28 July 2006.

The relief claimed

6 The Council seeks:

i. a declaration that the arbitration agreement dated 22 March 1999 has come to an end as a result of Austin's repudiation of that agreement and the Council's acceptance of such repudiation on 13 September 2006;

Commercial Arbitration Act, 1984

(NSW)

The arbitration agreement

7 Clause 20 (a) of the Construction Management Agreement [PX 1/28] provided relevantly as follows:

(I) the construction of the Contract; or

(II) as to any matter or thing of whatsoever nature arising thereunder or in connection therewith;

Relevant provisions of the Commercial Arbitration Act

8 Section 14 is in the following terms:

Procedure of arbitrator or umpire

9 Section 46 is in the following terms:

Delay in prosecuting claims

(1) Unless a contrary intention is expressed in the arbitration agreement, it is an implied term of the agreement that in the event of a dispute arising to which the agreement applies it is the duty of each party to the agreement to exercise due diligence in the taking of steps that are necessary to have the dispute referred to arbitration and dealt with in arbitration proceedings.

(a) has been inordinate and inexcusable, and

10 Section 47 is in the following terms:

General power of the Court to make interlocutory orders

The Court shall have the same power of making interlocutory orders for the purposes of and in relation to arbitration proceedings as it has for the purposes of and in relation to proceedings in the Court.

Imperial Leather

Co Pty Ltd v Macri & Marcellino Pty Ltd

Commonwealth v Cockatoo Dockyard Pty Ltd

Thumbnail sketch of matters likely to inform the ultimate decision

11 The matters which are likely to ultimately inform the decision as to whether or not the declaration claimed should be made or in the alternative, whether or not the arbitration should be terminated require a close analysis of a number of factual matters. In this regard the litigation has been conducted by dividing the relevant time line into segments each of which had been submitted to microscopic examination.

12 The matters of law and sometimes mixed fact and law thrown up include:

serious

ii. whether there was any inaction on the part of the Council to continue with the arbitration;

iii. whether as the Council has submitted, any delay on the part of Austin in complying with the Court's order for security is capable of constituting a breach of the implied term raised by s 46 (1) of the Act;

iv. whether there has been 'undue' delay of the type provided for in s 46(2) and whether the delay has been 'inordinate and inexcusable' within the meaning of s 46(3)(a);

a) will give rise to a substantial risk of it not been possible to have a fair trial of the issues in the arbitration proceedings or

13 Clearly without being exhaustive it may be said that the Court is entitled when assessing the character of any delay, to take into account matters to such as the following:

i. the length of the delay;

ii. any explanation for the delay;

iii. any hardship to Austin if the action is dismissed;

iv. the prejudice to the Council if the arbitration is allowed to proceed notwithstanding the delay;

14 One of the difficult matters raised by the cross contentions goes to whether the passage of time will preclude any realistic possibility of the arbitrator being able to recall matters, as for example concerning the demeanour of witnesses. Hence authorities requiring close attention concern occasions when a judge or arbitrator by passage of time, may have been seriously deprived of the advantage such a person once had of observing witnesses as they gave their evidence.

More precise chronicling of the issues

15 The defendant's statement of issues albeit of necessity of some length, comprises a reasonably accurate statement of the central issues. Excluding the detail of the issues concerning alleged prejudice as a result of delay it seems of assistance even at this early stage to repeat this statement:

REPUDIATION – DELAY FROM JUNE 2001-APRIL 2003

1. Did Austin breach the term implied by section 46 (1) of the Commercial Arbitration Act (the Implied Term) (and, if so, when and in what precise respects) and what delay to the arbitration did any such breach cause?

2. Was any such breach so “serious and continuous” so as to evince an intention to no longer be bound by the arbitration agreement?

3. If there was a breach by Austin, did the Council elect to affirm the arbitration agreement by continuing with the arbitration?

4. Was any breach on the part of Austin still existing as at the date of any purported acceptance of a repudiation by the Council?

5. Was the Council then itself in breach of the arbitration agreement through its own failures to exercise due diligence in the taking of steps reasonably necessary to have the dispute dealt with in the arbitration proceedings and so precluded from validly accepting any repudiation?

6. When and by what means did the Council accept any repudiatory act on the part of Austin?

7. Was any acceptance of a repudiation by the Council unconscionable and hence invalid?

8. If any repudiation was validly accepted so as to bring the arbitration agreement to an end so far as future performance of it was concerned, did it affect Austin’s accrued entitlement to have the Arbitrator determine the dispute?

REPUDIATION – DELAY FROM DECEMBER 2003

9. Did the Implied Term oblige Austin to provide the security for costs ordered by the Court and, if so, within any, and what, time?

10. Was any breach of such an obligation (if it existed) so “serious and continuous” as to evince an intention to no longer be bound by the arbitration agreement?

11. Did the Council elect to affirm the arbitration agreement by conduct including reserving its right to proceed with its cross-claim in the arbitration, seeking, negotiating the form of and accepting security and communicating with the arbitrator about and participating in the continued conduct of the arbitration?

12. Was any breach on the part of Austin still existing as at the date of any purported acceptance of a repudiation by the Council?

13. Was the Council then itself in breach of the arbitration agreement through its own failures to exercise due diligence in the taking of steps reasonably necessary to have the dispute dealt with in the arbitration proceedings and so precluded from validly accepting any repudiation?

14. When and by what means did the Council accept any repudiatory act on the part of Austin?

15. Was any acceptance of a repudiation by the Council unconscionable and hence invalid?

16. If any repudiation was validly accepted so as to bring the arbitration agreement to an end so far as future performance of it was concerned, did it affect Austin’s accrued entitlement to have the Arbitrator determine the dispute?

TERMINATION - DELAY FROM JUNE 2001-APRIL 2003

17. Did Austin cause any, and what, delay to the dispute being dealt with in the arbitration?

Commercial Arbitration Ac

TERMINATION – PREJUDICE AS A RESULT OF DELAY FROM JUNE 2001 – APRIL 2003

TERMINATION - DELAY FROM DECEMBER 2003

23. Was the delay in providing the $325,00 security for costs (ordered on 8 March 2004, provided on 1 August 2006) “inordinate and inexcusabl e” within the meaning of section 46 (3)(a) of the Commercial Arbitration Act ?..

TERMINATION – PREJUDICE AS A RESULT OF DELAY FROM DECEMBER 2003

TERMINATION – DISCRETION

the Commercial Arbitration Act

Dealing with the evidence

16 There is a very extensive chronology before the Court in the form of 'MFI D7' produced by Austin. In my view it is inappropriate and inefficient to include in these reasons, all of the detail in that chronology [albeit that the whole of the chronology is taken into account as informing these reasons].

17 The chronology for all intents and purposes may be regarded as giving the matrix of fact underpinning the reasons. However the efficient course has been to dwell in the judgment on only those parts of the chronology as seem to require special mention for one reason or another.

The respective periods of time

18 It seems convenient to divide the timeline into the following periods:

i. June 2001 to April 2003 ["the first period"];

ii. December 2003 to August 2006 ["the second period"];

The first period

19 The first period essentially commences with the first directions hearing in which the arbitrator set an original timetable for preparation to enable the arbitration hearing to occur late in 2001 and continues to the occasion in early 2003 when the arbitration hearings actually commenced. This period is marked by cross-contentions of similar ilk [each party claiming that the other had been guilty of sundry failures to comply with directions].

20 The finding is that both parties on occasion failed to comply with directions and that where Austin is shown to have failed to comply with directions the matter is of relatively slight significance only. The Council too was sometimes to blame. In short and regrettably as often occurs in some sets of proceedings and in some arbitrations, there is a leisurely approach to compliance with directions and repeated delays are encountered sometimes for good reason and sometimes due to lack of diligence on the part of one or other of the litigating parties.

The second period

21 The second period includes the arbitration hearings which took place between 7 April 2003 up to 17 April 2003 and on adjourned dates from 23 April 2003 until May 2003. The arbitration hearings recommenced for 16 hearing days in October, November and December 2003. On 18 December 2003 the further hearing was adjourned to May 2004.

22 As already indicated, on 31 December 2003 administrators were appointed to Austin and on 10 March 2004 liquidators were appointed. This was a watershed period for obvious reasons. Although there were later directions hearings from time to time before the arbitrator, these were always concerned with whether and if so when, and how, the arbitration could or would go forward. In short the substantive arbitration hearings never recommenced.

23 On 19 February 2004 the Council applied to the Court for an order for security for costs which order was made on 8 March 2004. The order was that Austin provide security for the Council's future costs of the arbitration in the sum of $325,000 and that Austin's claim before the arbitrator be stayed until security was provided.

24 Following negotiations between the parties which took place in June 2006, as to the precise terms of the security documentation, security was provided on 28 July 2006.

25 The events following the provision of this security do require reasonably close attention, the arbitrator by letter of 2 August 2006 appointing a preliminary conference, the matter being before the arbitrator for mention on 23 August 2006 and the Council purporting by letter of 13 September 2006 to accept a claimed repudiation by Austin of the arbitration agreement.

The third period

26 The third period is simply of relevance to mark the further passage of time and to add to the Council’s contentions reliant on s46 (2) and (3).

The central focus

27 It is fair to say that the central focus of much of the evidence during the present hearing concerned:

[particularly focusing upon:

1. what steps were taken by Austin in an endeavour to procure security and what information was imparted by Austin to the Council and on occasion to the Arbitrator in this regard;

itself

28 Naturally the above summary is not exhaustive of the factual issues examined. Nor does it seek to identify the close questions of law which will require to be treated with.

The alleged repudiation

Shepherd v Felt & Textiles

29 Although the findings do not justify the contention of repudiatory conduct, had the findings been otherwise it is appropriate to note that the Court accepts as of substance the contention put by the Council, reliant upon Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359 at 378, to the effect that as a general rule, a party is entitled to rely upon particular conduct of the other party as constituting repudiatory breaches of contract, albeit that the information only came to be known by the party seeking to so rely after the purported acceptance of a repudiation [see also Williams v Frayne (1937) 58 CLR 710 at 733; Minion v Graystone Pty Limited [1990] 1 Qd R 157 at 164, where McPherson J stated: “…the action taken must be capable of being justified at law, but…the grounds of justification, although they must have existed, need not have been known or relied upon at the time the action was taken”].

Obstacles facing the Council’s case

30 There are a number of answers in the way of an acceptance of the proposition that the Council's purported acceptance of Austin's alleged repudiation was valid:

at some

Making this assumption:

a) the simple fact remains that at the time of the purported acceptance of Austin's alleged repudiation, Austin was not in any then existing breach of the arbitration agreement. It had by then complied with the order for the provision of the security. The matters that had produced any arguably repudiatory delay had been attended to and any default had been cured;

b) in any event the Council elected to affirm the arbitration agreement by accepting the security;

at the time

could be

dealt with in arbitration proceedings

iii the third answer is that Austin in fact took steps which discharged any obligation it had [if such existed] to exercise due diligence in the provision of security. The liquidator expended much time and effort in an attempt to obtain funding. This attempt took a considerable period. And notwithstanding the exhaustive cross-examination of Mr Hutchison suggesting inappropriate delays in taking timely and proper steps to pursue the funding necessary to permit the provision of the security, proper steps were taken in that regard albeit over a protracted period in the face of a number of difficulties explained by Mr Hutchison;

a) failing to timeously make appropriate application to the Court for a permanent stay of Austin's claim and

b) in failing to pursue its own claim which had not been stayed;

was justified by reason of its having been misled by Austin as to its expectations concerning when funding would be available.

Bremer

31 The speech given by Lord Diplock in Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 constitutes an in-depth analysis of many principles basic to arbitrations. That speech [drawing upon and sometimes affirming and sometimes rejecting propositions put in previous authorities] includes a number of propositions of relevance to the present issues.

32 Of signal evidence presently is the fact that the decision in Bremer is authority for the proposition that there can be no effective termination of an arbitration agreement by reason of one party’s repudiatory delay where the other party has failed to take steps to have such delay addressed (the implied obligation to progress the arbitration being mutual). In this regard the decision is an application of the principle that a party who is not ready, willing and able to perform a contract may not terminate the contract notwithstanding the repudiatory conduct of the other party.

33 The propositions of relevance include:

i. that an arbitration clause constitutes a self-contained contract collateral or ancillary to the agreement itself;

ii. that the underperformed primary obligations of the parties under an arbitration agreement, like other contracts, may be brought to an end at the election of one party where there has been a repudiatory breach of that agreement by the other party [repudiatory breach being referred to as covering both what has been described as "fundamental breach" and "breach of condition": cf Photo ProductionLtd v Securicor Transport Ltd [1980] AC 827];

iii. that when, upon the commission of such a breach, the party to an arbitration agreement who is not in default has lawfully elected to bring to an end the underperformed primary obligations of both parties to continue with the arbitration up to the issue of an award, the Court has jurisdiction, in protection of that party's legal right to do so, to grant him an injunction to restrain the other party from proceeding further with the arbitration;

iv. that an arbitration clause continues to remain executory for so long as there are outstanding any disputes between the parties as to the existence or extent of their secondary obligations under the other clauses of an agreement.

34 At 982-983 his Lordship put the matter as follows:

“The event is one that either party can initiate by asserting against the other a claim under or concerning the shipbuilding agreement which they have not been able to settle by agreement. In that event, each is obliged to join with the other in referring the claim to arbitration and to abide by the arbitrator's award. The arbitration clause itself creates no obligation upon either party to do or refrain from doing anything unless and until the event occurs, and even then the mutual obligations that arise are in relation to the particular claim that constitutes the event. The primary obligations of both parties that arise then are contractual, whether express, or implied by statute or included by necessary implication in the arbitration clause. Breach of any of them would give rise to a general secondary obligation to pay compensation (damages), though this may well be nominal, but if the breach were such as to deprive the other party of substantially the whole benefit which it was the intention of the parties he should obtain from the mutual performance by both parties of their primary obligations in relation to the reference of the particular dispute to arbitration, i.e., what in an ordinary synallagmatic contract would be a repudiatory breach, I see no ground in principle why the party not in breach should not be entitled to elect to put an end to all primary obligations to proceed with the reference then remaining unperformed on his part and on the part of the party in default, and, in appropriate cases, to obtain an injunction to restrain the party in default from continuing with the reference to arbitration of that particular dispute.

It was this principle that Donaldson J. and Roskill L.J. (with whom Cumming-Bruce L.J. also agreed) purported to invoke in the instant case. They held that the arbitration agreement, indeed all arbitration agreements, were subjected to an implied term of which they held that South India was in repudiatory breach. They stated the implied term in somewhat different ways, but when applied to the facts of the instant case the effect of both was the same: viz. the claimant in an arbitration who is guilty of such delay in proceeding with the arbitration as would justify the High Court in dismissing the proceedings for want of prosecution if the arbitration were an action, commits a repudiatory breach of the contract to refer the disputes to arbitration. Donaldson J. was inclined to treat it as a fundamental breach of an innominate implied term "that each party will use reasonable endeavours to bring the matter to a speedy conclusion" (ante, p. 924G-H); whereas the implied term dealing with claimants proceeding timeously that was favoured by Roskill L.J. required them only to avoid such delay as would justify the High Court in dismissing the proceedings for want of prosecution if it had occurred *983 in an action; and the breach of this implied term would be repudiatory because it was a breach of condition.

Common to both ways of putting it is an assumption that an obligation to bring the arbitration to a conclusion with reasonable dispatch is incumbent on the claimant only, except where the next step in the procedure to be taken by either party is one which no one but the respondent is capable of taking. Even though there are available to the respondent effective means of requiring the claimant to put an end to any delay that is detrimental to the respondent, and sanctions for the claimant's non-compliance, the assumption is that the respondent is entitled to remain entirely passive and wait until the detriment is so great as to amount to a repudiatory breach of the agreement to refer.

Allen v Sir Alfred McAlpine & Sons Ltd

35 After drawing attention to the fundamental difference between an action at law and arbitration [in that the submission of a party to the jurisdiction of the High Court to determine a dispute which had arisen between that party and another was compulsory, neither party assuming any contractual obligation to the other as to what each must do in the course of the proceedings and their respective obligations as to procedure being imposed upon them by the rules and practice of the court] his Lordship turned to the contrast constituted by the purely voluntary submission of a dispute to arbitration under a private arbitration agreement. In that regard his Lordship observed as follows (at 983F):

36 As counsel for Austin has contended, Lord Diplock then turned to consider what the mutual obligation was of the parties to a private arbitration. His Lordship thought that the contractual obligations the parties assumed to one another arose from section 12 (1) of the Arbitration Act 1950. That section obliged the parties to, inter alia, do all things that the arbitrator might require.

37 Similarly, section 37 of the NSW Act provides:-

38 His Lordship put the matter as follows (at page 986B):-

, it is in my view, a necessary implication from their having agreed that the arbitrator shall resolve their dispute, that both parties, respondent as well as claimant, are under a mutual obligation to one another to join in applying to the arbitrator for appropriate directions to put an end to the delay

39 I accept that this is not materially different from the implied term that section 46 of the NSW Act now stipulates for. That term obliges both parties (regardless of who has initiated the referral of the dispute) to exercise due diligence in the taking of the steps necessary to have the dispute dealt with in the arbitration. In consequence I accept as of substance the submission that the Council was obliged to take steps to address any delay on the part of Austin. Additionally, it was obliged to prosecute its cross-claim.

40 On the facts as they were established, Lord Diplock did not regard the purported acceptance of the repudiation as valid observing (at page 987G):-

Crawford v A.E.A. Prowting Limited

For failure to apply for such directions before so much time had elapsed that there was a risk that a fair trial of a dispute would not be possible, both claimant and respondent were in my view, in breach of their contractual obligations to one another; and neither can rely upon the other’s breach as giving him a right to treat the primary obligations of each to continue with a reference as brought to an end. Respondents in private arbitrations are not entitled to let sleeping dogs lie and then complain that they did not bark.

41 The speech delivered by Lord Diplock was concurred by Lord Edmund–Davies (at page 988B) and Lord Russell of Killowen (at page 993H).

42 Lord Scarman (with whom Lord Fraser of Tullybelton concurred: page 993G) dissented.

43 Notwithstanding the trenchant criticism of Bremer [particularly by Lord Denning MR in the decision of the Court of Appeal in Andre et Compagnie v Marine Transocean Ltd [1981] QB 694], the House of Lords (differently constituted) refused to reconsider Bremer in Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854.

44 In my respectful view the decision of the majority in Bremer was correct.

45 A direct consequence of an acceptance of the majority decision in Bremer requires that the Council's repudiation claim be rejected for the reason that if Austin was otherwise guilty of repudiatory delay, the Council itself was guilty of such delay through:

i. failing to take steps to address delay in the progress of Austin’s claim; and

46 It may be observed that through the whole of the period between the making of the order for provision of the security and the time when the security was furnished the Council had the power to apply for a permanent stay of the arbitration proceedings in so far as Austin's claims were concerned, which would have been the appropriate route to take had it been disposed to do so. That it did not so apply is not a matter that can be laid at the feet of Austin. Indeed the evidence established to the Court's satisfaction that the Council's failure to so apply was solely due to its forensic tactical decision that it would be unwise to make such an application for the reason that the application may backfire if the Court determined, in the face of such an application, to lift or to reduce the amount of the security for costs order.

47 It has to be remembered that the arbitral process to which the parties had bound themselves by the arbitration agreement had been invoked by both parties who sought to prosecute their respective claims against one another. Whilst the form of the arbitration followed the presentation of Austin's claim as "claimant" followed by the presentation of the Council's claim as “respondent” and involved sundry overlap in terms of the presentation of evidence, the proper analysis involved there being separate claims pursued by each of the parties.

48 The circumstances before the arbitrator presently being examined involved separate obligations upon each party to exercise due diligence in the taking of steps reasonably necessary to have its claims in the dispute dealt with in the arbitration proceedings. That these obligations also extended to exercising due diligence in the taking of steps necessary to have the whole of the dispute dealt with in arbitration proceedings [as long as a party's entitlement to proceed had not been stayed], says nothing in relation to what was the extant obligation to pursue its claim which still rested upon a party whose claim had not been stayed. Clearly that party in that circumstance continued to be bound by its underlying obligation to exercise due diligence in the taking of steps necessary to have its claims dealt with to conclusion in the arbitration proceedings. Clearly the Council did no such thing.

Repudiatory intention not lightly inferred

49 It is trite to observe that repudiatory intention is not lightly to be inferred.

50 In Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 proceedings had been brought to establish an alleged repudiation. It was contended that an arbitration ought to be stayed because the arbitration agreement had been repudiated as a result of a failure of the other party to exercise due diligence in the prosecution of its claim in the arbitration. The other party had been placed into liquidation on 13 September 1990. It was known in the weeks following that the liquidator was considering what would happen in relation to the arbitration. It was not, however, until October 1991 that there was any statement made that the arbitration proceedings would be continued with.

51 Giles J held that there was no repudiation or that, if there was, it had not been accepted prior to October 1991. His Honour observed that repudiatory intention was not lightly to be inferred and that the inactivity, having regard to the liquidation, could not be regarded as repudiatory [page 212]. Similarly here, the fact that Austin was in liquidation is clearly relevant in assessing whether any delay in the progression of the arbitration or any statements of belief as to the anticipated securing of funding was repudiatory.

Whether the Council lost its right to accept any repudiation of the arbitration agreement by accepting the security for funds moneys

52 If one posits [for the purposes of this argument], that by early March 2006 the conduct of Austin in having failed to procure the security for funds moneys constituted a repudiatory breach of a primary obligation stipulated for in the implied term to exercise due diligence in the taking of steps necessary to have the dispute dealt with in the arbitration proceedings [s 46], it becomes necessary to consider whether the Council lost its right to accept that repudiation when it elected to accept the security for funds moneys.

53 The Council contends that it did not lose that right in the circumstances. It contends that the all-important fact to be borne in mind is that at the time when it elected to accept the security for funds moneys it was plainly unaware of its having been misled by the misstatements of Austin [otherwise described in these reasons] which it is said had no factual basis. Shepherd v Felt & Textiles is relied upon by the Council as giving it an entitlement once it became aware of these facts, to justify its purported acceptance of a repudiation on the basis of these misstatements and hence to avoid the otherwise consequences of having affirmed by receipt of the security for funds moneys.

54 Elder’s Trustee and Executor Co Limited v Commonwealth Homes and Investment Co Limited (1941) 65 CLR 603 [cited by the Council] is a somewhat complex decision which requires very careful examination. The headnote includes the following:

Quore

55 The joint judgment made clear that the Court found it unnecessary to discuss the question of what if any, distinctions may exist in cases where a party having in fact two grounds for rescission, decided to affirm, knowing that he was entitled in point of law to so elect.

56 Their Honours [at pages 616-618] made the following observations:

“If there are two breaches of condition in a lease, a landlord who, knowing of one of them only, does an act unequivocally recognising the continuance of the lease, is not precluded, on afterwards discovering the other, from re-entering — see, per Parker J in Matthews v Smallwood, [1910] 1 Ch 777 at p 757.

Where there are two independent grounds entitling a party to rescind or disaffirm, we do not think that, because a party having knowledge of the facts giving rise to one of them so conducts himself that he must be taken to have affirmed, he therefore is precluded on discovery of the other from rescinding or disaffirming. We are not dealing with a case where there is an actual decision taken to adopt or affirm the contract of membership by a person who knows that he may if he choose avoid it. The plaintiff did not actually know that an election was vested in him by reason of the fact of his failure to pay the full amount of allotment and application money in cash. It is unnecessary to discuss the question what, if any, distinctions may exist in cases where the party, having in fact two grounds for rescission, but being ignorant of one and aware of the other, decides to affirm, knowing that he is entitled in point of law to elect. In such a case the question whether, notwithstanding his election to affirm, afterwards on discovering the second ground he may resile from his former election and rescind, may depend on the reasons for his decision and the influence which full knowledge might have had as a reason for deciding differently . It is enough to say that a party who is ignorant of his right to elect, although he knows of facts which would in law afford a ground for rescission, cannot, because he failed to avail himself in due time of the first ground, be precluded from relying on a second ground of rescission, which he was then unaware of but afterwards discovers. Nor in our opinion will he be precluded by laches or acquiescence. His conduct cannot affect his right to avail himself of the newly-discovered ground.

O'Connor v S.P. Bray Ltd,

It has been urged that there must also be knowledge of the legal consequences of the facts and of the legal rights involved; but this is not borne out by the authorities, and the contention is, I think, based upon an attempt to import into ordinary cases of election rules which are peculiar to the equitable doctrine of election. This doctrine is referable to the principle that a person is not permitted both to approbate and to reprobate an instrument.

Waiver Distributed Among the Departments, Election, Estoppel, Contract, Release,

The necessity for knowledge as an element in election may be treated under the following headings: 1. Knowledge as to the existence of a right to elect. 2. Knowledge as to the happening of the circumstances which warrant the exercise of the right. 3. Knowledge as to the existence of circumstances which would affect the choice. Subject to certain qualifications, we may say that knowledge of all three kinds is a necessary pre-requisite of conclusive election between two estates, but that in the law of contracts, election is irreversible although knowledge of the first and third kinds was absent.

must be drawn between cases where the party's conduct is unequivocal in its effect and cases where his conduct does not necessarily amount to a waiver, but is merely some evidence that he has in fact elected to affirm

unless he is able to show not merely that he was unaware of the existence of his right, but of the facts amounting to breach of condition or of contract

57 In my view the distinctions which the joint judgment found it unnecessary to discuss [namely circumstances where a party, having in fact two grounds for rescission, but being ignorant of one and aware of the other, decides to affirm, knowing that he is entitled in point of law to effect], are precisely the distinctions which become necessary to deal with in terms of the issue presently before the Court and raised by the posited facts earlier set out.

58 It is presently necessary on the posited facts to examine whether, notwithstanding the posited election to affirm, the Council [afterwards on discovering the second ground], may resile from its former election and rescind. The answer to this question does here depend on the reasons for the Council’s so-called initial decision and the influence which full knowledge might have had as a reason for deciding differently.

59 The events which occurred in the real world did involve the conduct of the Council being unequivocal. This was not a situation in which the conduct of the Council did not necessarily amount to a waiver but was merely some evidence that it had in fact elected to affirm. The Council in the real world exercised rights in virtue of a contract which would not exist unless the contract endured and remained in force. In this regard the evidence included the following:

i. by the letter of 27 January 2005 [mis-typed as 2004] the liquidator's solicitors advised the arbitrator [copying the letter to the solicitors for the Council] that the liquidators had instructed that they expected to finalise arrangements for funding within the next 21 days and stated that they would advise the arbitrator;

ii. by letter dated 3 March 2005 the solicitors for the Council advised the solicitors for the liquidators that they had noted that four weeks had passed since the last correspondence in which correspondence the advice given had been that funding arrangements would be in place in approximately 3 weeks. They pointed out in the letter that it had been almost a year since the orders for payment of security for costs were made by the Court on 8 March 2004 and stated that they were of the view that more than sufficient time had passed for Austin to arrange any necessary funding. They concluded the letter by advising that unless firm arrangements were in place within 14 days of the date of the letter they would seek their client's instructions to relist the proceedings before the arbitrator to seek appropriate orders or directions. They asked for urgent advice as to the status of the Austin's funding of the proceedings;

iii. by letter dated 17 March 2005 the solicitors for the Council wrote to the arbitrator referring to the liquidators letter dated 27 January 2005 and enclosing a copy of their own letter to the liquidator’s Solicitor dated 3 March 2005. They advised that up to this date they had not received any response to this communication from the liquidators solicitors and proceeded to request that " this matter be listed for directions before the arbitrator, at the arbitrator's earliest available opportunity " and furnished their senior counsel’s available dates;

Mr Faulkner: We asked for the directions hearing, or conference, to be convened today and, as far as we are concerned, it need only be a short event today. It is now a long time since the court stayed Austin’s proceedings, and we would like the matter to be finalised – that is, the process from here on to be finalised – soon.

We do not know what the position is of Austin, but what we would want to do today is simply to ask you to give us a day during the first half of June, subject to everybody’s convenience, but not much longer than that, at which time we would move formally for you to set a date for the arbitration to proceed.

As I say, we are uncertain – or we have no idea, actually – what Austin’s position will be when we formally make that application, but if you were to grant that application then, it would mean that you would need to set the matter down for whatever is left in the hearing by way of evidence , which I don’t recall – or we were very close to reaching the stage of submissions, as I best recall it.

The Arbitrator: That’s right.

Mr Faulkner: Mr Arbitrator, we will put on a motion and an affidavit to formalise it, but we don’t want it to go longer – I am not here to be critical of anybody today or in the future, I hope, but it has been our desire, if I can just put it in as neutral terms as possible, this year to bring the matter to conclusion as soon as possible, and so we don’t want to delay any further.

The Arbitrator: When you say for the matter to proceed, do you mean that your cross-claim will proceed ?

60 It does seem quite clear that the Counsel was affirming that the arbitration agreement remained on foot, having asked for the matter to be relisted and when it was relisted having foreshadowed making an application to the arbitrator to proceed with the cross claim. All of this was conduct which could only occur if:

i. there still was an extant and operative arbitration agreement in respect of which the parties had rights and obligations;

61 The Council would lose its rights to determine the contract for repudiation by way of breach of a term going to the root of it, unless it is able to show not merely that it was unaware of the existence of the right but also of the facts amounting to breach of the condition. On the posited facts it was not unaware of the existence of the crucial material facts which would amount on the case it seeks to pursue, to a breach of the condition, because on those posited facts, by 2006 the Council must on the evidence, be taken to have been well aware:

(1) of the extended failure of Austin to provide the security;

62 Standing back from the detail, the environment in which the anticipated estimates of when funding was likely to come forward becomes all important. The relevant context importantly includes:

i. the occasion and nature of the material statements;

63 As to the period of currency of a particular statement [that is to say that period of time prior to the representation having lapsed or become spent] it is unnecessary to do more than to refer to the examination of authority to be found in Peabody Resources Ltd v Macquarie Generation [unreported, Supreme Court of New South Wales, Einstein J, 19 November 1998, BC9806319] at 229-233]. The principles there set out make clear that a representation may lapse without achieving its intended goal and will in those circumstances lose its significance. Certain representations are such that the representee can be presumed to know, or waives information on the subject: as for example was made clear by Cussen J in Dalgety & Co Ltd v The Australian Mutual Providence Society [1908] VLR 481.

Prejudice through delay and the lack of knowledge on the part of the council as to what happened in conclaves between the quantum experts (Mr Makin and Mr Thomson)

110 Ms Brew’s evidence also made it plain that there is no prejudice because there is no relevant lack of knowledge (T135).

111 The facts concerning the process by which Mr Makin and Mr Thomson gave evidence are:-

· Relevant documents are to be found at SGB2, pp84 (Court Book 2888), 294-295 (3098-3099), 455-456 (3259-3260), 543 (3348) and 611 (3416) (on 7, 11 and 17 April, 29 May and 16 October 2003). But these all predate the actual giving of evidence by Mr Makin and Mr Thomson.

· Mr Makin gave his evidence on 24 November and 9, 10 and 16 December 2003.

· On 24 November 2003 his evidence in chief (which commenced at SGB2, p1461) (4266):-

i. Included the production of a schedule of variations (which became Exhibit 18; SGB2, p1491.14) (4296);

ii. Which identified the areas of difference between himself and Mr Thomson (SGB2, p1461.31) (4266);

· Mr Faulkner commenced his cross-examination of Mr Makin after this, although this was only brief (SGB2, p1497.3) (4302).

· He was also cross-examined on 9 December (SGB2, pp1744-1763) (4549-4568), 10 December (SGB2, pp1767-1796) (4572-4601) and 16 December 2003 (SGB2, pp1800-1801) (4605-4606). At the conclusion of his cross-examination, Mr Faulkner made it clear that he had no further questions (SGB2, p1801.32) (4606). Mr Makin was then re-examined. Mr Makin was then excused (SGB2, p1806.21) (4611).

· Mr Thomson was called to give evidence on 16 December 2003 (SGB2, p1815) (4620). He produced his own schedule of variations (SGB2, p1816.8) (4621). It had not previously been produced (SGB2, p1817.1) (4622). The arbitrator noted that it contained a lot of commentary that Mr Makin would need to get across (SGB2, p1817.41 (4622), p1818.32) (4623). The arbitrator thought the schedule did not accord with Mr Makin’s schedule, Exhibit 18 (SGB2, p1818.21) (4623). Cross-examination was deferred (SGB2, p1819.1) (4624).

· There were difficulties with the cross-examination proceeding the following day (see SGB2, p1822) (4627).

· On 18 December 2003, Mr Simpkins addresses the weight to be given to Mr Thomson’s comments (SGB2, p1834.35) (4369), given Mr Thomson’s unavailability for cross-examination (SGB2, p1833.1) (4368). The arbitrator says that it is not necessary to cross-examine Mr Thomson on any additional comments (SGB2, p1835.14) (4640). The arbitrator says that he will allow Mr Makin to comment (SGB2, p1837.24) (4642).

· Mr Simpkins identified the basis of objections to Mr Thomson’s evidence (SGB2, p1841.25) (4646). The arbitrator generally agrees.

Prejudice through delay and the rectification of defects

112 Ms Brew’s evidence made it plain that there is no prejudice because a sufficient record of the defects exists and they were inspected before rectification.

113 Ms Brew’s evidence was:

· that she was asked about the site inspection on 24 October 2002: T89.28. The arbitrator was asked to look at defects and Mr Goncalves (the Council’s building officer) assisted by pointing them out (T90.4). All of the defects were inspected apart from those that were repeated (T90.37);

· that she was consulted from time to time about the Council’s plans to rectify some of the major defects (T130.1) and she gave advice that before any rectification occurred there ought to be a proper record made of what it was which was there to be seen constituting the defect (T130.8);

· that Council, through its own officer, took photographs of the defects (T130.34). The majority were photographed (T130.41). The arbitrator took photographs of all of the defects (T130.48).

Inability of Austin to meet any award of Council's costs

114 This issue [inserted into the pleadings as a late amendment during the hearing] inheres in the usual security for costs environment: in short applications are sometimes pressed seeking additional security as and when appropriate and such applications are treated by the Court on their merits when advanced. This judgment does not foreclose the Council from electing to pursue additional security by appropriate application to the Court. It would not be appropriate to presently forecast the result of any such application.

Other considerations

115 The current stance of the Council is that the Court should proceed by taking it as a given that if orders permanently staying Austin's claim were to be made the cross-claim would not be pressed. This is said to be by reason of the evidence of Mr Hutchison [in paragraph 15 of his affidavit dated 14 December 2006] which it is contended had the result that the Council presently viewed its prospects of ultimate recovery as "pretty hopeless" [T 44.20].

116 Reference has earlier been made to the observations of a number of the judges of the High Court in NAIS stressing the significance of the context in which delays occur as often affecting any legal consequences that may flow and stressing the requirement that the remedy is required to be tailored to the circumstances and justice of the case. In particular Kirby J. had noted with approval the proposition put forward in Blencoe v British Columbia (Human Rights Commission) [2000] 2 SCR 307 by Bastarache J (at [122]) that the determination of whether a delay had become inordinate depended:

was not

alone

117 It is necessary to step back from the detail and to more closely focus upon the significance to Austin of its entitlement to pursue the arbitration even in the present circumstances. In that regard the following observations are pertinent:

i. the Council never sought for a time limit to be imposed upon Austin in terms of its compliance with the order to provide security for costs;

ii. the Council could have but never did apply for an order that pending provision by Austin of the security monies, the Council was discharged from any obligation to pursue its own cross-claim;

iii. the Council took advice on its forensic tactical alternatives and elected not to approach the Court for a permanent stay principally by reason of its anxiety that such an application may have an adverse consequences to it;

iv. the arbitrator being in control of the arbitration has considerable leeway in terms of the future conduct of the arbitration, it being within his power to tailor the future conduct of the arbitration in fashion calculated to satisfy him that any areas of the evidence which had been called in the arbitration in respect of which he may need to be reminded [whether by the recall of witnesses or by address from the Bar table] are properly addressed;

118 The discretion reposed in the Court by s 46 (3) permits an examination of the significance of the Council's own delay against its complaints of prejudice.

119 As to a defendant’s entitlement to let sleeping dogs lie in the context of a dismissal of court proceedings for want of prosecution Moffitt P said, in Stollznow v Calvert [1980] 2 NSWLR 749, 753-754 that:

120 Accordingly, I accept as correct the contention by Austin that the complaints by the Council of prejudice need to be weighed against the fact that it took the deliberate decision not to advance its cross-claim which, if advanced to finality, would have avoided all of its current complaints of prejudice.

121 In Alginates (Australia) Pty Ltd v Thomson & Carroll Pty Ltd [1970] VR 570, 575, Smith, J said:

Duncan v Lowenthal

McAlpine Case

. Moreover the ruling that lying by is not improper relates to a party who is merely defending himself against an adverse claim. A party who, like the present defendant, invokes the court’s jurisdiction by counter-claim is outside that ruling. Having put forward an active claim, it is his obligation to use diligence in pursuing it

Zimmer Orthopaedic Ltd v Zimmer Manufacturing Co

122 It is also material to bear in mind that if a defendant induces a plaintiff to incur further expense in pursuit of an action during the period over which the delay complained of is alleged to have occurred this matter can be taken into account in the exercise of the court’s discretion: see Roebuck v Mungovin [1994] 2 AC 224; Newman v Victoria [unreported, Supreme Court of Victoria, McDonald J, 25 August 1995, BC9507248] at 31.

123 In Allen v McAlpine [1968] 2 QB 229, 260 Diplock LJ said:

. But also, if after the plaintiff has been guilty of unreasonable delay, the defendant so conducts himself as to induce the plaintiff to incur further costs in the reasonable belief that the defendant intends to exercise his right to proceed to trial notwithstanding the plaintiff’s delay, he cannot obtain dismissal of the action unless the plaintiff has thereafter being guilty of further unreasonable delay

124 Similarly, Salmon LJ said (at page 272):

“The only point that has caused me any hesitation upon this appeal arises out of the argument that the defendants have waived or acquiesced in the delay upon which they found their application. Clearly no defendant can successfully apply for an action to be dismissed for want of prosecution if he has waived or acquiesced in the delay.

Mere inaction on the part of the defendant cannot in my view amount to waiver or acquiescence. Positive action, however, by which he intimates that he agrees that the action may proceed, is a different matter. If, for example, he intimates that he is willing for the action to proceed and thereby induces the plaintiff’s solicitor to do further work and incur further expense in the prosecution of the action, it will be precluded from relying on the previous delay by itself as a ground for dismissing the action .
[Emphasis added]

Queensland Trustees Ltd v Drysdale Hendy & Co

125 Plainly the Council induced Austin to continue to seek litigation funding and to arrange for the security to be provided in the belief that, once provided, the arbitration would continue.

The leave application

126 This application presents yet another very unusual circumstance. The proceedings commenced after the commencement of the administration. In consequence it was necessary for the Council to obtain a grant of leave to proceed with the summons in accordance with s 440D (1) (b) of the Corporations Act 2001 (Cth). The summons which was filed on 20 September 2006 sought an order accordingly. However at no stage until very late during the hearing, was the Court's attention drawn to the necessity for the Council to obtain this leave. In the usual course of events the application for such leave would be pressed very early in the piece, preferably before or certainly at the commencement of a final hearing.

127 In the result and only during the course of final address at the conclusion of the proceedings, has attention been directed by the parties to this issue, the Council pursuing a grant of leave and Austin contending that no such leave should be granted, or that the question of leave should be left until after delivery of these reasons.

128 Generally the principles which apply are to be found set out in Ford's Principles of Corporations Law co-authored by Professor H A J Ford, Justice R P Austin and Professor I M Ramsay at [27.126]. The treatment of that subject includes the following propositions:

i. in circumstances where administrators/liquidators are appointed claimants lose the right to litigate in any court and receive instead a right to make a claim to be paid out of the estate;

ii. a stay is imposed to prevent harassment of the company in liquidation and to prevent its assets being wasted by unnecessary litigation;

iii. the court when granting leave to proceed against a company in administration/liquidation may impose conditions on the grant of such leave;

iv. leave can be granted nunc pro tunc;

v. the term "proceeding" covers claims in both superior and inferior courts and will also include an arbitration;

vi. an applicant for leave to seek a remedy against the company who has a provable claim must persuade the court that there is some good reason on the balance of convenience why his or her claim against the company should be pursued by court action to judgment rather than by lodging a proof of debt with the liquidator;

vii. it is really a matter of which of two alternative procedures is more appropriate. In the circumstances Court action will normally carry the risk that the fund of company assets available to the creditors will be depleted by costs;

viii. on an application for leave the Court considers whether the claimant has a case involving a real dispute which is not futile and involve serious questions whether the action will impede orderly winding up and whether it will cause prejudice to the other creditors;

ix. the requirement that the case involve a real dispute is less strict than that the applicant should demonstrate a prima facie case;

Ogilvie Grant v East

Oceanic Life

Ltd v Insurance and Retirement Planning Services

Pty Ltd

Dealing with the issue in the present context

129 To my mind both parties share some part of the blame for the late occasion when the application for leave is being pressed. Certainly the Council bore the onus of pressing the application. But it has to be said that the failure of Austin to bring the subject up until the end of the hearing, suggests its own form of ‘lying by’.

130 Ultimately the issue is one of discretion. The pervasive circumstance is that had the application been pursued in timely fashion [as for example prior to the commencement of the final hearing or upon the commencement of that hearing] the discretion would have been exercised by granting the leave subject to the court requiring the applicant to undertake that it would not, without the leave of the court, seek to enforce against the company, any judgment obtained. In the state of affairs which existed at that time it would not have been possible for the Court to do otherwise than to accept that there was good reason on the balance of convenience, why the Council should through the present proceedings, pursue the claim [which in a nutshell sought, by one means or another, to terminate the arbitration].

131 The fact was that it was Austin which, as claimant, had invoked the arbitration proceedings and had failed to provide the security for costs funds until 2006. As at the commencement of the final hearing, a principled exercise of the discretion would have been to grant the leave subject to the above-described condition.

132 Austin's contention that it is appropriate for the Court with the benefit of hindsight to now dismiss the application for leave on the basis that the reasons suggest that the Council's case was never one of substance is misconceived. The benefit of hindsight cannot be used in this way. The leave will be granted subject to the above-described undertaking coming forward or to an order to the same effect being made.

Short minutes of order

133 The parties are to prepare short minutes of order on which occasion they will be given an opportunity to address on costs. Leave is reserved to both parties to address should either party seek to contend that any particular issue has not yet been determined.

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Citations

Auburn Council v Austin Australia Pty Limited (in liquidation) [2007] NSWSC 130

Most Recent Citation

Auburn Council v Austin Australia Pty Limited (in liquidation) [2007] NSWSC 286

Cases Citing This Decision

5

Hutchison v Hillcrest Litigation Services Ltd [2010] NSWSC 934

J F Keir Pty Ltd v Priority Management Systems Pty Ltd (admin apptd) [2007] NSWSC 748

Complex Pty Limited v Auslat Properties Macquarie Waters Pty Limited; Auslat Properties Macquarie Waters Pty Limited v Complex Pty Limited [2007] NSWSC 435

Cases Cited

25

Statutory Material Cited

3

Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21

Williams v Frayne [1937] HCA 16

Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21

CITATION:	Auburn Council v Austin Australia Pty Limited (in liquidation) [2007] NSWSC 130
HEARING DATE(S):	12/02/07, 13/02/07, 14/02/07, 15/02/07, 16/02/07, 19/2/07, 20/02/07, 21/02/07 22/02/07
JUDGMENT DATE :	6 March 2007
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Plaintiff's claims to relief not made out. Parties to bring in short minutes of order.
CATCHWORDS:	Arbitration - Contract - Arbitration proceedings concerning contractual arrangement close to completion - Claimant placed into administration - Arbitration proceedings include cross claim by respondent - Court order for the provision of security for the respondent's future costs and staying claimants claim until provision of security - No order staying respondents cross-claim - Security for costs furnished extended period after order made - Respondent seeks declaration that the arbitration agreement ended as a result of claimant's repudiation and respondents acceptance of such repudiation or orders pursuant to s 46 of the Commercial Arbitration Act 1984 (NSW) terminating the arbitration - Whether repudiation made out - Whether delay on part of claimant in complying with court's order for security capable of constituting a breach of term implied in s 46 (1) of the Commercial Arbitration Act to exercise due diligence in taking of steps necessary to have dispute referred to and dealt with in arbitration proceedings - Implied obligation to progress arbitration being mutual - Whether delay would give rise to substantial risk of it not being possible for fair trial of the issues in arbitration proceedings or likely to cause serious prejudice to respondent - No effective termination of arbitration agreement possible by reason of one party's repudiatory delay where other party failed to take steps to have such delay addressed - Party not ready, willing and able to perform contract may not terminate contract notwithstanding the repudiatory conduct of other party - Whether respondent lost right to accept any repudiation of arbitration agreement by accepting security for funds moneys - Whether statements by the applicant concerning its beliefs as to when funding would be obtained for the provision of the security comprised repudiatory conduct or lack of due diligence on part of applicant in the taking of steps necessary to have the dispute dealt with in the arbitration proceedings - Leave to proceed against company in liquidation
LEGISLATION CITED:	Arbitration Act 1950 (UK) Commercial Arbitration Act 1984 (NSW) Corporations Act 2001 (Cth)
CASES CITED:	Alghussein Establishment v Eton College [1991] 1 All ER 267 Alginates (Australia) Pty Ltd v Thomson & Carroll Pty Ltd [1970] VR 570 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 Andre et Compagnie v Marine Transocean Ltd [1981] QB 694 Boodhoo v Attorney General of Trinidad and Tobago [2004] 1 WLR 1689 Blencoe v British Columbia (Human Rights Commission) [2000] 2 SCR 307 Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Carr v Fischer [2006] NSWCA 313 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 Commonwealth v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662 Crawford v AEA Prowting Limited [1973] QB 1 Dalgety & Co Ltd v The Australian Mutual Providence Society [1908] VLR 481 Duncan v Lowenthall [1969] VR 180 Dyer (Procurator Fiscal, Linlinthgow) v Watson [2004] 1 AC 379 Economides v Commercial Assurance Co plc [1998] QB 587 Elder’s Trustee and Executor Co Limited v Commonwealth Homes and Investment Co Limited (1941) 65 CLR 603 Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17 Gill Herron & Gardiner v Walton (1991) 25 NSWLR 190 GIO Australia Holdings Ltd v AMP Insurance Investment Holdings Pty Ltd and Another (1998) 29 ACSR 584 Goose v Wilson Sandford & Co [1998] TLR 85 Herron v McGregor (1986) 6 NSWLR 246 Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 Jago v District Court of New South Wales (1989) 168 CLR 23 Krivoshev v Royal Society for the Prevention of Cruelty to Animals Inc [2005] NSWCA 76 Liverpool City Council v Casbee Pty Ltd [2005] NSWSC 590 Matthews v Smallwood, [1910] 1 Ch 777 Minion v Graystone Pty Limited [1990] 1 Qd R 157 Monie v Commonwealth of Australia (2005) 63 NSWLR 729 NAIS V Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 77 Newman v Victoria [unreported, Supreme Court of Victoria, McDonald J, 25 August 1995, BC9507248] Oceanic Life Ltd v Insurance and Retirement Planning Services Pty Ltd (in liq) (1993) 11 ACSR 516 O'Connor v SP Bray Ltd (1936) 36 SR NSW 248 Ogilvie-Grant v East (1983) 7 ACLR 669 Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854 Peabody Resources Ltd v Macquarie Generation [unreported, Supreme Court of New South Wales, Einstein J, 19 November 1998, BC9806319] Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 Queensland Trustees Ltd v Drysdale Hendy & Co [1992] 2 Qd R 625 Roebuck v Mungovin [1994] 2 AC 224 Sea Containers Limited v ICT Pty Limited [2006] NSWCA 327; [2006] NSWSC 134 Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359 Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 Stollznow v Calvert [1980] 2 NSWLR 749 Williams v Frayne (1937) 58 CLR 710 Zimmer Orthopaedic Limited v. Zimmer Manufacturing Co Ltd [1968] 2 All ER 309
PARTIES:	Auburn Council (Plaintiff) Austin Australia Pty Limited (Defendant)
FILE NUMBER(S):	SC 50138/06
COUNSEL:	Mr TEF Hughes QC, Mr ID Faulkner SC, Mr MK Condon (Plaintiff) Mr J Simpkins SC, Mr AA Henskens (Defendant)
SOLICITORS:	Matthews Folbigg Pty Limited (Plaintiff) Colin Biggers & Paisley (Defendant)