Baulderstone Hornibrook Engineering Pty Ltd v State Constructions Pty Ltd

[1993] SASC 4258

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA LEGOE(1), MOHR(2) AND BOLLEN(3) JJ

CWDS
Costs - security for costs - Whether Supreme Court has jurisdiction to hear and determine an application for security for costs in arbitration proceedings under 5.47 of the Commercial Arbitration Act. Held: the words in 5.47 are sufficiently wide to give the court the power to make orders for security for costs - appeal allowed. Commercial Arbitration Act 1986 (SA) s 47 and Corporations Law 1990 s 1335. Alliance Petroleum Australia (NL) v Australian Gaslight Company (1983) 39 SASR 215; Imperial Leatherware v Macri and Marcellino (1991) 22 NSWLR 653 and Qantas Airways v Dillingham Corporation
(1985) 4 NSWLR 113, applied. Superannuation Fund v Leighton Contractors
(1990) 159 LSJS 223, distinguished.

HRNG ADELAIDE, 4 November 1993 #DATE 4:11:1993
Counsel for appellant:     Mr J M Wilkinson
Solicitors for appellant:    Cowell, Clarke
Counsel for respondent:     Mr G L Muecke
Solicitors for respondent: Andersons Barker Gosling

ORDER
Appeal allowed.

JUDGE1 LEGOE J This is an application for leave to appeal from an order made by a single judge of this court that the court has no jurisdiction to hear and determine an application for security for costs in arbitration proceedings. 2. The applicant is the defendant in certain arbitration proceedings. The respondent is the plaintiff in those proceedings. The dispute was referred to arbitration in 1992. There have been numerous preliminary conferences. On 7 December 1992 the applicant made application to this court for an order for security of costs pursuant to s.47 of the Commercial Arbitration Act and s.1335 of the Corporations Law. 3. That application was heard by a Master of this Court on 27 January 1993. Before the Master it was common ground between the parties that the court had jurisdiction pursuant to s.47. The Master refused to make an order for security of costs on the merits of the case and not on the grounds that he had no jurisdiction. 4. That decision was handed down on 3 February 1993. The applicant then appealed to a single judge of this court. The order of the learned judge was, as I stated above, namely, that the appeal be dismissed on the ground of no jurisdiction. 5. The learned judge published reasons for dismissing the appeal. 6. Section 47 of the Commercial Arbitration Act reads: "The court (that is the Supreme Court of South Australia) shall have the same power of making interlocutory orders for the purpose of and in relation to arbitration proceedings as it has for the purposes of and in relation to proceedings in the court." 7. As his Honour observed, the section is expressed very widely. It is wide enough to include every kind of interlocutory order made by the court. His Honour went on to observe that the power to make interlocutory orders under s.47 is one which is to make interlocutory orders as to procedural matters which will facilitate the course of the arbitration. It is not a power by which the court can interfere with the agreement of the parties to submit their differences to arbitration. 8. His Honour noted the remark of Southwell J in Matthew Hall Mechanical and Electrical Pty Ltd v Forest Hill Plumbing Services Pty Ltd, (an unreported decision of the Supreme Court of Victoria, 19 December 1991) that an application for security for costs is of a quite different nature from what might be termed an ordinary interlocutory process in litigation. 9. His Honour's conclusion in this matter was expressed as follows:
"Parliament did not intend that the powers invested by s.47
    should be used to make orders which might have the consequence
    of preventing parties from exercising their contractual rights.
To construe s.47 in this way would, however, in my view alter
    the rights of the parties by a side wind. If the parties had
    wished to be able to apply to the court for an order as to
    security of costs, they could have made express provision to
    that effect in their agreement. If Parliament seeks to empower
    courts to make orders for security for costs, it should do so in
clear and unambiguous terms." 10. His Honour gave as examples, s.18(11) of the Arbitration Act 1973 (Qld) now repealed, and s.12(6)(a) of the Arbitration Act 1950 (UK). 11. His Honour did recognise that decisions in other States of Australia handed down after the passing of the uniform Commercial Arbitration legislation have recognised that s.47 gives the court power to make orders for security for costs in arbitration proceedings. His Honour also noted the decision of this court in Alliance Petroleum Australia (NL) v Australian Gaslight Company (1983) 34 SASR 215 where the Full Court considered the meaning of the word "proceeding" in the expression, "requiring any person to appear and give evidence, or to produce documents in any civil or criminal trial or proceeding (including proceedings before a Coroner)". Section 16(1) of the Service and Execution of Process Act 1901 was considered in that case. His Honour noted that s.16(1) was expressed in terms wider than s.1335(1) of the Corporations Law. However, his Honour did not consider that the reasoning in the Alliance Petroleum case was applicable to s.1335(1), as the wording os s.16(1) of the Service and Execution of Process Act was much wider. 12. Before this court, counsel for the applicant for leave was invited, and counsel for the respondent agreed, that we should hear the submissions on the full appeal when considering whether it was an appropriate case for granting leave to appeal. Accordingly, this court has had before it today the full argument on the appeal in order to determine the question of jurisdiction. Counsel for the applicant drew the court's attention to the fact that there is no inherent jurisdiction in this court to order security for costs in arbitration proceedings. See C.R. Keath Earthmoving Company Pty Ltd v R.J. Davies Pty Ltd (1965) 39 ALJR 403. That was a decision of the High Court, and there are earlier decisions, both in England and elsewhere, to the same effect. 13. Secondly, an arbitrator does not have an inherent power to order security for costs unless the arbitration agreement itself gives the arbitrator that power. See Jacobs on Commercial Arbitration Law and Practice para.44.100 on p.11,668/2 and the authorities which are there referred to, including Keath's case. 14. Thirdly, counsel for the appellant submitted that the court has power to grant security for costs in arbitration proceedings if it is provided for by, or under, a statute. Counsel relied, for this purpose, on the provisions of s.47 of the Commercial Arbitration Act South Australia. 15. Fourthly, counsel submitted that courts have already determined that s.47 gives the court power to make interlocutory orders in the same way that the court has power to do so in its own proceedings. In this regard, Counsel referred to a number of interstate authorities, which, for the present purposes, I will merely cite without discussion: Mowbray College v Exhibition Design and Construction Pty Ltd (In Liquidation) (1987) 5 ACLC 478; Nasic v Dimovski (1988) VR 94; JLV Pipeline Pty Ltd v State Energy Commission, an unreported decision of Master Staples in Western Australia, published on 25 March 1988; Johnson v Macri and Marcellino Pty Ltd, an unreported decision of Cole J in the Supreme Court of New South Wales dated 8 June 1990; and W.H. Humphries Nominees Pty Ltd v Commissioner of Main Roads (1991) 4 ACSR 729. 16. There were no authorities referred to this court which held, or even suggested, that under the Uniform Commercial Arbitration Legislation that currently applies in Australia the court does not have jurisdiction to consider an application for security for costs in arbitration proceedings. 17. Counsel for the respondent submitted that s.47 provides the Supreme Court with a mere supervisory jurisdiction, as he put it, which authorises the court to make interlocutory orders where "run off the procedural rails". The section is designed, in counsel's submission, for the purpose of ensuring procedural fairness in a similar way to the power of the court in its own proceedings. 18. In this regard, reference was made to a number of comments by the late White J in Superannuation Fund v Leighton Contractors (1990) 159 LSJS 223, particularly at pp.226.and p.229. Further, counsel submitted that these comments were not inconsistent with some of the remarks of my brother Bollen J in that same case, in his dissenting decision, particularly at p.238 of the report as well as the comments of Tadgell J in Bryaley Pty Ltd v Fletcher, (unreported decision 13 February 1992) noted in the Australian Current Law under the heading "Practice and Procedure" at paragraph 325. Counsel drew attention, in particular, to paragraph 2 of the summary in the headnote where Tadgell J said: "Sections 47 and 49 of the Commercial Arbitration Act should not be understood to confer any 6 jurisdiction upon the Supreme Court or the County Court to interfere with the operation of an order for costs made by an arbitrator under s.34." 19. Counsel for the respondent also drew attention to the remarks of Southwell J in the Matthew Hall case, cited above, commenting on the different nature of an application for security for costs to other interlocutory proceedings. Those comments were made by the learned judge in respect of the decision in Nasic, also cited, particularly in relation to the comments about the inherent jurisdiction of the court. I note the passage in Jacobs on Arbitration Law and Practice (supra) at p.11,668/2 in Southwell J's remarks. I am not prepared to accept the submissions of counsel for the respondent in the present case. In my opinion the words of s.47 are sufficiently wide to give the court the power to make orders for security for costs in arbitration proceedings. 20. The uniform Commercial Arbitration Act was introduced in Australia in the 1980s. That Act changed the law as to arbitrations, particularly in South Australia, for example, see the amending provisions of the earlier Act striking down Scott v Avery clauses, except in major building disputes. More particularly, the old Case Stated practice under the earlier Arbitration legislation was abolished. The provisions of the Uniform Commercial Arbitration Act have recognized the very important position of arbitrations in dispute resolutions in Australia today. As Chief Justice Rogers in the Commercial Division commented in Imperial Leatherware v Macri and Marcellino
(1991) 22 NSWLR 653 at 659, letter E onwards, the various States of the Commonwealth of Australia have been content to adopt the form of the United Kingdom legislation, and his Honour goes on to discuss the fact that the cornerstone of the uniform legislation is that the parties decide to commit their dispute for determination by a privately appointed arbitrator and that all aspects of the dispute, except for the determination of the arbitrator's jurisdiction should basically be left to the arbitrator. I also note the comments of the same learned judge in Qantas Airways v Dillingham Corporation
(1985) 4 NSWLR 113. His Honour goes on to discuss in the Imperial Leatherware case the general nature of the Commercial Arbitration Act in Australia on the following page, 660. 21. In my opinion, the decision in the Superannuation case does not assist this court to determine the question of jurisdiction in this matter. That case was concerned with quite a different sort of application, and the obiter remarks relied upon do not, in my respectful opinion, have any relevance to the question here. I am content to follow the reasoning of the interstate decisions above referred to, which, in turn, have largely adopted the reasoning of this Full Court in Alliance Petroleum Australia v Gas Light Company relating to the term, "legal proceedings" and apply the reasoning in the Alliance case to the question of the power of the court to make interlocutory orders, including orders for security of costs, in arbitration proceedings. 22. In my opinion, as the arbitrator had no jurisdiction to make the orders applied for, this court clearly has jurisdiction to make such orders pursuant to the provisions of s.47. Once that jurisdiction has been established, then the applicant can proceed to bring the application within the provisions of s.1335 of the Corporations Law. 23. For these reasons, in my opinion, the application for leave to appeal should be granted, the appeal should be allowed and the order of the learned judge dismissing the appeal should be set aside. The matter should be referred to a single judge of this court for determination of the application for security for costs on the merits.

JUDGE2 MOHR J I agree with what the presiding judge has had to say. I merely wish to add this. S.47 is, on the face of it, very wide in it's application. It was argued that the apparent power given to this court by s.47 should be, in some way, read down to exclude an application for security for costs. I can see no warrant for that reading down. Had Parliament intended that there be powers of the court to make interlocutory orders, but some were not to be exercised in arbitration matters, it would have been very easy for Parliament to have said so. They did not. 2. The plain and ordinary meaning of the section is that this court does have power to make interlocutory orders and order for security for costs is such an order and I hold that the court has jurisdiction and I would grant leave to appeal and allow the appeal.

JUDGE3 BOLLEN J I agree with the remarks of the presiding judge. I agree with the remarks of Mohr J. I agree that the Superannuation case does not help us here. With undisguised self interest I must emphasize that my agreement here is in no way inconsistent with the remarks which I made obiter, or, indeed, with my reasons in the Superannuation case. There at p.237 I said:
"There is then power for this court, in effect, to step into
    the arena of an arbitration and make interlocutory orders. It
    cannot do this if the arbitrators, acting within power, have
    made, or refused, the order sought from the court." 2. That was the question there. There was coincidence of power. Here the arbitrator had no power to make the order sought. That concludes my remarks. 3. Mr Muecke, with some hesitation the court feels Mr Wilkinson's application for costs, both in this court and before Debelle J, should be granted. 4. The order as to costs will be that the respondent to this application will pay the applicant's costs of and incidental to the application for leave to appeal and the appeal. That will be the one set of costs of the appeal, of course. The respondent to pay the appellant's costs before Debelle J, to be taxed or agreed.