Boral Resources (Vic) Pty Ltd v Greater Bendigo City

[2002] VSC 74

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 8769 of 2001

BORAL RESOURCES (VIC) PTY LTD	Plaintiff
v
GREATER BENDIGO CITY	Defendant

---

JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	15 March 2002
DATE OF JUDGMENT:	15 March 2002
CASE MAY BE CITED AS:	Boral Resources (Vic) Pty Ltd v Greater Bendigo City
MEDIUM NEUTRAL CITATION:	[2002] VSC 74

---

Arbitration – extension of time for commencing arbitration – undue hardship.
Commercial Arbitration Act 1984 s. 48.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R.J. Manly SC with Ms C.E. Kirton	Gadens Lawyers
For the Defendant	Mr S. O’Bryan	Russell Kennedy

HIS HONOUR:

1. By a contract dated 1 April 1996, the plaintiff, Boral Resources (Vic) Pty Ltd (“Boral”) entered into an agreement with the City of Greater Bendigo (“the City”) for the maintenance of road infrastructure and drains.  The contract provided that it commence on 3 June 1996 and terminated on 3 June 2000.  The contract sum, of the order of $5.9 million, was to be adjusted by a rise and fall provision which is contained in Clause 100.9.  At a late stage in the contract, in July 2000, a dispute arose between the parties in relation to the proper construction of the contract adjustment provision.  I am not concerned with the nature nor the merits of this dispute other than to conclude, as I do, that the construction contended for by Boral was not a plainly hopeless one. 

1. The dispute arose, as I have said, late in the contract.  If the contention of Boral is correct as to its construction then it would be necessary to revisit claims and payments made from June 1999 to March 2001.  According to Julian Balmer, a manager of Boral, its entitlement upon such a recalculation is $281,463.10. 

1. The contract contains in Clause 45 an arbitration agreement which establishes a three step process leading to a referral of the dispute by Boral to arbitration. The first step is the submission to the superintendent of a Clause 45(a) notice; second is a submission to the principal, the City, of a Clause 45(b) notice; and third is a notice in writing to the City requiring that the matter at issue be referred to arbitration. Each of these steps is to be taken within a stipulated time. In this case Boral has not observed these time limits with respect to the second and third steps and its application brought by originating motion and summons filed on 17 December 2001 is for orders extending time pursuant to s. 48 of the Commercial Arbitration Act, 1984. This section is in the following terms:

“Extension of time

48(1)Subject to sub-section (3), the Court shall have power on the application of a party to an arbitration agreement or an arbitrator or umpire to extend the time appointed by or under this Act or fixed by the agreement or by an order under this section for doing any act or taking any proceeding in or in relation to an arbitration.

(2)The Court may make an order under this section although an application for the making of the order was not made until after the expiration of the time appointed or fixed for doing the act or taking the proceeding.

(3)An order shall not be made under this section extending the time within which arbitration proceedings might be commenced unless –

(a)the Court is satisfied that in the circumstances of the case undue hardship would otherwise be caused;  and

(b)the making of the order would not contravene the provision of any enactment limiting the time for the commencement of arbitration proceedings.”

1. It was not in issue that the taking of the second and third steps fell within the terms of the section, so that it is common ground that I have power to grant the extension sought. The issue was as to the exercise of my discretion in the circumstances of this case bearing in mind the statutory constraint imposed on that discretion by s. 48(3).

1. The dispute arose in July 2000.  The first step was taken on 20 July 2000 and no point is taken about this.  This Clause 45(a) submission was considered by the superintendent who responded on 21 August 2000, rejecting the claim. 

1. Pursuant to Clause 45(b) Boral was required to take the second step within 14 days, that is by 4 September 2000.  It did not do so.  On 15 September Boral wrote a letter which is relied upon as constituting a Clause 45(b) submission.  To my mind it does not comply with the requirements of that Clause notwithstanding that it is expressed to have been given pursuant to Clause 45, paragraph 4, a reference which I take as a reference to Clause 45(b). 

1. Accepting that I should read this letter in a commercial and not in an unduly legalistic way, it does not satisfy the formal requirements of Clause 45(b).  It is sent not to the City but to the superintendent.  It is not expressed to be a submission to the addressee, "for decision", but it requests that the matter be referred to arbitration.  This is the language of a step 3 letter.  There is not much in the way of detailed particulars in the letter but I would not consider that fatal in the circumstances of this case.  I conclude therefore that no Clause 45(b) submission was made to the principal so that the second step process for arbitration was not implemented.  This prevents Boral from submitting the dispute to arbitration so that the present application must fail at this point.

1. Nevertheless, in deference to the arguments presented and in case this matter may go further, I will venture my views upon the remaining contentions on the basis that the letter of 15 September 2000 is a valid Clause 45(b) submission.

1. The letter is some 11 days late in terms of Clause 45(b).  No explanation is offered for this delay and no excuse is proffered.  The delay, however, is modest although one might have expected a more rigorous attention to time given the fact that the raising of the dispute was so late.  It may be that Mr Balmer who wrote the letter had his eye on the third step of the process as his terminology in the letter suggests.  In such an event he might have thought that he had until 18 September to send a request for arbitration.  This, however, is mere speculation.  Mr Balmer certainly says no such thing and I put the possibility of error of this kind to one side.

1. Counsel for Boral pressed me on this point and in the context of the next point with a submission that the loss of a claim of about $281,000 is a serious matter for any plaintiff and that the City has not suggested that it has suffered prejudice itself. I accept this to be the case. I am mindful of the statutory prohibition against extending time found in s. 48(3)(a). I am required to look for undue hardship which might flow from a refusal. If this late delivery of the Clause 45(b) notice was the only departure from the processes of Clause 45, I might be minded to see the loss of the claim as such, an undue hardship, but in the context of the whole of this case I do not so conclude.

1. The response to the letter of 15 September is dated 17 November.  In it the superintendent pointed out to Mr Balmer, if this was needed, that his letter was misconceived and that arbitration was therefore not possible.  In terms, the superintendent does not make a decision on the matter in issue but argument on behalf of Boral before me proceeded on the basis that it was such.  This meant that the third step had to be taken in no later than 28 days, that is, by 15 December 2000.  It was not so taken. 

1. The letter relied upon as constituting the third step is that of the solicitors for Boral dated 7 March 2001, nearly three months late.  Again, no explanation or excuse for this delay is proffered.  To my mind this delay is so great that, as a matter of discretion, I ought not cure it.  I am mindful of the fact that Boral was well aware of the terms of Clause 45 and that it had obtained advice, "in or about February 2000".  I have regard too, to the magnitude of the claim which is at stake.  Nevertheless, I consider that the loss of this claim seen against the background of Boral's inactivity does not amount to undue hardship.  This conclusion too is fatal to the application.  The application, therefore, will be dismissed.

---