BTR Engineering (Australia) Ltd v Dana Corporation
[2000] VSC 246
•14 June 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL AND EQUITY DIVISION COMMERCIAL LIST | Not Restricted |
No. 2045 of 2000
| BTR ENGINEERING (AUSTRALIA) LIMITED & ORS | Plaintiffs |
| v | |
| DANA CORPORATION & ORS | Defendants |
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JUDGE: | Warren J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 June 2000 | |
DATE OF JUDGMENT: | 14 June 2000 | |
CASE MAY BE CITED AS: | BTR Engineering (Aust) Ltd & Ors v Dana Corporation & Ors | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 246 | |
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Commercial Arbitration Act 1984, s.53 – stay application – arbitration, dispute resolution clause – whether subject matter of "dispute" within arbitration clause – whether claims of fraudulent representation, misleading and deceptive conduct and/or negligent misstatement fall within the subject matter of the dispute – discretion to order partial stay – issue of multiplicity of proceedings.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Mr C. Scerri QC with | Minter Ellison |
| For the Defendants | Mr R.A. Brett QC with Mr P. Clarke | Blake Dawson Waldron |
HER HONOUR:
The defendants seek a stay of the proceeding pursuant to s.53 of the Commercial Arbitration Act 1984, alternatively, pursuant to the inherent jurisdiction of the court.
On about 12 February 2000 the plaintiffs and the defendants entered into an agreement whereby the defendants agreed to purchase particular assets, businesses and shares in Victoria, New South Wales, Indonesia and South Africa for the purchase price of US$63m. The plaintiffs seek specific performance of the agreement, alternatively, claim damages for breach of contract.
The plaintiffs were engaged in the business of designing, developing, manufacturing, marketing and selling automotive drive axels, stamping components and related products for the automotive markets and selected industrial markets conducted by the plaintiffs in New South Wales, Victoria, Indonesia and South Africa. The agreement between the plaintiffs and the defendants was for the sale of the business of the plaintiffs. On about 12 May 2000 a dispute arose between the parties in relation to forecasts for the business for the year 2000. On about 19 May 2000 the defendants informed the plaintiffs that they did not propose to complete the agreement in accordance with its terms at that time.
The agreement included an arbitration provision that provided:
"7.9 Dispute Resolution
If the parties have a dispute involving their respective rights and obligations under this Purchase Agreement (other than any dispute with respect to the determination of the Working Capital Adjustment which is to be resolved in accordance with Section 2.9), then the parties will resolve such dispute as follows:
(a) Dispute Notice: Any party may at any time deliver to the other party or parties a written dispute notice setting forth a brief description of the issues for which such notice initiates the dispute resolution mechanism set forth in this Section 7.9. Such dispute notice shall also specify the provision or provisions of this Purchase Agreement and the facts or circumstances that are the subject matter of the dispute.
(b) Informal Negotiations: During the 60 day period following delivery of a dispute notice described in Section 7.9(a), the parties will cause their representatives to meet and seek to resolve the dispute cordially through informal negotiations or some other alternative dispute resolution mechanism agreed between the parties in dispute.
(c) Dispute Resolution Proceedings: If representatives of the parties are unable to resolve the dispute through the informal negotiations described in Section 7.9 (b), then within 30 days after the expiration of the 60‑day informal negotiation period the parties will refer the dispute to arbitration as follows:
(i) The arbitration will be conducted under and governed by the Cornmercial Arbitration Act 1984 (Victoria) (the "Act") except so far as it is inconsistent with the terms of this Purchase Agreement;
(ii) The arbitrator shall be appointed by agreement between the parties to the dispute or failing agreement within 14 days of reference to arbitration, the arbitrator shall be appointed on the application of any party to the dispute by the President for the time being of the Law Institute of Victoria. The language of the arbitration will be English and the place of the arbitration will be Melbourne, Australia;
(iii) In any arbitration under this Section 7.9:
(A) subject to paragraph (D) below, the arbitrator's fees and costs and the costs of the arbitration shall be borne equally by the parties to the dispute;
(B) the rules of evidence will apply and each party shall be permitted to call and cross examine witnesses;
(C) each party shall be afforded an equal opportunity to present its views and contentions to reply to the evidence presented by any other party; and
(D) the arbitrator shall have discretion to amend costs in accordance with law.
(d) Equitable Relief: Notwithstanding any other provision of this Section, any party may seek from a court of competent jurisdiction interim injunctive relief in order to maintain the status quo or protect the party's rights under this Purchase Agreement pending resolution of a dispute pursuant to this Section 7.9.
(e) Binding Effect: The decision of the arbitrator under this Section 7.9 will be binding on all parties to this Purchase Agreement and will be neither appealable, contestable, or subject to collateral attack by any party except by way of an appeal on a question of law pursuant to section 38(2) of the Act."
The plaintiffs issued the present proceedings in the Commercial List of the Supreme Court on 23 May 2000. The defendants entered a conditional appearance on 25 May 2000. On 30 May 2000 the defendants served a dispute notice upon the plaintiffs pursuant to clause 7.9(a) of the agreement. The dispute was first raised by the plaintiffs on 12 May 2000 but the defendants waited until proceedings were issued and even then some days afterwards before serving a notice under clause 7.9 of the agreement seeking alternative dispute resolution. The notice of dispute contained a long list of matters said to be in dispute between the parties including alleged substantial deterioration in the actual and forecast profits of the business that were the subject of the agreement, breach of warranties and failure to deliver certificates confirming that the warranties that are the subject of the agreement between the parties were true and correct. Importantly, for present purposes, the defendants also made allegations in the notice of dispute of fraudulent misrepresentation, misleading and deceptive conduct, negligent misstatement and loss and damage. As a consequence of the delivery of the dispute notice the defendants purported to trigger the dispute resolution procedures contained in clause 7.9(a) of the agreement. Following service of the dispute notice the defendants sought a stay of the proceeding. In essence, the defendants submitted that the parties had agreed to submit to arbitration and that the court should order a stay and force the plaintiffs to be bound by the terms of the agreement pursuant to s.53 of the Commercial Arbitration Act. The section provides:
"53. Power to stay court proceedings
(1) If a part to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to sub-section (2), apply to that court to stay the proceedings and that court, if satisfied --
(a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and
(b) that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration –
may make an order staying the proceedings and may further give such directions with respect to the future conduct of the arbitration as it thinks fit.
(2) An application under sub-section (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance.
(3) Notwithstanding any rule of law to the contrary, a party to an arbitration agreement shall not be entitled to recover damages in any court from another party to the agreement by reason that that other party takes proceedings in a court in respect of the matter agreed to be referred to arbitration by the arbitration agreement."
The plaintiffs argued that the dispute resolution procedure contained in clause 7.9 of the agreement was inappropriate for the purposes of the present dispute between the parties on the basis of the timing of the dispute notice and the subject matter of the dispute between the parties.
Mr C. Scerri QC who appeared with Mr D.J. Batt for the defendants argued that the dispute notice was served after the commencement of the present proceedings. They submitted, also, that the dispute notice was used by the defendants for the purposes of overcoming other time requirements contained in the agreement. Article 6 of the agreement contained provisions concerned with the closing of the transaction. The term "Closing" was defined in clause 6.1 to mean "the time at which the transactions contemplated by this Purchase Agreement will be consummated … ". Clause 5.1(c) and (d) contained pre‑conditions of the satisfaction of the Federal Treasurer under the Foreign Acquisitions and Takeovers Act 1975 (Cth) and the Australian Competition and Consumer Commission to the agreement. Appendix A of the agreement contained the definitions under the agreement. Appendix A defined "Closing Date" as being the first day which is the last business day in a calendar month and a day that is at least five business days after the date when the requirements of the Federal Treasurer and the ACCC are satisfied or any other day as the parties agreed in writing. Clause 12.3 of the agreement is significant. It provides for automatic termination of the agreement without further action by the parties if closing has not occurred by 30 June 2000 unless otherwise agreed in writing by all of the parties.
It was submitted on behalf of the plaintiffs that the service of the dispute resolution notice under clause 7.9 of the agreement on 30 May 2000 brought into operation the 60 day negotiation period under clause 7.9(b) of the agreement. Accordingly, it was submitted, that if the plaintiffs were bound by the terms of the dispute resolution clause discussions must ensue for a period of 60 days after 30 May 2000 and that any dispute could not be referred to arbitration until after 29 July 2000. The plaintiffs emphasised, also, clause 7.9(c) to demonstrate that a further period of 30 days was imposed upon the parties with the consequence that the plaintiffs would be compelled to wait until after 28 August 2000 before they could take any further steps in the present proceeding. It was submitted that, as a result, if the proceeding is stayed and the procedure contemplated by clause 7.9 of the agreement is imposed upon the plaintiffs the closing of the agreement would be delayed until after the dates on which clause 12.3 of the agreement has operation. Pursuant to clause 12.3 the agreement would automatically terminate. It was said that in that case the mere raising of a dispute by the defendants would cause the agreement to lapse and the plaintiffs would be deprived of the benefit of the agreement. It was submitted against the defendants that they were purporting to take advantage of the time frame provided under the dispute resolution procedure contained in clause 7.9.
Mr Scerri for the plaintiff submitted, further, that as this court is already seized of the dispute between the parties and in light of an anticipated early trial date being provided by the court, this court should exercise its discretion so as to refuse the application for a stay. It was submitted that the comparative speed of curial proceedings in this court is a relevant consideration in the exercise of the discretion conferred under s.53 of the Commercial Arbitration Act: see Thomas v Star Maid International Pty Ltd, unreported judgment of Weinberg J., dated 25 June 1999; (1999) FCA 911.
It was further submitted that the period required for an arbitration pursuant to clause 7.9 of the agreement would cause severe commercial prejudice to the plaintiffs. The matters of prejudice were described in an affidavit sworn by Victor Anthony Gauci, general manager of BTR Engineering (Australia) Limited. The prejudice was said to constitute price increases, delays in production, deferred commitment to capital expenditure and impact upon staff morale and recruitment. These matters were not challenged by the defendants. Rather, the position of the defendants was one to the effect that the parties had agreed to a form of dispute resolution and the plaintiffs were bound by such provision.
In Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502, Dixon J stated the principles that should guide a court in an application to stay a court proceeding because of an arbitration agreement. At p. 508-509, the learned judge said:
“But the courts begin with the fact that there is a special contract between the parties to refer, and therefore in the language of Lord Moulton in Bristol Corporation v John Hard & Co, consider the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutton, LJ said in Metropolitan Tunnel and Public Works Ltd v London Electric Railway Co, a guiding principle on one side and a very natural and proper one, is that parties who have made a contract should keep it.”
More recently, Gillard J in Badgin Nominees Pty Ltd v Oneida Ltd and Anor (unreported judgment delivered 18 December 1998; (1998) VSC 188) expressed the matter thus: “…the court clearly has jurisdiction to stay a court proceeding on the simple basis that ‘a contract is a contract’ and the parties should abide by it”. The nature of the jurisdiction was discussed by the House of Lords in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. There the construction contract contained a dispute resolution procedure that had a number of tiers or layers. The first layer involved the resolution by a panel acting as independent experts but not as arbitrators. The second tier or layer involved arbitration. Lord Mustill delivered the leading speech and, at 353 observed: “…those who make agreements for the resolution of disputes must show good reasons for departing from them…”.
In my view the timing of the dispute notice in the context of the present matter is not a factor to be taken into account in the exercise of the discretion to stay the proceeding. My view is based upon the principles expressed in the authorities to the effect that the parties have agreed to resolve their disputes in a particular manner and having so agreed are bound by such arrangements unless there is good reason for a departure from the arrangements. In my view it is apparent that at the time the parties agreed to the provisions contained in clause 7.9 of the agreement they were or ought to have been aware of the various timing provisions contained in the other parts of the agreement, in particular, the requirement of 60 and 30 day negotiation periods in the context of the closing date provisions throughout the agreement and, in particular, the automatic termination provision contained in clause 12.3. In the circumstances I am satisfied that the timing of the matter is not an issue or factor that I should weigh in favour of the plaintiffs. They agreed to the terms of the agreement in its present form and they must be bound by it. Insofar as it is submitted that proceedings in the Commercial List will be heard and determined more quickly than an arbitration proceeding, again I am of the view that the plaintiffs were aware of these matters at the time they entered into the agreement including their acceptance of the framework contained in clause 7.9 of the agreement. Further, insofar as it is alleged by the plaintiffs that they will suffer actual or potential prejudice as a consequence of the resolution procedures contained in clause 7.9 of the agreement, it must be observed that they agreed to the agreement in its present terms including clause 7.9 and must be presumed, therefore, to have agreed to be subject to the actual or potential prejudice that may occur as a result of the application of the procedures contained in that clause. It follows, therefore, that the timing argument relied upon by the plaintiffs fails.
Whilst there may be occasions where a court will refuse to grant a stay where a party has failed to enliven an arbitration clause such circumstance does not arise at present: see Manningham City Council v Dura (Aust) Constructions P/L (unreported judgment of the Court of Appeal dated 1 October 1999; (1999) VSCA 158, para 17. Here there was only a matter of some ten days between the raising of the dispute and the issue of the proceedings and a further period of some seven days between that date and the delivery of the notice of dispute.
I turn to consider the second ground relied upon by the plaintiffs, namely, that the subject matter of the dispute between the parties does not fall within the parameters of clause 7.9 of the agreement.
It was submitted by Mr Scerri on behalf of the plaintiffs that as the dispute between the parties was concerned with satisfaction of the conditions for Closing under the agreement, clause 7.9 did not and could never have been intended to have operation to such a dispute. In addition, he submitted that on the basis of the correspondence between the parties (as exhibited to the affidavit of Victor Anthony Gauci sworn 23 May 2000) the present dispute was not one capable of resolution by informal negotiation as contemplated by clause 7.9 of the agreement.
Claims that are not within the scope of an arbitration agreement cannot be the subject of arbitration. By definition parties do not agree to refer disputes of that type to arbitration and hence there is no contractual basis for an arbitrator to assume jurisdiction or make a binding award: see Jacobs, Commercial Arbitration: Law and Practice, pp.2472-2533.
Consideration of the notice of dispute served by the defendants upon the plaintiffs reveals that matters are said to be "under" the umbrella of clause 7.9 of the agreement that are in fact not so. For example, there are allegations of misleading and deceptive conduct "contrary to statute", presumably a reference to the provisions of the Trade Practices Act 1974 and/or the Fair Trading Act 1985. There are allegations, also, of fraudulent misrepresentation and negligent misstatement. In my view these disputes are not of a type that fall under clause 7.9 of the agreement. The word "under" as contained in clause 7.9 is a relatively restricted word. It is an expression that is narrower than phrases such as "related to" and "arising out of". The courts have, on occasion, taken the view that when parties to a commercial contract agree to refer to arbitration any dispute or difference arising out of the agreement such agreement should not be construed narrowly: Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Limited (1996) 39 NSWLR 160, 165; IBM Australia Limited v National Distribution Services Limited (1991) 22 NSWLR 466; Ethiopian Oil Seeds v Rio del Mar Foods Inc (1990) 1 Ll. Rep. 86, 97. Nevertheless, as to whether an arbitration provision in an agreement is appropriately drawn so as to encompass claims for misleading and deceptive conduct, fraudulent misrepresentation and negligent misstatement and the like will depend upon the terms of the agreement, the particular facts of dispute between the parties and the nature of claims being made.
In Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited and Ors (1993) 43 FCR 439 the parties had entered into a written contract for the supply of machinery that contained a clause submitting to arbitration "Any dispute between the parties hereto arising under this agreement". The machinery supplied allegedly did not meet the represented specifications. The applicant commenced proceedings for breach of collateral warranty, negligent misrepresentation and misleading and deceptive conduct contrary to the provisions of the Trade Practices Act. The respondent sought a stay of the proceedings pursuant to a statutory provision equivalent to s.53 of the Victorian Commercial Arbitration Act. French J held in dismissing the stay application that there had been a significant change of attitudes by the courts to arbitration and that the range of disputes covered by an arbitration clause must depend upon the language of the clause of the agreement between the parties. The learned judge held that when the parties have agreed upon a restricted form of words that in their terms limit the reference to matters arising "ex contractu" there is little room for going outside the terms of such agreement.
In Allergan Pharmaceuticals Inc v Bausch & Lomb Inc (1985) 7 ATPR 40-636 the applicants alleged breaches under Part V of the Trade Practices Act and the respondents applied for a stay on the basis that the contractual arrangement between the parties contained a term "Any controversy or claims arising out of or relating to this agreement shall be settled by arbitration … ". Beaumont J held that an alleged contravention of Part V of the Trade Practices Act was not a "controversy or claim arising out of or relating to" the agreement between the parties. The learned judge was of the view (at 47,173) that the causes of action based on alleged contraventions of ss.52 and 53 of the Trade Practices Act arise exclusively from the statutory provisions themselves. His Honour was of the further view that causes of action under the general law whether lying in contract or otherwise arise independently of the provisions of the Trade Practices Act. Beaumont J considered that in the absence of a nexus or connection of substance between the contract and the alleged statutory contraventions, the causes of action arising under the statute did not give rise to controversy or claims "arising out of or relating to" the agreement between the parties. The views expressed by Beaumont J in Allergan were referred to by the High Court with approval in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332, 344. The views of Beaumont J were considered with approval, also, by the Full Court of the Federal Court in Hi-Fert Pty Ltd and Anor v Kiukiang Maritime Carriers Inc (1998) 90 FCR 1, 18.
The views of Beaumont J in Allergan were considered by the New South Wales Court of Appeal in IBM Australia Limited v National Distribution Services Limited, supra. Kirby P considered that there was much force in the argument accepted by Beaumont J in Allergan namely that the remedies under the Trade Practices Act are confined to their statutory application and are not available to an arbitrator receiving a dispute by contractual words expressed in very general language. However, Kirby P and indeed the other members of the Court of Appeal (Clarke and Handley JJA) followed the approach of the High Court in Government Insurance Office (NSW) v Atkinson-Leighton Joint Venture (1981) 146 CLR 206. In that case the High Court was concerned with the question of whether a reference to arbitration authorised an arbitrator to award interest. Mason J (at 246-247), with whom Murphy and Wilson JJ agreed, considered that a term is to be implied that an arbitrator is to have the authority to give a claimant such relief as would be available in a court of law having jurisdiction with respect to the subject matter. By contrast, in Hi-Fert the Full Court of the Federal Court distinguished the judgment in Government Insurance Office (NSW) on the basis that the right to interest on damages does not constitute an independent cause of action. Emmett J (with whom Beaumont and Branson JJ agreed) held (at 20) that the right to interest on damages is a mechanism to ensure that a party claiming damages is not prejudiced by delay between the time of the cause of action and the ultimate judgment of a court. Emmett J held " … That is not a justification for a conclusion that a completely independent cause of action is to be implied as having been referred to arbitration simply because it deals with a similar subject matter as those questions which are expressly referred to arbitration."
In Hi-Fert, Emmett J (at 21-22) held that a claim arising out of contravention of the Trade Practices Act during the performance of an agreement could be a claim arising out of the agreement but that such a claim could also be said to arise from the agreement. The learned judge held that save for the agreement between the parties itself there would be no basis for making the allegation of contravention of the Trade Practices Act and as such a claim would be dependent upon there being a contractual relationship between the parties. By contrast, Emmett J held that where there is a dispute as to a claim in respect of conduct antecedent to the making of a contract such dispute cannot be said to arise from the contract in question.
In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Limited, supra, the New South Wales Court of Appeal was concerned with an arbitration clause that referred to arbitration "any dispute or difference arising out of this agreement". The issue before the Court of Appeal was whether a purported termination of an agency agreement was wrongful by reason of matters that had been represented during the course of the agreement allegedly involving misleading conduct in breach of the Trade Practices Act. Gleeson CJ, with whom Meagher and Sheller JJA agreed, was of the view that the claim that the purported termination of the agency was wrongful by reason of the misrepresentations during the course of the agreement was a dispute arising out of the agency agreement. Gleeson CJ referred to the judgment in Ethiopian Oil Seeds v Rio del Mar Foods Inc, supra, where Hirst J held that there was little distinction between the words "arising out of" and "arising in connection with". Hirst J held in Ethiopian Oil Seeds that while the words "arising under" of themselves would probably not cover a claim for rectification, the expression "arising out of" should be given a wide interpretation covering disputes other than one as to the very existence of the contract itself. In Francis Travel Gleeson CJ (at 165) referred to the judgment in Ethiopian Oil Seeds and observed that the judgment in the latter case and the reason underlying it reflected the state of the law in New South Wales as stated by Kirby P in the IBM case. Gleeson CJ considered that the expression "arising out of" has generally been given a wide meaning by the courts.
On the basis of the authorities what does the expression in clause 7.9 of the present agreement "a dispute involving their respective rights and obligations under this Purchase Agreement" mean? The word "under" means "governed, controlled, or bound by; in accordance with"[1]. The verb "to involve" means to "include or affect in its operation"[2]. Hence, in the present arrangement between the parties they have agreed to refer a dispute including or affecting their rights and obligations governed, controlled, or bound by or in accordance with the agreement. Consideration and analysis of the words used in clause 7.9 lead me to conclude that the parties intended to confine the matters to be referred to arbitration to matters relating to their rights and obligations under the agreement and not other matters such as allegations of misleading or deceptive conduct, negligent misstatement or fraudulent misrepresentation. This view is further supported by the specific exclusion contained in clause 7.9 of the agreement whereby it excludes any dispute "with respect to the determination of the Working Capital Adjustment which is to be resolved in accordance with section 2.9". The exclusion of disputes relating to adjustment and the specific resolution formula under section or clause 2.9 of the agreement leads me to conclude that the parties must be taken by the terms of clause 7.9 to have given specific consideration to the types of matters they intended to have referred to arbitration even to the extent of excluding certain matters. The matter that is excluded is of itself a contractual matter falling under the umbrella of the agreement itself. All these matters lead me to conclude that the parties gave strict consideration to confining their disputes to be referred to arbitration to such disputes arising specifically under the agreement and no other. In my view, therefore, the words used in clause 7.9 of the agreement distinguish it from the words used in the subject agreement in Government Insurance Office (NSW) v Atkinson-Leighton, Francis Travel Marketing and Ethiopian Oil Seeds. It follows, therefore, that I do not consider that the allegations made by the defendants in the dispute notice served under clause 7.9 of the agreement raising misleading and deceptive conduct, fraudulent misrepresentation and negligent misstatement are subject to the arbitration clause. A clear dichotomy can be drawn in my view.
[1] The Shorter Oxford Dictionary.
[2] Ibid.
Having formed that view the next question to be considered is whether or not those matters falling outside the arbitration provision contained in clause 7.9 of the agreement should be dissected and the balance of the matters properly constituting contractual disputes between the parties under the agreement ought be referred to arbitration. Each case needs to be considered on the basis of its own facts. On occasions the courts have considered that where some claims in a proceedings are within and other claims are outside an arbitration agreement the proceeding should not be stayed as regard those which are within the arbitration agreement: McGrath v O'Sullivan (1964) NSWR 436, 437; Thomas v Star Maid International Pty Ltd, supra at para. 17. However, if in the present instance only part of the proceeding is stayed it could lead to an unnecessary multiplicity of proceedings with attendant cost and prejudice and a risk of inconsistent findings of fact. At the present point the plaintiffs have delivered its statement of claim. The defendants are yet to deliver their defence and counterclaim, if any. However, it can be readily anticipated that in light of the matters contained in the notice of dispute delivered on 30 May 2000 that the allegations made therein of misleading and deceptive conduct, fraudulent misrepresentation and negligent misstatement will be ventilated in any defence or counterclaim. In my view no purpose would be served by sending part of the matters to arbitration by ordering a stay of confined ambit. Indeed, I would go so far as to say it would be inappropriate in the circumstances of this matter to impose a stay whereby the contractual dispute would go to an arbitrator pursuant to clause 7.9 but other issues would remain to be answered in the present court. In the exercise of the discretion I would adopt the approach taken in the authorities that a partial stay of proceedings that runs the risk of an unnecessary multiplicity of proceedings should be exercised against the granting of a stay: W.C. Thomas & Sons Pty Ltd v Bunge (Aust) Pty Ltd (1975) VR 801, 805-806; Abigroup Contractors Pty Ltd v Transfield Pty Ltd, unreported judgment of Gillard J dated 16 October 1998; (1998) VSC 103.
For these reasons I consider that the proceedings should not be stayed and conclude that the defendants fail in their application.
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