CHARTER HALL RETAIL MANAGEMENT LTD - v- APP CORPORATION PTY LTD
[2018] WASC 94
•28 MARCH 2018
[2018] WASC 94
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS |
| CITATION | : | CHARTER HALL RETAIL MANAGEMENT LTD - v- APP CORPORATION PTY LTD [2018] WASC 94 |
| CORAM | : MASTER SANDERSON | ||
| HEARD | : 28 FEBRUARY 2018 | ||
| DELIVERED | : 28 MARCH 2018 | ||
| FILE NO/S |
| ||
| BETWEEN |
|
PERPETUAL LTD
Second Plaintiff
AND
APP CORPORATION PTY LTD
First Defendant
ROBERT BIRD GROUP PTY LTD
Second Defendant
DORIC CONTRACTORS PTY LTD
Third Defendant
Catchwords:
Practice and procedure - Application to stay action where contract contains dispute resolution provision - Turns on own facts
[2018] WASC 94
Legislation:
Civil Liability Act 2002 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr G M Abbott |
| Second Plaintiff | : | Mr G M Abbott |
First Defendant : No appearance Second Defendant : No appearance
| Third Defendant | : | Mr M D Howard SC |
Solicitors:
| First Plaintiff | : | King & Wood Mallesons |
| Second Plaintiff | : | King & Wood Mallesons |
First Defendant : No appearance Second Defendant : No appearance
| Third Defendant | : Lavan |
Case(s) referred to in decision(s):
Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] QSC 135
[2018] WASC 94
MASTER SANDERSON
MASTER SANDERSON:
By amended chamber summons filed 19 January 2018 the third defendant applied relevantly for the following order:
The Plaintiffs' claim insofar as it relates to the Third Defendant be stayed until further order, pending an expert determining (under the contract between the Plaintiffs and the Third Defendant) the matters the subject of the Plaintiffs' notice of dispute dated 21 September 2017.
The relevant facts were not in dispute between the parties. The plaintiffs (together 'Charter Hall') own and operate the Secret Harbour Shopping Centre which it refurbished and expanded. To complete the refurbishment and expansion of the shopping centre Charter Hall engaged the services of the first defendant as project manager, the second defendant as civil and structural engineers and the third defendant (Doric) to perform the design and construction works pursuant to the terms of the 'Doric Design and Construction Contract'.
One of Charter Hall's major tenants in the expanded portion of the shopping centre is Coles. Prior to Charter Hall executing contracts with the three defendants Coles prepared a document 'The Coles Lessors Supermarket Design Brief February 2013 Issue 87' (Coles Brief) setting out their design requirements relating to parts of the project and the retail premises that Coles would occupy. One of the design criteria in the Coles Brief was that the car parking zone associated with the Coles Supermarket must have what is referred to in the documents as the 'Coles Gradient Specification' (the Specification). The three defendants jointly undertook the process of designing and documenting the works. This included the exchange of information and documents, various design meetings and production of design documents required for the performance of the works and obtaining necessary permits for the works. Doric constructed the new car parks but, Charter Hall allege, did not ensure the works conformed to the Specification. Charter Hall directed Doric to rectify the alleged car park defects. Doric refused to do so. There is no issue but that Charter Hall suffered loss because Coles refused to accept the handover of the Coles Supermarket due to the car park defects.
To ensure the rectification works were completed Charter Hall and Doric entered into an arrangement without admission of liability whereby Doric completed the rectification work and Charter Hall paid 70% of Doric's costs of rectification. Charter Hall has paid under protest an amount of $1,146,541.97 to Doric. That represents 70% of
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the costs of the rectification work. Doric asserts the Charter Hall should pay Doric a further $491,375.13 being the remaining 30% of the cost of rectification works.
Charter Hall issued Doric with a notice of dispute pursuant to the contract on 21 September 2017. Doric had previously issued a notice of dispute dated 14 July 2017. Following the issue of Charter Hall's notice of dispute Charter Hall and Doric followed the dispute resolution procedures under the contract. By no later than 16 October 2017 the dispute had been referred by Doric for expert determination pursuant to the contract. The next day Charter Hall commenced these proceedings. Doric objected. It now says in commencing and maintaining these proceedings Charter Hall seeks to bypass the express terms of the contract. By this application Doric says it seeks to hold Charter Hall to the terms of the contract and accordingly seeks a stay of these proceedings.
The relevant clause in the contract between Charter Hall and Doric appears as attachment LVD 1 to the affidavit of Lance Albert Van Drunick sworn 31 October 2017. It reads as follows:
12. RESOLUTION OF DISPUTES
12.1 Dispute resolution procedures All disputes or differences arising between the Principal and the Contractor (including any dispute in relation to any determination or direction by the Superintendent) at any time as to the construction of this Deed or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith (in this clause referred to as a 'Dispute') must be resolved in accordance with clause 12.
12.2 Parties to negotiate
(a)
If a Dispute arises either party must give the other a written notice specifying the Dispute.
(b)
If the Dispute cannot be resolved by the Superintendent, the Principal and the Contractor within five (5) Business Days of the receipt of the notice referred to in clause 12.2(a), either party may issue a notice to the other detailing the Dispute.
(c)
Within five (5) Business Days of the receipt of the notice referred to in clause 12.2(b), the senior
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executives of the Principal and the Contractor will meet
to resolve the Dispute.
(d)
If the senior executives cannot resolve the Dispute within five (5) Business Days of the receipt of the notice referred to in clause 12.2(c), the matter will be referred to expert determination in accordance with clause 12.3.
12.3 Expert determination
(a)
The expert determination process must be conducted by such expert as the parties agree.
(b)
If the parties are unable to agree on an expert within five (5) Business Days of referral of the Dispute to expert determination, an expert appropriately qualified in the discipline most closely related to the subject of the Dispute shall be appointed by the President of the Western Australia Chapter of the Institute of Arbitrators and Mediators Australia or his nominee.
(c)
The expert must be appointed by letter of appointment in the form of Schedule 4. It is sufficient for the valid appointment of the expert that the letter of appointment is signed by either party acting alone.
(d)
The appointment of an expert is conclusive evidence that the Dispute relates to matters properly the subject of expert determination in accordance with clause 12.
(e)
The parties are bound by the rules for the expert determination process in Schedule 5.
(f)
The parties agree that the expert is bound by the code of conduct set out in Schedule 5.
(g)
The decision of the expert must be made as an expert and not as an arbitrator. The determination of the Dispute in accordance with the rules for the expert determination process in Schedule 5 is not a process of arbitration for the purpose of the Commercial Arbitration Act 2012 (WA).
(h)
Where a Dispute under this Deed arises as a result of facts and circumstances which give rise to the need for appointment of an independent expert under an Agreement for Lease then the parties are prepared to use the same expert provided that such expert confirms in writing that it is appointed as an expert in relation to all such matters for resolution or Dispute under this
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Deed and/or the Agreement for Lease and signs a letter of appointment in the form of Schedule 4 to this effect and the decision of the expert in relation to this Dispute shall be final and binding on the parties.
(i) The decision of the expert is final and binding on the parties if the amount determined by the expert as being payable by either party (excluding costs) is less than or equal to $250,000.00.
12.4 Pass Through Claims
(a) Where a claim of the Contractor against the Principal in relation to this Deed has the following features; (i) is substantially similar to a claim that Principal is able to make against a Tenant;
(ii) is for the same remedy or remedies as Principal's claim against such Tenant; and
(iii) is not frivolous or vexatious,
('Pass-Through Claim')
then the claim will be conducted in accordance with the
following principles:(iv) the Principal will conduct the claim against the Tenant in accordance with the Contractor's prompt and reasonable directions (including in respect of written submissions and selection of legal counsel);
(v) the Contractor will bear the third party costs incurred in accordance with this clause in respect of the conduct of the claim;
(vi) the Principal will, to the extent permitted by the Tenant, include the Contractor in formal and informal processes relating to the claim;
(vii) the Principal will not settle or compromise the claim without the Contractor's express written consent to do so, unless:
(A)
the Principal agrees to bear all costs associated with the claim and that the Contractor is then free to pursue the entire claim against Principal, without
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regard to this Pass-Through Claims
process; or
(B) the Principal agrees to provide to the Contractor all remedies required by it,
notwithstanding the compromise agreed by Principal; (viii) the Contractor will, subject to Principal complying with its obligations in respect of Pass-Through Claims, will (subject to the Principal's compliance with subclause (vii)) be bound by the outcome of the dispute resolution processes as between the Principal and the Tenant, including the timing of delivery of any remedies awarded in favour of Principal;
(ix) where a claim does not meet the criteria in subclauses (a)(i) and (ii) above, the Contractor will be entitled to pursue that claim against the Principal in accordance with the processes set out in this clauses 12.1 to 12.3; and
(b)
corollary principles as set out in subclause (a) above shall apply in respect of any claim initiated by the Tenant against the Principal which meets corollary criteria to those set out in subclauses (a)(i) and (ii) above.
12.5 Principal's right of deduction following expert determination The Principal may deduct, from moneys payable to the Contractor as a result of a determination of an expert, any moneys payable to the Principal by the Contractor arising under or in respect of the terms of this Deed, including liquidated damages.
12.6 Dispute resolution not to delay the Works Notwithstanding the provisions of clause 12, the Contractor must proceed without delay to continue to perform its obligations under this Deed.
It is worth pausing at this point to make a number of observations about the dispute resolution clause. First, it relates to 'all disputes or differences arising' 'at any time' which 'must' be resolved in accordance with cl 12. In other words the clause is very broadly drawn. The parties can be taken to have agreed they would use the mechanisms
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provided in the clause to resolve their disputes. While neither party suggested the breadth of the clause was determinative of the outcome of this application, Doric, in particular, emphasised its scope and the nature of the agreement between the Charter Hall and Doric.
Second, cl 12.2 commits the parties to negotiation. That part of the clause has been observed - that is to say, the senior executives met as was required by cl 12.2(c) but the dispute was not resolved. Consistent with the clause the next step is the expert determination procedure provided for in cl 12.3.
Clause 12.3(e) refers to the rules for expert determination process in sch 5. However, it is worth noting that under cl 12.3(g) the 'decision of the expert must be made as an expert and not an arbitrator'.
Under cl 12.3(i) the decision of the expert is final provided the decision is for an amount less than or equal to $250,000. That limitation has a curious consequence. Charter Hall's claim against Doric is for an amount of just over $1 million. Doric's claim against Charter Hall is for an amount of just under $500,000. This dispute seems to be headed on an all or nothing outcome; either Charter Hall will succeed to the exclusion of Doric or Doric will succeed to the exclusion of Charter Hall. If Charter Hall were to succeed and the expert ordered Doric to pay to Charter Hall $1.1 million then Doric would have a right to re-litigate the matter in this court. However, Doric could not counterclaim. Because the expert determined Doric was entitled to zero it is precluded from litigating the matter further. So, if, when the matter was litigated the court found the expert was wrong and in fact Doric did not owe Charter Hall anything, Doric would not then be able to claim the amount it must, by logical extension, be owed. Of course, the reverse is also true. That result is both unsatisfactory and unfair.
There was no real dispute between the parties as to the relevant legal principles. These were summarised in Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] QSC 135 [19]:
There is an undoubted jurisdiction to stay a legal proceeding where the parties have by contract agreed that their dispute shall be determined by means other than curial adjudication. As Lord Mustill explained in Channel Tunnel Group Ltd & Anor v Balfour Beatty Construction Ltd & Ors [1993] AC 334 at 352, there is an 'inherent power of the court to stay proceedings brought before it in breach of an agreement to decide disputes in some other way.' The basis for the power was said to be a 'wider general principle … that the court makes people abide by
[2018] WASC 94
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their contracts and … will restrain a plaintiff from bringing an action which he is doing in breach of his agreement with the defendant that any dispute between them shall be otherwise determined.' (Per MacKinnon LJ in Racecourse Betting Control Board v Secretary for Air [1944] Ch 114 at 126.)
Each case must be considered on its own merits and unless bargained away the parties to a contract have a right to have their disputes determined judicially. Charter Hall accepted that it had to persuade the court there were grounds for allowing the current Supreme Court action to proceed. Each of the parties maintained that the interests of justice favoured their position.
In my view this is not a case where a stay ought be granted. I have reached that conclusion for three main reasons. First, I have set out above the anomalous position occasioned by the limitation on further litigation after an expert determination found in cl 12.3(i) of the contract. In my view this is in and of itself a compelling reason not to stay proceedings.
Second, while the third defendant in this action applies for a stay no similar application has been made by the other two defendants. In other words, if this action was stayed the proceedings against the other two defendants could proceed. That is a waste of resources. It can lead to delay and duplication and it is not a satisfactory method of resolving the differences between the parties. Finally, there is the question of apportioning liability under the provisions of the Civil Liability Act 2002 (WA) (the Act). In order to give effect to pt 1F of the Act for the benefit of the other two defendants the court must make a determination about Doric's proportionate liability for the car park defects. To state the problem really illustrates the difficulties that arise. The best option is to have all three defendants before the court. That way if there is any liability by the defendants to Charter Hall the court can make a determination as to which defendant bears what proportion of the damage. If Doric was not present significant difficulties would arise in undertaking the assessment required by the Act.
For these reasons I am satisfied Doric's application ought be dismissed. I will hear the parties as to the precise form of orders and as to costs.
[2018] WASC 94
MASTER SANDERSON
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
ASSOCIATE TO MASTER SANDERSON
28 MARCH 2018
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