Computershare Limited v Perpetual Registrars Limited (No 2)
[2000] VSC 233
•6 June 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL & EQUITY DIVISION COMMERCIAL LIST | Not Restricted |
No. 5111 of 2000
| COMPUTERSHARE LIMITED (ACN 005 485 825) | Plaintiff |
| v | |
| PERPETUAL REGISTRARS LIMITED (ACN 083 214 537) | First Defendant |
| PERPETUAL TRUSTEES AUSTRALIA LIMITED | Second Defendant |
---
JUDGE: | Warren J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 June 2000 | |
DATE OF JUDGMENT: | 6 June 2000 | |
CASE MAY BE CITED AS: | Computershare Ltd v Perpetual Registrars Ltd and Ors (No.2) | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 233 | |
---
Stay of proceedings – dispute resolution term of agreement – whether term binding – whether dispute procedures exhausted – exercise of discretion – existence of related proceedings.
---
APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr J. Beach QC | Minter Ellison |
| For the Defendants | Mr A. Archibald QC with Mr P. Clarke | Blake Dawson Waldron |
HER HONOUR:
The plaintiff claims against the defendants monies said to be owed pursuant to an agreement between those parties. The defendants entered a conditional appearance and apply for a stay pending the completion of dispute resolution procedures said to have been agreed to under the agreement between the plaintiff and defendants.
The plaintiff (“Computershare”) together with Australasian Security Services Pty Ltd (“ASS”) entered into an agreement whereby Computershare Ltd provided registry bureau services to the Share Registry Service conducted by Coopers & Lybrand in about May 1991 (“the Coopers and Lybrand agreement”). It was a term of the latter agreement that Computershare would provide reporting services described as “FAST” Services. In about October 1994 Computershare and ASS entered into a further agreement whereby the FAST system was replaced by a system known as “CHESS”. In about August 1998 the first defendant (“Perpetual Registrars”) acquired the Share Registry Service business previously conducted by Coopers & Lybrand. As a consequence, Computershare, Perpetual Registrars and the second defendant (“Perpetual Trustees”) entered into an agreement, subsequently formalised in writing on about 1 September 1998 known as “the Bureau Services Agreement”. It was a term of the Bureau Services Agreement that Computershare would provide Bureau Registry Services the same as those previously provided by it to Coopers & Lybrand and that any charges previously levied by Computershare were included in the arrangement. It transpired that the terms of the Bureau Services Agreement when formalised in writing excluded a provision that the charges previously levied by Computershare under the Coopers & Lybrand agreement were to be included. As a consequence, Computershare alleges that the Bureau Services Agreement was drawn up and signed under a mutual mistake of fact. Alternatively, it seeks rectification of that agreement.
The principal claim of Computershare against Perpetual Registrars is that it seeks payment alleged under the Bureau Services Agreement for its services falling into three categories. First, the CHESS debt in the sum of $737,550.44 being for maintenance charges to the end of February 2000. Secondly, “Telstra 2” charges being for services provided by Computershare during 1999 and 2000 in the sum of $26,568.58. Thirdly, back-up site services described as “the Back-Up Site Service” in the sum of $235,395.30. Furthermore, Computershare alleges that Perpetual Trustees guaranteed the obligations of Perpetual Registrars under the Bureau Services Agreement and, therefore, seeks enforcement of the guarantee. The Bureau Services Agreement contained specific provision to deal with resolution of disputes between the parties. Clause 24 provided:
“24. RESOLUTION OF DISPUTES
24.1A party must not start arbitration or court proceedings (except proceedings seeking interlocutory relief) in respect of a dispute arising out of this agreement (‘Dispute’) unless it has complied with this clause.
24.2A party claiming that a Dispute has arisen must notify the other party within 30 days of becoming aware of the matter the subject of the Dispute.
24.3Within 7 days after a notice is given under clause 24.2 each party must nominate in writing a representative authorised to settle the Dispute on its behalf. Each representative will use their best efforts to arrive at an amicable solution as soon as possible.
24.4If the respective representatives of each party are unable to resolve the Dispute within 10 days (or such other period as agreed between the parties and in the absence of agreement, 10 days) after the notice is given, they must refer the dispute to the Chief Executive Officer of each party for resolution.
24.5If the Chief Executive Officers cannot resolve the Dispute within 10 days after referral under clause 24.4, the parties must endeavour in good faith during the following 10 days:
(a)to resolve the Dispute; or
(b)to agree on:
(i)a process to resolve all or at least part of the Dispute without arbitration or court proceedings (eg, mediation, conciliation, executive appraisal or independent expert determination),
(ii)the selection and payment of any third party to be engaged by the parties and the involvement of any dispute resolution organisation,
(iii)any procedural rules,
(iv)the timetable, including any exchange of relevant information and documents, and
(v)the place where meetings will be held.
24.6The role of any third party will be to assist in negotiating a resolution of the Dispute. A third party may not make a decision that is binding on a party unless that party’s representative has so agreed in writing.
24.7Any information or documents disclosed by a representative under this clause:
(a)must be kept confidential; and
(b)may not be used except to attempt to settle the Dispute.
24.8Each party must bear its own costs of resolving a Dispute under this clause and, unless the parties agree otherwise in accordance with clause 24.5(b)(ii), the parties must bear equally the costs of any third party engaged.
24.9After the second 10 day period referred to in clause 24.5 (or longer period between the parties), a party that has complied with clauses 24.2-24.5 may terminate the dispute resolution process by giving notice to the other party.
24.10If a party does not comply with any provision of clauses 24.1 – 24.5 the other party will not be bound by clauses 24.1 – 24.5.”
The Perpetual interests apply to stay the proceeding for an interim period on the basis that the contract upon which Computershare sues provided for a dispute resolution between Computershare and the Perpetual interests. Perpetual says that the dispute resolution provisions should be observed and completed in accordance with its terms before the present litigation proceeds.
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…”.
The disagreement before the court revolves around whether or not the procedures under clause 24 have been exhausted. The dispute resolution procedure contained in clause 24 of the Bureau Services Agreement contemplates a three tier or step procedure. First, upon a party claiming a dispute that party must notify the other within 30 days of becoming aware of the dispute (clause 24.2). Within seven days after such notice each party must nominate a representative to settle the dispute and such representative must use best efforts to arrive at a solution (clause 24.3). The second step or tier of the procedure is that if the representatives are unable to achieve a resolution within 10 days they must refer the dispute to the Chief Executive Officer of each party for resolution (clause 24.4). Thirdly, if the CEO cannot resolve the dispute within 10 days the parties must enter the third phase and endeavour “in good faith” during the following 10 day period to resolve the dispute or agree on a process to resolve the dispute (clause 24.5). After the expiration of the 10 day period in the third step or tier of the resolution procedure a party who has complied with the procedure may terminate the dispute resolution process on notice (clause 24.9).
Events transpired between Computershare and the Perpetual interests:
§ Between 1 and 9 March 2000 Computershare and Perpetual exchanged correspondence in relation to discussions over the FAST and CHESS charges. The parties had been discussing the relevant fees for a period of about six months.
§ On 16 March 2000 Perpetual informed Computershare of its final position with respect to charges. On the same day Computershare put a counter position.
§ On 23 March 2000 Computershare claimed outstanding fees for specified amounts and advised that as the dispute resolution process under clause 24 of the Bureau Services Agreement had been exhausted there was no option but to resort to litigation if not resolved within seven days.
§ On 28 March 2000 Ms C. Clough of Computershare advised Perpetual that she was nominated to settle the dispute and that she believed she had endeavoured to do so without success. Ms Clough sought to invoke the next tier in the dispute resolution process, namely, the nomination of the Chief Executive Officer of Computershare.
§ On about 5 April 2000 Perpetual purported to nominate its CEO to deal with the dispute.
§ On 6 April 2000 Ms Clough set a deadline of 12 April 2000 for the resolution of the dispute otherwise litigation would commence.
§ On 11 April 2000 Perpetual advised Computershare in writing of the identity of its Chief Executive Officer for the purposes of the dispute and requested that a meeting with his counterpart be arranged.
§ On 17 April 2000 solicitors acting for Computershare gave notice of the termination of the dispute resolution process and advised that proceedings would commence almost immediately.
§ 18 April 2000 the solicitors for Perpetual advised Computershare that Perpetual had been “at all times… willing and able to continue the process agreed between the parties according to its terms”.
§ 19 April 2000 the CEO for Computershare informed his counterpart at Perpetual that he was in the United States and not due to return to Australia for at least three months but would consider any written proposal.
§ The position of Perpetual remained prior to the commencement of these proceedings that it was prepared to continue negotiations with Computershare. However, the proceedings were issued and accordingly Perpetual has sought a stay.
Examination of the correspondence between the parties reveals that by and large they did not necessarily provide specific written notice of the various steps under clause 24. Nevertheless, consideration of the chronology of events between March to May 2000 reveals three steps having occurred. First, a dispute over fees is clearly identifiable. So too, is the giving of notice under clause 24.2 by Computershare at the latest by 23 March 2000 that there was a dispute that had been identified. This is apparent in any event from the course of correspondence between the representatives of Computershare and the Perpetual interests during March 2000. Hence, the first step of the alternative dispute resolution procedure contemplated by clause 24 of the Business Services Agreement was taken. The second, as of 28 March 2000, Computershare triggered the second step of the process by giving notice of the identity of its CEO under clause 24.4 of the Bureau Services Agreement. Significantly, clause 24 of that agreement does not make time of the essence. Nevertheless, it imposes a 10 day time limit whereby the other party, in this case, Perpetual Registrars, was to identify its CEO for the purposes of clause 24.4. The fact that time was not of the essence of the requirements of clause 24, appears to have been recognised by Computershare in its letter of 6 April 2000 when it granted an extension of time as it were to Perpetual to provide the identity of its CEO. As events transpired on 11 April 2000, Mr Richard Atkinson of Perpetual gave notice to Computershare that he was the CEO and requested that Computershare arrange for its CEO to contact him. In my view, once Perpetual gave notice as it did on 11 April 2000 of the identity of its CEO, a period of at least 10 days commenced to run thereafter for the exhaustion of the processes under clause 24. Six days after Perpetual activated the next step under the resolution procedure Computershare, through its solicitors, on 17 April 2000 asserted that a period in excess of 10 days had expired since the matter was referred to the respective CEOs of Computershare and Perpetual and that as the dispute remained unresolved, Computershare purported to terminate the process.
On the basis of the authorities Computershare was bound by the terms of the dispute resolution process. Time was not of the essence but in any event Computershare in its correspondence extended time to 12 April 2000 for Perpetual to identify its CEO. This was done by Perpetual on 11 April 2000. It follows that it was open to Perpetual to carry out the various procedures under clause 24.4 of the Bureau Services Agreement for a further period of 10 days after 11 April. It was deprived of this opportunity by the conduct of Computershare, principally, the action contained in the letter of its solicitors dated 17 April 2000. Notwithstanding the letter from the solicitors for Computershare on 18 April 2000, Perpetual through its solicitors endeavoured to keep the processes open under clause 24. Its endeavours were frustrated by the responses in the correspondence from Computershare’s solicitors.
In my view, therefore, the parties having committed themselves to a dispute resolution process by the terms of clause 24 of the Bureau Services Agreement. They were bound to exhaust those processes. They did not do so because of the approach adopted by Computershare. Indeed, as late as 19 April 2000 the Chief Executive Officer of Computershare was communicating with the Chief Executive Officer of Perpetual Registrars on the basis that the dispute resolution procedure contemplated by clause 24 was still on foot.
It was submitted by Mr J Beach QC who appeared with Mr D Star for Computershare that, in any event, clause 24.5 of the agreement was unenforceable on the basis that it did not provide a framework for dispute resolution. Mr Beach urged that in the exercise of the discretion I should not require the parties to be bound by the terms of clause 24, in particular clause 24.5.
In Hooper Bailie Associated Limited v Natcon Group Pty Ltd (1992) (28 NSWLR 194) Giles J held that an agreement to conciliate or mediate is enforceable in principle if the conduct required of the parties for participation in the process is sufficiently certain. In Coal Cliff Collieries Pty Ltd v CG Harmer Sijehema Pty Ltd (1991) 24 NSWLR 1, Kirby P, with whom Waddell A-JA agreed, considered that a contract to negotiate in good faith was known to the law and in some circumstances would be enforceable. In Coal Cliff Collieries, Kirby P considered that the proper approach to be taken depended upon the construction of the particular contract in each case. His Honour observed (at 26-27):
“I believe that the proper approach to be taken in each case depends upon the construction of the particular contract: Australia & New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695; see note (1991) 65 ALJ 59. In many contracts it will be plain that the promise to negotiate is intended to be a binding legal obligation to which the parties should then be held. The clearest illustration of this class will be cases where an identified third party has been given the power to settle ambiguities and uncertainties: see Foster v Wheeler (1888) LR 38 Ch D 130; Axelsen v O’Brien (1949) 80 CLR 219 and Biotechnology (at 136). But even in such cases, the court may regard the failure to reach agreement on a particular term as such that the agreement should be classed as illusory or unacceptably uncertain: Godecke v Kirwan (at 646f) and Whitlock v Brew (1968) 118 CLR 445 at 456. In that event, the court will not enforce the arrangement.
In a small number of cases, by reference to a readily ascertainable external standard, the court may be able to add flesh to a provision which is otherwise unacceptably vague or uncertain or apparently illusory: see, eg, Powell v Jones [1968] SASR 394 at 399; Sweek and Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699; cf Meehan v Jones (1982) 149 CLR 571 at 589; Jillcy Film Enterprises (at 521); Ridgeway Coal Co (at 408).
Finally, in many cases, the promise to negotiate in good faith will occur in the context of an ‘arrangement’ (to use a neutral term) which by its nature, purpose, context, other provisions or otherwise makes it clear that ‘the promise is too illusory or too vague and uncertain to be enforceable’: see McHugh JA in Biotechnology (at 156) and Adaras Development Ltd v Marcona Corporation [1975] 1 NZLR 324 at 331.”
Applying the approach taken by the NSW Courts, I consider that, as a matter of concept, agreements to negotiate are capable of being enforced. The circumstances in Hooper Bailie is an example of precisely that because there the agreement was an agreement to conciliate or mediate. Logically, parties cannot stipulate principles upon which mediation processes must produce an outcome. Of its very nature, the parties must negotiate and hold discussions to find their own solution. In essence, the parties are required to establish a protocol or framework within which the matters between them are to be negotiated. In essence, that is what mediation and conciliation are all about. It is very different from arbitration where the arbitrator must decide according to law, or for example, where an expert is to decide what is the fair market value of premises and the like. On the basis of such conceptual analysis, therefore, the present agreement as encapsulated in clause 24 of the Bureau Services Agreement is enforceable between the parties. In this respect, I am particularly assisted by the discussion of Kirby P, in Coal Cliff Collieries at p 208. The discussion sets out the circumstances in which the obligations to negotiate are enforceable and one of the factors focused upon in that case was that parties can impose upon one another by contract, a good faith requirement to negotiate to seek to reach the agreement that would be produced by that process. In my view, it follows that parties can impose an obligation to endeavour to reach an agreement and if they do not approach that task in good faith they are in dereliction of that obligation.
Consideration of clause 24.5 in the context of the discussion in Coal Cliff Collieries demonstrates that it falls within the parameters of the circumstances contemplated in that case. They agreed to endeavour in good faith to agree upon a process and to agree on procedural rules. Mr Beach relied upon Cott UK Limited v FE Barber Limited (1997) (3 All ER 540) where Judge Hejarty QC sitting as a Judge of the High Court considered that where a clause provided for an alternative form of dispute resolution, such as determination by an expert, a court should not exercise its inherent jurisdiction to stay an action where there is an absence of rules to govern arbitration or alternative dispute resolution between the parties. In my view, the approach taken in the Cott case can be distinguished by the present matter in that here there is a framework to which the parties have agreed including subjecting themselves to an obligation to establish a detailed framework within which a solution may be achieved between them. As a consequence, clause 24.5 is within the sphere of obligation to negotiate and is enforceable. Furthermore, where parties have made a special agreement requiring them to address a path to a potential solution there is every reason for a court to say such parties should be required to endeavour in good faith to achieve it. In these circumstances the court does not need to see a set of rules layed out in advance by which the agreement, if any, between the parties may in fact be achieved. It follows that I consider there is nothing in the uncertainty argument urged by Mr Beach. Furthermore, in so far as the exercise of the discretion is concerned, it is noteworthy that the parties have operated in a commercial context and made the Bureau Services Agreement between themselves. In so doing, they have expressly laid out in detail the steps they consider should be taken. In such a context, in my view, there is no reason why the discretion of the court should be exercised in the manner urged on behalf of Computershare.
Mr Beach submitted, further, that part of the claim of Computershare against the Perpetual interests was for rectification of the Bureau Services Agreement with respect to the basis upon which fees could be charged. In essence, he submitted that only courts can deal with rectification claims. I cannot accept such submissions. The parties have committed themselves pursuant to clause 24 of the agreement to pursue negotiations. Such negotiations relate to matters in dispute between those parties and on the basis of the pleadings and the material before me the rectification issue insofar as it arises is inextricably interwoven with the existing dispute. It follows, accordingly, that any issue with respect to rectification is subject to the dispute regime encompassed in clause 24 of the Bureau Services Agreement. Furthermore, from a practical perspective the rectification issue insofar as it arises would form part and parcel of the weighing up by the parties of the strengths and weaknesses of their positions in the course of their discussions.
Finally, it was submitted on behalf of Computershare that in light of other proceedings on foot in the Commercial List between those parties and other parties I should exercise the discretion to refuse the stay application in the present proceeding. The other proceeding has been the subject of interlocutory dispute between those parties: Computershare Ltd v Perpetual Registrars Ltd and Ors (unreported judgment delivered 17 April 2000; (2000 VSC 139). In the present proceeding the stay sought is of a limited nature, namely, that the parties exhaust their obligations under clause 24 of the Bureau Services Agreement. Accordingly, any stay should be of a limited ambit, subject to hearing from the parties in all likelihood an appropriate stay would allow for the expiration of the periods contemplated under clause 24 of the agreement. I do not consider, therefore, that the other proceeding and the interlocutory applications on foot therein affect the exercise of the discretion on the present application. In any event, I am satisfied that the present proceeding stands in an entirely different situation and set of circumstances to the other proceeding. So much in my view is apparent from the Reasons delivered in the other proceeding already referred to.
Ultimately, in this matter, Computershare and the Perpetual interests have voluntarily submitted themselves to an obligation to negotiate in good faith and that obligation must be exhausted in accordance with the terms of the parties’ agreement.
The application for a limited stay will, therefore, be granted.
---
3
3
0