Construcciones y Auxiliar de Ferrocarriles S.A. v CPB Contractors Pty Limited (No 2)

[2022] NSWSC 1483

Supreme Court

New South Wales

Medium Neutral Citation:

Construcciones y Auxiliar de Ferrocarriles S.A. v CPB Contractors Pty Limited (No 2) [2022] NSWSC 1483

Hearing dates:

On the papers

Decision date:

02 November 2022

Jurisdiction:

Equity - Technology and Construction List

Before:

Ball J

Decision:

The costs of the notice of motion dated 28 July 2022 be costs in the cause of the arbitration

Catchwords:

COMMERCIAL ARBITRATION — Costs — Where defendant successfully obtained stay of proceedings pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) — Whether to depart from the general rule that costs follow the event

Legislation Cited:

International Arbitration Act 1974 (Cth)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Construcciones y Auxiliar de Ferrocarriles SA v CPB Contractors Pty Ltd [2022] NSWSC 1264

Hancock Prospecting Pty Ltd v Rinehart (No 2) [2017] FCAFC 208

Karadag v Samkara Holdings Pty Ltd [2022] NSWSC 380

Category:

Costs

Parties:

Construcciones y Auxiliar de Ferrocarriles S.A. (Plaintiff | Respondent)
CPB Contractors Pty Limited (Defendant | Applicant)

Representation:

Counsel:
JC Giles SC with W Marshall (Plaintiff | Respondent)
RA Dick SC with B Yin (Defendant | Applicant)

Solicitors:
Pinsent Masons (Plaintiff | Respondent)
Minter Ellison (Defendant | Applicant)

File Number(s):

2022/173145

Publication restriction:

None

JUDGMENT

1. On 23 September 2022, the Court made orders pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) staying these proceedings pending the referral of the subject matter of the proceedings to arbitration. It was a condition of the stay that the defendant, CPB, not raise in the arbitration a defence that the arbitral tribunal did not have jurisdiction to determine the dispute because a precondition requiring the dispute be referred first to expert determination had not been satisfied: see Construcciones y Auxiliar de Ferrocarriles SA v CPB Contractors Pty Ltd [2022] NSWSC 1264 (the Principal Judgment).

2. The only outstanding question is costs. This judgment deals with that question. It assumes familiarity with the Principal Judgment and uses the same abbreviations as used in that judgment.

3. CPB seeks the costs of its motion seeking to stay the proceedings. In the alternative, it seeks its costs thrown away by reason of the amended summons and list statement filed with leave at the hearing of the stay motion. CAF, on the other hand, submits that the costs of the stay motion should be costs in the cause of the arbitration or alternatively that there should be no order for costs.

4. In my opinion, the appropriate order is an order that the costs of the motion be costs in the cause of the arbitration.

5. It is common ground that the general principle is that costs should follow the event (see Uniform Civil Procedure Rules 2005 (NSW) r 42.1) and that the event in this case was the grant of a stay. Consequently, in the normal case, it is usual for the Court to order that the plaintiff pay the defendant’s costs of a successful application to stay proceedings on the basis of an agreement to submit the dispute to arbitration: see, eg, Hancock Prospecting Pty Ltd v Rinehart (No 2) [2017] FCAFC 208 at [5] per Allsop CJ, Besanko and O’Callaghan JJ; Karadag v Samkara Holdings Pty Ltd [2022] NSWSC 380 at [149] per Ward CJ in Eq. However, I accept CAF’s submission that there are particular circumstances in this case which justify a departure from the general principle.

6. The parties had reached an impasse in relation to the dispute resolution process set out in the Contract in relation to which the dispute between them had arisen. The impasse arose at least initially because CPB would not agree to the appointment of an expert in accordance with the Contract because it said that the appointor specified in the Contract had a conflict of interest. Under the terms of the Contract expert determination was a precondition to arbitration of the dispute that had arisen. As I pointed out in the Principal Judgment, the parties could have sought to resolve that impasse by arbitration. In the event, it was resolved by a stay of the proceedings on the condition identified earlier. In either event, the parties have or were likely to incur costs in resolving that impasse. The costs of the motion essentially represent those costs. In my opinion, the costs of resolving the impasse are most fairly dealt with in the same way as the costs of the dispute in relation to which the impasse arose.

7. To put the point another way, the costs of the motion did not arise simply because CAF commenced these proceedings in breach of a contractual obligation to refer the dispute that had arisen between the parties to arbitration. It arose because the parties had reached an impasse in relation to the dispute resolution procedure. They would have incurred costs in resolving that impasse whether or not these proceedings had been commenced. The impasse was resolved through resolution of the motion. The impasse was resolved in a way that was not specifically proposed by either party in their correspondence before these proceedings were commenced. Accordingly, it is appropriate that the costs of resolving the impasse abide the outcome of the arbitration.

8. The order of the Court is that the costs of the notice of motion dated 28 July 2022 be costs in the cause of the arbitration.

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Decision last updated: 02 November 2022