CPB Contractors Pty Ltd v Celsus Pty Ltd

Case [2017] FCA 1620

FEDERAL COURT OF AUSTRALIA

CPB Contractors Pty Limited v Celsus Pty Limited (formerly known as SA Health Partnership Nominees Pty Ltd) [2017] FCA 1620

File number: NSD 1312 of 2017
Judge: LEE J
Date of judgment: 12 December 2017
Catchwords:

ARBITRATION – application by the first respondent for a mandatory stay pursuant to s 8 of the Commercial Arbitration Act 2010 (NSW) – whether the arbitration agreement is inoperative – where respondent to the stay application relies upon subsequent contractual arrangements between other parties to demonstrate inoperability – meaning of “inoperative” and determination of the proviso question – where the subsequent agreements relied upon do not have the effect of causing the arbitration agreement to cease having effect – mandatory stay pursuant to s 8 of the Commercial Arbitration Act 2010 (NSW) granted

ARBITRATION – application by the second and third respondents for a mandatory stay pursuant to s 8 of the Commercial Arbitration Act 2010 (NSW) – determination of the statutory precondition of whether the second and third respondents brought an application for a stay not later than when submitting their first statement on the substance of the dispute within the meaning of s 8 of the Commercial Arbitration Act 2010 (NSW) – where second and third respondents did not meet the statutory precondition of seeking a stay not later than when submitting their first statement on the substance of the dispute – application for a mandatory stay dismissed

PRACTICE AND PROCEDURE – applications for a discretionary stay pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) – where certain non-arbitral matters are ancillary to matters the subject of the mandatory stay granted in favour of the first respondent – where there are closely overlapping facts and where the arbitral matters will be largely determinative of a number of aspects of the claims made by the applicants – where discretionary stay is consistent with the facilitation of the overarching purpose – discretionary stay granted to second, third and fourth respondents

Legislation:

Federal Court of Australia Act 1976 (Cth), Pt VB, ss 23, 37M(1), 37N(1), 37N(4), 43

International Arbitration Act 1974 (Cth), s 7

Judiciary Act 1903 (Cth), s 79

Federal Court Rules 2011 (Cth), r 35.14

Commercial Arbitration Act 2010 (NSW), s 8(1), 16

Commercial Arbitration Act 2011 (SA)

UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended by the United Nations Commission on International Trade Law on 7 July 2006), art 8(1) 

Cases cited:

ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896

Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52

Carona Holdings Pte Ltd v Go Go Delicacy Pte Ltd [2008] SGCA 34; [2008] 4 SLR 460

Cars & Cars Pte Ltd v Volkswagen AG [2009] SGHC 233; [2010] 1 SLR 625

Casaceli v Natuzzi SPA [2012] FCA 691; (2012) 292 ALR 143

Dyna-Jet Pte Ltd…

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Details
AGLC
CPB Contractors Pty Ltd v Celsus Pty Ltd [2017] FCA 1620
Case
[2017] FCA 1620
Decision Date

CaseChat Overview and Summary

The case of CPB Contractors Pty Ltd v Celsus Pty Ltd involves multiple parties with complex contractual relationships, leading to various arbitration agreements. The primary dispute revolves around the enforceability of these arbitration agreements and the appropriate application of stay provisions under the Commercial Arbitration Act 2010 (NSW) and the Federal Court of Australia Act 1976 (Cth). The court was tasked with determining whether certain arbitration agreements were inoperative and whether the respondents met the statutory preconditions for seeking a stay of proceedings. Additionally, the court considered applications for discretionary stays to align with the overarching purpose of resolving disputes through arbitration.

The court examined the meaning of "inoperative" in the context of the arbitration agreements and assessed whether subsequent contractual arrangements caused the agreements to cease having effect. The court also evaluated whether the respondents satisfied the statutory requirement of seeking a stay within the stipulated timeframe. Furthermore, the court deliberated on the appropriateness of granting a discretionary stay to facilitate the resolution of overlapping factual and legal issues in the arbitral proceedings.

The court concluded that the arbitration agreements were valid and binding, leading to the grant of a mandatory stay for the first respondent under section 8 of the Commercial Arbitration Act 2010 (NSW). However, the court dismissed the stay application for the second and third respondents due to their failure to meet the statutory precondition. A discretionary stay was granted to the second, third, and fourth respondents to ensure consistency with the overarching purpose of resolving disputes through arbitration. The court also addressed the costs associated with the interlocutory applications, ordering the applicants to pay costs to the respondents.

In summary, the court granted a mandatory stay for the first respondent and a discretionary stay for the second, third, and fourth respondents, while dismissing the stay application for the second and third respondents due to procedural non-compliance. The court's decision reflects a careful balance between enforcing arbitration agreements and managing overlapping disputes to achieve an efficient resolution.

Orders

Orders of the court

1. The claims against the first respondent detailed in the originating application and the applicant’s amended statement of case dated 12 September 2017 be referred to arbitration and the proceedings in this Court stayed pursuant to s 8(1) of the Commercial Arbitration Act 2010 (NSW), on the basis that the claims are the subject of a valid and binding arbitration agreement.

2. The claims against the second, third and fourth respondents outlined in the originating application and the applicant’s amended statement of case dated 12 September 2017 be stayed on a temporary basis pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) until the conclusion of the arbitrations currently being case managed by the Hon Kevin Lindgren QC (being ACICA Cases 2017-103, 2017-104 and 2017-110) and also ACICA Case 2017-111.

3. The applicants pay the first respondent’s costs of the interlocutory application filed on 17 November 2017 and, to the extent required, leave be granted to the first respondent to seek taxation of its costs of its interlocutory application pursuant to Division 40.2 of the Federal Court Rules 2011 (Cth) (FCR).

4. The applicants pay 60 per cent of the costs incurred by the second and third respondents in relation to the interlocutory application filed 13 November 2017 (other than any costs incurred in relation to the relief sought in prayer 3 of the second and third respondents’ interlocutory application).

5. The applicants pay the costs of the interlocutory application of the fourth respondent filed on 15 November 2017 (other than any costs incurred in relation to prayer 2 of the fourth respondent’s interlocutory application).

6. The costs in relation to prayer 3 of the second and third respondents’ interlocutory application and in relation to prayer 2 of the fourth respondent’s interlocutory application be reserved.

7. The time for filing any application for leave to appeal from these orders be extended to a date 14 days after the date upon which the revised reasons for judgment are published to the parties and, to the extent necessary, the requirements of FCR 35.14 are dispensed with.

8. Liberty be granted to the applicants and the second to fourth respondents to relist the proceedings by application to the Associate to Lee J upon expiry of the temporary stay referred in in order 2.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Turning to the Stay Applications, I will divide the balance of these reasons into the following headings:Section B BackgroundB.1 The Contracts and Arbitration AgreementsB.2 The History of Disputation on the ArbitrationSection C EvidenceC.1 The Evidence GenerallyC.2 Findings as to Factual and Legal OverlapSection D The Stay ApplicationsD.1 Relevant PrinciplesD.1.1 Mandatory StayD.1.2 Discretionary StayD.2 Observations as to Disposition of the Applications and Agreed IssuesD.3 The Project Co ApplicationD.3.1 Mandatory Stay – Operability of Arbitration AgreementD.4 The State ApplicationD.4.1 Mandatory Stay – A Procedural IssueD.4.2 The Substantive Issue as to the Existence of an AgreementD.4.3 The Discretionary StayD.5 The IC ApplicationSection E Conclusion and CostsB BACKGROUNDB.1 The Contracts and Arbitration Agreements As a consequence of the contractual structure to which brief reference has already been made, there are no direct contractual obligations between the Builder and the State or the Builder and the IC to determine disputes between them by way of arbitration. In May 2011, a series of agreements was executed (Project Documents) which put in place the following contractual structure:(a)the State engaged Project Co to finance, design and build the hospital and to provide certain services in connexion with its operation (Project Agreement);(b)Project Co subcontracted to the Builder the design and construction of the hospital (Construction Contract);(c)Project Co and the State engaged the IC as the independent certifier under the Project Agreement to, inter alia, adjudicate extension of time claims, assess progress and determine completion (IC Agreement);(d)Project Co, the State and a syndicate of financiers (Financiers) entered into a number of financing agreements under which funds were advanced to Project Co and the State to fund the project; and(e)Project Co contracted with Spotless P&F Pty Ltd to provide facilities management services. Additionally, the State directly entered into side deeds, one of which is of relevance to these applications, being an agreement entered into with Project Co and the Builder, so as to provide the State with identified rights under the Construction Contract (Builder Direct Deed). As would by now be evident, the overall effect of this regime was that the State contracted with Project Co to provide its “most significant single investment”, leaving it to Project Co to arrange for the financing, design and construction, and the provision of services during the relevant operating term. Turning to the relevant arbitration agreements themselves (generally considered to be contracts independent of the underlying contract in which they are contained: see Heyman v Darwins, Limited [1942] AC 356 at 374 per Macmillan LJ; Pipeline Services WA Pty Ltd v Atco Gas Australia Pty Ltd [2014] WASC 10 at [42] per Martin CJ), reliance is placed upon:(a)clauses 69-72 of the Project Agreement (Project Arbitration Agreement);(b)clauses 69-72 of the Construction Contract (Construction Arbitration Agreement); and(c)clause 16 of the IC Agreement (IC Arbitration Agreement),(collectively, Arbitration Agreements).

Evidence

Evidence Before The Court

In this way, it seems to me, whether by agreement or otherwise, it is more likely than not that Mr Lindgren will be seized of the Defects Arbitration, the Defects Compensation Arbitration and both arbitral proceedings constituting the Second Arbitration.C EVIDENCEC.1 The Evidence Generally Three business days prior to the hearing of the interlocutory applications, eight lever arch folders described as “Court Book for Hearing on 11 and 12 December 2017” were delivered to my chambers. Included in this imposing, multi-volume court book was a series of affidavits often deposing to the same facts, and a range of other, non-essential material including, for example, extracts from the FCAA and the Federal Court Rules 2011 (Cth) (FCR). In order to ensure that the documentary material necessary to determine the Stay Applications was kept in manageable form, although affidavits were read, I did not allow annexures or exhibits to the affidavits to be adduced in evidence unless they were specifically referred to during the course of argument or in written submissions. Commendably, and at short notice, the parties worked cooperatively in identifying those materials that truly needed to be in evidence (ultimately a small subset of the voluminous court book). As a consequence, the documentary evidence comprises Exhibit A, being the Construction Contract, and Exhibit B, being a compendium of the documents which have been specifically referred to, either in writing or orally. No witness was cross-examined, and there is not any significant factual contest between the parties.C.2 Findings as to Factual and Legal Overlap Prior to the hearing of the Stay Applications (the date for which I had set at the second case management hearing after having been informed of the extra-curial actions of the State and Project Co), orders were made for the exchange of written submissions. In the “State’s submissions on Stay Application” dated 8 December 2017 (State’s Submissions in Chief), it was asserted that the various claims made by the Builder in this proceeding overlap closely with those the subject of existing arbitral proceedings or the Arbitration Agreements. Of course, this reference to “existing” arbitral proceedings in the State’s Submissions in Chief includes the Second Arbitration, which, as I have explained, was commenced after the commencement of this proceeding. A comprehensive summary of the factual overlap in respect of each of the Builder’s claims was provided as an annexure to the State’s Submissions in Chief. During the course of the first day of the hearing of the Stay Applications, I requested that the Builder identify whether there was any contest as to the extent of the overlap. Annexure A to these reasons sets out a summary of the factual overlap. The first four columns set out the contentions initially made in the State’s Submissions in Chief, and the last column identifies the Builder’s comments in relation to those submissions as to the factual overlap. The document speaks for itself, and the broad and substantial factual overlap identified by that document is not the subject of real dispute. Although there are some differences in emphasis, and some qualifications made by the Builder, the fact is that the Stay Applications fall to be determined in circumstances where I find that there is a broad and substantial factual overlap between the allegations made by the Builder in this proceeding and the factual matters that need to be determined in the arbitrations.D THE STAY APPLICATIONSD.1 Overarching Principles

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Additionally, consistently with this apparent intention to resolve all relevant disputes by way of arbitral proceedings, the arbitrator in each instance was granted broad powers to “grant all legal, equitable and statutory remedies”.B.2 The History of Disputation on the Arbitration It is unnecessary for the purposes of the Stay Applications to provide a detailed chronology of the various issues that arose in relation to the project. In very broad summary, and relevantly to this proceeding, the following should be noted:(a)by April 2016, an issue arose as to alleged significant delays;(b)as a consequence of the delays, Project Co (together with the Builder) was required to put forward a “Cure Plan” directed towards remedying or curing the delay which, if accepted by the State, was required to be implemented;(c)unsurprisingly in the context of delay, disputes arose in relation to extensions of time and extension of time claims were adjudicated by the IC; this adjudication resulted in a determination that Project Co and the Builder were not entitled to any extension; (d)a Mediated Agreement was entered into by Project Co and the State (but not the Builder) in January 2017 (Mediated Agreement), which sought to establish, with the consent of the Builder, a single arbitration process before Mr Lindgren to deal with all project disputes;(e)following a mediation, an agreement was reached between the State, Project Co and the Financiers by which those parties resolved to address the consequences of the ongoing delays to the project; this led to the execution of a “Completion Deed” and a “Consents and acknowledgements deed” (Consents and Acknowledgements Deed) (it will be necessary to return to the Mediated Agreement and these documents later in these reasons);(f)eventually, Technical Completion was achieved in March 2017 and Commercial Acceptance occurred in June 2017. Additionally, and of particular importance for present purposes, arbitral proceedings arose. In July 2016, Project Co issued a notice of dispute in relation to defects, which was stated as being made pursuant to cl 40.3(b) of the Project Agreement, and which “mirrored” an earlier notice of dispute issued by the Builder pursuant to the Construction Contract (Defects Dispute). The Defects Dispute was eventually referred for determination by an Independent Expert, pursuant to the procedures under the Project Documents. A further adjectival dispute arose as to the contractual remit of the Independent Expert to address aspects of the Defects Dispute and as to the Independent Expert’s determination. This expert determination had been made in September 2016, a month after proceedings had been commenced by the State in the Supreme Court of South Australia, in which a declaration was sought as to the scope of the Independent Expert’s role under the Project Agreement. A hearing was held which led to the delivery of judgment by Blue J (State of South Australia v Goldstein [2016] SASC 202) which identified his Honour’s reasons for determining that the Independent Expert had power to make determinations in relation to some matters, but did not have power in relation to others. The details are not presently material.