Electrical Resource Providers Pty Ltd v Active Tree Services Pty Ltd - [2010] WADC 90

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: ELECTRICAL RESOURCE PROVIDERS PTY LTD -v- ACTIVE TREE SERVICES PTY LTD [2010] WADC 90

CORAM: PRINCIPAL REGISTRAR GETHING

HEARD: 19 MAY 2010

DELIVERED : Delivered Extemporaneously on 19 MAY 2010 typed from tape and edited by the Principal Registrar

FILE NO/S: CIV 306 of 2010

BETWEEN: ELECTRICAL RESOURCE PROVIDERS PTY LTD
Plaintiff
AND
ACTIVE TREE SERVICES PTY LTD
Defendant

Catchwords:

Pre-action protocol in contract - Stay

Legislation:

Nil

Result:

Application dismissed - Stay ordered

Representation:

Counsel:

Plaintiff: Mr Y K Radich
Defendant: Mr A P Hershowitz

Solicitors:

Plaintiff: Bradley Bayly Legal
Defendant: Metaxas & Hager

Case(s) referred to in judgment(s):

Belcher v Austral Ships Pty Ltd [2002] WADC 259
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334
GWJ Blackman & Co SA v Oliver Davey Glass Co Pty Ltd & Noel Searle Pty Ltd [1966] VR 570
Mikkelsen v United Group Ltd [2005] WADC 24
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Wentworth v Attorney-General (NSW) (1984) 154 CLR 518

PRINCIPAL REGISTRAR GETHING: By application dated 21 April 2010 the defendant sought orders dismissing the action on the ground that the plaintiff failed to comply with a pre-action protocol in a contract.
The defendant filed two affidavits of Edward Crennan, a solicitor acting for the defendant, in support of the application. The first was dated 20 April 2010 and the second 17 May 2010. It also filed an affidavit sworn by its general manager in Western Australia, Craig Donaldson, sworn 14 May 2010.
The plaintiff filed two affidavits in relation to the application. The first is an affidavit of its general manager, one Christopher Robert Garlick, sworn 18 May 2010. The second is an affidavit of its solicitor, Yerko Radich, sworn 10 May 2010.
The relevant clause in the alleged contract relating to dispute resolution is contained in cl 28 of a document entitled "General Conditions of Contract":
"28DISPUTE RESOLUTION
28.1Resolution at Officer Level
Disputes, questions or differences of opinions ("disputes") arising out of the Agreement shall be resolved, if possible, at the site personnel level.
28.2Dispute Resolution Process
If within fourteen (14) days of the dispute arising, it had not been resolved, the following process shall be a condition precedent to any litigation:
a)The Subcontractor's Representative or the Contractor's Representative shall formally notify the General Managers of both parties that there is an issue that requires resolution.
b)The Subcontractor's Manager and the Contractor's Manager shall meet within fourteen (14) days after the dispute has been referred to them.
c)If the Subcontractor's Manager and the Contractor's Manager are unable to resolve the issue within thirty (30) days, the issue shall be referred to the Chief Executive Officers of the Subcontractor and of the Contractor.
d)The Chief Executive Officers of the Subcontractor and the Contractor shall meet within fourteen (14) days after the dispute has been referred to them and attempt to resolve the dispute or, if that is not possible, to agree on the means by which the dispute should be resolved."
The first issue for determination is whether or not cl 28 forms part of the contract between the parties. The second issue for the determination is whether or not the court ought to stay or dismiss the action.

Terms of the contract

In relation to the first issue, it is significant that this action is not an application for summary judgment. I have not been asked to make a determination as to whether or not the action ought to be dismissed summarily on its merits on the basis that cl 28, in particular the condition precedent, has not been complied with. Rather, the application was argued in the form of a stay application, essentially analogous to those cases in which there is a stay due to there being an arbitration clause or due to there being some statutory pre‑condition to the parties litigating.
In relation to cl 28, for the purposes of the stay application, I am satisfied that cl 28 forms part of the contract between the parties. I say this for three reasons.
First, the document containing cl 28, being the General Conditions of Contract, is pleaded by the plaintiff in its statement of claim as being part of the contract between the parties.
Second, in the correspondence between the solicitors prior to the application, there was confirmation that the contractual documents included the General Conditions of Contract. In particular, by a letter dated 22 February 2010, the defendant's solicitors wrote to the plaintiff's solicitors requesting that they identify with precision the contractual documents that the plaintiff's solicitors said comprise the contract. The response is by letter dated 18 March 2010. The response includes:
"Letter from Defendant to Plaintiff dated 6 May 2008 attaching unsigned and undated document entitled general conditions of contract, Vegetation Management Services, for south‑west interconnection system."
The third reason is that the plaintiff was not able to point to me anything in the materials to the effect that cl 28 was not a part of the contract between the parties. For example, it may have been the case that in one of the subsequent pieces of correspondence identified in the statement of claim, there was a contradictory clause to cl 28, such that there could then be an argument that that letter constituted a counter offer to that extent, which was subsequently accepted.
For the purposes of this application, I am prepared to find that the cl 28 is in the contract between the parties.

Stay application

Dealing then with the stay application, the court has an inherent power to order a stay to prevent its processes from being abused: Wentworth v Attorney-General (NSW) (1984) 154 CLR 518; Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334; and Mikkelsen v United Group Ltd [2005] WADC 24. The rationale for the court's intervention is to ensure that the court can operate effectively - or, put in the negative, the court will act where "to abstain from intervening could prevent the court from acting effectively": Geraldton Building (supra) at p 345.
In order to determine whether there has been an abuse of process, the court must balance the private interests of the parties against the broader public interest considerations involved in the administration of justice: Geraldton Building, at 345; Belcher v Austral Ships Pty Ltd [2002] WADC 259 at [29]; and Mikkelsen (supra) at [9]. There are thus three sets of interests that must be balanced:
(a)the interests of the party seeking the stay, in particular what prejudice the party would suffer if the stay is not granted;
(b)the interests of the party opposing the stay, in particular whether that party would suffer any prejudice if the stay is granted; and
(c)the public interest in the administration of justice, in particular ensuring that scarce public resources both in terms of time and facilities are applied in the best and most efficient means possible (see in particular: Geraldton Building at 345).
Overriding these perspectives is the caveat that the power to order a stay must be used with caution: Geraldton Building at 345.
In applying these principles to the present case, the interests of the party seeking the stay (the defendant) is that it says that the parties agreed contractually to try and resolve their disputes pursuant to cl 28 without the need to litigate. It seeks the opportunity to settle the matter or otherwise agree on the mechanism to resolve the matter without the need to go through the litigation process.
In support of the application, the defendant referred the court to the decision in GWJ Blackman & Co SA v Oliver Davey Glass Co Pty Ltd & Noel Searle Pty Ltd [1966] VR 570. In that case, the Full Court of the Supreme Court of Victoria made the following comments in relation to the policy behind statutory provisions requiring compliance with arbitration clauses (at 474 – 475):
"In the form the section throws upon the party to a submission, who desires that the agreement for submission should be enforced, the burden of satisfying the court that there is no sufficient reason why the matter should not be referred in accordance with the submission. But in applying the section courts have consistently acted on the view that the parties should be kept to their bargain unless strong reasons are shown why an action commenced in defiance of the agreement for a submission should be allowed to continue. In substance it is the party who is resisting an application for a stay who has the burden of satisfying the court that there are strong grounds for refusing to allow the dispute to be determined in accordance with the submission."
The reference in this quote to the "submission" is a submission to arbitration.
In the present case, it seems to me from a review of the correspondence, that neither party appreciated that there was an informal dispute resolution clause in the contract between them. Neither the plaintiff's general manager nor the defendant's general manager insisted on compliance with cl 28 in the course of the dealings between them. It seems that at some later stage a lawyer for one or other of the parties discovered the condition buried in the general conditions and then has sought to enforce it.
To the extent that the parties were not aware of their contractual obligation, this is technically immaterial. As the decision of the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 makes very clear, the parties are bound to a contract that they have agreed to, even if they do not appreciate the precise terms of the contract.
The interests of the party opposing the stay, the plaintiff, is to move the dispute towards resolution as expeditiously as possible. The principal prejudice it suffers for delay is that it is out of its money. This is a prejudice that can be dealt with by way of interest.
In its application, the defendant sought dismissal of the action. It seems to me that, at its strongest, the action should be discontinued rather than dismissed. It may very well be the case that even after compliance with cl 28, the parties are unable to agree and, therefore, the condition precedent to litigation is satisfied.
If there is a discontinuance as opposed to a dismissal, the obvious prejudice of the dismissal to the plaintiff falls away.
The final category is the public interest in the administration of justice. It seems to me that the court should be very willing to support, indeed enforce, a contract that the parties have agreed whereby they will attempt to resolve the dispute by informal means.
It seems to me that, recognising that the power to exercise a stay must be used with caution, the appropriate balance is struck in the following way. First, the parties ought be held to their agreement to try and resolve the matter informally. Second, there ought to be a stay in the action whilst that occurs. Third, the plaintiff ought be given an opportunity to have the stay lifted on the basis of satisfying the court that there has been compliance with cl 28 yet no agreement. Fourth, if it does not do so, the action ought be discontinued with costs going to the defendant.
Orders in those terms would reflect an appropriate balance of the competing risks of injustice, as well as giving effect to the public interest that court resources ought not be used where the parties have agreed that there be an attempt at informal resolution and that attempt has not been complied with.
On that basis, I will hear the parties as to formal orders, as well as on the question of costs.