Felmeri Builders and Developers Pty Ltd v Tonway Pty Ltd - [2023] SASC 54

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeal: Civil)
FELMERI BUILDERS AND DEVELOPERS PTY LTD v TONWAY PTY LTD
[2023] SASC 54
Judgment of the Honourable Justice Blue
14 April 2023
ARBITRATION - CONDUCT OF ARBITRAL PROCEEDINGS - GENERALLY
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS
Appeal against a decision by a Magistrate dismissing the appellant’s application for referral to arbitration of the parties to an action instituted against it by the respondent pursuant to section 8 of the Commercial Arbitration Act 2011 (SA).
In the action, the respondent seeks the following relief under the Building Work Contractors Act 1995 (SA):
1an order under subsection 36(4) for repayment of monies on statutory termination of the contract under subsection 36(2);
2an order under subsection 38(4) modifying the terms of the contract and repayment of monies by reason of harsh and unconscionable terms under subsection 38(2);
3an order under subsection 37(6)(b) for compensation for breach of statutory warranties implied by section 32.

In the alternative to the third claim under subsection 37(6)(b), the respondent seeks damages for breach of contract and in the further alternative damages for breach of duty of care.
The appellant filed an interlocutory application seeking referral to arbitration under the provisions of the contract. The Magistrate held that the arbitration provisions of the contract were rendered void by section 42 of the Building Work Contractors Act. The Magistrate held that it was not appropriate to refer the non-statutory causes of action to arbitration because they were in the alternative to the statutory causes of action.
In substance the appeal raises the following issues:
1Is the reference in section 42 of the Building Work Contractors Act to a “right” confined to substantive rights or does it encompass the right to proceed in the Magistrates Court under sections 36, 37 and 38?
2If the latter, is the right confined to the right to institute a proceeding or does it encompass the right to institute and prosecute a proceeding to determination in the Magistrates Court?
3Do clauses 25 to 27 of the contract (as opposed to section 8 of the Commercial Arbitration Act) purport to exclude, limit, modify or waive the right to proceed in the Magistrates Court?
4Is it an implied term of the contract that an arbitrator may exercise the powers of the Magistrates Court under sections 36, 37 and 38 of the Building Work Contractors Act?
5Did section 8 of the Commercial Arbitration Act require referral to arbitration of the non-statutory causes of action in any event?
Held (dismissing the appeal):
1The reference in section 42 of the Building Work Contractors Act to a “right” encompasses the right to proceed in the Magistrates Court under sections 36, 37 and 38 (at [143]).
2The right encompasses the right to institute and prosecute a proceeding to determination in the Magistrates Court (at [168]).
3Clauses 25 to 27 of the contract purport to exclude, limit, modify or waive the right to proceed in the Magistrates Court (at [179]).
4It is not necessary to decide whether it is an implied term of the contract that an arbitrator may exercise the powers of the Magistrates Court under sections 36, 37 and 38 of the Building Work Contractors Act (at [194]).
5Section 8 of the Commercial Arbitration Act did not require referral to arbitration of the non-statutory causes of action (at [201]).
6Appeal dismissed (at [202]).

Australian Competition and Consumer Act 2010 (Cth); Builders Licensing Act 1986 (SA) s 23, s 24, s 25, s 27, s 31, s 32, s 33; Building Work Contractors Act 1995 (SA) s 3(1), s 28, s 29, s 30, s 32, s 36, s 36(2), s 36(3), s 36(4),s 37, s 37(6)(b), s 38, s 38(2), s 38(4), s 39, s 40, s 42; Commercial Arbitration Act 2011 (SA) s 1(1), s 1(3), s 2(1), s 7(1), s 8, s 10, s 10(1), s 11, s 11(1), s 12, s 19, s 20, s 22, s 23, s 24, s 25, s 27C, s 28, s 33B, s 34(2), s 34A, s 35, s 36; Commercial Tribunal Act 1982 (SA); Magistrates Court Act 1991 (SA) s 3(1), s 3(2), s 5, s 7B, s 28, s 38(4), s 38(5), s 38(6), s 40, s 42, s 49(1)(e), s 50, referred to.
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Giles v GRS Constructions Pty Ltd [2001] SASC 274; Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206; Janbar Pty Ltd v Arborcrest Pty Ltd [2020] FCA 1519; Leunig v Henley Arch Pty Ltd [2000] SASC 81 ; Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd [2011] NSWSC 195; Tesseract International Pty Ltd v Pascale Construction Pty Ltd [2021] SASCA 8, considered.

FELMERI BUILDERS AND DEVELOPERS PTY LTD v TONWAY PTY LTD
[2023] SASC 54
Single Judge Appeal: Civil

BLUE J: Felmeri Builders and Developers Pty Ltd (Felmeri) appeals against a decision by a Magistrate dismissing its application for an order referring the parties to an action instituted against it by Tonway Pty Ltd (Tonway) in the Magistrates Court (the action) to arbitration pursuant to section 8 of the Commercial Arbitration Act 2011 (SA) (the Arbitration Act).
The parties entered into a domestic building contract in November 2015 for the construction by Felmeri for Tonway of a house on land owned by Tonway (the contract). The contract contained dispute resolution terms providing for “conciliation” and arbitration. The contract was a domestic building work contract within the meaning of, and was governed by, the Building Work Contractors Act 1995 (SA) (the Building Act).
In the action, Tonway seeks the following relief under the Building Act:
1an order under subsection 36(4) for repayment of monies on statutory termination of the contract under subsection 36(2);
2an order under subsection 38(4) modifying the terms of the contract and repayment of monies by reason of harsh and unconscionable terms under subsection 38(2);
3an order under subsection 37(6)(b) for compensation for breach of statutory warranties implied by section 32.
In the alternative to the third claim under subsection 37(6)(b), Tonway seeks damages for breach of contract and in the further alternative damages for breach of duty of care.
Felmeri filed an interlocutory application seeking referral to arbitration under the provisions of the contract. Tonway contended that the arbitration provisions of the contract were rendered void by section 42 of the Building Act. That section renders void any purported exclusion, limitation, modification or waiver of a right conferred, or contractual condition or warranty implied, by the Building Act.
The Magistrate upheld Tonway’s contention, applying the decision in Leunig v Henley Arch Pty Ltd,[1] which the Magistrate found was binding, and the decisions in Liu v Marusic[2] and Marusic v Liu,[3] which the Magistrate considered to be persuasive. The Magistrate held that it was not appropriate to refer the non-statutory causes of action (the alternative claims for breach of contract and breach of duty of care) to arbitration because they were in the alternative to the statutory causes of action.
[1] [2000] SASC 81 at [31].
[2] Unreported, Magistrates Court of South Australia, Magistrate Morris, 15 October 2012.
[3] Unreported, District Court of South Australia, Judge Barrett, 30 April 2013.
Felmeri appeals against the Magistrate’s decision on two grounds containing a total of 12 sub-grounds (many of which overlap). In substance the appeal raises the following issues:
1Is the reference in section 42 of the Building Act to a “right” confined to substantive rights or does it encompass the right to proceed in the Magistrates Court under sections 36, 37 and 38?[4]
2If the latter, is the right confined to the right to institute a proceeding or does it encompass the right to institute and prosecute a proceeding to determination in the Magistrates Court?[5]
3If the latter, do clauses 25 to 27 of the contract (as opposed to section 8 of the Arbitration Act) not purport to exclude, limit, modify or waive the right to proceed in the Magistrates Court?[6]
4If no to 1, 2 and 3, is it an implied term of the contract that an arbitrator may exercise the powers of the Magistrates Court under sections 36, 37 and 38?[7]
5Did section 8 of the Arbitration Act require referral to arbitration of the non-statutory causes of action in any event?[8]
[4]     Appeal grounds 1a, b, c, d, f, g, 2b, c.
[5]     Appeal grounds 1a, b, e, f, g.
[6]     Appeal ground 2a.
[7]     Nor raised by an appeal ground but arose on hearing of the appeal.
[8]     Appeal grounds 1h, 2d.
Background
Tonway is the registered proprietor of land at Port Noarlunga South (the land).
Felmeri is a building work contractor within the meaning of the Building Act.
On 20 November 2015 Felmeri and Tonway entered into a contract for the construction by Felmeri of a double storey dwelling on the land (the works) for $690,000. The contract is a domestic building work contract within the meaning of the Building Act. The works are domestic building works within the meaning of the Building Act.
Clauses 25, 26 and 27 of the contract provided:
25DISPUTE RESOLUTION
25.1 If a dispute between the Builder and Owner arises in connection with this contract might then either party shall deliver to the other a notice of dispute identifying and providing details of the dispute.
25.2 Whoever gives a notice of dispute must send a copy to the Master Builders Association of South Australia with $400.00 towards the cost of dispute conciliation.
25.3 The Master Builders Association’s Chief Executive Officer or delegate will be the Conciliator.
25.4 The Conciliator can:
25.4.1refer to documents of either party
25.4.2require the Builder and Owner to attend any meeting
25.4.3make any reasonable request for information or action to enable him or her to resolve the dispute.
25.5 The Conciliator can engage in a consultant to advise him or her.
25.6 The dispute conciliation will go ahead speedily and without formality.
25.7 The Conciliator will properly consider the dispute and would decide on justice and fairness.
25.8 The Conciliator’s costs (including the cost of any consultant) will be paid equally by the parties.
25.9 Both the Builder and Owner will pay their own costs associated with dispute conciliation.
25.10 The Conciliator can order that costs be paid differently from clauses 25.8 and 25.9 but only if there are special reasons.
25.11 Neither the Builder nor Owner may be represented by a lawyer for dispute conciliation.
26ARBITRATION
26.1 If the dispute is not resolved by Dispute Conciliation either party may refer the dispute to arbitration by notifying in writing the other party.
26.2 Whoever gives notice of their intention to refer the dispute to arbitration must give a copy of the notice to the Master Builders Association of South Australia with $400.00 towards the cost of arbitration.
26.3 The $400.00 is extra to the $400.00 mentioned in clause 25.2.
26.4 The Chief Executive Officer of the Master Builders Association of South Australia will appoint an Arbitrator.
26.5 The appointed Arbitrator must be a member of the Institute of Arbitrators.
26.6 The Arbitrator will notify both the Builder and the Owner of their appointment.
26.7 The Arbitrator will decide who will pay the costs of arbitration.
26.8 Lawyers can be involved if the dispute involves more than $25,000.00 or such other amount stipulated by the Commercial Arbitration Act.
27RULES APPLYING TO DISPUTE CONCILIATION AND ARBITRATION
27.1 At any time, the Conciliator Arbitrator may
27.1.1Require any money in dispute to be paid into the Master Builders Association trust account.
27.1.1.1Require that money towards the costs be paid into the Master Builders Association trust account.
27.1.1.2Direct how money in the trust account is to be paid.
27.2 Except as required by this contract, the conciliator or arbitrator may handle the dispute as he or she wishes.
27.3 The Builder and Owner must comply with the directions of the Conciliator or Arbitrator.
27.4 The Conciliator’s or Arbitrator’s decision will be in writing.
27.5 The written decision must state issues in dispute and the decision on them.
27.6 The decision will be binding on the Builder and Owner.
27.7 The Builder and Owner release the Conciliator and Arbitrator from any costs or loss resulting from the dispute conciliation or arbitration.
On 4 December 2015 Felmeri commenced the works.
On 7 May 2018 Tonway lodged with the Master Builders Association of South Australia a notice of dispute pursuant to clause 25 of the contract. A conciliator was appointed and the parties engaged in “conciliation” pursuant to clause 25 of the contract.
On 6 March 2019 the Conciliator issued a Determination. The Conciliator determined that the contract price should be adjusted upwards by $53,754.33 on account of 23 variations. The Conciliator determined that Felmeri should remedy 12 defects. The Conciliator acted as if he were performing an arbitration.
On 26 August 2019 Fred Centofanti, a building consultant, issued a building inspection report to Tonway. He identified numerous defects and the remedial work required in respect of each defect and assessed the cost to remedy each defect. The total remedial cost was $109,810 plus an allowance of five per cent for unforeseen items and a builder’s margin of 17.5 per cent. He identified numerous items of work that were incomplete and the cost to complete each item. The total completion cost was $295,570 plus an allowance of five per cent for unforeseen items and a builder’s margin of 17.5 per cent. He also allowed for insurances totalling $6,000. The total cost to remedy defects and complete works was assessed at $499,643.
On 10 September 2019 Tonway gave to Felmeri notice of termination of the contract pursuant to subsection 36(3) of the Building Act and in the alternative for breach of contract. It attached a copy of Mr Centofanti’s report.
Up to 10 September 2019, Felmeri had issued invoices for progress claims and asserted variations totalling $574,125. Tonway had paid to Felmeri that total amount.
On 7 December 2021 Tonway filed in the Magistrates Court a Claim supported by a statement of claim. The statement of claim pleaded the statutory and common law causes of action summarised at [3] above. It pleaded that the cost to remedy defective work was $137,115. It pleaded that the cost to complete was $318,757 compared to the difference between the contract price and the amount Tonway had paid to Felmeri totalling $117,875 (giving a difference of $200,882). Although the amount claimed under each cause of action was not explicitly pleaded, it was clarified on appeal that the amounts of the claims were as follows:
1Aclaim under subsection 36(4): $200,882;
1Balternative claim under subsection 38(4): $200,882;
2Aclaim under section 37(6)(b): $137,115;
2Balternative claim for breach of contract or breach of duty of care: $137,115.
On 22 June 2022 Felmeri filed an interlocutory application seeking an order referring the parties to arbitration under the provisions of the contract.
The Magistrate’s reasons
The Magistrate summarised the application, the facts, the issues and the parties’ contentions. The Magistrate referred to Tonway’s contention that in Leunig v Henley Arch Pty Ltd[9] Martin J held as part of the ratio decidendi that “a right to have recourse to the Magistrates Court pursuant to s 37 is a right conferred for the purposes of s 42 of the BWCA” and to Felmeri’s contention that that statement was obiter or alternatively should be distinguished from the present case.
[9] [2000] SASC 81.
The Magistrate referred to a decision by Magistrate Morris in Liu v Marusic[10] in which he held that subsections 36(3) and (4) created rights to which section 42 of the Building Act applied and to the decision of Judge Barrett in Marusic v Liu[11] on review which affirmed that decision.
[10] Unreported, Magistrates Court of South Australia, Magistrate Morris, 15 October 2012.
[11] Unreported, District Court of South Australia, Judge Barrett, 30 April 2013.
The Magistrate referred to contentions by Felmeri in the alternative that the rights conferred by the relevant provisions of the Building Act were only rights to institute a proceeding and the question whether a proceeding should be referred to arbitration arose subsequently and was not entrenched by section 42. He referred to a further contention that in the alternative the non-statutory causes of action should be referred to arbitration.
The Magistrate said:
I accept Tonway’s submission that the decisions in Leunig is not obiter and that ratio decidendi is binding on this Court. The decision of Marusic is also persuasive.
I do not consider that the facts in Leunig and/or Marusic are such that they should not be followed. Those cases were concerned with rights under the BWCA and whether those rights were protected by s 42 of the BWCA, the different facts arising in this matter do not alter that position and the same proposition is the matter relevant to this Claim.
This is supported by the persuasive Morris Decision which applied Leunig, and which identified that s 42 of the BWCA applied to not just the right to institute proceedings in the Magistrates Court, but to other rights under the BWCA including but not limited to those arising under s 36 of the BWCA.
I further accept Tonway’s submission that the right under s 38 of the BWCA is also a right protected by s 42 of the BWCA. In those circumstances, the arbitration provisions in the Contract offend s 42 of the BWCA and are null and void. Therefore, the exclusion within s 8 of the CAA applies to the Claim.
I further do not consider it appropriate to refer the causes of action that do not relate to the BWCA to arbitration because that may have the effect of circumventing the BWCA itself and the rights of the consumer under the BWCA.
Further, the breach of contract is a plea in the alternative to the BWCA and therefore I do not consider it appropriate to separate the Claim. By separating the Claim, Felmeri is in essence seeking to circumvent the protection provided to a party under s 42 of the BWCA.[12]
The legislative regimes
[12] Footnotes omitted.
The Building Act
The Building Act replaced the Builders Licensing Act 1986 (SA) (the Repealed Act) on 1 July 1996. Many provisions of the Building Act (particularly those in Part 5) reproduce (with or without minor changes) corresponding provisions of the Repealed Act.
The Building Act applies to building work contractors and building work. They are defined by subsection 3(1) in the following terms:
building work contractor means—
(a) a person who carries on the business of performing building work for others; or
(b)a person who carries on the business of performing building work with a view to the sale or letting (whether by lease, licence or other agreement) of land or buildings improved as a result of the building work;
building work means—
(a)the whole or part of the work of constructing, erecting, underpinning, altering, repairing, improving, adding to or demolishing a building; or
(b)the whole or part of the work of excavating or filling a site for work referred to in paragraph (a); or
(c) work of a class prescribed by regulation;

Parts 2, 3, 3A, 3B and 4 provide for the licensing of building work contractors, registration of building work supervisors and discipline of building work contractors and supervisors. Their evident purpose is to protect owners who contract with building work contractors for the performance of building work.
Part 5 is entitled Provisions with respect to domestic building work. It applies to domestic building work (although some of its provisions do not apply to minor domestic building work[13]) and domestic building work contracts. They are defined by subsection 3(1) in the following terms:
domestic building work means—
(a)the whole or part of the work of constructing, erecting, underpinning, altering, repairing, improving, adding to or demolishing a house; or
(b)the whole or part of the work of excavating or filling a site for work referred to in paragraph (a); or
(c) work of a class prescribed by regulation;
domestic building work contract means a contract between a building work contractor and another person for the performance by the contractor of domestic building work (including any variation of such a contract), but does not include a subcontract for the performance of domestic building work;
[13] The work in the present case was not minor domestic building work and for convenience I ignore the exclusions in respect of minor domestic building work.
The evident purpose of Part 5 is to protect owners who contract with building work contractors for the performance of domestic building work.
Formal requirements for contracts
Division 1 of Part 5 is entitled Requirements in relation to certain domestic building work contracts. It applies to domestic building work contracts other than for the performance of minor domestic building work.
Section 28[14] requires a domestic building work contract to be in writing, comply with any requirements of the regulations as to the contents of domestic building work contracts and comply with the other requirements set out in subsection (1). If the contract does not comply with the requirements set out in subsection (1), the building work contractor is guilty of an offence.
Price
[14] Essentially the same as section 23 of the Repealed Act.
Section 29[15] governs the price for the performance of the building work specified in the contract. Prima facie, the contract must stipulate a specific fixed price. There are exceptions (subject to constraints) in respect of cost-plus contracts and allowing rise-and-fall clauses.[16]
Progress payments
[15] Largely the same as section 24 of the Repealed Act.
[16] There is also an exception in respect of GST but this is principally relevant to contracts entered into before 1 July 2000.
Section 30[17] governs progress payments. Subsection (1) provides:
[17] Essentially the same as section 25 of the Repealed Act.
30—Payments under or in relation to domestic building work contracts
(1)A person must not demand or require that a payment be made under a domestic building work contract or preliminary work contract by the person for whom work is to be performed under the contract unless—
(a) the payment constitutes a genuine progress payment in respect of work already performed; or
(ab) the person is entitled to the payment under the Building and Construction Industry Security of Payment Act 2009; or
(b)the payment is of a kind authorised under the regulations.
Maximum penalty: $5 000.
Statutory warranties
Division 2 of Part 5 is entitled Statutory warranties. It applies to domestic building work contracts. Section 32[18] relevantly provides:
[18] Essentially the same as section 27 of the Repealed Act.
32—Statutory warranties
…
(2)The following warranties on the part of the building work contractor are implied in every domestic building work contract:
(a)     a warranty that the building work will be performed in a proper manner to accepted trade standards and in accordance with the plans and specifications agreed to by the parties;
(b)     a warranty that all materials to be supplied by the contractor for use in the building work will be good and proper;
(c)     a warranty that the building work will be performed in accordance with all statutory requirements;
(d)     if the contract does not stipulate a period within which the building work must be completed—a warranty that the building work will be performed with reasonable diligence;
(e)     if the building work consists of the construction of a house—a warranty that the house will be reasonably fit for human habitation;
(f)     if the building owner has expressly made known to the contractor, or an employee or agent of the contractor, the particular purpose for which the building work is required, or the result that the building owner desires the building work to achieve, so as to show that the building owner relies on the contractor's skill and judgment—a warranty that the building work and any materials used in performing the building work will be reasonably fit for that purpose or of such a nature and quality that they might reasonably be expected to achieve that result.
…
(5)Proceedings for breach of a statutory warranty must be commenced within five years after completion of the building work to which the proceedings relate.
(6)The period of limitation prescribed by subsection (5) may not be extended.
(7)In proceedings for breach of a statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arose from instructions insisted on by the building owner contrary to the advice in writing of the defendant.
Building indemnity insurance
Division 3 of Part 5 is entitled Building indemnity insurance. It applies to domestic building work contracts other than for minor domestic building work or work for which development or building approval was not or is not required. It requires a building work contractor to have in place a complying policy of insurance.
Statutory termination right
Section 36 (Division 4 of Part 5) applies to domestic building work contracts other than for minor domestic building work. Section 36[19] relevantly provides:
[19] Substantially the same as section 31 of the Repealed Act.
36—Right to terminate certain domestic building work contracts
…
(3)A building owner under a domestic building work contract may, by instrument in writing signed by the building owner and served personally on the building work contractor, or posted by certified mail addressed to the contractor, before the prescribed time, give notice to the contractor of the building owner's intention not to be bound by the contract and the contract is to be taken to have been terminated at the time the notice is served or posted in accordance with this subsection.
(4)If a contract has been terminated under subsection (3) (or under Part 5 of the repealed Act), the Magistrates Court may, on application by the building owner or the building work contractor, make such orders as it thinks just—
(a)     providing for the return or repayment of the whole or part of any consideration, or the value of any consideration, given by the building owner under or in relation to the contract; or
(b)     providing for payment to the contractor in respect of any materials supplied, or any building work or other services performed, by the contractor under or in relation to the contract.
(5)In this section—
business day means any day except a Saturday or a Sunday or other public holiday within the meaning of the Holidays Act 1910;
prescribed time means—
(a)     the end of five clear business days after the making of the domestic building work contract; or
(b)     if there has been a failure to comply with any of the requirements of Division 1 or 3 in relation to the domestic building work contract—the time of completion of the building work under the contract.
Powers of Magistrates Court
Section 37[20] (Division 5 of Part 5) relevantly provides:
[20] Substantially the same as section 32 of the Repealed Act but the Magistrates Court is substituted for the Commercial Tribunal.
37—Powers of court in relation to domestic building work
…
(2)A party to a domestic building work contract or a person entitled to the benefit of a statutory warranty may apply to the Magistrates Court for the determination of a dispute arising out of the contract or the performance of the building work to which the warranty relates.
(3)An application may not be made under subsection (2) in respect of a dispute arising out of a domestic building work contract unless the dispute involves some question of whether building work has been performed in accordance with the contract.
…
(6)If, on an application under this section, the Magistrates Court is satisfied that there has been any breach of, or failure to perform or fulfil, a contract or warranty to which the proceedings relate, the Court may, subject to this section, make one or more of the following orders:
(a)     to the extent to which it is satisfied that it is practicable for the breach or failure to be remedied by the performance of building work—an order requiring the performance of remedial work;
(b)     an order requiring the payment of an amount due under the contract or an order requiring the payment of an amount by way of compensation for the breach.
(7)An order made against a person under subsection (6)(a) may—
(a)     require the person to perform remedial work specified in the order within the time specified; or
(b)     if the Magistrates Court is of the opinion that the person is not likely to perform the remedial work properly—require the person to employ at the person's own expense a licensed building work contractor to perform remedial work specified in the order within the time specified.
(8)If the Magistrates Court orders a person to perform remedial work, or to cause remedial work to be performed, it may further order the person to provide to the Court, within a specified time after completion of the work, a certificate of a person holding qualifications specified in the order certifying that the remedial work has been performed properly in accordance with the order.
(9)If a person fails to perform remedial work, or to cause remedial work to be performed, in accordance with an order of the Magistrates Court (or an order of the Commercial Tribunal under Part 5 of the repealed Act)—
(a)     the person is guilty of an offence and liable to a penalty not exceeding a fine of $10 000; and
(b)     the Court may, on application, order the person to pay to the applicant such amount by way of compensation as the Court thinks just.
(10)In this section—
statutory warranty means—
(a)a warranty arising under this Act; or
(b) a warranty arising under Part 3C of the repealed Builders Licensing Act 1967.
Harsh and unconscionable terms
Section 38[21] (Division 6 of Part 5) relevantly provides:
[21] Essentially the same as section 33 of the Repealed Act.
38—Harsh and unconscionable terms
…
(2)If a term or condition of a domestic building work contract is harsh or unconscionable or such that a court of Equity would give relief, a party to the contract may apply to the Magistrates Court for relief under this section.
(3)Relief may be granted under this section by the Magistrates Court in proceedings under subsection (2), or by any court in proceedings instituted before the court for the enforcement of a domestic building work contract or for the recovery of damages or other compensation for a breach of such a contract.
(4)The court may, in granting relief—
(a)     avoid ab initio a term or condition of the domestic building work contract against which relief is sought;
(b)     modify the terms or conditions of the contract in such manner as it considers just;
(c)     order the repayment to a building owner of an amount paid by the building owner under a term or condition that has been avoided or modified under this section.
(5)The powers conferred by this section are exercisable in relation to a contract despite the discharge of the contract.
(6)If it appears to the court that a person has, or may have, shared in the profits of, or has, or may have, a beneficial interest in, the transaction in question, the person may be joined as a party to the proceedings and the court may make such orders against, or in respect of, the person as it considers just.
(7)The court may make any other orders and directions that it considers necessary or expedient for the purposes of effectually carrying out this section.
Proceedings in Magistrates Court under Part 5
Section 39 (Division 7) and Schedule 2 relevantly provide:
39—Participation of assessors in proceedings
In any proceedings under this Part, the Magistrates Court will, if a judicial officer of the Court so determines, sit with assessors selected in accordance with Schedule 2.
Schedule 2—Appointment and selection of assessors for Magistrates Court or District Court proceedings under Part 5
(1)The Minister must establish a panel of persons with expertise in building work who may sit with the Magistrates Court or District Court (Civil Division) as assessors in proceedings under Part 5.
(2)A member of the panel is to be appointed by the Minister for a term of office not exceeding three years and on conditions determined by the Minister and specified in the instrument of appointment.
(3)A member of the panel is, on the expiration of a term of office, eligible for reappointment.
(4)Subject to subclause (5), if assessors are to sit with the Magistrates Court or District Court (Civil Division) in proceedings under Part 5, a judicial officer of the Court must select two members from the panel to sit with the Court in the proceedings.
…
At the same time as the Building Act was enacted, the Magistrates Court Act 1991 (SA) (the Magistrates Court Act) was amended. The definition of “minor civil action” was amended to include an application under Part 5 of the Building Act. The effect of this was that all claims under Part 5 of the Building Act, regardless of amount, were prima facie minor civil actions to be dealt with in the Civil (Minor Claims) Division. However, pursuant to subsection 3(4) of the Magistrates Court Act, if the amount or value of the claim was greater than a prescribed amount (originally $5,000 and now $12,000), either party could elect to exclude the dispute or proceeding from the rules governing minor civil actions, in which case it was transferred to the Civil (Consumer and Business) Division.
Section 40 (Division 8) provides:
40—Magistrates Court and substantial monetary claims
(1)If proceedings before the Magistrates Court involve—
(a)a monetary claim for an amount exceeding $100 000; or
(b) a claim for relief in the nature of an order to carry out work where the value of the work exceeds $100 000,
the Court must on the application of a party to the proceedings refer the proceedings into the Civil Division of the District Court.
(2)If proceedings are referred to the Civil Division of the District Court, this Part (including Division 7) applies in relation to the proceedings and parties to the proceedings as if a reference to the Magistrates Court were a reference to the Civil Division of the District Court.
Exclusions etc void
Section 42[22] provides:
42—No exclusion etc of rights, conditions or warranties
Any purported exclusion, limitation, modification or waiver of a right conferred, or contractual condition or warranty implied, by this Act is void.
[22] Identical to section 34 of the Repealed Act.
The Arbitration Act
The Arbitration Act replaced the Commercial Arbitration Act 1986 (SA) (the Previous Arbitration Act). Many provisions of the Arbitration Act are modelled on or are counterparts of provisions of the Previous Arbitration Act.
Subsection 1(1) of the Arbitration Act provides that it applies to domestic commercial arbitrations.
Subsection 2(1) defines “domestic commercial arbitrations” merely by cross-reference to section 1. It defines “arbitration” to mean “any domestic commercial arbitration whether or not administered by a permanent arbitral institution”. These definitions are circular.
Subsection 1(3) defines when an arbitration is domestic. It provides that:
(3)     An arbitration is domestic if—
(a)     the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in Australia; and
(b)     the parties have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled by arbitration; and
(c)     it is not an arbitration to which the Model Law (as given effect by the International Arbitration Act 1974 of the Commonwealth) applies.
The term “arbitration” is effectively not defined by the Arbitration Act.
The term “commercial” arbitration is not defined by the Arbitration Act. However, a note to section 1 provides:
Model Law note—
The term "commercial" should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co‑operation; carriage of goods or passengers by air, sea, rail or road.
Subsection 7(1) defines an “arbitration agreement” to mean:
an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
By reading paragraph (b) of the definition of “domestic” in subsection 1(3) with the definition of arbitration agreement in subsection 7(1), it appears that the Act applies to agreements by the parties to submit to arbitration defined disputes which may arise, or have arisen, between them in respect of a defined legal relationship.
Parts 3 to 6 govern arbitration proceedings from composition of the arbitral tribunal and conduct of proceedings to making of the award and termination of the proceeding. In general terms, these provisions leave it to the parties to agree on appointment of the arbitrator or arbitrators comprising the arbitral tribunal and procedures for the conduct of the arbitration and making of the award, providing default provisions if the parties have not agreed on a relevant matter.
In Part 3, subsections 10(1) and 11(1) leave it to the parties to agree on the number of arbitrators and procedure for appointing them and sections 10 and 11 otherwise provide corresponding default provisions. The Arbitration Act leaves it to the parties to determine whether a person needs any qualification, and if so what, for appointment as an arbitrator. Section 12 provides that the only ground to challenge the appointment of an arbitrator is circumstances giving rise to justifiable doubts as to the arbitrator's impartiality or independence.
In Part 5, subsections 19(1), 20(1) , 22(1), 23(1), 24(1), 25(1) and 27C leave it to the parties to agree on the procedure to be followed, place of the arbitration, language to be used, pleadings to be used, whether hearings are to be oral or in writing, whether an independent expert is to be appointed and whether separate arbitration proceedings are to be consolidated and sections 19, 20, 22, 23, 24, 25 and 27C otherwise provide corresponding default provisions. The only constraint imposed by the Act is imposed by section 18 which requires the arbitrator to afford equal treatment to the parties and give them a reasonable opportunity to present their case.

In Part 6, subsection 28(1) leaves it to the parties to choose the rules of law to be applicable to the substance of the dispute and otherwise provides default provisions. Subsection 33B(1) leaves it to the parties to choose what costs rules apply to the proceeding and section 33B otherwise provides corresponding default provisions.
Parts 7 and 8 provide for recourse against and recognition and enforcement of an award. Subsection 34(2) provides that an award may only be set aside by the Supreme Court on very limited grounds. Section 34A provides for a very limited right of appeal to a court only if the parties agree that an appeal may be made within three months after the award and if the Supreme Court grants leave and confined to a question of law. Section 35 provides that an award can be enforced in a court by application in writing. Section 36 provides very limited grounds for refusal of recognition and enforcement of an award, being essentially the grounds on which an award can be set aside under section 34.
Section 8 provides:
8—Arbitration agreement and substantive claim before court
(1)A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(2)If an action referred to in subsection (1) has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.
The effect of an order under subsection 8(1) is twofold. First, it initiates an arbitral proceeding in the same manner as a referral to arbitration by a party to an arbitration agreement. Secondly, it results in the effective termination of the court proceeding. This is because the relevant rights of the parties will be determined by the arbitration and not by the court. There is nothing further to be done in the court proceeding. The arbitration award is enforceable as such pursuant to section 35 of the Arbitration Act. There is no need, and no provision under the Arbitration Act, for the party who is successful on the arbitration to return to the court proceeding. Indeed, the party who is successful on the arbitration may well not be the applicant in the court proceeding. Moreover, if there is a right to apply to set aside or appeal against the award, the application is made directly to the Supreme Court against the award and not to the court in which the original proceeding was instituted or against any order by it.
The equivalent of subsection 8(1) in the Previous Arbitration Act was subsection 53(1). Making an order under subsection 53(1) was expressed to be discretionary (“may”) and conditioned on the court’s satisfaction that there was no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement and the applicant was ready and willing to proceed with the arbitration.
The parties do not cite any authorities on the meaning of “commercial”. In the absence of authority, it might be thought that the reference to “commercial” designates business to business relationships as opposed to relationships between a business and a consumer. The note to section 1 reproduced at [47] above suggests that the reference to commercial designates business to business relationships. However, as Tonway proceeded on the basis that the contract is governed by the Arbitration Act, I assume that the relationship between Tonway and Felmeri is commercial within the meaning of the Arbitration Act.
The parties do not cite any authorities on the meaning of “arbitration”.
Clause 26 of the contract provides for referral to arbitration and the appointment of an arbitrator and requires that the arbitrator be a member of the Institute of Arbitrators. It clearly provides for arbitration within the meaning of the Arbitration Act.
By contrast, clause 25 provides for “conciliation” and the appointment of a “conciliator” and provides that the conciliator is to be the Chief Executive Officer of the Master Builders Association or their delegate. Clause 25 is ambiguous as to the process to be adopted and as to whether it provides for arbitration within the meaning of the Arbitration Act. On the one hand, it refers to conciliation, which is not arbitration and is a consensual process, clause 26.1 contemplates that the dispute might not be resolved by conciliation but will proceed to arbitration and the fact that clause 26 and not clause 25 refers to arbitration suggest that, whatever the clause 25 process is, it is not arbitration. On the other hand, clause 27 contains rules applying to both conciliation and arbitration, including clause 27.6 which provides that the decision will be binding on the Builder and Owner.
If on its proper construction clause 25 were construed as providing for consensual conciliation and clause 26 provides for arbitration, clause 26.1 makes it a precondition to referral to arbitration that the matter has proceeded to conciliation. In that event, Felmeri would need to seek orders from a competent court requiring Tonway to participate in conciliation pursuant to clause 25 (and probably a stay of the Magistrates Court proceeding in the meantime) and then after conciliation (if unsuccessful) an order under section 8 of the Arbitration Act for referral to arbitration.
If on its proper construction clause 25 were construed as providing for arbitration and clause 26 then provides for a second arbitration, the parties would potentially be put to the time, cost and delay of participating into sequential arbitrations. On this construction, Felmeri’s application for referral to arbitration under section 8 of the Arbitration Act would need to be for a referral in the first instance to arbitration under clause 25.
If on its proper construction clause 25 were construed as providing for a binding determination that does not amount to arbitration and clause 26 then provides for a binding arbitration, the parties would again potentially be put to the time, cost and delay of participating in two sequential determination processes.
In Tesseract International Pty Ltd v Pascale Construction Pty Ltd[23] the Court of Appeal determined the construction of a contract containing terms almost identical to clauses 25 to 27 of the contract, holding that the first clause provided for a binding determination (analogous to expert determination). The question whether that process amounts to an arbitration within the meaning of the Arbitration Act did not arise.
[23] [2021] SASCA 8.
For the future, it is highly desirable that clauses 25, 26 and 27, which are poorly drafted in this and other respects, be reviewed by their author, the Master Builders Association.
Tonway does not contend that section 8 of the Arbitration Act does not apply because clause 25 applies to “conciliation” and it is a precondition to referral to arbitration that the matter has proceeded to conciliation. I therefore proceed on the basis that, leaving aside the effect of section 42 of the Building Act, section 8 of the Arbitration Act would require referral to arbitration in one form or another.
The ambit of “a right” in section 42
Felmeri’s principal contention accepts that Martin J correctly held in Leunig v Henley Arch Pty Ltd[24] that the reference in section 42 of the Building Act to a “right” encompasses the right to litigate in the Magistrates Court under sections 36, 37 and 38 but this is limited to a right to institute a proceeding in the Magistrates Court and does not encompass a right to proceed to a determination by the Magistrates Court.
[24] [2000] SASC 81.
In the alternative, Felmeri contends that Leunig v Henley Arch Pty Ltd was wrongly decided and the reference in section 42 of the Building Act to a “right” is confined to substantive rights and does not encompass the right to seek orders under sections 36, 37 and 38 in the Magistrates Court (which it calls a “forum right”).
Tonway takes issue with both contentions.
There is some interrelationship between the two issues raised by Felmeri’s contentions and they both raise the proper construction of the reference to a “right conferred by this Act” in section 42. However, I address Felmeri’s alternative contention first because it logically arises first.
Substantive rights v rights to litigate in Magistrates Court
Section 42 provides:
Any purported exclusion, limitation, modification or waiver of a right conferred, or contractual condition or warranty implied, by this Act is void.
Felmeri contends that the reference to a “right” is a reference to a substantive right (including the right to the remedy referred to in each of subsections 36(4), 37 and 38(4)) as opposed to a right to seek a remedy in the Magistrates Court. It contends that the Magistrate wrongly held that the right extends to a “right to forum”. It contends that subsections 36(4), 37 and 38(4) of the Building Act merely confer jurisdiction on the Magistrates Court which is not a right within the meaning of section 42.
Starting with the phrase “right conferred … by this Act”, a right to seek a remedy for infringement of a substantive right is generally regarded as a right. Indeed, without a remedy, a substantive right is illusory. The right to seek a remedy is not conferred independently of the court. In sections 36 and 38, the right conferred is a right to seek a remedy in the Magistrates Court and not in any court or other forum. The remedy and the forum are an integrated, indivisible whole.
The other subject of the avoidance of exclusions etc effected by section 42 is a contractual condition or warranty implied by the Act. This refers to the statutory warranties implied by section 32 in every domestic building work contract. This does not assist in construing the word “right” in section 42. It is common ground that the implication of statutory warranties affected by section 32 confers a right and accordingly the reference in section 42 to an implied contractual warranty does not indicate that the legislature created a dichotomy between a warranty and a right. Further, subsections (3) and (4) of section 32 expressly treat the statutory warranties as being rights of the owner and of a purchaser from the owner or the contractor.
Turning to the text of section 36, subsection (3) provides that an owner may terminate a domestic building work contract either within five business days or, if there has been a failure to comply with a provision of Division 1 or Division 3, by the time of completion of the building work under the contract. Subsection (4)(a) provides that, if the contract has been so terminated, the Magistrates Court may, on application by the owner, make such orders as it thinks just providing for repayment of monies paid or other consideration given by the owner.
Felmeri characterises subsection 36(3) as conferring a substantive right and subsection 36(4) as conferring jurisdiction or a forum right. However, if subsection (4) had not been enacted, the rights of the parties would have been governed by the general law. Subsection (4) empowers the Magistrates Court to make such order as it thinks just, which confers on the owner a substantive right that the building owner would not otherwise have.
Felmeri accepts that the remedy conferred by subsection (4) is a substantive right (entrenched by section 42) for the purpose of its dichotomy but contends that the fact that the subsection provides for the remedy to be granted by the Magistrates Court is a mere forum right not entrenched by section 42. However, subsection (4) simultaneously confers jurisdiction and power on a court and confers rights on parties. The conferral of the substantive right is integrated with the conferral of jurisdiction and power on the Magistrates Court. It is an inherently unlikely construction that the right conferred by the single provision is to be divided such that one aspect of the right is entrenched by section 42 and the other is not.
It is true, as Felmeri points out, that subsection (4)(b) empowers a building contractor to seek on termination an order that the Magistrates Court thinks just for payment of an amount in respect of material supplied and/or services performed. This does not detract from the nature of the rights conferred on an owner by subsection (4)(a). In any event subsection (4)(b) itself involves the conferral of a substantive right integrated with the conferral of jurisdiction and power on the Magistrates Court.
Turning to section 37, subsections (2) and (6)(a) and (7) confer power on the Magistrates Court on application by the owner, or a purchaser entitled under subsection 32(3) or (4) to the benefit of a statutory warranty, on finding a breach of the contract or statutory warranties, to make an order requiring a building contractor to perform specified remedial work within a specified time or to employ at their own expense another contractor to do so. Subsection (8) confers power on the Magistrates Court to make an order for certification of performance of remedial work ordered. Subsection (9) confers power on the Magistrates Court to make an order for payment of compensation if the contractor fails to perform or cause to be performed such remedial work.
If section 37 had not been enacted, the rights of the parties on a breach of the contract would have been governed by the general law. An owner would rarely, if ever, be entitled to an order requiring the contractor to undertake remedial work. Section 37 confers jurisdiction and power on the Magistrates Court to order remedial work whenever it is practicable without any further requirement. It also empowers the Magistrates Court to specify a time for the performance of remedial work. It also confers jurisdiction and power on the Magistrates Court to order certification of the performance of remedial work or to award compensation if remedial work ordered is not performed. Under the general law, such orders could not be made.
Subsections 37(2) and (6)(b) confer power on the Magistrates Court on application by the owner, or a purchaser entitled under subsection 32(3) or (4) to the benefit of a statutory warranty, on finding a breach of the contract or statutory warranties, to make an order requiring payment of an amount by way of compensation. Under the general law, a court could award damages but compensation (for example equitable compensation) is a different concept to damages.
Section 37 is another example of a legislative provision that simultaneously confers jurisdiction and power on a court and confers rights on parties. The conferral of the substantive rights is integrated with the conferral of jurisdiction and power on the Magistrates Court. Again, it is an unlikely construction that the right conferred by the single provision is to be divided such that one aspect of the right is entrenched by section 42 and the other is not.
Turning to section 38, subsections (2), (3) and (4) confer power on the Magistrates Court, on application by an owner, if a term of the contract is harsh or unconscionable, to avoid ab initio the term and/or modify the contract terms in such manner as it considers just and to order repayment of an amount paid under a term so avoided or modified. Subsection (6) empowers the Court to make such order as it thinks just against a non-party to the contract who has or may have shared in the profits of, or a beneficial interest in, the transaction in question. Subsection (7) empowers the Court to make any other orders considered expedient for the purposes of effectually carrying out section 38.
Under the general law, a court has no power to make any orders because a contractual term is regarded as harsh. Although a court of equity has power to grant relief in respect of equitable unconscionable conduct, it is clear from the alternative in subsection 38(2) of a term being “such that a court of Equity would give relief” that the statutory concept of unconscionability (and indeed the composite term “harsh or unconscionable”) is broader than the equitable concept of unconscionable conduct. The position in this respect is analogous to the statutory concept of “unconscionable” in section 21 of the Australian Consumer Law.[25]
[25] Schedule 2 to the Australian Competition and Consumer Act 2010 (Cth).
Under the general law, a court would not have jurisdiction or power, or at least unconditional power, to avoid ab initio a term of a contract, to modify any term of the contract or to order repayment of an amount paid under an avoided or modified term or to make any other order considered expedient for the purposes of effectually carrying out section 38. Under the general law, a court would have no jurisdiction or power to make an order against a non-party to the contract.
Section 38 is another example of a legislative provision that simultaneously confers jurisdiction and power on a court and confers rights on parties. The conferral of the substantive rights is integrated with the conferral of jurisdiction and power on the Magistrates Court. Again, it is an unlikely construction that the right conferred is to be divided such that one aspect of the right is entrenched by section 42 and the other is not.
It is true, as Felmeri points out, that section 38 also confers power on a court of general jurisdiction to make the same orders that the Magistrates Court could make provided that proceedings have otherwise been instituted in that court to enforce or recover damages or compensation for breach of the contract. However, the jurisdiction and powers conferred by section 38 on such a court are not ones which such a court would otherwise possess in the same respects as in respect of the Magistrates Court. Again, section 38 simultaneously confers jurisdiction and power on such a court and confers rights on parties.
Sections 36 and 37 exclusively confer jurisdiction and power on the Magistrates Court.[26] They do not, for example, confer any jurisdiction or power on the Supreme Court. The Supreme Court cannot make orders under those provisions. The legislature could have provided that the remedies in subsection 36(4) are available on termination under subsection 34(3) or the remedies in subsection 37(6) are available on a breach of a statutory warranty but deliberately chose to provide those remedies exclusively in the Magistrates Court. It would be incongruous if the statutory intention is that an arbitrator have jurisdiction to grant such remedies but not the Supreme Court.
[26] The Building Work Contractors Act 1995 (SA) gives to either party a right to elect to transfer a proceeding where the amount or value of the claim exceeds $100,000 to the District Court. This is addressed below.
Section 38 confers jurisdiction and power on the Magistrates Court. Although it is not exclusive, in the sense that it also confers jurisdiction and power on a court of general jurisdiction provided that a proceeding has otherwise been instituted in that court, nevertheless the legislature deliberately selected the Magistrates Court as the primary court on which such jurisdiction and power is conferred. The legislature chose to confer the remedies conferred by subsection 38(4) only on courts and not to provide generally that they are available on a term being harsh or unconscionable.
The Magistrates Court had, at the time of enactment of the Building Act (and still has) various legislatively defined characteristics under the Magistrates Court Act and other legislation. It was (and is) a court. It was (and is) a court of record.[27] It had (and has) tenured judicial officers being legal practitioners of at least five years standing.[28] In proceedings under Part 5, a Magistrate may sit with two qualified assessors with experience in building work.[29]
[27] Magistrates Court Act 1991 (SA) section 5.
[28] Magistrates Court Act 1991 (SA) section 7B; Magistrates Act 1983 (SA) sections 5 and 9.
[29] Building Work Contractors Act 1995 (SA) section 39. The Magistrates Court Act 1991 (SA) section 7B provides that, when a Magistrate sits with assessors, questions are determined by majority opinion except questions of law or procedure which are determined by the Magistrate.

Court fees were (and are) prescribed by legislative instrument.[30] Applications under Part 5 of the Building Act were (and are) prima facie to be dealt with as minor civil actions under section 38 of the Magistrates Court Act,[31] in which event legal costs are not generally recoverable and the parties are generally not entitled to legal representation.[32] However, if the amount or value of the claim exceeded the prescribed amount (originally $5,000), either party could elect to proceed in the general division, in which event the parties are entitled to legal representation and legal costs are prescribed by legislative instrument.[33]
[30] Magistrates Court Act 1991 (SA) section 50.
[31] Magistrates Court Act 1991 (SA) subsection 3(1) and (2).
[32] Magistrates Court Act 1991 (SA) subsections 38 (4) and (5).
[33] Magistrates Court Act 1991 (SA) section 49(1)(e).
A right of review to the District Court in respect of minor civil actions and a right of appeal to the Supreme Court in respect of other actions was (and is) granted by the legislation.[34]
[34] Magistrates Court Act 1991 (SA) subsection 38(6) and section 40.
It is evident that the legislature selected the Magistrates Court as the body to hear and determine claims under sections 36 and 37, and the primary body to hear and determine claims under section 38, because of its legislatively defined characteristics. The legislature selected other courts as secondary bodies to hear and determine claims under section 38 because of their legislatively defined characteristics.
By contrast with the Magistrates Court, arbitration has very different characteristics. An arbitrator need not be a legal practitioner and indeed does not need to have any qualifications, expertise or experience. There are no legislative constraints on how an arbitrator is selected. An arbitrator has no tenure. There are no legislative constraints on fees charged by the arbitrator or legal costs that may be awarded by an arbitrator. There is no general right of appeal against an award by an arbitrator.[35]
[35] See [54] above.
The fact that the legislature selected the Magistrates Court, with its legislatively defined characteristics, as the body in which jurisdiction was vested to hear and determine the statutory rights created by section 36 or 37 and the primary body in which jurisdiction was vested to hear and determine the statutory rights created by 38 is a strong indication that the entitlement of a party under those sections to invoke the jurisdiction of the Magistrates Court under those sections is a right conferred by the Act within the meaning of section 42.
It is true, as Felmeri points out, that subsection 40(1) provides that, if a proceeding before the Magistrates Court involves an amount or value exceeding $100,000, either party has a right to elect for the proceeding to be transferred to the District Court. It appears from the conjunction between this section and section 8(1)(d) of the Magistrates Court Act that, if a party does not so elect, the Magistrates Court has jurisdiction in a claim under Part 5 of the Building Act without monetary limit.
However, subsection 40(2) provides that, if a proceeding is transferred to the District Court, Part 5 applies (including section 39 relating to sitting with assessors) as if a reference to the Magistrates Court were a reference to the District Court. It is evident that the legislature selected the District Court as the potential alternative forum in respect of large monetary amounts because of its legislatively defined characteristics, which are generally shared with the Magistrates Court.
The context of section 42 includes the general object of the Act, and of Part 5 in particular. As observed above, the general object of the Act is the protection of owners who engage building work contractors to undertake building work. The general object of Part 5 is to protect owners who engage building work contractors to undertake domestic building work. These objects support a construction of section 42 such that the entitlement of a party under those sections to invoke the jurisdiction of the Magistrates Court under those sections is a right conferred by the Act within the meaning of section 42.
The context also includes the historical context of the Building Act. Section 34 of the Repealed Act was identical to section 42 of the Building Act. Sections 31 to 33 conferred on the Commercial Tribunal virtually the same jurisdiction and powers as are now conferred by the Building Act on the Magistrates Court. The Commercial Tribunal had under the Commercial Tribunal Act 1982 (SA) legislatively defined characteristics. It is evident that the legislature in the Repealed Act selected the Commercial Tribunal because of these characteristics. If the reference to rights in section 34 of the Repealed Act extended to the rights conferred by sections 31 to 33 (including the right to proceed in the Commercial Tribunal), it is likely that the legislature intended the same in respect of section 42 of the Building Act and the right to proceed in the Magistrates Court.
The evident purpose of section 42 of the Building Act is to entrench the protections given by the Act, and in particular by Part 5, to owners and, amongst other things, to prevent building contractors including provisions in domestic building work contracts which prevent or inhibit owners enforcing rights created by, amongst others, sections 36 to 38 in the Magistrates Court. This supports the construction of rights in section 42 extending to the right to proceed in the Magistrates Court in respect of claims under sections 36 to 38.
It is true, as Felmeri contends, that a proceeding in the Magistrates Court can be instituted by a building contractor under section 36(4)(b) of the Building Act. Felmeri also contends that section 37 (and presumably section 38) provide for a proceeding to be instituted by building contractor because they refer to an application being made by a “party” to a domestic building work contract. However, the nature of the remedies that can be granted under sections 37 and 38 is such that proceedings would only be instituted by owners or, in the case of section 37 by a purchaser, against building contractors. The fact that a proceeding might be instituted by a building contractor (albeit inherently unlikely) under section 36(4)(b) of the Building Act does not detract from the general object of Part 5 and is not a reason to construe section 42 in a manner different to the construction that would otherwise be adopted.
The focus of the parties’ submissions was on a conventional arbitration as opposed to determination by the Magistrates Court of rights conferred by sections 36, 37 and 38. However, there are other forms of alternative dispute resolution than conventional arbitration, such as expert determination. If the construction advanced by Felmeri of section 42 is correct, the parties are free to agree on any form of alternative dispute resolution (including novel forms) in respect of those rights. Although some of the following examples may be regarded as fanciful, they illustrate why it was necessarily the intention of the legislature that the right to proceed in the Magistrates Court in claims based on section 36, 37 or 38 is entrenched by section 42.
The parties could agree that there be multiple sequential arbitrations. As observed at [63] above, on one construction clauses 25 and 26 of the contract provide for two sequential arbitrations. The parties could in theory agree on even more sequential arbitrations, inhibiting many owners from pursuing a dispute.
The parties could agree that a dispute must be determined without a hearing and on the face of limited evidence (say no testimonial evidence or only one witness and/or limits on documentary evidence) and submissions. They could agree that a dispute must be determined at a hearing of not more than a specified length (say one hour). The method of determination specified by the parties might well entail that the dispute cannot be determined in a just manner.
The parties could agree that a dispute must be determined by a person who does not have the expertise or experience required to do justice between the parties. For example, they could agree that a dispute be determined by an engineer when it requires accounting or legal expertise or they could agree that it be determined by an accountant when it requires engineering or legal expertise. There is nothing to prevent the parties agreeing that the dispute will be determined by a person or persons selected at random from the electoral roll.
The Building Act proceeds on the premise that there will be inequality in bargaining power as between building contractor and the owner, such that the building contractor is able to dictate the terms of the building contract and, for example, require the adoption of standard terms. If there is inequality of bargaining power, the building contractor would be in a position to dictate terms of the contract relating to alternative dispute resolution favourable to the contractor. On the construction advanced by Felmeri, this would result in the determination of rights conferred by section 36, 37 or 38 (that would otherwise be determined by the Magistrates Court) by alternative dispute resolution pursuant to such favourable terms.
In respect of all of these examples, the position is quite different in a proceeding in the Magistrates Court.
These examples illustrate that it was the intention of the legislature that the right to proceed in the Magistrates Court in respect of claims under sections 36, 37 and 38 were rights conferred by the Act within the meaning of section 42.
Felmeri contends that, in respect of section 36, the fact that the relevant right conferred by the section is the right to terminate is supported by the heading of the section “Right to terminate certain domestic work contracts”. When the Building Act was enacted, subsection 19(3) of the Acts Interpretation Act 1915 (SA) provided that a heading to a section did not form part of an Act. Subsection 19(1) of the Legislation Interpretation Act 2021 (SA) now provides that everything appearing in an Act is part of the Act. However, a heading is applied to an entire section and is necessarily general. The heading given to section 36 is apposite on the assumption that the right to proceed in the Magistrates Court is a right within the meaning of section 42. Moreover, Felmeri concedes that the right to a remedy conferred by subsection 36(4) is entrenched by section 42 (albeit not the right to proceed in the Magistrates Court to seek that remedy).
Felmeri contends that section 37 does not confer any rights upon a party at all but rather confers jurisdiction upon the Magistrates Court to make orders it might not otherwise have power to make. It makes similar contentions in respect of sections 36 and 38. I reject those contentions. These provisions simultaneously confer jurisdiction on the Magistrates Court and confer integrated rights on owners (and in some cases also building contractors) to rights and remedies and to proceed in the Magistrates Court.
Felmeri contends that section 42 is intended, and only intended, to prevent parties, within their private engagements, from circumventing the substantive rights and contractual warranties available to consumers by reason of the operation of the Act by attempting to contract out of the operation of the substantive rights conferred by the Act. I reject that contention for the reasons given above.
Felmeri contends that the construction of section 42 adopted by the Magistrate would create uncertainty when a party had participated in an arbitration resulting in an adverse award and then sought to institute a proceeding in the Magistrates Court under Part 5 of the Building Act relitigating the same issues. Felmeri refers in this respect to an observation by Martin J in Leunig v Henley Arch Pty Ltd,[36] in which his Honour referred to the possibility that such a party may be estopped from relitigating the same issues in the Magistrates Court by issue estoppel or abuse of process principles. Martin J said that it was unnecessary to decide whether such principles would apply but in any event the wording of section 42 was plain.
[36] [2000] SASC 81 at [31].
The construction adopted by the Magistrate does not give rise to the type of uncertainty that may militate against a particular construction. On its proper construction, section 42 either prohibits or does not prohibit general law principles applying to prevent the postulated relitigation. In a case in which it needs to be decided, it will be construed one way or the other. Whichever way it is construed does not detract from the construction of section 42 adopted by the Magistrate in a case in which a party has not so participated in an arbitration.
Although it is unnecessary to decide the question and I do not do so, I do not see any reason why a party to an arbitration agreement should not bound by the outcome if they have participated in the arbitration. Under the general law, the reason that an arbitration award is binding is that the parties have contractually agreed to abide by the event. This gives rise to an accord and satisfaction. Under contractual principles, the anterior rights of the parties merge in their rights under the award and the anterior rights therefore cease to exist. The position is the same as if the parties enter into a binding settlement agreement of a dispute. There is no reason why parties to a domestic building contract cannot settle a dispute over a claim by the owner pursuant to section 36, 37 or 38 of the Building Act. That would not be inconsistent with section 42. There therefore appears to be no reason why the parties could not settle such a dispute by participating in an arbitration leading to an award which they agree is binding. However, the determination of this question is best left to a case in which it needs to be decided.
Felmeri contends that the construction adopted by the Magistrate may have the effect of rendering inoperable section 28 of the Magistrates Court Act. That section provides:
28—Trial of issues by arbitrator
(1)The Court may refer an action or any issues arising in an action for trial by an arbitrator.
(2)The arbitrator may be appointed either by the parties to the action or by the Court.
(3)The arbitrator becomes for the purposes of the reference an officer of the Court and may exercise such of the powers of the Court as the Court delegates to the arbitrator.
(4)The Court will, unless good reason is shown to the contrary, adopt the award of the arbitrator as its judgment on the action or issues referred.
(5)The costs of the arbitrator will be borne, in the first instance, equally by the parties or in such other proportions as the Court may direct, but the Court may subsequently order that a party be reimbursed wholly or in part by another party for costs incurred under this subsection.
A referral of an issue or issues for trial by an arbitrator under section 28 of the Magistrates Court Act is entirely different to a referral to arbitration under section 8 of the Arbitration Act. First and foremost, as described at [56] above a “referral” to arbitration under the Arbitration Act involves the termination of the court proceeding and the parties proceeding to arbitration instead entirely independently of the Court or the court proceeding. By contrast, on a referral of issues for trial by an arbitrator under section 28 of the Magistrates Court Act, the Court retains both the proceeding and control of the proceeding. The arbitrator has no power to determine the outcome of the proceeding but merely provides a report by way of award to the Court. It remains the function of the Magistrate under subsection 28(4) to decide whether or not to adopt the award of the arbitrator. Under subsection 28(3), the arbitrator is an officer of the Court and exercises powers in the name of and on behalf of the Court.
Secondly, under subsection 28(1) the Court has a discretion whether or not to refer an action or any issues in the proceeding for trial by an arbitrator. It is inherently unlikely that the Court would exercise that discretion unless both parties consented. If it did so, it would only be in a case in which it was manifest that it was in the interests of both parties that there be a trial before an arbitrator rather than before a Magistrate. By contrast, if the parties have agreed to arbitrate before the dispute arises, a “referral” to arbitration under section 8 of the Arbitration Act is mandatory.
Thirdly, on a referral under section 28 of an action or any issues for trial by an arbitrator, the Court retains its legislative characteristics. The judgment of the Court remains subject to review or appeal like any other judgment by a Magistrate. Rights to legal representation, fees and the recovery of legal costs are the same as for a trial before a Magistrate.
Felmeri also contends that the construction adopted by the Magistrate may have the effect of rendering inoperable rule 11.4(2)(b) of the Uniform Civil Rules 2020 (SA) (the Uniform Rules), which provides for the making of orders in a proceeding for the appointment of an arbitrator, including the scope of the matter referred to the arbitrator for trial, and the powers of the Court that may be exercised by the arbitrator. As the note to this rule provides, this rule does not itself confer power to refer a action or any issues for trial to an arbitrator but merely reflects section 28 of the Magistrates Court Act.
Felmeri contends that the construction adopted by the Magistrate may result in the Magistrates Court having to deal with potentially thousands of building disputes under Part 5 of the Building Act that otherwise might have been resolved by alternative dispute resolution and this is an unlikely intention of the legislature. However, there is nothing that prevents parties engaging in voluntary alternative dispute resolution processes, such as mediation or conciliation. Further, as addressed above, where appropriate the Magistrates Court has power under section 28 of the Magistrates Court Act to refer an action or any issues for trial by an arbitrator.
Felmeri refers to the following passage from the second reading speech of the Deputy Premier on the Building Work Contractors Bill 1995:
A major element of the approach is to minimise the number of disputes which require formal judicial process for resolution, through the involvement of industry in conciliatory dispute resolution mechanisms.[37]
[37] Parliamentary Debates, House of Assembly, 21 November 1995, page 624.
Felmeri contends that this is inconsistent with any contention that the purpose of the Building Act was to funnel disputes into the Magistrates Court and away from arbitration. It is difficult to attribute meaning to the passage from the second reading speech when there is no provision in the Building Act relating to conciliatory dispute resolution mechanisms. However, on its face, the passage supports the construction of section 42 adopted by the Magistrate. Conciliation involves the voluntary resolution of a dispute and it may be accepted that that is desirable in respect of disputes under Part 5 as much as in respect of any other building disputes. Arbitration is not a conciliatory dispute resolution mechanism. The reference by the Minister to disputes requiring formal judicial process for resolution suggests that this was the process contemplated for the resolution of disputes when they cannot be resolved voluntarily. This is supported by what the Deputy Premier went on to say later:
The Bill proposes that the appropriate forum for the hearing of disputes is the Civil (Consumer and Business) Division of the Magistrates Court, and that where a dispute involves an amount greater than the Magistrates Court financial limit, the District Court be accessed as appropriate.[38]
[38] Parliamentary Debates, House of Assembly, 21 November 1995, page 625.

This passage does not support the construction advanced by Felmeri. Although Martin J referred to a right to apply to the Magistrates Court, it was a right to apply “for determination of a dispute”. In the second sentence, Martin J referred to “the right to seek a particular remedy”. There is no reason to consider that Martin J was drawing a distinction between applying to the Court and the Court proceeding to hear and determine the dispute that Felmeri seeks to draw.
On the contrary, in paragraph 31 reproduced at [128] above, Martin J concluded that “a right to have recourse to the Magistrates Court pursuant to s 37 is a "right conferred" for the purposes of s 42 of the BWCA”. Martin J earlier at paragraphs 15 and 18 referred to a right “to have recourse to the Magistrates Court”. This is apposite to apply to hearing and determination of the application and not merely to making the application.
Moreover, if Martin J had considered that the right under section 37 entrenched by section 42 was limited to the right to institute a proceeding, it would have entailed the summary rejection of Ms Leunig’s contention and Martin J would have said so.
Felmeri also draws attention to the sentence in paragraph 31 reproduced at [128] above where Martin J said:
Properly read, it [section 42] does not prevent the parties from agreeing to an alternative form of dispute resolution.
Read in context, that sentence means simply that section 42 does not prevent parties from agreeing to an alternative form of dispute resolution. If they engage in such dispute resolution and do not institute a proceeding in the Magistrates Court under (relevantly in Leunig) section 37, then section 42 will have no work to do and the resolution will be binding on them according to their agreement. That sentence does not mean that the right entrenched by section 42 is limited to a right to institute, as opposed to prosecute, a proceeding in the Magistrates Court under section 37.
In Liu v Marusic[52] Magistrate Morris said:
A statutory right to merely bring an action that is then stayed until the ADR provisions are complied with, which ADR provisions provide no way back to the court proceedings, it seems to me is a totally vacuous statutory right.
[52] Unreported, Magistrates Court of South Australia, Magistrate Morris, 15 October 2012.
Felmeri contends that the decisions in Leunig and Liu are distinguishable. It contends that in each case the contract precluded the parties from instituting a proceeding in a court; whereas the contract in the present case does not do so. The premises of this contention are not strictly correct. In Leunig the contract expressly permitted the institution of a proceeding in a court but provided that, if another party referred the dispute to a referee or arbitration, the court proceeding must stop. In Liu the Magistrate and Judge did not decide this question but the contract was not unlike that in Leunig. In the present case, the position is not beyond argument given the drafting of clauses 25 to 27.
I will assume (without deciding) that the premises of Felmeri’s argument are correct. Nevertheless, in Liu the court proceeding had already been instituted and the question was whether the arbitration should be stayed and the court proceeding should continue. Magistrate Morris and Judge Barrett held that section 42 entailed that the court proceeding should continue despite the contract terms. In Leunig no proceeding had been instituted in the Magistrates Court. Nevertheless, for the reasons given above, the effect of Martin J’s judgment was that, if it was instituted, section 42 entailed that the court proceeding should continue despite the contract terms.
Felmeri also contends that in Leunig and Liu the issue arose on an application by the owner for a stay of arbitration; whereas in the present case the issue arose on an application for referral to arbitration under section 8 of the Arbitration Act. This is not a relevant distinction.
Having regard to the text, context and evident purpose of sections 36, 37, 38 and 42 of the Building Act and existing authorities, the rights conferred by sections 36, 37 and 38 that are entrenched by section 42 encompass the right to proceed to determination in the Magistrates Court of an application under section 36, section 37 or section 38 as applicable.
The Magistrate was correct in his construction of the Act that the entrenched rights encompass the right to proceed to determination in the Magistrates Court.
Does the contract purport to exclude the Building Act rights?
Felmeri contends that, assuming that section 42 of the Building Act precludes a party purportedly excluding, limiting, modifying or waiving the right to proceed in the Magistrates Court, clauses 25 to 27 of the contract do not purport to do so but rather any such exclusion etc is effected by the operation of section 8 of the Arbitration Act.
Felmeri contends that Tonway, and the Magistrate, conflated the agreement to arbitrate contained in clauses 25 to 27 with the statutory obligation of the Court to refer a matter to arbitration under section 8 of the Arbitration Act. It contends that the contractual provisions must be read separately to section 8 of the Arbitration Act. It contends that, merely by agreeing to resolve disputes through alternative dispute resolution such as arbitration, the contractual provisions do not prevent recourse to the Magistrates Court. It contends that any exclusion etc of recourse to the Magistrates Court arises by reason of the operation of section 8 of the Arbitration Act rather than the terms of the contract itself.
I reject Felmeri’s contention. Subsection 8(1) of the Arbitration Act relevantly provides:
A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests …, refer the parties to arbitration ...
Subsection 8(1) only applies if the matter the subject of the Court proceeding “is the subject of an arbitration agreement”. The term “arbitration agreement” is defined by subsection 7(1) to mean:
an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
Subsection 8(1) therefore only applies if the parties have agreed to submit to arbitration the matter the subject of the court proceeding. In other words, it must be mandatory under the terms of the agreement to submit the matter to arbitration if the applicant for the subsection 8(1) order seeks referral of the dispute to arbitration. If, for example, an agreement merely provided that the parties may agree in future to submit a dispute to arbitration and the parties did not in the future agree to submit the dispute the subject of the court proceeding to arbitration, subsection 8(1) would have no operation. In other words, all that subsection 8(1) does is to provide a machinery for enforcement, by order of the court, of the agreement to arbitrate made by the parties.
Felmeri does not submit that clauses 25 to 27 of the contract do not make it mandatory for a dispute to be submitted to arbitration if one party invokes the arbitration provisions. On the contrary, it submits that the parties have, by the contract, agreed to refer certain disputes to be determined by arbitration.
In any event, on the proper construction of clauses 25 to 27, referral to arbitration is mandatory if one party invokes the arbitration provisions. Clause 25.1 is expressed in mandatory terms, providing that, if a dispute arises in connection with the contract, either party “shall deliver” a notice of dispute, which then leads to the appointment of a conciliator and the process described as conciliation. If on its proper construction clause 25 provides for arbitration (see [63] above), a clause 25 arbitration is mandatory if invoked by either party. If on its proper construction clause 25 provides for conciliation, the conciliation process is a pre-condition to arbitration.
Clause 26.1 provides that, if not resolved by the process under clause 25, either party may refer the dispute to arbitration. It is clear that, on its proper construction, if either party does so, clause 26 makes it mandatory for the parties to participate in and be bound by the outcome of the arbitration.
Further, if clauses 25 to 27 were construed such that arbitration is not mandatory if one party invokes the arbitration provisions, section 8 of the Arbitration Act would not apply, the Court would have no power to refer the parties to arbitration and Felmeri’s application would have to be dismissed on that ground alone.
Accordingly, clauses 25 to 27 are rendered void by section 42 of the Building Act to the extent that they mandate arbitration if one party invokes the arbitration provisions. It follows that section 8 of the Arbitration Act does not operate because there is no valid agreement by the parties to submit to arbitration the disputes the subject of the section 36, section 37 and section 38 claims by Tonway in the Magistrates Court action.
The Magistrate was correct in concluding that clauses 25 to 27 are rendered void by section 42 of the Building Act.
Implied term of contract vesting powers in arbitrator
Felmeri contends on appeal that it is common ground that it is an implied term of the contract that an arbitrator may exercise the powers of the Magistrates Court under sections 36, 37 and 38.
Tonway takes issue with that contention and contends that such a term is not implied. Both parties make submissions in support of their respective contentions. Because Tonway did not advance this contention before the Magistrate, ordinarily it would be required by rule 214.5 of the Uniform Rules to have filed a notice of alternative contention. However, Felmeri does not take this point and I proceed to consider the issue on the merits.
This issue only arises if Felmeri is successful on one of its contentions addressed above, each of which I have rejected. In addition, I have concluded that section 42 of the Building Act renders void clauses 25 to 27 to the extent that they mandate arbitration if one party invokes the arbitration provisions. It follows that it would be impossible in any event to imply the putative implied term and further the proviso to subsection 8(1) of the Arbitration Act would apply. It is not therefore necessary to decide this issue.
It is common ground that prima facie it is an implied term of the contract that an arbitrator is to have the powers that would be exercised by courts generally if the matter had been heard and determined in a court. The issue is whether the implied term extends to the particular powers conferred on the Magistrates Court by sections 36, 37 and 38 of the Building Act.
In Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture[53] the High Court held by majority that it was an implied term of the contract that the arbitrator had the power to award interest possessed generally by courts of law. Stephen J said:
The principle to be extracted from this line of authority is that, subject to such qualifications as relevant statute law may require, an arbitrator may award interest where interest would have been recoverable [had] the matter been determined in a court of law.[54]
[53] (1981) 146 CLR 206.
[54] At 235.
Mason J (with whom Murphy J agreed) answered affirmatively the question posed as follows:
The real question, as it seems to me, is whether there is to be implied in the parties’ submission to arbitration a term that the arbitrator is to have authority to give the claimant such relief as would be available to him in a court of law having jurisdiction with respect to the subject matter.
…
Although s. 94 [of the Supreme Court Act 1970 (NSW) which conferred power on the Court to award interest] is expressed in the form of an authority of the Court, its effect is to alter the antecedent principle of law regulating the payment of interest on moneys included in judgments between the date when the cause of action arose and the date when the judgment takes effect. The parties' submission to arbitration of all their differences is to be construed in the light of the new principle of law regulating the payment of interest enshrined in s. 94. There is to be implied in the submission an authority in the arbitrator to award interest conformably with s. 94 because the Supreme Court is given by the Arbitration Act a supervisory function in relation to an arbitration and because an award of an arbitrator is enforced as if it were a judgment or order of the Court.[55]
[55] At 246, 247.
Barwick CJ (with whom Wilson J relevantly agreed) (dissenting in relation to the power to award interest) said:
So it is said in substance that there should be implied in every consensual reference an authority to the arbitrator to award interest on any sum he shall find to have been due. This is said to be so because the agreement of the parties is that the arbitrator shall decide the matter before him according to the law of the land. So much, I think, may be granted. But the next steps which the submission takes is, in my opinion, unwarranted. It is said that the power or authority to award interest is part of the law of the land within this mutual concession. But, as I have already indicated, the relevant law – the procedural law – is that specified tribunals have such authority. I am unable to accept the submission that it is an implied term of a consensual reference that the arbitrator has authority to award interest in cases falling outside the common law categories.[56]
Wilson J added:
It is said that a term is to be implied in the contract that the arbitrator should decide according to the existing law of the contract and should exercise every right and discretionary remedy given to a court of law. I have no quarrel with the first part of that statement, but the concluding phrase in my respectful opinion goes too far.[57]
[56] At 224.
[57] At 248.
In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[58] the High Court revisited the question whether there was an implied term that the arbitrator had power to award interest in a different context. Mason J (with whom Stephen J, Aickin J and Wilson J relevantly agreed) said:
Accordingly … s. 94 should be regarded as defining the powers of an arbitrator with such variations as the nature of the circumstances requires, subject of course to any specific provision in that behalf which may be contained in the contract constituting the submission to arbitration. The terms of s. 94 are necessarily modified when they are imported into the submission in order to take account of those characteristics which distinguish an arbitration from court proceedings. For the purpose of exercising this implied authority to award interest the Arbitrator proceeds on the footing that the arbitration and the award are to be assimilated to court proceedings and to a curial judgment respectively. The hypothesis is that his award which determines the dispute or difference is the equivalent of a judgment which determines a cause of action.
… [T]he parties by arming the Arbitrator with implied authority to award interest have recognized that the arbitration has taken the place of court proceedings. The statutory power is therefore to be moulded so that it is expressed in terms appropriate to, and capable of being exercised in, an arbitration.[59]
[58] (1982) 149 CLR 337.
[59] At 368-369.
In neither case was the High Court called on to consider whether the implied term extends beyond powers conferred on courts generally (such as interest), or conferred on the Supreme Court which is given jurisdiction in respect of arbitrations, to unique powers conferred on a single court in respect of specific types of claim and specific circumstances (such as the powers conferred on the Magistrates Court by sections 36 and 37 of the Building Act).
In Tesseract International Pty Ltd v Pascale Construction Pty Ltd[60] the Court of Appeal determined a question of law arising in the course of an arbitration pursuant to section 27J of the Arbitration Act. The question was whether the proportionate liability provisions contained in Part 3 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) and Part VIA of the Competition and Consumer Act 2010 (Cth) apply to arbitration proceedings. The Court of Appeal answered the question in the negative because it was held that the proportionate liability provisions were not amenable to application in arbitration proceedings.
[60] [2022] SASCA 107.
Doyle JA (with whom Livesey P and Bleby JA agreed) said in relation to the implication of a term:
The above review of the authorities provides a sound basis for the implication of a term in an arbitration agreement to the effect contemplated by Stephen and Mason JJ in GIO; namely, that the arbitrator shall have authority, in determining the dispute contractually referred by the parties for his or her determination, to grant such relief as would have been available were the claimant to have sued in a court of law of appropriate jurisdiction.
…
I do not think that the BP Refinery conditions would fall to be considered by reference to the particular legislative provisions which the arbitrator is said to have implied authority to apply. Assuming, as I do, that the implied term is to be expressed at a general level (that is, conferring the arbitrator with authority with respect to all of the rights and relief that would have been available in a court of law), any requirement to apply the BP Refinery conditions would fall to be considered at that same level of generality. The question to be considered in applying those conditions would be whether this general authority on the part of the arbitrator is reasonable and equitable, necessary for business efficacy, obvious, able to be expressed in clear terms, and consistent with the express terms of the contract.[61]
[61] At [171], [173].
Again, this case did not involve an issue whether the implied term extends beyond powers conferred on courts generally to unique powers conferred on a single court in respect of specific types of claim and specific circumstances.
In the present case, Felmeri contends that it is an implied term of the contract that an arbitrator may exercise the powers of the Magistrates Court under sections 36, 37 and 38. Such a term will only be implied if the requirements identified in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[62] are satisfied, namely:
(1) it must be reasonable and equitable;
(2)it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3)it must be so obvious that ‘it goes without saying’;
(4)it must be capable of clear expression;
(5)it must not contradict any express terms of the contract.[63]
[62] (1977) 180 CLR 266
[63] At 283 per Lord Simon of Glaidsdale delivering the majority judgment of the Privy Council.
I am disposed to consider that a term to the effect contended by Felmeri is not implied because it is not so obvious that it goes without saying and the contract would not be ineffective without it, there being no reason to attribute to the parties an intention that a claim under section 36 or 38 of the Building Act, in respect of which jurisdiction is vested specifically in the Magistrates Court and not in courts generally, is to be the subject of mandatory arbitration precluding effective recourse to the Magistrates Court. However, it is preferable that determination of this question be left to a case in which it must be decided.
Referral to arbitration of non-statutory claims
Felmeri contends that section 8 of the Arbitration Act required in any event referral to arbitration of the non-statutory causes of action even if there was to be no referral of the statutory causes of action under sections 36, 37 and 38 of the Building Act.

Subsection 8(1) of the Arbitration Act relevantly provides:
A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests … refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
The subject of the referral to arbitration under the subsection is the “matter” which is the subject of the court action. The word “matter” has essentially the same wording as the word “matters” in section 75 of the Commonwealth Constitution.
The common law claims by Tonway for damages for breach of contract and breach of duty of care (for $137,115) are in the alternative to its principal claim for the same amount pursuant to section 37(6)(b) of the Building Act. The alternative common law claims only arise if Tonway first fails in its claim pursuant to section 37(6)(b). These three claims therefore comprise a single integrated matter.[64] It follows that the Magistrates Court only had power under subsection 8(1) of the Arbitration Act to refer that entire matter to arbitration: it could not refer part only of the matter (the alternative common law causes of action) and retain part only of the matter (the principal claim under section 37(6)(b)). It therefore had no power to refer the common law causes of action to arbitration.
[64] It may be that all of the claims pleaded by Tonway (including the claims pursuant to subsection 36(4) and subsection 38(4)) form part of a single matter. It seems more likely that the claims pursuant to subsection 36(4) and subsection 38(4) (which are themselves alternatives to each other) form part of one matter and the claims pursuant to section 37(6)(b) and the common law causes of action form part of a second matter. It is unnecessary to decide this question.
Further, clause 25.1 provides for referral to “conciliation” (which may or may not be arbitration: see [61] above) if “a dispute arises in connection with this contract”. Clause 26.1 provides for referral to arbitration if the dispute is not resolved by the process under clause 25. The subject of the referral to arbitration under clause 26 (and of the referral under clause 25 if it amounts to arbitration) is the “dispute” that has arisen in connection with the contract.
One dispute that arose in connection with the contract is whether Felmeri is obliged to pay $137,115 to Tonway pursuant to section 37(6)(b) of the Building Act or alternatively as damages for breach of contract or breach of duty of care. This is a single dispute for the purposes of clauses 25 and 26 in the same manner as it is a single matter for the purposes of subsection 8(1) of the Arbitration Act. Because the principal claim pursuant to section 37(6)(b) of the Building Act cannot be referred to arbitration, it follows that the alternative common law claims cannot by themselves be referred to arbitration under clauses 25 and 26 of the contract.
The Magistrate was correct in not referring the alternative common law claims to arbitration.
Conclusion
I dismiss the appeal. I will hear the parties as to costs.