Harris v Property Direct (International) Pty Ltd
[2014] VCC 132
•27 February 2014
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
GENERAL CASES DIVISION
Case No. CI-13-05855
| LISA HARRIS | Plaintiff |
| v. | |
| PROPERTY DIRECT (INTERNATIONAL) PTY LTD & ORS | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 February 2014 | |
DATE OF JUDGMENT: | 27 February 2014 | |
CASE MAY BE CITED AS: | Harris v. Property Direct (International) Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 132 | |
REASONS FOR JUDGMENT
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Catchwords: Commercial Arbitration – Application for stay of proceeding - Whether clause in parties’ contract constituted an “arbitration agreement” – Whether clause permitted person determining the dispute to act otherwise than as an arbitrator – Dispute involved persons who were parties in the proceeding but not parties to the contract – Whether dispute covered by the “arbitration agreement” – Stay granted – S.8(1) Commercial Arbitration Act 2011 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Minahan | Zilindis Lawyers |
| For the Defendants | Mr J. Richardson | Black & White Legal |
HIS HONOUR:
1By writ issued 12 November 2013, the plaintiff claims $342,598. The first defendant is a company and is sued for commission owing in respect of the sale of property by the plaintiff on its behalf. The commission is alleged to be owing pursuant to the terms of a written contract between the plaintiff and the first defendant dated 24 March 2011 (“the commission contract”).
2A claim is also made by the plaintiff against the second and third defendants pursuant to s.18 of the Australian Consumer Law. It is alleged that these defendants represented to the plaintiff that they would ensure that the plaintiff would be paid her entitlements under the commissions contract, and that, in the circumstances, their conduct constituted misleading and deceptive conduct.
3The defendants, by summons filed 13 December 2013, seek an order that the proceeding be permanently stayed. The application is made pursuant to s.8 of the Commercial Arbitration Act 2011 (Vic) (“the Act”) relying upon clause 10 of the commission contract. The defendants assert that clause 10 is an “arbitration agreement” which requires the dispute between the plaintiff and the first defendant to be referred to arbitration.
4Clause 10 of the commission contract reads as follows:
10.1Any dispute or difference between the parties arising from or in connection with this Agreement, which cannot be settled by negotiation between the parties must forthwith be referred for determination by a person appointed for that purpose by the parties and, failing agreement, appointed by the President of the Institute of Arbitrators & Mediators Australia (Victorian Division).
10.2Any determination made under the above sub-clause is binding on the parties and the Commercial Arbitration Act (1984) applies to the determination expect to the extent otherwise agreed by the parties.
5The following are the relevant provisions of the Act:
s.7(1) An arbitration agreement is 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.
s.8(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.
s.43(1)(b)A reference in an arbitration agreement to the Commercial Arbitration Act 1984, or a provision of that Act, is to be construed as a reference to this Act or to the corresponding provision (if any) of this Act.
6The plaintiff relies on the following submissions:
a.upon the proper construction of clause 10, the clause is not an arbitration agreement because the “determination” referred to might be made by an alternative dispute resolution method, such as an expert appraisal on an assessment which would not constitute an “arbitration”;
b.the defendants had not produced evidence that the dispute was one which “cannot be settled by negotiation between the parties” and therefore a condition precedent to the operation of the clause had not been established;
c.the dispute, the subject of the proceeding, involving further parties other than the first defendant, was not a “dispute or difference” contemplated by clause 10.1;
d.if clause 10 is an arbitration agreement and does apply to the dispute with the first defendant, the proceeding as against the second and third defendants should not be stayed.
Is clause 10 an “arbitration agreement”?
7To determine the meaning of clause 10, the Court must have regard to the words used when read in the context of the agreement as a whole.
8Defendant’s counsel, Mr Richardson, submitted that the approach of the courts was to favour an interpretation of a clause as constituting an arbitration agreement. He referred to the decisions of:
a.Subway Systems Australia v Ireland [2013] VSC 550, per Croft J, particularly at paragraphs 47 and 48;
b.Cape Lambert Resources Ltd v MCC Australia Danjin Mining Pty Ltd [2013] WASCA 66 per Martin CJ, McLure P and Buss JA, particularly at paragraph 57.
9In my view, the passages in these decisions support the view that courts should “strive to uphold the validity of arbitration agreements”. This principle does not, however, assist with the determination of the threshold issue as to whether “the parties have agreed on an arbitration agreement”.
10Plaintiff’s counsel, Mr Minahan, referred to the decisions of Hammond v Wolt [1975] VR 108 (Menhennitt J) and Ajzner v Cartonlux Pty Ltd [1972] VR 919 (Pape J) . In Hammond v Wolt, a stay was not granted pursuant to s.5 of the Arbitration Act 1958 because the “arbitrator” appointed to determine the dispute was “at liberty to decide the …dispute… by either the process of arbitration or the process of assessment”. Assessment would not involve “an inquiry in the nature of a judicial inquiry”.
11The result was reached in Hammond v Wolt by construction of the relevant clause of the parties’ agreement, which included provisions that:
a.the person appointed to adjudicate upon the dispute was referred to as “the arbitrator”;
b.the “arbitrator appointed under the provisions of this agreement shall at his own discretion act as the arbitrator or assessor”;
c.the “award or assessment made by the arbitrator shall be final and binding upon both parties”;
d.the parties “may enforce any such award in accordance with the Arbitration Act or sue the other upon any such agreement as a debt due and payable”.
12In Ajzner v Cartonlux Pty Ltd, Pape J at page 929 referred to the judgment of Lord Esher MR in Re Carus-Wilson & Greene (1886) 18 QBD 7 at page 9 where Lord Esher stated that in particular cases where it is difficult to say whether a person appointed to settle disputes that have arisen is “intended to be an arbitrator or to exercise some function other than that of an arbitrator. Such cases must be determined each according to its particular circumstances”.
13 In relation to clause 10 of the present agreement:
a.clause 10.1 refers to a person appointed who is to make a “determination”. It does not refer to the appointment of an “arbitrator”, or of a person who is to determine the dispute by the process of “arbitration” and by making an “award”;
b.by clause 10.1, the person appointed might decide to determine the dispute by sitting as an “expert adjudicator” or as an “assessor” and not to conduct a “judicial enquiry” or follow the requirements of the rules of natural justice, which would occur in an arbitral process;
c.by clause 10.2, the determination under clause 10.2 “is binding on the parties”;
d.by clause 10.2, the Act “applies to the determination except to the extent otherwise agreed by the parties”.
14The concluding works of clause 10.2 are in my view crucial. It was anticipated by the parties that the “determination” will be subject to the application of the Act, unless the parties otherwise agree. In clause 10.1, the word “determination” is used in the context of not only the final decision, but also the process by which that result is achieved. Clause 10.2 makes it clear that “determination” is to have the same meaning as in clause 10.1.
15The following provisions of the Act might have application to the “process” including the “result” of that process, ie., the “arbitration” and the “award”:
a.to govern the interlocutory steps in the process by granting “interim measures” (s.17);
b.equal treatments of parties and the opportunity to be heard (s.18);
c.the applicable rules for the conduct of the proceedings (s.19);
d.the pleading of the claim and defence (s.23);
e.the conduct of the hearing and the provision of documentary and expert evidence (s.24);
f.legal representation (s.24A);
g.supervision by the Court (s.27H, s.27I and s.27J);
h.recognition and enforcement of awards (s.35 and s.36).
16Clause 10.2 makes the application of the Act subject to “the extent otherwise agreed by the parties”. By clause 10.1, the parties may agree upon the appointment of a person to determine their disputes, and only if agreement cannot be reached will an appointment be made by the nominated third party. If the parties agreed to appoint a person under clause 10.1, they could at that stage determine the nature of the process, eg. expert appraisal or assessment, or might otherwise agree which provisions of the Act are not to apply to the process.
17In the circumstances where, in the absence of such agreement, the Act is to apply to the “determination”, ie., the process as well as the result, the determination must necessarily be conducted as an arbitration and the final decision will have the same effect as an award.
Had a condition precedent to the operation of Clause 10 as an “arbitration agreement” not been established?
18Mr Minahan submitted that, before Clause 10 operated as an arbitration agreement, it must be demonstrated that the dispute between the parties was one “which cannot be settled by negotiation between the parties”.
19In my view, the issue of the proceeding by the plaintiff, was a clear indication that the dispute was not capable of resolution without being litigated. I do not consider that a more restrictive construction of clause 10.1 would be consistent with the general rules of construction, particular in relation to arbitration agreements.
Does the arbitration agreement relate to the dispute the subject of the proceeding?
20Mr Minahan submitted that, as a matter of construction, clause 10.1 should be construed as not being applicable to the present dispute as it involved two parties in addition to the parties to the commission contract. Mr Minahan relied upon the decision of the Court of Appeal of the Supreme Court of Western Australia in Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASC 110.
21That case related to a contract between a contractor and a supplier which contained an agreement to refer disputes to arbitration. To secure the purchase price, a bill of exchange was provided to the supplier, endorsed as accepted by the contractor and as “co-accepted” by the customer.
22At paragraph 43 of the judgment, the Court of Appeal said that, “where a party to an arbitration agreement makes the same claim against both the other party to the arbitration agreement and a person who is not a party to the arbitration - with the result that, so far as it involves the latter, the dispute cannot be referred to arbitration – it will generally be equally difficult to ascribe to the parties to the arbitration agreement an intention that in such an event the dispute should be fragmented and that the liability of the party to the arbitration agreement, and that of the third party respectively should be determined in different forums”.
23The Court concluded that the arbitration agreement “was not intended to apply to a dispute involving the parties and a stranger to the contract”. The Court took the view that the parties could [not] “be taken to have contemplated such fragmentation” (paragraph 45).
24The Court noted at paragraph 44, that “whether or not the parties intended such an outcome will necessarily turn on the facts of each case, but in our view, it is not readily to be inferred. It will commonly result in a duplication of proceedings that will be costly, inefficient and time-consuming, and give rise to the unwelcome possibility of inconsistent decisions of the different tribunals involved, That is, it will commonly result in the very opposite of what the parties ordinarily set out to achieve by an arbitration clause”.
25I consider, however, that the present case is distinguishable. The plaintiff is not making the “same claim” against the first defendant as it makes against the second and third defendants. The claim against the second and third defendants is for misleading and deceptive conduct. The liability by these defendants would only be established if the first defendant were found to be liable to the plaintiff. However, the possible mischief of the duplication of proceedings and inconsistent decisions in the circumstances of the pleaded claims by the plaintiff is not, in my view, be a sufficient basis to limit the operation of clause 10.1 as an arbitration agreement between the parties.
Should the claim in the proceeding against the second and third defendants be stayed?
26Having determined that clause 10 is an arbitration agreement, and that it applies to the present dispute between the plaintiff and the first defendant, an order staying that proceeding will be made.
27In the circumstances, it would not be appropriate for the dispute between the plaintiff and the second and third defendants to proceed until the arbitration has concluded. To do otherwise, may result in the determination of the issue of the first defendant’s liability to the plaintiff in a proceeding in which it no longer participates. That would also not be the most efficient method of determining either dispute and would not allow effect to be given to the arbitration agreement. I will, therefore, stay the proceeding against the second and third defendants, as to permit it to proceed, would be an abuse of the Court process.
Orders
28Accordingly, I will make the following orders:
1. The plaintiff and the first defendant are referred to arbitration in respect of their dispute as defined by paragraphs 1 to 7 of the statement of claim in the proceeding.
2. The claim by the plaintiff against the second and third defendants as defined by paragraphs 8 to 16 of the statement of claim in the proceeding is stayed until the determination of the arbitration between the plaintiff and the first defendant, or further order.
29 I will hear further from the parties in relation to the question of costs.
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Certificate
I certify that these 7 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 27 February 2014.
Dated: 27 February 2014
Philippa Gilkes
Associate to His Honour Judge Anderson
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