Helliar v Decoppi

[2011] WADC 77

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   HELLIAR -v- DECOPPI [2011] WADC 77

CORAM:   REGISTRAR KINGSLEY

HEARD:   3 MARCH 2011

DELIVERED          :   18 MAY 2011

FILE NO/S:   BUN CIV 25 of 2010

BETWEEN:   COLIN HELLIAR

First Plaintiff

HELENE HELLIAR
Second Plaintiff

AND

TONY DECOPPI
First Defendant

TINA DECOPPI
Second Defendant

Catchwords:

Practice - Application for stay of proceedings - s 53 Commercial Arbitration Act - Cl 32 Home Building Works Contract 2007

Legislation:

Nil

Result:

Application for stay dismissed

Representation:

Counsel:

First Plaintiff                :     Mr D F Beere

Second Plaintiff            :     Mr D F Beere

First Defendant             :     Mr G J Dunne

Second Defendant         :     Mr G J Dunne

Solicitors:

First Plaintiff                :     D F Beere

Second Plaintiff            :     D F Beere

First Defendant             :     Slee Anderson & Pidgeon

Second Defendant         :     Slee Anderson & Pidgeon

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

ABB Power Plants Ltd v Electricity Commission of New South Wales t/as Pacific Power (1995) 35 NSWLR 596

Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160

Hammond v Wolt [1975] VR 108

PMT Partners Pty Ltd v Australian National Parks and Wildlife Service (1995) 131 ALR 377

1. REGISTRAR KINGSLEY: By an application dated 13 December 2010 the first and second defendants have brought an application seeking an order that the proceedings be stayed pursuant to s 53(1) Commercial Arbitration Act 1985 (WA) (the CAA).

Background

1. As pleaded in the statement of claim, the plaintiffs, as owners, entered into a contract dated 15 December 2009, with the defendants to build a house on property located at Peppermint Grove Beach.  In their pleading the plaintiffs claim the defendants wrongfully sought recovery of GST amounts and failed to execute and complete the building works in a proper and workmanlike manner.  The plaintiffs go on to plead that on 3 September 2010 the defendants rendered a progress claim in the sum of $40,000. At that time that progress claim was made, the defendants had not completed some works in accordance with the progress draw schedule and the plaintiffs refused to pay that progress claim.

2. The defendants, by an email dated 5 September 2010, gave notice to the plaintiff that they would suspend work unless payment of that amount was received by close of business on 6 September 2010.  The moneys were not paid and the defendants suspended the work.

3. The plaintiffs then, by notice dated 8 September 2009, gave notice of default and required the defendants to remedy the default within seven working days after service of the notice.  The plaintiffs allege the defendants failed to comply with the notice of default and the plaintiffs terminated the contract by notice dated 21 September 2010.

4. The plaintiffs filed an endorsed writ on 29 September 2010 and a memorandum of appearance by the defendants was entered on 13 October 2010.  A statement of claim was filed on 29 November 2010 and the chamber summons by the first and second defendants for a stay of the proceedings was filed on 15 December 2010.

The contract

1. The relevant contract is attached to the affidavit of Tony Decoppi sworn 30 November 2010. Clause 32 of the Home Building contract, headed 'Settlement of Disputes', provides that should any dispute or difference arise between the owner and builder in connection with the contract, then either party shall give written notice of the existence of such a dispute or difference, the notice providing sufficient details to identify the cause and nature of the dispute and call on the other party to rectify the matters complained of. At the expiration of five working days following the giving of the notice, unless it shall have been otherwise settled, such dispute or difference may then be submitted for resolution by one of the following procedures: by reference to the Disputes Tribunal or by reference to arbitration in accordance with the provision of the CAA. Thereafter follows provisions for the appointment of the arbitrator. Clause 32 concludes by providing that in event of a payment dispute as defined by the Construction Contracts Act 2004 (WA) then provision for the appointment of an adjudicator is set out.

2. It is common ground that the Disputes Tribunal had no relevance to this action. 

The CAA

1. Section 53(1) CAA provides that if a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement, that other party may apply to that court to stay the proceeding and the court, if satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement, and that the applicant was at all times when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration, may make an order staying the proceedings. Section 4(1) CAA, defines an arbitration agreement to mean an agreement in writing to refer present or future disputes to arbitration.

Is the dispute subject to an arbitration agreement?

1. The defendants submit that parties to a commercial agreement who have agreed to include an arbitration clause are likely to have intended that all disputes between them should be resolved by that means.  The defendants' counsel cites Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 where Gleeson CJ said:

   When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly.  They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.

2. The plaintiffs argue that an agreement which gives one of the parties an option to submit a dispute to arbitration does not readily answer the description of an arbitration agreement as defined.  The plaintiffs' argument, in this context, is that until a party elects to pursue a claim by way of arbitration, that is the point when cl 32 constitutes an arbitration agreement.

3. The argument of the plaintiff follows the view in Hammond v Wolt [1975] VR 108. For there to be an arbitration agreement the parties must have agreed that their disputes are to be referred to arbitration, not merely that they may be so referred. Where there is a clause which confers a right of election no arbitration agreement comes into existence until an election is made to have the matter arbitrated.

4. Further the plaintiffs submit that cl 22 of the contract offers an alternative procedure where the owners assert default by the builder. That procedure envisaged the owners giving a default notice to the builder requiring the default to be remedied. If the default is not remedied the contract may be terminated and the owner can recover the reasonable cost of works, to the extent they exceed the cost otherwise payable to the defendants, as a debt due and payable. The plaintiffs submit that, whilst cl 22 does not expressly say so, it is clear the wording contemplates court action could be taken by the owner in those circumstances. This is reinforced by the fact that cl 22 makes no reference to arbitration. Thus as the plaintiffs had a right to elect to pursue court proceedings by virtue of cl 22, and both plaintiff and defendant, prior to that election, had the power to elect arbitration proceedings under cl 32, as neither party has made an election to arbitrate then the requirements of s 53 CAA have not been met.

5. I have been referred to PMT Partners Pty Ltd v Australian National Parks and Wildlife Service (1995) 131 ALR 377. PMT entered into a commercial agreement with Parks and Wildlife.  Clause 45 of the agreement, headed 'Settlement of Disputes', provided that all disputes or differences arising out of the contract were to be decided by a specific procedure.  If a contactor was dissatisfied with a decision after following that procedure, the contractor may by notice in writing require the matter at issue be referred to arbitration.  Clause 45 also provided that where notice is given by the contractor requiring the matter at issue to be referred to arbitration, no proceedings in respect of that matter shall be instituted in any court unless and until the arbitrator has made his award in respect of that matter in issue.

6. In that context the High Court concluded that cl 45 is a provision of an arbitration agreement and that cl 45 did not permit PMT to elect between proceeding in the courts and proceeding by way of arbitration prior to the giving of notice requiring arbitration.  Clause 45 provided exclusively as to the procedures to be followed in the event of a dispute.

7. Brennan CJ and Gaudron and McHugh JJ were of the opinion that the words 'agreement … to refer present or future disputes to arbitration' in s 4 CAA are, in their natural and ordinary meaning, quite wide enough to encompass agreement by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition.  The justices went on to say that there was nothing in the CAA which requires that the natural and ordinary meaning of the words used in the definition be qualified in any way.  Thus an arbitration agreement does not require the parties to have agreed on arbitration to the exclusion of all other methods of dispute resolution.  This conclusion was agreed by Toohey and Gummow JJ though by a slightly different reasoning process.

8. Clause 32 of the home building contract  provides that five days after notice of a dispute is given, the dispute may be submitted for resolution by reference to the Dispute Tribunal, or by reference to arbitration.  Clause 32, however, leaves open other methods to resolve the dispute. 

9. Consistently with PMT's case, cl 32 is an arbitration clause even though it does not exclude other methods of dispute resolution: cl 32 is part of the binding agreement between the parties providing that, upon election, the dispute will be arbitrated.  Notwithstanding the reference to arbitration will occur in the future as a consequence of an election, cl 32 falls within cl 4 CAA as an agreement to arbitrate. 

Section 53(1) CAA

1. Section 53(1) CAA provides that a party against whom proceedings in a court have been commenced may apply to the court to stay proceedings. The court, if satisfied there is no sufficient reason why the matter should not be referred to arbitration, and that the applicant was at all times ready and willing to do things necessary for the proper conduct of the arbitration, may make an order staying the proceedings.

2. Tony Decoppi on 30 November 2010 gave preliminary notice under s 17(3) Home Building Contracts Act 1991 in terms of form 1 of the Home Building Contract Regulations 1992.  That form relates to the preliminary notice to be given before an application is made to the Disputes Tribunal. 

3. Clause 32 of the contract refers to either party giving written notice in the form prescribed under the Home Building Contracts Act 1991 as to the existence of a dispute.  The only form prescribed is that giving preliminary notice before an application is made to the Disputes Tribunal.  Clause 32 goes on to provide that the notice is to give sufficient detail to identify the cause and nature of the dispute.  At the expiration of five working days of giving of the notice, the dispute may then be submitted for resolution by reference to the Disputes Tribunal or by arbitration. 

4. Thus in my opinion, the form 1 serves the purpose of giving notice of the dispute for the purposes of either resolution in the Disputes Tribunal or by arbitration.  The form 1 notice is dated 30 November 2010 and so the five working days would have expired on 8 December 2010. 

5. This first step is obligatory.  Clause 32 establishes an agreed code for the resolving of disputes, the first step being the giving of notice.  The next step is not a matter of obligation but of choice, that being the reference to the Disputes Tribunal or to arbitration. 

6. In this regard, in my opinion the defendants have not exercised their choice, nor given any indication they will exercise their choice.  That is, the defendant have not elected to proceed to arbitration. 

7. In ABB Power Plants Ltd v Electricity Commission of New South Wales t/as Pacific Power (1995) 35 NSWLR 596 Cole JA at 625 states:

   Further, the reason why, absent such an election, a court may be unwilling to grant a stay pursuant to s 53(1) is not because there is no arbitration agreement as defined; nor is it because, absent election, the subject matter of the litigation falls outside the scope of the arbitration agreement. In my view, it is because s 53(1)(a) would not be satisfied if the party having the contractual right to have an unresolved dispute resolved by arbitration had not exercised that right. If either or both parties, having the right to elect to resolve a dispute by arbitration, have omitted to exercise that right, that is a sufficient reason for a court not requiring resolution by arbitration. Section 53(1)(a) would not be satisfied.

8. Whilst Decoppi has initiated the obligatory first step there is no evidence that Decoppi intends to proceed to arbitration.  There is no evidence of correspondence suggesting a reference to arbitration, nor is there any deposition from Decoppi that the defendants intend to proceed to arbitration.  The inactivity is consistent with an election to do nothing. 

9. Consistently with ABB Powers I am of the opinion that s 53(1)(a) CAA has not been satisfied.

10. Further, I am not persuaded that s 53(1)(b) has been satisfied. Whilst Decoppi has deposed he remains ready and willing to do all things necessary for the proper conduct of the arbitration, there is no evidence of Decoppi taking any step to refer the matter to arbitration.

11. There is a strong argument in favour of holding the parties to the agreement to arbitrate.  However Decoppi has not objectively demonstrated any willingness to progress the matter to arbitration.  There is no evidence of any correspondence prior to or subsequent to proceedings being launched that Decoppi intends to pursue the reference to arbitration. 

Conclusion

1. In my opinion, cl 32 is an agreement to arbitrate and the jurisdiction of the court under s 53 CAA is enlivened.

2. However, for these reasons I am not satisfied that the requirements of both heads of s 53 CAA have been fulfilled.

3. The defendants' application is dismissed.

4. Unless the defendant wishes to contend otherwise the costs will follow the event.