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JAMAC CONSTRUCTION GROUP PTY LTD -v- DE MOL INVESTMENTS PTY LTD [2014] WASC 273

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2014] WASC 273
Case No:	CIV:2619/2013	Heard:	13 MAY 2014
Coram:	KENNETH MARTIN J	Delivered:	29/07/14
No of pages:	36	Judgment Part:	1 of 1
Result:	Application dismissed
Category:	A
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Parties:	JAMAC CONSTRUCTION GROUP PTY LTD DE MOL INVESTMENTS PTY LTD
Catchwords:	Civil law and procedure Contract law Application to strike out defence Arbitration clause Whether binding after construction contract frustrated Whether binding on defendant and plaintiff by counterclaim in litigation already commenced Clause 47 of Australian Standards AS2124-1992 construed
Legislation:	Commercial Arbitration Act 1985 (WA) Commercial Arbitration Act 2012 (WA)
Case References:	Austman v Mount Gibson Mining Ltd [2012] WASC 202 Cleworth v Pickford (1840) 7 M & W 314; 151 ER 786 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 Dobbs v National Bank of Australasia Ltd [1935] HCA 49; (1935) 53 CLR 643 Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144 Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447 FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Jamac Construction Group Pty Ltd v De Mol Investments Pty Ltd [2013] WASC 360 Manningham City Council v Dura (Australia) Construction Pty Ltd [1999] 3 VR 13 McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457 Mulgrave Central Mill Company Ltd v Hagglunds Drives Pty Ltd [2001] QCA 471; [2002] 2 Qd R 514 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322 Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301 West Australian Land Authority v Simto Pty Ltd [2001] WASC 136

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION : JAMAC CONSTRUCTION GROUP PTY LTD -v- DE MOL INVESTMENTS PTY LTD [2014] WASC 273 CORAM : KENNETH MARTIN J HEARD : 13 MAY 2014 DELIVERED : 29 JULY 2014 FILE NO/S : CIV 2619 of 2013 BETWEEN : JAMAC CONSTRUCTION GROUP PTY LTD

Plaintiff

AND

DE MOL INVESTMENTS PTY LTD

Defendant

Catchwords:

Civil law and procedure - Contract law - Application to strike out defence - Arbitration clause - Whether binding after construction contract frustrated - Whether binding on defendant and plaintiff by counterclaim in litigation already commenced - Clause 47 of Australian Standards AS2124-1992 construed

Legislation:

Commercial Arbitration Act 1985 (WA)

Commercial Arbitration Act 2012 (WA)

Result:

Application dismissed

Category: A

Representation:

Counsel:

Plaintiff : Mr J A Thomson SC

Defendant : Mr C G Colvin SC & Mr N W Kalmund

Solicitors:

Plaintiff : Tottle Partners

Defendant : Hotchkin Hanly

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

Austman v Mount Gibson Mining Ltd [2012] WASC 202
Cleworth v Pickford (1840) 7 M & W 314; 151 ER 786
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337
Dobbs v National Bank of Australasia Ltd [1935] HCA 49; (1935) 53 CLR 643
Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144
Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447
FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Jamac Construction Group Pty Ltd v De Mol Investments Pty Ltd [2013] WASC 360
Manningham City Council v Dura (Australia) Construction Pty Ltd [1999] 3 VR 13
McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457
Mulgrave Central Mill Company Ltd v Hagglunds Drives Pty Ltd [2001] QCA 471; [2002] 2 Qd R 514
Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322
Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10
PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301
West Australian Land Authority v Simto Pty Ltd [2001] WASC 136

1 KENNETH MARTIN J: Jamac Construction Group Pty Ltd (Jamac) as the applicant is seeking pursuant to its chamber summons of 1 April 2014 to strike out various paragraphs in the defence of the respondent, De Mol Investments Pty Ltd (De Mol), in particular a substantial section under a heading 'Set Off' (pars 47 - 64).

2 Jamac first seeks an extension of time within which to bring its application. No opposition to an extension was raised either under the parties' exchanged written submissions, or during oral arguments. Accordingly, I will grant the extension of time, as requested.

3 The substantive part of Jamac's application attacks various identified paragraphs of the defence, and the entire counterclaim - on the basis of an asserted infringement of Rules of the Supreme Court 1971 (WA) (RSC) O 20 r 19(1)(a). In other words, Jamac first raises the alleged failure by De Mol to articulate a reasonably arguable defence. Next, and alternatively by reference to RSC O 20 r 19(1)(c), Jamac argues that various impugned paragraphs (I infer) are embarrassing (in a legal sense); then alternatively again, via RSC O 20 r 19(1)(d), Jamac finally argues that the impugned defence paragraphs and the counterclaim are an abuse of the processes of the court.

4 From an evidentiary perspective the application was argued upon only one affidavit filed by each side. For Jamac, this was the affidavit of John Giovanni Abrusci, sworn 1 April 2014. Significantly, it contains a copy of a construction contract, which it is accepted was entered into as between De Mol as principal and Jamac as head contractor on 14 January 2010 (par 5 of Mr Abrusci's affidavit). The affidavit attaches the written construction contract with its (mostly) agreed components as JGA-1.

5 The parties' agreement is accepted to incorporate, at pages 24 - 64 of the affidavit, the Australian Standard (AS) General Conditions of Contract AS2124-1992, containing therein, relevantly to the present dispute, General Condition cl 47.

6 In essence, it is contended that by its current defence and counterclaim, De Mol has failed in large part to comply with some core dispute resolution prerequisites under cl 47, as it needed to. That omission, Jamac submits, renders it impermissible now for De Mol to seek to raise by way of defence, set off, or counterclaim, most of the facts presently seen pleaded.

7 De Mol, of course, disagrees. It reads on this application an affidavit of its solicitor, Nicholas William Kalmund, sworn 2 May 2014. This essentially annexes correspondence passing between the parties and their legal representatives between August 2011 to as recently as 1 May 2014.

8 Those affidavits provide the evidence platform uncontroversially before the Court for the application.

Two preliminary observations

9 I need to render two preliminary remarks.

10 First, some background to the present dispute is found within my earlier reasons, given between the same parties, Jamac Construction Group Pty Ltd v De Mol Investments Pty Ltd [2013] WASC 360. These were distinct proceedings which were commenced as CIV 1873 of 2013. In particular, see [4] - [13].

11 In the earlier action I had been asked by Jamac to grant a stay of what was then a pending arbitration as between the same parties, commenced by Jamac. Some of the issues now raised were canvassed, albeit in a different context, in that earlier application. I observed, in ultimately granting a temporary stay, that fresh proceedings could be commenced in this court, and then either consolidated with, or heard with and resolved in harmony with the other pending litigation which I referred to (namely, the Rodgers litigation commenced in 2010, see those reasons [17](3)]).

12 My earlier reasons hypothesised a prospect of another action being commenced by Jamac against De Mol in this court. That came to pass on 24 October 2013, as the present action of Jamac against De Mol, CIV 2619 of 2013.

13 There ensued in the present action an exchange of pleadings, which I can identify as the amended statement of claim of Jamac (ASOC) of 29 November 2013, responded to by De Mol's defence and counterclaim (DAC) filed 7 January 2014.

14 The other, wholly trite observation to be recorded at an early point is that upon a strike out application against pleadings which is predicated upon the absence of a reasonably arguable cause of action or, as here, defence (that is, pursued under RSC O 20 r 19(1)(a)), the applicable test is still that in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, as articulated by Barwick CJ. In a practical sense the test requires Jamac to persuade me that its grievances against De Mol's pleading ultimately show De Mol's expressed defensive position as being hopeless, or untenable.

15 To the extent that any seriously disputed factual issues present to be resolved, it is also clear a strike out application against pleadings is no place for that to happen. Serious factual disputes can generally only be resolved within the confines of a trial.

16 There was no contention over the applicable legal tests governing a strike out application between these parties.

17 Therefore, Jamac must surmount a relatively high threshold to strike out the various paragraphs in the DAC which it challenges as not constituting arguable defences, and which in consequence should not be allowed to advance to a trial evaluation.

18 Despite the level of the threshold, Jamac contends by written submissions, and then through senior counsel during oral argument, that its challenges do meet that scrutiny and, hence, De Mol's position is said, in effect, to be hopeless in terms of showing reasonably arguable defences. That conclusion, Jamac contends, is essentially delivered as a matter of the proper commercial interpretation of AS2124-1992 cl 47 and its effects upon De Mol's current DAC.

AS 2124-1992 General Conditions: Context and principles of interpretation

19 I commence a construction exercise by mentioning cl 45, presenting earlier in the General Conditions. Clause 45 expressly addresses the scenario of contractual frustration.

20 It was uncontroversially accepted by both parties here that the future performance of their obligations under their construction contract was governed by the AS2124-1992 General Conditions, and that that performance ultimately came to an end by reason of events of frustration.

21 The relevant events of frustration arose out of the inability to resolve some serious dewatering issues at the excavation site for an intended building at 24 June 2011: see pars 24 - 25 of Jamac's ASOC (which De Mol admits, under pars 32 - 33 of the DAC).

22 There is no dispute between these parties their contract should be interpreted as a commercial contract. Accordingly, 'the meaning of the terms of a commercial contract [are] to be determined by what a reasonable businessperson would have understood those terms to mean': see Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447, 454 [35] (French CJ, Hayne, Crennan & Kiefel JJ). That plurality had said [35]:

As reaffirmed, [the approach to construction] will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.

Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in

Re Golden Key Ltd

, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'. (citation of footnote authority omitted)

23 I will shortly set out the full text of cl 45, cl 47.1, cl 47.2 and cl 47.4. Contextually, in terms of ascertaining a true meaning of cl 47, I was also referred to the terms of cl 46.1 and cl 46.2. I have not overlooked those surrounding provisions in those clauses. But to avoid over cluttering the reasons, I have omitted their express citation. They will be familiar to those who work regularly with the AS2124-1992 General Conditions.

24 The words of cl 45, cl 47.1, cl 47.2 and cl 47.4 are being considered in the context of evaluating a plenary interpretative submission of Jamac. Jamac argues that cl 47.1 and cl 47.2 set mandatory dispute resolution criteria, binding both it and De Mol, as regards disputes arising under their contractual relationship.

25 But Jamac also arges that because it brings here a claim for the payment of liquidated amounts against De Mol, invoking General Condition cl 45 and in circumstances whereby the ongoing performance of the parties' contract had become frustrated, Jamac became relieved by cl 45 from compliance with cl 47's dispute resolution requirements. Nevertheless, Jamac says De Mol was not so relieved.

26 Since they are ultimately significant to my end determination, it is convenient at this point to attach to these reasons as schedules A and B respectively, two key communications passing between the parties. These communications are found attached to Mr Kalmund's affidavit.

27 First, as schedule A, is a letter from De Mol director Steve De Mol to the directors of Jamac of 25 August 2011 (NKW2).

28 Next, as schedule B, I will attach NWK4, a letter from De Mol's solicitor, Mr Michael Hotchkin, to Mr Abrusci of 19 April 2012. (I will omit the lengthy attachments to that second communication. They can be found, if needed, between pages 17 and 34 of Mr Kalmund's affidavit).

29 This attached correspondence particularly bears upon an evaluation of the responsive arguments of De Mol, in resisting Jamac's strike out application. De Mol's responsive position is that, in substance, it met the pre-action dispute resolution requirements of cl 47.1 of the General Conditions. To that end, I draw some attention to the last sentence on the first page of De Mol's communication of 25 August 2011, which refers to cl 47.1.

Frustration: AS2124-1992 cl 45

30 Clause 45 of the General Conditions AS2124-1992 reads:

45. TERMINATION BY FRUSTRATION

If, under the law governing the Contract, the Contract is frustrated, the Principal shall pay the Contractor -

(a) for work executed prior to the date of frustration, the amount which would have been payable if the Contract had not been frustrated and the Contractor had made a progress claim on the date of frustration;

(b) the cost of materials reasonably ordered by the Contractor for the work under the Contract, which the Contractor is liable to accept, but only if the materials become the property of the Principal upon payment;

(c) costs reasonably incurred by the Contractor in the expectation of completing the whole of the work under the Contract and not included in any payment by the Principal;

(d) all retention moneys and security;

(e) the reasonable cost of removal of Constructional Plant;

(f) the reasonable cost of return to their place of recruitment of the Contractor's employees engaged in the work under the Contract at the date of frustration.

31 The ASOC contains an attachment which identifies Jamac's variation (VA) or 'Extension of Time' (EOT) claims by reference to asserted work performed, amounting in total to $451,739.84.

32 During argument, senior counsel for Jamac, Mr Thomson SC, helpfully provided an aide memoir document that further breaks down these various claims. I attach it in turn as schedule C to the reasons. It effectively re-categorises the liquidated claims advanced by Jamac against De Mol (save for item A19, which I was told Jamac now abandons (ts 51)).

33 Jamac splits the money amounts it claims from De Mol under three broad categories. First, are 'Delays due to Town of Vincent Stop Work Order and SAT Requirements'. The aide memoir shows such claims in the aggregate amount of $132,369.38.

34 A second classification of amounts claimed by Jamac presents under the heading, 'Variations due to Town of Vincent Stop Work Order and SAT Requirements'. The claims here only amount to $33,857.17.

35 Those costs can be viewed as arising out of sheet piling noise and vibration problems encountered at the excavation site, leading in turn to all work being halted by the Town of Vincent, but subsequently later recommenced under protective terms as varied by SAT.

36 The third category, 'Delays due to inability to dispose of water and personnel remaining on site', is underpinned by and tied to a different series of events. These 'EOT' claim items amount to $264,968.29.

37 The tripartite breakdown of Jamac's claims is significant. It highlights a vital distinction Jamac makes as between essentially two discrete series of events at the construction site: first, sheet piling noise and vibration issues and then later on the ultimately intractable and insoluable dewatering problem that led to the performance of the parties' contract being frustrated.

38 Noise, vibration and disturbance problems due to sheet piling first arose in February 2010 and resulted in stop work notices being issued by the Town of Vincent, inhibiting work at site for a time. De Mol then applied to SAT seeking permission to proceed with sheet piling, and the application was granted on terms ameliorating the noise and vibration: see generally ASOC pars 11 - 16.

39 Jamac's pleas about the dual problems culminate at pars 15 and 16, these contending:

(15) On 30 July 2010, the sheet piling anchoring system was complete.

(16) The Plaintiff was prevented from continuing with the Works after 30 July 2010 pending the issue of an instruction by the Superintendent regarding the contaminated groundwater issue.

40 Numerically ($264,968.29) the major area the underlying subject matter of the delay claims submitted by Jamac is the 'dewatering' issue. In short, it is said by Jamac that the Swan River Trust refused permission to dispose of ground water from the Mount Lawley site, on the basis the groundwater was contaminated. There is a minor level of disputation between the parties over this, arising as a pleading point.

41 De Mol contends the Swan River Trust did not actually ever refuse permission to Jamac to dispose of the groundwater from the site. Rather De Mol expresses the true position as being that the Trust did 'not support' Jamac's dewatering proposal to discharge waste water from the site into the Swan River via a local storm water drain as proposed: see DAC par 18(a).

42 De Mol further contends the Trust did not hold the power to refuse Jamac permission to dispose of groundwater from the site: DAC par 18(b).

43 However, there is no dispute that it was unresolved dewatering problems manifesting at the site which, in the end, were the foundation for De Mol's notice to Jamac, of 24 June 2011. That notice advised Jamac the construction contract had become frustrated. The parties' contract is agreed to have ended, as to any future performance, that day by reason of the unresolved dewatering problems. That position, as asserted by De Mol, is accepted by Jamac.

44 Under orthodox common law principles, an event of contractual frustration brings an end to the future performance obligations of all parties under their contract. However, by a close analogy to what follows subsequent to a termination of the ongoing performance of contractual obligations, in circumstances of significant breach, an event of frustration will not remove, or negate, the existence or efficacy of what are already unconditionally accrued rights under the contract, from periods whilst the contract's performance was operative: see McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457, 476 - 477 (Dixon J); Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337; FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340 [192] (Basten JA, Beazley JA agreeing). The FPM decision concerned somewhat different underlying General Conditions, namely under AS4300-1995. FPMwas applied in my decision in Austman v Mount Gibson Mining Ltd [2012] WASC 202 [544].

45 The work of AS2124-1992 General Conditions cl 45(a), cl 45(b) and cl 45(c), as I assess it, is essentially by way of confirmation and entrenchment of that common law frustration position. So it is that contractual rights unconditionally accrued prior to an event of frustration bringing the end to a future performance of the contract, are not lost by either party. Clause 45(a), (b) and (c) look to clarify and support such a preservation of rights already accrued - and rendering it plain that if a contractor had duly performed work up to the point of the frustration, that the principal will remain liable to remunerate the contractor for that completed work, costs of materials reasonably ordered, or for costs reasonably incurred.

46 By invoking cl 45 here, in the wake of an accepted contractual frustration, Jamac essentially claims payments from De Mol for its work, costs of materials ordered, as well as for its costs reasonably incurred. Jamac says its right to claim these amounts is crystal clear at common law and that position is entrenched and protected by the terms of cl 45.

47 I accept Jamac's submission as regards a clear preservation by cl 45 of the rights of it as contractor to pursue claims for payment in respect of completed work or costs incurred, prior to the events of frustration. However, in case Jamac's submissions implicitly went so far, I would also say that I would not assess cl 45 as necessarily inhibiting a principal from still raising any legitimate objections it held against the merits of such claims under cl 45, on the basis the principal might otherwise have objected to rendering payment, had the contract not been frustrated.

48 Nothing I detect within cl 45 would inhibit a principal taking legitimate issue against the merits of a claim submitted for completed works by a contractor, in the same way the principal could have done, had a progress claim for payment to that end been submitted in a time whilst the contract's performance remained on foot.

49 I mention that qualification in the context of the ultimate task here of evaluating a dispute arising between parties over claimed work and allowances against the associated cross claims raised by De Mol, in circumstances where the parties accept that their obligations of future performance were brought to an end by frustration.

Core issue: dispute resolution cl 47

50 The core question now presents: with future contractual performance obligations on both sides ended due to frustration, how then do cl 47.1 and cl 47.2 operate, if at all, as regards the required notice of dispute, an evaluation and reasons issued from a Superintendent and then a viable conferral process as is envisaged between authorised representatives of the disputing parties?

51 As a pragmatic issue, it is not too difficult to envisage, where the ongoing performance of a construction contract is accepted as having been brought to an end, that there may, at that point in time, be no Superintendent continuing to discharge their functions under the frustrated contract.

52 Or, if there is still an ascertainable Superintendent, it may still be problematic whether the Superintendent holds ongoing power and authority to legitimately process or approve a progress claim, or any claim analogous thereto: see FPM at [185] and an article by A. Bellemere, 'Must a Superintendent Extend Time?' (2002) 18 BCL 281 at 285. Mr Bellemere's article criticised an earlier NSW Court of Appeal decision, Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322. Some remarks by Mr Bellemere in that article were seemingly endorsed by Basten JA in FPM at [188], who distinguished that earlier decision at [191]. Basten JA at [190] said:

As already noted, in my view cl 47, dealing with dispute resolution, envisages the continuation of the contract.

(cf Giles JA dissenting in

FPM

at [30]).

Clause 47: AS2124-1992 General Conditions

53 Moving on from that context, I can now identify the terms of cl 47 in the General Conditions, under a heading, 'Dispute Resolution'. I observe that cl 47.2, entitled 'Further Steps Required Before Proceedings', contains two alternatives, described respectively as Alternative 1 and Alternative 2. For the parties' present contractual relationship, it is clear the words comprising Alternative 1 were all struck through and initialled. On that basis, there was clearly a pre-contractual decision by the parties to remove Alternative 1, and thereby to adopt only Alternative 2. Hence, I will omit from the quotation any reference to the removed Alternative 1.

54 Clause 47 provides:

47. DISPUTE RESOLUTION

47.1 Notice of Dispute

If a dispute between the Contractor and the Principal arises out of or in connection with the Contract, including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute.

Notwithstanding the existence of a dispute, the Principal and the Contractor shall continue to perform the Contract, and subject to Clause 44, the Contractor shall continue with the work under the Contract and the Principal and the Contractor shall continue to comply with Clause 42.1.

A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration.

47.2 Further Steps Required Before Proceedings

Alternative 1 (omitted by deletion)

…

Alternative 2

A party served with a notice of dispute may give a written response to the notice to the other party and the Superintendent within 28 days of the receipt of the notice.

Within 42 days of the service on the Superintendent of a notice of dispute or within 14 days of receipt by the Superintendent of the written response, whichever is the earlier, the Superintendent shall give to each party the Superintendent's written decision on the dispute, together with reasons for the decision.

If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a written decision on the dispute within the time required under Clause 47.2, the parties shall, within 14 days of the date of receipt of the decision, or within 14 days of the date upon which the decision should have been given by the Superintendent confer at least once to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference, either party shall be represented by a person having authority to agree to a resolution of the dispute.

In the event that the dispute cannot be so resolved or if at any time after the Superintendent has given a decision either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may, by notice in writing delivered by hand or sent by certified mail to the other party, refer such dispute to arbitration or litigation.

47.3 Arbitration

…

47.4 Summary or Urgent relief

Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under Clause 42 or to seek urgent injunctive or declaratory relief in respect of a dispute under Clause 47 or any matter arising under the Contract.

55 I will render some observations about various aspects of cl 47 at this point:

(a) The second paragraph of cl 47 encourages the ongoing expectation of contractual performance, notwithstanding an emergence of a dispute which becomes the subject of a notice. Hence, a broad policy objective underlying this clause is clear. Disputes ought not otherwise interrupt an ongoing performance of contractual obligations. Towards that same objective, the regime under cl 42 remains applicable to payments to the contractor under certificates, which are payments on account: see par 5 of cl 42.

(b) Jamac invokes the third paragraph of cl 47.1, noting an express right to agitate and include claims in tort, in restitution and, significantly, 'frustration', in an arbitration. On my assessment, that clause removes any doubts that claims to payment for amounts said to have accrued before an event of frustration fall validly within the possible ambit of an ensuing arbitration. Hence, a payment claim by a contractor under cl 45 for work already done, or to recover the incurred costs of materials before a termination, is confirmed as within the legitimate scope of the arbitration.

(c) However, allowing payment claims to be made under cl 45 post-frustration would not seem to detract from the requirements set out under cl 47.2 (Alternative 2) to allow certain specified dispute resolution steps to unfold, prior to convening the arbitration. These steps, in sequence, are: issuing a notice of dispute with proper details; obtaining a reasoned decision of a Superintendent; at least one conferral as between the parties (by persons authorised to resolve the dispute); and, in the absence of any resolution, the exploration of and, if possible, an agreement upon methods for resolving the dispute by 'other means'.

(d) Clause 47 displays nothing express about circumstances in which the abovementioned dispute resolution obligations of the parties are to continue, once the future performance of the contract is at an end, either on a termination for breach, or by events of frustration. However, the considerable weight of case authority, to be discussed shortly, would strongly suggest that the notice of dispute and conferral obligations will continue to apply - even after a termination. That remains so, even though the power and authority of the Superintendent at that point in time under the contract may come to an end as well.

(e) Although the delivery of a notice of dispute under cl 47.1 to the other party and to the Superintendent is obligatory, nothing in the words of cl 47.1 or cl 47.2 suggests to me that such matters are a legal prerequisite to a claimant party actually acquiring their cause of action in respect of a liquidated claim to payment. A clause of this genre could rise to that level if worded in stronger terms: cf Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 [99], [66]. Here cl 47 does not.

(f) The inter-relationship as between cl 47.1 and cl 47.2 (Alternative 2) tends to highlight a significance in the role of the Superintendent in resolving a dispute. Viable participation by a Superintendent begins by receiving the parties' stated positions, then by providing a reasoned response to the claim, and culminates in the Superintendent's reasons for decision.

(g) If there is dissatisfaction on the part of either party with the reasoned decision of a Superintendent cl 47 then envisages a requirement for the parties to 'confer', at least once, to attempt to resolve their dispute and, if conferral is not successful, to then explore other methods to resolve the dispute.

(h) The last sentence of cl 47.2 refers to a Superintendent's decision, temporally prior to any reference of the dispute either to 'arbitration or litigation'.

(i) Nothing seen in either cl 47.1 or cl 47.2 specifies a mechanism by which conferral between the parties is to take place, save that they must be represented by a person with authority to settle the dispute by agreement.

(j) The penultimate paragraph of cl 47.2 only refers to a 'conference'. That terminology is wide enough to include a telephone or video-link conference.

(k) Both cl 47.1 and cl 47.2 look to be wholly silent concerning what precise notice or conferral obligations fall upon the other (non-initiating) party in the dispute, in circumstances where a claimant has already proceeded (without objection) to commence either arbitration or litigation against the non-initiating party. That scenario sets a framework for much of the present controversy.

De Mol's position

56 Broadly stated, the stance articulated by De Mol, in resisting Jamac's strike out application, is:

(a) De Mol sufficiently complied with the notice of dispute requirements of cl 47.1. This it is said is seen in the pre-arbitration correspondence with Jamac, and particularly in the two written communications, which are schedules A and B to these reasons.

(b) Alternatively, De Mol argues that where Jamac has already commenced arbitration and, subsequent to the temporary stay of the arbitration, this present litigation, it must be allowed to defend itself without any restraints on its response. De Mol says it cannot and should not in all fairness be held out from pleading all legitimately held defences - including its set offs, counterclaims or offsetting claims.

(c) In any event, De Mol also argues that Jamac never gave it a cl 47.1 notice of dispute and did not engage in conferral under cl 47.2, as regards Jamac's cl 45 claims. Therefore, De Mol says Jamac effectively waived any obligations in De Mol to comply with cl 47, as regards giving Jamac notice, and conferral.

(d) In any event, and without prejudice to the above responses under (a), (b) and (c) above, De Mol also asserts that it actually has given Jamac an (admittedly, late) notice of dispute under cl 47.1 on 1 May 2014. De Mol therefore says this court, at most, ought only consider a short stay of proceedings, in order to allow a conferral process as mandated under cl 47.2 to unfold. In that regard, De Mol's says at this time that, given all that has preceded it, such an exercise would be pointless and a wholly unnecessary, bureaucratic waste of time and energy.

57 Jamac in turn then resists all De Mol's arguments. In particular, Jamac says, as to (d) above, that it is too late in the day for De Mol to seek to comply with cl 47. Jamac says any notice of dispute ought to have been given in respect of the precise issues supporting the non-payment stance De Mol now seeks to raise under its defence and counterclaim - concerning alleged defective sheet piling work attributable to Jamac. That notice, Jamac says, should have been issued by De Mol well prior to the parties' future performance obligations being ended by frustration in 2011.

58 Hence, Jamac contends, in effect, that any defective piling issues against its works are now permanently denied as defences capable of being raised by De Mol in this litigation.

Case law

59 I was referred to many case authorities during argument. Some specifically addressed cl 47 of the AS2124-1992 General Conditions.

60 But on my assessment, none of the prior case authorities is directly determinative of the present point over what the non-initiating but opposing party can legitimately raise in defence of litigation brought against it. The issue presents as unique.

61 I also observe that most of the cited case authorities were decided during periods when the Commercial Arbitration Act 1985 (WA) (1985 Act) or its interstate equivalent legislation was applicable. Under the 1985 Act, by s 53, this court exercised a discretion as to whether or not to stay litigation, so as, in effect, to allow an arbitration to proceed before litigation. However, for Western Australia, the former regime changed significantly on 7 August 2013, with the entry into force of s 8 of the Commercial Arbitration Act 2012 (WA) (the 2012 Act).

62 Under the 2012 Act, any contractually embedded reference of disputes to arbitration is now rendered considerably more robust: see s 8(1), by way of contrast to the former s 53 regime. The new and stronger regime favouring arbitration clauses being respected and enforced by courts was explained by Martin CJ in Pipeline Services: see particularly [32].

63 As I explained at [1] in my earlier reasons Jamac v De Mol [2013] WASC 360, an arbitration was commenced by Jamac in 2012. That was well prior to s 8 of the 2012 Act coming into force: again see Pipeline Services [30]. Hence the regime of the 2012 Act was not engaged in present circumstances.

64 Nevertheless, the Chief Justice's reasons in Pipeline Services collect and explain a considerable body of prior case authority, with all cases supporting the proposition that an arbitration clause in a contract will, generally speaking, hold an ongoing vitality - extending beyond a termination of the future performance of the underlying agreement. The cases indicate this result is achieved by the arbitration clause, being assessed as a contract independent of the overall agreement in which it is contained. Hence, an agreed submission to arbitration under an arbitration clause usually will survive the termination of the performance of the contract generally: see Pipeline Services [42] and authorities there mentioned.

65 Assessing that line of case authority, the Chief Justice observed at [47]:

Construction of a commercial agreement to the effect that provisions for the resolution of disputes, such as by arbitration, do not survive termination of the agreement would be inconsistent with the approach indicated in the authorities to which I have referred. That is because it will commonly be the case that parties will disagree as to whether their contract has been terminated and if so, as to the consequences of termination. In such a circumstance, the conclusion that the dispute resolution provisions of the contract depend upon the determination of the question of whether the contract has been terminated is manifestly inconvenient.

66 In Pipeline Services the dispute resolution clause considered was drafted in much stronger terms than the instant cl 47 of the AS2124-1992 General Conditions: see [9]. There was a clause in that contract (cl 26.14) which expressly mandated the survival of a number of identified contractual clauses beyond any termination: see [7].

67 I mention as well [88], where his Honour said:

In common with many other such clauses, the provisions of cl 25 are not limited to an arbitration agreement, but include procedures which must be followed by the parties before their dispute can be referred to arbitration.

Those procedures have not yet been followed, with the result that it might be argued that the matter is not yet ripe for a reference to arbitration.

If such an argument had been advanced, a question might have arisen as to whether the court should refer the matter to arbitration, notwithstanding that the preceding dispute resolution mechanisms in cl 25 have not been followed, or whether there should be a stay of proceedings prior to any such reference, to enable those procedures to be followed. (my emphasis in bold)

68 In Pipeline Services the Chief Justice then identified the 'nice question' there left unresolved

as to whether a stay could be granted without ordering a reference to arbitration, having regard to the terms of s 5 and s 8 of the 2012 Act. [93]

69 For the present case, cl 47.2 is seen to conclude with words 'refer such dispute to arbitration or litigation'. Case authority considering essentially the same cl 47 in AS2124-1992 has held that a clause affording the parties an option of referring their dispute either to arbitration, or to litigation, does not detract from the force of such a provision as a valid reference to arbitration: see Mulgrave Central Mill Company Ltd v Hagglunds Drives Pty Ltd [2001] QCA 471; [2002] 2 Qd R 514 in the reasons of McPherson JA (with whom Jones JA generally agreed).

70 Mulgrave gave extensive consideration to an earlier decision of the High Court of Australia, PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301.

71 Having identified cl 47 as an arbitration agreement for the purposes of cl 53 of the Commercial Arbitration Act 1990 (Qld) (that provision being on all fours with s 53 of the WA 1985 Act) McPherson JA considered the provision to be in similar form to the provision as was considered by the High Court in PMT Partners. There was no need to identify in the arbitration clause with an unconditional reference of disputes exclusively to arbitration. The option for, or an election provided in the clause to proceed to arbitration was enough. McPherson JA said at [8]:

That reasoning [from

PMT Partners

] applies with equal force to the provisions of cl 47 in the present case. Here either party is given the option, by written notice under cl 47.2, of referring to arbitration a dispute identified by the notice previously given under cl 47.1. With one important qualification, there are in this respect no sufficient differences in substance between cl 47 and the relevant provisions in

PMT Partners v Australian National Parks

to justify a departure from that decision. The fact that various conditions or contingencies are to be fulfilled or procedures gone through before the option becomes exercisable or the election made is no reason for denying to cl 47 the character of a binding agreement to arbitrate. Whether in the event those conditions are in fact fulfilled or procedures carried out may determine whether or not there will in due course be an arbitration; but it does not deprive it of the status of a binding, if executory, agreement to refer disputes to arbitration. It is enough that the parties have agreed that if certain things happen, even if only at the option of one of the parties or one of them, their dispute will be referred to arbitration.

72 McPherson J's observations at [12] provide, with respect, a very clear explanation of the workings of cl 47.2, rendered in light of an earlier decision of the Victorian Court of Appeal, Manningham City Council v Dura (Australia) Construction Pty Ltd [1999] 3 VR 13.

73 Locally, in West Australian Land Authority v Simto Pty Ltd [2001] WASC 136, Master Sanderson, in a context of another construction contract governed by the General Conditions of AS2124-1992, assessed circumstances in which dispute resolution procedures under cl 47 survived an acknowledged contractual termination for breach. The issue was whether there was a subsisting requirement for the parties to confer, with or without a Superintendent being present, in an effort to resolve the dispute before commencing of litigation. The plaintiff had not attempted to comply with any of the dispute resolution provisions.

74 Applying observations of Steytler J, as his Honour then was, in Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144, the Master struck out the litigation: see [18].

75 Eastern Metropolitan Regional Council had raised circumstances where each party to that construction contract had accused the other of repudiatory breaches of their contract. There had been, on any view, an acceptance by both sides that the ongoing performance of their construction contract had ended. Steytler J observed at [40]:

The opening paragraph of cl 47.1 makes it plain that any dispute between the contractor and the principal which 'arises out of or in connection with the Contract' may be made the subject of arbitration. Those are words of the widest import and, on their plain meaning, encompass a dispute as to the circumstances of termination of the contract, regardless of whether or not the parties regard the contract as any longer being on foot.

76 For present circumstances, the observations from Simto are directly applicable. That is notwithstanding I am dealing here with a scenario of the future performance of the parties' construction contract being at an end by reason of frustration, rather than termination following an accepted repudiatory breach. That distinction is immaterial, in my view. The same principles still apply as regards the survival and residual efficacy of the arbitration clause. That is the position even following the end to the future performance of all other contractual performance obligations otherwise on both sides. So much is clear. However, I leave open a possibility that there may arise an event of frustration so destructive in its pragmatic consequences as to render the dispute resolution clause simply impossible to comply with. If, say, one of the parties were wound up, for example, there may be no person to give notice to, and no representative(s) to confer with.

77 But on my assessment, the principles from Simto, accepted as they are, do not quite meet the issue arising in present circumstances. Here it is accepted Jamac has, on any view, validly referred its cl 45 frustration payment claims to an arbitration. Subsequently, it has also validly commenced this very litigation against De Mol, in the aftermath of my reasons in Jamac v De Mol [2013] WASC 360.

78 The more precise issue here then is whether cl 47.1 and cl 47.2 still apply to De Mol in these unique circumstances, first, where both sides accept the future performance of their construction contract is at an end and, second, where Jamac has validly commenced an arbitration, and now this litigation against De Mol. Given all that, must De Mol still give a notice of dispute to Jamac and engage in conferral to validly challenge Jamac's payment claims? Do the cl 47 pre-action dispute resolution requirements now 'bite' to inhibit De Mol from raising its pleaded set-offs, defences and counterclaims in answer to Jamac's claims in this litigation?

79 Those circumstances present as somewhat virgin territory from a precedent perspective, based on the materials relied upon by respective senior counsel during argument and from my own subsequent research efforts.

Determination

80 Nothing in the following analysis should be read as in anyway detracting from my fulsome and respectful recognition of the policy importance of a faithful compliance with cl 47 of these General Conditions. Clause 47 obviously does exhort a claimant to give proper notice of any dispute and then to properly engage in meaningful conferral, prior to any commencement of arbitration or litigation.

81 Nevertheless, one party to the construction contract (Jamac) is accepted by the other (De Mol), without controversy, to have legitimately commenced an arbitration and now this litigation. Some earlier cases have addressed situations where the future performance of a contract comes to an end, usually under an accepted termination for breach. Even so, it has been largely held that the life of clauses like cl 47 continues, so as to still require a notice of dispute and conferral before arbitration or litigation is begun. But one notice and one conferral process has been the requirement, not a multiple cross party series of notices.

82 So then, should De Mol, in resisting Jamac's claims under this litigation, be assessed as still required to give Jamac a notice of dispute under cl 47.1, then to confer under cl 47.2, before De Mol is entitled to defend and counterclaim? In my view, the answer must be 'No'. For this court to mandate that process to unfold at this late stage presents to me as pointless in the extreme. I would assess that outcome as a significant triumph of form over substance.

83 The present litigation is now unfolding courtesy of Jamac commencing it. As I assess cl 47, it does not state that following the dispute resolution procedure to the letter is necessary before a party's cause of action is complete. Likewise, for a party to hold a viable counterclaim. Why then should De Mol be procedurally shackled at this late stage of the parties' overall disputation in the defence of Jamac's litigation, accepted to have been validly commenced?

84 To mandate De Mol needing to follow the cl 47 notice of dispute procedure as advanced by Jamac at this stage would, in effect, erect a diversionary procedural regime somewhat reminiscent of a tarnished Dickensian bureaucracy. Fostering that sentiment, words from Little Dorrit spring to mind:

Containing The Whole of Science Of Government

…No public business of any kind could possibly be done at any time without the acquiescence of the Circumlocution Office. Its finger was in the largest public pie, and in the smallest public tart. It was equally impossible to do the plainest right and to undo the plainest wrong without the express authority of the Circumlocution Office. If another Gunpowder Plot had been discovered half an hour before the lighting of the match, nobody would have been justified in saving the parliament until there had been half a score of boards, half a bushel of minutes, several sacks of official memoranda, and a family-vault full of ungrammatical correspondence, on the part of the Circumlocution Office. Dickens C, Little Dorrit (1857 ed) 172 (emphasis in original).

85 Here a pointless exercise in circumlocution should be avoided.

86 Likewise, obligations as regards a conferral process under cl 47.2 at this point, viewed from a perspective of De Mol bearing an obligation to have carriage of a conferral process, would be pointless. The present litigation is validly commenced and in progress, case managed in the CMC list. The litigation should not, in my view, be artificially and unnecessarily encumbered at this stage. This is particularly so for circumstances where the role of a Superintendent in effectively providing an evaluation of the parties' notice of dispute, then written response to that notice by reasons, must be at least questionable in terms of the viability of engaging the Superintendent, given an accepted ending of contractual obligations between these parties as far back as 2011.

87 In substance, therefore, I would accept the second of De Mol's four arguments. In the face of full blown litigation validly commenced against it by Jamac, De Mol cannot, in effect, be placed in a 'straightjacket' and inhibited, as a matter of the proper construction of cl 47, from advancing legitimate set-offs, counterclaims or defences which it might otherwise properly raise against Jamac. That is so, even accepting the continued operation of cl 47 post-contractual frustration. Clause 47 does not intrude in the face of what is full blown litigation.

88 Even had the performance of the parties' contract been ongoing, I am still inclined to a view that once one party has validly commenced arbitration or litigation, it would be all of surprising, wasteful and unjust to procedurally inhibit the defending party from raising its legitimate defences and offsetting claims. Of course, the parties might expressly agree to such an uncommercial process were they to draft express terms that are absolutely explicit about that.

89 Nor is it at all feasible at this stage of the litigation and upon a strikeout application for me to render definitive factual assessments about the characterisation of the set-offs, defences and counterclaims that are pleaded and sought to be raised by De Mol. On their face, they look to raise respectable arguments against Jamac's money claims. That is enough at this stage. Their ultimate merits evaluation must await a trial. To seek to characterise them as being defences going distinctly to the noise or vibration site problems as opposed to the dewatering problems is also not appropriate at this point.

90 It is, of course, generally contrary to public policy for a contractual clause to attempt to oust the jurisdiction of a superior court. I mention in that respect Dobbs v National Bank of Australasia Ltd [1935] HCA 49; (1935) 53 CLR 643, where Rich, Dixon, Evatt and McTiernan JJ observed (652):

Parties may contract with the intention of affecting their legal relations, but yet make the acquisition of rights under the contract dependent upon the arbitrament or discretionary judgment of an ascertained or ascertainable person. Then no cause of action can arise before the exercise by that person of the functions committed to him. There is nothing to enforce; no cause of action accrues. But the contract does not attempt to oust the jurisdiction. (citations omitted)

91 Their Honours at (654), invoked Lord Abingers' reasons from Cleworth v Pickford (1840) 7 M & W 314, 321; 151 ER 786, 789:

What at common law could not be done was to abandon by contract the power of invoking the Court's jurisdiction before the cause of action had been extinguished by an award and the power of countermanding the authority of the arbitrator. But it was never considered that the Court's jurisdiction was ousted by an award, notwithstanding that it concluded the parties with respect to matters which otherwise would be determined by the Court. It is therefore a mistake to suppose that the policy of the law exemplified in the rule against ousting the jurisdiction of the Court prevents parties giving a contractual conclusiveness to a third person's certificate of some matter upon which their rights and obligations may depend.