John Holland Pty Ltd v Federal Building Industries Pty Ltd

[2001] QSC 326

SUPREME COURT OF QUEENSLAND

File No S7168 of 2001
[2001] QSC 326

In the matter of the Commercial Arbitration Act 1990

ApplicantJOHN HOLLAND PTY LTD (formerly known as JOHN HOLLAND CONSTRUCTION AND ENGINEERING PTY LTD)  ACN 004 282 268

AND

RespondentFEDERAL BUILDING INDUSTRIES PTY LTD (in liquidation) (formerly known as LAS SERVICES (AUST) PTY LTD)  ACN 006 137 220

MOYNIHAN J – REASONS FOR JUDGMENT

DELIVERED ON:

7 September 2001

HEARING DATE:

22 August 2001

ORDER:

Order in terms of paragraph 1 of the application.

CATCHWORDS:

ARBITRATION – CONDUCT OF THE ARBITRATION PROCEEDINGS – POWERS, DUTIES AND DISCRETION OF ARBITRATOR – Where Arbitrator held he had no power to strike out points of claim but ordered the respondent to deliver particulars – whether the Court should strike out the points of claim. 

COUNSEL:

M Perry for the Applicant

R Peterson for the Respondent

SOLICITORS:

Clayton Utz Lawyers for the Applicant

Walker Smith & Breen Solicitors for the Respondent

1. This is an application to strike out specific paragraphs and claims for relief in points of claim delivered in an  arbitration on the grounds that they:

   ·     don’t disclose a cause of action;

   ·     are embarrassing and vexatious and/or have a tendency to prejudice or delay the hearing;

   ·     don’t comply with the arbitrator’s directions for the provision of particulars.

2. It is convenient to refer to the applicant as John Holland and to the respondent as Federal.  In 1991 John Holland sub-contracted the installation of the hydraulics and plumbing systems of two buildings forming part of the South Brisbane College of TAFE to Federal.  The work was carried out between late 1991 and early 1993.  A series of disputes gave rise to three references to arbitration in 1994. 

1. The three references went to the same arbitrator and were consolidated.  They revolve around two contentious aspects of the work under the sub-contracts:

   ·     variation claims by Federal;  and

   ·     claims by Federal for costs incurred because of delays for which it contends John Holland is responsible.

2. The arbitrator directed Federal to deliver points of claim and that was apparently done.  On 17 August 2000, however, Federal delivered amended points of claim.  John Holland applied to the arbitrator to strike out portions of the amended points of claim or for an order that Federal deliver particulars.  On 6 November 2000, the arbitrator held that he had no power to strike out the points of claim but ordered Federal to deliver particulars.  This application proceeded on the basis that the arbitrator’s decision was correct and that it was concerned with a later edition of the points of claim than that dealt with by the arbitrator.

1. In his published reasons the arbitrator analysed the then edition of the points of claim demonstrating what he accurately described as a number of “obvious difficulties”.  Having held he had no power to strike out he nevertheless concluded to the effect that John Holland did not have sufficient information to understand the case it was required to meet and ordered particulars.

1. On 4 December 2000, Federal delivered another edition of the points of claim in purported compliance with the arbitrator’s order of 6 November.  John Holland was not satisfied;  after an exchange of correspondence the matter went back before the arbitrator.  On 6 March 2001 he ordered Federal to deliver particulars complying with his order of 6 November 2000. 

1. Federal eventually delivered yet another edition (the current edition) of the points of claim on 3 July 2000.  This still did not satisfy John Holland.  After an exchange of correspondence which did not satisfactorily address its concerns John Holland brought this application. 

1. From the beginning John Holland’s complaints have revolved around those aspects of the points of claim relating to Federal’s delay claim and particularly its failure to plead facts establishing a nexus between John Holland’s alleged wrongful conduct, consequent delay and resulting damage.

1. John Holland’s application is made under s 47 of the Commercial Arbitration Act 1990 which provides:-

“The Court shall have the same power of making interlocutory orders for the purposes of and in relation to arbitration proceedings as it has for the purposes of and in relation to proceedings in court.”

1. The decided case law shows a dichotomy in approaches to the nature of the jurisdiction conferred by s 47. Broadly speaking, the view on one hand is that s 47 gives the court a general supervisory role in respect of the conduct of arbitrations. On the other hand it is that its purpose is to allow courts to make orders in aid of arbitration, which arbitrators do not have power to make; common examples are security for costs, third party disclosure, a Mareva injunction, orders for the preservation or inspection of property.

1. These issues and the relevant cases are comprehensively considered in an article in (1995) 69 ALJ 822 by Marcus S Jacobs QC. I do not intend, nor is it necessary, to repeat that exercise. In my view the learned author is correct in his conclusion that the latter approach is correct. In any event for present purposes the following propositions are clear enough. Although an arbitrator does not have power to strike out points of claim, in appropriate circumstances that can be dealt with as an interim award pursuant to s 23 of the Act. The arbitrator in this case recognised as much in the reasons he published on 6 November 2000. No attempt has however been made to do that and I express no view as to whether the circumstances of this case are such as to make it appropriate to do so.

1. More importantly s 47 confers jurisdiction on the court to strike out a claim where it is demonstrated that it constitutes an abuse of process; Nauru Phosphate Royalties Trust v Matthew Hall Mechanical and Electrical Engineers Pty Ltd and Richard Butterworth (1992) 10 BCL 179.

1. John Holland’s application is to strike out specific paragraphs in Federal’s points of claim directed to advance its claim for delay costs and the associated claims.  As I have said the arbitrator’s published reasons and his order for particulars published on 6 November are useful in giving an understanding of the deficiencies in the points of claim at that stage.  Federal continues to be unsuccessful in rectifying the deficiencies.

1. The current edition of the points of claim comprises 97 paragraphs (with numerous sub-paragraphs) occupying 32 pages.  There are a further 6½ pages of pleadings excised by way of amendment from earlier editions of the statement of claim and there are attached schedules A-G, containing substantial numbers of individual or grouped items, occuping an additional 44 pages.  The analysis which follows is not intended to be comprehensive but to give an indication of what, in my view, is a continuing failure to address the issues raised by John Holland in respect of the delay claim which permeates the current edition of the pleading.

1. Paragraph 85 of the points of claim pleads three separate crucial implied terms.  First that John Holland would cooperate and not unreasonably interfere with the progress of Federal’s work or prevent Federal from carrying out its obligations under its sub-contract.  Second, that John Holland would act under the sub-contract in good faith.  Third, that John Holland would maintain a specific works program and “ensure” that sub-contractors completed their work within the program timeframe so that Federal also could do so and that other sub-contractors did not hinder the claimant.

1. Paragraph 79 pleads a further implied term that John Holland would “do all things reasonably necessary to claim for the Principal any additional costs or expenses incurred by the Claimant or a class of persons of which the Claimant was a member” in carrying out work under the sub-contract.  It was further pleaded in paragraph 80 that in breach of the implied term the respondent failed to claim from the principal the costs “the Claimant actually incurred due to the delays” in respect of the extensions of time.

1. The implied terms are apparently pleaded in reliance on Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596. The implication of the terms is pleaded essentially as a matter of assertion based on the fact of the contractual relationship, although the third of the implied terms pleaded by para 85 and the implied term pleaded by s 79 in particular require a good deal more justification.

1. Paragraph 86 rolls the breaches of the separate implied terms up together:

“The Respondent breached the implied terms set out in paragraph 85 above by the following acts, defaults and/or omissions by the Respondent, its servants or agents:

a.          the Respondent:

i.         failed to co-operate with the Claimant;  and/or

ii.unreasonably interfered with the progress of the Claimant’s work;  and/or;

iii.hindered or prevented the Claimant from carrying out its obligations in accordance with the FTB Sub-Contract.

Particulars

·     In relation to the Claimant’s fit out of level 3 services the Respondent constantly instructed the Claimant to move its workforce from one job to another unnecessarily.

·     The Respondent’s employees continually borrowed equipment from the Claimant’s employees causing delays to the Claimant’s work as its employees had to search for the equipment borrowed by the Respondent’s employees.

·     The Claimant had agreed with the Respondent’s site foreman as to the areas in which the Claimant could store its materials on the site.  The Respondent’s various instructions to the Claimant to remove the materials from the agreed areas caused delays to the Claimant as its workmen had to be removed from performing Contract work and proceed with the removal of materials and then subsequently the materials had to be transported to and from the site on a daily basis.

b.the Respondent failed to act reasonably and in good faith in performing its obligations under the FTB Sub-Contract and in exercising its rights and powers under the FTB Sub-Contract.

Particulars

The Claimant repeats and relies upon the particulars set out in subparagraph a. above.

1. The particulars of the costs Federal claimed it actually incurred due to delay are set out in a table forming part of paragraph 83 of the points of claim, totaling 3,644 man hours, full particulars are set out in Schedule G.  There is however nothing pleaded to connect Schedule G’s contents to the breaches pleaded in para 86.

1. Paragraphs 68, 69 and 70 of the points of claim seek reimbursement of the costs Federal incurred under sub-clause 31(h) of the contract.  That provides to the effect that costs arising as a consequence of the granting of an extension of time will be allowed only if the extension was necessary because of the contractor’s breach or the principal’s omission, subject to contractual provisions as to notification.  The points of claim allege that Federal was delayed and the works allegedly delayed are particularised in schedule G to the points of claim.  This contains claims in terms of “idle time”, “additional overheads” and “reduced production time”.  In each case a “cause for delay” is specified but not a connection between the cause and John Holland.  That is apparently intended to be derived by para 70 which endeavours to pick up the implied term pleaded in paras 85 and 86 referred to earlier. 

1. This approach, illustrated by the examples given, does little to tell John Holland the case it has to meet that it was in breach, that its breach caused delay and the delay lead to Federal’s suffering damage.

1. It seems to me that the position is summarised as follows.  The work giving rise to the disputes between parties was completed in 1993 and gave rise to three references to arbitration in 1994.  On 17 August 2000, the arbitrator, having determined that he had no power to strike out, ordered particulars to address the deficiencies of the edition of the pleadings current at that time.  Notwithstanding an extensive exchange of correspondence, a further order of particulars from the arbitrator and further editions of the points of claim, Federal continues to be unable to sufficiently state the claim it seeks to advance with respect to the matters dealt with in paras 67 to 96 and 97 (e), (f), (g) of the current edition of the pleadings (the Second Further Amended Further Amended Points of Claim).  It has had ample opportunity to do so.  As a consequence of its failure the allegations are embarrassing and delay the hearing of the arbitration and the resolution of the disputes referred in 1994.  The paragraphs should be struck out.  I order in terms of paragraph 1 of the application.