KBRV Resort Operations Pty Ltd v Anthony & Sons Pty Ltd
[1999] QSC 139
•30 June 1999
IN THE SUPREME COURT
OF QUEENSLAND No. 3528 of 1999
Brisbane
[KBRV Resort Operations Pty Ltd v Anthony & Sons Pty Ltd]
BETWEEN:
KBRV RESORT OPERATIONS PTY LIMITED
ACN 010 836 709Plaintiff
AND:
ANTHONY & SONS PTY LIMITED
ACN 009 144 861First Defendant
AND:
ANTONIO DI LATTE
Second Defendant
REASONS FOR JUDGMENT - CHESTERMAN J
Judgment delivered 30 June 1999
CATCHWORDS: ARBITRATION - construction of arbitration clause - whether plaintiff’s claims are within the reference to arbitration - whether the guarantor is a “party” as defined in the reference.
PRACTICE - stay - whether proceedings should be stayed to allow arbitration in accordance with the contract.
Counsel:Mr A Duffy for the applicant
Mr K Barlow for the respondent
Solicitors:McCullough Robertson for the applicant
Stephens & Tozer for the respondent
Hearing Date: 24 June 1999
IN THE SUPREME COURT
OF QUEENSLAND No. 3528 of 1999
Brisbane
BETWEEN:
KBRV RESORT OPERATIONS PTY LIMITED
ACN 010 836 709Plaintiff
AND:
ANTHONY & SONS PTY LIMITED
ACN 009 144 861First Defendant
AND:
ANTONIO DI LATTE
Second Defendant
REASONS FOR JUDGMENT - CHESTERMAN J
Judgment delivered 30 June 1999
By its writ of summons the plaintiff claims:
(a)against the first defendant damages for breach of a contract made on or about 1 September, 1995, damages for negligence and damages for contravention of section 52 of the Trade Practices Act 1974 (Cth);
(b)against the second defendant for a declaration that he is obliged to indemnify the plaintiff pursuant to the contract for the damages for which the first defendant is liable and alternative claims for damages for breach of the contract and for negligence and contravention of section 52.
The defendants have only conditionally appeared to the writ and no statement of claim has been delivered from which the nature of the claims may be more fully understood.
The contract was made in Perth between the first defendant who was described as vendor, the second defendant who was described as guarantor and the plaintiff described as purchaser. The contract recited that the vendor was building an aluminium catamaran vessel having a length of twenty-five metres designed to carry almost 300 passengers. Further recitals were that the vendor agreed to sell and the purchaser agreed to buy the vessel and that the guarantor agreed to guarantee some of the vendor’s obligations contained in the contract.
By clause 9.1 the vendor promised to build the vessel in a good and workmanlike manner in accordance with drawings and specifications identified in the contract. By clause 4 the vendor promised to sell and transfer the vessel to the purchaser free of encumbrances for a price of $1,653,000.00. By clause 35.1 the guarantor, in consideration of the purchaser becoming a party to the contract at the request of the guarantor, guaranteed the due and punctual performance of the vendor’s obligations contained in clause 17 and promised to indemnify the purchaser against all loss or damage which it might suffer by reason of any breach by the vendor of the obligations contained in clause 17. That clause is headed “WARRANTY OF QUALITY AND GUARANTEE” and contains a number of provisions, the essence of which is that the vendor warranted that the vessel and all her parts would be free of defects in materials, poor workmanship or defective design and would rectify or replace any such defects.
Clause 28.1 provides:
“If a dispute shall arise between the Purchaser and the Vendor under or in relation to or in connection with this Document or the interpretation of this Document the dispute shall be referred to arbitration in Perth in accordance with the laws relating to arbitration in force in Western Australia and any such arbitration award shall be final and binding upon the Parties.”
The “document” is the contract. “Parties” is defined to include the guarantor. The effect of the clause is that any dispute “under or in relation to or in connection with” the contract is to be referred to arbitration in Perth.
The defendants have applied for an order that the action be stayed and that the subject matter of the dispute identified in the writ be referred to arbitration in Perth. Section 53 of the Commercial Arbitration Act 1985 (WA) provides that:
“(1) If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, the other party may, subject to subsection (2), apply to that Court to stay the proceedings and that Court, if satisfied -
(a)that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and
(b)that the applicant was at the time 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 and may further give such directions with respect to the future conduct of the arbitration as it thinks fit.”
Sub-section (2) prohibits, except with the leave of the court, the making of an application for a stay “after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance”.
The pre-conditions necessary for the exercise of discretion conferred by section 53 have been satisfied. The defendants have not taken any step in the proceeding. They have not even entered an appearance. The material establishes that they are and remain ready and willing to participate in an arbitration.
The plaintiff opposes the application for stay on six grounds:
(i)Not all claims included in the writ are caught by the arbitration agreement. Those claims will continue to be the subject of the action. It is obviously inconvenient to have two concurrent sets of proceedings, one in court and one before an arbitrator in respect of related matters.
(ii)The second defendant, the guarantor, is not a party to the arbitration agreement and the action will proceed against him.
(iii)An arbitration in Perth will be much more expensive and inconvenient than litigation in Brisbane.
(iv)The Court is armed with powers to refer the dispute to Alternative Dispute Resolution which is likely in this case to be advantageous and to bring about a settlement. This is preferable to the matter proceeding laboriously through arbitration.
(v)The procedures of litigation are superior and more flexible. They allow for the determination of preliminary points, which in this case may be an advantage.
(vi)The defendants have delayed in referring the dispute to arbitration.
I am not satisfied that some of the plaintiff’s claims are not within the reference to arbitration. The clause is very wide in its terms and:
“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 ... ”
Per Gleeson CJ in Francis Travel Marketing Pty Ltd v. Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165.
The best understanding of what the plaintiff’s claims comprise appears in its solicitor’s affidavit. Mr Dickens deposes that:
“(k)the Plaintiff’s claims against the Defendants include the following:
(i)damages for misrepresentations made inducing the Plaintiff to enter into the contract;
(ii)damages for negligence in the design and construction of the vessel;
(iii)damages for breach of the contract;
(iv)damages for negligent advice and/or misrepresentations made in relation to the ability of the vessel to undertake the sea journey from Fremantle to Fraser Island;
(v)an order that the Second Defendant indemnify pursuant to the guarantee contained in the contract.”
The misrepresentations give rise to the claim for contravention of section 52. The negligence seems to arise out of the performance of the contract and is ancillary or alternative to the claims in contract. The claim in respect of negligent advice and/or misrepresentations relates to statements allegedly made after the vessel was complete and had been delivered to the plaintiff. The statements were to the effect that the vessel was fit to make the voyage from Perth to Hervey Bay via Torres Strait. The complaint is that she was not, substantial defects becoming apparent on the voyage which had to be interrupted to allow repairs to be effected in Cairns. It is said that the claim for negligent mis-statement is outside the contract. Lastly it is said that the second defendant will not be a party to the arbitration.
I am not satisfied there is any substance in any of these points. I think counsel for the defendants is correct that all the claims are disputes arising between the purchaser and the vendor under or in relation to or in connection with the contract. It is clear that the arbitrator will have power, arising from the parties’ submission to arbitration, to give the claimant such relief as would be available in a court of law having jurisdiction with respect to the subject matter of the disputes. This will include a power to award damages in respect of a contravention of the Trade Practices Act as well as damages for negligence: see Francis Travel at 167. The only question is whether the claims for damages for negligence and contravention of the Trade Practices Act are within the arbitration agreement. The claims all arise out of the making or performance of the contract or the seaworthiness of the vessel built and bought pursuant to the contract. Those claims relate to or are connected with the contract and are within the ambit of the submission to arbitration.
There is no more substance in the submission that the second defendant as guarantor will not be party to the arbitration and the action can proceed against him thereby duplicating process. The effect of clause 28 is that an award made after an arbitration of a dispute between the purchaser and the vendor is “binding upon the parties”. The second defendant is a party as defined. The agreement clearly contemplates that if an award is made in respect of a dispute that involves the guarantor’s obligations then the second defendant is bound by it. Even if the guarantor is not a participant in the arbitration he is interested in the proceedings and bound by the result. The dispute between the plaintiff and the second defendant is caught by the arbitration agreement. Even if this were not so it would in my view be proper to stay the action against the second defendant pending the termination of the arbitration if a stay of the action against the first defendant were appropriate.
The fact that an arbitration will in all likelihood be more expensive and less convenient to the plaintiff than litigating in the Supreme Court of Queensland is, in the circumstances, of little consequence. The parties agreed to refer disputes between them arising out of their contract to arbitration. It is not a sufficient ground to refuse the stay that the purchaser now wishes that it had not made that part of the bargain. As part of its contractual arrangements it agreed to arbitrate disputes in Perth. It must, when it made the agreement, have known that arbitrations are commonly more expensive than litigation and that arbitrating in Perth would be inconvenient to it. There is no reason why it should not be held to its bargain.
Nor is there any more substance in the submission that the court has available to it means of referring disputes to alternative dispute resolution which may bring about an economical and speedy end to the dispute. Arbitration is a form of alternative dispute resolution. It is the form which the parties agreed they would adopt to resolve their disputes. It is not a telling point that the litigation should continue so that the court can impose upon the parties a different alternative form of dispute resolution which may not produce a binding result.
I am similarly unpersuaded by the notion that a court can entertain the trial of a preliminary issue which may expeditiously terminate the dispute. So may an arbitrator. Moreover, experience overwhelmingly indicates that preliminary issues, when determined, do not live up to expectations and the larger dispute continues and is often enhanced.
The last point taken is that the defendants have delayed in referring the dispute to arbitration and thereby deprived the plaintiff of the benefit of the arbitration provisions. The first defendant has been paid under the contract. It has no outstanding claim to pursue. The plaintiff is the complaining party who seeks to be reimbursed the cost of rectifying defects in the vessel or otherwise compensated for the fact that she does not perform as promised. It was encumbent upon the plaintiff to take some action if it wished the dispute resolved. There was no obligation on the defendants to do anything until the plaintiff took action in disregard of the arbitration agreement.
The plaintiff has not shown any sufficient reason why the parties should not proceed to have their dispute resolved in accordance with the provisions of their contract. Accordingly I order that action no. 3528 of 1999 be stayed until the conclusion of any arbitration between the parties to the action in respect of the disputes identified in the writ of summons. I order that the plaintiff pay the defendants’ taxed costs of and incidental to the application for the stay.
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