Lend Lease Infrastructure Services Pty Ltd (Formerly Conneq Infrastructure Services (Australia) Pty Ltd) v Sino Iron Pty Ltd
[2012] WASC 492
•14 DECEMBER 2012
LEND LEASE INFRASTRUCTURE SERVICES PTY LTD (FORMERLY CONNEQ INFRASTRUCTURE SERVICES (AUSTRALIA) PTY LTD) -v- SINO IRON PTY LTD [2012] WASC 492
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 492 | |
| Case No: | CIV:2371/2012 | 14 SEPTEMBER, 5 NOVEMBER 2012 | |
| Coram: | ALLANSON J | 14/12/12 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application for a stay refused | ||
| B | |||
| PDF Version |
| Parties: | LEND LEASE INFRASTRUCTURE SERVICES PTY LTD (FORMERLY CONNEQ INFRASTRUCTURE SERVICES (AUSTRALIA) PTY LTD) SINO IRON PTY LTD |
Catchwords: | Practice and procedure Application for stay of proceedings Arbitration agreement Construction of terms Turns on own facts Commercial Arbitration Act Stay of proceedings under s 53 Turns on own facts Contract Construction of contract Incorporation of document by reference Turns on own facts |
Legislation: | Commercial Arbitration Act 1985 (WA), s 53 |
Case References: | Albon v Naza Motor Trading Sdn Bhd [2008] 1 Lloyd's Rep 1 Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 Carob Industries Pty Ltd v Simto Pty Ltd (1997) 18 WAR 1 Modern Buildings (Wales) Ltd v Limmer & Trinidad Co Ltd [1975] 2 Lloyd's Rep 318 PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SINO IRON PTY LTD
Defendant
Catchwords:
Practice and procedure - Application for stay of proceedings - Arbitration agreement - Construction of terms - Turns on own facts
Commercial Arbitration Act - Stay of proceedings under s 53 - Turns on own facts
Contract - Construction of contract - Incorporation of document by reference - Turns on own facts
(Page 2)
Legislation:
Commercial Arbitration Act 1985 (WA), s 53
Result:
Application for a stay refused
Category: B
Representation:
Counsel:
Plaintiff : Mr M J Feutrill
Defendant : Mr C A Luck
Solicitors:
Plaintiff : Norton Rose Australia
Defendant : Clayton Utz
Case(s) referred to in judgment(s):
Albon v Naza Motor Trading Sdn Bhd [2008] 1 Lloyd's Rep 1
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Carob Industries Pty Ltd v Simto Pty Ltd (1997) 18 WAR 1
Modern Buildings (Wales) Ltd v Limmer & Trinidad Co Ltd [1975] 2 Lloyd's Rep 318
PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301
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1 ALLANSON J: On 14 August 2012, Lend Lease Infrastructure Services Pty Ltd commenced proceedings against Sino Iron Pty Ltd, claiming in debt, alternatively for damages. Sino Iron asks the court to stay the action because the parties made an arbitration agreement which governs this dispute.
2 Lend Lease brings its claim under a written agreement with Sino Iron. The agreement was made by Bilfinger Berger Services (Australia) Pty Ltd, but it is not in dispute that the action is properly commenced in the name of Lend Lease.
3 Lend Lease pleads that, on or about 8 July 2010, it entered into a written agreement with Sino Iron to carry out certain works in relation to a desalination plant to be constructed in the Pilbara (the Agreement). Lend Lease pleads, in pars 3 and 4 of its statement of claim, that the Agreement comprised two documents: a letter of intent, dated 6 July 2010 but signed by the parties in the following days; and a document entitled Works Contract - General Terms and Conditions (the Contract). It says that, on its proper construction, the Agreement provided for Lend Lease to perform work on certain terms set out in the Contract.
4 Lend Lease pleads that between 6 July 2010 and 8 October 2010 it performed works pursuant to the terms of the Agreement for which it is entitled under the Agreement to be paid 'the reasonable costs incurred', subject to providing substantiation of those costs to the reasonable satisfaction of Sino Iron. Lend Lease says, in effect, that it incurred reasonable costs in the sum of $2,381,305.09 (excluding GST), alternatively, $2,267,775.77 (excluding GST), calculated by reference to the pricing schedule in sch 6 to the Contract. Sino Iron has paid only $1,224,776.01 (excluding GST), and despite demand refuses to pay the balance.
5 On 11 September 2012, Sino Iron applied under s 53 of the Commercial Arbitration Act 1985 (WA) for the court to stay Lend Lease's action. Sino Iron asserts that, properly construed, the Agreement constituted by the letter of intent and the Contract, as pleaded by Lend Lease, includes a written arbitration agreement.
6 The issues which arise under s 53 on this application can be shortly stated:
(1) as a threshold question, is there an arbitration agreement;
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- (2) if so, is the subject of the proceedings brought by Lend Lease a matter which the parties agreed to refer to arbitration under the arbitration agreement;
(3) if so, has Lend Lease demonstrated that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the arbitration agreement; and
(4) how should the court exercise its discretion.
7 The requirement under s 53 that Sino Iron was, and remains, ready and willing to do all things necessary for the proper conduct of the arbitration was in issue, but is no longer.
8 A procedural issue arose with respect to the way in which the court should deal with the threshold question. Both parties agreed that it was primarily a question of construction of the letter of intent, together with the Contract. But Lend Lease submitted that the existence of an arbitration agreement could not be resolved against it on an interlocutory basis, and that, in itself, is a reason for refusing the stay. The effect of the submission is that once a plaintiff puts the existence of the arbitration agreement in issue, the court is the only forum which may determine that question. And as the determination of that question separately would result in unnecessary duplication and delay, or, if resolved in favour of the defendant, would result in the risk of inconsistent findings, the stay application should be refused. In argument, this was refined and Lend Lease submitted that the stay should only be granted if it had no arguable case that there was no arbitration agreement.
9 Lend Lease put forward no authority directly supporting the proposition. There may be cases where the nature of the challenge to an arbitration agreement raises issues that require separate determination in open court on oral evidence. For example, counsel for Lend Lease referred to the decision in Albon v Naza Motor Trading Sdn Bhd [2008] 1 Lloyd's Rep 1, where on an application for an anti-arbitration injunction it was necessary for the court to determine whether the agreement had been forged. But, in the present case the issue is confined to the construction of documents. In such a case, there is guidance in the decision of the Court of Appeal in Modern Buildings (Wales) Ltd v Limmer & Trinidad Co Ltd [1975] 2 Lloyd's Rep 318, 322 (Buckley LJ):
It is not sufficient, in my judgment, for the party who resists a stay merely to say: 'Well there is some doubt as to how the contract between the parties should be construed and, therefore, it is proper for the court in the
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- exercise of its discretion to refuse to stay.' On the contrary, in my judgment, when an application is made by one party for a stay on the ground that there is in operation an arbitration agreement, it is incumbent on the court to discover whether or not there is such an agreement in force; and if that involves determining a question of construction, that question of construction must be decided there and then.
10 In my opinion, I should follow that decision and determine the question of construction in this application, even though it is interlocutory.
11 The letter of intent (LOI) is addressed to Bilfinger Berger Services (Australia) Pty Ltd. It is headed:
Sino Iron Operation Mechanical, Electrical & Instrument Installation & Commissioning For Desalination Plant
Contract: BCA1-ME-WC-3021 Letter of Intent (LOI)
Further to the proposal submitted by Bilfinger Berger Services (Australia) Pty Ltd (Contractor) to undertake the mechanical, electrical and instrument installation and commissioning for the desalination plant (Contract Work), CITIC Pacific Mining Management Pty Ltd (CPM) on behalf of Sino Iron Pty Ltd (Principal) acknowledges that, subject to the final internal approval requirements of the Principal, the parties have agreed in principle to the contract price and the terms and conditions for the Contract Work as contained in the contract attached to this letter of intent (LOI) and marked Annexure 'A' (Contract).
This LOI has been issued so that the Contractor can commence some of the Contract Work (in accordance with this LOI) while the principal obtains the final approvals referred to above.
12 There follow eight items. I need to set out the first four items in full to explain my reasons.
1. Basis of the Letter of Intent
(a) Upon acceptance of this LOI by the Contractor and otherwise until such time as the Contract is executed, this LOI constitutes the legally binding obligations of the Contractor and the Principal with respect to the undertaking of the Contract Work.
(b) The terms and conditions of this LOI will take precedence over any terms and conditions previously agreed between the parties.
- (c) If the parties execute the Contract, all conditions expressed or implied in this LOI will be superseded by the Contract and the Contract Work shall be deemed to have been supplied under, and be subject to the terms of the Contract.
- 2. Instructions to Proceed
(a) On acceptance of this LOI, the Contractor is instructed to undertake the Contract Work.
(b) The Contractor must at all times comply with the terms of the Contract, all applicable laws, by-laws, statutory instruments, regulations and codes of practice with respect to the Contract Work performed pursuant to this LOI.
(c) For the purposes of all time frames in the Contract, Contract award shall be the date on which this LOI is duly executed by both parties.
(d) The Forward Payment referred to in Schedule 5 of the Contract will not be payable until the Contract is executed and the conditions precedent to the Forward Payment identified in Schedule 5 are satisfied.
3. LOI Termination or Award of Contract
(a) If the Contract has not been executed by the Principal within three (3) months of the date of this letter (Lapse Date), then this LOI will terminate unless the Lapse Date is extended by written agreement between the parties.
(b) The Principal may terminate this LOI by giving the Contractor 14 days written notice. For the avoidance of doubt, the Termination Date shall be 14 days from the date of such notice.
(c) The parties acknowledge and agree that this LOI automatically terminates in the event that the Principal's financiers, China Development Bank, object to any term or condition of the Contract (CDB Termination).
(d) This LOI will expire (other than the obligations in item 4(b) of this LOI) on the earlier of the execution of the Contract or the Lapse Date or the Termination Date or in the event of CDB Termination.
4. Payment for work done under this LOI
(a) Unless the Principal provides prior written approval or agrees otherwise in writing, the Principal's liability to the
- Contractor for Contract Work and any and all matters in connection with this LOI shall not exceed AUD $4,000,000.00.
- (b) Subject to clause 4(a) above, in the event that:
i. the LOI expires and the Contract is not entered into by the Parties; or
ii. the Principal terminates the LOI;
the Principal will pay the Contractor within 14 days of the Lapse Date or the Termination Date the direct reasonable costs actually incurred by the Contractor in relation to the Contract Work on the condition that the Contractor provides substantiation of the reasonable costs that it has incurred in accordance with this LOI to the reasonable satisfaction of the Principal. For the avoidance of doubt, the caps on expenditure outlined in clause 4(a) of this LOI apply.
Upon payment of the above costs, the Principal will immediately obtain title and intellectual property rights to the LOI Work, whether it be complete or incomplete. The Contractor shall provide reasonable assistance to the Principal to ensure that it receives title to the LOI Work already undertaken. (emphasis added on each occasion)
14 Under item 5 the 'LOI Work' must be undertaken at the direction of the Principal's representatives: item 5(a). The Principal's representatives are entitled to carry out a review and inspection 'to ensure the LOI Work complies with the requirement of this LOI and the Contract'. The Contractor is obliged to attend meetings with the Principal's representative as may be reasonably required to monitor the progress of the LOI Work; agree the effect of any variations thereto or deal with any other matters arising under or in connection with the LOI; and provide the Principal with a fortnightly forecast of expenditure 'under this LOI' and advise if expenditure exceeds the forecast.
15 Item 6 requires the terms and conditions of the LOI and all ancillary agreements and other information to be confidential. Item 7 deals with
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- governing law, with the parties submitting to the exclusive jurisdiction of the courts of Western Australia. Item 8 deals with signing. In particular item 8(b) requires each page of the LOI and each page of Annexure A, the Contract, to be initialled.
16 The Contract comprises: a formal Instrument of Agreement; a document headed Contract Details, with 17 schedules dealing with matters including Scope of Work, Pricing Schedules, Construction Timetable and Policies, Procedures and Rules; the Works Contract - General Terms and Conditions; and any Purchase Orders, schedules, appendices and other documents annexed to or otherwise expressly incorporated.
17 The Contract is subject to two conditions precedent: execution by Principal and Contractor of a Direct Agreement (a separate agreement that was not put in evidence); and the Principal providing written notice to the Contractor that it had obtained all necessary approvals for entering into the Contract.
18 The General Terms and Conditions are in four parts. Part A, The Undertaking of the Works, which contains key principles and the provisions for commencement (including the conditions precedent). Part B, Site Access, Safety and the Environment. Part C, General Conditions, including care of works, defects, insurance, and default and termination, and Part D, General Conditions which Commence upon Execution. Part D contains the provisions for dispute resolution.
19 Under s 2 in Part A, that section and Part D commence on execution of the Contract. The remaining sections commence on the satisfaction or waiver of the conditions precedent. The time for satisfaction or waiver is 90 business days from final execution of the contract. Sections which do not commence until satisfaction of the conditions precedent include those for security, liquidated damages, and payment.
20 By s 40.1, 'any dispute between the parties in relation to this Contract (Dispute) must be referred to dispute resolution in accordance with this section and, except to the extent otherwise provided by law or this section, will not be the subject of legal proceedings'. The procedures prescribed include negotiation and arbitration.
21 Some attention was paid in submissions to the provisions of the General Terms and Conditions, or at least a selected few of them. The answer in the present application, however, lies in the proper construction of the LOI.
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22 While the Contract document is appended to the LOI, there is no express incorporation of any of its terms. Express incorporation is not necessary. An arbitration clause in a separate document can be incorporated into an agreement by implication: see, for example, Carob Industries Pty Ltd v Simto Pty Ltd (1997) 18 WAR 1, 15.
23 Although set out as a letter, the LOI is formal, and expressly intended to govern the relationship of the parties during the period (at most three months) before the Contract is executed or terminated. The whole of the LOI must be considered 'and the words of every clause must if possible be construed so as to render them all harmonious one with another': Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109. The primary duty of the court is to endeavour to discover the intention of the parties as embodied in the words they used, primarily in the LOI but also, to the extent the terms of the Contract appended to the letter may assist, in that document as well. It is the objectively ascertained intention of the parties, as it is expressed in those documents, that matters, and not their subjective intentions.
24 First, the LOI refers to the parties' agreement in principle to the terms of the Contract. The clear intent of the parties is that the Contract was subject to the internal approval requirements of Sino Iron and would govern their relationship retrospectively if executed. The LOI was made to provide for Lend Lease undertaking work for a limited period, either until that execution, or in the event that the Contract did not come into operation.
25 Second, the LOI is itself a binding agreement. In particular, item 1(a) states that until the Contract is executed the LOI constitutes the legally binding obligations of the Contractor and the Principal with respect to undertaking of the Contract Work. Should the Contract be executed, the work 'shall be deemed to have been supplied under, and be subject to the terms of the Contract': item 1(c), and see also item 4(c). The corollary is that, should the Contract not be executed, the work supplied under the LOI shall not be so deemed to have been done under, and subject to, the terms of the Contract.
26 Third, Lend Lease submitted that the requirement in item 2(b) that the Contractor comply with the terms of the Contract is expressed as a unilateral obligation. It is not necessary that there be mutual or bilateral rights of reference in an arbitration agreement: see PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA
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- 36; (1995) 184 CLR 301, 310. But the way in which item 2(b) is expressed does not demonstrate an intention to generally incorporate the terms of the Contract, including s 40. The item also requires the Contractor to comply with laws, by-laws, statutory instruments, regulations and codes of practice (all matters dealt with separately in the Contract).
27 Fourth, it would be completely impractical (and objectively unlikely) for the parties to incorporate some (unspecified) terms of the Contract, but not others. This is particularly so where some terms of the Contract only come into operation on execution and others on satisfaction or waiver of the conditions precedent.
28 Fifth, the agreement is for a limited time, at most three months, but subject to automatic termination under item 3(d). Item 3(d) preserves the obligations under item 4(b) of the LOI, but only those obligations, on expiry or termination.
29 Sixth, the LOI makes its own provision for payment, with the agreement that if the Contract is not entered into and the LOI expires, the Principal will pay costs reasonably incurred 'in accordance with this LOI' and substantiated: item 4(b).
30 There is no one decisive factor, but reading the LOI as a whole its intention is sufficiently clear: it did not incorporate the terms of the Contract, including s 40, either expressly or by implication. If the Contract was executed, it would govern the relationship between the parties, and be deemed to do so from the signing of the LOI. Otherwise, the LOI would be the effective agreement. The Contract was not executed. The dispute between Lend Lease and Sino Iron is not in relation to the Contract, but in relation to the LOI.
31 The threshold condition for the grant of a stay has not been made out. The further questions do not arise.
32 The application to stay the proceedings will be dismissed.
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