McConnell Dowell South East Asia Pty Ltd v SEC

SUPREME COURT OF VICTORIA

PRACTICE COURT

Not Restricted

No. 5035 of 1996

McCONNELL DOWELL SOUTH EAST ASIA PTY. LTD.	Plaintiffs
AND OTHERS
v.
STATE ELECTRICITY COMMISSION OF VICTORIA AND	Defendants
OTHERS

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JUDGE:	BEACH, J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	18 NOVEMBER 1998
DATE OF JUDGMENT:	24 NOVEMBER 1998
CASE MAY BE CITED AS:	McCONNELL DOWELL SOUTH EAST ASIA PTY. LTD. & ORS. v. S.E.C. & ORS.
MEDIA NEUTRAL CITATION:	[1998] VSC 152

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CATCHWORDS:

PRACTICE AND PROCEDURE - Proceeding in Victoria and Arbitration in Singapore - Similar issues arising from same facts - Jurisdiction of court to stay proceeding pending determination of arbitration.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. J. Karkar Q.C. with	Clayton Utz
Mr. P. Santamaria
For the Defendant	Mr. M. Dreyfus	Freehill Hollingdale & Page

HIS HONOUR:

This is an appeal from the order of Master Evans made on 23 October 1998 whereby the Master ordered that the proceeding be stayed until the determination or earlier conclusion of the arbitration in Singapore between the first named plaintiff and Power Gas Ltd. pursuant to Notices of Arbitration dated 26 May 1998 and 19 June 1998.
The following is the background to the appeal.
The first plaintiff McConnell Dowell South East Asia Pty. Ltd. is owned by the second plaintiff McConnell Dowell Holdings Pty. Ltd.
On or about 21 April 1993 McConnell Dowell South East Asia Pty. Ltd., to which I shall refer hereafter as McConnell, was awarded a contract by the Public Utilities Board of Singapore for the construction of a 70 kilometre gas pipeline in Singapore for the total estimated sum of $73,423,913.
In September 1995 the Board's rights and liabilities under the contract vested in Power Gas Pty. Ltd. which subsequently changed its name to Power Gas Limited.
The Gas and Fuel Corporation of Victoria (Gas & Fuel) was engaged by the Board as its design consultant and in particular was involved in the preparation of the tender documents for the project. Drawings prepared by Gas & Fuel were included in the tender documents. It is the case for McConnell that it relied upon those drawings in submitting its tender and entering into the contract.
By virtue of the provisions of the Gas Industry Act 1994 and/or the Gas and Fuel Corporation Act 1995 the liabilities of Gas & Fuel in relation to the project have vested in or alternatively have been transferred to the State Electricity Commission of Victoria (S.E.C.) and/or the Gas Transmission Corporation (G.T.C.) and/or Gascor.
McConnell contends that the tender documents including the drawings prepared by Gas & Fuel were inaccurate and misleading in that the underground services encountered by McConnell during the performance of the contract along the alignment of the pipeline substantially exceeded those shown in the drawings and other tender documents and were in different locations from those shown in the drawings and other tender documents.
The cost of performing the additional work necessitated by the inaccuracies in the drawings and tender documents exceeded $53,000,000.
Disputes arose between McConnell and Power Gas concerning McConnell's claims in respect of the additional work. On 26 May 1998 and 19 June 1998 respectively the disputes were referred to arbitration in Singapore pursuant to the provisions of the contract.
If McConnell and Power Gas are unable to agree on the appointment of an arbitrator by 23 November 1998 an arbitrator will be appointed by the Chairman of the Singapore International Arbitration Centre pursuant to the rules of the Centre.
I turn now to the proceeding before this Court.
On 2 April 1996 the plaintiffs filed a writ in the Court naming as defendants the S.E.C., G.T.C. and Gascor.
By their endorsement of claim the plaintiffs seek various remedies against the defendants for the losses they have suffered due to the inaccuracies in the drawings prepared by Gas & Fuel.
The plaintiffs commenced the proceeding to protect their position against the defendants should they not succeed in the arbitration in relation to those issues relevant to the case against the defendants. Had the plaintiffs not commenced the proceeding prior to 21 April 1986, it is arguable that any claim the plaintiffs had against the defendants pursuant to the provisions of the Trade Practices Act 1974 (C'th.) and the Fair Trading Act 1985 (Vic.) would have been statute barred by virtue of the provisions of s.82 and s.37 respectively of those Acts.
The writ filed in the Court by the plaintiffs was served on the defendants at the end of March 1997. Had the writ not been served then it would have ceased to have been a valid writ by virtue of the provisions of R.5.12 of the Supreme Court Rules.
On 2 September 1998 the plaintiffs filed a summons in the Court seeking that their proceeding be stayed until the determination or conclusion of the arbitration in Singapore. It was that summons which was before Master Evans on 23 October 1998.
The following are the matters principally relied upon by the plaintiffs in support of their application:
1.          The allegations made in the proceeding are similar to and arise out of the same facts and circumstances relied upon by McConnell in the arbitration.
2.          It is probable that the arbitration will be determined prior to the proceeding.
3.          If McConnell recovers the full amount of its loss in the arbitration then as a matter of practicality it cannot continue the proceeding. On the other hand McConnell would be entitled to continue with the arbitration whether it is successful in the proceeding or not.
4.          If the plaintiffs proceeded with the proceeding in this Court before finalisation of the arbitration, they could be met with a defence that McConnell did not suffer any loss because it had contractual rights against Power Gas which, by definition, had to be decided by arbitration. In the alternative they could be met with a defence that McConnell had failed to mitigate its loss by seeking to recover payment from Power Gas.
5.          If the stay is not granted and McConnell is successful in the arbitration, a substantial amount of cash and expense associated with discovery (which will be voluminous) and preparation will be wasted.
6.          Determination of certain issues in the arbitration will cast light on the issues to be determined in the proceeding, for example the question regarding the accuracy of the drawings prepared by Gas & Fuel.
7.          If the proceeding ran simultaneously with the arbitration that would cause serious difficulty with scheduling witnesses and in particular with the scheduling of expert witnesses who are likely to be in various locations around the world and who will be required to attend both the proceeding and the arbitration.
The arguments advanced on behalf of the defendants were basically twofold. In the first place it was submitted that as the plaintiffs have chosen to institute the proceeding they should be required to pursue it with expedition thereby ending the uncertainty now faced by the defendants concerning the substantial claim made against them. In that regard counsel for the defendants placed great reliance upon the judgment of Mustill, L.J. in H.M. Attorney General v. Arthur Andersen & Co. (United Kingdom) and Ors. [1989] European Commercial Cases 224 and in particular the following passage at p.229 of his Lordship's judgment:
"Nor am I convinced that a solution to the present problem is much advanced by talking in terms of burden of proof. Naturally, if a plaintiff has thought fit to commence an action, with all the hardship to the defendant which this involves in terms of expense, worry and disruption, he should in general be made to face up to the situation which he has chosen to create, and should not be permitted to conduct the action to a timetable which corresponds only to his own whimsy. Having put his hand to the plough he should continue to the end of the furrow. This is only fairness and common sense."
In the second place counsel for the defendants contended that the defendants would suffer real prejudice if the plaintiffs are permitted to put the proceeding "on hold" in that if the plaintiffs recover judgment against the defendants or any of them, the defendants may be required to pay a significantly larger amount of statutory interest (presently at the rate of 12.3% per annum) to the plaintiffs than they would be obliged to if the proceeding came to trial expeditiously.
A fall back position adopted by counsel for the defendants was that if the stay is to be granted it should be on the condition that the plaintiffs be not entitled to recover statutory interest in respect of the period of the stay.
There can be no doubt but that the Court has jurisdiction to stay a local proceeding whilst a foreign proceeding is on foot which involves the same or related factual issues even though the legal issues and the parties may not be the same. See Henry v. Henry (1996) 185 C.L.R. 751. Indeed it was not contended by counsel for the defendants that the Court did not have such jurisdiction.
The question which the Court should ask itself in considering an application such as the present application is that formulated by Mustill, L.J. in Arthur Andersen namely whether the good management of the concurrent set of proceedings clearly requires this Court which is in charge of one set of those proceedings, to decree that a temporary halt should be called to await the outcome of the arbitration in Singapore.
In my opinion and for the reasons advanced by counsel for the plaintiffs, I consider that there should be a temporary halt to this proceeding. In my opinion it would be totally unsatisfactory to have this proceeding and the arbitration going ahead in tandem.
Should any order granting a stay be conditional in the manner contended by counsel for the defendants? In my opinion it should not.
Section 58 of the Supreme Court Act 1986 provides so far as is relevant that if in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt ... from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made. (The emphasis is mine).
I have no doubt but that if this proceeding proceeds to judgment in the plaintiffs' favour, the trial Judge will give careful consideration to the question whether the plaintiffs are entitled to interest in respect of the period of the stay or some part of it and to the question of the rate at which interest should be calculated. I consider that it would be quite unacceptable for me to fetter the trial Judge's discretion in the matter.
The appeal will be dismissed with costs to be taxed and paid by the defendants.

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[1998] VSC 152

24 November 1998