McHutchison v Western Research and Development Ltd - [2004] FCA 419

FEDERAL COURT OF AUSTRALIA
McHutchison v Western Research and Development Ltd [2004] FCA 419
ARBITRATION – application by respondent to stay court proceedings – whether respondent a party to the arbitration agreement – whether sufficient reason why the matter should not be referred to arbitration – whether dispute or difference in court proceedings touches on matter or thing arising from consultancy agreement – whether dispute or difference raises other issues – whether risk of multiplicity of proceedings – motion refused
Arbitration (Foreign Awards and Agreements) Act 1974 (Cth) s 7(4)
Corporations Act 2001 (Cth) ss 50AA, 124, 125, 126
Patents Act 1990 (Cth) ss 15, 192
Trade Practices Act 1977 (Cth) ss 52, 87
Commercial Arbitration Act 1985 (WA) s 53(1), 53(1)(a), 53(2)
Property Law Act 1969 (WA) s 11
Eaton v Eaton [1950] VLR 233 cited
Ferris v Plaister (1994) 34 NSWLR 474 cited
Tanning Research Laboratories Inc v O’Brien (1950) 169 CLR 332 applied
Thomas (WC) & Sons Pty Ltd v Bunge (Australia) Pty Ltd [1975] VR 801 cited
Thomas v Star Maid International Pty Ltd [1999] FCA 911 cited
ROY NEIL McHUTCHISON v WESTERN RESEARCH AND DEVELOPMENT LTD
W208 of 2003
RD NICHOLSON J
8 APRIL 2004
PERTH

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W208 OF 2003

BETWEEN:

ROY NEIL McHUTCHISON
APPLICANT

AND:

WESTERN RESEARCH AND DEVELOPMENT LTD
RESPONDENT

JUDGE:

RD NICHOLSON J

DATE OF ORDER:

8 APRIL 2004

WHERE MADE:

PERTH

THE COURT ORDERS THAT:
1.The respondent’s notice of motion for stay of proceedings dated 13 February 2004 be dismissed.
2.The respondent pay the applicant’s costs of the motion.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W208 OF 2003

BETWEEN:

ROY NEIL McHUTCHISON
APPLICANT

AND:

WESTERN RESEARCH AND DEVELOPMENT LTD
RESPONDENT

JUDGE:

RD NICHOLSON J

DATE:

8 APRIL 2004

PLACE:

PERTH

REASONS FOR JUDGMENT

The respondent brings a notice of motion seeking to stay the action pursuant to s 53(1) of the Commercial Arbitration Act 1985 (WA) (‘the Act’) or alternatively pursuant to the inherent jurisdiction of the Court. Section 53 relevantly reads as follows:
‘(53)
(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, that 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.
(2)

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] FCA 419
Decision Date: 8 APRIL 2004

CaseChat Overview and Summary

The case of McHutchison v Western Research and Development Ltd involved a dispute between the applicant, McHutchison, and the respondent, Western Research and Development Ltd, regarding a consultancy agreement. The respondent moved to stay the action, arguing that the dispute should be referred to arbitration under the Commercial Arbitration Act 1985 (WA). The key legal issue was whether the court should grant a stay of the proceedings in favour of arbitration, in accordance with section 53(1) of the Act. Section 53(1) allows a party to an arbitration agreement to apply to the court for a stay of proceedings if the other party has commenced proceedings in respect of a matter agreed to be referred to arbitration. The court had to consider whether there was a sufficient reason why the matter should not be referred to arbitration and whether the respondent was ready and willing to proceed with the arbitration.

The court found that the respondent was ready and willing to arbitrate and was not responsible for any delay due to the inaccessibility of the consultancy agreements. However, the court also noted that the respondent's delay in making the application for a stay, despite being aware of the arbitration agreement, was a significant factor. The court held that the respondent's delay was unreasonable and that it had not demonstrated a sufficient reason why the matter should not be referred to arbitration. Consequently, the court dismissed the respondent's notice of motion for a stay of proceedings and ordered that the respondent pay the applicant's costs of the motion. This decision underscores the importance of timely applications for a stay of proceedings in arbitration cases and highlights the court's discretion in deciding whether to grant such a stay.

Orders

Orders of the court

1. The respondent’s notice of motion for stay of proceedings dated 13 February 2004 be dismissed.

2. The respondent pay the applicant’s costs of the motion.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The respondent brings a notice of motion seeking to stay the action pursuant to s 53(1) of the Commercial Arbitration Act 1985 (WA) (‘the Act’) or alternatively pursuant to the inherent jurisdiction of the Court. Section 53 relevantly reads as follows:‘(53)(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, that 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.(2)An application under subsection (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance.(3)…’EVIDENCE The case for the respondent relies upon affidavits of Mr CF Sharland, a director and company secretary of the respondent and a person authorised to swear the affidavits on the respondent’s behalf. These were sworn on 13 February 2004 and 23 March 2004. Additionally, reliance is placed on affidavits of Mr DA Sims, a director of the respondent and of Eastland Technology Australia Ltd (‘ETA’) sworn on 4 March 2004 (2 volumes) and 26 March 2004. The applicant’s case relies upon an affidavit of the applicant sworn on 2 October 2003. That affidavit is objected to on behalf of the respondent on the grounds that it lacks relevance. The point of relevance remains for determination in connection with the contentions made for the respondent. ARBITRATION AGREEMENT It is not in dispute that there is an arbitration agreement as defined by s 4(1) of the Act, namely, ‘an agreement in writing to refer present or future disputes to arbitration’. That agreement is a consultancy agreement dated 7 September 2001 purporting to be made between ETA ‘and its subsidiary companies of the one part and the applicant (described as the consultant) of the other part’. In cl 1 of the consultancy agreement it was provided that ETA engage the consultant for a period of three years commencing on 7 September 2001, with provision for an extension of a term of three years by mutual agreement. By cl 2 ETA appointed the consultant ‘its sole external consultant in respect of the design of all its Products which shall be manufactured, constructed, marketed or otherwise dealt in by ETA in the course of its business…’. This provision is to be understood against the first recital which reads:‘(1)ETA engages THE CONSULTANT to provide and THE CONSULTANT shall provide the following services:-(a)by close liaison with the ETA to develop concept drawings of the Products selected for development by ETA;(b)in consultation with the ETA and with such other contractors and subcontractors employed by ETA as appropriate, optimise the design of the Products to the requirements of efficient production and market needs;(c)provide consultative services to manufacturers selected by ETA with the aim of optimising production methods and to prepare the tool designs as required by the ETA;(d)prepare engineering design drawings of prototypes and products for small and large scale production in consultation with the engineers and manufacturers as required by the ETA;(e)submit all designs to ETA for approval and where necessary and by a consultative process, modify those designs where jointly deemed appropriate.(f)Assist ETA with the moulding of and assembly of prototype models of the Products.(g)In consultation with ETA undertake all such work as may be requested to ensure the timely and efficient development of the products.’

Decision

Reasons for decision

I also regard the respondent as ready and willing to arbitrate and not responsible for the delay due to inaccessibility of the consultancy agreements. However, these positive aspects for the respondent cannot overcome the earlier matters to which I have referred.CONCLUSION For these reasons I consider that the application for stay should be refused and the motion dismissed with costs.

Ratio Decidendi

Legal Principle Established

The applicant’s case relies upon an affidavit of the applicant sworn on 2 October 2003. That affidavit is objected to on behalf of the respondent on the grounds that it lacks relevance. The point of relevance remains for determination in connection with the contentions made for the respondent. ARBITRATION AGREEMENT It is not in dispute that there is an arbitration agreement as defined by s 4(1) of the Act, namely, ‘an agreement in writing to refer present or future disputes to arbitration’. That agreement is a consultancy agreement dated 7 September 2001 purporting to be made between ETA ‘and its subsidiary companies of the one part and the applicant (described as the consultant) of the other part’. In cl 1 of the consultancy agreement it was provided that ETA engage the consultant for a period of three years commencing on 7 September 2001, with provision for an extension of a term of three years by mutual agreement. By cl 2 ETA appointed the consultant ‘its sole external consultant in respect of the design of all its Products which shall be manufactured, constructed, marketed or otherwise dealt in by ETA in the course of its business…’. This provision is to be understood against the first recital which reads:‘(1)ETA engages THE CONSULTANT to provide and THE CONSULTANT shall provide the following services:-(a)by close liaison with the ETA to develop concept drawings of the Products selected for development by ETA;(b)in consultation with the ETA and with such other contractors and subcontractors employed by ETA as appropriate, optimise the design of the Products to the requirements of efficient production and market needs;(c)provide consultative services to manufacturers selected by ETA with the aim of optimising production methods and to prepare the tool designs as required by the ETA;(d)prepare engineering design drawings of prototypes and products for small and large scale production in consultation with the engineers and manufacturers as required by the ETA;(e)submit all designs to ETA for approval and where necessary and by a consultative process, modify those designs where jointly deemed appropriate.(f)Assist ETA with the moulding of and assembly of prototype models of the Products.(g)In consultation with ETA undertake all such work as may be requested to ensure the timely and efficient development of the products.’ The case for the respondent centres around cl 5 and cl 6 of the agreement which read as follows:‘5.The ownership of and sole right to obtain copyright in any design supplied by THE CONSULTANT to ETA upon the instructions of ETA shall be vested in ETA from the date of delivery by THE CONSULTANT to ETA. Any drawings or prototype models thereof and ETA shall thereupon be at liberty to effect and be responsible for the registration and other protection of such design as it sees fit.6.The ownership of and sole right to obtain patent or other protection in any design or other intellectual concept which may result from work supplied by THE CONSULTANT to ETA upon the instructions of ETA shall be vested in ETA and ETA shall thereupon be at liberty to effect and be responsible for the registration and other protection of such design as it sees fit. ETA at tis discretion may reward THE CONSULTANT for such inventive steps in such manner as it sees fit.’

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W208 OF 2003

BETWEEN:	ROY NEIL McHUTCHISON APPLICANT
AND:	WESTERN RESEARCH AND DEVELOPMENT LTD RESPONDENT
JUDGE:	RD NICHOLSON J
DATE OF ORDER:	8 APRIL 2004
WHERE MADE:	PERTH

JUDGE:	RD NICHOLSON J
DATE:	8 APRIL 2004
PLACE:	PERTH