Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd
[2001] QSC 40
•23 February 2001
SUPREME COURT OF QUEENSLAND
CITATION: Mulgrave Central Mill Co Ltd v. Hagglunds Drives Pty Ltd & Anor [2001] QSC 040 PARTIES: MULGRAVE CENTRAL MILL COMPANY LTD
(plaintiff)
v
HAGGLUNDS DRIVES PTY LTD
(first defendant)
HAGGLUNDS DRIVES A.B
(second defendant)FILE NO/S: S9130 of 2000 DIVISION: Trial Division at Brisbane PROCEEDING: Civil Trial ORIGINATING COURT: Brisbane DELIVERED ON: 23 February 2001 DELIVERED AT: Brisbane HEARING DATE: 15 February 2001 JUDGE: White J ORDER: Dismiss the application with costs CATCHWORDS: ARBITRATION – CONSTRUCTION OF ARBITRATION CLAUSE –Application to stay proceedings under s 53 Commercial Arbitration Act - whether one party is bound by other’s referral of dispute to arbitration - whether party entitled to litigate despite arbitration clause in contract
Commercial Arbitration Act 1990 s 53
KBRV Resort Operations Pty Ltd v Anthony & Sons Pty Ltd BC 9903595 unreported decision of 30 June 1999
PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301.
Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] 3 VR 13
Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355].COUNSEL: Mr J K Bond SC for the applicants/1, 2 defendants
Mr R Bain QC and Mr D Williams for the respondent/plaintiffSOLICITORS: Gadens Lawyers for the plaintiff
Mullins & Mullins for the first and second defendants
This is an application by the first and second defendants pursuant to s 53 of the Commercial Arbitration Act 1990 (“the Act”) to stay the proceedings commenced by the plaintiff on the ground that the parties have entered into an arbitration agreement to resolve their disputes.
The plaintiff carries on the business of a sugar crushing mill. On 25 August 1995 it entered into an agreement in writing with the first defendant to purchase a number of hydraulic motors and other machinery and equipment to install in its No. 1 mill. The second defendant manufactured the motors in its factory in Sweden. The first defendant is owned by the second defendant and acts as its agent in Australia. In October 1997 the No. 1 mill stalled, allegedly due to the failure of the equipment, the subject of the agreement.
The plaintiff has pleaded causes of action in contract, tort and breaches of the Trade Practices Act 1974 against the first defendant. It has pleaded causes of action in tort and pursuant to the Trade Practices Act against the second defendant.
The written agreement incorporates the Australian Standard General Conditions of Contract AS 2124 - 1992 (“the ASGC”) and, relevantly, cl 47 thereof which concerns dispute resolution. The defendants contend that the parties have, thereby, agreed for one party to be bound by the other party’s election for resolution of a dispute by arbitration. The plaintiff, on the other hand, contends that the terms of the agreement permit it to commence legal proceedings, as it has done, to resolve the dispute.
The law governing the written contract is the law of Queensland, while the location of the arbitration as agreed in the contract is Western Australia. The plaintiff is anxious to have the matter resolved by litigation in Queensland. Mr Bain QC who, with Mr David Williams appeared for the plaintiff, made reference to the attractions of that form of resolution over arbitration such as, being less expensive, the location of the subject-matter of the contract and the alleged breach being in Queensland, and the benefits of participation in the Supervised Case List so as to obtain an expedited hearing. This is not a venue application and, if it be the case that the parties by their bargain have bound themselves to arbitration in Western Australia those factors favouring litigation are of little consequence. As Chesterman J observed in KBRV Resort Operations Pty Ltd v Anthony & Sons Pty Ltd BC 9903595 unreported decision of 30 June 1999 at para [13] the parties must be taken to have weighed these matters when entering into their agreement.
Clause 47 of the ASGC offers alternative methods of proceeding to dispute resolution. The parties selected Alternative 1.
Clause 47.1 provides relevantly
“If a dispute between the Contractor and the Principal arises out of or in connection with the Contract, including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute .
…
A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration.”
Clause 47.2 Alternative 1 provides
“Within 14 days after service of a notice of dispute, the parties shall confer at least once, and at the option of either party and provided the Superintendent so agrees, in the presence of the Superintendent, to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference each party shall be represented by a person having authority to agree to a resolution of the dispute.
In the event that the dispute cannot be so resolved or if at any time either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may by notice in writing delivered by hand or sent by certified mail to the other party refer such dispute to arbitration or litigation.”
Clause 47.3 concerns the appointment of an arbitrator and certain of the arbitrator’s powers.
Clause 47.4 provides
“Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under Clause 42 or to seek urgent injunctive or declaratory relief in respect of a dispute under Clause 47 or any matter arising under the Contract.”
The general provision in the contract relating to “notice” is in cl 7. It provides
“A notice shall be deemed to have been given when it is received by the person to whom it is addressed or is delivered to the address of that person stated in the Contract or last communicated in writing by that person to the person giving the notice, whichever is the earlier …”
The first defendant through its solicitors on 23 August 1999 gave notice of a dispute to the plaintiff pursuant to cl 47.1. It sought a conference within 14 days to attempt to resolve the dispute. In the event that resolution did not occur the first defendant notified the plaintiff that the dispute would be referred to arbitration in accordance with cl 47. The parties met in an effort to resolve the matters in dispute on 28 March 2000 without success.
The plaintiff filed the within claim and statement of claim on 20 October 2000 to preserve its entitlement to relief under the Trade Practices Act and sent a copy of the pleadings to the solicitors for the defendants on 27 October 2000. The originating process was “not forwarded by way of service but to [enable] the defendants to consider [their] position in the knowledge that unless this matter is resolved to the satisfaction of our client, then these proceedings will be served and the matter litigated”, MAW 2 to the affidavit of Michael Albert Woolmer filed by leave 15 February 2001.
On 27 November 2000 the first defendant gave notice to the plaintiff of referral of the dispute to arbitration. On the same date the second defendant offered to have the dispute between itself and the plaintiff referred to arbitration on the same terms and conditions as those applying between the plaintiff and first defendant and offered to be bound by the arbitration including any issues decided between the plaintiff and the first defendant. Such an undertaking continues to be offered by the second defendant as a condition of granting the stay.
The claim and amended statement of claim were served on the first and second defendants on 27 December 2000. No further step has been taken by the first and second defendants thereby satisfying s 53(2) of the Act
The primary issue is one of construction, that is, whether cl 47 constitutes an arbitration agreement of the kind contemplated by s 53 of the Act such as to found the basis for the grant of a stay. By s 4 of the Act
“ ‘Arbitration agreement’ means an agreement in writing to refer present or future disputes to arbitration.”
Section 53 provides, relevantly,
“(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) … .”
Mr J Bond SC for the defendant’s submitted that cl 47 constitutes an arbitration agreement within the meaning of s 53 and the expression in cl 47.2 that either party may give notice to the other party referring “such dispute to arbitration or litigation” does not dictate to the contrary. That latter proposition may be accepted, PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 at 310. He submitted that when cl 47 is read as a whole, the specific saving of a party’s right to institute proceedings to enforce payments due or to seek urgent injunctive or declaratory relief provided for in cl 47.4 is indicative of the otherwise binding nature of an election to arbitrate. But, as Mr Bain noted, that subclause is apt to govern the circumstance where both parties have agreed to arbitration pursuant to cl 47.2.
Although Mr Bain refered to the “right” of a party to have access to the courts this did not amount, I concluded, to a submission that there was some bias against arbitration when construing cl 47 but rather that a contract will be construed as limiting the rights of a party to pursue remedies in a court if it clearly appears that that is what was agreed, see PMT Partners, per Brennan CJ, Gaudron and McHugh JJ at 311.
It is not disputed that the definition of “arbitration agreement” in s 4 of the Act is “wide enough to encompass agreements by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in the position to control the event or satisfy the condition”, PMT Partners, at 310. The issue is whether the parties agreed to the binding nature of an unilateral election to arbitrate.
Mr Bond submitted that the clause under consideration in Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] 3 VR 13 was not materially different from cl 47 and was held by the Court of Appeal to reflect the parties’ agreement to arbitrate. While cl 13.02 (which was the clause under consideration) concerned a preliminary requirement to attempt to resolve a dispute is very similar to cl 47.2 and cl 13.03 takes up the concluding paragraph of cl 47.2 entitling either party to give a notice referring to arbitration or litigation, cl 13.04 is a significant addition not found in cl 47. It provided that once a party electing for arbitration had fulfilled certain preconditions (notice and security for the costs of the arbitration)
“Such dispute or difference (unless meanwhile settled) shall be and is hereby referred to arbitration pursuant to the succeeding provisions of this Section 13.”
Winneke P concluded that the combined effect of cl 13.03 and 13.04 was to give primacy to arbitration as the preferred method of dispute resolution agreed between the parties. This, his Honour concluded, was because whether or not one party had given notice of an intention to refer the dispute to litigation there was nothing in the clause to prevent the other party from giving his own notice to refer the same dispute to arbitration and if that occurred and if that party has complied with the provisions of cl 13.04 the consequence was that from the time of giving the notice the dispute was referred to arbitration, at p 15. Phillips JA and Buchanan JA reached similar conclusions at pp 19 and 22 respectively.
Such an intention to have disputes resolved exclusively by arbitration, if the preconditions are satisfied, cannot be found in cl 47. Neither cl 47.3 and/or cl 47.4 have this effect.
Although it was submitted that no notice of an intention to resolve the dispute by litigation within the meaning of cl 47.2 had been given by the plaintiff, the service of the claim and amended statement of claim may be taken to be sufficient notice, Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at para [93]. Neither counsel contended for the primacy of one notice over the other in terms of time if the clause otherwise allows a party to elect for either arbitration or litigation, Manningham City Council.
Although in view of the decision to which I have come on the construction of the agreement, it is unnecessary to deal with the discretionary consideration which Mr Bain submitted would operate against the granting of a stay, I will make brief reference to his argument. He submitted that because there was no contractual relationship between the plaintiff and the second defendant, either with respect to arbitration or otherwise and because there were certain claims not within the scope of the arbitration agreement, if it were such an agreement, there was a risk of inconsistent findings both factual and legal being made separately by an arbitrator and the court. I did not find the submission compelling. The second defendant has agreed to be bound by the terms of the arbitral award and to participate in the arbitration on the same terms as the agreement between the plaintiff and the first defendant. The issues to be decided are closely connected. There are many common questions in the plaintiff’s case as pleaded against the first defendant and in its case as pleaded against the second defendant. The terms of cl 47 which set out the claims which may be included in an arbitration are broad, and would include the Trade Practices Act claims KBRV Resort Operations. Had I found a binding agreement to submit to arbitration I would have granted the stay.
The application for the grant of a stay has been unsuccessful. The order is that the application be dismissed.
Unless there are submissions which would indicate that some other order is appropriate the applicants/defendants should pay the costs of the plaintiff/respondent to be assessed.
0
2
1