Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd
[2014] WASC 10
•17 JANUARY 2014
PIPELINE SERVICES WA PTY LTD -v- ATCO GAS AUSTRALIA PTY LTD [2014] WASC 10
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 10 | |
| Case No: | CIV:1877/2013 | 14 AUGUST 2013 & ON THE PAPERS | |
| Coram: | MARTIN CJ | 17/01/14 | |
| 34 | Judgment Part: | 1 of 1 | |
| Result: | Application for stay of proceedings granted Matter referred for arbitration | ||
| B | |||
| PDF Version |
| Parties: | PIPELINE SERVICES WA PTY LTD ATCO GAS AUSTRALIA PTY LTD |
Catchwords: | Arbitration Arbitration clauses Proper approach to construction Arbitration Stay of court proceedings Reference to arbitration Effect of Commercial Arbitration Act 2012 (WA) Statutes Retrospective operation Whether Commercial Arbitration Act 2012 (WA) applies to arbitration agreements formed prior to commencement |
Legislation: | Commercial Arbitration Act 1985 (WA), s 53 Commercial Arbitration Act 2012 (WA), s 1C, s 5, s 8, s 43, s 44 Gas Standards (Gas Supply and System Safety) Regulations 2000 (WA) Interpretation Act 1984 (WA), s 18 Planning and Development Act 2005 (WA) Rules of the Supreme Court 1971 (WA), O 1 r 4A, O1 r 4B |
Case References: | A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170 ABB Power Plants Ltd v Electricity Commissioner of New South Wales t/as Pacific Power (1995) 35 NSWLR 596 Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103 Able Demolitions & Excavations Pty Ltd v Wilson [2012] WASC 61 ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101 Anderson Switchboards & Electronics Ltd v Schneider Electrical (NZ) Ltd (Unreported, High Court, Auckland, M1215-1M00, 16 January 2001) Aquagenics Pty Ltd v Tasmanian Water & Sewerage Corp (Southern Region) Pty Ltd [2013] TASSC 13 Australian Broadcasting Tribunal v Bond (1988) 19 FCR 259 Australian Granites Ltd v Eisenwerk Hensel Bayreuth Dipl.-Ing Burkhardt GmbH [2001] 1 Qd R 461 Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169 Bremer Vulkan Schiffbau & Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 Burns v Minister for Health [2012] WASCA 267 Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228 Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 Carter Holt Harvey Ltd v Genesis Power Ltd (2006) 3 NZLR 794 Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd [2012] FCA 21 Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 Eastern Metropolitan Regional Council v Four Seasons Constructions Pty Ltd [1999] WASCA 144 Endresz v Whitehouse [1998] 3 VR 461 Ferris v Plaister (1994) 34 NSWLR 474 Fisher v Hebburn Ltd (1960) 105 CLR 188 Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 Gilgandra Marketing Co-operative Ltd v Australian Commodities & Marketing Pty Ltd [2010] NSWSC 1209 Hammond v Vam Ltd [1972] 2 NSWLR 16 Hancock v Rinehart [2013] NSWSC 1352 Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701 Heyman v Darwins Ltd [1942] AC 356 Huddart Parker v The Ship (Mill Hill) [1950] HCA 45; (1950) 81 CLR 502 La Donna Pty Ltd v Wolford AG [2005] VSC 359 Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163 Louis Dreyfus Trading Ltd v Bonarich International (Group) Ltd (1997) HKCF 1312; [1997] 3 HKC 597 Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (No 3) [2013] VSC 435 Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261 Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 Minister for Industrial Affairs v Civil Tech Pty Ltd (1997) 69 SASR 348 Pathak v Tourism Transport Ltd [2002] 3 NZLR 681 PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66 Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd's Rep 205 Reinhart v Welker [2012] NSWCA 95 Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91 Robertson v Unique Lifestyle Investments Pty Ltd [2007] VSCA 29 Straits Exploration (Australia) Pty Ltd v Murchison United NL [2005] WASCA 241 Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332 Trans Pacific Investment Corporation Pty Ltd v Rusty Rees Pty Ltd (1995) 57 FCR 210 United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 Yew Bon Tew v Kenderaan Bas Mara [1983] 1 AC 553 Zhang v Shanghai Wool & Jute Textile Co Ltd [2006] VSCA 133; (2006) 201 FLR 178 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ATCO GAS AUSTRALIA PTY LTD
Defendant
Catchwords:
Arbitration - Arbitration clauses - Proper approach to construction
Arbitration - Stay of court proceedings - Reference to arbitration - Effect of Commercial Arbitration Act 2012 (WA)
Statutes - Retrospective operation - Whether Commercial Arbitration Act 2012 (WA) applies to arbitration agreements formed prior to commencement
Legislation:
Commercial Arbitration Act 1985 (WA), s 53
Commercial Arbitration Act 2012 (WA), s 1C, s 5, s 8, s 43, s 44
Gas Standards (Gas Supply and System Safety) Regulations 2000 (WA)
Interpretation Act 1984 (WA), s 18
Planning and Development Act 2005 (WA)
Rules of the Supreme Court 1971 (WA), O 1 r 4A, O1 r 4B
Result:
Application for stay of proceedings granted
Matter referred for arbitration
Category: B
Representation:
Counsel:
Plaintiff : Mr C V Eastwood
Defendant : Mr S Cho
Solicitors:
Plaintiff : Eastwood Sweeney Law
Defendant : Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170
ABB Power Plants Ltd v Electricity Commissioner of New South Wales t/as Pacific Power (1995) 35 NSWLR 596
Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103
Able Demolitions & Excavations Pty Ltd v Wilson [2012] WASC 61
ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101
Anderson Switchboards & Electronics Ltd v Schneider Electrical (NZ) Ltd (Unreported, NZHC, M1215-1M00, 16 January 2001)
Aquagenics Pty Ltd v Tasmanian Water and Sewerage Corp (Southern Region) Pty Ltd [2013] TASSC 13
Australian Broadcasting Tribunal v Bond [1988] FCA 283; (1988) 19 FCR 259
Australian Granites Ltd v Eisenwerk Hensel Bayreuth Dipl.-Ing Burkhardt GmbH [2001] 1 Qd R 461
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169
Bremer Vulkan Schiffbau & Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909
Burns v Minister for Health [2012] WASCA 267; (2012) 45 WAR 276
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66
Carter Holt Harvey Ltd v Genesis Power Ltd [2006] NZHC 114; [2006] 3 NZLR 794
Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd [2012] FCA 21; (2012) 201 FCR 209
Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45
Commonwealth of Australia v Verwayen [1990] HCA 39; (1990) 170 CLR 394
Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144
Endresz v Whitehouse [1998] 3 VR 461
Ferris v Plaister (1994) 34 NSWLR 474
Fisher v Hebburn Ltd [1960] HCA 80; (1960) 105 CLR 188
Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160
Geraldton Building Co Pty Ltd v May [1977] HCA 17; (1977) 136 CLR 379
Gilgandra Marketing Co-Operative Ltd v Australian Commodities & Marketing Pty Ltd [2010] NSWSC 1209
Hammond v Vam Ltd [1972] 2 NSWLR 16
Hancock v Rinehart [2013] NSWSC 1352
Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701
Heyman v Darwins Ltd [1942] AC 356
Huddart Parker v The Ship 'Mill Hill' [1950] HCA 43; (1950) 81 CLR 502
La Donna Pty Ltd v Wolford AG [2005] VSC 359
Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163
Louis Dreyfus Trading Ltd v Bonarich International (Group) Ltd [1997] HKCFI 312; [1997] 3 HKC 597
Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (No 3) [2013] VSC 435
Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261
Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571
Minister for Industrial Affairs v Civil Tech Pty Ltd (1997) 69 SASR 348
Pathak v Tourism Transport Ltd [2002] 3 NZLR 681
PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66
Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd's Rep 205
Rinehart v Welker [2012] NSWCA 95
Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91
Robertson v Unique Lifestyle Investments Pty Ltd [2007] VSCA 29
Straits Exploration (Australia) Pty Ltd v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187
Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332
Trans Pacific Investment Corporation Pty Ltd v Rusty Rees Pty Ltd (1995) 57 FCR 210
United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618
Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429
Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1
Yew Bon Tew v Kenderaan Bas Mara [1983] 1 AC 553
Zhang v Shanghai Wool & Jute Textile Co Ltd [2006] VSCA 133; (2006) 201 FLR 178
- MARTIN CJ:
Summary
1 The plaintiff, Pipeline Services WA Pty Ltd (Pipeline), commenced proceedings in this court against the defendant, ATCO Gas Australia Pty Ltd (ATCO), alleging breach of an agreement under which Pipeline was to install underground pipelines to be used for the transmission of gas in the area of Yanchep north of Perth (Agreement). Pipeline claims damages for breach of contract, and an order for delivery up of bank guarantees which it provided to ATCO pursuant to the terms of the contract.
2 After entering a conditional appearance, ATCO applied for a stay of the proceedings pursuant to s 53 of the Commercial Arbitration Act 1985 (WA) (the 1985 Act) or alternatively the inherent jurisdiction of the court, on the ground that the Agreement contained an arbitration agreement.
3 The week before ATCO's application for a stay was heard, the Commercial Arbitration Act 2012 (WA) (the 2012 Act) came into force, although neither of the parties nor the court were aware of that fact at the time ATCO's application was heard. When the commencement of the 2012 Act came to the notice of the court, the parties were notified and written submissions invited as to the effect of the commencement of the 2012 Act on ATCO's application. Directions were made for the sequential exchange of those submissions. Both parties submitted (correctly) that because no arbitral tribunal had been convened in respect of the dispute the subject of the proceedings, as from the commencement of the 2012 Act it governs the legal regime between the parties and the 1985 Act had no further application. Pipeline submitted that this had the consequence that ATCO's application for a stay under s 53 of the 1985 Act had to be dismissed. ATCO submitted that its application for a stay should be treated as an application for an order for referral to arbitration pursuant to s 8 of the 2012 Act and maintained its claim for a stay of proceedings in the inherent jurisdiction of the court.
4 For the reasons which follow there will be a reference to arbitration under s 8 of the 2012 Act and a stay of proceedings to enable that to occur.
The facts
5 The facts relevant to ATCO's application for a stay, and which are established by the affidavit evidence upon which the parties relied, are as follows.
6 During 2012 ATCO took responsibility for the extension of the underground gas pipeline network into an area near Yanchep north of Perth. For the purposes of that project, ATCO invited tenders for the installation of gas pipelines underground, including the excavation work necessary for that purpose. Pipeline submitted a tender for that work which was accepted by ATCO. The parties entered into a written agreement for the performance of the installation works by Pipeline.
The Agreement
7 The Agreement was executed by the parties on or about 11 July 2012. Pursuant to its terms, Pipeline was to carry out the work specified in sch 3 to the Agreement, commencing on 30 July 2012, achieving practical completion by 23 November 2012 (or as otherwise agreed), for the contract sum of $2,316,649.50. Pipeline was to remain liable for any defects in the works for a period of two years from the date of practical completion (cl 9 and item 13 of the Agreement Reference Table). The clause imposing that liability upon Pipeline expressly provides that it is to 'survive the termination of this Agreement'. Other express provisions of the Agreement relating to the survival of obligations following termination include cl 8.5, which concerns Pipeline's obligation to maintain confidentiality, and cl 26.14, which provides:
26.14 Survival of Terms
The following Clauses survive the expiration of termination (for whatever reason) of this Agreement:
(a) Clause 8 - Confidentiality and Intellectual Property;
(b) Clause 9 - Defects Liability;
(c) Clause 10 - Indemnity;
(d) Clause 24 - Privacy; and
(e) any other Clauses that are expressed to survive expiry or termination or which, although not so expressed, need to survive in order to protect the presumed intention of the parties as expressed in this Agreement.
9 Clause 25 of the Agreement is central to ATCO's application for a stay of proceedings. It provides:
25. Dispute Resolution
25.1 General
(a) Any party may, by written notice, notify the other of a dispute.
(b) Unless a party has complied with this Clause 25 that party may not commence court proceedings relating to any dispute under this Agreement, except where that party seeks urgent interlocutory relief.
(c) the Contractor [Pipeline] shall, if reasonably possible, continue to provide the Works during the Arbitration proceedings, and no payment due or payable by the Company in respect of such Work shall, unless it is the subject matter of such proceedings, be withheld on account only of proceedings.
(d) Nothing in this Clause 25 affects a party's rights to terminate this Agreement.
- 25.2 Escalation to Contract Manager
(a) Any outstanding dispute must initially be put forward to the Contract Manager for resolution.
(b) If a party considers that the matter is urgent a special meeting may be convened by two business day's written notice, identifying the nature of the dispute, to the other party.
If a resolution of the dispute acceptable to both parties cannot be achieved at the special meeting required in Clause 25.2, the dispute will be escalated to the respective Chief Executive Officers (or their delegates) of the parties, who must endeavour to resolve the dispute.
- 25.4 Escalation to Arbitration
(a) If the dispute is still to be resolved within two weeks of having to be referred to the Chief Executive Officers then either party may by notice to the other party refer the dispute to arbitration in accordance with the provisions of the Commercial Arbitration Act 1985 (WA) (the 'Commercial Arbitration Act'), and for the purposes of the Commercial Arbitration Act, the parties agree that this Agreement is an arbitration agreement.
(b) Upon every or such reference, the cost of and incidental to the reference and award respectively shall be in the discretion of the Arbitrator, who may determine the amount thereof or direct the same to be taxed as between solicitor and client, or as between party and party, and shall direct by whom to whom, and in what manner the same shall be borne and paid.
(c) The arbitration shall be conducted in accordance with the Commercial Arbitration Act except that:
(i) The Arbitrator shall observe the rules of natural justice;
(ii) A party may be represented by a qualified legal practitioner or other representative;
(iii) The Arbitrator shall not have the power conferred by Section 25 and 27 of the Commercial Arbitrator [sic] Act;
(iv) The Arbitrator shall include in the arbitration award the findings on material questions of law and of fact, including references to the evidence on which the findings of fact were based; and
(v) The parties consent to an appeal to the Supreme Court of Western Australia on any question of law arising in the course of the arbitration or out of the arbitration award.
The performance of works
11 Pipeline commenced work in late July 2012. Shortly after work commenced, Pipeline was advised that unexploded ordnance had been found in the area in which the pipeline was to be installed. It was advised that the area had been used as a target area by the armed services for the purposes of weapons training. Discussions took place between the parties with respect to the procedure to be followed for the performance of the works in light of this information. ATCO suggested that a full search for unexploded ordnance be undertaken along a strip 6 m wide into which the pipeline was to be installed. Pipeline did not consider that proposal to be acceptable and submitted a revised quote for the performance of the works, having regard to the increased difficulty of performance, in the amount of $2,929,679.50.
12 On or about 21 August 2012, Mr James of ATCO, and Mr David Shephard of Pipeline had a telephone conversation to discuss the situation. Although there are differences between the parties as to precisely what was said in this conversation, it is common ground that ATCO advised Pipeline that the Agreement would be terminated and tenders called for a new contract, taking into account the revised scope of works having regard to the prospect of unexploded ordnance being encountered in the performance of the work.
13 Pipeline submitted a tender to ATCO in respect of the revised scope of works in the amount which it had previously indicated - namely, $2,929,679.50. While the new tender process was undertaken, Pipeline continued to carry out work under the Agreement if that work could be carried out without danger having regard to the prospect of encountering unexploded ordnance. In early September 2012 ATCO advised Pipeline that its revised tender had not been successful, following which Pipeline ceased work. It is common ground that by at least this time the Agreement was terminated, although there is a dispute as to the legal mechanism by which termination occurred.
14 On or about 10 October 2012 representatives of ATCO and Pipeline met to discuss the amount to be paid by ATCO to Pipeline for work performed prior to termination of the Agreement.
15 By letter dated 17 October 2012, Mr James of ATCO wrote to Mr Shephard of Pipeline purporting to confirm that during the course of their telephone conversation on 21 August 2012 it had been agreed that the Agreement was terminated with effect from 5.00 pm on Wednesday, 22 August 2012, and that Pipeline would provide ATCO with an invoice for the work performed up to the time of termination, upon receipt of which ATCO would pay to Pipeline $19,058.76 (excluding GST) in full and final satisfaction of all claims by Pipeline in respect of work performed under the Agreement. The letter invited Mr Shephard to sign a copy and return it as confirmation of his agreement to those terms. Mr Shephard did not take up that invitation.
16 By email sent on 18 October 2012 Mr Shephard requested a meeting with Mr James and Mr Stephen Hughes of ATCO, with a view to resolving outstanding matters. Mr James responded by email repeating his request for an invoice in the amount of $19,058.76 and for the provision of an endorsed copy of his letter of 17 October 2012.
17 By email sent on 19 October 2012, Mr Shephard responded, asserting that Pipeline 'was not given fair and due process' and repeating his request for a meeting. Mr James responded to that request by email sent on the same day asserting that Pipeline 'were given due process', referring to previous meetings which had taken place and reiterating his request for an invoice in the amount of $19,058.76 plus GST and the provision of the letter of 17 October 2012 endorsed by Mr Shephard so as to indicate his agreement to the terms of that letter. The email concluded:
In the circumstances, we do not see the need for any further meetings to discuss any of the above, as the issues have already been covered in detail at previous meetings.
I look forward to hearing from you.
18 On 1 November 2012 solicitors acting on behalf of Pipeline wrote to Mr James of ATCO disputing the assertions contained in his letter of 17 October 2012. The letter reiterated earlier requests which had been made by Pipeline for delivery up of the bank guarantees.
19 ATCO responded to that letter by a letter from internal legal counsel dated 9 November 2012. That letter reiterated the assertion that there had been an agreement to terminate the earlier Agreement with effect from Wednesday, 22 August 2012. The letter also asserted that one of the bank guarantees which had been provided by Pipeline had in fact expired on 31 October 2012, and the other would be retained until the defects liability period expired in 2014. The letter also asserted:
ATCO Gas Australia has and continues to be willing to settle all sums due for works completed prior to termination of the Construction Agreement and that are payable. ATCO Gas Australia has made a number of requests for your client to provide an invoice so that payment can be made as required under clause 4 of the Construction Agreement, which your client has continued to refuse to provide.
20 By letter dated 24 December 2012 new solicitors acting on behalf of Pipeline wrote to ATCO. Although the letter was headed 'Without Prejudice Save as to costs', as the letter was tendered in evidence by Pipeline, it is clear that any privilege in the letter has been waived. The letter set out Pipeline's version of the sequence of factual events, and concluded by asserting that ATCO had committed a repudiatory breach of the Agreement which gave Pipeline a right to terminate the Agreement and claim damages for loss of the bargain. The letter contained an offer to settle its claim on the basis of the payment of a specified amount 'in full and final settlement of all and any claim it has or may have arising from the contract'. The letter concluded by advising that if the offer was not accepted the solicitors were instructed to commence proceedings without further notice.
21 ATCO responded to that letter by letter dated 24 January 2013. In that letter, the claims enunciated in the letter of 24 December 2012 were rejected and the position set out in ATCO's letter of 9 November 2012 reiterated. The letter concluded:
ATCO Gas Australia has and continues to be willing to settle all sums due for works completed prior to termination of the Construction Agreement and that are payable. ATCO Gas Australia has made a number of requests for your client to provide an invoice so that payment can be made as required under clause 4 of the Construction Agreement, which your client has continued to refuse to provide.
Should your client instruct your firm to issue proceedings, we reserve the right to refer the Court to this letter and its enclosures on the question of costs.
- It seems clear that this was the last communication between the parties before Pipeline commenced proceedings against ATCO.
The proceedings
22 Pipeline commenced proceedings by a writ endorsed with a statement of claim. In the statement of claim Pipeline asserts that its tender formed part of the contract between the parties. It also asserts that the Agreement incorporated a number of implied terms. Those terms include terms to the effect that ATCO would conduct investigations relating to the presence of hazardous materials in the area in which the pipeline was to be constructed, and would disclose whether or not unexploded ordnance had been found in that area prior to completion of the Agreement for the performance of the works. Pipeline asserts that ATCO breached those terms, by reason of which it suffered loss and damage to be particularised prior to trial.
23 The statement of claim also asserts that following termination of the Agreement ATCO has no entitlement to retain the bank guarantees, and demands their return. The prayer for relief claims an order for delivery up of the bank guarantees, damages for breach of contract, and interest on those damages.
24 ATCO entered a conditional appearance on 10 June 2013. On 24 June 2013, which is (just) within the period after which its appearance became unconditional, ATCO issued a chamber summons seeking orders that:
1. The proceeding be stayed until completion of the dispute resolution procedures under clause 25 of the Construction Agreement ...
2. Further, pursuant to section 53 of the Commercial Arbitration Act 1985 (WA) the proceeding be stayed until completion of an arbitration of any outstanding disputes not able to be resolved through the dispute resolution procedures under clause 25 of the Agreement or otherwise.
25 The summons was supported by an affidavit of Mr Simon Byrne, who is the senior legal counsel and company secretary of ATCO. In that affidavit Mr Byrne referred to the parties' entry into the Agreement, a copy of which was annexed. He referred also to the provision of the bank guarantees by Pipeline pursuant to the terms of the Agreement, and to ATCO's intention to retain the unexpired bank guarantee until the expiry of the defects liability period. Mr Byrne also referred to some of the communications between the parties, and asserted that Pipeline had never issued a notice of dispute, or convened a special meeting, or referred the dispute to the respective Chief Executive Officers of the parties, or referred the matter to arbitration in accordance with cl 25 of the Agreement.
26 Mr Byrne asserts in the affidavit that ATCO is, and was at the commencement of the proceedings by Pipeline, ready and willing to attempt to resolve the dispute by attending any special meeting convened by Pipeline, and by referring any unresolved dispute to the respective Chief Executive Officers of the parties, if Pipeline issued a notice for such a referral. Mr Byrne also deposes that ATCO is, and was at the commencement of the proceedings, ready and willing to do all things necessary for the proper conduct of an arbitration if the dispute was referred to arbitration by Pipeline.
27 ATCO's application was listed for hearing on 14 August 2013, and directions were made for the exchange of written submissions prior to that hearing. ATCO filed submissions which made it clear that it sought a stay of proceedings in the court's inherent jurisdiction, based upon the dispute resolution provisions contained in cl 25 of the Agreement and, in the alternative, a stay pursuant to s 53 of the 1985 Act on the basis of the arbitration agreement contained within cl 25. The hearing on 14 August 2013 was conducted on that basis, and at the conclusion of the hearing I reserved my decision.
The commencement of the 2012 Act
28 Unbeknown to the parties or the court at the time of the hearing on 14 August 2013, on 7 August 2013 the substantive provisions of the 2012 Act came into force (Western Australia, Government Gazette, No 142 (6 August 2013) 3677). Amongst the provisions which came into force on that day was s 44, which repeals the 1985 Act. However, s 43 of the 2012 Act provides:
43. Savings and transitional provisions
(1) Subject to subsection (2) -
(a) this Act applies to an arbitration agreement (whether made before or after the commencement of this section) and to an arbitration under such an agreement; and
(b) a reference in an arbitration agreement to the Commercial Arbitration Act 1985, or a provision of that Act, is to be construed as a reference to this Act or to the corresponding provision (if any) of this Act.
(2) If an arbitration was commenced before the commencement of this section, the law governing the arbitration and the arbitration agreement is to be that which would have been applicable if this Act had not been enacted.
(3) For the purposes of this section, an arbitration is taken to have been commenced if -
(a) a dispute to which the relevant arbitration agreement applies has arisen; and
(b) the arbitral tribunal has been properly constituted.
30 There is room for differing views as to whether the rights and obligations of parties under an arbitration agreement are substantive or alternatively procedural, and therefore upon the question of whether alterations of the statutory regime governing the exercise of those rights or the performance of those obligations invoke the presumption against retrospective operation: see Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91 [123] - [150] (Martin CJ); cf Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd [2012] FCA 21; (2012) 201 FCR 209 [65] - [71] (Murphy J). Those views might be influenced by questions such as whether a dispute between the parties had crystallised at the time of the commencement of the amending legislation or whether rights and obligations under the arbitration agreement had crystallised by a reference to arbitration. However, s 43 clearly and unequivocally reveals the intention of the legislature with respect to the operation of each of the 1985 Act and the 2012 Act. It expressly provides that if an arbitration was commenced before the commencement of the section, in the sense that a dispute to which the relevant arbitration agreement applies has arisen and the arbitral tribunal has been properly constituted, the 1985 Act continues to apply and governs the arbitration. However, if that has not occurred, the 2012 Act applies to an arbitration agreement, whenever made, and a reference in such an agreement to the 'Commercial Arbitration Act' or to a provision of that Act, is to be construed as a reference to the 2012 Act or to any corresponding provision of that Act (as the case may be). As I have noted, both parties correctly accept that since 7 August 2013 the 2012 Act has provided the legal regime governing their arbitration agreement, if indeed they have such an agreement.
31 The 2012 Act forms part of a coherent scheme for the provision of uniform state and territory legislation covering both domestic and international commercial arbitration. Decisions in other jurisdictions with respect to the proper construction and effect of analogous legislation should therefore be given due weight and deference in this state: Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485, 492 (Mason CJ, Brennan, Dawson, Toohey & Gaudron JJ); Minister for Industrial Affairs v Civil Tech Pty Ltd (1997) 69 SASR 348, 335 (Lander J, Doyle CJ & Bleby J agreeing); Trans Pacific Investment Corporation Pty Ltd v Rusty Rees Pty Ltd (1995) 57 FCR 210, 214. There are decisions in other jurisdictions under legislation which is analogous to the 2012 Act which are consistent with the conclusion that the 2012 Act provides the legal regime governing the rights and obligations of parties to an arbitration agreement when an arbitration has not been commenced, in the sense described in s 43 of the 2012 Act, even if the agreement was made prior to the commencement of the legislation: see Gilgandra Marketing Co-Operative Ltd v Australian Commodities & Marketing Pty Ltd [2010] NSWSC 1209 [42] (Slattery J); and Aquagenics Pty Ltd v Tasmanian Water and Sewerage Corp (Southern Region) Pty Ltd [2013] TASSC 13 [26] (Holt AsJ).
32 The legal regime governing the stay of legal proceedings relating to disputes the subject of an arbitration agreement is quite different under the 2012 Act. Section 53 of the 1985 Act conferred a discretion upon the court with respect to the stay of such proceedings, in the event that the court was satisfied of certain matters. By contrast, s 8 of the 2012 Act provides:
8. Arbitration agreement and substantive claim before court (cf. Model Law Art 8)
(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(2) Where an action referred to in subsection (1) has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.
33 The positions adopted by the parties in their oral and written submissions give rise to the following issues which require determination:
1. Should ATCO's application for a stay of proceedings be dismissed on the ground that it was not made under the 2012 Act, or should it be treated as an application for a referral to arbitration under s 8 of that Act?
2. Does s 8 of the 2012 Act apply, and in particular:
(a) did the arbitration agreement in cl 25 survive termination of the Agreement for the performance of the works;
(b) is cl 25 void for uncertainty;
(c) has ATCO waived its entitlement to insist upon compliance with cl 25;
(d) is the dispute between the parties the subject of the legal proceedings capable of being resolved by arbitration; and
(e) is ATCO precluded from requesting a referral under s 8 because it has submitted a statement on the substance of the dispute before requesting such referral?
34 Pipeline contends that ATCO's summons should be dismissed because it was commenced in June 2013, when the 1985 Act applied, and sought relief under the 1985 Act. It submits that the 2012 Act has covered the field of the legal regime governing the arbitration agreement between the parties since 7 August 2013, and that the application made by ATCO under a different legal regime should be dismissed, and ATCO required to make a fresh application under the provisions of the 2012 Act.
35 There are at least two reasons why this contention must be rejected. First, the contention ignores that part of ATCO's application which seeks a stay of proceedings in the inherent jurisdiction of the court. The question of whether or not there is an inherent jurisdiction to stay proceedings until the parties have complied with the provisions of a mandatory dispute resolution clause is a matter which I will address below. However, for the purposes of this question it is significant that it cannot be said that the only relief sought by ATCO was relief pursuant to s 53 of the 1985 Act.
36 Second, Pipeline's contention is directly contrary to the overarching objective of the rules and procedures of the court specified by O 1 r 4A and r 4B of the Rules of the Supreme Court 1971 (WA), and with the paramount object of the 2012 Act which is both manifest in the entire Act, and by the stipulation of s 1C, the facilitation of the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense. By virtue of the common law principles of statutory construction (see: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69] (McHugh, Gummow, Kirby & Hayne JJ), and s 18 of the Interpretation Act 1984 (WA) an interpretation of a provision promoting the purpose of that law is to be preferred where the language permits.
37 Subsequent to the court and the parties becoming aware of the commencement of the 2012 Act, ATCO has made it clear that it accepts that the regime provided by that Act governs its application for a stay of proceedings in order that the dispute resolution mechanisms provided by cl 25 of the Agreement might take their course. The parties have exchanged extensive written submissions based on that premise. The proposition that ATCO should nevertheless be required to bring a fresh application, after 7 August 2013, in order that those contentions can be determined by the court would represent the triumph of form over substance, contrary to the paramount object of the 2012 Act, and the overarching objectives of the rules of court.
38 There is ample power under the rules of court for the summons issued by ATCO to be amended if necessary. If ATCO were to apply to amend its summons so as to expressly seek an order for referral to arbitration under s 8 of the 2012 Act, there is no reason why such an application should not be granted, and every reason why it should, in the interests of the objectives to which I have referred. However, as the parties have been on notice that ATCO seeks such an order under its existing summons, and have exchanged extensive written submissions on that basis, issue has properly been joined and there is no need for a formal order of amendment, especially given that, in its summons, ATCO expressly sought 'such further or other orders as the court deems fit'.
39 It is of interest that precisely the same circumstances arose in Aquagenics v Tasmanian Water & Sewerage Corp. In that case an application for a stay of proceedings based upon the existence of an arbitration agreement was commenced under the old legislative regime governing such applications, but had not been determined prior to the commencement of the new regime. The court treated the application as an application for an order for referral to arbitration under the new regime, which is precisely the course which has been followed in this case. Pipeline's contention that ATCO's summons must be dismissed because it was brought under the 1985 Act must be rejected.
Does s 8 of the 2012 Act apply?
40 Pipeline advances five separate reasons why, in its submission, s 8 of the 2012 Act does not apply to the proceedings which it has commenced, with the result that there should be neither a stay of those proceedings nor a reference to arbitration under the section. I will deal with each in turn.
Does cl 25 survive termination of the Agreement?
41 Pipeline contends that on the proper construction of the Agreement, the parties should not be taken to have intended that the dispute resolution mechanisms provided by cl 25, including the arbitration agreement, should survive termination of the Agreement for the performance of the works.
42 An arbitration agreement is generally considered to be a contract independent of the underlying contract in which it is contained, and for that reason in the absence of evidence of a contrary intention of the parties, evident in the language that they have used, survives termination of the underlying contract: see Ferris v Plaister (1994) 34 NSWLR 474, 484 (Kirby P), 496 - 497 (Mahoney JA), 500 - 501, 503 - 504 (Clarke JA); Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701, 723 - 724 (Hoffman LJ); Heyman v Darwins Ltd [1942] AC 356, 374 - 375 (Macmillan LJ); Bremer Vulkan Schiffbau & Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909, 998 (Scarman LJ); Rizhao Steel Holding Group v Koolan Iron Ore [165] (Martin CJ). In Heyman v Darwins, Lord Macmillan said:
[A]n arbitration clause in a contract ... is quite distinct from the other clauses. The other clauses set out the obligations which the parties undertake towards each other ... but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. ...
[W]hat is commonly called repudiation or total breach of a contract, whether acquiesced in by the other party or not, does not abrogate the contract, though it may relieve the injured party of the duty of further fulfilling the obligations which he has by the contract undertaken to the repudiating party. The contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of their settlement. The purposes of the contract have failed, but the arbitration clause is not one of the purposes of the contract (373 - 374).
43 The question of whether the parties have, by the language of their contract, manifested a contrary intention must be assessed in the context of the commercial transaction as a whole and taking into account the entire text and objects of the Agreement: see Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 [52] (Martin CJ). Of course this does not mean that the court is entitled to disregard clear and unambiguous language used by the parties in order to produce results which the surrounding circumstances might indicate are more 'commercial': see Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 [6] (Gummow, Heydon & Bell JJ).
44 Nevertheless, in construing the language used by the parties in relation to an arbitration agreement, reference can and should be made to the authorities in Australia and in other comparable jurisdictions which establish that generally the courts should adopt a broad, liberal and flexible approach to the construction of such agreements and should favour a construction which provides a single forum for the adjudication of all disputes arising from, or in connection with, that agreement: see Cape Lambert Resources v MCC Australia Sanjin Mining WASCA [56] - [63] (Martin CJ); Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, 165 (Gleeson CJ, Meagher & Sheller JJA agreeing); ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 [114] - [120] (Austin J); Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 [41] - [43] (Allsop J).
45 In Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45, Allsop J explained the rationale behind this approach to construction:
This liberal approach is underpinned by the sensible commercial presumption that the parties did not intend the inconvenience of having possible disputes from their transaction being heard in two places. This may be seen to be especially so in circumstances where disputes can be given different labels, or placed into different juridical categories, possibly by reference to the approaches of different legal systems. The benevolent and encouraging approach to consensual alternative non-curial dispute resolution assists in the conclusion that words capable of broad and flexible meaning will be given liberal construction and content. This approach conforms with a common-sense approach to commercial agreements, in particular when the parties are operating in a truly international market and come from different countries and legal systems and it provides appropriate respect for party autonomy [165].
46 As the New South Wales Court of Appeal observed in Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163:
To adopt the liberal approach is not to depart from the meaning of the words chosen by the parties. Rather, it is to give effect to a coherent business purpose through an assumption commercial courts around the world will make that parties are unlikely to have intended multiple venues or occasions for the resolution of their disputes unless they say so [8].
47 Construction of a commercial agreement to the effect that provisions for the resolution of disputes, such as by arbitration, do not survive termination of the agreement would be inconsistent with the approach indicated in the authorities to which I have referred. That is because it will commonly be the case that parties will disagree as to whether their contract has been terminated and if so, as to the consequences of termination. In such a circumstance, the conclusion that the dispute resolution provisions of the contract depend upon the determination of the question of whether the contract has been terminated is manifestly inconvenient. For example, the parties might wish to refer such a dispute to arbitration, or may be required by their contract to refer such matters to arbitration as a condition of the exercise of any right to commence legal proceedings. But a decision of the arbitral tribunal to the effect that the contract has been terminated would deprive the arbitral tribunal of jurisdiction and prevent any award being made to give effect either to the termination or its consequences. This would in turn create an incentive for the parties to first determine, in a court, whether the contract remained on foot before then invoking its provisions relating to the resolution of disputes in the event of an affirmative answer to that question. However, that course would itself be inconsistent with their expressed desire to utilise particular mechanisms for the resolution of their disputes, and with the assumption that the parties intended that their disputes could be resolved in a single forum.
48 Nevertheless, as I have noted, commercial considerations of this kind, however weighty, cannot be allowed to override the clear and unambiguous language of the parties.
49 Pipeline contends that the language used by the parties in their Agreement compels the conclusion that it was not their intention that cl 25 survive termination. Pipeline points to the express stipulations in cl 8.5 and cl 9.3 to the effect that each of those clauses survive termination, and to cl 26.14, which lists four clauses which survive termination (cls 8, 9, 10 and 24) without referring to cl 25.
50 So, Pipeline's argument essentially comes down to a variant of the maxim 'expressio unius est exclusio alterius' (the expression of one is the exclusion of others). Put another way, Pipeline submits that if the parties had intended that cl 25 should survive termination, they would have expressly said so, as they did in respect of cls 8, 9, 10 and 24. However, it has been observed on a number of occasions that this maxim of construction should be applied with care: see PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301, 311 (Brennan CJ, Gaudron & McHugh JJ), 320 (Toohey & Gummow JJ).
51 The fundamental difficulty faced by Pipeline's contention is that it is clear from the express terms of cl 26.14 that the parties did not intend the express identification of the clauses which survive termination to be exhaustive. That is because, in cl 26.14 they expressly provided that any clauses which 'need to survive in order to protect the presumed intention of the parties as expressed in this Agreement' are to survive termination, even though they are not expressly stated to survive termination. Application of the maxim 'expressio unius' is entirely inconsistent with that clear and unequivocal manifestation of the intention of the parties to the effect that a clause of their Agreement can survive termination without an express provision to that effect.
52 There is nothing in cl 25 which would suggest that it was the intention of the parties that it not survive termination. In the absence of such an indication, for the reasons I have given there are powerful reasons for attributing to the parties an intention that the provisions upon which they agreed with respect to the resolution of their disputes, including their arbitration agreement, should survive termination.
53 For these reasons Pipeline's contention that cl 25 of the Agreement did not survive its termination should be rejected.
Is cl 25 void for uncertainty?
54 Pipeline contends that cl 25 is void for uncertainty, with the result that it provides no basis for a stay of proceedings or an order under s 8 of the 2012 Act. In particular, Pipeline asserts that uncertainty arises from:
(a) lack of clarity as to what is required by way of a notice of dispute;
(b) lack of clarity as to what is required to enable a dispute to be 'put forward' to the Contract Manager;
(c) the fact that cl 25.2 does not, on its face, mandate the convening of a special meeting, but escalation to the Chief Executive Officers is conditional upon a special meeting having been convened, and escalation to arbitration is in turn conditional upon the dispute having been escalated to the Chief Executive Officers;
(d) lack of clarity arising from the reference to the Chief Executive Officers having to 'endeavour' to resolve the dispute; and
(e) the fact that cl 25.4 provides that either party 'may' refer the matter to arbitration, but neither is required to do so.
General principles relating to contractual uncertainty
55 It is now well established that a construction which renders a commercial agreement certain is generally to be preferred to one which does not: see Hammond v Vam Ltd [1972] 2 NSWLR 16, 18 (Sugarman P); Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429, 436 (Barwick CJ). In the latter case, Barwick CJ observed:
[A] contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. ... So long as the language employed by the parties ... is not 'so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention', the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved (436 - 437).
Uncertainty in relation to dispute resolution provisions
56 Consistently with established principles relating to the construction of arbitration and other dispute resolution provisions, the tendency of recent authorities is strongly in favour of adopting a construction of such provisions which provides them with enforceable content: see United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 [78] - [80] (Allsop P, Ipp & Macfarlan JJA agreeing); Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101 [28] - [33] (Ipp J, Pidgeon J agreeing); Straits Exploration (Australia) Pty Ltd v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187 [14] (Wheeler JA, McLure JA & Murray AJA agreeing); Robertson v Unique Lifestyle Investments Pty Ltd [2007] VSCA 29 [38] (Habersberger AJA, Warren CJ & Neave JA agreeing); Able Demolitions & Excavations Pty Ltd v Wilson [2012] WASC 61 [157] (Martin J). So, consistent with this approach, effect may be given to an arbitration clause despite some ambiguity or vagueness, provided that judicial assistance is not required to rewrite the contract between the parties: see Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571, 589 (Mason J); Jones D, Commercial Arbitration in Australia(2nd ed, 2011) 105.
57 The modern approach was encapsulated by Sir Robin Cooke in Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd's Rep 205 (PC):
[I]n cases where the parties have agreed on an arbitration or valuation clause in wide enough terms, the Courts accord full weight to their manifest intention to create continuing legal relations. Arguments invoking alleged uncertainty, or alleged inadequacy in the machinery available to the Courts for making contractual rights effective, exert minimal attraction (210).
58 This approach is consistent with the general philosophy that parties should be held to their bargain to arbitrate, or to invoke other mechanisms of dispute resolution, in the absence of good cause: see Straits Exploration (Australia) V Murchison United NL [14] (Wheeler JA, McLure JA & Murray AJA agreeing); Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103 [148] (Gillard J); Huddart Parker v The Ship 'Mill Hill' [1950] HCA 43; (1950) 81 CLR 502, 508 - 509 (Dixon J).
Application of these principles
59 These authorities provide an inauspicious context for Pipeline's contention that cl 25 should be held to be void for uncertainty. Nevertheless, I will consider each aspect of that contention in turn.
60 There is no substance in the proposition that there is any lack of clarity with respect to the content of the written notice which was required to be served under the clause. Plainly the notice must contain such information as is necessary to enable the subsequent provisions of the clause to operate effectively. Whether any particular notice contains sufficient information of the dispute is a matter that can be readily ascertained and determined in an individual case.
61 Nor is there any substance in the proposition that there is lack of clarity or uncertainty arising from the requirement that the dispute must be 'put forward' to the Contract Manager. The expression 'put forward' is an ordinary English term described by the Macquarie Dictionary (5th ed, 2009) as meaning 'to propose'. See also: Endresz v Whitehouse [1998] 3 VR 461, 473 (Ormiston JA, Tadgell & Charles JJA agreeing); Australian Broadcasting Tribunal v Bond [1988] FCA 283; (1988) 19 FCR 259, 275 - 276 (Lockhart J) where the word 'propose' was said to be synonymous to 'put forward to another' or 'bring one's notice [or] call attention to'. So, in the context of cl 25, cl 25.2 simply requires that where a dispute has not been resolved by the parties, they must bring that dispute to the attention of the Contract Manager. The lack of specification of the particular means by which the parties are to bring the matter to his attention does not result in any uncertainty or ambiguity.
62 The third matter raised by Pipeline in support of its arguments with respect to uncertainty has a little more weight. Clause 25.2 empowers a party to convene a 'special meeting' if it considers that the matter is urgent. However, the clause contains no obligation to convene such a special meeting. Nevertheless, under cl 25.3, escalation to the next level of dispute resolution - namely, to the respective Chief Executive Officers of the parties, is to occur if a resolution 'cannot be achieved at the special meeting required in cl 25.2'. So, read literally, escalation to the Chief Executive Officers cannot occur unless a special meeting has been convened under cl 25.2.
63 However, there is no reason to construe the provision so literally when the words are capable of bearing an obvious meaning which accords with the intention attributable to the parties. That intention is evident in the general structure of the clause which first requires that notice of dispute be given, and then, if the dispute is not resolved, requires notice to be given to the Contract Manager, followed by a 'special meeting' in the case of urgency followed by reference to the respective Chief Executive Officers followed by escalation to arbitration if either party chooses that course. The specific reference in cl 25.2 to a 'special meeting' in the event of urgency clearly connotes that in other circumstances there should nevertheless be a meeting of the parties, but not conducted on an urgent basis, and in the event such a meeting fails to resolve the dispute, the matter can then be escalated to the respective Chief Executive Officers of the parties. Such a construction of the clause is open on its language, and accords with the general approach to construction of dispute resolution clauses identified in the authorities to which I have referred.
64 There is no substance in Pipeline's contention that there is uncertainty or lack of clarity arising from the description of the obligation of the respective Chief Executive Officers as being to 'endeavour to resolve the dispute'. Plainly, in the context in which the word 'endeavour' is used it bears its natural and ordinary meaning of 'attempt' or 'try': see Macquarie Dictionary (5th ed, 2009). There is no uncertainty or ambiguity in the meaning conveyed by those words.
65 Finally Pipeline contends that cl 25.4 is uncertain because it provides that a party 'may' refer a dispute to arbitration. However, there is no uncertainty arising from the fact that the parties have agreed that they should be given the option to withdraw their claim from the dispute resolution procedure should they wish to do so. So, in ABB Power Plants Ltd v Electricity Commissioner of New South Wales t/as Pacific Power (1995) 35 NSWLR 596, the relevant dispute resolution clause provided for determination of disputes by the superintendent appointed under the relevant contract, and further provided that if either party was dissatisfied with that determination that party 'may ... give notice in writing to the other party requiring that the matter at issue be referred to arbitration'. Handley JA observed:
The use of the word 'may' in cl 46.2 is readily explicable because a party dissatisfied with the superintendent's decision, or with the breakdown in the procedure under cl 46.1 may prefer to take the matter no further (599).
66 The same approach may be taken to the proper construction and effect of cl 25.4. No uncertainty arises from the fact that the parties are given an option to refer a dispute to arbitration. However, as cl 25.1(b) provides that no party may commence court proceedings without first complying with cl 25, the clause, on its proper construction, has the effect that if a party decides not to refer the dispute to arbitration it cannot thereafter commence legal proceedings relating to that dispute.
67 For these various reasons there is no uncertainty in cl 25 or in its operation and Pipeline's contention must be rejected.
Waiver
68 The rights arising under an arbitration agreement are private rights which may be waived: see Australian Granites Ltd v Eisenwerk Hensel Bayreuth Dipl.-Ing Burkhardt GmbH [2001] 1 Qd R 461, 466 - 467 (Pincus JA, Thomas JA & Shepherdson J agreeing); ACD Tridon v Tridon Australia [53] (Austin J); Zhang v Shanghai Wool & Jute Textile Co Ltd [2006] VSCA 133; (2006) 201 FLR 178 [13] (Chernov JA, Ashley JA & Bongiorno AJA agreeing). Waiver renders the arbitration agreement inoperative: see ACD Tridon v Tridon Australia and Zhang v Shanghai Wool & Jute Textile.
69 The cases dealing with waiver in the context of arbitration clauses refer to 'waiver' being used in a strong sense, as compared to 'waiver' being used in a weaker sense: see for example ACD Tridon v Tridon Australia [60] - [62] (Austin J). The former expression refers to an abandonment of the right to arbitrate implied from an intentional choice by a party not to exercise the right. As Toohey J observed in Commonwealth of Australia v Verwayen [1990] HCA 39; (1990) 170 CLR 394, such a form of waiver resembles a form of election and may sometimes be based on ordinary principles of estoppel although, unlike estoppel, it must always arise from an intentional act with knowledge (472). More recently waiver in this sense was described as 'an unequivocal final choice between alternative procedures so that it could be said that the party had abandoned the right, if the right was thereafter asserted': see La Donna Pty Ltd v Wolford AG [2005] VSC 359 [21] (Whelan J); Comandate Marine Corp v Pan Australia Shipping [64] - [65] (Allsop J).
70 Waiver in the weaker sense can be described as 'non-insistence upon a right either by choice or by default': Commonwealth v Verwayen (457) (Dawson J). So, in cases under the former legislative regime, questions have arisen as to whether waiver, in this weaker sense, has arisen as a result of limited participation in court proceedings, or from a failure to object to those proceedings. There is considerable room for doubt as to whether waiver in this weaker sense has any application under s 8 of the 2012 Act, which expressly defines the point at which a party loses the right to apply for a reference to arbitration as a result of their participation in legal proceedings, being the time at which that party submits its 'first statement on the substance of the dispute'.
71 Pipeline submits that ATCO's conduct constitutes waiver in the stronger sense, asserting that its failure to invoke cl 25 in the face of Pipeline's threat to commence proceedings should be taken to constitute a deliberate decision, electing not to insist upon its rights under that clause. However, that contention is not supported by the facts.
72 There were two distinct periods during which the parties communicated with respect to their disputes. First, in October/November 2012 the parties corresponded with respect to Pipeline's claim for surrender of the bank guarantees and in relation to the amount it was to be paid for works performed under the Agreement up to the time of termination. Although ATCO indicated unequivocally that it was not prepared to surrender the bank guarantee covering defects liability until the expiry of the defects liability period, there is nothing in the adoption of that position which is inconsistent with adherence to the rights conferred by cl 25 with respect to the resolution of that dispute. In relation to the dispute concerning the amount to be paid for works performed prior to termination, the communications in October/November 2012 concluded with a letter in which ATCO indicated that it 'continues to be willing to settle all sums due for works completed prior to termination of the Construction Agreement and that are payable'. Again, there is nothing in the adoption of that position which is inconsistent with the rights with respect to dispute resolution conferred by cl 25 of the Agreement.
73 The second period in which the parties communicated in relation to their dispute was over December 2012 - January 2013. Those communications took the form of a letter from solicitors acting on behalf of Pipeline, and a response from ATCO. The letter from Pipeline demanded, for the first time, damages for loss of the bargain represented by the Agreement. By its reply, ATCO reiterated its willingness to settle all sums due for works completed prior to termination, but, implicitly, denied any other liability. That denial of liability provides evidence of a dispute, but does not provide any evidence of an intention not to rely upon the provisions of the Agreement with respect to the resolution of that dispute.
74 Essentially Pipeline's argument comes down to the proposition that ATCO can be taken to have waived cl 25 because it failed to invoke the procedures specified in that clause in the face of Pipeline's claims. However, Pipeline was the party asserting its claims, in a contractual context in which, by cl 25.1(b), compliance with cl 25 was a prerequisite to the commencement of any court proceedings. As ATCO was not the claimant in the dispute, and had no intention of commencing legal proceedings to enforce any claims, its failure to invoke the provisions of the clause cannot be relied upon as evidence of an election to abandon its rights under the clause, or to waive compliance by Pipeline with its requirements.
Is the dispute capable of being resolved by arbitration?
75 Section 8 of the 2012 applies when legal proceedings are commenced in relation to 'a matter which is the subject of an arbitration agreement'. Pipeline contends, albeit somewhat faintly, that the dispute the subject of the proceedings before the court is not 'a matter' which is the subject of the arbitration agreement contained in cl 25.
76 In Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, Deane and Gaudron JJ observed that in order for a dispute to be capable of settlement by arbitration:
[T]he controversy must be one falling within the scope of the arbitration agreement and, perhaps, one relating to rights which are not required to be determined exclusively by the exercise of judicial power (351).
77 In Hancock v Rinehart [2013] NSWSC 1352, Bergin CJ in Eq, referred to various decisions concerning the meaning to be given to the word 'matter' in the context of applications for the stay of proceedings under various legislative regimes, including the observations made in Tanning Research Laboratories v O'Brien, in which it was held that the word 'matter' could but does not necessarily mean the whole matter in controversy in the court proceedings, or the claims within the scope of the court proceedings [91]. In that case what was required for the purposes of s 7(2) of the International Arbitration Act 1974 (Cth) (which corresponds with s 8 of the 2012 Act) was some subject matter, right or liability in controversy falling within the scope of the arbitration agreement which need not be coextensive with the subject matter in controversy in the court proceedings.
78 In Comandate Marine Corp v Pan Australia Shipping, Allsop J observed that the expression 'matter' when used in s 7 of the International Arbitration Act should be understood at a level of generality, without necessarily connoting exact correspondence between the ambit of the court proceedings and the ambit of the arbitration agreement [235]. In Carter Holt Harvey Ltd v Genesis Power Ltd [2006] NZHC 114; [2006] 3 NZLR 794, Randerson J, when considering a provision analogous to s 8 of the 2012 Act, observed that the requirement imposed was for a 'direct relationship' between the matter before the court and that which is the subject of the arbitration agreement [58].
79 Clause 25 employs language of wide import to describe the disputes falling within its terms - namely, 'any dispute under this Agreement'. While it is possible to conceive that wider language could have been used - such as, 'any dispute arising from or in any way connected or associated with the Agreement or the subject matter of the Agreement' - the language used is quite wide enough to capture the 'matter' the subject of the proceedings before the court. As I have noted, in those proceedings Pipeline claims damages for breach of contract and the return of bank guarantees provided to ATCO pursuant to the Agreement. Plainly each of those claims is a dispute under the Agreement within the meaning of cl 25, and it is therefore the subject of the arbitration agreement contained within that clause.
Are the disputes arbitral?
80 It is generally acknowledged that a doctrine of non-arbitrability is recognised by Australian law: see ACD Tridon v Tridon Australia [189] - [194] (Austin J); Comandate Marine Corp v Pan Australia Shipping [200] (Allsop J); A Best Floor Sanding Pty Ltd v Skyer Australia Pty Ltd [1999] VSC 170 [18] (Warren J); Rinehart v Welker [2012] NSWCA 95 [167] (Bathurst CJ). The doctrine has been described as resting on the notion that:
[S]ome matters so pervasively involve public rights, or interests of third parties, which are the subjects of the uniquely governmental authority, that agreements to resolve such disputes by 'private' arbitration should not be given effect (Born GB, International Commercial Arbitration (2009),768).
81 The suggestion that Pipeline's claim against ATCO falls within this exceptional category with the result that it could not be the subject of arbitration smacks of desperation. Pipeline's claim is a conventional claim arising under a commercial agreement and has, on its face, none of the characteristics which could conceivably bring it within the ambit of the doctrine of non-arbitrability. Pipeline seeks to overcome this obvious deficiency by referring to the possibility that issues might arise in the course of an arbitration concerning the extent to which the discovery of unexploded ordnance may have given rise to questions of compliance with a number of statutory standards and provisions including the Planning and Development Act 2005 (WA), and the Gas Standards (Gas Supply and System Safety) Regulations 2000 (WA). Pipeline contends that determinations as to whether ATCO complied with such statutory provisions are matters that should be resolved by the courts, and not by an arbitral tribunal.
82 It must first be observed that it is not at all clear to what extent the question of compliance with those statutory provisions would arise in any arbitration of Pipeline's claims for damages for breach of contract and return of the bank guarantees. As I have observed, those claims are based upon alleged breach of contractual obligations to investigate and advise upon the presence or absence of unexploded ordnance. On the face of it, it is difficult to see how those allegations give rise to any question of compliance with statutory provisions by ATCO.
83 Secondly, and in any event, the fact that issues with respect to compliance or non-compliance with statutory provisions might arise in the course of an arbitration falls well short of sustaining the conclusion that the matters in dispute between the parties cannot be referred to arbitration. The cases to which I have referred make it clear that the doctrine of non-arbitrability is an exceptional doctrine to be applied only in those cases in which, as was suggested in Tanning Research Laboratories v O'Brien, the relevant rights must be determined exclusively by the exercise of judicial power. Pipeline's claim for damages for breach of contract and for return of its bank guarantees cannot be said to be of that character, by any stretch of the imagination. Pipeline's contention to that effect is without substance and must be rejected.Has ATCO submitted its first statement on the substance of the dispute to the court, such that it cannot request reference to arbitration under s 8?
84 Finally, Pipeline submits that ATCO has submitted its first statement on the substance of the dispute to the court, by filing the affidavit in support of the application for a stay in June 2013, with the result that it was and remains too late to request a reference to arbitration under s 8 of the 2012 Act.
85 This submission is also redolent of desperation. I have outlined above the affidavit to which reference is made. Its contents are limited to a reference to the Agreement between the parties, the provision of bank guarantees in accordance with the Agreement, the extent to which the parties had attempted to resolve their disputes and ATCO's willingness and readiness to participate in dispute resolution processes. Those are precisely the matters which one would expect to be covered in an affidavit in support of an application for a stay of proceedings or for a reference to arbitration under s 8 of the 2012 Act. The request for a stay was filed simultaneously with the affidavit, and relied upon it, following entry of a conditional appearance by ATCO. ATCO has taken no other step in the proceedings, and has not filed a defence or counterclaim. It has not responded to the allegations made in the statement of claim either in substance or effect. There is simply no basis upon which it can be credibly contended that it has submitted its 'first statement on the substance of the dispute': see Pathak v Tourism Transport Ltd [2002] 3 NZLR 681; Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (No 3) [2013] VSC 435 [128] (Vickery J). Given the lack of any credible basis for Pipeline's contentions in this respect, it is not necessary to analyse, or to attempt to reconcile the various authorities on the subject - as to which see, in addition to the cases already mentioned: Gilgandra Marketing Co-operative v Australian Commodities & Marketing [56] (Slattery J); Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66; Anderson Switchboards & Electronics Ltd v Schneider Electrical (NZ) Ltd (Unreported, NZHC, M1215-1M00, 16 January 2001); Louis Dreyfus Trading Ltd v Bonarich International (Group) Ltd [1997] HKCFI 312; [1997] 3 HKC 597.
86 Accordingly, Pipeline's contention that ATCO submitted its first statement on the substance of the dispute by submitting an affidavit in support of its application for a stay must be rejected.
87 It follows that all of the arguments advanced by Pipeline to support its contention that s 8 of the 2012 Act does not apply to the arbitration agreement contained within cl 25 must be rejected.
Should there be a stay of proceedings prior to any reference to arbitration pursuant to s 8 of the 2012 Act?
88 As I have noted, ATCO claimed, and maintains its claim for a stay of proceedings based upon Pipeline's failure to comply with the provisions of cl 25 with respect to dispute resolution. In common with many other such clauses, the provisions of cl 25 are not limited to an arbitration agreement, but include procedures which must be followed by the parties before their dispute can be referred to arbitration. Those procedures have not yet been followed, with the result that it might be argued that the matter is not yet ripe for a reference to arbitration. If such an argument had been advanced, a question might have arisen as to whether the court should refer the matter to arbitration, notwithstanding that the preceding dispute resolution mechanisms in cl 25 have not been followed, or whether there should be a stay of proceedings prior to any such reference, to enable those procedures to be followed.
89 It should first be noticed that by cl 25, the parties have agreed that they 'may not commence court proceedings' unless they have complied with the clause, except where urgent interlocutory relief is sought. So, compliance with cl 25 is a mandatory prerequisite to the commencement of legal proceedings.
90 The conventional view is that where the parties have agreed upon such a provision, the prescribed procedure must be followed in respect of any dispute falling within its scope: see ABB Power Plants v Pacific Power (599) (Handley JA), (611 - 612) (Sheller JA); PMT Partners v Australian National Parks & Wildlife Service (311 -312) (Brennan CJ, Gaudron & McHugh JJ), (322 - 323) (Toohey & Gummow JJ); Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144 [41] - [44] (Steytler J, Pidgeon & Ipp JJ agreeing). Further, there is authority for the proposition that such a contractual provision can be effectively enforced by the exercise of the court's inherent power to stay proceedings: see Straits Exploration (Australia) V Murchison United NL [15] (Wheeler JA, McLure JA & Murray AJA agreeing).
91 However, there has been more recent debate with respect to the existence of such a power: see BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169 [42] - [45] (Finkelstein J); and Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228 [35] (Corboy J). Those doubts might be reinforced by s 5 of the 2012 Act, which provides that:
In matters governed by this Act, no court must intervene except where so provided by this Act.
92 Moreover, in the particular circumstances of this case, it may be of significance that where a matter falls within the scope of s 8 of the 2012 Act, the court has no discretion: it 'must' refer the parties to arbitration. For the reasons I have given, it is clear that s 8 does apply and ATCO has clearly and unequivocally requested that the matter be referred to arbitration in the written submissions which it has filed subsequent to it being realised that the 2012 Act applied. It is also of some significance that, despite advancing a diverse array of arguments in support of its contention that s 8 of the 2012 Act did not apply, Pipeline has never contended that a reference to arbitration should be deferred because of a failure to comply with the antecedent dispute resolution provisions contained within cl 25. It is unnecessary to speculate as to the possible reasons for that approach.
93 It is not difficult to imagine circumstances in which one or other party to an arbitration agreement might seek a stay of proceedings based on a failure to comply with mandatory dispute resolution provisions in an agreement which also contains an arbitration agreement, but does not seek a reference to arbitration until those procedures have been followed. In such a case, a nice question might arise as to whether a stay could be granted without ordering a reference to arbitration, having regard to the terms of s 5 and s 8 of the 2012 Act. However, neither party to these proceedings has adopted that position. Rather, each has conducted the proceedings on the basis that either ATCO's application will be dismissed and the proceedings in this court will continue, or there will be a reference to arbitration. Accordingly, by reason of the position adopted by the parties, the interesting question to which I have referred does not in fact arise in this case.
94 Section 8 of the 2012 Act is silent on the question of whether a reference to arbitration can or should be accompanied by a stay of the proceedings brought before the court. Although read literally, s 5 might suggest that the court lacks such a power, such a reading would, in my view, be inconsistent with the paramount object of the 2012 Act which is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals. That objective will be enhanced by an order for reference to arbitration being accompanied by an order for a stay of the proceedings brought in the court, and I propose to order accordingly.
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