PMT Partners Pty Ltd v Australian National Parks and Wildlife Service

[1995] HCATrans 177

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Darwin  No D9 of 1994

B e t w e e n -

PMT PARTNERS PTY LTD (In Liquidation)

Appellant

and

AUSTRALIAN NATIONAL PARKS AND WILDLIFE SERVICE

Respondent

BRENNAN CJ

TOOHEY J
GAUDRON J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 21 JUNE 1995, AT 11.55 AM

Copyright in the High Court of Australia

MR D.M.J. BENNETT, QC:   May it please the Court, I appear for the appellant with my learned friend, MR I.D. NOSWORTHY.  (instructed by McBride & Stirk)

MR T.J. RILEY, QC:   If it please the Court, I appear with my learned friend, MR P.G. MINOGUE, for the respondent.  (instructed by the Australian Government Solicitor)

BRENNAN CJ:   Mr Bennett.

MR BENNETT:   May I hand up an outline of submissions.

BRENNAN CJ:   Yes, Mr Bennett.

MR BENNETT:   If the Court pleases.  Your Honours, one of the first things which a young practitioner learns when he or she deals with rules of court is that one of the most important provisions to be found in virtually every rule of court is a rule which says one can extend the time for doing anything.  I suppose, all young practitioners have on occasions had their lives saved by a rule of that sort.  It is a useful rule, a sensible rule, and one which, by virtue of section 48 of the standard Commercial Arbitration legislation is extended to arbitrations, so that one does not get defeated or deflected from ones purpose by a rule which says you have got to do something within 14 days or some other comparatively short time.

The issue in this case is a very simple one.  There is a standard provision in building contracts, clause 45, which appears at page 36 of the appeal book, which deals with the settlement of disputes, and it sets out a procedure, a procedure having a series of alternatives and possibilities involving the settlement of disputes.  One first goes to the superintendent for a decision.  If the superintendent’s decision is against the contractor, there is 14 days to go to the principal for a decision.  If the principal’s decisions against the contractor, there is 28 days to refer the matter to arbitration, and the clause contains a large No  of ancillary provisions.

Section 48 of the Act says that the court can:

extend the time.....fixed by the agreement.....for doing an act.....in or in relation to an arbitration. 

And the short question is, do the preliminary steps involving the superintendent and the principal and the time limits there laid down, are they time limits in or in relation to an arbitration?  And the argument against me is equally simple.  The argument against me is, “Well the arbitration does not really start until there is a submission and therefore how can it be ‘in or in relation to an arbitration’ to extend the time limit for going to the superintendent or the principal?”  It is a bit like a situation where an employer says to his employee, who is required to travel interstate, “I will pay all expenses in or in relation to your flight to Melbourne”.  One would have thought that would include the taxi fare to the airport.  And in a sense that is the problem here.

Now we say that our construction is supported by the purpose of the section in the clause.  It is supported by the language of the section in the clause, and to the extent that they do help, which is not very much, it is supported by the authorities, and our outline sets out each of those three ways in which we attack the problem.  The first one really requires very little adumbration beyond what I have said:  the purpose is to mitigate the effect of arbitratary time limits.  That purpose would be totally defeated if one were able to say the clause does not apply to matters which are necessary conditions precedent to arbitration, in the same way as paying matters in relation to the flight to Melbourne would involve, we would submit, as a matter of normal commonsense, matters which may arise before the flight actually takes place. 

Of course, building contracts are normally contracts of adhesion. Contracts of adhesion at least in the sense that the proprietary provides a standard form and there is very little opportunity in practice, obviously, for the contractor to negotiate details of that, and a matter such as the arbitration clause ought not to be something which is excluded by arbitrary time limits.  We submit that section 45 should be construed broadly to achieve its purpose.  That purpose could be readily avoided if the decision below were to be affirmed.  That is the first part of my submissions.

The second part concerns the language.  Now the language of the section is very wide.  Your Honours can see the section at page 39 of the appeal book.  The words are “taking a proceeding in or in relation to an arbitration”.  It is not merely proceedings in an arbitration.  The fact that the arbitration may not exist until there is a submission might be very relevant if the section only used the words “in an arbitration”, but the words “in or in relation to” are clearly intended to widen that.

I have given your Honours in paragraph 2b four examples of the width of the words “in relation to”.  They are probably not much help, they are in different contexts and, of course, one can always find contexts for general words of that nature.  But they do indicate that the words are, as one would expect, quite wide words.  The first of those cases:  it was a use of a trade mark is in relation to goods where it was not on them at all, but in an advertisement that referred to them.

In the second of the cases:  anything done or omitted to be done in relation to the removal of a wreck covered a refusal to remove the wreck.  The third one:  an employee was acting in relation to his principal’s affairs where he was acting in relation to trade union affairs.  And the fourth, perhaps the best, was that the liability of a vendor to income tax was a liability in relation to the business in an indemnity clause in a sale agreement.

TOOHEY J:   The difficulty with those examples though is that they all relate to something which exists, do they not, and then one is concerned with the breadth of the relationship?  I suppose the argument it gets to here is that there is no arbitration and therefore there cannot be anything in relation to the arbitration.

MR BENNETT:   Your Honour, in my submission, there is no reason why one cannot have the words “in relation to” applying to something which may exist in the future to a contingency.  There is simply no reason as a matter of grammar why the existence of the arbitration should require something to be in relation to it.  Suppose, for example, a contract said, “On signing the contract the contractor shall deposit with the Master Builders’ Federation $1,000 as security for the costs of any arbitration that may arise under this agreement”, now such a clause would clearly be a clause in relation to an arbitration, although at the time of its operative effect there would be no arbitration.

TOOHEY J:   Yes, but that is because of the words “that may arise”, is it not?

MR BENNETT:   I am assuming that clause in the contract, we are merely assuming something outside the contract which talks about something in relation to an arbitration, and that would be a provision in relation to an arbitration, because it would be in relation to a possible arbitration.  Here one has a clause setting up a train journey on which the contractor must embark.  He can get off at various points, but the train journey has a series of logical steps:  there is the superintendent, then the principal, then the actual arbitration, and it is a series of events, and we submit the mere non‑existence of the last event at the time of the first event does not prevent something in relation to the first event being a time limit in relation to it.

Indeed, in one sense, your Honour, I suppose the clearest example might be a time limit for the submission itself.  If one had a time limit for the submission itself, that would clearly be caught by section 48 but, of course, if the time limit is operative, there would never be an arbitration.  If the submission is out of time, and that is effective, there is no arbitration at all.  So the very primary situation to which the section is directed involves the possibility that there will be no arbitration at the time, and that is why we submit it has the words “in relation to”.  The words “in relation to”, of course, are concerned with the finding of some relationship between two references.  The nature of that relationship obviously depends on the context and one has to look at the context to see what it is, but we would submit that in this case the relationship is clearly a very close one.

Your Honours will note that the clause is actually headed “Settlement of Disputes”.  That does not help me unfortunately, because the agreement has the standard provision at the beginning that you cannot look at the headings to construe the agreement, but if I can do what is sometimes done in relation to non-binding authorities, and adopt that heading as part of my submission rather than rely on its being there, and suggest that it is accurate to describe the subject matter of the whole of the clause as settlement of disputes, and arbitration is merely part of that.

BRENNAN CJ:   Do you accept that there is open to a party, who has a dispute or difference arising out of the contract, to go to litigation between paragraphs (a) and (b)?

MR BENNETT:   Yes, your Honour.

BRENNAN CJ:   How do you reconcile that with the words “shall be decided” in the opening words, and the words “decision” in (a) and (b)?

MR BENNETT:   Because, your Honour, of the word “may” in (b).

BRENNAN CJ:   In that case you have had a decision under (a).  Why is that not effective to decide the dispute or difference?

MR BENNETT:   Because, your Honour, one would not construe the words “shall be decided as follows” as being necessarily exhaustive.

BRENNAN CJ:   I thought that was precisely what the words meant.

MR BENNETT:   Your Honour, we would submit, “shall be decided” in the following way, firs,t the contractor “shall” refer the matter to the superintendent - that is compulsory, and then one says, “If the Contractor is dissatisfied.....he may.....submit”  - - -

BRENNAN CJ:   What follows that is, then the superintendent is to give his decision.  Why is that not a decision which decides the dispute or difference?

MR BENNETT:   Your Honour, I suppose because, if those words stood alone, it would, if the clause stopped there, it would.  But the clause does not stop there; it goes on to say that the contractor may do something else and that after the principal steps he may do something else, and that suggests that he has the alternative of doing that or going to the court, and that seems to be what the authorities suggest.  Certainly that is what the court below has decided and there is no notice of contention in relation to that.

BRENNAN CJ:   I would have thought it was something which would advance your cause rather than the opponent’s cause.

MR BENNETT:   Well, in one sense it does because it makes the effect more dramatic against my client.

BRENNAN CJ:   I am only saying, as a matter of first impression, the way in which I read this clause, was that these are the exclusive methods by which decisions are to be reached in settlement of disputes.  You either got a decision from the superintendent o,r under (b), you got a decision from the principal or you went to arbitration.  Now that may be wrong, but I would just like to know why it is wrong, if there is any particular reason to be assigned, apart from looking at the language and saying it means something different.

MR BENNETT:   The reason given by the Full Court and the reason given in the other cases, is the word “may”.

BRENNAN CJ:   Yes.

MR BENNETT:   And one incorporates that into the “shall be decided” and says the “may” implies that there must be an alternative.  The alternative is not merely to accept it; the alternative is to go to court.

BRENNAN CJ:   Yes.

MR BENNETT:   Of course, if one takes the strict view that your Honour has suggested to me, that would strengthen the argument based on policy, because it would mean that otherwise a contractor would be totally cut out if he were to wait 15 days after the contractor’s decision with no possibility of the court mitigating it under any circumstances.

BRENNAN CJ:   If it does not mean that, then is there any necessary relationship between the time prescribed in (b) and the arbitration because if that option is open to go to litigation there may never be any thought of arbitration on the part of either party?

MR BENNETT:   On the other hand, your Honour, it makes it closer to arbitration because (b) becomes a condition precedent to that mode of resolving the dispute.  So (b) becomes then something related peculiarly to arbitration as opposed to the possibility of litigation in that, if the time limits are exceeded, one is forever barred from arbitration but one can still litigate.  So, in that way the relationship required by the words “in relation to” is more closely satisfied.

We submit in paragraph 2d that the paragraph structure, the (a) and (b) set in, should not be given great emphasis, particularly bearing in mind the similarity of the words used in each of the three steps.  The structure is merely a recognition that there are some elements common to the first two steps, not in the third, and it was convenient as a matter of grammar and division to set it up that way, but it does not prevent the whole process being fairly described as in relation to arbitration.

In paragraph e we refer to the corresponding English provision and I do this for two reasons, first showing that our provision is wider and, secondly, for the purpose of distinguishing the English cases, which seem to have been referred to a bit.  The English section on the top of page 3 provides that:

Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed by the agreement...the High Court...may...extend the time.

Now the words “some other step to commence arbitration proceedings” are of course clearly narrower and would not normally be regarded as a matter of English as covering a condition precedent, and we point out that the draftsman of the Australian section has deliberately chosen to use wider words and used the words “in or in relation to an arbitration”.

There are some cases in England holding that general time limits for the notification of disputes are not caught by the provision, and I have given your Honours those references; I will not take your Honours to them.  There is one case that goes the other way.  But we would submit that at the end of the day they are not going to be of great assistance to your Honours.  Whatever else is caught by section 48, we submit, conditions precedent to arbitration such as these provisions are clearly included, particularly ‑ ‑ ‑

McHUGH J:      But does not section 48(3) indicate that the words “in relation to an arbitration” should be read fairly narrowly?  If your argument was successful, a court could make orders which would ultimately have a result of the matter going to arbitration even though undue hardship would be caused to a party.

MR BENNETT:   Your Honour, subsection (3) is, on any view of it, narrower than subsection (1).

McHUGH J:    Well, that may be accepted, but your submission would lead to quite a strange result.

MR BENNETT:   No, your Honour, subsection (3) only applies to those categories of subsection (1) which are concerned with the time limit for commencing arbitration proceedings.  It does not apply, for example, to the time for an order for particulars in an arbitration or filing an offence or something like that.

McHUGH J:    But in those cases one would assume that arbitration proceedings were on foot, but in this particular case you are seeking an extension of time in relation to preliminary steps which, ultimately, might result in an arbitration taking place, even though undue hardship would be caused to a party, yet subsection (3) would not apply to this application of yours.

MR BENNETT:   No, your Honour, nor would it apply to the case of a defence or particulars where the court would not need to be satisfied about undue hardship, and maybe undue hardship would be caused by allowing an arbitration, where some time limit had expired, to be revived many years later, but the section does not apply.  What subsection (3) does is take out of subsection (1) the middle category, the most important category, the category of actually commencing the arbitration, and say, “Well there the court cannot make the order unless there would be undue hardship”.  But where when it is dealing with subsequent matters in the arbitration or with matters preliminary to the commencement of the arbitration, then one does not have to go through that stricter test.

There is also one other section I might remind your Honours of before I get to the third part of my submissions and that is section 46.  Do your Honours have the Commercial Arbitration Act?  They are in the back of what has been handed to your Honours, I think.

GAUDRON J:   It starts at section 47.  No, no, it is loose.

MR BENNETT:   It is loose, I think, in the book that your Honours have.  Your Honours see that section 46 provides that there is a general obligation to “exercise due diligence” and ‑ ‑ ‑

GUMMOW J:   This is a product of  the House of Lords’ decision, is it not, Bremer Vulkan and all those cases?

MR BENNETT:   Yes, I think it is, your Honour, which had the effect that one could revive a 20-year-old arbitration in the middle and the English rule which enabled one to refuse to allow proceedings to be revived, where there had been a want of prosecution for a long time, did not apply to arbitrations.

GUMMOW J:   Yes.  And then there was a question of whether there was an implied term and there was debate about that.

MR BENNETT:   Yes.  The English court said that one was stuck with the arbitration.  But what is interesting is the amendments to this section, because if your Honours go to the third page of the insert, your Honours will see section 17 of the amending legislation amends section 46 by omitting certain words and substituting:

is the duty of each party to the agreement to exercise due diligence in the taking of steps that are necessary to have the dispute referred to arbitration and dealt with in arbitration proceedings.

Now there is a bit for me and a bit against me in that, obviously.  I suppose, in one sense there is always a problem looking at subsequent amendments to construe Acts anyhow, and one probably cannot and, secondly, of course, there is the fact that they have not put words like that in section 48.

TOOHEY J:   Mr Bennett, so far as section 48 is concerned and subsection (3) to which you were taken, is the notion of commencement of arbitration proceedings to be found in the Act itself or does one go elsewhere to identify when arbitration proceedings have been commenced?

MR BENNETT:   My recollection is that there is a provision, but may I just have that checked, your Honour, and answer your Honour in a moment?

TOOHEY J:   Yes, thank you. 

GUMMOW J:    Is there any prospect of us being given the whole Act, Mr Bennett,  instead of bits and pieces?

MR BENNETT:   Certainly, your Honour; I will have that done, your Honour.  It is uniform legislation, of course, but unless the Northern Territory ‑ ‑ ‑

GUMMOW J:   People have often said that.

MR BENNETT:   Yes, I will have the Act copied for your Honours during the day.

TOOHEY J:    Do not worry about it now, Mr Bennett; if you can let us know at some stage.

MR BENNETT:   Yes, I will check that over the luncheon adjournment, your Honour.  It certainly is not in the definition section, but there may be a provision which deals with it and I will have that checked.

That brings me to the third and final part of my submissions which is the question of authorities.  There are not any which really answer the question.  In Federal Airports Commission v Rheem Australia, 10 BCL 449, it was assumed by Mr Justice Ambrose at first instance that he had power to extend the time and he did so, and the unanimous Court of Appeal of Queensland seems to have accepted that, although it affirmed his Honour’s decision on slightly different grounds.  At no stage in that litigation does it seem to have been suggested that there was no power to extend time because it was not “in or in relation to an arbitration”.  So the decision is one where the ratio applies literally, but it was assumed rather than argued.

GUMMOW J:   Now some of these other decisions are applications for stay under section 53, are they not?

MR BENNETT:   Almost all of them, your Honour.

GUMMOW J:   Have we got section 53?  We do not.  We expire at section 51 at the moment.

MR BENNETT:   Yes.I think it may be referred to in the judgment at one point, your Honour.  I will just have that checked.  It is in my learned friend’s material I am told, your Honour, which he has not handed up yet.  That section provides:

If a party to an arbitration agreement commences proceedings.....that other party may.....apply to that court to stay -

and of course, prima facie, in cases of that nature, there would normally not be an arbitration on foot.

In relation to paragraph 3b, we have said that the English decisions are probably inapplicable, but there is one English decision which I might just very briefly remind your Honours of, and that is the decision - it is in my friend’s authorities - Pittalis v Sherefettin, (1986) 1QB 868. This was a case where there was a lease and the relevant provisions of the lease appear on pages 872 and 873, and your Honours will see from the sixth line of the judgment of Lord Justice Fox that:

section 27 of the Arbitration Act 1950 was applicable so as to empower the court to extend a time limit in the lease for an election by the tenant that the rent be determined by an independent surveyor.

That was the issue.  The provision of the lease is set out on page 873 in the middle of the page, and your Honour sees that it is starting at D:

The aforesaid open market rental value shall be determined.....shall be such a sum as shall be notified in writing.....or as shall within three months after such notification be agreed.....or at the election of the lessee by notice in writing to the lessor not later than three months.....it shall be determined -

by arbitration.

The question concerns the extension of the three months.  At the bottom of page 876 Lord Justice Fox said this:

The next question is the ambit of the words (in section 27): “or some other step to commence arbitration proceedings is taken within a time fixed by the agreement.”  Do they include the election to arbitrate required by proviso (2)(ii) of the lease?

And that is, as your Honour sees, the second part after the first step.

It can be said that the election is simply the conclusion of the agreement and is not part of the arbitration proceedings.  In reality, however, it is effectively the first step in the arbitration proceedings, and I think it would be an unduly narrow construction of section 27 to exclude it from the operation of the section.

He then goes through some of those cases and it refers to a statement by Lord Justice Donaldson.  This is just above D:

that the concept of “claiming arbitration” was well known in the commodity trades; the arbitration rules of the trade then provided the steps to be taken by each party.  He said that in such cases he would accept that “claiming arbitration” may be regarded as a step to commence arbitration proceedings within the meaning of section 27.

So it seems to suggest that one can put it back a little bit, if not a great deal.  If is also interesting at page 883 between E and F Lord Justice Dillon says this:

The rent review clause is not, in my judgment, a mere agreement to agree.  There is in the lease itself an agreement, binding on the landlords, that there shall be arbitration over the open market rental value of the premises if the tenant, by notice, so elects.  That is a binding contract to refer disputes over the open market rental value if the tenant so elects, and it must be an agreement for arbitration within section 27 -

and so on.  So that is an example in the English section of a case saying that, although it is a mere matter of election to refer to arbitration, that is sufficient.

There are three cases I have referred to in paragraph c.  I do not want to spend a lot of time on these cases; they are all concerned with different provisions, but they do contain some useful remarks about this standard clause.  In the Rheem Case - this is a different part of that litigation to the part I have taken your Honours to before - (1989) 6 BCL 130 and it is in the volume we have given your Honours as case No  2.  There is a discussion on page 133 in the second column about the steps and their nature as a condition precedent, and then he puts those together on the top of page 134, where his Honour says:

It follows in my view that the interdependence of one clause of clause 45 upon the other requires a construction that the limitations of time in clause 45 are mandatory if the arbitration process is to become available.  As will appear, the fact that it does not does not preclude the taking of action in any court of competent jurisdiction.

That is the point your Honour the Chief Justice put to me earlier.

I do not believe that there is any decision which binds me to decide the contrary.

And he refers to an earlier decision.

The next case which is in tab 3, a decision of Mr Justice Angel, TransAustralian Constructions Pty Ltd v Northern Territory (1991) 104 FLR 358, and at page 364, in the middle of the page:

In my opinion, clause 45 does constitute an arbitration agreement within section 4 -

and then it reads “may” as “shall” for that purpose.

Then the third case is Allied Constructions Pty Ltd v Novacoal Australia Pty Ltd (1991) 25 NSWLR 54, where Mr Justice Giles, this is tab 4, at page 59D there is a reference to the “steps” and the “first step” and the “second step” and then the conclusion at 65E. His Honour says:

Having considered these decisions, I remain of the view that GC 49 1

which is the whole of our clause 45 -

embodies an arbitration agreement within the meaning of the Act.

And that is on the basis of that series of steps.  Now those are, of course, in a sense, straws in the wind and they are for a different purpose, but they emphasise that this is a clause which has a series of steps leading up to one possible conclusion.  Certainly they are steps that need to be gone through if one is going to get to that conclusion.

I need to distinguish the decision in Jennings Constructions Ltd v CH & M Birt Pty Ltd which is case No 7 in the volume.  There, there was a clause which required notice of a claim for extras to be given to the proprietor and the question was whether that time limit could be extended and Mr Justice Smart held that it could not.  The distinction appears at page 28 and I have set out the passage in my submissions;  it is 28G where his Honour says:

In this case the provision requiring notice to be given and the arbitration clause are separate and distinct.  They do not go hand in hand.

But one thing one can say here about (a), (b) and the next paragraph of clause 45 is that they do go hand in hand and are not separate and distinct.

GUMMOW J:   Has not Jennings itself been disapproved in the New South Wales Court of Appeal?  Mr Justice Meagher’s decision?

MR BENNETT:   It has, your Honour.  I think that is in ABB Power, that is the case in the next paragraph which also disapproved the decision below in this case which I am appealing against.  What we simply point out about paragraph (g) on page 4 is this, that the submission is put in the alternative.  The wider submission I make is that anything involving a condition precedent, a time limit with a condition precedent, is a clause in relation to an arbitration.  That would involve overruling Jennings Constructions v Birt.  Alternatively, we would put the narrower submission that whether or not that is true, certainly in this case where the condition precedent is in a clause which is an overall clause dealing with the settlement of disputes in the form this clause takes where it goes hand in hand, to use his Honour’s phrase, it is caught.

The final matter I want to refer to is the unreported decision of the New South Wales Court of Appeal in ABB Power Plant Ltd v Electricity Commission.  That is case No 6 in this volume.  Two of the judges of the New South Wales Court of Appeal expressed disapproval of a decision in this case.  Again, the case did not deal with the present question;  it dealt rather with the question of options as opposed to compulsory arbitration.  The two passages are:  first, the decision of Mr Justice Cole at page 20 of his Honour’s judgment.  If your Honour’s go back one page from the very end of the report, your Honours will have that under tab 6.  At the top of page 20 his Honour says:

the agreement to refer to arbitration contained in cl 45 NPW3, or cl 46 AS 2124 1986 exists and, if the subject matter of the litigation falls within the scope of that clause, operates to confer upon the court the power conferred by s 53 ‑

that is the stay power ‑

To litigate where there has been a valid election by either party to resolve the dispute by arbitration, is to act contrary to the arbitration agreement.....However where there has been no exercise of a power of election by one or both parties having that power, s 53(1)(a) would not be satisfied, and nor, in many instances, would s 53(1)(b).

Insofar as Australian National Parks & Wildlife Service ‑

this is this case ‑

holds that cl 45 NPW3 does not, prior to an election to refer a dispute for resolution by arbitration, constitute an arbitration agreement within the meaning of s 4, I respectfully disagree.

In my view, Giles J was correct in finding that cl 46 constituted an arbitration agreement ‑

et cetera. 

Mr Sheller made the same point:  if your Honours go back into the middle of it, at page 16 of his judgment, that is the immediately preceding judgment, the middle one of the three where, on the fourth line of page 16, his Honour says this:

Unfortunately their Honours did not deal with the closely reasoned judgments of Giles J in Allied Constructions and in Turner nor with the decision of the English Court of Appeal in Pittalis v Sherefettin.  As I have said I agree with the conclusion arrived at by Giles J in Allied Constructions and the particular significance his Honour attached in that case to the opening words in the clause under consideration to the effect that all disputes or differences arising out of the contract should be determined in the manner thereafter described.  Those words led to the conclusion that the parties had agreed to refer present or future disputes to arbitration.  Similar words were to be found in the clause under consideration by the Full Supreme Court of Northern Territory but the Court did not pass upon their significance.  With the greatest respect I am not persuaded by the judgments in that case that there was not in the present case an arbitration agreement within the meaning of the section.

So, the approach that the whole clause was not an arbitration agreement was disagreed with.  Your Honours, I end where I started by looking at the section as a whole and looking at the clause as a whole.  The section is concerned with removing the tyranny of fixed time limits in or in relation to an arbitration.  An arbitration must mean, if that is to have any meaning at all, a possible future arbitration.  Otherwise, the section would have very little effect because, otherwise in a case, were the court chose not to extend the time limit, there would never have been any arbitration.  Here one has a series of steps necessary, a procedure for dispute resolution involving the contractor, the principal, then an arbitrator.

It is not strictly necessary for your Honours to resolve the question put to me by the Chief Justice as to whether or not one can litigate.  As I put to the Court, if one cannot litigate, if one breaks the time limit in (a), that makes the result all the more drastic.  On the other hand, if one can, it makes the clause at that stage more closely related to the concept of arbitration.  So, one could take either approach.  Our submission is that, in any event, those matters described in (a) and (b) are clearly part of the journey towards arbitration.  They are conditions precedent to it and the words “in relation to” are well capable of describing the relationship between those events and the possible future arbitration.

TOOHEY J:   Can I just ask you this, Mr Bennett?  In relation to your alternative argument that this is an agreement, this is an arbitration agreement?  I take it that is founded on the proposition that it is an agreement to refer disputes to arbitration and does the argument then continue that clause 45 is an agreement to refer disputes to arbitration because it provides for submission to arbitration if one of the parties chooses to take that step?

MR BENNETT:   Yes, your Honour.  We would submit that it satisfies the words “agreement to refer disputes to arbitration” if that agreement is conditional on something and if it is conditional on one party making an election ‑ so that if one party makes the election to go to arbitration, the other party is obliged to go along with that and to arbitrate.  That is an agreement in certain events, to refer to arbitration.  And that seems to be the way the authorities, in general, go although there has been some vacillation.

We stress that your Honours do not need to resolve that to resolve this case.  This case is really a fairly simple case about the context of the words “in relation to” in section 48 and applying that to a clause with a series of steps for the resolution of disputes such as clause 45.  May it please the Court.

BRENNAN CJ:   Thank you, Mr Bennett.  Yes, Mr Riley?

MR RILEY:   Your Honours should have our outline of submissions.  In our submissions, there is no arbitration agreement available for the operation of section 48 in this particular case and we say that no arbitration agreement arises until the election is made by the contractor to refer a dispute to arbitration and until that time no arbitration agreement exists.  That will be our first point.  Our second point will be that if there is an arbitration agreement, clause 45(a) and (b) have no part of that arbitration agreement and it only exists once referral has occurred and is constituted then by the final part of clause 45, excluding 45(a) and (b).

Finally, we say that the delivery of the notices under clause 45(a) do not amount to an act in relation to an arbitration as it does not have sufficient nexus to qualify as such.  In relation to whether or not this is an arbitration agreement, we point out that the clause is divided into two mechanisms of what we call alternative dispute resolution and they are the ones entered into contractually by the parties.  They can either refer the matter up the chain from superintended to principal and achieve a settlement through that process or, alternatively and subsequently, they can do so by referral to arbitration.  There is, however, a third mechanism that remains available at all times and that is proceeding through the courts.  The clause does not purport to remove the right to proceed through the courts and, indeed, in its provisions, suggests that that right is fully preserved.

If your Honours look at the whole of the clause, your Honours will find that there is the referral to the superintendent, then the referral to the principal and then there is the referral to arbitration and it is only at that time that legal resort to the courts is precluded.  The clause itself is set out at pages 36, 37 and 38.  At page 37 of the appeal book at the foot of that page, part of the clause reads:

Where a notice is given by the Contractor to the Principal pursuant to the last preceding paragraph requiring that the matter at issue be referred to arbitration no proceedings in respect of that matter at issue shall be instituted by either the Principal or the Contractor in any court unless and until ‑

and so it goes on.

TOOHEY J:   But, what do you make of that submission, that legal proceedings are available at least up until the point where notice is given?  Is that said to destroy this as an arbitration agreement, or are you using it for some other purpose?

MR RILEY:   We say it destroys it as an arbitration agreement.  We say that whilst there is an election ‑ in this case, I suppose, in a sense, it is a three‑way election.  The dissatisfied person can either become satisfied and take the matter no further;  it can proceed by way of arbitration ultimately, having gone through the alternative dispute methods set out in the beginning of the clause and, finally, it can go to court.  And both parties can do that.  Whilst that option remains open, you do not have, in our submission, an arbitration agreement and you do not have one until the actual referral to arbitration takes place.

TOOHEY J:   How do you square that with the definition of “arbitration agreement”, assuming that I have, amongst these bits and pieces, the correct section of the Act ‑ is it section 4 that has the definition section?

MR RILEY:   It is, your Honour, yes.

TOOHEY J:   And is the definition, “‘arbitration agreement’ means an agreement in writing to refer present or future disputes to arbitration”?

MR RILEY:   Yes, that is the clause.

TOOHEY J:   You seem to be reading that as meaning “an agreement in writing ‘only’ to refer present or future disputes to arbitration”.

MR RILEY:   Yes, one that actually refers disputes to arbitration.

TOOHEY J:   Well, that would be giving it an unusual construction, would it not, because it speaks of referring “present or future disputes to arbitration”.

MR RILEY:   Yes, but in the direct sense, your Honour, as appears in the English clauses, for example, that once a dispute arises it will be referred to arbitration.  So, that is it;  that is your choice.  Well, there is no choice, you refer it to arbitration.

TOOHEY J:   Well, that is the point, is it not.  You are reading “arbitration agreement” - you may well be right but you are reading it as meaning an agreement whereby the only method of resolution is reference to arbitration.

MR RILEY:   Yes, your Honour.

BRENNAN CJ:   We will adjourn now until 2.15, Mr Riley.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.20 PM:

BRENNAN CJ:   Yes, Mr Riley?

MR RILEY:   Thank you, your Honour.  For the reasons that we were putting to you before lunch, we contend that there is a continuing right to litigate up until it is taken away by the provisions of the clause and that seems to be not in dispute.  The authorities ‑ ‑ ‑

BRENNAN CJ:   Can I just pursue my little concern about that, Mr Riley?  If there were a dispute or difference and there was a decision by the superintendent under paragraph (a) and let it be assumed that the decision of the superintendent was that, for example, an additional amount of $100 was payable, would it be open to the contractor to sue upon that decision and recover the $100?

MR RILEY:   In our contention, it would be, your Honour because the clause does not ‑ ‑ ‑

BRENNAN CJ:   Well, the $100, by virtue of the decision, would be the amount payable under the contract?  Is that right?

MR RILEY:   Yes, your Honour.

BRENNAN CJ:   And if he were dissatisfied with it and gave notice under paragraph (b) and a principal decided that there were $200 payable, could the contractor sue on that decision and recover the $200 as the amount due and payable under the contract?

MR RILEY:   This is having gone through part (b)?

BRENNAN CJ:   Part (b)?

MR RILEY:   Yes, your Honour.

BRENNAN CJ:   Well, then, that means that the disputes and differences arising out of the contract can be decided by the decision, either of the superintendent or of the principal, as the case may be.

MR RILEY:   Can be?

BRENNAN CJ:   Can be?

MR RILEY:   Yes, if the parties ‑ well, if the contractor is not dissatisfied, yes.

BRENNAN CJ:   Yes.

MR RILEY:   Yes, your Honour.

BRENNAN CJ:   Well, now, if you concede once that they can be decided, why is it that the words “shall be decided” are not mandatory?  For determining the amount payable under the contract which might be recoverable by action?

MR RILEY:   They can be decided, subject to the ‑ I may not have understood your Honour correctly earlier, but, they can be decided in that manner unless one or other party resorts to the court.

BRENNAN CJ:   But, if a party is required, under paragraph (a) to submit the matter at issue in writing, then the decision that is given under paragraph (a) is not only capable of settling the dispute or difference, but it is the way in which a dispute or difference is settled subject to paragraph (b), is it not?

MR RILEY:   No, your Honour.  We say it is not finally binding in the sense that either party still has a capacity to refer the matter to the Court.

BRENNAN CJ:   Then, what is the effect of a decision given under paragraph (a) so far as the amount due under the contract is concerned?

MR RILEY:   It is that, subject to no one being dissatisfied with it ‑ and the dissatisfaction can be expressed by going on to paragraph (b) or alternatively going to the courts ‑ it would be binding.  But, there is a further ‑ ‑ ‑

BRENNAN CJ:   I do not understand that, I must say.  I do not understand why it is that the decision does not have the effect which is attributable to it by paragraph (a).

GUMMOW J:   The word “shall” appears in the line immediately above (a), do you see that?

MR RILEY:   Yes.

GUMMOW J:   Then it appears in the first line of (a).

MR RILEY:   Yes.

GUMMOW J:   Then, you go to (b) and the word in the first line of (b) is “may”.  Then you come down to the end of (b) and there is a sentence, “If  the Contractor is dissatisfied” and the second line says “he may”.  Now, there is some significance which must flow from the use of the imperative or mandatory “shall” and permissive “may”.  Does that not suggest some particular force flows under (a)?

MR RILEY:   The extent, we say, of the force is this, your Honour, that the parties have bound themselves contractually to an alternative dispute resolution mechanism which consists of (a) and (b) and in order to pursue any dispute that may arise ‑ ‑ ‑

GUMMOW J:   Not just just consist of (a) and (b), it begins with the last words in the line above (a).  It says “shall be decided”.

MR RILEY:   Yes.  If the parties are in dispute, they are obliged to give the notice under (a) before going further, contractually obliged.  Then, if the contractor is dissatisfied, having gone through the (a) process, he may ‑ so no longer an imperative ‑  proceed to refer the matter to the principal or he may do nothing, or he may refer the matter to the courts.

BRENNAN CJ:   What do you mean “refer the matter to the court”?

MR RILEY:   He may take court proceedings.

BRENNAN CJ:   Sue for what?

MR RILEY:   Well, it would depend on what the dispute is, but ‑ ‑ ‑

BRENNAN CJ:   Well, say that it is a money claim.

MR RILEY:   Then for the money, yes.

BRENNAN CJ:   For what, the money that he claims?

MR RILEY:   Yes, or a declaration.

BRENNAN CJ:   Without reference to the decision that has been made under (a)?  It just has no effect.  If so, why does he not go straight to the court?

MR RILEY:   Well, it may have an effect, your Honour, because that would be the decision with which he is dissatisfied and he may be suing for a declaration that he is entitled to something that has been denied him by the ‑ ‑ ‑

BRENNAN CJ:   Well, what you are saying is that the decision made by the superintendent has no effect, no binding effect against a party who does not want it to have.

MR RILEY:   Yes, that is what we do say, your Honour.

BRENNAN CJ:   Even though the introductory words are “shall be decided”.

MR RILEY:   Yes.  The clause must be read, as my learned friend said, as a whole and when you go to the end, you find that it is only at the end that resort to the ordinary litigation process is precluded.  It implies, we say, that up until that time that process is available and, therefore, it is only binding if neither party is dissatisfied.

BRENNAN CJ:   Well, I understand what you put.  I just want you to understand that for my part at the moment, I am unable to read this clause as meaning otherwise than that decisions of disputes or differences under the contract are to be decided either by the superintendent under (a) or by the principal under (b) or by arbitration, full stop.  I appreciate that you are saying that is not the construction you put on it or that the other side puts on it.

McHUGH J:   Do you contend that if the contractor said, “For this piece of work, I’m entitled to $200” and the superintendent said, “You’re only entitled to $100”, that the contractor could then sue in the courts to say he was entitled to $200?

MR RILEY:   Well, he would then only need to sue for $100 because that is all that would be in dispute.  I am sorry, have I misunderstood your Honour’s question?  If part of it is resolved by the superintendent, then ‑ it is whatever he is dissatisfied with, having referred the matter to the superintendent, that he could sue for.  He would not need to sue for anything else.

TOOHEY J:   Well, he might, because there may be no dissatisfaction but he may not get his money.  What does he do then?

MR RILEY:   Well, then he must sue.

TOOHEY J:   That is right, he must sue.  But he is suing what, on the decision of the superintendent, is he?

MR RILEY:   Yes.

TOOHEY J:   And would that action be defensible on the basis that the money was not owing?

MR RILEY:   Yes, I see your Honour’s point.

TOOHEY J:   Well, I do not know that I have one, Mr Riley.  I am working my way in that direction.

MR RILEY:   The defence to the contractor’s action may involve a widening of the dispute by the principal exercising its right to resort to litigation and it would presumably, in those circumstances, do it by way of counter‑claim.  Your Honour the Chief Justice, there is authority for the proposition that we have each put to you and it is not high authority, it is mostly single judge authority, but those authorities are set out in paragraph 3 of the outline of written submissions.

BRENNAN CJ:   Yes.

GUMMOW J:   These are all cases after the modern Commercial Arbitration Acts in the various States, are they?  It looks like it; I may be wrong.

MR RILEY:   Yes.  The Northern Territory Act was in 1985 and these cases are all post‑1985.

GUMMOW J:   Is there anything in those cases which deals with any idea that the traditional view of reading these clauses rather strictly, that is to say, reading them in a way that would leave the access to the courts are open rather than restricted?

MR RILEY:   Yes, they do proceed on that ‑ ‑ ‑

GUMMOW J:   But that requires requalification in the light of the new legislation which takes a different view, or manifests a different view really, by the legislature to arbitration to that traditionally taken by the common law courts perhaps.

MR RILEY:   It does, your Honour, but we would say within this particular clause, there is a strong hint as to what is intended by virtue of the provision that appears at the very end of the clause saying it is from this moment on that you shall not go to the courts, the implication being prior to that that, of course, you can.

GUMMOW J:   Is there anything in the parliamentary materials in relation to this legislation which is of any assistance, or was it the product of any law reform initiative?

MR RILEY:   Yes, there is a short history in one of the cases and I will endeavour to pull that out.  But I can tell your Honour that the second reading speech in relation to the Northern Territory legislation was of no assistance.

GUMMOW J:   It had already come in in other States.  I can understand that.

MR RILEY:   Yes, but there was a law reform process that was undertaken and submissions made, and that history I will have to find and give to your Honour but it is in one of the cases that is the bundle that your Honour has.  I will come back to that, if I might, your Honour.  The authorities that we refer to do proceed on the basis that you would need very clear words to take away the right to refer matters to the court and that those words do not here appear and that is said in Commonwealth v Jennings ‑ I should tell your Honour there was some discussion you had with my learned friend earlier about one of the Jennings Cases being overruled, or at least discussed, in ABB.  I think that was Commonwealth v Jennings rather than Jennings v Birt.  I did not propose to take your Honours to those cases and I will not, but I invite your Honours to read them.

Assuming, your Honours, that there is, in the clause with which we are dealing, an option to proceed either in the courts or through this alternate dispute resolution method, then it is our submission that such an agreement cannot constitute an arbitration agreement for the purposes of the Commercial Arbitration Act.

TOOHEY J:   But, why is that, Mr Riley?  Is it because of the interposition of the two steps to which paragraphs (a) and (b) refer?

MR RILEY:   Yes, because it is based on this, your Honour, that until someone elects to do so, there is no agreement to do so, basically.  And that is a proposition that comes from the Full Court in Western Australia which I will take you to now.  Two of the judges in ABB Power Plant Ltd v Electricity Commission ‑ various reasons are given and it is open to choose any one of them.  Basically, they come back to the proposition that if one party has a right to elect to proceed to arbitration until they, in fact, make that election, there is no agreement to proceed.

TOOHEY J:   Well, that is one way of looking at it, I suppose.  The other way might be to say if two parties agree that their disputes will be decided by arbitration but, before the matter can be referred to arbitration, there are some other steps that can be taken such as provided for in paragraphs (a) and (b), that does not mean that there is no arbitration agreement in terms of the definition in section 4.

MR RILEY:   These judgments that I am about to take your Honour to in fact say precisely the opposite.  They say that really until there is an actual referral, an actual election, then there is no agreement to arbitrate but rather an agreement providing an option to arbitrate at some later time.  Perhaps I can take you to them, your Honour.  Before I do that, the discussion of the history appears in Australian Shipping Commission v Kooragang Cement Pty Ltd (1988) VR 29 and it appears at page 33.

TOOHEY J:   Is that on your list?

MR RILEY:   Yes it is No 6 on our list, your Honour.  If I could then take your Honours to Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 and it is No 11 on our list. That is a judgment of the Full Court in Western Australia. The leading judgment is that of Justice Ipp with whom Justices Pidgeon and Franklyn agreed. If I can take your Honours to 46, 47. In that case, the court was not dealing with the clause that is presently before this Court. It was similar in kind but not the same, and it appears at the top of 46. Then at the foot of 46 in the final paragraph there, Justice Ipp said this:

In any event, in my view, cl 23(a) does not constitute an “arbitration agreement” within the meaning of s 53(1) of the Commercial Arbitration Act ‑

that is the stay proceeding ‑

Clause 23(a) merely confers a right upon each party to elect to give notice of the dispute.  Until that election is made there is no agreement to arbitrate ‑

and his Honour refers to Hammond v Wolt and Woolworths v Herschell, both cases included in the bundles that your Honours have. 

In Hammond v Wolt Menhennitt J described the clause under consideration in that case as an option to refer disputes to arbitration and not an agreement to submit disputes to arbitration.  In Brunswick NL v Sam Graham Nominees Pty Ltd I suggested that it would be preferable to describe the right given to both parties by such a clause as a right to elect to submit a dispute to arbitration.  This semantic difference was not intended in any way to be a departure from the general principle espoused by Menhennitt J (at 116) where his Honour said:

“In my opinion, it is also the position that, under disputes cl 23[sic], all the parties has is an option to have differences referred and there is no agreement to submit until the option has been exercised.  The prime reason for this conclusion is, I think, the presence of the word ‘may’ in the provision for giving notice of the dispute to the opposite party ‑

GUMMOW J:   But clause 23(a) is set out at the top of page 46, is it?

MR RILEY:   Yes.

GUMMOW J:   Well, it is a different clause, is it not?

MR RILEY:   Yes, it is a different clause.  We are dealing with different clauses throughout these proceedings, your Honour and following this, we do find in the ABB Case a discussion of the clause that we have, but again, that is a discussion on a matter not presently before this Court, but they tie the two together.  We have, and I think it is conceded by both parties, no authority directly on this point.  So we have to resort to authority which is not directly on the point.

GUMMOW J:   Well, it cannot be authority.

MR RILEY:   Well, yes, I accept that but to obtain guidance from cases ‑ ‑ 

GUMMOW J:   Guidance as to what though?

MR RILEY:   As to when the parties have an election, the right to elect between different alternatives, whether there is an agreement for the purposes of the Arbitration Act ‑ ‑ ‑

GUMMOW J:   When you say when the parties have an election, that rolls up in it a submission as to what this particular clause means.

MR RILEY:   And there was an election here.  If I can just read on in that quote:

It is entirely in the option of the parties as to whether or not they give notice and until they do nothing is submitted to anyone.  This conclusion is reinforced by the absence of any language directly referring any dispute to anyone...” -

which is the situation that we have and his Honour goes on to say he:

would, with respect, adopt that reasoning save for the substitution of the term “option” by “right of election”.

The most recent consideration of the question appears in the New South Wales Court of Appeal in ABB Power Plant Ltd v Electricity Commission of NSW, which is case No 6 in the bundle provided to your Honours by my learned friend.  In that case, the court was dealing again with a clause which was not NPWC 3 45 and was different from that clause in that, within the clause that the court was there dealing with, there was no right, or so the court held, to refer matters to litigation.  The only alternatives open were to do nothing or to go on to arbitration.

We point out that distinction in the clauses because that reflect upon the comments that their Honours made in relation to this case, the judgment in this case before the Northern Territory Court of Appeal.  Their Honours there disagreed with the judgment in the Court of Appeal but they did so without, it seems, being alive to the argument that the clause before the Court of Appeal preserved a right to litigate.

If I can take your Honours then to the judgments.  Justice of Appeal Handley, at page 3, said this of relevance for our purposes:  he notes that there are many clauses of different kinds, and then he says, two lines from the top:

It appears however that many of these cases have been decided without full consideration of all the relevant authorities.  Cases where a dissatisfied party has a choice between arbitration and litigation have been decided without reference to the decision in Helby v Matthews where the House of Lords held that an agreement for the hire of goods with an option of purchase was not an agreement for the purchase of goods within s 9 of the Factors Act 1889 and that such an agreement only arose when the hirer exercised the option.  It seems to me that it may equally be said that where a party under the relevant clause has an option to litigate or arbitrate there is no agreement to arbitrate until the option is exercised.

And Justice Sheller was to like effect, but in a more detailed consideration and with some alternative arguments.  Firstly, at page 7, at the very foot of page 7 of his judgment he referred to the judgment of Justice Giles in Turner Corporation, and he extracts a passage from that at page 8, where his Honour Justice Giles disagrees with the reasoning in Hammond v Wolt.  He says, about six lines down:

Why should that be so?  If the parties have agreed that disputes are to be referred to arbitration should one of them so elect, that is aptly described as an agreement to refer the disputes to arbitration. 

And then commenting upon that and the rest of the passage, Justice Sheller says:

With the greatest respect I have difficulty with this line of reasoning.  If the parties have by agreement obliged themselves to refer disputes arising out of the agreement to arbitration by a stipulated procedure there is an agreement to refer such disputes to arbitration.  But it does not follow that, if the parties agree that one or both may elect to refer a dispute to arbitration, either party is, prior to any election, contractually obliged to do so.  As his Honour acknowledged, historically the rationale for the Court’s intervention to stay proceedings where the parties have agreed to refer their disputes to arbitration is to keep the parties to their bargain:  Huddard Parker Limited v The Ship Mill Hill.  I can see no obvious reason why the legislature should empower the Court to frustrate the bargain by denying a party its right to elect not to proceed by arbitration but curially.

And he develops that argument a little more ‑ ‑ ‑

TOOHEY J:   Just before you move on from page 8 of Justice Sheller’s judgment, Mr Riley, is he not there, in the passage you took us to, drawing a distinction between an agreement to refer disputes to arbitration, which may ‑ I am interpolating here ‑ constitute an arbitration agreement for the purpose of the Act, and a rather different question, whether, if the parties have agreed to refer their dispute to arbitration, one party is precluded from bringing action in a court, in respect of the dispute?      In other words, could you not have an arrangement, to use a neutral word, between the parties that amounted to an arbitration agreement for the purposes of the Commercial Arbitration Act but which did not preclude one party from bringing action, rather than proceeding to arbitration?

MR RILEY:   What I read him to be saying, your Honour, is that it is that you have an arbitration agreement where the parties have obliged themselves to refer disputes to arbitration, but if there is an element of election there, prior to the election, there is no such agreement, for the purposes ‑ ‑ ‑

GUMMOW J:   No agreement in the first place for the purposes of the definition.

MR RILEY:   Yes.

TOOHEY J:   Yes, that might be reading quite a bit into that passage, perhaps, because his Honour was not necessarily directing his attention to that aspect of it.

MR RILEY:   Perhaps he makes it a little clear in the next passage I take your Honour to, and if he does not your Honour might bring me back to that.  At 16 and 17 ‑ ‑ ‑

GUMMOW J:   What about page 13?  I am sorry, I have taken you to the wrong one.  Page 13 is Mr Justice Cole’s ‑ ‑ ‑

MR RILEY:   Yes, in fact, he disagrees with Justice Cole, and the approach taken by Justice Cole, and he says so.  In face, he says that at the page I have taken your Honour to.  He says, in the second paragraph, at line 3:

As I have said I agree with the conclusion arrived at by Giles J in Allied Constructions ‑

and that is the approach adopted by Justice Cole ‑

and the particular significance his Honour attached in that case ‑

and then he goes on to deal with this particular case, and he says, in the paragraph commencing:

There has traditionally been difficulty in categorising the nature of a valid option.

And he sets out what comes from Greig and Davis, and that is that an “option is in fact a conditional contract”, or, alternatively, “an irrevocable promise to keep the offer open”.  And he then comments that on each of those interpretations of an option, there is not an arbitration agreement for the purposes of the Act.  He says:

According to the first theory it might be said that there is a conditional contract to refer disputes to arbitration and according to the second theory that there is an irrevocable offer to do so.  In a clause such as that under consideration in Hammond v Wolt the parties agreed that, in the event of dispute as to any matter arising under the agreement, one might, if it so wished, refer the dispute to arbitration.  Importantly the contract did not oblige either party to do so.  In one sense, as Giles J has pointed out, if in fact one of the parties referred the dispute to arbitration the other party was bound to this procedure by force of the contract.  Even so to say that the parties have agreed to refer the dispute to arbitration at the time the agreement is made is not, in my opinion, accurate.  What the parties have agreed, in the example given, is that either one may if it so decides and by taking the appropriate steps refer the dispute to arbitration.

And then further down he discussed ‑ and I will not read it to your Honours.  In the next paragraph, about 10 or 12 lines from the bottom, commencing, “In terms analogous to”, he deals with the offer, and says that is not an arbitration agreement either, it is an offer that is open to be accepted at a later time and, until acceptance, does not amount to an arbitration agreement.  Of course, the third member of the court was of the contrary view, that if ‑ ‑ ‑

GUMMOW J:   Why should we follow that?

MR RILEY:   For the reasons that their Honours expressed.  Justice Cole did not, in the course of his reasons, address the issue of an option at all.  He simply said, “If you’ve got an agreement that at the end of the day someone may refer a matter to arbitration, then that is an arbitration agreement for the purposes of the Act.”  He did not look at the ‑ ‑ ‑

GUMMOW J:   What is wrong with that?

MR RILEY:   Because we say it takes too simplistic an approach and, effectively for the reasons that Justice Sheller and Justice Handley ‑ ‑ ‑

McHUGH J:   But you do not get much use out of their judgments in this case, do you, because they are all agreed that this was a code and there was no option?

MR RILEY:   Yes, and the reason they do that is because the clause that was before them, and, indeed, even when they looked at our clause, they assumed that the only alternative open was arbitration, either you do not proceed, or you arbitrate, but in their clause, and when they considered our clause ‑ in their clause, there was no reservation of a right to proceed before the courts.  In our clause there is such a right and it must have an effect, it must have some meaning, in our submission.

McHUGH J:   No, but your difficulty, it seems to me, is that you start with the opening paragraph that , “All disputes or differences....shall be decided as follows”, and when you get down to (b), which says:

If the Contractor is dissatisfied with the decision.....he may.....submit the matter ‑

to the superintendent.  You say that has also got to be read, that if the contractor is dissatisfied with the decision of the superintendent he may take the matter to the court.

MR RILEY:   Yes, we do say that, your Honour.

McHUGH J:   Well, it is a fairly difficult argument, I think.

MR RILEY:   With respect, your Honour, if we are not right, then there is little point in those words that appear at the end of the clause that say, “After this time you shall not go to the courts”.

McHUGH J:   No.  There is nothing unusual or unexpected in the use of those words, because the opening words of the clause direct you to a procedure, and it says that you shall not institute proceedings unless and until the arbitrator has made his award.  It is all part of one and the same thing.  It starts off as a channel and you are directed along the channel, the steps along the channel and when you get to the arbitration proceedings - - -

MR RILEY:   Except, your Honour, the part the precludes access to the courts, which appears at the bottom of 37 of the appeal book, is that, “Where a notice is given”, then you lose your right.  It is not until then.

McHUGH J:   I appreciate that.  But you have got to say that if a decision is submitted to the superintendent as to whether or not work was done, and he holds work was not done, you can then go off to the court and get the court to hold that it was done.

MR RILEY:   It remains open, yes, your Honour, and it would take, we say, clear words, specific words, to take away that right.  If we be right about all of that - and I accept that there is quite some doubt about that, this is a clause which preserves the right to elect between arbitration and litigation - then this is not, in our submission, an arbitration agreement and section 48 has no role to play because you have to be a party to an arbitration agreement for that to take effect.

BRENNAN CJ:   That exclusion ‑ if I can come back again to the problem that troubles me, Mr Riley ‑ of litigation in relation to arbitration is perfectly explicable by reference to what happens under (a) and (b).  If under (a), the decision is the end of it, then you would go to the court to sue on the decision.  If under (b), the decision is the end of it, you go to the court to sue on the decision.  But if you start arbitration proceedings, you cannot go near the court at all until you get a decision from the arbitrator, and then, and then only, do you go to the court and sue on the award.

MR RILEY:   The effect of that interpretation, your Honour, would be that the principal, up until after the time of (a), has no rights at all, has no recourse to any ‑ he is precluded from pursuing any legitimate grievance he may have, because he has no rights.  He cannot take the matter further under what we have called the alternative dispute resolution clause, he cannot refer it on, and he cannot go to the courts, and we would say that is not the intention of the parties to preclude ‑ ‑ ‑

BRENNAN CJ:   That depends on who the superintendent is.

MR RILEY:   It does, your Honour, but it cannot be guaranteed that the superintendent and the principal - we are talking of a contract with general applications.  Indeed, in this case, the principal was the National Parks and Wildlife; the superintendent was an officer of the Northern Territory government, a transport and works officer, so, not necessarily in the same camp.

BRENNAN CJ:   I presume National Parks and Wildlife wanted the Northern Territory Government to be their agents for this construction.

MR RILEY:   Yes, but it is one thing to say that they are an agent.  It is another thing to say that they are within the same camp, necessarily, or that the principal will not be dissatisfied with what a superintendent might do.

BRENNAN CJ:   Mr Riley, is it right to say that the proposition as put to you by Justice McHugh corresponds with the decision that was reached by Justice Giles in Allied Constructions?  It is No 4 in the papers provided by ‑ ‑ ‑

MR RILEY:   Yes I have it here, thank you.  Justice Giles has the two judgments of Allied Constructions and ‑ ‑ ‑

BRENNAN CJ:   I am going largely on the interpretation of that by Justice Sheller at pages 4 and 16 of his judgment in the ABB Case.

MR RILEY:   There are two judgments of Justice Giles, there is Allied Constructions and then there is a later judgment of Turner Corporation v Austotel Ltd, which is No 10 in that list.  The second of those judgments, your Honour, is probably closer to the point that we have in this particular case, but in Allied, as in the other cases, the difference between what was there confronting the court and what we have confronting the court is this question of whether there is a right to sue or not, and in Allied there was, again, not that preservation of the right that I rely upon for the interpretation of clause 45 of our contract.

BRENNAN CJ:   But the reason why there was no preservation was because of the introductory works in Allied of “shall be determined”, was it not, just as there is here, “shall be decided”?

MR RILEY:   Yes, and you could more readily draw a conclusion where those words appear, and there is no subsequent reference to, “now you lose your rights to litigate”; that this is an arbitration agreement, than you can with our clause.  That is the distinction  between the two, we say.

TOOHEY J:   Mr Riley, the operation of clause 45 has been discussed between Bench and Bar, I think, entirely on the basis that it is the contractor who is seeking some sort of payment, but how does the clause work if, for instance, the principal claims that there has been a delay in the performance of the work, and that there is money owing, not to the contractor, but to the principal?

MR RILEY:   Your Honour, that was the point I was trying to make earlier.  The principal has no rights under the clause, and that is why - one of the reasons we say there must be a preservation of the right of the principal to approach the courts, because ‑ ‑ ‑

TOOHEY J:   When you say “approach the courts”, you mean sue for damages?

MR RILEY:   I mean, sue for damages, yes, because if the principal does not have that right then the principal is stymied.  There is nowhere for the principal to go. 

TOOHEY J:   Do you use that then as a step in the argument that this is not an arbitration agreement?

MR RILEY:   Yes, your Honour.

TOOHEY J:   Yes, I see that.

MR RILEY:   So, your Honour the Chief Justice, I was dealing with Allied, I am not sure whether I answered the question.

BRENNAN CJ:   I think you have answered the question.

MR RILEY:   Just passing by Allied, as I do, I should note that Justice Giles there drew some support from the decision of the Full Court in Western Australia in Brunswick v Graham, and some words that fell from Justice Ipp in that case.  Justice Ipp clarified his views in the passage that I read to you in the later case of Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd, and it is inconsistent with the interpretation that Justice Giles put on what Justice Ipp had earlier said.

Your Honours, if clause 45 does constitute an arbitration agreement, then it is our submission that it does so only in the latter stages, that is, post 45(a) and 45(b), and we say that there is a clear distinction drawn between the earlier steps that are to be found in (a) and (b), and those which relate to arbitrations, and so the end result of this submission is that the (a) and (b) procedures are not in an arbitration but rather are outside of the arbitration.

We rely upon some authorities that we have mentioned in our written outline of submissions.  In particular, and we rely upon the work of Dorter and Sharkey “Building and Construction Contracts in Australia”, 7088 and 7144.  At 7088 the learned authors refer to, at the top of the page, section 48 and then they proceed to distinguish between the two parts of the clause.  They say:

However, the tardy claimant should not glibly rely on these sections to overcome his or her own shortcomings.  First, there is the distinction between the different levels in the dispute process.  It is submitted that the better view is that only the notice requiring the matter at issue to be referred to arbitration has sufficient nexus with the arbitration to qualify as an “act or proceeding ... in relation to” the arbitration: s48(1).  Certainly the earlier references to the superintendent, principal or something other than arbitration do not qualify as an “act or proceeding in” the arbitration.

It can be argued that such earlier levels of dispute lead to the later arbitration, but the drafting of the whole arbitration (as distinct from settlement of disputes) clause must be such that such earlier steps go hand‑in‑hand with the arbitration ‑

and that is the test that we find in Jadranska ‑

It is contra if the drafting separates them ‑

and Babanaft is referred to ‑

It is submitted that the drafting of the Australian contracts such as AS 2124 ‑

which I think was the contract in ABB ‑

and NPWC, especially with their different consequences at each stage, and the Australian cases above are such that they are in the separated category.  In respect of NPWC this situation has been confirmed ‑

in the case that is now before your Honour.  Then they express similar sentiments at 7144 in the second paragraph. 

Our second submission to your Honours is that to the extent that an arbitration agreement is created by clause 45 of the agreement, it does so only upon reaching the stage of notice requiring referral to arbitration having been given.  Prior to that time there is no step towards arbitration.

The final issue we wish to deal with, and the one which my learned friend concentrated on, is whether or not these steps can be regarded as being in relation to an arbitration as opposed to simply being within an arbitration.  It is our submission that reference of such matters to the superintendent cannot be said to be a step in relation to an arbitration.  We invite your Honours to distinguish between the times fixed for doing acts which relate to the commencement of the arbitration and the times for doing acts which, although they precede arbitration, do not relate to the commencement of the arbitration.  By way of example, there is a requirement under clause 48 of the contract.  Your Honours do not have the contract before you but you will find the clause set out in the judgment at first instance in appeal book 16 which requires a lodgment of a claim by a contractor within a certain time.  Indeed, that clause is the same clause that is discussed in Jennings v Birt where the Court there said it is not part of an arbitration agreement; it is not sufficiently connected; it does not go hand in hand.

BRENNAN CJ:   Do we have the contract in the Court file?

MR RILEY:   I expect not, your Honour.

GUMMOW J:   Was it an exhibit at the trial?

MR RILEY:   At the trial it was, yes.

GUMMOW J:   It should be here, then.

BRENNAN CJ:   Do you have a copy available by any chance, Mr Riley?

MR RILEY:   Not with us, but we can after tomorrow - yes we do.  I thank my learned friend for that.  Is it in order to leave this with you?

BRENNAN CJ:   Yes, thank you.  That can be put with the Court file, Mr Bennett?

MR BENNETT:   Yes, certainly, your Honour.

BRENNAN CJ:   Yes, thank you.

MR RILEY:   In England, the courts have dealt with agreements, said to be arbitration agreements, where the dispute resolution clause and the subsequent arbitration clause are in the same clause.  They have also dealt with it where they are in quite separate clauses which is the situation in the case of Jennings v Birt, the case that my learned friend referred to.  But for the manner in which the Court of Appeal dealt with the matter in England, I refer your Honours to The ”Medusa” which is a case in our list, number 16, and I will not take your Honours through it - a passage from Lord Justice Nicholls at page 334 in the left‑hand column at the foot of the page.

In relation to section 48, and how wide that section goes, we refer your Honours to the judgment of Justice Tadgell in Kooragang, which is number 6 in our list - again, I will not take you to it - but where his Honour, at the passage at page 36, the passage identified in our written submissions, talks of the power being limited to the commencement of arbitration proceedings, and we say that that really is the effect of section 48(1) when read with section 48(3), for the reason that your Honour Justice McHugh raised with my learned friend earlier on.  Although 48(1) is expressed quite widely, it must be read down, in our respectful submission, to accord with what appears in 48(3), and we say that it would be incongruous if the Court could extend time at an earlier point in time without looking at the same requirements that appear in 48(3).

GAUDRON J:   It is almost inevitable that that requirement would be taken into account in any application.  No court is likely going to say “We’re going to extend time notwithstanding the injustice”, if it is a discretionary power.

MR RILEY:   Yes, you would expect so, your Honour, but it is, in fact, an express requirement now in 48(3).

GUMMOW J:   Yes.  So?  You say that is an encouragement to injustice in other circumstances?

MR RILEY:   No, we say it is an encouragement to say that in no other circumstance can you extend time.

TOOHEY J:   :   I have some difficulty with that.  I would have thought there was an argument that subsection (3) really works against you because if it prescribes criteria in relation to a particular matter, namely extending the time within which arbitration proceedings may be commenced but does not otherwise prescribe criteria, it tends to suggest that the power in section 48(1) goes to other matters as well as the time for commencement of proceedings.

MR RILEY:   We would say, your Honour, that it surely cannot be intended - the point that was just made to me by Justice Gaudron - that in those earlier times, in all those other proceedings, undue hardship is not a matter to be taken into account.

TOOHEY J:   That may be.  My point is a slightly different one, or my inquiry is a slightly different one.  It is, really, to ask you why section 48(3) singles out an order of a particular sort if subsection (1) did not contemplate that there may be other orders that can be made under the section.

MR RILEY:   Yes, it is a matter of which way you approach it, your Honour.

GUMMOW J:   That is right.  It is a double‑edged sword, that is true.  I did ask Mr Bennett about the time for commencement of proceedings.  There is a provision in section 3 but I am not sure how applicable it is here, because it seems to be in a section dealing with repeal, transitional and application positions - it is section 3(5) - and it is expressed to be for the purposes of the section only.  I have not, myself, been able to locate any other section which identifies when proceedings are said to have been commenced.

MR RILEY:   I am in a similar position to your Honour, and I heard my learned friend say that he is in the same position, as well.

TOOHEY J:   That provision might have some persuasive value or it may be that you are simply driven to decided cases in which this matter has been discussed, if it has been.  The point, I think, remains, Mr Riley, that the doing of an act or taking a proceeding in the language of subsection (1) appears to be wider or to cover a wider range of matters than the time for commencement of proceedings dealt with expressly in subsection (3).

MR RILEY:   I would accept that, your Honour and, at face value, that is so.  We would say, though, as I think I have already said, that you then, having discovered subsection (3), need to go back and revisit subsection (1) and read it subject to, as it indeed expresses itself to be, subsection (3) and we would go further and limit it to the scope of subsection (3).  Indeed, that is what the Court of Appeal did in the decision appealed from and they discussed it at page 47 of the appeal book.  He described it as setting the outer limit in a paragraph commencing at about line 17 going through to line 25.

The Court of Appeal also considered the relationship between our section 48 and the English section 27 and concluded that really the only difference between them was that in our section one can extend times which are in an arbitration, whereas under section 27 of the English Act, you could not do so.  But apart from that, and they say this in pages 50 through to about 53, that the effect of the sections is pretty much the same apart from that distinction.  It is on that basis, and have analysed it as such, that they rely upon the English decisions, in particular, Babanaft, for the conclusion that the (a) and (b) steps are sufficiently removed from the arbitration process as to be not in relation to it. 

So, in our submission, the steps of making a claim to the superintendent and referring it on to the principal are steps which do not have a sufficient nexus with the arbitration to be regarded as being in relation to an arbitration and, to adopt the approach of the court in Babanaft,  they do not commence or necessarily lead to the commencement of an arbitration, and that is what is required in order to give them that nexus with the arbitration itself.  We therefore say, your Honours, that that is an end to the matter if that be so.

There are only two other matters I would like to refer to: Pittalis v Sherefettin, a case that my learned friend referred to and relied upon, we invite your Honours, when considering that case, to regard it in light of the fact that there was, in that case, no right of election as between litigation and arbitration.  There was simply a right of arbitration alone.  In the other case that he specifically referred to of Rheem v FAC, that case was criticised in Dorter and Sharkey at page 7144.

GUMMOW J:    Yes but they were writing on the basis that the present appeal was correctly decided below - - -

MR RILEY:   Yes, if your Honour reads the release ‑ ‑ ‑

GUMMOW J:   It is one of these loose leaf services, is it not?  It is a moving panorama.

MR RILEY:   Yes, of course it is.  Your Honour is quite right.  But they formed that conclusion, your Honour, before the Northern Territory case, this case came to light and they have tacked on that as a confirmation of their tentative views.  The important thing in Rheem is that the matter was not discussed at all.  It was just assumed.  The parties agreed that the section 45(b) step which is the one that was before that court was some other step to commence arbitration proceedings and proceeded on that basis.  So the issues with which we are here concerned were not addressed there and, of course, similarly, before the court on appeal.

TOOHEY J:   What do you think we should make of the headnote to Rheem, Mr Riley, just before the second lot of numbering?

BRENNAN CJ:   Rheem; at first instance.

TOOHEY J:   Yes, that is Rheem before Justice Carter.

MR RILEY:   I am sorry, Rheem?

TOOHEY J:   I was asking you what you should make of the Latin expression in the headnote.

MR RILEY:   I am looking at the wrong Rheem, your Honour, mine does not have any Latin in it.

TOOHEY J:   It is only by way of light relief, Mr Riley, do not worry about it.

MR RILEY:   I am sure it is going to give me some light relief if I can find it, your Honour.

McHUGH J:   I think the editor is serious.  If you look down at the editor’s  note down at the bottom of the page, it seems to suggest he thinks it was the ‑ ‑ ‑

MR RILEY:   I have no idea, your Honour.  Those are the submissions, thank you, your Honour.

BRENNAN CJ:   Thank you, Mr Riley.  Mr Bennett.

MR BENNETT:   Your Honours, dealing with my friend’s section A, can I just say this:  we do not regard this proposition as being decisive of the present appeal but it is useful to consider it, and perhaps one needs to step back a moment and start looking at the section in the absence of authority.  Suppose one has an arbitration clause - if I may prejudge the question by describing it that way - which says this:  if a dispute arises, the contractor shall have an election, and within 14 days after notice of the dispute is given by someone, given by either party, the contractor has the election to arbitrate or litigate.  Assume the clause says that.  Assume that one day after notice - so while the 13 days is running and the contractor has still got his election - the other party, the principal, says “I am going to litigate” and goes to the court.  Can one really imagine that a court is going to say, when there is an application by the contractor for a stay, “The election has not been exercised yet so there is no arbitration agreement yet, therefore, of course, there cannot be a stay and we can litigate and you can litigate, and if the court is as efficient as the New South Wales commercial causes division and able to decide disputes in less than 14 days, it can resolve the whole dispute before the contractor has his chance to arbitrate”.  With respect, your Honours, that just cannot be right.

Assuming that that cannot be right it must follow that where a clause gives one party the right, the election if you like, to arbitrate after a series of steps that while one is moving towards those steps, while one is moving along the route laid down by the contract, the other party must be precluded from litigating.  I am sorry, I put that too highly.  The other party must be subject to an application to a stay if it attempts to litigate and that really is all that is relevant here.

There are lots of fascinating questions one can ask and your Honours asked some of them about what happens if at various stages along the track different parties try and make different sorts of application and examples of the $100 and $200 were put and one could work though those and come out with different solutions, but what is relevant for present purposes is that at least, so far as the principal attempting to litigate prior to the contractor having raised his election is concerned, the principal must be subject, if the principal does that, to the stayed proceedings of the Act and in that sense there is an arbitration agreement.

That is all that Pittalis says and some of the other cases and it simply must be right.  The way my learned friend seeks to use - some of the cases would suggest that in some circumstances that is not so - is to say, “Oh, that demonstrates that really (a) and (b) are not an arbitration agreement and not part of an arbitration agreement and so on.”  But, of course, they are because they are steps in a process which give rise to an election and one must be entitled to get a stay, if that is the relevant remedy, so long as the other party has the right to an election.

It may well be different from the contractor’s point of view.  If the contractor chooses to litigate after step 1, then, of course, one has a different issue.  One has then to reconcile the problem your Honour the Chief Justice has referred to of the words, “shall be decided” against the expressio unius problem arising out of the fact that no one is allowed to litigate after the matter has been referred to arbitration.  One has to weigh those and come to a decision, but the decision does not matter for this case.  What does matter for this case is that the whole of the clause is, at least in the sense I have referred to, an arbitration agreement.

That really deals with the whole of the way my friend seeks to use the submissions in relation to A.  I should just briefly refer to a couple of the cases my learned friend took your Honours to.  In relation to ABB, we are in agreement about what Mr Justice Cole says and we submit his Honour is correct.  We are in agreement about what Mr Justice Handley says and we submit his Honour is incorrect.  The question is what Mr Justice Sheller said and I may I just take your Honours to various parts of his judgment to show the way his Honour ultimately dealt with the matter. 

His Honour starts, after having referred to a number of the cases, at page 8.  Do your Honours have this?  It is case number 6 in our volume.  It is the middle judgment, page 8.  His Honour starts by setting out what Mr Justice Giles said which we, with respect, support and what Mr Justice Giles says, if your Honours go about 8 lines into the quotation against the words, “Why should that be so?”:

If the parties have agreed that disputes are to be referred to arbitration should one of them so elect, that is aptly described as an agreement to refer the disputes to arbitration.  To treat an agreement of that nature as an arbitration agreement for the purposes of s53 of the Act is consistent with the evident objective.....indeed, to exclude agreements of that nature.....might leave an arbitration consequent upon a notice of referral.....unregulated by the Act -

for various reasons.  Of course, there may, as I have indicated, be a difference between the position of the two parties in relation to who can get the stay and who has not.  There may have been an agreement by one to refer to arbitration if the other elects, but not an agreement by the other to refer to arbitration.  So, in the example given, the contractor might be able to litigate whereas the principal cannot.  His Honour then says in the middle of the page:

With the greatest respect I have difficulty with this line of reasoning.  If the parties have by agreement obliged themselves to refer disputes arising out of the agreement to arbitration by a stipulated procedure there is an agreement to refer such disputes to arbitration.  But it does not follow that, if the parties agree that one or both may elect to refer a dispute to arbitration, either party is, prior to any election, contractually obliged to do so.

That is a condensed sentence where the word “either” creates a little bit of an ambiguity.  We would say, one party is and one party is not or, at least, one party is conditionally and one party is not at all. 

As his Honour acknowledged, historically the rationale for the Court’s intervention into stay proceedings where the parties have agreed to refer their disputes to arbitration is to keep the parties to their bargain.  I see no obvious reason why the legislature should empower the Court to frustrate the bargain by denying a party its right to elect not to proceed by arbitration but curially.

That is right.  If one party has the right to litigate or the right to arbitrate and may elect, clearly that party can elect to litigate.  That is all his Honour is saying.  His Honour is not suggesting that the other party cannot obtain a stay at an earlier stage.  Then, further on in his Honour’s judgment at page 11 at the top of the page his Honour says:

In the present case Giles J was able, “without going to the wider question of whether an election to refer a dispute to arbitration can amount to an arbitration agreement even when the party -

I stress those words -

retains the ability to take curial proceedings,” to conclude that there was an arbitration agreement within the meaning of the Act.  As will shortly appear I agree with the conclusion his Honour reached and his reasons for it.  However in the light of the way that Cole JA has preferred to address the question raised by this appeal it is desirable that I say something more about a clause which does no more than give one or both parties an option -

His Honour then goes on to discuss this case and like Mr Dorter he got there before your Honours and at page 16 his Honour says this:

Unfortunately their Honours did not deal with the closely reasoned judgments of Giles J in Allied Constructions and in Turner nor with the decision of the English Court of Appeal in Pittalis v Sherefettin.  As I have said I agree with the conclusion arrived at by Giles J in Allied Constructions and the particular significance his Honour attached in that case to the opening words of the clause under consideration to the effect that all disputes or differences arising out of the contract should be determined in the manner thereafter described.  Those words led to the conclusion that the parties had agreed to refer present or future disputes to arbitration.

Subject, of course, to certain conditions.

Similar words were to be found in the clause under consideration by the Full Supreme Court of the Northern Territory but the Court did not pass upon their significance.  With the greatest respect I am not persuaded by the judgments in that case that there was not in the present case an arbitration agreement -

ie there was an arbitration agreement.  Then his Honour goes on to the familiar.....problem to wit the question of what is an option, and at the bottom of page 17 his Honour says:

It is unfortunate that the choice of one party may be pre-empted by the decision of the other but that flows from the language chosen by the parties.  If the parties wish to avoid this they can do so by making it plain that one or all parties are obliged by the contract to refer disputes to arbitration.  However in this case it is unnecessary finally to resolve this question.

So he leaves that part open.  And then finally in his conclusion at page 20 his Honour says:

In my opinion GC 46 establishes an agreed code for resolving disputes of the kind described between the Contractor and the Principal.  The first step is the furnishing in writing to the Superintendent of details of the party’s claim.....and a request to the Superintendent to make a decision and the second, in the three circumstances mentioned, the reference of the dispute to arbitration.  The first step in this procedure is described in the language of obligation, “shall”.

And he goes on to talk about the “shall” and the “may” and then he agrees with his Honour’s summary at page 21:

“The dissatisfied party, if it wished to do something more could refer the dispute to arbitration.  Either party, if the Superintendent failed to make a decision within twenty-eight days, could let things rest until a decision was made, or could refer the dispute to arbitration.  The claiming party, if the responding party did not furnish to the Superintendent its reasons for rejecting the claim, could again let the matter rest.....and a decision was made or refer the dispute to arbitration.  Reference to arbitration either takes the dispute to the next step if the Superintendent has given a decision, or provides a means of overcoming a failure of the first step in the process.  I do not think that cl 46.2 so far as it says the dispute ‘may be referred to arbitration’ is intended to give a choice between curial litigation to resolve the dispute, on the one hand, or referring the dispute to arbitration, on the other hand.  That, it seems to me would not be consistent with the scheme -

et cetera, and then he says:

that the appeal should be dismissed with costs.

Your Honour, we submit that is closer to what we submit than to what my learned friend submits.

I should mention very briefly the passage in Allied which deals with this question as well. That is case No 4 in the volume. Again, at 59D there is reference to the words all “disputes or differences shall be determined in the manner set out”. What follows is a machinery giving effect to that agreement. At page 60 midway between D and E his Honour says:

I would respectfully question whether describing the parties’ entitlement as an option necessarily means that there is no arbitration agreement, particularly if an option is to be regarded as a conditional contract.

That is the point I started with.  Then on the following page, page 62, his Honour refers to Pittalis and sets out an extract. In particular, at 63E, he has a quotation from Lord Justice Fox in Pittalis which I think I took your Honours to, which his Honour cites with approval.  Finally, as your Honour the Chief Justice said to my learned friend, on page 65 Mr Justice Giles specifically refers to the distinction between the two contracts and says at C

The arbitration clause was again very different from GC 49.1, particularly in the absence of any requirement that disputes “shall” be determined in the manner for which it provided.

Then he at E concludes that it is an arbitration agreement.

In relation to section B of my friend’s submissions, we are sufficiently at issue.  We would invite your Honours not to follow what was said by Dorter and Sharkey.

GUMMOW J:   Could I just ask you, Mr Bennett, what do you say about the point in construing 45 of the agreement that it does not cope with the situation where the party making the claim is the principal rather than the contractor?  It is said that that threw light on construction.

MR BENNETT:   Your Honour, it would seem that if the contractor is absolutely passive at all times and there is a dispute in that the contractor does not agree but he takes no other steps, the principal must be entitled to litigate subject to the right of the contractor to seek a stay under section 53 if the contractor starts the process moving.  So the contractor has the option if the principal seeks to litigate or in any way raises a dispute to go through those steps.  If the contractor chooses not to, the principal just has the right to litigate.

GAUDRON J:   In practical terms, however, it would be a rare event, would it not?  The principal would simply have withheld the moneys?

MR BENNETT:   Precisely, your Honour.

GAUDRON J:   It is difficult to say what is what without recourse to the entire contract, is it not?

MR BENNETT:   Yes, your Honour.  Clause 46 of the contract specifically preserves the principal’s rights, (a) to set off, and (b) to litigate.  So it is dealt with there.  But the only time it is really going to arise is, I suppose, either if the principal makes the mistake of paying too readily in circumstances where there is no estoppel or if there are gross delays which give rise to set‑offs which exceed the amounts involved.  Normally of course, it will be.....attention.  That is the assumption which clause 45 makes.

As I say, we are at issue in relation to B.  We would invite your Honours not to follow what is said in Dorter and Sharkey, although we note incidentally that at page 7144 Dorter and Sharkey do say:

The general view is that therefore it is not open to the principal to pursue a dispute after the superintendent’s initial decision on a claim.

The assumption being that one is moving towards an arbitration and the contractor has set in motion its various elections under the clause and at that stage the principal cannot himself do anything about it.

In relation to section C of my friend’s submissions, again we seem to be at issue, and I do not think there would be any advantage in my taking your Honours back to the cases or back to my submissions, unless there is some aspect your Honours wish me to deal with.  Those are my submissions in reply, your Honours.

BRENNAN CJ:   Thank you, Mr Bennett.

MR RILEY:   Can I inform your Honours that if it were that your Honours were against us in this matter, it will have to go back to the Court of Appeal because there are a number of grounds of appeal that have not yet been dealt with if the Court proceeded with this particular ground and did not deal with the others.

BRENNAN CJ:   Are you in agreement with that, Mr Bennett?

MR BENNETT:   It is unfortunate the court took that approach, but I cannot make any submission against what my friend is saying.

TOOHEY J:   Because the relief sought by the notice of appeal is simply to reinstate the order of the primary judge.

MR BENNETT:   That is so, your Honour.  Of course, that is what we would like, but my friend is correct in saying that the Court of Appeal did not deal with a number of his grounds of appeal because they were unnecessary in view of his success on this ground.  So logically, as I say, I cannot make any submission against what my friend puts.

TOOHEY J:   You mean did not deal with other grounds which go to the extension of time provision?

MR BENNETT:   Yes, your Honour.  It is unfortunate but that is so.

BRENNAN CJ:   Thank you, Mr Bennett.  The Court will consider its decision in this matter.

AT 3.45 PM THE MATTER WAS ADJOURNED