PMT Partners Pty Ltd v Director of National Parks and Wildlife

[1994] HCATrans 145

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
              Darwin        No D6 of 1994

B e t w e e n -

PMT PARTNERS PTY LTD (In
  Liquidation)

Applicant

and

DIRECTOR OF NATIONAL PARKS AND
  WILDLIFE

Respondent

Second Respondent
  Application for special leave to
  appeal

MASON CJ
GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 9 DECEMBER 1994, AT 9.32 AM

Copyright in the High Court of Australia

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

MR M.D.A. MAURICE, QC:   May it please the Court, I appear with my learned friend, MR T. SENIOR for the respondent.  (instructed by the Australian Government Solicitor)

MASON CJ:   Mr Bennett.

MR BENNETT:   If the Court pleases.  Might I hand to Your Honours a very short summary of the order in which I propose to put matters.  There was a document, I know, filed some time ago prepared by my predecessor.  He has been - - -

MASON CJ:   This is better, is it?

MR BENNETT:   It is different, Your Honour.  It is Sydney as opposed to Melbourne. 

MASON CJ:   It goes without saying, Mr Bennett.

MR BENNETT:   I can safely say that to this bench.  Your Honours, the issue in this case - - -

MASON CJ:   This written argument is so good, Mr Bennett, we will call on Mr Maurice.

MR BENNETT:   If the Court pleases.

MR MAURICE:   Your Honours, we say that ultimately the Court of Appeal decision turns on the construction of NPWC3, and the construction of that contract is not a matter which would attract the interest of this Court.  Could I just take Your Honours briefly to the application book where the relevant passages concerning the construction of that contract are set out.  In the joint judgment of Justices Mildren and Gray, application book page 32 at line 21, Their Honours say:

Clause 45 is concerned with the settlement of disputes arising out of the execution of the contract.  It is neatly divided into two parts.  The first part provides machinery whereby disputes may be settled by agreement -

that is by reference to the superintendent in the first place and then directly to the principal in the second place:

The second part provides for settlement by arbitration.  The two parts could quite appropriately have been made the subject of two separate clauses.

And then at page 39 at line 2, taking up this same point again, Their Honours say:

It is apparent that the dispute may be settled or taken to Court at any stage prior to the contractor giving notice requiring an arbitration.  Thus it is, in our view, impossible to say that steps taken in relation to subparagraphs (a) and (b) are “in or in relation to an arbitration”, merely because such steps need to be taken before an arbitration can be required by the contractor.  The failure to give notice requiring arbitration within 28 days results in a bar to arbitration.  The absence of any such provision in subparagraphs (a) and (b) is supportive of the view that those subparagraphs are not concerned with arbitration.  The right to arbitrate only arises if and when the appropriate notice is given within the time stipulated and a bar to arbitration is the consequence of non‑compliance.

MASON CJ:   But does that not all proceed on the footing that the section requires an existing arbitration before it can operate?

MR MAURICE:   No, Your Honour.  No, that is saying that fulfilment of the two steps of firstly, referring to the superintendent and then to the principal, are conditions precedent and there cannot be any arbitration unless those steps are taken.  But there does not have to be an arbitration on foot.

MASON CJ:   Why can not fulfilment of conditions precedent be matters or steps in relation to an arbitration?

MR MAURICE:   They can be, Your Honour, but it depends upon the construction of the contract, and the construction adopted by the Court of Appeal in this instance is that they are not steps in relation to an arbitration because they see this neat division.  They do not see clause 45 as having as its sole focus arbitration.  They see it as a clause - as it is headed, relating to the settlement of disputes; in the first instance, by agreement between the contracting parties and, in the second instance, in a separate paragraph in clause 45, by reference to arbitrator, if the two earlier attempts to resolve the dispute by settlement fail.  That is the point made by the Chief Justice in his judgment at page 26 of the application book at line 4, where he says:

the provisions of subclauses 45(a) and 45(b) are but steps which may be taken by the contractor if he wishes to have any disputes or differences decided.  They may be decided at any stage of that process.  It is only when the contractor has exhausted those avenues that the option of proceeding to arbitration as provided for in the remainder of the agreement is available.  Only when the option is taken up is the agreement to arbitrate enlivened.  Following the procedures set out in those subclauses has the purpose beyond that of enabling disputes or differences to be decided, that is, of refining the matters at issue and avoiding arbitration until that has been achieved.

The time limits set under subclauses 45(a) and 45(b) are not “in relation to an arbitration” (s48(1)), but in relation to the other procedures by which disputes or differences might be decided.

This approach, Your Honours, conforms to the English approach, though admittedly under section 27 of the English Arbitration Act the wording is somewhat different and time can only be extended in relation to a step to commence arbitration.  But although the language of that section is different, time can only be extended if the Act is, in effect, one in relation to the commencement of an arbitration, and the English cases - perhaps the principal English decision which is referred to in the judgment of Justices Mildren and Gray at page 41 of the application book, and following, Babanaft International Co S.A v Avant Petroleum Inc., (1982) 1 WLR 871. They call that the “Oltenia”.

The relevant passage, for our purpose, is set out in the application book at page 42 commencing at line 27 where Lord Justice Donaldson said:

“The concept of “claiming arbitration” is well known in the commodity trades.  Telex messages fly to and fro and at some stage one party or the other says, “We claim arbitration.”  The arbitration rules of the trade concerned then provide the steps to be taken by each party.  I would therefore accept that in such cases - - ‑

GAUDRON J:   Interrupting you there, Mr Maurice.  Could not the steps here also be regarded as a step to commence arbitration, even if you adopted the English reasoning?

MR MAURICE:   They could, Your Honour, it is a matter of construction.  Are they framed so as to be separate steps or as to be part of the arbitration process, as contemplated by the party?

GAUDRON J:   It is certainly a step to commence arbitration, is it not?

MR MAURICE:   We do not concede that at all.  We say it is a step to bring about a resolution of the dispute between the parties by consensus rather than by arbitration.

GAUDRON J:   And failing consensus?

MR MAURICE:   Failing consensus, then the contractor has the right to claim arbitration.  But it is not enough, we say, and that is what the English cases say, that, “It is a condition precedent to such proceedings” that these steps be taken.  It must be a step which either commences the arbitration or will necessarily lead to the arbitration being commenced.  That appears in the passage I was reading from, Lord Justice Donaldson’s judgment at line 12 on page 43.

That has been an approach which has been followed in subsequent cases.  The particular one I was going to refer the Court to is the decision in (The “Medusa”), the full title, Mariana Islands Steamship Corporation v Marimpex Mineraloel‑Handelsgesellschaft, [1986] 2 Lloyd’s LR 328. At page 330, the judgment of Lord Justice Neill in the first column, the relevant clauses are set out at about point 6 of the column. Clause 54 of the contract, it is perhaps the last sentence with which we are concerned, said:

Claims to be received by Charterers within 3 months from completion or discharge otherwise such claims are timebarred.

And then there is clause 59, a separate clause which has the heading “Arbitration Clause”.  Now, Lord Justice Neill discusses the jurisdiction under section 27 commencing at page 332, in the second column.  He sets out section 27 of the English Act towards the bottom of that page.  But the relevant passages to which we would take the Court are at page 334.  In the middle of the page in the first column it says:

Counsel for the owners, however, sought to distinguish The Oltenia on the grounds that the charter‑party in this case contained an arbitration clause in the Centrocon form.  He referred us to The Sandalion and to The Luka Botic.  But in these cases the Court was concerned with a claim under the arbitration clause itself.  This point was clearly explained by Mr Justice Lloyd in The Sandalion at p.519 where he said this:

It seems to me that in each case it is a question of construction whether the requirement to make a claim in writing, or any other requirement, is properly to be regarded as a step in the commencement of the arbitration.

Then the next column Lord Justice Nicholls says, line 3:

The time limit for making demurrage claims is contained in a clause which is quite separate from the arbitration clause, and I can find nothing in the decision of the Court of appeal in The Luka Botic which throws any doubt on this conclusion.

And likewise Lord Justice Nicholls, on the following page, page 335, the last paragraph in the first column:

As to the issue arising on this appeal concerning s.27 of the Arbitration Act, 1950, I agree entirely with the conclusion of Mr Justice Hobhouse.....As was pointed out by Mr Justice Lloyd in The Sandalion, [1983] 1 Lloyd’s Rep. 514, with regard to an arbitration clause not materially different from cl. 59 in the present case, “the appointment of the arbitrator and the making of the claim in writing go hand in hand. Both provisions are so inextricably bound together that they should, in my judgment, be regarded as part of the same process of commencing arbitration and, therefore, both are a step to commence arbitration -

and here he says, just over in the next column, that the cause in this case, as in The Oltenia, was “separate, distinct and unrelated.” 

On the construction adopted by the Court of Appeal, so too was the arbitration paragraph in clause 45 in NPWC3.  If there is any doubt about this, we say that it is resolved - as to the ambit of the words “in relation to” in section 48 of the Commercial Arbitration Act, we say it is resolved by reference to subsection (3) which, as Justices Mildren and Gray said, indicates the outer limit, going back in time, to which the court’s jurisdiction extends.  If one goes to section 48(3) it provides that:

(3)  An order shall not be made under this section extending the time within which arbitration proceedings may be commenced unless -

(a)  the Court is satisfied that undue hardship would otherwise be caused; and

(b)  the making of the order would not contravene the provision of an Act limiting the time for the commencement of arbitration proceedings.

It must necessarily follow that the legislature intended that that provision applied at the earliest point in time at which the jurisdiction to extend time can attach.  Otherwise, if you can go behind acts which commence the arbitration proceedings to anterior acts, then you are not constrained by reference to hardship or extending time limits where time limits have run out under other legislation.

So that if we are talking about steps to commence an arbitration, the only order which in term section 48(3) permits is an order extending the time within which arbitration proceedings may be commenced.  We contest it this way:  if we go to the order made at first instance by Justice Thomas in this case, it is set out in the application book at page 19 line 4 on that page.  He said:

I grant an extension of time as provided by clause 45(a) of Contract 5016B in relation to the letter of 27 August 1991 -

Now, that is not an order authorised by section 48(3).  It is not an order extending the time within which arbitration proceedings may be commenced.  It is an order extending the time within which some act anterior to the commencement of arbitration proceedings can be done, and there is no power to do that.  That perhaps really highlights the case we would seek to make in support of the Court of Appeal’s judgment.

Perhaps I should make one final point.  There was some discussion in the Court of Appeal as to whether at least the first part of clause 45(a) constituted an arbitration agreement for the purposes of the Act.  We say that is just an aside.  The Court ought not to take that point up in this case.  It is not essential to the decision which was made.  That was a decision which said that clause 45(a) and (b) involved Acts which were not Acts in relation to an arbitration.  It did not ultimately turn on whether clause 45, or any part of it, constituted an arbitration agreement.

The position of the respondent before the Court of appeal was that clause 45 did constitute an arbitration agreement, and the point was not argued.  It has been taken up by the Court of Appeal almost as an aside, we say.  And the authorities which have been referred to by the applicants in their original submissions were largely not put to or discussed by the Court of Appeal.  So it is inappropriate that a point like that should be taken on board by this Court when it has not been

discussed, so far as our search has revealed, at intermediate appellate court level in this country, at least not discussed properly.  Those are our submissions.

MASON CJ:   Thank you, Mr Maurice.  The Court need not trouble you, Mr Bennett.  There will be a grant of special leave in this case.

MR BENNETT:   If the Court pleases.

MR MAURICE:   If the Court pleases.

AT 9.49 AM THE MATTER WAS ADJOURNED SINE DIE