Re: Stanwell Corporation Ltd - [1998] QSC 248

IN THE SUPREME COURT
OF QUEENSLAND
Brisbane O.S. No.6742 of 1998
Before the Hon. Mr Justice Mackenzie
[re: Stanwell Corporation Ltd]

IN THE MATTER of Part 18 of the Supreme Court Act 1995

and
IN THE MATTER of an application by STANWELL CORPORATION LIMITED
O.S. 7465 of 1998

IN THE MATTER of the Commercial
Arbitration Act 1990
and
IN THE MATTER of an application by LURGI (AUSTRALIA) PTY LTD

CATCHWORDS: ARBITRATION - commercial dispute - whether procedure for referring the matter to arbitration was sufficient - powers of the arbitrator - stay of proceedings.

s.285(1)(3)-(6) Supreme Court Act 1995
s.53 Commercial Arbitration Act 1990
State Electricity Commission of Victoria v CC (Vic) Pty Ltd (unreported, Full Court of Victoria, 4704 of 1992, 8 December 1994)
Re Cotton Crops Pty Ltd (1985) 2 Qd.R448
Sydney Water Corporation Ltd v Aquaclear Technology Pty Ltd
(unreported, S.C. of NSW, 50087 of 1995, 7 July 1995)
The Commonwealth of Australia v Skonis Housing and Development (NT) Pty Ltd (in Liquidation) (unreported, S.C. of N.T., No. 419 of 1990, 24 December 1991)

Counsel:Mr A Morris QC with him Mr D Atkinson for the applicant
Mr P O’Shea for the respondent

Solicitors:Doyles for the applicant
Mallesons Stephens Jaques for the respondent

Hearing date: 29 October 1998

JUDGMENT - MACKENZIE J.

Judgment delivered 6 November 1998

Stanwell Corporation Limited (“Stanwell”) is a successor to Queensland Electricity Commission which entered into an agreement with Lurgi (Australia) Pty Ltd (“Lurgi”) for Lurgi to supply electrostatic precipitators to the Stanwell Power Station. There was provision in the contract for adjustment of the sums payable to Lurgi on account of changes in prices of materials and wages. In August 1989 the Australian Industrial Relations Commission varied the metal industry award and on the basis of this Lurgi submitted an escalation claim of about $570,000. About $120,000 of this claim was rejected. It is common ground that the rejection was based on a view that the award increase was based on increased productivity, which was excluded from the escalation clause.
In December 1994 a decision of the Full Court of Victoria held that award increases of the type in dispute were not awarded in recognition of or in exchange for efficiency or productivity improvements. (State Electricity Commission of Victoria v CC (Vic) Pty Ltd) (unreported F.C. of Vic, 4704 of 1992, 8 December 1994). Following this a further claim, which was rejected, was made in connection with the wage increases. Eventually on 2 June 1997 Lurgi, by an unsigned notice, purported to refer the matter to arbitration. On 4 June 1997 a signed copy of the notice was served by Lurgi. The matter did not progress significantly until 2 June 1998 when Stanwell’s solicitors requested Lurgi to indicate how it had satisfied the preconditions for a reference to arbitration. A reply was sent to this on 15 June 1998 and on 16 June 1998 Stanwell’s solicitors indicated to Lurgi’s solicitors that they were not satisfied that Lurgi had complied with the arbitration clause in the agreement.
There are two applications before me. The first (“the first summons”) is an application under s.285 of the Supreme Court Act 1995 for a declaration that Lurgi has not, by documents entitled “notice of dispute and reference to arbitration pursuant to clause 46.2" and provided under cover of letters dated 2 and 4 June 1997, referred any dispute to arbitration in accordance with the requirements of clause 46 of the general conditions of the contract between Queensland Electricity Commission and Lurgi made in August 1989. A consequential order for a stay of the arbitration proceedings is also sought. This summons was filed on 23 July 1998.
The second application (“the second summons”) was filed by Lurgi and seeks relief under s.53 of the Commercial Arbitration Act 1990 for a stay of proceedings under the first summons. When the matter came before me it was accepted that it was appropriate to decide the issue raised under the second summons as a preliminary matter leaving the first summons to be disposed of at a later date if the second summons was unsuccessful.
Section 53 of the Commercial Arbitration Act provides that if a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may apply to the court to stay the proceedings. If the court is satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement, it may make an order staying the proceedings and give directions with respect to the future conduct of the arbitration. The matter was argued on the assumption that an application under s.285(1) of the Supreme Court Act is “proceedings” within the meaning of s.53 of the Commercial Arbitration Act.
It is apparent from the terms of the first summons that it raises a threshold question, whether there has been a proper reference of the dispute to arbitration in accordance with the requirements of clause 46 of the contract. It should also be recorded, for completeness, that after the first summons was filed Lurgi made fresh submissions to the Superintendent, which is the first step in invoking the arbitration procedure.
On 13 October 1998 the Superintendent rejected the claim contained in the rise and fall claim of 30 May 1991, and on 23 October 1998, Lurgi again purported to refer the dispute to arbitration. 8 Section 285(1) of the Supreme Court Act 1985 provides that where a commercial dispute has arisen concerning the construction of a document or its application to any facts, any party to the dispute may apply to a judge in Chambers for the determination of the questions involved in the dispute notwithstanding that no commercial cause has been commenced. The underlying dispute between the parties as to entitlement to further payments under the rise and fall clause is a commercial dispute. Section 285(4) provides that where it is necessary in the determination of a commercial dispute to decide any question of fact the judge may decide the question forthwith or settle the issues for trial and give any consequential directions as if the matter was a commercial cause. Section 285(5) provides that a determination of any issue of fact or any question of law pursuant to s.285 is binding on all parties to the summons as if the issue or question had been determined in a commercial cause. 9 Section 285(6) is concerned with an application which turns out not to be in connection with a commercial dispute but is a matter in which an application could be made under Order 64 r.1A, 1B or 1BB. In such a case the judge may proceed to determine the matter as if it was the subject of an application pursuant to such of the rules as are applicable in the circumstances. In each of those instances the question is to be determined having regard to events that have happened but the judge is not bound to determine the question if there is any substantial dispute of fact, or if for any other reason it ought not to be determined on originating summons.
The provisions in s.285(3)(4) and (5) appear to give a wider scope to the court in hearing an application under s.285 than that conferred under Order 64. There is power in the former case to decide questions of fact forthwith whereas under Order 64 there is a right not to embark on a determination if there is a substantial dispute of fact. According to McPherson J. in Re: Cotton Crops Pty Ltd (1985) 2 Qd.R 448, 450-1 there are analogies between the kind of provision in s.285 and the procedure under Order 39 r.12 authorising the making of an Order that one or more questions be tried before any other question arising in a cause or matter. Care is needed in the selection of the proper occasion for adopting the procedure of determining preliminary issues, but in a case where there is a point of law which if decided one way is likely to be decisive of litigation, there is advantage in adopting the procedure. Cost saving considerations and convenience are important factors. While the fact that a decision will put an end to litigation is an indication that the procedure should be followed it is unnecessary to show that the decision either way on the preliminary issue will put an end to the whole litigation. In the present case if it should prove that what was done by Lurgi in purported implementation of the procedure for referring a matter to arbitration was insufficient, the basis for arbitrating goes away.
Clause 46 of the Australian Standard General Conditions of Contract AS2124-1986 forms part of the conditions of contract subject to additions amplifications and variations. It makes provision for settlement of disputes arising out of or in connection with the contract. The procedure to be followed is expressed by clause 46.1 in the following way:
1.Each party shall furnish in writing to the Superintendent details of that party’s claim or, where the other party is the claimant, the reasons for rejecting the other parties claim and shall request the Superintendent to make a decision under clause 46.
2.Within 28 days after receipt from each party of the information referred to in clause 46.1(a) the Superintendent shall give each party a written decision on the dispute.
3.Clause 46.2 allows a dispute to be referred to arbitration in the following circumstances:-
(a)if either of the parties are dissatisfied with the decision of the Superintendent;
(b)if the Superintendent fails to make a decision within 28 days;
(c)if the party required by clause 46.1(a) to furnish the Superintendent reasons for rejecting the other party’s claim fails to provide the reasons within 28 days after the request by the other party to do so.
The procedure for having an arbitrator nominated is that except in the case of agreement between the parties the nomination is made by a person external to the contract. I was informed that it was intended that Senior Counsel be appointed to conduct any arbitration that occurs.
Clause C22 of the conditions of contract adds a number of sub-clauses to clause 46. They include a provision that the arbitrator be appointed by an instrument setting out all the matters specified in the details furnished in conformity with the provisions of clause 46.1(a) which under the provisions of the contract the arbitrator has power and authority to hear and determine and no other matters. Clause C22 provides further that the party furnishing particulars to the other party shall be bound by such particulars and the arbitrator shall not have any power or authority to enquire into or determine any matter not specified in such particulars.
It is a necessary implication that the arbitrator has authority to determine several kinds of matters pertaining to the limits of his or her power or authority to hear and determine matters. For example if any matters specified in the details furnished under clause 46 are beyond the arbitrator’s power and authority to hear and determine under the contract he must necessarily have authority to declare so since the instrument is null and void with respect to those matters. If the matter sought to be determined goes beyond the particulars the arbitrator must necessarily have power and authority to declare so since his authority does not extend to determining the matter not specified in the particulars. He must also have power to find as to compliance with the conditions of the contract as to the time of making the claim, the time of arising of the claim and the time for giving notice and particulars of the claim since his power and authority to determine the claim does not extend to a case where there has been a failure by a party to comply with the conditions of contract in any of those respects.
As Stanwell’s summons is worded it raises a threshold question as to the existence of a valid referral to arbitration. However beneath its apparently simple exterior a complex group of issues exists, according to the submissions of the parties. They are that the prerequisites for a valid reference have not been complied with in a variety of respects. Mandatory procedural requirements have not been carried out. The claim purportedly referred to arbitration is barred wholly or in part for failure to comply with time limits in the contract for lodging the claim or for failure to make them within a reasonable time. These issues involve analysis of documentary evidence and fact finding from affidavit material. Perhaps but not certainly it may involve oral evidence.
It is also to be noted that nothing in the material before me suggests that the quantification of the claim is complex if the issues concerning validity of the arbitration are resolved in favour of Lurgi. The quantum of the moneys claimed is likely to be easily identifiable by reference to objective criteria, since the category into which the moneys claimed falls appears to be identified with precision.
I have come to the conclusion that I should refuse to decide forthwith the complex of issues inherent in the summons. I am also of opinion that rather than give directions for the trial of the issues it is appropriate to require the matter to be determined by the arbitrator. I am satisfied that Lurgi is ready and willing to do all things necessary for the proper conduct of the arbitration. I am satisfied that there is no sufficient reason why the issues could not be determined by the arbitrator in the exercise of the power and authority given under the agreement. As has been found above, I am satisfied that the power and authority to determine the jurisdiction or threshold questions is sufficient to allow this to be done. This view is generally in accord with that of Rolfe J in Sydney Water Corporation Ltd v Aquaclear Technology Pty Ltd (unreported, S.C. of NSW, 50087 of 1995, 7 July 1995. That decision also concerns Cl.46 of the General Conditions of Contract AS 2124 - 1986. In my view, the provision of the contract examined by Martin J in The Commonwealth of Australia v Skonis Housing and Development (NT) Pty Ltd (in Liquidation) (unreported, S.C. of N.T., No.419 of 1990, 24 December 1991) is significantly different on the issue of jurisdiction and does not therefore assist Stanwell.
The order is that the proceedings in O.S.6742 of 1998 commenced by originating summons dated 23 July 1998 be stayed pursuant to s.53(1) of the Commercial Arbitration Act 1990 and that the respondent Stanwell Corporation Limited pay the costs of the applicant Lurgi (Australia) Pty Ltd of and incidental to the application. If the parties wish to have directions as to the conduct of the arbitration, I will initial an agreed draft or hear the parties further if necessary.