Strzelecki Holdings Pty Ltd v ANDROM Pty Ltd as Trustee for the K N Buckingham Family Trust t/as Buckingham Re*Development Company - [2005] WADC 112

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: STRZELECKI HOLDINGS PTY LTD -v- ANDROM PTY LTD as Trustee for the K N BUCKINGHAM FAMILY TRUST t/as BUCKINGHAM REDEVELOPMENT COMPANY [2005] WADC 112

CORAM: WISBEY DCJ

HEARD: 16 MAY 2005

DELIVERED : 17 JUNE 2005

FILE NO/S: CIV 2797 of 2004

BETWEEN: STRZELECKI HOLDINGS PTY LTD (ACN 051 222 523)
Plaintiff
AND
ANDROM PTY LTD as Trustee for the K N BUCKINGHAM FAMILY TRUST t/as BUCKINGHAM REDEVELOPMENT COMPANY
Defendant

Catchwords:

Arbitration - Provision in contract providing election to arbitrate or litigate - Whether arbitration agreement - Primacy of arbitration - Legal proceedings commenced before submission to arbitration - Application for stay

Legislation:

Commercial Arbitration Act 1985 s 4, s 53

Result:

Order for stay of proceedings

Representation:

Counsel:

Plaintiff: Mr P G Clifford
Defendant: Ms P E Cahill

Solicitors:

Plaintiff: Lawton Gillon
Defendant: Jackson McDonald

Case(s) referred to in judgment(s):

Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] VSCA 158
Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd [2001] QCA 471
PMT Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 301

Case(s) also cited:

Bayside Civil & Drainage Pty Ltd v Marinestar Holdings Pty Ltd [2000] WASC 17
Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502
Western Australian Land Authority v Simto Pty Ltd [2001] WASC 136

WISBEY DCJ: Strzelecki Holdings Pty Ltd ("the Principal") instituted these proceedings against Androm Pty Ltd ("the Contractor") by writ issued 9 December 2004. The writ indorsement alleges that "the Plaintiff's claim is for damages for breach of a Building Contract made between the Plaintiff and the Defendant on or about 26 May 2003". It is apparent that the damage relates to alleged faulty workmanship.
The Contractor filed a memorandum of appearance on 10 December 2004 and by summons filed 15 December 2004 sought a permanent stay pursuant to s 53 of the Commercial Arbitration Act 1985 (WA). Deputy Registrar Hewitt granted a permanent stay on 28 February 2005.
By notice dated 11 March 2005 the Principal appeals against the decision granting the stay, and the matter comes before me by way of rehearing.
The building contract between the parties giving rise to the present controversy has provision for dispute resolution. Clause 47 relevantly provides:
47.1 Notice of Dispute
"If a dispute between the Contractor and the Principal arises out of or in connection with the Contract, including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute.
Notwithstanding the existence of a dispute, the Principal and the Contractor shall continue to perform the Contract, and subject to Clause 44, the Contractor shall continue with the work under the Contract and the Principal and the Contractor shall continue to comply with Clause 42.1.
A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration.
47.2 Further Steps Required Before Proceedings
Alternative 1
Within 14 days after service of a notice of dispute, the parties shall confer at least once, and at the option of either party and provided the Superintendent so agrees, in the presence of the Superintendent, to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree of methods or resolving the dispute by other means. At any such conference each party shall be represented by a person having authority to agree to a resolution of the dispute.
In the event that the dispute cannot be so resolved or if at any time either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may by notice in writing delivered by hand or sent by certified mail to the other party refer such dispute to arbitration or litigation.
Alternative 2
A party served with a notice of dispute may give a written response to the notice to the other party and the Superintendent within 28 days of the receipt of the notice.
Within 42 days of the service on the Superintendent of a notice of dispute or within 14 days of receipt by the Superintendent of the written response, whichever is the earlier, the Superintendent shall give to each party the Superintendent's written decision on the dispute, together with reasons for the decision.
If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a written decision on the dispute within the time required under Clause 47.2 the parties shall, within 14 days of the date of receipt of the decision, or within 14 days of the date upon which the decision should have been given by the Superintendent confer at least once to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference, each party shall be represented by a person having authority to agree to a resolution of the dispute.
In the event that the dispute cannot be so resolved or if at any time after the Superintendent has given a decision either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may, by notice in writing delivered by hand or sent by certified mail to the other party, refer such dispute to arbitration or litigation."
The Commercial Arbitration Act 1985 relevantly provides:
"S53(1)If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to subsection (2), apply to that court to stay the proceedings and that court, if satisfied –
(a)that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and
(b)that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration,
may make an order staying the proceedings and may further give such directions with respect to the future conduct of the arbitration as it thinks fit.
(2)An application under subsection (1) shall not, except with leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance.
(3)Notwithstanding any rule of law to the contrary, a party to an arbitration agreement shall not be entitled to recover damages in any court from another party to the agreement by reason that that other party takes proceedings in a court in respect of the matter agreed to be referred to arbitration by the arbitration agreement."
The stay application was supported by the affidavit of Kenneth Noel Buckingham which demonstrates that:
1.on 8 March 2004 the Principal wrote to the Contractor making numerous complaints about sub‑standard building work, the most significant being the condition of the market's floor and the boardwalk and jetty timbering.
2.by letter dated 15 April 2004 to the Superintendent, the Contractor sought an onsite meeting to discuss inter alia the problems referred to above.
3.the Contractor wrote to the Superintendent on 4 May 2004 protesting that all necessary remedial steps had been undertaken.
4.on 1 June 2004 the Contractor forwarded to the Superintendent an account for $173,041, and a demand for interest.
5.on 6 July 2004 the Principal wrote to the Superintendent advising that it would not meet any further progress claims until the outstanding items therein, which included the flooring, had been addressed.
6.thereafter sundry correspondence passed between the parties concerning outstanding issues.
7.on 8 October 2004 the Contractor forwarded to the Principal and the Superintendent pursuant to cl 47 of the building contract notice of dispute identifying "the failure of the Principal, Strzelecki Holdings Pty Ltd, to pay outstanding amounts owing under the contract in the sum of One hundred and seventy three thousand six hundred and eighty two dollars and sixty eight cents ($173,682.68)".
8.by letter dated 22 October 2004 the solicitors for the Principal forwarded to the Contractor pursuant to cl 47 of the contract notice of dispute identified as follows:
"(i)the finish of the concrete floors of the building and the oil stains in those floors which the Principal estimates will cost $150,000 to rectify plus the costs of relocating its tenants during the rectification works.
(ii)the amount of the retention moneys which the Principal considers should be $128,564.22.
(iii)there being no obligation of the Contractor to the Principal to pay the Contractor any interest on the retention moneys.
(iv)there being no interest payable by the Principal to the Contractor on any payment claims.
(v)there being no obligation to the Principal to pay the Contractor's claim for the cost of temporary work to turret louvres."
The letter advised that the directors of the Principal were overseas and would not be returning until about 13 November 2004, and noted that the dispute resolution clause of the building contract required the parties to confer at least once to attempt to resolve their disputes before taking further steps.
9.by letter dated 19 November 2004 the solicitors for the Principal wrote to the Contractor proposing a meeting be held at Dolphin Quay at 10.00 am on Wednesday 1 December 2004 at which meeting the condition of the floors could be viewed. The letter sought confirmation that the Contractor would attend the meeting.
10.by letter dated 24 November 2004 the solicitors for the Contractor wrote to the solicitors for the Principal stating that the Contractor was more than happy to attend a meeting at the offices of either party's solicitors, but not at the site proposed by the Principal.
11.by letter dated 29 November 2004 the solicitors for the Principal wrote to the solicitors for the Contractor pointing out that the primary issue in dispute was the finish of the concrete floors and that their client and the Superintendent considered that the nature of the dispute dictated that the meeting should be held on site. They nominated 9 December 2004 at 9.30 am as the appropriate time.
12.by letter dated 1 December 2004 the solicitors for the Contractor wrote to the solicitors for the Principal disputing that the primary issue was the finish of the concrete floors, claiming that it was in fact the failure of the Principal to pay the sum of $173,682.68 due under the contract. The Contractor indicated a willingness to meet on 9 December 2004 but not on site.
13.by letter dated 2 December 2004 the solicitors for the Principal gave notice that a meeting would be held at 9.30 am on Thursday 9 December 2004 on site at Dolphin Quay, and that the Principal and the Superintendent would be present.
14.on 3 December 2004 the solicitors for the Contractor wrote to the solicitors for the Principal noting that because of other commitments the writer would be unable to attend a meeting on 9 December 2004; reaffirming the Contractor's objection to the meeting being held on site; and stating "unless your client is prepared to reconsider its stance we see that the only way forward is to refer this matter forthwith to arbitration".
15.on 9 December 2004 the solicitors for the Principal wrote to the solicitors for the Contractor confirming that the Contractor had not attended at Dolphin Quay that morning and stating "in the circumstances our client considers that your client is not making reasonable efforts to resolve the dispute and on behalf of our client we hereby give your client notice that the disputes between our respective clients under the building contract for the Dolphin Quay development are referred to the District Court for determination". They forwarded a service copy of the writ.
16.by letter dated 10 December 2004 the solicitors for the Contractor wrote to the solicitors for the Principal forwarding a notice of referral to arbitration which relevantly stated "the Contractor hereby refers the dispute detailed in the Notice of Dispute sent on 8 October 2004 to arbitration under cl 47.2 of the Contract."
Simultaneously they wrote to the President of the Institute of Arbitrators & Mediators Australia requesting the nomination of an Arbitrator.
That history brings this matter before the Court.
On the material before me it would appear arguable that neither party positively attempted to resolve the disputes between them by negotiation but no issue is taken as to that.
I am satisfied on the authorities that cl 47 of the contract is an arbitration agreement. PMT Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 301; Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] VSCA 158; Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd [2001] QCA 471. Indeed that much does not seem to be disputed by the parties, although the Principal says it is also an agreement to litigate.
The Principal's position is that that which it desires to litigate (breach of contract by defective workmanship) is a different issue from that which the Contractor seeks to arbitrate (its claim for contract moneys owing). The Principal argues that it cannot be compelled to arbitrate the issue in respect of which it gave notice of dispute and that in the circumstances a stay should not have been granted. The Contractor's position is otherwise.
It is in my opinion an over‑simplification to suggest that the matter of concern to the Principal is entirely distinct and severable from that of concern to the Contractor. The Contractor wants the balance of contractual moneys payable and the Principal declines to make payment on the basis that the Contractor's breach of contract has caused it to suffer damage which it quantifies at a sum in excess of that owed by it to the Contractor. There can be no doubt that if this action proceeded the Principal would be met with a defence counterclaiming the balance of the contract moneys outstanding, alternatively seeking a set‑off of that sum; and in the arbitration the Contractor would be met with the argument that it is in breach of contract and consequently not entitled to the money claimed.
It would be entirely inappropriate and unsatisfactory to have these issues separately addressed. Apart from unnecessary duplication of costs and resources, there would be the risk of conflicting factual determinations. It is obvious that the controversy between the parties should be resolved in the one hearing and forum.
Manningham and Mulgrave (supra) are authority for the proposition that a provision for notice by either party referring disputes to arbitration or litigation was not designed to confer priority on a party who succeeded in giving notice referring the dispute to litigation before receipt of notice of arbitration from the other party; and that the effect of clauses such as cl 47 is to give primacy to arbitration as the preferred method of dispute resolution.
It is appropriate to grant a stay of these proceedings to allow the issues in dispute between the parties to be arbitrated.