Supalux Paint Co Pty Ltd v Roads Corporation
[2011] VCC 1218
•13 July 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-11-01707
| SUPALUX PAINT CO PTY LTD | Plaintiff |
| (ACN 008 776 243) | |
| v | |
| ROADS CORPORATION | Defendant |
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| JUDGE: | HIS HONOUR JUDGE SHELTON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 22 June 2011 |
| DATE OF JUDGMENT: | 13 July 2011 |
| CASE MAY BE CITED AS: | Supalux Paint Co Pty Ltd v Roads Corporation |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1218 |
REASONS FOR JUDGMENT
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Catchwords: Stay of proceedings – s.53 Commercial Arbitration Act 1984 – general conditions of contract – NPWC-RC – “as soon as practicable” – Abigroup Contractors Pty Ltd v Transfield Pty Ltd & Anor (1998) 217 ALR 435 – Royal Society for the Prevention of Cruelty to Animals (Victoria) Inc v Marson Constructions Pty Ltd (2000) 1 VR 274 – Oakton Services Pty Ltd v Tenix Solutions Imes Pty Ltd [2010] VSC 176.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R G Craig | Gadens Lawyers |
| For the Defendant | Mr N Pane | DLA Piper |
| HIS HONOUR: |
1 This is an application by the defendant for a stay of the proceeding pursuant to s.53 of the Commercial Arbitration Act (1984) (“the Act”).
The Facts
2 On or about 3 September 2004, the defendant entered into a contract with the plaintiff for pavement marking of roads in Western Victoria (“the contract”). The contract was for a period of five years and the contract sum was $5.65 million. On or about 25 June 2009, the contract was extended by six months from 3 September 2009 to 3 March 2010. General Conditions of Contract NPWC-RC (“the General Conditions”) were incorporated into the contract. Clause 45 of the General Conditions provided:
“Settlement of Disputes
…
All disputes or differences arising out of the Contract or concerning the performance or the non-performance by either party of its obligations under the Contract whether raised before or after the execution of the work under the Contract shall be decided as follows:
(a) the Contractor shall, not later than fourteen days after the dispute or difference arises, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Superintendent for decision and the Superintendent shall, as soon as practicable thereafter, give his decision to the Contractor; (b) if the Contractor is dissatisfied with the decision given by the Superintendent, he may, not later than fourteen days after the decision of the Superintendent is given to him, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Corporation for decision and the Corporation shall, as soon as practicable thereafter, give its decision to the Contractor in writing. If the Contractor is dissatisfied with the decision given by the Corporation pursuant to the last preceding paragraph, he may, not later than twenty-eight days after the decision of the Corporation is given to him, give notice in writing to the Corporation requiring that the matter at issue be referred to arbitration and specifying with detailed particulars the matter at issue, and thereupon the matter at issue shall be determined by arbitration. If, however, the Contractor does not, within the said period of twenty-eight days, give such a notice Corporation requiring that the matter at issue be referred to arbitration, the decision given by the Corporation pursuant to the last preceding paragraph shall not be subject to arbitration.
Where a notice is given by the Contractor to the Corporation 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 Corporation or the Contractor in any court unless and until the arbitrator has made his award in respect of that matter at issue.
… .”
3 It will be noted that the clause is headed “Settlement of Disputes” and, as Mr Pane, who appeared for the defendant submitted, provides a comprehensive regime for the settlement of disputes. As appears, the dispute resolution is three-year tiered with, firstly, a review by the Superintendent, then review by the defendant and then arbitration. These have variously been referred to as “cascading” or “escalating” provisions.
4 On 21 December 2009, the Superintendent under the contract, Lance Midgley, who is the Regional Director – Western Victoria of the defendant, assessed deductions against the plaintiff for failing to meet the performance standard specified in the contract at $354,715.67.
5 By letter of 8 February 2010, the plaintiff wrote to the Superintendent, submitting the matter to him for decision pursuant to Clause 45(a) of the General Conditions for Decision. The letter was just over two pages long. By letter of 12 March 2010, the Superintendent gave his decision pursuant to Clause 45(a). He reduced the deductions against the plaintiff to $288,503.64. He did not take the point that the letter of 8 February 2010 was forwarded more than fourteen days after the dispute or difference arose on 21 December 2009. This response was almost three-pages long.
6 By letter of 6 April 2010, the plaintiff responded to the Superintendant’s letter of 12 March 2010, disputing his decision.
7 By letter dated 7 May 2010, the acting Superintendent wrote to the plaintiff advising it that if it disagreed with the Superintendent’s decision of 12 March 2010, it should submit the matter to the defendant for a “Corporation review” pursuant to Clause 45(b) of the General Conditions.
8 On 10 August 2010, the plaintiff wrote to the defendant requesting a Corporation Review pursuant to Clause 45(b) of the General Conditions.
9 On 16 August 2010, the plaintiff made a final claim to the defendant for $152,768.81.
10 On 17 August 2010, the defendant wrote to the plaintiff acknowledging receipt of its letter of 10 August 2010 and indicated that the submission for a Corporation Review was made well outside the fourteen-day period provided for in Clause 45(b). Nonetheless, the letter indicated that the defendant “will review the merits of the dispute as soon as practicable and the Corporation reserves its rights in respect of the time bar”.
11 Pursuant to Clause 45(b) of the General Conditions, the Corporation was required to give its decision “as soon as practicable”.
12 By mid-December 2010, almost four months later, the plaintiff had not heard from the defendant. On 13 December 2010, the plaintiff’s solicitors wrote to the defendant alleging that the defendant had failed to make a decision “as soon as practicable” and requesting some action in the matter. On 20 January 2011, a meeting took place between John Vyse, the Managing Director of the plaintiff, John Mould of the plaintiff, Rex Atkins, the Director of the Contract Services Department of the defendant and lawyers from the defendant. During this meeting, Atkins stated to Vyse that he expected the defendant’s decision to be available within one month.
13 Following the meeting, on the same day, and then again on 25 January 2011, Vyse sent Atkins material which, in his affidavit of 21 June 2011, he deposes had previously been provided to the defendant.
14 On 9 February 2011, the plaintiff’s solicitors wrote to the defendant indicating that if its decision was not to hand by 21 February 2011, legal proceedings would be commenced. No response was forthcoming from the defendant and the plaintiff, accordingly, issued the Writ in this proceeding on 15 April 2011. On 22 April 2011, Vyse received a telephone call from Atkins indicating that the defendant required a further three months to make a decision but “that he thought it would be sooner than that”.
15 On 13 May 2011, the plaintiff filed an Amended Statement of Claim. In an affidavit sworn on 3 June 2011, Atkins stated that his “best estimate” was that a decision could be made by the defendant within a month.
The Law
16 Section 53 of the Act provides:
“Power to stay court proceedings
(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 … 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) … (3) … .”
17 It was not in issue that the defendant had complied with s.53(1)(b).
18 Section 53(1) of the Act gives me a discretion to stay the proceeding. The manner in which this discretion is to be exercised is well summarised by Gillard J in Abigroup Contractors Pty Ltd v Transfield Pty Ltd & Anor (1998) 217 ALR 435 at page 448:
“The authorities establish a general practice in favour of staying court proceedings where parties have agreed to refer their disputes to arbitration.
…
As a general rule, a court does stay a proceeding where there is an agreement to arbitrate. The reason is obvious. The parties have made an agreement to that effect and the court should enforce it. The general rule should only be departed from if there is good cause. … .”
A Preliminary Issue
19 Mr Craig, who appeared for the plaintiff, submitted as a threshold issue that the application for a stay by the defendant was premature in that the defendant had not yet made a decision with which the plaintiff could be “dissatisfied” as required by Clause 45 of the General Conditions. In my view, this approach takes an unduly narrow view of Clause 45 which, to use the words of Croft J in Oakton Services Pty Ltd v Tenix Solutions Imes Pty Ltd [2010] VSC 176 at paragraph 31 is “a comprehensive regime of dispute resolution procedures”.
Discussion
20 Mr Pane, in his written submission in support of the application, stated:
“The question is whether the time the Corporation has taken to conduct its review provides good cause and sufficient reason for the matter not to be stayed in accordance with the general rule.”
21 I agree, given that the defendant was required to make a decision “as soon as practicable” after the request for a Corporation review on 10 August 2010.
22 In Royal Society for the Prevention of Cruelty to Animals (Victoria) Inc v Marson Constructions Pty Ltd (2000) 1 VR 274, Tadgell JA considered the expression “as soon as reasonably practicable” contained in a building contract. He stated, at pages 277 and 278:
“The connotation of ‘soon’ is commonly indefinite. I understand it as a versatile word allowing for or designating, according to the relevant circumstances, an adaptable period in much the same way as the expression ‘a reasonable time’. In David Leahy (Aust.) Pty Ltd v McPherson's Ltd, I ventured a suggestion (apparently accepted by the Full Court) that -
‘The concept of 'a reasonable time' is frequently encountered in the law and life, but thankfully it can seldom be necessary to define it, much less to ascertain the period that the concept connotes. Rather than being concerned to designate a reasonable time, the courts are confronted almost daily with the question whether, within a specific context, a reasonable time has or has not run, when reckoned towards or away from a given point or event. The question is usually answered in the course of a value judgment not calling for much analysis and sometimes, perhaps, intuitively. Often the question answers itself. A reasonable time obviously has no norm or yardstick except that dictated by its own circumstances, including the purpose for which it is to be gauged.’”
23 He also stated, at pages 275 and 276:
“… The point or event from which the soonness falls to be measured is not nicely prescribed in terms but it is, as I should read the clause, to be implied from the context. … .”
24 Relevant considerations in the matter before me are, in my view:
•
There was no communication from the defendant to the plaintiff between 10 August 2010 and 13 December 2010. No explanation was given by the defendant for this four months delay.
•
At the meeting on 20 January 2011, it was indicated by Atkins that the Corporation review would be finalized within one month.
•
Vyse deposes that the information provided by the plaintiff to the defendant on 20 January 2011 and 25 January 2011 had previously been provided to the defendant. In any event, it was certainly not voluminous.
•
On 9 February 2011, the plaintiff’s lawyers put the defendant on notice that it had no other alternative but to issue proceedings if the Corporation review was not completed by 21 February 2011. No response was received to this letter.
•
Following the issuing of proceedings, Atkins told Vyse on the telephone that the Corporation review would not be completed for another three months although he hoped that it would be sooner than that.
•
In his affidavit of 3 June 2011, Atkins deposes that he anticipated that the Corporation review should be completed within approximately one month.
•
The Superintendent was able to complete his review within less than five weeks – from 8 February 2010 to 12 March 2010.
•
It is over ten months since a decision was sought from the defendant under Clause 45(b) of the General Conditions. Clause 45 provides an internal procedure for review of the Superintendant’s original decision. No convincing reason has been given for a delay of over ten months for the defendant to make its decision under Clause 45(b) while the plaintiff has an outstanding claim for $152,768.81. In addition, the defendant is holding its Bank Guarantee for approximately $250,000 on which it is paying interest.
25 Mr Pane relied upon paragraph 15 of Atkins’ affidavit where he stated, with respect to the task of reviewing and assessing the plaintiff’s claim:
“That task entailed collating information from VicRoads’ Western Region office regarding Supalux’s performance of its obligations under the Contract and material relating to the issues in dispute. The Corporation’s review and assessment process is ongoing. Presently, my best estimate is that this process will be completed within one month. The progress of the review and assessment has been delayed by the delivery of additional and different material going to the matters in dispute including an additional spreadsheet of calculations received by me on or about 25 January 2011 (exhibit RMA -10 to this my Affidavit) and the schedules attached to Supalux’s Statement of Claim and Amended Statement of Claim filed in this proceeding. This has required the Corporation to consider that new material and any differences between the new material and the material originally submitted in support of the Supalux claims.”
26 In my view, this is a far from adequate explanation of the delay in excess of ten months for the Corporation review. In any event, the schedules attached to the plaintiff’s Statement of Claim and Amended Statement of Claim are not relevant to the request for a Corporation review.
27 The plaintiff was in a bind, the only course open to it was to issue this proceeding.
Conclusion
28 I am satisfied that there is sufficient reason why the matter should not be referred to arbitration.
29 Mr Pane submitted that I could stay the proceedings on condition that the defendant complied with Clause 45(b) of the General Conditions within, say, one month. Given the previous history of this matter however, I fear that this would only further delay matters for the plaintiff.
30 The defendant’s application for a stay of the proceeding fails.
31 I will hear from the parties on the question of the costs of the application and appropriate directions to make for the future conduct of the proceeding, including the possibility of the determination of preliminary questions pursuant to Rule 47.04 of the County Court County Court Civil Procedure Rules 2008 and/or the appointment of a special referee pursuant to Order 50 of those Rules.
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