Tensioned Concrete Pty Ltd v Munich Re
[2020] WASC 431
•27 NOVEMBER 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: TENSIONED CONCRETE PTY LTD -v- MUNICH RE [2020] WASC 431
CORAM: KENNETH MARTIN J
HEARD: 27 OCTOBER 2020
DELIVERED : 27 NOVEMBER 2020
FILE NO/S: CIV 1721 of 2020
BETWEEN: TENSIONED CONCRETE PTY LTD
Plaintiff
AND
MUNICH RE
First Defendant
MIRABILIS ENGINEERING UNDERWRITING MANAGERS (PTY) LTD TRADING AS MIRABILIS ENGINEERING UNDERWRITING MANAGERS
Second Defendant
GREAT LAKES INSURANCE SE (UK BRANCH)
Third Defendant
THE HOLLARD INSURANCE COMPANY LTD (SCINTILLA ENGINEERING)
Fourth Defendant
QBE UNDERWRITING LTD
Fifth Defendant
BRYTE INSURANCE COMPANY LIMITED
Sixth Defendant
JOHN FISHER as administrator of JOHN FISHER
Seventh Defendant
BUILT ENVIRONS WA PTY LTD
Eighth Defendant
Catchwords:
Arbitration - Intersection and overlap between arbitration and subsequent civil litigation - Subrogation rights exercised by insurers in arbitration - Plaintiff claims benefit of insured status under policy with defendant - Alternatively claims benefit of waiver of subrogation clause - Defendant applies to stay litigation as overlapping issues the subject of the arbitration - Whether sufficiently overlapping issues to justify stay
Legislation:
Commercial Arbitration Act 2012 (WA)
Result:
Temporary stay granted
Category: B
Representation:
Counsel:
| Plaintiff | : | Ms L Chan |
| First Defendant | : | Ms J Taylor SC |
| Second Defendant | : | Ms J Taylor SC |
| Third Defendant | : | Ms J Taylor SC |
| Fourth Defendant | : | Ms J Taylor SC |
| Fifth Defendant | : | Ms J Taylor SC |
| Sixth Defendant | : | Ms J Taylor SC |
| Seventh Defendant | : | No appearance |
| Eighth Defendant | : | Ms J Taylor SC |
Solicitors:
| Plaintiff | : | Wotton + Kearney Lawyers (Perth) |
| First Defendant | : | DLA Piper Australia - Perth |
| Second Defendant | : | DLA Piper Australia - Perth |
| Third Defendant | : | DLA Piper Australia - Perth |
| Fourth Defendant | : | DLA Piper Australia - Perth |
| Fifth Defendant | : | DLA Piper Australia - Perth |
| Sixth Defendant | : | DLA Piper Australia - Perth |
| Seventh Defendant | : | No appearance |
| Eighth Defendant | : | DLA Piper Australia - Perth |
Case(s) referred to in decision(s):
Airbus SAS v Generali Italia SPA [2019] 2 Lloyd's Rep 59
Carter Holt Harvey Ltd v Genesis Power Ltd [2006] 2 NZLR 794
Castellain v Preston (1883) 11 QBD 380
Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd's Law Reports 767
Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77
Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77 (S)
Morley v Moore [1936] 2 KB 359
Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582
Sebastian Holdings Inc v Deutsche Bank AG [2011] 1 Lloyd's Law Reports 106
UBS AG v HSH Nordbank AG [2010] 1 All ER (Comm) 727
KENNETH MARTIN J:
Introduction
The present action was commenced by the plaintiff (TCPL) against the defendants by writ on 29 June 2020. It concerns and raises issues over the intersection of the litigation with a private arbitration earlier commenced, on 12 June 2019 by Built Environs (who is seen as well to be the eight defendant in the litigation) against TCPL.
The seventh defendant, Mr Fisher, is an engineer who acts as the arbitrator in that pending arbitration, which has been on foot for some 16 months and is proceeding. I was advised that the arbitration has been set down and listed for a final hearing over five days in the week of 8 March 2021.
The remaining defendants in the litigation are insurers. Whilst not named parties to the arbitration, it does not appear to be disputed that through the arbitral claimant, Built Environs, those insurers are exercising subrogated rights to recover their outlays as against TCPL under the arbitration.
Background
Under a head construction contract of 19 December 2012, Built Environs had been engaged as the principal contractor by AMP Royal Randwick for the purpose of expansion works during 2013 - 2014, at the Ocean Keys Shopping Centre in Clarkson, Western Australia (Head Contract).
TCPL and Built Environs then became parties to a subcontract as entered on 4 May 2013 and concerning TCPL providing the design and post tensioning works required for a cement slab to be constructed and installed on the roof level carpark of that shopping centre (Subcontract).
By the terms of their Subcontract, TCPL and Built Environs agreed, in effect, to refer any disputes arising between them to arbitration: see cl 42 and, in particular, cl 42.3 of the Subcontract. The precise terms of those parties' arbitration clause which, for present purposes, is agreed to be an 'arbitration agreement' engaging with the terms of the Commercial Arbitration 2012 (WA) (CA Act) are explained in detail, later in these reasons.
In 2014, issues emerged over the fitness for purpose of the concrete roof slab at the shopping centre by reason of cracking, resulting in water leakages and then, in grievances from occupants of the retail complex at the shopping centre, who were affected by water ingress. Those problems ultimately led to rectification work made to the concrete slab and undertaken by Built Environs - who duly expended in excess of $3 million on works and measures to address all the manifested concrete slab problems (slab rectification work).
The insurance policies
By reason of the required rectification works to the problematic original concrete slab, Built Environs made a claim for indemnity under two insurance policies it had caused to be taken out in respect of risks around this shopping centre expansion work. The first of the policies was a construction risks material damage policy granting coverage for the period between 1 June 2014 and 31 May 2017 (the CAR policy).
The second insurance policy upon which Built Environs also claimed was a professional indemnity policy applicable in the period between 31 May 2014 and 31 May 2015 (the PI policy).
The first, second, third and fourth defendants to the litigation are relevantly, the insurers under the CAR policy. The fifth and sixth defendants are the relevant insurers under the PI policy.
The insurers under both these policies appear to have at least partly indemnified Built Environs in respect of its expenditure and outlays as incurred in undertaking the slab rectification work.
Built Environs' loss and damage
Upon the case of TCPL as plaintiff, the insurers under the CAR and PI policies have provided indemnity to Built Environs in respect of the loss and damage expenditure incurred in carrying out the slab rectification work. Correlatively, TCPL says the same insurers have compensated those who were claiming on the basis of accrued physical or economic damage resulting from the water issues around the concrete slab.
However, as was explained by senior counsel for Built Environs, some of the expenditure outlaid by Built Environs in undertaking the slab rectification work has not been fully indemnified by any insurer. The consequence is that Built Environs has remained directly exposed to meet such losses itself (see ts 9 - 10).
It seems apparent that Built Environs (and its indemnifying insurers) considered TCPL to be responsible for the concrete slab deficiencies. As such, TCPL is also considered responsible for all related damage, arising out of what has been contended to be poor or inadequate workmanship on the part of TCPL and/or its employees or agents - in relation to performing the post tensioning works on the slab that TCPL had been engaged to perform by Built Environs under the Subcontract.
In consequence of unresolved disputation over that attempted attribution of legal responsibility (which TCPL would not accept), on 12 June 2019, Built Environs commenced a local arbitration against TCPL - and therein seeking to recoup all its loss and damage (both as indemnified and not indemnified) against TCPL.
Of course, to the extent Built Environs' indemnified losses were being pursued in the arbitration, that claim against TCPL was a manifestation of Built Environs' CAR and PI insurers effectively exercising, in the name of their insured, rights of subrogation as insurers to recoup their outlays from the party considered ultimately responsible. In respect of indemnified losses, Built Environs would hold any funds recouped (by way of recovered loss and damage the subject of any arbitral award against TCPL) on a constructive trust for the benefit of its indemnifying insurers: see Castellain v Preston (1883) 11 QBD 380 and Morley v Moore [1936] 2 KB 359.
The arbitration - parties
The parties to the arbitral proceedings as conducted before Mr Fisher are only Built Environs, as claimant, and TCPL, as respondent. Nevertheless, under the CA Act there is an expanded definition for the term 'parties'. By the definitions and rules of interpretation under s 2(1) of that Act, the term 'party' is defined as:
party means a party to an arbitration agreement and includes -
(a)any person claiming through or under a party to the arbitration agreement; and
(b)...
(my emphasis in bold)
As mentioned here, the relevant arbitration agreement is found in the Subcontract entered into as between Built Environs and TCPL of April 2013.
By the CA Act's expanded definition of 'party', to the extent that it is subrogated claims in respect of which Built Environs has been indemnified by the first to sixth defendants as a relevant CAR or PI policy insurer, then those indemnifying insurers of Built Environs clearly will meet that CA Act expanded definition of the term 'party' (to the arbitration agreement).
I return in due course to examine the precise terms of the parties' arbitration agreement within the Subcontract. Before that, however, I turn to elaborate on the current litigation in this court and by which TCPL as plaintiff brings action against all six defendants who are insurers, as well as Mr Fisher, as seventh defendant, and lastly, against Built Environs as eighth defendant.
The litigation in this court - CIV 1721 of 2020
The essential grievance sought to be litigated in this court (in CIV 1721 of 2020) by TCPL as plaintiff against all eight defendants (with the arbitrator, Mr Fisher, as the seventh defendant, not participating and filing a memorandum of appearance essentially abiding by the court's decision), is to the effect that TCPL is also an insured, along with Built Environs, under both the CAR policy and the PI policy. But that is a matter heavily in dispute.
The relevant insurers have obviously denied any indemnification to TCPL under those policies.
By the present action TCPL contends the CAR and PI insurers (the first through sixth defendants) have wrongly 'commenced the Arbitral Proceedings' (as defined). TCPL first says this conduct is in breach of certain express terms as found within the relevant insurance policies as issued by each of the insurers (see par 31 of TCPL's statement of claim dated 29 June 2020 endorsed to the writ (SOC)).
For the CAR policy, breaches are contended by TCPL in respect of cl 6.1, cl 6.8.1 and cl 6.8.5. For the PI policy, a breach of cl 7.10 is contended for.
As a part of those contentions, TCPL goes beyond merely contending is it another insured - that it is equally to be indemnified along with Built Environs in respect of relevant insured risks under both policies. TCPL goes even further to say that even if it is not to be regarded as an insured, that as a subcontractor of Built Environs in respect of the post tensioning works, that the terms of each relevant CAR or PI policy will still be engaged to expressly deliver for it what is the benefit of the waiver of subrogation promises as made therein by the insurers. TCPL contends that those waiver terms see each insurer promise, in effect, to not pursue any rights of subrogation they enjoy as against TCPL: again see cl 6.1 and cl 6.8.5 of the CAR policy and cl 7.10 of the PI policy.
Thus, argues TCPL, in consequence of it either being a party that is, along with Built Environs, another insured and, therefore a beneficiary of cover under both policies or, further and alternatively, is an entity that is a beneficiary of the waiver of subrogation rights as promised by each insurer, that thereby the present arbitral proceedings as currently pursued against it before Mr Fisher by Built Environs are wrongful and should not be allowed to continue.
By its SOC prayer for relief, TCPL seeks declarations from this court that it is an insured under both the CAR policy and the PI policy, in respect of the loss and damage sustained by Built Environs caused by the water ingress and slab rectification work during the defects liability period.
Under prayer C of the SOC, TCPL seeks to restrain all the defendant insurers, as well as Built Environs, against taking a step in any court concerning 'the defects that manifested in the concrete slabs at the Ocean Keys Shopping Centre'.
Even more fundamentally, under its prayer D, TCPL seeks injunctive relief against all defendants (including Built Environs and Mr Fisher as arbitrator) restraining them from:
... taking any step, either directly or indirectly, to continue with the arbitration purported to have been commenced by the first to the sixth and the eighth defendants against the plaintiff in Western Australia, by the appointment of the seventh defendant as the arbitrator pursuant to clause 42 of the Sub Contract between the plaintiff and the eighth defendant dated April 2014 [sic] concerning the concrete slabs at the Ocean Keys Shopping Centre.
TCPL also pursues the defendants for damages and costs in the present civil action.
The present application to stay the litigation
The application under determination was filed on 7 August 2020. It is brought by seven of the eight defendants (save for Mr Fisher) against TCPL, seeking orders that:
1.The action is and be stayed until further order (as an abuse of process and contrary to the Commercial Arbitration Act 2012 (WA));
2.A declaration that, insofar as the plaintiff by the action seeks to restrain the seventh and eighth defendants from continuing with the relevant arbitration, the plaintiff is requesting that the Court contravene section 5 of the Commercial Arbitration Act 2012 (WA);
3.In the alternative to order 1, insofar as the action purports to bind the seventh and eighth defendants to asserted constructions of the relevant Subcontract and to restrain them from continuing with the relevant arbitration, the action is and be stayed until further order;
4.An order under section 8(1) of the Commercial Arbitration Act 2012 (WA) referring the plaintiff and seventh and eighth defendants to the arbitration commenced by the eighth defendant's notice of arbitration dated 12 June 2019;
...
In essential terms, the defendants (save for Mr Fisher) apply to temporarily stay the present litigation of TCPL, either under s 8 of the CA Act, or as a matter of discretion, under the court's inherent jurisdiction, or as an abuse of the processes of the court.
The underlying theme of the present application by the defendants is that the arbitral issues in controversy and pending an imminent determination at the March 2021 arbitration before Mr Fisher are, essentially, the same as, or will intersect significantly (even if not assessed as precisely co‑extensive) against what TCPL is essentially litigating about in this civil action.
By the present application the defendants complain that the same, or what are significantly overlapping, issues are being pursued by TCPL, such that either:
(a)section 8 of the CA Act mandates TCPL's litigation be stayed and the parties be referred to the arbitration which is pending before Mr Fisher for a determination of these issues; or
(b)the court as a matter of discretion given, an overlap of issues and a potential for inconsistent findings ought, as a matter of discretion, stay this action so that the insurance coverage issues or waiver of subrogation rights which are contended for by TCPL are all resolved within the arbitral forum before Mr Fisher.
Needless to say, TCPL resists the stay application brought by the seven defendants. Its position is that, in effect, whilst there may well be some overlap as to common issues, that the parties are different in the litigation and that, because TCPL says it seeks no relief against Built Environs in this action that TCPL should be allowed to continue the litigation.
Evidence relied upon on the present stay application
The applicant defendants read and rely on an affidavit of a Mr Shane Murphy affirmed 7 August 2020 (of some 578 pages) (first Murphy affidavit). This affidavit contains the Head Contract (SMM 1), the Subcontract (SMM 2) and various other documents including insurance policies and arbitral documents.
Mr Murphy also filed a further short affidavit affirmed 24 August 2020 (second Murphy affidavit). That affidavit essentially updated the court with more contemporary information concerning the progress of the arbitration before Mr Fisher.
For TCPL as respondent, it reads and relies upon two affidavits sworn by one of TCPL's lawyers of record in this action. The affidavits are by Mr Stuart Lachlan Moore, affirmed 8 October 2020 (first Moore affidavit) and at 23 October 2020 (second Moore affidavit), respectively.
Sections 5 and s 8 of the CA Act
It may be helpful if I first set out the terms of s 5 and then s 8 of the CA Act, which are heavily relied upon by the applicant defendants to support the present stay application.
Section 5 provides:
In matters governed by this Act, no court must intervene except where so provided by this Act.
Section 8 of the CA Act says:
(1)A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests, not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(2)Where an action referred to in subsection (1) has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.
Looking at the CA Act, I should also mention the terms of s 7(1), as regards its definition of the term 'arbitration agreement'. Section 7(1) says:
An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
I have earlier mentioned as well the expanded definition of the term 'party to an arbitration agreement', under s 2(1) of the CA Act.
The arbitration agreement in the Subcontract
I turn now to examine the terms of the parties' arbitration agreement, as found within the Subcontract.
Clause 42, relevantly, is located within the Australian Standard Subcontract Conditions, but see also item 35 of Pt A (first Murphy affidavit SMM 2, page 111).
I turn to dispute resolution cl 42, within Pt B of the Subcontract (first Murphy affidavit SMM 2, page 303). It reads:
42Dispute resolution
42.1Notice of dispute
If a difference or dispute (together called a 'dispute') between the parties arises in connection with the subject matter of the Subcontract, including a dispute concerning:
(a)a Subcontract Superintendent's direction; or
(b) a claim:
(i) in tort;
(ii) under statute;
(iii) for restitution based on unjust enrichment or other quantum meruit; or
(iv) for rectification or frustration,
or like claim available under the law governing the 'Subcontract',
then either party shall, by hand or by registered post, give the other and the Subcontract Superintendents a written notice of dispute adequately identifying and providing details of the dispute.
Notwithstanding the existence of a dispute, the parties shall, subject to clauses 39 and 40 and subclause 42.6, continue to perform the Subcontract.
42.2Conference
...
42.3Arbitration
Subject to subclause 42.4, if within a further 14 days the parties have not agreed upon an arbitrator, the arbitrator shall be nominated by the person in Item 35(a). The arbitration shall be conducted in accordance with the rules in Item 35(b).
The application for a stay by the defendants
Arguments favouring
To better understand the expressed basis for the stay application as advanced by all defendants (save for Mr Fisher) against TCPL, it is necessary to obtain some better insight in relation to the matters being referred and to be determined by Mr Fisher within that arbitration.
The arbitration notice may be seen at the first Murphy affidavit SMM 7, pages 464 - 470.
It is convenient to relate a summary of the conduct of the arbitration history which is taken from pars 14 through 17 of the applicant defendants' outline of submissions filed in support of the application on 18 September 2020. These paragraphs explain:
14.By Arbitration Notice dated 12 June 2019, Built Environs (in its own right and as subrogee vis-à-vis the Insurers as subrogor) commenced the arbitration against Tensioned Concrete to recover these losses [in the amount of $3,748,466.58] with interest and costs.
15.On 27 September 2019, the Arbitrator determined he had jurisdiction. This ruling on jurisdiction was final and binding.
16.Built Environs and Tension Concrete have exchanged detailed statements of claim, defence and crossclaim in the arbitration. Built Environs has produced an expert report by a structural engineer. Tension Concrete's expert evidence is due on 2 October 2020 and a merits hearing is listed for 8 - 12 March 2021.
17.By its cross-claim in the arbitration, Tensioned Concrete alleges that Built Environs has breached its insurance obligations in the Head Contract and in the Subcontract and seeks a stay of the arbitration and damages. The allegations of breach are to the effect that the arbitration is not maintainable because Tensioned Concrete is or was required by the Head Contract and the Subcontract to be a co-insured with the benefit of cross-liability and waiver of subrogation provisions.
The arbitral defence and cross-claim of TCPL, insofar as they articulate there the contended breach of Built Environs' insurance obligations, as an allegation raised by TCPL itself within the arbitration, are a significant matter. The significance lies in the intersection or overlap as between what TCPL has thereby itself sought to raise before Mr Fisher in the arbitration, measured against the issues and relief that is pursued in the present litigation by TCPL as plaintiff.
Arguments against
As I understood the submissions advanced for TCPL, some intersection and overlap as between disputed insurance coverage issues in the arbitration, measured against what is raised by its SOC in the present litigation, is accepted (see ts 47 - 48, 78 - 79).
But TCPL in arguing against a stay says that, first, the parties are different, as the six insurer defendants to the present litigation are not parties to the arbitration, which is being pursued only as between Built Environs and TCPL.
Second, it appears to be said for TCPL that because the insurers are defendant parties to this litigation, and not to the arbitration, that this court is obliged, irrespective, to determine all issues as raised by it in the litigation. Further, TCPL says that no relief is being sought against Built Environs vis-à-vis the arbitration under the present litigation.
Third, it is also contended by TCPL, in effect, that this court holds undoubted in personam jurisdiction to determine the matters as raised under TCPL's SOC against all defendants, so that a potential for an intersection or overlap as between matters presenting in the arbitral proceeding and in this litigation, should not be of any concern to the court. Specifically, it is put for TCPL that s 8(1) of the CA Act is not engaged and, further, that this court ought not exercise any discretion in favour of granting a stay of this litigation.
To evaluate all those contentions put against a stay by TCPL, it is necessary to scrutinise more closely the current iterations of the arbitral defence and cross-claim pleadings by TCPL as against Built Environs within the pending arbitration.
TCPL's arbitral pleadings
The arbitral pleadings recently altered by a further amended defence and a further amended cross-claim, each filed on behalf of TCPL by its lawyer on 13 October 2020, in the arbitration. These current iterations are found in the second Moore affidavit at SLM‑1 and will be referred to as TCPL's FAD and FACC respectively.
It ought also to be noted, in the overall regime of disputation, that TCPL refutes and does not accept on its part any of the breach of contract, negligence or misleading and deceptive conduct liability contentions as regards its allegedly defective workmanship concerning the post tensioning of the concrete slab at the Ocean Keys Shopping Centre. TCPL does not accept any deficiencies in that respect as regards its post tensioning work in relation to cracks in the concrete slab.
But beyond TCPL's engineering based merits defence stance taken in the arbitration, TCPL also goes further to contend the subrogated arbitral recovery proceedings brought against it, in effect, by the CAR and PI insurers of Built Environs, are bad for reasons aside from their lack of underlying factual and engineering merit. TCPL advances to say they 'are not maintainable for reasons pleaded in the [TCPL's] Cross Claim' (see par 34 of the FAD).
Under specific paragraphs of its FACC, TCPL within the arbitration before Mr Fisher, is seen to contend at par 14, in effect, that as a matter of the proper construction of the Head Contract and of the Subcontract, and of various clauses therein (pleaded at par 6 of the FAD), that there arose an agreement, in effect, that the sole redress for recovery of loss would be via insurance and there would be no recovery action against TCPL.
By par 15 of its arbitral FACC, TCPL therefore pleads:
15.In circumstances where:
a.it is common ground that the arbitral proceedings are a subrogated recovery action brought by the insurers of the 2 Policies then Built has commenced the arbitral proceedings in breach of the Insurance Covenants in that Built has either:
i.failed to ensure that the 2 Policies contain cross liability and waiver of subrogation clauses such that the Arbitral Proceedings are not maintainable; or
ii.Built has assisted the Insurers of the 2 Policies to bring the Arbitral Proceedings which are not maintainable on a proper construction of the 2 Policies. [Referring to various clauses within each policy.]
By that same FACC pleading put against Built Environs in the arbitration, TCPL seeks damages seen as cross-referenced back to its claim for loss advanced by reference to TCPL's legal costs and disbursements under par 16(a), including the costs of defending both the arbitral proceedings and the civil litigation in this court.
Determinations
The overlap of common issues
It may be seen that by its FACC, it is TCPL itself that pleads into issue before the arbitrator the very contention that TCPL is, in fact, a beneficiary of insurance coverage under the CAR and PI policies. TCPL's counsel, Ms Chan, in effect accepted this. Alternatively, at minimum, TCPL pleads that no subrogated recovery action may legitimately be taken against it. This is on the basis of an agreed waiver of subrogation favouring TCPL (with such a broadly expressed waiver not necessarily being commensurate with the extent of the insurance cover available under either policy).
Issues raised concerning TCPL's insurance coverage under the arbitral FACC plainly overlap with and intersect against pleaded contentions now seen as advanced within the litigation - and concerning TCPL either being an insured under the CAR and PI policies, or being at least a beneficiary of waiver of subrogation promises favouring TCPL. As mentioned, TCPL seeks accordingly in the litigation that the defendant insurers are all inhibited from advancing a subrogation recovery action against it in the arbitration. The very arbitration itself is sought to be restrained by TCPL under its prayer for relief seen as prayer D in its SOC in these proceedings.
The extent of the overlap as between issues in the litigation and issues in the arbitration, especially by reason of what has been raised by TCPL under its FACC within the arbitration, is extensive.
To that end, I accept the submission of the applicant defendants that within this litigation, TCPL, in effect, is asking the court to deal with like, or very similar, issues to those as are raised under the arbitral FACC and as regards TCPL seeking to have this court:
·construe the same insurance provisions of the Head Contract and the Subcontract;
·make findings as to Built Environs' performance or alleged breach of those insurance provisions of the Head Contract and the Subcontract;
·construe [the] contracts of insurance;
·make findings as to the Insurers' alleged breach of those contracts of insurance;
·find, in effect, that [TCPL] is or is required by the Head Contract and the Subcontract to be a co-insured with the benefit of cross‑liability and waiver subrogation provisions;
·restrain the arbitration;
·require ... parties (Built Environs, the Insurers or all of them) to pay damages; and
·bind Built Environs, the Insurers and the Arbitrator to determinations made within the litigation.
(see par 21 of the applicant defendants' submissions of 18 September 2020).
The applicant defendants further highlight, properly, that the term 'disputes' is seen to be expressed broadly under cl 42.1 of the Subcontract arbitration clause. It therefore extends to embrace the wider disputes as between the parties 'in connection with' the subject matter of the subcontract.
The defendants further point out that it is not necessary that all controversies as between an arbitration and litigation be entirely co-extensive: see Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77 per Quinlan CJ at [119] - [122], referring there to case authorities supporting that well recognised and established proposition, including Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 at [68].
Here, it is tolerably clear that most of the controversy sought to be raised under the litigation by TCPL as plaintiff also forms a component of the dispute which is also the subject of the arbitration agreement and, beyond that, which is now currently pending for hearing in a March 2021 determination before the arbitrator.
I have already referred to the terms of s 8(1) of the CA Act. Given a pending arbitration final hearing in March 2021, it is redundant presently to refer the litigating parties to arbitration. They are already in that arbitration.
The parties to litigation and arbitration
I must also reject the argument of TCPL to the effect that the litigating and arbitrating parties are different. Given the already seen extended definition of 'parties' by reference to s 2(1) of the CA Act, it is plain that the defendant subrogor insurers, to the extent that they pursue a subrogated recovery claim through Built Environs as claimant in that arbitration against TCPL to recoup indemnified losses, will clearly meet the description of persons that are claiming through or under Built Environs as parties to the arbitration agreement, as it presents under cl 42 of the Subcontract and, indeed, thereby, to the arbitration itself.
The applicant defendant insurers, I agree, must, along with Built Environs, necessarily be bound ultimately by the effect of the arbitrator's award, including in relation to any decisions upon TCPL's FACC. The subrogated rights of those insurer defendants derive from and so are inextricably tied to the arbitrator's determination against Built Environs in the arbitration. The insurers' subrogation rights are wholly aligned with and cannot rise any higher than those of their subrogee, Built Environs.
Non-intervention of a court
I also accept a primary submission of the applicant defendants to the effect that where a matter is governed by the CA Act, a court must not intervene, except where the Act permits (s 5). Here the arbitral proceedings now pending for hearing in March 2021 are clearly governed by the CA Act.
To that end, I mention again the observations of Quinlan CJ in Hancock Prospecting Pty Ltd v DFD Rhodes at [299] - [300] and [322], as regards the purpose of s 5 of the CA Act. Matters currently raised under TCPL's arbitral FACC as regards insurance coverage, alleged breach of the insurance policies and waiver of subrogation are, by the terms of s 5, 'matters governed by this Act'. They are matters towards which this court, by the clear terms of s 5, must not intervene. Given that firm constraint and a demonstrable intersection of those insurance coverage issues between the arbitration with in this litigation, there can be no basis for this court to injunct Built Environs or the arbitrator from proceeding with the arbitration. Section 5 of the CA Act is engaged. The court will not intervene.
Consequently, the appropriate order is to temporarily stay the present action.
Whether court should exercise its inherent power
It is not strictly necessary to advance to consider the applicant defendants' alternative basis for a stay by reason of the court exercising its general or inherent powers. That question, of course, would raise with it issues of discretion.
It is established that the court might exercise its general or inherent powers to that end as Randerson J of the High Court of New Zealand has observed in Carter Holt Harvey Ltd v Genesis Power Ltd [2006] 2 NZLR 794 at [61], in terms:
It is possible to envisage a case where there is such a substantial degree of overlap of factual or legal issues that it would be inappropriate for both Court and arbitral proceedings to proceed simultaneously, even if the matters in the Court proceeding were not the subject of an arbitration agreement in a way which would engage [the equivalent of s 8 of the CA Act].
The principles towards a general application seeking a stay of litigation were articulated by Quinlan CJ in Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd and later, were adopted and summarised by Beech and Vaughan JJA in Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77 (S) at [31(1)]. Relevant to the present litigation, relevant considerations towards a stay would include:
•which proceeding was commenced first;
•whether the termination of one proceeding is likely to have a material effect on the other;
•the undesirability of two courts competing to see which of them determines common facts first;
•whether work done on pleadings, particulars, discovery, interlocutories and preparation might be wasted;
•the undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues;
•how far advanced the proceedings are in each court;
•the law should strive against permitting multiplicity of proceedings in relation to similar issues; and
•generally balancing the advantages and disadvantages to each party.
Clearly here, all the above considerations would, if the question were actively under a discretionary consideration, overwhelmingly favour the staying of the present litigation on a temporary basis, in order to allow the substantive issues raised, particularly under the TCPL's FACC, to be resolved within the arbitration.
By contrast, the current litigation commenced by writ as CIV 1721 of 2020 is essentially still in its infancy. See also considerations as identified at [333] by reference to Quinlan CJ's appeal reasons in Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd at (a) through (f).
Against such considerations TCPL, by tranches of responding written submissions of 12 October and 23 October 2020 and verbally by counsel at the hearing on 27 October 2020, have essentially not engaged with those considerations. I have already rejected the arguments of TCPL concerning a contended differentiation over parties. The attempted distinction is not one of realistic substance, bearing in mind the engagement with the extended definition of 'parties' under the CA Act s 2(1), as already mentioned. I also reject the TCPL contention that no relief is being sought against Built Environs or Mr Fisher in the litigation. Demonstrably, an examination of the SOC prayer for relief, prayer D in particular, signals directly to the contrary.
A hefty component of the first tranche of TCPL's submissions had sought by analogy of reasoning, to extract support out of a collection of English cases where there had been factually, in effect, complex jurisdictional choice clashes between different contracts variously choosing different forum jurisdictions, which clashes required resolution. In particular, counsel for TCPL referred me to Airbus SAS v Generali Italia SPA [2019] 2 Lloyd's Rep 59; Credit Suisse First Boston (Europe) Ltd v MLC (Bermuda) Ltd [1999] 1 Lloyd's Law Reports 767; UBS AG v HSH Nordbank AG [2010] 1 All ER (Comm) 727 and Sebastian Holdings Inc v Deutsche Bank AG [2011] 1 Lloyd's Law Reports 106. However, and with respect to the careful submissions put by reference to those English decisions, I do not assess any of them to be presently relevant to the issues confronting me on the present application of the defendants.
This court undoubtedly now holds in personam jurisdiction over all eight defendants who have all entered appearances unconditionally submitting to this court's jurisdiction in CIV 1721 of 2020. But the question is not whether this court holds jurisdiction over those parties. Plainly, it does.
The true question is only whether in exercising its undoubted jurisdiction this court is either obliged by s 5 of the CA Act, or should, as a matter of discretion, to stay its hand, in terms of the progress of the litigation - so as to allow for the pending arbitration proceedings under way to proceed to their March 2021 determination - and where a good many of the very same issues are raised there by TCPL. In my view, it must and should. No convincing argument to the contrary, on my evaluation of the application, has been articulated by TCPL.
Conclusion
Consequently, a temporary stay order must follow, given a substantive overlap of issues in terms of matters that are canvassed by reason of the parties' arbitration agreement and now, as illustrated by the FACC of TCPL filed in the arbitration.
A temporary stay order of this action should issue accordingly. I will hear the parties in due course concerning any other issues as to costs, if they remain in dispute post conferral, after publication of these reasons.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DW
Associate to the Honourable Justice Martin27 NOVEMBER 2020
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