Town of Port Hedland v Melreef Pty Ltd - [2023] WADC 147

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   TOWN OF PORT HEDLAND -v- MELREEF PTY LTD [2023] WADC 147
CORAM:   WALLACE DCJ
HEARD:   26 OCTOBER 2023
DELIVERED          :   6 DECEMBER 2023
FILE NO/S:   CIV 4303 of 2022
BETWEEN:   TOWN OF PORT HEDLAND
Plaintiff
AND
MELREEF PTY LTD
Defendant

Catchwords:

Stay application - Commercial Arbitration Act 2012 (WA) - Identification of 'matter' in dispute - Whether an action has been brought in a 'matter' - Whether the 'matter' arises under the arbitration agreement - Whether the 'matter' is capable of resolution at arbitration

Legislation:

Commercial Arbitration Act 2012 (WA), s 8(1)
Fire and Emergency Services Act 1998 (WA), s 3A(a)(i), s 36D, s 362
Land Administration Act 1997 (WA)
Local Government Act 1995 (WA), s 1.4(a)(ii), s 6.33, s 6.44, s 6.56, s 6.76(1)(b)
Valuation of Land Act 1978 (WA), s 32, s 33(1)

Result:

Application dismissed

Representation:

Counsel:

Plaintiff	:	Mr T B Bradley
Defendant	:	Mr V N Ghosh

Solicitors:

Plaintiff	:	Cove Legal
Defendant	:	CS Legal

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

Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54; (1977)17 ALR 513; (1977) 52 ALJR 254
Attorney General (NSW) v Quin [1990] HCA 21; (1990) 170 CLR 1; (1990) 64 ALJR 327; (1990) 93 ALR 1; (1990) 18 ALD 77; (1990) 33 IPR 263; (1990) 33 IR 363
Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52
Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45
Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206
Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77; (2020) 55 WAR 435
North West Pilots Pty Ltd as trustee for the Port Hedland Pilots Unit Trust t/as Port Hedland Pilots v Daniel [2023] WASCA 122
Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13
The Watson's Bay and South Shore Ferry Company Ltd v Whitfield [1919] HCA 69; (1919) 27 CLR 268; (1919) 20 SR (NSW) 438; (1919) 37 WN (NSW) 26
Tianqi Lithium Kwinana Pty Ltd v MSP Engineering Pty Ltd [No 2] [2020] WASCA 201; (2001) 56 WAR 169
Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 24] [2023] WASC 393

WALLACE DCJ:

Introduction

The plaintiff in the proceeding, the Town of Port Hedland (Town), filed a statement of claim with the court on 9 February 2023 seeking to recover local government rates, service charges and emergency services levies (collectively Rates) in relation to a parcel of land which the Town has leased to the defendant in the proceeding, Melreef Pty Ltd (Melreef).
The Town alleges that, in effect, Melreef has a statutory obligation to pay the Rates pursuant to relevant provisions of the Local Government Act 1995 (WA) (LG Act) and the Fire and Emergency Services Act 1998 (WA) (FAES Act). The Town further contends that Melreef's statutory liability is confirmed within the terms of the lease the parties entered, in respect of the relevant parcel of land. The Town also claims interest and costs in the proceeding. Melreef is yet to file a defence or counterclaim.
By way of chamber summons filed with the court on 19 June 2023, Melreef seeks orders pursuant to s 8(1) of the Commercial Arbitration Act 2012 (WA) (CA Act), that the proceeding be stayed 'pending the outcome of an arbitration of the dispute'. Unusually, Melreef does not seek orders for any part of the proceeding before this court to be referred to arbitration. No arbitration proceeding is currently on foot in relation to any dispute arising between the parties. The Town opposes the application.
In support of the application, Melreef filed two affidavits of Roger Andrew Blow sworn 16 June 2023 and 26 October 2023. The Town filed an affidavit of Timothy Burton Bradley affirmed on 19 July 2023 in opposition.
Both parties filed written submissions with the court and made oral submissions at the hearing of the application before me on 26 October 2023.
For the reasons which follow, the application should be dismissed.

Factual background

On 12 September 1975, Crown land reserve 33593 was created for the purpose of a stock holding yard on land within the district of the Town (Reserve).
On 16 September 1999, the Minister for Lands issued a management order pursuant to the Land Administration Act 1997 (WA) designating that the care, control and management of the Reserve be placed with the Town with a power to lease the Reserve for any term not exceeding 21 years, subject to ministerial approval. The Reserve was reduced in size in 2014 by way of order made by the Minister for Lands and was then registered as Lot 364 on Deposited Plan 42164 (Crown land).
The Crown land was let to the defendant from 1 July 2007 and upon the expiration of that lease, the parties entered a further 10‑year term lease on 1 July 2015 (Lease). The Schedule to the Lease identifies that the Crown land be used 'solely for the purposes of stock holding yards and other purposes associated with stock holding yards'. The Lease contains the following relevant provisions:
5.Rent and other payments
The Lessee covenants with the Lessor:
5.1Rent
To pay to the Lessor the Rent in the manner set out at Item 5 of the Schedule on and from the Commencement Date clear of any deductions.
5.2Rent Review
(1)The Rent will be reviewed by CPI on and from each Rent Review Date to determine the Rent to be paid by the Lessee until the next Rent Review Date.
(2)The CPI rent review will increase the amount of Rent payable during the immediately preceding period by the percentage of any increase in CPI having regard to the quarterly CPI published immediately prior to the later of the Commencement Date or the last Rent Review Date as the case may be and the quarterly CPI published immediately prior to the relevant Rent Review Date. If there is a decrease in CPI having regard to the relevant CPI publications the Rent payable from the relevant Rent Review Date will be the same as the Rent payable during the immediately preceding period.
(3)Notwithstanding the provisions of this clause, the Rent payable from any Rent Review Date will not be less than the Rent payable in the period immediately preceding such Rent Review Date.
(4)The Lessor may institute a rent review notwithstanding the Rent Review Date has passed and the Lessor did not institute a rent review on or prior to that Rent Review Date, and in which case the Rent agreed or determined shall date back to and be payable from the Rent Review Date for which such review is made.
5.3Outgoings
(1)To pay to the Lessor or to such person as the Lessor may from time to time direct punctually all the following outgoings or charges, assessed or incurred in respect of the Land:
(a)local government rates, services and other charges, including but not limited to rubbish collection charges and the emergency services levy;
(b)water, drainage and sewerage rates, charges for disposal of stormwater, meter rent and excess water charges;
(c)telephone, electricity, gas and other power and light charges including but not limited to meter rents and the cost of installation of any meter, wiring or telephone connection;
(d)any other consumption charge or cost, statutory impost or other obligation incurred or payable by reason of the Lessee's use and occupation of the Land.
(2)If the Land is not separately charged or assessed the Lessee will pay to the Lessor a proportionate part of any charges or assessments referred to in clause 5.3(1) being the proportion that the Land bears to the total area of the land or premises included in the charge or assessment.
…
13.4No Fetter
Notwithstanding any other provision of the Lease, the Parties acknowledge that the Lessor is a local government established by the Local Government Act 1995, and in that capacity, the Lessor may be obliged to determine applications for consents, approvals, authorities, licences and permits having regard to any written law governing such applications including matters required to be taken into consideration and formal processes to be undertaken, and the Lessor shall not be taken to be in default under this Lease by performing its statutory obligations or exercising its statutory discretions, nor shall any provision of this Lease fetter the Lessor in performing its statutory obligations or exercising any discretion.
…
21.Disputes
21.1Referral of Dispute: Phase 1
Except as otherwise provided any dispute arising out of this Lease is to be referred in the first instance in writing to the Lessor's Representative as nominated in writing by the Lessor from time to time (Lessor's Representative) who shall convene a meeting within 10 days of receipt of such notice from the Lessee or such other period of time as is agreed to by the parties between the Lessor's Representative and an officer of the Lessee for the purpose of resolving the dispute (Original Meeting).
21.2Referral of Dispute: Phase 2
In the event the dispute is not resolved in accordance with clause 21.1 of the Lease then the dispute shall be referred in writing to the CEO of the Lessor who shall convene a meeting within 10 Days of the Original Meeting or such other date as is agreed to by the parties between the CEO and a senior representative of the Lessee for the purpose of resolving the dispute.
21.3Appointment of Arbitrator: Phase 3
In the event the dispute is not resolved in accordance with clause 21.2 of this Lease then the dispute shall be determined by a single arbitrator under the provisions of the Commercial Arbitration Act 1985 (as amended from time to time) and the Lessor and the Lessee may each be represented by a legal practitioner.
…
25Statutory powers
The powers conferred on the Lessor by or under any statutes for the time being in force are, except to the extent that they are inconsistent with the terms and provisions expressed in this Lease, in addition to the powers conferred on the Lessor in this Lease.
…
Schedule
…
Item 5Rent
$5,000 (Five thousand five hundred dollars) exclusive of GST payable annually in advance with the first payment due on the Commencement Date.
…
Item 8Rent Review Dates
On the first anniversary of the Commencement Date and annually on that date for the duration of the Term, Further Term and any period of holding over a CPI Review will be undertaken.
The Town has issued rate notices to Melfeef since the commencement of the Lease in 2015. Melreef did not make any payments in relation to those notices between 1 July 2015 and 14 April 2019. Between 15 April 2019 and 27 February 2020 Melreef made partial payments in respect to rate notices issued to it by the Town.
It appears that one of the reasons why Melreef has refused to pay rate notices issued to it, is due to its dissatisfaction with the valuation of the Crown land and thus, the determination of rates which are payable by it. Since 1 July 2015, Melreef has lodged several successful objections to valuation pursuant s 32 of the Valuation of Land Act 1978 (WA) which resulted in reductions to the rates payable for rating years ending 30 June 2016, 30 June 2017, 30 June 2019, 30 June 2021 and 30 June 2022.
If Melreef had been dissatisfied with the decision of the Valuer‑General on any of the objections it had made, then pursuant to s 33(1) of the Valuation of Land Act 1978 (WA) it could have, within 60 days after service of the notice of the decision of the Valuer‑General, served on the Valuer‑General a notice requiring referral of the valuation to the State Administrative Tribunal for a review. No such review was sought by Melreef in respect to any decision made by the Valuer‑General.
In early 2018, Melreef raised with the Town whether a differential general rating could be applied to the Crown land pursuant to s 6.33 of the LG Act. In considering Melreef's proposal, the Town was required to review the current rating category of UV Pastoral, which at the time was being rated at 10.5449 cents in the dollar. The Town determined that the rating differential 'UV Pastoral' was an erroneous rating categorisation given the nature and characteristics of the Crown land and determined that it ought to be amended to 'UV Other'. This decision was communicated by the Town to Melreef by way of letter dated 7 June 2018 in which the reasoning for the amendment of the rating category was explained in these terms:
… The reason for this allocation of rating differential is the land is currently zoned 'Rural' under the Town of Port Hedland Local Planning Scheme No.5, and no mining tenement or pastoral lease has been granted in respect of the land. The lot is unable to be rated under GRV Commercial due to the zoning of the land.
…
… As a measure of good faith, the Town will not be amending the 2017/18 rates issued, nor will any back‑rates be applied, however the rating category will be amended to UV Other for the 2018/19 rates generation.
The Town's decision had a significant adverse financial impact on Melreef, approximately doubling the annual rates payable by it. Whilst the option was available to it, Melreef did not seek to object to the amended rating allocation of the Crown land pursuant to s 6.76(1)(b) of the LG Act.
However, Melreef did raise in correspondence with the Town during 2021 its concerns in relation to the increase in the quantum of the rates notices being issued to it in relation to the Crown land. That correspondence was not put before the court and so I have not had the benefit of reviewing its contents.
Correspondence continued to be exchanged between the parties in relation to the issue over the following 12 months, culminating in a letter being sent by Melreef to the Town on 30 July 2022. That letter sought to notify the Town that there was a dispute which required referral to arbitration pursuant to cl 21.3 of the Lease.
Given the degree of ambiguity in the specificity of disputation between the parties, it is important to set out excerpts of the relevant correspondence exchanged between them. In this regard, the 30 July 2022 letter relevantly raised the following matters:
We previously wrote to you concerning the disputed issues arising from the Town of Port Hedland's (ToPH) attempts to dramatically increase the rates payments relating to our client's leased property in our letter dated 12 July 2021. Our letter sought a resolution of that issue.
…
The imposition of a substantial increase in the rates payable on our client's leased property on a date after a new lease, with a substantial further lease term, had been executed between the parties, is a dispute arising in relation to the Lease.
…
In all of the above circumstances, and turning to the dispute resolution protocol prescribed by the relevant lease at clause 21, our client has notified a dispute in writing and that dispute has been the subject of a meeting with ToPH representatives that included the ToPH CEO. The dispute has thus passed through phases 1 and 2 of the dispute protocol, without being resolved.
At clause 21.3 the Lease provides that if a dispute is not resolved at the CEO meeting then the dispute is to be determined by a single arbitrator under the Commercial Arbitration Act 1985, with the legal representation allowed.
Our client therefore hereby notifies the ToPH that the dispute is to be referred to arbitration pursuant to clause 21.3 of the Lease.
…
A response was provided to Melreef on behalf of the Town on 14 September 2022, stating that no dispute had arisen pursuant to the terms of the Lease which was either appropriate or capable of being referred to arbitration. Relevantly that correspondence stated:
Under the Local Government Act 1995 ('LGA'):
1.The Reserve is rateable land - see s 6.26(1) of the LGA;
2.Melreef is deemed the 'owner' of the Reserve and including for the purposes of rating - see s 1.4 'Owner' (a)(ii) of the LGA; and
3.As the deemed owner, Melreef is liable for the outstanding rates and service charges to the Town as the relevant local government, not as lessee - see s 6.56.
Similarly, Melreef is a deemed owner under s 3A 'owner' (a)(i) of the Fire and Emergency Services Act 1998 ('FESA') and liable for the emergency services levies and related costs and interest.
There is no entitlement to refer the Rates Debt for arbitration because it is not a dispute under the Lease. The Lease does not and cannot create the relevant rating liabilities, which are statutory liabilities recoverable as debts under those statutes.
Pursuant to s 6.56 of the LGA and s 36Z of the FESA, and as the local government for the Reserve, the Town now gives notice of its intention to commence District Court proceedings against Melreef for recovery the accrued Rates Debt as well as related costs and interest.
…
Whilst other correspondence was exchanged between the parties during this period, only one other exchange is of relevance to the issues to be determined by this court. In this regard, on 15 September 2022, Melreefs' legal representative communicated the following, inter alia, to the Town's representative:
Turning therefore to what our clients agreed in the Lease with respect to the resolution of disputes and focussing upon what I consider to be the key provisions relevant to our discussion:
•Clause 21 requires that 'any dispute arising out of the Lease' be referred first to a meeting of representatives, then to a meeting of senior executives, and eventually to arbitration.
•It is difficult to envisage wording with any wider ambit than 'any dispute arising out of this Lease'. It was of course open to the parties to seek to carve out any potential disputes from the dispute resolution protocol. They did not consider it necessary to do so. In my opinion (having regard to the authorities on these issues) the Court will give the words used their ordinary meanings.
•Clause 5.3(1)(a) of the Lease establishes an obligation on my client to pay various charges in addition to the Rent, under the heading 'Outgoings'.
•The requirement to pay the rates for the relevant land is an obligation that arises solely by reason of the Lease. Were it not for the Lease, my client would have no such obligation.
In light of the above provisions, my client's position is that the obligation to pay the rates for the relevant land cannot be disassociated or disconnected, commercially or legally, from the Lease as the contractual document giving rise to that obligation as well as many other obligations and benefits. All of the Lease terms, considered together, form the commercial bargain reached between the Parties when entering into that agreement. The obligation to pay rates, and the amount of rates subsequently levied by your client, is merely one commercial term, one factor, in the Lease as a commercial deal.
Legal counsel for the Town responded on 23 September 2022 stating, inter alia, the following:
We agree that clause 21 is the relevant clause for arbitrations under the lease, and that the phrase 'any dispute arising out of this Lease' gives it broad application.
However, we remain of the view that the dispute is not a dispute arising out of the lease, noting:
1.The dispute here is the outstanding local government rates and charges and, as we understand it, contested due to change in the rating basis for the property;
2.While the lease confirms liability for those sums, the lease does not and cannot set the quantum of those sums nor the basis for their rating - those are determined by statute including the Local Government Act 1995, the Fire and Emergency Services Act 1998, and the Valuation of Land Act 1978; and
3.Your client has previously acted consistent with this interpretation (i.e.. It not being an arbitrable issue), lodging successful objections to the related valuations with the Valuer‑Generals office and instead of seeking to arbitrate the matter.

Subsequently, the Town filed a writ of summons with the court on 5 October 2022 claiming statutory debts from monies due and payable by Melreef to the Town in relation to the Crown land pursuant to the LG Act, the FAES Act and related legislation.

Issues to be determined

Given that Melreef seeks a stay of the proceeding pursuant to s 8(1) of the CA Act, a number of factors need to be satisfied as follows:
1.an action must have been brought in a 'matter' which is the subject of an arbitration agreement;
2.a party must request that the court refer the parties to arbitration;
3.the party making the request must do so not later than when submitting the party's first statement on the substance of the dispute; and
4.the arbitration agreement must not be null and void, inoperative or incapable of being performed.[1]
[1] Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 24] [2023] WASC 393 [67].
The first two factors or elements are relevant to the application before the court.
In relation to the first element, it raises three sub‑issues which require resolution as follows:
1.What is the subject matter of controversy or disputation between the parties?
2.Is that controversy a 'matter' in which the action is brought?
3.Is the 'matter' a dispute which arises pursuant to the terms of the Lease, and which is thus, the subject of an arbitration agreement?

Application of the legislative regime to the stay application

Section 8(1) of the CA Act provides:
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.
As to the application of s 8(1) of the CA Act, in Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd, Quinlan CJ observed the following:[2]
The emphasis in the Act is upon the voluntary submission by parties of their disputes to arbitration. By its terms, s 8 provides that when its preconditions are satisfied, the court must refer the parties to arbitration (subject to exceptions which are presently immaterial). Section 8 of the Act confers power on the court, together with a duty to exercise the power in a case where the power arises. If the statutory conditions are satisfied, the court 'must' make an order referring the parties to arbitration. Where, despite agreement by the parties to submit identified disputes to arbitration, one of those parties commences an action in a court in relation to such a dispute, s 8 provides the mechanism for making effectual the parties' agreement as to how their commercial disputes are to be resolved. The mandatory nature of s 8 ensures that the parties to an arbitration agreement are held to their bargain to resolve their disputes by arbitration rather than curial determination.
(citations omitted)
[2] Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [2020] WASCA 77; (2020) 55 WAR 435 [250] (Hancock Prospecting).
It was not in dispute before me that the Lease constitutes an arbitration agreement for the purposes of the CA Act.
The question is therefore whether an action has been brought before this court in a matter that is the subject of the arbitration agreement, that is, which is the subject of the Lease.
The context in which the term 'matter' is used in s 8 of the CA Act requires the court to identify and characterise the controversy or dispute which arises for determination in the proceeding.[3]
[3] Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52 [50].
The identification of the 'matter' or controversy is critical because only then can the court determine if there is any overlap between it and the action which is before the court and, also, whether there is any overlap between it and the arbitration agreement.[4] Only when the essential overlap is established (whatever its degree), is s 8(1) of the CA Act then enlivened.
[4] Hancock Prospecting [119]; North West Pilots Pty Ltd as trustee for the Port Hedland Pilots Unit Trust t/as Port Hedland Pilots v Daniel [2023] WASCA 122 [42].
A 'matter' within the meaning of s 8(1) of the CA Act consists of 'the subject matter in dispute and the substantive questions for determination in the proceedings'.[5]
[5] Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 [238].
Whilst the pleadings assist the court in resolving whether the 'matter' is before the court, they are not determinative of that question.[6] Further, the action before the court need not relate entirely to the 'matter' nor is it necessary for all issues arising in the action to be controversies arising under the arbitration agreement.[7] It also does not matter if the ultimate relief sought in the proceedings cannot be obtained by arbitration, as long as the controversy or 'matter' itself puts in issue a right or liability which is susceptible of resolution at arbitration.[8]
[6] Hancock Prospecting [134].
[7] Hancock Prospecting [194] - [195] (Quinlan CJ).
[8] Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206 [54] (Martin CJ); Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13 [68] (Kiefel CJ, Gageler, Nettle & Gordon JJ).
Whilst ordinarily it is not appropriate for a court, in considering an application for a stay pursuant to s 8 of the CA Act, to consider the merits of the party's contentions in determining whether the dispute constitutes a 'matter' which is the subject of an arbitration agreement, there appear to be two broad exceptions to that usual position:[9]
1.where the party seeking the stay fails to identify any conceivable basis or premise on which the disputed contention rests such that the 'matter' is so imprecise and generalised in nature that it becomes questionable whether a 'matter' in substance exists;[10] and
2.where the 'matter' is not capable of determination by an arbitrator at arbitration.[11]
[9] Tianqi Lithium Kwinana Pty Ltd v MSP Engineering Pty Ltd [No 2] [2020] WASCA 201; (2001) 56 WAR 169 [85] (Tianqi Lithium Kwinana Pty Ltd).
[10] Tianqi Lithium Kwinana Pty Ltd [86].
[11] Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [88].

What is the subject matter of controversy between the parties?

An initial difficulty arose at the hearing of the application before me given the generality and various formulations adopted by Melreef to articulate what it referred to in its application as 'the dispute' which was required to be determined by arbitration.
On the basis of the history of communications exchanged between the parties' legal representatives, it appeared that the dispute related to either one or more of the following:
(a)the basis for the rating categorisation of the Crown land; and/or
(b)the methodology by which quantification of the rates and/or levies had been determined; and/or
(c)Melreefs' obligation to pay local government rates and emergency services levies.
In its written submissions, Melreef also articulated the 'dispute' in various formulations including by way of asserting:
(a)that the Town had fundamentally changed the commercial bargain which had been agreed between the parties under the Lease without providing an adjustment for the impact on Melreef;[12]
(b)that the Town's decision to increase the Rates payable by it was done in a manner not permissible or consistent under the terms of the Lease;[13]
(c)that the Town has 'potentially acted in a manner that is not consistent with law, equity or the terms of the Lease' and as such it is entitled to exercise its rights under the arbitration agreement contained in the Lease to refer 'the dispute' to arbitration;[14]
(d)that the Town unfairly and materially changed the commercial bargain between the parties and acted inconsistently with the Town's obligations as lessor to Melreef as lessee arising under statute, at common law, or in equity;[15] and
(e)that the Town breached its obligations to Melreef under the Lease - whether in contract, in breach of its obligations not to engage in unconscionable conduct, or as a matter of conventional or equitable estoppel.[16]
[12] Defendant's Outline of Submissions dated 26 July 2023, par 7.
[13] Defendant's Outline of Submissions dated 26 July 2023, pars 26 and 34.
[14] Defendant's Outline of Submissions dated 26 July 2023, par 37.
[15] Defendant's Outline of Submissions dated 15 August 2023, par 3.
[16] Defendant's Outline of Submissions dated 15 August 2023, par 36.
It was somewhat difficult for the court to reconcile the written submissions with the correspondence exchanged between the parties. It was also difficult to clearly identify the basis on which the written contentions were founded. For example, it was not identified the mechanism by which an 'adjustment' for the impact of the increase in Rates would be achieved; it was not identified how the Town had acted in an 'impermissible' manner inconsistent with the terms of the Lease; it was not identified what cause/s of action Melreef relied upon in asserting that the Town had acted contrary to law, statute (nor which statute), or equity. With all due respect to Melreef's counsel, the written submissions appeared to reflect a somewhat scattergun approach, without identifying a discernible basis for the contentions made therein.
Thus, the hearing before me largely focussed on the need to identify the point of disputation between the parties, in order to identify the 'matter' in dispute - a crucial point, yet one the parties themselves remained uncertain of.[17]
[17] ts 18 dated 26 October 2023.
At the hearing, it appeared that Melreef largely resiled from its written submissions identified by me at [26]. It also appeared that Melreef was not asserting that the matter in dispute between the parties was any of those identified by me at [25] despite the nature of the correspondence exchanged between them.
During the hearing it became clear that Melreef wished to focus on the 'remedy' to the dispute, as opposed to the dispute itself:[18]
GHOSH MR: The dispute is in relation to the remedies that might be available to [Melreef] under the lease, as a consequence of this change of rating and what we say is the change of the underlying commercial bargain.
[18] ts 6 dated 26 October 2023.
The 'remedies' referred to by counsel for Melreef was the contention that an implied term or terms ought to be read into the Lease either:
(a)forming part of cl 5.3 which acted to limit the ability of the Town to increase the quantum of rates and/or levies beyond a certain threshold amount; and/or
(b)forming part of cl 5.2 of the Lease providing Melreef with an automatic right to seek a review/reduction in rent activated in circumstances in which the Town levied a threshold amount of rates and/or levies.
Melreef submitted to the court that such an implied term or terms would mitigate what was otherwise a fundamental change to the commercial bargain which had been agreed between the parties under the Lease, and to effectively provide an adjustment for that fundamental impact.
Melreef did not identify the relevant constructive limit or threshold amount of rates and/or levies which would be specified in either implied term.
Melreef appropriately conceded at the hearing that the 'remedy', as articulated during the course of the hearing, had never previously been communicated to the Town. That is certainly apparent given the extracts taken from the parties' communications set out at [16] - [19].

Whether an action has been brought in a 'matter'

Despite the various attempts by Melreef to formulate what is the nature of the controversy between the parties, what ultimately became clear to the court, is that the 'matter' in dispute is the rating differential applied to the Crown land over time, culminating in the 2018 increase in quantification of the rates payments issued to Melreef by the Town (as a result of the change in the rating method for the Crown land).
Some support for this position comes from the fact that the dispute regarding the rating differential for the Crown land has been ongoing for a number of years and arose well before the substantial increase in Rates in 2018, as evident by Melreef's refusal or failure to pay its rates from execution of the Lease in 2015 and onwards. Thus, the 'dispute' between the parties arose well before the alleged 'fundamental commercial change' to the Lease contended by Melreef.
The submission made by Melreef (for the first time at the hearing) that certain term/s ought to be implied into the Lease as a 'remedy' to the dispute between the parties cannot, on any proper consideration, be the 'matter' the subject of controversy between the parties. The purported 'matter', identified in such terms, is also not a 'matter' in which there is an action before this court. I say this for the following reasons.
Firstly, the true controversy between the parties is the rating differential for the Crown land over time culminating in the substantive increase in rates as a result of the rating differential change in 2018. Melreef has not been able to identify any basis on which the categorisation of the rating differential or the consequential quantification of ratings flowing from it, could be challenged. The 'remedy' of implied terms therefore, artificially contorts a commercial dispute arising under the Lease, in the absence of the commercial mechanism preceding it. That is, despite alleging a 'fundamental change to the commercial bargain', Melreef cannot point to any commercial change to the contractual terms of the parties' bargain.
Secondly, the nature of the controversy, as identified in detail in the correspondence exchanged between the parties, has always been described as a 'rates dispute' with no mention at any stage of an alleged breach of implied terms of the Lease. Indeed, Melreef in its 30 July 2022 correspondence with the Town stated that the Town's 'Rates Department' might elect to 'actually deal with the issue than remain silent'.[19] The ability of the Town's 'Rates Department' to resolve the controversy between the parties is indicative of its lack of connection with the terms of the Lease and any alleged breach of implied terms within it (in respect of which the Town's Rates Department would have no authority).
[19] Affidavit of Timothy Bradley affirmed 19 July 2023, page 66.
Thirdly, cl 21 of the Lease sets out the dispute resolution process which the parties must follow in relation to any dispute arising out of the Lease. Whilst that process was seemingly followed in relation to the 'rates dispute', it was clearly not followed in relation to any alleged breach of implied terms of the Lease. The parties' actions in this regard does not of course change the nature of the dispute between them such that it arises out of the terms of the Lease, but it does lend further support to the court's finding that the true controversy between the parties is not in respect of an alleged breach of implied terms of the Lease.
Fourthly, a finding that an alleged breach of implied terms is not the controversy arising between the parties is supported by the position that such a claim has never previously been articulated by Melreef to the Town and the Town had never previously been made aware of it prior to the hearing before me. [20]
[20] ts 18, 26 October 2023.
Fifthly, the pleadings seek recovery of unpaid rates and levies under the applicable provisions of the LG Act and the FAES Act. It, therefore, discloses a statutory recovery claim made by a local government authority and does not raise any claims as lessor under the Lease. No defence or counter claim has raised a claim of breach of implied terms. Whilst such pleadings are yet to be filed, it is nevertheless difficult to see how such a controversy or 'matter' is currently before the court when one considers the filed pleadings together with the history and nature of the dispute between the parties.
Sixthly, whilst certainly not decisive of the issue, (given that the 'matter' need only partly overlap with the action), but nevertheless of relevance, is the fact that the purported dispute of breach of implied terms of the Lease, does little to defend or respond to the majority of the claim made against Melreef, which encompasses outstanding Rates since the inception of the Lease in 2015.

Whether the 'matter' is the subject of an arbitration agreement

In my view, a dispute in relation to the rating differential categorisation of the Crown land and the quantification of rates pursuant to it, is also not a dispute arising under the Lease and is therefore, not a 'matter' the subject of an arbitration agreement. I make that finding for the following reasons.
Firstly, as mentioned previously, the Town seeks recovery of outstanding Rates issued to Melreef pursuant to its statutory authority as the relevant local government authority pursuant to s 1.4(a)(ii), s 6.44 and s 6.56 of the LG Act and s 3A(a)(i), s 36P and s 36Z of the FAES Act. Whilst cl 5.3(1)(a) of the Lease confirms the statutory responsibility of Melreef to meet those payments, it is not the source of its obligation. No issue has been raised by Melreef as to its statutory obligation as lessee of the Crown land to pay rates and levies and other associated charges issued in respect of that parcel of land.
Secondly, Melreef has acted in accordance with the statutory regime governing the imposition of rates and levies and its obligation to pay those amounts by asserting its right to challenge the quantification of rates from time to time through the appropriate legislative framework, which is outside of the terms of the Lease (see [11]).
Thirdly, Melreef has conceded that there is no dispute, or 'matter' arising in relation to the basis on which the Town imposed the Rates on Melreef or the quantification thereof, which forms the basis of the claims set out in the statement of claim before this court. That is, Melreef does not take issue with the ability of the Town to seek to recover, in the action before this court, outstanding Rates payable to it.
Fourthly, even if the basis on which the Rates had been determined is a 'matter' which is the subject of the Lease, in any event it is not capable of determination by an arbitrator at arbitration. The legislative framework set out in the LG Act and the FAES Act bestow powers, responsibilities and duties in respect of rates and levies on the relevant local government authority. No such similar powers, responsibilities and duties could be exercised by an arbitrator. Therefore, the 'matter' raises no right or liability which is susceptible to resolution by arbitration.
Fifthly, the inability of an arbitrator to determine the 'matter' is further supported by the 'no fetter' clause in the Lease, which appears to mirror the common law doctrine of 'Crown immunity' which is the broad rule that a contract cannot fetter the Crown's ability to govern, including the inability to imply conditions into contracts which seek to fetter the exercise of powers or discretions conferred on the Crown by legislation.[21]
[21] The Watson's Bay and South Shore Ferry Company Ltd v Whitfield [1919] HCA 69; (1919) 27 CLR 268; (1919) 20 SR (NSW) 438; (1919) 37 WN (NSW) 26, the Court at 277; Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54; (1977)17 ALR 513; (1977) 52 ALJR 254 (Mason J at 71), (Murphy J at 86), (Aickin J at 113 (CLR)); Attorney General (NSW) v Quin [1990] HCA 21; (1990) 170 CLR 1; (1990) 64 ALJR 327; (1990) 93 ALR 1; (1990) 18 ALD 77; (1990) 33 IPR 263; (1990) 33 IR 363 (Mason CJ at 17 - 18 (CLR)).

Whether Melreef sought to refer a 'matter' to arbitration

As a final matter, the second essential element of s 8(1) of the CA Act is that a party seek the referral of the 'matter' to arbitration.

In this regard, the chamber summons filed by Melreef appears to be defective as it fails to seek an order of the court for referral of the 'matter' to arbitration in circumstances where no arbitration is on foot.
This is a fundamental flaw in the application which falls foul of s 8(1) of the CA Act.
In any event, given my earlier findings, Melreef could not seek referral because there is no matter currently before the court capable of referral to arbitration, particularly given that Melreef is yet to file a defence and counterclaim.
Melreef is of course not prevented from making a further application pursuant to s 8(1) of the CA Act once its defence and counterclaim have been filed, assuming that at that stage all the pre‑requisites of s 8(1) of the CA Act are met.
However, even if at that time, Melreef's counterclaim identifies a 'matter' in an action the subject of an arbitration agreement, the court will only stay and refer that 'matter' the subject of Melreef's counterclaim to arbitration, as opposed to the entirety of the proceeding.
In conclusion, for the reasons comprising this judgment, the application made by Melreef seeking a stay of the proceeding pending the outcome of the arbitration of the dispute must be dismissed.
Subject to hearing from the parties as to the appropriate formulation of orders, my preliminary view is that a costs order should be made in favour of the Town in respect of the costs of and incidental to the stay application, in addition to relevant programming orders.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
GL
Associate to Judge Wallace
6 DECEMBER 2023