VDM Construction Pty Ltd v MCC Mining (Western Australia) Pty Ltd - [2011] WASC 269

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: VDM CONSTRUCTION PTY LTD -v- MCC MINING (WESTERN AUSTRALIA) PTY LTD [2011] WASC 269

CORAM: KENNETH MARTIN J

HEARD: 22 AUGUST 2011

DELIVERED : 22 AUGUST 2011

PUBLISHED : 29 SEPTEMBER 2011

FILE NO/S: CIV 1881 of 2011

BETWEEN: VDM CONSTRUCTION PTY LTD
Plaintiff
AND
MCC MINING (WESTERN AUSTRALIA) PTY LTD
First Defendant
CAO YUE
Second Defendant

Catchwords:

Mediation - Dispute resolution clause - Stay application - Scott v Avery clause requiring conferral and mediation - Conferral but no mediation - Litigation commenced - Practical completion dispute - Mediation to be elected - Not mandatory

Legislation:

Nil

Result:

Stay application by defendants refused with costs

Category: B

Representation:

Counsel:

Plaintiff:     Mr B Taylor
First Defendant             :     Mr S Flay
Second Defendant         :     Mr S Flay

Solicitors:

Plaintiff:     Talbot Olivier
First Defendant             :     Corrs Chambers Westgarth
Second Defendant         :     Corrs Chambers Westgarth

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

Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236
Fitzgerald v Masters (1956) 95 CLR 420

KENNETH MARTIN J:
(This judgment was delivered ex temporaneously on 22 August 2011 and has been edited from the transcript.)

This is an application for a stay brought by the defendants. The plaintiff, VDM Construction Pty Ltd (VDM) is the contractor under a contract of 2 September 2009 entered with the first defendant MCC Mining (Western Australia) Pty Ltd. Mr Cao Yue, the second defendant, is the principal's representative under contract MCCMCOO22 (the Agreement) and fulfils nominated contractual responsibilities in that regard.
By chamber summons of 4 July 2011 both defendants bring application seeking a stay of the action pending a mediation. The action was commenced against both defendants by writ in this Court on 24 May 2011. The action was admitted to my CMC list on 29 June 2011. VDM filed its statement of claim on 20 June 2011.
As respondent to the application, VDM opposed the stay. Essentially the matter for evaluation is my construction of a dispute resolution clause found within the Agreement. The defendants seek an order that the proceedings be stayed until the completion of a mediation which they say is mandatory under cl 46.2 of the Agreement.
The Agreement is described as being a design and construction contract in respect of Red River Village. It contains some key definitions. First, I refer to cl 7.1 which concerns the meaning of 'Principal's Representative'. Underneath the heading 'Agent' is the following:
(a)The Principal's Representative will carry out all of their functions under this Agreement as agent of the Principal.
(b)When exercising the role of certifier, assessor or valuer, the Principal will:
(i)act honestly and fairly;
(ii)arrive at a reasonable determination.
(c)Nothing in this Agreement will prevent the Principal's Representative acting in accordance with the legitimate self-interest of the Principal.
Clause 7.1 is relevant to VDM's contention that it has achieved practical completion under the Agreement on 30 June 2010. However, VDM has been unable to obtain from Mr Cao, the second defendant, a certificate of practical completion. Such a certificate should issue under the Agreement when the nominated prerequisites for practical completion as defined - see definition of 'Practical Completion' under the Agreement - are met.
By cl 17.5 it is provided:
The Principal's Representative must issue a certificate of Practical Completion when, in the opinion of the Principal's Representative, the Works has reached Practical Completion.
The grammar from time to time in the Agreement is less than perfect. An illustration of that deficiency is seen in cl 17.5 in relation to the word 'has'.
I also note what appears to be an error in subcl 7.1(b) (set out above) which concerns the role of certifier, assessor or valuer. Subclause 7.1(b) makes reference to 'the Principal'. I detect an error in the unintended omission of the word 'Representative'. Applying the construction technique explained by the High Court in Fitzgerald v Masters (1956) 95 CLR 420, regarding correcting obvious slips without a need to formally rectify the clause, the inclusion of 'the Principal's Representative' is required for the clause to make sense.
The real dispute at the heart of the matter turns upon the absence of a certificate of practical completion and the underlying controversy over whether VDM was entitled to institute these proceedings, as and when it did, in order to pursue relief sought under its statement of claim. VDM, by its prayer under the statement of claim, first seeks a declaration that it is entitled to a certificate of practical completion at 30 June 2010 or from such other date as the court thinks appropriate. Second, it seeks an order compelling the second defendant to issue the certificate.
Relevant to resolving these issues is the correct interpretation of dispute resolution clause cl 46. I will now set out cl 46.1 through to cl 46.5:
46.1Notice of Dispute
(a)If a difference or dispute (together called a Dispute) between the parties arises out of or relates to this Agreement, or the breach, termination, validity or subject matter of it, or as to any claim in tort, in equity or pursuant to any domestic or international statute or law, then any party may give the other a written notice of dispute adequately identifying and providing details of the Dispute (Notice of Dispute).
(b)Notwithstanding the existence of a Dispute, all parties will, subject to this Agreement, continue to perform this Agreement.
46.2Conference
Within ten Business Days after receiving a Notice of Dispute, the parties will confer at least once to resolve the Dispute or to agree on methods of doing so. At every such conference each party will be represented by a person having authority to agree such resolution or methods. All aspects of every such conference, except the fact of its occurrence, will be privileged.
If within fifteen (15) business days (or such longer period as they may agree) of the conference the Parties are unable to resolve the Dispute referred to in clause 46.1, either party may refer the dispute to mediation in accordance with The Institute of Arbitrators and Mediators, Australia, rules of mediation that are in force at the time of the notice being issued.
If the Parties are unable to resolve the dispute in accordance with The Institute of Arbitrators and Mediators, Australia, rules of mediation that are in force at the time of the notice being issued, the provisions of Clause 46.4 may apply.
Compliance with the requirements of this clause 46.2 in respect of a Dispute is a condition precedent to commencement of litigation in respect of that Dispute.
46.3Exchange of information
The parties acknowledge that the purpose of any exchange of information or documents or the making of any offer of settlement pursuant to this clause is to attempt to settle the Dispute between the parties. No party may use any information or documents obtained through the dispute resolution process established by clause 46 for any purpose other than an attempt to settle a Dispute between the parties.
46.4Termination of dispute resolution
After expiration of 90 days from the giving of the written notice under clause 46.1, any party which has complied with the provisions of clauses 46.1 to 46.3, may in writing terminate the dispute resolution process provided for in those clauses and may then refer the Dispute to litigation.
46.5Injunctive or urgent relief
Nothing in this clause 46 will prejudice the right of a party to seek injunctive or urgent declaratory relief.
What is of immediate interest is that cl 46 provides for conferral and mediation in specified circumstances. It does not provide for arbitration.
Clause 46 provides for the parties to the Agreement to confer after receipt of a notice of dispute is issued by either party. As regards the present dispute issue over VDM's achievement of practical completion, there appears to be no question that VDM issued a proper notice of dispute to the first defendant on 14 July 2010 about the dispute over VDM's achievement of practical completion. This was VDM's notice of dispute number 1. There is also a second notice of dispute issued by VDM with which I am not presently concerned.

Evidence

There were significant affidavits filed by each side on this application. The applicant filed two affidavits of Mr Ah Lek Tang. The first is in three volumes, sworn 4 July, filed 5 July 2011 and comprising 71 attachments, ALT1 through to ALT71. Mr Tang is the first defendant's senior contract engineer. Mr Tang swore a second affidavit of 3 August 2011. The second defendant filed an affidavit of Mr Cao sworn 15 August 2011 and filed on 17 August 2011. Those affidavits supported the stay.
VDM filed a long affidavit in three volumes by Mark Andrew Pemmelaar, sworn 19 July 2011, containing 114 paragraphs in three volumes with 43 attachments. Mr Pemmelaar is a senior project manager and contractor's representative of VDM.
VDM also relied on an affidavit of Geoffrey Keith Simpson, sworn 20 July 2011, containing attachments GKS1 through to GKS13. This affidavit was filed in response to Mr Tang's affidavit.
There were objections made to the contents of both sides' affidavits. But the disputation is minor and in the end so peripheral as to render them unnecessary for me to resolve.

Meaning of cl 46

First, it is uncontroversial that VDM gave written notice of dispute on 14 July 2010 to the first defendant as regards the asserted failure by Mr Cao to issue a notice of practical completion on the basis that the works were practically complete as of 30 June 2010.
Second, as to a need for the parties to confer, it will be remembered that the dispute resolution clause provides by cl 46.2 that:
Within ten Business Days after receiving a Notice of Dispute, the parties will confer at least once to resolve the Dispute or to agree on methods of doing so.
Third, there is no dispute that, subsequent to 14 July 2009, the parties have indeed conferred in an endeavour to resolve their dispute. However, the conferrals between representatives of the parties to date have proved unsuccessful in resolving this dispute. There is reference in the affidavits filed by both sides to the parties conferring on 16 and 17 August 2010, on 7 February 2011, on 1 and 21 March 2011 and then again on 13 April 2011. That last‑mentioned meeting apparently gave rise to VDM preparing what is referred to as an 'action plan' of 18 April 2011 with a view to fixing some of the matters complained about at the site.
Fourth, notwithstanding conferral that obviously had taken place between the parties, the point was reached at which VDM indicated to MCC by email communications (in the ongoing correspondence which occurred directly between the parties in various formats, by email, as well as between the parties' respective solicitors) that it proposed to convene a mediation of the first dispute. Part of the passing correspondence between solicitors going back to September 2010 is relevant. A letter of 3 September 2010 (attachment ALT38 (page 524) to Mr Tang's affidavit dated 5 July 2011) from solicitors Talbot Olivier (representing VDM) to Corrs Chambers Westgarth (representing the defendants) said:
As a result of the Principal's failure to attend the scheduled meetings or to provide a representative with the authority to act on behalf of the Principal, the Principal has waived its right to rely on strict compliance with clause 46.2 of the Contract. Accordingly, pursuant to clause 46.2, the Contractor is exercising its right to refer the dispute to mediation. A copy of the Institute of Arbitrators and Mediators Australia Institute mediation rules is attached for your information.
That communication was made almost one year ago. But the dispute was not then referred to mediation. It was suggested that the parties meet again by way of further conferral; see Corrs Chambers Westgarth's letter of 1 October 2010 (ALT42) to Talbot Olivier. The letter suggested another conferral would be more productive than mediation, but if conferral failed the parties could then refer that dispute to mediation.
Dialogue continued between the protagonists into 2011. Still there was no mediation convened by anyone. The conferrals I have referred to were not successful in achieving resolution of dispute number 1.
As the dispute remained unresolved by May 2011, Mr Geoff Simpson, managing director of VDM, sent some important emails to the representative of the first defendant, MCC.
The first of the Simpson emails to which I will refer is of Tuesday, 17 May 2011 (the emails can be found in Mr Ah Lek Tang's first affidavit commencing at page 606).
The first email was sent to Mr Hu Shun Qing of MCC by Mr Simpson in these terms:
Unfortunately we still have not received the Certificate of Practical Completion at Red River. This is of grave concern to me as the matter has been ongoing for many many months with no positive action by MCC. I have tried to meet with Mr Fan on this issue, but it would appear he is on site at the moment and not available.
I have no alternative but to take the necessary steps to have an independent person make the determination of whether Practical Completion should be issued and when.
I am happy to meet with you again to discuss the issue but must commence proceedings within the next few days to bring the matter to a quick conclusion.
Mr Simpson's email drew a next day response from Mr Hu. His response is found at attachment ALT53 (page 607). Mr Hu advised Mr Simpson on 18 May 2011 at 11.07 am:
I refer to your email below.
My understanding is that Mr Cao Yue (Principal's Representative) is unable to certify Practical Completion until the issues in RSA's report dated 11 February 2011 are resolved, primarily the issue of the sinking buildings.
Mr Hu continued:
I acknowledge your intention to appoint an independent third party to make a determination on whether Practical Completion should be certified. Please advise on what basis (if any) that [the] third party's determination has any contractual relevance to the Principal's Representative's decision not to certify Practical Completion.
Mr Hu concluded:
I understand that VDM disagrees with some of the findings of the RSA report dated 11 February 2011. As explained in our letter dated 27 April we are waiting on RSA to provide us with further evidence to substantiate its findings. Any inquiry please contact. Thanks!
Mr Hu's communication then drew the response from Mr Simpson found at attachment ALT54 (page 609), at 1.32 pm on Thursday, 19 May 2011 (bearing in mind that VDM's writ was issued on 24 May 2011, only five days later):
Hello Mr Hu.
Thank you for your reply. I would point out that the buildings are not sinking, but the surrounding ground is moving as your Geotechnical report of 2009 said it would.
MCC has used this camp since May 2010 and I do not accept that Mr Cao Yue has any reason to not issue the certificate of practical completion dated 30 June 2010 when the final camp was handed over to MCC. Mr Cao Yue is simply procrastinating for reasons of his own. He refused to issue PC in July, August and September of 2010 when the so‑called sinking buildings had not even occurred, so his current claim for not issuing is yet another delaying tactic and I believe he will come up with something different once this issue is resolved. This is not acceptable.
We have been extremely frustrated since July last year as a result of MCC continually refusing to enter the mediating process on this issue, and believe we have exhausted all of our contractual avenues for the dispute resolution process. Mr Cao Yue may not agree, but we do have contractual rights and he does not have absolute power to make final judgment.
We have no alternative but to now ask the courts to make a determination on when Practical Completion was achieved.
Mr Simpson's email was responded to by Mr Hu on Friday, 20 May 2011 at 3.39 pm; see attachment ALT55 (page 611) of volume 2 of Mr Tang's affidavit. Its last five paragraphs were:
In circumstances where VDM has not previously proposed mediation, I do not understand your assertion that MCCM has refused to enter into a mediation process. As you know, MCCM stands willing and able to attempt to resolve the dispute between VDM and MCCM by negotiation. If it is VDM's view that negotiation process is unlikely to resolve the dispute, MCCM invites VDM to refer the dispute to mediation as provided under general condition 46.2.
However, to date, VDM has not referred the dispute to mediation to be conducted in accordance with the Institute of Arbitrators and Mediators Australia mediation rules, as required under general condition 46.2. VDM also has not proposed nominations for a mediator.
If VDM wishes to refer this dispute to mediation, please advise whom it proposes to nominate as the mediator.
Given that the mediation resolution process in the Contract clearly requires the parties to mediate before commencing proceedings, if VDM attempts to commence proceedings in respect of the dispute, MCCM will apply for a stay.
I look forward to hearing from you with VDM's nomination for a mediator.
It is seen from this passing email correspondence that, notwithstanding cl 46.2 and the intimation of VDM in early September 2010 that it would seek to have a mediator appointed, the fact was that, as at the date VDM issued its writ on 24 May 2011, no mediation was ever convened between these parties. That position essentially grounds the basis for the stay which is now sought on behalf of the defendants in order to permit a mediation to take place.
It is important to scrutinise the content of cl 46. Notices of dispute and subsequent conferrals between the parties occurred in 2010.
Relevantly, cl 46.2 then provides:
If within fifteen (15) business days (or such longer period as they may agree) of the conference the Parties are unable to resolve the Dispute referred to in clause 46.1 either party may refer the dispute to mediation in accordance with the Institute of Arbitrators and Mediators, Australia, rules of mediation that are in force at the time of the notice being issued.
Significantly, the last paragraph within cl 46.2 says:
Compliance with the requirements of this clause 46.2 in respect of a Dispute is a condition precedent to commencement of litigation in respect of that Dispute.
(my emphasis in bold)
The last paragraph of cl 46.2 provides for what I assess to be something akin to a Scott v Avery conditional prerequisite to curial jurisdiction, applicable to mediation instead of arbitration. When applicable, a need for prior compliance with the mediation clause would mean that a court almost invariably would grant a stay of civil litigation commenced in violation of the requirement to submit a notified dispute to a mediation process. What is envisaged by cl 46, prior to litigation over a notified dispute, is first to engage in conferral, then second, to engage in a mediation. The real question then is, was a prior mediation required here?
My reading of cl 46.2 is that after the parties have conferred but are still in dispute, either party can within 15 days, or within such longer period as the parties agree, decide to refer the matter to a mediation. Either party alone has the right to elect to require the mediation process for the dispute before litigation. But I do not assess the cl 46 mediation requirement as being mandatory for every notified dispute where there has been unfruitful conferral. Clause 46 could have been drawn in more rigid terms, invariably requiring mediation before litigation, but it was not. Here, a mediation process does not become mandatory until one party elects for it and thereby makes it mandatory by that election.

Reference in the second paragraph of cl 46.2 to 'such longer period as they may agree', understood properly in overall context, is only applicable to the parties' possible agreement about extending the 15 business day period within which the parties otherwise would have to refer a dispute to mediation.
If the disputing parties confer, but their conferral is unfruitful in achieving resolution they then have 15 days within which either may refer the dispute to mediation. But they do not have to. Either may so elect for a mediation, or not. If the 15 day period expires, it is possible for them to then mutually agree a longer period than 15 days for the dispute to be referred to mediation by one or the other party. None of that makes a mediation process invariably mandatory, unless one party refers the dispute to mediation in the 15 days allowed (or as may be agreed as a longer timeframe).
Even if there is a referral to mediation, cl 46.4 imposes a further temporal constraint. The overall regime of cl 46.4 is such that after expiration of 90 days - here, effectively measured from 14 July 2010 - a party which has otherwise complied with the provisions of cl 46.1 to cl 46.3 can validly (by writing) terminate the dispute resolution process (i.e. conferral or mediation) and from that point properly proceed to litigation.
In this particular case, relevant written notice was given by VDM on 14 July 2010 regarding dispute 1. Hence, a 90 day period takes the matter to a potential cut‑off point arising in mid‑October 2010 had a mediation process been required by either party.
I find that VDM's notice of dispute of 14 July 2010 complied with cl 46.1. The ensuing conferrals between the parties met the conferral requirements of cl 46.2.
Here, a termination in writing by VDM of the cl 46 dispute resolution process is readily ascertained in either or both of the May 2011 email communications of Mr Simpson to which I have referred.
Mr Simpson's first communication was of 17 May 2011 at 1.07 pm. His second communication was of 19 May 2011 at 1.32 pm. In my view, he made it plain in both communications that the intent on the part of VDM was to commence litigation. I read that, in the circumstances, as being a sufficient written notice of termination of dispute resolution processes given after an expiry of 90 days, thereby satisfying the requirements of cl 46.4.
The defendants' stay argument put to me essentially is that under cl 46 there is a further mandatory requirement for a mediation, come what may, that VDM did not comply with. I reject the contention on the proper construction of cl 46. My interpretation of cl 46.2 is that mediation will be imposed only as a matter of election by either party. In the present case, VDM indicated on 3 September 2010 that it was minded to have a mediation. But VDM was effectively talked out of that course. The parties then engaged in further conferrals. There was in the end no election to invoke mediation by either VDM or MCC.
Moreover, an elapsing of the 90 day period after 14 July 2010 meant that it was open for VDM in any event to terminate any dispute resolution process and commence litigation, as it did, on 24 May 2011.
I do not assess that cl 46.5 has relevance to the construction exercise. That provision presents as another possible basis for me finding an exception to a Scott v Avery jurisdictional limitation, providing for the capacity of a party to seek an injunction or urgent declaratory relief. The provision is something of a wider exception to jurisdictional prerequisites of conferral and (if invoked) mediation.
Having clearly satisfied the requirements for conferral and there being no relevant election made by either it or MCC to mediation, VDM does not need the assistance of cl 46.5.
So, purely as a matter of contractual construction, the defendants' application for a stay, predicated upon the asserted non‑satisfaction by VDM of a jurisdictional prerequisite for mediation preceding any litigation, must fail.
That construction conclusion is reached purely as a matter of the overall interpretation of cl 46, in the context of the Agreement as a whole. The conclusion reached says nothing against the value or merits of mediation, which is obviously a very important and effective dispute resolution process. That is not the issue. The issue here is whether cl 46, in terms of how it operates, actually requires mediation come what may. My construction is that it does not. The election by either party to mediation is first required. That simply did not happen before VDM commenced litigation, as it was then fully entitled to do.
A subsidiary issue arises as to whether the court, having reached such a construction of cl 46, may possess any residual discretion to stay or grant an adjournment of the litigation, emanating from some obiter in Einstein J's decision in Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236, 246 [43]. However, even if such a residual discretion was accessible, it seems to me that these contracting parties should primarily be governed by the terms of their bargain. They have chosen to set down a bargain with only a limited elective obligation to engage in a mediation process. In what are governed circumstances under cl 46, it does not seem to be fair, just or appropriate to rewrite the parties' bargain. Here their contractual terms were clearly delineated and fixed as regards when a mediation would be required.
On that basis, I refuse the defendants' application under chamber summons for a stay.