Waterman's Rent My Property Pty Ltd v. Stathams Real Estate (Qld) Pty Ltd

[2008] QDC 80

[2008] QDC 80

DISTRICT COURT

CIVIL JURISDICTION

JUDGE ROBIN QC

No 117 of 2008

WATERMAN'S RENT MY PROPERTY PTY LTD	Plaintiff
and
STATHAMS REAL ESTATE (QLD) PTY LTD	Defendant

BRISBANE

..DATE 01/04/2008

ORDER

CATCHWORDS:  Practice and procedure -defendant applies for a stay of the claim in reliance on a Scott v Avery clause - stay granted.

HIS HONOUR:  This is an application by the defendant for a stay of the plaintiff's claim to permit the carrying out of dispute resolution procedures which are included in clause 13 of the standard conditions of sale for a business sale forming part of an overall contract for sale of a business, dated 17th
May 2007.  The contract was for the sale of a real estate business and is in common REIQ form.  Following completion certain financial aspects of the transaction remained outstanding.  As explained to the court that is centred on the "rent roll" and the uncertainty always likely to exist as to whether a purchaser of a real estate business where there is income generated from rental activity will enjoy the full benefit or substantially the full benefit of commissions to be earned by reference to rent collected.  Accommodation owners may withdraw their business if the vendor is not there to attend to it.

A dispute has arisen leading the plaintiff company, which was the purchaser, to the view that a proper adjustment post-completion would see it paid a sum of the order of $97,000. Against the possibility that matters might so develop that a payment back to the purchaser was called for, the contractual arrangements entitled the plaintiff to retain a sum of $50,000 for which a set off is proposed in the statement of claim.  It was filed with the claim on the 17th of January 2008.  The defendant says this was contrary to the provisions of standard condition 13 which provides:

1. "DISPUTE RESOLUTION

13.1Unless a party to this Contract has complied with clauses 13.1 to 13.4, that party may not commence litigation or arbitration relating to any dispute arising from this Contract except where that party seeks urgent interlocutory relief, in which case that party need not comply with this clause 13 before seeking such relief.  Where a party to this Contract fails to comply with clauses 13.1 to 13.4, any other party in dispute with the party so failing to comply, need not comply with this clause 13 before referring the dispute to arbitration, or commencing litigation relating to that dispute.

13.2Any party to this Contract, claiming that a dispute has arisen, shall give written notice to the other party, or parties in dispute, designating a representative with authority to settle the dispute on that party's behalf ("designation notice").  Each other party given a designation notice shall within three (3) Business Days of receipt of the designation notice give to the other parties in dispute, a designation notice appointing a representative with similar authority.

13.3The persons designated under clause 13.2 shall seek to resolve the dispute within five (5) Business Days of the service of the last designation required by clause 13.2.

13.4 If the dispute is not resolved within the period

referred to in clause 13.3 (or within such further period

as the representative may agree upon) the parties in

dispute shall within a further period of ten (10)

Business Days (or within such further period as the

representatives may agree) seek to agree on a process for

resolving the whole or part of the dispute through means

other than litigation or arbitration, such as further

negotiations, mediation, conciliation, independent expert

determination or mini-trial (each a "dispute resolution

process") and on:

(a)the procedure and timetable for any exchange of documents and other information relating to the dispute;

(b)procedural rules and a timetable for resolving the dispute;

(c)the procedure for the selection and remuneration of any neutral person who may be employed by the parties in dispute; and

(d)whether the parties should seek the assistance of a person or an organisation possessing dispute

resolution expertise.

13.5 The parties acknowledge that the purpose of any exchange

of information or documents or the making of any offer of

settlement under this clause 13 is to attempt to settle

the dispute between the parties.  

13.6After the expiration of the time established by or agreed under clause 13.4 for agreement on a dispute resolution process, any party which has complied with the provisions of clauses 13.1 to 13.4 may by notice in writing terminate the dispute resolution process and may then refer the dispute to arbitration or commence litigation relating to the dispute.

13.7Nothing in this clause 13 is intended to oust the jurisdiction of any court of competent jurisdiction."

Speaking broadly, the clause is an example of a so-called Scott v Avery clause of a kind which has long been recognised by the Courts: see [1856] 5 HLC 811. A leading local authority in Stevens v Trewin [1968] QdR 411. Care has to be taken that there is no ouster of jurisdiction of the courts, which has traditionally been seen as contrary to public policy. One wonders what is left of that public policy these days given the general proclivity of courts to encourage litigants to resolve their disputes by ADR and, perhaps more significantly, the growing number of Acts of Parliament which preclude access to the court unless identified procedures are embarked upon which offer the prospect of resolution without litigation. Instances are the Personal Injuries Proceedings Act, Motor Accident Insurance Act, and the Workers' Compensation and Rehabilitation Act.

The general point I am making is that we are now in an era where the courts tend to encourage extra curial resolution of disputes.
There is no guarantee that such procedures will bear fruit.  That they will not may be more likely where there are provisions such as the present which talk of parties seeking to agree. 

There is authority that provisions requiring negotiation in good faith and the like do not necessarily vitiate contracts, notably Coalcliff Collieries Pty Ltd v C G Harmer Sijehema Pty Ltd (1991) 24 NSWLR 1 at 26-27 per Kirby P, referred to by Warren J (as her Honour then was) in Computershare Ltd v Perpetual Registrars Ltd (No 2) [2000] VSC 233 at paragraph 13.

The Computershare decision I find particularly helpful and persuasive.  No one has located any decision upon clause 13, however the clause considered in Computershare strikes me as indistinguishable.  The time frames allowed for the taking of particular steps were different from those encountered here but that can hardly matter.  The outcome in Computershare was the granting of a stay, her Honour having noted before declaring that outcome that the parties had:

"voluntarily submitted themselves to an obligation to negotiate in good faith.  That obligation must be exhausted in accordance with the terms of the parties' agreement." 

See paragraph 18.  In my view, that ought to be the outcome here. 

The outcome can be reached only by disposing of Mr Pyle's argument which is based on the proposition that the circumstances are ones in which the applicant defendant has failed to comply with clause 13 procedures with the consequence of exonerating the plaintiff from having to comply with them, or in other words, freeing it to come to court as it is done.

What is relied on is a statement in Mr Woudwyk's affidavit in paragraph 7 to the effect that his client's representative advised him that an issue had arisen in respect of the amount payable for the rent roll.  Mr Statham apparently advised he had contacted the vendor's agent to get an expert nominated under the contract to resolve the issue.  In Woudwyk's letter of 1st of February 2008 was a similar indication that "our client raised an issue concerning the calculation of the rent roll with the expert nominated in the contract."

It is accepted by Mr Bowden for the applicant defendant that no "designation" as referred to in clause 13.2 has occurred.  As I understand Mr Pyle's argument, that is the default relied upon - or proof of the default relied upon. 

In my opinion, it is not appropriate to construe clause 13 or any clause of that nature in so technical a way.  I see little attraction in engaging in such contortions to try to identify which party has made default, freeing the other from operation of a Scott v Avery clause.  I think the correct approach is one which requires a contracting party who wishes to resort to the court to give the mandatory pre-litigation procedures their chance.  It is the plaintiff wanting to change the status quo by obtaining a payment from the defendant.

On that basis I think the defendant is entitled to the limited stay which is sought, and so the first part of the Court's order should be that the proceeding be stayed pending the carrying out of dispute resolution procedures in clause 13 of the standard conditions of sale in the parties' agreement dated 17th of May 2007 or further order.

Mr Bowden accepts that within a limited number of weeks it may be established that those procedures are not going to resolve matters.  In that event, in some formal way, the stay ought to be brought to an end, perhaps by the filing of a consent order.  My own inclination would be to identify a date when the court would be available to deal with the matter and resolve any issue as to whether the clause 13 procedures still had any useful life left in them.

...

HIS HONOUR:  I will adjourn the further hearing of the application to the 7th of May 2008.  And I will grant liberty to apply.

...

HIS HONOUR:  The defendant's application for costs is also adjourned to the 7th of May.

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