Western Australia v Civcon Pty Ltd (in
[2003] WASC 99
•12 MAY 2003
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS |
| CITATION | : | THE MINISTER FOR TRANSPORT FOR WESTERN AUSTRALIA -v- CIVCON PTY LTD (IN LIQ) [2003] WASC 99 |
| CORAM | : MASTER SANDERSON | ||
| HEARD | : 12 MAY 2003 | ||
| DELIVERED | : 12 MAY 2003 | ||
| PUBLISHED | : 28 MAY 2003 | ||
| FILE NO/S |
| ||
| BETWEEN |
|
AND
CIVCON PTY LTD (IN LIQ) (ACN 009 433 587)
Defendant
Catchwords:
Practice and procedure - Application to terminate arbitration - Turns on own facts
Legislation:
Commercial Arbitration Act 1985
Result:
Arbitration terminated
[2003] WASC 99
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr J A Thomson |
| Defendant | : | Mr C A Ryder |
Solicitors:
| Plaintiff | : | State Crown Solicitor |
| Defendant | : | Corrs Chambers Westgarth |
Case(s) referred to in judgment(s):
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Clements v Simto Pty Ltd [2001] WASCA 183
CMC Cairns Pty Ltd v Isicob Pty Ltd [2002] QCA 181
Case(s) also cited:
Aerospatiale Holdings Australia Pty Ltd v Elspan International Ltd (1992) 28
NSWLR 321
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997)
18 WAR 334
Commonwealth v Cable Water Skiing (Aust) Ltd (1994) 14 ACSR 760 Commonwealth v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662 FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd (2000) 22 WAR 241
Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001]
WASC 87
Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2002]
WASCA 206
GPI Leisure Corp Pty Ltd v Yuill, unreported; SC(NSW), Young J, 22 April
1998
Hughes v Gale (1995) 14 WAR 434
Lewandowski v Lovell (1994) 11 WAR 124
Lucas v Yorke (1983) 50 ALR 228
[2003] WASC 99
Nauru Phosphate Royalties Trust v Matthew Hall Mechanical and Electrical
Engineers Pty Ltd [1994] 2 VR 386
Packer v Meagher [1984] 3 NSWLR 486
Re Bond Corporation Holdings Ltd (1990) 1 WAR 465
South Australian Superannuation Fund Investment Trust v Leighton Contractors
Pty Ltd (1990) 55 SASR 327
State of Victoria v Seal Rocks Pty Ltd (2001) 3 VR 1
Williams v Spautz (1992) 174 CLR 509
[2003] WASC 99
MASTER SANDERSON
MASTER SANDERSON: This is the plaintiff's originating process seeking termination of pending arbitration proceedings between the plaintiff and the defendant. As an alternative, the plaintiff seeks to have the arbitration permanently stayed or to have the defendant provide security for the costs of the arbitration. The plaintiff's originating summons (in a form slightly different to the present) was filed on 20 May 2002. It came on for hearing on 1 October 2002. Counsel for the defendants sought to have the matter adjourned and after hearing argument, I adjourned the summons for six months. The reason for that lengthy adjournment will become apparent from a further reading of these reasons. The matter came on again for hearing on 7 April 2003. At that hearing counsel for the defendant sought leave to file a further affidavit. Leave was granted and certain further orders were made programming the matter to another special appointment. At the conclusion of the hearing on 12 May 2003 I indicated that I would make orders terminating the arbitration. I indicated to the parties that I would publish reasons for that decision. These are those reasons.
The application is brought under s 46 of the Commercial Arbitration Act. Relevantly, that section reads as follows:
"(1) …
(2)
Where there has been undue delay by a party, the Court may, on the application of any other party to the dispute or an arbitrator or umpire, make orders -
(a) terminating the arbitration proceedings; (b) removing the dispute into Court, and (c) dealing with any incidental matters. (3) The Court shall not make an order under subsection (2)
unless it is satisfied that the delay -
(a) has been inordinate and inexcusable; and (b)
will give rise to a substantial risk of it not being possible to have a fair trial of the issues in the arbitration proceedings or is such as is likely to cause or to have caused serious prejudice to the other parties to the arbitration proceedings."
[2003] WASC 99
MASTER SANDERSON
3 Both parties agreed that the principles to be applied in relation to
s 46(3) of the Act were the same as the common law test which applies on an application to dismiss a claim for want of prosecution. First, there must be a substantial risk that it would not be possible to have a fair trial of the issues in the action, or a likelihood of serious prejudice to the defendant. Secondly, the matters to be considered are the length of the delay, the explanation for the delay, hardship to the plaintiff if the action is dismissed and the cause of action left statute-barred, the prejudice to the defendant if the proceedings are allowed to proceed, notwithstanding the delay and the conduct of the defendant. These principles emerge from a number of cases including Clements v Simto Pty Ltd [2001] WASCA 183 and CMC Cairns Pty Ltd v Isicob Pty Ltd [2002] QCA 181.
4 The material facts can be summarised in this way. On 2 September
1996 the defendant commenced an arbitration against the plaintiff. The arbitration arose out of a contract between the plaintiff and the defendant pursuant to which the defendant agreed to construct a breakwater at Exmouth. The defendant was required to win limestone which was to be used in the construction of a breakwater. The limestone was to be taken from a quarry designated by the plaintiff. A dispute arose as to whether the designated quarry contained sufficient rock of appropriate quality to allow the defendant to meet its obligations under the contract. The defendant contended that it did not. The plaintiff maintained that the limestone available in the quarry was sufficient but that the defendant was not operating the quarry properly. These facts emerged from the affidavit of Peter Boreham ("Mr Boreham"), sworn 17 May 2002 at par 2 - 5 and the annexed pleadings at pages 182 - 251. The matter was referred to arbitration pursuant to the terms of the contract between the plaintiff and the defendant. The arbitrator made an interim award on 24 September 1996 - see Mr Boreham's affidavit pages 96 - 110. On 4 October 1996 the defendant was placed under administration and on 31 October 1996 the defendant was placed in liquidation.
5 It then took until 7 December 1998 for the defendant to deliver its
points of claim in the arbitration. On the plaintiff's case, and this is not seriously disputed by the defendant, the delay of over two years was caused by the defendant considering its position after being placed in liquidation, seeking litigation funding to enable it to pursue the arbitration, seeking (unsuccessfully) to reinterpret the arbitrator's interim award and then briefing senior counsel to settle the points of claim. Not all of the effort during this period was wasted. The defendant was able to obtain litigation funding. Unfortunately the litigation funding was provided by HIH Insurance Ltd ("HIH").
[2003] WASC 99
MASTER SANDERSON
6 There was a further delay of about six months caused by the points
of claim seeking to raise new causes of action in relation to which the defendant had to comply with various dispute resolution procedures in the original contract. Further, the defendant attempted to have the proceedings conducted in the Supreme Court, rather than by way of arbitration. This attempt was unsuccessful.
7 In April 2001 HIH went into liquidation. Without the backing of the
litigation funder, the liquidator was hamstrung. Attempts have been made by the defendant to obtain alternative litigation funding but these attempts have been unsuccessful: see the affidavit of Frank Peter Simunovich ("Mr Simunovich"), sworn 30 July 2002, par 5(f). Since April 2001 nothing further has happened. In other words, in just over three years the defendant has not taken a single step to advance the arbitration. For reasons which I will detail below, the defendant is unable to say when it will be in a position to take any steps. In the circumstances the plaintiff says that the delay is inexcusable, that it is being prejudiced, that the requirements for terminating the arbitration are all in place and that it is time this matter was put to an end.
8 The plaintiff's claim raises several different causes of action,
including breach of contract, misleading and deceptive conduct and negligent misstatement. The plaintiff contests all these claims and has counterclaimed for damages. The plaintiff says that significant parts of the defendant's case in the arbitration depend upon things said or upon the reasonableness of investigations carried out many years ago. The plaintiff supports this submission in this way. It is said by the plaintiff that the defendant alleges its contract with the plaintiff for the construction of the Exmouth breakwater was partly written and partly oral: see Mr Boreham's affidavit pages 182 - 183. The defendant claims that the plaintiff breached the contract by making certain oral statements upon which the defendant acted. There is a dispute between the parties as to what was actually said: see Mr Boreham's affidavit pages 195 - 198; 222 - 224. The defendant also claims that there was a latent condition. This is based on the circumstances in which certain preliminary investigations were carried out, including inspection of bore logs held by the plaintiff: Mr Boreham's affidavit page 205. The defendant claims there was misleading and deceptive conduct through oral representations made in April and May 1996: Mr Boreham's affidavit pages 213 - 214.
9 Against this background the plaintiff says it will be prejudiced if the
arbitration is not terminated. First it is said the case for both sides relies upon oral evidence of events which took place well over six years ago.
[2003] WASC 99
MASTER SANDERSON
That must inevitably mean that memories have faded and the plaintiff suffers the general prejudice that comes with delay in resolving the dispute between parties: see Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 per McHugh J at 551. Furthermore, the plaintiff says that two potential witnesses, both of whom are of some importance, will not be available. John Shand ("Mr Shand"), an engineer with the Department of Transport who was project engineer in relation to the work under the contract, has died. George Anderson ("Mr Anderson") was the original superintendent for the contract and held that position when the disputes arose. He now lives in England and is in poor health. It is problematical whether he would be in a position to return to Australia for the case. The plaintiff asserts that the evidence of both of these witnesses is vital: see Mr Boreman's affidavit, pars 23 - 25. There are difficulties in obtaining evidence from one other witness, Trevor Bradley, but these difficulties could be overcome.
10 In answer to the plaintiff's claim of prejudice, the defendant points
out that the arbitration has been on foot for many years and the plaintiff has had ample opportunity to proof all witnesses. Furthermore, even allowing for difficulties in relation to Mr Shand and Mr Anderson, there is at least one other witness who would be available and could give evidence on behalf of the plaintiff. The defendant says in the circumstances the plaintiff has not established that it has been prejudiced by the delay to date to the extent that it will not be possible to have a fair trial of the matter.
11 I am satisfied that in the circumstances of this case the delay has
occasioned the plaintiff real prejudice. A reading of the points of claim and the plaintiff's response indicates the extent to which this case is dependent upon what was said by various individuals, I accept that the plaintiff will be prejudiced by the unavailability of Mr Shand and the likely unavailability of Mr Anderson. I further accept that it is inevitable with the passing of time that the quality of justice will have deteriorated (to use McHugh J's phrase in the Taylor case).
12 Allied to all of this is the prospect that even if this arbitration were
not to be terminated now and the defendant was permitted to maintain its action, there is no real prospect of the arbitration moving forward in the near future. The defendant is in liquidation and consequently impecunious. It has been unable to obtain an alternative litigation funder since the demise of HIH. There is no evidence to suggest that an alternative funder will be found. What the defendant says is that at some stage in the future it is possible that a third party, Learmonth Limestone Pty Ltd, may be in a position to fund the defendant's action. The position
[2003] WASC 99
MASTER SANDERSON
is somewhat complicated but given the reliance placed upon the prospect of funding becoming available both in relation to the adjournment application and as a reason for not terminating the arbitration, it is appropriate if I detail the defendant's position.
13 Learmonth Limestone Pty Ltd ("Learmonth") is a company
associated with a Mr Neil Warburton ("Mr Warburton"). Learmonth is not yet in a position to fund the defendant in the arbitration but it may be in a position to do so in the near future. Learmonth, through the agency of another company, Finesky Holding Pty Ltd, has applied for a mining lease over a certain area in the Exmouth region. Learmonth intends to quarry limestone on the mining lease. The application for the lease has been recommended by the mining warden and necessary native title approvals have been obtained. It would appear now that the tenement will be granted subject to environmental approval which is likely to be obtained. This, it is said, will provide Learmonth with a significant income earning asset.
14 One of the prime uses for the limestone will be in the development of
a marina at Maud's Landing. It is said that the Environmental Protection Authority recommended approval of the development and that recommendation is now being considered by the Premier. If the Premier approves the development then it will be necessary to obtain Federal environmental approval which is not expected to provide a problem. Agreement has been reached in relation to native title. Finance approval has been obtained for the development and if it proceeds, Learmonth will be contracted to undertake extensive work which will generate substantial income. The work done will utilise stone quarried from the mining lease controlled by Learmonth. This summary is taken from the affidavits from Mr Simunovich sworn 30 July 2002 and 10 May 2003.
15 In my view the prospect of Learmonth being in a position to fund the
defendant is highly speculative. There is no indication when the mining lease might generate cash flow, or indeed whether independent of the Maud's Landing development it would provide sufficient cash flow to allow Learmonth to fund the defendant. The defendant is in no position to say when, or indeed, if, the Maud's Landing development will be approved. Even if approval were obtained in the near future, it is unclear if Learmonth would immediately have sufficient cash flow to fund the defendant. It might take years. In the meantime, the plaintiff is left with this arbitration and a potential liability for many millions of dollars hanging over its head. That is an unacceptable position.
[2003] WASC 99
MASTER SANDERSON
16 In reaching the conclusion that the arbitration should be terminated, I
am mindful of the effect upon the defendant. All parties agree that the relevant time limits have expired and on termination of the arbitration, that is the end of the matter for the defendant. It cannot be denied that the defendant will suffer substantial prejudice. Even taking that matter into account, I am satisfied that the proper course in this action is to terminate the arbitration. I will make orders accordingly.
I will hear the parties as to the precise form of orders and as to costs.
0
0
1