White Industries Ltd v J.D. Trammell

[1983] FCA 385

CATCEWORDS

TRADE P-CTIC'ES - A p p l i c a t i o n t o s t r i ke ou t s t a r emen t of claim

- a l l e g a t i o n that t h e r e s p o n d e n t s a c t e d i n c o n c e r t t o h i n d e r o r

I p r e v e n t t h e s u p p l y of services from t h i r d r e s p o n d e n t t o a p p l i c a n t

i n c o n t r a v e n t i o n of S, 4 5 D 015 t h e Trade Practices A c t - whether

"services" be ing supp l i ed by t h e t h i r d r e s p o n d e n t - whether f i rs t

respondent and second respondent, as employees of t h e t h i r d r e s p o n d e n t ,

are independant from the th i rd respondent - whether respogdents

"hindered" o r "prevented" - whether a p p l i c a n t s u f f e r e d loss or

damage - g e n e r a l p r i n c i p l e s g o v e r n l n q s t r lke o u t a p p l l c a t i o n s .

TRaDE PRACTICZS .. - a p p l i c a t i o n t o d4y proceedings - wherher there

is a "matter" capab le of se t t l emen t by a rb i t r a t ion unde r pa ra .7 (2 ) (b)

of the Arb i t r ay ion (Fore ign ' Awards' and' Agrements ) A c t 1974.

Trade PractLce's. K c t 1 9 7 4 S. 45D

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ArbitYation (ForGign	AWa33s' aWd	Atjreements	)	A c t -	1 9 7 4	ss . d ,	7 .
LQCKXART, J. 21 DECEINBER, 1983.
SYDNEY.

IN ?HE FEDERAL COURT OF AUSTFALIA ) )

NEW SOUTH PIALES DISTRICT REGISTRY No.G285 of 1983

)

GENERAL DIVISION.. )

BEIVEEN: WITE INDUSTRIES LIMITED

!

- Applicant

m: J.D. 'TRAMFIEL

First Respondent

J.O. KELLEY

Second Respondenr:

DRAW CORPORATION

Third Respondent

TOMAGO ALUMINIUM COMPANY PTY.

LIMITED

Fourth Respondent

O R D E R

JUDGE W I N G ORDER	:	Lockhart J.
DATE OF ORDER	:	21 December 1983
WHERE MADE	:	Sydney I

THE ORDERS OF THE COURT ARE AS FOLLOWS:-

-

(1) Order pursuant to S . 7 of the Arbitration (Forelm

Awards and Bqreenents) Act 1974 (Cth.):-

(a) That so much of the proceeding in this Court as

involves the matters alleged in paras. 3 5 , 48, 49,

62, 63, 75 and 76 of the statement of claim be

stayed upon the condition that such stay may be terminated upon application made by the applicant in the event that the respondents do not do all

thlngs necessary to be done on their part to have

the matters referred to hereunder determined In

4

accordance with the arbltration agreements between

the parties with reasonable expedition; and

_.

(b)	That the parties be referred to arbitration in
respect of the matters mentioned in (a) above;

( 2 )

Order that so much of the applicacion by the respondents

as seeks the dlsmissal of the proceeding in this Court

pursuant to order 20 rule 2 be dismissed;

( 3 ) Or&r	that the costs of	this application by the respondents
z.

pursuant to order 2 0 rule 2 and for a stay pursuant to

S. 7 of the Arbitation (Foreisn Awards and Asreements

A c t ) 1974 (Cth.) be costs in the proceeding;

(4)	Order that each party be at liberty to apply on two
days- notice in respect of the stay granted by order
l(a) above.

IN THE FEDERAL COURT OF AUSTRALIA	) )
NEW SOUTH W E S DISTRICT REGISTRY	) No.G285 of 1983
)
GENERAL DIVISION	)

BETWEEN: WHITE INDUSTRIES LIMITED

Applicant

AND: J.D. TRAMMEL

First Respondent

J . O . XELLEY

Second Respondent

DRAVO CORPORATION

Third Respondent

TOMAGO ALUMINIUM COMPANY PTY.

LIMITED

Fourth Respondent

LOCKHART J.

21 December, 1983

REASONS FOR JUDGMENT

The respondents to this proceeding seek to strike out the

statement of claim pursuant to Order 20 Rule 2 on the ground that it

discloses no reasonable cause of action. The statement of claim

certainly seeks to take S. 45D of the Trade Practices Act 1974 ("the

Act") to its outermost limits and shows considerable ingenuity. It

reminds me of Charles Lamb's words - "I like you, and your book,

ingenious Hone! I'

Alternatively, the respondents seek a stay pursuant to sub-S.

7 ( 2 ) of the Arbitration (Foreicrn Awards and Acrreements) Act 1974

(Cth-) of so much of the proceeding as involves the determination of a

matter that is capable of settlement by arbitration in pursuance of an

arbitration agreement as defined in that Act.

The statement of claim contains 76 paragraphs. It is common

ground that, for the purposes of this application, it is sufficient to look at paragraphs 1 to 35 because the remainlng paragraphs follow the same scheme and allege causes of action which, although arising from different facts, are based on the same legal principles.

Paragraphs 1 to 34,allege matters which are said to establish

first, that the first and second respondents have contravened S. 45D

of the Act and second, that the third and fourth respondents were

persons involved in that contravention wlthin the meanlng of S . 75B of

the Act. The applicants seek damages pursuant to S . 82 and orders

under S. 87. Paragraph 35 of the statement of claim alleges matters

which enliven this Court's accrued jurisdiction.

The statement of claim is not an easy document to summarise.

Rather than recite all the material paragraphs (1 to 35) in the body

of my reasons for judgment I will make them an appendix.

For present purposes it is sufficlent to say chat there is an

3.

!

aluminium smelter in the course of construction in the Hunter Valley

of New South Wales. A consortium of companies namely, Alummium

Pechiney Australia Pty. Limited,Gove Aluminium Finance Limited, Toa

Pty. Limited, VAW Australia Pty. Limited and Hunter Douglas Limited

are joint venturers f o r the purpose- of constructing and. operating the

smelter. The fourth respondent, Tomago Aluminium Company Pty.

Limited, is alleged to be the agent for the ~oint venturers in the

construction and operation of the smelter. The third respondent is a

company incorporated in the State of Pennsylvania In the United States

of America. It executed two agreements for the construction of the

smelter. The statement df claim alleges that it executed these

agreements "as agent forthe fourth respondent, as agent for the joint

venturers" (paras. 7 and 8 of the statement of claim). The third

respondent is both "the principal" and "the Superintendent" as defined

in each contract. The first respondent is an employee of the third

respondent and the "Manager - Site Operations" for the third

!

respondent in respect of the alunlinlrm 5i11eitcr z i t e . The semrui

respondent is an employee of the third respondent and its "Project

Director" in respect of the aluminium smelter projects.

It is alleged that the third respondent, as "Superintendent",

was required by the contracts to act "reasonably and equitably" in

maklng determinations as to whether variations to the contracc works

were necessary, whether claims for delay should be permitted and

extengions of time granted, and in performing various other tasks

under the contracts including valuation of relevant variations to the

contract (para. 23). The applicant lodged a claim "with the flrst

! 4.

respondent on behalf of the third respondent in Its capacity as

Superintendent" for additional costs for certain contract work

amounting to $314,628.72 and claimed for extension of time (para. 25).

Two or more of the first respondent, the second respondent and other

employees of the third respondent, acting in concert recommended to

the third. respondent in	its capacity as Superintendent that it reject
the claim (para. 26).	The third respondent notified the applicant

that the claim was rejected (para. 27) .

The applicant claims in paras. 1 to 34 in essence that the

first and second respondents, in concert with each other and other

employees of the third respondent, engaged in conduct that hindered or

prevented the supply of services by the third respondent to the

applicant and that the conduct was engaged in for the purpose and

would have or be likely to have the effect of causing substantial loss

or damage to the business of the applicant (sub-para. 45D(l)(b)(i) of

the Act). The third and fourth respondents are alleged to have alded,

abetted, counselled, procured or induced the first and second

respondents to have contravened S. 45D and to have been knowingly

concerned in each relevant contravention.

Counsel for the respondents submitted that the S . 45D claim

of the applicants was based on four propositions each of which must be

established to enable it to proceed. I shall state each proposition

in turn together	with the submissions of counsel for the applicants in
answer thereto.

The first proposition was said to be that when the third

respondent as Superintendent under the two contracts was considering

and dealing with claims made by the applicant as contractor it was

supplying "services" to the contractor within the meaning of the Act.

"Services" is defined by the Act (sub-S. 4(1) by an inclusive

definition as including:

"any rights ... benefits privileges or facilities that	are, or are to be, provided, granted or conferred in
trade or commerce, and without limiting the generality
of the foregoing, includes the rights, benefits,
privileges or facilities that are, or are to be,
provided, granted or conferred under -

-_

(a) a contract for or in relation to -

(i) the performance of work (including work of a professional nature), whether with or without the supply of goods;

....

but does not include rights or benefits being the

supply of goods or the performance of work under a

contract of service."

It was submitted on behalf of the respondents that any

relevant rights, benefits, privlleges or facilitles were conferred

when the two contracts were entered into and that It was no part of

the role of the third respondent as Superintendent or otherwise to

provide, grant or confer any rights, privilege, benefits or facilitles

to anybody. .All the Superintendent did was to perform its contractual

obligations. The task of the third respondent as Supermtendent was

to decide whether under the terms of the contracts the applicant was entitled to certain things. The relevant rights, benefits, privileges or facilities were conferred by the contracts and not otherwise.

6.

Counsel for the applicant submitted that, when the third

respondent as Superintendent dealt with claims submitted by the

applicant, it made determinations with respect to those claims

including directions as to variations, valuation of variations and the

granting of extensions of time and thereby provided "services" within

the meaning of that expression in the Act. Counsel pointed to the

wide import that the word "services" has according to its ordinary and

natural meaning and to the fact that the statutory definition of the

word is an. inclusive definition and in terms include matters

themselves of very wide import. Reliance was placed by counsel for

the applicant upon-'the judfient of Macfarlan J. in Perini Corporation

v.Commonwealth of Australia (1969) 2 N.S.W.R. 530.

The- second proposition referred to by counsel for the

respondents was that the first and second respondents are both

employees of the third respondent and that, when they made

recommendations to the third respondent, including recommendations

that it reject the relevant claims made by the applicant, they must be

shown by the respondents to have made those recommendations separately

and independently from the third respondent itself. He submitted that

it is inappropriate to regard the first and second respondents as

separate from their employer, the third respondent. He said that the

very people who would be most likely to make relevant recornmendations

within the structure of the third respondent would be the first and

second respondents as the manager/site operations and the project

director respectively in respect of the smelter pro~ect at Tomago. In

these circumstances he submitted that they were the people who made

I

the relevant decisions on behalf of the third respondent, so that S.

I

45D cannot apply because their conduct is the conduct of the thud

respondent. It is essential for the operation of S . 45D that the

conduct of the first and second respondents, in concert with each

other, should hinder or prevent the supply of services by the thlrd

respondent to the applicant, This cannot occur if the conduct of the

first and second respondents is	in truth that	of the third respondent
itself.

.

Counsel for the applicants said in answer to this submission

that there is nothing in the language of S . 45D that requires that the

persons engaging in the relevant conduct should be separate-from the

third person referred to in the section: sub-S. 45D(1). The first and

second respondents are not employees of the person referred to In

sub-S. 45D(1) as the "fourth" person who is specifically described In

that sub-section as the "fourth person (not being an employer of the

first-mentioned person)" which, so It was said, is a pointer to the

conclusion that the fact that the first or second persons mentioned in

the sub-section may be employees of the third person is not intended

to oust the operation of the sub-section.

The third proposition upon which the S. 45D claim of the

applicant was said to be based was that, in making recommendations to I

the third respondent, the first and second respondents must have

engaged in conduct that hindered or prevented the supply of services

by the third respondent to the appllcant. But, so it was said, the

only conduct alleged in the statement of claim to constitute the

hindering or preventing of the supply of services by the third person

to the applicant is the making of recommendations by the first and

second respondents to the third respondent to reject the relevant

claims (paras. 26 and 28 of the statement of claim and perhaps para.

3 2 ) . -There is no allegation that there was any obligation on the part

of the third respondent to comply with that recommendation; hence

making a recommendation to one's employer cannot constitute hindering

or preventing the employer from doing anything.

Counsel for the applicant submitted that, as it is necessary

to assume the truth of thegallegations in the statement of claim for

the purposes of an application to strike out, it is plain that the

relevant allegations are made in the statement of claim that the

recommendations to reject the claims were made by the first and second

respondents to the third respondent (para. 26) ; that the third

respondent notified the applicant that the claim was rejected (para.

2 7 ) ; and that this conduct of the first and second respondents

hindered or prevented the third respondent from supplying to the

applicant the relevant service (para. 2 8 ) . Whether the relevant

conduct did in fact hinder or prevent the supply of this service is a

question of fact to be determined at the trial; but the allegation is

made in the clearest terms in the statement of claim.

The fourth proposition on which counsel for the respondents

said the S . 45D claim rested was that the relevant conduct must have

been engaged in for the purpose or had or be likely to have the effect

of causing substantial loss or damage to the business of the

9.

applicant. It was said that it is impossible for someone in the

position of the applicant to suffer damage as the consequence of the decision by the third respondent as Superintendent of the project to

reject a claim, that the contractual consequences of such rejection is

that the matter proceeds to a third party for arbitration to be

adjudicated in accordance with the provisions of the contracts.

Counsel for the applicant submitted that there are at least

five heads of damage which could be suffered by the appl,icant in

addition to damage which they may recover by an award based upon the

arbitration provis’ions of the contracts being invoked. He identified

two such heads of damage as the arbitration costs themselves and the

lapse of time which inevitably occurs after a matter is referred to

arbitration and before an award is made which can have disastrous

affects on the business of a party to the arbitration. Notwithstanding

_.

that interest may be awarded in appropriate cases by an arbitrator

thls is not in truth compensation for damage under this head.

The prlnciples governing applications to dismiss or stay

proceedings on the ground that no reasonable cause of action is

disclosed are referred to in many cases. I do not propose to restate

them as they are well known- See - v. Victorian Railwavs

Commissioners (1949) 78 C.L.R. 62 especially per Dixon J. (at p. 91):

General Steel Industries Inc. v. Commissioner for Railways (N.S.W.)

(1964) 112 C.L.R. 125 especially per Barwick C.J. (at-pp. 129-130).

Hanimex Ptv. Limited v. Kodak (Australasia) Ptv. Limited (1982)

A.T.P.R. 40-287 (at p . 43999) and Universal Telecasters (Oueensland)

10.

Limited v. Ainsworth Consolidated Industries Limited (1983) A.T.P.R.

40-384 (at pp. 44-525-6).

In the.Genera1 Steel Case Barwick C.J. posed the relevant

test (at p. 130) as being whether the plaintiff's case "...is so

clearly untenable that it cannot possible succeed", a passage that has

been followed more than once and recently by a Full Court of this

Court in the Universal Telecasters Case (at p. 44,526).

Although the S . 45D claim in this proceeding is novel, I am

not satisfied that, as pieaded, it manifestly does not admit of

reasonable argument or that it is so clearly untenable that it cannot

possibly succeed. 1 think that this conclusion sufficiently appears

from my summary of the rival contentions of counsel. I see no useful

purpose in my analysing in depth the various propositions of law that

were the subject of argument. This would be, in the circumstances of

the present case, to embark upon an exercise that is more approprlate

for the trial Judge on the final hearing of the case.

I am not, of course, determining in this application the

-

ultimate strength or weakness of the applicant's case. B11 I am

deciding is that the exercise of this Court's summary jurisdiction to

dismiss a proceeding should not be invoked.

I turn now to the alternative claim by the respondents for a stay pursuant to sub-S. 7 ( 2 ) of the Arbitration (Foreim Awards and

Asreements) Act 1974 ("the Arbltration Act"). The long title to the

11.

Arbitration Act states that it is "an Act to approve Accession by

Australia to a Convention of a Recognition and Enforcement of Foreign

Arbitral Awardsr to give effect to that Convention, and for related

purposes". -

The "Convention" is defined by sub-S. 3(1) as meaning the

1958 Convention on the recognition and enforcement of foreign arbitral

awards, a copy of the English text of which is set out in the Schedule	..
to the Act.

By S. 4 approval is given to accession by Australia to the

Convention. Section 7, so far as relevant to the present application, provides:-

"7(1) Where.. .

(d) a party to an arbitration agreement is a

person who was, at the time when the

agreement was made, domiciled or ordinarily

resident in a country that is a Convention

Country, this section applies to the

agreement.

( 2 ) Subject to this Act, where -

(a)-proceedings instituted by a party to an

arbitration agreement to which this secti-on

applies against another party to the

agreement are pending in a Court; and

(b) the proceedings involve the determination of

a matter that, in pursuance of the agreement,

-is capable of settlement by arbitration, -

on the application of a party to the agreement,

the Court, shall, by order, up \ n such conditions

(if any) as it thinks fit, stgy the proceedlngs

or so much of the proceedings as involves the

determination of that matter, ag the case may lie,

and-refer the parties to arbikration in respect

Y l!

of that matter.

( 4 ) For the purposes of sub-ss. ( 2 ) and ( 3 1 , a

reference to a party includes a reference to a

person claiming through or under a party ..."

It is common ground between the parties that:-

(a)	The contracts expressed to be between the applicant
and the third respondent are "arbitration

agreements" within the meaning of the Arbitration

A A ;

_.

(b) The third respondent, being a corporation

incorporated in the U.S.A., is a person who was at

the time when the Arbitration agreements were made domiciled or ordtnarily resident in the U.S.A.;

(c) The U.S.A. is a Convention Country;

(d) Paragraph 7(1) (d) of the Arbitration Act therefore

applies ;

(e) Paragraph 7(2)(a) of the Arbitration Act applies.

The only dispute is whether para. 7(2)(b) applies. Counsel

for the respondents submitted thar; the proceedings in this Court do

not involve the determination of a matter that, in pursuance of the

-.--IICCOr*CIII---.I-..-.-------. --- - - --- - - - - .-. .

13.

arbitration agreements, is capable of settlement by arbitration. He

did not dispute that the third respondent was a party to the

agreements mentioned in the statement of claim and that it was llable

as a principal to the applicant as the other contracting party.

Counsel argued that it was an accidental circumstance that the third

respondent was also the "Superintendent" under the agreements. The

breach of contract alleged against the third respondent in para. 35 of

the statment of claim was said to be a breach of its obligations as

Superintendent not as a principal contracting party. If the third .

respondent had been the Superintendent only and not a party to the

_.

agreements then it could not be said to have been in breach of any

obligations under the agreement; nor could any party itself be said to

I	be in breach of the agreements. In these circumstances counsel argued that the material provisions of clause 49 of the agreements were not applicable. Clause 49, dealing with settlement of disputes, provides,
so far as relevant:-

"All disputes or differences arising out of the Contract

or concerning the performance or the non-performance

of either party of his obligations under the contract,

whether before or after the completion of the works,

shall be determined as follows.. . . "

There follows detailed provisions designed	to refer matters in dispute
to arbitration under the agreements.

It was said that the fact that in the present case the

Superintendent and the principal contracting party were one and the same person, namely the third respondent, was not to the point.

14.

I reject this argument. Accidental circumstance or not, the

fact is that the third respondent is both a principal contracting

party and the Superintendent under the agreements. If the third

respondent had not been a contracting party the applicant would have

no cause of action against it pursuant to para. 35 of the statement of

claim which asserts that one party to the relevant agreement (the third respondent) has breached his contractual obligations and is

liable accordingly. It is only because the third respondent is a

party to the relevant agreements that it can be sued for its breach.

It is plain that the opening words of the relevant part of cl. 49.1 of

the agreements are satisfied. There is a dispute or difference

arising out of the agreements or concerning the performance or the

non-performance by either party of his obligations under the

agreements. There is no warrant for reading down the plain language of

these opening words. Indeed, even if it were permissible to

distinguish between the role of the third respondent as a contracting

party on the one hand and as the Superintendent on the other hand, I

am satisfied as at present advised that the opening words of cl. 49.1

would still apply. There would still be a dispute or dlfference

arising out of the contract namely, a dispute or difference between

the applicant as builder and the third respondent as Superintendent in relation to the third respondent's alleged failure and neglect to act

in a reasonable and equitable manner in determining and valuing the

relevant claims and granting extensions of time. The second leg of

opening the words of clause 49.1 "All disputes or

differences. ... concerning the performance or the non-performance of

either party of his obligations under the contract" may not, however,

15.

apply on this hypothesis.

In these circumstances I am satisfied that para. 7(2) (b) of

the Arbitration Act applies. No other argument was put against the

making of the order required by sub-S. 7 ( 2 ) .	Accordingly, I propose
to make appropriate orders.

I was referred in argument to the orders made by McLelland J.

in Flakt Australia Limited v. Wilkies & Davies Construction Co.

Limited (1979) 2 N.S.W.L.R. 243 (at p. 251). In my opinion the orders

made in that case by his Honour may appropriately be made in the

present case-

It was not disputed that, if the respondents succeed in their

application for a stay pursuant to sub-S. 7(2) of the Arbitratlon

(Foreiqn Awards and Aqreements Act 1974, the stay should apply to the

matters mentioned in paras. 35, 48, 49, 62, 63, 75 and 76 of the

statement of claim, being the paragraphs which relate to so much of

the applicant’s claim as is based on the pendant or accrued

jurisdiction of this Court, not the claims based on S . 45D of the Act.

The orders of the Court are as follows:-

(1) Order pursuant to S . 7 of the Arbitration (Foreiun

Awards and Aqreements) Act 1974 (Cth.1:-

(a)	That so much of the proceeding in this Court as involves the matters alleged in paras. 35, 48, 49,
62, 63, 75 and 76 of the statement of claim be
stayed upon the condition that such stay may be
terminated upon application made by the applicant
in the event that the respondents do not do all things necessary to be done on their part to have the matters referred to hereunder determined in accordance with the arbitratlon agreements between the parties with reasonable expedltion; and
(b)	That the parties be referred to arbitration in
respect of the matters mentioned in (a) above;

( 2 )	Order that so much of the application by the respondents
as seeks the dismissal of the proceeding in this Court \- -
pursuant to order 20 rule 2 be dismissed;
( 3 )	That the costs of this application by the respondents
pucsuant to order 20 rule 2 and for a stay pursuant to
S. 7 of the Brbitation (Foreiqn Awards and Aqreements
A c t ) 1974 (Cth.) be costs in the proceeding;
(4)	Order that each party be at liberty to apply on two
-	days' notice in respect of the stay granted by order
l(a) above.