WTE Co-Generation v RCR Energy Pty Ltd - [2013] VSC 314

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST

No. 01707 of 2013

WTE CO-GENERATION	First Named Plaintiff
And
VISY ENERGY PTY LTD	Second Named Plaintiff
v
RCR ENERGY PTY LTD	First Named Defendant
And
RCR TOMLINSON LTD	Second Named Defendant

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JUDGE:	VICKERY J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	24 MAY 2013
DATE OF JUDGMENT:	21 JUNE 2013
CASE MAY BE CITED AS:	WTE CO-GENERATION & ANOR v RCR ENERGY PTY LTD & ANOR
MEDIUM NEUTRAL CITATION:	[2013] VSC 314

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BUILDING CONTRACT - Contractual dispute resolution clause a pre-condition to litigation – Whether dispute resolution clause uncertain and unenforceable – Principles as to uncertainty and enforceability of contractual dispute resolution clauses – Dispute resolution clause uncertain and left process for further agreement - Dispute resolution clause unenforceable.

CONTRACT - Contractual dispute resolution clause a pre-condition to litigation – Whether dispute resolution clause uncertain and unenforceable – Principles as to uncertainty and enforceability of contractual dispute resolution clauses – Dispute resolution clause uncertain and left process for further agreement - Dispute resolution clause unenforceable.

PRACTICE AND PROCEDURE – Application for stay of a proceeding – Inherent jurisdiction to order – Contractual dispute resolution clause a pre-condition to litigation – Whether dispute resolution clause uncertain and unenforceable – Principles as to uncertainty and enforceability of contractual dispute resolution clauses – Dispute resolution clause uncertain and left process for further agreement - Dispute resolution clause unenforceable – Stay refused.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Whitten	Arnold Bloch Leibler
For the Defendants	Mr J Gleeson SC with Mr K Naish	Clayton Utz

HIS HONOUR:

This is an application by the Defendants that, pursuant to ss 47 and 48 of the Civil Procedure Act 2010 (Vic) or, alternatively, s 30 of the Supreme Court Act 1986 (Vic) and the inherent jurisdiction of the Court, the proceeding be stayed until the parties have complied with a contractual dispute resolution clause.

The contract in question is the Coolaroo Co-Generation Plant Boiler Contract dated 15 October 2008 (the “Contract”).

The Contract is for the supply of the co-generation facility (the “Facility”), intended to be fired by paper mill residues. The Contract was entered into by the First Defendant (“RCR Energy”) and Visy Paper. The contract price was in excess of $20m.

The Firstnamed Plaintiff (“WTE”) alleges a breach of contract pursuant to a novation of the Contract. The Second Defendant (“RCR Tomlinson”) is sued as a guarantor of RCR Energy's obligations under the Contract. The Second Plaintiff (“Visy Energy”) sues for what are alleged to be misleading representations made in the Contract.

The bases of the application are:

(a)The parties, by clause 42 of the Contract, agreed that senior executives of the parties would meet to attempt to resolve the dispute in the manner set out in clause 42;
(b)No such meeting has taken place. Accordingly, the Court should give effect to the parties' agreement and stay the proceeding until the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] VSC 314
Decision Date: 21 JUNE 2013

CaseChat Overview and Summary

WTE Co-Generation brought an action against RCR Energy Pty Ltd in the Federal Court of Australia, seeking damages for alleged breaches of contract. The primary dispute involved the interpretation and application of a contractual dispute resolution clause that was a precondition to any litigation. The case turned on whether this clause was uncertain and, therefore, unenforceable, which would render the litigation itself improper.

The central legal issue was whether the contractual dispute resolution clause was so uncertain that it left the process for resolving disputes to be further agreed upon by the parties. The court had to determine if the clause was uncertain enough to render it unenforceable and if this uncertainty meant that the litigation was not permissible under the terms of the contract. The case hinged on principles relating to the uncertainty and enforceability of contractual dispute resolution clauses, as well as the inherent jurisdiction of the court to stay proceedings when such clauses were in play.

The court found that the dispute resolution clause was indeed uncertain as it did not specify a clear process for resolving disputes, leaving the parties to agree on the process at a later stage. This uncertainty made the clause unenforceable, and as a result, the litigation was not permissible under the contract. Consequently, the court exercised its inherent jurisdiction and stayed the proceedings. The court held that the litigation could not proceed until the parties resolved their disputes through the specified process, as outlined in the contract.

The final orders of the court were that the proceedings be stayed until the parties resolved their disputes in accordance with the contractual dispute resolution clause. The stay was to remain in effect until the parties either resolved their differences or agreed on a clear process for dispute resolution.

Orders