Wyong Shire Council v Jenbuild
[2012] NSWSC 720
•19 June 2012
Supreme Court
New South Wales
Medium Neutral Citation: Wyong Shire Council v Jenbuild [2012] NSWSC 720 Hearing dates: 19/06/2012 Decision date: 19 June 2012 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Summons dismissed with costs.
Catchwords: [COMMERCIAL ARBITRATION] - contracts - whether contracts made between the plaintiff and the first defendant constitute a valid arbitration agreement for the purposes of s 7 of the Commercial Arbitration Act 2010 (NSW) - whether contract ancillary to the principal contracts governed the dispute resolution process.
[ESTOPPEL] - estoppel in pais - convention; estoppel by - whether sufficient detriment that parties are estopped from denying their contractual relationship is governed by a dispute resolution clause.Legislation Cited: Commercial Arbitration Act 2010 (NSW) Cases Cited: Moratic Pty Ltd v Lawrence James Gordan & Anor [2007] NSWSC 5
Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202Category: Principal judgment Parties: Wyong Shire Council (Plaintiff)
Jenbuild Pty Limited (First Defendant)Representation: Counsel:
F C Corsaro SC (Plaintiff)
I G Roberts SC (Defendant)
Solicitors:
HWL Ebsworth (Plaintiff)
Herbert Geer (Defendant)
File Number(s): 2012/134485
Judgment
HIS HONOUR: The question for decision is whether, in four contracts made between the plaintiff (the Council) and the first defendant (Jenbuild), there is a valid arbitration agreement for the purposes of s 7 of the Commercial Arbitration Act 2010 (NSW) (the Act).
The contracts
On 10 March 2008, some four contracts were made between the Council and Jenbuild. Each contract related to a particular holiday park within the control of the Council. Each called for Jenbuild to perform what were, in effect, works upgrading and improving the facilities at the subject park.
In the usual manner of things, each contract was constituted by a multitude of documents. Those documents included (but by no means are limited to) the general conditions of contract AS2124-1992. They also included what purported to be the annexure part A to those general conditions of contract, completed to make provision for the various alternatives and choices for which the general conditions from time to time provide. In each case, the completed annexure part A was part of the request for tender documents and hence, by definition, part of the contract documents.
Although the provisions of the general conditions of contract are well known, it will be helpful to set them out so far as they are relevant.
The principal source of dispute arises from cl 47, which deals with dispute
resolution. By cl 47.1, any dispute is to be the subject of a notice of dispute. However, according to cl 47.2, there are further steps to be taken before proceedings, by way of arbitration or litigation, can be commenced in relation to the dispute the subject of the notice. Clause 47.2 provides for two alternatives. The first requires the parties to confer either to resolve the dispute or to explore its resolution by other means. If those attempts to fail, the dispute can be referred to arbitration or litigation.
Alternative 2 takes somewhat longer to work through. That is because it involves the superintendent (I do not intend to be disrespectful by saying that). The superintendent is to give a written decision on the dispute. A party dissatisfied with that decision can request a conference. Thereafter, steps equivalent to those under alternative 1 will follow.
Clause 47.3 deals with the appointment of an arbitrator, and matters relevant to the arbitration.
Although I have summarised the terms of cl 47, it is necessary to set it out full and I do so:
47.1Notice of Dispute
If a dispute between the Contractor and the Principal arises out of or in connection with the Contract, including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute.
Notwithstanding the existence of a dispute, the Principal and the Contractor shall continue to perform the Contract, and subject to Clause 44, the Contractor shall continue with the work under the Contract and the Principal and the Contractor shall continue to comply with Clause 42.1.
A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration; may be included in an arbitration.
47.2Further Steps Required Before Proceedings
Alternative 1
Within 14 days after service of a notice of dispute, the parties shall confer at least once, and at the option of either party and provided the Superintendent so agrees, in the presence of the Superintendent, to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference each party shall be represented by a person having authority to agree to a resolution of the dispute.
In the event that the dispute cannot be so resolved or if at any time either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may by notice in writing delivered by hand or sent by certified mail to the other party refer such dispute to arbitration or litigation.
Alternative 2
A party served with a notice of dispute may give a written response to the notice to the other party and the Superintendent within 28 days of the receipt of the notice.
Within 42 days of the service on the Superintendent of a notice of dispute or within 14 days of the receipt by the Superintendent of the written response, whichever is the earlier, the Superintendent shall give to each party the Superintendent's written decision on the dispute, together with reasons for the decision.
If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a written decision on the dispute within the time required under Clause 47.2 the parties shall, within 14 days of the date of receipt of the decision, or within 14 days of the date upon which the decision should have been given by the Superintendent confer at least once to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference, each party shall be represented by a person having authority to agree to a resolution of the dispute.
In the event that the dispute cannot be so resolved or if at any time after the Superintendent has given a decision either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may, by notice in writing delivered by hand or sent by certified mail to the other party, refer such dispute to arbitration or litigation.
47.3Arbitration
Arbitration shall be effected by a single arbitrator who shall be nominated by the person named in the Annexure or if no person is named, by the Chairperson for the time being of he Chapter of the Institute of Arbitrators Australia in the State or Territory named in the Annexure. Such arbitration shall be held in the State or Territory stated in the Annexure.
Unless the parties agree in writing, any person agreed upon by the parties to resolve the dispute pursuant to Clause 47.2 shall not be appointed as an arbitrator, nor may that person be called as a witness by either party in any proceedings.
Notwithstanding Clause 42.9 the arbitrator may award whatever interest the arbitrator considers reasonable.
If one party has overpaid the other, whether pursuant to a Superintendent's certificate or not and whether under a mistake of law or fact, the arbitrator may order repayment together with interest.
47.4Summary or Urgent Relief
Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under Clause 42 or to seek urgent injunctive or declaratory relief in respect of a dispute under Clause 47 or any matter arising under the Contract.
It was intended, clearly enough, that the annexure part A would provide, among other things, a statement of which of the two alternatives set out in cl 47.2 was applicable, and who was to be the appointer of the single arbitrator for the purposes of cl 47.3. Unfortunately, the annexure that the Council prepared and that was included in the request for tender in each case, referred not to cll 47.2 and 47.3 but to non-existent cll 46.6 and 46.8. I set out the relevant terms of the annexure, to the extent it refers to those clauses:
The person to nominate an Expert (Clause 46.6)
The Secretary General of the Australian Commercial Disputes Centre
The person to nominate an arbitrator: (Clause 46.8)
The President of the Law Society of NSW
As is apparent, there was to be at all times a superintendent for each contract. Clause 23 dealt with the superintendent. It provided, in the usual way, for the principal, the Council, to ensure that there would be a superintendent and that the superintendent would act appropriately. It also provided for a definition of "direction". Since that definition was raised in the course of argument, I set it out:
23 SUPERINTENDENT
The Principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the Contract, the Superintendent -
(a)acts honestly and fairly;
(b)acts within the time prescribed under the Contract or where no time is prescribed, within a reasonable time; and
(a)arrives at a reasonable measure or value of work, quantities or time.
If, pursuant to a provision of the Contract enabling the Superintendent to give directions, the Superintendent gives a direction, the Contractor shall comply with the direction.
In Clause 23 'direction' includes agreement, approval, authorization, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request, request or requirement.
Except where the Contract otherwise provides, a direction may be given orally but the Superintendent shall as soon as practicable confirm it in writing.
If the Contractor in writing requests the Superintendent to confirm an oral direction, the Contractor shall not be bound to comply with the direction until the Superintendent confirms it in writing.
Clause 8.1 of the general conditions contemplated (wisely, in the event) that there might be discrepancies between the several documents forming the contract. It sought to provide for a means of resolving those discrepancies: I set it out.
8.1Discrepancies
The several documents forming the Contract are to be taken as mutually explanatory of one another. If either party discovers any ambiguity or discrepancy in any document prepared for the purpose of executing the work under the Contract, that party shall notify the Superintendent in writing of the ambiguity or discrepancy. In the event of an ambiguity or discrepancy being discovered and brought to the attention of the Superintendent, or discovered by the Superintendent, the Superintendent shall direct the Contractor as to the interpretation to be followed by the Contractor in carrying out the work.
If the direction causes the Contractor to incur more or less cost than the Contractor could reasonably have anticipated at the time of tendering, the difference shall be valued under Clause 40.5.
Since there was a submission that the operation of cl 8.1 was limited by the definition of the phrase "work under the contract" I set out that definition from cl 2 of the general conditions:
'work under the Contract' means the work which the Contractor is or may be required to execute under the Contract and includes variations, remedial work, Constructional Plant and Temporary Works;
It will be seen, on the face of the documents, that there was no effective specification of the alternatives for the purposes of cl 47.2, and, if the reference in the annexure part A, against the words "the person to nominate an arbitrator", were to be read as referring to cl 47.3, then there was an indication of intention contrary to that expressed in cl 47.3 itself.
The discrepancies are addressed
Some time after the contracts were made, but well before any dispute arose, Jenbuild became aware of the discrepancies to which I have referred. On 24 December 2008, it wrote in that connection to the superintendent. The letter stated, relevantly:
In addition there has been nothing supplied for 47.2 or 47.3 and we advise our preference / details.
47.2-Alternative 2
47.3-Chairperson of the NSW Chapter of Arbitrators Australia
The superintendent replied, through his representative, by email dated 30 January 2009. That email acknowledged the discrepancies to which Jenbuild had drawn attention. However, it stated:
We acknowledge that there is a discrepancy in the Request for Tender documentation for the Contracts CPA/136398, CPA/136399, CPA/136400 and CPA/136401. In reference to the General Conditions and the denoted Clauses 46.6 and 46.8, which it should have referred to Clauses 47.2 and 47.3.
In regards to Clauses 47.2 and 47.3, we note your preference. However, the Principal's preference are as follows.
The alternative required in proceeding with dispute resolution (Clause 47.2)
Alternative One
The person to nominate an arbitrator: (Clause 47.3)
The President of the Institute of Arbitrators and Mediators Australia
Location of arbitration (Clause 47.3)
Sydney
Should you have an enquiries regarding the above, please do not hesitate to contact me as per the undersigned.
The notices of dispute
From late March 2009, a number of disputes arose in relation to each of the contracts. The first disputes were notified by Jenbuild to the Council on 26 March 2009. A letter of that date attached four separate notices of dispute, one for each contract. It noted that they were "formal notices of dispute for the four separate contracts". Nonetheless, the letter stated that, in the view of the writer, "the most efficient way to address these disputes pertinent to cl 47 is to join them as virtually separable parts of a singular dispute resolution procedure".
As I understand it, Jenbuild acknowledged thereby that there was a dispute resolution procedure to be followed under each contract, but proposed, as a procedural or mechanical way to address the disputes efficiently, that there be one cl 47 dispute resolution procedure encompassing each of the disputes.
The reference to cl 47 was then taken up in the following paragraph of the letter.
Clearly, Jenbuild appears to have accepted the statement of the Council's "preference", as notified by the superintendent's email of 30 January 2009.
The Council replied (through the superintendent) on 31 March 2009. That reply referred to each of the notices of dispute. It then stated:
In accordance with Clause 47.2 of the General Conditions of Contract (AS2124-1992), I hereby advise you that your request to confer at least once within 14 days of the notice of dispute in an attempt to resolve the disputed items has been considered and the Superintendent has proposed a meeting at Council for 10am on the 8th of April 2009.
I note your suggestion to not involve legal representation for the proposed meeting. However, I advise that Council's lawyer will be present during this meeting to help facilitate any resolution to the disputes as raised by Jenbuild.
Clearly, the Council thought that its stated preference, as conveyed through the superintendent's email of 30 January 2009, was to govern the process of dispute resolution.
The meeting as called was held.
On 7 January 2010, a further dispute was notified in relation to two of the contracts. In each case, the notice of dispute concluded:
Pursuant to Clause 47.2(Alternative 1) of the General Conditions of Contract we hereby request that you contact us to organise a meeting which needs to be held prior to 21-1-10 in accordance with Clause 47.2.
The Council replied by email of 18 January 2010, appointing a meeting for 21 January 2010 at 3pm. That was changed to 1pm on Friday, 22 January 2010. That meeting occurred.
In relation to that meeting, Mr Jensen of Jenbuild sent an email on 21 January 2010. Mr Corsaro of Senior Counsel, who appeared for the Council, objected to the tender of that email, relying on s 131 of the Evidence Act 1995 (NSW). He submitted that the email was a communication made between persons in dispute in connection with an attempt to negotiate a settlement of the dispute.
I do not think that a document appointing a meeting for a contractual purpose (for example, in compliance with alternative 1 set out in cl 47.2 of the general conditions of contract) is a "communication" of the kind referred to in s 131(1)(a). The purpose of s 131 is, as its heading indicates, to exclude evidence of what is said or communicated in the course of settlement negotiations. That reflects the law's concern to ensure that parties in dispute should be free to attempt to settle their disputes, without curial, arbitral or other imposed resolution, without being put at risk that what is said in an attempt to negotiate a settlement will be used in evidence against them at a later time. The fact that there was to be a meeting can hardly be of any significance, particularly where that meeting was one (on Jenbuild's case) required by the contract to be held. Nor did the email, to the extent that I admitted it, give any clue as to what had been said at the previous meeting, or what might be said at the meeting to be held later on the day the email was sent.
The email did however proceed further, and make observations as to the Council's conduct, apparently in the prior settlement meeting, in a way that did seem to me to infringe s 131. Accordingly, I rejected those paragraphs of the email from the tender.
However, at a later stage in the course of the hearing, Mr Corsaro then sought to tender those two paragraphs. When he did so, they were admitted. It appears that he sought to do so because he wanted to make the point that Jenbuild had proposed binding expert determination. That submission in turn prompted Mr Roberts of Senior Counsel, who appeared for Jenbuild, to tender a letter of 15 April 2009 from Jenbuild to the Council which had earlier been tendered and rejected on s 131 grounds (and on Mr Corsaro's application). Mr Roberts renewed the tender of that letter and I admitted it.
I have to say that all of this seems to me to be much ado about nothing. However, it will be necessary to return to the submission, as to expert determination, in due course.
On 13 August 2010, Jenbuild notified two further disputes in relation to two of the contracts. Again, that letter in each case concluded:
We request a meeting be organised pursuant to Clause 47.2 (Alternative 1) to be held within the next two weeks to discuss resolution of this dispute or to agree on other methods of resolving the dispute by other means.
The Council replied on 20 August 2010, agreeing to the meeting to discuss the disputes and noting that the superintendent would advise arrangements. The reply also advised a date, time and place for the meeting to take place. Again, the meeting was held.
On 10 December 2010, Jenbuild sent four further notices of dispute, one in relation to each of the contracts. Three of the letters concluded, invoking cl 47.2 (although without specifying alternative 1):
We request a meeting be organised pursuant to Clause 47.2 to be held within two weeks to discuss resolution of this dispute or to agree on methods of resolving the dispute by other means.
The fourth letter did not in terms invoke cl 47.2 (with or without alternative 1). But since it was apparently a follow up to an earlier notice of dispute, which did invoke cl 47.2, nothing seems to turn on that.
Again, the Council replied appointing a meeting as requested. In an email of 17 December 2010 from the Council to Jenbuild, it was said that a Mr Fulcher would attend as "the principal's representative" and that he could "act on behalf of the principal in regard to the requirements of cl 47.2". The meeting was held.
On 25 February 2011, Jenbuild gave yet another notice of dispute, relating to one of the contracts. It required, in the usual terms, a meeting pursuant to cl 47.2, alternative 1. On 6 March 2011, Jenbuild gave two further notices of dispute. Again, each notice requested a meeting in accordance with cl 47.2 alternative 1.
It appears that the requested meeting was held.
I come now to the notices of dispute that are the subject of the reference to arbitration that lies at the heart of this case. They were given on 7 December 2011. They covered numerous matters. Again, there was a request for a meeting in accordance with cl 47.2 (without specification of the relevant alternative). No such meeting was organised. The Council apparently did not indicate that it would organise such a meeting. On 30 January 2012, Jenbuild noted the lack of reply and said that if there were no meeting organised by a specified time, "we will regard your lack of any response as a refusal to hold the meeting".
On 20 March 2012, after the "deemed refusal" (I do not intend to suggest that it was open to Jenbuild unilaterally to create a situation of refusal, but it is clear that the Council was not prepared to hold the meeting), Jenbuild wrote to the Council notifying that it had referred the disputes to arbitration pursuant to cll 47.2 and 47.3 of the general conditions of contract. That was indeed done, on 21 March 2012, by letter to the president of the Institute of Arbitrators and Mediators Australia (IAMA). IAMA responded, appointing the second defendant as arbitrator. The second defendant has submitted, save as to costs, in these proceedings.
I turn now to the questions that were argued.
Is there an effective arbitration agreement for the purposes of the Act?
The definition of "arbitration agreement" is dealt with by s 7 of the Act. Subsections (1) to (4) are of particular significance. I set them out:
7 Definition and form of arbitration agreement
(cf Model Law Art 7)
(1)An "arbitration agreement" is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) The arbitration agreement must be in writing.
(4) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.
Mr Corsaro submitted that there was no arbitration agreement because, as a necessary precursor to arbitration, one or other of the alternatives in cl 47.2 had to be selected (and had to be worked through). He submitted that, in the absence of any meaningful reference in the annexure part A to cl 47.2, there was no choice and thus there was no indication, nor consent, as to the steps to be taken before there could be arbitration or litigation.
Mr Roberts submitted that one could read the two alternatives together and derive from them a consistent pattern which indicated an underlying, as he put it, default arrangement for the steps to be taken before there could be arbitration. Alternatively, Mr Roberts submitted, the exchange of correspondence on 24 December 2008 and 30 January 2009 came within cl 8.1 of the general conditions, and the latter document constituted a direction by the superintendent as to the correct interpretation of cl 47.2 and 47.3 to be followed.
Alternatively, Mr Roberts submitted, the first of those letters amounted to an offer by Jenbuild to follow one dispute resolution process. The email in reply amounted to a counteroffer by the Council. That counteroffer was accepted by correspondence.
Finally, and in the further alternative, Mr Roberts submitted that the Council was bound, by a conventional estoppel, so that it could not dispute that there was an arbitration agreement between it and Jenbuild in accordance with cl 47.3 of the contract.
In support of his submissions, Mr Roberts drew attention to the point that the requirement for an arbitration agreement to be in writing meant only that its content had to be recorded in written form. It did not matter that the contract to which it related had been concluded other than in writing. Thus, he submitted, the written form of cl 47 (which on any view is part of the contract between the Council and Jenbuild) was sufficient for the purposes of s 7(4) of the Act.
I do not think that it is appropriate to construe cl 47.2 in the manner that Mr Roberts submitted. That is to say, I do not think that it is appropriate to line up the two alternatives, extract from them that which is common, and say that that represents the minimum dispute resolution process to be followed through, which the parties are bound to attempt before they go to arbitration or litigation.
On its face, cl 47.2 sets out two alternatives. There are significant differences between them. The most obvious is that the second involves the superintendent, and provides for the superintendent to give a decision on the dispute. Another, and following from what I have just said, is that the ability to go to arbitration or litigation is substantially prolonged, or put off, if the second alternative is chosen.
It is clear that the parties tried, through the annexure part A, to give content to cll 47.2 and 47.3. It is equally clear that they failed to do so, in the case of cl 47.2. Whilst I remain of the view that (as expressed in the course of argument) the reference to cl 46.8 could be read, were it necessary to do so, as a reference to cl 47.3, there is no way that one can reconcile the reference to cl 46.6 with the requirements of cl 47.2 of the general conditions.
It follows, in my view, that when the contracts in question were made, the parties failed to achieve agreement on all aspects of the dispute resolution process to be followed.
I turn to the next argument, which was that the defect had been cured either through the application of cl 8.1 or by the making of a fresh, ancillary, contract, through the exchange of correspondence in December 2008 and January 2009.
In my view, the submissions for Jenbuild should be accepted on each point.
Clause 8.1 of the contract is intended to deal with discrepancies that arise between the various documents that form part of the contract, or that, in the words of the clause, are "prepared for the purpose of executing the work under the contract".
The "contract" is defined, simply, to mean the agreement between the parties (cl 2). One needs to go in each case to the letter of 10 March 2008, awarding the particular contract to Jenbuild, to see what documents constitute the contract. It is apparent, when one works through those documents (in particular, going to the request for tender, to see what it incorporates) that the contractual documents in each case include the general conditions of contract. They, thus, form part of the documents prepared for the purpose of executing the work under the contract. Since there is clearly a discrepancy or ambiguity in the documents (if only because the annexure part A does not perform its function in relation to cl 47), it is open to one party to refer the matter to the superintendent, and for the superintendent to give a direction as to the interpretation to be followed.
It is clear, if the wide definition of "direction" in cl 23 is applicable, that a direction as to the appropriate version of cl 47.2 - which alternative is to be followed - is capable of being a "direction" for the purposes of cl 8.1.
The functions of the superintendent include giving a direction under cl 8.1. Although the definition of "direction" is specifically limited to cl 23, it seems to me to be a matter of common sense to extend it to mean a direction in relation to any of the functions of the superintendent to which reference is made in cl 23.
Thus, as I have said, I conclude that the ambiguity or discrepancy in the contract documents was resolved no later than 30 January 2009, when the superintendent directed the principal's preference, and at least by implication made it clear that that preference was to be adopted.
If that were not correct then, as I have indicated, I would find that the two documents constituted offer and counteroffer, and that the Council's counteroffer (conveyed through the superintendent) was accepted by conduct.
Mr Corsaro sought to characterise the way in which the various disputes had been handled as amounting to, at most, ad hoc arrangements to deal with individual disputes. I do not agree. It seems to me that Jenbuild expressly, in its letter of 26 March 2009, adopted the course of conduct proposed in what is, on this analysis, the Council's offer. The Council acknowledged, or acted on, that acceptance in its reply of 31 March 2009.
It is impossible to view that exchange of correspondence as constituting anything other than an acknowledgment by the parties, which, in my view, may have contractual effect, that the appropriate method of dispute resolution was the first alternative set out in cl 47.2 of the general conditions.
It is clear that the promise of each party to submit to the routine imposed by the first alternative in cl 47.2 is capable of being good consideration for the reciprocal promise of the other party to do likewise. It is equally clear, in my view, that the parties intended that this choice should govern the dispute resolution procedure. Thus, I conclude, they formed a contract, ancillary to each of the principal contracts, clarifying and governing the dispute resolution process to be followed when dispute arose.
That interpretation of events is confirmed in part by a letter of 5 June 2009 from the Council's lawyers to Jenbuild, which letter stated, among other things, that the Council would not proceed by expert determination, but on the contrary "requires any disputes to be dealt with in accordance with the contract, that is by arbitration or litigation".
In my view, there could be no clearer confirmation, from the Council, that it regarded both parties as bound, in accordance with the contract, to proceed by way of arbitration or litigation. In context, that can refer only to, and assume the binding effect of, cll 47.2 and 47.3.
Thereafter, as I have noted, there were numerous occasions on which disputes were notified and a meeting was requested pursuant to cl 47.2, alternative 1; and on each occasion until the very last requests, which are now the subject of the arbitration, the request to hold the meeting was accepted and the meeting was in fact arranged and held.
That leaves the question of conventional estoppel.
In Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202, Young JA set out at [235], the five matters necessary to prove conventional estoppel drawing on the judgment of Brereton J in Moratic Pty Ltd v Lawrence James Gordan & Anor [2007] NSWSC 5 at [32]. At [236], Young JA pointed out that the Court of Appeal had approved that summary "at least twice". Accordingly, I do no more than set out, in these reasons, what Young JA said at [235]:
235In Moratic Pty Ltd v Lawrence James Gordan & Anor [2007] NSWSC 5; 13 BPR 24,713 [32], Brereton J said that there were five matters necessary to be established to prove a conventional estoppel, namely:
(1) that [the plaintiff] has adopted an assumption as to the terms of its legal relationship to the defendant;
(2) that the defendant has adopted the same assumption;
(3) that both parties have conducted their relationship on the basis of that mutual assumption;
(4) that each party knew or intended that the other act on that basis;
(5) that any departure from the assumption will occasion detriment to the plaintiff.
In this case, there is an irresistible inference from the facts that Jenbuild adopted an assumption that its legal relationship with the Council would be governed, in the event of dispute, on the basis that cl 47.2, alternative 1, applied; and on the basis that any arbitrator was to be appointed by the president of IAMA. It is equally clear, from those same facts, that the Council adopted the same assumption.
Further, it is clear that up until the very last set of disputes, Jenbuild and the Council conducted their relationship on the basis of that mutual assumption and that each knew that the other would so act.
The only issue in question, it seems to me, is detriment.
Mr Roberts pointed to the fact that, on numerous occasions, Jenbuild had incurred the expense of preparing a notice of dispute and then following through the alternative 1 process. Mr Corsaro countered that the requirement to prepare a notice of dispute was imposed by cl 47.1, and thus that the expense of doing so could not be counted as detriment.
It is I think correct to say that the notice of dispute was required in any event. But in each case, Jenbuild took time and trouble to act in accordance with alternative 1, as required by the Council. It did not (for example) resort to litigation without following through the dispute resolution process.
Further, in this case, Jenbuild has gone to the trouble and expense of applying to the president of IAMA for the appointment of a mediator, and paying the requisite fee.
In those circumstances, I conclude, there is sufficient detriment to warrant the conclusion that the parties are indeed estopped, on a conventional basis, from denying that their contractual relationship is governed by the first alternative in cl 47.2, and that any arbitrator is to be appointed by the president of IAMA.
I should note that Mr Corsaro sought to tender a redacted copy of a letter, dated 25 October 2001, from the Council to Jenbuild, in which the author stated, among other things, that in relation to two of the contracts he did not think there was a need for any further meetings "and it is now time to either finalise these matters or proceed to resolution through the Court".
Mr Corsaro submitted that if his client were bound by cl 47.2 alternative 1 (or, for that matter, alternative 2), this was a notice of reference to litigation for the purposes of the final paragraph of the relevant alternative.
Mr Roberts opposed the tender of the letter, on the basis that it had been sent "without prejudice" and, thus, that the s 131 privilege attached. As I understand it, the purpose of the redaction was to remove references to matters that might be the subject of the s 131 privilege.
I rejected the letter, on the basis that it was expressly sent "without prejudice", and that both the Council and Jenbuild were entitled to expect that evidence would not be adduced of its contents.
Mr Corsaro renewed the tender, so as to prove, as I have said, that his client had sought to refer the dispute to litigation.
Even if the letter were to be admitted, I do not think that it could bear the weight that Mr Corsaro sought to put upon it. It is clear, for the purposes of cl 47.2, that once the processes set out in the relevant alternative have been followed, either party can refer the dispute to arbitration or litigation. A statement that further negotiation is (in relation to two contracts) unlikely to be helpful, and it is time for the matter to proceed to resolution through the court, does not seem to me to be capable of coming within the concluding paragraph of either alternative.
I accept, as Mr Corsaro submitted, that it is not necessary for the reference expressly to invoke the clause and the alternative. But in this case, particularly bearing in mind that the letter deals with more than the two contracts in question and that the subject matter of the paragraph on which Mr Corsaro relied has been redacted out of the letter, it seems to me to be no more than an expression of opinion that "we have gone far enough with negotiations and should resolve our disputes by some other means". It does not seem to me to amount to some election on the part of the Council that litigation rather than arbitration should be the means of that final resolution.
I referred earlier to the question of independent expert determination. It is apparent that the annexure part A that had been prepared contemplated that there might be some process of expert determination. Mr Corsaro submitted that this meant that the parties had in some way agreed to expert determination as part of their dispute resolution process, and accordingly that what was set out in cl 47 must be regarded as incomplete.
If I may say so, that is a very bold submission, coming from counsel for the party whose incompetence, as it seems to me, is largely responsible for the confusion surrounding the contractual documents in this case. But in any event, I think, as Mr Roberts submitted, the reference to "other means" in each of the alternatives indicates that the parties might wish to explore (among other things) expert determination. It does not indicate that they were bound to do so.
However, in my view, the ultimate answer to that submission is, simply, that the reference was clearly a mistake, and equally clearly goes nowhere. The tail should not be allowed to wag the dog. I do not think that to take this approach requires the Court to act as the destroyer of bargains. On the contrary, I think, excluding something clearly irrelevant from consideration assists in attempting to understand, so as to enable the enforcement of, the bargain that was actually made.
Conclusion
The result, in my view, is that there is an arbitration agreement for the purposes of s 7 of the Act. That is because the agreement itself is in writing (cl 47) and the parties, either by ancillary agreement or by agreement inferred from conduct, have given sufficient content to it to make it enforceable. Further, if one has to have resort to the doctrine of conventional estoppel, the result is that the Council would be precluded from contending, as it wishes to do, that there is no such agreement.
Since I intend to resolve these proceedings in favour of Jenbuild, the estoppel flowing from my decision (assuming that it stands) will reinforce that.
For those reasons, I order.
1.The summons be dismissed.
2. The plaintiff to pay the first defendant's costs; make no other order as to costs.
3. That the exhibits be handed out.
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Decision last updated: 12 July 2012
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