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  4. Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd - [2001] QCA 471

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Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd[2001] QCA 471

Reported at [2002] 2 Qd R 514

Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd[2001] QCA 471

Reported at [2002] 2 Qd R 514
 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd & Anor [2001] QCA 471

PARTIES:

MULGRAVE CENTRAL MILL COMPANY LTD ACN 009 657 032

(plaintiff/respondent)

v

HAGGLUNDS DRIVES PTY LTD ACN 057 803 611

(first defendant/first appellant)

HAGGLUNDS DRIVES A.B

(second defendant/second appellant)

FILE NO/S:

Appeal No 2309 of 2001

SC No 9130 of 2000

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

2 November 2001

DELIVERED AT:

Brisbane

HEARING DATE:

2 October 2001

JUDGES:

McPherson and Thomas JJA, Jones J

Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER:

Appeal dismissed with costs

CATCHWORDS:

ARBITRATION – ARBITRATION CLAUSES - CONSTRUCTION OF ARBITRATION CLAUSE – CONSTRUCTION OF SUBMISSION OR REFERENCE – whether relevant dispute resolution clause in a contract was an ‘arbitration agreement’ under s 53 Commercial Arbitration Act 1990 –  whether parties had agreed to refer matters to arbitration - where in the event of a dispute parties had to deliver a notice of dispute – where parties then had to attempt to resolve dispute within a prescribed time – where parties then given an option to “refer such dispute to arbitration or litigation” – where respondent opted for litigation and appellants opted for arbitration – whether clause created equal rights of reference to arbitration or litigation – PMT Partners distinguished

ARBITRATION – STAY OF PROCEEDINGS – ORDER OR REFUSAL TO STAY – PARTICULAR CASES IN WHICH STAY REFUSED – whether trial judge ought to have stayed proceedings – where proceedings should only be stayed for good cause – inclusion of party not bound by any arbitration agreement – whether court has power to stay court proceedings against that party – court control over multiplicity of proceedings and possibility of inconsistent findings - where evidence strongly favoured determination of proceedings in court – application for stay dismissed

Commercial Arbitration Act 1990 (Qld), s 4, s 47, s 53, s 53(1)(a), s 53(1)(b), s 53(3)

Commercial Arbitration Act 1985 (NT), s 48

Trade Practices Act 1974 (Cth)

ABB Power Plants Ltd v Electricity Commission of NSW t/as Pacific Power (1995) 35 NSWLR 596, considered

Alto Constructions Pty Ltd v University of NSW SC (NSW) No 2549 of 1995, 15 December 1995, cited

Bulk Oil (zug) A-G v Trans-Asiatic Oil Ltd SA [1973] 1 Lloyd’s Rep 129, cited

Canas Property Co Ltd v K L Television Services Ltd [1970] 2 QB 433, cited

Heller Financial Services Ltd v Thiess Contractors Pty Ltd [2000] FCA 802, cited

Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144, considered

KBRV Resort Operations Pty Ltd v Anthony & Sons Pty Ltd (Unreported, 30 June 1999) considered

PMT Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 302, distinguished

Manningham City Council v Dura (Australia) Constructions [1999] 3 VR 13, considered

Taunton-Collins v Cromie [1964] 1 WLR 633, cited

Tylors Australia Ltd v Macgroarty [1928] St R Qd 170, cited

COUNSEL:

J K Bond SC for the appellants

R G Bain QC with D Williams for the respondent

SOLICITORS:

Mullins & Mullins for the appellants

Gadens Lawyers for the respondent

  1. McPHERSON JA: The plaintiff in proceedings in the Supreme Court numbered S9130 of 2000 is a company that carries on the business of crushing sugar cane at its mill at Gordonvale in North Queensland. It is alleged that the second defendant is a manufacturer of machinery including hydraulic motors at its factory in Sweden, and that the first defendant is its representative or agent in Australia with its head office in Western Australia.  On 25 August 1995 the plaintiff entered into contract with the first defendant by which the plaintiff agreed to buy from it six hydraulic motors of the second defendant’s manufacture for installation and use in driving its sugar mill. Among those supplied under the contract was a Marathon motor for driving the feed roller in the plaintiff’s no 1 mill. The motor in question proved, or so the plaintiff alleges, to be defective by reason of faults in its manufacture. As a result, the plaintiff has, in the Supreme Court proceedings referred to, claimed damages against the first defendant for negligence and breach of contract or under s 82 of the Trade Practices Act 1974; and against the second defendant, for negligence or under s 82.  Although defences to the claim have yet to be delivered, it is not in doubt that there are disputes between the parties about these allegations and claims.
  1. The contract with the first defendant incorporates the Australian Standard General Conditions of Contract identified as AS 2124-1992. Clause 47 of these General Conditions contains what is said to be a provision for arbitration of disputes between the parties. Consequently, when the plaintiff commenced the proceedings for damages, the first and second defendants applied to the Supreme Court under s 53(1) of the Commercial Arbitration Act 1990 for a stay of those proceedings until determination by arbitration of the disputes between the parties. The application was refused by the Chamber Judge before whom it came, and this is the defendant’s appeal against that order.
  1. In refusing the application for a stay, her Honour held that the provisions of cl 47 did not embody an “arbitration agreement” within the meaning of that expression, as defined in s 4(1) of the Act as being “an agreement in writing to refer present or future disputes to arbitration”. Her reason for so deciding was, stating it rather briefly, that cl 47.2 of the General Conditions AS 2124-1992 provides for a notice to be given referring disputes not merely to arbitration but to “arbitration or litigation”.
  1. For convenience of later reference, it is desirable to set out the relevant provisions more or less in full, even though some of them have little bearing on the question on appeal. Under the general heading DISPUTE RESOLUTION, cl 47 is, so far as material, in the following terms:

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, 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 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.”

There follows in cl 47(3) provision for nomination of the arbitrator and other matters of detail in relation to arbitration proceedings.

  1. The first and principal question to be determined is whether cl 47 embodies an arbitration agreement as defined in s 4 of the Act; for it is only if there is such an agreement that s 53(1) of the Act confers a power to stay the Supreme Court proceedings. It will be seen that the provisions of cl 47 contain a number of conditions or contingencies to be fulfilled. Arbitration may be resorted to only if a dispute arises out of the contract; in that event either party is to give a written notice of dispute complying with the terms of cl 47.1. Within 14 days of service of that notice, the parties are required by cl 47.2 to confer at least once to attempt to resolve the dispute, and, if it is not resolved, to explore and if possible agree on methods of resolving it by other means. In the event that the dispute cannot be resolved, either party may by a further written notice refer such dispute to arbitration or litigation.
  1. A provision in somewhat similar form was considered by the High Court in PMT Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 301. Like cl 47 here, the relevant clause in that case (cl 45) provided for a number of conditions to be satisfied before arbitration took place. The contract was to submit the matter at issue to the contract superintendent for decision; if dissatisfied with his decision, the contractor was to submit it to the principal for decision. If also dissatisfied with that decision, the contractor might within 28 days give written notice to the principal requiring the matter to be referred to arbitration. If the contractor did not do so, the principal’s decision was not to be subject to arbitration; but, if notice was given requiring reference of the matter to arbitration, no proceedings were to be instituted in court unless and until the arbitrator had made an award in respect of that matter. There were further provisions in cl 45 of that contract explaining the meaning of reference to arbitration and prescribing the steps to be taken for it to take place.
  1. The High Court held that these provisions amounted to an “arbitration agreement” within the meaning of s 4 of the corresponding Northern Territory statute. The fact that cl 45 did not unconditionally require the contractor to refer a dispute to arbitration, but merely conferred an option or election to do so, did not, it was held, make it any the less “an agreement to refer present or future disputes to arbitration”. The words “agreement … to refer present or future disputes to arbitration” in s 4 of the Act are, as Brennan CJ, Gaudron and McHugh JJ (184 CLR 301, 310) said:

“… in their natural and ordinary meaning, quite wide enough to encompass agreement by which the parties are bound to have their disputes arbitrated if an election is made or some event occurs or some conditions satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the conditions.”

To similar effect are the remarks of Toohey and Gummow JJ (184 CLR 301, 323) that the terms of the statutory definition of “arbitration agreement”:

“… extend to an agreement whereby the parties are obliged if an election is made, particular event occurs, step is taken, or condition is satisfied (whether by either or both of the parties) to have their dispute referred to arbitration.”

  1. That reasoning applies with equal force to the provision of cl 47 in the present case. Here either party is given the option, by written notice under cl 47.2, of referring to arbitration a dispute identified by the notice previously given under cl 47.1. With one important qualification, there are in this respect no sufficient differences in substance between clause 47 and the relevant provisions in PMT Partners v Australian National Parks to justify a departure from that decision. The fact that various conditions or contingencies are to be fulfilled or procedures gone through before the option becomes exercisable or the election made is no reason for denying to cl 47 the character of a binding agreement to arbitrate. Whether in the event those conditions are in fact fulfilled or procedures carried out may determine whether or not there will in due course be an arbitration; but it does not deprive it of the status of a binding, if executory, agreement to refer disputes to arbitration. It is enough that the parties have agreed that if certain things happen, even if only at the option of the parties or one of them, their dispute will be referred to arbitration.
  1. The provision considered in PMT Partners v Australian National Parks did not, however, include the concluding words in the second paragraph of cl 47(2) of these General Conditions that authorise either party to refer a dispute to arbitration or litigation. It is this difference that is said to be critical to the case under consideration. A contract embodying a similar provision has, however, been held by the Court of Appeal of Victoria to be an agreement to arbitrate within the terms of s 4 of the Act. In Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] 3 VR 13, the  contract was in the form designated JCC-D 1994, which was it seems a later edition of the Standard General Conditions AS 2124-1992 adopted in the present case. The relevant provisions of cl 13, as it was in that instance, are set out in the reasons for judgment of Buchanan JA ([1999] 3 VR 13, 20-21). Clause 13.01 was similar in terms to cl 47.1 in providing that, in the event of a dispute arising, either party might give a notice in writing identifying matters in dispute. Such a notice was declared to be a condition precedent to proceedings, whether by litigation or arbitration, with respect to those matters. A provision of that kind ousting the jurisdiction of the court is, as Phillips JA observed in Manningham [1999] 3 VR 13, 16-17, now deprived of effect by s 55 of the Act, which requires it to be construed as an agreement to refer that matter to arbitration: s 55(1)(b). At least that is so if all parties to the agreement are domiciled or ordinarily resident in Australia: see s 55(2). In the present case, there is in cl 4 no condition precedent of that kind in cl 47 of the General Conditions.
  1. Clause 13.02 of the contract in Manningham was in all material respects the same as the first paragraph of Alternative 1 of cl 47.2 of the General Conditions, and cl 13.02 was represented by the second paragraph of cl 47.2. Those two provisions were also identical in the critical respect, as I have called it, of providing for a notice by either party referring the dispute to arbitration or litigation. It was this characteristic of the agreement that gave rise to the question in Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] 3 VR 13. There the proprietor issued a notice of dispute under cl 13.01 identifying differences which had arisen between the parties. An attempt to resolve those differences by negotiation, or to agree on a method of doing so, was unsuccessful. On the following business day, the proprietor served notice under cl 13.03 referring the dispute to litigation. A little over an  hour later the contactor served notice under the same sub-clause referring the dispute to arbitration, which was accompanied by evidence that the deposit requirements that were prescribed in cl 13.04 had been complied with. Within the hour, the proprietor issued a writ out of the Supreme Court claiming a declaration and damages against the contractor for breach of contract.
  1. The Court of Appeal were unanimous in deciding that cl 13 of the contract in that case embodied an agreement to arbitrate as defined in s 4 as it had been interpreted by the High Court in PMT Partners Pty Ltd v Australian National Parks. The learned Judges of Appeal concurred in holding that the provision for a notice by either party referring to arbitration or litigation was not designed to confer priority on a party who succeeded in referring the dispute to litigation ahead of a notice by the other party referring to arbitration. Winneke P ([1999] 3 VR 13, 17) considered that the combined effect of cll 13.03 and 13.04 was “to give primacy to arbitration as the preferred method of dispute resolution agreed between the parties”. The reason why cl 13.03 mentioned reference to litigation was to enable a party to signify that the negotiation phase of the dispute was over.  Its function or effect was not to award the prize to the party whose notice or election choosing one method rather than the other was given or made first. Phillips JA  said ([1999] 3 VR 13, 18-19) that something was needed to mark the end of the period of negotiation; hence the requirement for a notice under cl 13.03. “Notice by one party”, his Honour said, “does not preclude notice by the other”. Here there was a notice referring the dispute to arbitration and no reason for supposing it did not effectively call the arbitration clause into operation, even though it was the later of the two. Buchanan JA said (at 23) that in his view “there was no less an arbitration agreement within the meaning of the Act because it recognises that litigation rather than arbitration may ensue in a particular case”. His Honour added (at 24) that he was unable to accept that under cl 13.03:

“… where each party has a right to elect to refer a dispute to arbitration, one party loses the right to make that election simply because the other has earlier opted not to exercise that right but rather to proceed by way of litigation.”

Together with the other members of the Court, Buchanan JA (at 25) regarded the provision for notice referring to litigation as no more than consequential upon the requirement that the parties must first attempt to resolve the dispute by negotiation.

  1. At first instance in the present case, her Honour distinguished the decision in Manningham on the ground that cl 13.04 was a “significant addition not found in cl 47” in the present case. It is true that, as her Honour remarked, Winneke P concluded that it was “the combined effect” of cll 13.03 and 13.04 that gave primacy to arbitration in that case; but the only difference of substance between the two provisions is that cl 13.04 provided for an automatic reference (“such dispute … is hereby referred to arbitration”), whereas the second paragraph of cl 47.2 provides for the giving of a notice referring the dispute to arbitration. When compared, however, the effect of the two provisions are, in my opinion, the same. Both provide for the giving of an initial notice of dispute, followed by a negotiation phase, and then by a second notice by either party referring the dispute to arbitration or to litigation. In both it is a function of that second notice to signify to the other party that the negotiation phase is at an end. In both the consequence of including in it a notice of election to arbitrate is to refer the dispute to arbitration. Clause 13.03 and the second paragraph of cl 47.02 are in identical terms. The purpose of the additional paragraph contained in cl 13.04 was simply to accommodate the further requirement that the necessary deposit of $1000 must first have been paid. It adds an additional prerequisite to be fulfilled, whereupon the dispute is “hereby referred to arbitration …”. If that prerequisite had not been included, cl 13.03 would have operated in the same way as the second paragraph of cl 47.2; that is, as a notice referring the matter to arbitration if that was the election that was in fact made.
  1. In my respectful opinion the contractual provisions considered in the decision in Manningham City Council v Dura (Australia) Pty Ltd [1999] 3 VR 13 are not distinguishable in their substance or effect from those in cl 47 here. This is an area of the law where the making of subtle verbal distinctions are not to be encouraged, and where it is desirable that standard conditions and uniform legislation should, as far as possible, be given the same meaning in jurisdictions throughout Australia. This Court should, in my view, follow the decision in Manningham City Council v Dura (Australia) Pty Ltd [1999] 3 VR 13, which I respectfully consider to be correct.
  1. In case I am mistaken about these matters, it is necessary to consider the respective notices given in the present case. A Notice of Dispute was given by solicitors for the first defendant under cover of a letter dated 23 August 1999. There is no question that it was given under cl 47.1 of the General Conditions and that it complied with the requirements of that provision. A negotiation phase, as it has been called, then ensued. On 27 October 2000 solicitors for the plaintiff sent a letter headed “Without Prejudice” to solicitors for the second defendant. After identifying their respective clients, the letter proceeded in the following terms:

“We refer to previous correspondence and particularly your letter of 3 April 2000.

Since that time we have been making enquires into the allegations that were made by your client on 28 March 2000.

Those enquires have been thorough and we are instructed to inform you that our client considers that the allegations which your client made at the conference as to the cause of the failure of the number 1 mill drive are unfounded. Our client is firmly of the belief that the cause of the failure was manufacturing defects which have previously been detailed.

In order to protect our client’s position and particularly any cause of action that our client has under the Trade Practices legislation we have issued a claim and amended statement of claim and a copy is enclosed. This is not forwarded by way of service but to enable your client to consider its position in the knowledge that unless this matter is resolved to the satisfaction of our client, then these proceedings will be served and the matter litigated.

This dispute has been outstanding for some considerable time and in our client’s view the issues are clear. In these circumstances we consider that your client should be able to respond as to its position in relation to this matter within three weeks.  If we do not hear from you within that time then as we have said we will take steps to serve the proceedings and will seek to progress the litigation expeditiously.

We await hearing from you.”

  1. I agree with the submission of Mr Bond SC for the appellant defendants that this letter from the plaintiff’s solicitors did not amount to a referral of the disputes to litigation within the meaning of the second paragraph of cl 47.2. Even if the “Without Prejudice” label is ignored, the letter does not appear to me to constitute notice of a definitive election to refer the dispute to litigation. It might well have been different if the writ, or claim as it is now called in Queensland, had been served then. But the writer of the letter is at pains to say that the claim was not forwarded by way of service “but to enable your client to consider its position …”. It is only if the matter is not resolved “to the satisfaction of our client” that those proceedings will be served and the matter litigated. It is, in short, not a statement that the matter is referred to ligation, but simply a warning that it will be unless the dispute is resolved to the plaintiff’s satisfaction. That might perhaps be considered as a conditional referral to litigation fulfilment of which was made to depend on non-resolution of the dispute in that way. But it can scarcely be regarded as precluding the plaintiff from reconsidering its position if it chose to do so. That impression is confirmed by the penultimate sentence of the letter, which is that “if we do not hear from you within” the time specified, “we will take steps to serve the proceedings”. The door to further negotiation is not finally closed by a failure to resolve the dispute to the satisfaction of the plaintiff. What is required or sought is that the plaintiff’s solicitors should “hear from you”, which may be understood to mean hear something that shows it would be worthwhile continuing or resuming the process of negotiation.
  1. To my mind the letter does not finally close off the possibility of further negotiation and possible settlement before the dispute goes to litigation. It is equivocal, and probably deliberately so. Considered from the standpoint of the other party who receives and reads the letter, it would not appear as notification of the exercise of an option to litigate, as distinct at most from an expression of intention to do so in certain circumstances in the future. If it had been a reference to arbitration instead of litigation it would not have sufficed. The only reason it is arguably a referral to litigation is that there is really no such thing. A person does not “refer” a dispute to litigation, but simply commences litigation, which is done by filing the necessary legal process. It is implicit in the requirement in the second paragraph of cl 47.2 that the decision or election to litigate must be communicated to the other party. As a general rule, it is only when that legal process is served (which did not happen here until 27 December 2000) that it can be said that a party has communicated an election between two alternative rights: Canas Property Co Ltd v K L Television Services Ltd [1970] 2 QB 433, 441. This tends to give further support for the view of the Court of Appeal in Manningham City Council v Dura (Australia) Pty Ltd [1999] 3 VR 13 that it is the option of arbitration that is to be given primacy under a provision like cl 47.2, so that, apart from an agreement between the parties to have the dispute determined by the courts, the efficacy of a notice by one of them referring a dispute to litigation depends in the end on the failure of the other to refer the disputed matter to arbitration or to apply for a stay of the legal proceedings.
  1. The effect of s 53 of the Commercial Arbitration Act is that if one party institutes and serves proceedings in court for determination of a dispute under a contact embodying an agreement to refer to arbitration, that dispute will be determined by the court unless the other party refers it to arbitration and obtains a stay of those proceedings. If the  notice does not deter the plaintiff from proceeding with the litigation, the remedy of the defendant is to apply for a stay under s 53(1) of the Commercial Arbitration Act which must be done before taking a step in those proceedings: s 53(2). The second paragraph of cl 47.2 of the General Conditions requires that notice be given referring such dispute to arbitration. It is conceivable that mere service of an application to stay could be regarded as an election to arbitrate. But it would be foolish to run the risk of not giving a specific notice of referral to arbitration. The Court has a discretion whether or not to stay litigation, and, as Phillips JA recognised in Manningham City Council v Dura Constructions [1999] 3 VR 13, 19-20, a party will, in the exercise of the court’s discretion, ordinarily not be allowed to depart from an agreement to arbitrate; which, as his Honour added, is not to say that:

“… when a party commences litigation, the stay will be granted if the other has taken no steps to render the arbitration agreement operative … and, if the arbitration agreement has not yet been called into operation, that may be a very significant circumstance.”

  1. Here, however, the first defendant did on 27 November 2000 give notice referring the dispute to arbitration. About that there is no contest. Given that, as I consider, cl 47 embodies an agreement to arbitrate, which was not stultified by the plaintiff’s giving notice on 27 October 2000 purporting to refer the dispute to litigation, if that is what it was, there is on the face of it no ground for refusing to stay the proceedings brought by the plaintiff against the first defendant in the Supreme Court. Indeed, her Honour said that, had she found a binding agreement to submit to arbitration, she would have granted the stay. The real difficulty is, however, that, although the first defendant is a party to the agreement to arbitrate, while the second defendant is not, the plaintiff’s claim for damages against the second defendant is brought not in contract but in negligence and under the Trade Practices Act.
  1. Section 53(1) of the Act is quite explicit about the power to grant a stay. Section 53(1) says that an order staying proceedings may be made “if a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement”. In that event, “that other party may … apply to the court to stay the proceedings …”. It is clear that, in speaking of an application by “that other party”, s 53(1) is referring to “another party to the arbitration agreement” identified earlier in the subsection, which is the arbitration agreement “in respect of a matter agreed to be referred to arbitration by the agreement”. There being no such agreement between the plaintiff and the second defendant, it has no right under s 53(1) to apply for a stay of the proceedings numbered S 9130 of 2000 against it in the Supreme Court. The difficulty is not solved by the fact that the material on the application included a document (ex PAL 8) dated 23 November 2000 under the signature of the second defendant. It is expressed to “agree and offer” to the plaintiff and the first defendant “that an agreement be entered into by acceptance of this offer” that the dispute set out in the plaintiff’s statement of claim be determined by arbitration on the same terms and conditions as those applying to the contact between them dated 12 July 1995 incorporating the General Conditions AS 2124-1992. That offer has admittedly never been accepted by the plaintiff and there is therefore no agreement between it and the plaintiff for arbitration of their disputes. It is scarcely necessary to say that s 53(1) requires for its operation more than a bare offer to arbitrate that has not been accepted by the other party. If the second defendant is not a party to an arbitration agreement, it has no standing to apply for an order under s 53(1) staying the proceedings against it.
  1. In an attempt to circumvent this difficulty, the second defendant, in its joint application with the first defendant on 5 February 2000 for a stay of those proceedings, sought to invoke “the exercise of the inherent jurisdiction of the Court”. No authority was cited in support of the existence of such a power in the absence of an agreement between the parties. Nothing is more beguiling than appeals to the inherent jurisdiction of the Court. Few of us are so modest as to confess to lacking power. Section 8(1) of the Supreme Court of Queensland Act 1991 invests the court with “all jurisdiction that is necessary for the administration of justice in Queensland”; but that can only mean justice according to law. It cannot mean anything else.  When one turns to the law, it is very far from suggesting that the Court has power to refer proceedings to arbitration in the absence of agreement between the parties to that effect. There has always been an inherent power to refer to arbitration disputed matters forming part of an action in Court; but it was and is exercisable only with the consent of the parties.  See Halsbury’s Laws of England (1st ed), vol 1, at 482; and, in more detail, Encyclopedia of the Laws of England, vol 12, at 506-507 (1908). Consent apart, compulsory jurisdiction to refer to arbitration was not conferred on courts in England until the passing of the Common Law Procedure Act 1854. Sections 3 and 6 of that Act authorised compulsory references in actions involving matters of account. In Queensland a similar provision was incorporated in s 79 of the Common Law Practice Act 1867. In this State, a complete discretion to order reference to arbitration of any matters arising in an action was, in 1922, conferred by O 97 of the Rules of the Supreme Court 1900. See Tylors Australia Ltd v Macgroarty [1928] St R Qd 170, 171‑172; affd [1928] St R Qd 371. Even under that rule, however, the principle on which the Court generally acted was that matters would not be sent to arbitration except with the consent of the parties to the litigation. See Silk v Eberhardt [1959] QWN 29; Honeywell Pty Ltd v Austral Motors Holdings Limited [1980] Qd R 355; A T & N R Taylor & Sons Pty Ltd v Brival Pty Ltd [1982] VR 762; cf also Park Rail Development Pty Ltd v R J Pearce & Associates Pty Ltd (1987) 8 NSWLR 123, 127-130. The broad power conferred by O 97 of the Rules of 1900 has, however, not survived the recent repeal of those Rules and their replacement by the Uniform Civil Practice Rules in Queensland. Without the power conferred by O 97, the position in Queensland now is as it was stated to be by Macnaughton J in Tylors Australia Ltd v Macgroarty [1920] St R Qd 170, 171, before 1921; which is that the Supreme Court has no power, without the consent of both parties to the action, to refer matters to arbitration, except in the limited two respects identified by his Honour in his reasons in that case. Neither of those exceptions is relevant here.
  1. There was some reference in argument on appeal to the possibility of an injunction being granted to restrain the plaintiff’s proceedings against the second defendant. But injunctions are granted to enforce a right or duty or to restrain some other kind of wrong. In instituting these proceedings, the plaintiff has breached no right of the second defendant, and has done it no wrong that would attract an injunction. In any event, common injunctions against actions at law are, since the Judicature Act, a thing of the past. The Court now acts by staying proceedings instituted within its jurisdiction. Where there is an agreement to arbitrate, s 53(1) now prescribes the remedy. As Buchanan JA said in Manningham City Council v Dura Constructions (Australia) Pty Ltd [1999] 3 VR 13, 23, “Arbitration agreements are only enforced indirectly by the granting of a stay”. Absent such an agreement, there is no reason and no power, inherent or otherwise, to grant a stay.
  1. The result, so far, is that the first defendant, but not the second defendant, is prima facie entitled to a stay of the plaintiff’s proceedings against it. That will produce the outcome that there will be arbitration of the plaintiff’s claims against the first defendant and litigation of the plaintiff’s claims against the second defendant. The claims against the first defendant are, by the terms of the parties’ contract, to be determined in accordance with the law of Queensland; but, as the contract also requires, the arbitration will take place in Western Australia, while the Supreme Court proceedings will be heard and determined here. In addition to the extra expense and inconvenience which that will involve, it raises the real possibility of conflicting findings of fact and decisions on what may be the same, or possibly differing, evidence at each of those separate hearings. For obvious reasons, this has been considered as something that the court ought to act to avoid if at all possible. See for example, Taunton-Collins v Cromie [1964] 1 WLR 633; Tropeano v Monogram Pty Ltd [1992] 2 Qd R 324; Alto Constructions Pty Ltd v University of NSW SC (NSW), No 2549 of 1995, 15 December 1995 (Young J, as he then was, at 17); and Heller Financial Services Ltd v Thiess Contractors Pty Ltd [2000] FCA 802 (Heerey J).  I note that Russell on Arbitration (21st ed. 1997) ¶7-014 says that there is “no longer any scope for the court refusing a stay of proceedings on the ground that third parties are involved and that it would be preferable for the dispute to be dealt with by one tribunal (ie the Court) in order to avoid the possibility of inconsistent decisions”. The principal authority cited for this statement is Bulk Oil (Zug) A-G v Trans-Asiatic Oil Ltd SA [1973] 1 Lloyd’s Rep 129. I am not persuaded that the decision or reasons of Kerr J in that case supports a proposition as broad as that propounded in Russell.  The case was one in which the plaintiff was a party to two interlinked contracts, one with, and the other without, provision for arbitration. Here there is a contract only with one of the defendants.
  1. In some matters of that kind the power to stay under s 53(1) of the Act may be attracted by the definition of “party” in s 4, which includes “any person claiming through or under a party to the arbitration agreement”. Assuming (which may be doubted) that this extension is capable of applying to a party which is not itself claiming anything but is being claimed against, I do not consider it possible to apply it to the first and second defendants here. Even if the two of them are related as subsidiary and principal, the claims against each of them, although arising out of the same or much the same set of facts, are legally speaking, separate and in some respects different. See Heller Financial Services Ltd v Thiess Contractors Pty Ltd [2000] FCA 802. If, to use the test stated by Tompkins J in Mount Cook (Northland) Ltd v Swedish Motors Ltd [1986] 1 NZLR 720, 725, and adopted by Young J in Alto Constructors Pty Ltd v University of NSW, the relationship between them is not “an essential ingredient of the claim”, then it is not within the scope of the extended definition of “party” in s 4. What was said by Tompkins J is applicable to the plaintiff’s claims against the second defendant; those claims are brought independently of the agreement, “so that any relationship between them is irrelevant to the grounds advanced in support of the claim” ([1986] 1 NZLR 720, 725). Here the plaintiff’s claim in negligence against the second defendant is not founded on the relationship between the two defendants but is essentially independent of it.
  1. One must, of course, be astute to ensure that the joinder of a second or further defendant is not done simply to take advantage of an argument that there is no binding arbitration agreement between them and the plaintiff. But that is not fairly capable of being suggested here. Since the decision in Donoghue v Stevenson [1932] AC 562 made it possible to claim damages against a manufacturer of defective goods, it has become a matter of common practice and precedence for a plaintiff in cases like this to join the manufacturer as a co-defendant to avoid the possibility of falling between two stools. The expression “agency” is sometimes used to describe the relationship between a manufacturer and a distributor, but more often than not it is a commercial rather than a legal description: see International Harvester Company of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Company (1958) 100 CLR 644. The plaintiff ought not to be required to run the forensic risk that the first defendant was not, in the legal sense, the “agent” of the second defendant in Australia and as such not responsible in law for its actions or representations in this country.
  1. The result is that the Court is confronted with a conflict between the two principles mentioned by Pearson LJ in Taunton-Collins v Cromie [1964] 1 WLR 633, 637. One is that parties should be held to their agreement to arbitrate; the other that multiplicity of proceedings is undesirable. As between the two, I would in this case give greater weight to the second. In saying so, I am conscious that the second defendant has offered to bring the plaintiff’s claims against it under the umbrella of the arbitration of the disputes with the first defendant. But that proposal is no more decisive than the plaintiff’s preference for having both sets of claims determined in the current proceedings in the Supreme Court. The Court has no discretion under s 53(1) or any other provision to stay those proceedings against the second defendant.  Short of leaving the two sets of proceedings to go  on independently of each other, there is no power, inherent or otherwise, in the Court to prevent the litigation from proceeding. The discretion conferred by s 53(1) should, in my opinion, not be exercised in a case like this in such a way as to force the plaintiff to accede to the second defendant’s offer to refer both claims to arbitration.
  1. The result in my opinion is that the order made by the decision of the primary judge should be affirmed even if on slightly different grounds. The appeal should be dismissed with costs.             
  1. THOMAS JA: This appeal involves the construction of a dispute resolution clause in a contract.  The primary question is whether it is an “arbitration agreement” under the Commercial Arbitration Act 1990.  If it is, a second question arises whether there should be a stay of the proceedings now pending between the parties in the Supreme Court.
  1. The respondent is a sugar miller whose crushing mill is situated in the Mulgrave area. On 25 August 1995 it entered into an agreement with the first appellant to purchase a number of hydraulic motors and other equipment for use in its number 1 mill. The motors were manufactured by the second appellant in its factory in Sweden. Its selling agent in Australia is its wholly owned subsidiary, the first appellant, whose head office is in Western Australia.
  1. In October 1997 the mill stalled, allegedly due to the failure of the equipment the subject of the agreement. The law governing the written contract is the law of Queensland. In the event that there is to be an arbitration the contract specifies Western Australia as the place of arbitration.Howe
  1. The respondent commenced the present proceedings in the Supreme Court of Queensland on 20 October 2000, against both appellants, pleading a cause of action in contract against the first appellant, and further causes of action in tort and under Trade Practices Act 1974 against both appellants.  In due course the appellants applied for a stay of those proceedings.  White J refused a stay, holding that the dispute resolution clause was not an “arbitration agreement” for the purposes of s 53 of the Commercial Arbitration Act 1990.
  1. The written agreement incorporates a version of the Australian Standard General Conditions of Contract – AS2124 – 1992. Clause 47 thereof concerns dispute resolution. It relevantly includes the following terms:

“47DISPUTE RESOLUTION

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 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 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 consider 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…

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 the 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.”

  1. Under Clause 2 of the Conditions the headings of clauses and sub-clauses are not to be used in the interpretation on the Contract. It is common ground that the relevant parties chose “Alternative 1” and that “Alternative 2” does not apply. It may however be noted in passing that Alternative 2, like Alternative 1, preserves the right of either party, in the events there stated, to refer the dispute to arbitration or litigation.
  1. On 23 August 1999, following demands by the respondent, the first appellant’s solicitors gave notice of a dispute under Clause 47.1. The stated intention of the first appellant was to require the matter to go to arbitration if no resolution were achieved. The respondent replied on 27 August 1999 indicating its intention to proceed by litigation if no resolution were achieved.
  1. Steps were taken to convene a meeting between the parties and on 28 March 2000 the meeting took place between the parties but no resolution was achieved.
  1. On 20 October 2000 the respondent commenced its present action in the Supreme Court against both appellants. On that day it sent a “without prejudice” letter to the appellants indicating that proceedings had been commenced to preserve its cause of action under the Trade Practices Act.  The claim and statement of claim were enclosed, but expressly not by way of service.  The letter stated that if the matter were not resolved the proceedings would be served and the matter litigated.  It stated that the appellants should be able to respond within three weeks and that if the respondents did not hear from them within that time, it would take steps to serve the proceedings and seek to progress the litigation expeditiously.
  1. The matter did not resolve within three weeks or at all. On 27 November 2000 the first appellant gave the respondent a notice of referral of the dispute to arbitration. This was accompanied by an offer on behalf of the second appellant to have all issues raised against it by the respondent in its statement of claim determined at the arbitration. That offer was not and has not been accepted.
  1. The respondent then formally served its claim and an amended statement of claim on the first and second appellants. Subsequently the first appellant applied to the court under s 53 of the Commercial Arbitration Act 1990 for a stay of the Supreme Court proceedings as against the first appellant.  The second appellant also applied for a stay of the proceedings against it, presumably under the inherent jurisdiction of the Court. It offered undertakings to the court as a condition of obtaining a stay, namely  –

“a.that it consented to the claims asserted against it by the respondent being referred to arbitration upon the same terms and conditions as applied in respect of the arbitration of the dispute between the respondent and the first appellant, such arbitration to take place at the same time and place and before the same arbitrator as the arbitration of the dispute between the respondent and the first appellant; and

b.that it agreed to be bound by the findings made in the arbitration of the dispute between the respondent and the first appellant.”

As earlier indicated, White J declined to grant a stay.  Her Honour however indicated that had she found a binding agreement to submit to arbitration she would have granted the stay notwithstanding discretionary considerations urged against that course.

  1. Section 53 of the Commercial Arbitration Act 1990 relevantly provides:

“Power to stay court proceedings

53.(1)If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to subsection (2), apply to that court to stay the proceedings and that court, if satisfied –

  1. that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement; and
  1. that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration;

may make an order staying the proceedings and may further give such directions with respect to the future conduct of the arbitration as thinks fit.

  1. …..
  1. Notwithstanding any rule of law to the contrary, a party to an arbitration agreement shall not be entitled to recover damages in any court from another party to the agreement by reason that that other party takes proceedings in a court in respect of the matter agreed to be referred to arbitration by the arbitration agreement.”
  1. In s 4 of the Act “arbitration agreement” is defined as follows:

“ ‘Arbitration agreement’ means an agreement in writing to refer present or future disputes to arbitration.”

Issue

  1. The question is whether the respondent is a “party to an arbitration agreement [who has commenced] proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement”.[1]  Unless those elements are satisfied there is no jurisdiction to make an order under s 53.

Discussion

  1. In the course of his comprehensive and helpful submissions for the appellants, Mr Bond referred to observations in both the majority and minority judgments in PMT Partners Pty Ltd v Australian National Parks & Wildlife Service.[2]

“The words “agreement….to refer present or future disputes to arbitration” in s 4 of the Act are, in their natural and ordinary meaning, quite wide enough to encompass agreements by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition.”[3]

“[I]n our view, the terms of the definition of ‘arbitration agreement’ in s 4 of the Act extend to an agreement whereby the parties are obliged if an election is made, particular event occurs, step is taken or condition is satisfied (whether by either or both parties) to have their dispute referred to arbitration.  This result is within the ordinary and natural meaning of the terms of the definition and there is no sufficient reason to cut down that meaning.”[4]

  1. It may be accepted that a clause will be regarded as an “arbitration agreement” if the parties have bound themselves, even conditionally, to have these disputes arbitrated. However I do not read Clause 47.2 as having such an effect. The preservation, in favour of either party, of an equal right to refer the matter to litigation is a critical provision which goes against the effect contended for by Mr Bond. For reasons which will be developed below, I am unable to see this as an agreement that in certain events the parties must arbitrate rather than litigate.
  1. It is convenient to commence with Clause 47.1. In the event that a dispute arises that clause compels the serving of a notice of dispute, but no more. That was done in the present matter as required. One then goes to Clause 47.2. This states the steps by which the parties are to attempt to resolve the dispute following delivery of the notice of dispute. Essentially it requires that the parties “shall confer” within a prescribed time, and failing resolution at such a meeting, to attempt to resolve the dispute by other means. Once again the parties complied with this but such steps were unable to bring about the resolution of their dispute. One then turns to the second paragraph of Clause 47.2.  Quite simply, for present purposes it provides that, “in the event that the dispute cannot be so resolved…either party may by notice in writing...refer such dispute to arbitration or litigation.”  The clause is quite even handed.  It gives no preference or priority to one form of procedure over the other, or to either party over the other.
  1. The question arises whether the clause should be read as making one method the binding method according to whichever party succeeds in first notifying the other of its choice, or as it was put during argument, whether it should be read as “first in best dressed”. Certainly the clause does not say so. I would in any event lean against a construction of a dispute resolution clause which gives an advantage or incentive to a party to declare at the earliest possible moment that the dispute cannot be resolved. Such a construction would require additional words to be read into the clause and would encourage insincerity. A similar view was taken of a clause concerned with the delivery of a notice to refer a dispute “to arbitration or litigation” in the Victorian case of Manningham City Council v Dura Constructions[5] Phillips JA stated that –

“The notice which is required by Clause 13.03, and which is expressly made a pre-condition to litigation or arbitration, is not required so that whoever leaps first, wins.”

 His Honour concluded that “notice by one party does not preclude notice by the other.”  Buchanan JA. noted that the suggestion that the first notice should prevail required a gloss on the clause, and considered that “the gloss is unnecessary, indeed, mischievous.”   His Honour was clearly unimpressed by “a result determined by success in a race to deliver notices.”[6]

  1. In my view the clause creates equal rights of reference to arbitration or litigation. Unfortunately it does not deal with the question how a case is to be resolved where one party at all material times opts for arbitration and the other at all material times opts for litigation. This does not mean that the clause is meaningless or useless. Either party might waive its right to insist upon its original preference, as for example by taking a step in form of dispute resolution nominated by the other party, or by in some other way indicating an intention not to rely upon its right to choose a different form of resolution.[7]  The clause in any event specifies the trigger for the next step in the dispute resolution, whether or not it be arbitration or litigation, and it serves the purpose of specifying a part of the procedure to be followed. 
  1. Mr Bond submitted that unless Clause 47.2 is read as binding the parties to arbitrate even if only one of them so chooses, Clauses 47.3 and 47.4 would be deprived of effect unless the parties made a further ad hoc arbitration agreement.  I do not accept this.  There would in any event be some utility in prescribing the type and method of arbitration that is to follow in the event that the parties do make such an agreement; but Clauses 47.3 and 47.4 would also operate in situations such as those described in the preceding paragraph.  Clause 47.4 further applies to the entirety of the dispute resolution procedure and additionally preserves the useful function of permitting a party to seek an injunction.
  1. Mr Bond further submitted against any construction of Clause 47.2 giving the parties equal rights of election of different processes. However the potential evil of concurrent litigation and arbitration of the same or overlapping issues would be within the control of the court, which has the power to stay the litigation under s 53, or to stay or otherwise control the pending arbitration proceeding by means of an order under s 47.[8]  The power to stay concurrent proceedings was probably within the inherent power of the court in any event,[9] although one would not expect it to be exercised if the parties had agreed upon arbitration as their preferred method of determination.  Section 47 of the Commercial Arbitration Act 1990 would seem to place the court’s powers in this respect beyond doubt, especially in a case where the parties have not specified one method to the exclusion of the other.
  1. Some utility therefore remains in Clause 47.2 on the construction which I favour. Further, I do not think that the clause should be read as having the effect that if one party chooses to arbitrate, even after the other party has commenced litigation, both parties are bound to have the matter determined by arbitration.
  1. The court was pressed with statements made in other cases involving differently worded clauses, including such cases as PMT Partners, ABB Power Plants Ltd v Electricity Commission (NSW),[10] Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd[11] and Manningham City Council v Dura Constructions.[12]  It is desirable to say something about each of these cases.
  1. In PMT Partners the court accepted the starting point that contracts will be construed as limiting rights of parties to pursue their remedies in the courts only if it clearly appears that that is what was agreed.[13]  Their Honours found such a limitation in the clause in question in that case. Their Honours could see “..no reason for treating the clause as conferring on the contractor the right to elect between pursuing its claim in the courts or by arbitration.”[14]  Significantly, the contract in PMT Partners provided that if a notice was given requiring the matter at issue to be referred to arbitration no proceedings should be instituted by either the principal or the contractor in any court unless and until the arbitrator had made his award.  Brennan CJ, Gaudron and McHugh JJ observed that “the express limitation on access to the courts ensures that the dispute is dealt with in its entirety by arbitration…”   By contrast, the present case clearly confers the right on each party to choose arbitration or litigation.
  1. In ABB Powerplants,[15] Cole JA expressed the view that “If the parties have agreed by a clause…that, upon one party electing, the dispute in consequence will be arbitrated, they have agreed to refer such a dispute to arbitration.”  His Honour added, “the expression ‘agreement in writing to refer present and future disputes to arbitration’ is not limited to existing or mutually accepted references: it includes references which flow in the future in consequence of an election, conferred by the contract on a party, by that party.”[16]  To this extent his Honour seems to have anticipated what was upheld in the High Court in PMT Partners in relation to what constitutes an “arbitration agreement”.  PMT Partners was concerned with an application under s 48 of the Commercial Arbitration Act 1985 (NT), not s 53.  The High Court was not concerned with the further question that arises under s 53 whether the reference was “in respect of a matter agreed to be referred to arbitration by the agreement.” One therefore needs to avoid the fallacy of thinking that characterising a clause as an “arbitration agreement” invokes jurisdiction under s 53.  In any event I am unable to see the present Clause 47 as amounting to an “arbitration agreement”, as it fails to give the first appellant a unilateral right of election to arbitrate so as to bind the respondent.
  1. Mr Bond made further reference to Eastern Metropolitan Regional Council v Four Seasons Constructions Pty Ltd,[17] where the Full Court of Western Australia upheld a discretionary stay of court proceedings in a case involving a clause identical with the present one.  However the question whether the clause in question was an “arbitration clause” under the equivalent of s 53 was not in issue, and there is no discussion of any relevant question or any reference to PMT Partners.  The only matters in issue in that particular case were the manner of exercise of discretion under s 53 and whether an arbitration clause would operate despite repudiation.
  1. In Manningham City Council, earlier referred to, the Victorian Court of Appeal dealt with a series of clauses, of which one (cl 13.03) has some resemblance to Clause 47.2 in that it provided that a party wishing to commence proceedings “whether by litigation or arbitration” must deliver a certain notice.  However there the comparison ceases.  The court placed considerable reliance upon the following Clause (cl 13.04) which provided that in the event of a party wishing the dispute to be referred to arbitration providing evidence of the necessary deposit of security for costs as therein provided “such dispute or difference (unless meanwhile settled) shall be and is hereby referred to arbitration..”  The combination of cl 13.03 and 13.04 was described by Winneke P as suggesting that arbitration of disputes “was the parties’ preferred method of dispute resolution and the one which they intended to be adopted in the event that either party elected to refer a dispute to arbitration in compliance with those clauses.”[18]  Buchanan JA held that the provisions amounted to “an agreement by which the parties are bound to have their disputes arbitrated if certain conditions are fulfilled.  If a notice is properly given under Clause 13.03 referring the dispute to arbitration and security for costs is provided, the dispute is referred to arbitration because the parties have already agreed that the dispute will be resolved by arbitration upon the occurrence of those events.”[19]
  1. In the present matter it is quite clear that litigation is regarded as one of the available methods by which the dispute may be resolved. There is of course a distinction between dispute resolution and alternative dispute resolution. In my view litigation is the classical example of the former and it is expressly referred to in Clause 47.2 as a means of resolving the dispute.
  1. In short this agreement lacks any clear provision that in certain events the parties must arbitrate rather than litigate. Clause 47 does not meet the requirements identified by the majority in PMT Partners.  Furthermore agreement has been made to refer the present dispute to arbitration.  There is no inference that either party is bound by the other’s choice.  In the state of equipoise presented by this particular form of agreement, the respondent’s action is not in terms of s 53, “in respect of a matter agreed to be referred to arbitration by the agreement.”
  1. I therefore agree with White J’s decision that the appellants failed to establish jurisdiction under s 53 of the Commercial Arbitration Act 1990. 

Exercise of discretion under s 53

  1. Strictly speaking it is unnecessary to deal with the further submission of counsel for the respondent, to the effect that even if Clause 47 were construed as an “arbitration agreement”, her Honour should in any event have dismissed the application on discretionary grounds. I shall however express a view upon it as all the evidence relevant to the exercise of the discretion is before this court.
  1. The respondent’s material shows a strong case for declining to stay the pending proceedings in the Supreme Court. Leaving aside the fact that Clause 47 shows no clear preference by the parties in favour of arbitration over litigation, the proceedings obviously involve related and overlapping claims against both the manufacturer and the seller of the equipment in question. The manufacturer has no contractual relationship with the respondent and they have no arbitration agreement. There are multiple causes of action of a kind which courts are used to dealing with. It is true that Clause 47 contemplates the possibility of an arbitrator dealing, as between the parties to the agreement, with “a claim in tort, under statute or for restitution based on unjust enrichment or rectification or frustration”, but there is no contemplation of other parties. A stay of the case against the first appellant would give rise to a multiplicity of proceedings and the possibility of inconsistent findings. That would weigh heavily against granting such a stay.[20]  Some weight should of course be given to the ad hoc undertaking of the manufacturer to consent to involvement in and being bound by the same arbitration, but this cannot, as it were, permit that appellant to buy into its own preferred manner of dispute resolution.  The respondent had an unfettered right to commence proceedings against the second appellant in a court having jurisdiction, and has not agreed to the second appellant’s proposal for arbitration.  Such proceedings should only be stayed for good cause.
  1. I accept the force of statements such as those of Chesterman J in KBRV Resort Operations Pty Ltd v Anthony & Sons Pty Ltd[21] that once parties bind themselves to arbitration in a particular place, factors favouring overall convenience are of little consequence, as the parties must be regarded as having taken such matters into account when entering into their agreement.  That however returns the discussion to the original point – namely that this agreement shows no particular agreed preference by the parties for arbitration over litigation.  The evidence in the present matter quite strongly favours determination of these proceedings in the jurisdiction where the machinery has been installed, and the cost of arbitratory proceedings would be significantly higher. Undoubtedly, on a change of venue application, there would be a determination in favour of the respondents. Whilst such matters are usually of little account in a s 53 application, they are of some relevance here.  
  1. In all the circumstances, including the reasonable inclusion of the second appellant in the current action, if the clause were to be construed as an “arbitration agreement” I would hold that the appellants’ application for stay of the pending proceedings should be dismissed.

Order

  1. The appeal should be dismissed with costs.
  1. JONES J:  This appeal gives rise to two questions, the foremost of which is whether certain provisions of the contract between the respondent and the applicants constituted an arbitration agreement within the meaning of s 4 of the Commercial Arbitration Act 1990 (“the Act”). The other question concerns the proper exercise of a discretion pursuant to s 53 of the Act in the event it is found that the terms of the contract do create an arbitration agreement.
  1. The circumstances of the dispute between the parties and the full terms of the relevant statutory and contractual provisions have been set in the preceding judgments and, save for convenience of reference, it is unnecessary for me to repeat them here.
  1. The first question concerns the proper construction of clause 47 of the Australian Standard General Conditions of Contract – AS 2124 – 1992. These general conditions of contract (or variants of them) are in common use and consequently the question is of some public importance.
  1. The construction point focuses on the terms of the last paragraph of Alternative 1 in clause 47.2.  This paragraph is in the following terms:-

“In the event that the dispute cannot be so resolved or if at any time either party consider 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.”

  1. The appellants submit that the terms of cl 47 satisfy the definition viz “an agreement…to refer present or future disputes to arbitration”. They support this submission by reference to a number of cases including the High Court decision in PMT Partners Pty Ltd v Australian National Parks and Wildlife Service[22] in which both majority and minority judgments explained that the definition caught agreements which simply enabled one party to choose arbitration which “bound” or “obliged” the other party to follow that course.[23]
  1. The respondent argues that in circumstances where the contractual terms gave an unfettered right in a party to litigate even if the other party had sought arbitration there was no agreement which bound the parties to arbitrate in accordance with the definition as explained. As was pointed out in PMT Partners, the definition given its natural and ordinary meaning, would still be satisfied even if the contractual terms do not “preclude (a party) from pursuing its claim in the Courts.”[24]
  1. The question for decision therefore turns on whether cl 47 had the potential, at some point in its application, to bind the parties to arbitrate. The assessment of whether the clause is of this character is to be made prospectively. Once it is accepted that (the clause) is or contains an arbitration agreement, it follows that the contractor is a party to an arbitration agreement.[25]
  1. In PMT Partners the relevant clause (cl 45) provided that all disputes “shall be decided” by a process which involved submitting the dispute firstly to the Superintendent for decision and failing resolution there to the Principal.  If the dispute was not resolved by the Principal the Contractor “may give notice within 28 days requesting the matter to be referred to arbitration”.  If notice was not given within the specified time the right to arbitration was lost but if timely notice was given, “no proceedings in respect of that matter at issue shall be instituted by either the Principal or the Contractor in any court unless and until the arbitrator has made his award in respect of that matter at issue.”
  1. In this case, the terms of cl 47 require that the dispute resolution follow a compulsory course of giving notice of dispute followed by a conference between the parties. If there is no resolution at this point, a party may, by notice, elect either to refer the dispute to arbitration or to litigate. A party, upon being served with the notice to arbitrate, has the option of accepting the referral to arbitration and thereby being bound to that course. Alternatively, that party may elect to litigate, but such an election would not take away the right of the party giving notice to pursue arbitration. The recipient of the notice would still be bound to the arbitration process until the conflict between that process and litigation was resolved. The Court’s jurisdiction under s 53 of the Act caters for this provided it is accepted, or determined, that an arbitration agreement exists.
  1. In Manningham City Council v Dura (Australia) Constructions Pty Ltd,[26] the Victorian Court of Appeal construed contractual terms (cl 13 on Building Works Contract – JJC – D 1994) which, save for one feature, were identical with cl.47.  That feature was the requirement that a deposit for security for costs be lodged by the party seeking arbitration as a condition of the referral.  That requirement does not, in my view, provide any point of distinction with the terms of cl 47 in an assessment of its true purpose.  Most significantly the terms in both cl 47 and the terms reviewed in Manningham provided for either party to elect between arbitration or litigation.  Each of the members of the Court of Appeal took the view that notice by one party electing a particular course did not preclude notice by the other electing the alternative course.[27]
  1. The question whether, in all the circumstances, a party to an agreement can be said to be bound to arbitrate within the meaning of the definition must inevitably turn on the particular words used in the processes described in the agreement. The court of Appeal in Manningham, considering terms which I regard as indistinguishable from cl 47, held that the terms constituted an arbitration agreement.  It seems to me not to matter whether arbitration is the preferred method of dispute or whether the clause is construed to give primacy to arbitration.  It is sufficient in my view that there exists within the meaning of the terms, a potential for a party to be bound to have the dispute arbitrated if an election to that end is made.
  1. I have had the opportunity to read the judgment of McPherson JA, I agree generally with the reasons he advances for his conclusion that the cl 47 falls within the definition of s 4 of the Act.
  1. The second question concerns the proper exercise of the discretion pursuant to s 53 of the Act were it found that the terms of the contract do create an arbitration agreement. On this latter question I agree with the conclusions reached by both McPherson JA and Thomas JA and their respective reasons for so doing. In the circumstances of this case it would not be appropriate to have split proceedings, requiring arbitration against one defendant in Western Australia and litigation against the other defendant in Queensland. Questions of costs, convenience and finality of outcome clearly dictate the continuation of court proceedings in Queensland. In these circumstances I would dismiss the application to stay these court proceedings.
  1. I therefore agree that the appeal be dismissed with costs.

Footnotes

[1] Commercial Arbitration Act 1990, s 53 (my emphasis).

[2] PMT Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 302.

[3]Ibid at 310 per Brennan CJ, Gaudron and McHugh JJ.

[4]Ibid at 323 per Toohey and Gummow JJ.

[5] Manningham City Council v Dura (Australia) Constructions [1999] 3 VR 13.

[6]Ibid at 24.

[7]Cf Corkin v Taylor and Anor [1963] Qd R 534, 539.

[8]Section 47 states - “The court shall have the same power of making interlocutory orders for the purposes of and in relation to arbitration proceedings as it has for the purposes of and in relation to proceedings in the court.”   See Imperial Leather Wear Co Pty Ltd v Macri and Marcellino [1991] 22 NSWLR 653, 666-667; Proprietors of Strata Plan No 3771 v Travmina Pty Ltd [1986] 4 BCL 91.

[9] Construction Engineering (Aust) Pty Ltd v Tambel (Australasia) Pty Ltd [1984] 1 NSWLR 274 per Clarke J; Halsbury’s Laws of England 4th Edn, Vol 2 para 518; cf Bissill v Williamson (1861) 7 H&N 391, 395-396 (158 ER 525, 527); Jackson v Sterling Industries Ltd (1987) 162 CLR 612, 617, 639-640.

[10] ABB Power Plants Ltd v Electricity Commission [1995] 35 NSWLR 596.

[11] Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144.

[12] Manningham City Council v Dura Constructions [1993] 3 VR 13.

[13] PMT Partners above at 311.

[14]Ibid at 312.

[15] ABB Power Plants above at 620.

[16]Ibid.

[17]Above.

[18] Manningham City Council above at 15.

[19] Manningham City Council above at 22.

[20] Thomas v Star Maid International Pty Ltd [1999] FCA 911; Heller Financial Services Ltd v Thiess Contractors Pty Ltd [2000] FCA 802, paras 13-15.

[21]Chesterman J (Unreported, 30 June 1999).

[22](1995) 184 CLR 301

[23]Ibid at 310 per Brennan CJ, Gaudron and McHugh JJ; at 323 per Toohey and Gummow JJ

[24]Ibid at p.311

[25]Ibid at p.311

[26](1999) 3 VR 13

[27]Per Winneke P at para 4; per Phillips JA at para 13; per Buchanan JA at para 28 and 30

Close

Editorial Notes

  • Published Case Name:

    Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd & Anor

  • Shortened Case Name:

    Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd

  • Reported Citation:

    [2002] 2 Qd R 514

  • MNC:

    [2001] QCA 471

  • Court:

    QCA

  • Judge(s):

    McPherson JA, Thomas JA, Jones J

  • Date:

    02 Nov 2001

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2001] QSC 40--
Appeal Determined (QCA)[2002] 2 Qd R 51402 Nov 2001-

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
A-G v Trans-Asiatic Oil Ltd SA [1973] 1 Lloyds Rep 129
2 citations
Jump To
Cite 1 - [1973] 1 Lloyds Rep 129
Cite 2 - [1973] 1 Lloyds Rep 129
A.T. & N.R. Taylor & Sons Pty Ltd v Brival Pty Ltd (1982) VR 762
1 citation
Jump To
Cite 1 - (1982) VR 762
ABB Power Plants Ltd v Electricity Commission of New South Wales (1995) 35 NSWLR 596
2 citations
Jump To
Cite 1 - (1995) 35 NSWLR 596
Cite 2 - (1995) 35 NSWLR 596
Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644
1 citation
Jump To
Cite 1 - (1958) 100 CLR 644
Bissill v Williamson (1861) 158 ER 525
1 citation
Jump To
Cite 1 - (1861) 158 ER 525
Bissill v Williamson (1861) 7 H & N 391
1 citation
Jump To
Cite 1 - (1861) 7 H & N 391
Canas Property Co. Ltd v K.L. Television Services Ltd [1970] 2 QB 433
2 citations
Jump To
Cite 1 - [1970] 2 QB 433
Cite 2 - [1970] 2 QB 433
Construction Engineering (Aust) Pty Ltd v Tambel (A/ asia ) Pty Ltd [1984] 1 NSWLR 274
1 citation
Jump To
Cite 1 - [1984] 1 NSWLR 274
Corkin v Taylor [1963] Qd R 534
1 citation
Jump To
Cite 1 - [1963] Qd R 534
Donoghue v Stevenson (1932) AC 562
1 citation
Jump To
Cite 1 - (1932) AC 562
Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASCA 144
2 citations
Jump To
Cite 1 - [1999] WASCA 144
Cite 2 - [1999] WASCA 144
Heller Financial Services Ltd v Thiess Contractors Pty Ltd [2000] FCA 802
4 citations
Jump To
Cite 1 - [2000] FCA 802
Cite 2 - [2000] FCA 802
Cite 3 - [2000] FCA 802
Cite 4 - [2000] FCA 802
Honeywell Pty Ltd v Austral Motors Holdings Ltd [1980] Qd R 355
1 citation
Jump To
Cite 1 - [1980] Qd R 355
Imperial Leatherware Co. Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653
1 citation
Jump To
Cite 1 - (1991) 22 NSWLR 653
Jackson v Sterling Industries Ltd (1987) 162 C.L.R 612
1 citation
Jump To
Cite 1 - (1987) 162 C.L.R 612
Manningham City Council v Dura (Australia) Constructions Pty Ltd (1999) 3 VR 13
19 citations
Jump To
Cite 1 - (1999) 3 VR 13
Cite 2 - (1999) 3 VR 13
Cite 3 - (1999) 3 VR 13
Cite 4 - (1999) 3 VR 13
Cite 5 - (1999) 3 VR 13
Cite 6 - (1999) 3 VR 13
Cite 7 - (1999) 3 VR 13
Cite 8 - (1999) 3 VR 13
Cite 9 - (1999) 3 VR 13
Cite 10 - (1999) 3 VR 13
Cite 11 - (1999) 3 VR 13
Cite 12 - (1999) 3 VR 13
Cite 13 - (1999) 3 VR 13
Cite 14 - (1999) 3 VR 13
Cite 15 - (1999) 3 VR 13
Cite 16 - (1999) 3 VR 13
Cite 17 - (1999) 3 VR 13
Cite 18 - (1999) 3 VR 13
Cite 19 - (1999) 3 VR 13
Manningham City Council v Dura Constructions [1993] 3 VR 13
3 citations
Jump To
Cite 1 - [1993] 3 VR 13
Cite 2 - [1993] 3 VR 13
Cite 3 - [1993] 3 VR 13
Mount Cook (Northland) Ltd v Swedish Motors Ltd [1986] 1 NZLR 720
2 citations
Jump To
Cite 1 - [1986] 1 NZLR 720
Cite 2 - [1986] 1 NZLR 720
Park Rail Developments Pty Ltd v R.J. Pearce Associates Pty Ltd (1987) 8 NSWLR 123
1 citation
Jump To
Cite 1 - (1987) 8 NSWLR 123
PMT Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 302
6 citations
Jump To
Cite 1 - (1995) 184 CLR 302
Cite 2 - (1995) 184 CLR 302
Cite 3 - (1995) 184 CLR 302
Cite 4 - (1995) 184 CLR 302
Cite 5 - (1995) 184 CLR 302
Cite 6 - (1995) 184 CLR 302
PMT Partners Pty Ltd v Australian National Parks and Wildlife Service (1995) 184 CLR 301
7 citations
Jump To
Cite 1 - (1995) 184 CLR 301
Cite 2 - (1995) 184 CLR 301
Cite 3 - (1995) 184 CLR 301
Cite 4 - (1995) 184 CLR 301
Cite 5 - (1995) 184 CLR 301
Cite 6 - (1995) 184 CLR 301
Cite 7 - (1995) 184 CLR 301
Silk v Eberhardt [1959] QWN 29
1 citation
Jump To
Cite 1 - [1959] QWN 29
Strata Plan 3771 v Travmina Pty Ltd (1986) 4 BCL 91
1 citation
Jump To
Cite 1 - (1986) 4 BCL 91
Taunton-Collins v Cromie (1964) 1 WLR 633
3 citations
Jump To
Cite 1 - (1964) 1 WLR 633
Cite 2 - (1964) 1 WLR 633
Cite 3 - (1964) 1 WLR 633
Thomas v Star Maid International Pty Ltd [1999] FCA 911
1 citation
Jump To
Cite 1 - [1999] FCA 911
Tropeano v Monogram Pty Ltd [1992] 2 Qd R 324
1 citation
Jump To
Cite 1 - [1992] 2 Qd R 324
Tylors (Australia) Ltd v Macgroarty [1928] St R Qd 170
2 citations
Jump To
Cite 1 - [1928] St R Qd 170
Cite 2 - [1928] St R Qd 170
Tylors (Australia) Ltd v Macgroarty [1928] St R Qd 371
1 citation
Jump To
Cite 1 - [1928] St R Qd 371
Tylors Australia Ltd v Macgroarty [1920] St R Qd 170
1 citation
Jump To
Cite 1 - [1920] St R Qd 170

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Lee v Lin(2022) 11 QR 325; [2022] QCA 1408 citations
Mazelow Pty Ltd v Herberton Shire Council[2003] 1 Qd R 174; [2002] QCA 1192 citations
North Goonyella Coal Mines Pty Ltd v North Goonyella Coal Properties Pty Ltd [2002] QSC 368 3 citations
Parsons Brinckerhoff Australia Pty Ltd v Thiess Pty Ltd [2013] QSC 754 citations
US Healthcare Food Group Pty. Ltd. v Zouky [2019] QDC 581 citation
Viridian Noosa Pty Ltd v Neumann Contractors Pty Ltd [2009] QSC 3982 citations
1

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