CATCHWORDS Arbitration - whether in the circumstances the defendant ought to be restrained from proceeding with an arbitration under an arbitration clause in an agreement between the plaintiff and defendant when a Federal Court action 1s pending - delay by the defendant in proceeding to arbitration - the desirability of proceeding with the arbitration - the jurisdiction of the Federal Court to restrain the arbitration or the parties from proceeding with the arbitration. L. GROLLO & CO. PTY. LTD. v. NU-STATT DECORATION PTY. LTD. & ORS. VG No. 39 of 1977 1 December 1983 Smithers J. Melbourne. IN_THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG NO.39 OF 1977 } GENERAL DIVISION ) ) EX TEMPORE JUDGMENT BETWEEN : L. GROLLO & CO. PLY. LID. AND: NU-STATT DECORATING PTY. LID. & ORS. 1 December 1983 Smithers J. REASONS FOR JUDGMENT HIS HONOUR: In this case I feel unable to give the relief which is sought in the chamber summons before me. The relief sought is that I should restrain Nu-Statt Decorating Pty. Ltd. (the defendant) from proceeding with an arbitration under an arbitration clause in an agreement dated 18 August 1975 between L. Grollo & Co. Pty. Ltd. (the plaintiff) and the defendant for the carrying out of painting to buildings erected as part of the Darwin Reconstruction at Anula-Wulagi sub-division, Leept Road, Darwin, after Cyclone 2. Tracey ("the said agreement"). The original proceedings, No. 39 of 1977 in this court, were brought against some tweive defendants, the last six named defendants being the Master Builders Association, The Royal Australian Institute of Architects, The Royal Australian Institute of Architects (Victorian Chapter); the President of the Royal Australian Institute of Architects (Victorian Chapter); The Master Builders Federation of Australia Inc. and The Australian Institute of Building. Inter alia, allegations were made by the plaintiff that, by reason of agreements between the twelve defendants which were alleged to be in restraint of trade the said agreement was itself void, illegal and unenforceable because it was in contravention of the Trade Practices Act 1974 (the Act). The Pleadings were amended on 1 August 1983 by the elimination of the last six named defendants and the claims relating to them, and the reformation of the cause of action. In substance the statement of claim now comprises a claim under the Act against the remaining defendants in respect of alleged misleading and deceptive conduct concerning their competence to 3. do the work and also, a claim in respect of breaches of warranty in connection with the performance of the work which has been done by the defendant for the plaintiff in painting some four hundred houses. The action will be heard in this Court early in February 1984. On 5 April 1977 the defendant had given to the plaintiff a notice claiming that a dispute had arisen, which was subject to arbitration under the said agreement between the parties. It is clear, however, that from the time the notice of dispute was given until the amendment of the proceedings in this case with the elimination of the last six named defendants and the allegations pertaining to them the arbitration proceedings were not pursued. Since the statement of claim has been reformed the defendant has taken proceedings to revive the arbitration and is proceeding with some energy to bring it on. The arbitration will involve guestions of the value of work done by the defendant, whether it was done efficiently or not; and how its performance will support the claim for certain payments, which it claims under the said agreement. It is clear that allegations that the defendant's work was badly done will necessarily come before the arbitrator. It is also clear that if the plaintiff succeeds in establishing, in its action in this court, that the defendant was guilty of misleading conduct, as alleged or that it breached the purported warranties then, in relation to damages, questions of the same kind as those which will arise in the arbitration may have to be dealt with. They will, however, be dealt with on ai slightly different basis from the way in which they will be deait with in the arbitration because, in the arbitration, it will be a question of how those deficiencies or errors or defects of workmanship relate to the contractual obligations of the defendant. In the case before this court in relation to the claims under the Act the issue will be what damage has been suffered by reference to the fact, if it be the fact, that the defendant did not have the expertise that it purported to have and that, when it was employed, it was employed under a misapprehension as to its competence. Under the claim for warranty the issues will be 5. almost the same as the issues which will be before the arbitration. It is undesirable, if it can be properly avoided, that those issues which relate to the four hundred houses and involve much evidence and much time and probably more time before a court than before an arbitrator - anarbitrator is amore suitable tribunal for the issues of the kind involved - it is desirable, if possible, in the course of the proceedings between these two parties that all that evidence be called once rather than twice. In addition, I merely say this: if the arbitration does proceed, and if findings are made, they may have relevance to the damages that are otherwise obtainable in this Court. I would give great consideration and hesitate long before I did anything in the way of restraining this arbitration from proceeding. The situation is made clearer as I do not perceive that in the circumstances of this case, this court has jurisdiction on the basis of the delay which has occurred, to restrain the respondent from proceeding with the arbitration, nor has it as far as the question of delay is concerned, jurisdiction to restrain the arbitrator from 6. proceeding with the, arbitration. As was held by the House of Lords in Bremer Vulkan v. South India Shipping £19813 1 All ER p.289:- "A court did not have jurisdiction to dismiss a claim in an arbitration for want ef prosecution or to grant an injunction restraining a claimant from proceeding with the arbitration if he has been guilty of inordinate and inexcusable delay. An arbitration was not sufficientiy analagous to an action at law for the jurisdiction to dismiss an action for want of prosecution to be applied mutatis mutandis to an arbitration, since the court's jurisdiction to dismiss an action was derived from its inherent jurisdiction whereas the jurisdiction to supervise the conduct of an arbitration was confined to the statuory powers contained in the Arbitration Acts 1950 to 1979. Furthermore submissions to the private arbitration was consensual and voluntary by both parties unlike an action where the defendant was obliged to submit to the jurisdiction of the court, and the duty on the parties to an arbitration not to be dilatory was a mutual contractual obligation. If therefore one party was dilatory the other party was under a duty to apply to the arbitrator for directions with aview to keeping the arbitration moving, and apply the principle that the law only assisted the vigilant; it was not open to a respondent to hit back while the claimant did nothing and then found on the claimant's delay as a reason for asking the claim to be dismissed." I would refer also to Paal Wilson & Co. A/S v. Partenreederei Hannah Biumenthal C1983] 1 All ER p.34. Compare Heyman & Anor v. Darwins Limited (1942) A.C. 356. I should just mention that it would appear, and indeed it is conceded, in this case the arbitration clause is of the Scott and Avery variety. The relevant provision in the contract provides that: "In the case of any dispute or difference ».. then either party shall give to the other, notice in writing of such dispute or difference and at the expiration of seven working days unless it shall have been otherwise settled or agreed such dispute or difference shall be submitted within seven days to the arbitration of the person or persons nominated in clause ltr) or if no person shall be named therein or if all the persons so named therein are unable or unwilling to act then the sole arbitrator shall be the president for the time being of the Master Builders Association of Victoria or his nominees." And the next sub-clause provides: "And the award made by the said arbitrator shall be final and binding on both the builder and sub-contractor and neither party shail be entitled to commence or Maintain any action upon such dispute or agifference until such matter shall have been deferred or determined as herein before provided, and then only on a point of law." While that clause on its face purports to deprive a court of jurisdiction, and if it did so it might well be regarded as unlawful, clauses of such kind have been interpreted by the courts as not being so intended but as intended to establish the 8. situation in which the cause of action does not arise until the arbitration has been completed and not interpreted as an attempt to deprive any court of jurisdiction in respect of a claim which has already arisen. In the circumstances, therefore, the summons is formally dismissed and J think it must be dismissed with costs. MR JOHNSTONE: It has been the practice, your Honour, in the past in these matters that we might still be under the High Court rules and your Honour could certify for counsel. HIS HONOUR: Very well, I certify. MR HERCULES: The only matter I would be worried about is that I have not said what arrangements led to the other defendants no longer being parties to the action, and every claim that was ever made against Nu-Statt right throughout the statement of claim has never been abandoned, and that includes the sub-contract is void. HIS HONOUR: I follow that and to that extent I may have misunderstood the situation, but insofar as I am in error, no conclusions would follow naturally. It does not affect my views in this particular ™ case. MR HERCULES: All I intended to do is put the record right as far I was concerned. HIS HONOUR: Quite so, I appreciate that. Tocer .1. 4a%t this and the g pre Pp ed wre a true copy oe? tha Feu, 5 v v dud,ment herein of 418 avnuur Mr. Jusi,ve S~ithtan Sherr Pris ndede ! Associate