JUDGMENT No. 73.74.2283 IN THE FEDERAL COURT OF AUSTRALIA ) ) WESTERN AUSTRALIA DISTRICT PEGISTRY) No. WAG 114 of 1986 ) : GENERAL DIVISION ) BETWEEN: BOND CORPORATION PTY. LIMITED Applicant THIESS CONTRACTORS Pry. LIMITED First Respondent OVE ARUP PTY. LIMITED, ARUP PARTNERS PTY. LIMITED and OVE ARUP CONSULTANTS PTY. LIMITED Second Respondents MINUTES OF ORDER JUDGES MAKING ORDER: BOWEN, C.J., SHEPPARD and LEE JJ. DATE OF ORDER 2 9 MARCH 1988 WHERE MADE PERTH THE COURT ORDERS THAT: - L. The applicant's motice of motion of 4 February 1988 seeking leave to appeal against the order of French J. made on 20 January 1988 be dismissed. 2. The applicant pay the respondents' costs of the motion. NOTE: Settlement and entry of orders is dealt with in Order 36 "ae of the Federal Court Rules. IN THE FEDEPAL COUPT OF AUSTRALIA WESTERN AUSTPALIA DISTRICT REGISTPY No. WAG 114 of 1996 SENEPAL DIVISTON BETWEEN: BOND CORPORATION Pry. LIMITED Applicant THIESS CONTRACTORS PTY. LIMITED First Respondent OVE ARUP PTY. LIMITED, ARUP PARTNERS PTY. LIMITED and OVE ARUP CONSULTANTS PTY. LIMITED Second Respondents THE COURT: BOWEN, C.J., SHEPPARD and LEE JJ. DATE: 9 March 1989 REASONS FOR JUDGMENT This is a notice of motion seeking leave to appeal against an order made by French J. on 20 January 1988. The application is made by the applicant ("Bond") which has sued the first respondent ("Thiess") for causes of action under the Trade Practices Act 1974 and for breach of contract. Sond has also cued the second respondents ("Qve Arup") in the same proceedings but they are not concerned with the matters which arise for consideration in the present motion. 2. The background to the matter is this. On 24 February 1987 French J. made an order rectraining Thiess from prosecuting an arbitration between uit and Bond in accordance with a netice of vefererce t2 arbitration served by Thiess on 12 September 1986. The notice was given pursuant tec an arbitration cause, clause 49, in certain gztneral conditions of centract which were annexed to and formed part of a contract made on 12 March 1985 whereby Bond engaged Thiess to carry out certain civil engineering work on land at Millendon in Western Australia. The causes of action relied upon by Bond against Thiess in the principal proceedings arise out of such work and the contract of 12 March 1985. The second respondents were engaged by Bond to act as its consulting and supervising engineer for the development of the land. They were appointed the superintendent under the contract. His Honour made the order of 24 February 1987 staying the arbitration proceedings substantially because he accepted submissions made by counsel for Bond that all issues which would arise for determination in the application and in the arbitration proceedings were justiciable in this Court and that Thiess would be able to raise in the proceedings all matters of claim which 1t desired to raise in the arbitration. After his Honour's order was made Thiess filed a cross claim whereby it raised the matters which it wished to rely upon in the arbitration. Pond made application to strike out certain parts of the cross-claim. This matter came before French J. who, on 1 Jctober 1987, made orders striking out a number of paragraphs of lw the cross claim. Thiess took the view that his Honour's decision demonstrated that, notwithstanding the belief of the parties and his Honour that all matters which Thiess wished to raise before the arbitrator were justiczrable in this Court, that was not in fact the case. It decided to seek leave to discontinue its cross claim and to have the stay of the arbitration lifted. His Honour gave leave to discontinue the cross-claim and varied the order relating to the stay so that Thicss was restrained from prosecuting the arbitration but only beyond completion of all preliminary and interlocutory matters. Bond wishes to appeal against that decision. In order to understand the differences which there are between the parties it is necessary to refer to some of the provisions of the general conditions of contract. Clause 23 provides for directions to be made by the Superintendent and for the steps which Thiess might take inthe event of its being dissatisfied with those directions. The relevant parts of clause 23 are as follows:- "23. Directions of the Superintendent. The Superintendent shall exercise in a reasonable and equitable manner the powers conferred on - him by the Contract. The work under the Contract shall be executed in accordance with the Contract and any directions of the Superintendent pursuant to the provisions of the Contract. If the Contractor considers that he is involved in loss or expense beyond that 4. provided for elsewhere in the Contract by reason of- {a} compliance by im with a direction of the Superintendent, or : (b) the Superintendent withholding, unreasonably delaying or refusing to givo adiurection which he 125 by the Contract required to give, provided that such direction is notwithheld, refused or delayed by reason of or in relation to some breach of the Contract by the Contractor, then the Contractor may claim payment by the Principal of such loss or expense by- (1) giving in writing promptly after he becomes aware of such situation, notice thereof to the Superintendent, such notice to contain particulars of the direction and if the amount of the loss and expense 1s then known an itemized statement thereof, and : (ii) aif the amount of such loss and expense is not then known, giving to the Superintendent the notice referred to in subparagraph (i) and as soon as practicable thereafter giving an itemized statement. The Superintendent shall thereupon determine the amount of any such loss and expense and give notice in writing thereof to the Principal and the Contractor. The amount so determined shall be paid by the Principal to the Contractor. Pe ee 23.2 Dissatisfaction with Directions of the Superintendent. The parties to the Contract shall give effect to the directions of the Superintendent provided that if either party is dissatisfied with any direction of the Superintendent he may notify the other party of such dissatisfaction and then or subsequently, proceed in accordance with the provisions of Clause 49 provided that unless the party so notifies the other party within two months after the date on which such direction was given, he shall not be entitled to have the said matter referred to arbitration". Clause 49, as earlier mentioned, is the arbitration clause. Its opening words oblige Thiess to comply with all directions given by continues: At the nature of 5. the Superintendent pursuant to the contract. "All disputes or differences arising out of the Contract or concerning the performance or the non-performance by either party of his obligations under the Contract, whether before or after the completion of the Works, shall be determined as follows: (a) One or both of the parties shall notify the Superintendent in writing that a dispute under this clause has arisen and shall within fourteen days of such notification submit the matter at issue in writing with detailed particulars to the Superintendent for determination and the Superintendent shall, within fourteen days after receipt thereof, give his determination to both parties to the Contract. (b) If either party is dissatisfied with the determination given by the Superintendent, or if he fails to give his determination, pursuant to (a) of this clause, the dissatisfied party may -not later than twenty-eight days after the Superintendent is required to give his determination give notice in writing to the other party requiring that the matter at issue be referred to arbitration and specifying with detailed particulars the matter at issue and thereupon the matter at issue shall be determined by arbitration. If, however, either party does not within the said period of twenty-eight days give such a notice to the other party requiring that the matter at issue be referred to arbitration the determination given by the Superintendent pursuant to (a) in this clause shall not be subject ta arbitration. It then heart of the disagreement between the parties is the the review to which Thiess is entitled. The primary submission of counsel for Bond was to the effect that the only way in which Thiess can seek review was to proceed against Bond, 6. whether in this Court or by way of arbitration proceedings, for Breach of a promise made by Bond to Thiess that the superintendent would exercise the powers conferred upon him Ly the contract in a reascnable and cquitable manner. Unless Thiecs can show that there was something unreasonable or inequitable absut any of the directions which the superintendent gave, Thiess had no remedy whether 1n judicial proceedings or in arbitration procecdings. Counsel for Bond said that the promise, which he conceded was included in the contract, was derived from the opening words of clause 23.1 of the general conditions earlier quoted on the basis that the superintendent was Bond's agent for the purposes of the carrying out of the contract. Counsel for Thiess, on the other hand, contended that clauses 22 and 49, when read together, conferred on Thiess a right to have all directions of the superintendent reviewed in arbitration procecdings irrespective of whether the superintendent was shown to have acted unreasonably or inequitably. In his submission the words used in these two clauses disclosed an intention on the part of the parties that the arbitrator was to stand in the shoes of the superintendent whose directions were thus all exposed to an independent review which would enable the arbitrator to substitute his own decisions for those of the superintendent if he disagrced with him in any respect. Counsel relied on the decision of the Court of Appeal in England in Northern Regional Health Buthority v. Derek Crouch Construction Co. Limited C1984] 1 Q.B. 644. The point which is raised by these competing submissions is a - point of substance which it will be important to resolve at some Time. But there is a question, notwithstanding the argument which we have had, whether now is the appropriate time to resolve 1t. Tacs learned primary Judge dealt with the matter. He referred to the Crecuch case at length and to certain other authorities. He concluded his judgment as follows:- "It might well be possible for Thiess to raise a cross-claim based upon a failure by Ove Arup, attributable to Bond, to exercise 'in a reasonable and equitable manner' the powers conferred on it by the contract. That course however, may not offer the same direct substitutive remedial power as is available to the arbitrator. I say 'may not' because it is conceivable that the court might be able by some appropriate exercise of its remedial powers or of a combination thereof, to arrive at a similar result. It remains to be demonstrated that the court could do so. In the circumstances and given the significance of cl. 23 determinations to Thiess' cross-claim I think the best course = for the present is to allow it to proceed at least through all interlocutory stages necessary to prepare for the hearing of the arbitration. The matters at issue as disclosed in the Notice of Reference are wide in their terms and as framed they are capable of encompassing issues able to be resolved by the court. No doubt in the course of the interlocutory proceedings in the arbitration, the issues will be better defined than they are at present. The parties may come back to the court in that regard if it is thought that some confinement of the matters to be raised before the arbitrator is appropriate to avoid unnecessary overlap between the arbitral and - the judicial proceedings. I propose therefore to order that Thiess have leave to discontinue its cross-claim and to vary the injunction in order that it may proceed through the necessary interlocutory stages in connection with the arbitration". S. It is apparent that his Honour expressed no final view on the foint which is at issue. One of the reasons he did not was that there was not before him any precise formulation of Thiess' claim. It was given leave to discontinue i1ts cross claim, substantial parts of which had in any event been struck out, and the claim which it wished to formulate before the arbitrator had net been propounded. As his Honour said, the matters at issue disclosed in the notice of reference to arbitration are wide in their terms and are capable of encompassing issues (we would say, at least some of the issues), able to be resolved by the Court. Undoubtedly the interlocutory steps to take place before the arbitrator will, as his Honour said, much more clearly define the 1ssues than is the case now. For these reasons we think that Bond has shown no error in the decision against which leave to appeal is sought. His Honour exercised a discretion in a matter relating to practice and procedure. He determined no matter of substance between the parties. Lest there be any misunderstanding, we make it clear that nothing we have said is intended to determine any such matter either. In all the circumstances, therefore, we have reached the conclusion that this is not a case for leave to appeal. The motion is dismissed with costs. I certify thas shts end the "7 precoding pages are a true copy of thre rassons for judgment herein of the Court fort x Aesociate Deed F March /IFF ive) Counsel for Applicant: Mr. T.E. Hughes, Q.C. with Mr. P. Tottle Soliciters for Applicant: Robinson Cox, 140 St. George's Terrace, Perth. W.A. 6000. Counsel for First Respondent: Mr. Clifford Solicitors for First Respondent: Freehill, Hollingdale & Page, 15 William Street, Perth. W.A. 6000. Counsel for Second Respondents: Mr. J.T. Saunders Solicitors for Second Respondent: Kott Gunning, 22 St. George's Terrace, Perth. W.A. 6000. Date of hearing: 4 March 1988 Place of hearing: Perth