FPM Constructions Pty. Limited v. Wollongong City Council [2004] NSWCA 418

New South Wales Court of Appeal

CITATION : FPM Constructions Pty. Limited v. Wollongong City Council [2004] NSWCA 418 HEARING DATE(S) : 11 November 2004 JUDGMENT DATE : 11 November 2004

JUDGMENT OF : Hodgson JA at 1; Bryson JA at 8 DECISION : Application for leave to appeal dismissed with costs.

CATCHWORDS : ARBITRATION - Security for costs - Whether for court or arbitrator - Order staying arbitration if security not given - Effect on cross-claim. CASES CITED : Holman v. Dynabuild Pty. Limited [1975] 2 NSWLR 334 Imperial Leatherwork Co. Pty. Ltd. v. Macri (1991) 22 NSWLR 653 PARTIES : FPM Constructions Pty. Limited - claimant Wollongong City Council - opponent FILE NUMBER(S) : CA 40584/04 COUNSEL : Mr. G. McVay with Mr. J. Hammond for claimant Mr. S. Kerr for opponent SOLICITORS : James A. Moustacas & Co., Bondi Junction for claimant Clayton Utz, Sydney for opponet

LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT SC55020/04 FILE NUMBER(S) : LOWER COURT Einstein J JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40584/04

HODGSON JA BRYSON JA

Thursday 11 November 2004 FPM CONSTRUCTION PTY. LTD. V. WOLLONGONG CITY COUNCIL Judgment 1 HODGSON JA: This in an application for leave to appeal from a decision of Einstein J to order security for costs. Essentially the ground which is sought to be advanced, if leave to appeal is granted, is that the judge's exercise of discretion miscarried because he did not take into account the agreement of the parties to the effect that there should be no security for costs, or the agreement of the parties to the effect that any questions concerning security for costs should be dealt with by the arbitrator. 2 Mr McVay for the claimant referred to cl.45 of the building contract and submitted that it disclosed an intention that there should not be security for costs, an intention that there should be no court proceedings and an intention that an arbitrator should have powers including powers to order security for costs. He submitted that this clause made reference to powers given inter alia by the Commercial Arbitration Act, and reference was made to s.34 and s.47 of the Act. He submitted that leave should be granted because this form of contract and the form of the legislation is in operation throughout Australia. 3 There is authority inter alia in Holman v Dynabuild Pty Limited [1975] 2 NSWLR 334 that an arbitrator does not have power to order security for costs in the absence of express provision in the agreement. I would think that there may be such power if it is clearly implied in the agreement. I think the view that this agreement does not express or clearly imply such a power is one that was well open to the primary judge. It seems that s.34 of the Commercial Arbitration Act was not referred to the primary judge, but it seems to me at least doubtful if that does give power to an arbitrator to award security for costs. The restriction on court proceedings in respect of a matter in issue, contained in cl.45, seems to me to be referring to the actual subject matter of the dispute, rather than incidental matters. If an arbitration is proceeding when building work is continuing, the agreement in cl.45 may suggest a powerful discretionary reason against granting security for costs; but in my opinion that would be of far less weight in relation to an arbitration undertaken after work has ceased. 4 There is considerable first instance authority to the effect that orders for security for costs, like Mareva injunctions are orders appropriately made by a court under s.47 of the Act, for example in Imperial Leatherwork Co Pty Limited v Macri (1991) 22 NSWLR 653 at 666-7. 5 Having regard to those considerations, it does not seem to me that the claimant has indicated such doubt as to the exercise of discretion by Einstein J as to justify the grant of leave to appeal. 6 It has been noted during submissions that the order of a primary judge is that the arbitration be stayed if the security is not given. I think it is clear that that has the effect of staying the whole arbitration including a cross-claim brought by the opponent. If the opponent in those circumstances wished to pursue its cross-claim, it seems to me that it would have to have the order discharged; and there would then be questions as to whether the order should have been obtained in the first instance, as it would have proved futile, if the order is discharged so that the opponent could pursue its cross-claim. Then it seems to me that the claimant's claim could be brought as a cross-claim in those proceedings, without a ground being shown for security for costs. 7 For those reasons in my opinion the application for leave to appeal should be dismissed with costs. 8 BRYSON JA: I agree. 9 HODGSON JA: That is the order of the Court. **********