New South Wales Supreme Court CITATION : Auburn Council v Austin Australia Pty Limited (in liquidation) [2007] NSWSC 130 HEARING DATE(S) : 12/02/07, 13/02/07, 14/02/07, 15/02/07, 16/02/07, 19/2/07, 20/02/07, 21/02/07 22/02/07 JUDGMENT DATE : 6 March 2007 JURISDICTION : Equity Division Commercial List JUDGMENT OF : Einstein J DECISION : Plaintiff's claims to relief not made out. Parties to bring in short minutes of order. CATCHWORDS : Arbitration - Contract - Arbitration proceedings concerning contractual arrangement close to completion - Claimant placed into administration - Arbitration proceedings include cross claim by respondent - Court order for the provision of security for the respondent's future costs and staying claimants claim until provision of security - No order staying respondents cross-claim - Security for costs furnished extended period after order made - Respondent seeks declaration that the arbitration agreement ended as a result of claimant's repudiation and respondents acceptance of such repudiation or orders pursuant to s 46 of the Commercial Arbitration Act 1984 (NSW) terminating the arbitration - Whether repudiation made out - Whether delay on part of claimant in complying with court's order for security capable of constituting a breach of term implied in s 46 (1) of the Commercial Arbitration Act to exercise due diligence in taking of steps necessary to have dispute referred to and dealt with in arbitration proceedings - Implied obligation to progress arbitration being mutual - Whether delay would give rise to substantial risk of it not being possible for fair trial of the issues in arbitration proceedings or likely to cause serious prejudice to respondent - No effective termination of arbitration agreement possible by reason of one party's repudiatory delay where other party failed to take steps to have such delay addressed - Party not ready, willing and able to perform contract may not terminate contract notwithstanding the repudiatory conduct of other party - Whether respondent lost right to accept any repudiation of arbitration agreement by accepting security for funds moneys - Whether statements by the applicant concerning its beliefs as to when funding would be obtained for the provision of the security comprised repudiatory conduct or lack of due diligence on part of applicant in the taking of steps necessary to have the dispute dealt with in the arbitration proceedings - Leave to proceed against company in liquidation Arbitration Act 1950 (UK) LEGISLATION CITED : Commercial Arbitration Act 1984 (NSW) Corporations Act 2001 (Cth) Alghussein Establishment v Eton College [1991] 1 All ER 267 Alginates (Australia) Pty Ltd v Thomson & Carroll Pty Ltd [1970] VR 570 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 Andre et Compagnie v Marine Transocean Ltd [1981] QB 694 Boodhoo v Attorney General of Trinidad and Tobago [2004] 1 WLR 1689 Blencoe v British Columbia (Human Rights Commission) [2000] 2 SCR 307 Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Carr v Fischer [2006] NSWCA 313 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 Commonwealth v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662 Crawford v AEA Prowting Limited [1973] QB 1 Dalgety & Co Ltd v The Australian Mutual Providence Society [1908] VLR 481 Duncan v Lowenthall [1969] VR 180 Dyer (Procurator Fiscal, Linlinthgow) v Watson [2004] 1 AC 379 Economides v Commercial Assurance Co plc [1998] QB 587 Elder's Trustee and Executor Co Limited v Commonwealth Homes and Investment Co Limited (1941) 65 CLR 603 Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17 Gill Herron & Gardiner v Walton (1991) 25 NSWLR 190 GIO Australia Holdings Ltd v AMP Insurance Investment Holdings Pty Ltd and Another (1998) 29 ACSR 584 Goose v Wilson Sandford & Co [1998] TLR 85 Herron v McGregor (1986) 6 NSWLR 246 CASES CITED : Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 Jago v District Court of New South Wales (1989) 168 CLR 23 Krivoshev v Royal Society for the Prevention of Cruelty to Animals Inc [2005] NSWCA 76 Liverpool City Council v Casbee Pty Ltd [2005] NSWSC 590 Matthews v Smallwood, [1910] 1 Ch 777 Minion v Graystone Pty Limited [1990] 1 Qd R 157 Monie v Commonwealth of Australia (2005) 63 NSWLR 729 NAIS V Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 77 Newman v Victoria [unreported, Supreme Court of Victoria, McDonald J, 25 August 1995, BC9507248] Oceanic Life Ltd v Insurance and Retirement Planning Services Pty Ltd (in liq) (1993) 11 ACSR 516 O'Connor v SP Bray Ltd (1936) 36 SR NSW 248 Ogilvie-Grant v East (1983) 7 ACLR 669 Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854 Peabody Resources Ltd v Macquarie Generation [unreported, Supreme Court of New South Wales, Einstein J, 19 November 1998, BC9806319] Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 Queensland Trustees Ltd v Drysdale Hendy & Co [1992] 2 Qd R 625 Roebuck v Mungovin [1994] 2 AC 224 Sea Containers Limited v ICT Pty Limited [2006] NSWCA 327; [2006] NSWSC 134 Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359 Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 Stollznow v Calvert [1980] 2 NSWLR 749 Williams v Frayne (1937) 58 CLR 710 Zimmer Orthopaedic Limited v. Zimmer Manufacturing Co Ltd [1968] 2 All ER 309 PARTIES : Auburn Council (Plaintiff) Austin Australia Pty Limited (Defendant) FILE NUMBER(S) : SC 50138/06 COUNSEL : Mr TEF Hughes QC, Mr ID Faulkner SC, Mr MK Condon (Plaintiff) Mr J Simpkins SC, Mr AA Henskens (Defendant) SOLICITORS : Matthews Folbigg Pty Limited (Plaintiff) Colin Biggers & Paisley (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Tuesday 6 March 2007 50138/06 Auburn Council v Austin Australia Pty Limited (in liquidation) JUDGMENT The proceedings 1 Auburn Council brings these proceedings against Austin Australia Pty Ltd seeking relief in relation to arbitration proceedings commenced in May 2001. The background to the disputes which led to the initiation of the arbitration concern the contractual arrangements whereunder Austin had been retained by the Council in March 1999 to provide project management services in relation to the redevelopment of the Council Chambers and in relation to the redevelopment of the Auburn Police Headquarters. 2 Austin's claim was for approximately $4.5 million plus interest. The Council's cross-claim and setoff was for approximately $7 million plus interest. 3 Mr Bailey SC was appointed arbitrator and the arbitration hearing commenced on 7 April 2003. By December 2003 the arbitration hearing had not yet completed. On 31 December 2003 administrators were appointed to Austin and on 10 March 2004 liquidators were appointed. 4 On 8 March 2004 the court ordered inter alia: · Austin to provide security for the Council's future costs of the arbitration in the sum of $325,000; · that the arbitration proceedings be stayed until the security was furnished; · that to the extent necessary the Council was granted leave to proceed with its cross-claim in the arbitration proceedings. 5 The security was only furnished on 28 July 2006. The relief claimed 6 The Council seeks: i. a declaration that the arbitration agreement dated 22 March 1999 has come to an end as a result of Austin's repudiation of that agreement and the Council's acceptance of such repudiation on 13 September 2006; ii. alternatively, an order pursuant to s46 (2) (a) of the Commercial Arbitration Act, 1984 (NSW) terminating the arbitration. The arbitration agreement 7 Clause 20 (a) of the Construction Management Agreement [PX 1/28] provided relevantly as follows: "In case any dispute or difference shall arise between the Principal and the Construction Manager as to either during the progress of the Works or after the determination, abandonment or breach of the contract: (I) the construction of the Contract; or (II) as to any matter or thing of whatsoever nature arising thereunder or in connection therewith; then either party shall give to the other notice in writing of the dispute or difference and at the expiration of seven days, unless it shall have been otherwise settled, the dispute or difference shall be and is hereby submitted to the arbitration of an Arbitrator who shall be, at the option of the party who first serves the notice of dispute either the President or the Acting President of the Chapter of the Institute of Arbitrators, Australia, in the State or Territory in which the works are situated, or his nominee…" Relevant provisions of the Commercial Arbitration Act 8 Section 14 is in the following terms: Procedure of arbitrator or umpire Subject to this Act and to the arbitration agreement, the arbitrator or umpire may conduct proceedings under that agreement in such manner as the arbitrator or umpire thinks fit. 9 Section 46 is in the following terms: Delay in prosecuting claims (1) Unless a contrary intention is expressed in the arbitration agreement, it is an implied term of the agreement that in the event of a dispute arising to which the agreement applies it is the duty of each party to the agreement to exercise due diligence in the taking of steps that are necessary to have the dispute referred to arbitration and dealt with in arbitration proceedings. (2) Where there has been undue delay by a party, the Court may, on the application of any other party to the dispute or an arbitrator or umpire, make orders: (a) terminating the arbitration proceedings, (b) removing the dispute into Court, and (c) dealing with any incidental matters. (3) The Court shall not make an order under subsection (2) unless it is satisfied that the delay: (a) has been inordinate and inexcusable, and (b) will give rise to a substantial risk of it not being possible to have a fair trial of the issues in the arbitration proceedings or is such as is likely to cause or to have caused serious prejudice to the other parties to the arbitration proceedings. [It is important to note that sub-paragraphs (a) and (b) are cumulative] 10 Section 47 is in the following terms: General power of the Court to make interlocutory orders 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. [It is convenient at this point to observe that s 47 does not authorise the Supreme Court to entertain appeals from interlocutory orders made by an arbitrator: Imperial Leather ware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653; Commonwealth v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662]. Thumbnail sketch of matters likely to inform the ultimate decision 11 The matters which are likely to ultimately inform the decision as to whether or not the declaration claimed should be made or in the alternative, whether or not the arbitration should be terminated require a close analysis of a number of factual matters. In this regard the litigation has been conducted by dividing the relevant time line into segments each of which had been submitted to microscopic examination. 12 The matters of law and sometimes mixed fact and law thrown up include: i. whether Austin repudiated the arbitration agreement; [the questions raised include whether the alleged breaches were sufficiently serious to be regarded as repudiatory as well as questions concerning which party was responsible for particular delays and whether on some occasions that responsibility may be sheeted home to both parties]; ii. whether there was any inaction on the part of the Council to continue with the arbitration; iii. whether as the Council has submitted, any delay on the part of Austin in complying with the Court's order for security is capable of constituting a breach of the implied term raised by s 46 (1) of the Act; iv. whether there has been 'undue' delay of the type provided for in s 46(2) and whether the delay has been 'inordinate and inexcusable' within the meaning of s 46(3)(a); v. if the Court be satisfied that any undue delay on the part of Austin was inordinate and inexcusable, whether the delay: a) will give rise to a substantial risk of it not been possible to have a fair trial of the issues in the arbitration proceedings or b) is such as is likely to cause or to have caused serious prejudice to the Council: s 46(3). 13 Clearly without being exhaustive it may be said that the Court is entitled when assessing the character of any delay, to take into account matters to such as the following: i. the length of the delay; ii. any explanation for the delay; iii. any hardship to Austin if the action is dismissed; iv. the prejudice to the Council if the arbitration is allowed to proceed notwithstanding the delay; v. the conduct of the Council in the Proceedings. 14 One of the difficult matters raised by the cross contentions goes to whether the passage of time will preclude any realistic possibility of the arbitrator being able to recall matters, as for example concerning the demeanour of witnesses. Hence authorities requiring close attention concern occasions when a judge or arbitrator by passage of time, may have been seriously deprived of the advantage such a person once had of observing witnesses as they gave their evidence. More precise chronicling of the issues 15 The defendant's statement of issues albeit of necessity of some length, comprises a reasonably accurate statement of the central issues. Excluding the detail of the issues concerning alleged prejudice as a result of delay it seems of assistance even at this early stage to repeat this statement: REPUDIATION – DELAY FROM JUNE 2001-APRIL 2003 1. Did Austin breach the term implied by section 46 (1) of the Commercial Arbitration Act (the Implied Term) (and, if so, when and in what precise respects) and what delay to the arbitration did any such breach cause? 2. Was any such breach so "serious and continuous" so as to evince an intention to no longer be bound by the arbitration agreement? 3. If there was a breach by Austin, did the Council elect to affirm the arbitration agreement by continuing with the arbitration? 4. Was any breach on the part of Austin still existing as at the date of any purported acceptance of a repudiation by the Council? 5. Was the Council then itself in breach of the arbitration agreement through its own failures to exercise due diligence in the taking of steps reasonably necessary to have the dispute dealt with in the arbitration proceedings and so precluded from validly accepting any repudiation? 6. When and by what means did the Council accept any repudiatory act on the part of Austin? 7. Was any acceptance of a repudiation by the Council unconscionable and hence invalid? 8. If any repudiation was validly accepted so as to bring the arbitration agreement to an end so far as future performance of it was concerned, did it affect Austin's accrued entitlement to have the Arbitrator determine the dispute? REPUDIATION – DELAY FROM DECEMBER 2003 9. Did the Implied Term oblige Austin to provide the security for costs ordered by the Court and, if so, within any, and what, time? 10. Was any breach of such an obligation (if it existed) so "serious and continuous" as to evince an intention to no longer be bound by the arbitration agreement? 11. Did the Council elect to affirm the arbitration agreement by conduct including reserving its right to proceed with its cross-claim in the arbitration, seeking, negotiating the form of and accepting security and communicating with the arbitrator about and participating in the continued conduct of the arbitration? 12. Was any breach on the part of Austin still existing as at the date of any purported acceptance of a repudiation by the Council? 13. Was the Council then itself in breach of the arbitration agreement through its own failures to exercise due diligence in the taking of steps reasonably necessary to have the dispute dealt with in the arbitration proceedings and so precluded from validly accepting any repudiation? 14. When and by what means did the Council accept any repudiatory act on the part of Austin? 15. Was any acceptance of a repudiation by the Council unconscionable and hence invalid? 16. If any repudiation was validly accepted so as to bring the arbitration agreement to an end so far as future performance of it was concerned, did it affect Austin's accrued entitlement to have the Arbitrator determine the dispute? TERMINATION - DELAY FROM JUNE 2001-APRIL 2003 17. Did Austin cause any, and what, delay to the dispute being dealt with in the arbitration? 18. Was any such delay "inordinate and inexcusable" within the meaning of section 46 (3)(a) of the Commercial Arbitration Ac t?… TERMINATION – PREJUDICE AS A RESULT OF DELAY FROM JUNE 2001 – APRIL 2003 TERMINATION - DELAY FROM DECEMBER 2003 23. Was the delay in providing the $325,00 security for costs (ordered on 8 March 2004, provided on 1 August 2006) "inordinate and inexcusabl e" within the meaning of section 46 (3)(a) of the Commercial Arbitration Act ?.. TERMINATION – PREJUDICE AS A RESULT OF DELAY FROM DECEMBER 2003 TERMINATION – DISCRETION 47. Should the Court should make any, and if so what, order under section 46 (2) of the Commercial Arbitration Act ? Dealing with the evidence 16 There is a very extensive chronology before the Court in the form of 'MFI D7' produced by Austin. In my view it is inappropriate and inefficient to include in these reasons, all of the detail in that chronology [albeit that the whole of the chronology is taken into account as informing these reasons]. 17 The chronology for all intents and purposes may be regarded as giving the matrix of fact underpinning the reasons. However the efficient course has been to dwell in the judgment on only those parts of the chronology as seem to require special mention for one reason or another. The respective periods of time 18 It seems convenient to divide the timeline into the following periods: i. June 2001 to April 2003 ["the first period"]; ii. December 2003 to August 2006 ["the second period"]; iii. September 2006 up to the commencement of the present hearing ["the third period"]. The first period 19 The first period essentially commences with the first directions hearing in which the arbitrator set an original timetable for preparation to enable the arbitration hearing to occur late in 2001 and continues to the occasion in early 2003 when the arbitration hearings actually commenced. This period is marked by cross-contentions of similar ilk [each party claiming that the other had been guilty of sundry failures to comply with directions]. 20 The finding is that both parties on occasion failed to comply with directions and that where Austin is shown to have failed to comply with directions the matter is of relatively slight significance only. The Council too was sometimes to blame. In short and regrettably as often occurs in some sets of proceedings and in some arbitrations, there is a leisurely approach to compliance with directions and repeated delays are encountered sometimes for good reason and sometimes due to lack of diligence on the part of one or other of the litigating parties. The second period 21 The second period includes the arbitration hearings which took place between 7 April 2003 up to 17 April 2003 and on adjourned dates from 23 April 2003 until May 2003. The arbitration hearings recommenced for 16 hearing days in October, November and December 2003. On 18 December 2003 the further hearing was adjourned to May 2004. 22 As already indicated, on 31 December 2003 administrators were appointed to Austin and on 10 March 2004 liquidators were appointed. This was a watershed period for obvious reasons. Although there were later directions hearings from time to time before the arbitrator, these were always concerned with whether and if so when, and how, the arbitration could or would go forward. In short the substantive arbitration hearings never recommenced. 23 On 19 February 2004 the Council applied to the Court for an order for security for costs which order was made on 8 March 2004. The order was that Austin provide security for the Council's future costs of the arbitration in the sum of $325,000 and that Austin's claim before the arbitrator be stayed until security was provided. [It is noteworthy that on certain applications for security for costs the applicant may persuade the Court to order that in the absence of compliance with the order by a nominate date, the proceedings are automatically dismissed. Here no time limits were ever imposed for the provision of the security. Presumably the Council simply never saw fit to apply for time limits to be set.] 24 Following negotiations between the parties which took place in June 2006, as to the precise terms of the security documentation, security was provided on 28 July 2006. 25 The events following the provision of this security do require reasonably close attention, the arbitrator by letter of 2 August 2006 appointing a preliminary conference, the matter being before the arbitrator for mention on 23 August 2006 and the Council purporting by letter of 13 September 2006 to accept a claimed repudiation by Austin of the arbitration agreement. The third period 26 The third period is simply of relevance to mark the further passage of time and to add to the Council's contentions reliant on s46 (2) and (3). The central focus 27 It is fair to say that the central focus of much of the evidence during the present hearing concerned: i. the period of time between the making of the order for security and the provision of the security; [particularly focusing upon: 1. what steps were taken by Austin in an endeavour to procure security and what information was imparted by Austin to the Council and on occasion to the Arbitrator in this regard; 2. why the Council did not itself seek to pursue its cross-claim which had never been stayed]; ii. the allegation that in the present circumstances and after the lengthy hiatus between the last of the arbitration hearings proper and the present time, it is simply not possible for the arbitrator to conclude the arbitration for various reasons: the proposition put by the Council is that the measure of justice to which the Council was entitled can no longer be achieved. 28 Naturally the above summary is not exhaustive of the factual issues examined. Nor does it seek to identify the close questions of law which will require to be treated with. The alleged repudiation Shepherd v Felt & Textiles 29 Although the findings do not justify the contention of repudiatory conduct, had the findings been otherwise it is appropriate to note that the Court accepts as of substance the contention put by the Council, reliant upon Shepherd v Felt and Textiles of Australia Limited (1931) 45 CLR 359 at 378, to the effect that as a general rule, a party is entitled to rely upon particular conduct of the other party as constituting repudiatory breaches of contract, albeit that the information only came to be known by the party seeking to so rely after the purported acceptance of a repudiation [see also Williams v Frayne (1937) 58 CLR 710 at 733; Minion v Graystone Pty Limited [1990] 1 Qd R 157 at 164, where McPherson J stated: "…the action taken must be capable of being justified at law, but…the grounds of justification, although they must have existed, need not have been known or relied upon at the time the action was taken"]. Obstacles facing the Council's case 30 There are a number of answers in the way of an acceptance of the proposition that the Council's purported acceptance of Austin's alleged repudiation was valid: i. the first answer assumes in favour of the Council that Austin's conduct could at some time have been properly regarded as repudiatory [an assumption which is not accepted in the reasons which follow] Making this assumption: a) the simple fact remains that at the time of the purported acceptance of Austin's alleged repudiation, Austin was not in any then existing breach of the arbitration agreement. It had by then complied with the order for the provision of the security. The matters that had produced any arguably repudiatory delay had been attended to and any default had been cured; b) in any event the Council elected to affirm the arbitration agreement by accepting the security; c) the Council had no entitlement to accept any alleged repudiation by reason of the fact that the Council was itself in breach of the term implied by s 46 (1) of the Act at the time of its purported acceptance of the repudiation. Its breach was constituted by the fact that it had cross-claimed against Austin in the arbitration and that notwithstanding the stay in respect of Austin's claim, there was nothing to prevent the cross-claim been proceeded with and the implied term obliged the Council to prosecute the cross-claim with diligence. It did not do so. This was a serious breach of s46 (1) . Indeed during the entirety of the period prior to the provision of the security, the Council conducted itself on the basis that the arbitration agreement was on foot and that the arbitration would proceed subject to the security that had been awarded being provided; ii the second answer rests in the misconceived proposition that there could be a failure by Austin to exercise due diligence [within the meaning of that phrase as used in s 46 (1) of the Act] in the taking of steps necessary to have the dispute dealt with in arbitration proceedings if, as a result of a stay imposed by the Supreme Court, Austin was prevented from taking any such steps. The case pursued by the Council is misconceived in its assumption that any delay on the part of Austin in complying with the Court's order for security was capable of constituting a breach of this implied term. As already observed, the order of the Court for the provision of security did not stipulate a date for that provision. No application was ever made by the Council for a date to be fixed; iii the third answer is that Austin in fact took steps which discharged any obligation it had [if such existed] to exercise due diligence in the provision of security. The liquidator expended much time and effort in an attempt to obtain funding. This attempt took a considerable period. And notwithstanding the exhaustive cross-examination of Mr Hutchison suggesting inappropriate delays in taking timely and proper steps to pursue the funding necessary to permit the provision of the security, proper steps were taken in that regard albeit over a protracted period in the face of a number of difficulties explained by Mr Hutchison; iv. the fourth answer rejects the Council's proposition that in the relevant circumstances its inaction in: a) failing to timeously make appropriate application to the Court for a permanent stay of Austin's claim and b) in failing to pursue its own claim which had not been stayed; was justified by reason of its having been misled by Austin as to its expectations concerning when funding would be available. [In short the Council in the events which happened was not entitled to rely upon any breach by Austin as giving it the right to treat the arbitration agreement as at an end.] Bremer 31 The speech given by Lord Diplock in Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corp Ltd [1981] AC 909 constitutes an in-depth analysis of many principles basic to arbitrations. That speech [drawing upon and sometimes affirming and sometimes rejecting propositions put in previous authorities] includes a number of propositions of relevance to the present issues. 32 Of signal evidence presently is the fact that the decision in Bremer is authority for the proposition that there can be no effective termination of an arbitration agreement by reason of one party's repudiatory delay where the other party has failed to take steps to have such delay addressed (the implied obligation to progress the arbitration being mutual). In this regard the decision is an application of the principle that a party who is not ready, willing and able to perform a contract may not terminate the contract notwithstanding the repudiatory conduct of the other party. 33 The propositions of relevance include: i. that an arbitration clause constitutes a self-contained contract collateral or ancillary to the agreement itself; ii. that the underperformed primary obligations of the parties under an arbitration agreement, like other contracts, may be brought to an end at the election of one party where there has been a repudiatory breach of that agreement by the other party [repudiatory breach being referred to as covering both what has been described as "fundamental breach" and "breach of condition": cf Photo Production Ltd v Securicor Transport Ltd [1980] AC 827]; iii. that when, upon the commission of such a breach, the party to an arbitration agreement who is not in default has lawfully elected to bring to an end the underperformed primary obligations of both parties to continue with the arbitration up to the issue of an award, the Court has jurisdiction, in protection of that party's legal right to do so, to grant him an injunction to restrain the other party from proceeding further with the arbitration; iv. that an arbitration clause continues to remain executory for so long as there are outstanding any disputes between the parties as to the existence or extent of their secondary obligations under the other clauses of an agreement. [Lord Diplock observed that the collateral agreement contained in an arbitration clause does not fit readily into a classification of contract that are synallagmatic on the one hand or unilateral or "if" contracts on the other, but was rather an agreement between the parties as to what each of them would do if and whenever there occurred any event of a particular kind]. 34 At 982-983 his Lordship put the matter as follows: "The event is one that either party can initiate by asserting against the other a claim under or concerning the shipbuilding agreement which they have not been able to settle by agreement. In that event, each is obliged to join with the other in referring the claim to arbitration and to abide by the arbitrator's award. The arbitration clause itself creates no obligation upon either party to do or refrain from doing anything unless and until the event occurs, and even then the mutual obligations that arise are in relation to the particular claim that constitutes the event. The primary obligations of both parties that arise then are contractual, whether express, or implied by statute or included by necessary implication in the arbitration clause. Breach of any of them would give rise to a general secondary obligation to pay compensation (damages), though this may well be nominal, but if the breach were such as to deprive the other party of substantially the whole benefit which it was the intention of the parties he should obtain from the mutual performance by both parties of their primary obligations in relation to the reference of the particular dispute to arbitration, i.e., what in an ordinary synallagmatic contract would be a repudiatory breach, I see no ground in principle why the party not in breach should not be entitled to elect to put an end to all primary obligations to proceed with the reference then remaining unperformed on his part and on the part of the party in default, and, in appropriate cases, to obtain an injunction to restrain the party in default from continuing with the reference to arbitration of that particular dispute. It was this principle that Donaldson J. and Roskill L.J. (with whom Cumming-Bruce L.J. also agreed) purported to invoke in the instant case. They held that the arbitration agreement, indeed all arbitration agreements, were subjected to an implied term of which they held that South India was in repudiatory breach. They stated the implied term in somewhat different ways, but when applied to the facts of the instant case the effect of both was the same: viz. the claimant in an arbitration who is guilty of such delay in proceeding with the arbitration as would justify the High Court in dismissing the proceedings for want of prosecution if the arbitration were an action, commits a repudiatory breach of the contract to refer the disputes to arbitration. Donaldson J. was inclined to treat it as a fundamental breach of an innominate implied term "that each party will use reasonable endeavours to bring the matter to a speedy conclusion" (ante, p. 924G-H); whereas the implied term dealing with claimants proceeding timeously that was favoured by Roskill L.J. required them only to avoid such delay as would justify the High Court in dismissing the proceedings for want of prosecution if it had occurred *983 in an action; and the breach of this implied term would be repudiatory because it was a breach of condition. Common to both ways of putting it is an assumption that an obligation to bring the arbitration to a conclusion with reasonable dispatch is incumbent on the claimant only, except where the next step in the procedure to be taken by either party is one which no one but the respondent is capable of taking. Even though there are available to the respondent effective means of requiring the claimant to put an end to any delay that is detrimental to the respondent, and sanctions for the claimant's non-compliance, the assumption is that the respondent is entitled to remain entirely passive and wait until the detriment is so great as to amount to a repudiatory breach of the agreement to refer. This notable departure from the maxim vigilantibus non dormientibus jura subveniunt is introduced into the implied term as a consequence of the decision of the Court of Appeal in Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229, which was treated by Donaldson J. and Roskill L.J. as applicable by analogy to arbitrations; but in my view, the differences both conceptual and procedural between actions and private arbitrations make any such analogy fallacious." 35 After drawing attention to the fundamental difference between an action at law and arbitration [in that the submission of a party to the jurisdiction of the High Court to determine a dispute which had arisen between that party and another was compulsory, neither party assuming any contractual obligation to the other as to what each must do in the course of the proceedings and their respective obligations as to procedure being imposed upon them by the rules and practice of the court] his Lordship turned to the contrast constituted by the purely voluntary submission of a dispute to arbitration under a private arbitration agreement. In that regard his Lordship observed as follows (at 983F): "Where the arbitration agreement is in a clause forming part of a wider contract and provides for the reference to arbitration of all future disputes arising under or concerning the contract, neither party knows when the agreement is entered into whether he will be claimant or respondent in disputes to which the arbitration agreement will apply. If it creates any contractual obligation to proceed with reasonable dispatch in all future arbitrations held pursuant to the clause - and I will consider later what that obligation is - the obligation is, in my view, mutual; it obliges each party to cooperate with the other in taking appropriate steps to keep the procedure in the arbitration moving, whether he happens to be the claimant or the respondent in the particular dispute." 36 As counsel for Austin has contended, Lord Diplock then turned to consider what the mutual obligation was of the parties to a private arbitration. His Lordship thought that the contractual obligations the parties assumed to one another arose from section 12 (1) of the Arbitration Act 1950. That section obliged the parties to, inter alia, do all things that the arbitrator might require. 37 Similarly, section 37 of the NSW Act provides:- The parties to an arbitration agreement should at all times do all things which the arbitrator or umpire requires to allow a just award to be made and no party shall wilfully do or cause to be done any act or delay or prevent an award being made. 38 His Lordship put the matter as follows (at page 986B):- No doubt in some arbitrations of a kind with which those who act on behalf of the parties in the conduct of the arbitration are familiar, both claimant and respondent may carry out voluntarily some or all of the preliminary steps needed to prepare the matter for the hearing by the arbitrator, and do so without seeking and obtaining any prior direction from him; but if what is done voluntarily by way of preparation is done so tardily that it threatens to delay the hearing to a date when there will be a substantial risk that justice cannot be done , it is in my view, a necessary implication from their having agreed that the arbitrator shall resolve their dispute, that both parties, respondent as well as claimant, are under a mutual obligation to one another to join in applying to the arbitrator for appropriate directions to put an end to the delay … [Emphasis added] 39 I accept that this is not materially different from the implied term that section 46 of the NSW Act now stipulates for. That term obliges both parties (regardless of who has initiated the referral of the dispute) to exercise due diligence in the taking of the steps necessary to have the dispute dealt with in the arbitration. In consequence I accept as of substance the submission that the Council was obliged to take steps to address any delay on the part of Austin. Additionally, it was obliged to prosecute its cross-claim. 40 On the facts as they were established, Lord Diplock did not regard the purported acceptance of the repudiation as valid observing (at page 987G):- In the instant case, however, as in Crawford v A.E.A. Prowting Limited [1973] QB 1, the respondents were content to allow the claimant to carry out voluntarily the preparation of detailed points of claim. They never made an application for directions to the arbitrator and none were made by him. For failure to apply for such directions before so much time had elapsed that there was a risk that a fair trial of a dispute would not be possible, both claimant and respondent were in my view, in breach of their contractual obligations to one another; and neither can rely upon the other's breach as giving him a right to treat the primary obligations of each to continue with a reference as brought to an end. Respondents in private arbitrations are not entitled to let sleeping dogs lie and then complain that they did not bark. [Emphasis added] 41 The speech delivered by Lord Diplock was concurred by Lord Edmund–Davies (at page 988B) and Lord Russell of Killowen (at page 993H). 42 Lord Scarman (with whom Lord Fraser of Tullybelton concurred: page 993G) dissented. 43 Notwithstanding the trenchant criticism of Bremer [particularly by Lord Denning MR in the decision of the Court of Appeal in Andre et Compagnie v Marine Transocean Ltd [1981] QB 694], the House of Lords (differently constituted) refused to reconsider Bremer in Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854. 44 In my respectful view the decision of the majority in Bremer was correct. 45 A direct consequence of an acceptance of the majority decision in Bremer requires that the Council's repudiation claim be rejected for the reason that if Austin was otherwise guilty of repudiatory delay, the Council itself was guilty of such delay through: i. failing to take steps to address delay in the progress of Austin's claim; and ii. failing to take steps to prosecute its cross-claim. 46 It may be observed that through the whole of the period between the making of the order for provision of the security and the time when the security was furnished the Council had the power to apply for a permanent stay of the arbitration proceedings in so far as Austin's claims were concerned, which would have been the appropriate route to take had it been disposed to do so. That it did not so apply is not a matter that can be laid at the feet of Austin. Indeed the evidence established to the Court's satisfaction that the Council's failure to so apply was solely due to its forensic tactical decision that it would be unwise to make such an application for the reason that the application may backfire if the Court determined, in the face of such an application, to lift or to reduce the amount of the security for costs order. 47 It has to be remembered that the arbitral process to which the parties had bound themselves by the arbitration agreement had been invoked by both parties who sought to prosecute their respective claims against one another. Whilst the form of the arbitration followed the presentation of Austin's claim as "claimant" followed by the presentation of the Council's claim as "respondent" and involved sundry overlap in terms of the presentation of evidence, the proper analysis involved there being separate claims pursued by each of the parties. 48 The circumstances before the arbitrator presently being examined involved separate obligations upon each party to exercise due diligence in the taking of steps reasonably necessary to have its claims in the dispute dealt with in the arbitration proceedings. That these obligations also extended to exercising due diligence in the taking of steps necessary to have the whole of the dispute dealt with in arbitration proceedings [as long as a party's entitlement to proceed had not been stayed], says nothing in relation to what was the extant obligation to pursue its claim which still rested upon a party whose claim had not been stayed. Clearly that party in that circumstance continued to be bound by its underlying obligation to exercise due diligence in the taking of steps necessary to have its claims dealt with to conclusion in the arbitration proceedings. Clearly the Council did no such thing. [It should be noted that the cross-claim was a claim for cost overrun in the project, the Council contending that it had had to pay out sums to contractors with whom it entered into contracts for the project (and done so allegedly on the recommendation of Austin). There was also a claim advanced that in breach of the agreement and in negligent breach of a duty of care, Austin had prepared in unsatisfactory manner, the trade packages that were to go out to in excess of 100 trade contractors, thus incurring the Council considerable expenditure.] Repudiatory intention not lightly inferred 49 It is trite to observe that repudiatory intention is not lightly to be inferred. 50 In Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 proceedings had been brought to establish an alleged repudiation. It was contended that an arbitration ought to be stayed because the arbitration agreement had been repudiated as a result of a failure of the other party to exercise due diligence in the prosecution of its claim in the arbitration. The other party had been placed into liquidation on 13 September 1990. It was known in the weeks following that the liquidator was considering what would happen in relation to the arbitration. It was not, however, until October 1991 that there was any statement made that the arbitration proceedings would be continued with. 51 Giles J held that there was no repudiation or that, if there was, it had not been accepted prior to October 1991. His Honour observed that repudiatory intention was not lightly to be inferred and that the inactivity, having regard to the liquidation, could not be regarded as repudiatory [page 212]. Similarly here, the fact that Austin was in liquidation is clearly relevant in assessing whether any delay in the progression of the arbitration or any statements of belief as to the anticipated securing of funding was repudiatory. Whether the Council lost its right to accept any repudiation of the arbitration agreement by accepting the security for funds moneys 52 If one posits [for the purposes of this argument], that by early March 2006 the conduct of Austin in having failed to procure the security for funds moneys constituted a repudiatory breach of a primary obligation stipulated for in the implied term to exercise due diligence in the taking of steps necessary to have the dispute dealt with in the arbitration proceedings [s 46], it becomes necessary to consider whether the Council lost its right to accept that repudiation when it elected to accept the security for funds moneys. 53 The Council contends that it did not lose that right in the circumstances. It contends that the all-important fact to be borne in mind is that at the time when it elected to accept the security for funds moneys it was plainly unaware of its having been misled by the misstatements of Austin [otherwise described in these reasons] which it is said had no factual basis. Shepherd v Felt & Textiles is relied upon by the Council as giving it an entitlement once it became aware of these facts, to justify its purported acceptance of a repudiation on the basis of these misstatements and hence to avoid the otherwise consequences of having affirmed by receipt of the security for funds moneys. 54 Elder's Trustee and Executor Co Limited v Commonwealth Homes and Investment Co Limited (1941) 65 CLR 603 [cited by the Council] is a somewhat complex decision which requires very careful examination. The headnote includes the following: "Where a shareholder in a company, having in fact two independent grounds for rescinding the contract of membership, and being aware of the facts giving rise to one of them but not of his right in point of law to rescind, loses by his conduct the right to rescind on that ground, he is not thereby precluded from rescinding on his subsequently discovering the existence of the other ground. Quore as to the position where, having in fact two grounds for rescission, but being ignorant of one and aware of the other, he elects to affirm with knowledge of his right in law to rescind." 55 The joint judgment made clear that the Court found it unnecessary to discuss the question of what if any, distinctions may exist in cases where a party having in fact two grounds for rescission, decided to affirm, knowing that he was entitled in point of law to so elect. 56 Their Honours [at pages 616-618] made the following observations: "If there are two breaches of condition in a lease, a landlord who, knowing of one of them only, does an act unequivocally recognising the continuance of the lease, is not precluded, on afterwards discovering the other, from re-entering — see, per Parker J in Matthews v Smallwood, [1910] 1 Ch 777 at p 757. Where there are two independent grounds entitling a party to rescind or disaffirm, we do not think that, because a party having knowledge of the facts giving rise to one of them so conducts himself that he must be taken to have affirmed, he therefore is precluded on discovery of the other from rescinding or disaffirming. We are not dealing with a case where there is an actual decision taken to adopt or affirm the contract of membership by a person who knows that he may if he choose avoid it. The plaintiff did not actually know that an election was vested in him by reason of the fact of his failure to pay the full amount of allotment and application money in cash. It is unnecessary to discuss the question what, if any, distinctions may exist in cases where the party, having in fact two grounds for rescission, but being ignorant of one and aware of the other, decides to affirm, knowing that he is entitled in point of law to elect. In such a case the question whether, notwithstanding his election to affirm, afterwards on discovering the second ground he may resile from his former election and rescind, may depend on the reasons for his decision and the influence which full knowledge might have had as a reason for deciding differently . It is enough to say that a party who is ignorant of his right to elect, although he knows of facts which would in law afford a ground for rescission, cannot, because he failed to avail himself in due time of the first ground, be precluded from relying on a second ground of rescission, which he was then unaware of but afterwards discovers. Nor in our opinion will he be precluded by laches or acquiescence. His conduct cannot affect his right to avail himself of the newly-discovered ground. With respect to the 40 shares, however, the position is somewhat different. The plaintiff made no actual election, because he was ignorant that he had a right of rescission. He had reason for knowing the facts which conferred a right of rescission upon him, and over a long period of time he failed to repudiate the shares. It is not shown that he actually grasped the fact that the full number of shares mentioned in the prospectus were not to be allotted, but the terms of the prospectus and the terms of his application considered together and combined with the fact, which he must be taken to have known, that the further shares formed part of the 25,000 shares, provided him with information from which the decisive fact was a clear if not a necessary inference. The decision of the Full court in respect of the 40 shares is based upon the view that the plaintiff could not rely upon his ignorance of the existence and effect of s 226 as an answer to what otherwise would be the legal consequence of his conduct. The doctrine upon which the Court acted is that, as a general rule, in order that a party may be precluded by his conduct from exercising an election, it is not necessary that he should have knowledge of the existence of his right to avoid the transaction, as well as of the facts upon which that right arises. This accords with the opinion of Jordan, C.J, expressed in the course of his judgment in O'Connor v S.P. Bray Ltd, (1936) 36 SR (NSW) 248 at p 263, where the general subject of election is discussed in a very full and informative manner. His Honour said — It has been urged that there must also be knowledge of the legal consequences of the facts and of the legal rights involved; but this is not borne out by the authorities, and the contention is, I think, based upon an attempt to import into ordinary cases of election rules which are peculiar to the equitable doctrine of election. This doctrine is referable to the principle that a person is not permitted both to approbate and to reprobate an instrument. In his book entitled, Waiver Distributed Among the Departments, Election, Estoppel, Contract, Release, at p 72, the late Mr J. S Ewart deals with the subject. He wrote — The necessity for knowledge as an element in election may be treated under the following headings: 1. Knowledge as to the existence of a right to elect. 2. Knowledge as to the happening of the circumstances which warrant the exercise of the right. 3. Knowledge as to the existence of circumstances which would affect the choice. Subject to certain qualifications, we may say that knowledge of all three kinds is a necessary pre-requisite of conclusive election between two estates, but that in the law of contracts, election is irreversible although knowledge of the first and third kinds was absent. But a distinction must be drawn between cases where the party's conduct is unequivocal in its effect and cases where his conduct does not necessarily amount to a waiver, but is merely some evidence that he has in fact elected to affirm . Where rights are exercised, either in virtue of an estate or interest in property, or in virtue of a contract, which would not exist unless the estate, interest or contract endured or remained in force, it may well be that the party exercising them loses the right to determine the estate or interest on breach of condition or the contract for breach of some term going to the root of it, unless he is able to show not merely that he was unaware of the existence of his right, but of the facts amounting to breach of condition or of contract ." [Emphasis added] 57 In my view the distinctions which the joint judgment found it unnecessary to discuss [namely circumstances where a party, having in fact two grounds for rescission, but being ignorant of one and aware of the other, decides to affirm, knowing that he is entitled in point of law to effect], are precisely the distinctions which become necessary to deal with in terms of the issue presently before the Court and raised by the posited facts earlier set out. 58 It is presently necessary on the posited facts to examine whether, notwithstanding the posited election to affirm, the Council [afterwards on discovering the second ground], may resile from its former election and rescind. The answer to this question does here depend on the reasons for the Council's so-called initial decision and the influence which full knowledge might have had as a reason for deciding differently. 59 The events which occurred in the real world did involve the conduct of the Council being unequivocal. This was not a situation in which the conduct of the Council did not necessarily amount to a waiver but was merely some evidence that it had in fact elected to affirm. The Council in the real world exercised rights in virtue of a contract which would not exist unless the contract endured and remained in force. In this regard the evidence included the following: i. by the letter of 27 January 2005 [mis-typed as 2004] the liquidator's solicitors advised the arbitrator [copying the letter to the solicitors for the Council] that the liquidators had instructed that they expected to finalise arrangements for funding within the next 21 days and stated that they would advise the arbitrator; ii. by letter dated 3 March 2005 the solicitors for the Council advised the solicitors for the liquidators that they had noted that four weeks had passed since the last correspondence in which correspondence the advice given had been that funding arrangements would be in place in approximately 3 weeks. They pointed out in the letter that it had been almost a year since the orders for payment of security for costs were made by the Court on 8 March 2004 and stated that they were of the view that more than sufficient time had passed for Austin to arrange any necessary funding. They concluded the letter by advising that unless firm arrangements were in place within 14 days of the date of the letter they would seek their client's instructions to relist the proceedings before the arbitrator to seek appropriate orders or directions. They asked for urgent advice as to the status of the Austin's funding of the proceedings; iii. by letter dated 17 March 2005 the solicitors for the Council wrote to the arbitrator referring to the liquidators letter dated 27 January 2005 and enclosing a copy of their own letter to the liquidator's Solicitor dated 3 March 2005. They advised that up to this date they had not received any response to this communication from the liquidators solicitors and proceeded to request that " this matter be listed for directions before the arbitrator, at the arbitrator's earliest available opportunity " and furnished their senior counsel's available dates; iv. on 31 May 2005 the arbitrator convened an arbitration hearing transcribed as "day 41", the transcript of which includes the following: Mr Faulkner: We asked for the directions hearing, or conference, to be convened today and, as far as we are concerned, it need only be a short event today. It is now a long time since the court stayed Austin's proceedings, and we would like the matter to be finalised – that is, the process from here on to be finalised – soon. We do not know what the position is of Austin, but what we would want to do today is simply to ask you to give us a day during the first half of June, subject to everybody's convenience, but not much longer than that, at which time we would move formally for you to set a date for the arbitration to proceed. As I say, we are uncertain – or we have no idea, actually – what Austin's position will be when we formally make that application, but if you were to grant that application then, it would mean that you would need to set the matter down for whatever is left in the hearing by way of evidence , which I don't recall – or we were very close to reaching the stage of submissions, as I best recall it. The Arbitrator: That's right. Mr Faulkner: Mr Arbitrator, we will put on a motion and an affidavit to formalise it, but we don't want it to go longer – I am not here to be critical of anybody today or in the future, I hope, but it has been our desire, if I can just put it in as neutral terms as possible, this year to bring the matter to conclusion as soon as possible, and so we don't want to delay any further. The Arbitrator: When you say for the matter to proceed, do you mean that your cross-claim will proceed ? Mr Faulkner: That is all that can proceed if it is still stayed. 60 It does seem quite clear that the Counsel was affirming that the arbitration agreement remained on foot, having asked for the matter to be relisted and when it was relisted having foreshadowed making an application to the arbitrator to proceed with the cross claim. All of this was conduct which could only occur if: i. there still was an extant and operative arbitration agreement in respect of which the parties had rights and obligations; ii. there was an arbitrator who remained vested with the authority of the parties to resolve their dispute. 61 The Council would lose its rights to determine the contract for repudiation by way of breach of a term going to the root of it, unless it is able to show not merely that it was unaware of the existence of the right but also of the facts amounting to breach of the condition. On the posited facts it was not unaware of the existence of the crucial material facts which would amount on the case it seeks to pursue, to a breach of the condition, because on those posited facts, by 2006 the Council must on the evidence, be taken to have been well aware: (1) of the extended failure of Austin to provide the security; (2) that previous indications of anticipated provision of the security had not been honoured and must be also taken to have been aware [had it had any rights to accept the conduct of Austin as repudiatory], of those same rights. 62 Standing back from the detail, the environment in which the anticipated estimates of when funding was likely to come forward becomes all important. The relevant context importantly includes: i. the occasion and nature of the material statements; ii. an understanding of the period of time during which a representation may be regarded as remaining operative. 63 As to the period of currency of a particular statement [that is to say that period of time prior to the representation having lapsed or become spent] it is unnecessary to do more than to refer to the examination of authority to be found in Peabody Resources Ltd v Macquarie Generation [unreported, Supreme Court of New South Wales, Einstein J, 19 November 1998, BC9806319] at 229-233]. The principles there set out make clear that a representation may lapse without achieving its intended goal and will in those circumstances lose its significance. Certain representations are such that the representee can be presumed to know, or waives information on the subject: as for example was made clear by Cussen J in Dalgety & Co Ltd v The Australian Mutual Providence Society [1908] VLR 481. 64 Returning to the environment in which the anticipated estimates of when funding was hoped to come forward are concerned, it is clear enough that statements of belief of this kind are not akin to the giving of warranties. Here the statements were made in circumstances not commonly understood as actionable if they turned out to be over optimistic or even to be based upon somewhat doubtful or insubstantial information. The point is that even if viewed in representational terms, the period across which the representations could fairly be regarded as remaining operative [ie of continuing significance] was exceptionally short. The Council's case eschews any examination of the undoubted fact that a reasonable bystander in the position of the Council aware of all of the matters known to the Council, would not conduct himself on the basis of reliance upon stale representations as to the occasion when it was believed that security for funds moneys would be available. The passage of time which passed following the making of the representations/statements mandates the inference which is drawn, namely that the Council in the events which happened and acting reasonably, would have appreciated the obvious: vide that Austin continued to have real difficulties in providing the security funds. Was the purported acceptance void as being unconscionable 65 There was another contention put by Austin as follows: i. the proceedings before the arbitrator had plainly involved considerable time and expense and had advanced to a stage where the proceedings were close to finality; ii. the Council was plainly aware that Austin was devoting time and incurring expense in seeking to obtain funds that would permit the ordered security to be provided; iii. in those circumstances, the purported acceptance, after the security had been provided and without any forewarning of it, was unconscionable. 66 This contention comes close to the proposition that there is an absolute rule of law which prevents a party taking advantage of his own wrong, whatever the terms of the contract. Such a proposition received short consideration in Alghussein Establishment v Eton College [1991] 1 All ER 267 [at 274] in the speech delivered for their Lordships by Lord Jauncey of Tullichettle who found it unnecessary to deal with the contention, adding: "For my part, I have no doubt that the weight of authority favours the view that, in general, the principal is embodied in a room of construction rather than in an absolute rule of law. However, that is not to say that there cannot be situations such as self-induced frustration,… where an absolute rule exists." 67 Likewise it does not seem to me necessary for the above-described contention to be treated with in the present circumstances. The limits of the reach of unconscionability remain of jurisprudential concern, the general approach being that such limits cannot be proscribed but will be treated with depending upon the facts of the particular situation. The misstatement case 68 In any event, given the amount of Court time taken in litigating the facts said to support the repudiation case, the convenient course is to examine the issue on it's merits with care. I proceed accordingly. 69 The very close cross-examination conducted by Mr Hughes QC, leading counsel appearing for the Council, seeking to establish that Austin's assertions concerning the availability of finance [after Bergin J ordered security] had no factual basis was put inter alia as follows: Relevant statement i. On 18 May 2004, the defendant – by its counsel – stated to the arbitrator during a hearing: "we presently believe that funding will be obtained shortly for the provision of an amount of the security and the arbitration will progress…" Contention ii. There was no factual basis for the belief attributed to the defendant by its counsel. The statement was untrue. iii. At this time, no potential funder had indicated more than an expression of interest in the possibility of funding the arbitration. Negotiations were still embryonic. Before this statement was made, two potential funders had written expressing grave concerns about funding the claim. iv. The making of the statement constituted a lack of due diligence on the part of the defendant in the taking of steps necessary to have the dispute dealt with in the arbitration proceedings, in that the exercise of due diligence would have required the defendant to state frankly to the arbitrator and to the plaintiff that there was no present, realistic prospect of obtaining funding to enable the defendant to provide security for costs. v. Such a statement would have provided the plaintiff with an opportunity to terminate the arbitration by accepting the defendant's repudiation or seeking a permanent stay of the arbitration. Relevant statement vi. On 1 December 2004 the defendant, by its solicitors, stated that the liquidators believed that they would be in a position to advise if funding could be obtained by the end of January 2005 . vii. On 27 January 2005 those solicitors wrote to the plaintiff's solicitors stating: "The liquidators have instructed us that they expect to finalise arrangements for funding within the next twenty- one days." Contention viii. There was no basis for either of these claims because no potential funder had committed itself to funding the claim. ix. By March 2005, the liquidator had concluded that the defendant would be unlikely to obtain funding. General overall contention 70 The general overall contention put by the Council was that the statements made on 18 May 2004, 1 December 2004 and 27 January 2005: i. constituted grave and distinct breaches of the defendant's obligation to act with due diligence in having the dispute dealt with in the arbitration proceedings; ii. were made by the defendant on serious occasions: the first to the arbitrator and the remainder in inter partes communications; iii. due diligence entailed the exercise of care in formulating statements regarding serious matters concerning the arbitration; iv. the untrue statements made without any disclosure of the true position about litigation funding prevented the plaintiff from taking steps in and in relation to the arbitration, which would have been open to the plaintiff had it known the truth; v. the defendant appreciated that such steps were open to the plaintiff. 71 The findings do not accept that any of the above described statements when read in context constituted a lack of due diligence on the part of the defendant in the taking of steps necessary to have the dispute dealt with in the arbitration proceedings. 72 With the benefit of hindsight it is fairly simple to attack [as made without any factual basis], indications to the arbitrator and/or to the Council that funding inquiries afoot were anticipated to have particular results within particular timeframes. It is particularly important to note that each alleged representation was a statement of belief/expectation as to an anticipated fruition of complex and delicate negotiations by a liquidator requiring input from a number of potential funders and committee members as well as requiring close attention to internal recoveries and the possibility of such in relation to preference claims. The Council's case was not put suggesting that Mr Hutchison did not have the beliefs to which he testified but was limited to the proposition that there was no factual basis for the relevant beliefs nor proper foundation for the statements made. No implied representation 73 At threshold level there was no implied representation that the relevant belief had reasonable grounds. 74 Whether a representation of a belief implicitly also conveys the existence of reasonable grounds for that belief depends upon the context :see GIO Australia Holdings Ltd v AMP Insurance Investment Holdings Pty Ltd and Another (1998) 29 ACSR 584, 615. See also Economides v Commercial Assurance Co plc [1998] QB 587. 75 Here, the statements were not made in circumstances in which the liquidator knew or ought to have known that the Council was likely to reasonably rely upon them for the purposes of determining what it would do or not do and that it, if it did so rely, the Council would or might suffer serious detriment if the belief had no reasonable basis. There was, therefore, no implied representation that the liquidator's belief had reasonable grounds. 76 There must be many statements made in the course of progressing an arbitration that, although made bona fide, might be regarded by the arbitrator or the other parties to the arbitration (with the benefit of the knowledge possessed by the representor) as not having had a reasonable foundation. For example, representations that statements of evidence can be put on by a particular date might be thought (if the full extent of the information known to a representor was disclosed) to have been based upon inadequate inquiry or inadequate assessment of the scale of the undertaking required. 77 For reasons that are set out later in this judgment, during the period between 18 May 2004 and 1 December 2004 any representational quality which may have attached to the 18 May 2004 statement had been spent. Likewise between 27 January 2005 and the provision of the security in 2006, any representational quality which may have attached to the 1 December 2004 and 27 January 2005 statements had been spent. 18 May 2004 78 In so far as it may be necessary to make findings in relation what was established by the more detailed evidence, without necessarily being exhaustive the Court is satisfied [in relation to the position as it was on 18 May 2004] with each of the following matters as having been established: i. Mr Hutchison gave reliable evidence [T 337:10] that in his experience, generally, the periods of time taken by litigation funders to respond to proposals for litigation funding generally vary. His evidence was that much depended on the particular circumstances of the funder as well as on the issue they are being asked to fund [T 338:50]; ii. Mr Hutchison gave reliable evidence that a selective approach had been taken by himself [and his staff] in seeking potential litigation funders to fund the Auburn arbitration as explained at [T 333:15]. This included making reference to the liquidators interest in obtaining funding in circulars to creditors, of whom there were some 1500. He had believed that this was quite a significant base on which to draw by way of persons who may know of litigation funders and bring such to the attention of the liquidators [T 333]; iii. he also gave reliable evidence that that there was an obvious significance and hence particular interest in avoiding speculative parties who may or may not have a genuine interest in providing funds; iv. the evidence established that as at 18 May 2004: a) the liquidator had received an expression of interest in funding the Auburn Council arbitration proceedings and/or other Austin proceedings from Litigation Lending Services; b) the liquidator had received an expression of interest in partial funding for the potential preference actions available to Austin from IMF (Australia) Limited which actions, if successful, might provide partial funding for the Auburn Council arbitration proceedings; and c) Australian Surety Corporation Pty Limited, Westpac Banking Corporation and Smorgon ARC had expressed potential interest in providing funds to enable Austin to comply with the order for security for costs. [Notably: Mr Bob Reynolds, a senior manager with Westpac, had stated [in a meeting on or about 22 April 2004 with Mr Hutchison] words to the effect that if funding could not be obtained from other sources for the Auburn arbitration, Westpac would be open to having further discussions about the potential of the bank providing funding for the arbitration [T 210:40] Mr Hutchison stated that Mr Reynold's words provided a factual basis for his belief, as liquidator, that funding would shortly be provided] v. it was however true that none of these entities who had been approached had actually committed to provision of funding vi. the evidence established that: a) the statement made by Mr Simpkins [as counsel for Austin] at the arbitration hearing on 18 May 2004, '[we] presently believe that funding will be obtained shortly for the provision of an amount of the security' was based on the instruction given by Ms Janna Robertson to Mr Simpkins. Ms Janna Robertson herself had been instructed by Mr Hutchison to this effect [T 190:15]; b) Mr Hutchison took steps to acquaint himself of the factual position relating to the prospects of obtaining funding for the Auburn arbitration, prior to giving the above instruction; c) such steps involved several inquiries, including meetings and discussions between Mr Hutchison and Ms Silvers from Litigation Lending Services [T 193:50] as well as meetings and discussions with Mr Hutchison's own staff in relation to IMF. Correspondence to IMF requesting or seeking signed confidentiality letters had been undertaken [T 194:15]. Discussions were also had with creditors [T 194:35] as well as committee members in relation to potential funding, including GMG, ARPIC, Australian Surety and Himex [T 194:15]; d) as at 18 May 2004, Mr Hutchison was unaware that IMF had declined to fund the Auburn Council arbitration [T 194:52] and had regarded them as a possible funder. Mr Hutchison gave evidence that the letter from IMF dated 17 May 2004 [Exhibit P3] that stated that IMF was not prepared to provide funding to Austin for the Auburn Council arbitration did not come to his attention nor any of his staff who were connected with the arbitration at or before the 18 May 2004 hearing [T 201:20]. vii. The evidence included that: a) with reference to Australian Surety, Mr Hutchison was aware in or about May 2004, that Mr Coleman (the principal of Australian Surety) was referring the proposal for funding to his reinsurers that were situated overseas and needed first to be consulted and provided with information; b) Mr Coleman had indicated to Mr Hutchison that he did not expect an instant response given by those overseas parties [T 339:35]; c) in the meantime, Mr Hutchison pursued another solution to the 'funding problem' by trying to gain funding from other recoveries in the estate of Austin; d) at all times, Mr Hutchison pressed his staff to resolve the funding arrangement promptly [T 296-297]. 79 By reason of the analysis to be found in these reasons as it is clear that the allegations concerning the so-called representations of 1 December 2004 and 27 January 2005 had been spent prior to the end of 2005 and certainly prior to the purported acceptance by the Council of a repudiation, it becomes strictly unnecessary to examine the detailed contention that there was no basis whatever for the making of these so-called representations. Suffice it to say that: i. the finding is that Litigation Lending Services had stated at various times in the period from December 2000 for up to January 2005 that it was likely to provide funding for the arbitration; ii. at all times the representations made on behalf of the liquidator were only representations of a bona fide belief in a situation in which certainty was extraordinarily difficult to achieve bearing in mind: a) the number of contingencies affecting the procuring of funding; b) the fact that the liquidator had to keep an open mind in protecting the interests of diverse creditors; c) the fact that the liquidator also had to be prepared to consult with a number of different interests. The 1 December 2004 statement i. Mr Hutchison's understanding at 1 December 2004 was that before a commitment to provide funding was to be given by Litigation Lending Services, the potential funder required a report from Henry Davis York [T 266:45] as to the viability of a possible insolvent trading claim; ii. under cross-examination, Mr Hutchison referred to an implied (later said to be express) suggestion by Mr Crawford that the due diligence on the Auburn arbitration and the insolvent trading claim could be completed before the end of January 2005. Whilst the cross examiner dwelt on the suggested inconsistency in whether the suggestion was implicit or express, the witness was not a lawyer and it is common ground that it was not being suggested to the Court that Mr Hutchison was lying or did not have the beliefs to which he testified, but only that there was no factual basis for the relevant beliefs [Transcript 429]; iii. Mr Hutchison's instruction to Mr Crawford to carry out the due diligence task was in November 2004 [T 343:20]; iv. the court accepts the evidence given by Mr Hutchison as to having in one way or another imparted the urgency of the report to Mr Crawford, [who on the balance of probabilities would in any event have understood the urgent nature of the task]: hence it was not unreasonable for Mr Hutchison to believe that he would be "in a position to advise if funding could be obtained by end January 2005"; v. Mr Hutchison also did not consider Mr Crawford's task as complicated, but instead simple [T 345:30]. The 27 January 2005 statement i. Mr Hutchison's expectation to "finalise arrangements for funding within the next 21 days" was based on the (qualified) verbal commitment to fund given by Ms Silvers from Litigation Lending Services prior to 27 January 2005. [The date of this verbal 'commitment' was 9 December 2004]; ii. this commitment was subject to due diligence, and under cross-examination Mr Hutchison agreed this to be a very substantial condition, but disagreed that the qualification negated a verbal commitment to fund [T 224:15]; iii. at the time of the 27 January 2005 statement, Mr Hutchison clarified that the due diligence was focused on the insolvent trading claim, but not the due diligence on the Auburn arbitration [T 289:10]. Due diligence to be carried out on the potential to provide funding required both aspects of the due diligence to be completed; iv. whilst these matters cannot be weighed in 'coffee spoons' it has to be said that the 27 January statement was somewhat optimistic as is clearly borne out with the benefit of hindsight; v. Mr Hutchison was satisfied through February 2005 of Mr Crawford's progress with the due diligence task [T 288:47], although the due diligence was not actually completed until May 2005 according to Mr Hutchison's recollection [T 288:25]; vi. clearly enough as February 2005 wore on it became apparent to Mr Hutchison that the estimate given by his solicitors in the letter of 27 January 2005 was unlikely to be achieved and the passage of time before which the security funds were ultimately provided makes clear that considerable further effort was required before all of the logistics of what had to be put into place were bedded down. Authorities on undue delay 80 It seems next appropriate to examine some of the authorities which have dealt with undue delay in order to set the context for the more detailed examination of s46 (2) the instant context. 81 NAIS v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 77 is a relatively recent decision in the context of an application by the appellants to the respondent for protection visas which took many years for the tribunal to reach its decision which came before six judges of the High Court. Notwithstanding that NAIS involved a very different context to the present and was principally concerned with undue delays in decision-making where the majority decision invalidated the tribunals decision, a number of the reasons for decision expressed by the judges are pertinent for present examination. 82 The judgments generally accept that undue delay in decision-making whether by courts or administrative bodies is always to be deplored. The judgment of the Chief Justice makes the point that the circumstances in which delay, of itself, will vitiate proceedings or a decision are rare: (at [5]). In their joint judgment, Callinan and Heydon JJ (at [161]) also made the point that nothing, apart from bias or unfairness, was more likely to bring public administration and the law into disrepute than inexplicable prolonged delay in the disposition of matters. As they went on to observe (at [161]): "Delay of that kind immediately and inevitably raises questions. How earnest was the consideration given to the matter? Did the maker of the decision truly apply his or her mind to it? Did he or she find it too hard? Was the decision maker distracted? Was the decision in the end made out of desperation, or a realisation that it had at last to be given, regardless of its correctness or otherwise?" 83 Importantly the Chief Justice observed (at [6]) that the context in which delay occurs will affect any legal consequences that may flow [having observed (at [5]) that the remedy is required to be tailored to the circumstances and justice of the case and having adverted to the fact that in the adversarial litigation, neither party may be at fault and remedies available where delay has caused problems can sometimes be discretionary]. 84 The Chief Justice (at [10]) made the point that in the context then before the High Court the appellants had to demonstrate that the procedure was flawed; and flawed in a manner that was likely to affect the tribunal's capacity to make a proper assessment of the sincerity and reliability of the appellants. He observed that the procedures required by the Act there under consideration were designed to give the appellants a reasonable opportunity to state their claims and to have those claims competently evaluated. 85 Kirby J referred (at [79]) to the decision of the Supreme Court of Canada by Bastarache J in Blencoe v British Columbia (Human Rights Commission) [2000] 2 SCR 307 in a case involving delay on the part of an administrative body which, although finding that delay per se did not occasion an abuse of process, held that proof of unacceptable delay that caused relevant prejudice could taint the proceedings: "The determination of whether a delay has become inordinate depends on the nature of the case and its complexity, the facts and issues, the purpose and nature of the proceedings, whether the respondent contributed to the delay or waived the delay, and other circumstances of the case [PO [It] is not based on the length of the delay alone, but on contextual factors, including the nature of the various rights at stake in the proceedings…" [at 376-7]. 86 Kirby J [at 81] cited with approval the decision in Dyer (Procurator Fiscal, Linlinthgow) v Watson [2004] 1 AC 379 [also cited by Gummow J], and where Lord Bingam of Cornhill had made the point that if the period which had elapsed was one which on its face gave ground for real concern, the court considering the legal consequences of delay required to inquire into the particular facts and circumstances of the case [the context there being the need to decide whether the "reasonable time" requirement in Article 6 (1) of the European Convention had been breached]. Later [at 84] Kirby J made the important observation that one of the reasons why delay in reaching and providing a decision may not, of itself, entitle a party to relief, is the recognition of the infinite variety of cases and the differing powers and capacities of those who decide them. 87 Reference was made by the parties in the present hearing to a line of cases stemming from Goose v Wilson Sandford & Co [1998] TLR 85 a decision of the English Court of Appeal where Gibson LJ in delivering the judgment of the court said inter alia (at 86): "The judge's tardiness in completing his judicial task denied justice to the winning party during the period of delay. It also undermined the loser's confidence in the correctness of the decision when it was eventually delivered. Compelling parties to await judgment for an indefinitely extended period prolonged, and probably increased, the stress and anxiety inevitably caused by litigation, and weakened public confidence in the whole judicial process. … Because of the delay it was incumbent on their Lordships to look with especial care at any finding of fact which was now challenged. In ordinary circumstances where there was a conflict of evidence a judge who had seen and heard the witnesses had an advantage denied to an appellate court, which was likely to prove decisive on appeal unless it could be shown that he failed to use or misused his advantage. The very fact of the huge delay in itself weakened the judge's advantage and that consideration had to be taken into account when reviewing material which was before the judge. In a case as complex as this it was not uncommon for a judge to form an initial impression of the likely result at the end of the evidence, but when he came to study the evidence, both oral and written, and the submissions with greater care, he would then go back to consider the effect witnesses made on him when they gave evidence about matters which were now troubling him. At a distance of 20 months [the judge] denied himself the opportunity of making that further check in any meaningful way." 88 In Monie v Commonwealth of Australia (2005) 63 NSWLR 729, 730 Giles JA said (at paragraphs [2]-[3]): [2] His Honour (Hunt A-JA) describes (at 741 [43] infra) the approach be taken on appeal where there is delay in giving judgment, derived from cases the most recent of which is Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17. The approach is reflected in his Honour's subsequent discussion of the reasons of Dowd J. [3] The thrust of the approach is that extensive delay may cause an appellant court to take a more stringent approach in determining whether error has been demonstrated in the trial judge's findings or whether the trial judge's reasons are adequate. In Krivoshev v Royal Society for the Prevention of Cruelty to Animals Inc [2005] NSWCA 76, in which judgment was delivered after the conclusion of argument in the present case, I questioned (at [123]-[124]) whether delay was more correctly explanatory of deficiency otherwise found in the decision-making or expression of the decision. Referring to Expectation Pty Ltd v PRD Realty Pty Ltd , I said:- [123] Their Honours referred at [75]-[76] to the passing of time 'that alters the normal approach of an appellate court', described as 'operative delay'. Delay is of course undesirable, and is contrary to the public interest in the prompt resolution of disputes. But delay, however undesirable, does not itself mean that on appeal a different result is substituted or a new trial ordered – there would be no sense in causing further delay by a new trial. What must be considered is the effect of the passage of time on the quality of the decision-making, including the perception of an effect. The label of delay adds little. [124] There are difficulties in determining that the passage of time is operative delay. A reserved judgment is commonly written with some lapse of time and the intervention of other matters. The assumption that the passage of ten months is destructive of recollection and understanding where the passage of (say) two months is not be justified; and with the advantage of transcript, contemporaneous documents and the capacity of a trained mind, why is the passage of ten months, albeit undesirable, necessarily destructive at all? There is not a factual enquiry, and judges not rated according to retentive capacity and application to the evidence and issues. On one view, delay is a possible explanation for deficiency in decision-making or expression of the decision, the deficiency being otherwise found, and what matters is the quality of the decision-making assessed by regard to the issues, the evidence and the judge's reasons. [4] It was not appropriate in Krivoshev v Royal Society for the Prevention of Cruelty to Animals to take those matters further, and it is not necessary in this case to do so… 89 In the same case Hunt A-JA said (at paragraph [43]) – after referring to authority such as Goose v Wilson Sandford & Co [1998] TLR 85 – that where there is a significant delay between seeing and hearing witnesses a trial judge ought to give specific reasons for accepting or rejecting the evidence of those witnesses whose evidence plays an important part in the factual finding made. His Honour made it clear that if inadequate reasons are given, a judgment given after such delay may be open to a successful attack on appeal. His Honour continued (at paragraph [44] and [45]), saying: [44] It must, however, be emphasised that delay between taking evidence and the delivery of judgment does not, in itself, justify upholding an appeal against a judgment given. Error must still be established on the part of the trial judge warranting either a reversal of the judgment or the grant of a new trial. Delay may assist an appellant in establishing such error because, as the approach identified by the Full Federal Court demonstrates, the inference will more readily be drawn that a trial judge's failure to deal in a significantly delayed judgment with particular matters on which the appellant relied in contradiction of the findings made in that judgment resulted from those matters being overlooked by the judge – either because of the time which has passed or because of the pressure on the judge in the end to complete the judgment. In Boodhoo v Attorney General of Trinidad and Tobago [2004] 1 WLR 1689 at 1694[11], the Privy Council acknowledged that the delay in giving the decision may adversely affect its quality to such an extent that it cannot be allowed to stand. This is what must be shown in order to demonstrate error resulting from delay which warrants either a reversal or a new trial. That is what I understand the judgment in Expectation Pty Ltd v PRD Realty Pty Ltd (at [69] et seq) to be saying. [45] Giles JA has quoted in his concurring judgment what he said concerning the Expectation decision in another decision of this Court, differently constituted, delivered yesterday: Krivoshev v Royal Society for the Prevention of Cruelty to Animals [2005] NSWCA 76. The comments he made there were obiter, and he concedes it is not appropriate to take it any further in the present case … 90 In Sea Containers Limited v ICT Pty Limited [2006] NSWSC 134, Rein AJ held that an arbitral award delivered 19 months after submissions (not evidence) was not procedurally unfair, regarding it as of significance that there was a detailed and fair consideration of the issues, determined by inferences from undisputed facts and not shown to have ignored or overlooked significant evidence (see [77]-[81]). His Honour's decision was upheld on appeal: Sea Containers Limited v ICT Pty Limited [2006] NSWCA 327. 91 The Court of Appeal has recently given further consideration to delays in giving judgment in Carr v Fischer [2006] NSWCA 313. Notwithstanding a delay of 21 months after submission and the fact that it included credit findings (see [63]), the judgment was not impeached. 92 Returning to the present proceedings, as will appear from what follows, the evidence satisfies the Court that the arbitration may now be continued. There is an experienced arbitrator. None of the difficulties put forward by the Council as suggested insuperable barriers to the arbitration being completed and the arbitrator bringing down whatever award is appropriate, are of substance. Liverpool City Council v Casbee Pty Limited 93 In reaching the findings set out below, the analysis by Nicholas J in Liverpool City Council v Casbee Pty Limited [2005] NSWSC 590 has been followed. There his Honour did not regard the presumptive prejudice that would follow on from any delay as sufficient for the purposes of s46. His Honour said: [47] For Council it was submitted that the delay will give rise to a substantial risk that it would not be possible to have a fair trial of the issues or is such as is likely to cause it serious prejudice in the arbitration proceedings. It was submitted that delay gives rise to a presumption of prejudice in that it is likely to lead to the deterioration in quality of the evidence available to the parties for the fair trial of the issues (cf. Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at page 551 per McHugh J). It was also put that the delay was likely to be prejudicial to Council by reason of its inability to call some former employees as witnesses. [48] The effect of the delay is to be determined objectively by reference to the nature of the issues in the arbitration proceedings , and to the ability of Council to advance its case and to meet that of its opponent. It is important to keep in mind the requirement of the legislature that the degree of risk to be established is substantial, and the degree of prejudice is serious. In this context, it is relevant to refer to the passage from the dissenting judgment of Mahoney, JA in Gill v Walton (1991) 25 NSWLR 190 at page 212: 'As was indicated in Jago ( Jago v District Court of New South Wales (1989) 168 CLR 23), it is not every disadvantage accruing to a party which will constitute for this purpose unacceptable injustice. Records may be lost, witnesses may die, and recollections may fade in ordinary cases. And these are matters which, as I have indicated, a tribunal will be expected to take into account in any trial or proceeding. It is only where the disadvantages which have accrued are of such an order that the injustice to the party would be of such dimensions as to be, notwithstanding such matters, unacceptable. In Jago ( at 34, 60, 78): cf. (at 53) per Brennan J; this situation was described by terms such as 'special' and 'exceptional'. It is necessary that the doctors establish such a case. [49] Thus more will be required than a demonstration that the delay may result in less than perfect justice in the proceedings. [50] In order to prove either a substantial risk of impossibility of a fair trial, or the likelihood of serious prejudice, it would ordinarily be necessary to demonstrate the disadvantage caused by the delay, for example, the unavailability of the testimony of a potential witness, or the loss of documents, or that sources of information had dried up. Accordingly, in my opinion in this case it is necessary for Council to show that the likely consequence of delay is to deprive it of the opportunity of a fair trial, or that it was so seriously prejudiced that justice would not be done in the proceedings. Thus the question posed under s 46(3)(b) requires an evaluation of the evidence of the extent to which the delay is likely to disadvantage, or has in fact disadvantaged, Council. (See, e.g., the analysis and findings of McHugh, JA in Herron v McGregor (1986) 6 NSWLR 246 at pages 265-266). [Emphasis added] Section 46 (2) 94 Even if the findings had been that the Council had made good its case that: i. Austin had breached any duty stipulated for in s 46 (1) to exercise due diligence in the taking of steps necessary to have the dispute referred to arbitration and dealt with in the arbitration proceedings; and/or ii. there had been undue delay by Austin in the taking of such steps; iii. the delay had been proven to be inordinate and inexcusable; no order could be made under s46 (2) unless the Court was satisfied that i. the delay will give rise to a substantial risk of it not being possible to have a fair trial of the issues in the arbitration proceedings [ the first limb of the disjunctive in s 46(3) (b) ]; or ii. the delay is such as is likely to cause or to have caused serious prejudice to the other party to the arbitration proceedings [ the second limb of the disjunctive in s 46(3) (b) ]. As to the first limb of the disjunctive 95 In my view the evidence simply does not establish this limb as made out. Some of the reasons have already been referred to. Others are as immediately follow [and are later supplemented lower in the judgment]: i. the arbitration like many other pieces of complex litigation may be resolved by a careful examination of the documentary evidence read in the light of the oral evidence as generally explained in final address; ii. it is the common experience of judicial officers, arbitrators and others having occasion to preside over substantial disputes that ultimately once the issues have been clearly defined and each party has been given an opportunity to carefully put their case the training of the person presiding enables a just result to be produced if the necessary industry and application comes forward from the presiding officer; iii. it is the common experience of judicial officers, arbitrators and others having occasion to preside over substantial disputes that for all the heat and emotion and innumerable folders of evidence placed before the relevant tribunal, ultimately there are only a limited number of matters which truly bear on the vital substantive issues thrown up in the litigation; iv. It would be wrong to in any fashion downplay the ability and experience of the Mr Bailey SC, who is the present arbitrator Notably the parties have reached the following express agreement [Exhibit D 12] during the present litigation in relation to his experience: "The parties agree that Mr Ian Bailey SC, having presided over and appeared in many building and construction arbitrations over an extended period of time, is very experienced in the field of the arbitration of disputes." [cf Mr Bailey's extensive CV Exhibit D8] v. notwithstanding the extent to which the parties to these proceedings were at issue with respect to whether and if so to what extent, any vital issues of credit required to be determined by the arbitrator [the parties disagreement extending to matters such as the relevance of much of the cross-examination to the issues pleaded], following a very careful and extended examination of the pleadings and an attempt to follow a number of matters through the transcript, I have come to the clear view that: a) the nature of the issues, b) the manner in which they had been presented, c) the ability of the arbitrator to call for clarification as necessary, d) the ability of the arbitrator to call for submissions on whatever matters may trouble the arbitrator arising by reason of the passage of time; e) and very importantly the experience of the arbitrator; clearly combine to mandate a rejection of the proposition that a continuance of the arbitration in light of the delays which have taken place will give rise to a substantial risk of it not being possible to have a fair trial of the issues in the arbitration proceedings. [The reasons below make observations in relation to the pleadings] As to the second limb of the disjunctive 96 Essentially the very same matters to my mind clearly combine to mandate a rejection of the proposition that the delay which has been experienced is such as is likely to cause or to have caused serious prejudice to the Council. Returning to the pleadings before the arbitrator 97 It is likely inappropriate for the Court to presently do otherwise than to make some observations in relation to certain aspects of the pleadings before the arbitrator: and this because the arbitration remains live and the arbitrator may himself be required to construe the pleadings. 98 The following short overview of essential matters should suffice for present purposes: i. the further amended points of claim [Court book 2020] commence [at paragraph 3] with a pleading of the material contract bearing date 22 March 1999: this paragraph pleads and particularises a written contract; ii. each of the express terms of the contract relied upon by Austin is pleaded in a way that relies upon the terms of the documents comprising the contract: see paragraphs 3A, 4, 5, 6, 8, 10, 11, 14, 15, 16, 18, 22, 29, 31, 32 and 35; iii. later in the further amended points of claim one finds a reliance upon the implied terms of these are claimed primarily to arise as a matter of law : cf paragraphs 36, 37, 38, 38A and 38B; iv. paragraph 3A pleads that the contract contained the promise of a guaranteed maximum price based upon the then current drawings and specifications with a promise to reduce that guaranteed maximum price only if particular conditions precedent or alternatively particular alleged terms said to be conditions precedent, were fulfilled. These particular alleged terms are set out in sub paragraphs (a), (b), (c) and (d). a) Sub paragraph (a) alleges as a term that the parties would "work closely together" in relation to formulating and implementing design modifications to reduce the scope of work; b) Sub paragraph (b) alleges as a term that the design modifications would only be finalised by the Council's consultants in conjunction and by agreement with Austin; c) Sub paragraph (c) alleges as a term that the Council would not enter into trade contract for the project without the prior agreement of Austin; d) Sub paragraph (d) alleges that the Council would complete the design development by 4 June 1999. v. the particulars to paragraph 3A of the further amended points of claim are as follow: I Austin relies upon the whole of the Contract but especially annexures A and C and special condition 23.1; II Austin relies upon the express representations by the Council at the meeting on 11 February 1999 [those attending the meeting are identified] that the design changes would be directed by the Council and made within 12 weeks; vi. it appears however to be apparent from the written terms of the contract which are also particularised that whether or not any such express representations were made on the 11 February 1999 is arguably immaterial since each of the conditions precedent are, in any event, established by the written terms; vii. Special condition 23.1 (CB 1/47) provided:- 23.1 Guaranteed Maximum Price The Guarantee Maximum Price shall be $16,900,000 (sixteen million nine hundred thousand dollars) as set out in Annexure A. Council requires that the total cost of the project not exceed $16,900,000 and Austin undertakes to deliver the project for that sum provided that the design is modified and finalised by Council's Consultants (in conjunction with Austin) to match Council's total Construction budget sum, all as set out in Annexure A (Austin's letter of 10 February 1999, including attachments). viii. Annexure C was a construction programme (CB 1/98). Item 6 was described as 'design development' and was shown as being complete by 4 June 1999; ix. Annexure A was Austin's letter to the Council dated 10 February 1999 (CB pages 66-67). After identifying modifications that would need to be undertaken, the letter stated (at CB, page 68):- The implementation of these modifications to meet targeted cost budgets will necessitate all project team workers working closely together, with all trade contracts to be agreed by both the Principal and Austin. x. in consequence it is arguable that the written contract, accordingly, supports each of the pleaded conditions precedent in paragraph 3A of the Further Amended Points of Claim, those conditions precedent being:- (i) that Auburn and its advisers would 'work closely together' with Austin in relation to formulating and implementing design modifications to reduce the scope of work from $18.65 million cost for the current design to the targeted cost budget of $16.9 million; (ii) that the said design modifications would only be finalised by Auburn's consultants in conjunction and by agreement with Austin; (iii) that Auburn would not enter into trade contracts for the project without the prior agreement of Austin; (iv) that Auburn would complete the design development by 4 June 1999; xi. in those circumstances the contention pursued by the Council before this Court was that whilst it is true that the particulars provided for paragraph 3A of the Further Amended Points of Claim refer to a meeting held on 11 February 1999, a reference to that meeting is in reality an unnecessary flourish . This is said to be apparent from a careful reading of the entirety of the Further Amended Points of Claim itself; xii. the particulars which refer to the meeting held on 11 February 1999 state that the reliance upon it is for the representation by Auburn at such meeting that design changes would be directed by Auburn and made within 12 weeks; xiii. it is presently unnecessary to reach any decision on whether the reference to the meeting of 11 February in 1999 is in reality an unnecessary flourish as this is a matter which will have to be determined by the arbitrator; xiv. whether whatever differences there may be between Mr Gervay and Mr Brownley about what was said on 11th February 1999 are peripheral to any proper resolution of the contractual claim or important to any such resolution, must be a matter for the arbitrator; xv. paragraph 3B of the further amended points of claim is then a pleading that the alleged conditions precedent were not fulfilled for a number of reasons such as, for example, that the Council and its advisers did not work closely with Austin for the purposes of achieving design modifications; xvi. it is urged by the Council upon this Court that what work was done in terms of matters such as modifying design is likely to be determined by communications about what were the modifications. However it is of course quite possible that evidence on the issue could extend outside the documentary evidence; xvii. paragraph 3 C of the same further amended points of claim is a consequential paragraph flowing from the alleged failure to fulfill conditions precedent; xviii. the topic of variations is dealt with in paragraph 14 et seq being an issue which as the arbitration had progressed, was being dealt with by the arbitrator by conclaving and by consultation with content experts. The same was true of cost savings. There were delay experts with which the arbitrator dealing with by conclaving with a view to forming a view about whether there was appropriate case for delay damages or liquidated damages; xix. turning to the defence it appears that whilst it raised a conventional estoppel to the effect that the GMP was $16.9m (paragraphs 3C to 3H), this was based on documentary representations; xx. in any event, to the extent that the conventional estoppel raised credit issues, these were the same as those raised in the Cross-claim which pleaded a Trade Practice Claim (at paragraphs 39 to 47). The representations pleaded were all documentary (paragraphs 43A to 43F), and were broadly to the effect that the GMP would not be exceeded. The credit issue was essentially the assertion that the Council had acted in reliance upon whatever it was claimed had been represented in documents (see paragraph 43J); xxi. it suffices with respect to the cross claim to note that in so far as it includes claims made pursuant to the Trade Practices and Fair Trading Acts the alleged representations are said to arise out of documents or out of conversations which are not disputed or out of other communications. 99 This brief overview and my own more careful study and analysis of the central issues thrown up by the pleadings and of the matters being litigated, although making it clear that there certainly are areas in respect of which credit findings [to a lesser or more significant extent], are likely to figure, is not suggestive of any insuperable difficulties which should be faced by the arbitrator in dealing with these as with all issues. Certainly it would appear that as with many contract cases which commonly include litigation of trade practices claims, estoppels and of course alleged implied terms, ascertaining what were the terms of the contract, when if ever they were varied and similar issues, would likely heavily inform the ultimate decision. 100 Bearing in mind the extraordinarily detailed cross-contentions put to this Court in final address as to whether or not, and if so to what extent, the Council has demonstrated [by reference to the evidence before the arbitrator as well as the close examination of the pleadings] that demeanour and credit is of importance to the issues to be determined in the arbitration, it has to be said that my own conclusion is that: i. the preponderance of the issues seem to clearly rest upon documentary material; ii. there are some issues which fall for determination and may be affected by oral evidence; iii. the cross examinations conducted before the arbitrator very often involved questions going to the content of documents but naturally from time to time, dealt with matters suggestive that they were not necessarily totally confined to a simply documentary case. 101 It should be recalled that such difficulties as may arise in resolving the estoppel/representation issue because of delay is the product of both the failure of the main claim to proceed and the failure of the cross-claim to proceed. 102 Finally it should not be forgotten that the arbitrator delivered an interim award on a number of matters at a time when the evidence was fresh in his mind (CB 2/508-512). Additional consideration of the suggested difficulties 103 Without necessarily being exhaustive the suggested difficulties centrally included the following: a) the advantage the arbitrator once had of observing the demeanour of the witnesses as they gave evidence has dissipated due to the significant period of time that has elapsed since the arbitrations were stayed; b) the arbitrator will have difficulty recalling all relevant matters from the arbitration, whether they arise from documents or not – notes from the arbitration not being able to record all such matters; c) aspects of the evidence [relating to the curtain wall] were not transcribed, including: i. the evidence of Mr Gervay who gave what was called "off the record" evidence of what was built; and ii. the evidence of Mr Bagga, an important witness of the plaintiff; d) since the stay of the arbitration proceedings, the plaintiff has lost access to Mr Bagga; e) oral evidence was not recorded during the on site defects inspection on 24 October 2002; it being unlikely that such evidence can be recalled with any accuracy; f) a large number of defects the subject of the plaintiff's claim in the arbitration have since been rectified; g) the parties will have to incur heavy costs in an attempt to regain familiarity with the proceedings; and h) more generally, the advantages that the arbitrator could gain from drawing on the "feeling" of a case which the transcript cannot record as well as the advantage of viewing the evidence as a whole [while it is all fresh in the mind] has been lost; i) similarly, the ability of the plaintiff's lawyers to address on the issues has been impaired since they have lost the same advantages that the arbitrator has now lost. 104 As counsel for Austin has submitted: i. The fact of delay establishes nothing more than a potential for prejudice. It does not establish the likelihood of prejudice, let alone that it is (in the context of the dispute) "serious". ii. What needs to be firmly borne in mind in respect of the present application is that the arbitrator, before he makes his award, will receive submissions from the parties which, no doubt to the extent necessary, will fully draw his attention to those matters that may be of significance to any findings that will need to be made. iii. The arbitrator is a senior counsel of the NSW bar who can be assumed to be well alive to any difficulties arising by reason of any delay and able to take such steps as he thinks necessary to attend to such difficulties, including the recalling of witnesses, convening of further conclaves and further views – as well as requesting additional assistance in address. His qualifications are shown in Exhibit D8. iv. In the context of the adoption of referee's reports, the training of the referee as a trained lawyer has an importance to the court relying on its conclusions: e.g. where the Report shows a thorough, analytical and scientific approach to the assessment of the subject matter of inquiry, the Court will have a disposition towards acceptance of the Report, for to do otherwise would be to negate the purpose of references: Chloride Batteries v Glendale Chemical (1988) 17 NSWLR 60 at 67C-E; Super Pty Limited at 555C-D, and 564A-C; Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 at 576B-G. The same can be said of the arbitration and the chosen arbitrator with his peculiar skills in this case. His special skills to determine this case, will not be lightly dispensed with in the circumstances of this case. 105 It is convenient to turn to examine the more particular detail of each of the suggested difficulties. In that regard the submissions of Austin are of substance and adopted in what follows. Prejudice through delay and the alleged non-transcription of the evidence of Mr Gervay & Mr Bagga 106 Properly understood there was no 'evidence' that was not transcribed and the course that is now complained of was consented to by the Council during the course of the arbitration. 107 The facts are: · On 11 April 2003 Mr Gervay took the arbitrator through the plans referred to and analysed in his Supplementary Statement dated 10 April 2003 (SGB2, p303.12 (Court Book 3107)) – the statement is at SGB1, pp1044-1048) (2500-2504). · Mr Bagga's statement dated 4 April 2002 became Exhibit 25 (SGB2, p1637 (4442), SGB1, p584 (1910)). · Mr Bagga was called to give evidence on 26 November 2003 (SGB2, p1628.40) (4433) [seven months after Mr Gervay had given evidence, including his explanation of the plans]. · Mr Simpkins expressed no desire to cross-examine on the current evidence (SGB2, p1628.42) (4433). · Mr Simpkins suggested that if Mr Bagga was going to make a submission as to what the plans showed it might be best to deal with it off the record (SGB2, p1629.15) (4434). · Mr Simpkins noted that there was no cross-examination of what Mr Gervay had said the plans showed (SGB2, p1629.21) (4434). · Mr Neal expressed the desire to lead evidence from Mr Bagga as to what his marked-up drawings showed (SGB2, p1630.11) (4435) and to tender the drawings (SGB2, p1630.15) (4435) as well as evidence about 'wall systems' (SGB2, p1630.18) (4435). · Mr Neal, however, accepted that it was for the arbitrator to use his expertise to compare what was built with the GMP drawings (SGB2, p1630.22) (4435). · The arbitrator observed that after conclaving with the quantum experts (Messrs Thomson and Makin), the need to interpret the façade drawings had "dissipated" (SGB2, p1630.42) (4435). · Mr Neal still expressed a desire to lead the evidence (SGB2, p1631.4) (4436). · The arbitrator said that he would not stop Mr Neal, but suggested that Mr Bagga mark up Mr Gervay's marked-up plans (SGB2, p1631.7) (4436). · Mr Simpkins observed that if Mr Bagga was going to contradict Mr Gervay there ought to be a statement (SGB2, p1631.15) (4436). · Mr Neal stated that Mr Bagga had marked up drawings the night before, after returning from India (SGB2, p1631.39) (4436). · The arbitrator asked if Mr Bagga was going to contradict Mr Gervay (SGB2, p1631.44) (4436) and whether the evidence was in the nature of expert evidence that should have been in a report (SGB2, p1632.1) (4437). · Mr Neal observed that Mr Bagga's understanding of what was built was different from that of Mr Gervay but that it was a matter for the arbitrator to decide what was built from looking at the plans (SGB2, p1632.20) (4437). · The arbitrator asked Mr Neal whether it was necessary to explore the disagreement between Mr Gervay and Mr Bagga "if I am not going to consider what Mr Gervay said about what was built" given the agreement (between the quantum experts as to the façade): SGB2, p1632.23 (4437). · Mr Neal said that since the arbitrator had evidence from Mr Gervay on the point, he should also receive the evidence of Mr Bagga: SGB2, p1632.45) (4437). · Mr Simpkins observed that: - i. Mr Gervay gave his evidence several months ago; ii. he was not cross-examined on it; iii. before any contradictory evidence was lead there ought to be a written outline (SGB2, p1633.5) (4438). · Mr Simpkins expressed that it was a matter for the arbitrator to interpret the plans (SGB2, p1633.16) (4438). · The arbitrator stated that he would direct his mind to the differences between the construction drawings and the GMP drawings (SGB2, p1633.40) (4438), but that he would let Mr Bagga mark drawings off the record to explain his understanding (SGB2, p1633.42) (4438). · The arbitrator expressed that he could construe the documents "relatively easily" himself (SGB2, p1634.3) (4439). · Mr Neal said that he was content with that course (SGB2, p1634.8) (4439). · Mr Neal also said that he wanted to tender the documents that Mr Bagga had marked up (SGB2, p1634.8) (4439). · The matter was then adjourned to enable these documents to be looked at by Mr Simpkins (SGB2, 1634.29) (4439). · After the adjournment Mr Simpkins observed that the arbitrator had the expertise to construe the documents and that Austin should not be forced to cross-examine Mr Bagga as an expert without a report having been served (SGB2, p1634.31) (4439). · Mr Simpkins expressed, however, that Mr Bagga could explain off the record what the plans showed if it was just advanced as Auburn's contention (in the same way that Mr Gervay had proceeded to give his understanding on that basis) (SGB2, p1634.44) (4439). · Mr Neal stated that Mr Bagga was there and could give lay evidence as to what was built and oral evidence of that should be permitted (SGB2, p1635.11) (4440). · The arbitrator observed that there was no issue as to what was built as this was shown in the construction drawings (SGB2, p1635.20) (4440). · Mr Neal agrees to Mr Bagga explaining the drawings off the record (SGB2, p1635.40) (4440). · The arbitrator suggested that it would be useful for Mr Bagga and Mr Gervay to do it together (SGB2, p1636.24) (4441) and Mr Neal agreed (SGB2, 1636.32) (4441). · Mr Neal tendered Mr Bagga's statement (SGB2, p1637.8) (4442). · Mr Simpkins expressed no desire for cross-examination on the current statement (SGB2, p1637.18) (4442), as the defects were being dealt with through conclaves between Mr Abbott (Austin) and Mr Plaister (Council) (SGB2, p1637.26) (4442). · Mr Simpkins stated that Mr Gervay was available to participate with Mr Bagga (SGB2, p1638.33) (4443). · Mr Neal observed that Mr Bagga must go (SGB2, p1638.39) (4443). · The arbitrator asked that Mr Bagga stay for 20 minutes to go through the drawings with Mr Gervay and make notes on the drawings (SGB2, p1639.24) (4444). · There is a reference later in the day to the plans having been marked by Mr Bagga with Mr Gervay noting his agreement or otherwise (SGB2, p1711,15) (4516). Prejudice through delay and the alleged unavailability of Mr Bagga 108 Ms Brew's evidence made it plain that there is no prejudice (assuming that Mr Bagga is unable to be located after reasonable efforts – a fact not established on the current evidence). 109 Her relevant evidence was:- · Initially, Ms Brew claimed that Mr Bagga was someone who might give evidence in relation to the curtain wall (T133.28). She agreed, however, that the curtain wall was still in place (T133.35) so that if someone wanted to know what was built one only needed to go to the Council's premises and have a look (T133.40). · In any event, the Council had at an earlier time had another architect look at the curtain wall for the purposes of providing evidence as to what was built and how it compared with the GMP plans (T133.48). · Ms Brew had never asked the Council to find out what other information it might have (beyond such a report) on the topic of the curtain wall and how it was constructed (T134.41). · Ms Brew agreed that no further evidence was required to be given by Mr Bagga (T137.17). He is only required to assist with submissions (T137.31). The kind of instruction that Mr Bagga could give in that regard is the same that any architect could give with the provisions of plans and an inspection of the curtain wall apart from one aspect (T137.38). That one aspect was the definition of the deletion which contained 'a confusing definition' (T137.41). What was involved was a question of construction only (T137.48). Prejudice through delay and the lack of knowledge on the part of the council as to what happened in conclaves between the quantum experts (Mr Makin and Mr Thomson) 110 Ms Brew's evidence also made it plain that there is no prejudice because there is no relevant lack of knowledge (T135). 111 The facts concerning the process by which Mr Makin and Mr Thomson gave evidence are:- · Relevant documents are to be found at SGB2, pp84 (Court Book 2888), 294-295 (3098-3099), 455-456 (3259-3260), 543 (3348) and 611 (3416) (on 7, 11 and 17 April, 29 May and 16 October 2003). But these all predate the actual giving of evidence by Mr Makin and Mr Thomson. · Mr Makin gave his evidence on 24 November and 9, 10 and 16 December 2003. · On 24 November 2003 his evidence in chief (which commenced at SGB2, p1461) (4266):- i. Included the production of a schedule of variations (which became Exhibit 18; SGB2, p1491.14) (4296); ii. Which identified the areas of difference between himself and Mr Thomson (SGB2, p1461.31) (4266); iii. Explained the differences (as Mr Makin understood it) between himself and Mr Thomson (SGB2, p1462.33) (4267). · Mr Faulkner commenced his cross-examination of Mr Makin after this, although this was only brief (SGB2, p1497.3) (4302). · He was also cross-examined on 9 December (SGB2, pp1744-1763) (4549-4568), 10 December (SGB2, pp1767-1796) (4572-4601) and 16 December 2003 (SGB2, pp1800-1801) (4605-4606). At the conclusion of his cross-examination, Mr Faulkner made it clear that he had no further questions (SGB2, p1801.32) (4606). Mr Makin was then re-examined. Mr Makin was then excused (SGB2, p1806.21) (4611). · Mr Thomson was called to give evidence on 16 December 2003 (SGB2, p1815) (4620). He produced his own schedule of variations (SGB2, p1816.8) (4621). It had not previously been produced (SGB2, p1817.1) (4622). The arbitrator noted that it contained a lot of commentary that Mr Makin would need to get across (SGB2, p1817.41 (4622), p1818.32) (4623). The arbitrator thought the schedule did not accord with Mr Makin's schedule, Exhibit 18 (SGB2, p1818.21) (4623). Cross-examination was deferred (SGB2, p1819.1) (4624). · There were difficulties with the cross-examination proceeding the following day (see SGB2, p1822) (4627). · On 18 December 2003, Mr Simpkins addresses the weight to be given to Mr Thomson's comments (SGB2, p1834.35) (4369), given Mr Thomson's unavailability for cross-examination (SGB2, p1833.1) (4368). The arbitrator says that it is not necessary to cross-examine Mr Thomson on any additional comments (SGB2, p1835.14) (4640). The arbitrator says that he will allow Mr Makin to comment (SGB2, p1837.24) (4642). · Mr Simpkins identified the basis of objections to Mr Thomson's evidence (SGB2, p1841.25) (4646). The arbitrator generally agrees. Prejudice through delay and the rectification of defects 112 Ms Brew's evidence made it plain that there is no prejudice because a sufficient record of the defects exists and they were inspected before rectification. 113 Ms Brew's evidence was: · that she was asked about the site inspection on 24 October 2002: T89.28. The arbitrator was asked to look at defects and Mr Goncalves (the Council's building officer) assisted by pointing them out (T90.4). All of the defects were inspected apart from those that were repeated (T90.37); · that she was consulted from time to time about the Council's plans to rectify some of the major defects (T130.1) and she gave advice that before any rectification occurred there ought to be a proper record made of what it was which was there to be seen constituting the defect (T130.8); · that Council, through its own officer, took photographs of the defects (T130.34). The majority were photographed (T130.41). The arbitrator took photographs of all of the defects (T130.48). Inability of Austin to meet any award of Council's costs 114 This issue [inserted into the pleadings as a late amendment during the hearing] inheres in the usual security for costs environment: in short applications are sometimes pressed seeking additional security as and when appropriate and such applications are treated by the Court on their merits when advanced. This judgment does not foreclose the Council from electing to pursue additional security by appropriate application to the Court. It would not be appropriate to presently forecast the result of any such application. Other considerations 115 The current stance of the Council is that the Court should proceed by taking it as a given that if orders permanently staying Austin's claim were to be made the cross-claim would not be pressed. This is said to be by reason of the evidence of Mr Hutchison [in paragraph 15 of his affidavit dated 14 December 2006] which it is contended had the result that the Council presently viewed its prospects of ultimate recovery as "pretty hopeless" [T 44.20]. 116 Reference has earlier been made to the observations of a number of the judges of the High Court in NAIS stressing the significance of the context in which delays occur as often affecting any legal consequences that may flow and stressing the requirement that the remedy is required to be tailored to the circumstances and justice of the case. In particular Kirby J. had noted with approval the proposition put forward in Blencoe v British Columbia (Human Rights Commission) [2000] 2 SCR 307 by Bastarache J (at [122]) that the determination of whether a delay had become inordinate depended: (i) on the nature of the case and its complexity; (ii) on the facts and issues; (iii) on the purpose and nature of the proceedings; (iv) on whether the respondent contributed to the delay or waived the delay; (v) on other circumstances of the case, and was not based on the length of the delay alone but on contextual factors, including the nature of the various rights at stake in the proceedings. 117 It is necessary to step back from the detail and to more closely focus upon the significance to Austin of its entitlement to pursue the arbitration even in the present circumstances. In that regard the following observations are pertinent: i. the Council never sought for a time limit to be imposed upon Austin in terms of its compliance with the order to provide security for costs; ii. the Council could have but never did apply for an order that pending provision by Austin of the security monies, the Council was discharged from any obligation to pursue its own cross-claim; iii. the Council took advice on its forensic tactical alternatives and elected not to approach the Court for a permanent stay principally by reason of its anxiety that such an application may have an adverse consequences to it; iv. the arbitrator being in control of the arbitration has considerable leeway in terms of the future conduct of the arbitration, it being within his power to tailor the future conduct of the arbitration in fashion calculated to satisfy him that any areas of the evidence which had been called in the arbitration in respect of which he may need to be reminded [whether by the recall of witnesses or by address from the Bar table] are properly addressed; v. the Court is simply not persuaded by any of the evidence adduced by the Council on the current application [or pointed to by the Council] that such delay as occurred during the period of Austin's attempts to obtain security for costs will give rise to a substantial risk of it not been possible to have a fair trial of the issues in the arbitration proceedings or in the circumstances it is such as is likely to cause or to have caused serious prejudice to the Council. 118 The discretion reposed in the Court by s 46 (3) permits an examination of the significance of the Council's own delay against its complaints of prejudice. 119 As to a defendant's entitlement to let sleeping dogs lie in the context of a dismissal of court proceedings for want of prosecution Moffitt P said, in Stollznow v Calvert [1980] 2 NSWLR 749, 753-754 that: "… despite some judicial observations concerning the right of defendants to let sleeping dogs lie and that defendants should not be penalised for earlier inaction when subsequently an application is made to dismiss proceedings for want of prosecution, no rigid rule can be laid down on the matter. By way of example, which I give because of its relevance in the present case, in some cases inaction by a defendant in the face of impending prejudice to him if delay continues, may render a later claim of actual prejudice less creditworthy, and the prejudice, if established, a less weighty factor. A defendant in proceedings which have been instituted, particularly as in the present case, proceedings brought to issue on the pleading with the supply of all required and requested particulars, is in quite a different position from that of the nominal defendant who may be unaware of the relevant occurrence. A defendant of the former type is in a position to prepare his case for trial, including interview witnesses and enquire as to their availability to be called to give evidence. A plaintiff may have legitimate reasons for some delay, as where he is about to undergo an operation expected to clarify his medical future. It is too simplistic an approach to regard preparation for, and bringing the proceedings to trial, as a one sided affair resting entirely on the plaintiff, who has the carriage of the action. I cannot accept, for example, that a defendant, who has written complaining of the delay and warning that particular prejudice will occur to him if delay continues, is not, on a later application to dismiss the proceedings, in a position superior to that of a defendant who has lain silent, and later claims for the first time that prejudice has occurred by reason of the delay. Whatever may have been past views of the adversary system regarding skill in the exploiting the rules in an adversary duel as some kind of virtue, current ideas of justice, at least in this country, are directed to the substance of things. The exercise of the undoubted right of a defendant to do nothing runs the risk of being classified in the circumstances of some cases as being in the category of the 'ambush' approach to litigation." 120 Accordingly, I accept as correct the contention by Austin that the complaints by the Council of prejudice need to be weighed against the fact that it took the deliberate decision not to advance its cross-claim which, if advanced to finality, would have avoided all of its current complaints of prejudice. 121 In Alginates (Australia) Pty Ltd v Thomson & Carroll Pty Ltd [1970] VR 570, 575, Smith, J said: "Again, though it has been held that a defendant is not acting improperly in lying by in the hope that the plaintiff will delay long enough to enable a dismissal to be obtained (c.f. Duncan v Lowenthal [1969] VR 180 at 186); nevertheless, a defendant may strengthen his claim that justice requires a dismissal by warning a plaintiff of the consequence of further delay: compare the McAlpine Case [1968] to QB 229, 253, 265, 275. But this the present defendant did not do . Moreover the ruling that lying by is not improper relates to a party who is merely defending himself against an adverse claim. A party who, like the present defendant, invokes the court's jurisdiction by counter-claim is outside that ruling. Having put forward an active claim, it is his obligation to use diligence in pursuing it : see Zimmer Orthopaedic Ltd v Zimmer Manufacturing Co [1968] 2 All ER 309 at 312 and on appeal [1968] 3 All ER 449 at 450-451. And to the extent that he fails to do so he has the less right to claim that delay on the part of the plaintiff entitles him, in justice, to a dismissal of the action." [Emphasis added] 122 It is also material to bear in mind that if a defendant induces a plaintiff to incur further expense in pursuit of an action during the period over which the delay complained of is alleged to have occurred this matter can be taken into account in the exercise of the court's discretion: see Roebuck v Mungovin [1994] 2 AC 224; Newman v Victoria [unreported, Supreme Court of Victoria, McDonald J, 25 August 1995, BC9507248] at 31. 123 In Allen v McAlpine [1968] 2 QB 229, 260 Diplock LJ said: "Since the power to dismiss an action for want of prosecution is only exercisable upon the application of the defendant, his previous conduct in the action is always relevant. So far as he himself has been responsible for any unnecessary delay, he obviously cannot rely upon it . But also, if after the plaintiff has been guilty of unreasonable delay, the defendant so conducts himself as to induce the plaintiff to incur further costs in the reasonable belief that the defendant intends to exercise his right to proceed to trial notwithstanding the plaintiff's delay, he cannot obtain dismissal of the action unless the plaintiff has thereafter being guilty of further unreasonable delay ." [Emphasis added] 124 Similarly, Salmon LJ said (at page 272): "The only point that has caused me any hesitation upon this appeal arises out of the argument that the defendants have waived or acquiesced in the delay upon which they found their application. Clearly no defendant can successfully apply for an action to be dismissed for want of prosecution if he has waived or acquiesced in the delay. Mere inaction on the part of the defendant cannot in my view amount to waiver or acquiescence. Positive action, however, by which he intimates that he agrees that the action may proceed, is a different matter. If, for example, he intimates that he is willing for the action to proceed and thereby induces the plaintiff's solicitor to do further work and incur further expense in the prosecution of the action, it will be precluded from relying on the previous delay by itself as a ground for dismissing the action . [Emphasis added] [This approach was followed by Cooper, J in Queensland Trustees Ltd v Drysdale Hendy & Co [1992] 2 Qd R 625.] 125 Plainly the Council induced Austin to continue to seek litigation funding and to arrange for the security to be provided in the belief that, once provided, the arbitration would continue. The leave application 126 This application presents yet another very unusual circumstance. The proceedings commenced after the commencement of the administration. In consequence it was necessary for the Council to obtain a grant of leave to proceed with the summons in accordance with s 440D (1) (b) of the Corporations Act 2001 (Cth). The summons which was filed on 20 September 2006 sought an order accordingly. However at no stage until very late during the hearing, was the Court's attention drawn to the necessity for the Council to obtain this leave. In the usual course of events the application for such leave would be pressed very early in the piece, preferably before or certainly at the commencement of a final hearing. 127 In the result and only during the course of final address at the conclusion of the proceedings, has attention been directed by the parties to this issue, the Council pursuing a grant of leave and Austin contending that no such leave should be granted, or that the question of leave should be left until after delivery of these reasons. 128 Generally the principles which apply are to be found set out in Ford's Principles of Corporations Law co-authored by Professor H A J Ford, Justice R P Austin and Professor I M Ramsay at [27.126]. The treatment of that subject includes the following propositions: i. in circumstances where administrators/liquidators are appointed claimants lose the right to litigate in any court and receive instead a right to make a claim to be paid out of the estate; ii. a stay is imposed to prevent harassment of the company in liquidation and to prevent its assets being wasted by unnecessary litigation; iii. the court when granting leave to proceed against a company in administration/liquidation may impose conditions on the grant of such leave; iv. leave can be granted nunc pro tunc; v. the term "proceeding" covers claims in both superior and inferior courts and will also include an arbitration; vi. an applicant for leave to seek a remedy against the company who has a provable claim must persuade the court that there is some good reason on the balance of convenience why his or her claim against the company should be pursued by court action to judgment rather than by lodging a proof of debt with the liquidator; vii. it is really a matter of which of two alternative procedures is more appropriate. In the circumstances Court action will normally carry the risk that the fund of company assets available to the creditors will be depleted by costs; viii. on an application for leave the Court considers whether the claimant has a case involving a real dispute which is not futile and involve serious questions whether the action will impede orderly winding up and whether it will cause prejudice to the other creditors; ix. the requirement that the case involve a real dispute is less strict than that the applicant should demonstrate a prima facie case; x. there are many factors that the Court might consider, including the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved and importantly, the stage to which the proceedings, if already commenced, may have progressed [cf Ogilvie Grant v East (1983)7 ACLR 669 at 672]. [see generally Oceanic Life Ltd v Insurance and Retirement Planning Services Pty Ltd (in liq) (1993) 11 ACSR 516 at 522] Dealing with the issue in the present context 129 To my mind both parties share some part of the blame for the late occasion when the application for leave is being pressed. Certainly the Council bore the onus of pressing the application. But it has to be said that the failure of Austin to bring the subject up until the end of the hearing, suggests its own form of 'lying by'. 130 Ultimately the issue is one of discretion. The pervasive circumstance is that had the application been pursued in timely fashion [as for example prior to the commencement of the final hearing or upon the commencement of that hearing] the discretion would have been exercised by granting the leave subject to the court requiring the applicant to undertake that it would not, without the leave of the court, seek to enforce against the company, any judgment obtained. In the state of affairs which existed at that time it would not have been possible for the Court to do otherwise than to accept that there was good reason on the balance of convenience, why the Council should through the present proceedings, pursue the claim [which in a nutshell sought, by one means or another, to terminate the arbitration]. 131 The fact was that it was Austin which, as claimant, had invoked the arbitration proceedings and had failed to provide the security for costs funds until 2006. As at the commencement of the final hearing, a principled exercise of the discretion would have been to grant the leave subject to the above-described condition. 132 Austin's contention that it is appropriate for the Court with the benefit of hindsight to now dismiss the application for leave on the basis that the reasons suggest that the Council's case was never one of substance is misconceived. The benefit of hindsight cannot be used in this way. The leave will be granted subject to the above-described undertaking coming forward or to an order to the same effect being made. Short minutes of order 133 The parties are to prepare short minutes of order on which occasion they will be given an opportunity to address on costs. Leave is reserved to both parties to address should either party seek to contend that any particular issue has not yet been determined. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.