New South Wales Supreme Court CITATION : Dualcorp Pty Limited v Remo Constructions Pty Limited [2008] NSWSC 749 HEARING DATE(S) : 11 July 2008 JUDGMENT OF : McDougall J at 1 EX TEMPORE JUDGMENT DATE : 11 July 2008 DECISION : See paragraph [31] of the judgment. CATCHWORDS : BUILDING AND ENGINEERING CONTRACTS – contract dispute – compulsory dispute resolution procedure - application for stay of proceedings – discretion. CATEGORY : Procedural and other rulings Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99 BP Refinery (Westernport) v Hastings Shire Council (1977) 180 CLR 266 CASES CITED : Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 147 CLR 337 Hillas & Co v Arcos Limited (1932) 38 Com. Cas. 23 Legal & General Life of Australia Limited v A Hudson Pty Limited (1985) 1 NSWLR 314 Savcor v State of New South Wales (2001) 52 NSWLR 587 PARTIES : Dualcorp Pty Limited (ACN 115 266 021) (Plaintiff) Remo Constructions Pty Limited (ACN 117 453 826) (Defendant) FILE NUMBER(S) : SC 55038/08 COUNSEL : I G Roberts (Plaintiff) F P Hicks (Defendant) SOLICITORS : Turner Freeman (Plaintiff) Moray & Agnew (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST McDOUGALL J 11 July 2008 ex tempore (revised 13 July 2008) 55380/08 DUALCORP PTY LIMITED v REMO CONSTRUCTIONS PTY LIMITED JUDGMENT 1 HIS HONOUR: In July 2007 the defendant (Remo) as contractor and the plaintiff (Dualcorp) as sub-contractor entered into a sub-contract relating to a project at Five Dock. Under that sub-contract Dualcorp was to carry out demolition, excavation and piling works. 2 Although it appears substantial amounts of work have been carried out under the sub-contract, the parties have had a number of disputes. Some of those disputes they have sought to resolve through the contractual dispute resolution mechanism, to which it will be necessary to turn. Dualcorp seeks to have other disputes resolved in these proceedings. 3 Clause 14 of the sub-contract deals with dispute resolution. It provides, on the face of things, for a staged dispute resolution process. The first stage, cl 14.1, consists of compulsory conferences following the giving of written notice of dispute. The second stage, cl 14.2, provides for compulsory mediation. That second stage is engaged if the compulsory conference process has not resolved the dispute. 4 The third stage, cl 14.3, is for reference to expert determination. That is said in the heading to cl 14.3 to be "final and binding". The meanings by which (if at all) it is made final and binding are infelicitously expressed: (f) The determination of the expert is not subject to review under this Agreement, but may be the subject of judicial review by a Court of competent jurisdiction who grants leave for an appeal of the expert's determination. 5 Clause 14.5, dealing with the topic of "conditions precedent" does nothing to illuminate the operation of cl 14 - in particular, cl 14.3(f). 6 On 25 January 2008, Dualcorp gave a notice of dispute under cl 14.1. One of the matters in dispute included what Dualcorp called its "hard rock claim". A conference was held on 6 February 2008. That conference produced at least a measure of agreement, although Dualcorp's case is that it did not deal with the hard rock claim because Remo refused to discuss that claim. The agreement that was reached, confirmed in writing by representatives of both parties, included that Remo would pay an amount in excess of $340,000 to Dualcorp, and that when the payment was cleared Dualcorp would recommence work. 7 For whatever reason, it appears, Dualcorp (having received the agreed payment) left the site at some stage shortly after 6 February 2008. Remo terminated (or purported to terminate) the sub-contract by letter dated 21 February 2008. Two months later, on 21 April 2008, Remo gave Dualcorp notice under cl 14.1. Dualcorp has not complied with the requirements of cl 14 to the extent that they were engaged by the notice. 8 In the meantime, these proceedings were commenced by summons filed on 20 May 2008. One of the topics of dispute adumbrated by the Technology and Construction List statement is the hard rock claim. There are other disputes. Although the ambit of the issues is by no means clear, it seems that Dualcorp is asserting that Remo engaged in misleading or deceptive conduct before the sub-contract was made, and that the conduct in question induced Dualcorp to enter into the sub-contract on the terms that it contained. Those terms include a clause, 5.9, whereby if an extension of time is granted, Dualcorp is not entitled to delay costs. The effect of cl 5.9 appears to be to deprive Dualcorp of delay costs even if (for example) the extension of time were due to matters wholly outside its control and wholly caused by the acts or omissions of Remo. Part of the relief claimed by Dualcorp in these proceedings is in relation to cl 5.9. 9 It is notable that Dualcorp does not claim relief avoiding or setting aside the sub-contract as a whole. 10 Against that background, Remo moved by notice of motion filed on 20 June 2008 for an order staying these proceedings. It relies on the compulsory dispute resolution procedure set out in cl 14. In short, and relying on the authorities that were summarised by Barrett J in Savcor v State of New South Wales (2001) 52 NSWLR 587, Remo submits, in substance that, the parties having agreed to a dispute resolution procedure, they should now be held to it. 11 The core question is whether the disputes or issues that will arise on Dualcorp's claim in this Court are caught by cl 14.1 of the sub-contract. The introductory words to that clause read as follows: "Any dispute, difference or Claim arising between the parties to this Agreement, at any time as to the construction of this agreement or as to any matter or thing of whatsoever nature ... must be referred to a conference in the following manner ...". 12 I do not propose to set out the remainder of cl 14, but it should be noted that in substance the intention (and perhaps the effect) is that each step is a compulsory sequence to the preceding step if the dispute has not been resolved by that preceding step and if it is still pressed. 13 The question therefore is whether the claims by Dualcorp, including its claim that the making of the sub-contract was induced by pre-contract, misleading or deceptive conduct on the part of Remo, falls within the opening words of cl 14.1. If it does then the prima facie result is that the parties' bargain should be enforced, although of course the Court nonetheless possesses a discretion as to whether or not to do so. 14 It is clear that, whatever the disputes or the issues may be, they do not appear to include a dispute "as to the construction of" the sub-contract. Thus, attention is focused on the words "or as to any matter or thing of whatsoever nature". It has to be said that both those words as they appear on their own and the context of which they form a part are unclear. The dispute which is to be referred to the compulsory dispute resolution process is one "arising between the parties". There is no doubt I think that the disputes or issues raised by Dualcorp in these proceedings are within the ambit of that expression. Are they "as to any matter or thing of whatsoever nature"? 15 The words that I have just quoted have no grammatical point of reference and no grammatical limitation. On their face, they might suggest that any dispute between the parties as to anything at all, whether or not related to the sub-contract, ought to be – indeed, must be - the subject of the compulsory dispute resolution procedure set out in clause 14. Clearly, the parties could not have intended that outcome. Thus, some limitation must be placed upon those words either as a matter of implication or as a matter of construction. 16 If one approaches the question as one of implication then one is forced to ask: how, viewed objectively, did the parties intend to limit the ambit of the words "or as to any matter or thing of whatsoever nature"? Did they intend to limit them to matters under the sub-contract? Or to matters arising out of the sub-contract? Or to matters in any way related to the sub-contract? The cases to which Barrett J referred in Savcor at 597 [39], and other cases that are referred to all the time on this topic, show that all those descriptors or connectors have been used from time to time. They show also that the ambit of the disputes that are to be settled by the agreed process (be it arbitration as is often the case or expert determination) depends firstly on the precise words used and secondly on the proper construction to be given to those words in context. 17 I do not know how one could say as a matter of implication that the parties intended to use one form of descriptive or connecting words rather than another, or one way of limiting the width of the words in question rather than another. Thus, referring to the well-known rule for implication referred to by the Privy Council in BP Refinery (Westernport) v Hastings Shire Council (1977) 180 CLR 266, adopted with approval in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 147 CLR 337 and in innumerable cases thereafter, one cannot say that the particular term to be implied is so obvious that it goes without saying. One can imagine sound policy reasons why the parties would have negotiated for one form of words rather than another. 18 Thus, if the words are to be read down in some way, it is necessary to do so by a process of construction. But that process, which seeks to ascertain the objective intention of the parties, runs into exactly the same problem. The parties have not really given any indication of what, objectively, their intention was. How is the Court to ascertain it? The words that the parties have chosen do not enable the Court to do so. 19 It is always a matter of regret that the Court should be compelled to find that words chosen by the parties in a contract are so imprecise that they cannot be given meaning. The Court should strive, as I have striven, to give meaning and effect to all the words of the contract, placing them in context and seeking to render each part of the contract harmonious with each other part (see Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99 at 109. 20 Equally, to adopt the well-known words of Lord Tomlin in Hillas & Co v Arcos Limited (1932) 38 Com. Cas. 23 at 29, the courts should strive to act so as to treat people's dealings as effective, and should not "incur the reproach of being the destroyer of bargains". 21 It is one thing to seek to avoid being the destroyer of bargains. From time to time, however reluctantly, the Court has to assume that role. It is quite another thing to be the maker of a bargain. If the parties have not done so, and the Court cannot do so by a legitimate process of implication or construction, (noting that there is no claim for rectification) it can go no further. 22 In this case, I think, the words in question are so imprecise, and so devoid of any limitation (which, I repeat, they were clearly intended to have) that they cannot be given effect. It follows that they are not effective as a ground for the relief sought. 23 If the anomaly to which I have referred was the only problem in cl 14 then it might mean that one needed to look more closely at what I have just said. But there are many other aspects of cl 14 that indicate that it was drafted with some degree of haste and a far lesser degree of attention. For example, although I shall not trouble the reader by setting out the wording, there are obscurities in the drafting of cl 14.2. I refer in particular to para (b), whereby the giving of a mediation notice and compliance with cl 14.2(c) are conditions precedent to the commencement of the mediation process. But it is cl 14.2(c) that appears to refer to the commencement of the mediation process. If this is the correct way to approach cl 14.2, then para (c) could be thought to be a condition precedent to itself. 24 I have set out cl 14.3(f). Presumably in referring to "judicial review", the parties were intending to engage the concept of review of expert determination in the manner discussed, in particular by McHugh JA, in Legal & General Life of Australia Limited v A Hudson Pty Limited (1985) 1 NSWLR 314. In other words, the parties were intending to suggest that once an expert determination had been concluded, it could only be reviewed by the courts on the very limited bases described in that case. But if this is the case, there is no requirement for leave, let alone for leave to appeal. If the requirement for leave to appeal is intended to be meaningful, it might suggest that the process of "judicial review" is in fact something far wider. If it is, the nature of the review, and its limits, are left to the imagination. 25 Again, cl 14.5(b) makes it a condition precedent to the right of either party to commence litigation (other than for urgent interlocutory or declaratory relief) that it has gone through the cl 14.1, 14.2 and 14.3 steps. But if those cls (14.1 to 14.3) are to be given the meaning that Remo puts upon them, there is no right to commence any litigation apart from that for "judicial review". 26 In short, the obscurities in cl 14 as a whole are such as to diminish the sense of regret that, inevitably, the Court must feel in expressing the conclusion, as to the relevant part of cl 14.1, that I have. 27 Having said what I have said, it is, strictly speaking, unnecessary to deal with the question of discretion. But in case this matter goes further, I will deal briefly with it. 28 The process of expert determination is to be that administered by LEADR. The LEADR rules for expert determination, which are in evidence, provide for the expert to determine the dispute "on the papers". Even though no list response has been filed, it is clear from the material with which the Court has been favoured that there will be very significant questions of fact, most likely to be decided by reference to questions of credibility, that require attention in this case. I simply cannot understand how an expert looking at the matter on the papers could decide complicated questions of fact where, as I have said I think is likely, it would be impossible to resolve those in any proper way without going beyond the papers that the parties submitted. 29 Other questions of discretion were argued. I do not think that it is necessary to go through those because the matter to which I have referred - the unsatisfactory nature of the LEADR expert determination process in the context of this kind of dispute - is sufficient to resolve the discretionary issues in favour of Dualcorp were it necessary, against my conclusion on the proper construction of cl 14, to consider the question of discretion. 30 In the result, I order that the defendant's notice of motion filed on 20 June 2008 be dismissed. 31 I order the defendant to pay the plaintiff's costs of that notice of motion. ********** 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. 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