New South Wales Supreme Court CITATION : Bitannia Pty Limited v Rossfield Nominees (ACT) Pty Limited [2008] NSWSC 939 HEARING DATE(S) : 11 July & 1 September 2008 JUDGMENT OF : Hammerschlag J EX TEMPORE JUDGMENT DATE : 1 September 2008 DECISION : The proceedings are stayed. The plaintiff to pay the defendant's costs of the motion for a stay. CATCHWORDS : CONTRACT – arbitration agreement provided that all disputes will be submitted to arbitration in accordance with UNCITRAL Arbitration Rules – plaintiff alleged agreement that strata units would be sold on registration of plan – seeks declaration to that effect and orders that the defendant co-operate in selling – plaintiff also seeks appointment of trustees for sale and sale of jointly owned property under Pt 4 Div 6 of the Conveyancing Act 1919 (NSW) - agreement requires unanimity for sale – defendant seeks stay of proceedings under s 53(1) of the Commercial Arbitration Act 1984 (NSW) – no good reason why principal dispute should not be referred to arbitration even if arbitrator has no power to make orders sought under Conveyancing Act – proceedings stayed Strata Schemes (Freehold Development) Act 1973 (NSW) LEGISLATION CITED : Conveyancing Act 1919 (NSW) International Arbitration Act 1974 (Cth) Commercial Arbitration Act 1984 (NSW) CASES CITED : IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 PARTIES : Bitannia Pty Limited (ACN 062 312 323) Rossfield Nominees (ACT) Pty Limited (ACN 008 657 190) FILE NUMBER(S) : SC 2986/2008 COUNSEL : C.J. Birch SC (Plaintiff) T.O. Bland (Defendant) SOLICITORS : DTA Lawyers (Plaintiff) Gwynne Thompson Solicitors (Defendant) - 7 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST HAMMERSCHLAG J 1 SEPTEMBER 2008 2986/2008 BITANNIA PTY LTD (ACN 062 312 323) -V- ROSSFIELD NOMINEES (ACT) PTY LIMITED (ACN 008 657 190) EX TEMPORE JUDGMENT 1 HIS HONOUR: In the principal proceedings the plaintiff seeks: a a declaration that the parties entered into a binding agreement as partners to create 14 residential strata units as part of rebuilding the Ettalong Hotel at Ettalong Beach, New South Wales; b an order that the defendant co-operate with it in the lodgement and registration of a plan of subdivision to have the land concerned subdivided into common property and lots respectively pursuant to the Strata Schemes (Freehold Development) Act 1973 (NSW), that is, to create strata units; c orders that upon creation of the units there be appointed trustees for sale, and that the units be sold, pursuant to the provisions of Pt 4 Div 6 of the Conveyancing Act 1919 (NSW). 2 There are two motions presently before the Court. In the first the defendant seeks an order staying the proceedings on the grounds that the plaintiff's claim is covered by an arbitration agreement. In the second the plaintiff challenges the retainer of the solicitors on the record for the defendant. 3 The second motion may be disposed of briefly because the defendant has now proffered material which has satisfied the plaintiff (correctly) that if there was no retainer previously there is now one in that the defendant has ratified the retainer of its solicitors. That motion is accordingly dismissed, with costs to be costs in the cause. 4 I turn then to the motion for a stay. 5 On 12 May 1997 the parties entered into a written joint venture agreement ("the agreement") which recorded that they had acquired or agreed to acquire the freehold and "Business" of the Ettalong Hotel. The agreement defines Business as "the licensed hotel business known as the Ettalong Hotel and situate at 384 Ocean View Road, Ettalong, together with any other business acquired by the parties". 6 The agreement formalised their relations regarding the management of the Business. The parties each own 50 per cent of the land and Business. 7 Originally only a hotel stood on the land. In 2003 and 2004 the parties together redeveloped the hotel into a mixed development comprising the hotel and 14 residential apartments. Finance was obtained from St George Bank to facilitate the redevelopment. 8 The plaintiff asserts that the parties additionally agreed that on completion of the redevelopment and creation (upon registration of the necessary plan pursuant to the provisions of the Strata Schemes (Freehold Development) Act 1973 (NSW)) of strata units, those units would be sold to third parties to maximise the return to "the partnership" and to reduce partnership debt. 9 The plaintiff asserts further that the facility is out of order and that the defendant is not co-operating with respect to the execution of documents to amend the facility. It says the venture is losing money and that even if the facility were to be extended it would continue to incur additional interest charges and to lose money. Hence it seeks principal relief which has as its aim the sale of the strata units. Because of the economic consequences of delay the defendant's motion was initially granted expedition. 10 The defendant does not dispute that the parties agreed to carry out the development and that their goal was the creation of strata units. It says, however, that there are building defects. Litigation with the builder is on foot. The defendant takes the position that registration of the strata plan will in those circumstances not be approved. But it says that even if there is no agreement between the parties that the strata units would be sold immediately upon their creation. It says further that in the present economic climate and given the defects, it does not wish the units to be sold now. 11 Clause 2.1(h) of the agreement provides that a party shall not without the unanimous approval of the other parties "sell or dispose of the principal assets of the Business". 12 Clause 4.1 of the agreement provides for rights of pre-emption. Under it the parties, for the duration of the agreement, shall not without the unanimous consent of the others sell, transfer or otherwise part with ownership of any of their share in the Business without first making an offer to sell to the other. 13 Clause 16 of the agreement, entitled Conciliation and Arbitration, is in the following terms: "16.1 This Agreement is based upon mutual confidence and friendly co-operation. 16.2 Where, in the event of a dispute arising out of or relating to this Agreement, parties wish to seek amicable settlement of that dispute by conciliation, the conciliation shall take place in accordance with the UNCITRAL Conciliation Rules as at present in force. 16.3 Subject to Sub-Clause 16.2, any dispute, controversy or claim arising out of or relating to this Agreement, or the branch [sic], termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force: (a) the number of arbitrators shall be one (1); and (b) the place of arbitration shall be Sydney, New South Wales." 14 The parties are agreed that the reference to the UNCITRAL Arbitration Rules is a reference to the UNCITRAL Model Law on International Commercial Arbitration which is Schedule 2 to the International Arbitration Act 1974 (Cth). 15 Section 7(2) of that Act enables the Court to stay Court proceedings where they involve determination of a matter subject to an international arbitration agreement. 16 An initial submission put by counsel for the defendant was that s 7(2) of that Act applied to the present dispute. However that submission was appropriately abandoned because that Act applies to international arbitrations where the parties have their places of business in different States (meaning countries), the arbitration is to take place outside the State where they have their places of business or where the subject matter of the arbitration agreement relates to more than one country. 17 It was ultimately accepted by both parties that cl 16.2 of the agreement falls within the definition of arbitration agreement in s 4(1) of the Commercial Arbitration Act 1984 (NSW) ("the Act") and that that enactment applies in the present case. 18 Sections 53(1) and (2) of the Act are in the following terms: "53(1) If a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement, that other party may, subject to subsection (2), apply to that court to stay the proceedings and that court, if satisfied: (a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement, and (b) that the applicant was at the time when the proceedings were commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration, may make an order staying the proceedings and may further give such directions with the respect to the future conduct of the arbitration as it thinks fit. (2) An application under subsection (1) shall not, except with the leave of the court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the proceedings other than the entry of an appearance" 19 Counsel for the plaintiff conceded that the controversy between the parties whether there is or is not an agreement to sell the strata units, as the plaintiff claims, is a dispute, controversy or claim "arising out of or relating to" the agreement within clause 16.3. The concession was correctly made: see for example IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466; Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160. 20 Accordingly the Court should stay the proceedings if satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the agreement. 21 Counsel for the plaintiff put that there is sufficient reason because firstly, the time periods in the UNCITRAL Rules for doing things in the arbitration do not cater for the commercial urgency of the situation, and secondly because the relief it claims under the Conveyancing Act 1919 (NSW) cannot be granted by an arbitrator. 22 Although neither party referred the Court to any authority on point, counsel for the defendant conceded that there was at least doubt whether the arbitrator would have power to make the orders under Pt 4 Div 6 of the Conveyancing Act 1919 (NSW). It is, however, not necessary for me to resolve that issue. I will proceed on the assumption that the arbitrator has no power to make such orders. 23 The plaintiff has not sought an order for sale of the jointly owned property in its present legal state nor has it sought the appointment of a receiver or any other urgent interlocutory relief to protect the asset. It has sued by summons for final relief for a declaration as to the terms of an agreement and for orders that the parties co-operate in obtaining the strata title subdivision. It has also claimed orders for the trustee sale of the strata units but those orders are dependent on its success in obtaining the primary relief. 24 There is no good reason why the primary question whether there is an agreement to sell should not be the subject of determination in the forum that the parties agreed should be the one for the resolution of their disputes. Both the resolution of that dispute in favour of the plaintiff and the actual registration of the plan are preconditions, on the terms of the summons itself, which must be satisfied before any question of a trustee sale arises. 25 On the assumption that the arbitrator could not make orders for the trustee sale of the property under the Conveyancing Act 1919 (NSW), the only basis for a stay is the commercial urgency in resolving a dispute which arises because the plaintiff wishes to sell now, whereas the defendant does not. This is not sufficient reason why the determination of the substantive dispute between them should not be referred to arbitration as they agreed. 26 There are additional reasons why I consider it appropriate that the proceedings should be stayed and the dispute go to arbitration. 27 Although it has been said that the entitlement of a co-owner to an order for the sale of joint property is one almost as of right, one possible ground to resist such an order is that it may be in conflict with a contractual provision which binds the relevant parties. On its face the agreement in this case contemplates either unanimity for the sale of the joint enterprise or confers rights of pre-emption where a divestment of a party's interest is proposed. The plaintiff's evidence on the other hand at this point does not disclose an agreement that the parties would be bound to sell immediately on registration, as the summons claims. The plaintiff has not proffered sufficient material to satisfy me that it has a solid case for such an agreement. 28 In the circumstances the proceedings will be stayed. 29 The plaintiff is to pay the defendant's costs of the 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.