Aquagenics Pty Ltd v Break O'Day Council

• Jurisdiction: Tasmania
• Court: Full Supreme Court
• Judge: Evans J,Tennent J,Wood J
• Judgment Date: 10 May 2010
• Date: 10 May 2010
• Docket Number: FCA 917/2009

[2010] TASFC 3

[2009] TASSC 89

SUPREME COURT OF TASMANIA (FULL COURT)

Evans, Tennent and Wood JJ

FCA 917/2009

Aquagenics Pty Ltd

and

Break O'Day Council

Tasmanian Water & Sewerage Corporation (North Region) Pty Ltd

Aquagenics Pty Ltd

and

Break O'Day Council (No 2)

REPRESENTATION:

Counsel:

Appellant: I H Bailey SC

Respondent: S B McElwaine

Aust Dig Contracts [259]

Aust Dig Arbitration [37]

Civil Liability Act 2002 (Tas), s3A(3).

Commercial Arbitration Act 1986 (Tas), s53(1).

Civil Liability Act 2002 (Tas), ss3A(3), 43A, 43B.

Contracts — Building, engineering and related contracts — The contract — Construction of particular contracts and implied conditions — Other matters — Proportionate liability legislation — Applicability — Contracting out.

Arbitration — The submission and reference — Submissions as a defence and as a ground for stay of proceedings — Stay of proceedings — Order or refusal to stay — Particular cases in which stay ordered — Applicability of proportionate liability legislation.

Order of the Court:

Appeal dismissed.

REASONS FOR JUDGMENT

FULL COURT

Evans J

1 This is an appeal against an order staying an action pursuant to the Commercial Arbitration Act 1986, s53(1). The action arose from a contract dated 23 February 2006, between the Break O'Day Council and Aquagenics Pty Limited, for the detailed design, construction, testing, commissioning and process approval of a waste water treatment plant for the Council at St Helens. The Council's rights and liabilities in relation to the plant have been transferred to Tasmanian Water & Sewerage Corporation (Northern Region) Pty Ltd (‘the Corporation’) pursuant to the Water and Sewerage Corporations Act 2008, ss41 and 43. In the contract the Council is referred to as the ‘Principal’. When I use that term in these reasons, it is a reference to the Council until the time of the transfer of its rights and liabilities in relation to the plant to the Corporation and thereafter it is a reference to the Corporation. In the contract Acquagenics Pty Limited is referred to as the ‘Contractor’ and I will adopt that term for Acquagenics Pty Limited in these reasons.

2 A substantial portion of the work had been completed by July 2007, when a dispute arose between the Principal and the Contractor about the quality of the work. Provisions in the contract entitle the Principal, if the Contractor commits a substantial breach of the contract and the Principal considers that damages may not be an adequate remedy, to give the Contractor notice to show cause as to why the Principal should not take the work remaining to be completed out of the hands of the Contractor or terminate the contract. If the Contractor fails to show reasonable cause within the time specified in the notice, the Principal is entitled to take either of these steps. The Principal gave the Contractor such a notice and when, in the Principal's view, the Contractor failed to show reasonable cause, the Principal took over the work.

3 The Contractor brings the action, which is the subject of these proceedings, on the basis that it was not in substantial breach of the contract and that the Principal, by so acting, repudiated the contract. In the action the Contractor seeks a declaration that in response to the Principal's repudiation the Contractor has validly terminated the contract, an order for the return of security held by the Principal under the contract, and damages for loss of profit.

4 The Principal disputes the Contractor's claims and, pursuant to a dispute resolution clause contained in the contract, gave notice of the dispute. The dispute was not resolved in the time provided for by the contract, in which case the contract requires that it be referred to arbitration. As the Principal contends that the dispute should be determined by arbitration, it applied for a stay of the action pursuant to the Commercial Arbitration Act s53(1), which is as follows:

‘ (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 respect to the future conduct of the arbitration as it thinks fit.’

5 Before the Principal applied for a stay, no pleading had been delivered by the Principal in response to the Contractor's statement of claim in the action. Had the Principal taken a step in the action, besides entering an appearance, that Act s53(2),would have applied and required the Principal to obtain leave from the Court before applying for the stay.

6 Upon the hearing of the stay application before Blow J, it was conceded that the Principal was and remained, ready and willing to do all things necessary for the proper conduct of the arbitration; so the requirement contained in that Act, s53(1)(b), was satisfied. What was in issue is whether the requirement contained in that Act, s53(1)(a), was satisfied, that is, whether there was no sufficient reason why the matter should not be referred to arbitration. Blow J concluded that there was no such reason and exercised his discretion in favour of granting the Principal's application for a stay of the action, see Aquagenics Pty Ltd v Break O'Day Council (No 2) [2009] TASSC 89

7 This appeal being against the exercise of that discretion, consistent with the Supreme Court Civil Procedure Act 1932, s45(1), this Court may not reverse or vary the stay order unless it appears that:

‘ (b) the judge has proceeded on a wrong principle or otherwise contrary to law, or on irrelevant or insufficient materials, or has misapprehended the facts or has failed to consider any material fact;

(c) the adjudication is founded wholly or in part on an erroneous finding of fact or an erroneous determination in point of law.’

8 Central to the Contractor's contention that there is good reason not to refer its dispute with the Principal to arbitration, is the proposition that the dispute is likely to involve novel and difficult questions concerning proportionate liability provisions introduced by amendments made to the Civil Liability Act 2002 (Tas) in 2005 when Pt9A was added to that Act. Those amendments came into effect on 1 June 2005, which is before the making of the contract that is the subject of these proceedings. Prior to those amendments, when a number of wrongdoers were liable in respect of the same damage, a claimant was entitled to recover the whole of the claimant's damage from one only of those wrongdoers. This is because wrongdoers are jointly and severally liable to a claimant for the whole of the claimant's damage. However, in those situations where the proportionate liability provisions of the Civil Liability Act now apply, each wrongdoer responsible for the damage is held to be liable to the claimant for that proportion of the damage that is attributed to that wrongdoer alone, and not for the whole of the damage or loss suffered by the claimant. Similar proportionate liability provisions have been introduced in every Australian jurisdiction, although with some significant differences to which I will refer.

9 The Civil Liability Act 2002 (Tas), Pt9A, is as follows:

‘ 43A— Application of Part 9A

(1) This Part applies to the following claims (“apportionable claims”):

• (a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care (but not including any claim arising out of personal injury);

• (b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1990 for a contravention of section 14 of that Act.

(2) In this Part—

“concurrent wrongdoer”, in relation to a claim, means a person who is one of two or more persons whose act or omission caused, independently of each other or jointly, the damage or loss that is the subject of the claim;

“excluded concurrent wrongdoer” means a concurrent wrongdoer referred to in subsection (5)(a) or (b).

(3) For the purpose of this Part, apportionable claims are limited to those claims specified in subsection (1).

(4) For the purpose of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.

(5) Nothing in this Part operates to limit the liability of a concurrent wrongdoer in proceedings involving an apportionable claim if—

• (a) the concurrent wrongdoer intended to cause the economic loss or damage to property that is the subject of the claim; or

• (b) the concurrent wrongdoer fraudulently caused the economic loss or damage to property that is the subject of the claim.

(6) The liability of an excluded concurrent wrongdoer is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant.

(7) The liability of any other concurrent wrongdoer who is not an excluded concurrent wrongdoer is to be determined in accordance with the provisions of this Part.

(8) This Part does not apply to civil liability that is excluded from the operation of this Part by section 3B.

(9) For the purpose of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind).

43B— Proportionate liability for apportionable...