Authenticateit Pty Ltd v Enikom Pty Ltd (Civil Claims) [2016] VCAT 2134 (19 December 2016)

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL CLAIMS LIST

 

VCAT REFERENCE: C5870/2016

CATCHWORDS: Dispute resolution clause in contract – providing for arbitration in Singapore – respondent applies for summary dismissal – discretion to grant a stay of the proceeding.

APPLICANT: Authenticateit Pty Ltd (ACN 155 162 253)

RESPONDENT: Enikom Pty Ltd (ACN 003 151 960)

WHERE HELD: 55 King Street, Melbourne

BEFORE: Senior Member A. Vassie

HEARING TYPE: Civil Claims Hearing

DATE OF HEARING: 16 November 2016

DATE OF ORDER: 19 December 2016

 

ORDERS

1. The proceeding is stayed until further order.

2. The applicant may, by notice in writing given to the principal registrar and to the respondent, apply for an order lifting the stay if the applicant alleges that:

(a) by 1 March 2017 the respondent has not given written notice under clause 13.1 of the agreement between them, or

(b) after having given such written notice the respondent is not pursuing with due expedition the dispute resolution procedure set out in clause 13 of the agreement.

REASONS

1. The applicant Authenticateit Pty Ltd has claimed from the respondent Enikom Pty Ltd $13,741.12 as money owing for the provision of computer software services. They were provided under a written contract, undated but made in 2013. The contract contained a dispute resolution clause. By a written application dated 15 November 2016 Enikom has sought an order that the proceeding “be dismissed on the basis that VCAT does not have jurisdiction to hear the matter”, relying on the dispute resolution clause.

2. The clause in question was as follows:

13. Dispute Resolution

13.1 A party claiming that a difference, dispute or question has arisen concerning this Agreement (including any question regarding its existence, validity or termination), must give written notice to the other party specifying the nature of the difference, dispute or question.

13.2 On receipt of a notice under clause 13.1, the parties must endeavour in good faith to expeditiously resolve the difference or dispute, or to expeditiously answer the question contemplated by clause 13.1, which has arisen between the parties.

13.3 If the parties do not agree within thirty (30) days of receipt of the notice under clause 13.1 (or such further period as agreed upon in writing by them) the difference, dispute or question shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by a sole arbitrator appointed in accordance with the said Rules. The seat, or legal place, of the arbitration shall be Singapore. The language to be used in the arbitral proceedings shall be English.

13.4 Nothing in this clause 13 shall prevent either party from having recourse to a court or tribunal of competent jurisdiction for the sole purpose of seeking a preliminary injunction or such other provisional relief as it considers necessary to avoid irreparable damage.

13.5 In calculating the limitation period for any claim that is ultimately pursued through arbitration, the period between the date of the notice in clause 13.1 and the date on which the parties are free to resort to arbitration shall be excluded.

3. The contract bore the name of Authenticateit’s solicitors, who drew it, I presume.

4. I heard Enikom’s application during a directions hearing on 16 November 2016. Gennady Volchek, Authenticateit’s manager, represented it at the hearing. Enikom’s director, Andrew Thomas represented it and attended the hearing by telephone. Neither of those gentlemen is a lawyer. I gave Authenticateit leave to file a written submission of law, gave Enikom leave to file a written submission of law in reply, reserved my decision and said that I would decide the application on the papers after having considered the submissions.

5. Authenticateit filed a written submission which obviously had been prepared by a lawyer. Enikom filed a written submission in reply which obviously had not been prepared by a lawyer.

6. Neither in its written application nor in its submission did Enikom allege that clause 13 of the agreement was an arbitration agreement for the purposes of the Commercial Arbitration Act 2011. Authenticateit has not been called upon to respond to any such allegation. So, as the agreement itself does, I refer to clause 13 as a dispute resolution clause rather than as an arbitration clause.

7. Whatever else is the effect of the dispute resolution clause, it does not oust the Tribunal’s jurisdiction. The dispute between the parties being about the supply or possible supply of services by Authenticateit to Enikom, it is a “consumer and trader dispute” and the Tribunal has jurisdiction to hear and determine the dispute and all aspects of it, including the issue of the effect of clause 13.

8. As Authenticateit has correctly submitted, the effect of the clause is that the courts or the Tribunal have a discretion whether to stay a proceeding until the dispute resolution clause has been complied with, but in exercising the discretion that courts (and the Tribunal) “consider the circumstances of a case with a strong bias in favour of maintaining the special bargain” and follow “the guiding principle” that “parties who have made a contract should keep it.” Although that principle was enunciated in an age when the courts’ facilitation of alternative dispute resolution was much less common than it is now, the courts have consistently and recently applied it and have made orders that stay a proceeding pending the outcome of the dispute resolution procedure provided for under a dispute resolution clause.

9. In its submission Authenticateit referred to two cases as examples of a court exercising its discretion to refuse a stay of a proceeding. The two cases were not helpful because they dealt with exclusive jurisdiction clauses, not dispute resolution clauses.

10. Sometimes a reason for exercising the discretion against granting a stay of a proceeding is that the dispute resolution clause is so vaguely expressed, or so difficult to put into operation, that the interest of the parties are best served by allowing the proceeding to continue. There is no allegation that such circumstances exist in this case.

11. In its written submission Authenticateit put forward circumstances which, it argued, justified the exercise of the discretion against granting a stay despite the “strong bias”:

(a) The amount of the claim is relatively small, about $25,000.00, and presents as a straightforward dispute as to whether or not the respondent ought to pay for services rendered by the applicant.

(b) Both parties and their principal officers and witnesses are located in Melbourne (although the applicant is also based in Singapore and is less inconvenienced by the matter being heard there). Both parties will be put to cost in travelling to and staying in Singapore for an arbitration.

(c) Unlike conducting an arbitration in Singapore, which would come at significant expense for both parties including the costs of hiring an arbitrator and the cost of legal representation, VCAT provides the ideal venue for both parties to resolve their relative dispute in a convenient location and without requiring the involvement or costs of legal representation.

(d) As a consumer and trader dispute as described above, the dispute is of a type that, were it brought in a Court in Victoria, the respondent would have been entitled to seek a stay of under s.188 of the Act on the basis that VCAT is a more appropriate forum.

I am not able to say whether the dispute, whatever it is, is “straightforward”. Otherwise, all those circumstances do exist. Later in its written submission Authenticateit stated:

Here, the respondent curiously wants to prevent what is a small dispute from being heard in a local forum more convenient to itself (and the applicant, but less so), in a jurisdiction that is disposed towards excluding legal representation and not awarding costs, in favour of forcing the applicant re-issue in a foreign jurisdiction less convenient to itself and in which legal representation will be expected and costs will be a factor.

I agree that Enikom’s stance is curious in the way that Authenticateit has described it, but Authenticateit was the creator of the agreement that enabled Enikom to take that stance. I framed the order I made on 16 November 2016 in a way that virtually invited Enikom to withdraw the application that it had made. It did not.

12. If I were to exercise a discretion against granting Enikom a stay I would, in effect, be permitting Authenticateit to ignore the dispute resolution clause and take proceedings at VCAT whenever that suited Authenticateit, but to invoke the dispute resolution clause to require an arbitration in Singapore whenever that suited Authenticateit. I have decided that I should not do that, at least at the moment. The “strong bias” in favour of granting a stay remains. That is to say, I consider that the bias has not been counteracted by any of the circumstances on which Authenticateit has relied.

13. Although there is nothing in the VCAT Act 1998 which specifically empowers the Tribunal to make an order staying a proceeding, the Tribunal has for many years made such an order on the footing that a combination of several sections of the Act results in the existence of the power. The Court of Appeal has appeared to accept that the power exists.

14. I propose to make an order that stays this proceeding. The matter does not end there, however. Neither party has given any written notice to the other under clause 13.1 of the agreement. There is no reason why Enikom could not give such a notice and thus enliven the dispute resolution procedure. If Enikom really wishes to enliven that procedure it will give such a notice. I propose to allow it until 1 March 2017 to do so. If it has not given such a notice by that date, or if it does not pursue the procedure expeditiously after giving such a notice, Authenticateit may apply for an order that lifts the stay. It would then be on stronger ground that it is at the moment to persuade the Tribunal that Enikom has no genuine intention to follow the dispute resolution procedure under clause 13 but rather wishes to obstruct and delay.