Maco Group Pty Ltd v Johns Lyng Commercial Builders Pty Ltd (Civil Claims) [2019] VCAT 1815 (22 November 2019)

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL DIVISION
CIVIL CLAIMS LIST VCAT REFERENCE NO. C4998/2019

CATCHWORDS
Commercial Arbitration Act 2011 sections 1AC(1) and 1AC(3), interpretation of the Act to achieve its paramount object, section 7 meaning of “arbitration agreement”, section 8(1) – Subway Systems Australia Pty Ltd v Ireland [2014] VSCA 142 – Thiess v Collector of Customs and Others [2014] HCA 12; (2014) 88 ALJR 514 – PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301.
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APPLICANT
Maco Group Pty Ltd ACN: 613 930 957
RESPONDENT
Johns Lyng Commercial Builders Pty Ltd ACN: 088 343 453
WHERE HELD
Melbourne
BEFORE
Deputy President I. Lulham
HEARING TYPE
Hearing
DATE OF HEARING
15 November 2019
DATE OF ORDER
22 November 2019
DATE OF REASONS
22 November 2019
CITATION
Maco Group Pty Ltd v Johns Lyng Commercial Builders Pty Ltd (Civil Claims) [2019] VCAT 1815

ORDER

  1. The Respondent’s costs of its application for summary dismissal, or alternatively a stay, of this proceeding are reserved.
  1. Any application for costs shall be made in writing by 16 December 2019, but shall not be accompanied by an assessment of the costs or an itemised bill of costs.
  1. The proceeding is otherwise stayed.
  1. The parties are referred to arbitration.

I. Lulham
Deputy President

REASONS

  1. This proceeding arises from excavation works performed by the Applicant for the Respondent, as a sub-contractor at a site called the Yarra Ranges Civic Centre. The Respondent is a commercial builder.
  1. In its Application filed 8 July 2019 the Applicant sued for payment of $127,857.00. The Applicant does not seek an injunction or a declaration. The Applicant has not engaged a legal practitioner and it has filed documents in a fairly ad hoc fashion. Mr Malik Ahmad, director, prepared the Applicant’s documents and represented it at the hearing on 15 November 2019.
  1. In the Application form filed to initiate this proceeding the Applicant wrote that it was relying on the Australian Consumer Law and Fair Trading Act 2012 (page 1), and that it was claiming payment for goods and services including rock breaking and the digging of footings (page 3). It wrote that the Respondent had rejected the Applicant’s invoices, and disclosed that there are disputes over the calculation of rock volume, whether material excavated from the site was rock at all, and whether rock was rippable or non-rippable (the significance of which would lie in the rates for payment). The Applicant wrote that it was entitled to be paid for rock breaking at the rate of $300.00 per hour, as agreed at a tender meeting (page 4).
  1. Even though the Applicant emailed to the Tribunal copies of several documents, when issuing the Application, it is clear that the Tribunal would need some form of pleadings to clarify the issues and the basis of the claim. Clearly the Applicant was alluding to a subcontract in some form, by referring to an agreement made at a tender meeting, but its express reliance on the Australian Consumer Law and Fair Trading Act 2012 potentially raises many issues under the Australian Consumer Law which might include misleading and deceptive conduct, unconscionable conduct, and unfair terms.
  1. At the first directions hearing on 23 September 2019 the Respondent foreshadowed an application for summary dismissal of the proceeding under section 75 of the Victorian Civil and Administrative Tribunal Act 1998 or an application for a stay. Orders were made for the Respondent to file and serve any affidavits in support by 15 October 2019, for the Applicant to file and serve affidavits in opposition by 5 November 2019, and for the hearing of the Respondent’s applications on 15 November 2019.
  1. The basis of the Respondent’s applications is that the subcontract between the parties includes a dispute resolution clause which compels the parties to engage in private mediation or arbitration and which thus prevents either party from suing the other in a Court or in this Tribunal.
  1. Clearly then the first question is whether the parties executed a contract containing such a clause. Only if they did, do questions of enforceability and relevant legislation arise.

Is the subcontract recorded in the “Subcontract Services Agreement”?

  1. The Respondent has been represented by legal practitioners from the outset. It filed and served affidavits of Messrs Luke Edwards, Ahmad Pour and James Turnbull all sworn 15 October 2019. Mr Edwards is the Respondent’s Senior Site Manager, Mr Pour is the Respondent’s Contracts Administrator, and Mr Turnbull is a legal practitioner.
  1. The three short affidavits exhibit a Subcontract Services Agreement dated 1 May 2019, and other documents.
  1. Mr Edwards deposed that two copies of the Subcontract were delivered to the site on 8 April 2019, for Mr Ahmad to sign when he came to the site. On 9 April 2019 Mr Ahmad attended the site and went through an induction process, signing a document entitled “Safe Work Method’s Statement” (which is given the acronym SWMS which the parties call the “swims”) and Mr Edwards gave Mr Ahmad both copies of the Subcontract. Mr Ahmad sat down on the desk adjacent to Mr Edwards and commenced reading it and filling it out. On 11 April 2019 Mr Pour realised that the Subcontract had not been signed and asked Mr Malik to come to the site office. In the presence of Mr Edwards and Mr Pour on 11 April 2019, Mr Ahmad signed the two copies of the Subcontract, and Mr Edwards witnessed him writing his signature on the Subcontract.
  1. Mr Pour deposed that on 11 April 2019 he went to the site to collect the Subcontract, and on his arrival realised that it had not been signed. He asked Mr Malik Ahmad of the Applicant to meet him at the site office, and at that meeting Mr Ahmad signed the Subcontract in the presence of Mr Pour and Mr Edwards. Mr Pour deposed that he had witnessed Mr Ahmad writing his signature on the subcontract.
  1. Mr Turnbull deposed to other matters.
  1. The Applicant filed an affidavit by Malik Ahmad on 14 November 2019. However, because the Applicant did not engage a legal practitioner, Mr Ahmad’s affidavit is, objectively, disorganised and in parts is in the form of a submission or argument rather than a deposition as to facts. It did not properly exhibit documents, and in the hearing on 15 November 2019 Mr Ahmad referred to documents which were not referred to in the affidavit. I will come to these irregularities below.
  1. Mr Ahmad denied that the Applicant executed the Subcontract Services Agreement. In substance the Applicant contends that the subcontract was made in a meeting on 5 April 2019, and that to the extent that it was recorded in writing, it is evidenced by a document headed “Vetting Notes” which contains a list of 38 items or subjects and which has been signed by Mr Ahmad.
  1. This document is in 3 columns, the third of which was blank and was designed to be filled in with a tick or a cross. The first 2 columns are printed. The first column lists each item number 1 – 38; the second column sets out the topic [for example, item 9 “Control measures for noise and dust generated from works under this subcontract”]; and the third has the heading “In contract” followed by an explanation that a tick means ‘yes’ and a cross means ‘no’.
  1. As the Vetting Notes do not mention dispute resolution, the Applicant’s point is that there is no dispute resolution clause or “arbitration agreement” within the meaning of the Commercial Arbitration Act 2011  in the parties’ contract.
  1. On the issue of whether the Applicant executed the Subcontract Services Agreement, Mr Ahmad’s affidavit was vague and contradictory. I do not mean this in a pedantic sense, but instead as a matter of substance. Relevantly it said that Mr Ahmad signed the Vetting Notes at around 4:00pm on 5 April 2019 at the Respondent’s office, and the “SWMS Contract Agreement” at around 7:00am on 11 April 2019. At paragraph 3V the affidavit says:

“The Respondent is claiming my signature on the subcontract agreement which I am not aware if I ever signed. This signature is no way closer to my signature, we can use the services of signature expert to verify this”. (emphasis added)

  1. Mr Ahmad used an equivocal expression – even given that English is apparently his second language – “which I am not aware if I ever signed” being vastly different from, for example, “I did not sign the Subcontract Services Agreement”.
  1. The Tribunal must be fair to both parties, and this can present some practical difficulties when dealing with self-represented parties. Legal practitioners prepare documents carefully, and ambiguities or omissions in a document prepared by legal practitioner can be far more significant than one prepared by a self-represented litigant. In making submissions for the Applicant Mr Ahmad positively said from the Bar table that he had not signed the Subcontract Services Agreement.
  1. The fact that he made that assertion when not on oath raised a number of possibilities: I could disregard the submission on the basis that it was inconsistent with his affidavit; I could hear an application by the Applicant for an adjournment to enable time for a supplementary affidavit to be filed and served and, if I granted the adjournment over the Respondent’s objection, then deal with the inevitable application for costs by the Respondent; or I could permit Mr Ahmad to give supplementary evidence orally, which would avoid the need to adjourn. If Mr Ahmad was to give further evidence, the Respondent should have the opportunity to cross examine him, even though the parties would not be cross-examined on their affidavits. There was a discussion about these matters in the hearing and the parties consented to Mr Ahmad giving supplementary evidence orally, and being subject to cross-examination. This was an imperfect solution but seemed better than any alternative. I could not envisage permitting Mr Ahmad to give supplementary evidence orally without being cross examined, as it was plain that his supplementary evidence would be inconsistent with the equivocal statement in his affidavit.
  1. Mr Ahmad gave evidence on affirmation. He stated briefly in chief that he positively had not signed the Subcontract Services Agreement.
  1. When he was cross-examined, Mr Ahmad’s attention was drawn to a wide array of documents that he had signed, and it was put to him that the signatures on those documents were identical to what purported to be his signature on the Subcontract Services Agreement and that it followed that he had executed that document. Mr Ahmad denied that he had signed the Subcontract Services Agreement.
  1. I found Mr Ahmad’s evidence in cross examination to be quite unedifying, evasive, unrealistic and unbelievable, and I reject his evidence that he did not sign the Subcontract Services Agreement. I am satisfied that Mr Ahmad was motivated to give that evidence as a means of taking the dispute resolution clause and “arbitration agreement” out of the picture. I find that he signed the Subcontract Services Agreement, for these reasons:

(a) the signatures on the documents that Mr Ahmad said he had signed, and his disputed signature on the Subcontract Services Agreement, are essentially identical. I do not purport to be a “handwriting expert”, but one does not have to be an expert to recognise a person’s signature. Of course there are slight differences in the various signatures, but it would be all the more remarkable if the signatures were entirely identical. Additionally, in addition to there being a signature, several of the documents have Mr Ahmad’s name written near the signature in capital letters, and those versions of his name in capital letters are essentially identical. The name in capitals and the signature are written in the same pen (and the signatures of others are in different pens) which leads me to conclude that Mr Ahmad wrote both.

(b) Mr Ahmad admitted that he had received the Subcontract Services Agreement, but said he did not sign it. He did not volunteer any reason for this, plausible or otherwise. A person might say, for example, that having received a draft subcontract they declined to sign it because it was inconsistent with previous negotiations. Mr Ahmad gave no explanation.

(c) If Mr Ahmad did not sign the Subcontract Services Agreement, then someone in the Respondent’s camp must have forged his signature. Why would an officer of the Respondent do that? It makes no sense to suggest that this would have occurred.

(d) If Mr Ahmad did not sign the Subcontract Services Agreement, then the witness Ahmad Pour not only signed a false document when inserting his signature as witness, but he lied on oath in his affidavit. Similarly, Mr Edwards would have lied on oath in his affidavit. I reject this as a possibility.

(e) In the hearing, Mr Ahmad described the Respondent’s head contract as having a contract value of around $24 million. The Respondent did not seek to deny or contradict that description. It would be highly unusual in my view for a commercial builder to not execute proper subcontracts in a project of that size. Put another way, it would be highly unusual for a commercial builder to only record its subcontract in a document headed “Vetting Notes” where that document identifies topics, says (where ticked) that the topics are in the subcontract, but then contains no contractual provisions about them itself.

  1. Mr Ahmad made other statements in his affidavit, which tie in with the Applicant’s reliance on the Australian Consumer Law and Fair Trading Act 2012. In paragraphs 3 and 7 he says that the Respondent misled and deceived the Applicant, to induce it to enter a subcontract at a low price, by misrepresenting the site of the works as not being a “union site” when it was, in the knowledge that union requirements would increase the costs incurred by the Applicant to perform its works; and in representing by conduct and silence that the “Vetting Notes” recorded the terms of the subcontract.
  1. Somewhat contradicting that last point, at paragraph 9 Mr Ahmad deposed that the Respondent had accepted the Applicant’s tender letter, which not only stated the Applicant’s price but also incorporated the Applicant’s ‘terms and conditions’, which do not contain an arbitration agreement.
  1. As I conclude that the Applicant executed the Subcontract Services Agreement, I reject the Applicant’s submission that the subcontract was created by the Respondent’s acceptance of the Applicant’s tender letter.

Is the dispute resolution clause enforceable?

  1. Clause 32 of the Subcontract Services Agreement is as follows:

32.1 Notwithstanding the existence of a dispute, the Subcontractor shall at all times continue to fulfil all obligations under the Subcontract and comply with all directions given by the Builder.

32.2 A party claiming that a dispute has arisen under this Subcontract shall within 7 calendar days of the dispute arising, give written notice to the other party providing particulars of the dispute and designating as its representative a person with authority to settle disputes and the other party shall promptly give notice in writing to the first party of its representative with authority to settle the dispute.

32.3 The designated persons shall within 7 calendar days of the giving of the notice of dispute, meet and in good faith and without prejudice, seek to resolve the dispute.

32.4 If the dispute is not resolved within 28 calendar days of the giving of the notice of dispute, either party may, by giving written notice to the other, submit the dispute to mediation in accordance with, and subject to The Resolution Institute Australian Rules for Mediation of Commercial Disputes. The costs of the mediation will be borne in equal portions by the builder and the Subcontractor.

32.5 If the dispute is not resolved at the mediation, either party may, by giving written notice to the other, refer the dispute to arbitration. Such arbitration shall be affected by a single arbitrator who shall be agreed by the parties, or failing agreement within 7 calendar days after receipt by the other party of the notice in writing given under this clause, then by the Chairperson for the time being of The Victorian Chapter of The Resolution Institute. The arbitration shall be conducted in Melbourne. To give valid notice under this clause, the Subcontractor must first provide security for costs for the benefit of the Builder in the amount of 10 per centum of the amount claimed to the Master Builders Australia Inc and provide evidence of such payment to the Builder at the same time as giving the notice.

32.6 The exhaustion of the above dispute resolution process is a condition precedent to the right of the Subcontractor to commence court proceedings in relation to the dispute, but nothing here in shall prejudice the right of either party to seek injunctive or urgent declaratory relief in respect of any matter arising under the subcontract.

  1. The Respondent’s submission was that clause 32 was an “arbitration agreement” within section 7 of the Commercial Arbitration Act 2011. It satisfied sub-section 7(1) which says:

An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

  1. This is strengthened by sub-sections 1AC(1) and 1AC(3) which say:

(1) The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.

(3) This Act must be interpreted … so that (as far as practicable) the paramount object of this Act is achieved.

  1. It is further strengthened by clause 34 of the Subcontract Services Agreement which states that the document constitutes the entire agreement between the parties.
  1. Section 8(1) of the Commercial Arbitration Act 2011 says:

A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

  1. In his affidavit Mr Turnbull, legal practitioner for the Respondent, deposes that a dispute has arisen between the parties; that having regard to clause 32.6 the Applicant issued this VCAT proceeding in August 2019 in breach of the Subcontract, and that on 17 September 2019 he had sought the Applicant’s consent to the VCAT proceeding being stayed pending the exhaustion of the dispute resolution process under the Subcontract.
  1. Additionally, Mr Turnbull deposes that at the first directions hearing on 23 September 2019 he had submitted that the VCAT proceeding should be stayed in compliance with the dispute resolution clause.
  1. Paragraphs 2 and 3 of the Order made at the directions hearing on 23 September 2019 are consistent with this statement. I am satisfied that the Respondent has sought to have the dispute dealt with in arbitration before “submitting the (Respondent’s) first statement on the substance of the dispute” within the meaning of sub-section 8(1).
  1. The Respondent submitted that VCAT is a “court” for the purposes of sub-section 8(1), relying on the decision of the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland. That case arose from a dispute under a franchise agreement which contained an arbitration clause, where the franchisees issued a proceeding in VCAT alleging that Subway had breached the franchise agreement. VCAT had held that because it was not a “court” it was not obliged to refer the dispute to arbitration under sub-section 8(1). An appeal by Subway to a single judge was dismissed, but Subway succeeded in its appeal to the Court of Appeal. The three appeal Justices reached the same conclusion, for different reasons, reflecting the complexity which can bedevil the task of statutory interpretation.
  1. Maxwell P emphasised the national characteristic of the Commercial Arbitration Act 2011, which Act had enacted as domestic law of Victoria a Model Law adopted by the United Nations Commission on International Trade Law. Maxwell P said at paragraph 7 that, for the purposes of that Act, VCAT “was indistinguishable from those other adjudicative bodies of the State which bear the title ‘court’ ”, and that for the purposes of that Act it is a court.
  1. Beach JA analysed the matter from paragraphs 73 to 89 by noting the different meanings of the word ‘court’ in different contexts; the absence of a definition of ‘court’ in the Commercial Arbitration Act 2011 but that Act’s occasional use of the expression ‘the Court’; that the word ‘court’ in section 41 does not and could not mean VCAT; and the High Court’s approach to statutory construction in Thiess v Collector of Customs and Others which was to begin with the consideration of the statutory context and not to make a fortress out of the dictionary when seeking the meaning of legislation. He concluded at paragraph 90 that he was “driven towards a conclusion that the underlying purpose of the [Commercial Arbitration Act 2011] was not merely to express a preference for low cost speedy arbitrations over longer more expensive court trials – but rather, and partly in the interests of uniformity, to express a preference for holding parties to their bargains that in terms involve preferring arbitration of whatever kind has been agreed between the parties over State sponsored dispute resolution (no matter how cost efficient or time effective the relevant state body or arm might prove to be)”. In a footnote His Honour said, “(I)t does not seem to me to be relevant to examine the efficiency or otherwise of a particular tribunal when determining the proper construct of …s8 of the Act”. At paragraph 91 His Honour concluded that the word ‘court’ in section 8 includes VCAT.
  1. Kyrou JA also held that the word ‘court’ in section 8 includes VCAT. His Honour said this arose from the ordinary rules of statutory construction.
  1. The Respondent also submitted that nothing turned on the different meanings of “shall” and “may” in clauses 32.2 and 32.5. In particular, that the latter clause provided that a party “may, by giving written notice to the other, refer the dispute to arbitration” did not make the clause any less of an “arbitration agreement” or a clause which merely allowed parties the option of using arbitration.
  1. The Respondent relied, in support of this submission, on the High Court’s decision in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service. That case arose under a building contract, in which PMT was the builder and Parks and Wildlife was the principal. PMT had issued a notice of dispute for an arbitration, but had done so out of time, and had applied for an extension of time under the arbitration statute applicable in the Northern Territory at the relevant time. Similarly to clause 32.6 of the Subcontract in this VCAT case, the building contract in PMT provided that “no proceedings in respect of a matter at issue (in arbitration) shall be instituted in any court unless and until the arbitrator has made (an) award in respect of that matter at issue”.
  1. At first instance PMT succeeded in obtaining an extension of time. In the appeal by Parks and Wildlife to the Northern Territory’s Court of Appeal, that Court held that there was no power to extend time and did not examine other issues. PMT appealed to the High Court. The five judges in the High Court ruled that PMT’s appeal be allowed, but divided 3-2 as to the reasons.
  1. Relevantly to the Respondent’s submission, Brennan CJ, Gaudron and McHugh JJ set out the relevant clause in the contract relating to arbitration, clause 45.
  1. It used the words “shall” and “may”, saying :

(a) The Contractor shall, not later than 14 days after the dispute or difference arises, submit the matter at issue in writing to the Superintendent for decision and the Superintendent shall give his decision …

(b) If the Contractor is dissatisfied … he may, not later than 14 days after the decision by the Superintendent is given to him, submit the matter at issue, in writing to the Principal for decision …

If the Contractor is dissatisfied with the decision given by the Principal … he may not later than 28 days after the decision … is given to him, give notice in writing to the Principal requiring that the matter at issue be referred to arbitration … If, however, the Contractor does not, within the said period of 28 days, give such a notice to the Principal requiring that the matter at issue be referred to arbitration, the decision given by the Principal pursuant to the last preceding paragraph shall not be subject to arbitration.

  1. Section 48 of the relevant legislation empowered the Court to extend a time limit “in or in relation to an arbitration”. Brennan CJ, Gaudron and McHugh JJ said that the Court of Appeal approached clause 45 as meaning that it was only when the Contractor had given notice to the Principal requiring the dispute to be referred to arbitration that it had taken a step “in or in relation to an arbitration”. Until the Contractor took that first step of giving that 14 day notice to the Superintendent, it was open to the Contractor to elect to pursue the claim in the Courts or by arbitration.
  1. Their Honours said that the Court of Appeal doubted that the second part of clause 45 was an “arbitration agreement” within the meaning of the Act, because that definition required both parties to be bound, then and there, to refer their disputes to arbitration. An agreement that gave one party an option to submit a dispute to arbitration did not fall within the definition.
  1. At pages 307 – 310 their Honours discussed a line of authorities commencing in 1975 under arbitration legislation which has since been repealed, and which was not made to adopt the Model Law that is now reflected in the Commercial Arbitration Act 2011. That line of authority had distinguished between agreements that referred disputes to arbitration and those which gave the parties a right of election. Their Honours said that in the authorities there had been “a focus on the textual consideration that ‘arbitration agreement’ (in the statute) was defined as an “agreement to refer present or future disputes to arbitration” not as “an agreement referring disputes to arbitration”.
  1. At page 310 their Honours said that statutory definitions had to be construed according to their natural and ordinary meaning unless some other course was clearly required, and that it was of fundamental importance that limitations and qualifications are not read into a statutory definition unless clearly required by its terms or its context. It should be noted here that their Honours were speaking in 1995, and that the arbitration legislation to which they were referring did not include an equivalent of sub-section 1AC(3) of the Commercial Arbitration Act 2011. Their Honours said:

The words “agreement … to refer all present or future disputes to arbitration” in section 4 of the Act are, in their natural and ordinary meaning, quite wide enough to encompass agreements by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition … (W)hen it is given its natural and ordinary meaning, the definition [of ‘arbitration agreement’] is clearly satisfied by clause 45 even if, as was held by the Court of Appeal, clause 45 does not preclude the Contractor from pursuing its claim in the courts”. (emphasis added)

  1. In conclusion, then, the Respondent submitted that VCAT was bound by section 8 of the Commercial Arbitration Act 2011 because it was a ‘court’ for the purposes of that section; that clause 32 of the Subcontract was an “arbitration agreement”; and that by its use of the word “must” section 8 obliged VCAT to refer the dispute to arbitration.
  1. The Applicant did not make submissions in reply in relation to the construction of the Subcontract, the legislation or any authorities. This was probably unsurprising as it had not engaged a legal practitioner. The Applicant repeated its allegations that the Respondent had misled it in relation to the execution of the contract documents. To the extent that these allegations would support claims for damages for misleading and deceptive conduct and/or unconscionable conduct, they are matters which could be brought in an arbitration.
  1. The Applicant did not submit that the Subcontract, and clause 32 in particular, contained unfair terms. Again this is unsurprising as the Applicant had not engaged a legal practitioner, and further because making submissions of that nature would be inconsistent with the Applicant’s primary and unsuccessful argument that it had not executed the Subcontract. It goes without saying that because the Applicant did not raise it, the Respondent was not on notice of any such argument and did not lead any evidence or put any submissions on the topic.
  1. In view of the Tribunal’s obligation to afford the parties natural justice, I can do no more than point out that section 23 of the Australian Consumer Law provides that a term of a small business contract is void if it is unfair and the contract is a standard form contract. It appears that the Subcontract is a “small business contract” as defined. It is arguable that the Subcontract is a “standard form contract”: on the one hand, its design is such that similar forms appear to have been used by the Respondent in its dealings with other subcontractors, but on the other hand, the presence of the Vetting Notes which allow the parties to agree on whether topics are ‘in’ or ‘not in’ their subcontract may be relevant under section 27(2). Whilst there are statements in Subway Systems Australia Pty Ltd v Ireland  to the effect that the cost of a dispute resolution mechanism is irrelevant to the construction of section 8 of the Commercial Arbitration Act 2011, the rather extraordinary obligation of the Applicant, imposed by 32.5 of the Subcontract, to “first provide security for costs for the benefit of the (Respondent) in the amount of 10 per centum of the amount claimed” seems to fall squarely within the example of an unfair term given in section 25(k) of the Australian Consumer Law.
  1. If section 23 applied, there would be a question of whether it rendered the whole of clause 32 void, or only parts of it.
  1. I note that in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service clause 45 set time limits within which the parties were to serve documents on each other, but that the clause as quoted lacked some of the detail of clause 32 of the parties’ Subcontract in this case. Whilst these matters were not raised by the Applicant, and again the Tribunal’s obligation to afford the parties natural justice means that it is not its role to find arguments on behalf of parties, I note in passing that Mr Turnbull did not depose to:

(a) whether any demand for payment sent by the Applicant to the Respondent constituted a written notice of dispute within clause 32.2;

(b) the existence of Rules for Mediation of Commercial Disputes, of the Resolution Institute, referred to in clause 32.4;

(c) as to the existence of the office of Chairperson or the existence of The Victorian Chapter of The Resolution Institute; or

(d) as to the ability of The Master Builders Australia Inc (which I gather is distinct from Master Builders Victoria, though possibly affiliated on some level) to accept payments by way of security for costs.

  1. At paragraph 10 of his affidavit Mr Turnbull deposed that the Applicant had failed and refused to comply with the dispute resolution process, but if that process expressly imposed procedures which were in effect non-existent, it would be an open question as to whether clause 32 could be “construed” to make it operative, or whether the arbitration agreement was rendered “null and void, inoperative or incapable of being performed” as set out in section 8(1), even leaving aside section 23 of the Australian Consumer Law.
  1. The matters referred to in paragraphs 50-54 were not raised in the Respondent’s application and I say no more about them.
  1. In view of the manner in which the application for summary dismissal or a stay was made and argued, and sub-sections 1AC(1) and 1AC(3) of the Commercial Arbitration Act 2011, I am compelled to find in favour of the Respondent. The Respondent submitted that the appropriate form of the Order was that the proceeding be stayed and the parties be referred to arbitration. This form of words does not amount to a mandatory injunction, but is instead the form of words required by section 8(1) of the Commercial Arbitration Act 2011.

I. Lulham

Deputy President

22 November 2019