Dickson, Re [1992] QSC 293 [1993] 2 Qd R 624

State Reporting Bureau · :;e.- lfo/d:<93 ----~--------------------------------------------------------------------- 'I TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be madeor sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION . . Motion No 370 of 1992 IN THE MATTER OF THE "COMMERCIAL ARBITRATION ACT 1990" and IN THE MATTER OF AN ARBITRATION PURSUANT TO THE COMMERCIAL ARBITRATION ACT 1990 (AS AMENDED) BETWEEN GREGORY PAUL BROWNE TRADING WITH OTHERS AS KLEERSTYLE HOMES (BUILDER) OF 81WINNETTS ROAD, SLACKS CREEK IN THE STATE OF QUEENSLAND AND ROBERT ALLAN DICKSON AND AILEEN NANCY DICKSON OF 5 YEATES CRESCENT, LOGANLEA IN THE STATE OF QUEENSLAND BRISBANE .. DATE 18/0 8/92 .. JUDGMENT 1 4th Floor, The Law Courts, George Street, Brisbane, Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 .· ' '".)- ' . _, -- 1 of 33 -- 180892 HIS HONOUR: In this matter, I have determined that all of the ,, questions sought to be referred to this Court were properly within the scope of the Arbitrator's power, but, nevertheless in the exercise of my discretion, having regard to the -10 submissions of both parties, I have determined the question as to the applicability of section 67 of the Queensland Building Services Authority Act 1991, but no other questions. The formal order is that the reference to arbitration pursuant to clause 25 of the agreement, the subject of the arbitration, is 20 not void pursuant to section 67 of the Queensland Building Services Authority Act 1991, otherwise the notice of motion is dismissed. I publish my reasons. 30 I order that the applicant pay the costs of and incidental to the motion to be taxed. Order accordingly. 40 50 JUDGMENT 60 2 -- 2 of 33 -- ( ( ' IN THE SUPREME COURT OF QUEENSLAND Before the Hon. Mr. Justice Lee Counsel: Solicitors: Motion No. 370 of 1992 IN THE MATTER of the "Commercial Arbitration Act 1990" and IN THE MATTER of an Arbitration pursuant to the Commercial Arbitration Act 1990 (as amended) between GREGORY PAUL BROWNE trading with others as KLEERSTYLE HOMES (builder) of 81 Winnetts Road, Slacks Creek in the State of Queensland and ROBERT ALLAN DICKSON and AILEEN NANCY DICKSON of 5 Yeates Crescent, Loganlea inthe State of Queensland. REASONS FOR JUDGMENT - W.C. LEE J. Delivered the 18th day of Ausgust 1992. D. Skennar for the Applicants. K. Dorney QC with him, P. Baker for the Respondent. Barker Gosling for the Applicants. Neil B. Lyons & Co. for the Respondent. Hearing date: 11th August 1992. -- 3 of 33 -- IN THE SUPREME COURT OF QUEENSLAND Motion No. 370 of 1992 IN THE MATTER of the "Commercial Arbitration Act 1990" and IN THE MATTER of an Arbitration pursuant to the Commercial Arbitration Act 1990 (as amended) between GREGORY PAUL BROWNE trading with others as KLEERSTYLE HOMES (builder) of 81 Winnetts Road, Slacks Creek in the Stateof Queensland and ROBERT ALLAN DICKSON and AILEEN NANCY DICKSON of 5 Yeates Crescent, Loganlea in the State of Queensland. REASONS FOR JUDGMENT - W.C. LEE J. Delivered the 18th day of August 1992. This is an application pursuant to s. 39 of the Commercial Arbitration Act 1 990 ("the Act") by way of notice of motion issued 23rd July 1992. Notwithstanding the lengthy submissions, the outcome of the application is quite clear. The applicants are the proprietors who, on 23rd April 1991, ~-/ entered into a contract with the respondent builder for the erection of a dwelling house on their land. See ex. RKW1 to the affidavit of Richard Knox Woodhead, filed 23rd July 1992. The relevant events appear from the chronology submitted by counsel for the proprietors (ex. 2), and from the timetable of arbitration tendered by senior counsel for the builder, (ex. 4). The works proceeded to a stage whereby two of the four equal progress payments of $33,625.00 each were paid by the proprietors to the builder pursuant to the contract. Certain disputes arose -- 4 of 33 -- 2 between the parties and work ceased on 15th July 1 991 . The builder on·2nd September 1991 referred the matter to arbitration pursuant to the contract. It was not in dispute that he was entitled to do so. Indeed, s. 46 of the Act imposed the duty on each party, in the event of a dispute arising, to exercise due diligence to have the dispute referred to arbitration and dealt with in the arbitration proceedings. Thereafter, exs. 2 and 4 sufficiently show for the purposes of this application, the numerous steps taken by both parties with a view to advancing the arbitration to hearing and determination. Reference will be made to some only of them. On 2nd September 1991, there was a notification of preliminary conference before the arbitrator. On 13th March 1992 a directions hearing occurred before the arbitrator when s. 67 of the Queensland Building Services Authority Act 1991 was first raised. At that time, that section was not in operation. It commenced on 1st July 1992. On 3rd April 1992, the builder delivered his points of claim consisting of seventy-nine paragraphs (ex. RKW2 to the above affidavit) . Thereafter () 0 0 particulars were sought of the builder who supplied them on 0 30th May 1992. On 3rd July 1991 the proprietor provided points of defence and counter-claim and discovery consisting of eighty-eight paragraphs (ex. RKW3 to the above affidavit). On 6th July 1992 the builder sought further and better particulars which the proprietors supplied on 9th July 1992. On 10th July 1992 the builder delivered his reply (ex. RKW4 to the above affidavit). On that date, preliminary argumentoccurred before .~---- ---------~~~~- ~--------"--- -- 5 of 33 -- 3 the arbitrator. The arbitration hearing was fixed to commence on 13th July 1992. On 13th July 1992, both parties appeared. Counsel for the proprietors then applied for the first time to the arbitrator to consent pursuant to s. 39 ( 1) (a) of the Act to apply to the Supreme Court with respect to what was submitted to be various points of law for determination by the Supreme Court, notwithstanding that the builder's points of claim, which were the main basis of the relief sought, was delivered on 3rd April 1992 after which considerable costs were incurred by both parties. This course was opposed by counsel for the builder but ~-~,, ~ J the arbitrator nevertheless acceded to the request and adjourned ( ) the arbitration. What was submitted to be the various points of law and the relief sought are set out in the notice of motion as follows: 11 ( i ) Whether the reference to arbitration pursuant Clause 25 of the agreement, the subject of arbitration, is void pursuant to Section 67 of Queensland Building Services Authority Act 1991. tothe the (ii) Whether the agreement, the subject of the arbitration, was an entire contract requiring the builder to erect a dwelling at Lot 169 Mattes Place, Loganlea in the State of Queensland. (iii) Whether the builder is entitled pursuant to the agreement the arbitration or otherwise. to claim subject any of sum the (iv) Whether the progress payments which were paid by the proprietors to the builder were monies had and received by the .builder to the use of the proprietors. (v) Whether the builder is able to claim a quantum meruit. (vi) Whether the builder is entitled to claim damages forbreach of contract pursuant to its points of claim. (vii) Whether paragraphs 4, 6 and 7 of the Reply constitute a departure. -- 6 of 33 -- 4 (viii) Whether the conversations and consequential documents pleaded in paragraphs 51 to 57 inclusive of the Points of Claim are able to be adduced into evidence. (ix) Whether the builder was able to determine the agreement the subject of the arbitration by its letter dated the 10th day of July, 1992. and for the following orders: (i) The Points of Claim be struck out; (ii) The Reply be struck out; ( i i i) Such further or other orders of the Honourable the Chamber Judge may seem meet; (iv) Costs." However, counsel for the proprietors conceded that orders (i) and (ii) could not properly be made by this court but were matters for the arbitrator. I have been favoured with detailed submissions in writing by each party and many authorities have been referred to. These have all been considered. The submissions of the proprietors are ex. 1 for the purposes of this application and those of the builder, ex. 3. Copies of these two exhibits will be annexed to these reasons. It was submitted by counsel for the proprietors that there are substantial questions of law which must be judged on the pleadings as they presently stand and that if determined in the manner sought by the proprietors, would end the whole arbitration. Her lengthy submissions have been helpfully set out in the ex. 1 annexed hereto and will not be separately referred to although they have been carefully considered. Senior counsel for the builder, whose outline of argument appears in ex. 3, further submitted that many of the matters raised by the notice of motion and as expanded in argument by ---------------------- . .--------' --- 0 0 0 0 -- 7 of 33 -- 5 counsel for the proprietors, apart from the point concerning s. 67 of the Queensland Building Services Authority Act 1991, went to matters of practice and procedure which were entirely within the province of the arbitrator to sort out by necessary amendments to the points of claim and/or the reply as well as to the defence and counter-claim which was defective in several respects from a pleading perspective, including paras. 67, 70 and 88(e)(ii) thereof. It was further submitted that other matters raised by the proprietors depended upon findings of fact by the arbitrator and that the so-called points of law could not arise in the course of the arbitration unless and until the facts were determined after the pleadings were put in order and evidence .given before the arbitrator. It was submitted that s. 39(1) of the Act applied only to the determination of preliminary points of law arising in the course of the arbitration and were material to be determined at ( \1 \,~-- J that stage. Further, that by reason of s. 39(2) of the Act, the court should not entertain this application as the court could not be satisfied that the determination of the application might produce substantial savings in costs to the parties and that the questions of law, if properly so-called, are ones in respect of which leave to appeal would be likely to be granted under s. 38(4) (b) of the Act, such leave not being granted unless s. 38(5) applies. It was said that all of these matters could quite easily have been determined by the arbitrator at the appropriate time, if and when it could be said that they properly arose before him, when the pleadings were put in order and the necessary facts -- 8 of 33 -- I1/ 6 found, so that it could not be said that there would be a substantial savings in costs or that, at least with respect to matters of practice and procedure, leave to appeal would be likely to be granted under s. 38(4)(b) of the Act: National Mutual Holdings Pty. Ltd. v. Sentry Corp (1988) 19 F.C.R. 155 at 1 61 where the full Court of the Federal Court referred to a passage in the judgment of Gibbs C.J., Aickin, Wilson and Brennan JJ. in Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. (1981) 148 C.L.R. 170 at 177. 0In short, it was submitted that this application was totally misconceived, inappropriate and at the very best premature. It was submitted that it was obvious from the points of claim, 0 defence and reply that substantial disputes of fact are in existence between the parties which depended upon the giving of evidence, findings of fact and resolution by the arbitrator if any points of law could be then said to arise for determination. It was submitted that it was not a proper use of s. 39 of the Act to totally disrupt the arbitration in this way. It was further 0 submitted that s. 39 does not authorise an advisory opinion. The section authorises only the determination of preliminary points 0 of law submitted to the court with the consent of the arbitrator or with the consent of all parties, which necessarily arise in the course of the arbitration and which are material to be determined at the stage at which they are referred to the court. The equivalent of s. 39 of the Act was considered by Gobbo J. in Mideco Manufacturing Pty. Ltd. v. Tait (1989) V.R. 50. At p. 54, His Honour quoted a passage from the judgment of Donaldson L.J. in Babanaft International Co. v. Avanti Petroleum -- 9 of 33 -- ( \ "· ) 7 Inc. - The Oltenia [1982] 1 W.L.R. 871 at 882; [1982] 3 All.E.R. 244 at 252-3 as follows: 11 ' . . . Parliament has indicated that the High Court is not bound by the agreement of the parties. The judge has to consider the application on its inherent merits. If he is not satisfied that the question of law proposed for determination ought to be determined at that stage, he should refuse the application Section 2 is thesuccessor in title to the old consultativecase, which more aptly describes its nature. Put colloquially the arbitrator or the parties nip down the road to pick the brains of one of Her Majesty's Judges and, thus enlightened, resume the arbitration. It is essentially a speedy procedure designed to interrupt the arbitration to the minimum possible extent and it is an exception to the general rule that the courts do not intervene in the course of an arbitration. If, other than in wholly exceptional cases, it were used to obtain definitive decisions from this court or even the House of Lords, it would create unacceptable interruptions in the conduct of arbitrations. The exceptional case which I have in mind is where the preliminary question of law, if·rightly decided, determines the whole dispute between the parties.' " In the instant case, counsel for the proprietors conceded that even if the application were decided in their favour, so that the arbitration was at an end, the builder might well have other rights which he could pursue against the proprietors, and that, if the arbitration was not at an end, an amendment to the pleadings in the arbitration was possible so as to cure at least some of the points raised. It is therefore difficult to see how the determination of the matters raised "determines the whole dispute between the parties". At p. 53, Gobbo J. said: "The second prerequisite to jurisdiction is that the question is one in respect of which the Court would be likely to give leave to appeal. There is something of -- 10 of 33 -- 8 a conundrum in asking the Court to decide whether leave to appeal would be given when there is no answer to the question as yet, and the implications of the actual answer cannot be analysed." And further at p. 55, the following passage appears in respect of which it was submitted by senior counsel for the builder that the court, notwithstanding that the requirements of s. 39(2) of the Act have been satisfied, had a residual discretion as to whether or not the application should be granted and whether or not the court should proceed to determine any questions of law: "As I am satisfied of the prerequisites for jurisdiction laid down in s. 39 of the Act, and as I am also satisfied that in the exercise of discretion I should grant the application, I proceed to determine the question-of law." That such a discretion exists is also clear from the judgment of Donaldson L .J. in Babanaft International eo. v. Avanti Petroleum Inc. [1982] 1 W.L.R. 871 where at 876, His Lordship said: "Nevertheless, it should be emphasised that the High Court has a discretion whether or not to grant such an application. It is a not uncommon experience to be faced in the Divisional Court of the Queen's Bench Division with a question of law stated by Justices which, although important as a question, can on the facts found only be answered by saying, 'Well, it all depends'. If such were the position, it would not be surpr1.s1.ng if an application were refused notwithstanding the fact that it was supported by both parties." Whilst s. 39 of the Act does not prescribe the method by which points of law should be raised for consideration by the court, and appears to contemplate a simpler procedure to that applying by which arbitrators had the power to state a case for the opinion of the court, the section nevertheless does not authorise a reference to the court merely as a matter of 0 0 0 0 ----------- -- 11 of 33 -- 9 convenience either at the instance of one party with the consent of the arbitrator: s. 39(1)(a), or with the consent of all parties: s. 39(1)(b). This approach is reminiscent of the words used by Devlin J. in Windsor Rural District Council v. Otterway and Try Ld. [19S4] 1 W.L.R. 1494 at p. 1497, which, whilst referring to what an arbitrator should do, are equally applicable to the parties under s. 39, His Honour said: "... the court is not at the beck and call of the arbitrator to answer whatever questions the arbitrator may want to put to it, and it is not here to indulge in legal exercises. It is here only to answer questions which it is satisfied do arise in the course of the reference and are material to be determined." See also A.B. Gotaverken v. Westminister Corpn of Monrovia [1971] 2 Lloyd Rep. SOS at S11 where Donaldson J. said: "The section refers to questions of law 'arising' in the course of the reference not to questions of lawwhich may or may not arise according to the view which the arbitrators thereafter take of the facts. Furthermore, it refers to the court deciding those issues, not expressing an opinion about them." Notwithstanding the foregoing, both counsel submitted that it would be appropriate if the court were to determine the point as to s. 67 of the Queensland Building Services Authority Act 1991 which came into effect on 1st July 1992, although senior counsel for the builder submitted that this question could be left to the arbitrator to decide, along with other questions, if and when they properly arise. It was submitted that the arbitrator was perfectly capable of determining the question under s. 67, there being no reason to suggest that he would not get the result right. As the matter was argued before me, I consider that the requirements of s. 39(2) have been satisfied -- 12 of 33 -- 10 and that in the exercise of my discretion I should determine this question. Section 67 provides as follows: "A contractual provision requiring the reference of a dispute under a domestic building contract to arbitration is void." Clause 25 of the contract between the parties (ex. RKW1), is the clause in the contract which authorised the reference of the disputes between the parties to this particular arbitration and is the clause under which the builder acted. This is not in dispute. Nor is it in dispute that within the meaning of the 0 Queensland Building Services Authority Act 1991, the dispute between the parties is a dispute under a domestic building 0 contract. This is clear from the definitions of "domestic building contract" and "domestic building dispute" in s. 4 of that Act. Counsel for the proprietors submitted that as there are no transitional provisions in the Act dealing with arbitrations which have already commenced and that as there is nothing in the 0 Act to protect clauses in contracts entered into prior to the date· of the· commencement of the Act, any clause conferring a O right to refer to arbitration any disputes whenever arising in connection with a domestic building contract is simply void and of no effect for all purposes. The necessary result, so it was argued was that a prior reference to arbitration pursuant to a void clause must also be a nullity. Reliance was placed on the High Court decision of Roach v. Bickle (1915) 20 C.L.R. 663 at 671 where the following passage appears in the judgment of Isaacs, Gavan Duffy JJ. at p. 671: ------------ ··--·---- -- -- 13 of 33 -- 1 1 "The law which forbids its existence cannot consistently recognise it as ever having any binding force. Its existence in fact may be recognised forthe purpose of punishing those who disobey the law, but the parties who are both transgressors cannot assert any right under it. It is lifeless from the beginning." Senior counsel for the builder submitted that s. 67 does not have a retrospective effect and that it was clear from the High Court decision of Carr v. Finance Corporation of Australia Ltd. (1982) 42 A.L.R. 29 and in particular at p. 38 in the judgment ( \. of Mason, Murphy and Wilson JJ. that the common law presumption against imputing to the legislature an intention to interfere retrospectively with rights which had already accrued did not call for a narrow conception of the right because, if it were otherwise, the essential justice of the rule would be eroded. Their Honours said: "With all respect, we think it does rather less than justice to the effect of the amending Act to describe it merely as imposing the requirement of a notice as a condition precedent to the exercise of a power of sale. On the other hand, if its full import be appreciated then the common law presumption against affecting vested rights will operate unless a contrary legislative intention appears, in Sir Owen Dixon' s words, 'with reasonable certainty': Maxwell v. Murphy (96 C.L.R.) at 267. In our opinion, no such certainty appears here." Reference was also made to s. 20(1)(c) of the Acts Interpretation Act as generally supportive of this submission, even if s. 67 was not a "repeal, amendment or expiry of an Act or provision of an Act". Section 20(1)(c) and also s. 20(1)(e), the effect of which may be displaced, wholly or in part by a contrary intention (s. 4), are as follows: "The repeal, amendment or expiry of an Act or a provision of an Act does not - -- 14 of 33 -- 12 (c) affect a right, privilege, obligation or liability acquired, accrued or incurred under the Act· or provision; or (e) affect an investigation, proceeding or remedy in relation to such a right, privilege, liability or penalty." It was further submitted that there was no contrary intention displayed in s. 67 and no indication of a retrospective operation. Furthermore, the decision of Roach v. Bickle (supra) · did not deal with this particular issue but was only concerned with the effect of a statute on a particular contract. There was a distinct statutory prohibition against the dealing by a lessor 0 from the Crown without the consent of the Commissioner to the grant of a sub-lease. It had not been asked for by the plaintiff 0 · in the action. It was in this context that the passage quoted above at p. 671 refers. The submission in this respect by senior counsel for the builder is correct. As indicated to counsel for the proprietors during argument, it is inconceivable that an arbitration, validly instituted under the Act, and even if it had progressed for months or years 0 including hearings and involving considerable expense to all parties, was simply of no effect because of the coming into force O of s. 67 of the Queensland Building Services Authority Act 1991 on 1st July 1992. That section operates to render void any contractual provision requiring a reference of a dispute under a domestic building contract to arbitration where that contractual provision had not been validly activated prior to the coming into effect of s. 67. An arbitration could be all but complete and merely awaiting the arbitrator's decision. If the argument is valid, the arbitrator must then cease handing down -- 15 of 33 -- ( 13 his decision and all that occurred including costs thrown away is simply of no avail. Such a conclusion is unsustainable and is contrary to the ordinary presumption against retrospectivity of legislation and to the particular provisions of the Acts Interpretation Act quoted above. It is true that there are no transitional provisions preserving arbitrations already commenced, but there is no answer to the submission of senior counsel for the builder that rights (and obligations) have already accrued to both parties prior to the coming into force of the new section and the proceedings have been validly instituted with a view to having those rights or obligations determined. It is also of interest that s. 11 0 of the Queensland Building Services Authority Act 1991 provides that various Acts do not apply to domestic building work. It was contended by counsel for the proprietors that the subject matter of the arbitration was domestic building work and this is clearly the case. See s. 4 of that Act. One of the Acts no longer applying is the Commercial Arbitration Act 1990. Consistently with the submissions of counsel for the proprietors with respect to s. 67, it may be wondered whether the proprietors have the right to bring this application to the court pursuant to s. 39 of the Act if it does not apply to any domestic building work at all, or if the reference to arbitration from which rights under s. 39 may arise is void ab initio. This further demonstrates that the submission on behalf of the proprietors cannot be sustained. Accordingly, the reference to arbitration pursuant to cl. 25 of the agreement, the subject of the arbitration, is not void -- 16 of 33 -- 14 pursuant to s. 67 of the Queensland Building Services Authority Act 1991. As to the balance of the items referred to in the notice of motion, I have carefully considered all of the submissions of each party and the numerous authorities relied upon. It is not necessary to separately refer to each submission in detail. Suffice to say that I have no hesitation in accepting, for the purposes of this application, the submissions of senior counsel for the builder as contained in ex. 3 and reject the submissions on behalf of the proprietors. Counsel for the proprietors conceded that the orders sought 0 in the notice of motion namely that the points of claim and reply c=) be struck out, is not something within my power but should be left to the arbitrator. I am clearly of the opinion that the balance of the matters raised in the notice of motion (apart from the question of s. 67 of the Queensland Building Services Authority Act 1991 which is a matter of discretion I have determined) fall fairly within the scope of the arbitrator's 0 jurisdiction. Any question of inadequacy or otherwise of the pleadings of either party should be referred to him for O resolution, along with the questions of admissibility of evidence the subject of para. (viii) of the notice of motion which deals with the question of whether or not, certain discussions said to be without prejudice, resulted in a concluded agreement. The remaining matters cannot be determined until evidence is given and the facts are found. Some of this may not arise at all. Whether it will be appropriate for a further application to be ~---- --~-~ ·~- ------------- -- 17 of 33 -- C) 15 made to the court under s. 39 of the Act cannot be foreseen at this stage. Accordingly, apart from the determination with respect to s. 67 of the Queensland Building Services Authority Act 1991, I conclude that there is no relevant preliminary question of law arising in the course of the arbitration which is sufficiently material and properly the subject of a determination at this stage by this court pursuant to s. 39 of the Act. If this conclusion is wrong, I would not in exercise of discretion determine the matters raised apart from the relief in para. (i) of the notice of motion. The formal order is that the reference to arbitration pursuant to cl. 25 of the agreement, the subject of the arbitration, is not void pursuant to s. 67 of the Queensland Building Services Authority Act 1991. Otherwise the notice of motion is dismissed. -- 18 of 33 -- IN THE SUPREME COURTOF QUEENSLAND Motion No. 370 of 1992 IN THE MATTER of the Commercial Arbitration Act, 1990 -and- IN THE MATTER OF an Arbitration pursuant to the Commercial Arbitration Act, 1990 (as amended) between GREGORYPAUL BROWNE trading with others asKLEERSTYLE HOMES (Builder} of 81 Winnetts Road, Slacks Creek in the State of Queensland and ROBERT ALLAN DICKSON and AILEEN NANCY DICKSON of 5 Yeates Crescent, Loganlea in the State of Queensland WRITTEN SUBMISSIONS ON BEHALF OF THE PROPRIETORS, ROBERT ALLAN DICKSON AND ( J AILEEN NANCY DICKSON 1. Application (a} This is an application to the Court with the consent of the Arbitrator pursuant to section 39(1) of the Commercial Arbitration Act, 1990. (b) Section 39(1) requires that in order for the Court to determine the points of law, it must be established that the determination will result in a substantial savings of costs and that it is a matter in which leave to appeal from the determination of an . arbitrator would be given. (c) Clearly a determination of any of the issues in the motion would result in a substantial saving of costs. The points of law are sufficiently crucial to the hearing that if the Arbitrator had made a final determination of the issues and applied the law incorrectly, leave to appeal would be granted by the Court. 2. Entire Contract Paragraph BO of the Proprietor's response to the Builder's points of claim pleads that the agreement between the Builder and the Proprietors was an entire contract requiring the Builder to erect a dwelling at Lot 169 Mattes Place, Loganlea in the State of Queensland. -- 19 of 33 -- Clause 1 of the Contract [see; Ex RKW 1 to the Affidavit of Mr Woodhead] provides:- "The Builder shall carry out and complete the works in accordance with the said plans and specification in a workmanlike manner for the consideration set forth in the Appendix hereto (hereinafter called the •contract sum•) or such other sum or sums as shall become payable hereunder". The recitals state that the Proprietor is desirous of erecting a dwelling at the address in accordance with the plans and specifications and the Builder agreed to carry out the works on the terms and conditions provided in the contract. Although the contract provides in Clause 11 (b) of the Appendix, for progress payments in relation to the contract sum, the contract is still for the erection of a complete dwelling. 0 The contract does not allow for the Builder to partially complete the works and then to cease work. 0 An entire contract is one which expressly or impliedly provides that a party must perform his part in full before he can recover the consideration due to him under the contract In Cutter -v- Powell (1795) 6 T.R. 320, Cutter was employed by the Defendant as a second major on a voyage from Jamaica to Liverpool. He took a promissory note from the 0 Defendant by which the Defendant agreed to pay him 30 guineas upon his arrival in England. The ship sailed from Jamaica on 2nd August, 1793 and arrived in Liverpool over 0two months later on October 9. On September 20, Cutter died on the voyage. There was evidence that a voyage of this time and usually took two months and the usual monthly wage for a second mate upon such voyage was about 4 pounds per month. The Court held that on the particular facts and in the absence of any contrary usage, the contract was an entire contract and the Plaintiff, Cutter's adminstratrix, was not entitled to recover upon a quantum meruit in respect of the services which he had rendered before his death. In Sumpter -v- Hedges [1898] 1 OB 673, Sumpter had contracted with the Defendant to build on the Defendant's land two houses and stables for 565 pounds. He did work to the -- 20 of 33 -- value of 333 pounds, receiving part payment of price. Later he became insolvent and told the Defendant that he could not go on with the work. The Defendant finished the building using materials which the Plaintiff had left behind. On the Plaintiff's claim for work done and materials supplied, Bruce J. allowed the Plaintiff the value of the materials left on the site but nothing more. This decision was affirmed by the Court of Appeal. There was no evidence of any fresh contract and no contract could be implied from the fact that the Defendant took the benefit of the work that was done for he had no choice but to accept it. Collins LJ. at page 676 held:- "The circumstances must be such as to give an option to the Defendant to take or not to take the benefit of the work done. lt is only where the circumstances are such as to give that option that there is any evidence on which to ground the inference of a new contract. • The fact that there are part payments does not mean the contract is divisible. Part payments are an allowance to the Builder in relation to his on-going costs. This contract is not like a contract to supply goods on various dates where each separate supply may be regarded as a separate right to payment. The exception to the doctrine of entire contracts, where a party has substantially performed the contract (see: Hoenig -v- lsaacs [1952] 2 All ER 176) does not apply in this case as the Builder cannot be said to have substantially performed the contract. He received the first and second progress payments which were for expenses to the •roof on - frame complete stage• which is also described in the Appendix to the contract as so percent of the work [see Ex RKW 1 to the Affidavit of Mr Woodhead]. As the contract in question is an entire contract, the Builder is not entitled to retain any part of the moneys received to date. lt is established by a long line of authority that the party who has contracted to perform his part of the contract •can recover nothing unless the work be done, or it can be shown that it was the Defendant's fault that the work was incomplete, or that there is something to justify the conclusion that the parties have -- 21 of 33 -- entered into a fresh contract•. (See: Appleby -v- Myers (1867) LR 2 CP 651 at 661 per Blackburn J.). Therefore, the $67,250.00 are moneys had and received by the Builder to the use of the Proprietors. 3. Quantum Meruit. Paragraphs 62 to 64 of the Builder's Points of Claim plead:- 62. •on the 14th day of October, 1991, the Builder did, by its Solicitors, reject each allegation made in the notice by the Proprietors. • 63. •on the 28th day of October, 1991, the Solicitors for the Proprietors did deliver to the Builder a notice purporting to determine the Builder's contract.• 64. •on the 30th day of October, 1991, the Builder, by its Solicitors had rejected the purported notice of determination, on the grounds that it was given unreasonably and vexatiously and was given at a time when the Proprietor was in breach of the terms of the contract. • Paragraph 66 of the Builder's Points of Claim pleads that the Builder has received two progress payments in the sum of $67,250.00. In Paragraphs 67, 68, 69, 70, 71, 72, 73, 74, 75 and 76, the Builder sets out the basis upon which he is entitled to claim further sums 0 0 0 ' for material supplied and services rendered. The Points of Claim do not assert that the Proprietors are in .breach of contract. Therefore, the conclusion that must be drawn from 0 the Points of Claim is that the sum sought therein is a quantum meruit seeking costs plus a profit margin to 15th July, 1991. This is confirmed by paragraph 7 of the Reply. Indeed, the only right that arises pursuant to the contract prior to the determination of the contract is a right to interest on late progress payments and a right to suspend the works pending the payment of the progress payment [see: Clause 11 (b) of the contract]. [The fact that the Reply deals with a purported termination of the contract is dealt with below.] A right to sue for a quantum meruit does not arise until the contract is determined (see: -- 22 of 33 -- () Richmond Gate Property Co. Ptv Ltd [1965) 3 All ER 936; Ladder -v- Slowey [1904) AC 442; Ettridge -v- Vermin Board of the District of Murat Bay [1930) SASR 21 0; Chandler Bros. Ltd -v- Boswell [1936) 3 All ER 179 at 186 per Greer LJ.; Brooks Robinson Ptv Ltd -v- Rothfield [1951) VLR 405 at 409 per Dean J.; Earthworks and Quarries Limited -v- F.T. Eastment & Sons Ptv Ltd [1966) VR 24 at 28-29 per Dean J.; Gino D'Aiessandro Constructions Ptv Ltd -v- Powis [1987] 1 QdR 40). In Balfour Beattv Power Construction Australia Pty Ltd v. Kidston [1989) 2 Qd R 105, at 165 His Honour, Dowsett J considered the judgment in Thorn v. Mayor and Commonaltv of London {1876) App. Cas. 1120 at 127-128, in relation to when a quantum meruit is available to a Builder that had performed work totally outside the terms of the contract. He said:- "Lord Cairns dealt with three situations, two of which he described as payment upon a quantum meruit. The first situation was that the builder might refuse to go on with the contract with the proposed additional work. The second basis was that he might offer to do the work upon the basis that he would be paid a quantum meruit. This appears to have been in contemplation of a further agreement as between the builder and the principal because otherwise there would have been no reason for the third situation postulated by his Lordship,merely doing the work and subsequently maintaining an entitlement to remuneration upon the quantum meruit. • · · In this case the Builder has not determined the contract and has not done work in contemplation of a new agreement or in circumstances where there is an expectation of payment. He has ceased to do the work at all. 4. Objection to Evidence The Builder's Points of Claim in a number of paragraphs refers to discussions that were conducted on a •without prejudice• basis. Where an attempt is made to settle a dispute and comments are made "without prejudice•, the statement cannot be used in evidence without the consent of both parties because the statement is one of joint privilege {see: Re Turf Enterprises Ptv Ltd (1975) QdR 266 at 277). -- 23 of 33 -- lt is clear from the Builder's Points of Claim that the dispute between the parties has not been settled. Therefore, statements made on 25th July, 1991 and correspondence arising from it are privileged and the evidence must be excluded from the hearing. 5. Section 67 of the Queensland Building Services Authority Act Section 67 of the Queensland Building Services Authority Act, 1991 provides:- "A contractual provision requiring the reference of a dispute under a domestic building contract to arbitration is void. • A "domestic building contract" is defined in section 4 of the Act as •a contract for the carrying out of domestic building work". "Domestic building work" is defined in section 4 as •work related to a home or associated building•. A "home• is defined as •any residential premises except premises constituting , or forming part of, commercial or industrial premises•. Section 67 is part of the Act that came into effect by proclamation and commenced on 1 June, 1992. There are no transitional provisions in the Act dealing with matters that have already 0 0 commenced. There is nothing in the Act to protect clauses in contracts prior to the date of 0 commencement of the Act. Clauses of this nature in any contract in existence as at the date of commencement of the Act are void. lt is therefore impossible for the Clause to be of any effect. lt is submitted that a prior reference to arbitration pursuant to a void clause must also be a nullity. In Roach v. Sickle (1915) 20 CLR 663 at 671, the High Court considered the effect of a statute that rendered a contract invalid and said:- "The law ferl!ids which forbids its existence cannot consistently recognize it as ever having any binding force. Its existence in fact may be recognized for the purpose of punishing those who disobey the law, but the parties who are both transgressors cannot assert any right under it. • 1t is therefore submitted that the logical conclusion is that the arbitration in this matter must be regarded as void and cannot continue. 0 -- 24 of 33 -- () ( 1 6. Departure in the Reply 7. The Reply, Ex RKW 4 to the Affidavit of Mr Woodhead was delivered on 1Oth July, 1992. In paragraphs 4 and 6 of the Reply, there is a departure from the pleading in paragraphs 62 and 64 of the Builder's Points of Claim. lt is clear that the Builder cannot assert both that the contract is affirmed in his Points of Claim and that the contract has been determined in the Reply. Indeed, there was never any attempt by the Builder to determine the contract until 10th July, 1992 [see: Ex RKW 6 to the affidavit of Mr Woodhead]. The Reply is clearly contrary to the Points of Claim and must be struck out. Determination by the Builder The Builder had no right to attempt to determine the contract on 10th July, 1992. He asserted that the Proprietors assertions as to his breaches of the contract have no merits. Therefore, he must regard himself as the innocent party to the dispute and has therefore been put to an election. He clearly elected to affirm the contract and that election is final [see:"Contract Law in Australia" by Lingren, Carter and Harland at paras 1971-1972; United Australia Ltd v. Barclays Bank Ltd [1941] AC 1 at 30; Sargent v. ASL Developments Ltd (1974) 131 CLR 634 at 646]. In any event, in order to determine the contract, the Builder must give written notice to the Proprietors by certified mail [see: Clause 16 of the contract] Further, it cannot be asserted that the Builder is relying on some new breach of contract by the Proprietors to determine the contract because the Builder ceased work on 15th July, 1991 [see; para 67 of the Builder's Points of Claim] and the Notice of Intention to Determine the contract by the Proprietors was given on 10th October, 1991 [see: para 60 of the Builder's Points of Claim], it is therefore impossible to imagine what new right has arisen to determine the contract as each allegation by the Proprietors in the Notice of Intention to Determine has been rejected by the Builder and the Builder has asserted an entitlement to suspend the works [see: paras 61, 62 and 65 of the Builder's Points of -- 25 of 33 -- I Claim]. 8. Damages for Breach of Contract If the Builder has affirmed the contract, no right to damages arises. In any event, damages for loss of bargain can only be assessed at the time the bargain is lost [see: Tredegar Iron and Coal Co. v. Hawthorn Bros & Co. (1902) 18 TLR 716]. Any argument that the contract has been determined as pleaded in the Reply must be rejected as the pleading in the Reply amounts to a departure from the Builder's Points of Claim and must be struck out. 9. Conclusion 0 (a) As there is no breach of contract by the Proprietors pleaded by the Builder, there 0 can be no claim for damages for breach of contract; (b) Therefore, the pleading must relate to a quantum meruit, which cannot be claimed until the contract is terminated; (c) The Builder's Points of Claim is totally defective and cannot succeed, no matter what argument is put forward, it must be struck out; (d) The Builder's Reply is a departure and ought to be struck out; (e) The contract should be regarded as an entire contract and the progress payments as necessarily being moneys had and received. 0 0 -- 26 of 33 -- or-r-- -----·------~---·-l '• , - ,,,-, ·:.';' ~ -:-S . C-..~: ....... ···'· L ....... , J. j( / ~ jV{ v:C · ~:~A0c·11~ . l r RE: DICKSON E .,.' ~~-~ 1\ l-::\_V ,._ Q~r)r" ·A·rc ............. .... .. . ............. C:./",._.,Jvvl ESPONDENT'S OUTLINE OF ARGUMENT 1. The-xpplicants have not satisfied the required threshold tests: (a) that the determination of the application might produce substantial savings in costs to the parties: see s. 39 (2) (a) of the "Commercial Arbitration Act, 1990 11 ; (b) that the questions of law are ones in respect of which leave to appeal would be likely to be granted under s.38(4) (b): see s.39(2)(b); (c) that in the exercise of its general discretion, the court should not entertain the application. 2. As to 1 (a), apart from the consideration of s. 67 of the "Queensland Building Services Authority Act, 1991", there is no question here that the court can make any determination which "might" produce substantial savings in costs because those other determinations are either premature or determinations concerning practice and procedure only. As to s.67, that is clearly inapplicable such that it, as well, does not satisfy the "might" test. -- 27 of 33 -- /! / ... /) . './ ---- ! -2- 3 ~ As to 1 (b), Gobbo J. in Mideco Manufacturing Pty. Ltd. v. Tait [1989) V.R. 50 (at 53-4) held that the second prerequisite to jurisdiction presented something of a conundrum in asking the court to decide where leave to appeal would be given when there was no answer to the question as yet and whether the implications of the actual answer could not be analysed. Nevertheless, he determined that it was 0 necessary to proceed on the basis that s. 3 8 ( 5) (a) would provide sufficient guidance. It is submitted that the various questions of 0 law do not satisfy the test of "substantially" affecting the rights of one or more of the parties. 4. As to 1(c), such a discretion is recognised in () Mideco Manufacturing Pty. Ltd. v. Tait (at 55) and should be exercised in this particular 0case. 5. Section 67 of the "Queensland Building Services Authority Act, 1991": From the material filed, the builder referred this matter to arbitration on 2nd September, 1991 (see para. 58 of the Po;ints of Claim). Further, the Points of Claim are dated 3rd -- 28 of 33 -- -3- April, 1992. Part 4 of the Act (which contains s.67) did not commence until 1st July, 1992 (see Gazette 29th May, 1992, p.869). The accrued rights that the parties had pursuant to their agreement and the "Commercial Arbitration Act, 1990" cannot, even arguably, have been abrogated by s. 67. First, s. 67 does not even purport to have a retrospective effect. 'I ( Secondly, it is ' clear from the High court decision of Carr v. Finance Cor:Qoration of ) Australia Ltd. {1982) 42 A.L.R. .J_y 29 ·which held that the common law presumption against imputing to the legislature an intention to interfere retrospectively with rights which had already accrued did not call for a narrow conception of the right because, if it were ) otherwise, the essential justice of the rule would be eroded (at 38) (and the particular decision with respect to whether the introduction of a requirement of non-compliance with a prescribed notice of demand as a precondition to a mortgagee exercising the statutory power of sale was inapplicable), that this argument has no merit whatsoever. 6. Entire contract: It is premature to determine, finally, any -- 29 of 33 -- -4- question of law as to whether or not this agreement was an entire contract because the arbitrator may well decide that the applicants were in breach of their agreement such that it was their fault that the work was riot able to be completed. On such an outcome, even a builder, such as the respondent, who has not substantially performed an entire contract, is able to recover: see Phillips v. Ellison Bros. c=) Pty. Ltd. (1941} 65 C.L.R. 221 at 223-4; "Booking .on Building Contracts" (2nd ed.) 0(para. 9 .1). 7. Progress Payments: The question of whether progress payments which were paid were moneys "had and received", again, is an issue which may not need to be decided if the arbitrator determines that the applicants were at fault with respect to the respondent being unable to complete the 0 building. Necessarily, if the progress payments are truly progress payments for work, in fact performed and accepted, which itself depends upon the arbitrator making certain findings of fact, no question of moneys had and received arises. As to progress payments, see: Re Sanders Constructions Pty. Ltd. v. Eric / I -·-----~ -- 30 of 33 -- -5- Newham (Wallerawang Pty. Ltd.) (1969) Qd.R. 29 at 39; and Ownit Homes Pty. Ltd. v. Batchelor (1983) 2 Qd.R. 124 at 134-5. 8. Quantum Meruit: The applicable principles are now set out in Pavey & Paul v. Matthews (1986-87) 162 C.L.R. 221 at 227-8 and 256. What is now important is the determination of whether or not there has been "unjust enrichment". That, again, in this ) case, depends upon determinations of fact by the arbitrator. It is arguable that even if the respondent is held to be at fault by the arbitrator, if he also holds that the agreement has been 11 avoided 11 and that benefits of work performed by him have been accepted by the applicants, quantum meruit may still be available. Nevertheless, the findings of fact need to be made first. 9. Damages for Breach of Contract: Presumably, this 11 point of law" depends upon the later 11 point of law 11 as to whether the respondent is able to determine the agreement by its letter dated lOth July, 1992. It is, of ·- ---· -···----- course, not necessary to rely upon that letter as the initiation of the arbitration, claiming, -- 31 of 33 -- I 10. -6- as it does, either "loss of bargain", damages or "quantum meruit", necessarily means that any "repudiation" by the applicants has been accepted by the respondent: see Sunbird Plaza Pty. Ltd. v. Moloney (1987-88) 166 C.L.R. 245 at 260 and Perri v. Coolangatta Investments Pty. Ltd. (1982) 149 C.L.R. 537 at 570. But again, a finding of this kind depends upon the arbitrator's determination of whether or not G\ one or other of the parties has repudiated the agreement and whether the applicants, in .. ·- l purporting to "terminate" the agreement were themselves, at the relevant time, in breach and thereby precluded either by the agreement {Exhibit "RKW1" - clause 15) or at law (Foran v. Wight (1989) 168 C.L.R. 385 at 407) from doing so. ('\) \. "Without and conversations Prejudice" 0 Consequential Documents: It is perfectly proper to rely upon such conversations and documents if it is alleged, as it is here, by a party such as the respondent that an agreement by way of compromise has been reached: see Rush & . Tompkins v. Greater London Council (1989] 1 A.C. 1280 at 1300. This "question of law" is -- 32 of 33 -- -7- 'simply not arguable. 11. Matters of Practice and Procedure: The remaining matters are ones of pure practice and procedure and are for the arbitrator only. They cannot constitute "points of law". ) I. ) ~ • -- 33 of 33 --