On 19 April 2013, Associate Justice Holt of the Supreme Court of Tasmania handed down his decision in Aquagenics Pty Ltd v Tasmanian Water and Sewerage Corporation (Southern Region) Pty Limited  TASSC 13.
The Aquagenics decision has particular implications for Western Australia where the new uniform national laws on domestic arbitration have yet to come into force.1
Background to the Proceedings
Aquagenics Pty Ltd (Aquagenics), as contractor, entered into a design and construct contract with Tasmanian Water and Sewerage Corporation (Southern Region) Pty Limited trading as Southern Water (Southern Water), as principal, for the design and construction of a water treatment plant.
Under the contract, Aquagenics was to submit to the contract superintendent regular claims for payment for the value of the work undertaken. The contract superintendent was to assess such claims and issue certificates stating the amounts payable by Southern Water. If a certificate was not issued within 14 days of the superintendent’s receipt of a claim, Southern Water was required to pay the whole amount of the claim within 28 days of its lodgement with the superintendent.
On 2 June 2010, Aquagenics submitted a progress claim to the contract superintendent claiming the sum of $279,936.80. The contract superintendent failed to issue a payment certificate and so the amount claimed became payable by Southern Water 28 days later.
Southern Water did not pay the claim and instead, on 8 February 2011, delivered a formal notice of dispute alleging that Aquagenics had failed to perform certain contract work and that other work was performed unsatisfactorily. Aquagenics denied the allegations.
Aquagenics issued a writ in the Supreme Court of Tasmania against Southern Water claiming payment of $279,936.80.
Southern Water filed a defence with a counterclaim in respect of the matters the subject of its notice of dispute issued under the contract on 8 February 2011.
Aquagenics did not file a defence to the counterclaim. Instead, it filed an application seeking an order staying proceedings on the counterclaim on the basis that, under the contract, those matters should be resolved by arbitration.
The hearing of the application for the stay was scheduled to commence on 10 October 2012. Nine days before the commencement of the hearing, the Commercial Arbitration Act 2011 (Tas) (2011 Act) commenced, section 8(1) of which provides:
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.
Formerly, the relevant provision of the Commercial Arbitration Act 1986 (Tas) (1986 Act) provided that a party to an arbitration agreement against whom court proceedings were commenced could apply for a stay which the court “may” order if satisfied that:
- there was no sufficient reason why the matter should not be referred to arbitration in accordance with the parties’ arbitration agreement; and
- the party applying for the stay was ready and willing to do everything necessary for the proper conduct of the arbitration.
Counsel for Southern Water submitted that the 2011 Act did not have retrospective impact on Aquagenics’ stay application which should be dealt with under the discretionary power to grant a stay in the 1986 Act.
Associate Justice Holt held that section 8 of the 2011 Act applies retrospectively and accordingly, Aquagenics’ application for a stay was to be dealt with as if it were an application for referral to arbitration under section 8 of the 2011 Act. Since the arbitration agreement between Southern Water and Aquagenics remained on foot and had not become inoperative or incapable of being performed, His Honour ordered that the parties be referred to arbitration.
Counsel for Southern Water submitted that:
- the Acts Interpretation Act 1931 (Tas) provides that a repealing enactment shall not, unless the contrary is expressly provided, “affect any right” or any “legal proceeding, or remedy in respect of any such right” acquired under the repealed enactment. In this case, the relevant “right” that would be affected by giving retrospective effect to section 8 was the right of Southern Water to have its counterclaim determined by the court subject only to the discretionary power to stay contained in the 1986 Act; and
- the words “a court before which an action is brought” [emphasis added] in section 8 indicates that section 8 is to have prospective operation only.
His Honour held that Southern Water’s contractual rights were not impacted as its rights were not dependent on a determination by the court and remained ascertainable and enforceable through arbitration.
In any event, His Honour noted that the savings and transitional provisions of the 2011 Act expressed an intention that section 8 was to apply retrospectively. The relevant clause provides that the 2011 Act “applies to an arbitration agreement (whether made before or after the commencement of [the 2011 Act]).”
Holt AsJ dismissed Southern Water’s submission that the word “is” in section 8 had any temporal significance and held that it was there simply to identify the court which is to exercise the jurisdiction contained in section 8.
With the exception of the ACT and Western Australia, the new uniform domestic arbitration laws are now in full force in all Australian jurisdictions. While the Commercial Arbitration Act 2012 (WA) was passed by the Western Australian parliament almost a year ago, the substantive provisions of the Act are yet to come into force and are set to commence on a date to be proclaimed.
Assuming that the reasoning in the Aquagenics decision is followed by the WA courts, any application for a stay of court proceedings under the Commercial Arbitration Act 1985 (WA) which is brought before but not heard and decided until after the proclamation date of the new legislation will be treated as a request for referral to arbitration under section 8 of the Commercial Arbitration Act 2012 (WA).
In such an instance, assuming that the underlying agreement was valid, the court would have no choice but to refer the matter to arbitration even though the stay application was brought at a time when the legislation afforded the courts a discretion as to whether to refer the matter to arbitration.