Catchwords

Home Building Act 1989 (NSW) section 7C – contracts requiring disputes under contract to be referred to arbitration – whether whole or part of agreed dispute resolution regime is rendered void by  section 7C – proceedings commenced contrary to agreed dispute resolution regime – stay of proceedings sought – Civil Procedure Act 2005 (NSW) section 67.

Significance

This decision confirms that section 7C of the Home Building Act 1989 (NSW) (HB Act) is only directed at provisions that require contractual disputes to be referred to arbitration and not to provisions that concern other forms of dispute resolution.  It also illustrates that where the contract provides for an agreed dispute resolution regime, and that regime has been invoked, it is prima facie inappropriate for the dispute to be litigated in court.

Facts

Clause 45 of a contract between the New South Wales Land and Housing Corporation as principal (defendant) and Cavasinni Constructions Pty Ltd as contractor (plaintiff) for the construction of residential units provided for an agreed four-step dispute resolution regime (clause 45). The first step required the contractor to submit the dispute to the superintendent for decision. The second step (which may occur if the contractor is dissatisfied with the decision) involved the contractor submitting the dispute to the principal for decision. The third step (which may occur if the contractor is dissatisfied with the decision of the principal) required the dispute to be determined by an expert. The fourth step permitted either party to require the dispute to be referred to arbitration. That fourth step would only arise if the decision of the expert required the principal to pay the contractor more than $500,000.

Various disputes arose between the parties. The plaintiff gave notice that it required matters to be determined by an expert in accordance with the third step in the dispute resolution regime. On the same day, the plaintiff commenced proceedings. The defendant sought a stay of the proceedings pursuant to section 67 of the Civil Procedure Act 2005 (NSW) on the grounds that the proceedings were commenced in breach of the mandatory dispute resolution regime stipulated in clause 45 and an abuse of process as they created a duplicity of proceedings in relation to the same disputes.

The plaintiff submitted that the grounds for a stay were nullified because clause 45 was rendered void by section 7C of the HB Act, which provides that 'a provision in a contract or other agreement that requires a dispute under contract to be referred to arbitration is void'.  The defendant conceded that the fourth step in the dispute resolution regime was void, but contended that the first three steps of the regime remained operative.  The critical issue was whether section 7C of the HB Act operated to make void the whole or only part of clause 45.

Decision

Darke J considered it appropriate that the proceedings commenced by the plaintiff be stayed, confirming that section 7C of the HB Act is only directed at provisions that require contractual disputes to be referred to arbitration and not to provisions concerning other forms of dispute resolution. Consequently, only the fourth step in the dispute resolution regime was void and the first three steps, which did not have an unseverable nexus with the fourth step, remained binding on the parties.