PARTIES:

BETWEEN:
AUSTRALIAN NATIONAL PARKS AND WILDLIFE SERVICE
Appellant
AND:
PMT PARTNERS PTY LTD
(In Liquidation)
Respondent

TITLE OF COURT:

JURISDICTION:

FILE N2:

DELIVERED:

HEARING DATES:

In the Supreme Court of the Northern Territory of Australia

Supreme Court of the Northern Territory of Australia exercising Territory jurisdiction

AP15 of 1994

Delivered at Darwin Thursday 7 July 1994

Heard at Darwin Friday 13 May 1994

JUDGMENT OF:	MARTIN	CJ,	MILDREN	J	&
GRAY   A/J

CATCHWORDS:

Limitation of Action - Contracts - Appeal - Arbitration clause Provision requiring disputed claims to be submitted to superintendent within 14 days - Submission made late - trial judge extended time under Arbitration legislation -
Commercial Arbitration Act, s48.
Limitation of Action - Practice and Procedure - Contracts - Arbitration clause - Contractor submits  dispute  to superintendent within 14
.days - Decision given as soon as practicable - Contractor	may	submit	matter	to	dispute

principal	Rights circumstances -

barred	in	certain

Commonwealth v Jennings  Construction  Ltd  [1985] VR 586, considered.
Port Jackson Stevedoring Pty Ltd v Salmond and
Spraggon	(Australia)	Pty Ltd (1977-8) 139 CLR 231, considered.
Alliance   Petroleum  Australia   NL and  Ors	v
Australian	Gaslight	Company	[ 1985-6]	39 SASR
84, considered.
Transaustralian Constructions Pty Ltd v Northern Territory of Australia and Anor (1991) 104 FLR 358.
Practice	Contracts	Arbitration	clause Circumstances allowing referral to arbitration
Contractor		chooses	to		give	notice	to principal requiring referral - Contr ctor has taken	a	step	in	relation	to	arbitration Other considerations -
C6mmercial Arbitration Act, ss4, 48(1) & (3).
Minister for Main Roads for Tasmania v Leighton Contractors  Pty  Ltd   and  Candac  Ltd   and Maµnsell and Partners (1985) 1 BCL 381, considered.
John	Grant	and	Sons	Limited	v.	The  Trocadero
..:Building  and Investment  Company  Limited (1938)
60 CLR 1, considered.
Plucis v. Fryer (1971-72) 126 CLR 17, considered.
Hammond v.	Wolt [1975] VR 108,·considered.
Transaustralian Constructions Pty Ltd v. Northern Territory of  Australia  &  Another  (1991) 104 FLR 358, considered.
Babanaft   International  Co. S.A.  v.	Avant Petroleum
Inc. (1982) 1 WLR 871, followed.
Nestle  Company  Ltd	v.	E.	Biggins  &  Co.	Ltd	(1958)
1 Lloyds Rep 398, referred to.
Pinnock	Brothers	v.	Lewis	and  Peat	Ltd	[1923] 1
K.B. 690, referred to.
Australian    Shipping   Commission    v.	Kooragang Cement Pty	Ltd	(1988) VR 29, considered.
Trustees	Executors	and Agency	Co	Ltd	v.	Reilly
(1941] VLR 110, applied.
Jadranska	Slobodna	Plovidba	v.	Oleagine	S .A.
(1984) 1 WLR 300, considered.
Rheem	Australia	Limited	v.	Federal	Airports Corporation (1990) 6 BCL 130, distinguished.
Reed Constructions Pty Ltd v. State Rail Authority
of	New	South	Wales	( 1987)	3	BCL	384, distinguished.

REPRESENTATION:
Counsel

Counsel for the Appellant Counsel for the Respondent
\
Solicitors

Mr Riley QC Mr Nosworthy

Solicitor for the Appellant	Australian	Government
Solicitor
Solicitor for the Respondent	Messrs McBride & Stirk

Judgment Category classification: CAT Court Computer Code:
Judgment ID Number: MIL94019 Number of pages:	23

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA
AT DARWIN

N2 AP15 of 1994 BETWEEN:
AUSTRALIAN NATIONAL PARKS AND WILDLIFE SERVICE

AND:

Appellant

PMT PARTNERS PTY LTD
(In Liquidation)
Respondent

CORAM: MARTIN CJ, MILDREN J & GRAY A/J

REASONS FOR JUDGMENT
(Delivered 7 July 1994)

MARTIN CJ
I have had the benefit of the reasoning of Mildren J and Gray A/J. and agree with them. That is contrary to the opinion expressed by me in Commonwealth of Australia v. Skonis Housing and Development (NT} Pty Ltd (In Liquidation), unreported, 24 December 1991. That case concerned the application of s53 of the Commercial Arbitration Act, the provision  relating to the power of the Court to stay proceedings commenced by a party to an arbitration agreement. Following the views of Angel J. in Transaustralian constructions Pty Ltd v. Northern Territory of Australia & Another (1991) 104 FLR 358, and for additional reasons expressed therein, I concluded that the same provisions as those in question here constituted an arbitration agreement. That view did not, however, affect the result, since the application for the stay was dismissed because  of the failure of the defendant to comply with the

terms of the agreement in relation to the particulars to be supplied by it when requiring the matter at issue to be referred to arbitration.

On further consideration, the provisions of subclauses 45(a) and 45(b) are but steps which may be taken by the contractor if he wishes to have any disputes or differences decided. They may be decided at any stage of that process. It is only when the contractor has exhausted those avenues that the option of proceeding to arbitration as provided for in the remainder of the agreement is available. Only when the option is taken up is the agreement to arbitrate enlivened. Following the procedures set out in those subclauses has the purpose beyond that of enabling disputes or differences to be decided, that is, of refining the matters at issue and avoiding arbitration until that has been achieved.

The time limits set under subclauses 45(a) and 45(b) are not "in relation to an arbitration" (s48(1)), but in relation to the other procedures by which disputes or differences might be decided.

I agree that the appeal should be allowed and the orders below set aside.

MILDREN J & GRAY A/J:

On 15 August 1990, the appellant contracted with the respondent to carry out road and carpark construction work in the Uluru National Park.

During the course of the work the appellant rejected certain	work		as			defective		and  directed		that	it		be reconstructed.				Differences		arose	between		the parties as to the justification	for the rejection and the cost of consequential delays and extra work. The contract is in a standard form (NPWC 3) which is in	common		use			in		construction		works		throughout Australia.		Clause 45 of the Contract deals with the settlement	of		disputes.		As	an		initial		step	the contractor is required to submit the dispute to the superintendent		no		later	than		14		days		after the dispute arises. In this case, the respondent made a submission which the superintendent rejected as having been made outside the time stipulated. The respondent made an application to the Court on 3 December 1993 pursuant to s48 of the Commercial Arbitration Act ("the Act"). The respondent sought, inter alia, an extension of the time provided by clause 45(a) for the submission of the dispute to the superintendent.

On 4 February 1994, the learned trial Judge granted the relief sought. This appeal is brought against that decision.

There are a number of grounds alleged in the Notice of Appeal. We propose to deal first with ground 3 which goes to the jurisdiction of the court to grant the relief sought in the original application. Ground 3 alleges that the learned trial Judge erred in holding that s48 of the Act applied to clauses

45(a) and 45(b) of the contract.

The learned trial Judge found that the relevant dispute arose on 12 August 1991. This  was  occasioned by the rejection by the superintendent's representative of a claim made by the respondent on
4 June 1991. This finding can be accepted on this appeal, although Mr Riley QC, who appeared for the appellant, submitted that the dispute arose as early as January 1991.

Following the rejection of its claim, the respondent submitted the matter in dispute to  the superintendent by letter dated 27  August  1991. There is a dispute about whether this letter constituted a submission in writing in accordance with the contract.

The learned trial Judge found that the letter dated
27 August was served in accordance with the contract and, although disputed on the appeal, we accept that finding for the purpose of expressing our views upon this ground.

The findings of the learned trial Judge meant that the submission to the superintendent was made beyond the 14 day period stipulated in the contract.

At this point it is necessary to set out the provisions of clause 45.

"SETTLEMENT OF DISPUTES
Notwithstanding the succeeding provisions of this clause, the Contractor shall if the work under the Contract has not been completed, at all times (subject as otherwise provided for in the Contract) proceed without delay to continue to execute the work under the Contract and perform his obligations under the Contract and in so doing shall comply with all directions as

defined in clause 23 issued or given to or served or made upon the Contractor under or pursuant to the provisions of the Contract either by the Principal in writing or by the Superintendent in accordance with clause 23.
All disputes or differences arising out of the Contract or concerning the performance or the non-performance by either party of his obligations under the Contract whether raised before or after the execution of the work under the Contract shall be decided as follows -
The Contractor shall, not later than fourteen days after the dispute or difference arises, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Superintendent for decision and the Superintendent shall, as soon as practicable thereafter, give his decision to the Contractor.
If the Contract is dissatisfied with the decision given by the Superintendent, he may, not later than fourteen days after the decision of the Superintendent is given to him, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Principal for decision and the Principal shall, as soon as practicable thereafter, give his decision to the Contractor in writing.
If the Contractor is dissatisfied with the decision given by the Principal pursuant to the last preceding paragraph, he may, not later than twenty-eight days after the decision of the Principal is given to him, give notice in writing to the Principal requiring that the matter at issue be referred to arbitration and specifying with detailed particulars the matter at issue, and thereupon the matter at issue shall be determined by arbitration. If however, the Contractor does not, within the said period of twenty-eight 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.
Where a notice is given by the Contractor to the Principal pursuant to the last preceding paragraph requiring that the matter at issue be

referred to arbitration no proceedings in respect of that matter at issue shall be instituted by either the Principal or the Contractor in any court unless and until the arbitrator has made his award in respect of that matter at issue."
Arbitration shall be effected -
by an arbitrator agreed upon in writing by the parties within twenty-eight days after the said notice is received by the Principal; or

in the absence of that agreement, by one of at least three persons, none of whom shall be an employee of the Principal or of the Contractor or have had any association with the work under the Contract, whose names are submitted in writing by the Principal for selection by the Contractor within a further period of twenty-eight days after expiry of that last mentioned period, being the person whose selection as arbitrator is notified in writing by the Contractor to the Principal within twenty-eight days after the names are so submitted; or
in the absence of that selection, by an arbitrator appointed in accordance with the provisions of the laws relating to arbitration in force in the State or Territory named in the Annexure hereto.
A reference to arbitration under this clause shall be deemed to be a reference to arbitration within the meaning of the laws relating to arbitration in force in the state or Territory named in the Annexure hereto the meaning of the laws relating to arbitration in force in the State or Territory named in the Annexure hereto and the arbitration proceedings shall be conducted in that State or Territory. The arbitrator shall have all the powers conferred by those laws and it shall be competent for him to enter upon the reference without any further or more formal submission than is contained in this clause.
Moneys that are or become due and payable by the Principal in respect of work carried out under the Contract shall not be withheld because of arbitration proceedings but the Principal may, at his discretion, and pending the award of the arbitrator withhold payment of

moneys	in respect	of any	matter	that	is the subject of arbitration proceedings."
The central question which arises under this ground of appeal is whether the power to extend time under s48 of the Commercial Arbitration Act extends to the
times fixed by clause 45(a) and (b) of this contract. Section 48 of the Act provides:-

"EXTENSION OF TIME
(l)Subject to subsection (3), the Court shall have power, on the application of a party to an arbitration agreement or an arbitrator or umpire, to extend the time appointed by or under this Act or fixed by the agreement or by an order under this section for doing an act or taking a proceeding in or in relation to an arbitration.
The Court may make an order under this section although an application for the making of the order was not made until after the expiration of the time appointed or fixed for doing the act or taking the proceeding.

An order shall not section	extending	the arbitration	proceedings unless -

be made under this time within which may be commenced

the Court is satisfied that undue hardship would otherwise be caused; and
the making of the order would not contravene the provision of an Act limiting the time for the commencement of arbitration proceedings."

Mr Riley contended that the step provided for by Clause 45(a) is not the doing of an act "in or in relation to an arbitration". Mr Nosworthy, who appeared for the respondent, submitted that the

required step is a necessary part of the process of initiating an arbitration and is within the scope of s48. The learned trial Judge accepted the latter submission.

Clause 45, as is evidenced by the cases to which the Court was referred, is in very common use in construction contracts throughout Australia. Despite the fact that contracts containing clause 45 or its equivalent have been in common use for many years, the Court was not referred to any case in which the construction of clause 45 has been comprehensively considered, although there are a number of single Judge decisions where parts of the clause have been considered in differing contexts. In particular there is no decided case of which we are aware in which the times fixed by clause 45(a) or (b) have been extended pursuant to s48 of the Act.

Clause 45 is concerned with the settlement of disputes arising out of the execution of the contract. It is neatly divided into two parts. The first part provides machinery whereby disputes may be settled by agreement. The second part provides for settlement by arbitration. The two parts could quite appropriately have been made the subject of two separate clauses.

The second paragraph of clause 45 includes the words that disputes or differences inter alia, concerning the performance by either party of his obligations under the contract "shall be decided as follows." This expression prima facie implies that, in the event of a dispute, neither party can go to the Court as a first step (i.e. without complying with clause 45(a)) without being in breach of contract: see Commonwealth v. Jennings Construction Limited [1985] VR 586 per Fullagar J at p595.

Once a dispute has arisen, the contractor is required to submit the matter in issue to the superintendent within 14 days. The superintendent is required to give his decision to the contractor as soon as practicable.

If the contractor is dissatisfied with the superintendent's decision, clause 45(b) provides that the contractor "may" submit the matter in dispute to the principal. However, the clause does not, by its express terms, take away rights or bar conduct for a failure to comply with either clause 45(a)  or (b):   see Commonwealth   v.   Jennings,   supra and the only party who can refer the dispute in the first place is the Contractor. The contract does however expressly provide for a barring of rights in two circumstances. First, if the Contractor fails

to give notice within time to the Principal requiring the matter to be referred to arbitration, the Principal's decision is not subject to arbitration. However, the contract does not say that the Principal's decision is final and binding on the parties; nor does it say that legal proceedings may not be taken in respect of the matters at issue which were the subject of the Principal's decision. Secondly, the clause provides that if the contractor does, within time, require the Principal to refer the matter at issue to arbitration, then

"no proceedings in respect of that matter at issue shall be instituted by either the Principal or the Contractor in any court unless and until the arbitrator has made his award."

In our view the consequence of a failure to comply with clause 45(a) within time does not mean that the Contractor's claim cannot be pursued. As Fullagar J observed in Commonwealth v. Jennings, supra:
11	I do not think that a contract of this kind should be construed as making all disputes dead, as soon as the time expires for submitting them to the first step towards arbitration, unless there is some term to that effect - I do not think that such a term should be merely implied. If the Commonwealth wished to bind the Contractor to such a result, it should have inserted a term to that effect 11
Clauses in contracts which impose time bars are enforceable according to their terms unless their application would lead to absurdity, or defeat the main object of the contract, or for some other

reason,  their  scope  is  to  be  cut  down.   But   such clauses are to  be  strictly  construed  and  where  there is  ambiguity,  these  clauses  are  construed  in   favour of the contractor: see Port Jackson Stevedoring Proprietary Limited v. Salmond & Spraggon (Australia) Proprietary Limited (1977-8) 139 CLR 231
at	238, 281, 286.

Both  parties  have  proceeded upon the	assumption that the time	limits  fixed	by clauses		45(a)			and	(b)	are mandatory.					One  possibility	is			that		a		failure		to comply with the times limited by either  clause 45(a) or	45(b)		has		the	result	only	that		the		contractor loses		the			right		to		follow		the		course		of			referring the		matter		to		the principal and ultimately, to arbitration. Another  possibility  is  that   the contractor not only  loses  those  rights, but  should he commence proceedings, he is in breach of a condition of the contract which may be pleaded as a defence to the action in  the  same  way  as  if  the action were statute barred although in this case it
is	not		inevitable	that	the action		must		fail.		The defendant		may		have			waived	noncompliance			or	may be estopped		from  relying upon  the		point.		The possible view	just			discussed			has more	force		in		relation		to clause		45(a)	than		(b)	given	the	use	of		the	word "shall" in the former whilst "may"  is  used  in  the latter.  It   may   be   therefore   that   clause   45(b) unlike clause 45(a) is not  a  condition  the  breach  of which gives rise to a defence to legal proceedings.
A	third		possibility	is	that	whilst		compliance	with clause	45(a)	is	mandatory	the		time	limits	fixed	by these clauses
are not  mandatory  at  all,  but merely  directory,  so that neither the right to proceed further to the Principal or arbitrator, nor the right to  commence legal proceedings, is affected merely because the

contractor fails to comply with clause 45(a) in time. This seems to be the view of J. Dorter, in an article "Understanding and Selecting Construction Contract Forms" published in (1992) 8 BCL 5 at 53: see also the approach of Cox Jin Alliance Petroleum Australia    NL    and    Others    v.      Australian     Gaslight Company (1985-1986) 39 SASR 84; (1985) 1 BCL 389.

Whilst it is not strictly necessary for us to decide the point (which was in any event not fully argued before	us)		there	is	much		to	commend		the	third possible view of these provisions.		Clause 45 does not state what are the consequences of a failure to comply with either clauses 45(a) or (b), whereas it is	clear			that	the		failure			of		the		contractor		to require			the			Principal		to	refer		the	Principal's decision			to			arbitration		within			the			time	limited results in a loss of the right to arbitrate.		Why should		it		therefore be supposed that the time limits, fixed by clauses 45(a) and (b) were meant to be mandatory? Time is not expressly stated to be of the essence, and the implication flowing from the express provisions relating to the right to arbitrate is to the contrary. If the provisions as to time in clause 45(a) are of the essence, as Fullager J seemed to think in commonwealth  v. Jennings, supra, at 589, it is difficult  to reconcile this view with His Honour's conclusion at
595		that	"there			is to	be	no	loss		of	rights,	or barring of conduct, merely because of a failure to submit the matter at issue to the director of works (the		equivalent		of	the			Superintendent	under	this clause).		We note that		in		In		the	matter	of	"The Commercial			Causes				Act		1910-1972"			and    in		the		matter of	an     Agreement	Between		Rheem Australia Limited v. Federal Airports Corporation (1990) 6  BCL 130, at  134, Carter J also concluded that these time limits

are mandatory so that a failure to comply strictly with clause 48(b) resulted in a loss of the right to proceed to arbitration, but nevertheless His Honour concluded that legal proceedings could be still taken, although at what stage is not clear from His Honour's judgment.

Even  if   the   time   limits   must   be   strictly   complied with, it does not follow that the contractor is obliged to follow the course charted by clause 45(b). We think that the use in that clause of the word "may" was deliberately chosen by the draftsman. The clause states that the contractor may submit the matter to the Principal who shall as soon as practicable thereafter give his decision etc. Similarly, in the next paragraph of the clause, it is provided that the contractor, if dissatisfied with the Principal's decision, may require the issue to be referred to arbitration, and thereupon the matter at issue shall be determined by arbitration. The draftsman appears to us to have been careful in his choice of words and this change, from "shall" to "may" indicates that the intention of the draftsman was that the contractor has the choice at each of these stages to either commence proceedings or proceed in accordance with the machinery provided by the clause. This is further supported by the fact that the superintendent's determination to reject a claim does not determine
the dispute itself:	see Commonwealth	v.	Jennings,
supra. The use of the word "may"  in clause 45(b)  would make it impossible to prove a breach of contract by the contractor as a defence or upon an application for a stay, assuming s53  of the Act to be applicable.

If the contractor chooses to submit the dispute to

the principal, the principal must give his decision to the contractor in writing as soon as practicable. If the contractor is dissatisfied with the

principal's decision, he has, option	to	go	to	Court	or

in our view, again an put	the	arbitration

machinery in motion. In the former event, he is not in breach of contract and his action could not be defended on that ground or stayed.

It is, we think, quite understandable that the draftsman of clause 45 decided to give the contractor the option of going to Court when he had failed to obtain satisfaction from the

superintendent. the contractor having	failed

It is equally understandable that should have the same option after to receive satisfaction from the

superintendent or principal.

We do not think there is anything in the context which requires the word "may" where it appears in clause 45 to be read as "shall" as Angel J did in concluding that the whole of clause 45 was an arbitration agreement within the meaning of the Act: see   Transaustralian   Constructions    Pty    Ltd    v. Northern Territory of Australia and Another (1991)
104 FLR 358.

In our opinion, it is only when, and if, the contractor chooses to give notice to the principal requiring the dispute to be referred to arbitration that "the matter at issue shall be determined by arbitration" and that the contractor has taken a step "in or in relation to an arbitration".

For the same reasons it is in our view clear that the provisions of subparagraphs (a) and (b) do not constitute an arbitration agreement within the

definition thereof in s4 of the Act.

It is apparent that the dispute may be settled or taken to court at any stage prior to the contractor giving notice requiring an arbitration.  Thus it is, in our view, impossible to say that steps taken in relation to subparagraphs (a) and (b) are "in or in relation to an arbitration", merely because such steps need to be taken before an arbitration can be required by the contractor. The failure to give notice requiring arbitration within 28 days results in a bar to arbitration. The absence of any such provision in subparagraphs (a) and (b) is supportive of the view that those subparagraphs are not concerned with arbitration. The right to arbitrate only arises if and when the appropriate notice is given within the time stipulated and a bar to arbitration is the consequence of non-compliance.

Section 48(3) of the Act expresses the discretionary considerations to be considered upon an application to extend time. The fact that its operation is confined to an order "extending the time within which arbitration proceedings may be commenced" suggests that a step initiating arbitration proceedings is the outer limit of what is encompassed by the expression "relating to an arbitration" in s48(1).

There is also a very real question whether the second part of clause 45 amounts to an arbitration agreement as defined in s4 of the Act as meaning "an agreement in writing to refer present or future disputes to arbitration".

This contemplates that the parties to the agreement are bound to refer present or future disputes to

arbitration. An agreement which gives one of the parties an option to submit a dispute to arbitration does not readily answer the description of an arbitration agreement as defined. In Minister for Main Roads for Tasmania v. Leighton Contractors Pty Ltd and Candac Ltd and Maunsell and Partners (1985}
1 BCL 381, Underwood J expressed the opinion, obiter, that clause 45 did not amount to a submission within the meaning of s3 of the Tasmanian Arbitration Act which defines "submission" in substantially identical terms to the definition of "arbitration agreement" in s4 of the Act. Underwood J cited John Grant and Sons Limited v. The Trocadero Building and Investment Company Limited (1938) 60 CLR 1, Plucis v. Fryer (1971-72} 126 CLR 17 and Hammond v. Wolt [1975] VR 108.

This point was raised in Transaustralian Constructions Pty Ltd v. Northern Territory of Australia, supra where Angel J held that clause 45 did fall within the definition of arbitration agreement in the Act. His Honour relied chiefly upon passages in Russell on Arbitration 19th ed. p44.

The question cannot be said to be settled: see the discussion and citations in Dorter and Sharkey Building and Construction Contracts in Australia 2nd ed. Volume 2 p7129 to 30. However, as the penultimate paragraph of clause 45 deems a reference to arbitration under the clause as a reference to arbitration within the meaning of the Commercial Arbitration Act, it would seem clear that once the Principal is required by the clause to refer the dispute to arbitration, there is an "arbitration agreement" within the meaning of s4.

The question whether the extending power contained in s48 of the Act extends to the time limit fixed by clause 45(a) and (b) of the contract must depend upon the proper construction of s48 and clause 45.

The	English	equivalent	of	s48	is	s27	of	the
Arbitration Act.
It provides:-

"Where the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the High Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may, on such terms, if any, as the justice of the case may require, but without prejudice to the provisions of any enactment limiting the time for the commencement of arbitration proceedings, extend the time for such period as it thinks proper."

The scope	of	s27 was considered		by	the	Court	of Appeal in Babanaft	International	Co.  S .A.		v.	Avant

Petroleum Inc. (1982) 1 WLR 871. owner of the tanker "Oltenia". chartered to Avant Petroleum.

Babanaft was the The	vessel	was The charter		party

which contained an arbitration clause, provided in clause M2, that the charterers would be discharged from liability in respect of any claims the owners may have unless

"··· a claim has been presented to charterers in	writing	with	all	available	supporting

documents, within 90 (ninety) days from the completion of discharge of the cargo..."

Claims were made by the owners which had not been notified within the stipulated time limit. The charterers relied upon this point in its defence of the claims.

The owners applied to the Court for an order extending time under s27. The trial Judge refused the application and the owners appealed to the Court of Appeal. The principal judgment was delivered by Donaldson LJ with which Stephenson LJ and Sir David Cairns concurred.

Donaldson LJ considered that the question was whether the giving of notice under clause M2 could be said to be "a step to commence arbitration proceedings". His Lordship first discussed the judgment of the Divisional Court in Nestle Company Ltd v. E. Biggins & Co. Ltd {1958) 1 Lloyds Rep 398. In that case, the Court had extended the time for making a claim for quality or condition of the goods which had to be made not later than 14 days from the discharge of goods at the point of final destination. Goddard CJ, who gave the judgment of the Court, considered that the claim was a step to commence arbitration proceedings and was thus within the ambit of s27.

Donaldson LJ (at p885) said in relation to the judgment of Goddard CJ:-

"The concept of "claiming arbitration" is well known in the commodity trades. Telex messages fly to and fro and at some stage one party or the other says, "We claim arbitration. " The arbitration rules of the trade concerned then provide the steps to be taken by each party. I would therefore accept that in such cases "claiming

arbitration"			may		be regarded		as a step		to commence arbitration			proceedings	within the. meaning of section 27.		I would also accept that		under		that		particular	contract,	the claim for quality or condition had to precede or accompany the claim for arbitration, since arbitration cannot be claimed in vacua - it has	to	be	linked		to	a	specific	dispute. Where		I		have	much		more	difficulty	is		in seeing why the making of a claim for quality or	condition		is			a		step			to		commence arbitration proceedings. It is a condition precedent to such proceedings, but it does not of itself commence the proceedings or necessarily lead to their being commenced. The claim may be conceded or settled amicably. In my judgment, the decision of the Divisional Court was wrong and should be overruled.
In essence section 27 empowers the court to extend the time fixed for giving notice to appoint an arbitrator, appointing an arbitrator or taking some other step to commence arbitration proceedings if doing so will prevent a claim becoming time-barred. It does not empower the court to extend any other time limits. In parenthesis, I would add that it does not empower the court to extend a time limit for commencing arbitration if, in the absence of such an extension, the claim would remain alive and could be litigated as was the case, for example, in Pinnock Brothers v. Lewis and
Peat Ltd [1923] 1 K.B. 690.11
Later at p886, Donaldson LJ said:-
"Alternatively, Mr Yorke submitted that presenting a claim with all available supporting documents can itself be regarded as a step to commence arbitration proceedings and that accordingly clause M2 can be construed as barring claims unless such a step is taken. The answer to this is that presenting a claim with all available supporting documents does not necessarily lead to an arbitration and so is not a step to commence such proceedings..."

We respectfully agree with the opinion of Donaldson LJ to which we have just referred.

The view has been expressed	by the Victorian Full

Court that s48 is wider in some respects than s27, as it undoubtedly is. In Australian Shipping Commission v. Kooragang Cement Pty Ltd (1988) VR 29, Tadgell J, at p36, said:-

"The similarities and differences between s48 of the Commercial Arbitration Act and s27 of the English Arbitration Act 1950 were much debated before us. Section 48 of our Act is certainly wider in its application in several respects than s27 of the English Act. Yet counsel for the appellant argued that in its essential and presently relevant operation it is narrower than s27. The latter applies only to allow the extension of a time fixed by an arbitration agreement for the commencement of arbitration proceedings. It does not, for example, allow the extension of a time appointed or fixed for doing some act in arbitration proceedings already commenced; and it applies only where the arbitration agreement itself provides that any claims to which the agreement applies shall be barred unless the provision is complied with. The jurisdiction conferred by s48 is not expressed to depend upon the existence of a provision in the arbitration agreement imposing a time bar on claims. The jurisdiction is expressed to allow the Court to extend a time which is either (a) appointed by or under the Act; or (b) fixed by the arbitration agreement; or (c) fixed by an order under s48 itself, for doing any act or taking any proceeding in or in relation to an arbitration."

See also the passage in Kaye J's judgment at p33, where His Honour discusses the history of the enactment of s48 and concludes that s27 was the model for s48.

In a comparison between the two sections in the present context, the question is whether taking "a step to commence arbitration proceedings" is distinguishable from "doing an act in or in relation to an arbitration".

It	is	clear	that			the		former	expression		does	not embrace a step to be taken within an arbitration, as Tadgell J noted.		But otherwise, we can detect no ground of distinction.			In our opinion, to be an act in relation to an arbitration, the act must be shown to be more than an act which may or may not turn out to be a step towards an arbitration.		The expression "in		relation	to"	is			doubtless		very			wide			but	the essential		component		is			that	there				must			be	two subject matters which are to some extent connected: Trustees	Executors				and			Agency			Co	Ltd	v. Reilly [1941] VLR 110 per Mann CJ at plll.

This component seems to me to be missing when one considers the step required by clause 45(a) or (b). In our view, it cannot be said that the act required by clause 45(a) or (b) is an act in relation to an arbitration. In this connection, we adopt the reasoning of Donaldson LJ in Babanaft which I think is equally applicable in the present context.

The point is reinforced by comtrasting the present circumstances with cases concerning a Centrocon arbitration clause where the whole clause expressly relates to arbitration: see Jadranska Slobodna Plovidba v. Oleagine S.A. (1984) 1 WLR 300.

Mr Nosworthy relied upon three cases which were said to be contrary to the views we have just expressed. In Rheem Australia Limited v. Federal Airports Corporation, supra, Carter J heard an application to extend time under s36 of the Arbitration Act (Old). The contractor was out of time in its reference under clause 45(b) to the principal but had given the notice requiring arbitration within time. It sought an extension of time in relation to its reference under clause 45(b). Carter J, although

refusing the extension upon discretionary grounds, accepted that the Arbitration Act applied to the time limited imposed by clause 45(b). Section 36 of the Queensland Act is expressed differently from s48 and is in the same terms as s27 of the English Act. Carter J stated (at pl34) that it was common ground that "some other step to commence arbitration proceedings" (the words of s36) comprehended the
submission by the contractor to the principal under clause 45(b) and that s36 was available to extend the time taken for that step. Thus, it appears that what we regard the critical point was not argued before Carter J.

In  ::.;R=e=e:.::d==----   ;:C;..::o=-=n=s::;_t=r=-=u-=c-=t=i:.::o=n=s::;  ---=P'--'t==-y,  ---=L:....:t=d=-----=v_;.'---==S'--'t=a=t:::.ce=    =R=a=i==· l
Authority of New South  Wales  {1987)  3  BCL 384,  Young J, although refusing a claim for certain declarations, expressed the view (at p386) that, if a contractor went to the Court after complying with clause 45(a) alone, his proceeding could be stayed under s53 of the Act. This obiter opinion was offered tentatively and without elaboration. In that case the contractor had made the submission under clause 45(b) and the principal's ruling had been received. Young J accepted the view that the contractor was free to go to a Court after receiving the principal's ruling under clause 45(b), but the point was conceded by the defendant in any event.

In	Transaustralian		Constructions			Pty		Ltd		v. Northern			Territory			and	Another,				supra,		the contractor had issued proceedings in Court after the rejection		of		a	claim		under				clause	45{a)				by	the principal.			The		principal		applied		for	a		stay. Angel J,			after referring to Reed	Constructions	and Rheem		Australia,			concluded			that		clause			45 did constitute an arbitration agreement within s4 of the

Act. His Honour concluded that the word "may" in subparagraph (a) should be read as "shall" and that, accordingly,  the  contractor  was  in   breach   of contract in commencing legal  proceedings.  In  the  result    His Honour    granted  a   stay.	Insofar as Angel J's judgment is contrary to the view we have expressed,  we  are  obliged  to  say,  with  respect,   that it is wrongly decided.

For the	reasons we have	endeavoured	to	express,	we consider		that	ground	3 of		the	appeal		has	been made out.	The appeal	should		be allowed	and the	orders below set			aside.