September 2, 2020

A recent decision of the VSC in Transurban WGT Co Pty Ltd v CPB Contractors Pty Limited [2020] VSC 476 considered whether urgent declaratory relief and an interlocutory injunction should be granted in order to effect the suspension of a ‘downstream’ arbitration until the outcome of a related ‘upstream’ arbitration had run its course.

The State of Victoria (the State) and Transurban WGT Co (Project Co) entered into an agreement for Project Co to design, construct, commission, finance, and operate the West Gate Road tunnels and related works (the Project Agreement). Project Co, in turn, entered into an agreement with CPB Contractors Pty Limited (the Subcontractor) to design and construct the West Gate Road tunnels and related works (the Subcontract). The Subcontract contained a provision concerning claims or disputes under the Subcontract in respect of which Project Co may have a related claim against the State under the Project Agreement. Cl 44A of the Subcontract provided that:

  •   when notifying of a claim, the Subcontractor is to notify Project Co whether it is a ‘Linked Claim’;
  •   Project Co is obliged to pursue its related claim upstream against the State under the Project Agreement, with the assistance of the Subcontractor; and
  •   subject to certain conditions being met, the Subcontractor’s entitlement against Project Co under the Subcontract in respect of a ‘Linked Claim’ would correspond with Project Co’s entitlement against the State under the Project Agreement.

The Subcontract also provided that a ‘Linked Claim’ was not to be progressed under the Subcontract whilst any related dispute under the Project Agreement was in progress (the Suspension Clause).

A number of disputes arose between the Subcontractor and Project Co, including in relation to the discovery of per and poly-fluoroalkyl substances on the site. The Subcontractor submitted a number of claims to Project Co, and notified Project Co that some of these claims constituted ‘Linked Claims’. Project Co subsequently made corresponding claims upstream against the State, which were not accepted.

The Subcontractor referred the downstream claims to arbitration, including a claim as to whether the Suspension Clause was invalid by reason of ss 13 and 48 of the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act).

Project Co issued a Notice of Arbitration to the State under the Project Agreement and then commenced urgent interlocutory proceedings seeking:

  •   a declaration that the Suspension Clause was valid; and
  •   an interlocutory injunction restraining the Subcontractor from taking steps to progress the downstream arbitration until such time as the upstream arbitration is determined.

In finding in favour of the Subcontractor, and refusing to grant the requested urgent declaratory and injunctive relief, Lyons J held that:

  •   the Court’s power to grant interim measures should be exercised only in circumstances in which such orders were effectively the only means by which a party could be protected until an arbitral tribunal was convened;
  •   the questions of validity, enforceability and / or applicability of the Suspension Clause were questions within the jurisdiction of the downstream arbitration tribunal, and thus, there would be no real prejudice to Project Co should the Court refuse to grant relief;
  •   the circumstances of this case were neither exceptional nor objectively urgent such that a declaration from the Court is necessary to protect Project Co’s rights in accordance with the Subcontract; and
  •   the proceeding should be referred to the downstream arbitral tribunal pursuant to s 8 of the Commercial Arbitration Act 2011 (Vic).

Although the Court was not required to consider if the suspension clause fell foul of the SOP Act, Lyons J “doubt[ed] whether a suspension clause is itself a ‘pay when paid provision’ under s 13 of the SOP Act“.

The use of ‘Linked Claims’ regimes and equivalent project relief clauses are common in construction and infrastructure contracts for projects procured through Public-Private Partnerships. This decision highlights that courts will not interfere with an arbitration agreement unless it can be said that such agreement is null and void, inoperative, or incapable of being performed.

A copy of the full decision can be found here.

Share on: