Siemens Ltd v Origin Energy Uranquinty Power Pty Ltd

This is an application by the defendant, Origin, for the stay of these proceedings under s 8 of the Commercial Arbitration Act 2010 (the CA Act 2010). In the proceedings, the plaintiff, Siemens, seeks to recover amounts that were the subject of two payment claims made in accordance with the Building and Construction Industry (Security of Payment Act) 1999 (the SOP Act ). It does so on the basis that that Origin failed to provide a payment schedule in response to the claims within the time specified in s 14(4) of the SOP Act and that, as a result, it is entitled to recover the claimed amounts as a debt due to it under s 15(2)(a)(i) of that Act.

The application for a stay under s 8 of the CA Act 2010 raises two issues. The first is whether the parties agreed to refer the dispute arising under s 15(2)(a)(i) of the SOP Act to arbitration. The second is whether that dispute is arbitrable. If the answer to both those questions is yes, it is clear that s 8 of the CA Act 2010 requires the court to stay these proceedings.

In the alternative to a stay under s 8 of the CA Act 2010, Origin seeks an order either pursuant to s 67 of the Civil Procedure Act 2005 or in the exercise of the court's inherent jurisdiction staying the proceedings. Finally, Origin submits that, if the proceedings are not stayed, the court should refer the matter out to the arbitrators chosen by the parties pursuant to UCPR rule 20.14.

On 18 December 2006, the parties entered into a contract by which Siemens agreed to provide four gas turbines and associated equipment and services in connection with the construction by Origin of the Uranquinty power station located in the Riverina region of New South Wales.

The contract, which was amended on a number of occasions, provided in cl 8.6 for progress payments for the work to be performed by Siemens.

The final payment (aside from a bonus payment) was to be made when the power station achieved what was described in the original contract as "Commercial Operation Unit 14", but which in an amendment to the contract made on 30 April 2007 is referred to as "Practical Completion Unit 14". Under cl 16.7(e) of the contract, the works, in order to achieve that milestone, were required to achieve "Environmental Guarantees". The Environmental Guarantees included guarantees in relation to how much noise would be emitted from the power station under what were described as "base load conditions". The contract set out how and under what conditions the noise would be measured and the maximum permissible level of noise under those conditions. Those requirements were amended by the parties by the amendment agreement entered into on 30 April 2007. The precise details of what was agreed are not important to the present application.

Clause 36 of the contract sets out a dispute resolution procedure. The parties are first required by clause 36.2 to have without prejudice meetings in an attempt to resolve any dispute. Clause 36.3 provides that, in the event the parties fail to resolve the dispute, "either Party may refer the Dispute to arbitration by providing the other Party with an Arbitration Notice". "Dispute" is defined in clause 36.1(b) to mean: ... any dispute, difference, issue or disputed Claim between the parties concerning or arising out of or in connection with or relating to this Contract or the subject matter of this Contract or the existence, breach, termination, validity, repudiation, rectification, frustration, operation or interpretation of this Contract, including, without limitation, any claim: (i) in contract, tort (including negligence), equity (including unjust enrichment) or otherwise; (ii) pursuant to any applicable state, territory, Commonwealth, foreign or international statute or law; or (iii) for damages, compensation, restitution or adjustment of the Contract Price. "Claim" is defined in the same terms in clause 35.1 - that is, as being any claim submitted by the Contractor in writing "concerning or arising out of or in connection with or relating to this Contract or the existence, breach" etc. "Arbitration Notice" is defined in clause 36.1(a) to mean: ... a notice in writing specifying the Disputes(s) to be referred to arbitration and attaching a copy of the relevant Dispute Notices(s). "Dispute Notice" is defined in clause 36.1(c) to mean: ... a notice in writing providing sufficient details about the Dispute for the other Party to reasonably understand the: (i) alleged facts on which the claim is based; (ii) legal basis on which the claim is made; and (iii) relief that is claimed.

Clause 36.3(d) provides: The arbitration shall: (i) take place in Brisbane in the State of Queensland; and (ii) be governed by the laws of Queensland, including the Commercial Arbitration Act 1990 (Qld).

Clause 36 has been amended by the parties in circumstances that I will describe below.

Clause 43.5 of the contract provides: (a) This Contract will be construed in accordance with and be governed by, and the rights of the parties construed in accordance with the laws of New South Wales. (b) The Parties hereby submit to the non-exclusive jurisdiction of the courts of the State of New South Wales.

On 23 December 2008, Siemens wrote to Origin enclosing an acoustical test report which indicated that the power station met the acoustic requirements of the Environmental Guarantees (as amended).

On 24 December 2008, Origin issued a Commercial Operation Certificate in respect of Unit 14. One consequence of that certificate is that, under clause 16.11(b) of the contract, Origin is not entitled to liquidated damages from the time the certificate was issued.

On 7 January 2009, Siemens delivered a Request for Payment in respect of Practical Completion of Unit 14. The amount claimed was expressed in various currencies and totalled approximately $6 million. The accompanying tax invoice stated that the claim was made under the SOP Act.

On 2 February 2009, Origin obtained a copy of a draft report prepared by Heggies Pty Ltd, an acoustic consultant retained by ERM Power, the consultant engaged by Origin. According to that draft report, the power station did not meet the acoustic requirements of the contract. Subsequent testing supports the conclusions of Heggies' draft report.

On 6 February 2010, Siemens made a second payment claim. The claim, which was for approximately $100,000 and which again was expressed in various currencies, was for interest on the first claim. Again, the accompanying tax invoice stated that the claim was made under the SOP Act.

After receiving the draft Heggies report, Origin, on 2 March 2009, served a Dispute Notice on Siemens under cl 36 of the contract. In that Dispute Notice, Origin asserted in substance that: