Materials Fabrication Pty Ltd v Baulderstone Pty Ltd [2009] VSC 405 (8 September 2009)
On 8 September 2009, Vickery J of the Victorian Supreme Court handed down a decision which considered the right to commence a civil proceeding.  In the decision, Vickery J noted that the common law enshrines a right to commence legal proceedings and that this right is re-inforced by of s 24(1) of the Victorian Charter.  A dispute resolution clause in a commercial contract which aimed to limit parties’ access to the court was held inconsistent with this right and therefore invalid. 

Facts

In December 2008, Materials Fabrication Pty Ltd (‘MF’) commenced proceedings against Baulderstone Pty Ltd, claiming that Baulderstone had wrongfully terminated its building subcontracts.  By consent, proceedings were stayed in February 2009.  MF sought leave of the Court to lift the stay order to enable it to prosecute its claims against Baulderstone.

The building contracts in question specified a dispute resolution procedure.  Relevantly, it provided that certain preconditions must be met before the commencement of litigation, including the provision of security for costs to the builder’s solicitor (ten per cent of the amount being claimed) (cl 20.3). 

Decision

In deciding to lift the stay granted in February 2009, Vickery J considered whether the dispute resolution clauses were legally valid, and if so, whether they had been complied with.

Justice Vickery was particularly concerned with the validity of clause 20.3 – the requirement for MF to provide security to Baulderstone to the value of ten per cent of MF’s claim before commencing litigation.  His Honour stated that the common law enshrines the right to commence civil proceedings and that this right is re-inforced by s 24 of the Charter, which enshrines the right to a fair hearing.  

It is well established in international and comparative law that the right to a fair hearing subsumes a positive right to access the courts (see, eg, Kijewska v Poland [2007] ECHR 73002/01 (6 September 2007)).  Justice Vickery expressed concern that clause 20.3 may ‘severely inhibit, if not preclude, the exercise of a legitimate right for a party to a dispute to conduct a trial of its cause before a court’ (para 43).  The Court acknowledged that a prospective litigant will most likely have already expended legal fees on commencing its action, thus the contractual requirement to pay ten per cent of its claim prior to commencing litigation may act as a deterrent or a disincentive to pursuing the full quantum to which the party may be entitled.  On this basis, the Supreme Court of Victoria held clause 20.3 to be void, on the grounds that it offended public policy.

The decision is available at http://www.austlii.edu.au/au/cases/vic/VICSC/2009/405.html.

Melissa Gundrill is on secondment to the Human Rights Law Resource Centre from Clayton Utz