Case Reports

Justice Vickery rules security provision void against public policy

In Materials Fabrication Pty Ltd v Baulderstone Pty Ltd [2009] VSC 405 (8 September 2009), Justice Vickery (the Judge in charge of the Technology, Engingeering and Construction (TEC) list) handed down a decision which considered the right to commence a civil proceeding.   In deciding whether to lift the stay granted in February 2009, His Honour considered whether the dispute resolution clauses were legally valid, and if so, whether they had been complied with.

Vickery J was particularly concerned with the validity of clause 20.3, which required Materials Fabrication Pty Ltd (MF) to provide security to Baulderstone to the value of 10% of MF’s claim before commencing litigation.  In his judgment, Vickery J noted that the common law enshrines a right to commence legal proceedings and that this right is re-inforced by s 24(1) of the Victorian Charter.  His Honour said [at 43] 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".  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 10% 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.