Sydney Jacobs, Barrister at 13 Wentworth Chambers and Vikram Misra, Barrister at Clarence Chambers highlight that the first step to look for when a dispute arises, is the arbitration clause, where they delve into whether the dispute falls under that clause or not.
The first tactical consideration for parties in dispute , and where there is an arbitration clause tucked away amongst the usual boilerplate clauses, is to consider whether it is still desirable for the dispute to be settled privately, away from the public gaze.
Agreements with such clauses are often signed years ago, when warm feelings of collegiality and beacons of hope for the (then) infused the relationship.
This is a consideration, especially if one party is making allegations of moral impropriety.
The party making such allegations may consider such matters are more advantageous to ventilate in open court, where the chances of them becoming publicised are enhanced. The party at the receiving end of such allegations, will presumably wish for any such dispute to be thrashed out behind the closed doors and in the privacy of the arbitration room.
Thus, the scene is set for one party to argue that the arbitration clause is wide enough to encompass the dispute (and hence the court ought refer the dispute to arbitration under s 8 of the Commercial Arbitration Act 2010 (NSW) (‘the Act’) and issue a stay of curial proceedings) and the other party to contend the polar opposite.
Whether a particular dispute falls within an arbitration clause is, and remains, a question of construction of the words used, albeit that such an agreement should not be construed narrowly. The words of such an agreement cannot be given a meaning they do not have or, for that matter, not be given a meaning they do have, to satisfy a perceived commercial purpose.[1]
The authors note that there has been a shift in judicial attitude to favouring the referral of disputes to arbitration in the last 10 years. This is somewhat due to the courts preferring to give the meaning to words such as “arising out of”, “arising under”, “in connection with” or “connected with” contained in arbitration clauses a wide ambit[2]. Hammerschlag J has commented that arbitration provisions “should be liberally construed so as to further their ultimate intent, namely, that their disputes should be susceptible to the forum which they have chosen.”[3]
There is no rule of construction to be applied to a commercial arbitration agreement irrespective of the plain meaning of the words used[4]. Further, it has been held that irrespective of the language of the clause, the Court should not apply a presumption, that the parties are likely to have intended all their disputes to be decided by the one tribunal[5].
While the general objective approach to construing commercial agreements is applicable[6], arbitration clauses draw specific considerations into focus. Some of these were identified by Gleeson CJ[7]:
“An extensive examination of the many cases dealing with the meaning and effect of various common arbitration clauses in contracts was undertaken by Hirst J in Ethiopian Oilseeds v Rio del Mar [1990] 1 Lloyd’s Rep 86. As his Lordship demonstrated, the expression “arising out of” has usually been given a wide meaning. Some older cases, such as Crane v Hegeman-Harris Co Inc [1939] 4 All ER 68 and Printing Machinery Co Ltd v Linotype & Machinery Ltd [1912] 1 Ch 566, which held that arbitration agreements expressed in a certain manner or entered into in certain circumstances did not permit an arbitrator to deal with a claim for rectification, have been confined by later authorities to their special facts, and should not now be regarded as indicating the correct general approach to problems of this kind.
When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument.”
We welcome suggestions as to topics, feedback and positive criticism to sjacobs@13wentworth.com.au or counsel@vikrammisra.com.
[1] John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451, [82]. See also Inghams Enterprises Pty Limited v Francis Gregory Hannigan [2019] NSWSC 1186, [55] – [57].
[2] John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451, [69].
[3] John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451, [69].
[4] Rhinehart v Welker [2012] NSWCA 95 at [114] – [122].
[5] Rhinehart v Welker [2012] NSWCA 95 at [121].
[6] I.e. the principles enunciated in Electricity Generation Corp v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp (2014) 251 CLR 640; (2014) 306 ALR 25; [2014] HCA 7 (“Woodside”) and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37 (“Wright Prospecting”).
[7] Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, 165B-E; (1996) 131 FLR 422. See also Hancock Prospecting Pty Limited v Rinehart & Ors (2017) 350 ALR 658; [2017] FCAFC 170.
With over 20 years’ experience as a barrister, Sydney Jacobs practices in the areas of commercial law and equity, real property and building and construction law. He has acquired experience in the area of easements: he has obtained easements for applicants and otherwise appeared in the cases listed below, has a number of current matters in the NSW Equity Division Real Property List being case -managed to final hearing 2018 and is briefed in certain easement matters being worked up for filing in Court. Prior to being called to the Bar, Sydney was a solicitor in the well -known firms listed below, as a commercial litigator with a construction law focus. Sydney has experience in acting for clients seeking or opposing easements and clients whose rights of way have been impeded by neighbours. You may connect with Sydney via email sjacobs@13wentworth.com.au or LinkedIn
Vikram Misra was admitted as a solicitor in 2012 and called to the NSW Bar in 2015. He maintains a broad commercial practice and is regularly briefed in matters relating to taxation law, property law, construction law and equity. Vikram has completed a Graduate Diploma in Taxation Law at the University of Sydney in 2015 and a Master of Laws majoring in construction law and contract law at the University of Melbourne in 2016. You may connect with Vikram via email counsel@vikrammisra.com or LinkedIn
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