The message is clear – a party who commences legal
proceedings in breach of a contractual obligation to refer a
dispute to arbitration is likely to be ordered to pay indemnity
The Supreme Court of Western Australia recently affirmed the
principle determined in the English High Court case of A v
B  EWHC 54.
In Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty
Ltd  WASC 10, Pipeline commenced proceedings against
ATCO alleging breaches of an installation agreement for underground
ATCO filed a conditional appearance, and applied for a stay of
the proceedings on the basis that the parties' agreement
contained a dispute resolution clause requiring a dispute to be
referred to arbitration. The clause prohibited the parties from
commencing court proceedings before complying with the agreed
Under section 8(1) of the Commercial Arbitration Act
2012 (WA) (the Act), the Court must refer
parties to arbitration where the dispute is the subject of an
arbitration agreement, unless it finds that the agreement is null
and void, inoperative or incapable of being performed.
Pipeline argued that the relevant arbitration agreement lacked
clarity and was uncertain, and that ATCO had waived its right to
insist on compliance with the arbitration agreement by failing to
invoke the agreement in response to threatened Court
The Court held that the dispute be referred to arbitration and
the proceedings be stayed.
ATCO applied for an order that Pipeline pays its costs of the
stay application on an indemnity basis.
The Court found that:
the Act had at its heart the UNICTRAL Model Law on
International Commercial Arbitration, being internationally
accepted and recognised;
the object and purpose of the Act required the Courts to
support and enforce arbitration agreements;
the dispute resolution clause survived termination of the
ATCO had promptly applied for a stay of the Court proceedings,
and did so before taking any substantive steps; and
there was nothing to suggest that ATCO had waived its rights
under the dispute resolution clause or would acquiesce to the
dispute being resolved in any other manner.
The Court ordered Pipeline to pay ATCO's actual costs of the
stay application provided that the costs were not unreasonably
incurred and were not unreasonable in amount.
The Supreme Court of Western Australia no longer has a
discretion under the Act (as it did under its precursor, the
Commercial Arbitration Act 1985 (WA)) on whether to stay
proceedings or refer to arbitration. An arbitration agreement must
be null and void, inoperative or incapable of performance, before
the Court can hear the dispute.
The decision will deter parties from commencing Court
proceedings where the parties have entered a binding arbitration
agreement to resolve disputes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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