KEYWORDS: STAYS OF ARBITRATION

KEY TAKEAWAY

  • Even in the context of a broader dispute that could involve many parties, where there is a dispute between two parties inter se, the court will strive to uphold an arbitration agreement between those parties.
  • Where parties are referred to arbitration under the Commercial Arbitration Act, it will usually be appropriate for the proceeding to be stayed, not dismissed.

The facts

This case arose out of the Waratah train project in New South Wales. John Holland was engaged to design and construct the Auburn Maintenance Centre for the new trains. In turn, and relevantly, John Holland entered into two contracts:

  • a consultancy agreement with KBR for design and documentation services relating to stormwater detention
  • facilities; and
  • an agreement with Atlantis to design, manufacture, supply and certify the stormwater detention facilities.

Aa modular tank system was installed under the car park. But subsidence was observed. John Holland commenced Supreme Court proceedings against both KBR and Atlantis for breach of contract, negligence, misleading conduct, and under contractual indemnities. But as both contracts contained arbitration agreements, each of KBR and Atlantis sought orders staying the proceedings against them.

The decision

In relation to the KBR dispute, Hammerschlag J rejected an argument by John Holland that the dispute ought not be arbitrated because it could involve multiple parties. Hammerschlag J held that the parties ought to be held to their bargain (at [69], [87]). Even if other parties were involved in a broader dispute, there were disputes between John Holland and KBR that could be arbitrated (at [71]–[72]). Hammerschlag J noted that, while a court had a discretion under the old arbitration legislation to decline to refer the parties to arbitration if there was sufficient reason to take that course, that is not available under the new legislation (at [74], [86], [132]).

Hammerschlag J made orders referring the parties to arbitration, as required by the Commercial Arbitration Act 2010 (NSW). But Hammerschlag J noted that the Commercial Arbitration Act was silent about what was to occur with the proceedings. After a subsequent hearing, he considered that staying (and not dismissing) the proceeding so far as it involved KBR was preferable as:

  • the arbitration agreement could subsequently become incapable of being performed (therefore requiring court proceedings);
  • keeping the proceedings on foot could prevent a limitation period from expiring; and
  • a stay would be a result under the International Arbitration Act 1974 (Cth) and given the uniformity of the legislation, congruent outcomes should be preferred where possible.

In relation to the Atlantis dispute, there were some stages in the dispute resolution clause that had not been completed (namely negotiation and expert determination): so the arbitration agreement was presently inoperative (at [186]–[191]). Hammerschlag J stayed the proceeding so far as it involved Atlantis.

http://www.austlii.edu.au/au/cases/ nsw/NSWSC/2015/564.html

http://www.austlii.edu.au/au/cases/ nsw/NSWSC/2015/451.html

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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