UK: New South Wales CA Imports Arbitration Clause From One Entity To Another, Stays Proceedings

Last Updated: 21 May 2018
Article by Brenda Horrigan and Mitchell Dearness

In Warner Bros Feature Productions Pty Ltd v Kennedy Miller Mitchell Films Pty Ltd [2018] NSWCA 81, the New South Wales Court of Appeal overturned the decision of the New South Wales Supreme Court by referring a dispute to arbitration in California pursuant to the parties' agreement and by ordering a stay on court proceedings pursuant to section 7(2) of Australia's International Arbitration Act 1974 (Cth). The Court of Appeal applied a pragmatic approach to determine whether an arbitration clause found in standard term contracts used by other members of a company's corporate group should be incorporated into the parties' agreement.

Background

Warner Bros Feature Productions Pty Ltd (WB Productions) entered into an agreement with Kennedy Miller Mitchell Films Pty Ltd (KMMF) and Kennedy Miller Mitchell Services Pty Ltd (KMMS). The agreement was in the form of a 'Letter Agreement' (Letter Agreement).

A dispute arose regarding, among other things, KMMS and KMMF's entitlement to a bonus payment under the Letter Agreement for services provided in connection with the production of a film. KMMF and KMMS brought proceedings against WB Productions in the Supreme Court of New South Wales. WB Productions sought a stay on those proceedings on the basis that, pursuant to the Letter Agreement, the dispute should be submitted to arbitration in California. WB Productions' position was that an arbitration clause had been incorporated into the Letter Agreement as the Letter Agreement contained the following clause: "The balance of terms will be WB and WB standard for 'A' list directors and producers, subject to good faith negotiations within WB's and WB's customary parameters" (Incorporation Clause). Relevantly, WB Productions sought to incorporate an arbitration clause which was found in standard form contracts used by other members of the Warner Bros Group.

Hammerschlag J, the primary judge, dismissed the application for a stay on the proceedings and determined that the New South Wales Supreme Court had jurisdiction to decide the matter. It was held that none of the contracts which were exhibited as evidence by KMMF and KMMS were agreements to which WB Productions was a party, and that there was "no evidence of any regularity of contracting on the standard terms by [WB Productions] itself". His Honour also refused to read the clause as including WB Pictures given that the Letter Agreement unambiguously defined 'WB' as WB Productions. As such, WB Productions, as distinct from other members of the corporate Warner Bros Group, did not have any terms which were 'standard' and which could be incorporated into the Letter Agreement.

The applicants WB Productions and Warner Bros Entertainment Inc subsequently appealed the decision to the New South Wales Court of Appeal.

Court of Appeal Decision

Chief Justice Bathurst delivered the leading judgment and drew upon the constructional approach in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 in interpreting the Letter Agreement which required: "consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract."

The first issue for the Court of Appeal's consideration was whether the Letter Agreement incorporated terms which were "WB Standard for 'A' list directors and producers prior to good faith negotiations occurring." His Honour held that the proper construction of the clause was that the standard terms "were immediately incorporated, while leaving room for subsequent negotiations about their precise effect." Accordingly, the Incorporation Clause did not require that the parties engage in good faith negotiations prior to the incorporation of standard terms.

The second and primary issue for determination was whether the arbitration clause was incorporated into the Letter Agreement. On this point the Court of Appeal disagreed with the decision of the primary judge. Bathurst CJ noted that the evidence established that WB Productions (the contracting entity) was under the control of WB Pictures and the fact that negotiations in respect of the film occurred between WB Pictures business affairs executive in conjunction with the Senior Vice-President and General Counsel and that of the United States representatives of KMMF and KMMS. In these circumstances, it was held that 'WB standard' referred to in the clause were terms which were 'standard' for companies generally, throughout the Warner Bros Group. Rather than evaluating what constitutes a 'standard' term based on the frequency of usage by WB Productions or use in a "sufficient preponderance of cases", the Court of Appeal preferred to describe terms which are 'WB standard' as "terms which are habitually proffered by companies in the Warner Bros group for agreements with 'A' list directors and producers."

The Court of Appeal then noted a number of factors which suggested that the arbitration clause was habitually proffered in Warner Bros Group agreements relating to 'A' list directors and producers. These included: that both of the 2009 Form Agreements contained the same arbitration clause; that this arbitration clause had been used since the early 2000s (as indicated by the 56 agreements in evidence) and that a substantially similar arbitration clause was also used in additional 'Certificate of Employment' agreements made between the same parties (including WB Productions).

As a result, it was held that the clause requiring arbitration in California contained in the 2009 Form Agreements was incorporated as a term which was 'WB standard for 'A' list directors and producers' into the Letter Agreement. Given that the procedure in relation to arbitration was governed by Californian law, the law of a Convention country (the United States), the proceedings were stayed under s 7(2) of the International Arbitration Act 1974 (Cth).

Comment

While it is significant that in this case the Court of Appeal determined that a standard arbitration clause used by one corporate entity could be incorporated into the contract of another entity in the same group, it must be noted this was largely a question of contractual construction which will always be approached on a case-by-case basis. Absent the Incorporation Clause there would have been no arbitration agreement, although had the arbitration clause been included directly within the Letter Agreement then it is unlikely that this dispute would have arisen in the first place. The case reinforces that it is important for those drafting arbitration agreements to take care to ensure that they are incorporated into the contract.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions