Australian company and US company enter into agreement
In January 2016, two companies, one Australian-based and one US-based, entered an agreement under which the US company would provide social media marketing services to the Australian company. A dispute arose.
The written agreement between the two companies contained a conflict resolution clause providing that, in the event of a dispute which could not be resolved by the parties, either by themselves or with the assistance of a mutually agreed third party, the dispute would be referred to a cleric who was chief judge of a court established within a particular religion.
The director of the US company and the director of the Australian company were both practising adherents of that religion. The conflict resolution clause provided that the decision of the chief judge of the religious court would be "final and acceptable by both sides".
Australian company terminates contract and US company seeks adjudication by religious court
Despite the existence of the dispute resolution clause, in July 2016 the Australian company ended the arrangement with the US company under a clause providing that it could terminate the contract by giving two months' notice and making a payment.
However, the director of the US company remained aggrieved and, in the latter part of 2016, had discussions with other clerics of the religion, which culminated in a plan that the US company's grievances should be adjudicated by this religious court, which had been in existence since 1905.
The claim brought by the US director before the religious court was for damages up to the amount of $5 million for breach of service and partnership agreements and fraudulent use of company funds.
Director of Australian company receives summons to religious court
Over the ensuing couple of months all manner of preparatory activities – filing forms, making payments, identifying people to be involved – went on between the director of the US company and various clerics of the religion.
In December 2016, a summons to the religious court was sent to the director of the Australian company and to members of his family, who were shareholders. (They were eventually removed as parties.)
Refusal to appear before religious court leads to threat of religious sanctions
Four days later, the lawyers for the director of the Australian company wrote to the religious court and said, while expressing respect, that their client had no intention of appearing at a hearing of the religious court and that, if the director of the US company had a "proper claim", he should bring it in an appropriate civil court, in conformity with the rules of that court.
The response was rapid. One of the clerics wrote on behalf of the religious court that, if the director of the Australian company did not recant and submit, various formal sanctions would be imposed on him, which would have the effect of considerably curtailing his participation in services in the religion's places of worship, and in the religious community generally.
The cleric's advice said that these sanctions would be notified to the place of worship which the Australian director attended and that further sanctions might be imposed should his defiance persist.
Australian company director commences legal action in Supreme Court
Characterising this advice as intimidation, and being a threat of "partial excommunication", the Australian director's lawyers did not budge an inch.
The war of words went on until, in early February 2017, the lawyers for the Australian director started proceedings in the NSW Supreme Court, complaining of apprehended bias and seeking injunctive relief to restrain the religious court from hearing the dispute and from continuing to threaten the imposition of religious sanctions on the Australian director.
Subsequently, the claim was amended to include a claim that the clerics, by threatening the religious sanctions, had committed a contempt of court.
It was up to the Supreme Court to decide whether the clerics were indeed guilty of contempt of court.
Case a - The case for the Australian director
Case b - The case for the clerics
So, which case won?
Cast your judgment below to find out
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