Court of Appeal promotes enforceability of arbitration agreements

Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd [2021] QSC 75

The unanimous findings of the Court of Appeal in Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd [2021] QSC 75 is another illustration of the Australian Courts' support for arbitration. Unsurprisingly, the Queensland Court of Appeal (consisting of Morrison and Mullins JJA and Bowskill SJA) has upheld the decision at trial by Justice Henry to stay proceedings and refer a dispute to arbitration pursuant to section 8(1) of the Commercial Arbitration Act 2013 (Qld) (CAA).

In this case the respondent, Civil Mining & Construction Pty Ltd (CMC) was the principal contractor engaged by the Queensland Department of Transport and Main Roads to carry out a project for roadworks construction. CMC entered into a subcontract with the appellant, Cheshire Contractors Pty Ltd (Cheshire) to assist with civil engineering on the project (Contract). A dispute arose between the parties in relation to a claim for payment made by Cheshire in connection with the subcontracted works.

At trial, the substance of Cheshire's claim against CMC was based on estoppel by convention and statutory unconscionable conduct, as well as for the return of a bank guarantee. In lieu of filing its defence, CMC contended that the matter was the subject of an arbitration agreement and applied for an order referring the parties to arbitration. Cheshire argued that the arbitration agreement at clause 12.3.3 of the Contract failed to define the ‘disputes or differences’ between the parties and did not identify a ‘defined legal relationship’. Absent any articulation of a defined legal relationship within clause 12.3.3, Cheshire argued, the clause was not an arbitration agreement for the purposes of section 7(1) of the CAA. Cheshire's argument was rejected by Henry J.

On appeal, Cheshire maintained that the arbitration agreement itself must define the legal relationship to which it is intended to apply. This interpretation was rejected by the Court of Appeal. In reaching its decision, the Court of Appeal conducted a textual analysis of section 7 of the CAA. It was held that the proper construction of section 7(1) of the CAA is that the words ‘in respect of a defined legal relationship’ required an identifiable legal relationship between the parties that gives rise to legal remedies (i.e. in contract or tort). These words were held to not require the arbitration agreement to expressly define the legal relationship that existed as a precondition of enforceability of that arbitration agreement.

In reaching this conclusion the Court of Appeal had regard to the objective of the CAA: to give effect to the UNCITRAL Model law which was to be achieved by ‘enabling parties to agree about how their commercial disputes are to be resolved’. Bowskill SJA observed that decisions from other jurisdictions in relation to the interpretation of equivalent provisions are both relevant and persuasive. The case reiterates that Australian courts will continue to promote arbitration as a method of resolving disputes.[i]

[i] [Disclaimer: The above material provides a summary only of the subject matter covered, without an assumption of a duty of care by Resolution Institute or Clayton Utz. The material is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Copyright in the material is owned by Clayton Utz.]