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I want a second opinion: the Federal Court considers the right to appeal an arbitral award under the Commercial Arbitration Act 1984 (Vic)

Jacobs Group (Australia) Pty Limited v Commonwealth of Australia [2020] VSC 127

The recent case of Jacobs Group (Australia) Pty Limited v Commonwealth of Australia [2020] VSC 127 provides an important reminder that if parties to an arbitration agreement wish to allow for a right of appeal, they must make that right explicit in their agreement.

Background

On 28 April 2011, the applicant (Jacobs Group) and the respondent (the Commonwealth) entered into a contract, pursuant to which Jacobs Group was to provide services in relation to a project at Townsville Air Force Base (the Contract).

Clause 12.13 of the Contract provided that disputes could be referred to arbitration. However, it also provided that nothing in that clause was intended to modify or vary the rights of appeal contained in the Commercial Arbitration Act 1984 (Vic) (1984 Act).

On 16 August 2017, the Commonwealth requested an arbitration of certain matters contained in a notice of dispute issued on 18 August 2016. On 21 August 2019, the arbitrator issued a partial award against Jacobs Group for $3,424,970.35.

On 20 November 2019, Jacobs Group filed an application under s 34A of the Commercial Arbitration Act 2011 (Vic) (2011 Act) (which was the legislation enacted to amend and update the 1984 Act) for leave to appeal on a question of law in respect of the award.

Issues to be determined

Relevantly, s 34A of the 2011 Act provides that an appeal of an award on a question of law may be made if the parties agree that an appeal may be made ‘under this section’, and the court grants leave. While the 2011 Act came into force after the Contract had been entered into, the 2011 Act, upon its enactment applied to all then-existing arbitration agreements (with some exceptions that are not relevant to this case).

The issues requiring determination by the court were:

  1. whether clause 12.13 of the Contract constituted an agreement that an appeal could be made against an award as a matter of right; and
  2. whether such an agreement must relate expressly or implicitly to an appeal ‘under this section’ i.e. s 34A of the 2011 Act.

The Commonwealth submitted that the court did not have jurisdiction to consider the appeal, as there was no agreement between the parties that an appeal could be made as a matter of right. Clause 12.13 was simply an agreement to leave open appeal rights under the 1984 Act. The Commonwealth further submitted that an agreement to appeal must expressly or implicitly relate to an appeal under s 34A; an agreement to appeal on a matter of law generally is not sufficient.

Jacobs Group submitted that by clause 12.13 of the Contract, the parties agreed that, subject to leave of the court, either party could appeal against an award on a question of law. Further, it was submitted any agreement ‘under this section’ refers to an agreement for an appeal on a question of law.

What did the court decide?

The court dismissed Jacobs Group's application.

In relation to the first issue, Riordan J rejected Jacobs Group's submission that clause 12.13 was an express agreement that the parties would have a right to appeal any award on a question of law.

His Honour held that, by clause 12.13, the parties plainly intended not to exclude rights of appeal under the 1984 Act. However, clause 12.13 was silent as to whether a party would consent to an appeal, or the situation that would arise if the rights of appeal under the 1984 Act were amended (as in fact occurred in this case). The fact the parties did not intend to exclude their appeal rights did not lead to the conclusion they were obliged to consent to an appeal.

In relation to the second issue, Riordan J held that s 34A of the 2011 Act should be read as requiring a pre-existing agreement between the parties that a party may appeal an award on a question of law. The Act does not require the parties to:

a) expressly or implicitly recognise that the appeal is under s 34A; or

b) even be aware of the section at the time of the agreement.

Riordan J reached this conclusion having regard to, inter alia, the fact that purpose of the 2011 Act was expressed to have been to facilitate the resolution of disputes without unnecessary delay or expense and the fact the 2011 Act plainly contemplates regulating arbitration agreements before and after its commencement.

Implications

This case demonstrates that if parties to an arbitration agreement wish to allow for the right to appeal an award, that right must be made explicit in the wording of their agreement.

It is not sufficient for their agreement to merely state that any appeal rights provided under legislation are unaffected by the agreement, as those rights are still subject to the threshold tests in the relevant legislation (i.e. in this case, s 34A of the 2011 Act requiring the consent of the parties and the leave of the court). Parties must record their agreement that an appeal may be made on question of law.

As s 34A of the 2011 Act is mirrored in each state's equivalent arbitration legislation, this case is instructive for all jurisdictions. [i]


[i] [Note: 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.]