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Lin v Lee[2021] QSC 336

SUPREME COURT OF QUEENSLAND

CITATION:

Lin & Anor v Lee [2021] QSC 336

PARTIES:

ZEJIAN LIN

(first plaintiff)

GANG LIN

(second plaintiff)

v

JUNMIN LEE

(defendant)

FILE NO/S:

BS No 11347 of 2021

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

17 December 2021

DELIVERED AT:

Brisbane

HEARING DATE:

10 December 2021

JUDGE:

Martin J

ORDERS:

  1. The application is dismissed.
  2. I will hear the parties as to costs.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the plaintiffs have commenced proceedings against the defendant alleging, among other things, breach of contract and negligence – where the contract includes a dispute resolution clause that the defendant argues is an arbitration agreement within the meaning of s 7 of the Commercial Arbitration Act 2013 – where the defendant applies for an order that the parties be referred to arbitration and the proceeding be stayed – whether cl 11 constitutes an arbitration agreement – whether the court must refer the parties to arbitration and, therefore, necessarily grant the stay under s 8 of the Commercial Arbitration Act 2013

Commercial Arbitration Act 2013, s 8

Uniform Civil Procedure Rules 1999, r 16

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640

Jemena Gas Networks (NSW) Ltd v AGL Energy Limited [2017] NSWCA 266

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Victoria v Tatts Group Ltd (2016) 328 ALR 564

COUNSEL:

MJ Henry for the applicant/defendant

RA Kipps for the respondents/plaintiffs

SOLICITORS:

Sung Do Lawyers for the applicant/defendant

Irish Bentley Lawyers for the respondents/plaintiffs

  1. [1]
    In 2014, the plaintiffs and the defendant entered into a contract (“the contract”) whereby the defendant agreed to provide services as a migration agent to the plaintiffs.
  2. [2]
    In September 2021, the plaintiffs commenced proceedings against the defendant alleging, among other things, breach of contract and negligence (“the proceeding”).
  3. [3]
    In October 2021, the defendant filed a conditional notice of intention to defend.
  4. [4]
    By this application, the defendant seeks orders that:
    1. (a)
      the parties be referred to arbitration pursuant to s 8(1) of the Commercial Arbitration Act 2013 (“the Act”), and
    2. (b)
      the proceeding be stayed pursuant to r 16(g) of the Uniform Civil Procedure Rules 1999.
  5. [5]
    The basis for the application is that the defendant has activated, what he argues is, an arbitration clause within the contract.

The relevant legislation

  1. [6]
    Section 7 of the Act provides the definition of arbitration agreement used in the Act:

7 Definition and form of arbitration agreement (cf Model Law Art 7)

  1. (1)
    An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
  1. (2)
    An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
  1. (3)
    The arbitration agreement must be in writing.
  1. (4)
    An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract was concluded orally, by conduct or by other means.
  1. (5)
    The requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained in it is accessible so as to be useable for subsequent reference.
  1. (6)
    In this section—

data message means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.

electronic communication means any communication that the parties make by means of data messages.

  1. (7)
    Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.
  1. (8)
    The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

Note—

This section is substantially the same as Option 1 set out in Art 7 of the Model Law.

  1. [7]
    Section 8 of the Act provides for the reference to arbitration:

8 Arbitration agreement and substantive claim before court (cf Model Law Art 8)

  1. (1)
    A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
  1. (2)
    Where an action referred to in subsection (1) has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.”

The relevant clauses in the contract

  1. [8]
    The defendant argues that cl 11 of the contract constitutes an arbitration agreement within the meaning of the Act:

11. RESOLUTION OF DISPUTES

a. If a dispute arises—out of or relating to this agreement, or the breach, termination, validity, or subject matter thereof, or as to any related claim in restitution or at law, in equity or pursuant to any statute—the parties agree to discuss the dispute with the aim of reaching an agreement that is acceptable to both sides. The agreement will be documented in writing, dated and signed by both the Agent and the Client.

b. If one party requests an opportunity to discuss the dispute, the parties should attempt to reach an agreement within 21 days of that request (or a longer period if agreed between the parties).

c. If the parties cannot reach an agreement within 21 days, the parties agree to refer the dispute to the Australian Commercial Disputes Centre (ACDC) for final settlement by a single arbitrator appointed in accordance with the Rules of the ACDC, or by another dispute resolution process suggested by ACDC and accepted by the parties. It is expected that any fees payable to ACDC or to the person appointed by ACDC will be paid by the parties equally.

d. If the parties have been unable to resolve their dispute through ACDC, either party may commence Court proceedings but not before the expiry of 28 days from the date of referral to ACDC.

e. A Client may vary the procedure set out in this clause if the Client can establish that DIAC may require the Client to depart Australia.”

  1. [9]
    The plaintiffs argue that cl 12 constitutes an exclusive jurisdiction clause and prevents the defendant from relying on any arbitration agreement:

12. RELEVANT LAW AND JURISDICTION

a. These conditions and all aspects of the performance of our services for you are governed by, and you agree to be bound by, the law of the QLD and the Code of Conduct. The Client and Agent irrevocably submit to the exclusive jurisdiction of the courts of the QLD and/or the Migration Agents Registration Authority.”

  1. [10]
    For the reasons which follow I do not need to decide that point.

What must the defendant establish?

  1. [11]
    The defendant must show that cl 11 in the contract is an arbitration agreement within the meaning of the Act. If that is done, this Court must refer the parties to arbitration unless the Court finds that the agreement is “null and void, inoperative or incapable of being performed”.
  2. [12]
    There is no dispute between the parties that the subject matter of the proceedings comes within cl 11(a) of the contract, namely that it is a dispute which arises out of or relates to the contract.
  3. [13]
    The dispute between the parties is about the nature of cl 11 and whether it constitutes an arbitration agreement.

Is clause 11 an arbitration agreement?

  1. [14]
    Clause 11 is a dispute resolution clause that requires the parties to take identified action in the event of a dispute arising. Clause 11(a) and (b) require the parties to attempt to reach an agreement through discussion. If the parties cannot reach an agreement within 21 days, then, under cl 11(c), “the parties agree to refer the dispute to the Australian Commercial Disputes Centre (ACDC)[1] for final settlement by a single arbitrator appointed in accordance with the Rules of the ACDC, or by another dispute resolution process suggested by ACDC and accepted by the parties”.
  2. [15]
    The relevant principles of contractual construction are not controversial. The legal meaning of a critical clause is discovered by reference to the contractual text construed in the light of its context and purpose.[2] Further, attention must be given to the commercial nature of this contract in this way:

“The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd (in rec), unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.”[3] (citations omitted)

  1. [16]
    The process envisaged by cl 11 is as follows:
    1. (a)
      If a dispute arises, the parties agree to discuss the dispute with the aim of reaching an acceptable agreement.
    2. (b)
      If the parties cannot reach an agreement within 21 days of the request to discuss then:
      1. the parties agree to refer the dispute to the ACDC,
      2. for “final settlement”,
      3. by a single arbitrator appointed under ACDC rules, or
      4. by another dispute resolution process suggested by ACDC and accepted by the parties.
    3. (c)
      If the parties do not resolve their dispute through ACDC, then court proceedings may be commenced.
  2. [17]
    It should be noted that cl 11 does not provide that the parties have agreed that a dispute is, upon the conditions in cl 11(a) and (b), to be submitted to arbitration. Rather, it refers to the reference of the dispute for “final settlement by a single arbitrator”. The use of the word “arbitrator” is relied upon by the defendant as the foundation of the argument that cl 11 is an arbitration agreement.
  3. [18]
    The current rules of the ADC were exhibited to one of the affidavits read by the defendant. The rules in existence at the time of the contract were not provided. It was not contentious that there are two ways in which an arbitration can conclude:
    1. (a)
      by the making of an award, or
    2. (b)
      by the parties settling the matter before an award is made.
  4. [19]
    Clause 11(d) provides that either party may commence Court proceedings if they “have been unable to resolve their dispute through ACDC”. That is inconsistent with a requirement that the parties submit to arbitration which, by the definition in the ACDC rules, must result in a resolution. But, it is consistent with the parties having agreed to the use of alternative methods of dispute resolution (e.g., mediation) which may come to an end without a final resolution.
  5. [20]
    For the following reasons, I find that cl 11 is not an arbitration agreement:
    1. (a)
      it does not require that the parties submit to an arbitration,
    2. (b)
      it does not require that the “single arbitrator” engage in an arbitration,
    3. (c)
      it contemplates other dispute settlement methods being agreed upon by the parties, and
    4. (d)
      it contemplates the possibility (cl 11(d)) that the parties are unable to resolve their differences through the ACDC.
  6. [21]
    Section 7 of the Act defines an arbitration agreement as one where the parties have agreed to submit a dispute to arbitration. A generous reading of cl 11 might lead to the conclusion that arbitration is an option available, but it goes no further.
  7. [22]
    A clause which provided that parties who had failed to resolve a dispute would submit to mediation administered by ACDC “before having recourse to arbitration or litigation” was held not to be an arbitration agreement in Jemena Gas Networks (NSW) Ltd v AGL Energy Limited.[4] I respectfully adopt what was said by the Court about the requirement for submission:

[27] While there may be some doubt as to what is meant by the reference in s 7(1) of the Commercial Arbitration Act to an agreement to submit “certain disputes” to arbitration, that phrase should not be read to refer to an agreement which merely identifies the possibility of arbitration without any express or implicit agreement to submit all disputes or any class of disputes to arbitration, as opposed to litigating. The purpose of s 8 of the Act is to provide a mechanism to ensure that an agreement to arbitrate is enforceable and excludes the power of the court to permit litigation to proceed in the face of such an agreement. It would not assist that purpose to accept that any contractual arrangement which contemplated the possibility of arbitration, without any express agreement in writing to submit a particular category of disputes to arbitration, should result in the unilateral power to enforce arbitration in relation to all disputes.” (emphasis added)

  1. [23]
    Clause 11 contemplates the possibility of arbitration but there is no express agreement to submit a dispute to arbitration.

Orders

  1. [24]
    The application is dismissed.
  2. [25]
    I will hear the parties as to costs.

Footnotes

[1] The ACDC changed its name to Australian Dispute Centre (“ADC”). The parties agree that it is the same body as is referred to in clause 11.

[2] See Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at 116-117 [46]-[51] per French CJ, Nettle and Gordon JJ, 131-132 [108]-[109] per Kiefel and Keane JJ; Victoria v Tatts Group Ltd (2016) 328 ALR 564 at 575-580 [51]-[75] per French CJ, Kiefel, Bell, Keane and Gordon JJ.

[3] Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656-657 [35] per French CJ, Hayne, Crennan and Kiefel JJ.

[4] [2017] NSWCA 266.

Close

Editorial Notes

  • Published Case Name:

    Lin & Anor v Lee

  • Shortened Case Name:

    Lin v Lee

  • MNC:

    [2021] QSC 336

  • Court:

    QSC

  • Judge(s):

    Martin J

  • Date:

    17 Dec 2021

  • Selected for Reporting:

    Editor's Note

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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