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This case considered whether there was an “arbitration agreement” between the parties as defined by s 7(1) of the Commercial Arbitration Act 2013, such that a court could order arbitration to take place. The appellant argued that there was no such agreement in place, because the relevant agreement did not define the legal relationship to which arbitration was applicable. The Court unanimously rejected this argument on the basis that “the requisite ‘defined legal relationship’ did not need to be recorded in the arbitration agreement itself”.
Morrison and Mullins JJA and Bowskill SJA
1 October 2021
The appellant, Cheshire, was subcontracted by CMC to carry out certain roadworks. . A dispute arose between them in relation to payment. . Cheshire filed a claim against CMC in the Supreme Court, seeking to recover monies it alleged were owing to it. . CMC contended that the matter was subject to an arbitration agreement, and applied for an order referring the parties to arbitration under s 8(1) Commercial Arbitration Act 2013 (“the Act”). .
At first instance, Henry J allowed CMC’s application and referred the dispute to arbitration. . Cheshire appealed against those orders, contending that there was no “arbitration agreement” between the parties, as defined by s 7(1) of the Act. . Bowskill SJA gave the reasons of the Court, with which Morrison and Mullins JJA agreed. –.
Why the appeal was unsuccessful
Section 7(1) of the Act provides that (emphasis added):
“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.”
Clause 12 of the subcontract between the parties dealt with disputes between the parties, and relevantly provided that if the “disputes or differences” between the parties had not been able to be resolved by good faith discussions or mediation, then “the disputes or differences shall be referred to arbitration by either Party”. .
Cheshire argued that s 7(1) of the Act requires that an arbitration agreement “must ‘define’ the legal relationship with respect to which it is intended to operate”. . It contended that cl 12 of the subcontract did not do so, and therefore was not an “arbitration agreement” within the meaning of the Act. .
Justice Bowskill considered that the construction contended for by Cheshire was neither “supported on a textual analysis … nor by reference to the context and purpose of the provision”. . In relation to the text, Bowskill J observed that the only specified requirement was that there be “a defined legal relationship – in the sense of an identifiable legal relationship giving rise to legal remedies”. . The section did not say that the agreement must itself define that relationship. .
In relation to the text and context, her Honour noted that the paramount object of the Act was to “facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay and expense”. . Consistent with this object, existing case law had held that a “broad purposive approach is required” in interpreting the requirement for a “defined legal relationship”. –. This also supported the conclusion that the requisite “defined legal relationship” “does not need to be recorded in the arbitration agreement itself”. .
In this case, “the existence of a defined legal relationship could not be clearer”. . The disputes covered by cl 12 of the subcontract were “disputes or differences arising between the Parties”. When the definition of “Parties” was read into that phrase, it was clear that “the relevant disputes are disputes or differences arising between CMC and Cheshire, as parties to the subcontract”. Her Honour concluded that this was a “defined legal relationship” in the relevant sense. .
The appeal was dismissed with costs. .