Lin & Anor v Lee

In this significant application, Martin J provided an important clarification of when a dispute resolution clause in a contract will be an arbitration agreement for the purposes of s 7 of the Commercial Arbitration Act 2013.

Martin J

17 December 2021

The defendant was engaged by the plaintiffs to provide services to them as a migration agent. [1]. Some years later, the plaintiffs commenced proceedings against the defendant, alleging, among other things, breach of contract and negligence. [2]. Relying on a purported arbitration clause in the contract with the plaintiffs, the defendant applied for orders referring the matter to arbitration in accordance with s 8 of the Commercial Arbitration Act 2013 (“the Act”) and staying the proceedings. [4].

The critical question before Martin J was whether or not the purported arbitration clause in the contract constituted an “arbitration agreement” for the purposes of s 7 of the Act. [6], [11]–[13]. The dispute resolution clause in the contract was cl 11. [8]. Relevantly, cl 11(c) of the contract provided: [8]:

“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.”

Martin J considered that cl 11, like all contractual provisions, should be interpreted “by reference to the contractual text, construed in light of its context and purpose”. [15]. Given the commercial nature of the contract, his Honour also considered that the clause should be given the meaning a reasonable businessperson would have understood it to have. [15].

In respect of when a contractual provision would be an arbitration clause for the purposes of ss 7 and 8 of the Act, his Honour adopted the NSW Court of Appeal’s statement in Jemena Gas Networks (NSW) Ltd v AGL Energy Limited [2017] NSWCA 266, [27]. [22]. That is, his Honour accepted that a provision would not be an arbitration clause for the purposes of s 7 of the Act if it “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”. [22].

Ultimately, Martin J found that cl 11 was not an arbitration agreement for four reasons:

a) cl 11(c) does not require that the parties submit to an arbitration, but merely that their dispute be referred to the ACDC for “final settlement by a single arbitrator”; [17], [20]

b) neither cl 11(c) nor the ACDC rules requires that the “single arbitrator” necessarily conduct an arbitration; [17]–[18], [20]

c) cl 11 “contemplates other dispute settlement methods being agreed upon by the parties”, rather than just arbitration; and [17]–[18], [20]

d) cl 11(d) contemplates that the parties may be unable to resolve their difference through the ACDC. [19]–[20].

As cl 11 of the contract “contemplates the possibility of arbitration but there is no express agreement to submit a dispute to arbitration”, Martin J dismissed the application. [23]–[24].

M Paterson