The dispute was not capable of being referred to arbitration
84 As Foster J said in WDR Delaware Corporation v Hydrox Holdings Pty Ltd (2016) 245 FCR 452 at 474 [124]-[125], [128]:
The issue of arbitrability goes beyond the scope of an arbitration agreement. It involves a consideration of the inherent power of a national legal system to determine what issues are capable of being resolved through arbitration. The issue goes beyond the will or the agreement of the parties. The parties cannot agree to submit to arbitration disputes that are not arbitrable.
The question of whether a dispute is arbitrable is to be determined by the application of the nation's domestic law alone …
…
… it is uncontroversial that some disputes cannot be the subject of private arbitration. Examples [include]: criminal offences; divorce; custody of children; property settlement; wills; employment grievances; some intellectual property disputes; competition law disputes; and bankruptcy and insolvency.
85 As Allsop J (as the Chief Justice then was) explained in Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 at 98 [200], "[t]he types of disputes which national laws may see as not arbitrable" have the common elements "that there [is] a sufficient element of legitimate public interest … making the enforceable private resolution of disputes concerning them outside the national court system inappropriate" and that "the identification and control of these subjects [is] the legitimate domain of national legislatures and courts".
86 In MJ Mustill and SC Boyd, The Law and Practice of Commercial Arbitration in England (Butterworths, 2nd ed, 1989) at 149, the learned authors explained (in a passage quoted in part by Deane and Gaudron JJ in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 351-352):
English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not. The general principle is, we submit, that any dispute or claim concerning legal rights which can be the subject of an enforceable award, is capable of being settled by arbitration. This principle must be understood, however, subject to certain reservations.
…
[T]he types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a winding-up order or a decision that an agreement is exempt from the competition rules of the EEC under Article 85(3) of the Treaty of Rome [which, the footnote added, was exclusively within the province of the European Commission].
(Footnotes otherwise omitted, emphasis added.)
87 Along similar lines, the learned authors of Russell on Arbitration at 71-72 [2-081] said:
There are … well-recognised categories of dispute that may not be capable of being resolved by arbitration and certain underlying principles that can be identified in determining whether a matter is arbitrable. In particular, a dispute will generally not be arbitrable if it involves an issue of public policy, public rights or the interests of third parties, or where the dispute in question is clearly covered by a statutory provision which provides for inalienable access to the courts. In these cases, as the Court of Appeal has confirmed, "even the most widely drafted arbitration agreement will have to yield".
Crime. One of the accepted categories of dispute which is recognised as being incapable of being referred to arbitration is criminal proceedings leading to conviction and related penal sanctions such as a custodial sentence or a fine. These matters are reserved to the courts. However, that is not to suggest that any allegations or claims made in an arbitration which may give rise to the potential for criminal sanctions or reveal that a crime may be committed in the future (such as a claim for payments of a commission to be used for payment of a bribe) are not arbitrable. On the contrary, it is accepted that an arbitrator has jurisdiction to find facts which constitute a criminal offence, such as fraud, or in appropriate cases to find that a criminal offence has been committed [citing The London Steamship Owners' Mutual Insurance Association Ltd v The Kingdom of Spain ("The Prestige") (No 2) [2015] EWCA Civ 333 at [78]].
(Footnotes otherwise omitted.)
88 GB Born in his work International Commercial Arbitration (Wolters Kluwer, 3rd ed, 2021) vol I at 1029 states the position with respect to typical examples of nonarbitrable matters in different jurisdictions, as follows:
The New York Convention and other international arbitration conventions recognize, and permit Contracting States to apply, nonarbitrarily exceptions of this nature as an exceptional escape mechanism. Although the better view is that the Convention imposes international limits on Contracting States' applications of the nonarbitrability doctrine … the types of claims that are nonarbitrable differ from nation to nation. Among other things, typical examples of nonarbitrable subjects in different jurisdictions include selected categories of disputes involving criminal matters; domestic relations and succession; bankruptcy; trade sanctions; certain competition claims; consumer claims; labor or employment grievances; and certain intellectual property matters. Over the past several decades, the scope of the non-arbitrarily doctrine has materially diminished in most developed jurisdictions.
As these examples suggests, the types of disputes which are nonarbitrable nonetheless almost always arise from a common set of considerations. The nonarbitrability doctrine rests on the notions that some matters so pervasively involve either "public" rights and concerns, or interests of third parties, that agreements to resolve such disputes by "private" arbitration should not be given effect. The rational was summarized, in evocative terms, by one U.S. appellate court:
"A claim under the antitrust laws is not merely a private matter. … Anti-trust violations can affect hundreds of thousands - perhaps millions - of people and inflict staggering economic damage. …We do not believe Congress intended such claims to be resolved elsewhere than in the courts." [Citing Am. Safety Equip. Corp. v J.P.Maguire & Co., 391 F.2d 821, 826-27 (2d Cir. 1968).]
The court explained that the relevant statute, the Sherman Act, "is designed to promote the national interest in a competitive economy" and equated a private litigant asserting antitrust claims under the provisions of the Act with an agent of the government, reasoning "thus, the plaintiff asserting his rights under the Act has been likened to a private attorney-general who protects the public's interest." [Citing ibid at 826.] Other explanations of the rationale for the non-arbitrability doctrine are similar. [Citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 646-50 (U.S. S.Ct. 1985).]
(Footnotes otherwise omitted.)
89 In The London Steamship Owners' Mutual Insurance Association Ltd v The Kingdom of Spain ("The Prestige") (No 2) [2015] EWCA Civ 333; [2015] 2 Lloyd's Rep 33 at 48 [77]-[78], Moore-Bick LJ (with whom Patten and Tomlinson LJJ agreed), having stated the obvious proposition that "[s]ince an arbitrator cannot convict a person of a criminal offence, the claim cannot be constituted in arbitration proceedings", went on to say, in the passage referred to in Russell on Arbitration above:
It was not disputed that in the ordinary way an arbitrator has jurisdiction to find facts which constitute a criminal offence (fraud being an all too common example) or that in an appropriate case an arbitrator also has jurisdiction to find that a criminal offence has been committed. As the judge pointed out, however, it is necessary to distinguish between a finding of criminal conduct and a conviction which provides the basis for a penal sanction. It may also be important in this context to distinguish between a claim and a dispute or difference.
(Emphasis added.)
90 The purpose of the civil penalty regime contained in the FW Act "is ensuring compliance with norms of industrial behaviour prescribed by Parliament in the public interest". See Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Broadway on Ann Case) (2018) 265 FCR 208 at 226 [69] (Logan J, with whom Tracey J agreed).
91 As French CJ, Kiefel, Bell, Nettle and Gordon JJ said in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at 494-495 [23]-[24]:
Since 1974, the Commonwealth has enacted a considerable number of civil penalty provisions. Some of those provisions are contained in legislation which provides for both civil penalties and criminal penalties … while, in other cases … the legislation provides only for civil penalties. In each case, however, the form of the civil penalty provisions is essentially similar.
In essence, civil penalty provisions are included as part of a statutory regime involving a specialist industry or activity regulator or a department or Minister of State of the Commonwealth (the regulator) with the statutory function of securing compliance with provisions of the regime that have the statutory purpose of protecting or advancing particular aspects of the public interest. Typically, the legislation provides for a range of enforcement mechanisms, including injunctions, compensation orders, disqualification orders and civil penalties, with or … without criminal offences. That necessitates the regulator choosing the enforcement mechanism or mechanisms which the regulator considers to be most conducive to securing compliance with the regulatory regime. In turn, that requires the regulator to balance the competing considerations of compensation, prevention and deterrence. And, finally, it requires the regulator, having made those choices, to pursue the chosen option or options as a civil litigant in civil proceedings.
(Emphasis added, footnotes omitted.)
92 Along the same lines, the majority of the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599 (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ) observed at 602 [9], 604 [15] and 611 [42]:
9 Under the civil penalty regime provided by the [FW] Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act.
…
15 Most importantly, it has long been recognised that, unlike criminal sentences, civil penalties are imposed primarily, if not solely, for the purpose of deterrence. The plurality in [Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482] said:
"[W]hereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty … is primarily if not wholly protective in promoting the public interest in compliance …"
…
42 [C]ivil penalties are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions.
(Footnotes omitted.)
93 In my view, a dispute about whether a party (here, the appellant) is liable for a contravention of s 50 of the FW Act, whether if so declaratory relief should be granted, and whether if so in what amount penalties should be imposed in respect of such contraventions (which I shall refer to collectively as a s 50 dispute), is a dispute that is covered by statutory provisions (including here, ss 546(1) and 50 of the FW Act) which requires determination only by the exercise of judicial power. That is because: (i) the issues that arise affect or potentially affect a person's legal status; (ii) there is an important public interest in the determination of the questions of whether the contravention is established and if so, what penalty or other relief should follow, including in light of applicable principles concerning specific and general deterrence; and (iii) such disputes must be determined in open court and not privately.
94 For those reasons, in my view a s 50 dispute is not a dispute that is capable of being referred to arbitration.
95 Before turning to the question of whether the s 50 dispute is one within the scope of the arbitration clause contained in the EA, I should deal with one other point that was argued both below and on appeal. As noted above, the appellant submitted that having regard to the scheme of the FW Act, it was not open to the respondent to notify a dispute to the FWC about failure to comply with certain clauses of the EA, obtain a decision from the FWC by way of arbitration in relation to those alleged failures, and then subsequently make an application to this court under s 50 of the FW Act. In my opinion, the primary judge was correct to reject that submission. As the passage from The Prestige at [89] above makes clear, it is entirely consistent with orthodox principle that an arbitrator may make findings of fact or even make a finding of criminal conduct which does not involve, and cannot involve, a finding of conviction. And so it is here. In my view, it is entirely consistent with the scheme of the FW Act, and orthodox general principles, that an arbitrator may make binding findings of fact falling short of doing that which he or she is not permitted to do (including make declarations of contravention of the FW Act and impose penalties).
96 It was not disputed that in a case such as this, a party in the position of the appellant is estopped from denying the truth of such factual findings made by the arbitrator. The hearing before the primary judge proceeded on that basis. But the question of whether those facts thus established constituted a contravention of a civil penalty provision of the FW Act, whether declaratory relief should be granted, and whether penalties should be imposed and if so, in what amount, are all questions that are the exclusive preserve of the courts. In my view, the bifurcation of the process involves no difficulty at all and as I say, is consistent with orthodox principles of the type described in the passage from The Prestige.
97 It follows that the appellant's submissions that because the respondent elected to arbitrate the dispute about the matters raised by the questions for determination, the Dispute Notification, and the concise summary (see [56] above), "there is now no vehicle for the [r]espondent to ask the Court to grant a declaration, or to order penalties (or other remedies that might have been available to the Court under s 545 or s 546 of the FW Act)" and, relatedly, that there is no longer any dispute capable of being resolved, must also be rejected.