Brisbane Airport Corporation Pty Ltd v Jacobs Group

ARBITRATION - ARBITRATION AGREEMENT - CONSTRUCTION OF ARBITRATION AGREEMENT OR REFERENCE - GENERALLY - where the plaintiff and the defendant are parties to a design consultancy agreement entered into by deed - where the design consultancy agreement concerned the provision of design engineering services by the defendant for a new runway project at the Brisbane Airport - where the plaintiff started a proceeding by way of claim and statement of claim seeking an indemnity or damages for allegedly defective design work performed by the defendant said to have caused cracking in parts of the runway - where the defendant contends that the proceeding has been started in contravention of an arbitration agreement contained in a clause in the deed - where the defendant applies for a stay pursuant to s 8(1) of the Commercial Arbitration Act 2013 (Qld) or in the court's inherent jurisdiction - where there emerged four real issues on this application - where the first issue concerned the proper construction of the clause and whether, properly construed, the clause conferred upon the parties a choice or option as to whether to commence litigation or to engage the dispute resolution process - where the second issue concerned whether, in circumstances where the steps outlined in the clause had not occurred, the arbitration agreement was to be regarded as "inoperative" within the meaning of that expression as contained in s 8 - where the third issue concerned whether, upon the proper construction of the clause, what might be styled as "non-contractual claims" were excluded from the agreement to arbitrate - where the fourth issue concerned whether, in circumstances where s 8 had no application, this court in its supervisory jurisdiction could and should impose a stay of the proceeding - whether the proceeding should be stayed pursuant to s 8(1) of the Act, pending any arbitral reference between the parties or until further order

Commercial Arbitration Act 2013 (Qld), s 8(1)

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, cited

Broken Hill City Council v Unique Urban Built Pty Ltd [2018] NSWSC 825, cited

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544, cited

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, cited

John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451, cited

Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, cited

PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301, cited

Siam Steel International Plc v Compass Group (Australia) Pty Ltd [2014] WASC 415; (2014) 293 FLR 260, cited

Stevens Constructions Pty Ltd v Zorko [2002] SASC 42; (2002) 81 SASR 316, cited

WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (No 2) [2022] NSWSC 505, cited

A J H O'Brien and L Heit for the plaintiff/respondent

• [1] The plaintiff ("BAC") and the defendant ("Jacobs") are parties to a Design Consultancy Agreement entered into by deed on 12 February 2015. The Design Consultancy Agreement concerned the provision of design engineering services by Jacobs for a new runway project at the Brisbane Airport. The Design Consultancy Agreement was varied by a further deed on 28 May 2018. I will refer to the initial agreement as amended by the later agreement as the "Varied Deed".
• [2] On 1 October 2024, BAC started a proceeding by way of claim and statement of claim seeking an indemnity or damages for allegedly defective design work performed by Jacobs said to have caused cracking in parts of the runway. By that proceeding, BAC seeks:

(a) an indemnity pursuant to a clause of the Varied Deed;

(b) damages for breach of contract;

(c) damages for negligence;

(d) damages pursuant to s 236 of the Australian Consumer Law ("the ACL").

• [3] On 14 November 2025, Jacobs filed a conditional notice to defend.
• [4] Jacobs contends that the proceeding has been started in contravention of an arbitration agreement contained in cl 23 of the Varied Deed. The application now before the court is an application by Jacobs for a stay pursuant to s 8(1) of the Commercial Arbitration Act 2013 (Qld) ("the Act") or in the court's inherent jurisdiction.

• [5] Section 8(1) of the Act provides that 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 proceedings unless it finds that the agreement is null and void, inoperative or incapable of being performed.
• [6] Clause 23 of the Varied Deed is in the following material terms:

Subject to clause 23.2, if a dispute or difference between the Consultant and BAC arises out of or in connection with the Agreement, then either party may serve the other with a notice of dispute, in writing, adequately identifying and providing details of the dispute or difference. Notwithstanding the existence of a dispute or difference, the Consultant must continue to perform its obligations under the Agreement.

If the Consultant disputes a direction or determination given pursuant to the Agreement then the Consultant must serve BAC with a notice of dispute which complies with clause 23.1, within 5 Business Days of the direction or determination being given. If the Consultant fails to serve a notice of dispute regarding a direction or determination strictly in accordance with this clause 23.2, the Consultant will be forever barred from disputing BAC's direction or determination.

Within 5 Business Days after a dispute or difference is notified in accordance with either clause 23.1 or 23.2, BAC's Representative (and any other representative of BAC, nominated by BAC's Representative) and the Consultant (if a person) or a director of the Consultant (if a company) must meet to discuss the issue in good faith with a view to resolving the issue by agreement.

If a dispute or difference remains unresolved after the parties have met in accordance with clause 23.3, either party may refer the issue to the Management Committee immediately (or within such longer period as the parties may agree). For the purposes of this clause 23.4, Management Committee means the committee established by the parties comprising two senior managers from each party.

The Management Committee must meet at BAC's offices within 10 Business Days of having the issue referred to it under clause 23.4, to discuss the dispute or difference in good faith with a view to resolving the issue by agreement.

(1) If the dispute or difference is not resolved within:

(i) 25 Business Days after the service of the notice of dispute under clause 23.1 or clause 23.2 (as the case may be); or

(ii) such longer period of time as the parties may agree in writing,

then unless the parties have, prior to that time, agreed some other means of attempting to resolve the dispute or difference (such as mediation), the dispute or difference shall be finally settled by arbitration under the Rules of Arbitration of the International Chamber of Commerce (Rules) in effect at the time of the arbitration by one arbitrator appointed in accordance with the Rules.

(2) The seat of the arbitration shall be Brisbane, Australia, and it shall be conducted in the English language.

(3) The arbitration award shall be final and binding on the parties. The parties undertake to carry out any award without delay and waive their right to any form of recourse based on grounds other than those contained in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Award of 1958 insofar as such waiver can validly be made. Judgement upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant party or its assets.

(4) Either party has the right to apply to any court of competent jurisdiction for interim relief, including urgent injunctive relief, necessary to preserve the party's rights. A request by a party to a court of competent jurisdiction for interim measures necessary to preserve the party's rights shall not be deemed incompatible with, or a waiver of, this agreement to arbitrate.

23.7 Condition precedent to commencing proceedings

Compliance with the procedures in this clause 23 is mandatory and is a condition precedent to either party commencing arbitration (other than urgent or injunctive relief) in relation to a dispute under the Agreement."

• [7] BAC also referred to cl 5.8 which materially provides that the Varied Deed is governed by the law of Queensland and each party submits to the non-exclusive jurisdiction of the courts of Queensland.
• [8] Section 7(1) of the Act provides that 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. An arbitration agreement must be in writing.[1]
• [9] BAC concedes that cl 23 contains an arbitration agreement within the meaning of that expression as defined by s 7(1) of the Act. BAC submits that, whilst cl 23 contains an arbitration agreement, the parties agreed that only those disputes for which a notice under cl 23.1 had been issued, and where subsequent conditions contained in that clause had been met, were disputes to be submitted to arbitration. BAC submitted that, upon the proper construction of the Varied Deed, the parties were free to elect whether to litigate their disputes or to trigger the dispute resolution process set out in cl 23, and only in that latter case after the completion of certain steps would the agreement to arbitrate operate.

• [10] Having regard to the parties' written and oral submissions, there emerged four real issues on this application. The first concerned the proper construction of cl 23 and whether, properly construed, that clause conferred upon BAC and Jacobs a choice or option as to whether to commence litigation or to engage the dispute resolution process under cl 23. The second concerned whether, in circumstances where the steps outlined in cls 23.1 to 23.5 had not occurred, the arbitration agreement was to be regarded as "inoperative" within the meaning of that expression as contained in s 8. The third was whether, upon the proper construction of cl 23, what might be styled as "non-contractual claims", essentially involving claims in negligence and under the ACL, were excluded from the agreement to arbitrate. The fourth concerned whether, in circumstances where s 8 had no application, this court in its supervisory jurisdiction could and should impose a stay of the proceeding.

• [11] As to the first issue, it was uncontroversial that the Varied Deed was an agreement which fell to be construed as a commercial contract. It is convenient to outline some relevant principles of interpretation. A starting point is the often cited statement in Australian Broadcasting Commission v Australasian Performing Right Association Ltd,[2] where Gibbs J said:

"It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop (1888) 39 Ch D 387, at p 393, which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case (1880) 16 Ch D 681, at p 686. Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503, at p 514, that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. ; , at p 437)."

• [12] The terms of a commercial contract are to be understood objectively by what a reasonable businessperson would have understood them to mean.[3] The reasonable businessperson is someone placed in the position of the parties at the time of the contract.[4] It is from that person's perspective that the court considers the language used by the parties, the surrounding circumstances known to them and the commercial purpose and objects of the contract.[5] A court is entitled to approach the task of giving a commercial contract a business like interpretation on the assumption "that the parties intended to produce a commercial result".[6] A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".[7]
• [13] BAC relied upon three principal arguments in support of its submission that cl 23 revealed the parties' objective intention to provide a choice as to whether to commence litigation or to trigger the dispute resolution process under cl 23. Those submissions may be outlined as follows. No party was required to serve a notice of dispute under cl 23.1. Emphasis was placed upon the word "may" as it appeared in cl 23.1. Compliance with cl 23 was made a condition precedent to the commencement of arbitration, but not to litigation. The parties, by cl 5.8, submitted to the non-exclusive jurisdiction of the Queensland courts. Properly construed, cl 23 was said to merely permit the instigation of contractual steps culminating in an arbitration and s 8(1) of the Act was not "enlivened" until such time as either BAC or Jacobs had elected to trigger the dispute resolution process under cl 23.
• [14] I reject these arguments as to the proper construction of cl 23.1. I accept as a starting point that a court will not treat a contract as preventing parties from pursuing their remedies in the courts unless it is clear that that is what they have agreed. However, I am also conscious of what was said by Brennan CJ, Gaudron and McHugh JJ in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service[8] to the effect that the aims of dispute resolution are not well served and disputes are not readily resolved by procedures which can be set at nought if one party elects to pursue some other course of action. Having regard to cl 23, read as a whole and with regard to the other provisions of the Varied Deed to which BAC referred, I favour the construction of cl 23 which is to the effect that the parties have agreed to provide for arbitration rather than litigation as the ultimate means of dispute resolution. The presence of the word 'may' in cl 23.1 reflects the fact that if there is a dispute each party has the option of acquiescing in the view of the other party or giving notice with a view to arbitration. I would respectfully adopt, in this regard, the reasoning of Doyle CJ in I also note that cl 23.7 contains express language that compliance with the procedures in cl 23 is mandatory. Those words precede the words "and is a condition precedent ...". I find that the objective agreement of the parties was that compliance with the procedures in cl 23 was mandatory. The presence of the mandatory language in cl 23.7 is inconsistent with the notion that arbitration was optional to litigation in the usual or ordinary course. It is not surprising that cl 23.7 spoke in terms of the procedures being a condition precedent to arbitration and made no mention of litigation. Upon the proper construction of the Varied Deed, litigation in the usual course was not contemplated. The presence of cl 5.8 does not warrant any different conclusion. Clause 23.6 conferred a right to apply to any court of competent jurisdiction for interim relief, including urgent injunctive relief, necessary to preserve the party's rights. The parties agreed that the exercise of that limited right was not to be deemed incompatible with or a waiver of the agreement to arbitrate.

• [15] As to the second issue, in the alternative to its primary submissions on the first issue, BAC submitted that the arbitration agreement was "inoperative" within the meaning of s 8 because the preconditions to arbitration had not been satisfied. According to that submission, arbitration under cl 23.6 could only occur once mandatory preconditions to arbitration set out in earlier subclauses of cl 23 had been satisfied. As none of those preconditions had been met, the parties' agreement to arbitrate was to be regarded as "contractually dormant" with no party having an entitlement to commence arbitration. I reject these submissions.
• [16] It may be observed that s 8 appears in an Act which has the paramount object of facilitating the fair and final resolution of commercial disputes. The Act aims to achieve that object by enabling parties to agree about how their commercial disputes are to be resolved and by providing procedures that enable commercial disputes to be resolved in a cost-effective manner informally and quickly. The Act must be interpreted so that the paramount object of the Act is achieved.
• [17] In WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (No 2),[10] Rees J conducted a thorough and comprehensive analysis of the meaning of "inoperative" as contained within equivalent provisions to s 8 of the Act. In the course of her Honour's analysis, reference is made to two decisions of Hammerschlag J in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd[11] and Broken Hill City Council v Unique Urban Built Pty Ltd.[12] In John Holland, Hammerschlag considered that an arbitration agreement was "presently inoperative" within the meaning of s 8(1) in circumstances where proceedings had been commenced before negotiation or expert determination had taken place. His Honour reasoned that unless and until a condition was fulfilled neither party could effectively refer a dispute to arbitration and it was only when the condition was fulfilled that the arbitration agreement became operative. In Broken Hill, his Honour interpreted "inoperative" to mean having no field of operation or to be without effect.
• [18] In the course of her Honour's reasons in , and after having conducted a detailed analysis of the authorities, Rees J relevantly reasoned and concluded as follows:

"Generally, 'inoperative' has been interpreted across jurisdictions implementing the Convention and the Model Law as meaning that the arbitration agreement has ceased to have effect for the future, either for a specific type of dispute or at large. An arbitration agreement may be 'inoperative' as it is unenforceable, has been amended by a further agreement, is the subject of res judicata, has been set aside by a Court, has been frustrated or discharged by breach or by reason of waiver, estoppel, election or abandonment or has otherwise been repudiated.

John Holland falls outside this rubric. It may be observed that Hammerschlag J was not taken to the authorities referred to in this judgment. Whilst John Holland was approved in Blanalko and Transurban, neither case concerned whether proceedings should be referred to arbitration notwithstanding that a preliminary step under a tiered dispute resolution clause had yet to be completed. (The case may also be distinguished as the arbitration agreement expressly provided, 'It is a condition precedent to a party being entitled to refer a Dispute to arbitration ... or to commence court proceedings ... that the procedures referred to ... first be complied with.' Schedule 3 of the D&C Deed does not so provide.)

Whilst a more experienced commercial judge would be hard to find, I respectfully consider that, to the extent that John Holland is authority for the proposition that failure to complete preliminary steps in a tiered dispute resolution clause before arbitration makes the clause 'inoperative', it should not be followed. Such a construction would undermine the object of the Act, depart from the interpretation of the term more widely and enable a party to bypass their contractual bargain to submit their disputes to arbitration by commencing proceedings before all preliminary steps have been completed: Channel Tunnel Group at 669 (per Staughton LJ). As Findlay J put it in Westco, 'It cannot possibly have been the intention of the parties that, if one of them issues a writ before that [preliminary] step is taken, their joint wish to avoid proceedings at law is frustrated': at [11]. Or as Le Miere J stated in Siam Steel, 'To construe "inoperative" to cover such a situation would turn the exception ... into a backdoor for a party wanting to escape the arbitration agreement': at [45].

I doubt that Hammerschlag J had such a result in mind. Rather, in both John Holland and Broken Hill City Council v Unique Urban Built, his Honour made facultative orders to hold the parties to their bargain to arbitrate, notwithstanding a failure to comply with the precise terms of the arbitration agreement, at least by the time that the application for a stay was heard. Hammerschlag J either stayed or stood over the proceedings until the preliminary steps required before arbitration had been completed.

As such, the arbitration agreement in the D&C Deed is 'operative' notwithstanding that the expert determination phase has yet to be undertaken. As such, the Court "must" refer the parties to arbitration. The fact that preliminary steps must be taken before the Jurisdiction Dispute or Directions Dispute reaches the arbitration stage matters not. As the Court explained in Hancock Prospecting Pty Limited v Rinehart, section 8 'involves the referral to arbitration, by a stay of court proceedings': at [146]. In that case, the Court stayed the proceedings under section 8(1) 'pending any arbitral reference between the parties or until further order': at [417], relevantly upheld by the High Court on appeal (Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 267 CLR 514 at [81]. The same result was achieved, albeit by a different route, in Channel Tunnel Group. As Staughton LJ observed at 669:

'The defendant in the court proceedings who applies for a stay may not have any claim which he wishes to make against the plaintiff, or any other reason either to start an arbitration or to carry out any preliminary action before there can be one; he may merely wish to resist the plaintiff's claim. I can see no reason why he should not say to the plaintiff: "I dispute your claim. If you wish to pursue it, you must carry out the preliminary step and then proceed to arbitration".'"

• [19] In Siam Steel International Plc v Compass Group (Australia) Pty Ltd,[13] Le Miere J observed:

"An arbitration agreement is not inoperative in relation to particular claims merely because an arbitrator has not been appointed or a step that must be taken before an arbitrator is appointed has not yet been taken in relation to those claims. To construe 'inoperative' to cover such a situation would turn the exception in s 7(5) into a backdoor for a party wanting to escape the arbitration agreement. The effect of s 7 of the International Arbitration Act is that the parties are to be held to their bargain to arbitrate except relevantly where the arbitration agreement has ceased to have effect for the future at least in relation to the claims the subject of the action."

"Section 7(2) of the International Arbitration Act provides that if the specified conditions are met the court shall stay the proceedings and refer the parties to arbitration. The plaintiff objected that the court cannot refer the parties to arbitration because no valid notice of referral to arbitration has been given by the parties and no arbitrator has been validly appointed. In its further written submissions filed on 30 October 2014 the defendant said that more than one construction s 7 of the International Arbitration Act was open but that the better construction gave rise to the conclusion that the court should not stay the proceedings where a condition precedent to the referral of the relevant dispute to arbitration has not occurred. The argument is as follows. The court's power under the International Arbitration Act s 7(2) is to stay the proceedings and refer the parties to arbitration. If the operation of the contractual provisions is such that the court cannot refer the parties to arbitration because the matters in dispute have not been identified by the mandatory mechanism provided by the contract in the event of a dispute then that itself indicates that the agreement is relevantly inoperative.

I do not agree that the arbitration agreement is inoperative because a step that must be taken before an arbitrator is appointed has not yet taken place. I do not agree that the court cannot refer the parties to arbitration, and therefore cannot stay the proceedings, because an arbitrator has not been appointed or a step that must be taken before an arbitrator is appointed has not yet been taken."

• [21] The reasoning of Rees J in WCX M4-M5 and of Le Miere J in Siam is in my respectful view, compelling and authoritative. In my consideration, the reasoning of Rees J and of Le Miere J is consistent with authority and gives effect to the paramount object of the Act. For the reasons explained by Rees J in WCX M4-M5, I decline to follow the reasoning of Hammerschlag J in John Holland and Broken Hill City Council. The arbitration agreement is not inoperative in the circumstances of the present case.

• [22] As to the third issue, BAC's argument sought to limit the referral to arbitration to what might be described as "non-contractual claims". In that regard, BAC's arguments sought to focus upon the language in cl 23.7 "under the agreement", without paying proper regard to the earlier language in cl 23.1. The earlier language in cl 23.1 contemplated that a notice of dispute might be given in respect of "a dispute or difference" arising "out of or in connection with the agreement". In oral submissions, BAC conceded that this language in cl 23.1 was apt to encompass all claims in its statement of claim in this proceeding. Counsel for Jacobs correctly emphasised the introductory words of cls 23.4 and 23.6, namely "the dispute or difference". Those words are a clear reference to the dispute or difference referred to in cl 23.1. The contemplated referral to arbitration is of a dispute of difference arising out of or in connection with the agreement. The words "dispute under the agreement" as they appear in cl 23.7 should be interpreted as a shorthand reference to "the dispute or difference" the subject of any notice of dispute as referred to in cl 23.1. It would also be uncommercial to interpret the Varied Deed as limiting arbitration to claims strictly "under the contract" when cl 23 contemplated a notice of dispute being given in respect of much wider claims, namely claims concerning a dispute or difference arising out of or in connection with the agreement.

• [23] Having regard to my reasons, it is not necessary for me to proceed to decide the fourth issue.
• [24] Jacobs proposed an order that the proceeding be stayed pursuant to s 8(1) of the Act, pending any arbitral reference between the parties or until further order. BAC did not make any submission to the effect that this form of order was inappropriate in the event that its arguments in respect of the first to third issues were unsuccessful.
• [25] The orders I make are as follows:
  1. The proceeding be stayed pursuant to s 8(1) of the Act, pending any arbitral reference between the parties or until further order.
  2. The plaintiff pay the defendant's costs of the application filed 25 November 2025 on the standard basis.

[2] [1973] HCA 36; (1973) 129 CLR 99 at 109-10.

[3] Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 at 551 per Kiefel, Bell and Gordon JJ.

[5] Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 461-2 [22] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 656-7 [35] per French CJ, Hayne, Crennan and Kiefel JJ.

[6] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 656-7 [35].

[8] [1995] HCA 36; (1995) 184 CLR 301 at 311.

[9] [2002] SASC 42; (2002) 81 SASR 316 at [25] to [28].

[10] [2022] NSWSC 505 at [95] to [121].

[11] [2015] NSWSC 451.

[12] [2018] NSWSC 825.

[13] [2014] WASC 415; (2014) 293 FLR 260 at [45].