Court of Appeal (WA)|2013-05-10|Before: Martin CJ

CAPE LAMBERT RESOURCES LTD -v- MCC AUSTRALIA SANJIN MINING PTY LTD [2013] WASCA 66 (10 May 2013)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : CAPE LAMBERT RESOURCES LTD -v- MCC AUSTRALIA SANJIN MINING PTY LTD [2013] WASCA 66

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : CAPE LAMBERT RESOURCES LTD -v- MCC AUSTRALIA SANJIN MINING PTY LTD [2012] WASC 228

International commercial arbitration - Interim orders - Refusal to award payment into escrow as a condition of stay of proceedings or as an interim or supplementary order - Interim powers of court when parties have agreed that disputes be referred to arbitration - Proper construction of clause referring disputes to arbitration - Conditions that may be placed on a stay of proceedings

United Nations Commission on International Trade Law - Model Law on International Arbitration, Art 1, Art 9, Art 17J

First Respondent : Dr A S Bell SC & Mr C W Lockhart

Second Respondent : Dr A S Bell SC & Mr C W Lockhart

Third Respondent : Dr A S Bell SC & Mr C W Lockhart

Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103; (1998) 217 ALR 435

ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896

Allen v Henry [1999] VSC 238

Ansett Australia Ltd v Malaysian Airline System [2008] VSC 109; (2008) 217 FLR 376

Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB 488; [1988] 2 All ER 577

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153

Canadian National Railway Co v Lovat Tunnel Equipment Inc (1999) 174 DLR (4th) 385

Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228

Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228(S)

Cetelem SA v Roust Holdings [2005] ECWA Civ 618; [2005] EWCA Civ 618; [2005] 4 All ER 52

Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334

Charrington & Co Ltd v Wooder [1914] AC 71

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45

Commonwealth of Australia v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662

Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169

Fiona Trust and Holding Corporation v Privalov [2007] UKHL 40

Forge v Australian Securities and Investments Commission [2006] HCA 44; (2006) 228 CLR 45

Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160

Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216

Harris v Caladine [1991] HCA 9; (1991) 172 CLR 84

Hebei Import & Export Corporation v Polytek Engineering Co Ltd [1999] HKCFA 40

IBM Australia Ltd v National Distribution Services Pty Ltd (1991) 22 NSWLR 466

Knight v Henderson [1958] VicRp 26; [1958] VR 134

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115

Larsen Oil and Gas Pte Ltd v Petropod Ltd [2011] SGCA 21

Leviathan Shipping Co Ltd v Sky Sailing Overseas Co Ltd [1998] HKCFI 550; [1998] 4 HKC 347

Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163

Marnell Corrao Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 608

McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579

Metcalf v Permanent Building Society (in liq) (1993) 10 WAR 145

Mitsubishi Motors Corporation v Soler Chrysler-Plymouth Inc [1985] USSC 203; 473 US 614 (1985)

Moses H Cone Memorial Hospital v Mercury Construction Corporation [1983] USSC 33; 460 US 1 (1983)

NCC International AB v Alliance Concrete Singapore Pte Ltd [2008] 2 SLR(R) 565

O'Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601

Oceanic Sun Line Special Shipping Co Inc v Fay (1987) 8 NSWLR 242

Onex Corp v Ball Corp (1994) 12 BLR (2d) 151

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

Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110

Pathak v Tourism Transport Ltd [2002] 3 NZLR 681

Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109

Photo Production Ltd v Securicor Transport Ltd [1980] UKHL 2; [1980] AC 827

Rinehart v Welker [2012] NSWCA 95

Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45

Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332

The Owners of the Ship or Vessel, 'The Lady Muriel' v Transorient Shipping [1995] HKCA 615; [1995] 2 HKC 320

Tjong Very Sumito v Antig Investments Pte Ltd [2009] 4 SLR(R) 732

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Transfield Philippines Inc & Ors v Pacific Hydro Limited [2006] VSC 175

Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; (2012) 201 FCR 535

United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177

Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102

Waterside Workers' Federation of Australia v JW Alexander Ltd [1918] HCA 56; (1918) 25 CLR 434

Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1

WesTrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd [2008] NSWSC 894; (2008) 219 FLR 461

Wilson v Metaxas [1989] WAR 285

1 Cape Lambert Resources Ltd and Mt Anketell Pty Ltd (together, the Cape Lambert parties) appeal from a decision of the primary judge refusing to order that Metallurgical Corporation of China Ltd (MCC) pay $80,000,000 into escrow either as a condition of the grant of a stay of proceedings which he ordered pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) (the Act), or as an interim or supplementary order in the exercise of the powers conferred upon the court by s 7(3) of the Act. The appeal raises a number of issues with respect to the exercise of the powers of a court when the parties to an agreement have agreed that their disputes are to be referred to international arbitration for resolution. For the reasons which follow, the appeal should be dismissed.

2 It is appropriate to set the context for a consideration of the issues which arise in this appeal by first outlining the commercial transactions which have given rise to the disputes between the parties and identifying the provisions in the agreements recording those transactions which are relevant.

3 By an agreement made on 11 June 2008, the Cape Lambert parties agreed to sell certain mining tenements and related assets to MCC Mining (Western Australia) Pty Ltd (MCC WA) (Asset Sale Agreement). The purchase price for the assets was $390,000,000, payable in three tranches. The first payment of $230,000,000 was payable on settlement, and the second payment of $80,000,000 was payable within 45 days of settlement. Both of those payments were made.

4 The third and final instalment of $80,000,000 was payable on terms set out in cl 3.5(c) and cl 3.6 of the Asset Sale Agreement which relevantly provide:

3.5 Payment of the Purchase Price

...

(c) [S]ubject to clause 3.6, $80,000,000 will be payable to the Seller in Immediately Available Funds without counterclaim or set off within seven days of the conditions described in schedule 2 (Approvals Conditions) being satisfied on terms satisfactory to the Buyer, acting reasonably, within two years of the date of this agreement.

3.6 Payment for the Approvals Conditions

(a) The Buyer must act in good faith and use all reasonable endeavours to do all things reasonably requested by the Seller to assist it with the satisfaction of the Approvals Conditions in the time prescribed in clause 3.5(c).

(b) If:

(2) any event or occurrence outside of the control of the Seller results in the Seller being unable to satisfy Approval Conditions within the period prescribed in clause 3.5(c),

(3) the period prescribed in clause 3.5(c) will be extended by such time as the Seller can demonstrate to the Buyer's satisfaction, acting reasonably, that the Buyer's breach or the event or occurrence delayed the Seller's satisfaction of the Approval Conditions; and

(4) the Buyer must pay the Seller $80,000,000 in Immediately Available Funds without counterclaim or set off within seven days of the expiration of the period prescribed in clause 3.5(c).

5 Schedule 2 to the Asset Sale Agreement provides that the 'Approvals Conditions' are 'All Mining Approvals'.

6 Clause 16.2 of the Asset Sale Agreement specifies the law governing the agreement and the procedures to be followed by the parties in the event of a dispute. It provides:

16.2 Governing Law and Dispute Resolution

(a) This agreement is governed by the laws of Western Australia.

(b) Subject to clause 16.2(d), the procedures prescribed in this clause 16 must be strictly followed to settle a dispute arising under this agreement.

(c) If any dispute arises out of or in connection with this agreement, including any question regarding the existence, validity or termination of this agreement;

(1) within ten Business Days of the dispute arising senior representatives from each party must meet in good faith, act reasonably and use their best endeavours to resolve the dispute by joint discussions;

(2) failing settlement by negotiation, either party may, by notice to the other party, refer the dispute for resolution by mediation:

(A) at the Singapore Mediation Centre (SMC) in Singapore;

(D) with English as the language of the mediation; and

(E) with each party bearing its own costs of the mediation; and

(3) failing settlement by mediation, either party may, by notice to the other party, refer the dispute for final and binding resolution by arbitration:

(A) at the Singapore International Arbitration Centre (SIAC) in Singapore;

(B) under the United Nations Commission on International Trade Law Arbitration Rules (UNCITRAL) in force on the date of this agreement, which are deemed to be incorporated by reference into this clause;

(C) to the extent, if any, that the UNCITRAL do not deal with any procedural issues for the arbitration, the procedural rules in the SIAC Arbitration Rules in force on the date of this agreement will apply to the arbitration;

(D) with the substantive law of the arbitration being Western Australian law;

(F) with English as the language of the arbitration; and

(G) with each party bearing its own costs of the arbitration.

(1) prevents either party seeking urgent injunctive or declaratory relief from the Supreme Court of Western Australia in connection with the dispute without first having to attempt to negotiate and settle the dispute in accordance with this clause 16; or

(2) requires a party to do anything which may have an adverse effect on, or compromise that party's position under, any policy of insurance effected by that party.

7 By an agreement dated 23 December 2009, the parties to the Asset Sale Agreement agreed to novate that agreement so as to substitute MCC Australia Sanjin Mining Pty Ltd (MCC Sanjin) for MCC WA (Novation Agreement). Under the terms of the Novation Agreement, MCC Sanjin was obliged to perform all of MCC WA's obligations under the Asset Sale Agreement (cl 2.2). The Novation Agreement further provided that the Cape Lambert parties were obliged to perform their obligations under the Asset Sale Agreement in favour of MCC Sanjin (cl 2.3).

8 By an agreement also dated 23 December 2009, MCC agreed to guarantee the obligation to pay the final tranche of the purchase price due under the Asset Sale Agreement (Guarantee Agreement). The terms and conditions of the Guarantee Agreement include the following:

2.1 Guarantee and indemnity

(a) Subject to clause 3(a), on and from the Start Date the Guarantor:

(i) guarantees for the benefit of the Beneficiaries the full, complete and prompt payment of each Guaranteed Obligation (allowing for any defence, set-off or counterclaim that MCC WA, or MCC Sanjin if the Principal Agreement is novated from MCC WA to MCC Sanjin, asserts) and indemnifies the Beneficiaries from and against all loss, damage, costs, claims and expenses suffered or incurred by the Beneficiaries by reason of MCC WA's, or MCC Sanjin's if the Principal Agreement is novated from MCC WA to MCC Sanjin, default, breach or non-performance or non-observance of any of the Guaranteed Obligations; and

(ii) within 24 hours of receiving a Valid Demand, must pay the Beneficiaries the Guaranteed Obligation that is the subject of the Valid Demand (all payment obligations must be satisfied by the payment of a bank cheque).

(b) Immediately upon receiving any amount under clause 2.1 (a)(ii) the Beneficiaries must:

(i) provide a receipt of payment to the Guarantor and MCC WA, or MCC Sanjin if the Principal Agreement is novated from MCC WA to MCC Sanjin; and

(ii) Release MCC WA, or MCC Sanjin if the Principal Agreement is novated from MCC WA to MCC Sanjin, from any obligation to pay that amount under the Principal Agreement.

9 For the purposes of the Guarantee Agreement, the Guarantor is MCC, the Beneficiaries are the Cape Lambert parties, and the Guaranteed Obligation is defined to mean, after novation, the obligation of MCC Sanjin to pay the final tranche of the purchase price under cl 3.5 of the Asset Sale Agreement. It is common ground that the 'Start Date', defined as the date on which all shares in MCC WA and MCC Australia Holdings are transferred to MCC, has occurred and the guarantee is in force.

(a) The Guarantor is only liable to pay the Beneficiaries under clause 2.1(a) if:

(i) subject to clause 3(b), upon a Guaranteed Obligation becoming due under the Principal Agreement to the Beneficiaries:

(A) demands MCC WA, or MCC Sanjin if the Principal Agreement is novated from MCC WA to MCC Sanjin, to pay the Guaranteed Obligation;

(B) provides a copy of the demand to the Guarantor; and

(C) notifies MCC WA, or MCC Sanjin if the Principal Agreement is novated from MCC WA to MCC Sanjin, and the Guarantor of its intention to demand the Guarantor to pay the Guaranteed Obligation under this document; and

(ii) upon MCC WA, or MCC Sanjin if the Principal Agreement is novated from MCC WA to MCC Sanjin, failing to pay the Guaranteed Obligation in accordance with clause 3(a)(i)(A), the Beneficiaries demand the Guarantor to pay the Guaranteed Obligation, providing evidence substantiating the amount of the Guaranteed Obligation owed.

(b) If there is any dispute between the parties to this document regarding whether an amount is payable that amount will be paid into an escrow account organised by a solicitor that is independent from the parties (on such reasonable escrow terms as the parties may agree in good faith) and must be released as soon as practicable in accordance with the outcome or decision of the mediation or arbitration (as the case may be).

11 The provisions of cl 3(b) of the Guarantee Agreement relating to the payment of funds into escrow are central to the issues that arise in the appeal.

12 Clause 9.9 of the Guarantee Agreement makes provision for the governing law of the agreement and the procedures to be followed by the parties in the event of a dispute. It provides:

(a) This document is governed by the laws of Western Australia.

(b) Subject to clause 9.9(c)(iii)(G), the procedures prescribed in this clause 9.9 must be strictly followed to settle a dispute arising under this document.

(c) If any dispute arises out of or in connection with this document, including any question regarding the existence, validity or termination of this document:

(i) within 10 Business Days of the dispute arising senior representatives from each party must meet in good faith, act reasonably and use their best endeavours to resolve the dispute by joint discussions;

(ii) failing settlement by negotiation, any party may, by notice to the other parties, refer the dispute for resolution by mediation:

(A) at the Singapore Mediation Centre (SMC) in Singapore;

(D) with each party bearing its own costs of the mediation; and

(iii) failing settlement by mediation, any party may, by notice to the other parties, refer the dispute for final and binding resolution by arbitration:

(A) at the Singapore International Arbitration Centre (SIAC) in Singapore or in Hong Kong;

(C) to the extent, if any, that UNCITRAL do not deal with any procedural issues for the arbitration, the procedural rules in the SIAC Arbitration Rules in force on the date of this agreement will apply to the arbitration;

(D) with the substantive law of the arbitration being Western Australian law;

(F) with English as the language of the arbitration; and

(G) with each party bearing its own costs of the arbitration.

(i) prevents any party seeking urgent injunctive or declaratory relief from the Supreme Court of Western Australia in connection with the dispute without first having to attempt to negotiate and settle the dispute in accordance with this clause 9.9; or

(ii) requires a party to do anything which may have an adverse effect on, or compromise that party's position under, any policy of insurance effected by that party.

13 It will be noticed that the provisions of the Guarantee Agreement relating to the resolution of disputes are very similar to the equivalent terms of the Asset Sale Agreement. There are two material differences. First, under the Guarantee Agreement, an arbitration can take place in either Singapore or in Hong Kong, whereas under the Asset Sale Agreement, the arbitration is to take place in Singapore. Second, under the Asset Sale Agreement, the obligation of the parties to 'strictly follow' the dispute resolution procedures is subject to the provision which allows either party to seek urgent injunctive or declaratory relief from the Supreme Court of Western Australia without having first followed the dispute resolution procedures. However, under the Guarantee Agreement, read literally, the obligation to strictly follow the dispute resolution procedures is said to be subject to 'clause 9.9(c)(iii)(G)' which is a clause relating to the costs of an arbitration. It seems likely that there was a drafting error in the Guarantee Agreement, and that the parties intended the obligation to strictly follow the dispute resolution procedures to be subject to cl 9.9(d), which empowers any party to seek urgent injunctive or declaratory relief from the Supreme Court of Western Australia without first having followed the dispute resolution process specified by the Guarantee Agreement. Argument in the appeal was presented on this assumption, and these reasons proceed on the same assumption.

14 The approvals required to allow mining to take place on the tenements the subject of the Asset Sale Agreement were not granted within the time specified by that agreement (within two years of entry into the Asset Sale Agreement, that is, by 11 June 2010). The Cape Lambert parties assert that this failure to obtain the mining approvals within the time prescribed was caused by the failure of each of MCC WA and MCC Sanjin to act in good faith and use all reasonable endeavours to do all things reasonably requested by the Cape Lambert parties to assist in procuring the grant of the approvals within the prescribed time, in breach of cl 3.6(a) of that agreement (Approvals Dispute). Alternatively, the Cape Lambert parties assert that the failure to obtain the required mining approvals within the prescribed time occurred by reason of events and occurrences outside their control. The Cape Lambert parties therefore assert that MCC Sanjin was liable to pay the balance of the purchase price ($80,000,000) without counterclaim or set-off within seven days of 11 June 2010. The Cape Lambert parties assert that demand for payment of that amount was made by letter to MCC WA dated 14 June 2010, and again by letter from the Cape Lambert parties' solicitors to the solicitors for MCC Sanjin dated 30 July 2010 (30 July Letter). In the 30 July Letter, the Cape Lambert parties' solicitors advised the respondents' solicitors that they had instructions to make a demand under the Guarantee Agreement. The Cape Lambert parties further assert that by letter from the Cape Lambert parties' solicitors to MCC dated 10 August 2010, they made a demand for payment of $80,000,000 by MCC pursuant to the Guarantee Agreement. The Cape Lambert parties further assert that MCC has failed to perform its obligations under the Guarantee Agreement (Guarantee Dispute).

15 After the occurrence of the disputes, the Cape Lambert parties commenced proceedings in the Supreme Court of Western Australia. The dispute resolution procedures specified in the Asset Sale Agreement and the Guarantee Agreement were also invoked. Both the court proceedings and the dispute resolution procedures specified by the agreement have been protracted and tortuous. The information available to the court does not enable any assessment to be made with respect to the allocation of responsibility for the delays as between the parties. The Supreme Court must accept a significant share of the responsibility for the delay in the resolution of the issues the subject of this appeal. However, it seems that this delay has had no impact on the ultimate resolution of the disputes between the parties because, at the time the matter last came before this court, the dispute resolution procedures specified under the agreements had not reached the point where an arbitrator had been appointed, for a variety of reasons (appeal ts 116).

16 The Cape Lambert parties commenced proceedings in this court by a writ issued on 7 September 2010. Each of the respondents (MCC Sanjin, MCC WA and MCC) is named as defendants to those proceedings, although no relief is sought against MCC WA. As against MCC Sanjin and MCC, the relief sought is declaratory, together with judgment in the amount of $80,000,000 plus interest. MCC has entered a conditional appearance to those proceedings, solely for the purposes of obtaining a stay, and has not otherwise submitted to the jurisdiction of the court.

17 On 29 September 2010, the respondents applied for a stay of the proceedings on the grounds that both the Asset Sale Agreement and the Guarantee Agreement contained dispute resolution procedures such as to constitute arbitration agreements, and that these arbitration agreements governed the disputes the subject of the proceedings. Although stays were sought under both the Commercial Arbitration Act 1985 (WA) (WA Act) and the Act, it is now common ground that the WA Act does not apply to the proceedings, due to the operation of s 21 of the Act (see [45] - [46] below). The Cape Lambert parties responded to the application for a stay by applying for an interlocutory injunction requiring MCC to pay $80,000,000 into an escrow account (pursuant to the terms of cl 3(b) of the Guarantee Agreement) as a condition of any stay of the court proceedings, or in the alternative, as an interim or supplementary order granted in conjunction with a stay of the proceedings.

18 For reasons which it is unnecessary to recount, the cross-applications were heard before the primary judge on 24 November 2010, and three times during 2011. The primary judge delivered reasons for his initial conclusion on 26 June 2012, although orders were ultimately made on 13 August 2012 for supplementary reasons published on 20 August 2012 - see Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228(S). Delays of this magnitude are unacceptable in proceedings of this nature. The procedures of the court have been changed in order to eliminate the risk of any recurrence of delays of this magnitude in proceedings concerning commercial arbitration.

19 The primary judge concluded that the dispute resolution procedures contained in the Asset Sale Agreement and the Guarantee Agreement each created a mandatory regime for the resolution of disputes rather than an optional procedure that might be invoked by one or other of the parties (Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2012] WASC 228 [54] - [59]). He also concluded that each of those procedures was an arbitration agreement for the purposes of the Act, and that s 7(1)(d) of the Act was satisfied (at least in relation to the Guarantee Dispute) because MCC was, at the time the Guarantee Agreement was made, ordinarily resident in the People's Republic of China (PRC), a country party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (see sch 1 of the Act), and that the dispute arose out of a legal relationship that would be considered commercial under the national law of the PRC (reasons [41] - [43]; [117] - [122]).

20 The primary judge also concluded that the dispute over whether MCC was obliged to pay $80,000,000 into an escrow account (Escrow Dispute) was a dispute for the purposes of cl 9.9(c) of the Guarantee Agreement, and was therefore covered by the dispute resolution procedures specified in that clause (reasons [93] - [95]). He also made a number of observations with respect to the competing contentions of the parties relating to the proper construction of the guarantee obligation in cl 2, but as he did not purport to resolve those competing contentions, it is unnecessary to relate the views expressed.

21 The primary judge concluded that orders should be made staying the proceedings against all of the respondents, and that MCC should be ordered to pay $80,000,000 into an escrow account as an interim order pursuant to s 7(3) of the Act. His reasons for that conclusion are at [130] - [134], and involved the following process of reasoning.

22 First, he considered that it was reasonably arguable that a dispute could arise under the Guarantee Agreement contemporaneously with a dispute under the Asset Sale Agreement. Second, the obligation to pay funds into an escrow account was triggered by the existence of the Guarantee Dispute. In his Honour's view, the right to be preserved by the order which he proposed to make under s 7(3) of the Act was 'the right to have the Disputed Amount paid into an escrow account prior to and pending the outcome of the mediation - and to have any amount agreed to be paid to the plaintiffs in a mediation paid out of the account' (reasons [130]). However, the order proposed by his Honour was only intended to preserve the rights of the parties pending mediation. It was intended by his Honour that any arbitrator would be able to review the order of the court if requested to do so, although the mechanism by which that was to occur was not identified (and would have been problematic - see [26] - [28] below).

23 His Honour considered that the balance of convenience favoured the grant of an interim order on the basis that it would give effect to a status quo which the parties intended would prevail during the dispute resolution process, and would enable the intention of the parties evident in cl 3(b) of the Guarantee Agreement to be given effect; that is, that the outcome of any mediation or arbitration could be immediately satisfied by payment of the funds held in escrow. The final step in the process of reasoning was his Honour's conclusion that damages would not be an adequate remedy.

24 His Honour also outlined the competing contentions of the parties with respect to the proper construction and effect of cl 3(b) of the Guarantee Agreement in the context of the dispute resolution procedures of each of the Guarantee Agreement and the Asset Sale Agreement. His Honour observed that those issues:

[S]hould be left to the arbitrator to consider if the disputes between the plaintiffs and MCC are referred to arbitration and the question of the interim order requiring a payment into escrow is revisited. The purpose of the interim order I propose to make is to preserve the rights of the plaintiffs in the dispute resolution procedures prior to any referral to arbitration [133].

25 The primary judge rejected the application for an interlocutory injunction requiring the payment of funds into escrow, primarily on the ground that there was no factual basis for the grant of urgent relief against MCC under cl 9.9(d) of the Guarantee Agreement. His Honour noted that the audited accounts for MCC for the year ended 31 December 2009 disclosed net assets of approximately $AUD10 billion (reasons [142]). No appeal has been brought from the findings of fact made by the primary judge, or from his order refusing the interlocutory injunction.

Proposed interim order of the primary judge

26 As I have noted, the primary judge intended that the interim order he proposed to grant would be able to be reviewed by the arbitrator following mediation (reasons [130(c)]). However, there are a number of significant difficulties with that aspect of his Honour's proposed orders which were not addressed in the reasons given. First, the power of any arbitrator to modify any order of this court would be governed by the lex arbitri, which would most likely be the law of Singapore, or perhaps Hong Kong, if an arbitration was commenced in that forum under the Guarantee Agreement. No evidence was adduced which established that the law of either forum empowered an arbitrator to make orders modifying an order of this court.

27 Second, the comity between jurisdictions that underpins private international law may give pause to any arbitrator in another jurisdiction considering modifying or setting aside an order of this court, even if empowered to do so - see Oceanic Sun Line Special Shipping Co Inc v Fay (1987) 8 NSWLR 242, 260; Allen v Henry [1999] VSC 238 [64]; Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; (2012) 201 FCR 535 [105]; Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 [252]; Hebei Import & Export Corporation v Polytek Engineering Co Ltd [1999] HKCFA 40 [27] - [28].

28 Thirdly, arbitrators do not exercise judicial power; an arbitrator's power is defined by the content of the relevant arbitration agreement and the lex arbitri - see Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169 [50]; Commonwealth of Australia v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662, 675 - 677 (Kirby P); Waterside Workers' Federation of Australia v JW Alexander Ltd [1918] HCA 56; (1918) 25 CLR 434, 464. While a court is able to attach conditions to the orders which it makes which can limit the operation of those orders generally (Knight v Henderson [1958] VicRp 26; [1958] VR 134, 141), and under the Act (s 7(2)), under Australian law (Ch III of the Australian Constitution), federal judicial power cannot be delegated to a non-judicial person or body - see Forge v Australian Securities and Investments Commission [2006] HCA 44; (2006) 228 CLR 45 [60]; Harris v Caladine [1991] HCA 9; (1991) 172 CLR 84, 94 - 95. Accordingly, the powers conferred upon the court by the Act cannot be delegated by the court to an arbitrator. However, this is not to say that a court could not make orders which terminate upon the occurrence of an event, such as the appointment of an arbitrator. Such an order would not involve the delegation of judicial power - rather it would define the extent of its exercise.

The supplementary reasons of the primary judge

29 As I have already noted, no orders were made by the primary judge at the time he published the reasons to which I have referred. Subsequent to the publication of those reasons, and prior to the making of any orders, the primary judge was advised by the parties that, contrary to his understanding, the mediation had occurred and was concluded without any agreement being reached in relation to the disputes between the parties. His Honour was also informed that following publication of his reasons, the respondents had referred the disputes under the Asset Sale Agreement and Guarantee Agreement to arbitration, but that this referral was disputed by the Cape Lambert parties (Referral Dispute). In his supplementary reasons published on 20 August 2012, the primary judge concluded that there had been a material change in the circumstances from those which he understood existed at the time he published his earlier reasons, in that the right of the Cape Lambert parties to have funds paid into escrow so that they could immediately receive any amount agreed to be paid as a result of mediation no longer had any practical utility, the mediation having failed to result in an agreement. The primary judge also concluded that because the mediation had concluded, there was no status quo to be preserved in the sense he had described in his preceding reasons, between completion of the mediation and the reference of the disputes to arbitration. As the primary judge had not contemplated that the interim order he had proposed would bind the arbitrator, it was appropriate that the question of whether MCC should pay the amount of $80,000,000 into an escrow account pursuant to cl 3(b) of the Guarantee Agreement should be considered and determined by the arbitrator as a preliminary issue.

30 For the purpose of resolving the Referral Dispute, the primary judge directed that the Cape Lambert parties were to refer the disputes to arbitration. His Honour ruled that this referral was to occur on terms which would require that the same arbitrator be appointed to determine each of the disputes (and that the appointment of the same arbitrator was not to be opposed by the respondents). The primary judge also ordered the respondents to consent to any application made by the Cape Lambert parties for the preliminary determination of the Escrow Dispute, and that the Cape Lambert parties and MCC take all steps that may be reasonably required to expedite the hearing and determination of the Escrow Dispute.

31 As I have noted, the dispute resolution procedures specified in each of the Asset Sale Agreement and the Guarantee Agreement have been invoked. Both conferral between representatives of the relevant parties to each of the disputes, and mediation, have failed to resolve either the Approvals Dispute, or the Guarantee Dispute. Further, in accordance with the directions made by the primary judge, the Cape Lambert parties have referred each of those disputes to arbitration to be managed by the Singapore International Arbitration Centre. Each reference to arbitration was accompanied by a statement of claim. Although the statement of claim relating to the Guarantee Dispute makes reference to the obligation to pay funds into an escrow account, no specific relief is sought in the statement of claim with respect to the payment of funds into escrow. However, the Cape Lambert parties expressly accept that it is within the power of the arbitrator appointed to determine the Guarantee Dispute to determine the Escrow Dispute as a preliminary issue, and to order the payment of such funds into escrow prior to determination of the Guarantee Dispute (appeal ts 48, 55). It is common ground that the arbitrator would have such jurisdiction and powers either by reason of Article 26 of the UNCITRAL Arbitration Rules applicable at the time the Guarantee Agreement was entered into, or pursuant to the International Arbitration Act (Singapore) Ch 143A, s 12 - see Sun CL, Singapore Law on Arbitral Awards (2011) 23 - 29 and appeal ts 48, 55 and 63. The evidence with respect to the latter provision, being evidence of foreign law, was adduced in the form of a written report from Mr Malcolm Holmes QC, an expert in the field of international arbitration.

32 At the most recent hearing of the appeal (on 4 December 2012), the court was advised that as at that date, no arbitrator had been appointed to embark upon the references, despite extensive correspondence between the SIAC and the parties (appeal ts 116). However, subsequent to the hearing, the court has been advised that an arbitrator has now been appointed to determine both references.

The grounds of appeal and notice of contention

33 At the commencement of the hearing of the appeal there were three grounds of appeal. The first two grounds are closely related, and essentially advance the proposition that the right to be protected by the making of an interim order was the right to have funds paid into escrow pending resolution of the dispute by either mediation or arbitration, so that the fact that the mediation had been concluded did not materially alter the considerations relevant to the making of an interim order to protect that right, given the pending arbitration. The third ground asserts that the primary judge erred in the exercise of the discretion conferred by s 7(3) of the Act by failing to take into consideration a number of relevant matters which, in combination, are said to compel the conclusion that the power conferred by the section should have been exercised by making an order that MCC pay $80,000,000 into an escrow account.

34 Shortly after the hearing commenced, counsel for the Cape Lambert parties moved to amend the grounds to include an additional ground of appeal contesting the conclusion of the primary judge to the effect that the Escrow Dispute was itself a dispute within the meaning of the dispute resolution procedure specified by cl 9.9(c) of the Guarantee Agreement. Leave to amend the grounds by including this additional ground was granted on the basis that the respondents would be given an opportunity to present written submissions in response to the additional ground, and, upon request, oral submissions augmenting those written submissions. Such a request was made, which explains the second hearing of the appeal on 4 December 2012.

35 In addition, the respondents have served notice to the effect that they contend that the decision of the primary judge should be upheld for reasons other than those given by his Honour, namely:

(a) the court had no jurisdiction to make an order requiring MCC to pay funds into the escrow account under s 7(3) of the Act; or in the alternative

(b) if the court did have jurisdiction to make such an order, it would have been an inappropriate exercise of the court's power under s 7(3) of the Act.

36 When considering a dispute referable to international commercial arbitration, it is appropriate to identify the law applying to the various dimensions of the dispute, given the complex interaction between the different systems of law bearing on the different aspects of the arbitration. As described by Blackaby N, Partasides C, Redfern A and Hunter M in Redfern and Hunter on International Arbitration (5th ed 2009), there are at least five systems of law that may apply to an international commercial arbitration. These include:

(a) The law governing the arbitration agreement and performance of that agreement;

(b) the law governing the existence and proceedings of the arbitral tribunal (lex arbitri);

(d) other applicable rules and non-binding guidelines and recommendations, including any ethical codes of conduct and any UNCITRAL guidelines for international arbitral proceedings; and

(e) the law governing the recognition and enforcement of the award (which may involve more than one law, depending on the nature of the arbitration) (165).

37 The procedural law of the arbitration must further be distinguished from the procedure of the arbitration, as the parties may elect that a particular set of rules govern the procedure of their arbitration (such as, in this case, the UNCITRAL Arbitration Rules). However, those rules will be subject to the procedural law of the jurisdiction in which the arbitration takes place.

38 To apply this taxonomy to these disputes, in accordance with both the Asset Sale Agreement and the Guarantee Agreement, relevantly:

(a) the law governing the arbitration agreement is the law of Western Australia, which in this context is the Act - see cl 16.2(a) of the Asset Sale Agreement and cl 9.9(a) of the Guarantee Agreement;

(b) the lex arbitri governing the arbitration is the law of Singapore, in accordance with the agreement of the parties, and the orders made by the primary judge requiring that the same arbitrator determine the disputes in the same forum - see also 16.2(c)(3)(A) of the Asset Sale Agreement and cl 9.9(c)(iii)(A) of the Guarantee Agreement;

(d) the substantive law of the dispute is the law of Western Australia - see cl 16.2(c)(3)(D) of the Asset Sale Agreement and cl 9.9(c)(iii)(D) of the Guarantee Agreement; and

(e) the law governing the recognition and enforcement of the award will depend upon the jurisdiction in which the parties seek recognition and enforcement, and might be expected to be either Australia or PRC or both.

39 As these proceedings concern the proper construction and effect of the arbitration clauses contained in the Asset Sale Agreement and the Guarantee Agreement, the law with which these proceedings primarily engage is the Act. It is therefore appropriate to set out the legal regime created by the Act, and place the competing contentions of the parties in that context.

2D Objects of this Act

The objects of this Act are:

(a) to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and

(b) to facilitate the use of arbitration agreements made in relation to international trade and commerce; and

(c) to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and

(d) to give effect to Australia's obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting; and

(e) to give effect to the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006; and

(f) to give effect to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States signed by Australia on 24 March 1975.

41 Further, s 39 of the Act provides that where a court is considering performing any functions or exercising any powers under the Act, or interpreting an agreement to which the Act applies:

(2) The Court or authority must, in doing so, have regard to:

(a) the objects of the Act; and

(b) the fact that:

(i) arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes; and

(ii) awards are intended to provide certainty and finality.

42 Part II of the Act is concerned with the enforcement of foreign arbitration agreements and foreign awards. Section 7, which is within that part, provides:

7 Enforcement of foreign arbitration agreements

(1) Where:

(a) the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;

(b) the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a country not being Australia or a Convention country, and a party to the agreement is Australia or a State or a person who was, at the time when the agreement was made, domiciled or ordinarily resident in Australia;

(c) a party to an arbitration agreement is the Government of a Convention country or of part of a Convention country or the Government of a territory of a Convention country, being a territory to which the Convention extends; or

(d) a party to an arbitration agreement is a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country;

this section applies to the agreement.

(a) proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and

(b) the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;

on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.

(3) Where a court makes an order under subsection (2), it may, for the purpose of preserving the rights of the parties, make such interim or supplementary orders as it thinks fit in relation to any property that is the subject of the matter to which the first-mentioned order relates.

(4) For the purposes of subsections (2) and (3), a reference to a party includes a reference to a person claiming through or under a party.

(5) A court shall not make an order under subsection (2) if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

43 It has been noted on several occasions that once the requirements of s 7 are satisfied, so long as the arbitration agreement is not null and void, inoperative, or incapable of being performed, a stay under s 7(2) is mandatory - see Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, 350 (Deane and Gaudron JJ); Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103; (1998) 217 ALR 435 [79] - [80]; Transfield Philippines Inc & Ors v Pacific Hydro Limited [2006] VSC 175 [55]; Comandate Marine Corp [35]; Ansett Australia Ltd v Malaysian Airline System [2008] VSC 109; (2008) 217 FLR 376 [4]. This is consistent with the express objects of the Act which include the encouragement of arbitration as a method of resolving disputes.

44 Part III of the Act is concerned with international commercial arbitration. By s 16 of the Act, which is within that part, the UNCITRAL Model Law on International Commercial Arbitration 1985, as adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended by the United Nations Commission on International Trade Law on 7 July 2006 (UNCITRAL Model Law) is given the force of law in Australia. The UNCITRAL Model Law is therefore part of the law governing the arbitration agreement.

45 The Act was significantly amended by the International Arbitration Amendment Act 2010 (Cth). Prior to the amendments, s 21 of the Act enabled parties to exclude the operation of the UNCITRAL Model Law by agreement. The former s 21 was observed to have caused 'considerable practical and interpretive problems', and a number of decisions had undermined the 'exclusivity' of the Act in governing international commercial arbitrations in Australia (Explanatory Memorandum, International Arbitration Amendment Bill 2010 (Cth) [112]; Holmes M and Brown C, The International Arbitration Act 1974: A Commentary (2011) 98). The 2010 amendments repealed the former s 21, and substituted a new s 21 in the following terms:

21. Model Law covers the field

If the Model Law applies to an arbitration, the law of a State or Territory relating to arbitration does not apply to that arbitration.

46 Article 1(1) of the UNCITRAL Model Law applies the model law to 'international commercial arbitration', a term defined in Article 1(3). Hence, since the 2010 amendments came into effect on 6 July 2010, the Act has covered the field in relation to international commercial arbitration (although it may be noted that this consequence has become less significant as the States and Territories have progressively adopted legislation which applies the UNCITRAL Model Law, with some modification, to domestic commercial arbitration). In this case, by the time of the appeal hearing, it was common ground that each of the arbitrations was an 'international commercial arbitration' within the meaning of Article 1, and that the WA Act does not apply to these proceedings (appeal ts 34, 38).

47 The UNCITRAL Model Law is Schedule 2 to the Act. Articles of the UNCITRAL Model Law which inform the proper construction and effect of the provisions of the Act relevant to this appeal include Article 9 which provides that:

Article 9. Arbitration agreement and interim measures by court

It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

48 Further, Article 17J of the UNCITRAL Model Law provides:

Article 17 J. Court-ordered interim measures

A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration.

49 Although the application by the Cape Lambert parties for an order that MCC pay funds into an escrow account was, for the purposes of the appeal, primarily based upon the powers conferred upon the court by s 7(3) of the Act, or alternatively the power to impose conditions upon the grant of the stay of proceedings under s 7(2) of the Act, during oral argument brief reference was made to Article 17J of the UNCITRAL Model Law. However, there is no ground of appeal which asserts that the primary judge erred by failing to exercise powers conferred by that Article. Further, any contention to that effect would face the insuperable obstacle that there has been no appeal from the finding of the primary judge to the effect that the evidence with respect to the financial position of MCC did not justify the grant of urgent interim relief, or from the decision of the primary judge to refuse the application for interlocutory injunctive relief. Relief of that character is precisely the kind of relief contemplated by Article 17J, and there has been no appeal from its refusal. It is therefore unnecessary to give any further consideration to the powers conferred by Article 17J in these reasons.

Ground 4 - is the Escrow Dispute a dispute falling within cl 9.9(c) of the Guarantee Agreement?

50 It is appropriate to first consider amended ground of appeal 4, which contests the primary judge's conclusion to the effect that the Escrow Dispute was itself a dispute falling within the mandatory dispute resolution procedures of cl 9.9(c) of the Guarantee Agreement. That is because rejection of that ground of appeal makes it much more difficult for the Cape Lambert parties to succeed on any of the other grounds of appeal, because of the forceful argument to the effect that an order of the court requiring MCC to pay funds into the escrow account would effectively resolve the Escrow Dispute, thereby subverting the parties' agreement to deal with that dispute in accordance with the agreed dispute resolution procedures.

51 The issue raised by ground 4 essentially concerns the proper construction to be given to the Guarantee Agreement, particularly cl 3(b) and cl 9.9 of that agreement. The principles to be applied to the process of construction are well established, and may be succinctly stated. Both the individual clauses, and the agreement as a whole, must be construed objectively. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, the High Court observed that:

This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transactionhttp://www.lexisnexis.com/au/legal/ - 7#7 [40]. (citations omitted)

52 In order to determine the proper construction of the Guarantee Agreement, reference must be made to the language used by the parties read in the context of the commercial transaction as a whole, including the Asset Sale Agreement and the Novation Agreement, and the common intention of the parties as manifest in the text and explicit and implicit objects of the agreement - see Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 [48]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 462 [22]; Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 [70]; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, 191 - 192; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579, 589; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352 - 354; Charrington & Co Ltd v Wooder [1914] AC 71, 77.

53 In the present case, it was not suggested by any party that consideration should be given to the matrix of circumstances known to the parties when the Guarantee Agreement was executed. It is therefore unnecessary to analyse the emphatic observations made by Gummow, Heydon and Bell JJ in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 [2] - [5].

54 Because the parties have agreed that their agreement is to be governed by the law of Western Australia (which of course includes the Act), and because the agreement falls to be construed in a context in which the parties ask the court to exercise powers under the Act, it is appropriate to take into account such principles of public policy as are evident in the Act, and to give effect to s 39 of the Act when construing the arbitration agreement contained within cl 9 of the Guarantee Agreement.

55 In addition, because the Guarantee Agreement has been made by parties resident in different jurisdictions providing for resolution of their disputes by international commercial arbitration in a third jurisdiction, account should be taken of principles which are evident in international jurisprudence dealing with the construction of such agreements, and the relationship between national courts and international arbitral tribunals - see Comandate Marine Corp [164] (Allsop J).

56 The weight of decisions in Australia and in leading commercial jurisdictions internationally establishes that courts will generally take a broad, liberal, and flexible approach to the construction of agreements to refer disputes to arbitration, and will favour a construction of an agreement which provides a single forum for the adjudication of all disputes arising from, or in connection with, that agreement. In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, the New South Wales Court of Appeal was asked to consider whether an arbitration clause was sufficiently broad to cover a claim under the Trade Practices Act 1974 (Cth). Gleeson CJ (with whom Meagher and Sheller JJA agreed) stated that:

When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument (165).

57 As Allsop J (as his Honour then was) said in Comandate Marine Corp:

The court should, however, construe the contract giving meaning to the words chosen by the parties and giving liberal width and flexibility to elastic and general words of the contractual submission to arbitration.

This liberal approach is underpinned by the sensible commercial presumption that the parties did not intend the inconvenience of having possible disputes from their transaction being heard in two places. This may be seen to be especially so in circumstances where disputes can be given different labels, or placed into different juridical categories, possibly by reference to the approaches of different legal systems. The benevolent and encouraging approach to consensual alternative non-curial dispute resolution assists in the conclusion that words capable of broad and flexible meaning will be given liberal construction and content. This approach conforms with a common-sense approach to commercial agreements, in particular when the parties are operating in a truly international market and come from different countries and legal systems and it provides appropriate respect for party autonomy [164] - [165].

58 These principles have been accepted in this court - see Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 11 [33] - [45], referring to Francis Travel Marketing, as well as ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896; Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB 488; [1988] 2 All ER 577; Fiona Trust and Holding Corporation v Privalov [2007] UKHL 40; Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102; IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, 483.

59 Moreover, an expansive approach to the construction of arbitration clauses is consistent with principles enunciated in other jurisdictions, forming 'part of the law of international commerce' - see Fiona Trust and Holding Corporation [31]; United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177 [3]; Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163 [6]. In Ashville Investments Ltd v Elmer Contractors Ltd at 517, Bingham LJ (as his Lordship then was) said, with respect to the scope of an arbitration clause:

I would be very slow to attribute to reasonable parties an intention that there should in any foreseeable eventuality be two sets of proceedings (598).

60 In Fiona Trust and Holding Corporation, a decision referred to in Paharpur, Lord Hoffman held that:

Arbitration is consensual. It depends upon the intention of the parties as expressed in their agreement. Only the agreement can tell you what kind of disputes they intended to submit to arbitration. But the meaning which parties intended to express by the words which they used will be affected by the commercial background and the reader's understanding of the purpose for which the agreement was made. Businessmen in particular are assumed to have entered into agreements to achieve some rational commercial purpose and an understanding of this purpose will influence the way in which one interprets their language [5].

...

[T]he construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator's jurisdiction [13].

61 In Rinehart v Welker [2012] NSWCA 95, Bathurst CJ declined to follow Lord Hoffman's speech in Fiona Trust and Holding Corporation due to his Honour's concern that it may be interpreted as suggesting 'a particular rule of construction be applied [when construing arbitration clauses] irrespective of the plain meaning of the words' [122]. Nevertheless, to the extent that Lord Hoffman's observations endorse an expansive approach to the construction of the ordinary meaning of the words of dispute resolution clauses, they are consistent with authority in Australia and other jurisdictions (see [63] below). As Austin J observed in ACD Tridon Inc:

In Australia, courts see their task as ascertaining the intention of the authors of a commercial instrument, as expressed in the instrument, taking into account surrounding circumstances and extrinsic materials to the extent permitted by law

...

[W]hile Australian courts are not constrained by considerations of public policy to adopt a 'liberal' construction or arbitration clauses, reflection on the likely intention of the parties will steer them away from any narrow construction.

...

If, however, the parties have chosen narrow language - for example, language that that [sic], on its face, confines the reference to arbitration to the contractual aspects of their dispute - an Australian court will not disregard the language used so as to permit a reference to arbitration of the non-contractual aspects of the dispute as well [119] - [121].

62 Similarly, as was observed by the New South Wales Court of Appeal in Lipman:

To adopt the liberal approach is not to depart from the meaning of the words chosen by the parties. Rather, it is to give effect to a coherent business purpose through an assumption commercial courts around the world will make that parties are unlikely to have intended multiple venues or occasions for the resolution of their disputes unless they say so [8].

CAPE LAMBERT RESOURCES LTD -v- MCC AUSTRALIA SANJIN MINING PTY LTD [2013] WASCA 66 (12 March 2013)

At a glance

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CAPE LAMBERT RESOURCES LTD -v- MCC AUSTRALIA SANJIN MINING PTY LTD [2013] WASCA 66 (10 May 2013)

Legislation Cited (5)

Cases Cited (24)