Cole J also had before him a counter-application by the appellant seeking orders preventing the pursuit of a current arbitration insofar as it related to the matters raised by the appellant's proceedings in the Commercial Division. That counter-application was dismissed.

By an agreement in writing entered into in July 1990 the respondent, an English company engaged in air passenger transportation, appointed the appellant to be its General Sales Agent in Australia. Article 16 of the agreement provided that it could be terminated at any time by either party upon three month's notice in writing to the other.

In 1994 the parties fell into disagreement about various aspects of their relationship. Amongst other things, there were disputes as to monies owing by the appellant to the respondent and vice-versa. Those disputes remain unresolved.

On 22 March 1994 the respondent gave the appellant a notice of termination of the agency agreement under Article 16. The appellant claims that the respondent was not entitled to give such a notice, and asserts that, during 1992, the respondent made either a promise or a representation to the appellant that the agreement would not be terminated until the end of 1995.

The agency agreement contained the following provisions:

Any dispute or difference arising out of this Agreement shall be referred to the arbitration in London of a single Arbitrator to be agreed upon by the parties hereto or in default of such agreement appointed by the President for the time being of the Royal Aeronautical Society. The and the provisions of the Arbitration Act 1950 and any statutory modifications or re-enactments therefore for the time being in force shall apply. (sic)

This Agreement shall in all respects be interpreted in accordance with the Laws of England."

The disputes between the parties, other than the dispute in relation to the purported termination, were referred to an arbitrator in London pursuant to Article 19. Those other disputes are not directly relevant to this appeal.

The appellant commenced proceedings in the Commercial Division in relation to its complaint about the termination of the agency agreement. The proceedings were commenced by Summons. The relief sought in the Amended Summons included damages, a declaration that the agreement had not been terminated, and relief pursuant to s87 of the Trade Practices Act 1974 (Cth).

The nature of the dispute was described in the Amended Summons as follows:

"Claim for damages for breach of contract alternatively equitable damages arising out of an unconscionable departure from representations and/or a common assumption made and induced by the Defendant."

There was also a reference to an allegation that the defendant had engaged in misleading or deceptive conduct.

The summary of the appellant's contentions included the following:

"3. During or about June 1992 the Defendant, represented by James Welsh, agreed with the Plaintiff represented by Sue Francis that, notwithstanding the provisions of the said agreement, the Plaintiff would not terminate the agreement until the end of 1995.

The agreement was oral and entered into on the telephone Mr Welsh being in England and Sue Francis in Sydney, Australia. The Plaintiff was about to enter into a lease for premises and sought the Defendant's assurance that it would not terminate.

4. Alternatively to paragraph 3, during or about July 1992 the Defendant represented to the Plaintiff, alternatively it was a common assumption between the parties which common assumption was induced by the Defendant and held to its knowledge by the Plaintiff, that the Defendant would not terminate the said agreement until the end of 1995.

4A. Further and in the alternative, the said representation was:

(b) made with respect to a future matter and the Defendant did not have reasonable grounds for making it;

(c) in the circumstances misleading or deceptive or likely to mislead or deceive in contravention of Section 52 read with Section 51A of the Trade Practices Act, 1974 (Cth)."

The respondent, the defendant in the action, applied, by notice of motion, for a stay of the proceedings commenced by the appellant. The appellant in turn moved to restrain the respondent from adding to the arbitration proceedings in London the matters in dispute the subject of the Amended Summons.

Cole J made an order staying the appellant's proceedings. He dismissed the appellant's counter-application. The practical effect of this is that the appellant will be obliged to go to arbitration in London, not only in relation to the other issues between the parties, but also in relation to the dispute about the termination of the agency agreement. It is the last-mentioned dispute which the appellant seeks to have litigated in New South Wales.

There is only brief reference in the reasons of Cole J to the source of the power to stay proceedings which was invoked by the respondent. When this matter was raised by the Bench on the hearing of the appeal it became evident that it was not a question that had been closely considered in argument at first instance. The parties were given the opportunity to file written submissions on the point. It is relevant, for instance, to the nature and extent of any discretion which the primary judge may have had available to him.

Cole J treated the decisive question as being whether the arbitration agreement between the parties covered the dispute before him (ie the dispute as to termination of the agency). He concluded that it did. He then observed that the law of England was the proper law of the contract, and that s7 of the Arbitration Act 1975 (UK) obliges a court to stay proceedings commenced in contravention of an arbitration agreement.

The Arbitration Act 1975 (UK) is not a source of either a power or a duty in a New South Wales court to stay proceedings. However, s7 of the International Arbitration Act 1974 (Cth), which gave effect to the same International Convention as resulted in the United Kingdom Act of 1975, is, for present purposes, not relevantly different from s7 of the United Kingdom Act. It was the Australian Act which was the source of the jurisdiction invoked in the application for a stay of proceedings. However, the error (which reflected the way counsel presented the case at first instance) is immaterial.

The primary issue in the case concerns the meaning and effect of Article 19 of the agency agreement. Does it comprehend all, or any, or some of the claims made in the appellant's Amended Summons, and particularised in paragraphs 3, 4 and 4A set out above?

A subsidiary issue concerns the claim of the appellant under the Trade Practices Act, and whether it is amenable to arbitration in London.

Both sides in the present appeal are in agreement that the manner in which Cole J dealt with the subsidiary issue was erroneous.

Cole J took the view that, because the proper law of the contract was the law of England, the appellant could not claim relief (anywhere) under the Trade Practices Act. His Honour said:

"Whether such Trade Practices Act claims may properly be brought depends upon the proper law of the contract. If the proper law of the contract is that of England, then no relief can be sought for breach of an Australian statute."

Neither the appellant nor the respondent has sought to sustain that proposition. Section 52 of the Trade Practices Act prohibits a corporation from, in trade or commerce, engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. Trade or commerce means trade or commerce within Australia, or between Australia and places outside Australia. Section 51A, which is also relied upon, amplifies the meaning of the concept of misleading conduct. The remedies available for a contravention of s52 are dealt with elsewhere in the Act. It is to be assumed, for the purposes of the argument, that a litigant has invoked the provisions of the Act in a forum which may properly give effect to them. It is also to be assumed that the form of misleading conduct relied upon is the making of a representation concerning the termination of an existing contract. The fact that the proper law of the contract is the law of a foreign country does not prevent the conduct of one party to the contract from falling within the purview of s52, if it would otherwise do so. The conduct of a party to a contract under, or pursuant to, or in connection with, that contract, can amount to a contravention of s52 even though the proper law of the contract is foreign law, provided it is conduct in trade or commerce as defined. There is nothing in the Trade Practices Act which, in the case of trade or commerce carried on under a contract, limits the application of the Act to cases where the relevant contract has local law as its proper law. If it were otherwise, the provisions of the statute could easily be circumvented.

Although neither side endeavoured to support the reasoning of Cole J on the subsidiary issue, there remains the question of the way in which an English arbitrator could, if at all, deal with the appellant's claim under the Trade Practices Act. Cole J found it unnecessary to consider that question because, on his view, the circumstance that the proper law of the contract was the law of England meant that the appellant had no viable claim under the Trade Practices Act. Once it is acknowledged, as both parties to the appeal acknowledge, that the problem cannot be disposed of in that way, it becomes necessary to deal with this question in the context of the subsidiary issue. First, however, I shall go to the primary issue because, if the appellant's argument on that issue is correct, the subsidiary issue does not arise.

The question to be determined is whether the claims made by the appellant concerning the termination, or purported termination, of the agency agreement, having regard to the alleged conduct of the respondent (involving, as particularised, representation, estoppel and misleading conduct in contravention of the Trade Practices Act), have given rise to a dispute or difference "arising out of" the agency agreement, within the meaning of Article 19.

An extensive examination of the many cases dealing with the meaning and effect of various common arbitration clauses in contracts was undertaken by Hirst J in Ethiopian Oilseeds v Rio del Mar [1990] 1 Lloyd's Rep. 86. As his Lordship demonstrated, the expression "arising out of" has usually been given a wide meaning. Some older cases, such as Crane v Hegeman-Harris Co Inc [1939] 4 All ER 68 and Printing Machinery Co Ltd v The Linotype & Machinery Ltd [1912] 1 Ch 566, which held that arbitration agreements expressed in a certain manner or entered into in certain circumstances did not permit an arbitrator to deal with a claim for rectification, have been confined by later authorities to their special facts, and should not now be regarded as indicating the correct general approach to problems of this kind.

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.

In Ethiopian Oilseeds Hirst J held that a claim for rectification of a contract gave rise to a dispute "arising out of" the relevant agreement.

That decision, and the reasoning underlying it, reflects the current state of the law in New South Wales. (See also IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 at 475-477 per Kirby P).

The essential claim made in the Amended Summons, and disputed by the respondent, is that by reason of alleged conduct in June 1992, involving a representation by the respondent to the appellant that the agency would not be terminated until the end of 1995, the purported termination in March 1994 was ineffective or, alternatively, gave the appellant a right to damages or compensation under s47 of the Trade Practices Act. In brief, the claim is that the purported termination of the agency was wrongful, by reason of what had been represented during the course of the agreement, and such termination was either ineffective or such as to give rise to an entitlement in the appellant to damages or compensation. That, in my view, is a dispute arising out of the agency agreement.

Cole J reached the same ultimate conclusion by a more indirect approach. His Honour felt constrained by the decision of this court in Mir Brothers Developments Pty Ltd v Atlantic Constructions Pty Ltd (1984) 1 BCL 80 to hold that Ethiopian Oilseeds does not represent the law in New South Wales. However, he found that Ethiopian Oilseeds governed the present case, by force of Article 20.

I do not consider that this suggested difference between the law in New South Wales and the law in England in truth exists. A close examination is the reasoning of the majority in the former case shows that the decision turned to a significant extent upon its own special facts. It should not be regarded as deciding that the expression "arising out of" in an arbitration agreement should be narrowly construed. It may be added that the reasoning of the judges in Mir Brothers was based on English authority. This is not an area where the common law in this country has departed from the common law of England. The analysis of the authorities undertaken by Hirst J in Ethiopian Oilseeds is as valid and compelling here as in England.

On the question of the meaning of Article 19, and the intention of the parties, a particular point was made by the appellant in relation to at least so much of the dispute as related to the claim under s52 of the Trade Practices Act.

Quite apart from the matters to be discussed in connection with the subsidiary issue, and purely as a matter of construction of the agreement, the appellant submits that, when regard is had to the nature of a claim under the Trade Practices Act, and the wide discretionary jurisdiction conferred upon a local court under, for example, s87 of the Act, the proper conclusion ought to be that the parties did not intend to confer upon an arbitrator, and especially a foreign arbitrator, power to deal with such a claim.

Putting to one side, for the moment, the fact that the arbitration provided for by the present agreement is to take place in England, there is no reason in principle why the parties to a commercial contract cannot agree to submit to arbitration disputes which have arisen between them in relation to their rights and obligations under the Trade Practices Act. Indeed, it is consistent with the modern policy of encouragement of various forms of alternative dispute resolution, including arbitration, mediation and conciliation, that courts should facilitate, rather than impede, agreements for the private resolution of all forms of dispute, including disputes involving claims under statutes such as the Trade Practices Act. There is no relevant difference, in principle, between agreeing to refer such a claim to arbitration after it has arisen, and agreeing to refer it before it arises.

It was decided by this court in the case of IBM Australia (above), first, that it is possible and lawful for parties to agree to refer to arbitration a dispute under the Trade Practices Act, second, that an arbitrator to whom such a dispute has been referred may, in general, exercise the discretionary powers which the Act confers upon the Supreme Court or the Federal Court, and, third, that there is no reason to read down an otherwise comprehensive arbitration agreement in order to avoid a conclusion that this is what the parties have agreed to do. (See also Attorney-General v Mobil Oil NZ Ltd [1989] 2 NZLR 649; Apparel Holdings Ltd v Jones [1992] 3 NZLR 713).

In Allergan Pharmaceuticals Inc v Bausch & Lomb Inc (1985) ATPR 40-636 Beaumont J held, as a matter of construction, that an arbitration clause did not, in the circumstances of that case, cover a dispute under the Trade Practices Act, but there his Honour pointed out that the agreement between the parties was merely part of the background to the alleged contraventions of the Act, and therefore the dispute did not arise out of the agreement. In the present case the alleged contravention of the Act arose out of a representation concerning the duration of the agreement, and appellant's claims concerns its purported termination. The agreement is not merely the background to the dispute. The dispute is about the agreement, and its performance, and whether it was properly and lawfully brought to an end.

The fact that the arbitration provided for in Article 19 is to take place in London is a relevant matter to take into account in construing the agreements. However, it is not decisive. It may be argued that it is somewhat unlikely that it would have been intended that an English arbitrator, probably lacking familiarity with the Trade Practices Act, would be called upon to apply Australian legislation if necessary. On the other hand, the unlikelihood of the parties intending different aspects of potential disputes to be decided in different tribunals is increased when the relevant possible tribunals are so far apart.

In my view Article 19, on its true construction, covers the whole of the claims propounded in the Amended Summons.

Although related to the primary issue, this matter warrants separate consideration.

It will be for the arbitrator to decide, applying relevant principles of conflict of laws, what part the allegation of a contravention of s52 of the Trade Practices Act, and the asserted entitlement to relief under s87, will play in the arbitration. It is not for this court to pre-empt that decision.

In Government Insurance Office of NSW v Atkinson-Leighton Joint Venture [1981] HCA 9; (1981) 146 CLR 206 at 246, Mason J identified as the central question, which was resolved affirmatively, whether there was to be implied in the parties' submission to arbitration a term that the arbitrator is to have the authority to give the claimant such relief as would be available to him in a court of law having jurisdiction with respect to the subject matter. The same question is central to the present case, and is to be answered in the affirmative.

In Mitsubishi Motors Corp v Soler-Chrysler Plymouth Inc [1985] USSC 203; (1985) 473 US 614 the Supreme Court of the United States held that anti trust claims under the Sherman Act of the United States were arbitrable under an agreement which provided for arbitration by the Japanese Commercial Arbitration Association, and under which the proper law of the contract was Swiss law. Blackmun J, speaking for the majority, said, at 636-637:

"There is no reason to assume at the outset of the dispute that international arbitration will not provide an adequate mechanism. To be sure, the international arbitral tribunal owes no particular allegiance to the legal norms of particular states; hence, it has no direct obligation to vindicate their statutory dictates. The tribunal, however, is bound to effectuate the intentions of the parties. Where the parties have agreed that the arbitral body is to decide a defined set of claims which includes, as in these cases, those arising from the application of American anti trust law, the tribunal therefore should be bound to decide that dispute in accord with the national law giving rise to the claim."

There is no reason in principle why the whole dispute is not amenable to arbitration in London.

Cole J was correct to stay the proceedings in the Commercial Division, and to decline to restrain the pursuit of the arbitration.

SHELLER JA: I agree with the reasons of the Chief Justice and the order he proposes.

An English company and an Australian company entered into an agency agreement. The parties agreed to refer disputes or differences "arising out of" the agreement to arbitration in London. A dispute arose as to a purported termination of the agreement by the English party. The Australian party alleged that the purported termination was contrary to a representation made, after the contract was entered into, that it would not be terminated until a certain date. The Australian party said there was an estoppel, or misleading conduct in breach of the Trade Practices Act 1974 (Cth). The Australian party sued in a New South Wales Court. The judge at first instance granted a stay. On the question whether the dispute fell within the scope of the arbitration agreement - HELD - It did. The expression "arising out of" should be construed broadly.

Ethiopian Oilseeds v Rio del Mar [1990] 1 Lloyd's Rep. 86 applied.

Mir Brothers Developments Pty Ltd v Atlantic Constructions Pty Ltd (1984) 1 BCL 80 distinguished.

TRADE PRACTICES ACT - ARBITRATION

The proper law of the agency agreement was the law of England. It was argued that the trade practices aspect of the dispute was not amenable to arbitration in London - HELD -

1 The fact that the proper law of the contract was the law of England did not prevent either party from relying on the Trade Practices Act if it were otherwise applicable.

2 A claim under the Trade Practices Act is amenable to arbitration in London.

IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, Mitsubishi Motors Corp v Soler-Chrysler Plymouth Inc [1985] USSC 203; (1985) 473 US 614 applied.

Allergan Pharmaceuticals Inc v Bausch & Lomb Inc (1985) ATPR 40-636 distinguished.