Metrocall Inc v Electronic Tracking Systems Pty Ltd

PARTIES : RESPONDENT: Electronic Tracking Systems Pty Limited

INTERVENER: Attorney General for New South Wales FILE NUMBER: IRC 4433 of 1999 CORAM: Wright J President; Walton J Vice-President; Hungerford J Unfair contract - motion to stay proceedings and refer to arbitration - licence agreement containing arbitration clause - clause provided disputes be arbitrated in Texas - whether Commission required to stay proceedings by the International Arbitration Act 1974 (Cth) - whether proceedings under s106 of the Industrial Relations Act 1996 (NSW) are a matter "arising out of or relating to" the agreement or the breach thereof - whether proceedings under s106 constitute a "matter" - whether the substance of proceedings under s106 are "capable of settlement by arbitration" - whether the powers conferred by s106 may be exercised by a private arbitrator. CATCHWORDS : Constitutional law - inconsistency of laws - whether s106 of the Industrial Relations Act 1996 is inconsistent with s7 of the Interntional Arbitration Act - whether the International Arbitration Act is supplementary to State laws. Anti-Discrimination Act 1977 The Constitution s109 LEGISLATION CITED : Contracts Review Act 1987 (NSW) Industrial Relations Act 1996 s3 s105 s106 Part 9 of Chapter 2 s146(2) s152 s169(1) International Arbitration Act 1974 (Cth) s3 s7 Trade Practices Act 1974 (Cth) s52 s87 Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103 Allergan Pharmaceuticals Ind v Bausch & Lomb Inc (1985) 7 ATPR 40-636 Beahan v Bush Boake Allen Australia Limited (1999) 93 IR 1 Blackley v Devondale Cream (Vic) Pty Ltd (1968) 117 CLR 253 BP Australia Ltd v Amann Aviation Pty Ltd (1996) 62 FCR 451 Carter v Egg and Egg Pulp Marketing Board (Vic) (1942) 66 CLR 557 Colvin v Bradley Brothers Pty Ltd (1943) 68 CLR 151 Conagra International Fertiliser Co v Lief Investments Pty Ltd (1997) 141 FLR 124 Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 Ethiopian Oilseeds v Rio del Mar Foods Inc [1990] 1 Lloyd's Rep 86 FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 117 Ferris v Plaister (1994) 34 NSWLR 474 Flakt Australia Ltd v Wilkins & Davies Construction Co. Ltd [1979] 2 NSWLR 243 Flexible Manufacturing Systems Pty Ltd v Super Products Corporation 86 F 3d 96 (1996) Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) (1998) 90 FCR 1 CASES CITED : Hooper v Kirella (1999) 167 ALR 358 IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 43 FCR 439 Maldoc Pty Ltd v Bollard (1997) 90 IR 29 Minister for Youth and Community Services v HREA NSW Branch (1987) 10 NSWLR 543 Mitsubishi Motors v Soler Chrysler-Plymouth, 473 US 614 (1985) Nutshack Franchise Pty Ltd v Smith (1999) 90 IR 355 QH Tours Ltd v Ship Design & Management (Aust) Pty Ltd (1991) 33 FCR 227 R v Brisbane Licensing Court , Ex Parte Daniell (1920) 28 CLR 23 Re Dingjan, Ex parte Wagner (1995) 183 CLR 323 Recyclers of Australia Pty Ltd v Hettinga Equipment Inc [2000] FCA 547 Stevenson v Barham (1976) 136 CLR 190 Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 Telstra Corporation Limited v Worthing (1999) 197 CLR 61 Victoria v The Commonwealth (1937) 58 CLR 618 Viskauskas v Niland (1983) 153 CLR 280 Winron Pty Ltd v Shell Company of Australia Ltd (1996) 66 IR 64 Younan-Sedrak v State of New South Wales (Department of Public Works and Services) (Unreported, Hungerford J, 19 August 1999) HEARING DATES: 10/28/1999 DATE OF JUDGMENT: 08/31/2000

APPELLANT: Mr D F Jackson QC Mr J V Murphy of Counsel SOLICITOR: Mr B Heddle Minter Ellison

RESPONDENT: Mr S C Rothman SC LEGAL REPRESENTATIVES: Mr D D Knoll of Counsel SOLICITOR: Mr D Kemp Dibbs Crowther & Osborne

INTERVENER: Dr A S Bell of Counsel SOLICITOR: Mr I V Knight State Crown Solicitor

JUDGMENT:

• 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION FULL BENCH CORAM: Wright J, President Walton J, Vice-President Hungerford J Thursday 31 August 2000

Matter No IRC 4433 OF 1999 METROCALL INC (SUCCESSOR BY MERGER TO PRONET INC) v ELECTRONIC TRACKING SYSTEMS PTY LIMITED

Application for leave to appeal and appeal against an interlocutory judgment of Justice Schmidt given on 29 July 1999 in Matter No IRC 6246 of 1998. JUDGMENT OF THE COURT [2000] NSWIRComm 136 1 This matter is an application for leave to appeal and, if leave be granted, an appeal against an interlocutory judgment of Schmidt J dated 29 July 1999. The judgment of Schmidt J related to an application by Electronic Tracking Systems Pty Limited ("the respondent") under s106 of the Industrial Relations Act 1996 (NSW) ("the IR Act"). The application concerned a licence agreement entered into by the respondent and ProNet Inc ("the appellant") in connection with the installation, marketing, leasing, operation and maintenance of the ProNet Tracking System. In substance, the respondent alleges that the licence agreement between the parties was a contract under which work was performed and was unfair within the meaning of s106 of the IR Act. The cause of the unfairness essentially revolved around representations alleged to have been made by or on behalf of the appellant and the termination of the licence agreement by letter dated 27 January 1998 contrary to those representations. 2 Following the commencement of the proceedings, the appellant filed a notice of motion seeking an order that the summons for relief under s106 be dismissed or, in the alternative, an order staying the summons and referring the parties to arbitration. In support of the orders sought, the appellant claimed that the Commission had no jurisdiction to deal with the application on the grounds that the making of an application under s106 was contrary to the provisions of the International Arbitration Act 1974 (Cth) ("the IA Act"). Hence, it was argued, the Commission had no jurisdiction to hear the matter by virtue of s109 of the Australian Constitution because s106 is inconsistent with the IA Act. In the alternative, the appellant submitted that the Commission was required by s7(2) of the IA Act to stay the proceedings and refer the parties to arbitration. 3 The notice of motion was heard by Schmidt J on 17 May and 17 June 1999. Her Honour gave her decision on 29 July 1999 and dismissed the motion. It is against that decision which the appellant appeals. The Legislation 4 The jurisdiction of the Commission to declare void or vary an unfair contract is conferred by Part 9 of Chapter 2 of the IR Act. That Part, in which s106 appears, provides: 105. Definitions

contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract:

(a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument.

Note: The jurisdiction of the Commission under this Part is exercisable only by the Commission in Court Session.

106. Power of the Commission to declare contracts void or varied

(1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract.

(2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason.

(3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time.

(4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force.

(5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case.

(1) The Commission, when making an order under section 106 or at a later time, may make such further order as the Commission considers appropriate for the purpose of prohibiting (either absolutely or otherwise than in accordance with specified conditions):

(a) any party to the contract, or (b) any other person who is (in any way considered relevant by the Commission) associated with any such party,

(c) entering into any specified kind of contract whereby a person performs work in an industry, or (d) doing any act (whether by way of advertising or otherwise) which may reasonably be construed as being intended to induce other persons to enter into any such contract.

(2) An order under this section must identify the person or persons bound by the order and takes effect in respect of each such person:

(a) on service on the person of a copy of the order, or (b) on publication of the order in a daily newspaper circulating generally throughout New South Wales,

An order may be made under this Division on the application of:

(a) any party to the contract, or (b) any person who, but for the making of such an order, would be a party to the contract, or (c) an industrial organisation of employers whose members employ persons working in the industry to which the contract relates, or (d) an industrial organisation of employees whose members are employed in the industry to which the contract relates, or (e) an association registered under Chapter 6 of which a party to the contract is a member,

109. Conciliation of applications to be attempted first

(1) The Commission must endeavour, by all means it considers proper and necessary, to settle a matter under this Division by conciliation.

(2) When, in the opinion of the Commission, all reasonable attempts to settle the matter by conciliation have been made but have been unsuccessful, the Commission is to determine the matter in accordance with this Act.

(3) Nothing in this section prevents further conciliation from being attempted at any time before the Commission makes such an order.

(4) Any member of the Commission (whether or not a judicial member) may undertake the conciliation of a matter under this Division.

109A. Exclusion of certain contracts in connection with unfair dismissals

(1) This Division does not apply to a contract of employment that is alleged to be an unfair contract for any reason for which:

(a) an application has been or could have been made by the employee under Part 6 (Unfair dismissals), or (b) such an application could have been made but for the provisions of section 83 that exclude the employee from making an application under that Part.

contract of employment means any contract or arrangement under which work is done by a person in the capacity of an employee, and includes a related condition or collateral arrangement with respect to such a contract. dismissal has the same meaning that it has in Part 6. 5 The grounds advanced by the appellant in support of the notice of motion essentially concern the operation of the IA Act. The IA Act was enacted to implement the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 ("the Convention") with the intention of providing for the enforcement of foreign arbitration agreements and awards by Australian courts. 6 Relevantly, the IA Act seeks to enforce certain agreements under which the parties undertake to submit to arbitration all or any differences which have arisen between them in respect of a defined legal relationship. The applicable provisions are as follows: 3. Interpretation

(1) In this Part, unless the contrary intention appears:

agreement in writing has the same meaning as in the Convention; arbitral award has the same meaning as in the Convention; arbitration agreement means an agreement in writing of the kind referred to in sub-article 1 of Article II of the Convention; Australia includes the Territories; Convention means 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, a copy of the English text of which is set out in Schedule 1; Convention country means a country (other than Australia) that is a Contracting State within the meaning of the Convention; court means any court in Australia, including a court of a State or Territory; foreign award means an arbitral award made, in pursuance of an arbitration agreement, in a country other than Australia, being an arbitral award in relation to which the Convention applies.

(2) In this Part, where the context so admits, "enforcement", in relation to a foreign award, includes the recognition of the award as binding for any purpose, and enforce and enforced have corresponding meanings.

(3) For the purposes of this Part, a body corporate shall be taken to be ordinarily resident in a country if, and only if, it is incorporated or has its principal place of business in that country.

(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;

(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. 7 It will be noted that the basis of the application of s7 of the IA Act is the existence of an "arbitration agreement". An "arbitration agreement" is defined in Article II of the Convention to mean: … an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration. 8 Section 7 applies in a range of circumstances, including where 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: s7(1)(a), or where a party to the agreement is a person who was at the time the agreement was made domiciled or ordinarily resident in Australia: s7(1)(b). It was agreed that the United States of America, whose law governs the licence agreement, was a "Convention country". In the proceedings before Schmidt J a copy of a proclamation and certificate to that effect was tendered. 9 If a party to such an arbitration agreement institutes proceedings in a court, the court "shall" stay the proceedings and refer the parties to arbitration (s7(2)). "Court" is defined in s3 to include any court in Australia, including a court of a State or Territory. The Commission in Court Session is established by the IR Act as a superior court of record (see s152 thereof) and the IA Act thereby applies to it. Whether a court is required to stay proceedings and refer the matter to arbitration will depend on whether the proceedings "involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration" (s7(2)). If these conditions are satisfied, the court is obliged to stay the proceedings. However, the court will not make an order referring the parties to arbitration if it finds that the arbitration agreement is "null and void, inoperative or incapable of being performed" (s7(5)). The Licence Agreement 10 The licence agreement ("the agreement") was entered into between the respondent and the appellant on 30 August 1991. The agreement essentially granted an exclusive licence to the respondent to market, lease, operate and maintain the ProNet Tracking System within Australia. The ProNet Tracking System is a state-of-the-art miniature radio receiver and transmitter system which is designed to be used primarily in law enforcement. The respondent subsequently sought to develop and market the product throughout Australia. 11 The application by the respondent under s106 of the IR Act attacks the agreement in a number of respects, but focuses principally upon the purported termination of the agreement by the appellant at the expiration of the initial seven year term. The respondent sought orders varying clause 9.1 of the agreement so as to preclude the appellant from terminating the agreement at that time. Clause 9.1 provides: IX. Term of Agreement

9.1 This Agreement shall become effective on the date hereof and shall continue in effect for a period of seven (7) years thereafter unless sooner terminated or extended as provided below. Unless notice of intention to terminate this Agreement is given by either party at least sixty (60) days prior to the last day of the applicable term, this Agreement shall be deemed automatically renewed for a period of five (5) years thereafter. 12 Significantly for present purposes, the agreement contained provisions dictating the proper law of the contract and requiring disputes arising out of or relating to the agreement to be settled by arbitration. Relevantly, clause 13.7 and 13.8 provide: XII. Miscellaneous

13.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, U.S.A.

13.8 Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in the State of Texas, in the United States of America, in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 13 It is agreed by the parties that clause 13.7 renders the contract governed by the law of Texas in the United States of America and that clause 13.8 is an "arbitration agreement" as described in Article II of the Convention and s3 of the IA Act. The issues raised in this case are complicated somewhat by the fact that the respondent, in its application under s106, also sought orders that clause 13.7 and 13.8 be declared void in whole or in part. It should be noted that the application also attacks the arbitration clause itself as being unfair, harsh or unconscionable or contrary to the public interest. The Judgment of Schmidt J 14 Schmidt J handed down her decision on the notice of motion on 19 July 1999 determining that the orders sought on the motion must be rejected and the motion dismissed. 15 Her Honour first rejected the submission that the Commission lacked jurisdiction to hear or determine the application as a result of the operation of s109 of the Australian Constitution . The appellant submitted that the institution of proceedings under s106 of the IR Act was inconsistent with the provisions of the IA Act, which therefore prevailed by virtue of s109 of the Constitution. Her Honour observed that s7 of the IA Act contemplated that the court in question has jurisdiction in connection with the proceedings sought to be stayed. Her Honour stated that "if there was no jurisdiction, there would be nothing to stay in accordance with the requirements of the provision." As a result, no inconsistency under s109 of the Constitution arose. 16 The judgment then considered whether the proceedings should be stayed and referred to arbitration pursuant to s7 of the IA Act. Whilst Schmidt J recognised the breadth of clause 13.8 of the agreement, her Honour expressed some doubt as to whether a claim of this kind was envisaged by the parties as being subject to the arbitration clause (see, by analogy, Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) (1998) 90 FCR 1). Her Honour observed that "it seems odd … to infer an intention to parties, even from the wide terms of their arbitration agreement, that an arbitrator applying the laws of Texas was to exercise the jurisdiction of this Court under s106 of the Act". Her Honour did not consider it necessary to decide the questions raised as to the construction of the arbitration provisions. 17 Her Honour ultimately approached the issue of whether the Commission was obliged to stay the proceedings by considering whether the claims advanced by the respondent were "capable of settlement by arbitration" pursuant to s7 of the IA Act. In relation to this question, her Honour arrived at a number of conclusions. Firstly, her Honour observed that the respondent sought to challenge the choice of law and arbitration clauses themselves. Following the decision of the Full Federal Court in Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) , her Honour determined that any stay which was granted should be subject to a condition that the proceedings should not be referred to arbitration until the claims made in relation to those clauses had been determined. 18 Secondly, her Honour emphasised the peculiar nature of the Court's jurisdiction under s106. Under that provision, the Commission has a discretion to intervene in the contractual arrangements of certain parties and make monetary orders as it "considers just in the circumstances of the case" (see s106(5)). The remedy and the relief granted by s106 are inextricably linked with the jurisdiction of the Court. This power must be exercised in accordance with s146(2) of the IR Act which requires the Court to take into account the public interest and must have regard to the objects of the IR Act in s3, and the state of the New South Wales economy. Her Honour also noted that under s169 of the IR Act the Court is required to have regard to the principles in the Anti-Discrimination Act 1977. 19 Her Honour concluded: It follows, in my view, that it is not open to parties to an agreement which comes within the definition of 'contract' in s105 of the Act, to agree with each other that the jurisdiction of the Court under s106, is to be exercised as between them, by anyone other than a member of the Court. For it is not only the position of the direct parties which must be considered in such proceedings. In every case the objects of the Act and the public interest must be taken into account, as must the principles contained in the Anti-Discrimination Act 1977. In my view, no parties to a contract within the Court's jurisdiction under s106, could clothe an arbitrator with the power and duty to exercise that function. It follows that those aspects of the jurisdiction take the 'matter for determination' in these proceeding beyond matters 'which are capable of settlement by arbitration'. 20 It was not, in her Honour's view, open to parties to a contract to agree that such questions may be decided privately by an arbitrator. 21 Her Honour stated that the peculiar nature of the Commission's jurisdiction under s106 distinguished these proceedings from cases dealing with the Trade Practices Act 1974 (Cth): see particularly IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 and Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160. The Trade Practices Act (particularly s52) imposes statutory obligations upon corporations and the only question for determination was whether those obligations had been breached. This was a matter which could be decided by an arbitrator. In contrast, s106 creates no existing obligations, but grants a right to various persons to seek relief from the Commission. The Commission is clothed with a power to recreate the contractual terms on a basis which could not be contemplated by the parties. 22 Finally, her Honour noted that the obligation imposed by s109 of the IR Act that the Commission endeavour, by all means it considers proper and necessary, to settle a matter by conciliation further militates against the conclusion that matters raised under s106 are capable of settlement by arbitration. The parties cannot, by their agreement, confer upon an arbitrator the role of conciliation so as to remove the statutory obligation from the Commission. Submissions on Appeal 23 The appellant initially submitted that her Honour erred in finding that the IA Act contemplated that a court has jurisdiction in connection with the proceedings sought to be stayed and, on that basis, erred in rejecting the submission that there was inconsistency under s109 of the Constitution as between s106 of the IR Act and s7 of the IA Act. However, during submissions, Mr D F Jackson QC, who appeared with Mr J V Murphy of counsel for the appellant, conceded that constitutional inconsistency arose only if the proceedings were proceedings to which s7 of the IA Act applied. That is, if the proceedings are instituted by a party to an arbitration agreement which involve the determination of a "matter that, in pursuance of the agreement, is capable of settlement by arbitration". Where the IA Act applies the Commission in Court Session is prevented from in any way altering, impairing or detracting from its operation. 24 Turning to the arbitration clause itself (clause 13.8), Mr Jackson submitted that the clause was extremely wide in its terms. He particularly emphasised that the clause purported to apply to any controversy or claim "arising out of or relating to" the agreement "or the breach thereof". The specific reference to the circumstance of "breach" in a context where one already has law relating to the agreement was said to support the view that the provision was intended to have a broad operation. Mr Jackson submitted that an examination of the summons for relief revealed that the relief sought referred directly to the contract itself. Mr Jackson argued that it was very difficult to take any view other than that the claim was one relating to the agreement. 25 It was submitted that her Honour erred in considering the nature of the substantive claims made by the respondent and whether they were capable of settlement by arbitration, against the background of the peculiar jurisdiction of the Commission under s106 of the IR Act. It was not the "peculiar" nature of the Commission in Court Session's jurisdiction under s106 that determined whether the claims were capable of settlement by arbitration, but the nature of the claims themselves. These claims are essentially in the nature of inter partes commercial litigation and could have been made pursuant to the Trade Practices Act , the Contracts Review Act 1980 or the common law. 26 Mr Jackson disputed the distinction drawn by her Honour between an application under s106 and claims brought under similar provisions contained in the Trade Practices Act . It was submitted that her Honour focused unduly on s52 of the Trade Practices Act . Mr Jackson particularly drew attention to s87 of that Act as requiring a similar determination to be made as that demanded by s106 of the IR Act. 27 Finally, reference was made to the aspect of the claim which sought orders that the arbitration clause itself be declared void. It was submitted that the attack on clauses 13.7 and 13.8 of the agreement was not a claim of substance but, rather a stepping stone towards having the Commission in Court Session determine the substantial claims. Mr Jackson also contended that s7(5) of the IA Act has no application to the present case. The term "null and void" in that section was referable to concepts in law of contracts which were void for reason of illegality, mistake or some other reason. Nothing of that nature was suggested in this case and the claim by the respondent that clause 13.7 and 13.8 be declared void under s106 was of no consequence to the determination of the question as to whether the agreement is null and void in the sense referred to in s7(5) of the IA Act. 28 If the claims in relation to clause 13.7 and clause 13.8 were considered to be matters of substance, it was submitted that they were, in any event, severable from the remainder of the agreement. Mr Jackson conceded that one possible view was that the Commission would be required to stay the proceedings in relation to the bulk of the matters and proceed to determine that claim under s106 in relation to the arbitration clause. If the arbitration clause was declared void, the Commission could proceed to determine the remainder of the claims. If the arbitration clause was not declared void, the Commission would be required to refer the remaining claims to arbitration as provided in the clause. 29 Mr S C Rothman SC, who appeared with Mr D D Knoll of counsel for the respondent, relied substantially upon the correctness of her Honour's judgment below. He rejected the argument that the operation of the IA Act gave rise to any inconsistency under s109 of the Constitution. Section 7(2) of the IA Act applied only if "the proceedings involve the determination of a matter that … is capable of settlement by arbitration"; referring to Flexible Manufacturing Systems Pty Ltd v Super Products Corporation 86 F 3d 96 (1996) (United States Court of Appeals, Seventh Circuit). If the section did not apply to the proceedings, no inconsistency would arise. 30 Further, Mr Rothman contended that the proceedings are not a matter capable of settlement by arbitration pursuant to the agreement. This is because the operation of s106 was inconsistent with its exercise by anyone other than the Commission and because the statutory right of action under s106 existed independently of contract: The Rochester Communications Group Pty Ltd v Adler (1996) 65 FCR 572; Allergan Pharmaceuticals Ind v Bausch & Lomb Inc (1985) 7 ATPR 40-636 and Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) . Section 106 is a provision which is peculiar to this Commission and in which a specialist court has been given jurisdiction in a manner which inextricably binds the grant of jurisdiction and the procedure for its enforcement. The operation of s106 differed from the operation of provisions of other legislation, particularly the Trade Practices Act . It is only the Commission in Court Session which is given jurisdiction to determine if a contract was an unfair contract and in order for a contract to be declared void or varied, the Commission must make such a finding. 31 In the alternative, Mr Rothman submitted that the claims before the Commission were not a "matter" for the purposes of s7 of the IA Act. A "matter" involved a justiciable controversy between parties and excluded controversies which were not the exercise of judicial power: see BP Australia Ltd v Amann Aviation Pty Ltd (1996) 62 FCR 451. The provisions of s106 created rights rather than enforced them and were arbitral rather than judicial in nature: see Minister for Youth and Community Services v Health and Research Employees' Association of Australia, NSW Branch (1987) 10 NSWLR 543 at 549, 560; Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 360 - 361; Winron Pty Ltd v Shell Company of Australia Ltd (1996) 66 IR 64 at 65 - 66. 32 Dr A S Bell of counsel, who intervened for the Attorney-General for New South Wales, made essentially three points. Firstly, the decision in Ferris v Plaister (1994) 34 NSWLR 474 to the effect that an arbitration clause was to be regarded as severable from the main contract does not assist in the present case. The application under s106 directly attacked the arbitration clause itself by seeking orders that it be declared void. In such a situation, even if the remainder of the claim under s106 was capable of settlement by arbitration, the attack on the arbitration clause would have to be determined as a preliminary matter. Dr Bell referred by way of analogy to Conagra International Fertilizer Co v Lief Investments Pty Ltd (1997) 141 FLR 124 and FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 117 and 41 NSWLR 559 to illustrate that it is possible to determine issues relating to the validity or existence of an arbitration clause as a separate issue. 33 Secondly, Dr Bell submitted that there was no inconsistency between the IA Act and s106 of the IR Act for the purposes of s109 of the Constitution. Dr Bell characterised the IA Act as a Commonwealth law which operated within the setting of other laws so that it was supplementary to or cumulative upon State law: Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at 76. The IA Act was only activated if a party applied for a stay. Furthermore, the IA Act presupposed jurisdiction in the court to deal with the application and had built into it the concept of severable arbitration. Dr Bell ultimately contended that this was not a case of inconsistency. The real question is whether the preconditions for a stay dictated by the IA Act are satisfied, that is, whether the matter raised by the proceedings is capable of settlement by arbitration. 34 Finally, Dr Bell addressed the question of whether the matter was "capable of settlement by arbitration". Dr Bell commenced with the proposition that whether a matter was capable of settlement by arbitration will depend upon whether the arbitrator has power to deal with it. The powers of an arbitrator are derived from the terms of the agreement between the parties. Dr Bell submitted that there were some powers which it is not possible for parties to an agreement to confer on an arbitrator or for an arbitrator to exercise. Dr Bell supported the conclusion reached by her Honour below that the powers under s106 were of this nature. It is not within the gift of the parties to empower an arbitrator to, for instance, determine what is in the public interest of New South Wales. This function is conferred exclusively upon the Commission in Court Session. 35 In reply, Mr Jackson emphasised that where parties have agreed that an arbitral body is to decide a defined set of claims, the tribunal is bound to decide that dispute in accordance with the national law giving rise to them: see Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd at 167. The fact that the arbitration is proposed to take place in Texas does not prevent the arbitrator from applying New South Wales law. In relation to the nature of the claim under s106, Mr Jackson submitted that an arbitrator may have authority to give the claimant such relief as would be available in a court of law: see IBM Australia Ltd v National Distribution Services Ltd at 487. If there is any qualification of this principle based on the nature of a jurisdiction, it should not operate as an exclusion merely by reference to the title of the court. The Commission is required to determine if the claims themselves are of a nature which can be decided by an arbitrator. Constitutional Inconsistency 36 The initial argument advanced on behalf of the appellant is that her Honour erred in determining that the Commission has jurisdiction in connection with the proceedings to be stayed and, on that basis, her Honour erred in rejecting the submission that there was any inconsistency under s109 of the Constitution as between s106 of the IR Act and the IA Act. 37 Section 109 of the Constitution provides: When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. 38 Where there is a valid State law and a valid Commonwealth law which are inconsistent, the State law becomes inoperative, to the extent of the inconsistency, but remains a valid law of the State which enacted it: see Carter v Egg and Egg Pulp Marketing Board (Vic) (1942) 66 CLR 557 at 573. 39 The High Court has generally formulated three broad approaches to determine the existence of inconsistency. Inconsistency is present where it is impossible to obey both laws, for example where one law requires X and the other forbids X (see for example, R v Brisbane Licensing Court ; Ex Parte Daniell (1920) 28 CLR 23) or where one law purports to confer a legal right, privilege or entitlement which the other law purports to take away or diminish (see, for example, Colvin v Bradley Brothers Pty Ltd (1943) 68 CLR 151). Inconsistency may also arise where the Commonwealth law evinces a legislative intention to "cover the field" or that its law shall be all the law there is on that topic, even where there is not a direct contradiction between the two enactments, the State law will be inoperative to the extent that it seeks to operate within that field. The intention to "cover the field" may be express or implied (see, for example, Viskauskas v Niland (1983) 153 CLR 280). 40 In Telstra Corporation Limited v Worthing, the High Court considered whether the operation of the Commonwealth Safety, Rehabilitation and Compensation Act 1988 (Cth) was inconsistent with the operation of the Workers Compensation Act 1987 (NSW). The Court affirmed the principle in Viskauskas v Niland that inconsistency may exist under s109 although it is possible to obey both the State and Commonwealth law, and that a "direct collision" (in the words of Barwick CJ) would exist where the State law would impose a greater obligation than that provided for in the federal law (referring to Blackley v Devondale Cream (Vic) Pty Ltd (1968) 117 CLR 253 at 258-259). The Court stated (at 76): Thus, in Australian Mutual Provident Society v Goulden (1986) 179 CLR 388 at 398, in a joint judgment, the Court determined the issue before it by stating that the provision of the State law in question "would qualify, impair and, in a significant respect, negate the essential legislative scheme of the Life Insurance Act 1995 (Cth)". A different result obtains if the Commonwealth law operates within the setting of other laws so that it is supplementary to or cumulative upon the State law in question ... 41 The Court also affirmed the principles laid down by Dixon J in Victoria v The Commonwealth (1937) 58 CLR 618 that where a State law would "alter, impair or detract from the operation" of a Commonwealth law, then to that extent it is invalid, and, secondly, that if it appears from the nature of the Federal enactment that it is intended to be a "complete statement of the law governing a particular matter or a set of rights and duties, then for a State law to regulate or apply to the same matter or relation is regarded as a detraction from the full operation of the Commonwealth law and so is inconsistent." 42 We are satisfied that no inconsistency arises between the IA Act and s106 of the IR Act so as to deprive the Commission in Court Session of jurisdiction to hear the application. We agree with Schmidt J that s7 of the IA Act is to be construed as operating on the basis that the relevant court has jurisdiction as to the proceedings sought to be stayed. The IA Act does not purport to alter the jurisdiction of courts to entertain proceedings as to agreements to which it applies. It merely requires those courts to stay proceedings in the event that there is an arbitration agreement which applies to the matters raised in those proceedings. Even then, the court is only required to stay the proceedings on application by a party. The IA Act contemplates courts having jurisdiction to determine the existence of an arbitration clause, whether the proceedings involve a matter which is capable of settlement by arbitration (s7(2)), whether to make any interim or supplementary orders (s7(3)) and whether the arbitration clause is "null and void, inoperative or incapable of being performed" (s7(5)). These findings must be made by the court as a prerequisite to the granting of a stay of proceedings: see Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) at 14. As Emmett J observed in that case, at 28: Section 7(2) is only invoked upon the application of a party. It is open to the parties not to invoke s7(2) or the discretionary inherent jurisdiction of the Court. If a party chooses to make no application, then there will be no occasion for the Court to consider ordering a stay under s7(2).

See also, to similar effect, the judgment of Gillard J of the Supreme Court of Victoria in Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103 at 94 - 112. 43 Mr Jackson conceded during submissions that any inconsistency only arose in circumstances in which the IA Act applies, that is, where the proceedings involve a "matter which is capable of settlement by arbitration". Any inconsistency would only arise, therefore, if the IR Act required that the Commission in Court Session proceed to hear and determine the proceedings contrary to the IA Act. The IR Act does not require such a course. As with any court, the Commission is obliged to hear and determine cases brought within its jurisdiction. The Commission may, however, stay proceedings before it in a variety of circumstances. The Commission, for instance, may stay proceedings for abuse of process: see Maldoc Pty Ltd v Bollard (1997) 90 IR 29 at 29 - 30 and Nutshack Franchise Pty Ltd v Smith (1999) 90 IR 355 at 356. The IA Act, in our view, does no more than specify a circumstance in which the Commission must stay proceedings if the requirements of that Act are present. We agree with the submissions advanced on behalf of the respondent and on behalf of the Attorney-General that the IA Act is to be considered as supplementary to State laws conferring jurisdiction on various courts. The International Arbitration Act 44 It is necessary then to determine whether the Commission in Court Session was required by s7 of the IA Act to stay the proceedings and refer the matter to arbitration. This question depends ultimately upon whether the proceedings involve a "matter that … is capable of settlement by arbitration". This question has three components: (i) whether the substance of the dispute is a "matter" within the meaning of s7; (ii) whether the dispute giving rise to the proceedings is within the scope of the arbitration clause agreed by the parties; and (iii) whether the matter is "capable of settlement by arbitration". As discussed subsequently, the second and third components conceptually overlap. In addition, it may be necessary to consider whether the claim that the arbitration clause itself be declared null and void is capable of settlement by arbitration. We will examine each component in turn. Subject Matter of the Proceedings 45 One submission advanced on behalf of the respondent was that the substance of the claims under s106 is not a "matter" within the meaning of s7 of the IA Act. It was contended that the term "matter" refers to a judicial controversy and excludes controversies which are not the exercise of judicial power. It was submitted that the jurisdiction under s106 is arbitral in nature and not an exercise of judicial power. 46 We are not satisfied that the reference to a "matter" in s7 of the IA Act is circumscribed in the manner urged by the respondent. The meaning of the word "matter" in s7 of the IA Act has been considered in a number of decisions. In Flakt Australia Ltd v Wilkins & Davies Construction Co. Ltd [1979] 2 NSWLR 243, the issue in the proceedings was essentially how much the plaintiff was entitled to be paid for work done. The plaintiff contended that the word "matter" denotes the ultimate subject matter at issue between the parties and this was not a "matter" capable of settlement because of alternative claims raised by the plaintiff for rectification and breach of duty. McLelland J stated (at 250): In my opinion, the word "matter" in s.7(2)(b) denotes any claim for relief of a kind proper for determination in a court. It does not include every issue which would, or might, arise for decision in the course of the determination of such a claim. The use of the word "settlement" provides support for this view. "Settlement" is an apt term to be used in relation to a claim for relief - it is less apt in relation to a mere issue. 47 This view was supported by the judgment of the High Court in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 345, 351. If a "matter" for the purposes of s7 of the IA Act includes any claim for relief proper for determination in a court, there is no reason why the term should not be seen to encompass proceedings under s106. It is not necessary in this context to embark upon a consideration of whether proceedings under s106 are judicial or arbitral in nature. 48 The submission relating to the "matter" does, however, emphasise the importance of initially identifying the subject matter of the controversy which falls for determination in the proceedings sought to be stayed. It is only once this has been done that it is possible to determine whether the proceedings involve a "matter that is … capable of settlement by arbitration": see Tanning Research Laboratories at 350. The appellant contended that the issue as to whether a matter is capable of settlement by arbitration should be resolved not by reference to the nature of the issues in dispute rather by reference to the nature of the jurisdiction in which they are sought to be heard. Thus, it was submitted that the claims are essentially claims for specific performance and/or damages based upon alleged representations and breaches of contract. 49 There is some tension in the authorities concerning the proper approach to the identification of the nature of a dispute for the purposes of determining whether it is capable of settlement by arbitration. On the one hand, the judgment of Deane and Gaudron JJ in Tanning Research Laboratories provides some support for the position adopted by the appellant. Their Honours stated (at 353): Section 7(2) of the Act is concerned with "proceedings (which) involve the determination of a matter ... capable of settlement by arbitration". Its operation is thus not confined to proceedings in which the parties seek the same relief as might have been sought in arbitration proceedings. Because s.7(2) has this wider operation, the question whether a person is claiming through or under a party to the arbitration agreement is necessarily to be answered by reference to the subject matter in controversy rather than the formal nature of the proceedings or the precise legal character of the person initiating or defending the proceedings. 50 It should be recognised that their Honours were considering a different question when making these observations; that is, whether a liquidator defending a decision to reject proof of debt was claiming "through or under" the liquidated company under s7(4). Nevertheless, their Honours concentrated primarily on the nature of the controversy between the parties rather than the formal nature of the proceedings. 51 However, this approach may conflict with the approach adopted in a number of other cases. In the case of claims made under the Trade Practices Act , courts have generally examined the nature of the statutory claim and the remedies available under the Act before deciding as to whether the claim is one which may be arbitrated: see IBM Australia Ltd v National Distribution Services Ltd, Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd, Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5), and Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 43 FCR 439. 52 A recent consideration of these issues is found in the decision of Merkel J of the Federal Court in Recyclers of Australia Pty Ltd v Hettinga Equipment Inc [2000] FCA 547. In that case, his Honour observed in relation to the decision in Tanning Research Laboratories : 18 While Deane and Gaudron JJ may have differed in some respects from the majority on the question of the scope of a "matter", Tanning Research is authority for the view that, for the purposes of s7(2), the "matter" to be determined in a proceeding is to be ascertained by reference to the subject matter of the dispute in the proceeding and the substantive, although not necessarily the ultimate, questions for determination in the proceeding. The scope of the matter is to be ascertained from the pleadings and from the underlying subject matter upon which the pleadings, including the defence, are based: Tanning Research at 343-344 and 351-354 cf Fencott v Muller (1983) 152 CLR 570 at 608, Hooper v Kirella (1999) 167 ALR 358 at 368-371.

19 The manner in which a claim or a defence is pleaded is of importance to, but is not determinative of, the characterisation of the "matter" for the purpose of s7(2). Once the "matter" is properly characterised the question to be determined is whether that matter is capable of settlement under the arbitration clause. 53 It is necessary, on this view, to have regard to the subject matter of the dispute in the proceedings as well as the substantive questions to be determined. We consider that it is appropriate to have regard to the nature of the dispute between the parties rather than merely the formal nature of the proceedings. However, the nature of the proceedings may affect the nature of the controversy. In proceedings under s106 of the IR Act, the question to be determined is whether the contract whereby work is performed is unfair having regard to the factors or considerations referred to in the Act. Regardless of the basis of the claims made, the issue for determination is whether the contract is an unfair contract because it is unfair, harsh or unconscionable, against the public interest, provides for remuneration less than a person performing work as an employee, or is designed to avoid the provisions of an industrial instrument. 54 In this case, the dispute concerns the fairness of the licensing agreement having regard to the termination of the agreement at the end of the initial term and to certain representations alleged to have been made on behalf of the appellant. Although the thrust of the allegations contained in the summons for relief concern certain representations and also the termination of the agreement, the subject matter of the controversy raises nevertheless the fairness of the agreement. It is whether this "matter" is capable of settlement by arbitration which must be determined in this case. We do not consider that this situation is altered merely because it may have been open for the respondent to bring its claim in another jurisdiction in which the ultimate question for determination would have been different. The Scope of the Arbitration Clause 55 The next step in the analysis requires an examination of the terms of the arbitration clause and the context of the agreement to determine if the "matter" or matters in dispute were intended by the parties to be resolved through arbitration. Before a matter can be "capable of settlement by arbitration" pursuant to s7 of the IA Act it must fall within the scope of the arbitration agreement: see Tanning Research Laboratories at 343, 351. 56 Although most arbitration clauses are drafted in wide terms, the precise words used are important. A number of cases have discussed differences between verbiage such as "under this agreement", "anything arising out of this agreement", "in respect of, or with regard to, this agreement" and "in connection with this agreement": see, for example, GIO v Atkinson-Leighton Joint Venture (1981) 146 CLR 206; Allergan Pharmaceuticals Inc v Bausch & Lomb Inc ; Ethiopian Oilseeds v Rio del Mar Foods Inc [1990] 1 Lloyd's Rep 86; QH Tours Ltd v Ship Design & Management (Aust) Pty Ltd (1991) 33 FCR 227; IBM Australia Ltd v National Distribution Services Ltd ; Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd and Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd . 57 The wording of clause 13.8 of the agreement, by incorporating reference to "any controversy or claim … relating to" the agreement, would appear to be in the widest possible terms. This was acknowledged by Schmidt J. There is ample authority to support the proposition that an arbitration clause drafted in such wide terms should not be read narrowly. For example, Clarke JA in IBM Australia Ltd v National Distribution Services Ltd said (at 483): The phrases "in relation to" or "related to" are of the widest import and should not, in the absence of compelling reasons to the contrary, be read down: Fountain v Alexander (1982) 150 CLR 615 at 629; Dowell Australia Ltd v Triden Contractors Pty Ltd [1982] 1 NSWLR 508 at 511 and Ashville Investments Ltd v Elmer Contractors Ltd . In its context I would, in the absence of contrary indication in the contract, understand the clause to be sufficiently wide to encompass claims that pre-contractual misrepresentations induced the complaining party to enter the contract. 58 In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd, Gleeson CJ stated (at 165): When 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. 59 However, the decision of the Full Federal Court in Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) demonstrates that it is still necessary to examine whether it was within the intention of the parties to refer a particular type of claim to arbitration. That case concerned a provision in a charter contract that any dispute arising from the contract be settled in accordance with the Arbitration Act 1950 (UK) in London and that the contract be governed by English law. 60 The Court found that the arbitration clause was not capable of applying to certain non-contractual claims, principally claims under the Trade Practices Act . Beaumont J observed (at 6 - 7): In choosing arbitrators with commercial backgrounds, the parties indicated a choice for the practical solution of disputes of the kind referred to the arbitrators. But to read cl 34 as contemplating a reference to such persons of a problem of considerable private international legal complexity, let alone the application of a foreign (Australian) law in the form of the Trade Practices legislation, would seem to contradict a desire for a practical outcome. We should not attribute such a bizarre intention to these parties. It is not likely that they intended to refer to these arbitrators in London any dispute however remotely connected with the charter party or the bill of lading and however special its legal characteristics in terms of English law. It appears that there is no counterpart of the Trade Practices Act in England. The consumer protection provisions in Part V of the Trade Practices Act were derived from American legislation and constitute an exhaustive code in the field covered.

Similar conclusions were reached by Emmett J (at 23 - 24) in respect of the "non-contractual" claims brought under the Trade Practices Act . 61 In this case, there must be doubt whether the parties intended to confer on an arbitrator in Texas the power to determine that the licensing agreement is unfair, harsh or unconscionable or contrary to the public interest under a very particular and, in many ways, unique piece of legislation in New South Wales. However, there are relevant differences in the wording of clause 13.8 and the arbitration clause considered in Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) . In that case, the relevant clause referred merely to "any disputes arising from" the contract in question. The fact that the parties had chosen "restricted language" to describe those disputes to be settled by arbitration was a significant factor in the court deciding that claims under the Trade Practices Act relating to conduct antecedent to the making of the contract were not within the scope of the arbitration clause: see Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) at 23. 62 Clause 13.8, to the contrary, refers not only to any controversy or claim "arising out of" the agreement, but also to any controversy or claim "relating to" that agreement. Those words are of very wide import. Plainly, there are a wide range of claims as to the nature, form and validity of the licensing agreement and its provisions dealing with the termination of the agreement and the actual manner of its termination which are or could amount to claims "relating to" the agreement. Although an application brought under s 106 must, by its nature, relate to the contract, and must challenge the terms or operation of a contract whereby work is performed in an industry (see Beahan v Bush Boake Allen Australia Limited (1999) 93 IR 1 at 42) it does not follow that the claim as characterised is within the scope of clause 13.8 of the licensing agreement when regard is had to the particular nature of proceedings under s106 and the related provisions in Part 9 of Chapter 2 of the IR Act. Capable of Settlement by Arbitration 63 The final question to be considered, therefore, is whether the subject matter of the proceedings is one that is "capable of settlement by arbitration". As Deane and Gaudron JJ observed in Tanning Research Laboratories Inc v O'Brien at 351: The words "capable of settlement by arbitration" indicate that the controversy must be one falling within the scope of the arbitration agreement and, perhaps, one relating to rights which are not required to be determined exclusively by the exercise of judicial power.

That is, although a necessary condition of the conclusion that a matter is "capable of settlement by arbitration" is the finding that the controversy is one within the scope of the arbitration agreement, that finding may not be sufficient for that conclusion. Although the other members of the court did not consider this aspect we do not consider that the conclusion of Deane and Gaudron JJ in this respect is inconsistent with the approach of the other members of the court and we therefore consider that we are obliged to apply it. We have already dealt with the first of these issues and now turn to the second issue as to whether it was open to the parties to agree to confer on a private arbitrator the power to resolve proceedings under s106 of the IR Act. 64 It is useful at this point to refer again to the submissions of the parties in respect of this question. The thrust of the submissions advanced by the appellant was that, in determining whether a matter is capable of settlement by arbitration, it is appropriate to look at the substance of the dispute rather than the nature of the Commission's jurisdiction. Whatever is the case for other proceedings under s106 of the IR Act, it was claimed that this dispute was essentially in the nature of inter partes commercial litigation and so was capable of settlement by arbitration. The respondent, on the other hand, submitted that the proceedings were not capable of settlement by arbitration because of the peculiar nature of the Commission's jurisdiction under s106 and the considerations which must be taken into account in determining whether a contract is unfair. 65 There is authority which suggests that wide powers may be conferred on an arbitrator by the parties to an agreement containing an arbitration clause. This has been held to encompass all the powers which may ordinarily be exercised by a court, including broad and discretionary powers contained in remedial legislation such as the Trade Practices Act . In Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206, for example, the majority of the High Court found that an arbitrator had an implied power to order interest be paid on an award. Stephen J said (at 235): The principle to be extracted from this line of authority is that, subject to such qualifications as relevant statute law may require, an arbitrator may award interest where interest would have been recoverable and the matter been determined in a court of law. What lies behind that principle is that arbitrators must determine disputes according to the law of the land. Subject to certain exceptions, principally related to forms of equitable relief which are of no present relevance and which reflect the private and necessarily evanescent status of arbitrators, a claimant should be able to obtain from arbitrators just such rights and remedies as would have been available to him were he to sue in a court of law of appropriate jurisdiction. As Russell on Arbitration , 19th ed., puts it at p. 356, speaking of an arbitrator's power to award interest up to the date of his award, "it was always considered that he had power to do so, by virtue of his implied authority to follow the ordinary rules of law". 66 Mason J observed (at 246 - 247): For my part, I do not think that the answer to the question should depend on what was decided in Edwards over one hundred years ago when the basis of the Court's decision was not clearly elaborated in the judgment. The real question, as it seems to me, is whether there is to be implied in the parties' submission to arbitration a term that the arbitrator is to have 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.

In the United States it is accepted that the parties to an arbitration are free to clothe the arbitrator with such powers as they may deem it proper to confer, provided that they do not violate any rule of law (5 Am. Jur. (2d), p. 539). There it has been held that the parties may authorize the arbitrator to grant equitable relief, even including relief by way of injunction (5 Am. Jur. (2d),p. 620; 70 A.L.R. (2d), p. 1058). I see no reason why the parties cannot authorize an arbitrator to decide whether interest is payable by one party to another, just as they can authorize him to decide whether damages should be awarded. It is to the submission that one looks to find the powers of the arbitrator, though the powers thereby conferred are supplemented by the Arbitration Act and by other relevant statutory provisions.

On this approach, an arbitrator will generally have 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 of the dispute. 67 The decision in GIO v Atkinson-Leighton Joint Venture was followed by the Court of Appeal in IBM Australia Ltd v National Distribution Services Ltd . In the latter case, the Court decided that an arbitrator appointed by the parties could exercise the jurisdiction under the Trade Practices Act . Kirby P recognised the breadth of the powers under the Trade Practices Act , including the power to award damages, to declare the whole or any part of the contract to be void, to order the contract be varied, to refuse to enforce its provisions, as well as discretionary powers such as granting an injunction. However, his Honour concluded (at 480): The appellant urged that the very width of the relief available under the Trade Practices Act (Cth) was an argument against imputing to the parties the intention to provide all of the relief of the kind afforded to courts by that Act. It is sufficient to answer this argument by saying that the holding in Government Insurance Office of New South Wales v Atkinson-Leighton contemplates that the very purpose of a reference to arbitration will frequently be to confer on the arbitrator the powers which be enjoyed, even by statute only, by the court of law of competent jurisdiction that would otherwise hear the case. 68 Kirby P referred to a "presumption in favour of free negotiation of contractual choice of forum" which was reinforced by a "policy in favour of arbitral dispute resolution": see also Clarke JA at 485 and Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No.5) at 29. In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd , the Court of Appeal again considered the power of an arbitrator in determining proceedings arising under the Trade Practices Act . Gleeson CJ stated (at 166): 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).

And, as Gleeson CJ observed, the Supreme Court of the United States has found that a claim under anti-trust legislation (the Sherman Act ) can be resolved by international arbitration: see Mitsubishi Motors Corp v Soler Chrysler-Plymouth Inc 473 US 614 (1985). 69 However, the capacity of parties to agree to refer disputes to private arbitration is not unrestricted. Notwithstanding the important policy considerations as to arbitration agreements in the discussion by Gleeson CJ with which with respect we concur, for reasons of public policy, practicality or otherwise some matters are not amenable to private settlement. Dr Bell referred to the following passage in the judgment of Deane and Gaudron JJ in Tanning Research Laboratories at 351 (part of which has already been referred to): The words "capable of settlement by arbitration" indicate that the controversy must be one falling within the scope of the arbitration agreement and, perhaps, one relating to rights which are not required to be determined exclusively by the exercise of judicial power. See Mustill and Boyd, Law and Practice of Commercial Arbitration in England , 2nd ed. (1989), pp.149-150, where it is noted that "English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not" but that the powers of arbitrators "are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state". 70 We do not understand the reference to matters which are required to be determined exclusively by the exercise of judicial power as the full extent of the powers which may not be conferred on an arbitrator. The intent of the passage is to include reference to matters which must, by their nature, be determined by the court or tribunal entrusted with jurisdiction to hear them. The extended quote from Mustill and Boyd reads as follows: ... English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not. The general principle is, we submit, that any dispute or claim concerning legal rights which can be the subject of an enforceable award, is capable of being settled by arbitration. This principle must be understood, however, subject to certain reservations.

First, certain types of disputes are resolved by methods which are not properly called arbitration. …

Second, the types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a winding-up order or a decision that an agreement is exempt from the competition rules of the EEC under Article 85(3) of the Treaty of Rome. 71 The reference to the making of an award which "affects the public at large" may be significant in the context of an application under s106 of the IR Act. In IBM Australia Ltd v National Distribution Services Ltd , Handley JA expressed the view that certain matters within the jurisdiction of specialist courts and tribunals may represent examples of matters which are beyond the power of a private arbitrator. His Honour observed (at 487 - 488): The relevant implied term in the submission which this Court is bound to recognise is that referred to in the judgment of Mason J in Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 at 246-247, namely a term that the arbitrator is to have the authority to give the claimant such relief as would be available in a court of law having jurisdiction with respect to the subject matter. Since the Supreme Court as a court of general jurisdiction under State law now has jurisdiction with respect to claims under Pt V of the Trade Practices Act (Cth) it must follow that the arbitrator has the same powers. It also follows, in my opinion, that a submission in the present form, without more, would not confer on the arbitrator any authority to exercise the powers of specialist tribunals established under State law such as the Industrial Commission, the Commercial Tribunal, or the Landlord and Tenant Tribunal. Such tribunals are not courts of law and do not have general jurisdiction over all controversies and claims arising out of or related to an agreement or the breach thereof. 72 This statement supports the view that the specialist nature of the jurisdiction and powers of the Commission in Court Session in s106 proceedings, and the nature of the considerations required to be taken into account, would remove a claim from the scope of powers which may be exercised by an arbitrator. Significantly, the passage from the judgment of Handley JA draws attention to an important and relevant distinction discernible from the various cases where consideration has been given to whether an arbitration agreement should be construed as providing authority to the arbitrator to provide remedies available under the Trade Practices Act . An important judgment in this area is that of Kirby P, as his Honour then was, in IBM Australia Ltd v National Distribution Services Ltd where his Honour held, at 480 - 481: The appellant urged that the very width of the relief available under the Trade Practices Act (Cth) was an argument against imputing to the parties the intention to provide all of the relief of the kind afforded to courts by that Act. It is sufficient to answer this argument by saying that the holding in Government Insurance Office of New South Wales v Atkinson-Leighton contemplates that the very purpose of a reference to arbitration will frequently be to confer on the arbitrator the powers which would be enjoyed, even by statute only, by the court of law of competent jurisdiction that would otherwise hear the case.

In the present case the relief claimed, as particularised by the solicitors, is not so exceptional as to cast doubt on the construction of the arbitration clause in a way similar to that adopted in Government Insurance Office of New South Wales v Atkinson-Leighton . Whilst it is true that the respondent may later seek to enlarge its claim and whilst the clause must be given meaning irrespective of the way in which the claim for relief is later particularised, there is nothing in the relief claimed which undermines the application to this arbitration clause of the Government Insurance Office of New South Wales v Atkinson-Leighton principle. Until reversed or refined by the High Court its holding binds this Court to conclude that the submission to arbitration here was intended to give the arbitrator authority to provide the claimant with the relief available to it in a court of law of competent jurisdiction dealing with the dispute. This is so even though such relief is itself only provided by statute. In respect of a claim, related to the agreement, based upon the Trade Practices Act (Cth), that principle confers upon the arbitrator (subject to any constitutional inhibitions yet to be determined) the power to provide at least those remedies under the Act which are the only remedies that the respondent has claimed in the present case.

A distinction must be drawn between disputes concerning the authority of the arbitrator and disputes as to the way in which the arbitrator's authority should be exercised . At this level of the present controversy, it is enough to say that the former question is determined for this country by Government Insurance Office of New South Wales v Atkinson-Leighton . Properly analysed, the holding of that case is not confined solely to an authority to award interest. It concerns the entitlement of parties to confer upon an arbitrator by agreement, express or implied, authority to resolve their dispute in the same way as a court of law of competent jurisdiction would do utilising its powers. The holding stems from the proposition that, in determining the arbitrator's authority, the powers conferred upon such a court by statute may be taken to be agreed within the submission to the arbitrator. This may be so even where the language of the submission is expressed in perfectly general terms. How the arbitrator exercises such authority in the particular case presents an issue which has not yet arisen in the present case. 73 His Honour's conclusions were relied upon by Gleeson CJ in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd at 166, 167 where, for example, it was held: In Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (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. 74 The references in those cases to, for example, "such relief as would be available … in a court of law having jurisdiction with respect to the subject matter", are in our opinion to be seen as referring to relief available from a court of general jurisdiction. As is clear from each of the judgments in IBM Australia Ltd v National Distribution Services Ltd ( Kirby P at 481, Clarke JA at 485 and Handley JA at 487 - 488) the basis upon which the arbitrator was held to have authority under the Trade Practices Act was the concurrent conferral of such powers on the Supreme Court of New South Wales as a court of general jurisdiction. The distinction drawn by Handley JA in IBM Australia Ltd v National Distribution Services Ltd at 488 is to be understood accordingly. A submission to arbitration could not confer on the arbitrator authority to exercise the powers of specialist tribunals, including courts of limited or specialist jurisdiction, which do not have general jurisdiction over all controversies and claims as to the agreement or the breach thereof. The Commission in Court Session although a superior court of record is, nevertheless, a court of limited jurisdiction in that sense. 75 Further, we have mentioned, the subject matter of the proceedings under s106 concerns the fairness of the licensing agreement having regard to its alleged representations and the provisions dealing with the termination of the agreement. We are satisfied that this is not a matter "that is … capable of settlement by arbitration" for the purposes of s7 of the IA Act. This conclusion results, in our view, from the nature of the determination which must be made under s106. The Commission has frequently commented on the novelty of proceedings under s106 and its predecessors. Perhaps most well known is what was said by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 373 in relation to s88F of the Industrial Arbitration Act 1940: It is true, however, that, once it has been confined within its proper industrial context, s 88F acts with drastic and pervasive effect. It certainly plays havoc with the classic principles relating to contracts. "In general, unless a contract is vitiated by duress, fraud or mistake, its terms will be enforced though unreasonable or even harsh or unconscionable … Moreover in the ordinary case the court will not remake a contract; unless in the special case where a contract is severable, it will not strike out one provision as unenforceable and enforce the rest" ( Esso Petroleum v Harper's Garage (per Lord Ried )). But s88F has no such inhibitions; for it not only proscribes transactions which directly undermine awards (see (d) and (e)) or threaten general industrial standards (which, I think, is the most relevant "public interest" referred to in (c)), but it also, in (a) and (b), strikes separately at those which are "unfair", "harsh" or "unconscionable". Presumably, this is because any transaction, leading to work in an industry, which can be so described is regarded as inimical to the purposes of the Act. 76 In Stevenson v Barham (1976) 136 CLR 190 at 192, Barwick CJ stated: Notwithstanding the wide language of s 88F, I have found difficulty in becoming convinced that it was within the contemplation of the legislature that agreements for business ventures, of which the present may be a specimen, freely entered into by parties in equal bargaining positions, should be so far placed with the discretion of the Industrial Commission as to be liable to be declared void. However, I have come to the conclusion that the language of s 88F of the Act is intractable and must be given effect according to its width and generality . The legislature has apparently left it to the good sense of the Industrial Commission not to use its extensive discretion to interfere with bargains freely made by a person who was under no constraint or inequality, or whose labour was not being oppressively exploited. 77 Much debate during submissions focussed on the scope of the Commission in Court Session's powers under s106 where a finding of unfairness is made. The Commission may declare a contract wholly or partly void or varied. It may also make such order as to the payment of money in connection with any contract declared void or varied "as the Commission considers just in the circumstances of the case": s106(5). Mr Jackson argued that extensive powers are conferred on courts under the Trade Practices Act , particularly s87. These powers have not led the courts to regard proceedings under that Act not to be capable of settlement by arbitration. 78 However, the novelty of s106 is not restricted to the powers which may be exercised by the Commission. It is the nature of the considerations which must be taken into account, rather than merely the extent of the Commission's powers, which lead us to the view that the determination of the substance of a claim under s106 is not a matter which may be conferred on a private arbitrator by the parties to a contract or arrangement to which the section applies. Of particular importance are the grounds on which the Commission may find that a contract or arrangement is unfair and the type of considerations which must be taken into account. An "unfair contract" is defined firstly as a contract which is "unfair, harsh or unconscionable", but also includes contracts which are "against the public interest" or which provides remuneration less than that available to an employee or which are designed to avoid an industrial instrument. Whilst unconscionability is a concept known to the general law as well as the Trade Practices Act , the concepts of "unfair" and "harsh" indicate the breadth of the jurisdiction. The fact that s106 is aimed at contracts which are against the public interest or which undermine the system of industrial awards and agreements indicates that Parliament intended that the Commission exercise its functions not merely in the manner of ordinary inter partes litigation, but so as to assist in the achievement of industrial objectives set out in the Act. 79 We consider that Schmidt J was correct to emphasise also those other provisions of the IR Act which dictate considerations which must generally be taken into account by the Commission in exercising its functions. In the exercise of its functions, the Commission is required to take into account the objects of the IR Act and the state of the New South Wales economy: s146(2). The objects of that Act include to "provide a framework for the conduct of industrial relations that is fair and just" and to "promote efficiency and productivity in the economy of the State": see s3. The Commission is also required to take into account the principles contained in the Anti-Discrimination Act : s169(1). These are functions which are properly conferred on a specialist court or tribunal empowered to consider them. They are not matters which may be conferred on a private arbitrator by the parties to an agreement. 80 The appellant contended that whatever considerations may arise in other cases, the application in this matter is no more than inter partes commercial litigation and is therefore capable of settlement by arbitration. We do not agree that this is a useful way in which to analyse the issues raised in this case. However, in deference to the way in which the matter was argued before us we express the view that the application in this matter raises considerations which are not appropriate to be determined by a private arbitrator. Although the substance of the allegations relates to representations alleged to have been made on behalf of the appellant and the reliance on those representations by the respondent, the ultimate determination of this Court must remain whether, in light of the considerations mentioned, the licence agreement was an "unfair contract" within the terms of the statute. For the reasons we have given, we believe this is not a matter which can be decided by a private arbitrator. Order that the Arbitration Clause be declared Void 81 A further issue was raised in the proceedings as to whether it was possible to refer to an arbitrator that part of the claim in which the respondent seeks orders that clause 13.8 itself be declared void. In light of our finding that the substance of the proceedings under s106 is not capable of settlement by an arbitrator it is unnecessary for us to express a final view on this issue. The way in which that issue was argued, as we understand it, is that it only arose for decision if the respondent was unsuccessful on the major issue. However, it is to be observed that it follows from our conclusions otherwise, that the issue should also be answered in favour of the respondent. Conciliation under Section 109 82 The judgment of Schmidt J concluded with these observations: To my mind of further relevance to these questions are the requirements of s109 of the Act, which provides: (1) The Commission must endeavour, by all means it considers proper and necessary, to settle a matter under this Division by conciliation. (2) When, in the opinion of the Commission, all reasonable attempts to settle the matter by conciliation have been made but have been unsuccessful, the Commission is to determine the matter in accordance with this Act. (3) Nothing in this section prevents further conciliation from being attempted at any time before the Commission makes such an order. (4) Any member of the Commission (whether or not a judicial member) may undertake the conciliation of a matter under this Division. Savage v Digital Equipment Corporation (Australia) Pty Ltd, (Unreported, Glynn , Hungerford and Schmidt JJ, 17 May 1999), is the latest authority in a series in which the s106 jurisdiction has been considered by Full Benches of the Court. In Chrysler Jeep Automotive Distributors Australia Pty Limited v Canberra Star Motors Pty Limited (1997) 79 IR 452 the view was taken that the agreement of the parties, in relation to choice of law, cannot either confer or deprive the Commission of jurisdiction under the section. This approach was followed Xcellenet and later in Savage .

A similar conclusion, by way of analogy, must result in respect of the parties' agreement as to arbitration, in so far as the provisions of s109 of the Act are concerned. The obligation falling upon the Commission under s109 of the Act, in respect of a claim brought under s106, to 'endeavour, by all means it considers proper and necessary', to settle the matter by conciliation, is one which in my view parties may not by their agreement confer upon an arbitrator, so as to remove this statutory obligation from the Commission.

Further, it is also of relevance that it is only if that conciliation exercise fails, that the matter may proceed to determination by the Court (s109(3)). Such conciliations may be conducted by any member of the Commission, whether or not a judicial member of the Commission in Court Session (s109(4)). No stay was sought in respect of that obligation and in my view, the question of a stay of the proceedings before the Court could not, in any event, arise until after the Commission had itself complied with the statutory obligation to conciliate under s109. If the matter was settled in the conciliation proceedings, there would after all be no 'matter for determination' in the proceedings before the Court, to use the words of s7 of the International Arbitration Act, which could be the subject of any stay and reference to an arbitrator.

We consider that these observations are correct: cf Younan-Sedrak v State of New South Wales (Department of Public Works and Services) (Unreported, Hungerford J, 19 August 1999). Costs 83 The parties accepted that an appropriate method of dealing with costs was that, subject to the relevant party having an opportunity to make contrary submissions, costs should follow the event. We have adopted that course in the costs order we will make. Orders 84 We make the following orders: 1. Leave to appeal is granted. 2. The appeal is dismissed. 3. Unless the appellant, within 14 days of judgment being delivered, makes an application as to costs accompanied by written submissions: a) The respondent's costs of the appeal and its costs of the proceedings before Schmidt J as to the appellant's notice of motion shall be paid by the appellant in a sum as agreed or assessed. b) There shall be no costs order as to the intervention of the Attorney-General either on appeal or as to the motion. __________________

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