SAMSUNG C&T CORPORATION -v- DURO FELGUERA AUSTRALIA PTY LTD [2016] WASC 193 (28 June 2016)

4 Duro says that the Interim Subcontract includes an arbitration agreement on the terms of cl 42 of the Subcontract and hence the arbitral tribunal has jurisdiction to determine the Duro Claims and those claims must be determined by arbitration. Duro seeks to stay the proceedings pursuant to s 7 of the International Arbitration Act 1974 (Cth) (the Act) or alternatively seeks an order that the proceeding be dismissed on the ground that the proceeding concerns the jurisdiction of the duly constituted arbitral tribunal and the court has no jurisdiction to interfere with arbitral proceedings or in the further alternative, that, if it has jurisdiction, the court should dismiss the proceeding as a matter of discretion.

5 The central issue in this proceeding, and in Duro's application to stay or dismiss the proceeding, is whether the Interim Subcontract includes an arbitration agreement in the terms of cl 42 of the Subcontract. I determined that, for considerations of case management, Samsung's application for declarations and Duro's application for a stay of, or dismissal of, the proceeding should be heard together.

6 For the reasons which follow, I have concluded that an arbitration agreement in the terms of cl 42 of the Subcontract is a term of the Interim Subcontract, that this proceeding involves the determination of a matter that, in pursuance of the arbitration agreement, is capable of settlement by arbitration and therefore this proceeding should be stayed and referred to arbitration.

7 The essential facts are not in dispute. The unincorporated joint venture of Duro and Forge entered into the Subcontract with Samsung to engineer, procure, construct and commission works in relation to the Roy Hill iron ore mining, rail and port project (Subcontract Works). The Subcontract contains a dispute resolution clause, cl 42, which provides that if a dispute is not resolved after a notice of dispute has been given and the parties have conferred the dispute shall be referred to arbitration. On 21 February 2014 Samsung terminated the Subcontract, as it was entitled to do, on the ground that an administrator had been appointed to Forge.

8 On or about 24 February 2014 Samsung and Duro executed an instrument entitled Subcontract Term Sheet (Term Sheet) dated, and to take effect from, 21 February 2014 by which Duro agreed to continue to perform the works set out in Schedule 2 to the Term Sheet (Duro Works) which will apply as a binding agreement between them (Interim Subcontract). The Duro Works were a subset of the Subcontract Works and were essentially the part of the Subcontract Works which Duro and Forge had agreed would be performed by Duro. The Term Sheet provides that the Interim Subcontract is on the same terms as the Subcontract as modified by the terms set out in the Term Sheet and its schedules for the performance of the Duro Works. The Term Sheet provides that the parties will negotiate in good faith and make such additional changes as are logically or practicably required considering the Duro Works and execute a Substitute Subcontract which is based on the terms of the Subcontract as modified in the Term Sheet as soon as reasonably possible. No Substitute Subcontract was entered into. The Term Sheet contains a governing law clause (cl 3.2(a)) and a jurisdiction clause (cl 3.2(b)). The Term Sheet contains no separate arbitration agreement.

9 Disputes arose under both the Subcontract and the Interim Subcontract. On 23 December 2015 Duro issued notices of dispute under each of the Subcontract (the Subcontract Notice of Dispute) and the Interim Subcontract (Interim Subcontract Notice of Dispute). On 17 February 2016 Duro issued a notice of dispute which consolidated the Subcontract Notice of Dispute and the Interim Subcontract Notice of Dispute. On 17 March 2016 Samsung issued a notice of arbitration against Duro in respect of various claims under the Subcontract (Notice of Arbitration). By letter of 17 March 2016 to the Singapore International Arbitration Centre (SIAC) Samsung requested that SIAC administer the arbitration between Samsung and Duro. On 18 March 2016 Duro issued its response to the Notice of Arbitration (Response). The Response included various claims for the purpose of set off against Samsung. Those claims, insofar as they arise under the Interim Subcontract, concern claims to:

(a) payment of amounts allegedly outstanding to Duro for the performance of works under the Interim Subcontract in excess of $58,836,000;

(b) payment for additional works allegedly carried out by Duro under the Interim Subcontract; and

(c) declarations that Duro has no liability to Samsung in respect of liquidated damages under the Interim Subcontract and alleged defect rectification costs under the Interim Subcontract;

10 On 5 April 2016, Samsung commenced this action by writ of summons. In its indorsement of claim Samsung refers to the Notice of Arbitration issued by Samsung on 17 March 2016 and Duro's response to the Notice of Arbitration which includes the Duro Claims. Samsung asserts that the Duro Claims are claims arising under the Interim Subcontract and are subject to the dispute resolution procedure in the jurisdiction clause, cl 3.2(b), of the Term Sheet and asserts that the proper forum for the determination of the Duro Claims is this court. Samsung claims:

(a) a declaration that the Duro Claims constitute 'proceedings arising out of or in connection with this agreement' for the purposes of cl 3.2(b) of the Term Sheet;

(b) a declaration that the proper forum for the determination of the Duro Claims is the Supreme Court of Western Australia;

(c) a declaration that the parties have not agreed to resolve the Duro Claims by arbitration.

11 Duro seeks to stay the proceedings pursuant to s 7 of the Act and article 8 of the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (Model Law), which by s 16 of the Act has the force of law in Australia. Alternatively, Duro says that the proceeding concerns the jurisdiction of the duly constituted arbitral tribunal and the court has no jurisdiction to interfere with arbitral proceedings and should dismiss this proceeding on the grounds that the court has no jurisdiction. In the further alternative Duro says that if the court has jurisdiction it should not grant the relief sought by Samsung as a matter of discretion. Finally, Duro says that if the court does not stay the proceeding or dismiss it on the ground of lack of jurisdiction or for discretionary reasons the court should dismiss the proceeding on the basis that Samsung's grounds for relief are not made out.

12 On 13 June 2016, after I had heard the applications in this matter, the arbitral tribunal delivered its decision on Samsung's submission that the arbitral tribunal did not have jurisdiction over counterclaims and claims for setoff brought by Duro in respect of the Duro Claims. I received from each party written submissions whether the tribunal's decision should be provided to the court. I have decided not to give leave to Duro to reopen its case to adduce evidence of the tribunal's decision for the following reasons.

13 Once an application has been heard, there is no right to deliver any further evidence or submissions without leave. The overriding principle to be applied in exercising the discretion to give leave to reopen is whether the interests of justice are better served by allowing or rejecting the application to reopen. In the case of an application to reopen to admit fresh evidence relevant factors include why the evidence was not called at the hearing and the materiality of the evidence to the issues in dispute and whether the admission of the evidence would have produced a different result. Clearly, the evidence could not have been admitted at the hearing. The principal issue is the materiality of the decision of the tribunal.

14 Duro advances three arguments in favour of the court receiving the tribunal's decision. The first is that the tribunal's decision is relevant to the avoidance of inconsistent judgments. Samsung says that the premise that the tribunal decision and the decision of the court may give rise to inconsistent judgments is false. Samsung says that no relief is sought against the arbitrators nor is any declaration as to the scope of the arbitrator's jurisdiction being pursued by Samsung in these proceedings. I agree.

15 Duro submits that Samsung contends, in opposition to the stay sought by Duro, that the arbitration agreement in the Subcontract has become inoperative within the meaning of s 7(5) of the Act. Duro says that the court has a discretion to either determine that question of inoperativeness or to grant a stay and permit that issue to be resolved by the arbitral tribunal and that a factor relevant to the exercise of that discretion is whether there has been or will be related proceedings addressing the arbitrability issue between the parties. If the arbitrability dispute has been addressed or resolved in other proceedings, the court will be anxious to do what it can to minimise the risk of inconsistent judgments and provide for orderly case management: Golden Ocean Group Ltd v Humpuss Intermoda Transportasi Tpk Ltd [2013] EWHC 1240, [59(7)] (Popplewell J) (Golden Ocean), Rinehart v Rinehart (No 3) [2016] FCA 539, [124(d)] (Gleeson J). Therefore Duro says the tribunal decision is relevant to this discretionary factor.

16 I do not accept Duro's argument. In this case, the relevant issue is whether the Interim Subcontract contains an arbitration agreement in the terms of cl 42 of the Subcontract, not whether cl 42 of the Subcontract has been rendered inoperative. Holmes and Brown 'The International Arbitration Act 1974 a Commentary' (2nd ed), at [S721] refer to Bakri Navigation Company Ltd v Owners of Ship 'Golden Glory' Glorious Shipping SA [1991] FCA 179; (1991) 217 ALR 152. The parties were involved in a dispute arising out of negotiations for the sale of a ship. The plaintiffs sought a declaration that there was a binding contract for the sale of the ship and obtained the arrest of the ship. After the initiation of court proceedings and before the application for a stay under s 7 of the Act was made, the parties entered into a further agreement which allowed the release of the ship which resolved certain claims in proceedings before the court. Gummow J found that there was a concluded contract of sale which contained an arbitration agreement. Gummow J then considered the terms of the subsequent undertaking to the court and the agreement which had been reached between the parties that allowed for the release of the ship. His Honour found that the subject matter of this later agreement was the whole of the proceeding before the court and not merely the release of the ship. In the circumstances the subsequent agreement effected a variation of the arbitration agreement which rendered it 'inoperative or ineffective in respect of the claims involved in the proceedings before the court'. Gummow J was of the view that 'inoperative' describes an arbitration agreement which although not void ab initio has for some reason ceased to have effect for the future. This may be because the arbitration agreement may have ceased to operate by reason of some further agreement between the parties. The court found that the term requiring arbitration had, sofar as the claims of the plaintiff were concerned, become inoperative by reason of the further agreement between the parties.

17 In this case the arbitration agreement in the Subcontract does not apply to the Duro Claims because they arise out of the Interim Subcontract. The arbitration agreement in the Subcontract survives the termination of the Subcontract but it does not apply to claims which arise out of the Interim Subcontract not the Subcontract. The Interim Subcontract does not render the arbitration agreement in the Subcontract inoperative sofar as the Duro Claims are concerned. The question is whether there is an arbitration agreement in the Interim Subcontract which applies to the Duro Claims.

18 In my opinion the question of whether the Term Sheet renders the arbitration agreement in the Subcontract inoperative sofar as the Duro Claims are concerned does not arise in this proceeding. Accordingly, there is no risk of inconsistent findings in this proceeding and in the proceedings before the arbitral tribunal whether the arbitration agreement in the Subcontract covers the Duro Claims or is inoperative sofar as those claims are concerned.

19 Secondly, Duro says that the tribunal's decision is relevant to Samsung's urgency argument. Samsung contends that if, contrary to its submission, the Interim Subcontract contains an arbitration agreement in the terms of cl 42 of the Subcontract then Samsung relies on the carve out or exception provided for by cl 42.5 for urgent declaratory relief. Samsung says that the time to assess the urgency of the declaratory relief is at the time the proceedings seeking such relief are initiated and heard. That urgency is not to be reassessed on an ongoing basis after argument has closed to determine if the urgent declaratory relief exception applies. I agree. The delivery of the tribunal's decision does not affect whether the relief sought by Samsung in this proceeding is urgent declaratory relief.

20 The third reason advanced by Duro is that the tribunal's decision is relevant to the utility of the declaratory relief sought by Samsung in this proceeding. Duro says that a decision on jurisdiction by a properly constituted tribunal in the exercise of an unchallenged jurisdiction resolves the question of jurisdiction as between the parties. Where a question of jurisdiction has been so resolved, a declaration by a court has no utility. Duro says this is reinforced by the fact that there is an appeal process from a decision of a tribunal on a plea as to jurisdiction to the High Court of Singapore: s 10(3) International Arbitration Act (Singapore).

21 Samsung says that the existence of the appeal mechanism reenforces the utility of these proceedings. Both the Subcontract and the Interim Subcontract are governed by Western Australian law. A decision by this court would be of assistance to the High Court of Singapore should an appeal be commenced against the tribunal's decision irrespective of the content of the tribunal's decision.

22 In my view, the tribunal decision might affect the exercise of the court's discretion whether or not to grant the declarations sought by Samsung if the court determined that the Interim Subcontract does not contain an arbitration clause and the proper forum for the determination of the Duro Claims is this court. However, as I have decided that the Interim Subcontract contains an arbitration agreement in the terms of cl 42 of the Subcontract no question arises whether I should exercise the discretion to make the declarations sought by Samsung.

23 I will deal at the outset with Duro's submission that the court has no jurisdiction to grant the relief sought by Samsung.

24 Section 25(6) of the Supreme Court Act 1935 (WA) gives the court power to make declarations of right without granting consequential relief. Order 18 rule 16 of the Rules of the Supreme Court 1971 (WA) provide that no action or other proceedings shall be open to objection on the ground that a merely declaratory judgment or order is sought and the court may make binding declarations of right whether or not any consequential relief is or could be claimed. The existence of the right is a matter going to the discretion rather than to the jurisdiction to grant declaratory relief. Declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. There is a real controversy whether the Interim Subcontract contains an arbitration agreement in the terms of cl 42 of the Subcontract and whether the arbitration agreement covers the Duro Claims.

25 Article 16 of the Model Law provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence of the arbitration agreement. This provision gives effect to the principle of kompetenzkompetenz or compétencecompeténce which is that the arbitral tribunal may independently rule on the question of whether it has jurisdiction, including any objections with respect to the existence of the arbitration agreement, without having resort to a court.

26 Neither the Act nor the Model Law has removed the jurisdiction of the court to grant declaratory relief in relation to the existence of an arbitration agreement. The court has jurisdiction to grant the declaratory relief sought by Samsung. Declaratory relief is discretionary. It is not necessary to consider the exercise of the court's discretion in this case because for the reasons which follow I have determined that the court should stay the proceedings pursuant to s 7(2) of the Act.

27 Section 7 of the Act provides for the enforcement of an arbitration agreement by a court in which a party has commenced proceedings covered by the arbitration agreement staying the proceeding and referring the parties to arbitration. Section 7(1) prescribes the arbitration agreements to which the section applies. The section applies to the arbitration agreement at cl 42 of the Subcontract and the arbitration agreement in the Interim Subcontract on those terms, if there is such an agreement in the Interim Subcontract. That is not in dispute.

28 Section 7(2) of the Act prescribes when the court will stay an arbitration agreement to which the section applies. It is in these terms:

Subject to this Part, where:

(a) proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in the 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 and refer the parties to arbitration in respect of that matter.

29 Accordingly, to enliven the court's power to stay this proceeding, Duro must establish that this proceeding involves the determination of a matter that, in pursuance of an arbitration agreement in the Interim Subcontract on the terms of the arbitration agreement in cl 42 of the Subcontract, is capable of settlement by arbitration. Determining whether a matter the determination of which is involved in the proceedings is capable of settlement by arbitration requires the identification of the matter or matters in the proceedings, the existence of an arbitration agreement and the scope of the arbitration agreement.

A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

Whether the court should refer the parties to arbitration under Article 8 depends on whether the dispute or claim in the proceeding is a matter that is subject to an arbitration agreement.

31 Article 8 operates independently from, but in a similar manner to s 7 of the Act. In the circumstances of this case whether the conditions for ordering a stay under s 7(2) of the Act or Article 8 of the Model Law are made out depend on the same considerations. In each case, the principal issue between the parties is the existence of a relevant arbitration agreement. The issue is whether the Interim Subcontract includes an arbitration agreement on the terms of the arbitration agreement in cl 42 of the Subcontract. In the circumstances, I will consider whether the conditions for the court ordering a stay under s 7(2) of the Act are made out. It is not necessary to consider separately whether a stay should be ordered under Article 8.

32 Samsung says that there is no arbitration agreement in the Interim Subcontract. Duro says that an arbitration agreement in the terms of cl 42 of the Subcontract is a term of the Interim Subcontract, that the Duro Claims are within the scope of that arbitration agreement and hence this court must stay the proceeding and refer the matter to arbitration.

33 The authors of Dicey, Morris & Collins, The Conflict of Laws (15th ed) say at [16.075] that there is a general principle of the law of international arbitration that the arbitral tribunal has the power to determine its own jurisdiction. This is known as the principle of kompetenzkompetenz or compétencecompétence. The principle does not require that a tribunal has the exclusive power to determine its jurisdiction, nor that the court may not determine whether the tribunal has jurisdiction before the tribunal has ruled on its jurisdiction.

34 In this case, the issue is whether there is an agreement to arbitrate in the Interim Subcontract and hence an agreement to arbitrate which covers the Duro Claims. The kompetenzkompetenz principle has the potential to give rise to friction with the regime set out in the Act (and the Model Law), which mandates a stay of court proceedings in favour of arbitration when the conditions of a grant of a stay are satisfied. Specifically, under s 7(2) of the Act the court must stay court proceedings which involve the determination of a matter that, in pursuance of the arbitration agreement, is capable of settlement by arbitration. A court hearing a stay application under s 7(2) of the Act will necessarily have to take a view on the existence and scope of the arbitration agreement in question. Only then can it decide whether a stay must be granted under s 7(2) of the Act. The friction which I have referred to may arise because any determination made by the court on the existence and scope of the arbitration agreement may well intrude into the authority of the arbitral's tribunal's kompetenzkompetenz.

35 Where, on an application for a stay under s 7(2) of the Act, there is a dispute whether any relevant arbitration agreement exists there is a threshold question - what standard of review should the court adopt in determining the existence and scope of the arbitration agreement. There are two competing views of the approach the court should take. The first is that the court should only undertake a prima facie review of the existence and scope of the arbitration agreement. Thus, if the court is satisfied on a prima facie standard that the conditions for the grant of a stay, that is there is an arbitration agreement which covers the dispute at hand, have been met, it should grant the stay and defer to the arbitral tribunal the determination of whether those conditions have been satisfied. In Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57 (Tomolugen Holdings), the Singapore Court of Appeal referred to that as the prima facie approach. This approach preserves the arbitral tribunal's kompetenzkompetenz to examine the existence and scope of its jurisdiction afresh and determine it fully: Tomolugen Holdings at [29].

36 The second approach is that the court should determine on the balance of probabilities the existence and scope of the arbitration agreement when it hears a stay application. On this view, the court grants a stay if, and only if, it is satisfied that the requirements for a grant of a stay have in fact been met. The Singapore Court of Appeal referred to this as the full merits approach. This approach has the advantage of expedience in that it allows the court to pronounce with finality on an arbitral tribunal's jurisdiction in the first instance, instead of deferring the question to the arbitral tribunal, only to face the prospect of the same question coming back to the court in the event of an appeal against the arbitral tribunal's jurisdictional ruling, or if the unsuccessful party in the arbitration resists enforcement of the arbitral award or applies to set it aside on the basis of the arbitral tribunal's lack of jurisdiction: Tomolugen Holdings at [30].

37 This case is unusual in that if the court follows the full merits approach in determining Duro's application for a stay, it will at the same time, leaving aside questions of discretion, determine the merits of Samsung's claims in the court proceeding.

38 Section 9 of the Arbitration Act 1996 (UK) provides that a party to an arbitration agreement against whom legal proceedings are brought in respect of a matter which under the agreement is to be referred to arbitration may apply to the court to stay the proceeding so far as they concern that matter. The English courts generally adopt the full merits approach when hearing stay applications under s 9 of the Arbitration Act 1996 (UK) subject to a residual discretion to stay the court proceedings under the court's inherent jurisdiction so as to allow the arbitral tribunal to make a determination on its own jurisdiction instead. Section 9 of the UK Act is in different terms from s 7(2) of the Act. However, they are similar and both are similar to Article 8 of the Model Law and all are based on Article II(3) of the New York Convention. Furthermore, the reasoning in the English cases applies to the approach a court should take to s 7(2) of the Act notwithstanding the differences in the language of the provisions.

39 In Golden Ocean at [59] Popplewell J summarised the principles applicable to a situation where C brings proceedings against D in relation to matters which D claims, but C disputes, are governed by an arbitration agreement which confers kompetenzkompetenz on the arbitral tribunal. Popplewell J's summary includes the following principles:

(1) Section 9(1) permits the grant of a stay under the section only if D is party to a written arbitration agreement which has agreed to refer to arbitration the matters in respect of which C has brought the proceedings. Section 9(1) is concerned with whether an agreement to arbitrate was concluded. It is not concerned with whether such agreement is valid or enforceable or continues in existence, which is the subject matter of s 9(4). It is also concerned with whether the scope of the agreement to arbitrate extends to the matters in issue between the parties in their substantive dispute. To bring himself within the scope of section 9, D must establish that such an agreement was concluded, and that its terms apply to the underlying dispute...

...

(5) It is for D to satisfy the court that he comes within s 9(1) before the court can grant relief under that section. It is not enough for him to show merely an arguable case that he is party to a concluded arbitration agreement which has agreed to refer to arbitration the matters in respect of which C has brought the proceedings. Unless the court is satisfied that that is so, there is no jurisdiction under the section to stay proceedings. The court must therefore determine the dispute if it affects the question whether D comes within s 9(1). If it cannot do so on the written evidence at the hearing of the application, it must direct a trial of that issue before granting a stay under s 9. It may however decline to direct a trial of the issue and grant a stay under its inherent jurisdiction without resolving the issue.

40 The English position was also summarised by Aikens LJ, with whom Mann J and Laws LJ agreed, in Joint Stock Co 'Aeroflot Russian Airlines' v Berezovsky [2013] EWCA CIV 784; 2 Lloyd's Rep 242 (Berezovsky):

[T]here is a burden on the party asserting that there is: (a) a concluded arbitration agreement as defined in the 1996 Act; and (b) that it covers the disputes that are the subject of the court proceedings, to prove that this is the case. This is borne out by the authorities. If the party seeking a stay cannot prove both (a) and (b), then there is no jurisdiction to grant a stay under section 9(1) and (4) of the AA 1996. However, if the court considers that it cannot decide those issues for itself in a summary fashion on the written evidence, it has two other options, as this court made clear in Ahmed Al-Naimi (T/A Buildmaster Construction Services) v Islamic Press Agency Inc. It can direct an issue to be tried, pursuant to CPR Pt 62.8(3), or it can stay the proceedings (under its inherent jurisdiction) so that the putative arbitral panel can decide the issue of the existence of the arbitration agreement, pursuant to section 30 of the AA 1996. If the court decides that it will and can determine whether or not there was a concluded arbitration agreement on the written evidence before it then, in my view, the authorities establish that it is for the party asserting the existence of the concluded arbitration clause to prove it on a balance of probabilities. As I point out below, the position appears to be different if the court decides, on an application for a stay, that it cannot, on the materials before it, determine whether there was a concluded arbitration agreement.

Under section 9(4) the court 'shall grant a stay' unless 'satisfied' that the arbitration agreement is 'null and void, [or] inoperative ... '. This means, in my view, that once the first party has established the existence of an apparently concluded relevant arbitration agreement and that it covers the matters in dispute in the proceedings, it is for the party resisting a stay to 'satisfy' the court that the apparently existing arbitration agreement is 'null and void'. That was the position under the old law, ie section 1 of the Arbitration Act 1975, which provision first gave statutory effect in English law to the New York Convention. This court has said that this remains the position under the AA 1996, albeit without elaborating on its reasoning [73] [74].

41 In Tomolugen Holdings the Singapore Court of Appeal departed from the English position and adopted the prima facie approach.

42 The issue was recently addressed by Gleeson J in Rinehart v Rinehart (No 3), when considering an application that the court stay the proceedings before it under s 8(1) of the Commercial Arbitration Act 2010 (NSW) which provides:

A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

In that case, there was a dispute as to the enforceability of various alleged arbitration agreements and as to the scope of the alleged arbitration agreements. The respondents contended that those issues should be resolved by arbitration. The applicants contended that they should be determined by the court. Gleeson J held that the language of s 8(1) and s 16 and the authorities her Honour considered led to the conclusion that the existence of an apparently valid arbitration agreement is sufficient to establish for the purposes of s 8(1) and s 16 of the NSW Act that there is a valid arbitration agreement between the parties to the court proceedings. The next question was whether the dispute in the court proceedings, or any part of it, fell within the scope of the arbitration agreement. The parties seeking the stay must prove that the dispute in the court proceedings falls within the scope of the arbitration agreement. However, there is a question as to the standard to which the applicant for a stay must prove that a matter is the subject of the arbitration agreement. Gleeson J referred to two contending standards of proof that the proceeding is brought in a matter which is the subject of arbitration agreement:

(a) does it require an arguable case or sustainable argument that the matters(s) in the court proceedings are the subject of an arbitration agreement; or

(b) does it require the parties seeking the stay to prove, on the balance of probabilities, that matter(s) in the court proceedings are the subject of an arbitration agreement?

Gleeson J referred to a number of authorities including Golden Ocean, Berezovsky and Robotunits Pty Ltd v Mennel [2015] VSC 268, [297] and concluded:

In my view, the approach in Robotunits is consistent with the approach articulated in Berezovsky, which I respectfully consider to be correct for the reasons given by Aitkens LJ. Thus, in my view, the correct approach is to decide on the balance of probabilities whether, on the proper interpretation of the relevant arbitration agreement, a matter arising in the proceeding falls within the scope of the agreement. This will generally involve a characterisation of the matter, without an assessment of the merits of the disputes arising from the matter. However, in some cases, it may be necessary to consider the merits of a claim or defence said to be the subject of an arbitration agreement in order to be satisfied that there is a relevant 'matter'. For example, if the application of the release is a matter which falls within the scope of an arbitration agreement, the mere fact that the release's application is asserted will not justify a finding as to the existence of a matter the subject of the arbitration agreement if there is no sustainable argument that the release potentially operates to bar or preclude the claims the subject of the dispute.

43 I will follow the full merits approach adopted by Gleeson J in Rinehart v Rinehart (No 3), Popplewell J in Golden Ocean and Aikens LJ in Beresovsky. Section 8 of the Commercial Arbitration Act 2010 (NSW) and s 9 of the Arbitration Act 1996 (UK) are in different terms to s 7(2) of the Act but are to a similar effect. The question in Rinehart v Rinehart (No 3) is different from that in this case. In this case the Duro Claims clearly fall within the scope of an arbitration agreement in the terms of cl 42 of the Subcontract modified to apply to the Interim Subcontract; the question is whether an arbitration agreement in those terms is a term of the Interim Subcontract under which the Duro Works are to be performed. In my opinion the correct approach to that question is to decide on the balance of probabilities whether, on the proper interpretation of the Interim Subcontract, the arbitration agreement is a term of the Interim Subcontract and hence whether the Duro Claims fall within the scope of an arbitration agreement in the Interim Subcontract. If the party seeking a stay cannot prove the existence of an arbitration agreement that covers the disputes that are the subject of the court proceedings then the conditions for staying the proceedings under s 7(2) of the Act have not been met.

44 In Berezovksy Aikens LJ said that if the court considers that it cannot decide that issue for itself in a summary fashion on the written evidence, it has two other options. It can direct an issue to be tried or it can stay the proceedings under its inherent jurisdiction so that the putative arbitral panel can decide the issue of the existence of the arbitration agreement. In this case the court is able to determine whether or not there is an existing arbitration agreement that covers the disputes in this proceeding. That matter was fully argued before the court.

45 In this case, the question comes down to whether the terms of the Interim Subcontract include an arbitration agreement in the terms of cl 42 of the Subcontract. I will now turn to that question.

Terms of Term Sheet are terms of Interim Subcontract

46 Samsung says that the terms of the Term Sheet, including cl 3.2(b), are terms of the Interim Subcontract. Clause 3.2 is:

Governing Law

(a) This Term Sheet is governed by the law in force in Western Australia.

(b) Each party irrevocably submits to the nonexclusive jurisdiction of courts exercising jurisdiction in Western Australia and courts of appeal from them in respect of any proceedings arising out of or in connection with this agreement. Each party irrevocably waives any objection to the venue of any legal process in these courts on the basis that the process has been brought in an inconvenient forum.

(c) In any court proceedings arising out of or related to this Term Sheet or the Interim Subcontract, the court shall award to the prevailing party, if any, the costs and legal fees reasonably incurred by the prevailing party in connection with the court proceedings.

47 Samsung says that cl 3.2(b) is inconsistent with an arbitration agreement in the terms of cl 42 of the Subcontract. Clause 42 is:

42.1 Notice of dispute

If a difference or dispute (together called a 'Dispute') between the parties arises in connection with the subject matter of the Subcontract, including Dispute concerning:

(a) a Contractor's Representative's Direction; or

(b) a Claim

Then either party shall, by hand or by registered post, give the other and the Contractor's Representative a written notice of Dispute adequately identifying and providing details of the Dispute.

Notwithstanding the existence of a Dispute, the parties shall, subject to clauses 39 and 40 and clause 42.5, continue to perform the Subcontract.

42.2 Conference

Within 14 days after receiving a notice of Dispute, the parties shall confer at least once to resolve the Dispute or to agree on methods of doing so. At every such conference each party shall be represented by a person having authority to agree to such resolution or methods. All aspects of every such conference except the fact of occurrence shall be privileged.

If the Dispute has not been resolved within 28 days of service of the notice of Dispute or such longer period as the parties may agree in writing, that Dispute shall, subject to the Dispute being a Pass Through Claim and the operation of the Pass Through Provisions, be and is hereby referred to arbitration.

42.3 Arbitration

The arbitration shall be administered by the Singapore International Arbitration Centre with the UNCITRAL Arbitration Rules. The appointing authority shall be the Singapore International Arbitration Centre. The number of arbitrators shall be three. The language used in the arbitral proceedings shall be English. The place of arbitration shall be Singapore.

42.4 Joinder and Consolidation Disputes

...

42.5 Summary Relief

Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under the Subcontract or to seek injunctive or urgent declaratory relief.

48 Therefore, Samsung says, the terms of the Subcontract as modified by the terms set out in the Term Sheet and its schedules for the performance of the Duro Works do not include an arbitration agreement in the terms of the second paragraph of cl 42.2 of the Subcontract.

49 Duro says that the terms of the Interim Subcontract include a dispute resolution clause in the terms of cl 42 of the Subcontract, which includes the arbitration agreement. Duro advances two separate grounds in support of that contention. First, Duro says that the Term Sheet is an instrument separate from the Interim Subcontract and the jurisdiction clause in the Term Sheet is not a term of the Interim Subcontract. Secondly, Duro says that if the jurisdiction clause in the Term Sheet is a term of the Interim Subcontract, it is not inconsistent with and does not modify the dispute resolution clause of the Subcontract, including the arbitration agreement, by excluding it and therefore the arbitration agreement is a term of the Interim Subcontract.

Governing clause is part of Interim Subcontract

50 Duro says that the Term Sheet contains transitional provisions that cause the Interim Subcontract to come into effect, terms that address the negotiation and execution of the Substitute Subcontract and terms that address matters arising from the termination of the Subcontract. Duro says that the governing law and jurisdiction clauses, cl 3.2(a) and (b), of the Term Sheet are not terms of the Interim Subcontract. I do not agree for the following reasons.

51 The Term Sheet is an instrument by which the parties made a legally enforceable agreement or agreements. The agreement or agreements relate to Duro performing the Duro Works which the Term Sheet describes as the Interim Subcontract, to the negotiation and execution of a further replacement contract which is described as a Substitute Subcontract and to the continuation of Duro's liability under the Subcontract. In my opinion it is not accurate or helpful to describe the Term Sheet as an agreement separate and distinct from the Interim Subcontract. The relevant issue is whether cl 3.2 of the Term Sheet is a term of or applying to the Interim Subcontract. That is a question of construction.

52 Section 3 of the operative part of the Term Sheet, in which cl 3.2(b) is found, is headed 'General'. That is some indication that it applies to the whole of the agreement or agreements created by the Term Sheet. Clause 3.2(a) says that the Term Sheet is governed by the law in force in Western Australia. The ordinary and natural meaning of that provision is that the agreement or agreements in the Term Sheet are governed by the law of Western Australia, not that the instrument alone is governed by Western Australian law or that some of the arrangements or promises in the Term Sheet are governed by the law of Western Australia but not others. Clause 3.2(b) provides that each party submits to the nonexclusive jurisdiction of Western Australian courts in respect of any proceedings arising out of or in connection with 'this agreement'. The natural and ordinary meaning of that provision is that it applies to the whole of the agreement created by the Term Sheet, including the arrangements or promises which constitute the Interim Subcontract.

53 Clause 3.2(b) is a term of, or applies to, the Interim Subcontract which is an agreement in the Term Sheet. The next question is whether cl 3.2(b) of the Term Sheet is inconsistent with and modifies the terms of the Subcontract so as to result in the arbitration agreement in cl 42 of the Subcontract not being a term of the Interim Subcontract.

The Interim Subcontract and the terms of the Subcontract

54 To determine whether the Interim Subcontract includes a term in the same terms as the arbitration agreement in cl 42 of the Subcontract the court must first construe the incorporating clause in the Term Sheet in order to determine the width of the incorporation of the terms of the Subcontract into the Interim Subcontract. The incorporating cl 2(a) is:

The parties agree and acknowledge that, on and from the Start Date, Duro will continue to perform the scope of works set out in Schedule 2 (Duro Works) under this Term Sheet which will become legally binding on the parties and will apply as a binding agreement between the parties (Interim Subcontract), and Duro shall in good faith continue to perform the Duro Works under the Interim Subcontract. The Interim Subcontract is on the same terms as the Subcontract as modified by the terms set out in this Term Sheet and its schedules for the performance of the Duro Works. The parties acknowledge and agree to negotiate in good faith and make such additional changes as are logically or practicably required considering the Duro Works and execute a Substitute Subcontract which is based on the terms of the Subcontract, as modified in this Term Sheet, as soon as reasonably possible.

55 The meaning of a term of a commercial contract is to be determined by what a reasonable business person would have understood that term to mean; it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35].

56 The sentence 'the Interim Subcontract is on the same terms as the Subcontract as modified by the terms set out in this Term Sheet and its schedules for the performance of the Duro Works' is arguably ambiguous. The words 'for the performance of the Duro Works' might be read to be qualifying the words 'the terms set out in this Term Sheet' and 'the schedules' or they might be read as qualifying only the words 'the schedules'. The ordinary grammatical meaning of the sentence is that the words 'for the performance of the Duro Works' refer to the subject which immediately precedes them, the schedules, and not the words 'this Term Sheet'. The ordinary grammatical meaning of the sentence is that the Interim Subcontract is on the same terms as the Subcontract as modified by the terms set out in the Term Sheet and the Schedules.

57 I have set out earlier in these reasons the circumstances in which the Interim Subcontract was made. Samsung terminated the Subcontract on 21 February 2014. Samsung and Duro then entered into a replacement subcontract for Duro to continue to perform the Duro Works, which was a subset of the Subcontract Works which Duro had been performing under the Subcontract. The Interim Subcontract was to be a temporary contract until they negotiated and executed a replacement contract which was referred to in the Term Sheet as the Substitute Subcontract. The parties agreed that the Interim Subcontract and subsequently the Substitute Subcontract are to be on the same terms as the Subcontract with some modifications. Obviously, the scope of works and subcontract sum had to be modified or altered. Those things and some other key terms and conditions as set out in Schedule 1 to the Term Sheet were modified or altered. The purpose of the Interim Subcontract was to make a temporary contract by which Duro continued to perform part of the original Subcontract Works on the same terms as the Subcontract with modifications until the parties negotiated and executed a replacement contract - the Substitute Subcontract - on the terms and conditions of the Subcontract as modified by the Schedules of the Term Sheet, that is the key terms and conditions set out in Schedule 1, the scope of works set out in Schedule 2 and the new procurement milestones and liquidated damages set out in Schedule 3 and any other terms and conditions the parties consider are reasonable or necessary that directly relate to the terms and conditions as set out in those Schedules. In those circumstances cl 2.1(a) means that the Interim Subcontract is on the same terms as the Subcontract except as modified by the terms and conditions set out in the Schedules to the Term Sheet and any other modifications or alternations made expressly or by necessary implication by the terms of the Term Sheet. To put that another way, the meaning of cl 2.1(a) is that the terms of the Subcontract are modified by the terms of the Term Sheet only to the extent that they are inconsistent with a term or terms of the Term Sheet or a term or terms of the Term Sheet show a clear intention that the term or terms of the Subcontract are not to be terms of the Interim Subcontract or are altered or supplemented by a term or terms of the Term Sheet.

58 That approach is consistent with the arguments advanced by the parties. Samsung argued that cl 3.2 of the Term Sheet is inconsistent with an arbitration agreement in the terms of cl 42 of the Subcontract and therefore the arbitration agreement is not a term of the Interim Subcontract. Duro argued that the arbitration agreement in the Subcontract and cl 3.2 of the Term Sheet may stand together and are both terms of the Interim Subcontract.

Samsung says the Arbitration Agreement is excluded from the Interim Subcontract

59 Samsung says that cl 3.2 of the Term Sheet is inconsistent with an arbitration agreement in the terms of cl 42 of the Subcontract for the following reasons. Clause 3.2 of the Term Sheet addresses the concepts of governing law and jurisdiction. It is fundamentally different from the dispute resolution clause in cl 42 of the Subcontract. It is inconsistent with that clause which requires any disputes that were notified and not able to be resolved consensually to be referred to arbitration. There is no equivalent in the Term Sheet and no reference at all to arbitration. Rather, the parties in the Interim Subcontract have moved from one form of dispute resolution, arbitration, which had been used in the Subcontract, to a different form of dispute resolution in the Interim Subcontract - dispute resolution by judicial determination. Clause 3.2(b) has a wide reach. The words 'any proceedings' are of wide import. The expressions 'arising out of or in connection with' and 'arising out of or related to' are to be given a wide or generous construction: Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 [162] [166].

60 Samsung referred to Monde Petroleum SA v Westernzagros Ltd [2015] EWHC 67 (Comm) (Monde Petroleum), [44] in which Popplewell J said that a new and inconsistent dispute resolution provision raises the presumption that the parties intended to impeach the dispute resolution agreement within the earlier agreement. In Monde Petroleum Westernzagros engaged Monde under a consultancy services agreement (CSA) to assist Westernzagros in conducting and maintaining an exploration and production sharing agreement which Westernzagros was negotiating with the Kurdistan Regional Government in Iraq. The CSA contained an arbitration clause. Westernzagros stopped paying the monthly fee invoiced by Monde under the CSA and purported to terminate it. Westernzagros disputed that the unpaid amounts invoiced by Monde, which included a milestone payment, were due. The parties then entered into a termination agreement, under which Westernzagros was to pay Monde's disputed invoices in full and there was a mutual release and waiver of all claims by each party against the other in respect of the CSA. The termination agreement included a clause that the agreement shall be governed by and construed in accordance with the laws of England and Wales and the parties 'herein irrevocably attorn to the exclusive jurisdiction of the courts of England and Wales'. Monde brought proceedings in the Commercial Court and also commenced arbitration proceedings but later withdrew its arbitration claims. Westernzagros counterclaimed in the arbitration seeking declarations of nonliability under the CSA. The arbitral tribunal held that it had no jurisdiction to determine Westernzagros' counterclaims for declaratory relief. Westernzagros contended that the arbitration agreement and the CSA was not terminated or superseded by the termination agreement. Monde contended that it was. Popplewell J held that the arbitration clause in the CSA was superseded by the jurisdiction clause in the termination agreement. Popplewell J held that where there was more than one agreement between the same parties, and they contained conflicting dispute resolution provisions, the presumption of one stop adjudication dictated that the parties would not be taken to have intended that a particular kind of dispute would fall within the scope of each of two inconsistent jurisdiction agreements. The provisions would fall to be construed on the basis that they were mutually exclusive in the scope of their application, rather than overlapping, if the language and surrounding circumstances so allowed. The jurisdiction clause in the termination agreement had to be construed on the basis that the parties were likely to have intended that it should supersede the clause in the earlier agreement and apply to all disputes arising out of both agreements. The language of the termination agreement was supportive of the presumption that the parties had intended to supersede the arbitration clause in the first agreement. It had been expressed to be an exclusive jurisdiction clause, its wording suggested that the parties had intended a formulation that would include disputes as to what rights were extant under the first agreement at the time of the termination agreement and the verb 'attorn' suggested a transfer of jurisdiction, not merely a conferral of jurisdiction.

Duro says arbitration agreement is not inconsistent with jurisdiction clause

61 Duro referred to English cases considering an exclusive jurisdiction clause and an arbitration agreement. In Ace Capital Ltd v CMS Energy Corp [2008] EWHC 1843 (Comm) the claimant, as lead underwriter under certain insurance policies, applied for an injunction to restrain the insured, a Michigan corporation, from continuing proceedings commenced by it against the underwriters in Michigan. The policies contained an English law and arbitration clause and also a service of suit or jurisdiction clause. The claimant sought an injunction precluding the Michigan company from proceeding in Michigan arguing that the service of suit clause did not entitle the Michigan company to sue the underwriters on the merits in the US. Christopher Clarke J granted an injunction restraining the Michigan company from proceeding in Michigan. Christopher Clarke J said:

The arbitration clause in the present case does not exclude any particular grievances from arbitration. On the contrary it provides that all disputes arising under, out of, or in relation to the policy shall be arbitrated. In those circumstances the law's policy in favour of arbitration provides a strong impetus (i) not to read the Service of Suit clause as removing from the scope of arbitration, at the option of the assured, the sort of disputed claim most likely to arise under a policy, i.e. for payment: and (ii) to confine the clause so as to not to give the assured an option to have determined in any court of the Union the merits of disputes which the parties agreed to have determined by LCIA arbitration.

Such an interpretation still leaves the Service of Suit clause with meaningful scope. It enables the assured to found jurisdiction in any US Court, including its home court, to declare the arbitrable nature of the dispute, to compel arbitration, to declare the validity of an award, to enforce an award, or to confirm the jurisdiction of US courts on the merits in the event that the parties agree to dispense with arbitration. Use of the clause for those purposes would not detract from the arbitration clause. The fact that the New York Convention should mean that there ought to be little difficulty in enforcing a London award in the United States does not mean that there is no benefit in having an acceptance of personal jurisdiction by Ace in each State of the Union [81] [82].

62 In Sulamerica Sia Macional De Seguros SA v Enesa Engenharia SA [2012] EWHC 42 (Comm) the claimant insurers instituted arbitration proceedings and upon the insured defendant obtaining a temporary antisuit injunction in Brazil, the claimant applied to the English court for an antisuit injunction. The contract contained Brazilian law and exclusive jurisdiction clauses but also provided for London arbitration if mediation failed. The arbitration clause incorporated the supervisory jurisdiction of the English courts and the governing law of the agreement to arbitrate was English law. The judge granted the claimant's application, finding that giving full width to the Brazilian exclusive jurisdiction clause would have effectively excluded the right to arbitrate and this was not the parties' intention. The court said:

The English courts, when faced with an exclusive jurisdiction clause and an arbitration agreement, look to the strong legal policy in favour of arbitration and the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal. Unless expressly provided otherwise, the parties must be taken to have agreed on a single tribunal for the resolution of all disputes. A liberal approach to the words chosen by the parties in their arbitration clause must now be accepted as part of our law. I follow in this regard the comments of Christopher Clarke J. In the present case, on the construction that I have held, all disputes or differences can be and must be referred to arbitration under the terms of Condition 12, but if that is so, what is left of the exclusive jurisdiction of the courts of Brazil under Condition 7? The answer is very little in practice - much the same as found by Christopher Clarke J in paragraph 82 of the ACE decision. It enables the parties to found jurisdiction in a court in Brazil to declare the arbitrable nature of the dispute, to compel arbitration, to declare the validity of the award, lo enforce the award, or to confirm the jurisdiction of the Brazilian courts on the merits in the event that the parties agree to dispense with arbitration. It specifically operates to prevent the parties proceeding in another court on the merits. Use of the Condition 7 rights for these purposes does not detract from the arbitration clause but gives the meaning. Furthermore, enforcement in Brazil against Brazilian parties is self-evidently a realistic possibility [47] [48].

63 Samsung submits that Ace Capital and Sulamerica and other cases referred to by Duro have no bearing in the present situation because they involved cases where the parties' contract included both a jurisdiction and arbitration clause in one contract. The court in each of those cases was required to determine, between the two clauses, which should be given priority or how they should or could be read together. Further, Samsung says, Australian courts do not approach the construction of commercial contracts with any predisposition in favour of arbitration or presumptive approach to questions of construction of arbitration clauses and refers to Rinehart v Welker [2012] NSWCA 95 [120] [122] Bathurst CJ and [204] per McColl JA in support of that proposition.

64 In Rinehart v Welker the appellant sought an order that proceedings brought by the respondents alleging misconduct in the appellant's conduct as trustee of a family trust of which they were the beneficiaries be stayed on the basis that the respondents had earlier signed a settlement deed requiring them to refer disputes under the settlement deed to confidential mediation and arbitration. Bathurst CJ considered the construction and scope of the relevant clause of the settlement deed. His Honour said that the approach to be adopted in relation to the construction of such clauses is no different to the construction of any other contractual provisions: they are to be construed objectively. His Honour said that arbitration clauses should not be construed narrowly. But the words of the clause cannot be given a meaning they do not have to satisfy a perceived commercial purpose: the scope of disputes covered by an arbitration clause must depend on the language of the clause. Further, it is not appropriate to construe arbitration clauses irrespective of language in accordance with the presumption that the parties are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal unless the language makes it clear the certain questions were intended to be excluded: [120] [121].

Approach to construing arbitration and jurisdiction clauses

65 Each of the cases referred to by the parties considered different circumstances and different questions from those which arise in this case. Nevertheless, they support the following principles or approach. First, it is to be presumed that rational business people who are parties to contracts dealing with the same or a related subject matter intend all questions arising out of their legal relationship to be determined in the same forum. Secondly, the possibility of fragmentation may be inherent in the scheme of the parties' agreements and clear agreements must be given effect to even if this may result in a degree of fragmentation in the resolution of disputes between the parties. Thirdly, such fragmentation is productive of increased expense and delay and gives rise to a risk of inconsistent findings between a court and an arbitral tribunal which rational businessmen are likely to have intended to avoid. Fourthly, in the final analysis, the question whether a jurisdiction clause in a subsequent agreement is inconsistent with and supersedes an arbitration agreement in an earlier agreement is a question of construction and the words of the subsequent agreement are to be given effect so far as it is commercially rational to do so.

Arbitration agreement is a term of Interim Subcontract

66 I approach the question of whether cl 3.2 of the Term Sheet is inconsistent with an arbitration agreement in the terms of cl 42 of the Subcontract and hence whether the arbitration agreement is incorporated in to the Interim Subcontract by considering the text, context and purpose of the terms of the Term Sheet. For the following reasons I conclude that an arbitration agreement in the terms of cl 42 of the Subcontract is a term of the Interim Subcontract.

67 It is possible to construe cl 3.2(b) of the Term Sheet and cl 42 of the Subcontract in a way that allows them to coexist. Clause 42 can be read harmoniously with cl 3.2(b) by construing the 'proceedings' to which cl 3.2(b) refers to be proceedings which a party may institute under the terms of the dispute resolution clause in the terms of cl 42 of the Subcontract or other proceedings which a party may commence consistently with cl 42. Clause 3.2(b) of the Term Sheet does not provide that each party submit to the jurisdiction of Western Australian courts in respect of any difference or dispute arising out of or in connection with the Interim Subcontract but rather provides for submission in respect of 'any proceedings' arising out of or in connection with the agreement. That is, if a party commences in a Western Australian court a proceeding which arises out of or in connection with the agreement then the other party submits to the jurisdiction of the Western Australian court. The dispute resolution clause, cl 42 of the Subcontract, whilst providing that any difference or dispute between the parties which arises in connection with the subject matter of the Subcontract is to be referred to arbitration, at cl 42.5 provides for three instances where a party may institute proceedings - a party may institute proceedings to enforce payment due under the Subcontract or to seek injunctive or urgent declaratory relief. Duro has twice within the last few months commenced such proceedings for an interlocutory injunction restraining Samsung from taking any step to enforce the Security under the Subcontract: Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2015] WASC 484; Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2016] WASC 119. There are other proceedings which the parties to the Interim Subcontract might commence consistently with the arbitration agreement in cl 42 of the Subcontract including proceedings to enforce any arbitration award or to confirm the jurisdiction of the Western Australian courts on the merits in the event that the parties agree to dispense with or waive the right to arbitration.

68 The Term Sheet is a brief document. It provides that the Interim Subcontract is on the same terms as the Subcontract as modified by the terms set out in the Term Sheet and the schedules. That is, the terms of the Subcontract are to be terms of the Interim Subcontract except insofar as they are modified by the Term Sheet and the schedules. The arbitration agreement in the Subcontract provides for the resolution of all differences and disputes between the parties in connection with the subject matter of the Subcontract including claims which are widely defined. The jurisdiction clause in the Term Sheet does not provide for the resolution of all such differences or disputes. It provides only for 'proceedings' arising out of or in connection with the agreement. The natural and ordinary meaning of the jurisdiction clause is that it provides for each party to submit to the nonexclusive jurisdiction of Western Australian courts in respect of relevant proceedings. It does not provide that all disputes or differences arising out of or in connection with the Interim Subcontract are to be resolved by litigation.

69 Considerations of commercial convenience favour construing the Term Sheet to incorporate an arbitration agreement in the terms of cl 42 of the Subcontract. Indeed, the result of construing the jurisdiction clause, together with cl 2.1(a) of the Term Sheet to displace the arbitration agreement results in a commercially inconvenient outcome which should not be readily attributed to rational business people. The arbitration agreement in cl 42 survived the termination of the Subcontract. Therefore, any disputes falling within that arbitration agreement must be referred to arbitration. The Interim Subcontract provides for Duro to continue to perform some of the work that was the subject of the Subcontract. It would be inconvenient if disputes concerning work under the Subcontract must be referred to arbitration and disputes concerning the continuation of the work under the Interim Subcontract must be resolved by litigation. Furthermore, the Term Sheet provides by cl 2.2(b), subject to clause 2.1(a), if directed by Samsung, Duro will execute a Substitute Subcontract that incorporates the terms and conditions of the Subcontract as modified by schedules of the Term Sheet together with any other terms and conditions that Samsung and Duro consider are reasonable or necessary that directly relate to the terms and conditions as set out in the schedules of the Term Sheet. That is, in the absence of any other terms and conditions agreed by Samsung and Duro, Samsung may direct Duro to execute a Substitute Subcontract that incorporates the terms and conditions of the Subcontract as modified by schedules of the Term Sheet not as modified by cl 3.2 of the Term Sheet. Therefore, such a Substitute Subcontract would include an arbitration agreement in the terms of cl 42 of the Subcontract. The result, if the arbitration agreement in those terms is not part of the Interim Subcontract would be that disputes concerning works under the Subcontract would be referred to arbitration, the continuation of the works under the Interim Subcontract would be resolved by litigation in Western Australian courts and the continuation of the works under the Substitute Subcontract would be referred to arbitration. That is an outcome business people are unlikely to have intended.

Relief claimed by Samsung is within scope of the arbitration agreement

70 A 'matter' for the purposes of s 7(2) means some right or liability in dispute which is susceptible of settlement as a discrete controversy: cf Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332 (Tanning Research) per Deane and Gaudron JJ; Flint Inc NZ Ltd v Huhtamaki Australia Pty Ltd [2004] VSCA 166; (2014) 289 FLR 30 (Fink Ink).

71 A 'matter' is something more than a mere issue that falls for decision: cf Tanning Research per Deane and Gaudron JJ. In Comandate Marine Corp v Pan Australia Shipping Pty Ltd Allsop J said in construing s 7(2)(b) of the International Arbitration Act:

... the word 'matter' in s 7(2)(b) can be seen to be a reference to the differences between the parties or the controversy that are or is covered by the terms of the arbitration agreement. That is, such part (or all) of the differences that fall within the scope of the arbitration agreement. It is that body of differences which is to be capable of settlement by arbitration.

...

The above approach conforms to the requirement expressed in Tanning Research to ascertain the 'matter' by reference to the subject matter in dispute and the substantive questions for determination in the proceedings and, necessarily, by reference to the scope of the arbitration agreement [235] [238].

72 A 'matter' for the purposes of s 8(1) may or may not comprise the whole dispute in any given court proceeding: Tanning Research per Deane and Gaudron JJ; Fink Ink at 53 [87(c)] per Nettle JA.

73 The dispute between the parties in this court proceeding is whether the Duro Claims constitute 'proceedings arising out of or in connection with this agreement' for the purposes of cl 3.2(b) of the Term Sheet and are therefore to be determined in this court or whether they are a dispute between the parties arising in connection with the subject matter of the Interim Subcontract and by reason of an arbitration agreement in the Interim Subcontract in the terms of cl 42 of the Subcontract are to be referred to arbitration. I have found that there is in the Interim Subcontract an arbitration agreement in the terms of cl 42 of the Subcontract. The Duro Claims are a dispute between the parties which arises in connection with the subject matter of the Interim Subcontract and therefore disputes which are to be referred to arbitration. It follows that this proceeding involves the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration unless the matter is excluded from the scope of the arbitration agreement by cl 42.5 of the Subcontract as incorporated into the Interim Subcontract.

74 Clause 42.5 contains a qualification to, or carve out from, the agreement to refer disputes to arbitration. Clause 42.5 carves out from the arbitration agreement the right of a party to institute proceedings to seek urgent declaratory relief. The relief sought must in fact be urgent, a matter to be determined objectively. Clause 42.5 must be read in the context of the dispute resolution provisions of the contract as a whole. Those provisions show the parties preference that disputes arising under the contract are to be decided by arbitration. This preference may be set at naught if cl 42.5 is not limited to cases which are in fact urgent. In my opinion the Duro Claims are not urgent. There is no reason of urgency that they should not be determined in the arbitration. The declarations sought by Samsung cannot derive urgency from the need to resolve the Duro Claims urgently. There is no reason of urgency that whether the Duro Claims fall within an arbitration agreement in the Interim Subcontract should not be resolved by the arbitral tribunal.

75 The Interim Subcontract includes an arbitration agreement in the terms of cl 42 of the Subcontract. The scope of the arbitration agreement covers the determination of the Duro Claims. That is, the parties have agreed by the Interim Subcontract, incorporating an arbitration agreement in the terms of cl 42 of the Subcontract, that the Duro Claims are to be determined by arbitration. In substance the matter in controversy in this proceeding is whether the Duro Claims are within the jurisdiction of the arbitral tribunal to which disputes under the arbitration agreement are to be referred. The answer is that they are. This proceeding involves the determination of a matter that, in pursuance of the arbitration agreement in the Interim Subcontract, is capable of settlement by arbitration. Section 7(2) of the Act requires that the court stay the proceeding and refer the parties to arbitration in respect of that matter. It is unnecessary to determine Duro's alternative claims. It is inappropriate to do so given the basis on which I have found that the proceedings should be stayed.

76 The proceedings should be stayed and the whole of the matter or matters the subject of this proceeding should be referred to arbitration.