Australian Court Upholds Liberal Construction of Arbitration Clause

A recent decision of the Queensland Supreme Court has taken an expansive approach to the scope of an arbitration clause in the context of a subcontract for road construction.

In Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd [2021] QSC 75, Civil Mining & Construction Pty Ltd (CMC) successfully applied to stay proceedings and refer a dispute to arbitration pursuant to 8(1) Commercial Arbitration Act 2013 (Qld).

Justice Henry considered that the arbitration clause in question (which was relevantly expressed to apply to “disputes or differences arising between the Parties”) merited a liberal construction. In this case, his Honour found that the scope of the arbitration clause encompassed Cheshire’s claims for relief based on estoppel by convention or statutory unconscionable conduct under the Australian Consumer Law.

Justice Henry interpreted the scope of the arbitration clause in the light of three general principles of interpretation:

  • consider the contract when construing the arbitration clause;
  • construe commercial contracts to give effect to their commercial purpose; and
  • avoid construing arbitration clauses narrowly.

He also engaged in an extensive review of cases considering the degree or nature of connection a dispute must have to a contract to be covered by a broadly worded dispute resolution clause, such as that found in the contract in this case. Justice Henry also considered but distinguished cases in which the relevant arbitration clause was limited to disputes arising “under” the applicable agreement. Here, the drafting of the arbitration clause had no such specificity.

Justice Henry concluded that Cheshire’s claim fell within the ambit of the arbitration clause in the contract. He found a “sufficiently close connection” (as contemplated by the authorities) between Cheshire’s claims and the contract. The work performed by Cheshire, to which its claim for additional payment (the genesis of the dispute between the parties) related, would not have been performed but for the commercial relationship created by the contract.

See the case note by Herbert Smith Freehills.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Hong Kong Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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