One Sector Pty Ltd v Panel Concepts Pty Ltd [2021] QDC 54



Case Name: One Sector Pty Ltd v Panel Concepts Pty Ltd [2021] QDC 54
Medium Neutral Citation: [2021] QDC 54
Hearing Date(s): 19 March 2021
Date of Orders: 8 April 2021
Decision Date: 8 April 2021
Before: Barlow QC DCJ
Decision: Application dismissed
Catchwords: ARBITRATION – ARBITRATION AGREEMENT – ARBITRATION AGREEMENT AS GROUND FOR STAY OF COURT PROCEEDINGS – POWER OF COURT TO STAY – VALID ARBITRATION AGREEMENT – Plaintiff sub-contracted defendant to complete construction work – Plaintiff suing defendant for breach of contract – Sub-contract includes dispute resolution clause – Dispute resolution clause includes potential referral to arbitration – Whether clause amounts to arbitration agreement under Commercial Arbitration Act.


ARBITRATION – ARBITRATION AGREEMENT – ARBITRATION AGREEMENT AS GROUND FOR STAY OF COURT PROCEEDINGS – POWER OF COURT TO STAY – TIME FOR APPLICATION –Plaintiff suing defendant for breach of contract – Plaintiff successfully sought default judgment – Defendant applied to have default judgment set aside – Defendant filed affidavit in support of application to set aside judgment – Whether statements in affidavit describing proposed defences amounted to first statement on the substance of the dispute.

Legislation Cited: Commercial Arbitration Act 2013 (Qld), s 8
Cases Cited: CPB Contractors Pty Ltd v Celsus Pty Ltd (2017) 353 ALR 84, considered


Gilgandra Marketing Co-operative Ltd v Australian Commodity & Marketing Pty Ltd [2010] NSWSC 1209, considered


Pathak v Tourism Transport Ltd [2002] 3 NZLR 681, cited

Texts Cited: NIL





Representation: Counsel:


S Colditz, for the plaintiff

J Marr, for the defendant




Active Law for the plaintiff

Robinson Locke Litigation Lawyers for the defendant

File Number(s): BD 2957/2020
Publication Restriction: NIL
Decision under appeal: NIL



1. The defendant was a sub-contractor of the plaintiff – the head contractor – under a contract for the construction of an industrial complex. The plaintiff sues the defendant for damages for breach of that contract.

2. The defendant applies for a stay of the proceeding, pursuant to s 8(1) of the Commercial Arbitration Act 2013, so that the parties may refer their dispute to arbitration pursuant to the contract.

3. Subsection 8(1) of the Act 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.

4. “Arbitration agreement” is defined in s 7, in essence, as a written agreement to submit to arbitration disputes that have arisen or may arise between the parties.

5. The contract in this case is apparently a standard form of subcontract drawn by the plaintiff. Its operative part (the general conditions) is not long. Clause 25, upon which the defendant relies, is headed “Dispute Resolution.” It is set out in the annexure to these reasons.

6. The defendant’s principal contention is that none of the steps referred to in clause 25 has been taken and therefore the parties remain obliged, by clause 25.1, to comply with the steps set out in the balance of the clause before the plaintiff may continue with this proceeding. Therefore it seeks a stay of this proceeding. The parties agree that an order staying the proceeding is an effective way of the court referring the parties to arbitration under s 8.

7. The plaintiff submits that the parties have taken the steps provided in clauses 25.2 to 25.4 (a notice of dispute, followed by a without prejudice conference), but it says that, after the conference, the defendant did not issue a further notice of dispute, under clause 25.5, setting out the details of the dispute and referring it to arbitration. Nor have the parties otherwise agreed on arbitration which, the plaintiff contends, is an alternative route for arbitration (that is, by a separate agreement).

8. The plaintiff opposes a stay on a number of grounds:
(a) first, there is no arbitration agreement, as the preconditions to the operation of the contractual requirement that the parties arbitrate their differences have not been met;
(b) secondly, the defendant made this application too late – in particular, after it had, in this proceeding, submitted its first statement on the substance of the dispute;
(c) thirdly, any arbitration agreement in the contract is inoperative as the defendant has chosen to participate in this proceeding rather than to arbitrate and it should be held to that choice.

Is there an arbitration agreement?

9. The defendant contends that clause 25 constitutes an arbitration agreement. The parties must therefore comply with the steps provided in that clause before they may litigate. But the plaintiff contends that none of the steps taken by the parties to date was a step under clause 25 or, if any action purported to be such a step, it was taken too late. Therefore there is no current or operative agreement that the disputes the subject of this proceeding be referred to arbitration.

10. The plaintiff submits that only clause 25.5 permits one party, in the circumstances described in that clause, unilaterally to refer disputes to arbitration. A party may do so only after the following steps have occurred:
(a) one party has given to the other a notice of dispute under clause 25.2;
(b) the parties have held a without prejudice conference, either within 7 days of the giving of the notice of dispute under clause 25.3 or later under clause 25.4 if either party is a member of the Queensland Master Builders Association;[1]
(c) if the parties do not settle at a conference, one party has given the other a second notice of dispute and referred the dispute to arbitration.

11. Unless those steps are taken within the time periods stated, then arbitration may only occur if the parties agree to proceed to arbitration. In the event of such an agreement, clauses 25.6 to 25.9 apply. Otherwise, either party may commence and proceed with litigation.

12. In his submission, Mr Colditz, counsel for the plaintiff, sought to distinguish between a unilateral referral to arbitration under clause 25.5 and a bilateral, separate agreement under clause 25.6. The basis of this distinction was the reference, in clauses 25.6 and 25.9 to “the parties” referring or failing to agree to refer a dispute to arbitration. Mr Colditz submitted that clauses 25.6 to 25.9 did not apply to a unilateral referral under clause 25.5. Rather, those clauses refer to the possibility that, in the absence of a unilateral referral, the parties may agree jointly to refer their dispute, to arbitration. In this case, there was no unilateral referral, nor have the parties separately agreed to refer their dispute to arbitration. Therefore, there is no arbitration agreement.

13. I respectfully disagree with that construction. The contract is not well drawn, but clearly clauses 25.6 to 25.8 apply to an arbitration to be conducted after one party requires referral under clause 25.5. The references to “the parties” should be construed as referring to either party. Otherwise clauses 25.6 to 25.8 would be redundant (being entirely dependent on there being a fresh agreement to arbitrate). Furthermore, the reference, in clause 25.9(c) to a referral to arbitration under clause 25.6 is clearly an error, as the only method of referring a matter to arbitration is under clause 25.5.

14. The effect of clauses 25.5 to 25.9 is that:
(a) if the parties have had a without prejudice conference after a notice of dispute under clause 25.2 was given, then either party may give the other another notice of dispute setting out details of the dispute then existing (which may not be all the original disputes) and, by that notice, elect to refer to arbitration the items of dispute set out in the notice;
(b) if either party makes such a referral and the parties cannot agree on an arbitrator, the method of selection of an arbitrator set out in clauses 25.6 and 25.7 will be used to have one appointed;
(c) if neither party gives the other a notice of dispute and referral to arbitration (under clause 25.5) within 7 days of a conference under clause 25.3,[2] or if a conference did not take place due to the refusal of the party given the original notice of dispute, either party may commence litigation about the disputes set out in the original notice of dispute.

15. Clause 25 as a whole is clearly an arbitration agreement.
Was the defendant’s application for a stay made too late?

16. The plaintiff contends that the defendant sought to refer the dispute to arbitration too late, as the first occasion on which the defendant, by its solicitor, mentioned referral to arbitration was on 9 March 2021, after it had successfully applied to have a default judgment against it set aside. In support of that application, the defendant’s solicitor swore an affidavit in which he said,[3]I am informed by John Hennessy and believe that the Defendant has a Defence and a Counterclaim, being:
(a) At all times, the Defendant was ready and willing to complete the work pursuant to the subcontract, including rectifying any alleged defects. However, the Plaintiff prevented the Defendant from performing work because the Defendant was denied access to site. As the Plaintiff prevented the Defendant from performance, by the doctrine of prevention, it cannot take advantage of its own default and allege breach of contract by the Defendant.
(b) The Plaintiff’s claim for alleged liquidated damages includes claim for a period caused by the Plaintiff itself which prevented earlier performance. The Plaintiff only gave access to site after 4 December 2018. As such the liquidated damages claim seek to take advantage of delay caused by the Plaintiff. Further, the period of time includes time when the Defendant was prevented from performance due to exclusion from site.

17. Counsel for the plaintiff submitted that those paragraphs comprise the defendant’s “first statement on the substance of the dispute,”[4] in which case the defendant became disentitled to file its application seeking a stay after it filed that affidavit.

18. Mr Colditz referred me to several authorities that have considered what amounts to a “first statement on the substance of the dispute.” I have also reviewed the discussion of the section and its equivalents in other jurisdictions in Commercial Arbitration Act 2010 (NSW) (Annotated) published by Westlaw AU.

19. I preface my consideration of this issue by noting that a court should attempt to construe the Act in a manner consistent with the UNCITRAL model law on international commercial arbitration, on which the Act is based.[5]

20. In CPB Contractors, at [91]-[92] Lee J referred to two decisions of other Courts. Of particular assistance is that of Slattery J in Gilgandra Marketing Co-operative Ltd v Australian Commodity & Marketing Pty Ltd [2010] NSWSC 1209. His Honour commenced his decision by remarking, at [1], that the case illustrated that a party operating under the Act may need to decide early to pursue a stay application.

21. In Gilgandra, the plaintiff commenced an action for a debt allegedly owed and obtained an interlocutory injunction restraining the defendant from dealing with the goods sold to it by the plaintiff. Directions were made for pleadings and a prompt trial. The defendant filed an unconditional notice of appearance and then took other steps, including applying to set aside the injunction. Some months later, it filed its defence and, on the same day, a motion seeking a stay of the proceeding to enable arbitration under the sale agreement. Slattery J held that it was not entitled to a stay.

22. At [49] to [53], his Honour considered a number of New Zealand decisions on when a party’s first statement on the substance of the dispute is made. His Honour extracted the following passage from a learned article[6] summarising those decisions:
It has been variously held that the following constitute a “party’s first statement on the substance of the dispute”:
(a) a notice of opposition and affidavit in opposition to an application for an interim injunction;
(b) an originating application for an order setting aside a statutory demand and supporting affidavit;
(c) an affidavit in reply in a summary judgment application in which the plaintiff raises matters which are the subject of an arbitration agreement in reliance on which the plaintiff subsequently seeks to stay proceedings brought by the defendant;
(d) proceeding with a claim after making an application for interim relief with reference to an arbitration agreement but failing then or immediately after the resolution of the interim relief application to apply for a stay, so adopting the statement in the interim relief application as a statement on the substance of the dispute.

23. Slattery J went on to say:
“the principles stated in a decision in Pathak v Tourism Transport Ltd[7] show that a defendant who opposes interim relief in Court and fails to seek a stay or protest jurisdiction in respect of the substantive dispute at an early time under Article 8(1) will be prevented from seeking a stay. … Heath J found that had a stay been sought by the plaintiff immediately after the resolution of the interim relief application it would have been granted … [but] because the plaintiff had proceeded with the Court action and therefore adopted the earlier statement made in the interim relief the plaintiffs had therefore submitted their first statement on the substance of the dispute and that it was too late then to seek a stay.

24. Notably, in Pathak, Heath J referred to a number of other New Zealand decisions on the equivalent provision to s8(1) of the Queensland Act. In one,[8] it was held that, in filing a response to an interim injunction application, the defendant had submitted to the court’s jurisdiction. Its notice of opposition to the interim injunction application and its affidavits in support constituted a statement on the substance of the dispute.

25. In another,[9] the Master held that an affidavit filed on behalf of the applicant to set aside a statutory demand was a “first statement on the substance of the dispute”.

26. Heath J concluded, most relevantly, that “a defendant who opposes interim relief and fails to seek a stay (or protest jurisdiction) in respect of the substantive dispute will also be prevented from seeking a stay.”[10]

27. Slattery J, after referring to those decisions, concluded at [54] that the defendant’s opposition to the plaintiff’s application for interim relief was its first statement on the substance of the dispute. But even if that were not the case, its failure to seek a stay immediately afterwards and its conduct in cooperating over some two months in bringing the proceeding on for hearing, even before a formal defence was filed, was a continuing adoption by it of its first statement at the interlocutory hearing.

28. Returning now to CPB Contractors, having briefly referred to the New Zealand cases, Lee J concluded at [92] that they –
supported the principle that a respondent which opposes interim relief and fails to seek a stay or protest jurisdiction in respect of a substantive dispute at an early time would be prevented from seeking a stay.

29. Lee J went on to refer to decisions of courts of Singapore and Hong Kong. In particular, his Honour quoted this observation from the Court of Appeal of Singapore:[11]

It now seems to be fairly settled that a “step” is deemed to have been taken if the applicant employs court procedures to enable him to defeat or defend those proceedings on their merits and/or the applicant proceeds, from a procedural point of view, beyond a mere acknowledgment of service of process by evincing an unequivocal intention to participate in the court proceedings in preference to arbitration.

30. Lee J concluded that the State in the case before him had not made its application for a stay prior to filing its first response on the substance of the dispute and therefore was not entitled to a stay of the proceeding.
31. Counsel for the plaintiff in this proceeding submitted that the sworn statements as to the defences available to the defendant in this proceeding were in common with the common feature in all the cases, namely that they constituted statements that “contained what the party in question said about how the substantive dispute in the primary proceedings should be determined.”[12]

32. In its application to set aside the default judgment,[13] the defendant in this case also sought an order that it have 28 days from setting aside the judgement within which to file a notice of intention to defend and defence. It did not seek an order staying the proceeding for the purpose of an arbitration. I have set out above what Mr Robinson deposed to about the defences available to the defendant. On 1 March 2021, the day before the proposed hearing of its application, the defendant consented to an order that it file and serve its notice of intention to defend and defence by 23 March 2021.

33. It was not until its solicitors wrote to the plaintiff’s solicitors on 9 March 2021[14] that the defendant first raised the arbitration agreement, purported to refer the dispute to arbitration and foreshadowed making this application for a stay of the proceeding to enable arbitration to take place.

34. One might ordinarily think that the phrase “first statement on the substance of the dispute” would be referring to a formal document that makes a claim in court proceedings or responds in detail to the claim. The phrase is used in the Model Law because it applies to many countries with different procedural requirements. In the Australian context, one might consider that it refers to such documents as a statement of claim and a defence, or perhaps an affidavit supporting an originating application. In contrast, one might think, a short description of the bases of defences available in an affidavit to set aside a default judgment might not constitute such a statement. This is particularly so when courts have decided that a plaintiff’s application for, or opposing, an interim injunction, which must include evidence setting out the factual basis for the application, does not comprise such a statement.

35. However, the almost unanimous weight of authorities in which equivalent provisions have been considered is to the effect that a party who submits to a court’s jurisdiction in a proceeding concerning the subject matter of an arbitration agreement and, in that proceeding, makes some statement of the nature of its claim or defence, except where a proposed claimant invokes a court’s jurisdiction and power to grant interim relief, is thereafter prevented from seeking a stay under s 8 or its equivalents. While I am not bound by those authorities, I am not persuaded that they are clearly wrong. In the circumstances, I should follow them.

36. In its application to set aside the judgment, it was not necessary for the defendant to demonstrate to the court that it has a good arguable defence, because the application was based on the basis that the judgment was irregularly entered.[15] It could have sought to set aside the judgement on that basis and, at the same time, sought a stay. It did not do so. Instead, it sought to set aside the judgment and to seek an order that it file its unconditional notice of intention defend and a defence. In support, Mr Robinson described, although in short compass, the defences on which the defendant apparently intended to rely.

37. Having regard to the weight of authority, I conclude that Mr Robinson’s description of those defences do constitute the defendant’s first statement on the substance of the dispute. It is therefore now too late for it to seek a stay under s 8.

38. That conclusion makes it unnecessary for me to consider and determine the plaintiff’s third ground of opposition to the application. However, I will record that the defendant’s application, by which it not only sought to set aside the default judgment but also sought an order that it file a notice of intention to defend and a defence, as well as its consent to that latter form of order, seem clearly to constitute an election to defend the litigation in this proceeding rather than by arbitration. This third ground therefore does seem to have merit.

39. The defendant’s application must be dismissed. I shall hear from the parties on costs and directions for the next step in the proceeding.

Subcontract clause 25

25. Dispute Resolution

25.1 Except to the extent that any litigation that may be commenced for injunctive relief in relation to any matter arising out of or in connection with the Subcontract Agreement, the requirements of this clause are a condition precedent to either party commencing (or, if wrongly commenced, continuing) litigation.

25.2 If a dispute or difference arises out of, or in connection with, the Subcontract, either party may give the other party a written notice of dispute setting out the details of the dispute including any amount in dispute.
‘Without Prejudice’ Conference

25.3 The parties shall arrange, and participate in, a ‘without prejudice’ conference between them, or their authorised representatives, in an attempt to resolve the dispute or difference set out in the notice of dispute within 7 Days after the giving of the notice of dispute.

25.4 Subject to one of the parties being a member of the Queensland Master Builders Association:
(a) if either party gives a written notice to the Queensland Master Builders Association and the other party requesting that the Queensland Master Builders Association appoint a person to facilitate discussion in a ‘without prejudice’ conference, the Queensland Master Builders Association may appoint such a person; and
(b) On any appointment of a person by the Queensland Master Builders Association under Clause 25.4(a), the parties shall permit that person to make suitable arrangements for, and to facilitate discussion in, the ‘without prejudice’ conference.

Mediation or Arbitration

25.5 If the parties fail to resolve all of the dispute or difference set out in the notice of dispute during the ‘without prejudice’ conference, or if the party given the notice of dispute fails to participate in a ‘without prejudice’ conference within 7 Days after the giving of the notice of dispute, then either party may give the other party a written notice of dispute setting out the details of the dispute including any amount in dispute and may refer all or any part of the dispute or difference to mediation or arbitration.

25.6 If the parties refer all or any part of the dispute or difference set out in the notice of dispute to mediation or arbitration but fail to agree on the person to be appointed as the mediator or the arbitrator, then either party may give a written notice to the President of the Queensland Master Builders Association and the other party requesting that the President appoint (as the case may be):
(a) a mediator to facilitate the mediation; or
(b) An arbitrator to decide all or that part of dispute or difference referred to arbitration.

25.7 If either party gives a notice under Clause 25.6, the President shall give to the parties a written notice setting out the name and contact details of (as the case may be):
(a) the mediator appointed by the President to facilitate the mediation; or
(b) The arbitrator appointed by the President to decide all or that part of the dispute or difference referred to arbitration.

25.8 On the giving of a notice under Clause 25.7, the parties shall:
(a) request the mediator or the arbitrator named in the notice to make suitable arrangements for (as the case may be) the mediation or the arbitration; and
(b) Participate in (as the case may be) the mediation or the arbitration and pay the costs of the mediation (including the costs of the mediator) or the costs of the arbitration (including the costs of the arbitrator) in equal shares unless otherwise agreed by the parties or decided by the arbitrator.

25.9 If the parties fail to:
(a) agree to refer any part of the dispute or difference set out in the notice of dispute to mediation or arbitration within:
(i) 7 Days after the ‘without prejudice’ conference; or
(ii) If the party given the notice of dispute fails to participate in a ‘without prejudice’ conference 14 Days after the giving of the notice of dispute, or
(b) resolve all of the dispute or difference set out in the notice of dispute during any mediation,
Then either party may commence litigation in relation to any part of the dispute that is not:
(c) agreed to be referred to mediation or arbitration under Clause 25.6; or
(d) Resolved during any mediation.

25.10 Notwithstanding the giving of a notice of a dispute, the parties shall, subject to the Subcontract, continue to perform the Subcontract.


[1] Neither party is a member of the QMBA.

[2] That period of 7 days derives from clause 25.9, which I consider applies to a referral by either party under clause 25.5 (or indeed by both parties). If there is no referral within 7 days of a conference, either party may commence litigation.

[3] Affidavit of Malcolm Robinson filed on 24 February 2021, paragraph 8 (errors in original).

[4] Commercial Arbitration Act, s8

[5] CPB Contractors Pty Ltd v Celsus Pty Ltd (2017) 353 ALR 84, [43]. The model law was produced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the “New York Convention”.

[6] Tómas Kennedy-Grant QC, “The New Zealand Experience of the UNCITRAL Model Law: A Review of the Position as at 21 December 2007” (2008) 4 AIAJ 1.

[7] Pathak v Tourism Transport Ltd [2002] 3 NZLR 681.

[8] The Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66.

[9] Anderson Switchboards & Electronic Ltd v Schneider Electrical (NZ) Ltd (High Court, Auckland, M 1215-IM00, 16 January 2001), a decision of Master Kennedy-Grant.

[10] Pathak, 692.

[11] Carona Holdings Pte Ltd v Go Go Delicacy Pte Ltd [2008] 4 SLR 460; [2008] SGCA 34, [55]. Emphasis in the original.

[12] Quoting from Mitchell J in Australian Maritime Systems Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52, [93].

[13] Court document no 9, filed on 24 February 2021.

[14] Affidavit of Paul Jason Hick filed by leave on 19 March 2021, “PH-6”, pp 339-341.

[15] A defendant may almost always have an irregularly entered judgment set aside as of right: Cusack v De Angelis [2008] 1 Qd R 344, [36].

Venetian Nominees Pty Ltd V Weatherford Australia Pty Ltd [2021] WASC 137




Medium Neutral Citation: [2021] WASC 137
Hearing Date(s): 15 FEBRUARY 2021
Date of Orders: 5 MAY 2021
Decision Date: 5 MAY 2021
Before: 5 MAY 2021
Decision: Application dismissed
Catchwords: Arbitration – Private arbitration award made concerning disputed apportionment of outgoings under a lease – Interim award determination made pursuant to issues in Arbitration Agreement – Challenge to set aside award under s 34(2)(a)(ii) and (iv) of the Commercial Arbitration Act 2012 (WA) – Application to Supreme Court to set award aside on alleged basis of plaintiff being unable to present its case or on the basis of alleged unfairness grievances as to arbitral procedure – Contention as to an ‘unpleaded’ argument being accepted and relied on by arbitrator – Contention of a failure to ensure a fair hearing by providing insufficient opportunity to respond by evidence – Whether present application permissible or whether a de facto appeal ‘dressed up’ under the guise of fitting within s 34(2)(a) of the Commercial Arbitration Act
Legislation Cited: Commercial Arbitration Act 2012 (WA), s 34(2)(a)
Cases Cited: AKN v ALC [2015] SGCA 18
Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 326
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Ivankovic v West Australian Planning Commission [2020] WASC 40
Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2011] WASCA 49
Spaseski v Mladenovski [2019] WASC 65
The State of Western Australia v Mineralogy Pty Ltd [2020] WASC 58
Texts Cited: NIL
Category: (In Chambers)








Representation: Counsel:


Plaintiff : Mr M Hotchkin
Defendant : Mr M Howard SC & Ms S B Nadilo




Plaintiff : Hotchkin Hanly
Defendant : Jackson McDonald

File Number(s): ARB 6 of 2020
Publication Restriction: NIL
Decision under appeal: NIL




Linguistic camouflage aside, this is an attempted appeal by the plaintiff against a decision of an arbitrator delivered in a wholly private arbitration. There presents the problem. There is, by the clear words of the local arbitration statute, no appeal available against the adverse arbitral decision. No doubt by reason of that inconvenient obstacle, the present challenges directed against the arbitrator’s award decision have been grammatically cast as an alleged failure by the arbitrator to hear some of the plaintiff’s arguments and, alternatively the too frequently seen allegation of a denial of procedural fairness within the arbitration process. Curial challenges attempted against non-appealable award decisions continue to bedevil and undermine legislative policy endeavours to entrench arbitration as a quick, relatively inexpensive and final medium for private dispute resolutions. Unfortunately, too many unsuccessful arbitration participants still see it as worth their while to ‘roll the dice’ by manufacturing a pathway to a court, where strained procedural unfairness arguments rise to the fore as something of a last refuge of the desperate. Here, such challenges have been productive of delay to the successful party enjoying the fruits of the award and have necessitated an allocation of resources – equivalent to what would otherwise have been devoted to the hearing of a full blown appeal by way of a rehearing. This farcical position should no longer be entertained. Where the backdoor strategy is unsuccessfully deployed in future it should be met with a punitive costs sanction.


The arbitration:

A wholly private arbitration was conducted in 2020 between the plaintiff, Venetian Nominees Pty Ltd (Venetian), and the defendant, Weatherford Australia Pty Ltd (Weatherford). The arbitration was conducted under the Commercial Arbitration Act 2012 (WA) (the CA Act) before Mr Marcus Solomon SC as the parties’ appointed arbitrator.
In the arbitration, Weatherford was the claimant. Venetian, a member of the Caratti Group of companies, was the respondent. The arbitration concerned a money dispute arising out of the parties’ written lease agreement of 13 November 2012 entered between Venetian as Lessor and Weatherford as Lessee (the Lease). The Lease is in evidence before the court on the current application, found attached to the affidavit of Michael Charles Hotchkin sworn 25 August 2020 at MCH1.
Procedural orders concerning a provision of pleadings and written submissions had issued in the arbitration prior the arbitral hearing across two days of March 2020.
Due to COVID-19 constraints which had prevailed at the time, the arbitral hearing was conducted remotely, utilising an audio-link between the arbitrator and the respective counsel for each of the parties.
At the heart of the arbitral dispute was a controversy over the true meaning of a phrase used within the text of cl 4.6 of the Lease.

Clause 4.6

The fiscal dispute between the lease parties ultimately concerned the correct level of the Lessor’s (ie, Venetian’s) apportionment of the outgoings for its land, known as lot 9009, and as were assessed and allocated by it to its Lessee.
The dispute had manifested under factual circumstances whereby the land area to be leased by Weatherford (known as the ‘Premises’) at the time the Lease was entered, was only a smallish component (roughly 11%) of the Lessor’s overall land at the relevant location. In that respect, cl 4.6 of the Lease read:

If any such Outgoings shall not be separately and wholly assessed or charged against the Premises then the Lessee shall pay to the Lessor within seven (7) days of written demand thereof that proportion thereof that the area of the Premises (as certified by the Lessor) bears to the total lettable area of the premises covered by the relevant assessment or charge (as certified by the Lessor). (emphasis in bold and noting the distinction between capital ‘P’ Premises (the leased area) and the lower case ‘premises’, in reference to the Lessor’s land).
The dispute arose because Weatherford, as Lessee, was complaining it had been overcharged by its landlord, Venetian, in respect of the proper proportion of outgoings payable by it to Venetian over time. Weatherford claimed that it had overpaid moneys by reason of Venetian’s erroneous prior apportionments of claimed outgoings. Weatherford contended Venetian had attributed too great a proportion of Venetian’s own outgoings to it (ie, to Weatherford) and Weatherford was claiming back its contended outgoings overpayments in the arbitration.
Venetian’s primary outgoings exposure arose because it, as a landowner, had received from various rating authorities such as the City of Swan, or the State entity responsible for issuing land tax, what were global rating or tax assessments issued levied by reference to the total area of Venetian’s landholding (lot 9009). As mentioned by cl 4.6 of the Lease, Weatherford, as Lessee, was only required to bear contractually to Venetian an appropriate proportion (by land area) of its Lessor’s outgoings. Ultimately, this contractual outgoings proportionate reimbursement liability to Venetian under the Lease distilled to a ratio calculation – over which the parties descended into disagreement. At the heart of the dispute was the true meaning of the phrase seen in cl 4.6 of the Lease, namely, ‘total lettable area of the premises covered’ vis-à-vis the outgoing assessment or charge to the Lessor.
As will be seen, the ratio or fractional calculation required by cl 4.6 can be mathematically described as: . The correctly ascertained fraction or ratio is then applied to Venetian’s total levied outgoings against its aggregate landholding area to derive the correct proportion of outgoings which may be properly levied under cl 4.6 to Weatherford under the Lease.
There had been no debate before the arbitrator, and there remained no debate before this court, that the numerator, or top line of the fraction reference to be used in the calculation (N), was the ‘area of the Premises’ of the Lessee (ie, the area of Weatherford’s leased land).
Next, the denominator (D) component is the ‘total lettable area of the premises covered by the relevant assessment or charge’ rendered to the Lessor (as in cl 4.6). It was the denominator input figure (D) which had generated the controversy in the arbitration.

It follows that even if I am wrong in my construction of clause 4.6 such that any common area over the larger lot is to be omitted from the calculation of the denominator, no such common areas were designated and certified in accordance with the requirements of the Lease.  (emphasis in bold)

The Premises, being the fractional input (N), is the square meterage of Weatherford’s tenancy area as identified in the Lease, namely some 31,600m2. That figure was wholly uncontroversial.
Item 1 in a Schedule to the Lease (see page 32 of the Lease) by reference to a term ‘Premises’ refers to ‘Corner Milly Court and Metal Circuit, Malaga, Western Australia having an area of approximately 31,600m2 as hachured on the plan attached hereto and erected on the Land together with the Lessor’s chattels[.]’
Item 2 of the same Schedule refers to ‘Land’. It refers to ‘Part Lot 9010 on Deposited Plan 66057 being Lot [blank] on Deposited Plan [blank] and being all of the land in Certificate of Title Volume [blank] Folio [blank][.]’
At this point it may be helpful for overall orientation purposes to pause to direct some attention to a useful diagram of Venetian’s land, and which shows Weatherford’s leased Premises. To that end, I refer to the affidavit of Mr Basil Georgiou sworn 19 October 2020, tendered on behalf of Weatherford. I refer in particular to attachment BG-27, page 405. I incorporate as Schedule 1 to these reasons a copy of the diagram as it is found at page 405 (the aerial plan).
As can be seen, the aerial plan identifies various features, including an overhead powerline pylon base, the leased area of Weatherford’s Premises, a hatched area in orange indicating so-called common areas (including a car park, access and driveway), a lot boundary line in green and a broken green horizontal line indicating what is a Western Power easement over Venetian’s land. To that end, see the key in the bottom left.
Weatherford’s Premises are found depicted at the bottom right‑hand corner of the aerial plan, marked as ‘Weatherford’.
The dispute

Because the parties could not resolve a dispute over the correct level of the proportion of outgoings payable by Weatherford to Venetian, they agreed to the appointment of a private arbitrator and hence, to Mr Solomon SC’s appointment in May 2019. That was effected by an arbitration agreement of 15 May 2019. By that agreement, the ‘dispute’ was defined in an attached document called ‘Agreed Issues for Determination’.
In simple terms, the ‘battle ground’ of the arbitral dispute, relevant to the present application, was over the correct total lettable area denominator input figure (D) to be used in the ratio exercise required to determine the correct apportionment of a component of the Lessor’s overall outgoings exposures, over to its Lessee.
Of course, as a matter of simple mathematics, given that the numerator area (N) input figure for the area of Weatherford’s Premises as Lessee is fixed (agreed at 31,600m2), then the higher the (area) figure used as the denominator input (D) in the fraction, then necessarily, the lower must be the ultimately calculated Lessee’s proportion of outgoings payable to its Lessor. The reverse also follows, so that the lower the number used as the denominator input (D), then the higher the end amount of outgoings payable by Weatherford to Venetian.
Hence, for a time and, indeed, right up until the start of the arbitral hearing before the learned arbitrator, it had been the contention of Weatherford as Lessee that the denominator input figure (D) – as a matter of the proper construction and interpretation of the phrase ‘total lettable area’ of the premises – was the entirety of the square meterage area of Venetian’s land.
Venetian had never apportioned outgoings to Weatherford on that basis in the past. Instead, Venetian had followed an outgoings apportionment methodology of reducing the area of the square meterage figure to be used in the denominator input figure (D) by deducting certain areas from out of its total land holding area. The Venetian deduction of areas approach achieved the end result of reducing the potential quantum level of the denominator figure (D) – and thereby increased mathematically the allocated proportion of outgoings ultimately claimed as payable by Weatherford to Venetian. But if the denominator figure (D) was to be numerically higher, then correspondingly, Weatherford’s as calculated outgoings exposure to Venetian would be lower.
In particular, two areas of Venetian’s land look to have been the subject of deduction against the aggregate cl 4.6 denominator input figure (D) calculated under the apportionment methodology of Venetian. First, in this category appears to be the area of land the subject of an easement over Venetian’s land held by Western Power – see the top right and across of the aerial plan (the easement area) scheduled to these reasons.
Under the parties’ starting pleadings at the arbitration, the argument to sustain a deduction of the Western Power easement area to reduce the level of (D) looks to have been advanced by Venetian – along the lines that an existence of such a registered easement area favouring Western Power had rendered that land area as being inappropriate or unsuitable for development by Venetian. It appears Venetian’s stance was that in consequence, all the easement area was not a ‘lettable area’, or even a potentially lettable area, within Venetian’s land for the purpose of cl 4.6. As a result, the easement area was not included in the denominator input figure (D) used to apportion the lease outgoings. As seen from the aerial plan in Schedule 1, the Western Power easement area within Venetian’s overall land holding (marked by broken green lines) is located some distance to the north and to the west of the Weatherford (leased) Premises.
A second broad area of land also deducted from out of the (D) figure by Venetian was attributable to the land areas as shown on the aerial plan as cross‑hatched in orange, referred to as the ‘common areas’. Some of the common areas are found some distance to the west of Weatherford’s Premises (save for an orange cross‑hatched area abutting and adjacent to the as identified Nick Scali (leased) premises, directly to the north of the Weatherford Premises).
Again the underlying issue was whether or not, by regard ultimately to the true meaning of the cl 4.6 phrase ‘total lettable area of the premises covered’, all these common areas of land within Venetian’s aggregate land could legitimately be deducted from the ultimately used denominator input figure (D). That, of course, would thereby contribute in the end to a higher eventual outgoings apportionment liability exposure for Weatherford than would otherwise be the case, had all those areas of land not been carved away from the level of the denominator input figure (D).
Ultimately, of course, the contention of Venetian as Lessor was and remained that such common areas over its land as were used for car parking, access and for driveways, were not, by reason of such common usage deployment, then to be assessed as a part of its lettable area, or as potentially lettable areas by Venetian.

Issues for determination

Before the arbitration hearing commenced, arguments between the parties over the correct apportionment of outgoings to Weatherford had essentially distilled to two major areas of conflict, as reflected in the parties’ Agreed Issues for Determination. The first battle ground to be resolved by the arbitrator was over the true meaning of the denominator phrase used within cl 4.6, namely, ‘the total lettable area of the premises’. Then, once a true meaning was ascertained, a second battle concerned the application of that true meaning to the underlying facts. A key question to be answered in this exercise was whether the areas of Venetian’s land as had been deducted away from the denominator input figure (D) used by Venetian, and so removing from (D) the Western Power easement area as well as the so-called common areas within Venetian’s land, were so legitimately deducted. Collectively, these two battles were known as ‘issue 1’ in both the arbitration and upon the present application.
As mentioned, Weatherford had first contended by its pleadings at the arbitration that the denominator input figure (D) should be the entirety of the square meterage of Venetian’s land – and for which a relevant outgoings assessment or charge had been levied against it by the relevant rating or taxation body. But a difficulty with that ambit submission, as the arbitrator eventually construed the phrase, was that if that had been the true meaning, then it was more likely that the chosen cl 4.6 terminology would have been more simple. Clause 4.6 could merely then have referred to the total area of the Lessor’s ‘land’. Instead, a distinct phrase and the word ‘premises’ in lower case was used. The as chosen words of cl 4.6, reasoned the arbitrator, suggested a somewhat different concept was (objectively) envisioned, and so not just the entirety of the area of the Lessor’s land (see Award pars 92 -93).
Conduct of the arbitration

As mentioned, the arbitration hearing was conducted on 31 March and 1 April 2020. Prior to the hearing, various procedural orders had been issued by the arbitrator to facilitate the hearing – see the attachments to Mr Hotchkin’s affidavit and attachments to the affidavit of Michael Andrew Daniels sworn 19 October 2020.
Given a prevalent COVID-19 pandemic afflicting Western Australia at the time and restrictions upon gatherings as then imposed, the arbitration was conducted remotely by telephone links over two days of hearing. There does not appear to be any issue taken by Venetian over the fact of the hearing taking place by audio-link.
The parties did not ever arrange for a transcript of the two days of arbitral hearing to be produced. As such, there was and is no independent verbatim record of what transpired across the hearing days. This is not at all satisfactory or acceptable in this court. In the context of a presently attempted challenge put against the award based on alleged unfairness in the overall process, or a failure to afford procedural fairness to Venetian – an absence of a verbatim transcript is simply hopeless towards reliably evaluating, after an event, what happened at the hearing from an overall fairness perspective. Affidavits relied on in this current application each contain accounts and recollections of the hearing – see Mr Hotchkin’s affidavit at pars 7, 11 – 14, Mr Georgiou’s affidavit at pars 5, 46 – 52, 54 – 56, 58 – 59, 61 -65, 70 – 76, and Mr Daniels’ affidavit at pars 31 -36. Mr Daniels’ affidavit also attaches various handwritten notes he made during the course of the arbitration hearing (see MAD-10 to MAD-12). There was no cross-examination upon any of this material at the hearing in this court. But this is all still a second best approach which, albeit not objected to by the respondent, is unsatisfactory and should not be repeated save in the most exceptional of circumstances.
Nevertheless, it is notable that Mr Hotchkin (par 13), Mr Georgiou (par 64) and Mr Daniels (par 66), all identify that at the conclusion of oral submissions, Venetian filed a Summary of Respondent’s Oral Submissions of 3 April 2020 (see Mr Hotchkin’s affidavit at MCH14). Those written submissions (and Weatherford’s responsive written submissions of 6 April 2020), were referred to by the arbitrator in the Award (reasons) (pars 60 – 61).
Legal principles bearing upon the present application by Venetian

I pause at this point to re-emphasise that upon the present application I am not concerned over any question about whether or not the arbitrator was right or wrong on his ultimate contractual interpretation of cl 4.6 of the Lease. As I began, I repeat that the present application of Venetian cannot and will not be determined in the manner of any kind of appeal against the Award. It is nothing of the sort. Rather, all I am concerned with is, for the purposes of Venetian’s present invocation of s 34(2)(a)(ii) and (iv) of the CA Act, whether (and without a verbatim transcript) Venetian can make good a serious contention that in the two-day hearing before the learned arbitrator it was, overall, either ‘unable to present its case’, or that the Award of the arbitrator upon issue 1 was made ‘on the basis of an arbitral procedure not in accordance with the Arbitration Agreement’ (see Venetian’s originating summons filed 26 August 2020).
In the end, Venetian’s s 34(2)(a)(ii) and (iv) contentions commonly distil to a similar basket of assembled grievances as articulated in Venetian’s originating summons under the ensuing pars 1, 2 and 3(a) – (j).
Notwithstanding the textual magnitude of what is found there, the essential nature of the underlying grievance looks to be that the learned arbitrator denied Venetian a fair hearing or, in other words, that the arbitral hearing was procedurally unfair to Venetian in some allegedly significant respects.
In Spaseski v Mladenovski [2019] WASC 65 commencing at [49], I have earlier discussed arbitral challenges by reference to observations of Menon CJ in the Singapore Court of Appeal decision AKN v ALC [2015] SGCA 18. In particular, I drew attention there to his Honour’s identification of the central notion of party autonomy and to the consequences of the parties’ choices made towards choosing to proceed by an arbitration. His Honour had observed at [37]:

… The courts do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases …
Menon CJ had referred to a policy of minimal curial intervention towards arbitral proceedings as being a mainstay of the Model Law – the adoption of which locally in this State is, of course, the basis for the significant structural changes that were made to West Australian law by the enactment of the CA Act in 2012, all of which I explained at some length in Spaseski at [49] and following.
In Spaseski at [56], I also cited Menon CJ’s observations concerning the ingenuity of lawyers towards circumventing the constraints against the challenging of an arbitrator’s award by appeal. Here, I need to repeat again from his Honour’s reasons in AKN v ALC at [38] this salient observation:

… That is not to say that the courts can never intervene. However, the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement. It follows that, from the court’s perspective, the parties to an arbitration do not have a right to a ‘correct’ decision from the arbitral tribunal that can be vindicated by the courts. Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process.
At [57] in Spaseski, I also identified article 18 of the Model Law, stipulating a need for equal treatment of parties in arbitration proceedings, expressed in terms that:

The parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party’s case.
At [58] in Spaseski, I emphasised the adjective ‘reasonable’ preceded the noun ‘opportunity’. See also my further observations in The State of Western Australia v Mineralogy Pty Ltd [2020] WASC 58 at [2] and [78] and then in Ivankovic v West Australian Planning Commission [2020] WASC 401 at [212] – [213], [220] and [222] concerning the limited scope for challenges against an arbitral award in the wake of the new regime of the CA Act in this State.
For present circumstances concerning Venetian’s expressed grievance to the effect that it was denied a reasonable opportunity to present its case concerning the true meaning of the critical phrase at issue between the parties within cl 4.6 of the Lease, I would reiterate the further observations of Menon CJ from AKN v ALC. They were made, of course, in relation to attempted appeals ‘dressed up’, essentially, to look like process grievances in order to circumvent a closed gate against appeals otherwise by the Model Law.
I re-emphasise the learned Chief Justice’s observations from [39] of AKN v ALC. His Honour had said:

In the light of their limited role in arbitral proceedings, courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration. A prime example of this would be a challenge based on an alleged breach of natural justice. When examining such a challenge, it is important that the court assess the real nature of the complaint. Among the arguments commonly raised in support of breach of natural justice challenges are these:

(a) that the arbitral tribunal misunderstood the case presented and so did not apply its mind to the actual case of the aggrieved party;

(b) that the arbitral tribunal did not mention the arguments raised by the aggrieved party and so must have failed to consider the latter’s actual case; and

(c) that the arbitral tribunal must have overlooked a part of the aggrieved party’s case because it did not engage with the merits of that part of the latter’s case.

Although such arguments may be commonly raised, more often than not, they do not, in fact, amount to breaches of natural justice.
At [61] of Spaseski, by reference to s 34(2)(b)(ii) of the CA Act, I also cited Croft J’s observations in the Supreme Court of Victoria in Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2016] VSC 326. His Honour had said at [42] – [43]:

As is clear from this passage, Art 18 of the Model Law – and, by implication, s 18 of the Act – does not invoke the principles of natural justice or procedural fairness developed in, for example, administrative law, or other common law principles not developed in the context of the Model Law. Such common law principles undoubtedly flow from the same jurisprudential source as Art 18 of the Model Law in that they are, fundamentally, concerned with fairness, equality and due process. Indeed, there are many circumstances where these principles may overlap with the requirements of [Art 18] and may produce similar outcomes. However, ultimately, the requirement of fairness and equality of treatment of the parties in arbitration is distinct from, and often more straightforward in its application than the position developed by the common law in various contexts.

The relevant test is to be drawn from the words of s 18 of the Act itself and may be stated as follows: ‘Were the parties treated with equality and was each party given a reasonable opportunity of presenting the party’s case?’ As is apparent from the reasons that follow, a failure to recognise and apply this test may result in the adoption of an impermissible judicial approach to the question of whether an objecting party was denied procedural fairness or natural justice in breach of the Act. Like any other provision of the Act which mirrors the Model Law, s 18 must not be viewed ‘through the prism of principles and doctrines not found in the Model Law or the New York Convention, and which may be peculiar to a particular domestic jurisdiction’. The temptation to approach the application of the Act in this way – the temptation of ‘domesticity’ – the temptation of ‘domesticity’ must be resisted in order to promote uniformity between the application of the Act and the application of the Model Law as required by s 2A of the Act and as emphasised by the Court of Appeal in Subway Systems Australia Pty Ltd v Ireland. (footnotes omitted)
Bearing all these considerations in mind, the essential question here is whether Venetian, in a context of a two-day arbitral hearing in circumstances where the participating parties had been offered the opportunity by the learned arbitrator at the end of that hearing to file further written submissions and any extra materials – were treated with equality and whether Venetian overall was afforded a ‘reasonable opportunity’ to present its case. Contextually, it should be kept in mind as well that to the extent that Venetian acted in the past to reduce the square meterage of the input (D) to a level below the full area of its rated or taxed land, Venetian must be expected at the time of so acting to have held a basis for it excising those chosen areas from the denominator input figure (D) in producing its apportionment of outgoings to Weatherford. For Venetian to suggest unfair surprise in it being asked later to explain its land area excision rationale in conducting its derivation to arrive at the level of (D) that was used is, of itself, somewhat curious.
The ultimate issue of contractual interpretation concerning the phase ‘total lettable area’ used in the parties’ lease is a question of law (not fact) and about which there could be only one true meaning. Venetian faces a difficult hurdle in contending that a contended rival interpretation was not accepted by the arbitrator when it has no right to appeal against that determination.
Indeed, despite the many layers of lipstick, the essential nature of Venetian’s grievance is ultimately exposed to being that its advocated rival interpretation of the clause’s true meaning was rejected by the arbitrator. Such a grievance is not a true process grievance. It is a poorly disguised attempted appeal raised against a decision reached against it. Save to say, losing is not a violation of procedural fairness principles.
The arbitrator’s Award and determination

The arbitrator delivered reserved reasons for decision constituting his determination and forming a part of the Award, on 29 June 2020. By that determination over some 34 pages of reasons, the learned arbitrator comprehensively traversed the parties’ rival submissions and positions, over what ultimately was the parties’ basal dispute over the contested true meaning of the cl 4.6 phrase (being issue 1 for the arbitrator) at issue, namely ‘total lettable area’.

Meaning of ‘total lettable area’

The arbitrator’s consideration of this issue of law commences at par 67 of his reasons, referring to a leading local appellate authority discussing the orthodox principles of contractual interpretation, namely, Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 at [42]. The parties were not in any level of dispute over these principles. Hence, that starting platform was perfectly orthodox and appropriate.
It is necessary then to look even more closely at the arbitrator’s reasons underlying his eventual issue 1 determination.
Having considered the parties’ rival positions, the learned arbitrator eventually decided for himself the true meaning of the clause at issue. That was his obligation – irrespective of the parties’ rival stances.
The true meaning question, of course, was not a determination of fact, it was a determination of law. Having cited Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 at [98] the learned arbitrator then proceeded to observe at Award pars 69 – 72:

… Thus, the meaning of clause 4.6 is to be determined by reference to what a reasonable business person would have understood by the phrase “total lettable area of the premises covered by the relevant assessment or charge”, having regard to the background knowledge of the surrounding circumstances….

It is necessary to begin with a consideration of the text of clause 4.6. As noted above, there is no dispute about what is meant by the area of the Premises or the area of the premises covered by the charge. The dispute centres on the meaning of the word lettable in the context of the clause.

In my respectful view, neither of the parties’ constructions sits entirely simply and easily with the word lettable.

The words plainly mean able to be let.
Referring to Weatherford’s submission as to the meaning of those words, the learned arbitrator then said at par 73:

As noted above, Weatherford’s construction requires the word lettable to include undeveloped land. In the usual context of commercial leasing it would be somewhat unusual to refer to undeveloped land as lettable, although it is not necessarily inapt to refer to cleared but undeveloped land as able to be let. In that regard, it may also be observed that the clause does not state immediately lettable or other words to that effect. The word lettable of itself, as a matter of plain language, is capable of encompassing land that is able to be let in due course even if it is not immediately available to be let.

Referring to Venetian’s rival proposal meaning of ‘lettable’, the learned arbitrator observed at par 74:

“… Venetian’s construction requires some embellishment of the text to clarify that it means land that is both developed and available for letting. I appreciate that Venetian contends that lettable of itself necessarily connotes land that is developed and is to be distinguished from ‘usable’, but as a matter of plain English there remains some strain in the proposition that developed land that a lessor resolved not to let (for example because it is to the lessor’s commercial advantage for some reason such as making it available as common area) is not area that is able to be let or capable being let. In addition, as I have observed, there is an element of immediacy in Venetian’s construction that is not mandated by the word lettable of itself. Venetian submitted that lettability is not a concept that speaks of ‘possibility’. But neither does it necessarily require immediacy or inevitability. As a matter of plain language, land may be able to be let even if it is not available to be let now, and even if it is ultimately never let.”

Next, commencing at par 75, the learned arbitrator observed that it was not possible simply from the bare text of cl 4.6 alone to determine its true meaning. In perfectly orthodox fashion, he determined it was necessary to look beyond the bare text to the surrounding circumstances and so to the background and genesis of the Lease, including to a progenitor Heads of Agreement of 10 January 2011 – identifying such matters under par 76(a) through (e) of his reasons.

Part of the facts as identified at the time of the parties’ earlier Heads of Agreement in reference then to Venetian’s lot 9009, were that the proposed leased premises to Weatherford had then constituted only approximately 11% of a much larger area of Venetian’s lot 9009.

On 29 August 2011, the parties entered their Agreement for Lease. The deed provided that Venetian would construct a facility and the parties would enter into a lease.

At par 80, the learned arbitrator identified some mutually known surrounding circumstances contextually prevailing at the time of the Agreement for Lease, noting the proposed leased premises were to be only a small part (approximately 10.3%) of the much larger lot in Venetian’s single ownership (lot 9009). At that time, the balance of lot 9009 had been cleared for potential development, but it ‘remained largely undeveloped’. An (objective) intention towards an eventual creation of an independent (ie, smaller) lot just for the premises leased to Weatherford out of a portion of lot 9009 was also identified (see par 80(f)).

With those surrounding facts then identified, the learned arbitrator returned to the differences as between the parties over their rival meanings as advocated for cl 4.6.
At this point, he observed upon, in effect, the pragmatics of their dispute in monetary terms over a correct apportionment of some of the Lessor’s outgoings exposure to its lessee, Weatherford. He duly observed at par 82:

“The real practical difference between the competing constructions relates to whether clause 4.6 requires Weatherford to contribute to the cost of outgoings for land that remained undeveloped or was common area – even if the common area was some distance from and did not provide any shared facility for the Premises. Having regard to the surrounding circumstances referred to at paragraph 80 above, in my view, it is most unlikely that a reasonable business person would have objectively understood clause 4.6 to require the lessee to bear a significant proportion of the cost of outgoings in respect of the very considerable areas of the lot 9009 that remained undeveloped or for common area that provided no utility to the Premises. This is especially so as the lessee would have no control, or even visibility, of the lot’s future development beyond a vague expectation that it was in the lessor’s interest to develop the balance of the lot in due course. (emphasis in bold)”

At par 83 of his reasons the learned arbitrator acknowledged Venetian’s submission concerning the true meaning of the phrase ‘lettable area’ and that its contention may not sit comfortably with including land that was cleared, but not yet developed. Nevertheless, in evaluating that submission, the learned arbitrator reasoned that Venetian’s preferred construction would expose it to other difficulties which, in the end, were more persuasive considerations (see pars 84 – 86, 89 – 90). The learned arbitrator now reasoned as follows:

[91] For those reasons, I do not accept that objectively construed, the Lease requires Weatherford to bear a proportion (in the circumstances that prevailed upon entry to the Lease, quite a significant proportion) of the outgoings that relate to the whole of the larger lot 9009 or 9010. I also consider that unwarranted ambiguities and potential difficulties arise with Venetian’s proposed construction of the clause.

[92] At the same time, I accept the submission of Venetian that:

(a) the clear choice in clause 4.6 of wording other than simply ‘Land’ as defined; and

(b) the references to ‘common area’ and (in my view, to a lesser extent) ‘complex’ in the Lease;

are strong indicators that clause 4.6 contemplates, as the denominator in the applicable ratio, an area different from, and less than, the ‘Land’.

I pause here to observe that notwithstanding Venetian’s multiple as expressed process grievances, in terms of an alleged unfair denial of a fair opportunity to present key arguments bearing upon its rival construction of cl 4.6, the learned arbitrator had in fact, accepted some important aspects of Venetian’s arguments as a matter of overall contractual construction (as now exposed under par 92). This was to reduce the scope and therefore the numerical area of the denominator input figure (D) to below the total square meterage area of Venetian’s land. This was against the starting rival contention of Weatherford.

That arbitrator’s constructional view as expressed at par 92 could, in the end, consequentially increase the ratio of outgoings to be apportioned to and payable by Weatherford. Success for Venetian in that degree can hardly be complained about.
But the learned arbitrator then proceeded to observe at par 94:

Weatherford responds to that challenge by accepting that the denominator can indeed be less than the Land where there is some regulatory impediment to the leasing of a portion of the larger lot. Venetian counters that no such prospect is evident in the Heads of Agreement, Agreement for Lease, or the Lease and nor was it ever in the contemplation of the parties. (emphasis in bold)

Reference to some ‘regulatory impediment’ so seen in par 94 grounds a key part of the unfair process grievances raised at this hearing by Venetian, in terms of a contended unfair inability to put arguments, or as a denial of fairness to it, by reason of the arbitral procedure followed. But having found that the denominator input figure (D) generated by the term ‘lettable area’ was not the whole area of the Lessor’s land, what the arbitrator was then doing at par 94, quite correctly on my view, was then seeking to identify any genres of areas of Venetian’s land which might be outside that meaning of ‘lettable area’. Any such excluded areas so found would only favour Venetian, not disadvantage it, in the apportionment of outgoings calculation to be conducted. That was not unfair to Venetian.

Areas to be excluded from ‘total lettable area’

Upon the rejection of the ambit denominator area meaning submission (‘lettable area’ being all of Venetian’s land), Weatherford also put a further and alternative submission to the arbitrator, concerning what could be (limited) excludable areas from the denominator input figure (D). Weatherford had, by senior counsel, postulated excising any area in the larger lot of Venetian that was shown to be constrained by some regulatory impediment against that area being lettable. This fall back alternative construction of Weatherford looks (without having a transcript) to have emerged, in effect, during oral arguments of counsel put during the arbitral hearing, as an aspect of the ultimate legal debates over the true meaning of the phrase ‘lettable area’ within cl 4.6.

Contrary again to the procedural unfairness submission of Venetian as was put to this court, I assess there to be nothing unfair or untoward to Venetian in the arbitration over a dispute over the true cl 4.6 interpretation of ‘lettable area’ in the arbitrator determining what areas of land fell within or outside of that criterion. The true meaning of ‘lettable area’ under cl 4.6 was at the very heart of the dispute between the parties.

Even if the submitted fall back construction of Weatherford only emerged during the arbitral hearing, the learned arbitrator at the end of a two day hearing had then afforded the parties an equal and very fair opportunity to make further submissions in writing and as well to tender any further materials that each side thought relevant. The opportunity afforded was generous and more than fair.

Nor on what I have before me (ie, with no transcript) can I ascertain that Venetian, through counsel, had ever sought to object at the hearing when Weatherford’s fall back interpretation had been raised by senior counsel to the arbitral exploration of this aspect of determining the true meaning of ‘lettable area’ within cl 4.6 of the Lease.
Venetian’s grievance as put to this court as to it being taken by surprise, or by not having an opportunity to tender evidence upon or over this aspect of the question of true meaning, is also misplaced. On my assessment, no factual evidence from Venetian could ostensibly bear upon the objective question of interpretation (law) concerning the true meaning of ‘lettable area’ within cl 4.6 of the Lease.

In any event, the learned arbitrator then continued at pars 95 – 96 of his reasons:

In addition, there is force in Venetian’s contention that in principle, if an area is indeed common area, then it is not lettable. Thus, as a matter of textual construction, the expression lettable area in the context of clause 4.6 needs to be understood in light of the fact that if an area is indeed ‘Common Area’ under the Lease, then it cannot be part of the lettable area.

In my view, the references to ‘common area’ and ‘complex’ are readily explicable in a manner that does not mandate the constructional conclusion urged by Venetian.
Evaluating the implications of finding many such common areas across the breadth of a large lot 9009, the learned arbitrator rendered this observation, at par 100:

In addition, the Lease does not refer to any common area that may exist in the whole of lot 9009 to serve any tenancy no matter how remote, or independent from the Premises, it might be. The references to common areas are largely qualified by reference to areas that serve the Premises or are used by the Lessee: clauses: 5.1.8, 5.5.1, 5.6.6. I agree with the submission made orally by counsel for Venetian that whether the common areas serve the Premises as a matter of fact, does not impact upon the proper construction of the Lease. Nevertheless, the references to ‘serve’ and ‘use’ in respect of common areas under the Lease are significant as a matter of proper construction, quite independently of the factual matters emphasised by Weatherford. (emphasis in bold)

[I note in passing that in the context of what is Venetian’s process grievance, as to the fairness of the arbitral hearing by way of an alleged unfair inability to engage with the arbitrator against the meaning ultimately arrived at by the learned arbitrator, that in fact, counsel for Venetian through his submission (as noted under par 100) had very directly engaged then with the arbitrator upon the concept of common areas served by the premises. The Venetian submission seen above in par 100 which was accepted by the learned arbitrator concerning the issue of construction of the Lease did just that].
The learned arbitrator then continued upon the topic of ‘common areas’ as a concept in terms of an area that may or may not present as appropriate to excise from the denominator by its meterage in the ‘Premises’ as ‘lettable’ or not:

[101] Clause 5.5.4 and clause 24 (definition of ‘Outgoings’) refer to common area without reference to service of the premises or use by the Lessee. However, both those clauses refer to the common areas of the complex ‘of which the Premises form part’. That serves to illustrate that a common area in the Lease contemplates a joint facility enjoyed within a ‘complex’ in common with other tenancies.

[102] Perhaps, most importantly, ‘Common Areas’ the subject of a substantive grant of tenure in clause 1, is a defined term in clause 24 set out at paragraph 27 above. The definition refers to areas intended by the lessor ‘to be for the use of lessees of the Land … and are so designated from time to time by the Lessor …’.

[103] In my view, it would be a curious construction of the words ‘for the use of lessees of the Land’ to include reference to a common area for the use of lessees on the lot that were some distance, and entirely separate, from and independent of the Premises and where that area was of no utility to the lessee the subject of the Lease.

[104] Further, a Common Area is an area which the lessor has ‘so designated’. The Shorter Oxford dictionary defines the word designate to mean point out or indicate. Pointing out and indicating, and thus designating, is not a unilateral act that can be done in the absence of some manifestation or communication to another. It is necessary to indicate or point out to someone else. In context, that designation in my view is required to be to the lessee. If Common Areas are the subject of the grant of tenure it seems to me most unlikely that on a proper construction, the lessor’s designation can be to some third party without notice to the lessee of the Lease.

[105] There was no evidence of a designation communicated to Weatherford of any common area that Venetian intended for Weatherford’s use in common with any other tenancy or that would serve the Premises. That is not surprising as lot 9009, at least in respect of a section leased to Weatherford, did not develop in a manner that lent itself to shared facilities, less still a ‘complex’.

The learned arbitrator continued as to a certification process for a common area at par 106:

Moreover, that outcome is reinforced by the terms of clause 4.6 itself which provides for a certification process in respect of both the area numerator and the denominator. It stands to reason that if the lessor has “designated” areas as common area for use by lessees, in order to provide a level of transparency and clarity, the lessor is required to ‘certify’ that area. There was no evidence of any relevant certification. Once again that is unsurprising in the circumstances.

At par 107 the learned arbitrator referred to the aerial plan (which was PL‑15 before him and which I have included as Schedule 1 to these reasons), showing various depicted areas on lot 9009 as common areas. The arbitrator said at par 107:

There was no evidence that Weatherford had been given notice or was even aware of those depictions. Perhaps more significantly, it became apparent that the depictions did not in any event reflect the manner in which the proportion under clause 4.6 had been calculated. Although this was in Weatherford’s favour, that is beside the point. The document rather reinforced the conclusion that there had been no ‘designation’ less still any certification, of common area under the Lease.

Another process grievance of Venetian is that it did not get the opportunity to engage by evidence. There is no substance in this grievance. What the learned arbitrator was doing was interpreting in surrounding context, the text of cl 4.6, which after the phrase ‘total lettable area of the premises’ had manifested the further words ‘as certified by the Lessor’.

It was entirely orthodox and proper for the learned arbitrator to identify and give some function to those surrounding words, in a context of Venetian’s challenged approach to the apportionment of outgoings to its Lessee.
As seen, Venetian’s cl 4.6 challenged approach had been to excise from the denominator figure (D) all areas that it unilaterally attributed as being common areas within its land and which were thereby, it considered, not lettable by it. Those area excisions from (D), mathematically, increased the proportion of Venetian’s outgoings that could be apportioned to and recovered from Weatherford.

At the arbitration hearing Venetian was always, in effect, defending the legitimacy of its outgoings apportionment approach taken by it as regards deducting all common areas from out of the lettable area figure in the ratio’s denominator. Venetian could hardly have been taken by surprise that in that overall context, the true meaning of the term ‘certification’ as it is used by cl 4.6 came under scrutiny as well within that overall context.

At par 108, the arbitrator recorded, dealt with and ultimately rejected a submission by Venetian (made orally by counsel) as to a notion of designation of common areas by reference to planning approval documents that duly identified car parks and public toilets. Likewise, a submission was put by Venetian to the effect that outgoings claim invoices as were issued to Weatherford by Venetian could in themselves constitute a sufficient lessor’s certification for the purposes of meeting cl 4.6. Such certification by invoice arguments were made, considered, but ultimately rejected by the learned arbitrator as matters of true construction of the term ‘certification’ in cl 4.6. There was a direct engagement upon this aspect of the dispute for Venetian through its counsel at the arbitral hearing at the time. There was no element of surprise or forensic prejudice. The issue was fought upon and lost fairly and squarely at the hearing.

Again, the question on the present application is not whether the learned arbitrator was right or wrong over that end determination. That issue is not up for any level of review in this court. There is no appeal.

The only issue is whether there was some ascertainable process deficiency by an absence of a fair hearing afforded to Venetian by it being denied a reasonable opportunity to engage with the overall process of interpretive evaluation concerning the true meaning of cl 4.6 of the Lease.

Clearly, as is recorded in par 108, Venetian did at the hearing actively engage with the ‘certification’ aspect of the controversy under cl 4.6 and the true meaning issues concerning the designation of common areas. Venetian, through counsel, made submissions to that end. Ultimately, some of Venetian’s submissions were not accepted. Losing does not equate to procedural unfairness.

Overall, I can discern (again with no transcript) no process or procedural failure adverse to Venetian. Venetian was not denied the reasonable opportunity to engage over these aspects of the controversy.
Paragraph 109 towards common areas under the learned arbitrator’s reasons displays that Venetian lost at two levels – as a matter of construction and then further, as a determination of fact. Paragraph 109 reads:

It follows that even if I am wrong in my construction of clause 4.6 such that any common area over the larger lot is to be omitted from the calculation of the denominator, no such common areas were designated and certified in accordance with the requirements of the Lease. (emphasis in bold)

At par 111 the learned arbitrator addressed a further submission by the parties, particularly Venetian, at the arbitration hearing concerning the force of a decision of the West Australian Court of Appeal. This was the decision in Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2011] WASCA 49. That was an appeal concerning the determination of the proportion of outgoings payable by lessees rendered in the particular circumstances of a different lease with different textual provisions. The learned arbitrator plainly evaluated the implications of this case authority. There was no process deficiency or unfairness in that approach.

Conclusion on construction of cl 4.6

Commencing at par 112, the learned arbitrator expressed his final constructional conclusions by reference to what he gave then as a ‘simple example’.
At this point he explained, by reference to the parties’ rival contentions, how as a matter of the true meaning of cl 4.6, the applicable ratio for a proper determination of the payment of outgoings ( ) was to be arrived at: see pars 113 – 117. Having explained the example and the results that would arise under Venetian’s and Weatherford’s rival constructions, the learned arbitrator concluded at par 118:

Under Venetian’s construction, the lessee would be making a significant contribution to the undeveloped area and common area that service other tenancies but not its tenancy. Assuming, common terms in the other leases the balance would be paid by the other lessees and the lessor would pay nothing for the outgoings associated with the undeveloped and unleased land.

The learned arbitrator, in terms of the as required task towards construing a commercial lease instrument and affording it a commercially sensible interpretation, was perfectly entitled to render that observation. As I will explain, that observation and the process under which it was arrived at do not manifest any process deficiency or unfairness capable of being legitimately challenged under the CA Act in this court where, again, there is no appeal.

Arbitrator’s ultimate conclusion on issue 1

Ultimately, on issue one 1, the arbitrator found:

[119] By reason of the matters set out above, in my view, the proper apportionment of Outgoings for which Weatherford is liable is determined under clause 4.6 on the following basis:

(a) the numerator is 31,600;

(b) the denominator is the whole area of the larger lot (lot 9009, 9010 or 9011 as the case may be), less:

(i) any area in respect of which there is a regulatory prohibition preventing it from being lettable. There was not evidence of any such area, and so I determine that this is not relevant to the calculation;

(ii) any Common Area designated by Venetian by overt manifest conduct communication to Weatherford of an area that served or was for the use of the Premises, and certified by Venetian for the purposes of clause 4.6. There was no evidence of any such area, and so I determine this is not relevant to the calculation.

[120] It is common cause that Weatherford has paid the Outgoings on the basis of Venetian’s construction. It has therefore overpaid.

[121] I therefore determine in accordance with the Agreed Issues for Determination document, that to the extent of the overpayment, Weatherford is entitled to deduct that amount from future payment to be made by Weatherford to Venetian under the Lease.

That concluded the learned arbitrator’s reasoning upon issue 1.
Venetian’s specific grievance with the concept of ‘regulatory prohibition’

Venetian’s primary challenge, by which it alleges it was unfairly unable to present its arbitral case, is that the concept of a ‘regulatory prohibition’ (that phrase as seen used in Award par 119(b)(i)) only emerged, at earliest, at the arbitral hearing.
Given the arbitration hearing was not transcribed, Venetian accepts it cannot be known with certainty how the concept of a ‘regulatory prohibition’ was first raised. It is said that the concept was either first raised by senior counsel for Weatherford during the arbitral hearing, or alternatively appeared for the first time in the Award. The uncertainty over this is unsatisfactory in this court.

A significant emphasis was placed on the fact that none of the pleadings exchanged prior to the hearing contained reference to any such concept. Venetian says that Weatherford’s statement of claim in the arbitration does not mention a ‘regulatory prohibition’ in its pleaded construction of cl 4.6. Nor, it is put, is there any basis to give rise to such an idea from the pleaded construction. Venetian argues then that ‘pleadings … are critical for fairly governing the conduct of a matter’ (Venetian’s written submissions dated 30 November 2020, par 25). Venetian heavily emphasises a fundamental rule of pleadings that the party who pleads a proposition is the party that is required to make good that proposition to the legal burden, including carrying any evidential burden.

An allied strand of Venetian’s expressed process grievance is that there was no basis for it to have anticipated from the text of the Lease (in cl 4.6 or otherwise) that a concept of ‘regulatory prohibition’ would arise, nor to consider and argue what it means. The implication of this was said by Venetian to have had the following impact (written submissions, par 26):

The significance of the belated idea of a ‘regulatory prohibition’ in the fair determination of the matter, when it was not a pleaded construction for clause 4.6 in the Defendant’s case, arises because there is no basis in the text of clause 4.6, or otherwise by reference to any other provisions in the Lease, that such a concept should properly have been anticipated by the Plaintiff, and if so, what it actually meant.

The significance of that concern is made evident by the Arbitrator’s finding that there was ‘no evidence’ of a regulatory prohibition, when:

(a) the only relevant evidence could have been of a ‘regulatory prohibition’ prior to the date of the Lease, and the Plaintiff’s point in an attempt to engage with the idea was that the absence of such evidence was a point in favour of the Plaintiff, not against it; and

(b) if the finding of there being ‘no evidence’ could only have been in respect of a ‘regulatory prohibition’ after the date of the Lease, then it is not capable in point of law of assisting in the proper construction of clause 4.6 of the Lease, and could not reasonably be anticipated as a possible finding by the Arbitrator.

Venetian says that if the arbitrator was impressed by the lack of evidence post-Lease execution, then that, and the fact that there was a lack of evidence would be used against it in a cl 4.6 construction, should have been put to Venetian.

Venetian argues that the onus that should have been on Weatherford to prove what the concept of a ‘regulatory prohibition’ meant, came to be shifted towards Venetian – in effect, to disprove the regulatory prohibition. Much is made of this, particularly from an evidentiary standpoint. Venetian says that as this point was not pleaded, it was not able to anticipate it would need to call evidence as to whether the phrase ‘regulatory prohibition’ was known at the time of the Lease, which would then go to the construction of cl 4.6.

Further, Venetian says that the reference to an ‘Easement’ in Weatherford’s arbitral pleading is relevant to the unfairness of the conduct of the arbitration, in that there was evidence of a ‘regulatory prohibition’ because of the terms of the Western Power easement, and the pleaded alternative of the easement was not engaged with by the arbitrator.

Venetian contends (written submissions, par 32):

The reason that the pleaded reference by the Defendant to the ‘Easement’ in paragraph 16 of the Defendant’s Statement of Claim is relevant to the unfairness of the conduct of the Arbitration is that, if the idea of a ‘regulatory prohibition’ relates to any form of prohibition asserted by any public authority (which is not addressed at all by the Arbitrator), then:

(a) there was evidence of such a ‘regulatory prohibition’ before the Arbitrator, because the terms of the Easement to Western Power pleaded at paragraph 16 of its Statement of Claim prohibited any development in the Easement area without its consent; and

(b) the existence of the Easement was the pleaded alternative to the Defendant’s case, yet the Arbitrator did not engage at all with that aspect of the Defendant’s alternative pleaded case, relying instead on an undeveloped idea which had not been pleaded or could otherwise have reasonably been anticipated in a way which differed from the express prohibition contained in the Western Power Easement Deed. (footnotes omitted)

Venetian says further that the shift of the legal and evidential burden to it, from Weatherford, particularly a departure from Weatherford’s pleading, constitutes failure to accord procedural fairness on the part of the arbitrator.
Weatherford by its submissions rejects all these contentions. It says, and emphasises, that at no point did Venetian ever object to the issue of regulatory prohibitions being raised – either the time the submission was made prior to, during or after the arbitration hearing.

Weatherford says that even if the arbitrator made findings of fact without probative evidence, which it denies, that would only trigger a review if such a finding results in real unfairness or practical injustice. Given Venetian did not raise issues as to evidentiary burden at the time of the arbitration hearing, nor in its subsequent written submissions, Weatherford says that no unfairness or injustice was suffered by Venetian.

As to the allegation that the burden of proof was shifted, Weatherford says that such an inquiry in truth, goes to challenge the merits of the arbitrator’s findings, and thus, in substance, is really an appeal against a finding of the award. It says Venetian’s ground is ‘dressed up’ as a breach of the arbitration procedure – an exercise the court must avoid engaging in (Weatherford’s written submissions dated 22 December 2020, par 52). Weatherford says that court should also avoid ‘bailing out’ Venetian for its strategic choice not to object to, nor to call evidence at the time the issue of a regulatory prohibition was raised. This, Weatherford says, was an intentional forensic decision by Venetian which it now obviously regrets, but that none of this is to the immediate point.

Finally, as to the argument that the Western Power easement constituted a ‘regulatory prohibition’ and was not a part of Weatherford’s alternate construction which it abandoned, Weatherford says the evidence shows that its alternate construction of cl 4.6 fell away, when Venetian amended its defence prior to the arbitration hearing. Again, this is said to be a strategic choice on the part of Venetian. Further, it is said that even if the arbitrator did not deal with or determine an alternate construction of Weatherford, it is difficult to see how that could lead to an unfairness suffered by Venetian (Weatherford’s written submissions dated 22 December 2020, par 57).
Venetian’s grievance with the concept of common areas

Whilst there is overlap between Venetian’s complaints about ‘regulatory prohibition’ and what it says regarding common areas, the ‘common areas’ issue was always squarely in play at the time of the arbitration hearing.

Venetian says that it presented and fought a case by reference to the terms of the Lease, and the context in which ‘common areas’ might arise from other terms of the Lease. However, it complains the arbitrator dealt with a point of the application of cl 4.6, rather than engaging in this construction of the clause. The application of cl 4.6 is said to not arise in any of the pleadings or submissions.

A particular grievance emphasis by Venetian is against the arbitrator making findings of fact as to the ‘certification’ or designation of common areas, or the factual lack thereof. Venetian says that the arbitrator conflated the task of construing cl 4.6 with a factual undertaking, as to whether the common areas had been designated or certified. If Venetian was to have been treated fairly and have reasonably anticipated that finding, it is said that Weatherford should have pleaded this in its arbitral reply pleading. This, according to Venetian, was not done. According to Venetian, the primary grievance over this not occurring is that the arbitrator should have told it (Venetian) that he would, as Venetian submits, depart from orthodox principles of construction by referring to evidence or apply the construction of ‘common areas’ as a figure to be excluded from the ‘lettable area’ calculation.

Venetian says that it suffered unfairness in presenting its case by the arbitrator departing from the pleaded case of the parties. This, according to Venetian, was because the arbitrator’s finding that Venetian, as Lessor, was ‘required’ to certify the common areas (Award par 106) had not arisen or emerged from the pleadings or oral submissions, and was inconsistent with the text of the Lease which only ’empowers’ Venetian, rather than ‘compels’ it.

A final point Venetian makes as to the alleged unfairness it suffered in process was that without warning from the arbitrator, it was unable to put in evidence about how ‘common areas’ are created within the property industry. I return to this argument later.

Weatherford, in reply submits that Venetian has misapprehended what was ‘in the ring’ before the arbitrator, whether by the pleadings, or otherwise. By this, Weatherford is saying that the issue of common areas was in play before the arbitration hearing – in particular, in Venetian’s opening submissions. Weatherford also says that over the time before the hearing the issue of common areas was a relevant issue. Not only that, but Weatherford says that from the Award it is clear that common areas were, in fact, in the arbitral arena (identifying Award pars 62 and 108).

Weatherford submits that arguments of unfairness in process as to the issue of common areas are without merit. First, it says that the submission that Venetian should have been put on notice about the application of common areas as a disputed issue, is wrong. Weatherford says that the requirement for the designation of common areas in the text of the Lease itself (cl 24) was central to Venetian’s case and was addressed by Venetian at the hearing – both orally and in writing.

Second, Weatherford says that Venetian had an opportunity to present evidence as to how the common areas are or were designated to tenants under any Lease in the relevant lot 9009, however, it made an election to not adduce any such evidence.

Finally, as to the argument that Venetian was denied an opportunity to dissuade the arbitrator of a view he ultimately reached, Weatherford says this is not to the point. Relying on Amasya at [55], it is said that the fact that the arbitrator might have arrived a different conclusion if the arbitration played out differently, is an irrelevant consideration.

Process unfairness: common areas

I turn to the aspect of the procedural grievance contention by Venetian that it was denied an opportunity by the arbitrator to lead evidence in support of its rival construction of the clause.

Venetian contends that it could have led expert evidence if it had been given proper notice of the ultimate construction conclusion reached by the learned arbitrator about how common areas in a lease are designated. To that end, an affidavit of Paul Edward Testar sworn 25 August 2020 was sought to be relied upon by Venetian at the present application. Mr Testar says in his affidavit that he is employed as the commercial property manager of the Caratti Group of companies (of which Venetian is a member) and has 30 years’ experience in the development, sale, leasing and management of commercial real estate.

Mr Testar commenced working for the Caratti Group in September 2013. His work involves management of its property portfolio, including about 50 real property assets across Western Australia at various metropolitan and country locations.
The expert evidence that Venetian complains it was denied the opportunity to lead, looks to be found as expressed under pars 11 through 16 of Mr Testar’s affidavit. This evidence is directed towards common areas – the concept that Mr Testar at par 10 says that he is very familiar with in the context of his commercial leasing experience.

At par 11 Mr Testar explains what he believes the notion of common areas normally include. He relates that they are typically shared by tenants in a complex and their customers, visitors and service contractors. But none of that looks to be particularly controversial or helpful. In my assessment, this evidence does not in any sense carry a potential impact concerning the present controversy over a process grievance.

At par 12, Mr Testar seeks to contend that in his experience that ‘Common area is rarely identified on a plan in a lease …’. However, I do not accept that Mr Testar is qualified to express such sweeping views about the contents of written leases generally, or their plans generally. This is obviously a diverse subject matter which must be almost infinite in its potential dimensions.

Likewise Mr Testar’s further observations under par 13 as to the size or measurement of common areas in a complex as being set out in a lease document. This proposed evidence from Mr Testar about what ‘lease documents’ generally provide towards common areas and their designations is equally, in my view, too broad. It is sweeping, generalised, unhelpful, of no weight and ultimately inadmissible.

Even more sweeping generalised observations by Mr Testar at his par 14 concerning tenancy complexes being subject to ‘ongoing development’ are so trite in terms of such complexes changing from time to time, as to be facile. They are unhelpful.

At par 15, Mr Testar purports to speak of a so-called practice of all landlords as being not to designate common areas ‘by specifically notifying each and every tenant during the term of each and every lease of any change to a common area’. Again in my view, such generalised attempted evidence was never admissible. And even if it were admitted, it could not possibly relevantly bear towards the key issue of construction confronting the learned arbitrator during the present hearing.
Likewise unhelpful is par 16, by Mr Testar’s reference to a designation of common areas by painted lines depicting car parking bays and the demarcation directing traffic in common driveways, etc. That purported expression of an expert opinion is again, simply too broad and ultimately, yet again, is wholly irrelevant to the construction exercise required to be undertaken by the learned arbitrator in reference to the phrase ‘lettable area’, used within cl 4.6 of the Lease.

Determination on present application under s 34(2) of the CA Act

The present application, as expressed, seeks to set aside the arbitral determination by a resort to s 34(2)(a)(ii) and (iv) of the CA Act, on a basis that Venetian was not able to ‘present its case’ to the arbitrator, or that the arbitral procedure was somehow unfair, by denying Venetian a reasonable opportunity to present its case. In the end, the contentions are untenable.

Venetian received an entirely fair two-day arbitral hearing. The process followed by the learned arbitrator, on my assessment, was perfectly fair. I repeat that an opportunity for the arbitrating parties to file even further materials given at the conclusion of two days of arbitral hearing, was afforded. The indulgence provided a more than fair opportunity to address any issues as regards further legal submissions or extra documentary expert evidence that Venetian may have wished to have further submitted, arising in the wake of the two days of hearing. But no extra evidence was sought to be added to Venetian’s case. Yet there is a process grievance raised to this court. That is truly breathtaking in its audacity.
Nor did Venetian ever complain to the arbitrator about being denied a fair or reasonable opportunity to present any part of its case at the hearing or afterwards.

An impression I hold, reading only the limited materials put before me (there being no transcript of the two days of arbitral hearing) is that the true underlying grievance Venetian complains over does not really concern the end meaning conclusion reached by the learned arbitrator. Rather, Venetian’s gripe is more against the arbitrator’s conclusion as to ‘regulatory prohibition’ – namely that ‘there was not evidence of any such area, and so I determine this is not relevant to the calculation’ (Award par 119(b)(i) and (ii)).

The construction conclusion of the learned arbitrator allowing Venetian the theoretical scope to reduce the denominator’s fractional number down to below the actual whole area of the larger lot of land owned by Venetian was actually a constructional conclusion reached in Venetian’s favour. A consequence would thereby, as a matter of mathematics theoretically, ultimately increase the proportion of the outgoings to be payable by Weatherford to its Lessor.

Within this overall framework it looks that the numerical areas of its land that Venetian in fact decided to excise against the denominator input figure (D) had included the subject Western Power easement area. The problem for Venetian at the hearing was that merely proving a bare existence of that easement alone was not enough for it to prove that this same easement area was thereby ‘not lettable’ by Venetian. That was a forensic failure on its part – no-one else’s.

Depending on how Venetian had run its arbitral case, it may have been open then for it to have led evidence upon that pragmatic factual utilisation question – in terms of the uses of the Western Power easement area of its land as not being lettable and so, for that area to be excisable from the denominator input figure (D) used in the fraction. But that was a question of fact over which the parties might then have been at odds at the hearing.

Venetian did not run a non-utilisation of the easement area case before the arbitrator at the hearing that way, as best I can ascertain from what is before me. It only tendered the easement document, thinking (presumably) that was enough. It was not.

At the time Venetian’s contention looked to be that a mere existence of a registered easement favouring Western Power had thereby prevented this part of its land from being developed and so, therefore, that the easement area affected was not lettable and so, further, that its area was excisable from the D figure.

That argument was ultimately not accepted at the hearing. But that is not a process grievance. That is just a badly run case.
Nor do I assess in the submissions of Venetian upon the present application complaining of a process failure any suggestion that Venetian might have tendered some tangible negative evidence – in terms of a (non) use and negative letting potential of the area of the Western Power registered easement.

Indeed, the terms of the easement itself, found within Mr Hotchkin’s affidavit at MCH13, explicitly envisage the easement area as retaining some utility for farming purposes (see page 256).

The point is that the true construction of cl 4.6 of the Lease was not really the problem for Venetian with the easement area. The true forensic problem was a lack of any evidence led by Venetian to engage with the interpretation as was reached by the learned arbitrator – which, as seen, actually favoured Venetian had it led the required factual evidence to a non‑utilisation end (if such evidence was ever available, of course).

Likewise, in respect of the arbitrator’s common areas conclusion and observation at par 119(b)(ii) to the effect that there was no evidence of a common area communicated to Weatherford ‘of an area that served or was for the use of the Premises … ‘. There was again a more than sufficient opportunity to engage over that issue at the hearing afforded to Venetian had it chosen to take it up. It did not.


In the end, on what is put before this court, it simply cannot be reliably shown that Venetian suffered a disadvantage by reason of being denied a reasonable opportunity to present its case, or that the arbitral hearing process overall was unfair to it. Venetian must accept that there is no appeal against the arbitrator’s Award and come to terms with that adverse result.
Consequently, the application advanced under Venetian’s originating summons of 26 August 2020 fails to demonstrate any basis for the court to intervene against the Award by under s 34(2)(a)(ii) or (iv) of the CA Act and is dismissed upon publication of these reasons.

I reserve other questions, including as to costs orders.

I will hear the parties as to the precise terms of an appropriate costs order in due course, if that is required.

Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd [2021] QSC 75

Supreme Court of Queensland


Case Name: Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd
[2021] QSC 75
Medium Neutral Citation: [2021] QSC 75
Hearing Date(s): 12 February 2021
Date of Orders: 19 April 2021
Decision Date: 19 April 2021
Before: Henry J
  1. The parties are referred to arbitration pursuant to s 8(1) Commercial Arbitration Act 2013 (Qld).
  2. Cairns Supreme Court proceeding 571/20 is stayed.
  3. The court will agree to hear the parties as to costs, if costs have not been agreed by 9.15am 28 April 2021 (leave given for out of town parties to appear by telephone or video-link).
Catchwords: ARBITRATION – ARBITRATION AGREEMENT – DEFINITIONS AND FORM OF ARBITRATION AGREEMENT – ARBITRATION AGREEMENT AS GROUND FOR STAY OF COURT PROCEEDINGS – where the applicant defendant engaged the plaintiff respondent as sub-contractor for roadwork construction – where the plaintiff respondent complains it was required to complete work and incur associated costs beyond that contemplated by the original agreement – where the plaintiff respondent alleges it is owed money for this additional work – where the plaintiff respondent says the applicant defendant should be estopped by convention from denying that the plaintiff respondent is entitled to reasonable additional remuneration or damages or compensation pursuant to ss 236, 237 Australian Consumer Law for loss suffered as a result of the applicant defendant’s alleged unconscionable conduct – where the plaintiff respondent requests an order in relation to the return of a bank guarantee – where the applicant defendant relies upon an arbitration clause in the contract to refer the parties to arbitration and permanently stay the proceeding – where the plaintiff respondent contends the matter ought not be referred to arbitration as its claim does not rely on the contract and rather arises by operation of law outside the contract – whether there is an “arbitration agreement” as per s 8(1) Commercial Arbitration Act 2013 (Qld) – whether the application has been “brought in a matter which is the subject of the arbitration agreement” – whether the agreement is “null and void, inoperative or incapable of being performed” – whether the matter should be referred to arbitration – whether the proceeding should be stayed.
Legislation Cited: Australian Consumer Law (Cth), s 20, s 21, s 236, s 237

Commercial Arbitration Act 2013 (Qld), s 7, s 8

Cases Cited: Astro Vencedor SA v Mabanaft [1971] 2 QB 588, applied.


Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99, cited.


Commandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, distinguished.


CPB Contractors Pty Ltd v Celsus Pty Ltd (2017) 353 ALR 84, applied.


Duncombe v Porter (1953) 90 CLR 295, applied.


Francis Travel v Virgin Atlantic Airways (1996) 39 NSWLR 160, applied.


Hi-Fert v Kiukiang Carriers (1998) 90 FCR 1, distinguished.


IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, explained.


Incitec Ltd v Alkimos Shipping Corporation [2004] FCA 698, cited.


Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196, distinguished.


McCann v Switzerland Insurance (2000) 203 CLR 579, cited.


Methanex Motonui Ltd v Spellman [2004] 1 NZLR 95; [2004] 3 NZLR 454, cited.


Re Hohenzollern Actien Gesellschaft and City of London Contract Corp (1886) 54 LT 596, applied.


Roose Industries Ltd v Ready Mixed Concrete Ltd [1974] 2 NZLR 246, explained.


TCL Air Conditioner v Federal Court (2013) 251 CLR 533, applied.


Westfield Management v AMP Capital (2012) 247 CLR 129, applied.


Woolf v Collis Removal Service [1948] 1 KB 11, applied.


Yeshiva Properties No 1 Pty Ltd v Lubavitch Magal Pty Ltd [2003] NSWSC 615, distinguished.

Texts Cited: NIL
Category: TRIAL


ABN 18 102 557 175






ABN 75 124 700 385


Representation: COUNSEL:
M Jonsson QC for the applicant defendant
M Hindman QC for the plaintiff respondentSOLICITORS:
O’Connor Law for the applicant
Clayton Utz for the respondent
File Number(s): SC No 571 of 2020
Publication Restriction: NIL
Decision under appeal: Referred to Arbitral Hearing





The applicant defendant, Civil Mining & Construction Pty Ltd (CMC), was contracted by the Queensland Department of Transport and Main Roads (TMR) as principal for roadworks construction (the project).  CMC sought the aid of a civil engineering roadworks sub-contractor to perform some of the works.

CMC entered into a written sub-contract (the contract) with the plaintiff respondent, Cheshire Contractors Pty Ltd (Cheshire).  A dispute has arisen between CMC and Cheshire, which alleges it is owed money by CMC in connection with the works Cheshire performed for CMC.  Cheshire filed a claim against CMC in this court seeking money owing in the sum of $1,393,616.80 plus GST, interest thereon and the return of a bank guarantee.

Rather than file a defence, CMC countered with the present application which relies upon an arbitration clause in the contract to refer the parties to arbitration and permanently stay the proceeding.

Cheshire contends the matter ought not be referred to arbitration for reasons including that its claim does not rely on the contract and rather arises by operation of law outside the contract.



In carrying out the subcontracted works, Cheshire was obliged by the contract to comply with the performance requirements of TMR’s specifications.  The specifications required construction under the contract to use only materials that complied with the material specified therein, and not use any material that did not comply with the specifications (out of spec material).  The specifications of material anticipated to be found in the earth in the vicinity of works in a project of this kind will not always meet expectations, resulting in greater than anticipated expense.

During the performance of Cheshire’s work, out of spec material was encountered in at least 12 locations on the site of the contract works. On eleven occasions CMC allegedly gave Cheshire a direction on how to integrate or otherwise deal with the out of spec material.

Cheshire notified CMC of its intention to make a claim arising from the use of out of spec material.  CMC requested Cheshire provide it with a letter upon which CMC could base a latent condition claim on TMR for the use of out of spec material.  Cheshire complied.  This is the genesis of Cheshire’s current complaint, in effect, that CMC in serving its own interests procured Cheshire to make a claim for remuneration on a basis different than that contemplated by the contract.  Following receipt of that letter, CMC stated to Cheshire that the letter would not suffice as a variation claim and suggested amendments to the document.  Cheshire amended its out of spec claim letter accordingly and again submitted it to CMC.

Cheshire contends the parties consensually departed from the contract by agreeing that they would progress their dealings on the mutual assumption and convention that the latent conditions encountered by Cheshire in the course of excavation could not have been anticipated by them at the time of tender for the contract works.  It was also agreed, allegedly, that the requirement to complete road excavation and road embankment work operations with out of spec material would need to be reasonably remunerated additionally to the remuneration already allowed under the contract in respect of excavation and embankment works.  Further, it was allegedly agreed that CMC would make payment to Cheshire for its work involving use of out of spec material on a basis consistent with any payment it received from TMR for its claim to be made on TMR.

In March 2016 CMC made a claim on TMR for use of out of spec material (CMC’s Latent Condition Claim), seeking payment for it.   In April of 2016, CMC again requested Cheshire to provide further information and Cheshire made a claim on CMC for payment of Cheshire’s out of spec claim.

During July and August 2016, CMC and TMR engaged in dispute resolution meetings in regard to CMC’s Latent Condition Claim. In the course of those meetings CMC and TMR jointly appointed a third-party engineer to independently assess and value CMC’s Latent Condition Claim.

CMC received an approval and payment from TMR for CMC’s Latent Condition Claim under the Head Contract, (the TMR Payment). This was the amount of $2,507,975.00 as certified for payment for two of the applicant’s progress payments and the amount of $2,597,462.00 approved as ‘variations’ – being $1,643,975.00 for ‘Latent Conditions’ and $953,667.00 for ‘VVA-092 Latent Condition Claim’.

On about 9 November 2016 Cheshire issued a final progress claim for the amount of Cheshire’s out of spec claim.  By letter of 23 November 2016, CMC responded saying the amount it proposed to pay was $0.00.  The letter explained in denying Cheshire’s claim “for a purported latent condition” it relied upon clauses 2.1.1 and 13 of the contract’s general conditions.  Clause 13 imposed temporal and other requirements for the submission of claims.  Clause 2.1.1 provided:


“2.1.1       The Subcontractor agrees and accepts the obligation to fully inform itself on site conditions and all documents furnished by CMC, prior to it tendering for the Subcontract Works and to fully satisfy itself regarding all the conditions, risks, contingencies and other circumstances which might affect its performance of the Subcontract Works. In particular, the Subcontractor shall accept the obligation to thoroughly investigate all matters regarding the relevant site, surface and sub-surface conditions. No increase in the Subcontract Sum will be allowed for the Subcontractor’s failure to ensure that it is fully informed regarding all the circumstances relating to its performance of the Subcontract Works. Also CMC shall not be liable for any additional cost which may be incurred by the Subcontractor in the event that different site, surface and sub-surface conditions are experienced by the Subcontractor to those which may be shown in the Subcontract documents provided by CMC, the information in such documents being provided by CMC for indicative purposes only.” (emphasis added)

In short, CMC’s position was that Cheshire’s claim for payment did not conform with the contract’s temporal requirements and money was not payable under the terms of the contract because Cheshire assumed the risk of encountering out of spec material.

In February 2020 Cheshire gave notice of dispute seeking referral to mediation pursuant to clause 12 of the contract which in part provides:

“12.  Disputes


12.1         Early resolution


It is mandatory that the Parties comply with this clause before a dispute or difference is referred to mediation.  Disputes or differences arising between the Parties shall be negotiated between the Parties with the bona fide intention of resolution without unreasonable delay. …


12.3         Settlement of unresolved disputes or differences


12.3.1       If disputes or differences arising between the Parties cannot be resolved pursuant to clause 12.1 then either party shall refer such disputes or differences to a CMC Director and in the case of the Subcontractor means (sic) a Company Director or Partner of the Subcontractor of the respective Parties in writing.  Within 7 days of receipt of the written referral of such disputes or differences to Company Directors, Directors shall meet or otherwise confer to hold good faith discussions in an effort to resolve the disputes or differences by amicable agreement.


12.3.2       Should the parties fail to reach agreement in accordance with clause 12.3.1 the Parties agree that the disputes or differences shall within 14 days from the receipt of the written referral pursuant to clause 12.3.1 be referred to mediation.  Either party may refer the dispute or difference to ACDC in writing requesting the appointment of a mediator.  The mediation shall be conducted in accordance with the Australian Commercial Dispute Centre (“ACDC”) mediation Rules and Procedures, and the Chairperson of the ACDC or the Chairperson’s nominee will select the mediator and determine the mediator’s remuneration.  The Parties agree that the costs of any mediator appointed shall be borne equally between the Parties.” (emphasis added)


It will be relevant later in these reasons that where clause 12 refers to “disputes or differences” such references are to the description at the outset of clause 12.3.1, namely “disputes or differences arising between the Parties”.

A mediation proceeded on 4 August 2020 but was unsuccessful.  Cheshire did not further pursue the dispute resolution process.

Cheshire complains it was required to complete work and incur associated costs beyond that contemplated by the originally contracted Subcontract Works. By making and pursuing what was in effect CMC’s out of spec claim, Cheshire alleges it lost the opportunity to make an alternative claim for damages or remuneration under and in compliance with the contract. Cheshire argues CMC is, or ought to be, estopped by convention from denying that Cheshire is entitled to reasonable additional remuneration in respect of excavation and embankment works. Cheshire claims it is entitled to payment by CMC in the sum of $1,393,616.80 plus GST as reasonable remuneration for works done by the respondent or alternatively, the same sum as damages or compensation pursuant to ss 236, 237 Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010 (Cth)) for loss suffered as a result of CMC’s allegedly unconscionable conduct.

Further, Cheshire seeks an order that CMC return a bank guarantee issued by Westpac Banking Corporation in the sum of $48,430.41 or that the applicant notifies Westpac Banking Corporation that Cheshire’s bank guarantee has been lost and that the applicant no longer has any interest in that guarantee.  Cheshire provided the guarantee as security in satisfaction of clause 7.7.1 of the contract.  The defects liability period under the contract expired on 21 October 2016.  By a letter dated 9 November 2016, Cheshire requested CMC to return the remaining security.  It is alleged CMC has not made a call on the bank guarantee, has failed or refused to release to Cheshire the bank guarantee and failed or refused to confirm that the bank guarantee has been lost but is no longer required.

The ensuing reasons will, for ease of explanation, consider whether the present application should succeed on the premise that the claim is for relief based on estoppel by convention or statutory unconscionable conduct and does not seek the additional order about the bank guarantee.  Having done so the reasons will then return to the fact the claim also seeks the order about the bank guarantee and consider whether that makes a difference to the outcome otherwise of the application.

The legislated obligation to refer to arbitration


In bringing its application to refer the parties to arbitration and stay the proceeding, CMC contends it and Cheshire are parties to an arbitration agreement under the contract and the matters the subject of the proceeding fall within the ambit of that arbitration agreement.

If that contention is correct the court is obliged to refer the parties to arbitration pursuant to s 8(1) Commercial Arbitration Act 2013 (Qld) (the Act) which provides:

“8 Arbitration agreement and substantive claim before court


(1)   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.” (emphasis added)


CMC’s application has met the timeframe stipulated by s 8(1) so the determinative questions arising from the remaining elements of s 8(1) are:


(a)          Is there an “arbitration agreement”?


(b)          Is CMC’s Supreme Court claim “brought in a matter which is the subject of the arbitration agreement”?


(c)          Should this court find the agreement “null and void, inoperative or incapable of being performed”?


As will become apparent from reasons below, the answers to those questions are, respectively, yes, yes and no.

Definition of an arbitration agreement


Section 7 of the Act relevantly defines an arbitration agreement as follows:

“7 Definition and form of arbitration agreement


(1)     An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.


(2)     An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. …” (emphasis added)


The term “defined legal relationship”, used in s 7(1), is not defined by the Act.

Arbitration clause 12.3.3


The purported arbitration agreement is here said to be in the form of clause 12.3.3 in the contract.  It falls within clause 12 about dispute resolution, earlier passages of which are quoted above.  Following the mediation clause at 12.3.2, clause 12.3.3 provides:


“12.3.3      If the disputes or differences have not been settled within six (6) weeks (or such other period as may be agreed to in writing between the parties) after the appointment of the mediator, the disputes or differences shall be referred to arbitration by either Party in accordance with and subject to The Institute of Arbitrators and Mediators Australia (Queensland Chapter), Rules for the Conduct of Commercial Arbitrations. In any arbitration both Parties shall be entitled to be legally represented. The parties shall appoint an arbitrator within 7 days of referral to arbitration. If the Parties fail to agree on the identity of the arbitrator, the Parties agree that the President, for the time being of the Institute of Arbitrators and Mediators Australia, is on written request from a Party to appoint an arbitrator to hear and determine the disputes or differences. The Parties agree that they will not be able to proceed to arbitration unless clause 12.3.2 has first been complied with.” (emphasis added)

It is not suggested in the present context that the above use of the term “differences” additionally to “disputes” carries any significance.  These reasons will approach consideration of the matter on the basis a difference is a form of dispute and refer for convenience to disputes rather than to both disputes or differences.




Cheshire argues the purported arbitration agreement at clause 12.3.3 does not meet that aspect of the definition at s 7(1) of the Act which speaks of an agreement to submit to arbitration disputes which have arisen or which may arise between the parties “in respect of a defined legal relationship”. It argues clause 12.3.3 fails to define the requisite “disputes or differences” to which it refers by reference to any identified legal relationship, whether contractual or otherwise, and so, absent the articulation of a defined legal relationship within clause 12.3.3, it cannot be an arbitration agreement.

In support of its argument that the defined legal relationship, if there is one, must be ascertainable from the purported arbitration clause, Cheshire referred to the following observation by French CJ and Gageler J in TCL Air Conditioner v Federal Court:[1]

“[P]arties who enter into an arbitration agreement for commercial reasons ordinarily intend all aspects of the defined relationship in respect of which they have agreed to submit disputes to arbitration to be determined by the same arbitral tribunal.”[2]


However, that passage does not suggest a requirement that the defined relationship must be ascertainable from the arbitration clause considered in isolation.  Such a requirement would be contrary to orthodox principles of construction, particularly that the whole of the relevant instrument is to be considered in construing its meaning.[3]  Clause 12.3.3 falls for interpretation in the broader context of the document as a whole, which is that it is a clause within a contract.  Clause 12.3.3’s references to the “The Parties” is to the parties to the contract, that is, CMC and Cheshire.  They have a defined legal relationship in that they are parties to a contract.


This answers only part of Cheshire’s argument. Cheshire complains that clause 12.3.3 does not contain any description of the nature of the disputes so as to indicate, consistently with the s 7 definition, that they are disputes arising between the parties in respect of their defined legal relationship as parties to the contract. The purported agreement says nothing as to the nature of the disputes other than that they are disputes arising between the parties. For this reason, Cheshire contends clause 12.3.3 fails to meet the s 7 definition of an arbitration agreement.

In support of that argument Cheshire emphasised referral to arbitration causes the significant result of denying the right of adjudication by a court.  In submitting that ought not occur unless it is clear the denial was intended, Cheshire cited the following observation of Fullagar J in Duncombe v Porter about a general principle of interpretation:[4]


“Rights which exist at common law or by statute are not to be regarded as denied by words of dubious import.  Before any such denial is accepted, it must appear with reasonable clarity from the language used that the denial is intended.”[5]


In the present case, it is implausible having regard to the language of clause 13.3.3 that no denial at all was intended.  It is the breadth of that denial which is the real issue.

In considering whether the language of clause 13.3.3 is sufficiently clear to deny Cheshire the court-based pursuit of its claim it is necessary to consider the meaning of the clause in the context of the contract in which it appears.  These reasons earlier concluded the legal relationship of CMC and Cheshire is a defined one, namely the relationship of parties to a contract.  Such a relationship is defined not merely by the contract’s specific provisions as to the legal rights and obligations existing between the parties but also by the general law applicable to such contracting parties.  Indeed, it has been observed it will be sufficient to constitute a defined legal relationship between parties if there exists a relationship which gives rise to “the possibility that one is entitled to some form of legal remedy against the other”.[6]


It is a reasonable inference, premised upon the circumstance that clause 12.3.3 forms part of the contract into which the parties entered, that the disputes to which it refers are, at least, disputes in respect of the rights and obligations conferred and imposed by that contract.   Cheshire would argue even this inference goes too far and CMC would argue it does not go far enough.

Three relevant general principles of interpretation tell against Cheshire’s argument.  The first, already noted, is that the whole of the relevant instrument is to be considered in construing its meaning.  The second is commercial contracts should be construed to give effect to their commercial purpose.[7]  This contract’s purpose was the performance of paid works, which supports the interpretation that disputes about payment should be caught by clause 12.3.3.   The third interpretive principle is that arbitration clauses should not be construed narrowly.[8]  On this point, in Incitec Ltd v Alkimos Shipping Corporation[9] Allsop J, as he then was, observed:


“The clear tide of judicial opinion as to arbitration clauses, where the fair reading of them is not confined, is to give width, flexibility and amplitude to them.”[10]


The application of these principles compels the inference that the disputes to which clause 12.3.3 refers are, at least, disputes in respect of the rights and obligations conferred and imposed by the contract in which the clause is found.  But how much further does it reach, if at all?

CMC’s argument at its most extreme would in effect have it that clause 12.3.3’s reference to disputes arising between the parties encompasses any disputes arising between them.  However, there is nothing in the contract to fuel the objective attribution of such a free form intention, unconstrained by the context of the contract within which it is found and the limits of the legal relationship it defines.

CMC relied upon some cases in which clauses referring “all disputes” (or disputes described in similarly broad language) to arbitration were upheld, despite the uncertain breadth of their description.[11]  Significantly, none of these cases suggest the range of such disputes is to be regarded as unlimited by the context of the source document.  To the contrary, the clauses in those cases were read down to conform with that context.


The cases in this field vary in articulating the degree or nature of connection the dispute must have with that context.  However, some common threads can be identified.

In Re Hohenzollern Actien Gesellschaft and City of London Contract Corp[12] the contract, for the supply of locomotives and boilers, provided for arbitration of “[a]ll disputes”.  Payment was conditional upon the purchaser’s engineer’s certification that the locomotives and boilers had been received in working order.  Certification was not forthcoming and it was optimistically argued there was no dispute because certification was a condition precedent to entitlement under the contract.  Lord Esher MR observed:


“Now, of course “all disputes” cannot mean disputes as to matters that have no relation at all to the contract.  But I think that those words are to be read as if they were “all disputes that may arise between the parties in consequence of this contract having been entered into”.  I think that, as my brother Mathew pointed out in the court below, there being all these clauses in the contract as to any of which a dispute might arise, this last clause was added to settle them all.”[13] (emphasis added)


In Woolf v Collis Removal Service[14] the arbitration clause related to “any claims upon or counterclaim to any claim made by the contractors”.  The plaintiff claimed damages for a breach of contract and or negligence because of loss and damage of goods stored in a location other than the warehouse which the plaintiff had contracted with the defendants to have the goods stored at.  The decision to stay the action pursuant to s 4 Arbitration Act 1889 was upheld on appeal, Asquith LJ observing:


“The arbitration clause in the present case is, as to the subject matter of claims within its ambit, in the widest possible terms.  That clause is not, in terms, limited to claims arising “under” the contract.  It speaks simply of “claims”.  This, of course, does not mean that the term applies to claims of every imaginable kind.  Claims which are entirely unrelated to the transaction covered by the contract would no doubt be excluded; but we are of opinion that, even if the claim in negligence is not a claim “under the contract”, yet there is a sufficiently close connexion between that claim and that transaction to bring the claim within the arbitration clause, even though framed technically in tort.”[15] (emphasis added)


In Astro Vencedor SA v Mabanaft,[16] there was a claim in tort for wrongful arrest of a chartered ship, which arrest had occurred to secure damages allegedly owed in connection with a claim the shipowner had wrongfully stopped discharging oil during the charter contract.  The claim about stopping the oil was caught by the arbitration clause, which covered “[a]ny dispute arising during the execution of this charter-party”.  The issue was whether the claim in tort was also within the scope of the arbitration clause.  Lord Denning MR, with whom the rest of the court agreed, concluded it was, observing the arrest was “the follow-up to” and “so closely connected to” the claim about stopping the oil as to be within the scope of arbitration.[17]  This approach echoes Lord Asquith’s test of sufficiently close connection in Woolf.  Its reference to the chain of causal connection likewise echoes Lord Esher’s test of consequential connection in Hohenzollern.


In Roose Industries Ltd v Ready Mixed Concrete Ltd,[18] a contract for the supply of metal chips and so-called “all-in” materials referred to both categories in a number of its clauses, but the clause relating to quality mentioned metal chips only.  The purchaser sought a declaration or alternatively rectification in order to require the “all-in” materials to conform to the same standard specification as for metal chips.  An arbitration clause applied to “[a]ny dispute which may arise between the parties to this agreement”.  However the primary judge refused a stay of the action to permit arbitration on the basis the arbitrator would have no jurisdiction to order rectification, that being “clearly outside the arbitration clause”.  That decision was reversed by the New Zealand Court of Appeal which observed:


“In our view, the court should restrict the operation of such a wide clause no further than necessary, and on that reasoning should exclude, in the words of Asquith LJ in Woolf v Collis Removal Service …, only claims which are entirely unrelated to the commercial transaction covered by the contract.  Here, the essential question in dispute is whether the parties intended that the “all-in” materials should be required to conform to the standard specification.  That seems to be very much a question arising out of that commercial transaction.  With great respect …, we cannot agree that the particular dispute is not within the arbitration clause.”[19] (emphasis added)


In IBM Australia Ltd v National Distribution Services Ltd,[20] IBM agreed to supply systems integration services, including IBM hardware and software.  A dispute arose regarding the suitability of the hardware and software which manifested as an alleged breach of the Trade Practices Act 1974 (Cth) for misleading or deceptive conduct. The relevant arbitration clause was expressed to govern “any controversy or claim arising out of or related to this agreement or the breach thereof”. In concluding there was no basis to exclude from arbitration claims arising under the Trade Practices Act, Handley JA observed the words “related to this agreement or the breach thereof” should not be read down, noting:


“These words can only have been added to include within the submission claims other than in contract such as claims in tort, and restitution, or in equity.  I can see no basis for excluding claims arising under statutes which grant remedies enforceable in or confer powers on courts of general jurisdiction.”[21]


In the same case, after engaging a lengthy review of the authorities, Kirby P observed:


“From the foregoing trend of authority, both in Australian and overseas courts, it can be seen that an arbitration clause, expressed in the language of the clause here under consideration, is not to be narrowly construed.  It is sufficiently wide to include claims for rectification and for relief on the ground of misrepresentation or mistake. …  Whilst it is true that the conduct complained of as being in breach of the Trade Practices Act (Cth) is alone sufficient to enliven the provisions of that Act and whilst such provisions do not depend upon the agreement of the parties, such considerations do not determine the simple question posed. That question is whether the misrepresentations alleged are “related to this agreement or the breach thereof”. It is enough to say that, in this case, it was open to … determine that the relationship was made out on the pleadings.”[22] (emphasis added)


In Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways,[23] an agency agreement between an English principal and an Australian agent for air passenger transport contained an arbitration clause referring “[a]ny dispute or difference arising out of this Agreement” to arbitration.  The dispute arising was a claim for damages for breach of contract, alternatively equitable damages “arising out of an unconscionable departure from representations and/or a common assumption made and induced by the defendant”.  A clause of the agreement had provided the agreement could be terminated at any time on three months’ notice, however it was allegedly subsequently promised or represented by the English principal there would be no termination until the end of 1995.  Notwithstanding this, the English principal gave notice of termination in 1994.  The English principal’s alleged representation was said to have induced a common assumption that there would be no termination until the end of 1995 and was also said to have been a representation involving misleading or deceptive conduct under the Trade Practices Act.  The primary issue for determination by the New South Wales Court of Appeal was whether the claims concerning the purported termination having regard to the alleged representation, estoppel and misleading conduct gave rise to a dispute or difference arising out of the agency agreement.


Gleeson CJ, with whom Meagher JA and Sheller JA agreed, distinguished Allergan Pharmaceuticals Inc v Bausch & Lomb Inc[24] where Beaumont J held an arbitration clause did not cover a dispute under the Trade Practices Act, the agreement merely being part of the background to the alleged contraventions so that the dispute did not arise out of it.  Gleeson CJ observed:


“In the present case the alleged contravention of the Act arose out of a representation concerning the duration of the agreement, and the appellant’s claims concern its purported termination.  The agreement is not merely the background to the dispute.  The dispute is about the agreement, and its performance, and whether it was properly and lawfully brought to an end.”[25]


That reasoning has the effect that a dispute pursuing rights said to arise outside a contract should nonetheless be regarded as arising out of or closely connected with the contract where the dispute turns upon whether or not the parties’ rights are constrained by the strict operation of the terms of the contract.  The present case appears to involve just such a dispute, in that CMC relies upon the strictures of the contract’s payment provisions in contending Cheshire is not owed more, whereas Cheshire relies on CMC’s conduct to ground a right to further payment notwithstanding the contractual provisions upon which CMC relies.

In this respect both the present case and Francis Travel are distinguishable from Hi-Fert v Kiukiang Carriers,[26] on which Cheshire placed reliance.  In that matter the issue of current relevance was whether a cargo owner’s claims met the requirement of the arbitration clause of the charter contract that they arose from the contract.  The claims alleged the charterer of a vessel conveying the cargo had engaged in misleading and deceptive conduct, made negligent misrepresentations and breached collateral warranties.  Those claims related to conduct said to have induced the cargo owner to have entered into an addendum contract.  The Full Court of the Federal Court considered the alleged loss would not have been suffered but for the entry into the addendum contract, as distinct from the charter contract, and concluded the claims did not arise out of the charter contract.[27]  In contrast, in the present case there is only said to be one contract and the work performed by Cheshire would not have been performed but for the entry into that contract.


Cheshire also relied upon Inghams Enterprises Pty Ltd v Hannigan,[28] where the New South Wales Court of Appeal reversed a primary judge’s determination that a claim for damages for breach of contract fell within the scope of the arbitration subclause of the dispute resolution clause in the contract.  The clause was relevantly worded as, “the Dispute concerns any monetary amount payable and/or owed by either party to the other under this Agreement” (emphasis added).  The New South Wales Court of Appeal concluded Mr Hannigan’s claim for unliquidated damages was not a claim for an amount payable or owed “under” the contract.  Meagher JA, agreeing with Bell P, observed:


“The distinction between monetary amounts which are payable or owed “under a contract” and remedies which arise by operation of law is a recognised and meaningful one.  Whereas ‘liquidated damages’ are recoverable in satisfaction of a right of recovery created by the contract itself and accruing by reason of breach, unliquidated damages for breach of contract are compensation assessed by the court in accordance with common law principles for loss occasioned by breach.

It follows that the notified dispute does not concern a monetary amount payable or owed by Inghams to Mr Hannigan under their agreement and accordingly it is not a dispute referred to arbitration by clause 23.6.1.”[29]


That conclusion was an inevitable result of the arbitration clause’s specific confinement to disputes concerning any monetary amount payable or owing “under” the agreement.  The present clause has no such specificity.  There is nothing in it to suggest it ought to be read down as applying only to amounts payable under the contract as distinct from amounts payable by operation of law.  Indeed, the parties’ decision to impose no qualification on the nature of the disputes referred to in clause 12.3.3 of the contract supports a liberal width being given to the degree of connection the disputes should have with the contract in order to come within the clause’s reach.


Section 8 of the Act directs attention to the matter which is the subject of Cheshire’s claim in the Supreme Court. That matter might be stated in various ways but at its most fundamental it is the question of whether Cheshire should be paid more than it already has been for works it was contracted to perform. Admittedly, that question arises out of the conduct relied upon to raise an entitlement to payment other than pursuant to the contract. But it is also, to adopt the language of Roose Industries, very much a question arising out of the commercial transaction to which the contract gave rise.

A dispute about the question is a dispute arising between the parties out of the commercial relationship created by the contract.  But for that relationship, Cheshire would not have been performing the works for CMC for which it seeks more payment.  The connection between the contract and the performance of the work gives the dispute the degree of close and consequential connection with the contract which is contemplated by authorities such as Hohenzollern, Woolf and Astro Vencedor.  Further, consistently with the quality contemplated in Francis Travel, the dispute turns upon whether or not the parties’ rights are constrained by the strict operation of the terms of the contract or whether events between the parties should found a right to payment beyond the terms of the contract.   These features in combination compel the conclusion that Cheshire’s claim has been brought in a matter which is the subject of an arbitration agreement.

That conclusion must result in the application succeeding, unless the court finds the arbitration agreement is null and void, inoperative or incapable of being performed. Cheshire argued clause 12.3.3 is inoperative.

In part that argument relied upon the same arguments unsuccessfully advanced in contending the clause is too vague or uncertain to meet the s 7 definition. In support of that contention Cheshire additionally cited Yeshiva Properties No 1 Pty Ltd v Lubavitch Magal Pty Ltd,[30] apparently as an example of a case considering reference to “all” disputes where such language was considered too uncertain to leave the matter to arbitration.  However, consideration of that matter does not assist by parity of reasoning because its relevant facts were considerably vaguer than the present case, including the absence of a formal document and lack of intention to be bound until such a document was executed.  For reasons already given as to the proper interpretation of clause 12.3.3, the clause was not so vague or uncertain that contractual effect ought not be given to it.


Cheshire’s written outline of argument indicated inoperability would be argued on the basis that Cheshire’s reliance upon estoppel by convention precluded reliance upon the contract including the arbitration agreement,[31] citing CPB Contractors Pty Ltd v Celsus Pty Ltd[32] and that case’s reference to the Singapore High Court decision in Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd.[33]  In CPB Contractors, after referring to Dyna-Jet, Lee J concluded an arbitration agreement will be inoperative where it has ceased to have effect, though how it may cease to have effect will vary in individual cases.[34]  His Honour concluded a construction arbitration agreement did not cease to have effect by reason of a mediated agreement not involving the builder or a completion deed clause establishing a further consolidated arbitration process.


In the present case Cheshire’s reliance upon estoppel by convention merely seeks to establish a right to payment not provided for by the contract.  The pursuit and existence of such a right does not appear to be inconsistent with the continued operation of the contract and its arbitration clause.

In oral argument Cheshire’s argument broadened to the submission that its complaints of statutory unconscionability were non-arbitrable.[35] It was argued there is an implicit public interest dimension to the category of unconscionability relied upon in ss 20 and 21 Australian Consumer Law.  It was highlighted, for example, that those sections allow the court to have regard to industry codes of conduct (not that such codes are said to be relevant to Cheshire’s claim).  Cheshire placed reliance upon an observation of Allsop J in Commandate Marine Corp v Pan Australia Shipping Pty Ltd[36] that a common element to the notion of non-arbitrability in the context of international arbitration is that a sufficient element of legitimate public interest in the disputed matters makes the enforceable private resolution of the dispute outside the national court system inappropriate.  However, that is not the context with which the present matter is concerned.


It is uncontroversial that, as the plurality observed in Westfield Management v AMP Capital,[37] the policy of the law is against enforcing contractual arrangements which “operate to defeat or circumvent a statutory purpose or policy according to which statutory rights are conferred in the public interest, rather than for the benefit of an individual alone”.  However, is also well established it is an implied term of an arbitration clause that the arbitrator should reach a decision according to the existing law of the land and should exercise every right and discretionary remedy given to a court of law.[38]  Cheshire has not demonstrated how reference to mediation in the present context would deprive it of the protection of the provisions of the Australian Consumer Law on which its claim relies.  The arbitrator will be obliged to determine Cheshire’s disputed right to payment considering those provisions to the extent they are relevant to the facts as found by the arbitrator.


The above analysis demonstrates there is no substance to Cheshire’s arguments as to inoperability.  On the materials presently before the court[39] it has not been shown the court should make a finding pursuant to s 8 that the arbitration clause is inoperative.


If follows s 8 of the Act requires this court to refer the parties to arbitration pursuant to clause 12.3.3 of their contract.

That conclusion has been arrived at on the premise that the claim is for relief based on estoppel by convention or statutory unconscionable conduct and does not seek the additional order about the bank guarantee.  Enlarging consideration now to the matter of the bank guarantee does not alter the conclusion, indeed it fortifies it.  In oral submissions Cheshire’s counsel categorised the foundation of the order as being part of its unconscionability case.[40]  That is not apparent from Cheshire’s pleading.  In any event the provision of the bank guarantee was a contractual requirement, so any dispute as to its return inevitably involves a sufficiently close and consequential connection with the contract that it is a matter which is subject to clause 12.3.3.



CMC has made good its argument that the parties should be referred to arbitration pursuant to s 8 of the Act.

CMC’s application also sought a “permanent stay” of Cheshire’s proceeding.   In the present context the integrity of the reference can be safeguarded simply by a stay.  It will in effect operate as a stay of permanent effect unless, in consequence of some event or decision in the arbitration process, the dispute cannot be determined by arbitration.  Such a development could ground an application to lift the stay.

On the face of it costs should follow the event but I will allow the parties an opportunity to be heard.



My orders are:

  1. The parties are referred to arbitration pursuant to s 8(1) Commercial Arbitration Act 2013 (Qld).


  1. Cairns Supreme Court proceeding 571/20 is stayed.


  1. I will hear the parties as to costs, if costs have not been agreed in the meantime, at 9.15am 28 April 2021 (out of town parties having leave to appear by telephone or video-link).




[1] (2013) 251 CLR 533.


[2] (2013) 251 CLR 533, 550 [16].


[3]        See for instance the oft-cited observations on this principle by Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99, 109.


[4] (1953) 90 CLR 295.


[5] (1953) 90 CLR 295, 311.


[6]        Methanex Motonui Ltd v Spellman [2004] 1 NZLR 95, 121 [85]; endorsed on appeal [2004] 3 NZLR 454, 471 [62].


[7]        See for example, McCann v Switzerland Insurance (2000) 203 CLR 579, 589.


[8]        See for example, Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, 165; Commandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45.


[9] [2004] FCA 698.


[10] [2004] FCA 698, [36] (citations omitted).


[11]       Applicant’s submissions in reply [15]; Roose Industries Ltd v Ready Mixed Concrete Ltd [1974] 2 NZLR 246 (and other cases cited therein).


[12] (1886) 54 LT 596.


[13] (1986) 54 LT 596, 597.


[14] [1948] 1 KB 11.


[15] [1948] 1 KB 11, 18.


[16] [1971] 2 QB 588.


[17] [1971] 2 QB 588, 595.


[18] [1974] 2 NZLR 246.


[19] [1974] 2 NZLR 246, 249.


[20] (1991) 22 NSWLR 466.


[21] (1991) 22 NSWLR 466, 487.


[22] (1991) 22 NSWLR 466, 477.


[23] (1996) 39 NSWLR 160.


[24] (1985) ATPR 40-636.


[25] (1996) 39 NSWLR 160, 166-167.


[26] (1998) 90 FCR 1.


[27] (1998) 90 FCR 1, 17, 22 (per Emmett J with whom Branson J agreed and Beaumont generally agreed).


[28] (2020) 379 ALR 196.


[29] (2020) 379 ALR 196, 245 [150] – [151] (citations omitted).


[30] [2003] NSWSC 615 [52]; Plaintiff’s outline of argument [18].


[31] Plaintiff’s outline of argument [19].


[32] (2017) 353 ALR 84, 98-100.


[33] [2016] SGHC 238 [166].


[34] (2017) 353 ALR 84, 100.


[35]       T 1-33 L 11 (the submission included reference to the complaint of estoppel by convention but the argument which developed focussed upon the complaints of statutory unconscionability).


[36] (2006) 157 FCR 45, 98.


[37] (2012) 247 CLR 129.


[38]       Government Insurance Office v Atkinson Leighton Joint Venture (1981) 146 CLR 206, 234-235, 246-247.


[39]       A qualification added in deference to the possibility this court is not presently possessed of all information which may be put before an arbitrator – see Rinehart v Rinehart (No 3) (2016) 257 FCR 310, 347.


[40]       T 1-34 L 42.