- Australia -
eter Hirst
31 ReSolution | Nov 2017
Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206
The plaintiffs (the Growers), comprised 47 grain growers in WA. They commenced proceedings in the Supreme Court of Western Australia in connection with contracts between each of them and the defendant (Emerald) in relation to the placement of grain produced by the Growers into a pool of grain held by and sold by Emerald. The precise characterisation of the contracts, and whether they gave rise to a trust relationship, whereby Emerald held funds received from the sale of the grain on trust for each grower, was one of the main matters in dispute.
Each of the contracts contained an arbitration clause which stated, relevantly:
Any dispute or claim arising out of, relating to or in connection with these Terms and Conditions, a Pool Contract[ ] or delivery of Commodities to a Pool, including any question regarding the existence of a contract, the validity or its termination, and which cannot be resolved between the parties, shall be resolved by arbitration in accordance with the GTA Dispute Resolution Rules[ ] in force at the commencement of any arbitration. [Emphasis added]
In the Court proceedings, the Growers sought, among other things, an order for payment to each Grower of their entitlement, and relief pursuant to the Trustees Act 1962 (WA), including the appointment of a new trustee to administer the Trust. Emerald applied for orders to stay the court proceedings and to refer the parties to arbitration pursuant to s 8 of the Commercial Arbitration Act 2012 (WA) (CAA) which provides, inter alia, as follows:
8. Arbitration agreement and substantive claim before court (cf. Model Law Art 8)
(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.
This section is based on Article 8 of the UNCITRAL Model Law on International Commercial Arbitration (which forms part of the International Arbitration Act 1974 (Cth)). The same provision is found in the domestic Arbitration Acts enacted in each State and Territory including the Commercial Arbitration Act 2011 (Vic). Accordingly, the relevance of this case extends beyond Western Australia.
Chief Justice Martin identified the matters in issue (at [41]), in connection with s 8 in this case, as follows:
(a) What is the scope of the arbitration agreement?
(b) Do the proceedings include a matter or matters which are within the scope of the arbitration agreement?
(c)
Court of Appeal
The Court of Appeal agreed with the Trial Judge that both parties were in a similar position concerning their knowledge of the Claimants' claim but only the Defendants had knowledge of their counterclaim and were better placed to assess litigation risk. The Court of Appeal affirmed the Claimants were reasonable.
The Court of Appeal then addressed mediation and agreed that the Claimants "took proactive steps", whereas the Defendants had "dragged their feet and delayed for so long that the claimants lost confidence in the process". The Court of Appeal gave five reasons why a mediation would have had a real chance of settlement:
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Arbitration – scope of arbitration agreement – whether a dispute as to an alleged breach of trust constitutes a “matter” within the scope of an arbitration agreement – proper approach to construction of arbitration agreement – whether the arbitration agreement incapable of being performed – application for stay of proceedings under s 8 of Commercial Arbitration Act 2012 (WA)
Trust dispute no bar to arbitration
By Albert Monichino QC & Adam Rollnik
eter Hirst