THE AUTHORS
Promissory estoppel
The plaintiff’s final contention was that the defendant was precluded by promissory estoppel (i.e. a promise not to enforce a legal right) from pursuing arbitration, as its actions in litigating the matter constituted a representation that it would not enforce its right to arbitrate the dispute.
This argument was also unsuccessful, as the Court did not agree that the defendant’s commencement of litigation could be characterised as a forbearance of any legal right. Further – as with waiver by election – promissory estoppel could only be raised against a party seeking to enforce its rights in response to another party’s breach. In this case, it was being raised by the party seeking to enforce its rights.
Comments
As illustrated in the BMO decision, a party’s commencement of litigation may not, in itself, bar a subsequent switch to arbitration, provided the following is satisfied:
● First, the party seeking to switch to arbitration must not have previously elected litigation over arbitration in response to the wrongful conduct of the other party.
● Second, the arbitration agreement must give both parties the right to arbitrate, as the initiation of litigation may otherwise constitute a unilateral waiver of that right.
● Third, the prior commencement of litigation must not have been done with the intention of rejecting or repudiating the arbitration agreement.
● Fourth, if the party had in fact initiated litigation with repudiatory intent, the repudiation must not have been accepted; i.e. the other party must not have taken any steps in the proceedings.
Even if this change of forum is possible, as a lot of time and money will likely have to be spent in front of the tribunal and the courts before it can be effected. It is therefore crucial that the decision to litigate or arbitrate a dispute is only made after a careful review of the documents and a thorough review of the available options.
Trust dispute no bar to arbitration Cont...
Adam Rollnik
Barrister
Albert Monicchino, QC
Barrister
Adam has a broad commercial dispute resolution practice, with particular expertise in construction law disputes, corporations, employment law, insolvency, retail tenancy, misleading conduct, tort, contract, and franchising disputes.
Albert practices as a barrister, chartered arbitrator and mediator. He has a general commercial litigation practice - particularly in corporations and construction law - in the Supreme and Federal Courts in Australia, and also in commercial arbitrations (domestic and international).