Green v Econia Pty Ltd - [2016] SASC 153

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
GREEN v ECONIA PTY LTD
[2016] SASC 153
Judgment of Judge Dart a Master of the Supreme Court
23 September 2016
ARBITRATION - GENERAL
Partnership agreement contains arbitration clause - plaintiff commences proceedings - whether arbitration clause engaged - stay of proceedings - referral to arbitration pursuant to s 8 of the Commercial Arbitration Act 2011.
Held:
1. Defendant entitled to a stay of these proceedings.
2. Parties are directed to arbitrate their disputes.
Commercial Arbitration Act 2011 (SA) s 5, s 8, referred to.
AED Oil Ltd & Anor v Puffin FPSO Ltd (2010) 27 VR 22; Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FC 45; Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160, considered.

GREEN v ECONIA PTY LTD
[2016] SASC 153

On or about 17 December 2004 the plaintiff and defendant entered into a written partnership agreement. The partnership was called the “RBI Partnership” and was involved in the business of software ownership, development, maintenance and licencing.
The partners have now fallen into dispute, as a result of which the plaintiff has instituted these proceedings seeking a declaration and an injunction.
These reasons deal with an application by the defendant seeking a stay of these proceedings and an order referring the parties to arbitration. The application is made pursuant to s 8(1) of the Commercial Arbitration Act 2011 (“the Act”). In my opinion, for the reasons that follow, the defendant is entitled to the orders it seeks.
The relevant provision of the partnership agreement
The Partnership Agreement provides for disputes between the parties to be resolved by negotiation, failing which the parties are to proceed to arbitration. The plaintiff seeks to bring himself within a provision in the dispute resolution clause which permits the commencement of legal proceedings.
The Partnership Agreement provides as follows:
25. Dispute resolution
25.1In the event of any dispute between the partners concerning the terms of this Agreement or any matter arising in connection with this Agreement (“the Dispute”), either partner may notify the other partner of the existence and nature of the Dispute. Upon the other partner receiving the notice, the parties must exercise good faith in resolving the dispute by negotiation between themselves through their nominated representatives.
25.2. If the Dispute cannot be resolved by negotiation under clause 25.1 within 14 days of the notice, either partner may by notice to the other, refer that Dispute for determination by a single arbitrator to be appointed by agreement between the partners. If he partners cannot agree on the appointment of an arbitrator within 7 days of the service of the notice of referral, an arbitrator will be appointed at the request of either party by the President of the Institute of Arbitrators and Mediators (South Australian Division). The arbitrator [sic] will be held in Adelaide and will be conducted pursuant to the Commercial Arbitration Act 1986.
25.3 Clauses 25.1 and 25.2 will not prejudice…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] SASC 153
Decision Date: 23 September 2016

CaseChat Overview and Summary

In the matter of Green v Econia Pty Ltd, the plaintiff brought proceedings against the defendant in the Supreme Court of Victoria. The dispute centres on the interpretation and enforcement of an arbitration clause within a partnership agreement. The plaintiff, Green, sought to enforce a final, rather than interlocutory, injunction and also a declaration, claiming these actions were urgent and permissible under the terms of the agreement. The defendant, Econia, argued that the proceedings should be stayed and the dispute referred to arbitration as the arbitration clause in the partnership agreement was engaged.

The primary legal issue the court had to decide was whether the arbitration clause in the partnership agreement precluded the plaintiff from initiating court proceedings for a final injunction and a declaration. The defendant contended that the arbitration clause required any disputes to be referred to arbitration, while the plaintiff maintained that clause 25.3 of the agreement allowed him to commence court proceedings for urgent relief. The court had to interpret the term "urgent" within clause 25.3 and determine if the plaintiff's actions met the objective criteria for urgency.

The court examined the drafting of clause 25.3 and considered the concept of urgency in the context of arbitration agreements. It noted that while the plaintiff argued the declaration he sought was urgent, the clause did not require the plaintiff to form a reasonable opinion that the relief was necessary to protect his rights, unlike the clause considered in AED Oil Ltd & Anor v Puffin FPSO Ltd. Instead, the court held that the use of the word "urgent" in clause 25.3 should be determined objectively. The court found that the plaintiff's assertion of urgency was not substantiated by the facts of the case, as the proceedings were not accompanied by an application for urgent relief nor did they come before the court in an urgent manner. Consequently, the court held that the arbitration clause was engaged and ordered the proceedings to be stayed and the disputes referred to arbitration.

The court issued an order staying the proceedings and directing the disputes to be referred to arbitration in accordance with the terms of the partnership agreement.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

There is no dispute that clause 25 is an arbitration agreement for the purpose of the Act and that no party suggests that that agreement is null and void, inoperative or incapable of being performed. As a result, the defendant says the proceedings should be stayed and the disputes referred to mediation.Consideration of clause 25.3 The plaintiff says he is entitled to commence these proceedings he is simply exercising his entitlement pursuant to clause 25.3 to institute proceedings. He is seeking a final, rather than interlocutory, injunction and also he says the declaration he seeks is urgent. In the circumstances, the plaintiff says s 8 of the Act is not engaged. The drafting of clause 25.3 is perhaps the result of an oversight. An application for an injunction, in the overwhelming majority of cases, is an urgent application for interlocutory relief. The word “urgent” is only used in clause 25.3 in respect of the declaratory relief. The plaintiff argues therefore that it is not necessary for the injunctive relief to be urgent. That seems to create a commercially odd outcome. It is common for arbitration clauses to allow provision for urgent relief to be sought from a Court. That is often necessary even if an arbitration thereafter proceeds. It is difficult to see the commercial utility in allowing a party to bring proceedings in relation to an injunction when that is not in fact urgent. There is no dispute that an arbitrator may grant an injunction, if one is required. Nonetheless, the argument is open to the plaintiff given the wording of the clause. The plaintiff says that the declaration being sought is urgent. The Court of Appeal in Victoria had to consider the concept of “urgent” in an arbitration provision in the case of AED Oil Ltd & Anor v Puffin FPSO Ltd.[2] The Court wrote a joint judgment. The clause under consideration was as follows:Nothing in this Article 33 prevents a party from seeking urgent interlocutory or declaratory relief from a court of competent jurisdiction where, in that party’s reasonable opinion, that action is necessary to protect that party’s rights.[2] (2010) 27 VR 22. The Full Court said: [3]In our opinion, the article, by its terms, contained two requirements. First, that the relief was in fact urgent, a matter to be determined objectively. Secondly, that the party claiming the relief form the reasonable opinion that the relief was necessary to protect that party’s rights.[3] AED Oil Ltd & Anor v Puffin FPSO Ltd (2010) 27 VR 22 at [27]. There is no requirement in clause 25.3 that the plaintiff form a reasonable opinion that relief was necessary to protect his rights. Nonetheless, in my opinion, the use of the word “urgent” in clause 25.3 is something that falls to be determined objectively. It is not enough simply for a plaintiff to assert that in his opinion the matter is urgent. It must be urgent objectively. For a matter to be urgent it must have the quality of requiring immediate attention. I am unable to accept the plaintiff’s assertions that the declaratory relief is urgent. The proceedings were issued in the usual way on 6 June 2016. The proceedings were not accompanied by any application seeking urgent relief or an urgent hearing of the matter. The matter did not come before the Court until 29 July 2016. On that occasion, the Court considered the defendant’s application to stay the proceedings.