FEDERAL COURT OF AUSTRALIA
Nicola v Ideal Image Development Corporation Incorporated [2009] FCA 1177
CORRIGENDUM
PRACTICE AND PROCEDURE – conflict of laws – exclusive jurisdiction clause
PRACTICE AND PROCEDURE – whether proceedings against non-parties to arbitration agreement may be stayed pending arbitration between parties
EVIDENCE - whether evidence as to content of law of Florida admissible
ARBITRATION – claim for stay under International Arbitration Act 1974 (Cth) - whether dispute capable of settlement by arbitration - authority of arbitrator to vary or set aside franchise agreement – whether dispute of a kind suitable for arbitration – whether right to mediation waived by commencement of proceedings
GEORGE NICOLA, MIRIAM NICOLA and GEORGE & MIRIAM NICOLA PTY LIMITED v IDEAL IMAGE DEVELOPMENT CORPORATION INCORPORATED and JOHN PACE
NSD 1738 of 2008
PERRAM J
16 OCTOBER 2009 (CORRIGENDUM 21 OCTOBER 2009)
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1738 of 2008
BETWEEN: GEORGE NICOLA
First ApplicantMIRIAM NICOLA
Second ApplicantGEORGE & MIRIAM NICOLA PTY LIMITED
Third ApplicantAND: IDEAL IMAGE DEVELOPMENT CORPORATION INCORPORATED
First RespondentJOHN PACE
Second Respondent
JUDGE:
PERRAM J
DATE:
16 OCTOBER 2009
PLACE:
SYDNEY
CORRIGENDUM
The judgment in this matter has now been replaced in its entirety.
I certify that the preceding one (1) numbered paragraphs is a true copy of the Corrigendum to the Reasons for Judgment of the Honourable Justice Perram.
Associate:
Dated: 21 October 2009
FEDERAL COURT OF AUSTRALIA
Nicola v Ideal Image Development Corporation Incorporated [2009] FCA 1177
PRACTICE AND PROCEDURE – conflict of laws – exclusive jurisdiction clause
PRACTICE AND PROCEDURE – whether proceedings against non-parties to arbitration agreement may be stayed pending arbitration between parties
EVIDENCE - whether evidence as to content of law of Florida admissible
ARBITRATION – claim for stay under International Arbitration Act 1974 (Cth) - whether dispute capable of settlement by arbitration - authority of arbitrator to vary or set aside franchise agreement – whether dispute of a kind suitable for arbitration – whether right to mediation waived by commencement of proceedings
GEORGE NICOLA, MIRIAM NICOLA and GEORGE & MIRIAM NICOLA PTY LIMITED v IDEAL IMAGE DEVELOPMENT CORPORATION INCORPORATED and JOHN PACE
NSD 1738 of 2008
PERRAM J
16 OCTOBER 2009
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1738 of 2008
BETWEEN: GEORGE NICOLA
First ApplicantMIRIAM NICOLA
Second ApplicantGEORGE & MIRIAM NICOLA PTY LIMITED
Third ApplicantAND: IDEAL IMAGE DEVELOPMENT CORPORATION INCORPORATED
First RespondentJOHN PACE
Second Respondent
JUDGE:
PERRAM J
DATE OF ORDER:
16 OCTOBER 2009
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The parties to bring in short minutes of order giving effect to these reasons within 7 days.
The applicants to pay the first respondent’s costs of the motion.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH…
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- Case
- [2009] FCA 1177
- Decision Date
CaseChat Overview and Summary
The court addressed several key legal issues, including the admissibility of expert evidence on Florida law, the proper interpretation of the arbitration clause, the characterisation of the claims made by the respondents, the scope of the arbitrator’s authority, the relevance of public policy considerations in the arbitration context, and the enforceability of the exclusive jurisdiction clause in Florida. Additionally, the court had to consider whether the respondents' claims attacked the arbitration clause itself and whether the third applicant and the second respondent, who were not parties to the franchise agreement, could be subject to the arbitration clause and jurisdiction clause. Finally, the court examined whether a mediation requirement, stipulated in the arbitration clause, had been satisfied.
In its reasoning, the court found that the expert evidence on Florida law was admissible, aiding in the interpretation of the arbitration clause. The court determined that the arbitration clause was broad enough to encompass the respondents' claims, and that the arbitrator had sufficient authority to make orders affecting the franchise agreement itself. The court also concluded that public policy did not preclude the enforcement of the arbitration clause. Regarding the exclusive jurisdiction clause, the court held that it was enforceable and required the stay of the proceedings in favour of Florida courts. The court further found that the respondents' claims did not attack the arbitration clause itself and that the third applicant and the second respondent, though not parties to the agreement, were subject to the arbitration and jurisdiction clauses due to their relationship with the respondents. Lastly, the court ruled that the mediation requirement had been waived by the respondents' initiation of the proceedings.
The final orders of the court mandated that the parties prepare minutes of order reflecting the court's reasons within seven days and required the applicants to pay the first respondent’s costs of the motion. The court's decision effectively stayed the respondents' proceedings, directing them to pursue their claims through arbitration in Florida, in accordance with the terms of the franchise agreement.
Orders
Orders of the court
1.
The parties to bring in short minutes of order giving effect to these reasons within 7 days.
2.
The applicants to pay the first respondent’s costs of the motion.
Note:
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
Established by: PERRAM J
Clause 31(a) is, so Ideal submits, an agreement to arbitrate. The second matter relates to the first and concerns s 7(2) of the International Arbitration Act 1974 (Cth) (“the IAA”) which provides: 7 Enforcement of foreign arbitration agreements(2) Subject to this Part, where:(a)proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and(b)the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration; on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter. The third matter concerns cl 40 of the Franchise Agreement, which provides:40. GOVERNING LAW; CONSENT TO JURISDICTIONExcept to the extent governed by federal law, this Agreement and the franchise right granted herein shall be governed by and construed in accordance with the laws of the State of Florida. If, however, any provision, or portion hereof in any way contravenes the laws of any state or jurisdiction where this Agreement is to be performed, such provision, or portion thereof, shall be deemed to be modified to the extent necessary to conform to such laws, and still be consistent with the parties intent as evidenced herein. All claims which, as a matter of law or public policy cannot be submitted to arbitration in accordance with Paragraph 31 shall be brought within the State of Florida in the judicial district in which Ideal Image Development Corporation has its principal place of business; provided, however, with respect to any action which includes injunctive relief, Ideal Image Development Corporation may bring such action in any court in any state which has jurisdiction. Franchisee irrevocably submits to the jurisdiction of such courts and waives any objection Franchisee may have to either the jurisdiction or venue of such court. As a result of the first two matters, Ideal submits that the Court is bound to stay the Nicolas’ proceedings pursuant to s 7(2) of the IAA. Whether that is so or not, Ideal submits that since the Nicolas have committed themselves, by cl 40, to the exclusive jurisdiction of the courts of Florida, the pursuit of the present proceedings is an abuse of process which ought, as a matter of discretion, to be stayed. The application gave rise to nine issues. These were: (a) The issue as to the content of the law of Florida. The parties agreed that, in principle, an important issue between them was the proper construction of cl 31(a) and that, by reason of cl 40, that clause was to be interpreted in accordance with the law of Florida. Ideal led evidence from an expert about the law of Florida to prove how cl 31(a) should be interpreted. The Nicolas objected that this evidence was inadmissible. The first question, therefore, was whether the expert’s evidence should be received.(b) The issue as to the proper construction of cl 31(a). The critical words in cl 31(a) consigned to arbitration disputes “arising out of or relating to the Franchisee’s operation of the Franchised Business under this Agreement”. Ideal submitted that all of the Nicolas’ allegations met this description; the Nicolas correspondingly denied that any did. (c) The issue as to the proper characterisation of the claims. Both parties made submissions that the various integers making up the Nicolas’ allegations fell within their competing constructions of cl 31(a). (d) The issue as to the authority of the arbitrator. The Nicolas submitted that the effect of cl 31(e) was to prevent any arbitrator from making orders which would vary or set aside the agreement itself. So far as the proceedings sought relief of that kind they submitted, therefore, that the proceedings did not meet the requirements of s 7(2) of the IAA, that is, that the proceedings did not include the determination of a matter which was “capable of settlement by arbitration”. Ideal, on the other hand, denied that cl 31(e) had that effect. (e) The issue as to the role of public policy. The Nicolas submitted that the resolution of their proceedings raised important issues touching upon the public interest. As such, they pointed to an established line of authority which held such litigation to be unsuitable for arbitration in foreign parts. Ideal did not deny the existence of the principle but sought, instead, to deny that the Nicolas’ proceedings had that quality. (f) The issue as to the exclusive jurisdiction of the Courts of Florida. Ideal submitted that even if the present proceedings were not required to be submitted to arbitration, the Nicolas had agreed by cl 40 that any dispute that could not be referred to arbitration was required to be resolved by the courts of Florida. Accordingly, the present proceedings should be stayed to give effect to the exclusive jurisdiction of those courts. The Nicolas submitted that this was not what cl 40, properly understood, said; alternatively, it was submitted that this Court was bound to proceed on the basis that the claims made under the TPA and those made under the ICA had to be heard in Australia because both Acts contained overriding choice of law provisions which outflanked any jurisdiction clause contained in the agreement. (g) The attack on the arbitration clause issue. The Nicolas submitted that their pleading attacked the arbitration clause itself pursuant to the TPA. It followed that that issue should not be resolved by the arbitrator. Ideal denied the pleading said any such thing.(h) The parties’ issue. The third applicant and the second respondent were not parties to the agreement. The Nicolas submitted that whatever else had happened there could be no stay so far as they were concerned. Ideal submitted that the third applicant was a privy of the Nicolas. Alternatively, if the rest of the proceedings were stayed, the Court should in the exercise of its discretion stay those claims as well. (i) The mediation issue. The Nicolas submitted that the matter should not be sent to arbitration unless there was first a mediation as the arbitration clause required that the parties had been unable amicably to settle the dispute as condition precedent to its operation. Ideal submitted that the Nicolas had waived this point by commencing the present proceedings.