Cheshire Contractors Pty Ltd v Civil Mining & Construction [2021] QCA 212

Julie Whitehead  |  Allie Flack  |  Oliver Waddingham

Key takeouts

The term ‘defined legal relationship’ in section 7 of the Commercial Arbitration Act 2013 (Qld) is to be given a broad interpretation.  Parties to a construction contract containing an arbitration clause will be parties to the arbitration agreement created by that clause. The relationship does not need to be further defined or expressly set out in the arbitration agreement.

Facts

Civil Mining & Construction Pty Ltd (CMC) contracted with the Queensland Department of Transport and Main Roads (TMR) to complete a project for a roadworks construction (project). CMC subcontracted Cheshire Contractors Pty Ltd (Cheshire) to undertake civil engineering works for the project (subcontract).

A dispute arose between CMC and Cheshire following Cheshire’s claim for the payment of costs associated with alleged directions given by CMC regarding the use of material not in the project specifications. Cheshire filed proceedings in the Supreme Court of Queensland seeking payment of $1,393,616.80 plus GST, interest and the return of a bank guarantee. In response, CMC sought a stay of the proceedings and applied for an order referring the parties to arbitration in accordance with section 8(1) of the Commercial Arbitration Act 2013 (Qld) (Act).

In the first instance, Henry J allowed CMC’s application, granting a stay on the proceedings and referring the parties to arbitration under section 8(1) of the Act.

Cheshire appealed the decision on the basis that Henry J had erroneously interpreted the meaning of ‘in respect of a defined legal relationship’ under section 7(1) of the Act. Cheshire’s argument followed that as the purported arbitration agreement did not itself define the legal relation to the which the clause was intended to apply, there was no ‘arbitration agreement’ within the meaning of section 7(1) of the Act.  

Decision

The Court of Appeal dismissed Cheshire’s arguments on appeal, upholding the decision of Henry J.

Cheshire argued that in order to satisfy section 7 of the Act, the arbitration clause itself must define the legal relationship to which it is intended to apply. The relevant clause of the subcontract was the dispute resolution clause, which dealt with ‘disputes or differences arising between the parties’. In the original decision, Henry J concluded that considering the clause in isolation would be:

‘contrary to orthodox principles of construction, particularly that the whole of the relevant instrument is to be considered in construing its meaning,’

The dispute resolution clause which is the ‘arbitration agreement’, should be interpreted in the broader context of the documents as a whole. In this case, the subcontract established that there was a contractual relationship between CMC and Cheshire.

The Court of Appeal agreed with Henry J, holding that section 7 of the Act should be given a broad interpretation.

A number of cases in Australia and New Zealand were referred to supporting the proposition that the term ‘defined legal relationship’ should be given a broad meaning and not be restricted to relationships recorded in documents, other formal relationships or defined by the arbitration agreement itself.