Australian Corporation Act rights no bar to stay of proceedings in favour of arbitration

In Re Ikon Group Ltd (No 2) [2015] NSWSC 981, the New South Wales Supreme Court granted a stay of proceedings in favour of international commercial arbitration.  

The relevant arbitration clause was contained in an addendum to a joint venture agreement.   It referred “[a]ny and all Disputes including any question regarding the existence, validity or termination of any of the JV Documents or the Third Addendum [ … ]” to arbitration under the LCIA Rules.  It expressly revoked or amended an exclusive jurisdiction clause contained in the original joint venture agreement.  

The term  “Disputes” (used in the arbitration clause) was defined in clause 22 of the joint venture agreement to mean “any dispute or difference [arising] out of, or in relation to or in connection with the JV Documents or any of them or the Third Addendum”.   Brereton J concluded that “a dispute or difference that arises out of or is in relation to or in connection with the performance of any of the joint venture documents is within the words of [clause 22] and thus within the concept of a “Dispute” for the purposes of [the arbitration clause]”. 

There was no dispute before the Court as to the validity of the arbitration agreement.  There was also no issue amongst the parties as to whether the requirements for a stay as set out in Australia's International Arbitration Act 1974 (Cth) (IAA) had been satisfied in this case.  The question for the Court on hearing the application was whether “the proceedings before this court involve the determination of a matter that, in pursuance of the arbitration agreement, is capable of settlement by arbitration”.  

His Honour accepted that in answering this question, regard ought be had not only to the relief claimed or pleaded (which is the starting point), but also to what is alleged in support of the claims and what defences which will be raised in response to them.  

There were parties to the proceedings who were not parties to the joint venture documents (and the claims against them were not therefore the subject of the application before the court).  In relation to claims against parties to both the proceedings and the joint venture documents and thus bound by the arbitration agreement, his Honour was satisfied that each of those claims necessarily invoked provisions of the joint venture agreement.  This meant that the respective dispute “arises out of, relates to or is in connection with” the joint venture agreement.  However, his Honour noted that these claims also involved allegations of breaches of directors’ duties, bringing into play provisions of the Corporations Act 2001 (Cth) (CA). 

As to the interplay between the civil claims and potential action pursuant to the CA, his Honour observed, in reliance on earlier authority of the NSW Court of Appeal, that: 

… [I]t is beside the point that the rights sought to be invoked by the plaintiff may be statutory rights under [the CA] and not rights directly arising under joint venture agreements, and it is also beside the point that an arbitrator may not be able to grant all the relief which a court could grant under [the CA].  Rinehart v Welker confirms that it matters not that an arbitrator may not be able to grant all the relief or remedies that a court could grant […] and also that rights under statute can be the subject of arbitration […]. 

His Honour granted a stay in respect of the claims brought against the defendants who were also parties to the arbitration agreement. 

For further information, please contact Bronwyn Lincoln, Partner, or your usual Herbert Smith Freehills contact.