The decision of the Supreme Court of Queensland in Bulkbuild Pty Ltd v Fortuna Well Pty Ltd & Ors  QSC 173 provides guidance as to whether an arbitration agreement is "incapable of being performed" in the context of the Commercial Arbitration Act 2013 (Qld).
Despite being a Queensland decision, the decision is of broader interest given the similarities in legislation applying in other Australian jurisdictions, following the harmonisation of domestic commercial arbitration legislation.
The case involved a design and construct building contract that included a dispute resolution clause in which the parties agreed to submit disputes to arbitration. It was agreed that the clause was an arbitration agreement within the meaning of the Act. The Contractor (Bulkbuild) commenced action in the Supreme Court of Queensland against, amongst others, the owner under the building contract (Fortuna). Fortuna sought an order to stay the proceeding brought against it, on the basis that the contract contained a valid arbitration agreement. Section 8 of the Act provides that so long as there is an arbitration agreement that is not null or void, inoperative or incapable of being performed, the court must refer the parties to arbitration.
Bulkbuild argued that the agreement was "incapable of being performed" for the purposes of section 8. Bulkbuild's claim against Fortuna arose out of similar factual matters as its claim against the second and third defendants in the same proceeding. As a result, Bulkbuild contended that there would be a risk of different factual findings if its claim against Fortuna were determined by arbitration but its claims against the other defendants determined by a court.
Justice Bowskill gave short shrift to this argument, finding that having two separate proceedings involving similar factual circumstances would be a "mere inconvenience" that did not render an arbitration agreement "incapable of being performed". Her Honour also went on to elaborate upon circumstances in which an arbitration agreement may be "incapable of being performed" under section 8 of the Act, including:
- where there is contradictory language in the contract that indicates an intention to litigate (rather than arbitrate);
- if a specific arbitrator is stated in a contract who at the time of the dispute is deceased or unavailable; and
- if the arbitration agreement is itself too vague, confusing or contradictory to be performed.
This case highlights that the prospect of inconsistent factual findings in different dispute resolution forums is not enough to render an arbitration agreement "incapable of being performed".