Subway Systems Australia Pty Ltd v Ireland  [2014] VSCA 142

A majority of the Victorian Court of Appeal has found that VCAT is “court” for the purposes of s8 of the Commercial Arbitration Act 2011 (the CAA) with the result that if a party to the arbitration agreement so requests, the Tribunal is precluded from hearing the proceeding and the dispute must be referred to arbitration.

Background

A dispute under a franchise agreement was commenced by the franchisees at VCAT.  Subway Systems, the franchisor, contended that the matters in dispute were within the arbitration clause in the franchise agreement and should be arbitrated and thus by, force of s8 of the CAA, the Tribunal was precluded from hearing the matter.  The Tribunal rejected this contention and the matter went on appeal to Croft J.[1]  Croft J agreed with the Tribunal that it was not a “court”.

On appeal, two judges of the Court of Appeal (Maxwell P and Beach JA) determined that VCAT was a “court”.  The other member of the court, Kyrou AJA, disagreed.

Pausing at that point, it should be noted that VCAT senior member Riegler and two judges (Croft J and Kyrou AJA) were of the opinion that VCAT is not a “court” for the relevant purpose however, the majority in the Court of Appeal were of the opposite opinion.

 At VCAT and before Croft J

As “court” (small “c”) is not defined in the CAA, statutory interpretation was at the forefront at all three levels of determination.[2]  At the Tribunal, senior member Reigler considered the inconsistent way in which “court” had been used in other legislation with the effect that in some cases the Tribunal comes within the definition of “court” and in some cases not.

His Honour was influenced by the requirement of s2A of the CAA which, in substance, requires an interpretation of the CAA in uniformity with the International Arbitration Act 1974 (Cth) (the IAA) and the UNCITRAL Model Law adopted by both the domestic and international arbitration Acts.  Nevertheless, s1AC(4) of the CCA preserves the application of s35 of the Interpretation of Legislation Act 1984 for the purposes of interpreting the CCA.

The definition of “court” in Article 2 of the Model Law means “a body or organ of the judicial system of a State”.  Croft J saw this evidence of a “careful consideration” by Parliament of the relationship between and use of “court” and “Court” in the CAA. Parliament could have made clear that VCAT was to be included within the definition of “court” for the purposes of s8 if that was its intention.

 Decision on appeal

Separate reasons were delivered by the three judges in the Court of Appeal.  The President, Maxwell P, applied the “special rules” of interpretation relevant to interpretation of international agreements where certainty and uniformity of application are of paramount importance “unconstrained by technical rules of interpretation”.[3]

The learned President considered VCAT part of the “judicial system” in because it is “invested with authority to judge causes” and its decisions determine the rights and liabilities of parties.  His Honour saw no policy reason to exclude VCAT from the definition.

Justice of Appeal Beach essentially reasoned that in exercising its original jurisdiction VCAT’s function resembled that of the exercise of judicial power by a court.  Notwithstanding its inability to enforce its own orders, his Honour considered that VCAT fell within the description of “a body or organ of the judicial system” of Victoria.

Acting Justice of Appeal Kyrou came to a different conclusion.  His Honour’s reasoning followed a conventional contextual approach to statutory interpretation.  Having considered the interrelationship between the IAA and CCA, his Honour concluded that the definition of “court” in Article 2 of the Model Law could not be resorted to determine its meaning in s8.  This was because clear differences were incorporated into the CAA to those of the Model Law.  Even if that were put to one side, his Honour concluded that VCAT was not a “body or organ of the judicial system” in Victoria.  His Honour noted that there were relevant distinctions between VCAT and a court, namely that VCAT was not bound by the rules of evidence, cannot enforce its own decisions, some of its members are not legally qualified, it can be required to apply a statement of government policy and it can be required to provide advisory opinions.

 Impact of decision

The decision is important because if there is an arbitration agreement and one party requires the dispute to be determined by arbitration, no court or Tribunal in Victoria can stand in their way.  Moreover, it is important because courts in other States are bound to follow the Court of Appeal’s decision unless there are “compelling reasons” not to do so.[4]

It will be interesting to see whether an application for special leave is made.