Mad Max: Fury Road was an unexpected critical and commercial success. However, it is now the subject of a dispute between Kennedy Miller Mitchell Pty Ltd and Warner Bros over alleged unpaid earnings.

Whilst we can’t speak for the Mad Max universe, in Australia, justice for commercial parties can be achieved expeditiously by referring a dispute to arbitration.

In the most recent act of this ongoing dispute, the New South Wales Court of Appeal (the Court) delivered its decision in Warner Bros Feature Productions Pty Ltd v Kennedy Miller Mitchell Films Pty Ltd [2018] NSWCA 81. This judgment continues to demonstrate Australia’s ongoing support of the arbitration process by staying legal proceedings in favour of arbitration in California. This result is consistent with the overarching approach of minimal judicial intervention in international and domestic arbitrations which permeates many legal jurisdictions. However, like all commercial contract disputes, each dispute turns upon the proper construction of the contract in question.

Facts

Kennedy Miller Mitchell Films Pty Ltd and Kennedy Miller Mitchell Services Pty Ltd (Kennedy Companies) entered into an agreement with Warner Bros Feature Productions Pty Ltd (WB Productions) to supply the services of Mr George Miller and Mr Doug Mitchell for the production and direction of “Max Max: Fury Road” (the Agreement). The Agreement provided for a bonus payment scheme for the Kennedy Companies, if the net cost of the film was below an agreed figure. A dispute arose in relation to the calculation of those costs and the payment of the bonus.

The proceedings

The Kennedy Companies commenced proceedings in the New South Wales Supreme Court against WB Productions and Warner Bros Entertainment Inc (WB Entertainment) alleging a breach of the Agreement by WB Productions and that they had both engaged in misleading and deceptive conduct.

WB Productions sought a stay of the proceedings, relying upon an arbitration clause requiring disputes to be referred to arbitration in California under the JAMS Arbitration Rules. WB Entertainment sought a stay of the proceedings on the basis that Australia was a clearly inappropriate forum for the dispute.

WB Productions argued that the arbitration clause was a standard clause incorporated into the Agreement, which provided that the “balance of terms” would be “WB standard for ‘A list’ directors and producers”, subject to “good faith negotiations”.

The relevant issues for the primary judge and on appeal were:

  1. whether the Agreement incorporated terms which were “WB standard” prior to good faith negotiations occurring; and
  2. whether an arbitration clause was incorporated into the Agreement as it was a term which was “WB Standard”.

Were the terms binding before good faith negotiations?

Both the primary judge and the Court of Appeal held that the WB standard terms were incorporated into the Agreement prior to any good faith negotiations occurring. This was a matter of construction of the Agreement.

Did the WB standard terms include an arbitration clause?

The primary judge dismissed the application for a stay of the proceedings on the basis that the evidence did not establish that WB standard terms included an arbitration clause.

The Court of Appeal construed the phrase of “WB standard” as meaning “habitually proffered”. This was a broader construction compared to the primary judge’s construction that the words meant “sufficient preponderance” to make their use “usual”. Based upon the evidence before the Court, the Agreement incorporated an arbitration clause which was contained in many WB Entertainment “form agreements”.

Accordingly, the Court stayed the proceedings entirely. The proceedings between the Kennedy Companies and WB Productions were stayed under section 7(2) of the International Arbitration Act 1972 (Cth). The proceedings between the Kennedy Companies and WB Entertainment were stayed (with a right to seek to have the stay lifted) because they were clearly linked to the claim against WB Productions.

Our thoughts

Section 7(2) of the International Arbitration Act 1972 (Cth) implements the provisions under Article II(3) of the New York Convention and Article 8 of the UNCITRAL Model Law, which require disputes commenced in court which are the subject of an arbitration agreement to be referred to arbitration, unless an arbitration agreement is null, void, inoperative or incapable of being performed. The New York Convention is a pro-arbitration and pro-enforcement Convention which has 159 contracting states. The Court’s decision to stay proceedings in favour of arbitration is consistent with the principles of minimal judicial intervention and judicial support for the arbitration process.

The stay of court proceedings is just one of the many tools used by Australian courts to support the international arbitration process. Another remedial tool which may be of assistance to parties is an anti-suit injunction. Courts in Australia still possess wide powers in granting anti-suit injunctions to support the arbitration process.