InfraShore Pty Ltd v Health Administration Corporation  NSWSC 736
The court will not refer a dispute to arbitration unless the action is subject to an arbitration agreement. Care must be taken when drafting dispute resolution clauses to avoid ambiguity as to the dispute resolution procedure to be followed by the parties.
The Health Administration Corporation (plaintiff) and InfraShore Pty Ltd (defendant) entered into a contract for the design, construction, maintenance and provision of services in relation to the Royal North Shore Hospital.
The dispute resolution clause in the contract provided that disputes be referred to the Project Co-Ordination Group and if not resolved, to the designated representatives of the parties. Failing resolution by the representatives, by agreement, disputes could be referred to expert determination, arbitration or some other procedure agreed by the parties. Expert determinations were binding unless referred to arbitration or legal proceedings within ten business days.
The defendant issued a variation claim under the contract for additional work necessitated by the presence of asbestos. By agreement, the dispute was referred to expert determination. The expert determined that the defendant was not entitled to additional payment and on the same day the defendant commenced legal proceedings. Ten days later, the plaintiff served the defendant with a notice referring the dispute to arbitration, and filed a motion seeking an order that the proceedings be referred to arbitration.
Justice Hammerschlag dismissed the motion, finding that the dispute was not one which either party could require to be arbitrated.
Section 8(1) of the Commercial Arbitration Act 2010 (NSW) (Act) provides that the court must refer the parties to arbitration, where the following four requirements are met:
- there is brought before a court an action;
- the action is in a matter which is the subject of an arbitration agreement;
- not later than when submitting its first statement on the substance of a dispute, a party to the action requests that the action be referred to arbitration; and
- the agreement is not null and void, inoperative, or incapable of being performed.
The issue was whether the action was the subject of an arbitration agreement.
As a matter of construction, neither party could require arbitration following an expert determination. There was no agreement that arbitration would prevail over litigation. Therefore, the dispute was not the subject of an arbitration agreement for the purposes of section 8(1) of the Act.