Many Australian Standard construction contracts, commonly used for construction projects in Queensland and across Australia, contain dispute resolution clauses referring disputes to Arbitration and are binding Arbitration Agreements for the purposes of the Commercial Arbitration Act 2013 (Qld) and equivalent legislation in other states. A party to such a construction contract may be unaware it is also a party to a binding Arbitration Agreement, and that Arbitration is the agreed forum for disputes rather than the Courts. A party may learn this for the first time after having already commenced Court proceedings, having incurred legal costs unnecessarily to bring the dispute to the Court.
The Queensland Court of Appeal in Cheshire Contractors Pty Ltd v Civil Mining & Construction Pty Ltd recently considered that scenario and a technical argument as to why the subject dispute clause (and the subcontract itself) did not constitute a binding Arbitration Agreement. The contention was, that to fall within the ambit of a binding Arbitration Agreement, the dispute clause itself must describe the legal relationship governed by the agreement. The Court unanimously rejected that contention, confirming that the legal relationship does not need to be recorded in the dispute clause or subcontract itself for it to constitute a binding Arbitration Agreement, rather the circumstances of the dispute need to merely identify that a legal relationship exists. In this instance, the existence of a legal relationship was simple to demonstrate as the parties were the named parties to the subcontract.
