In the recent decision of Lee v Lin & Anor [2022] QCA 140, the Queensland Court of Appeal considered the enforceability of an arbitration agreement.

Jungmin Lee (Appellant) and Zejian Lin (Respondent) entered into a Contract which contained a tiered dispute resolution clause. Clause 11(a)-(b) of the Contract required the parties to attempt to resolve any dispute via mutual agreement. If the parties failed to reach an agreement, clause 11(c) allowed the parties to:

…  refer the dispute to the Australian Commercial Disputes Centre (ACDC) for final settlement by a single arbitrator appointed in accordance with the Rules of the ACDC, or by another dispute resolution process suggested by ACDC and accepted by the parties. 

A dispute arose between the parties and then the Respondent commenced a proceeding in the Supreme Court. The Appellant sought an order that the proceeding be stayed and the dispute be referred to arbitration on the basis that clause 11 constituted a binding arbitration agreement within the meaning of s 7 of the Commercial Arbitration Act 2013 (Qld) (CAA). Relevantly, s 7(1) of the CAA defines an arbitration agreement as:

… an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. 

At first instance, Martin J found that clause 11 of the Contract did not amount to an arbitration agreement. His Honour determined that while the clause contemplates the possibility of arbitration, it is ultimately devoid of express agreement to submit a dispute to an arbitral tribunal.

The Court of Appeal overturned this decision. Dalton JA (Morrison JA and Kelly J in agreement) held that:

•    clause 11(c) of the Contract constituted an arbitration agreement under the CAA on the basis that a proper construction of “final settlement” in clause 11(c) reflected the parties’ agreement to have an arbitrator finally determine or end the dispute; and
•    while clause 11(c) indicated the parties may agree to another form of dispute resolution as suggested by ACDC, this did not detract from the fact that unless, and until, such agreement occurs, the parties have agreed to have the dispute determined by an arbitral tribunal.

In interpreting the language in clause 11(c), her Honour relied on the general principle that commercial contracts must be construed in a business-like way and citing earlier authorities, noted that the CAA was an area of law where the “making of subtle verbal distinctions is not to be encouraged”.

Having concluded there was a binding arbitration agreement, the Court of Appeal stayed the proceedings and referred the matter to arbitration.

The decision can be found here.