The recent Supreme Court of WA case of Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC illustrates the importance of complying with arbitration clauses, and by implication dispute resolution clauses of any kind.
Alternate Dispute Resolution (ADR) clauses are now almost standard in contracts of all kinds and across all industries. At their best, ADR procedures offer a faster and more cost effective way to resolve disputes, while preserving, or at least minimising further damage to, the business relationship between the parties. Section 8 of the Commercial Arbitration Act 2012 (WA) provides that a Court is required to refer parties to arbitration where the contract between them calls for it, unless the Court finds that the clause or agreement is null and void, inoperative or incapable of being carried out.
In the case of Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd the contract required that the parties submit their dispute to arbitration before they could commence proceedings in Court. Pipeline had commenced Court proceedings to resolve a dispute instead of complying with the ADR clause and going to arbitration. ATCO applied to suspend the proceedings (referred to as a “stay” of proceedings) to compel Pipeline to participate in arbitration as required by the contract. Pipeline argued that ATCO waived its right to arbitration by failing to enforce the clause earlier, that the contract had been terminated and the ADR clause was therefore unenforceable, and that the contract itself was uncertain and therefore void.
The Court rejected Pipeline’s arguments and referred the matter to arbitration even though the contract had been terminated, on the basis that the arbitration clause survived termination of the contract. The Court applied the law that an arbitration clause is to be treated as a contract operating in some ways independent to that of the underlying agreement. Because Pipeline did not comply with the ADR clause the Court ordered that Pipeline pay the legal costs incurred by ATCO by having to apply for a stay of Court proceedings.
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