Inghams Enterprises Pty Limited v Francis Gregory Hannigan

1. [1]

   From his farm near Casino, Francis Gregory Hannigan grows one day old chicks into chickens for Inghams Enterprises Pty Ltd (“Inghams”), a supplier of poultry to the market. Mr Hannigan receives the chicks, grows them and returns them to Inghams under a contract (“the Contract”) made between them on 22 December 2015. Disputes about the Contract have arisen between Inghams and Mr Hannigan in the last two years.

2. [2]

   On 8 August 2017, Inghams purported to terminate the Contract and refused to supply chicks for growing under it to Mr Hannigan, who maintained in response that the Contract was still on foot. He commenced proceedings in this Court (proceedings 2017/264087, “the 2017 proceedings”) against Inghams, seeking declarations that Inghams’ termination of the Contract was wrongful.

3. [3]

   In March this year, Robb J gave judgment for Mr Hannigan in the 2017 proceedings, declaring that Inghams had wrongfully terminated the Contract: Hannigan v Inghams Enterprises Pty Ltd [2019] NSWSC 321 (“Robb J’s judgment”). Inghams resumed supplying chicks to Mr Hannigan in June this year.

4. [4]

   Mr Hannigan and Inghams are in dispute again. Mr Hannigan claims damages from Inghams for loss of profits, due to its inability to grow Inghams-supplied chickens between August 2017 and June 2019. Inghams denies liability to pay Mr Hannigan damages on this account.

5. [5]

   Mr Hannigan issued a Notice of Dispute in May (“the Dispute”), engaging the Contract’s clause 23 dispute resolution procedures. A mediation has since taken place. But the mediation was unsuccessful. Mr Hannigan contends that Contract, clause 23 now entitles him to refer the dispute to arbitration and has issued a Notice of Dispute.

6. [6]

   Inghams disagrees. It commenced these proceedings to restrain the referral to arbitration and for declarations that: (a) Mr Hannigan’s damages claim does not fall within Contract, clause 23; and (b) if it did, Mr Hannigan has waived any entitlement to arbitrate the dispute under clause 23, because he commenced the 2017 proceedings.

7. [7]

   This judgment deals with those two issues. These reasons decide that Mr Hannigan is entitled to refer his damages claim to arbitration under clause 23 and has not waived that entitlement. In order to preserve Inghams’ rights of appeal, should it wish to exercise them, the Court will temporarily stay Mr Hannigan's entitlement to refer the dispute to arbitration under Contract, clause 23. The stay will apply only until 5pm on Friday, 27 September 2019.

8. [8]

   These proceedings were commenced by Summons and heard in the Court’s Duty List on Thursday, 5 September 2019 occupying approximately three hours’ hearing time. The parties agreed that, although the proceedings were in the Duty List, they should be determined on a final basis.

9. [9]

   Mr P.S. Braham SC and Mr D. Neggo of counsel, instructed by Geoffrey Alan Charnock, appeared for the plaintiff, Inghams. Mr M. Henry SC, instructed by James Harmon, appeared for the defendant, Mr Hannigan.

10. [10]

    The relevant contractual provisions and further relevant factual background may be shortly outlined.

Mr Hannigan, Inghams and a Contract Dispute – 2017 to 2019

1. [11]

   Mr Hannigan grows chickens supplied to him by Inghams, as one day old chicks. For this service, Inghams pays Mr Hannigan a “Fee” as defined under the Contract. Their mutual relations are regulated by the Contract. The Contract closely regulates the process of the supply of chicks and return of chickens, and the standard of care expected of Mr Hannigan whilst the chicks are in his custody.

2. [12]

   Limited parts of the Contract are relevant to the present contest about its proper construction. Less relevant provisions have not been extracted in these reasons.

3. [13]

   Mr Hannigan is defined as the “Grower” for relevant purposes under the Contract and Inghams by its own name. The recital to the Contract says that “Inghams agrees to supply Chickens to the Grower and the Grower agrees to raise those Chickens in accordance with the terms and conditions of this Agreement”. The agreement commenced on 6 February 2016 and will expire on 6 February 2021, a period it describes as the “Initial Term”.

4. [14]

   Inghams and the Grower are independent contractors (clause 2). Inghams’ general obligations under the Contract are defined in clauses 3.1 and 3.2 of the Contract:

5. [15]

   Mr Hannigan’s general obligations as Grower are provided for in clauses 4.1 to 4.7 of the Contract:

6. [16]

   Inghams undertakes to “arrange for the Birds [as defined] to be caught, loaded for transportation and delivered to Inghams’ chosen destination, free of charge to the Grower” (clause 7.2).

7. [17]

   Contract, clause 9 provides for Inghams’ payment to the Grower by reference to “Batches” of chickens (as defined) supplied to the Grower. Clauses 9.1 and 9.4 of the Contract are of present relevance, as follows:

8. [18]

   Contract, clause 10 provides for a payment system between the parties. It provides that “from the commencement of this agreement Inghams will make Payments to the Grower calculated in accordance with Annexure 1 and Annexure 2” (clause 10.1).

9. [19]

   Contract, clause 12 allocates the risk of loss to Inghams from any negligence of the Grower. Clauses 12.1 and 12.4 are of present relevance:

10. [20]

    Clause 13, deals with the subject of compulsory slaughter of chickens under the requirements of a State or Federal Government authority. The full detail of clause 13 need not be set out. But it provides that, if Inghams receives financial compensation from the authority in respect of destroyed Birds, Inghams must pay an amount from that compensation received, in most circumstances, being an amount calculated in accordance with a formula related to the Fee, multiplied by a percentage of the fee that “Inghams reasonably determines to be referable to the raising of the Birds in the relevant age group to that age”, taking into account factors such as Bird maturity at the time of destruction and the cost to the Grower to growing them to that age. That in turn is multiplied by the numbers of Birds.

11. [21]

    Inghams closely prescribes the standards of care of the chicks in a published Inghams Manual for the Grower, which is identified for Contractual purposes (clause 15). Clauses 15.1, 15.2 and 15.3.3 are of present relevance, as follows:

12. [22]

    The Contract contains an express termination clause (clause 20). Aspects of the operation of clause 20 were in dispute in the 2017 proceedings and were determined in Robb J’s judgment.

13. [23]

    The Contract contained a dispute resolution clause (clause 23). This clause is the central clause at issue in the present proceedings and is set out below in full:

14. [24]

    The “Fee” to be paid to the Grower, Mr Hannigan as defined under the Contract, is constructed by means of a complex calculation of adjustments to a price per Bird payable by Inghams to the Grower depending upon factors such as: the renewal of the Contract; the conditions in which the Birds are grown; Grower productivity; Bird mortality; and Grower efficiency, compared with other Inghams’ Growers.

15. [25]

    Limited parts of the 2017 proceedings are of present relevance. Inghams purported to terminate, by letter dated 8 August 2017, what it said in the 2017 proceedings was a chicken growing “arrangement” between itself and Mr Hannigan. Inghams did not admit that the written and signed form of Contract was binding upon it. Rather, it contended that there was a chicken growing relationship between the two parties not governed by the Contract, because of Mr Hannigan’s failure to sign and return the Contract document. Robb J found against Inghams on that contention.

16. [26]

    In the alternative, Inghams contended that, even if it were bound by the terms of the Contract, it was entitled to terminate it for Mr Hannigan’s breach, because of Mr Hannigan’s alleged failure to feed thousands of chickens in contravention of animal welfare standards and because of his alleged failure to provide Inghams, from time to time, with certain documents relating to the weight of chickens.

17. [27]

    Robb J also found that, even if Mr Hannigan was in material non-compliance with relevant animal welfare standards, Inghams was the primary cause of that non-compliance in breach of the Contract due to non-delivery of necessary feed to Mr Hannigan’s enterprise.

18. [28]

    Mr Hannigan’s claim in the 2017 proceedings did not include any claim for consequential relief, including damages, as Robb J explained in his judgment, (at [24]):

19. [29]

    Mr Hannigan’s decision not to include a claim for consequential loss was a deliberate one, constrained as it was, he says, by the commercial circumstances he faced. Mr Henry SC, who also appeared for Mr Hannigan in the 2017 proceedings, explained this to Robb J at a directions hearing on 10 May 2018, in the following terms:

20. [30]

    The commercial reasoning behind this approach is understandable. Mr Henry SC’s then statement to the Court is consistent with Mr Hannigan’s evidence adduced in these proceedings about his state of mind at the time. He was not cross-examined in these proceedings and his affidavit evidence is accepted. Mr Hannigan explained, “I wanted to have that dispute determined as quickly as possible”. He has six chicken sheds on his property, which collectively housed approximately 210,000 chickens. The logistics and costs of running those sheds are substantial. For that reason he said, “I wanted certainty as to whether the Contract remained on foot as soon as possible”. His belief was that “the quickest way in which I was likely to obtain that certainty, by a judgment of the Court, was to confine the matters in dispute in the [2017] proceedings”. He not unreasonably believed that bringing a claim for damages in the 2017 proceedings would delay, complicate and increase the costs of the 2017 proceedings. Consistently with the position, his counsel stated to the Court, he certainly thought, as he said, that, “throughout the course of the [2017] proceedings I believed that I had reserved my position to claim damages at a later point if I had such a claim”.

21. [31]

    Mr Henry SC’s statements at the directions hearing articulated this reasoning in substance and Robb J accepted that the 2017 proceedings were limited in this way.

22. [32]

    On 29 May 2019, Mr Hannigan issued a Notice of Dispute to Inghams based upon Inghams’ failure to supply chickens to Mr Hannigan from 8 August 2017 (the purported termination date by Inghams) to 17 June 2019 (the resumption date of Inghams’ supply). The Notice of Dispute contained the following “details of dispute”:

23. [33]

    On 25 June 2019, Mr Hannigan wrote to the solicitors for Inghams complaining that no genuine attempt had been made to use “best efforts” to resolve the matter, either by the solicitors or by Inghams, as required by Contract, clause 23.3.

24. [34]

    On 25 June 2019, the solicitors for Inghams replied in the following terms:

25. [35]

    Other more detailed arguments were elaborated by Inghams’ solicitors in correspondence and in response by Mr Hannigan. The detail of that correspondence need not be included here, as the substance of the arguments are dealt with below.

26. [36]

    The matter came to a head on 28 August 2019. The parties were mediating that day and the following day. Inghams’ solicitors sought in correspondence to have Mr Hannigan confirm by 5pm that day that he would not take any step to refer any of the matters set out in the Notice of Dispute to arbitration without first giving 24 hours’ notice. The same day in response, Mr Hannigan made clear through his solicitor, in the event that mediation were unsuccessful on the following day, “we hold instructions to adhere to the Contract between the parties and seek it be appointed before an arbitrator”. The following day, Inghams commenced these proceedings.

27. [37]

    These reasons now deal with the two main issues Inghams raises. These are: (a) whether clause 23 of the Contract encompasses a claim for damages; and (b) whether Mr Hannigan has by his conduct waived his right to refer this dispute to arbitration. The reasons first outline Inghams’ contentions. The Court accepts much of Mr Hannigan’s contentions in reply and has included them in the Court’s analysis of the two issues.

(a) Whether Clause 23 Encompasses a Claim for Damages

1. [38]

   Inghams argues that the word "payable" connotes a legally enforceable obligation to pay: Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190, (at [118]). It submits there is no legally enforceable obligation to pay damages for breach of the Contract pending the judicial determination of Mr Hannigan's claim. Nor could any money be "owed'' until determination of his claim. The Dispute, as notified, does not concern any monetary amount "payable and/or owed'' by Inghams. Rather, it is a claim for damages for breach of the Contract for failure to supply chicks for growing between August 2017 and June 2019.

2. [39]

   Inghams further contends that, even if damages for breach of the Contract become payable, they are not payable "under the Agreement".

3. [40]

   The Contract deals with payments in some detail. The Contract provides that Inghams will pay Mr Hannigan for each batch of chickens grown [Clause 9.1]. The payment is to be calculated by reference to the "Fee" [Clause 9.1 and Annexure I]. The "Fee" may be re­negotiated if Inghams' growing requirements change over time [Clause 15.3.3]. Also, the amount of the payments may be reduced for various reasons, such as: if chickens are unsuitable based on animal welfare standards [Clause 9.4], or if lnghams has suffered financial loss caused by the negligence of Mr Hannigan [Clause 12].

4. [41]

   The Contract does not contain a clause dealing with the payment of damages in the event of its breach. There is no "primary obligation" to pay damages Photo Production Ltd v Securicor Transport Ltd (1980) AC 827, at 848F-849D, per Lord Diplock; [1980] 1 All ER 556; [1980] 2 WLR 283. A breach of the Agreement may give rise to a "secondary obligation" to pay damages. Inghams submits that on its proper construction, clause 23.6.1 applies to payments of money due only as primary obligations, not secondary obligations. Inghams argues this is the only construction of clause 23 that is sensibly available, having regard to the preceding words ''payable and/or owed''. Any entitlement of Mr Hannigan to pursue a secondary obligation for damages for breach of contract is, it is submitted, at present, inchoate.

5. [42]

   The arbitration process is limited to disputes concerning the amounts to be paid “under the Contract”. Inghams’ submits that the parties intended that such disputes would be dealt with quickly and finally. On the Contract’s true construction, Inghams says that other disputes are not required to be submitted to arbitration and that the present Dispute is in the latter category.

6. [43]

   Inghams submits that the text of clause 23.6, including as it does reference to clauses 9.4, 10.11, 12.13 and 15.3.3, supports Inghams’ construction of the agreement. Inghams contends these are all clauses which identify monies payable “under the Contract”. Inghams’ contentions then examine the significance of the inclusion of each of these clauses.

7. [44]

   For example, Inghams submits that clause 9.4 allows Inghams to deduct from the payment of the Fee an amount based on Inghams “normal and reasonable expectations” as to the weight of Birds, the numbers of Birds rejected or based on the number of Birds being processed, or based on treating the Grower as a non-accredited facility. Inghams argues that amounts deducted from payments to the Grower under clause 9.4 involve substantial matters of judgment and the need to implement welfare standards. These are matters that could well call for urgent arbitration resolution and thus they are deliberately included in clause 23.6.1, and dealt with expeditiously as is required by clause 23.8.

8. [45]

   Clause 10 is also mentioned in clause 23.6.1. It contains the fundamental obligation to make payments to the Grower in accordance with the calculations in Contract, Annexure 1 and 2. This, Inghams says, is another fitting example of specific payments being made “under this agreement”.

9. [46]

   Inghams contends clause 12 is mentioned in clause 23.6.1 for similar reasons. Clause 12 creates a right to recoup financial loss caused by the Grower’s negligence. Inghams points out this is a right to offset such loss against payments due to the Grower (although limited in amount to the cost of goods supplied to the Grower). Inghams contrasts clauses like clause 12.1, with the absence of a general right to seek damages under the Contract in favour of the Grower. Importantly, Inghams points out that clause 12.4 refers “any dispute relating to the amount of any loss pursuant to clause 12 will be resolved in accordance with” the dispute resolution and arbitration clauses, namely the provisions of clause 23. The effect of clause 12.4, Inghams says, is that it must pay the Grower within 14 days of the Friday of the week in which the last Birds in a Batch are collected by Inghams “one half of the Payment determined by it to be due to the Grower in respect of the relevant Batch”. This is designed to maintain part of the Grower’s cash flow, while an arbitration takes place. And this will result in “an adjustment [being] made after the resolution of the Dispute”.

10. [47]

    Inghams submits clause 13 also contains a formula that involves a degree of reasonable judgment on the part of Inghams, and is therefore apt for rapid referral to arbitration and that is why it is indeed referred to in clause 23.6.

11. [48]

    Finally, clause 23.6 refers to clause 15.3.3 of the Contract. This clause requires the parties to “renegotiate the Fee”, having regard to the effect of any amendments taking place [to the Manual]. Inghams submits that a fast arbitration process is the logical back-up in case negotiated consensus cannot be reached about the Fee.

12. [49]

    Although Inghams contends that Mr Hannigan has waived the use of clause 23 as a whole (see its waiver argument below), without prejudice to that contention, Inghams went through a mediation with Mr Hannigan on 28 and 29 August. The present contest is clearly at least a “Dispute” within clauses 23.1 to 23.4, as these provisions are sufficiently broadly drafted to cover all disputes arising out of the Contract, including claims for damages, such as the present claim. It is undoubtedly a Dispute “regarding any breach or purported breach of this agreement” and it is a matter, “concerning a party’s performance or observance of its obligations under this agreement”.

13. [50]

    The full context of clause 23 Inghams says is important to its argument. The breadth of the definition of “Dispute” in clauses 23.1 to 23.4 it submits is far wider than the words in 23.6 “if…the dispute concerns…” followed by words of limitation confining the scope of the Dispute. This is less than its unconfined width in clause 23.1. Inghams submits that the subset of disputes, which are required to go to arbitration under clause 23.6, are only disputes that concern amounts the payment of which are expressly prescribed under the Contract.

14. [51]

    Inghams submits that this conclusion is reinforced by the words in clause 23.6.1, “including without limitation”. Inghams asks rhetorically: why would the drafter of the Contract craft clause 23.6.1 the way it is crafted; not repeating the general words at the beginning of clause 23.1 regarding breach or purported breach of the agreement. The unconfined definition of “Dispute” would have been an easy vehicle for reference of all likely contests to arbitration, if it had been intended to pick up a claim for damages for breach. Inghams submits that the clear inference from this drafting is that the Contract clause 23.1 was intended to pick up claims for damages for breach of contract and send them off to mediation. But such claims were not to be included in references to arbitration under clause 23.6. Rather, the latter provision is limited to amounts that expressly become payable under the Contract.

15. [52]

    Inghams submits that the Contract, clause 23 requires the parties to cooperate towards quick arbitral determination. Clause 23.8 is consistent with this construction. The matters to be referred to arbitration under the Contact would need to be resolved quickly and efficiently in a continuing commercial relationship of constant chick delivery, chicken redelivery and payment. A Grower such as Mr Hannigan would need to know where he stands, as would Inghams, so that the rapid resolution of disputes about rejecting chickens, about calculating fees and about the consequences of destruction of chickens can be sorted out quickly. Inghams says its construction aids this objective.

16. [53]

    Finally, Inghams further submits that on its construction the words in clause 23.6.1 “payable and/or owed by either party” [emphasis added] have work to do and are not inconsistent with its construction. Amounts do become payable “under” the Contract both ways. To the extent that clause 23.6.1 refers to “monetary amounts payable and/or owed by either party” [emphasis added], the specific provisions of the Contract already referred to, do require payment in both directions. For example, the recalculation of the Fee relates to monies payable by Inghams to Mr Hannigan. Claw backs of money from Mr Hannigan to Inghams are activated under clause 12.

17. [54]

    The Court finds Mr Hannigan’s reply submissions put by Mr Henry SC to be persuasive. The Court accepts the logic of those submissions which it adopts as the Court’s analysis of the operation of clause 23. The Court's analysis, largely based on Mr Hannigan’s submissions, is set out below.

18. [55]

    The starting point is applicable legal principle. Of course, the Contract is a commercial agreement which should be construed in accordance with the principles that apply to the construction of such agreements: Electricity Generation Corp v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp (2014) 251 CLR 640; (2014) 306 ALR 25; [2014] HCA 7 (“Woodside”) and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37 (“Wright Prospecting”).

19. [56]

    But the Court is here also construing an arbitration clause. Within the broad canons of construction laid down by cases such as Woodside and Wright Prospecting, arbitration clauses draw specific considerations into focus. Some of these were identified by Gleeson CJ in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 (“Francis Travel”), at 165B-E; (1996) 131 FLR 422:

20. [57]

    These principles have been further discussed by Bathurst CJ in Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95 (“Welker”) and by the Full Court of the Federal Court of Australia in Hancock Prospecting Pty Limited v Rinehart & Ors (2017) 350 ALR 658; [2017] FCAFC 170.

21. [58]

    These cases inform the approach the Court should take to the construction of clause 23. But as Bathurst CJ said in Welker, (at [121]) irrespective of the language of the clause, the Court should not apply a presumption, that the parties are likely to have intended all their disputes to be decided by the one tribunal.

22. [59]

    First, Inghams’ argument gives insufficient weight to the word "concerns” in clause 23.6.1. Mr Henry SC submits, correctly in my view, that Inghams’ argument reads the word "concerns", as if it were other words, such as "is a claim for". Clause 23.6 does not limit its operation merely to "claims for any amount payable or owed under the agreement". The introductory word "concerns" broadens its scope. Clause 23.6 is not confined to claims in debt or amounts payable or that may be calculated as payable arising under express terms of the agreement.

23. [60]

    Giving appropriate emphasis to the word "concerns" in clause 23.6 readily accommodates within the words of the Contract the considerations that Gleeson CJ emphasised in Francis Travel about the approach to be considered in construing arbitration clauses.

24. [61]

    Secondly, the express reference to clauses 9.4, 10, 11, 12, 13 and 15.3.3 in clause 23.6.1 does not assist the construction for which Inghams contends: based as it is, upon an analysis that the Contract is attempting to draw a fundamental distinction between actions based on primary and secondary contractual obligations.

25. [62]

    As Mr Henry SC submits, “clause 12.1 defies that proposition". No monetary amount is able to be directly calculated from clause 12, as being payable under the Contract. Rather, clause 12 in substance describes no more than a claim for damages that Inghams may have, as its words bear out: "the Grower will bear financial losses suffered by Inghams" [Emphasis added].

26. [63]

    Moreover, one would not ordinarily read provisions which are introduced in clause 23.6.1 by words of inclusion, "including without limitation matters relating to…", as limiting the subject matter the words that precede the words of inclusion. It is quite consistent with the proper construction of clause 23.6.1 that the references in it to the other specific clauses of the Contract are no more than examples that do not confine the broad natural meaning of the words preceding the words inclusion.

27. [64]

    Thirdly, Inghams’ construction of clause 23 introduces a degree of arbitrariness to the operation of the clause that does not seem consonant with the predictable operation of a clause designed to provide rapid certainty in a commercial contract. As Mr Henry SC points out, if Mr Hannigan received chicks and performed his part of the bargain by growing them and they were in turn collected by Inghams, ordinarily the Fee calculated in accordance with clause 9 would become due to Mr Hannigan. Mr Hannigan could attempt to recover the fee by suing on clause 9 as an action in debt. In that case, clause 23.6.1 would operate to allow the dispute to be referred to arbitration. Alternatively, Mr Hannigan could sue to recover the money as damages for breach of contract, that is, a breach of the obligation to pay the Fee. In these circumstances, clause 23.6.1 would, on Inghams’ construction, not operate to allow referral of the dispute to arbitration. Such inconsistency in outcome between two modes of suing for non-payment of the same fee could hardly have been intended by the contracting parties.

28. [65]

    Fourthly, it does no violence to the words of clause 23.6.1 to see that in an action for breach of contract the calculation of the quantum of the "monetary amount payable and/or owed by either party to the other under this agreement" is the measure of the ultimate damages that may be awarded for breach of this Contract. What is actually payable as a Fee under the Contract would be a critical integer in any damages calculation at the suit of Mr Hannigan. At least in that sense, it can be said without difficulty that the dispute "concerns" such "money amounts".

29. [66]

    Finally, Mr Hannigan points out, and the Court accepts, that another odd consequence would follow from Inghams’ construction of the Contract, clause 23. If Inghams cannot deliver chicks in breach of the Contract, no money would become payable under clause 9. Mr Hannigan’s only remedy would be for breach of contract, as non-delivery would mean that no monies would become payable under the Contract by way of accrual of a Fee. On Inghams’ construction of clause 23, the requirement for such a dispute to go to Court, not arbitration, because Inghams’ breach of contract, prevents monies becoming payable under the Contract. This creates a not obviously rational outcome. The reason why the Contract would require that different procedural path in those circumstances, contrasted with circumstances where chicks were actually delivered, is not at all obvious.

30. [67]

    For these reasons, Mr Hannigan is successful on the first issue.

(b) Whether Waiver Prevents Mr Hannigan Referring the Dispute to Arbitration

1. [68]

   Inghams argues in the alternative, that even if the present Dispute falls within clause 23.6.1, Mr Hannigan has waived his entitlement to rely on that clause. Mr Hannigan’s success on the first issue means that this issue must also now be considered.

2. [69]

   Inghams points out that the parties nominated the IAMA Arbitration Rules to govern any arbitration under the Contract. Those rules, it submits, give the arbitral tribunal seized of the matter the power to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement [Article 23.1]. That means that the question in the 2017 proceedings as to the existence of the Contract and the validity of its termination could equally have been raised and dealt with in an arbitration, at the same time as any claim for breach of that agreement was determined. Inghams submits it was not necessary for Mr Hannigan to approach the Court to obtain a declaration as to the existence of the Contract before commencing an arbitration in relation to its alleged breach.

3. [70]

   Inghams submits that by commencing and conducting the 2017 proceedings in this Court, Mr Hannigan acted in a manner inconsistent with his right to have the questions in those proceedings determined in an arbitration. Inghams submits that he thereby waived that right: Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303, (at [30]); (2013) 303 ALR 199; [2013] HCA 46 (“Expense Reduction”), see also Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641; (1937) 11 ALJR 272; [1937] HCA 58. In Expense Reduction, (at [30]), the High Court said of the doctrine of waiver:

4. [71]

   Inghams submits that Mr Hannigan’s conduct here gives rise to such a waiver.

5. [72]

   Once the 2017 proceedings came before this Court, Inghams submits the Court became the proper forum to determine any question of damages for breach of the Contract; after all, it was already being asked to rule upon the existence and termination of the same Contract. Inghams says the existence and termination of the Contract is closely bound up with the question of damages for breach by reason of the termination and is all part of the same overall controversy. But having agitated half of that controversy in this Court in the 2017 proceedings, Inghams submits Mr Hannigan now seeks to improperly agitate the other half in arbitration.

6. [73]

   Furthermore, Inghams submits it was open to it to resist the bringing of the 2017 proceedings in this Court, on the basis that the subject matter of the case was required to be submitted to mediation and (if Mr Hannigan’s contentions are right) arbitration and it did not do so. The conduct of both parties in conducting the 2017 proceedings to final judgment in this Court indicates an acquiescence between them that they would not refer that dispute to mediation or arbitration.

7. [74]

   Inghams submits, when Mr Hannigan commenced the 2017 proceedings without observing the procedural requirements of clause 23.1, that was an act inconsistent with the application of clause 23 to a claim for damages, arising out of a breach of contract. Inghams contends that there is a strong connection between the allegations of breach and damages in this case and the outcome of the 2017 proceedings. Inghams submits that Mr Hannigan cannot ignore clause 23 commencing a proceeding choosing the forum of the Court, waiving clause 23 rights and then later seeking to insist upon those rights when consequential loss is being assessed, loss that could have been brought in the 2017 proceedings.

8. [75]

   Put another way, Inghams submits that Mr Hannigan, having abandoned reliance upon clause 23 when he commenced the 2017 proceedings, cannot now insist upon compliance with it. Mr Hannigan having engaged in that conduct and Inghams acquiescing in it, he is now estopped from relying upon his right to enliven the arbitral mechanism of clause 23.

9. [76]

   Mr Hannigan’s response to Inghams’ waiver arguments are also persuasive. The Court concludes that Mr Hannigan has not waived his right to have his damages claim arbitrated under clause 23 of the Contract. The Court’s analysis of this issue also largely reflects the submissions Mr Henry SC, put on behalf of Mr Hannigan.

10. [77]

    The Court concludes there was no waiver for the following reasons. First, this was not a case of waiver within the principles of Expense Reduction, of Mr Hannigan doing an intentional act (of abandoning a right to go to arbitration), by now acting in a manner inconsistent with that right. There was no objective intention to abandon the right here because Mr Hannigan’s intention to preserve the right was clearly signalled to all parties. Nor can it be said that Mr Hannigan has acted inconsistently with the present exercise of his rights under Contract, clause 23.

11. [78]

    In Mr Hannigan’s response to Inghams’ termination of the Contract in August 2017, he immediately put in issue the validity of the termination and expressly reserved his rights to seek damages. But he also made that reservation clear in later correspondence, in his statement of issues to the Court and in the directions hearing before Robb J in May 2018. And Robb J’s judgment in the 2017 proceedings, (at [24]), cited above, clearly accepted that this was the way the case was being conducted by Mr Hannigan: that consequential damages that might arise from a finding that Inghams had wrongfully terminated the Contract in August 2017 would be deferred and would not dealt with in that litigation.

12. [79]

    And there was a sound reason for that. Mr Hannigan was not accepting the repudiatory effect of Inghams’ notice of termination and refusal to supply chicks to Mr Hannigan. He did not reply to Inghams’ conduct by accepting the repudiation and standing on his entitlement to sue for loss of bargain damages. Rather, he sought declaratory relief that the notice of termination was invalid.

13. [80]

    Secondly, the procedural course he took also meant that his losses did not crystalize. By the time he had filed his Summons on 30 August 2017, there had been a very short period of non-delivery of chickens from 8 August 2017, the date of the termination letter. But whatever damage he had suffered by that point for non-delivery of chicks would have been negligible. He then had little or no damages to claim. He was really only entitled to nominal damages for any breach, until he saw the result of the 2017 proceedings, how long they took, and how the matter of Inghams’ future delivery of chicks in fact unfolded. He clearly had some right to damages at this point. But as a practical matter, it was rational and procedurally efficient for him to wait and see whether it was worth pursuing such a claim until the outcome of the 2017 proceedings was known.

14. [81]

    For these reasons, there was no actual inconsistency between Mr Hannigan’s present threatened use of clause 23.6 to refer the dispute to arbitration and his earlier course in bringing the 2017 proceedings for declaratory relief that Inghams was in breach of the Contract by purporting to terminate and not supplying chicks with the Contract. Mr Hannigan says, and the Court accepts, that it was at least procedurally difficult, impractical and not necessarily in conformity with the objectives of Civil Procedure Act 2005, s 56 for the present claim to be brought at that time. Moreover, there would have hardly been any overlap between the present damages claim and such damages that might have been assessed in those proceedings. The present claim against Inghams relates to events occurring after 8 August 2017. The potential damages claim against Mr Hannigan in the 2017 proceedings related entirely to events before 8 August 2017.

15. [82]

    Thirdly, Mr Hannigan’s conduct in commencing the 2017 proceedings is not in itself necessarily inconsistent with his later use of clause 23. Regard must be had to the effect of clause 23.11, which allows a party to the Contract to seek “urgent injunctive or declaratory relief”. That is exactly what Mr Hannigan sought in the 2017 proceedings. His Summons claimed declaratory relief and it was brought on an urgent basis. Thus, his election to take the course of commencing proceedings in the Court comes within an exception to clause 23 in the Contract and is not incompatible with his present attempts to use of clause 23.

16. [83]

    For these reasons, in my view, Mr Hannigan is also successful in relation to the second issue.

17. [84]

    For these reasons the Court makes the following declarations and orders:

    1. (1)

       Declare that the dispute the subject of the defendant’s “Notice of Dispute” dated 29 May 2019 may be submitted to arbitration under clause 23.6 of the Contract made between the plaintiff and the defendant on 22 December 2015.

    2. (2)

       Order that the defendant be restrained from taking any steps to refer the Dispute to arbitration, until 5pm on Friday 27 September 2019, unless before then the plaintiff communicates to the defendant that the plaintiff does not intend to appeal from this judgment.

    3. (3)

       Order the plaintiff pay the defendant’s costs of these proceedings.