Inghams Enterprises Pty Limited v Hannigan

1. [1]

   BELL P: This is an application for leave to appeal from the decision of Slattery J (the primary judge) of 16 September 2019, concerning the proper forum for the determination of a claim for damages for breach of contract, the relevant contract being a standard form chicken growing contract (the Agreement) between Mr Francis Gregory Hannigan (Mr Hannigan) and Inghams Enterprises Pty Limited (Inghams).

2. [2]

   Mr Hannigan sought to have his claim referred to arbitration, pursuant to cl 23.6 of the Agreement but Inghams resisted, initiating proceedings in this Court to restrain the commencement or continuation of any arbitration and seeking declarations as to the proper construction of the Agreement.

3. [3]

   As shall be seen, the dispute resolution clause in the Agreement contemplates the litigation of some disputes in court proceedings and the arbitration of other disputes, following a preliminary mediation requirement. At first instance, the primary judge held that the claim for damages fell within the scope of the arbitration sub-clause and, accordingly, declined to restrain the commencement or continuation of the arbitration and dismissed Inghams’ proceedings: [2019] NSWSC 1186.

4. [4]

   Inghams seeks leave to appeal because of the fact that it was considered that the value of the outcome of the real issue in dispute, namely the question of forum, did not exceed $100,000 with the consequence that s 101(2)(r) of the Supreme Court Act 1970 (NSW) applied: see, generally, Gaynor v Attorney General of New South Wales [2020] NSWCA 48 at [13]-[20].

5. [5]

   Inghams raised two main issues on the prospective appeal:

   1. (1)

      whether the primary judge erred in finding that the notified dispute between the parties must be referred to arbitration, pursuant to cl 23.6 of the Agreement; and

   2. (2)

      whether the primary judge erred in not finding that Mr Hannigan had waived his right to refer the dispute to arbitration pursuant to cl 23.6 of the Agreement.

6. [6]

   In my opinion, leave to appeal should be granted in circumstances where final and injunctive declaratory relief was sought, the arguments were not free of complexity and called for a consideration of the principles applicable to the interpretation of a complex dispute resolution clause, and the ultimate commercial ramifications for the parties were significant.

The Agreement

1. [7]

   Under the Agreement entered into on 22 December 2015, Mr Hannigan receives batches of one day old chicks (referred to in the Agreement as “Birds”) from Inghams, grows them in sheds into chickens and returns them to Inghams. For this service, Inghams pays Mr Hannigan a “Fee”, as defined in the Agreement. The Agreement 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. [8]

   Inghams’ general obligations under the Agreement are defined in cl 3.1 and 3.2 of the Agreement, as follows:

3. [9]

   One oddity of the Agreement which may present issues in the assessment of any claim for damages, irrespective of the forum in which that claim is determined, is that it does not appear to specify the number of Batches that Inghams will supply per year or during the life of the Agreement. The reference to “placement densities commensurate with the Commercial Growers” in cl 3.2 appears to reflect the fact that a grower such as Mr Hannigan is a member of a pool or collective and, by a complex series of formulae in Annexures 2 and 3 of the Agreement, the fee paid to and efficiency rating of any one grower in the pool is affected by his or her performance relative to other growers. It is not necessary to go into the complexity of such formulae, other than to note that they have implications for the calculation of the damages claimed in the present case and the potential complexity of that exercise.

4. [10]

   Mr Hannigan’s general obligations as Grower are provided for in cl 4, with cl 4.1 to 4.7 of the Agreement providing as follows:

5. [11]

   Clause 9.1 of the Agreement provides that:

6. [12]

   Clause 9.4 of the Agreement provides that:

7. [13]

   Clause 10.1 of the Agreement provides that:

8. [14]

   Clause 7 of Annexure 1 highlights the complexity of the calculation of the Fee payable for chickens collected by Inghams from the growers, making provision for detailed adjustment by the application of productivity criteria. Again, it is not necessary to descend to further detail in relation to this calculation, other than to note that the calculation of a Fee payable (and thus the calculation of any damages for breach of contract) would not appear to be a straightforward exercise free from complexity.

9. [15]

   Clause 11 of the Agreement provides:

10. [16]

    Clause 12 of the Agreement provides:

11. [17]

    Clause 15.3.3 of the Agreement provides:

12. [18]

    The Agreement contains a dispute resolution clause which is the central clause at issue in the present proceedings. Clause 23 relevantly provides:

The 2017 proceedings and the proceedings at first instance

1. [19]

   Before considering the proceedings at first instance, an earlier set of proceedings between the parties should be noted.

2. [20]

   On 8 August 2017, Inghams purported to terminate the Agreement and refused to supply chicks for growing to Mr Hannigan, who maintained in response that the Agreement was still on foot. Inghams contended that there was a chicken growing relationship between the two parties which was not governed by the Agreement because of Mr Hannigan’s failure to sign and return the Agreement document. Alternatively, Inghams contended that even if it were bound by the terms of the Agreement, it was entitled to terminate it on account of Mr Hannigan’s breach, due to his 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 the chickens.

3. [21]

   Mr Hannigan commenced proceedings in the Supreme Court on 30 August 2017 (the 2017 proceedings), seeking a declaration that Inghams’ purported termination of the Agreement was wrongful. He did not, however, seek damages in those proceedings and did not (and has never) terminated the Agreement. The speed with which proceedings were commenced reflected their urgency from Mr Hannigan’s perspective. His business and livelihood were under threat and he wanted the Agreement to continue, seeking a declaration in effect that it remained on foot. At [29]-[30] of his judgment, the primary judge observed that:

4. [22]

   The 2017 proceedings were heard by Robb J who entered judgment for Mr Hannigan on 29 March 2019, declaring in effect that Inghams had wrongfully terminated the Agreement: Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321. Inghams resumed supplying chicks to Mr Hannigan on or about 17 June 2019.

Subsequent claim for damages and jurisdictional dispute

1. [23]

   Mr Hannigan issued a Notice of Dispute to Inghams dated 29 May 2019, seeking damages from Inghams for loss of profits, based on Inghams’ failure to supply chicks to Mr Hannigan from 8 August 2017 (the purported termination date by Inghams) to 17 June 2019 (the resumed date of supply).

2. [24]

   The “Details of Dispute” were relevantly outlined as follows:

3. [25]

   A mediation was unsuccessfully undertaken by the parties on 28-29 August 2019 and thus Mr Hannigan contended that cl 23 of the Agreement entitled him to refer the dispute to arbitration (see at [18] above).

4. [26]

   Inghams commenced proceedings in the Supreme Court to restrain the referral to arbitration, and for declarations that (a) Mr Hannigan’s damages claim did not fall within cl 23 of the Agreement and that (b) even if it did, Mr Hannigan had waived any entitlement to arbitrate the dispute under cl 23 because his commencement of the 2017 proceedings meant that he had abandoned reliance upon cl 23 at that time.

The primary judgment

1. [27]

   The primary judge held that Mr Hannigan was entitled to refer his damages claim to arbitration under cl 23 of the Agreement, and that he had not waived that entitlement by commencing the 2017 proceedings.

2. [28]

   After referring to the familiar principles concerning the interpretation of commercial contracts articulated by the High Court in cases such as Electricity Generation Corporation v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation (2014) 251 CLR 640; [2014] HCA 7 (Woodside) and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (Mount Bruce), the primary judge observed (at [56]) that “[w]ithin the broad canons of construction laid down by cases such as Woodside and Wright Prospecting, arbitration clauses draw specific considerations into focus.” In this respect, his Honour referred to the well-known decision of Gleeson CJ in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165 (Francis Travel), where the Chief Justice observed that:

3. [29]

   The essence of the primary judge’s reasoning is contained in [59]-[66] of the primary judgment. His Honour began by noting the breadth of the word “concerns” in cl 23.6 of the Agreement, stressing that it was not confined to claims in debt or amounts payable or that may be calculated as payable arising under express terms of the Agreement: at [59]. His Honour then observed (at [60]) that:

4. [30]

   His Honour then accepted the submission by senior counsel for Mr Hannigan that the reference to cl 12 in cl 23.6 provided a telling answer to Inghams’ submission that the Agreement contemplated that arbitration was to be used solely for monetary disputes, such as in relation to the calculation of a Fee under the various formulae contained in the Agreement.

5. [31]

   The submission accepted by the primary judge was that “clause 12.1 defies that proposition.” As the primary judge held (at [62]), “[n]o 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 in original).

6. [32]

   The significance of this submission lay in the fact that no genus of dispute could be derived from the specific clauses referred to in cl 23.6.1 to suggest what did and did not fall within the scope of the arbitration agreement constituted by that sub-clause. This was only emphasised, in the primary judge’s opinion, by the fact that that clause used the words “including without limitation”: at [63].

7. [33]

   The primary judge then observed (at [64]) that:

8. [34]

   On the question of waiver, the primary judge held that the bringing of the 2017 proceedings was not an abandonment of a right to seek damages in a subsequent arbitration, that Mr Hannigan had reserved his right to do so and that this was apparent from the terms of [24] of the earlier decision in the 2017 proceedings, in which Robb J had said:

9. [35]

   Further, the primary judge characterised the 2017 proceedings as falling within cl 23.11 of the Agreement, concluding that Mr Hannigan’s “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 [sic] clause 23”: at [82].

Submissions on appeal

1. [36]

   As noted at [5] above, Inghams raised two issues which may conveniently be labelled “the construction issue” and “the waiver issue”.

2. [37]

   In relation to the construction issue, Inghams contended that the primary judge erred in his construction of cl 23.6 of the Agreement, submitting that the correct construction of cl 23.6 is as follows:

3. [38]

   In written submissions, Inghams raised the following textual considerations as to why its construction of the clause should be preferred:

   1. (1)

      As a matter of ordinary language, a dispute “concerns” a monetary amount payable under an agreement if it is a dispute about the monetary amount. It is not sufficient that one integer in the calculation of a disputed claim is a monetary amount that would have been payable under the Agreement had different circumstances come to pass.

   2. (2)

      The scope of cl 23.6 is to be construed by reference to the differently and more broadly drafted cl 23.1, with such difference in drafting weighing heavily against a broad reading of cl 23.6. In this respect, it was submitted that the primary judge’s construction of cl 23.6 tended to remove that distinction.

   3. (3)

      The “list” of matters referred to in cl 23.6.1 includes matters relating to “determination, adjustment or renegotiation of the Fee” or a number of other specified clauses, all of which concern the manner of calculation or adjustment of various monetary amounts payable under the Agreement. It was submitted that, although the list was obviously not intended to be exhaustive, using as it did the phrase “including without limitation”, it was nonetheless relatively narrow in its scope.

   4. (4)

      The use of the phrase “payable and/or owed” suggests that damages claims were not intended to be covered, as the word “payable” connotes a legally enforceable obligation to pay. In this respect, reference was made to Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190 at [118ff]. It was submitted that there was no legally enforceable obligation to pay damages for breach of the Agreement pending the judicial determination of Mr Hannigan’s claim and that no money could be “owed” until determination of the claim. Thus, it was submitted that the dispute in the present case did not concern any amount “payable and/or owed” by Inghams.

   5. (5)

      The need for amounts payable to be payable “under the agreement” maintained a distinction between primary obligations to pay money (which might be owed or payable under the Agreement) and secondary obligations arising upon breach (which might become payable upon judgment being given by reason of the judgment, but which are not ever payable “under the agreement”).

4. [39]

   In oral submissions, Mr Braham SC who appeared on behalf of Inghams attacked the primary judge’s reliance on Francis Travel to justify a broad interpretation of the language used in cl 23.6. He submitted that Gleeson CJ’s observations in that case proceeded on the basis, to use the Chief Justice’s language at 165, that the parties were “unlikely to have intended that different disputes should be resolved before different tribunals”. In the present case, however, Mr Braham suggested that the parties had contemplated this very outcome, drawing a distinction in this regard between the language of cl 23.1 and 23.6.1. As such, it was submitted, there was no justification for construing cl 23.6 broadly.

5. [40]

   Mr Braham also submitted in oral argument that “[t]he Agreement clearly needed a rapid dispute resolution procedure for fee calculation and it was provided by [cl] 23.6.1”.

6. [41]

   Mr Hannigan submitted that Inghams’ submissions should be rejected for the following reasons:

   1. (1)

      Inghams’ submissions involved form prevailing over substance. For example, if Mr Hannigan fulfilled his contractual obligations by growing chicks and, in breach of its obligations, Inghams refused to pay him, he could recover the outstanding money by an action in debt or an action for damages for breach of contract. Although both actions would seek recovery of the same unpaid amount, on Inghams’ construction of c 23.6.1 of the Agreement, the former action would have to be determined by arbitration, whereas the latter action would have to be determined by a court.

   2. (2)

      The dispute the subject of Mr Hannigan’s damages claim need not be confined to an amount payable and/or owed under the Agreement. As specified under cl 23.6.1 of the Agreement, provided it “concerns” such an amount, the dispute will fall within the relevant clause. In view of the primary judge’s finding at [65] that the Fee payable to Mr Hannigan under the Agreement would be a “critical integer in any damages calculation at the suit of [the respondent]”, the dispute the subject of that claim relates to or is connected with the amount payable and/or owed under the Agreement.

   3. (3)

      Inghams’ submission that the monetary amount must be a liquidated amount due for payment was at odds with the terms of cl 23.6.1, and its submission that cl 23.6.1 applies only to primary obligations, but not secondary obligations, is misplaced.

   4. (4)

      Inghams’ submission that no monetary amount was payable within the meaning of cl 23.6.1 of the Agreement because there “is no legally enforceable obligation to pay damages for breach of the agreement pending the judicial determination of Mr Hannigan’s claim” was incorrect. Referring to Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 58 FCR 365 at 375, it was submitted that an entitlement to damages accrues upon breach of contract. Further, it was submitted that it did not follow from the fact that the quantum of damages may not be ascertained at the date of breach that there is no legally enforceable obligation to pay damages.

7. [42]

   On the waiver issue, which arises only if its submissions in relation to the construction issue are not accepted, Inghams submitted that the primary judge erred in finding that Mr Hannigan had not waived his right to refer the dispute to arbitration.

8. [43]

   Inghams submitted that Mr Hannigan did not follow cl 23 of the Agreement in commencing the 2017 proceedings in court. Consequently, it was submitted that Mr Hannigan was now prevented from asserting any right to have the current dispute referred to arbitration for two reasons:

9. [44]

   Mr Hannigan responded on the basis that the question whether Inghams lawfully terminated the Agreement on 8 August 2017 (being the subject of the 2017 proceedings) and whether he was entitled to damages for breach of the Agreement post 8 August 2017 were disparate matters. As the primary judge held at [81], the 2017 proceedings primarily concerned events leading up to and including Inghams’ invalid letter of termination dated 8 August 2017. The current proceedings, on the other hand, concerned Inghams’ failure to supply chicks after 8 August 2017.

10. [45]

    It was submitted that, as held by the primary judge at [79], “there was a sound reason” for Mr Hannigan not claiming damages for breach of the Agreement in the 2017 proceedings. The issue in the 2017 proceedings was whether Inghams’ purported termination of the Agreement was valid. Mr Hannigan’s position was that it was invalid, that he did not accept the repudiation constituted by the invalid notice of termination, and that the Agreement remained on foot. Accordingly, unlike the position that would have occurred had the repudiation been accepted and the Agreement terminated with the accrual of a right to loss of bargain damages, Mr Hannigan could not have claimed the damages the subject of his current claim at the time of the 2017 proceedings.

11. [46]

    Further, Mr Hannigan submitted that cl 23.11 of the Agreement provided that nothing in cl 23 shall prevent the making of an application to the court by any party for urgent injunctive or declaratory relief. As the primary judge held at [82], this “is exactly what Mr Hannigan sought in the 2017 proceedings”. Mr Hannigan thus submitted that there was no inconsistency between, or waiver consequent upon, his approaching the Court for declaratory relief in 2017 and subsequently seeking to have a damages claim referred to arbitration.

12. [47]

    Additionally, Mr Hannigan submitted that the 2017 proceedings did not fall within cl 23.6.1, and therefore could not have been submitted to arbitration, as they did not concern any monetary amount payable or owed under the Agreement.

Consideration – the construction issue

1. [48]

   Dispute resolution clauses may be crafted and drafted in an almost infinite variety of ways and styles. The range and diversity of such clauses may be seen in the non-exhaustive digest of dispute resolution clauses considered by Australian courts over the last thirty years, which is appended to these reasons.

2. [49]

   Dispute resolution clauses may be short form or far more elaborate, as illustrated by the cases referred to in the Appendix. They may be expressed as service of suit clauses: see, for example, HIH Casualty & General Insurance Ltd (in liq) v RJ Wallace (2006) 68 NSWLR 603; [2006] NSWSC 1150 (HIH Casualty). They may provide for arbitration: see, for example, TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 251 CLR 533; [2013] HCA 5 (TCL Air Conditioner). They may be standard form: see, for example, Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; [2006] FCAFC 192 (Comandate). They may be bespoke: see, for example, Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 366 ALR 635 (Rinehart). They may be exclusive or non-exclusive: see, for example, FAI General Insurance Co Ltd v Ocean Marine Mutual Protection & Indemnity Association (1997) 41 NSWLR 117 at 120-124 (FAI). They may be asymmetric: see, for example, Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 WLR 588. They may be optional: see, for example, Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110 (Paharpur); HIH Casualty. They may and often will be coupled with choice of law clauses: see, for example, Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418; [1996] HCA 39. They may be multi-tiered, providing first for a process of mediation, whether informal or formal, or informal and then formal, before providing for arbitral or judicial dispute resolution: see, for example, Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169; Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; (2013) 298 ALR 666.

3. [50]

   Dispute resolution clauses are just as capable of generating litigation as any other contractual clause, and the law reports are replete with cases concerned with the construction of such clauses. The cases referred to in the Appendix supply a sample.

4. [51]

   Such clauses have also spawned specialist texts and monographs (eg. D Joseph, Jurisdiction and Arbitration Agreements and their Enforcement (3rd ed, 2015, Sweet & Maxwell); A Briggs, Agreements on Jurisdiction and Choice of Law (2007, Oxford University Press) (Briggs); M Davies (ed), Jurisdiction and Forum Selection Clauses in International Maritime Law (2005, Kluwer Law International)) and journal articles too numerous to list. It is not without significance to note in this context that, in his fifth edition of The Interpretation of Contracts (2011, Sweet & Maxwell) (Lewison), Sir Kim Lewison added a chapter devoted to the interpretation of dispute resolution clauses. This chapter is expanded in the most recent, sixth, edition of Lewison, published in 2015. See also M Davies, A S Bell, P L G Brereton and M Douglas, Nygh’s Conflict of Laws in Australia (10th ed, 2019, LexisNexis Butterworths) at 7.59 - 7.78.

5. [52]

   The question raised by this appeal is purely one of construction. It is accordingly desirable to begin by identifying the principles applicable to the construction of a dispute resolution clause.

6. [53]

   It has been rightly observed that “the starting point is that the clause should be construed, just as any other contract term should be construed, to seek to discover what the parties actually wanted and intended to agree to”: Briggs at 4.58; Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR 936 at [30]-[33]. In Australia, of course, the search is for the parties’ intention, objectively ascertained: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52.

7. [54]

   In short, the orthodox process of construction is to be followed: Hancock Prospecting at [167]; Rinehart at [18]. Thus, a dispute resolution clause, like any other clause of a commercial contract, must be construed by reference to the language used by the parties, the circumstances known to them and the commercial purpose or objects to be secured by the contract: see Woodside at [35]; Mount Bruce at [47].

8. [55]

   Further, as the plurality observed in Woodside at [35], citing Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56 at [82], a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.

9. [56]

   Contextual considerations are also important, as the High Court’s decision in Rinehart (at [26]ff) illustrates. The context in which the dispute resolution clauses had been entered into in the two deeds under consideration in Rinehart bore heavily upon the interpretation in that case of the expression “dispute under this deed”. The plurality (at [26]) cited with approval the observations of the Full Court of the Federal Court of Australia in Hancock Prospecting (the decision under appeal in the High Court), that "[c]ontext will almost always tell one more about the objectively intended reach of such phrases than textual comparison of words of a general relational character": see Hancock Prospecting at [193]. In his separate judgment in Rinehart, in agreement with that of the plurality on the question of construction, Edelman J observed at [83] that:

10. [57]

    It is also axiomatic that, in the construction of a contract including an arbitration agreement or an arbitration clause in a commercial agreement, as with the interpretation of a statute, a particular contractual clause or sub-clause must not be construed in isolation but as part of the contract as a whole: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16]; Mastrobuono v Shearson Lehman Hutton Inc. 514 U.S. 52 (1995). In the former case, Gibbs J (as he then was) famously said (at 109):

11. [58]

    One consequence of this is that the same clause, or the same phrase in a particular clause, may not bear an identical meaning from case to case: see FAI at 120-124 for a discussion of cases where identically worded jurisdiction agreements have been given different constructions.

12. [59]

    In the context of dispute resolution clauses, whether they be arbitration or exclusive jurisdiction clauses, much authority can be found in support of affording such clauses a broad and liberal construction. A particularly well known statement in this area of discourse is that of Gleeson CJ in Francis Travel to which the primary judge referred and which has been reproduced at [28] above. In Francis Travel, Gleeson CJ referred to the decision of the United States Supreme Court in Mitsubishi Motors Corp v Soler-Chrysler Plymouth Inc 473 US 614 (1985). In that case, at 626, the Supreme Court said that “as with any other contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability.” (The Court’s reference to “arbitrability” was, in context, a reference to the scope of the arbitration agreement.)

13. [60]

    In Welker at [118], Bathurst CJ made reference not only to Francis Travel but also to the similarly well known observations of Allsop J (as he then was and with whom Finn and Finkelstein JJ agreed) in Comandate at [164], namely that:

14. [61]

    See also Global Partners Fund Limited v Babcock & Brown Limited (in liq) [2010] NSWCA 196; (2010) 79 ACSR 383 at [60] (Global Partners), per Spigelman CJ who identified the rationale for the broad construction of arbitration and exclusive jurisdiction clauses in the following passage (at [67]):

15. [62]

    A similar rationale had been identified by French J (as he then was) in Paper Products Pty Ltd v Tomlinsons (Rochdale) Limited (1993) 43 FCR 439 at 448; [1993] FCA 346, where his Honour noted that:

16. [63]

    In TCL Air Conditioner at [16], French CJ and Gageler J observed that “… parties who enter into an arbitration agreement for commercial reasons ordinarily intend all aspects of the defined relationship in respect of which they have agreed to submit disputes to arbitration to be determined by the same arbitral tribunal”.

17. [64]

    In Australia, unlike other jurisdictions, the process of contractual construction of dispute resolution clauses has not been overlaid by presumptions cf the jurisdictions surveyed in G B Born, International Commercial Arbitration (2nd ed, 2014, Wolters Kluwer) at 1325-1338. Thus, in Welker at [122], Bathurst CJ, although not eschewing the liberal approach that had been adumbrated in both Francis Travel and Comandate to the construction of arbitration clauses, rejected the adoption of a presumption that had arguably commended itself to the House of Lords in Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2007] 4 All ER 951. To quote from Lord Hoffmann’s speech, the presumption was that the court should, in the construction of arbitration clauses, “start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal”, and that the clause should be construed in accordance with that presumption, “unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction”: at [13]. The Full Court of the Federal Court in Hancock Prospecting (at [193]) treated Fiona Trust as not saying anything different in substance from Francis Travel and Comandate (the latter case being itself referred to in Fiona Trust at [31]).

18. [65]

    In Rinehart, the plurality indicated that the appeals could be resolved with the application of orthodox principles of construction, which required consideration of the context and purpose of the Deeds there under consideration, without reference to Fiona Trust: at [18]. In his separate judgment, Edelman J described as a “usual consideration of context” the fact that “reasonable persons in the position of the parties would wish to minimise the fragmentation across different tribunals of their future disputes by establishing ‘one-stop adjudication’ as far as possible”: at [83]. This may have been to treat the considerations underpinning cases such as Francis Travel, Comandate and Fiona Trust as not necessarily giving rise to a presumption, but rather as stating a commercially commonsensical assumption. It may be observed that Lord Hoffmann’s speech in Fiona Trust (at [13]) slides from the language of “assumption” to that of “presumption”.

19. [66]

    The proper contemporary approach was eloquently articulated in the following passage in Hancock Prospecting (at [167]) which I would endorse:

20. [67]

    For completeness, it may be noted that principles of construction relevant to the question of the nature of a dispute resolution clause (that is, as to whether or not it is exclusive or non-exclusive, as opposed to its scope) have been valuably identified and discussed by Giles J (as he then was) in FAI at 126-127.

21. [68]

    Clause 23 of the Agreement, extracted at [18] above, is what might be styled a “multi-tiered” dispute resolution clause. Clause 23.1 contemplates, by implication, that court proceedings may be commenced by a party, but proscribes the commencement of court proceedings “until it has complied with this clause 23”. Clause 23 makes provision, in subclauses 3 and 4, for the initial informal and then formal mediation of disputes. It also provides in subclause 6 for arbitration of certain types of dispute if there is a failure to resolve the dispute at formal mediation. Clause 23.11 also preserves the ability of the parties to have recourse to the court for urgent injunctive or declaratory relief.

22. [69]

    It has been observed by the doyen of private international law scholars (see Briggs at 4.55-4.56) that:

23. [70]

    One of the decisions footnoted by Professor Briggs in the above passage was that of the Supreme Court of New South Wales in HIH Casualty. The relevant clauses under consideration in that case have been reproduced in the Appendix to these reasons.

24. [71]

    Although the Agreement in the present case meets the description in the first sentence of the passage from Briggs extracted at [69] above, cl 23 of the Agreement differs significantly from the articles of the reinsurance policy that were the subject of consideration in HIH Casualty, although those articles, like cl 23, appeared to contemplate both litigation of disputes arising under this Agreement in “any competent Court in the Commonwealth of Australia” and the arbitration of “[d]isputes arising out of this Agreement or concerning its validity…”. The challenge for the Court in HIH Casualty was to ascertain whether the proceedings that had been commenced in the Supreme Court should be stayed in favour of arbitration. In the present case, the situation is the converse, namely whether a foreshadowed arbitration should be restrained in favour of litigation.

25. [72]

    Articles XVIII and XIX in the reinsurance policy in HIH Casualty differed in their language in many respects, but most conspicuously, for present purposes, in the use of the prepositional phrase “dispute arising under this Agreement” in Article XVIII, on the one hand, and the different prepositional phrase “[d]isputes arising out of this Agreement” in Article XIX, on the other hand. The Court held (at [98]) that:

26. [73]

    Later in his reasons, Einstein J observed (at [116]) that:

27. [74]

    The decision in HIH Casualty did not turn upon the difference in prepositional language between Article XVIII and XIX of the reinsurance policy. In the present case, however, Mr Braham sought to attribute much significance to the breadth of the prepositional phrase “arising out of this Agreement” in cl 23.1 by way of contrast to what he submitted was the narrower language in cl 23.6.1, viz “the Dispute concerns any monetary amount payable and/or owed by either party to the other under this Agreement” (emphasis added).

28. [75]

    It is true that the expression “arising under this agreement” has often been held to be narrower in compass than the phrase “arising out of this agreement” (see, for example, Welker at [123] per Bathurst CJ), but it has not always been narrowly construed, as the High Court’s recent decision in Rinehart illustrates. In some cases, it has been equated with the phrase “arising out of”: see Samick Lines Co Ltd v Owners of the “Antonis P Lemos” [1985] AC 711 at 727. The Full Court of the Federal Court described it in Hancock Prospecting as an “elastic relational phrase”: at [205].

29. [76]

    It must also be appreciated in the present case that cl 23.1 of the Agreement plays a very different role to that played by Article XVIII, for example, in the reinsurance policy considered in HIH Casualty. Unlike Article XVIII, cl 23.1 is not a service of suit or form of jurisdiction clause at all. Rather, it has two principal functions. First, it defines the term “Dispute” in unquestionably broad terms, and that term is then used in the balance of cl 23. Second, it proscribes the commencement of court proceedings by a party, until that party “has complied with this clause 23”. That, of course, includes cl 23.6.1 to the extent it is engaged.

30. [77]

    The broadly defined term “Dispute” is employed in cl 23.6.1. Thus, the Dispute in question, which may be the subject of arbitration, may be one arising out of the Agreement including, for example, a dispute “regarding any breach or purported breach of the Agreement”. This follows from the definition of “Dispute” in cl 23.1, and the use of that defined term in cl 23.6.1. The critical question then becomes, for the purpose of determining if the dispute in the present case was required to be submitted to arbitration, whether or not it “concerns any monetary amount payable and/or owed by either party to the other under this Agreement”. That is a question of construction and characterisation.

31. [78]

    In answering that question, the principles of construction I have sought to identify and summarise at [53]-[67] above should be applied. Apart from the fact that the parties were in an ongoing commercial relationship, there was nothing of particular significance going to matters of context that was relied upon by the parties to inform the proper construction of cl 23 generally, and cl 23.6.1 in particular. The focus then necessarily must be on the language employed by the parties in the Agreement.

32. [79]

    I have already noted the broad definition of “Dispute” in cl 23.1, and the fact that that broadly defined term is carried into cl 23.6.1. The next key word to be considered in cl 23.6.1 is the word “concerns”. This is a relational term of indeterminate ambit. It, like any other connecting or prepositional phrase, will take its meaning from its context, which includes the manner in which dispute resolution clauses have been construed in contemporary case law: see Hancock Prospecting at [165]; Welker at [221] and compare, in the case of statutory interpretation, Attorney General for New South Wales v Melco Resorts & Entertainment Limited [2020] NSWCA 40 at [86].

33. [80]

    Whilst the usual caution is to be applied to consideration of the meaning of a term in other contracts or instruments, some recent examples of judicial consideration of the meaning of the term “concerns” may be given. In PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2011] FCAFC 52 at [197], the verb “concern”, in the context of “in so far as the proceeding concerns”, was giving the meanings “relate to; be about; affect or involve”. However, in the earlier decision of Australian Securities Commission v Lord (1991) 33 FCR 144; (1991) 105 ALR 347 at 352, the Federal Court held that the term “concerns” (in relation to the phrase “concerns the management or affairs of a body corporate”) had a narrower ambit than the phrase “relates to”.

34. [81]

    More recently, in Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 258 CLR 31; [2015] HCA 43, the High Court considered the meaning of s 11(1) of the Foreign States Immunities Act 1985 (Cth) which provides that “[a] foreign State is not immune in a proceeding in so far as the proceeding concerns a commercial transaction”. Nettle and Gordon JJ observed (at [186]-[187]) that:

35. [82]

    There is no reason, in my opinion, to give the word “concerns” in cl 23.6.1 of the Agreement a narrow meaning, or to insist that the Dispute must only have a single character i.e. “be about” an amount payable or owed as a fee cf. Inghams’ submission noted at [38(1)] above. The approach articulated in Hancock Prospecting, referred to at [66] above, supports that approach.

36. [83]

    There are also a number of textual indications in cl 23.6.1 of the Agreement which suggest that the parties intended the clause to be construed broadly. Affording a narrow construction to the word “concerns” would be contrary to those other textual indications of breadth, which include the use of the indefinite pronoun “any” in the phrase “any monetary amount”, the alternative formulation “payable and/or owed”, and the phrase “including without limitation”.

37. [84]

    As to the use of the word “any” in the phrase “any monetary amount … under this Agreement”, “any” is a word that has traditionally been understood to connote a breadth of matters. Thus, for example, in Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217 at [49], the Victorian Court of Appeal observed that a clause expressed to apply to “any dispute” suggested “a comprehensive approach to the class of disputes”. See also JTA Le Roux Pty Ltd as trustee for the FLR Family Trust v Lawson [2013] WASC 293 at [74]; Perovich v Whitton (No 2) (2016) 250 FCR 272; [2016] FCAFC 152 at [48], in which the Full Court of the Federal Court said that “the word ‘any’ is a word of very broad import”; Mineral Resources Ltd v Pilbara Minerals Ltd [2016] WASC 338 at [61]; and Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2017] NSWSC 203, where Stevenson J noted that “[t]he word ‘any’ is of the widest import”: at [42].

38. [85]

    It is also significant, in my opinion, that the parties did not confine the scope of cl 23.6.1 of the Agreement to a dispute as to payment of the Fee or the question of fees more generally, but used the broader concept of “monetary amount”, coupled with the indefinite pronoun “any”. That composite concept is apt, in my opinion, to include compensatory damages. In oral argument, Mr Braham accepted that the phrase “monetary amount payable” could extend to include unliquidated claims for damages, but submitted that it did not mean this, or extend this far, in the particular context of cl 23 of the Agreement.

39. [86]

    The requirement that the monetary amount be payable “under this Agreement” does not stand in the way of this construction, for at least two reasons. First, in Welker (at [125]), Bathurst CJ said that:

40. [87]

    Contractual damages are designed to put a party into the position it would have been in had the contract been performed: Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64 at 80; [1991] HCA 54 (Amann Aviation). Even applying the arguably narrow meaning given to the expression “under the deed” by Bathurst CJ in Welker, it may be said that the amount of compensatory damages for breach of the Agreement will be “governed or controlled by” the Agreement, because it will be by reference to the notional performance of the Agreement that the damages will be quantified. In Amann Aviation at 80, Mason CJ and Dawson J observed that:

41. [88]

    Secondly, and contrary to Inghams’ submission that cl 23.6.1 of the Agreement is only concerned with primary obligations (see [38(5)] above), a secondary obligation to pay damages arises from or under the contract just as much as a primary obligation (although a secondary obligation will generally be implied).

42. [89]

    In Moschi v Lep Air Services Ltd [1973] AC 331 at 350; [1972] 4 WLUK 46 (Lep Air Services), Lord Diplock said:

43. [90]

    In Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 848-849; [1980] 2 WLUK 146 (Photo Production), Lord Diplock made it plain that a secondary obligation to pay damages was sourced in the contract. His Lordship observed:

44. [91]

    What Lord Diplock said as to the source of the secondary obligation has been expressly followed or accepted in a number of subsequent decisions, including by Lord Hoffmann (with whom the other Law Lords agreed) in Harding v Wealands [2007] 2 AC 1; [2006] UKHL 32 at [44] and, most recently, by Lord Reed (with whom Lady Hale P, Lord Wilson and Lord Carnwath agreed) in Morris-Garner v One Step (Support) Ltd [2019] AC 649; [2018] UKSC 20 at [34].

45. [92]

    In New South Wales, in Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [108] (Cherry), Leeming JA, with whom Gleeson and White JJA agreed, said in a case concerning the construction of a guarantee:

46. [93]

    In D W Greig and J L R Davis, The Law of Contract (1987, The Law Book Company Limited) at 1292, it is observed that it followed from Lord Diplock’s analysis of primary and secondary obligations in Photo Production that:

47. [94]

    It is entirely consistent with this line of authority that damages for breach of contract may, in cl 23.6.1, be treated as an amount payable under a secondary obligation of the Agreement following breach, especially if one adopts a liberal approach to the construction of cl 23.6.1 as the authorities referred to at [59]-[63] above, on my understanding of them, require. But I am by no means convinced that a liberal approach is necessary to reach this conclusion.

48. [95]

    In this context, I agree with Meagher JA’s observation at [137] that “the description of such amounts as ‘payable and/or owed’ ‘under’ the agreement directs attention to the source of the underlying payment obligation” (emphasis added). That observation is supported by the High Court’s consideration of the phrase “under a contract” in both Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [42] and Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; [2007] HCA 53 at [55], both being decisions to which Meagher JA refers.

49. [96]

    As the authorities referred to at [89]-[92] above indicate, however, the parties’ contract is the source of the right to damages for breach. Indeed, as has been seen, Leeming JA in Cherry at [108] described the obligation to pay damages following breach as a “classic example” of an obligation arising under a contract.

50. [97]

    Not all contractual obligations arise as a result of the parties’ agreement; some are implied by operation of law into a contract, as Hope JA’s well known decision in Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 487 (Castlemaine Tooheys) illustrates. Such obligations are no less contractual in nature. Significantly, Castlemaine Tooheys was cited by Gleeson CJ, Gaudron and Gummow JJ in Concut Pty Ltd v Worrell (2000) 75 ALJR 312 at [23]; [2000] HCA 64. That paragraph of that decision was in turn cited by Nettle, Gordon and Edelman JJ in Mann at [195] as authority for the proposition that “the remedial obligation to pay damages for breach of contract has been understood as an obligation ‘arising by operation of law’”. This is the passage from Mann upon which Meagher JA places heavy reliance at [148].

51. [98]

    Just because an obligation arises by operation of law as opposed to the parties’ express agreement does not mean, however, that the contract may not be the source of that obligation. Terms implied by operation of law are not dependent upon the intentions, objectively ascertained, of the parties: Castlemaine Tooheys at 487; J D Heydon, Heydon on Contract (2019, Lawbook Co) at [10.130]. That the secondary implied contractual obligation to pay damages on breach may be modified by an exclusion or limitation clause also highlights that what is being modified or excluded is another contractual provision, for parties cannot modify the general law but only such obligations as are otherwise implied by operation of law into their contract: see [93] above.

52. [99]

    To the extent that Nettle, Gordon and Edelman JJ were critical of Lord Diplock’s analysis of primary and secondary obligations in Mann (and the extent to which they were is not clear – their Honours certainly did not describe his well known analysis as wrong), that criticism did not carry the support of a majority of the Court.

53. [100]

    It is in this context that it is necessary to return to Mr Braham’s central argument referred to at [39] above in relation to Francis Travel, and whether the broad and liberal approach towards the construction of arbitration clauses that that case, and others that have followed it, endorsed, should be applied in the present case. In my opinion, it should.

54. [101]

    Mr Braham’s argument, it will be recalled, was that what I have described at [65] above as the commonsense assumption that the parties did not intend to fracture or fragment the resolution of their disputes could not be made in the present case because cl 23.1 contemplated court proceedings. This being the case, the argument ran, the liberal approach to the construction of the scope of cl 23.6.1 was not appropriate or called for.

55. [102]

    Parties to an arbitration agreement may always commence court proceedings. Whilst a stay of such proceedings is mandatory both under the International Arbitration Act 1974 (Cth) and the uniform Commercial Arbitration Acts of the States, a stay requires a party to first seek it. Unlike court ordered mediation pursuant to the Civil Procedure Act 2005 (NSW) s 26(1), or a transfer order under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) s 5(7) which the Supreme Court of New South Wales may make of its own motion, a court may not order a stay of proceedings and refer a matter to arbitration of its own motion, under either the International Arbitration Act or the Commercial Arbitration Acts of the States.

56. [103]

    Thus, the fact that cl 23.1 of the Agreement contemplates the possibility of court proceedings does not, in my opinion, differentiate the current case from Francis Travel. It is always a case of construing the arbitration clause in question to determine its proper scope. What falls outside its scope, properly construed, may be the subject of litigation, and arbitral resolution may not be insisted upon.

57. [104]

    As noted at [76] above, cl 23.1 is not itself a jurisdiction clause or service of suit clause, as was Article XVIII in HIH Casualty. Subject to cl 23.11, cl 23.1 establishes a contractual bar against the initiation of court proceedings, and mandates that a particular procedure be followed. That bar may be enforced by a stay application in the jurisdiction in which proceedings have been commenced in the face of it, or by an anti-suit injunction in another jurisdiction. Clause 23.1 is not, in my opinion, a textual contra-indication of the commonsense assumption that the commercial parties to the Agreement did not intend to fragment their dispute resolution processes any more than the language of their contract, liberally construed, required.

58. [105]

    Clause 23.11 is significant in this regard, because it identifies particular types of cases where it will be appropriate to invoke the jurisdiction of the Court without either mediation or arbitration, namely, disputes where urgent interlocutory or declaratory relief is sought. This is not to deny, however, that there may be cases which do not fall within the ambit of cl 23.11, but which are also outside the scope of cl 23.6.1 (for example, suits for specific performance of a non-monetary contractual obligation such as the delivery of chicks). However, I do not consider that the present case falls into that category or that a broad and liberal approach to the interpretation of an arbitration clause, such as cl 23.6.1, should not be favoured.

59. [106]

    One further difficulty for Inghams’ construction and its submission that the “list” of matters referred to in cl 23.6 includes matters relating to “determination, adjustment or renegotiation of the Fee” or a number of other specified clauses, all of which concern the manner of calculation or adjustment of various monetary amounts payable under the Agreement (see [38(3)] above) is that that submission does not sit with or explain the inclusion of cl 12 of the Agreement in that list, as the primary judge observed (see [30] – [32] above). Clause 12 would not generate monetary claims for liquidated damages.

60. [107]

    For the reasons set out above in addition to those of the primary judge, I favour Mr Hannigan’s construction of the clause. He is entitled, subject to the argument of waiver which I consider below, to pursue his claim for damages by way of arbitration.

Consideration – the waiver issue

1. [108]

   This claim may be dealt with in much shorter compass.

2. [109]

   Had Mr Hannigan sought damages in the 2017 proceedings, there may have been some force in Inghams’ argument based on waiver. He did not, however, for the reasons that I have referred to at [21] above. There was no unequivocal abandonment of any right to arbitrate the question of damages for breach of contract at some time in the future nor was there any attempt to resist or restrain the arbitration by reference to the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 cf. Kraft Foods Group Brands LLC v Bega Cheese Limited (2018) 358 ALR 1; [2018] FCA 549.

3. [110]

   Moreover, pursuing urgent declaratory relief in court proceedings was authorised by cl 23.11. That sub-clause is a carve out from the balance of clause 23. If, as I consider to be the case, the declaratory relief sought in the 2017 proceedings fell within the description of “urgent injunctive or declaratory relief”, the pursuit of those proceedings cannot be characterised as an election not to proceed with arbitration, or the waiver of a right to arbitrate any question of contractual damages. Rather, it was an action entirely consistent with the Agreement and, more pertinently, not inconsistent with the rights and obligations contained in clause 23.

4. [111]

   By way of contrast to the urgent relief that was sought by Mr Hannigan in the 2017 proceedings, the pursuit of damages for breach of contract, underpinned by the ability of the Court to award interest, could not be described as “urgent”.

5. [112]

   The waiver argument also fell foul of cl 27.4 of the Agreement which provided that “[n]o right under this Agreement will be deemed to have been waived except by notice in writing signed by the party waiving the right”.

6. [113]

   For completeness, I should note an argument that was faintly submitted on behalf of Inghams, in effect by way of an alternative to the waiver argument.

7. [114]

   Clause 23.6.1 requires the submission of disputes falling within its scope to arbitration, “unless otherwise agreed”. It was submitted that, in some way, the 2017 proceedings either gave rise to or evinced an agreement by the parties not to submit any damages claim to arbitration. To the extent this argument was advanced in writing, it was done in a most exiguous way. The argument was entirely inconsistent with the conduct of Mr Hannigan in the 2017 proceedings, as summarised by the primary judge in the passage from his judgment extracted at [21] above.

8. [115]

   Any agreement reached, within the terms of cl 23.6.1, would need to be of contractual force and effect. It would, in effect, be a variation of cl 23.6.1. Such a variation would, by cl 27.2, need to be in writing. No written variation was identified. Nor, for that matter, was any oral modification identified.

9. [116]

   The alternative argument was a makeweight and should be rejected.

Conclusion and orders

1. [117]

   For the above reasons, I would grant leave to appeal but dismiss the appeal with costs.

2. [118]

   MEAGHER JA: I agree with Bell P that the applicant, Inghams, should have leave to appeal. The question in the appeal is whether Mr Hannigan’s contested claim against Inghams, for damages for breach of contract is a dispute which “concerns any monetary amount payable and/or owed by either party to the other under” the chicken growing agreement between them (cl 23.6.1). I agree also with the President’s conclusion that if that dispute is required to be referred to arbitration Mr Hannigan has not waived his right to insist that occur.

3. [119]

   As the President observes that question is “purely one of construction” and accordingly to be determined by the application of orthodox principles of construction. Those principles provide that the meaning of the terms in a commercial contract, such as here, is to be determined objectively and accordingly by reference to what a reasonable person in the circumstances of the parties would have understood those terms to mean: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [47] (French CJ, Nettle and Gordon JJ). That inquiry requires attention to the language of the contract, the commercial context which it addresses and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65 at [22] (Gleeson CJ). Those principles do not describe a process which is rule based, rather than concerned with the construction of the words in question in their context. Nor is that process overlaid by assumptions or presumptions which cannot be justified as informing what a reasonable person would have understood the words to mean in their commercial context: Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442; [2017] FCAFC 170 at [167] (Allsop CJ, Besanko and O’Callaghan JJ).

4. [120]

   For the reasons which follow it is my view that Mr Hannigan’s claim for breach of Inghams’ general obligation to supply chickens (cl 3.1) is not a dispute within cl 23.6.1 and accordingly not one which must, in the absence of any ad hoc agreement, be submitted to arbitration. The primary judge erred in concluding otherwise: Inghams Enterprises Pty Ltd v Francis Gregory Hannigan [2019] NSWSC 1186.

The chicken growing agreement

1. [121]

   The relevant terms of this agreement are extracted by the President at [7]-[18]. The “general obligations” of the parties (cll 3 and 4) describe their respective obligations in relation to the growing of the chickens. On Inghams’ part those obligations fundamentally include to supply one day old chicks, feed and the technical services required for Mr Hannigan to perform his primary obligation, which is to “raise” those chicks in his shed facilities in accordance with a detailed Manual supplied by Inghams. There follow a provision making clear that at all times the chickens remain the property of Inghams (cl 6), and provisions governing the collection of the chickens for processing (cl 7) and Inghams’ rights of access to the grower’s premises (cl 8).

2. [122]

   Clauses 9 to 13 address the payment obligations of the parties, principally Inghams’ obligation to make ongoing payments to the grower for the term of the agreement, initially a period of five years. In essence Inghams agrees, in relation to each batch of chickens raised and collected, to pay the grower a Fee calculated on a per chicken basis. That Fee is to be adjusted annually, following negotiations and after taking account of defined “productivity criteria”. In addition the grower may be entitled to an additional payment calculated in accordance with a “Pool Payment System”, which takes account of the productivity of the grower measured against the productivity of a pool of growers (cll 9.1, 10.1 and Annexures 1 and 2).

3. [123]

   There follow provisions which qualify the ordinary position that the grower receives payments determined in accordance with Annexures 1 and 2. First, where the payment to the grower in respect of a batch is less than 85 per cent of the Fee as a consequence of a single event determined by Inghams to be a “disaster”, a different regime applies for the determination of the Fee. It does so depending on whether the disaster has been caused by the action of Inghams, neither of the parties or is attributable partially to each of them (cl 11).

4. [124]

   Secondly, Inghams is entitled to deduct from any payment due to the grower financial losses suffered by it (limited to the cost of all goods supplied to the grower and excluding all consequential and indirect losses) as a result of the grower’s negligence in raising the chickens (cl 12.1). Inghams may also “charge to and recover from the grower” losses and expenses incurred in collecting and raising any chickens to which cl 12.1 losses are referrable (cl 12.3). Thirdly, in the event that the compulsory slaughter of chickens is required by any statutory authority Inghams is required to pay to the grower part of any financial compensation received by it in respect of that destruction (that part to be calculated in accordance with a specified formula) (cl 13).

5. [125]

   Finally, in addition to Annexures 1 and 2 providing for variations and adjustments to the annual Fee, cl 15.3.3 provides that in the event that the Manual with which the grower must comply (cl 4.2) is amended, the parties agree to “renegotiate the Fee having regard to the effect of [any] relevant amendments”.

The chicken supply dispute

1. [126]

   Mr Hannigan’s formulation and notification of the relevant dispute is extracted in the President’s judgment at [24]. It is constituted by Mr Hannigan’s contested claim to damages for breach of Inghams’ general obligation to supply, during the period 8 August 2017 to 17 June 2019, batches of chicks in accordance with the terms of the agreement. The ordinary measure of damages for loss sustained by such a breach is the amount required to place Mr Hannigan in the same position in money terms as he would have been in had the contract been performed: Robinson v Harman (1848) 1 Exch 850; 154 ER 363 at 855;365 (Parke B). Applying that measure, the matters to be taken into account will ordinarily include the payments to which Mr Hannigan would have been entitled, on the hypothesis that chicks had been supplied, raised and collected (in whole or in part) during the relevant period, as well as the variable and other costs which would have been, but were not in fact, incurred by him in so doing.

The dispute resolution clause

1. [127]

   The relevant provisions of the dispute resolution clause are extracted by the President at [18] above. It is convenient nevertheless to set out cll 23.1, 23.6, 23.8 and 23.11 in these reasons:

2. [128]

   Clause 23.1 prohibits each party from commencing court proceedings in respect of the universe of disputes “arising out of” their agreement and that prohibition applies until the relevant party “has complied with this clause 23”. There is no reason to construe this provision narrowly. The rational assumption of a reasonable person in the position of the parties would be that the provisions of this clause should apply to all of the disputes relating to their agreement. Approaching the construction of this overriding provision by reference to such an assumption is merely an application of the objective theory of contract.

3. [129]

   This clause also recognises the breadth of the types of dispute which may arise and, particularly, that they may arise before or after the time for performance or observance of an obligation, no distinction in that context being drawn between what the agreement describes as “general” obligations and those providing for the payment of money.

4. [130]

   The matters which must be complied with respect to all disputes “arising out of” the agreement are that any dispute be notified to the other party (cl 23.2), that the parties use “best endeavours” to resolve that dispute (cl 23.3), and that if the dispute cannot be resolved it must thereafter be mediated (cll 23.4, 23.5).

5. [131]

   Clause 23.6.1 provides that a subset of the universe of disputes arising out of the agreement must then be referred to arbitration. The necessary characteristic of disputes in that subset is that they “concern” “any monetary amount payable and/or owed by either party to the other under this Agreement”. This language does not suggest this characteristic has to be the defining or only characteristic which those disputes bear: Firebird Global Master Fund II Ltd v Republic of Nauru (2015) 258 CLR 31; [2015] HCA 43 at [187] (Nettle and Gordon JJ).

6. [132]

   That composite description requires that subject matter be “any” “monetary amount” which is “payable and/or owed” by one party to the other where the attribute of being “payable and/or owed” is qualified by the words “under this Agreement”. There must then be a sufficient relationship between the dispute and that subject matter such that the former “concerns” the latter.

7. [133]

   What is immediately apparent is that cl 23.6.1 does not purport to refer to arbitration any dispute “arising out of this Agreement” or, for that matter, any dispute “under this agreement”. Here, subject to the qualification introduced by cl 23.11 in relation to “urgent injunctive or declaratory relief”, the parties clearly intended that only a subset of the disputes within the universe of disputes “arising out of” their agreement must be resolved by arbitration: cf Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165 (Gleeson CJ); Hancock Prospecting Pty Ltd v Rinehart at [167] (Allsop CJ, Besanko and O’Callaghan JJ); and Fiona Trust Holding Corporation v Privalov [2007] UKHL 40; [2007] 4 All ER 951 at [13] (Lord Hoffman).

8. [134]

   Furthermore, whilst cl 23.6.1 requires attention to the sense in which the expression “under this Agreement” is used, it does not do so in relation to its use in a clause referring all disputes answering that description to arbitration. Accordingly whether there is any distinction in that context between disputes “arising under” and disputes “arising out of” an agreement is a controversy which does not arise in this case: see Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 93 ALJR 582 at [18]-[25] (Kiefel CJ, Gageler, Nettle and Gordon JJ).

9. [135]

   The question as to the meaning of the expression “under this Agreement” used in relation to an amount “payable and/or owed” remains. As Lindgren J observed in Energy Resources of Australia Ltd v Commissioner of Taxation (2003) 52 ATR 120 at [37] the word “under” admits of “degrees of precision and exactness on the one hand, and of looseness and inexactness on the other” making it “necessary to have regard to the context in order to identify the meaning of the word intended in a particular case.” See more generally The Queen v Khazal (2012) 246 CLR 601; [2012] HCA 26 at [31] (French CJ); and Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [102] (Leeming JA) (There the guaranteed money in question was defined to mean “all amounts (including damages) that are payable, owing but not payable or that otherwise remain unpaid … on any account at any time under or in connection with” the relevant agreement).

10. [136]

    The expression “monetary amount payable” describes an amount of money that is or may become liable to be paid, and accordingly “payable”. Thus it can refer to an amount that will from time to time fall due for payment, as well as to an amount due for payment. These different senses in which the word “payable” may be used, are discussed by Hoffman J (as his Lordship then was) in Tea Trade Properties Ltd v CIN Properties Ltd (1990) 1 EGLR 155 at 158, in a passage cited in K Lewison, The Interpretation of Contracts (6th Ed, 2015, Sweet & Maxwell) at p 367. Thus an amount that will from time to time fall due as a fee, which is the subject of negotiation or variation or adjustment, will at that time nevertheless be a “monetary amount payable”. That expression is to be contrasted with the expression “monetary amount owed” which describes an amount liable to be paid, due for payment and unpaid. The use of the joining words “and/or” recognises that the money amounts which these expressions describe may overlap.

11. [137]

    The description of such amounts as “payable and/or owed” “under” the agreement directs attention to the source of the underlying payment obligation and whether the agreement governs or controls its existence, as the following three cases demonstrate. In Chan v Cresdon Pty Ltd (1989) 168 CLR 242; [1989] HCA 63 a lease of land contained a provision by which a person, who was a party to the lease, guaranteed the performance by the lessee of its obligations “under this lease”. The majority (Mason CJ, Brennan, Deane and McHugh JJ) considered that the word “under” referred “to an obligation created by, in accordance with, pursuant to or under the authority of, the lease. The obligation which arose under the common law tenancy at will [did] not answer this description” (at 249).

12. [138]

    The appeal in Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 concerned the “time of disposal” of assets for the purpose of determining the year of income in which a net capital gain accrued. Where the “asset was acquired or disposed of under a contract” Income Tax Assessment Act 1936 (Cth), s 160U(3) deemed the time of disposal to be “the time of the making of the contract” (at [33], [34], [37]). The plurality (Gleeson CJ, Gaudron, McHugh and Hayne JJ) held (at [42]) that “the words ‘under a contract’, in s 160U(3), direct attention to the source of the obligation which was performed by the transfer of assets which constituted the relevant disposal”. In that case an agreement of 31 May 1991 “was the source of the obligation which [Sara Lee] discharged” by performance of its obligation to transfer on 30 August 1991.

13. [139]

    Finally, in Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; [2007] HCA 53 the question was whether the registration of a transfer of two Torrens title mortgages vested in the transferee a right to recover moneys owed under a loan agreement which was separate from, but secured by, one of the mortgages. Land Title Act 1994 (Qld), s 62 defined the “rights” transferred as including the right “to recover a debt or enforce a liability under the mortgage”. The Court (Kiefel J, Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ agreeing) held that the right to recover moneys under the loan agreement was not assigned, observing at [55] that this conclusion was confirmed by the words “under the mortgage” in s 62(4):

14. [140]

    Returning to the language in the growers’ agreement, the words “payable and/or owed” when used in relation to “a monetary amount” describe an obligation owed by one party to the other and the use of the phrase “under this Agreement” with respect to that obligation identifies their contract as its source. That is the natural and ordinary meaning of this language and there is nothing in the text or context which suggests that a reasonable person in the circumstances of the parties would have understood it to mean otherwise.

15. [141]

    The inclusion in cl 23.6.1 of the list of “matters relating to [the] determination, adjustment or renegotiation of the Fee under Annexure 1” is wholly consistent with the subject matter of the reference to arbitration being disputes concerning payment obligations under the agreement. The words introducing that list - “including without limitation” - convey that the listed matters are not intended either to restrict the matters which would otherwise fall within the language of the preceding description or to narrow the construction of that language by reason of any genus of the matters listed. As to that being the function of such an inclusive “definition” see Corporate Affairs Commission (SA) v Australian Central Credit Union (1985) 157 CLR 201 at 206-207 (Mason ACJ, Wilson, Deane and Dawson JJ); [1985] HCA 64.

16. [142]

    The purpose for the parties’ agreement that disputes which “concern” payment obligations should be referred to arbitration emerges in cl 23.8. By that provision the parties agree to “use their reasonable endeavours to enable the arbitrator to make a determination [of such disputes] as quickly as possible”. Their commercial reasons for doing so, particularly from the perspective of the grower, are obvious. In argument this Court was informed that a batch of chickens takes between 35 and 45 days to be raised and collected, thus allowing for the delivery of batches every two months or so. In Mr Hannigan’s case that meant that up to six batches a year might be raised, with the potential for over 200,000 chickens in each of those batches. In such a short cycle and high turnover business, an expeditious dispute resolution procedure directed to payment obligations under the agreement seeks to ensure continuity of cash flow, from the perspective of the grower, and ongoing certainty as to the costs of production, from the perspective of Inghams.

17. [143]

    It follows that the connecting word “concerns” should be given sufficient “width and flexibility” to ensure that any dispute which relates to the negotiation, adjustment, determination or performance of a payment obligation “under this Agreement” is submitted to arbitration. Doing so, a dispute will “concern” a payment obligation under the agreement if the dispute is about such an obligation, which will be the case where there is a claim to payment or for damages for breach of such an obligation; if the dispute affects or involves or relates to such a payment obligation which would be the case where there is an issue concerning the negotiation, adjustment or determination of any fee to be paid; or if there is a dispute as to an entitlement of a party to deduct any sum from a payment which it is otherwise liable to make. These examples are obviously not exhaustive. However they recognise that the relational word “concerns” will be satisfied if a dispute relates to or is about or affects or involves a money payment obligation under the agreement.

Is the chicken supply dispute one within cl 23.6.1?

1. [144]

   The subject matter of the notified dispute is a claim for unliquidated damages for breach of Inghams’ obligation under cl 3.1. It is not a claim to or about an amount “payable” or “owed” by Inghams to Mr Hannigan under an express or implied term of their agreement. Nor is it a dispute which affects or relates to the negotiation, adjustment or determination of any amount “payable” or “owed” under such a term. The argument that Mr Hannigan’s claim concerns a monetary amount payable under the agreement proceeds as follows. First, it is said that a claim to “compensatory damages” will result in a judgment or award for a monetary amount which, when determined, will be “payable”. For the purposes of argument, that much may be accepted.

2. [145]

   The second part of the argument addresses the qualification that the obligation which makes that amount “payable” is created by, or in accordance with the parties’ agreement. This part of the argument is put in two ways. First, it is said that the amount of damages once awarded is payable “under” the agreement because the measure of damages includes as an element an amount which would have been payable had the agreement been performed. To that extent the quantum of those damages is said to be “governed or controlled” by the agreement. It is not however contended that the source of the underlying obligation to pay damages is the agreement, or that the contract says anything about the amount recoverable and how it is to be calculated.

3. [146]

   The second way in which the argument is put is captured in the judgment of the President at [88]-[90]. It is that damages for breach of contract may be treated or described as an amount payable under a “secondary obligation” of the agreement following the breach of a primary obligation. In support of that analysis reference is made to the statements of Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331 at 350 and Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 848-849, and the statement of Kiefel CJ, Bell and Keane JJ in Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 93 ALJR 1164 at [12] that:

4. [147]

   However, none of those statements suggest that the obligation to pay damages for breach of contract is created by or arises under the contract. On the contrary, Lord Diplock’s analysis in Lep Air Services and Photo Production acknowledges that the so-called “secondary obligation” arises “by operation of law” or by “implication of the common law”, which is the same thing. The description of the right to loss of bargain damages following a termination for wrongful dismissal as a “creature of the contract” does not take this analysis any further.

5. [148]

   The orthodox and uncontroversial position remains as stated by Nettle, Gordon and Edelman JJ in Mann v Paterson Constructions at [195]:

6. [149]

   It is equally wrong, as a matter of legal theory, to suggest that the assessment of unliquidated damages for breach of contract is “governed or controlled by” the contract simply because the measure of damages at common law takes account of benefits which would have been received as a result of performance. The position is as stated by Gageler J in Mann v Paterson Constructions at [83]:

7. [150]

   The distinction between monetary amounts which are payable or owed “under a contract” and remedies which arise by operation of law is a recognised and meaningful one. Whereas ‘liquidated damages’ are recoverable in satisfaction of a right of recovery created by the contract itself and accruing by reason of breach, unliquidated damages for breach of contract are compensation assessed by the court in accordance with common law principles for loss occasioned by breach: Rotheberger Australia Pty Ltd v Poulsen [2003] NSWSC 788 at [27] (Barrett J); Galafassi v Kelly (2014) 87 NSWLR 119 at [178] (Gleeson JA, Bathurst CJ and Ward JA agreeing). That distinction has been endorsed as one which it is “essential” to maintain: Galafassi at [177].

8. [151]

   It follows that the notified dispute does not concern a monetary amount payable or owed by Inghams to Mr Hannigan under their agreement and accordingly it is not a dispute referred to arbitration by cl 23.6.1.

The reasoning of the primary judge

1. [152]

   It remains necessary to consider three aspects of the primary judge’s reasoning in support of his contrary conclusion that cl 23.6.1 includes a contested claim to unliquidated damages for breach of a non-money payment obligation under the agreement.

2. [153]

   The first is his Honour’s conclusion at [62] that the inclusion of the reference to cl 12 in the list in cl 23.6.1 is inconsistent with the description of the relevant subject matter of the clause as limited to claims to enforce payment obligations arising under the agreement because cl 12 describes no more than a claim for damages. As the President ventures at [32] the significance of the argument accepted by the primary judge may lie in the fact that no “genus of dispute could be derived from the specific clauses referred to in cl 23.6.1 to suggest what did and did not fall within the scope of the arbitration agreement”. However that observation does not take account of the words “without limitation” which indicate that no constructional inference regarding the meaning of the descriptive definition should be drawn from any shared features or lack of shared features of the matters included in the list.

3. [154]

   More significantly, the primary judge’s analysis gives a narrower meaning to the word “concerns” than is consistent with the purpose of cl 23.6 and overlooks the application of cl 12.1 which permits Inghams to deduct losses to be borne by the grower “from any Payments due to the Grower” for the relevant batch. Thus any dispute as to the fact or amount of such loss necessarily “concerns” a “monetary amount” “payable” “under” the agreement because of the entitlement by cl 12.1 of Inghams to deduct any amount to which it is entitled from that “monetary amount”.

4. [155]

   The second is that the primary judge considered at [64] that on the construction urged by Inghams, cl 23.6.1 would have the consequence that a claim in debt for non-payment of a fee due under cl 9.1 would be referred to arbitration whereas a claim to damages for the same breach would not. His Honour described that inconsistency in outcome as “hardly [to] have been intended by the contracting parties”. In this respect the primary judge’s analysis again depends on a narrower construction of the connecting term “concerns” than I consider it should be given, as appears above, particularly at [142]-[143]. If the notified dispute involves a claim for damages for breach of cl 9.1, that dispute bears a sufficient relationship to a “monetary amount payable” under the agreement because the claim is for breach of such an obligation. Accordingly, the dispute is about or involves that monetary obligation, and in that sense is a dispute which “concerns” it. Therefore no inconsistency in outcome arises.

5. [156]

   Thirdly, the primary judge at [65] considered that because one integer in the assessment of Mr Hannigan’s damages was the amount which would have been received under cl 9.1 had the supply obligation been performed, the relevant dispute could be said to “concern” “monetary amounts” payable under the agreement. The difficulty for this argument is identified above at [145]. Whilst the assessment of damages may involve attention to amounts which would have been paid or payable had the contract been performed, the dispute in this respect does not relate to or involve a monetary amount that is or may become liable to be paid so that it answers the description of an amount “payable” under the agreement. Rather that dispute concerns an amount which might have been payable in a hypothetical counterfactual adopted for the purpose of assessing damages under the common law.

Conclusion

1. [157]

   For these reasons I would make the following orders:

   1. (1)

      Grant leave to appeal.

   2. (2)

      Allow the appeal.

   3. (3)

      Set aside orders (1) and (3) made by Slattery J on 16 September 2019.

   4. (4)

      Declare that the dispute the subject of the respondent’s Notice of Dispute dated 29 May 2019 is not required to be submitted to arbitration pursuant to cl 23.6 of the Queensland Broiler Chicken Growing Agreement between the parties dated 22 September 2015.

   5. (5)

      The respondent pay the appellant’s costs of the proceedings at first instance and on appeal.

2. [158]

   GLEESON JA: I agree with the orders proposed by Meagher JA and with his Honour’s reasons.