Dnata Airport Services Pty Ltd v Polar Air Cargo Worldwide, Inc

BELL CJ: The sole question raised on this application for leave to appeal is whether Sweeney J (the primary judge) erred in dismissing a Notice of Motion brought by dnata Airport Services Pty Ltd (Dnata) seeking to stay two third party contractual cross-claims brought against it by Polar Air Cargo Worldwide, Inc (Polar Air) in favour of arbitration: Joseph Iosefa v Polar Air Cargo Worldwide, Inc; Polar Air Cargo Worldwide, Inc v Dnata Airport Services Pty Ltd [2025] NSWSC 1500 (PJ or primary judgment).

Polar Air is a cargo airline which owns and operates freight aircraft and has its principal office in Purchase, New York. Dnata is an Australian corporation with its principal office in Mascot, New South Wales. On 1 June 2016, the parties entered into an agreement (the SGHA) pursuant to which Dnata was contracted by Polar Air to provide ground cargo handling services at Sydney Airport. The SGHA consisted of three instruments, the “Main Agreement”, Annex A and Annex B. The Main Agreement was a Standard Group Handling Agreement prepared by the International Air Transport Association (IATA).

Questions going to the proper construction of a standard form of international agreement, presumably adopted and adapted by carriers and handling operatives globally, made this an appropriate case for the grant of leave to appeal.

The underlying proceedings arose out of a Statement of Claim dated 28 September 2023 filed by Mr Iosefa, an employee of Dnata, claiming in negligence against Polar Air alleging that, on 22 March 2021, he suffered injuries by slipping on the wet surface of a Polar Air-owned Boeing 747 freighter aircraft while unloading unit load devices from the aircraft’s “Cargo Loading System”.

By its third-party Statement of Cross-Claim filed on 31 July 2025, Polar Air alleged that Dnata had breached the SGHA and also had failed to indemnify it in respect of any liability arising out of Mr Iosefa’s negligence claim against it (the contractual cross-claims). Polar Air also alleged that Dnata had been negligent. By Notice of Motion dated 2 September 2025, Dnata sought a stay of the contractual cross-claims.

The stay was sought primarily pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) (the Act) or, alternatively, either Article 8 of the UNCITRAL Model Law on International Commercial Arbitration (1985) (the Model Law) or the inherent jurisdiction of the Court. The basis of the asserted stay was that the two contractual cross-claims fell within the scope of an “arbitration agreement” in Article 9 of the “Main Agreement” or, perhaps more accurately, as Mr Brennan SC put it in submissions on appeal, that an arbitration agreement came into existence upon Dnata’s election for arbitration pursuant to Article 9 which was made on its behalf by its solicitor, Mr Tzortzatos, on 2 September 2025 by way of an affidavit filed in the proceedings.

Article 9 provided as follows:

The parties agreed that the contractual cross-claims fell within the scope of Article 9 and that the negligence cross-claim did not. The single question of law raised before the primary judge, and reagitated before this Court, concerned the proper construction of Article 9.

The essence of the primary judge’s reasoning was contained in PJ [51]-[53] as follows:

Insofar as Article 9 referred to arbitration, on its proper construction the expression – “the parties may elect to resolve the dispute through arbitration” (emphasis added) – in the second sentence indicated that, while each was amenable as a matter of principle to arbitration, any election for arbitration involved both parties electing for that method of dispute resolution (which had not occurred) and agreement as to the arbitration process to be followed.

On this construction, which the primary judge correctly, in my view, favoured, neither party was obliged to agree to that form of dispute resolution and the third sentence of Article 9 expressly contemplated that the parties may fail to agree to an “arbitration process”. The opening words of the third sentence – “[i]n the event that the parties fail to agree to an arbitration process” – highlighted that consensus was required, failing which the dispute was to be settled by litigation.

This observation is reinforced when one has regard to the absence in Article 9 of any specification, whether in terms or by the adoption or incorporation of the rules of an arbitral institution such as ACICA (Australian Centre for International Commercial Arbitration), the ICC (International Chamber of Commerce), SIAC (Singapore International Arbitration Centre), or the AAA (American Arbitration Association), or provisions relating to important procedural aspects of arbitration including the seat of the arbitration, any limitations on its length and nature (i.e. whether it was a stopwatch arbitration), any right of appeal and the ability of arbitrators to rule on their own jurisdiction cf. for example, the arbitration clauses in Hermes One Ltd v Everbread Holdings Ltd [2016] 1 WLR 4098 at [3]; [2016] UKPC 1 and Elecnor Australia Pty Ltd v Clough Projects Australia Pty Ltd [2025] NSWSC 610 at [27] (Elecnor), both of which were referred to by the parties in argument. It is unlikely that commercial parties, had they intended to submit themselves to arbitration (following negotiation), would leave so many procedural matters unresolved, especially in relation to the uncapped number of arbitrators.

It is also unlikely that the parties intended that the (single) party who elected for arbitration could choose the number of arbitrators (noting that Article 9 did not put a limit on the number of arbitrators who may be chosen on a panel), but Mr Brennan accepted this was one consequence of the construction for which he contended on Dnata’s behalf. If the party who made the first election may unilaterally dictate the form of the arbitration and especially the arbitral panel, Mr Hogan-Doran SC, who appeared for Polar Air, submitted that would be a “license to untoward commercial pressure” of a kind that might undermine the preceding negotiation phase and unfairly disadvantage smaller parties. This, he submitted, was a reason why Article 9 required a joint election, that is to say, an election by “the parties” as opposed to either party.

Contrary to Mr Brennan’s submission, the construction contended for by Dnata required reading the expression – “[t]he parties” – in the second sentence of Article 9 as meaning “either party” such that an election by one party for arbitration (as occurred in the present case) would bind the other party to arbitrate. There are two compelling reasons why this is not an attractive construction.

First, the same phrase – “the parties” – is used in the first and third sentences of Article 9 and in both of those sentences, the expression is plainly referring to both parties. It would be very odd and conspicuously discordant if the parties intended that that same expression would bear a different meaning within the same Article of the Main Agreement. In this context, it should be noted that there was a tendency in Dnata’s argument to place attention on the second sentence of Article 9 without the immediate context and textual indications contained in its companion sentences. At times it appeared that only lip service was being paid to the important principle stated by Gibbs J in Australian Broadcasting Commission v Australasian Performing Rights Association (1973) 129 CLR 99 at 109; [1973] HCA 36 (ABC v APRA), namely to give meaning to the words of a clause or part of a clause in the contract within the context of the contract construed as a whole. “The duty of a court in construing a written contract is to endeavour to discover the intention of the parties from its words, and this requires consideration of the whole of the agreement between them”: Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129; [2012] HCA 54 at [27].

Second, there are numerous references to “either party” elsewhere in the Main Agreement (e.g. articles 10.1, 10.2, 11.4, 11.5, 11.6, 11.7, 11.8, 11.9. 11.10 11.12); see also Article 2.2 which refers to “[n]either Party”. This militates strongly against the submission that “[t]he parties” in the second sentence of Article 9 was intended to mean “either party”. The drafter’s conscious differentiation between “the parties” and “either party” throughout the Main Agreement must be taken to have been deliberate and, in submissions in reply, Mr Cooper accepted that “[t]he parties” when used in the second sentence of Article 9 could refer to both parties.

I would also reject Mr Brennan’s reliance upon the reference at the beginning of the Main Agreement that “the Carrier and/or the Handling Company may hereinafter be referred to as the ‘party(ies)’”. Contrary to that submission, that reference is either neutral or favours Polar Air’s construction, given the term “party(ies)”, combined with “and/or”, suggests that, where the Main Agreement refers to “party”, it refers to either Dnata or Polar Air, and where it refers to “parties”, it refers to both.

Mr Brennan emphasised, by reference to PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301; [1995] HCA 36 (PMT), that the reference to “election” in Article 9 was a reference to a contractual right. For the proposition that an “arbitration agreement” under the Act includes an agreement which confers on either party the right to elect to arbitrate, Mr Brennan referred to the joint judgment of Brennan CJ, Gaudron and McHugh JJ in PMT at 310 where their Honours observed, by reference to the definition of an “arbitration agreement” in the Commercial Arbitration Act 1985 (NT), that:

It may well be correct that Article 9 conferred on each party a contractual “right” but the critical point for present purposes is that it was a qualified right which only had any efficacy if it was exercised by both parties to the agreement. Alternatively, even if it were a right conferred on either party which was able to be unilaterally exercised, the third sentence of Article 9 made its efficacy subject to both parties’ agreement to the arbitration process. Absent such agreement, the parties were directed by the balance of the third sentence to settle their dispute by litigation.

Dnata sought to rely on Canadian National Railway v Lovat Tunnel Equipment Inc (1999) 174 DLR (4th) 385 in which the Court of Appeal for Ontario (at [12]-[14]) upheld the trial judge’s finding that, in the following arbitration clause,

Dnata advanced the argument, which the primary judge rejected, that the third sentence of Article 9 was directed not to resolving the substantive dispute between the two parties referred to in the first two sentences of the Article but to a different dispute, namely that which had arisen from the parties’ failure “to agree as to an arbitration process”. This argument, which was repeated on appeal, was unattractive for at least five reasons.

First, it involved, as Mr Brennan accepted, giving the word “dispute” as referred to in Article 9 a different meaning as between the first two sentences and the third. The unlikelihood of the parties having that objective intention was only reinforced by the use of the definite article “the dispute” twice in the second sentence and again in the third sentence, reinforcing the fact that the dispute being referred to was one and the same. So Dnata’s construction of Article 9 involved not only giving the expression “the parties” a different meaning within Article 9 (see [15] above) but also involved giving a differential meaning to the expression “the dispute” when used within Article 9.

The presumption that a word or expression appearing multiple times in a document has the same meaning throughout is not immutable or invariable but it must be more powerful where the same expression is used in the same section, article or clause of a contract or agreement: see, generally, P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Lawbook Co) at [22.60]. It is also trite to observe, as noted above, that an arbitration clause such as Article 9 must, as with any other contractual provision, be interpreted as a whole, “and the words of every clause must if possible be construed so as to render them all harmonious one with another”: ABC v APRA at 7 (Gibbs J).

Second, if, as Dnata contended, the third sentence of Article 9 is directed to resolving a “dispute” as to the arbitration process to be followed, and directs that that different dispute be settled by a court, neither the SGHA nor the general law offered any criteria for resolving such a dispute.

It was contended on behalf of Dnata that the reference in the third sentence to the laws of Australia picks up the Act, and that, by reason of s 18 of the Act, Article 11(3)-(4) of the Model Law provided such criteria relating to the appointment of arbitrators in the absence of agreement between the parties. The Model Law, however, provides for very limited curial intervention in the arbitral process (see Article 5) and only a small number of provisions of the Model Law are intended for curial application. These are specified in Article 6 of the Model Law. Notably, they do not include Articles 18, 19, 20, 22, 25 and 26 of the Model Law which concern matters such as equal treatment of parties, determination of rules of procedure, place and language of arbitration, default of a party and appointment of experts. Moreover, Article 11(3)-(4), which may be applied by a court by reason of the stipulation in Article 6 of the Model Law, presupposes that the parties have agreed on the preliminary question of whether to adopt a single arbitrator or a panel of three, and does not provide for curial intervention where there is no such agreement.

Accordingly, the position remains that if, on Dnata’s argument, the third sentence of Article 9 of the Main Agreement was directed towards the resolution of a procedural dispute as to the arbitration process rather than the parties’ substantive dispute, the absence of any criteria for the resolution of such a dispute militates powerfully against that construction. Moreover, the third sentence refers to the failure to agree on “an arbitration process” which highlights the inchoate nature of any contractual commitment to arbitration.

Third, on Dnata’s argument, any procedural dispute having been resolved curially, the substantive dispute would return to arbitration. That is a somewhat cumbersome and, one might suppose, uncommercial outcome.

Fourth, the language in the third sentence of Article 9 – “the dispute shall be settled in accordance with” – is language apt for the resolution of a substantive dispute: cf. Flakt Australia Ltd v Wilkens & Davies Construction Co Ltd [1979] 2 NSWLR 243 at 250; (1979) 25 ALR 605.

Fifth, the third sentence of Article 9 makes perfect sense: it contains a choice of law and exclusive jurisdiction clause in the event that both parties do not elect to settle their substantive dispute by means of arbitration. It has particular utility given that Polar Air was a foreign corporation and it made provision for nomination of an exclusive jurisdiction in which to resolve disputes curially in the event that arbitration was not agreed (albeit that the parties did not make any express reference to Australian courts in Annex B of the SGHA).

Further, as I pointed out in Inghams Enterprises Pty Limited v Hannigan (2020) 379 ALR 196; [2020] NSWCA 82 at [48], “dispute resolution clauses may be crafted and drafted in an almost infinite variety of ways and styles.” Such clauses may give (or purport to give) one or both parties an option to arbitrate or litigate. An example of the former was considered by Einstein J in HIH Casualty & General Insurance Limited (in liquidation) v R J Wallace sued on his own behalf and on behalf of all other members of Syndicate No 683 at Lloyd's of London for the 1993 underwriting account & Ors (2006) 68 NSWLR 603; [2006] NSWSC 1150; see also Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 110.

King v Brandywine Reinsurance Co (UK) Ltd [2004] 2 Lloyd’s Rep 670; [2004] EWHC 1033 (Comm) (Brandywine) is an example of the latter albeit that the clauses in question were held to be “unenforceable as binding arbitration agreements” because “they are agreements to agree to refer disputes to arbitration” (emphasis added) at [52]. This was the same conclusion as was reached by the primary judge in the present case. The relevant clause in Brandywine, extracted at [49] of the decision, provided that:

The decision of the Ontario Court of Appeal in Re McNamara Construction of Ontario Ltd v Brock University [1970] 2 O.R. 583; 11 D.L.R. (3d) 513 is also instructive. There, the Court considered the following clause in a construction contract:

In Nas Aviation Services India Pvt. Ltd. vs Kingfisher Airlines Limited (High Court of Judicature at Bombay, 28 February 2014, unrep) (Nas Aviation), the Court was involved in construing the following clause which was based on the same Standard Group Handling Agreement prepared by IATA as formed the basis of the Main Agreement in the present case:

This clause is the same as Article 9 in respect of the first two sentences, but slightly different in the third, and a further distinction was that the contract in Nas Aviation contained a governing law article which made further reference to arbitration (in respect of which the Main Agreement had no equivalent). The Court held that recourse to arbitration was optional and required the consent of both parties, observing as follows:

The construction of this clause was to the same effect as that given to Article 9 by the primary judge in the present case (although her Honour does not appear to have been referred to it).

True it is that many cases give effect to arbitration agreements where one or more parties has been given a right to elect for arbitration. Reliance was placed in this regard on extracts from G B Born, International Commercial Arbitration (3rd ed, 2021, Wolters Kluwer) at §5.01 ff and the cases referred to, but it is a departure from principle to work from some generalised statements either by text writers or judges in particular decisions rather than the text of the contract or clause being construed. Professor Born’s commentary, in any event, discloses a range of constructions as the following extracts make plain (citations omitted):

Perhaps the strongest argument advanced by Dnata, but one which I would ultimately also reject, was that the construction of Article 9 preferred by the primary judge had the effect of rendering the “right” to elect for arbitration redundant. This was said to be a most unlikely result in circumstances where Article 9 was headed “Arbitration”. This argument presupposed that the right was conferred on both parties but was able to be exercised unilaterally. Mr Brennan submitted that the second sentence of Article 9 was superfluous because it is always open to contractual parties to agree to arbitration.

As to the significance of the heading to Article 9, Mr Brennan did not seek to give that fact particular weight, accepting that it was only part of the context when confronted with McHugh JA’s observation, in the course of argument, that:

Superfluity or surplusage may, depending on the circumstances of a case, be a sound principle of contractual construction but there are a number of circumstances where it is inapplicable: Interpretation at [22.50]. Where a clause or part of a clause is invalid because it is or involves an unenforceable agreement to agree, for example, it is not so much a question of superfluous language as ineffective drafting.

Further, the presumption against redundancy operates within an otherwise enforceable agreement. In the present case, the asserted arbitration agreement said to have been contained within Article 9 is treated as a separate agreement: Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; (2006) 238 ALR 457; [2006] FCAFC 192 at [228]; Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 1102 at [89]; Ferris v Plaister (1994) 34 NSWLR 474 at 504; (1994) 11 BCL 417; see also FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association (1997) 41 NSWLR 559 at 567. It was that separable agreement that the primary judge held was not an arbitration agreement within the meaning of the Act, as being in effect an agreement to agree.

Still further, in AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd (2010) 15 BPR 28,199; [2010] NSWSC 985 at [13], in a decision approved by this Court in XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215 at [72], Ball J summarised the applicable principles with respect to redundancy of words in a contract as follows:

Mr Hogan-Doran submitted that the second sentence of Article 9 served at least two purposes, one legal and one commercial. First, it signalled that the ultimate commitment to dispute resolution by litigation (in the third sentence of Article 9) should not be taken to be a bar to arbitration if both parties elected for it. This would be an example of the words in the second sentence of Article 9 having been included out of abundant caution. In this context, the role of the second sentence of Article 9 was to make clear that, notwithstanding the exclusive jurisdiction clause contemplated in the third sentence of Article 9, it was open to both parties to agree to arbitration instead. This was an attractive submission which was embraced by Kirk JA who posited in the course of argument on appeal that “a way of reading the third and second sentences in that order is there is exclusive jurisdiction of Australian courts but that does not prevent you arbitrating if you so agree.” This was a means of giving sensible work to the second sentence of Article 9 even if that sentence did not give rise to an enforceable arbitration agreement. I agree.

Commercially speaking, Mr Hogan-Doran submitted that the inclusion of Article 9 in IATA’s standard form contract signalled that IATA itself was not opposed to parties seeking to resolve their disputes by arbitration but left the decision to the parties to mutually agree to do so. It should also be recalled that the Main Agreement was a standard form IATA Agreement intended for global application and that in some jurisdictions, what might appear to be an unenforceable agreement to agree may give rise at least to an enforceable obligation to negotiate in good faith: see generally the learned discussion of the topic within the common law tradition by Allsop P, as he then was, in United Group Rail Services Limited v Rail Corporation New South Wales (2009) 74 NSWLR 618; [2009] NSWCA 177 at [30] ff; see also Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 21-5 citing Ridgeway Coal Co Inc v F M C Corporation 616 F Supp 404 (1985) at 407 (USDC, WVA); Itec Corp v Chicago Aerial Industries 248 A 2d 625 (Del 1968); Jillcy Film Enterprises Inc v Home Box Office Inc 593 F Supp 515 (1984) at 521 (USDC, NY).

I would make two additional observations. First, familiar statements which Dnata invoked about affording arbitration (and exclusive jurisdiction) agreements a broad, liberal and elastic construction have typically been made in relation to construing the scope of the clause in question: Global Partners Fund Limited v Babcock & Brown Limited (in liq) [2010] NSWCA 196; (2010) 79 ACSR 383 at [60] (Global Partners). In the present case, the scope of Article 9 was delimited by the language “any dispute or claim concerning the scope, meaning, construction or effect of this Agreement”. As has already been noted, there was no dispute between the parties as to the scope of Article 9 and that the two contractual cross-claims, but not the negligence cross-claim, fell within it, properly construed. I do not consider that the broad and liberal approach referred to in Global Partners has any particular applicability to the construction of Article 9 in the present case.

Second, Dnata sought to frame much of its argument both at first instance and on appeal by reference to a tripartite schema of analysis which had been considered by Stevenson J in Elecnor, a decision currently under appeal in this Court. In that case, the parties had crafted their arguments by reference to three potential constructions of the dispute resolution clause there in question, namely the “Permissive Construction”, the “Mandatory Construction” and the “Elective Construction”: see at [60]-[65]. That schema was considered in the context of the particular clause in question in that case. Its invocation in the present case which concerned a different clause in a different contract was unhelpful. The focus should be on the words used by the parties in the context of the agreement as a whole.

For the above reasons, coupled with those in [52] of the primary judge’s reasons, her Honour’s decision was correct. The appeal should be dismissed with costs.

KIRK JA: I agree with Bell CJ.

McHUGH JA: I agree with the Chief Justice.