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

1. [1]

   SWEENEY J: By Notice of Motion filed on 2 September 2025 the Cross-Defendant, dnata Airport Services Pty Ltd (“dnata”), seeks an order that the cause of action asserting a breach of contract and contractual indemnity pleaded in paragraphs [10], [11], [12], [13], [14] and [15] of the cross-claim filed by Polar Air Cargo Worldwide, Inc (“Polar Air”), the Cross-Claimant, against dnata, on 31 July 2025 be stayed. Polar Air, the Cross-Claimant, opposes that order.

2. [2]

   The background to the action between these two parties is that dnata provided cargo handling services at Sydney airport for Polar Air, a company which has its principal office in New York and owned and operated freight aircraft. An employee of dnata, Joseph Iosefa, has commenced proceedings against Polar Air, claiming that in the course of his unloading cargo from a Polar Air aircraft on 22 March 2021 he was injured. He has sued Polar Air in negligence.

3. [3]

   Polar Air has filed its cross-claim against dnata, pursuant to an agreement between them, claiming a breach of contract and a failure of dnata to indemnify Polar Air against liability for the Plaintiff’s claim against it.

4. [4]

   The dispute between these two parties in this application is the construction of Article 9 of the Main Agreement between them. The parties agree that the cross-claim for indemnity and breach of contract falls within the scope of Article 9 Main Agreement and that the claim in negligence falls outside the scope of Article 9.

5. [5]

   Dnata’s position is that it having chosen to resolve the dispute between it and Polar Air by arbitration, pursuant to Article 9 Main Agreement, Polar Air is required to participate in the arbitration process and not litigate the dispute between these two parties in this court.

6. [6]

   Polar Air’s position, in summary, is that because it is required to litigate Mr Iosefa’s claim against it in this court, it does not wish to deal with the dispute on two fronts, litigating a part of it and arbitrating the other part of it, and that it is not bound by Article 9 Main Agreement to resolve the dispute with dnata by arbitration.

7. [7]

   The relevant agreement between the two parties is the IATA Standard Ground Handling Agreement of 1 June 2016. The relevant parts of that agreement to be considered in this application are in the Main Agreement and Annex B. Polar Air also relied on some parts of IATA Standard Form Annex B, which was not signed by the parties, and is different in some respects from Annex B, which was signed by the parties on 1 June 2016.

8. [8]

   The indemnity clause is contained in cl 8.4 of the Main Agreement and is in the following terms:

9. [9]

   Article 9 Main Agreement, which is at the centre of the dispute between these two parties, is in the following terms:

10. [10]

    Both parties submitted that Article 9 must be considered with the choice of law clause in cl 8 of Annex B which states:

11. [11]

    The parties’ legal representatives have corresponded. In that correspondence Polar Air sought indemnity from dnata for the Plaintiff’s claim, pursuant to the agreement. A dispute between the parties as to whether dnata is required to indemnify Polar Air was discussed, and whether that dispute was governed by the agreement between them. Dnata has advised Polar Air that it does not waive the arbitration clause in Article 9 Main Agreement. Polar Air has advised that it will not elect for or agree to arbitration.

12. [12]

    Therefore the issue between these two parties is whether Article 9 Main Agreement is an agreement by the parties to negotiate and then participate in binding arbitration of the underlying dispute (as dnata contends) or (as Polar Air contends) an agreement to negotiate and perhaps agree on an arbitration of the dispute, and, failing such agreement, to submit to litigation in accordance with the law chosen by the parties.

Dnata’s submissions

1. [13]

   Dnata relies on s 7 of the International Arbitration Act 1974 (Cth) (“International Arbitration Act”) as the primary power by which it asks the court to stay the proceedings as a means of enforcing the arbitration agreement it contends is found in Article 9 Main Agreement. Section 7 relevantly provides:

2. [14]

   “Arbitration agreement” in s 7(2) is defined in s 3 of the International Arbitration Act as “an agreement in writing of the kind referred to in sub‑article 1 of Article II of the Convention.”

3. [15]

   Article II, sub-article 1 refers to:

4. [16]

   Dnata submits that Article 9 Main Agreement is plainly an arbitration agreement to which s 7 applies, because it is “an agreement in writing in which the parties undertake to submit to arbitration” their differences, as referred to in sub-article 1 of Article II of the Convention. Dnata submitted that s 7(2) makes a stay mandatory, not discretionary, once it has been established that there is a binding arbitration agreement.

5. [17]

   In the alternative, dnata relies on Article 8 of UNCITRAL Model Law on International Commercial Arbitration (“Model Law”) or the inherent jurisdiction of the Court.

6. [18]

   Submitting that s 7(2) applies, counsel for dnata relied on the decision of Stevenson J in Elecnor Australia Pty Ltd v Clough Projects Australia Pty Ltd [2025] NSWSC 610 (“Elecnor”) at [92]. There Stevenson J said that whether s 7(2) is engaged requires identification of a “matter” and whether the proceedings involve the determination of that “matter”, that “matter” falls within the scope of the arbitration agreement and the “matter” is “capable of settlement by arbitration” and arises in proceedings between parties to the arbitration agreement. Clearly what is in dispute between the parties in this application is whether they are parties to an arbitration agreement.

7. [19]

   Dnata relied on Stevenson J’s statement of principles for the construction of arbitration clauses. His Honour said:

8. [20]

   Counsel for dnata relies on Stevenson J’s construction of the arbitration clause in that case, which was in these terms:

9. [21]

   Stevenson J considered three possible constructions of the clause. The first was the “Permissive construction”, which permits arbitration but does not stipulate arbitration as the only form of dispute resolution and gives a party the choice to arbitrate or litigate, said to arise from the use in the clause of the word “may” and the absence of any express term prohibiting the parties from litigating disputes. The second was the “Mandatory construction”, being that the clause prescribes arbitration as the mandatory procedure for the resolution of disputes between the parties. The third was the “Elective construction”, which gave either party the choice to litigate or require submission to arbitration, and if one party insisted on arbitration then the clause applied mandatorily. Stevenson J preferred the Mandatory construction. His Honour concluded that the use of the word “may” in the arbitration clause should be construed as invoking a choice between arbitrating the dispute or taking it no further. His Honour expressed the view that the other constructions would serve no meaningful purpose or not be commercially convenient or reasonable.

10. [22]

    Counsel for dnata relied on the agreement between these two parties being a standard form international commercial contract and relied on the observations of Allsop J (Finn and Finkelstein JJ agreeing) in Comandate Marine Corporation v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45; [2006] FCAFC 192 at where his Honour said at [164]-[165]:

11. [23]

    Counsel for dnata submitted that the parties’ choice to prescribe arbitration as a means of dispute resolution reflects common and obvious commercial objectives which should not be frustrated by construing Article 9 narrowly or in a way which deprives it of meaningful operation.

12. [24]

    Counsel for dnata submitted that the multitiered dispute resolution clause in Article 9 needs to be approached with regard to the commercial consequences of the competing constructions. He submitted that the first tier of the dispute resolution is contained in the first sentence of Article 9:

13. [25]

    It seemed by the time of the hearing of this application that the parties were agreed that the discussions between the legal representatives to date had satisfied that process.

14. [26]

    Counsel for dnata relied on the “Mandatory construction” preferred by Stevenson J in Elecnor as most consistent with the text, context and purpose of Article 9 Main Agreement in these proceedings. He submitted that by this construction of Article 9, if the parties are unable to resolve the dispute between themselves, in accordance with the first sentence, their choice is to leave the dispute unresolved, or they may, in accordance with the second sentence, elect to resolve the dispute through arbitration.

15. [27]

    Counsel for dnata submitted that the third sentence of Article 9 does not direct the parties to resolve their substantive dispute through litigation; rather, it provides that where the parties disagree as to the arbitration procedure, such as the number and identity of arbitrators or the seat of the arbitration, that dispute as to procedure is to be settled by the specified court. That is, counsel submitted that the words “the dispute” in the final sentence of Article 9 do not refer to the parties’ substantive dispute referred to in the first sentence of the clause, but to the parties’ failure to agree to an arbitration process. Counsel submitted that that construction reflects the natural meaning of the language of the clause and is the most practical result in accordance with the clause’s purpose. He disputed Polar Air’s construction which he submitted would allow any party to refuse to agree to the arbitration process and in doing so, veto any right or ability to arbitrate at all. He submitted that would deprive the arbitration agreement of any force.

16. [28]

    Counsel submitted that the meaning of the word dispute used in each sentence has to yield to the context, and in the third sentence is governed by the words before it, “if the parties fail to agree”. He submitted that “dispute” is not a defined term.

17. [29]

    Counsel submitted that its proposed construction that what may be submitted to the specified court is the dispute about the arbitration process is supported by commentary by Professor Adrian Briggs, author of Agreements On Jurisdiction and Choice of Law (2008, Oxford, Oxford University Press). Counsel submitted that if the court was not satisfied of the Mandatory construction, it should apply the Elective construction, which would mean that either party to the agreement has the choice of litigation or arbitration, but once at least one of the parties elects to arbitrate, then arbitration is the sole available mode of achieving a binding dispute resolution. In support of this proposed construction counsel relied on the decision of the Privy Council in Anzen Ltd & Ors v Hermes One Ltd [2016] 1 WLR 4098; [2016] UKPC 1 (“Hermes”), while noting that Stevenson J in Elecnor did not agree with the decision in Hermes, because his Honour preferred the Mandatory construction over the Elective construction decided in Hermes. The Court in Hermes considered a dispute resolution clause which provided that “any party may submit the dispute to binding arbitration”. The Privy Council held that the words of the clause were permissive in that either party was entitled to commence litigation, but litigation having been commenced, the other party had the option to elect to submit the dispute to arbitration instead, by commencing arbitration proceedings or insisting on arbitration by obtaining a stay of the litigation.

18. [30]

    Relying on that decision, counsel for dnata submitted that dnata is entitled to make an election for arbitration and on that basis obtain a stay of the litigation commenced by Polar Air. He noted that while the clause in Hermes provided that “any party” may submit the dispute to arbitration, Article 9 in the present case provides that “the parties may elect”. Relying on the approval in Hermes of the Canadian decision of Canadian National Railway & Ors v Lovat Tunnel Equipment Inc (1999) 174 DLR (4th) 385 that “the parties” meant either party, as opposed to both parties acting jointly, he submitted that the same conclusion should be reached in relation to Article 9. Counsel submitted that construing Article 9 to permit either party to retain the right to insist on litigation over arbitration deprives the parties’ choice to include an arbitration clause in their agreement of any meaningful effect. He submitted that it is commercially logical in this matter to proceed by arbitration. He relied on observations in Hermes that “parties to an agreement to arbitrate are under mutual obligations to one another to cooperate in the pursuit of the arbitration”: at [34].

19. [31]

    Counsel submitted the Court should avoid a construction which has no commercial meaning, sense or utility. He referred to the commercial inconvenience of litigating and arbitrating.

20. [32]

    Counsel submitted that these parties are not litigating the same action twice by two different means, as the plaintiff, Mr Iosefa, is not a party to the arbitration agreement and the negligence claim is a different claim.

Polar Air’s submissions

1. [33]

   Polar Air’s position is that Article 9 Main Agreement does not give rise to a binding agreement to arbitrate, but is an “agreement to agree”, and therefore does not come within s 7 of the International Arbitration Act, as it is not an agreement to submit to arbitration. Counsel submitted that nor does Article 8 of the Model Law apply.

2. [34]

   Polar Air relied on the principles of construction summarised by Bell P in Lepcanfin Pty Ltd v Lepfin Pty Ltd (2020) 102 NSWLR 627; [2020] NSWCA 155. His Honour’s summary of the principles began in paragraph [78] of that decision. Omitting the authorities his Honour stated the following:

3. [35]

   Senior Counsel for Polar Air submitted that the court should apply those principles and that it is dangerous and wrong to rely on decisions on contractual terms in other cases. Senior Counsel submitted that none of the clauses in the decisions relied upon by dnata were similar to the clause under consideration here, and nor were they construed in the context of an industry standard form agreement as the Standard Ground Handling Agreement is. Senior Counsel submitted that neither of the clauses in Elecnor or Hermes referred to the applicable court or law in the absence of agreement as to the arbitration procedure.

4. [36]

   Senior Counsel submitted that Article 9 Main Agreement must be construed in light of the choice of law clause in Annex B, especially cl 8.1-8.3, and the exhibits to Annex B, identifying the services dnata were to provide and which has exposed Polar Air to the Plaintiff’s claim, which cannot be arbitrated under Article 9 Main Agreement. Senior Counsel submitted that the context in which the parties made the agreement was that the parties contemplated dnata would provide services, dnata would supervise its staff in the use of equipment, and parts of the Agreement contemplate actions by employees and staff members of dnata.

5. [37]

   Senior Counsel submitted that there is substance in the “agreement to agree” in the second sentence of Article 9 because it seeks to avoid having to litigate and arbitrate at the same time. He submitted this is not just a dispute between these two parties; the proceedings were properly commenced by somebody else, an employee of dnata, which has brought Polar Air into the court, and Polar Air does not want to arbitrate because Mr Iosefa, the Plaintiff, is not a party to the Agreement and has commenced litigation.

6. [38]

   Senior Counsel submitted that the second sentence in Article 9 Main Agreement is permissive only of what the parties may agree, and the third sentence applies only where the parties have failed to agree to arbitrate. Senior Counsel relied on Professor Briggs’ statement in his book Agreements on Jurisdiction and Choice of Law that:

7. [39]

   Polar Air proposed the following construction of Article 9 of the Main Agreement, read with Annex B, cl 8. The first sentence of Article 9 states “In the event of any dispute or claim concerning the scope, meaning, construction or effect of this Agreement the parties shall make all reasonable efforts to resolve disputes among themselves.” Polar Air submits that this first sentence of Article 9 obliges the parties to seek to negotiate to settle disputes as to the scope, meaning, construction or effect of the Agreement, that being the underlying dispute.

8. [40]

   The second sentence of Article 9 states “Failing mutual resolution of the dispute, the parties may elect to resolve the dispute through arbitration (either by a single arbitrator or a panel of arbitrators).” Polar Air submits that this part of Article 9 means that after the parties seek to negotiate to settle their dispute the parties may then, but are not required to, go to arbitration to resolve their underlying dispute.

9. [41]

   The third sentence of Article 9 states “In the event that the parties fail to agree to an arbitration process, the dispute shall be settled in accordance with the laws of the state or jurisdiction set out in Annex(es) B, by the court set out in Annex(es) B without regard to principles of conflicts of laws.” Polar Air submits that if the parties cannot agree to an arbitration process, so as to establish an effective arbitration of the underlying dispute, the underlying dispute is to be resolved through litigation in a court which shall apply Australian law. Polar Air submits that since Annex B, cl 8.1-8.3 contains no choice of court clause, the selection of which court will apply Australian law will depend on the court in which one of the parties commences proceedings to enforce the Agreement.

10. [42]

    Polar Air relies on a number of factors in support of its proposed construction of Article 9 of the Main Agreement. The first factor is the structure of Article 9 in three sentences. Senior Counsel submitted that although the title of Article 9 is “Arbitration”, the clause is not merely concerned with arbitration but broader dispute resolution. He submitted this supports reading down the significance of the heading and allowing for the clause to include negotiation in the first sentence, arbitration in the second sentence, and litigation, in the third sentence, of any underlying dispute concerning the “scope, meaning, construction or effect of” the Standard Ground Handling Agreement.

11. [43]

    Senior Counsel submitted the first sentence contains an obligation of direct negotiation as a form of dispute resolution. He submitted the second sentence is concerned with arbitration, and it begins with a qualifying event of a failure to mutually resolve the underlying dispute. He submitted the third sentence begins with a qualifying event, being the failure to agree on an arbitration process.

12. [44]

    Senior Counsel submitted the clause is a typical multitiered clause, but it is not one with arbitration at its apex as in Elecnor or in Inghams Enterprises Pty Ltd v Hannigan [2020] NSWCA 82 (“Inghams”).

13. [45]

    Senior Counsel submitted that dnata cited no authority for its proposition that its Mandatory construction or even its Elective construction of Article 9 is the only way in which the parties may obtain a result which is binding upon them, submitting that this Court will produce a judgment that is binding upon dnata. Senior Counsel submitted that dnata’s submission that the parties would be required to abandon their right to arbitrate and proceed to litigation assumes the construction for which dnata contends.

14. [46]

    The next factor Senior Counsel relied on was the scope of the application of Article 9 Main Agreement. Senior Counsel submitted that it is plain that Article 9 does not deal with all disputes or claims that may arise between the parties. It is not an agreement to arbitrate or litigate in a chosen court for any claim arising out of or in connection with the Standard Ground Handling Agreement. Senior Counsel submitted that some claims between the parties would not fall within the scope of Article 9, such as the negligence claim in these proceedings, tends to indicate that the parties appreciated the risk of binding themselves to arbitration, because they may then be left with some claims having to be litigated and some arbitrated, even if arising from the same facts, giving rise to duplication of costs and risks of inconsistency of findings and outcome.

15. [47]

    The next factor counsel relied on is the consistent use of the term “dispute”. Senior Counsel submitted that the word “dispute” is used consistently in the clause, without any qualification to suggest that in respect of the need to agree on an arbitration procedure, “dispute” has the narrower meaning asserted by dnata as meaning only a dispute as to procedure. Senior Counsel submitted that the use of “dispute” in the first sentence is plainly a reference to the underlying dispute in respect of the Standard Ground Handling Agreement and its effect on the parties’ rights and obligations, that the use of “dispute” twice in the second sentence plainly refers to the underlying dispute, and therefore in the third sentence the natural meaning of the word “dispute” is the underlying dispute and not merely a dispute about the arbitration procedure. Senior Counsel submitted that the reference to “arbitration” in the second sentence and “arbitration process” in the third sentence is an implicit reference to the underlying dispute, since arbitration is a process used to resolve disputes. Senior Counsel submitted that its proposed construction is consistent with the obvious purpose of Article 9, being the resolution of any underlying dispute within its scope.

16. [48]

    Senior Counsel submitted that the words “may elect” in the second sentence does not confer on either party a right to elect to pursue arbitration at its option, thus compelling the other party to an arbitration process; it is an election made by both parties to do something, and that is plain from the words used in their context. Senior Counsel submitted that the word “may” in the second sentence indicates an absence of obligation and the presence of a permission, that being the ordinary meaning of the word “may”. Senior Counsel submitted that the opening words of the third sentence “In the event that the parties fail to agree” makes plain that the words “may elect” in the second sentence means “may agree”. Therefore Senior Counsel submitted that the election in the second sentence is by both parties, not one party, since the possibility of a “failure to agree” does not arise if the second sentence confers on each party a unilateral right to elect to refer the matter to arbitration.

17. [49]

    Senior Counsel submitted that the third sentence of Article 9, especially when read with Annex B, cl 8.1-8.3, is a general choice of law clause apt to the resolution of any underlying dispute concerning the scope, meaning, construction or effect of the Standard Ground Handling Agreement; it is not a mere choice of the law governing a dispute as to arbitral process and this is apparent from the terms of cl 8.1 and 8.2 of Annex B.

18. [50]

    Senior Counsel submitted that because the purpose of the contract was to set out the services that dnata would provide to Polar Air, which would require dnata to provide services through its employees, contractors and other agents, the parties must have contemplated the possibility of claims by dnata staff against Polar Air, with the resulting possibility that the underlying dispute could not be fully arbitrated but only litigated in the court chosen by the third-party plaintiff.

Consideration

1. [51]

   I am of the view that the construction of Article 9 contended for by Polar Air is the correct construction. That follows from the language and structure of Article 9. It is not a clause, to use Stevenson J’s phrase, which “culminates” in arbitration. In my view, the use of the word “dispute” in each sentence of Article 9 refers to the underlying dispute between the parties about the scope, meaning, construction or effect of the agreement between them, and does not have the narrow construction contended for by dnata in the third sentence as a dispute about the arbitration procedure. The use of the term “the parties may elect” to resolve the dispute through arbitration, and the use in the third sentence of the term “In the event that the parties fail to agree to an arbitration process” means that failing mutual resolution of the dispute among themselves, the parties may agree to resolve the dispute through arbitration, but in the event that the parties fail to agree to resolve the dispute through arbitration, then the dispute shall be settled by litigation.

2. [52]

   This is also, in my view, consistent with the context of the agreement which was that dnata agreed to provide services to Polar Air, the agreement contemplated dnata would provide services through its staff and contemplated suits by dnata staff. This construction does not lack commercial sense in that it avoids Polar Air having to deal with a dispute in two forums when it is drawn into litigation by an employee of dnata, thus duplicating costs.

3. [53]

   Article 9 is not an agreement by the parties to submit to arbitration of their disputes about the Agreement. It is not an arbitration agreement as defined. Therefore s 7of the International Arbitration Act does not apply and dnata is not entitled to the stay it seeks.

Orders

1. [54]

   Therefore:

   1. (1)

      The Cross-Defendant’s motion is dismissed.

   2. (2)

      The Cross-Defendant is to pay the Cross-Claimant’s costs of and incidental to the motion.