FEDERAL COURT OF AUSTRALIA

Nexus Energy Corporate Pty Ltd v Trident Australasia Pty Ltd [2010] FCA 1328

THE COURT ORDERS THAT:

1.    The notice of motion dated 1 October 2010 be dismissed.

2.    The applicant (Nexus) pay the costs of the respondent (Trident) on the notice of motion to be taxed if not agreed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

APPLICATION FOR LEAVE TO APPEAL

1    On 24 September 2010, the primary judge dismissed the application of the respondent (Nexus) for a stay of the whole of the primary proceeding. Nexus had applied for such a stay by notice of motion dated 10 August 2010. The basis of that application was that Nexus was entitled to refer to arbitration a dispute represented by the subject matter of the primary proceeding. Nexus now seeks leave to appeal against this decision.

2    The essence of the issue before the primary judge may be drawn from the reasons of the judgment of the primary judge in Trident Australasia Pty Ltd v Nexus Energy Corporate Pty Ltd [2010] FCA 1135.

3    On 25 June 2007, Nexus entered into an agreement with a company, TD Joint Venture Pty Ltd (TDJV) pursuant to which TDJV undertook to build an offshore pipeline between the Longtom Gas Field and the Patricia Baleen Gas Field in Bass Strait, Victoria for Nexus.

4    One of the subcontractors engaged by TDJV to work on the project was Trident. On 30 July 2007, TDJV and Trident entered into the subcontract referred to as the “Services Agreement”.

5    The Services Agreement records that TDJV had been engaged to develop and perform engineering, procurement and installation services of the sub-sea pipeline systems for the Nexus Longtom Gas Project and that the contractor, TDJV, required the services of Trident in support of the project.

6    Without here setting them out in detail (they may be seen in the reasons of the primary judge) the Services Agreement contained clauses dealing with the obligations of the “Supplier” (a reference to Trident) and the “Contractor” (a reference to TDJV) in relation to scope of services, price schedule, maximum amount of Services Agreement, prices, schedule of services, payment terms, invoices as well failure to comply.

7    In relation to failure to comply, cl 14 of the Services Agreement provides:

If the Supplier fails to comply with the requirements of Clauses 11 to 13 the Contractor may, at the Contractor’s sole discretion and at Supplier’s sole cost, impose any one or all of the following measures until such time as the Supplier has achieved full compliance:

a)    delay the commencement of the Services;

b)    suspend the performance of the Services; and/or

c)    refuse payment upon any invoice in respect of the Services.

8    Clause 20 of the Services Agreement then deals with the topic of the settlement of disputes as follows:

SETTLEMENT OF DISPUTES

All disputes arising out or related to this Services Agreement, if not amicably settled by the Parties, shall be finally settled under the Rules of the Conciliation and Arbitration of the International Chamber of Commerce by three Arbitrators appointed in accordance with the said rules.

The arbitration venue shall be Perth Western Australia.

(as appears in the original)

9    In June 2009, Nexus was informed that in order to ensure the expedited completion of the project, it had to pay the subcontractors directly.

10    In July 2009, an agreement (the 2009 Agreement, also referred to as the Letter Agreement by Nexus and the Order of Variation by Trident) naming TDJV, Trident and Nexus as parties was drawn up. The 2009 Agreement, which was signed by TDJV and Trident, but not Nexus, provides, in effect, for Nexus to pay moneys due for the performance of services by Trident under the Services Agreement, to Trident directly. Although Nexus did not sign the 2009 Agreement, it relies upon cl 2(c)(i) of the 2009 Agreement as comprising the arbitration agreement between itself and Trident.

11    Clause 2 of the 2009 Agreement provides as follows:

2.    Payment Obligations

(a)    Nexus undertakes to pay directly to the Subcontractor all amounts lawfully due to the Subcontractor under the Subcontract for works and services provided by the Subcontractor to TDJV on and after the Effective Date, but TDJV must certify any payments as being due and owing before payment is made.

(b)    Nexus must make such payments on the terms provided for in the Subcontract but subject to the presentation of tax invoices and any other documentation required to be provided by the Subcontractor under the Subcontract as a condition of payment.

(c)    Nexus is entitled to:

(i)    the same rights to dispute liability for and to withhold payments under the Subcontract as TDJV would otherwise have been entitled to; and

(ii)    the same grace periods, notices of default and cure periods for default in payment under the Subcontract as TDJV would otherwise have been entitled to.

(d)    Payments by Nexus under clause 2(a) of this letter are to be applied by the Subcontractor strictly in respect of the invoices in respect of which those payments are made.

(e)    Nothing in this letter or elsewhere is to be taken as an implied obligation on the part of Nexus to make any payments to the Subcontractor in respect of works and services provided by the Subcontractor to TDJV before the Effective Date. However, Nexus may in its absolute discretion make such payments to the Subcontractor and, where it elects to make any such payment, it must specify to which invoices rendered by the Subcontractor to TDJV those payments are to be applied, and the Subcontractor must apply those payments accordingly. To the extent of those payments, the liability of TDJV to the Subcontractor for them is discharged.

12    Nexus contended and contends in this application for leave to appeal that cl 2(c)(i) comprises an agreement with it and Trident to settle their disputes under the 2009 Agreement, in accordance with the provisions in cl 20 of the Services Agreement.

13    The primary judge, at [16], formed the view that cl 2(c)(i) is only intended to confer on Nexus the right to rely upon the same grounds to resist payment of Trident’s claims, as the principal contractor, TDJV, is entitled to rely upon under the Services Agreement, and that is all. It does not also permit Nexus in effect to call in aid the settlement of disputes arbitration procedure provided for by cl 20 of the Services Agreement.

14    The primary judge, at [18]–[20], set out three reasons why he did not consider that cl 2(c)(i) of the 2009 Agreement constituted the arbitration agreement contended for by Nexus:

18    First, there is a difference between the language of “disputing liability” used in cl 2(c)(i) of the 2009 Agreement and the language “settling disputes” used in cl 20 of the Services Agreement. It is one thing for parties to agree as to the basis on which a party will be able to dispute a liability to perform a primary obligation, but it is quite a different thing for the parties to agree as to the means by which disputes will be settled, once they have arisen. The fact that the parties used the language in cl 2(c)(i) of “disputing liability” rather than “settling disputes” militates against the construction contended for by Nexus. This is particularly so when meaningful effect can be given to a construction of cl 2(c)(i) which falls short of cl 2(c)(i) being construed as comprising an agreement between the parties as to the means whereby disputes will be settled.

19    Secondly, cl 2(c)(i) is the first of two subclauses which comprise clause 2(c). In my view, the construction of cl 2(c)(i) is informed by the content of cl 2(c)(ii) which uses the language of “grace periods”, “notices of default” and “cure periods” - concepts which relate to performance of primary contractual obligations. This subclause seeks to give Nexus the benefit of these concepts as a means of qualifying Nexus’s duty to perform its primary obligation under the 2009 Agreement, namely, to make payment on the presentation of a valid invoice. This also militates against Nexus’s contention that cl 2(c)(i) comprises an arbitration agreement. The clause does not, in my view, comprise a separate agreement in relation to a discrete matter, namely settling disputes, which is distinguishable from the definition of primary contractual rights and obligations binding each of the parties. This distinction is also manifest by the fact that cl 2(c)(i) is part of cl 2 of the 2009 Agreement which is headed “Payment Obligations” – a primary obligation on Nexus; whereas cl 20 of the Services Agreement is a separate clause addressing the discrete topic of the settlement of disputes.

20    Thirdly, cl 2(c)(i) only addresses the position of Nexus. The absence of mutuality in cl 2(c)(i), in my view, further militates in favour of a construction that the clause is intended to address and qualify the performance of Nexus’s primary obligation, namely, to make a payment, rather than comprising a separate arbitration agreement.

15    In light of his Honour’s reasoning, the primary judge was not required to consider whether a stay should be granted or refused by reference to “discretionary” considerations.

the test governing grant of leave to appeal

16    Leave to appeal an interlocutory decision is required. The parties accept that the refusal of the stay order by the primary judge was an interlocutory order. They also accept that the test that governs the grant of leave is that enunciated in Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, namely:

(1)    whether, in all the circumstances, the decision at first instance is attended by sufficient doubt to warrant its reconsideration by a Full Court; and

(2)    whether substantial injustice would result if leave were refused supposing the decision to be wrong.

17    It has been emphasised more than once (for example in the recent decision of the Full Federal Court in Rawson Finances Pty Ltd v Deputy Commissioner of Taxation [2010] FCAFC 139 at [5]) that the test is cumulative. It is not satisfied unless each limb of the test is made out. I will say more about the application of this test below.

whether there is sufficient doubt

18    Nexus in its application for leave first draws attention to the fact that the 2009 Agreement had attached to it the Services Agreement. Accordingly, Nexus contends there was no doubt about the matters which were to be treated as incorporated into the 2009 Agreement.

19    As to the first, or linguistic, reason for decision provided by the primary judge, Nexus says that while it is true that one provision refers to “disputing liability” and the second to “settling disputes”, that is not the end of the story. Nexus draws attention to the principle of construction of a written contract that requires not only the language of the document to be considered, but also the surrounding circumstances known to the parties and the apparent purpose and object of the transaction: see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40], Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. Consequently Nexus says that the whole of the instrument should be considered and preference given to a construction supplying a congruent operation of the various components of the whole instrument, as suggested in Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 at 529.

20    In short, Nexus contends that in construing cl 2(c)(i) of the 2009 Agreement it is necessary to ascertain the intention of the parties from the whole of the instrument taken together.

21    So far as cl 2(c)(i) is concerned, Nexus first refers to the fact that it is the “same rights” that Nexus is entitled to, “to dispute liability for and to withhold payments under the sub-contract” as TDJV would otherwise have been entitled to. The entitlement to the “same rights to dispute liability for payments under the subcontract” may therefore be distinguished from the “same rights to withhold payments under the subcontract”. This difference suggests that the grant of the same rights to dispute liability for payments must invoke other provisions of the Services Agreement, apart from those permitting the withholding of payments.

22    Nexus argues that when the Services Agreement is examined, there are mechanical provisions which prescribe the forms that invoices must take and such other material relevant to the delivery of documents so as to engender the payment obligations. Insofar as entitlements to dispute liability are concerned, there is no provision other than cl 20 which deals with the settlement of disputes.

23    Secondly, Nexus contends that cl 2(c)(i) must be construed in the face of the circumstance that the Services Agreement was attached to the 2009 Agreement and, also in the face of the prefatory words to that Agreement, namely that:

TDJV and the sub-contractor represent and warrant to Nexus that the copy of the Sub-contract annexed to this letter is a true and complete copy and may be relied upon by Nexus accordingly.

24    Nexus emphasises for the purpose of this argument the concluding words – “may be relied upon by Nexus accordingly”.

25    Thirdly, Nexus contends that when the terms of cl 2(c)(i) are read in the context of the 2009 Agreement, it may be seen that they achieve a broader outcome than that accepted by the primary judge.

26    For my part, I think there is a reasonable argument that the expression “the same rights to dispute liability for… payments under the Sub-Contract as TDJV would otherwise have been entitled to” textually includes the right to take advantage of a dispute settlement for procedures such as that expressed or implied by cl 20 of the Services Agreement.

27    Nexus though make further arguments concerning the construction of the relevant clause in context. Nexus draws attention to the following scheme of cl 2 of the 2009 Agreement:

    Clause 2(a) provides that Nexus undertakes to pay directly to the sub-contractor all amounts lawfully due to the sub-contractor under the sub-contract, which creates the payment obligation.

    Clause 2(b) provides that Nexus must make payments on the terms provided for in the sub-contract, subject to certain matters, which deals with the mechanical aspects of payment.

    Clause 2(c)(ii) deals with grace periods, notices of default and cure periods specifically.

28    Nexus contends that the effect of these provisions is to place Nexus in the same position as TDJV. There is, in essence, a sort of standing in the shoes of TDJV by Nexus. This becomes clear when consideration is given to the words in cl 2(c)(i) that Nexus is given “the same rights to dispute liability … for payments”.

29    Thus, it is submitted that Nexus is to enjoy the same rights. Nexus contend that to say that arbitration is not a right as Lord MacMillan appears to have done in Heyman v Darwins Limited [1942] AC 356 (a passage referred to by the primary judge at [15]) fails to acknowledge the significance of the clause. Nexus rhetorically raises the issue in this way: if there is a right to dispute or challenge payment, how is it to be resolved?

30    Nexus contends that as to the meaning of the word “dispute” used in the sense of cl 2(c)(i), it is a verb. As a verb, the word means “to engage in argument or discussion, or to quarrel or fight about; contest” (Macquarie Dictionary 5th Ed) or “to discuss, debate or argue, contest, strive against or resist (an action)”, (Shorter Oxford English Dictionary 5th Ed).

31    Nexus says that cl 4 of the 2009 Agreement, which refers to remedies for financial default is also of significance. It refers to any right given to TDJV to terminate the subcontract for any reason, including “on the basis of any unresolved dispute” and requires TDJV not to assert those rights unless it first offers to enter into a contract with Nexus, giving Nexus the same rights and benefits which TDJV would have had under the same contract, had it not been terminated. Such a provision, using the language of rights and disputes, demonstrates an intention that Nexus gets to stand in the shoes of TDJV both if the Services Agreement comes to an end and, in the circumstances where, although TDJV was still a party to the contract, Nexus were to acquire such rights as it possessed, given it was to pay for such services as were provided in accordance with the 2009 Agreement.

32    Nexus further contends that no issue of principle is identified as to why a narrow construction of the expression, “same rights to dispute liability” is correct, in the context of broader considerations. In this regard, Nexus refers to the broad approach to the discovery of an arbitration agreement in Comandate Marine v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45 at [151]–[161], Allsop J (with whom Finklestein J agreed and with whom Finn J agreed generally). The point that Nexus wishes to emphasise is that a broad approach should be taken to an analysis of evidence of an agreement of the parties to resolve the dispute by an arbitral process.

33    Secondly, Nexus emphasise that the Commercial Arbitration Act 1985 (WA) defines, in s 4(1), an arbitration agreement broadly to include “an agreement in writing to refer present or future disputes to arbitration”. A party in relation to an arbitration agreement is defined to include “any person claiming through or under a party to the arbitration agreement”.

34    Counsel for Nexus emphasises that the Services Agreement does not prohibit assignment or, at least, in circumstances where consent is given in the form of the 2009 Agreement, a question arises as to the significance of this event. It is generally held that an assignee of a contractual benefit does not become party to the arbitration agreement but the assignee cannot enforce the benefit without recognising the obligation to arbitrate: The Voeste Alpine [1997] 2 Lloyd’s Rep 279; The Jordan Nicolov [1990] 2 Lloyd’s Rep 11.

35    Counsel for Nexus also refers to what Moore-Bick J said in Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co Ltd [2005] EWHC 455 at [22] to the effect that the relevant authorities all speak in terms that suggest that an assignee of rights under a contract is bound by the arbitration agreement as a whole with the result that he both attains the benefit of the agreement and is subject to its burdens.

36    Counsel submits that in effect an assignee may not be a party to the arbitration agreement, but is a party claiming under or through a party to the arbitration agreement, as in The Leage [1984] 2 Lloyd’s Rep 259.

37    Counsel for Nexus generally argues that there is a trend in the authorities to suggest that when determining the parties intentions concerning the scope and proper interpretation of a provision such as cl 2(c)(i), the incorporated provisions require close attention. In particular, in circumstances where the very agreement from which particular provisions are to be incorporated are to be attached, and the language of the clause refers to the grant of the “same rights”, there is no need to adopt a position requiring any particular language. So far as the importance of the physical incorporation of a document in an agreement and the significance it may have, counsel draws particular attention to what Malcolm CJ observed in Carob Industries Pty Ltd (in liq) v Simto Pty Ltd (1997) 18 WAR 1 at 19.

38    Contrary to the primary judge’s narrow reading of cl 2(c)(i), Nexus contends that as a matter of language, and as a matter of commercial business sense, a narrow construction is not tenable.

39    In my view, there is sufficient force in the constructional arguments made on behalf of Nexus to cause me to consider that there is sufficient doubt about the construction preferred by the primary judge to warrant its reconsideration by a Full Court. The textual arguments of themselves I think raise that doubt, as do the overall circumstances including the incorporation of the Services Agreement into the 2009 Agreement.

40    The absence of mutuality in cl 2(c)(i) was considered by his Honour as an additional third reason that militated in favour of the construction he preferred. In that regard I accept that there is no necessity of mutuality in order for one party to take advantage of an arbitration clause: see PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 184 CLR 301 at 310 (Brennan CJ and Gaudron and McHugh JJ; Toohey and Gummow JJ at 323).

41    There is force also in the contention made on behalf of Nexus that there is no necessity on a proper construction of the relevant clause for it to refer to anything other than the position of Nexus. The position of TDJV is set out in the Services Agreement, there is no reason to alter that position. The concern of Trident and Nexus was to set out how Nexus was to proceed. Nexus’ concern was to see that it was protected or given such rights as TDJV enjoyed. On that view, cl 2(c)(i) achieves that outcome.

42    Nexus also respond to a particular submission made by Trident that while Nexus is claming to want to go to arbitration, it has not admitted that the 2009 Agreement is a valid and binding agreement. Trident contend that this means that Nexus could attend an arbitration and dispute all issues resulting in a protracted process without any issue being addressed.

43    In response to that submission, counsel for Nexus refers to the decision of the Full Federal Court in Comandate Marine, referred to above, where Allsop J dealt with the doctrine of separability. His Honour emphasised, at [219], that an arbitrator can be seen to have a clear basis of jurisdiction to decide whether the substantive contract was void or voidable or should be rescinded, without destroying his or her own authority or jurisdiction to arbitrate. His Honour added that the invalidity of the substantive contract does not necessarily entail the invalidity of the arbitration clause.

44    For present purposes at least, the doctrine of separability appears to answer the contention of Trident, in effect, that Nexus cannot have its cake and eat it too, so far as the validity of the 2009 Agreement is concerned. I should add, in any event, that on the materials before me, the position of Nexus is more precise than that. It has purported to “reserve” its position in relation to the validity question and it seems that in its pleadings in the proceeding to date, it simply does not admit the validity of the 2009 Agreement.

45    In conclusion then, I am satisfied that the decision at first instance is attended by sufficient doubt as to warrant its reconsideration by a Full Court.

The question of substantial injustice if leave were refused

46    I turn then to the question whether substantial injustice would result if leave were refused, supposing the decision to be wrong.

47    Nexus emphasises that the primary decision effectively precludes the pursuit of any arbitration. If leave were refused Nexus would be denied the right to appeal from a final decision on the construction of an important provision of the 2009 Agreement.

48    The question of substantial prejudice is perhaps evenly balanced. Trident emphasise that to date Nexus has not taken any steps to commence an arbitration whilst maintaining its position that disputes between it and Trident must be arbitrated. Nexus does not even admit that it is bound by the 2009 Agreement.

49    Trident submits that although Nexus does not admit it is bound by the 2009 Agreement it seeks to rely on the 2009 Agreement to access the arbitration clause in the Services Agreement and further claims that this forms a binding arbitration agreement between it and Trident. Trident says this causes a conceptual difficulty, which is further compounded by Nexus’ position that the same arbitration agreement encompasses both issues in the proceedings and that it will rely on that arbitration agreement to arbitrate both issues. As to this point, I have already observed that the separability doctrine permits this position to be taken, or at least appears to in this case.

50    Further, the primary proceeding was commenced on 23 June 2010. Trident says the first time Nexus ever raised arbitration (or mentioned it) was on 26 July 2010, being the day before the first directions hearing in the primary proceeding. As noted above, the notice of motion for a stay was filed on 10 August 2010.

51    Trident also complains that Nexus has continually refused to move the proceeding forward and only filed a defence on 8 November 2010, which was filed without prejudice to Nexus’ right to seek a stay of the proceeding.

52    Trident also refers to the defence of Nexus at para 7(b), that the invoices in dispute in the proceedings have not been certified in accordance with cl 2(a) of the 2009 Agreement.

53    Trident has now filed a reply in the proceeding.

54    Trident says this is not a matter where injustice will be wrought by refusing leave to appeal. The issues between the parties are on course to be finally determined in the proceeding. Nexus has not taken any steps to arbitrate and it appears unlikely that it will do so. Nexus has continually sought to delay. This appears to be its intention and the Court is entitled to draw this inference from the facts.

55    Trident further submits that, if it is found that there is an arbitration agreement, then the scope of such an arbitration would not be broad enough to encapsulate the validity of the 2009 Agreement in any event.

56    Trident says this would necessitate further proceedings concerning the validity of the 2009 Agreement and arbitration proceedings concerning the debt owing to Trident. This would incur additional expense and delay.

57    Trident emphasise that while Nexus is claiming it wants to go to arbitration, it has not admitted that the 2009 Agreement is valid and binding. This would mean that Nexus could attend an arbitration and dispute all issues resulting in a protracted process without any issue being addressed. Trident say that this appears to be Nexus’ intention. They further contend that if it is not its intention then it should admit that the 2009 Agreement is a valid and binding agreement. The issue then becomes only whether the debt is owing, which can be dealt with expeditiously.

58    Trident also refers to the requirements of Art 4 of the International Chamber of Commerce Rules concerning arbitration, whereby a party must pay an administration fee of US$31,215 plus 0.46% of amounts over $US2 million (being the value of the amount in dispute). Under Art 30 the claimant may also be required to pay further funds to cover costs of the arbitration. If the proceedings were stayed then the net effect would be to eradicate the ground made in the progression of the issues in dispute between the parties and increase the burden in both legal expenses “and emotion”.

59    For these reasons, Trident contend that leave should be refused.

60    In correspondence between solicitors, the solicitors for Nexus have indicated to the solicitors for Trident that the position of Nexus is that there is an arbitration agreement and, in circumstances where Nexus says that Trident agreed that disputes would be dealt by arbitration, Nexus is entitled to hold Trident to that agreement by pressing for a stay.

61    The solicitors for Nexus have also suggested, however, that there are substantive reasons why Nexus is pressing for a stay. In this regard, liquidators have been appointed to TDJV. It appears the liquidators have not acknowledged the efficacy of the 2009 Agreement. In those circumstances, the solicitors for Nexus say it remains possible that TDJV will assert that Nexus should not have paid any amounts and should not pay any further amounts to Trident in respect of works performed after 15 July 2009. Nexus is concerned to avoid the possibility of double recovery against it and to that end will need to seek to join TDJV in the proceeding so that TDJV is bound by the outcome of the proceeding. However, having regard to the requirements of s 471B of the Corporations Act 2001 (Cth), it will need the leave of the Court to do this. However, such an impediment does not exist in relation to any arbitration proceedings.

62    Nexus, through its solicitors, also says that it is difficult to see why Trident would consider the arbitration proceedings would not be broad enough to encapsulate the validity of the 2009 Agreement, and also why Federal Court proceedings would still be required in relation to that issue. Nexus submits that would be an inefficient means by which to progress matters currently in dispute and it is not Nexus’ intention to proceed in such a manner.

63    Ultimately, on the hearing of the application before me, counsel for Nexus says that in any arbitration proceedings Nexus will not take steps to prevent the arbitrator from dealing with any issues concerning the validity or binding nature of the 2009 Agreement if such issues arose.

64    At this point it is clear that the position of Nexus is that it “reserves” its right to challenge the efficacy and validity of the 2009 Agreement, but that it expressly adopts the position that it would not raise the issues itself as an issue in arbitration proceedings.

65    I do not doubt that if leave to appeal is refused, Nexus will potentially suffer prejudice. The question however is whether it is likely to suffer substantial prejudice if leave to appeal is not granted.

66    The argument put on behalf of Nexus is that leave to appeal should be more easily granted where the primary judge’s decision is not about practice and procedure but if allowed to stand, will have the practical effect of determining the claim of the applicant: see Johnston v Cameron [2002] FCAFC 251; (2002) 124 FCR 160, 163[8].

67    Nexus argues that because the primary judge resolved the stay question by preferring a particular construction of the 2009 Agreement, the practical effect of the primary decision was to finally resolve Nexus’ rights in respect of the manner in which Nexus is to resolve disputes with Trident. This effectively precludes the pursuit of any arbitration. To refuse leave would effectively deny Nexus the right to appeal from a final decision on the construction of an important provision of the 2009 Agreement.

68    In Décor itself, the Full Court, at 399, endorsed the view that the sufficiency of the doubt in respect of the decision and the question of substantial injustice should not be isolated “in separate compartments”. They bear upon each other, so that the degree of doubt that is sufficient in one case may be different from that required in another. Ultimately, a discretion must be exercised on what may be a fine balancing of considerations. Their Honours added, at 399, that the major considerations identified provide an appropriate litmus test to the general run of cases in which leave to appeal from an interlocutory decision is sought. But that does not mean they are rigid rules, because they might destroy a court’s discretion in all cases but those falling within them. Indeed, their Honours went on, at 399-400, to emphasise the principles identified provide “general guidance” which a court should normally accept. However, there will continue to be cases raising special considerations and the Court should not regard its hands as tied in any case beyond this. These sentiments were affirmed recently in Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; (2010) FCR 261, at [20], where the Court (Keane CJ, Gilmour and Logan JJ) observed that leave to appeal against an interlocutory ought usually be granted only where the applicant is able to show that the order occasions substantial prejudice to the applicant and there is a reasonable argument that the order should be set aside.

69    In this case, as explained earlier, I am satisfied that there is a reasonable argument that the order should be set aside. However, I am much less satisfied that substantial prejudice to Nexus will flow if leave to appeal is denied. In that regard, as I have said, I do not doubt that there is prejudice to Nexus if leave is refused. The prejudice is that generally identified by Nexus. It is left with a final decision that will have the practical effect of constraining its ability to arbitrate any dispute over the claims made by Trident.

70    To the extent that counsel for Nexus suggest that leave to appeal ought to be granted on the basis that these arbitration clause questions are of high significance that have been addressed by the highest courts both in England and the United States, but not in Australia, that, I do not think, at least in the circumstances of this particular case, is a matter of any moment. It certainly is not a consideration that identifies any particular prejudice to Nexus in this case.

71    The competing position strongly contended for by Trident is that the whole question of arbitration has arisen lately in a proceeding which has advanced in this Court to the stage where pleadings on the face of it are now closed. There is some weight in that observation, although the defence recently filed by Nexus has been filed under protest.

72    I accept there may be a need, on the basis explained by Nexus, for TDJV to be joined in the proceeding, but that, I consider, to be a separate issue. In my view, it does not bear materially on the question of prejudice.

73    As to whether or not any forthcoming claim about the validity of the 2009 Agreement is to be agitated by the liquidator of TDJV, and whether or not it can be or should be or might be agitated in the arbitration proceeding, if there were one, or in separate proceedings in this Court, is also a matter which I do not consider of great moment in assessing the extent of any prejudice to Nexus should leave to appeal be refused.

74    In the result, I am simply not satisfied that substantial prejudice will be suffered by Nexus if leave to appeal is refused. While I consider there is a reasonable argument to be made, contrary to the construction adopted by the primary judge, the reality is that if leave to appeal is refused, the interests of Nexus are not suddenly lost. This is not a case where some substantive right, as against a matter of practice and procedure, is really at issue, because although the right to have a dispute resolved through arbitration should not be considered unimportant (as Allsop J explained in the context of international commercial arbitration in Comandate Marine), in the particular circumstances of this case, the potential loss of that right does not appear to me to be one that, in a practical sense, will cause Nexus to be disadvantaged in the resolution of the question of its liability to Trident under the 2009 Agreement.

75    What I consider of particular relevance in making an assessment about the extent of the prejudice to Nexus should leave to appeal be refused, is that Nexus did not raise the arbitration question issue until 26 July 2010, the day before the first directions hearing in the primary proceeding. That it did not do so sooner is, in my view, a fair indication that Nexus itself did not, until relatively late in the disputation process, consider that it would be seriously prejudiced by the continuation of the primary proceeding in this Court. This tells me, in the overall circumstances of this case, that Nexus will not be substantially prejudiced if leave to appeal is refused.

76    In all of the circumstances, I am not satisfied the second limb of the Décor test is made out. I would therefore refuse leave to appeal.

conclusion and order

77    The orders should be:

1.    The notice of motion dated 1 October 2010 be dismissed.

2.    The applicant (Nexus) pay the costs of the respondent (Trident) on the notice of motion to be taxed if not agreed.

Associate:

Dated:    1 December 2010