In a well-publicised decision last month, the High Court sent the latest round of Rinehart/Hancock family litigation to confidential arbitration. In doing so, the Court provided a refresher on the principles of contractual interpretation which apply to all contracts, including those in the technology sector.
Our friends in the Disputes + Investigations team have provided a detailed summary of the case here. For present purposes, the background to the case is this:
- between 2003 and 2010, Gina Rinehart and two of her children entered into multiple deeds of settlement relating to various disputes between them;
- the deeds contained the terms of their settlement and included an arbitration clause which forced future disputes to be referred to confidential arbitration;
- Rinehart’s children alleged that they were coerced into entering the Deed, and therefore shouldn’t be bound by the terms of the settlement; and
- Gina Rinehart denied the allegation of coercion and sought to rely on the dispute resolution provisions of the deeds to require that question of enforceability be resolved by confidential arbitration.
While the arbitration clauses stated that disputes under [the deeds] were to be referred to confidential arbitration, Rinehart’s children argued that this should be given a narrow interpretation and that their current dispute, which goes to the enforceability of the deed, should not be considered as having arisen “under” the deed.
The High Court considered the phrase and while acknowledging that a broader phrase (such as in connection with or relating to) could have been used, still found that the dispute should be referred to confidential arbitration. In coming to this decision, the Court set out the following principles:
- The starting position in construing any commercial contract is to identify the parties’ intention by considering the language used. The Court should give effect to what a reasonable person would consider the language to mean.
- The language used may not be enough to identify the parties’ intention with certainty. The High Court held that, in instance such as this, “under this deed” was ambiguous and so further elements needed to be considered.
- Where the terms used are ambiguous, the context becomes crucial in identifying the parties’ intention. Here, the Court considered that it was clearly the intention of the parties to finally resolve their various disputes and to keep the details away from public scrutiny.
Accordingly, the proper construction was that all disputes, including questions of coercion and enforceability of the deed, were intended to be resolved by confidential arbitration.
Although expressed in the context of a deed of settlement, the principles set out by the High Court are equally applicable to any commercial contracts. In any dispute as to the proper construction, Courts will give effect to the plain meaning of the contract. In the case of ambiguity, Courts will look to the broader context of the agreement to identify what the parties intended. In a narrow sense, this case highlights the importance of avoiding ambiguous phrases when drafting. Particular care should be taken when using phrases such as ‘under this deed' and ‘hereunder’, as such phrases may unintentionally narrow the scope of many different clauses, not merely dispute resolution clauses.
Authors: Simon Burns, Mark Ferguson and Matthew Scrocca