Robotunits Pty Ltd v Juergen Karl Mennel (2015) VSC 268 is a case from the Supreme Court of Victoria concerning disputes arising from shareholders agreements.
The Defendant sought a stay of the proceedings and referral to arbitration on the basis that the parties agreed to submit disputes between them to arbitration. He sought to rely on the arbitration agreement in Clause 15(2) of the Amended Shareholders Agreement, which stated as follows:
“Each party irrevocably and unconditionally submits to arbitration in accordance with the arbitration guidelines of the Law Institute of Victoria.”
Is there an operable arbitration agreement? Croft J held that it was undisputed that on its face the arbitration agreement was pathological because “the arbitration guidelines of the Law Institute of Victoria” referred to” do not exist and do not appear to have ever existed.” The Claimant conceded that the agreement may be rendered effective with judicial assistance. Croft J found the words in Clause 15(2) to be strong words evincing a clear intention to submit disputes, falling with the scope of the arbitration agreement, to arbitration. As such, it was held that the arbitration agreement is operable and capable of forming the basis of the orders sought by the Defendant.
Croft J held that the whole of the proceedings should be stayed, but only the issue of whether the Shareholders Agreements provided a legal or equitable basis for the Defendant to cause the Claimant to make the share payment shall be referred to arbitration. It was further held that as a result of the pathologies of the arbitration agreement, the orders should be made on the condition that the parties (within 28 days) seek to agree on the arbitral seat and the rules of the arbitration.