In Viridian Noosa Pty Ltd v Neumann Contractors Pty Ltd [2009] QSC 398, a dispute arose between the principal and a contractor under a building contract that incorporated the General Conditions of Contract, as set out in an Australian Standard (AS 2124-1992) (a standard form frequently used in contracts of this type in Australia).

The General Conditions include an arbitration agreement, as defined by the Commercial Arbitration Act 1990 (Qld), stipulating that disputes may be referred to arbitration or litigation. Further, subclause 47.4 states that "nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due".

The "superintendent" under the contract had certified a sum due for payment by the contractor to the principal. The contractor did not pay and the principal instituted proceedings seeking to enforce payment of the certified sum.

The contractor raised several challenges and applied to have the proceedings stayed so that the issues could be arbitrated. The challenges related to the inclusion of damages, the method of valuation for rectification works and the special interest of the supervisor in the outcome. These challenges broadened the issues beyond a dispute about enforcement of payment of a certified sum.

Under the domestic legislation there is a discretion as to whether court proceedings, commenced in the face of an arbitration agreement, should be stayed to allow an arbitration to take place, or whether they should be allowed to proceed in court.

Byrne SJA considered that the issues to be determined were legal and found that "there is no reason to suppose that [the issues] can be decided more conveniently in an arbitration". Hence, the application for a stay was refused.

Byrne SJA noted that the contract contemplates litigation or arbitration without expressing preference for one over the other. In these circumstances, Byrne SJA found that 'there can be no predisposition in favour of arbitration'.

The Queensland Supreme Court's finding, that arbitration of this dispute would be no more convenient than litigation, indicates a lack of appreciation for the benefits of arbitration. The refusal to stay ongoing litigation purports to be based on the fact that there was no express preference for arbitration over litigation in the express wording of the contract.

While this decision does not suggest that there will never be cases where arbitration will be found to be more convenient, parties involved in domestic arbitration in Australia should be aware that the courts may not order that arbitration should proceed. There are presently proposals to amend Australia's domestic arbitration legislation.