Solicitor, Herbert Smith Freehills

In Tesseract International Pty Ltd v Pascale Construction Pty Ltd, the High Court of Australia upended the then-prevailing view that proportionate liability laws do not, by default, apply to arbitration. This case note presents a survey of how, by a 5:2 majority, the High Court of Australia came to overturn that widespread consensus, with the result that proportionate liability laws do apply to arbitrations governed by the substantive law of an Australian State or Territory, unless the parties have expressly or impliedly provided otherwise.

Prior to the High Court of Australia’s (HCA) decision in Tesseract International Pty Ltd v Pascale Construction Pty Ltd (“Tesseract”), there was, in Edelman J’s words, a “widespread consensus … that, absent a clearly expressed or implied choice to the contrary, proportionate liability laws would not apply to arbitrations governed by the substantive law of an Australian State [or Territory]”.1 That consensus no longer applies in Australia. By a 5:2 majority in Tesseract, the HCA has confirmed that proportionate liability laws do apply to arbitrations governed by the substantive law of an Australian State or Territory, unless the parties have expressly or impliedly provided otherwise.