WORDING OF ALTERNATIVE DISPUTE RESOLUTION CLAUSES FOR PROJECT AGREEMENTS

Dispute resolution procedures are often interdependent and care must be taken when drafting clauses that seek to fast track particular types of dispute to a single specified method of dispute resolution.

Importantly, it should be clear whether one party has the ability to unilaterally oblige other parties to undergo the fast track dispute resolution mechanism, as should the interaction of the fast track option within the framework provided by the general dispute resolution clauses.

Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd ¹⁾ required the interpretation of the dispute resolution provisions of a Project Agreement, pursuant to which the Appellant had agreed to design, construct and operate a biosciences research facility.

The Appellant had submitted three extension of time claims, which were rejected by the Respondent. The Appellant then proceeded to serve a Notice of Dispute and submissions on the Respondent disputing the rejection of its extension of time claims.

The Respondent sought to exercise its right to refer the dispute for resolution under the Accelerated Dispute Resolution Procedures provided for in the Project Agreement and at first instance (Biosciences Research Centre Pty Ltd v Plenary Research Pty Ltd ²⁾ ), Croft J held that the agreement required the dispute to be resolved by an Independent Expert in accordance with the Accelerated Dispute Resolution Procedures.

The Appellant disputed that referral and claimed the Notice of Dispute must proceed to arbitration.

The Project Agreement provided three dispute resolution procedures:

• Senior Negotiations;
• Accelerated Dispute Resolution Procedures; and
• Arbitration.

The principal issue in the appeal was to determine which dispute resolution procedure applied.

There were two classes of disputes which could be referred for determination by the Accelerated Dispute Resolution Procedures. One class consisted of disputes expressly referred for determination by an Independent Expert or by Accelerated Dispute Resolution. The second class consists of disputes agreed to be referred to an Independent Expert in the event that the Senior Negotiations procedure did not succeed (subject to the quantum being below the agreed threshold).

The Project Agreement provided that an extension of time dispute may be referred to an Independent Expert for resolution.

Croft J preferred the Respondent’s view that the word ‘may’ gives either party the option to refer an extension of time claim to an Independent Expert.

The Appellant submitted that the construction adopted by Croft J was incorrect. They argued that whilst ‘may’ can mean ‘must’, the construction of the clause should not enable one party to proceed unilaterally to impose the Accelerated Dispute Resolution Procedures against the opposition of the other party.

The Appellant maintained that the fast track referral to an Independent Expert remained possible, on the initiative of one party, but not compulsory in the event that the other party objected, or where the preferred arbitration process had commenced.

The Court, Garde AJA with Maxwell P and Tate JA in agreement, held that the construction of the clause governing extension of time disputed by the trial judge was correct, for reasons including, amongst others:

• The clause governing extension of time claims was expressed to apply to any dispute about an extension of time claim. The use of the word ‘any’ was held to suggest a comprehensive approach to the class of disputes identified in the provision;
• The right to refer an extension of time dispute to an Independent Expert for resolution was conferred on either party;
• The use of the word ‘may’ gives either party a choice to invoke the provision;
• Extension of time claims are notorious in building disputes and it is reasonable and sensible for them to be resolved using a ‘fast track’ process;
• It is important for provisions to be reasonably and meaningfully construed so as to give the parties a real opportunity of avoiding prolonged and expensive litigation or arbitration proceedings which they have sought to avoid through access to accelerated dispute resolution.

Croft J noted the High Court’s reference to the decision of the Queensland Supreme Court in Zeke Services Pty Ltd v Traffic Technologies Ltd ³⁾, 570 [27] (Chesterman J) in Shoalhaven City Council v Firedam Civil Engineering Pty Ltd ⁴⁾, 315 [25] (French CJ, Crennan and Kiefel JJ) in which it was stated that the evident advantage of an expert determination of a contractual dispute is that it is expeditious and economical.

With correctly worded agreements, the parties can make good use of a fast track resolution process involving expert determination for specified areas of dispute, while maintaining an overarching dispute resolution mechanism to govern the agreement as a whole. The main challenge is to identify which classes of potential disputes are to be covered by the fast track process and the mechanism by which the fast track process may be instigated.

SARAH PIKE & STEVE WHITE
WHITE SW COMPUTER LAW
SEPTEMBER 2013

www.computerlaw.com.au

© White SW Computer Law 2013

This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.