In the recent case of Dualcorp Pty Limited v Remo Constructions Pty Limited [2008] NSWSC 749, the NSW Supreme Court confirmed that it will only enforce alternate dispute resolution clauses if it satisfied that the proposed process is complete and appropriate. Dualcorp Pty Ltd (Dualcorp) and Remo Constructions Pty Ltd (Remo) entered into a contract under which Dualcorp would carry out demolition, excavation and piling works for Remo at a site in Five Dock in New South Wales.

Dualcorp and Remo agreed that if disputes arose between them, they would give a notice of dispute and then submit the dispute to a dispute resolution process consisting of three stages:

  • Compulsory conferences.

  • Compulsory mediation.

  • The final and binding determination of an expert that is not subject to review (except for judicial review).

The type of disputes that the parties agreed could be the subject of dispute resolution were:

'Any dispute, difference or Claim arising between the parties to this Agreement, at any time as to the construction of this Agreement or as to any matter or thing of whatsoever nature ... must be referred to a conference in the following manner ...'.

A dispute arose between the parties that included an allegation by Dualcorp of misleading and deceptive conduct that had led them to enter into the contract with Remo. Dualcorp commenced Supreme Court proceedings in relation to that and other matters of dispute. Remo asked the Court to stay the Court proceedings commenced by Dualcorp. Remo said that the issues raised by the Court proceedings should have been dealt with under the dispute resolution process provided by the contract.

The Court looked at the definition of 'dispute' in the contract and concluded that the definition was far too wide to be enforceable. The parties had not tried to limit the dispute resolution clause in the usual way by saying 'in relation to disputes arising out of the contract' and the Court took the view that the clauses were 'so imprecise, and so devoid of any limitation... they cannot be given effect.'

The Court concluded that it should decide on issues between the parties. The Court found that it was impossible to read the dispute resolution clause in a way that gave it rational meaning and any attempt to give the clause meaning would be like re-writing the clause.

IMPLICATIONS

This case sends a very clear message to those involved in preparing dispute resolution clauses to make sure that the clause is precise and carefully prepared. While a dispute resolution clause can be widely drafted to cover a range of possible disputes, it must also be limited in some way to the contracting relationship between the parties. A dispute resolution clause will only be enforced by the Court if it provides a complete regime for the resolution of a dispute including appropriate limits on what the expert can deal with.

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