1144 Nepean Highway Pty Ltd v. Leigh Mardon Australasia Pty Ltd [2009] VSC 317
It is not unusual to see in construction contracts a short-form clause referring particular disputes to mediation or expert determination without the particular rules or procedures for the mediation or expert determination being specified. If both parties remain happy to go to mediation or expert determination they will ordinarily do what is necessary (including signing documents required by the mediator or expert) to give effect to his or her engagement. However, if one party has had a change of mind since the contract was first entered into that party might not be so co-operative.
In the Supreme Court case, 1144 Nepean Highway Pty Ltd v. Leigh Mardon Australasia Pty Ltd [2009] VSC 317, one of the parties refused to sign the terms of engagement required by the nominated expert. In that case, the clause in the contract provided for disputes to be resolved by an expert to be appointed for the purpose. When an expert was so appointed he required as a condition of his engagement that the parties sign a document giving him a release and indemnity for any liability he might occur by reason of his expert determination. One party objected to the release and indemnity and the Supreme Court was asked to consider whether an obligation to sign a release and indemnity in those terms was implied from the brief wording in the contract.
Pagone J referred to a further clause in the agreement which provided that each party must promptly execute all documents and do all things necessary to give full effect to the agreement and determined that clause required the parties to execute an agreement with the expert which included a release and indemnity of liability of the expert. That was because such a provision was a "likely and obvious consideration upon the appointment of any person to act as an expert in the resolution of the dispute of the kind contemplated by" the relevant clause.
Pagone J also referred to an earlier New South Wales decision (Elizabeth Bay Developments v. Boral Building Services Pty Ltd) where Giles J decided that "an agreement to mediate whereby the parties merely agree ... to sign a mediation agreement the terms of which had not been settled beyond the necessity that they be consistent with the specified guidelines, is not sufficiently certain to be given effect".
Although in the 1144 Nepean Highway decision a very brief clause referring disputes to expert determination was held in the circumstances to be sufficient (with the extra wording the Court determined was implied), the Elizabeth Bay Developments Pty Ltd decision makes it clear that in certain circumstances minimalist wording which does not specify the terms of the agreement to be entered into with the mediator (or potentially an expert) might not give rise to an enforceable agreement to refer disputes to mediation or expert determination. Parties to a construction contract therefore would be well advised to specify in some detail the rules to apply in a mediation or expert determination and include an express obligation to execute either the specified wording of a mediation or expert determination agreement, or, include an obligation to execute such document with any amendments or further provisions required by the nominated mediator or expert.
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