1144 Nepean Highway Pty Ltd v Leigh Mardon Australasia Pty Ltd
[2009] VSC 317
•30 July 2009
IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST C
No. 6530 of 2009
| 1144 NEPEAN HIGHWAY PTY LTD | Plaintiff |
| and | |
| LEIGH MARDON AUSTRALASIA PTY LTD | Defendant |
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JUDGE: | PAGONE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 30 July 2009 | |
DATE OF JUDGMENT: | 30 July 2009 | |
CASE MAY BE CITED AS: | 1144 Nepean Highway Pty Ltd v Leigh Mardon Australasia Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 317 | |
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CONTRACTS – Construction of clause providing for appointment of expert – Whether the parties must also agree to expert’s terms of appointment – Whether parties must do all that is necessary to give full effect to the agreement.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Brett, QC with Mr C Northrop | Bazzani Scully Brand |
| For the Defendant | Mr J Gleeson, SC with Mr M Whitten | Corrs Chambers Westgarth |
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HIS HONOUR:
In this proceeding the defendant seeks to compel the plaintiff to execute an agreement described as the Expert Determination Appointment Agreement, which is Exhibit BDD-1 to the affidavit of Benjamin Donald Davidson dated 29 July 2009. A Mr Nunns has been appointed to be an expert pursuant to clause 12.4(a) of an Agreement to Lease made between the plaintiff as landlord and the defendant as tenant which provides for disputes between plaintiff and defendant to be resolved by an expert to be appointed for that purpose. The defendant has invoked that process but the plaintiff has brought proceedings in the Supreme Court. On 11 June 2009 Davies J ordered a stay of proceedings which had been commenced by the plaintiff. Her Honour's stay of the proceeding was expressed to be pending the determination of the dispute by an expert. Mr Nunns has been appointed as the expert under clause 12.4(a) but before accepting the appointment has sought agreement by the parties to be indemnified from suit. The defendant has agreed to the expert's terms but the plaintiff refuses to do so. The defendant maintains that each has an obligation to accept such terms by reason of the agreement for lease which has been entered into between the plaintiff and the defendant.
Clause 12 of the Agreement to Lease made between the parties provides a mechanism to resolve disputes which may arise. Clause 12 contains provisions commonly found when parties seek to provide a mechanism for dispute resolution other than by litigation in court. These parties have agreed in clause 12.3 that they would refer their disputes "to an appropriately qualified and experienced independent expert". The clause contemplates that the parties might be able to agree on who to appoint as the expert but have prudently gone on to provide a process if agreement about appointment could not be reached.
In this case the parties have not been able to agree on who is to be appointed as the expert. In this case that is not because each has a different view about who should be appointed. The plaintiff does not put forward any person for appointment to resolve their dispute, notwithstanding the fact that the plaintiff willingly contracted with the defendant for dispute resolution through the mechanism in clause 12. More importantly, in this case, the plaintiff does not wish the dispute to be resolved by an expert pursuant to clause 12 or by an expert under any basis other than litigation. There is no evidence of the plaintiff making any attempt to identify any person who might be suitable to the plaintiff, or who might be willing to act as expert on terms acceptable to the plaintiff, for the purposes of having the dispute resolved pursuant to clause 12 of the agreement that it had entered into with the defendant. This position is maintained notwithstanding an order by this Court made on 11 June 2009 contemplating a determination of a dispute by an expert pursuant to clause 12.
The plaintiff maintains that it is not obliged, and cannot be obliged, to agree with the terms of an expert to provide a release and indemnity from liability as may arise through the expert's dispute resolution process. The plaintiff points to its entitlement at common law to sue an expert for damages in negligence.[1] The defendant, in contrast, relies upon the terms of clause 12 and 20.4 of its agreement with the plaintiff.
[1]Legal & General Life of Australia Ltd v Hudson Pty Ltd (1985) 1 NSWLR 314, 335 (McHugh JA).
Clause 12 represents the agreement between the parties that any dispute between them falling within its terms would be dealt with not by legal proceedings in Court but by referral to an appropriately qualified and experienced independent expert. That agreement was given effect to by the orders of Davies J on 11 June 2009. There has been no appeal from those orders and the issues dealt with by her Honour may now conclusively be determined as between the parties.[2] Clause 12.4 provides that if the parties are unable to agree upon the person to be appointed as the independent expert, then the appointment should be made by the President of the Law Institute of Victoria or the President's nominee. Three persons have been identified and put forward under this process, each of which has put forward terms requiring the plaintiff and the defendant to agree to release the expert from potential liability in negligence. The plaintiff has refused to enter into any such agreement and maintains that it is not required to do so upon the proper construction of clauses 12.4 and 20.4 of its agreement with the defendant.
[2]See O’Toole v Charles David Pty Ltd (1990) 171 CLR 232, 259 (Brennan J).
Clause 12.4(a) permits the President of the Law Institute of Victoria, or the President's nominee, "to appoint" the person to act as expert for the purpose of referral of a dispute between the parties. The choice of the word "appoint" might ordinarily suggest the authorisation of the person to fulfil a particular role or a particular task.[3] What was contemplated by the clause was not a mere selection of a person to be authorised to do a task, but rather, an appointment of a person to fulfil the task contemplated by clause 12; namely, the resolution of the dispute engaging the clause. On that view, the appointment would operate on its own terms without the need for any further agreement between the expert and the parties whose rights may be affected by the reference.
[3]Gollin & Co. Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455.
On any view, however, the appointment of the expert by the third party confers upon the third party, in this case a person occupying a significant position within the legal profession in the State of Victoria, an important task to perform which is to be performed in the exercise of professional judgment. Many facts and circumstances may need to be considered by that third party in deciding whether a person is suitable for appointment to resolve any particular dispute. In my view, clause 12.4 contemplates the exercise of such judgment and relevantly confers upon the President or the President's nominee a broad discretion to determine the suitability of a person as the expert. The terms upon which a person may be appointed as the expert is one such consideration. In that regard it is relevant that the person whom the parties have chosen in Clause 12.4(a) to resolve one of the disagreements between them, being but a step in a broader dispute between them (namely who is to be the expert), is the President of the Law Institute of Victoria or the President's nominee. In that regard I note that the appointment of an expert on terms as sought by the persons who have been proposed in this dispute typically requires agreement by the parties that they will not sue the expert for negligence. The risk to an expert of suit in negligence has long been known.[4] Such evidence as there is before me on this point is that experts typically seek release and indemnities from the potential suit in negligence. It would be surprising if it were otherwise given that experts in this context are being asked to undertake the resolution of a dispute where it is likely, if not inevitable, that one or other party will be dissatisfied with the expert's decision or determination. The potential for release and indemnity from potential suit is, in my view, 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 clause 12.4 and, indeed, is a requirement which of its nature is calculated to bring finality to the controversy. It is, in other words, a matter likely to be an issue for consideration and likely to arise whenever an appointment under a provision such as clause 12.4 needs to be made. There is nothing in clause 12 pointing to the contrary. There is no express reservation by any party of a right to maintain any cause of action against any person who might be appointed as an expert. There is no express limitation upon the power willingly given by the parties upon the President of the Law Institute of Victoria or the President's nominee to prevent the appointment of a person who would not agree to be subject to the possibility of suit in tort, contract or otherwise. There is no express limitation in the power willingly given by clause 12.4(a) which limits the person who could be appointed as an expert to a person who would otherwise assume the risk of the possibility of suit by one of the parties who come to that person already in dispute amongst themselves.
[4]Sutcliffe v Thackrah (1974) AC 727 and Legal & General Life of Australiav Hudson Pty Ltd (1985) 1 NSWLR 314, 335 (McHugh JA).
It follows, in my view, that clause 12.4(a) provides for the appointment of a person as an expert who would require to be released from potential suit in negligence by the parties whose dispute the expert is being sought to resolve. Clause 20.4 provides that each party must promptly execute all documents and do all things necessary or desirable to give full effect to the arrangements contained in the agreement between them. In my view, this clause requires the parties to execute such agreement as is necessary to give effect to that which was agreed within clause 12.4(a) including, as I have said, the release and indemnity which I consider to be an element in the appointment necessarily contemplated by the clause.
The plaintiff relies upon the decision of Giles J in Elizabeth Bay Developments Pty Ltd v Boral Building Services Pty Ltd[5] in which His Honour held that:
[5](1995) 36 NSWLR 709, 709 (a decision followed by others, for example, in 1999).
An agreement to mediate whereby the parties merely agree (inter alia) to sign a mediation agreement the terms of which had not been settled beyond the necessity that they be consistent with specified guidelines, is not sufficiently certain to be given effect.
His Honour said:
In par 6 and elsewhere the guidelines contemplated some kind of agreement, but its terms were left to be settled. If this be so, then by the incorporation of the guidelines the parties had agreed (inter alia) to sign mediation agreements the terms of which were not settled beyond the necessity that they be consistent with the guidelines. The agreements to mediate were open-ended, indeed unworkable because the process to which the parties had committed themselves would come to an early stop, when prior to the mediation, it was asked what the parties had to sign and the question could not be answered.[6]
Counsel for the plaintiff submits that the same may be said in this case of the terms agreed in clause 12.4. I do not agree. It has long been a rule of law, reaffirmed as recently as yesterday by the High Court, that:
As a general rule, where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.
The principle comes from Mackay v Dick,[7] and as I said, was reaffirmed yesterday by the High Court in Campbell v Back Office Investments Pty Ltd.[8]
[6]Ibid 715.
[7](1881) 6AC 251, 263 (Lord Blackburn).
[8][2009] HCA 25, [169] (Unreported, Gummow, Hayne, Heydon and Kiefel JJ).
In this case the parties have agreed that disputes be referred to an expert pursuant to clause 12. That is the bargain they agreed to. More particularly they agreed that any disagreement about the expert be determined by the appointment of a person by, amongst others, the President of the Law Institute of Victoria or the President's nominee. That appointment requires the agreement of the parties to make it effective. That agreement may be a matter implied by law as might follow from Mackay v Dick. It was, however, also expressly agreed to by the terms in clause 20.4. It is a thing necessary to be done to give full effect to the arrangements, including those concerning referral to an expert contained in the agreement between the plaintiff and defendant. It is, if nothing else, a thing "desirable" (within the ordinary meaning of that word as used in clause 20.4) to be done to give full effect to those arrangements including the referral of a dispute to an expert appointed by the President of the Law Institute of Victoria or the President's nominee.
The agreement between the parties contained in clause 12 is not “unworkable” in its terms.[9] The parties, by the terms of their agreement, contemplated that some aspects necessary to give effect to their bargain needed to be dealt with by general terms. Those general terms are incorporated by clause 20.4 to the extent, limited though it may be, to give effect to the clear bargain found in clause 12. The terms of the agreement for dispute resolution in this case cannot be characterised as an agreement whose terms were left to be settled. What was agreed is clear: namely, that there be resolution by appointment of an expert. It is also clear that the parties would do whatever was necessary or desirable to give “full effect” to what the parties described as “the arrangements contained” in the agreement between them.
[9]Cf Elizabeth Bay Developments Pty Ltd v Boral Building Services Pty Ltd (1995) 36 NSWLR 709, 715 (Giles J).
The plaintiff also contended that a clause such as 20.4 cannot be construed as an agreement between the parties about terms that have not been agreed. In support of that submission reliance was placed upon cases such as GPI Leisure Corporation v Herdsman Investment Pty Ltd[10] in which Young J considered the operation of an assurance clause by which the parties in that case had agreed that each would "make, execute and do or cause to be made, executed or done all necessary agreements, deed and acts which may be necessary to protect, secure or otherwise give effect to the terms of this agreement." In that case his Honour concluded that the clause did not operate as an agreement beyond what the parties had agreed to. The same was held in other cases such as Fox Entertainment Precinct Pty Ltd v Centennial Park and Moore Park Trust.[11] So much may be accepted, but the question must in each case be what has been agreed to. In my view, the parties agreed to an appointment (on the facts and circumstances which might, and in this case did, arise) of an expert upon such terms as are presently offered with the consequence that the parties and, in particular for present purposes, the plaintiff, might be required to sign such release and indemnity as might be necessary to ensure that the appointment (which on any view has been agreed to) would be given "full effect".
[10](Unreported, Supreme Court of New South Wales, Young J, 24 November 1989), 5.
[11][2004] NSWSC 214 (Unreported, Supreme Court of New South Wales, Barrett J, 26 March 2004).
Accordingly, subject to the date by which compliance is to be made, I will make the order sought in the terms of the amended summons.
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