Crown Sturt Pty Ltd v Infinity Southbank Pty Ltd (No 1)
[2025] VSC 360
•19 June 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2025 01084
| CROWN STURT PTY LTD (Provisional Liquidators Appointed) (ACN 616 219 759) | Plaintiff |
| v | |
| INFINITY SOUTHBANK PTY LTD (ACN 609 641 125) as Trustee for Infinity Southbank Unit Trust (ABN 44 121 680 744) | Defendant |
---
JUDGE: | Waller J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 May 2025 |
DATE OF RULING: | 19 June 2025 |
CASE MAY BE CITED AS: | Crown Sturt Pty Ltd v Infinity Southbank Pty Ltd (No 1) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 360 |
---
CONTRACTS — Dispute resolution clause — Expert determination — Application for stay of proceedings — Joint venture agreement — Whether dispute resolution clause applies to matters in dispute — Whether expert determination procedures sufficiently certain to be enforceable — Absence of procedural directions and mechanism for resolving overlapping expert disciplines — Discretionary factors — Delay in asserting dispute resolution rights — Stay refused — Property Law Act 1958 (Vic), s 225.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M Tennant | Johnson Winter Slattery |
| For the Defendant | J McKay | Moray & Agnew |
HIS HONOUR:
A. INTRODUCTION
This proceeding concerns a joint venture to develop a high-rise residential tower with commercial lots and car parking facilities. The development was never completed and the joint venture was terminated.
On 28 February 2025 the plaintiff, Crown Sturt Pty Ltd, commenced this proceeding by writ primarily seeking the sale of the property the subject of the joint venture.
On 31 March 2025, the defendant, Infinity Southbank Pty Ltd as Trustee for Infinity Southbank Unit Trust, filed a summons seeking a permanent stay of the proceeding on the basis that the underlying dispute ought be resolved through the dispute resolution procedure under the parties’ agreement.
For the reasons set out below the application for a stay is refused.
B. BACKGROUND
On 19 May 2017, the plaintiff and defendant entered into a Landowners Participation Agreement (‘Agreement’) in respect of a joint venture whereby they agreed to jointly develop a high-rise residential tower with commercial lots and car parking facilities (‘Project’) at 175–187 Sturt Street, Southbank, Victoria (‘Property’).
Westpac Banking Corporation (‘Westpac’) provided funding to the parties by way of a Bank Bill Business Loan Facility to assist in the purchase of the Property.
On 6 October 2017, the parties jointly acquired the Property and were registered on the title as proprietors of the Property as tenants in common in equal undivided shares.
While a planning permit for the development of the Property was obtained and some off the plan sales were made as contemplated by the Agreement, the development did not proceed to completion. Neither party now seeks to progress it.
On 11 August 2023, following a dispute between the plaintiff’s shareholders, the Supreme Court of NSW appointed Andrew Sallway and Duncan Clubb as joint and several provisional liquidators of the plaintiff (‘Provisional Liquidators’).
On 14 November 2023, Westpac informed the parties that their funding facility was in default due to the appointment of the Provisional Liquidators and that, by reason of this default and the increased risk to Westpac, the interest rate on the facility would increase from 6.4986% to 9.4986% from 1 January 2024.
The defendant considered that the appointment of the Provisional Liquidators constituted an event of default under the Agreement and, on 12 August 2024, purported to issue a default notice to the plaintiff. Under the Agreement, if the default was not adequately rectified or compensation was not an adequate remedy, the defendant would be entitled to purchase the plaintiff’s interest in the Property for an amount equivalent to 90% of its value.[1]
[1]Clauses 8.3 and 8.4 of the Agreement.
On 13 November 2024, the plaintiff’s solicitors sent a letter to the defendant’s solicitors disputing the validity of the default notice on the basis that it had been issued after the joint venture between the parties had been terminated. The plaintiff requested the defendant’s written consent to the sale of the Property in accordance with the Agreement,[2] failing which proceedings would be commenced to appoint a trustee to sell the Property pursuant to the Property Law Act 1958 (Vic) (‘PLA’).
[2]Clauses 16(a)(iv) and 16(a)(v) of the Agreement.
By letter from its solicitors dated 25 November 2024, the defendant maintained that the dispute notice was valid and invoked its right to purchase the plaintiff’s interest in the Property pursuant to the Agreement.
On 27 November 2024, the plaintiff’s solicitors responded, maintaining the plaintiff’s position regarding the termination of the joint venture and the invalidity of the default notice.
On 29 November 2024, the defendant’s solicitors sent a letter maintaining its position and asserting that the defendant had exercised a right to buy out the plaintiff’s interest in the Property.
On 28 February 2025, the plaintiff commenced this proceeding by writ, seeking orders that the Property be sold and the proceeds divided between the parties, either pursuant to the Agreement or s 225 of the PLA.
On 31 March 2025, the defendant’s solicitors sent a letter to the plaintiff’s solicitors stating that it was apparent from the correspondence between the parties, and the commencement of proceedings, that a dispute existed between the parties under or in relation to the Agreement. The nature of the dispute was said to relate to:
(a) whether or not the Joint Venture referred to in the Agreement was terminated on 6 October 2022, or alternatively, 19 May 2023; and
(b) the proper construction of the Agreement and whether the provisions of cl 8 of the Agreement continued to apply after any termination of the Joint Venture under cl 16(a)(iv),[3] or alternatively, 16(a)(v) of the Agreement.
[3]The reference in the letter to cl 16(a)(v) twice appears to be a typographical error.
On the same day, the defendant filed a summons seeking a permanent stay of this proceeding on the basis that the underlying dispute ought be resolved through the dispute resolution procedure under the Agreement.
On 7 April 2025, the plaintiff’s solicitors by reply letter invited the defendant to withdraw the purported notice of dispute and agree to orders dismissing the summons.
C. ISSUES TO BE DETERMINED
This application raises the following issues:
(a) What is the nature of the dispute between the parties?
(b) Does the dispute resolution clause in the Agreement apply to the dispute between the parties?
(c) If so, should the Court exercise its discretion to grant a stay of the proceeding?
D. RELEVANT TERMS OF THE AGREEMENT
The relevant terms of the Agreement are as follows:
1.1. Definitions
Insolvency Event means in relation to a party:
(a) if a receiver, receiver and Trustee, trustee, administrator, liquidator, other controller (as defined in the Corporations Act) or similar official is appointed … otherwise than for the purpose of an amalgamation or reconstruction that has the prior written consent of the other party …
Landowners means:
(a) INFINITY SOUTHBANK PTY LTD (ACN 609 641 125) as Trustee for Infinity Southbank Unit Trust (ABN 44 121 680 744); and
(b) CROWN STURT PTY LTD (ACN 616 219 759).
Major Decision means a decision regarding the Project which is not of a type ordinarily required for the day to day management of the Project, and includes a decision regarding the following:
…
(b)the transfer or dealing with of any legal or beneficial interest in any asset of the Venture;
…
(f)to vary the Project;
…
(h)to distribute any proceeds of the Venture, except as agreed in this Agreement or any other agreement between the Landowners; or
(i)to wind-up the Venture other than in accordance with clause 16.
Non Major Decision means any decision that is not a Major Decision.
Project means the development of a high-rise residential tower with commercial lots and car parking facilities on the Property as proposed in the Project Feasibility in accordance with the plans and specifications approved and the sale of the Lots.
Property means the real property situated at 175-187 Sturt Street, Southbank VIC 3006.
Purpose of the Venture or Purpose of Venture means the undertaking of the Project on a commercial basis.
Venture means the Venture between the Landowners for the Purpose of the Venture conducted pursuant to this Agreement.
7. NON-MAJOR DECISIONS AND MAJOR DECISIONS
(a)All Non-Major Decisions must be determined by a simple majority of the Landowners. Clause 7(f) shall apply where any matter that requires a Non-Major Decision cannot be decided due to lack of a Quorum in the first instance.
(b)All matters requiring a Major Decision must be determined by a unanimous decision of the Landowners.
(c)The Developer and each of the Landowners may convene a meeting of the Developer and Landowners for the purpose of considering a matter requiring a Major Decision or a Non-Major Decision by giving each of the other Landowners not less than five (5) Business Day’s written notice (or such shorter period as the other parties accept) which notice must include details of the matter to be considered.
…
(f)Where any matter that requires a Non-Major Decision (Non-Major Decision Issue) cannot be determined by a simple majority because of a lack of quorum at a meeting convened in accordance with cl 7(c), the following provisions shall apply:
(i)either Landowner requiring the Non-Major Decision Issue to be resolved (“the First Landowner”) may give the other Landowner (“the Second Landowner”) two (2) Business Day’s written notice (or such shorter period as the other parties accept) to convene a further meeting (“the Further Meeting”) which notice must include details of the Non-Major Decision Issue to be further considered;
(ii)if either the First Landowner or the Second Landowner does not arrive at the Further Meeting within 30 minutes of the time scheduled for the commencement of the Further Meeting, the Landowner that attends the Further Meeting (“the Attending Landowner”) may determine the Non-Major Decision Issue at the Attending Landowner’s absolute discretion and the Attending Landowner’s determination of the Non-Major Decision Issue shall be deemed to constitute the Quorum required to determine the Non-Major Decision Issue; and
(iii)the provisions of clause 7(h) shall apply:
(A)if both the First Landowner or the Second Landowner do not arrive at the Further Meeting within 30 minutes of the time scheduled for the commencement of the Further Meeting; or
(B)if both the First Landowner or the Second Landowner attend the Further Meeting and fail to determine the Non-Major Decision Issue by a Quorum at the Further Meeting.
…
(h)If a Quorum of the Landowners cannot be achieved in respect of a Non-Major Decision Issue after the Landowners have engaged in the processes contemplated by cls 7(a) and 7(f), the Non-Major Decision Issue must be referred to an independent expert for determination. For the purposes of this Agreement, the independent expert procedure is:
(i)a Landowner may start this expert determination process by serving a notice on the other Landowner which states that a dispute has arisen and identify what the dispute is (‘the Notice’).
(ii)the Landowners must jointly request appointment of an independent expert, but if the parties fail to agree on the appointment within 7 days of service of the Notice or if the parties fail to make a joint request within the same period, on the application of any Landholder, the independent expert will be:
(A) for a matter of law, a practising barrister or solicitor appointed by the President of the Law Institute of Victoria;
(B)for a financial or accountancy matter, a practising chartered accountant appointed by the President of the Victorian Division of the Institute of Chartered Accountants in Australia;
(C)for a matter connected with the construction of any part of any improvements on the Property, a registered civil engineer appointed by the President of the Victorian Chapter of the Engineers Australia;
(D)for a matter connected with the cost of construction of any works on the Property, a practising quantity surveyor appointed by the President of the Victorian Chapter of the Australian Institute of Quantity Surveyors;
(E)for a matter connected with land or rental value, a qualified valuer appointed by the Australian Property Institute; and
(F)for any other matter, a qualified person appointed by the senior officer of an appropriate association, institute, society or Board;
(iii)or, if appropriate and the Landowners agree, the dispute may be referred to a panel of experts representing more than one of the appropriate skills;
and any Landowner may apply to the relevant body to appoint the independent expert.
(i)The Landowners agree to appoint the independent expert on the following terms:
(i)the independent expert shall act as an expert and not as an arbitrator;
(ii)the independent expert shall determine the dispute on the basis of the rights and obligations set out in this Agreement and having regard to all relevant factors and circumstances, including any relevant industry or commercial practices;
(iii)the independent expert shall retain experts in other fields to assist in the determination of the dispute when the independent expert considers it to be necessary or appropriate;
(iv)the determination of the independent expert shall be final and binding on the Landowners;
(v)the cost of the determination shall be borne equally by the Landowners unless the expert otherwise determines;
(vi)the Landowners may be legally represented at any hearing before the independent expert;
(vii)the Landowners may make written or oral submissions to the independent expert personally or through legal representatives or other consultants;
(viii)the independent expert will be required to hand down their decision within 28 days of his appointment; and
(ix)the independent expert must have at least 10 years current and continuous standing in the expert’s profession at the date of appointment.
(j)During any period when a Quorum cannot be reached for a Non Major Decision or a unanimous decision cannot be reached for a Major Decision, unless otherwise expressly provided for in this Agreement, the Landowners must continue to satisfy their obligations under this Agreement which do not touch upon or involve the subject matter of the dispute that the Landowners have referred for resolution to the independent expert.
8. DEFAULT PROVISIONS
8.1 Events of Default
(a)A Landowner will be a defaulting Landowner (‘Defaulting Party’) if, in respect of that Landowner, any of the following occurs (each an ‘Event of Default’):
…
(iv) an Insolvency Event
…
(b)Without limiting clauses 8.1 to 8.3, a Landowner who is not a Defaulting Party (‘Notifying Parties’) may serve a notice of default on a Defaulting Party if the Notifying Parties desire to take action under clauses 8.1 to 8.3, specifying the time to rectify the default (subject to any minimum time periods prescribed in this Agreement) if the default is capable of being rectified.
8.3 Events of Default
If a Notifying Party has served a notice under clause 8.1(b) and the Defaulting Party fails to remedy the default within the timeframe stated in the notice, or in circumstances where the Event of Default is not capable of being remedied and compensation is not an adequate remedy, the Notifying Party may:
(a)by notice to the Defaulting Party require the sale of the assets of the Venture for cash on the open market and on the best possible terms, acting reasonably;
(b)do nothing and continue the Venture on the terms in this Agreement; or
(c)buy the interest of the Defaulting Party under clause 8.4.
8.4 Buy-Out
Where a Notifying Party (‘the Buyer’) make[s] an election under clause 8.3(c) to buy out the Interest of the Defaulting Party in proportion to their Agreed Proportion (calculated by reference to their Agreed Proportion but ignoring in all cases the Defaulting Party’s Agreed Proportion):
…
(b)the purchase price for the Defaulting Party’s Interest (‘the Purchase Price’) will be the amount equivalent to 90% of the Defaulting Party’s Agreed Proportion of the Net Value of the Venture (subject to clause 8.4(c)).
…
(d) the purchase of the Defaulting Party’s Interest by the Buyer under this clause 8.4 will be completed on the following terms and conditions (or any other terms and conditions agreed between the Defaulting Party and the Buyer):
(i)the Purchase Price must be paid at the election of the purchaser on not less than 1 months’ notice but not later than 6 months of the Purchase Price being determined;
…
(e)the Defaulting Party must execute all agreements, releases and other documents which the Buyer may reasonably require to give effect to the full and unencumbered transfer of the Defaulting Party’s Interest consistent with the terms specified in this clause 8.4.
16. TERMINATION OF THE VENTURE
(a) The Venture will terminate on the earlier of:
…
(iv) 5 years of the date the Landowners completed the acquisition of the Property, but only if the construction of the Project has not commenced by that date (in which case the Property must be offered for sale on the open market); or
(v)6 years after the date of this Agreement, but only if the Project has not been completed by that date (including the settlement of the sale of all Lots) (in which case any unsold Lots must be sold in the manner agreed by the parties or, failing such agreement, by auction).
(b) Upon termination of the Venture as set out above, the Landowners must procure that all remaining Venture Assets are realised, and, after payment of all Project Costs, including realization costs, must distribute the surplus capital amongst the Landowners ( or recoup the deficit from the Landowners) in the Agreed Proportions.
(c)Notwithstanding the above, the Landowners may by mutual agreement, determine the Venture prior to any time specified in this clause and upon such termination, all Venture Assets shall be distributed by mutual agreement between the Landowners on an in specie basis in the Agreed Proportions. Any costs, Project Costs, taxes or other charges which may arise as a result of the distribution of the assets in accordance with this sub-clause shall be borne absolutely by the Landowner taking title to that asset.
(d)Despite this clause, the Landowners acknowledge and agree that the Venture will continue for so long as is necessary after termination to complete the winding up of the Venture.
19. DISPUTE RESOLUTION
(a)If a dispute arises between the Landowners or between the Landowners or either of them and the Developer in respect of any matter arising under or in relation to this Agreement, they must first seek to resolve it in accordance with the provisions of this clause. Each Landowner will continue to fulfil its obligations under this Agreement during the duration of any dispute.
(b)A Landowner claiming that a dispute has arisen will give notice to the other parties specifying the nature of the dispute and the facts giving rise to the dispute. Within ten (10) Business Days after the date of the dispute notice, the CEOs of the parties to the dispute will negotiate in good faith and will use reasonable endeavours to resolve the notified dispute. Such negotiation will include a good faith consideration by them as to whether an expert should be appointed to determine any factual matter which is relevant to the dispute, or whether a mediator should be appointed to assist in the resolution of the dispute.
(c)If a dispute is not resolved to the satisfaction of any of the parties pursuant to clause 19(b) at the expiration of ten (10) Business Days after the date of the dispute notice, the dispute must be referred to an independent expert and the terms of clause 7(h) will apply.
20. GOVERNING LAW
(a) This Agreement is governed by the laws in force in the state of Victoria.
(b)Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of Victoria and any courts having jurisdiction to hear appeals from those courts.
E. SUBMISSIONS
E.1 What is the nature of the dispute?
Both parties agree that the ultimate resolution of their dispute involves the sale of the Property. However, they fundamentally disagree about which provision of the Agreement governs that sale and the terms on which it should occur.
The defendant claims it is entitled to compulsorily acquire the plaintiff’s interest at 90% of its value under cl 8.4, following what it says was a valid default notice served after the appointment of provisional liquidators constituted an Insolvency Event under the Agreement. On this basis, the defendant contends it can purchase the plaintiff’s 50% interest for 90% of that interest’s value, effectively acquiring the entire Property at a discount to market value.
The plaintiff takes a diametrically opposed position, contending that the Property must be sold on the open market under cl 16(a)(iv) following termination of the Venture, with the proceeds then divided equally between the parties. The plaintiff argues that the defendant’s claimed default notice is invalid and that no buy-out right is available under the current circumstances.
The resolution of this disagreement depends on several complex and interconnected factual and legal issues, each of which could determine the outcome of the entire dispute.
The first and perhaps most fundamental issue is whether the Agreement or just the Venture has terminated, and if so, what the legal consequences of any such termination might be for the parties’ respective rights and obligations. The defendant concedes that the Venture terminated on 19 May 2023, but argues that this did not terminate the broader Agreement, which continues to operate during the winding up phase and therefore continues to support the default provisions in cl 8.
The plaintiff contends that either the entire Agreement has terminated, or that termination of the Venture precludes reliance on the operational default provisions, leaving only the specific post-termination sale mechanism in cl 16.
The second issue is whether the default notice served by the defendant in August 2024 was procedurally and substantively valid, which in turn depends on whether such a notice could be validly served more than 12 months after the alleged triggering Insolvency Event and after any termination of the Venture.
The third issue is whether the matters in dispute constitute Major Decisions under the Agreement requiring unanimous agreement between the parties (and therefore court resolution when deadlock occurs, given the practical impossibility of reaching unanimity) or whether they are general contractual disputes suitable for expert determination under the dispute resolution procedures.
The defendant characterises this as a relatively straightforward contractual provision selection dispute involving standard contractual interpretation principles that would be well-suited to expert determination by an appropriately qualified legal practitioner.
The plaintiff characterises it as a complex, multi-faceted Major Decision dispute involving multiple interconnected legal and factual issues spanning property law, corporate law, and contractual interpretation, which the Agreement’s structural framework demonstrates were intended for judicial rather than expert resolution.
E.2 Does the dispute resolution clause apply?
The defendant submits that the dispute resolution procedure established by cl 19 governs the dispute between the parties. The defendant argues that the language of cl 19(a), which applies to disputes ‘in respect of any matter arising under or in relation to this Agreement’, is sufficiently broad to cover a dispute about the parties’ rights in relation to the Property, which is the core subject matter of the Agreement.
The defendant submits that unlike cl 7, cl 19 contains no distinction between Major and Non-Major Decisions, but is cast in extremely broad terms by its reference to ‘dispute’ rather than ‘decision’. The defendant also points to cl 7(j), which provides that when a unanimous decision cannot be reached for Major Decisions, Landowners must continue satisfying their Agreement obligations except those touching upon the subject matter referred for expert resolution, suggesting that Major Decision deadlocks can also be referred to expert determination. When cl 19(c) refers disputes to independent expert determination using ‘the terms of clause 7(h)’, this picks up the procedural processes as a drafting technique without importing any limitation to Non-Major Decisions only.
The defendant further submits that it is inconsequential that the plaintiff also seeks relief under the PLA, because any determination under that Act would be directly informed by the Agreement, and relief under the PLA may, in any event, be refused where it is sought in breach of a dispute resolution clause. The defendant argues that the Agreement has not terminated and relevant provisions remain in operation, but that even if the Agreement has terminated, cl 19 would not be rendered inoperable, because disputes regarding whether the Agreement has been terminated and the consequences of such termination are within the scope of expert determination. The defendant contends that the dispute resolution processes are sufficiently certain, with any apparent ambiguity resolvable by application of ordinary principles of construction.
Addressing the plaintiff’s argument that cl 19(b) is inoperative because provisional liquidators cannot fulfil CEO negotiation requirements, the defendant submits that ‘CEO’ is an undefined, colloquial term describing a person with managerial control, and can extend to external administrators vested with management and control under statute. Even if the plaintiff’s construction were preferred, this would not disable the dispute resolution process, because unresolved disputes under cl 19(b) must still be referred under cl 19(c). The defendant argues that the negotiation requirements and expert determination procedures are sufficiently certain and the present dispute involves straightforward contractual interpretation suitable for determination by a legal expert.
The plaintiff submits that on a proper construction of the Agreement, the dispute is not required to be resolved through the dispute resolution procedures. The plaintiff’s primary argument is that the Agreement defines Major and Non-Major Decisions and differentiates how such decisions are made and disputes resolved. The plaintiff contends that only disputes regarding Non-Major Decisions are required to be resolved through expert determination, while disputes about Major Decisions are to be resolved through the courts.
The plaintiff submits that the present dispute concerns Major Decisions including transfer of legal or beneficial interests in Venture assets, distribution of Venture proceeds, and winding up the Venture other than under cl 16. Since Major Decisions require unanimous agreement under cl 7(b), and as the plaintiff argues no expert determination mechanism exists for Major Decision deadlocks, such disputes must be resolved by the courts.
The plaintiff argues that cls 19 and 7 are inconsistent because cl 19(c) requires all disputes to be referred to expert determination while cl 7(h) only requires disputes regarding Non-Major Decisions to be so referred. To resolve this inconsistency, the specific clause should prevail over the general clause, meaning cl 7 as the specific clause must prevail over cl 19 as the general clause. The plaintiff submits that the parties’ submission to the non-exclusive jurisdiction of the courts of Victoria in cl 20(b) is consistent with their intention that certain disputes, namely disputes about Major Decisions, be determined by the courts.
The plaintiff further argues that cl 19(b) is inoperative because it requires CEOs to negotiate in good faith and following the appointment of provisional liquidators, the powers of the CEO and other officers are suspended, rendering the plaintiff unable to comply. The plaintiff contends that the role of a CEO is entirely different from that of a provisional liquidator, whose primary duty is to preserve the status quo pending court determination of whether the company should be wound up. The plaintiff submits that the defendant’s submission that ‘CEOs’ can refer to provisional liquidators would require impermissible implication of a term into cl 19(b).
Finally, the plaintiff submits that cls 19(b) and 7(h)–(i) are void for uncertainty. Clause 19(b) fails to set out any framework as to how negotiation should take place and amounts to an unenforceable agreement to agree, as any negotiation must include ‘a good faith consideration by [the CEOs] as to whether an expert should be appointed to determine any factual matter which is relevant to the dispute, or whether a mediator should be appointed to assist in the resolution of the dispute’. Clauses 7(h) and (i) lack essential elements, including agreed procedural directions to the expert and agreement on how disputes involving overlapping expert disciplines should be resolved. The present dispute likely involves overlapping construction, valuation, accounting and legal issues, but the expert determination processes provide insufficient certainty about how such multi-disciplinary disputes should be resolved.
E.3 Should a stay be granted?
The defendant seeks a stay to facilitate completion of the dispute resolution process including expert determination. The defendant submits that the starting point is that courts will stay proceedings to allow parties to adhere to agreed dispute resolution procedures, with the onus on the party opposing the stay to justify continuation of the proceeding.
The defendant argues that it will be prejudiced if the proceeding continues because the parties’ lender has increased the interest rate by 3% following the appointment of provisional liquidators, and negotiation and expert determination would provide an inexpensive and efficient means of resolution. The defendant contends that the present dispute is readily capable of resolution by expert determination, noting that there are barristers and retired judges well qualified to carry out expert determination covering any discipline and requiring resolution of issues of fact or mixed fact and law.
The plaintiff opposes the stay application. The plaintiff denies that the defendant will suffer prejudice if the proceeding continues, arguing that the defendant’s conduct is inconsistent with any desire to resolve the dispute with urgency or concern about increased interest rates.
The plaintiff points to the defendant’s delay of 12 months from the appointment of the provisional liquidators and nine months after notification of the interest rate increase before serving the default notice, and its failure to assert dispute resolution rights until March 2025. The plaintiff submits that where particular dispute resolution clauses are determined to be unenforceable due to uncertainty, this operates to preclude the ordering of a stay. The plaintiff argues that Major Decision disputes were intended for court resolution under the Agreement’s structure, and seeks dismissal of the application with standard case management directions.
F. LEGAL PRINCIPLES
F.1 Contractual construction
The general principles applicable to the construction of commercial contracts were recently summarised by the Court of Appeal in VS Property & Holding Pty Ltd v Zurzolo:
(a)In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. To answer that question, ‘the reasonable businessperson [is] placed in the position of the parties’, and the Court applies the following principles:
(b)The rights and liabilities of parties under a provision of a contract are determined objectively. The subjective intentions of the parties are irrelevant.
(c)The objective approach requires reference to the text and its ordinary meaning, together with:
(i)the context, being the entire text of the contract including matters referred to in the text; and
(ii) the purpose of the contract and/or the clause in question.
(d)These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words’. Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.
(e) Unless a contrary intention appears in the contract, the court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result, and should construe it so as to avoid a commercial nonsense. However, the court does not weigh the commerciality of the agreement, and business common sense is a topic on which reasonable minds may differ.
(f) If the language used in the contract ‘is ambiguous or susceptible of more than one meaning’, then evidence of surrounding circumstances external to the contract is admissible to assist with interpretation of the language in question.
(g) However, ‘evidence of the parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible. Although evidence of prior negotiations is admissible to establish objective background facts known to both parties and the subject matter of the contract, evidence of negotiations reflective of actual intentions and expectations is not receivable.
(h)Post-contractual conduct is inadmissible to construe the terms of the contract. However, the parties’ subsequent communications may be relevant to determine whether the parties intended to enter into a binding contract.
In addition, and to the extent possible, clauses within a contract are to be construed harmoniously with each other. However, if there is any inconsistency between terms then the specific clause will prevail over the general clause.[4]
[4]VS Property & Holding Pty Ltd v Zurzolo [2024] VSCA 199, [54]–[55] (Niall, Walker and Kenny JJA) (citations omitted).
F.2 Uncertainty
The starting point for considering whether a dispute resolution process contained in a contract is sufficiently certain to be enforceable was set out by Vickery J in WTE Co-Generation v RCR Energy Pty Ltd (‘WTE’):
What is enforced is not cooperation and consent but participation in a process from which consent might come.
…
It is for this reason that that the process from which consent might come must be sufficiently certain.
This is not to suggest that the process need be overly structured. Certainly, if specificity beyond essential certainty were required, the dispute resolution procedure may be counter-productive as it may begin to look much like litigation itself.[5]
[5]WTE Co-Generation v RCR Energy Pty Ltd [2013] VSC 314, [33]–[34], citing Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236, 250–1 [60]–[62] (Einstein J) (‘WTE’).
In Raskin v Mediterranean Olives Estate Ltd (‘Raskin’), Hargrave J discussed the essential matters that ought to be included in an expert determination clause to make it sufficiently certain so as to be enforceable:
First, agreed procedural directions to the expert. There are no such directions in the expert determination clause.
Second, agreement as to how disputes involving overlapping fields of expert disciplines are to be resolved. The expert determination clause does not deal with that issue. For example:
(1)What is to happen if one party refers an accounting issue to a chartered accountant and another party refers a dispute concerning a horticultural issue to a horticultural expert? Was it intended that there should be two parallel expert referrals which might conflict or lead to different outcomes? Such a course could not have been intended by commercial parties acting sensibly.
(2)What is to happen if a horticultural expert reaches a different finding on a relevant fact to that reached by a chartered accountant or an independent lawyer? Was it intended that, where there is overlap, all disputes be determined by an independent lawyer in accordance with procedural fairness?
In my opinion, these are essential matters which ought to have been included in the expert determination clause to make it sufficiently certain to be enforceable. Their absence makes the clause uncertain and unenforceable.[6]
[6]Raskin v Mediterranean Olives Estate Ltd [2017] VSC 94, [40]–[42] (‘Raskin’).
F.3 Discretion to grant a stay
The Court has jurisdiction to stay a proceeding seeking to enforce contractual rights where a dispute resolution mechanism provides that the completion of expert determination is necessary for a contractual right to be enforceable. It may do so under its inherent jurisdiction,[7] or pursuant to r 23.01(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), which provides:
(1) Where a proceeding generally or any claim in a proceeding—
(a) is scandalous, frivolous or vexatious; or
(b) is an abuse of the process of the Court—
the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.
[7]Meyertran Pty Ltd v TVS-Asianics Australia Holdings Pty Ltd (2020) 61 VR 320, 339–40 [76]–[77] (Lansdowne AsJ) (‘Meyertran’).
The grant of a stay to allow parties to follow pre-agreed dispute resolution procedures is discretionary.[8]
[8]Orica Investments Pty Ltd v Aurelius Marvel One Ltd [2023] VSC 18, [36] (Lyons J); Meyertran (2020) 61 VR 320, 346 [102] (Lansdowne AsJ); Onslow Salt Pty Ltd v Buurabalayji Thalanyji Aboriginal Corp [2018] FCAFC 118, [19] (Besanko, Barker and Colvin JJ) (‘Onslow Salt’); Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502, 508–9 (Dixon J).
In considering the exercise of that discretion, Lansdowne AsJ said in Meyertran Pty Ltd v TVS-Asianics Australia Holdings Pty Ltd:
Although the discretion is a wide one, the starting point is that the parties should ordinarily be held to their bargain to resolve their dispute in the agreed manner. As a consequence, good reason is required to depart from that agreement, and the onus of showing that good reason is on the party opposing the stay. A stay will be refused if it would be unjust to deprive a party of judicial determination. Each case is to be determined on its own facts and circumstances.
Matters that may be relevant in the exercise of the discretion in the case of an expert determination include:
(i)The ‘weighty consideration against refusal of a stay’ that parties should be held to their bargain;
(ii)Whether the agreed process would deal with the whole, or only part of the dispute;
(iii)Whether there would be duplication of effort if the agreed process was to be followed in the particular case;
(iv)Whether the refusal of a stay would result in multiplicity of proceedings;
(v)Whether the dispute is apt for determination by the proposed category of expert;
(vi)Whether the agreed procedures are appropriate and adequate for the nature of the dispute; and
(vii)Whether there is a wider public interest in the dispute being dealt with in a court.[9]
[9]Meyertran (2020) 61 VR 320, 346 [102]–[103] (citations omitted).
The Full Court of the Federal Court of Australia said in Onslow Salt Pty Ltd v Buurabalayji Thalanyji Aboriginal Corp that:
A stay will be refused if it would be unjust to deprive a party of its right to have its claim determined judicially. Matters that have been identified as reasons that may, in the particular circumstances, cause the Court to refuse to grant a stay include:
(1) the agreed process would deal with only part of the dispute;
(2)there would be duplication of effort if the agreed process was to be followed in the particular case;
(3)the refusal of a stay would result in a multiplicity of proceedings;
(4)in the case of an expert determination, the dispute is inapt for determination by an expert because it does not involve the application of specialist knowledge to matters to be observed or investigated by the expert or is outside the expert’s field of expertise; and
(5)the agreed procedures are inappropriate or inadequate for the nature of the dispute.[10]
[10]Onslow Salt [2018] FCAFC 118, [16] (Besanko, Barker and Colvin JJ).
In WTE, Vickery J set out the following principles to be considered when determining whether a stay should be granted in circumstances where a contractual dispute resolution process is expressed to be a precondition to litigation, and where the enforceability of such provision is in issue:
1.The general rule is that equity will not order specific performance of a dispute resolution clause, notwithstanding that it may satisfy the legal requirements necessary for the court to determine that the clause is enforceable. This is because supervision of performance pursuant to the clause would be untenable.
2.The Court may, however, effectively achieve enforcement of a dispute resolution clause by default, by ordering that a proceeding commenced in respect of a dispute subject to the clause, be stayed or adjourned until such time as the process referred to in the clause, is completed. What is enforced by this means is not co-operation and consent of the parties but participation in a process from which consent might come.
3.A circumstance which will operate to preclude the ordering of a stay on this ground arises where the particular dispute resolution clause is determined to be unenforceable, as where for example, the clause is found to be uncertain.
4.Dispute resolution clauses in contracts should be construed robustly to give them commercial effect. The modern approach to the construction of commercial agreements is generally to endeavour to uphold the bargain by eschewing a narrow or pedantic approach in favour of a commercially sensible construction, unless irremediable obscurity or a like fundamental flaw indicates that there is, in fact, no agreement.
5. Honest business people who approach a dispute about an existing contract will often be able to settle it. If business people are prepared in the exercise of their commercial judgment to constrain themselves by reference to express words that are broad and general, but which nevertheless have sensible and ascribable meaning, the task of the court is to give effect to and not to impede such solemn express contractual provisions. Uncertainty of proof does not detract from there being a real obligation with real content.
7.A dispute resolution clause in a contract, consistently with public policy in promoting efficient dispute resolution, especially commercial dispute resolution, requires that, where possible, enforceable content be given to contractual dispute resolution clauses.
8.The trend of recent authority is in favour of construing dispute resolution clauses where possible, in a way that will enable those clauses to work as the parties appear to have intended, and to be relatively slow to declare such provisions void either for uncertainty or as an attempt to oust the jurisdiction of the court.
9.The court does not need to see a set of rules set out in advance by which the agreement, if any, between the parties may in fact be achieved. The process need not be overly structured. However, the process from which consent might come must be sufficiently certain to be enforceable. A contract which leaves the process or model to be utilized for the dispute resolution ill defined, or the subject of further negotiation and agreement, will be uncertain and unenforceable.
10.An agreement to agree to another agreement may be incomplete if it lacks the essential terms of the future bargain.
11.An agreement to negotiate, if viewed as an agreement to behave in a particular way, may be uncertain, but is not incomplete. The relevant question is whether the clause has certain content.
12.An obligation to undertake discussions about a subject in an honest and genuine attempt to reach an identified result is not incomplete.[11]
G. CONSIDERATION
[11]WTE [2013] VSC 314, [39] (citations omitted).
G.1 What is the nature of the dispute?
Clause 19(b) of the Agreement requires a party claiming that a dispute has arisen to ‘give notice to the other parties specifying the nature of the dispute and the facts giving rise to the dispute.’ The defendant’s solicitor’s letter of 31 March 2025 does not clearly specify the nature of the dispute, but obliquely states that ‘the nature of this dispute relates to’ certain matters. The letter compounds this imprecision by stating that the defendant should treat ‘this letter, our previous correspondence and the subject matter of [the plaintiff’s] writ and statement of claim in the Proceeding as notice of dispute under cl 19(b) of the Agreement’. This broad and imprecise formulation fails to clearly specify the nature of, and the facts giving rise to, the dispute required by clause 19(b).
Notwithstanding the imprecise form of the notice, in substance, the dispute between the parties concerns the mechanism by which the Property should be sold and the proceeds distributed. Both parties accept that the Property must be sold, but they advance fundamentally different positions about which provisions of the Agreement govern that sale. The defendant seeks to exercise what it claims is a contractual right to purchase the plaintiff’s 50% interest at 90% of its assessed value under cl 8.4, effectively acquiring the entire Property at a discount to market value. The plaintiff opposes this and seeks an order for the sale of the Property on the open market under cl 16.4, with proceeds divided equally between the parties at full market value.
The dispute has several distinct but interconnected elements. The first element concerns whether the Agreement or Venture has terminated, when any such termination occurred, and what legal consequences flow from termination for the parties’ respective rights and obligations. The second element concerns the validity of the default notice served by the defendant in August 2024, more than 12 months after the alleged triggering Insolvency Event and after any termination. This raises questions about the temporal scope of default rights and whether such notices can be served post-termination. The third element involves the interaction between different remedial provisions in the Agreement — specifically whether the default buy-out mechanism in cl 8 can operate alongside or instead of the post-termination sale mechanism in cl 16.
For the purposes of determining whether this dispute falls within cl 19, I do not need to resolve the underlying factual and legal disagreements between the parties. The question is not whether the defendant’s interpretation of the Agreement is correct, or whether the plaintiff’s position should prevail, but whether there is arguably a dispute arising under or in relation to the Agreement that could fall within the scope of cl 19.
G.2 Does the dispute resolution clause apply?
The threshold question is whether cl 19 applies to the dispute between the parties. The language of cl 19(a) is cast in broad terms, applying to disputes ‘in respect of any matter arising under or in relation to this Agreement’. The present dispute concerns the proper construction and application of the Agreement’s provisions regarding default, termination, and sale of the Property. Such a dispute plainly arises ‘under or in relation to’ the Agreement within the meaning of cl 19(a).
The plaintiff’s argument that cl 19 is limited to Non-Major Decision disputes, while cl 7 applies only to Major Decision disputes, faces several difficulties.
First, the text of cl 19 contains no such limitation. Unlike cl 7, which expressly distinguishes between Major and Non-Major Decisions, cl 19 is framed by reference to the different concept of ‘disputes’ arising under or in relation to the Agreement.
Secondly, the plaintiff’s construction would create commercial difficulties given that cl 7(j) contemplates that both Non-Major Decision deadlocks (due to lack of quorum) and Major Decision deadlocks (due to inability to reach unanimous decision) can result in matters being ‘referred for resolution to the independent expert’. This suggests the Agreement contemplates expert resolution of Major Decision deadlocks, undermining the plaintiff’s argument that such disputes must go to court.
Thirdly, when cl 19(c) incorporates ‘the terms of clause 7(h)’ for expert determination, this appears to be a drafting technique to avoid repetition of procedural details, and cl 7(j) supports the view that this expert determination mechanism can apply to Major Decision disputes.
However, I have serious concerns about the certainty and workability of the dispute resolution mechanism in cl 19. Clause 19(b) requires that ‘the CEOs of the parties to the dispute will negotiate in good faith’, but following appointment of provisional liquidators, the plaintiff has no CEO in the ordinary sense of that term.
The defendant’s argument that ‘CEO’ should be interpreted to include provisional liquidators faces the difficulty that provisional liquidators have fundamentally different duties and powers from company officers. A provisional liquidator’s primary duty is to preserve the status quo pending determination of whether the company should be wound up,[12] which is quite different from the commercial decision-making role ordinarily expected of a CEO in good faith negotiations.
[12]Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2013) 93 ACSR 189, 193 [16(c)] (Gordon J) citing Re Carapark Industries Pty Ltd (in liq) (1966) 9 FLR 297, 303 (Street J).
There is force in the plaintiff’s argument that cl 19(b) amounts to an unenforceable agreement to agree requiring the CEOs to consider whether an expert should be appointed to determine any factual matter which is relevant to the dispute, or whether a mediator should be appointed to assist in the resolution of the dispute.
More fundamentally, the expert determination procedures in cls 7(h) and (i), which cl 19(c) incorporates, suffer from significant uncertainty.
While cl 7(i) provides some general terms for expert appointment, it lacks essential procedural directions. There is no guidance on timelines for submissions, hearing procedures, or the conduct of the determination process beyond the basic 28-day timeframe for the decision.
Further, while cl 7(h) provides a framework for appointing experts in different disciplines, it provides no guidance as to how disputes involving multiple overlapping disciplines should be resolved. The present dispute potentially involves questions of legal construction, property valuation and accounting treatment. Clause 7(h)(iii) contemplates that disputes may be referred to a panel of experts ‘if appropriate and the Landowners agree’, but provides no mechanism for resolving disagreement about whether a panel is appropriate or what should happen if the parties cannot agree on the composition of the panel.
These uncertainties are not merely theoretical in the present case. The dispute involves overlapping legal, valuation and accounting issues. If referred to a lawyer as expert under cl 7(h)(ii)(A), that expert might reach conclusions about property valuation that differ from those that would be reached by a valuer under cl 7(h)(ii)(E). The Agreement provides no guidance as to how such conflicts should be resolved, whether multiple experts should be appointed, or what happens if experts in different disciplines reach inconsistent conclusions about overlapping factual issues.
G.3 Should a stay be granted?
The cumulative effect of these uncertainties is that the dispute resolution mechanism in cl 19, while broadly worded in its application, lacks sufficient certainty to be enforceable. As Hargrave J observed in Raskin, the absence of essential procedural elements and mechanisms for resolving overlapping expert disciplines makes the clause ‘uncertain and unenforceable’.[13]
[13]Raskin [2017] VSC 94, [42].
Even if cl 19 were sufficiently certain to be enforceable, I would decline to exercise my discretion to grant a stay in this case. While the starting point is that parties should be held to their bargain to resolve disputes in the agreed manner, several factors weigh against granting a stay here.
First, the defendant’s conduct is inconsistent with any genuine desire for urgent resolution of the dispute. The provisional liquidators were appointed in August 2023, and Westpac notified the parties of the interest rate increase in November 2023. Yet the defendant did not serve its default notice until August 2024, and did not assert that dispute resolution procedures should be followed until March 2025. This delay of some 19 months from the triggering event to assertion of dispute resolution rights suggests that urgency is not a genuine concern.
Secondly, while the dispute does involve some valuation and accounting elements, the predominant questions are matters of contractual construction and legal analysis that courts are particularly well-equipped to determine. The core issues — whether the Agreement has terminated, the consequences of any such termination and the interaction between different remedial provisions — are primarily legal questions requiring the application of principles of contractual construction rather than specialist technical expertise. Although property valuation and accounting considerations may be relevant to the ultimate remedy, these subsidiary issues do not alter the fundamentally legal character of the dispute.
Thirdly, the manner in which the defendant has sought to invoke the dispute resolution procedure demonstrates its unsuitability for expert determination. The defendant’s solicitor’s letter of 31 March 2025 purports to treat that letter, previous correspondence, and ‘the subject matter of [the plaintiff’s] writ and statement of claim’ as a notice of dispute under cl 19(b). This vague and general characterisation fails to identify with precision the dispute being referred for expert determination. The defendant has essentially sought to refer the entire proceeding (albeit without the benefit of its defence which would more precisely define the issues in dispute) to expert determination without specifying the particular issues requiring resolution. Such an approach is antithetical to expert determination, which works best when specific, defined issues are referred to appropriately qualified experts. The broad and unfocused nature of the defendant’s dispute notice supports the conclusion that this matter is better suited to judicial determination, where the court can manage the full scope of the dispute through the pleading process and case management procedures.
Fourthly, granting a stay would create uncertainty about what would happen if the expert determination process broke down due to the uncertainties that I have identified. If the parties could not agree on appointment of appropriate experts, or if experts in different disciplines reached conflicting conclusions, the matter would likely return to court for resolution, creating inefficiency and duplication of effort.
Finally, the plaintiff seeks alternative relief under the PLA, which provides a statutory mechanism for resolving disputes between co-owners concerning the sale of property. While such relief might be refused if it conflicted with clear contractual dispute resolution obligations, the uncertainties in cl 19 weigh against treating it as a clear obligation that should override the statutory remedy.
H. CONCLUSION AND ORDERS
For these reasons, I find that while the dispute arguably falls within the scope of cl 19, the dispute resolution mechanism is insufficiently certain to be enforceable, and in any event, discretionary factors weigh against granting a stay.
The defendant’s application for a stay is refused.
I will hear the parties on costs and case management directions for the substantive proceeding.
---
0
6
0