Skill Tiling v Trio Construct
[2014] VMC 4
•12 MARCH 2014
| IN THE MAGISTRATES’ COURT OF VICTORIA |
AT MELBOURNE
CIVIL DIVISION
Case No. D13814412
| SKILL TILING PTY LTD (A.C.N 124 037 896) | Plaintiff |
| -and- | |
| TRIO CONSTRUCT PTY LTD (A.C.N. 126 075 689) | Defendant |
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MAGISTRATE: | GINNANE |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 4 MARCH 2014 |
DATE OF DECISION: | 12 MARCH 2014 |
CASE MAY BE CITED AS: | SKILL TILING v TRIO CONSTRUCT |
REASONS FOR DECISION
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Catchwords: Practice and procedure – application by defendant for stay of proceedings commenced in court before process of mediation undertaken under sub-contractor agreement – no notice of defence to complaint filed by applicant at time of issue of summons for stay – effect of Magistrates’ Court General Civil Procedure Rules 2010 requiring filing of a notice of defence – construction of clause in subcontract agreement for resolution process – whether mandatory – whether clause in subcontract agreement sufficiently prescriptive or void for uncertainty – relief in summons partially dismissed – management of determination of alternative relief sought in summons for payment of security.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff (Respondent) | Ms O’Sullivan | Biz Legal Pty Ltd |
| For the Defendant (Applicant) | Mr Tomlinson | JBT Lawyers |
HIS HONOUR:
1 The plaintiff and defendant are in dispute over a claim brought by the plaintiff for the amount of $51,317.85. The complaint was issued on 17 December 2013. The plaintiff sues on an agreement for $53,388.85. How the amount claimed is characterised, whether as a claim for monies due pursuant to a Subcontract agreement between the parties or for damages is a matter relied upon by the defendant (hereafter referred to as the “applicant”) in support of a stay of the proceeding. The applicant submits that the plaintiff (hereafter referred to as the “respondent”) has commenced proceedings not for a claim for payment due pursuant to the contract but rather for an amount that is subject to assessment by reference to the quality of work done by the respondent and assessed by the applicant. Hence the applicant argues that this is a dispute in respect of amounts falling due under the sub contract agreement which must be mediated before recourse is had to law.
2 An affidavit sworn in support of the applicant’s summons by Claire Long, a solicitor representing the applicant addressed some of the historical matters relating to the service of payment claims on the applicant pursuant to the sub contract agreement.
Background to the dispute
3 It would appear that the respondent was engaged by the applicant pursuant to a Subcontract agreement made in May 2013 to perform certain tiling works to a project site involving the construction of residential apartments in Malvern. The agreement contained provision for the payment of the respondent’s works and the respondent has pleaded that between May 2013 and October 2013 it performed work and labour and supplied materials in an amount of $123,638.35 plus GST and also that it furnished the applicant with invoices totalling that sum. It is further pleaded by the Complaint that the applicant has paid $70,249.51 plus GST leaving a residue owing $53,388.85 plus GST. The respondent alleges that the failure to pay the total sum invoiced was wrongful and in breach of the subcontract agreement and that in consequence it has suffered loss and damage being the balance of the total sum due. The respondent also sues on an alternative basis seeking restitution in consequence of an alleged repudiation of the agreement by the applicant.
4 The applicant has not filed its defence to the proceeding. No reason was advanced why it had not done so.
5 By summons filed in the Court and dated 14 February 2014 the applicant seeks orders that:
1.The proceeding be stayed until the 28th day following the completion of mediation between the parties in accordance with the terms of the Subcontract between them dated on or about 28 May 2013.
2.The time for the Defendant to file and serve a Defence be extended to 21 days following the expiry of the stay in paragraph 1.
3.Alternatively:
(a)pursuant to Rule 62.0 2(1)(b) and (f) of the Rules of this Honourable Court, s. 1335 of the Corporations Act 2001 and the inherent jurisdiction of the Court, the Plaintiff provide the sum of $20,000 (or such other sum as this Honourable Court deems fit) as security for the Defendant's costs of the proceeding;
(b)that until such security is given the claim by the Plaintiff be stayed;
(c) the security to be provided be given within 14 days and otherwise in such manner as the Court directs; and
(d) that if the Plaintiff fails to provide the security within the time stipulated in paragraph 2(c), than pursuant to Rule 62.04, the Plaintiff's claim be dismissed.
4.The Plaintiff pay the Defendant's costs of this Summons.
5.Such further order or other orders as this Honourable Court considers appropriate.
6 The orders sought in the summons are opposed.
7 The applicant was represented by Mr Tomlinson of Counsel and the respondent was represented by Ms O'Sullivan of counsel.
8 The applicant’s summons does not invoke any particular Rule of Court in support of a stay. This court may of course stay a proceeding. The Rules of Court make express provision for this to occur and provide as follows:
23.01 Stay or order in proceeding
(1)If a proceeding generally or any claim in a proceeding—
(a)does not disclose a cause of action; or
(b)is scandalous, frivolous or vexatious; or
(c)is an abuse of the process of the Court—
the Court may upon the application of a defendant who has filed a defence stay the proceeding generally or in relation to any claim or make an order for the defendant in the proceeding generally or in relation to any claim.
9 Rule 23.02 places the applicant in a difficult position because unlike O23 the Supreme Court (General Civil Procedure) Rules 2005, the Magistrates’ Court General Civil Procedure Rules 2010 stipulate that an application for stay may only be granted on application by a defendant who has filed a defence in the proceeding. Neither party addressed the operation and effect of the rule. It was not argued before me that I could exercise some other power in the rules of court to grant a stay. However, in accordance with the manner in which the application was developed in the course of argument the applicant proceeded as if the respondent’s proceeding is an abuse of process and hence something the Court may control by appropriate disposition under the power to control its own processes.
10 In the event it has not proved necessary for me to determine the extent to which if at all, a defendant may apply for a stay prior to the filing of its defence by invoking the general power conferred in the rules of court to control its own process, when the rules otherwise make specific provision for just such an application but after the filing of a defence. It may be well be that to sanction such an approach would be contrary to Rule 1.15 which recognises the Court’s implied power to regulate its own proceedings when the manner or form of doing so is not otherwise prescribed by the rules. If required to determine the point, I would regard the rules for the making of an application for the grant of a stay inform the process and stage at which an application of this type can be made. Therefore the defendant not having filed a defence, the precondition to seek the principal relief in the summons has not been engaged. However, in the event my view about this is wrong, and in deference to the arguments advanced in support of and in opposition to the relief sought, I have determined to entertain the application as if it were properly before me.
The relevant terms of the subcontract agreement
11 The applicant submits that the Subcontract agreement expressly provides that the parties engage in an alternative dispute resolution procedure prior to the commencement of legal proceedings. It is common ground that no attempt has been made by either party to utilise the procedure.
12 The respondent submitted that there exists a number of unsatisfactory features attendant the dispute resolution clause and that in combination the process is productive of unfairness and uncertainty.
13 The respondent’s attack on the relief sought in the summons was twofold. The first limb may be regarded as jurisdictional. To appreciate the submission it is necessary to set out the clause in full. It is expressed in the agreement between the parties in these terms:
39.6 If a dispute arises under this Subcontract, either party may within 28 days give written notice to the other which sets out the details of the dispute requesting that a settlement meeting take place.
39.7 Senior representatives of each party (who have authority to settle the dispute) must meet within seven days of the notice and endeavour to resolve the dispute in good faith.
39.8 If the meeting is not resolve the dispute, then within a further 28 days the parties must mediate the dispute. If the mediation has not resulted in a resolution of the dispute within a further 28 days than the parties are free to pursue their rights at law.
39.9 Nothing in this Clause 40 prevents nor will prejudice the right of a party to institute proceedings to enforce payment due under the subcontract or to seek injunctive or urgent declaratory relief in respect of a dispute or any matter arising under the subcontract.
39.10 If the Subcontractor applies for adjudication under the SOP Act the parties agree that the authorised nominating authority in respect of such an adjudication application shall be one of those nominated in item 23.
14 “Dispute” is not a defined term in the agreement. It is however a word of wide general import and sufficiently broad as to encompass matters litigious and non-litigious but anchored at least by the need for the “dispute” to be one that “arises under the subcontract”. The matter of the amount of payments due for works performed under the subcontract is a matter about which the parties are in dispute under the Subcontract and the applicant contends that the recourse to law by way of remedy first requires compliance with the gateway contained in cl 39.
15 The respondent submits that cl 39 of the subcontract is not mandatory. It submits that cl 39.8 is but one part of a process and not an entire process and is only mandatory otherwise than for a “carve out” of claims “to enforce a payment under the Subcontract” or to seek injunctive or declaratory relief (neither of which are relevant here) if availed of by the parties.
16 The applicant submitted that the process of mediation is mandatory because the respondent is in dispute with the applicant. Counsel for the applicant directed me to the decision in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd & Ors [2013] VSC 435 in which Vickery J determined an application for a stay under s 8 of the Commercial Arbitration Act 2011 brought under s 63 of the Civil Procedure Act 2010 or O 22 of the Supreme Court (General Civil Procedure) Rules 2005. There the applicant relied on the terms of cl 42.1 of the contract. The scheme provided for in that clause is quite different to the mechanism for payments under the subcontract in issue before me. However the applicant referred to cl 47.1 of the contract in Lysaght that relevantly provided:
If a dispute or difference (hereafter called a “dispute”) between the Contractor and the Principal arises in connection with the Contract or the subject matter thereof, including a dispute concerning –
(a)a direction given by the Superintendant; or
(b)a claim-
(i) in tort;
(ii) under statute;
(iii) for restitution based on unjust enrichment; or
(iv) for rectification or frustration
then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute.
17 Lysaght does not assist the applicant because as regards the mandatory nature of the clause requiring the parties to set forth on the process of arbitration, His Honour made plain at [141- 142] that his conclusions were predicated on a trigger that unleashed the arbitral process. His Honour put it this way:
“However, whichever alternative is invoked by the parties under clause 47.2, on the assumption that a notice of dispute has been served and the dispute remains unresolved and has not been resolved within 28 days of service of the notice of dispute, that dispute ‘shall be and is hereby referred to arbitration.’
In my opinion, provided these pre-conditions have been met, the parties have expressed a clear intention in their written agreement that an outstanding dispute, in the circumstances described, is required to be referred to arbitration, and is not to be heard and determined by a Court. In these circumstances, clause 47.2 constitutes an agreement by the parties to submit to arbitration certain disputes which are defined.” (My Emphasis).
18 The preconditions to invoke a process that would then be set in train and be followed to a conclusion in accordance with the two periods of 28 days simply does not exist in the present matter. If a dispute arises under the subcontract then either party may start a process that begins with the steps contained in cl 39.6. I agree with Ms O’Sullivan’s submission that the scheme under the agreement contemplates an optional early alternative dispute resolution process.
19 If I am wrong about this then the applicant also argues that the complaint is not one that falls within the “carve out” in cl 39.9 that permits recourse to law because it is not an action to “enforce a payment due under the Subcontract”. I also reject this submission. The submission was made in the course of argument and by reference to and reliance on various terms in the contract that defined expressions “Payment” (cl 13) and “Payment Claim” and “Payment Preconditions”. The applicant submitted that in order for the matter to be the subject of a permissible “carve out” under cl 39.9 there must first have occurred a process of assessment of the quality and workmanship provided by the respondent and an adjustment if warranted by it of the claims for payment before it can be said that the respondent has a claim “to enforce a payment due under the Subcontract”. The applicant argued that to sanction a suit in damages for the amount of the payments due or to clothe any such demand for payment whether “due under the Subcontract or not” as Mr Tomlinson put it, would be to permit an impermissible circumvention of the intention underscoring cl 39.9. I do not accept that submission. It was an argument made by way of a submission as to construction of the provisions of the clause and it was not a matter pleaded in any defence: (see Rule 23). In any event I do not accept the characterisation of the complaint as one that does not plead an action that fulfils the meaning of a claim to “enforce a payment due under the Subcontract”.
20 If I am wrong in this conclusion, nonetheless there are additional reasons why I would reject the application for stay and based on the process laid down in cl 39. These reasons address the other principal ground of opposition to the summons by the respondent.
21 The second and alternative limb of the respondent’s argument is that there are good reasons why the court in the exercise of its discretion should determine the clause as unenforceable and therefore dismiss the applicant’s summons. The grounds adumbrated relate in large part to what the respondent described as a lack of minimum prescription such as to give effect to the contemplated process of mediation.
22 There is ample authority to the effect that a contract may validly include an agreement to negotiate. It was not suggested to the contrary by either party. However to recognise this authority is not to conclude the matter in issue.
The approach to the application of such clauses
23 In Bagdin Nominees v Oneida Ltd [1998] VSC 188 Gillard J said at paragraph 29 of his judgement:
"It is a trite proposition that parties may contract about anything and subject to the principles of public policy and illegality the agreement should be enforced unless there is some other vitiating factor such as mistake, misrepresentation or incapacity."
24 It accords with good public policy to encourage parties to have recourse to alternative dispute resolution and to be the architects of their own means of settlement of disputes that takes into account the commerciality and practicality of the dispute to the parties as opposed to leaving a decision to be imposed by a court.
25 In Huddart Parker Ltd v The Ship Mill [1950] 81 CLR 502 Dixon J said at 508-509:
"But the Courts begin with the fact that there is a special contract between the parties to refer, and therefore in the language of Lord Moulton in Bristol Corporation v John Aird & Co, consider the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutton L J said in Metropolitan Tunnel and Public Works Ltd v London Electric Railway Co, “A guiding principle on one side and a very natural and proper one, is that parties who have made a contract should keep it.” At the same time…the Court’s discretion has not been restricted by any exclusive definition of the circumstances which will warrant a refusal of a stay.””
26 I was not directed by the parties and my own researchers have not been able to identify a case in which a clause with the exact wording as that before me has been judicially considered. However clauses of similar purport abound.
27 In 1144 Nepean Highway Pty Ltd v Leigh Mardon Australasia Pty Ltd [2009] VSC 226, Davies J considered the approach to be taken to the construction of dispute resolution clauses and commercial contracts. Her Honour at [15] applied a decision of the High Court in PMT Partners Pty Ltd (in liquidation) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 at 311-2 (per Brennan CJ, Gaudron and McHugh) in holding that the approach to such clauses should be:
"an approach which treats [the] clause as requiring the parties to have their disputes decided in accordance with the procedure specified-and only in accordance with those procedures-unless there is something which clearly indicates to the contrary".
28 Her Honour concluded (see p 8 of Her Honour’s reasons – unnumbered paragraph) that the approach to construction should be:
"to give effect to the intention of the parties is expressed, unless there is something which clearly indicates that the ambit of the clause should be limited in some way".
29 Various authorities cited by Her Honour, such as Incitec Ltd v Alkimos Shipping Corporation (2004) 2006 ALR 558 per Allsop J at 565-6 confirmed Her Honour’s view that the discretion not to grant a stay in order to allow a dispute resolution clause to be utilised "requires substantial grounds" more so than mere convenience, and “recognising that the starting point is the fact that the parties should, absent strong countervailing circumstances, be held to their bargain”.
30 The respondent did not challenge the principles which I have outlined above however it argued that I have discretion whether or not to order a stay and that the discretion should be exercised in its favour.
31 The respondent submitted that the clause was unenforceable as it provided no mechanism for the appointment of a mediator, if the parties were unable to agree as to who the mediator should be. The clause simply provides that the matter is to be mediated between the parties. The applicant countered this by submitting that the parties could easily solve such problem if it arose. The reference in the clause to mediation is no more it suggested that the starting point for good faith negotiations as to the appointment of a suitable person in the event of a dispute.
32 I've already referred to the first instance decision of Davies J in 1144 Nepean Highway. Reference to that litigation reveals that injunctive orders were made in the same proceeding as was before Her Honour but by a different judge. Those injunctive orders were themselves the subject of an appeal to the Court of Appeal in 1144 Nepean Highway v Abnote Australasia Pty Ltd (2009) VSCA 308. In determining that appeal in which one of the parties refused to accept the nomination of any expert who required the provision of an indemnity from the parties as a condition of appointment and whereby the dispute resolution procedure made no such allowance, the Court of Appeal considered the question of whether terms could be implied into an agreement governing the terms of the appointment of an expert and made some general observations on the capacity of the court to imply reasonable terms into a dispute resolution clause. In order to give effect to the dispute resolution clause, the Court of Appeal was prepared to imply a term into the contract of the expert was to be appointed on reasonable terms. It further held that there was an amplitude of evidence that the experts insistence on obtaining a release was in accordance with industry practice, it held such a term to be "reasonable and equitable" and it said at paragraph 29 of its reasons:
"It is necessary for the effective operation of the agreement. On the evidence, it is so obvious that it goes without saying. It is capable of being clearly expressed in it contradicts no express term of contract".
33 The Court of Appeal cited the decision of Lord Blackburn In Mackay v Dick (1881) 6 Ap Cas 251 at 263 that:
"as a general rule where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectively 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".
34 I note too that the Court of Appeal’s comments in 144 Nepean Highway reflect the remarks made by Davies J at first instance that: “the absence of procedures itself is no reason for refusing to stay."
35 The applicant’s counsel referred me to the decision in Queensland Electricity Generating Ward v Hope Collieries Pty Ltd [1989] 1 Lloyd's Reports 205210:
"At the present day, in cases where parties have agreed on an arbitration or valuation clause in wide enough terms, to their manifest intention to create continuing legal relations. Arguments in evoking alleged uncertainty, or alleged inadequacy in the machinery available to the courts the making contractual rights effective, exert minimal attraction".
36 To like effect I note the decision of Warren J (as she then was) in Computershare Ltd v Perpetual Registrars Ltd [2000] VSC 33 at [15] as authority that the parties having agreed upon a dispute resolution procedure, should be required to deal with each other in good faith to overcome such difficulties in order to give effect to their own agreement.
37 The authorities in this field certainly indicate a bias in favour of a stay and comments indicating that the party seeking not to be held to their contract or bargain carry a heavy burden should, in my view, be given appropriate weight. However, one should be wary of elevating statements of principle to normative legal rules. Relevant principles must be considered in the light of the particular circumstances prevailing in a particular case. Nonetheless I do start from the presumption that this being a commercial transaction the parties should be held to their bargain unless the agreement fails for good and sufficient reasons and that the respondent can establish significant matters to persuade me to exercise my discretion to the contrary.
38 Despite the statements made in the decided cases, it strikes me that the applicant’s argument that places reliance on them misses the target. The point is not whether there is to be imported into the Subcontract a term of “good faith” (that obligation in any event existing in cl 39.7) to drive disparate parties to do that which they had contracted to do but rather whether in the case before me there is a sufficient prescription to provide (see cl 39.8) that:
“If the meeting does not resolve the dispute, then within a further 28 days, the parties must mediate the dispute…”
39 In WTE Co-Generation & Anor v RCR Energy Pty Ltd & Anor [2013] VSC 314 per Vickery J the contentious clause was in these terms:
“In the event the parties have not resolved the dispute then within a further 7 days a senior executive representing each of the parties must meet to attempt to resolve the dispute or to agree on methods of doing so.”
40 It was instructive as far as Vickery J was concerned that the clause required the parties meet to attempt to resolve the dispute without more which set it apart from the decision by Allsop P in United Group Rail Services Ltd v Rail Corporation of New South Wales (2009) 74 NSWLR 618 in which the clause sated that the relevant representative of each party “meet and undertake genuine and good faith negotiations with a view to resolving the dispute or difference...;”
41 As Vickery J said, the point of relevant distinction is that in United, Allsop determined what may be legitimately implied into the expression “good faith” whereas in the matter before him there were simply no relevant attempts to negotiate. His Honour commenced his examination of the issue by referring to Hooper Bailie Associated v Natcon Group Pty Ltd (1992) 28 NSWLR 194 where Giles J observed at p 206:
“What is enforced is not cooperation and consent to participation in the process from which consent might come”.
42 Einstein J in Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWC 996 reasoned at [61]-[62] that:
"It is for this reason 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 certainly were required, the dispute resolution procedure may be counter-productive as it may begin to look much like litigation itself."
43 The wording of cl 39 is different from the clause under consideration in United. However it might be well asked of the respondent given that the clause under consideration in United, the validity of which was enforced by importing “good faith” to prescribe the nature of the contemplated negotiations, is any more susceptible to attack as is the clause under consideration before me that specifies the method for resolution as one of “mediation”? Well, in my view, the question is answered in some measure by Vickery J in WTE at [41] in which after having assembled the disparate and varied threads of authorities together, His Honour said:
“To my mind, sub-clause 42.2 of the relevant Contract, which provided that ‘In the event that the parties have not resolved the dispute then [within a further 7 days] a senior executive representing each of the parties must meet to attempt to resolve the dispute or to agree on methods of doing so’, is unenforceable. [Emphasis added]."
44 Furthermore the clause under consideration by His Honour in WTE was uncertain because once the operation of the relevant subclause was triggered, the parties were required to do one of two things, either to meet to resolve the dispute, or to agree on methods of doing so. No process was prescribed to determine which option is to be pursued. This is to be contrasted with the sub clause 39.7 and 39.8 before me which separately provide:
"Senior representatives of each party (who have authority to settle the dispute) must meet within 7 days of the notice and endeavour to resolve the dispute in good faith.
If the meeting does not resolve the dispute, then within a further 28 days, the parties must mediate dispute…”
45 Clause 39 further provides that if mediation has not resulted in the resolution of the dispute within a further 28 days then the parties are free to pursue their rights at law. Unlike the clause in WTE, cl 39 does not require further agreement before the process of mediation can proceed. Nonetheless and critically relevant in my judgement is that it fails to meet the requirements identified by Einstein J in Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWC 996 for certainty in a mediation. The mediation agreement in the contract lacked provision in the clause setting out a mechanism for the appointment of the mediator's costs. His Honour considered that it was not open to the court to imply a term of the parties would jointly share the reasonable remuneration of the mediator, because the suggested implied term was not so obvious that it would go without saying see, Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337. Einstein J also referred to the decision of Giles J in Elizabeth bay Developments Pty Ltd v Boral Building Services Pty Ltd (1995) 36 NSWLR 709, 714 to the effect that apart from the express agreement in the relevant contract to negotiate in good faith, the agreement to mediate did not lay down a procedure for the mediation process other than the parties’ presence or representation, the mediator's discretion for private sessions with any party to the mediation, and the stipulation that, unless otherwise agreed, the parties would within 14 days of the agreement provide to each other and to the mediator, a short statement of issues outlined the nature of the dispute and the various matters in issue. Giles J concluded the agreement to mediate being so open-ended, was unworkable, as the “process to which the parties had committed themselves would come to an early stop when, prior to the mediation, it was asked for the parties have a sign on the question could not be answered" [715].
46 In my view it would be wrong for the Court to impose on the parties a mechanism for the conduct of mediation. The process of alternative dispute resolution may be as varied as the subject matter of the dispute. A clause such as the one before me, lacking as it does any guidance for the process to be adopted invites discord and not accord between parties to the dispute. In my opinion, cl 39.8 fails the test required for the adoption of the process of mediation to be deployed as a precondition to commencing a proceeding in this court due to its inherent uncertainty.
47 Einstein J in Aiton said that the following matters constituted the minimum requirements for a mediation or dispute resolution clause to be enforceable:
· It must be in the form described in Scott v Avery. That is, it should operate to make completion of the mediation a condition precedent to the commencement of court proceedings.
· The process established by the clause must be certain. There cannot be stages in the process were agreement is needed on some course of action before the process can proceed because if the parties cannot agree, the clause will amount to an agreement to agree it will not be enforceable due to this inherent uncertainty.
· The administrative processes for selecting a mediator and in determining the mediator's remuneration should be included in the clause and, in the event that the parties to reach agreement, a mechanism for a third party to make the selection will be necessary.
· The Clause should also set out in detail the process of mediation to be followed or incorporate these rules by reference. These rules will also need to state with particularity the mediation model that will be used.
48 Clause 39 would not pass muster and meet the minimum requirements laid down by Einstein J. But as I have already concluded it would be wrong to regard Einstein J’s list or any list or judicial statement as exhaustive of the process required to be applied or that a mechanical exercise can supplant the plain language of an agreement to divine the intention of the parties.
49 The plain language expressed by the parties is the proper starting point I have applied to the disputed clause. However, there is only so far judicial exhortations in filling the gaps of a dispute resolution clause in a commercial contract should be taken irrespective of the benefit of applying clauses robustly in order to give them their commercial effect so as to avoid them being struck down. In my view the clause is uncertain as it fails to provide any process for the conduct of the contemplated mediation once (and if) the operation of the clause is triggered. By reference to the dispute mechanism the parties are left to their own devices to both set the mediation and endeavour to resolve the dispute in light of that process.
50 No process for the method of resolving the dispute by the mediation is prescribed and so it would depend upon the parties’ further agreement as to the method to be employed. An “agreement for an agreement” as this would necessitate should fail for uncertainty.
51 Counsel for the applicant submitted that the undertaking of the mediation is a common process and familiar to commercial litigants and their lawyers. This submission is valid to an extent but in my view it is not for the court to leave parties to surmise as to a mechanism that has not been contemplated in their bargain or for the court to substitute its own mechanism where the parties have not agreed upon it in their own contractual arrangements.
52 Although not determinative of my decision, the outcome will enable effect to be given to the objects underpinning the Civil Procedure Act 2010 for the conduct and disposition of litigation.
53 Having regard to the submissions made and the evidence before the Court, the application by the defendant for a stay of the plaintiffs proceeding must be refused as cl 39.8 is unenforceable.
54 In these circumstances, and by reason of my decision, it will be necessary for the application for security for costs to be determined, that being a further and alternative relief sought in the summons. I will hear the parties on any form of order that is required in consequence of my decision and the further determination of the summons.
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