Tesseract International Pty Ltd v Pascale Construction Pty Ltd - [2021] SASCA 8

SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
TESSERACT INTERNATIONAL PTY LTD v PASCALE CONSTRUCTION PTY LTD
[2021] SASCA 8
Judgment of the Court of Appeal
(The Honourable President Kelly, the Honourable Justice Doyle and the Honourable Justice Livesey)
9 March 2021

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - ILLEGAL AND VOID CONTRACTS
The appellant is a company that provides engineering consultancy services. In October 2015, it entered into a contract with the respondent building company, pursuant to which it was engaged to review tender documentation and provide an engineering design for the construction of a warehouse in conformity with that documentation. The contract consists of a standard form contract, and included dispute resolution provisions, as well as several special conditions agreed between the parties that had the effect of modifying some of the clauses of those provisions. Clauses 20 and 21 of the contract provided for conciliation and arbitration processes, respectively, while clause 22 provided that the Conciliator’s or Arbitrator’s decision will be binding on the parties.
A dispute arose between the parties, with the respondent alleging that the engineering designs prepared by the appellant were defective and that it has consequently suffered loss and damage. In correspondence, the respondent noted that clause 21 of the contract provided for the referral of any dispute between the parties to arbitration, in the event that the dispute could not be resolved by conciliation pursuant to the provisions of clause 20. By way of response, the appellant noted that its position was that it was not possible for either party to participate in the processes described in clauses 20, 21 and 22 of the contract as those clauses are void for uncertainty.
In December 2019, the appellant issued proceedings in the Supreme Court seeking relief, inter alia, in the form of a declaration that clauses 20, 21 and 22 of the contract are void for uncertainty. A Master of this Court rejected the appellant’s contentions, and subsequently made an order dismissing the proceedings.
The appellant’s appeal from the Master’s decision relies upon one ground, to the effect that the Master erred in law in failing to hold that clauses 20, 21 and 22 of the contract are void for uncertainty. The appellant contends that there is an inherent contradiction between a conciliation process and a process that is intended to be determinative and binding, and, in any event, contends that to the extent the parties intended the clause 20 conciliation process to be binding, this cannot be reconciled with the existence of the arbitration process contemplated by clause 21.
Held, per Doyle JA (Kelly P and Livesey JA agreeing), dismissing the appeal:
1. While clause 20 contemplates a process that can be described as determinative and binding, and hence not in conformity with the usual concept of a conciliation process, the use of the label ‘conciliation’ does not of itself give rise to any uncertainty. It is not the labels that the parties have used, but the substance of what they have agreed, that governs the construction task.
2. There is no difficulty or tension in the operation of clauses 20 and 21. It is clear from the structure and terms of the dispute resolution provisions that the conciliation process in clause 20 and the arbitration process in clause 21 operate as consecutive processes, with the conciliation process being determinative and binding, subject to arbitration; and the arbitration process being available if one or both parties do not accept the conciliator’s decision and wish to pursue a resolution of the dispute through arbitration.
Commercial Arbitration Act 2011 (SA), referred to.
Rinehart v Welker (2012) 95 NSWLR 221; Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196; Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Illawara Community Housing Trust Ltd v MP Park Lane Pty Ltd [2020] NSWSC 751; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; The Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429; Braude v Kaye [2013] VSC 705; Masonic Homse Ltd v Oppedisano [2016] SASC 196; Toll (FHL) Pty Ltd v Pixcar Services Pty Ltd [2007] VSC 187; Fearnley v Australian Fisheries Management Authority (2006) 94 ALD 519; Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587; Raskin v Mediterranean Olives Estate Ltd [2017] VSC 94 ; Sturt Football Club Inc v Commissioner of State Taxation [2010] SASC 279, discussed.

TESSERACT INTERNATIONAL PTY LTD v PASCALE CONSTRUCTION PTY LTD
[2021] SASCA 8

Court of Appeal: Kelly P, Doyle and Livesey JJA

KELLY P: I agree with the reasons of Doyle and Livesey JJA.
DOYLE JA: The appellant contends that the dispute resolution provisions within its contract with the respondent are void for uncertainty. For the reasons which follow, I do not accept this contention, and would dismiss the appeal.
Background
The appellant is a company that provides engineering consultancy services. In October 2015 it entered into a contract with the respondent building company, pursuant to which it was engaged to review the tender documentation, and provide an engineering design, for the construction of a warehouse in conformity with that documentation. The project related to the construction of a Bunnings Warehouse at Windsor Gardens.
The contract between the parties consists of a standard form Master Builders Association of South Australia contract, styled “Consultant – Design & Construct Plain English Contract” (December 2011 version) (the Contract). The contract price, inclusive of GST, was in the sum of $224,350.50.
The Contract included the following dispute resolution provisions:
20. DISPUTE CONCILIATION
20.1 If a dispute between the Builder and Consultant arises in connection with this Contract, then either party must deliver to the other a notice of dispute identifying and providing details of the dispute.
20.2 Whoever gives a notice of dispute must send a copy to the Master Builders Association of South Australia with $400.00 towards the cost of dispute conciliation.
20.3 The Master Builders Association’s Chief Executive Officer or delegate will be the Conciliator.
20.4 The Conciliator can;
20.4.1Refer to documents of either party
20.4.2Require the Builder and Consultant to attend any meeting
20.4.3Make any reasonable request for information or action to enable him or her to resolve the dispute.
20.5 The Conciliator can engage any consultant to advise him or her.
20.6 The dispute conciliation will go ahead speedily and without formality.
20.7 The Conciliator will properly consider the dispute and will decide on justice and fairness.
20.8 The Conciliator’s costs (including the cost of any consultant) will be paid equally by the parties.
20.9 Both the Builder and Consultant will pay their own costs associated with dispute conciliation.
20.10 The Conciliator can order that costs be paid differently from clauses 20.8 and 20.9 but only if there are special reasons.
20.11 Neither the Builder nor Consultant may be represented by a lawyer for dispute conciliation.
21.ARBITRATION
21.1 If the dispute is not resolved by dispute conciliation either party may refer the dispute to arbitration by notifying in writing the other party.
21.2 Whoever gives notice of their intention to refer the dispute to arbitration must give a copy of the notice to the Master Builders Association of South Australia with $400.00 towards the cost of arbitration.
21.3 The $400.00 is extra to the $400.00 mentioned in clause 20.2.
21.4 The Chief Executive Officer of the Master Builders Association of South Australia will appoint an Arbitrator.
21.5 The appointed Arbitrator must be a member of the Institute of Arbitrators.
21.6 The Arbitrator will notify both the Builder and the Consultant of their appointment.
21.7 The Arbitrator will decide who will pay the costs of arbitration.
21.8 Lawyers can be involved if the dispute involves more than $25,000.00 or such other amount stipulated by the Commercial Arbitration Act.
22.RULES APPLYING TO DISPUTE CONCILIATION AND ARBITRATION
22.1 At any time, the Conciliator or Arbitrator may:
22.1.1Require any money in dispute to be paid into the Master Builders Association trust account.
22.1.1.1Require that money towards the costs be paid into the Master Builders Association trust account.
22.1.1.2Direct how money in the trust account is to be paid.
22.2 Except as required by this Contract, the Conciliator or Arbitrator may handle the dispute as he or she wishes.
22.3 The Builder and Consultant must comply with the directions of the Conciliator or Arbitrator.
22.4 The Conciliator’s or Arbitrator’s decision will be in writing.
22.5 The written decision must state the issues in dispute and their decision on them.
22.6 The decision will be binding on the Builder and Consultant.
22.7 The Builder and Consultant release the conciliator and arbitrator from any costs or loss resulting from the dispute conciliation or arbitration.
The Contract also included several special conditions agreed between the parties. These included the following conditions that had the effect of modifying some of the clauses of the dispute resolution provisions within the Contract:
20. Dispute Conciliation
After 20.1 add the following paragraph:
“Within 14 days after receiving a notice of dispute, the parties shall confer at least once to resolve the dispute or to agree on methods of doing so. At every such conference each party shall be represented by a person having authority to agree to such resolution or methods. All aspects of every such conference except the fact of occurrence shall be privileged.”
In line 1 of item 20.2, delete the words “whoever gives a notice of dispute” add “If the dispute has not been resolved within 28 days of service of the notice of dispute then the party who raised the dispute”
A dispute arose between the parties, with the respondent alleging that the engineering designs prepared by the appellant were defective and that it has suffered loss and damage as a result of those defects. The material before the primary judge included a draft points of claim, prepared by the solicitors for the respondent, for use in a contemplated arbitration. The points of claim allege that the respondent builder became liable to Bunnings in respect of liquidated damages and other breach of contract and related claims. It says that, as a result of the appellant engineer’s breaches of duty, it has suffered an estimated loss of $8,410,000.
It is also apparent from the material before the primary judge that the parties conducted a mediation, but that it was unsuccessful.
By letter dated 7 November 2019 from the respondent’s solicitors to the appellant (and copied to the appellant’s solicitors), the respondent served what it described as a Notice of Dispute in accordance with clause 20 of the Contract. The letter stated that clause 21 of the Contract provided for the referral of any dispute between the parties to arbitration, in the event the dispute could not be resolved by conciliation pursuant to the provisions of clause 20. However, the letter went on to note that the respondent was prepared, for the reasons which were then set out, to dispense with the provisions of clauses 20.2 to 20.11. It requested that the appellant advise within seven days whether it agreed to dispense with the conciliation process. The letter concluded by referring to an enclosed draft points of claim which, if the matter could not be resolved, the respondent would rely on at arbitration.
The appellant responded by letter from its solicitors dated 25 November 2019. The letter noted that the appellant’s position was that it was not possible for either party to participate in the processes described in clauses 20, 21 and 22 of the Contract as those clauses are void for uncertainty and/or constitute an impermissible attempt to oust the jurisdiction of the Court.
In subsequent correspondence, the respondent took issue with the appellant’s position, and advanced submissions in support of the validity of the dispute resolution provisions in clauses 20, 21 and 22 in similar terms to the submissions it ultimately advanced before the primary judge and in this Court.
In December 2019, the appellant issued proceedings in the Supreme Court seeking relief in the form of:
·a declaration that clauses 20, 21 and 22 of the Contract are void for uncertainty and/or constitute an impermissible ouster of the Court’s jurisdiction; and
·an order restraining the respondent from taking any steps or otherwise proceeding with the dispute resolution procedure in clauses 20, 21 and 22 of the Contract.
In his reasons for judgment dated 18 August 2020, a Master of this Court rejected the appellant’s contentions to the effect that the dispute resolution provisions were void for uncertainty, or constituted an impermissible ouster of the Court’s jurisdiction. The Master subsequently made an order dismissing the proceedings.
The appellant’s appeal from the Master’s decision initially relied upon two grounds, which were to the effect that the Master erred in law in failing to hold that clauses 20, 21 and 22 of the Contract are void for uncertainty, or in the alternative, that they involve an impermissible ouster of the Court’s jurisdiction. The second of these two grounds was abandoned in oral argument and so does not need to be addressed.
General principles governing the construction of dispute resolution clauses
It is appropriate to commence by summarising the general principles governing the construction of dispute resolution clauses, and the circumstances in which a dispute resolution regime provided for by the parties might be void for uncertainty.
The starting point is that the approach to be adopted in construing a dispute resolution clause is the same as that which governs the construction of other contractual clauses.[1] The Court is required to construe the terms of the contract objectively, by reference to its text, context and purpose, and by reference to what a reasonable businessperson would understand the relevant words to mean.[2] As an aspect of the former, the words used by the parties are to be construed in the context of their agreement as a whole, and not in isolation.[3] And as an aspect of the latter, commercial contracts are to be construed so as to avoid making commercial nonsense or working commercial inconvenience.[4]
[1]     Rinehart v Welker (2012) 95 NSWLR 221 at [115]; Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196 at [54], [64]-[65], [119]; Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155 at [78]-[80].
[2]     Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[47]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22].
[3]     Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196 at [57]; Illawara Community Housing Trust Ltd v MP Park Lane Pty Ltd [2020] NSWSC 751 at [44]; Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155 at [83].
[4]     Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [52].
While the ordinary principles governing the construction of contracts apply, the authorities nevertheless support a liberal approach to the construction of dispute resolution clauses, at least in the context of determining the scope of operation of those clauses.[5]
[5] Rinehart v Welker (2012) 95 NSWLR 221 at [117]-[120]; Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155 at [85]-[93].
Turning to the related issue of when the Court might conclude that the dispute resolution provisions within a contract are void for uncertainty, the usual principles are again applicable. In short, they will not be void for uncertainty merely because the words used by the parties admit of more than one possible meaning. They will only be void if the words used are so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention. As Barwick CJ explained in The Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd:[6]
But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co. Ltd. v. Arcos Ltd. ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G.) & Nephew Ltd. v. Ouston is not "so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention", the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved.
[6] The Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 436-437 (citations omitted).
This passage from the reasons of Barwick CJ has been cited with approval and applied in numerous subsequent decisions, including the relatively recent decision of Kyrou J in Braude v Kaye.[7] In that case, his Honour summarised the principles in the following terms:[8]
[7] Braude v Kaye [2013] VSC 705.
[8] Braude v Kaye [2013] VSC 705 at [320]-[325] (citations omitted).
The legal principles for determining whether a contract is void for uncertainty can be summarised as follows.
The language used in a contract must be “certain in the sense that it provides a criterion by reference to which the rights of the parties may ultimately and logically be worked out, if not by the parties then by the courts.” A contract may be void for uncertainty where it is devoid of any meaning or where various meanings are open and it is impossible to say which one of them was intended.
A contractual provision will not be void for uncertainty merely because its language may admit more than one possible meaning or because, when construed, the application of the provision may produce more than one result. Rather, a provision will be uncertain only where “the language used [by the parties] was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention.”
Provided that the provision is susceptible of a meaning, it will ultimately bear the meaning that is determined by the court upon the proper application of the principles of construction.
Once the court is satisfied that the parties intended to make a contract, it will endeavour to give effect to that intention by overcoming, if possible, any difficulties of construction that may arise. The language used by the parties is to be interpreted fairly and broadly, and not narrowly or pedantically, especially in the context of commercial arrangements. As Lord Wright said in G Scammell & Nephew Ltd v Ouston:
The court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract.
The Federal Court has emphasised that the common law of contract has evolved to consist of a blend of technical rules and requirements, infused ‘with a sense of commercial practicality.’ As such, once the parties engage in commercial relations, the common law ‘has striven to develop a realistic legal framework to uphold and enforce bargains.’ However, the court must not rewrite a contract, and will not uphold a contract when the parties have failed to agree upon the content of essential terms.

In Masonic Homes Ltd v Oppedisano[9] I made reference to what I consider to be the modern trend in this context towards upholding, and giving effect to, commercial bargains:[10]
The courts have in the past sometimes taken a strict approach to the issue of uncertainty. However, in more modern times the balance has tended to favour a more flexible approach, with the courts generally striving to uphold commercial bargains. Reflecting the business-like approach to the interpretation of commercial contracts, the courts will construe the terms of an agreement with an inclination to give effect to the intention of the parties, even if that intention has been obscurely expressed.
[9] Masonic Homes Ltd v Oppedisano [2016] SASC 196.
[10] Masonic Homes Ltd v Oppedisano [2016] SASC 196 at [55] (citations omitted).
There is no issue between the parties as to the principles applicable to the resolution of the issue the subject of this appeal. They are agreed that they are as summarised in the authorities to which I have referred. The only issue between the parties is as to their application to the dispute resolution provisions in clauses 20, 21 and 22 of their Contract, and in particular whether the Court can appropriately discern the meaning intended by the parties. The appellant contends that the Court cannot do so, and that to do so in the manner contended for by the respondent would be for the Court to engage in an impermissible rewriting of the parties’ Contract.
Are the dispute resolution provisions void for uncertainty?
As set out earlier in these reasons, clauses 20, 21 and 22 of the Contract contain the dispute resolution provisions agreed to by the parties in the present case.
Those clauses form part of a standard form agreement apparently in use throughout South Australia. In the present case, it is apparent from the fact that the parties agreed to a special condition that altered the operation of the dispute resolution provisions, albeit in only a minor way, that the parties gave some attention to the existence and content of those provisions, and intended to be bound by them.
To the extent these are relevant considerations to the issue with which this appeal is concerned, I do not think they do more than underscore the appropriateness of the courts’ general approach of endeavouring to give meaning and effect the parties’ agreement.
In contending that it is not possible to discern what the parties intended to agree through clauses 20, 21 and 22, the appellant focussed upon clause 20 and the references to the ‘conciliation’ process being a determinative and binding process. The appellant contends that there is an inherent contradiction between a conciliation process and a process that is intended to be determinative and binding. Further, and in any event, the appellant contends that to the extent the parties intended the clause 20 process to be binding, this cannot be reconciled with the existence of the arbitration process contemplated by clause 21. The clause 21 arbitration process is expressed as operating “[i]f the dispute is not resolved by dispute conciliation” (clause 21.1). But, on the appellant’s argument, if the clause 20 conciliation process is intended to be determinative and binding, then there would be no occasion for arbitration. Put another way, there is an inherent uncertainty that arises from the parties’ Contract providing for two separate mechanisms for binding determinations of the one dispute.
I accept that in ordinary legal parlance, a reference to conciliation typically connotes a consensual process of dispute resolution involving the use of a third party to facilitate and assist the parties to reach a resolution of their dispute. While it may result in an agreed outcome that is determinative and binding, it is not a process that would ordinarily be described as having these features. The role of the conciliator is typically one of facilitating and assisting the parties to resolve their dispute; not one of deciding or determining the outcome of that dispute for them. I accept that the following, taken from the website of the Australian Disputes Centre, is a convenient summary of the process ordinarily contemplated by the label ‘conciliation’:
Conciliation is a process in which the parties to a dispute, with the assistance of a dispute resolution practitioner (the conciliator), identify the issues in dispute, develop options, consider alternatives and endeavour to reach an agreement. The conciliator may have an advisory role on the content of the dispute or the outcome of its resolution, but not a determinative role. The conciliator may advise on or determine the process of conciliation whereby resolution is attempted, and may make suggestions for terms of settlement, give expert advice on likely settlement terms, and may actively encourage the participants to reach an agreement.
For reasons I will explain below, I accept that clause 20 contemplates a process that can be described as determinative and binding, and hence not in conformity with the usual concept of a conciliation process. As the parties acknowledged during the course of oral argument, clause 20 contemplates a process that is in substance more akin to what might ordinarily be described as an expert determination. However, even accepting this to be the case, I do not think the use of the label of ‘conciliation’ in the drafting of clause 20 of itself gives rise to any uncertainty. Not only is the notion of conciliation relatively broad and elastic, but more fundamentally I do not think it much matters what labels the parties have chosen to describe the process prescribed by clause 20. While the use of the labels ‘conciliation’ and ‘conciliator’ may inform the construction exercise to some extent, the ultimate issue is what process, if any, the parties have agreed to by their use of the words in clause 20.
As the Master said, in rejecting this aspect of the appellant’s contentions:
The first issue I have with the propositions put by the applicant is that they suffer from a degree of artificiality. [They involve] asserting that there is a paradigm for a conciliation process and the provisions of clauses 20 and 22 are inconsistent with that paradigm and, for that reason, uncertain. The difficulty with that proposition is that the parties are at liberty to agree a process for conciliation. They did so. The fact that the conciliation process that they agreed to may be different from other conciliation processes does not of itself make the clauses uncertain. It is simply what the parties agreed.
In other words, it is not the labels that the parties have used, but rather the substance of what they have agreed, that governs the construction task.[11]
[11] Toll (FHL) Pty Ltd v Pixcar Services Pty Ltd [2007] VSC 187 at [38]; Sturt Football Club Inc v Commissioner of State Taxation [2010] SASC 279 at [46]; Fearnley v Australian Fisheries Management Authority (2006) 94 ALD 519 at [27].
Turning to the more general challenge mounted by the appellant to the certainty of the dispute resolution provisions, I accept that the drafting is less than ideal. However, it is at least clear that the parties intended to agree two separate and distinct processes in clauses 20 and 21.
Before describing and comparing these two processes, I should for completeness note that by reason of the special conditions agreed to by the parties, and in particular the addition they made through those conditions to clause 20.1, the conciliation process is to be preceded by the parties conferring at least once in an attempt to resolve their dispute or at least agree on a method of doing so.
As to the balance of clause 20, the process it contemplates, which is referred to as conciliation, is to be overseen by a conciliator (being the chief executive officer of the Master Builders Association, or his or her delegate (clause 20.3)). The conciliator is to have the ability to access documents or information (clauses 20.4.1 and 20.4.3), engage consultants to advise him or her (clause 20.5) and require the parties to attend meetings (clause 20.4.2). The process is to “go ahead speedily and without formality” (clause 20.6), with the conciliator to “decide on justice and fairness” (clause 20.7). Neither party is to be represented by a lawyer (clause 20.11). The parties are required to pay their own costs (clause 20.9), and to share the costs of the conciliator (clause 20.8), unless there are special reasons for the conciliator to order otherwise (clause 20.10).
By way of contrast, the process contemplated by clause 21, referred to as arbitration, is to be overseen by an arbitrator, who is to be appointed by the Chief Executive Officer of the Master Builders Association (clause 21.4) and be a member of the Institute of Arbitrators (clause 21.5). The parties are entitled to be represented by lawyers if the dispute involves more than $25,000 (or such other amount as stipulated by the Commercial Arbitration Act 2011 (SA)) (clause 21.8). The arbitrator is to decide who pays the costs of the arbitration (clause 21.7).
Clause 22 contains various provisions which apply to both the conciliation and arbitration processes, being provisions to the effect that both the conciliator and arbitrator “may handle the dispute as he or she wishes” (clause 22.2); that the parties must comply with their directions (clause 22.3); and that the decision of the conciliator / arbitrator will be in writing (clause 22.4), state the issues in dispute and their decision on those issues (clause 22.5) and be binding on the parties (clause 22.6).
It is apparent from the above summary that the conciliation process is intended to be a relatively more informal and efficient process. This flows from the provisions that require that the process “go ahead speedily and without formality”, and consistently with this, prevent the involvement of lawyers in that process and assume that the parties will generally bear their own costs. The arbitration process contemplated by the parties appears to be a typical commercial arbitration, governed by the Commercial Arbitration Act. While such a process might ordinarily be expected to be less formal and expensive than court proceedings, the Contract assumes a process with a greater level of formality and expense than the conciliation process.
It is clear that the parties intended that the arbitration process be determinative and binding (subject to the courts’ usual supervisory role). Further, despite the conciliation process being intended as a more informal and efficient process, it is apparent that the parties also intended that that process be determinative and binding (again, subject to the courts’ usual supervisory role). The intention that the conciliation process be determinative and binding is apparent from the requirement that the parties crystallise their dispute in a notice of dispute (clause 20.1); that the conciliator “decide [the dispute] on justice and fairness” (clause 20.7); and that the decision of the conciliator be in writing (clause 22.4), state the issues in dispute and their decision on those issues (clause 22.5) and be binding on the parties (clause 22.6).
The terms in which the dispute resolution provisions in the Contract have been drafted suggest that the two processes are intended to be consecutive processes rather than alternative processes. That is, they are intended to provide that, in the event that the parties have not been able to resolve their dispute through the conference(s) contemplated by clause 20.1,[12] the parties will first attempt to resolve their dispute through conciliation before then moving to arbitration. This sequence is indicated not only by the ordering of the provisions in the Contract (that is, clause 20 conciliation followed by clause 21 arbitration), and the logic of the more informal process being followed by the more formal process, but also the terms of those provisions. The clause 20 conciliation process applies when the dispute “arises”, and requires the delivery of “a notice of dispute identifying and providing details of the dispute” (clause 20.1). The clause 21 arbitration process applies “[i]f the dispute is not resolved by dispute conciliation” (clause 21.1).
[12] As varied by the special conditions to the Contract.
There is no inherent difficulty with having two consecutive processes for dispute resolution within a single contract. As Bell P recently observed in Inghams Enterprises Pty Ltd v Hannigan,[13] “[d]ispute resolution clauses may be crafted and drafted in an almost infinite variety of ways and styles.” As his Honour went on to explain, and illustrate through examples, not only may they be short form or more elaborate, and standard form or bespoke, but also they may be multi-tiered, providing first for some more informal process before providing for arbitral or judicial resolution.[14]
[13] Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196 at [48].
[14] Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196 at [49].
That said, there is, at first blush, a potential difficulty or tension inherent in having two consecutive dispute resolution processes, both of which are intended to be determinative and binding. Such an arrangement might be said to give rise to the prospect of two binding determinations in respect of the one dispute. Put another way, and as the appellant asks rhetorically, once the parties have undergone conciliation, and have received a determinative and binding decision in writing from the conciliator, what role is there left for arbitration?
In my view, this difficulty or tension is to be resolved by having regard to the sense in which, and extent to which, the parties intended that the conciliation process in clause 20 be binding. I consider it to be tolerably clear from the structure and terms of the dispute resolution provisions that the conciliation process in that clause is intended to be binding, subject to arbitration. In other words, if the parties choose to accept the decision of the conciliator, and hence choose not to continue their dispute, then that decision will be determinative and binding upon them. However, the parties are given a contractual entitlement, if they are not prepared to accept the decision of the conciliator, to instead continue to pursue their dispute through an arbitration process. In my view, this is what is contemplated by the introductory words to clause 21.1 (“[i]f the dispute is not resolved by dispute conciliation either party may refer the dispute to arbitration”). In other words, if, by reason of one or both parties not being prepared to accept the conciliation outcome and wishing to continue to pursue the dispute through arbitration, the dispute is not resolved by the conciliation determination, then the dispute will be resolved through arbitration.
Understood in this way, there is no difficulty or tension in the operation of clauses 20 and 21. They operate as consecutive processes, with the conciliation process being determinative and binding, subject to arbitration; and the arbitration process being available in the event that one or both parties do not accept the decision of the conciliator and wish to continue to pursue a resolution of the dispute through arbitration.[15]
[15] I leave open the possibility, adverted to by the respondent in its correspondence, that the parties might agree between themselves to bypass the conciliation process.
There is nothing incongruous or uncommercial about construing the dispute resolution provisions in this way. To the contrary, and while I accept that the drafting is less than ideal, construing clauses 20, 21 and 22 in this way not only conforms with the terms and structure of the dispute resolution provisions in the Contract, but also gives effect to the courts’ general approach in this area of striving to give contractual effect and force to the parties’ bargain.
The appellant contends that to construe the references to the conciliation process being “binding” in this limited way would be to impermissibly distort the notion of a binding process, and to give it a meaning that is contrary to its accepted legal meaning. I do not agree. Just as the outcome of a trial before a court can be described as binding even though it is subject to appeal (should a dissatisfied party choose to exercise its right to appeal), so too can the outcome of a conciliation or expert determination process be described as binding even though it is subject to arbitration (should a dissatisfied party choose to exercise its right to arbitrate).
In this respect, I mentioned earlier that the authorities recognise that contracts may contain multi-tiered processes for dispute resolution. The illustrations of such processes referred to in the cases to which this Court was directed include examples of processes that contemplate an expert determination that is binding unless and until one of the parties decides to exercise its further right to arbitrate.
For example, in Savcor Pty Ltd v State of New South Wales,[16] Barrett J considered what he described as “a staged system of review of disputes arising from claims by the contractor” within clause 46 of the relevant contract.[17] The system of review contemplated by clause 46 included a process of expert determination followed by a right of arbitration. His Honour described it in the following terms:[18]
The structure of cl 46 in relation to claims by the contractor is such that, once dispute resolution attempts based on negotiation and the superintendent have been exhausted, there will be, in the first instance, a determination by an expert. Such a determination is the first step where the claim is a claim by the principal. Whether the claim originates with the principal or with the contractor, there can never be arbitration under cl 46.7 unless there has first been resort to expert determination. The expert determination may or may not be final and binding. It will not be final and binding if the expert’s decision is that one party must pay to the other a sum exceeding $500,000 (excluding interest and costs). Otherwise it will be final and binding. Where the expert’s determination is not final and binding, either party may require the dispute to be referred to arbitration.
[16] Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587.
[17] Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587 at [12].
[18] Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587 at [20].
The clause in question plainly contemplated that the expert determination be final and binding in the event that the determination was either not able to be challenged through arbitration (being for a sum of less than $500,000), or the parties otherwise chose not to do so. Barrett J saw nothing incongruous about the contract contemplating a referral of the parties’ dispute to arbitration, despite it having already been the subject of a determination by an expert. His Honour saw nothing incongruous about rights to arbitration being predicated upon the existence of an earlier determination with which at least one of the parties is dissatisfied. His Honour added:[19]
This view is, I think, consistent with the approach taken by the House of Lords in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. Lord Mustill (at 353), with whom Lord Keith of Kinkel, Lord Goff of Chieveley, Lord Jauncey of Tullichettle and Lord Browne-Wilkinson agreed, there described a two-tiered resolution process similar to that now under consideration as “an agreement to submit such differences to resolution by a panel of experts, the arbitrators providing no more than a contingent form of appeal …”.
[19] Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587 at [26].
I mention this example only to emphasise what I consider to be the commercial workability of a dispute resolution process that contemplates consecutive determinations of the one dispute, with the binding effect of the former being subject to the parties invoking the latter. Not only may a multi-tiered process be commercially workable, but it may also reflect a commercially sensible approach to dispute resolution where, as here, the stages involve an escalation from a process with a focus upon informality and efficiency to a process that is more formal and quasi-judicial in nature.[20]
[20] See Illawara Community Housing Trust Ltd v MP Park Lane [2020] NSWSC 751 at [60]-[62] (cited in Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155 at [94]) for a recent summary of some of the differences between the character of expert determinations and arbitrations.

I also mention, although only to distinguish, the decision of Hargrave J in Raskin v Mediterranean Olives Estate Ltd.[21] The appellant relied upon this decision as an illustration of the courts’ preparedness to find a dispute resolution clause void for uncertainty on account of it providing for multiple binding determinations. His Honour found the clause in that case void for uncertainty because it made provision for agricultural disputes to go to a horticultural expert, disputes relating to management of the project or the legal interpretation of the parties’ agreement to go to an independent lawyer, and for disputes of a financial or accounting nature to go to an independent accountant, without providing any mechanism for preventing or resolving any overlap. In the absence of any such mechanism there was the prospect of conflicting outcomes. In my view, that can be contrasted with the present case where, upon the construction I have adopted, there is no difficulty in reconciling outcomes. They are to be reconciled by appreciating that the outcome of the conciliation process is intended to be binding, but subject to the parties’ rights to proceed to arbitration if dissatisfied.
[21] Raskin v Mediterranean Olives Estate Ltd [2017] VSC 94.
I acknowledge that the construction of the dispute resolution provisions that I have adopted differs from that which the Master appears to have adopted. To the extent that his Honour’s reasons may be read as preferring a construction of those provisions that confined the binding effect of the conciliation process to any orders for costs made by the conciliator, I do not think it matters. The appellant was on notice of the construction contended for by the respondent upon the appeal, and which I have adopted, and did not suggest that there was any procedural reason why the Court could not proceed to give effect to that construction if it considered it legally appropriate to do so.
Finally, I add that because I have accepted the respondent’s primary contention as to the proper construction of the dispute resolution provisions, I do not consider it necessary to address its submissions as to the mechanisms available to courts, in appropriate cases, to rescue dispute resolution clauses from a finding that they are void for uncertainty by reading down or severing the offending aspects of those provisions.
Conclusion
For the reasons set out, I would dismiss the appeal.
LIVESEY JA:
I agree with Doyle JA.
I agree that the appeal must be dismissed.
In this case, the appellant contends that because the operation of clauses 20, 21 and 22 is uncertain, it follows that those parts of the agreement are void for uncertainty. That problem arises, the appellant says, because the “dispute conciliation” provisions operate as an expert determination, culminating in a conciliator’s decision which is in writing and binding on the parties.[22]
[22] See clauses 22.4 and 22.6.
Because dispute conciliation inevitably results in a binding written decision, the appellant says there is no scope for a subsequent reference to arbitration. The dispute conciliator will necessarily have resolved the dispute. In those circumstances, there is no scope for the operation of clause 21.1:
If the dispute is not resolved by dispute conciliation either party may refer the dispute to arbitration by notifying in writing the other party.
In addition, the appellant says that there cannot be two binding dispute resolution processes: conciliation and arbitration. The agreement does not explain how these are to operate or how they can be reconciled. For example, are they alternatives? If so, how is a choice made? It is because of uncertainties such as these that the appellant maintains that it may ignore these processes and litigate in the usual way before a court.
In my opinion, this is a good example of a poorly drafted agreement which, nevertheless, is capable of being given a business-like interpretation so as to produce a commercially sensible result.[23] The court is reluctant to find that an agreement is void for uncertainty and will only do so as a last resort.[24] This may be regarded as a corollary of the “strong bias” which favours holding parties to their bargain.[25] Parties will be held to their bargain unless the relevant provisions are “so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention”.[26]
[23] Electricity Generation Corporation v Woodside Energy (2014) 251 CLR 640, [35] (French CJ, Hayne, Crennan and Kiefel JJ).
[24] Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429, 436-437 (Barwick CJ); Brown v Gould [1972] Ch 53, 61-62 (Megarry J).
[25] Huddart Parker Ltd v Ship Mill Hill (1950) 81 CLR 502, 508-509 (Dixon J).
[26] G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251, 268 (Lord Wright).
When ascertaining the intention of the parties, undertaking a process of construction, “no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements”.[27] In an appropriate case that may warrant taking a liberal construction to the ordinary meaning of the words used.[28]
[27] Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429, 436-437 (Barwick CJ), see also Masonic Homes Ltd v Oppedisano & Platinum Property Retirement Pty Ltd [2016] SASC 196, [55] (Doyle J).
[28] Rinehart v Welker (2012) 95 NSWLR 221, [117]-[120] (Bathurst CJ). See also Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45, [164] (Allsop J), Nearmap Ltd v Spookfish Pty Ltd [2014] NSWSC 1790, [67] (Bergin CJ in Eq) and Lepcanfin Pty Ltd v Lepfin Pty Ltd [2020] NSWCA 155, [85]-[89] (Bell P).
In this case the critical question of construction concerns the meaning and operation of clause 21.1, earlier set out.
In my opinion, the words “the dispute is not resolved by dispute conciliation either party may refer” mean that the dispute conciliation decision, though ostensibly binding, is subject to the right of either party to refer the dispute to arbitration. That requires that a broad meaning be given to the word “resolved” in clause 21.1. That approach is supported, I think, by the following features of this agreement:
1.The parties negotiated a standard form agreement and explicitly agreed by the special conditions to incorporate an obligation to confer before they could refer their dispute to “dispute conciliation”.
2.The process of “dispute conciliation” is, as was agreed on the hearing of this appeal, effectively a form of expert determination. Though expert determination does not sit easily with what is usually regarded as “conciliation”, the “label” applied to the process is not determinative.[29]
3.The process of arbitration under the Commercial Arbitration Act 2011 (SA) is intended to follow “dispute conciliation”. That is the clear effect of clause 21.1. In context, arbitration operates as a “contingent form of appeal”.[30]
4.Therefore, and in broad terms, the alternative dispute resolution mechanisms employed by the parties in this case can be said to be both “bespoke”[31] and “multi-tiered”.[32] I say “bespoke” because the parties have in this case amended their standard form agreement so as to introduce an initial tier to what is ultimately a three-tiered dispute resolution process. The parties must first confer before they engage the assistance of a “dispute conciliator” and before arbitration can be considered.
5.It is, I think, noteworthy that each tier represents something of an escalation in the time and expense required of the parties. Each of conferral (or perhaps mediation) and conciliation appears to be comparatively informal and expeditious. Whilst conciliation cannot involve lawyers, arbitration may only involve lawyers where the dispute involves more than $25,000.00 “or such other amount stipulated by the Commercial Arbitration Act”.[33]
6.In circumstances where the parties have clearly considered and agreed to a three-tiered dispute resolution process, and notwithstanding drafting infelicities (particularly the use of the word “resolved” in clause 21.1), this Court should be slow indeed to find that the alternative dispute resolution mechanism agreed by these parties is “nugatory or ineffective”.[34]
[29] Toll (FHL) Pty Ltd v Prixcar Services [2007] VSC 187, [38] (Hollingworth J); Sturt Football Club Inc v Commissioner of State Taxation [2010] SASC 279, [46] (White J).
[30] Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, 353 (Lord Mustill), cited in Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587, [26] (Barrett J), another case of expert determination followed by arbitration.
[31] Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196, [49] (Bell P).
[32] Electra Air Conditioning BV v Seeley International Pty Ltd [2008] FCAFC 169; Inghams Enterprises Pty Ltd v Hannigan 379 ALR 196, [49] (Bell P).
[33] See clause 21.8
[34] Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402, 411 (Lockhart and Hill JJ).
Respectfully, it would be both “commercial nonsense” and result in a “commercial inconvenience”[35] to find that this agreement cannot be given a business-like interpretation as the result of a process of construction rather than judicial drafting:[36]
At the present day, in cases where the parties have agreed on an arbitration or valuation clause in wide enough terms, the Courts accord full weight to their manifest intention to create continuing legal relations. Arguments invoking alleged uncertainty, or alleged inadequacy in the machinery available to the Courts for making contractual rights effective, exert minimal attraction.
[35] Electricity Generation Corporation v Woodside Energy (2014) 251 CLR 640, [35] (French CJ, Hayne, Crennan and Kiefel JJ).
[36] Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd’s Rep 205, 210 (Sir Robin Cooke), cited in Australia Pacific Airports (Melbourne) Pty Ltd v Nuance Group (Australia) Pty Ltd [2005] VSCA 133, [50] (Nettle JA).
When these provisions are read as a whole, the parties clearly intended that the processes of conferral and conciliation would be subject, ultimately, to arbitration. Though both the conciliation and arbitration processes are binding,[37] the prima facie binding effect of the conciliator’s decision is here made subject to arbitration.
[37] And, in this respect, I respectfully disagree with the Master’s conclusion that the conciliation process is not binding, cf paragraph 22 of his Honour’s reasons.