Summary
This case provides useful guidance on dispute resolution clauses and confirms that courts are willing to hold parties to their agreement to use expert determination to resolve disputes.
A dispute arose over whether Mineralogy Pty Ltd (‘Mineralogy’, the ‘Appellant’) was required to enter into third party consent deeds with financiers under the terms of a royalty deed it had with Adani Mining Pty Ltd (‘Adani’, the ‘Respondent’).
Adani referred the dispute to expert determination.
Mineralogy sought declarations there had been no valid notice of dispute and no valid appointment of an independent expert. It also sought an injunction permanently restraining the expert determination.
Mineralogy contended the dispute resolution clause (which categorised different types of disputes by reference to “technical matter”, “financial matter”, and “legal matter”) was not sufficiently wide enough to capture the dispute. This was due to the dispute being of mixed fact and law and that the dispute related to third party financiers rather than the parties.
The Court of Appeal dismissed the matter and declined to stay the expert determination finding that the dispute fell within the wide scope of the dispute resolution clause.
This case highlights the importance of precise drafting of dispute resolution clauses to capture the intended scope of disputes and is a reminder that courts will interpret and enforce such terms as agreed between the parties.
What happened?
By way of a royalty deed, Adani agreed to pay royalties to Mineralogy for mining a particular mining tenement.
Following a dispute which enlivened the dispute resolution clause (clause 8 of the deed), the Respondent referred the dispute to an independent expert in accordance with that clause.
Relevantly, clause 8.1 of the deed stated:
“The mechanisms set out in this clause 8 apply to all disputes or claims arising out of or relating to this Deed and the alleged breach, termination or claimed invalidity of this Deed (dispute).”
Clause 8.5 subsequently provided that:
“Failing resolution of the dispute by the chief executive officers (or their nominees) of the parties within 20 Business Days, either party may refer the dispute to an Independent Expert for determination”.
The Appellant applied to stay the expert determination, claiming that the dispute did not fall within the scope of the dispute resolution clause for the following reasons:
- clause 8.1 was to be narrowly interpreted by the balance of the dispute resolution clause including the categorisation of disputes into “technical matter”, “financial matter”, and “legal matter”;
- rights of third parties were involved; and
- the dispute was subject to questions of fact and law.
The primary judge dismissed the Appellant’s claim and held that, in circumstances where there is a contractually agreed position by which a dispute must be resolved via a dispute resolution clause, parties must resolve that dispute via that mechanism. Further, the court concluded by noting that, parties who have agreed to a contract must maintain and adhere to such terms. The Appellant consequently referred the matter to the Court of Appeal on the basis that the primary judge misconstrued the dispute resolution clause.
What did the Court of Appeal say?
The Court of Appeal upheld the position of the primary judge and found that the dispute (as to whether or not the Appellant was obliged to sign the consent deeds) was a dispute within the meaning of clause 8.1. The proposition that the dispute did not fall within the scope of the expert determination clause was rejected as an argument with no merit.
The Appellant’s contention that the balance of the dispute resolution clause would narrow the scope of clause 8.1 was similarly dismissed. The court held that, the purpose of the categorisation of disputes into a “technical matter”, “financial matter”, or “legal matter” provided a mechanism by which disputes would be allocated to an expert with qualifications best suited to determining such dispute and that in any event, it would be unreasonable to adopt a narrow interpretation of the clauses as clause 8.1 clearly provided that the dispute resolution process applies to “all disputes or claims arising out of or relating to this Deed”.
Further, the Court held that the dispute (including its outcome) would not impact the rights of third parties (i.e. the financiers) as the financiers were not a party to the royalty deed or dispute and it was therefore irrelevant whether the consent deeds were drafted in anticipation of being executed by a third party.
Finally, the Court found that even if the expert determination was required to determine mixed questions of fact and law, the expert determination clause was sufficiently broad enough including due to the “legal matter” category including the words “and any other matter that is not a technical matter or a financial matter”.
The Court also noted that technical or accounting experts would undoubtedly be determining questions of fact (rather than questions of law), and it could not have been the contemplation of the parties to render the whole dispute resolution procedure inappropriate in circumstances where a dispute would involve a question of fact.
The Court of Appeal ordered the appeal to be dismissed and gave effect to the appointment of the independent expert, in accordance with the dispute resolution clause in the royalty deed.
Why is this important?
This case is a reminder that courts will interpret and enforce a dispute resolution clause using the same approach of construing any other legally binding document – with a focus on the ordinary meaning of the clause and the intention of the parties.
Accordingly, it is crucial that parties carefully consider the dispute resolution mechanism (e.g. executive negotiation, mediation, arbitration, litigation and/or expert determination) which is most appropriate for the circumstances prior to entering into a contract with dispute resolution provisions, noting that once a legally binding contract is signed, courts will enforce the agreed dispute resolution procedures.
This article was written by Leighton Moon, Partner, Kevin Lock, Special Counsel and Jashrin Whitehead, Solicitor.
