Avoiding the courts – a reminder on drafting

01 July 2024

Background

The Australian Nuclear Science and Technology Organisation (ANSTO) and Icon Si (Aust) Pty Ltd (Icon) fell out over the construction of ANSTO’s SyMo Facility at Lucas Heights. The relevant contract contained a multi-tier dispute resolution mechanism, which required the parties to first exhaust negotiation, followed by expert determination, and then arbitration.1

Sometime later, and after negotiations failed, ANSTO and Icon made some contractual amendments in a deed. The amendments included waiving the requirement (or ability) to proceed to the next tier of expert determination. Other than the amendments, the contract remained unchanged.

The way in which the waiver was drafted created ambiguity. Icon argued that pending disputes could only be referred to arbitration if certain conditions were fulfilled. These conditions, according to Icon, still depended on proceeding to expert determination. But as the parties had subsequently waived the application of expert determination, the requisite conditions were incapable of being fulfilled, rendering the arbitration clause inoperative.2

Icon was intent on proceeding in court.

By contrast, ANSTO sought to have the proceedings in court stayed, arguing that the disputes had to be resolved by arbitration. According to ANSTO, the waiver of the expert determination application was only a waiver of one of the multiple tiers, with the arbitration clause still firmly in place.

Arbitration clause – operative or inoperative?

The Supreme Court preferred ANSTO’s interpretation. The court held that dispute resolution clauses should, like any other part of a contract, be interpreted by considering the language of the parties, the circumstances known to them and the commercial purpose of the contract.3 Here the language indicated that disputes were to be dealt with under the multi-tier mechanism, meaning that any dispute not resolved by expert determination should be referred to arbitration. It was, therefore, only the expert determination tier that fell away, nothing more.

The court further held that, while the parties changed specific rights and obligations through a deed, the dispute resolution mechanism was not amended more generally. To assume the parties intended dispensing with their agreement to resolve disputes through arbitration, would be wrong. Doing so would fundamentally alter the dispute resolution mechanism in place, which is not what the parties intended.4

Had the parties intended to do away with arbitration, the deed should have included an express waiver to that effect. It did not, and the court granted ANSTO’s request to refer the disputes to arbitration, whilst staying the pending court proceedings.

Key takeaways

The decision serves as a reminder that any clause or amendment should be drafted carefully, taking care to express the intention of the parties clearly. Doing so mitigates the risk of wasting time and resources which may be better spent elsewhere. A dispute resolution clause should be no exception.

HWLE’s construction law team is well placed to provide our clients with the required assistance in this respect – whether it be through assisting you with drafting clear, effective and operative clauses or handling disputes that arise from ambiguous (or not so ambiguous) dispute resolution clauses.

This article is written by Jane Wild, Partner, Jacques Lourens, Senior Associate, and Tamanna Gambhir, Law Graduate.


1Icon Si (Aust) Pty Ltd v Australian Nuclear Science and Technology Organisation [2024] NSWSC 324 at [15].

2Icon Si (Aust) Pty Ltd v Australian Nuclear Science and Technology Organisation [2024] NSWSC 324 at [20].

3Icon Si (Aust) Pty Ltd v Australian Nuclear Science and Technology Organisation [2024] NSWSC 324 at [18].

4Icon Si (Aust) Pty Ltd v Australian Nuclear Science and Technology Organisation [2024] NSWSC 324 at [26].

Jane Wild

Partner | Sydney

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