July 15, 2020

The recent decision of the New South Wales Supreme Court in The Illawarra Community Housing Trust Limited v MP Park Lane Pty Ltd [2020] NSWSC 751 considered the scope of an expert determination clause in the context of termination.

The Illawarra Community Housing Trust (the Trust) entered into an agreement with MP Park Lane (the Developer) to construct residential apartment buildings in New South Wales (the Agreement). Clause 21 of the Agreement contained the dispute resolution regime, which provided (amongst other things) that:

  •   any dispute in connection with this Agreement must be dealt with by this clause;
  •   a notice of dispute must be given in the event of such a dispute;
  •   the parties must meet in order to resolve the dispute; and
  •   if the parties cannot resolve the dispute, either party may submit the dispute to expert determination.

The Agreement also contained ‘Critical Dates’ which the Developer was required to achieve. A dispute arose between the parties as to whether the Developer would be able to achieve the Critical Dates. The Trust sought to terminate the Agreement on the basis of various actual and anticipatory breaches, including a failure to meet the Critical Dates. The Developer issued a Notice of Dispute responding to each of the allegations in the Trust’s termination notice and asserting the Trust’s termination of the Agreement was invalid, wrongful and constituted repudiation of the Agreement. The Developer accepted the Trust’s repudiation and terminated the Agreement. Shortly thereafter, the Developer took steps to appoint an expert to determine whether the purported termination was invalid, wrongful or amounted to repudiation, and to assess the Developers claim for damages.

In response, the Trust commenced proceedings seeking a declaration that clause 21 of the Agreement:

  •   did not survive termination such that it could not be used to deal with any disputes regarding termination or repudiation, and any loss or damage arising therefrom;
  •   did not confer jurisdiction upon an expert to determine the dispute;
  •   was so uncertain as to be void and/or unenforceable; and
  •   did not require any expert referral process to be determined as a condition precedent to a party commencing court proceedings.

Ultimately, the NSW Supreme Court dismissed the Trust’s case, finding that clause 21 of the Agreement survived termination and the dispute was to be referred to expert determination. In reaching this decision, the Court:

  •   noted that clause 21 did not contain any implication that it would not survive termination of the Agreement;
  •   emphasised the need to construe commercial contracts in light of the plain language used by the parties, the purpose of the transaction and the objects the agreement was intended to secure; and
  •   found that the fact clause 21 did not prescribe a step-by-step process for an expert to follow for the purposes of an expert determination did not render the clause void or unenforceable. Rather, it was sufficient that the parties left it up to the expert to decide on the most appropriate process to follow.

This case serves as a reminder that, unless a clear intention appears otherwise, Courts are likely to enforce an expert determination regime notwithstanding termination.

A full decision can be found here.

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