In Raskin v Mediterranean Olives Estate Limited & Ors the Victorian Supreme Court (Hargrave J) was considering, among other things, whether an expert determination clause was void for uncertainty. His Honour, in considering whether the particular expert determination clause was unenforceable in this case, makes a distinction between simple and more complex cases. His Honour said:
29 The plaintiff contends that the expert determination clause is void for uncertainty. Reliance was placed upon the decision of Vickery J in WTE Co-Generation & Anor v RCR Energy Pty Ltd & Anor. In WTE Co-Generation, Vickery J considered an agreement containing a clause requiring the parties, in response to a notice of dispute served by a party, to engage in a settlement conference as a pre-condition to a party commencing a legal proceeding. The plaintiffs in that case contended that the agreement to negotiate at a settlement conference was uncertain and unenforceable. In this context, Vickery J summarised some of the legal principles relating to whether ‘dispute resolution clauses’ are enforceable. Relevantly, his Honour stated:
Dispute resolution clauses in contracts should be construed robustly to give them commercial effect. The modern approach to the construction of commercial agreements is generally to endeavour to uphold the bargain by eschewing a narrow or pedantic approach in favour of a commercially sensible construction, unless irremediable obscurity or a like fundamental flaw indicates that there is, in fact, no agreement.
Honest business people who approach a dispute about an existing contract will often be able to settle it. If business people are prepared in the exercise of their commercial judgment to constrain themselves by reference to express words that are broad and general, but which nevertheless have sensible and ascribable meaning, the task of the court is to give effect to and not to impede such solemn express contractual provisions. Uncertainty of proof does not detract from there being a real obligation with real content.
A dispute resolution clause in a contract, consistently with public policy in promoting efficient dispute resolution, especially commercial dispute resolution, requires that, where possible, enforceable content be given to contractual dispute resolution clauses.
The trend of recent authority is in favour of construing dispute resolution clauses where possible, in a way that will enable those clauses to work as the parties appear to have intended, and to be relatively slow to declare such provisions void either for uncertainty or as an attempt to oust the jurisdiction of the court.
The court does not need to see a set of rules set out in advance by which the agreement, if any, between the parties may in fact be achieved. The process need not be overly structured. However, the process from which consent might come must be sufficiently certain to be enforceable.
30 With respect, I do not accept that the emphasised sentence in paragraph 8 of Vickery J’s summary is correct as a matter of general principle. The sentence is based on the decision of Warren J (as the Chief Justice then was) in Computershare Ltd v Perpetual Registrars Ltd. That case relevantly concerned the enforceability of an agreement to negotiate in good faith (a specified objective standard) to either resolve the dispute or to agree on ….
31 It was on the basis of the particular clause in the particular contract, that her Honour held that:
In these circumstances, the Court does not need to see a set of rules [set] out in advance by which the agreement, if any, between the parties may in fact be achieved
There is no general legal principle to that effect applying to all kinds of alternative dispute resolution clauses.
34 In my opinion, care needs to be taken in applying the statements in WTE Co-Generation to cases involving expert determination clauses. That case did not involve an expert determination clause, but a requirement to engage in a settlement conference. Although there is some commonality of approach, different kinds of alternative dispute resolution clauses may involve differing approaches. The context in which the alternative dispute resolution clause appears and is intended to operate will always be a relevant factor to consider. General rules should be viewed with caution, and each case determined on its own facts. In particular, whether an expert determination clause is uncertain will depend on the context of the clause in the contract as a whole; the nature and width of the dispute or disputes which are or may be referred to the expert; and the content of the issues he or she must consider to determine the dispute.
35 The defendants also rely upon WTE Co-Generation, for the purpose of submitting that dispute resolution clauses should be construed robustly so as to give them commercial effect, and the task of the Court is to give effect to the words used by the parties. They contend that the ‘trend of recent authority is in favour of construing dispute resolution clauses, where possible, in a way that will enable those clauses to work ... and to be relatively slow to declare such provisions void ... for uncertainty ...’. Applying this approach, the defendants contend that the Court should find that:
(1) the whole of the dispute relates to the management of the project and that, accordingly, it is only necessary to refer the disputes in the statement of claim, which the defendants deny without filing a defence, to a single Independent Expert who is an independent lawyer; and
(2) if that is done, the parties and the Court can reasonably expect that the independent lawyer will provide procedural fairness, as if he or she was required to act as an arbitrator or judicially.
36 On this basis, the defendants contend that the expert determination clause is not uncertain. For the following reasons, I do not accept those contentions.
37 In a simple case, involving a single issue to be determined by an expert applying his or her own observation, knowledge and expertise in the absence of disputed facts and in the ordinary course of the expert’s practice, the essential elements of an expert determination clause may not include agreement as to the procedure the expert is to apply to the task. In such cases, the criterion specified in the expert determination clause may be sufficient. An example is an expert determination clause referring the market value of a property to an expert valuer. Agreement as to the procedure may be unnecessary in such a case.
38 Simple cases of that kind stand in sharp contrast to a case such as the present. In my opinion, reading the statement of claim as a whole, it is evident that the disputes relate to overlapping horticultural, accounting, and management and legal interpretation issues. Each of those issues may involve disputed questions of fact, law (including legal interpretation of the project constitution and other project agreements) and mixed fact and law.
39 Reading the expert determination clause in the context of the project constitution and related project documents (the leases and the management agreements), it is clear that the parties recognised that the possible range of disputes to be referred for expert determination included disputes in a variety of circumstances, involving the recognised need for differently qualified experts to determine disputes according to their nature. The definitions of ‘Independent Person’ and ‘Independent Expert’ make this intention plain. In these circumstances, there were two essential matters for the parties to agree in order for the expert determination clause to be sufficiently certain to cater for the range of possible disputes and the possibility they may overlap, as here.
40 First, agreed procedural directions to the expert. There are no such directions in the expert determination clause.
41 Second, agreement as to how disputes involving overlapping fields of expert disciplines are to be resolved. The expert determination clause does not deal with that issue. For example:
(1) What is to happen if one party refers an accounting issue to a chartered accountant and another party refers a dispute concerning a horticultural issue to a horticultural expert? Was it intended that there should be two parallel expert referrals which might conflict or lead to different outcomes? Such a course could not have been intended by commercial parties acting sensibly.
(2) What is to happen if a horticultural expert reaches a different finding on a relevant fact to that reached by a chartered accountant or an independent lawyer? Was it intended that, where there is overlap, all disputes be determined by an independent lawyer in accordance with procedural fairness?
42 In my opinion, these are essential matters which ought to have been included in the expert determination clause to make it sufficiently certain to be enforceable. Their absence makes the clause uncertain and unenforceable.