In Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd, the Victorian Court of Appeal was considering the dispute resolution provisions under a Project Agreement for the design, construction, and operation of a biosciences research facility at Latrobe University. The parties were arguing as to the correct dispute resolution procedure under the Project Agreement in respect of three extension of time claims. At trial, the Supreme Court (Croft J) had referred to a number of Australian authorities, noted that the position is entirely dependent upon the proper construction of the relevant agreement, and decided that the particular disputes, under this agreement, were to be resolved by the “Accelerated Dispute Resolution Procedures”, essentially an expert determination procedure.

In the primary judgment, Garde AJA reasoned as follows:

Despite the arguments of the appellant, I am of the opinion that the construction of cl 26.16 adopted by the trial judge is correct.

As to the construction of cl 26.16, I note: 

(a)             the Project Agreement is the sole and exclusive repository of the agreement between the parties;

(b)             the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the language of the Project Agreement to create. The language of cl 26.16 and of cls 51 to 53 should be given its natural and ordinary meaning in the light of the Project Agreement as a whole;

(c)              clause 26.16 is expressed to apply to ‘any dispute about an extension of time claim’[1] or ‘acceleration under this cl 26’.  The use of the word ‘any’ suggests a comprehensive approach to the class of disputes identified in the provision;

(d)             clause 26.16 stands to be read as part of cl 26, and as part of the whole Project Agreement.  Clause 26 is a code dealing with ‘Time’.  Clause 26.16 is the provision in that code which describes how extension of time disputes are to be resolved.  Parts of that code involved the submission of Change Notices,[2] the grant of extensions of time by the Project Director,[3] and the unilateral extension of time by the respondent in its absolute discretion when it considers that any act or omission by it or certain other parties will, or is likely to, delay the appellant;[4]

(e)              clause 26.16 refers to any dispute about any extension of time or acceleration under cl 26.6 expressly including determinations or rejections by the Project Director under cl 26.9.  Decisions of the Project Director under cl 26.9 are well suited for ‘fast track’ determination by an Independent Expert;

(f)               the matrix of facts mutually known to the parties includes the background, object, context and commercial purpose of the Project Agreement, including the nature of claims and disputes as to extensions of time and acceleration, the significance of cl 26 and its provisions relating to time, and the role of the Project Director in seeking to resolve extension of time and acceleration disputes;

(g)             the right to refer a dispute under cl 26.16 is conferred on either party. As the word ‘may’ indicates, it is not obligatory for either party to refer a dispute but if neither party does so, the status quo will remain. Typically, although not invariably, the status quo will be the decision made by the Project Director under cl 26.9.  The use of the word ‘may’ in cl 26.16 gives either party a choice as to whether or not it seeks to invoke these provisions.  Such a construction is reasonable, and consistent with business efficacy;

(h)             the use of the word ‘may’ attracts a prima facie presumption that the word is to be understood in its natural meaning, that sense being permissive or facultative only.[5]  This is also the ordinary meaning of the word ‘may’ read in the light of the Project Agreement as a whole;

(i)               whilst the appellant contends that the exercise of cl 26.16 by one party requires the consent of the other party before the dispute is referred to the Independent Expert under cl 52, there is nothing in cl 26.16 which supports such a limitation on the operation of the right of each party to have the dispute determined under the Accelerated Dispute Resolution Procedures.  The exercise of the right conferred by cl 26.16 is open to ‘either party’;

(j)               if one party does refer a dispute for resolution under cl 26.16, there are a number of important consequences:

(i)                   first, the dispute is referred for resolution by an Independent Expert.  There is no reference to the Senior Negotiations procedure or to arbitration in cl 26.16;

(ii)                 secondly, cl 26.16 states that the dispute is to be resolved ‘in accordance with the Accelerated Disputes Resolution Procedures’.  This is a clear and unequivocal reference to cl 52;

(iii)                thirdly, cl 26.16 contemplates only the application of the Accelerated Dispute Resolution Procedures.  It directs that an Independent Expert must be instructed, and that those instructions must have regard to the Change Compensation Principles;

(k)              clause 26.16 requires the Independent Expert to act in accordance with the Accelerated Dispute Resolution Procedures;

(l)               the definitions in the Project Agreement support such a construction of the Project Agreement:

(i)                   the definition of ‘Accelerated Dispute Resolution Procedures’ makes express reference to cl 52, and not to cls 51 or 53;

(ii)                 likewise the definition of ‘Accelerated Dispute Panel’ makes express reference to cl 52 and not to cls 51 or 53;

(iii)                again, the definition of ‘Independent Expert’ makes express reference to appointment in accordance with cl 52, and does not refer to cls 51 or 53;  and

(iv)                clause 26.16 contemplates and proceeds on the basis of an Independent Expert determination under cl 52;

(m)            the construction adopted by his Honour gives cl 26.16 important work to do.  Clause 26.16 is intended as the gateway by which the code agreed by the parties as to ‘Time’ in cl 26 interacts with the dispute resolution process contained in cls 50 to 53.  By contrast, the appellant’s construction of cl 26.16 would give that provision very little work to do.  It is unlikely that this is what the parties intended when they agreed on cl 26.16 in the context of cl 26 which deals with the very important topic of time in a large building contract;

(n)             it is commercially efficacious for the parties to agree on dispute resolution procedures so that disputes as to the decisions of the Project Director concerning extensions of time directly engage the Accelerated Dispute Resolution Procedures.  Before making an extension of time decision under cl 26.9(a), the Project Director will already have taken into account all relevant evidence presented by the parties.[6]  Extension of time claims are notorious in building disputes and it is reasonable and sensible for them to be resolved using a ‘fast track’ process;

(o)             the range of disputes which can be referred under cl 26.16 is limited, and not co-extensive with the disputes that fall under cl 50.1. Consistently with its role as part of a code of provisions dealing with time, cl 26.16 applies to disputes about extensions of time or acceleration under cl 26;  and

(p)             the selection by the parties of Accelerated Dispute Resolution Procedures for the resolution of specified types of disputes necessarily means that other types of disputes will be resolved by a different process.  The parties in the Project Agreement provided for different types of disputes to be dealt with by different types of dispute resolution mechanisms.  This result is not capricious, unreasonable, inconvenient or unjust.  To the contrary, the reference to the Accelerated Dispute Resolution Procedures in cl 26.16 shows that the parties
intended to bypass the Senior Negotiations process contained in cl 51. They also decided not to directly engage the Arbitration procedures in cl 53.  Neither consequence is in any way unlikely or unreasonable, particularly given that in the typical extension of time case the Project Director will, and is required under cl 26.09(b) to, have taken into account all relevant evidence presented by the parties.  The result achieved by this construction is consistent with business efficacy.

 

His Honour concluded (and Maxwell P and Tate JA agreed) that the appeal should be dismissed.

 


[1]              Emphasis added.

[2]              Clauses 26.6 and 26.7.

[3]              Clause 26.9.

[4]              Clause 26.10.

[5]              Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51, 63 (Mason CJ); Ward v Williams (1955) 92 CLR 496, 505 (Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ).

[6]              Clause 26.9(b).