It is not unusual to see in construction contracts a short-form
clause referring particular disputes to mediation or expert
determination without the particular rules or procedures for the
mediation or expert determination being specified. If both parties
remain happy to go to mediation or expert determination they will
ordinarily do what is necessary (including signing documents
required by the mediator or expert) to give effect to his or her
engagement. However, if one party has had a change of mind since
the contract was first entered into that party might not be so
In the Supreme Court case, 1144 Nepean Highway Pty Ltd v.
Leigh Mardon Australasia Pty Ltd  VSC 317, one of the
parties refused to sign the terms of engagement required by the
nominated expert. In that case, the clause in the contract provided
for disputes to be resolved by an expert to be appointed for the
purpose. When an expert was so appointed he required as a condition
of his engagement that the parties sign a document giving him a
release and indemnity for any liability he might occur by reason of
his expert determination. One party objected to the release and
indemnity and the Supreme Court was asked to consider whether an
obligation to sign a release and indemnity in those terms was
implied from the brief wording in the contract.
Pagone J referred to a further clause in the agreement which
provided that each party must promptly execute all documents and do
all things necessary to give full effect to the agreement and
determined that clause required the parties to execute an agreement
with the expert which included a release and indemnity of liability
of the expert. That was because such a provision was a
"likely and obvious consideration upon the appointment of
any person to act as an expert in the resolution of the dispute of
the kind contemplated by" the relevant clause.
Pagone J also referred to an earlier New South Wales decision
(Elizabeth Bay Developments v. Boral Building Services Pty Ltd)
where Giles J decided that "an agreement to mediate whereby
the parties merely agree ... to sign a mediation agreement the
terms of which had not been settled beyond the necessity that they
be consistent with the specified guidelines, is not sufficiently
certain to be given effect".
Although in the 1144 Nepean Highway decision a very
brief clause referring disputes to expert determination was held in
the circumstances to be sufficient (with the extra wording the
Court determined was implied), the Elizabeth Bay Developments
Pty Ltd decision makes it clear that in certain circumstances
minimalist wording which does not specify the terms of the
agreement to be entered into with the mediator (or potentially an
expert) might not give rise to an enforceable agreement to refer
disputes to mediation or expert determination. Parties to a
construction contract therefore would be well advised to specify in
some detail the rules to apply in a mediation or expert
determination and include an express obligation to execute either
the specified wording of a mediation or expert determination
agreement, or, include an obligation to execute such document with
any amendments or further provisions required by the nominated
mediator or expert.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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