In Lipman Pty Limited v. Emergency Services Superannuation
Board  NSWSC 710, the New South Wales Supreme Court held
that an expert determination made under a construction contract was
binding on the parties.
Lipman, as principal, retained Emergency Services Superannuation
Board to redevelop a shopping centre near Sydney.
The contract required the parties to refer disputes for expert
determination. It also provided that the expert determination would
be final and binding unless and until it was "reversed,
overturned or otherwise changed" under a specific negotiation
procedure provided for in the conract.
The contractual negotiation procedure enabled a party
dissatisfied with the expert determination to issue a notice of
appeal. This notice of appeal triggered a requirement for the
executives of the parties to meet and undertake negotiations with a
view to resolving the dispute (or trying to agree upon a process to
resolve the dispute).
On 14 March 2005 the parties appointed experts under the
provisions of the contract to resolve a disputed claim. The experts
gave their written determination on 7 December 2005. Between
February and June 2006 the parties held a number of meetings to try
to resolve the dispute as contemplated by the contractual
negotiation procedure. The negotiations were ultimately
unsuccessful and the parties did not resolve the dispute or agree
on a process to resolve it.
The court proceedings
On 11 December 2009 (some three and a half years later), Lipman
issued proceedings in the New South Wales Supreme
Court making a claim against Emergency Services for over
$1 million. The proceedings related to the same subject matter as
the expert determination.
Emergency Services argued that the parties were bound by the
expert determination, which meant that the court proceedings could
not be maintained.
Lipman contended that the expert determination was not binding
and that it was free to pursue its claims in the court even though
those claims were the subject of the expert determination. It
alleged that, if the expert determination was binding, this would
be an abrogation of the parties' common law rights for which
express words would be required.
The decision in Lipman
The court did not accept Lipman's arguments, holding that
the plain and unambiguous words of the clause required the expert
determination to be binding unless it was reversed, overturned or
otherwise changed under the procedure outlined in the clause.
The negotiation process the parties had participated in did not
result in the determination being reversed, overturned or otherwise
changed. It followed that the expert determination remained
Implications for parties to construction contracts
These days, more and more construction contracts contain dispute
resolution clauses that require parties to submit to mandatory
expert determination or arbitration.
Parties to construction contracts do not always give proper
attention to such clauses, wrongly believing that expert
determinations or arbitrations are not binding or can be challenged
in court proceedings. This is not always the case.
This case sounds a strong warning to parties involved in the
construction industry about the need to ensure that they fully
understand the terms of any dispute resolution clauses in their
contracts. Depending on how the clauses are worded, parties may be
bound by an independent expert determination and prevented from
challenging the determination in a court if they are not happy with
The case also has implications for other types of commercial
contracts that contain a dispute resolution clause.
For more information regarding this article, please
contact Rocco Russo , Partner, on (07) 3231 2468 or Lisa Valentine,
Associate on (07) 3231 2939.
Cooper Grace Ward was named Best Australian Law Firm in the BRW
Client Choice Awards 2010 - Revenue < $50m. Joint Best
Australian Law Firm in the BRW Client Choice Awards 2009 - Revenue
The firm has also been named as the fastest growing law firm in
Australia for 2009 by The Australian.
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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