The age old proclamation "we'll see you in court"
has been limited by the recent Victorian Supreme Court decision of
1144 Nepean Highway Pty Ltd v Leigh Mardon Australasia Pty
Ltd  VSC 226. This decision should serve as a warning to
contracting parties to ensure that they abide by dispute resolution
procedures that form part of the contract. This case is significant
as alternative dispute resolution mechanisms such as mediation or
binding expert determinations are increasing in popularity as means
to resolving commercial disputes. Many contracts now include a
procedure that require the parties to employ these, or similar
methods, before court proceedings can be issued. This decision is a
reminder that such clauses "mean what they say", and any
attempt to avoid their effect will be opposed by the courts.
Leigh Mardon Australasia Pty Ltd was the landlord of a property
at 1144 Nepean Highway, Highett (Landlord). The
Landlord had entered into an agreement to lease property to the
tenant that included a clause that set out the procedure that the
parties were required to follow in certain situations
(Lease). Specifically, the procedure had to be
followed if a dispute or difference arose, or the parties failed to
agree in connection with any matter arising out of, or relating to,
The procedure relevantly required that:
a notice be issued by one party to the other setting out the
if the parties were unable to resolve the matter within a
certain time, the dispute was to be referred to an independent
the expert's determination would be conclusive and binding
on the parties.
Importantly, the relevant clause also stated that no legal
action could be commenced until the clause had been complied
The parties fell into dispute regarding a planning permit that
the Landlord was required to obtain and that the tenant alleged was
deficient. That dispute, and the tenant's consequential right
to terminate the Lease, was referred by the tenant to the dispute
resolution procedure. The Landlord then sought to depart from the
dispute resolution procedure and instituted legal proceedings,
seeking a declaration that the Lease remained on foot between the
parties (on the basis that the planning permit complied with the
Lease). The Landlord also sought an injunction restraining the
tenant from referring the question of termination to the dispute
resolution procedure. During the proceedings, the Landlord claimed
the dispute resolution procedure only applied to disputes
concerning the performance of the agreement and did not extend to
questions about the termination or existence of the agreement.
The Court held that:
the language in a dispute resolution clause should be given its
full meaning and construed on its terms,
dispute resolution clauses should be given a wide
interpretation so as to avoid different processes having to be
followed depending on the particular issue in dispute,
the dispute regarding the issue of whether the Lease had been
terminated was clearly a matter "arising out of" the
agreement (thereby invoking the dispute resolution procedure),
accordingly, the Landlord should be held to its bargain, and
the dispute should be determined pursuant to the prescribed
procedure (that is, by expert determination), and
in the absence of any strong, countervailing circumstances, the
Landlord's proceedings were stayed.
This decision is a reminder that when you sign up to a dispute
resolution clause, you get what you bargain for. Once the dispute
arises, parties must play by the rules. The prescribed procedure
must be strictly followed, or the non-complying party risks wasting
time and money on alternative action which will be restrained by
the court, so that the agreed dispute resolution procedure can
instead be followed.
To ensure that your rights are properly protected, you should
only agree to a dispute resolution clause if you believe the
procedure is the best way of resolving any disputes which might
arise, and you are willing to fully engage in each part of the
procedure should a dispute arise. If there is an aspect of the
transaction that you want dealt with in some other manner (such as
commencing court proceedings), you should specifically reserve this
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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