Lipman Pty Ltd v Emergency Services Superannuation Board [2011] NSWCA 163
Granting leave to appeal but dismissing the appeal, the New South Wales Court of Appeal held that, read as a whole, clause 42.10 of a building contract kept an expert's determination in effect unless and until changed under the clause 42.11 negotiation procedure, so it remained binding once that procedure was, as was not disputed, exhausted without resolving the dispute or agreeing a procedure.
What the court decided
Lipman Pty Ltd sought leave to appeal from a declaratory order of the primary judge, Hammerschlag J, in its proceeding against the Emergency Services Superannuation Board, on whether an expert determination under a building contract was final and binding [1].
Clause 42.10, an expert determination clause, made the determination final and binding unless a party gave notice of appeal within 21 days [2]. Clause 42.10(c) required the parties to give effect to the determination "unless and until" it was changed under the procedure in the following clauses [2].
On a notice of appeal, clause 42.11 referred the dispute to persons described in Annexure Part A, who were to negotiate in good faith and, failing resolution, endeavour to agree on a procedure to resolve it [2]. The annexure described no one, but both parties accepted that their own negotiations gave effect to clause 42.11 [4].
On the primary judge's findings, which Allsop P adopted, Lipman served a notice of appeal in January 2006 against a December 2005 determination, after the Board agreed to extend the time for doing so [3]. Meetings between February and June 2006 neither resolved the dispute nor produced agreement on a procedure to resolve it [3].
The primary judge's first reason was that clause 42.10(c) required the determination to be given effect to unless and until changed under the clause 42.11 procedure [4]. His Honour also thought it unlikely that the parties intended the same disputes to go before different tribunals, or that one party could make the chosen experts' determination ineffective by not agreeing [4]. It was not suggested that the parties had failed to comply with clause 42.11 or that its procedure had not been exhausted [4]. The determination therefore remained binding and the proceeding was dismissed [4].
On appeal, Lipman argued that the words beginning with "unless" meant the determination was never final and binding once a notice of appeal was given [5].
Allsop P rejected that argument, finding the primary judge's reasons correct [6]. He said the primary judge had approached the clause by reference to a liberal approach expressed in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 and Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2008] 1 Lloyd's Rep 254 [6]. That those cases concerned arbitration clauses did not lessen their force for this expert determination clause [7].
His Honour said the liberal approach does not depart from the meaning of the words the parties chose, but gives effect to a coherent business purpose, assuming that parties "are unlikely to have intended" more than one forum or occasion for resolving their disputes, absent words saying so [8].
Allsop P thought it unlikely that one side's mere statement that it wished to negotiate would mean the determination was never binding [9]. Read as a whole, the clause gave the determination full effect, subject to it not being final and binding if the parties were able to "give substance and effect to the good faith negotiations" under clause 42.11 [9]. Substantially for the primary judge's reasons and for these additional reasons, the determination was to be given effect to as the rest of the clause provided, not provisionally [10].
Young JA agreed with Allsop P, and Tobias AJA also agreed [17]–[18]. The Court allowed the application for leave to appeal, directed that the draft notice of appeal stand as a filed notice of appeal and dismissed the appeal with costs [16], [19].
In remarks made in passing, Allsop P said that one volume of appeal material should have sufficed instead of four, that neither client should pay for all of it unless it had instructed its preparation against advice and that the Registrar should be told when an appeal is short [11], [13]–[14]. He expected the clients to be told of those remarks [15].
Why it matters
The result turned on clause 42.10(c) and the clause read as a whole, not on the notice of appeal proviso alone [4], [9]–[10].
A party that wants to litigate afresh after giving notice should consider saying expressly what happens if the post-notice procedure fails to resolve the dispute. On Allsop P's reasoning, courts read such clauses on the assumption that parties "are unlikely to have intended" more than one forum or occasion for resolving their disputes, absent words saying so [8].
It is a decision of the New South Wales Court of Appeal on the construction of one clause, so readers should consider the words of their own clause before relying on it.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.