May Harlow Pty Ltd v Winten

Consideration and determination

As noted above at [49], the plaintiffs concede that the dispute that is the subject of this proceeding falls within the scope of the dispute resolution mechanism provided in cl 13 of the PDA. It follows that the onus is on the plaintiffs to demonstrate a good reason as to why the Court should not exercise its discretion to stay the proceeding.
The plaintiffs' principal complaint was that the dispute resolution mechanism in cl 13 was unsuitable for the resolution of the dispute between the parties because it lacks procedures to compel third parties to produce documents or to give evidence before the appointed expert.
The lack of such procedures is a feature of all contractual dispute resolution processes (see The Illawarra Community Housing Trust Ltd (supra) at [62]). The parties would have been well aware of this when they agreed to resolve their disputes in accordance with cl 13 of the PDA. Equally, they would have been well aware from cl 6.7 that Winten 48 would engage developers and subcontractors on the Waitara project and that documents and information in the possession of such third parties may be relevant to the resolution of any disputes arising under the PDA. The parties nevertheless agreed to resolve those disputes by the process set out in cl 13, without the benefit of the procedures that are available in judicial proceedings but with the benefit of the Project Costs Statements that Winten 48 was obliged to provide under cl 10.1, the ability for the plaintiffs to undertaken audits of those Project Costs Statements under cl 10.2 and the contractual obligation on both parties under cl 13.4(f)(iii) to provide documents and information required by any expert appointed to determine any dispute between the parties.
The fact that the expert is able to request information and documents under cl 13.4(f)(iii) only from the parties to the PDA, and not from third party sub-contractors or consultants, does give rise to the possibility that the expert may not be able to obtain all information relevant to the resolution of a dispute concerning fees charged by sub-contractors or consultants to Winten 48, which Winten 48 has passed on to the plaintiffs as Project Costs.
However, in my opinion, that possibility is more theoretical than real. Winten 48 is in a position to use its relationships with the sub-contractors and consultants to obtain information and documents from them relevant to the question whether the fees are Project Costs, and to put those documents and information before the expert. Any failure by Winten 48 to put before the expert the kind of documents that one would expect to be created recording the nature of the services provided and the basis on which fees have been charged, and to address any issues raised by the plaintiffs, will prejudice Winten 48's prospects of having the dispute determined in its favour. One would expect the plaintiffs to exploit any such failure by strenuously submitting that the expert should take the failure into account in resolving the dispute, including by drawing inferences adverse to Winten 48.
I accept the plaintiffs' submission that Lainson Holdings Pty Ltd (supra) and The Illawarra Community Housing Trust Ltd (supra) are not directly applicable to the determination of the application for a stay of this proceeding. Those cases concerned the construction of specific dispute resolution clauses in commercial contracts as opposed to the question of whether the Court should exercise its discretion to refuse to grant a stay of proceedings. However, those cases do recognise that commercial disputes may be resolved in accordance with contractual expert determination processes that do not include the powers that a Court has to compel production of documents and the giving of evidence. Consistently with that recognition, and for the reasons that I have outlined above, the fact that the plaintiffs now wish to take advantage of such forensic tools is not a good reason to allow them to depart from the bargain that they struck in cl 13.
I reject the plaintiffs' submission that an expert determination made in accordance with cl 13.4 would not be final and binding on the parties. The well-known principles of construction of commercial contracts were recently summarised in Lawrence v Ciantar [2020] NSWCA 89 at [98]-[99] (per Bathurst CJ, Meagher and Gleeson JJA agreeing): "[98] The principles surrounding the construction of commercial contracts in this country are well established. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], the plurality (French CJ, Hayne, Crennan and Kiefel JJ) stated that '[t]he meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean' in context. The Court stated that 'it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract': see also Mount Bruce Mining at [46]-[49]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [78]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]; Victoria v Tatts Group Ltd (2016) 90 ALJR 392; [2016] HCA 5 at [51]. [99] In Mount Bruce Mining it was pointed out at [46] that context includes 'the entire text of the contract as well as any contract, document or statutory provision referred in the text of the contract'."
Applying those principles, cl 13.4(g)(iii) must be read in the context of the PDA as a whole, including cl 13.4(g)(iv) and cl 13.4(g(ii). The words emphasised by the plaintiffs - "otherwise changed" - are part of a composite expression: "reversed, overturned or otherwise changed". That composite expression describes the range of possible outcomes from a group of procedures referred to as "any validly applied process or by judgment or order of any Court or under clause 13.4(g)(iv)".
In my opinion, a reasonable businessperson would not read the composite expression in cl 13.4(g)(iv) as meaning that any of the outcomes within the composite expression could be achieved by any one of the group of procedures. Such an interpretation would render cl 13.4(g)(ii) redundant. The Court should not attribute to the parties an intention to include a redundant cl 13.4(g)(ii): Strike Australia Pty Ltd v Data Base Corporate Pty Ltd (2019) 19 BPR 39,621; [2019] NSWCA 205 at [23(ii)] (Bell P).
In addition, a reasonable businessperson reading cl 13.4 in the context of the PDA as a whole would have regard to the fact that the parties had put in place mechanisms for the provision of information and audits concerning Project Costs in cl 10.1 and 10.2, and had provided for a 30 day expert determination process to resolve any disputes, including any disputes concerning fees that arose despite (or, perhaps, because of) information provided under cl 10.1 and 10.2. A reasonable businessperson would not consider that the parties had intended to embark on this dispute resolution process as a mere warm up to court proceedings in which any party could apply to change the expert determination on any basis whatsoever. Having regard to this context, it is my opinion that the reasonable businessperson would understand the reference to the words "reversed" and "otherwise changed" within the composite expression in cl 13.4(g)(iii) as referring to potential outcomes of the process set out in cl 13.4(g)(iv), rather than a potential outcome of any judgment or order of the Court. The word "overturned" in the composite expression is apt to refer to the relief that a court might grant applying the principles most recently referred to in Australian Vintage Ltd v Belvino Investments No 2 Pty Ltd (2015) 90 NSWLR 367; [2015] NSWCA 275 at [74]-[78] (Bathurst CJ, Beazley P and McColl JA agreeing) and Strike Australia Pty Ltd (supra) at [106]-[108] (Ward JA, Basten JA agreeing). That is the meaning of cl 13.4(g), in my opinion.
I do not accept the plaintiffs' submission that the expert determination process in cl 13 is an unsuitable procedure to pursue the plaintiffs' pleaded claim for an account. That submission was premised on the plaintiffs' assertion that the conduct of an account would be too complex for the expert to be able to perform within the 30 day timeframe. There are two answers to this, in my opinion.
First, it is not self-evident that this exercise would be complex. The plaintiffs have acknowledged (at [18]) that they have received all of the Project Costs Statements. Each of the Project Costs Statements must contain the amount, payee and nature of that cost pursuant to cl 10.1(b). No submission was made that the Project Costs Statements provided did not contain these particulars. It appears to me that the parties are in a position to make any submissions that they see fit before the expert about which item or items they contend are not properly incurred by Winten 48 in connection with the PDA. As Winten 48 acknowledged, it is open to the plaintiffs to undertaken an audit of the Project Costs Statements pursuant to cl 10.2 before challenging specific Project Costs in an exercise conducted through the expert akin to the taking of an account.
Second, it is also not self-evident that the expert would not be able to complete this exercise within the 30 day timeframe. The time required will depend on the expert's experience, time available to commit to the determination process and whether or not the expert retains other professionals to assist pursuant to cl 13.4(f)(iv). Taking into account these matters, there is simply no reason to think that the 30 day time period would be inadequate.
For completeness, I note that the plaintiffs suggested that Winten 48 would be unlikely to agree to an extension of the 30 day time frame in the event that the 30 day period proves to be inadequate. The plaintiffs did not identify any evidence to support that suggestion. If the expert determination process were unable to be concluded, this would have the practical result that either party would be able to commence proceedings in respect of the dispute at very low risk of those proceedings being stayed on account of the expert determination clause. I am not prepared to assume that Winten 48, having invested the time and effort in an expert process that had lasted 30 days, would wish to abort that process rather than extend the time.
Further, to infer that Winten 48 would not agree to an extension under any circumstances seems to me to be akin to inferring that Winten 48 would act contrary to the terms of cl 3, under which the parties agreed to perform their respective obligations to each other under the PDA in good faith. There is no basis for any such inference. That is not to say that the express obligation of good faith would necessarily require Winten 48 to consent to an extension of time for the expert determination process. That would depend on all of the circumstances in which the need for an extension had arisen.
Finally, I accept Winten 48's submission that the possibility of multiple expert determination processes under cl 13 to resolve the disputes concerning the Rove Invoice, the payments to Mr Weihart and Winten 48's "further position" does not warrant an exercise of the Court's discretion to refuse to stay the proceeding. The parties clearly contemplated that cl 13 of the PDA would apply to disputes as and when they arose. Their bargain to resolve disputes by expert determination was not conditional upon all disputes being put before one expert at the same time. Nevertheless, it is open to the parties to achieve that in the circumstances of this case, as Winten 48's submissions identified and as one would expect the parties, acting commercially and sensibly in their best interests, to do. Even if there were multiple expert determination processes, each of which resulted in an application to the Court to set aside the expert's determination on the grounds that it had not been made in accordance with the contract, there would be no risk of those separate proceedings resulting in inconsistent findings.

At a glance

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Judgment (7 paragraphs)

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Legislation Cited (1)

Cases Cited (24)

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