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In UCI v Alex Rasmussenvar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} & Denmark NOC &SF, the Court of Arbitration for Sport wasvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} reviewing the Demark NOC and Sports Federation’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3rd quarter 2010, and (this was a disputed breach) on 28 April 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14var link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that
a departure from the IST can invalidate the finding of an anti-doping rule violation only invar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} the event that the particular anti-doping rule violation had been caused by the departure itself. Thevar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} Tribunal reduced thevar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} period of suspension form 2 years to 18 months (relating to degree of guilt), and determined that the suspension start from October 2011, when ineligibility was first imposed.
In UCI v Alex Rasmussenvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} & Denmark NOC &SF, the Court of Arbitration for Sport was reviewing the Demark NOC and Sports Federation’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3rd quarter 2010, and (this was a disputed breach) on 28 April 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14 days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that
a departure from the IST can invalidate the finding of an anti-doping rule violation only in the event that the particular anti-doping rule violation had been caused by the departure itself. The Tribunal reduced the period of suspension form 2 years to 18 months (relating to degree of guilt), and determined that the suspension start from October 2011, when ineligibility was first imposed.
In Glenvill Projects Pty Ltd v North Melbourne Pty Ltd & Taylor [2013] VSC 717 (Vickery J), Justice Vickery (the Judge in Charge of the Supreme Court Technology, Engineering and Construction List) was considering a challenge to a decision of an expert appointed under an expert determination clause in a residential building contract.
His Honour referred to 500 Burwood Highway v Australian Unity & Ors in which His Honour had analysed the role of a contractually appointed expert, and the basis upon which an expert determination might be invalidated following judicial intervention. His Honour had said in 500 Burwood Highway:
…. there is no procedural code for expert determination, in contradistinction to arbitration. The activities of an expert are subject to little control by the court, save as to jurisdiction or departure from the mandate given. Unless the parties specify the procedure, the expert determines how he will proceed; it is rare for what might be perceived as procedural unfairness in an arbitration to give rise to a ground for challenge to the procedure adopted by an expert ….
For these reasons, unless required by the contract in question, the parties have no entitlement to insist that the expert adopt any particular procedure; or that the appointed expert seek their approval to the proposed determination; or that they are given any hearing or facility to provide input into the process. An expert is not obliged to afford to the parties procedural fairness in the manner required of a court or arbitration in a curial context. A certifying expert is not under an obligation to provide procedural fairness or natural justice in the absence of an express contractual provision, and there is none in the present case …. How the task is undertaken is in the hands of the expert, subject to anything to the contrary in the contract pursuant to which the appointment was made.
This result is in part the product of the contract and what is to be gleaned from it as to the intention of the parties. When the parties appoint an expert, they usually do so because they agree to place reliance on the expert’s skill and judgment. They implicitly agree to accept and be bound by the determination. In the usual case, provided the decision is arrived at honestly and in good faith, the parties will not be able to re-open it and will be bound by the result.
It is also in part the product of a particular body of expert experience, learning, skill and judgment which the parties wish to apply to the problem to be dealt with. This is to be applied in a manner which is untrammelled by procedural considerations, so that the specialist skills and insights of the expert can be freely applied to the issue.
Finally, considerations of commercial utility are likely to be relevant factors. Efficiency, the production of a speedy and authoritative outcome and the elimination of the expense of a more elaborate procedure, undoubtedly play a part in parties selecting the contractual process of expert determination.
Mistake or error in the process of the determination of the appointed expert will not invalidate a decision. However, if the expert asks the wrong question or misconceives the function of the appointment, the task required to be performed by the contract will not have been fulfilled. In this event, the determination will be exposed to being set aside.
Parties to a contract who, by the terms of that contract, agree to submit a question to an independent expert, are bound by the determination of that expert acting honestly and in good faith.
His Honour reasoned further in relation to the construction of the expert engagement contract:
An expert is appointed by contract to make an expert determination in respect of specific matters which may arise during the course of a commercial relationship. An expert, in making a determination, is not obligated to abide by the rules of procedural fairness in the manner required of a court or an arbitration in a curial context. The expert’s obligations with regard to procedural fairness, or natural justice …. , are defined by the content of the express contractual agreement between the parties comprised in the Expert Engagement Contract, which in this case includes the terms of the IAMA Rules.
The manner in which the task of making the determination in question is undertaken is in the hands of the expert, subject to anything to the contrary in the contract which governs the appointment of the expert and in the IAMA Rules.
The result which is arrived at by the expert – the determination, in this case – is thus ultimately the product of the contract in the full sense of the word, as properly construed in accordance with the usual approach to the construction of commercial contracts.
The approach was recently considered in ICM Investments Pty Ltd v San Miguel Corporation & Ors [No 2]). Where it was observed that the applicable principle is often stated in terms of a necessity to construe commercial agreements so as to accord with ‘business commonsense’ or ‘commercial reality’.
As Santow J said in Spunwill Pty Ltd v BAB Pty Ltd, in construing a written document, the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the document’s language to create.
Further, the language used in the contract is generally assigned its natural and ordinary meaning, read in the light of the contract as a whole. Where it is ambiguous, surrounding circumstances may be taken into account in assigning the constructed meaning. The surrounding circumstances include the matrix of mutually known facts, and the background, object, context and commercial purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind.
…. The commercial context in which a reference of disputes to an expert in a commercial contract is thus most relevant. The decision to refer disputes for determination by a contractually appointed expert will usually arise because the parties desire a particular body of expert experience, learning, skill and judgment to be applied to the resolution of defined issues which may arise in the course of the relationship and need to be dealt with. This problem-solving role is usually intended to be applied in a manner which is untrammelled by overly restrictive procedural considerations, so that the specialist skills and insights of the expert can be fully applied to the issues for resolution, in an expeditious and cost effective manner which is attended with an appropriate measure of ‘finality’.
This may give rise to the parties agreeing that they will abide by a decision which in hindsight appears to be ‘wrong’. In such circumstances, mistake or error in the process of the determination of the appointed expert will not invalidate a decision, as long as it is made in accordance with the terms of the agreement.
This is not to say that there are no parameters of fairness or that the determination will be unreviewable. For example, if the expert asks the wrong question or misconceives the function of the appointment, the task required to be performed by the contract will not have been fulfilled…..
In this case, His Honour ultimately concluded that the Expert had acted within the terms of his engagement in making the procedural determinations that he did.
In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, the Judge in Charge of the Supreme Court of Victoria Technology, Engineering and Construction List (Vickery J) was considering the dispute resolution provisions under a design and construct contract for the construction of a rail freight terminal, a container paved area and a locomotive workshop together with associated facilities in Penfield, South Australia (though the Contract was governed by the law of Victoria). The General Conditions of Contract incorporated Australian Standard form of contract, AS4300-1995.
Summary Judgment:
The Contractor asked for summary judgment in respect of three unpaid payment claims, for approximately $3.13 million. The Principal claimed damages for breach of contract, and claimed a number of waivers and estoppels against the Contractor. His Honour ordered that the argument as to the principles to be applied in respect of summary judgment be argued before the Court of Appeal. His Honour then applied those principles. At paragraph 19, His Honour said:
The Court of Appeal determined the following upon the present state of authority, which I adopt and apply in these reasons:[1]
(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in General Steel;
(c) it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
Payment Claims:
His Honour then set out Clause 42.1 of the General Conditions of Contract (the standard form provision) and reviewed the facts surrounding the unpaid payment claims.
His Honour referred to a number of authorities to be followed where a progress payment certificate was not properly issued by the Superintendent under Clause 42.1. At paragraphs 29-31:
In Daysea v Pty Ld v Watpac Australia Pty Ltd (“Daysea”)[2] the Court of Appeal of the Supreme Court of Queensland considered the position under a contract which contained provisions very similar to clause 42.1 of the AS4300-1995 standard form. In that case the Superintendent failed to issue a progress payment certificate within the stipulated 14 days after receipt of a claim, but did so before the expiry of the 28 day period for payment. The Court of Appeal accepted that if the Superintendent under an AS4300-1995 failed to respond to a claim for payment under clause 42.1 within 14 days, even if it did respond shortly thereafter, the Principal was still obliged to pay the amount of the claim. Williams JA observed that a strict approach to the construction of clause 42.1 should be adopted at least with respect to the provisions for payment, set off and deductions, and this was so because of the consequences which flow from the issuing of the certificate. His Honour reasoned as follows:
Of more significance is the decision of Rolfe J in Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215. The clause in question there was in the same terms as clause 42.1 here. The learned Judge found that the certificate issued by the Principal’s Representative did not satisfy the requirements of paragraph (a) to paragraph (f) of paragraph [4]. In consequence he said that “the Payment Certificate failed to comply with various contractual obligations as to its contents and that, accordingly, it was not a valid notice”. His reasoning for so concluding is set out in the following passage:
“… the effect of a Payment Certificate is to require the recipient to pay the amount stated. Failure to do so could lead to summary judgment and there is no right to dispute the amounts payable until the dispute resolution procedures are activated. Accordingly, the recipient of the certificate is required to pay money during the course of the contract which, at the end of the day, it may be found it does not owe. The requirement to pay money may lead to financial difficulties for the payer, just as the failure to receive money during the course of the contract may cause financial difficulties to the payee. Also the payee may not be able, at the end of the day, to refund any overpayment. Considerations such as these lead me to the conclusion that a certificate must comply strictly with cl 42.1 if it is to have the consequences specified”.
That reasoning is in my view compelling. As all of the cases I have just referred to establish, the consequences of issuing a certificate are serious. The proprietor is bound to pay the amount of the certificate notwithstanding that the amount is provisional only and subsequently may be found to be incorrect. Notwithstanding such considerations the proprietor must pay the amount specified in the certificate and take the chance that any excess can be recovered subsequently. Similarly, the contractor is not entitled to payment of anything more than the amount specified in the certificate though it may well be less than the progress claim made. Even though it may ultimately be found that the contractor was entitled to more, the recovery of any such amount must await the determination of disputes at the end of the contract.
Because of the consequences which flow from the issuing of the certificate strict compliance with the provisions of clause 42.1 is required …[3]
[Emphasis added]
Daysea was applied by Byrne J in Southern Region Pty Ltd v State of Victoria (No 3) (“Southern Region”).[4]
It follows that a certificate purportedly issued under clause 42.1 which does not satisfy the formal requirements of theclause is ineffective and invalid, or as Byrne J said in Southern Region: “… it was as if no certificate had issued at all.”
(emphasis added)
His Honour then considered the principles to be adopted where the Contractor failed to support the payment claim with evidence and any information required by the Superintendent. His Honour referred to the NSW Court of Appeal decision in Brewarrina Shire Council v Beckhaus Civil Pty Ltd . In that decision, the majority concluded that under clause 42.1 of AS2124–1992 the obligation of the Superintendent to issue a payment certificate in relation to a progress claim was subject to the condition precedent that the contractor support that claim with evidence of the amount due to it and with such information as the Superintendent might reasonably require.
His Honour referred to the Victorian Court of Appeal decision in Aquatec-Maxcon Pty Ltd v Minson Nacap Pty Ltd . The Court of Appeal, in adopting Brewarrina, said:
The decision is a recent, and carefully considered, decision by the New South Wales Court of Appeal which, so far as we have been told and so far as we are aware, is the only decision which currently exists on this particular point of construction of this paragraph of the clause. The point was argued by counsel for the appellant before the trial judge, in the course of which counsel referred his Honour to evidence which showed, or suggested, that the superintendent had repeatedly been seeking substantiation for the “one line variation claims”, and submitted that where the contractor persisted – in the face of opposition and request for further information – in submitting “one line claims” there must come a point where clearly the Progress Claim as presented is entitled to be regarded by the superintendent as not a claim within the meaning of clause 42.1. His Honour requested of counsel whether he (ie counsel) was able to show to him any authority where such an approach had been adopted to a claim, ie “where the claim has been treated by the court as being invalid for noncompliance …”. Trial counsel for the appellant conceded that he was not able to refer his Honour to any authority on the point; and his Honour then indicated to trial counsel for the respondent that he would not “trouble him” about the criticisms made of the progress claims.
His Honour, noting further that Warren CJ in Kane Constructions Pty Ltd v Sopov, while expressing some reservations regarding the application of Brewarrina and Aquatec as to the timing issue in the matter before her, had concluded that she was bound by the adoption of Brewarrina in Acquatec at the very least, or to regard Brewarrina as highly persuasive, concluded:
Accordingly, pursuant to clause 42.1 of the AS4300-1995 standard form contract, a failure by the contractor to support a payment claim with evidence and any information required by the Superintendent means that the Superintendent is not be obliged to issue a payment certificate to certify the payment of a progress claim.
(emphasis added)
His Honour concluded that on the facts before him, the Principal had a “real” chance of success on the material presented in the application, and concluded that summary judgment should not be awarded to the Contractor.
Stay Application – Section 8 Commercial Arbitration Act 2011 (Vic):
His Honour then addressed a claim for a stay of the Supreme Court proceedings pursuant to Section 8 of the Commercial Arbitration Act 2011 (Vic), on the grounds that there was an arbitration clause (the provision was the standard form Clause 47 of AS4300-1995). His Honour noted the important change between the new Act and the 1984 superseded Act. At paragraphs 125-126, 143 :
The use of the imperative word “must” in s 8(1), rather than the permissive “may”, which was employed in the superseded Commercial Arbitration Act 1984, removes the court’s discretion to refuse to grant a stay, and renders the provision mandatory. The only reason a court can refuse to grant a stay is if the arbitration agreement is found to be “null, void, inoperative or incapable of being performed”.[5] This means that if the requirements of the section are met the Court has no choice but to grant a stay of the proceeding before it and refer the matter to arbitration.[6]
This may result in some inefficiencies in case management in some cases, arising from the potential for litigation on the same project being conducted before different tribunals. Nevertheless the statutory meaning is clear.[7]
……. It follows that a Court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests, not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration.
(emphasis added)
Ultimately, His Honour decided that a stay should not be ordered in respect of certain parts of the claims, on the basis that the particular dispute was not, on the basis of other provisions of the Contract excluding a right of a party to institute proceedings to enforce payment under the Contract from the arbitration clause. In respect of the balance of the claims, His Honour ordered that those claims were to be referred to arbitration and ordered a stay.
[1] Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158 [35].
[2] Daysea v Pty Ld v Watpac Australia Pty Ltd (2001) 17 BCL 434.
[3] Daysea Pty Ltd v Watpac Australia Pty Ltd (2001) 17 BCL 434, 439 [20]–[22].
[4] Southern Region Pty Ltd v State of Victoria (No 3 ) (2002) 18 BCL 211.
[5] D Jones, Commercial Arbitration in Australia (2nd ed, Lawbook Co., 2013) p 108.
[6] Although in the 2009 Consultation Draft Bill the provisions vested a discretionary power in the court and more closely reflected s 53 of the Superseded Uniform Acts, following submissions from over 17 different organisations, the final Bill reflected s 8 of the Model Law. The imperative “must” replaced the permissive “may” such that granting a stay is now mandatory unless the court finds that the arbitration agreement is “null, void, inoperative or incapable of being performed”. D Jones, Commercial Arbitration in Australia (2nd ed, Lawbook Co., 2013) p 110.
[7] It has been noted that there will be situations that arise where matters are referred to arbitration as a consequence of the word “must” that would have been more efficiently conducted in court, for example, multi-party proceedings that will require arbitrations and potentially different findings of fact. See: D Jones, Commercial Arbitration in Australia (2nd ed, Lawbook Co., 2013) p 111.
In Braceforce Warehousing Limited v Mediterranean Shipping Company (UK) Limited [2009] EWHC 3839 (QB) Ramsey J (Sir Vivian Ramsey, the judge in charge of Technology and Construction, Queens bench Division), was considering arguments in relation to the commencement of an expert determination over defects in a warehouse the subject of an Agreement to Lease. Just before the 6 year limitation period (dating from the agreement) was to expire, the parties had exchanged letters in relation to extending the limitation period and appointing the expert.
His Honour observed that the Limitation Act did not seem to apply to expert determination (His Honour did not need ultimately to resolve this). Ultimately, His Honour concluded that Mediterranean’s letter proposing an expert for agreement, and advising that failing agreement it would apply to appointing body for an appointment, had commenced the expert determination procedure sufficient to stop any limitation period applying (if, in fact, a limitation period did apply in relation to expert determination).
His Honour, then, in addressing the appropriate forum where two valid sets of proceedings had been commenced, referred to the following passage from the speech of Lord Mustill in the House of Lords in Channel Tunnel Group v Balfour Beatty ….
Having made this choice I believe that it is in accordance not only with the presumption exemplified in the English cases cited above that those who make agreements for the resolution of disputes must show good reasons for departing from them, but also with the interests of the orderly regulation of international commerce that, having promised to take their complaints to the experts and if necessary to the arbitrators, that is where the appellant should go. The fact that the appellants now find their chosen method too slow to suit their purpose is, to my way of thinking, quite beside the point.
His Honour concluded:
This is a case where the Part 8 proceedings have been brought to prevent the expert determination continuing on grounds of lack of jurisdiction and I have rejected that application. The general position is that parties should be held to the terms of their contracts, but the court retains a discretion in each case. I am not persuaded in this case that the existence of the protective proceedings in court or the fact that, as in the Channel Tunnel case, the claimant now finds the chosen method of dispute resolution unsuitable, are factors which are so persuasive that they should outweigh the principle that the parties should be held to the agreed method of dispute resolution in accordance with clause 24 of the Agreement (emphasis added) .
This decision is modern high-level authority for the principle that, In cases where an expert determination clause is contained in an agreement, but one party then decides it prefers the proceedings to be litigated, the courts will require strong grounds to persuade them from the presumption that the parties should be held to their agreement.
