Resources

Expert determination: you get what you bargained for

Minerals Resources Ltd v Pilbara Minerals Ltd [2016] WASC 338

Parties contractually agree to a certain dispute resolution method, but then one of the parties decides to pursue a claim in a different forum. What are the consequences? Are the parties bound by their contract?

A recent WA Supreme Court decision — Minerals Resources Ltd v Pilbara Minerals Ltd [2016] WASC 338 — sheds some light on these questions.

The dispute and the contractual dispute resolution method
Pilbara Minerals and a wholly-owned subsidiary of Mineral Resources, ACN, had a contract under which, if Pilbara Minerals wanted to sell lithium to another party, it had to first offer that lithium to ACN. The dispute centred around a notice that Pilbara Minerals provided ACN to inform ACN of its intention to sell lithium to another party. Under the contract, ACN had 45 days to respond to such a notice.

ACN claimed the notice was invalid and sought an expedited trial in the WA Supreme Court. However, Pilbara Minerals argued that the contract provided that an Expert would determine any dispute relating to such a notice. Pilbara Minerals sought a stay of the application, initiated expert determination and (in conjunction with ACN) appointed an Expert.

What did the Court have to determine?
The Supreme Court was tasked with deciding if:

  • Pilbara Minerals and ACN were bound by their contractual dispute resolution method, meaning the matter should be heard in expert determination;
  • the issues in dispute were appropriate for expert determination; and
  • the expert determination clause removed the Court's jurisdiction.

Were the parties bound by their bargain?
First and foremost, Banks-Smith J held that Pilbara Minerals and ACN should be kept to their contractual bargain. The Court found that the parties had contractually agreed to have this type of dispute heard via expert determination and they should be bound by this agreement. This meant that the stay was granted, and the dispute referred to expert determination.

Were the issues in dispute appropriate for an expert determination process?
ACN argued that the Court was the proper forum for the present dispute, because the parties had restricted the time period in which to resolve the dispute to 45 days. ACN argued that the Court could hear the dispute and any appeals within this time period. Banks-Smith J found that the parties had not intended for the 45 day limit to encompass an appeals process. In fact, Her Honour found that the parties had elected an alternative dispute resolution method which facilitated a speedy and efficient resolution of the kind of dispute that had ultimately arisen in this instance.

Her Honour acknowledged that there are some instances when expert determination is the contractually agreed dispute resolution method but is not appropriate. For example, when it would result in multiple proceedings, when the expert is not qualified or if it would be unjust to stay the proceedings. However, in the present case, Banks-Smith J found that none of these considerations applied.

The Court also questioned whether the appointed Expert was capable of determining the dispute. The Court found that the mere fact that the dispute is complex does not mean the chosen dispute resolution method should be abandoned. Further, the Court found that the Expert the parties had elected (Mr Colvin SC) was unquestionably appropriate to determine the questions of law that had arisen in the present dispute.

How does an expert determination clause affect a court's jurisdiction?
Banks-Smith J observed that the effect of a valid expert determination clause is not to remove a court's jurisdiction, but rather to limit the matters a court can hear. Her Honour held that the expert determination clause in question did not remove the Court's jurisdiction. It was a valid clause.

Implications
This case is a clear reminder that parties cannot simply abandon their agreed alternative dispute resolution method to initiate proceedings in court.

In the event that a party seeks to do so, there is a heavy onus on them to establish a basis for the court intervening to hear the dispute.

It is also a reminder that, if parties wish to retain the ability to have their disputes heard in court, they need to carefully consider the effect of any alternative dispute resolution clause in their contract. As this case demonstrates, a valid expert determination clause does not remove a court's jurisdiction; it merely limits the issues that a court can hear. The position may not be the same for other contractually agreed forms of alternative dispute resolution.

Note: The above material provides a summary only of the subject matter covered, without an assumption of a duty of care by Resolution Institute or Clayton Utz. The material is not intended to be nor should it be relied upon as a substitute for legal or other professional advice. Copyright in the material is owned by Clayton Utz.

Thanks

We thank the authors of this legal update Karen Ingram and Heather Costelloe from Clayton Utz Litigation and Dispute Resolution team for their contribution to Pulse.

Tags: Expert determination, Legal practice, Dispute handling administration