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"Expert" the unexpected: when the parties cannot agree on whether they agreed to appoint an expert

Redpath Contract Services Pty Ltd v Anglo Coal (Grosvenor Management) 

The fundamental aim of alternative dispute resolution clauses in commercial contracts is to try to resolve disputes outside the courts. As we've seen in other legal updates, that aim can be thwarted despite the parties' best intentions.

The case of Redpath Contract Services Pty Ltd v Anglo Coal (Grosvenor Management) Pty Ltd [2016] QSC 313 shows that, in the context of an expert determination clause, even the issue of whether an expert was appointed can be genuinely fraught.

The Facts
Redpath Contract Services Pty Ltd (Redpath) entered into a contract to supply services to Anglo Coal (Grosvenor Management) Pty Ltd (Anglo) at the Grosvenor coal mine in central Queensland. Numerous disputes arose between Anglo and Redpath, some of which were referred by Redpath for expert determination. Redpath proposed two experts, both of whom were rejected by Anglo in favor of five alternative candidates. Redpath urged consideration of its original candidates, but said that it was "in principle" willing to agree to the appointment of one of Anglo's candidates, "subject to" that candidate's availability to act as expert and him confirming that he has "no actual or commercial conflicts" in so acting.

The parties jointly drafted an email to be sent to the candidate, enquiring as to his availability. That email was agreed by the parties in May 2016, but not sent until September 2016. The candidate then informed the parties that he would not be available until June 2017, and was unable to assist in resolving the dispute.

It was Anglo’s position that the parties should wait to commence the expert determination process until the candidate was available. Redpath wished to commence the process with one of its proposed expert candidates.

The question before the Court was whether there was an agreement between the parties to appoint Anglo's candidate, with the effect that the expert had been appointed by agreement.

The Decision
The Court drew a distinction between the stages in the appointment of an expert as set out in the parties' contract. His Honour observed that the first stage was for the parties to try to reach an agreement on the appointment. If that failed, the second stage was for an expert to be nominated by the President of one of two stipulated organisations.

The reason his Honour held this to be relevant was that the case authorities pointed to there being an implied contractual term once the second stage was reached; being that the parties agreed to be bound by the appointment of the expert provided his terms of engagement were not unreasonable. The basis for the implication of that term was that, were it not implied, "the contractual provision for the appointment of an expert would have failed". In this case, the Court held that, if Redpath did not agree to the appointment of the expert by agreement with Anglo, the second stage of appointment by one of the two stipulated Presidents would come into play. The contractual provision for appointment of an expert would not have failed at that point. There was no work for the implied term to do in this case.

The Court then turned to the question of whether Redpath unreasonably refused to accept that the expert candidate was available. His Honour's view was that, if Redpath's refusal was not unreasonable, Anglo's arguments must fail.

His Honour found that Redpath's agreement in principle to appoint the candidate was expressly subject to the candidate's availability. His Honour highlighted the fact that Redpath's subsequent refusal was in response to the candidate having expressly said that he was unavailable to act as expert for a period of a further 9.5 months:

"There is at least a touch of irony in the idea that a court would hold that it is unreasonable for a party to a formal dispute resolution process to seek expedition in putting the process into effect. Nowadays courts strive to achieve resolution of litigation under modern rules of court that insist on fidelity to the aspirations of avoiding undue delay, expense and technicality."

The Court found that Redpath had not acted unreasonably in rejecting the candidate's appointment on the basis that he was not available soon enough. His Honour pointed out that:

  • it had always been Redpath’s position that the candidate's appointment was subject to availability over a period of 4 to 6 months from May 2016;
  • the candidate was in fact not available for a further period of 9.5 months from September 2016; and
  • the scope of the disputes to be resolved had already been determined, so there was no requirement for a further period before the expert determination process commenced.

The Court held that there was no concluded agreement to appoint Anglo's candidate and, as a result, no expert had been appointed under the contract.

Implications
This case illustrates that even the most fundamental aspects of dispute resolution clauses in commercial contracts can lead to controversy. In this case, the issue was the appointment of an expert under an expert determination clause and the legal principles of contractual construction which apply in that scenario. This is an important take-away for parties who regularly incorporate that form of ADR into their commercial contracts.

Despite the Court's decision that no expert had been appointed by agreement, ultimately, the Court granted the parties a further two weeks in which to try to appoint an expert by agreement. In that respect, this case is yet another example of the clear judicial reluctance to derail parties' ADR agreements.

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 Christabel Richards-Neville from Clayton Utz Litigation and Dispute Resolution team for their contribution to Pulse.

Tags: Expert determination, Legal practice, Building and construction, Dispute handling administration