Top five things to consider – compulsory acquisition of a business
by Carita Kazakoff
The recent Regional Rail Link compulsory acquisitions in Footscray provide a reminder of the difficulties faced by business owners when government departments acquire land for public infrastructure projects. Slater & Gordon represents a number of business owners in Footscray who’ve been affected by this project – and the process of proving a claim for compensation is by no means smooth sailing for business claimants.
If your business operates on land that is, or is potentially, earmarked for compulsory acquisition, or if you provide professional advice to a business owner who is likely to be affected by compulsory acquisition, there are a number of issues to grapple with – and in most cases, you will need to address these matters as early as possible.
1. Start looking for an alternative property
This is particularly important if you own the land on which your business operates and if there is a rising property market. One of the largest parts of your compensation claim is likely to be a claim for market value. You are entitled to receive compensation for the value of the land that is acquired. The market value is assessed at the date of acquisition, not the potential value in 12 months’ time when you are still looking for an alternative property, and not what you might have to pay to purchase an equivalent property. Compensation is generally based, on what your property was worth and not on the replacement property value. So when you’re served with a Notice of Intention to Acquire, it is time to start looking for alternatives.
If you’re a tenant in a commercial premise, it’s also important to consider your alternatives early. If you intend to relocate, the more evidence that is available of your intention to move, your attempts to find a suitable alternative and the likely costs you will incur, the stronger your claim for relocation costs will be. What’s more, if the acquiring authority needs possession of the property within a short time frame, you may find yourself without a business premise – and with no guarantee of your storage or other interim costs being recoverable.
2. Get your lease in order
If you’re a commercial tenant, the length of your lease, any options for renewal and the market value of your rental will all be relevant issues in determining your compensation claim. Ideally, your lease is already in progress and the terms are documented. And once the property is acquired, it is likely to be too late to finalise any lease arrangements, because of the landlord’s power to deal with the land ceases. However, if you’re aware that an acquisition might occur, check that your lease documents are in order, that both parties have signed the relevant paperwork and that there is evidence of your intention to remain at the property into the future (if that is in fact the case). If you have no paperwork, have only been at the property a short time or have a monthly tenancy terminable at will by the landlord, then you may not have an entitlement to claim compensation for the acquisition.
3. Finalise your tax returns and provide financial records
The profitability or market value of your business is a relevant factor in assessing the ‘reasonableness’ of your claim. You may be interested in claiming removalists’ costs, fit out of a new premise or marketing a new address, for example – and this claim will be assessed, among other things, in light of the value of the business that has been forced to move. Similarly, any potential claim for loss in profits suffered as a result of an acquisition must be supported by detailed accounting records and probably an expert accountant’s report.
It is therefore important that your lawyer and professional advisers are provided with a proper picture of your business: what it cost you to buy (if you purchased the business recently); your profit and loss statements; the value or at least a list of its assets; and the income you take from the business from year to year. Complete your recent years’ tax returns and financial statements and provide them as soon as possible to your advisers. The Authority will only work on the information in your tax returns and if they disclose a low profit this will result in a low valuation of the business for acquisition purposes.
4. Keep records of all expenses
In support of any claim for reimbursement of costs or expenses, you will need to provide invoices or receipts which prove that you have met the expense and which demonstrate the nature of the services or goods provided. Government departments will be reluctant to pay money only on the basis of a bald statement of expenditure made by your lawyer.
Keep receipts and invoices relating to any removalist fees, utility costs, construction work, stationery or any of the other multitude of expenses that may be incurred in a business relocation. If you hold a closing down sale or otherwise discount stock prior to a relocation, be sure to keep detailed cash books which show the changed margin on your stock sales, so that your advisers can if necessary explain any change to your business profits. If news of a proposed acquisition begins to affect the number of customers who visit, keep a record of this.
5. Get a lawyer
It is important to get individual, detailed legal advice when faced with an acquisition. A lawyer will be able to advise you about any entitlement to claim compensation, any potential difficulties with your claim, and will assist in guiding you through the process and liaising with the acquiring authority and any experts.
You are entitled to seek independent advice about an acquisition and its affect on you. The legislation provides for the reimbursement of your reasonable legal expenses if land has been acquired. Contact a solicitor early to discuss your circumstances and the options available to you.
New health and safety laws for your business
by Kath Fawcett
National harmonisation of occupational health and safety laws has been underway in Australia for some time. The goal of harmonisation was that each jurisdiction in Australia would pass uniform health and safety laws, as of 1 January 2012, but retain its own enforcement agency and court systems in relation to the model laws.
Key features of the model laws
The impact of the model laws, and what changes, depends on which jurisdiction your business operates in. For some states, such as Victoria, the model laws are not significantly different to pre-existing state OHS legislation. In other states, the differences are more significant.
Some key features of the model laws that businesses should be aware of include:
- The key duty holder has shifted from the “employer” to a general class of “persons conducting a business or undertaking” or "PCBU".
- The traditional employment relationship is no longer relied on to determine who a duty holder owes health and safety duties to. The model laws introduce the concept of a “worker”, who is any person carrying out work in any capacity for a PCBU.
- Officers of a PCBU hold a primary duty under the model laws to exercise due diligence to ensure that the PCBU meets its obligations under the model laws.
- Workers, health and safety representatives, health and safety committees and union representatives all play a role in addressing work health and safety. This includes union rights of entry to premises, powers of health and safety representatives to issue provisional improvement notices to rectify health and safety breaches, powers of health and safety representatives to direct that work cease, and very significant obligations on PCBUs to consult with workers and their representatives about a wide range of issues which may affect health and safety.
- A tiered penalty regime for failure to comply with health and safety duties, with higher penalties for reckless conduct and where the consequences of the breach of duty result in a risk of serious injury or death.
The Model Work Health and Safety Act was developed back in 2009, and final Model Regulations to underpin the Model Act were released in November 2011. Model Regulations in relation to mining have not yet been finalised.
Which jurisdictions have implemented the model laws?
The model laws commenced operation for the Commonwealth, Queensland, New South Wales, Australian Capital Territory and Northern Territory on 1 January 2012. However, the laws were passed with modifications in New South Wales, which provided for unions to retain pre-existing rights to prosecute for breaches of the Act. Furthermore, Queensland passed supplementary laws regulating the diving industry for that state.
Which jurisdictions have introduced the legislation?
Tasmania and South Australia have both introduced the model laws into their parliaments. However, they each announced late last year that the laws would not be passed by the 1 January 2012 deadline. South Australia, in a statement, reaffirmed its commitment to the model laws. In Tasmania, the upper house amended the proposed start date to 1 January 2013 and the legislation will be further considered this year.
Which jurisdictions have not introduced legislation?
Western Australia has always indicated that it opposed a range of measures in the model laws, relating to penalty levels, union right of entry and powers of health and safety representatives. Notwithstanding that, Western Australia was expected to introduce a version of the model laws omitting these features. It has not yet done so, and it is unclear whether this is still its intention.
In September 2011 Victoria announced that while it continued to support the “principle of OHS harmonisation” it called on the Commonwealth to delay implementation by 12 months due to concerns about the impact of the laws. Victoria is now undertaking an impact assessment which is expected to take several months. It is a matter of “watch this space” as far as Victoria’s intentions of implementing the model laws is concerned.
Where to from here?
Notwithstanding the hiccups to the process of harmonisation, it seems likely that most, if not all, jurisdictions will ultimately end up with some version of the model laws.
Given this, business owners should ensure they have conducted a thorough analysis of the model laws and their impact, even where the model laws are not yet implemented.
When apportioning liability, economic loss is more than just financial
by Andy Munro
A recent NSW Court of Appeal decision (Mitchell Morgan Nominees Pty Ltd & Anor v Vella & Ors[1]) serves as a warning in cases where a defendant seeks to apportion blame to a third party, invoking proportionate liability provisions.[2]
Background
The proceedings concerned events surrounding Mr Alessio Vella who, in December 2005, entered into a joint venture with Angelo Caradonna. The two men planned to promote and sell tickets to the Anthony Mundine v Danny Green boxing fight in April 2006, and to hold a dinner the following night to be hosted by the former heavy weight boxing champion, “Smokin” Joe Frazier.
They opened a joint bank account with ANZ bank, specifically with instructions of “both to sign” in respect of any transactions on the account. In late January 2006, they borrowed $300,000 from a friend, Mr Cartisano, and deposited the money into the joint account as seed money.
Around the same time, Mr Vella was looking to consolidate loans for three properties he owned at Enmore, Leppington and Mangrove Mountain. He took his three certificates of title from his solicitor’s office and placed them in a drawer of a desk in an office he shared with Mr Caradonna.
Unknown to Mr Vella, Mr Caradonna removed the three certificates of title and fraudulently applied for finance in Mr Vella’s named through a mortgage broker. He forged Mr Vella’s signature on application documents, loan agreements, and subsequent mortgages. He was assisted in his deception by a solicitor (who was his cousin), Mr Lorenzo Flammia, and also by a justice of the peace (who was his sister), Ms Maria Palumbo.
The first borrowing was through Mitchell Morgan Nominees Pty Ltd and Mitchell Morgan Nominees (No. 2) Pty Ltd. Upon the security of a loan agreement and mortgage registered against Mr Vella’s Enmore property, Mitchell Morgan paid $1,001,748 to the credit of the joint account between Mr Vella and Mr Caradonna.
The second borrowing was through Permanent Mortgages Pty Ltd. Again, upon the security of loan agreements and mortgages registered against the Leppington and Mangrove Mountain properties, Permanent paid $1,111,124 to the credit of the joint account.
None of the Cartisano money, Mitchell Morgan money or Permanent money stayed long in the joint account. Mr Caradonna forged Mr Vella signature on numerous cheques and within two months he had spent all the money in the account.
After finding out about the fraud, Mr Vella commenced a complex set of proceedings against ANZ, Mitchell Morgan and Permanent, as well as against a number of third parties who had received forged cheques.[3] Numerous cross claims were filed, including a claim by Mitchell Morgan against their solicitors, Hunt & Hunt.
Decision at first instance
In the decision at first instance, Young CY in Eq found that Mr Vella was not liable to either Permanent or Mitchell Morgan under the loan agreements, which were forgeries. In respect of the mortgages, even though forged, they gained indefeasibility by operation of the Real Property Act 1900, however in line with the findings of the Court in Perpetual Trustees Victoria v Tsai[4] and Small v Tomasetti [5], the mortgages were indefeasible “as to nothing” since they secured an obligation to pay money under a loan agreement that did not exist.
Young CJ found that Hunt & Hunt was liable to Mitchell Morgan in negligence, for failing to prepare a mortgage which secured the monies paid away to the fraudsters. His Honour also found that Mitchell Morgan’s claim against Hunt & Hunt was an apportionable claim pursuant to s. 34(1) of the Civil Liability Act (CLA), on the basis that Hunt & Hunt, Caradonna and Flammia were concurrent wrongdoers in respect of the economic loss sustained by the lender. In applying the test of relative blameworthiness and causal potency [6] his Honour determined that Caradonna as orchestrator of the fraud was 72.5% liable, Flammia 15% and Hunt & Hunt 12.5% liable for the loss.
Issues on appeal
The issues on appeal as between Vella, ANZ, Mitchell Morgan and Permanent settled, leaving as the remaining issue the question of proportionate liability between Mitchell Morgan and Hunt & Hunt; specifically, whether Hunt & Hunt was a concurrent wrongdoer in relation to the apportionable claim.
The key question addressed by the court was whether Hunt & Hunt was one of two or more persons (H&H, Caradonna and Flammia) whose acts or omissions caused, independently of each other or jointly, the damage or loss that was the subject of Mitchell Morgan’s claim.
The findings
His Honour Giles JA delivered the lead judgment, with whom Bathurst CJ, Campbell, Macfarlan JJA and Sackville AJA agreed. The relevant distinction was between “damage” and “damages”, for the purpose of determining whether the loss suffered by Mitchell Morgan was apportionable.
To understand this, Giles JA gave the example of a claim in personal injury in respect of a broken leg. There is damage in the form of the injury (the broken leg) and damage in the form of the financial consequences. The two forms of damage are distinct from each other. In another example, where a tortfeasor causes damage to a car, the damage (the dent) is distinct from the damages (such as the inability to use the car for work). Extending this to a claim for economic loss, the loss is not simply the financial detriment.
Applying this analysis to the present situation between Mitchell Morgan and Hunt & Hunt, Giles JA found that the loss, or the harm to an economic interest, suffered by Mitchell Morgan was in the one case paying out money to the fraudsters when it would not otherwise have done so, and in the other case not having the benefit of security for the money paid out. The basis of the claim against Hunt & Hunt was the failure of the solicitors to ensure their client had the benefit of adequate security over the Enmore property. The acts and omissions of Caradonna and Flammia did not cause that harm. On that analysis, losses the subject of the claim as against Hunt & Hunt, and Caradonna and Flammia, were different.
The decision, and how this may affect you or your client
The Court found that Hunt & Hunt’s liability should not be limited under the proportionate liability provisions of the CLA, and the firm was to be wholly liable for Mitchell Morgan’s loss. That loss was determined as being the amount the lender would have received had it sold the Enmore property under a valid mortgagee sale, plus interest at the rate under the loan agreement up to the date of sale, then court interest after that date.
When acting for defendants in damage to property or economic loss claims, this decision and the line of authority contained within it should be carefully considered. With strict requirements already in place in NSW concerning proportionate liability (with defendants having to notify plaintiffs of concurrent wrongdoers, rather than simply issuing a cross claim), practitioners must also carefully consider the nature of the “damage” suffered by the plaintiff.
At first blush, an in-depth analysis of the nature of the plaintiff’s damage may appear to be both arbitrary and onerous. However, caution should be paid in advising defendant clients that notwithstanding an apparently strong claim for contribution against a concurrent wrongdoer, if the damage suffered by the plaintiff due to the acts or omissions of one party is different to the damage due to the other, damage may not be apportioned and both defendants may be fully liable on a joint and several basis.
[1] [2011] NSWCA 390
[2] See Part 4 of the Civil Liability Act (NSW) and Part IV AA of the Wrongs Act (VIC) 1958
[3] Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505; Vella v Mitchell Morgan Nominees Pty Ltd [2008] NSWSC 511; Vella v Australia and New Zealand Banking Group Ltd, Vella v Permanent Mortgages Pty Ltd, Mitchell Morgan Nominees Pty Ltd v Vella [2009] NSWSC 123; and 23 June 2009
[6] Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492 at 495
Approach “off the plan” investments with caution
by Andrew Young
Slater & Gordon is regularly approached by buyers of “off the plan” investment properties who wish to explore their legal rights to escape the purchase contract or damages for misleading representations. A recent series of Supreme Court cases underscores the need for such buyers to carefully consider their legal position before asserting a right of termination.
The background
In Gough & Anor -v- South Sky Investments [2011] QSC 361 and seven related cases, the purchasers entered into contracts to buy proposed apartments in The Oracle, a twin tower high-rise development at Broadbeach, Gold Coast. The apartments were marketed as iconic, luxurious, up-market and exclusive.
Prior to settlement, the buyers were informed that letting rights had been acquired by the Peppers brand and the towers would be known as Peppers Broadbeach.
The buyers relied on the contract and a disclosure statement which formed part of the contract. It was alleged they had expected and contracted to purchase an apartment in a residential tower known as The Oracle whereas at settlement what was proffered was a lot in a hotel or resort branded as Peppers Broadbeach. Concerns were raised about the likely reduction in security and privacy, accelerated deterioration of common areas and liquor licence implications.
Due to the changes, it was argued the seller had evinced an intention not to be bound by the terms of the contract and therefore the buyers were entitled to terminate.
Some buyers also attempted to terminate the contracts under the Body Corporate and Community Management Act on the basis they would be “materially prejudiced” if compelled to settle given the extent to which the disclosure statement had become inaccurate.
The decision
In all eight cases, Justice Applegarth found the buyers had no entitlement to terminate the purchase contracts. The nature of the development as a residential tower had not changed despite the introduction the Peppers branding and business. There had been no contractual promise that the development would be occupied predominantly by owner-occupiers or long-term tenants rather than holiday makers. Although the development was now known by a different name, this did not mean the seller had repudiated the terms of the purchase contracts.
Similarly he found the disclosure statement had not become inaccurate in any relevant way, save for one exception, but on that issue, the buyers had not suffered material prejudice.
The buyers were ordered to perform the contracts and pay the seller’s costs on the indemnity basis.
The implications
This case illustrates a Court will look to the terms of the contract when assessing whether a seller has failed to fulfil its contractual obligations rather than the buyer’s expectations.
There are at least two lessons for buyers here.
First, buyers need to ensure their expectations about the property to be purchased are sufficiently enshrined as fundamental terms of the contract before signing.
Second, buyers need to be cautious about asserting a right to terminate a contract in “line ball” cases. Buyers commonly scour the contractual documents for a discrepancy that may allow them to escape their settlement obligations but they need to be realistic and objective when assessing whether any discrepancies found will be sufficient to establish a right to termination.
The buyers in Gough have appealed the decision.
Turning the tables on what classifies misleading and deceptive advice
by Jessica Latimer
Tomasetti, a barrister, sued his accountants for damages of more than $4million in respect of financial advice to invest in various agribusiness investments. Tomasetti claimed that he was a conservative investor and the financial advice given to him, his wife and his superannuation fund was deficient. His claim failed – he did not establish that the advice was negligent or that the true nature of the investments had been misrepresented to him.
Between 2000 and 2005, the plaintiffs invested in agribusiness investments on advice from Brailey. The investments included Great Southern and Timbercorp investment schemes, as well as almond and citrus schemes. Tomasetti later experienced substantial financial distress, and gave evidence that this was related to ongoing loan repayments and management fees from these investments.
A feature of agribusiness investment schemes is the obligation for investors to pay management fees until the agribusinesses mature and start generating an income – with no guarantee that any income would be derived from such projects. In relation to just one of the plaintiffs’ investments, made in 2000, resulting financial costs (to fund the investment and ongoing costs) amounted to about $1.6million by the end of June 2008.
The background
Tomasetti’s evidence was that his investment goals included achieving modest capital growth and minimising his tax liability. He claimed that he would not have invested if he had been made aware that the schemes were risky or the nature and extent of the schemes’ ongoing management fees. In addition, he claimed that he did not read any of the disclosure or other documents provided to him and that he relied entirely on his financial advisor.
Brailey, the financial advisor, gave evidence that in relation to the later investments, he told Tomasetti that he would be able to afford the ongoing commitments so long as he controlled his discretionary spending – Tomasetti had commissioned a boat to be built, for example, at a cost of some $800,000.
Tomasetti’s investments into the agricultural managed investment schemes were made using borrowed funds – his wife admitted that the investment loan was obtained to achieve a tax deduction. Tomasetti’s wife admitted that discretionary spending could have been reduced to meet loan repayments (or, indeed, could have purchased the agribusiness investment lots outright), however, they were motivated by the tax benefits of an investment loan.
Expert evidence
Evidence as to the standard of care of a reasonably prudent financial advisor was provided by an expert.
The expert’s conclusions were found to be matters of common sense, rather than opinions deriving from expertise, and were therefore inadmissible. The expert witness’ opinion failed to take into account Tomasetti’s financial situation at the time that particular investments were made, and failed to take into account the tax benefits. The expert was critical of the failure to conduct a “know your client, know your product” exercise, but failed to form an opinion about what that would have revealed and how that would bear on the advice given. The expert evidence did not set out what investments Tomasetti should have made at the relevant times and, therefore, did not support the claim that the defendants breached their duties.
The decision
The Court was critical of Tomasetti’s evidence. There were many instances of conflicts between Tomasetti’s evidence and documentary evidence. The Court criticised Tomasetti referring to his position of being a barrister, which was found to be “unnecessary and...unimpressive and self-serving attempts to bolster his own credibility” (at 374).
The Court found that it was improbable that Tomasetti did not understand the investment application forms he signed – particularly concerning the ongoing financial obligation. The judge questioned how “a person, no matter how busy or pre-occupied, could sign such documents without either having been told what they were for, or failing that, asking what they were for, defies imagination” (at 367). The Court found that the forms signed by Tomasetti, “by their very appearance” made it difficult to accept that he had no idea what he was signing.
Tomasetti’s evidence was largely directed at the risky nature of the investments which he claimed had not been explained– the judge found that the tax benefits enjoyed as a result of the investments were a primary motivating factor for Tomasetti which were not sufficiently addressed in evidence.
Advice was not misleading or deceptive
Tomasetti alleged that Brailey misrepresented to him that the investments would produce reasonable commercial returns with time, when, in fact, the investments did not provide any future income. The Court found that was a submission made with the benefit of hindsight, and that the performance of the investment was not reasonably foreseeable at the time the representation was made. In agribusiness type investments, it was found that “anything might be possible” in relation to their financial performance.
Tomasetti’s case confirms that the mere fact that a prediction or opinion as to future events is not ultimately fulfilled does not make it misleading or deceptive – particularly because there was no evidence as to how an assessment could have been made at the time that the agribusiness would not perform as expected.
Conclusion
The decision in this case illustrates how the Court looks at all factors that motivate someone to invest before ruling on whether advice given is misleading or deceptive. In Tomasetti’s case he would have invested no matter what the advice because his prime objective was to reduce his tax liability. A plaintiff’s evidence should address all relevant facts, but in Tomasetti’s case, his evidence did not address the tax minimisation of the investments and how this influenced his decision making.
Tomasetti’s case also clarifies that expert evidence called on behalf of a plaintiff must address the plaintiff’s financial circumstances at the time the investment was made, in order to be persuasive. Furthermore, for expert evidence to be admissible, expert witnesses must draw their conclusions based on their expertise rather than common sense.
Shoalhaven City Council v Firedam Civil Engineering Pty Limited [2011] HCA 38
by Roop Sandhu
The High Court has unanimously allowed an appeal by a local council against a contractor in relation to dispute resolution provisions in a contract between them.
Dispute resolution
To avoid costly and time-consuming litigation contracts often contain provisions dealing with possible disputes between the parties, and specifically how these disputes are to be resolved. Dispute resolution methods commonly inserted into contracts include arbitration, expert determination and mediation. Each of these methods has value and can be useful, depending on the circumstances between the parties.
Mediation is a process where a third-party facilitates discussion in an attempt to have the parties reach a mutually acceptable resolution. Mediation is helpful in circumstances where the parties wish to retain control of their dispute, and not have a decision imposed on them. However, with mediation, because a decision is not imposed, there is a greater risk of the dispute resolution process failing and the matter winding up in court. To reduce this risk, arbitration or binding expert determination may be more appropriate.
In arbitration, the parties submit their dispute to what is effectively a private judge, who makes a decision. Expert determination differs from this, in that the dispute is not determined by a private judge based on legal principles, but rather by a person with expertise and practical experience on the matter in dispute, eg: a property valuear or engineer.
The Background
A contract was formed between Shoalhaven City Council and Firedam Civil Engineering Pty Limited for Firedam to build a waste water collection and transport system as part of a wider regional sewage scheme. As is common in contracts in the building and construction field, the contract contained dispute resolution provisions.
The contract incorporated the NSW Government GC21 (Edition 1) General Conditions of Contract. These conditions (which are voluminous) included dispute resolution provisions that called for a party to give notice of a dispute, and for the parties to then attempt to resolve the dispute between them.
If that failed, the conditions required that the dispute be submitted to expert determination. The conditions specified that the role of the expert was not to act as an arbitrator, although the expert was required to give reasons. According to the conditions, the decision of the expert was final and binding, provided the aggregate liability attributed by the determination to one party in favour of the other did not exceed $500,000. Otherwise, parties were free to unilaterally commence proceedings.
The dispute between the Council and Firedam arose from delays in completion of the contract. Firedam sought several variations relating to difficulties with boring work, rock blasting and realignment. Firedam asserted that it could not have foreseen these difficulties when it entered into the contract. An expert determination was sought.
The expert allowed some of Firedam’s claims but disallowed others. The Council claimed $783,031.60 in damages, which it attributed to Firedam’s delay. The expert determined that, since some of Firedam’s variations and delays were contributed to by the Council, Firedam should have more time to complete the contract, which had the effect of reducing the Council’s claim to $497,142.55. This was below the $500,000 threshold that, according to the contract, made the determination binding.
Firedam challenged the determination on the basis of an assertion that the determination was inconsistent. Firedam said that, without an explanation for the purported inconsistency, the determination was not binding as it was not made according to contractual requirements, and specifically the requirement to give reasons.
At first instance, the Supreme Court of New South Wales dismissed Firedam’s claim. Firedam appealed to Court of Appeal, which found in favour of Firedam. The Council appealed to the High Court.
The Decision
The High Court decided unanimously in favour of the Council. The court decided that, as a threshold matter, there was no inconsistency in the determination, meaning that the premise of Firedam’s attack on the determination was not made out.
Despite disposing of the dispute in this way, the court nevertheless made a number of statements of principle that are broadly applicable to these sorts of disputes.
The court pointed out that to best understand whether the dispute resolution procedure (in this case, the expert determination) has been carried out properly, it is important to examine the contract carefully and the role intended for the expert in handling disputes. The court pointed to the conditions specifying that the expert was to act “as an expert and not as an arbitrator” as being important in assessing the appropriateness of the reasons provided in the expert determination.
The court also observed that it may be the case that, even if the determination had contained an inconsistency or mistake, the mistake would not necessarily deprive the determination of being one given “with reasons”. Ultimately, assessing this question would depend on the importance of the mistake to the issues in dispute, and the nature of the determination to be made and the reasons to be given, as described in the contract.
The Implications
In general, courts will try and give effect to the intentions of the parties in entering into contractual terms regarding dispute resolution. This case is a good recent example of the increasing tendency of courts to approach contractual disputes in this manner.
Accordingly, when entering into contracts, parties should consider including a dispute resolution mechanism to avoid the time and expense of litigation. It is important to consider which available mechanism would be most appropriate to the disputes that are likely to arise.