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Peter Condliffe Owen Dixon Chambers East

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ADR Clauses in Commercial Contracts

Alternative dispute resolution clauses (ADR) are now found in most contemporary

contracts. These clauses are meant to be used when the contract breaks down or to

assist the parties in the management of differences that may emerge. There are several

significant reasons and advantages for the use of such clauses including:

• They help the parties prepare for the possible eventuality of

conflict and disputes;

• They allow the parties to design their own hopefully flexible

procedures including the type of process, the third party

intervenor and the service organisation who may be utilised

to provide ADR services;

• They assist the parties to avoid a secondary dispute over the

methods of dealing with the primary dispute and may

motivate them to negotiate;

• They help avoid (although not entirely) the ploy to “play

tough” and not to appear weak that parties and their legal

advisors use when confronted with disputes;1 and

• They may be perceived as assisting the professional profile

and obligations of legal advisors although there has as yet

been no cases involving professional negligence for a failure

to include such a clause.

Professional associations and service-providers have standard dispute

resolution clauses: see Appendix 1. These clauses provide that if a dispute

arises the parties will use one or more of the dispute resolution processes

provided by the particular association. These clauses are usually drafted in a

generalist way and are not designed for particular circumstances. Therefore,

there is often the need to design and draft particular dispute clauses to suit the

needs of the parties. It should also be remembered that dispute resolution

clauses of various sorts have been incorporated in contracts for many years

1 For an analysis of lawyers approach to mediated disputes see Andrew Robertson, “Compulsion, Delegation and Disclosure – Changing Forces in Commercial Mediation,”(2000)9(3) ADR Bulletin 50.


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but the challenges to them are relatively new. Most of the earlier forms of

dispute resolution clauses provided for a referral to arbitration. The dispute

clauses traditionally used under the Uniform Commercial Arbitration Acts

were and are generally quite uncertain at the time of their creation. However,

they were generally upheld because of certain characteristics of that process

which will be explored later in this paper. ADR clauses that include

processes other than arbitration have become much more prevalent in the last

fifteen years and been subjected to extra scrutiny. The design and drafting of

such clauses has thus become more an issue for lawyers and will be dealt with

later in this paper. Before coming to this let us look at the dispute resolution

clause in the box below.

A Possible Dispute Resolution Clause

Let us assume that one of the parties to the contract in which this clause

appears regards that there has been a breach of contract and issues

proceedings. The other party in turn objects and says that the dispute

resolution clause has not been properly adhered to and applies to the Court for

a stay of proceedings.

Courts have on many occasions entertained applications for a stay of proceedings on

the basis that the dispute the subject of the litigation is one to which the parties have, by

contract, committed themselves to engage in a defined resolution procedure before

approaching a court for relief. The purpose of such a stay is to require the parties to

adhere to their contractual agreement to delay going to court until after some agreed

dispute resolution process of their choosing has been exhausted. In dealing with the

particular case of an arbitration agreement, Dixon J said in Huddart Parker Ltd v The

Ship Mill Hill (1950) 81 CLR 502:

"But the courts begin with the fact that there is a special contract between the parties to refer, and therefore in the language of Lord Moulton in Bristol Corporation v John Hard & Co, consider the circumstances of a case with a strong bias in favour of maintaining the special bargain or as Scrutton, LJ said in Metropolitan Tunnel and Public Works Ltd v London Electric Railway Co, a guiding principle on one side and a very natural and proper one, is that parties who have made a contract should keep it."


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While this and other similar statements refer to an agreement to submit to arbitration,

there is no reason why the same principles should not and do not apply where the

agreement of the parties is to follow some other non-curial process for seeking to

resolve their dispute. In Badgin Nominees Pty Ltd v Oneida Ltd 18 December 1998

[1998] VSC 188, Gillard J held that the principle in Mill Hill applied to an application

for a stay where the parties had agreed to a dispute resolution involving an expert; and

in other cases mentioned below, the same approach has been taken in relation to

contractual provisions involving other forms of dispute resolution: see also Morrow v

Chinadotcom Corp – BC200101296 [2001] NSWSC 209.

"A Possible Dispute Resolution Clause”

(a) The parties must attempt to settle by negotiation any dispute in relation to this Agreement in accordance with this clause before resorting to external dispute resolution mechanisms.

(b) A party claiming that a dispute has arisen under this Agreement must immediately notify the other parties' Nominees.

(c) If the dispute is not resolved by the Nominees within seven (7) Business Days of it being referred to them then the dispute must be immediately referred by the Nominees to their respective Chief Executive Officers.

(d) If the dispute referred to in the case of a referral to the Chief Executive Offices under clause (c) hereof, is not resolved within seven (7) Business Days of referral, the matter must be referred by the Nominees for dispute resolution to the Institute of Arbitrators and Mediators Australia (IAMA) or its successors and the parties shall enter into that process in good faith.

(e) If a dispute is not resolved within 2 months after referral to clause (d) hereof, or such longer period as agreed between the parties, then either party may institute legal proceedings without further notice.

(f) Notwithstanding the existence of a dispute each party must continue to perform its obligations under this Agreement, including payment.

Possible Conditions Precedent to Maintain a Viable Dispute Resolution Clause

For the litigation to be stayed there are at least five possible conditions to be satisfied.

First, in order to avoid being void as an unlawful attempt to oust the jurisdiction of the

Court, the provision must operate as a pre-condition to the parties' freedom to litigate


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rather than a purported denial of that freedom: Scott v Avery (1855) 5 HLC 811.

Second, it will be void for uncertainty and unenforceable if it constitutes an “agreement

to agree.” Third, it is self-evident that the disputes which are the subject of the

proceedings sought to be stayed must be within the scope of the contractual provision.

Fourth, the agreed contractual process must possess such a degree of definition and

certainty as to enable it to be meaningfully undertaken and enforced. Finally, at least in

NSW, there should be careful reference to such terms as “good faith.”

In the present case the first and second of these conditions appears to present no

difficulty. The other conditions are more difficult and require some further analysis.

The Scott v Avery nature of the clause is apparent. Paragraph (e) makes explicit the

ability of the parties to access a court at a reasonable stage in the process.

The second condition that a contract clause is unenforceable if it is merely an

“agreement to agree” is also clear. One cannot enforce an ADR clause which is

dependent upon the wishes of one or more of the parties. For example, “A and B will

mediate if they agree…..” This is too uncertain and would be both void and

unenforceable.2 A relevant matter to determine is whether the parties reached a point of

agreement on all essential matters or were there matters still subject to negotiation? As

Gillard J in Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103 (16

October 1998)

“The court considers all circumstances leading up to and subsequently to the date of the alleged contract. This involves considering the background facts, the setting in which negotiations took place, the facts objectively known to the parties, what they said wrote and did or did not do, and any other matters which bear on the question whether they intended to and did reach a concluded agreement in law

To be binding the parties much have reached a concluded bargain. See May v. Butcher (1934) 2 K.B. 17 at 21. The law does not recognise an agreement to make an agreement, nor does it recognise a contract to negotiate. See Thorby v. Goldberg (1964) 112 C.L.R. 597 at 603. If any alleged term is uncertain and/or vague, this would be a relevant factor pointing against a

2 Minister for Main Road for Tasmania v Leighton Contractor Pty Ltd (1985) 1 BCL 381.


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binding contract in law. See Brew v. Whitlock (1968) 118 C.L.R. 445 at 456-7 and at 460-1.” 3

The judgement of Kirby P in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24

NSWLR 1 in which he held that a contract to negotiate in good faith could be

enforceable in some circumstances is a good example of the way in which Australian

courts, compared with the English courts, have been ready to be flexible in applying

this principle. As Warren J in Computershare Ltd v Perpetual Registrars Ltd, 6 June

2000 [2000] VSC 223 states that agreements to negotiate a dispute are capable of being

enforced4. In the present case the clause goes beyond being simply an agreement to

agree as the parties have laid out the terms of their agreement in specific enough terms

in so far as it relates to the procedures to be followed.

The third condition - that the scope of the dispute resolution clause be sufficient to

comprehend the subject matter of the proceedings - raises two possible issues. What if,

for example, the litigation contemplates or is not confined to claims based upon a

breach of the original contract? Also, what if one or more of the parties is not a party to

the contract?

To answer this question one must go to the wording of the clause and in particular the

meaning of "any dispute in relation to this Agreement." In the New South Wales Court

of Appeal in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39

NSWLR 160 Gleeson CJ (in which Meagher and Sheller JJA concurred) at p.165

stated:

"When the parties to a commercial contract agree, at the time of making the contract, and before any disputes have yet arisen, to refer to arbitration any dispute or difference arising out of the agreement, their agreement should not be construed narrowly. They are unlikely to have intended that different disputes should be resolved before different tribunals, or that the appropriate tribunal should be determined by fine shades of difference in the legal character of individual issues, or by the ingenuity of lawyers in developing points of argument."

The question in the Francis Travel case was whether a particular dispute was properly

described as one "arising out of" an agency agreement. The dispute involved a claim

3 [39-40]. 4 At [14].


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that a purported termination of the agreement had been wrongful because of

representations made during the course of the agreement involving, as particularised,

representation, estoppel and misleading conduct in contravention of the Trade Practices

Act 1974. The Court held that that claim was one "arising out of" the agreement and it

is in that connection that the Chief Justice's warning against construing such

agreements narrowly was made.5

Whether one thing may be said to exist or arise "in relation to" another is, as Lehane J

observed in Australian Securities Commission v Bank Leumi Le-Israel ( 1996) 69 FCR

531, very much a matter of impression to be gathered from the whole of the context.

Justice Barrett in Morrow v Chinadotcom Corp held that similar words in a contract

“…extend to all controversies about the transactions and processes provided for in the

agreement or which flow from it. It is not, in my judgment, confined, as the Founders

(the Plaintiffs in that case) contend, to claims for breach of the agreement.”6

What about the issue of the joinder of a party to the proceedings who is not a party to

the original contract in which the dispute resolution clause appears? Can the clause

operate to include this party? This will depend upon the role and attitude of that third

party and is not necessarily fatal to the operation of the dispute resolution clause.7

The fourth condition concerns whether the dispute resolution clause has the necessary

degree of certainty of operation. In this regard there has been considerable case law

mainly in NSW. Three decisions of the Supreme Court in that State have a particular

bearing on the matter. They are Hooper Bailie Associated Ltd v Natcon Group Pty Ltd

(1992) 28 NSWLR 194 and Elizabeth Bay Developments Pty Ltd v Boral Building

Services Pty Ltd (1995) 36 NSWLR 709, both of which are decisions of Giles J, and

the decision of Einstein J in Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153

FLR 236. In Victoria the decision of Warren J of the Supreme Court of Victoria in

5 The authorities supporting a broad construction of this kind are discussed in the judgment of Rolfe J in O'Connor v Leaw Pty Ltd (1997) 42 NSWLR 285 where an arbitration clause referred to any dispute or difference "concerning this agreement". His Honour held that this extended to a claim on a quantum meruit.

6 Op. cit., at par 17. 7 Morrow v Chinadotcom Corp at [18].


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Computershare Ltd v Perpetual Registrars Ltd, 6 June 2000 [2000] VSC 223 is of most

relevance here. In Hooper Bailie and Computershare, the particular dispute resolution

clause was found to have the degree of certain operation necessary to justify a stay,

while in Elizabeth Bay and Aiton it was not.

Hooper Bailie involved an agreement of the parties to submit to conciliation of their

differences by a named conciliator, one Schick. The decision of Giles J upheld the

conciliation clause the subject of the case. On the issue of certainty of operation his

decision is summed up in the following passage from the judgment:

"[T]here was a clear structure for the conciliation by which Natcon was to attend before Mr Schick, put before him such `evidence' and submissions as it desired, and receive his determinations. As has been said, ancillary to this arose an exchange of information between the parties for the purposes of the conciliation, and there were no determinations in any sense other than in the sense of suggested solutions. In my opinion Natcon promised to participate in the conciliation by doing those things, and the conduct required of it is sufficiently certain for its promise to be given legal recognition."

At page 206 Giles J stated:

“What is enforced is not co-operation and consent but participation in a process from which co-operation and consent might come.”

In Elizabeth Bay, the relevant contractual clauses provided for "mediation administered

by the Australian Commercial Disputes Centre (`ACDC')". Giles J had before him

evidence of the published mediation guidelines of ACDC but noted that the parties had

not purported to contract by reference to those guidelines. He nevertheless accepted a

concession that that had been their intention. Even then, however, he found that the

guidelines did not identify any applicable form of mediation agreement and

contemplated that a number of key features of the agreement in any given case would

be as the parties to the mediation agreed.8 At p.715, Giles J said:

8 See also The Heart Research Institute Ltd V Psiron Ltd [2002]NSWSC 646 where the dispute resolution clause included a provision that where a dispute could not be settled by mediation it would be submitted to expert determination conducted in accordance with the ACDC Expert Determination Guidelines. The Guidelines provided that the parties had to sign an Expert Determination Agreement


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"The agreements to mediate were open-ended, indeed unworkable because the process to which the parties had committed themselves would come to an early stop when, prior to the mediation, it was asked what the parties had to sign and the question could not be answered."

Earlier, at pp.714-5, referring to the position as it might have been in the absence of the

concession as to the applicability of the ACDC guidelines, Giles J said:

"The concession makes it ... unnecessary to express any view upon whether a mediation clause having no greater content than an agreement to settle the dispute by mediation administered by a named person or body would require of the parties participation in a process of mediation of sufficient certainty for legal recognition of their agreement. It may be that a conclusion favourable to incorporation or sufficient certainty would not be warranted ..."

The dispute resolution clause before Einstein J in Aiton made reasonably detailed

provision for the parties to place their differences before a mediator appointed by the

President of the New South Wales Bar Association. The place of mediation was fixed

and things the mediator was expected to do were specified. There was also provision as

to the order in which the parties might make representations to the mediator. The

central clause was worded as follow, "The Parties agree to use all reasonable

endeavours in good faith to expeditiously resolve the Dispute by mediation."

At p.252 of his judgement, Einstein J set out what he regarded as minimum

requirements which ought to be seen as applying to any stage of a dispute resolution

clause, whether for mediation or otherwise. Three of these are:

"!The process established by the clause must be certain. There cannot be stages in the process where agreement is needed on some course of action before the process can proceed because if the parties cannot agree, the clause will amount to an agreement to agree and will not be enforceable due to this inherent uncertainty.

* The administrative processes for selecting a mediator and in determining the mediator's remuneration should be included in the clause and, in the event that the parties do not reach agreement, a mechanism for a third party to make the selection will be necessary.

setting out the terms of the process. Enstein J found that there were inconsistencies between these two documents and therefore void for uncertainty. This is a similar to the line of reasoning in Elizabeth Bay.


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* The clause should also set out in detail the process of mediation to be followed - or incorporate these rules by reference. These rules will also need to state with particularity the mediation model that will be used."

Applying these criteria to the clause, and following the decision in Elizabeth Bay,

before him, Einstein J found that it lacked the necessary certainty. The stumbling block

was that there was no provision for determining the costs of the mediator or who was to

pay them.

In summary, Hooper Bailie upheld the conciliation agreement because it prescribed the

conduct of the parties for participation in the ADR process with sufficient certainty. In

Elizabeth Bay, the guidelines did not take up ACDS’s form of mediation agreement

because, beyond a simple reference to those terms they did not identify the form and it

was not wholly consistent with the guidelines. That is the terms of the agreement were

left to be agreed, and it was not possible to identify that which the parties would have

been required to follow. In Aiton, what was held to be the problem with the clause was

the fact that it was silent about the remuneration to be paid to the mediator and the

effect of a declined appointment.

In the Computershare case, Warren J emphasised, in holding the particular clause to be

sufficiently certain, that there was "a framework to which the parties have agreed

including subjecting themselves to an obligation to establish a detailed framework

within which a solution may be achieved between them". The situation in Victoria,

because of this case, would seem to constitute an exception to the uncertainty rule and

runs counter to the trend in NSW. Whereas in NSW there appears to be a narrow

interpretation of the uncertainty rule although Einstein J in Aiton stated:

It is for this reason that the process from which consent might come must be sufficiently certain. This is not to suggest that the process need be overly structured. Certainly, if the specificity beyond essential certainty were required, the dispute resolution procedure may be counter-productive if it began to look much like litigation itself.9

Warren J seemed to agree with this. The Computershare case involved a contract for

the supply of share registry services. The dispute resolution clause in the contract

9 At p. 250-251.


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provided that the parties were to try and resolve the dispute themselves prior to it being

handed over to the Chief Executive Officers of each party for resolution using

mediation, conciliation, executive appraisal or expert determination. No procedures

were specified for any of these suggested procedures. The dispute resolution clause

under examination in this case is included at Appendix 2.

The defendants sought to enforce the dispute resolution clause by way of a stay of

proceedings. The plaintiffs argued that it was void because of uncertainty. Warren J

found that the dispute resolution clause capable of being enforced. Her Honour stated:

14. Applying the approach taken by the NSW Courts, I consider that, as a matter of concept, agreements to negotiate are capable of being enforced. The circumstances in Hooper Bailie is an example of precisely that because there the agreement was an agreement to conciliate or mediate. Logically, parties cannot stipulate principles upon which mediation processes must produce an outcome. Of its very nature, the parties must negotiate and hold discussions to find their own solution. In essence, the parties are required to establish a protocol or framework within which the matters between them are to be negotiated. In essence, that is what mediation and conciliation are all about. It is very different from arbitration where the arbitrator must decide according to law, or for example, where an expert is to decide what is the fair market value of premises and the like. On the basis of such conceptual analysis, therefore, the present agreement as encapsulated in clause 24 of the Bureau Services Agreement is enforceable between the parties. In this respect, I am particularly assisted by the discussion of Kirby P, in Coal Cliff Collieries at p 208. The discussion sets out the circumstances in which the obligations to negotiate are enforceable and one of the factors focused upon in that case was that parties can impose upon one another by contract, a good faith requirement to negotiate to seek to reach the agreement that would be produced by that process. In my view, it follows that parties can impose an obligation to endeavour to reach an agreement and if they do not approach that task in good faith they are in dereliction of that obligation.

With regard to uncertainty Her Honour stated:

15. Consideration of clause 24.5 in the context of the discussion in Coal Cliff Collieries demonstrates that it falls within the parameters of the circumstances contemplated in that case. They agreed to endeavour in good faith to agree upon a process and to agree on procedural rules. Mr Beach relied upon Cott UK


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Limited v FE Barber Limited (1997) (3 All ER 540) where Judge Hejarty QC sitting as a Judge of the High Court considered that where a clause provided for an alternative form of dispute resolution, such as determination by an expert, a court should not exercise its inherent jurisdiction to stay an action where there is an absence of rules to govern arbitration or alternative dispute resolution between the parties. In my view, the approach taken in the Cott case can be distinguished by the present matter in that here there is a framework to which the parties have agreed including subjecting themselves to an obligation to establish a detailed framework within which a solution may be achieved between them. As a consequence, clause 24.5 is within the sphere of obligation to negotiate and is enforceable. Furthermore, where parties have made a special agreement requiring them to address a path to a potential solution there is every reason for a court to say such parties should be required to endeavour in good faith to achieve it. In these circumstances the court does not need to see a set of rules layed out in advance by which the agreement, if any, between the parties may in fact be achieved. It follows that I consider there is nothing in the uncertainty argument urged by Mr Beach. Furthermore, in so far as the exercise of the discretion is concerned, it is noteworthy that the parties have operated in a commercial context and made the Bureau Services Agreement between themselves. In so doing, they have expressly laid out in detail the steps they consider should be taken. In such a context, in my view, there is no reason why the discretion of the court should be exercised in the manner urged on behalf of Computershare.

Her Honour ordered a limited stay so that the clause could be performed. Her Honour

seems to be suggesting that the essence of dispute resolution clauses is the lack of

certainty regarding the procedures and processes to be used. But as Spencer posits

should such clauses be an exception to the uncertainty rule?10 He suggests that the

answer is probably “yes”. Having complex sets of procedures that takes away from the

parties autonomy seems contrary to the basic premises underlying alternative dispute

resolution. The benefits of such processes (simplicity, cost efficiencies, and timeliness

etc.) which are meant to relieve the burden on overburdened courts would otherwise be

lost. Such procedures could then be reduced to just another rung along the ladder of

various processes which only suit the well-heeled litigant not particularly interested in a

timely response to the dispute.

10 Spencer, D, To What Degree of certainty Must a Dispute Resolution Clause Be Drafted? (2003) 14 ADRJ 153; see also Spencer, D., Uncertainty and ADR Clauses: The Victorian View (2001) 12 ADRJ 214.


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Warren J clearly appreciated the central part that party control plays in the

attractiveness of ADR to participants. To intervene in this aspect of the process only

militates against the chance for successful outcomes. In fact the NSW courts attitude to

these matters would appear to be a clear indication of the way in which such processes

as ADR can be impeded in their development. In this regard the importance of the

decision by Warren J cannot be understated and one hopes it will be followed in further

cases as they emerge in future. It represents a marked departure from the legal

formalism of the NSW courts linked to an understanding of the informality of ADR

processes. The matter is not entirely settled and it therefore would be wise for any

drafters of dispute resolution clauses to draft them in such a way that gives their

opponents or the courts little scope for contemplating a challenge on the basis of

uncertainty.

The final condition precedent relates to providing for negotiation in “good faith.” Good

faith provisions, whether implied, inferred or express, have seen increasing use in

recent years. Carter and Harland regard the obligation to act in good faith as being

more onerous than the obligation to cooperate but less than the obligations of a

fiduciary.11 Good faith provisions regularly occur in legislation.12 Giles J had some

difficulties with such a concept in the Elizabeth Bay case because of the tension

between self-interest and the interests of the other party in negotiation.13 He held that

the parties could not commit to in advance to negotiate in good faith because this might

change by the time they got to the dispute and was alternatively to uncertain to be

enforceable. Subsequent decisions have been less formalistic and more realistic in this

regard. Einstein J in Aiton disagreed with the analysis of Giles J. In this case part of the

dispute resolution clause provided that the parties use “…all reasonable endeavours in

good faith to expeditiously resolve the dispute…’ as well similar terms in certain other

parts of the clause. Whilst Einstein J found the clause to be uncertain as indicated

above this was based upon a lack of certainty about the mediators remuneration.

However, he disagreed with Giles J’s distinction between self-interest and other interest

because one party does not have to represent the other party’s interests. He stated that

11 Carter JW and Harland, Contract Law in Australia (4th Ed. (2002) par. 113. 12 The UNCITRAL Model Law on International Commercial Arbitration (2002) contains a good faith clause.12 Sections 170QK(2) and 170MP of the Native Title Act 1993(Cth) and the Trade Practices Act 1974 (Cth). 13 At 716.


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“….maintenance of good faith in a negotiation process is not inconsistent with having

regard to self-interest.” The comments of Warren J above would also indicate a

preference for this view and has been supported by a number of other courts.14 Given

the above considerations it would appear that the good faith provision contained in our

draft clause would not be fatal to its enforceability.

Where do these considerations leave our dispute resolution clause? The clause provides

for a series of steps and it is necessary to trace those steps to see how the clause works.

The clause provides for the general principle that the parties "must attempt to settle by

negotiation any dispute in relation to this Agreement in accordance with this clause

before resorting to external dispute resolution mechanisms". It then says that a party

claiming that a dispute has arisen under this agreement must immediately notify the

other parties' Nominee. The clause thus provides a means whereby the party claiming

there is a dispute notifies the other parties of that dispute. Paragraph (c) begins with the

words, "If the dispute is not resolved by the Nominees with seven (7) business days of

it being referred to them" - thus implying (but not explicitly saying) that the first step

after that referral is for the Nominees to make some attempt among themselves to

resolve the notified dispute. Failing that, the remainder of (c) requires that the dispute

be referred by the Nominees "…respective Chief Executive Officers”. The final stage

in the process is that "the matter must be referred by the Nominees for dispute

resolution to IAMA. Finally, and failing successful resolution by any of these means,

either party may institute legal proceedings without further notice, provided that at least

two months (or any longer period the parties have agreed) has passed since referral to

the IAMA.

The clause clearly leaves it to the parties, their Nominees and Chief Executive Officers,

as to how the dispute or disputes are going to be managed. Only then does it require

that the parties, per paragraph (d), refer any unresolved matter to IAMA. But what

does this mean? If one looks at the IAMA site there are a number of possible processes

that this organisation operates to assist parties in dispute. It is a member driven dispute

resolution organisation whose principal objects are to promote various kinds of dispute

resolution principally arbitration and mediation but including expert determination and 14 See Aiton Australia Pty Ltd v Transfield Pty Ltd[1999]NSWLR996;ACCC v Leelee Pty Ltd [1999] FCA 1121; Demagogue Pty Ltd v Ramesnsky (1992) 39 FCR 31.


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conciliation. There are guidelines for the various processes that may be used. Except

for expedited matters there are no set fees required these being dependent upon the

experience of the arbitrator, mediator, expert or conciliator to be used. There are

extensive guidelines for the use of these various processes. IAMA acts as a sort of

referral agent to those of its members who may be appropriate to act in any particular

matter. Neither does it determine what process the parties will use. It is not one of

those cases where the parties have referred matters in the contract to a third party for

management and which the courts have often found to be sufficiently certain. 15 This

clause does not refer to dispute resolution to be managed by IAMA or cast IAMA in the

role of a decision maker who is, by the parties' agreement, to fill a gap they have

consciously left. Rather, the clause speaks of a dispute being referred "for dispute

resolution to" IAMA without seeking to define its role.

In NSW at least it would appear that this clause would fail for want of certainty. There

the authorities require certainty as to procedure and process as an essential element

before there can be an exercise of the courts power to order a stay of proceedings. In

Victoria the situation would be somewhat different. The clause would most likely to

held to be certain enough to be enforced. However, there are other issues as well as the

ability of one of the parties to enforce the clause. These relate to severability,

compliance and remedies for breach of the contract.

Other Issues

Where a dispute resolution clause is held to be void or invalid it is severable from the

rest of the agreement in which it is contained. What if only part of the clause is held to

be invalid or unenforceable? The answer would seem to be that the whole clause

fails.16 For example, in Banabelle the failure of one of five stages precluded the legal

enforceability of the whole process.

Another issue is determining how a court will determine whether parties are complying

with a dispute resolution clause. Compliance with a dispute resolution clause is a

15 For example see Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600. But this line of authority is probably not relevant to the matters now under consideration. 16 See Baulderstone Hornibrook Engineering Pty Ltd v Kayah Holdings Pty Ltd (1997) 14 BCL 277; State of NSW v Banabelle Electrical Pty Ltd (2002)54 NSWLR 503 [70];


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matter of evidence in every case. For example in Computershare Ltd v Perpetual

Registrars Ltd No. 217 the plaintiff was held to have improperly terminated the process

on the evidence.18 There may be objective criteria, express or implied which may be

relatively easy to determine. But requirements of good faith and reasonableness can

muddy the waters as can the essentially private and confidential nature of many of the

processes.

The remedies for breach are essentially centred upon breach of contract. There are

three possibilities. Firstly, there can be a stay of the proceedings and the Supreme Court

and the Federal Court has an inherent jurisdiction to do this.19 Stays are only granted

where the proceeding amount to an abuse of process or are vexatious or frivolous. The

Commercial Arbitration Act specifically provide for a stay of proceedings in s.53. The

NSW courts in the cases mentioned above and Warren J in Computershare accepted the

appropriateness of ordering a stay to enable an ADR process to be pursued. There is

obviously a balance between participation in a process which can expedite a resolution

against the possibility that it will not work.

The other remedies are specific performance so as to order a party to carry out his or

her undertakings. However it has not yet been ordered in an Australian court as yet but

it may be that this will not be so far away. The problem with this remedy is that such an

order would be difficult to supervise and may simply become an exercise in futility.

Damages would also appear to be a limited remedy although in Simon Richard Lane

The Commonwealth Bank of Australia [2000] NSWIRC Comm 274 a dispute resolution

clause had not been complied with in an employment contract and that this was part of

the unfair conduct directed towards him. It was held that the failure to conduct the

mediation deprived the plaintiff of an opportunity to put forward his view that he not be

dismissed. Consequently the plaintiff was awarded costs including those relating to his

attempt at mediation.20 There is also a line of authorities developing in the United

Kingdom which may indicate a distinct propensity of the courts to compel mediation

17 [2002] FSC 233. 18 See also Aiton Australia Pty Ltd v Transfield (1999) 153 FLR 236 where it was found the at the defendant had frustrated the process. 19 Supreme Court Act, Order 23; Federal Court of Australia Act s29. 20 At [258] and [269].


16

through the use of cost orders which penalise parties who do not make reasonable use

of ADR clauses in contracts.21

The Power to Order Mediation

What if the applicant, in the alternative, sought an order for compulsory mediation? The

Supreme Court Act 1986 and the Supreme Court Rules provide for such mandatory

orders. 22 This jurisdiction is a discretionary one.

If the parties agreed to such a referral then it is probable that in most instances so would

the Court. There is not a lot of precedent to guide the courts here although it seems

clear that the intent of the powers is to enable the Court to order compulsory mediation

against the wishes of one of the parties.23 Justice Perry in the South Australian

Supreme Court in Hopcroft v Olson stated:

"Be that as it may, it does not appear to me that precedent is of much assistance in determining the present application. Every case involves different circumstances. What might be an appropriate procedure in one case, may clearly be inappropriate in another."

One would therefore have to consider the circumstances of the case to determine if the

Court would consider using its power.

If the parties had used a dispute resolution clause similar to the one above it does at

least show some predisposition towards ADR. It could be argued however that if it fails

for uncertainty that there has been no agreement at all to an ADR process at all. As

Barrett, J in the Supreme Court of NSW stated when considering a like provision stated

the fact that the parties had included an ADR clause in their contract was of marginal

significance and the opposition of one of the parties to pursuing mediation would have

to be very carefully considered by the court.24 Robertson makes the point that more

21 See for example Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 at par 16. 22 See s. 24A and Rule 50.07. 23 But see Supreme Court of South Australia in which the implications of the jurisdiction to order mediation over a party's opposition were briefly considered: see Hopcroft v Olsen, 21 December 1998 [1998] SASC 7009 and Baulderstone Hornibrook Engineering Pty Ltd v Dare Sutton Clarke Pty Ltd, 7 June 2000 [2000] SASC 159. 24 43 The fact that the parties showed in their agreement a desire to adopt some alternative dispute resolution procedure which, as in the present case, has been found to be of uncertain operation is, at most, of marginal relevance to the question whether the Court should impose some such regime against


17

recent case law demonstrates that the judiciary are becoming more open to the

possibility of ordering mediation even if the parties object before a court.25 This is, in

part because the parties through their legal representatives are likely to adopt stances in

a court predisposed to overstating the merits of their own case and downplaying the

possibility of settlement in the adversarial arena of a court.

The learned Judge goes on to argue that because the parties and their advisors are

engaged in a commercial exchange and can be assumed to understand the pros and cons

of mediation a Court would have to think carefully before compelling them into such a

process.26 Although one could question the rationale of these arguments he states that

in any case, “Access to mediation or any other form of dispute resolution may be

obtained at any time through a simple agreement among the parties to pursue such a

course.”27

The limitations of mediation after litigation has commenced was amply demonstrated in

Seven Network Limited v News Limited [2007] FCA 1062. Sackville J stated:

19 Mega-litigation creates formidable challenges for any court required to manage the case and to decide it within a reasonable time frame. The presiding judge can make efforts – perhaps strenuous efforts – to confine the scope of the litigation and thereby limit its cost, both to the parties and to the community. For example, the parties can be encouraged or even directed to undertake mediation or other forms of dispute resolution with a view to resolving their differences or at least narrowing the areas of dispute. They can also be directed to take measures designed to identify and record matters not genuinely in dispute. But there is a limit to what the judge can do without compromising his or her role as an independent and impartial judicial officer.

the will of one of them. That question has to be determined by reference to the circumstances which exist at the time of the proceedings, not at the time the parties contracted. 44 The clearly stated preference of one party to continue with the litigation which that party sees as the most appropriate means of dispute resolution must cause a Court to think very carefully before compelling what, on the face of things, may well turn out to be an exercise in futility attended by delay and expense. There will no doubt be some cases where such a course will be justified: where, for example, the Court perceives that emotional or other non-rational forces (including unreasonable intransigence) are at work and a proper sense of proportion may be introduced into the picture by the efforts of a third party skilled in conciliation.” 25 Op. cit. at 51-53: see for example Azmin Firoz Days v CAN Reinsurance Co Ltd [2004] NSWSC 705. 26 D. Spencer, "Mandatory Mediation and Neutral Evaluation: A Reality in New South Wales", (2000) 11 ADRJ 237 27 Par. 47.


18

20 In the present case, I repeatedly encouraged the parties to enter mediation, if not to settle the proceedings, then at least to narrow the issues. In fact the parties did undertake mediation on more than one occasion, but apparently with only limited (but by no means negligible) success. Later in the proceedings, I directed the parties to prepare an agreed chronology and encouraged them to agree on a template for written submissions. However, the responses illustrate that parties to mega-litigation are often able effectively to ignore (albeit politely) directions made by the court, if they consider that their forensic Interests will be advanced by doing so.

The wide publicity this case received, including the fact that costs for the parties were

estimated to be over $200 million fuelled calls, most notably from the Commonwealth

Attorney-General, for the introduction of compulsory arbitration.28 Victorian Law

Reform Commissioner Peter Cashman said that he planned to recommend that judges

of the Victorian Supreme Court be given this power.29 This is a power the County

Court of Victoria already enjoys.30 Compulsory arbitration does exist in some United

States jurisdictions.31 Part of the concern seemed to be that a large part of the costs

were to be born by taxpayers through both the provision of the court system itself and

tax subsidies available to the parties for their costs. However, arbitration as a preferred

option has gone into some decline in recent years.32

Arbitration: The Forgotten Process

The formation of Australia’s oldest dispute management association, the Institute of

Arbitrators and Mediators in 1975, was set against a background of significant reform

and development of arbitration legislation. The catalyst for this was the enactment of

new English arbitration legislation in 1979. This was used as the basis of the

momentous development of Australian arbitration legislation with the first enactment of

the uniform Commercial Arbitration Acts in Victoria in 1984.

28 The Weekend Australian, “Ruddock Backs Calls to Force Firms to Mediate”,28-29 July 2007. The title of this piece 29 Ibid. 30 In the County Court arbitration can be ordered whether or not the parties consent: the power derives from the County Court Act 1958 s 47A and r.50.08. In the Supreme Court arbitration can only be ordered when the parties consent: r 50.08. The Magistrates Court has power to compulsorily order parties to mediation: Order 22A. In civil matters of less than $5000 the Magistrates Court can also conduct the matter as an arbitration: Order 21. 31 See for example the Philadelphia Civil Rules which requires all civil claims under $US50,000 to be arbitrated before a three member panel. 32 Condliffe, P., “Arbitration: The Forgotten ADR” Law Institute Journal, V78, No. 8 (August 2004).


19

However, despite these changes mediation and other forms of ADR have continued to

gain popularity at the expense of arbitration apparently because they were and are seen

as less formal processes which offer substantial savings in time and legal costs.

The interesting question is why in the face of the many criticisms of traditional court

litigation has arbitration not maintained the same level of popularity that it has in the

European or even American context?33 After all, arbitration is generally cheaper than

litigation, speedier, ensures privacy, is more likely to contain the excesses of

interlocutory processes like discovery, is readily enforceable, relatively flexible and

ensures finality. In some ways it is as if arbitration has become the “forgotten element”

in dispute management especially when it comes to drafting dispute resolution clauses.

I think there may be three principal reasons why this may be occurring in Australia.

These are greater disputant choice,the increasing use of tribunals and adverse publicity.

33 For example, the American Arbitration Association reported in its 2002 Annual Report that it had administered 230,255 cases for the year. This represented a 5.6 per cent increase on the previous year. Most of these were arbitrations. Of these 3298 were for sums in excess of $US250,000. In my time as CEO (2000-2003) there were never in excess of 150 cases administered by the Institute in any one year.


20

First, accross all sectors of the economy and community disputants now have more

choices and the range of alternatives continues to broaden. In any society there are

alternatives when conflicts arise. The fact that there are numerous procedures within

any society with which to handle the same dispute implies that one particular procedure

is not necessarily the best for every situation.There has been a definite move over the

last thirty years towards limiting the role of third parties so as to ensure greater

autonomy of parties. This has often been associated in the literature with the rise of

communitarianism (with its emphasis upon localised responses to conflict management)

in the 1960s-70s and associated skepticism about the role of traditional institutions and

professions.During the last three decades dissatisfaction with certain aspects of the

court system has been a major factor in people seeking alternative ways to resolve

disputes. The traditional system of litigation through the courts has come under scrutiny

and attack for a variety of reasons. Many question the capacity of lawyers and court

procedures to adapt to the new “social rights” of consumers, tenants, and the poor.

Courts are expensive and often very slow, and these features are aggravated by formal

procedures. There is growing concern about the proliferation of laws and their

complexity. “Legality” it is often claimed seems to obscure and override basic justice.

Courts in response have increasingly turned to case management techniques including

referencing-out used extensively in New South Wales) and new administrative systems.

Arbitration has suffered in this process of change because it is often associated with the

old style resolution focused (determinative) and evaluative procedures rather than the

management focused facilitative processes that have developed. Indeed arbitration has

often been lumped with litigation as a disputing system. This has not always been

helpful to those who would want to encourage its greater use. For example, Donaldson

J (as he then was) in Bremer Vulkan Shiffbau und Maschinenfabrik v South India

Shipping Corp Ltd [1981] AC 909 stated:

“Courts and arbitrators are in the same business, namely, the administration of justice. The only difference is that the courts are in the public and arbitrators are in the private sector of the industry.”


21

With respect to the learned judge I think there may be other differences than a simple

public-private divide and I would offer that many arbitrators do not see themselves as

involved in the “administration of justice”. Although it is true to say arbitration is

essentially the outcome of an agreement between the parties and hence their

relationship is one based on private rather than public law this is not to say that there

are not other fundamental differences including matters of procedure, use of prescribed

rules and precedent including evidentiary rules. Perhaps more importantly in litigation

the role of the third party (the judge) is directly backed by the power of the state and the

parties are attempting to resort to it. This establishes an aura of authority around the

judge and perhaps the parties also, which transcends such a simple division as the

learned judge may seek to establish.

The second reason why Australians have moved away from arbitration as a conflict

management process is because we have developed a marked preference for relatively

informal tribunals over private arrangements for settling disputes. Tribunals of various

sorts have proliferated and been strengthened with the promise of further relieving the

case burdens of courts with the added bonus of bringing to bear special technical

expertise. The “new” facilitative processes of mediation and conciliation have often

assumed a new significance and become compulsory precursors in the establishment of

these new bodies. The Victorian Civil and Administrative Appeals Tribunal is a good if

somewhat contradictory example. It brings together the proliferation of tribunals and

jurisdictions in Victoria into a body that in some ways is now paradoxically assuming

the proportions and look of a court of law. In this process legislatures can actively

discriminate against the use of arbitration.34.

34 For example, Section 14 of the Domestic Building Contracts Act 1995 (Vic) prohibits arbitration clauses.The case of Age Old Builders Pty Limited v Swintons Pty Limited [2002] VCAT 1489 points out some of these procedural and jurisdictional issues nicely. Here, deputy president Professor Damien Cremean held that an expert determination clause was invalid because it breached the provisions of the Domestic Building Contracts Act, which prohibited arbitration clauses. The decision of the Tribunal has recently been overruled on appeal to the Supreme Court in Victoria, which has sought to clarify the distinction between the two processes: see Age Old Builders Pty Ltd v Swintons Ltd [2003] VSC 307 (21 August 2003). The Court also found that that on its proper construction s14 is not intended to apply to present disputes. That is, parties can enter into an arbitration agreement once a dispute is underway


22

The third reason is that arbitration is often only given mention in the media or comes to

notice when a case appears to go wrong. Because it is not a process that goes onto the

public record like litigation its triumphs and successes lie mute while the disasters go

down with a fanfare akin to the Titanic.35

These three possible reasons for the lack of use of arbitration exist despite the attempt

in the uniform arbitration acts to make the process more adaptable and flexible.

The Commercial Arbitration Act permits parties in arbitration to agree to a large

number of different provisions including that they may seek settlement by a variety of

non-arbitral means.36 There is no prescription for what procedures to be followed

except that they may seek settlement “by conciliation or similar means” and “before or

after proceeding to arbitration….” Therefore it would appear that if the parties bring

their dispute within the parameters of the Commercial Arbitration Act it makes the line

of cases concerning uncertainty in dispute resolution clauses largely irrelevant.

35 Sea Containers Ltd v ICT Pty Ltd [2002] NSWCA 84 was a prominent example of how things can go wrong. In this case the parties, as part of the preliminary negotiations were asked by the arbitrators to place $250,000 in a trust account as security for fees, costs and expenses. A dispute then arose between the parties over the arbitrators’ request for cancellation fees which would be paid in the event the hearing settled early or did not proceed for the full period set aside. ICT argued that the arbitrators had misconducted themselves by pressing repeatedly for the agreement of the parties to pay cancellation fees. This company further argued that in view of that it could not get a fair hearing. The arbitrators would not withdraw. Before the Supreme Court Justice Gzell ordered the arbitrators to be removed saying they acted to “the detriment of their duty to maintain the appearance of acting in the interests of bringing down a just award”. When Justice Gzells’s finding were appealed Justice Meagher went even further:

“Just how there could be a moral obligation to pay for work which might never be done, I quite fail to see. It is, in my opinion, that at this point that the conduct of the arbitrators passed beyond the realms of the unseemliness into misconduct and misconduct of a very high order. They, apparently, brushed to one side any consideration that a litigant might feel more than a little uncomfortable if he went to court knowing that the judge was plaintiff in an action against him arising out of the very matter the judge was supposed to adjudicate. At this point the arbitrators conduct became disgraceful.” The other case was a contractual dispute between the owner of a tourist business at Phillip Island called Seal Rocks Victoria Australia, and the State Government. On 20 November 2003 the Victorian Auditor-General revealed that the dispute over the centre cost the State Government $55.9 million. A total of $42.9 million was the amount required to be paid to the business owner by the government. Of this sum, $37.3 million was awarded by an arbitrator appointed to settle the dispute and a further $5.6 million paid in costs. Legal fees of $9.3 million were paid out during the dispute, which continued in the Victorian Supreme Court when the Government appealed against the arbitrators’ award: see Seal Rocks Victoria (Australia) Pty Ltd v State of Victoria and Anon [2003] VSC 85 (24 April 2003). The Government has been left with an empty building and the community with some significant disquiet about the cost effectiveness of the whole process. 36 S. 27.


23

Section 55 of the Acts provides that where an agreement makes provision for

arbitrations as a “condition precedent” to the commencement of legal proceedings it

will not prevent legal proceedings from being brought even if there has not been

compliance with the clause. Section 53 however provides for a stay of proceedings in

these circumstances provided there is no “sufficient reason” why it should not be dealt

with in arbitration. There is no legislation comparable to this for other ADR processes.

The non-ouster principle in other ADR cases relies upon common law principles as

outlined above.

Dispute resolution clauses referring parties to a contract to arbitration have faced fewer

difficulties than those referring parties to mediation or other processes. The reasons for

this include:

(1) Commercial arbitration is regulated by statute including provision for the enforcement of such clauses.

(2) Arbitration is a mandatory process (see below), similar to litigation itself and is therefore more likely to be understood by the courts.

(3) The arbitration results in an award which the parties can rely upon whereas mediation and like processes have no such guarantee.

(4) Because arbitration is so regulated it is much easier to ascertain if there has been compliance whereas in mediation and like processes it is much more difficult.37

How to Draft a Dispute Resolution Clause There is little point in incorporating dispute resolution clauses in contracts if they are

struck down by a court. In the age of desktop computers lawyers are tempted to cut and

paste clauses from one document to another. In some instances it may be advisable to

adopt one of the standard dispute clauses which are available from one of the major

dispute resolution providers and which may be incorporated into contracts. However

even these may not be adequate for your needs. In this case you will have to draft the

terms yourself. As Boulle suggests a dispute resolution clause is like a “mini system of

conflict management for the future use of the parties.”38 The fact that there are

numerous procedures to handle disputes implies that there is no one particular

procedure that is necessarily the best for a particular situation. When considering the

range of possible dispute resolution options and strategies that can be employed in any

37 Boulle, L, Mediation: Principles, Process, Practice, 2nd Ed.,Lexis Nexis Butterworths (2005) at 422. 38 Ibid. at 419.


24

situation, there are at least five categories. These are preventative, collaborative,

facilitative, fact finding, advisory and mandatory. These are briefly outlined in the

Table below. 39

The principles for establishing criteria to examine the possibilities have long been

outlined in the ADR literature. These principles include:

• Set clear and achievable objectives for the system. • Build in data collection and evaluation from the start. • Early intervention is usually indicated although remember that where people

have experienced serious conflict or loss the ability to respond co-operatively may take some time.

• Move from least intervention to more. i.e. a graduated approach • Any system should be seen as non-linear. That is, there is ability to go back to

less interventionist processes. • Disseminate information, education and training relevant to the system so as to

make it accessible. • Each part of the system should be time limited. • Privacy and other rights are respected • Rather than simply prescribing processes a system should, if possible, provide a

“road map” i.e. several possible ways to proceed.40

In recognition of these principles and with an increasing number of lawyers trained in

ADR procedures the drafting of dispute resolution clauses has improved over recent

times and they have become both more complex and sophisticated.

From the above considerations a number of drafting propositions need to be kept in

mind.41

(1) Avoid an “Agreement to Agree”: Consider carefully before leaving any

part of the future agreement to the parties. That is it should avoid being an

“agreement to agree.” There is an essential contradiction here. That is that

the more certainty the clause has the less autonomy the parties have. For

example in selecting the type of procedure to be followed. However, in

trying to prevent or pre-figure challengers by either party the risk of an

adverse ruling by a court has to be seriously contemplated. Parties may

39 Condliffe, P., Conflict Management: A Practical Guide, 2nd Ed., Lexis Nexis, (2002) at 226. 40 Ibid at 231-232. 41 See also Spencer, op. cit. at p.160.


25

well want to leave open for future agreement various aspects of an ADR

process, such as the procedures to be followed, timing etc. This will not

be fatal if they also provide for default arrangements to provide certainty

where they cannot agree on an important element. In summary there

should be no part of the process requiring the parties to agree on a course

of action before the ADR procedure can proceed.

(2) Selecting a Third Party: It is probably best to avoid allowing the parties

to select a third party themselves. However, if the parties prefer to keep

such a thing then it is best to have a provision which allows them to break

any impasse that may develop between them in making such an

appointment. For example, list the Chairperson or President of the Law

Institute, Bar Association or State Chair of IAMA or LEADR as a position

which can nominate a third party if the parties themselves are unable to

come to an agreement.

(3) Incorporating other Documents: When using other documents or

powers annex them to the contract or recite that the parties agree to the

terms in a named document and that each has a copy of them. This avoids

the problems that occurred in the Elizabeth Bay case where the documents

in question had been unsighted at the time of the execution of the contract

and the parties were therefore agreeing to something that neither had

sighted nor agreed to. Further, ensure that the documents being

incorporated into the contract do not contain terms that are not

inconsistent with it. In this way certainty can be derived from the external

standard.

(4) Language: Use language which is precise to identify the parameters of the

procedural rights and obligations between the parties.42 It should be

relatively complete and comprehensive.

42 Ibid, p160.


26

Table: Options in Dispute Resolution

OPTION BRIEF DEFINITION EXAMPLES

Preventative

Used to pre-empt disputes. Usually designed in advance.

Dispute management clause in a contract or policy document as part of partnering/consensus building/team building/training.

Collaborative

Parties come together to work on a problem or issue.

Collaborative problem solving/negotiation.

Facilitating

An impartial or neutral third party intervenes to assist the parties in dispute.

Conciliation/mediation/arbitration ombudsperson.

Fact

Finding/Advisory

Third party expert employed to provide data or an opinion – usually non-binding.

Case appraiser/ non-binding arbitration.

Mandatory

Where a third party neutral

makes a binding decision on the

parties.

Tribunal/court/binding

arbitration.

Conclusion

As mediation becomes more institutionalised and the courts become more familiar with

its processes it will become more difficult for them to attack dispute resolution clauses

upon the grounds of uncertainty. This is highlighted by the increasing use of mediation

referral orders by the courts under various pieces of legislation or rules which often

lack specific details relating to procedural matters. Tension between the need for

flexibility in the ADR process itself that attracts parties to it and the courts need for

certainty will continue. There is currently still no definite boundary between these two

and perhaps there never will be. As Warren J said in Computershare “…the parties are

required to establish a protocol or framework within which the matters between them

are to be negotiated.”43 As the learned judge indicated the courts should not require the

43 Computershare at [14].


27

parties to set rules in advance but should only require them to attempt in good faith to

achieve the path they have chosen.


28

Appendix 1: Standard ADR Clauses in Commercial Contracts Provided by the Major ADR Service Providers

Leading Edge Adr (Leadr) Clauses Available at www.leadr.com.au 1.1 Mediation

The parties must endeavour to settle any dispute in connection with the contract by mediation. Such mediation is to be conducted by a mediator who is independent of the parties and appointed by agreement of the parties or, failing agreement within 7 days of receiving any party's notice of dispute, by a person appointed by the Chair of LEADR, ACN 008 651 232, level 9, 15 – 17 Young Street Street, Sydney; phone: 02 9251 3366, fax: 02 9251 3733, e-mail: [email protected], or the Chair's designated representative.

1.2 Rules

The LEADR Mediation Rules shall apply to the mediation. 1.3 Arbitration or Litigation

It is a condition precedent to the right of either party to commence arbitration or litigation other than for interlocutory relief that it has first offered to submit the dispute to mediation.

Dispute Resolution 1.1 Before court or arbitration proceedings other than for urgent interlocutory relief may be commenced, the following steps must be taken to attempt to resolve any dispute that arises out of or in connection with this contract (including any dispute as to the validity, breach or termination of the contract, or as to any claim in tort, in equity or pursuant to any statute). 1.2 Notice (the notice of dispute) must be given in writing by the party claiming that a dispute has arisen to the other party (or parties) to this contract specifying the nature of the dispute. 1.3 Upon receipt of the notice of dispute, the parties must attempt to agree upon an appropriate procedure for resolving the dispute. 1.4 If within 10 business days of receipt of the notice of dispute the dispute is not resolved or an appropriate alternative dispute resolution process is not agreed, then the parties shall refer the dispute to LEADR, ((ACN 008 651 232) level 9, 15-17 Young Street, Sydney NSW 2000 DX 1067 Sydney email: [email protected] Telephone: (61-2) 9251 3366 Facsimile: (61-2) 9251 3733) for facilitation of a mediation in accordance with LEADR's Mediation Rules. LEADR shall act in accordance with its Facilitation Rules (available at LEADR or www.leadr.com.au). 1.5 The parties must co-operate with LEADR as facilitator. 1.6 If within 10 business days after referral of the dispute to LEADR the parties have not agreed upon the mediator or other relevant particular the mediator and any other relevant particular will be determined in accordance with LEADR’s Facilitation Rules. 1.7 This clause will remain operative after the contract has been performed and notwithstanding its termination.

Clauses Recommended for use in Agreements by The Institute of Arbitrators and Mediators Australia (IAMA) from www.iama.org.au

ARBITRATION

The standard clause which is recommended for insertion in agreements where arbitration is the desired method of

resolving a dispute is:

‘Any dispute or difference whatsoever arising out of or in connection with this contract shall be submitted to

arbitration in accordance with, and subject to, The Institute of Arbitrators & Mediators Australia Rules for the

Conduct of Commercial Arbitrations’.


29

Unless the parties agree upon an arbitrator, either party may request a nomination from either the President OR the

Chapter Chairman of the Chapter where the dispute arises.

EXPEDITED ARBITRATION in small disputes and/or where quantum is limited or restricted

To limit the potential cost of small disputes an additional phrase may be added to the arbitration clause which

restricts the right of a formal hearing to when the quantum in dispute is above a certain, agreed amount. For example:


arbitration in accordance with, and subject to, The Institute of Arbitrators & Mediators Australia Expedited

Commercial Arbitration Rules. For disputes in which the quantum is less than $ (include amount here – usually

$50,000 or under) arbitration shall take place using the submission of documents alone unless both parties agree

otherwise.’

MEDIATION - ARBITRATION

Where mediation is the desired method of resolving a dispute and where, if the dispute is not settled by mediation

and you require this further option, the dispute is referred to arbitration is:


mediation in accordance with, and subject to, The Institute of Arbitrators & Mediators Australia Mediation and

Conciliation Rules.’

Add the following if you require the matter to go onto arbitration if not settled.

‘If the dispute or difference is not settled within 30 days of the submission to mediation (unless such period is

extended by agreement of the parties), it shall be and is hereby submitted to arbitration in accordance with, and

subject to, The Institute of Arbitrators & Mediators Australia Rules for the Conduct of Commercial Arbitrations’.

‘Notwithstanding the existence of a dispute or difference each party shall continue to perform the Contract’.

INTERNATIONAL ARBITRATION

‘Any dispute or difference whatsoever arising out of or in connection with this contract shall be and is hereby

submitted to arbitration in accordance with, and subject to, the UNCITRAL Arbitration Rules. The appointing and

administering body shall be The Institute of Arbitrators & Mediators Australia (IAMA). There shall be one

arbitrator, the language of the arbitration shall be English, the place of the arbitration shall be (nominate city in

Australia).’

Please note:

• The parties may designate different rules to the UNCITRAL Arbitration Rules.

• The parties may provide for 3 arbitrators.

• The parties may designate a language other than English.

INDUSTRY/CONSUMER CONTRACTS

This clause can be modified as appropriate to the particular scheme.

‘Any dispute under, or arising out of, this contract shall be referred to the Institute of Arbitrators & Mediators

Australia, for resolution under the Rules of the (Trade Body or Association) Consumer/Industry Dispute Resolution

Scheme. Each case will first be referred to a Conciliator appointed by the Institute unless either party wishes to

proceed directly to arbitration. If the conciliation is not satisfactorily concluded within six weeks or if the parties

want to proceed directly to arbitration, the Institute will appoint an Arbitrator who will make a final and binding

award'.

EXPERT DETERMINATION

‘Any dispute or difference whatsoever arising out of or in connection with this contract shall be submitted to an

expert in accordance with, and subject to, The Institute of Arbitrators & Mediators Australia Expert Determination

Rules’

MEDIATION


mediation in accordance with, and subject to, The Institute of Arbitrators & Mediators Australia Mediation and

Conciliation Rules.’

If you require any clarification of any of these clauses and how to use them please contact the Institute.


30

Appendix 2: The Computershare Dispute Resolution Clause

"24. RESOLUTION OF DISPUTES

24.1 A party must not start arbitration or court proceedings (except proceedings seeking interlocutory relief) in respect of a dispute arising out of this agreement (`Dispute') unless it has complied with this clause.

24.2 A party claiming that a Dispute has arisen must notify the other party within 30 days of becoming aware of the matter the subject of the Dispute.

24.3 Within 7 days after a notice is given under clause 24.2 each party must nominate in writing a representative authorised to settle the Dispute on its behalf. Each representative will use their best efforts to arrive at an amicable solution as soon as possible.

24.4 If the respective representatives of each party are unable to resolve the Dispute within 10 days (or such other period as agreed between the parties and in the absence of agreement, 10 days) after the notice is given, they must refer the dispute to the Chief Executive Officer of each party for resolution.

24.5 If the Chief Executive Officers cannot resolve the Dispute within 10 days after referral under clause 24.4, the parties must endeavour in good faith during the following 10 days:

(a) to resolve the Dispute; or

(b) to agree on:

(i) a process to resolve all or at least part of the Dispute without arbitration or court proceedings (eg, mediation, conciliation, executive appraisal or independent expert determination),

(ii) the selection and payment of any third party to be engaged by the parties and the involvement of any dispute resolution organisation,

(iii) any procedural rules,

(iv) the timetable, including any exchange of relevant information and documents, and

(v) the place where meetings will be held.

24.6 The role of any third party will be to assist in negotiating a resolution of the Dispute. A third party may not make a decision that is binding on a party unless that party's representative has so agreed in writing.

24.7 Any information or documents disclosed by a representative under this clause:

(a) must be kept confidential; and

(b) may not be used except to attempt to settle the Dispute.

24.8 Each party must bear its own costs of resolving a Dispute under this clause and, unless the parties agree otherwise in accordance with clause 24.5(b)(ii), the parties must bear equally the costs of any third party engaged.

24.9 After the second 10 day period referred to in clause 24.5 (or longer period between the parties), a party that has complied with clauses 24.2-24.5 may terminate the dispute resolution process by giving notice to the other party.

24.10 If a party does not comply with any provision of clauses 24.1 - 24.5 the other party will not be bound by clauses 24.1 - 24.5."