A recent Queensland Supreme Court case considered the issue of when a stay of proceedings should be granted in the context of dispute resolution clauses.

Downer EDI Mining Pty Ltd v Wambo Coal Pty Ltd [2012] QSC 290

The recent Queensland Supreme Court case of Downer EDI Mining Pty Ltd v Wambo Coal Pty Ltd [2012] QSC 290 considered the issue of when a stay of proceedings should be granted in the context of dispute resolution clauses.

In ordering the stay, His Honour Justice Martin confirmed the following legal principles:

  • The starting point is that parties who have made a contract should keep it. The courts will be slow to declare provisions void for uncertainty or for attempting to oust the jurisdiction of the courts.
  • A party opposing a stay of enforcement of a dispute resolution clause has a heavy onus of proof.

Background

By a written Agreement, Downer EDI Mining (Downer) agreed to provide Wambo Coal Pty Ltd (Wambo) with equipment maintenance services. A dispute arose over an alleged failure by Wambo to make certain payments to Downer. Downer commenced proceedings against Wambo for breach of contract. Wambo applied for a stay of the proceedings on the basis that Downer had not first complied with the dispute resolution process under clause 46 of the Agreement.

Clause 46 set out a timetable of meetings during which certain representatives of the parties were to try and resolve a dispute. In the absence of a resolution, the parties could then refer the dispute to an expert or commence litigation.

Downer opposed the stay on essentially two grounds:

  1. Clause 46 was void for uncertainty.
  2. That in any event, following the procedure in clause 46 would be futile because Wambo, in discussions to date, had been intransigent and unmovable.

Uncertainty

Downer argued that clause 46 imposed a time limit for resolving a dispute, but there was no procedure for the contingency where the required representatives were incapable of meeting within the specified time. However, the Court pointed out that the agreement allowed the parties to amend the clause to deal with the matter (eg. by an extension of time).

Downer then argued, that in respect of one of the meetings required, no time was specified for the meeting to occur. The Court did not think this created any uncertainty either because the contractual rules for implying terms would permit the parties to imply a “reasonable time”. In the context of the other steps, a reasonable time would be 10 days after the completion of the previous step.

Finally, Downer argued that the phrase “attempt to resolve” was too vague, namely because it lacked the term “in good faith”. The Court said there was no need to qualify the word “attempt” to achieve certainty. The phrase simply means making an effort to accomplish a particular result.

Futility

The parties had engaged in some form of unstructured negotiations in a general sense, but they had not commenced any formal process of negotiation like the one required under clause 46. Thus, his Honour concluded “…it is not uncommon to find that parties which are at loggerheads can, through a formal process of negotiation, reach an agreed position. I conclude that it has not been demonstrated that to proceed in accordance with cl 46.3 would be futile”. Critically, the required representatives identified in clause 46 were not present at the general discussions.

The case is confirmation that where a contract sets out a dispute resolution procedure, the procedure does need to be complied with before proceedings are commenced