On 22 July 2022, Justice Freeburn handed down the decision in the Mineralogy v Adani matter in the Supreme Court of Queensland. The decision considered important questions with respect to the enforceability of a dispute resolution clause. The clause in question is similar to those used in many commercial transactions in Queensland and Australia more generally, so the decision has potential application far beyond the parties directly involved. The key issue was whether Mineralogy could stop an Independent Expert, who had already been appointed, from making a decision.
Scope of the Dispute Clause
As is often the case with such a clause, the scope of the clause is broadly stated as follows:
The mechanisms set out in this clause 8 apply to all disputes or claims arising out of or relating to this Deed and the alleged breach, termination or claimed invalidity of this Deed (dispute).
Per Clause 8.1
The dispute concerned a clause in the contract prohibiting the granting of security, and the judge noted that the dispute seemed to easily fall inside any reasonable commercial interpretation of clause 8.1.
The Expert Determination Clause
The complexity with the clause arose out of clause 8.3, which is set out below:
(a) technical matter means a matter involving issues relating to the production of coal and the determination of coal Mined or the like which is capable of determination by reference to engineering or scientific knowledge and practice;
Per Clause 8.3
(b) financial matter means a matter involving financial calculations which is capable of determination by audit or reference to accounting, taxation or normal financial practices; and (c) legal matter means a matter involving the meaning or interpretation of the provisions of this Deed on the rights, duties or liabilities of the parties under or in connection with this Deed which is capable of determination by reference to the law and any other matter that is not a technical matter or a financial matter.
Failing resolution of the dispute by the chief executive officers (or their nominees) of the parties within 20 Business Days, either party may refer the dispute to an Independent Expert for
Per Clause 8.5
determination.
Mineralogy relied on the words “which is capable of determination” in clause 8.3 to limit the application of the dispute resolution clause. Justice Freeburn found this argument to be flawed in two respects. First, it the language in clause 8.1 was broad enough to apply to the dispute. Second, the wording of clause 8.3 in context was held not to be able to be interpreted as restricting the application of the clause. The third difficulty with Mineralogy’s argument, as Adani pointed out, is the definition of “legal matter” in clause 8.3(c). That definition includes a “catch-all” at the end:
“and any other matter that is not a technical or a financial matter”.
Therefore, even if technical and financial matters were narrowly interpreted, the dispute would fall within the definition of “legal matter”. The words “any other matter” are words of wide import. The Court held that Mineralogy’s argument that clause 8.3 limited the operation of clause 8.1 was unsuccessful.
Third Party Rights
Mineralogy’s next argument was that the dispute resolution clause does not apply to disputes where third party rights may be affected. The dispute related to a Priority Deed that Mineralogy had refused to sign which would have been with Adani and Adani’s financier. Mineralogy argued that the dispute clause can not apply as the financier would not be bound by the decision. The relevant clause relating to the Priority Deed did not expressly oblige Mineralogy to sign it. Rather, it obliged the financier to sign. Adani’s argument was that Mineralogy’s obligation to sign arose from clause 12.5 which provides that each party to the Royalty Deed must promptly do all further acts and execute and deliver all further documents – in form and content satisfactory to that party – required by law or reasonably requested by another party to give effect to the Royalty Deed. Justice Freeburn rejected this as well, finding:
The dispute that the Independent Expert is to determine is whether clause 7.1 and clause 12.5 of the Royalty Deed obliges Mineralogy to execute the Priority Deed. That is a determination of the rights of Mineralogy and Adani. The expert’s determination cannot affect the rights of the financier…
Justice Freeburn at [48]
Mixed Facts and Law and Justice
Mineralogy’s final arguments were even more expansive in their approach. First was that the dispute clause could not be read as applying to disputes involving mixture of facts and law, which again was rejected by Justice Freeburn based on the broad language used. He noted that there was no logical reason for reading into the dispute resolution clause some sort of qualification excluding disputes that involve questions of fact or questions of fact and law. Second they argued that the justice of the case required the dispute to be heard by a court, and not an independent expert, which was rejected as the argument did not provide any basis to overturn what the parties had agreed.
Lack of Proper Notice
Mineralogy also alleged lack of proper notice, based on the argument that the notice of dispute did not provide sufficient particulars and details of the dispute. This is a very common argument raised in response to dispute notices. In this case though, it appears there had been ample disclosure of the particulars in correspondence between the parties, as there was one specific letter which was held to contain all of the necessary information.
Delay in Objecting
Even if they had a basis for their claims, Justice Freeburn indicated that the relief would not have been granted as Mineralogy did not raise their issue with the dispute procedure early enough, and consented to the appointment of an Independent Expert. Mineralogy consented to the appointment of the Independent Expert in March 2022, and while they had previously reserved their rights, they did not express any particular objection.
Conclusion
Justice Freeburn emphasised the importance of parties abiding by the terms they have agreed, though it should be noted that Mineralogy (probably rightly as a large well-resourced entity) did not raise objections to the clause based on unconscionability or similar matters. Justice Freeburn noted:
In any event, the parties have agreed that their disputes in relation to the Royalty Deed would be resolved by their chief executives and, if they were unable to resolve the dispute, determined by an Independent Expert. That is what the parties agreed and, to quote again from Scrutton LJ in Metropolitan Tunnel and Public Works Limited v London Electric Railway Co [[1926] Ch 371.], “parties who have made a contract should keep it.”
Usefully, Justice Freeburn also set out many of the benefits of Expert Determination to explain why parties may wish to agree such a clause:
There are many reasons why the parties may have chosen an expert determination over traditional litigation. The expert will often have technical or specialist knowledge, which can achieve savings of time and expense. The expert may also have an investigative role. The expert determination is conducted privately rather than publicly, and frequently the expert determination is specified as final and binding. And frequently the parties are obliged to pay their own costs, and to bear the expert’s costs equally. Those are all features which mean that, in selecting a dispute resolution process that involves an expert determination, the parties can be taken to have consciously selected a substantively different mode of dispute resolution. The court ought not lightly disregard that substantive bargain.
Freeburn J at [88]