King & Wood Mallesons

Asia-Pacific 100 position: 3

Is your dispute resolution clause enforceable?

The recent Victorian Supreme Court decision of WTE Co-Generation & Anor V RCR Energy Pty Ltd & Anor [2013] VSC 314 has held that where a dispute resolution clause is uncertain it will not be enforceable. As a result, a party may be able to proceed straight to litigation rather than complying with the compulsory pre-litigation steps set out in the dispute resolution clause.

RCR Energy (the defendant) was engaged to supply a co-generation facility under the Colaroo Co-Generation Plant Boiler Contract. WTE Co-Generation (the plaintiff) believed RCR had breached the contract and ultimately issued a notice to terminate the contract. WTE subsequently commenced court proceedings in relation to the dispute.

The contract contained a dispute resolution clause, which was a precondition to litigation. The clause specified that ‘in the event the parties have not resolved the dispute, then within a further seven days senior executives representing each of the parties must meet to attempt to resolve the dispute or to agree on methods of doing so’. As the meeting of senior executives had not occurred, RCR argued that WTE had not complied with the dispute resolution process prescribed under the contract and applied for the proceedings to be stayed until that process had been observed…

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