Ian Garrard is an associate at Osborne Clarke, Bristol.
ADR has much in common with Darwin's theory of evolution. Disputes have been determined by the courts, by experts chosen by the parties, and by mediation. Each has developed in the commercial and legal environment of their time. Are they the final chapter or will a new concept of dispute resolution evolve?
What of contracting parties agreeing that one of them shall be the "sole judge" of matters to avoid the time and cost associated with litigation?
The Court of Appeal in West of England Ship Owners Mutual Insurance Association (Luxembourg) v Cristal (TLR 26/10/95) held that one party's decision on whether a claim by the other was time-barred was binding (on an issue of fact). It was not open to court review if it was not unfair, made in bad faith or perverse.
The contract was between oil companies and Cristal, a company formed by the companies to insure themselves against claims for compensation arising from oil pollution. The contract stated: "Cristal shall be the sole judge in accordance with these terms of the validity of any claim" and imposed time limits for bringing claims. The contract was considered "special".
Despite the special nature of the contract, is a new concept of dispute resolution dawning? Where is the line to be drawn if contracting parties agree one of them shall determine certain matters between them? What if a party acting as a sole judge decided the matter negligently?
The area is clarified in part by Henderson and ors v Merrett Syndicates and ors. An agreement governing the investment of the funds of a Lloyd's Name syndicate by its managing agent stated the agent could decide "at its absolute discretion" how to invest the funds. The clause did not exclude liability for negligence. One party could not oust interference by the courts in its performance of the agreement where decisions were negligent. The line is important – a negligence claim may be more easily sustained than one of unfairness, bad faith or perversity.
The line is also drawn by delineating between fact and law. The Cristal decision shows courts will review any decision as "sole judge" of law. Such a provision can therefore only apply to decisions of fact. In equal bargaining situations, contracting parties may agree for certain matters to be decided conclusively by one of them. This is unlikely to eliminate dispute since there is still room for argument. However, only time will tell whether this new concept plays its part in the evolution of dispute resolution.