Chris Drayton
27 April 2012

Dispute Resolution Provision – Need to Comply

Chris Drayton


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Mob : 0421 006 305


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It is increasingly common for leases to contain dispute resolution provisions. Generally, the provisions are inserted to minimize the expense and time which would be involved if the dispute needed to be resolved through the courts. The intention is to provide a quicker means of resolving disputes.

The dispute resolution provisions typically prohibit the commencement of court proceedings (except where an urgent injunction is required) until the procedure in the clause has been followed or alternatively, provide for the determination of the dispute under the clause to be final and binding.

The time to consider whether such a clause is acceptable to you as a landlord or a tenant is prior to executing the lease. From time to time there are situations where a party to a lease commences court proceedings contrary to the provisions of the dispute resolution clause.

In a recent decision, the Supreme Court of NSW confirmed that the starting point when considering whether or not parties to a lease or agreement for lease should be forced to comply with a dispute resolution clause before commencing court proceedings, is that they should be held to their bargain.

The agreement for lease in those proceedings contained a dispute procedure which provided that a party may not begin legal proceedings in connection with the dispute unless that dispute has first been decided by a person appointed under a particular clause of the agreement.

The Court noted that it has a wide discretionary power to stay legal proceedings where the parties have by contract agreed to have their disputes determined by an expert.

It is necessary for the party opposing the stay to show good reason why the action should proceed and the court noted that the onus is a heavy one. In this particular matter the Court found that the relevant party had begun proceedings in breach of the clause and stayed the proceedings permanently, the parties accordingly being required to comply with the provisions of the dispute resolution clause.

Other aspects to consider are whether to identify a specific person to refer the dispute to or whether to allow a recognised industry body to appoint someone and finally whether to agree the decision is in fact to be final and binding on you.

It should also be noted that in each jurisdiction in Australia there are provisions in the retail lease legislation concerning retail tenancy disputes. If your dispute is a retail tenancy dispute you should have regard to the relevant provisions before commencing any action or procedure in the Court.

Please do not hesitate to contact us should you require any advice in relation to a lease dispute.

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