Improving Security of Payment Building and Construction Industry

5. Proof of Payment Page 65National Public Works Council IncImproving Security of Payment in the Building and Construction Industry(i)(ii)(iii)the dispute resolution technique and procedures to be adopted;the timetable for all steps in those procedures; andthe selection and compensation of the independent person required for suchtechnique;the parties must mediate the dispute in accordance with the Mediation Rules of theLaw Society of New South Wales and the President of the Law Society of New SouthWales or the President's nominee will select the mediator and determine themediator's remuneration."5.7 Are Contractual Terms in a Contract Requiring ADR Valid?A term in a contract requiring the parties to undertake alternative dispute resolution prior toany Court proceedings has been held to be enforceable in the case of Hopper BailieAssociated Ltd v. Natcon Group Pty Ltd (1992) 28 NSWLR 194.Whilst this authority suggests that a clause in a contract requiring the parties to mediate orconciliate before attempting Court proceedings is enforceable, there is also authority whichsuggests that such a clause is not enforceable. For example, in the case of Walfort v. Miles[1992] 2 AC 128, Lord Ackner in deciding whether a term to the effect that "to continue tonegotiate in good faith" was enforceable, said that such a clause was unenforceable as itlacked certainty. His Lordship had the following to say:"The concept of a duty to carry on negotiations in good faith is inherently repugnantto the adversarial position of the parties when involved in negotiations. Each party tothe negotiation is entitled to pursue his (or her) own interests, so long as he avoidsmaking misrepresentations. To advance that interest he must be entitled, if he thinksit appropriate, to threaten to withdraw from further negotiation or to withdraw in fact,in the hope that the opposite party may seek to reopen the negotiation by offering himimproved terms. ...... a duty to negotiate in good faith is as unworkable in practice asit is inherently inconsistent with a position of a negotiating party. It is here that theuncertainty lies. In my judgement, while negotiations are in existence, either party isentitled to withdraw from those negotiations, at any time and for any reason. Therecan be thus no obligation to continue to negotiate until there is a "proper reason" towithdraw. Accordingly, a bare agreement to negotiate has no legal content".Lord Ackner's view should be contrasted with that of Mr Justice Giles in the case of HooperBailie Associated Ltd in which His Honour had the following to say:"The proponents of enforceability contend that this misconceives the objectives ofalternative dispute resolution, saying that the most fundamental resistance tocompromise can wane and turn to co-operation and consent if the dispute is removedfrom the adversarial procedures of the Courts and exposed to procedures designed topromote compromise, in particular where a skilled conciliator or mediator isinterposed between the parties. What is enforced is not co-operation and consent butparticipation in process from which co-operation and consent might come".