Commonly dispute clauses in amended Australian Standard construction contracts (or derivatives thereof) contain dispute clauses that prescribe preliminary steps for dispute resolution and ultimately direct parties to either expert determination, arbitration or litigation.
Where there is ambiguity in the meaning and effect of a dispute clause, the dispute clause itself may become the subject of dispute.
Prior to the 2025 christmas break, the QLD Supreme Court in the case of Brisbane Airport Corporation (BAC) considered the application of design consultant, Jacob, seeking a stay of BAC’s Court proceeding seeking relief for defective design work.
The parties had entered into a consultancy agreement and the dispute clause in that agreement provided that, when a dispute arose, preliminary steps were mandatory before referral of the dispute to arbitration.
Although it was not in dispute that the clause prescribed a binding arbitration agreement for the purposes of the Commercial Arbitration Act 2013 (Qld) (Act), arguments arose between the parties whether that was the case in all circumstances. Jacob argued that it was, and pursuant to s8(1) of the Act, that BAC's Court proceeding should be stayed.
BAC argued against the stay, suggesting that because the preliminary steps outlined in the dispute clause had not been initiated, it was open to either party to validly elect an alternative to arbitration. Further, BAC argued that the arbitration agreement was inoperative if those preliminary steps were not undertaken, and in the alternative, that non-contractual claims (tort and statute) were excluded.
Adopting a commercial approach to the interpretation of the entire agreement, the Court disagreed with BAC’s position, suggesting that it’s interpretation of the clause undermined the object of the Act and departed from the contractual bargain reached. Further, it was an attempt by BAC at a backdoor escape from arbitration.
The Court upheld that the dispute clause was a binding arbitration agreement and stayed the Court proceeding.
This decision provides practical guidance on how similar dispute clauses used in a wide variety of construction contexts will be interpreted by a Court.
For example, the dispute clause 42 in new AS4000 2025 allows parties to elect various dispute mechanisms, with the default provisions to apply where no other mechanism is preferred and where only arbitration is also selected. If that type of default clause was nominated in the new AS4000, it will likely be interpreted in the same way as discussed above.
This is because the opening words of the clause are “Each Dispute between the parties must be dealt with in accordance with this clause 42” and the word ’Dispute’ is broadly defined. The effect being that, if a default mechanism is selected in this way, irrespective of the circumstances of the dispute, it will likely constitute a binding arbitration agreement.
Julian Troy is specialist construction lawyer with over 23 years experience and the director and founder of Troy Legal. Troy Legal advises construction businesses in SEQ and across Australia in respect of construction contracts, payment disputes and litigation. If you need assistance with a dispute clause in your constrruction contract, call Julian on m0439207579.
Commonly dispute clauses in amended Australian Standard construction contracts (or derivatives thereof) contain dispute clauses that prescribe preliminary steps for dispute resolution and ultimately direct parties to either expert determination, arbitration or litigation.
Where there is ambiguity in the meaning and effect of a dispute clause, the dispute clause itself may become the subject of dispute.
Prior to the 2025 christmas break, the QLD Supreme Court in the case of Brisbane Airport Corporation (BAC) considered the application of design consultant, Jacob, seeking a stay of BAC’s Court proceeding seeking relief for defective design work.
The parties had entered into a consultancy agreement and the dispute clause in that agreement provided that, when a dispute arose, preliminary steps were mandatory before referral of the dispute to arbitration.
Although it was not in dispute that the clause prescribed a binding arbitration agreement for the purposes of the Commercial Arbitration Act 2013 (Qld) (Act), arguments arose between the parties whether that was the case in all circumstances. Jacob argued that it was, and pursuant to s8(1) of the Act, that BAC's Court proceeding should be stayed.
BAC argued against the stay, suggesting that because the preliminary steps outlined in the dispute clause had not been initiated, it was open to either party to validly elect an alternative to arbitration. Further, BAC argued that the arbitration agreement was inoperative if those preliminary steps were not undertaken, and in the alternative, that non-contractual claims (tort and statute) were excluded.
Adopting a commercial approach to the interpretation of the entire agreement, the Court disagreed with BAC’s position, suggesting that it’s interpretation of the clause undermined the object of the Act and departed from the contractual bargain reached. Further, it was an attempt by BAC at a backdoor escape from arbitration.
The Court upheld that the dispute clause was a binding arbitration agreement and stayed the Court proceeding.
This decision provides practical guidance on how similar dispute clauses used in a wide variety of construction contexts will be interpreted by a Court.
For example, the dispute clause 42 in new AS4000 2025 allows parties to elect various dispute mechanisms, with the default provisions to apply where no other mechanism is preferred and where only arbitration is also selected. If that type of default clause was nominated in the new AS4000, it will likely be interpreted in the same way as discussed above.
This is because the opening words of the clause are “Each Dispute between the parties must be dealt with in accordance with this clause 42” and the word ’Dispute’ is broadly defined. The effect being that, if a default mechanism is selected in this way, irrespective of the circumstances of the dispute, it will likely constitute a binding arbitration agreement.
Julian Troy is specialist construction lawyer with over 23 years experience and the director and founder of Troy Legal. Troy Legal advises construction businesses in SEQ and across Australia in respect of construction contracts, payment disputes and litigation. If you need assistance with a dispute clause in your constrruction contract, call Julian on m0439207579.
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