Joint ventures, dispute resolution clauses: when are they enforceable?

dispute resolution clauses in joint venture agreements; CEO good faith negotiation; using expert determination; agreements to agree; defining the dispute; effects of delay; overarching obligations in the Civil Procedure Act (Vic)

For decades now, Victoria has been a national, if not international, leader in applying alternative dispute resolution techniques to avoid trial in court. The Victorian Supreme Court was an early implementer of mandatory mediation in civil litigation and the 2010 Civil Procedure Act (Vic), which was introduced to change litigation culture, includes the overarching obligation to use reasonable endeavours to resolve a dispute save where only judicial determination is appropriate (s 22).

It is now well recognised that in Victoria, properly drafted arbitration clauses are binding and will be enforced through stays of proceedings – but what about more run-of-the-mill dispute resolution clauses containing CEO good faith negotiation provisions and the like?

In Crown Sturt Pty Ltd (provisional Liquidators Appointed) v Infinity Southbank Pty Ltd [2025] VSC 360(19 June 2025), Justice Waller had to consider this issue. The question before the judge was whether to stay proceedings brought by one former joint venturer against the other for an order to sell the property the subject of the joint venture in circumstances where the JV agreement contained a dispute resolution clause. That clause referred to CEO good faith negotiation, with the CEOs to consider  whether an expert should be appointed to determine any factual matter or a mediator to assist in resolution of the dispute. If the dispute could not be resolved by the CEOs, the next step was referral to an independent expert for determination.

Justice Waller refused to grant a stay on the basis that the dispute resolution clause lacked sufficient certainty to be enforceable via a stay. In addition, the judge said that in this instance he would not have exercised his discretion to grant a stay in any event.

Background

The JV had been entered into to develop a high-rise residential tower and land was acquired for this purpose. While a planning permit was obtained and some off-the-plan sales were made, the development did not proceed and the JV was terminated.

Following a dispute between the shareholders, on 11 August 2023, the NSW Supreme Court appointed provisional liquidators to one of the joint venturers, the plaintiff company. A year later, the other party then served a default notice treating the provisional liquidation as a default, which if not rectified, meant that the other party would be entitled to acquire the interest of the plaintiff company at 90% of market value of its share. The plaintiff disputed the validity of the default notice given that the JV had been terminated a year earlier and sought the other party’s consent to a sale.

Th parties could not reach agreement regarding a sale and eventually the plaintiff issued proceedings in the Victorian Supreme Court seeking sale of the property either under the JV agreement or pursuant to s 225 of the Property Law Act (Vic), the parties being tenants-in-common.

After proceedings were issued, the defendant sought a stay on the basis that dispute resolution provisions in the JV agreement applied which required CEO good faith negotiation and then expert determination, not proceedings in court. For the defendant, the dispute was whether the JV had been validly terminated and also whether the default provisions which included the 90% buy out, continued to operate after the JV had been terminated. It said that the correspondence between the parties and statement of claim articulated the dispute.

Key Learnings

1. Where possible, consistently with public policy in promoting efficient dispute resolution, the Courts will look to find enforceable content in dispute resolution clauses in commercial contracts [52].
2. The Courts will not grant specific performance of a dispute resolution clause because of difficulties in supervision however they may achieve practical enforcement of such clauses by granting a stay of a proceeding arising out of the dispute. That is, participation in the process is effectively enforced but not cooperation and consent ([52,] citing Vickery J in WTE-Co-Generation v RCR Energy Pty Ltd [2013] VSC 314,). However, the dispute resolution clause must be sufficiently certain to support a stay.
3. In the case of submission to expert determination, for there to be certainty, the clause must include agreed procedural directions to the expert and agreement about how overlapping fields of expertise are to be resolved. If these matters are not addressed in the dispute resolution provisions, then they may be uncertain and unenforceable [47].
4. Where the process is ill defined or requires further negotiation and agreement, it will be uncertain and unenforceable [52]. However, “[a]n obligation to undertake discussions about a subject in an honest and genuine attempt to reach an identified result is not incomplete” so may be upheld [52 citing WTE].
5. Workability may also be a material factor where one party has no effective CEO. The role of a provisional liquidator, to preserve the status quo pending determination of whether the company should be wound up, is quite different to that of a CEO in good faith negotiations [63].
6. The dispute resolution clause also required the CEOs to consider whether an expert should be appointed to determine any factual matter or whether a mediator should be appointed. Being required to consider alternatives, amounts to an unenforceable agreement to agree [64].
7. Further the expert determination provisions lacked essential procedural directions [66] and while there was a framework for the appointment of experts from different disciplines, there was no guidance regarding disputes about overlap if the parties could not agree [67].
8. Where a Court is being asked to exercise its discretion to grant a stay, the party seeking the stay must show a genuine desire for urgent dispute resolution [71]. Here there had been a delay of 19 months.
9. The dispute must be specific and defined if referral to experts is being considered. Invoking a dispute resolution clause by reference to previous correspondence and statement of claim (no defence having been filed) supported the conclusion that the dispute was better suited to judicial determination where the parties would have the benefit of pleading rules and case management [73].
10. Another factor is whether there is another remedy available to the Court, not available under the agreement. Such a remedy may be refused if it was in conflict with clear dispute resolution obligations – that is, it was possible to  contract out of s 225 of the Property Law Act (Vic) – but in this instance, the uncertainties in the dispute resolution provisions weighed against this interpretation [75].

Drafting take aways

11. Dispute resolution clauses are more likely to be enforceable, via a stay, if they provide a clear, step-by-step path for dispute resolution. Where parties are required to consider alternatives with no means of breaking an impasse, they may be only agreements to agree.

12. Expert determination clauses must contain not only a means of appointing the expert in the face of disagreement but also a means of determining what kind of expert is to be appointed and how to manage any overlap of areas of expertise. Indeed, such provisions may be more likely to survive if they are clearly limited only to certain defined types of dispute, with all other disputes to be resolved in Court.

Dispute resolution take aways

13. Where dispute clauses are being triggered, the more specific the definition of the dispute, the more likely it will be that a stay may be granted.
14. Act promptly!

But even if a dispute resolution clause is unenforceable…?

15. All this said, even if a dispute resolution clause is unenforceable in terms of supporting a stay, depending upon the circumstances, adhering to it may still be a useful way for the parties to try to discharge their overarching obligations under the Civil Procedure Act and – who knows – they may even settle their dispute!