Australian Vintage Limited v Belvino Investments No. 2 Pty Limited (as trustee of the McGuigan Simeon Trust ABN 76965280510)

1. [1]

   The plaintiffs (“AVL”) for whom Mr N.C. Hutley SC, with Mr S.A. Goodman appears, lease a vineyard known as the Del Rios Vineyard in Kenley, Victoria from the first defendant (“Belvino”) for whom Mr R.A. Dick SC, with Mr D.J Barnett, appears.

2. [2]

   The matter has been expedited and Mr Hutley informed the Court that AVL needs to obtain a determination as soon as possible given that the outcome is very relevant to AVL’s position in respect of the next year’s harvest.

3. [3]

   One of the clauses in the lease, clause 4.26, provides a means of dealing with external events that result in significant crop loss and which, if a threshold of loss is reached, permit AVL to terminate the lease or alternatively to require remedial works to be undertaken. AVL claims that as a result of “October Frost” in 2013 the harvest was significantly adversely affected with the consequence that production of grapes was reduced to the extent required under the clause and with the further consequence, by reason of the clause, that it is entitled to terminate the lease.

4. [4]

   The clause includes the possibility of appointment of an expert to determine the matters relevant to the entitlement of AVL to terminate the lease or to require remedial words to be undertaken. The second defendant Mr Peter Scholefield (who is employed by his company the third defendant), was appointed by the parties as the expert, and Mr Scholefield provided his determination to the parties on 7 October 2014.

5. [5]

   AVL claims that the expert misunderstood the task which he was required to perform pursuant to clause 4.26(f) because he misconstrued that clause. AVL seeks to have the Court declare that the construction for which it contends is the correct construction and have the expert determine afresh the matters which pursuant to clause 4.26(f) he is required to determine. Mr Scholefield and the third defendant, have each filed a submitting appearance.

6. [6]

   Belvino resists the claims on several basis:

   1. (1)

      it relies on the fact that the expert’s determination is expressed in the lease to be final and binding and that there is no scope for, in effect, an appeal from the expert’s determination.

   2. (2)

      it asserts that there is, in any event, no flaw in the expert’s approach to the clause.

7. [7]

   Belvino also contends that if, contrary to its principal submissions, AVL is entitled to have the expert’s determination set aside, the expert erroneously determined that the ‘frost’ in October 2014 was a Natural Disaster within the meaning of clause 4.26 and that the Court should make declarations relevant to that issue.

8. [8]

   The parties provided competing statements of issues. It appears to me that the questions which require determination by the Court are:

   1. (1)

      Was Mr Scholefield, in determining the matters required to be determined under clause 4.26(f) of the lease, required to form his own view as to the meaning of that clause and in particular the expression “reduced by more than 50% of Average Production Capacity” and the methodology to be adopted?

   2. (2)

      (a) What did Mr Scholefield determine?

   3. (3)

      (a) In determining the answer to (2)(a) is the Court required to form its own view of the correct interpretation of clause 4.26(f)? and

   4. (4)

      If the answer to (3)(a) or (b) is yes has the expert utilised the correct interpretation of clause 4.26(f)?

   5. (5)

      If the answer to (4) is no should the determination be set aside?

   6. (6)

      If the answer to (5) is yes should the Court make declarations dealing with the issue of Natural Disaster?

9. [9]

   Clause 4.26 is relevantly in the following terms:

10. [10]

    Another clause to which attention was drawn by Mr Dick in the course of his submissions is:

11. [11]

    I extract from clause 4.26 for convenience the key definitions:

12. [12]

    The matters for expert determination (from 4.26(f)) are therefore:

13. [13]

    The following figures used by the expert are not in dispute:

    1. (1)

       Actual production 2014 = 15,260.62 tonnes

    2. (2)

       Actual production 2012 = 16,715 tonnes

    3. (3)

       Actual production 2013 = 25,757 tonnes

    4. (4)

       The two year average yield = 21,236 tonnes

    5. (5)

       50% of the two year average yield = 10,617 tonnes

14. [14]

    As I understand it (from Exh C) harvesting occurs very early in the year which would explain why although the frost occurred in October the harvest affected is a 2014 harvest.

15. [15]

    AVL claimed in its submissions to the expert that the amount of grapes capable of being produced for 2014, ie Production Capacity, was 31,865 tonnes. That was not accepted by Belvino in the course of the expert’s determination but it was accepted by the expert.

16. [16]

    The expert determined that the difference between the actual production for 2014 and the two year average yield (ie the figure derived as the average production for 2012 and 2013) was 10,615 tonnes which he determined was less than 50% of the average production for 2012 and 2013. He determined that the reduction was due to the frost experienced in October 2013, and that the frost was a Natural Disaster within the meaning of clause 4.26 (thus answering the Natural Disaster Question favourably to AVL).

17. [17]

    The expert then went on to examine the difference between Production Capacity for 2014 (the 31,865 tonnes as claimed by AVL) and the actual production for 2014 (15,260.62 tonnes) and concluded that since there had been no reduction from Production Capacity in comparison to the two year average yield (but rather a significant increase) that calculation did not produce a figure that could be described as a reduction at all.

18. [18]

    Having determined both limbs of the Reduction Question adversely to AVL there was no need to determine the Remedial Works question.

19. [19]

    The consequence of the expert’s determination was that AVL could not terminate the lease.

20. [20]

    AVL claims that the expert’s approach was flawed. What he was required to do by the contract, says AVL, is compare the Production or Production Capacity post the frost and the Production Capacity before the frost- and that by comparing the Production Capacity before the frost and the two year average yield the expert was in fact comparing two pre frost figures which makes no sense at all and produced “the absurd result that the very thing that triggered the clause… was not considered, was rendered irrelevant to and as a result had no role in his determination” see para 40 of the plaintiff’s submissions. It was contended that since the frost must have caused a reduction in Production and Production Capacity the notion that there was no reduction indicates that the expert wrongly interpreted the clause in question. That wrong interpretation, it is contended by AVL, means that the Court is empowered to intervene and declare that the determination is not binding on the parties, because, it was submitted, the expert did not perform the task which the contract called on him to perform, and hence was not a determination binding on the parties. AVL as part of its argument contended that a question of construction of a contract is a question of law referring to Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 p 287. That case is one dealing with statutory interpretation and it might be more accurate to say that construction of a written agreement is a question of mixed law and fact see Nettle JA (with whom Neave JJA and Kyrou AJA agreed on this point) at [33] of Baiada Poultry Pty Ltd v The Queen [2011] VSCA 23; 203 IR 296, Jones v Sherwood Computer Services plc [1992] 1 WLR 277 in the passage set out at [42] (infra) and see Chitty on Contracts 30th edn 12.046 (Sweet & Maxwell, 2008). Nothing turns on the point because Belvino does not contend that the determination was one only of fact, and accepts that Mr Sholefield had to interpret the clause in order to apply it.

Can the Court Intervene

1. [21]

   The parties to the lease have agreed that the expert is deemed to act as an expert and not as an arbitrator, and that his determination shall be final and binding. There was agreement before me that the circumstances in which the Court can intervene and set aside an expert determination are limited.

2. [22]

   Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 was a case in which an expert had been appointed to assess market rental for the purpose of a rent review clause in a lease. Both Mahoney JA and Priestley JA were of the view that the trial judge had erred in his conclusion that the valuer had valued the premises at the wrong time and held that the declaration by the trial judge that the valuation was not binding on the lessee had to be set aside. McHugh JA was of the view that the valuer had made a mistake but he held that the mistake was one in the process of valuation, “not a departure from the terms of the contract” and accordingly his Honour came to the same result as the other members of the Court.

3. [23]

   The Privy Council rejected an appeal from the Court of Appeal in A Hudson Pty Ltd v Legal & General Life of Australia Ltd (1986) 61 ALJR 280 agreeing that no mistake had been made by the valuer and at page 281 their Lordships noted that they were “not concerned to consider the kinds of mistake which might justify the intervention by the Court with valuation of an expert”.

4. [24]

   Both parties proceeded on the basis that the test to be applied is that identified by McHugh JA in Legal & General namely:

5. [25]

   A critical question which falls for determination in this case is whether it is open to a party dissatisfied with the expert’s determination because, it is said, he misinterpreted the clause under which he was required to make his determination, to challenge the final and binding quality of the determination.

6. [26]

   There have been a number of cases since Legal & General in which Australian Courts have given consideration to the question of whether an expert’s determination is binding. In Shoalhaven the High Court, upholding an appeal from the NSW Court of Appeal and reinstating the judgment of the trial judge, found that there was no inconsistency in the reasons given by the expert and hence no basis to conclude that the expert had failed to give reasons as he was obliged by the contract to do. The plurality, French CJ, Crennan and Kiefel JJ at [27], noted that a deficiency or error in reasons given may disclose that “the expert has not made a determination in accordance with the contract and that the purported determination is therefore not binding” (see p 316 [27]) but they also noted as a general proposition that

7. [27]

   In Firedam in the Court of Appeal Macfarlan JA (with whom Beazley JA agrees and with whom Campbell JA, with some qualifications, agreed) had held that there was inconsistency in the expert’s reasons, that the contract required reasons to be given and that therefore the determination was not one of the contractual description- applying the reasoning of McHugh JA in Legal & General. His Honour also noted that the Court of Appeal in Kanivah had applied McHugh JA’s approach in Legal & General.

8. [28]

   In Kanivah in the Court of Appeal, Stein AJ (with whom Beazley JA and Giles JA agreed) stated:

9. [29]

   Giles JA added:

10. [30]

    In AGL Nettle JA (as his Honour then was), with whom Maxwell P and Bongiorno AJA, agreed described the trial judge as having accepted that:

11. [31]

    The Court held that the determination by the expert was not in accordance with the contract and could be reopened due to a significant error as to the volume of gas extracted from the transmission system. At [43] and part of [44] his Honour said:

12. [32]

    In Savcor Pty Ltd v New South Wales [2001] NSWSC 596 Barrett J (as his Honour then was) in dealing with the question of whether a contractual condition relating to the determination of an expert as a threshold to arbitration is an arbitration agreement said [35]:

13. [33]

    In addition to Legal & General, AGL, Savcor, Firedam and Shoalhaven, the parties included in their Combined Book of Authorities the following expert determination cases: Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd [No 2] [2008] VSC 478, Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd [2001] NSWSC 405, Downer Engineering Power Pty Ltd v P & H Minepro Australiasia Pty Ltd [2007] NSWCA 318 and Belvino Investments No 2 Pty Ltd v Australian Vintage [2014] NSWSC 978 (15 July 2014). Also included was Mercury Communications Ltd v Director General of Telecommunications [1996] 1 WLR 48.

14. [34]

    Candoora was a case concerned with whether, where an expert’s determination has been set aside by a Court, the same expert should be retained to determine the matter. The case provides authority for the reference back to the expert for determination in such a circumstance. I did not perceive Belvino to assert that that would not be the appropriate course if AVL was otherwise successful in having the determination set aside.

15. [35]

    In Downer Engineering the valuer had been given the task of determining an amount payable on completion of a sale of business agreement, inter alia in relation to work in progress, in the event of dispute. Downer (the vendor) was required to provide to Minepro (the purchaser) a completion statement containing claimed figures, and Minepro was entitled, if it disputed the figures, to have the matter referred to the valuer. Minepro claimed that the completion statement provided to it by Downer did not comply with the contract so that the terms of clause 5.4 calling for expert determination were not engaged, and with the further consequence that Minepro was not to be taken to have agreed to Downer’s figures.

16. [36]

    A District Court Judge accepted Minepro’s contention that the completion statement did not comply with the contract and was not binding in the absence of a request for referral to a valuer. The Court of Appeal unanimously upheld the appeal. Hoeben J (as his Honour then was) with the concurrence of Giles JA, held that the completion statement did comply except in one respect but he held in relation to that compliance that the issues litigated in the District Court were issues which Minepro should have referred to the valuer. Hoeben J said:

17. [37]

    Basten JA, agreeing in the result, said:

18. [38]

    I think Basten JA’s approach and probably that of Hoeben J as well provide support for Belvino’s contention in the present case, but the precise question that falls for determination here was not in issue in Downer. Indirect support can also be obtained I think from the Victorian Court of Appeal’s decision in Email Ltd v Robert Bray (Langwarrin) Pty Ltd [1984] VR 16 at 21(per Crockett, Kaye and Gray JJ) where the Court held that the words ‘reasonable rental’ should mean whatever the expert considers is reasonable having regard to all the circumstances which the valuer considers are relevant. The Court then said:

19. [39]

    Before the expert was appointed, but after it was obvious that AVL and Belvino had different views on how clause 4.26 should be interpreted, Belvino commenced proceedings in this Court seeking declarations as to the meaning of clause 4.26 including the matters in dispute before me now. AVL sought to stay those proceedings. In July 2014 White J rejected the various arguments of Belvino, and held that Belvino should be held to the bargain, namely that all issues would be determined by the specifically identified expert. In directing that the expert determination should proceed his Honour said:

20. [40]

    Belvino draws attention to the fact that AVL was not willing to take up the option of having the Court direct the expert (yet to be appointed) in the proper meaning of the clause- inherently because on AVL’s position it was clear that the expert was authorised, and required, to form his own view on that matter.

21. [41]

    I think that White J was clearly of the view that the expert was able and required to form a view as to the meaning of clause 4.26(f). It is equally clear that he was expressing no view on whether, if the expert did reach a conclusion based on a wrong interpretation of the clause that would prevent the determination from being binding.

22. [42]

    One case to which reference was made in Shoalhaven (and it is also referred to in AGL and Holt v Cox) is Jones v Sherwood Computer Services plc [1992] 1 WLR 277. In Jones, the English Court of Appeal (Dillon and Balcombe LJJ) rejected an attack on an expert determination by chartered accountants determining the amount of sales made by a software company for the purpose of a share acquisition contract. The plaintiff alleged that the expert had not taken into account transactions which ought to have been taken into account. The relevant clause provided that the expert’s determination was to be final and binding. The Court said:

23. [43]

    I think that Jones is authority for the proposition that any question of construction of the clause under which the expert is to operate is as much part of the task of the expert as the determination of facts and the calculation of figures and not open to review by a Court.

24. [44]

    AVL places reliance on McHugh JA’s judgment in Legal & General and says that the mistake or error on the part of Mr Scholefield was of a kind which shows that his determination was “not one in accordance with the contract”, and one which does not comply with the terms of the contract. I set out the passage in which McHugh JA rejected the contention that the valuation should be set aside:

25. [45]

    As Giles JA emphasised in Kanivah one has to examine carefully McHugh JA’s reasons for refusing to set aside the valuation notwithstanding the mistake that McHugh JA identified, and not simply the question posed by his Honour.

26. [46]

    AVL in its submissions refers to Mercury. At p 586-587 of Mercury Lord Slynn, with whom other law lords agreed, said:

27. [47]

    In Mercury the critical question for the Court was whether the proceedings brought by Mercury were incompetent and should have been struck out as the Court of Appeal, by majority, had decided they should. The context was one of a statutory licence which was to incorporate contractual terms to be agreed or if they could not be agreed then to be determined by the Director of Telecommunications. The Director was required by the contract to determine matters in accordance with the principles set out in the clauses previously determined. Lord Slynn noted at p 56B that there was no issue before the Court

28. [48]

    It will be observed that Lord Slynn regarded it as significant that there was no provision expressly or impliedly that the matters were remitted to the director exclusively and no provision excluding the intervention of the Court but on the contrary, a clause which contemplated that there might be an appeal or proceedings arising out of the Director’s decision. His Lordship held that there were “issues of construction are ones which are not removed from the court's jurisdiction by the agreement of the parties” (p 59B). Lord Slynn did refer to Jones at p 58F and was not critical of the decision saying that the expert there had done exactly what was asked of him. He also referred to a decision of Norwich Union Life Insurance Society v P & O Property Holdings Ltd [1993] 1 EGLR 164 without criticism although the question in that case was really akin to the matter that White J had to decide in Belvino rather than the matter I have to decide here.

29. [49]

    Read in isolation from the context the words highlighted in [44] above do offer support for AVL’s contention but given that in Mercury there was not given to the Director’s determination a final and binding quality, or even the characterisation as an expert determination, that Lord Slynn interpreted the clause as not having remitted expressly or impliedly a determination of the meaning of the clause (and of the principles to which regard were to be had by the Director), and his Lordship’s lack of criticism of Jones, I do not think that the comments in Mercury ought be seen as undermining the line of authority to which I have referred.

30. [50]

    Belvino submits that Mr Scholefield’s determination establishes that the expert understood precisely the task which he had to perform and that the complaint that he did not carry out the task entrusted to him by the contract is really a complaint that he adopted a construction of the clause which was not that advanced by AVL and which AVL asserts is incorrect. Belvino submits that the decision as to which construction was to be preferred was very much part of the task that the expert was required to perform and which he did perform, hence that the determination was one made in accordance with the contract.

31. [51]

    I accept that an expert may so misunderstand the task which the parties have retained him to perform that what he has done does not meet the requirements of the contract but where the parties have entrusted to an expert a determination which requires him to ascertain facts and figures and also to decide as between competing constructions of the meaning of the clause under which he is to operate I do not think that it can be said that the determination was not made in accordance with the terms of the contract. The ‘final and binding’ clause is not qualified and does not say, for example, “subject to a right of appeal on a question of law”.

32. [52]

    As a matter of objective construction of clause 4.26 I conclude that the parties intended to leave to the expert all questions of interpretation of the clause that were pertinent including deciding between any contending views advanced by the parties in support of one or other figures for lost tonnage (and the categorisation of the reasons for that loss in deciding the question of Natural Disaster). The parties must have contemplated that the expert would have to make a judgment about how the clause was to operate either by choosing between the competing interpretations advanced by the parties or even rejecting both and adopting another interpretation for which, in his opinion, the clause called. The construction of the clause is not an objective fact such as which property or which vineyard was under consideration. The interpretation of the clause and its application are, to use the phraseology of Nettle JA in AGL, matters involving the expert’s “discretion, judgment and opinion” and very much within “the realm of contractual contemplation”. It involved the expert’s “skill and judgment” per McHugh JA in Legal & General even though he is not legally trained as the parties were well aware, and it was “within the contemplation of the parties” as a matter which was referred to the expert: per Basten JA in Downer.

33. [53]

    Mr Scholefield determined that (a) Production (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined), and (b) that had Production Capacity (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined).

34. [54]

    I should add that whilst the area of concern has some similarity to the questions in administrative law as to whether a tribunal’s error amounts to a jurisdictional error I do not think it is necessary to venture in to that territory: see the competing views on this of Nettle JA in AGL at [52] and the similar views of Mason P (and Priestly JA) in Holt v Cox on the one hand, and Basten JA in Downer at [17] on the other, although I would add that it is difficult to comprehend that a Judge’s determination of the meaning of a clause in a contract could amount to “a jurisdictional error” hence that an expert’s conclusion on that aspect could be akin to a jurisdictional error: see “Jurisdictional Error and Beyond” in M.Groves (ed) Modern Administrative Law in Australia Concepts and Context (Cambridge, 2014) p 256, and see Craig v State of South Australia (1995) 184 CLR 163 at pp 177-179 and Kirk v Industrial Relations Commission (NSW) [2010] HCA 1, (2010) 239 CLR 531 AT [71]-[72].

Estoppel

1. [55]

   AVL asserts that by reason of what Belvino did or said before White J in resisting the reference to the expert of all matters pertaining to clause 4.26 Belvino is now precluded from contending in the current proceedings that the Court should not itself determine what is the correct construction of clause 4.26(f). Mr Goodman, who conducted this part of AVL’s case before me, pointed to the following matters:

   1. (1)

      That Belvino had submitted before White J that it had the right to approach the Court to obtain declarations as to the meaning of terms used in the clause and that it asserted that the expert, not being a lawyer was not the appropriate person to determine the construction of the clause under which he was operating. Thus Belvino was contending that the Court was not excluded from construing the contract: see T43 (17 February 2015).

   2. (2)

      He also complains that Belvino did not submit to White J that the Court would be excluded by reason of the contract from questions of construction once the expert had made his determination.

   3. (3)

      That at T14.36 of the transcript proceedings before White J Mr Dick SC is recorded as having submitted:

2. [56]

   Mr Goodman submitted that Belvino should not be permitted to advance a case different to that which it had advanced before White J and that the principle of Anshun estoppel applied. He referred also to the case of Oswal v Yara Australia Pty Ltd [2011] WASC 355 in which Kenneth Martin J held that a party could not advance in one set of proceedings a clause based on the existence of an agreement and in another proceeding contend that the agreement was void, at least not whilst the earlier proceedings had not been concluded. Such a course Martin J held was an abuse of process and AVL contended that Belvino was embarking on a similar abuse here. Mr Goodman also contended that his client was led to believe that there would be no argument that should the expert reach a conclusion based on an erroneous interpretation of the contract it was open to review and may have taken a different course had they been appraised of that attitude.

3. [57]

   There therefore appear to be three threads to AVL’s contentions:

   1. (1)

      an assertion of an abuse of process on the part of Belvino

   2. (2)

      a general estoppel claim

   3. (3)

      Anshun estoppel

4. [58]

   It appears clear that before White J Mr Dick was accepting the possibility that after the expert’s determination the disgruntled party might be able to seek to establish that the determination was not one in accordance with the contract but it was not part of the case advanced to persuade the Court that the declarations sought should be made that this was the case. The Court determined Belvino’s application adversely to it determining that all matters relevant to the task required by clause 4.26 were to be determined by the expert. The Court expressed no view one way or the other on the question of whether a misinterpretation of the clause of the expert would require the determination to be set aside, and it was not therefore a prevalent element of White J’s reasoning to reach the conclusion to which he came.

5. [59]

   That parties should not be permitted to advance fundamentally inconsistent claims in two different proceedings (or in the same proceedings: see Uniform Civil Procedure Rule 14.18) is well recognised but the present situation has no similarity to Oswal at all. Belvino contended in the earlier proceedings that declarations should be made, the Court rejected Belvino’s arguments and ordered that the expert determination proceed. Those proceedings are at an end and the result of them was that the expert was appointed to deal with all matters over the opposition of Belvino. In my view Belvino is not, by contending that the expert’s determination is binding, engaging in an abuse of process.

6. [60]

   In relation to the general estoppel claim no evidence was called in support of the assertions made. I infer that had Belvino advanced such a contention AVL would, as it does now, have contended that it was not correct. I reject the claim that Belvino is estopped from relying on the final and binding nature of the determination.

7. [61]

   The High Court in Anshun stayed proceedings brought by the Port of Melbourne Authority against Anshun Pty Ltd, a crane company operating at the port, seeking indemnity pursuant to an agreement between the Authority and Anshun. In earlier proceedings brought by an injured stevedore arising out of the use of the crane at the Port of Melbourne, the Authority and Anshun had been adjudged liable as tortfeasors and the Authority had not pleaded in defence to the cross-claim brought against it by Anshun the indemnity agreement. The High Court held that the Authority was estopped from bringing fresh proceedings because the Authority had not raised the indemnity in the first proceeding and that matter was so relevant to the subject of the matter of the first action that it was unreasonable for the Authority not to have done so: see 602–603 per Gibbs CJ, Mason and Aickin JJ.

8. [62]

   A decision as to whether the matter was one so relevant to the later matter is so relevant that the failure to raise it was unreasonable involves “a value judgment to be made referable to the proper conduct of modern litigation” per Allsop P in Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33, (2010) 75 NSWLR 245 at [3] and see CG Maloney Pty Ltd v Noon [2011] NSWCA 397 [60]-[62] per Giles JA (with whom Allsop P and Handley AJA agreed). In Anshun a very important consideration of the Court was the fact that second proceedings raised the spectre of inconsistent judgments (ie that the crane operator was required in the first proceedings to pay 20% of the plaintiff’s judgment and in later proceedings that the crane operator would, if the Authority was successful, be required to pay all of the stevedore’s judgment by way of indemnity). There is no such prospect here.

9. [63]

   In my view all that can be said of Belvino here is that it did not submit to White J that no stay should be granted because if a stay was granted the expert’s determination would be final with no means of redress. That is an assertion which it was entitled to advance or not as it saw fit, and one reason for not advancing it would be a concern that if the determination of the expert was adverse to Belvino it might be said that it had agreed that it would be a final and binding determination or if the Court had based its decision on that point, that there was an issue estoppel. I do not think that Belvino can be precluded from putting an argument concerning the effect of an expert’s determination after it had sought to have the Court make declarations concerning the meaning of the clause and its application was resisted by AVL and its contentions rejected by the Court.

10. [64]

    It follows that in my view there is no impediment to Belvino maintaining that the expert’s determination is final and binding and that the Court should not form its own view as to the correct interpretation of clause 4.26(f).

11. [65]

    I conclude that the case is not one in which the Court should embark upon its own assessment of the clause hence that the relief sought by AVL should be refused.

12. [66]

    It follows that it is not necessary for me to express a view on whether the expert fell into error. Against the possibility that I am in error in relation to the first point however, I will express my views on this topic as well.

13. [67]

    I am not persuaded that the expert fell into error and for the following reasons:

    1. (1)

       I think that on a natural reading of the clause it is offering to AVL two different bases for a claim to bring the lease to an end:

    2. (2)

       In the case of option 1 the reduction that must be demonstrated is a reduction of the average two year tonnage yield to the actual production which reduction must be greater than 50% of the average two year yield.

    3. (3)

       In the case of option 2 the reduction that must be demonstrated is a reduction of the tonnage of grapes which the vineyard is capable of producing from the average two year yield which reduction must be greater than 50% of the average two year yield.

    4. (4)

       I note that apart from the need to read the words “in that vintage” between “whether” and “Production” in f(i) and (ii), an insertion on which both parties are agreed, neither party contended that any words should be read into clause 4.26(f).

    5. (5)

       If the words “reduced by more than 50% of Average Production capacity” do not contain both the comparator and the extent of reduction required but rather just provide the figure for the extent of reduction required the clause does not expressly provide from what Production and Production Capacity must be reduced. Neither party contended that the clause was void for uncertainty.

    6. (6)

       I do not accept AVL’s contention that the Production Capacity which is referred to in (f)(i) is the pre frost Production Capacity. I think it is more likely that the lessee was by the clause given an opportunity to measure post frost Production Capacity and to use that as one of the two comparables ie option 2. AVL chose to use a pre frost figure which was high and seeks to have that compared to the actual production for the affected year. The clause does not expressly call for that comparison and if no other words are to be read in to the clause I do not think that the clause as it stands can be read as requiring a comparison between “Production Capacity” and “Production”.

    7. (7)

       In my view, AVL having put forward a figure for Production Capacity prior to the frost, presumably because it, or those advising it, thought that would produce a higher differential, and which had the opposite effect when utilised in the clause to that for which they had hoped, does not provide any support for the construction for which AVL contends. Once it is appreciated that the clause called for a comparison between post frost Production or Production Capacity on the one hand and the two year average yield on the other, it can be seen that provision to the expert by AVL of a figure for pre frost Production Capacity has produced what AVL claims is an odd result. The expert may have fallen into error in accepting AVL’s pre frost Production Capacity as one of the two comparators under option 2 but AVL does not attack his determination for that reason and nor does Belvino. Mr Scholefield has however in my view correctly identified that he needed to compare Production Capacity (as determined) with the two year average yield, so if he did fall into error in accepting the pre frost Production Capacity figure advanced by AVL it is not a relevant error or one which AVL can (or does) rely.

    8. (8)

       As a matter of logic I can accept that one measure of loss might be the difference between Production Capacity prior to the frost in comparison to Production Capacity after the frost but that is not what the clause says and AVL did not in any event provide the expert with a figure for post frost Production capacity.

    9. (9)

       I see an important element in the operation of clause 4.26 as being to ensure that the average two year yield (ie using the two previous vintages) was the yardstick. It may have been a less generous test than a comparison between actual Production and pre frost Production Capacity but that is what the parties agreed on.

    10. (10)

        I accept Belvino’s contention that subclause 4.26(c)(iii) and 4.26(i) emphasise that the parties were treating the two year yield (ie Average Production Capacity) as the key benchmark reinforcing the correctness of the interpretation of clause 4.26(f) which the expert adopted. Subclause 2.3(b)(xi) uses a different measure for the requirement of notice to be given but it also focuses on actual production (the year before) not Production Capacity.

    11. (11)

        I would add that one of AVL’s contentions is that the expert wrongly used as his benchmark the Average Production Capacity rather than 50% of the Average Production Capacity. Ironically, if the expert had used 50% of the Average Production Capacity as the benchmark there would have been no reduction at all since Production, at 15,260 tonnes, was greater than 50% of Average Production Capacity (see page 36 of Plaintiff’s submissions Tab 10 Exh A). I think that the expert was treating the clause as containing both the comparator and the measure of the reduction.

    12. (12)

        I do not accept that the expert was not comparing the post frost situation with a pre frost situation (see plaintiff’s submissions para 40). He was comparing post frost yield to pre frost yield but was required, for the pre frost situation, to use the two year average yield.

    13. (13)

        I do not accept that by comparing Production Capacity to the two year average yield the expert was treating the words “reduced by more than 50% of Average Production Capacity” as something different to what was stated. To be entitled to rely on the clause AVL had to establish that Production Capacity was reduced- if it chose a figure that involved no reduction (as it did) the clause could not operate in its favour. I do not accept that Energy World Corp Pty Ltd v Maurice Hayes & Associates Pty Ltd (2007) 239 ALR 457 has any relevance here.

    14. (14)

        As Belvino’s submissions point out the construction that AVL put forward for comparing Production Capacity with Production does not work if Production was chosen ie for both the “before” and “after” scenario. There is nothing to which actual Production can be compared hence AVL is driven to assert that actual production also should be compared to Production Capacity.

    15. (15)

        Mr Hutley contended that as the crop came closer to harvest Production Capacity and actual production became virtually the same. I can accept that but I do not accept that this permits clause 4.26 to be read as requiring a comparison between actual production and Production Capacity, moving the calculation away from an agreed benchmark of the two year average yield. One reason for the parties to have included Production Capacity was in recognition that vines may be well off from harvest at the time of the disaster and to permit the impact to be assessed without awaiting the harvest for that year. AVL did not provide a figure for post frost Production Capacity and the inference was that post frost Production Capacity and actual production were the same.

    16. (16)

        Belvino in its submissions claims that the expert determined that there was no permanent damage to the vines (see defendant’s submissions [41]-[48] and see plaintiff’s submissions in reply [31]-[33])- I accept Mr Hutley’s point that the expert was required to determine whether there has been a reduction in Production Capacity for a particular vintage. I do not see how this assists AVL however. The expert accepted AVL’s own proposed figure for Production Capacity. He was, having accepted that figure, required to compare it to the two year average yield which is what he did.

    17. (17)

        In summary then, I think Mr Scholefield has taken the correct approach to clause 4.26(f).

14. [68]

    It follows in my view that even were I persuaded that the Court could set aside the determination of the expert if satisfied that the interpretation adopted by the expert was incorrect I would not be persuaded that it is appropriate to do so. It also follows that there is no need to consider whether the Court should express its views on the meaning of Natural Disaster as used in the clause, but consistent with what I have said earlier I think that also was a matter wholly for the consideration and determination of the expert.

Conclusion

1. [69]

   I therefore answer the questions posed at [8] as:

   1. (1)

      Yes.

   2. (2)

      (a) Mr Scholefield determined that (a) Production (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined), and (b) Production Capacity (as defined) had not been reduced by more than 50% of Average Production Capacity (as defined).

   3. (3)

      (a) No.

   4. (4)

      Not necessary to answer but yes.

   5. (5)

      Does not arise.

   6. (6)

      Does not arise.

2. [70]

   The relief sought in the Amended Summons and Amended Cross Claim should be refused. I will hear the parties on the appropriate cost orders both in respect of the Amended Summons and Amended Cross Claim.