Data

Date:: 03-07-2009
Country:: Australia
Number:: [2009] NSWCA 177
Court:: Supreme Court of New South Wales Court of Appeal
Parties:: United Group Rail Services v Rail Corporation Of New South Wales

Keywords

CONSTRUCTION CONTRACT - BETWEEN TWO AUSTRALIAN COMPANIES - REFERENCE TO UNIDROIT PRINCIPLES AS MEANS OF INTERPRETING APPLICABLE DOMESTIC LAW (AUSTRALIAN LAW)

AGREEMENT TO NEGOTIATE IN GOOD FAITH - ENFORCEABLE UNDER AUSTRALIAN LAW - REFERENCE TO ARTICLE 1.7 UNIDROIT PRINCIPLES

Abstract

A contract between two Australian companies for the design and building of new rolling stock contained an extensive dispute resolution clause providing, among others, that before submitting their disputes to arbitration the parties had “to meet and undertake genuine and good faith negotiations with a view to resolving the dispute [...]”.

When a dispute actually arose one of the parties took the dispute to the Supreme Court of New South Wales, arguing that the dispute resolution clause had no effect because, among others, the commitment to negotiate in good faith was effectively an “agreement to agree” and as such uncertain and therefore unenforceable.

The Court of Appeal on the contrary held that in the case at hand the agreement to negotiate in good faith was enforceable.

In his opinion Justice Allsop first of all pointed out that a Court's task is to give effect to business contracts where there is a meaning capable of being ascribed to a word or phrase or term or contract, ambiguity not being vagueness. Moreover, good faith is far from being foreign to the common law. Not only has it been an underlying concept in the law merchant for centuries, but is recognised as part of the law of performance of contracts in numerous sophisticated commercial jurisdictions, and in this respect the learned Judge expressly referred, among others, to §§ 1-201 and 1-203 of the United States Uniform Commercial Code and to Article 1.7 of the UNIDROIT Principles. Admittedly, an agreement to negotiate in good faith has been considered unenforceable by the English House of Lords in Walford v Miles [1992]. However Justice Allsop openly declared that he was not at all persuaded by the Lord Ackner's arguments on which that decision was based. In the words of the learned Judge "[a]n obligation to undertake discussions about a subject in an honest and genuine attempt to reach an identified result is not incomplete. It may be referable to a standard concerned with conduct assessed by subjective standards, but that does not make the standard or compliance with the standard impossible of assessment. Honesty is such a standard [...] If what is required by the voluntarily assumed constraint is that a party negotiate honestly and genuinely with a view to resolution of a dispute [...], there is no inherent inconsistency with negotiation, so constrained. To say, as Lord Ackner did, that a party is entitled not to continue with, or withdraw from, negotiations at any time and for any reason, assumes that there is no relevant constraint on the negotiation or the manner of its conduct by the bargain that has been freely entered into. Here, the restraint is a requirement to meet and engage in genuine and good faith negotiations [...] These are not empty obligations; nor do they represent empty rhetoric. An honest and genuine approach to settling a contractual dispute [...] does constrain a party [...] A party, for instance, may well not be entitled to threaten a future breach of contract in order to bargain for a lower settlement sum than it genuinely recognises as due [...] A party would [likewise] not be entitled to pretend to negotiate, having decided not to settle what is recognised to be a good claim, in order to drive the other party into an expensive arbitration that it believes the other party cannot afford [...] "

Fulltext

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Judgment of
ALLSOP P, IPP JA, MACFARLAN JA

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Judgment

1. ALLSOP P: This appeal concerns the content and operation of a clause dealing with dispute resolution in the General Conditions of Contract of two contracts between Rail Corporation New South Wales, formerly the State Rail Authority of New South Wales (“Railcorp”) and United Rail Group Services Limited, formerly known as A. Goninan & Co Limited (“United”) under which United undertook to design and build new rolling stock for Railcorp. The relevant provisions are identical and reference need only be made to one group of provisions.

2. The dispute resolution clause, cl 35, is long and detailed, reflecting the parties’ careful attention to the subject. The clause commenced with a broadly expressed provision (cl 35.1) dealing with the scope of the clause, as follows:
“[35.1] Notice of Dispute
If a dispute or difference arises between the Contractor and the Principal or between the Contractor and the Principal’s Representative in respect of any fact, matter or thing arising out of or in connection with the work under the Contract or the Contract, or either party’s conduct before the Contract, the dispute or difference must be determined in accordance with the procedure in this Clause 35. Where such a dispute or difference arises, either party may give a notice in writing to the Principal’s Representative and the other party specifying:
(a) the dispute or difference;
(b) particulars of the dispute or difference; and
(c) the position which the party believes is correct.”

3. That clause is to be read liberally as required by the common law of Australia: Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 at 165-166 (Gleeson CJ with whom Meagher JA and Sheller JA agreed) and Comandate Marine Corporation v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; 157 FCR 45 at 87-93 [162]- [187] (Allsop J with whom Finn J and Finkelstein J agreed). See also the law of international commerce: Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2008] 1 Lloyd’s Rep 254 (see [31] for the phrase “law of international commerce”) and Threlkeld & Co Inc v Metallgesellschaft Limited (London) [1991] USCA2 61; 923 F 2d 245 (2nd Cir. 1991). So reading the clause, it can be seen to require the totality of likely disputes between the parties to be dealt with by the clause. No evidence is needed to appreciate that an engineering contract for the designing and building of new rolling stock for Railcorp could lead to complex disputes, which, if litigated, could be productive of very large legal and associated forensic costs. As I said in Comandate at 95 [192]:
“An ordered efficient dispute resolution mechanism leading to an enforceable award or judgment by the adjudicator, is an essential underpinning of commerce. Disputes arising from commercial bargains are unavoidable. They are part of the activity of commerce itself. Parties therefore often deal with the possibility of their occurrence in advance by the terms of their bargain.”

4. In cl 35.2 to 35.9, the contract provided for expert determination of certain kinds of dispute. Clause 35.2 provided as follows:
“[35.2] Submission to Expert Determination
If the dispute or difference is in relation to a Direction of the Principal’s Representative under one of the Clauses referred to in Attachment ‘A’, the dispute or difference must, if it is not resolved within 14 days after a notice is given under Clause 35.1, be submitted to expert determination to be concluded by:
(a) the independent industry expert specified in Attachment ‘A’; or
(b) where:
(i) no such person is specified; or
(ii) the independent industry expert specified in Attachment ‘A’ or person appointed under this Clause 35.2:
(A) is unavailable;
(B) declines to act;
(C) does not respond within 14 days to a request by one or both parties for advice as to whether he or she is able to conduct the appraisal; or
(D) does not issue his or her decision within the time required by Clause 35.7, a person agreed between the Principal and the Contractor and failing agreement within 21 days then a person appointed by the President for the time being of the Institution of Engineers, Australia.”

5. For present purposes, it is unnecessary to dwell on the details of Attachment A, including the types of dispute to be dealt with by experts and the identity of the experts.

6. Clause 35.3 made clear that the expert was not an arbitrator and could reach a decision from his or her own knowledge and experience.

7. Clause 35.4 provided for the procedure of the expert determination by the adjudicator.

8. Clause 35.5 provided for disclosure of interests of the adjudicator.

9. Clause 35.6 provided for each party to bear its own costs of the expert determination.

10. Clause 35.7 provided for a determination by the adjudicator within 28 days of acceptance by him or her of the appointment, unless the parties otherwise agreed.

11. Clause 35.8 provided for the terms of an adjudication agreement between the parties and the adjudicator.

12. Clause 35.9 dealt with the determination in the following terms:
“[35.9] Determination
The determination:
(a) must be given in writing by the Adjudicator;
(b) will be final and binding unless a party gives notice of appeal to the other party within 7 days of the determination; and
(c) is to be given effect to by the parties unless and until it is reversed, overturned or otherwise changed under the procedure in the following Clauses 35.10 to 35.12.”

13. Clause 35.10 provided that if a notice of appeal is given under subcl 35.9(b) or if the dispute is of a kind that is not required by cl 35.2 to be sent to expert determination:
“[T]he dispute or difference must be determined by arbitration in accordance with the following Clauses”.

14. It is to be noted that the parties expressed the process of what was thereafter to occur as the dispute or difference being “determined by arbitration”, though, of course, the following words were “in accordance with the following Clauses.”

15. Clauses 35.11 and 35.12 are the critical provisions in the appeal. They were as follows:
“[35.11] Negotiation
If:
(a) a notice of appeal is given in accordance with Clause 35.9; or
(b) the dispute or difference for which the notice under Clause 35.1 has been given does not relate to a Direction of the Principal’s Representative under one of the Clauses referred to in Attachment ‘A’,
the dispute or difference is to be referred to a senior representative of each of the Principal and Contractor who must:
(c) meet and undertake genuine and good faith negotiations with a view to resolving the dispute or difference; and
(d) if they cannot resolve the dispute or difference within 14 days after the giving of the notice under Clause 35.1 or 35.9 (whichever is later), the matter at issue will be referred to the Australian Dispute Centre for mediation.
[35.12] Arbitration
If the senior representatives referred to in Clause 35.11 cannot resolve the dispute or difference or, where the matter is referred to mediation under Clause 35.11(d), the matter is not settled within 42 days after the giving of the notice under Clause 35.1 or Clause 35.9 (whichever is the later), or within such longer period of time as these representatives may agree in writing, the dispute or difference will be referred to arbitration. The arbitration will be conducted before a person to be:
(a) agreed between the parties; or
(b) failing agreement within:
(i) 49 days after the giving of the notice under Clause 35.1 or Clause 35.9 (whichever is the later); or
(ii) where the senior representatives referred to in Clause 35.11 have agreed upon a longer period of time prior to reference to arbitration, 7 days after the expiration of that period, appointed by the President for the time being of The Institute of Arbitrators and Mediators Australia. The Rules for the Conduct of Commercial Arbitration of The Institute of Arbitrators and Mediators will apply to the arbitration. The arbitrator will have power to:
(c) open up and review any Direction of the Principal’s Representative and decision by the Adjudicator; and
(d) grant all legal, equitable and statutory remedies.”

16. Clause 35.13 provided that cl 35 would survive termination of the contract.

17. Clause 35.14 provided for the continuation of the work under the contract despite the existence of a dispute between the parties.

18. Clause 2.2 of the General Conditions of Contract was an interpretation provision, which provided that unless the context indicated a contrary intention headings were for convenience only and did not affect interpretation.

19. Clause 2.14 dealt with severability in the following terms:
“[2.14] Severability of Provisions
If at any time any provision of this Contract is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that will not affect or impair:
(a) the legality, validity or enforceability in that jurisdiction of any other provision of this Contract; or
(b) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Contract.”

The issues

20. The parties were agreed that subcl 35.11(d), the mediation clause, was uncertain and unenforceable. The agreement of the respondent (Railcorp) to this proposition was based on the fact that the “Australian Dispute Centre” did not exist. The parties’ agreement recorded by the primary judge at [5] in his reasons was that subcl 35.11(d) was “void for uncertainty.”

21. United also asserted (and Railcorp denied) that subcl 35.11(c) was also uncertain and therefore void and unenforceable.

22. Most importantly, United asserted (and Railcorp denied) that cl 35.12 (providing for the reference to arbitration) was not severable from cl 35.11, such that in circumstances where subcl 35.11(d) or subcl 35.11(c) and (d) was or were void and unenforceable, cl 35.12 was likewise void and unenforceable. The result of this argument, if it were accepted, would be that any dispute will be justiciable in Court, where the power to send any dispute to a referee would be available. The consequences and commercial relevance of success of United’s arguments were not explored.

The primary judge’s decision

23. The primary judge (Rein J sitting in the Technology and Construction List of the Equity Division) rejected the arguments of United. His Honour found subcl 35.11(c) valid and enforceable. His Honour found cl 35.12 severable from the agreed voidness and unenforceability of subcl 35.11(d).

The primary judge’s reasons and the arguments of the parties

24. As to the question of the certainty of subcl 35.11(c) the primary judge concluded by reference to various authorities, including in particular Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWSLR 1; Burger King Corporation v Hungry Jacks Pty Ltd [2001] NSWCA 187; 69 NSWLR 558; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; and Con Kallergis Pty Limited v Calshonie Pty Limited (1998) 14 BCL 201 that the obligation to undertake genuine and good faith negotiations had sufficient content not to be uncertain.

Subclause 35.11(c) and good faith negotiations

28. The obligation on the parties in subcl 35.11(c) is to refer the dispute or difference to a senior representative of each party (a category of employee, agent or officer which no one said was uncertain). Those persons must meet and undertake negotiations. The qualification is that negotiations must be “genuine and good faith negotiations”. Though the drafter used adjectives to describe the noun “negotiations”, the meaning is clear that the obligation is upon the contracting parties to have their respective senior representatives negotiate genuinely and in good faith. The phrase is a composite one, each limb of it informing the other. I will come to its contents in due course.

29. The status of a clause purporting in terms to create a legal obligation to negotiate or to negotiate in a particular way, such as here – genuinely and in good faith and, in particular, whether such a clause is intended to be legally binding, and, if so whether it has a sufficiently certain content to be enforceable has been the subject of some debate in the common law world for some time.

History of the authorities
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30. At a time when the common law of England, to a significant degree, determined the common law in Australia (see for example: Public Transport Commission of NSW v J Murray-More (NSW) Pty Limited [1975] HCA 28; 132 CLR 336 at 341 and 349 and the Judiciary Act 1903 (Cth), s 80 (before its amendment in 1988 by the Law and Justice Legislation Amendment Act 1988 (Cth), s 41)) the views of the English Court of Appeal and the House of Lords were often decisive. This is not now the case, and has not been at least since 1986: Cook v Cook [1986] HCA 73; 162 CLR 376 at 389-390 and the Australia Acts 1986 (Cth) and (UK). Foreign (including English) precedents are useful to the degree of persuasiveness of their reasoning.

[...]

Consideration of the proper approach

56. Before turning to the terms of the clause in question, given the juristic debate that has taken place about agreements to negotiate in good faith, it is helpful to begin with some essential propositions founded on accepted authority and principle. First, an agreement to agree is incomplete, lacking essential terms: Booker at 604. (That is not a question of uncertainty or vagueness, but the absence of essential terms.)

57. Secondly, the task of the Court is to give effect to business contracts where there is a meaning capable of being ascribed to a word or phrase or term or contract, ambiguity not being vagueness: Upper Hunter County District Council v Australian Chilling and Freezing Co Limited [1968] HCA 8; 118 CLR 429 at 436-437; New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1974] UKPC 1; [1975] AC 154 at 167; Meehan v Jones [1982] HCA 52; 149 CLR 571 at 589; and Trawl Industries at 332. (The commercial law should foster and support commercial practice, not fight it: see Devlin J writing extracurially “The Relation Between Commercial Law and Commercial Practice” (1951) 14 Modern Law Review 249.)

58. Thirdly, good faith is not a concept foreign to the common law, the law merchant or businessmen and women. It has been an underlying concept in the law merchant for centuries: L Trakman The Law Merchant: The Evolution of Commercial Law (Rothman 1983) at p 1; W Mitchell An Essay on the Early History of the Law Merchant (CUP 1904) at pp 102 ff. It is recognised as part of the law of performance of contracts in numerous sophisticated commercial jurisdictions: for example Uniform Commercial Code ss 1-201 and 1-203 (1977); Wigand v Bachmann-Bechtel Brewing Co 118 NE 618 at 619 (1918); Farnsworth on Contracts (3rd Ed) Vol 1 at pp 391-417 § 3.26b; UNIDROIT Principles of International Commercial Contracts (2004 Ed, Rome 2004) Art 1.7; R Zimmerman and S Whittaker Good Faith in European Contract Law (CUP 2000). It has been recognised by this Court to be part of the law of performance of contracts: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263-270; Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91; Burger King Corporation v Hungry Jack’s Pty Ltd at 565-574 [141]-[187]; and Alcatel Australia Ltd v Scarcella at 363-369. In Alcatel Sheller JA (with the express and unqualified agreement of Powell JA and Beazley JA) said the following at 369:
“The decisions in Renard Constructions and Hughes Bros mean that in New South Wales a duty of good faith, both in performing obligations and exercising rights, may by implication be imposed upon parties as part of a contract. There is no reason why such a duty should not be implied as part of this lease.”
59. There are other decisions of Australian courts and discussions by scholars recognising the obligation of good faith in a non-fiduciary context: see J Carter and E Peden “Good Faith in Australian Contract Law” (2003) 19 Journal of Contract Law 155; Finn J writing extracurially “Good Faith and Fair Dealing: Australia” (2005) 11 New Zealand Business Law Quarterly 378; H Lucke “Good Faith and Contractual Performance” in P Finn (Ed) Essays on Contract (Law Book Company 1987) at p 155; GEC Marconi Systems v BHP-IT [2003] FCA 50; 128 FCR 1 at 208 [915] ff; Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 at 36-37; Far Horizons Pty Ltd v McDonald’s Australia Ltd [2000] VSC 310; Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; (1999) ATPR 41-703 at p 43,014 [34]-[35]; Elfic Limited v Macks [2000] QSC 18 at [109]; Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288; (2005) Aust Contract Reports 90-213; Aiton Australia Pty Limited v Transfield Pty Limited [1999] NSWSC 996; 153 FLR 236; AMCI (IO) Pty Limited v Aquila Steel Pty Limited [2009] QSC 139.

60. It is fair to say that caution (in some cases a lack of enthusiasm) has been expressed by some, for example: Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; 76 ALJR 436 at 445 [40], 452 [88] and 463 [155]; Vodaphone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 at [183] ff; Service Station Association Ltd v Berg Bennett & Associates Pty Ltd [1993] FCA 445; (1993) 45 FCR 84 at 91-98; NT Power Generation Pty Ltd v Power and Water Authority [2001] FCA 334; 184 ALR 481 at 574; Asia Television Ltd v Yau’s Entertainment Pty Ltd [2000] FCA 254; (2000) 48 IPR 283; Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128; 24 WAR 382 at 391-393 [16]- [22]; on appeal [2002] WASCA 94; 26 WAR 33 at 48-50 [45]- [55]; Wenzel v ASX Ltd [2002] FCAFC 400; 125 FCR 570 at 586-587 [80]- [81]; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228; and Jobern Pty Ltd v Break Free Resorts (Victoria) Pty Ltd [2007] FCA 1066.

61. Whilst this necessarily incomplete review of authorities reveals that the law in Australia is not settled as to the place of good faith in the law of contracts, this Court should work from the position that it has said on at least three occasions (not including Renard) that good faith, in some degree or to some extent, is part of the law of performance of contracts. It is unnecessary to go beyond this proposition to gain assistance in the construction of this particular clause of this contract. Many issues arise in respect of any implication (whether as a matter of fact or by law) of any term requiring performance of a contract, or the exercise of contractual rights, in good faith. Those issues need not be explored here in a case dealing with an express clause as part of a dispute resolution clause.

[...]

64. I turn to the major contrary appellate decisions. In relation to Courtney, the reasoning of Lord Denning MR equated an agreement to negotiate with an agreement to agree. The latter is, of course, not enforceable: Booker at 604 (Gibbs CJ, Murphy J and Wilson J), as Kirby P recognised in Coal Cliff. It does not follow, however, that an agreement to undertake negotiations in good faith fails for the same reason. An agreement to agree to another agreement may be incomplete if it lacks essential terms of the future bargain. An agreement to negotiate, if viewed as an agreement to behave in a particular way may be uncertain, but is not incomplete. The objection that no court could estimate the damages because no one could tell whether the negotiations “would be” successful ignores the availability of damages for the loss of a bargained for valuable commercial opportunity: Chaplin v Hicks [1911] 2 KB 786; Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 349 ff. The relevant question is whether the clause has certain content.

65. Nor, with respect, do I find the views of Lord Ackner in Walford v Miles persuasive. An obligation to undertake discussions about a subject in an honest and genuine attempt to reach an identified result is not incomplete. It may be referable to a standard concerned with conduct assessed by subjective standards, but that does not make the standard or compliance with the standard impossible of assessment. Honesty is such a standard: cf Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4; [1995] 2 AC 378 and Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 AC 164. Whether it is capable of assessment depends on whether there is a standard of behaviour that is capable of having legal content. Asserting its uncertainty does not answer the question. The assertion that each party has an unfettered right to have regard to any of its own interests on any basis begs the question as to what constraint the party may have imposed on itself by freely entering into a given contract. If what is required by the voluntarily assumed constraint is that a party negotiate honestly and genuinely with a view to resolution of a dispute with fidelity to the bargain, there is no inherent inconsistency with negotiation, so constrained. To say, as Lord Ackner did, that a party is entitled not to continue with, or withdraw from, negotiations at any time and for any reason assumes that there is no relevant constraint on the negotiation or the manner of its conduct by the bargain that has been freely entered into. Here, the restraint is a requirement to meet and engage in genuine and good faith negotiations. For the reasons expressed below that expression has, in the context of this contract, legal content.

66. Of course, it must be that the certainty and content of any contract will depend on its specific terms and context. Sweeping generalised rules, however, are difficult to sustain and not of great assistance.

[...]

70. What the phrase “good faith” signifies in any particular context and contract will depend on that context and that contract. A number of things, however, can be said as to the place of good faith in the operation of the common law in Australia. The phrase does not, by its terms, necessarily import, or presumptively introduce, notions of fiduciary obligation familiar in equity or the law of trusts. Nor does it necessarily import any notion or requirement to act in the interests of the other party to the contract.

[...]

71. The phrase “genuine and good faith” in cl 35.11 is, as I have said, a composite phrase. It is a phrase concerning an obligation to behave in a particular way in the conduct of an essentially self-interested commercial activity: the negotiation of a resolution of a commercial dispute. Given that context, the content of the phrase involves the notions of honesty and genuineness. Whilst the activity is of a self-interested character, the parties have not left its conduct unconstrained. They have promised to undertake negotiations in a genuine and good faith manner for a limited period (14 days). As a matter of language, the phrase “genuine and good faith” in this context needs little explication: it connotes an honest and genuine approach to the task. This task, rooted as it is in the existing bargain, carries with it an honest and genuine commitment to the bargain (fidelity to the bargain) and to the process of negotiation for the designated purpose.

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73. These are not empty obligations; nor do they represent empty rhetoric. An honest and genuine approach to settling a contractual dispute, giving fidelity to the existing bargain, does constrain a party. The constraint arises from the bargain the parties have willingly entered into. It requires the honest and genuine assessment of rights and obligations and it requires that a party negotiate by reference to such. A party, for instance, may well not be entitled to threaten a future breach of contract in order to bargain for a lower settlement sum than it genuinely recognises as due. That would not, in all likelihood, reflect a fidelilty to the bargain. A party would not be entitled to pretend to negotiate, having decided not to settle what is recognised to be a good claim, in order to drive the other party into an expensive arbitration that it believes the other party cannot afford. If a party recognises, without qualification, that a claim or some material part of it is due, fidelity to the bargain may well require its payment. That, however, is only to say that a party should perform what it knows, without qualification, to be its obligations under a contract. Nothing in cl 35.11 prevents a party, not under such a clear appreciation of its position, from vindicating its position by self-interested discussion as long as it is proceeding by reference to an honest and genuine assessment of its rights and obligations. It is not appropriate to multiply examples. It is sufficient to say that the standard required by the notion of genuineness and good faith within a process of otherwise tactical and self-interested behaviour (negotiation) is rooted in the honest and genuine views of the parties about their existing bargain and the controversy that has arisen in connection with it within the limits of a clause such as cl 35.1.

74. With respect to those who assert to the contrary, a promise to negotiate (that is to treat and discuss) genuinely and in good faith with a view to resolving claims to entitlement by reference to a known body of rights and obligations, in a manner that respects the respective contractual rights of the parties, giving due allowance for honest and genuinely held views about those pre-existing rights is not vague, illusory or uncertain. It may be comprised of wide notions difficult to falsify. However, a business person, an arbitrator or a judge may well be able to identify some conduct (if it exists) which departs from the contractual norm that the parties have agreed, even if doubt may attend other conduct. If business people are prepared in the exercise of their commercial judgement to constrain themselves by reference to express words that are broad and general, but which have sensible and ascribable meaning, the task of the Court is to give effect to, and not to impede, such solemn express contractual provisions. It may well be that it will be difficult, in any given case, to conclude that a party has not undertaken an honest and genuine attempt to settle a dispute exhibiting a fidelity to the existing bargain. In other cases, however, such a conclusion might be blindingly obvious. Uncertainty of proof, however, does not mean that this is not a real obligation with real content.

[...]

81. The business people here chose words to describe the kind of negotiations they wanted to undertake, “genuine and good faith negotiations”, meaning here honest and genuine with a fidelity to the bargain. That should be enforced. In my view, subcl 35.11(c) was not uncertain and had identifiable content.

[...]

Orders

99. I would dismiss the appeal with costs.

100. IPP JA: I agree with Allsop P.

101. MACFARLAN JA: I agree with Allsop P.}}

Source

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