Scott v Avery Clauses

It is important when you enter into an agreement or contract that you understand the process for resolving disputes in that agreement.  With the recent shift towards alternative dispute resolution including arbitration and expert determination, particularly in the commercial and construction setting, you may have come across a reference to a contractual provision requiring parties to deal with their disputes in a particular way.

The law permits and recognises that the contracting parties have agreed to deal and attempt to resolve their disputes via the dispute resolution clause and are prepared to honour that contractual promise before they ask for the Court’s assistance.

This type of clause is often referred to as a “Scott v Avery” clause, named after the House of Lords decision of Scott v Avery (1856) 5HL CAS811.

It is important to understand that the contractual provision does not oust the jurisdiction of the Court, as that would be unlawful, what it merely recognises is that the parties have agreed to follow a dispute resolution process first. This usually means that the parties can only seek the Court’s assistance if there is an error of law or if there is need to take urgent action such as an injunction.

What does this mean for your agreements?

What this means is that you may be required to follow a particular pathway which is outside the Court’s system. It is usually binding. If there is a technical dispute the person who may adjudicate on the dispute may have technical expertise and could be nominated by one or both parties. The other advantage is that it is a private adjudication process which is generally quicker, cost effective and confidential.

However, being a private process this means that the parties are paying for a person who is in a position analogous to the role of a judge. The process may not follow the formal evidence process, which means you are reliant on the knowledge and experience of the adjudicator. That person also does not have all the powers of a judicial officer, for example, the power to compel non-party witnesses to attend or produce documents. Similarly, the contractual process does not lend itself very well to disputes were there are parties outside the contract who may have a legal interest or are liable.

Conclusion

If you want to potentially manage the dispute process in a particular way, you need to give thought to this before entering any contract or agreement so that you can negotiate or amend the terms to stipulate a suitable dispute process in the particular circumstances. This could be no more than for example having the right to nominate a particular person as adjudicator.

The information in this document represents general information, and should not be relied for your specific circumstances. If you require legal advice and assistance on the matters contained or associated in this document you should contact Trinity Law. Subject to the limits of the law, Trinity Law disclaims any liability on persons relying on this document.