A potted guide to expert determination

Jonathan Seitler QC guides practitioners through the basics of the law relating to expert determination What is expert determination? In the property field, expert determination arises when a lease or other contract provides for a dispute to be determined by an expert. The idea is that it is cheap, quick, confidential and, because the nature and qualifications of the expert can be predefined, ensures that the dispute is resolved by someone with the relevant expertise. To varying degrees, that is not something that can always be said about taking a dispute to court. Under leases and sale and purchase agreements, expert determinations are often the chosen method of dispute resolution in relation to issues of valuation, whether valuation of rent (on rent review) or land transfer price (on freehold sale, letting or leaseback). It is usually a surveyor who the lease or contract provides is to be appointed for the purposes of such valuations. What is the difference between expert determination and arbitration? The question of whether a dispute resolution clause actually provides for expert determination or arbitration is a question of the construction of the relevant clause in the contract or lease: see Wilky Property Holdings v London & Surrey Investments [2011] EWHC 2226 (Ch). Expert determination is generally regarded as more informal and yields a determination less amenable to appeal. That is because arbitration is governed by the rules and processes set out in the Arbitration Act 1996 and is subject to a considerable body of case law. It means that parties are generally stuck with the result of expert determinations that they have bound themselves, in the contract or lease, to accept as final and binding. Does an expert have wider powers than an arbitrator? In some ways, yes and in some ways, no. The source of the expert’s powers is limited to the terms of the contract or lease or the agreed terms of reference for the specific appointment. If there is no power from those sources, for instance to order disclosure or the attendance of witnesses, the expert has no such power: see British Shipbuilders v VSEL Consortium plc [1997] 1 Lloyd’s Rep 106. Any application for such disclosure would therefore have to be made to the court, which would determine it in accordance with the contract or lease and terms of reference. This means that an expert has greater latitude to conduct the determination in the manner that the expert considers appropriate as regards matters such as the scope of the issues in dispute; the timetable for the determination; whether and how evidence is to be presented; whether there is to be an oral hearing and, if so, when, where and how it is to be conducted; and whether or to what extent the final determination will include reasons for the decision. The expert, for instance, can adopt an inquisitorial approach and can rely on materials not put forward by either party. Nor is an expert duty bound to allow the parties to comment on material that might affect the determination, however a good practice that might otherwise be. There is no external source of rules for requiring an expert to comply with the requirements of fairness or natural justice, unless a basis for that can be found in the contract or lease or terms of reference, as was found, exceptionally, in Ackerman v Ackerman [2011] EWHC 3428 (Ch). In short, therefore, an expert has much greater leeway, both in terms of flexibility during the determination and as regards the finality of the determination, than has an arbitrator because the legal constraints are that much less. When can the court interfere in an expert determination? Only where an issue arises as to the expert’s jurisdiction. The question of the expert’s jurisdiction will turn on the precise construction of the clause in the lease or contract which provided for the expert’s appointment and the terms of reference, if any, which the parties have agreed for the particular determination. It is rare (though not unheard of) for the court to regard itself as having the ability to intervene in an expert determination: see Thorne v Courtier [2011] EWCA Civ 460; [2011] PLSCS 113. The question of the scope of the expert’s jurisdiction is therefore treated, ultimately, as a matter for the court, rather than the expert themselves, though there may be cases where the expert would determine it in the first instance: see Barclays Bank plc v Nylon Capital LLP [2011] EWCA Civ 826. However, as with any other jurisdictional point, the party taking such a point needs to take it as soon as practicable to avoid any participation in the process to bar it from that course: see ZVI Construction Co LLC v University of Notre Dame (USA) in England [2016] EWHC 1924 (TCC) and, more generally, Apex Global Management v Global Torch Ltd [2017] EWCA Civ 315. In practice, the “route into court” based on a challenge to the expert’s jurisdiction sometimes results in lawyers (especially) seeking to turn a determination that they do not like into an issue of jurisdiction: see Shafi v Rutherford [2014] EWCA Civ 1186 and Premier Telecom Communications v Webb [2014] EWCA Civ 994. This can cause delay and, probably, expense. What can I do if the other side fails to co-operate with the appointment of an expert? Ultimately this would amount to a breach of the implied duty under a contract or lease to co-operate in relation to terms which patently require co-operation in order to be effective and therefore ultimately the matter amounts to a breach of contract, remediable by injunction or damages: see Cream Holdings v Davenport [2011] EWCA Civ 1287. In relation to the former remedy, the court can, in certain circumstances, impose a machinery for the expert determination if the existing machinery is deficient: see Sudbrook Trading Estate Ltd v Eggleton [1983] 1 EGLR 47. Can an expert make an award of costs? Not unless it is specifically provided for or allowed in the contract or lease or in the expert’s terms of reference which the parties have agreed in the course of appointment of the expert. This illustrates the more general point that the source of the all the expert’s powers, one way or another, must be the agreement of the parties. This is not so much the case in court-based litigation, where the Civil Procedure Rules govern the powers of the court to manage the case. The result is that in the absence of specific provision, the parties will bear their own costs of an expert determination, irrespective of the outcome. What happens about legal issues which arise on an expert determination if the expert is not a lawyer? The parties will have had to have agreed, either in the contract or lease or in the expert’s terms of reference, to allow the expert to seek the assistance of a legal assessor to provide advice on that legal question. Otherwise, absent subsequent agreement, the court will determine the issue: see Persimmon Homes Ltd  v Woodford Land Ltd [2011] EWHC 3109 (Ch); [2011] PLSCS 277. How do I challenge an expert determination which I think is wrong? Where, as in most cases, the contract or lease provides for the expert’s decision to be final and binding, it will be subject to review only in rare cases of fraud or manifest bias or where the decision is so left-field that it can be categorised as outside the jurisdiction of the expert to make. The general principle is that the court cannot entertain a challenge to the expert’s determination if the expert has answered the right question in the wrong way, but only if the wrong question has been answered: see Jones v Sherwood Computer Services plc [1992] 2 All ER 170, Nikko Hotels (UK) Ltd v MEPC plc [1991] 2 EGLR 103 and Mercury Communications Ltd v Director General of Telecommunications [1996] 1 All ER 575. In Jones, Dillon LJ took as “the starting point for the modern statement of the law” the judgment of Lord Denning MR in Campbell v Edwards [1976] 1 EGLR 103, where he said: “It is simply the law of contract. If two persons agree that the price of property should be fixed by a valuer on whom they agree, and he gives that valuation honestly and in good faith, they are bound by it. Even if he has made a mistake they are still bound by it. The reason is because they have agreed to be bound by it. If there were fraud or collusion, of course, it would be very different. Fraud or collusion unravels everything.” This is only subject to a situation in which the expert exceeds the jurisdiction which the contract or lease circumscribes. In Mercury Communications, Hoffmann LJ summarised the position as follows: “So in questions in which the parties have entrusted the power of decision to a valuer or other decision-maker, the courts will not interfere either before or after the decision. This is because the court’s views about the right answer to the question are irrelevant. On the other hand, the court will intervene if the decision-maker has gone outside the limits of his decision-making authority.” Determinations of experts can be opened up on the grounds of manifest error only where the contract or lease or terms of reference provide for that to happen: see Walton Homes Ltd v Staffordshire County Council [2013] EWHC 2554 (Ch); [2013] PLSCS 231 . How do I enforce an expert’s determination? Through the courts, by way of summary judgment, which shouldn’t take too long. Jonathan Seitler QC is a barrister at Wilberforce Chambers The podded guides: click here to check out our new tie-in podcast series where Jonathan Seitler QC takes a more informal, but no less incisive, look at key areas of law