Expert determination: no way out!

In recent years, expert determination as an alternative dispute resolution method has grown in popularity. It is an ideal method for determining discrete technical issues although it can also be used for resolving all disputes arising under a contract. The parties choose, either at the time of signing the contract or when a dispute arises, to refer the dispute to an expert (in the particular field in which the dispute has arisen). The agreement usually states that the decision will be final and binding. If it does, then it is extremely difficult to overturn the expert's determination. In Owen Pell Limited v Bindi (London) Limited, the judge points out that expert determination can have many advantages, including speed and limited costs exposure, and discusses the very limited circumstances in which an expert's decision is unenforceable.

The facts

A dispute arose during the construction of an extension by the claimant at the defendant's property. The parties agreed to refer their dispute to an independent expert appointed by the Royal Institution of Chartered Surveyors. In the agreement the parties expressly agreed that the expert should conduct the proceedings in any manner that he saw fit and that the parties would be bound by his decision and could not refer the dispute to a subsequent tribunal.

The expert read submissions, held a site visit and ultimately ordered the defendant to pay a sum in excess of £50,000 plus VAT. The defendant refused to pay. The claimant issued proceedings to enforce the decision and sought summary judgment from the court.

The defendant alleged that terms should be implied into the agreement (to give business efficacy to it and as a matter of obvious inference) that the decision would be of no effect and would be set aside in the event that the expert:

1. failed to conduct himself in accordance with the principles of natural justice; or
2. was biased or gave the appearance of bias; or
3. where the parties received a reasoned decision (as opposed to a decision without any explanation), that the award is only enforceable if free from gross or obvious error or perversity.

The defendant also sought to rely on expert evidence to demonstrate that the expert was biased.

What the Court had to say

The claimant applied for summary judgment on the basis that the defendant's arguments had no real prospect of success. The judge agreed, awarded summary judgment and confirmed the following:

1. There is no requirement for the rules of natural justice to be followed in an expert determination.
2. Only actual bias was sufficient to render the decision unenforceable. Whether the expert was biased is a question of fact to be decided by the court and did not require expert evidence. The judge also concluded that, on the facts, there was no apparent bias or appearance of bias.
3. As with adjudication, provided the expert answered the right question, his decision will be binding even if it is wrong. The court would not imply a term into the agreement allowing it to set aside or to refuse to enforce the decision by reason of errors in the determination, whether gross, obvious or perverse.
4. There is no real distinction between an expert determination where reasons are provided (referred to as a speaking decision) and one where no reasons are provided (a non speaking decision). Since the agreement did not require the expert to give reasons, the fact that he did could not be used to justify implying a term that the decision could be challenged if those reasons were in error.
5. The scope of the expert determination, the powers of the expert, and the grounds for any challenge, are governed by the agreement between the parties.

In this case, the agreement between the parties expressly stated that the decision would be final and binding. The judgment does not address the question of whether an expert determination would be final and binding in the absence of an express term.

Lessons to learn

1. An expert determination should be enforceable unless:
   1. The agreement contains express provisions allowing the parties to challenge the decision;
   2. The expert has answered the wrong question; and/or
   3. There is evidence of fraud or actual bias.
2. The terms of the agreement will set the boundaries for the expert so you have to make sure that it accurately reflects your intentions. Particular attention should be paid to the following:
   1. the scope of the dispute to be determined. Therefore, for example, if you are an employer in a payment dispute ensure the scope includes the right to raise counterclaims or other contra charges;
   2. whether the expert is to be expressly asked to provide reasons for his decision (although following this judgment no additional avenues of escape are open if the expert determination includes reasons);
   3. the extent to which the decision is to be final and binding. It is usual to state that the parties agree that the decision of the expert is final and binding. However, you may wish to reinforce this by expressly stating that the dispute cannot be referred to a subsequent tribunal. Alternatively, you could state that the decision is final and binding but also set out the grounds upon which it may be challenged, for example, if there has been:
      1. Gross or obvious error or it is perverse;
      2. A breach of the rules of natural justice; or
      3. Bias.

It is not advisable for the agreement to remain silent on this issue. Uncertainty still surrounds the question of whether an expert determination is final and binding in the absence of an express term.

Wragge & Co acted for the successful claimant in this case.