Expert Determination

General

Expert determination involves the appointment of an independent expert to make a  decision or determination of particular issues, which is binding on the parties to the agreement.  It differs from arbitration, in that the expert does not act in a quasi-judicial manner.  He can and should draw on his own expertise in the field.

The determination may be undertaken by a lawyer, engineer, surveyor or other appropriate experts.  It may be undertaken by a panel with a lawyer and other experts.  The matter will be determined by the terms of the agreement governing the position.

The parties agree that the determination is final and binding without an appeal.  There is limited scope of challenging it in court.  It is not based on seeking to have the parties reach an agreement.

As with arbitration, the parties may agree before or after a dispute has arisen, to use expert determination.  Expert determination is frequently provided for in commercial agreements in order to resolve specific issues within a short timeframe.  It may be employed in the course of a settlement or mediation, in order to conclude a dispute or aspects of a dispute.

Expert determination is suitable in technical areas, where a high degree of expertise is involved in the decision.  It is commonly used in relation to valuation, property disputes and in the construction and engineering sectors.

Expert determination clauses should be carefully drafted so that they are workable and appropriate to the circumstances.  A named expert may be provided for.  More commonly, in a  pre-dispute agreement, a mechanism is provided for appointment of the expert, commonly by the President of a relevant representative body, in the absence of agreement as to appointment. Provided that the clauses in above terms, it will be upheld by courts.

Expert Determination Clauses

Expert determination has the advantage of speed and cost-effectiveness.  It is informal and can be tailored to the requirements of the circumstances.  The matters in dispute may be kept confidential. The determination by the expert is enforceable as a matter of contract.  It is not equivalent to a court order in itself.  Proceedings must be issued to give effect to it.

The courts enforce agreements providing for expert determination clauses, provided that they are properly drafted.  They will grant damages for breach of contract if the reference is frustrated by one party.  Moreover, the court is likely to stay proceedings issued by a person who has breached the terms of the contract, in relation to a  dispute within the scope of the clause. There is a heavy onus on a person who seeks to proceed with court action, where there is an existing expert determination clause.

The expert may be identified from the outset or a mechanism may be provided, for the appointment of the expert.  As with arbitration clauses, it is a commonly provided that the expert is chosen by the President of a relevant institution or body.

The expert determination clause will determine the scope of matters within the remit of the expert.  It will usually provide that his decision is final and binding.  It may provide that the expert must give reasons for his decision.  It may deal with issues of cost and time scale.  It may set out procedures for the expert to follow.

An expert determination clause implies a duty on the parties to cooperate with each other and with the expert, in order to make the clause workable.  If the procedure by which the expert is to be appointed or by which the determination is to take place, breaks down or cannot be agreed, the courts may intervene and provide its own machinery.

Procedure

Expert determination commonly involves submission of written statements of case by the parties and the furnishing of relevant documents. An agreed bundle may be agreed upon by the parties. Their legal representatives may make representations at a meeting or hearing.  Exceptionally, live evidence may be part of the process. In the absence of agreement otherwise, expert determination does not require the expert to follow fair procedures and the principles of natural justice.

The agreement may specify whether reasons are to be given by the expert.  In the absence of specific provision, the expert need not provide reasons.  Where reasons are to be given, they should be adequate and comprehensible.  They may be brief but they should explain the basis of the decision.

If parties have agreed that the expert’s determination is to be conclusive and binding, then they cannot generally be challenged in court. This is so even if it is patently wrong and mistaken, whether by way of legal error or error of fact.

Parties may give confidential information to the expert, on the basis that it is not shared.  The expert may preserve confidentiality in his findings.  He should summarise information given to him, even if not known by the other parties so that they may know what the expert has taken into account, in making his determination.  This is particularly appropriate where the common parties agree that the expert’s determination may be set aside if there is a manifest error.

Challenging the Decision

A determination by an expert is usually limited to challenge on a limited number of grounds only. The decision may be challenged if the expert has departed in a material respect from his instructions.  This may be deliberate or may be in error.  A determination that is not within the scope of the contract term, may be set aside.  The variation must be material and not trivial.

Parties commonly agree that the decision is to be binding, in the absence of manifest error. Manifest errors are oversights so obvious as to admit to no difference of an opinion. This must be a very clear error in law or in fact.

An expert does not have immunity from suit.  He may be liable for a negligence or breach of contract, if fails to act in accordance with the terms of the contract.  He may be granted immunity by the terms of the reference or by the contract.

If the expert has been guilty of fraud or collusion, his determination may be set aside.  It may be shown that the expert is biased.   In some cases, the contract or context may require that the expert must act judicially.  In this case, the appearance of bias may be sufficient to challenge his decision.

Where the expert is obliged to give reasons for his decision and fails to do so, he may be ordered by the court to give reasons.