A question of expert determination
Wednesday 2nd October 2024
Head of Property Disputes, Paul Joyce, looks at the outcome on a recent contract dispute
A question of expert determination
In Dandara South East Limited v Medway Preservation Limited & Anor [2024] EWHC 2318 (Ch), the High Court held that a contractual expert determination clause will survive the termination of the contract, and the parties will remain bound by its terms.
Background
The parties exchanged a contract for the sale of land. The Claimant subsequently sought to terminate it and issued a claim for the return of the deposit. The Defendant disputed the court’s jurisdiction, arguing that the contract contained a mandatory expert determination clause and that the claim should be stayed to allow expert determination to proceed. The Claimant’s main counterarguments were that:
- The true construction of the contract meant that it did not extend to the dispute at hand, and
- As the contract had terminated, the parties were no longer bound by the expert determination clause.
Decision
On the first point, the court decided that, while there was tension between the expert determination clause and the separate jurisdiction clause, which conferred exclusive jurisdiction on the courts, the expert determination clause took precedence.
The parties were commercial entities who must have intended for the expert determination clause to have effect. It was a wide-ranging “one-stop shop” type clause, and whilst it was unusual that there was no separation between categories of disputes to be referred to the expert or the court, this lack of a carve-out suggested that the parties had intended the expert to deal with all disputes. This interpretation did not rob the court jurisdiction clause of effect, as there may be situations where the court was required to give effect to the outcome of an expert’s determination.
On the second point, the court concluded that where the parties have created a “one-stop shop” expert determination clause, it should be presumed that the parties intended that all disputes should fall within that clause, regardless of timing. There is, therefore, a presumption of separability and survival of an expert determination clause. It is for the party arguing against it to convince the court otherwise, which the Claimant had not successfully done in this case. The court here stayed the claim to allow the expert determination to proceed.
Comment
It is surprising that a court hasn’t had to determine this issue before now. The court’s decision on both points makes sense, however, and aligns with s.7 of the Arbitration Act 1996 which says that arbitration clauses are separable and distinct from the underlying agreement.
It should be noted, though, that much of the judge’s reasoning revolved around the relatively unusual fact that the parties had agreed to a very wide-ranging expert determination clause. When the scope of an expert determination clause is more limited, the presumption of separability may be weaker, and there may be an argument that it does not survive the termination of the underlying contract.
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