Homepace Limited v SITA South East Limited

[2008] EWCA Civ 1

Expert Determiners need to know what they are doing

The Facts

This appeal concerned whether a certificate issued by an expert for a determination pursuant to a lease was valid and therefore binding. The lease was of commercial premises part of which involved an area where extraction of minerals can and did take place. The lease provided for early termination upon written notice by the tenant with a cessation of liability to pay rent 12 months thereafter. The lease specifically made provision for an expert to determine the validity of the notice. The Court of Appeal considered that the surveyor was given exclusive power to determine the questions to which his certificate was directed. As part of his consideration he was bound to consider “minerals” on the site. As a matter of fact, the surveyor took into account only the minerals and not the reserved minerals on the site. The issue as to the determination was whether he should have taken into account both or not. 

On the facts the Trial Judge and the Court of Appeal determined that the surveyor ought to have taken both into consideration.

The Issues

What effect did this finding have upon the validity of the decision and the binding nature of that decision?

The Decision

The binding effect, or otherwise of an expert’s determination has already been considered in a number of cases over the years. Each case depends upon the terms of the contract under which the determination is made, both as to what it is that the expert has to decide, and as to how far his decision is binding upon the parties. Accordingly, it is necessary to examine the scope of the expert’s authority. If the expert goes beyond that scope, then the determination has no effect as between the parties. If it does stay within the bounds of that authority, the contract itself will govern the question of whether the determination is binding and if so, in what circumstances and to what extent that decision can be challenged.

Accordingly, it was decided that the first question was to ask what the agreement had entrusted to the expert. Thereafter the second question was whether that is what he has decided. If so, the third question is whether it can be shown he has made such a mistake as to vitiate his decision. 

Accordingly, the Court considered the agreement; considered his decision; and came to the conclusion that he had only considered the minerals (as opposed to the reserved minerals as well). 

Therefore, the Court of Appeal (and indeed the Court below) concluded that the expert did not proceed on the correct basis. Accordingly, his decision was not binding upon the parties.

In so determining, the Court had the benefit not only of the decision of the expert but also of a series of correspondence flowing between the disgruntled party and the expert post his decision. The expert had replied to those letters. The Court, therefore, considered those letters in regard to its final conclusions as to what the expert did and did not take into consideration. The Court made the point that:-

"Mr. Hill need not have responded to the request for clarification of the certificate and his report. If he had not done so, he could not have been compelled to explain himself. However, since he did do so, and thereby made clear the basis upon which he had proceeded, it seems to me that the Court must look at his explanations when considering what was the reasoning which led him to issue his certificate and whether it was prepared on the correct basis".

Comment

This case re-emphasises the importance of an expert breaking down his or her precise role. That role ought to be clearly set out in the contract that governs the reference to the expert in the first place. However, it highlights the importance of the expert staying within the brief so that the ultimate decision is binding and not subject to challenge. 

Further, it reinforces that (under this particular agreement) there was no necessity for the expert to explain himself further although he did do. If of course the expert then does go on to explain himself that becomes evidence which may be used in any later challenge. 

Of course, the agreement itself may demand that the expert give reasons for any decision and therefore care should be taken at all times to comply with the agreement in that regard too.

Once again, the Academy of Experts "Rules for Expert Determination" state that:

"Unless otherwise agreed by the parties and communicated to the Expert in writing at the time of his appointment, the Expert will not give reasons for his determination"

Utilising that agreement may therefore be preferable.