Macdonald Estates Plc v National Car Parks

[2009] Csih 79a (Extra Division, Inner House, Court of Session)

Arbitration or Expert’s Determination

The Facts

The parties had entered into a contract relating to the proposed development of a multi -storey car park. The terms of that contract are of little relevance here, save to say that the contract contained several provisions for resolution of disputes, some of which involved an Independent Expert whilst others provided for an Independent Surveyor and for Arbitration. The Arbitration Clause expressly excluded the provisions of s3(1) of the Administration of Justice (Scotland) Act 1972.

The parties appointed Gordon Murray, architect, as an Independent Expert acting under the contract. He was appointed to determine whether or not a suspensive condition in the contract had been purified.

The dispute was as to whether the agreement under which Mr. Murray was acting as an Independent Expert was an “agreement to refer to Arbitration” within the meaning of s3(1) of the Administration of Justice (Scotland) Act 1972 with the consequence that Mr Murray could be required to state a case for the opinion of the Court.

The issue

Ultimately, the issue was, did s3(1) of the Administration of Justice (Scotland) Act 1972 apply?

Accordingly, the real issues were:

1. How was the term “agreement to refer to Arbitration” to be interpreted?

2. Was Arbitration and Expert Determination to be classed as one and the same in Scots Law?

3. Accordingly, was Mr Murray’s role as an Arbiter or an Expert?

The Decision

Is Arbitration and Expert Determination one and the same?

It was submitted that Scots law drew no distinction between Arbitration and Expert Determination. Their Lordships disagreed. Whilst in older Scottish cases the terminology of Arbitration was used in relation to agreement as pursuant to which questions of valuation were referred to a valuer for determination, the parties’ agreements expressly used such terms and the Court did not attempt to define the concept of Arbitration in Scots law. Their Lordships were not persuaded that any reference to Expert Determination was, as a matter of law, a reference to Arbitration.

Their Lordships considered that there were fundamental reasons for rejecting the idea that Expert Determination and Arbitration were to be classed as one and the same. They noted that the legal incidents of Arbitration would not necessarily meet the needs of parties in dispute and thus other forms of ADR had developed (mediation and Expert Determination for example). Their Lordships distinguished Expert Determination from Arbitration as not being judicial in character. Expert Determination would depend upon the terms of the parties’ agreement and therefore can differ according to context.

However, their Lordships pointed out that the use of the word “expert” was not conclusive. Generally, phrases such as “acting as an expert not as an arbiter” were clear in their general effect. An arbiter, sitting in a judicial or quasi-judicial capacity would decide the matter on the basis of submissions and evidence put before him. An expert, however, (subject to the provisions of his remit), would be entitled to carry out his own investigations and come to his own conclusions, regardless of the evidence or submissions placed before him.

Furthermore, s3(1) of the Administration of Justice (Scotland) Act 1972 is only applicable to Arbitration. Expert Determination cannot be appealed against by way of case stated which may, of itself be one of the reasons the parties agree on Expert Determination in the first place.

Their Lordships reiterated that Arbitration remained a jurisdiction based on the parties’ agreement to do so. Given that s3(1) applies where there is “an agreement to refer to Arbitration”, the words direct attention to the terms and intention of the agreement of the parties in a particular case.

On the interpretation of the parties’ agreement, the Court found that Mr Murray was not acting as an Arbiter and therefore s3(1) of the Administration of Justice (Scotland) Act 1972 did not apply.

Comment

This is a Scottish case but the fundamental principle is similar in England and Wales. It is very important to review the terms of appointment in order to define the role you are being asked to carry out.

TEDR Volume & Issue

TEDR Volume: 
15
TEDR Issue: 
2