Expert Determination – the dangers of (inadequate) reasons

[2007] EWHC 503 TEDR Volume 13 Issue 2

The Facts

The parties agreed to refer their dispute for determination by an Expert.

They agreed the Umpire’s terms of reference, which included terms that:

1. The decision would be binding on the parties save in the case of a manifest error;

2. The Umpire would include reasons for the decision.

A decision was given after the Umpire had held several meetings with each party and viewed various documents.

Halifax contended that the Decision was not binding because:

1. The Umpire had failed to give reasons as to why he rejected part of their contentions;

2. The Umpire failed to give reasons which explained what he had learned from his private meetings with Equitable life;

3. The Umpire therefore materially departed from his instructions and/or his decision contained a manifest error.

Equitable argued the decision should be binding.

The Issues

1. What were the terms of reference to the Umpire?

2. Therefore, what as a matter of contract had the parties agreed to remit to the Umpire by way of expert determination?

3. What was the Umpire appointed to do?

4. Has the Umpire done that which he was appointed to do?

The Decision

The decision reached by the Umpire was to be binding save for “manifest error” as per the agreement of the parties. Manifest error means, “oversights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion” (See: Veba Oil Supply and Trading v Petrograde Inc [2001] EWCA Civ 1832).

In litigation, justice will not be done unless the parties understand who has won, who has lost and why? Therefore, a Judge needs to give reasons for his or her conclusions. This is the same in any judicial or quasi-judicial decision, for example arbitrations pursuant to the 1996 Act.

What of expert’s Determinations? In this particular case, the Umpire was also required to give reasons by agreement in his terms of reference.

“Reasons” need to “convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.They could be briefly stated but they had to explain the Umpire’s reasons for his conclusion on key or substantial points raised…”.

In this case, it was found that reasons were given but they were not adequate.

Accordingly, the Court directed the Umpire to review the matter and provide further reasons on certain specific issues.

Accordingly, the Court proceedings were adjourned for the case to be remitted to the Umpire and permission was given for the matter to be returned to Court once those reasons were available for further consideration as to whether the decision was binding.

The Court recognised that in arbitrations, there was a specific power under the 1996 Act for the Court to remit the decision for further reasons. Although there was no similar statutory power with regards to Expert Determination, the Court considered that there was power to do so whether by way of remedy in relation to the original contract or under the inherent jurisdiction of the Court or both. In any event, it was acknowledged that the Court was entitled to invite the Umpire to provide further reasons.

Comment

The importance of defining the role of the Umpire within his or her terms of reference is stressed.

It is useful to note that 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”

This will not relieve the Expert from the duty to act in accordance with his or her terms of reference but will seemingly avoid the type of situation in this case.