Wilky Property Holdings Plc v London & Surrey Investments Ltd

Interpretation of a clause – is it Arbitration or Expert Determination?

[2011] EWHC 2226 (Ch) TEDR Volume 16 Issue 3

The Facts

The Defendant was applying for a stay of Part 8 proceedings issued by the Claimant pursuant to the Arbitration Act 1996 or the inherent jurisdiction of a Court. The Defendant claimed that it had invoked a dispute resolution provision in the Agreement between the parties which they said was an arbitration clause to which the Act applied. The Claimant contended that the dispute resolution provision was for expert determination; that, therefore, the Arbitration Act was of no application; and thus they were entitled to have issued a Part 8 claim to have the Court rule upon various matters.

The Issues

How should the provisions of the Agreement between the parties be interpreted?

The Decision

The relevant term of the contract was as follows:-

“22. If there is any difference or dispute as to the meaning or effect of the terms of this letter of appointment, or the calculation of a profit share to be paid thereunder, we agree and acknowledge that either you or we acting independently should be at liberty to refer any such dispute to an independent expert to be appointed by either you or ourselves jointly, but in the event that you or ourselves cannot agree upon such an expert, then either we or yourselves shall request the president of the Royal Institution of Chartered Surveyors to appoint an expert to determine the dispute, whose decision thereon, and the liability for the costs of the referral, shall be binding upon ourselves and yourselves.”

Mr Richard Snowdon QC (sitting as Deputy Judge of the High Court) considered whether that clause amounted to an arbitration agreement in the first instance.

His Lordship observed that the Act did not attempt to answer the basic question of, “what is an arbitration?” but he was referred to the leading textbook (Mustill & Boyd) which urged that the question should be answered intuitively. His Lordship observed that the obvious place to start was the agreement and prima facie, parties who had expressly chosen to refer to their dispute to an expert should not be taken to have intended a reference to arbitration. His Lordship considered that he could not find anything in the wording of the clause which intended that the reference to an “independent expert” was intended to be a reference to an arbitrator.

Accordingly, the Defendant urged His Lordship to consider the substance of the dispute that the decision maker was being required to make. It was argued that the Clause required the decision maker to settle a dispute that had arisen and it was argued that that was a distinguishing feature of an agreement for arbitration. The Defendant referred to various authorities which His Lordship declined to accept were general authority for the proposition that a process that provided for a binding determination of dispute that had already arisen was an arbitration rather than an expert determination, particularly when the clause was clear. Accordingly, His Lordship did not consider that the Defendant was entitled to a stay of the action under the Arbitration Act 1996. In actual fact His Lordship’s view was the Court should not use its inherent jurisdiction to stay the claim either.

Comment

It is clear that when interpreting a contract for either expert determination or arbitration that the normal meaning of the words used should be considered and will be persuasive. If the words remain unclear, there is authority for the proposition that one can look to the subject matter of the dispute and what it is the decision maker is being asked to do to consider what label should be put upon the decision making process. If one is acting as an expert or an arbitrator and remains unsure it may be wise to seek clarification from the instructing parties prior to undertaking work so that it is clear what process is being invoked.

Macdonald Estates Plc v National Car Parks

Arbitration or Expert’s Determination

[2009] ScotCS CSIH_79A TEDR Volume 15 Issue 2

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.

Update Volume 23 Issue 5

The Academy’s Update newsletter to members.

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Information sheet introducing mediation as an ADR approach.

What is Expert Determination

An information sheet introducing the ADR approach, Expert Determination

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