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appeal_of_an_expert_determination

Table of Contents

Can I appeal an expert determination?

  • Yes, however, the basis of appeal is limited.
  • Such an appeal is not one for judicial review of a decision in the administrative law sense1).
  • McHugh JA2) recognised, and it has repeatedly been accepted, that the fundamental question is whether the exercise performed in fact satisfies the terms of the contract so as to make the determination binding.
  • The expert determination documentation needs to be carefully construed to determine the effect of the words “final and binding”.
  • Absent fraud or collusion, a valuation is binding if it was made in accordance with the contract, and if so it is beside the point that it proceeded on the basis of error, or was a gross over or under value, or took into account irrelevant considerations3).
  • This does not mean that a valuation will stand regardless of error; it depends on the terms of the contract4).
  • Accordingly, the question is whether the Expert's determination binds the parties in accordance with their contract, and that depends on whether the Expert has performed the task allocated him by the contract, in a way that the contract makes binding on the parties.
  • Some contracts grant the express right to appeal an expert determination and this can be problematic as to whether or not the expert determination was intended to be final and binding.

Cases

2017

2016

  • Funtastic Ltd v Madman Film and Media Pty Ltd5)
    • CONTRACT – Share sale agreement – Dispute resolution clause – Expert accountant appointed by the parties to calculate an adjustment amount – Whether expert complied with the terms of the agreement – Scope of expert’s broad discretion under agreement – Whether the expert made a ‘manifest error’ in determining the accounting treatment of two items – General principles regarding ‘manifest error’ – Consequences of a finding of ‘manifest error’ – Whether whole determination vitiated – One issue referred to expert for re-determination
  • Adnow Pty Ltd (as Trustee for the Adnow Pension Fund) v Greenwells Wollert Pty Ltd 6)
    • CONTRACT - Expert determination - Valuation of land - Assumptions - Planning Scheme - Ministerial approval - Application of Valuation and Property Standards - Whether determination was a ‘valuation’ - Determination made pursuant to contract

2015

  • Foote & Anor v Barton Property Partnership No.27)
    • http://www.austlii.edu.au/au/cases/act/ACTSC/2014/330.html8)
    • CONTRACT – Dispute resolution expert determination – binding nature of the decision of the expert– whether expert properly appointed – waiver of entitlement to contest the binding nature of the decision – election not to contest the binding nature of the decision – waiver or election demonstrated by participation in expert determination process
    • Not an agreed appointing authority
    • No valid appointment and further it was reasonable for BPP2 to take the pragmatic decision that it would participate in the process in case it transpired that the legal expert was authorised to make a final and binding decision.

2013

  • Glenvill Projects Pty Ltd & Ors v North North Melbourne Pty Ltd & Ors 9) Expert appointed under the contract to determine issue of escalation costs - Scope of issues under expert determination agreement - Late amendment of claim - Procedural directions given by expert - Contract construction - Incorporation of IAMA rules into expert engagement contract. Scope of expert's jurisdiction under contract - Power to vary the scope of the determination - Expert determination differs from arbitration - Whether expert determination open to review - Whether breach of expert engagement contract - Procedural fairness ­ Manifest error - Whether expert determination reviewable - Applicability of administrative law remedies - Contractual remedies - Relief governed by terms of contract - Whether declaration should be granted. The Court found that the Expert engaged, Mr Taylor, acted entirely within the terms of his engagement defined by the contract in making the procedural determination he did.

2012

  • TX Australia Pty Limited v Broadcast Australia Pty Limited10)
    • Broadcasting and related industry contracts - plaintiff owner and operator of broadcast infrastructure - defendant has access to and use of plaintiff's infrastructure pursuant to contract - defendant exercises option to renew contract - contract provides for expert determination of licence fee if parties fail to reach agreement - expert charged with determining a reasonable fee having regard to rates charged to third parties at facility in question - term sheet determines that expert determination final and binding except if attended by manifest error or error of law - terms of contract direct task to be performed by expert and whether determination binding.
    • Plaintiff alleges error of law on basis expert misconceived function by adopting objective “market value” assessment to ascertain fee as opposed to a subjective “fair value” approach - function of expert determined by contractual provisions - contract provides for hybrid process requiring consideration of subjective and objective factors, with rates charged to third parties a mandatory consideration - contract requires appraisal akin to 'fair market value' - expert does not have regard to exclusively objective considerations and considers position of particular parties - expert did not misconceive function.
    • Plaintiff alleges error of law on basis expert failed to consider relevant factor - relevant consideration said to be 'special value' of contract to defendant - requirement for ascertainment of 'reasonable fee' refers to defendant as a willing but not anxious and involuntary purchaser - requirement for 'reasonable fee' antithetical to valuation proceeding on basis plaintiff a monopolist - expert did consider special value of contract to defendant.
    • Plaintiff alleges error of law on basis expert failed to give weight to current fees under original contract - expert had regard to such fees but concluded of limited relevance - not an error of law to weigh relevant factors in a particular way as opposed to not consider them - circumstances prevailing ten years previously when agreement first made materially different to present - fees agreed ten years previously not useful guide to what constitutes a 'reasonable fee'.
    • Plaintiff alleges error of law and manifest error on basis expert used incorrect comparator in assessing 'reasonable fee' - expert said to have incorrectly compared digital audio broadcasting with digital television broadcasting - audio broadcasting said to be inapposite comparator due to fact radio different medium to television with different cost factors - digital audio broadcasting fees considered by expert pertain to agreement between same parties and are relatively recent - errors in methodology employed by expert valuer not errors of law - matter of professional judgment as to weight to accord cost recovery and profit margin - expert evidence adduced in attempt to illustrate manifest error - fact such evidence needs to be adduced conveys error not manifest - expert did not make error of law or manifest error.
    • Plaintiff alleges expert failed to give detailed reasons - question whether reasons are 'reasons' within the meaning of the contract - failure to provide 'detailed reasons' entails there will not be a binding determination - due to requirement of 'detailed statement of reasons', provision of wider than usual scope to challenge binding nature of determination and fact issues are complex standard of reasons required by contract akin to that expected of judges and commercial arbitrators - expert sufficiently identifies methodology and provides sufficiently detailed and comprehensive reasons - reasons are 'detailed reasons' within meaning of contract.
    • Plaintiff alleges error of law on basis determination manifestly unreasonable - determination said to be unreasonable in Wednesbury sense because of relative magnitude of reduction in licence fee - contract requires new fee to be determined with predominate regard to market based considerations and cost considerations not prevailing when original fee determined - determination not so unreasonably low - determination rewards plaintiff above avoidable cost - arguable that perpetuating current fee would be unreasonable - determination not manifestly unreasonable
  • Doohan v North Shore Transport Pty Ltd 11)
  • Sugar Australia Pty Limited v Mackay Sugar Ltd12)
  • State of Victoria v Grawin Pty Ltd13)
  • VIH Aviation Group Ltd. v. CHC Helicopter LLC14)

2011

  • Lipman Pty Ltd v Emergency Services Superannuation Board
  • Shoalhaven City Council v Firedam Civil Engineering Pty Limited15) French CJ, Crennan and Kiefel JJ
    • The General Conditions provided
      • The Principal may in its absolute discretion for the benefit of the Principal extend the time for Completion at any time and for any reason, whether or not the Contractor has Claimed an extension of time.
      • The Contractor is not entitled to an extension of time for Completion under this clause 54.6 unless the Principal exercises its discretion to extend the time for Completion.
      • A party to the Contract could give notice to the other party of an issue about any matter arising under the Contract16)
      • Senior executives were required to attempt to resolve issues so notified.
      • An issue not able to be resolved by senior executives of the parties could be referred to an Expert for “Expert Determination”.
      • The Contract also provided that, in answer to any issue referred to the Expert by a party, the other party could raise any defence, set-off or cross-claim
    • The Contract further provided:
      • the parties to treat the Expert Determination as final and binding if the aggregate liability of one party to the other did not exceed $500,000.
      • If the aggregate amount determined exceeded $500,000, then either party was free to commence proceedings in respect of the determined amount within 56 days after receiving the Determination
    • The Expert's use of the principal's discretion to extend time as a device for allocating responsibility for delay caused by the principal was adequately explained and was not inconsistent with his refusal to allow the contractor's claimed extensions of time.
  • Dunnes Stores -v- Holtgen Ltd17)
  • Westport Insurance Corporation v Gordian Runoff Limited18) French CJ, Gummow, Crennan and Bell JJ

2006

2004

1980

  • Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd23)
    • in default of agreement between the parties, the … would have to assess what rent it would have been reasonable for these landlords and these tenants to have agreed under this lease having regard to all the circumstances relevant to any negotiations between them of a new rent from the review date.

1977

1) TX Australia Pty Limited v Broadcast Australia Pty Limited
2) Legal & General Life of Aust Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314
3) Legal & General Life of Aust Ltd v A Hudson Pty Ltd , 335-336 (McHugh JA); Holt v Cox [1997] NSWSC 144; (1997) 23 ACSR 590, 596 (Mason P)
4) Holt v Cox , 597 (Mason P)
5) [2016] VSC 708
6) [2016] VSC 153
7) [2015] ACTCA 53
8)
9) [2013] VSC 717
10) [2012] NSWSC 4
11) [2012] NSWWCCPD 42
12) [2012] QSC 38
13) [2012] VSC 157
14) 2012 BCCA 125
15) [2011] HCA 38
16) A dispute resolution procedure was set out in cll 73-76 of the General Conditions.
17) 2011 370 MCA
18) [2011] HCA 37
19) [2006] VSCA 173
20) [2006] QSC 181
21) [2004] NSWCA 451
22) [2004] VSC 19
23) [1980] EWCA Civ 3
24) [1997] NSWSC 144

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