High Court Judgment: Expert Determination Clauses Can be Separable from the Contract.
Summary
Dalton Hale successfully represented the Defendant in its High Court application to stay proceedings brought in contravention of an expert determination clause. The contract between the parties concerned the sale of land, conditional upon the completion of certain groundworks by the Defendant. A dispute arose between the parties concerning whether the pre-conditions for the sale had been met, and the Claimant sought to terminate the contract and demanded repayment of a deposit. The validity of that termination was disputed by the Defendant, who asserted that the pre-conditions for sale had been satisfied.
Clause 28.1 of the contract was an expert determination clause which provided as follows:
“Any dispute or difference between the parties as to any matter under or in connection with this contract shall be submitted for the determination of an expert (the Expert) and the following provisions of this clause 28 shall apply to any submission and to any other matter required to be dealt with by the Expert.”
Notwithstanding Clause 28, the Claimant issued proceedings in the High Court, claiming repayment of the deposit. The Defendant brought an application seeking a stay of proceedings on the basis that the expert determination clause was mandatory.The Claimant argued that the doctrine of separability does not apply to expert determination clauses, and that Clause 28 did not survive termination of the contract.
The Decision
Whilst acknowledging that expert determination clauses are ordinarily limited to the determination of particular matters, carved out for expert determination, the judge found that this particular clause was an all-embracing clause, applicable to all disputes. The judge considered that there is a strong connection between the one-stop principle and separability, and that in circumstances where the parties had created a one-stop shop in the form of Clause 28, there was a presumption of separability as there is with arbitration clauses. He determined that there is no reason in principle why an expert determination clause cannot be separable from the contract in which it is found, the question being dependent on the parties’ intentions.
Comment
Whilst it had been suggested that the doctrine of separability applies to expert determination clauses (See the discussion in Kendall on Expert Determination at 7.2-6), there had been no decided case on the issue.
This is the first case on the point, and whilst the judgment confirms that there is no reason in principle why an expert determination clause cannot be separable from the contract within which it is contained, it is clear that the question is one of ordinary contractual interpretation in all cases. Whilst the clause in this case was clearly akin to an arbitration clause, with its all-encompassing drafting, many other expert determination clauses will not be so easily interpreted as a “one-stop shop” for dispute resolutions. Given that the judge considered there to be a strong connection between the one-stop principle and separability, this raises the question of whether some more common forms of expert determination clause (which carve out specific issues for expert determination, such as e.g. valuations) could be regarded as separable. That question remains unanswered, but this judgment clarifies that where the expert determination clause does provide a one-stop shop, the doctrine applies.
Dalton was instructed by Warners Law LLP.
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