Two recent cases consider Barclays Bank PLC v Nylon Capital LLP [2011] EWCA Civ 826

We previously reported on the Court of Appeal decision in Barclays v Nylon. In that case, the Court of Appeal considered whether there should be a stay of court proceedings pending expert determination under an agreement between the parties. It ruled that the expert in the case did not have jurisdiction to decide the dispute, and so there should be no stay of the proceedings. Two recent cases have considered Barclays.

Persimmon Homes Limited v Woodford Land Limited [2011] EWHC 3109 (Ch)

In this case, the parties had entered into a put and call option agreement relating to the sale and purchase of a development site. The put option under the agreement was exercised. However, a dispute arose over the terms and conditions of possible completion. A dispute resolution clause in the agreement provided for any dispute to be referred to an expert if it could not be resolved by directors.

The developer advanced an action in the High Court claiming relief under five heads: (1) a declaration as to what the expert decided; (2) a declaration as to the true meaning of the agreement; (3) whether satisfactory technical consents within the meaning of the agreement had been provided; (4) whether the agreement could be rectified to reflect the parties' common intention; (5) an estoppel claim. Head (2) had already been decided in the vendor's favour by an expert.

The vendor applied to strike out or stay the developer's claim (other than the rectification claim, which it accepted should go to trial) on the basis that the heads of relief claimed, which included issues concerning the construction of the agreement, fell within the expert's remit and were covered by the wording of the dispute resolution clause. The developer submitted that the dispute resolution clause was not a general provision for dispute resolution by an expert and that it applied only where its provisions were incorporated by reference elsewhere in the agreement.

The vendor's application was granted in relation to heads (1) and (3), but refused in relation to heads (2) and (5). The first and third heads both fell within the dispute resolution clause and had to be referred to the expert for determination.

However, in relation to heads (2) and (5), rectification was a remedy that only the court could grant. It was always discretionary in nature and its retrospective effect could not be brought about by agreement between the parties, or by the determination of an expert. The agreed exclusion of rectification claims from the scope of the dispute resolution clause showed that the words "any dispute arising between the parties" could not be read literally. The parties must have been taken to have intended that the court should also be free to decide any question of construction of the agreement upon which the rectification claim depended, as well as any estoppel claim which turned on a detailed investigation of essentially the same facts.

The expert's determination, although binding as a matter of contract between the parties, did not and could not bind the court, which had to consider the question of construction as an essential preliminary to the rectification claim. There should be no presumption in favour of resolution by an expert, Barclays Bank Plc v Nylon Capital LLP applied.

Wilky Property Holdings Plc v London & Surrey Investments Ltd [2011] EWHC 2888 (Ch)

In this case, the parties entered into an agreement which provided that if there was any dispute as to the meaning of the terms in the agreement, either party could "refer any such dispute to an independent expert". The expert's decision was to be binding on the parties. Following a dispute, an expert was appointed, but one of the parties commenced proceedings in the High Court. The court had to decide whether or not to stay the claim in favour of expert determination.

Snowden J stayed the majority of the claim in favour of expert determination. He did not accept that the judge in Barclays Bank Plc v Nylon Capital LLP was intending to lay down a prescriptive rule to the effect that any decision by the expert in relation to his own jurisdiction would inevitably be subject to review by the court, and thus it would be wasteful for the expert to decide such matters first. Instead, it was important first to clarify whether, and if so on what basis, the claimant intended to run a point relating to contractual interpretation, in relation to which an issue existed as to the expert's jurisdiction to decide the matter. In this case, the obvious and convenient forum for that clarification to be sought was in the expert determination itself, and it could be done without prejudice to any argument that the expert had no jurisdiction to decide the matter. Once that point had been established, the expert could decide the appropriate approach.