High Court finds expert determination clause survived termination of the contract

A High Court Master has stayed proceedings regarding a contractual dispute in order to give effect to a clause in the contract requiring all disputes to be resolved by expert determination. In doing so, the court concluded that the clause was separable from the contract in which it was contained and remained operative even if the contract had been validly terminated as alleged: Dandara South East Limited v Medway Preservation Limited & Anor [2024] EWHC 2318 (Ch).

The decision indicates that whether any particular expert determination clause will be separable will depend on the parties' intentions, determined objectively through the usual principles of contractual construction. However, the court considered that, where it is found that the contractual intention was (unusually) for expert determination to be a "one-stop shop" dispute resolution mechanism to deal with all disputes in relation to a contract, then there will be a presumption of separability - by analogy with arbitration clauses.

Importantly, the court's conclusions were limited to such comprehensive "one-stop" clauses, rather than the much more typical expert determination clause that applies only to disputes regarding a particular subject matter, leaving all other disputes to the courts or arbitration.  

The court was also only considering the issue in the context of a dispute as to whether a contract had been validly terminated. It did not need to decide whether the expert determination clause would also be separable for the purposes of a dispute as to whether a binding contract had ever been formed.

The decision highlights that contracting parties should take care to make clear within the contract the scope of disputes to which any nominated dispute resolution mechanism will apply. That is particularly important with respect to expert determination clauses given the (usually) very limited scope to challenge a determination.

Background

The contract in question was for the purchase of land, and was subject to a pre-condition requiring the seller to complete certain earthworks.

A dispute arose as to whether that pre-condition had been met and the purchaser purported to exercise a right to terminate the contract on that basis. It commenced High Court proceedings seeking repayment of its deposit.

The defendant disputed the court's jurisdiction and sought a stay of the proceedings on the basis that the contract included a broadly-worded expert determination clause ("the EDC") - which providing for "any dispute or difference between the parties as to any matter under or in connection with this contract" to be referred for expert determination. The clause detailed the procedure for that process, under which either a surveyor or solicitor (depending on the nature of the dispute) would deliver a binding decision within 30 days.

In response, the claimant's key arguments were that:

1. properly construed, the EDC only applied to disputes that were suitable for expert determination by a single surveyor or solicitor within a 30 day period (which it said this dispute was not, as it would involve both contractual construction and complex technical issues regarding the earthworks). It argued that all other disputes were covered by the contract's standard exclusive jurisdiction clause in favour of the English courts; and
2. the contract had come to an end and the EDC was not separable from it, so was no longer operative.

Decision

The court (Master Brightwell) stayed the proceedings to enable the parties' compliance with the EDC.

Interpretation  

In arguing for a broad interpretation of the EDC's scope, the defendant submitted that key principles developed in the context of arbitration clauses applied equally in the context of expert determination clauses, or at least to the EDC here. 

In particular, the court considered the fundamental "one-stop" presumption derived from Fiona Trust & Holding Corp v Privalov [2007] UKHL 40 – broadly to the effect that the construction of an arbitration agreement should start from the assumption that the parties as rational business people would have intended that any dispute arising out of their relationship would be decided by the same tribunal – unless the language made it clear that certain questions were to be excluded from the arbitrator's jurisdiction.   

The court here noted that, in Barclays Bank Plc v Nylon Capital LLP [2011] EWCA Civ 826, Thomas LJ  had stated that the Fiona Trust "one-stop" presumption is not applicable to expert determination clauses. However, in the court's view, that was because Thomas LJ was clearly referring to a typical expert determination clause limited to certain issues or subject matters, with the balance of issues to be determined by litigation or arbitration.    

In the present case, the natural reading of the EDC was that it was all-embracing – it required expert determination of any dispute concerning the contract. That was unusual for expert determination clauses, and mirrored the breadth of disputes generally subject to an arbitration clause.

The court concluded that, in the case of the EDC here, a "one-stop" construction was appropriate:

• The parties, as business people operating in property development, were to be taken to know that such broad wording was apt, as in an arbitration clause, to cover all disputes arising in relation to the contract, not just those that might be suitable for that form of dispute resolution.
• The fact that the expert determination procedure was not carved out of the court's jurisdiction was a factor in favour of a one-stop construction of the EDC.
• The fact that the EDC was positioned before the jurisdiction clause in the contract did not support a suggestion that the latter was the primary dispute resolution mechanism.
• The one-stop construction of the EDC did not denude the jurisdiction clause of all effect – it would still apply, for example, if the expert's determination was challenged as being beyond their authority, or if a party needed to enforce the decision.

Separability

The parties proceeded on the basis that there was no authority directly considering the separability of expert determination clauses.

The court considered that there was no reason in principle why an expert determination clause could not be separable from the contract in which it was found. It would depend on the parties' intentions, as objectively determined by the usual principles of contractual construction.

In circumstances where the parties had created a "one-stop shop" such as the EDC here, the court considered there to be a presumption of separability, on the same basis as for arbitration clauses. Once it was found that the parties' intention was for all disputes relating to an agreement to be subjected to a prescribed form of dispute resolution, a party arguing that such procedure was not separable from the agreement bore the burden of explaining why the parties would objectively have intended the courts to resolve some disputes in a different forum. The claimant had provided no such explanation here.

The court also highlighted that the question in this case was whether the EDC was separable for the purposes of a claim that the contract had been terminated due to a supervening event, not a claim that there was never a binding contract. Arbitration clauses had been presumed to be separable in relation to supervening events even before the recognition of the more general presumption of separability. In the present case it was unnecessary to determine whether the EDC would be separable in relation to a dispute as to whether a binding contract had ever existed.