Expert Determinations – Recent Developments, January 2014

21-01-2014

Author: Andrew Lenny



Ireland adopts expert determination as a form of Alternative Dispute Resolution. Parties must agree to be bound by the decision of an expert to make a legally binding determination to resolve the dispute. The expert’s jurisdiction arises directly from the appointment. Expert determination is used mainly for determining technical disputes, e.g. when calculating compensation for the acquisition of shares, rent reviews, and construction disputes.
If a contract provides for disputes to be resolved by expert determination, the court may enforce the expert’s decision. If there is no provision in the contract allowing for challenge or appeal of a decision to the courts, no challenge or appeal can be made. However, if there is an obvious lack of bona fides on the part of the expert, or an allegation of fraud or an allegation that the expert exceeded his powers, the decision may be challenged in the courts.
The courts are generally reluctant to interfere with the procedures adopted by an expert provided that the expert has operated within the realm of instructions agreed by the parties beforehand. The above principles have been applied by the Irish Courts in two more recent cases.

Relevant Caselaw

O’Mahony v O’Connor Builders (Waterford) Limited [2005] 3 IR 167

In O’Mahony, the High Court (Clarke J.) considered the enforceability of an agreement to appoint an independent quantity surveyor.  Differences had arisen between the parties in relation to defective building works and the final sums owing to the Defendant. 
An expert was appointed by agreement between the parties and he engaged in the process valuing the works and published an interim report to be agreed between the parties within 7 days. The Plaintiff failed to engage with the process in any way at this stage. The expert subsequently wrote to the parties to inform them that, in light of their failure to communicate as requested, his report should be considered final. 
The Court held that the valuation was not binding on the parties in the following circumstances:
  • that, where a party was in default of making the representations which the agreed process entitled him to make, the expert was entitled to reach a final determination without reference to such representations. Whether a point had been reached which entitled the expert to make a final determination without reference to the representations of a party depended on all the circumstances of the case and in particular, the extent to which the party in default could be said to have been in specific breach of a defined obligation to make representations in a particular manner or within a particular time scale.
  • that the process in which an expert was required to engage so as to reach a determination binding on the parties was primarily to be derived from and found in the agreement between those parties. In the absence of an express provision to the contrary, the expert was entitled to pursue his own lines of inquiry and use his own skill and judgment without necessarily referring to the parties.
  • that the failure of the expert to give the plaintiff any notice of his intention to make the report final in the absence of compliance meant that the report could not be considered final. An expert, before proceeding to give a final determination, should give a defaulting party notice of his intention to do so.
The above determination was based very much on the individual facts of the case and the lack of detail in the ADR agreement. The Court accepted the proposition that, in the normal course of events, where parties agree to be bound by the report of an expert, such report cannot be challenged in the courts on the ground that mistakes have been made in its preparation unless it can be shown that the expert had departed from the instructions given to him in a material respect or had in some way acted in bad faith.  
It is of note that the Court cited Jones v. Sherwood Services Plc. [1992] 1 W.L.R. 277, Rajdev v. Becketts [1989] 2 E.G.L.R. 144 and pars. 13.6.6 – 13.6.7 of Kedall Expert Determination (3rd ed.), as representing the law in this jurisdiction.

HSE v Keogh [2009] IEHC 419

In Keogh, the Defendant provided support and maintenance IT services to the Health Services Executive (“HSE”). In essence, the agreement between the parties provided for the release of ‘source code’ (human-readable form of computer program which can be used to assist in supporting, maintaining and fixing software) if a trigger event occurred. If there was debate as to whether a ‘trigger event’ had occurred, the agreement provided for a dispute resolution procedure:  the Defendant would release the source code on the decision of an independent expert whose appointment is mutually agreed, or failing mutual agreement, to be appointed by the President of the Law Society. It was expressly stated that “the Independent Expert’s decision will be final and binding on all parties to this agreement and shall not be subject to appeal to a court in legal proceedings except in the case of manifest error”.
The Plaintiff commenced plenary proceedings seeking to compel the Defendant to provide support and maintenance services to it at 180 locations around the state; the application before the Court was for an interlocutory injunction compelling the provision of said services until the trial of the action – it was submitted that there was a serious risk to the health and safety of its patients in the absence of such order. However, prior to instituting proceedings the Plaintiff had set in train the dispute resolution process.
The Court (Laffoy J.) refused to grant the injunction and relied on the Supreme Court (Keane C.J.) in Re Via Networks (Ireland) Limited [2002] 2 IR 47 where it was held (1) that petitioners under s.205 of the Companies Acts 1963 who entered an arbitration agreement, had expressly waived their rights to have the issues raised by them litigated in any forum other than the arbitral tribunal (2) that the High Court had an inherent jurisdiction to stay proceedings having regard to the arbitration agreement and (3) that parties who make agreements for the resolution of disputes must show good reasons for departing from them.
The Court also approved of the dicta of the English High Court in Cable & Wireless Plc v IBM UK Limited [2002] CLC 1319 where it was held that:
“[a]…reference to ADR is analogous to an agreement to arbitrate. As such, it represents a freestanding agreement ancillary to the main contract and capable of being enforced by a stay of the proceedings or by injunction absent any pending proceedings. The jurisdiction to stay, although introduced by statute in the field of arbitration agreements, is in origin an equitable remedy. However, the availability of the remedy whether of a stay or an adjournment or case management order must be a matter for the discretion of the court.”
Applying the principles in Via Networks, the Court exercised its inherent jurisdiction to grant a stay. It saw no good reason to depart from the dispute resolution mechanisms, which it stated, were likely to be speedier and more cost effective than procuring a determination on a contested interlocutory application in the High Court. 
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