The dispute essentially revolved around the validity of a certificate of completion in a construction contract.
The judgment focused on the extent to which an expert can decide questions of law, or whether a court can be asked in advance to determine questions of law that may arise in the course of the resolution of a dispute.
The parties had entered into a contract for the development of ‘Point Village’ on North Wall Quay. The development did not proceed as planned and, as a result, a dispute arose between Dunnes and Point Village.
An independent expert was appointed to resolve the dispute.
Central to the dispute was clause 7.7.2 of the development agreement, which provided that: “The design and specification for Point Square shall be to a first-class standard appropriate to a prestigious shopping centre, commensurate with the newly redeveloped Eyre Square in Galway and Grand Canal Square, Dublin, and the Civic Plaza, Dundrum Town Centre.”
The dispute revolved around whether or not the completed Point Square met the requirement that its design and specification was “to a first-class standard appropriate to a prestigious shopping centre”.
Dunnes issued a plenary summons, in which it sought (among other matters) a court declaration that the area known as Point Square did not comply with the defendants’ obligations under clause 7.7.2 of the development agreement; and a declaration that clause 7.7.2 of the development agreement, and the design and specification and requirements therein, were to be “interpreted, applied and implemented in accordance with the factual matrix as of the date of execution of the development agreement”.
Dunnes maintained that this should include all representations made by action, by conduct and orally, and by reference to various plans appended to the development agreement and terms, sections, elevational drawings, perspective images and marketing material, as well as comparators set out in clause 7.7.2 that illustrated the overall design, specification, quality and completion of the Point Square and the manner in which it was to, ultimately, present.
The defendant applied for a stay, preventing Dunnes from taking any further step in the proceedings pending the determination by the independent architect of the dispute between the parties. The scope of authority of the independent expert was, accordingly, central to the dispute.
In essence, the argument made by Dunnes was that, while British authorities tended to be to the effect that courts should not intervene in relation to an issue of interpretation or construction of a clause to be considered or applied by an expert (in advance of the expert commencing and completing his determination), more recent authority from that jurisdiction was no longer so fixed in that view.
Dunnes made the point that the dispute between the parties as to the interpretation and construction of clause 7.7.2 of the development agreement needed to be resolved in the first instance, before the independent architect could make his determination in accordance with the correct interpretation of that clause.
Dunnes contended that the independent architect was not authorised under the agreement between the parties to carry out an interpretation of clause 7.7.2.
The court observed that it was evident that Dunnes had a fear that the expert would not consider all of the material sought to be relied on by Dunnes in the course of the consideration of the dispute between the parties.
It was the view of Point Village that there was no dispute of law or contractual interpretation between the parties.
Rather, there was an issue of professional judgement or fact about the weight that ought to be attached to certain factors and documents in determining the dispute between the parties as to whether or not Point Square had been completed to a “first-class standard appropriate to a prestigious shopping centre”, commensurate with the three named comparators.
Point Village maintained, among other things, that where a dispute is referred to an expert, the expert is required to determine the meaning of any contractual term necessary for the determination of the dispute.
The court approved of the following summary of the principles established by English case law:
- Where the parties have chosen to resolve an issue by the determination of an expert rather than by litigation or arbitration, the expert’s determination is final and binding, unless it can be shown that he acted outside his remit,
- A distinction must be drawn between an expert who has misunderstood or misapplied his mandate, with the consequence that he has not embarked on the exercise that the parties agreed he should undertake, and an expert who has embarked on the right exercise but has made errors in concluding that exercise, and has come up with what is arguably the wrong answer,
- A failure of the first kind means that the determination is not binding, because it is not a determination of the kind that the parties have contractually agreed should be binding,
- A failure of the second kind does not invalidate the determination, but may leave the expert exposed to a claim in negligence,
- In deciding whether an expert determination can be challenged, the first step is to construe his mandate. This is, ultimately, a matter for the court,
- The second step is to ascertain whether the expert adhered to his mandate and embarked on the exercise he was engaged to conduct by asking himself the right question(s) and applying the correct principles,
- Once it is shown that the expert departed from his instructions in a material respect, the court is not concerned with the effect of that departure on the result. The determination is not binding,
- Where the expert has made an error on a point of law that is not delegated to him, the error means that the determination will be set aside. (It has yet to be decided whether an error by the expert on any point of law arising in the course of implementing his instructions will also justify setting aside the determination – the court referenced Lord Neuberger MR in Barclays Bank v Nylon Capital  EWCA Civ 826.)
- Where a procedure has been laid down (for example, to produce a draft memorandum), the expert must follow it. However, what the procedure requires the expert to do is an aspect of the mandate, and ultimately a matter for the court.
However, the court qualified its endorsement of the above principles by observing that they should not be elevated into a rigid set of principles to be slavishly applied in every case.
It would be important to emphasise that, in every case, it will be necessary to construe the precise terms of the contract to see what the parties actually agreed between them as to the role of the expert: one needs to consider precisely what disputes were intended to be referred to the expert; whether the dispute that has arisen is one that is intended to be resolved by expert determination; and whether there is any other relevant term in the contract as to how the expert is to reach his determination.
It is important to bear in mind that, if the expert goes outside the terms of his mandate, his decision will be invalid.
The court noted the parties’ terms of appointment of the independent expert as provided in the contract, which stated that the appointee (by the appropriate body, in due course) “shall act as an expert and not as an arbitrator and whose decision shall be final and binding on the parties hereto” (clause 15.1 of the relevant agreement).
That agreement went on to state that: “The expert shall allow both parties to make representations in writing, and shall consider such, but shall not be limited or fettered by them in any way, and shall be entitled to rely on his own judgement and opinion” (clause 15.2).
In light of those specific terms of appointment, the court observed that: “It would not have made sense for the agreement to provide that a dispute should be referred to an independent architect for resolution whilst, at the same time, leaving open the need to go to court to interpret the terms under which he was to resolve the dispute” (paragraph 66).
The court noted that the parties agreed that this particular area of dispute should be referred to an independent architect. They agreed that, while he could receive representations from the parties, he was not to be limited or fettered by them, and he was free to rely on his own judgement and opinion.
Finally, it was agreed that his decision was to be final and binding on them. Therefore, the court found that there was no basis for interfering with the resolution of the dispute between the parties by the independent expert, and that the proper course was to permit the independent expert to carry out the function the parties had given him.
The court also endorsed a public-policy consideration: namely, that there is a public-policy interest in encouraging the use of ADR to provide potential litigants with a means of resolving their dispute in a way that is cheaper and more efficient than litigation through the courts; and that such policy considerations would be undermined if the process provided for by parties in an agreement could be halted by initiating court proceedings in order to seek a judicial determination of a legal dispute in the course of the expert-determination process.
Accordingly, the court found that, in circumstances where the independent architect has been appointed and (in accordance with the terms of the agree-ment) submissions have been furnished to him, he should be allowed to proceed with his function.
The fact that he may be obliged in the course of carrying out his function to interpret the terms of clause 7.7.2 does not preclude him from exercising his function. His function necessarily involves the resolution of mixed questions of law and facts.
The court observed that, as a matter of practicality, it would be difficult to see how he could actually decide whether or not the Point Village Square had been completed in an appropriate fashion without interpreting what was meant by clause 7.7.2.
The court found that this clearly had to have been within the contemplation of the parties when they entered into the agreement.
The combination of the precise terms of the appointment of the independent expert – namely that (a) his decision was to be final and binding on the parties, and (b) while the expert shall allow both parties to make representations in writing and shall consider such, he shall not be limited or fettered by them in any way and shall be entitled to rely on his own judgement and opinion – appears to have been key to the court’s finding in this case.
That finding was supported by the public-interest objective of the promotion of ADR, where the parties have chosen to avail of it as the mechanism to resolve their dispute.
The judgment serves also as authority that, where an independent expert strays outside the terms of their mandate, their decision will be invalid.
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