There is no general obligation on an expert to apply the rules of natural justice to the process of making an expert determination. Provided the expert has answered the right question then it will be enforceable even if the answer is wrong. It may be possible to set aside an expert determination if it can be shown that the expert was actually biased.
Expert determination is a means by which the parties to a contract appoint an independent expert to decide a dispute that has arisen. The particular advantages of this approach to dispute resolution include the fact that the parties are free to agree who the expert will be and the expert's terms of reference. These will include whether the expert is merely to provide advice or whether he is required to reach a decision that is to be temporarily or finally binding.
In recent years there have been a number of cases where one of the parties has not been happy with an expert determination and has sought to have it set aside. Where the parties have agreed that an expert determination is to be final and binding then one would have thought that both parties would be stuck with it.
In the recent Court of Appeal decision in Homepace Ltd v Sita South East Ltd [2008], Lloyd LJ said at paragraph 18:
"Each case depends on the terms of the contract under which the determination is made, both as to what it is that the expert has to decide, and as to how far his decision is binding on the parties. In each case it is necessary to examine the determination, in order to see whether it lies within the scope of the expert's authority. If it does not, then it has no effect as between the parties. If on the other hand it does, then the contract also governs the question whether the determination is binding...."
The recent case of Owen Pell Limited v Bindi (London) Limited, involved the expert determination of a dispute concerning the final account and deductions for defects arising from work carried out by Owen Pell at a property owned by Bindi.
The expert was appointed under a relatively brief letter which included the terms that the independent expert should conduct the proceedings in any way that he saw fit subject to a maximum timescale of 2 months. The parties agreed that they should be bound by the decision of the expert and that the dispute could not then be referred to a subsequent tribunal.
The expert determined that the sum of £53,487.65 plus VAT was due to Owen Pell, which Bindi refused to pay. Bindi argued that in reaching his determination the expert had failed to conduct himself in accordance with the rules of natural justice, or that he had conducted himself in a manner that was biased or gave the appearance of bias or that the expert was guilty of gross or obvious error and was perverse in his conclusions. The important point here is that Bindi was relying for its defence on a breach of terms that it said should be implied into the expert determination agreement rather than terms that were actually contained within the agreement.
Owen Pell argued that the expert answered the question put to him; that his decision was binding and that the rules of natural justice do not apply to expert determination.
Her Honour Judge Frances Kirkham agreed with Owen Pell. In reviewing the authorities the judge found that there was no general requirement for the rules of natural justice or due process to be followed in an expert determination. The judge found that there was no evidence that the expert was actually prejudiced against the defendant or that he was influenced by partiality or prejudice in reaching his decision. There was no evidence of actual bias. As far as the appearance of bias was concerned the judge applied the test in Porter v Magill and concluded that a fair-minded and informed observer would not conclude that there was a real possibility that the expert was biased.
The fact that the expert had conducted separate meetings with the parties and met both at the end of the site visit was something Bindi could have complained about or addressed at the time but did not, and the expert was entitled to disregard a letter from the architect that had been provided later than required by the expert's procedure for the determination.
Finally, the judge found that the expert had answered the right question and even if it was wrong the determination was final and binding.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.